1

GOOD GOVERNANCE AND

CORPORATE SOCIAL RESPONSIBILITY
MODULE

TABLE OF CONTENTS

Module 1 INTRODUCTION TO GOVERNANCE

Learning Outcome
Discussion of Topics
Definition of Governance
Mind-setting of Governance
Elements of Governance
Key Players
Governance Indicators

Module 2 CORPORATE GOVERNNACE

Learning Outcome
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Introduction
Discussion of Topics
Corporate Governance: Defined
Corporate Culture
Corporate Governance History and Framework
The Agency Theory
The Stakeholder Theory
The Stewardship Theory

Module 3 ETHICS AND BUSINESS

Learning Outcome
Introduction
Discussion of Topics
Nature of Business
Ethics: Defined

Relationship of ethics and Business

Normative Ethical Theories used in Corporate Decision-making
Kohlberg’s Stages of Moral Development
Machiavellian Principles
The Kantian Ethics
Ethical Decision-making Models
Test of Ethical Behavior

Module 4 CORPORATE SOCIAL RESPONSIBILITY

Learning Outcome
Introduction
Discussion of Topics
The Concept and Definition of Corporate Social responsibility
Theories of Corporate Social Responsibilities
Corporate Integrity
Corporate Citizenship, Philanthropy and Social Initiatives
Corporate Initiatives: Corporate Community Involvement
and Social Accountability
Corporate Social Responsibility in the Global context:
Multinationals and less developed countries; International
Business.
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COURSE GUIDE FOR GOOD

GOVERNANCE AND CORPORATE SOCIAL
RESPONSIBILITY

1. Course Introduction

This course is designed to inform and stimulate thinking on issues of ethics

and social responsibility encountered in business. The material covered is
intended to prepare students to recognize and manage ethical and social
responsibility issues as they arise, and to help them formulate their own
standards of integrity and professionalism.

2. Course Learning Objectives

At the end of the course students are expected to:

 Understand the field of Good Governance and Social Responsibility

from the local and the global perspectives
 Practice appropriate business responses and management
approaches for dealing with social, political, environmental,
technological and global issues;
 Increase awareness of the ethical dimensions of business conduct
 Stimulate critical thinking skills on issues of ethics and social
responsibility in the workplace
 Recognize and manage ethical problems and social responsibility issues
as they arise in their respective organization
 Formulate their own standards of integrity and professionalism in
decision- making about ethical and social responsibility issues.

3. Course Requirements/ Assessment Activities

In assessing your performance in this course, the assessment that will be used is
categorized into two: formative and summative. For the formative assessment,
you will be given Self- Assessment quizzes in every module before the start of the
lesson. These quizzes are intended to test your learning and validate your
knowledge with regard to the lesson; this will not be recorded or graded.
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For summative assessment,

 A term Exam will be given (Midterm/Finals)
 Task Performance at the end of every module
 Case Study and Caselets
 Major output for the subject:
o Case Study
o CSR Outline

4. Learning Resources
To facilitate learning, resources will be provided along the duration of the course
it will be available on the course site. However, for those with poor internet
connection may schedule time to connect to university Wi-Fi and download all term
materials. The learning resources are:

1. Modules
Modules will be prepared per course and is uploaded in the course site.
Each module in the manual has its own set of Self-Assessment Tests. You
are required to read all the modules and take the self-assessment tests.
You will also find the Performance Task at the end of each module
which you need to accomplish and submit on the indicated date.

2. Video Lectures/Resources
Video lectures/resources are additional resources to help you
understand the lesson.

3. Additional Reading Materials

Case Study and caselets are included in some parts of the module as
additional reading materials to enhance understanding of the course.

MODULE 1
I. INTRODUCTION TO GOVERNNACE

INTRODUCTION

Welcome to the lessons of Governance! This module is the first part of your
journey in the exciting and challenging world of Governance.

In this module you will be guided by the topic coverage with the learning outcome.

To help you understand the topic, below is the Learning Outcome and Topic Coverage.

Learning Outcome:

Towards the end of the Module students are expected to:

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 Discuss the concepts in Governance and its relationship to the social
environment.
 Gain insights of characteristics of Good Governance

TOPIC COVERAGE

 Definition and Concept of Governance

 Mind-setting of Governance
 Elements of Governance
 Key Players in Governance
 Governance Indicators

Definition of Governance

What is Governance?

The concept of "governance" is not new. However, it means different things to

different people. The actual meaning of the concept depends on the level of
governance we shall be talking about, the goals to be achieved and the approach
being followed.

The concept has been around in both political and academic discourse for a long
time, referring in a generic sense to the task of running a government, or any
other appropriate entity for that matter. In this regard the general definition
provided by Webster's Third New International Dictionary (1986:982) is of some
assistance, indicating only that governance is a synonym for government, or "the
act or process of governing, specifically authoritative direction and control". This
interpretation specifically focuses on the effectiveness of the executive branch of
government.

The working definition used by the British Council, however, emphasizes that
"governance" is a broader notion than government (and for that matter also
related concepts like the state, good government and regime), and goes on to
state: "Governance involves interaction between the formal institutions and those in
civil society. Governance refers to a process whereby elements in society wield
power, authority and influence and enact policies and decisions concerning public
life and social upliftment."

"Governance", therefore, not only encompasses but transcends the collective

meaning of related concepts like the state, government, regime and good
government. Many of the elements and principles underlying "good government"
have become an integral part of the meaning of "governance". John Healey and
Mark Robinson1 define "good government" as follows: "It implies a high level of
organizational effectiveness in relation to policy-formulation and the policies
actually pursued, especially in the conduct of economic policy and its
contribution to growth, stability and popular welfare. Good government also
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implies accountability, transparency, participation, openness and the rule of law. It
does not necessarily presuppose a value judgement, for example, a healthy
respect for civil and political liberties, although good government tends to be a
prerequisite for political legitimacy".

Mind-setting of Governance

We can apply our minds to the definition of governance provided by the World
Bank in Governance: The World Banks Experience, as it has special relevance for the
developing world:

"Good governance is epitomized by predictable, open and enlightened policy-

making, a bureaucracy imbued with a professional ethos acting in furtherance of
the public good, the rule of law, transparent processes, and a strong civil society
participating in public affairs. Poor governance (on the other hand) is
characterized by arbitrary policy making, unaccountable bureaucracies,
unenforced or unjust legal systems, the abuse of executive power, a civil society
unengaged in public life, and widespread corruption."

The World Bank's focus on governance reflects the worldwide thrust toward
political and economic liberalization. Such a governance approach highlights
issues of greater state responsiveness and accountability, and the impact of
these factors on political stability and economic development. In its 1989 report,
From Crisis to Sustainable Growth, the World Bank expressed this notion as follows:

"Efforts to create an enabling environment and to build capacities will be wasted

if the political context is not favorable. Ultimately, better governance requires
political renewal. This means a concerted attack on corruption from the highest to
lowest level. This can be done by setting a good example, by strengthening
accountability, by encouraging public debate, and by nurturing a free press. It also
means ... fostering grassroots and non-governmental organizations such as farmers'
associations, co-operatives, and women's groups".

Apart from the World Bank's emphasis on governance, it is also necessary to refer to
academic literature on governance, which mostly originates from scholars
working with international development and donor agencies. Most of these scholars
has concentrated almost exclusively on the issue of political legitimacy, which is
the dependent variable produced by effective governance. Governance, as defined
here, is "the conscious management of regime structures, with a view to enhancing
the public realm".

The contribution of Goran Hyden to bring greater clarity to the concept of

governance needs special attention. He elevates governance to an "umbrella
concept to define an approach to comparative politics", an approach that fills
analytical gaps left by others. Using a governance approach, he emphasizes "the
creative potential of politics, especially with the ability of leaders to rise above the
existing structure of the ordinary, to change the rules of the game and to inspire
others to partake in efforts to move society forward in new and productive
directions".
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His views boil down to the following:

 Governance is a conceptual approach that, when fully elaborated, can

frame a comparative analysis of macro-politics.
 Governance concerns "big" questions of a "constitutional" nature that
establish the rules of political conduct.
 Governance involves creative intervention by political actors to change
structures that inhibit the expression of human potential.
 Governance is a rational concept, emphasizing the nature of interactions
between state and social actors, and among social actors themselves.
 Governance refers to types of relationships among political actors: that is,
those which are socially sanctioned rather than arbitrary.

To sum up, the concept of governance has over the years gained momentum and
a wider meaning. Apart from being an instrument of public affairs management,
or a gauge of political development, governance has become a useful mechanism
to enhance the legitimacy of the public realm. It has also become an analytical
framework or approach to comparative politics.

Eight Elements of Good Governance

Good governance has 8 major characteristics. It is participatory, consensus
oriented, accountable, transparent, responsive, effective and efficient, equitable
and inclusive, and follows the rule of law. Good governance is responsive to the
present and future needs of the organization, exercises prudence in policy-
setting and decision-making, and that the best interests of all stakeholders are
considered.

1. Rule of Law
Good governance requires fair legal frameworks that are enforced by an
impartial regulatory body, for the full protection of stakeholders.

2. Transparency. Transparency means that information should be provided in

easily understandable forms and media; that it should be freely available and
directly accessible to those who will be affected by governance policies and
practices, as well as the outcomes resulting therefrom; and that any decisions
taken, and their enforcement are following established rules and regulations.

3. Responsiveness. Good governance requires that organizations and their

processes are designed to serve the best interests of stakeholders within a
reasonable time frame.
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4. Consensus Oriented. Good governance requires consultation to understand
the different interests of stakeholders to reach a broad consensus of what is in
the best interest of the entire stakeholder group and how this can be achieved
in a sustainable and prudent manner.

5. Equity and Inclusiveness. The organization that provides the opportunity for
its stakeholders to maintain, enhance, or generally improve their well-being
provides the most compelling message regarding its reason for existence and
value to society.
6. Effectiveness and Efficiency. Good governance means that the processes
implemented by the organization to produce favorable results meet the needs of its
stakeholders, while making the best use of resources – human, technological,
financial, natural and environmental – at its disposal.

7. Accountability. Accountability is a key tenet of good governance. Who is

accountable for what should be documented in policy statements. In general, an
organization is accountable to those who will be affected by its decisions or actions
as well as the applicable rules of law.

8. Participation. Participation by both men and women, either directly or

through legitimate representatives, is a key cornerstone of good governance.
Participation needs to be informed and organized, including freedom of expression
and assiduous concern for the best interests of the organization and society in
general.
Good governance is an ideal which is difficult to achieve in its totality.
Governance typically involves well-intentioned people who bring their ideas,
experiences, preferences and other human strengths and shortcomings to the
policy-making table. Good governance is achieved through an on-going discourse
that attempts to capture all of the considerations involved in assuring that
stakeholder interests are addressed and reflected in policy initiatives.

