Cooperate, Comply, or Evade? A Corporate Executive's Social Responsibilities with Regard to Law

Corporate Directors and Social Responsibility: Ethics versus Shareholder Value

“…For managers and directors to behave ethically and be socially responsible they must comply with law and follow the underlying spirit of law (Bowen, 1953;Ostas, 2004;Preston and Post, 1975). Conflicts of interest between duties to comply with the letter of the law and meet the spirit of law create situations where business leaders may behave unethically.…”

“…If there are no federal or state regulations that specifically prohibit the release of large quantities of the dangerous toxins, then business leaders have the opportunity to choose to harm society in order to maximize profits. According to corporate social responsibility (CSR) theory (Bansal and Kandola, 2004;Bowen, 1953;Ostas, 2004;Preston and Post, 1975), this behavior is unethical, even though the business leaders are fully complying with applicable law.…”

“…According to Ostas (2004) and Williams (1998), a businessperson can ethically take advantage of loopholes in law and ambiguities in law, but only when the law prohibits malum prohibitum, rather than malum in se activities. A malum prohibitum activity is illegal by statute, but the illegal activity does not violate any moral standards or directly harm the public.…”

“…Bansal and Kandola (2004) indicate that responsible firms ''should operate within legal parameters and not knowingly harm stakeholders.'' In a summary of foundational CSR literature from Bowen (1953) and Preston and Post (1975), Ostas (2004) defines CSR as both compliance and cooperation with the creation, implementation, and reform of business law. That is, for firms and individuals to be ethical and socially responsible they must comply with law and also follow the ''underlying spirit'' of law (Ostas, 2004).…”

“…Duties to shareholders and duties to society are often conflicting, and business leaders can feel pressure to trade social good for shareholder wealth (Ostas, 2004). For example, assume that a manufacturing plant can only maximize shareholder value when the production process releases high levels of harmful toxins into the environment.…”