Foundations of CSR and Corporate Ethics

Introduction

Corporate social responsibility (CSR) and corporate ethics have moved from the margins of business activity to the centre of strategic and leadership practice. Organisations are now judged not only by the goods and services they provide, but also by how they obtain resources, treat employees, affect communities, manage environmental impacts, use data, and exercise power. Investors, regulators, consumers, employees and civil-society organisations increasingly expect businesses to demonstrate responsible conduct and to provide credible evidence of their claims.

CSR is not simply charitable giving, public relations or compliance with the law. It is a broad approach to managing the economic, social, environmental and ethical consequences of organisational decisions. Corporate ethics provides the principles and reasoning used to determine what an organisation ought to do, while CSR concerns how those responsibilities are recognised, managed and communicated in practice.

This chapter establishes the conceptual foundation for later study of CSR strategy and leadership. It explains the evolution and terminology of CSR, distinguishes closely related concepts, introduces major theoretical frameworks, and examines the relationship between profit, society and the natural environment.

Learning Objectives

By the end of this chapter, you should be able to:

1. Explain the historical development and changing meaning of CSR.
2. Distinguish CSR from sustainability, ESG, corporate citizenship and philanthropy.
3. Describe major theories and models used to understand corporate responsibility.
4. Analyse the ethical responsibilities of organisations to stakeholders.
5. Explain how legitimacy, trust and organisational accountability influence business success.
6. Apply CSR and ethical reasoning to a practical organisational situation.

1. The Meaning and Scope of CSR

There is no single universally accepted definition of CSR. The concept has developed in response to changing expectations about the role of business in society. A useful working definition is:

CSR is the organisation’s responsibility to understand, prevent, manage and account for the economic, social, environmental and ethical effects of its activities, while creating value for relevant stakeholders.

This definition contains several important ideas.

First, CSR concerns responsibility, not merely opportunity. A responsible organisation considers the consequences of its decisions, including consequences that may not appear in its financial accounts. Second, CSR is concerned with impacts. A company cannot compensate for serious labour abuses or pollution simply by sponsoring community events. Third, CSR involves accountability: organisations should be able to explain their decisions, provide evidence and accept scrutiny. Finally, CSR is connected with stakeholders, meaning parties who affect or are affected by the organisation.

CSR covers issues such as:

• fair treatment, diversity and inclusion in employment;
• occupational health and safety;
• human rights in supply chains;
• responsible marketing and product safety;
• environmental protection and climate action;
• anti-bribery and anti-corruption;
• data privacy and responsible technology;
• community relations and development;
• tax responsibility and transparent governance; and
• responsible engagement with governments and regulators.

The scope of CSR depends on the organisation’s sector, size, geography and impacts. A mining company, a hospital, a bank and a software company face different risks, although all have ethical responsibilities.

2. The Evolution of Corporate Responsibility

Early foundations

Business responsibility has long existed in the form of duties to employees, customers, communities and the state. Religious traditions, professional codes and ideas of stewardship encouraged business owners to behave responsibly. However, early approaches were often based on personal benevolence rather than formal organisational systems.

During industrialisation, large factories generated employment and economic growth but also produced dangerous working conditions, child labour, urban pollution and exploitation. Social reform movements and labour organisations challenged the idea that legal ownership gave businesses unlimited moral freedom.

The twentieth-century development of CSR

In the mid-twentieth century, CSR became a subject of management and academic debate. Howard Bowen’s work in 1953 is often associated with the modern study of the social responsibilities of business executives. Bowen argued that business decisions should reflect values and expectations held by society.

Later debates became more polarised. A strongly shareholder-centred view argued that managers should focus on increasing owners’ returns, provided they obey the law and follow accepted rules of competition. A broader view held that corporations possess considerable social power and therefore owe duties to employees, consumers, communities and the environment as well as shareholders.

In the 1970s and 1980s, stakeholder theory, business ethics and social performance became increasingly important. The question shifted from whether business had social responsibilities to how those responsibilities should be identified and managed.

Globalisation and accountability

From the 1990s onward, global supply chains made corporate impacts more difficult to locate and govern. Companies could outsource production, while consumers and investors still held the lead firm responsible for labour and environmental conditions. International standards, voluntary codes, social audits and sustainability reports expanded in response.

Major corporate scandals also demonstrated that legal compliance alone is insufficient. Organisations may comply with formal rules while encouraging misleading sales practices, excessive risk-taking or a culture that suppresses dissent. Ethical culture became recognised as a governance issue rather than merely an individual matter.

