This research paper will compare and contrast the differences between corporate social responsibility and ethical behavior in corporations by considering the ethics that impact business decisions. In order for a clear contrast of the two there first must be a clear understanding of ethics and business ethics.
Ethics comes from the Greek word ethos, which means moral character. When we think of ethics in terms of behavior we understand it to be an aspect concerning good and bad, the right and wrong; and those people with ethics consistently strive to set an example of good conduct. In a business setting being ethical means applying principles of honesty and fairness to all aspects the workers, and the customers. (Brammer, Millington, & Rayton, 2007). When we incorporate the word business with ethics we think about a company having to follow the right behavior to benefit the good of everybody, including the shareholders, stakeholders, and even the community.
What generally happens is that when profit and making money are of most importance then there ethics and ethical behavior sometimes take a backseat. Businesses should have good business ethics that focus more on ways to benefit the entire community or society then with just making a profit. In business ethics the activities should not harm people. So because businesses want to make a profit and money, their focus on profits must include a social responsibility. Business are obligated to perform beneficial activities for society wile business ethics are at the forefront.
There are several ethical behaviors that impact business decisions. The first ethical behavioral decision is they must promote in their practices of basic understanding of integrity. The business must conduct affairs with honesty and a commitment to treating every customer fairly. This is important because when customers think a company is exhibiting unwavering ethical practices, there becomes a high level of trust that is developed between the business and the people the company is trying to reach.
Another ethical behavior that impacts business decisions is how they are responding to diversity in the work force and with those they are trying to service. Every business has an ethical responsibility which starts with their recruiting workforce, providing equal opportunity in all the training programs so that the business or company is maximizing the value of each employee’s contribution. By the business using ethical behavior in diversity issues the company allowing employees to contribute to the success of the business.
Also, compliance and governance issues also impact business decisions. All businesses are expected to fully comply with environmental laws, federal and state safety regulations, fiscal and monetary reporting statues. Businesses can that don’t use ethical behavioral efforts in the area of compliance and government issues are subject to be penalized by the law and sanctions will result. When companies do not engage in good business ethics, they are penalized by the law. But such cases are rare and the profits of companies engaging in unethical behavior are far more than these punitive fines.
In looking at ethical behavior and how it impacts business decisions I believe that companies and organizations have to exhibit social responsibility in order to be considered ethical. Like previously stated business should not just be focused on profit and money, but the businesses behavior must displayed according to the moral norms of the community or society. There are things that are good for the society that are not good for business; but there are also good things in business that are not good for society and this is where business ethics comes in. Social responsibility is more of a policy or an obligation to the community, while the business ethics is more of a conscience. For example the selling of liquor and tobacco isn’t a violation of business ethics but it needs to report the causes of partaking in these items in order to demonstrate social responsibility to a community or society.
Keeping in mind of the social responsibility of organizations there are some other ethical issues that business organizations face. Business always must keep in mind the ethical advertising decision. Most businesses need to advertise in order to increase their customer base. So companies must be ethical in advertising by considering how homes and truthful they are when portraying what’s being sold. Like when I company advertises they are comparable to another competitor’s product when they clearly know they are using lower quality materials or ingredients. Social responsibility is an ethical theory, in which individuals are accountable for fulfilling their civic duty; the actions of an individual must benefit the whole of society.
Literature suggests there must be a balance between economic growth and the welfare of society and the environment. If this equilibrium is maintained, then social responsibility is accomplished. Literature also states that the theory of social responsibility and ethics should be applied in both individual and group capacities. In organizations social responsibility and behavioral ethics should be incorporated into daily actions/decisions, particularly ones that will have an effect on other people and/or their environment (McWilliams, 2001).
Businesses should have developed a system of social responsibility that is tailored to their company environment. If social responsibility is maintained within a company than the employees and the environment are held equal to the company’s economics. Maintaining social responsibility within a company ensures the integrity of society and the environment are protected(Joyner, 2002).
