UNIT1-BE.docx

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Unit1- Business Ethics

1. Meaning of Business Ethics

What is ethics? And what is business ethics?

The word Ethics which is coined from the Latin word Ethics and Greek word Ethikos

pertains to character. Ethics is thus said to be the science of conduct. As a matter of fact it

deals with certain standard of human conduct and morals. The field of ethics involves

systematizing, defending and recommending concepts of right and wrong behavior. Ethics

is a mass of moral principles or set of values about what is right or wrong, true or false,

fair or unfair, proper or improper what is right is ethical and what is wrong is unethical.

Defining Ethics

Peter F. Drucker writesThere is only one ethics, one set of rules of morality, one code

that of individual behavior in which the same rules apply to everyone alike.

Philip Wheel Wright says Ethics is the branch of philosophy which is the systematic

study of selective choice, of the standards of right and wrong and by which it may

ultimately be directed.

Ethics refers to the principles and standards of moral behaviour that are accepted by society

as right versus wrong. To make the right choice, or at least the best choice from amongcompeting alternatives, individuals must think through the consequences of their actions.


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Ethics can be defined as a set of principles of right conduct. It can also be defined as a

theory or a system of moral values. Ethics is the study of moral standards, the process of

examining the moral standards of a person or society to determine whether these standards

are reasonable or unreasonable in order to apply them to concrete situations and issues.

The ultimate aim of ethics is to develop a body of moral standards that we feel are

reasonable to hold standards that we have thought about carefully and have decided are

justified standards for us to accept and apply to the choices that fill our lives.

Objectives of Ethics

The objectives of ethics are as below:

1. The very basic objective is to define the greatest good of man and establish a

standard for the same.

2. Set/Establish moral standards/norms of behavior.

3.

An overall study of human behavior: what is moral or immoral should be assessed.4. Apply judgment upon human behavior based on these standard and norms.

5. Suggest moral behavior, Prescribes recommendations about Dos and Donts.

6. Ones opinion or attitude about human conduct is expressed in general.

Nature of Ethics

The nature of ethics can be explained by these points:

1. The concept of ethics is applied to human beings only as they have freedom of choice and

means of free will. They can only decide the degree of ends they wish to pursue and the

means to achieve the ends.2. The study of ethics is nothing but a field of social science in which a set of systematic

knowledge about moral behavior and human conduct is learned.

3. Ethics deals with human conduct which is voluntary not forced by circumstances or

humans. So we can say that at the ground level ethics deals with moral judgment regarding

set directed human conduct.

4. The science of ethics is a normative science. It is a search for an ideal litmus test of proper

behavior. Normative science involves arriving at moral standards that regulate right and

wrong conduct.

Business ethics is the application of moral standards to business situations. Business ethicsis a specialised study of moral right and wrong, as they apply to business institutions,

organisations, and behaviours. Business ethics is a study of moral standards and how these

apply to the social systems and organisations through which modern societies produce and

distribute goods and services and to the behaviours of the people who work within these

organisations. Business ethics, in other words, is a form of applied ethics. It not only

includes the analysis of moral norms and moral values but also attempts to apply the

conclusions of these analyses to that assortment of institutions, organisations, activities and

pursuits that we call business.

The 3 Cs of Business ethics:


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1. Compliance: (The need for compliance of rules including):

Laws

principles of morality

policy of the company

2. The Contribution (Business can make to the society):

The core values

Quality ofproducts/services

Employment

Usefulness of activities to surrounding activities

QWL

3. The Consequences of business activity:

Toward environment inside and outside the organization

Social responsibility toward shareholders, bankers, customers and emp loyees of

organization.

Good public image, sound activity- good image.

As this description of business ethics suggests, the issues that business ethics covers

encompass a wide variety of topics. To introduce some order into this variety, it helps if we

distinguish three different kinds of issues that business ethics investigates: systemic,

corporate and individual.

Systemic issues in business ethics are ethical questions raised about the economic, political,

legal, and other social systems or institutions within which businesses operate. Theseinclude questions about the morality of capitalism or of the laws, regulations, industrial

structures and social practices within which businesses operate.

Corporate issues in business ethics are ethical questions raised about a particular

organisation. These include questions about the morality of the activities, policies, practices

or organisational structure which an individual company takes.

Finally, individual issues in business ethics are ethical questions raised about a particular

individual or particular individuals within a company and their behaviours and decisions.

These include questions about the morality of the decisions, actions or character of such


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individuals. It is helpful when analysing the ethical issues raised by a particular decision or

case to sort out the issues in terms of whether they are systemic, corporate or individual

issues.

What are the factors affecting business ethics? (Asked in End Term Exam-

2008)

personal code of behaviour/ individual characteristics

companys policy

Corporate culture and environment

Leadership

Governments Rules and regulations

Legal environment

ethical standards imposed on managers.

ethical climate of the country etc

So then, what, is morality?

We can define morality as the standards that an individual or a group has about what is

right and wrong, or good and evil. Moral standards include the norms we have about the

kinds of actions we believe are morally right and wrong as well as the values we place on

the kinds of actions we believe are morally good and morally bad. Moral norms can usually

be expressed as general rules or statements, such as Always tell the truth, It is w rong to

kill innocent people, etc. Where do these standards come from? Typically, a persons

moral standards are first imbibed as a child from family, friends and various societal

influences and associations. Later, as the person grows up, experience, learning and

intellectual development may lead the maturing person to revise these standards. Some

are discarded and new ones may be adopted to replace them. Through this maturing

process, the person may develop standards that are more intellectually adequate and so

more suited for dealing with the moral dilemmas of adult life.


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What Are values?

Significance/ Importance/ Need / Benefits/ Advantages of Business Ethics

Why should businessmen be ethical in their conduct? Appearing to be ethical, it may be

suggested, is simply good business. Other more specific significance of business ethics are

as follows:

Consumers are, arguably, more likely to buy from a company which can be seen to

be acting ethically.

Graduates are more likely to be attracted to companies which treat their mployees

fairly and give customers a fair deal.

Ethical business practice is a means of forestalling legislation and stringent

government regulations.

Business ethics requires companies doing their bit to contribute towards a just and

fair society, while also ensuring that environmental pollution is brought under

control.

Another significance of business ethics stems from the fact that businesses need to

retain the vast amount of social power entrusted to them by the public.

Enhanced Goodwill and brand image

Societal Welfare

Long Term sustainability of business

Increased profitability and market capitalization


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Theories of Business Ethics

1. Stakeholder Theories The stakeholder theory of the firm is used as a basis toanalyse those groups to whom the firm should be responsible. In this sense, the firm

can be described as a series of connections of stakeholders that the managers of the

firm attempt to manage. A stakeholder is any group or individual who can affect or

is affected by the achievement of the organisations objectives.

2. Social Contract TheoryThe social contract theory has a long tradition in ethical

and political theory. In general, this theory considers the society as a series of social

contracts between members of society and society itself. The social contact

theory in business ethics argues that corporate rights and responsibilities can be

inferred from the terms and conditions of an imaginary contract between business

and society.

3. Legitimacy Theory Legitimacy is defined as a generalised perception or

assumption that the actions of an entity are desirable, proper, or appropriate within

some socially constructed system of norms, values, beliefs and definitions.

There are three types of organisational legitimacy:

Pragmatic

Moral

Cognitive.


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Moral Development (Asked in End Term Exam-2011)

We sometimes assume that a persons values are formed during childhood and do not

change after. In fact, a great deal of psychological research, as well as ones own personal

experience, demonstrates that as people mature, they change their values in very deep and

profound ways. Just as peoples physical, emotional, and cognitive abilities develop as they

age, so also their ability to deal with moral issues develops as they move through their lives.

