Responsibility For Ethical Decision Making Within Companies Business Essay


As Crane and Matten (2007) explained, the areas that ethics, business ethics and law cover overlap with each other. Meanwhile, ICSA Professional Development (2003) reminds that fair practice of business requires more effort that just to complying with laws set by the government. At this point, it is important to note that corporate governance plays a significant role in this context because good practice of corporate governance is an important determinant in the nature of business conduct that a company follows.

What is Corporate Governance?

As ICSA Professional Development (2003) defines, corporate governance of the company refers to governing a company in a way that would ensure the achievement of its objectives. Although those objectives could vary from company to company but usually, they focus on maximizing its shareholders' profits in a way that does not violate any guidelines and laws or interfere with interests of the groups that a company's activities either have effect on or attract their interest (ICSA Professional Development, 2003). Meanwhile, Parkinson (2006) suggests a slightly different approach to it and identifies two meanings of corporate governance. The first one suggests that society controls the activities of the business; that a company's activities are subject to the state regulations like laws of employment or laws concerning the environment. In other words, Parkinson (2006) suggests that company's activities should comply with laws of the state and be in interest of the public. The second meaning refers to governance at the level of the company rather that the state. Parkinson (2006) gives an example of corporations in Anglo-American society and points out that they justify their objectives to maximize shareholders' profits as the best means to bring the most wealth and benefits to the society.

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Although Doh and Luthans (2009) describe corporate governance as a company's system to control and direct its business, Davies (2006) gives a more detail explanation. The writer notes that there are many important aspects of corporate governance and one of the most relevant to the area that this dissertation explores refers to a company as a legal body that has to comply to law the same as any other individual. Davies (2006) also points out that corporate governance is more focused on a how business operations are directed by the executives of a company, rather than evaluating their skills of management. He also stresses the importance of business executives taking responsibility for the strategic decisions that they are making, although points out that those strategies themselves do not concern corporate governance (Davies, 2006).

Relevance of Stakeholders in the context of Ethics of Business discussed in this project

It was explained previously in "Relevance of Corporate Governance to the Ethics of Business" chapter how corporate governance relates to the business ethics as one of the areas of concern of this project. The groups that either are affected by the activities of a company or have an interest in them, as identified by Parkinson (2006), ICSA Professional Development (2003) and Crane and Matten (2007) are called stakeholders. Relevant



Davies (2006) ICSA Professional Development (2003) defines a stakeholder as someone having an interest in a company's activities and at the same time being affected by them. Therefore, the writer continues, stakeholders can have certain expectations in the way the company acts, particularly if those activities have any effect on the stakeholders' interests. Davies (2006) identifies main types of stakeholder groups as the following:


The Board of Directors/ Executives Directors






The groups of stakeholders that will be the most relevant to the topic of discussion of this project are project are customers and community.

Relevance of Corporate Social Responsibility in the Context of the Project

As Parkinson (2006) suggests it, corporate governance can be seen as a way to overcome limitations in the regulations imposed by the state. This Parkinson's idea reminds Crane and Matten's explanation of how ethics, business ethics and law are related. However, Parkinson (2006) specifies that it is "explicit function of governance to encourage 'socially responsible conduct' that includes going beyond what regulation demands" (Parkinson, 2006, p.3). This writer's explanation aids in comprehending the relationship that corporate governance and corporate social responsibility holds.

Corporate Social Responsibility

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Corporate social responsibility is closely related to ethics and ethics of business, corporate citizenship and pertain affects the interests of stakeholders. It expresses the idea that companies should take into account societal and environmental interest when making its business related decisions (Morrison, 2009). CSR refers to transforming a company's business activities into more responsible ones that go beyond requirements of law and do not bring any direct profits to the company, but benefit the society. Doh and Luthans (2009) explain that companies are experiencing more pressure not only to act in accordance to specific principles and conducts of ethics but also to offer their contribution to the society.

Following this explanation, it is important to explain that a company' corporate social responsibilities are evaluated by the "triple bottom line" measures, meaning that its performance is judged from social, financial and economic perspectives (Morrison, 2009). Despite the pressure of the society for the companies to act responsibly and do their best they to contribute to the society, CSR is voluntary and none of the companies are obliged to adopt CSR, it is not required by law. To sum it up, all of the above mentioned sources mutually agree on the following aspects of CSR:

It goes beyond requirements of the law

It benefits the society

Is not necessarily in the direct interest of a company

Is voluntary

Carol (1991, as quoted in Morrison, 2009)) suggests looking at CSR from the dimensions of ethics, economics, law and philanthropy. He recognizes the importance of economic responsibilities of a company relating to profit, jobs and products; however he notes that those responsibilities should be in harmony with the ones of the social nature. Carol suggest to visualize his multidimensional CSR model by placing economic responsibilities at one extreme and move towards philanthropic responsibilities at the other extreme whilst passing through legal and ethical responsibilities.

Carol's model.

Carol, A. (1991) The Pyramid of corporate social responsibility: Toward the moral management of organizational stakeholders, Business Horizons, 34: 39-

Luthan and Doh (2099) stress that in the current world big corporations must consider what social role they play in foreign markets where part of their business activities take place, there have been and still are many debates related to corporate social responsibility and its relevance of to businesses. As Kline (2005) reminds, there most contrasting views on what business obligations should be and what should not be within their scope are expressed by Milton Friedman's and Edward Freeman's views. In 1970, Milton Friedman, defender of free market, wrote an article "The social responsibility of business is to increase its profits" in New York Times, where he expressed his now widely quoted views on CSR. His perspective on CSR still have supporters even today. Joel Bakan ( 2004) in his book "The Corporation" compares CSR to oxymoron and suggests that companies should not have any other aim other that looking after their interests only. According to him "They have no capacity, and their executives no authority, to act out of a genuine sense of responsibility to society" (Bakan, 2004, p. 109). A completely different perspective

The article in the Economist called "A Stitch in Time: How companies manage risks in their reputation", observes that companies embrace CSR not only just an aspect of ethical business, but because it has become a fashionable. However, as the article notes, sometimes companies just pursue a message that everybody expects to hear, therefore discrepancy has also emerged between a company's CSR aspirations and its actual actions. (2010), shows how a corporation's reports on its social corporate responsibility can drastically differ from actual reality. This draws back attention to a previously mentioned Sternberg's (2000) point that unethical behavior can actually cost business its life.

The Economist Intelligence Unit (2007) has carried out a global online survey, which encompassed 1,222 companies from all over the world - 42% respondents were from Europe, 19% from North America and 23% from Asia Pacific. The results of the survey, as The Economist (2008) asserts ,

Results of global online survey carried out by Economist Intelligence Unit (2007). ""&HYPERLINK ""source=login_payBarrier

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there has become between company's aspiration the (2010), shows how a corporation's reports on its social corporate responsibility can drastically differ from actual reality. This draws back attention to a previously mentioned Sternberg's (2000) point that unethical behavior can actually cost business its life.