Social Responsibility
Topic Three
Aims
To examine the some of the theoretical
and practical aspects of the issues of social responsibility and marketing
ethics. The theoretical underpinnings of social responsibility are explored
from the viewpoint of stakeholder theory and the ethics of marketing examined
from a number of viewpoints including that behind direct action.
Learning Outcomes
At the end of the topic you should be able to:
PreparationIdentify the role that stakeholder theory plays in the study of social responsibility.Understand how the study of ethics can help inform marketing decisions.
Understand how pressure groups inform the debate on ethics and social responsibility in the marketing area.
Discuss the circumstances under which direct action can be justified as an ethical action.
The formal study requirements for this topic are:
ReadingPre-sessional preparation using Internet sources.Reading and digesting the key material on marketing ethics.
Reflecting on the role of marketing and ethics on business practice.
Set Text
JournalsChapter 2: A Stakeholder Approach, Issues, Management Frameworks and Business EthicsChapter 5: The Corporation and External Stakeholders: Managing Moral responsibility in the Marketplace.
Carroll, A .B. (1991) The Pyramid of Social Responsibility: Toward the Moral Management of Organisational Stakeholders; Business Horizons, July-August, pp. 39-48.Online SourcesCarroll, A. B. and Meeks, M. D. (1999) Models of Management Morality: European Applications and Implications; Business Ethics: A European Review, Vol.8, No. 2, April, pp. 108-116.
Dennis, B., Neck, C .P. and Goldsby, M. (1998) Bodyshop International: An Exploration of Corporate Social Responsibility; Management Decision; 36/10, pp. 649-653.
Dunfee, T. W., Smith, N. C. and Ross, W. T. (1999) Social Contracts and Marketing Ethics; Journal of Marketing , Vol. 63, July, pp. 14-32.
Ketola, T. (1998) Why Don't the Oil Companies Clean-up Their Act? - the Realities of Environmental Planning; Long Range Planning , Vol. 31, No. 1, pp. 108-119.
Reich, R. B. (1998) The New Meaning of Corporate Social Responsibility; California Management Review , Vol. 40, No. 2, Winter, pp 8-17.
Smith, N. C. (1995) Marketing Strategies for the Ethics Era; Sloan Management Review, Summer, pp. 85-97.
Takala, T. and Uusitalo, O. (1996) An Alternative View of Relationship Marketing: A Framework for Ethical Analysis; European Journal of Marketing, Vol. 30, No.2, pp. 45-60.
Waddock, S. A. and Boyle, M-E. (1995) The dynamics of Change in Corporate Community Relations, California Management Review, Vol. 37, No. 4, Summer, pp. 125-140.
We would strongly advise students to find their own links to sites on the Web to further enhance their earning on this large and well-documented topic, as this paper copy of the student guide cannot interact with the WWW.
However here are some sites to begin your research on this topic.
A very interesting site called Human Rights Watch and well worth a visit. The site has information about human rights and abuse of rights by companies and governments.
A massive site linked to many partner organisations operating in the charity and non-governmental sector. Excellent links to organisations and reports on world trade, child labour etc.
http://www.christian-aid.org.uk
The Christian Aid site is particularly useful as it is a campaigning organisation with key reports on the ethics questions behind trade and aid. Reports on Sports Shoes, Supermarket Produce and Sporting Goods Manufacture are all available from the this Organisation online or in printed form. Select Reports and then choose your topic.
Home Page for GenetiXSnowball a direct action group against GM farming. Its subsidiary site at http://www.gn.apc.org/pmhp/gs/links.htm gives the reader a list of key sites for information on this topic.
PETA - People for the Ethical Treatment of Animals is a direct action group working for animal rights. This is the master site for the group. http://www.meatstinks.com/ This URL is a representative site to give the reader a flavour of a campaign run under the PETA banner.
http://www.oxfam.org.uk/campaign/clothes/clocodh.htm
Oxfam's site that is running a campaign on clothes and labels and manufacturing issues regarding UK high street companies and third world suppliers. It has links with other sites offering similar information.
A site that will allow access to the images used by Benetton in their advertising. Surf the site to find the image gallery. You will also be able to download the images place the mouse pointer on the image, then by clicking your right mouse button and following the menu options you can capture the image by saving the gif file to your disk. The site also gives you the thoughts of the artist who made the images and the issues he/she was trying to articulate.
An excellent site for information on the company. Download the Body Shop’s ethical trading policy and also the ethics report now available.
The Pensions and Investment Research
Consultants site with interesting material on governance and other issues
about responsibility for the reader to capture. Go to their archive button
for reports on Shell etc.
Overview
It could be argued that in the modern era business has begun to be more accountable to a greater number of constituencies than ever before. The notions of the stakeholder have become to be drawn much wider than before. Social responsibility, once decried as being irrelevant in the early 1950s and 60s is now at the forefront of business relationships. Of course there are firms that take this concept lightly, there are others who espouse such notions, but are seen to be lacking in the finer points when under scrutiny. It is often argued that business will always be responsible only to itself. We now see, in number of settings that a lack of social responsibility can often be very costly for the firm. The Carroll model discussed in chapter 1 of this guide gives us a model to base responsibility upon. The classification of managerial and business behaviour in terms of a hierarchy from purely economic to that of an ethical philanthropy gives us a good guide to help judge firm behaviour around.
