Business Ethics and Corporate Social Responsibility

BUSINESS ETHICS

WHAT IS ETHICS?

• Ethics are principles that explain what is right or wrong, good or bad, and what is appropriate or inappropriate in various settings.

WHAT IS BUSINESS ETHICS?

• Business ethics provide standards or guidelines for the conduct and decision making of employees and managers

• ALTHOUGH WE MAY DIFFERENT HAVE DIFFERENT ETHICAL STANDARDS IN DIFFERENT COUNTRIIES, STILL WE HAVE CERTAIN VALUES COMMON WORLDWIDE.

• NAME A FEW SUCH ETHICAL VALUES FOR BUSINESS?

• TRUST• HONESTY• FAIRNESS• DIGNITY AND RESPECT FOR

HUMANITY• RESPECT FOR LAW• RESPECT FOR PROPERTY• FREEDOM AND AUTONOMY• OBJECTIVITY • COMPASSION

• Correlative principles

• Live up to your agreements

• Provide each employee with equal opportunity

• Respect trade secretes of your company

• Provide sound advice to clients

Framework for solving ethical problem:-

• 1. Define the problem

• 2. Is it an ethical issue or a straightforward business question?

• 3. Is a case about differing opinion,conflict of interest or question of rights/ fairness?

• 4. Problem level-an individual, company, cultural problem

How to institutionalise business ethics?

• How can managers bring ethical principles into practice?

Three steps:

• The first step:-

• Create a company credo:-

• General guidelines about the values of the company and ethical responsibilities to its stakeholders.

• Second step:-

• Develop a code of ethics

• Written statements of standards of behavior and ethical principles a company expects from its employees.(establish minimum standards)

• Such as product quality ,safety

• Health and safety at workplace

• Employment practices

• Selling and marketing practices

• Financial reporting

• Protecting the environment

• The code should be strictly enforced.

• If violation occurs, what penalty????????

Step third:-Ethics committee and ethical training:-

• Committee:- Procedures for reporting unethical behavior

• Also perform periodical ethical audits –here two –way communication is very important.

• Training:- Case studies:- alert employees to the types of ethical dilemmas they are likely to fall into.

• Wistleblowing:-

• Employees anonymously report braches of ethical behavior through proper channels.

Ways Companies Integrate Ethics

• Top management commitment in word and deed

• Company codes of ethics

• Supply chain codes

• Develop, monitor, enforce ethical behavior

Instances where business ethics is involved:-

–    Pricing, billing, and contracting         Trading in securities and/or use of insider

information         Payments to obtain business         Acquiring and using information about

others         Security and political activities         Environmental protection         Intellectual property or use of proprietary

information

Definitions and Relationships

• Corporate social responsibility (CSR) is the process by which businesses negotiate their role in society

Social ResponsibilitySocial ResponsibilitySocial Responsibility

The attempt of a business to balance its The attempt of a business to balance its commitments to groups and individuals in commitments to groups and individuals in its environment, including customers, its environment, including customers, other businesses, employees, and other businesses, employees, and investorsinvestors

Organizational Stakeholders Organizational Stakeholders 

Those groups, individuals, and Those groups, individuals, and organizations who are directly affected by organizations who are directly affected by the practices of an organization and who the practices of an organization and who therefore have a stake in its performancetherefore have a stake in its performance

1. Corporate scandals in Japan (former Mitsubishi Motors executive arrested on suspicion of professional negligence - defective truck parts);

2. Citibank turfed from Japan for irregularities.

Spectrum of Approaches toCorporate Social Responsibility

LOWEST LEVEL LOWEST LEVEL OF SOCIAL OF SOCIAL

RESPONSIBILITYRESPONSIBILITY

HIGHEST LEVEL HIGHEST LEVEL OF SOCIAL OF SOCIAL

RESPONSIBILITYRESPONSIBILITY

Obstructionist Stance

DefensiveStance

Accommodative Stance

ProactiveStance

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Approaches to Social ResponsibilityObstructionist Stance 

Approach to social responsibility that involves doing as little as possible and may involve attempts to deny or cover up violations

