CHAPTER 2

BUSINESS ETHICS AND SOCIAL

RESPONSIBILITIES

ASM401/Chapter 2 1
 ETHICS IN THE WORKPLACE
 Ethics are beliefs about what’s right and wrong or good
and bad in actions that affect others.
 An individual’s values and moral plus the social context in
which his or her behaviour occurs determine whether a
particular behaviour is seen as been ethical or unethical.
 Ethical Behaviour conforms to individual beliefs and
social norms about what’s right and good.
 Unethical behaviour is behaviour that individual beliefs
and social norms define as wrong and bad.
 Business ethics is a term often used to refer to ethical or
unethical behaviour by employees of commercial
organizations.

ASM401/Chapter 2 2
 ETHICS IN THE WORKPLACE
Individual Ethics

 It is based on both individual beliefs and social concepts,

they vary from person to person, from situation to
situation, and from culture to culture.
 Thus ethical and unethical behaviour is determined partly
by the individual and partly by the culture.

ASM401/Chapter 2 3
 CONDUCT BUSS. ETHICALLY & RESPONSIBILITY
Individual Ethics

Ambiguity, the Law, and the Real World

 Societies generally adopt formal laws that reflect
prevailing ethical standards or social norms. E.G. most
people regard theft as unethical; we have laws against
such behaviour and ways of punishing those who steal.

Individual Values and Codes

 Each people personal code of ethics is determined by a
combination of factors – influenced by peers, experience
shapes our life and contributes to our ethical beliefs and
our behaviour when adult, develop values and morals that
contribute to ethical standards.

ASM401/Chapter 2 4
 COMPANY PRACTICES & BUSINESS
ETHICS
 Many firm have taken additional steps to encourage
ethical behaviour in the workplaces as unethical and even
illegal activities conduct by both managers and
employees.
 Many set up code of conduct and develop clear ethical
positions on how the firm and its employees will conduct
business.
 Most effective step that a company can take is to
demonstrate top management support of ethical
standards.
 This policy contributes to a corporate culture that values
ethical standards and announces that the firm is as
concentrated with good citizenship as with profits.

ASM401/Chapter 2 5
 COMPANY PRACTICES & BUSS. ETHICS
Adopting Written Codes

Adopting Written Codes

 Many company have adopted written codes that formally
announce their intent to do business in an ethical manner.
 The number of companies has risen dramatically in the
last three decades, and today almost all major
corporations have written codes of ethics.

ASM401/Chapter 2 6
 COMPANY PRACTICES & BUSS. ETHICS
Instituting Ethics Programs

Instituting Ethics Programs

 Ethical responses can be learned through experience.
 Most analysis agree that even though business school
must address the issue of ethics in the workplace,
companies must take the chief responsibility for educating
employees.
 All managers must go through periodic ethics training to
remind them of the importance of ethical decision making
and to update them on the most current laws and
regulations that might be particularly relevant to their
firms.

ASM401/Chapter 2 7
 SOCIAL RESONSIBILITY

 Social responsibility: The attempt of a business to

balance its commitments to groups and individuals in its
environment, including customers, other businesses,
employees, investors, and local communities.
 These groups and individual are often called organization
stakeholders (Those groups, individual, and
organizations that are directly affected by the practice of
an organization and who therefore have a stake in its
performance).
 Social responsibility is influenced by many factors such as
government agency, customers, the demand of investors
and behaviour of other firms in the same industry & same
country.

ASM401/Chapter 2 8
 AREAS OF SOCIAL RESPONSIBILITY

 When defining its sense of social responsibility, a firm

typically confronts four areas of concern:
Responsibility towards the environment
Responsibility towards customers
Responsibility towards employees
Responsibility towards investors

ASM401/Chapter 2 9
 AREA OF SOCIAL RESPONSIBILITY
Responsibilities Towards Environment

 Controlling pollution - the injection of harmful

substances into the environment is significant
challenge to contemporary business.
 Although noise pollution is now attracting increased
concern, air, water, and land pollution remain the
greatest problem in need of solutions from
governments and businesses alike.
 The criteria for estimating change are population,
economic growth, energy supplies and technologies.

ASM401/Chapter 2 10
 AREA OF SOCIAL RESPONSIBILITY
Air Pollution
 Air pollution result when several factors combine to
lower air quality.
 Carbon monoxide emitted by automobiles contributes to
air pollution, as do smoke and other chemical from
manufacturing plants.
 Under new laws, many companies must now install
special devices to limit the pollutions they expel into the
air. However such efforts are costly.
 Air pollution is compounded by such problem as acid
rain which occurs when sulphur is pumped into the
atmosphere, mixed with natural moisture and fall to the
ground as rain.