In fact, just as there are identifiable stages of growth in the physical development, so the

ability to make reasoned moral judgments also develops in identifiable stages. The

psychologist Lawrence Kohlberg, for example, who pioneered research in this field,

concluded on the basis of over 20 years of research that there is a sequence of six

identifiable stages in the development of a persons ability to deal with moral issues.

Level one: Preconvention Stages

Stage 1: Punishment and Obedience orientation (Obey rules to avoid punishment)

Stage 2: Instrument and relativity orientation (Follow the rules only if in own interest, Let

others also do the same, Conform to secure rewards)

Level Two: Conventional Stages

Stage 3: Interpersonal Concordance orientation (Conform to meet expectations of others,

please others, adhere to the stereotypical images)

Stage 4: Law and Order orientation (Doing right is ones duty, obey the law , ,uphold the

social contract and order)

Level 3: Post conventional, Autonomous, Or Principled Stages

Stage 5: Social Contract orientation (Current laws and values are relative laws and duty are

obeyed on rational calculations to serve the greatest no)

Stage6: Universal Ethical Principles Orientation (Follows self-chosen universal ethical

principles . In events of conflicts principles override laws)

Moral Reasoning (Asked in End Term Exam-2011)

Moral reasoning refers to the reasoning process by which human behaviours, institutions, or

policies are judged to be in accordance with or in violation of moral standards. Moral

reasoning always involves two essential components:

An understanding of what reasonable moral standards require prohibits value or

condemn;

Evidence or information that shows that a particular person, policy, institution,

or behaviour has the kinds of features that these moral standards require,

prohibit value or condemn

There are various criteria that ethicists use to evaluate the adequacy of moral reasoning.

First and primarily, moral reasoning must be logical. Second, the factual evidence cited in


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support of a persons judgment must be accurate, relevant and complete. Third, the moral

standards involved in a persons moral reasoning must be consistent

Note: (for details on Moral development and Moral Reasoning, refer to M G Velasquez

Unit-2 page no 27)

Moral Responsibility and Blame

The term moral responsibility is sometimes used to mean moral duty or moral

obligation. Moral reasoning, however, is sometimes directed at a different kind of

judgment: determining whether a person is morally responsible for an injury or for a wrong.

A judgment about a person's moral responsibility for wrongdoing is a judgment that the

person acted intentionally and so should be blamed, punished, or forced to pay

restitution. We are concerned here with the kind of moral responsibility a person has when

we say a person is to blame for something. "Morally responsible is used to mean toblame.

Note: (for details on Moral Responsibility and Blame, refer to M G Velasquez Unit-2 page

no 46)

Code of Conduct

A code of conduct is a written statement setting forth the principles that guide an

organisations decision. An effective code of conduct requires the following:

Top management commitment

Employee communications efforts

Employee commitment to follow it

Formal training programmes

A system that supports reporting unethical or illegal actions at work

A system of action.


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2. Why Ethical Problems Occur in Business

What is Ethical Dilemma?

An Ethical Dilemma is a moral situation in which a choice has to be made between two

equally undesirable alternatives. Dilemmas may arise out of various sources of behaviour or

attitude, as for instance, it may arise out of failure of personal character, conflict of personal

values and organizational goals, organizational goals versus social values, etc. An Ethicaldilemma is a complex situation that often involves an apparent mental conflict between moral


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imperatives, in which to obey one would result in transgressing another. This is also called an ethical

paradox A business dilemma exist when an organizational decision maker faces a choice

between two or more options that will have various impacts on

a. the organizational profitability and competitiveness,

b. and b. its stakeholders.

Structure of Ethical Dilemma

There are various reasons that act as potential sources of ethical problems/ ethical

dilemmas in business.

Other reasons could be

Selfishness / Corrupted value system/ Failure of personal character

Competitive pressure to increase profitability of business

Conflict of Interest (between individual and corporate goals)

Organizational Goals versus Social goals

Cross-cultural contradictions in global business operations

Sustainability of Business

Newer Technologies, diverse religious, social and cultural beliefs

Different ideologies, political systems etc.

Doing what is

morally right

Doing what is

morally wrong

Good or at least

better effects or

A bad outcome

or bad effectsResults in

Results in

Either

Or


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Resolving an Ethical Dilemma

There are two basic approaches in resolving ethical dilemmas: deontological and

teleological approach.

Teleological also known as Consequentiali st approach (resul t ori ented)under which it is

claimed that actions should be judged according their consequences, and

Deontological Approach(action-oriented)under which the opposing view is assumed, i.e. that

rightness or wrongness is a judgement not dependent on consequences but rather on the intrinsic

goodness of the action in and of itself.

The Centre for Ethics and Business offer a brief three step strategy in which both

deontological and teleological approaches converge

STEP 1: ANALYZE THE CONSEQUENCES (Teleological ethics)

STEP 2: ANALYZE THE ACTIONS(deontological ethics)

STEP 3: MAKE A DECISION

To resolve the ethical problems that may create an ethical dilemma, the manager should

take into account the ethical principles of Utility, Rights, Justice and Care to evaluate the

morality of any action or decision.

The Basis of the Moral Judgements should include the following to reduce or completely

resolve ethical dilemmas:

Evaluations of social costs and benefits.

Respect for individual rights.

Just distribution of benefits and burdens.

Caring for those in concrete relationships.

Note: (For details on ethical Dilemmas, refer A C Fernando Unit-3 pg-55)


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Also firms are striving for winning awards and avail certifications for best practices from

industry regulators or representative bodies like SEBI n CII.


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3. Ethical principles in business

Ethical principles are guidelines based on morality than determine the lengths or boundaries

a person or business sets for itself. Ethical principles are standards of conduct defining the

kind of behavior an ethical person should and should not engage in. Ethical theories and

principles are the foundations of ethical analysis because they are the viewpoints fromwhich guidance can be obtained along the pathway to a decision.

A. Utilitarianism: Weighing Social Costs and BenefitsThis approach is sometimes referred to as a consequentiality approach and sometimes as a

utilitarian approach, because that course of action would have the most beneficial

consequences. Hence, the name utilitarianism is used for any theory that advocates

selection of that action or policy that maximises benefits (or minimises costs). Jeremy

Bentham (1748-1832) is generally considered the founder of traditional utilitarianism. JBentham sought an objective basis for making value judgments that would provide a

common and publicly acceptable norm for determining social policy and social legislation

Utilitarianism: A general term for any view that holds that actions and policies should be

evaluated on the basis of the benefits and costs they will impose on society. The utilitarian

principle assumes that we can somehow measure and add the quantities of benefits'

produced by an action and subtract from them the measured quantities of harm the action

will have and thereby determine which action produces the greatest total benefits or the

lowest total costs. That is, the principle assumes that all the benefits and costs of an action

can be measured on a common numerical scale and then added or subtracted from each

other

UTILITY: The inclusive term used to refer to any net benefits produced by an action.

Characteristics:

Advocates maximising utility.

Matches well with moral evaluations of public policies

Appears intuitive to many people

Helps Explain why some actions are generally wrong and others are generally light. Influenced Economics

An action is right if it produces the most utility for allpersons affected by the action

(including the person performing the action)

Utilitarianism holds that, in the final analysis, only one action is right: that one action

whose net benefits are greatest by comparison to the net benefits of all other

possible alternatives.

Both the immediate and all foreseeable future costs and benefits that each

alternative will provide for each individual must be taken into account as well as any

significant indirect effects.


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Evaluating utilitarianism/ critics and response:

Critics say not all values can be measured on common numerical scale

Utilitarians respond that monetary and common sense measures can measure

everything. (identification of Intrinsic, instrumental, non-economic goods)

Critics say utilitarianism fails with rights and justice. Utilitarians respond that rule utilitarianism can deal with rights and justice.

