ETHICS

AND
VALUES
Introduction
ETHICS
Definitions and
concept
• 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
standards of human conduct and morals.
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 (Philip Wheel).
Ethics is the right thing to do, it is action that best serves the ideas
of honesty, integrity, morality and good management practices.
Ethics goes beyond the immediate facts that pertain to amoral question—
What the situation is, it addresses the question of what ought to
be?
 Business Values & Ethics
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.
Ethics and Values
• Moral values are deep-seated ideas and feelings that manifest
themselves as behavior or conduct. These values are not so
easy to measure or express in words. There is very thin line
which distinguishes between ethics and values both drive what is
right and what is wrong in human conduct and what ‘ought to
be’.
 Business Values & Ethics
But then alsoContd.
a relationship can be derived between value and
ethics like this.
Law + Knowledge = Ethics

So as, we know the consequences of our actions, we can convert

values into rules of behavior that can be derived as ethics.

Business and Ethics

Ethics is considered as everybody’s business.

It is not just only achieving high level of economic performance but
also to conduct one of business’s most important social challenges,
ethically at the same time.
Business ethics are the application of general ethical rules to
business behavior.
Business ethics are rules of business by which propriety of
business activity may be judged.
Business ethics is generally coming to know what is right or
wrong in the workplace and doing what is right—this is in
regard to effects of products/services and in relationship with
stakeholders” (Cater Mcnamara).
Business ethics in short can be desired as the systematic study
of ethical matters pertaining to business industry or related
activities, institutions and beliefs.
Business ethics is the systematic handling of values in business
and industry (John Donaldson).
 The 3 C’s of Business ethics:
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 of products/services
• Employment
• Usefulness of activities to surrounding environment
3. The Consequences of business activity:
• Toward environment inside and outside the organization
• Social responsibility toward shareholders, bankers, customers and employees of
organization.
• Good public image, sound activity- good image.
Ethical Values, Issues and Choices
Ethical values: shared beliefs about right and wrong, good and bad
Govern the behaviour of a person or a group

Ethical issues: problems or dilemmas which present a

conflict of values
Pay a ‘living wage’ or personal financial gain

Ethical choices: decisions about which option to take in

response to a dilemma
Difficult decisions, because each option has its own drawbacks
 Everyday Ethical Dilemmas

Ethical analysis and ethical diagnosis of past events,

happenings, clarifying the standards, uncover the moral values,
habits of thought.
How to evaluate the situation? Ethics provides rational methods
for answering the present situation and related future issues. A
well equipped information is a must to achieve this second
objective, a careful assessment of relevant information will lead
to balanced judgments.
Business Ethics ...

Free
Law Ethics
Choice

Legal Standard Social Standard Personal Standard

A personal responsibility?
Why be Ethical
 overview
• Who cares? Who bothers?

• The “amoral” majority

• Unconscious biases
 Why does Ethics Matter in Business?
Doing the right thing” matters to firms, taxpayers, employees,
and other stakeholders, as well as to society.
To companies and employers, acting legally and ethically means
saving billions of dollars each year in lawsuits, settlements, and
theft.
It has also been estimated that theft costs companies $600
billion annually, and that 79% of workers admit to or think about
stealing from their employers (the amoral majority).
Other studies have shown that corporations have paid significant
financial penalties for acting unethically.
The U.S. Department of Commerce noted that “as many as one-
third of all business failures annually can be attributed to employee
theft”. For example : Some ECG workers in Ghana constructing
illegal light connection to people’s homes for money.
 Why does Ethics Matter in Business?
Contd.
Experts have estimated that approximately 40% of fraud and
theft losses to American businesses are internal.
Costs to businesses also include deterioration of relationships;
damage to reputation; declining employee productivity, creativity,
and loyalty; ineffective information flow throughout the
organization; and absenteeism.
Companies that have a reputation for unethical and uncaring
behavior toward employees also have a difficult time recruiting and
retaining valued professionals.
Therefore the consequences of being unethical in business is far
more reaching than anticipated.
What is the degree to which coworkers, managers, and senior leaders
display integrity and ethical conduct at work?
Out of 88% of employees at the top (upper staff), 10% of them
agreed or strongly agreed that co-workers displayed integrity and ethical
conduct at all times whereas out of 60% of employees who work at the
bottom (lower staff) only 10% attested to this fact.
With respect to managers, the numbers were 90% at the top 10 and 63%
at the bottom 10 organizations.
A bigger difference existed with regard to whether senior leadership
displayed integrity and ethical conduct at all times, with 89% of employees
at the top 10 best employers agree or strongly agree to this fact, whereas
less than half— 48%—felt that way at the bottom 10 employees.
A study found out that “a perceived lack of integrity on the part of co-
workers, managers and leaders has, as expected, a detrimental effect on
engagement (if my colleague, manager or boss is not doing the right thing,
why should I?).
Employees care about ethics because they are attracted to ethically
and socially responsible companies.
The most frequently mentioned characteristics of good business
ethics include profit sharing, bonuses, and monetary awards.
However, the list also contains policies and benefits that balance
work and personal life and those that encourage social
responsibility.
