Cabahug: Perspective on ethics and Corporate Social Responsibility

THE Enron scandal in 2001 was a business scandal that came to symbolize the excesses of corporations. It played a major role in shaking investor confidence in business because the firm was able to hide its losses for nearly five years and its managers, whose activities brought the company to the brink of ruin, escaped with millions of dollars as they retired or sold their company stock before its price plummeted.

The Enron debacle was akin to the famous Titanic, where the captain went down with the ship. Only at Enron, the captain gave himself and his friends a bonus, then lowered himself and the top folks down the lifeboat and then hollered up and said, by the way, everything is going to be fine.

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This unparalleled scandal was committed by people who wanted nothing else but to satisfy their “greed”. It is a typical example of a well-run business who failed to observed high and consistent standards of ethics.

A company's ethical conduct is something like a big flywheel. It might have a lot of momentum, but it will eventually slow down and stop unless you add energy. Ethical responsibilities in business include meeting other societal expectations, not written laws. As such, ethics is one dimension of Corporate Social Responsibility (CSR).

We should not lose sight of the fact that the moment we start operating our business we assumed an obligation toward society which – this is called corporate social responsibility. The socially responsible business maximizes its positive effects on society and minimizes its negative effects. Social responsibility is beyond its legal and economic obligation, to do the right things and acts in ways that are good for the society.

Deciding how socially responsible an organization needs to be – for instance, when is it better to be focused on profits – is just one example of the complicated types of ethical and social responsibility issues that managers may have to cope with as they plan, organize, lead, and control. As managers manage, social issues can and do influence their action.

There are two views of social responsibility: The classical – or purely economic view where it stipulates that the management’s only social responsibility is to maximize profits and the socioeconomic view – where management social responsibility goes beyond making profits to include protecting and improving society’s welfare. The differences between the two perspectives are easier to understand if we think in terms of the people to whom organizations are responsible. Classicists would say that stockholders or owners are the only legitimate concern. Others would respond that managers are responsible to any group affected by the organization’s decisions and actions – that is, the stakeholders.

It is used to be that profit maximization and corporate social responsibility were regarded as antagonistic, leading to opposing policies. But now, in a more “ethicized” business climate, the two views can converge. Earlier attention to CSR focused on alleged wrongdoing and how to control it. More recently, attention has been on the possible competitive advantage of socially responsible actions. For example, a recent study showed that CSR enhances company reputations, which in turn make them more attractive employers, and they attract more applicants. This CSR can provide competitive advantage by helping to attract and perhaps retain superior employees.

The recent accelerator pedal recall of Toyota to avoid further damage to properties and lives is a stark example of a good CSR. Companies can avoid unnecessary and costly requirements if they are socially responsible. Honesty and fairness – including admitting mistakes; apologizing genuinely, quickly, and sincerely and making up for mistakes – may pay great dividends to the conscience, to the personal reputation, to the public image of the company, and in making market response.

Society’s problems can offer business opportunities, and profits can be made from systematic and vigorous efforts to solve these problems. In other words, it can pay to be good.

It is imperative for a firm to have their own business conduct policy so that every member is aware of the organization’s ethical direction. A very good example of business conduct policy goes this way, “consistent with our overall commitment to honesty and integrity, we will focus on producing a quality product and providing excellent service; conduct our affairs as a responsible corporate citizen at all times; comply with all government laws and regulations; and provide all of our employees with a challenging and rewarding work experience, along with a safe and healthy work environment.”

Ethics and CSR is really a matter of conscience. Federick Bird once said: “An organization can develop a strong and vibrant voice of conscience only by finding ways to harmonize its multiple voices of conscience.”

(You may send your comments or suggestions to the writer at e-mail: archietim@yahoo.com and cell No. 09266468591)