In a previous decade, a seemingly never ending succession of corporate scandals has hit the headlines worldwide. Debacles in Australia and overseas including AWB, James Hardie Industries, HIH and arguably the biggest of them all, Enron/Arthur Andersen, have catapulted the topics of corporate ethics, transparency and accountability onto the front pages. These scandals have not only destroyed the reputations of individual companies, but have shaken confidence in the entire global business and financial system.
As a communications function, public relations has a key role to play in the disclosure of financial and other corporate information of critical public importance as well as the management of relationships between the organisation and its key stakeholders. Many public relations strategists would argue that the role of public relations goes well beyond mere dissemination of information. Public relations must also help shape corporate behaviour. Some have suggested public relations should be the “corporate conscience”. At the same time, the public relations profession itself has come in for more than its fair share of criticism for allegedly unethical activities. Indeed, critics have disputed whether public relations is really a profession at all.
This paper explores the interplay between public relations, ethics and corporate social responsibility by answering the following questions: What is public relations and why has ethics become a central issue for the public relations field in recent years? What role should public relations play in improving levels of corporate social responsibility?
Keywords: Public relations, corporate social responsibility, corporate ethics.
What is Public Relations?
A number of definitions have been evolved over the years. A definition approved at the First World Assembly of Public Relations in Mexico City in 1978 and endorsed by 34 national public relations organizations (Wilcox et al., 2003, p. 5) is that “public relations practice is the art and social science of analyzing trends, predicting their consequences, counseling organizational leaders, and implementing planned programs of action which will serve both organization and public interest.”
National and international public relations organizations also have formulated definitions. Here is a definition of the Public Relations Society of America (PRSA): “public relations is a management function that involves counseling at the highest level and being involved in strategic planning for the organization” (cited in Newsom, Turk & Kruckeberg, 2004, p. 2). While British Institute of Public Opinion defines public relations as “the deliberate, planned, and sustained effort to establish and maintain mutual understanding between an organization and its publics.”
More succinct definitions are provided by theorists and textbook authors. An example is stated by Cutlip, Center and Broom (1985) “public relations is the management function that identifies, establishes and maintains mutually beneficial relationships between an organization and the various publics on whom its success or failure depends” (cited in Wilcox et al., 2003, p.4). Similar to PRSA’s definition here the management function is emphasized. Likewise, Grunig and Hunt (n.d., cited in Wilcox et al., 2003) define public relations as “the management of communication between an organization and its publics”.
Ethics and Corporate Social Responsibility
Ethics can be defined as the standards governing the conduct of a person or the members of a profession (Alfredo, 2005). It is clear that ethics can only have come into existence when human beings started to reflect on the best way to live. As stated in Encyclopedia Britannica (2004):
This reflective stage emerged long after human societies had developed some kind of morality, usually in the form of customary standards of right and wrong conduct. The process of reflection tended to arise from such customs, even if in the end it may have found them wanting. Accordingly, ethics began with the introduction of the first moral codes (cited in Alfredo, 2005, p. 1).
Nonetheless, human behavior is not only influenced by moral codes and ethics. There are other important elements associated to it: from a social point of view (social rules, cultural industries, societal culture, etc.), from a professional point of view (ethics codes, etc.) and from an organizational point of view (corporate culture, etc.).
Business ethics is a form of applied ethics. It aims at inculcating a sense within a company’s employee population of how to conduct business responsibly. Many authors state that applied public relations-ethics can influence both the relationship between organizations (public, private, political and others) and their publics, and the level of corporate social responsibility thereof.
Ethics refers to standards of conduct or moral behaviour, whereas social responsibility refers to the concept that businesses should be actively concerned with the welfare of society (Bracker, n.d.). Social responsibility and ethics are not inconsistent with the maximization of firm value. While there is a cost to engaging in ethical and socially responsible behaviour, there are often benefits in goodwill and public relations that may more than offset those costs.
Social responsibility is now a necessity in a new business world where reputation and good standing can be the key to winning and retaining prestigious clients and attracting and retaining the best employees. According to Brown (n.d.), corporate social responsibility is defined as being about ‘how business takes account of its economic, social and environmental impacts in the way it operates – maximizing the benefits and minimizing the downsides’ (cited in Canniffe, 2005, p. 7).
