CORPORATE CORPORATE RESPONSIBILITY AND RESPONSIBILITY AND

BUSINESS ETHICSBUSINESS ETHICS

ASST PROF. JONLEN DESAASST PROF. JONLEN DESA

CORPORATE RESPONSIBILITY/ CSR CSR is the intelligent and main concern for the welfare of society that restrains

individual and corporate behavior from destructive activities.

Through CSR, management is responsible to itself and to all other interested groups i.e. its stakeholders- shareholders, customers, employees, suppliers, creditors, government, society etc.

It is the duty of a business firm to protect the interest and welfare of all its stakeholders.

All businesses should also focus on the needs of society besides profit maximization. They should consider the impact of their decisions and activities on others.

Businesses are accountable voluntarily to society for its actions. Both businesses as well as society need each other for their survival and functioning.

CSR is the obligation of decision makers to take actions which protect and improve the welfare of society as well as their own interests.

Society expects that the businesses are conscious and ethical in their practices.

Examples of CSR include providing employment opportunities, paying taxes on time, paying fair wages to employees, supplying good quality products at reasonable rates to customers, being eco- friendly, infrastructure development, meeting the needs of others etc.

Business and society are interrelated and interdependent.

DEFINITION

Corporate Responsibility “ is the obligation of the organization to serve its own interest and those of society.” - John R.S.

Corporate Responsibility “ is the responsibility of decision makers to take action which helps society and serves own interest.”

FEATURES OF CSR

Conduct social audit

Arrange public meetings

Use trained staff

Use of means of communication

Obtaining collective results

Help the needy

More than the law

NEED FOR CSR To avoid excessive government interference/ regulation or control by government

agencies in the conduct of business activities.

To avoid misuse of natural resources and economic power available with businessmen/ corporate sector.

To avoid class-conflicts by giving fair treatment to all social groups including consumers and employees.

To establish a better public image & to have cooperation from all for expansion of business activities.

To fulfill long-term self-interest i.e. to create favorable environment for business growth

ADVANTAGES OF CSR

Growing public expectations of business

Creating favorable environment for business

Creating favorable public image

Minimize government control

Business is a means and not the end in itself

Better use of surplus resources

Complexity of social problem

Prevention is better than cure

Benefits to firm & interest groups

ARGUMENTS FOR CSR

Changes in public expectations

Business is a part of society

Avoiding intervention by government

Favorable public image

Favorable environment for business

Prevention is better than cure

Business is a means and not the end in itself

Better usage of resources

ARGUMENTS AGAINST CSR

Opposes the principles of profit maximization

Excessive Costs

Lack of necessary skills among business people

Economically Irrational

Business & Social Activities are Opposite

Charity degrades Human Dignity

CORPORATE RESPONSIBILITIES OF BUSINESSCORPORATE RESPONSIBILITIES OF BUSINESS

1. RESPONSIBILITIES TOWARDS ENTERPRISE ITSELF

To earn adequate profit for survival, growth and for discharging social responsibility.

To utilize its resources to the fullest extent and earn profits year after year.

To earn profit through efficient business management and not by exploiting consumers, employees and other social groups.

To follow business laws honestly and to maintain cordial relations with all sections of the society.

To create good corporate image for the enterprise through systematic image building measures.

To fulfill global customer needs at globally approved quality and globally competitive prices. This may be treated as social responsibility to global business environment.

2. RESPONSIBILITIES TOWARDS CUSTOMERS To provide goods and services as per the needs of consumers and also to provide

maximum possible satisfaction to consumers by providing quality goods and guaranteeing about the lifetime performance of the product supplied.

To avoid all monopolistic/ restrictive/ unfair/ trade practices which are harmful to consumers.

To allow free and fair competition in the market. To ensure that the product supplied has no adverse effect on the life and health of

consumers/ customers. To avoid artificial scarcity of goods and services and thereby ensure fair and equitable

distribution. To supply goods at fair and reasonable prices to consumers. This means the price

should be within the reach of common consumer. To conduct marketing research activities in order to make business consumers friendly.

To maintain close link with consumers and to introduce consumers advisory councils and consumer cells in order to give attention to the complaints/ suggestion of consumers.

To maintain continuous supply of goods and to provide satisfactory after sale service.

To honor and protect the rights of consumers. To avoid exploitation of consumers through business malpractices such as

adulteration and short weights. To study the needs and expectation of consumers and to adjust business activities

accordingly. To reveal correct information in advertising, packing and labeling to consumers. To give decent treatment to consumers. The principle of ‘good manners are good

business’ should be followed while dealing with consumers. To follow honestly the code of fair business practices/ the code of business ethics.

