Business Ethics and Corporate Social Responsibility
A. Purpose of Corporate Social Responsibility
Corporate social responsibility can be defined as a form of business approach contributing to sustainable development in an organization through delivering social, environmental and economic benefits to all stakeholders (Crowther, 2008). The main purpose of CSR in the company would make sure that it carries out its businesses transactions and activities in an ethical manner. The company following CSR concept would be expected to take into consideration economic, environmental as well as social effects of its activities and consider an issue related to human rights. Therefore, the purpose of CSR to the company would make sure it engages in activities that are social, environmentally and economically sustainable Griseri and Seppala, 2010). For example, ensuring its manufacturing activities does not contribute to the pollution of the environment.
A1. Primary and Secondary Stakeholders
The primary stakeholders can be said to be those who might have some direct interests in Paradigm Toys, while secondary stakeholders are those who do not have any direct interests within Paradigm Toys (Crane and Matten, 2016). The company’s primary stakeholders include management, strategic partners, staff, shareholders, and strategic clients. These groups of stakeholders have a direct financial interest in the company; hence their well-being financially is dependent on the ability of the company to remain stable and record improved financial performance always. On the other hand, the secondary stakeholders include customers, competitors, government, creditors, and community. These stakeholders do not have a direct interest in the company but are indirectly affected by the decision taken by it.
A2. Responsibility to Stakeholders
One of the key responsibility of the company’s board of director towards its primary and secondary stakeholders is playing the oversight management role, thereby, making sure that the company has systems put in place to aid in effective management of major risks that might end up harming the reputation of the firm and ones that can bring legal liability on issues related to adverse environmental and social effects (Crane and Matten, 2016). For instance, the board of directors of Paradigm Toys is supposed to make sure that the senior management always acts in the best interest of the stakeholders, ensuring that various risks that might harm the reputation of the firm are fully managed. Secondly, the board of directors in the company has social responsibility of ensuring that the senior management of the firm has financial and other types of resources needed to meet the changing needs and expectations of the stakeholders in a way that is in line with the values as well as strategic priorities of the firm. For example, the board of director is supposed to allocate adequate financial resources that would help to implement certain investment strategies, such as acquisitions with an objective of enhancing the ability of the firm to generate more income in the future.
B1. Importance of Ethical Culture
There are several benefits that are associated with an organization having an ethical culture. One of the benefits of Paradigm Toys having ethical culture is that it ensures that employees act in a moral way, whereby they act with honesty as well as integrity while serving customers, leading to overall satisfaction of the target customers. Also, ethical culture plays a great role in ensuring that the company always acts in the best interest of the majority of the people in the society in all the decisions that it takes (De George, 2011). For example, ethical culture would ensure that the company does not sell toys with defaults to the customers. Additionally, ethical culture plays a central role in ensuring that the organization's leadership take ethical decisions, so as to build the reputation and the image of the firm (De George, 2011). Finally, ethical cultural helps a company to achieve the goal of building a workforce that is highly motivated and satisfied with its work.
B1a. Fostering Ethical Culture
The leadership of Paradigm Toys can foster an ethical culture in different ways. The leadership can develop ethical standards and policies that are supposed to be followed by the employees with an objective of ensuring that they act ethically (Griseri and Seppala, 2010). For example, leadership having employees code of conduct and ethics, outlining ethical principles to guide their work. Additionally, the company's leadership can build ethical culture through their actions, whereby, they are supposed to make decisions that demonstrate ethics. For example, always making sure that any product sold to the customers is safe. Furthermore, the leadership can build ethical culture through ensuring that there are accountability and transparency in the operations of the firm. The leadership should also foster ethical culture through employing hiring and retention policies that help the company to employ individuals who meet certain ethical standards and this would make sure that the workforce is made up of individuals who behave ethically at all times (De George, 2011).
B2. Ethics Audit
According to Griseri and Seppala (2010), ethics audit can be defined as investigations concerned with determining how well an organization comply with industry or societal, ethical standards in its operations. Ethics audit is therefore concerned with understanding whether an organization is engaging in ethical practices, which have positive social, environmental and economic impact on the society and other stakeholders. The audit is essential in today's business environment as it helps an organization to comply to engage in ethical business practices.
B2a. Value of an Ethics Audit
Ethics audit would be valued to Paradigm Toys in different ways. First, the audit would play a major role in ensuring that the company understands its weaknesses when it comes to complying with societal, ethical standards; hence making appropriate actions to make improvements in building an ethical culture in all its transactions and activities (Crane and Matten, 2016). Also, ethics audit would help to understand the expected ethical standards by the industry and society, making sure that the company can develop ethical policies, standards, and principles to guide its employees by what is expected of it by the industry and the society in general. Ethics audit would also be beneficial to Paradigm Toys by making sure that it put in place internal control measures directed towards helping it employees and managers to act always in an ethical way. For example, using the audit to develop an ethical code of conduct to guide employees while interacting with customers at all times, to ensure that they act in a manner that is in line with ethical expectations of the customers.
