Within my business degree, one of first unit's I am studying is Ethics. When starting to learn the basic beliefs and arguments for the theories, I quickly realised how big this subject truly is, and that my year group along with many other students, barely get the opportunity to scratch below the surface of this incredible subject. My interest was spiked when starting to revise Corporate Social Responsibility (CSR) and how a corporation can use a corporate internal decision structure (C.I.D.S). The first statement I read on this was in a BU Lecture presentation1 - stating, 'every organisation has a corporate internal decision structure, so it is possible to identify responsibility and thus accountability'. Yet, when reading the Crane and Matten Book, 'Business Ethics', it shared Paul French’s view on the use of the C.I.D.S, stating that it worked in the corporations favour - rather than against - ‘By when acting together, result in a situation whereby the majority of corporate actions cannot be assigned to any individuals decisions alone - and therefore accountability alone'; suggesting that both the organisational chart and corporate policies, result in the inability of corporate actions being assigned to any one individual and be their responsibility alone. The first issue, when conducting further research it became apparent quickly that no definition of the C.I.D.S had actually been given here – instead, opinions of the use of the structure. The issue at hand is the fact that French’s opinion of the use of the C.I.D.S became the definition. The problem of ones opinion taking on the form of a definition doesn’t appear to be a problem with this single case in Ethics, but in other cases also - such as within Fayol’s Principles of Management2. It is therefore necessary to define an independent specification of what a C.I.D.S is, so that ones opinion of the use of it, does not become part, or all of, the definition. The second issue, whether French’s opinion of the use of the structure is correct. The C.I.D.S (as argued by French) 'directs decisions in line with predetermined goals'. He states that the structure involves two main parts (the organisational chart & H.L.A Hart’s, 1961, rule of recognition). Firstly, the government body will need to use H.L.A Hart’s set of rules of recognition to establish whether this was a corporate decision or one of an employee, without an accepted reason. This can be achieved by looking into the corporation’s policies, vision, mission, goals, aims and objectives. Hypothetically, this would create problems however, if one main corporate objective were based on the corporation’s vision - which hadn’t been updated for a number of years - resulting in the original owner of the corporation now being deceased. As said by Friedman, 'a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers'. Does this not suggest that employees should make decisions, based on what they perceive to 1 L5 - Social Responsibility Advocates 2 14 principles of Administration Management, within the Classical Approach - Organisational Behaviour. 1
be in the owners of the corporation’s best interest? Furthermore, in the eyes of the law, 'where an offence under enactment is committed by a body corporate the directors, the general manager, the secretary or other senior offer of that body corporate shall be demand to have personally committed that offence'3. Assuming this is correct, then wouldn’t this also mean that only the owners could be penalised for any wrong doing in a corporation - since employees have the responsibility 'to conduct the business in accordance with their desires' (Friedman)? Nevertheless, it is important to note here this is by no means saying a corporation has a 'free pass', to do as they please if they think it could be what the owners (or original deceased owners) would want. Imagine, if around 36,000 McDonald's Store Managers decided to set individual restaurant objectives, that they believe would be in Ray Kroc’s best interest; this could cause complete chaos, if was how corporations thought! Friedman's famous belief of CSR is that a corporation only has one CSR, which is profit maximisation - 'so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud'. Thus appreciating the simple fact that a corporation cannot survive, if it’s sole focus is profit - preventing future chaos due to possible wrongdoings for the goal of profit! Contradictory to above, Fayol's second Principle of Management, Authority, states that 'Responsibility involves being accountable, and is therefore naturally associated with authority. Whoever assumes authority also assumes responsibility'. Fayol's theory of a Principle of Management would oppose Friedman’s theory, suggesting that it would be the employee (most likely the manager) authorising (gives the go ahead) for the decision, who is both responsible and accountable, and not the owners of the business (unless was them who authorised the decision). The corporation’s organisational chart can be used to discover the job roles of the individual employees, and consequently their job descriptions; therefore, the member of the corporation who gave the direction to commit the wrongdoing, would be discovered, and only when determining this, should any one individual be penalised. An issue here however, is the assumption of the corporation having a thorough C.I.D.S, when this may not be the case. For instance, 'Soho'4 does not have any supervisor roles. Every employee is considered an equal, apart from the manager. Fayol's principle would imply that, if only the authoriser can be responsible and accountable, then the manager of the bar will always be at fault for any employees wrongdoing. This could be an issue for corporations such as those that are family-orientated and don't have a strong internal decision structure when get to the owner section of the organisational chart, due to becoming less rigid at the top. In today’s society, management is formed of many different levels. Consequently, it wouldn't be accurate to use an organisational chart to pinpoint the authoriser of a decision. 'Scalar Chain' and 'Unity of Command, Principles of Management (by Fayol’s), suggest employees should communicate to the direct 3 Irish Data Protection Act, 1988 4 A bar in Torquay, Devon, United Kingdom 2
