BUSINESS ETHICS &

SOCIAL RESPONSIBILITY

Abhimanyu Basyal
Unit 1: Introduction
 Origin of Ethics
Ø The term “ethics” is derived from the Greek word “ethikos”
meaning custom or character.
Ø It is generally described as a set of principles or moral conduct.
Ø Ethics is a branch of philosophy and is considered a normative
science because it is concerned with the norms of human
conduct.
Ø Ethics, as a science, involves systemizing, defending, and
recommending concepts of right and wrong behaviour.
 Meaning/Concept of Ethics
§ Ethics are beliefs about what is right and wrong or good and
bad. An individual’s personal values and morals, as well as
the social context, in which they occur, determine whether a
particular behavior is perceived as ethical or unethical.
 Meaning/Concept of Ethics
§ Ethical behavior is behavior that conforms to individual
beliefs and social norms about what is right and good.

§ Unethical behavior is behavior that individual beliefs

and social norms define as wrong and bad.

§ Business Ethics deals with the ethical or unethical

behavior by a manager or employee of an organization.
The Bakery Café
helping differently
able people!
■ The Bakery Cafe is known not only for its quality food,
accessibility and efficient service but also for accepting and
employing deaf staff.
■ Shyam Kakshapati, the Chairman of Nanglo International,
got the inspiration to employ these deaf people, otherwise
not considered eligible for work in most professional
settings, after working with them at some public events.
■ Their dedication and professionalism impressed him.
■ In 1997 when he opened The Bakery Cafe at New
Baneshwore he employed 12 young deaf people who had no
previous work experience and certainly no training in the
food and hospitality industry.
Lets talk about some of ethical practices…
■ Coming to college on time and being regular.
■ Doing assignment regularly and not copying form
your friend or google.
■ Helping juniors at your college or young ones at
your home.
■ Respecting your elders, mom dad, teachers, guard
dai and safe garne didis etc.
 ETHICS AND RELATED TERMS
1. Ethics and Morality:
 Ethics
■ Ethics, derived from a Greek word “Ethikos” which means
character.
■ Ethics are related to right and wrong conduct of an individual in a
particular situation.
■ Ethics is a branch of philosophy that deals with the principles of
conduct of an individual or group. It works as a guiding principle as
to decide what is good or bad. They are the standards which
govern the life of a person. Ethics is also known as moral
philosophy. Some ethical principles are:
■ Truthfulness, Honesty, Loyalty, Respect, Fairness, Integrity, etc.
 Morality
■ Moral is derived from a Greek word “Mos” which means custom.
Morals are rules or principles that a person may apply in daily
life that are fundamentally founded on what is considered right
or wrong.
■ Morals are the social, cultural and religious beliefs or values of
an individual or group which tells us what is right or wrong. They
are the rules and standards made by the society or culture
which is to be followed by us while deciding what is right. Some
moral principles are:
■ Do not cheat, Be loyal, Be patient, Always tell the truth, Be
generous, etc.
 Examples: Ethics and Morality
■ If the son of a big politician has committed a crime and he uses his
powers to free his son from legal consequences.
■ Then this act is immoral because the politician is trying to save a
culprit.
■ A very close friend or relative of an interviewer comes for an interview
and without asking a single question, he selects him.
■ This act is unethical because the selection process must be transparent
and unbiased.
■ A grocer sells adulterated products to his customers to earn more
profit.
■ This act is neither moral nor ethical because he is cheating his
customers and profession at the same time.
2. Ethics & Religion:
■ A religion is a particular system of
belief in a god or gods and the
activities that are connected with
this system.
■ Though ethics is not synonymous to
religion morality is a primary force in
shaping our ethics.
■ Thomas M. Garrett writes- “The
religion derive their moral percepts
not only from human experience but
from divine revelation. It must rely
on the unaided human reason.”
■ Ethics are based on logic and reason rather than tradition or
injunction.

■ Ethics gets idea from religion and through experiments it

approves them as “code of conduct”.

■ The development of ethics is dependent on the religious

morality. The great historian Arnold J. Toynbee writes— “No
society should succeed without any religious aim.”
3. Ethics & Law:
■ Law is a code of conduct, which the authority in
power prescribes for society. It is concerned
with the minimum regulation necessary for
public order that is enacted by government.
■ So government gives shape to only those
minimum social obligations, customs or
traditions, which are essential to be complied
with by the people. It basically differs from
ethics in its option to use it and in fact it is
backed by power.
■ The most important divergence between ethics and law is that
ethics concentrate on the do’s and laws on the don'ts.

