ETHICS AND SOCIAL RESPONSIBILITY

Chapter 12

A.ETHICAL THEORIES
1. Relativism and Absolutism
Ethical and moral belief systems of society
Relativism
- Many sets of moral rules
- Rules and beliefs change over time and type of
society (e.g. public execution)
- What is right depends on conditions of the time
- Not one moral truth
- Allows different beliefs e.g. different stances on
abortion
Absolutism
- One set of rules that always true
- Do not change over time or society
- Now tend to believe that one truth per society but
basic morals always be same whatever the culture
(e.g. not killing children)
In business context legislators try to impose a set of
absolute rules, but relevant parties chose to interpret those in
light of relativism (e.g. Money Laundering correct when
individual not harmed)
2

Dogmatic approach only one truth and must be followed in

all situations e.g. some pope pronouncements (absolutism)
Pragmatic approach Best solution depends on the situation
(relativism finding solution based on given belief system of
individuals involved)

2. Kohlbergs cognitive moral development (CMD) Theory

A theory that tries to explain the reasoning process
behind making decisions or moral judgments
Theory views ethical decisions from an individuals
perspective
Kohlbergs levels of human moral development
Three levels of moral development and each level
divided into 2 stages
- Level 1: The individual is focused on self interest,
external rewards and punishment
- Level 2: Individual tends to do what is expected of
them by others
- Level 3: Individual develops more autonomous
decision making which is based on internal
3

perspectives of right/wrong etc (not on external

influences)
As individuals grow tend to move from level 1 3.
Most people on level 2

CMD Level
1.1 Preconventional obedience and
punishment

1.2 Pre
conventional
instrumental
purpose and
exchange

2.1
Conventional-

Explanation

Example in
business
Right & wrong
Unethical
defined based go decision taken
expected
because
rewards or
employee
punishment
believes either
from figures of
they will be
authority
rewarded or Co
will not punish
them (e.g. fraud)
Right defined
One employee
according to
covers another
whether there is on understanding
fairness in
that other will
exchanges
cover them next
self interests
time
benefit!
Actions defined
by what

Employee
justifies going on
4

expected by
their peers
(those close to
them)
2.2 Conventional Same as above
social accord
but broadened
and system
to social accord
maintenance
not just
immediate peers
interpersonal
accord and
conformity

3.1 Post
conventional
Social contract
and individual
rights
3.2 Post
conventional
universal ethical
principles
Managers

Based on basic
human rights,
values and
contracts of
society
Self-chosen
ethical principles

facebook cause
everyone else
does it
Salaries raised
above average
based to
standard
expected by
pressure groups
in society
Full disclosure of
ingredients even
if no law or no
pressure groups
Stop purchasing
products tested
on animals

level 2

Whistleblowers normally level 2.2 or 3.2 as must have a strong

moral sense of ethics to take the stance
5

Link example with stage:

- A manager includes an hour overtime on his/her
timesheet because all other managers do so.
- A fishing Cos CSR report explains how the welfare of
fish is maintained in its fish farms, although there is
no statutory or other obligation to provide the
information or care for the fish.
- An employee does not disclose information
indicating that financial statements have omitted
important liabilities in return for enhanced pension
benefits from the Co.
- A director does not include some important
liabilities in the financial statements because
inclusion would damage the reputation of the Co.
- The company canteen only uses organic ingredients
in meals provided even though employees do not
know this and did not request the change.
- Employees are given vouchers to obtain free lunches
in the company canteen.

3. Deontological and teleological approaches

Two main approaches to ethical decision making

Deontological and Teleological approach
Deontological
- Humans decide what is wrong and right
themselves
- Action is right if the motivation is right
- 3 Tests whether motivation is right
7

 Teleological
- Right/wrong depends on the outcome of
decisions
- Two theories: egoism and utilitarianism
- Egoism: what is right for me?
- Utilitarianism: what is right for the greatest
number

Deontological Approach
Maxim

Explanation Application
to business
1 Act only according to
Principle of Child labour
that maxim by which you consistency managers in
can at the same time will
Europe do
that it should become a The action is not want this
universal law
right if
to become a
everyone
universal law
can follow
i.e. being
the same
applied to
underlying
their children
principle
as well
2 Act so that you treat
Principle of Child labour
humanity always as an
human
dignity of
end and never as a
dignity
child may be
means only
ignored
Other
goods
humans
produced
needs and
cheaply but
expectations their right to
must be
safe and
taken into
accident free
consideratio upbringing
9

may be
ignored
3 Act only so that the will Principle of Child labour
through its maxims could Universality would the
regard itself at the same
European
time as universally law
Action
manager like
giving
deemed
the fact that
suitable
his Co was
when
using child
viewed by
labour to be
others not
published in
by person
the
taking it (e.g. newspapers?
when put
action in the
press