ASM401/Chapter 2 11
 AREA OF SOCIAL RESPONSIBILITY
Water Pollution

 Water becomes polluted primarily from chemical and

wastes dumping.
 Some business & cities dumped waste into rivers,
streams & lakes with little regard from the
consequences.
 By introduced the new legislation and increase
awareness, water quality is improving.

ASM401/Chapter 2 12
 AREAS OF SOCIAL RESPONSIBILITY
Land Pollution
There are 2 key issues in land pollution
 How to restore the quality of land that has already been
damage – Land and water damaged by toxic waste –
must be clean up for the simple reason that people still
need to use them.
 Concern how to prevent future contamination

 Toxic waste disposal - is a dangerous chemical and

need to have a special place to be disposed.
 Toxic wastes are dangerous chemical or radioactive by-
products of manufacturing processes.
 As a rule, toxic waste must be stored; it cannot be
destroyed or processed into harmless material

ASM401/Chapter 2 13
 AREA OF SOCIAL RESPONSIBILITY
Land Pollution

 Recycling: Recycling is another controversial area

in land pollution.
 Recycling – the recon version of waste materials
into harmful products – has become an issue not
only for municipal and stage governments but also
for many companies engaged in high waste
activities.
 Certain product, such as aluminium beverage cans
and glass, can be very efficiently recycled. Other
such as plastics is more troublesome.
 Many local communities actively support various
recycling programs.

ASM401/Chapter 2 14
 RESPONSIBILITY TOWARDS CUSTOMERS
 A company which does not act responsibly towards its
customers will ultimately lose their trust – and thus their
business.
 Unethical and irresponsible business practices toward
customers can result in government-imposed penalties and
expensive civil litigation.
 Social responsibility toward customers generally falls into
two categories:
 Providing quality product
 Pricing product fairly
 Naturally, firms differ as much in their level of concern about
customer responsibility as in their approaches to
environment responsibility.

ASM401/Chapter 2 15
 RESPONSIBILITY TOWARDS CUSTOMERS
Customer Right
 The current interest in business responsibility toward
customers can be traced to the rise of
consumerism: social activism dedicated to
protecting the right of consumers in their dealing with
businesses.
 The consumer right protection is as follows:
Consumers have a right to safe product
Consumers have a right to be informed about all
relevant aspect of a product
Consumers have a right to be heard
Consumers have a right to choose what they buy.
Consumers have a right to be educated about
purchases.
Consumers have a right to courteous service

ASM401/Chapter 2 16
 RESPONSIBILITY TOWARDS CUSTOMERS
Unfair Pricing

 Interfering with competition can take the form of

illegal pricing practices.
 Collusion (illegal agreement between two or more
companies to commit a wrongful act) occurs when
two or more firms agree to collaborate on such
wrongful acts as price fixing.
 Under some circumstances, firms can also come
under attack for price gouging - responding to
increase demand with overly steep price increase.

ASM401/Chapter 2 17
 RESPONSIBILITY TOWARDS CUSTOMERS
Ethics in Advertising

 Increase attention has been given to ethics in

advertising and product information.
 Because of controversies surrounding the potential
misinterpretation of words and phrases such as light,
reduce calories, diet and low fat, food producers are
now required to use a standardized format for listing
ingredients on product packages.
 Another issue concerns advertising that some
consumers consider morally objectionable – E.g.
include advertising for product such as underwear,
condoms, alcohol, tobacco product and firearms.

ASM401/Chapter 2 18
RESPONSIBILITIES TOWARDS EMPLOYEES
 A number of human resource management activities
are essential to a smoothly functional business
 These activities such as recruiting, hiring, training,
promoting & compensation are also the basic for
social responsibilities towards employee.
 A company that provides its employees with equal
opportunities for rewards & advancement without
regards to race, sex or other irrelevant factors is
meeting its social responsibilities.
 Firm that ignore their responsibilities run the risk of
losing productive and high motivated employee.
 Whistle-blower: employee who detects and tries to put
an end to a company’s unethical, illegal, or social
irresponsible actions by publicizing them.

ASM401/Chapter 2 19
RESPONSIBILITIES TOWARDS INVESTORS

 Shareholders are the owner of a company. It may

sound odd to say that a firm can act irresponsibly
toward its investor.
 Manager can abuse their responsibilities to investors
in several ways.
 As a rule, irresponsible behaviour towards
shareholders means abuse of a firm's financial
resource.
 Companies can also act irresponsibly toward
shareholder - owner by misrepresenting company
resource.

ASM401/Chapter 2 20
 RESPONSIBILITIES TOWARDS INVESTORS
Improper Financial Management

Improper financial management

 Organisations are guilty of financial mismanagement
- offences that are unethical but not necessarily
illegal.
 In such situations, creditors can often do little, and
stockholders have few options – trying to force a
management changeover is a difficult process that
can drive down stock prices – a penalty that
shareholders are usually unwilling to impose on
themselves.