C1. Ethical Dilemma
One of an ethical dilemma that a person can experience in a business setting is a situation where a product is faulty and poses a risk to the safety of the customers. In this dilemma a person will be faced with a situation to decide on whether to allow faulty product to be sold to customers or not on the basis of protecting the financial interests of the company or not to allow the sale of faulty products, such as toys with an objective of protecting the interests of the customers.
C2. Potential Solutions
There are two possible solutions that a manager in the company can use to solve the ethical dilemma presented above. The first solution would be to allow the sale of a faulty product with an objective of protecting the organization's financial interests, as a lot of financial resources have been used in development and manufacturing of the products at hand. The second solution would be for the company manager to recall the sale of all the faulty products. The main disadvantage of this solution is that it would cost the company financially, as it will have to lose all the finances used in the manufacturing of faulty products.
C3. Explanation of Choice
Based on utilitarian ethics and action should be taken by an organization that has benefits to the greatest section of the society (Crane and Matten, 2016). In this case, the best ethical decision would be one that is aimed to benefit the biggest section of the society. Thus, the best solution would be to recall the sale of the products with an objective of protecting the customer's interest. Selling of faulty products would put the safety of the customers at risk, and this would damage the long-term reputation of the firm. The best course of action would be one that is aimed at protecting the business reputation and the interests of the customers.
D1. Key Components
One of the elements that would be included in the company’s ethical training program would train the employees by various judgment philosophies associated with ethics. The second element is ensuring that the training program is based on industry-specific ethics and rules. The last element that would be included in the training program would be aimed at providing organization rules and ethics.
D1a. Explanations of Key Components
The element of training by different ethical judgment philosophies would be included in the organization's training ethical training program for purposes of helping the employees to understand various schools of ethics; theories that can be used to guide the ethical decision-making process (Crane and Matten, 2016). Additionally, training employees by industrial ethics are included as the basis of helping the trainees understand various ethical standards that guide the operation of the company within the industry it operates and this form the basis of empowering them to make ethical decisions in future which is in line with industry ethics. Finally, ensuring that the training program empowers employees with organization rules and ethics, tries to make sure that employees engage in behaviors that are in line with organizational standards and rules related to ethical practices.
The simulation would be the best method for delivering ethical training program in the company. The simulation method would allow the trainee an opportunity of having a real life ethical situations simulated to them so that they can acquire skills of solving them. This approach is the best as it provides evidence and skill based ethical training to the company's employees.
Corporate social responsibility represents one of the most research topics in the arena of contemporary business. So important is this topic that it has attracted research and related investments from across the globe. Abbreviated simply as CSR, corporate social responsibility is also known as sustainable business, corporate sustainability, responsible business, corporate conscience, or corporate citizenship. During its inception and initial development, sustainable business was designed to exist as an initiative by private business across the global market and business arenas. However, there have been developments that have taken place with regards to the traditional setting of corporate social responsibility. One such development is the establishment and constant growth of the legal framework attached to corporate sustainability. Today, countries across the globe have designed and instituted laws which have transformed corporate social responsibility from an initiative of private business to government backed legal expectation of corporations and businesses across the globe. Although corporate social responsibility exists differently from one setting to the next, there are unique activities and investments that stand out in the myriad of investments and activities. Corporate social responsibility may be designed as the sum of activities and investments through which companies focus on furthering some form of social good which exists beyond the corporate or business interest required by law and outside the interests of the institution. The common usage of this term is employed in referring to the initiatives that are designed to ensure a company’s activities and the effects birthed thereof are effectively assessed in order to provide the institution with information and a background through which it can maintain and constantly improve social wellbeing through being responsible for its activities. Challenges in corporate social responsibility range from those birthed in the process of integrating corporate responsibility initiatives into the business model to the legal interaction between in-house CSR initiatives and laws designed to govern business activities. One of the universal challenges in CSR is coming up with a universal yardstick through which the investments and activities shaping up corporate social responsibility are effectively reported, measured, and represented (Okpara, Idowu, & Springer-Verlag GmbH, 2016, p. 97).
