Sample Essay on Business Ethics and Corporate Social Responsibility
Thursday, 18 January 2018 / Published in Business Studies
Corporate social responsibility refers to self-regulation in businesses where an organization assimilates social and environmental concerns to ensure that its operations comply with legal and social ethics, as well as the universal norms. Corporate have the responsibilities of avoiding preventable damages, not causing harm to the surrounding and improving the society's wellbeing. Contravention of either of the accountabilities gives a corporate an undesirable public image, which in turn affects its performance.
Stakeholder Analysis
Stakeholders refer to people, organizations, social groups or the society who have influence over business operations. Their stake in business activities ranges from ownership, property benefits, legal onuses to moral obligations. Any organization has a commitment to its stakeholders and must consider their wellbeing during its operations.
The stakeholder groups that are likely to be affected by the decision to be made can be classified into two groups; primary and secondary stakeholders. Primary stakeholders refer to stakeholders who are directly involved in business activities and their interests and involvement are vital to the success of the organization. They are also internal stakeholders and in this case include shareholders and employees. Secondary stakeholders refer to stakeholders who do not directly take part in business operations but are likely to be affected by the organization's actions. They are also external stakeholders because they are not part of the organization although they have an interest in the organization's operations.
Primary Stakeholders
TideeKleen Waste Management Inc. is a publicly traded company. In terms of interests and relation to the organization, shareholders are the owners as well as the investors in the company. Their interests include profitability, growth as well as to ensure that the organization remains a going concern. As investors, their concerns include earning sufficient dividends and returns on their investment.
Option A or restructuring proposed by Greide S. Goode, is likely to increase short term profitability of the company through its NewKleen Corporation. High share prices as well as state-of-the-art equipment would reduce labor costs and guarantee safety of both employees and the environment. In addition, in the event of bankruptcy of TideeKleen Inc., which is inevitable under this option, shareholders are unlikely to suffer financial loss due to cushioning provided by new shares provided under NewKleen Corporation.
Profitability may be short lived as bankruptcy of TideeKleen Corporation may have a negative organizational image on NewKleen Corporation. Restructuring the company into two corporations, with TideeKleen facing the likelihood of bankruptcy would also subject NewKleen, to the stigma subjected to companies that have faced bankruptcy. The two corporations under the same management may face dishonor as a result of denigration of the organization's management. This may affect NewKleen's stock prices, profitability, and its subsequent growth. Shareholders may decide to replace the directors or liquidate the business.
Option B or strategic alliance with Freedom Coast Ventures will increase shareholders' returns because of reduction in labor costs. New employees in Liberia would be paid less than what they would be earning in TideeKleen Inc. Production costs would reduce significantly and increase the company's earnings. However, the option cannot be considered ethical because preventing illness while causing death is not moral. While organizations have an obligation under the economic ideals of social responsibility to maximize shareholder value by increasing profit margins, they also have a duty to the entire society at large. Organizations have to ensure health and safety, efficient energy consumption, and maximum environmental protection. Cadbury (13) refers to this as the integrative model of corporate social responsibility. Organizations face likely disengagement from the society when they do not consider the interests of other stakeholders.
Option C provides organizational growth and expansion opportunities. Making substantial profits and return on investment over the short term would be low as the business struggles to break even. Modest wage concessions made by employees would reduce strain on the business profit as it struggles to settle its debts. The yields may not be large enough, but the business would be capable of remaining a going concern. In the long run, shareholders are likely to benefit from growth of profits, higher returns on their investments, and continued operations well into the future.
Employees are directly involved in the operations of the business. They are interested in job security, better rewards and returns as well as better rates of payment. Option A means that older and majority of employees would lose their employment when TideeKleen Corporation becomes bankrupt. Unlike shareholders who automatically own NewKleen Corporation via shares, employees of TideeKleen Corporation would lose their employment as NewKleen Corporation seeks fewer, younger, and highly skilled employees to operate the new equipment. Employees may stage strikes to express their displeasure, and this may negatively affect the organization's public image.
Option B is also unfavorable for employees, as they will lose their jobs due to outsourcing. Employees in Liberia who are paid less are more attractive than employees in TideeKleen Inc. who demand better compensation via collective bargaining arrangements through the workers' union. Employees are also exposed to greater risk on their health due to toxic waste. The low-tech equipment makes it difficult for employees to protect themselves from toxic hazards.
Option C is favorable for employees as they can assure themselves of job security with the growth and expansion of new facilities. They can obtain better compensation and health benefits to treat diseases because of exposure to toxic substances from the old facilities.
