Social Responsibility of Business Taught in Schools

Introduction

Due to high levels of competition and the presence of multiple challenges, the notion of business ethics has always been viewed rather suspiciously by most participants of economic and trade-related transactions. However, the idea of ethics and moral reprehensibility as an addition to legal agreements has been an important addition to the general principles of conduct in the American economic environment up until recently (Núñez-Cacho, Górecki, Molina, & Corpas-Iglesias 2018).

With a heavy emphasis on the critical standpoints of business ethics such as Corporate Social Responsibility (CSR), rejection of any fraudulent activities, and promotion of transparency, the American used to show rather a decent level of morality and ethical behavior. However, with the exclusion of the described points from the contemporary education system, a string of corporate scandals and instances of fraudulence was observed (Ghoshal 2005). Due to the rapid-fire nature of the observed situations after the reconsideration of the curriculum for students majoring in business and economy, it will be reasonable to infer that the reintroduction of ethics studies is necessary.

Alongside the described alteration, a change in the current principles of justice in the American market will be needed. In order to provide solutions to the situation observed currently in the American market, one should determine the factors that have defined its development in the first place. Given the time frame of the increase in the range of unethical decisions made in business, one can infer that the beginning of the problem aligns with the change in the curriculum of Business and Economy studies in American academic institutions. Consequently, a cause-and-effect connection may need to be drawn between the two. By studying the arguments in favor of returning to the traditional study of ethics in the Business and Economy classes and against it, one will prove the need to shift to the promotion of CSR and the relevant ethical principles in the context of the current American economy.

American Business Schools and the Lack of Emphasis on Moral Responsibility in Teaching

The idea of complying with ethics rigidly in an incredibly complex and competitive context of the American market might be deemed as naïve, yet it is likely to be quite productive as long as the notion in question is integrated into the designated environment for all parties involved. According to a recent study, the problem of the lack of studies on ethics and the importance of CSR has modified people’s perception of morality in business, causing graduates to overlook the significance of morality in the economic context (Ghoshal 2005).

Overall, the current principles of managing a business seem to revolve around the concept known as the Friedman Doctrine or the idea that the sole responsibility of a firm is to multiply its profit (Tian & Slocum 2016). Despite having been rather successful in the past, the described notion has worn out its welcome in the modern economic environment (Ghoshal 2005). With the increase in the importance of cultural and ethical sensitivity in the workplace, organizations have become accountable not only to their immediate stakeholders, such as employees and clients but also to the entire global community.

In addition, addressing the core of the current misconceptions about ethics in business, one should mention the misrepresentation of management theories in the academic environment when exploring the theories of business and economics. As Ghoshal (2005) notes, “obsessed as they are with the ‘real world’ and skeptical as most of them are of all theories, managers are no exception to the ‘intellectual slavery’” (p. 75).

The observed problem causes students to develop a wrong concept of ethics in the workplace, thus failing to recognize corporate fraud or any other instance of unethical behavior as such (Ghoshal 2005). Thus, the argument that the lack of focus on teaching ethics in the academic setting leads to a rise in the instances of corporate fraud is not devoid of common sense.

Viewing Moral Responsibility as an Innate Notion That Cannot Be Taught

Although the problem of corporate fraud has recently gained momentum in the global economy, the connection between the subject matter and the representation of ethics in the academic setting may be tenuous. Attributing the lack of CSR in the modern business setting to gaps in education implies that students have no moral compass prior to commencing the learning process, which is quite dubious. Even given possible differences in cultural backgrounds of learners, the importance of honesty, in general, and in business relationships, in particular, seems to be a universal notion. (Michaelson 2016). Moreover, it is sensible to expect the presence of ethical principles as an integral part of one’s identity as a member of the modern society in business people (Ghoshal 2005). Therefore, it could be argued that the teaching of moral principles and the notions of CSR s self-explanatory ideas is unlikely to cause a positive change in the American corporate environment.

However, the observations made above do not align with the evidence that can be obtained from recent cases of companies failing to comply with the standards of ethical behavior. Although the nature of ethical sensitivity has been debated vastly, there is a general agreement among scholars that the understanding of morality is fostered as an individual develops rather than observed from the very beginning of one’s personal growth (Ghoshal 2005).