Key Players in Corporate Governance

A corporation's decisions and actions affect many people and entities, known as
stakeholders, who include shareholders, directors, employees, creditors,
suppliers, and other interested parties. As noted, corporate governance involves the
way a corporation's stakeholders interact with one another to make corporate
decisions. However, not all stakeholders have an opportunity to participate in
corporate governance.
Within corporate governance, there are typically three key groups of
stakeholders involved: shareholders, directors, and officers. In practice, these key
players have the most power in corporate governance.

1. Shareholders
You already know that as an owner of an AAPL stock, you are a
shareholder, and you can participate in corporate governance by voting on
important issues. However, not all shareholders are people like you.
Some shareholders are institutional investors, which are generally commercial
or legal entities like mutual funds, insurance companies, trusts, investment
banks, etc. They often invest in large quantities of stock in strong
corporations on behalf of others. As noted previously, a shareholder with
many shares often has more power than a shareholder with few shares.

2. Directors
Directors, often referred to as the board of directors, are often appointed
or elected by the shareholders. These stakeholders are legally accountable for
many actions of the corporation. The board of directors decides important
 9
issues and develops the long- term strategies of a corporation.

3. Officers
Officers are employees who serve the directors as top-level management, such
as the CEO, CFO, and COO. These stakeholders often make the day-to-day
decisions for the corporation. These decisions are intended to carry out the
will of the shareholders and the directives of the board of directors.
It isn't uncommon for officers to also be members of the board of directors.
It's crucial to the corporation's health that the officers and board of
directors work together.

Governance Indicators
Governance consists of the traditions and institutions by which authority in a
country is exercised. This includes the process by which governments are
selected, monitored and replaced; the capacity of the government to effectively
formulate and implement sound policies; and the respect of citizens and the state
for the institutions that govern economic and social interactions among them.
The Worldwide Governance Indicators (WGI) report on six broad dimensions of
governance for over 215 countries and territories over the period 1996- 2018:

1. Voice and Accountability

2. Political Stability and Absence of Violence
3. Government Effectiveness
4. Regulatory Quality; (V) Rule of Law
5. Control of Corruption.

The WGI are composite governance indicators based on over 30 underlying data
sources. These data sources are rescaled and combined to create the six aggregate
indicators using a statistical methodology known as an unobserved components
model. A key feature of the methodology is that it generates margins of error for each
governance estimate. These margins of error need to be taken into account when
making comparisons across countries and over time.
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MODULE 2

II. CORPORATE GOVERNANCE

Learning Outcome:

Towards the end of Module 2 students are expected to

 Integrate general concepts of governance to corporate setting and

distinguish the different approaches to governance
 Enhance knowledge and understanding of Corporate Code of Conduct

Topic Coverage

 Corporate Governance: Defined

 Corporate Culture
 Corporate Governance History and Framework
 The Agency Theory
 The Stakeholder Theory
 The Stewardship Theory

INTRODUCTION

Now that you have completed module 1 you have a clear understanding of what
governance is, its key player and elements. Module 2 will cover concepts on
corporate governance. Corporate Governance is the framework as how a company
is managed, directed and controlled. It is the set of rules, policies, and practices
and processes an organization designs for its operation. We will also discuss
approaches to governance. Let’s start!

Corporate Governance: Defined

The term corporate/corporation was derived from the Latin word “corporare”
which means combined in one body and governance from the Latin word
“gubernare” which means to steer or rule. To put it simply Corporate
Governance means a set of systems, procedures, policies, practices, and
standards (streer/rule) put in place by a corporate (one body) to ensure
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relationships with various stakeholders is maintained in transparent and honest
manner. corporate governance have been used and studied for a long time but never
knew its name until Robert Ian Trickler defined the field in his book (1984).


Author & Founder of Oxford Centre for
Management Studies
 Born: 1933
 FATHER OF CORPORATE GOVERNANCE
“Corporate Governance is concerned with the way corporate
entities are governed, as distinct from the way business
within those companies are managed. Corporate governance
addresses the issues facing Board of Directors, such as the
interaction with top management and relationships with the
owners and others interested in the affairs of the company” -
Robert Ian Tricker (who introduces corporate governance
IMAGE SOURCE: [Link]
for the first time in his book in 1984)
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Throughout the 20th century the focuses of study have always on Management,
Tricker thought “but where was the board on the management chart?” in addition,
Tricker realized that management is different from governance and clearly the
governance of corporate entities and the process of this governing bodies deserved
study. In 1983 a collection of essays in the Exercise of Corporate Governance was
published.

Corporate governance is the system by which organizations are managed,

directed and controlled to achieve its objectives. Cadbury defined corporate
governance as ‘the direction, management and control of an organisation’
(1992).

Why do we need to study corporate governance? Many studies have showed that a
well managed and governed company succeeds.

Corporate Culture

Can you imagine an organization where everyone is the same? The

organization will suffer from lack of creativity and development leading to
failure. How about an organization with entirely diverse people who can’t
seem to agree on almost everything? The organization will be in total
chaos leading to failure. The truth is an organization is composed of
different individual with different personality, values, objectives and ideas.
How do we manage this conflict? Organizations have their own culture
shaped by its vision, mission and core values.

STAGNANT ORGANIZATION CHAOTIC ORGANIZATION SUCESSFUL ORGANIZATION

Corporate Culture have been defined academically over the course of time.
Here are some definitions of corporate culture:

Shared meanings, values, attitudes and beliefs that are created and
communicated within an organisation (Ashkenasy, Widerson and Peterson,
2000)

The set of shared taken for granted implicit assumptions that members of an
organisation hold and that determine how they perceive, think about and react
to their various environments (Schein, 1992)

Culture is the best way we do things around here. (Bowers and Seashore, 1966)

Corporate culture, also called organization’s personality, is not only set of

company rules, mission statement, code of conduct, core values; it is a complex
mix of factors that put together to shape an existing practice how things are
done in the workplace. There are tangible manifestations of culture but there are
also aspects of culture that are not visible. ‘Culture’ include unwritten rules;
assumptions about expected office behavior; and shared values. Below is a figure
illustrating the observable and not observable aspect of corporate culture.
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IMAGE SOURCE: [Link]

The cultural iceberg shows that the observable aspect and practice of
culture is just a small part of the entire components of culture. The Iceberg
has three components namely: Behavior and practice, interpretation and
core value. Behaviors and practice include words and actions which are
highly observable. Interpretation is how we feel the core values should
be reflected in specific situations in daily life. One of San Miguel
Corporation’s core values is “We are good neighbor . We are a positive force
in our communities. We believe in doing what is good for the greatest number of
people.”, the current president of SMC Mr. Ramon S. Ang, interpreted this as
helping the nation as we battle the pandemic COVID-19 this is then manifested by
launching (action/behavior and practice) their project “walang Iwanan” where the
company donated medical equipments, testing kits, PPE’s and food although,
obviously, it’s also a bad time for their business. Finally, core values are learned
ideas of what is regarded as good or bad; right or wrong; desirable or
undesirable; acceptable and unacceptable. Core value although not observable is
composed of the greater portion of the iceberg. Our values are further influenced
by external and personal factors.

Corporate Governance History and Framework

Corporation was born in Britain with an 1844 Act allowing to define their own purpose.
The
power to control them thus passed from the
government to the courts. In 1855, shareholders
were awarded limited liability where their personal
assets are protected from the corporation’s
behavior. During this time roles of ownership and
control were separated which emphasized the
need for corporate governance. A company must
be managed where the interest of all its
stakeholders are carefully considered.

In 1922, Cadbury Report provided a Code of Best

Practice for companies. This code was built around
key principles of accountability, probity, and
transparency.
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These principles along equity have been proven a good foundation for excellent
corporate governance and have been used as standard of good governance.
Benchmarking from this principles private corporation began developing their ideas
of what good governance looks like.

The cornerstone of good corporate governance is when all the stakeholders’

interest are considered and protected .In order to adhere to good corporate
governance a company needs to be accountable, transparent, and ethical. To be
accountable is take responsibility to another party for our decisions, actions or
activities. To be transparent, a business needs to adhere to the full, accurate and
timely disclosure of information. To be ethical means that the business must
focus on doing ‘what is right’ and what is expected from society instead of what
is expected from them from an economic and legal viewpoint. This implies that
Corporate Social Responsibility has a direct linkage to a company having good
corporate governance procedures and is therefore an important part of how a
company operates. However, these are principles and guidelines and are not
compulsory because it may true to one organization but may not apply to
another.

Importance of Good Corporate Governance

The ultimate goal of every business is to gain profit without compromising its
corporate social responsibility. With good governance the company will perform
better, and be able to make a sound decision by reducing the impact of risk and
exploiting business opportunities. It also underpins the company’s responsibility in
handling company assets and conduct of business.

The Agency Theory

Do you know what KFC, Apple and Mc Donald’s have in common? All of these
multinational companies are very successful and started small. This storyline is very
common to both local and multinational company. As the business grows the
effectiveness of an individual or a small group of individuals to effectively
manage the business declines consequently the need for someone to assist them
in day-to-day operation to strategic planning arises. This is the root of agency
theory. The managers or directors are agents of the investor or shareholders, known
as the principal. The agent is entrusted with the principal’s money and their role
is to make decision that would best protect the principal’s interest.

It is expected that the agents will (a) use the asset to create profit, (b) expand
the initial capital, and (c) preserve and grow the asset of the business. In return
agents receive decent remuneration proportionate to their status and their level
of success in making money for the principal. The agents are more familiar with
the business operations and may have more
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information in their control making it easier for them to decide in behalf of the
principal. They make the principal riche, they receive fat paycheck. Sounds like a
fairytale? Not really! Several studies show that the agent may make decision that
serves him and not the principal. The Institute of Chartered Accountants in England
and Wales, in November 2006, expressed it this way: In principle the agency model
assumes that no agents are trustworthy and if they can make themselves richer
at the expense of their principals they will. (Taylor 2013). It is imperative that
company must reconcile the principal’s and the agent’s objective and interest.

The Stakeholder Theory

Contrary to the “shareholder theory,” in the early 20th century by economist

Milton Friedman, says that a company is beholden only to shareholders, the
stakeholder theory maintains that the company has wider range of
responsibilities to a broad range of stakeholders rather than simply its
shareholders. Stakeholder theory was first described by Dr. F. Edward
Freeman, a professor at the University of Virginia. A company’s stakeholders are
"those groups without whose support the organization would cease to exist."
These groups would include customers, employees, suppliers, political action
groups, environmental groups, local communities, the media, financial institutions,
governmental groups, and more. Freeman stated in his book that a successful
company never loses sight of everyone involved in its success.

