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Evolution and Implementation:

A Study of Values, Business


Ethics and Corporate Brenda E. Joyner
Social Responsibility Dinah Payne

ABSTRACT. There is growing recognition that good business ethics, and CSR actions within the two orga-
ethics can have a positive economic impact on the nizations studied.
performance of firms. Many statistics support the
premise that ethics, values, integrity and responsibility
are required in the modern workplace. For consumer Introduction
groups and society at large, research has shown that
good ethics is good business. This study defines and It has been clearly established that ethics is not
traces the emergence and evolution within the
just a fad.
business literature of the concepts of values, business
ethics and corporate social responsibility to illustrate
the increased emphasis that has been placed on these “. . . (W)inning companies first emphasize values
issues over time. Two organizations that have suc- – the beliefs and attitudes that . . . the business
cessfully dealt with these issues were analyzed to owner, ha(s) about . . . employees, customers,
identify the links among values, ethics, and corpo- quality, ethics, integrity, social responsibility,
rate social responsibility as they are incorporated into growth, stability, innovation and flexibility.
the culture and management of a firm. This study Managing by values – not by profits – is a powerful
identified the presence and implementation of values, process that will set . . . (a) business on the path
to becoming . . . a “Fortunate 500” company
(Blanchard, 1998).”
Brenda E. Joyner is Associate Professor of Management at
Loyola University New Orleans. She received her Ph.D.
from the University of Georgia in 1995. Dr. Joyner Dinah Payne is Professor of Management at the University
teaches classes in strategic management, entrepreneurship, of New Orleans. A graduate of Loyola University New
and strategic quality management. Her research inter- Orleans, Dr. Payne earned a Juris Doctor Degree and
ests include venture startups, entrepreneurial behaviors, a Master of Business Administration Degree. Her
and entrepreneurial ethics. Her business experience teaching and research interests include multiple facets of
includes eight years with a startup venture in the con- international business: law, strategy, organizational
struction industry, two years with a Fortune 500 man- behavior, corporate social responsibility and ethics.
ufacturing firm, and many years in the financial services Additionally, she has done extensive research in U.S.
industry in investment and commercial banking. She has domestic business law, ethics, management and engi-
published articles in Journal of Developmental neering management. She has had articles published in
Entrepreneurship, Journal of Business and the Journal of Business Ethics, the Labor Law
Economic Perspectives, Frontiers of Journal, the Journal of Managerial Issues,
Entrepreneurship Research, Global Focus and Management Accounting, and the Journal of
Quality Progress. She is a 1997 recipient of the Corporate Accounting and Finance. She is a
Certificate of Distinction for Excellence in member of the American Bar Association, the Louisiana
Research in Entrepreneurship and Independent Bar Association, the New Orleans World Trade Center,
Business, given by the Academy of Management and the Academy of Legal Studies in Business and the
the National Federation for Independent Businesses. International Academy of Business Disciplines.

Journal of Business Ethics 41: 297–311, 2002.


© 2002 Kluwer Academic Publishers. Printed in the Netherlands.
298 Brenda E. Joyner and Dinah Payne

Many statistics support the premise that “talk that a business has a fiduciary responsibility to
about ethics, values, integrity and responsibility any group but the firm’s stockholders. To initiate
is not only becoming acceptable in the business corporate giving, for example, would be a
community, it’s practically required (Stodder, fiduciary breach of management in Friedman’s
1998).” For consumer groups and society at large, opinion: an agent for a principal is neither legally
research has shown that good ethics is good nor morally permitted to give away or “waste”
business. Stodder (1998) reports that a Walker the principal’s capital. The manager’s fiduciary
Information survey (1994) of consumers duty, one wherein stockholders should be able to
produced results indicating that good business is repose trust and confidence in management’s
good ethics: forty-seven per cent of those polled obligation to act in the shareholders’ own best
responded that they would be much more likely self-interest, is to husband organizational strength
to buy from a “good” company given parity in and generate a growth environment, for the
quality, service and price. Additionally, 70% of continued maximization of shareholder wealth.
the consumers answered that they would not do Employees are also an integral part of the firm’s
business with a firm that was not socially respon- environmental ethics. A Walker Information
sible, regardless of price. survey (1997) revealed that 86% of the employees
In light of the change in the way values and surveyed who felt their firm’s ethics were
ethics are viewed by organizational stakeholders, positive, were strongly committed to their orga-
there has been growing recognition that prof- nizations, while only 14% of the respondents
itability measures, in isolation, fail to capture the who did not regard the firm’s ethics highly, were
essence of an organization’s overall performance, similarly committed. 42% of all surveyed indi-
both as a profit-seeking entity and as a member cated that a firm’s ethical integrity would directly
of society. This paper suggests, as a starting point, influence their choice of employer (Stodder,
general suppositions as to why businesses are 1998).
ethical and proceeds with a review of the seman- The view of pursuing shareholder wealth
tics of business ethics and a foundational presen- alone, of course, is not the approach most
tation of the definitions of values, business ethicists or, now, most business people take. The
ethics/morality and corporate social responsibility realization has occurred that businesses must
(CSR). Further, it traces the emergence and participate in society in an ethically symbiotic
evolution within the business literature of the way. A fundamental truth is that business cannot
concepts of values, business ethics and CSR to exist without society and that society cannot go
illustrate the increased emphasis which has been forward without business. Thus, business must
placed on these issues over time. Two organiza- acknowledge society’s existence and society’s
tions that have successfully dealt with these issues growing demand for more ethically responsible
are profiled in order to try to discover the link business practice.
between values, ethics, and CSR as they are Businesses will in fact engage in ethical
incorporated into the culture and management business practices for one of two reasons, one
of a firm. These organizations are also models ethical in nature and one more machiavellian.
to show the positive economic impact that good The ethical motivation guiding business is related
ethics can create. Thus, we perceive the eco- to a desire to do the right thing, without external
nomic and moral value of good business ethics. pressure or governmental constraint. As this
empirical evidence presented here shows,
business does choose this approach without being
Business ethics: the why forced into doing so. These business people
recognize their own personal existence in society
A predicate question to the role of ethics in and thus acknowledge that their firms must also
business is the question of why businesses engage operate in this sphere in an ethical manner.
in ethical practices. Some authors, notably The more machiavellian approach that busi-
Milton Friedman (1962), would strongly deny nesses espouse in their use of ethics has its roots
Evolution and Implementation 299