Ethics matters in business because all stakeholders stand to gain
when organizations, groups, and individuals seek to do the
right thing, as well as to do things the right way.
Ethical companies create investor loyalty, customer satisfaction, and
business performance and profits.
 Why Use Ethical Reasoning in Business?
The Unconscious Biases
Ethical reasoning is required in business for at least three reasons:
First, many times laws do not cover all aspects or “gray areas”
of a problem.
How could tobacco companies have been protected by the law
for de cades until the settlement in 1997, when the industry agreed
to pay
$368.5 billion for the first 25 years and then $15 billion a year
indefinitely to compensate states for the costs of health care
for tobacco- related illnesses? What gray areas in federal and state
laws (or the enforcement of those laws) prevailed for decades?
What sources of power or help can people turn to in these
situations for truthful information, protection, and
compensation when laws are not enough?
 Why Use Ethical Reasoning in Business?
Contd.
Second, free - market and regulated - market mechanisms do
not effectively inform owners and managers how to respond to
complex issues that have far – reaching ethical consequences.
Enron’s former CEO Jeffrey Skilling believed that his new
business model of Enron as an energy trading company was the
next big breakthrough in a free- market economy. The idea was
innovative and creative; the executive’s implementation of the
idea was illegal. Perhaps Skilling should have followed Enron’s
ethics code; it was one of the best available.
A third argument holds that ethical reasoning is necessary
because complex moral problems require “an intuitive or
learned understanding and concern for fairness, justice, [and] due
process to people, groups, and communities.
Company policies are limited in scope in covering human,
environmental, and social costs of doing business. Judges have to
use intuition and a kind of learn- as- you- go approach in many
of their cases.
In Microsoft’s previous alleged monopoly case, for example,
there were no clear precedents in the software industry— or
with a company of Microsoft’s size and global scope — to offer
clear legal direction. Ethics plays a role in business because laws
are many times insufficient to guide action.
Criteria for Ethical Decision Making
Utilitarian approach – moral behavior produces the greatest
good for the greatest number
Individualism approach – acts are moral when they promote
the individual’s best long-term interests
Moral rights approach – moral decisions are those that
best maintain the rights of those affected, including free
consent, life and safety
Justice approach – decisions must be based on standards
of equity, fairness, and impartiality; (esp. important in
HR managment)
 CASE STUDY - SHELL AND OGONI PEOPLE
1. Identify the environmental aspects of the damage caused by Shell to
the Ogoni people.
2. The socio-economic/social impact of the damage
3. The health impact of the damage
4. The impact it has on relationships of Shell and The Ogoni people.
5. What ethical issues can you identify from the case?
6. What better solutions do you think Shell should have offered the
people to stay in business?
7. The solutions they offered later, were they appropriate? What
more should they have done and how best should they have
offered the solution to satisfy the people?
8. What do you think should be the best approach in resolving this
conflict between Shell and the Ogoni people. (analyze from both
sides: from the side of Shell and from the side of the Ogoni
people).
9. What role should the government also play in resolving this
conflict?
Business Ethics
 Business Ethics
Business ethics are the principles and standards that
determine acceptable conduct in business organizations.
Business ethics relates to an individual’s or a work group’s
decisions that society evaluates as right or wrong.
The acceptability of behavior in business is determined by
customers, competitors, government regulators, interest groups,
and the public, as well as each individual’s personal moral
principles and values.
However, all actions deemed unethical by society are not necessarily
illegal, and both legal and ethical concerns change over time.
Many problems and conflicts in business can be avoided if
owners, managers, and employees know more about business
law and the legal system.
 Types of Ethical Issues
1. Systemi Ethical questions about the social, political, legal, or
c economic systems within which companies
operate.
2. Corporate
Ethical questions about a particular
corporation/company and
policies, culture, climate, impact or actions.
3. Individual
Ethical questions about a particular individual’s
decisions, behavior, or character.
 The case for and against ethics in business
AGAINST
In a free market economy, the pursuit of profit will ensure maximum social benefit
so business ethics is not needed.
The Milton Friedman argument: The ethical duty of business people is to maximize
profit. This means they should study marketing, finance, and operations and should
not waste time studying ethics.
The argument from incentives: Even if there are duties beyond profit
maximization, the only practical way to encourage ethical behavior is to install
financial and legal incentives. Business people respond to these, not ethics
lectures.
The gut feeling argument: One cannot study ethics in any meaningful sense
anyway, since it is something you feel, not something you think about.
The moral development argument: Moral character is formed in early childhood,
not while sitting in ethics class. By the time students enter business school, it is
too late to change.
The motivational argument: Even if there is reason to study ethics, business students
see no motivation to study it and do not take the subject seriously.
A manager’s most important obligation is loyalty to the company regardless of ethics.
So long as companies obey the law they will do all that ethics requires.
 The case for and against ethics in business
Contd.
FOR
Ethics applies to all human activities.
Business cannot survive without ethics.
Ethics is consistent with profit seeking.
Customers, employees, and people in general care about ethics.
Studies suggest ethics does not detract from profits and seems to contribute to
profits.

