13 Ethics in a Global Society

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· The Dangers of Globalization and the Challenges of Ethical Diversity

· Developing Cross-Cultural Ethical Competence

· Coming to Grips With Ethnocentrism

· Becoming a World Citizen

· Understanding Ethical Diversity

· Finding Moral Common Ground

· Resolving Ethical Cross-Cultural Conflicts

· Chapter Takeaways

· Application Projects

Globalization is having a dramatic impact on life in the 21st century. We inhabit a global society knit together by free trade, international travel, immigration, satellite communication systems, and the Internet. In this interconnected world, ethical responsibilities extend beyond national boundaries. Decisions about raw materials, manufacturing, outsourcing, farm subsidies, investments, marketing strategies, suppliers, safety standards, and energy use made in one country have ramifications for residents of other parts of the world. Organizational citizenship is now played out on a global stage. Businesses, in particular, are being urged to take on a larger role in solving the world’s social problems.

To act as ethical global citizens, organizations must confront and master the dangers of globalization and the dilemmas of ethical diversity. In this section, I’ll describe these obstacles and offer tactics for overcoming them.

The Dangers of Globalization and the Challenges of Ethical Diversity

The benefits of living in a global economy are obvious: lower labor costs, higher sales and profits, cheaper goods and services, instant communication to anywhere on Earth, increased information flow, and cross-cultural contact. What’s often hidden is the downside of globalization. Of particular concern is the growing divide between the haves and the have-nots. The richest 10% of the global population controls over 85% of the world’s assets and income, with the top 1% controlling 46% of the wealth. Governments of wealthy nations appear more interested in promoting the sale of their goods (including agricultural products) than in opening up their markets to poor countries.1 Lumber, minerals, and oil are extracted from poor regions and consumed in privileged areas, leaving environmental damage behind. At the same time, the United States sends solid and toxic waste to the developing world.2

Critics also note that global capitalism frequently promotes greed rather than concern for others. Ethical and spiritual values have been shunted aside in favor of the profit motive. Few industrialized countries give even the suggested minimum of.07% of gross national product (70 cents of every $100 produced by the economy) to alleviate global poverty.3 Local cultural traditions are being destroyed in the name of economic progress. As burgers, fries, pizza, and other popular American foods replace local fare, people around the world can expect to suffer the same kinds of chronic health problems as U.S. residents do—type II diabetes, obesity, and heart failure.

The big winners in globalization are multinational corporations. According to one estimate, 44 of the world’s 100 largest economies are corporations. Royal Dutch Shell, for example, has revenues that exceed the gross domestic products of 171 countries.4 Some multinationals have pursued free trade at the cost of human rights and the environment. They have employed sweatshop and slave labor, stood by as repressive regimes tortured their citizens, and plundered local resources.

Along with the potential moral pitfalls of globalization, organizations also face the challenges of ethical diversity.5 Nations, tribes, ethnic groups, and religions approach moral dilemmas differently. What members of one group accept as right may raise serious ethical concerns for another. For example, in Germany contracts are highly detailed and strictly enforced. In Egypt, contracts spell out guidelines for business deals rather than specific requirements. Egyptians expect to renegotiate and revise contracts, and there is no moral stigma attached to violating a signed agreement. In Mexico, honoring a contract is based on the signer’s personal ethics. There is little legal recourse if a contract is violated.

Bribery offers another instance of conflicting moral standards. In South American countries, it is nearly impossible to move goods through customs without making small payments to cut through red tape. At the other extreme, Malaysia executes corporate officials who offer and accept bribes. U.S. corporations and foreign firms listed on a U.S. stock exchange are prevented from exchanging money or goods for favors or services under the Foreign Corrupt Practices Act of 1977. However, in recognition of the fact that petty bribery is common in some parts of the world, small payments to facilitate travel and business are permitted under the statute. Cultures also clash over intellectual property rights (which are strictly enforced in the West but not protected in parts of Southeast Asia) and deception (Americans lie to protect their privacy, whereas Mexicans are more likely to lie to protect the group or family). Another clash of moral standards is described in Case Study 13.1.

The challenges posed by globalization and ethical diversity can undermine ethical decision making. For some organizations, it is business as usual. Interested only in making a profit or expanding their influence, they fail to weigh the possible negative consequences of their choices in the global environment. Leaders faced with ethical diversity sometimes behave as ethical imperialists by imposing their personal moral standards on members of other cultures. Or they may opt for cultural relativism by always following local customs (“When in Rome, do as the Romans do”). Nevertheless, being in a new culture or working with a diverse group of followers doesn’t excuse managers from careful ethical deliberation. Standards from one culture can’t be blindly forced upon another; conversely, just because a culture has adopted a practice doesn’t make it right. For example, trafficking in humans takes place in some parts of the world, but most societies condemn this practice.

Fortunately, you can develop your cross-cultural ethical competence and help your organizations to do the same. To achieve this goal, you must first wrestle with ethnocentrism and consider becoming a world citizen. Next, you have to recognize the value orientations of cultural groups and how these patterns influence ethical decision making. Then, you need to adopt universal moral principles that should govern behavior in every cultural setting and employ guidelines for sorting through conflicts between competing ethical norms.

Developing Cross-Cultural Ethical Competence

Coming to Grips With Ethnocentrism

Overcoming the challenges of globalization and ethical diversity is impossible if we fall victim to ethnocentrism. Ethnocentrism is viewing the world from our cultural group’s point of view, which makes our customs and values the standard by which the rest of the world is judged. Our ways are “right,” while their ways fall short. A certain degree of ethnocentrism is probably inevitable; it can help a group band together and survive in the face of outside threats. Nevertheless, high levels of ethnocentrism can lead to reduced contact with outsiders, racial slurs, insensitivity to strangers, pressure on other groups to conform, justification for violence and war, and other negative outcomes.6

A number of the ethical communication competencies introduced earlier in the text can be used to confront ethnocentrism. Pursue dialogue in cross-cultural conversations by treating members of other cultures as equal partners and by trying to understand their point of view. Mindfulness is particularly important in diverse cultural settings because the scripts we follow in our own groups don’t work when we find ourselves in other cultures. Adopt a pluralistic perspective that acknowledges the legitimacy of other groups and customs in order to avoid moral exclusion. (See the next section for more information on an ethical approach that greatly expands the circle of moral inclusion.)

Personal virtues can help undermine ethnocentric attitudes and at the same time lay the groundwork for meeting the challenges of globalization and ethical diversity. Philosopher and theologian Michael Novak identifies four cardinal or hinge virtues essential to encouraging global cooperation: cultural humility, truth, dignity, and solidarity.7 Cultural humility means acknowledging the shortcomings of our own cultures as well as our personal biases. A commitment to truth allows for reasoned argument based on evidence and logic. Recognition of human dignity forbids using others as a means to an end. Solidarity is being aware that each individual lives in communion with others and has responsibility for their welfare.

Case Study 13.1

The Right to Be Forgotten

Individual privacy is a fundamental right in both the United States and Europe. However, the two regions define this right very differently. In the United States, privacy is “the right to be left alone” and this right is often superseded by free press and free speech rights.1 This view of privacy was illustrated by a California Supreme Court ruling that journalists could publicize the sexual orientation of a gay man who stopped an assassination attempt on former President Gerald Ford. The hero repeatedly asked the press not to reveal this information, which was hidden from his family, but the court ruled that helping to protect the president had made him a public figure. In Europe, dignity underlies privacy concerns. According to Zurich law professor Rolf Weber, Europeans consider “dignity, honor and the right to private life” the most fundamental rights. There is the “right for the [moral and legal] integrity of a person not to be infringed and for a sphere of privacy to be maintained and distinguished.”2 The European Court of Human Rights ruled, for example, that German papers had violated Princess Caroline of Monaco’s privacy rights by publishing photographs of her and her family. The tribunal noted that the pictures were taken in “a climate of continual harassment” and involved “a very strong sense of intrusion into their private life.”3

The European Court of Justice applied the European conception of privacy to the Internet when it ruled that its citizens have the “right to be forgotten.” A Spaniard petitioned the court to force Google to remove information about the auction sale of his repossessed home. He argued that this reference was irrelevant because the matter had been resolved years earlier. He asked Google to remove the pages and to ensure that news of the auction no longer appeared in search results. The Court of Justice agreed, declaring that individuals have a limited right to ask search engines to remove links with personal information if the information is “inaccurate, inadequate, irrelevant or excessive.”4 This judgment applies to all current or future Internet providers operating in Europe.

In response to the ruling, Google, which handles an estimated 85% of Europe’s web traffic, set up a system to handle data removal requests. Applicants fill out an online form that is submitted to a team within Google’s legal department, which weighs the request against the public interest. If the request is approved, the search engine then removes the web link within the 28 nations of the European Union as well as in Iceland, Norway, Switzerland, and Liechtenstein. (The link would still be visible outside the region.) Country data-protection regulators will decide in cases where individuals dispute Google’s decision. Initially 70,000 requests came in to remove personal information. Several links to stories in The Guardian newspaper, including articles about a disgraced soccer referee and the ouster of former Merrill Lynch CEO Stanley O’Neill, were among the first to be removed. Google later restored several of these links after free speech advocates and journalists complained. However, opponents of the right to be forgotten worry that prominent people and corporations will use the system to delete unfavorable information about them.

The European Parliament is expected to pass digital privacy legislation that would expand the right to be forgotten to social media providers like Facebook as well as to e-commerce sites. Some U.S. observers argue that American citizens should have the same right to maintain their electronic dignity as Europeans. They then could petition Google, Bing, Yahoo, and other providers to take down embarrassing personal photos, criminal convictions and mug shots, old bankruptcy filings, caustic blog posts, and other items they would like to leave in their pasts.

Discussion Probes

1. What does the right to privacy mean to you? The right to be left alone or the right to maintain your dignity?

2. What should take precedence—the right of privacy or the right of free speech?

3. What do you think constitutes “inaccurate, inadequate, irrelevant or excessive” information on the Internet? Can you think of any examples?

4. Should American citizens “have the right to be forgotten”?

5. What information should never be deleted from the Internet?

Notes

1. Chow (2013).

2. Learning from Europe’s ‘right to be forgotten’ (2013).

3. Learning from Europe’s ‘right to be forgotten’ (2013).

4. Factsheet on the “Right to be Forgotten’ ruling. (2014, May 13). European Commission. Additional sources for this section are Google restores links to some news articles after outcry (2014); Scott (June 18, 2014; July 5, 2014); Spanier (2014).

Becoming a World Citizen

A number of scholars argue that cosmopolitanism is the best way to meet the ethical challenges of globalization while avoiding ethnocentrism. Since we live in a global society, they argue, we should consider ourselves citizens of the world (cosmopolitans) rather than of one particular nation-state. This approach acts as an “ethics of strangers” in a world where we increasingly interact with those outside our cultural group.8

Cosmopolitanism has a long history in Western philosophy, stretching back to the ancient Greek Stoic philosophers who believed that our responsibilities extend to strangers as well to acquaintances. Immanuel Kant proposed the creation of an international legal authority to regulate relations between nations. He encouraged hospitality toward foreigners.9 Modern cosmopolitans take a humanistic approach to globalization based on the fundamental premise that every human being has dignity and value, regardless of their location, status, or background. They have a strong sense of global justice and work to ensure human rights. Their sense of care or empathy for the needs of others extends well beyond their immediate group to helping the “distant needy”—the less privileged who are often found in the world’s developing nations. Cosmopolitans believe that they have a moral obligation or duty to act on that concern by providing assistance to others around the world. In particular, cosmopolitans argue that affluent businesses and nations have a responsibility to give to less fortunate people and nations.10 Some other values and norms underlying ethical cosmopolitanism include the following:11

1. Limitations on patriotism and the sovereignty of countries

2. Opposition to nationalism

3. Commitment to aid those suffering from natural or human-made disaster, which includes extreme poverty

4. Liberalization of immigration and refugee policies

5. Quest for lasting world peace

6. Prosecution of crimes against humanity

7. Submission to the rule of international law

8. Religious and cultural tolerance

9. Dialogue and communication across cultural and national boundaries

10. Viewing the world as single polity and community

Acting as a global citizen takes certain attitudes and skills, what British political and social theorist William Smith calls cosmopolitan “worldliness.”12 Worldliness means, first off, being self-reflexive. To be self-reflexive, we need to step back from (create distance from) our relationships and culture in order to offer criticism and reform. Next, worldliness involves compassion for the world’s people and working to create institutions and laws that will protect the less fortunate. However, worldliness does not mean feeling pity for others but having a sense of solidarity with them. Third, worldly individuals have the necessary skills to bring about change through setting strategy, persuading others, working with governments and nonprofits to promote global initiatives, and so forth.

Being totally cosmopolitan may be impossible given the fact that, as we noted earlier, humans naturally band together in local groups. And you might take issue with some of the tenets of cosmopolitanism, such as its rejection of patriotism and promotion of a world government. Nevertheless, cosmopolitans offer an attractive normative framework for living ethically in a global society. They encourage us to be altruistic, becoming compassionate citizens of the world who keep the dignity of all human beings in mind. We do need to be able to step back from, and then critique, our cultural norms and values. If we fail to distance ourselves, we blindly follow our cultural programming no matter how unethical our culture’s practices.

Understanding Ethical Diversity

Ethical decisions and practices are shaped by widely held cultural values. Every culture has its own set of ethical priorities; however, researchers have discovered that ethnic groups and nations hold values in common. As a result, cultures can be grouped according to their value orientations. Understanding these orientations helps explain ethical differences and enables us to better predict how members of other societies will respond to moral dilemmas. Three widely used cultural classification systems include Hofstede’s programmed value patterns, the GLOBE studies, and moral foundations theory.