Stakeholder theory can be linked to the concept of corporate social

responsibility which will be discussed later in this module.

The Stewardship Theory

A steward is someone who protects and takes care of the needs of others. The
stewardship theory is a concept that has inspired organization whose mission is
to preserve, protect and grow social and economic assets for the benefit of
stakeholders.

To understand the stewardship theory better, it is helpful to contrast it with two

other popular governance theories. The agency theory focuses on a checks-and-
balances type of governance. The CEO and Chairman of the Board are two
distinct entities where the board of directors, is tasked with monitoring
management to avoid problems. The stakeholder theory examines the needs of
not only shareholders but of every faction associated with the organization –
including employees, suppliers and business partners -- and no one group is
more important than the other. In stewardship theory company executives
protect the interests of the owners or shareholders and make decisions on their
behalf and likewise promoting the interest of the stakeholders.

The stewardship theory of governance has a clear objective of stakeholder

satisfaction. Having a single leader creates one channel to communicate
business needs to the shareholders and the shareholders’ needs to the business.
This also eliminates confusion as to who is in charge when a company needs to
weather a storm. Stewardship governance requires that a CEO be trustworthy
and willing to put personal gains aside for the good of the organization.
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MODULE 3

I. ETHICS & BUSINESS

Learning Outcome:

Towards the end of Module 3 students are expected to

 Explain the relevance of ethics to business practices.

 Discuss the different Ethical Theories
 Design and create business policies anchored in the principles of Business
Ethics

Topic Coverage

 Nature of Business
 Ethics: Defined
 Relationship of Ethics and Business
 Normative Ethical Theories used in Corporate Decision-Making
 Kohlberg’s Stages of Moral Development
 Machiavellian Principles
 The Kantian Ethics
 Ethical Decision-making Models
 Test of Ethical Behavior
 Ethical Issues in the Corporate World

Nature of Business

What Is a Business?

A business is defined as an organization or enterprising entity engaged in

commercial, industrial, or professional activities. Businesses can be for-profit
entities or they can be non- profit organizations that operate to fulfill a
charitable mission or further a social cause.

The term "business" also refers to the organized efforts and activities of
individuals to produce and sell goods and services for profit. Businesses range in
scale from a sole proprietorship to an international corporation. Several lines of
theory are engaged with understanding business administration including
organizational behavior, organization theory, and strategic management.

Understanding a Business
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Generally, a business begins with a business concept (the idea) and a name.
Depending on the nature of the business, extensive market research may be
necessary to determine whether turning the idea into a business is feasible and if
the business can deliver value to consumers. The business name can be one of
the most valuable assets of a firm; careful consideration should thus be given
when choosing it. Businesses operating under fictitious names must be registered
with the state.

Businesses most often form after the development of a business plan, which is a
formal document detailing a business's goals and objectives, and its strategies of
how it will achieve the goals and objectives. Business plans are almost essential
when borrowing capital to begin operations.

It is also important to determine the legal structure of the business. Depending

on the type of business, it may need to secure permits, adhere to registration
requirements, and obtain licenses to legally operate. In many countries,
corporations are considered to be juridical persons, meaning that the business
can own property, take on debt, and be sued in court.

To have a better understanding of what a business is, we must go through the

following points:

Regular Process – It is an activity which is performed repeatedly to generate profit.

Economic Activity – The whole sole purpose is maximizing wealth.

Creates Utility – The goods or service must be such that it creates form utility –
conversion of products in a consumable form, time utility – making the goods and
services available when needed; and place utility – availability of goods or
services wherever required, for the consumers.

Capital Requirement – Any venture requires fund depending on the size and its
type.

Deals in Goods and Services – It is related to manufacturing and offering

goods for sale or catering services.

Risk – All businesses have a risk factor or uncertainties of failure and loss.
 18
Profit Earning Motive – The initial motive of a businessman is making a profit out of
his venture.

Satisfaction of Consumer’s Need – It is concerned with the fulfilment of the

customer’s demands and needs.

Involves Buyer and Seller – There are majorly two parties involved, the
customer and the merchandise.

Social Obligations – It has some social responsibilities, like creating job

opportunities, dealing with licensed products, etc.
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Ethics

Ethics deals with such questions at all levels. Its subject consists of the
fundamental issues of practical decision-making, and its major concerns include
the matter of ultimate value and the standards by which human actions can be
judged right or wrong…. In this sense, ethics is equivalent to moral philosophy.

Ethics or moral philosophy is a branch of philosophy that involves systematizing,

defending, and recommending concepts of right and wrong conduct… Ethics
seeks to resolve questions of human morality by defining concepts such as good
and evil, right and wrong, virtue and vice, justice & crime.

Why Study Ethics?

Ethics is a central component of any happy, healthy, and mature life. But some
critics still question the value of studying ethics and living an ethical life. After all,
if you ignore ethics, you can just focus on yourself, right? Not so fast. Some great
reasons to resist those critics include the following:

1. Ethics allows you to live an authentic life. An authentic and

meaningful life requires you to live with a sense of integrity. Integrity is
making commitments and sticking to them through thick and thin — no
matter how much violating them may benefit you. Having a firm character
or set of principles to guide your life and the choices you make is what
ethics is all about.

2. Ethics makes you more successful. You may think that ethics can hold
you back in all kinds of ways, but the truth is the opposite. Ethical people
embody traits that unethical people have to work at to fake — they’re
honest, trustworthy, loyal, and caring. As a result, ethical people are
perfectly suited not only for interpersonal relationships generally, but also
more specifically for the kinds of interactions that make for thriving
business. Unethical people generally don’t do so well at these things.

3. Ethics allows you to cultivate inner peace. Lives that are lived
ethically tend to be calmer, more focused, and more productive than those
that are lived unethically. Most people can’t turn off their sympathy for
other human beings. Hurting people leaves scars on both the giver and the
receiver. As a result, unethical people have stormier internal lives because
they have to work to suppress their consciences and sympathies to deal with
the ways they treat others. When they fail to properly suppress their
sympathies, the guilt and shame that comes with harming or disrespecting
one’s fellow human beings takes deep root within them.

4. Ethics provides for a stable society. When people live ethical lives,
they tell the truth, avoid harming others, and are generous. Working with
such people is easy. On the other hand, callous and insensitive people are
distrusted, so it’s difficult for them to be integrated well into social
arrangements. A stable society requires a lot of ethical people working
together in highly coordinated ways. If society were mostly composed of
unethical people, it would quickly crumble.

5. Ethics may help out in the afterlife. Some religious traditions believe
ethics is the key to something even greater than personal success and social
stability: eternal life. No one can be sure about an eternal life, but people of
 20
faith from many different religions believe that good behavior in this life
leads to rewards in the next life.

Ethics and Morals

Our second point of clarification is on the use of the words “ethics” and “morals”.
This discussion of ethics and morals would include cognates such as ethical,
unethical, immoral, amoral, morality, and so on. As we proceed, we should be
careful particularly on the use of the word “not” when applied to the words
“moral” or “ethical” as this can be ambiguous. One might say that cooking is not
ethical, that is, the act of cooking does not belong to a discussion of ethics; on
the other hand, one might say that lying is not ethical, but the meaning here is
that the act of lying would be an unethical act.

Let us consider those two words further. The term “morals” may be used to refer
to specific beliefs or attitudes that people have or to describe acts that people
reform. Thus, it is sometimes said that an individual’s personal conduct is
referred to as his morals, and if he falls short of behaving properly, this can be
described as immoral. However, we also have terms such as “moral judgement” or
“moral reasoning”, which suggest a more rational aspect. The term “ethics” can
be spoken of as the discipline of studying and understanding ideal human behavior
and ideal ways of thinking. Thus, ethics is acknowledged as an intellectual discipline
belonging to philosophy. However, acceptable and unacceptable behaviors are also
generally described as ethical and unethical, respectively. In addition, regarding the
acceptable and unacceptable ways of behaving in a given field, we have the term
“professional ethics” (e.g. legal ethics for the proper comportment of lawyers and
other people in the legal profession; medical ethics for doctors and nurses; and
media ethics for writers and reporters).

Therefore, various thinkers and writers posit a distinction between the terms
“moral” and “ethics” and they may have good reasons for doing so, but there is
no consensus as to how to make that distinction. Ordinary conversation presents
a much less rigid distinction between these terms, and in this book, we will lean
in that direction as we do not need to occupy ourselves here with the question of
how different thinkers and writers construe that distinction. So, in this subject, we
will be using the terms “ethical” and “moral” (likewise, “ethics” and “morality”)
interchangeably. (Christopher Panza, Adam Potthast)

Descriptive and Normative

Our third point of clarification is to distinguish between a descriptive and a

normative study of ethics. A descriptive study of ethics reports how people,
particularly groups, make their moral valuations without making any judgement
either for or against these valuations. This kind of study is often the work of the
social scientist: either a historian (studying different moral standards over time)
or a sociologist or an anthropologist (studying different moral standards across
cultures).

A normative study of ethics, as is often done in philosophy or moral theology,

engages the question: What could or should be considered as the right way of
acting? In other words, a normative discussion prescribes what we ought to maintain
as our standards or bases for moral valuation. When engaging in a discussion of
ethics, it is always advisable to recognize whether one is concerned with a
descriptive view (e.g., noting how filial piety and obedience are pervasive
characteristics of Chinese culture) or with a normative perspective (e.g. studying how
Confucian ethics enjoins us to obey our parents and to show filial piety).
 21
We need to go further. A philosophical discussion of ethics goes beyond
recognizing the characteristics of some descriptive theory; also, it does not
simply accept as correct any normative theory. A philosophical discussion of ethics
engages in a critical consideration of the strengths and weaknesses of these
theories. This will be the primary concern in this subject.
 22

Relationship of Ethics and Business

Understanding the relationship between business & ethics

The relationship between business and ethics is intrinsically entwined. A successful

company is one which can effectively recognize and cultivate the relationship which
exists between the two.

Businesses that exhibit and promote strong corporate codes of ethics are more
prosperous in the long run because they show a commitment to an expectation
of sound moral behavior. This demonstrates a dedication to society, customers,
employees and the business itself. It also enhances a company's reputation if they
become commonly known as an ethical company, and this brings more value to the
organization.

The highly competitive environment in today's global economy puts pressures on

company leaders to remain profitable and to show a good return to stakeholders.
Often this pressure can result in unethical decisions being made in order to
deliver positive results. When this occurs it usually results in a pattern that gets
passed down through the organization. As leaders show unethical behavior, and
perhaps even justify such behavior while knowing it to be wrong, this eventually
becomes a part of organizational culture. People follow by example, and the lack
of moral judgment will spread.