in a desire to convince the stakeholder that the ceeding generation has impact on the next
firm is doing the right thing. The firm’s end here generation’s values, beliefs, attitudes and behav-
is either to avoid legal consequences of its actions iors. Thus, our grandparents’ values are likely to
or to convince the stakeholders that the firm does be reflected in ours, as ours are to be reflected
have their best interests at heart and seeks to serve in our children’s and grandchildren’s. As the
their interests rather than their own. An example movement towards consciously incorporating
of this is the beer industry: the advertising cam- ethics into businesses in our society grows, the
paigns touting responsible consumption of beer stronger will be the cultural pull to be ethical.
may in fact be to serve the consumer interest in Ethics are defined as the conception of what
safety. However, in a more cynical world, such is right and fair conduct or behavior (Carroll,
an advertising campaign could have been 1991; Freeman and Gilbert, 1988). “Ethics is a
designed to make the consumer feel that the system of value principles or practices and a
firms cared more for their consumers than for definition of right and wrong (Raiborn and
selling their products. Payne, 1990).” Velasquez (1999) defined ethics as
In fact, minimal compliance with legal being concerned with judgements involved in
standards alone can be deadly to the firm. The moral decisions: normative judgements which
myriad of laws affecting corporate existence and state or imply that something is good or bad, or
behavior is numerous enough to entangle any right or wrong. Thus, these statements of ethics
business to its demise (see the example of Johns- or value judgements attempt to ascribe value to
Manville, the now defunct manufacturer of actions, so the actor can determine whether or
asbestos). Public outrage over perceived illegal or not he should engage in the action.
immoral acts is as harsh, if not worse: trust is More specifically with regard to business, De
lost and public image tarnished, good will that George (1999) defined business ethics as the
is extremely expensive to generate initially and interaction of ethics and business. Such a defin-
almost impossible to regain once lost. Thus, ition encompasses a moral evaluation of the
“(A)lthough legality generally stems from what economic system of the free enterprise system
society believes is morally right or wrong, an in the United States, the businesses which
issue’s legality does not always reflect the totality operate in this system, a moral evaluation of
of its perceived morality. This differentiation individuals and their actions in conducting
reflects the classic distinction between the spirit business and a review of business behavior in the
of the law (morality) and the letter of the law international arena. De George provides further
(legality) (Raiborn and Payne, 1990).” illumination: moral judgements should be uni-
versally applicable, they involve serious matters
with potential to cause serious results, and moral
Right or wrong: the definitions of ethics judgements invoke praise or blame. Additionally,
moral judgements can only be made by individ-
There has been considerable debate regarding uals for themselves: others, including govern-
what the terms values, business ethics and CSR mental agencies, cannot force moral judgements
represent. In order to be consistent with prior on anyone. De George also distinguished
literature in social issues and management between objective and subjective morality.
research and to assist the reader, the following Objective morality is the broader, societally held
definitions were used throughout this research. moral law. This is most easily equated with
Values are defined as the core set of beliefs and promulgated law. Subjective morality, on the
principles deemed to be desirable (by groups) of other hand, is one’s own belief as to the right-
individuals (Andrews, 1987; Mason, 1992). ness or wrongness of an action. This is equat-
Values are derived from one’s membership in a able to the concept of conscience. In a perfect
culture. With attitudes, beliefs, and behaviors, world, the decision-maker would make decisions
values combine to form a continuous spiral of that were deemed both objectively and subjec-
community culture (Adler, 1999). Each suc- tively correct. In the world of business and entre-
300 Brenda E. Joyner and Dinah Payne

