Question.1143 - Ethics - Relationship of Corporate Governance to Corporate Social Responsibility and eReserve Required Readings re: BP Gulf Oil spill and corporate social responsibility (CSR) Readings. PROMPT: What was key corporate decision point that defines BP's ethical dilemma in this case study? Which ethical frameworks characterizes BP's decision? In your initial Discussion post, be sure to include the following three areas: Explain how the philosophy of Milton Friedman might have played a role in BP management's decisions leading up to the disaster. Explain the role of the ethical framework called "egoism" in the decisions made by BP relating to this disaster. Explain how CSR and theories of sustainability such as triple bottom line could have led BP to make different decisions and avoid the disaster. What would have been the corporate considerations and decision making process?
Answer Below:
BP had committed itself to sustainable conduct, with governance mechanisms in place to ensure safety and environmental responsibility that includes safety committees, environmental assurance committees, risk committees, and a code of conduct (Lin?Hi & Blumberg, 2011). BP's sustainability efforts were acknowledged by various third parties, receiving awards for environmental stewardship and excellence suggesting that, on the surface, BP appeared to be dedicated to good corporate governance and sustainable practices (King, 2010). Despite having robust governance mechanisms, internal documents suggested that BP management was aware of safety concerns but continued operations without adequate risk-avoidance measures (Lin?Hi & Blumberg, 2011). The financial burden and damage to BP's reputation were significant, jeopardizing the company's long-term success.? Despite having governance rules and committees in place, the case highlights that these mechanisms did not effectively guide corporate behavior since the company's willingness to take excessive risks for quick wins undermined the intended function of governance structures (King, 2010). The case illustrates the tension between short-term needs (quick wins, cost savings) and long-term success (sustainability, compliance with governance rules); the urgency of short-term goals often took precedence, leading to actions that compromised long-term viability (Lin?Hi & Blumberg, 2011). The analysis introduces the concept of institutions playing a crucial role in aligning short-term and long-term incentives for corporations, and conflicting relationships between the two can be addressed through institutions that provide binding effects on corporate behavior. The case suggests that corporations should actively engage in global governance efforts, contributing to the creation of effective institutional orders. Global governance processes involve corporations collaborating with stakeholders to establish rules that promote sustainable practices and counteract the negative impacts of short-term decision-making. The Responsible Care initiative in the chemical industry and the Business Social Compliance Initiative (BSCI) are cited as examples of corporations engaging in global governance (Lin?Hi & Blumberg, 2011). These initiatives aim to improve industry-wide standards and promote sustainable practices through self-regulation. The Deepwater Horizon case highlights the importance of having higher safety and environmental standards, indicating that corporations should have an enlightened self-interest in contributing to global governance efforts. The call for corporations to actively participate in global governance processes reflects a perspective that extends beyond individual companies' interests to consider broader industry and societal impacts. Milton Friedman's philosophy, emphasizing shareholder value maximization, might have influenced BP's management decisions and the pursuit of quick wins and cost savings, as seen in BP's choices to cut safety measures and ignore risks, aligns with Friedman's emphasis on profit maximization (Clarke, 2020). The ethical framework of egoism, focusing on self-interest, played a role in BP's decisions, and the drive for quick wins and cost reductions, even at the expense of safety and long-term consequences, reflects an egoistic approach that prioritizes immediate gains for the corporation (Clarke, 2020). CSR and sustainability theories like the triple bottom line could have led BP to different decisions and emphasizing social and environmental responsibility, these frameworks encourage a more balanced approach. Prioritizing safety and environmental concerns over quick wins might have aligned better with CSR principles, potentially avoiding the disaster (Claydon, 2008).? The conflicting relationship between short-term goals and long-term sustainability, as highlighted by BP's pursuit of quick wins, points to the need for institutions and global governance. Effective institutions, addressing the tension between immediate gains and long-term success, could have guided corporations like BP to prioritize sustainable practices over problematic quick wins.? References Claydon, J. (2008). Two models of CSR and sustainability.?Issues in Social and. Clarke, T. (2020). The contest on corporate purpose: why Lynn Stout was right and Milton Friedman was wrong. Accounting, Economics, and Law: A Convivium, 10(3), 20200145. Lin?Hi, N., & Blumberg, I. (2011). The relationship between corporate governance, global governance, and sustainable profits: lessons learned from BP. Corporate Governance: The international journal of business in society, 11(5), 571-584. King, R. O. (2010). Deepwater horizon oil spill disaster: Risk, recovery, and insurance implications. Diane Publishing.More Articles From Business Management
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