Importance of CSR Activities and Ethical Theories in Business Operations

This paper discusses the importance of CSR activities in organizations and the implementation of ethical theories in business operations. It includes a literature review on narrow and broad views of CSR, analysis of Westpac's decisions, and justification of those decisions.

Running head: ETHICAL BUSINESS MANAGEMENT
Ethical Business Management
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Abstract
The purpose of the following paper is to discuss about the importance of CSR activities in the
organizations and the implementation of the ethical theories in their business operations. The
literature review on the importance of the narrow view and broad view of CSR has been
conducted. It has been found that the broad view of CSR is much effective in the current
business environment. The discussion on the various ethical theories has been done as well. The
theories like deontological ethics and utilitarianism have been compared in the light of decisions
taken by the Westpac Bank of Australia. The Australian economy will be strengthened by the
proper implementation of the strategies by the organization. Besides this the organization should
keep their focus on the sustainability of the environment at large.

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Table of Contents
1.0. Introduction...............................................................................................................................3
1.1. Background...........................................................................................................................3
1.2. Aims of the assignment........................................................................................................4
1.3. Scope.....................................................................................................................................4
2.0. Literature review on narrow and broad views of CSR.............................................................4
2.1. Narrow views........................................................................................................................4
2.2. Broad views..........................................................................................................................5
3.0. Analysis of the Westpac’s decisions.........................................................................................7
3.1. Ethical theories.....................................................................................................................7
3.2. The application of relevant theories on Westpac’s decisions...............................................8
4.0. Justification of Westpac’s decisions.........................................................................................9
5.0. Conclusion..............................................................................................................................10
6.0. References...............................................................................................................................11

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1.0. Introduction
1.1. Background
The Westpac bank in Australia has been facing several climate change and environmental
issues in the current times. This is why the customers have complained against these issues from
time to time. The Westpac Bank is one of the most common and famous banks of Australia and
they provide the customers with several financial services as well (Westpac.com.au, 2018). It is
considered as one of the big four banks of Australia and the headquarters of the bank is located at
Sydney in Australia.
1.2. Aims of the assignment
In this assignment the several environmental issues related to Westpac Bank will be
discussed. There have been some sustainability issues that have been recorded regarding the
operations of the bank in the recent times (Schwartz, 2017). The purpose of the bank is to ensure
a sustainable future for their customers. In this assignment the several risks and opportunities
would be discussed.
1.3. Scope
The several sustainability strategies would be discussed in this assignment. Apart from
that a proper literature review would be conducted in this assignment regarding the broad and
narrow views about the aspects of CSR (Schwartz, 2017). The proper analysis of the decisions
taken by Westpac would be done and the justifications on their decisions would be made as well.

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2.0. Literature review on narrow and broad views of CSR
2.1. Narrow views
The Corporate Social Responsibility (CSR) is one of the most important and integral
factors of management by which the organizations contribute to the social well-being in a large
manner (Tai & Chuang, 2014). However, this aspect of the management has faced several
disputes as well. These corporate social responsibilities are mainly the ethical obligations
towards the society and mainly the stakeholders as well. As the powers of the companies have
increased it is quite important to know that their responsibilities towards their surrounding
society and the stakeholders have increased a lot as well. The main aim of implementing the
CSR strategies is to make sure that the communities and families of the employees should be
given the proper security as well (Tai & Chuang, 2014). Thus it can be said that the CSR
activities of the organization always looks to provide the resources for the overall economic
development of the society.
The classical view of the CSR surrounds the fact that the companies whose only aim is to
make economic profits provide the proper services and goods to the people of the communities
or the customers just to gain the economic benefits (Tai & Chuang, 2014). It has been noted that
most organizations are trying to adopt the CSR activities for the betterment of the opportunities.
The economic interests of the company are very essential but the interests of the employees
should be kept at the focus as well (Ni & Van Wart, 2015). The contributions of the companies
towards the society should be made very essential for the good reputation. The experts have
argued that the sole responsibility of the organizational managers is to gain the interests and
economic profits by satisfying the needs of the customers and the shareholders.

