Corporate Social Responsibility and Business Ethics in Controversial Sectors: Analysis of Research Results.

• Author: Sroka, Wlodzimierz
• Position: Report - Abstract

INTRODUCTION

Until recently, in business practice, there was a belief that companies were operating solely for the profit of their owners. Few companies have recognized the need to combine their activities with ethics, and in particular with their obligations toward society or the environment. It is also a reason why the essence of social responsibility and the conflict between real and simulated altruism has been turbulently discussed (Majerova, Krizanova, & Nadanyiova, 2015). A similar standpoint could be found in the literature. Many authors have quoted the views of Milton Friedman, whose well-known response on a company's social responsibility was: "a company's responsibility is to make as much money for the stockholders as possible" (Corporate..., 2017). Overtime, however, the views on the role of companies in socio-economic reality, derived from classical economics, have become increasingly less relevant to the current socio-economic reality. Additionally, there have been numerous changes in the sphere of modern business operations. Globalisation, accompanied by rapid technological changes, has given rise to a completely new business environment. Under these new circumstances, the development of a modern company is determined not only by the effective use of resources and applying appropriate strategies but also by taking into account the concept of Corporate Social Responsibility (CSR) and business ethics in management processes. For example, Bhattacharya, Sen and Korschub (2011, pp. 29-30) indicate a fast-changing approach of companies to CSR:

* the concept of CSR is increasingly viewed as a business opportunity, not as an obligation,

* companies are beginning to see the role of other stakeholders such as investors, regulators, employees, nonprofits,

* the concept of CSR is being treated as a strategic, long-term approach, not as a single shot, as a one-off action in the short term.

Therefore, one may state that if a company wishes to be perceived as a reliable partner in business, it should implement elements of this concept, and indeed this concept itself (Sroka & Lorinczy, 2015). In other words, companies are forced to maintain profitability and at the same time behave responsibly (Mohr, Webb, & Harris, 2001). This relates not only to global corporations but also to small and medium-size companies, operating in developed, as well as developing, countries and a variety of sectors functioning within. Given these facts, it is no wonder that many European and American business schools run business ethics programmes (Donaldson & Fafaliou, 2003; Jastrzebski, 2012), and growing interest in ethical issues has opened a market for the services of consultants and trainers (Van Liedekerke & Demuijnck, 2012). Though companies utilize different sets of instruments in order to be regarded as ethical organizations (e.g., codes of ethics, ethical values and norms) business practice shows, however, that these companies often operate in a completely different way (Lorinczy & Sroka, 2017). Also, one should also remember that social responsibility may only be duly carried out and implemented in the organization on condition of a favorable approach of the management understanding the need for its development (Formankova, Kucerova, & Prisazna, 2016).

The role and importance of CSR and business ethics is especially evident in controversial sectors of the economy. It is expected that firms in controversial sectors exhibit their ethical behavior and engage in corporate responsibility practices very intensively since they seek for organizational legitimacy (Reast, Maon, Lindgreen, & Vanhamme, 2013). There is no universal definition of a controversial sector (which is also called a problematic or sensitive one) as the categories sometimes overlap, and it seems that a continuum of sensitiveness can be created. One claims that the pharmaceutical industry is among the most admired and most criticized of all (Nussbaum, 2009). This view, however, may be strange to some extent. On the one hand, pharmaceutical products can save lives, they make the lives of millions of people a lot easier, and many legendary diseases have been eradicated from the world thanks to the innovations of the industry. On the other hand, the industry faces many criticisms at the same time. The basic source of this paradox is the controversial activities of the large transnational pharmaceutical companies (Kasapi & Mihiotis, 2011). Though they are sometimes praised for their unarguable successes in treating diseases and improving quality of life (DiMasi, Hansen, & Grabowski, 2003), at the same time they are heavily criticized for several reasons (Leisinger, 2005; Radoilska, 2008; Lee & Kohler, 2010). Additionally, these companies are often accused of charging high prices, applying immoral marketing practices, abandoning the poor, doing ethically questionable clinical trials, etc. (Corporate watch..., 2011). Pharmaceutical firms answer these criticisms in many ways and acting as 'socially responsible companies' is one of them. Despite these efforts, some authors like Radoilska (2008) points out that the pharmaceutical industry is no longer considered trustworthy due to the unavailability of drugs in less-developed countries and the 'overmedication' of the developed world at the same time. Morsing and Schultz (2006, p. 323) also claim that "while stakeholders previously primarily attributed negative attention to particular industries (i.e., 'sin stocks', including companies producing tobacco, alcohol, weapons, pornography, etc.), today CSR issues have become more unpredictable and changing, and including, for example, child labor, gene-modified organisms (GMOs), hormones, union assembly rights, sweatshops, etc., which in practice are concerns across many if not all industries".

It is generally acknowledged that Central and Eastern European (CEE) countries represent a fairly unique case regarding business ethics and corporate social responsibility. Societal infrastructure is rather weak, and one can sense a great level of distrust in corruptive public services (Habish--Jonker, 2005). Steurer and Konrad (2009) identify a significant gap between Western-European and CEE countries regarding the understanding and relevance of corporate responsibility issues, while Elms (2006) sees the lack of stakeholder activity as one of the main peculiarities concerning business ethics and corporate responsibility in the CEE region. Some similarities can be explained by the common historical roots of these countries, in that they went through two disastrous world wars and operated under totalitarian regimes (Bohata, 1997). In examining business ethics and CEE economies, it seems especially relevant to focus on business ethics in the three controversial industries of two key CEE countries, namely Poland and Hungary. Despite similarities, there are significant differences between these countries. Poland's economy is almost four times larger, while Hungary has a much more open economy, and therefore some significant differences were expected regarding their business ethics principles and practices.

The objectives of the study were achieved on the basis of data gathered through survey methodology. The target subjects included a group of 48 companies operating in these industries (25 Hungarian and 23 Polish ones). Our survey mainly focused on the degree of institutionalization of business ethics (such as the presence of a code of conduct, an employee appointed to deal with ethical issues, ethical training, and so on), the perceived ethical behavior of the firms, and their relationship with their key stakeholders.

LITERATURE REVIEW

Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics that examines the ethical principles and moral or ethical problems which arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and entire organizations. Ethical behavior and CSR can bring significant benefits to a business. For example, they may (Lorinczy & Sroka, 2015):

* attract customers to the company's products, thereby boosting sales and profits;

* ensure that employees want to stay with the business, reducing labor turnover and therefore increasing productivity;

* attract more employees...