It's easy to blame "the system", yet many fail to realize "the system" is
comprised of decision- making individuals. The relationship between business and
ethics is inherently linked, but there are some who fail to make this connection. To
say "business is business" is not justified, as responsible (ethical) decision
making is an important component of doing good business.

Today's society is an instant gratification one, and people expect immediate

results. This is perhaps part of the reason why some companies exhibit bad
business practices. Not the only reason, but perhaps a common one. Obviously,
one's individual moral compass impacts choices made in a business, and when the
cultural environment nurtures sound moral philosophies and does not tolerate bad
business practices, the immoral acts will decline.

Granted the unethical companies may initially make significant gains financially and
deliver the profits, but at what cost? When companies make unethical decisions,
it can result in defective or rushed products, unsubstantiated firing of employees,
and false presentations of products to consumers.

Is this good for the company? The fact is the only thing it creates is an illusion.
Yes, these factors will all cut costs and give the appearance of profit, but it's
inevitable that poor choices will negatively impact the business and be costlier in
the long run.

While the immediate bottom lines show a healthy profit through immoral acts,
the reputations of these companies ultimately suffer. Over the course of time this
can really hurt a business and its profits. All too often we hear about CEOs who
have either stolen funds, or ruined a company's reputation, due to corrupt
practices.

In the long run, managers and leaders who promote an atmosphere with low
ethical standards bring harm the business. While it may not necessarily shut the
business down, it will impact the opportunity to increase revenues to its fullest
potential.
 23
Good business practices start with management setting standards of what's
expected, and they should lead by example. The establishment of higher levels of
ethical behavior within a business benefits the company in many ways. It displays
strong values have been set for a commitment to company philosophy and
mission.

There is no good reason why a company cannot make ethically sound decisions, and
still turn a profit. Cheating and/or lying do not bring value to a business, and it
also affects employee morale. Employees and reputation are two very valuable
assets, and by promoting a morally sound environment for both employees and
customers; this can only enhance those assets.

Consumer trust and confidence in a business can only serve to benefit the company.
Economic rules dictate that the larger a network, the more value is added to that
network. If customers can accurately rely on the fair treatment, expertise and
knowledge of a company, this will further expand their reputation as honest and
as a result attract more customers. This ultimately economically benefits the
company as well, and their network will grow. This being the case, it would be in a
company's best interest to promote universal ethically good behavior in the
workplace.

A positive reputation leads to higher profits and provides better service for the
public. Ethics and business go hand in hand and cannot effectively be separated.
Ultimately implementing a strong ethical policy is a win-win situation for all. In
today's competitive environment why wouldn't a company want to do all they can
do to promote success on all levels?

Normative Ethical Theories used in Corporate Decision-Making

This chapter will introduce different approaches to ethical decision-making:

● Deontological

● Teleological

● Character-based

Normative ethical theories

The word ‘normative’ is an adjective which comes from the word ‘norm’, which
means a ‘standard’, or a ‘rule’, so moral norms are standards or principles with
which people are expected to comply. Obviously, people have different ideas about
what these standards are, so the various normative theories of ethics therefore
focus on what they claim makes an action a moral action: on what things are
good or bad, and what kind of behavior is right as opposed to wrong. The three
normative theories you are studying therefore illustrate three different sets of
ideas about how we should live. Deontology, teleology, consequentialism and
character-based ethics are not in themselves ethical theories – they are types of
ethical theory. Natural moral law is seen by most people as one type of
deontological theory; Kant’s theory of the Categorical Imperative is another.
Fletcher’s situation ethics is one type of consequentialist theory; utilitarianism is
another. Aristotle’s virtue ethics is a type of teleological theory and is also
character based. The different types of ethical theory are not exclusive, however,
so we also find teleological ideas in virtue ethics and situation ethics. To unpack
 24
these words further:

Deontological

The word ‘deontological’ comes from the Greek deon, meaning “obligation”,
“necessity”, “that which is binding”. Those words translate as ‘duty’, so
deontological theories tell you what your moral duties are. As you might guess,
once people start telling you what duties you have, those duties form the basis of
moral “rules”. Deontological systems hold that the moral worth of an
 25

action lies in your conforming to duties and rules, as opposed to considering the
consequences of what you do. Alongside obligations, duties and rules,
deontological theories also consider “rights”, because your obligation to follow
rules and duties implies that there is an intrinsic (built-in) value of doing so. If you
follow the rule, “Do not murder”, then you implicitly have the right not to be
murdered. Deontologists therefore live in a world of moral rules. Apart from, “Do
not murder”, some of the obvious ones are: “Do not steal” “Do not lie” “Do not
break your promises” Such rules can also be expressed by using the moral word,
“ought”: these actions ought or ought not to be performed. Since deontologists
hold that acts are intrinsically right or wrong, then their rightness or wrongness is
in some sense built into the world and can be accessed by reason, or by studying
the world, or (for religious deontology) by knowing the will of God. This intrinsic
goodness is why deontologists emphasize the importance of “motive” and
“intention”. One of the best examples of this comes from Immanuel Kant’s
deontological ethical theory based on categorical imperatives (commands that
must be obeyed). Kant would have argued that an action was moral only if it was
done in obedience to a rule; other motives (such as personal gain or satisfaction)
were discounted. Kant gave the example of a grocer who is kind to his customers,
not because he sees that as his moral duty, but because he wants their custom.
Instead of being kind because of the intrinsic goodness of kindness, the grocer is
kind simply because he wants to achieve the best consequence for himself. Any
moral goodness from his action has therefore been lost. You can probably see that
deontological ethics can lead people to act in ways which bring about bad
consequences. For example, if you have a duty not to lie, but following that duty
means that somebody dies in consequence, the value of the rule, “do not lie”,
can be questioned. Kant himself thought about this problem a lot in connection
with the “mad axe-murderer”, which you have probably heard about. If not, look
it up online.

Consequential

Consequentialist theories of ethics hold that the moral worth of an action should
be judged by its consequences. So, a good or right action is one which produces
the best consequences overall in the situation. There are therefore situations
where a consequentialist would be prepared to lie if that was thought necessary
to bring about the best consequence(s).

The best-known consequentialist theory is Utilitarianism, which is an example of

“act- consequentialism”, where right actions are those which maximize the
‘happiness’ of sentient beings (beings that can think, reason, feel, experience).
Happiness has different shades of meaning for different utilitarian, so can include
pleasure, well-being, individual preferences and individual interests. Although
consequentialist theories are not focused on moral rules, they can be included in the
theory, so, for example, rules can be used to maximize the best consequences.
This follows because rules often become rules because historically they have been
shown to produce the best consequences for society. Our ancestors found out that
having simple rules (such as those prohibiting murder and theft) usually led to a
happier society overall. Whereas in deontological theories the focus is on the
intrinsic value of the rule itself, in consequentialist ethics the focus is on the
value of the consequence of the rule. There are no inherently right or wrong acts.
Consequentialist theories have to be “predictive”, because in order to bring
about the best consequences of an act, we have to be able to predict what the
consequences will probably be. In order to bring about these consequences, it can be
 26
legitimate to ignore rights; for example, the rights of minorities. Consequentialism
is a type of teleological theory.

Teleological

“Teleological” derives from the Greek word telos, meaning “end”, “goal”, or
“purpose”. You have already come across this word in connection with the
Design Argument for the existence of God, which is also known as the Teleological
Argument, because it claims that God’s purposes are visible in what we can observe
about the universe. In ethics, the end, goal or purpose which we seek referred to
our responsibilities in attaining specific moral goals or ends. For teleological ethical
theories, therefore, if you want to find out how you should behave morally, you
need to decide what the ultimate goal of ethics is. Teleological ethical theories
can also be consequentialist, because as well as being directed towards an
ultimate goal or purpose, a teleological theory can also look to achieve the best
consequence in any particular situation. This will follow the simple reason that to
achieve the best consequence in any particular situation will generally contribute
to the overall goal.

Character-based

You will have noticed that deontological and consequentialist theories are act-
centered – we judge that specific acts are good or bad, right or wrong. By
contrast, character-based ethics is agent-centered, meaning that goodness is not
in the act but in the person: we judge whether the agent is by habit and by
character a good or virtuous person. In Kant’s deontological theory, someone who
does morally good acts by habit is not thought of as being morally good, because
moral goodness requires the moral agent to decide what to do in accordance with
reason. Consider this example: There was an obituary, some years ago, about a
lady in one of the local church communities who was regarded as being a virtuous
person because she was habitually kind to everybody, no matter who they were.
The editor of the newspaper concerned added a note to the letter saying: “I
never met Mrs C, but it has been a pleasure to receive this obituary notice as a
testimony to her naturally good qualities”. In other words, the editor praised the
lady’s natural character and thereby judged that Kant had got it wrong: goodness
is in the person, not in the act.

Kohlberg's Stages of Moral Development

Level 1 - Pre-conventional morality

At the pre-conventional level (most nine-year-olds and younger, some over nine), we
 27
don’t have a personal code of morality. Instead, our moral code is shaped by the
standards of adults and the consequences of following or breaking their rules.

Authority is outside the individual and reasoning is based on the physical

consequences of actions.

• Stage 1. Obedience and Punishment Orientation. The child/individual is good to avoid

being punished. If a person is punished, they must have done wrong.

• Stage 2. Individualism and Exchange. At this stage, children recognize that there is not just
one right view that is handed down by the authorities. Different individuals have different

Level 2 - Conventional morality

At the conventional level (most adolescents and adults), we begin to internalize the
moral standards of valued adult role models.

Authority is internalized but not questioned, and reasoning is based on the norms of
the group to which the person belongs.

• Stage 3. Good Interpersonal Relationships. The child/individual is good to be seen as

being a good person by others. Therefore, answers relate to the approval of others.

• Stage 4. Maintaining the Social Order. The child/individual becomes aware of the wider
rules of society, so judgments concern obeying the rules in order to uphold the law and
to

Level 3 - Post-conventional morality

Individual judgment is based on self-chosen principles, and moral reasoning is

based on individual rights and justice. According to Kohlberg this level of moral
reasoning is as far as most people get.

Only 10-15% are capable of the kind of abstract thinking necessary for stage 5 or
6 (post- conventional morality). That is to say, most people take their moral
views from those around them and only a minority think through ethical
principles for themselves.

• Stage 5. Social Contract and Individual Rights. The child/individual becomes aware that while
rules/laws might exist for the good of the greatest number, there are times when they will work
against the interest of particular individuals.

The issues are not always clear-cut. For example, in Heinz’s dilemma, the protection of life is more
important than breaking the law against stealing.