preneurship, the decision-maker must sometimes ognized in developing this responsibility that
choose between those moralities: strong minded these expectations may not be only a matter of
entrepreneurs choose the subjective right. legal compliance, according to the letter of the
A common sense, dictionary-type definition law, but may go further in pursuit of the spirit
of the word moral or even morality indicates that of the law. Finally, the firm’s discretionary
morality is the ability to choose between right responsibilities encompass the duty to carry out
and wrong. Reasonably, the definitions of ethics acts of a voluntary nature designed to provide for
and morality are cross-referenced to each other. the betterment of society, such as philanthropic
The terms moral and ethical have been used contributions or provisions of certain employee
interchangeably in this paper, as they are in much benefits. Such acts are not required to be under-
of the social issues literature (Freeman and taken by the firm, as legal responsibilities are, and
Gilbert, 1988). Additionally, the concept of cor- the firm would not be considered unethical for
porate social responsibility, defined more specif- not engaging in these activities, but it is within
ically below, is often included in the definition the firm’s discretion to do the acts as a con-
of ethics in general (Singer, 1993). tributing member of society.
Corporate social responsibility (CSR) is The second dimension of Carroll’s model is
defined as categories or levels of economic, legal, represented by the firm’s the “Philosophy of
ethical and discretionary activities of a business Social Responsiveness.” These philosophies direct
entity as adapted to the values and expectations how an organization will respond to social issues.
of society (Andrews, 1987; Carroll, 1979; Sethi, There are four types of social responsiveness
1975). The term corporate social responsibility philosophies. First, the reaction philosophies
is used more in the management literature than require the firm to address social issues as a result
in the business ethics literature. However, while of the application of external forces, such as legal,
some authors may not agree (Friedman, 1962), regulatory or social pressures. Defense philoso-
the researchers feel that these concepts, as with phies address social issues to escape being forced
the terms moral and ethical, are similar enough into it by the external forces. The third philos-
to be interchangeable for the purposes of this ophy of responsiveness is the accommodation
paper. philosophy: these firms address social issues
Archie Carroll (1979) has developed a frame- because they exist. This represents a stride in the
work for integrating all dimensions of social direction of doing the right thing because it is
responsibility into the firm’s corporate culture the right thing, rather than from some ulterior
and decision making processes. The “Organiza- motive to further the economic interests of the
tional Social Performance Model” is comprised firm. In this instance, the demands to recognize
of three dimensions and can be visualized as a and deal with social issues are not likely to be
three dimensional cube, with all sets of dimen- made by external forces, but the firm takes a
sions intersecting with the others: the level of voluntary stance in dealing with social issues
responsibility can be measured against the social before being forced into it by outside forces. The
issue involved, as well as the firm’s social respon- final philosophy goes even further than the
siveness to these issues. Dimension I contains the accommodation philosophy. The proaction
“Social Responsibility” categories. These respon- philosophy is one that attempts to be proactive
sibilities, in order of importance to the firm, are with society: it attempts to anticipate important
economic, legal, ethical and discretionary. The social issues before they are generally recognized
economic responsibilities of the firm are to as being important and to develop strategies for
produce goods and services to be sold at a profit. addressing these issues.
Obedience to societal laws and regulations, while The third dimension of this model is the
executing economic responsibilities is the firm’s dimensions of the social issues themselves. A
legal responsibilities. The firm’s ethical responsi- review of stakeholders and issues in our society
bilities are to meet society’s expectations for yields a list of issues identified by Carroll: con-
conscientious and proper behavior. Carroll rec- sumerism, environmentalism, discrimination
Evolution and Implementation 301

issues, issues involving product safety and occu- The evolving concepts
pational safety, and shareholder issues. It can be
anticipated that these issues and stakeholders are While the management literature has many good
not static; social issues are as dynamic as is society books and articles which address values, business
and the list should be considered illustrative only, ethics, and CSR, the following works have been
not complete. In light of the Carroll model, it is chosen because they have endured through the
clear that one must consider the existence and years and generated much of the original dis-
importance of the firm’s stakeholders in the course in the concepts of interest (Schendel and
ethical decision making process. These stake- Hofer, 1979; Summer et al., 1990). They are
holders include, but are not necessarily limited summarized in Table I.
to: employees, stockholders, customers, suppliers, The role of the organization within the larger
lenders, communities and society at large society was addressed by Chester Barnard as early
(Vaughn, 1997). This paper attempts to track the as 1938 in his seminal book, The Functions of the
use of these dimensions by entrepreneurs and to Executive. Barnard decried the lack of recogni-
determine the extent to which the entrepreneurs tion that formal organizations are a most impor-
and their business have incorporated these ideas tant characteristic of social life, as they are the
into their corporate cultures. principal structural frameworks of society itself
These concepts of values, ethics/morality and (1938, p. xxix). He concentrated on aspects of
CSR are not mutually exclusive; rather, they are individual action, which are directed by their
interrelated and somewhat interdependent. connection with formal organizations. Barnard
Values influence the extent of a corporation’s recognized that many unwritten rules guiding an
perceived social responsibility and are influenced organization’s course of business grew from actual
by societal activities and norms or standards. One practice (1938, p. 172). He addressed the need
component of corporate social responsibility is to analyze the economic, legal, moral, social, and
an organization’s ethical responsibility, which is physical elements of the environment when
also influenced by the values of society (Carroll, making business decisions (1938, p. 198), stating
1979). Conversely, ethical or unethical activities that the organization endures depending upon
of an organization can influence the values held the quality of its leadership, which is in propor-
by members of society. Once again, the spiral of tion to the breadth of morality on which it stands
culture, wherein culture influences values, which (1938, p. 282).
influence beliefs, which influence attitudes, Herbert Simon’s book, Administrative Behavior
which influence behaviors, which shapes culture, (1945), built on the work of Barnard. Like
continues to form. Barnard, Simon noted the strong influence of the
organization on the individual and addressed
aspects of individual action within the context of
Literature review the organization. While Simon recognized that
organizations must be responsive to community
Some of the classic texts that form the founda- values, far beyond explicit legal considerations,
tions of management research and practice were he saw the primary criteria of “good” business
researched to identify these themes as they as economic behavior accurately calculated to
emerged and evolved in the literature to identify recognized a gain (1945, p. 62). He noted,
changes in perception of these concepts over however, that an increasing number of businesses
time. In addition, other texts published more had become affected with a public interest, as
recently were reviewed to identify the most executives had become concerned with respon-
recent changes in the understanding of these sibilities of trusteeship toward the community
concepts. beyond the legal limits imposed on them (1945,
p. 70).
Peter Drucker, in his book The Practice of
Management, was among the first authors to
302 Brenda E. Joyner and Dinah Payne

