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1. Before the crisis, Hershey exhibits a certain type of CSR, as initiated by its founder. What is the type of CSR displayed by Hershey, referring to the typologies of Caroll, Lantos, and others you might consider appropriate? In a time of economic crisis, does it appear to you as appropriate and relevant?
Before we embark on answering question 1, let us first define CSR, and its different approaches. Numerous definitions of CSR are available, but Backman's seems to be the catchiest: "social responsibility usually refers to the objectives or motives that should be given weight by business in addition to (emphasis added) those dealing with economic performance (e.g., profits)" (as cited in Carroll, 1979). Here, we can make a parallel to a life of a college student whose extracurricular activities could be compared with social responsibilities of a company. Both are voluntary actions of commitment towards our surroundings, and both may or may not result in our benefit. And precisely this fact (the payoff of our actions) separates CSR into its different types. Lantos defines these three: Ethical, Altruistic, and Strategic CSR.
Rather than with social responsibilities, Ethical CSR concerns itself more with the morality of the company's actions. Meaning the company's only boundary for a decision is its morality. And so, it is responsible towards the society by not taking immoral actions. On the other end of the CSR spectrum is the Altruistic CSR. Its philanthropic nature goes far beyond the companies' moral responsibilities, and will often coincide with their ultimate goal of profitability. Lastly, Strategic CSR serves as a compromise between the two extremes. The company will only commit to those social issues that will eventually positively affect the business. (2001)
Which approach had Hershey (whether consciously or not) applied? To find out, let us highlight some of his (or the company's) society related doings. From the company's early beginnings Hershey declared he "wanted the money to be used for a purpose of enduring good" (Carr & Rodriguez, 2004). And he always stood by his statement, expanding Hershey (the town), and serving its workers as well as community, even in time of such circumstances as The Great Depression. During these troubled times Hershey avoided lay-offs, and took on a number of real estate projects. These (Hershey Estates) later continued to operate at a financial loss. In 1909, Hershey's new venture, Milton Hershey School, absorbed his entire personal fortune. The school prospered and until today retains one of the largest private educational endowments (Carr & Rodriguez, 2004). Obviously, such large commitment is selfless, and not aimed at any personal or company gain. Hence Hershey's initial approach (and we assume that this approach continued) corresponds to our definition of Altruistic CSR.
Should the resources for CSR be cut off in time of economic crisis? No. Such measures would be looked upon as hypocritical. And, moreover, the customers will value the presence of a company, and their dedication, in times when they need it most. Quelch and Jocz give 5 reasons why CSR gains in importance in time of recession.
"Consumers will be willing to pay price premiums for brands that have a track record of doing good. The habit is ingrained among a large segment of consumers and can survive recession.
Critical cross-border global issues require multinational corporations to act, recession or not.
Recession creates poverty exacerbates problems that government alone can not solve.
Employees are attracted to socially responsible companies and want to see CSR retained.
The global economic crisis has produced a loss of trust in all corporations, which a strong commitment to CSR can help them to withstand." (2009)
Just as fair-weather friends turn from you in desperate times, so will the companies whose CSR is merely a superficial whim.
2. What is the purpose of a company, who is it meant to serve: what position does the Board of Trustees of the school take on this issue as they decide to sell their shares of Hershey? Analyze its arguments; what theoretical background is it based on? Analyze the relevancy and limits of these arguments.
"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their own interest. We address ourselves not to their humanity, but to their self- love, and never talk to" says Smith. And what he means is that it is in human nature to act in one's self-interest. Moreover, Smith says that a businessman often caters to others' wants and needs not because he wants to but because he needs to (as cited in D'Souza, 2000). Than the company's only purpose in a capitalistic political system (and this is the only system we can conceive its existence in) is to provide its owner with the means to survive. Is this moral? Its critics argue that capitalism leads to greed and selfishness (traits that are generally considered to be somewhat "bad"). But bad or not, as the saying goes, forbidden fruit will always taste the sweetest, and people will always be drawn to act in their own self-interest, and seek, ultimately, pleasure and happiness. And "capitalism works to civilize greed, just as marriage civilizes lust" (D'Souza, 2000). So, if we do not want to suppress the human nature (just as Communism had), the smartest thing is to exploit it for the good of society. The entrepreneurs, although pursuing their own goals (usually profit), will serve the society by providing for their wants (needs), and will only achieve their goals if other people will respond to their offer, that is they will value it. Just like that, your selfishness and egoism will be transformed into virtue and goodness (Ayn Rand). Still, only utilitarians would pass this approach as being moral. A Kantian would argue that moral consequences do not mean moral motives, and so the whole process remains immoral (amoral in any case) (Slide reference?).