Ethical senility as a notion can be applied to the realm of the corporate setting when observing interactions within it. Thus, one can conclude that the current issue with the lack of CSR and refusal to comply with ethical principles is linked closely to the specifics of business education (Palich, Neubert & McKinney 2016). The phenomenon of ES is defined by Fatima and Zafar (2018) in the following manner:

The capacity to decide with intelligence and compassion, given the uncertainty in a care situation, drawing as needed on a critical understanding of codes for ethical conduct, experience, academic learning, and self-knowledge, with an additional ability to anticipate consequences and the courage to act. (p. 12)

At this point, one should mention another essential component of ethical decision-making and the application of CSR. Apart from ethical reasoning, the notion of ethical intuition constitutes the phenomenon of ethics in the workplace (Zollo, Pellegrini & Ciappei, 2017). While, unlike reasoning, ethical intuition is based on one’s intrinsic understanding of a problem, it is still based on one’s concept of morality and can be developed. By considering different examples of ethical dilemmas and learning about the implications that each solution entails, one will be able to grasp the necessity to protect the rights of all parties involved.

Positions of Contemporary Businesses: Real-Life Examples

Despite being a very competitive environment, the global economy is currently guided by a fixed set of ethical principles. In most cases, companies that are willing to leave a strong and memorable mark on the field of their choice tend to focus on the active use of CSR and other ethical principles that help them to remain reputable and trustworthy in the target market. At the same time, the role of shareholders as the primary decision-making force behind the choices made by the company’s leaders has also been gaining momentum. Despite multiple pieces of evidence that prove the necessity to abandon the agency theory and focus on addressing the needs of multiple stakeholders, a vast range of organizations have been viewing catering to their shareholders as the ultimate path to success in the global environment.

For example, the case of General Electric (GE) shows the benefits of incorporating the principles of social responsibility into corporate management as the tool for addressing the needs of multiple stakeholders. The case under analysis proves that the use of SR is critical to firms in the modern setting since they need to cater to a much larger audience and, therefore, find ways of attracting a wider range of people. For example, the study indicates that the introduction of the principles of business ethics, specifically, the one based on the principles of Utilitarianism and the promotion of global well-being, will bring vastly positive outcomes (Ghoshal 2005).

As the authors of the analysis explain, “Utilitarian ethical theories are classified as teleological in nature because they assume that the morality of a decision is determined by taking into account the decision alternative that produces the greatest good for the greatest number of people” (Payne, Corey & Fok 2016, p. 21). Thus, the reputation of a company has to remain intact for the firm to make the desired impression and ensure customers that purchasing its services or products is fully ethical.

Thus, claiming that the sole pursuit of profit becomes the justification for a company’s decision-making would imply overlooking a vast array of factors that shape a company’s success. Underestimating the impact of these factors, such as the brand image, customer loyalty, and market presence, are likely to lead to deleterious effects for an organization, leading either to a vast loss of money or to it ultimately being forgotten by its target demographic (Gaspara, Popescua, Dragomira & Unguras, 2017).

Neither of the solutions provides the opportunity for further development; thus, the focus must be kept on researching the properties, needs, and demands of stakeholders, at the same time maintaining the balance of powers and not letting shareholders dictate their swill without full knowledge of a company’s specifics.

Another example worth scrutinizing is the case of a mostly unknown organization. The research addressing the case in question [points to the fact that cultural incongruences in the general perspective of decision-making may also serve as major points of conflict between stakeholders, especially in the global business setting (Kamilaris, Pitsillides & Fidas 2016). Therefore, it is critical to developing a uniform tool for measuring the extent to which organizations practice ethical decision-making and address the needs of their stakeholders. The company in question serves as the proof of the efficacy of the TPSR model, which is expected to support the process of managing a form in a diverse environment. For instance, the authors prove that there is a strong need to incorporate the agents of change into the organizational environment (Ghoshal 2005).

The selected strategy is believed to give an organization a major advantage in spurring its development and, thus, gaining increasingly high competitiveness with every stage of its growth (Ghoshal 2005). Although the integration of non-incremental innovations may cause certain disruptions in the firm’s operations, at first, it will allow establishing a change cycle in the firm. As a result, an organization will institutionalize change and develop a pliable approach toward meeting the ever-changing needs of its customers and quality standards. As Baptista et al. (2019) put it,

This development implies, in a sense, the need to break free from methodologies and strategies that have been observed over the years, such as the belief that teaching must be centered on the teacher, as well as the authoritarianism imposed on students in the classroom, which, in turn, generates fear of participating, intervening or even sharing their opinions. (p. 9)

The tendency to abstain from relying mostly on the traditional methodologies does not mean a complete refusal from using the theoretical frameworks utilized to manage organizations. Instead, it is recommended to revisit some of the perspectives that are used to determine the scope and goals of an organization and define the criteria for its success in the market. For example, the case of Apple, Inc. shows that to create a positive corporate image and attract new audiences, a firm is required to embrace the notion of SR wholeheartedly and refrain from any deviations from the chosen ethical principles (Fogden 2019).