• Stage 6. Universal Principles. People at this stage have developed their own set of moral guidelines
which may or may not fit the law. The principles apply to everyone.

E.g., human rights, justice, and equality. The person will be prepared to act to defend these
principles even if it means going against the rest of society in the process and having to pay the
consequences of disapproval and or imprisonment. Kohlberg doubted few people reached this
stage.
 28

Problems with Kohlberg's Methods

1. The dilemmas are artificial (i.e., they lack ecological validity) Most of the
dilemmas are unfamiliar to most people (Rosen, 1980). For example, it is all very
well in the Heinz dilemma asking subjects whether Heinz should steal the drug to
save his wife.

However, Kohlberg’s subjects were aged between 10 and 16. They have never been
married, and never been placed in a situation remotely like the one in the story.
How should they know whether Heinz should steal the drug?

2. The sample is biased According to Gilligan (1977), because Kohlberg’s

theory was based on an all-male sample, the stages reflect a male definition of
morality (it’s androcentric). Mens' morality is based on abstract principles of law
and justice, while womens' is based on principles of compassion and care.

Further, the gender bias issue raised by Gilligan is a reminded of the significant
gender debate still present in psychology, which when ignored, can have a large
impact on the results obtained through psychological research.

3. The dilemmas are hypothetical (i.e., they are not real). In a real situation,
what course of action a person takes will have real consequences – and
sometimes very unpleasant ones for themselves. Would subjects reason in the
same way if they were placed in a real situation? We just don’t know.

The fact that Kohlberg’s theory is heavily dependent on an individual’s response

to an artificial dilemma brings a question to the validity of the results obtained
through this research.

People may respond very differently to real life situations that they find
themselves in than they do with an artificial dilemma presented to them in the
comfort of a research environment.

4. Poor research design. The way in which Kohlberg carried out his research
when constructing this theory may not have been the best way to test whether
all children follow the same sequence of stage progression.

His research was cross-sectional, meaning that he interviewed children of

different ages to see what level of moral development they were at.

A better way to see if all children follow the same order through the stages would
have been to carry out longitudinal research on the same children.

However, longitudinal research on Kohlberg’s theory has since been carried out by
Colby et al. (1983) who tested 58 male participants of Kohlberg’s original study. She
tested them six times in the span of 27 years and found support for Kohlberg’s
original conclusion, which we all pass through the stages of moral development
in the same order.

Problems with Kohlberg’s Theory

1. Are there distinct stages of moral development?

Kohlberg claims that there are, but the evidence does not always support this
conclusion. For example, a person who justified a decision based on principled
reasoning in one situation (post- conventional morality stage 5 or 6) would frequently
fall back on conventional reasoning (stage 3 or 4) with another story.
 29

In practice, it seems that reasoning about right and wrong depends more upon
the situation than upon general rules.

What is more, individuals do not always progress through the stages and Rest (1979)
found that one in fourteen actually slipped backward.

The evidence for distinct stages of moral development looks very weak, and some
would argue that behind the theory is a culturally biased belief in the superiority
of American values over those of other cultures and societies.

2. Does moral judgment match moral behavior?

Kohlberg never claimed that there would be a one to one correspondence between
thinking and acting (what we say and what we do) but he does suggest that the
two are linked.

However, Bee (1994) suggests that we also need to take account of:

a) habits that people have developed over time.

b) whether people see situations as demanding their participation.

c) the costs and benefits of behaving in a particular way.

d) competing motive such as peer pressure, self-interest and so on.

Overall Bee points out that moral behavior is only partly a question of moral
reasoning. It is also to do with social factors.

3. Is justice the most fundamental moral principle?

This is Kohlberg’s view. However, Gilligan (1977) suggests that the principle of caring
for others is equally important. Furthermore, Kohlberg claims that the moral
reasoning of males has been often in advance of that of females.

Girls are often found to be at stage 3 in Kohlberg’s system (good boy-nice girl
orientation) whereas boys are more often found to be at stage 4 (Law and Order
orientation). Gilligan (p.
484) replies:

“The very traits that have traditionally defined the goodness of women, their care
for and sensitivity to the needs of others, are those that mark them out as
deficient in moral development”.

In other words, Gilligan is claiming that there is a sex bias in Kohlberg’s theory.
He neglects the feminine voice of compassion, love, and non-violence, which is
associated with the socialization of girls.

Gilligan concluded that Kohlberg’s theory did not account for the fact that women
approach moral problems from an ‘ethics of care’, rather than an ‘ethics of
justice’ perspective, which challenges some of the fundamental assumptions of
Kohlberg’s theory.

Machiavellian Principles

Machiavelli list two other principles that are

important to becoming a successful leader.
First, Machiavelli believed that regardless of how a
prince was elected to office, he would only be
 30
successful when he utilized the strengths of his
ministers. Machiavelli believed that collaboration
created camaraderie and would leave little room
for disunity and rebellion. If Machiavelli was to
translate this to leadership in today’s
organizations I am sure he would tell us that our
missions cannot succeed without collaboration and
dialogue with others in our organization. We must
draw on and value the strengths, creativity, and
opinion of others to build an organization that
becomes an unstoppable force.
Second, Machiavelli wrote, “the prince ought to read history, and reflect upon the
deeds of outstanding men…examine the causes of their victories and defeats,
and thereby learn to emulate the former and avoid the latter.” In our world today,
it is imperative that we do not take our leadership journey alone. A leader must be
led. Outstanding leaders have outstanding mentors, coaches, and accountability
partners that push, pull, and walk beside to help them reach their goals.
In the classic book, The Prince, Niccolò Machiavelli stated that “Everyone sees what
you appear to be, few experiences what you really are.” Speaking primarily to the
prince and principalities of his time, Machiavelli said that a prince should present
the appearance of being a compassionate, trustworthy, kind, frank, sincere,
credible, faith-filled, courageous, generous and pious ruler. Thought-provoking
statements from a man that believed it was impossible for a person to actually
possess the virtues and principles he said were imperative for a leader to
influence others and lead effective change.
Machiavelli says that the prince is the state, and the state is the prince. Is it not
true that the same applies to leadership in organizations? The leader is the
organization, and the organization is the leader. Therefore, whatever virtues, vision,
and mission the leader hold, the organization will typically follow in.

The Kantian Ethics

Kant’s ethics are organized around the notion of a

“categorical imperative,” which is a universal ethical
principle stating that one should always respect the
humanity in others, and that one should only act in
accordance with rules that could hold for everyone.
Kant argued that the moral law is a truth of reason, and
hence that all rational creatures are bound by the same
moral law. Thus, in answer to the question, “What
should I do?” Kant replies that we should act rationally,
in accordance with a universal moral law.

Kant also argued that his ethical theory requires belief

in free will, God, and the immortality of the soul.
Although we cannot have knowledge of these things,
reflection on the moral law leads to a justified belief in
them, which amounts to a kind
rational faith. Thus, in answer to the question, “What may I hope?” Kant replies
that we may hope that our souls are immortal and that there really is a God who
designed the world in accordance with principles of justice.

In addition to these three focal points, Kant also made lasting contributions to
nearly all areas of philosophy. His aesthetic theory remains influential among art
critics. His theory of knowledge is required reading for many branches of analytic
philosophy. The cosmopolitanism behind his political theory colors discourse about
globalization and international relations. And some of his scientific contributions are
even considered intellectual precursors to several ideas in contemporary
cosmology.
 31

Ethical Decision-making Models

Ethical decision-making models provide a suggested mechanism for critical

thinking and planning for the resolution of ethical dilemmas. An ethical decision-
making model is a tool that can be used by health care providers to help develop
the ability to think through an ethical dilemma and arrive at an ethical decision. A
number of models are presented in the ethics literature, most of which are
similar in design and content. The goal of each model is to provide a framework
for making the best decision in a particular situation with which the health care
provider is confronted. Most of these models use principle-based reasoning, an
approach derived from the work of philosophers Beauchamp and Childress. These
models consider ethical principles, obligations and values. They advocate the use
of resources such as published evidence, clinical data and consulting colleagues in
dentistry. Some of these models incorporate four, five or seven steps for resolving
dilemmas but all support careful reasoning through the structure of a decision
model whether in solo private practice, large clinical settings, or advocacy
organizations.

The model suggested in this module is a simple six-step approach derived from
the decision- making literature as interpreted by Atchison and Beemsterboer and
used since the early 1990s with dental and dental hygiene students in a combined
ethics course. It is a reasoned approach based on theory and principle. The model
has been diagrammed as a circle to emphasize the use of past information and
experiences on current and future decision-making (Figure 1).

The process of decision-making is dynamic, evolving as additional information comes

to light. Dentists and dental hygienists are confronted with myriad questions to
consider, requiring them to factor in the code of ethics and their own values and
beliefs before arriving at a decision. The evaluation process involved in an ethical
dilemma is not unlike that which occurs when the practitioner is faced with a
clinical or scientific problem. Careful attention to and systematic analysis of the
evidence, facts, and details will help the health care professional reach an
appropriate decision. Applying the decision-making model gives a tool to use
throughout professional life.

Six-Step Decision-making Model

1. Identify the Ethical Dilemma or Problem. Step 1 is the most critical step in
the process as awareness of an issue must occur to move through the steps. Many
situations are simply never perceived to be ethical problems or dilemmas. Once
the problem has been recognized, the decision maker must clearly and succinctly
state the ethical question, considering all pertinent aspects of the problem. If the
ethical question does not place principles in conflict, it is a simple matter of right
and wrong and no process of ethical decision-making is required. Proceeding to
 32
step 2 is not necessary if a clear determination of right or wrong has been made.

2. Collect Information. The decision maker must gather information to make an

informed decision. This may be factual information about the situation as it
developed, and it may come from more than one source. Information regarding
the values of the parties involved, including those of the health care provider, is
needed.

3. State the Options. After gathering all the necessary information, one may
proceed to the third step, which involves brainstorming to identify as many
alternatives or options as possible. Often the best decision is not the first one that
comes to mind. Also, a tendency exists to think that a question has only one
answer. This step forces us to stop and view the situation from all angles to
identify what other people might see as alternative answers to the problem. An
enlightened and open mind is required to recognize often more than one answer
to a problem exists.

4. Apply the Ethical Principles to the Options. Focus on the ethical principles
(autonomy, beneficence, nonmaleficence, justice, veracity) and ethical values and
concepts (paternalism, confidentiality, and informed consent). In general, one or
more of these will be involved in any ethical decision.
State how each alternative will affect the ethical principle or rule by developing a
list of pros and cons. In the pro column, show alternatives that protect or hold
inviolate each principle or value. In the con column, state how an alternative
could violate the principle or value. Do this for each option. This process will
enable you to see which ethical principles are in conflict in this situation. Refer to
the appropriate code of ethics for guidance. Often discussing the issue with a trusted
colleague can help one gain a better-rounded appraisal of the situation and
subsequent solutions.

