Skillmart International College

Bahir Dar campus

Master of Business
1 Administration

Business Ethics
የንግድ ሥነ-ምግባር

By: Girma N. (PhD candidate)

girmanegash21@gmail.com

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 Chapter 3
2

Corporate social
responsibility

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 Objective of the chapter
3

At the end of this chapter the student will able to:

 Define social responsibility
 Define Corporate governance
 Define Corporate social responsibility
 Differentiate business ethics and CSR
 Describe Carroll's four corporate social responsibility
 Describe the relationship between Models of Management
Ethics with CSR
 Discus with Managers response to social responsibility

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 Introduction
4

 Recent global focus on corporate misdeeds, such as

garment factory disasters, environmental damage,
banking scandals and health and safety issues in the
food chain has increased public scrutiny.
 There is now an expectation of ethical and transparent
practice from customers and civil society.

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 Introduction (cont’d )
5

 Businesses are part of societies (locally, nationally,

globally) therefore have a duty to act within their
expectations and norms.
 By doing so they are able to operate successfully
without harming the societies, communities and
environments in which they operate (Sethi, 2003).

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 Business and Society
6

 Business and Society are correlated with each

other.
 As business fulfill the needs of society and
society gives business the resources required to it.

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 Meaning of Social Responsibility
7

 According to concept of Social Responsibility of

business the objective of managers for taking decision
related to business is not only to maximize profit or
shareholder value but also to serve and protect the
interest of other members of its society like
consumer, worker and community as a whole.
 Social responsibility is the duty to do what is best for
the good of society.

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 Corporate governance
8

 Corporate governance is the system by which companies

are directed and controlled.
 Boards of directors are responsible for the governance of
their companies.
 The shareholders’ role in governance is to appoint the
directors and the auditors and to satisfy themselves that
an appropriate governance structure is in place.
 The responsibilities of the board include setting the
company’s strategic aims, providing the leadership to put
them into effect, supervising the management of the
business and reporting to shareholders on their
stewardship.
 The board’s actions are subject to laws, regulations and
the shareholders in general meeting. Cadbury Report
(1992, paragraph 2.5).
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 Cont’d
9

 Corporate governance covers the areas of

environmental awareness, ethical behavior,
corporate strategy, compensation, and risk
management.
 The basic principles of corporate governance are
accountability, transparency, fairness, responsibility,
and risk management.
 If management is running the business,
corporate governance is about seeing that is
it run properly?

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10

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 Corporate social responsibility
11

 The evolution of the concept of social

responsibility of business has passed through
different stages of struggle.
 Corporate social responsibility refers to the
approach that an organization takes in balancing
its responsibilities toward different stakeholders
when making legal, economic, ethical, and social
decisions.

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 Cont’d
12

 “Corporate Social Responsibility is operating a company

in a manner that meets or exceeds the ethical, legal,
commercial and public expectations that society has of
business” (NEPALI 2008).
 CSR is the concept that an enterprise is accountable for
its impact on all relevant stakeholders.
 Commitment by the business to behave fairly,
responsible and contribute to economic development
while improving the quality of life of the work force,
their families as well as the local community and society
at large.

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Business ethics and CSR
13

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Carroll's four corporate social
responsibility
14

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Cont’d
15

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Cont’d
16

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Cont’d
17

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Cont’d
18

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Cont’d
19

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20

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Social responsibility of corporation
21

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Environmental responsibility of corporation
22

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Three Models of Management Morality
and Emphasis on CSR
23

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Managers response to social responsibility
24

There are four ways managers respond to this duty:

1. Obstructionist response
 Managers choose not to be socially responsible.
 They behave illegally and unethically.
 They hide and cover-up any problem of the company.

2. Defensive response
 Managers stay within the law but make no attempt to
exercise additional social responsibility.
 Put shareholder interest above all other stakeholders.

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 Cont’d
25

3. Accommodative response
 Managers realize the need for social responsibility
 Try to balance the interests of all stakeholders.