COST BENEFIT ANALYSIS:

Utilitarianism is also the basis of the techniques of economic costbenefit analysis. This type

of analysis is used to determine the desirability of investing in a project (such as a dam,

factory, or public park) by figuring whether its present and future economic benefits

outweigh its present and future economic costs.

EFFICIENCY:

Operating in such a way that one produces a desired output with the lowest resource input.

utilitarianism fits nicely with a value that many people prize: efficiency, Efficiency can mean

different things to different people, but for many it means operating in such a way that one

produces the most one can with the resources at hand

NONECONOMIC GOODS:

Goods such as life, love, freedom, equality, health, beauty, whose value is such that no

quantity of any economic good is equal in value to the value of the noneconomic good.

INSTRUMENTAL GOODS:

Things that are considered valuable because they lead to other good things.

INTRINSIC GOODS:

Things that are desirable independent of any other benefits they may produce.

RULE-UTILITARIANISM

The view that an individual action is right when it is required by correct moral rules and if the sum

total of utilities produced if everyone were to follow the rule is greater than the sum total utilities

produced if everyone did not follow the rule.

B. Rights and Duties:Rights are the individual entitlements to freedom of choice and

well- being. It analysis the morality of actions from the point of view of the individual. A


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person has a right when that person is entitled to act in a certain way or is entitled to

have others act in a certain way towards him or her.

CHARACTERISTICS OF RIGHTS:

A right is an individuals entitlement to something. Rights derived from legal systems are limited by jurisdiction

Moral or human rights are based on moral norms and are not limited by jurisdiction.

LEGAL RIGHT:

An entitlement that derives from a legal system that permits or empowers a person to act in

a specified way or that requires others to act in certain ways toward that person.

MORAL RIGHTS/HUMAN RIGHTS:

Rights that human beings of every nationality possess to an equal extent simply by virtue of

being human beings.

CHARACTERISTICS OF MORAL RIGHTS:

Tightly correlated with duties.

Provide individuals with autonomy and equality in the free pursuit of their interests.

Provide a basis for justifying ones actions and for invoking the protection or aid of thers.

KINDS OF MORAL RIGHTS:

Negative rights require others leave us alone

Positive rights require others help us

Contractual or special rights require other to keep agreements.

NEGATIVE RIGHTS:

Duties others have to not interfere in certain activities of the person who holds the right

(Duties of Non-interference- requires others to leave us alone).

POSITIVE RIGHTS:

Duties of other agent to provide the holder of the right with whatever he or she needs to

freely pursue his or her interests. (Duties of positive performance- requires others to help

us).

CONTRACTUAL/SPECIAL RIGHTS

Contractual rights and duties (sometimes called special rights and duties or special

obligations) are the limited rights and correlative duties that arise when one person enters

an agreement with another person. For example, if l am contracted to do something for

you, then you are entitled to my performance: You acquire a contractual rightto whatever Ipromised; and I have a contractual dutyto perform as I promised.


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CHARACTERISTICS OF CONTRACTUAL RIGHTS

It is attached only to specific individuals

It depends on publically accepted system of rules that defines transactions (social

institution of contracts It defines special duties or obligations.

KANTS CATEGORICAL IMPERATIVE:

Immanuel Kant advocated the requirement that everyone should be treated as a free

person equal to everyone else. Everyone has the moral right to such a treatment and

everyone has the correlative duty to treat others in this way.

MAXIM:

The reason a person in a certain situation has for doing what he or she plans to do.

UNIVERSALIZABILITY:

The persons reasons for acting must be reasons that everyone could act on atleast in

principle.

REVERSABILITY:

The persons reasons for acting must be reasons that he or she would be willing to have all

others use, even as a basis of how they treat him or her.

KANTS CATEGORICAL IMPERATIVE FORMULAS:

Never do something unless you are willing to have everyone do it.

Never use people merely as means, but always respect and develop their ability to

choose for themselves.

CRITICISMS OF KANT:

Categorical Imperatives are unclear

Kants rights can conflict Kants theory implies some mistaken moral conclusions


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C. Justices and Fairness. Ethical executives strive to be fair and just in all dealings. They

do not exercise power arbitrarily nor do they use overreaching or indecent means to gain or

maintain any advantage nor take undue advantage of anothers mistakes or difficulties.

Ethical executives manifest a commitment to justice, the equal treatment of individuals,

tolerance for and acceptance of diversity. They are open-minded; willing to admit they arewrong and, where appropriate, change their positions and beliefs. Issues involving questions

of justice and fairness are usually divided into three categories as mentioned below.

TYPES OF JUSTICE:

Distributive Justice: Just distribution of benefits and burdens

Retributive Justice: Just imposition of punishments and penalties.

Compensatory Justice: Just compensation for wrongs or injuries.

DISTRIBUTIVE JUSTICE:

Distributing societys benefits and burdens fairly. The fundamental principle of distributive

justice is that equals should be treated equally and un-equals should be treated unequally.

PRINCIPLES OF DISTRIBUTIVE JUSTICE:

Fundamental: Distributive benefits and burdens equally to equals and unequally to

unequals.

Egalitarianism: Distribute equally to everyone.

Capitalist Justice: Distribute by Contribution

Socialism: Distribute by need and ability.

Libertarian: Distribute by Free Choices/Justice as freedom

Rawls: Justice as fairness. Distribute by equal liberty, equal opportunity, and needs of

disadvantaged.

EGALITARIANISM:

Every person should be given exactly equal shares of a societys or a groups benefits and

burdens. Egalitarians emphasised upon political and economic equality of people wherebypolitical equality refers to: Equal participation in, and treatment by, the political system.

And economic equality refers to: Equality of income, wealth and opportunity.

CAPITALIST

Capitalist theorists emphasized upon work effort and puritan ethic , they emphasized

upon the productivity and work efforts as the criteria to distribute profits among people.

Work Effort: The view that values individual effort and believes that hard work does

and should lead to success. The harder one works the more one deserves. This is the

assumption behind the Puritan ethic.


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Puritan Ethic: The view that every individual has a religious obligation to work hard

at his calling (the career to which God summons each individual).

Productivity: The amount a person produces.

SOCIALISM

Work burdens should be distributed according to the peoples abilities, and benefits should

be distributed according to the peoples needs.

LIBERTARIAN PHILOSOPHERS:

The libertarians hold that no particular way of distributing goods can be just or unjust apart

from the free choices individuals make. Robert Nozick believed that freedom from human

constraint is necessarily good and that all constraints imposed by others are necessarily evil

except when needed to prevent the imposition of greater human constraints. The only

distribution that is just, according to Nozick, is one that results from free individual choices.

Any distribution that results from an attempt to impose a certain pattern on society

(example taking from haves and giving to the have nots) will therefore be unjust.

JOHN RAWLS

Justice as fairness is associated with John Rawls; the belief that the distribution of benefits

and burdens in a society is just only if each person has an equal right to the most extensive

basic liberties compatible with similar liberties for all, and social and economic inequalities

are arranged so that they are both to the greatest benefit of the least advantaged and

attached to offices and positions open to all fairly and equally. He gave the following

principles:

PRINCIPLE OF EQUAL LIBERTY:

The claim that each citizens liberties must be protected from invasion by others and

must be equal to those of others.

DIFFERENCE PRINCIPLE:

The claim that a productive society will incorporate inequalities, but takes steps to

improve the position of the most needy members of society. PRINCIPLE OF FAIR EQUALITY OF OPPORTUNITY:

The claim that everyone should be given an equal opportunity to qualify for the

more privileged positions in societys institutions.

ORIGINAL POSITION:

An imaginary meeting of rational self interested persons who must choose the

principles of justice by which their society will be governed.

VEIL OF IGNORANCE:


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The requirement that persons in the original position must not know particulars

about themselves which might bias their choices such as their sex, race, religion,

income, social status etc.,

RETRIBUTIVE JUSTICE:

Blaming or punishing persons fairly for doing wrong. Three issues in retributive justice are:

If people do not know or freely choose what they are doing, they cant justly be

punished or blamed for it.

