Crane et al.

Crane et al.
Business Ethics (5th Edition)

Chapter 2

© Crane et al., 2019. All rights reserved.

Crane et al.

Framing Business Ethics:

Corporate Responsibility, Stakeholders, and
Citizenship

Lecture 2

© Crane et al., 2019. All rights reserved.

 Overview

• Analyse the notion of responsibility for

corporations
• Distinguish the various concepts of CSR
• Present the stakeholder theory of the firm
• Outline the concept of corporate accountability
• Critically examine the notion of corporate
citizenship
• Discuss implications of these – mostly US-born –
concepts for different regions

Crane et al.: Business Ethics, 5th edition

 Towards a framework for business
ethics

What is a corporation?

Crane et al.: Business Ethics, 5th edition

 Key features of a corporation

Crane et al.: Business Ethics, 5th edition

 Can a corporation have social
responsibilities?

Crane et al.: Business Ethics, 5th edition

 Can a corporation be morally
responsible for its actions?
• Long, complex debate but generally support from
literature for some degree of responsibility
accredited to corporations. Argument based on:
– Every organisation has a corporate internal decision
structure which directs decisions in line with
predetermined goals (French 1979)
– All organisations manifest a set of beliefs and values
that lay out what is generally regarded as right or
wrong in the corporation – organizational culture
(Moore 1999)

Crane et al.: Business Ethics, 5th edition

 Corporate Social Responsibility

Crane et al.: Business Ethics, 5th edition

 Why do corporations have social
responsibilities?
• Business reasons (‘enlightened self-interest’)
– Extra and/or more satisfied customers
– Employees may be more attracted/committed
– Forestall legislation
– Long-term investment which benefits corporation
• Moral reasons:
– Corporations cause social problems
– Corporations should use their power responsibly
– All corporate activities have some social impacts
– Corporations rely on the contribution of a wide set of
stakeholders in society, not just shareholders

Crane et al.: Business Ethics, 5th edition

 Carroll’s four-part model of corporate
social responsibility

Desired by society
Philanthropic
Responsibilities
Expected by society
Ethical
Responsibilities

Required by society
Legal
Responsibilities
Required by society
Economic
Responsibilities
Source: Carroll (1991)

Crane et al.: Business Ethics, 5th edition

 What is the nature of corporate social
responsibilities?

Crane et al.: Business Ethics, 5th edition

 CSR in an international context

• CSR strong in US. Influence elsewhere is more recent.

This is partly explained by explicit vs. implicit CSR
• Regional differences exist with respect to all CSR levels:
– Economic responsibility
• Focus in USA on shareholders; France has extensive responsibility for
employees; India has tradition of investment in the local community
– Legal responsibility
• State seen in Europe as key enforcer of rules; elsewhere government seen
with more scepticism (e.g. corrupt, interfering with liberty)
– Ethical responsibility
• Wide range of local ethical values & preferences: expectations vary
– Philanthropic responsibility
• Europe tends to compel giving via legal framework; elsewhere (e.g., USA,
India, China), companies are expected to share their wealth.

Crane et al.: Business Ethics, 5th edition

 CSR and strategy: corporate social
responsiveness

Crane et al.: Business Ethics, 5th edition

 Outcomes of CSR: corporate social
performance

Crane et al.: Business Ethics, 5th edition

 Stakeholder theory of the firm

Crane et al.: Business Ethics, 5th edition

 Stakeholder theory of the firm

• Theory developed by Edward Freeman (1984)

• A stakeholder of an organization is:
– …any group or individual who can affect, or is affected
by, the achievement of the organization’s objectives
(Freeman 1984:46)
• More precise definition of ‘affects’ and ‘affected
by’ (Evan and Freeman 1993)
– Principle of corporate rights - the corporation has
the obligation not to violate the rights of others
– Principle of corporate effect – companies are
responsible for the effects of their actions on others

Crane et al.: Business Ethics, 5th edition

 Stakeholder theory of the firm:
Traditional management model

Shareholders Customers

CORPORATION
(Firm)

Suppliers Employees

Crane et al.: Business Ethics, 5th edition

 Stakeholder theory of the firm

Government Competitors

Shareholders
Customers
CORPORATION
Firm

Suppliers Employees
Civil
society

Crane et al.: Business Ethics, 5th edition

 Stakeholder theory of the firm:
A network model

Customer
stakeholder
1
Governmen Competitor
t s
Customer
stakeholder
Shareholde CORPORATION
Customers
3
rs Firm

Employee
Suppliers stakeholder
Employees 1
Civil society
Supplier Employee
stakeholder stakeholder
Civil society 2
1 Civil society stakeholder
stakeholder 1
2

