Ethics & Corporate Social Responsibility 22 April, 2010

So, what exactly does it mean to be ethical? Shouldn't the answer be easy? Many people assume that knowing what is right is the easy part, and it's the implementation that comes at a higher cost. Obeying the law is pretty obvious. I'm going to say that agreeing on what is right is the difficult task. Everyone has their own definition of right and wrong and people can put everything into these categories. The problem exists because everything they put in the 'right' category is what they believe to be ethical, and although there may be a universal standard, not everyone accepts it. Honesty and integrity are fairly standard, but creativeness is something that can walk a fine line.

So what does this mean for a business? Here are my thoughts. The purpose of business is to cater to society's wants. But what is a business without uniqueness? A business generally has a mission and set of values that set them apart, even if they aren't explicit. These values denote the moral obligations that it has, and the values should act as helps to make decisions when no explicit policy exists. Now, there are some responsibilities that happen as a side effect of running the business like sustainability, licenses to operate, and reputation, but these are usually just side effects. The moral obligations derived from a company's values are the only things the company will still pursue in difficult times. However, Peter Drucker has said that it is irresponsible to promote a noble motive that is beyond what is economically feasible for a company. Martyrdom can only happen once, and it is often better to steadily create value for society than to make one single and final attempt at perfect ideology.

There are right vs. right decisions where there are two competing ethical needs, but choosing one forces you to ignore the other. Les Miserables is a case in point. Another example is differences in bribes. Is bribing to sway decisions for personal gain any different than bribing to sway decisions to be what they ethically should be?

I suggest that making sure ethics are addressed on all issues (a go/no-go analysis for a project for example) can remind everyone that it does matter. People would be prepared to make the correct decision if a gray area alternative ever arose.

Although profit is thought to be the major motivation for organizational action, the value provided to customers is a far better indicator of future success and profits. This value to customers should not include corporate social responsibility (CSR) if its costs are high and the CSR does not directly apply to the industry or area of expertise for the company. Usually it is best to CSR that is within a company's competency domain. In the end, this is actually beneficial to a company because it keeps them from having to scramble later on should regulations be put in place to force the behavior.

Bowen, Carrol, et. al may have said it best: A company should act like a good citizen.