Why the law cannot do it?

1. Most businesses bribe the law to get away with it
2. Laws do not cover every aspect of ethics pertaining to individuals, groups
or communities.
3. Laws are enforced by people who formed the amoral majority and do
not themselves adhere to good ethics.
 Does business ethics make economic sense?
The invisible hand and market failures
Exchange, production and distribution: The concept of the Butcher-
brewer-baker by Adam Smith the economist: (the issue of production
and distribution) – the flourishing of the system of exchange of
commodity (self-interest as a motivation for exchange)- The butcher,
the brewer and the baker want our money, and we want their products,
and the exchange benefits us all. Bringing about this betterment of
all the parties involved. All that is needed is regard for our own
respective interests, and the market is meant to do the rest in bringing
about the mutually gainful exchanges.
There will seem to be no need for any business ethics BUT there is a
need to go beyond profit-maximization because humanity, justice,
generosity and public spirit are the qualities most useful to
others.
Businesses defrauding consumers or consumers attempting to
swindle sellers? (the China- African market?)So Ethics comes in.
Does business ethics make economic sense
Contd.? and exchange: rules and trust: The concern of the different
Organization
parties with their own interests certainly can adequately motivate
all of them to take part in the exchange from which each benefits. But
whether the exchange would operate well would depend also on
organizational conditions. This requires institutional development which
can take quite some time to work?
What must be considered now is the extent to which the
economic institutions operate on the basis of common behavior
patterns, shared trust and a mutual confidence on the ethics of
the different parties.
If he cannot trust the householder, the baker may have difficulty
in proceeding to produce bread to meet orders, or in delivering
bread without prepayment. And the householder may not be certain
whether he would be sensible in relying on the delivery of the
ordered bread if the baker is not always altogether reliable.
These problems of mutual confidence can be solved by being
ethical. E.g in many third world countries (e.g Asia) there is a
traditional lack of confidence in the moral behaviors of particular
groups of traders merchants of food grains (maize, rice etc.)
Organization of production: firms and public good: Capitalism (unregulated
market by the state where people own business privately) has been
successful enough in generating output and raising productivity. But the
experiences of different countries are quite diverse.
Japan is often seen rightly in a particular sense as a great example of
successful capitalism, but is clear that the motivation patterns that
dominate Japanese business have much more content than would be
provided by pure profit maximization (the issue of non-profit motives).
When uses of a commodity are non-competitive as in the case of public
goods (e.g breathing air) the rationale of the self-interest based market
mechanism comes under severe strain. As soon as a price is put on a
commodity, there becomes competition in the market because the issue
of demand and supply comes on board as consumers willingness to buy at a
prevailing price emerges.
The over-all success of the firm, thus, is really a public good, from which
all benefit, to which all contribute, and which is not parceled out in little
boxes of person-specific rewards strictly linked with each person's respective
contribution.
A challenge of distribution : values and incentives: It is not hard
to see that non-self-seeking motivations can be extremely important
for distributional problems in general. In dividing a cake, one person's
gain is another's loss.
At a very obvious level, the contributions that can be made by
ethics and business ethics and others include the amelioration of
misery through policies explicitly aimed at such a result. There is an
extensive literature on donations, charity, and philanthropy in general,
and also on the willingness to join in communal activities geared
towards social improvement. The connection with ethics is
obvious enough in these cases.
In conclusion, One way in which business ethics can make
economical sense is to see the improvement of society in which one
lives as a reward in itself. And secondly to use ultimately a business
criterion for improvement, but to take note of the extent to which
good business behavior could in its turn lead to favorable business
performance; this enlightened self-interest involves an indirect
reasoning.
Ethical
Decision
Making
• Eight steps in resolving ethical dilemmas and conflicts
• Applications to:
• Ethical dilemmas of managers
• Ethical dilemmas of organizations
• Theories in Ethics
 Eight steps in resolving ethical dilemmas
and conflicts
1. DETERMINE whether there is an ethical issue or/and dilemma. Is
there a conflict of values, or rights, or professional responsibilities?
(For example, there may be an issue of self-determination of an
adolescent versus the well-being of the family.)
2. IDENTIFY the key values and principles involved. What meanings
and limitations are typically attached to these competing values?
(For example, rarely is confidential information held in absolute
secrecy; however, typical decisions about access by third parties
to sensitive content should be contracted with clients.)
3. RANK the values or ethical principles which in your
professional judgement are most relevant to the issue or
dilemma. What reasons can you provide for prioritizing one
competing value/principle over another? (For example, your client's
right to choose a beneficial course of action could bring hardship or
harm to others who would be affected.)
4. Identify your resources. These can be a supervisor, special
education director, or colleague. Ask yourself if you need more
information, clarification, or ideas from others who have had a
 Eight steps in resolving ethical dilemmas
similar problem.
and
 conflicts Contd.
5. Make a list of possible actions and their positive and negative
consequences.
6.DEVELOP an action plan that is consistent with the ethical priorities that
have been determined as central to the dilemma. Have you conferred with
clients and colleagues, as appropriate, about the potential risks and
consequences of alternative courses of action? Can you support or justify your
action plan with the values/principles on which the plan is based? (For example,
have you conferred with all the necessary persons regarding the ethical
dimensions of planning for a battered wife's quest to secure secret shelter and
the implications for her teen-aged children?)
7. IMPLEMENT your plan, utilizing the most appropriate practice skills and
competencies. How will you make use of core social work skills such as
sensitive communication, skillful negotiation, and cultural competence? (For
example, skillful colleague or supervisory communication and negotiation may
enable an impaired colleague to see her/his impact on clients and to take
appropriate action.)
8. REFLECT on the outcome of this ethical decision making process. How
would you evaluate the consequences of this process for those involved:
Client(s), professional(s), and agency(ies)? (Increasingly, professionals have
begun to seek support, further professional training, and consultation through the
development of Ethics review Committees or Ethics Consultation processes.)
 Applications to ethical dilemmas of
managers
There are several instances where ethical dilemmas can be applied to managers in a
typical firm:
Conflict of Interest. A conflict of interest exists when a person must choose whether
to advance his or her own personal interests or those of others. For example, a
manager in a corporation is supposed to ensure that the company is profitable
so that its stockholder-owners receive a return on their investment.
In other words, the manager has a responsibility to investors. If she instead makes
decisions that give her more power or money but do not help the company, then
she has a conflict of interest—she is acting to benefit herself at the expense of her
company and is not fulfilling her responsibilities. To avoid conflicts of interest,
employees must be able to separate their personal financial interests from their
business dealings.
it is considered improper to give or accept bribes — payments, gifts, or special
favors intended to influence the outcome of a decision. A bribe is a conflict of
interest because it benefits an individual at the expense of an organization or
society.
Plagiarism—taking someone else’s work and presenting it as your own without
mentioning the source—is another ethical issue. For example, copying someone else’s
term paper or quoting from a published work without acknowledging it. In
business, an ethical issue arises when an employee copies reports or takes the work
or ideas of others and presents them as his or her own. A manager attempting to
take credit for a subordinate’s ideas is engaging in another type of plagiarism.
Applications to ethical dilemmas of managers
Contd.
Fairness and Honesty. Fairness and honesty are at the heart of business
ethics and relate to the general values of decision makers. At a
minimum, businesspersons are expected to follow all applicable laws and
regulations. But beyond obeying the law, they are expected not to
harm customers, employees, clients, or competitors knowingly
through deception, misrepresentation, coercion, or discrimination.
But what do we see most managers do? For example the case of
Mawako restaurant management and employee.
Business Relationships. The behavior of businesspersons toward customers,
suppliers, and others in their workplace may also generate ethical
concerns. Ethical behavior within a business involves keeping company
secrets, meeting obligations and responsibilities, and avoiding undue
pressure that may force others to act unethically.
Managers, in particular, because of the authority of their position,
have the opportunity to influence employees’ actions. For example, a
manager can influence employees to use pirated computer software to
save costs. The use of illegal software puts the employee and the
company at legal risk, but employees may feel pressured to do so