Crane et al.: Business Ethics, 5th edition

 Why stakeholders matter

• Milton Friedman – businesses should only be

run in the interests of shareholders
• Freeman – ‘others’ have a legitimate claim on
the corporation
– Legal perspective
• ‘Stake’ in corporation already protected legally in some way
(e.g. legally binding contracts)
– Economic perspective
• Externalities – outside contractual relationships
• Agency problem – short term interests of ‘owners’ vs. long
term interests of the corp ( all stakeholders: employees,
customers etc.)
Crane et al.: Business Ethics, 5th edition
 A new role for management

Crane et al.: Business Ethics, 5th edition

 Stakeholder thinking in an
international context

Crane et al.: Business Ethics, 5th edition

 Different forms of stakeholder theory

Crane et al.: Business Ethics, 5th edition

 Corporate accountability

The firm as a ‘political’ actor

Crane et al.: Business Ethics, 5th edition

 Corporate accountability

Crane et al.: Business Ethics, 5th edition

 Reasons for the political role of the firm

• Government failure
– Governments incapable? Unwilling?
• Rise of ‘subpolitics’

• Corporate power on the rise

– Liberalization and deregulation results in more power
and choice for private actors
– Privatization of ‘public’ services
– Responsible for employment decisions
– Globalization
– Governments increasingly encourage self-regulation

Crane et al.: Business Ethics, 5th edition

 Corporate citizenship

Crane et al.: Business Ethics, 5th edition

 Defining corporate citizenship: three
perspectives

Crane et al.: Business Ethics, 5th edition

 Three views of corporate citizenship
Limited View Equivalent View Extended View

Focus Philanthropy, focused All areas of CSR Citizenship: social,

on projects, limited political and civil
scope rights

Main Stakeholder Local communities, Broad range of Broad range of

Group employees stakeholders citizens; society in
general

Motivation Primarily Mixed – economic, Political

philanthropic; also legal, ethical,
economic where philanthropic
citizenship is
strategies

Moral Grounding Reciprocity, i.e. Duty to be Grounding is not

‘putting something responsible and moral but comes
back’ avoid harms to from changes in the
society political arena

Source: Crane et al (2019)

Crane et al.: Business Ethics, 5th edition
 An extended view of CC

Corporate citizenship

Social role of the corporation in governing citizenship

Social rights corporation as provider/ignorer

Civil rights corporation as dis-/enabler

Political rights corporation as channel/blockage

Crane et al.: Business Ethics, 5th edition

 The problem of democratic accountability

Crane et al.: Business Ethics, 5th edition

 Summary

• Business ethics is related to the social role of the

corporation
• Confining corporations to commercial activities
too limited
• Different perspectives and their relevance in
European context
– CSR
– Stakeholder theory
– Corporate accountability
• Effects of globalization on role of corporation
• Corporate citizenship is latest concept in the field

Crane et al.: Business Ethics, 5th edition

 Assessing corporate citizenship as a
framework for business ethics

Extended view of CC adds something significant

that helps us frame business ethics in new ways:
• Helps us better see the political role of the corporation
• Clarifies the demand for corporate accountability
• Helps to understand business in relation to common
citizenship rights within different cultures and some of the
challenges posed by globalization
• The rights of citizenship have strong links to the goal of
sustainability
• Provides a critical perspective on corporations’ social role
that is more in keeping with non-US ways of thinking
about business ethics

Crane et al.: Business Ethics, 5th edition

 Corporate Citizenship Statements
Company Industry and Corporate Citizenship Statement (emphasis added) Source
Country of
Origin
BMW Automobile, Corporate citizenship forms an integral part of how the BMW group https://www.bmwgroup
Germany defines itself as a company. With this in mind, we address current .com/en/responsibility/
challenges in society and focus on those areas in which we can apply our corporate-citizenship.h
tml
core expertise to achieve specific and measurable improvements. We (2017)
believe that our corporate citizenship activities contribute towards mastering
challenges in society, while at the same time brining economic benefits to
the company.

Citibank Financial Services, At Citi, we intentionally use the work ‘Citizenship’ to describe these efforts http://www.citigroup.co
US because the word reflects a sense of belonging to communities that extend m/citi/about/citizenship
well beyond our firm. It also reflects a longstanding recognition that our /
success is inextricably linked to the positive outcomes and progress we can (2017)
help enable for others. And its an acknowledgment that we take our
responsibility to use our many strengths and resources to contribute to the
greater good very seriously.

Distell Brewing and We are committed to being a caring, socially and environmental responsible https://www.distell.co.z
beverage, South corporate citizen that conducts business with fairness and integrity, This a/corporate-responsibil
Africa includes contributing to safe and responsible alcohol consumption, driving ity/
socio-economic transformation and championing ethical conduct.

Panasonic Electronics, Japan Panasonic is promoting corporate citizenship activities (social contribution https://www.Panasonic
activities) and working to solve social issues around the world. Panasonic, .com/global/corporate/
as a global corporate citizen, aims to be a benefit to the environment by sustainability.html (201
creating more energy than it uses. 7)

Source: Crane et al (2019)

Crane et al.: Business Ethics, 5th edition