BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY

RECIPROCITY – A STUDY OF SELECTED COMPANIES

Authors: Rhea Pereira1, Vidisha Bhat2, Dr V. Basil Hans3

1
Student of Final M. Com
Email: rheapereira98@gmail.com
Mob No: 9972150815
St Aloysius Evening College, Mangaluru-575003
2
Student of Final M. Com
Email: bhat.vidisha97@gmail.com
Mob No: 9483206442
St Aloysius Evening College, Mangaluru- 575003
3 Associate Professor & HOD of Economics, St Aloysius Evening College, Mangaluru-
575003
Email: vhans2011@gmail.com
Mob No: 9845237602

This is the revised version of the paper presented by the first and second authors in ANVESHAN, the National
Seminar on Transforming India: Issues and Challenges, Besant Evening College, Mangalore on 15th February
2020.

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Abstract

The concept of business ethics and CSR has been developed or adopted widely by the
business/companies in the recent years and it has its specific impact on the development of the
country and also the welfare of the organisations. The prominent reciprocal benefits that
these two concepts can bring needs to be studied. The thought behind these two concepts is to
show some responsibilities of the company towards the society, by uplifting the morals of the
members of the company and around the company. Here the company not only focuses on the
profit but also takes measures to invest for the betterment of the society. The paper addresses
the concept of business ethics and CSR in the context in relation to selected diverse companies
based on the perspectives of the employees working in the companies. We examined if and
how the surveyed companies implemented the ethical code in their business practice; and
what benefits flowed there from. The second question assayed if the implementation of CSR
brought about any significant change in the business turnover. The results show that business
ethics and CSR are very important for the organisations’ growth and success. Specifically
they consider business ethics to lead benefit to employees, customers and societal
relationship, along with better goodwill and reputation and can generate customer loyalty. A
firm and good customer relation can be framed to benefit the company that considers itself
responsible for the development of the society. Inferences of findings and research are finally
drawn.
Keywords: Business ethics, customer loyalty, CSR, ethical code, reciprocity

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 1. INTRODUCTION
Globalisation undoubtedly has increased and distributed prosperity among the nations which
was suffering heavy economic hit backs after the 2nd world war. In 1991 when India witnessed
the major economic reform it was our private sector who largely benefitted. Also the doors for
corporate and other service oriented sectors were opened and became the highest benefitted
personals till date. Due to this our companies earmarked greater economic growth and hereby
increasing their net worth and emphasized the need of BUSINESS ETHICS which are
considered as a set of moral principles and code of conduct which people in an organisation
are expected to do. The ethical investment along with philanthropist approach was held as

2. CORPORATE SOCIAL RESPONSIBILTY

Our government recognised the benefits arising from the admixture of business ethics and
corporate social responsibility (CSR) and made separate provisions under sec 135 of
companies’ act 2013. CSR was 1st addressed by our former Prime Minister Dr Manmohan
Singh in the annual general meeting of industry body CII. He said that it is not just the
responsibility and duty of government for making developmental activities but also of the
corporate entities as well, who are one of the major financial beneficiaries from the society
and it is the moral obligation on the part of corporations to the same to society.
This paper explains the concepts of ethical behaviour and CSR which is believed to bring
about significant changes in both corporations and society. This concept perceives that better
public image and reputation plays a major role for market sustainability, greater customer
loyalty, and strong and healthy community relations. With this idea our paper draws
inferences on how business turnover and market sustainability is affected by following ethical
conduct and CSR.

3. IMPORTANCE OF BUSINESS ETHICS AND CORPORATE SOCIAL

RESPONSIBILITY
1. Build Customer Loyalty: A loyal customer base is one of the keys to long range
business success. If consumers believe they have been unfairly, such as being
overcharged, there will not be repeat customers. Also a company’s reputation for
ethical behaviour can help it create a more positive image in the marketplace, which
can bring in new customers through word of mouth referrals. Conversely, a reputation
for unethical dealings hurts the company’s chances to obtain new customers.

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 Dissatisfied customers can quickly disseminate information about experiences with the
company. (www.eajournals.org)

2. Discretionary Responsibility: Here one of the main purposes to engage oneself in

CSR activity is to contribute to the community and maintain a consistent status of
being a good corporate citizen. (ukessays .com)

3. Retain Good Employees: Talented individuals at all levels of an organization want to

be compensated fairly for work and dedication. Companies who are fair and open in
their dealings with employees have a better chance of retaining the most talented
people.(www.eajournals.org )

4. Ethical Responsibility: Every employer and employee has a professional obligation

to behave ethically. The main idea behind ethical responsibility is to do what is right
and avoid harm. ( ukessays.com)

