CORPORATE RESPONSIBILITY

BUSINESS ETHICS

a specialized study of moral right and wrong, focused on moral standards as they apply to business institutions, organizations, and behaviour.

Business ethics is a form of applied ethics which investigates moral standards and how these apply to the social systems and organizations through which modern societies produce and distribute goods and services and the behaviours of the people who work within these organizations.

SYSTEMIC ISSUES
Ethical questions raised about the economic, political, legal, and other social systems or institutions within which businesses operate. These include questions about the morality of capitalism or of the laws, regulations, industrial structures, and social practices within which different businesses operate.
questions about the morality of the government contracting system through which B. F. Goodrich was allowed to test the adequacy of its own brake for the A7D
questions about the morality of international economic system with which Merck was forced to deal questions about the morality of privatization of Romanian stateowned enterprises during the so-called transition from socialist command economy to market economy questions about the morality of the Romanian government policy of absolving the state-owned enterprises of their fiscal obligations questions about the morality of the Romanian state's policy concerning the restitution of private properties illegally confiscated by the former communist regime

CORPORATE ISSUES
Ethical questions raised about a particular organization; these include questions about the morality of the activities, policies, practices, or organizational structure of an individual company taken as a whole. Questions about the morality of B. F. Goodrich's corporate culture or about the company's corporate decision to qualify the A7D brake Did the company violate anyone's rights in deciding to qualify the brake? Was the company thinking of how society's welfare would be affected? Was the company's decision just or unjust to other parties? Were ethics concerns part of B. F. Goodrich's ongoing decision-making process?

Did the company encourage or discourage employee discussions of how their actions might impact the moral rights of other people?
In doing this did the company violate the rights of its stockholders?

Questions about the morality of Merck's corporate decision to invest so many millions of dollars in a project that the company knew would probably not generate any profits

Was Merck's decision fair and just to the various parties that decision affected?

INDIVIDUAL ISSUES
Ethical questions raised about a particular individual or particular individuals within a company and their behaviours and decisions; these include questions about the morality of the decisions, actions, or character of an individual. The question of whether Vandivier's decision to participate in writing a report on the A7D brake, which he believed to be false, was morally justified. The question of whether it was moral for Merck's chairman, Dr. P. Roy Vagelos, to allow his researchers to develop a drug that would probably not generate any profits. It is helpful when analyzing the ethical issues raised by a particular decision or case to sort out the issues in terms of whether they are systematic, corporate, or individual issues. Often the world presents us with decisions that involve a large number of extremely complicated interrelated kinds of issues that can cause confusion unless the different kinds of issues are first carefully sorted out and distinguished from each other. Moreover, the kinds of solutions that are appropriate for dealing with systemic or corporate issues are not the same as the kinds of solutions that are appropriate for dealing with individual issues.

APPLYING ETHICS TO CORPORATE ORGANIZATIONS

The statement that corporate organizations can be ethical or unethical raises a puzzling issue. Can we really say that the acts of organizations are moral or immoral in the same sense that the actions of human individuals are?

CORPORATE RESPONSIBILITY

The traditional view:

Those who knowingly and freely did what was necessary to produce the corporate act are each morally responsible. Situations in which a person needs the action of others to bring about a wrongful corporate act are no different in principle from situations in which a person needs certain external circumstances to commit a wrong.

If I want to shoot an innocent person, I must rely on my gun going off (an external circumstance).

If I want to defraud the stockholders of a corporation, I must rely on others to do their part in the fraud.

In both cases, I can bring about the wrongful injury only by relying on something or someone other than myself. In both cases, if I knowingly and freely bring about the injury, then I am morally responsible.

CORPORATE RESPONSIBILITY

The person is fully responsible for the wrong or the injury even if this responsibility is shared with others.
If, as a member of the board of directors of a corporation, with full knowledge and complete freedom, I act on insider information to vote for some stock options that will benefit me but unfairly injure the other stockholders, then I am morally responsible for the wrongful corporate act of the board even if I share this responsibility with other members of the board. By my vote, I was trying to bring about the illegal corporate act and I did so knowingly and freely.

CORPORATE RESPONSIBILITY

It makes no sense to hold business organizations 'morally responsible' or to say that they have 'moral' duties. Business organizations are the same as machines whose members must blindly and undeviatingly conform to formal rules that have nothing to do with morality. Consequently, it makes no more sense to hold organizations 'morally responsible' for failing to follow moral standards than it makes to criticize a machine for failing to act morally.