Specifically, a recent report mentions that Apple’s indecisiveness and half-measures have affected the firm’s reputation in the marketplace, reducing its influence significantly (Fogden 2019). Despite the fact that the organization has been managing to maintain a continuous balance between the power of its shareholders and other stakeholders, Apple has failed to meet the current standards of social justice (Fogden 2019). As a result, the firm will need to struggle extensively to counteract the effects of the bad press that it has been receiving.

Solutions to the Concern about Moral Reprehensibility, the American Education System, and the Management of Businesses

In order to address the problem of the lack of compliance with the established ethical standards in the modern economic context, one will need to revisit the approaches toward teaching Business and economy in modern academic institutions. The curriculum in the target organizations will have to include essential corporate ethics and especially a profound study of the social responsibility of businesses. The latter notion incorporates responsibility for stakeholders, the environment, the consumers, the employees, and global society as a whole (Ghoshal 2005).

Consequently, companies will be managed by graduates who are fully aware of the impacts that fraud and other unethical choices have on companies. Specifically, people studying business and economics have to be aware of the detrimental and ubiquitous impact that unethical choices and the lack of social responsibility in corporate decision-making have on a firm’s reputation and its position in the global market. Managers must know that a drop in trust among stakeholders toward their company entails an immediate reduction in the profit margins, share prices, and performance levels within a firm (Ghoshal 2005). Once the connection between immoral behaviors in business and drastic implications, including legal repercussions, are made, people are less likely to engage in the described criminal activities.

However, using fear as the sole restricting factor in preventing managers from performing corporate fraud is a largely ineffective method of managing the present levels of corruption in business. In addition to introducing students to the negative aftermath of fraudulence in business, academic institutions also have to shift the focus from the agency theory as the leading theoretical framework for managing ethical issues in business to a more sensible approach. Ghoshal (2005) states that the use of the agency theory warps people’s perception of ethical decision-making in business, specifically, the use of leadership and its goals in running an organization (Ghoshal 2005). For instance, Ghoshal (2005) claims that the agency theory sets “unrealistic assumptions and invalid prescriptions” (p. 81). In other words, the identified theory remains an obstacle for numerous students due to its innate inconsistencies and contradictions within it.

In addition to being a crutch for managing the business as opposed to contributing to its active progress, the agency theory also opens the gateway to the misplacement of ethical standards and moral values in business for students. As Ghoshal (2005) clarifies, the agency theory distorts the notion of corporate governance, implying that the extent to which shareholders affect organizational decision-making increases, causing companies to lose their financial assets and face multiple challenges.

The shift toward corporate governance as the promotion of shareholder-oriented policies could be seen as the action entailing contradictory implications, with organizational decisions being directed to the increase in share prices and at the same time being driven away from the options defined by company-specific factors (Zou & Chan 2019). Due to the lack of understanding of the organizational context in which company decisions are taken, shareholders may lead a firm to a rapid demise unless they are made fully aware of the intrinsic company-related facts (Ghoshal 2005). Therefore, Ghoshal’s (2005) consideration regarding the distortion of the corporate ]governance principles implies that the agency theory should not be introduced into the context of business and economy education as the most effective and viable framework.

The problem of government regulation as one of the key impediments on the way to enhancing corporate performance also requires a mention due to the side effects that it will cause. As stressed above, the parties that are not privy to the specifics of a particular company’s performance are unlikely to introduce the changes that will spur its immediate growth (Ghoshal 2005). On the contrary, the innovations caused by well-meaning yet unconcerned parties will pose a threat to multiple firms’ existence, minimizing their competitive advantages (Cómez-Mármol et al., 2017). Therefore, it is crucial to retain balance in the extent to which shareholders and governments have an effect over business entities.

Thus, instead of continuing to use the agency theory as the platform for teaching economic relationships in academic institutions, educators should consider placing emphasis on representing learners to the concept of social responsibility in business. Since the latter implies direct accountability to all key stakeholders, such as customers, shareholders, employees, partners, and the global community, the proposed tool for managing ethical dilemmas has the potential of saving the modern economic setting.