1. Programmed Value Patterns

Geert Hofstede of the Netherlands argues that important values are “programmed” into members of every culture. To uncover these value dimensions, he conducted the first extensive international investigation of cultural value patterns, surveying more than 100,000 IBM employees in 50 countries and three multicountry regions.13 He then checked his findings against those of other researchers who studied the same countries. Four value orientations emerged:

· Power distance. The first category concerns how societies deal with human inequality. While status and power differences are universal, cultures treat them differently. In high–power distance cultures (Malaysia, Guatemala), inequality is accepted as part of the natural order. Leaders are set apart and enjoy special privileges and make no attempt to reduce power differentials. Low–power distance cultures (Israel, Austria), on the other hand, are uneasy with large gaps in wealth, power, privilege, and status. Superiors tend to downplay status and power differentials, and such societies stress equal rights.

· Individualism versus collectivism. This category divides cultures according to their preference for either the individual or the group. Individualistic cultures (the United States, Australia, Great Britain) put the needs and goals of the person and her or his immediate family first. Members of these cultures see themselves as independent actors and believe that everyone should take care of themselves and their immediate family. In contrast, collectivistic cultures give top priority to the desires of the larger group—extended family, tribe, community. Members of these societies (Guatemala, Ecuador, Panama) think in terms of “we,” not “I.” They want to fit into the collective, not stand out. (You can determine your level of individualism and collectivism by completing Self-Assessment 13.1.)

· Masculinity versus femininity. The third dimension reflects attitudes toward the roles of men and women. Highly masculine cultures (Japan, Austria, Saudi Arabia) maintain clearly defined sex roles. Men are expected to be tough and focus on performance; women are to be tender and focus on relationships. Men should be ambitious and assertive, while women are expected to care for the weak. Feminine cultures (Sweden, Norway, Netherlands) blur the differences between the sexes. Both men and women can be competitive and caring, assertive and nurturing. These cultures are more likely to stress cooperation, quality of life, and concern for others.

· Uncertainty avoidance. This dimension describes the way in which cultures respond to uncertainty about the future. Members of high–uncertainty avoidance societies (Greece, Portugal, Uruguay) feel anxious about uncertainty and view it as a threat. They are less likely to break the rules; they value loyalty to the company, accept directives from those in authority, and view outsiders and change as threats. In addition, they are reluctant to change jobs or to express dissatisfaction with their current employers. People who live in low–uncertainty avoidance cultures (Sweden, Denmark, Jamaica) are more comfortable with uncertainty, viewing ambiguity as a fact of life. They experience lower stress and are more likely to pursue their ambitions by, for example, starting a new company or accepting a new job in another part of the country. These people tend to trust their own judgments instead of obeying authority figures. As a result, they are more likely to break rules and regulations.

Hofstede argues that the value patterns he identifies have a significant influence on ethical behavior.14 For instance, countries that are masculine, high–power distance, and high–uncertainty avoidance are generally more corrupt. Masculine European countries give little to international development programs but invest heavily in weapons. Feminine European nations do just the opposite. High–uncertainty avoidance cultures are prone to ethnocentrism and prejudice because they follow the credo “What is different is dangerous.” Low–uncertainty avoidance cultures follow the credo “What is different is curious” and are more tolerant of strangers and new ideas.

Other researchers have also linked Hofstede’s value patterns to ethical attitudes and behavior.15 They have discovered that members of feminine cultures are more sensitive to the presence of moral issues. Consumers from societies characterized by short-term orientation, low power distance, and low uncertainty avoidance generally punish socially irresponsible firms. Corporate governance is better in individualist societies as compared to masculine, high uncertainty societies. Accounting organizations from high individualism/high uncertainty avoidance cultures are less likely to adopt global codes of ethics because they don’t want to submit to the authority of outside, international organizations. Individualistic countries prefer universal ethical standards such as Kant’s categorical imperative. Collectivistic societies take a more utilitarian approach, seeking to generate the greatest good for in-group members.

Individualistic and collectivist societies have different communication patterns, which also shape the ethical behavior of citizens.16 Individualists use low-context communication in which most of the information in the message is embedded in the message itself. In nations like Germany and Switzerland, communicators directly express their thoughts and feelings as clearly as possible and rely heavily on carefully crafted written messages like contracts. To them, conflict should be faced head-on. Collectivists engage in high context communication where most of the information is contained in the situation or context where the message is delivered. Speakers in Japan and other high-context cultures communicate indirectly, rarely expressing direct disagreement, for example. They are more interested in maintaining harmony in the group than in expressing their true thoughts and feelings and often avoid direct confrontation. As a consequence, followers are much less likely to confront unethical superiors or coworkers or to blow the whistle on corporate misbehavior.17 They are more willing to sacrifice the truth to save “face” and to protect their group.

Additional examples of how individualism and collectivism affect ethical decisions are presented in Table 13.1.

Self-Assessment 13.1

Individualism/Collectivism Scale

Instructions: This questionnaire will help you assess your individualistic and collectivistic tendencies. Respond by indicating the degree to which the values reflected in each phrase are important to you: “Opposed to My Values” (answer 1), “Not Important to Me” (answer 2), “Somewhat Important to Me” (answer 3), “Important to Me” (answer 4), or “Very Important to Me” (answer 5).

· _______ 1. Obtaining pleasure or sensuous gratification

· _______ 2. Preserving the welfare of others

· _______ 3. Being successful by demonstrating my individual competency

· _______ 4. Restraining my behavior if it is going to harm others

· _______ 5. Being independent in thought and action

· _______ 6. Having safety and stability of people with whom I identify

· _______ 7. Obtaining status and prestige

· _______ 8. Having harmony in my relations with others

· _______ 9. Having an exciting and challenging life

· _______ 10. Accepting cultural and religious traditions

· _______ 11. Being recognized for my individual work

· _______ 12. Avoiding the violation of social norms

· _______ 13. Leading a comfortable life

· _______ 14. Living in a stable society

· _______ 15. Being logical in my approach to work

· _______ 16. Being polite to others

· _______ 17. Being ambitious

· _______ 18. Being self-controlled

· _______ 19. Being able to choose what I do

· _______ 20. Enhancing the welfare of others

Scoring

To find your individualism score, add your responses to the odd-numbered items. To find your collectivism score, add your responses to the even-numbered items. Both scores will range from 10 to 50. The higher your scores, the more individualistic or collectivistic you are.

SOURCE: Gudykunst, W. B. (2004). Bridging differences: Effective intergroup communication (4th ed.). Thousand Oaks, CA: Sage. Used by permission.

2. Project GLOBE

Project GLOBE (Global Leadership and Organizational Behavior Effectiveness) is an ongoing international effort. To date, 200 researchers from around the world have gathered data from more than 17,000 managers in 62 countries. The goal of the project is to identify the relationship between cultural values and effective leadership behaviors. This information can help managers become more successful in cross-cultural settings. The GLOBE researchers incorporate into their study Hofstede’s dimensions of power distance, uncertainty avoidance, gender differentiation (masculinity and femininity), and individualism versus collectivism. However, they also extend Hofstede’s list by identifying four additional values patterns:18

SOURCE: Carroll, S. J., & Gannon, M. J. (1997). Ethical dimensions of international management. Thousand Oaks, CA: Sage. Copyright © 1996, SAGE Publications, Inc. Used by permission.

· Performance orientation. This is the “extent to which a community encourages and rewards innovation, high standards, and performance improvement.”19 Places such as Hong Kong, Singapore, and the United States are results focused. Citizens value competition and materialism and want to be rewarded for individual achievement. In countries such as Russia, Italy, and Argentina, people put loyalty and belonging ahead of performance. They are uncomfortable with competition and merit pay and put more weight on someone’s seniority, family, and background than on his or her performance.

· Future orientation. This is the extent to which a society fosters and reinforces such future-oriented activities as planning and investing (Singapore, Switzerland, the Netherlands) rather than immediate rewards (Russia, Argentina, Poland).

· Assertiveness. Assertiveness is defined as the extent to which a culture encourages individuals to be tough, confrontational, and competitive, as opposed to modest and tender. Spain and the United States rate high on this dimension; Sweden and New Zealand rate low. Those in highly assertive societies have a take-charge, can-do attitude and value competition. They admire the strong and assertive and are not particularly sympathetic to the weak and less fortunate. Members of less assertive cultures place more value on empathy, loyalty, and solidarity. They have empathy for the weak and want to live in harmony with the environment rather than control it.

· Humane orientation. Humane orientation refers to the extent to which a culture encourages and honors people for being altruistic, caring, kind, fair, and generous. Support for the weak and vulnerable is particularly high in such countries as Malaysia, Ireland, and the Philippines. Members of society care for one another and rely much less on the government. In contrast, power and material possessions are more likely to motivate people in the former West Germany, Spain, and France; self-enhancement takes precedence. Individuals are to solve their own problems, and the state provides more support for the less fortunate.

The GLOBE values dimensions have also been linked to ethical diversity. People oriented toward the future will save and invest. They will condemn those who live in the moment and spend all they earn. Future-oriented organizations are also more likely to engage in practices that benefit society. Competition, direct communication, power, and personal advancement are applauded in assertive, performance-oriented, less humane groups. These elements are undesirable to people who put more value on harmony, cooperation, family, and concern for others. Those living in assertive, performance-oriented cultures are tempted to engage in unethical activities in order to succeed. The businesses they create are more likely to be focused on shareholders, profits, and results instead of on stakeholders and social responsibility (including care for the environment).20 Countries high in uncertainty avoidance and future orientation are more likely to protect intellectual property than cultures high in humane orientation and in-group collectivism.21

3. Moral Foundations Theory

Hofstede and the GLOBE researchers treat ethical diversity as just one of the outcomes of cultural diversity. In contrast, moral foundations theory was developed specifically to account for the ethical differences between cultures. University of Virginia moral psychologist Jonathan Haidt and others believe that to understand ethical diversity we first need to understand the psychological systems or foundations of morality. These mental foundations, which are part of our genetic makeup, enable humans to successfully live together in groups. Cultures shape how these systems are used, emphasizing one or more values over the others. Haidt compares these moral systems to taste buds. Nearly everyone is born with the same set of taste receptors, but each culture develops its own cuisine, which highlights different tastes.

Haidt identifies five foundations for our moral intuitions.22 They include the following:

· Harm/care. All species are sensitive to suffering in their own offspring, but for primates and humans sensitivity to suffering extends beyond the family. We can also feel compassion for outsiders. Attuned to cruelty and harm, we generally approve of those who prevent or alleviate suffering. Kindness and compassion are therefore important human virtues. However, the other moral foundations described below temper the amount of compassion that individuals in different cultures display.

· Fairness/reciprocity. Reciprocity—paying back others—is essential for the formation of alliances between individuals who are not related to each other. As a result, all cultures have virtues related to justice and fairness. Individual rights and equality are highly prized in the West. However, many traditional societies put little value on personal autonomy or equal treatment.

· In-group/loyalty. Trust and cooperation have been critical to human survival. Individuals need to work effectively with others in their group while being wary of outsiders. As a result, they value those who sacrifice on behalf of the in-group while despising members who don’t come to their aid in times of conflict. They are disturbed when fellow citizens challenge symbols of group unity, like the pledge of allegiance to the national flag.

· Authority/respect. Hierarchy is fact of life in primate as well as human groups. Dominant individuals get special perks but are expected to provide services (e.g., protection, food) in return. Primates rely on brute strength to assert their authority; people use such factors as prestige and deference. Followers in many cultures feel respect, awe, and admiration for leaders and expect them to act like wise parents. Many of these same societies make virtues out of duty, obedience, respect, and other subordinate behaviors.

· Purity/sanctity. Only humans appear to feel disgust, which helps to protect the body against the transmission of disease through corpses, feces, vomit, and other possible contaminants. Disgust has a social dimension as well, becoming associated with those who are diseased or deformed or with certain occupations (gravediggers and those who dispose of excrement, for example). Members of most cultural groups admire those who are spiritually minded or pure and disapprove of individuals who seem to be ruled by lust, gluttony, greed, and uncontrolled anger. For example, in the United States, one of the most materialistic societies in the world, most citizens still look down on those who regularly “shop until they drop.”

The United States and many other Western nations largely focus on reducing harm and promoting autonomy. But as Haidt points out, that is not the case in much of the rest of the world. In Brazil, morality is based on loyalty, family, respect, and purity in addition to care. Confucian and Hindu value systems emphasize authority and stability. Muslim societies place a high priority on purity, which is reflected in the segregation of men and women and separation from infidels. Haidt urges us to keep all five moral systems in mind when dealing with diverse groups. Purity and authority may not be important to us, but they are to a great proportion of the world’s population. Our ethical appeals will be most effective if they speak to loyalty, authority, and purity in addition to care and fairness. (Complete Self-Assessment 13.2 to determine which moral intuitions are most important to you.)

Professor Haidt developed his theory to explain moral differences between cultures, but he soon discovered that moral foundations explain the differences between liberals and conservatives in the United States.23 Contrasts between these political philosophies further demonstrate how the moral foundations shape ethical attitudes. Haidt believes that the purity/sanctity dimension is the best predictor of positions on abortion, for example. American liberals who value autonomy want to preserve the woman’s right to choose, and conservatives want to preserve the sanctity of the fetus. Authority predicts competing attitudes toward gay marriage. Liberals believe that individuals have a right to do as they choose if they don’t hurt anyone else. In their minds, opposition to gay marriage is homophobic. Conservatives, on the other hand, see gay marriage as a threat to the family, which serves as the foundation of society. Those on the political left and right are also divided by their attitudes toward loyalty. Liberals believe that citizens can protest against a war while at the same time supporting the soldiers fighting in the conflict. This argument offends conservatives, who believe it is unpatriotic to protest when the country is at war.