TABLE I
Corporate social responsibility, business ethics, and values: An historical perspective

Authors Corporate social responsibility Ethical/Moral considerations Values/Other

Barnard Analyze economic, legal, Morals are active result of Responsibility: power of
(1938) moral, social and physical accumulated influences on private code of morals to
aspects of environment persons evident in actions control individual conduct
Simon Organizations must be Ethical propositions assert Firm survival involves
(1945) responsible to community “oughts”, rather than facts adapting objectives to values
values of customers
Drucker Management must consider Morality must be principle First responsibility to society
(1954) impact of every business of action exhibited through is to make a profit
policy upon society tangible behavior
Selznick Enduring enterprise will Definition of mission Leadership requires defense
(1957) contribute to maintenance includes wider moral of critical values
of community stability objectives
Andrews Firm should have explicit Defining firm only in financial Ethical behavior is product
(1971- strategy for support of terms leads to subordination of values
Revision) community institutions of ethical concerns
Freeman Business must satisfy Concern for ethics necessary Enterprise strategy: what do
(1984) multiple stakeholders but not sufficient to decide we stand for?
“what we stand for”

explicitly address the “social responsibilities of “It has to consider whether the action is likely
business” (1954, p. ix). Whereas Barnard (1938) to promote the public good, to advance the basic
and Simon (1945) gave far more attention to the beliefs of our society, to contribute to its stability,
moral/ethical dimensions of individual behavior strength, and harmony” (1954, p. 388). The
in organizations, Drucker concentrated more on ultimate responsibility of management was “to
CSR. He included public responsibility as one of itself, to the enterprise, to our heritage, to our
the eight key areas in which business objectives society, and to our way of life” (1954, p. 392).
should be set. Further, Drucker stated that Philip Selznick primarily addressed values,
objectives in this area must be set according to although he did provide some insight into
prevailing political and social conditions as per- moral/ethical considerations and corporate social
ceived by management (1954, p. 82). Morality responsibility, in his book Leadership in
had to be a principle of action, exhibited through Administration: A Sociological Perspective. He noted
tangible behavior, that stressed building on that sound organizational leadership required the
strengths, integrity, and high standards of justice “proper ordering of human affairs, including the
and conduct (1954, p. 146). Drucker recognized establishment of social order, the determination
the growing requirement that a manager assume of public interest, and the defense of critical
responsibility for the public good, as he subor- values” (1957, p. ix). Like Drucker (1954),
dinated his actions to an ethical standard of Selznick realized that organizations had become
conduct. While he emphatically declared that the increasingly public in nature and needed to deal
organization’s first responsibility to society with problems that affected the welfare of the
involved making a profit, he felt it was also most entire community. He stated that goal statements
important that management consider the impact based on making a profit offered little guidance
of every business policy and action upon society. in the formulation of organizational purpose. A
Evolution and Implementation 303

large corporation which shifted from “a narrow about values, ethics, morality, and corporate
emphasis on profit making to a larger social social responsibility have flourished. Today the
responsibility” was required to build special demands for social responsibility and ethical
values into the organization (1957, pp. 26–27). behavior by corporations and their leaders
For Selznick, the formation of an institution was are stronger than ever before. Solomon (1997)
marked by the making of value commitments postulates several reasons for this. First, the
that accounted for its role in the community. enormous success of American businesses has
Kenneth R. Andrews, in his 1987 revision of bred extravagant expectations by the public.
The Concepts of Corporate Strategy, originally Second, the new nobility, the privileged class,
published in 1971, viewed ethical behavior as a that has emerged because of this enormous
product of values and, like the previous authors, success is corporate business – and society has
recognized the ever growing importance of always made demands of its nobility (noblesse
values, ethical/moral considerations and CSR. oblige). Finally, Solomon states that “now that
He stated that defining the corporation as a businesses are often the most powerful institu-
means to serving only the financial interests of tions in the world, the expanse of social respon-
its shareholders led to a subordination of ethical sibility has enlarged to include areas formerly
concern to financial outcome. Andrews suggested considered the domain of governments: quality
that a company should venture into good works of education and support of the arts, funding and
that were strategically related to its present and facilities for basic research, urban planning and
prospective economic functions. He also development, world hunger and poverty, hard-
proposed that a firm should have both economic core unemployment. The more powerful business
and non-economic objectives, which coincided becomes in the world, the more responsibility for
with similar views held by Drucker (1954) and the well-being of the world it will be expected
Ansoff (1965). Andrews stated that the strategi- to bear” (pp. 204–206). Clearly the concept of
cally directed company “will have a strategy for corporate social responsibility has grown to
support of its community institutions as explicit include a stunning plethora of social concerns.
as its economic strategy and as its decisions about But what about our understanding of values
the kind of organization it intends to be and the and ethics today? How do our leaders encourage
kind of people it intends to attract to its mem- and promote ethical behavior by individuals in
bership” (1987, p. 77). an organization? Solomon (1997, p. 140) states
In his book, Strategic Management: A Stakeholder that “. . . corporate cultures set up the network
Approach, R. Edward Freeman built on a promi- of people and positions with whom we feel
nent theme found in the previous books comfortable and, given the enormous power of
examined here: business organizations operate in peer pressure in ethics, one should not be sur-
increasingly complex environments and must prised that the culture of the corporation – rather
satisfy multiple constituencies, or “stakeholders” than ‘individual values’ – is the primary deter-
(1984, p. 26). Freeman noted that the traditional minant of business ethics. Different businesses
corporate strategy attention to stockholder provide different cultures, and different cultures
concerns could involve actions which are define different values, different ethics, different
immoral or unethical, as well as illegal. He lives”. In small firms the cultures, and therefore
recognized the growing importance of ethics, as the values and ethics of the organization, are
evidenced by the development of codes of ethics strongly shaped by the founders ( Joyner and
in businesses and the increasing number of ethics Hofer, 1992). As firms grow, there is the danger
courses in business schools. He proposed the that impersonality may set in and ethics may
concept of stakeholder management as an inte- generate into a set of abstract rules that can too
grating force to address CSR, ethical/moral easily be compromised (or reinterpreted) under
considerations, and values. the pressure of corporate hierarchy (Solomon,
In the decade since the last of these founda- 1997, p. 144). However, size is not always the
tional books was published, books and articles determining factor. Some individuals may
304 Brenda E. Joyner and Dinah Payne