3. RESPONSIBILITIES TOWARDS EMPLOYEES

To provide opportunity for meaningful work in the enterprise and to create a sense of loyalty towards the enterprise.

To create the conditions in which employees are able to put forward their best efforts for achieving the objectives of an enterprise.

To recognize and honor the workers rights to: fair wages, participate in decisions affecting them and to join trade unions.

To provide adequate opportunities to develop their capabilities through education, training and promotion.

To provide a security of employment so as to raise their morale and loyalty to the organization.

To introduce impartial promotion and transfer policies for the entire labour force.

To create a sense of belonging and to motivate employees to contribute their best towards the progress of the enterprise.

To provide welfare facilities to workers and to make arrangements for their recreation and safety.

To pay just and fair wages and allowances to workers and to introduce fair work standards and norms.

To introduce suitable grievance handling machinery in consultation with the trade union.

To provide best possible working conditions and thereby to make workplace attractive and agreeable to employees.

To recognize, appreciate and encourage special skills and capabilities of employees.

To introduce schemes of participative management.

4. RESPONSIBILITIES TOWARDS SHAREHOLDERS To earn sufficient profit and to bring financial soundness to the company and also to the

investment of shareholders.

To keep the business enterprise stable and dynamic. In addition, to run the business in a cost concscious and efficient manner so as to stay in the business over a long period.

To provide fair return on capital provided in the form of reasonable dividend and long term appreciation of shares.

To supply complete and accurate information about the financial position of the company through reports and circulars.

To supply audited annual accounts in order to inform the owners that their capital has been fruitfully employed.

To take investors into confidence and to consult them as and when necessary.

To improve the prestige of the company through growth and expansion.

To raise the public image of the company so that shareholders will be proud of their company.

5. RESPONSIBILITIES TOWARDS GOVERNMENT

To pay taxes, duties, fees etc. regularly and honestly.

To respect and follow different commercial, industrial and other relevant laws, rules and regulations.

To offer co-operation to the government in the execution of different economic policies.

To avoid the use of corrupt and unethical means to seek favors from the government and politicians.

To avoid tax evasion and to assist the government in promoting exports.

To submit various returns/ forms/ documents etc. to government authorities correctly and in time.

6. RESPONSIBILITIES TOWARDS SOCIETY

To generate employment opportunities and to provide better life and welfare to all members of society.

To see to it that all amenities of the local community are not damaged.

To avoid bad effluents, smoky chimneys and other forms of pollution. To preserve ecological balance.

To contribute towards economic growth, economic stability and national security.

To introduce social audit by professional experts.

To provide financial support to social and cultural activities. Also contribute to social causes like education and rural development.

To improve the quality of products and to look after the welfare of the local community.

To rehabilitate the population affected by the operation of business, if any.

ETHICSETHICS Ethics is a science of morals. It deals with values that reflects conduct.

Ethics is a set of principles or standards that direct human behavior. They act as guidelines or standards as to how humans behave in a particular situation.

Ethics is intangible in nature.

Ethics is derived from the Greek word “ Ethos” meaning character. Thus the character of a person is very important.

Ethics distinguishes between what is right and wrong, good and bad, ethical and unethical, moral or immoral.

Every profession has its own ethical standards that acts as a code of conduct, which is to be strictly followed by each professional while discharging their duties.

BUSINESS ETHICSBUSINESS ETHICS Business Ethics is a system of moral principles and values that are applied to business

activities.

Business Ethics is an etension of values of personal life to business.

It deals with morals, principles, values and code of conducts in the business.

All business activities should be conducted morally and ethically which is appreciated by everyone.

All activities or actions of businesses should cause no harm to any person or anything.

All rules and regulation, standards set should be followed strictly by all business enterprises.

3 main types of business ethics are moral management, amoral management and immoral management.

DEFINITION

According to Wheeler, “Business ethics is an art or science of maintaining harmonious relationship with society, its various groups and institutions as well as reorganizing the moral responsibility for the rightness or wrongness of business conduct.”