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This will lead to the maximization of the profits of the company matching coincidentally
with the profit generation (Ni & Van Wart, 2015). This area of CSR is becoming is very much
essential for the companies to execute the well-being of the society. In the recent times the
classical view of the corporate social responsibility is fading in the lights of the socio-economic
approach for the betterment of the society. The companies must look after the society in which
he operates. However the broader view of CSR is gaining the better focus indeed.
2.2. Broad views
The broader view of the CSR is very important to be considered in this scenario. It is
because the modern day business organizations would always look to focus on the society in
which they currently operate. In contrast to the narrow views of CSR, the main purpose of the
business organizations would not lie solely on making money (Crane, Matten & Spence, 2013).
They should analyze both the positive and negative impacts of their businesses on the society.
However, it is also the responsibility of the organizations to look after the fact no deceptions and
fraudulent activities should take place in this scenario.
This would be helpful for the organizations to make the right choice. Most of the
managers in the organizations would support the broader view of the organizations for a number
of reasons (Crane, Matten & Spence, 2013). Some people have argued against the broader view
of CSR that companies would not be able to gain the profits if they focus too much on the CSR
activities. Some people have also argued that the executives of the organizations do no not have
the capabilities to take the decisions regarding the welfare of the society. The critics have also
discussed the fact that the it is the responsibility of the governments to make sure that all the
organizations act ethically and take the right decisions suitable for the country.

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In contrast to these arguments it should be mentioned that it will never be possible for the
government alone to take the right ethical decisions and control the behaviors of the
organizations to ensure they are thinking of the well-being of the organizations. Some people
have also opined that the business organizations would look to convert the society into a
materialistic place rather than the place it is now (Crane, Matten & Spence, 2013). They would
like to use their power to do this. However, this view can be deemed as baseless since the
business organizations already have enough power to manipulate the society and make it
commercial (Servaes & Tamayo, 2013). The phrase ‘with great power comes greater
responsibilities’ should be considered in this scenario since the business organizations would use
their power to think for the overall well-being of the society from the material and economic
aspects. The business organizations should always their power and concentrate on the
sustainability of the society (Wagner & Hollenbeck, 2014).
3.0. Analysis of the Westpac’s decisions
3.1. Ethical theories
The ethical considerations are really very crucial facts for the organization to do the
business in the proper ways (Campbell, Coff & Kryscynski, 2012). The business organizations
must always abide by the rules and ethical regulations when they conduct their businesses in the
proper ways. Being one of the big four banks it is also the responsibility of the Westpac Bank to
do the same. The organization believes that the financial crime is very harmful for the overall
well-being of the organization and the employees as well (Servaes & Tamayo, 2013). Thus some
of the ethical theories should be considered in this aspect. Some of the most crucial ethical
theories applied in the business practices are utilitarianism, deontological ethics, morality and

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natural rights. Another important ethical theory in this regard is the virtue ethics. It is a very
recent philosophical issue in the organizations regarding to the application of the ethics. The
importance of the moral character is indeed very much crucial (Hursthouse, 2013). The egoism is
also a theory that can be attributed to this section as well. The self-interested behavior is one of
the major issues in the egoism or ethical considerations in the organizations (Van Hooft, 2014).
The aspect of altruism is also prevalent in this section since the reflection is on the workplace
cultures. The ethics of care can also be attributed to thus issue as well (Audi, 2012). The ethical
considerations had not been taken into consideration in the case of their Westpac Bank. The
honesty and morality of the individual persons or the morality of the persons should be
considered in the virtue ethics since the Westpac Bank had not acted ethically in lending home
loans to over 10,500 people in an irresponsible manner through their HEM benchmark. The
agent-based approach of the virtue ethics would be much important in this context. The decay
from the morality would not consolidate the condition of the individuals (Hursthouse, 2013).
The deontological ethics means that the outcomes of the works would depend upon the
fact whether it is inherently good or evil. According to this ethical belief, the works done with
good purpose would have good outcomes and the same for the evil ones (Campbell, Coff &
Kryscynski, 2012). The unusual HRM practices are the examples of the application of the
business ethics in the organizations. This ethical theory determines whether the employees are
happy. However, the utilitarianism determines the fact best things must be done within the
organization for the greatest number of the people. Another ethical principle in business ethics is
the morality ethics. The internal ethics are very much important in this scenario. The fourth
ethical theory is the natural ethics (Gamble, Thompson & Peteraf, 2013). This ethical theory
deals with providing the benefits to the employees committing the homosexual marriages.