identify strongly with smaller groups within a responsiveness in the Carroll model. See Table
larger organization and ethical responses are II.
reinforced. Even in small organizations, some Two organizations that have been publicly
individuals may feel isolated and resort to uneth- acknowledged as socially responsible firms by
ical behavior. organizations and communities where they
The emergence of the concepts discussed here operate were selected as subjects for this study.
and their evolution over time in the literature of The first firm (Firm A) is a large commercial
management shows an increasing emphasis by the construction company with annual sales of
academic community on the social issues that a approximately $150 million. The company has
firm must consider. However, at the same time been in business for more than three decades and
these issues were being considered by the is highly regarded, both in the local business
academic community, they were also being community where its headquarters are located,
addressed by the business community. It is the and also within the national community of
way in which practitioners have addressed these builders. The second subject (Firm B) is also a
issues that is the focus of this study. commercial construction firm with annual sales
of approximately $40 million. This company has
been in business for fifteen years and specializes
Methodology in renovation of large commercial complexes. It
is also well regarded by its peers within the local
This study seeks to identify the link between and national business communities. Both orga-
values, business ethics, and corporate social nizations are still run by their founding entre-
responsibility. The first phase of the study was preneurs. The founders were willing to discuss
the empirical identification and description of their experiences during the start up and devel-
these issues within business practice. opment of these ventures, and agreed to partic-
Because CSR is a concept made up of various ipate fully in whatever manner seemed
categories, it was necessary to find a framework appropriate for the research.
for identifying those levels within the practice
of CSR. A widely used set of categories of CSR
appears to be that set identified by Carroll (1979) Data collection
in his “Organizational Social Performance
Model.” It should be noted that the concept of Interviews are an appropriate technique for gath-
business ethics falls within the category of ethical ering data concerning cultural categories and

TABLE II
Organizational social performance model

Dimension I – Philosophy Dimension II – Social Dimension III – Social Issues


of Social Responsiveness Responsibility Categories Involved

Proaction Discretionary responsibilities Consumerism


Accommodation Ethical responsibilities Environment
Defense Legal responsibilities Discrimination
Reaction Economic responsibilities Product safety
Occupational safety
Shareholders

Adapted from A. B. Carroll (1979), ‘A Three-Dimensional Conceptual Model of Corporate Performance’,


Academy of Management Review 4, 503.
Evolution and Implementation 305

shared meanings (McCracken, 1988). Semi-struc- Data analysis


tured interview questions were prepared in
advance to probe those areas of interest to the Content analysis was used to search for the three
researcher. (See Exhibit 1.) These open-ended concepts of values, business ethics and CSR
questions allowed elaboration by the subject, but within the transcripts. All data related to corpo-
focused the discussion to allow the most efficient rate social responsibility were then further
use of time by the interviewer. Both interviews analyzed to identify whether or not they could
were recorded on tape and then transcribed for be assigned to any of the four categories of social
analysis. The two entrepreneurs then reviewed responsibility as outlined by Carroll (1979). Data
the transcripts and made any corrections neces- which fell within the business ethics concept
sary. The corrected transcripts were used for the were placed within the ethical responsiveness
data analysis. category of the Carroll model. Once the data
were assigned to categories, the categories were
analyzed for possible links to the financial per-

EXHIBIT 1
Interview guide

01. Give me a little background about yourself. How did you end up in this business?
02. How did you identify the business opportunity and evaluate the potential of the business before you started
up?
03. Did you have a fully developed concept of the business when you began? If not, how did it develop? How
has it changed over time?
04. What resources did you need to get started? How did you acquire them?
05. How did you market your company in the beginning? Has that changed over time? How important is
marketing in your business?
06. Do you compete mainly on price, quality, differentiated service or product – or in some other way? Who
do you see as your competition?
07. How do you produce your product or service? Has that changed over time?
08. Has technology played a significant role in the development of your business?
09. As new ventures grow, their cultures develop. How would you describe the culture of this company? How
have you influenced the development of culture within your company?
10. With growth comes the formalization of structure. What kind of structure does this company have and
why did you choose that particular form?
11. With growth, systems and processes must be put in place. What systems and processes did your company
develop? Which were most important? How did your employees react to them?
12. How have you managed the transition from startup entrepreneur to manager of such a large business?
13. Do you foresee selling the company, retiring, or turning it over to other management in the near future?
14. What do you see as the future of the business?
15. What was the state of the industry when you entered it? How has that changed over time?
16. How have you developed the people in your company over time?
17. Were there any people who were especially important in helping you develop the ideas or experience
necessary to begin the company?
18. How does the decision-making process in your business work?
19. Do you do research and development for either products or processes for the business? If so, how do you
do that?
20. Have you ever reached a point where you had to redefine your business concept? When did that occur
and how did you do that?
21. Are there other tasks associated with startup and development of your business that you found essential to
the success of the venture that we haven’t discussed?
306 Brenda E. Joyner and Dinah Payne