Self-Assessment 13.2

Moral Foundations Questionnaire

Part I. Moral Relevance

When you decide whether something is right or wrong, to what extent are the following considerations relevant to your thinking? Please rate each statement using this scale:

0 = not at all relevant, 1 = not very relevant, 2 = slightly relevant, 3 = somewhat relevant, 4 = very relevant, 5 = extremely relevant.

1. Whether or not someone suffered emotionally.

2. Whether or not someone cared for someone weak or vulnerable.

3. Whether or not some people were treated differently from others.

4. Whether or not someone acted unfairly.

5. Whether or not someone’s action showed love for his or her country.

6. Whether or not someone did something to betray his or her group.

7. Whether or not someone showed a lack of respect for authority.

8. Whether or not someone conformed to the traditions of society.

9. Whether or not someone violated standards of purity and decency.

10. Whether or not someone did something disgusting.

· Part II. Moral Judgments

Please read the following sentences and indicate your agreement or disagreement.

0 = strongly disagree, 1 = moderately disagree, 2 = slightly disagree, 3 = slightly agree, 4 = moderately agree, 5 = strongly agree

11. Compassion for those who are suffering is the most crucial virtue.

12. One of the worst things a person could do is hurt a defenseless animal.

13. When the government makes laws, the number one principle should be ensuring that everyone is treated fairly.

14. Justice is the most important requirement for a society.

15. I am proud of my country’s history.

16. People should be loyal to their family members, even when they have done something wrong.

17. Respect for authority is something all children need to learn.

18. Men and women each have different roles to play in society.

19. People should not do things that are disgusting, even if no one is harmed.

20. I would call some acts wrong on the grounds that they are unnatural.

Scoring

Add up the scores on each moral foundation (range 0–20). The higher the score, the more important that foundation is to you.

· Harm: Items 1, 2, 11, 12 ______

· Fairness: Items 3, 4, 13, 14 ________

· Ingroup/Loyalty: Items 5, 6, 15, 16 ______

· Authority: Items 7, 8, 17, 18 ______

· Purity: Items 9, 10, 19, 20 _____

SOURCE: Graham, J., Nosek, B. A., Haidt, J., Iyer, R., Koleva, S., & Ditto, P. H. (2011). Mapping the moral domain. Journal of Personality and Social Psychology, 101, 366–385. Copyright © 2016 by the American Psychological Association. Reproduced with permission.

Finding Moral Common Ground

Some organizations and their members respond to ethical diversity by practicing ethical relativism, which is conformity to local customs. Ethical relativism avoids the problem of ethnocentrism while simplifying the decision-making process. We never have to pass judgment and can concentrate on fitting in with the prevailing culture. However, this approach is fraught with difficulties. Without shared standards, there is little hope that people of the world can come together to tackle global problems. There is no basis upon which to condemn the actions of governments (like Sudan, for example) that are engaged in genocide and torture or to criticize businesses that exploit their employees and the environment. Cultural relativism obligates us to follow (or as least not to protest against) abhorrent local practices like female genital mutilation. Without universal rights and wrongs, we have no grounds for contesting such practices.

There appears to be a growing consensus that ethical common ground can be found. In fact, the existence of common moral standards has enabled the world community to punish crimes against humanity in Germany, Serbia, and Rwanda. Responsible multinational corporations like Starbucks, The Body Shop, and Proctor & Gamble adhere to widely held moral principles as they do business in a variety of cultural settings. Activist groups use these same guidelines to condemn irresponsible firms.

One group of researchers used the “trolley problem” to determine if there are similarities in cross-cultural reasoning.24 In the trolley problem, an out-of-control trolley threatens to kill five people unless immediate action is taken. In one case, the trolley operator is incapacitated, and a passenger has to decide whether or not to throw a switch that will divert the vehicle to safety on a side track (and save the five passengers) but will kill a pedestrian who happens to be standing on the rails. In the other case, someone standing by the tracks must decide whether or not to directly intervene by throwing another bystander into the path of the trolley to slow it down and save the five passengers.

Responses to the trolley problem from 30,000 subjects in 120 countries revealed widespread agreement across all groups, regardless of nationality, educational level, or religion. By a significant margin, participants said it was justified to throw the switch to save the trolley passengers but not to throw someone onto the tracks to accomplish the same goal. Respondents reported that throwing a switch is an impersonal act, and they saw the death of the pedestrian as an unfortunate consequence. On the other hand, throwing a bystander onto the track is a deliberate, highly personal act that makes the victim a means to an end.

The hypothetical trolley problem has parallels in real life. For example, most of us would allow terminally ill patients to refuse treatment and thus die sooner than they would have with the additional care. (This approach is similar to throwing the trolley switch.) However, it is illegal in most states to give a drug overdose to hasten a terminally ill patient’s death (which raises the same concerns as throwing a bystander onto the trolley track).

Universal standards provide additional evidence that members of diverse societies can find moral common ground. Such global standards have enabled members of the world community to punish crimes against humanity and to create the United Nations and its Universal Declaration of Human Rights. I’ll describe three different approaches to universal ethics, any one of which could serve as a worldwide standard. You’ll note a number of similarities between the lists. Decide for yourself which approach or combination of approaches best captures the foundational values of humankind (see Application Project 5 at the end of the chapter).

The United Nations Universal Declaration of Human Rights

Human rights are granted to individuals based solely on their status as persons. Such rights protect the inherent dignity of every individual regardless of background. Rights violations are unethical because they deny human value and potential.25

The most influential list of basic human rights was adopted by the United Nations immediately following World War II, a conflict fought in large part to protect human freedoms. Among the key rights spelled out in the universal declaration are the following:26

Article 4. No one shall be held in slavery or servitude; slavery and the slave trade shall be prohibited in all their forms.

Article 5. No one shall be subjected to torture or to cruel, inhuman, or degrading treatment or punishment.

Article 9. No one shall be subjected to arbitrary arrest, detention, or exile.

Article 13. Everyone has the right to freedom of movement and residence.

Article 17. Everyone has the right to own property alone as well as in association with others.

Article 19. Everyone has the right to freedom of thought, conscience, and religion.

Article 25. Everyone has the right to a standard of living adequate for the health and well-being of himself [or herself] and of his [or her] family.

Article 26. Everyone has the right to education.

In 2000, the United Nations launched a program called the Global Compact (GC) to encourage multinational corporations to honor human rights, labor rights, and the environment. Members agree to the principles outlined in Ethics in Action 13.1 and specify how they are complying with these guidelines. Nonprofit watchdog groups meet regularly with corporate representatives to talk about their firms’ performance. Membership in the Global Compact has grown rapidly. It is now the largest voluntary corporate citizen group in the world. However, there is considerable debate about the effectiveness of this organization. Critics argue that the UN leaders have weakened the Compact’s standards in order to attract new members and they claim that there is little evidence that the GC has improved the conduct of member firms. GC staff and supporters argue, on the other hand, that the Global Compact has contributed to growing consensus about moral norms for global business. They point to the contrasting responses of Nike and Apple to mistreatment of overseas workers as evidence of that fact. It took Nike 20 years to take responsibility for the behavior of subcontractors after initial criticism in the 1970s. Apple responded immediately in 2012 to reports that Foxconn, a major contract supplier in China, was forcing employees to work long hours for low wages in unsafe conditions, all while living in overcrowded dormitories. The Global Compact has also sponsored initiatives to reduce bribery in India, Brazil, Nigeria, Egypt, and South Africa.27

Ethics in Action 13.1 United Nations Global Compact: The Ten Principles

Human Rights

· Principle 1: Businesses should support and respect the protection of international human rights within their sphere of influence; and

· Principle 2: make sure that they are not complicit in human rights abuses.

Labour

· Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;

· Principle 4: the elimination of all forms of forced and compulsory labour;

· Principle 5: the effective abolition of child labour; and

· Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

· Principle 7: Businesses should support a precautionary approach to environmental challenges;

· Principle 8: undertake initiatives to promote greater environmental responsibility; and

· Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

· Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.

SOURCE: United Nations Global Compact: The ten principles. Retrieved from http://unglobalcompact.org.

The Global Business Standards Codex

Harvard business professor Lynn Paine and her colleagues argue that outstanding (“world-class”) corporations base their codes of ethics on a set of eight universal, overarching moral principles.28 Paine’s group came to this conclusion after surveying a variety of global and corporate codes of conduct and government regulations. They offer the following Global Business Standards Codex as a benchmark for those who want to conform to universal standards of corporate conduct.

1. Fiduciary principle. Act on behalf of the company and its investors. Be diligent and loyal in carrying out the firm’s business. As a trustee, be candid (open and honest).

2. Property principle. Respect and protect property and the rights of its owners. Don’t steal or misuse company assets, including information, funds, and equipment. Avoid waste and take care of property entrusted to you.

3. Reliability principle. Honor all commitments. Keep promises and follow through on agreements even when they are not in the form of legally binding contracts.

4. Transparency principle. Do business in a truthful manner. Avoid deceptive acts and practices and keep accurate records. Release information that should be shared in a timely fashion but maintain confidentiality and privacy as necessary.

5. Dignity principle. Respect the dignity of all who come in contact with the corporation, including employees, suppliers, customers, and the public. Protect their health, privacy, and rights. Avoid coercion. Promote human development instead by providing learning and development opportunities.

6. Fairness principle. Deal fairly with everyone. Engage in fair competition, provide just compensation to employees, and be evenhanded in dealings with suppliers and corporate partners. Practice nondiscrimination in both employment and contracting.

7. Citizenship principle. Act as a responsible member of the community by (a) obeying the law, (b) protecting the public good (not engaging in corruption, protecting the environment), (c) cooperating with public authorities, (d) avoiding improper involvement in politics, and (e) contributing to the community (e.g., economic and social development, giving to charitable causes).

8. Responsiveness principle. Engage with groups (neighborhood groups, activists, customers) that may have concerns about the company’s activities. Work with other groups to better society while not usurping the government’s role in protecting the public interest.

The Caux Principles

The Caux Round Table is made up of corporate executives from the United States, Japan, and Europe who meet every year in Caux, Switzerland. Round Table members believe that businesses should improve economic, social, and environmental conditions and hope to set a world standard by which to judge business behavior. Their principles are based on twin ethical ideals. The first is the Japanese concept of kyosei, which refers to living and working together for the common good. The second is the Western notion of human dignity, the sacredness and value of each person as an end rather than as a means to someone else’s end.29 The Caux Principles for Business, perhaps because they were written by corporate executives from around the world, have gained widespread support. Business schools in Latin America, Asia, Europe, and the United States have endorsed them, and a number of international firms have used them as a guide when developing their own mission statements and ethics codes. However, as Case Study 13.2 illustrates, many firms continue to fall short on these standards.

· Principle 1. Respect stakeholders beyond shareholders. 30 Businesses should have goals that extend beyond economic survival. Corporations have a responsibility to improve the lives of everyone they come in contact with, starting with employees, customers, shareholders, and suppliers, and then reaching out to local, national, regional, and global communities.

· Principle 2. Contribute to economic, social, and environmental development. Companies operating in foreign countries not only should create jobs and wealth but should also foster human rights, better education, and social welfare. Multinational corporations have an obligation to enrich the world community through the wise use of resources, fair competition, and innovation.

· Principle 3. Build trust by going beyond the letter of the law. Businesses ought to promote honesty, transparency, integrity, and keeping promises. These behaviors make it easier to conduct international business and to support a global economy.

· Principle 4. Respect rules and conventions. Leaders of international firms must respect both international and local laws in order to reduce trade wars, to ensure fair competition, and to promote the free flow of goods and services. They also need to recognize that some behaviors may be legal but still have damaging consequences.

· Principle 5. Support responsible globalization. Firms should support international trading systems and agreements and eliminate domestic measures that undermine free trade.

· Principle 6. Respect the environment. Corporations ought to protect and, if possible, improve the physical environment through sustainable development and by cutting back on the wasteful use of natural resources.

· Principle 7. Avoid illicit activities. Global business managers must ensure that their organizations aren’t involved in such forbidden activities as bribery, money laundering, supporting terrorism, and drug and arms trafficking.

After spelling out general principles, the Caux accord applies them to important stakeholder groups. Corporations following these standards seek to (1) treat customers and employees with dignity, (2) honor the trust of owners and investors, (3) create relationships with suppliers based on mutual respect, (4) interact fairly with competitors, and (5) work for reform and human rights in host communities. The Caux Round Table has also developed principles for moral governments and nongovernmental organizations (NGOs). Integrity is the fundamental principle for NGOs, which must serve the common good while remaining true to their mission. NGO staff members should not abuse the public trust or use their positions for personal gain. Grounded in integrity, NGOs need to retain their independence, respect international and local laws, take care to be truthful when advocating positions while recognizing the potential impact on governments and corporations, and be accountable by regularly reporting on their activities and finances.31

Resolving Ethical Cross-Cultural Conflicts

So far, we’ve established that (1) there are significant differences between cultures in how they respond to ethical issues, and (2) there are universal moral principles that apply across cultural boundaries. Reconciling these two facts when making ethical decisions is not easy. How do we respect ethical diversity while remaining true to global moral principles, for example? What do we do when two competing ethical perspectives appear to be equally valid? What set of standards should have top priority—those of the host nation or those of the international organization? Business ethicists Thomas Donaldson and Thomas Dunfee developed the integrated social contracts theory (ISCT) to help us answer questions like these.32

ISCT is based on the notion of social contracts, which are agreements that spell out the obligations or duties of institutions, communities, and societies. The model is integrative because it incorporates two kinds of contracts. The first kind of contract (macrosocial) sets the groundwork or standards for social interaction. Examples of ideal contracts include the requirement that governments respect the rights of people and help the poor. The second type of contract (microsocial) governs the relationships between members of particular communities—nations, regions, towns, professions, industries. These contracts are revealed by the norms of the group. Community contracts are considered authentic or binding if (1) members of the group have a voice in the creation of the norms, (2) members can exit the group if they disagree with prevailing norms, and (3) the norms are widely recognized and practiced by group members.