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3.2. The application of relevant theories on Westpac’s decisions
The issues that the Westpac Bank has faced lately deals with the several complications
regarding the environment and the climate change. The decision making of the Westpac Bank is
concerned with the facts where invest and lend their money. The organization has several
policies, frameworks and positions where they take the proper decisions regarding lending and
investing their money (Gamble, Thompson & Peteraf, 2013). The climate policy of Westpac has
been negative news for lending the coal mines in the Gailee Basin. The coal sector in Australia
would be badly hampered by this decision. The Resources Minister of the Federal Government
indeed got furious over this decision.
However, the sustainability journey of the environment by Westpac did not go as it was
expected. The operational efficiency was not at the proper place indeed. The engagement of the
stakeholders of Westpac has not been that much. This is why it has enraged the stakeholders to a
certain limit as well (Carroll & Buchholtz, 2014). In this context, the ethical theory of
utilitarianism can be taken as a valid response for the organization. It is because this theory deals
with doing the best for the greatest number of people. The well-being of the society can be
related with the sustainability (Bowie, 2017). As the coal lending has been affected it will create
negative environmental impact on the society at large.
Thus the stakeholders would be affected as well. If they are not able to do the best for the
entire society their reputation will be hampered largely as well. The external crisis owing to the
global inflation might be responsible for this but the message to the customers and the society
has not been much positive (Carroll & Buchholtz, 2014). However, their other decisions like
supporting the aboriginal Indians can be supported very much as well. However, the decision to

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rule out the Adani project might prove to be effective for the society on the long run since the
level of pollution can decrease (DesJardins & McCall, 2014).
The ethical consideration that will have to be considered for Westpac Bank is the
irresponsible lending (Bartholomeusz, 2018). The Westpac Bank had been fined a sum of record
$35 million for breaching the provisions regarding the responsible money lending. The Federal
Court Trial had settled for this immense fine as the settlement was done with the Australian
Securities and Investment Commission. Westpac Bank had used the benchmark of the Household
Expenditure Measure (HEM) rather than using the declared living expenses of the consumers.
The bank had failed to use the higher repayments at the flag end of the interest-only period of the
borrowers so the assessment could be done on their capacity to pay the loans again. This seems
to be a direct breach of the rules completely (Bartholomeusz, 2018).
The aspect of relying heavily on the benchmark of the Household Expenditure Measure
(HEM had brought about this ruin for the bank. The figures show that Westpac Bank had made
an approval of 261,987 home loans between the timeline of December 2011 and March 2015
(Bartholomeusz, 2018). The bank did not receive the actual information about the expenses of
the consumers in around 50000 cases. The ASIC had given the opinion that the bank should not
have used the HEM benchmark in approving the benchmark for around 5041 cases of home
loans (Bartholomeusz, 2018). The automatic approval of the bank had not worked properly in
case of the Westpac Bank indeed. This dispute had to be settled for retaining the proper
reputation of the bank in the best ways. The Westpac Bank had finally changed their systems in
2015 and they believe that they will have a better credit quality system indeed. However, the
financial experts found out that no loss or damage had been done to the consumers as a result of
these admissions by the bank.

