BUSINESS ETHICS & SOCIAL RESPONSIBILITY

DEFINING ETHICS
Understanding of right and wrong Ability to distinguish between the right and the wrong. Integral part of life Running a business is a part of life

WHAT IS ETHICS?
Ethics

Right or wrong, good or bad, in actions that affect others

Business

ethics

Ethical or unethical behavior by employees of organizations. Ethics refers to a set of moral principles which should play a very significant role in guiding the conduct of managers and employees in the operation of any enterprise.

BUSINESS ETHICS

Focuses on - Stakeholders, and employees Quality of product and services Customer satisfaction. Community and environment

BUSINESS ETHICS ARE IMPLEMENTED TO.

Define the framework of the acceptable behavior. Follow high standards of practice. Create benchmarks for self evaluation. Enhance sense of community. Create transparency in the business activities. Foster higher standards of business ethics. Comply with government laws and norms.

BEHAVIORS

IN AREAS (FROM A
SURVEY):

WALL STREET JOURNAL

Government: 66% Sales 51% Law 40% Media 38% Finance 33% Medicine 21% Banking 18% Manufacturing 14%

WHO IS RESPONSIBLE FOR ETHICS IN THE COMPANY?

Everyone

COMMON APPROACHES TO BUSINESS ETHICS

Utilitarianism

basic premise is that an

action is judged as right or wrong depending on the consequences of the action Universalism the means justify the ends of an action, not the consequences Rights based on entitlements and unquestionable claims

NEED FOR ETHICS IN MANAGEMENT

Environmental Pressure Credibility Moral Consciousness Legal Pressure

STEPS IN MAKING ETHICAL DECISIONS

TOOLS OF ETHICS
It is for improving our ethical reasoning. Values: Relatively permanent desires that seem to be good in themselves. Values lead to quality improvement. Value represent basic conviction that a specific mode of conduct is personally or socially preferable to an opposite mode of conduct. Characteristics of Value: Part of culture, Learned Response, Inculcated, Social phenomenon, Gratifying Responses, Adaptive Process

Rights: Claims that entitle a person to take a particular decision. Duties: Obligation to take specific steps or obey the law. Moral Rules: Rules for behavior that often become internalized as moral values. Human Relationships Morality of care: primacy of relationship, Attachment & Interdependence

Common morality: The body of moral rules governing ordinary ethical problems. Promise keeping No malevolence Mutual aid Respect for a person Respect for property

INSTITUTIONALIZING ETHICS

Social Audit : Report describing a companys activities in a given area of social interest, such as environmental protection, workplace safety, or community involvement.

THE CHALLENGE OF RELATIVISM

Moral Relativism: The idea that we can not decide matters of right and wrong, good and evil, in any rational way. Nave Relativism : The idea that all human beings are themselves the standard by which their actions should be judged. Cultural Relativism : The idea that morality is relative to a particular culture, society or community.

CASE: INFOSYS TECHNOLOGIES

Have a distinctive work culture and value system. Great importance on customer delight, leadership, integrity, transparency, fairness and pursuit of excellence. Open door policy. Value employees and encourage them to make decisions about their own work. Treated as a flat organization when it comes to communication and information sharing

SHIFT TO ETHICS BECAUSE OF FOLLOWING TYPE OF FRAUDS

Does

Satyams story tell the myth and reality of Indian corporate ethics?

CORPORATE ETHICS: INDIVIDUALS PERSPECTIVE

Signs

of ethical deterioration. In business, people have made immoral millions In government, public officials are involved in bribery. In education, cheating scandals among students are common. under-the-table payments for admission People believe that they have to cheat to win.

CORPORATE ETHICS: MANAGEMENT

PERSPECTIVE
Accountable for corruption in a company. Boards decisions on resource allocation, Performance targets or promotions Always trump official statements of ethical values. Whistleblowers are to be given protection Influence the pressures which the CEOs handle in managing ethics.

PRINCIPALS FOR ETHICALLY RUN BUSINESS

Principle 1 Productivity Is Much More Important Than Profitability Principle 2 The Customer Is Not Sheep That Can Be Sheared Principle 3 The Buyer's Domain Is More Important Than the Middlemen's Domain Principle 4 Be Diplomatic With Your Competitors

SOCIAL RESPONSIBILITY

Social Responsibility has been defined by Davis as follows: Social Responsibilities refer to the businessmans decisions and actions taken to reasons at least partially beyond the firms direct economic or technical interest.

DIFFERENCE BETWEEN ETHICS AND SOCIAL RESPONSIBILITY

Ethics

provides guidelines for human behavior in every field, whether organizational or nonorganizational. Social responsibility works in organizational context.

Ethics

is concerned with micro aspect, that is relating to daily operating decisions with limited social impact. Social responsibility is concerned with macro aspect relating to decisions with broad implications for a large segment of the society.

Why corporate responsibility is needed?

social

Business is using the resources from the society like material, manpower and many the other things which it need to return it back. Business is with the people, of the people and for the people.

RESPONSIBILITY TOWARD CUSTOMERS

Consumer Rights

Fair Pricing

Ethics in Advertising

RESPONSIBILITY TOWARD EMPLOYEES

Legal and Social Commitments

Safe work environment Equal pay no discrimination Good human relations Freedom, Self Respect & Self- Realization Increase in productivity and efficiency by recognition on merit, by providing opportunities for creative talents and incentives.

RESPONSIBILITY TOWARD INVESTORS

1.

NO improper financial management

2.
3.

NO insider trading
NO misrepresentation of finances on financial statements

RESPONSIBILITY TOWARD LOCAL COMMUNITIES

Environment

Air

pollution Water pollution Land pollution

Clean up toxic waste Use recycling

Growth / infrastructure Social well-being of all members of the community

WHICH THEORY SHOULD BE USED FOR BUSINESS ETHICS?

Each approach has strengths and weaknesses Need to look at situation and apply best analysis/judgment

SR BY McDonalds
McDonalds having long chain of food chains in many countries & they do some CSR practices there

McDonald now using the recyclable paper in food packaging instead of plastic
They are using less light during day hours They process their waste & then dispose it & have different dust bins for different wastes

Advantages of SR

Ethical thing to do. Improves the firms Image Avoids Excessive regulation

An improved social environment will be beneficial to the firm. It can increase employee motivation. Helps to correct social problems caused by the business.

Disadvantages of SR
It will reduce economic efficiency and profit. SR behavior imposes additional costs which reduce competitiveness.

The only social responsibility of business is to create shareholder wealth. The pursuit of social goals dilutes businesses 'primary purpose. Costs will be passed on to customers.

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