According to ISCT, universal principles (called hypernorms) act as the ultimate ethical standard in making choices. Communities have a great deal of latitude, or moral free space, to create their own rules, however, as long as these local norms do not conflict with hypernorms. Victim compensation provides one example of norms arising out of moral free space. In Japan (where the victim compensation system is unreliable), airline officials go in person to offer compensation to victims’ families after an accident. In the United States (where the compensation system is more reliable), payments are determined through court decisions.

Dunfee and Donaldson offer a number of guidelines for determining which norms should take priority. Three of these rules of thumb are particularly important. One, determine if the local practice is authentic (widely shared) and legitimate (in harmony with hypernorms). If it’s not, it should be rejected. Second, follow the legitimate local customs of the host community whenever possible. To return to our earlier compensation example, a U.S. airline official stationed in Japan should distribute compensation directly to crash victims’ families instead of relying on the Japanese court system. Third, give more weight to norms generated by larger communities. A norm embraced by a nation as a whole, for instance, should generally take precedence over the norm of a region. The U.S. government followed this guideline in overturning laws promoting racial discrimination in the South. A similar argument can be made for choosing the norm of gender equality—which has broad international acceptance—over the norms of a particular nation that discriminates against women. (You can test the ISCT model and the one that follows by applying them to one or more of the scenarios in Case Study 13.3 at the end of the chapter.)

University of Louisiana professors J. Brooke Hamilton, Stephen B. Knouse, and Vanessa Hill offer an alternative strategy for resolving cross-cultural ethical conflicts, one specifically designed for use in multinational enterprises (MNEs).33 They provide six questions (the HKH model) to guide managers in determining whether to follow the values of their firms or to adopt the practices of the host country instead. Decision makers don’t have to completely answer one question before moving onto the next. Instead, they can move ahead, returning to reconsider earlier questions as needed in order to clarify the final course of action.

1. What is the questionable practice (QP) in this situation? The first question identifies the nature of the problem, which may or may not have an ethical component. To qualify as an ethical conflict, the norms and values of the host country and the business must clash. A firm then has to determine whether to comply with local customs or to follow its own standards, which may mean leaving the host country.

2. Does the QP violate any laws that are enforced? Managers need to determine if the contested practice violates either the laws of their home country or the country where they are doing business. For example, the Foreign Corrupt Practices Act prevents U.S. firms from offering bribes anywhere in the world. Refusing to support government Internet censorship violates Chinese law.

3. Is the QP simply a cultural difference, or is it also a potential ethics problem? A questionable practice qualifies as an ethical issue if it seems to cause harm or violates widely accepted ethical principles like justice or human rights. For example, offering small gifts to show respect is standard business procedure in much of Asia. Gift giving doesn’t become an ethical issue unless significant sums are offered to bribe recipients at the expense of other parties.

4. Does the QP violate the firm’s core values or code of conduct, an industrywide or international code to which the firm subscribes, or a firmly established hypernorm? The answer to this question may differ based on whether a company is interested only in complying with the law or is also interested in living up to its values. For a compliance-only company, an action is ethical as long as it is legal. Managers are interested only in avoiding punishment or harm to the company. Corporations seeking both to comply with the law and to live out their values (compliance/integrity firms) follow a higher standard. They recognize that the law doesn’t condemn all forms of unethical behavior, and at the same time they empower their employees to base their decisions on core values. For example, workers at Motorola are encouraged to follow the firm’s guidelines, called “Uncompromising Integrity and Constant Respect for People.” Organizational decision makers can also base their choices on the widely accepted moral standards described earlier in the chapter.

5. Does the firm have leverage (something of value to offer) in the host country that allows the firm to follow its own practices rather than the QP? Companies with leverage have greater freedom to follow their own standards or to adapt their practices in a way that doesn’t violate their central principles. Leverage comes from contributing to the local economy, offering jobs, supplying currency that can be used for international trade, providing training, purchasing local goods and services, transferring technology to the regional economy, and having an ethical reputation. McDonald’s used its leverage to operate in Moscow without engaging in bribery and other forms of corruption endemic to the Russian economy. Of course, compliance-only companies don’t have to worry about using leverage, since they automatically follow local regulations.

6. Will market practices in the host country improve if the firm follows its own practices rather than the QP in the host country marketplace? This question should be considered only after determining the amount of leverage held by the firm. If the company has significant leverage, it has a responsibility to try to change prevailing practices by refusing to engage in the questionable practice. Improving the way business is done (by not offering bribes, for example) may encourage local firms to follow suit, and local residents will benefit as a result.

Chapter Takeaways

· In addition to providing significant benefits, globalization poses a number of ethical dangers, including increasing the gap between the haves and have-nots and promoting greed and corporate power at the expense of individuals.

· Overcome ethnocentrism—the tendency to see the world from your cultural group’s point of view—through dialogue, mindfulness, adoption of a pluralistic perspective, and the practice of personal virtues that promote global cooperation.

· Seeking to be a citizen of the world is one way to address the dangers of globalization while combating ethnocentrism. Cosmopolitanism encourages compassion for those outside our nations to extend aid to the less fortunate no matter how distant from us.

· Understanding the values that ethnic groups and nations hold in common helps explain ethical differences and better equips you to predict how members of other societies will respond to moral dilemmas. Common values orientations include power distance, individualism versus collectivism, masculinity versus femininity, uncertainty avoidance, performance orientation, future orientation, assertiveness, and humane orientation.

· Ethical differences between cultures can also be explained by the emphasis that various groups place on one or more of the following: harm/care, fairness/reciprocity, in-group/loyalty, authority/respect, purity/sanctity.

· Resist the temptation to practice cultural relativism. Instead, look for ethical common ground, found in such universal principles as the UN Universal Declaration of Human Rights, the Global Business Standards Codex, and the Caux Principles for Business.

· When making ethical decisions in global settings, balance universal principles with the need to honor local laws and values. Keep three key decision-making guidelines in mind: local customs must (1) conform to global standards or hypernorms; (2) give priority to the authentic, legitimate norms of the host country; and (3) whenever possible, give more weight to norms generated by larger communities. In cases involving conflicts between your company’s norms and those of the host country (questionable practices), empower employees to decide based on corporate values, and look for ways to leverage your firm’s influence to change local business practices.

Application Projects

1. Do you think the benefits of globalization outweigh its costs? Defend your position.

2. What do you think it means to be a “citizen of the world?” Should you strive to be a cosmopolitan? Why or why not? What would be some of the implications of living as a world citizen? Write up your response.

3. Select a culture, and write an analysis using the Hofstede and GLOBE dimensions. Determine how the culture rates on each dimension, and determine how this cultural profile shapes the ethical attitudes and behaviors of citizens. Write up your findings.

4. Is there a common morality that peoples of all nations can share? Which of the global codes described in the chapter best reflects these shared standards and values? If you were to create your own declaration of global ethics, what would you put in it?

5. What do your scores on Self-Assessment 13.1 and Self-Assessment 13.2 reveal about how your culture has shaped your values and ethical decision making?

6. Develop a case study based on the conflict between the ethical norms of different countries. Identify the values patterns that are contributing to this dilemma. Resolve the conflict using the guidelines provided by integrated social contracts theory or the HKH (questionable practices) model.

7. Create a case study based on a company or other organization that you believe is a good example of a global citizen.

8. Select one of the diversity scenarios in Case Study 13.3, and reach a conclusion based on concepts presented in the chapter.

Case Study 13.2

The High Cost of Cheap Clothes

Bangladesh’s Rana Plaza factory collapse in April 2013 was one of the worst industrial accidents of all time. Over 1,100 workers died and 1,800 more were injured when a nine-story building housing a collection of garment makers fell after support beams gave way. The day before, the building—which was designed for shops and offices and not the weight of heavy machinery—had been evacuated after video footage of cracks in the building was aired on a local television station. The building’s owner then told the media the building was safe and employees returned. (Some workers were threatened with the loss of a month’s pay if they didn’t show up for work.) The building imploded after diesel generators were started the next morning. This disaster came just a few months after a fire killed 112 workers making shorts and sweaters at another Bangladeshi clothing factory. (Another building collapse claimed 64 lives in 2005.)

In the aftermath of the tragedy, a group of clothing manufacturers, led by Primark (which markets Atmosphere and Denim Company brands) and Loblaw (maker of the Joe Fresh brand) created a compensation fund for victims and their families. Said Primark’s general counsel: “When you know where your clothes are made, then you take responsibility for the results of where your clothes are being made.”1 A Loblaw official noted, “We believe we have a moral obligation to support workers who are producing our products.”2 Several large retailers, including Walmart, Sears, The Children’s Place, JC Penney, Benetton, Matlan, and Carrefourt did not contribute to the fund, though Walmart and Children’s Place later relented. Some of the firms who refused to give claimed that they had no products being manufactured at Rana Plaza when the building collapsed. While this may officially be the case, factory owners in Bangladesh often turn to friends in the industry when they receive large orders they cannot fill on their own. As a result, unauthorized subcontractors may have been producing clothing for Walmart, Sears, and JC Penney that day.

Both European and U.S. retailers formed organizations to inspect Bangladeshi garment factories and to close them if they are structurally unsound, have faulty electrical boxes, or lack fire exits and sprinkler systems. However, efforts to even temporarily close unsafe factories have met with stiff resistance. Factory owners, who say they do not have money for repairs, fear they will lose large contracts to other manufacturers or to other countries. Workers fear that they will lose their jobs and not get paid. (Bangladesh has the lowest wage rates in the world, but garment workers still make more than most of their fellow citizens and the garment industry is credited with lifting many out of extreme poverty.) In at least one case, the Bangladeshi government sided with a company that refused to close down, perhaps because the garment industry accounts for 17% of the country’s economy and 75% of its exports. The worst offenders, who make up the vast majority of firms manufacturing for clothing export, are unregulated.

Industrial accidents in Bangladeshi garment factories will always be a significant threat as long as Western consumers continue to look for clothing bargains, paying more attention to the price tag than to where (and how) the garment was made. The demand for low-cost clothing puts pressure on retailers who, in turn, put pressure on their suppliers to keep costs down. According to the executive director of Worker Rights Consortium, little will change unless major retailers are willing to pay more: “The front line responsibility [for improving safety standards] is the government’s, but the real power lies with Western brands and retailers, beginning with the biggest players: Walmart, H & M, Inditex, Gap and others. The price pressure these buyers put on factories undermines any prospect that factories will undertake the costly repairs and renovations that are necessary to make these buildings safe.”3

Discussion Probes

1. How much attention do you pay to where your clothing is made? Have you ever refused to buy clothing manufactured in a certain country?

2. Do you think consumers could change factory conditions in Bangladesh and other developing countries if they agreed to pay more for their clothes? Would you pay more if you knew your garments were made in safer conditions by workers earning higher wages?

3. Should retailers help compensate the Rana Plaza victims even if they did not have contracts with factories operating in the building at the time of the tragedy?

4. Who should pay for factory improvements in Bangladesh—European and U.S. retailers or the garment manufacturers? Why?

5. If manufacturing standards are tightened, what might be some of the negative consequences for Bangladesh’s people, garment industry, and economy? How could some of these costs be reduced?

Notes

1. Greenhouse (2013).

2. Greenhouse (2013).

3. Manik and Yardley (2013). Additional sources for this section are Greenhouse and Manik (2014); Kennedy (2014); O’Connor (2014); Report: A year after Bangladesh disaster, retailers fail to address biggest factory risks (2014).

Case Study 13.3

Scenarios for Analysis

Layoffs in Saudi Arabia

You’re a British consultant sent to Saudi Arabia to have a look at a new joint venture your company has taken a stake in—a family-run, light manufacturing firm with 400 employees. You look at the books and mention that you think the workforce is terribly bloated. Output and revenue per employee are below average. You suggest laying off up to 20% of the workforce. The Saudi owners look at you in horror, saying that layoffs are downright unethical and that there is more to business than maximizing profits. You are equally horrified.

What will you do?

SOURCE: Mitchell (2003), p. 162.

Real Estate Guanxi

You are a licensed realtor who recently helped a family from Hong Kong find a new home in the San Francisco, California, area. Fortunately for you, locating a suitable property for your clients wasn’t hard and didn’t require much effort on your part. (It can be difficult to find reasonably priced housing in the Bay area, which is one of the most expensive regions of the United States.) In two weeks your clients made an offer that was accepted by the seller. At the home closing, after the papers were signed, the father of the family took you aside and gave you $2,000 in cash as a thank you gift. This money is an addition to your commission, which is a percentage of the home’s sale value. You know that gifts are frequently used to cement business relationships in China, part of the practice known as guanxi. However, you don’t believe that your effort on behalf of these clients merits any special consideration and worry that this “gift” could be seen as a “bribe.”

Would you accept the $2,000?

NOTE: For more information on the practice of guanxi, see Langenberg (2013).

The Warlord Tax

You are the CEO of a small international relief agency. Your group’s policy is never to pay bribes in any of the countries in which you operate, no matter how corrupt. The policy has not seriously hampered your operations until now. Severe famine has struck in the Horn of Africa, in an area controlled by armed warlords. In order for food to reach the 100,000 starving residents of the region, you must pay a “tax” to the local military commander in the form of money or foodstuffs. This “tax” is clearly a form of extortion and violates your antibribery policy and possibly U.S. law. Other international relief agencies pay the tax, so you know that food shipments won’t be completely cut off if your organization decides to pull out of the area. On the other hand, stopping shipments would significantly reduce food supplies to the region and could contribute to malnutrition and starvation.