CORPORATE RESPONSIBILITY

The major problem with this view is that, unlike machines, at least some of the members of organizations usually know what they are doing and are free to choose whether to follow the organization's rules or even to change these rules. When an organization's members collectively, but freely and knowingly, pursue immoral objectives, it ordinarily makes perfectly good sense to say that the actions they perform for the organization are 'immoral and that the organization is 'morally responsible' for this immoral action.

CORPORATE RESPONSIBILITY

Critics of the traditional view of the individual's responsibility for corporate acts claim that when an organized group such as a corporation acts together, their corporate act may be described as the act of the group and, consequently, the corporate group and not the individuals who make up the group must be held responsible for the act.
We normally credit the manufacture of a defective car to the corporation that made it not to the individual engineers involved in its manufacture.
The law typically attributes the acts of a corporation's managers to the corporation (as long as the managers act within their authority) and not to the managers as individuals.

CORPORATE RESPONSIBILITY Within the modern corporation, responsibility for a corporate act is often distributed among a number of cooperating parties. Corporate acts normaly are brought about by several actions or omissions of many different people all cooperating together so that their linked actions and omissions jointly produce the corporate act. One team of managers designs a car, another team tests it, and a third builds it. One person orders, advises, or encourages something and others act on these orders, advice, or encouragement. One group knowingly defrauds buyers and another group knowingly but silently enjoys the resulting profits. One person contributes the means and another person accomplishes the act.

One group does the wrong and another group conceals it.

Who is morally responsible for such jointly produced acts?

CORPORATE RESPONSIBILITY The rules that tie organizations together allow us to say that corporations act as individuals and have intended objectives for what they do; consequently, we can also say that they are morally responsible for their actions and that their actions are moral or immoral in exactly the same sense that a human being is. More often than not, however, employees of large corporations cannot be said to have 'knowingly and freely joined their actions together' to bring about a corporate act or to pursue a corporate objective. Employees of large-scale organizations follow bureaucratic rules that link their activities together to achieve corporate outcomes of which the employee may not even be aware. The engineers in one department may build a component with certain weaknesses not knowing that another department plans to use the component in a product that these weaknesses will render dangerous.

CORPORATE RESPONSIBILITY A person working within the ongoing bureaucratic structure of a large organization is not necessarily morally responsible for every corporate act he or she helps to bring about.
If I am working as a secretary, clerk, or janitor in a corporation, or if I become a stockholder in a corporation, then my actions may help the officers of the corporation commit a fraud. If I know nothing about the fraud or if I am in no way able to prevent it (e. g., by reporting it), then I am not morally responsible for the fraud.

The major problem with this view is that organizations do not seem to 'act' or 'intend' in the same sense that human individuals do, and organizations differ from individuals in morally important ways: organizations feel neither pain nor pleasure and they cannot act except through human beings.

CORPORATE RESPONSIBILITY

Which of these two extreme views is correct? Perhaps neither.

Although we say that corporate organizations 'exist' and 'act' like individuals, they obviously are not human individuals.
Yet our moral categories are designed to deal primarily with individual humans who feel, reason, and deliberate, and who act on the basis of their own feelings, reasonings, and deliberations.

The underlying difficulty with which both views are trying to struggle is this:

Therefore, how can we apply these moral categories to corporate organizations and their 'acts'?

CORPORATE RESPONSIBILITY

We can see our way through these difficulties only if we first see that corporate organizations and their acts depend on human individuals: Organizations are composed of related human individuals that we conventionally agree to treat as a single unit, and they 'act' only when we conventionally agree to treat the actions of these individuals as the actions of that unit.

CORPORATE RESPONSIBILITY

Because corporate acts originate in the choices and actions of individuals, it is these individuals who must be seen as the primary bearers of moral duties and moral responsibility. Individuals are responsible for what the corporation does because corporate actions flow wholly out of their choices and behaviours. If a corporation acts wrongly, it is because of what some individuals in that corporation chose to do; if a corporation acts morally, it is because some individuals in that corporation chose to have the corporation act morally.

Organizations have moral duties and are morally responsible in a secondary sense: A corporation has a moral duty to do something only if some of its members have a moral duty to make sure it is done, and a corporation is morally responsible for something only if some of its members are morally responsible for what happened.

