Organization Theory - Final exam LECTURE notes

ORGANIZATION THEORY
LECTURE NOTES – FINAL EXAM

,Organization Theory Lecture Notes – Final Exam Vrije Universiteit



CHAPTER 13 – MANAGING SOCIAL RESPONSIBILITY ETHICALLY

BUSINESS ETHICS

What is business ethics?

 Core issue in business ethics is about how organizations ought to act  ethics are complex
 Normative ethics
 Seek to establish norms to judge whether business practices are right or wrong
 Rather abstract and philosophical
 Descriptive ethics
 Uses social scientific analysis to describe the actual behaviour of organizations and its
members
 Monitor and describe what actually happens
 Corporate code of ethics
 Common formal management tool that managers often adopt to ensure ethical behaviour
and compliance with organizational interest:
o A form of insurance to manage business ethics
o Expectations of ethical behaviour corporate employees, suppliers




Milton Friedman (1970)

Friedman (1970): core business of organizations is to make profits

 Only people have responsibilities
 A corporate executive is an employee of the owner of the business
 Make as much profit as possible
 Create shareholder value
 Executive is spending the money of the owners
 Executives could spend their own money if they wish to do so
 Threatens the free market and self-regulating forces of capitalism

Organizations have, however, limits:

 Respect the law
 Organizations should stay within the rules of the game and must not engage in illegal or criminal
activities
 For everything else, they are free whatever they want to do to increase profits



 Limitations of Friedman’s view: relies too much on the belief of self-regulating forces of capitalism

,Organization Theory Lecture Notes – Final Exam Vrije Universiteit



CORPORATE SOCIAL RESPONSIBILITY (CSR)

What is Corporate Social Responsibility (CSR)?

 CSR is part of business ethics, not always the other way around
 Can be considered management template
 Economic, governance, social and environmental programs/impact
 Corporate social responsibility is defined as “the explicit attempt by an organization to signal that it
exceeds minimum legal obligations to stakeholders that are specified through regulation and
corporate governance, often by extending the notion of stakeholders to be more inclusive”
 Balance economic (profit), ecological (planet), and social (people) fields: PPP or the 3 P’s

Corporate greening

 Corporate greening is a process that involves trying to adopt green principles and practices in as many
facets of the business as it is possible to do so
 Examples:
 Fewer energy use
 Green materials for recycling processes to achieve zero waste
 Green transportation
 Green facilities to minimize energy waste and use
 Green products that use fewer non-renewable energy resources
 A continuing program of educating employees
 Spreading learning about being green employees as widely as possible

Example: Friedlandcampina

[Is about an advertisement from a few years ago]

 Nutrition and health:
 Healther products, less sugar and salt, reduce obesity
 Educate children on a healthy diet and lifestyle
 Support vulnerable communities
 Promoting efficient use of land, energy and water:
 Renewable energy generated on Dutch dairy farms
 Reduce water consumption, energy, volume waste production, CO2 emissions
 Purchase more sustainable raw materials
 Improve animal welfare
 Maintain biodiversity
 Collaboration with non-governmental organizations (NGOs)
 Good prospects for the dairy farmers

Concerns for organizational action

 Ethical concern relates to establishing perceived legitimacy of organizational actions and the role of
organizations in society
 Instrumental concern is reflected in economic theories of the firm where focusing on efficiencies that
maximize what economists call rent-seeking opportunities
 Stakeholder concerns relates to any person with an interest in the firm whom the organization affects
with their activities

, Organization Theory Lecture Notes – Final Exam Vrije Universiteit



DRIVERS OF CSR


ETHICAL MOTIVES

 A personal feeling of responsibility to “do no harm” and behave ethically
 Corporations cause social problems, and hence have an ethical responsibility to solve those they have
caused and to prevent further social problems arising.
 Corporations rely on the contribution of a wide set of constituencies, or stakeholders, not just
shareholders, and hence have a moral duty to take into account the interests of these stakeholders
 As powerful social actors, with resources to substantial resources, corporations should use their
power and resources responsibly in society
 All corporate activities have social impacts and corporations cannot escape responsibility for those
impacts, whether they are positive, negative, or neutral


INSTRUMENTAL MOTIVES

CSR as an instrumental tool

 Product differentiation
 Advantage attracting new employees
 Increased productivity
 Marketing instrument
 Lifts reputation of corporations
 Creates a competitive advantage
 The business case for CSR

Ethics pays: Good ethics = good business  you need good management for this which will ensure both profits
and ethical outcomes in the long run

 “Doing well by doing good”
 CSR is assumed to increase profits
o E.g. saving costly resources in the production process (easy to quantify)
 Links CSR to financial performance and competitiveness
 “Enlightened self-interest”
 Corporations take on social responsibilities because it promotes their own self-interest

What are the problems with instrumental approaches on CSR?

 Diminishing returns from instrumental motives because ‘everyone is doing the same thing’ makes it
difficult for firms to obtain business benefits from CSR behaviour
 Probably the most important driver for CSR is everyone is doing CSR