10

Teleological Approach
Teleological 1: egoism
Egoism in practice
Action morally right if
decision maker freely
decides in order to pursue
either their short term or
long term interests. Pursuit
of self interest will also
ensure society benefits
because outcomes morally
desirable for society
Egoist will do what appears
to be right in society
because it makes them feel
better
Egoism not always work
because actions of all
members of society cannot
be determined
Teleological 2:
utilitarianism
Utilitarianism in practice

Example
Production of poor quality
goods- Bad!
Manufacturer will not sell
thus no profit thus not
pursue his self interest
Society will get poor quality
goods

Donation to charity makes

you feel good

Exhaustion of resources
means future generations
will not benefit from those
resources

Example
11

Action is right if results in

the greatest amount of
good for the greatest
number of people
Applies to society as a
whole not only the
individual
Valuable in business
decisions because
introduces the concept of
utility or the economic
value of actions
However, utilitarianism is
highly subjective

Principle of Greatest
Happiness
Action ok if good effects
outweigh the bad effects
Effect on collective welfare
is important
Good/bad utility a cost
benefit analysis of decisions
thus making decisions
quantifiable
Difficult to assign benefits
and costs to actions. Also
value placed on those
benefits and actions
depend on the viewpoint of
the person making those
estimates.

Test your understanding:

Explain the teleological and deontological views of the following
actions:
a. Animal testing
12

b. Murder of a serial killer

c. Whistleblowing
4. Seven positions of social responsibility

13

 Grays book on social responsibility of

organisations
Believe that organisations have some social
responsibility
With social responsibility comes social
accountability
Difference between how world is now and how it
should be
7 positions as alternative views of this difference

Position
Pristine Capitalist
Underpinning value is shareholder wealth
maximization
Anything that reduces shareholder wealth (such
as acting in a socially responsible way) is theft
from the shareholders
Expedients
Recognize some social responsibility expenditure
14

may be necessary to strategically position an

organisation so as to maximize profits
This is back to the concept of self enlightened self
interest (Ch. 8 )
Proponents of social contract
Businesses enjoy a license to operate granted by
society so long as the business acts in an
appropriate way
Social ecologist
Recognizes that a business has a social and
environmental footprint and therefore bears
responsibility for minimizing that footprint
Socialist
Actions of business are those of the capitalist
class oppressing other classes of people
Radical feminist
Society and business should be based on feminine
characteristics such as equity, dialogue,
compassion and fairness.
Deep ecologist
Humans have no more intrinsic right to exist than
any other species
15

Know how to match the position on social responsibility to its

name.
Refer to the article published in February 2008 All about
stakeholders part 2
Test your understanding 3 (page 349)

5. Variables determining cultural context (see below)

Economic: focus on profitability

Legal: focus on compliance with law
Ethical: focus on doing what is right
Philanthropic: focus on doing what is desired
16

 Cultural differences:
- The extent of ethics and CSR varies according to
culture
- The 4 responsibilities have different
connotations in Europe and US
- The European context focuses on ethics and
philanthropic actions being enforced legally
while the US system tends to focus on the
discretionary actions of companies and
individuals.
Cultural differences: CSR and Europe and US
Responsibility
Economic

US
Focused on
profitability and
interests of SH

Legal

Role of
government

Europe
Additional focus
on actions of
organisation e.g.
supporting loss
making Cos in
periods of
recession as
closing it socially
unacceptable
Government and
laws are
17

regarded as
minimal and as
interference with
private liberty
Ethical

Philanthropic

Organisations are
normally seen to
be acting ethically
and there is
greater public
trust companies
here than in
Europe
High focus on
philanthropic acts
of individuals and
corporations (e.g.
Angelina Jolie, Bill
Gates) rather
than on any
compulsory legal
framework

necessary to
regulate the
organisations.
Government seen
as law enforcer
Ethical
responsibility is
seen as very
important and
organisations
need to be aware
of the ethics of
their actions
High focus on
regulatory
systems to
provide
appropriate
education,
recreation,
cultural
opportunities
(e.g. museums)

18

5. Corporate and personal ethical stances

Corporate stance = approach of the organisation to the
different theories.
Personal stance = approach of the individual to the
different theories.
Analysis of theories (See below)
Theory
Short term
shareholder
interests

Corporate stance
-Must provide
adequate return to its
SH

Long term -Must maintain its

SH interests existence

Multiple
-Identify stakeholders
Stakeholder with high power and
obligations influence over the
organisation and

Personal stance
- Small SH
require annual
return on
investment
-Large SH have
little short term
interest in Co
-Concerned
about security
of investment
-Require capital
growth
-Each
stakeholder
group expects
their interests
19

attempt to satisfy their to be

objectives
understood and
acted on
Shaper of
society

-Change society, by
applying its own
positional power either
for corporate or social
benefit
e.g. Mac Donalds
assisted poor eating
habits v. Toyotas
research for pollution
free transport

-Individually
little can be
done to shape
society
-As a group
individuals can
affect
organisations by
the choices that
are made

20