5. Make the Decision. When each alternative has been clearly outlined in terms
of pros and cons, a reasonable framework is apparent for making a decision.
Each option must then be considered in turn, with attention to how many pros
and cons would attend each decision. The seriousness of the cons must then be
weighed by the dental hygienist, remembering that, as a professional, he or she
is obliged to put the patient’s interests first. Simply by examining the options in a
careful way, the best solution to an ethical dilemma frequently becomes obvious.
Before implementing the decision, the practitioner should replay each principle
against the decision to see if the decision holds up to this evaluation.

6. Implement the Decision. The final step involves acting on the decision that
has been made. The decision process will have been futile if no action is taken.
Many appropriate decisions are never implemented because this step is omitted.
Remember that no action represents tacit approval of a situation.

Test of Ethical Behavior

What is an Ethics Test?

An ethics test is a test designed to measure someone's ability to adhere to a
code of conduct and beliefs. The test usually presents a series of hypothetical
situations and asks the test taker to explain how he or she would respond to those
situations. Ethics testing can be used in many different ways, ranging from
collecting data about participants in a scientific study to screening job candidates to
determine whether they would be a good fit for a workplace.
 33

Ethics is a set of principles that set

out the differences between right
and wrong. People can approach
ethics from a number of
perspectives. People from different
cultures, for example, may view
right and wrong differently.
Likewise, many professions have
ethical codes for their members,
designed to ensure a high standard
of behavior, and people who work in
these professions may incorporate
their professional ethics into their
personal lives.

An ethics test may be administered to an aspiring police officer.

One reason to conduct an ethics test is to determine whether or not someone has
absorbed professional ethics. Many workplaces rely on ethical behavior from their
employees, whether they are providing financial advice or counseling people in
need of psychiatric help. An ethics test screens people to see how they respond
to given situations. If a job candidate answers questions in unethical ways, it
suggests that this person may not be a good choice for the position.

Ethics tests can also be administered by professional organizations to people who

would like to join. These tests are used along with other measures to decide
whether or not someone is qualified to practice under the banner of the
organization. People must also usually agree to sign a document indicating that
they understand the ethical code of the organization and will adhere to it.

Sometimes people take ethics tests as a matter of personal interest. Answers to

ethics tests can sometimes reveal interesting information about people and
challenge the way people think about ethical issues. Sometimes students in
philosophy and ethics classes are invited to take such tests as a way of exploring
the role that ethics can have in their personal lives. People are sometimes
surprised to find that they do not apply ethics universally and may struggle
unexpectedly with ethically ambiguous situations presented on an ethics test. It
is important to note that although ethics purports to help people tell the
difference between right and wrong, these concepts can be nebulous. There are not
necessarily right or wrong answers to an ethics test, because ethical situations do not
occur in a vacuum. Complicated circumstances can cloud a decision and make it
difficult to determine the best course of action.

Ethical Issues in the Corporate World

From factory working conditions at the turn of the 20th century, to today’s
emphasis on diversity training, the history of workplace ethics is the ongoing
story of the relationship between employees and employers.

According to the Global Business Ethics Survey of 2018, employees (40%) believe
that their company has a weak leaning ethical culture, and that little progress
has been made to mitigate wrongdoing. Here are some of the ethical issues in
 34
business and real-world cases of how these ethical issues have affected companies.

1. Accounting
“Cooking the books” and otherwise conducting unethical accounting practices is
a serious problem, especially in publicly traded companies. One of the most
infamous examples is the 2001 scandal that enveloped American energy company
Enron, which for years inaccurately reported its financial statements and its auditor,
accounting firm Arthur Andersen, signed off on the statements despite them being
incorrect. When the truth emerged, both companies went out of business,
Enron’s shareholders lost $25 billion, and although the former “Big Five”
accounting firm had a small portion of its employees working with Enron, the
firm’s closure resulted in 85,000 jobs lost.
Although the Federal Government responded to the Enron case and other corporate
scandals by creating the Sarbanes-Oxley Act in 2002, which mandates new financial
reporting requirements meant to protect consumers, the “Occupy Wall Street”
movement of 2011 and other issues indicate that the public still distrusts
corporate financial accountability.

2. Social Media
The widespread nature of social media has made it a factor in employee conduct
online and after hours. Is it ethical for companies to fire or otherwise punish
employees for what they post about? Are social media posts counted as “free
speech”? The line is complicated, but it is drawn when an employee’s online
activities are considered disloyal to the employer, meaning that a Facebook post
would go beyond complaining about work and instead do something to reduce
business.
For example, a Yelp employee wrote an article on Medium, a popular blogging
website, about what she perceived as awful working conditions at the influential
online review company. Yelp fired her, and the author said she was let go
because her post violated Yelp’s terms of conduct. Yelp’s CEO denied her claim.
Was her blog post libelous, or disloyal conduct, and therefore a legitimate cause
for termination? In order to avoid ambiguity, companies should create social
media policies to elucidate what constitutes an infringement, especially as more
states are passing off-duty conduct laws that prohibit an employer’s ability to
punish an employee for online activities.

3. Harassment and Discrimination

Racial discrimination, sexual harassment, wage inequality – these are all costly
ethical issues that employers and employees encounter on a daily basis across
the country. According to a news release from the Equal Employment
Opportunity Commission (EEOC), the EEOCC secured $505 million for victims of
discrimination in private sector and government workplaces in 2019. The EEOC states
that there are several types of discrimination, including age, disability, equal pay,
genetic information, harassment, national origin, race, religion, retaliation,
pregnancy, sex and sexual harassment.

One type of discrimination, family’s responsibilities discrimination (FRD), has had an

increase in cases of 269% over the last decade, even as other forms of employee
discrimination cases have decreased. FRD is found in every industry and at every
level within the company, according to a 2016 report by the Center for WorkLife
Law at the UC Hastings College of Law. The report defines FRD as “when an
employee suffers an adverse employment action based on unexamined biases
about how workers with caregiving responsibilities will or should act, without
regard to the workers’ actual performance or preferences.” FRD includes many types
of family responsibilities and caregiving, including pregnancy and eldercare. For
example, a father being fired for wanting to stay home to care for his sick child, or
a pregnant employee not being allowed to take a break even though it was her
doctor’s orders.

These cases are expected to continue to rise due to the growing number of
family members who have disabilities, the increase in people 65 and older who
need care, the increase of men who are becoming caregivers, and growing
expectation for employees that they can work and provide family care.
Employers will need to adjust to these employee perspectives and restructure
 35
how work can be accomplished to reduce FRD.

4. Health and Safety

The International Labour Organization (ILO) states that 7,397 people die every
day from occupational accidents or work-related diseases. This results in more than
2.7 million deaths per year. According to the Occupational Safety & Health
Administration, the top 10 most frequently cited violations of 2018 were:
1. Fall Protection, e.g. unprotected sides and edges and leading edges
2. Hazard Communication, e.g. classifying harmful chemicals
3. Scaffolding, e.g. required resistance and maximum weight numbers
4. Respiratory Protection, e.g. emergency procedures and respiratory/filter
equipment standards
5. Lockout/Tagout, e.g. controlling hazardous energy such as oil and gas
6. Powered Industrial Trucks, e.g. safety requirements for fire trucks
7. Ladders, e.g. standards for how much weight a ladder can sustain
8. Electrical, Wiring Methods, i.e. procedures for how to circuit to reduce
electromagnetic interference
9. Machine Guarding, e.g. clarifying that guillotine cutters, shears, power
presses and other machines require point of operation guarding
10. Electrical, General Requirements; i.e. not placing conductors or equipment in
damp or wet locations

Physical harm isn’t the only safety issue to be aware of, though. In 2019, an ILO
report focused on rise of “psychosocial risks” and work-related stress. These
risks, which include factors like job insecurity, high demands, effort-reward
imbalance, and low autonomy, have been associated with health-related
behavioral risks, including a sedentary lifestyle, heavy alcohol consumption,
increased cigarette smoking, and eating disorders.

5. Technology/Privacy
With developments in technological security capability, employers can now
monitor their employees’ activity on their computers and other company-
provided electronic devices. Electronic surveillance is supposed to ensure efficiency
and productivity, but when does it cross the line and become spying? Companies can
legally monitor your company email and internet browser history; in fact, 66% of
companies monitor internet connections, according to 2019 data from the
American Management Association. 45% of employers track content, keystrokes and
time spent on the keyboard, and 43% store and review computer files as well as
monitor email. Overall, companies aren’t keeping this a secret: 84% told
employees that they are reviewing computer activity. Employees should review
the privacy policy to see how they are being monitored and consider if it can
indicate a record of their job performance
 36

MODULE 4

CORPORATE SOCIAL

RESPONSIBILITY

Learning Outcome:
Towards the end of Module 4 students are expected to:
 To fully appreciate corporate social responsibility (CSR) as one of the core
values of any organization.
 Be able to integrate CSR in their own way especially in their community,
and when they become part of any organization.

Topic Coverage
 The Concept and definition of Corporate Social Responsibility
 Theories of Corporate Social Responsibility
 Corporate Integrity
 Corporate Citizenship, Philanthropy and Social Initiatives
 Corporate Initiatives: Corporate Community involvement and Social
Accountability
 Corporate Social Responsibility in the Global context: Multinationals and less
developed countries; International Business

INTRODUCTION
Corporate social responsibility has become a practice in almost every
organization when its concept has evolved. It is giving back to society to uplift
and enliven the lives of others which the organization takes part to their well-being
and development. Being socially responsible is an attribute every organization
should embrace to show compassion to the world it operates.