Therefore, some companies are now taking a view that social responsibility should be an integral part of the way their operation is managed. For some it is seen to make good business sense as consumers, clients, employees and regulating agencies demand more responsible and ethical social and environmental behavior from the companies they do business with.
Proponents of corporate social responsibility argue that it is not just philanthropy from companies that is involved, but business actions and policies that should lead to sound long-term business success as well as benefiting the wider community.
Indeed, corporate social responsibility goes far beyond the old philanthropy of the past and is instead an all year round responsibility that companies accept for the environment around them, for the best working practices, for their engagement in their local communities and for their recognition that brand names depend not only on quality, price and uniqueness, but on how, cumulatively, they interact with companies’ workforces, community and environment.
Central Issue for the Public Relations Field
In the past few years, publics have been bombarded with a glut of news stories about corporations behaving unethically. Some people claim that the behavior of Enron, Arthur Andersen, and WorldCom have contributed to both a loss of confidence in the integrity of American corporations and to the 2000-2002 decline in the US stock market (Tsalikis & Seaton, 2006). This was followed by the high profile public prosecution and conviction of Martha Stewart on charges of insider trading. Most recently as to the oil-for-food scandal AWB faces the prospects of being charged with defrauding the Commonwealth by allegedly lying to the Government about almost $300 million in kickbacks paid to Saddam Hussein’s regime (Martin & Tasker, 2006). This barrage of negative publicity is assumed to have had deleterious consequences on consumer trust in businesses.
It is clear that reputations of corporations have been shredded by the scandal of unethical behavior. Ethical standards are being seen as increasingly important, whether the situation involves bribery and corruption, executive pay, treatment of employees or suppliers, human rights, intellectual property, or misappropriation of funds (Lane, 2005). That’s why ethics – an understanding of moral principles applied to decision making – is becoming such an important part of the global debate and is also attaining more and more presence and consideration among the executives, leaders, entrepreneurs, etc., of the different organizations.
Doing business in today’s global marketplace places new demands on companies, their employees, governments, the financial community, regulators assessing corporate performance and communicators. There is also greater pressure for regulators to act on corporate malpractice. The activities of the companies are being monitored by multiple areas of interest such as mass media, non profit organizations, consumers, governments, environmental organizations, unions and even competitors, who scrutinize the international behavior of the companies, their respect to the human rights and to the international rules, their management of human resources, their respect to environmental issues, the conditions of work of their suppliers and even their relationship with the governments concerned.
Besides, financial analysts and other market watchers have tuned into the trend of investors still wanting profits but not without social responsibility from corporations. Terms such as engagement and social responsibility are becoming as common as dividends and earnings. Governments are also being pressured to act. Investigations of bribery and corruption can now involve trans-governmental information exchanges and even extradition.
In the face of widespread ethical malpractice, international business has moved to head off further reputation crises. Some observers feel that ethics may be the most important business leadership issue of this decade, calling for a dynamic relationship among the entire executive “C” suite. Some say that in the company of the future, the whole senior management team will have a direct reporting line to the new “C” suite, the Chief Ethics Officer (Lane, 2005).
Without a doubt once public relations helps the organization to build relationships with strategies constituencies, the organization saves money by reducing the costs of litigation, regulation, legislation, pressure campaigns, boycotts, or lost revenue that result from bad relationships with publics, who become activist groups when relationships are bad. It also helps the organization make money by fostering relationships with contributors, consumers, shareholders and legislators who are essential to support organizational goals. And specifically, two-way symmetrical model helps public relations practitioners to create, maintain, or modify a relationship between the organizations and their publics in the higher terms of effectiveness (Alfredo, 2005). In other words, with openness, with assurances of legitimacy, with participation in mutual networks, with sharing tasks (helping to solve problems of interest to the other party), with integrative negotiation in a crisis, with cooperation and collaboration, being unconditionally constructive, and knowing that both actors, the organizations and the public can benefit from the relationship.
It is only recently that business ethics has become visible. For many, intrinsic reasons are sufficient. Doing the right thing needs no justification. But some in the business world look for stronger arguments as to why they should change the ways in which they operate. For such skeptics there are no unambiguous assessments of the direct benefits of ethical behavior, in terms of hard cash.
