An overview of moral and ethical theories in the context of social enterprise

1. The Call to Purpose Over Profit
• “The perverse incentives inherent in a largely unconstrained
capitalist system…drive behaviors that:
– increase inequality, reduce social mobility, devalue
communities
– deplete soils, acidify oceans, destroy biodiversity
– trigger mass migrations and social instability..
– fuel violence and war…”.
Jay Coen Gilbert,
Social enterprise movement leader
PAGE 1
Source: Forbes

2. The Response: Social Enterprise
• An organization in which the primary activities tie directly to a
social mission.
• Formational documents must include a social commitment
– a traditional charitable
– a social cause, such as responsible sourcing
– company culture
PAGE 2
Source: Conscious Company Media

3. How Do We Ask Questions As A Leader? (Gilligan)
• Socially conscious stakeholders impose new demands
– Create conflict between individual (care) and institutional
(justice) interests.
• What should be done in a relationship (e.g., employer/various
socially conscious stakeholders) when there is no good thing that
can be done?
PAGE 3
Source:Gilligan

4. How Do We Ask Questions As A Leader? (Gilligan,
cont.)
• Care-based perspective:
– Self and other are interdependent.
• Survival is self interested…
…so we are responsible to others and avoid violence
…and we balance caring for self with care of others.
– Action is responsive.
• “Self-governed” by human interaction and language.
PAGE 4
Source: Gilligan

5. What is Corporate Social Responsibility (CSR)?
• Significant shared value creation through smart partnering.
– “moves beyond avoiding risks or enhancing reputation”
– improves a business’ core value creation ability
• Focuses on improving employment, the overall quality of life, and
living standards.
• Each party “taps into the resources and expertise of the other,
finding creative solutions to critical social and businesses
challenges.”
PAGE 5
Source: McKinsey & Company

6. Are Corporate Philanthropists, Public Relations and
“Pet Project” Sponsors Morally Undeveloped? (Starratt)
• CSR Leaders might say:
– “Why change? The current state works well!”
• Ethicists of critique would ask:
– Who controls?
– Who defines?
– What legitimates?
– Who benefits?
– Who dominates?
PAGE 6
Source: Starratt

7. The Problem for Social Entrepreneurs
• Corporate Social Responsibility (CSR) runs counter to the
entrepreneurial mindset and is a risk to sustainability.
– Disruption is the new normal
• Requires nimbleness, resourcefulness and creativity to
solve challenges around:
– New technologies
– Entrepreneurships
– Bankruptcies
– Acquisitions
– Changes in customer preferences
– Loss of market share
PAGE 7
.

8. Activity: The Entrepreneurial Mindset
PAGE 8
“I constantly think about
cash flow and liquidity,
rather than using credit
cards to pay for my
necessary expenses.“
I can be seen as an outsider:
opinionated, quirky and
demanding. When I’m
rejected for being different in
some way, it just makes me
work harder.

9. The Problem for Social Entrepreneurs, cont.
• More reliance upon employees and external partners
– No criteria for resource and profit allocation
– New stakeholder demands to balance purpose with profit.
• Customers, employees, investors, partners
• Creates conflict between institutional (professional) and
individual (personal) goals.
PAGE 9
.

10. The Problem for Social Entrepreneurs, cont.
• Entrepreneurships already resource-strapped.
– Questions of professional vs. personal morality
PAGE 10
.

11. A Significant Response: Benefit Corporations
• A legal, for-profit form of social enterprise
– Available in 34 states and Italy.
– ~5000 benefit corporations in the US (Gilbert, 2019).
• Foundational documents allow them to:
– honor their social commitments, even at the expense of profit
maximization.
PAGE 11
Source: Forbes

12. Certified B Corps
• Meet standards of verified social and environmental performance,
public transparency, and legal accountability
– to balance profit and purpose
• Works toward:
– reduced inequality, lower levels of poverty, stronger
communities
– a healthier environment
– the creation of more high quality jobs with dignity and purpose
PAGE 12
Source: B Lab .

13. B Impact Assessment Standards and Benchmarks
• Developed by The Global Impact Investing Network, B Lab,
Acumen Fund, and the Rockefeller Foundation with support from
Hitachi, Deloitte and PricewaterhouseCoopers
PAGE 13
Source: B Impact Assessment .

14. B Impact Assessment Standards and Benchmarks
• Businesses assess and compare their overall impact (since 2008).
• Impact Reporting and Investment Standards (IRIS)
– common reporting language
• social and environmental performance
• uniform measurement and articulation of impact across
companies.
• benchmarking of data
PAGE 14
Source: B Impact Assessment .
“It's a sales and marketing tool to use for attracting talent or
capital, as well as competing for market share. Not only is
there verified performance around your impact, but there is
the legal structure so you and the investor know that it's
being baked into the DNA of the business.”
Source: Entrepreneur

15. Questions for Social Entrepreneurs:
How Do They Balance Purpose and Profit?
• What personal and professional dilemmas arise when leading a
for-profit socially conscious business?
– Where are examples of sustained success?
– What are the best practices of successful for-profit social
entrepreneurs?
PAGE 15
.