Contemporary CSR

Today, CSR is increasingly integrated with sustainability strategy, risk management, human rights due diligence, climate transition planning, responsible investment and corporate reporting. Important contemporary concerns include:

• climate change and the transition to low-carbon business models;
• biodiversity loss and resource scarcity;
• modern slavery and supply-chain transparency;
• racial, gender and economic inequality;
• artificial intelligence, surveillance and algorithmic bias;
• greenwashing and misleading social claims; and
• the credibility and comparability of non-financial information.

The contemporary trend is from isolated projects towards embedded responsibility: responsible practices should be reflected in strategy, procurement, operations, incentives, leadership and board oversight.

3. Related Concepts and Their Differences

The terms used in responsible business are related but not interchangeable.

CSR and sustainability

Sustainability is a broad concept concerned with the ability of social, environmental and economic systems to endure. It often includes the needs of future generations and the limits of ecological systems. CSR focuses more directly on the responsibilities and impacts of an organisation. Sustainability asks whether a pattern of development can continue; CSR asks what the organisation should do about its contribution to that pattern.

The concepts overlap. A company reducing emissions, protecting workers and designing durable products may be advancing both CSR and sustainability. However, sustainability can be discussed at the level of cities, ecosystems or national economies, while CSR specifically addresses organisational responsibility.

CSR and ESG

ESG stands for environmental, social and governance. It is commonly used by investors, analysts, rating agencies and reporting systems to classify information relevant to organisational performance and risk. Environmental factors may include emissions and water use; social factors may include labour standards and human rights; governance factors may include board independence, controls and anti-corruption systems.

CSR is primarily a responsibility and management concept. ESG is often an assessment, disclosure or investment framework. A high ESG score does not automatically prove that a company is ethical: ratings may differ in scope, rely on incomplete data or measure exposure to risk rather than actual social benefit. Conversely, a CSR initiative may be valuable even when it has limited relevance to investors.

CSR and corporate citizenship

Corporate citizenship presents the corporation as a participant in civic and social life. It emphasises rights, duties, relationships with communities and contribution to public wellbeing. The term can encourage organisations to consider how their power resembles that of a social institution. Critics, however, note that corporations are not citizens in exactly the same legal and moral sense as individuals and that citizenship language can conceal unequal power.

CSR and philanthropy

Philanthropy is voluntary donation of money, products, time or expertise to a cause. It can be an important part of CSR, but it is only one part. Philanthropy does not excuse harmful core operations. A company that donates to schools while producing unsafe products has not demonstrated comprehensive responsibility. Strategic philanthropy is most credible when it complements, rather than substitutes for, responsible operations.

4. Theoretical Foundations

The stakeholder perspective

Stakeholder theory, associated especially with R. Edward Freeman, argues that organisations should create value for all groups that affect or are affected by corporate activity. Stakeholders may include employees, customers, suppliers, investors, communities, governments, future generations and the natural environment.

Stakeholder management does not mean that every demand can be satisfied equally. It requires managers to identify legitimate interests, assess impacts, recognise power differences and make transparent trade-offs. For example, closing an unsafe facility may protect employees and communities but impose short-term costs on investors and consumers. Ethical leadership requires the decision to be justified, not merely asserted.

Stakeholder analysis commonly asks:

1. Who is affected by the decision?
2. What rights, interests or expectations do they possess?
3. Which groups are vulnerable or unable to represent themselves?
4. What are the short- and long-term consequences?
5. How can affected stakeholders participate in the decision?
6. What remedy is available if harm occurs?

The triple bottom line

The triple bottom line, associated with John Elkington, encourages attention to three dimensions of performance: people, planet and profit. It challenged the assumption that financial results alone adequately represent organisational success.

The model is useful as a communication device, but it has limitations. The three dimensions cannot always be treated as separate accounts that can be simply added together. Environmental destruction may not be compensable by higher profit, and social rights should not be reduced to a numerical score. The model is strongest when used to prompt integrated analysis rather than as a claim that all values are easily interchangeable.

Carroll’s responsibility framework

A widely used framework presents four layers of corporate responsibility:

1. Economic responsibility: produce goods or services, remain financially viable and create employment and value.
2. Legal responsibility: obey applicable laws and regulations.
3. Ethical responsibility: do what is fair and right, including where the law is incomplete.
4. Philanthropic responsibility: contribute voluntarily to community wellbeing.

