Crane & Matten, Business ethics, 3rd Edition, Chapter 2

Suggested answers to the Think Theory exercises associated with the Ethics in Action boxes

THINK THEORY 1 Theories of CSR suggest there are both business and moral reasons for engaging in social initiatives. Go to the website of one or two companies of your choice and find the section dealing with social issues (the page may be headed CSR or sustainability, or perhaps corporate citizenship) and see what kinds of reasons the corporations give for their involvement in CSR. Is there a balance of business and moral reasons, or does one type of reason predominate? How do you explain this?

The specific kinds of reason given will depend on the exact nature of companies whose websites students visit. For this question, two car company websites were considered. Both give mostly business reasons for their social initiatives, and both companies clearly hope to profit from their CSR initiatives. Consider the words of one chief executives note to readers: lasting business success is possible only if environmental and social concerns arent neglected. * Other companies may choose to give mostly moral reasons for their actions, but as the textbook argues, corporate motives are difficult, sometimes impossible, to determine. * (http://www.daimler.com/dccom/0-5-876574-1-1195182-1-0-0-0-0-0-36-0-0-0-0-0-0-00.html)

THINK THEORY 2 Think about the theory of CSR in the context of a multinational. To what extent can a multinational corporation operate a global CSR programme, or is it necessary for such companies to operate on a more national or regional basis?

It is difficult to see how a company could credibly run a CSR programme either entirely centrally (given regional differences in customs and social expectations) or entirely locally (given existence of some global responsibilities). A multinational corporation may therefore choose to have a CSR programme with both global and national/regional elements. Globally-defined elements could include attention to the economic and legal responsibilities (following Carrolls model), and instructions to national/regional managers to develop ethical and philanthropic programmes that were locally appropriate, and these would then comprise the national/regional element of the companys CSR programme. Examples of such approaches: going beyond the existing laws to provide employees with good health-care benefits in the United States (ethical) or providing educational facilities to local communities in parts of sub-Saharan Africa (philanthropic).

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Crane & Matten, Business ethics, 3rd Edition, Chapter 2

THINK THEORY 3 What levels of CSR are mentioned in this example from India? What could be reasons for the alleged imbalanced approach of Indian companies towards CSR?

In Carrolls four-part model of social responsibility (see Fig.2.1), firms have: economic, legal, ethical and philanthropic responsibilities. In this example, corporate responsibility is defined as equivalent to charity (i.e. philanthropy). One assumes that the economic and legal levels are also taken seriously, but the Satyam case suggests this is not always the case. This narrow definition (CSR = philanthropy) is common among Indian companies. Speculating about the reasons, one could suggest that in a country with so much poverty philanthropic engagement is a culturally-valued good. Actions at the ethical level of Carrolls pyramid may not in the past have been expected by society.

THINK THEORY 4 The network model of stakeholder theory suggests that firms have indirect relationships with a whole range of constituencies via their immediate stakeholders. To what extent should corporations also have to respect the rights of these indirect stakeholders? Think, for example, about the case of a companys supply chain and all the different tiers of supplier stakeholders that are involved. Does a company have responsibilities to suppliers at all tiers?

Following Evan & Freemans (1993) principles of corporate rights and corporate effects, the company does have a responsibility to respect the rights of indirect stakeholders, at least to the extent that its actions have a bearing on those stakeholders. A company therefore does have responsibilities to suppliers at all tiers. In practice, this could find expression in (e.g.) not setting a manufacturing target for an immediate supplier that that supplier could only meet by engaging in actions that your firm would not countenance. To paraphrase a well-known corporate motto, the responsibility is: dont be evil and dont let evil be done on your behalf. THINK THEORY 5 Think about the concept of globalization that was discussed in chapter one, and our characterization of globalization as deterritorialization, namely the progressive eroding of the relevance of territorial bases for social, economic and political activities, processes and relations. How might this influence the failing of government and increasing power of corporations?

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Crane & Matten, Business ethics, 3rd Edition, Chapter 2

As globalization continues, companies become increasingly independent of national territory for their continued survival. This makes it easier for companies to relocate their operations to territories with lower operating costs, or even to move their head office. Problems like unemployment are territorially-bounded, however, meaning that the benefits of such a move are disproportionately felt by the company and the costs by the local government whose territory is being abandoned. This gives companies a great deal of bargaining power vis--vis governments (on, e.g., tax rates, subsidies for factories, or contractual arrangements under public-private partnerships). At the same time, governments have ever-more-limited powers to hold companies accountable for their actions. THINK THEORY 6 In which way are the companies in Kenya and Russia mentioned in this case implementing the extended view of corporate citizenship? What are the new responsibilities arising from this role and what are the limits of this approach?

In both cases, the companies were involved with local communities social rights the freedom to participate in society. In both cases, it could also be argued that they were involved to some extent in political rights enabling individuals to participate in the process of governance beyond their private sphere. In the Magadi case, the company was government like providing the services directly. In the case of the Russian aluminium producer, the role was more a facilitating one the company did not provide services directly, but rather helped the local community to help itself by facilitating NGOs. The new responsibilities are government-like in nature. When they take on such a role, firms become responsible for providing the sorts of services that a government would traditionally have provided and the local communities come to expect such services to continue. Part of the problem is that the companies are not governments: they are private companies whose primary expertise is the business sector they operate in. They also have limited funds, and cannot be relied upon to provide government-like services for ever: indeed, shareholders may be unhappy with the amount of local investment. Their accountability to the local population is also limited. The Magadi case is salutary: it recognized these limits and helped set up a county council that minimized Magadis longterm involvement.

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