Role of Corporations in Ethics


The ethical and social obligations of organizations are basically self-regulating instruments that ensure that international norms, ethical standards, and the law are part of a business’ functions. These responsibilities are therefore brought on by the fact that a company’s activities have direct effects on the public, company staff, its consumers, the environment, and members of surrounding communities. These ethical obligations, therefore, represent a shift from organizational interests to the public interest, especially during decision-making processes.

Practical ethical/ social obligations of corporations

Companies can take on social or ethical responsibilities in two major ways: through business approaches or the community. In the business environment, these obligations can be implemented in a variety of scenarios. For example, in human resources, firms can include the values of their staff members to improve the perception of the organizations amongst these members. For instance, employees can be involved in community work, salary donations, and fundraising. Most of the time, companies that involve their employees in social responsibilities often seem more humane and easier to work with than those that do not. Consequently, these organizations are likely to attract better recruits than those who do not partake in their social obligations. After hiring the best candidates, such firms can also be in a position to retain their staff because most of them will be more engaged than if their employers did not take corporate responsibilities seriously. (Fields, 2002)

Sometimes, ethical obligations amongst corporations can be perceived in another manner; they may be considered risk managers. In this regard, companies can take these responsibilities seriously to prevent any potential scandals in the future. For example, if a company gets sued for selling harmful or substandard goods then it may have to face court charges or deal with negative publicity in the media. One way of mitigating against these risks is by always instilling ethical values in one’s representative’s sp that ugly incidences do not occur. One such case was the Enron accounting scandal. The latter organization had failed to create a strong ethical base and this may have prompted its staff to engage in unscrupulous accounting practices that eventually led to its failure.

Alternatively, ethical or social obligations may take the form of supply chain regulation. This is especially applicable to multinational or transnational organizations. Companies have to define and redefine what is acceptable to them in terms of labor practices, production methods, and the like. Organizations like Starbucks are frequently under pressure from lobby groups to select only those suppliers that employ appropriate coffee production methods. Consequently, the latter organization has had to take up this responsibility fully especially in running the firm. (Chapple et al., 2003)

The need for appropriate actions

Ethical consumerism is one of the major drivers for taking up ethical and social obligations by corporations. This is because natural resources may not possess the capacity to meet rising population demands. Constraints on those resources necessitate some type of action. Furthermore, external forces like technology or globalization are boosting industrialization. However, these same forces are causing consumers to become more conscious of their surroundings. Consequently, their decisions are driven by a need to reduce consumerism. Respective organizations need to respond to these issues otherwise they risk being sidelined by the very groups that drive their profits. (Roth & Bansal, 2000)

Several needs necessitate ethical and social obligations from corporations. For instance, corporations themselves need because they shift from a short-term to long term focus. The ethical responsibilities, therefore, represent what the company means to its consumers and hence their commitment to them. Sometimes the nature of a business is seen to contradict general social good. For instance, petroleum manufacturing companies are often perceived as detrimental to the environment because they contribute to the utilization of fossil fuels which are well-known environmental hazards. In such cases, these firms’ reputations are under increased risk of deformation. Therefore, to counter such perceptions, organizations need to rebrand and present themselves as ethical. For example, British Petroleum has made its ethical and social obligations part of its core values by using the ‘Beyond petroleum’ strategy.

Community needs also present a strong case for social and ethical responsibilities in organizations. Since businesses normally take resources from particular communities, then it is only fair to compensate those communities that have released the resources to organizations. Sometimes because the resources are accumulated from various locations, companies may choose to engage in community development in any part of the world. For example, Shell has established a project known as Flower valley in Africa. It is intended to provide children an opportunity to acquire skills needed in their adult life through learning centers. Additionally, Marks and Spencer have set up trade networks with communities to ensure fair trading. This has protected communities from unfair buys thus promoting development.

Because companies are part of the global environment, then they must consider the social problems that global citizens go through. In other words, these social obligations stem from philanthropic concerns. More often than not, organizations will donate money to selected organizations or selected communities. However, many argue that such a perspective does not promote long-term solutions as it only tackles momentary problems in poor countries.

Sometimes business operations can be done unethically and companies must therefore step in to prevent these occurrences. For example, those firms that outsource some of their production to different parts of the world may find that labor practices are not in line with international standards. It is the prerogative of such organizations to take up responsibility for instating ethical manufacturing practices. Additionally, some countries may use potentially dangerous production methods that may affect consumers’ health. This routinely creates a need for responsible corporations in such situations. One such case was KPMG; the latter firm specializes in coffee and tea production. It committed only to purchasing products from suppliers who engage in fair practices and who adhere to strict labor practices.