To sum this up, the better the company is doing, the more profit for their shareholders they generate, the more they contribute to the wellbeing of the society. And this they do in the broadest scope imaginable: providing value to the consumers, stakeholders (employees, suppliers), government (research, taxes), and, last but not least, the company itself (shareholders). There is, however, one catch. How do we measure the company's contribution to the society? Profit is unreliable. It can be easily manipulated by cunning accounting moves. The stock price is also debatable. It is not a representation of the real value (e.g.: it does not reflect the liquidity in time of crisis). The real value is the company's sustainability. Thus the value created is the essence of the purpose of business, and any philanthropic and humanitarian deeds go, in principle, against the capitalistic conception. In the Fountainhead Ayn Rand writes: "It stands to reason that where there's sacrifice, there's someone collecting sacrificial offerings. Where there's service, there's someone being served. The man who speaks to you of sacrifice, speaks of slaves and masters. And intends to be the master" (1943). And where there is someone who gets the unearned benefit, there is someone who is shortened at his expense. Therefore the role of government is best to be kept in the realms of the Comte-Sponville's "legal order" (Slide reference), and not let it mingle in the moral one.
With this short background of the company's role in mind, we can finally look at and analyze the Hershey Board's decision. The Board believed that the Hershey trust overspent on shares of Hershey Foods Corporation. This, they believed, tied the fund to a very volatile, and single stock. Hershey Foods depends on crop commodities like sugar and cocoa. In case of sugar, produced in the U.S., they count on the government subsidies, while cocoa's harvest is subject to a healthy season, and the stability of the exporting country's government. The decision of a potential sale was reached, and the bids received (from William Wrigley Jr. Company, NestlÃÂ© S.A., Cadbury Schweppes PLC, Kraft Foods, The Coca-Cola Company, and PepsiCo). In all cases would the sale of Hershey Foods increase the value for shareholders. Furthermore the planned diversification of their investment portfolio would reduce the undertaken risk. The purchase would undoubtedly hurt the Hershey community. It would lead to reduced job certainty (despite the promise of no lay-offs), and less commitment towards the people of Hershey, who were pampered, so far, by their idyllic tie to the company. But the first and foremost duty of the board is to increase the value for shareholders (in an ethical manner), and so their decision, at first glance, was foul. The Board's members decided to continue in Milton Hershey's footsteps (his approach to CSR), and, essentially, put the stakeholders in front of the shareholders.
Unfair? Perhaps. But not unless the Altruistic CSR is so deeply embedded in the company culture that its long term success, depends solely on its pursuit.
3. If the Board were to vote in favor of the sale of the Hershey shares:
-Analyze the legitimacy of this decision according to the three moral approaches, namely deontology, utilitarianism, and axiology.
-Synthesizing your results, decide whether this would be the moral option or not.
-Whatever conclusion you reach, mention possible alternatives.
Let us alternate, always, one definition followed by its respective parallel to the case.
Deontology. "Deontological ethical theories argue that actions are moral or immoral because of their very nature, not because of their consequences" (Libermann, K. & Nissen, B. 2005). This basically means that one has to abide by certain rules that are considered moral. There are different sets of these rules, having their origins in religions, philosophies, or even totalitarian governments. Some examples are The 10 commandments from the Bible, Kant's categorical imperative (its two definitions), or Libertarianism. The rules are supposed to guide you to a moral decision; however, this decision's consequences will not always turn out to be moral as well. Why is this? Let's take the example of Kant's categorical imperatives. Its first definition tells us that our decisions should be universally applicable (similarity to the "Golden Rule"), and second, that each person should always be treated as an end in himself/herself. (as cited in Libermann, K. & Nissen, B. 2005). This is a very noble idea, but it can only work in a society where everybody would follow the same rules. And this applies for most of these dogmatic doctrines. Where there is diversity of culture, and hence in religion, philosophy, customs, etc., there will always be more than just black and white.