Penalties should be based upon complete evidence.

Punishments should be consistent and proportioned to the wrong done.

COMPENSATORY JUSTICE:

Compensatory justice concerns the justice of restoring to a person what the person lost

when he or she was wronged by someone. Issues in compensatory justice are:

There are no hard and fast rules in determining absolute compensation in few cases,

like loss of life limb etc.

The amount of restitution should be actually equal to the loss the wrongdoer

knowingly inflicted on the victim.

D. Ethics of CareConcern For Others. Ethical executives are caring, compassionate,

benevolent and kind. They always consider the business, financial and emotional

consequences of their actions on others and seek to accomplish their business objectives in

a manner that causes the least harm and the greatest positive good. An ethic that

emphasizes, caring for the concrete wellbeing of those near to us. This view that we have

an obligation to exercise special care toward those particular persons with whom we have

valuable close relationships, particularly relations of dependency is a key concept in an

ethic of care, an approach to ethics that many feminist ethicists have recently advanced Advocates the concept of communitarian ethics, whereby the communitarian ethics is

described below. Compassion, concern, love, friendship, and kindness ate all sentiments or

virtues that normally manifest this dimension of morality. Thus, an ethic of care emphasises

two moral demands:

We each exist in a web of relationships and should preserve and nurture those

concrete and valuable relationships we have with specific persons.

We each should exercise special care for those with whom we are concretely related

by attending to their particular needs, values; desires, and concrete well-being as


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seen from their own personal perspective, and by responding positively to these

needs, values, desires, and concrete wellbeing, particularly of those who are

vulnerable and dependent on our care.

Characteristics

Claims ethics need to be impartial.

Emphasizes preserving and nurturing concrete valuable relationships.

Says we should care for those dependent on and related to us.

COMMUNITARIAN ETHIC

An ethic of care, therefore, can be seen as encompassing the kinds of obligations that a so-

called communitarian ethic advocates. A communitarian ethic is an ethic that sees concrete

communities and communal relationships as having a fundamental value that should be

preserved and maintained. What is important in a communitarian ethic is not the isolatedindividual, but the community within which individuals discover who they are by seeing

themselves as integral parts of a larger community with its traditions, culture, practices, and

history Two additional issues are important to note.

First, not all relationships have value, and so not all would generate the duties of care.

Relationships in which one person attempts to dominate, oppress, or harm another;

relationships that are characterised by hatred, violence, disrespect, and viciousness; and

relationships that are characterised by injustice, exploitation, and harm to others lack the

value that an ethic of care requires. An ethic of care does not obligate us to maintain and

nurture such relationships. Second, it is important to recognise that the demands of caring

are sometimes in conflict with the demands of justice.

Objection to Care Approach to Ethics:

Charge: Ethic of care can degenerate into favouritism.

Response: Conflicting moral demands are an inherent characteristic of moral choices.

Charge: Ethic of care can lead to burnout

Response: Adequate understanding of ethic of care will address the need to care for the

caregiver.

Integrating Utility, Rights, Justice, and CaringUtilitarian standards must be used when we do not have the resources to attain everyone's

objectives, so we are forced to consider the net social benefits and social costs consequent

on the actions (or policies or institutions) by which we can attain these objectives.

Our moral judgments are also partially based on standards that specify how individuals must

be treated or respected. These sorts of standards must be employed when our actions and


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policies substantially affect the welfare and freedom of specifiable individuals. Moral

reasoning of this type forces consideration of whether the behaviour respects the basic

rights of the individuals involved and whether the behaviour is consistent with one's

agreements and special duties.

Third, our moral judgments are also in part based on standards of justice that indicate howbenefits and burdens should be distributed among the members of a group. These sorts of

standards must be employed when evaluating actions whose distributive effects differ in

important ways. The moral reasoning on which such judgments are based will incorporate

considerations concerning whether the behaviour distributes benefits and burdens equally

or in accordance with the needs, abilities, contributions, and free choices of people as well

as the extent of their wrongdoing

Fourth, our moral judgments are also based on standards of caring that indicate the kind of

care that is owed to those with whom we have special concrete relationships. Standards of

caring are essential when moral questions arise that involve persons embedded in aweb of relationships, particularly persons with whom one has close

relationships and particularly relationships of dependency.

Our morality, therefore, contains four main kinds of basic moral considerations, each

of which emphasises certain morally important aspects of our behaviour, but no one of

which captures all the factors that must be taken into account in making moral judgments.

Utilitarian standards consider only the aggregate social welfare but ignore the

individual and how that welfare is distributed. Moral rights consider the individual but

discount both aggregate well-being and distributive considerations. Standards of justice

consider distributive issues but they ignore aggregate social welfare and the individual as

such. Although standards of caring consider the partiality that must be shown to those close

to us, they ignore the demands of impartiality.

These four kinds of moral considerations do not seem to be reducible to each other, yet all

seem to be necessary parts of our morality. That is, there are some moral problems for

which utilitarian considerations are decisive, whereas for other problems the decisive

considerations are the rights of individuals or the justice of the distributions involved, and

for others the most significant issue is how those close to us should be cared for. Thissuggests that moral reasoning should incorporate all four kinds of moral considerations,

although only one or the other may turn out to be relevant or decisive in a particular

situation.

One simple strategy for ensuring that all four kinds of considerations are incorporated into

one's moral reasoning is to inquire systematically into the utility, rights, justice, and caring

involved in a given moral judgment. One might, for example, ask a series of questions about

an action that one is considering:


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Does the action, as far as possible, maximise social benefits and minimise social

injuries?

Is the action consistent with the moral rights of those whom it will affect?

Will the action lead to a just distribution of benefits and burdens?

Does the action exhibit appropriate care for the well-being of those who are closely

related to or dependent on oneself?

At this time, we have no comprehensive moral theory capable of determining

precisely when utilitarian considerations become sufficiently large to outweigh narrow

infringements on a conflicting right, a standard of justice, or the demands of caring.

Nor can we provide a universal rule that will tell us when considerations of justice become

important enough to outweigh infringements on conflicting rights or on the demands of

caring.

C.An Alternative to Moral Principles: Virtue Ethics

Moral Virtue is an acquired disposition that is valued as part of the character of morality

good human being and that is exhibited in the persons habitual behaviour. A person has a

moral virtue when the person is disposed to behave habitually in the way and with the

reasons, feelings, and desires that are characteristic of a morally good person.A more

adequate approach to ethics, according to few ethicists, would take the virtues (such as

honesty, courage, temperance, integrity, compassion, self-control) and the vices(such as

dishonesty, ruthlessness, greed, lack of integrity, cowardliness)as the basic starting point for

ethical reasoning.

As we see, there are virtues that are correlated with utilitarianism (e.g., the virtue of

benevolence), virtues that are correlated with rights (e.g., the virtue of respect), and virtues

that are correlated with justice and caring. The virtues, then, should not be seen as

providing a fifth alternative to utility, rights, justice, and caring. Instead, the virtues can be

seen as providing a perspective that surveys the same ground as the four approaches but

from an entirely different perspective. What the principles of utility, rights, justice, and

caring do from the perspective of action evaluations, an ethic of virtue does from

the perspective of character evaluations.

THEORIES OF MORAL VIRTUE:

Aristotle: Habits that enable a person to live according to reason.

Aquinas: Habits that enable a person to live responsibly in this world and be united with

God in the next life.

MacIntyre: Disposition that enables a person to achieve the good at which

humanpractices aim.

Pincoff: Dispositions we use when choosing between persons or potential future selves.

