Over the past several years there has been increasing interest and discussion on the topic of ethics. Business scandals are in the news more and more. Ethical behaviour is about knowing what’s right and wrong and behaving the right way, not just talking about it. Being ethical is about having qualities such as honesty, fairness, responsibility impartiality, accountability and dedication. Ethical behaviour goes beyond just obeying by the law. Social responsibility is the showing of genuine concern for the welfare of the whole of society through both words and deeds. Being socially responsible and showing genuine concern for others is about having qualities such as patience, kindness, gentleness, peace, generosity and self-control. This discussion is about ethics from an organizational point of view.
Corporations are primarily in business to make a profit. Does their responsibility go beyond that? Firstly, they are legal entities that are responsible for obeying the law, just as citizens are. When a corporation is socially responsible, they have gone beyond simply obeying the law and have taken into account the needs and ethical standards of society and acted accordingly.
Society has long been concerned about the behavior of business, well before the Industrial Revolution. For this brief discussion about business, we will start in the time of the Industrial Revolution. Back in the Industrial Era, businesses were not spending as much time discussing ethics. Producing more products at less cost than previously was the mandate. Any negative consequences of industrialization, such as pollution, were for the most part tolerated. However, many people condemned the greed and cruel treatment of workers. Conditions were often dangerous, fraught with numerous accidents, unhealthy and sometimes deaths resulted from accidents. Low pay, long hours and child labour was used by many organizations in their quest for even greater profits.
In the twentieth century governments began to take measures to deal with the shortcomings of capitalism. The United States, Canada and many other countries have values that include fairness in hiring, firing and job promotional practices and having opportunities to work and go to school among many others. As a society, we are against poverty and children going to school hungry. We are concerned about the damage to the environment. We are concerned about the violation of human rights in areas of the world such as South Africa and others.
Corporate Social Responsibility
The interest in social responsibility is on the rise. The financial power of many corporations today exceeds that of many governments. Does this power shift also bring with it increased responsibility? Many people think so. Some consumers do not buy products from companies that they fell are not socially responsible. There has been a number of news reports of corporations responding to events that have happened. One such event is the 1989 oil spill off the coast of Alaska by the Exxon Valdez oil tanker. When Exxon delayed in assuming responsibility for the spill, the public’s opinion of the company plummeted and the company was fined. The Chapter 11 bankruptcy protection filing of the telecommunications giant WorldCom in 2002 put thousands of people out of work. Arthur Andersen failed to uncover WorldCom's financial problems. In an another example, some companies are being criticized for their sales of nuclear reactors and weapons of war. All corporations are under pressure to make a profit and being socially responsible may seem to get in the way.
Corporate transparency means disclosing more information on the inner workings of a business, in a quicker and more comprehensive fashion to a wider audience.
Corporate scandals have undermined the public’s trust in the reliability of public corporation accounting and financial reporting. Many investors who trusted that information were devastated. In response to this, the United States Congress passed a new law: the Public Company Accounting Reform and Investor protection Act of 2002. It is more commonly known as Sarbanes-Oxley or "SOX". Since SOX, investor confidence has risen. Many corporate executives, however, are not too pleased with the extra paperwork SOX requires. Accounting firms are helping many American corporations comply with SOX. Audits are taking longer to complete. However, with SOX, there is more transparency in corporate financial transactions.
Organizational Benefits of Corporate Social Responsibility
Corporate social responsibility is a social movement and a collection of specific management practices. When corporations implement some of these practices, the environment and social climate improves. Does the organization itself receive any benefits from its efforts? There is some evidence that it does. With an improved environment and social climate, people become more healthy and productive and therefore are better employees which in turn benefits the corporation they work for.
The fair trade movement is just one example of a social movement that is attempting to promote just business practices. Fair trade aims to empower developing country producers and workers at those producers to promote sustainability. To achieve this, it advocates the payment of a fair price as well as social and environmental standards in areas related to the production of a wide variety of goods. Fair trade focuses in particular on exports from developing countries to developed countries. Economic self-sufficiency of these producers
and workers is the objective.