superior above them, rather than one multiple levels above. This means that floor staff should communicate with their shift supervisor, not store manager. For a large corporation, looking at their organisation chart to pinpoint the authoriser of the wrongdoing would not be an easy task when although we would like to assume employees cooperate with the desired scalar chain of communication, in reality, they don't - levels of management can be skipped in order to directly communicate with higher levels of management. Moreover, consideration for how the power within the corporation is centralised will need taken into account. (Fig.1)5 The hierarchical path of communication within the corporation, and whether or not they had a gang path, would also need to be determined. The image to the left would apply to a corporation who had what’s known as a 'double ladder'. For instance, in theory employee F should have authorisation from employee E. For employee F to communicate with employee P, both employees should have climb through to A. It would be much more time efficient however to directly communicate with each other, causing that to be the case more often than not. This would create the problem of not knowing who the employee also spoke to when committing a wrongdoing, as could be anyone within the corporation. The issue of this not being common within corporations in today's society could be traced back to Fayol, since suggested there could be a gang plank/bridge and the structure can be ignored at times. If he insisted the chain of command is necessary all the time, it would allow for French's theory of the use of the C.I.D.S to be more believable. The span of control will also need to be taken into consideration. If the corporation has a wide span of control, then a manager is responsible for. By using a simple calculation, the corporation is able to calculate their efficient span of control, which can then be reflected within their organisational chart by how many employees are managed by that single employee. If the corporation were to have a Narrow span of control - a flat organisation there would be more managers, resulting in more possibility of bridging the communication structure and more possibility of true accountability. However, this can mean that the corporation is able to closer supervise the employees and control their decisions more effectively. Whereas, if the corporation was to have a wide (and more common) span of control- a tall organisation- the number of possible employees who can be accountable for a wrongdoing could be less due to there being less superiors able to authorise an action. This can also prevent wrongdoing within a 5 Gazendam, H. W. M. Conceptual Analysis and Specification of Fayol’s Management Principles Using the CAST Method. Groningen: Wolters-Noordhoff, 1993. University of Groningen. Web. 02 Nov. 2015. 3
corporation if employees have to consult with the manager rather than a supervisor due to considering their action more seriously and the manager having a more ethical outlook due to the potential damage it could cause. 'Centralization' the eighth Principle of Management, suggests that the most important decisions are made at the top levels of management and less important ones are made at the lower levels. If a corporation was to operate using this principle, then it would lessen the potential management who could have authorised the wrongdoing. However, the corporation may operate with a decentralised approach - distributing power at every level of management resulting in the wrongdoing being authorised by any level of management. French believed that with both, the organisational chart and H.L.A Hart’s rule of recognition, it was possible to know the raw ingredients of the corporation, and this would be something of a 'moral agency in natural persons'. Moral agency can 'also be termed responsible agency, meaning that a person is open to moral evaluation'. If a person can be open to moral evaluation, then can't a person chose to be closed? Thus, implying that a choice could be involved. French’s theory of the use of the C.I.D.S suggesting that responsibility can be accounted for, because the individual employees are moral agents, would require that employees are willing to be open to morality reasoning. Within morality, it is important that the employee thinks 'about their actions in the right manner' (Kant) and the 'good will' of the employee would had to have been considered within French’s theory. For example, a McDonald's employee not charging a child the full price for a Big Mac burger, because it had to be thrown away in one minute, if not sold, wouldn’t make the employee a moral agent if it was because their manager was behind them watching. However, if the discount were due to the employee’s honesty, then this would make them a moral agent - meaning that French’s theory is correct. Supporting the propositions above is the well-known argument by Manuel Velasquez (1983). The structures within the C.I.D.S that French are referring to, are 'the product of human agency and design' - where there are rules of cooperation (for the workers, managers etc.) under the corporate banner (vision and mission statement). By French assigning