Dilemma Solving Ethics

ID-number:

 0986764

Dilemma Workshop 1

Course code and name:

GRA 6038 – Applied Business Ethics

Hand in date

01.03.2016

Campus

BI Oslo

Introduction

In the paper, an ethical dilemma faced by a Nordic shipping company is presented. The company is using one of the harbours in the Far East which is about to be modernized. Although increasing the harbour`s capacity is appealing in terms of possible revenue growth of the company, it will involve tearing down houses of several thousands of the poorest citizens in the city the harbour is located in, with no alternative housing provided by local authority. What is more, the company has recently joined the United Nations Global Compact and has committed itself to strengthen its efforts in corporate social responsibility. Still it also has to consider possible deterioration in relations with the harbour management, which could lead to delays in shipping and losses in revenue, if the company takes any actions. The board of the company has to decide how to react to this ethical issue.

The dilemma will be addressed by describing possible company`s responses to this ethical issue using Carroll’s theory of Corporate Social Responsiveness (Crane & Matten, 2010), UN Global Compact Principles on human rights (1 and 2), Navigation Wheel for two main courses of actions. Then it will be possible to choose the best option for the company and give recommendations.  

Company`s responses according to Carroll’s theory of Corporate Social Responsiveness

The most established and accepted model of corporate social responsibility is Archie Carroll’s multi-layer concept, according to which the focus is on four main social responsibilities formed into a pyramid (Crane & Matten, 2010, p. 53). The key elements of the pyramid have economic responsibilities as basic layer, legal responsibilities, ethical responsibilities and philanthropic responsibilities as the top of the pyramid. The idea of corporate social responsiveness describes how companies respond to social concerns and expectations. It is the capacity of a company to respond to social pressures (Frederick, 1994). Archie Carroll delineated four “philosophies” or strategies of social responsiveness (Carroll, 1979): reaction, defence, accommodation, and pro-action.

1. Reaction – the company denies any responsibility for social issues, for example, by claiming that they are the responsibility of government, or by arguing that the company is not to blame.

According to this strategy, the Nordic shipping company will deny all responsibility for the local citizens since the decision maker is the harbour management, and leave the issue to the local government. The company will care about keeping and increasing its profits and can defend itself by appealing to the fact that moving to another harbour is costly and destructive to its business and that by remaining in the same harbour it will save and probably create more work places. If the company tries to negotiate with the harbour management not to let the houses to be destroyed, it may cause conflicts with the harbour management leading to problems in business. It may also lead to the harbour management decision to renew the houses and share the costs with the company that is not at all the one to blame for houses destruction. Therefore, according to this strategy, the company will deny any responsibility. In this case it is considering the Economic Responsibilities in Carroll`s pyramid (maximizing profit), it has no Legal Responsibilities since they are not violating any laws when they do not take action but it is not taking any  Ethical or Philanthropic Responsibilities.

2. Defence – the company admits responsibility, but fights it, doing the very least that seems to be required. Hence, the company may adopt an approach based mainly on superficial public relations rather than positive action.

This approach also corresponds to Economic Responsibilities in Carroll`s pyramid. The company will admit some responsibility but will not jeopardize its revenues and competitive position in this case, so it will create a PR-campaign, for instance. It can promote itself as an employer who keeps and creates new work places. The company may show that it agrees to support the harbour management because it cannot afford leaving this harbour and ruin relations, it does not have enough financial means to do so. On the other hand, the company may defend itself also by pretending to be lacking of the information about bad consequences and say that it will try to help the locals doing some social projects or providing aid in the near future. In this case the company will not risk the relation with the harbour management but will also not suffer from substantial losses.

3. Accommodation – the company accepts responsibility and does what relevant groups demand of it.

In this case, while taking ethical responsibility, the company’s board does not consider the economic responsibility to be so crucial. Possible solutions could be to cooperate with the local authorities, NGOs and the harbor management in order to find a good long-term solution to all the citizens, for instance, help to rebuild the houses, raise funds together with other companies through social campaigns. The company is not only obliged to act in an ethical way since it has signed Global Compact, so it can say it cannot act another way, but also high ethical standards will provide it with a better reputation that can benefit the firm, also economically, in the long run. By choosing this accommodation response, they do not take any philanthropic responsibility, since they do not go beyond what is expected because the citizens are not provided by anything extra that improves their quality of life. However, when choosing accommodation strategy, the company does not treat people as means to an end, so Maxim 2 is fulfilled.

4. Pro-action – the company seeks to go beyond industry norms and anticipates future expectations by doing more than expected (Crane & Matten, 2010, p. 57).

By doing something more, the company is also taking on the philanthropic responsibility of being a good corporate citizen. A solution for the dilemma according to this strategy would be cooperation with the government, NGOs, harbour management, and the locals affected. The company could also invite other companies operating in the harbour to participate in the campaign to help the locals by sharing costs needed to find a long-term housing alternative for them. The company should also provide the poor locals affected with something that also improves their living standards and life in general.  This could be achieved by, for instance, enhancing education opportunities for the locals, creating job opportunities together with other companies. This will improve company`s reputation tremendously and make it more appealing for potential employees.