Ethics of Corporate Social Responsibility (CSR)

1. Ethics of Corporate Social Responsibility (CSR) Glen Kurokawa, B.Sc., J.D. Regional Unit for Social & Human Sciences in Asia and the Pacific (RUSHSAP) UNESCO Bangkok 920 Sukhumvit Road, Prakanong, Bangkok 10110, THAILAND g.kurokawa@unescobkk.org

2. Corporate Social Responsibility • Company’s decision to significantly increase beneficial impacts and/or significantly decrease harmful impacts to stakeholders in society. • Stakeholders: investors, employees, suppliers/distributors (i.e. anyone in value chain), consumers, and residual of society. • Can also include temporal dimension: present and future generations (superset of sustainable development and intergenerational equity).

3. Examples of CSR • From the Asian region: • Lux: Promoting the use of soap. • Thai Oil Corporation: Environmental clean-up campaigns. • Siam Cement: university scholarships. • Honda: Environmental supply chain management and environmentally friendly technology research. • Steel Authority of India: helping townships with irrigation. • Malaysian Airlines: Below-cost rural flights. • Telkom Indonesia: Providing capital to SMEs.

4. Social & Human Sciences (SHS) • Sector of UNESCO. Includes: • Ethics • Science and Technology • Environmental Ethics. • Bioethics. • Human security • Philosophical Dialogues • Social development

5. CSR Ethics • Ethical dilemmas? Companies have to provide a return on investment for shareholders, so can they engage in activities designed to benefit society? • Shareholders vs. other stakeholders?

6. Management and Ethics Literature Review: • Two main, extreme “camps”: (1) Corporations should profit-maximize. • Responsibility to shareholders, businesses are specialized for business and not other purposes, agency costs, existence of welfare state and corporate taxes. (2) Corporations should be responsible to other stakeholders. • Corporations are influential, extended public governance, extended stakeholder theory and game-theoretical derivation of neo-institutional social contract. • At least in some cases, there is a business case for CSR. Some possible mechanisms: corporate reputation, long-term sustainability. Is there anything we can add?

7. Begin with a version of utilitarianism close to economics, and therefore reasonable, comprehensible, and persuasive to corporations: • Maximize shareholder utility value, not $$$. -Thus, takes a very conservative position. (b) Preference utilitarianism. (c) Rule utilitarianism = act utilitarianism. (d) Negative utilitarianism.

8. Altruistic CSR • “interest in doing good for society regardless of its impact on the bottom line” • Conservative position: unethical all the time • Liberal position: ethically permissible virtually all the time • SFU: ethically mandated depending on the situation – depending on whether SUM is achieved. • Example: corporate donations for impoverished. Depends on utility indifference map of shareholders.

9. Ethical CSR • “morally responsible to any individuals or groups where it might inflict actual or potential injury” • Conservative position: ethically mandated all the time • Liberal position: ethically mandated all the time • SFU: ethically mandated, depending on the situation – whether SUM is achieved. • Example: dumping toxic by-products. Depends on utility indifference map, as well as future utility (because of, e.g., public pressure and corporate reputation).

10. Strategic CSR • When profit intention is aligned with societal interests • Conservative position: ethically mandated all the time • Liberal position: ethically permissible all the time • SFU: ethically mandated, depending on whether utility-maximization for shareholders gives same result as profit-maximization. • Example: purchasing a tobacco company. Depends on utility indifference map, as well as future utility (because of, e.g., public pressure and corporate reputation).

11. Result

12. Result

13. Result • Provides a different position • “moderate” with regards 2 dimensions: altruistic and strategic CSR • “radical” with regards 1 dimension: to ethical CSR • Provides theoretical framework and rationale for position

14. Corporate Takeover? • Issue: using SFU and its SUM criteria may lead to corporations not profit-maximizing, and therefore subject to takeovers. Once new management takes over, there will be profit-maximization, rendering SFU useless. • Resolution: shareholders in a utility-maximized firm will resist takeover because new management will decrease SUM. Thus, SFU can hold.

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