4. Proactive response
 Managers actively support social responsibility
 Managers actively help stakeholders.

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Cont’d
26

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Corporate awards for commitment to CSR
27

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 Benefits by companies to society
28

1. Supply goods and service which customer can’t or do not

want to produce themselves.
2. Creating jobs for suppliers, co-workers, customer and
distributor.
3. Continually developing new process. Goods and service.
4. Investment in new technologies as well as in the skills of
employees.
5. Building up as well as spreading international
standards, for example environmental practice.
6. Developing good practice in different areas such as
environment and workplace safety.
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 Importance of Social Responsibility
29

Social responsibility of business is important from the following

point of view.
1. From employees’ point of view: with the help of
companies employment and healthy working condition,
social responsibility of business is important for employees.
2. From Customer point of view: under social
responsibility, business follows ethical practice and
manufacture the product which is as per expected
quality and reasonable price.
3. From investor point of view: business who
understand value of social responsibility is provide
protection to the investor fund with help of
development and growth of its business as well as
expected return to investors with profit earn by it.

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 Cont’d
30

4. From Suppliers point of view: When they are paid on

time as well as reasonable demands of them are satisfied
company, suppliers are loyal to business.
5. From government point of view : when business pay
regular taxes, follow the norms of government then it is
consider as social responsibility of business which is duly
fulfill by it.
6. From Society point of view: The business provide good
product, try to maintain clean environment, provide opportunity
to participate to business as well as work for the overall
development of society, these are the some example of it.

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 To the business
31
Improved
financial
performance

Enhanced brand Increased sales

image and and customer
reputation loyalty
Benefits of
Ethical
Improved Business Better
productivity and Practices recruitment and
quality reduced turnover

Fewer regulatory
Improved access
inspections and
to capital
less paperwork

2–31
© 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a
license distributed with a certain product or service or otherwise on a password-protected website for classroom use. 12/3/2022
 Need for Corporate Social Responsibility
32

• To reduce the social cost.

• To enhance the performance of employees.
• It a type of investment.
• It leads to industrial peace.
• It improves the public image.
• Can generate more profit.
• To provide moral justification.
• It satisfies the stakeholders.
• Helps to avoid government regulations & control.
• Enhance the health by non polluting measures.
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 THE 21st CENTURY UNETHICAL
ALLIANCE OF CAPITALISM
33

Self-serving CEOs
+
“Insider” boards (hand-picked by executives)
+
Unethical accounting firms
+
Irresponsible politicians
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 Arbitrary Laws (unethical activities corporations know are
illegal but sometimes engage in because “everybody else does it”)
34

1. Inside stock trading

2. Sweat shops
3. Polluting
4. Bribery (Corruption)
5. Using black market currency
6. “Social dumping” (manufacturing in nations with lax
enforcement of laws designed to regulate business)

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 35

Thank you!!!
end of the chapter

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 Chapter five
36

International
Business Ethics

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 Objective of the chapter
37

 Discuses with why international business arise ethic

problems
 Define Stakeholder theory and its relation with
business ethics
 Discus with Ethical Issues in International Business

 Discus with Philosophical Approaches to Ethics in

international business

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 Introduction
38

Every culture and nation has its own values, history, customs

and traditions, thus it has developed own ethical values and

understanding of ethical principles;

 There is no international ethical code of conduct, accepted

and followed by all the countries;

 There is a lack of governments’ initiative to create ethical

cooperation framework and thus to enhance ethical behavior

in international business.

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 Cont’d
39

Specific ethic problems that rise in international affairs are

due to several factors, amongst which:
 the diversity of political and law regulation systems;
 the diversity of economical organizing forms and levels of
economic development;
 insufficient regulations, especially in less developed
countries;
 existing conflicts between national and regional economic
interests;
 the influenced area and power of the multinational
corporations, as well as their ability to elude law
regulations;
 corruption in some areas of the world.

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 Stakeholder theory
40

 In a general sense, a business stakeholder is

anyone who affects or is affected by the decisions
made within the organization either directly or
indirectly.
 Stakeholder theory asserts that ethical business
decision MUST move beyond a narrow concern with
stockholders to consider the impact that decisions
will have on a wide range of stakeholders.

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Cont’d
41

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Cont’d
42

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Ethical Issues in International Business
43

 The most common ethical issues in business involve

 employment practices
 human rights
 environmental regulations
 Corruption
 the moral obligation of multinational
companies

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 Cont’d
44

Employment
practices

Environme
Human
ntal
rights
pollution

Other
Corruption
Obligations

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 Cont’d
45

Employment Practices:
 Take work from employees according their
compensation, age, gender and ability.
 If work conditions in a host nation are clearly
inferior to those in a multinational’s home nation,
should companies apply:
 Home country standards
 Host country standards
 Something in between

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 Cont’d
46

 Respect host country labor standards

 Upgrade the local work force through training
 Promote favorable working conditions with respect
to wages, work hours, holidays.
 Promote job stability and security
 Develop non-discriminatory employment policies.
 Adopt adequate health and safety standards

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 Consumer Protection
47

 Respect host county laws and policies and

regarding the protection of consumers.
 Safeguard the health and safety of consumers
through safe packaging, proper labeling and
accurate advertising.

