Self-interest paradigm
Q: Mention at least two social preferences beyond material self-interest (you've seen six in slides)
People care about material self-interest but also…
Inequity aversion: Tend avoid inequality. Prefer equality. Dislike disadvantaged more than advantaged.
Intension-based reciprocity: Care people's intensions. Willing sacrifice material payoff to return intensions.
Interdependent preferences: Care (non)-prosocial (type person). Willing sacrifice material payoff to affect opponent's payoff.
Social image: Care perceived (non-)prosocial (type person). Willing sacrifice material payoff to affect how perceived.
Social norms: Care actions perceived socially appropriate. Disutility if actions perceived inappropriate.
Guilt aversion: Care choosing actions expected to choose. Disutility from disappointing others.
Q: What is CSR?
A: Implication of social preferences. Firms provide public goods and reduce negative externalities.
Must be observable/measurable and exceed obligatory levels.
Q: Explain the concept Moral Wiggle Room. What does it imply regarding unethical behaviour?
A: When a decision situation creates room for relaxing one's morals, i.e. social preferences can be influenced by context of decision situation.
Explain why even well-oriented agents can contradict their own preferences behaving unethically while convincing themselves it is not.
Q: What does the self-interest paradigm imply regards fairness of transactions? Is this consistent with empirical evidence (ultimatum game)?
A: "Fairness for transactions is irrelevant for success"
Ultimatum game: Proposer and responder split money. Predict agents only care max own utility, thus, responder accept any and proposer take all. Results, responders didn't accept low offers, i.e. resistant against unfairness.
Reality: Consumers do boycut unfair/unethical brands.
Q: What type(s) of CSR does empirical evidence support?
A: No evidence classical CSR and not-for-profit CSR. Some evidence for strategic CSR.
Strategic CSR: 'Donated labour'-thesis not supported. 'Separating equilibrium' supported but not universal. 'Intertemporal exchange' supported.
Q: Mention at least one example of moral wiggle room mechanisms in organizations
A: Diffusion of responsibility: Decision makers multiple and layers in firm.
Exploiting uncertainty: High degree uncertainty magnitude negative externalities.
Seeking justification: Everybody ese does it incl. competitors and firm goal max profit/serve shareholders' interests.
Q: What does the self-interest paradigm imply regards monitoring? Is this consistent with empirical evidence (lost wallet)?
A: "Monitoring is essential to avoid misbehaviour"
Lost wallet: Hand in lost wallet in public institution. Predict public officer keep wallet. Get wallet (benefit) and avoid effort (cost) returning. Result, varies between country, but many handed in wallet despite absence of monitoring.
Reality: Employees do work hard despite unmeasurable effort
Q: Explain intuition behind classical CSR.
A: Firm max profit and only engage in CSR by investing in innovation to obtain LR payoff. Believe public should manage CSR activities.
Q: Explain both types of 'Diffusion of responsibility'.
A: Shifting some blame onto others so individuals feel less responsible of actions.
Vertical: Delegate ethically dubious actions.
Horizontal: Sharing responsibility among group.
Q: What does the self-interest paradigm imply regards externalities? Is this consistent with empirical evidence (bribery game)?
A: "Externalities on third party is irrelevant to agent".
Bribery game: Citizen apply for license or bribe public official. Public official accept or reject. Predict third party is irrelevant and agents self-max propose bribe and accept bribe. Results, low acceptance rate. Relatively many give up money to avoid cheating (negative externality on third party)
Reality: Consumers do buy environmental friendly products.
Q: Explain intuition behind not-for-profit CSR
A: Firm shareholders satisfy own social preferences
Shareholders have social preferences. "Private donation" firm owners use to max utility.
Tradeoff profit max and CSR.
Q: Explain 'Exploiting uncertainty'
A: Remain ignorant about consequences by "hiding" behind veil of uncertainty.
Q: What is the self-interest paradigm?
A: Agents driven by personal gain: Max utility through material payoff.
Q: Explain intuition behind strategic CSR.
A: Accommodate "demand-sided" pressure from employees, consumers and gov. Goal max profit.
Theories:
Employees 'donated labour' (substitute monetary incentives with social incentives)
Consumers 'separating equilibrium' (CSR-concerned consumers willing to pay premium non-CSR-concerned consumers are not)
Politics 'intertemporal exchange' (firm engage in CSR now voluntarily for preferential treatment tomorrow)
Q: Explain 'Seeking justification'
A: Process information selectively. Justify unethical behavior and convince oneself behavior is ethical. Moral disengagement.
Narratives: Everybody else does it, deserved, not my job, necessary…