CORPORATE RESPONSIBILITY

A corporation is much more than the arithmetic sum of its individual members. A business organization is a functional system, that imposes on its members certain obligations beyond their own personal judgment and control.
Apart from individuals taking decisions within companies, every organization has a CORPORATE INTERNAL DECISION STRUCTURE which directs corporate decisions in line with predetermined goals. Such an internal decision structure gets manifest in various elements which, acting together, result in a situation whereby the majority of corporate actions cannot be assigned to any individual's decisions and therefore responsibility alone. The corporate internal decision structure is manifest in the organization chart as well as in the established corporate policies that determine the company's actions far beyond any individual's contribution.

CORPORATE RESPONSIBILITY

All companies not only have an organized corporate internal decision structure, but furthermore manifest a set of moral standards (beliefs, norms and values) that lay out what is generally regarded as right or wrong in the corporation namely the ORGANIZATIONAL CULTURE. These moral standards are widely believed to be a strong influence on the individual's ethical decision-making and behaviour. Hence, many issues for which corporations receive either praise or blame can be traced back to the company's culture.

SUBORDINATES' RESPONSIBILITY

In a corporation, employees often act on the basis of their superiors' orders. Who is morally responsible when a superior orders a subordinate to carry out an act that both of them know is wrong?
Some people suggest that when a subordinate acts on the orders of a legitimate superior, the subordinate is absolved of all responsibility for that act: Only the superior is morally responsible for the wrongful act even though the subordinate was the agent who carried it out.

It is clearly mistaken, however, to think that an employee who freely and knowingly does something wrong is absolved of all responsibility when 'following orders'. Moral responsibility requires merely that one act freely and knowingly, and it is irrelevant that one's wrongful act is that of freely and knowingly choosing to follow an order.

SUBORDINATES' RESPONSIBILITY
If I am ordered by my superior to murder a competitor and I do so, I can hardly later claim that I am totally innocent because I was merely 'following orders'. The fact that my superior ordered me to perform what I knew was an immoral act in no way alters the fact that in performing the act I knew what I was doing and I freely chose to do it anyway, and so I am morally responsible for it. Thus, when a superior orders an employee to carry out an act that both of them know is wrong, the employee is morally responsible for that act if the employee carries it out. Obviously, the superior is also morally responsible because in ordering the employee, the superior is knowingly and freely bringing about the wrongful act through the instrumentality of the employee. The fact that a superior uses a human being to bring about the wrongful act does not change the fact that the superior brought it about.

THE COMPONENTS OF CORPORATE RESPONSIBILITY

For what is business responsible?

A. B. Carroll gives us a systematic answer in a classical pyramid of corporate social responsibility [CSR]

Discretionary

Desirable but discretionary (e. g. philantropy)

Ethical responsibility

Ethical expectations of a company (e. g. licence to operate)

Legal responsibility

Obligations to fulfill economic mission within the confines of the law Responsibility to produce goods/service that society wants at a profit

Economic responsibility

THE COMPONENTS OF CORPORATE RESPONSIBILITY

To whom is business responsible and what kind of activities are relevant to CSR? Area 1 Leadership, vision, and values
a) Defining and setting the corporate purpose, values, and vision b) Translating this into policies and procedures c) Putting it into practice, including empowering and embedding

d) Ethical leadership and championing

Area 2 Marketplace activities

a) Responsible customer relations, including marketing and advertising b) Product responsibility c) Using corporate responsibility product labelling d) Ethical competition

e) Making markets work for all

THE COMPONENTS OF CORPORATE RESPONSIBILITY

Area 3 Workforce activities

a) Employee communication and representation
b) Ensuring employability and skills development

c) Diversity and equality

d) Responsible / fair remuneration e) Work life balance f) Health, safety, and well-being g) Responsible restructuring

THE COMPONENTS OF CORPORATE RESPONSIBILITY

Area 4 Supply chain activities

a) Being a fair customer

b) Driving social and environmental standards through the supply chain

c) Promoting social and economic inclusion via the supply chain

Aria 5 Stakeholder engagement

a) Mapping key stakeholders and their main concerns b) Stakeholder consultation c) Responding to and managing stakeholders d) Transparent reporting and communication

THE COMPONENTS OF CORPORATE RESPONSIBILITY

Area 6 Community activities

a) Financial donations

b) Volunteering employee time

c) Giving gifts in kind d) Being a good neighbor

Area 7 Environmental activities

a) Resource and energy use b) Pollution and waste management c) Environmental product responsibility d) Transport planning