FEATURES OF BUSINESS ETHICS

Refers to code of conductBased on moral and social values Provides protection to social groups Provides basic framework for business Needs willing acceptance Education and guidance required for

introductionNot against profit making

NEED FOR BUSINESS ETHICS

For checking business malpractices

Improving consumer confidence

Making businessmen conscious of social responsibilities

Protecting consumer rights and social welfare

Protecting social groups

Developing cordial relations between business and society

Creating good image of business

CODE OF CONDUT AND STANDARDS

Code of conduct and standards are associated with set of rules and guidelines.

It is the code of conduct introduced to please pressure groups or is it making serious attempt at maintaining ethical behavior.

Code of conduct and standard has no importance if they are not followed.

Code of conduct is a published statement of moral expectations for employee conduct. Some codes specify penalties for offender.

It is possible to formulate a code for the entire organization.

In order to formulate such a code acceptable to all, knowledgeable and experienced executives may be appointed.

When employees are associated in the process of formulations, it is possible to clarify misunderstanding, ambiguity and implementation of the code.

Once the code is drafted, it may remain relevant for a long period of time. When circumstances and situations affecting business change, it becomes necessary to redraft the code.

Important Code Of Conduct And Standard:

Avoid exploitation of consumers: Do not cheat or exploit consumers through business malpractices such as artificial price rise and adulteration.

Avoid profiteering : Do not resort to hoarding, profiteering and sale of harmful goods. Encourage healthy competition: Do not destroy healthy competition which offers certain

benefits to consumers. Do not tarnish the image of competitors. Ensure accuracy : Ensure accuracy in weighing, packing and quality while supplying goods

to consumers. Regular tax payment : Pay taxes and other charges to concerned authorities honestly and

regularly. Avoid bribing officials and lobbying for favors. Proper accounts-keeping: Maintain accurate business records, accounts and make them

available to all authorized persons and authorities. Service before profit : Accept the ‘principle service first profit next’ Practice fair business: Make your business efficient and dynamic. Give the benefit of these

features to consumers. Avoid monopoly : Avoid formation of private monopolies and concentration of economic

power.

Fair treatment to employees: Pay fair wages, provide facilities and incentives and also give human treatment to employees.

Keep shareholders informed: Supply reliable information to shareholders regarding financial position and other policy decision of the company.

No discrimination among employees: Avoid injustice and partiality to employees in regards to transfers and promotions. Avoid discrimination among them on the basis of gender, religion and language.

No bribe: Refrain from secret commissions, payoff to suppliers, administrators and finally politicians.

Discourage secret agreement : Do not make secret agreement with fellow businessmen for controlling production, pricing or for any other activity harmful to consumers.

Fulfill customer expectations: Adjust your business activities as per the needs and expectation of customers.

Respect consumer rights : Give due respect and honor to the basic rights of consumers. Accept social responsibility : Honor responsibility towards different social groups on

voluntary basis and not by force.

MANAGERS AND ETHICAL BEHAVIOURMANAGERS AND ETHICAL BEHAVIOUR Ethics and HRM

Behavior at workplace

Practice accountability

Emphasis on teamwork

Follow time management

Ensure safety of workplace

Commitment

Communication

Organize proper meetings.

Ethical Guidelines for Managers

Tell the truth

Obey the Law

Uphold Human Dignity

Lead by example

Above all, do no harm

Allow room for Participation

Establish codes of Ethics

Include Ethics in Performance Appraisal

Hire individuals with high ethical standards

Provide support to individuals facing Ethical Dilemmas

BARRIERS TO ETHICAL BUSINESS

FACTORS THAT DETERMINE ETHICAL FACTORS THAT DETERMINE ETHICAL AND UNETHICAL BEHAVIOURAND UNETHICAL BEHAVIOUR

1. Stages Of Moral Development{Level of Moral Development}:

a) Pre-conventional level: At this stage, moral decisions are taken to avoid punishment as it is against societal norms or for fulfilling one’s own needs.

b) Conventional level: At this stage, individuals select their moral options based on the cultural norms of the society to which they belong.

c) Post- conventional level: At this is the final stage where an individuals follow self- chosen ethical principles . He does not care for majority’s option when he is convinced that he is right.

1. Moral Situation

a) Rights and duties

b) Virtues and vices

c) Agreements and laws

3. Individual Characteristics

4. Structural Variables

5. Organization Culture

6. Intensity of Issues

Ethical issues are delicate hence they should be handled delicately. Each situation is unique and it should be treated independently.

a) The number of people harmed is very large

b) Employee escapes being close to the boss

c) Action is considered wrong by one and all

d) Abrupt solution may cause greater harm

e) Action disturbs the victim violently

f) Proximity to victims