The framework is often illustrated as a pyramid, but the layers should not be interpreted as a rigid sequence. Economic performance does not justify unethical conduct, and philanthropy cannot repair severe violations of law or rights. In practice, the responsibilities are interdependent.

The social contract and legitimacy

The social contract perspective holds that business operates with society’s acceptance. Organisations receive privileges such as legal personality, access to public infrastructure, limited liability and the ability to use social resources. In return, they are expected to operate in ways that society considers acceptable.

Legitimacy is the perception that an organisation’s actions are appropriate within socially constructed norms and values. A legitimacy gap occurs when there is a difference between what stakeholders expect and what the organisation does or is believed to do. Public controversy, employee departures, regulatory intervention and loss of customer trust may follow.

Legitimacy is not the same as reputation. Reputation is an assessment of the organisation’s character or performance; legitimacy concerns whether its conduct is viewed as acceptable and appropriate. An organisation may have a strong reputation in one market and weak legitimacy among affected communities.

Ethics of duty, consequences and virtue

Corporate ethical decisions can be examined through several traditions.

Duty-based ethics asks whether a proposed action respects rights, obligations and principles. Deception, forced labour and bribery may be wrong even when they produce financial benefits.

Consequentialist ethics evaluates likely outcomes. Managers consider benefits, harms, probability, scale and distribution. A limitation is that forecasting consequences is difficult and that harmful treatment of a minority may be incorrectly justified by aggregate benefits.

Virtue ethics focuses on character and organisational qualities such as honesty, courage, fairness, humility and practical wisdom. It asks what a responsible organisation or leader would do, not only which rule applies.

In professional practice, these approaches can be combined. A decision may be rejected because it violates a right, produces unacceptable harm and reflects a corrupt organisational character.

5. Profit, Society and the Environment

The relationship between profit and responsibility is frequently presented as a choice: either a company maximises profit or it serves society. This is too simplistic. Responsible conduct may reduce short-term profits through investment, compliance or remediation, but it may also support long-term value by improving trust, innovation, employee commitment, resilience and access to capital.

Nevertheless, CSR should not be justified only when it increases profit. If all responsibility is reduced to financial advantage, stakeholders are protected only when protection is commercially convenient. Ethical responsibility requires attention to rights, justice and harm, including cases where responsible action is costly.

A more realistic model recognises three relationships:

• Conflict: a firm may face short-term cost when improving wages, safety or environmental performance.
• Alignment: responsible design may reduce waste, attract talent or create customer value.
• Transformation: responsibility may change the business model itself, such as replacing a disposable product with a durable or circular alternative.

Environmental responsibility is particularly important because ecosystems provide resources and absorb waste, yet many environmental costs are externalised. An externality occurs when the costs or benefits of an activity affect parties who are not directly involved in the transaction. Pollution imposed on a community is a negative externality. CSR and public regulation seek to ensure that decision-makers recognise and manage such effects.

The concept of planetary boundaries also challenges unlimited growth based on resource consumption. Businesses must consider not only efficiency but also absolute reductions in emissions, resource use and ecological damage where necessary.

6. Ethical Responsibilities in Organisational Practice

Responsibility to employees

Employers should provide safe and healthy conditions, fair treatment, respect for dignity, lawful remuneration and meaningful mechanisms for voice and remedy. Diversity initiatives should address structural barriers rather than merely improve public image. Ethical leadership also requires protection for whistleblowers and freedom from retaliation.

Responsibility to customers

Organisations should provide safe products, accurate information, accessible services and fair contractual terms. Marketing becomes unethical when it deliberately exploits vulnerability, conceals material risks or creates unreasonable expectations. Digital businesses have additional duties concerning privacy, consent, cybersecurity and algorithmic fairness.

Responsibility to suppliers and workers in value chains

A company may cause harm indirectly through purchasing practices that demand unrealistic prices or delivery times. Effective supply-chain responsibility therefore requires risk assessment, contractual standards, worker engagement, credible monitoring and remediation. Audits alone are insufficient when workers fear reporting violations or when buyers ignore audit findings.

Responsibility to communities and the environment

Organisations should identify impacts on health, livelihoods, culture, land, water and ecological systems. Consultation should occur before decisions are finalised, especially where affected communities are vulnerable or historically excluded. Community investment is most credible when the organisation first prevents and remedies harm caused by its core operations.