by their superior’s authority.
Application to ethical dilemmas of organizations
Ethical application to organization can also be analyzed in the following ways:
Communications. Communications is an area in which ethical concerns may
arise. False and misleading advertising, as well as deceptive personal-selling
tactics, anger consumers and can lead to the failure of a business.
Truthfulness about product safety and quality are also important to
consumers.
In the pharmaceutical industry, for example, dietary supplements, such as
herbs, are sold with limited regulation and testing, and many supplements are
sold by small, independent marketers. Some tests show that herbs, such as
ginseng, may be sold without enough of the active ingredients to be
effective.
Ethical decisions in an organization are influenced by three key factors:
individual moral standards, the influence of managers and coworkers, and the
opportunity to engage in misconduct. While you have great control over
your personal ethics outside the workplace, your coworkers and management
team exert significant control over your choices at work through authority
and example. In fact, the activities and examples set by coworkers, along
with rules and policies established by the firm, are critical in gaining
consistentethical compliance in an organization.
Application to ethical dilemmas of organizations
Contd.
If the company fails to provide good examples and direction for
appropriate conduct, confusion and conflict will develop and result
in the opportunity for misconduct. If your boss or coworkers leave
work early, you may be tempted to do so as well. If you see
coworkers making personal long-distance phone calls at work and
charging them to the company, then you may be more likely to
do so also. In addition, having sound personal values
contributes to an ethical workplace.
It is difficult for employees to determine what conduct is
acceptable within a company if the firm does not have ethics
policies and standards. And without such policies and standards,
employees may base decisions on how their peers and superiors
behave.
Professional codes of ethics are formalized rules and standards
that describe what a company expects of its employees.
 Theories in Ethics
Ethics is a branch of philosophy that, at its core, seeks to
understand and to determine how human actions can be
judged as right or wrong.
We may make ethical judgments, for example, based upon our
own experience or based upon the nature of or principles of
reason.
Those who study ethics believe that ethical decision making is based
upon theory and that these theories can be classified. What follows
is a very brief description of four classes of ethical theories (See
Garrett, Baillie, & Garrett, 2001):
1. Consequentialism
2. Kantian Deontologism (Deontology)
3. Natural Law
4. Virtue Ethics
 Theories in Ethics
1. Contd.
Consequentialism
Ethical theories that fall under the classification of consequentialism posit that
the rightness or wrongness of any action must be viewed in terms of the
consequences that the action produces. In other words, the consequences are
generally viewed according to the extent that they serve some intrinsic
good. The most common form of consequentialism is utilitarianism (social
consequentialism) which proposes that one should act in such a way to
produce the greatest good for the greatest number. E.g dying on behalf of
a group of people, a community or society.
2. Kantian Deontologism(Deontology)
Deontologism is a position based, predominately, on the work of Immanuel
Kant. Most simply, deontologism suggests that an act must be performed
because the act in some way is characterized by universality (i.e. appropriate
for everyone) or that it conforms with moral law (formal rules used for judging
the rightness or wrongness of an act). According to this theoretical position,
the rightness or wrongness of some acts are independent of the
consequences that it produces and the act may be good or evil in and of
itself. The outcome of an act cannot be judged by the act itself. E.g copying
in exams hall to get good grades/ studying to get good grades but got bad
grades.
3. Natural Law
This theoretical position suggests that one may, through rational reflection on
nature (especially human nature), discover principles of good and bad that can guide
our actions in such a way that we will move toward human fulfillment or flourishing.
This position suggests that human beings have the capacity within themselves for
actualizing their potential. E.g becoming what you want to be in future based on
your innate abilities and strive.
4. Virtue Ethics
Virtue ethics consists of two differing approaches to ethics. Very briefly, the first
approach to ethics in this theoretical orientation proposes that there are certain
dispositional character traits (virtues) that are appropriate and praiseworthy in
general and or in a particular role. More formally, virtue ethics represents a
"systematic formulation of the traits of character that make human behavior
praiseworthy or blameworthy" (Shelp, 1985, p.330).
The second approach to virtue ethics not only identifies the virtues, but focuses on
their integration into what can be described as "practical wisdom" or "right reason."
Practical wisdom is the phrase used to describe ones ability to choose patterns of
actions that are desirable. These patterns of actions are informed by reasoning that is,
in part, influenced by habits of emotional experience or virtues (Baillie, 1988), but
also by the depth and breath of experience available to the human being as he
or she is placed in society.
Virtue: according to moral principles.
 CASE STUDY – THE Bhopal Tragedy
1. Identify the damage that the methyl isocyanate gas leak caused to
the people of Bhopal (India) in December 1984.
2. Outline some of the interventions Union Carbide, India put in
place to remedy/alleviate the Bhopal tragedy in 1984. Were the
interventions enough?
3. Six years before DOW acquired Union Carbide, certain
interventions were put in place by Ever ready Industries India Ltd.
(EIIL) who also bought carbide shares. Outline these
interventions.
4. After DOW’s acquisition of the Union Carbide Shares, what role can
they play as part of their corporate social responsibility to the people
of India to address some of their needs?
5. Identify some of the present day needs in India and outline them.
(Read further on Indian economy)
6. Infer from the case and suggest some of the preventive measures
DOW can put in place to prevent this kind of tragedy from
happening again in the future.
Corporate Social
Responsibilities
• CSR as an ethical responsibility of business towards society
• Responsive VS strategic CSR choosing the right CSR
initiatives to create shared social and business value
• Implementing, evaluating and scaling up CSR to maximize
shared value
CSR as an ethical responsibility of business towards
society
What is CSR?
The continuing commitment by business to behave ethically and
contribute to economic development while improving the quality
of life of the workforce and their families as well as of the local
community and society at large.
CSR is also responsibility of a company for the impacts of its
decisions and activities on society and the environment through
transparent and ethical behavior that contributes to the sustainable
development, health and welfare of society; takes into account the
expectation of stakeholders is in compliance with applicable law; is
consistent with international norms of behavior; and is integrated
throughout the company.
CSR means that corporations/firms should be held accountable for
any of its actions that affects people, their communities, and their
environment.
It may require a company to forgo some profits if its social impacts
seriously hurt some of its stakeholders or if its funds can be used to
have a positive social impact.
 CSR as an ethical responsibility contd.
What is Ethical CSR?
This is the legal and ethical requirements that businesses must fulfil. This
is the ‘cover your back’ aspect of CSR and failure to address these
requirements can result in a loss of reputation, Or even worse,
legal prosecution. Large companies are advised to have a
specialist CSR department to keep on top of legal requirements, lack of
knowledge is never a defense in court of law. There are strict laws
regarding working conditions for employees, and environmental laws
regarding sourcing materials, emissions and so forth.
• It is a morally mandatory fulfillment of a firm’s economic responsibilities,
legal responsibilities and ethical responsibilities (Lantos, 2001). Hence a
firm is morally responsible to any individuals or groups where it
might inflict actual or potential injury (physical, mental, economic,
spiritual and emotional) from a particular course of action.
 Responsive VS strategic CSR
Responsive CSR and Strategic CSR
Since the 1990s, companies worldwide have begun to invest in various
CSR programmes to improve their relationships with society and the
environment— not only because they want to be good corporate citizens but
also because they believe doing so is good for business.
Responsive CSR involves acting as a good corporate citizen, satisfying the
evolving needs of stakeholders, and mitigating existing or potential adverse
effects of organizational activities.
Strategic CSR moves beyond Responsive CSR and directs organizational
resources and managerial attention to initiate and operationalize CSR agendas
that are consistent with firms’ strategies and are able to differentiate
themselves from their competitors, resulting in strengthened strategic
positions.
Whereas Responsive CSR depends on being a good corporate citizen and
addressing the social risks that a business faces, Strategic CSR is more
selective and dynamic. A firm’s selection of appropriate Strategic CSR
initiatives entails a thorough understanding of its competitive position and
an examination of its capacities to benefit society. Strategic CSR initiatives
must move beyond simply addressing a standardized checklist of stakeholder
expectations and social risks and must enable the firm to differentiate
itself and obtain a competitive advantage.
 Implementing, evaluating and scaling up CSR
to
maximize
The following factors have to be consideredshared
up CSR for maximum profit:.
value
when implementing , evaluating and scaling