Defensive Stance Approach to social responsibility by which a company meets only minimum legal requirements in its commitments to groups and individuals in its social environment

Accommodative Stance Approach to social responsibility by which a company, if specifically asked to do so, exceeds legal minimums in its commitments to groups and individuals in its social environment

Proactive Stance Approach to social responsibility by which a company actively seeks opportunities to contribute to the well-being of groups and individuals in its social environment

Major Stakeholders

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Employees Investors

Customers Suppliers

Local Communities

CORPORATION

Areas of Social Responsibility• Environment

• Customers

• Employees

• Investors

Responsibility Toward the Environment

“We’re conducting a global experiment. And we’re all in the test tube.”

~ Researcher on greenhouse emissions

Controlling Pollution

Discuss:

• Air Pollution

• Water Pollution

• Land Pollution– Toxic Waste Disposal– Recycling

Responsibility Toward Customers

Consumer Rights

ConsumerismConsumerism

Form of social activism dedicated to Form of social activism dedicated to protecting the rights of consumers in their protecting the rights of consumers in their dealings with businessesdealings with businesses

Responsibility Toward Customers

Consumer Rights

1. Consumers have a right to safe products.

2. Consumers have a right to be informed about all relevant aspects of a product.

3. Consumers have a right to be heard.

4. Consumers have a right to choose what they buy.

Responsibility Toward Customers

Unfair Pricing

CollusionCollusion

Illegal agreement between two or more Illegal agreement between two or more companies to commit a wrongful act companies to commit a wrongful act (i.e., price fixing)(i.e., price fixing)

Responsibility Toward Customers

Ethics in Advertising

Discuss:

Food product labeling

Morally objectionable advertisements

Responsibility Toward Employees

Legal & Social Commitments

Discuss: Illegal Discrimination

WhistleblowerWhistleblowerEmployee who detects and tries to put an end to a Employee who detects and tries to put an end to a company’s unethical, illegal, or socially irresponsible company’s unethical, illegal, or socially irresponsible actions by publicizing themactions by publicizing them

Responsibility Toward Investors

Improper Financial Management

Unethical offenses — not necessarily illegalUnethical offenses — not necessarily illegal

Responsibility Toward InvestorsIllegal ActivitiesCheck KitingCheck Kiting

Illegal practice of writing checks against money that has not Illegal practice of writing checks against money that has not yet been credited at the bank on which the checks are drawnyet been credited at the bank on which the checks are drawn

Insider TradingInsider TradingWhen someone uses confidential information to gain from the When someone uses confidential information to gain from the purchase or sale of stockspurchase or sale of stocks

Managing Social Responsibility Programs• Social responsibility must start at the top. • A committee of top managers must develop a plan

detailing the level of management support. • One executive must be put in charge of the firm’s

agenda. • The organization must conduct occasional social audits

Social Auditssystematic analyses of its success in using funds earmarked for its social responsibility goals

Three Common Values for Global Business

• respect for human dignity

• respect for human rights

• good citizenship

• Decisions– choices from two or more alternatives– all organizational members make

decisions• Decision-Making Process

– a comprehensive, 8-step process

Decision Making

– Step 1 - Identifying a Problem• problem - discrepancy between an existing

and a desired state of affairs– must be such that it exerts pressure to act– manager is unlikely to characterize a situation as

a problem unless s/he has resources necessary to act

– Step 2 - Identifying Decision Criteria• decision criteria - what’s relevant in making a decision

– Step 3 - Allocating Weights to the Criteria• must weight the criteria to give them appropriate

priority in the decision

– Step 4 - Developing Alternatives• list the viable alternatives that could resolve the

problem without evaluating them

– Step 5 - Analyzing Alternatives• each alternative is evaluated against the criteria

– Step 6 - Selecting an Alternative• choosing the best alternative from among those

considered

– Step 7 - Implementing the Alternative• implementation - conveying the decision to those

affected by it and getting their commitment to it– participation in decision-making process inclines people

to support the decision– decision may fail if it is not implemented properly

– Step 8 - Evaluating Decision Effectiveness• determine whether the problem is resolved