■ Ethics is a much wider term than law. The law may not cover
the required ethical behavior at all. ‘Look after the aged’, ‘be
considerate to your workers’, ‘Teach well to your students’, ‘Do
not tell a lie’, Obey your elders’, - will fall within the circle of
ethics but not within that of law.
4. Ethics & Values:
■ Values are the moral principles and beliefs or accepted
standards of a person or social group. They are the principles
or standards of behavior; one's judgement of what is important
in life.
■ 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 a 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’.
■ A relationship can be
derived between value and
ethics like this:
Value + 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 Ethics
■ Business Ethics is the application of general ethical ideas to
business behavior.
■ Business Ethics is the art and discipline of applying ethical
principles to examine and solve complex moral dilemmas.
■ Business Ethics is that set of principles or reasons which should
govern the conduct of business whether at the individual or
collective level.
■ Business ethics is based on the principle of integrity and fairness
and concentrates on the benefits to the stakeholders, both
internal and external.
Importance of Ethics in Business
■ Protection of Consumer Rights
■ Social Responsibility
■ Concept of Socialism
■ Interest of Industry
■ Consumer Movement
■ Better Relations With the Society
■ Buyer’s Market
■ Beneficial to Business and Society
Importance of Ethics in Business
■ Protection of Consumer Rights:- Consumer is the centre of all the
business activities. In fact, business is essentially meant for
satisfaction of consumer wants. Unfortunately, consumers are the
most neglected and exploited group. The application of business
ethics will help to confer and implement consumer rights.
■ Social Responsibility:- Business ethics is a means of making
business socially responsible for its actions. Exploitation of
consumers, employees, discriminate use of natural resources, etc.,
is quite common in all type of business. Compliance to ethical
standards will ensure (a) Protection of consumer rights (b) Public
accountability (c) Protection of worker’s interests, and (d) Proper
utilization of natural resources.
Importance of Ethics in Business
■ Concept of Socialism:- The Concept of Socialism in business states
that gains of a business must be shared by all and not just by the
owner of business. Profit is a sign of business skill and talent.
Profit is also a result of group efforts. Employees, shareholders,
consumers, suppliers, and others contribute to the success of the
business. Therefore, success should be shared by all concerned.
■ Interest of Industry:- Business Ethics are necessary to safeguard
the interests of the small scale business firms. The tendency of big
business firms is always to dominate the market and drive away
the small industries out of the market. Small scale units can
establish their position and fight for their right if the industry
follows a code of ethics.
Importance of Ethics in Business
■ Consumer Movement:- The growth in consumer movement is
also another important factor that has necessitated the need for
business ethics. The spread of education and awareness among
consumers about their rights has made the business community
to conduct business on ethical principles.

■ Better Relations With the Society:- Business Ethics is needed to

develop good relations between business and society. The
relationship of business with society has various dimensions such
as its relations with shareholders, employees, consumers,
distributors, competitors and government.
Importance of Ethics in Business
■ Buyer’s Market:- There has been a structural change in the
concept of business. The concept of profit has been gradually
taken over by consumer satisfaction. The large scale production
and increased competitions in the market changed the business
scene from a seller’s market to a buyer’s market.

■ Beneficial to Business and Society:- Ethics suggests what is good

and bad, right and wrong, ethical and unethical, etc., to
businessman. It also brings an element of honesty, sincerity,
fairness, and human touch to business activities.
 Why a business should run ethically ?

To improve the To win customer To attract

brand image; loyalty; investors;

Lower stress for

To attract best To attract corporate
employees; vendors/suppliers; managers and
other employees;
1. To Improve the Brand Image:
■ An ethical company will have a very good reputation in a
market and that in turns helps to enhance the brand
image of the company as well. Also, a company with good
corporate social responsibility is highly appreciated in the
society.
 2. To Win Customer Loyalty
■ No consumer wants to make a purchase from
the company that are unethical, that has bad
reputation in the market, that lies, cheats on
their customers.
■ For example: If a company sells a product that
is of low quality and promotes it claiming it to
be the best one available in the market then
after consuming that product, customers might
never return to them. So, in order to win the
trust of the buyers and make them be a regular
customer, a company should be ethical.
 3. To Attract Investors:
■ Ethical companies will have a good name in the market and no
one can deny the fact that everyone wants to be a part of good
thing. So an ethical company can attract investors and have a
greater access to capital. They don't have to prove every now
and then that their company is doing well. The ethical value
they posses helps them create an image in the market and
hence, attract many investors.
 4. To Attract Best Employees:
■ No individual wants to work in an unethical
company unless he is unethical himself. Best
employees seek for the best place to work.
The success of a business largely depends
on the type of employees they hire.
■ To be a successful company, they got to hire
best employees and one of the best ways to
attract good employees is to remain true to
your stakeholders and avoid unethical stuffs.
 5. To Attract Vendors/Suppliers:
■ Same thing goes with vendors and suppliers as well. A company
with great ethical values tends to maintain a good relationship
with the suppliers.
■ They will be able to attract new suppliers as everyone wants to
deal with the company that has good reputation in the market.
■ Also, it will enable both the parties to negotiate things regarding
business decisions to end up in a win-win situation. So, it is
important for a business to run ethically.
Why some business individual might
resort to unethical behaviors?

Misguided Loyalty Fear

Pressure

Lack of Ethical
Greed
Knowledge
1. Misguided Loyalty

■ Though being loyal is considered to be a good

characteristic in a business industry but sometimes this
loyalty might lead an individual to do unethical activities
when s/he is misguided.
■ Most often this type of cases occurs when ethical values
of a company are not clearly mentioned to employees and
they blindly trust their managers.
2. Pressure

■ Unethical activities are not always carried out

intentionally. One needs to meet the company’s
expectation.

■ As a result, these expectations might lead an individual to

do unethical activities to impress boss, get ahead among
co- workers and to meet all the deadlines expectation.
3. Fear

■ Business individual don't have all control over their

activities under any circumstances.