Responsibility to investors and regulators

Investors are entitled to accurate information and responsible stewardship of capital. Regulators and the wider public expect compliance, cooperation and honest reporting. Concealing risks, manipulating disclosures or lobbying against public protections while claiming social responsibility undermines corporate integrity.

7. From Principles to Practice

A CSR strategy translates values and responsibilities into priorities, objectives, resources, governance arrangements and measures. A practical process can include the following stages.

Stage 1: Understand the organisation’s context

Map products, operations, locations, stakeholders, supply chains and dependencies. Identify where the organisation has the greatest potential to cause or contribute to harm.

Stage 2: Conduct materiality and impact assessment

Materiality traditionally asks which issues could influence organisational decisions or performance. Impact-oriented assessment also asks which activities have the most significant effects on people and the environment. Organisations should not ignore severe impacts merely because they are difficult to measure financially.

Stage 3: Set priorities and objectives

Objectives should be specific, time-bound and connected to organisational authority. For example, “improve sustainability” is weak; “reduce absolute operational emissions by a stated percentage by a stated year, using a defined baseline and credible measurement method” is more useful.

Stage 4: Assign responsibility and resources

Boards should oversee major risks, while senior leaders integrate responsibility into strategy. Operational managers need budgets, training, decision rights and incentives. Responsibility cannot be delegated entirely to a CSR department.

Stage 5: Engage stakeholders and provide remedy

Engagement should be inclusive, accessible and capable of influencing decisions. A grievance mechanism should be safe, confidential where appropriate, predictable and linked to remedy. Consultation without the possibility of change is largely symbolic.

Stage 6: Measure, disclose and improve

Organisations may use indicators such as injury rates, emissions, staff turnover, supplier findings, complaints resolved and remediation outcomes. Indicators should be defined consistently, supported by reliable evidence and interpreted with care. Reporting should disclose negative as well as positive results.

8. Leadership and Governance

CSR becomes credible when leadership systems reinforce it. Boards and executives influence culture through strategy, resource allocation, incentives, appointments and responses to bad news. If leaders publicly endorse ethics but reward only sales volume, employees receive a contradictory message.

Effective governance commonly includes:

• board oversight of material social and environmental risks;
• clear accountability for responsible performance;
• a code of conduct supported by training and advice;
• independent channels for raising concerns;
• due diligence for high-risk activities and relationships;
• controls against bribery, fraud and conflicts of interest;
• transparent reporting and assurance; and
• consequences for misconduct, including at senior levels.

Ethical culture is demonstrated by what the organisation does when responsible action is inconvenient. Leaders should encourage challenge, admit uncertainty and avoid unrealistic targets that make misconduct predictable.

9. Illustrative Case: Meridian Apparel’s Supply-Chain Decision

Background

Meridian Apparel is a fictional mid-sized clothing company that sells affordable garments through online and retail channels. It has grown rapidly by outsourcing production to factories in three countries. Its annual report highlights a school-support programme and donations to local charities.

Problem

A worker organisation reports excessive overtime, recruitment fees charged to migrant workers and unsafe fire exits at one supplier. Meridian’s purchasing team argues that changing suppliers before the peak season will increase prices and delay orders. The supplier passes Meridian’s social audit, but interviews conducted by an independent group suggest that workers were coached before auditors arrived.

Analysis

The issue is not solved by asking whether Meridian made the violations itself. Meridian may be contributing to the risk through low prices, short lead times and weak monitoring. Stakeholder analysis identifies factory workers as rights-holders and vulnerable stakeholders; customers, suppliers, investors and the company are also affected.

A narrow philanthropic approach would continue donations and issue a public statement. A CSR and ethics approach examines purchasing practices, worker voice, remediation and management incentives. The company must also distinguish between immediate protection and long-term system change.

Approach and solution

Meridian takes the following actions:

1. Requires immediate correction of blocked fire exits and reimburses unlawful recruitment fees to affected workers.
2. Establishes a confidential worker grievance channel in relevant languages.
3. Suspends new orders only where necessary to prevent serious harm, rather than abruptly abandoning workers.
4. Reviews its purchasing deadlines, price negotiations and forecasting practices.
5. Places worker representatives and independent specialists on a remediation committee.
6. Links senior procurement incentives to labour and safety outcomes, not only cost and delivery.
7. Publishes the problem, actions taken, limitations and progress timetable.