16. Questions for Social Entrepreneurs:
How Do They Balance Purpose and Profit, cont.?
– Why did they choose the for-profit model?
• Ability to set impact goals (i.e., independence from
grantors)?
• Ability to manage staff rather than volunteers?
• How – and why – do they allocate profit dollars across:
– Retained earnings to fuel growth
– Shareholder dividends
– Investments in community, employees, and
environment?
PAGE 16
.

17. Questions for Social Entrepreneurs:
How Do They Balance Purpose and Profit (cont.)?
• How do they manage transparency in reporting their social
impact?
– What kind – of social impact information do they share? Is it
qualitative or quantitative? With whom is the information
shared, and why?
– What value does the independent oversight have for the social
entrepreneur? Credibility?
PAGE 17
.

18. Questions for Social Entrepreneurs:
How Do They Balance Purpose and Profit (cont.)?
• What kind of risk to profitability – and how much –
can entrepreneurs accept?
– Public opinion
– Uncertain outcomes from decisions
PAGE 18
.

19. Social and Logical Reasoning (Kohlberg)
• Theory: Social entrepreneurs are aspirational leaders.
– Strive to reach a high level of moral reasoning,
nonconventional/universal moral principles.
• “4 ½’s” – relativistic egoism” maintains the
entrepreneurial mindset.
• Few people attain universal ethical principles and accept
consequences (e.g., lower profit margins).
PAGE 19
Source: Kohlberg.

20. Social and Logical Reasoning (Kohlberg)
• Proposed social enterprise leader behavior:
– Think deontologically but behave teleologically
• Model moral agency
• Create a justice structure to serve as the “moral
atmosphere” of the organization.
– Answer to “How shall we govern ourselves?” is “by
observing justice” (Starratt)
– Maximize benefits by finding out “what is good”.
• Determine what must be sacrificed between purpose and
profit.
PAGE 20
Source: Kohlberg.

21. Social and Logical Reasoning (Kohlberg)
• Proposed social enterprise leader behavior:
– Provide opportunities for practice through “role-taking”.
• Discussion, reasoning, communicating feelings, making
group decisions.
PAGE 21
Source: Kohlberg.

22. The Evolution of Business Ethics (Early Ideas)
• All human behavior is essentially self-interested but not immoral
(neo-Classic view).
• Ethics are untenable.
– Contrary to managerial roles/responsibilities
• To be ethical, a business should banish “all external motivation,”
(i.e., power, authority, leadership, incentives) which is coercive and
morally wrong.
PAGE 22
Source: Harvard Business Review

23. The Evolution of Business Ethics (Today)
• Corporations are “places of liberation and achievement rather
than oppression and denial.”
• Both utilitarianism and deontological.
– “…a willingness to do what [is] necessary” and an “insistence
on doing it as humanely as possible.”
PAGE 23
Source: Harvard Business Review

24. Care As a Way of Knowing (Starratt)
• Ethic of Care and Ethic of Justice can coexist
– Strong policy that incorporates care..
• Leaders must ask relevant questions.
– Motivation must be ethical when those affected have no input.
– Develop an appropriate metric.
• “No social arrangement is neutral”.
– People value it.
PAGE 24
Source:Starratt .

25. Ethic of Care (Beck, Mayeroff, Gilligan, et al)
• Development is a goal of caring and is teleological (Beck)!
• Three main activities:
– Receiving
• Openness and willingness to accept another’s reality,
uncritically
– Responding
• A willingness to assume responsibility for another
– Remaining
• Devotion that develops (when) overcoming
obstacles/difficulties
PAGE 25
Source: Beck

26. The Process, Not the Product, is Teleological (not
Deontological) (Mayeroff)
• Know yourself and others:
– Who is the other?
– What are his powers and limitations?
– What are his needs?
• How should I respond to them?
– What is conducive to his growth?
– What are my powers and limitations?
PAGE 26
Source: Mayeroff

27. Reflective Equilibrium – Reconciling the Temptation to
be Teleological (Callahan)
• Situational perception
– Moral development is challenged by situations
• Influences that shape your perspective.
• One “sees” the moral answer; and doesn’t reason it
through.
– Resolves conflicts using equality and reciprocity
• Impartial, on the basis of personal merit (data)
• Policy and practice (“do” ethics)
– Find new principles (become ourselves)
PAGE 27
Source: . Callahan

28. Reflective Equilibrium – Reconciling the Temptation to
be Teleological (Callahan)
• Seeks to make hard choices
– Use answers to normative (behavior/morals/values) and
descriptive (factual) questions
– The most cost effective option is not necessarily the most
moral.
• If my company is losing market share, what action is in the
best interest of the employees?
PAGE 28
Source: . Callahan

29. PAGE 29
References
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30. PAGE 30
References
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