RUSHSAP Ethics of Corporate Social Responsibility (CSR) Glen Kurokawa, B.Sc., J.D. Regional Unit for Social & Human Sciences in Asia and the Pacific (RUSHSAP) UNESCO Bangkok 920 Sukhumvit Road, Prakanong, Bangkok 10110, THAILAND

RUSHSAP Corporate Social Responsibility Company’s decision to significantly increase beneficial impacts and/or significantly decrease harmful impacts to stakeholders in society. Company’s decision to significantly increase beneficial impacts and/or significantly decrease harmful impacts to stakeholders in society. Stakeholders: investors, employees, suppliers/distributors (i.e. anyone in value chain), consumers, and residual of society. Stakeholders: investors, employees, suppliers/distributors (i.e. anyone in value chain), consumers, and residual of society. –Can also include temporal dimension: present and future generations (superset of sustainable development and intergenerational equity).

RUSHSAP Examples of CSR From the Asian region: From the Asian region: –Lux: Promoting the use of soap. –Thai Oil Corporation: Environmental clean-up campaigns. –Siam Cement: university scholarships. –Honda: Environmental supply chain management and environmentally friendly technology research. –Steel Authority of India: helping townships with irrigation. –Malaysian Airlines: Below-cost rural flights. –Telkom Indonesia: Providing capital to SMEs.

RUSHSAP Social & Human Sciences (SHS) Sector of UNESCO. Includes: Sector of UNESCO. Includes: –Ethics Science and Technology Science and Technology Environmental Ethics. Environmental Ethics. Bioethics. Bioethics. –Human security –Philosophical Dialogues –Social development

RUSHSAP CSR Ethics Ethical dilemmas? Companies have to provide a return on investment for shareholders, so can they engage in activities designed to benefit society? Ethical dilemmas? Companies have to provide a return on investment for shareholders, so can they engage in activities designed to benefit society? –Shareholders vs. other stakeholders?

RUSHSAP Management and Ethics Literature Review: Management and Ethics Literature Review: –Two main, extreme “camps”: (1) Corporations should profit-maximize. Responsibility to shareholders, businesses are specialized for business and not other purposes, agency costs, existence of welfare state and corporate taxes. Responsibility to shareholders, businesses are specialized for business and not other purposes, agency costs, existence of welfare state and corporate taxes. (2) Corporations should be responsible to other stakeholders. Corporations are influential, extended public governance, extended stakeholder theory and game-theoretical derivation of neo-institutional social contract. Corporations are influential, extended public governance, extended stakeholder theory and game-theoretical derivation of neo-institutional social contract. –At least in some cases, there is a business case for CSR. Some possible mechanisms: corporate reputation, long-term sustainability. Is there anything we can add?

RUSHSAP Begin with a version of utilitarianism close to economics, and therefore reasonable, comprehensible, and persuasive to corporations: Begin with a version of utilitarianism close to economics, and therefore reasonable, comprehensible, and persuasive to corporations: (a)Maximize shareholder utility value, not $$$. -Thus, takes a very conservative position. (b) Preference utilitarianism. (c) Rule utilitarianism = act utilitarianism. (d) Negative utilitarianism.

RUSHSAP Altruistic CSR “interest in doing good for society regardless of its impact on the bottom line” “interest in doing good for society regardless of its impact on the bottom line” Conservative position: unethical all the time Conservative position: unethical all the time Liberal position: ethically permissible virtually all the time Liberal position: ethically permissible virtually all the time SFU: ethically mandated depending on the situation – depending on whether SUM is achieved. SFU: ethically mandated depending on the situation – depending on whether SUM is achieved. –Example: corporate donations for impoverished. Depends on utility indifference map of shareholders.

RUSHSAP Ethical CSR “morally responsible to any individuals or groups where it might inflict actual or potential injury” “morally responsible to any individuals or groups where it might inflict actual or potential injury” Conservative position: ethically mandated all the time Conservative position: ethically mandated all the time Liberal position: ethically mandated all the time Liberal position: ethically mandated all the time SFU: ethically mandated, depending on the situation – whether SUM is achieved. SFU: ethically mandated, depending on the situation – whether SUM is achieved. –Example: dumping toxic by-products. Depends on utility indifference map, as well as future utility (because of, e.g., public pressure and corporate reputation).

RUSHSAP Strategic CSR When profit intention is aligned with societal interests When profit intention is aligned with societal interests Conservative position: ethically mandated all the time Conservative position: ethically mandated all the time Liberal position: ethically permissible all the time Liberal position: ethically permissible all the time SFU: ethically mandated, depending on whether utility- maximization for shareholders gives same result as profit-maximization. SFU: ethically mandated, depending on whether utility- maximization for shareholders gives same result as profit-maximization. –Example: purchasing a tobacco company. Depends on utility indifference map, as well as future utility (because of, e.g., public pressure and corporate reputation).

RUSHSAP Result Altruistic CSR Ethical CSR Strategic CSR ConservativeUnethicalMandated “ethical custom” Mandated LiberalPermissibleMandatedValue-basedPermissible SFU Situation- dependent

RUSHSAP Result

Result Provides a different position Provides a different position –“moderate” with regards 2 dimensions: altruistic and strategic CSR –“radical” with regards 1 dimension: to ethical CSR Provides theoretical framework and rationale for position Provides theoretical framework and rationale for position

RUSHSAP Corporate Takeover? Issue: using SFU and its SUM criteria may lead to corporations not profit-maximizing, and therefore subject to takeovers. Once new management takes over, there will be profit- maximization, rendering SFU useless. Issue: using SFU and its SUM criteria may lead to corporations not profit-maximizing, and therefore subject to takeovers. Once new management takes over, there will be profit- maximization, rendering SFU useless. Resolution: shareholders in a utility-maximized firm will resist takeover because new management will decrease SUM. Thus, SFU can hold. Resolution: shareholders in a utility-maximized firm will resist takeover because new management will decrease SUM. Thus, SFU can hold.

RUSHSAP End UNESCO Bangkok, Social & Human Sciences, Programs and Activities: UNESCO Bangkok, Social & Human Sciences, Programs and Activities: programmes_and_activities programmes_and_activities programmes_and_activities programmes_and_activities