5. Avoid Legal Problems: It can be tempting for a company’s management to cut

corners in pursuit of profit, such as not fully complying with environmental
regulations or labour laws, ignoring worker safety hazards or using sun-standard
materials in their products. The penalties if caught can be severe, including legal fees
and fines or sanctions by governmental agencies. The resulting negative publicity can
cause long range damage to the company’s reputation that can be even more costly
than the legal fees or fines.(www.eajournals.org)

6. Giving Justice: The general purpose and idea behind conducting CSR and ethical
code of conduct is to bring justice to all and it should appear that justice given is due.
(yourarticlelibrary.com)

7. Legal And Economic Responsibility: Every entity has a deemed obligation and
responsibility to obey the law and be profitable so that it should be helpful for uplifting
our GDP and national income and be more productive towards economy and society as
whole. ( ukessays.com )

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 4. ADVANTAGES OF BUSINESS ETHICS AND CSR RELATED TO
COMPANIES
1. Improved public image
2. Increased brand awareness and recognition
3. Cost savings
4. Advantage over competitors
5. Greater employee and customer engagement
6. Benefits to the employees
7. Greater working environment
8. Effective and efficient management.

5. LITERATURE REVIEW
Business ethics and CSR are often used to refer to the same business activity. Basically, the term
“business ethics” comprises two words: “business” and “ethics,” which cover the areas of moral
principles, beliefs, values, culture, governance issues and a code of conduct for business (Dimitriades,
2007).

It is widely believed that business ethics are essential for today’s managers. As Jamnik (2011) claims,
“managers face ethical issues at work every day. It is rare for their decision not to concern the ethical
aspects”. There are various definitions of ethics in business in the literature, but the vast majority of
them focus on the righteous actions undertaken by the managers and employees of the organization
(De Cremer, van Dick, Tenbrunsel, Pillutla, & Muringhan, 2011). Generally, it can be stated that
business ethics scrutinize the set of moral values, believes and norms, principles and standards that
define and curb the behavior of participants in business at all levels of economic life.

Ethical issues arise in every industry. The fundamental ethical requirement of financial markets is that
they may be fair. Fairness may be defined either substantively or procedurally (Hans, 2020).

CSR reciprocity between buyer and seller firms in a supply chain affects channel tie intensity
and channel sales performance (main effects) and that market competition may amplify these
influences (moderated effects). This has important implications regarding the role of
reciprocal CSR for channel relationship management (Luo & Zheng, 2013).

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The development of CSR practices contributes to increase the competitive performance both
directly and indirectly, through the ability of these organizations to manage their stakeholders
(Madueno et al., 2016).

6. OBJECTIVES OF THE STUDY

 To study the awareness of corporate social responsibility and Business ethics
 To understand the areas in which selected company has shown interest to spend on
CSR activities
 To know the perception of employees of selected companies regarding business ethics
and CSR.
 To analyse how effectively the code of conduct is followed by selected companies.
 To interpret the benefit from the implementation of Business ethic and CSR.
 To accumulate information regarding how effectively the company’s turnover and
profit has been boosted from the implementation of Business ethics and CSR.

7. RESEARCH METHODOLOGY
A research was conducted to understand the study based on business ethics and CSR
reciprocity of selected companies. The research instrument that was used in collecting primary
data was a questionnaire through Google forms. The questionnaire was prepared on the basis
of secondary data gathered. As far as secondary data is concerned, the information was
collected from other sources (Internet).
The sample size was chosen randomly and the sample size consisted of 100 respondents i.e.,
employees of selected companies like Mphasis, Infosys, IBM, KPMG in and around
Mangalore and Bangalore.

8. LIMITATIONS
 The data as far as possible has moved away from subjective to objective.
 The study as concerned is restricted to selected companies in the areas of Mangalore
and Bangalore.
 There can be chances of difference in the response received from respondents.
 Due to time constrain much information could not be collected.

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9. ANALYSIS AND INTERPRETATION OF THE DATA

Table 1: Age of the respondent

Scale No. of Respondents Percentage
20-30 73 73
30-40 19 19
40-50 6 6
50-60 2 2
Total 100 100

From the available information it is known that among the respondents of the survey i.e.,
employees, 73% belong to 20-30 age group while 19% are of the age group 30-40, 6%
belong to 40-50 age group and the remaining2% are of 50-60 age group.

Table 2: Employment Status

Scale No. of Respondents Percentage

Yes 94 94
No 6 6
Total 100 100

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The above data represents the respondents working in an organisation. Majority of them
i.e., 94% are working in an organization and 6% are not currently working but were
previously employed in the selected companies.

Table 3: Awareness on corporate social responsibility and business ethics

Scale No. of Respondents Percentage
Yes 89 89
No 11 11
Total 100 100

The above data shows the awareness of CSR and business ethics among the employees.
Here it shows that most of the employees are aware about the concept i.e., 89% so the
company is informative about this to its employees and 11%are not aware of the concept.

