Sahira Musrial MahfuzhProfessor Mohammed AliBA 3646 December, 2017Table of Contents Executive SummaryThe target audience is to convince those who are opposed to the ideals of social responsibility in relation to morality to understand the importance of valuing company morals to the ideals and expectations of society. Multinational corporations are morally obligated to cater to the expectations of society because their success is determined by society’s viewpoint on them. This thesis statement is important and relevant because multinational corporations act as a significant section of society. Whether people intend to or not, these corporations influence their daily lives directly or indirectly through advertisements and actions. Their impact on society or lack thereof makes a difference in the grandiose scheme of things. The ethical issue I pose in my research question debates the presence of a moral obligation of multinational corporations to be honest to its stakeholders and to keep the best interest of the stakeholder in mind.
On one hand, a business is set out to generate as much net profit as they can, in order to satisfy the natural human desire for money and power. On the other hand, multinational corporations hold a great influence over society, so scholars argue that with that much power comes with a moral obligation to aid society in its social wellbeing. Throughout my paper I have explored the topics of the Corporate Social Responsibility, the Iron Law of Responsibility, and the Social Environment.
Within these topics, I describe Enron and Trafigura, two cases of companies who failed to follow moral laws and put the interest of the upper management and the craving and greed for money in front of the interests and needs of the stakeholders and society as a whole. Their selfishness led to either their demise, or extreme public outcry, which also caused them intense monetary losses. My research process included extracting information from various news articles and academic journals from scholars holding profound recognition in their studies, including Ph.D’s. Multinational Corporations and Moral ResponsibilityIntroductionThe concept of morality can be interpreted on a spectrum, but overall, there is a general notion people have when basing a decision off of moral guidelines. Humans are innately selfish, and these selfish desires transfer not only to personal aspects of life, but they also transpire throughout the business world, where the meaning of morality can be construed to various degrees. Not all who wear white collars subscribe to moral obligations, and there is controversy over whether or not corporations have a moral obligation in regards to corporate social responsibility.
I am to argue upon the fact that multinational corporations have moral obligations to society. It is under this topic that I will be researching how the decisions and actions of corporations have a major impact on society whether directly or indirectly. Multi-national corporations are money-making machines, but must they be corrupt, money-making monsters as well?GoalIt is important to discuss how corporations relate and connect with not only each other, but to society and how their decisions are impactful to the social welfare of society.
Not only that, but society expects corporations to act a certain way that benefits them, particularly the stakeholders. I will explore several concepts that depict these aforementioned obligations and how companies may base actions and decisions on specific models and concepts. The four important concepts I will discuss to explain why multinational corporations have a moral obligation to society are the Corporate Social Responsibility, the Iron Law of Responsibility, and the Social Environment. I will be conducting my research using the Penn State Library’s database systems to find academic journals and articles to support my paper, the BA 364 course-prescribed textbook, and perhaps even credible online sources.
Corporate Social Responsibility – 2 pagesThe first analysis to argue the moral obligatory guidelines of corporations is the overall presence and concept of corporate social responsibility, which is a fine ideology to subscribe to in order to maintain the satisfaction of consumers.. Various companies subscribe to the notion of corporate social responsibility, and some even use the concept as a means toward a gimmick, to attract customers. Regardless of intentions, all corporations should realize their morals should align with the best interest of the public. Companies who agree with this recognize their obligations to the public, whether it be in reference to their wealth, or to the environment, or more. Corporate social responsibility seriously considers the impact of the company’s actions on society.
It is the obligation of decision makers to take actions which protect and improve the welfare of society and to take responsibility for their effects on society in reference to environmental and social well-being, along with their own interests. Corporate Social Responsibility has widely been a controversial topic for decades amongst all who work alongside and are affected by the actions and inactions of a corporation. Corporate social responsibility is the theory that corporations have an obligation to society. Perhaps the implementation of corporate social responsibility in the mindset of the corporation is a controversial and subjective topic to convey amongst the workers, but this business system “enables the production and distribution of wealth for the betterment of its stakeholders through the implementation and integration of ethical systems and sustainable management practices” (Smith). Richard E. Smith of University of Pennsylvania says, “Many of the concepts in the proposed definition are commonplace amongst CSR practitioners and organizations, the validations for the key segments – production and distribution of wealth, stakeholder management, ethical systems, sustainable management practices – coupled with the application of a systems approach and other business practices make the definition unique and conclusive” (Smith.
The argument at hand in relation to corporate social responsibility is that the actions of a corporation, especially those with the biggest affluence, can majorly affect a society. Take, for example, the company, Trafigura, which is a Singaporean multinational company that participates in trading metals and energy, including oil. Trafigura was the face of a gigantic scandal known as the 2006 Ivory Coast Toxic Waste Dump. They deceived the public by pretending as if the materials they were dumping into the ivory coast were merely ‘routine slops from ordinary tank-cleaning’ (theguardian). The cost of disposing of the waste in Holland was a price too steep for Trafigura to pay. Instead, they found a way where the excess cost would be paid for in a different way by nearby residents of their filth dumping. This episode became one of the worst outbreaks of pollution in recent history.
Upon further investigation, it was found that Trafigura was very well aware of the dangerous propensities of their chemicals they were spilling into the ivory coast. They paid a compensation of approximately $30 million to 31,000 Africans who were victims to this incident. Some people died from the poisonous gases emitting from their sludge. A UN human rights specialist named Professor Okechukwu Ibeanu wrote that there were 15 deaths, 69 people hospitalized, and over 108,000 medical consultations.This damning discovery of the social irresponsibility of Trafigura poses a large question that other corporations may ponder upon.