The Concept and Definition of Corporate Social Responsibility

What is CSR?
Corporate Social Responsibility is a management concept whereby companies
integrate social and environmental concerns in their business operations and
 37
interactions with their stakeholders. CSR is generally understood as being the way
through which a company achieves a balance of economic, environmental and social
imperatives (“Triple-Bottom-Line-Approach”), while at the same time addressing
the expectations of shareholders and stakeholders. In this sense it is important to
draw a distinction between CSR, which can be a strategic business management
concept, and charity, sponsorships or philanthropy. Even though the latter can
also make a valuable contribution to poverty reduction, will directly enhance the
reputation of a company and strengthen its brand, the concept of CSR clearly
goes beyond that.
Promoting the uptake of CSR amongst SMEs requires approaches that fit the
respective needs and capacities of these businesses, and do not adversely affect
their economic viability. UNIDO based its CSR programme on the Triple Bottom Line
(TBL) Approach, which has proven to be a successful tool for SMEs in the
developing countries to assist them in meeting social and environmental
standards without compromising their competitiveness. The TBL approach is used as
a framework for measuring and reporting corporate performance against
economic, social and environmental performance. It is an attempt to align private
enterprises to the goal of sustainable global development by providing them with
a more comprehensive set of working objectives than just profit alone. The
perspective taken is that for an organization to be sustainable, it must be
financially secure, minimize (or ideally eliminate) its negative environmental
impacts and act in conformity with societal expectations.
Key CSR issues: environmental management, eco-efficiency, responsible sourcing,
stakeholder engagement, labour standards and working conditions, employee and
community relations, social equity, gender balance, human rights, good governance,
and anti-corruption measures.
 38

A properly implemented CSR concept can bring along a variety of competitive

advantages, such as enhanced access to capital and markets, increased sales and
profits, operational cost savings, improved productivity and quality, efficient
human resource base, improved brand image and reputation, enhanced customer
loyalty, better decision making and risk management processes.

Theories of Corporate Social Responsibility

Carrol CSR Pyramid

Carroll made a specific theory for the way that corporation interact with its
surrounding community and the whole world, this theory is known nowadays as
Carroll’s Pyramid of CSR (Fig. 1). Carroll’s theory is composed of four obligations
that create a foundation or infrastructure for the business’s responsibilities
toward society.

A. Economic responsibility. It’s the obligation of a business organization

to make money. Carroll placed the economic obligation in the base of the CSR
Pyramid because it’s vital for business survival. Any corporation or
organization, even if it’s a non- profitable organization, as charities
association needs assets in order to succeed and sustain. According to
Carroll, the first step in implementing CSR is to enroll in business
operations and to make profits. Carroll added that profits are necessary to
reward investors and owners. Moreover, profits must be reinvested back to
maintain business growth. Economic responsibility is represented by a
corporation through investments, marketing strategies, business operations,
and long-term financial strategies with variant stakeholders. For example,
when a corporation enrolls into business operations, it must hire a number of
employees and it will deal with different stakeholders as vendors, sellers,
marketing consultants, stockholders, investors, insurance companies, banks,
and financial institutes. Variant stakeholders will be affected positively if
corporation achieves profits, this what economic scholars named as Win-Win
theory. As a result, stakeholders will make profits, money circulation
process will improve and a corporation will successfully achieve its CSR
economic responsibility

B. Legal responsibility. Corporations must respect laws and regulations.

According to Carroll’s Pyramid theory, Legal Responsibility placed in the
 39
second level of the CSR Pyramid. A responsible corporation is a corporation
that accepts rules of a fair business game. A responsible corporation
adheres to law because it believes that fair business reflects positively on
the whole economy and society. If a corporation makes tax evasion process,
or deals with money laundering activities, or even produces a toxic
product, it is illogical to consider it is sharing in CSR values.

C. Ethical responsibility. Corporations must behave as a good citizen in its

society. Such responsibility allows corporations to make what is good for
society even if the law didn’t require it. Carroll mentioned that
corporations must be responsive to the spirit of the law, not just to the
letter of law. In other words, ethical responsibility embrace fair activities
done by a corporation and expected by society. For example, fishing
companies are allowed to hunt unlimited amounts of fish in the Middle East
seabed, but it is immoral to hunt larger quantities than the quantity
required by the market. Civil societies and associations play an important
role in determining the ethical controls of companies until these controls
become official laws.

D. Philanthropic responsibility. It is a voluntary activity guided by the

business’s desire to participate in social activities that are not mandated,
not required by law, and not generally accepted in business as ethical sense.
So philanthropic responsibility is a pure giving for society, it’s an activity or
project created by a corporation and purely dedicated to community
expectation. At the philanthropic level, the business corporations could
satisfy what is desired by their society. To fulfill in philanthropic
responsibility, corporations engage in various giving forms, as sponsoring
sports activities like an annual marathon or volunteering employees in
donation campaigns, etc. The value behind philanthropic activities is to reveal
a good citizenship image of the company and increase its reputation.

The main idea of Carroll Pyramid is to apply CSR projects in the order form.
Companies should apply social responsibility by achieving economic objectives at
the first level through maintaining sustainability and profitability. Only then it can
move to the next stage which is the commitment to recognize regionally and
internationally laws and obligations. Only after that third level come, which is the
commitment to ethical standards. Finally achieving the last level, where
companies contribute to the philanthropic responsibilities required by society and
environment.

The Triple Bottom line Theory

The Triple Bottom Line theory (TBL) was found by John Elkington in his book
“Cannibals with Forks: The Triple Bottom Line of 21st Century Business” [14]. TBL
can be considered as CSR framework that incorporates three dimensions of
performance: economic, social and environmental. As elaborated by John
 40
Elkington, the three dimension of TBL must obtain sustainable results.
Sustainability is the main aim of the TBL concept. Companies must apply TBL in order
to achieve continuous profits and long-term social and environmental projects.
Many corporations and nonprofit organizations have adopted the TBL
sustainability framework to perform CSR projects.

Economic dimension. According to TBL theory the most important for a

company is not to make high profits but to achieve continuous profit for
the long term. So Business corporations start to enroll in the TBL CSR
framework as well as they draw a strategic plan through calculating
expenditures and taxes, forecasting business climate factors, evaluate market
benchmark and avoid maximum risk threats. Real study for all these
components will lead to achieve sustainable profits.

Social Dimension. Business must pay attention to its social affairs as well
as paying attention to its financial affairs. Achieving social sustainability by a
corporation is a must in the TBL CSR framework. But since societies differ
from region to another, every corporation has to collect data from national
authorities concerning social affairs, as unemployment rates, human
rights, female labor force participation, health services, educational
services provided by government, etc. After determining the community
priorities, shareholders must take decisions to satisfy as much as possible
the social needs. So for a business to be stable over the long term social
activities of a business corporation must satisfy surrounding society needs
as much as possible.

Environmental Dimension. Environmental sustainability is one of the

main concepts in the TBL framework. If business companies will not
respect the environmental dimension, our children will not be able to enjoy
the same quality of life we are enjoying now. Corporations must pay
attention to environmental changes and obey the new environmental laws
with being careful to the consumption of natural resources. Corporations
have to use the alternative energy sources in order to minimize the
consumption of traditional sources of energy (for example oil, gas, coal, etc.),
and it has to safe air and water sources, with disposing of toxic and solid
waste in an environmental manner. All these factors maintain
environmental sustainability.

The Stakeholder Theory

Stakeholders are described broadly by Freeman and Reed as any identifiable group or
individual who can affect the achievement of an organization’s objectives or who
are affected by the achievement of an organization’s objectives. Edward Freeman
mentioned in his famous article “Strategic Management, A Stakeholder Approach”
that a corporation has stakeholders, that is, groups and individuals who benefit
connected with the corporation actions. So stakeholders might be T. Thus,
stakeholder theory proposes that objectives of a corporation can be only
achieved by protecting and balancing the interests of different groups of
stakeholders. As a descriptive theory stakeholder theory has been used to
describe the nature of the firm, management of corporations, and how board
 41
directors think about the interests of corporate constituencies. While from an
instrumental perspective, the theory is used to identify the connection between
stakeholder management and the CSR approach.

After defining stakeholder theory and its relationship with CSR, the main question
is how to apply the stakeholder theory. Corporations, especially corporate directors
and leaders can be more responsive to the interests of society as a whole by
incorporating the participation of stakeholders in the corporation’s boards of
directors. In other words, every stakeholder of a corporation should be
represented at least by one person in the board of directors of the corporation in
order to share the interest of his group. After that, the board of director for a
corporation will draw a strategy to align both corporation and stakeholders goals.
Realistically, according to The Stakeholder Theory and stakeholder ethics, if top
managers are going to let every stakeholder actively participate in a corporation’s
decision making process, then those stakeholders need to be aware external and
internal environment of the corporation. As a result, the risk in The Stakeholder
Theory is that corporate directors would share the interest of stakeholders who
are only interested in maximizing profits, across the spectrum of other
stakeholders as people in the surrounding area, those whose lives are touched by
the business operations.

Corporate Integrity

The context for corporate integrity

THE scandals of Enron, World-Com, Arthur Andersen, and others in the past few
years have once again destroyed the naiveté of those who trusted corporations
and confirmed the suspicions of those who did not. This is not the first time that
corporate behavior has confirmed the opinions of its critics and shattered the
opinions of its supporters. The difference today is that corporate conduct,
whether good or bad, makes a much greater footprint than ever before, not only
on human communities, but also on the natural environment. Furthermore, as
corporations have become more powerful, the civic institutions that have saved
them in the past have become weaker. The overall direction of global
corporations today gives us some notion of what it must have been like traveling
on the Titanic: to be slowly moving in the wrong direction, but too big and
powerful to change course.

There is another side of the story, of course. It is the story of the increased
involvement of corporations in ethics, social responsibility, and corporate
citizenship. It will be told in the chapters ahead. Both stories are important.
Taken together they create the context for rethinking organizational ethics and
leadership. In contrast to the narratives that make prime- time viewing and TV
entertainment/news, these stories are not focused primarily on individuals. They are
mostly about designing and redesigning the ongoing conversational patterns that
constitute corporations as human organizations. These stories are also
multidimensional. For the stories to be told well, and for the telling to show what
can and needs to be done, these different dimensions must become available for
analysis, evaluation, and change. The five dimensions of corporate stories include
the cultural, the interpersonal, the organizational, the civic, and environmental. All
five dimensions much be taken into account, because any one can hold back the
 42
other four, and anyone can also improve the whole. At the same time, not one of
the five can become an adequate substitute for any of the other four. Exploring
these five dimensions represents the core of this book.

On each of these dimensions of corporate life there is always more than one way
of getting things done. The cultural dimension, for example, can prevent or
promote the introduction of new ideas. The environmental dimension can hide or
reveal knowledge about the sustainability of consumer products. The same is true
for the other three dimensions as well. Not every accomplishment, however, can
be justified. How can we tell which ones are justified? Not how can I tell, but how
can we tell? I can tell because I know what is right and wrong. The problem is you
also know, and you and I may disagree. What can we do then? We need a shared
standard that we can use to make good judgments. I think that integrity can
serve as such a standard.
Integrity could become our standard for corporate conduct because it is closely
tied to the implicit issue raised by both the critic’s disdain for corporations and
the supporter’s disappointment in corporate scandals: the issue of trust. If people
have integrity, then we can usually trust them. If we could design corporations
with integrity, people could trust them too. They could work in them and with
them to develop a viable future for us and for our children.
So what would that design look like? It could involve the arrangement of physical
things, of course, such as the design of interior office space. Interior design
certainly reveals a corporation’s view of how people should relate to each other
at work, but that is only a small portion of the life of a corporation. We need to
examine how the whole corporation is designed, and we can if we look at the
design of the ongoing verbal and nonverbal communication patterns that
constitute a corporation as a social system. It is the quality of the communication
patterns, in other words, that will give us the data to evaluate a corporation’s
integrity.