The change in the theoretical framework based on which the concept of corporate managements introduced to learners will define the manner in which the target demographic will frame their understanding of the social responsibility of business. Studies show quite evidently that the attempt to “protect the pretense of knowledge” does not make the global economy flourish; quite the contrary, it causes its gradual decay (Ghoshal 2005). Therefore, the agency theory has to be reconsidered in favor of more recent frameworks that were modeled based on the idea of operating in the global, multicultural setting.

Conclusion

Despite the pressure that high levels of competitiveness place on modern businesses, companies have to comply with key ethical standards so that they could retain their reputation and the loyalty of their key stakeholders. However, with the academic approach aimed at teaching the relevant skills, a vast array of students develops business skills without the necessary sense of business ethics, such as the idea of moral reprehensibility for unethical actions. As a result, the threat of corporate fraud and less drastic yet nonetheless unpleasant effects such as a drop in loyalty among customers toward organizations can be observed in the economic setting nowadays. One can manage the described dilemma by redesigning the current approach toward teaching business.

Foisting the principles of the agency theory on learners, thus distorting their perception of the role of shareholders in a firm and rendering any opportunity for growth moot, should be abandoned. Instead, managers should accept the principles of moral and ethical reprehensibility by following the notion of social responsibility for businesses.

The proposed change will affect organizations vastly, making them embrace the notion of corporate ethics and the importance of addressing the needs of all stakeholders, including not only shareholders but also their customers and global society, in general. It is believed that the shift in the process of education will spur profound and lasting changes in all aspects of business, thus causing improvements across all areas that are affected by companies. Specifically, the needs of marginalized groups, the rights of staff members, and environmental concerns are expected to be managed.

Reference List

Baptista, C., Dias, T., Corte-Real, N., Dias, C., Regueiras, L., Pereira, A.,… Fonseca, A. (2019). Constructing agents of change through the model of personal and social responsibility (TPSR): A study of physical education in East Timor. International Journal of Sports Science, vol. 9, no. 1, pp. 8-16.

Cómez-Mármol, A, Martínez, BJSA, Sánchez, EDLC, Valero, A & González-Víllora, S 2017, ‘Personal and social responsibility development through sport participation in youth scholars’, Journal of Physical Education and Sport, vol. 17, no. 2, pp. 775-782.

Fatima, S & Zafar, MA. 2018. ‘Servant Leadership and Meaningfulness at Work: The Contingency Effect of Leader Ethical Sensitivity’, Pakistan Journal of Social Sciences (PJSS), vol. 38, no. 1, pp. 11-22.

Fogden, M. 2019. ‘Apple’s half-hearted commitment to social responsibility’. Tech.co. Web.

Ghoshal, S. 2005. ‘Bad management theories are destroying good management practices’, Academy of Management Learning & Education, vol. 4, no. 1, pp. 75-91.

Kamilaris, A, Pitsillides, A & Fidas, C. 2016. ‘Social electricity: a case study on users perceptions in using green ICT social applications’, International Journal of Environment and Sustainable Development, vol. 15, no. 1, pp. 67-88.

Michaelson, C. 2016. ‘A novel approach to business ethics education: exploring how to live and work in the 21st century’, Academy of Management Learning & Education, vol. 15, no. 3, pp. 588-606.

Núñez-Cacho, P., Górecki, J., Molina, V., & Corpas-Iglesias, F. A. (2018). ‘New measures of circular economy thinking in construction companies’, Journal of EU Research in Business, vol. 1, no. 1, pp. 1-16.

Palich, LE, Neubert, MJ & McKinney, JA. 2016. ‘Ethical attitudes of business professionals in China and the United States: same or different?’. The Journal of Business Inquiry, vol. 15., no. 2, pp. 55-84.

Payne, D, Corey, CM & Fok, LY. 2016. ‘The indirect effects of cultural values on ethical decision making via utilitarian ethical orientation’. American Journal of Management, vol. 16, no. 1, pp. 19.

Tian, X & Slocum, JW. 2016. ‘Managing corporate social responsibility in China. Organizational Dynamics,’ vol. 45, no. 1, pp. 39-46.

Zollo, L, Pellegrini, M & Ciappei, C 2016, ‘What sparks ethical decision making? The interplay between moral intuition and moral reasoning: lessons from the scholastic doctrine’, Journal of Business Ethics, vol. 145, no. 4, pp. 681-700.

Zou, LW & Chan, RY 2019, ‘Why and when do consumers perform green behaviors? An examination of regulatory focus and ethical ideology’, Journal of Business Research, vol. 94, no. 113-127.