Companies also considered ethical and social obligations as a competitive strategy (Fields, 2002). Nowadays, analysts have asserted that certain similarities exist between social welfare goals and corporate success. In this regard, companies need to embrace all the opportunities available to them to gain a sustainable advantage; therefore ethical concerns are one of these avenues. Leading corporate strategists like Michael Porter acknowledge that the traditional conception of social responsibility as a business liability needs to be revised. Compliance with environmental and social standards can give a company some source of advantage as this builds its value. It should be noted that this mostly refers to long-term goals. Several organizations in the United States have used ethical and social responsibilities as unique selling points in their businesses and these include the Body Shop as well as American Apparel. These firms have established themselves as best practice firms. Consequently, their consumers do not just purchase their items based on ordinary consumer needs but they do so because they are responsible corporate citizens. (Roth & Bansal, 2000)

A more reactive need exists in the business environment as well; they need to cope with government regulations. Failure to comply with common ethical or social obligations can cause governments to impose certain restrictions upon firms and this can harbor their operations. For instance, in every industry certain safety and health standards exist that companies must oblige. Furthermore, countries have instated certain diversity requirements during recruitment such that businesses must reflect cultural differences in their societies. Taking up these obligations can ensure that firms stay in business without interruption.

Optimal ethical decision-making processes

Ethical decision-making processes need to be a sign of the needs of concerned stakeholders. For instance, investors and shareholders sometimes require responsible actions by corporations and these should be given utmost precedence. Furthermore, the concern should be given to the apprehensions of other stakeholders who have a direct effect on a particular business because, at the end of it all, organizations have been created to meet the needs of these stakeholders. Non-governmental organizations are increasingly affecting the way decisions are being made in the corporate arena so companies must keep in mind pressure from such bodies.

Ethical decision-making processes are often seen in the day-to-day operations of firms. Although some ethical experts assert that humans have the inherent tendency to manipulate or act selfishly, the right training and culture can cultivate an atmosphere of ethical responsibility. In this regard, employees will only make decisions based on governmental laws or moral norms (in instances where the former are absent or not applicable). Numerous firms use this kind of reasoning during decision-making processes. An example is Best Buy and another is Caterpillar. The latter companies have nurtured healthy environments for social and ethical responsibilities through training and forging the right corporate culture. Consequently, they have reaped its benefits by having employees who think twice before making a morally challenging choice. (Hemingway, 2005)

Ethical decision-making should also involve foreseeing problems and mitigation against them in whichever way one can. Several organizations have demonstrated how reckless they have been in their decisions and this has caused them severe repercussions. For example, toy manufacturing giant Mattel was confronted with the problem of lead poisoning in their toys after it was discovered that the type of paint used had this harmful substance. Consequently, the organization was forced to recall most of its toys. Part of their strategy to mitigate these problems was the statement of quality control and risk management processes. The latter firm would have been better off if it has included these aspects in decision making. In other words, companies need to consider risk management as a vital part of their ethical decisions. Manufacturing businesses are at a high risk of ethical crises; consequently, they need to be more vigilant than other types of organizations. In this regard, they should never compromise on the quality of products.

Environmental issues need to be considered when producing commodities as well. For example, a company such as Magellan Metals had to halt its operations immediately after it had been discovered that the company was releasing lead into the environment and hence killing the local bird population. The firm had to use up its remaining resources to clean the physical mess that it had created. The organization’s staffs were likely well aware of the repercussions of their actions but they chose to continue acting despite this because they did not have a strong sense of ethical responsibility. In other words, they let their need for short-term profit override their obligations to their community and this eventually compromised those very goals that they had set for themselves (Sacconi, 2004).


Companies need to prioritize what matters or what is most relevant to them in terms of ethics. To do this, they can start with the general community and combine it with social concerns. Furthermore, they can proceed to consider some of the issues that matter to their employees such that greater engagement may be achieved from the latter individuals. Lastly, the media, consumers, and academics should also be engaged in ethical decision-making processes because their needs will tremendously affect how a particular company can earn profits. Lastly, companies need to regard their ethical obligations as their moral responsibilities as this is not something optional. Their actions can halt their ability to profit.


Roth, R. & Bansal, P. (2000). Why Companies may go green: ecological responsiveness model, Management Academy Journal, 43(4), 717.

Fields, S. (2002). Sustainable businesses make dollars. Environmental Health journal, 110(3), 142-154.

Sacconi, L. (2004). Social contract for corporate social responsibility. Business Ethics Journal, 11(5), 67-90.

Hemingway, C. (2005). Personal values for corporate entrepreneurship. Business ethics journal, 60(3), 233.

Chapple, W., Crane, A. & Matten, D. (2003). Revealing the true corporate citizenship. Business ethics journal, 54(1), 109.

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