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title: Business Ethics Lecture 4 (Presentation)

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# Business Ethics Lecture 4 (Presentation)

## Presentation Script
Now I'm going to talk about the limitations of the theories.
In short, both theories by Friedman and Bannerjee talk about the failures of CSR, and how companies should focus on their core businesses rather than dabbling in CSR.

This then, begs the question, has modern CSR failed completely?

In exploring this counterpoint, we would like to bring up 2 limitations, 2 possible scenarios with the correlation between social responsibility and its consequence to the business that were not discussed in the theory.

1. Absence of social responsibility (Indirect impact of social irresponsibility)
* While CSR today is rather shortsighted in its goals, it is still important for both the society and the business. There is an underlying assumption under the theories that the responsibility of profiteering is an opportunity cost of exercising CSR. This means that by exercising CSR, the corporate executive is forgoing their main responsibility of generating profits for their employers (stockholders).
* However, we believe that sometimes **CSR is equally important in profiteering**. Some businesses need to exercise CSR to carry out their main responsibility to the stockholders, as the lack of exercising social responsibility could sometimes indirectly detriment the company's business. 
* The absence of CSR may result in social discourses which in turn will get in the way of the company's main responsibility of profiteering
* One case in point is the Freeport gold mine exploitation.
* In decades of its operations in Indonesia, there have been numerous decisions made by the company that exasperated the local citizens, ranging from environmental damages to the lack of employment of the locals. This resulted in multiple attempts done by the locals to sabotage the company's business, which led to them having to spend a huge sum of money to hire additional security professionals to protect the day-to-day operations.
* In this case, the negligence to exercise social responsibility has resulted in the corporate executive failing his responsibility to maximize profits for their stockholders as they had to spend additional cost just to keep their business running.


2. Next, let's explore the scenario where CSR is legally enforced.
* Banerjee mentions that CSR doesn't work because it is voluntary by nature, and  companies are not held accountable for their claims. 
* If we try to enforce CSR, this will lead to less genuine CSR efforts, since companies will just be doing them to meet the criteria. 
* Companies' underlying motivation is still profit-driven and not to serve the public. They could still facade their underlying profiteering motivations under CSR. Despite CSR being legally enforced by the law, CSR will still fail since it does not fulfil these motivations.
* Businesses **intrinsically** are built for profiteering purposes. Even with legal enforcement, companies will only try to meet the minimum requirement to pass the so-called "CSR criteria" and are less incentivised to go beyond that (especially so, now that there is less of a competitive advantage given that all companies are mandated to exercise CSR).

This proves that although CSR is enforced, it might still fail.





## IGNORE BELOW


Extra points from 1.

* Both theories view CSR as an extraneous effort that would give competitive advantages against their business rivals.
* However, sometimes it can be clearly seen when a company is masking their profit-making motive with the CSR facade. An example was the greenwashing campaign that H&M did.
* When a company does a CSR campaign right, they will benefit from it.
* An example of a successful CSR campaign is the one done by Xerox.
* Xerox actively tries to minimize the harmful byproducts in their production, dedicating their R&D team to achieve this goal, and successfully diverted a lot of their product waste for recycling.
* As a reward for achieving their goal, they were given multiple environmental awards. This improves the public perception towards Xerox and thus potentially streams more revenue towards the company.
* Although it is true that there's no real way to identify the fundamental motivation behind the campaign (it could either be profit-driven with an environmental benefit as a byproduct or social-driven with a profit-boost as its byproduct), the fact that the campaign has successfully brought about significant positive impact 
* From a more positive public perspective to a better technology driven by the R&D done in this direction, they are able to profit more from the business.



## CSR
Does the successful business first try to profit or to serve?
Questioning the role of business in society. Banerjee talks about taking the word "successful" out of the picture.

## Corporate
Until the early 19th century, the state had an important role in the ruling of companies (or "charters") so as to preserve the public interest.
Charters could be revoked.

At the end of 19th century, the corporation was defined as an entity that could enjoy property right, like an individual does.

Social responsibility cannot be legally prescribed. It is a strategic decision based on market forces.

The changes in the legal environment shifted the onus of addressing the "social" term corporation to governments.

## Social
![](https://i.imgur.com/fZdPNBv.png)

A corporation is supposed to serve its stakeholders.

### Shareholder/Stakeholder theory
![](https://i.imgur.com/yc7u4Vy.png)


### Exercise
Who are SUTD's stakeholders?
* Students
* Faculty
* Prospective students
* Alumni
* Investors
* Industry partners
* Government
* Parents


What are SUTD's obligations to them?
Unlike most corporations, SUTD has an 'eleemosynary purpose', which is to utmostly serve the students, to provide education as the objective.

* In fulfilling this objective, there are other stakeholders that the school will need to answer to.
    * For example, in providing opportunity for more people to study, SUTD requires external stakeholders (e.g. donors) to help SUTD to provide education to students.
    * If SUTD were to only maximize profit, they would just be providing education to those who pay (more?)
    * Making sure that the fees charged are reasonable. -> Must work with the stakeholders in order to be able to provide this. Government and Donors are the ones that the school need to work with closely.
    * School still needs to profitable -> sustainable -> better facilities for education.

* Parents: SUTD has the obligation to answer to the students' wellbeing.
* Students are paying customers. SUTD's obligation to set the value propositions apart from the other universities.
* Should future workforce be considered as a stakeholder?
* Obligation to support the partnering (internship) companies well (make sure students do their job).


### Different Viewpoints on Social Responsibility
![](https://i.imgur.com/Rybik3H.png)
![](https://i.imgur.com/QiSsyEA.png)

## "Responsibility"
* Respondere, to respond:
    * The duties attached to a specific role
    * And/or the judgment attached to the accomplishment of these duties
* What does a corporation owe to its stakeholders? What can form the basis of the judgment of a corporations' action?
### Group Activity
* Choose 2 SG corporations and compare their main CSR axes.

Grab vs Koufu:
* Both do CSR within their domains.
* Larger corporations will do CSR that are less specific.
* Bigger company -> More (diverse) CSR


## Financial Performance
Does CSR affect company's FP?
What are the KPIs that measure company's success in CSR?