Will you pay the warlord tax and continue the food shipments?

Note: This scenario is loosely based on actual events.

Shutting Down the Internet

You are in charge of Far East operations for a multinational Internet and cell phone company. Your firm recently became the largest provider for a small country in your region. Over the past month thousands of citizens have taken to the street to overthrow this nation’s repressive regime. Antigovernment forces rely heavily on e-mail, Facebook, Twitter, and phone calls to rally their supporters and to pressure government leaders to step down. To cripple the protest movement, the head of the nation’s security forces has demanded that your company shut down all service for a week. You believe the government has the authority to make this request and, if you don’t comply, will cut off service on its own and imprison your local employees. However, shutting off service puts you on the side of an authoritarian government and violates your company’s mission, which is to promote the free flow of information. Based on the response to a similar shutdown during antigovernment protests in Egypt, you expect heavy criticism from international human rights groups if you go along with the current government’s request.

Will you shut down Internet and cell phone service for a week?

NOTE: Thanks to Jonathan Cooley, Concordia University, Portland, Oregon, for bringing my attention to the issues raised in this case.

SOURCES: Beam, C. (2011, January 28). Block like an Egyptian. Slate.com. Garside, J. (2011, July 26). Vodaphone under fire for bowing to Egyptian pressure. The Guardian.

Final Portfolio Project

This assignment is the capstone of this course. It asks that you bring together and showcase your business writing skills in a professionally packaged portfolio. Keep this portfolio and take it with you on job interviews—business internships and careers often ask for writing samples.

Keep in mind that all components in this portfolio are new—you cannot reuse assignments we have already completed in class. Use this as an opportunity to showcase your skills.

Project Components

1. Email: Include one email with prefatory information (To, Copy, BCC, Subject), that you feel you might send to someone in your current place of employment or in a future position. This email should be about 200-300 words long and must showcase email writing skills learned in class and reviewed in Chapter 2 of your text book.

2. Memo: Write a memo to a department or team in your current place of employment or imagine a future situation where a memo might be necessary. This memo should conform with standard memo formatting (see course materials and Chapter 2) and should be no longer than one page.

3. Sales Letter: Sales letters are covered in Chapter 7 of your textbook. Be sure to review the information in Chapter 7 as well as the sample sales letters on pages 174-175. Use proper letter formatting and focus on persuasion in your letter. The topic and product being sold is your decision.

4. Bad News Letter: You work in the customer service department of a pest control company, Gooden Gone. Recently, Marjorie Jones, a client located in North Park, encountered a termite infestation in the lower level of her 1940s bungalow. Ms. Jones will need to replace the entire first floor of her home. She claims that Gooden Gone is responsible for the cost of her repairs. After researching the case you learn that Ms. Jones has two homes under termite coverage with your company—one in North Park and one in Chula Vista. The Chula Vista home is protected by the “Kitchen Sink” policy which covers annual treatments and the cost of repairs should an infestation occur. The North Park home, the one with the current infestation, is covered on the by the “Back Up” plan that covers only annual prevention treatments. The “Back Up” plan does not cover the cost of repairs. However, it will cover retreatment once the repairs have been made.

You will need to write to Ms. Jones and inform her that Gooden Gone is not responsible for the cost of her floor repairs in North Park. Ms. Jones has been a client for over 30 years. Maintain her goodwill while making sure she fully understands why the claim is being rejected.

5. Short Report: One of your responsibilities at work is to help maintain your company’s blog. The traffic to the blog, however, has recently been in decline. Your boss has asked you to identify ways to generate more visits and comments. Research corporate blogs and write a short report (1-2 pages) summarizing your findings on how to increase traffic to your company’s blog. The company can be real, or you can create your own.

Project Guidelines

· All project components must be typed, saved, and submitted on Blackboard.

· All assignments must be submitted on time. No exceptions.

Project Evaluation

· Does each piece of the portfolio follow established guidelines for the genre?

· Is the content and subject matter appropriate to each genre?

· Does each document reflect an analysis of the rhetorical situation?

· Is the font and design of each document suitable for the intended audience?

· Is this portfolio professionally designed?

· Is the portfolio free from grammar and punctuation errors?

· Has the writing been edited for clarity, conciseness, and directness?

· Are the documents scannable? Easy to access?

12 Promoting Organizational Citizenship

Chapter Preview

· The Organization as Citizen

· Components of Organizational Citizenship

· Corporate Social Responsibility

· Sustainability

· The Stages of Corporate Citizenship

· Promoting Organizational Citizenship

· Adopting a Stewardship Mindset

· Measuring Social Performance

· Chapter Takeaways

· Application Projects

In this chapter, we’ll look beyond the borders of our organizations to focus on the role that they should play in local and national communities. Our individual responsibility is to equip our groups to act as socially responsible citizens. The first section of the chapter describes what it means for an organization to act as a citizen. Section two outlines strategies for encouraging our organizations to play this role.

The Organization as Citizen

“From those to whom much has been given, much will be required.” That saying encapsulates the relationship between organizations and Western society over the past several decades. Organizations wield more power than ever before. The decline of the extended family, urbanization, industrialization, and other factors have increased our reliance on corporations, governments, schools, nonprofit agencies, and other institutions. At the same time, societal expectations of organizations have greatly expanded. We now demand that organizations, even for-profit entities, behave responsibly. As evidence of that fact, consider the following: 1

· Seventy-nine percent of Americans believe that businesses should support social causes; three quarters of business leaders say that the public should expect good citizenship from companies.

· A survey of citizens in 23 countries found that 90% of respondents wanted firms to focus on more than profits; another survey of online consumers from 60 nations revealed that 55% were willing to pay more for products and services provided by “socially responsible brands.”

· Sales of organic foods increased during a major global recession and are expected to continue to grow by over 9% a year for the foreseeable future.

· Over $3 trillion in U.S. assets are held in funds that only invest in companies that meet high environmental, social, and corporate governance standards. This is equivalent to the annual gross domestic product (GDP) of Canada and Brazil combined.

· America’s Most Admired Companies earn that label in part because they are concerned about the community and the environment.

· Watchdog groups regularly monitor the financial status and effectiveness of charities.

· Labor activists, disability advocates, environmentalists, and other groups are quick to bring suit against governments and businesses that don’t fulfill their social duties.

The term organizational citizenship best describes what society expects from businesses, governments, and nonprofits. Good citizens acknowledge their obligations to their communities. They use their influence to improve society. 2 Sandra Waddock offers this definition of outstanding corporate citizenship:

Leading corporate citizens are companies that live up to clear constructive visions and core values consistent with those of the broader societies within which they operate, respect the natural environment, and treat well the entire range of stakeholders who risk capital in, have an interest in, or are linked to the firm through primary and secondary impacts. . . They recognize they are responsible for their impacts and are willing to be held accountable for them. 3

Three components or elements are key to the practice organizational citizenship: (1) a stakeholder focus, (2) corporate social responsibility (CSR), and (3) sustainability.

Components of Organizational Citizenship

Stakeholder Focus

To function as citizens, organizations must first recognize that they have obligations to a variety of groups who have an interest or “stake” in their operations. The stakeholder framework first developed as an alternative way to define the relationship between large businesses and society but since has been extended to organizations of all types—partnerships, small businesses, governments, and nonprofits. 4 Traditionally, corporate executives were viewed as agents who acted on behalf of the company’s owners. According to this perspective (called agency theory), the manager’s primary ethical obligation is to promote the interests of stockholders. Companies that operate efficiently and profitably benefit the community through the creation of jobs and wealth as well as through higher tax revenues.

Stakeholder theorists challenge the notion that a manager’s sole moral duty is to company owners. 5 They note that the pursuit of corporate wealth doesn’t benefit everyone. When a major retailer like Walmart forces its suppliers to cut costs, for example, lots of groups suffer. Employees manufacturing the goods see their wages and benefits cut, and jobs are lost; local businesses and economies decline. Also, shareholders aren’t the only groups with an interest or stake in what the company does. Governments charter corporations based in part on the expectation that they will provide benefits to society. Governments invest in businesses by supplying them with cheap land, building access roads, and offering tax breaks.

Advocates of stakeholder theory argue that organizations of all kinds have an ethical obligation to “heed the needs, interests, and influence of those affected by their policies and operations.” 6 (See Ethics in Action 12.1 for a list of the possible stakeholders of one organization.) Drawing from Kant’s categorical imperative, some proponents believe that all stakeholders have intrinsic value. 7 It is wrong to use any group of people as a means to organizational ends. The interests of diverse stakeholder groups are valid and worthy of respect. Other supporters of this approach draw upon justice-as-fairness theory to emphasize that outside groups and individuals need to be treated fairly by the organization. 8 Still others believe that the stakeholder framework best reflects the feminist commitment to relationships. Feminists see corporations as webs of relationships with stakeholders, not as independent entities. 9 One final group adopts a communitarian perspective, which emphasizes the importance of serving the common good. They point out that serving stakeholders, not just stockholders, is more likely to promote cooperation and the development of networks that advance the overall good of society. 10

Recognizing the concerns of multiple stakeholders has strategic as well as ethical implications. Identifying the needs of stakeholders should be part of any major decision, like entering additional markets, establishing a new social service program, or changing an investment strategy. You will want to engage in stakeholder management in order to improve organizational performance at the same time that you respond to your moral responsibilities. Stakeholder management means answering five key questions: 11

1. Who are our stakeholders? Categorizing stakeholders can make it easier to answer this question. Those with an interest in the organization can be classified as primary or secondary stakeholders. Primary stakeholders—customers, investors, employees, suppliers—have a direct stake in the organization’s success or failure and thus exert significant influence. Their interests generally are given priority. Secondary stakeholders—social pressure groups, media, trade bodies—have an indirect stake in the organization. Accountability to these groups is therefore less.

2. What are our stakeholders’ stakes? As Ethics in Action 12.1 illustrates, stakeholder groups have different interests, concerns, and demands. Some of these stakes are more legitimate than others. Owners, for example, have a legal interest in a corporation, while suppliers do not. Further, some groups have more power than others. The board of trustees of a university system typically wields more power than the faculty or students.

3. What opportunities and challenges do our stakeholders present? Opportunities allow organizations to build cooperative, productive relationships with stakeholder groups. An inner-city church, for instance, might view other religious groups, local merchants, civic associations, and government agencies as potential allies in combating neighborhood blight. Challenges take the form of demands from groups who believe that the organization is at fault. These must be handled carefully, or they may result in significant damage. Home Depot faced such a challenge from the Rainforest Action Network. The retailer pulled old-growth lumber from the shelves after the environmental group threatened to picket if it did not.

4. What responsibilities does the firm have to its stakeholders? These include the economic, legal, ethical, and environmental factors described earlier.

5. What strategies or actions should management take to best handle stakeholder challenges and opportunities? Organizations can take the offensive or go on the defensive when dealing with stakeholders, decide to accommodate or negotiate, use one strategy or a combination of several, and so on. One consideration is the potential for cooperation or threat posed by a particular group. Typically, the best strategy is to become involved with groups that are currently supportive or could be cooperative in the future and to defend against those who pose a significant threat.

University of Virginia business professor Edward Freeman and his colleagues urge organizations to focus on creating value for all stakeholders. 12 Freeman believes that it is possible to simultaneously meet the needs of a variety of groups. For instance, companies are more likely to survive over the long term if they generate profits for owners and at the same time treat employees well, deal fairly with suppliers, and serve the community. Trade-offs—meeting the needs of one group at the expense of another—are inevitable but should not become standard operating procedure. Freeman is also convinced that businesses should take the initiative to engage all stakeholders in dialogue, including those who could be seen as a threat. It is not always possible to satisfy every critic, but opponents provide an alternative point of view. Understanding their concerns can open up new opportunities to generate value (e.g., enter new markets, meet unmet needs, reduce costs). Engaging with both primary and secondary stakeholders also provides information that can be used to better meet their needs.

In addition to managing ongoing relationships with stakeholders, organizations also need to identify and respond to changing social and ethical conditions. This process is called issues management. Ethical sensitivities and moral customs continually evolve. Smoking, which once was allowed nearly everywhere in this country, is now banned from many indoor public spaces, for instance. Same-sex marriages, which used to be banned, are now legal in many states.

Issues management is a function of public relations departments at a number of major corporations, though it can also be housed in other departments like legal, government relations, or quality assurance. SC Johnson credits its issues management program for the firm’s decision to eliminate fluorocarbons from aerosol sprays three years before federal regulations took effect. Sears noted the potential dangers of flammable nightwear early on and quickly removed these products before federal regulations were passed. 13 It would be wrong to make issues management solely the responsibility of public relations or another department, however. Companies skilled at issues management place individuals from a variety of functional areas on their issues management teams. 14 Then, too, all employees have a responsibility to be on the lookout for future trends through scanning and monitoring. In this context, scanning refers to surveying the environment to identify potential issues that might impact your organization. Surf the Web, monitor tweets, blogs, and YouTube, read a wide variety of issues-oriented print and online publications (The Nation, Huffington Post, The Standard, for example), track news sources and talk shows, and interact with stakeholder groups.

One model of the stages of issue development is shown in Self-Assessment 12.1 . You can monitor the progress of any issue using this format. Take the issue of global warming, for example. At first, only a few environmental groups were aware of this problem, and evidence of its existence was scarce. Next, the issue began to grab political and media attention, and some businesses began to take note. Currently, this concern appears to be moving from the consolidating to the institutionalized stage with increasing recognition of the ethical dimension of the problem. A number of nations have passed measures aimed at reducing greenhouse emissions, and businesses around the world have joined in the effort to combat global warming.

