1. ETHC3200 Ethics and Society
Week 4: Corporate Ethics

2. Business Ethics is Normative
Your role as a technology manager, and your role as a citizen, require you to provide answers to some interesting questions. Some examples follow:
What is the proper role of business management in making decisions?
What is the proper role of business in society?
Do business managers have an overriding ethical responsibility to serve the interests of stockholders before acting for society’s interests? What about the interests of the planet and its many non-human inhabitants?
To begin crafting answers to these questions Read Chapter 3: “Corporate Social Responsibility” in Joseph Desjardins’ An Introduction to Business Ethics.
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.

3. Answers according to the Classical Model of Corporate Social Responsibility
The classical or economic model of CSR has its roots in free market economic theory.
It is the most influential theory of corporate responsibility in last century.
Milton Friedman, Nobel-prize winning Economist:
“[In a free economy], there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game…”
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.

4. The Classical/Economic Model
According to one interpretation of Friedman, a corporation’s social responsibility does not go beyond the bottom two layers of the pyramid to the right: be profitable, and obey the law.
Under this model, a business is understood as the private property of stockholders.
Pursuing any social objective other than the maximization of profit is spending someone else’s money for your own purposes. This is ethically equivalent to theft.
Business management must pursue maximum profits under this model.
Required by society
Expected by society
Desired by society

5. Social and Political Consequences of the Classical Model
To allow for corporations to maximize profit within the law, government must have a laissez-faire approach to business. It is believed that freedom from government regulation and control allows the market to function most efficiently.
Do you recognize this political message? What political organizations do you think are most likely to abide by this creed?
The Desjardins text provides a thorough critique of this model. Let’s supplement this critique with a better understanding of what a corporation is.
View the film The Corporation. It is available through the NAIT library’s streaming service at mp4&w=640&h=480 (Make sure you have Flash enabled in your browser.)
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.

6. Journal Entry
The film suggests that the corporation is the dominant social institution of our day. It is an institution created by the ideology of the classical model of corporation social responsibility. Based on reflection on what you viewed in The Corporation, combined with the critiques outlined in Desjardins, create a journal entry to record your own critique of the classical/economic model of CSR. Be sure to include reference to the ethical frameworks we have reviewed so far in your journal entry.

7. Growth
The primary way that wellbeing is measured in the classical model is Gross Domestic Product (GDP). Growth, as measured by GDP, is considered a good that indicates improvement in the overall wellbeing of society. One of the issues with GDP is that it only measures quantitative growth; qualitative growth is ignored altogether. The volume of money flows is the core measure of wellbeing according to GDP. Consider the quote from former US Senator Robert Kennedy on the following page. The context is American but applies equally well to many so called “developed” countries.

8. GDP as an Insufficient Indicator of Wellbeing
“Too much and for too long, we seemed to have surrendered personal excellence and community values in the mere accumulation of material things. Our gross national product, […] if we judge the United States of America by that – counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”
Senator Robert Kennedy, 1968 in Capra & Henderson (2013:2)

9. Alternatives to GDP
Here are some interesting links to explore alternatives to GDP as an indicator of economic wellbeing:
Genuine Progress Indicator (GPI) (2 minutes):
The Human Development Index (HDI) (10 minutes):
Gross National Happiness (GNH) (3:30 minutes):
Interesting stuff. If there are alternatives to GDP, are there alternatives to the classical model of CSR?

10. Alternatives to the Classical Model of CSR
Normal Bowie: the pursuit of profit is constrained by an obligation to obey a moral minimum.
This framework distinguishes between
Ethical imperatives to cause no harm
Ethical imperatives to prevent harm
Ethical imperatives to do good
For Bowie, while it is ethically good for managers to prevent harm or to do some good, their duty to stockholders overrides these concerns. This seems like a minor improvement to the classical model. It includes the 3rd tier of the pyramid to the right.
Required by society
Expected by society
Desired by society

11. The Stakeholder Theory
Businesses affect a wide variety of people, benefiting some and imposing costs on others.
The Stakeholder theory rejects the premise that the primary beneficiaries of business decisions should be investors.
Stakeholder theory requires management to balance the ethical interests of all affected parties such as consumers, employees, competitors, the environment, and the disabled.
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.

12. Strategic Model: Sustainability
The strategic model of CSR, focusing on sustainability, goes one step further. “One serves the ends of shareholders by serving social ends” (p. 71). This model adds a discretionary responsibility to CSR as represented by the upper tier of the pyramid.
Question for reflection: Should “a firms financial goals […] be balanced against, and perhaps even over ridden by, environmental considerations” (p. 73).
Required by society
Expected by society
Desired by society

13. Further Reflections
In many ways the CSR chapter in Desjardins doesn’t go far enough. This is not surprising since the book does not consider the alternative lenses that were introduced in Week 3. The diagrams on the following slides explore sustainability in different ways.
The sustainability slide that follows recognizes that an economic framework is not enough, in fact, the economy is embedded in social and ecological dimensions that transcend it. First, the economic system is a social construct. It has been constructed by humans, and can be deconstructed, reconstructed, and re- imagined. Second, the economic system does not exist without the ecological system functions that enable it. As ecological systems are destroyed, the economic systems that rely on them will be destroyed also. These ecological functions are not “external” to economics after all.
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Copyright © 2014 by McGraw-Hill Education. All rights reserved.

14. Sustainability
Source:

15. Establishing Socially and Ecologically Responsible Economic Systems.
From a citizenship perspective we can make ethical decisions regarding how much we choose to consume. View The Story of Stuff (20 minutes) to get an idea of how and why this makes an impact: stuff/
Now view The Story of Change (6:25 minutes) to get an idea of why this might not be enough:

16. Corporate Culture
This week is already packed with important material and we haven’t had time to do justice to the topic of corporate culture. Corporate culture can influence ethical behavior for good or bad.
Read Chapter 4: “Corporate Culture” in Joseph Desjardins’ An Introduction to Business Ethics.
Create a forum entry describing an “Aha moment” that you experienced through engaging with this week’s material. (Alternatively, describe what you think is the most important lesson embedded in this week’s material.) Use the “Corporate Ethics” forum in the week 4 section of Moodle to post your response. Please take the time to read your colleagues’ responses and reply to at least two.