Notes from Business Ethics by Crane and Matten - Assignment Example

S FROM BUSINESS ETHICS BY CRANE AND MATTEN Carroll model Carroll’s model focused on four major aspects of corporate social responsibility (CSR). Already, Crane and Matten (2010) had identified CSR as an important tool in business ethics having both ethical and moral implications for businesses. As showed in the figure below, Carroll’s model identifies four major parts of CS namely philanthropic responsibilities, ethical responsibilities, legal responsibilities, and economic responsibilities. Figure 1: Carroll’s four-part model of CSR The table below feature gives the breakdown of what each responsibility entails from Carroll model perspective. Responsibility Outcome Economic The expectation of shareholders for profits to be made by the company; employees to earn good incomes; and consumers to have value for money must all be met in one scope. Legal The need for companies to be law abiding and operate according to stipulated rules must be emphasised Ethical The need for companies to go beyond the legal framework to conduct themselves in manners that are considered just, right and fair; especially by society. Very typical of these in a real world scenario is society’s expectation of companies to fight global warming Philanthropic Companies are expected to give back to society through the betterment of the lives of employees, communities in which they operate and the larger society. Crane and Matten (2010) are critical of the model as they conceive that the model refuses to pay attention to the U.S. context and is thus biased against it. It is also held that where there may be conflicts with two or more responsibilities, there is no clear cut guide on how to deal with the conflict. This notwithstanding, Carroll advocates a 4 philosophy concept towards coporate social responsiveness. These are i. Reaction ii. Defense iii. Accommodation iv. Pro-action. Once these are followed, the outcomes that will be produced are a. Social policies b. Social programmes c. Social impacts. 2) Kohlberg model Whiles addressing ethical issues and problems, Crane and Matten (2010) argue that there are some crucial levels of reasoning that can be applied (p. 153). The effectiveness of these levels are however dependent on the three level of moral development possessed by a person and as suggested by Kohlberg. More particularly, the writers emphasise on the Kohlberg’s Cognitive Moral Development Theories. In all, there are six stages spread through the three levels as depicted below: Level 1: Preconventional level Stage/Plane 1: Punishment-obedience orientation Stage/Plane 2: Instrumental relativist orientation Level 2: Conventional level Stage/Plane 3: Good boy-nice girl orientation Stage/Plane 4: Law and order orientation Level 3: Postconventional level Stage/Plane 5: Social contract orientation Stage/Plane 6: Universal ethical principle orientation Through the application of this model, it is possible to identify the mastery of a company or a business outfit over facing basic ethical issues and problems. From the model, there is the understanding that a business outfit would have greater control over ethical issues and problems, and a commitment to rise above personal interest to face ethical challenges if the business has advanced deeper through the stages of the model. In the real world scenario, a company that is at level 1 will put up an unethical behaviour of withholding salaries of employees because the company is running on a deficit. Another company at level 3 will show much urge over ethical pressure and release the funds when faced with the same challenge. 3) Utilitarianism theory Crane and Matten (2010, p. 98) describe the utilitarianism theory as a consequentialist theory. They go on to show that as a consequentialist theory, utilitarianism as a theory used in the business context concerns itself with addressing issues of right and wrong, according to the outcomes of actions. From a utilitarianism theorist approach therefore, a business action will not be judged as being either right or wrong until its outcome has been known. It is because Crane and Matten (2010) believes that it should take the action or outcome produced as a result of a business entity’s action to pass judgment on an action being right or wrong. This notwithstanding, there is an emphasis on the need to maximise utility in one’s quest to propagate a business action. By maximising utility, reference is being made to the need to increasing happiness and diminishing suffering (Scheffler, 2008). In the opinion of the Crane and Matten (2010), the reason this is important is that utilitarianism always concerns itself with the influence that a business action has on the wider society (p. 100). Because society is a multi-variant entity or stakeholder within the business context, the best or perhaps only way to please it to its entirety is to maximise utility. In the real world context, a business manager’s ethical action that is taken on the basis of utilitarianism would always attempt to keep promises if it is physically within the power of the manager to do so. This may include promises to employees on promotions, incentives and bonuses. But even as a business person attempts to use utilitarianism theory, one weakness that Crane and Matten (2010) find is the fact that it is highly subjective and as such one may hardly reach a level of moral acceptance if the recipient of an action do not reason as such (p. 103). 