VIRTUE THEORY:


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The theory that the aim of the moral life is to develop those general dispositions called

moral virtues, and to exercise and exhibit them in the many situations that human life sets

before us. The key action-guiding implication of virtue theory, then, can be summed up in

the claim that an action is morally right if in carrying out the action the agent exercises,

exhibits, or develops a morally virtuous character, and it is morally wrong to the extent

that by carrying out the action the agent exercises, exhibits, or develops a morally vicious

character.

VIRTUE THEORY CLAIMS:

We should exercise, exhibit, and develop the virtues.

We should avoid exercising, exhibiting, and developing vices.

Institutions should instil virtues not vices.

Virtue ethics is a broad term for theories that emphasize the role ofcharacter and virtue

in moral philosophy rather than either doing ones duty or acting in order to bringabout good consequences. A virtue ethicist is likely to give you this kind of moral advice:

Act as a virtuous person would act in your situation.

Most virtue ethics theories take their inspiration from Aristotle who declared that a

virtuous person is someone who has ideal character traits. These traits derive from natural

internal tendencies, but need to be nurtured; however, once established, they will become

stable. For example, a virtuous person is someone who is kind across many situations over a

lifetime because that is her character and not because she wants to maximize utility or gain

favours or simply do her duty. Unlike deontological and consequentialist theories, theories

of virtue ethics do not aim primarily to identify universal principles that can be applied inany moral situation. And virtue ethics theories deal with wider questionsHow should I

live? and What is the good life? and What are proper family and social values?

Since its revival in the twentieth century, virtue ethics has been developed in three main

directions: Eudaimonism, agent-based theories, and the ethics of care. Eudaimonism bases

virtues in human flourishing, where flourishing is equated with performing ones distinctive

function well. In the case of humans, Aristotle argued that our distinctive function is

reasoning, and so the life worth living is one which we reason well. An agent-based theory

emphasizes that virtues are determined by common-sense intuitions that we as observers

judge to be admirable traits in other people. The third branch of virtue ethics, the ethics ofcare, was proposed predominately by feminist thinkers. It challenges the idea that ethics

should focus solely on justice and autonomy; it argues that more feminine traits, such as

caring and nurturing, should also be considered.

Another distinguishing feature of virtue ethics is that character traits are stable, fixed, and

reliable dispositions. If an agent possesses the character trait of kindness, we would expect

him or her to act kindly in all sorts of situations, towards all kinds of people, and over a long

period of time, even when it is difficult to do so. A person with a certain character can be

relied upon to act consistently over a time. The development of moral character may take a

whole lifetime. But once it is firmly established, one will act consistently, predictably and

appropriately in a variety of situations.
http://www.iep.utm.edu/moral-ch/http://www.iep.utm.edu/ethics/http://www.iep.utm.edu/aris-eth/http://www.iep.utm.edu/ethics/#SH2bhttp://www.iep.utm.edu/consequehttp://www.iep.utm.edu/consequehttp://www.iep.utm.edu/ethics/#SH2bhttp://www.iep.utm.edu/aris-eth/http://www.iep.utm.edu/ethics/http://www.iep.utm.edu/moral-ch/


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Knowing virtue is a matter of experience, sensitivity, ability to perceive, ability to reason

practically, etc. and takes a long time to develop. The idea that ethics cannot be captured in

one rule or principle is the uncodifiability of ethics thesis. Ethics is too diverse and

imprecise to be captured in a rigid code, so we must approach morality with a theory that is

as flexible and as situation-responsive as the subject matter itself. As a result some virtue

ethicists see themselves as anti-theorists, rejecting theories that systematically attempt to

capture and organize all matters of practical or ethical importance.

Criticism: Here are some common objections to virtue ethics.

Its theories provide a self-centred conception of ethics because human flourishing is

seen as an end in itself and does not sufficiently consider the extent to which our

actions affect other people.

Virtue ethics also does not provide guidance on how we should act, as there are no

clear principles for guiding action other than act as a virtuous person would act

given the situation. Lastly, the ability to cultivate the right virtues will be affected by a number of

different factors beyond a persons control due to education, society, friends and

family. If moral character is so reliant on luck, what role does this leave for

appropriate praise and blame of the person?

Ethical principles focus on evaluating actions as the basic subject matter of ethics (action

based focus but ignores the character of the agent who carries out the action. However the

virtue ethics focus on what one ought to be-agent based focus which evaluates the

persons moral character that whether it exhibits virtues or vice.

Hence, there is no conflict between theories of ethics that are based on principles and

theories of ethics based on virtues. However, a theory of virtue differs from an ethic of

principles in the perspective from which it approaches moral evaluations. A theory of virtue

judges actions, for example, in terms of the dispositions that are' associated with those

actions, whereas an ethic of principles judges dispositions in terms of the actions associated

with those dispositions. For an ethic of principles actions are primary, whereas for an ethic

of virtue dispositions are primary. An ethic of virtue, then, is not a fifth kind of moral

principle that should take its place alongside the principles of utilitarianism, rights, justice,and caring. Instead, an ethics of virtue fills out and adds to utilitarianism, rights, justice, and

caring by looking not at the actions people are required to perform, but at the character

they are required to have.

5. Morality in International Contexts

Multinational corporations operate in foreign host countries whose laws or government

decrees, common practices, levels of development, and cultural understandings are

sometimes much different from those of their home counties. These differences, we argued,do not provide adequate justification for the theory of ethical relativism. How should the


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moral principles of utilitarianism, rights, justice, and caring be applied in foreign countries

that differ in so many ways from our own? Common practices can also differ markedly

among nations.

Multinationals also often operate in countries at very different level of development. Some

countries have very high levels of technological, social, and economic resources available,whereas the resources of other countries in these and other areas are quite undeveloped.

Technological sophistication, unions, financial markets, unemployment insurance, social

security, and public education are widespread in' more developed nations but are virtually

unknown in Third World countries.

When confronted with a foreign context, in which laws and government decrees., prevailing

practices, levels of development, and cultural understandings are very different from those

of the manager's home country, what should the manager of a multinational do? For

example, when operating in a foreign country, should the manager of the multinational

adopt the practices of its home country or those prevalent in the host country?

Some have claimed that, when operating in less developed countries, multinationals from

more developed home countries should always follow those practices prevalent in the more

developed country, which set higher or more stringent standards. But this claim ignores the

possibility that introducing practices that have evolved in a highly developed country into

one that is less, developed may produce more harm than good-a violation of utilitarian

standards of ethics. For example, if an American company operating in Nigeria pays local

workers U.S. wages, it may draw all the skilled workers away from local Nigerian companies

that cannot afford to pay the same high salaries. As a consequence, Nigeria's efforts to

develop local companies may be crippled while havoc is wreaked in local labour markets.Again, if American companies operating in Nigeria are required to operate in Nigeria

according to the more costly wage, consumer, environmental, and safety standards

prevalent in the United States, they will have no reason to invest in Nigeria and Nigeria's

development will be retarded. Precisely because they need and want foreign investment

and technology, the governments of many less developed nations, genuinely interested in

advancing the interests of their people, have insisted on less costly standards that can

attract foreign companies. Thus, it is clear that local conditions, particularly developmental

conditions, must at least be considered when determining whether to import practices from

a developing country into a less developed one and that it 'is a mistake to accept the blanket

claim that one must always adopt the "higher" practices of the more 'developed homecountry.

Some have gone to the opposite extreme and argued that multinationals should always

follow local practices, whatever they might be, or that they should do whatever the local

government wants, because it is the representative of the people. But it is often unethical to

go along with local practices as government requires sometimes than it is to oppose them.

The lower environmental standards of Nigeria for example, may be so low that they permit

pollution levels that cripple the health of or even kill those living near chemical plants,

producing flagrant violations of these people's basic human rights. Therefore, the blanket

claim that local practices should always be adopted is also mistaken.


