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 Contd.
But then also 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 Values & Ethics Contd.
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.
 Why does Ethics Matter in Business? Contd.
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?).
 Why does Ethics Matter in Business? Contd.
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.
 Why Use Ethical Reasoning in Business? Contd.
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. Systemic
Ethical questions about the social, political, legal, or economic systems
within which companies operate.
2. Corporate
Ethical questions about a particular corporation/company and its
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.?
Organization and exchange: rules and trust: The concern of the different
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.)
Does business ethics make economic sense Contd.?
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.
Does business ethics make economic sense Contd.?
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 similar problem.
 Eight steps in resolving ethical dilemmas 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 consistent ethical 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 Contd.
1. 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.
 Theories in Ethics Contd.
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 shared value
The following factors have to be considered when implementing , evaluating and scaling up
CSR for maximum profit:.
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.
 Implementing, evaluating and scaling up CSR to
maximize shared value
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 projected in
publicity and public relations in general.
 Corporate culture
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’.
Corporate Governance
(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 Contd.
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.
Qualities of an ethical leader:
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).
 Ethical Leadership Contd.
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 Contd.
In such a 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.
 Ethics in finance and accounting Contd.
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.
 Ethics in finance and accounting Contd.
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.
 Ethics in finance and accounting Contd.
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 advertising
Over the 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 advertisement, to
eventually create the desired brand awareness and enhance persuasion.
 Ethics in marketing and advertising Contd.
The emotional advertising is designed to stimulate one's emotions, rather 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 eventually
harm them.
 Ethics in marketing and advertising 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 management
HRM is 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.
 Ethics in human resource management Contd.
 Unethical practices in HRM
Employers:
• Exploiting cheap labour market
• Creating split in union
• Child labour
• Physical violence
• Longer and inflexible working 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:
• Announcing the 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 Contd.
It 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 and high quality goods
and services to their, largely lower income, members.
 Ethics in Global Business Environment Contd.
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.
 Ethics in Global Business Environment Contd.
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.
 Ethics in Global Business Environment Contd.
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.