Business Ethics

Social Responsibility

Reasons to Act Ethically

Moral awareness, moral judgment, and moral disengagement are factors that contribute to individual ethics.

There is no certainty that an organization's ethical behavior will pay off in the short term or the long term. However, research has shown that an ethical organization is more likely to win financially because it has a better reputation, more dedicated employees, and higher profitability than unethical organizations.

An ethical decision may not increase profitability. It may even lead to additional costs. However, acting ethically benefits employees, companies, and society. Ethical behavior contributes to building trust, a factor in all relationships. Unethical behavior can harm the bad actors, the organization, the industry, and even entire countries. The organization may suffer because unethical behavior can create an unproductive work environment with low employee satisfaction.

Several factors contribute to individual ethics, including moral awareness, moral judgment, and moral disengagement. Moral awareness is a person's ability to recognize that their conduct could affect others in a way that may conflict with one or more ethical standards. For example, suppose Ben is faced with a dilemma in which he can choose between two options. Ben realizes that choosing one option over the other brings up ethical concerns. Ben's realization that ethical standards apply demonstrates his moral awareness. Moral judgment is the opinion that is formed when a person decides whether certain conduct is ethical or unethical. Using the same example, if Ben realizes that one option is ethical while the other is unethical, this is moral judgment because Ben has decided whether a certain behavior is ethical. However, not everyone has moral awareness. Moral disengagement is the separation of moral reactions from unethical behavior and removal of the process of self-condemnation. This happens when people convince themselves that ethical standards do not apply to the particular conduct at issue. For example, Ben may decide that his ethical standards do not apply because he feels the people his decision will affect deserve what they will receive because they are liars.

Moral disengagement comes in many varieties. Moral justification happens when a person who is examining potentially unethical conduct attempts to make it seem right. The person wants to view the potentially unethical conduct in a positive light in order to have a clear conscience. For example, John knows that the food in the office refrigerator belongs to Barry. However, John is certain that Barry ate John’s lunch last week. John decides to take Barry's food because Barry took his food last week. This is moral justification because John attempts to make his behavior right by referencing Barry's previous bad behavior.

Advantageous comparison is when a person tries to justify their conduct by comparing it to a more extreme alternative. For example, Dan attempts to park his car in a parallel spot and strikes the bumper of the car behind him. Dan decides not to inform the owner of the car that he hit it. Dan justifies this behavior by observing that the impact barely left a dent and that it is not as if he totaled the car. Dan engaged in advantageous comparison by comparing a small dent to a totaled car.

Displacement of responsibility is when a person contends that they were just following the orders of another person—usually a person with authority. Suppose Sarah throws away all of Lisa's old collectible dolls without her permission. When Lisa confronts Sarah about her actions, Sarah states that she was told to throw away the dolls by their roommate, Gary. This is an example of displacement of responsibility because Sarah is arguing that she was only following the orders of Gary, suggesting that she was not responsible.

Euphemistic labeling means sanitizing language to make the reality seem less harsh—for example, referring to jails as “correctional facilities.” Disregard of the consequences means a person ignores or minimizes the consequences of their conduct. Dehumanization means seeing people as less human and more deserving to be on the receiving end of unethical behavior. Perhaps the most notorious example is how the Nazis treated Jewish people during World War II. The Nazis treated them as if they were not people and thus deserving of the Nazis' unethical behavior.

Euphemistic Labeling

Regular Term/Label Euphemistic Label
Jail Correctional facility
Genocide Ethnic cleansing
Death Negative patient outcome

"Correctional facility" is an example of euphemistic labeling for a jail or prison. Other examples of euphemistic labeling include "ethnic cleansing" to mean genocide and "negative patient outcome" to mean death.

Role of Corporate Social Responsibility in Society

Corporate social responsibility, as illustrated by Carroll's pyramid, plays an important role by ensuring long-term benefits and care for society as well as the corporation.

Corporate social responsibility refers to an organization's obligation to contribute to itself, its stakeholders, and society as a whole in a positive way. The phrase corporate social responsibility became popular in the late 1960s and refers to organizations that focused on the triple bottom line. The triple bottom line is an accounting framework that measures social responsibilities, environmental responsibilities, and financial responsibilities to determine an organization's corporate social responsibility performance. These organizations emphasize the triple bottom line to ensure long-term benefits for their organizations, employees, the environment, and society. This refocused strategy is based on the belief that when an organization cares for its surroundings, it will realize greater success.

In 1991 Dr. Archie Carroll developed a pyramid of corporate responsibility that outlines four main tasks of business organizations. Corporate social responsibility, as demonstrated by Carroll's pyramid, plays an important role in improving the welfare of society along with corporate interests. The first level in Carroll's pyramid is the responsibility to be profitable—a duty to corporate shareholders to maximize profitability under U.S. law. Profitable organizations typically have efficient processes and innovate their offerings.

The second level in Carroll's pyramid is the corporation's legal responsibility to obey the law. Laws that affect corporations relate to employment, competition, safety, and the corporation's specific industry. An organization's compliance with the law protects consumers and stakeholders.

The third level of Carroll's pyramid is the corporation's responsibility to follow its own code of ethics. The organization's ethical responsibility extends from general business practices (employment policies, advertising, negotiations, and so on) to managing the organization's environmental impact. The organization's efforts typically go beyond what the law requires. For example, Amazon is known as a leader of corporate social responsibility. Amazon has taken actions that benefit the public beyond any legal obligation. Among many other initiatives, Amazon has made its packaging environmentally friendly and provides research grants for climate change.

The fourth and last level is the corporation's philanthropic responsibility to use its resources toward societal purposes. The purpose of philanthropy is to actively promote welfare and spread goodwill.

Carroll's Corporate Social Responsibility Pyramid

Carroll's pyramid shows the steps a business takes to fulfill its economic, legal, and ethical duties of corporate social responsibility.
Why should corporations be socially responsible? Doing so allows organizations to address issues that they helped cause. It protects the organization's self-interests. It limits future government intervention. It allows businesses to tackle a problem with resources and expertise. Critics of corporate social responsibility argue that it weakens the fundamental goal of organizations. Critics also contend that business organizations are not suited to handle social issues and that being socially responsible restricts profit maximization and limits an organization's ability to compete in the market. The issue of social responsibility remains complex for many business leaders.