ACCA Strategic Professional · Strategic Business Leader · Stakeholder analysis and organisational social responsibility
Zenith Energy, a listed utility, has a strong record on legal compliance and is highly profitable. Investors complain that the company spends heavily on donations and sponsorship, while its pricing to low-income customers is widely seen as exploitative though lawful. An adviser uses Carroll's pyramid to recommend a priority. Which recommendation is most consistent with the model?
The adviser should recommend fixing the ethical problem in pricing first. In Carroll's pyramid, philanthropy sits at the top and cannot make up for unethical conduct in core operations, although it need not be abandoned. The levels build on each other, with economic responsibility as the base.
- AReduce donations entirely, since philanthropy is the least important level and the firm is already legal
- BMaintain donations, because philanthropy is the base of the pyramid and supports the others
- CAddress the ethical shortcoming in pricing first, because philanthropy cannot compensate for unethical conduct in core operationsCorrect
- DPrioritise economic responsibility, because profit is the foundation and ethical issues arise only in loss-making firms
Explanation
Carroll's levels are cumulative: a firm should be profitable, law-abiding, ethical and a good citizen, and philanthropy does not offset failings lower down. The pricing problem is an ethical-level issue in core operations, so correcting it takes priority over discretionary giving. Option A is wrong because Carroll does not say to abandon philanthropy. Option B reverses the pyramid, since economic responsibility is the base.
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