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Table 4: Code of business conduct in the organisation

Scale No. of Respondents Percentage

5 Star 57 57
4 Star 25 25
3 Star 10 10
2 Star 6 6
1 Star 2 2
Total 100 100

The above figure shows grading level for the business code of conduct that the company
follows among the employees. Majority i.e., 57% of the respondents are of the opinion
that the ranking for code of conduct is 5star however 25% lean towards 4 star and 10%
feel the rating is 3star, followed by 6% towards 2 star and 2% towards 1star as they are
really not satisfied with the code of conduct. Hence there are variances in opinion of
employees.

Table 5: Company’s spending on Corporate Social Responsibility

Scale No. of Respondents Percentage
5 Star 64 64
4 Star 17 17
3 Star 12 12
2 Star 4 4
1 Star 3 3
Total 100 100

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The above data shows the grading on how the company spends on CSR and here the
employees based on knowledge about the spending has graded as follows and from this it
is clear that 64% have graded as 5 star and the other grading is less than the majority
grades.

Table 6: Do you think the code of ethical conduct and CSR has benefited the
following persons, i.e., the Stakeholders, employees, society and others
Scale No. of Respondents Percentage
Yes 94 94
No 6 6
Total 100 100

Here 94% of the respondents say ”yes” when they were asked if they felt the code of
ethical conduct and CSR has actually benefited the stakeholders employees and the

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society . This kind of feedback not only shows the benefit but also shows how well the
company plays its role in the development of all factors concerned to the company.

Table 7: If yes, whom has it benefited (multiple answers are allowed)

Scale No. of Responses Percentage

Stakeholders 32 32.33
Employees 37 37.4
Society 27 27.22
None 3 3.05
Total 99 100

The above data shows who is more benefitted from ethical code of conduct and CSR
according to the respondents. Here employees are believed to be highly beneficial i.e.,
62%, the next being stakeholders at 55%, followed by the society and here there is
diversification of opinion as they might have chosen for multiple opinions also.

Table 8: Has the implementation of CSR brought any significant change in turnover

Scale No. of Respondents Percentage

Yes 63 63
No 3 3
Maybe 34 34
Total 100 100

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The above data shows whether the implementation of CSR ought any significant changes
in the companies’ turnover according to the respondents. It is gathered from the above that
63% respondents believe CSR has brought benefit to the company where they are working
and 34% of the respondents are suspicious about the CSR having impact on the turnover.

Table 9: Has the implementation of CSR brought any significant increase in the
mutual trust with the customer and society
Scale No. of Respondents Percentage
Strongly agree 51 51.5
Agree 33 33.3
Neutral 14 14.1
Strongly Disagree 0 0
Disagree 1 1
Total 99 100

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We saw that CSR and business ethics was favoured until now ,it continues as 51.5% of
respondents strongly agree saying that the implementation of CSR has increased the
mutual trust with the customer and society which along with 33.3% of respondents
agreeing to the above which show the company has greater scope for gaining a wider
market, and now there are 14.1%who are neutral with the CSR brining a greater scope of
mutual trust and remaining that is 1% disagree with the implementation of CSR benefiting
the customer and the society.

Table 10: How well are the employers and employees following business ethics?

Scale No of Respondents Percentage

1 rate 2 2
2 rate 2 2
3 rate 9 9
4 rate 30 30
5 rate 57 57
Total 100 100

The above information it shows that there are majority (57%) of respondents saying that
employers and employees are following a fair deal relation by following business ethics in
the companies were they are working and the rest of the respondents have vague opinion
towards the way the business ethics followed between the employer and employee.

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Table 11: Areas in which your company has shown interest to spend on CSR
activities
Scale No. of Respondents Percentage
Promotion of Education 28 28
Eradication of Hunger & Poverty 27 27
Promotion of Gender Equality 14 14
Contribution to PM’s National Relief
11 11
Fund
Rural Development Projects 13 13
Others 5 5
None 2 2
Total 100 100

From the information given by respondents working in companies we can understand that
the company works on different CSR activities and firstly it spends on promotion of
education and Eradication of hunger and poverty and the next highly chosen activity is
promotion of gender equality, Rural Development projects and contribution to PMNRF
and there are 11% who choose other CSR activities where the company is spending a part
from its profits.

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Table 12: If others, specify.
Scale No. of Respondents Percentage
Environmental Protection 2 18.2
Protection from Natural
disasters and flood affected 1 9.1
areas
Other comments 8 72.8
Total 11 100

This is based on the 11% Respondents who said that the company invests in other CSR
activities i.e., environmental protection and protection from natural disasters and flood
affected areas (27.3%) others have not shared accurate opinion about the other CSR
activities followed by the company.

