Answer Question 1Diverting corporate profits to fight a childhood disease could be considered a legitimate CSR initiative under the right circumstances since the cause meets the criteria of being a philanthropic cause. The problem with the actions of the CEO of DM Bicycle Company is that he is attempting to impose his will on the company because he selected this cause solely for personal reasons. A CEO is not suppose to drive his decisions based on personal criteria, instead he is suppose to make decisions that are in the best interest of the company. The amount of money he wants to divert to fight this disease is outrageous. He implied in his answer to one of the members of the board that he would divert half of corporate profits. Corporate profits are supposed to be either placed in retained earnings or paid to the shareholders in dividends. In the case of this company the extra profits were going to be used in the employee profit sharing plan. Donating half of corporate profits is an insane proposition due to the fact that the average amount of corporate profits in the United States that is used on charitable donations is less than one percent (Stern, 2013). There is absolutely no justification for the company to donate half its profits towards any charitable initiative.
Answer Question 2
Based on Carroll’s corporate social responsibility pyramid the idea of Gino Duncan of donating corporate profits towards helping find a cure to Batten disease falls under the philanthropic responsibility level. Donating money towards this disease is an honorable cause, but Carroll’s CSR pyramid for the philanthropic level states that actions should be performed based on what is desired by global stakeholders. There is no way that global stakeholder’s desire the company to spend half its profits to fight a rare disease. It seems as if the only stakeholder interested in this cause is the CEO. The employees of the firm which are the company’s most valuable asset were expecting to receive money from the profit sharing plan.
Answer Question 3
Out of the ten general ethical principles discussed in the chapter the one that associates most to the philanthropic cause Gino Duncan wants to support is utilitarian benefits. Utilitarian benefits state that you should never take any action that does not result in greater good than harm for the society of which you are part of. Finding a cure for innocent children that suffer from Batten disease helps our society. The ethical principal that is most associated with a corporate profit sharing plan is economic efficiency.
Answer Question 4
The board of directors of DM Bicycle Company must immediately intervene with Gino Duncan in order for him to change his stance on what to do with the corporate profits of the company. Under no circumstance can the board of directors allow Gino to continue on his personal crusade to find a cure for his daughter’s disease. A close door meeting between Gino and the board is necessary immediately. During this meeting the board of directors should make it extremely clear to Gino that his intentions of diverting 50% of profits to fight Batten disease will not be approved by the board. The board of directors can make a compromise with Gino Duncan and divert a small portion of 1% to 5% of profits towards the disease. Along with the donation the board of directors will also sponsor an awareness program about the disease so that society can learn about its existence which can help raise support for the disease from our entire society. The best solution towards solving this problem is cooperation between the CEO and the board of directors.
- Stern, K. (2013). Why Don’t Corporations Give to Charity? Retrieved from http://www.slate.com/articles/business/moneybox/2013/08/corporations_don_t_give_to_charity_why_the_most_profitable_companies_are.html