Outcome

In the short term, Meridian incurs additional costs and faces delayed deliveries. Over the following year, worker complaints are resolved more quickly, turnover declines and the company develops more stable supplier relationships. The company does not claim that the problem has disappeared; instead, it reports remaining risks and continues verification.

Learning points

The case demonstrates that CSR is broader than charity, audits and public relations. It requires attention to causes, power relationships, stakeholder participation, remedy and organisational incentives. It also shows that responsible leadership may involve accepting short-term financial costs in order to protect rights and preserve long-term legitimacy.

10. Challenges and Limitations

CSR faces several important criticisms and practical difficulties.

Greenwashing and social washing occur when organisations exaggerate responsible performance or use selective information to create a favourable impression. Clear claims, evidence, boundaries and independent verification reduce this risk.

Measurement problems arise because social value, dignity, trust and ecological resilience cannot always be represented by a single indicator. Quantification supports accountability but should not replace judgement.

Conflicting stakeholder interests make prioritisation unavoidable. Organisations should explain trade-offs and provide remedy rather than pretending that all interests are automatically aligned.

Global differences create challenges concerning labour standards, culture, law and enforcement. Respect for local context does not justify violating universal human rights.

Voluntary action and regulation are sometimes presented as alternatives. Voluntary initiatives can encourage innovation, but regulation establishes minimum protections and addresses collective-action problems. Effective CSR generally requires both.

Power imbalance may weaken consultation. A community that depends on an employer may not be able to express disagreement freely. Stakeholder engagement must therefore consider independence, representation and access to remedy.

11. Contemporary Developments

CSR is increasingly connected with mandatory sustainability reporting, human-rights due diligence, climate-related risk disclosure and responsible artificial intelligence. These developments increase expectations for evidence, governance and traceability.

AI can support supply-chain risk analysis, emissions monitoring and document review, but it also creates ethical risks. Biased training data may produce discriminatory outcomes; automated systems may obscure responsibility; and surveillance may violate privacy. Organisations remain accountable for decisions made with technological assistance. AI should therefore be governed through human oversight, explainability appropriate to the context, data protection, testing and avenues for appeal.

The future of CSR is likely to emphasise impact rather than claims. Organisations will be expected to demonstrate not only policies and activities, but also whether people and ecosystems are actually better protected as a result.

Chapter Summary

CSR is the organisational responsibility to manage and account for economic, social, environmental and ethical impacts. Its development reflects industrialisation, social movements, globalisation, corporate scandals, environmental challenges and rising stakeholder expectations. CSR is broader than philanthropy and cannot be reduced to public relations or legal compliance.

Sustainability concerns long-term resilience; ESG provides a classification and assessment framework; corporate citizenship emphasises the organisation’s role in society; philanthropy concerns voluntary giving; and corporate ethics addresses principles of right conduct. These concepts overlap but serve different purposes.

Stakeholder theory, the triple bottom line, Carroll’s responsibility framework and social-contract theory provide useful ways to understand corporate responsibility. Ethical analysis can draw on duties, consequences and virtues. Responsible business may involve conflicts with short-term profit, alignment with long-term value or transformation of the business model. Credible CSR requires leadership, governance, impact assessment, stakeholder engagement, remedy, reliable measurement and honest disclosure.

Key Terms

CSR: Organisational responsibility for economic, social, environmental and ethical impacts.

Corporate ethics: Principles and reasoning concerning right and responsible organisational conduct.

Sustainability: The capacity of social, environmental and economic systems to endure over time.

ESG: Environmental, social and governance factors used in assessment, disclosure and investment analysis.

Corporate citizenship: The role and responsibilities of a corporation as a member of society.

Philanthropy: Voluntary donation of resources to charitable or social causes.

Stakeholder: A person or group that affects or is affected by an organisation.

Shareholder: An owner of shares or equity in a company.

Legitimacy: Perceived appropriateness and acceptability of an organisation’s conduct.

Social contract: The implicit agreement between business and society concerning rights and responsibilities.

Externality: A cost or benefit imposed on parties outside a transaction.

Triple bottom line: An approach considering people, planet and profit.

Materiality: The significance of an issue for decisions, performance or affected stakeholders.

Due diligence: A process for identifying, preventing, mitigating and accounting for risks and impacts.

Greenwashing: Misleading presentation of environmental performance or claims.

Stakeholder engagement: Deliberate interaction with affected or interested groups.

Remedy: Action taken to correct, compensate for or otherwise address harm.