formance of the firms. It should be noted that and discretionary responsibilities to meet or
the design of this study prohibits the ascertain- exceed societal standards of what is expected or
ment of causality with respect to financial per- considered morally right. This statement also
formance and these issues; while some linkages reflects three of the response philosophies
have been identified, the authors cannot state that discussed earlier: the defense, accommodation
the values, ethics and CSR linkages cause and proaction philosophies. His statement implies
changes in financial performance. The findings that the defense philosophy is only marginally
are detailed below. in place; the entrepreneur would apparently
exceed his ethical and discretionary responsibil-
ities even if he did not want to avoid being forced
Findings of the study into it by outside forces. The statement also
implies the accommodation philosophy of
Economic responsibilities addressing social issues because they exist –
“because the public service scene” exists. Also,
According to the Carroll model, the economic that such participation is “a tailor made oppor-
responsibilities of the firm are to produce goods tunity to network with other decision-makers”
and/or provide services and sell them at a profit. implies a proactive approach to social issues: the
The need to make a profit is sometimes thought proaction philosophy. As a whole, the entrepre-
of as incompatible with the assumption of neur’s statement seems to recognize the impor-
responsibility to the larger community. “‘The tance of Carroll’s model’s Dimension III, social
marketplace puts one’s convictions to the test. A issues/publics. Acknowledgement of the idea of
business is not a philanthropy, social aid service a “relationship driven” business is a tacit accep-
or school. And if it tries to be all things to all tance of a number of stakeholders affected by the
people, it won’t be able to fulfill its mission founder’s firm’s actions: stockholders, creditors,
(Vaughn, 1997, p. 14).’” However, the two firms other business leaders in the community, the
in this study had different thoughts on the community itself . . .
subject: they did not perceive that the produc- The founder of Firm B found that doing the
tion of goods and/or provision of services at a socially responsible thing can also result in
profit was mutually exclusive with good business positive economic gain.
ethics.
Firm B: In 1980 we were two years old. The only
Firm A: In the Atlanta business community you job I could get in (the city) was renovating low-
are expected to be a part of the public service income housing. I couldn’t get another job. . . .
scene, process. It’s a negative if you don’t do it. (W)e were getting robbed every night, we were
And when you do it you find yourself doing it with getting torched every night. I got this idea. We
all kinds of other business leaders. So it’s an could hire four security guards who would cost
opportunity, it’s a tailor made opportunity to $150,000 for the duration of the project. Their
network with other decision-makers and a lot of lives would be in jeopardy. Instead I went to the
the business we get is relationship driven. neighborhood association leader, a marvelous . . .
lady who was President of the neighborhood asso-
The founder of this firm clearly perceived that ciation. I said, “Look, I need your help. I would
his economic responsibility was to make a profit; like to put $10,000 in escrow with an attorney of
he was also farsighted enough to realize that his your choosing. If the neighborhood would simply
call the police if you see strangers around our
firm’s economic welfare, a duty asserted to exist
project at night. I don’t want anyone to jeopar-
by the Carroll model, was dependent on his dize his or her life, I want you to simply help us
involvement in the public service sector. Because to secure the job.” I actually found a dead body
of this, he used networking as a means to increase on the job one day. There was shooting around the
his exposure with the public service sector. His site. It was a major drug dealing area.
statement above unites the fulfillment of the The police got wind of it and they decided that
firm’s economic responsibilities with its ethical they had been trying to get a neighborhood watch
Evolution and Implementation 307