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4.0. Justification of Westpac’s decisions
In this segment the justifications for the implementation of the climate change policy of
the Westpac (Weiss, 2014). This might seem to affect the society in a negative manner but the
experts have suggested that this would benefit the society in the coming times. The company has
not been able to cope up with the challenges and pressures put by the people in the community to
rule out the project (Bourne, 2016).
The fact of the irresponsible lending has somewhat ruined the reputation of the company
and it has been a sign of worry for the company as well. The decision has been discussed in the
earlier section only. It can be said that the decision taken by Westpac on giving the home loans
to more than 10,500 people without checking the actual information of expenses of the
customers does not sound practical at all. It would have been a loss for the company if the
customers were unable to repay the loans.
The security of the borrowers would have been in question if anything went wrong in this
situation it would have led to a great loss in this context. However, the Prime Minister of
Australia after the Westpac had a rate hike in their proceedings. The ASIC had said that this fine
would be a great lesson for all the banks within the industry so they could not take such steps
indeed.
5.0. Conclusion
The conclusion to this paper can be drawn by saying that CSR is a very crucial activity
for all the organizations to be resolved. The organizations should always try to interact with the
business environment they are operating their business in. In the current scenario, the adoption of
the broader views of the corporate social responsibility should be adopted since the

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organizational managers should think of the well-being of the society as well as their economic
benefits (Ferrell & Fraedrich, 2015). The various ethical theories in business have been discussed
in this paper. It has been found that the utilitarianism is probably the most fitting to all the issues
in the business. The impact of the irresponsible lending has led to a sort of dissatisfaction among
the customers of the bank. Thus the decision of imposing the fine on the customers could have
said to be an ethical decision in order to retain the faith of the customers in a better way. This
would give a straight message to all the companies working in this industry.

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6.0. References
Audi, R. (2012). Virtue ethics as a resource in business. Business Ethics Quarterly, 22(2), 273-
291.
Bartholomeusz, S. (2018). The paradox within Westpac's 'irresponsible' lending breach.
Retrieved from https://www.smh.com.au/business/banking-and-finance/the-paradox-
within-westpac-s-irresponsible-lending-breach-20180911-p50310.html
Bourne, L. (2016). Stakeholder relationship management: a maturity model for organisational
implementation. Routledge.
Bowie, N. E. (2017). Business ethics: A Kantian perspective. Cambridge University Press.
Campbell, B. A., Coff, R., & Kryscynski, D. (2012). Rethinking sustained competitive advantage
from human capital. Academy of Management Review, 37(3), 376-395.
Carroll, A., & Buchholtz, A. (2014). Business and society: Ethics, sustainability, and stakeholder
management. Nelson Education.
Crane, A., Matten, D., & Spence, L. (2013). Corporate social responsibility in a global context.
DesJardins, J. R., & McCall, J. J. (2014). Contemporary issues in business ethics. Cengage
Learning.
Ferrell, O. C., & Fraedrich, J. (2015). Business ethics: Ethical decision making & cases. Nelson
Education.

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Gamble, J. E., Thompson, A. A., & Peteraf, M. A. (2013). Essentials of strategic management:
The quest for competitive advantage. McGraw-Hill/Irwin.
Hursthouse, R. (2013). Normative virtue ethics. ETHICA, 645.
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In Building Business-Government Relations (pp. 175-196). Routledge.
Schwartz, M. S. (2017). Corporate social responsibility. Routledge.
Servaes, H., & Tamayo, A. (2013). The impact of corporate social responsibility on firm value:
The role of customer awareness. Management science, 59(5), 1045-1061.
Tai, F. M., & Chuang, S. H. (2014). Corporate social responsibility. Ibusiness, 6(03), 117.
Trevino, L. K., & Nelson, K. A. (2016). Managing business ethics: Straight talk about how to do
it right. John Wiley & Sons.
Van Hooft, S. (2014). Understanding virtue ethics. Routledge.
Wagner III, J. A., & Hollenbeck, J. R. (2014). Organizational behavior: Securing competitive
advantage. Routledge.
Weiss, J. W. (2014). Business ethics: A stakeholder and issues management approach. Berrett-
Koehler Publishers.
Westpac.com.au. (2018). Westpac - Personal, Business and Corporate Banking. Retrieved from
https://www.westpac.com.au/