■ They work under others and do poses many fear factor

such as fear of losing job, fear of losing money, fear from
boss and government which may lead them to do
unethical work.
4. Lack of Ethical Knowledge

■ Not knowing what is wrong and what is right might also

lead an individual to do unethical work.

■ As most ethical problems are complicated, the proper

choice may be far from obvious.
5. Greed
■ Some people do exist who only work for money lifelong.
They even don't care about the ethical values and its
importance.
■ Only they concern is about their personal benefits like
promotions and money, no matter whether it is ethical or
not.
■ This also leads an individual to do unethical works
regardless of its bad consequence.
 Benefits of Being Ethical
■ PosiKve effects on many performance aspects such as firm
financial performance, firm market value, stock market value
and returns, and perceived future financial performance.
■ MinimizaKon of loss of reputaKon and financial losses due to
legal costs and fine. Increased potenKal to achieve sustainable
compeKKve advantage through the consideraKon of various
stakeholders inherent in an ethical approach.
■ Increased interest from investors.
 Benefits of Being Ethical
■ Higher customer trust and satisfaction.

■ Potential willingness for consumers to pay higher prices.

■ Potential to increase supplier diversity and benefit from these

partnerships.

■ Many employee benefits such as higher organizational

commitment, better identification with company values, and
higher job satisfaction.
Consequences of Ethical Problems

Reduced Sales of Goods

Drop in Stock Price

Negative Effect on
Employee Performance
1. Reduced Sales of Goods:
As customers may boycott goods produced by a company known for
unethical behavior.
2. Drop in Stock Price:
Investors will be unwilling to buy shares from companies known to
transact business dishonestly. Investing in dishonest firms will result in
poor returns.
3. Negative Effect on Employee Performance:
Employees are not motivated to work for an unethical company and
others. Ethics is important in business because it builds trust and
confidence in business relationships. Unethical actions may result in
negative publicity, declining sales, and even legal action.
 MYTHS ABOUT BUSINESS ETHICS
■ MYTH 1: We learn ethics as little kids, not as adults.
■ MYTH 2: Sitting in behavior doesn’t change your behavior.
Only incentives change behavior.
■ MYTH 3: We all know what is right. It is just a matter of
doing it.
■ MYTH 4: Ethics is a matter of opinion; it’s just a matter of
personal values. There is no objectivity.
■ MYTH 5: Ethics is about personal values.
Myth 1: We learn ethics as little kids, not as
adults.
■ Ethical maturity grows with cognitive maturity. Making ethical
decisions requires brainpower.
■ Developmental psychology has shown that people become
more ethical as they become more mature in general.
■ Successful leaders tend to have more advanced ethical
reasoning skills. Lawrence Kohlberg asserts that you continue
to grow ethically even to your sixties. It is a life-long process.
Myth 2: Sitting in behavior doesn’t change your
behavior. Only incentives change behavior.
■ If this is true, let’s shut down all business school in Nepal. But
it is not. You all are doing BBA; because you believe learning
something will change your behavior.

■ You will learn how to accomplish your goals.

Myth 3: We all know what is right. It is just a
matter of doing it.
■ If this is true, why we disagree all the time? In fact, every
single issue that the ethics teacher will present in your
BBA class, you and your fellow students will disagree. It is
not obvious what is right.
Myth 4: Ethics is a ma<er of opinion; it’s just a
ma<er of personal values. There is no objecFvity.
■ Remember this next time, when you are robbed. The robber
has his values and you have yours.

■ Suppose your teacher returns yours assignment with very

low grades, and you ask the reason. The teacher replies that
it is because of your looks. You say it’s not fair. The teacher
replies you have your values and I have mine.
Myth 5: Ethics is about personal values.

■ It is not about personal values.

■ Ethics is about interpersonal values. It puts all of us on

same page to generate rational consensus.

■ The whole point of ethics is to reach consensus.