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 Cont’d
48

Human Rights:
 In developed countries, basic human rights such as
freedom of association, freedom of speech,
freedom of assembly, and freedom of movement,
are taken for granted in other countries, these
rights may not exist

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 Cont’d
49

Environmental Pollution:
 Ethical issues arise when environmental regulations
in host nations are far inferior to those in the home
nation.
 Environmental questions take on added importance
because some parts of the environment are a public
good that no one owns, but anyone can despoil.
 The tragedy of the commons occurs when a resource
held in common by all, but owned by no one, is
overused by individuals, resulting in its degradation.

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 Cont’d
50

 Corruption
 The Convention on Combating Bribery of Foreign
Public Officials in International Business
Transactions adopted by the Organization for
Economic Cooperation and Development (OECD)
obliges member states to make the bribery of foreign
public officials a criminal offense

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 Cont’d
51

Moral Obligations:
 Social responsibility refers to the idea that business
people should take the social consequences of
economic actions into account when making
business decisions.
 People argue that businesses need to recognize their
noblesse oblige and give something back to the
societies that have made their success possible.

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 Discussion
52

 What you do in a situation where you have 14year

old employee and his family has no other food
winner & it is not ethical to keep a child labor. In this
situation what action is ethical, Replace him or keep
him?

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 Philosophical Approaches to Ethics
53
Straw men approaches
 There are four common straw men approaches:
1. Friedman doctrine suggests that the only social
responsibility of business is to increase profits, so long as
the company stays within the rules of law.
2. Cultural relativism argues that ethics are culturally
determined and that firms should adopt the ethics of the
cultures in which they operate, or in other words, “when in
Rome, do as the Romans do”.
3. Righteous moralist approach claims that a
multinational’s home country standards of ethics should be
followed in foreign countries.
4. Naive immoralist asserts that if a manager of a
multinational sees that firms from other nations are not
following ethical norms in a host nation, that manager
should not either.
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 Cont’d
54

Utilitarian and Kantian Ethics

 Utilitarian: approaches to ethics hold that the moral
worth of actions or practices is determined by their
consequences.
 Actions are desirable if they lead to the best possible
balance of good consequences over bad consequences
Problems with utilitarianism include measuring the
benefits, costs, and risks of an action, and the fact that
the approach fails to consider justice.
 Kantian: ethics are based on the philosophy of
Immanuel Kant who argued that people should be
treated as ends and never purely as means to the ends of
others. People have dignity and need to be respected,
they are not machines.
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 Cont’d
55

Rights theories
 Rights theories recognize that human beings have
fundamental rights and privileges which transcend national
boundaries and cultures .
 Rights theories establish a minimum level of morally
acceptable behavior.
Moral theorists argue that fundamental human rights form
the basis for the moral compass that managers should navigate
by when making decisions which have an ethical component.
 The Universal Declaration of Human Rights specifies the
basic principles that should always be adhered to irrespective
of the culture in which one is doing business.
 The declaration was prompted by the idea that some
fundamental rights transcend national borders and cultures.
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 Cont’d
56

Justice theories
 Justice theories focus on the attainment of a just
distribution of economic goods and services.
 A just distribution is one that is considered fair and
equitable.
 One theory of justice that is particularly important
was proposed by John Rawls who argued that all
economic goods and services should be distributed
equally except when an unequal distribution would
work to everyone’s advantage.

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 Discussion Question
57

What should the manager do?

 A manager from a developing country is overseeing a multinational’s
operations in a country where drug trading and lawlessness are
common.
 One day, a representative of a local “big man” approaches the
manager and asks for a “donation” to help the “big man” provide
housing for the poor.
 The representative tells the manager that in return for the donation,
the “big man” will make sure that the manager has a productive stay
in his country.
 No threats are made, but the manager is well aware that the “big
man” heads a criminal organization that is engaged in drug trafficking.
 He also knows that the big man does indeed help the poor in the run
down neighborhood of the city where he was born.

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 58

End of the chapter

thank you!!!

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