Much of the information about communicative patterns is very accessible. We

just need to listen and reflect on what is being said (and not said), who is
speaking (and not speaking), what is talked about (and not talked about), and so
on. After listening, we can learn how the conversations create the conditions and
the expectations for how people should act towards each other, toward the
organization, and toward nature.

This exploration of corporate integrity rests on a series of assumptions about

corporations and about integrity. Perhaps the most important assumptions are
definitions. Corporations can be defined in several ways, but a definition that is
especially relevant for corporate integrity is to see them as human systems
designed to achieve some purpose. Systems are sets of interactive parts that
constitute a whole. Integrity is also about parts and whole. To integrate is to
make whole. So the initial connection between systems and integrity is that while a
systems approach examines how parts and wholes are related to each other, an
integrity approach investigates how they should be related. Some human
systems, such as individual persons, are both biological and linguistic systems.
Corporations, of course, are not biological. They are, however, constituted by
language, or, we could say, by ongoing communication patterns. These patterns
include both verbal and nonverbal communications. The verbal communication
includes mission and policy statements as well as daily conversations. The nonverbal
includes work design, daily schedules, and practical skills. If we look at corporate
systems as ongoing communications, then corporate integrity will depend on the
character of these communications.

Corporations are not only systems themselves; they also belong to larger social
and natural systems. To investigate their integrity in these larger systems, it is
necessary to find the best angle from which to examine how corporations should
relate to the other parts of these systems. The best angle is from a civic
perspective. Instead of putting corporations in a separate sphere of economics, for
example, the civic perspective places them in the context of civic life, and in
relationship with other civic agents, such as nonprofits and government agencies.
Exploring and evaluating the types of conversations in which these different agencies
participate will give us a picture of the requirements of corporate integrity in
 43
terms of society and the environment.

The meanings of integrity

Sometimes integrity is simply used as a substitute for the good or the right.
Richard DeGeorge uses the term in this way: “Acting with integrity is the same as
acting ethically or morally.” There is certainly something right about this
definition; integrity does have a normative meaning. In fact it has several
meanings, and each one can help us understand its significance, not as a
substitute for ethics, but as a significant addition to other ethical standards. To
understand these various meanings, we need to begin with its original meaning,
which comes from the notion of “integral.” An integral represents a whole.
Wholeness, of course, always implies the presence of parts, so integrity requires
not only wholeness, but also the right relationships among the parts of a whole.
To create integrity, therefore, is to integrate the parts into a whole. The
relationships between the parts and the whole offer various meanings of integrity,
including integrity as consistency, as relational awareness, as inclusion, and as
pursuing a worthwhile purpose.

Corporate Citizenship, Philanthropy and Social Initiatives

What is Corporate Citizenship?

Corporate citizenship refers to an organizations responsibility to create business
value by caring for the well-being of all stakeholders including the environment
(Glavas & Piderit, 2009). Due to its voluntary nature, organizations engage in many
different types of corporate citizenship from making philanthropic donations to
establishing volunteer programs with non-profit organizations to preserving
environmental resources to using core competencies to create products or
services that help solve social issues. This article focuses on three categories of
externally focused corporate citizenship: philanthropy, community involvement
and social innovation.
Philanthropy: Monetary gifts or other
donations given voluntarily by an
organization to support the local
community and offset any negative
impact of their business (Wang, Choi &
Li, 2008). Such activities may include
but are not limited to cash donations,
event sponsorship, grant making and
employee charitable donation matching
programs.

Community Involvement:
Opportunities for employees to offer
their time and skills to serve the
community through volunteer/service
events in an effort to help solve social
issues around a range of issues including
the environment, education, health,
development, etc.
Social Innovation: Opportunities for employees to get involved in leveraging
the core competencies of the organization to create business value and positive
social change. This can be achieved many ways, including creating access to more
socially responsible products and services or lowering costs (Saul, 2011). Some
additional examples include:
Decreasing the environmental impacts of the company through reuse and
recycling or green technologies.

Creating or re-designing a product, service or process that has an increased benefit

for society. For example, an employee may come up with the idea to open up an
office in a neighborhood with high unemployment or decrease the amount of
sodium in processed foods.
 44
Developing a more Eco-efficient product/service/process (less resource and/or
energy intensive). For example, an employee could figure out how to increase
the amount of recycled materials used in a process.

Corporate Initiatives: Corporate Community involvement and Social

Accountability

Corporate Social Responsibility Companies

Many well-known corporate social responsibility companies are larger, more
established businesses with the comfortable means to give back to society. Having a
solid business plan that has proven results and is profitable, the companies are
much better placed to participate in large-scale CSR initiatives.

For these companies, business isn’t just about profit. They also take active steps to
contribute to the community through sustainable projects and partnerships.

Microsoft
Microsoft has one of the best reputations as a corporate social responsibility
company. The business operates a number of initiatives, including 4Afrika which
focuses on helping African youth and entrepreneurs develop skills and
opportunities.

So far, the scheme has brought over 500,000 SMEs online, upskilled almost 800,000
people and assisted 82 startups expand their businesses.

Similarly, YouthSpark is a global initiative by Microsoft in partnership with

governments and charities to offer free computer programming resources and
courses to help create educational, employment and entrepreneurial opportunities
for over 300 million young people across the globe.

However, Microsoft doesn’t just have strong programmes. The business also
operates environmental corporate social responsibility efforts, with 44% of all
electricity used in Microsoft data centres coming from wind, solar and hydro
power electricity and this number expected to pass 50% by 2018.
As if that weren’t impressive enough, the company’s global operations have been
carbon neutral since 2012.

TOMS

Since 2006, TOMS have given one pair of shoes to a child in need for each pair
purchased, supplying over 60 million shoes in over 70 countries.
As part of their ‘One for One’ campaign, the company’s CSR efforts have also
expanded to providing access to water and sight-saving eye surgery and prescription
glasses in communities, leading to improved health and in turn increased
economic potential.
The programmes TOMS runs in these communities also helps to provide valuable
training and work, with their safe birth scheme providing teaching for birth
attendants in addition to ensuring safe births for over 25,000 mothers as of 2016.
The TOMS eyesight initiative also provides basic eye care training to local
volunteers and teaching, whilst also creating a number of professional jobs, often
 45
for young women.

As with Microsoft, TOMS have committed to investing in communities consistently

and in valuable, tailored ways. For example, the shoes that TOMS gives out vary
depending on the region’s terrain and season to ensure that the users receive
the best support for the long-term. With CSR initiatives by TOMS the intention is
to implement programmes that will continue to benefit the communities for years
to come, as illustrated by their creation of sustainable water systems.

Social Responsibility in the Global context: Multinationals and less

developed countries; International Business
Corporate social responsibility has a powerful potential to make positive
contributions to addressing the needs of disadvantaged communities in
developing countries. On the other hand, there are ways in which CSR could,
whether by mistake or design, damage the same communities, politically, socially
and economically. Although there is a good business case for Shell to contribute to
poverty alleviation in the Niger Delta, Nigeria, there is also a danger that in the
long term Shell could effectively be leading the pace of, and directing the paths
to, socio- economic development in the region with little or no contribution from
the Nigerian government. The paper concludes that lack of national macro-
economic planning and management, backed by equitable resource allocation,
and an enabling environment, have significant implications for the overall
performance of CSR initiatives by multinational corporations (MNCs) in
developing countries. In other words, if the macro-economy is under- performing
due to government failure, there is a likelihood that the contributions of MNCs to
poverty alleviation could fail to achieve the desired outcomes. Good governance
in all its dimensions is therefore an important component of the CSR agenda.

Leveraging CSR to support public policy goals

From the limited experience over the last few years, some lessons nonetheless
emerge. CSR offers real opportunities for the governments of middle and
lowincome countries to change the terms on which they interact with business.
Engagement with CSR can help to develop capacity within public policy and
regulatory institutions, to free up existing resources, and to leverage additional
resources through partnership.

However, CSR defined only or primarily in rich countries could have limited
benefits for — or in some cases create obstacles to — sustainable development.
SMEs in particular may need some assistance in responding to CSR demands from
foreign buyers. The governments and citizens of low and middle income countries
would do well to set the CSR agenda for themselves, taking the best of what has
evolved to date and of what their business communities already have to offer.
Governments may derive greater developmental benefits from CSR where there
is a national strategy framework which explicitly recognizes its potential
contribution and seeks to align CSR with development goals.

Foreign investors bring with them expertise on CSR that could be tapped more
effectively to strengthen domestic capabilities; contractual arrangements and public-
private partnerships are two ways of doing so.

For each potential intervention, there is a need to assess the likely costs and
benefits and possible undesirable side effects. Governments should avoid the
tendency to over-engineer policy responses. More generally, there is a need to
ensure that CSR-related interventions are seen as contributing to an enabling and
predictable environment for private sector activity. If they are ill-conceived or
represent an extra burden for business that is not justified by the business
benefits, they are unlikely to succeed.
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The Africa Comprehensive HIV/AIDS Partnership (ACHAP) in Botswana

The Africa Comprehensive HIV/AIDS Partnership (ACHAP) was established in 2001 as a
formal partnership between the drug company Merck, the Bill and Melinda Gates
Foundation and the Government of Botswana. ACHAP works with government
agencies, development partners, the private sector and civil society. The aim is to
develop and implement a national comprehensive HIV/AIDS strategy, with the goal of
decreasing the spread and mitigating the impact of HIV/AIDS in Botswana. The
initiative includes capacity building and strategic planning within government
institutions. As of December 2005, total spending on the programme was just
over 45 million USD. The strength of ACHAP lies in its full integration with
government strategy and its ability to harness private-sector expertise in support
of national efforts to address HIV/AIDS.

Public procurement and regional government: Shenzhen

In March 2006, the Shenzhen Municipal Bureau of Labour and Social Security
published a report on CSR in Shenzhen and announced that it would be working to
produce guidelines on CSR by the end of the year. A press report suggests that the
guidelines could include provisions refusing to give contracts to companies that do
not shoulder social responsibility, or refusing to subsidize such firms. A spokesman for
the municipality was quoted in the Shenzhen Daily saying that “The city
government’s annual procurement reaches more than 2 billion yuan (US$241
million). It should make full use of its economic influence to promote corporate social
responsibility (CSR).
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