However, there are many examples of how ethical behavior can feed through to the bottom line, improving relationships with customers, employees, shareholders and suppliers. Moreover, there is no shortage of evidence of the costs that follow from serious failures of ethical controls. In business, costly problems, ranging from shareholder opposition to executive pay to environmental disasters, are judged by customers and others in ethical terms, just as in politics the success of a government is judged not only in relation to its performance but also in relation to its integrity. More generally business suffers when its legitimacy is in question.
Public Relations’ Role in Corporate Social Responsibility
As defined above public relations involves a communications function, it plays an important role in developing programs to communicate the policies/products to publics that need to know in such a way that a good relationship is established and maintained. Mostly in case of corporate social responsibility communication, public relations has a key role to play in the disclosure of financial and other corporate information of critical public importance, as well as the management of relationships between the organization and its stakeholders.
The year of 2002 saw an unprecedented number of corporate scandals. In July, WorldCom filed for bankruptcy protection after several disclosures regarding accounting irregularities. Among them was the admission of improperly accounting for operating expenses as capital expenses in violation of generally accepted accounting practices (GAAP) (Moberg & Romar, 2006). In many ways, WorldCom is just a case of failed corporate governance, accounting abuses, and outright greed. At the same time, Enron collapsed when the market lost confidence in it following profit and asset write-downs in the latter part of 2001. However, the loss of market confidence was not so much the cause of the collapse as a symptom of the long-term exaggerated reporting of assets and expected earnings. This was compounded by the passive compliance of the auditors who were willing to allow the types of financial reports and reporting decisions that produced fundamentally unfair and inaccurate portraits (Moberg & Romar, 2006). These cases have been seen as in some way emblematic of problems with contemporary corporate governance, and alongside other high profile scandals have led to a renewed interest in the topic (Daily et al., 2003, cited in Moberg & Romar, 2006).
Certainly with the recent events at Enron, Arthur Anderson and WorldCom much criticism has been directed toward the accounting industry, but much must be directed toward the corporate communicators as well. The annual reports, the quarterly reports, the press releases, and speeches delivered all failed to reveal the problems and in fact may prove to have been presented to cover up the problems. In this case, the creative ability of the corporate communication professionals have been used to express negative information in positive terms, because there is a fine line between failing to disclose information and disclosing it in such way as to hide its reality.
Therefore, from professional ethics standpoint, corporate communicators must inform their stockholders as to what their companies do and how they make money righteously, as well as the opportunities open to those invest in those companies. In many cases, as professional communicators, public relations practitioners build bridges between organizations and stakeholders, ensuring that concerns raised are fed back to directors and actioned.
Furthermore, in term of societal marketing, corporate social responsibility is not merely about public spiritedness and philanthropy resulting in conveniently favourable publicity. At the core of a proper corporate social responsibility strategy is the need for organisations and businesses to operate with integrity, transparency and accountability in public and private relationships. From a communications perspective, this means that organisations must establish open and honest dialogue with all stakeholders.
Many say that openness is now the most important ethical value. A lack of openness has caused the downfall of many companies. In all but a very few instances, it is necessary to put a formal ethical process in place in order to ensure openness within an organization (Carmichael, n.d.).
Additionally, for corporate social responsibility to be effective, organizations must dispense with the marketing spiel and incorporate responsible thinking and behavior into their strategy and culture, finding ways to transform words into action with public relations mediating between the various stakeholder groups.
Moreover, some argue that the role of public relations goes well beyond mere dissemination of information; it must also help draw corporate behavior and serves as “the corporate conscience” as well. Clearly, frequently dealing with highly controversial and sensitive issues public relations professionals must have the integrity to persuade management that when unfairness or injustice exists in corporate policy or practice, it should be eliminated. Hence practitioners should be guided by concern for the public interest above all other interests, have been seen as “conscience of the corporate”.
Finally, being ethical is not enough companies should communicate their corporate social responsibility performance repeatedly. Public relations communicates internally and externally. The challenge for business communicators is to communicate this role modeling in a trustworthy and convincing way. Corporate social responsibility communication that is designed and distributed by the company itself about its corporate social responsibility efforts profoundly influences the willingness of managers and employees to identify with their workplace. As organizational members increasingly identify personally with their workplace, the corporate identity concerning ethical and social responsibility becomes inseparable from the identity of individuals and, in turn, makes them allies and mutually loyal. Consequently, while corporate social responsibility messages indeed communicate to external stakeholders, they also forcefully serve internal purposes such as reinforcing corporate identity and building identification among organizational members (Morsingn, 2006).
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