1. Link CSR to the company’s core purpose

According to Peter Drucker, successful companies have a reason-for-being (mission) beyond
making money, and the strategy must connect to it. Therefore core business of the
organization should be the stimulus for finding a valuable CSR strategy. CSR efforts
should be linked to the organization’s core business. Though critics might criticize the
approach as a marketing ploy, a company must be profitable from being a good
corporate citizen, to become a better citizen (from Carroll’s CSR pyramid). By doing what
they do best to meet society’s needs each of these companies create shared value for
their business and society.
2. Insist on profitability
CSR should focus on business value, not philanthropy or cause marketing. The company
needs to think carefully about how CSR can create value for its business for the
shareholders, meet the challenge of a specific societal need, and create shared value
by acting in its own best interests. This way, the company would be perceived to operating
within the ethical dimension of CSR (CSR pyramid). Therefore, the CSR effort should be
profitable in the judgement of senior leadership. The guiding principle is that a good
corporate responsibility strategy is about how to make money, not give it away.
3. Understand customers
Understand the diversity among customers, and base conclusions on
corporate biases to perceive the customers. Customers are usually not
willing to trade-off the main promise of a product and/or a service; rather
they expect a great product that is sustainable. An effective sustainability
strategy integrates the customer, society and the business and it does not
compromise them.
4. Focus on the right issues
CSR and sustainability apply to a wide range of issues. Studies show that
environmental and poverty-alleviation issues are more strategically relevant
in Ghana than those associated with local economic opportunity and
philanthropic activities which most companies focus their CR efforts.
5. Employee engagement, collaboration and innovation
A good strategically crafted CSR helps employee engagement, collaboration
and innovation.
Ethical Stances of Organizations
Socially obstructive
Prioritising short-term shareholder interests
Avoids highly regulated business locations, lobby to change laws
Socially obligative
Prioritising longer-term shareholder
interests Comply with laws
Socially responsive
Balancing multiple stakeholder obligations
Pay attention to pressure groups, use CSR to build competitive advantage
Socially contributive
Seeking to shape society
Promoting sustainability and locally led economic development
Evaluating Corporate Responsibility

The Pyramid of CSR

Archie Carroll (1991)
Organisations and Ethical Choice
Key question…
Should a business prioritise shareholder value or
stakeholder needs?

Shareholders own the business

 Primarily for financial gain

Stakeholders are affected by the decisions and operational activities of

the business
 Financial, non-financial and personal benefits

The social contract between business and society is

constantly evolving... (Waddock 2010)
The CSR Debate moves on…
The early message ‘doing well by doing good’
CSR imposes political functions of govt on corporate executives
CSR has failed to create the good society – expecting too much from business
Close adherence to CSR agenda leads to falling profits
Difficulty in allocating rights responsibilities and enforcing them – who
decides?
Stakeholder theory the way forward – CA through building superior
relationships.
 Good CSR manages the paradox of profitability & responsibility

Jury is still out – you decide!

Corporate Culture,
Governance, and
Ethical Leadership
 Corporate culture
Corporate culture is the culmination of the shared values, beliefs,
and assumptions that shape the behavior of the organization—
the “unwritten rules” that guide the thousands of decisions
employees make throughout the company every day.
The concept of culture is the climate and practices that
organizations develop around their handling of people (Schein,
2004).
Some corporate culture can be found in workforce attitudes,
behavioral preferences, and the work environment including
structure, physical artefacts, slogans, company attire,
language, symbols, celebrations and communication
channels.
“Organizational culture may also be visible in the type of
buildings, offices, shops of the organization and in the image
 Corporate culture
projected in publicity and public relations in general.
Google Inc. (GOOGL) is a company that is well-known for its
employee-friendly corporate culture.
It explicitly defines itself as unconventional and offers perks
such as telecommuting, flextime, tuition reimbursement, free
employee lunches, on-site doctors and, at its corporate
headquarters in Moutain View, Calif., on-site services like oil
changes, massages, fitness classes, car washes and a hair
stylist.
Google's corporate culture has helped it to consistently earn a
high ranking on Fortune magazine's list of 100 best companies to
work for.
Culture and leadership are intertwined so far as organizations
are concerned. This take us to the concept of governance.
Corporate Governance
Definitions…

 The way in which organizations are directed and controlled

Cadbury (1992)

 The process by which corporations are made responsive to

the rights and wishes of stakeholders
Demb and Neubauer (1992)
Corporate Governance
The Growth of Modern
Corporations The ‘Agency
Problem’

 The agency problem arises because of the separation

between ownership of an organization and its control

 The agency problem is inherent in the relationship

between the providers of capital, referred to as the
‘principal’, and those who employ that capital, referred
to as the ‘agent’.
 (Jensen & Meckling 1976)

The ‘Agency Problem’

 Agency problems occur because no contract, however precisely drawn,
can possibly take account of every conceivable action that an agent may
engage in

 How do you ensure that the agent will always act in the best interest of
the
principal?

 ‘Agency costs’ occur where there is a divergence between these interests

Hence original purpose of Board of Directors
How are such issues addressed?
Directors Roles &
Responsibilities
BusinessWeek’s ‘Principles of Good Governance’

 No more than 2 directors are current or former company executives

 No directors do business with the company
 Each director owns a large equity stake in the company
 At least one outside director with extensive experience
 Each director attends at least 75% of all meetings
 Board is frugal on executive pay, diligent in CEO succession, and
prompt to act when trouble arises
 CEO is not also the chairperson of the board
 Shareholders have considerable power and information to
choose & replace directors
Corporate Governance &
CSR?
The Purpose of Corporations?
To maximise shareholder value

‘In a free enterprise, private property system, a corporate

executive is an employee of the owners of the business. He
has direct responsibility to his employers. That responsibility is to
conduct the business in accordance with their desires, which
generally will be to make as much money as possible…’
Milton Friedman (1970)
Corporate Governance & CSR
The Debate…
The Purpose of Corporations?
To meet the needs of stakeholders