10. FINDINGS
 As per our survey conducted the respondents are employees working in the selected
companies.
 Business ethics and CSR is followed by the companies and majority of the employees
are aware of it.
 It is clear through this that the implementation of CSR has benefited not only the
company but also the stakeholders, employees and society.
 Most of the employees working in the organisation are of the age group 20-30 yrs.

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  Companies are investing in various CSR activities from the part of profits of the
company.
 The ethical code of conduct is at a higher end which creates a good mutual trust
between the various factors attributing to the development of the company.
 Survey reveals that the company is more informative about be and CSR activities.
 Through the survey it is found to be known that Majority companies spends large
portion of its profits on Promotion of Education and towards Eradication of Hunger
and Poverty.

11. RECOMMENDATIONS
Suggestions for this research are divided into two types. They are as follows.

For Employees
1. Finding a peer group within the industry or outside, may give the company and employees
useful insight into others' experiences, perceptions and expectations. At this level, one can
discuss ethical issues without judgment and obtain feedback.
2. Forming an Employee Union to discuss ethical issues, set a code of conduct and to follow
up the implementation of the codes of conduct will help the employees to indulge in Ethical
and CSR activities more effectively within the organisation.
3. The employees may take the initiative to understand the various programs and policies
pertaining to the company’s Corporate Social Responsibility practices.

Suggestions for Employers

1. Special education and employment enhancing vocation skills may be provided by the
company especially among children, women, elderly and the differently abled and conduct
livelihood enhancement projects for the employees to promote Business Ethics thus
improving the employee efficiency as well.
2. Almost for every business brand promotion is one of their main objectives and in order to
achieve this, the companies can get in Innovations in implementing CSR by using social
media to encourage the users to take part in their activities.
3. Being transparent about the finances is a good ethical practice which gives a good picture
of the company’s dealings meanwhile ensuring the involvement of employees and the public
in various company activities.

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4. The policies set up by the government shall be strengthened within the organisation by
appointing proper personnel to plan, check, act and evaluate
5. Further study may focus on identifying and comparing the perception of line managers,
staff managers, and employees on Corporate Social Responsibility practices of the company.
6. Companies can fund social start-ups for better utilisation of their CSR funds that helps to
create sustainable impact on the society at large.

12. CONCLUSION
From this study, we can infer that the innovations in CSR and adapting good ethical practices
are proven to be a boon to the organisations. An innovation in CSR helps in reducing the
employee costs and thereby increasing the productivity in the organisation. Most of the
Employers and Employees recognise business ethics and social responsibility as important for
the growth and success of an organisation. Specifically, they consider business ethics to lead
to positive employee, customers and as well community relations .Key CSR issues include
environmental management, eco-efficiency, responsible sourcing, stake holder involvement,
labour standards and working conditions, employee and community relations, social parity,
gender balance, human rights, good governance and anti-corruption measures under self-
regulation and balanced choice mechanism. Furthermore, they perceive better corporate
image/reputation, greater customer loyalty; and a strong and healthier community as benefits
that can inure to the benefit of corporations that are socially responsible. It is therefore,
important that professionals in the corporate world turn their attention to these factors, since
they are critical components in their training and practices.
Every business is dependent on the society for further existence as it cannot operate in
isolation. Thus it’s the duty of the business to take care of societal needs, reduce harmful
effects to environment, contribute in nation-building and comply with the law. Likewise,
everyone will support enterprises who are contributing toward the betterment of the society
and its interest will be served. CSR and business Ethics must not be engaged in solely for
profits but for the overall good that it does to the company, its employees, the environment
and the general public.

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QUESTIONNAIRE:

A Study on Business Ethics and Corporate Social Responsibility Reciprocity – A Study

of selected companies

1) Age
o 20-30
o 30-40
o 40-50
o 50-60
2) Are you employed in any organisation?
o Yes
o No

3) Are you aware of corporate social responsibility and business ethics

o Yes
o No

4) Code of business conduct in your organisation

o 5star
o 4star
o 3star
o 2star

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 o 1star

5) How honestly the company is spending on corporate social responsibility(CSR)

o 5star
o 4star
o 3star
o 2star
o 1star

6) Do you think the code of ethical conduct and CSR has benefited the following persons
o Yes
o No

7) If yes, whom has it benefited (multiple answers are allowed)

o Stakeholders
o Employees
o Society
o None

8) Has the implementation of CSR brought any significant change in the turnover
o Yes
o No
o Maybe

9) Has the implementation of CSR brought any significant increase, in the mutual trust
with the customers and society
o strongly agree
o agree
o neutral
o strongly disagree
o disagree

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10) How well are the employers and employees following business ethics?
o 1
o 2
o 3
o 4
o 5

11) Areas in which your company has shown interest to spend on CSR activities
o Promotion of education
o Eradication of hunger & poverty
o Promotion of gender equality
o Contribution to PM’s National relief fund
o Rural development projects
o Others
o None

12) If others, specify

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