Corporate Social Responsibility and Ethical Boundaries - Term Paper Example

When brand attachment occurs, the consumer will often participate in brand communities, such as discussing the merits and benefits of the company and its products on social media. This is free word-of-mouth advertising that is highly valuable to a business brand.

            When a business includes social responsibility and ethical behavior as part of its strategic plan, trust in the company’s integrity is developed. According to Riegelsberger et al. (2005, p.383), trust is built on the “reliability and predictability” of an organization. As one example, a company that contributes a small margin of its profit toward urban development can use press releases and promotional advertisements to illustrate its sponsorship or investment support in building better local infrastructure. When consumers witness that the business believes in improving the human condition and lifestyle, trust in their brand, product, and leadership is developed especially when these activities happen recurrently. Thus, having an ethical focus and a belief in social responsibility can assist in developing promotional strategies, charity as a competitive advantage, and better consumer relationship development.

            One example of a company that overstepped ethical boundaries is Pulte Homes, a major national home and commercial builder with a significant profit margin. In 2006, the former president of Pulte Homes, Steve Seymoure, determined it would be a positive strategic decision to develop a variety of first-class, luxury vacation getaways in Mexico. Pulte Homes conducted considerable ethical and responsible preliminary research and legal negotiations to ensure that a disputed area of land cleared all ownership and construction laws for the development of high-class condominiums for American tourists.

            However, well into the construction phase, a variety of expired commercial leases on the existing property where Pulte was building were considered by Mexican property sellers to be a cause to reclaim the property from Pulte. These sellers argued that since other business owners had defaulted on their commercial leases, it was a pre-existing claim that superseded the sale of the property to Pulte. Unfortunately, Mexican law agreed and, halfway through construction on a luxury condo tower, Pulte was forced to suspend any further construction while the decision was being appealed.

            The ethical boundary crossed in this case was the $11 million already paid by many investors in Arizona to own real estate upon completion of the tower (Corbett, 2007). Pulte did not refund these investments to the private investors and, even today, the luxury condo is a half-completed project still in the hands of the original sellers. While Pulte might argue that future appeals could provide an opportunity to finish the project, investors are waiting and battling for a return on their investment dollars.

            This situation could have been avoided by first examining Mexican law, which differs from U.S. law, as part of a risk management focus. Additionally, having an understanding that this land was disputed prior to accepting a real estate deal, Pulte could have taken small deposits from interested buyers and, instead, utilized its own capital or procured loan funds to ensure that ethical behavior was recognized and the security of the investors was a primary goal for focus.