Once an issue has been identified, determine its significance and its likely impact. Evaluate the issue according to magnitude and probability. 15 Some issues have low probability and magnitude. They are not likely to affect the organization and, if they do, their effects will likely be minimal. These developments should be given low priority. Focus instead on issues with higher probability and magnitude. Create a list of these high-priority issues and develop strategies for responding to them. Failure to prepare can have disastrous effects. Beef producers underestimated how concerned U.S. residents are about food—and particularly meat—safety. When media reports surfaced that “pink slime” (officially known as “lean finely textured beef” made from meat scraps) was being used in hamburger, the meat industry stood by instead of promoting the safety of its products. (Lean finely textured beef has been tested over 7,000 times for the school lunch program and has never been linked to food-borne illness.) Activists then succeeded in getting fast food chains and supermarkets to pull meat with pink slime from menus and shelves and several Midwestern meat-processing plants closed as a result. 16

Ethics in Action 12.1 Organizational Stakeholders

SOURCE: From Sims, R. R., Ethics and Corporate Social Responsibility: Why Giants Fall; Copyright © 2003. Reprinted with permission of the Green wood Publishing Group, Inc

Self-Assessment 12.1

The Four Stages of Issue Maturity Scale

Pharmaceutical company Novo Nordisk created a scale to measure the maturity of societal issues and the public’s expectations surrounding the issues. An adaptation of the scale appears here.

Brainstorm three or four ethical issues that could pose a challenge to your college or university or your employer. Track each issue’s stage of development using the issue maturity scale. Determine how your school or employer should respond to each issue.

SOURCE: Zadek, S. (2004, December). The path to corporate responsibility, Harvard Business Review, p. 128. Used by permission.

Corporate Social Responsibility

Corporate social responsibility (CSR) describes the efforts of companies and other organizations to actively improve the welfare of society. Not everyone is supportive of such activities. Some follow the lead of economist Milton Friedman who argued that business should focus solely on making profits. 17 Managers who give to philanthropic causes are not only deciding how to spend the money of stockholders without their consent but they also lack the skills to effectively address social concerns. Dealing with social problems is best left to the government. Disciples of Friedman worry that if businesses are distracted from their primary goal, they will generate less economic activity, which will mean fewer jobs and lower tax revenues. In other words, society benefits more if business sticks to business. Others take issue with claims that CSR adds to the bottom line, noting that while some companies see higher profits from CSR activities, many others do not. Skeptics note that CSR can be used as a public relations “smokescreen,” enabling firms to burnish their images while still behaving unethically. Encouraging corporations to become more active in meeting social problems appears to further increase the influence of business, which already wields tremendous economic and political power. 18

CSR critics make some valid points. There is no guarantee that citizenship will lead to higher profits. Some firms employ CSR activities for public relations purposes only. We should be concerned about the amount of power wielded by multinational corporations (see Chapter 13 ). But the objections of CSR detractors fall short. Friedman seems to equate CSR with philanthropy. As we’ll see, CSR activities extend well beyond corporate giving, and many organizations (Timberland, Interface, Starbucks) build CSR into their corporate DNA. Governments, by themselves, have not always been able to effectively deal with social problems. While not every company benefits financially from being socially responsible, many do. 19 Participating in CSR activities can pay significant dividends. Studies reveal that engaging in social responsibility efforts improves a firm’s reputation while increasing customer loyalty and ratings of its products. Employees who work for socially responsible firms are more likely to identify with their employers, while getting along better with fellow workers. They perform better, stay with the company longer, and engage in more organizational citizenship behaviors. CSR also makes a company more attractive as a prospective employer. 20

From an ethical perspective, being a corporate citizen appears to be the right thing to do. CSR behaviors are altruistic, contribute to the common good, treat others with dignity, are just, and so on. Finally, as we noted at the beginning of the chapter, society expects more from its organizations than ever before. Corporations must be good citizens or risk being punished by investors and consumers alike.

CSR efforts can take many different forms. To demonstrate the wide scope of CSR activities, I’ll describe three different typologies. The first typology is the CSR pyramid developed by Archie Carroll. 21 Economic responsibilities form the base of Carroll’s CSR Pyramid. Businesses have a duty to be profitable so they can provide goods and services, pay employees, and reward investors. If they go bankrupt, they cannot carry out the duties to follow. Legal responsibilities make up the next level of the CSR pyramid. Corporations and small businesses must obey employment laws, follow environmental regulations, honor contracts, make good on warranties and guarantees, and so on. However, the law only outlines minimum acceptable behavior. Legal regulations don’t cover all situations and what is legal is not always moral. As a result, corporations should move to the next stage of the pyramid—ethical responsibilities. They must live up to the ethical values and standards of society, which include being fair and just and doing the right thing. Philanthropic responsibilities are at the top of the CSR pyramid. At this level businesses voluntarily give back to the community through making contributions, donating goods and services, employee volunteerism, partnering with nonprofits (see Case Study 12.1 ), and other means.

A second classification system divides CSR activities according to the domain or area they are designed to impact. 22 According to this typology, CSR efforts address four domains:

· Human resources: The development of protection of people. For example: providing a safe work environment, fairly compensating workers, offering training opportunities, refusing to support organizations that engage in child labor or slavery.

· Community, cultural, and societal involvement and philanthropy. For example: respecting the culture and rights of indigenous people, obeying laws and regulations, giving back to the community through donations, foundations, and volunteerism.

· Environmental protection, waste reduction, and sustainability. For example: restoring biodiversity, eliminating waste, treating animals humanely, recycling, reducing energy and water use.

· Product, consumer, and service contributions and protections. For example: protecting consumers, using renewable materials in manufacturing, providing truthful information about the environmental impacts of products, buying in a socially responsible manner from minority, indigenous, and women-owned businesses.

A third approach ties CSR strategies to the particular stakeholder groups. 23 These are various CSR actions directed at six of the stakeholder groups identified earlier in the chapter.

SOURCE: Jamili, D. (2008). A stakeholder approach to corporate social responsibility: A fresh perspective into theory and practice. Journal of Business Ethics, 82, 213–231. Used by permission.

Case Study 12.1

Girl Scout Barbie

A number of large corporations partner with nonprofits by, for example, sponsoring such charity fund raising events as runs and golf tournaments. Other companies go further, establishing business partnerships or relationships with charities through product tie-ins. Susan G. Komen for the Cure has tie-ins with dozens of corporations, and its trademarked pink ribbon is displayed on Quilted Northern bathroom tissue, Vanity Fair paper napkins, and other household products. The American Heart Association’s heart check mark appears on Cheerios and other foods certified by the AHA as low in saturated fat and cholesterol. By partnering with charities, businesses hope to address social issues while, at the same time, enhancing their images by being connected to worthy organizations and causes. Charity partners not only benefit financially, but being associated with a corporate sponsor can also raise their profiles.

Some product tie-ins generate significant controversy. The partnership between toy maker Mattel and the Girl Scouts of the USA is a case in point. Mattel pledged $2 million to the Girl Scouts for the right to create tie-ins to its most popular product—the Barbie doll. Young scouts can now earn a lavender Barbie participation patch reading, “Be anything. Do everything.”; receive a Barbie-themed activity booklet; visit a Barbie website; and buy a Barbie doll in a scout uniform. Children’s advocacy groups immediately took issue with the collaboration, labeling it as an attempt to market to a vulnerable audience. They also argued that Barbie (a leggy blonde who maintains an hourglass figure even though she has been around for 55 years) encourages young women to define themselves through appearance and sexiness. They cite research suggesting that young girls exposed to Barbie are more dissatisfied with their bodies, wishing they were thinner. According Susan Linn, director of the Campaign for a Commercial-Free Childhood, wearing the Barbie patch turns the youngest scouts into “walking advertisements.” Further, “Holding Barbie, the quintessential fashion doll, up as a role model for Girl Scouts simultaneously sexualizes young girls, idealizes an impossible body type and undermines the Girl Scouts’ vital mission.” 1 Critics note that the Barbie/Scout website appears to trivialize women. It features an online game where players match clothes to women in a range of occupations, including an astronaut in pink boots and a female race car driver in stiletto heels.

Both the Scouts and Mattel vigorously defend Girl Scout Barbie. The Scout website declares: “The participation patch is designed to inspire the next generation of female leaders, encouraging girls to explore endless career possibilities through exciting new program activities.” 2 A spokesperson claims that both girls and their mothers associate the doll with such positive messages as “the outdoors, camping, giving back to the community.” 3 She cites the results of a study that found that over three-quarters of Scout mothers thought that the doll would help their daughters look into new opportunities and feel good about who they are. Mattel executives believe that Barbie and the Scouts are a good fit. According to the company’s senior vice-president for marketing in North America, “Aligning with the Girl Scouts mission, Barbie has inspired girl’s imaginations on their journey to self-discovery, allowing them to explore a world without limits.” 4

Discussion Probes

1. Is Mattel’s partnership with the Girl Scouts a good example of corporate social responsibility? Why or why not?

2. Who benefits more from this partnership—the Girl Scouts or Mattel? Who is at greatest risk?

3. What other examples of corporate–nonprofit product tie-ins can you identify? How do you respond to these products, their manufacturers, and the nonprofits associated with them?

4. Should the Girl Scouts end its partnership with Mattel? Why or why not?

5. What advice would you give to nonprofits who are considering product tie-ins with corporations? To the corporations who want to establish such partnerships?

Notes

1. Horovitz, B. (2014, March 6). Ad group slams Barbie tie-in with Girl Scouts. USA Today.

2. Landau, J. (2014, July 21). Girl Scouts continue plans for own Barbie doll despite objections. New York Daily News.

3. Horovitz (2014).

4. Horovitz (2014). Additional sources for this section are Associated Press (2014, March 6); Flam (2014); Hochman (2014); Winograd (2014).

Sustainability

As we saw in the previous section , treating the environment well is an important social responsibility. In fact, environmental care or sustainability serves as the primary standard or guideline for corporate citizenship in Europe and other parts of the world. Sustainability means preserving the natural environment while at the same time creating long-lasting economic and social value. Sustainable organizations want to meet their current needs, but they want to do so in a way that doesn’t reduce the ability of future generations to meet their needs. 24 They adopt a long-term perspective, hoping to create conditions that foster decades of economic health and social responsibility and assure the well-being of future generations. Corporate citizens reduce greenhouse gases and waste, develop environmentally friendly products, and so on. (One list of sustainable practices is found in Ethics in Action 12.2 .)

The need for sustainable business practices is great because the natural world is under assault, largely because of population growth. The world’s population is expected to grow from over 7 billion in 2012 to around 9.3 billion by 2050. 25 (By the end of the century Africa’s population is expected to triple.) More people means more air and water pollution, deforestation, flooding, climate change, water shortages, soil erosion, and species loss. (A quarter of all mammals and a third of all amphibians face extinction within the next 30 years.) Affluence also stresses the environment. As families around the world reach the middle class, they buy more consumer products and often change their diets. An estimated 80,000 new cars are hitting the roadways every day, and millions of Asian consumers are developing a taste for meat. A pound of beef takes 16 pounds of grain to produce; meat production demands lots of water, energy, and fertilizers while producing tons of animal waste.

Sustainability is a high standard that demands constant improvement. For instance, manufacturers seeking to boost their environmental records generally begin by transitioning from pollution control to pollution prevention. 26 Instead of cleaning up messes after they occur, they try to prevent them from happening in the first place by reducing smokestack emissions and waste. Such tactics can greatly reduce the costs of disposing of toxic substances. However, if manufacturers want to continue to improve, they shift their focus from minimizing pollution to considering all the possible environmental impacts over the life cycle of a product. They create goods that are easier to recover, recycle, or reuse. Xerox took this approach by taking parts from leased copiers and reconditioning them for use in new machines. If environmentally conscious organizations want to progress still further, they must invest in clean technology that is environmentally sustainable. Hybrid gas and electric cars are a step in this direction. So are BMW automobiles, which are built to be easier to disassemble when they leave the road for good.

While sustainability efforts can be expensive, more often than not they boost profits. Throwing away less translates into lower raw materials costs and disposal fees. Recycling parts, as in the case of Xerox, reduces costs yet further. Sustainable firms greatly reduce the risk of being sued or fined for environmental infractions like polluting rivers or producing toxic emissions. They enjoy better relationships with activists, local communities, and other stakeholder groups. Their corporate reputations or “brands” get a boost. Consumers and investors reward companies with good environmental records through purchases and investment. Those working for such firms are more committed to their organizations and more willing to put forth effort. Higher employee engagement, in turn, produces higher productivity and revenue.

Consultant Andrew Savitz describes how sustainability increased employee engagement and profit at one large restaurant chain. 27 While the chain’s customers weren’t too concerned about the environment, employees at this chain were. Company leaders created green teams of frontline employees and charged them with addressing the results of an environmental audit. Auditors found widespread waste. Some stores left their lights and appliances on 24 hours a day, many used excessive amounts of water, few had recycling or composting programs, and waste disposal costs were not tracked. The green teams reduced these wasteful practices, saving each restaurant $10,000 a year while heightening the level of employee engagement.

Ethics in Action 12.2 CERES Principles

CERES (a nonprofit organization dedicated to sustainability) published the following corporate environmental conduct principles right after the 1989 crash of the Exxon Valdez oil tanker that caused significant environmental damage in Alaska’s Prince William Sound. Companies that pledge to adhere to these principles also commit themselves to publicly reporting on their performance.