Stakeholders are individuals or groups that affect or are affected by

the achievement of an organization’s objectives

Edward Freeman (1984)

eg., shareholders, customers, suppliers, employees,

government, local community, media…
 Corporate Governance
Corporate governance is, “the framework of rules, relationships, systems and
processes within and by which authority is exercised and controlled in
corporations.
Cadbury Report in 1992, defined Corporate governance as the system by
which companies are directed and controlled.
It encompasses the mechanisms by which companies, and those in
control/position, are held to account.
Corporate governance influences how the objectives of the company are set
and achieved, how risk is monitored and assessed, and how performance
is optimized.
Effective corporate governance structures encourage companies to create
value, through entrepreneurialism, innovation, development and exploration,
and provide accountability and control systems.
Principles of corporate governance
Fundamental to any corporate governance structure is establishing the roles
of the board and senior executives.
 Corporate Governance Contd.
There is a basic need for integrity among those who can influence a company’s
strategy and financial performance, together with responsible and ethical decision-
making which takes into account not only legal obligations but also the interests of
stakeholders.
The rights of company owners, that is shareholders, need to be clearly recognized
and upheld.
Companies should make relevant, timely disclosures on matters affecting financial
performance, management and ownership of the business.
Every business decision has an element of uncertainty and carries a risk that can
be managed through effective oversight and internal control.
Rewards are also needed to attract the skills required to achieve the performance
expected by shareholders.
Key notes
It is important to recognize that effective corporate governance relies to some extent
on compliance with laws, but being fully compliant does not necessarily mean that
a company is adopting sound corporate governance practices.
For example Maxwell Communications plc collapsed because of the concentration
of power in the hands of one individual and the company borrowing from its
pension fund in order to achieve leveraged growth.
 Corporate Governance consists of two (2) element:
1.The long term relationship which has to deal with checks and balances,
incentives for manager and communications between management and investors;
2.The transactional relationship which involves dealing with disclosure and
authority.
Importance of corporate governance
1. Good Corporate Governance ensures that the business environment is fair
and
transparent and that companies can be held accountable for their actions.
2. Conversely, weak Corporate Governance leads to waste, mismanagement, and
corruption.
It is also important to remember that although Corporate Governance
has emerged as a way to manage modern joint stock corporations it is
equally significant in state owned enterprises, cooperatives, and family
businesses.
Regardless of the type of venture, only Good Governance can deliver
sustainable
Good Business Performance and good business ethics.
 Ethical Leadership
Leadership is defined as the process of influencing others to achieve
goals.
Ethical leadership is defined as the process of influencing people
through principles, values and beliefs that embrace what we have
defined as right behavior.
Here is an example of an ethical leader: Susan is the director
of an organization that provides services to people who are homeless.
One day several boxes of stylish new sweaters are donated to the
organization from a popular clothing store. The staff is very excited and
starts sorting through the clothes and trying on different sweaters.
An unethical leader will allow herself and the staff to select what
they want from the boxes before making them available to
clients.
An ethical leader reminds everyone, including herself, that the
donations were intended for clients and makes the sweaters
immediately available to the people they serve.
 Ethical Leadership
Contd.leader:
Qualities of an ethical
1. Ethical leaders Respect Others: Philosopher Immanuel Kant (1724-
1804) argued that it is our duty to treat others with respect. To do
so means always to treat others as ends in themselves and never as
means to ends. Leaders who respect others also allow them to be
themselves, with creative wants and desires. They approach other
people with a sense of their unconditional worth and valuable
individual differences (Kitchener, 1984). Respect includes giving
credence to others’ ideas and confirming them as human beings.
2. Ethical Leaders Serve Others: A number of ethical theories emphasize
a concern for the interests of others (ethical altruism). The
service principle clearly is an example of altruism. Leaders who
serve are altruistic: they place their followers’ welfare foremost in
their plans. In the workplace, altruistic service behavior can be
observed in activities such as mentoring, empowerment behaviors,
team building, and citizenship behaviors, to name a few (Kanungo
& Mendonca, 1996).
Qualities of an ethical leader:
3.Ethical Leaders Are Just: Ethical leaders are concerned about issues of fairness
and justice. They make it a top priority to treat all of their subordinates in an
equal manner. Justice demands that leaders place issues of fairness at the
center of their decision making. As a rule, no one should receive special
treatment or special consideration except when his or her particular
situation demands it. When individuals are treated differently, the grounds
for different treatment must be clear and reasonable, and must be based
on moral values.
4. Ethical Leaders Are Honest: To be good meant we must be truthful. For
leaders the lesson is the same: To be a good leader, one must be honest. The
importance of being honest can be understood more clearly when we
consider the opposite of honesty: dishonesty (Jaksa & Pritchard, 1988).
Dishonesty is a form of lying, a way of misrepresenting reality.
5. Ethical Leaders Build Community: Leadership is a process whereby a person
influences a group of individuals to achieve a common goal. An ethical leader
takes into account the purposes of everyone involved in the group and is
attentive to the interests of the community and the culture. Such a leader
demonstrates an ethic of caring toward others (Gilligan, 1982) and does not
force others or ignore the intentions of others (Bass & Steidlmeier, 1999).
Functional Area
Applications
of Business
Ethics
• Ethics in finance and accounting
• Ethics in marketing and advertising
• Ethics in human resource management
• Ethics in governance and leadership
 Ethics in finance and accounting
Accounting is the process through which any business keeps track of its financial
activities by recording its Debits and Credits and balancing its accounts.
The financial scandals raised in the recent times were characteristics of deeper
problems and identified that improvement of ethical standards, adequacy of
financial management, reporting mechanisms, audit quality and strengthening of
governance regimes as means to improve public confidence in financial reporting.
The accounting profession has a responsibility towards these areas, whose deficiencies
have led to corporate scandals and collapses. Hence, today, ethical conduct of
accounting and finance has become a topical issue.
For accounting and finance professionals it is extremely important to be ethical in
their practices due to the very nature of their profession.
The nature of accountants‘ work puts them in a special position of trust in relation
to their clients, employers and general public, who rely on their professional judgment
and guidance in making decisions.
Ensuring highest ethical standards is important to a public accountant‘ (one who
renders professional services such as assurance and taxation service to clients for a
fee) as well as to an accountant in business‘ (one who is employed in a private
or public sector organization for a salary).
Both public accountants‘ and accountants in business‘ are in a fiduciary relationship,
former with the client and latter with the employer.
 Ethics in finance and accounting
In such aContd.
relationship, they have the responsibility to ensure that their duties
are performed in conformity with the ethical values of honesty, integrity,