4) Egoism theory In the business ethical context, the egoism theory is another that Crane and Matten (2010) classify to be a consequentialist theory (p. 98). As a result, the egoism theory is approached by the writers from a perspective that focuses on the consequence of a business person’s actions. The difference that egoism has from other forms of consequentialism however has to do with the fact that it emphasises on the motivation and ambition of the person taking an action. In effect, the actions of the business leader must meet the desires of stakeholders and yet please both the performer of the action and the recipient of the action (Harwood, 2003). The egoism theory is one that the writers find to be very hard to apply in pleasing all within the business stakeholder base. This is because the judgement of right and wrong is left with the recipients of an action even though the ultimate interest must rest with the one taking the decision. Crane and Matten therefore explained that in the business context, egoism theory may best be applied from a context where an action is morally right if the decision-maker is in a position to freely decide in order to meet the interests of each individual involved (p. 100). Crane and Matten (2010) see the egoism theory as a technical principle that can work best only when there is a mechanism to ensure fair judgment. That is to say that there ought to be a scale of judgment with which the rightness or wrongness of an action can be measured. There are a number of ways that the egoism theory has been applied in a real world context. Typical example of this is how businesses respond to charity calls after there have been natural disasters. In most cases, businesses peg their scale of support to give with what other competitors are doing. This way, the egoistic interest of the businesses and that of the public becomes satisfied at the same time. 5) Theories of rights Crane and Matten (2010) argue that the issue of moral rights of most businesses are directly related to the ethical beliefs of these companies (p. 49). To a large extent therefore, such moral rights are given credence in relation to the degree to which they conform to the ethical beliefs of the businesses. In terms of legal rights however, not the same can be said because most forms of legal rights are always binding to the companies and give them very little room to have any choice in deciding whether or not to adhere to these legal rights. An example in the real business situation was cited with the issue of the human rights of people, where there are specific legal regulations on child labour. No matter how a minor may exhibit strong abilities to undertake certain roles, companies have to decide between bridging legal rights and face the law or just doing with the legal provisions. The fact that there are several legal rights that protect the interest of workers and other stakeholders within the organisation has also been mentioned by the writers as an important variable for ensuring fairness, privacy and equity. Examples of such rights are cited to include workers’ right, salary issues and whistle blowing (p. 28). In effect, Crane and Matten (2010) sees theories of rights, particularly legal rights as important ethical standards that come to benefit and protect the interest of stakeholders. The writers therefore lamented that in most developing countries, there is no regard for human rights such as the protection of the rights of children against child labour. In its ethical form however, the level of adherence by companies makes it possible to distinguish good businesses from bad ones. In the decisions of investors therefore, they would always want to be mindful of the legal rights record of a particular company. 6) Shareholder VS stakeholder view According to Crane and Matten (2010), shareholders are seen as the owners of the cooperation and so the cooperation owns its greatest obligation to them. This is however according to the typical traditional management model. In other models such as the continental European model, even though the shareholder is recognised as an important figure within the business setting, the greatest obligation is not held to the shareholder. Rather than focusing on the shareholder, the continental European model focuses on the stakeholder, part of which is the shareholder (Jean-Philippe, 2009). As issues of ethical concerns continue to become instrumental in the business setting, Crane and Matten agrees that the perspective to viewership where consideration is given to stakeholders ahead of shareholders is the best. This is because the stakeholder view is always seen as a larger and a collective view that can withstand most forms of manipulation and influence. It is important to note that in the principles of corporate governance, there are provisions made for both shareholders by way of rights and equity treatment of shareholders, and stakeholders by way of interests of other stakeholders (Sun, 2009). In pursuant to this, Crane and Matten (2010) fosters the adherence to both shareholder and stakeholder views in a way and manner that does not conflict with the other as the best way to observe business ethical provisions. In an everyday business context, the issue of supply chain management and its effect on the organisation’s turnover can be used as an example. As much as shareholders will want higher turnovers, it is important for managers to recognise the need to satisfy ethical standards in dealing with all stakeholders within the supply chain so that the need to get the best of returns will not be equated to foregoing laid down standards in outsourcing and tender processes. At any point while managing stakeholders, there are three relationship attributes that can be used as instrumental perspectives. These are Power Legitimacy Urgency Each of the relationship attributes above can also be translated into one of the types of stakeholder relationships below. Challenge Sparring partners One-way support Mutual support Endorsement Project dialogue Strategy dialogue Task force Joint venture or alliance 7) Ethical decision making On very regular basis, decisions are taken within the business environment. But for decisions to be made on the basis of aligning with laid down principles and ethics, the ethical decision making process has to be used. With reference to the four-stage model by James Rest (1986), Crane and Matten (2010) identifies four main stages in ethical decision making. These are summarised in the diagram below. Figure 2: Stages in Ethical Decision-Making Crane and Matten (2010) posits that following these stages does not necessarily guarantee that there will be desirable outcomes from decision that are made. To be assured of desirable outcomes that are considered ethical, it is important to focus on normative theories at the point of making moral judgment about the issue (p. 81). The selection of the normative theory must at every point in time seek to have both the business and individual recipients of the decisions in mind (Kenji and Shadlen, 2012). Once the steps and