Contemporary Business and Online Commerce Law - Chapter 7

Ethics and Social Responsibility of Business

International Law

Caux Round Table Principles for International Business

a collaboration of leaders from various multinational corporations -- promulgated on international ethics code called the Principles for International Business. So they were first introduced in 1994, the Principles have been adopted by many multinational corporations around the world.

The Caux Round Table Principles are:

1. the responsibility of business beyond shareholders toward stakeholders.


2. the economic and social impact of businesses: toward innovation, justice, and world community


3. business behavior -- beyond the letter of law toward a spear of trust


4. respect for rules


5. support for multilateral trade


6. respect for the environment


7. avoidance of illicit operations

Theories of Ethics

• ethical fundamentalism -- persons look to an outside source (ex. Bible or Koran) or central figure for ethical guidelines


• utilitarianism -- persons choose the alternative that would provide the greatest good to society


• Kantain ethics -- a set of universal rules establishes ethical duties. The rules are based on reasoning that require consistency in application and reversibility.


• Rawls's social justice theory -- moral duties are based on on implied social contract. Fairness is justice. The rules are established from unoriginal position of a "veil of ignorance."


• ethical relativism -- individuals decide what is ethical based on their own feelings as to what is right or wrong

The Corporate Social Audit

corporations that conduct social audits will be more apt to prevent unethical and illegal conduct by managers, employees, agents. Companies should institute the following procedures when conducting a social audit:

• an independent outside firm should be hired to conduct the audit. This will ensure autonomy and objectivity in conducting the audit.


• the company's personnel should cooperate fully with the auditing firm, while the audit is being conducted.


• the auditing firm should report its findings directly to the company's board of directors.


• the results of the audit should be reviewed by the Board of Directors


• the board of directors should determine how the company can better meet its duty of social responsibility and can use the audit to implement a program to correct any deficiencies it finds

Theories of Social Responsibility

• maximizing profits -- to maximize profits for stockholders


• moral minimum -- to avoid causing harm and to compensate for harm caused


• stakeholder interest -- to consider the interests of all stakeholders, including stockholders, employees, customers, suppliers, creditors, and local communities


• corporate citizenship -- to do good and solve social problems