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It is clear, then, that although local laws or government decrees, prevalent practices, levels

of development, and cultural understandings all must be taken into account when

evaluating the ethics of business policies and actions in a foreign country, the local status

quo cannot simply be adopted without question by the multinational manager but must still

be subjected to ethical analysis. What factors should be considered when evaluating the

ethics of an action or policy in a foreign context? The foregoing discussion suggests that the

following questions should be asked about any corporate action or policy under

consideration by a company operating in a foreign country.

1. What does the corporate policy or action really mean in the context of the local culture?

When viewed in terms of its local cultural meaning, is the policy or action ethically

acceptable, or does it violate the ethical standards of utilitarianism, rights, justice, and

caring to such an extent that it should not be undertaken? From the perspective of virtue,

does the action or policy encourage the exercise or the development of morally good

character?

2. Taking into account the nation's level of technological, social, and economic development

and what its government is doing to promote this development, does the corporate policy

or action produce consequences that are ethically acceptable from the point of view of

utilitarianism, rights, justice, and caring or from the point of view of moral character? Can

the more stringent legal requirements or practices common in more developed nations be

implemented without damage to the host country and its development, and in context

would such implementation be more consistent with the ethical standards of utilitarianism,

rights, justice, and caring? Would such implementation encourage the exercise or the

development of morally good character?

3. If the corporate action or policy is allowed or required by the laws or the decrees of the

local government, does this government truly represent the will of its people? Does the

corporate action or policy nevertheless violates the principles of utilitarianism, rights,

justice, or caring or is it commendable from the perspective of the normal character? If so,

and if the action or policy is legally required to do business in the host country, then is the

ethical violation significant enough to require with drawl from that country?

4. If the corporate action or policy involves the local common practice that is morally

questionable by the home countries standards (such as sexual discrimination or bribery) , is

it possible to conduct business in host country without engaging in the practice? If not, then

does the practice violate the principles of utilitarianism, rights, justice, or caring to a degree

significant enough to require with drawl from that country? Is the practice so pernicious

from the perspective of the moral character as to require with drawl from that country.


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6. Moral Issues In Business: Workers And Employees Rights and

Responsibilities

The individual in the organisation dwells on 3 main parts of an organisation which are:

o

The traditional model of an organisationo The political structure of an organisation

o The organisation as a network of personal relations.

The Rational Organisation

An organisation is the rational coordination of the activities of a number of people for the

achievement of some common explicit purpose or goal, through a division of labour and

function and through a hierarchy of authority and responsibility. What is the glue that holds

together the organisations many layers of employees and managers and that fixes these

people onto the organisations goals and formal hierarchy? Contracts.By virtue of this

contractual agreement, the employee has a moral responsibility to obey the employer in the

course of pursuing the organisations goals, and the organisation in turn has a moral

responsibility to provide the employee with the economic support it has

promised.

The Political Organisation

The political model of the organisation sees the organisation as a system of competing

power coalitions and formal and informal lines of influence and communication that radiate

from these coalitions. In place of the neat hierarchy of the rational model, the political

model postulates a messier and more complex network of clustered power relationshipsand criss-crossing communication channels.

The Caring Organisation

So far we have looked at organisations as having two aspects. First, we have considered

organisations as hierarchical collections of autonomous individuals who are connected to

each other and to the organisation by contractual agreements. The employee signs a

contract agreeing to carry out the tasks spelled out in the job description in return for a

wage that the employer agrees to pay. Employees take their orders from ranked tiers ofmanagers arranged in a hierarchy of authority, at the top of which sit the CEO and top-

management staff and at the bottom of which stand the workers who perform the actual

labour of the organisation. The whole organisation pursues the goal of profit. We have

called this aspect of the organisation the rationalorganisation. Criss-crossing the rational

organisations formal lines of authority is a second system of power, which we have called

thepoliticalorganisation. The political elements of the organisation consist of the network

of power relationships, coalitions, and informal lines of communication through which

individuals seek to achieve their personal goals and seek to get others to help them achieve

their personal goals through the exercise of power. It is possible to conceive of organisations

as consisting of yet another, quite different set of relationships. Recent thinkers havesuggested that organisations can and should be thought of as networks of relationships in


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which connected selves form webs of on-going personal relationships with other

connected selves. In this aspect of the organisation, the focus of employees is not on the

pursuit of profit and personal goals, but on caring for those particular individuals who make

up the organisation and those with whom the organisation interacts.

Employees And Workers Rights

Right to fair wages and compensation

Right to fair working conditions: Health and Safety

Right to fair working conditions: Job satisfaction (jobs must be expanded along five

dimensions: Skill Variety, Task Identity, Task Significance, Autonomy, Feedback)

Right to privacy

Right to be treated as free and equal person

Right to equal opportunities for growth The right to consent (employees must be given opportunity to give or withhold their

consent before the private aspects of their lives are investigated)

The right to freedom of speech

The right to freedom of conscience (individuals must not be forced to cooperate in

activities that they conscientiously believe are wrong).

Whistleblowing: disclosing wrongdoing in or by the organization.

The right to participate and participatory management

The right to due process (versus employment at will): due process refers to the

fairness of the process by which decision makers impose sanctions on theirsubordinates. It ensures that employees are not treated arbitrarily, capriciously, or

maliciously by their superiors in the administration ofthe firms rules, and it sets a

moral limit on the exercise of the superiors power.

Right to information (related to risks involved in job, plant shut- down etc)

Right to organize, associate and form unions

Right to rest and leisure, including reasonable limitation of working hours and

periodic holidays with pay etc.

Employees And Workers Responsibilities

The obligation of the employee to obey organisational superiors,

Loyally pursue the organisations goals, and avoid any activities that might threaten

that goal

Avoiding conflict of interest

they must not use their position as leverage to force illicit benefits out of others

through extortion or commercial bribery.

Fulfilling the contractual duties well

Not accepting gifts: cash or kind for giving benefits to others


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Not using companys resources for personal use without the consent of its rightful

owner ex: electronic gadgets, client information, computer softwares and data,

stationery items etc.

Avoiding unauthorized access to confidential information, trade secrets etc. and not

leaking or publically disclosing the same Not indulging in the act of insider trading on any grounds/ Strictly avoiding Insider

trading etc.

Note: (for details on employees rights and responsibilities, refer MG Velasquez unit-8)

7. Common Indicators for Measuring Business/ Corporate Social

Performance (CSP)

The effective translation of an institution's social goals into practice in line with accepted

social values; these include sustainably serving increasing numbers of poor and excluded

people, improving the quality and appropriateness of financial services, improving the

economic and social conditions of clients, and ensuring social responsibility to clients,

employees and the community they serve. Traditional evaluation has focused on end

results and impact. However, impact is just one element of social performance. Social

performance looks at the entire process by which impact is created. It therefore includes

analysis of the declared social objectives of institutions, the effectiveness of their systems

and services in meeting these objectives, related outputs (for example, reaching largernumbers of very poor households) and indeed success in effecting positive changes in the

lives of clients.

WHAT DO WE MEAN BY TRIPLE BOTTOM LINE?

Organisations that focus on their single bottom line are exclusively concerned with their

financial returns. Notwithstanding the importance of profits as a prerequisite for continuity

of the business, organisations that want to contribute to sustainable development should

take a more holistic approach to performance. Businesses that focus on their triple bottomline include economic, social and environmental effects that their activities generate.

TBL can be defined as a construct that emphasizes a companys responsibilities to multiple

stakeholders, such as employees and the community at large, in addition to its traditional

responsibilities to economic shareholders. . However, measuring CSP has proven to be a

daunting task because it represents a broad range of economic, social, and environmental

impacts caused by business operations and thus requires multiple metrics to fully cover its

scope. It cover areas of environmental performance, social contribution, corporate

governance, and controversial business involvement. Because of the qualitative nature of

CSP, the assessment of CSP relies mostly on soft measures related to management


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practices, rather than the harder measures (e.g., tons of CO2 emission or of toxic

releases). Common CSP measures include, for example, labour right protection and the

transparency of social and environmental performance reporting etc.

