In the wake of corporate scandals such as those of Enron and WorldCom, many investors, businesspeople and consumers began to take the question of corporate ethics more seriously. Dishonesty, fraud and misleading advertising can undermine public confidence in corporations. Ethics policies and corporate social responsibility (CSR) are designed to counteract this trend and to make companies behave in a more honest and productive way.
The Nature of Profit
In an honest and well-run business, a healthy profit is made in a transaction that benefits both the buyer and the seller. In some cases, either buyer or seller may decide to try to take advantage of the other party in a dishonest way, leading to a transaction that can damage one or both parties. Ethical policies are put into place to discourage the idea that a larger profit is more important than honest dealings and mutual benefit. When business relationships become exploitative, their balance and mutuality are lost. In contrast, socially responsible businesses seek to benefit both their customers and themselves.
Many people follow corporate regulations and laws simply because they have been trained to be obedient or because they don't want to get into trouble. While this is better than everyone behaving like a criminal, it doesn't lead to a true understanding of the value of ethical behavior. Ethical awareness, which ideally is fostered by comprehensive ethics policies, not only teaches people how to behave ethically but also why they should do so and how it will benefit them as well as others.
Redefining the Corporation
Corporate social responsibility attempts to redefine the corporation as an entity that has a responsibility not only to its shareholders but also to the natural environment and to society as a whole. Classical economics defines natural resources as "externalities" and assigns them no value. Traditional "robber baron" approaches to labor sought to acquire work at the lowest possible cost. CSR is a policy that bypasses these archaic attitudes and places the corporation within the context of a society on whose health it is dependent. A corporation that exploits its environment and community will eventually damage itself, and CSR attempts to avoid this by fostering a mutually beneficial relationship between the corporation and its environment and community.
Corporations that work for the public good are viewed more favorably by consumers. While many companies benefit from this fact by doing good works, some others engage in "greenwashing," putting more effort into appearing socially responsible than in being so. Serious ethical corporations take real steps to reduce their waste and pollution and treat their employees and customers well, knowing that they will benefit from the goodwill that these steps generate among the public.
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