ASM401/Chapter 2 21
 RESPONSIBILITIES TOWARDS INVESTORS
Improper Financial Management
 Check kiting - Illegal practice of writing checks
against money that has not yet been credited at the
bank on which the checks are drawn.
 Insider Trading – Illegal practice of using special
knowledge about a firm for profit or gain - is someone
use confidential information to gain from the purchase
/ sale of stock, that person is practising insider
trading.
 Misrepresentation of business - Certain behaviour
regarding financial representation is also illegal. In
maintaining and reporting its financial status, every
corporation must conform to generally accept
accounting practices.
 Sometime, managing project profit far in excess of
what they actually expect to earn. When the truths
come out, investors are disappointed.

ASM401/Chapter 2 22
 APPROACHES SOCIAL RESPONSIBILITY
PROGRAM
Approaches to social responsibility.
 Corporation have adopted a variety of approaches to
social responsibility.
 Organization themselves adopt a wide range of
positions on social responsibility.
 There are four stances that an organization can take
concerning its obligations to society fall along a
continuum ranging from the lowest to the highest
degree of socially responsible practice.
Obstructionist Stance
Defensive stance
Accommodative stance
Proactive stance

ASM401/Chapter 2 23
IMPLEMENTING SOCIAL RESPONSIBILITY PRGM.
Obstructionist stance
 Obstructionist stance is an approach to social
responsibility that involves doing as little as possible and
may involve attempts to deny or cover up violations.
 The few organizations that take what might be called an
obstructionist stance to social responsibility usually do as
little as possible to solve social or environmental
problem.
 When they cross the ethical or legal line that separates
acceptable from unacceptable practices, their typical
response is to deny or cover up their actions.
 Firms that adopt this position have little regard for ethical
conduct and will generally go to great lengths to hide
wrongdoing.
 E.g. company has a long record of breaking
environmental protection, labour, and food processing
laws and then trying to cover up its offences.

ASM401/Chapter 2 24
IMPLEMENTING SOCIAL RESPONSIBILITY PRGM.
Defensive stance

 Defensive stance is an approach to social

responsibility by which a company meets only
minimum legal requirements in its commitments to
groups and individuals in its social environment.
 One step removed from the obstructionist stance is
the defensive stance.
 This approach is most consistent with arguments
against corporate social responsibility.
 Managers who take a defensive stance insist that
their job is to generate profits. E.g. a firm would install
pollution-control equipment dictated by law but would
not install higher-quality equipment even though it
might further limit pollution.

ASM401/Chapter 2 25
IMPLEMENTING SOCIAL RESPONSIBILITY PRGM.
Accommodative stance
 Accommodative stance is an approach to social
responsibility by which a company, if specifically
asked to do so, exceeds legal minimums in its
commitments to groups and individuals in its social
environment.
 A firm that adopts an accommodative stance meets its
legal and ethical requirements but will also go further
in certain cases.
 Such firm voluntarily agree to participate in social
programs, but solicitors must convince them that given
programs are worthy of their support.
 Many organizations respond to requests for donations
to Little League, Girl Scouts, Youth soccer program
etc.
 Accommodative organizations do not necessarily or
proactively seek avenues for contributing.

ASM401/Chapter 2 26
IMPLEMENTING SOCIAL RESPONSIBILITY PRGM.
Proactive stance

 Proactive stance is an approach to social

responsibility by which a company actively seeks
opportunities to contribute to the well-being of
groups and individuals in its social environment.
 The highest degree of social responsibility that a
firm can exhibit is the proactive stance.
 Firms that adopt this approach take a heart the
arguments in favour of social responsibility.
 They view themselves as citizen in a society and
proactively seek opportunities to contribute.
 The most common – and direct – way to implement
this stance is by setting up a foundation through
which to provide direct financial support for various
social programs

ASM401/Chapter 2 27
 MANAGING SOCIAL RESPONSIBILITY
PROGRAMS
1. Social responsibility must start at the top and be
considered as a factor in strategic planning.
 Without support of top management, no program can
succeed.
 Top management must embrace a strong stand on social
responsibility & develop a policy statement outlining that
commitment.

2. A committee of top managers must develop a plan

detailing the level management support.
 Some companies set aside percentages of profits for
social programs

ASM401/Chapter 2 28
 MANAGING SOCIAL RESPONSIBILITY
PROGRAMS
3. One executive must be put in charge of the firm's
agenda
 Whether the role is created as a separate job or added to an
existing one, the selected individual must monitor the
program & ensure that its implementation is consistent with
the firm's policy statement & strategic plan.

4. The organization must conduct occasional social

audit: systematic analyses of its success in using
finds earmarked for its social responsibly goals.

ASM401/Chapter 2 29
 END OF CHAPTER 2

BUSINESS ETHICS AND SOCIAL

RESPONSIBILITIES

THANK YOU

ASM401/Chapter 2 30