Course Name: BUSM4403_ETHICS AND

GOVERNANCE

Location of Study: RMIT Vietnam - SGS Campus

Title of Assignment: Corporate Social Responsibility: Profit or

Ethic

Student Name: Le Pham Quynh Nhu

Student ID: s3575630

Group: G1

Submission Date: Wednesday 11/04/2018

Lecturer: Dr. Son Tan Nguyen

Word Count: 1800 words

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 I. CENTRAL PURPOSE:

The current market becomes extremely competitive. It causes many difficulties for the firm to
survive and develop. Many companies have to change and adapt quickly to the demand of
consumers and society in order to maintain the business. These factors might be the reason to
explain the fact that most of the entities focus on financial performance. It means they seem
to be focus more on profit-driven aspect when making a business decision and building
strategy . On the other hand, many pop-up scandals related to ethics and moral are raising up
in the society. Government, authority parties and communities have already raised the flag
about these ethics crises. These issues immediately become the big concern that organization
has to consider while operating and running the business. As the consequence, many
discussion and arguments are given to debate for the statement that profit and ethics are
mutually exclusive or not. In other words, people give their opinion on how business ethics
make economic sense. This paper is to analyze and examine some notable reasons in order to
give the clearer view and more specific reasons of whether profit and ethics are mutually
exclusive or not.

II. ANALYSE AND DISCUSS:

A. Some business cases for profit-driven approach:

The development progress of being the ethical business has evolved throughout 5 stages
which are before 1960s, the 1960s, the 1970s, the 1980s, and the 1990s. In the twenty-first
century, it continues to improve and adjust. However, many enterprises still underlook the
important of ethics while running business. Thus, in this period, many crises occurred that
most of them related to sustainability, Chinese product safety, human right issue, and other
global problems. The discussion below has brought out in order to confirm that ethics and
profit are not mutually exclusive. If firms can build up their own ethical principle, they not
just gain the better financial performance (Crane & Matten 2010). These notable business
cases filtered from some well-known companies. Due to the profit-based decision, they have
to take responsibility on the scandals and offer solutions for many parties such as consumers,
employees, environments and community.

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To start with the crisis of Heekcaa and Feeling Vietnam which are known as the two famous
milk tea brand with high reputation on the market (VIR 2018). According to Vietnam
Investment review, many unlabeled tea bags are found in these two company warehouse.
These ingredients might threat to consumer health especially children. As the consequence, a
huge number of consumer decided to stay away from these milk tea shops. Many anti-bubble
tea groups are established that caused the significant drop down in profit generated (Tien
2018).

The second business case taken from McDonald’s Vietnam crisis that affected negatively on
labour right. To be more specific, this company promote for the full time internship program
with no allowance, which target mainly to teenager from 14 to 18 years old. During the
internship period, they have to produce, sell and serve McDonald’s products as the normal
employees for at least 5 hours per day. McDonald’s summer internship program have
received many negative feedback and comment from communities. Also, their positive
images in term of protecting employees with best benefit have been damaged (Doanh nhan
Viet Uc 2017). The employees have negative views toward McDonald's working
environment. Furthermore, many parents and children start to anti these chain of stores. As
the result of violating labour rights, this firm get the bad financial performance as well as
low reputation in employee point of view and customer perception (Xiaomin 2008).

BP oil blowout scandal seem to be the third case that bring damages and negative effects to
companies, environments and communities. BP corporation have make the profit driven
decision while drilling of the well that lead to the serious oil spill (The Guardian 2014). Once
again, BP organization, as other listed case above, have to face with losses from finance to
reputation, brand image or even legal issues. To be more specific, according to the Telegraph,
BP has to bear the huge compensation fund up to $20 billion and $28 billion for massive
clean-up operation as well.

Finally, H&M crisis probably provide the very different lesson if the business just focus on
profit generated when running business. This entity have a mistake in promotion campaign in
South Africa. They seem to encourage and support the racial discrimination especially in
kid’s clothes (Vietnam Economy 2018). H&M have to shut down all 17 stores in South
Africa for certain period due to the gravity of the crisis (Luke 2018)

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The discussion from these 4 business cases have conclude the same statement that ethics are
extremely important to the firm in order to increase financial performance as well as reaching
sustainable development (Marc 2014). According to Linda 2007, business can not even
survive without ethical principle. In Particular, for long-term success, firm have to consider
profit and ethical factors at the same time when making any decision (Charles 2015).

