RMIT CSR and Law Individual Assignment-Reflection and Law Individual Assignment...There is greater...

Corporate Social Responsibility and Law

Joseph Rega eMBA in progress RMIT University, B Architecture B Science University of NSW

February 2012

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OMBA640 BUSM4139

2 3.02.12

CSR and the Law: Individual Reflection

Corporate Social Responsibility and the Law

MBA (Executive)

Lecturer/Teacher’s Name Tutor (or Marker’s) Name (if applicable) Rhett Martin

Rhett Martin

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OMBA640 / BUSM4139: Corporate Social Responsibility & The Law: Joseph Rega [[email protected]] 1

Corporate social responsibility (CSR) and business ethics have gained considerable

momentum as globalization has accelerated common goals across diverse cultures.

Increasingly more companies are certifying as socially responsible (Vergalli & Poddi 2009)

together with ethical considerations. There is greater social awareness of corporate

responsibility, greater scrutiny of morality and a public desire for high ethical standards

confronting today’s corporation. Ethics is most definitely relevant to CSR.

CSR policy is observed with the corporation as a moral agent (Manning 1984), a legal

fictitious person under the doctrines of respondeat superior and vicarious liability, or in

Velasquez (2003) pre-legal terms, paying obligatory compensation to society where it is due.

CSR is inextricably linked with corporate governance (Owen 2003) and the ethical behavior

of the corporate’s individual agents (Velasquez 2003). CSR and business ethics are core to

business strategy. My reflection follows the path of CSR in recent times together with

business ethics as primary drivers of stakeholder interests, and summons observations of

where to from here?

Business ethics is the primary element that underpins CSR programs and together they

infuse corporate culture, unites its people and help accomplish desired ends (Bolman & Deal

2008), a culture promoting high-level performance and ethical behavior by design and support

(Nohria, Joyce, & Robertson 2003), to the point … and I quote my lecturer Rhett Martin …

what may be a reluctant forced exercise becomes naturally compelling and gets swept up in

the normal processes and becomes part of the business model and almost habitual in nature.”

Effective legislation and evolving case law in many OECD countries (Scholl 2001)

indicates a purpose of enhancing trust, accountability and the competitiveness of world

markets in direct response to a corporation’s obligations to all stakeholders and mandates the

consideration of stakeholder interests rather than serving shareholder interests alone (Scholl

2001).

By stakeholder I mean groups such as shareholders, investors, customers, employees,

suppliers, governments who provide infrastructures and the legal framework, the natural

environment and the communities, including interest groups, in which a corporation operates

(Galbreath 2006). International accords have widened in scope to protecting the rights of

individuals and the environmental commons of society as a whole. The scenery has changed

in favor of advocates of stakeholder interests challenging Freeman’s (cited in Ellerup Nielsen

& Thomsen 2007) view that stakeholder management should be voluntary.


CSR and business ethics have shaped the way corporations are governed and will underlie

superior business management and performance in the twenty first century. Developing trust

and cooperation between stakeholders takes time, which in turn leads to mutually beneficial

value exchanges (Galbreath 2006). Vergalli and Poddi (2009) emphasize … given their over-

riding priority compared with other stakeholders, the consumer has assumed a focal role,

which has led firms to act ethically on their behalf as part of a new social consciousness.”

Ellerup Nielsen and Thomsen (2007) on Grundfos, a Danish corporation … diversity

among people is a chance to reveal new possibilities and unknown competences.” I center

social responsibility on Etzioni’s (1998) premise that … corporations are a societal creation

and society grants shareholders a valuable privilege in exchange for which the society can

seek some specific consideration.” I augment by stating the duty of a corporation is to act in

the interests of all stakeholders.

We have a defined a role for CSR policies based on ethical, economic and risk

fundamentals. Heal (2004) contends … the role is to anticipate and minimize conflicts

between corporations and society and its representatives, aligning private and social costs if

differences are the source of the conflict, or minimizing distributional conflicts if these are the

issue.” Reinforcing the implications of CSR and business ethics, their extension to all

stakeholders beyond the expected is fundamental to the corporation’s business strategy

(Ellerup Nielsen & Thomsen 2007). However CSR requires further attention and research to

framework, and business ethics must go beyond the simple acknowledgement of a code of

ethics. Where to from here?

Self-realization of ethical virtues; justice, courage, compassion or temperance, and

intellectual virtues; knowledge and practical reason or practical wisdom, together assumes a

moral act, the primary driver in pursuit of excellence. Acting virtuously through intellect is

learned through instruction, apply to the means that is directed at achieving an ethical end,

which is learned through practice (Aquinas’ theory of action cited in Wolfgang 2010).

It all commences with education. Justice Owen reporting on the HIH collapse made the

well-defined observation that ethical education is key in our schools and universities (Owen

2003). Business ethicists, ethics officers and practitioners in management have found there

way into many OECD and US corporations (Ferrell, Fraedrich, & Ferrell 2011, Hill 2011,

Segon 2010). Michael Segon’s calls for university status and the professionalization of

business ethicists are well founded and necessary (Segon 2010).