 Other Myths About Business Ethics
■ Business ethics is an oxymoron;
■ It’s easy to be ethical;
■ Business ethics is more about religion than management;
■ Hire only ethical people, so further time on business ethics is not needed;
■ Business ethics is a discipline best led by philosophers, academicians and
theologians;
■ Ethics can’t be managed;
■ We’ve never broken the law so we must be ethical;
■ Business ethics and social responsibility is the same thing;
■ Business ethics is superfluous – it only asserts the obvious: “do good”;
■ The business of a business is the business.
 MORAL REASONING
■ We are often faced with the situations in life where we need to use
our logic and instincts to decide whether the particular situation is
right or wrong.
■ Moral reasoning changes with their age because the definition of
doing right also changes once they excel a level of morality.
■ A person’s judgement becomes more wise and logical once they go
through their various stages of learning process and their
understanding becomes broader in life.
■ It is actually easier to do objective moral reasoning i.e. to say right or
wrong but difficulty lies in using our moral values, moral creativity,
moral sensitivity, moral judgment and perseverance to realize the
consequence of our action.
 MORAL REASONING
■ We should be able to look at the situation from multiple perspectives
before deciding what to do (moral creativity), should be able to
understand how my action is going to affect another person life
(moral sensitivity), should be committed enough to work on moral
plan that I have decided to work on despite of many hurdles that
come along the way (perseverance), and should be able to reason
correctly regarding what needs to be done in different situations
(moral judgment).
■ So, this mental process which sets a human’s mind in action to reach
to a certain decision of right and wrong is called moral reasoning.
■ It mostly depends on the person’s values, learning and most of the
time a person’s psychology.
Moral Reasoning is required in business for
these reasons:
1) Many times law does not cover all aspects of a problem.
There are gray, difficult and controversial areas.
2) Free-market and regulated market mechanism do not
effectively inform owners and managers how to respond to
complex issues that have far reaching moral consequences.
3) Moral reasoning is necessary because complex moral
problems require “an intuitive or learned understanding and
concern for fairness, justice, due process to people, groups,
and communities.
 Kohlberg’s Theory of Moral Judgment
■ Kohlberg defined moral reasoning as judgements about right and
wrong.
■ His studies of moral reasoning are based on the use of moral
dilemmas, or hypothetical situations in which people must make a
difficult decision.
■ He thought this more important than the actual choice made, since
the choices people make in such a dilemma aren't always clearly
and indisputably right.
■ He noted that development of moral reasoning seemed to be
related to one's age. However, he also determined that the highest
level of moral reasoning was not reached by all of his subjects.
 Kohlberg Moral Dilemma
■ In Europe, a woman was near death from cancer. One drug
might save her, a form of radium that a druggist in the same
town had recently discovered. The druggist was charging
$2,000 ten times what the drug cost him to make. The sick
woman’s husband, Heinz, went to everyone he knew to borrow
the money, but he could get together $1,000 only about half of
what it cost. He told the druggist that his wife was dying and
asked him to sell it cheaper or let him pay later. But the
druggist said No. The husband got desperate and broke into
the man’s store to steal the drug for his wife. Should the
husband have done that? Why?
Levels of Kohlberg’s Theory of Moral Judgment
■ Pre-Conventional Morality
At this level, judgment is based solely on a person's own needs
and perceptions.
■ Conventional Morality
The expectations of society and society's laws are taken into
account in a decision about a moral dilemma.
■ Post-Conventional Morality
Judgments are based on abstract, more personal principles that
aren't necessarily defined by society's laws.
 Moral Reasoning in Theory & Philosophy
S.No. Level Stage Heinz should steal the drug, because Heinz should not steal the drug, because
It is only worth $200 and not how much
the druggist wanted for it; Heinz had even He will consequently be put in prison which
Obedience
offered to pay for it and was not stealing will mean he is a bad person.
Pre- anything else.
1
Conventional He will be much happier if he saves his Prison is an awful place, and he would more
Self-Interest wife, even if he has to serve a prison likely languish in a jail cell than over his wife's
sentence. death.
Stealing is bad and he is not a criminal; he
His wife expects it; he wants to be a good
Conformity has tried to do everything he can without
husband.
breaking the law, you cannot blame him.
His wife will benefit, but he should also
2 Conventional take the prescribed punishment for the
crime as well as paying the druggist what
Law-and-Order The law prohibits stealing.
he is owed. Criminals cannot just run
around without regard for the law; actions
have consequences.
The scientist has a right to fair compensation.
Social Contract Everyone has a right to choose life,
Even if his wife is sick, it does not make his
Orientation regardless of the law.
Post- actions right.
3
Conventional Universal
Saving a human life is a more
Others may need the medicine just as badly,
fundamental value than the property
Human Ethics and their lives are equally significant.
rights of another person.
Stage 1: Obedience and Punishment Orientation

■ In Heinz dilemma, perhaps, individual in this stage react as

Heinz should not steal the medicines because stealing is
against law and he could go to jail. Or Heinz should steal
medicines because it is only worth $200 and not how much
local chemist wanted for it; Heinz had even offered to pay
rationally for it.
Stage 2: Self-interest Orientation / Exchange of
Favors
■ In Heinz dilemma, an individual in this stage possibly reacts as
Heinz should steal the drug because he will be happier if his
wife survives even if that means he goes to jail. Or, Heinz
should not steal medicine because a prison is an awful place,
and he would more likely languish in a jail cell than over his
wife’s death.
Stage 3 : Interpersonal Accord and Conformity
■ In Heinz dilemma dilemma, an individual in this stage
possibly reacts as Heinz should steal the drug, because his
wife expects him to, and he wants to be seen as a good
husband. Or, Heinz should not steal the drug because
stealing is bad and he is not a criminal.
Stage 4: Law and Order
■ In Heinz dilemma, an individual in the stage could react as
Heinz shouldn't steal the drug because the law prohibits
stealing any kind of things. Or Heinz should steal the drug
for his wife but also take the prescribed punishment for
the crime as well as paying the druggist what he owed.
Criminals cannot just run around without regards for the
law: action have consequences.
Stage 5: Social Contract

■ In Heinz dilemma, an individual in this stage may perhaps

react as Heinz should steal the medicine because everyone
has right to choose life, regardless of the laws. Or, Heinz
should not steal the medicine the scientist has a right to fair
compensation. Even is his wife is sick, it does not not make his
actions right.
Stage 6: Universal Ethical Principal
■ In Heinz dilemma, an individual in this stage may possibly
react as Heinz should steal the drug because human life has
more value than the property right of another person. Or
Heinz should not steal the medicines, because others may
just need medicine as badly, and their lives are equally
significant.
 Principles of Moral Reasoning
1. Deontological Reasoning

