This document provides a summary of the lecture notes (final exam) for the subject Organization Theory, which is taught in the first year of IBA. The chapters this is based on are 13-16. The textbook these notes are based on is Managing & Organizations (Clegg et al.), fourth edition.
,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
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