Founded during the first quarter of 2006, Toms Shoes might not feature in the Fortune 500 companies, but the company has an approach and attitude towards corporate social responsibility that sets it apart. Founded by Blake Mycskie and Alejo Nitti, the company is headquartered in the Santa Monica area of California and is part of the global retail industry. The company specializes in shoes, shirts, eyewear, clothing, and coffee. The company’s uniqueness is not presented in its product line, but in its approach to corporate social responsibility and how it has affected its business model. When the company was founded, its main aim was to introduce the famous Argentine alpargata show design into the United States retail industry and profit out of it. However, the administration of the company adopted a corporate social responsibility initiative that brought international recognition to the company. The company has a unique business model which is represented in the phrase – One for One. For every pair of shoes a customer purchases in any Toms outlet across the globe, the company goes on to provide a pair of shoes to an impoverished child. Whenever a sale is recorded for eyewear, the company directs part of the amount received to initiatives aimed at improving and restoring eyesight in developing countries. Whenever there is a coffee sale made by the company, part of the profit realized thereof is directed towards providing clean and safe water to people in need across the world. For every bag collection sold by the company, there are investments made in light of maternal health in different regions of the world. The company ensures maternal mortality is constantly being addressed through straining maternity nurses and providing birth kits across the globe in a bid to improve childbirth safety (TOMS, 2018).
After information about the corporate social responsibility of Toms became public, there were a number of unique changes experienced by the company. The company begun when the founder sold a company he had in order to secure funds for the shoe company. Proceeds from the sale of driver education – an online-based business – amount to $500,000 and were sufficient for the company to order to 250 pairs for a start. When sales official began in the 5th month of 2006, the company experienced the slow movement of sales characteristic of start-ups. However, this changed drastically when the Los Angeles Times ran an article about the company’s corporate social responsibility. When the world got to know about the sustainable business initiatives by the company, overwhelming orders were made and the company found itself at a point where it had to deal with nine or ten times the stock that was available. At the end of the first year in business, the company had already sold over 10,000 pair across the globe. A year after is founding, the company was attracting partnership from global players in raising awareness about the impact shoes have the life of children across different regions in the world. Five years after it was founded, the company was approached by over 1000 retailers across the globe and 500 of these were already stoking and carrying the brand across the global marketplace. 6 years since its establishment, the company had expanded its product line and distributed over 2.5 million pairs to needy children and people across the globe (TOMS, 2018).
Measuring the nature and level of effectiveness attached to corporate social responsibility is one of the most sought after business tools in the global business arena. There is hardly a company across the globe that is not presented with a fair measure of challenges in light of quantifying the effect of corporate social responsibility. Some of the most conspicuous benefits attached to corporate social responsibility are an improved reputation and customer loyalty. The lack of tools and techniques to effectively quantify and or assess the value attached to corporate social responsibility is the main reason behind the growing difficulty in attaching value to the various activities and investments shaping up a corporate social responsibility initiative. However, there are new approaches being designed to provide grounds through which corporate social responsibility can be effectively assessed. The three measures employed in analysis and quantification of corporate social responsibility are; disclosing the important of corporate social responsibility activities and investments to customers and stakeholders, improving decision making activities in corporate social responsibility over the long term, and aligning the business activities with the activities and investments shaping up corporate social responsibility. Some of the tools and techniques that incorporate these principles in their measurement techniques include the Community Mark Standard, the Global Environment KPIs, and the CR Index Insights (Pompper, 2017, p. 76).
The CR Index Insight CSR measurement tool is designed to function through focusing on five unique elements; the values and vision within the internal environment of a company that drive and sustain CSR, the leadership, administration, and culture within an organization and how it is designed to enhance CSR practices, the supply chain collaboration in light of CSR sustainability, investment and innovations on corporate responsibility, and the investments geared towards mitigating climate change. The company has a uniquely excellently score in each of these principles. For instance, in light of how the leadership and culture enhances CSR business practices, the company was founded for and sustained through a CSR culture. The founder of the company has extensively invested in ways through which he can constantly improve the company’s corporate social responsibility business practices. This is evident in the birth of new products in the company and how they immediately get integrated into the company’s business model while focusing on corporate social responsibility. In light of collaboration with the entities that shape up the company’s supply chain, it is important to underscore that the success being achieved by the company in its corporate social responsibility – especially the one for one shoe initiative –is the product of sustainable and effective supply chain management and relation investments. The visions and values driving internal change and corporate social responsibility in the company have expanded as the company grows over the course of time. The values and vision by the founder of the company are still in place to date and have played a monumental role in ensuring the company is able to effectively maintain and expand its corporate social responsibility across the globe (Okpara, Idowu, & Springer-Verlag GmbH, 2016, p. 156)
Okpara, J., Idowu, S. O., & Springer-Verlag GmbH. (2016). Corporate Social Responsibility: Challenges, Opportunities and Strategies for 21st Century Leaders. Berlin, Germany: Springer Science & Business Media.
Pompper, D. (2017). Corporate social responsibility, sustainability and public relations: negotiating multiple complex challenges.
TOMS. (2018, May 1). TOMS® Official Site | The One for One® Company. Retrieved from http://www.toms.com/
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