2. Teleological Reasoning

3. Ontological Reasoning
1. Deontological Reasoning
■ The term deontology comes from the Greek Word “deon” means
“duty”.
■ According to the deontologist the rules and principles are crucial for
guiding human action.
■ To make the correct moral choices, we have to understand what our
moral duties are and what correct rules exist to regulate those duties.
■ Deontological reasoning is the judgment of the morality based on the
actions adherence to certain rules. It creates a certain boundary for
you to perform a duty, going out of that boundary will be considered
wrong or unethical.
■ Like for example: Stealing a book from a library. A library is a place
from where you are supposed to only borrow books for a time being so
stealing from there is a wrong doing.
2. Teleological Reasoning
■ The term teleology is derived from the Greek work “telos” which
means, “end” or “purpose”.
■ According to this theory the concept of right, wrong and duty are
subordinated to the concept of end or purpose of the action.
■ This reasoning believes in the consequences or the results of the
action. Action here is such which will bring good results i.e. finding a
right thing to do.
■ Good result becomes the benchmark rather than the specific course
of action. Here we analyze the optimum benefit rather than the
right action.
■ For example: Living your life with virtues so that you will ultimately
find happiness in life.
3. Ontological Reasoning
■ Here the positive character traits like courage, justice, honest,
generous, truthfulness etc. is the basis for moral judgment or
decision making.
■ A person who has gained excellence through his virtuous
activities is considered as morally right and he is one who is
able to avoid the negative aspects of life like cowardice and
vanity.
■ So, ethics is grounded in a sense that good is that which is
virtuous.
 THE MORALITY OF PROFIT MOTIVE
■ Profit motive refers to the underlying motivation of business to
make more money (profits). It is morally criticized because the
owner of a business is motivated by profit alone, and monetary
motives are associated with selfishness and greed. This is the
cause of overconsumption, and exploitation of world’s
resources.
■ People are suspicious of profit, thinking that profit to one person
must mean a loss to someone. People and firms if were
motivated by something else besides profit, they would be
better able to provide the things that consumers really need.
The major criticism against the profit motive centers at the idea
that profits should not supersede the needs of the people.
■ An entrepreneur or a businessman who makes discoveries in the
marketplace is entitled to the rewards they generate. That is, if
customers demand safe products, or workers demands privacy,
then they will buy from or work for only those businesses that
meet their demands. Businesses that do not need these
demands will not survive. Since this view maintains that the drive
for profit will create morality, the strong version can be expressed
in the dictum that good business results in good ethics, which is
the converse of the above dictum.
■ For example: Consumers may opt for cheaper car without air
bags, even though doing so places their own lives and the lives of
their passenger at greater risk, which is morally irresponsible. In
short, not every business practice will simply emerge from the
profit principle.
 The Good Side of Profit Motive
■ Profit mo`ve mo`vates the people to do meaningful as it gives
human life a goal to pursue and something to live for.
■ It helps to promote ingenuity and cleverness in running a
business.
■ It makes people produc`ve. As they desire for money,
businessmen have become produc`ve and some of their
products have been useful and have enhanced human life.
■ Profit-mo`ve generates poten`al capital for the business and
this poten`al capital can be invested to establish new business
which results in various job opportunity and more goods and
services to consumer.
 The Bad Side of Profit Motive
■ Profit-motive promotes rivalry among competitors as competition
sometimes becomes stiff. This certainly creates negative effect in
business environment and people associated with it.
■ Profit-motive makes people so focused only in making money rather than
considering for the actual need of the customer which builds negative
trust among people.
■ Profit motive may turn individual business person from being reflective
and a questioning person because it focuses his attention on the practical
activity of making money.
■ It may promote self-interest rather than the common good. It may create
some social costs that many people have to suffer. Eg. Depletion of
natural resources, toxic wastes being thrown in rivers, pollution of the
environment, and disregard for the next generation to come.
The society as a whole
thus benefits from the
profits gained which
finally shows positive
impact in the economic
growth of country itself.
CORE ELEMENTS OF ETHICAL CHARACTER
■ Trustworthiness

■ Respect

■ Responsibility

■ Caring

■ Citizenship

■ Fairness
 1. Trustworthiness
■ Trustworthiness, which includes honesty,
reliability and loyalty, is a core element of
ethical character for managers.
■ For example, he will not change the numbers in
his sales report to make it appear that his team
is performing better than it is, exaggerate
claims about his product or persuade
customers to buy more product than they need.
■ Honesty in conduct is playing by the rules,
without stealing, cheating, fraud, subterfuge
and other trickery.
2. Respect
■ People are not things, and everyone has a right to be treated with
dignity.
■ We certainly have no ethical duty to hold all people in high
esteem, but we should treat everyone with respect, regardless of
who they are and what they have done.
■ We have a responsibility to be the best we can be in all situations,
even when dealing with unpleasant people.
3. Responsibility
■ It means being accountable for what we do and who we are. It also
means recognizing that our actions matter and we are morally on
the hook for the consequences.
■ Our capacity to reason and our freedom to choose make us
morally autonomous and, therefore, answerable for whether we
honor or degrade the ethical principles that give life meaning and
purpose.
■ Ethical people show responsibility by being accountable, pursuing
excellence and exercising self-restraint. They exhibit the ability to
respond to expectations.
4. Caring
■ Caring is also a core element of ethical character. Managing a
business without hurting anyone's feelings is difficult but not
impossible.
■ However, a caring manager feels an emotional response to both
the pleasure and pain of others and consciously seeks to cause no
more harm that is necessary in carrying out his/her duties.
■ If you must reprimand or fire an employee, find a way to protect
his/her dignity.
5. Citizenship
■ Citizenship includes civic virtues and duties
that prescribe how we ought to behave as
part of a community.