Hence the common indicators for measuring business/corporate social performance are:

Economic (direct and indirect economic impacts/value creation), Environmental (energy,

water, biodiversity, effluents- emissions-waste treatment etc) and Social. The Social

category is broken down further by Labor, Human Rights, Society and Product

Responsibility subcategories.

1. Trade, Investment and Linkages: Common indicators are as follows

Total revenues

Value of imports vs. exports

Total new investments

Local purchasing

2. Employment Creation and Labour Practices: Common indicators are as follows

Total workforce with breakdown by employment type, employment contract and

gender (workplace diversity)

Employee wages and benefits with breakdown by employment type and gender

Total number and rate of employee turnover broken down by gender Percentage of employees covered by collective agreements

3. Technology and Human Resource Development: Common indicators are as follows

Expenditure on research and development

Average hours of training per year per employee broken down by employee category

Expenditure on employee training per year per employee broken down by employee

category

4. Health and Safety : Common indicators are as follows

Cost of employee health and safety

Work days lost due to occupational accidents, injuries and illness

5. Government and Community Contributions: Common indicators are as follows

Payments to Government

Voluntary contributions to civil society
https://www.globalreporting.org/resourcelibrary/G3-EconomicIndicatorProtocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-EconomicIndicatorProtocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Environment-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Environment-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Labor-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Labor-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Human-Rights-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Human-Rights-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Society-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Society-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Product-Responsibility-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Product-Responsibility-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Product-Responsibility-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Product-Responsibility-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Product-Responsibility-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Society-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Human-Rights-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Labor-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-Environment-Indicator-Protocols.pdfhttps://www.globalreporting.org/resourcelibrary/G3-EconomicIndicatorProtocols.pdf


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6. Corruption: Common indicators are as follows

Number of convictions for violations of corruption related laws or regulations and

amount of fines paid/payable

Source:

http://unctad.org/en/Docs/iteteb20076_en.pdf

http://informeanual.abengoa.com/web/2011/en/Responsabilidadsocialcorporativa/I

ndice/desempenosocial/index.html

Other key performance indicators (KPIs) to measure corporate social performance are:

Sponsoring social and charitable causes Focus on human element

Protecting and promoting stakeholders interest (consumers, employees, owners)

Creation of wealth

Good corporate governance

Abiding by rules and laws

Rendering social service

Promotion of common welfare programmes

Philanthropy

Ensuring ecological balance

Improve productivity

Supplement state efforts

Expenditure on employees training, education and development

Awards and accolades for corporate citizenship

Transparency in reporting social responsibility measures in annual reports

Active participation in forums or conferences that seek to promote corporate

citizenship etc.

Note: (Also refer hand written notes for details on CSR and A C Fernando Ch-9 pg-226 to

231 for indicators for measuring CSP)


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8. Reporting Social Responsibility Measures in Annual Report

Sustainability reporting, alternatively known as CSR reporting, is the annual process

whereby companies - public, private; large and small - report on their sustainability

performance. Reports typically cover social, environmental, economic and ethicalperformance and incorporate information on a company's environmental impact or carbon

footprint, staff satisfaction, community investment etc. As the climate change and

governance debates heat up, sustainability reporting is becoming increasingly important as

a tool companies can use to demonstrate accountability to their stakeholders

Reporting is perhaps the most visible aspect of CSR activity, because reports, published

annually, are issued to communicate how the business is recognising and dealing with their

impacts beyond their financial performance. Ideally, the CSR report needs to explain both

how a business contributes to the economic, social and environmental aims of

sustainability, and it also needs to suggest how the business is going about improving thosecontributions.

Recent years have witnessed a remarkable resurgence of academic, professional and

corporate interest in the area of social and ethical accounting, auditing and reporting

(SEAAR).Drawing a parallel to the existing financial reporting framework that provides

principles underlying the usefulness of companies reported information, the following

quality criteria should be taken into account in selecting indicators that meet the common

needs of a wide range of users of corporate responsibility reporting:

Comparability;

Balance

Relevance and materiality;

Clarity /Understand ability; and

Reliability and verifiability.

Accuracy

Timeliness

Comparability: Users should be able to compare the indicators over time and between

enterprises to enable them to identify and analyse the outcome of changes in policy andmanagement.

Balance: The report should reflect positive and negative aspects of the organizations

performance to enable a reasoned assessment of overall performance.

Relevance and materiality: To be useful, information should be relevant in meeting the

needs of users in forming an opinion or decision. Information has the quality of relevance

when it influences the opinion or decision of users by helping them to evaluate past,

present or future events, or confirming or correcting their past evaluations. Information is

material if its omission or misstatement could influence users decisions. Materiality


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depends on the size of the item or error judged in the particular circumstances of its

omission or misstatement. Thus, it provides a threshold or cut-off point rather than being a

primary qualitative characteristic which information must have if it is to be useful.

Understand ability: The information on corporate responsibility must be understandable to

the reader. This means that the manner of presentation has to be in keeping with the

knowledge and experience of users, and should include the following: (a) a good design; (b)

systematic classification of topics and indicators; (c) concise use of language; and (d) an

explanation of unknown terms in the text, or the inclusion of a glossary to enhance

understand ability.

Reliability and verifiability: Information has the quality of reliability when it is free from

material error and bias, and when it gives a true, complete and balanced view of the actual

situation. The information should be faithful and representative of the actual situation in

the business, complete within the boundaries of what is relevant, well balanced on both

positive and negative events, presented in the right context, and free of material

misstatement. It should be neutral (free from bias).

Timeliness

Reporting occurs on a regular schedule and information is available in time for stakeholders

to make informed decisions.

The concept of CSR reporting is almost as flexible as the concept of CSR itself. Just like every

company can define to itself what CSR means, it can also choose how to communicate its

CSR progress in whatever way it finds suitable.

Three phases can be identified in the development of CSR reporting. The first, dating from

the early 1970s, was seen to be composed of advertisements and annual reports that

focused on environmental issues but were not linked to corporate performance. The second

phase, in the late 1980s, was characterised by the introduction of social audits, which

examined the performance of companies in the areas of social responsibility with respect to

communities, employees, customers, suppliers and investors. The third phase, dating from

the late 1990s, saw the strengthening of social auditing through the introduction of

externally set and verified standards.

Some see reporting as an effective communication and reputation management tool,

building loyalty with customers, investors and suppliers around important values and issues.

CSR reporting could also bring market advantage by putting firms in a better position.

Most of the CSR related standards produced in recent years requires corporations to

voluntarily develop and implement policies and practices in consonance with suggestive

performance standards on various CSR issues. In recent years a limited number of standards

has been developed, which instead of providing substantive recommendations forimplementation of specific CSR policies and practices, are designed to provide guidance for


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companys which seek to report on their social, environmental and economic performance.

In many cases, these performance standards and reporting standards are complementary in

nature.

The global reporting initiatives (GRI)

AA1000 Accountability

Social Accountability 8000

The Cauxround table CRT

OECD

United Nationa Global compact

Asia pacific Economic Cooperation

Global Sullivan principles etc.

GRI -G3.1 (The G3.1 Guidelines are an update and completion of the third generation ofGRI's

Sustainability Reporting Guidelines, G3.)

The GRI is a multi-stakeholder process and independent institution whose mission is to

develop and disseminate globally applicable Sustainability Reporting Guidelines. Theseguidelines are for voluntary use by organisations for reporting on the economic,

environmental, and social dimensions of their activities, products, and services. The GRI

reporting framework is designed for use by organisations of any size, sector, or location,

and takes into account the practical considerations faced by a diverse range of

organizations from small enterprises to those with extensive and geographically

dispersed operations.