Another ethical issue faced by organizations is their ethical policies on confidentiality. When companies use customers private information without their approval. For example when businesses fail to disclose their intended business practices, such as selling customers information to third parties, this is considered unethical although it may allow the company gaining a profit.
Another ethical issue is with sales practices. For example wen a company honestly discloses both the advantages and disadvantages of their products and stands behind them 100 percent this is considered ethical. But on the other hand if a company misleads or baits a customer to buy something and then tries to entice them to purchase more expensive merchandise through deceitful means then this is unethical business practices.
Finally, business face the ethics of pricing strategies. For example significantly raising the cost of water during a natural disaster, this would make the company a profit but it wouldn’t benefit the community which is a determinate of business ethics.
Many businesses want of their employees to understand the importance of business ethics, so they provide trainings on codes of ethics. These trainings are essential because it make the employees aware of the policies and behaviors that are expected.
Michael Connor an expert on the importance of businesses establishing code of ethics in order to encourage ethical behavior states, “A code of ethics is about corporate culture, having a code is often viewed as a luxury or something that is an added cost,” he says. He goes on to say, “The reality these days is that the business that does not have a code of ethics subjects itself to a much greater risk in its day-to-day operations and if there is an unfortunate incident, they expose themselves to much greater risk [from] regulatory and prosecutorial authorities.(Spiro, 2013)”
Stakeholders which include: customers, supplier, employees, and shareholders make up the primary stakeholders in a business. These group of people have a tremendous effect on a business approach to corporate social responsibility. The stakeholders effect businesses in multiple ways first economic responsibility, which requires the business to be responsible to produce the goods and service that a society wants and to maximize profit for the stakeholders
Also, there is a legal responsibility of stakeholders on business approach, they require the business to fulfil their economic goals within the legal framework. The require them to do so by imposing them to abide by local councils, state and federal government and their regulating agencies. Another effect is the ethical responsibility which is includes behavior that is not necessarily codified into law and may not serve the businesses direct economic interests. The stakeholders hold the business to be ethical and ensure that the act with equity, fairness, impartiality, respect the rights of individuals (Morsing & Schultz, 2006).
One major ethical violation by a major corporation that affected me was by Volkswagen. In September of 2015 the Environmental Protection Agency (EPA) found the many Volkswagens cars sold in America had a “defeat device” software that could detect when the car was being tested and would change the performance accordingly to improve results. So over 11 million cars worldwide and 800,000 in the US, and Europe were sold with irregularities in tests that measure carbon dioxide. The unethical problem is these cars emitted nitrogen oxide pollutants up to 40 times above what is allowed in the US. As a result of this scandal the VW recalled 8.5 million cars in Europe, 2.4 in Germany, 1.2. Million in UK, and 500,00 in US as a result of the emission scandal. This scandal had “Broken the trust of our customers and the public” said Michael Horn Chief Executive of VW. Also as a result of this unethical decision it really effected the stakeholders because during this investigation VW shares fell by 1/3 since the scandal.
So as a result of trying to cover up the Emission results VW not only lost the trust of its customers but they also were fine $18 billion dollars. This example of unethical practice of Volkswagen has stained their good name. It’s important not to cut corners in order to make a big profit, businesses must realize that good business ethics translate into good business.
- Brammer, S., Millington, A., & Rayton, B. (2007). The contribution of corporate social responsibility to organizational commitment. The International Journal of Human Resource Management, 18(10), 1701-1719.
- Morsing, M., & Schultz, M. (2006). Corporate social responsibility communication: Stakeholder information, response and involvement strategies. Business ethics: a European review, 15(4), 323-338.
- Spiro, J. (2013). How to write a code of ethics for business. Dostopno na: http://www. inc. com/guides/how-to-write-a-code-of-ethics. html/1.
- McWilliams, A., & Siegel, D. (2001). Corporate social responsibility: A theory of the firm perspective. Academy of management review, 26(1), 117-127.
- Joyner, B. E., & Payne, D. (2002). Evolution and implementation: A study of values, business ethics and corporate social responsibility. journal of Business Ethics, 41(4), 297-311.