the role of a moral agency to a corporation, it asks the question - how a corporation can be morally responsible for something that a natural person can’t be; when a corporation is a separate entity to those who work, manage and own the corporation. If the separate entity entitlement allows for managers to make mistakes causing financial losses - and yet not lose their houses (that aren’t attached to the business) as personal, then surely this entitlement has to allow for managers (and other employees) wrong doings in the decision making process and not be personally penalised. When because of organisational norms and cultures, their decisions are only based on trying to achieve success for the business, which would have been installed into them from training upon joining the corporation. Which again, would lead back to not only the (potentially long deceased owner of the corporation), but also consideration for the knowledge of other goings on in society and considering them norms, whether technically considered unethical not. 4
What's more, 'Esprit de Corps', the fourteenth Principle of Management suggests that corporations should strive to promote team spirit and unity as said by Fayol "Union is strength" and 'subordination of individual interest to general interest', the fifth Principle of Management suggests that employees should sacrifice their personal interests for the good of the corporation - meaning that the goals of the corporation would be preferred over the interest of the employee. Although could be in the employees best interest to do the 'right' thing over the 'wrong' thing, because of this principle, they may chose to go ahead with the wrongdoing - if believe it would aid in achieving the corporations goals. As a result, this would all would contribute to corporate norms and culture and potentially suggesting the wrongdoing may have been done for the benefit of the team and not solely for ones benefit. Within Archie Carroll's CSR, 4 part model, the first responsibility for corporations to meet is Economic Responsibilities. As suggested by Hockerts et al (2008) this CSR model is displayed as a hierarchy. To meet this level, a corporation 'has a responsibility to produce goods and services that society wants and sell them at a profit. All other business roles are predicted on this fundamental assumption' 6. This further questions the possibility that corporations can be moral agents when they first and foremost have a responsibility of making profits. For a corporation to be working towards a goal of achieving a profit, these would have been set within the corporation’s objectives. How can you penalise a corporation, or a single employee, for making objectives based on a corporation trying to be socially responsible? Another of Fayol's Principles of Management is 'Initiative', suggesting that employees should be allowed to see their plans thorough without the authorisation of management. As a result, the employee may see him or herself as achieving this basic level of CSR if using their initiative in order to achieve greater profits, and not had the 'ok' from a manager/supervisor, but was of their own authorisation. French's view of the use of the C.I.D.S can be finally questioned when considering Friedman’s view - of the role of the corporate executive within his article. It states that 'a corporation cannot have moral responsibilities that people can- only artificial ones' because a corporation is seen as an 'artificial person'. This creates the question, how can you assign responsibility to an employee if they are working for something that is artificial? Shooting a criminal in a game therefore artificial - does not assign a child responsibility for murdering a person, so why would an employee be responsible for making a decision that, according to Friedman, has no moral recognition to them. The first two different opinions on accountability based on the C.I.D.S, were based on a opinion of the use of the C.I.D.S - and not, the C.I.D.S itself. Therefore, to find the correct opinion of whether responsibility can be accounted for by one employee (or a few), within a corporation, it would require French’s 'definition' of the C.I.D.S to be correct. If a statement were to be made such as ‘the C.I.D.S - if taking into account the organisational chart and the corporations vision, mission, goals, aims, objectives and policies - can 6 Archie Carroll ‘A three dimensional model of corporate performance’ 1979 5
account for a degree of accountability, within wrong doings’, I’d then agree! This would then be correct, mainly because of the word “can”, as then allows for leniency for other issues to be taken into account such as corporate governance issues, in the likes of bribery. According to The New York Times, in Moscow, Ikea fired "two officials in 2010 as allowed a contractor to pay a bribe"7. The consequences of their wrong doing wasn’t as serious as it could have been and it stated that 'while bribes are common in Russia, the revelation of a lapse by Ikea executives is deeply troubling for the company because it had been in a long public campaign against government corruption'. This emphasises both, the problems of national norms as well as corporate norms (bribery is a very big issue within the Ikea corporation) having an effect on accountability. Camilla Meiby also said that "the two executives were not accused of acting for personal gain, but had agreed to a plan by a contractor to pay a bribe to an electrical company official”, This highlights the issue of trying to operate in the owners best interest, increasing profit, for the corporation, based on the C.I.D.S.
7 Kramer, Andrew E. 'Ikea Fires 2 Officials in Russia Bribe Case.' The New York Times. N.p., 15 Feb. 2010. Web. 30 Oct. 2015. 6