The GRI has been developed and is used, and monitored, with active participation from

representatives of business, accountants, investors, environmental campaigners and

researchers, human rights organisations, academics and labour unions from around theworld. Started in 1997, GRI became independent in 2002, and is an official collaborating

centre of the United Nations Environment Programme (UNEP). GRI also works in

cooperation with the UN Global Compact.

GRIs Sustainability Reporting Guidelines were last released in 2002. Over the past four

years hundreds of organisations have used the Guidelines as the basis for their

reporting, and thousands of stakeholders have used information in reports issued by the

organisations they are interested in or have a relationship with.

GRI, AA 1000 n SA

8000 are mostwidely used

standards. They are

more of reporting

standard rather than

a performance

standard.


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The G3 Guidelines are made up of two parts. Part 1 features guidance on how to report.

Part 2 features guidance on what should be reported, in the form of Disclosures on

Management Approach and Performance Indicators.

The guidelines consist of principles for defining report content and ensuring the quality

of reported information, as well as standard disclosures. The guidelines also include helpwith specific technical issues in reporting and are divided into a number of areas:

Part 1: Report Content, Boundary and Quality

Part 2: Standard Disclosures

Part 3: Guidelines use and report compilation

The GRI Reporting Framework is intended to serve as a generally accepted framework for

reporting on an organizations economic, environmental, and social performance. It is

designed for use by organizations of any size, sector, or location. It takes into account the

practical considerations faced by a diverse range of organizations from small enterprises

to those with extensive and geographically dispersed operations. The GRI Reporting

Framework contains general and sector-specific content that has been agreed by a wide

range of stakeholders around the world to be generally applicable for reporting an

organizations sustainability performance.

AA1000 Accountability

In October 2008 Accountability launched new AA1000 standards designed to put the voice

of stakeholders at the heart of the assurance process. First released in 1999 the

sustainability assurance standards now consist of a guidance document and three key

standards:

AA1000 Accountability Principles Standard (2008);

AA1000 Assurance Standard (2008);

AA1000 Stakeholder Engagement Standard (2005), a revision of which is currently

underway.

The standard was developed consultatively through 20 international consultations,

numerous sector briefings and an online wiki used by more than 4,500 people from 90

countries.


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The AA1000 series is the only assurance standard specifically developed for sustainability

reporting. The other standard, the ISAE 3000, used within the accounting industry applies to

all non-financial reporting, not just sustainability.

In key changes, the standards focus on three primary principles - inclusivity, materiality and

responsiveness. They encourage organisations to involve a wide range of stakeholders intheir decision making which can provide powerful insight into unintended consequences as

well as innovative ideas - a powerful resource in difficult times. In addition, they encourage

organisations to focus on those issues that have the greatest impact, an important tool in

prioritising smaller budgets and ensuring that corporate responsibility effort is focused on

the areas of greatest potential value.

Social Accountability 8000

It is one of the worlds first auditable social certification standards for decent workplaces,

across all industrial sectors. It is based on conventions of the ILO, UN and national laws. TheSA8000

standard spans industry and corporate codes to create a common language for

measuring social compliance. Those seeking to comply with SA8000

have adopted policies

and procedures that protect the basic human rights of workers. The management system

supports sustainable implementation of the principles of SA8000: child labor, forced and

compulsory labour, health and safety, freedom of association and right to collective

bargaining, discrimination, disciplinary practices, working hours, remuneration.

Note: (Also refer hand written notes for details on reporting social responsibility

measures in annual report or A C Fernando Ch-9 pg-231 to 233)

9. Business Ethics In Indian Perspective

(For details pls. refer the handwritten notes or A C Fernando Ch-13 pg-366 to 374 or

Assignment number 1)

10. Transactional Ethics (Asked In End Term Examination 2009)

A Transaction can be defined as

1. An agreement between a buyer and a seller to exchange an asset for payment.

2. In accounting, any event or condition recorded in the book ofaccounts.
http://www.investorwords.com/12803/buyer.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/1797/exchange.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/48/accounting.htmlhttp://www.investorwords.com/6456/condition.htmlhttp://www.investorwords.com/42/account.htmlhttp://www.investorwords.com/42/account.htmlhttp://www.investorwords.com/6456/condition.htmlhttp://www.investorwords.com/48/accounting.htmlhttp://www.investorwords.com/3634/payment.htmlhttp://www.investorwords.com/273/asset.htmlhttp://www.investorwords.com/1797/exchange.htmlhttp://www.investorwords.com/13835/seller.htmlhttp://www.investorwords.com/12803/buyer.html


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Transactional Ethics

Asymmetrical relations of unequal claims and conflicting interests do not exhaust the

arsenal of possible action patterns. The concept of common interests needs to be specified

because of different types of common interests can be distinguished. Common Is used in the

senseof occurring simultaneously. Their communality is that they occur at one and the same

time and place, without,

however, dependent on another. All parties involved in the action pattern have interests

that happens to coincide in time but that do not affect each other. I am pursuing my

affairs, as he pursue his affairs. We both are aware of others existence, but that is all the

relationship we have - a very relationship. There is morality involved In this relation. In order

to let each partys transaction run smoothly, all parties have to accept the principle of

equality. Implying that every agent should allow every other the same amount of freedomor action he claims for himself. The moral principle of equality tells us where to refrain from

Intrusions In the freedom action of others while following ones own affairs, which Is

negative principle, as well as basic. Interests can also be common In the stronger sense of

being connected. It can also be noted that If connected interests are at stake the Interests of

both cannot be realised (without the Interest of the other being satisfied as well). Both

parties are needed to arrive at the Intended result [a cooperative arrangement for mutual

benefit). Every party is indispensable, every party is equally entitled to an appropriate share

In the outcome of the arrangement- All market transactions fall within this category.


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Example: I need vegetables from vegetable vendor. The vendor want customers like me for

survival so we both are dependent on each other as long as we both contribute

appropriately, together we generate a surplus that none of us on his own is able to produce.

In order to let things run smoothly, again adherence to two specific moral principles is

required- Principle of honesty, i.e.. one should operate In good faith fairly and equitably, not

betraying the confidence received. Principle of reciprocity i.e. one should avoid free riding

one somebody elses efforts. The domain of ethics covering transactions that are

performed or the basis of simultaneous or connected interests and that are general by the

principles of equality, honesty and reciprocity is indicated as the domain of transactional

ethics.

Glossary

capitalist justice the belief that benefits should be distributed according to

the value of the contribution made by the individual to a

group.

categorical

imperative

the requirement that I must act such that the maxim of my

action could be made universal law (or the requirement that

in acting I always treat others as ends in themselves and

never as a means to an end).

communitarian ethic concrete communities and communal relationships have

fundamental value that should be preserved and

maintained.

compensatory justice the belief that persons should have restored to them what

they lose as the result of another's wrong action.

cost-benefit analysis analyzes desirability of a project by comparing present and

future economic benefits to present and future economic

costs.

difference principle productive societies incorporate inequalities, but work to

improve the position of the neediest.distributive justice concerned with the fair distribution of society's benefits and

burdens; the belief that individuals who are similar in all

relevant respects should be given similar benefits and

burdens.

Efficiency producing desired output with lowest resource input.

economic equality equality of income and wealth, and equality of opportunity.

egalitarian justice the belief that every person should be given exactly equal

shares of a group's benefits and burdens.

ethic of care emphasizes care for the well-being of those close to us.ethic of virtue evaluates the moral character of individuals or groups.


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instrumental goods goods valued only because they lead to other good things.

intrinsic goods things desired independently of any benefits they may

produce.

Justice how benefits and burdens are distributed among people.

justice as fairness associated with John Rawls; the belief that the distributionof benefits and burdens in a society is just only if each

person has an equal right to the most extensive basic

liberties compatible with similar liberties

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