objectivity, due care, confidentiality, and the commitment to the public
interest before one‘s own.
Thus, accountants, as professionals, are expected to maintain a level of ethical
conduct that goes beyond society‘s laws. This has made the professional
accounting bodies to develop a code of professional conduct, which sets rules
or standards that define right from wrong to ensure that members‘
behavior complies with perceived public expectations of ethical
standards.
However, in recent times accountants‘ involved with large corporate
scandals shows that they have not complied with the expected ethical
standards.
It is argued that accountants‘ focus too much on technical issues and lack
ethical sensitivity to recognize ethical dilemmas involved with their work,
which would ultimately lead to making wrong decisions.
Thus, accountants should be trained to be sensitive to identify the moral
dimension of seemingly technical issues.
Ethical issues in accounting:
Underreporting Income: Under-reporting income in order to avoid taxes is
an illegal practice. When people under report their incomes, the federal
government loses tax revenue that could go towards social security,
Medicare and other federal projects. Corporations are especially watched by
auditors because of the large tax bills at stake each tax year. If caught under
reporting, individuals and companies will be subject to penalties and, in
extreme cases, criminal charges.
Falsifying Document: Falsification of Documents is to change details on the
original document and try to pass them off as real. Some types of documents
that are commonly falsified may include: Tax returns and income
statements, Personal checks, Bank account records, Business record
keeping books, Immigration documents (such as visas, passports, etc.),
Identification cards and birth certificates.
Many different types of acts can be considered as falsifying a document,
including: Altering or misrepresenting factual information such as prices
or monetary amounts, Stating false information when requested to provide
truthful statements, Forging a signature, Using official letterheads without
authorization, Concealing assets or property (especially in bankruptcy
proceedings), Knowingly using or distributing a fake document.
Ethical issues in accounting:
Again, a person can only be held criminally liable if they are acting with
the intention of deceiving or defrauding another party.
Falsifying documents is a very serious offense and is generally classified
as a felony. This means that a person charged with falsifying documents
may be subject to the following legal penalties:
• Having to pay a monetary fine
• Incarceration in a prison facility
Creative accounting: Accounting practices that follow required laws
and regulations, but deviate from what those standards intend to
accomplish. Creative accounting capitalizes on loopholes in the
accounting standards to falsely portray a better image of the
company.
When firms indulge in creative accounting they often distort the
value of the information that their financials provide. Creative
accounting can be used to manage earnings and to keep debt off
the balance sheet.
Ethical issues in finance:
Insider trading: “Insider trading” is a term that most investors have heard and usually
associate with illegal conduct. But the term actually includes both legal and illegal
conduct. The legal version is when corporate insiders—officers, directors, and
employees—buy and sell stock in their own companies. Illegal insider trading
refers generally to buying or selling a security, in breach of a fiduciary duty or other
relationship of trust and confidence, while in possession of material, non-public
information about the security. Insider trading violations may also include
“tipping” such information, securities trading by the person “tipped,” and
securities trading by those who misappropriate such information.
Campaign financing: Campaign finance refers to all funds raised in order to
promote candidates, political parties, or policies in elections, referendums,
initiatives, party activities, and party organizations. The funds could also detract from
the opponents of the above. Campaign funds are the subject heading under which all
books dealing with money in politics are catalogued by the Library of Congress.
The above Issues can be prevented through: GAAP (generally accepted
accounting principles) GAAP for short of Generally accepted accounting principles,
are the accounting rules used to prepare and standardize the reporting of financial
statements, such as balance sheets, income statements and cash flow statements, for
publicly traded companies and many private companies.
 Ethics in marketing and
Over the advertising
years advertising and marketing communication messages have
created a lot of debatable ethical issues, due to the public belief that
advertisements nowadays deeply affect the way people perceive
themselves and the world surrounding them, including crucial actions
and behaviors.
Ethics issues in marketing are important, given the fact that marketing
is expected to identify, predict and satisfy customer requirements
profitably.
There exist several controversial moments in marketing that could be
offensive or which could cause unexpected negative influence on
costumers.
Sex appeal can be defined as brand information in advertising contexts or as
persuasive appeals in marketing contexts, which are integrated with
sexual information, also as the degree of nudity or sexual explicitness in
an advertisement.
 Decorative models are used to add a sexual stimulus to a product
despite its irrelevance. Sex appeal is used to form some kind of brand
awareness, using the shock technique.
Such techniques are intentional and are meant to be controversial to grab
more attention, increasing the viewer’s interest to follow the
 Ethics in marketing and
advertisement, to eventually create the desired brand awareness and
advertising
enhance persuasion.
 Ethics in marketing and advertising
Contd. advertising is designed to stimulate one's emotions, rather
The emotional
than one's sense of the practical or impractical.
Using of emotional appeal in advertising intended for the consumer's
psychological, social, or emotional needs.
The emotional advertisement is written to arouse fear, love, hate, greed,
humor, or otherwise create psychological tension that can best be resolved by
purchase of the product or service.
 Western union, for instance, used this technique to convey the concepts of
trust
and reliability.
MasterCard has used this approach for one of its most successful
advertisements with the slogan “there are some things money can’t buy, for
everything else there is MasterCard’.
 Emotional advertisements are very popular and can be used creatively for
almost
anything.
For that reason there is a great ethical debate about this appeal, since it
can sometimes exploit the audience’s emotions, leading to the purchase
of the product that they might have not needed, or a product that would
 Ethics in marketing and advertising
eventually harm them.
Contd.
Ethics in advertising and marketing:
Should not mislead the consumer
What it promises must be there in the performance of products
Ad should not be indecent and obscene
As advertising is also a social process, it must honor the norms of social behavior, and should
not offend our moral sense
It has the set guidelines ASCI (Advertising Standards Council of India) regulates the
advertising in India.
Ethical issues in advertising and marketing:
Advertising is a highly visible business activity and any lapse in ethical standards can often be
risky for the company. Some of the common examples of ethical issues in advertising are
given below:
• Vulgarity / Obscenity used to gain consumers’ attention
• Misleading information and deception
• Puffery (extreme exaggerating)
• Stereotypes
• Racial issues
• Controversial products (e.g. alcohol, gambling, tobacco etc)
 Ethics in human resource
HRM ismanagement
the process of organizing, directing and controlling human
activities to achieve the organizational goals and individual goals.
Ethics in human resource management indicates the treatment of
employees with ordinary decency and distributive justice. The
ethical business contributes to the business goals as the employee
will feel motivated and they will work with efficiency and
effectiveness.
Ethics in HRM generally deals with the affirmative moral obligations of
the employer towards employees to maintain equality and equity
