Nicoleta Bubulac (0956246)

Soumadeep Ghosh (0954514)

Phuong Nguyen (0957545)
Vidar Lyngvr (0959755)
Laurne Zwisler (0970878)



GRA 6038
Applied Business Ethics



Workshop 1




Examination end date: 25.02.2014, 14:00








1


Introduction
Development-induced displacement (DID) is defined as the forceful eviction of
people from their homes for the purposes of economic development. Terminski
[2012] estimated that about 15 million people are displaced each year to make room
for development projects.
[4]
Cernea [2006] and Oliver-Smith [2009] support such
estimates.
[5][6]
DID often affects the poor and other marginalized groups the hardest.
Rehabilitation/resettlement may not be offered. Sometimes, there is compensation but
it does not usually commensurate the risks as well as social hardships. Terminski
[2012] argues that the societal and healtheffects of such forced migration is often
severely negative on men, women and children.
[7]
as the process of displacing people
often involves violence. Regarding this specific case, it can be argued that DID does
include varying degrees of violation of one or more of the Articles in the Universal
Declaration of Human Rights.
[8]
In our case of the Nordic company, its clear that the
local authorities will not provide alternative housing to thehomeless in the harbor
modernization process. It is probable that moving such a large number of the poor
will involve some violence as well as severe economic costs on the
individuals.However, the business itself is not causing the DID through its direct
action. In fact, the bulk of the responsibility lies on the government of the foreign
nation. Nevertheless, by taking any responsibility required by the relevant parties, the
company goes beyond in supporting human rights.







2

Q1. Describe four possible responses, based on Carrolls theory of Corporate
Social Responsiveness (see C & M).
According to Carroll (1979)
[1]
there are 4 basic Corporate Social Responsiveness
approaches:
Reaction
The first type of corporate social responsiveness is Reaction, which is denying all
responsibility. As Milton Friedman often is paraphrased,the business of business is
business (Friedman 1970).
[2]
The sole objective of the corporation is to serve their
shareholders, while still competing in a legal and fair way, and thereby it can be
argued that corporate social responsibility will be irrelevant in this case. Being the
fact that the management are acting as agents for the shareholders, their concern
should be aimed towards the shareholders interests.By applying the reaction
approach, the company should argue that resource allocation and charity should be
performed by those best equipped to do the task, which is the government. After all,
if the government is not willing to help the locals, why should the company, which is
registered in Europe, have any higher motivation? While the company will not
provide any compensation for the newly homeless, there are plenty of actions to
pursue. It will be highly important for the company to prepare a defense in case the
media gets the hold of what is going on in the harbor.
Defense
The second type of responses is Defense, according to which the company accepts to
take some responsibility, but limit them to a minimum. There are several reasons that
motivate a company to take somewhat responsibility; the most important one might
be the profitability of supporting their reputation. We know from the BP-incident,
that to neglect responsibility can mean that the reputation can take a serious hit.By
ambiguously admitting some responsibility, the company can save face at the same
time avoiding spending too much of their profits. As Carroll firmly states, the first
and fore-most social responsibility of business is economic in nature (Carroll,
1979).A way to approach this would be to arrange a press conference in order to draw
awareness to the issue, and to encourage companies and the public to give donations
3

to help the homeless. This way the company will spend a minimal amount, while
their reputation is still solid.
Accommodation
Accommodation is the third social responsiveness strategy stated by Carroll (1979).
In this strategy, the company accepts its social responsibilities and tries to conform to
economic, legal and ethical perspectives identified by Carroll (1979). In other words,
a company choosing accommodation as its social responsiveness strategy tends to use
a stakeholder approach, at a minimum level. (Freeman, 1984) In order to apply this
strategy to the case, it is important to determine the relevant groups first. The harbors
management expects the company to support the modernization, the shareholders
expect the management to maximize profits, the locals expect to be compensated for
the loss of their homes, and the employees and customers expect the company to
maintain a good reputation. A possible response according to the accommodation
strategy would be the indirect involvement of the company in helping the citizens.
Indeed, by investing money in non-governmental organizations that help to find new
habitations to the population concerned by the modernization of the harbor, the
company can answer to the expectations of all groups. These actions are in
accordance with two out of six different activities identified by Kolter and Lee
(2005)
[3]
, cause promotions and cause-related marketing. Through these two
initiatives, the company can achieve the level of accommodation of the corporate
social responsiveness response as it takes into account the stakeholder approach and
the importance economic, legal and ethical perspectives.
Pro-action
Considering a proactive response to social pressure (Carol, 1979), the company
should leadsocial initiatives in order to anticipate social problems and solution,
focusingmore on its discretionary responsibilities. Since the company wants to be
perceived as a socially responsible entity, not taking anyaction about the
displacement of the slum is not an option. The initiatives should help solvingthe
situation of the people that are about to be evacuated, in a way that wont affect the
companys relationship with the harbors management or the companys profits.
4