program for years and they said this is our chance. of both the community and the firm. The stake-
They’re getting $10,000 bucks from this contractor holders who benefited here are numerous:
in return for doing what we’ve been trying to get shareholders (who saved thousands of dollars), the
them to do. So the police made a commitment to neighborhood association, the groups funded at
respond to any call from this neighborhood during the discretion of the neighborhood association,
the project time within three minutes. The Fire
the community itself . . .
Department heard about it. Some of the guys from
the Fire Department lived in the neighborhood.
They promised that on their way back from fires
they would go through the neighborhood. The Legal responsibilities
school principals sent home flyers outlining the
chance to earn $10,000 for the neighborhood if Obedience to society’s promulgated laws coupled
residents would just help this contractor. The with pursuit of the firm’s economic responsibil-
ministers from the churches urged their members ities is the second most important element of
every Sunday to remember to watch the (City) Carroll’s dimensions of social responsibility. It
apartments. The crime virtually stopped. The requires at least minimal adherence to the law.
heavy stuff stopped although we still had some The entrepreneurs in this study exhibited an
minor problems. understanding of the importance of laws and
The neighborhood was presented a check at the
abiding by them, as part of their strategy to be
end of the project. They gave me a full accounting
of every nickel of the $10,000 that they spent.
successful, ethical businesses.
They got uniforms for the neighborhood kids track
team and baseball teams and some equipment for Firm B: This company was the first to test for
the community center. We’re still members of the drugs. When you go on a scaffold you will know
Neighborhood Association. The press picked up that the person standing next to you, the person
on it . . . And we just got tremendous mileage out who erected the scaffold is not on drugs and we
of the $10,000 instead of $150,000 for watchmen. will have random testing every month, because I
Remember that’s what we saved: $140,000. want to assure you that your place of work will
be safe.
This is an interesting combination of the two
This statement indicates that the entrepreneur has
motivations to do the right thing. In this
accepted the societal prohibition against the use
instance, the business owner had the choice of
of controlled substances that could endanger safe
involving the community or not, of acting in
conditions at the workplace. In so accepting these
recognition of the symbiotic relationship between
laws and regulations (laws against illegal substance
business and the community or not. This entre-
abuse and OSHA regulations), the entrepreneur
preneur decided to invest in the community, with
has not only complied with his basic legal
the result that his return on his investment was
responsibilities, he has also complied with
both tangibly (”the press picked it up” – equating
Carroll’s model in obeying such laws and regu-
to free publicity, a marketing method that is not
lations to the betterment of the firm’s economic
paid for and frequently results in very positive
responsibilities: a safe workplace means fewer
gains for the business) and intangibly: the
costly accidents.
goodwill of the community and the Neighbor-
The organizational response to the example of
hood Association. This action is again commen-
the legal issue of drug testing presented here is
surate with the Carroll model dictating economic
once again that of the proaction philosophy.
responsibility as the first duty of the firm. By
Rather than wait for one of the many stake-
engaging in ethically laudable behavior, this firm
holders that could be affected to be injured, the
saved a good bit of money – the first obligation
founder of the firm anticipated the need to
of the firm.
address the social issue of drug abuse in the
The firm accepted the possibility of trouble
workplace.
associated with building in that area and, suc-
cessfully, dealt with them, to the mutual benefit
308 Brenda E. Joyner and Dinah Payne

Ethical responsibilities the right thing). Additionally, doing the right


thing may have other rewards, as well, like in
The founder of Firm A spoke of his role in a the previous example wherein the dividends of
community project and the impact it has had on doing the right thing were not anticipated but
the organization. In acknowledging his obliga- were a direct result of doing the right thing.
tions to his society, the founder exhibits Further, the entrepreneur could experience self-
commitment to fulfilling Carroll’s ethical respon- actualization (Maslow, 1957).
sibilities “to meet society’s expectations for The importance of being ethical in day-to-day
conscientious and proper behavior, even when dealings with the many stakeholders of the
these expectations are not reflected in the letter organization was addressed by the owner of Firm
of laws and regulations” (Dunham and Pierce, B.
1989).
Firm B: To people who do business with us, we
Firm A: I am the chairman of (a large, highly should be known as an honorable and fair company
visible social event). I’m able to do that. Not only composed of people who keep their word and
am I spending a lot of my time doing that, a lot always fulfill their obligations in a timely fashion.
of my money doing that. I don’t accept any kind We are going to pay our bills on time.
of money, I’m a volunteer so I don’t get paid. And If we say it’s going to be there on Tuesday. If
I don’t take any reimbursement. And we disqual- we say the building will be completed in 16
ified our company from doing any of the con- months, it will be done in at least 16 months. No
struction because of the conflict of interest. Which matter what it costs and we will keep our word.
means we sit here and watch the team who got
picked to do the stadium build the stadium. That’s This statement smacks of integrity – a
a $150 million job . . . So we sit and watch our hallmark concept of the ethical responsibilities
competitors . . . do that. Carroll’s model asserts are the duties of the firm.
This founder is clearly more concerned about the
The firm’s ethical responsibilities are to meet spirit of the law and doing the right thing even
society’s expectations for conscientious and though the expectations are not reflected in
proper behavior. Additionally, the firm should society’s laws and regulations than about the
have good faith commitment to the spirit of the consequences of failing to complete the “job”
law, not just the letter of the law, as the legal in a timely fashion, a lawsuit for breach of
responsibilities category requires. It is important contract.
to note that doing the right thing can be diffi- Both of the statements related here imply a
cult, both personally and in business. The proaction philosophy. In acting to serve the com-
question this founder asked and answered is munity through chairing a social benefit and in
whether one should do the ethically right thing cultivating the reputation to be an honest and fair
in the face of substantial costs to the firm. This company, these entrepreneurs anticipate the
entrepreneur clearly found that his commitment, positive role they play in society and rise to play
his ethical responsibility, to the community was that role completely. They have clearly made
much greater than the fear of the potential for great efforts, and even sacrifices, to understand
lost profits. Vaughn (1997, p. 14) warns of the their business and community environment and
dangers of being ethical at any cost. “‘They need to plan strategies that can help their communi-
to remember that their shareholders are not ties.
empowering them to manage charities but are
asking them to manage their corporations.’”
While this is most definitely true, it should be Discretionary responsibilities
noted that doing the right thing has its own
reward, satisfaction in knowing that one did the The founder of Firm B exercised discretionary
right thing (according to De George, mentioned responsibility in a very different area of the com-
previously, moral praise is associated with doing munity.
Evolution and Implementation 309