justice.
Areas of HRM ethics
Basic human rights, civil and employment rights (e.g job security,
feedback from tests)
Safety at the workplace
Privacy
Justifiable treatment to employees (e,g equity and equal opportunity)
Respect, fairness and honesty based process in the workplace.
 Ethics in human resource management
Contd.
The role of HR in promoting Ethics:
1.Improve recruitment and selection tests:
Follow the recruitment policy that is
identification of the recruitment
needs, monetary aspects, criteria of selection and preference.
Follow the situational factors such as
economic factors, social factors,
technological factors
Selection must be in planned manner
Avoid illegal questions
2.Conduct ethics training
It is a short term process of training given to the HR of the
organization to do their work in adherence to the ethical code of
conduct. The main advantages are increased productivity, Higher
employee morale, less supervision, less wastage e.tc.
3.Ensure that there are no pitfalls in performance appraisal.
 Unethical practices in HRM
Employers:
• Exploitingcheap labour market
• Creating split in union
• Child labour
• Physical violence
• Longer and inflexibleworking hours
• Coercion
• Putting more stress on employees for increased productivity.
Employees:
False claims of personal details like age, qualification e.tc.
Producing false certificate
Taking decisions as per their convenience
Government:
• Announcingthe vacancies and not taking any actions further
• Functioning of Government offices not transparent and reliable
• Reservation quotas by selection commitees.
 Ethics in governance and leadership
Ethics is very critical in governance and leadership in any organizational setting.
Leadership demands ethics because of the responsibilities it shoulders. Bowman (2008)
noted that ethics is the key to the flourishing of democracy and its
administration.
Those in leadership positions in a democratic government and, in fact, in all forms
of government need to be ethical as they pilot the affairs of their organizations or
societies.
Those in a leadership role, to a greater extent, play a part in determining the
moral quality of their followers. Their behavior influence can positively or negatively
impact the moral fiber of the society (Kanungo & Mendonca, 1996, p. 6).
He noted that such influence has a great ethical burden and responsibility.
They noted that leaders do more than physical harm any time their actions and
behavior fail to be in congruence with the shared moral values.
Effective organizational leaders need ethics as fish need water and human beings need
air”.
Good governance in third world countries, as in other corners of the world, hinges
“on many factors such as sound leadership, encouraging grassroots participation
in the governing process, accountability and transparency of government, among
others”.
Such sound leadership could only be guaranteed by men and women of moral
integrity who understand the importance and the role of ethics and practice in the
leadership process toward achievement of the common good.
Ethics in Global
Business
Environment
 Ethics in Global Business Environment
Business is about making goods and services that people are willing and
able to buy. It achieves this by combining natural resources, financial,
social and physical capital, and people’s competencies, insights, and
energies.
Businesses, or the people that run, work in, buy from, and own them,
find themselves making ethical decisions every day.
How to treat a job applicant who is disabled or pregnant, how to pay
their suppliers quickly, and where to invest in new facilities or close
down financially unattractive bits of the business.
More often the ethics of business concern the daily millions of decisions
and actions that every business stakeholder makes. Ethics is an integral
part of day-to-day business; the question is how it is played out in
practice.
Certainly most businesses do indeed seek to earn a financial return on
their investments. In finding General Electric to be the world’s most
respected company, a Financial Times survey concluded:
 Ethics in Global Business Environment
It Contd.
is not hard to see why General Electric is so widely
respected...few companies have ever created so much wealth for
their shareholders in so short a period...The company had a
market capitalization of less than $20 bn when Jack Welch took
over as chairman in 1981: last month, as share prices recovered
from their early autumn swoon, it topped $300 bn. “A
phenomenal return to shareholders,” as another respondent put
it.
Financial returns to capital are, however, by no means the sole or
even necessarily the most central aim of business owners and
leaders.
First, is the large number of “business vehicles” designed specifically
to deliver social and environmental “goods.” Cooperatives, for
example, do business on behalf of over 150 million members
worldwide. Many of these were initiated to provide affordable
 Ethics in Global Business Environment
andContd.
high quality goods and services to their, largely lower
income, members.
Second, is the burgeoning nonprofit sector comprising an extraordinary
assortment of organizations designed to deliver social and environmental
benefits. Increasingly this sector includes many enterprises providing goods
and services. The measured financial income flows through this sector in most
developed countries amount to anything up to 3–5% of gross domestic product
(GDP). The voluntary sector is one of the most rapidly growing parts of many
economies as we enter the new millennium.
Third, are the millions of small businesses that are vehicles for securing the
independent livelihood of the families that initiate, own, and run them.
Financial rewards are of course important to these families, but a traditional
cost–benefit analysis that factors in their enormous and often poorly-paid
“sweat equity” would quickly reveal that there must be other “returns”
for the enterprises to be worthwhile.
Fourth, are the growing number of “new social partnerships” that combine
the resources of businesses, not-for-profit organizations, and governments.
Here we find that businesses are in part seeking financial returns from their
involvement in partnerships that have at their core social and
environmental aims.
Business ethics needs to be understood in this broader context. Business ethics
is too often taken to be about the unusual company, the visionary leader,
the organization that is somehow “more than” a business.
The realm of ethics is where people have some degree of choice in how they
are to handle dilemmas and take actions that will affect both themselves and
others. The question therefore is should businesses have ethics” since it
frames the matter of ethics as somehow a deviation from “normal”
business behavior.
Certainly inspired leadership plays a role in those enterprises that are
notable in their social and environmental responsibility.
Today’s businesses are faced with the particular pressures that arise from
the current pattern of globalization. Deeply rooted social and cultural norms
that have for generations, or centuries, guided business in defining what
practices are or are not acceptable are being eroded. This is as true for
companies in Jakarta as it is for those in London, large and small.
For larger companies, particularly those with publicly traded shares, the
pressure to constantly enhance shareholder value creates downward pressure
on costs and ever-sharper marketing that penetrates what were previously the
private areas of, for example, family and child and youth development.
Smaller companies find themselves swept along in increasingly globalized
markets, constantly in danger of being absorbed by larger players
(like hostile take-overs, merger and acquisitions), or of being
stripped of and ousted from their markets by these larger players.
This creates pressure to cut costs and can lead to a “race for the
floor” in social and environmental standards practices.
Bribery, corruption, worker abuse, and damage to the environment
are not merely the playing out of bad habits and tradition, as some
would claim.
These traits of business practice are in part the inappropriate but
understandable responses to market pressures.
Yet the pressures of globalization should not be caricatured as
necessarily making business less ethical. Indeed, many do argue that
“open markets” raise the ethical playing field when it comes to some
aspects of business behavior and outcomes.