The main course of action should be to support the modernization of the harbor as
long asthe people are evacuated and offered new accommodation.The first step
should be to estimate how much money the company can donate for the newhouses
the without destabilizing its financial structure. Next step is to create awareness
among other companies that are using the harbor to conducttheir commercial and
delivery activities. If more companies become aware of thesituation of the homeless,
and see the example of the companys donating a considerableamount of money, they
will also donate. Scheduling a meeting with representatives of allshipping companies
willing to help, the harbors management and the local authoritiesinvolved, to discuss
the terms of the donations, the legal aspects of the action, or the horizonof time it will
take to solve the situation, will definitely bring fruitful results for each party.
Q2. Apply the Global Compact Principles on human rights (Principles 1 and 2)
to the case.
UN Global Compact Principles
The UN Global Compact is a strategic policy initiative for businesses that are
committed to aligning their operations and strategies with ten universally accepted
principles in the areas of human rights, labor, environment and anti-corruption.
[9]
Two
principles of particular interest to the case are:
Principle 1:
Businesses should support and respect the protection of internationally proclaimed
human rights.
Principle 2:
Businesses make sure that they are not complicit in human rights abuses.
Application of the Principles to the Responses
No matter what response the company chooses, it seems to be in respect of Principle
2. As the business is only a client of the harbor, it is not directly complicit if any
alleged human rights abuses do take place.However, Principle 1 requires more critical
judgment. The company probably respects the protection of human rights, but the
term support provides no clear indication as to the degree of the approach a
business might take.For example, if we take an absolutely strict moralistic view, we
5

may argue that even by doing nothing, the business plays a role in not supporting
Principle 1. In this case, the company ought to impose some cost on the harbor
management in order to truly support the principle.On the other hand, we may argue
that the reach of this principle is necessarily limited in practice, and that no sound
business can really go about championing human rights halfway around the world.
Even if they did make some demands of the harbor management, they may go
unheard. So supporting human rights in its local environment is the practical way to
support this principle, and the business probably already does perform its fair share.
Q3. Identify two main courses of action and analyze them by using the
Navigation Wheel (K & ).
Main courses of action
We have identified Reaction and Pro-action as the two main choices we want to
pursue. Defense and Accommodation seem like defensive strategies and the public
would perceive the choosing of either as the company not being assertive enough.
Reaction and Pro-action would be perceivedas active strategies.We contrast the two
choices using the Navigation Wheel by (Kvalnes & Overenget, 2012).
[10]

Economy
Regarding the Economic part of the Navigation Wheel, by adapting the Reaction
strategy, the company has to wonder if it is in accordance with the business
objectives of the company (Kvalnes & Overenget, 2012).By applying the Reaction
strategy, the company only endorses the economic responsibility described by Caroll
(1979), which can be assumed as being profitable. Furthermore, Caroll defines
Reaction as the strategy that reflects economic priorities. The Reaction strategy
implies that the company ignores other social responsibilities; therefore it will
continue its business objectives and this decision wont impact its profitability.
Adapting a Pro-action strategy will not impact the profits of the company either. Even
if the company makes a direct contribution to charity, it will have little or no impact
on its profits as it probably has a budget for Corporate Social Responsibility issues.
Furthermore, the company can claim tax relief on these donations and improve its
profits.
6

Reputation
Choosing Reaction as a response can have negative impact on the reputation of the
company. The Reputation component of the Navigation Wheel asks this question:
Does it affect our goodwill? (Kvalnes&Overenget,2012) Indeed, business reputation
is a strategic asset for the company and according to the case, if the company denies
its social responsibilities in the destruction of houses of thousands of people, it will
negatively impact the reputation of the company. It can then lead to an increase in
bad reputation via the media, result in loss of clients and a decrease in the profit of
the company. However, adopting Pro-action as a response will have a positive impact
on the reputation of the company. A direct contribution in the cause, involving
employees and partners, and investing directly to help the community would show
the goodwill of the company and its involvement in solving the issue.
Ethical analysis
Within the Ethics aspect of the Navigation Wheel, we have several tools to help us.
Most notable are perhaps the principles of ethics, the theories of ethics, and the
categorical imperative. We will here try to focus on what the main ethical theories
have to say about the case, and what Immanuel Kant would have to say.The two
ethical theories we will focus on are Utilitarianism and Deontology. While
Utilitarianism says that the right thing to do is to choose the option with the best
combined outcome, Deontology puts emphasis on the morally right action itself.One
can argue that the Reaction approach is the most profitable, and therefore the choice
to maximize stakeholder utility. However, it excludes one of the most important
stakeholders: the locals forced to move out of their homes. By pursuing a Pro-action
approach, one will most likely obtain a higher aggregated utility. From
microeconomic utility theory, we know that an increase in utility is worth more for
the poor than for the rich, which supports our argument that the ethical right thing to
do is to go with the Pro-action option.One should also consider the categorical
imperative, which aims to guide the users by its three maxims: Golden rule, Maxim
of Human Dignity, and NY Times Test. Reaction option contradicts Maxim of
Human Dignity talking about not using human beings as tools to an end, but rather as
an end in themselves. By using the Reaction response, the company initially uses the
locals as mean to increase profit. By instead applying the Pro-action response, one
7

