Public Enterprise Management Ch20. Corporate Ethics·CSR·ESG — Social Responsibility and Sustainab...
1. Business Ethics
Business Ethics: Moral principles and value systems that determine right and wrong in corporate management activities.
Ethical Decision-Making Criteria
| Criterion | Content |
|---|---|
| Utilitarianism | Greatest happiness for the greatest number |
| Deontology (Kant) | Actions based on universal moral laws |
| Virtue Ethics | Actions arising from a virtuous character |
| Theory of Justice (Rawls) | Principles of fair distribution |
Obstacles to Ethical Management
- Ethical Fading: A phenomenon where ethical aspects gradually fade during decision-making
- Conformity Pressure: Following unethical practices of a group
- Ethical Blind Spots: A bias of failing to recognize one’s own unethicality
2. CSR (Corporate Social Responsibility)
Carroll’s CSR Pyramid (4 Stages)
| Stage | Responsibility Type | Content |
|---|---|---|
| 4 (Top) | Philanthropic Responsibility | Donations, community contribution (Optional) |
| 3 | Ethical Responsibility | Expected moral behavior |
| 2 | Legal Responsibility | Compliance with laws and regulations (Mandatory) |
| 1 (Foundation) | Economic Responsibility | Profit creation (Fundamental) |
Core: Economic responsibility is the foundation, and philanthropic responsibility is the expected top-level activity.
Stakeholder Theory (Freeman)
Corporations are responsible not only to stockholders, but to all stakeholders.
Types of Stakeholders: Stockholders / Employees / Customers / Suppliers / Local communities / Governments / Environment
Stockholder Theory vs. Stakeholder Theory
| Distinction | Stockholder Theory (Friedman) | Stakeholder Theory |
|---|---|---|
| Goal | Maximize stockholder profits | Balance interests of all stakeholders |
| CSR Perspective | Cost, waste of stockholder funds | Long-term corporate value creation |
3. ESG Management
ESG: Environmental · Social · Governance — Framework for measuring sustainable management performance.
E (Environment)
| Item | Content |
|---|---|
| Carbon Emissions | Greenhouse gas reduction, Net-Zero 2050 |
| Energy | Renewable energy transition (RE100) |
| Resource Management | Water usage, waste reduction |
| Biodiversity | Minimize ecosystem impact |
RE100: A global initiative to procure 100% of the electricity used by companies from renewable sources.
S (Social)
| Item | Content |
|---|---|
| Labor Practices | Safety, diversity, fair wages |
| Supply Chain Management | Partner human rights and environmental standards |
| Local Community | Social contribution, contribution to local economy |
| Product Responsibility | Consumer safety, personal data protection |
G (Governance)
| Item | Content |
|---|---|
| Board of Directors | Independence, diversity, expertise |
| Anti-Corruption | Transparent accounting, compliance |
| Executive Compensation | Performance-linked compensation fairness |
| Shareholder Rights | Voting rights, information disclosure |
ESG Investment
ESG Screening: Filtering investment targets based on ESG criteria. TCFD (Task Force on Climate-related Financial Disclosures): Incorporating climate risks into financial reports.
4. Corporate Governance
Corporate Governance: Principles and structures that control and direct a company — boards of directors, audits, and shareholder relations.
Agency Problem
Conflict of interest between principals (stockholders) and agents (management) — the risk that management may act for its own interests.
Means of Resolution: Performance-linked compensation / Board supervision / External audits / Enhanced information disclosure
Board Structure
- Outside Directors: External directors independent of management → Monitoring function
- Audit Committee: Supervising financial reporting and internal controls
- Compensation Committee: Determining executive compensation
5. UN SDGs and Corporations
UN Sustainable Development Goals (SDGs): 17 global goals to be achieved by 2030.
Key SDGs related to corporations:
- SDG 8: Decent work and economic growth
- SDG 12: Responsible consumption and production
- SDG 13: Climate action
- SDG 17: Partnerships for the goals
CSV (Creating Shared Value, Porter & Kramer): An approach where companies simultaneously create economic value by solving social issues. Distinct from CSR (cost perspective).
Core Summary (Frequently Tested Keywords)
| Keyword | Connected Theory |
|---|---|
| Carroll Pyramid | Economic → Legal → Ethical → Philanthropic 4 stages |
| Freeman | Stakeholder Theory |
| Friedman | Shareholder Value Maximization Theory |
| ESG | Environmental, Social, Governance |
| RE100 | 100% Renewable Energy Initiative |
| Agency Problem | Shareholder-Management conflict of interest |
| CSV | Porter, Creating Shared Value |
| TCFD | Climate-related Financial Disclosures |
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