Protection of the Biosphere

We will reduce and make continual progress toward eliminating the release of any substance that may cause environmental damage to the air, water, or the earth and its inhabitants. We will safeguard all habitats affected by our operations and will protect open spaces and wilderness, while preserving biodiversity.

Sustainable Use of Natural Resources

We will make sustainable use of renewable natural resources, such as water, soils, and forests. We will conserve non-renewable natural resources through efficient use and careful planning.

Reduction and Disposal of Wastes

We will reduce and where possible eliminate waste through source reduction and recycling. All waste will be handled and disposed of through safe and responsible methods.

Energy Conservation

We will conserve energy and improve the energy efficiency of our internal operations and of the goods and services we sell. We will make every effort to use environmentally safe and sustainable energy sources.

Risk Reduction

We will strive to minimize the environmental, health and safety risks to our employees and the communities in which we operate through safe technologies, facilities and operating procedures, and by being prepared for emergencies.

Safe Products and Services

We will reduce and where possible eliminate the use, manufacture or sale of products and services that cause environmental damage or health or safety hazards. We will inform our customers of the environmental impacts of our products or services and try to correct unsafe use.

Environmental Restoration

We will promptly and responsibly correct conditions we have caused that endanger health, safety or the environment. To the extent feasible, we will redress injuries we have caused to persons or damage we have caused to the environment and will restore the environment.

Informing the Public

We will inform in a timely manner everyone who may be affected by conditions caused by our company that might endanger health, safety or the environment. We will regularly seek advice and counsel through dialogue with persons in communities near our facilities. We will not take any action against employees for reporting dangerous incidents or conditions to management or to appropriate authorities.

Management Commitment

We will implement these Principles and sustain a process that ensures the Board of Directors and Chief Executive Officer are fully informed about pertinent environmental issues and are fully responsible for environmental policy. In selecting our Board of Directors, we will consider demonstrated environmental commitment as a factor.

Audits and Reports

We will conduct an annual self-evaluation of our progress in implementing these Principles. We will support the timely creation of generally accepted environmental audit procedures. We will annually complete the Ceres Report, which will be made available to the public.

SOURCE: CERES. Retrieved from http://www.ceres.org/about-us/our-history/ceres-principles . Used by permission.

The Stages of Corporate Citizenship

Becoming an outstanding citizen doesn’t happen overnight. Scholars at Boston College’s Center for Corporate Leadership believe that organizational citizenship follows a developmental path. 28 Knowing your company’s stage of development can help you identify the challenges the group faces and set goals for going forward.

· Stage 1: Elementary. This is the lowest developmental stage. Companies at this stage don’t understand corporate citizenship. They are interested only in complying with laws and industry standards. Department heads make sure the company obeys the law to prevent harm to the group’s reputation. Nike was in this phase when it was first accused of abusive labor practices in the 1990s and claimed that it had no responsibility for the actions of its overseas contractors. Credibility is the primary challenge for elementary-level firms. Their reputations are particularly vulnerable to crises, such as when outside groups challenge their employment practices or treatment of the environment.

· Stage 2: Engaged. These organizations have “awakened” to the need for social responsibility. DuPont’s leaders, for example, determined that the company would move from complying with environmental regulations to actively seeking to win the public’s trust. Engaged companies adopt policies to lower the risk of lawsuits and reputational damage. These policies generally call for exceeding legal requirements for safety, environmental health, and employment. Engaged firms enter into two-way communication with stakeholders like community groups and NGOs. Corporate units begin to participate in CSR efforts. Developing capacity is the biggest challenge in this phase. The group must develop its ability to address a variety of needs, which can seem overwhelming.

· Stage 3: Innovative. Organizations in the innovative stage implement creative ways to improve and measure social performance. In this stage, leaders become even more involved in CSR, engage in dialogue with a greater variety of stakeholders, and develop new citizenship initiatives. In 2000, for example, Ford Motor Company developed a set of CSR principles after hosting a forum with company executives and citizenship experts, followed by discussions with employees. As an outcome of these conversations, the firm converted one of its aging plants into a highly efficient, environmentally friendly facility. Data collection is another important component of this phase. Innovative organizations monitor their social and environmental activities and may report the results to the public. (We’ll take a closer look at social audits in the next section of the chapter.) Creating coherence is the primary challenge for Stage 3 organizations. Managers typically work independently on citizenship initiatives, and these efforts are not tied to corporate strategy and culture. While innovative organizations compile data, they don’t make effective use of the information.

· Stage 4: Integrated. In this stage, organizations take a more unified approach to citizenship than their counterparts in Stage 3. They try to incorporate citizenship concerns throughout every level and unit of the firm, making CSR part of the business plan. Leaders set citizenship goals, create performance indicators, and then monitor how well they do. They report the findings of all social and environmental audits, even when they are not favorable. Integrated organizations—Henkel, Interface, Groupe Diageo, Danone—often have committees made up of senior executives or board members to oversee these efforts. Deepening commitment is the primary challenge in Stage 4. Maintaining and strengthening commitment to citizenship is difficult when tackling significant problems like neighborhood blight and poverty.

· Stage 5: Transformative. Companies like Ben & Jerry’s, The Body Shop, and Patagonia make citizenship central to their mission and reputation. Consumers buy their products in part because of their citizenship activities. Transformative organizations hope to create new markets by merging their social commitment with their business strategies. They are willing to lose money in the short term if there is the possibility of a significant social and economic payoff in the long term. Stage 5 organizations often have visionary leaders who, troubled by the world’s problems, are out to make it a better place. Firms in the transformative stage often partner with nonprofits, other businesses, and community groups to address these problems. Hewlett-Packard demonstrates how organizations can simultaneously meet social and financial goals. HP worked with other groups and organizations in India, South Africa, and Brazil to provide communication technology infrastructure that enables underserved residents to access the Web. This effort not only improved the lives of poor citizens in these areas but also gave HP an advantage in these markets. The challenge for transformative companies is to learn how to develop alliances with other organizations and to balance stockholder interests with social concerns. (See Case Study 12.3 for a closer look at a new kind of corporation that addresses the tension between profit and social responsibility.)

While Center for Corporate Citizenship researchers emphasize that top leaders are critical to the development of organizational citizenship, they also cite examples where lower-level leaders and followers led the way. At AMD, Petro-Canada, and Agilant, mid-level managers from a variety of departments—community affairs, corporate communication, environmental management—joined together to convince senior management of the importance of citizenship and to form coordinating committees. Unilever’s Asian food business employees encouraged the company to address nutritional needs in the region. As a result, the company launched a children’s nutrition program and implemented the campaign in conjunction with UNICEF and Indian nonprofit groups. 29

Promoting Organizational Citizenship

To move our organizations to a higher stage or level of citizenship development, two factors are critical: (1) taking on a stewardship mentality and (2) adopting strategies for measuring citizenship. We’ll conclude this chapter by taking a closer look at each of these elements.

Adopting a Stewardship Mindset

Organizational citizenship is founded in large part on a commitment to stewardship. Stewardship, as we noted in our discussion of servant leadership in Chapter 8 , means acting on behalf of others. Stewards seek to serve the interests of the organization and followers rather than pursuing selfish concerns. On an organizational level, stewardship theory operates on the premise that virtuous managers will meet the needs of internal and external groups and society as a whole. 30 By pursuing long-term organizational benefits or goals instead of short-term gain, stewards are better able to serve the needs of all stakeholders and the common good. They also keep in mind the interests of future generations by, for example, spending more on production now to reduce pollution in hopes of protecting future generations.

Several characteristics set organizational stewards apart from their organizational colleagues. First, they are intrinsically motivated. They seek such intangible rewards as personal growth, affiliation, achievement, and self-actualization rather than tangible rewards like bonuses and company cars. Second, stewards identify themselves with the goals, mission, and vision of their organizations. They take credit for the group’s success and shoulder the blame for its failure when it falls short. Third, stewards rely on personal power instead of on positional forms of power (see Chapter 5 ) to achieve their goals. Fourth, stewards demonstrate a high level of concern not only for the performance of the organization but also for employees, customers, and the disadvantaged.

Covenantal relationships are critical to organizational stewardship. 31 Unlike traditional transactional contracts, which are based on exchanges between parties (labor for money, money for products), covenantal relationships are based on the commitment of parties to each other and on loyalty to shared values. The relational partners realize that they may not benefit from every decision but remain committed to the relationship. Covenants are directly tied to social responsibility. Covenantal relationships between workers and employers are more likely to develop in organizations that invest in social welfare. Employees are more likely to buy into the ideology of groups that promote community interests. Of course, establishing covenantal relationships can be difficult, particularly with those outside the organization. Nonetheless, if you place collective interests over selfish concerns, you are less tempted to engage in such ethical abuses as excessive executive compensation and lying to boost short-term profits. By acting as a steward, you are more likely to be a committed, productive organizational member who reaches out to help your colleagues and outsiders. You can promote stewardship in your organization as a whole through

· Sharing leadership responsibilities

· Building collaborative relationships

· Emphasizing shared values and a collective purpose

· Empowering workers

· Promoting a long-term orientation that benefits the next generation

· Helping members see their work as a calling

· Emphasizing collective interests

· Modeling other-focused behaviors

· Investing in employee development

· Promoting a sense of employee ownership 32

To determine if your employer has made efforts to develop a covenantal relationship with its workers, complete Self-Assessment 12.2 .

Self-Assessment 12.2

Covenantal Relationship Questionnaire

Part 1. Organizational Relationship With Employees

Rate each of the following items on the following scale.

1 = Strongly disagree, 2 = Disagree, 3 = Neither agree or disagree, 4 = Agree, 5 = Strongly agree

· My superior gives personal attention to subordinates who seem neglected.

· My superior delegates responsibilities to me to provide me with training opportunities.

· My superior treats each subordinate as an individual.

· My superior spends a lot of time coaching each individual subordinate who needs it.

· My superior gives newcomers lots of help.

Part 2. Company Identification

Rate each of the following items:

I think [your organization’s name] considers employees:1= much less important than sales and profits, 2 = less important than sales and profits, 3 = neither less nor more important than sales and profits, 4 = more important than sales and profits, 5 = much more important than sales and profits

How do you describe [your organization’s name] as a company to work for?: poor (1), just another place to work (2), fairly good (3), very good (4), couldn’t be much better (5)

From my experience, I feel [your organization’s name] probably treats its employees: poorly (1), somewhat poorly (2), fairly well (3), quite well (4), extremely well (5)

Scoring

Possible scores range from 8 to 40. The higher your score, the more you believe that you have a covenantal relationship with your employer. You can also compare your scores on both parts of the instrument to determine, for instance, if you have a strong sense of identification with your employer even though your superior doesn’t make an effort to build a strong relationship with you and other workers.

SOURCE: Van Dyne, L., Graham, J. W., & Dienesch, R. M. (1994). Organizational citizenship behavior: Construct redefinition, measurement and validation. Academy of Management Journal, 37, 765–802. Used by permission.

Measuring Social Performance

When it comes to organizational citizenship, “you get what you measure.” 33 As we noted in Chapter 10 , organizational members engage in those activities (in this case citizenship initiatives) that are measured and rewarded. The same is true of organizations as a whole. Companies recognized for their CSR activities or sustainability practices try to maintain those accolades. Survey results also reveal if organizations are reaching their goals and lay the groundwork for improvement. This data is not only critical to members but to stakeholder groups like socially conscious customers and investors who use this information when making buying and investment choices.

Financial statements don’t provide an accurate (total) picture of an organization’s performance because they ignore the group’s social impact and environmental performance. Proponents of CSR and sustainability argue that corporations need to be judged by a triple bottom line. 34 In addition to providing traditional financial data, companies should supply information on how well they are meeting their three social and environmental responsibilities: profit, people, and planet. The triple bottom line is measured in a variety of ways. A number of companies sponsor their self-audits, which are conducted by outside auditors. Starbucks’ annual “Global Responsibility Report” is one such example. This document addresses such topics as ethical sourcing, environmental impact, energy and water conservation, recycling, and community service. Self-audits are particularly prone to abuse, however. Firms may use them as public relations tools, limiting the analysis to just a few areas of strength or reporting only favorable findings. To be credible, such audits need to be complete and should be conducted and certified by an outside group, such as an accounting firm.

Standardized audits are gaining in popularity. Social Accountability 8000 is designed to measure labor practices at overseas suppliers. A firm must meet measurable, verifiable performance standards in nine areas to be certified. These standards forbid child labor, forced labor, coercion, discrimination, unlimited overtime, and substandard wages. 35 The Global Reporting Initiative, which has been adopted by such organizations as Baxter International, Canon, Deutsche Bank, and Ford Motor Company, is another popular measure. 36 This instrument examines three sets of performance indicators. Economic indicators look at an organization’s direct and indirect impacts on stakeholders and on local, national, and global economic systems. These include such elements as wages, pensions and benefits, payments to suppliers, taxes, and subsidies received. Environmental indicators reveal an organization’s impacts on natural systems. They cover energy, material and water use, greenhouse gases and waste generation, hazardous materials, recycling, pollution, and fines and penalties for environmental violations. Social indicators concern an organization’s influence on social systems and cluster around labor practices (diversity, health, and safety), human rights (child labor, for example), and other social issues (bribery and corruption, community relations).

