BHL6016 Contemporary And International Issues In Business Ethics YR17

Ethics and Corporate Social Responsibility
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Ethics and Corporate Social Responsibility
For the past few decades, the concepts of corporate social responsibility and ethics have grown to be the fore in both developed and developing countries due to the growing concern of corporate wrongdoings. Additionally, the have been an increase in research in the field of business and society that have asserted that corporate social responsibility and ethics can be profitable to organizations if well integrated with business strategy. Various scholars have also argued that good business ethics, corporate social responsibility and performance of an organization are related. During their presentation at the Academy of Management in 1998, Husted and Allen begun to speak of “corporate social responsibility. However, these studies have raised troubling question: is the incorporation of ethics and corporate social responsibility in the business strategy a good thing? This paper attempts to demonstrate how good business ethics and corporate social responsibility is a good business strategy by first understanding the strategy concept. The understanding of the concept strategy will provide a base for identifying and establishing the strategic utilization of ethics and corporate social responsibility for the benefit of the business.
Strategy Concept
The major concern ethics and corporate social responsibility is whether the use of good business ethics and corporate social responsibility a good business strategy. There strategic utilization in an organization forces us to clarify what is the mean of strategy in businesses. However, in order to understand the concept of strategy, first we will consider the early definition from military science which considers it to be unambiguous term. Therefore, according to military science, strategy is the science and art of winning war. Winning a war requires proper planning. Earlier scholars of strategy such as von Clausewitz (1982, p.4), wrote “strategy makes the plans for the separate campaigns and regulates the combats to be fought in each.” These earlier definitions of military strategies built a base for the understanding of corporate strategies.
However, the focus of the early definitions of corporate strategy was on how to make plans that will enable an organization to compete successfully in the industry. The Chandler (1962) and Harvard Business School definitions are the most common and considered classic definitions. In his definition Chandler (1962) defines strategy as “the determination of the long-run goals and objectives of an enterprise, and the adoption of a course of action and the allocation of the resources necessary for carrying out these goals.” Andrews (1967) defines strategy as the (pattern of objectives, purposes or goals and the major policies and plans for achieving these goals.” These two definitions have incorporated the four elements of design which is long-term, requires the organization to set specific objectives, develop a plan and commit resources. These four basic elements are found in various definitions of business strategy in most textbooks.
Based on the above definitions, this paper considers strategy as the various plans and actions taken by business as an attempt of achieving higher performance and competitive advantage in the market. Moreover, these plans and actions must result in unique capabilities that leverage the organizational processes and be the source of a sustainable competitive advantage. This paper adopts a definition which incorporates elements from both the design school and resource based approaches to strategy. This definition emphasizes on the role of ethics and social responsibility in the business strategy.
Based on ethics theories, the major focus is on intentions that requires the considerations of plans that are adopted to fulfil them. Therefore, the major focus of this paper is to represent the intentions and plans in the attempt of gaining a competitive advantage through a socially responsible and ethical behaviour (Guadamillas-Gómez and Donate-Manzanares, 2011).
Most business may be tempted to make huge profits in the short-term by ignoring ethical behaviours. With the presence of numerous practice codes, regulatory oversight committees and an increase in public pressure, most businesses choose to ignore some of the ethical considerations. Their claim for that is that they are simply required to abide by the law and not to be concerned with ethical issues. This disregard may undermine the wider economy which results in irreparable damage. Corporate collapses from the past decade should serve as a lesson that myopic strategies have the potential of creating profitable entities but despite their impressiveness, the results may be unsustainable in the long-run. There are strong business cases that demonstrate the need for running an organization in a socially and ethically responsible manner. A socially and ethically approach to business ensures that the organization has the capabilities thriving in the long-run by protecting its various aspects such as reputation, license of operation, supply chain and relationships with all stakeholders (Colombo and Gazzola, 2014). Therefore, it is all about avoiding collapses due to malpractices.
For the past decade, more than 20 companies have fallen out of the S&P 500 index where few of them were due to failure to adopt the new market trends. Most of these companies were as a result of massive malpractices or failures failed to adopt a sustainable business model. This is evident in the financial service industry where companies such as Bear Steams and Lehman Brothers chose short-term gains over long-term survival in the industry. Another example is that collapsed due to its unsustainable model is Marconi, a UK based electronic company. Although some companies chose to ignore the social and ethical factors, others have gained a competitive advantage in the market by emphasizing on the two. An example is Toyota, which is the leading car maker in world.
In order to establish whether adopting a socially and ethically strategy is a good business model, we have to consider its benefits from a utilitarian perspective (Bowie, 2017). The commitment to social and ethical involvement in a democratic environment means actions. Intentional social and ethical strategies allow organizations to extend and focus on the impact they have on the society they are operating in. Moreover, businesses that pursue social and ethical strategies that have a direct link to their products and services as well as customer base are in pursuit of a competitive advantage and adding value to their customers (Werhane, Freeman and Dmytriyev, 2017). The bottom line, effective ethical strategy results in a competitive success which enables social action. This remove the barriers between ethical/social strategy and business strategy. According to social scientists such as Drucker, the best way to understand contemporary firm is by viewing it as a purposeful social institution that has a responsibility to its stakeholders (total good created to them). However, the total good created by the business may not be understood by the entire community. Moreover, the pursuit for value creation may raise controversial concerns in the society. However, the value-added should be measured in function of the relevant stakeholders who suffers a direct impact.
Based on the action and stakeholder theories, the focus should be on the measurement of greatest good in function gained by those who are directly affected. This results in Benetton, which besides offending a few in the society defends its principles by ensuring that the important stakeholders to the company’s performance and long-term survival are satisfied. If all organizations were to pursue their strategies based on this dictum, their value added through these strategies could lead to a new type of competitive behaviour where the “value added” is increased. Moreover, the increased pursuit for value added projects with low risks demonstrates that organizations consider ethical/social strategy as a positive contribution to their overall business strategy.
Some scholars have argued that it is individuals who should be concerned about social issues and not business organizations. However, it is difficult to differentiate between a social support from an individual and the organization. The scholars continue to argue that the latter involves the utilization of organizational resources because they can be diverted for radical causes. Consequently, this social/ethical strategic focus should result in an increase in social projects in the society bearing in mind that some of them will be approved by certain people while others will be disapproved. From a utilitarian perspective, the advantages of the approved projects should be measured against the disadvantages of the disapproved projects.
Another perspective that can be used to measure the effectiveness of ethical/social strategies is deontological ethics whose focus is on a different type of a problem that might affect the ethical/social strategies of companies (motives). The idea of doing what can be considered to be right but for a wrong reason is still questionable based on moral standards. Some of the early scholars such as Kant (1964) assert that doing a right thing out of self-interest is not supported by the moral standards. It is only those actions that arise from motives of responsibility are morally supported. The intentions of businesses in respect to ethical/social projects are highly regarded while those that arise out of self-interest are questionable at their worst. The focus of a strategy is to add value to the organization by creating a competitive advantage. Therefore, if an action does not result in value creation, then it cannot be considered to be strategic. From its definition, strategy requires actions that benefits the business. Therefore, by definition an ethical strategy would be incompatible with moral motives that evaluate the worthiness of a particular action.
A business has a responsibility to its owners (maximize the earnings). Consequently, it has responsibilities to other stakeholders (creditors, customers, community, suppliers and environment). These duties happen to be opposing creating a crux of ethical dilemmas for businesses. Both ethical and social strategies tend reconcile the opposing responsibilities to set a framework for doing what is good to the society. Ethical and social strategies may also express the desire to fulfil the responsibilities owed to stakeholders. Therefore, their strategic orientation re...