If Hershey's board followed Kant's categorical imperative, or The 10 commandments for that matter, they would never have voted in favor of the sale. They would be concerned only with the direct impact of their decision, which would negatively affect Hershey's people and values. They would not even think about the benefits the sale might bring to their shareholders, or what indirect positive effect might this sale trigger in the long run.
Utilitarianism is a consequential theory. "An action that leads 1 their actions, all consequences taken into account. But, they differ in their definition of "good", and "bad". Bentham defines the two poles as pleasure and pain while Mill argues that these have to be qualitatively distinguished, as some might cause more overall happiness than others (Libermann, K. & Nissen, B. 2005). Limitations are the following. Let's take an extreme example of sacrificing one human being for the survival of ten others. Clearly we can't compare human lives. Why? This is simplistic, but it provides a simple logical proof. Life is of highest value to us. Some might argue that it is the country we live in, but it seems to me that it does not matter who wins the war to someone who is dead. The highest value we know is the infinity. Infinity equals infinity, but by definition, infinity also equals infinity plus infinity. Hence, human life equals human life plus human life. So the value of life of one person is equal to any number of other lives.
From a utilitarian perspective, the decision to sell would pass as legit. The sale would increase the overall number of employees, it would increase the wealth produced, and ultimately, it would maximize the generated happiness.
Axiology. Aristotle says: only a morally virtuous person can constantly and habitually act the way a human being should (as cited in Libermann, K. & Nissen, B. 2005). In other words, whether we make moral decisions or not, depends on our character. We can strive to achieve this "nirvana" of axiology by our conscious virtuous actions that will, with time, enroot in our character. What is a virtue though? A virtue is a "golden mean, a middle ground that lies between the vice of deficiency and the vice of excess." (as cited in Libermann, K. & Nissen, B. 2005). Aristotle defines four main virtues: courage, temperance, justice, and prudence, which are the means of their respective extremes. Furthermore, from Aristotelian perspective, "a corporation could be judged, by how well it contributes to the development of the character (such as integrity, tolerance, fairness, and cooperation) of its employees and shareholders" (as cited in Libermann, K. & Nissen, B. 2005). A business, which acts in line with these conditions, would then be considered moral. And vice versa.
Up until the bids were proposed, morality of Hershey's company culture was thriving. The company was truly concerned with their employees' development, but at the same time delivered a steady return on investment for the shareholders. Change of management would harm the corporate culture, as the larger the hierarchy gets, the more bureaucracy and standardization is necessary to keep a tight control over the company. Moreover, companies bidding for Hershey's were not specifically known for their employee recognition and on-going support, and so they would probably draw the average "virtuousness" of the venture down. Were the bidding companies virtuously moral to begin with, this could have changed the output, but as it is, the decision to sell Hershey's would be immoral from an axiological standpoint.
Synthesizing our results, the decision to sell seems to be moral for the two more short-sighted philosophies: Deontology and Axiology. Utilitarians would argue that the sale would ultimately lead to more happiness, and thus is the more moral decision of the two. But, as previously mentioned, Deontology and Axiology would work if the other side abided by the same rules. If one of the bidders treated their employees in line with the theory of Deontology or Axiology (e.g.: always using the three tests when taking actions), than the decision to sell would pass as moral from all three perspectives. Shareholders, Board, and Employees would surely not object to such decision. Always, a compromise needs to be sought for. We should take a step back and judge moral philosophies from there. They tend to simplify the model of life. But we do not live in a vacuum, and a whole spectrum of human emotions and impacts needs to be taken into account here. Moral philosophies should, therefore, not be followed word by word, but should only serve as a guide for making decisions, both, moral and practical.