Ethical culture: Shared organisational expectations that influence responsible conduct.

Supply-chain responsibility: Accountability for impacts arising through suppliers and business relationships.

Corporate governance: Structures and processes used to direct, oversee and control an organisation.

Review Questions

Short Answer Questions

1. Define CSR in your own words and identify three areas it covers.
2. What is the main difference between CSR and philanthropy?
3. Explain the meaning of ESG.
4. What is meant by organisational legitimacy?
5. Identify the four responsibilities in Carroll’s framework.

Long Answer Questions

1. Discuss how CSR has evolved from philanthropy and compliance towards strategic and impact-oriented responsibility.
2. Compare CSR, sustainability, ESG and corporate citizenship.
3. Explain stakeholder theory and its significance for managerial decision-making.
4. Discuss the relationship between profit, social responsibility and environmental protection.
5. Evaluate the strengths and limitations of the triple bottom line.

Analytical / Application Questions

1. A food manufacturer discovers that one of its suppliers uses excessive overtime but meets all local legal requirements. Using at least two ethical theories, analyse what the manufacturer should do.
2. Design a practical CSR strategy for a small technology company that collects customer data. Identify stakeholders, material risks, governance arrangements and performance measures.
3. A company publishes extensive sustainability claims while refusing to disclose negative environmental incidents. Assess whether this represents greenwashing and recommend corrective actions.

Multiple Choice Questions with Answers

Question 1

Which statement best defines corporate social responsibility?

A. The obligation to maximise shareholder returns regardless of social effects

B. The responsibility to manage and account for an organisation’s economic, social, environmental and ethical impacts

C. The practice of donating profits to charities

D. The process of complying only with environmental laws

Correct Answer: B. The responsibility to manage and account for an organisation’s economic, social, environmental and ethical impacts

Question 2

What is the principal emphasis of ESG?

A. Charitable donations by corporations

B. Personal morality of individual employees

C. Environmental, social and governance factors used in assessment and disclosure

D. The legal incorporation of companies

Correct Answer: C. Environmental, social and governance factors used in assessment and disclosure

Question 3

Which activity is philanthropy?

A. Improving factory safety systems

B. Publishing accurate product information

C. Donating money to a community health programme

D. Reducing forced labour in a supply chain

Correct Answer: C. Donating money to a community health programme

Question 4

Stakeholder theory argues that organisations should primarily:

A. Create value only for shareholders

B. Create value for groups affected by or able to affect the organisation

C. Avoid all relationships with governments

D. Replace managers with community representatives

Correct Answer: B. Create value for groups affected by or able to affect the organisation

Question 5

Which of the following is an example of a negative externality?

A. A firm developing a more efficient production process

B. A customer receiving a safer product

C. Pollution from a factory imposing health costs on a nearby community

D. An employee receiving professional training

Correct Answer: C. Pollution from a factory imposing health costs on a nearby community

Question 6

Under Carroll’s framework, which responsibility concerns doing what is fair and right even where the law is incomplete?

A. Economic responsibility

B. Legal responsibility

C. Ethical responsibility

D. Philanthropic responsibility

Correct Answer: C. Ethical responsibility

Question 7

Why are social audits alone insufficient for supply-chain responsibility?

A. Audits can never examine working conditions

B. Audits may miss hidden problems and do not necessarily provide remedy

C. Audits are legally prohibited in all countries

D. Audits measure only financial profitability

Correct Answer: B. Audits may miss hidden problems and do not necessarily provide remedy

Question 8

A company’s legitimacy is best understood as:

A. Its total annual revenue

B. Its legal ownership structure

C. The perceived appropriateness and acceptability of its conduct

D. The number of charitable projects it funds

Correct Answer: C. The perceived appropriateness and acceptability of its conduct

Question 9

Which leadership practice most strongly supports an ethical culture?

A. Rewarding sales results regardless of conduct

B. Discouraging employees from reporting problems

C. Aligning incentives with responsible performance and protecting challenge

D. Publishing only favourable performance information

Correct Answer: C. Aligning incentives with responsible performance and protecting challenge

Question 10

Why should CSR not be reduced entirely to financial returns?

A. Financial performance is never relevant to responsibility

B. Ethical duties and protection from harm may apply even when responsible action is costly

C. Stakeholders do not care about organisational survival

D. Responsible organisations must always operate at a loss

Correct Answer: B. Ethical duties and protection from harm may apply even when responsible action is costly