Maturity of virtuous CSR managers is also called for. Working in systems of exchange

where mutual influence is created between stakeholders and the company, the virtuous CSR

manager will analyze through moral lenses, the objectives, resources and strategy of common

groups of stakeholders that need to be considered; mobilizing other stakeholders (Vergalli &

Poddi 2009) and so manage the shaping, implementation and reporting of CSR programs.

Advancement of better managers working virtuously (Grassl 2010) is paramount and the

rooting out of morally irresponsible individuals (Velasquez 2003) must become a priority.

Superior business performance is thus dependent; this conditions my reflection. Where to

from here?

Velasquez (2003) views the corporation as a metaphorical person distinct from the persons

or members who incorporate it, an organized group of people who collectively carry on some

form of business activities which we recognize as a single body distinct from its environment.

He emphasizes that the corporation is not causally morally responsible and cannot act

intentionally and be an agent for moral responsibility, rather it is its members individually

who are the agents for moral responsibility. Intentional causality can only be attributed to

individual persons … those intentions, beliefs and desires that we can be conscious of.”

The importance of the Velasquez’s (2003) thesis is that in taking an individualistic rather

than a collectivist view it bears directly on the issue of individual punishment imposed

reasonably to deter future occurrences of misconduct and thus effectively control the behavior

of the corporation. Velasquez (2003) enforces … if only the corporate organization as such

was held responsible for the crime and if no individuals were directly punished and removed

from their positions, then … misconduct … might reoccur, because the people who had

carried out the … misconduct … would remain in a position to carry it out again, and not

having been punished, they would have no incentive to refrain from such crimes.” In other

words, by weeding out those morally irresponsible individuals you sanitize the systems,

culture and the corporation itself, eventually leading to superior management and business

performance.

That is not to say Velasquez (2003) does not recognize that circumstances arise where no

individual is at fault, nor does he say that corporations do not exert causal responsibility,

ethical treatment to its stakeholders, economic, social and environmental, fiduciary

obligations by law etc., all of which are exposed to obligatory compensation in the event

corporations are responsible for stakeholder cost differentials and or transgressions.

Accordingly, virtuous management has a significant role to play.


Aquinas saw two operations at work in the exercise of prudence or practical reason as

Grassl (2010) explains … the first comprises the finding, ordering, and comparing of options,

and the second the choice among these.” Practical reason, a habitual disposition, extends to

the management of corporations. For Aquinas, management’s essence is the exercise of

prudence as moral discretion supported by ethical virtues, and establishes for the manager

what is good and how resources should be directed towards the end (Grassl 2010).

Aquinas continues … formal learning of rules is necessary but what is indispensable is

learning by doing … the development of character, and of good managerial habits, rather than

the mere study of management principles; mentoring relationships are called for through

which the wisdom of the mentor can slowly impress itself on the manager” (Grassl 2010).

Grassl (2010) contends that Aquinas saw management not as a reaction to challenges

arising neither in a corporation’s environment nor to primarily adapt to market structure as in

the industrial organization. Mintzberg (cited in Mail Online 2011) had a point when he

argued that managers are not reflective thinkers but tend to be reactive and make decisions

with insufficient information.

For Aquinas, effective management directs all steps including execution towards ends and

thus allows managers to make correct choices, where correctness has both an instrumental and

an ethical meaning, both efficiency and equity. According to Grassl (2010) on Aquinas …

humans are neither reduced to calculative utility-maximizes [utilitarian view] nor to irrational

creatures acting by chance or as driven by emotions [existentialist model], they act according

to reason as driven by a rightly ordered will.”

Gavetti and Rivkin (cited in Grassl 2010) suggest memory allows managers to reason by

analogy, which is how many strategies are developed, exactly the cognitive components of

practical reason according to Aquinas and the whole process is psychologically sequential but

not linear … it is iterative and a repetitive learning cycle rather than a progression towards

one perfect decision” (Grassl 2010).

Aquinas’ model lies outside the paradigm of rational choice by considering right actions

and amounts to rational choice in a more basic, comprehensive, and realistic sense, by

integrating not only the utilitarian calculations of managers but also their will, morality, and

personality … the answer it gives to the question of how to improve the practice of

management is as simple as it is powerful: develop better managers” (Grassl 2010).


Where to from here?

I propose RMIT or like institution establish a postgraduate diploma in ‘CSR and Business Ethics’

offered to business undergraduates, consisting of the following six core courses:

CSR & THE LAW

CSR MANAGEMENT Management, Design, Implementation & Reporting

of CSR programs; Western & Asian.

ETHICS & THE THEORY OF MANAGEMENT Theory by Coaching – (one on one in person or

online; one hour sessions, eight in total plus course

work, individual reflection and major assignment).

APPLIED BUSINESS ETHICS Management, Design, Implementation & Reporting

of Ethics programs; Western & Asian.