■ The good citizen knows the laws and obeys

them, yes, but that’s not all.

■ She volunteers and stays informed on the

issues of the day, the better to execute her
duties and privileges as a member of a self-
governing democratic society.
6. Fairness
■ Fairness embodies concepts of procedural and distributive justice.
Behaviors linked to fairness seek equitable distribution of
opportunities and/or outcomes.

■ Unlike respect, fairness does not require that all the parties be
identifiable – one can demonstrate fairness to a group of people
without knowing them directly.
Code of Ethics/Conduct
 Code of Ethics/Conduct
■ An agreement on ethical standards for a profession or business.
■ Formalized rules and standards that describe what a company
expects of its employees.
■ Is in a written form that guides the behavior of the employees.
■ Employers should require all staff to abide by a code of
professional ethics.
■ The code of conduct for a group or organization is an agreement
on rules of behavior for the members of that group or
organization.
■ Usually it talks about expectations to obey the law, conflict of
interest, inside trading, preserving confidential information,
bribery, competition and about fair dealing.
■ A code of ethics is a written guide to acceptable and ethical behavior as
defined by an organization.
■ It outlines uniform policies, standards, and punishments for violations.
■ Because employees know what is expected of them and what will
happen if they violate the rules, a code of ethics goes a long way
towards encouraging ethical behavior.
■ However, codes cannot possibly cover every situation; companies must
also create an environment in which employees recognize the
importance of complying with the written code.
■ Managers must provide direction by fostering communication, actively
modeling, and encouraging ethical decision making and training
employees to make ethical decisions.
■ At many companies, a formal statement or code of ethics summarizes
core ideologies, corporate values, and expectations.
Significance of Code of Conduct

■ Typically codes talk about expectations to: obey the law,

conflicts of interest, insider trading, preserving confidential

information, bribery, corporate opportunities, competition

and fair dealing among other things.

 ETHICS AND PHILOSOPHY
■ Ethics is a branch of philosophy that involves systemaFzing, defending,
and recommending concepts of right and wrong. As a branch of
philosophy, ethics invesOgates the quesOons “what is the best way for
people to live”. Ethics and philosophy combined is someOmes also
referred as Moral Philosophy. There are following major areas of study
within ethics and philosophy:
■ Meta-Ethics: What does "right" even mean?

■ Normative (Prescriptive) Ethics: How should people act?

■ Descriptive Ethics: What do people think is right?

■ Applied Ethics: How do we take moral knowledge and

put it into practice?
1. Meta-Ethics: What does "right" even mean?
■ Meta-ethics talks about the nature of ethics and moral reasoning.
Discussions about whether ethics is relative and whether we always
act from self- interest are examples of meta-ethical discussions.
■ It is an attempt to answer the fundamental philosophical questions
about the nature of ethical theory itself.
■ Example: Are ethical statements such as “lying is wrong”, or
“friendship is good” true or false?
■ Meta-ethics is concerned primarily with the meaning of ethical
judgements, and seeks to understand the nature of ethical properties,
statements, attitudes, and judgments and how they may be
supported or defended.
■ A meta-ethical theory, unlike a normative ethical theory, does
not attempt to evaluate specific choices as being better, worse,
good, bad or evil; rather it tries to define the essential meaning
and nature of the problem being discussed.

■ It concerns itself with second order questions, specifically the

semantics, epistemology and ontology of ethics.
2. Normative Ethics : How should people act?
■ Normative Ethics (Prescriptive Ethics) is the branch of ethics
concerned with establishing how things should or ought to be, how
to value them, which things are good or bad, and which actions are
right or wrong. It attempts to develop a set of rules governing
human conduct, or a set of norms for action.
■ Normative ethics is a philosophy of ethics that tells us how we ought
to live.
■ This theory attempts to provide actions-guide, procedures for
answering the practical question “What I ought to do”?
■ The central question of normative ethics is determining how basic
moral standards are arrived at and justified.
■ If you get great grades in school, does it really matter how you
got them?