Secondary Stakeholders
General public, society or community
The public or community is interested in employment, sustainability, and protection of the environment. Option A would be unfavorable for the society because of bankruptcy of TideeKleen Inc. The corporation is charged with environmental remediation and bankruptcy would halt further environmental clean-up. The community would suffer health problems because of exposure to toxic substances from the old facilities. In addition, the rate of unemployment would increase as a result of employees being laid off. The public may disengage the business and make it difficult for it to carry on with its operations.
Option B is hazardous to the community because the low-tech equipment used in extracting valuable materials from electronic waste may expose the environment to toxic and hazardous substances. Poor sanitation makes community members prone to illnesses, such as cancer and neurological impairment due to exposure to toxic substances. The toxic recycling facility labor-intensive and low-tech methods of production in Liberia would cause environmental degradation.
Option C is favorable to the society in terms of creation of employment. Growth and expansion of new facilities creates an increase in production capacity. More jobs would be created for the youth in the society. In addition, expansion would provide growth in profitability. More funds would make it easier for environmental remediation and reduce the exposure of community members to toxic substances.
Ethical Assessment
Option C that was suggested by the workers' union is the most suitable decision in this case. The society allows corporate to carry out their businesses in their neighborhood. Therefore, corporate should return the society's leniency by promoting health and safety and going beyond what is required by the rule of law. The growth and expansion alternative suggested by employees follows the care ethics concern by focusing on building better and maintaining strong relationships with employees as well as with the local communities. This is done by guaranteeing job security and environmental conservation respectively. This alternative implies that TideeKleen Inc. is committed to ethics of virtue. It infers that the organization has good character above its economic nature by acting rightly to ensure mutual benefit of the stakeholders. In this case, according to Weiss 30, the profit maximization goal would be constrained by justice. The organization would have to forego increase in profit for the purpose of ensuring that the organization provides employment, undertakes environmental remediation and pays pension and health benefits for employees previously affected by exposure to toxic substances. For an organization to operate successfully in the society, it should not follow a wholly economic objective.
In addition, Option C follows the principle of utilitarianism by minimizing suffering to its stakeholders as a result of the organization's actions. It is the alternative, which causes the least iniquity to all the stakeholders. Option A and B may cause suffering to employees and the community by causing loss of employment and potential health problems. The growth and expansion alternative distributes the potential risks and benefits equally to all the relevant stakeholders. This options treats all stakeholders equally and not shareholders as superior to employees and the general public. Employees and the community will feel that they are treated with respect because they will be guaranteed job security, compensation, and access to safe environment. According to Weiss, "Individual rights should be extended to all that have a stake in an organization's affairs and that organizations are not simply economic by nature but can do and act in socially responsible ways as members of communities" (Weiss 30).
There are four models of CSR: economic model, philanthropic model, social web model, and integrative model (Hendry 14). The economic model of CSR requires maximizing shareholder wealth by raising the profit margins. According to the proponents of the philanthropic model, mechanisms such as environmental maintenance are simply organizational acts of charity. The social web model advocates openness and fair trading practices by organizations while the integrative model intertwines financial goals with its conservational objectives of environmental sustainability. The ideal model of Corporate Social Responsibility is an integration of the four models of social responsibility. Option C is the most suitable decision as it integrates the models of CSR. Shareholders would earn their income and dividends. Under the social web model, any organization has a duty to protect its stakeholders. Kantian ethics requires TideeKleen Inc. protect its stakeholders by doing good and acting right (Hendry 15). Option C provides TideeKleen Inc. with an opportunity to protect the jobs of employees as well as protect the community from health problems because it can still provide environmental remediation despite the huge costs involved in the process. The option also protects shareholders from financial loss by preventing further decline in stock prices and providing the possibility of future income.
Possible Stakeholder Reaction to Option C
Shareholders may have to accept lower income in the short-term under Option C. The business would be struggling to break even and to repay the short-term debt obligations. The opportunity is that this option also provides certainty into the longevity of the business. The challenge, however, is the fact that Option A or restructuring may provide better income on the condition that the bankruptcy of TideeKleen Corporation does not negatively affect NewKleen's operations. Employees would be willing to accept lower compensation during the time when the company's yields remain low. The public may be supportive of the business because of its continued efforts to remediate its pollution on the environment. This is an opportunity for the organization to undertake further expansion as its boasts of a good public image.
Cadbury, Adrian. "Corporate social responsibility." Twenty-First Century Society 1.1 (2006): 5-21.
Hendry, John. Between Enterprise and Ethics: Business and Management in a Bimoral Society. Oxford: Oxford UP, 2004. Print.
Weiss, Joseph W. Business Ethics: A Stakeholder and Issues Management Approach. Sixth ed. Mason, OH: South-Western, Thomson Learning, 2003
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