guidance above are followed, there are two major influences that are going to be produced on ethical decision-making. The first of these is based on individual factors, which looks at the person making the decision. Some of the commonest factors are most likely to include gender, age, experience, ethnicity and socialization. There are also the situational factors, which focus on work context features and issue features that influence the framing of ethical decisions. The table below represents some of the major breakdowns that can be achieved from typical individual factors and situational factors. Table 1: Influences on ethical decision-making Individual Factors Age and gender National and cultural characteristics: as reflected in Hofstede’s 5 dimensions: Individualism/collectivism Power distance Uncertainty avoidance Masculinity/femininity Long-term/short-term orientation Education and employment Psychological factors Cognitive moral development: 1. Level one (preconventional): Stage 1: Obedience & Punishment >> Stage 2: Instrumental purpose and exchange 2. Level two (conventional): Stage 3: Interpersonal accord, conformity and mutual expectations Stage 4: Social accord and system maintenance 3. Level three (postconventional): Stage 5: Social contract and individual rights Stage 6: Universal ethical principles Locus of control: High locus of control Low locus of control Personal values Personal integrity Moral imagination Situational Factors Issue-related factors Moral intensity Magnitude of consequences Social consensus Probability of effect Temporal immediacy Proximity Concentration of effect Moral framing: Harmony Efficiency Effectiveness Context-related factors Reward systems Authority Bureaucracy: Suppression of moral autonomy Instrumental morality Distancing Denial of moral status Work roles Organizational culture National context Adopted from Crane and Matten (2010) 8) Ethical codes and systems For businesses to make the best of business ethics, Crane and Matten (2010) advises on the need for these businesses to use ethical codes and systems. Such codes and systems spell out the precise ethical goals that the businesses strive to achieve and the medium by which they will achieve these. It is not surprising that the writers note that two thirds of global businesses have code of ethics, which represent the ethical codes of these companies. There are four major types of code of ethics as identified by Crane and Matten (2010). These are noted to be Organizational or corporate codes of ethics Professional codes of ethics Industry codes of ethics Programme or group codes of ethics The system aspect of ethics is reflected by the degree to which these codes are featured in a manner that meet the all ethical needs of the organization. The commonest forms of codes of ethics would therefore have the following contents: a. Definition of principles that the company wants to achieve b. Practical guidelines for employee behaviour in terms of general and specific situations There are several variables that must be in place in order for the ethical codes and systems to function effectively. One of the main variables is for the management of the organization to have role models that act as benchmarks for achieving ethical standards. With such role models, employees ought to be encouraged for full participation so as to increase buy-in. Another major responsibility that typical modern day organisations would have as a way achieving effectiveness with their ethical codes and systems is for them to put discipline in practice. This will include disciplining employees and other people who breach ethical codes. The standardisation of codes must also be attained through the use of any of Audit instrument Manager’s performance evaluation 9) Ethical responsibilities to employees From the perspective of Crane and Matten (2010), the ethical responsibility of employees is directly embedded into the need to comply with ethical standards, codes and systems. To know whether or not employees stick to their ethical responsibilities, it is always important to have assessment of ethical performance. The assessment of ethical performance can thus be done through four major tags as given below Reports tagged ‘ethical’ Employees’ responsiveness to code of ethics, legal rights and legal violations. Reports tagged ‘environmental’ Impact of employees action on the natural environment Reports tagged ‘social’ Employees’ responsiveness to issues of social importance such as human rights, health and safety practices, community relations, corporate charity and equal opportunities. Reports tagged ‘sustainability’ Employees’ responsiveness to people, planet and profit. The writers made an important assessment of the fact that the level of employee responsibility to ethics reflects the collective outcome of the organizational responsibility to ethics. Because of this, it is important to have a framework for social accounting with which the organizational activities and its social, ethical and environmental impacts can be measured. Such measurement is taken from the perspective of stakeholders and produces the following relevance: Measurement of Internal and external pressure Identification of company risks Achievement of improvement in stakeholder management Enhancement of accountability and transparency But for any social accounting aimed at enforcing the ethical responsibility of employees to be attained, there is the need to focus on the following principles: Comparability Completeness Continuous improvement Disclosure Evolution: a commitment to learning and change References Crane A. and Matten D. (2010). Business Ethics: Managing Corporate Citizenship and Sustainability in the Age of Globalization. Oxford University Press: New York Harwood, S. (2003) Eleven Objections to Utilitarianism, Hackett Publishing Co: New York Jean-Philippe T. (2009), Does Company Ownership Matter?, Cheltenham: London, UK Kenji D and Shadlen M. N. (2012). "Decision Making". Current Opinion in Neurobiology Vol. 22 No. 6: pp. 911–913. Scheffler, S. (2008). Consequentialism and its Critics. Revised Ed. Oxford University Press: New York Sun, W. (2009), How to Govern Corporations So They Serve the Public Good: A Theory of Corporate Governance Emergence, Edwin Mellen: New York Read More