Social or responsibility auditing has become a “mainstream business practice,” according to accounting firm KPMG, which regularly surveys corporate social responsibility reporting. 37 Seventy-one percent of the 4,100 largest global companies (and 93% of the largest 250 firms) it surveyed provide such information, and there have been dramatic increases in reporting rates in Asia and Latin America. However, social measurement still is plagued with a number of problems. 38 Standardized social performance instruments aren’t as universally accepted as financial audits. There are questions about who is qualified to conduct social audits, what they should cover, how data should be collected, who should have access to the results, and how to draw comparisons between organizations. Determining social and environmental impact is more difficult than determining profits and losses. According to KPMG, there is “much room for improvement,” with only one quarter of companies in its report scoring 80 or higher out of 100 on reporting quality. The accounting firm says that best CR (corporate reporting) reporting practices include the following:

· Strategy, risk, and opportunity. Include a careful assessment of the CSR risks and opportunities the business faces and what it is doing to respond to these factors.

· Materiality. Identify the social/environmental issues that have the greatest potential impact on a firm and its stakeholders. Outline how these dangers have been assessed, how stakeholders have been involved, and how this assessment impacts their reporting and management of these issues.

· Target and indicators. Use meaningful, measurable targets and indicators to measure progress and report on performance.

· Suppliers and the value chain. Explain the impacts of the firm’s supply chain and what happens to the products and services after they have been sold (and what the company is doing to decrease harmful impacts).

· Stakeholder engagement. Identify stakeholders, how the company engages with stakeholders, and how the company has responded to their feedback.

· Governance of CR. Spell out who is responsible for CR and how CR performance is linked to pay.

· Transparency and balance. Provide information on obstacles and failures as well as achievements.

Outside groups often conduct their own audits of an organization’s social performance. To make the Forbes list of the companies with the best CSR reputations, consumers must rate firms highly on such items as “______ is a good corporate citizen—it supports good causes and protects the environment”; “_____ is a responsibly-run company—it behaves ethically and is open and transparent in its business dealings”; and “______ is an appealing place to work—it treats its employees well.” (Microsoft, Walt Disney, Google, and BMW tied for the top spot in 2013). 39

Socially conscious mutual funds and other institutional investors rely on the Dow Jones Sustainability Index and other, similar indices when deciding whether or not companies meet their investment criteria. The Dow Jones Sustainability Index (DWSI) evaluates companies in various regions and industries according to such factors as corporate governance, climate change mitigation, labor practices, and risk management; evaluators reject firms that don’t operate in an ethical, responsible manner. Charities are also subject to external evaluation. Charity Navigator rates the performance of nonprofits based on these categories: (1) program expenses, (2) administration expenses, (3) fund-raising expenses, (4) fund-raising efficiency (the percentage of the budget spent on raising money), (5) primary revenue growth (the ability to sustain income over time), (6) program expenses growth (the ability to expand programs), (7) working capital (the ability to survive a short downturn in revenue), (8) accountability (willingness to explain actions to the public), and (9) transparency (willingness to share critical data with outsiders). 40

Third-party evaluations, like self-audits, are far from perfect. Oil producer BP qualified for the DWSI before it caused the massive oil spill in the Gulf of Mexico. The firm was quickly dropped from the index.

Chapter Takeaways

· In today’s society, organizations are expected to act as citizens who promote the welfare of society.

· Your organization has a moral obligation to respond to groups affected by its policies and operations. Engage in stakeholder management by responding to five questions: (1) Who are our stakeholders? (2) What are our stakeholders’ stakes? (3) What opportunities and challenges do our stakeholders present? (4) What responsibilities does the firm have to its stakeholders? (5) What strategies or actions should management take to best handle stakeholder challenges and opportunities?

· Whenever possible, seek to create value for all stakeholders, engaging in dialogue with supporters and critics alike. Track the progress of moral issues that might impact your organization. Develop strategies for addressing those trends with highest probability and magnitude.

· Corporate social responsibility (CSR) describes a corporation’s efforts to better society. These activities can be classified (1) according to levels of responsibility (economic, legal, ethical, philanthropic), (2) according to areas of impact (human resources; community, cultural, societal, philanthropic; environmental protection, waste reduction, and sustainability; product, consumer, and service contributions and protections), and (3) according to important stakeholder groups.

· Make sustainability—doing business in a way that preserves the natural environment while creating long-lasting economic and social value—an important organizational objective. Sustainability is a standard that demands constant improvement, but sustainability efforts can reduce costs, build better relationships with stakeholders, enhance the corporate reputation, and foster employee engagement.

· Determining your organization’s stage of citizenship development can help you identify challenges and set objectives. Elementary organizations, which are at the lowest stage of development, don’t understand corporate citizenship. Engaged organizations adopt social responsibility policies. Innovative organizations develop creative ways to improve and measure social performance. Integrated organizations incorporate citizenship into every operation. Transformative companies make citizenship central to their missions and reputations. Citizenship efforts can be spearheaded by front-line employees and middle managers as well as by top-level executives.

· Organizational citizenship rests largely on a commitment to stewardship. As an employee or manager, seek to meet the interests of the organization, followers, and external groups rather than your own needs. Seek to build covenantal relationships based on mutual commitments and shared values.

· Focus attention on organizational citizenship by auditing social and environmental performance in addition to financial performance (the triple bottom line). You can create your own audit or use a standardized one. External evaluators frequently measure the citizenship performance of companies and nonprofits in order to provide information to investors and donors.

Application Projects

1. In a group, identify the important stakeholders of your college or university. What ethical responsibilities does your institution have to each group?

2. Identify the ethical issue that could pose the greatest challenge to your college or university or employer based on Self-Assessment 12.1 . Share your conclusions in a small group. Then, together, generate a strategy for the issue members determine has the greatest likelihood and greatest magnitude for your organization.

3. Evaluate the sustainability efforts of your college or university. How well does your institution live up to the CERES Principles found in Ethics in Action 12.2 ? Write up your findings.

4. Create a list of sustainability practices you can adopt as an individual both at work (or school) and at home.

5. Discuss your scores on Self-Assessment 12.2 with a partner. Why do you think you do or do not have a covenantal relationship with your employer or organization? How can you encourage your organization to adopt a stewardship mind-set?

6. Compare and contrast two corporate social audits reports available online. What do you learn from examining these materials? Do they meet the standards set out in the chapter?

7. Create a case study based on an organization that you identify as a leading citizen. How is its citizenship reflected in its stakeholder focus, corporate social responsibility activities, and sustainability efforts? How does it report on its social and environmental activities? How is it rated by external agencies and why? As an alternate, select an organization and determine its stage of corporate citizenship development.

8. What can you do to help your organization become a better corporate citizen? Outline a strategy.

Case Study 12.2

The Public Benefit Corporation

Corporate officers, as we saw in Chapter 10 , serve the financial interests of stockholders. This fiduciary duty can come into conflict with other goals, like helping to improve the local school system or restoring the environment. Shareholders may argue that companies should focus less on corporate responsibility and more on the bottom line. For example, Costco, which pays it employees well and provides them with health insurance, is under constant pressure from Wall Street to pay workers less in order to increase profits and raise the stock price.

In recognition of the fact that many companies have other goals besides profit, Delaware, New York, California, and a number of other states have passed laws creating a new category of corporation called the public benefit corporation. Public benefit corporations (BCs) are for-profit entities that “create a material positive impact on society and the environment.” 1 Their social purposes are written into their corporate charters, which enables them to pursue social as well as financial objectives. To maintain their standing, BCs must file yearly reports on how well they are reaching their social or environmental goals. Alter Eco, Plum Organics, Method, and New Leaf Paper are some of the firms that have registered as public benefit corporations in Delaware. Yves Chouinard, founder of the Patagonia outdoor clothing company, was the first corporate leader to file under California’s public benefit corporation law. Patagonia is known for its strong environmental emphasis, giving 1% of sales to environmental causes, manufacturing recyclable clothing, funding a national park in Chile, and encouraging consumers to only purchase their products if they really need to do so. Chouinard registered the company as a BC because he feared that when he died, his successors might set aside the sustainability values and practices of the company in favor of higher financial returns.

Benefit corporations aren’t for everyone. The vast majority of companies will continue to focus on the bottom line and investors will continue to demand high returns. (Delaware law requires that existing publicly held corporations receive 90% stockholder approval before changing to BC status.) Some worry that managers will use the BC designation as cover for poor business decisions. Other observers are leery of the annual reporting requirement, arguing that measuring social progress is much more complex than tracking financial objectives. It may take years to demonstrate progress on social goals and there is no “one size fits all” standard that applies to all types of public benefit. Then, too, it is not clear what happens to companies that fail to meet their social objectives in a given year.

Since benefit corporations are a recent development, it remains to be seen how effective they will be in attracting investment and fulfilling their stated purposes. Nevertheless, proponents are optimistic, saying that BCs are the latest development in corporate social responsibility and should be attractive to the millennial generation, many of whom are social entrepreneurs who start businesses to meet social needs like restoring blighted neighborhoods and training unskilled workers. Delaware governor Jack Markell believes that benefit corporations will increase investment, “helping to build public trust in business, and becoming an attractive investment opportunity for the growing number of investors who increasingly want to make money and to make a difference.” 2

Discussion Probes

1. What advantages or disadvantages do you see in public benefit corporations?

2. Would you be more likely to purchase goods and services from public benefit corporations than traditional corporations? Why or why not?

3. Would you invest in a public benefit corporation even if it meant that you would earn significantly less? Would you invest in a mutual fund that only held socially responsible companies?

4. Are there certain companies or types of businesses you would never invest in? Why?

5. Do you think that annual reports will be enough to guarantee that benefit corporations fulfill their objective to create a “positive material impact on society and the environment?”

Notes

1. H. Martin (2012).

2. Markell (2013). Additional sources for this section are Burke and Bragg (2014); Cummings (2012); Gilbert (2013); Herdt (2012); Hiller (2013); Loewenstein (2013); Solnik (2012); Wright (2011); Young (2014).

Case Study 12.3

The Greening (or Greenwashing) of Walmart

Can the world’s largest company also be its most sustainable? Leaders at Walmart think so. Since 2006 Walmart has been engaged in an ambitious sustainability campaign. The company has pressured suppliers to reduce packaging (removing toilet roll cores and deodorant boxes, for example), set a goal of using 100% electricity from renewable sources, installed water conservation technologies in its stores, kept the vast majority of its waste out of landfills, and is well on its way to doubling its truck fleet’s fuel efficiency. In one particularly bold move, the firm instituted a sustainability index. Walmart rates suppliers on their environmental impact in a variety of product categories, from best to worst. For example, the index measures the amount of fertilizer, chemicals, and water used to produce ingredients for soup and beer. The performance of Walmart buyers is evaluated, in part, on how well their suppliers meet sustainability standards.

Some environmental groups like the Earth Defense Fund and Act Now have partnered with Walmart, recognizing that its efforts to go green can have a significant impact because of the company’s size and global reach. Walmart employs 2.2 million associates at 11,000 locations in 27 countries. In 2013, the multinational generated $473.1 billion in revenue. Its typical supercenter stocks 125,000–150,000 items.

Other environmentalists believe that Walmart is not going green but is engaged in “greenwashing.” In greenwashing, companies make deceptive claims about their environmental efforts that cover up or “greenwash” their true environmental records. They tout their sustainability programs while continuing to despoil the planet. General Electric has been accused, for instance, of spending $90 million advertising its Ecoimagination program while remaining one of the biggest polluters in the country and resisting efforts to make it clean up its waste sites.

Critics cite the following as evidence that Walmart is more about greenwashing than greening:

· Walmart derives less than 4% of its electricity from renewable sources despite its goal to reach 100%. Kohls and Whole Foods have already reached the 100% benchmark.

· The company relentlessly demands ever-lower prices from suppliers, who then supply shoddy products that wear out quickly, increasing the amount of stuff that ends up in landfills.

· Walmart’s emission of greenhouse gases actually increased between 2005 and 2010, making it one of the biggest polluters in the United States.

· Walmart continues to gobble up land for new stores. In most cases it develops land that was previously unoccupied, threatening wildlife and farm production. The company doesn’t hesitate to abandon stores when it decides to open larger supercenters close by.

· The firm regularly contributes to antienvironmental political candidates.

Is Walmart going green or merely greenwashing? Probably some of both. There is little doubt that the firm is committed to reducing waste and promoting more environmental sensitive practices in its stores and in its supply chain. However, at the same time, Walmart’s business model makes achieving its sustainability objectives nearly impossible. Rapid expansion overwhelms environmental progress. For example, even though it reduced CO2 emissions in existing stores, these savings were not enough to offset the CO2 contributed by its new stores. Walmart’s mission is to maintain its “Everyday Low Prices.” Company leaders won’t undertake some sustainability initiatives if the price is too high. The firm’s use of renewable energy lags, in part, because it believes available sources are too expensive. According to the Walmart Canada CEO, the company would only consider raising prices on a few sustainable products: “Would we put our prices up [across the board?] No. Our raison d’être is to save people money.”1

Walmart faces some tough choices when it comes to sustainability. Many of its efforts, like reducing fuel use and waste, are a natural fit for the firm because these initiatives help keep prices low and boost profits. However, more ambitious goals, like offering healthier food and recyclable small appliances and electronics, may mean higher prices and lower earnings. Company leaders will have to determine if they are willing to forgo short-term gains in order to leave the world a better place for generations to come.

Discussion Probes

1. What is your experience with Walmart? What is your impression of the company? Do you shop there?

2. Do you think that Walmart is a good corporate citizen? Why or why not?

3. Should environmental groups work with Walmart or against it?

4. Do you think Walmart’s business model makes it unlikely that it can become sustainable?

5. Is Walmart going green or greenwashing? Why?

SOURCE: Lambert (2010). Additional sources for this section are Cagle (2012); Fishman (2011); Gunther (2011, 2013); Institute for Local Self-Reliance (2012); Kewalramani and Sobelson (2012); Kurtzleben (2012); Mitchell (November 8, 2011; November 18, 2011; February 2, 2012); Sacks (2007); Sheppard (2013); Walmart (2014).