will take into consideration that one is dealing with human beings, which are as
valuable as any other individuals. Even though, given the case that the locals are
living there illegally, the maxim holds. Just because something is legal doesnt mean
that it is the right thing to do.
Identity
In order to approach the case from the Identity point of view, the board needs to ask
themselves if this is in accordance with their values. As a shipping company, it is
likely to have shareholder interest as their main core value, maintain good
relationships, and possibly to remain as low an ecological footprint as possible. In
order to comply with these values, the company should focus on the modernizing of
the new harbor, in order to sustain the relationship with the harbor management, and
to operate as effectively as possible. However, the employees will have an identity of
themselves, which are likely to conflict with the use of the locals. From an individual
perspective, the use of the locals is likely to contradict their HSE values and their
working environment values.
Morality: Is it right?
Morality is the sum of subjective perceptions over what is right and serve as guides
and deterrents for conduct (Badura, 2002).
[11]
In terms of morality, individuals
should behave in ways that align to their personal convictions. The Reaction response
cannot be in line with the companys morality principle, since the company has
committed to convey to the Global Compact values of conducting their activities
without violating human rights, labor standards, or the environment quality and
without refraining from improvement of the situation. Opposed to Reaction, Pro-
action seems the right approach concerning morality because helping people from
homelessness and creating awareness regarding this issue, will lead to a better
outcome; not only for the poor neighborhood involved, but also for the companies
that are supporting this initiative.
Legal: Is it legal?
Business is expected to comply with the laws and regulations of the states and
governments under which the company operates (Caroll, 1979). From the legal
perspective, it can be argued that both Reaction and Pro-action as courses of actions
8

abide the law to some extent.Reaction implies not interfering in the local authorities
action of evacuating the 7000 people. In this case, the local authorities will apply the
current local laws concerning evacuation. However, this practice can be considered
against human rights and against the Global Compact principles. Perhaps it is also
against the companys own regulations regarding social responsibility, if they have
any.Being proactive is legal, as donations offered to support the construction of new
houses are not against any countrys law and starting campaigns that advertise social
responsible behavior is also perfectly legal.
Q4. Provide advice to the shipping company, based on the discussion above.
Considering all the advantages discussed above, the company is supposed to take pro-
action strategy. Though it is not an abnormal practice for a shipping company to get
involved in corporate social responsibilities actions, the firm will be a pioneer in
supporting those citizens who do not directly fall into mischief under its activities.
Through very simple and not very costly projects like: funding the homeless
relocation, providing volition training and even jobs afterwards, the company will
benefit both socially and economically. To the society, it will reinforce the image as a
responsible entity, which is willing to take more actions than required to support
human rights. At the same time, the firm gains first-mover-advantage since any
multinational companies in general, and shipping companies, in particular, will
eventually have to commit more to social responsibilities than just superstitious
actions. Regarding economic benefits, the amount company has to spend is still
inconsiderable compared to its overall profit; but it works to better the company
image. This is not to mention that the money spent for training is somehow not
wasted and can be considered investment on human capital for the future. We are also
to state the positive reactions from governments of developing countries, which can
possibly result in more favorable offers to the company for contributing in social
welfare. Hence, we conclude that pro-action is the most prominent strategy to adopt
not only for companys current position but also for its future development.

.


References
[1] Carroll, A. 1979. A Three-Dimensional Conceptual Model of Corporate
Performance. The Academy of Management Review, Vol. 4, No. 4, pg. 497 505.
[2] Freeman, R. E. 1984. Strategic management: A stakeholder approach.
Cambridge University Press.
[3] Kotler, P., Lee, N. 2005.Corporate Social Responsibility: Doing the Most Good
for Your Company and Your Cause, Best practices from Hewlett-Packard, Ben &
Jerrys, and other leading companies. John Wiley & Sons, Inc.
[4] B. Terminski, Environmentally-Induced Displacement. Theoretical Frameworks
and Current Challenges, Liege, 2012.
[5] M.M. Cernea, "Development-induced and conflict-induced IDPs: bridging the
research divide", Forced Migration Review, Special Issue (December): 25-27, 2006;
[6] A. Oliver-Smith (ed.), Development & Dispossession: The Crisis of Forced
Displacement and Resettlement (School for Advanced Research Advanced Seminar),
2009.
[7] BogumilTerminski, Oil-induced displacement and resettlement. Social problem
and human rights issue, Simon Fraser University, March 2012
[8] UN General Assembly, Universal Declaration of Human Rights (UDHR), G.A.
Res. 217A(III), U.N. GAOR, 3d Sess., U.N. Doc. A/810, Dec. 10, 1948.
[9] http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/
[10] Kvalnes, ., verenget, E. (2012). Ethical Navigation in Leadership Training.
Nordic Journal of Applied Ethics/Etikkipraksis, 6(1).
[11] Albert Badura, (2002), Selective Moral Disengagement in the Exercise of Moral
Agency, Journal of Moral Education, Vol.31, No.2, 2002.