Should the state of the public matter in accordance with company values? By ‘state of the public’ I am describing the mental health, physical health, and the health of the environment, because the latter will ultimately affect humans as well. By analyzing the unethical decision-making of Trafigura, it is evident that their actions gave them negative consequences. They opted to cheat the public, and to lie to save themselves money. In the end, they lost a lot more money than they would have lost to begin with had they chosen to dispose of their waste properly. This negative outcome proves one prime example of a company suffering from disobeying the guidelines of corporate social responsibility. Either they ignored these guidelines, or they did believe or care for the concept as a whole. Those cIron Law of ResponsibilityThe Iron Law of Responsibility is part of the overall concept of ‘Corporate Social Responsibility”. A pronounced author by the name of Keith Davis wrote about the topic of corporate social responsibility and its connections to power relating to the world of business.
He is the one who coined the term, “Iron Law of Responsibility”. This is the notion that claims that the “social responsibilities of businessmen need to be commensurate with their social power” (Davis p.71).
He also said that the corporation’s power must but at an equilibrium with their social responsibilities because the :avoidance of social responsibility leads to gradual erosion of social power” (..)It is this notion that serves as one of the primary basis’ that describes exactly why multinational corporations have moral obligations.
It is in various aspects of life where disobedience and irresponsibility leads to severe punishments, and the corporate world is not one place that strays from this philosophy. Those corporations who deviate from the necessities and expectations of the masses in society, will live to see their powers dissipate. Overall, the powers they inhibit are not rights; they are privileges granted to them by society. What the masses may give, they may so easily take away from the hands of the ungrateful and the irresponsible. Now that I have explained the basis and the history of the Iron Law of Responsibility, I would like to describe a situation in which a corporation abused and overestimated its powers, and what would follow a sequence of abuses, would lead to their demise.
One of America’s largest corporations faced a downfall that would be written in history books for decades. This specific corporation was the world-famous, Enron Corporation. In a detailed academia report by a Ph.D. Student of the Bucharest Academy of Economic Studies in Romania, Ana-Maria Petrache, she titled her piece, “The Collapse of ENRON, a classic case of corporate social irresponsibility” (Petrache). Enron failed to follow suit the expectations of society and in turn, their name was tarnished. According to Petrache, “Former employees of the American companies declare that for the heads of Enron, the most important thing was the immediate financial success, at any price, with any means, and they were inflicted that it is allowed to lie, cheat, or to make their own rules, as long as they make money”(..
..). They were accused of ‘cooking the books,’ or inflating their numbers in their financial reports to make themselves seem more successful than they were. This disrupted their responsibility to the society, mainly to their stockholders. Their success was highly publicized, which only attracted more people to buy stocks in the corporation. Their increase in support and money related with their increase in power.Upon analysis of the moral failures of Enron, their actions ended in the consequences as put forth by the teachings of the Iron Law of Responsibility.
Their stakeholders expected them to act fairly and just, putting the needs of the stakeholders first, but this is not what occurred. Instead, Enron prioritized the monetary needs of the upper management. Their reputation was blemished and they were taken down by society.
The Iron Law of Responsibility is a warning to those corporations who might disobey the calls of the the public.Although corporations seek to generate as much income as possible, by stepping foot into a position that so immensely and profoundly affects the lives of those operating in society outside of the direct world of business, corporations hold a moral responsibility to society. As evident by Enron, their irresponsibility to their moral obligations to be true and honest to their stakeholders and to all of society, speculators foresaw their catastrophic demise.Social EnvironmentThe social environment is critical in regards to initializing and running a successful organization. By definition, the social environment “focus on demographics, lifestyles, and social values of the society'(…
.). The various factors that might affect the social environment include education, affluence, awareness, expectations of the general public and stakeholders.
It is these factors that would either directly or indirectly affect the success of the corporation.The Social Environment focuses on demographics, lifestyles, and social values of the society. There are many factors that affect a social environment. Examples of these factors are education, affluence, awareness, rising expectations, and right movements. These factors and how they influence the social environment may lead to business criticism. From here, that criticism may take one of two paths.
It may either raise concern for the societal environment and/or a changed social contract.The concept of the social environment is important because it analyzes the different facets that attribute to and influence a society. Positive factors in society may catalyst the growth of another positive result. For example, as a society becomes more prosperous and better educated, higher expectations of its major institutions, such as business, naturally follow. More education leads to more affluence, and greater standards or living. Essentially, the understanding of the social environment is crucial because it allows society to analyze the inner workings of what positively creates growth in their society, and how that growth can be encouraged. Likewise, if there are shortcomings, they can be critiqued by society as a whole and disposed of, decreased, or fixed.
Corporations hold a moral obligation to the needs and desires of society because their success relies on the contentedness and satisfaction of the public, stakeholders, and consumers in general. A company that lies in the positive light in the eyes of society will grow as the domino effect of successes will propel them forwards. Upper management is very well aware of the fact that their prosperity is directly linked with the satisfaction of society, as that is where they receive their monetary gains. The purpose of a corporation is to gain money. Because of this, the marketing teams of companies analyze the needs and wants of consumers by studying the social environment.
In one study, the corporation will study the demographics of a a region and their values should surround the expectations of their target group. This means that they are obligated to follow morals that would fall in line with the best interest of this group. If they were to lie, cheat, or steal from these groups, then they would lose trust from them, and their accounting and financial books would show the negative impacts of their deviant ways.A small shoe company will study the social environment of a region in which they would target their marketing focuses on, Conclusion-When corporations don’t hold their moral obligations to society, then what have we succumbed to?References