B. The competitive advantages for ethical business:

If the firm apply ethical concepts and principle to run the business, they will take many
advantages to build on company competitive position. Definitely, these advantages come
from various aspects. Business with ethics culture brings four main positive effects to
contribute for the better performance and higher profit rate which are employee commitment
and trust, Investor loyalty and trust, Customer satisfaction and trust, Financial performance
(McMurrian et al. 2016). With these advantages, they can maintain and develop the company
in the long run. There are some specific explanations for the contribution of each positive
effect toward the company value and performance:

1. Ethics contribute to employee commitment:

When the firm applying ethics concept and principle to manage their employees, they can
ensure the commitment of staffs (Rodrigo 2014). In fact, the more they trust and perceived
positively about the company, the more commitment they will contribute to the task (Jon
1993). According to Linda 1951, it means the productivity and quality of work will increase
because of the high level of commitment. Moreover, with ethic culture, business can ensure
the level of willingness from their staffs. to illustrate, if firms express the dedication and take
care worker carefully, high percentage of employees will voluntarily sacrify back for the
organization. Also, staff will automatically take full responsibility for their own task and put
more effort to complete the assigned mission. In addition, according to the NBES survey,
more than 79% of staffs agree that ethic is the essential factor to consider when they have to
decide staying or leaving the company. Once again, the important role of ethic are
emphasised via this impressive statistic. Finally, the employee loyalty rate is grew because
the company commit in offering goodwill and respect to workers (John Fraedrich 2011).

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 2. Ethics contribute to investor loyalty:

For the second positive effect, which ethic concept might bring to improve the performance
of the entity, is investor loyalty and trust. In recent years, investors are looking for the
company with ethics, high social responsibility, high level of reputation to invest. Due to
ethic and moral concern of the society, they might feel safer with those companies who is
running the the ethics business (William 2016). Furthermore, from the point of view of
investor, they perceived organization with ethics culture having higher level of quality,
productivity and efficiency (Eric 2014). In addition, investors tend to take more risk if they
are investing in the company with negative publicity, law suits or fines. The reason is that,
the dividend, stock price of these company can be lower significantly anytime. 92% of TIAA-
CREF investors choose ethics company when were asked for selecting a financial services. In
general, almost all of the investor companies follow triple bottom principle which refer to
profit, people and planet. It means that they are not only consider profit factor while looking
for the partner. Other ethic factors such as people and planet also are on top priorities.
Investors believed that the fluctuation rate of stock price, dividend and bond can be under
control if they are collaborate with ethical businesses (John Fraedrich 2011)

3. Ethics contribute to customer satisfaction:

The third effect is considered as the most valuable factor that ethics have contribute to the
business development. Currently, approximately 60% of customer have impression with
company who focus on the social responsibility and building brand reputation. Understanding
these need of consumer, firm has to develop the appropriate strategy in order to satisfy and
serve them better. To be more specific, many company concentrate on donating activities or
sponsorship event. For example, Coca-Cola has sponsored for 2006 FIFA World Cup
Germany in order to connect with target consumer and build better brand image. As the
result, they have generated higher level of brand awareness and brand love throughout the
World Cup season (Nicolas 2010). In addition, firm with ethic culture have more advantage
in term of creating the good long term relationship with consumer based on mutual respect
and cooperation principle (John Fraedrich 2011)

4. Ethics contribute to profits:

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This fourth positive effect of ethic has confirmed that ethics and profits are not mutually
exclusive. Related to this advantage, firm which is applying ethics concept and principle, not
only maintain the certain level of financial performance but also generate more profits. Ethics
have paid off with better performance in many aspects due to the three mentioned advantages
above. For example, comparing to other firm, ethics business with greater resource-
employee commitment and size, higher level of reputation and trust from customer and
public, they can confidently state that they can reach the sustainability with high rate of profit
generated (Zoe 2015). There is the interesting fact that the more engagement the firm
dedicated to the corporate social responsibility, the higher level of pre-tax income they are
generated. It also emphasises that ethics and profit performance are not conflict to each other.

III. CONCLUSION:

In conclusion, this essay has identified and examined some notable reason to support
the statement that profits and ethics are not mutually exclusive. Some notable business cases
with profit-driven based also brought out for discussion to define clearly the important role of
ethic in term of making more profits as well as reaching sustainability in long term. Through
these analysis, at least ethics factor demonstrated the ability of helping firm to survive in the
competitive market as current. For instance, organization has to take ethics component into
consideration besides the profit element when making any business decision. In addition,
there are four main positive effects such as the contribution of ethics on employee
commitment, investor loyalty, customer satisfaction and profits, which ethical business has
been gained comparing to other firms. Overall, business can indicate that with their ethics
culture they can generate the higher level of financial performance and also be sustainable in
the long-run (Joh Fraedrich et al. 2011).

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