The following two tables are taken
from Carroll (1991) and sate the social responsibility position for firms
in terms of Ethical and Philanthropic as well as Economic components.
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Table 1: Ethical and Philanthropic Components of Corporate Social Responsibility |
|
|
Ethical Components (Responsibilities) |
Philanthropic Components (Responsibilities) |
1. It is important to perform in a manner consistent with expectations of societal mores and ethical norms. |
1. It is important to perform in a manner consistent with the philanthropic and charitable expectations of society. |
2. It is important to recognize and respect new or evolving ethical/moral norms adopted by society. |
2. It is important to assist the fine and performing arts. |
3. It is important to prevent ethical norms from being compromised in order to achieve corporate goals. |
3. It is important that managers and employees participate in voluntary and charitable activities within their local communities. |
4. It is important that good corporate citizenship be defined as doing what is expected morally or ethically. |
4. It is important to provide assistance to private and public educational institutions. |
5. It is important to recognize that corporate integrity and ethical behaviour go beyond mere compliance with laws and regulations. |
5. It is important to assist voluntarily those projects that enhance a community’s "quality of life." |
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Table 2: Economic and Legal Components of Corporate Social Responsibility |
|
|
Ethical Components (Responsibilities) |
Philanthropic Components (Responsibilities) |
1. It is important to perform in a manner consistent with maximising earnings per share. |
1. It is important to perform in a manner consistent with expectations of government and law. |
2. It is important to be committed to being as profitable as possible. |
2. It is important to comply with various federal, state, and local regulations. |
3. It is important to maintain a strong competitive position. |
3. It is important to be a law-abiding corporate citizen. |
4. It is important to maintain a high level of operating efficiency. |
4. It is important that a successful firm be defined as one that fulfils its legal obligations. |
5. It is important that a successful firm be defined as one that is consistently profitable. |
5. It is important to provide goods and services that at least meet minimal legal requirements. |
Go to Carroll Model in Topic One
Go
to Reidenbach and Robin Model in Topic One
Task:
Case Study: Vitamins Inc.
A number of leading European chemical and pharmaceutical companies were recently caught by the US anti trust authorities for running a cartel in the supply of chemicals for the production of vitamins. These firms were BASF of Germany, Hoffman La Roche of Switzerland and Rhone-Poulnec of France. The cartel ran what its members called Vitamins Inc. The cartel had fixed prices and controlled market share among the members for a period of 9 years. The cartel operated as follows:
The cartel was eventually busted by the US anti trust authorities in May 1999 and the firms were fined a total of $725m, a number of executives were found guilty of running the cartel and jailed for 4 months and fined $100,000 each. Rhone-Poulenc was discharged as the company turned state evidence. Furthermore, recompense to the cartel’s customers is being negotiated. Indeed, in the 1999 accounts of Roche, $1.5 bn were earmarked for settling the compensation claim arising from this cartel action.· They held meetings and had an annual summit between key executives in late summer· They negotiated a budget for the year that covered prices and sales volumes around the world
· Quarterly meetings were held between mid-level mangers to monitor each members’ figures
· The cartel’s targets were policed with regular telephone calls between members
· Each member’s performance was reviewed at the end of each year at a ‘shareholders meeting’ of the key top executives.
· Where would you classify these three companies on the Carroll and the Reidenbach and Robin models?· Can firms like these be seen as moral and ethical in their other SBUs, while at the same time be manipulating the market by running an illegal cartel? Discuss.
· How would you argue this from a social responsibility point of view? Would you trust the company in its other product areas?
From Caveat Emptor to Caveat Vendor
The social responsibility argument has, according to Smith (1995) moved from the position of buyer beware to that or seller beware. The regulated markets that businesses operate in in the modern era have seen this key shift of focus. Litigation, regulation and consumer monitoring has meant that responsible firms can no longer fall back to the ancient maxim of caveat emptor. Figure 1 below sets out Smith’s (1995) continuum.
Some observers argue that this change in attitude can be traced to the famous case of the Ford Pinto and the campaigning stance taken by Ralf Nader to force US auto manufacturers to make safer cars. The Nader argument for accountability shifted to other sectors where firms were seen as operating sharp practice against the consumer. For example, the campaign against ‘big tobacco’ is a continuing one. The acceptance by ‘big tobacco’ that their product is harmful has meant very large payouts to the US government in order to avoid certain types of liability.
The issues of marketing ethics come in a variety of forms from the impact that marketing practice has on individuals to marketing’s impact on society in terms of excess and conspicuous consumption and waste. These issues will be explored in the lecture in detail.
Table 1: Marketing Ethics Continuum
Smith (1995) gives us a series of statements for us to consider and suggests that marketers often rely on simple maxims to evaluate their marketing practices. While useful, they generally lack specific guidance.