■ If a company is highly profitable, does it really matter how those

profits were earned?
3. Descrip[ve Ethics: What do people think is
right?
■ This branch of philosophy attempts to answer why people do
and what they do.
■ It brings perspectives from various other disciplines including
psychology, sociology, anthropology etc.
■ It is the empirical (observational) study of the moral beliefs
and practices of different peoples and cultures in various
places and times.
■ It aims not only to elaborate such beliefs and practices but also
to understand them insofar as they are causally conditioned by
social, economic, and geographic circumstances.
■ Descriptive Ethics is sometimes referred to as Comparative
Ethics because so much activity can involve comparing ethical
systems: comparing the ethics of the past to the present;
comparing the ethics of one society to another; and comparing
the ethics which people claim to follow with the actual rules of
conduct which do describe their actions.
4. Applied Ethics: How do we take moral
knowledge and put it into practice?
■ It is an attempt to answer difficult moral questions that actual people
face in their lives.
■ Applied Ethics is a discipline of philosophy that attempts to apply
ethical theory to real-life situations. Strict, principle-based ethical
approaches often result in solutions to specific problems that are not
universally acceptable or impossible to implement.
■ Applied Ethics is much more ready to include the insights of
psychology, sociology and other relevant areas of knowledge in its
deliberations. It is used in determining public policy.
■ Example: Is abortion always morally wrong? Is euthanasia always
morally wrong?
■ Meta-Ethics: What does "right" even mean?

■ Normative (Prescriptive) Ethics: How should people act?

■ Descriptive Ethics: What do people think is right?

■ Applied Ethics: How do we take moral knowledge and

put it into practice?
Meaning and Importance of Social Responsibility
■ Social responsibility is the way a corporation achieves a
balance among its economic, social, and environmental
responsibilities in its operations so as to address shareholder
and other stakeholder expectations.
■ An organization receives inputs from society in the form of
skilled/unskilled labor, raw material and natural resources, and,
in turn, offers goods and services to society. Thus businesses
depend on society for their existence and it is in their interest
to take care of society.
■ While industry provides employment opportuni`es and thus
facilitates socio-economic progress, it also displaces people,
and the onus is, therefore, on industry to ensure proper
infrastructure facili`es. Businesses cannot operate either in
isola`on or in a vacuum. Like individuals, businesses also
need to live in the real world, i.e., in society.

■ Till the late twen`eth century, the mission of business firms

was exclusively economic.
■ With the business environment being characterized by
various developments including the shift of power from
capital to knowledge, increased levels of literacy and the
shrinking of geographical boundaries due to faster means of
travel and communication, people are, by and large,
becoming conscious of their rights, which has led to a rise in
the expectations of society from business.
■ Over the years, the nature of the involvement of business
houses with social causes has undergone a change. It has
moved away from charity and dependence to empowerment
and partnership.
The idea of social responsibility supposes that the corporation
has not only economic and legal obligations, but also certain
responsibilities to society which extend beyond these obligations.
Corporate Social Responsibility
 Corporate Social Responsibility
Corporate Social Responsibility (CSR) is the idea that a business has
a responsibility to the society that exists around it.
CSR is the business approach that contributes to sustainable
development by delivering economic, social and environmental
benefits to all stakeholders.
CSR is a self regulating business model that helps company socially
accountable to its stakeholders, consumers and the society it
survives in. CSR is important for the company for its survival and
growth.
 Corporate Social Responsibility
Corporate Social Responsibility is a management concept whereby
companies integrate social and environmental concerns in their
business operations and interactions with their stakeholders.
CSR is generally understood as being the way through which a
company achieves a balance of economic, environmental and
social imperatives (“Triple-Bottom-Line- Approach”).
While at the same time addressing the expectations
of shareholders and stakeholders.
Key CSR Issues:
Environmental Management, Eco-efficiency, Responsible
Sourcing, Stakeholder Engagement, Labour Standards
And Working CondiEons, Employee and Community
RelaEons, Social Equity, Gender Balance, Human Rights,
Good Governance, and AnE-corrupEon Measures.
 Types of CSR
1. Environmental Responsibility

