Week 7: Integrity and Corporate Social Responsibility

Economic theories are founded on the notion of the scarcity of resources (Sowell, 2004). Business goals and competitive advantage perspectives are intended to maximize profits for company owners and shareholders (Porter, 1990). Usually, the ethical principles underlying these business and economic conceptualizations are predominantly utilitarian in nature (Cavanagh, 2006). Further, Freeman and Gilbert (1988), working from a stakeholder perspective, point out that ethics has not always been a conscious part of corporate strategy, and at times has even been ignored. Viewing corporations as human institutions that are instruments for achieving the goals of various individuals and groups associated with them, they contend that business planning and operations can no longer overlook organizational ethics as an integral component. They purport that “[c]orporate strategy must reflect an understanding of the values of organizational members and stakeholders…[and]…the ethical nature of strategic choice” (p.7).

Aspects of the latter notion are at the core of the American business perspective, even though they have not always been stressed and adhered to. In The Social Responsibility of Business, Heald (2005) outlines that the awareness of the need to link business activity and outcomes with social welfare, as well as a company’s responsibility to do so, dates back to the nineteenth century, and stems from both the Enlightenment’s humanistic perspectives and various religious precepts promulgated at that time.

In the twenty-first century, this awareness and sense of ethics has helped form business practices grounded in corporate social responsibility (CSR), the notion of businesses being good corporate citizens and agents of social change, and believing:

1. That the claims of humanizing are equal to the claims of economizing.

2. That the obligations of human beings to one another are greater than the obligations imposed upon human beings by systems of power and dominance.

3. That claims of legitimacy in corporate life must have as their referent a concern for human consciousness, human community, and human continuity such that human rights may be protected and social justice promoted and preserved.

4. That the enduring significance of corporate management is found in its ability to harmonize the multiform interests of a pluralistic society.

5. That the most important meaning of freedom of enterprise can assume is the liberation of humankind from the bonds of poverty that restrain body, mind and spirit (Frederick, 2006, p. 93).

Social conscious perspectives have also been an impetus for trends regarding executives and managers leading with integrity (Cohan, 2003; Coughlin, Wingard, and Hollihan, 2005; Sullivan, 1995), local and world communities being considered as business stakeholders (Laszlo, 2005), and companies and associations stressing the importance of professional codes of ethics (Robison, Pritchard, and Ellin, 1983; Brincat and Wike, 2000). These perspectives have fueled the development of the sustainable capitalism and the value-driven notion of business (Cohen and Warwick, 2006; Ikerd, 2005; Pava and Krausz, 1995), and the formulation of a triple bottom line method of conducting business, an approach where people and the environment are as much a business concern as are financial profits (Savitz, 2006). While on the surface these practices may seem to oppose sound financial business practices and not be attractive to savvy professionals, key companies have found that such value-based and employee/civic community-centric philosophies and practices actually increase profits. They create employee commitment and job satisfaction, foster local community support, increase customer loyalty, and decrease operational waste and expenses. Major companies spearheading this socially responsible approach include Patagonia, 3M, Starbucks Coffee Company, Intel, Xerox, Henkel, Ben and Jerry’s, Toyota, Sony, IKEA, and Novozymes (Laszlo, 2005; Esty and Winston, 2006).

Companies do not have to be bottom line-oriented to survive (Dawson and Bartholomew, 2003), and capitalism can have a “compassionate” side (Benioff and Southwick, 2004). Martin (2003), utilizing a virtue matrix approach that recognizes “competing claims of shareholders, governments and society” (p. 102) and promulgates a vision where companies by choice strategically contribute to the advancement of the common good, points out that “shareholder value and social responsibility are not necessarily incompatible” for “corporations can and do serve shareholder’ interests…[when]…serving the larger community” (p. 88). Porter and Kramer (2006), explaining how contemporary companies can be effective socially responsible enterprises, state that the “most strategic CSR occurs when a company adds a social dimension to its value proposition, making social impact integral to…[its]…overall strategy….When a well-run business applies its vast resources, expertise, and management talent to problems that it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philanthropic organization” (pp.9-92).

The most significant impediment to the growth of corporate virtue is a dearth of vision among business leaders. Opportunities abound to devise programs and processes that benefit society as they enrich shareholders. What seems lacking is imagination and intrinsic motivation on the part of corporations and executives. This is by no means an insurmountable obstacle….Fundamental economics are on the side of innovation in the strategic frontier. What’s needed is support…[from consumers, governments, and nongovernmental organizations]…for the companies and leaders who undertake bold initiatives. (Martin, p. 98-99)

How can contemporary businesses’ CSR initiatives authentic and not just good recruitment strategies and public relations statements?