Framing Business Ethics

Chapter 2
Lecture 3 & 4

Key features of a corporation

A corporation is essentially defined in terms of legal

status and the ownership of assets

Corporations have three key features:
Corporations are typically regarded as artificial
persons in the eyes of the law
Corporations are notionally owned by shareholders,
but exist independently of them
Managers and directors have a fiduciary
responsibility to protect the investment of
shareholders

Can a corporation have social

responsibilities?
Milton Friedman 1970 classic article The social

responsibility of business is to increase its profits

Vigorously argued against the notion of social
responsibilities for corporations based on three main
arguments:
Only human beings have a moral responsibility for
their actions
It is managers responsibility to act solely in the
interests of shareholders
Social issues and problems are the proper
province of the state rather than corporate
managers

Can a corporation be morally

responsible for its actions?
Long and complex debate but generally support

from literature for some degree of responsibility

accredited to corporations
Argument based on
Every organisation has a corporate internal
decision structure which directs corporate
decisions in line with predetermined goals
(French 1979)
All organisations manifest a set of beliefs and
values that lay out what is generally regarded
as right or wrong in the corporation
organizational culture (Moore 1999)

Corporate Social
Responsibility

Why do corporations have social

responsibilities?
Business reasons (enlightened self-interest)
Extra and/or more satisfied customers
Employees may be more attracted/committed
Forestall legislation
Long-term investment which benefits corporation
Moral reasons:
Corporations cause social problems
Corporations should use their power and resources
responsibly
All corporate activities have social impacts of one sort or
another
Corporations rely on the contribution of a wide set of
stakeholders in society rather than just shareholders

What is the nature of corporate

social responsibilities?
Corporate social responsibility
encompasses the economic, legal, ethical,
and philanthropic expectations placed on
organizations by society at a given point in
time
(Carroll & Buchholtz 2000:35)

Carrolls four-part model of

corporate social responsibility
Desired by
society
Philanthropic
Responsibilities
Ethical
Responsibilities
Legal
Responsibilities
Economic
Responsibilities

Expected by
society
Required by
society
Required by
society

Source: Carroll 1991

CSR and strategy: corporate social

responsiveness
Corporate social responsiveness refers to the

capacity of a corporation to respond to social

pressures (Frederick 1994)
4 philosophies or strategies of social
responsiveness (Carroll 1979)
Reaction
Defence
Accommodation
Proaction

Outcomes of CSR: corporate social

performance
Outcomes delineated in three concrete areas:

Social policies
Social programmes
Social impacts

Stakeholder theory of the

firm

Stakeholder theory of the firm

Theory developed by Edward Freeman

(1984)
A stakeholder in an organization isany
group or individual who can affect, or is
affected by, the achievement of the
organizations objectives (Freeman
1984:46)

Stakeholder theory of the firm:

Traditional management model
Shareholders

Customers

Firm

Suppliers

Employees

Stakeholder theory of the firm

Competitors

Government

Customers

Shareholders

Firm
Suppliers

Employees
Civil
society

Stakeholder theory of the firm:

A network model
Customer
stakeholder 1
Competitors

Government

Customers

Shareholders

Customer
stakeholder 3

Firm

Suppliers

Employees

Employee
stakeholder 1

Civil society
Supplier
stakeholder 1
Civil society
stakeholder 2

Civil society
stakeholder 1

Employee
stakeholder 2

Summary
We have discussed business ethics in

relation to the social role of the corporation

Outlined the nature of corporations
Discussed the different views and elements of
CSR and stakeholder theory.