LEADING PEOPLE & ORGANIZATIONS

KNOWLEDGE MANAGEMENT

Postgraduates would specialize as CSR Managers or Business Ethicists or both and a professional

board would be established licensing and advancing the profession as defined by Michael Segon

(2010).


References

Bolman, L & Deal, T 2008, Reframing organizations, 4th edn, Jossey-Bass, USA.

Ellerup Nielsen, A & Thomsen, C 2007, ‘Reporting CSR – what and how to say it?’, Aarhus School of Business, Denmark Corporate Communications: An International Journal, Vol. 12, No. 1, pp. 25-40.

Etzioni, A 1998, ‘A communitarian note on stakeholder theory’, Business Ethics Quarterly, Vol. 8 (4), pp. 679-691.

Ferrell, OC, Fraedrich, J & Ferrell, L 2011, Business ethics: ethical decision making and cases, 8th edn, South Western Cengage Learning, Mason.

French, P 1979, 'The Corporation as a moral person', American Philosophical Quarterly, Vol. 16, pp. 207-215.

Galbreath, J 2006, ‘Does primary stakeholder management positively affect the bottom line?: some evidence from Australia’, Management Decision, Vol. 44, Iss: 8, pp. 1106 – 1121.

Goodpaster, KE & Mathews, JB Jr 1982, ‘Can a corporation have a conscience?’, Harvard Business Review, January-February, pp. 1-9.

Grassl, W 2010, ‘Aquinas on management and its development’, Journal of Management Development, Vol. 29, Iss: 7/8, pp. 706-715.

Heal, GM 2004, ‘Corporate social responsibility - an economic and financial framework’, SSRN, December, Annual Conference of the Monte Paschi Vita, available at: <http://ssrn.com/abstract=642762>

Hill, CWL 2011, Global business today, 7th edn, McGraw-Hill/Irwin, NY.

Mail Online 2011, Apple factory finds answer to worker suicides; replace staff with one million robots, The Daily Mail, London, viewed 20th November 2011, <http://www.dailymail.co.uk/sciencetech/article-2021251/Foxconn-Apple-factorys-answer-worker-suicides-replace-staff-1m-robots.html>

Manning, RC 1984, ‘Corporate responsibility and corporate personhood’, Journal of Business Ethics, Vol. 3, pp. 77—84, 0167--4544/84/0031—00775.

Matten, D & Moon, J 2008, ‘Implicit' and 'Explicit' CSR: a conceptual framework for a comparative understanding of corporate social responsibility’, Academy of Management Review, February, Vol. 33, No. 2.

Morrison Paul, CJ & Siegel, DS 2006, ‘Corporate social responsibility and economic performance’, SSRN, January, JEL Classification: L15, L21, M14, available at: <http://ssrn.com/abstract=900838>

Nohria, N, Joyce, W & Robertson, B 2003, ‘What really works?’, Harvard Business Review, July, pp. 43-52.

OECD 2004, Principles of corporate governance, Organization for Economic Co-operation and Development, viewed 15 December 2011, <http://www.oecd.org/dataoecd/32/18/31557724.pdf>

Owen, N, Justice, 2003, ‘Report of the HIH Royal Commission: Vol. 1, a corporate collapse and its lessons, Vols. 2 & 3, reasons, circumstances and responsibilities’, National Library of Australia Cataloguing-in-Publication data: National Capital Printing, Canberra, April, viewed 20th December 2011, <http://www.hihroyalcom.gov.au/> and <http://www.hihroyalcom.gov.au/finalreport/index.htm>

Preston, N 1996, Understanding ethics, Federation Press, Sydney.

Scholl, HJ 2001, ‘Applying stakeholder theory to e-government: benefits and limits’, Proceedings of the 1st IFIP Conference on E-Commerce, E-Business, and E-Government, (I3E 2001), Zurich, Switzerland, October 3-5, Center for Technology in Government.

Segon, M 2010, ‘Managing organisational ethics: professionalism, duty and HR practitioners’, Journal of Business Systems, Governance and Ethics, Vol. 5, No. 4, pp. 13-25.

Sheppard, J 1994, ‘The corporate moral person: the organization’s personality and its board’, Journal of Business & Society, 7 (2), pp. 151-164.


Unknown author, ‘Can virtue and honesty add up? why new laws can't enforce morality’ Journal of Risk Finance, The, Vol. 5, Iss: 4, pp. 18-19.

Velasquez, M 2003, ‘Debunking Corporate Moral Responsibility’, Business Ethics Quarterly, October, Vol. 13, No. 4, pp. 531-562.

Vergalli, S & Poddi, L 2009, ‘Does corporate social responsibility affect the performance of firms?’, SSRN, FEEM Working Paper No. 52.2009, 5 August, available at: <http://ssrn.com/abstract=1444333>

RMIT CSR and Law Individual Assignment-Reflection and Law Individual Assignment...There is greater...

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