2. Ethical Responsibility

3. Economic Responsibility

4. Philanthropic Responsibility
Carrol’s Pyramid of CSR
 Approaches to CSR Social Social
Contribution Obstruction

1. Social Obstruction Approach Social Social

Response Obligation

2. Social Obligation or Defensive Approach

3. Social Responsive or Accommodation Approach

4. Social Contribution or Proactive Approach

 Importance of CSR
a) Social responsibility improves financial performance
and reduces operating costs.
b) Social responsibility enhances brand image and
reputation.
c) Social responsibility increases customer loyalty and
sales.
d) Social responsibility increases the ability to attract and
retain employees.
e) Social responsibility brings less regulatory /activists
oversight.
Importance of CSR from Stakeholders’ Perspective
Employees Salaries, Job Security, Compensation, Respect, Communication
Customer Reasonable Price, Quality Customer Care, Ethical Products, etc.
Suppliers Continuity in Business, Timely Payment, Business Opportunities.
Creditors Good Credit Score, New Contracts, Scheduled Payment
Shareholders Profit, ROI, Sustainable Growth, Reputation, Value
Maximization
Government Tax, VAT, Legislation, Employment, Environment Protection
Community Job Opportunities, Philanthropy, Shares, Environmental
Protection,
Trade Unions Fair Wages, Worker Protection, Healthy Working Environment
Business Associates Power, Prestige, Protection, Strong Pressure Group
INGOs Human Rights, Fair Labour Management, Social Justice,
Environmental Protection, Anti- Corruption, etc.
 Arguments for CSR
■ Profits are necessary for any business entity to exist, but at the
same time, all groups in society should strive to add value and
make life better.
■ Businesses rely on the society within which they operate and
could not exist or prosper in isolation. They need the
infrastructure that society provides, its source of employees,
not to mention its consumer base.
■ CSR is recognition of that inter-dependence and a means of
delivering on that obligation, to the mutual benefit of
businesses and the societies within which they are based.
 Arguments for CSR
■ Moral Argument for CSR
– The Externalities Argument (deal with the negative externalities like
pollution, resource depletion)
– The Power Argument (with power comes great responsibility)
– The Dependency Argument (contribution of the stakeholders)
■ The Rational Argument
– Maximize the performance by minimizing restrictions on operations
■ The Economic Argument
– Increases self interest of the business
■ Shared Value Argument
– Business and corporation have shared values so they need to
cooperate with each others
 Arguments against CSR
■ Profit Maximization
■ Society/Consumer has to pay the Cost
■ Lack of Social Skills
■ Business has enough Power
■ Social Overhead Costs
■ Lack of Accountability
■ Many companies involve themselves in social activities because
of the tax exemptions on the income spent on social purposes.
Outcomes of CSR
 The Evolution of CSR
■ In USA, idea of corporate social responsibility (CSR) appeared
around the start of 20th century.
■ Corporations at that time came under attack for being too big,
too powerful and guilty and using anticompetitive practices.
■ In this protest, few farsighted business executives advised
corporations to use their power and influence voluntarily for
broad social purpose rather than profits alone.
■ Steelmaker Andrew Carnegie who became great Philanthropist
gave much of their wealth to education and charitable
donations.
 a) The Charity Principle
■ The wealthiest members of the society should be charitable to
the less fortunate ones. It is kind of private aid to the needy
members of the society.

■ This is a voluntary ac`on to promote social good.

■ Example: Andrew Carnegie and John D. Rockefeller are usually

credited as pioneers of great modern philanthropists.
 b) The Stewardship Principle
■ Business leaders who follow the stewardship principle believe that
they have an obligation to see that everyone particularly, those in
need or at risk benefits from their firms’ actions.
■ Corporate managers control vast resources and these resources can
affect people in fundamental ways.
■ Now, these organizations have a responsibility to use these
resources in ways that are good not just for the stockholders alone
but for society generally.
■ This thinking eventually produced the modern theory of stakeholder
management.
 CSR Evolved Through Following Phases
■ Phase 1: Charity, Philanthropy.
■ Phase 2: Dedication to the progress of the society.
■ Phase 3 (1960-1980): Shift from the focus on public
organizations to private organizations for socio-economic
development.
■ Phase 4 (1980-2000): Present concern for labor and
environmental standards.
■ Phase 5: (2000-present): Long term sustainability and CSR into
business strategy.
 History of CSR in Nepal
■ The CSR in Nepal started mostly in the form of
philanthropic contribution.

■ There are many examples of admirable philanthropic

practices in Nepal; such as the guthi (trust).

■ Almost all major temples in the country have a large area

of land donated to them, usually managed by the guthi.
■ The income from such property is used for rituals and
maintenance of the shrine, and for the service of the needy
people.

■ Construction of wells for drinking water, rest places for travelers

and porters (pati, pauwa & chautara), rest houses for pilgrims
(dharmashalas), donations of land and money for schools,
hospitals, and orphanages and traditional rituals of donation
(daan) to the poor and needy are other examples of
philanthropic acts rooted in Nepalese culture and tradition.
 Increasing Relevance of CSR
■ CSR no longer simply affects relationship between business
and society. It had become a way of rethinking the role of
companies in society, which takes governance and
sustainability as it core values and changes the focus of CSR
public policies.
■ Strategic approach to CSR is increasingly important today
and there is an increasing relevance to CSR. It is associated
with a lot of benefits. It brings benefits in terms of customer
and stakeholder engagement, stronger performance and
profitability, and human resource management.
 Haagen-Dazs Loves Honeybee
■ The extinction of honeybees, an important part of the global
food chain, is an issue of great importance to every company
especially Haagen-Dazs and their natural ice-creams.
■ Therefore, the organization called people for action by informing
them that every time they bought a carton of their ice-cream
they helped Haagen-Dazs ice-cream fund research to save the
bees.
■ By that the organization was able to show its human side to
people who were more likely to associate themselves with the
organization and also help solve an important social cause.
CSR is becoming increasingly relevant for business
today because of five identifiable trends:

■ Growing Affluence

■ Ecological Sustainability

■ Globalization

■ The Free Flow of Information

■ Brands
 CSR Domains
1. The Economic Domain (Mo$ve: To be Profitable)
Ø Shareholder value maximization or profit maximization

2. The Legal Domain (Mo4ve: To Obey the Law)

Ø Legal Compliance

3. The Ethical Domain (Mo4ve: To Sustain Legi4miza4on)

Ø Legitimate the working of the business
 Social Responsibility and Ethics
■ Social Responsibility is an ethical theory, in which
individuals are accountable for fulfilling their civic duty;
the actions of an individual must benefit the whole of
society.

■ In this way, there must be a balance between economic

growth and the welfare of society and the environment. If
this equilibrium is maintained, then social responsibility is
accomplished.
Social Responsibility and Ethics
 AN Y ?
T IO N S
QUE S