Firm B: When I first came here I thought that all his commitment to his community and to doing
companies would buy tickets to arts events. I just quality jobs, the adherence to ethically sound
thought that’s what you do in a major metropol- business practices. In this instance, however, he
itan area . . . (W)e got a bunch of tickets and all found an unexpected payoff for doing the right
our employees went and we were all proud. We thing because it is right. Here, he found that he
took some clients and some of the management
gained something other than simple satisfaction
guys thought it was extreme to spend that much
money. I said, “Look let’s think about this. We’re
that he did the right thing: he was awarded a
going to get exposure. We’re getting in the right contract as a tangential outcome of his ethical
circles”. behavior and he received the help of a required
A lawyer’s wife turned out was on the board of professional to complete a job in a timely fashion.
(the local ballet) where one of our guys was selling The initial motivation of the entrepreneur was to
a tenant fit-up to that law firm. The firm gave us do the right thing because it was right. His
that job basically because . . . (we) sponsored (a reward was actually greater than that; in doing
show) for his wife’s favorite ballet company. An the right thing, his unexpected dividend was the
architect said to us, “You know I wouldn’t do this securing of a contract and the help he needed.
– work over a weekend – for any other construc-
tion company. But you guys have helped the arts.
I’m going to do this for you. I’m going to work
Conclusions and implications
this weekend to get you that documentation you
need.”
We now give – we tithe to the arts. In 1983 This research identified the presence and imple-
we made that commitment. Ten percent of the mentation of values, business ethics, and CSR
after tax profits are given to the arts in communi- actions within the two organizations studied. The
ties in which we build. study found that the link to financial perfor-
mance of the firm can be either direct or
This statement is an indication that the firm indirect. However, it is impossible to state that
is meeting its discretionary responsibilities. These these linkages caused the changes in financial
duties are to act voluntarily to aid society in some performance noted. In one instance, it appeared
way, even if not acting this way would not be to be possible to assign an exact dollar value to
considered unethical. There is no legal mandate the socially responsible action. In other instances,
that firm’s tithe to the arts; many firms do not it was apparent that the contacts made through
do so and are not necessarily viewed negatively socially responsible behavior resulted in contracts
for not doing so. Thus, the firm is engaging in awarded at a later date. While it is impossible to
philanthropic activities they have no legal or even generalize the results of this study because of the
moral obligation to do; however, in fulfilling the small sample, a larger study of the link of CSR
firm’s discretionary responsibilities, the firm may to firm financial performance, using the frame-
certainly act to the benefit of society. work tested in this research, could be undertaken
This entrepreneur also takes a proaction phi- in order to further explain the direct and indirect
losophy with regard to the arts in his commu- links to performance.
nity, an important “social issue” often It also appears that the indirect links identi-
undervalued by society as a whole. Knowing this fied in the research have associated time lags
and anticipating the need in that area, the entre- between socially responsible behavior by the firm
preneur committed himself and his firm to being and financial gain. These lags could be traced in
of service to those stakeholders. order to find out how the impact of the time
This action also highlights the conundrum of lag affects the ability of the firm to connect
an ethical business person engaging in ethical specific behaviors to future financial reward. A
behavior for both the ethical and more longitudinal study of a larger sample of firms
Machiavellian approach discussed in the intro- using a time frame of from five to ten years could
duction section of this paper. The founder of shed much light on the effect of time lag on the
Firm B has already indicated in many instances issue.
310 Brenda E. Joyner and Dinah Payne

For many researchers in the areas of ethics and De George, Richard T.: 1999, Business Ethics (Simon
corporate social responsibility, the issue of finding & Schuster, Upper Saddle River, NJ).
a financial performance link to ethical behavior Drucker, P. F.: 1954, The Practice of Management
is unnecessary and a waste of time. Surely there (Harper & Row Publishers, New York, NY).
are enough compelling reasons besides financial Dunham, R. B. and J. L. Pierce: 1989, Management
(Scott, Foresman and Company, Glenview, IL).
gain to push firms to support and champion
Freeman, R. E.: 1984, Strategic Management: A
ethical behaviors from their employees and to Stakeholder Approach (Pitman Publishing Inc.,
engage in socially responsible behavior with Marshfield, MA).
respect to the environment and the communi- Freeman, R. E. and D. E. Gilbert Jr.: 1988, Corporate
ties within which they conduct their businesses. Strategy and the Search for Ethics (Prentice Hall,
The authors agree with such reasoning. However, Englewood Cliffs, NJ).
the ability to link socially responsible behavior Friedman, Milton: 1962, Capitalism and Freedom (The
with positive firm financial performance adds a University of Chicago Press, Chicago, IL).
strong, quantitative foundation to the push for Joyner, Brenda E. and Charles W. Hofer: 1992, ‘The
such actions. By showing ways to link changes Key Tasks of Successful Venture Creation and
in culture that can generate positive financial Development’, in Douglas Naffziger and Jeffrey
performance that shows up as increases in the Hornsby (eds.), Emerging Entrepreneurial Strategies in
the 1990s, Conference Proceedings of the Seventh
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Annual National USASBE Conference, Chicago,
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boost financial results might provide the impetus Raiborn, Cecily A. and D. Payne: 1990, ‘Corporate
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Continuum’, Journal of Business Ethics 9, 897–
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E-mail: dinahpayne@aol.com
Brenda E. Joyner, Ph.D.
Loyola University New Orleans,
6363 St. Charles Avenue, Box 15,
New Orleans, LA 70118,
U.S.A.
E-mail: bjoyner@loyno.edu