Slide 5.1
Chapter 5
CORPORATE
RESPONSIBILITY
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.2
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Contrasts in business practice
Evaluating individual and corporate actions
Ethical decision making models
Stakeholders, strategy and responsible action
Managing corporate responsibility
Integrating themes
Cases and examples
– The Co-operative Group, Bernard Madoff,
Facebook, Gap, Wipro
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.3
Why study corporate responsibility?
• Corporate practice affects wider society
– corruption, pollution, ‘rewards for failure’, etc.
• Practice reflects assumptions about acceptability
• As expectations change, established practices
add less value
• Managers face ethical AND commercial dilemmas
• Thinking critically means questioning
assumptions, and considering contexts,
alternatives and limitations.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.4
Contrasts in business practice
• Malpractice (see also Table 5.1)
– Madoff – took money from people to invest, but
used it to pay dividends to earlier investors
– Barclays – traders provided wrong to the body
setting an industry interest rate
– Aviva – generous executive pay.
• Philanthropy and enlightened self-interest
– Philanthropy – Bill Gates, Jeff Skoll, many local
givers
– Enlightened self-interest prompts community
sponsorships.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.5
Substance of corporate responsibility
Table 5.2 lists the topics that arise in this area:
• Inputs and resources – dealing fairly with staff and
suppliers
• Transformation – managing workforce responsibly,
minimising waste and energy use
• Outputs – responsible customer relations, clear
labelling
• Process – leadership and stakeholder
engagement
• Context – community activities and support.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.6
Perspectives on individual actions
Figure 5.1
Three domains of human action
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.7
Four criteria for evaluating actions
• Moral principles
– In line with accepted principles?
• Utilitarianism
– Best outcome for the greatest number?
• Human rights
– Does it maintain individual’s human rights?
• Individualism
– In an individual’s long-term interests?
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.8
Table 5.3
Questions within each philosophy
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.9
Why people reach different
conclusions
Figure 5.2
Making ethical judgements
Source: Adapted from Business and Society: Ethics and Stakeholder Management, 1st ed., South Western (Carroll, A.B. 1989) Copyright © 1989 South-Western, a part of Cengage
Learning, Inc., reproduced by permission, www.cengage.com/permissions.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.10
Role of business in society
• Milton Friedman (1962)
– To increase profits as long as it stays within the
rules of the game (no deception or fraud).
• Corporate responsibility
– Business and society depend on each other, and
have mutual obligations
– Pressure groups and advocates help ensure that
public expectations of business change
– Expectations vary between countries.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.11
Ethical decision-making models
• Attempt to place individual decisions within the
wider context that will shape them
• They examine the effects of both
– Individual factors
• Personal value systems, beliefs
– Organisational factors
• Power distribution, incentives and rewards.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.12
A simple ethical decision model
Figure 5.4
A simple model of ethical decision making
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.13
Stakeholders and corporate
responsibility
Stakeholder theory offers a way of managing
that recognises conflicting interest groups:
– Shareholders, customers, suppliers
(Kraft Foods), natural environment (BP)
– Figure 5.3 shows the range of positions
companies take on responsibility
– Processes of mutual influence between managers
and stakeholders shape policies.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.14
Stakeholders and corporate
responsibility (Continued)
Stakeholders’ interests shape policy (Table 5.4)
Vogel (2005) on the ‘market for virtue’ –
responsible actions need to be financially
sustainable. Examples of responsible action:
• corporate mission
– The Body Shop, The Co-op
• to meet customer needs
– stocking Fair Trade goods
• part of strategy
– Kraft, M&S.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.15
Managing corporate responsibility
How can managers organise the business
to encourage good practice?
• Leading by example
– Senior people set the tone (Wipro)
• Codes of practice
– Formal statements of principles and practices
• Corporate responsibility structures and reporting
– Specific committees and roles (Vodafone, BP)
• Inclusion in FTSE4Good Index Series
– Affects investors’ decisions on holding shares.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.16
Integrating themes
Entrepreneurship
While owners of new businesses lack the resources for
CR investments, taking a long-term view brings returns.
Sustainability
Carbon trading schemes an example of how companies
link CR and strategy.
Internationalisation
CR reporting practices seem to reflect national
management systems rather than directed action.
Governance
Some environmental management systems impress
customers more than they change daily practice.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014
Slide 5.17
Summary
• The models presented show alternative
expectations of business in society.
• Ethical (responsible) action depends on individual
beliefs and the organisational context.
• Responsible corporate behaviour can only be
sustained if it contributes to some strategic
advantage.
• Boards create structures of corporate governance
which they hope will help resolve these dilemmas.
Boddy, Management: An Introduction PowerPoints on the Web, 6th edition © Pearson Education Limited 2014