Tasks:· Do unto others, as you would have them do unto you.· Would you be embarrassed in front of your family/ friends/ colleagues if the media published your decision?
· Good ethics is in the long-term interests of the firm.
· Would an objective panel of professional colleagues view my actions as proper?
· When in doubt, don’t.
Read the articles by:
Reich, R.B. (1998) The New Meaning of Corporate Responsibility; California Management Review, Vol. 40, No. 2, Winter, pp. 8-17.
Badaracco, J.L. and Webb, A.P. (1995) Business Ethics: A View From the Trenches; California Management Review, Vol. 37, No.2, Winter, pp. 8-18.
Read the article in the readings section
by Dennis, Neck and Goldsby (1998) on Bodyshop International and reflect
on the
questions the authors pose at the end
of the article. You can download the article from the Emarald Library web
site using
thier online facility.
Over the past decade or so, we have seen a significant increase in the use of ‘direct action’ in the form of the sit-in, the boycott and the occupation in order for the alternative voice or argument to be heard. Often such action challenges the authority of the state, the company or organisation to conduct its business as it sees it. These actions are often conducted by groups opposed to the legitimacy of the corporation and is an attempt to bring to the public’s attention potential wrong-doing by the corporation and to hold it to account for its actions. The classic cases in this area were the Brent Spar case and Shell Oil in Nigeria. We have also seen protesters vandalise BaeSystems’ aircraft in protest against arms sales; protesters vandalising GM trial crops; threatening scientists who are using animals in their research; organising boycotts of petrol stations and ‘bombing’ company web sites in protests. The protest group has also adapted the Internet to exploit its message. See the Peta site as an example of a web based protest organisation.
Huntingdon Life Sciences Case
Most recently, protesters having obtained the names and addresses of shareholders in a bio-medical research services firm, Huntingdon Life Sciences Plc, quite legitimately, then ran a mail shot against the company, picketed the firm and individual shareholder’s houses, placed ads in the press to ‘name and shame’ prominent shareholders in the company. The company shares fell dramatically, from around a high of 29 pence to around 9 pence. This was as at 13 August 2000. Major institutional shareholders were similarly affected and sold their stake in the company and the company's bank cancelled their overdraft. Other shareholders followed suit after direct action. Indeed, some of Huntingdon's major customers also publicly withdrew their contracts from the firm. Protesters put further pressure on the company by campaigning against HLS's major bank - the Royal Bank of Scotland in order that the bank call in and not extend to HLS further credit lines thus leading to HLS's likely demise. At the last minute, however, an unknown benefactor from the US came to HLS's rescue and paid the outstanding loan to the Royal Bank of Scotland, this resulted in HLS's shares to rise on the market. The Company, however posted a loss in fiscal year 1999-2000. The firm at the centre of this action protests its innocence and argues its right to pursue its line of trade without intimidation from protesters. The protesters have vowed to target other pharmaceutical companies, like Glaxo Smith Kline, in their campaign against the use of animal in experiments. What is your view on this issue?
Go to the Huntingdon Life Sciences web site for a company view
Go to the SHAC web site to assess SHAC's case against Huntingdon and review their direct action strategy.
Go to the Financial Times site for an anthology of the case study as a series of press cuttings.
E.P. Thompson, in an essay published
in 1971, coined the concept ‘social economy’ as an alternative concept
to ‘political economy’. Social economy, he argued arose out of the objectives
shared by the community and legitimatised by custom and legislation and
informed by the principles of morality. This can be diametrically opposed
to the principles espoused by political economy and the concept of the
market. Thompson argued that the food riots in Hanoverian England of the
18th century, was not mob rule, but a disciplined crowd acting
in pursuit of clear objectives shared by the community that was defending
their moral rights over that of commercial exploitation and un-regulated
markets, particularly over the purity of foodstuffs. (See The Times Higher,
August 4,2000, p 25. This was a book review of Moral Economy and Popular
Protest: Crowds, Conflict and Authority; edited by A. Randall and A.
Charlesworth; Macmillan.) There are, of course other arguments in favour
and against such direct action.
Also See Topic Four - Issues Management Brent Spar Case et al.
Task:
· Can direct action be justified? When, How and Why? Justify your position. Give examples.Activities· What tactics are legitimate to use in a protest action? Justify your argument.
· Review the marketing ethics of your firm and link your analysis around the ethics models that we have discussed.· In the Spring of 2000, Barclays announced that it would streamline its branch network by closing over 120 branches. Many of these branches were in small rural communities often without alternative facilities, at the same time the company also announced that it would implement a charge to customers using cash dispensers. In the reporting season, Barclays announced a large increase in profits and a substantial remuneration package for its chief executive. How would you argue Barclays’ case? How would you argue the consumer case? Is Barclays marketing ethics responsible or not? Justify your position.
· We will look at the images of Benetton that the firm has used to sell its knitwear around then world. We will discuss the ‘marketing ethics’ behind Benetton’s campaign.
· We will review, in class, some direct action sites and discuss some of the issues that arise from protest action and the role of the pressure group.