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Name: Warren Mike Fernandes Roll No.: 104134 Class: F.Y.Bcom ‘B’ Subject: Managerial Economics
Chapter 1. – Business Ethics
Business ethics is a form of applied ethics or professional ethics that examines ethical principles and moral or ethical problems that arise in a business environment. It applies to all aspects of business conduct and is relevant to the conduct of individuals and business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and environmental ethics. Ethical norms are essential for maintaining stability and harmony in social life, where people interact with one another. Recognition of others' needs and aspirations, fairness, and cooperative efforts to deal with common issues are, for example, aspects of social behavior that contribute to social stability. In the process of social evolution, we have developed not only an instinct to care for ourselves but also a conscience to care for others. There may arise situations in which the need to care for ourselves runs into conflict with the need to care for others. In such situations, ethical norms are needed to guide our behavior. The history of business is tainted by and through the history of slavery, history of colonialism. The need for business ethics in the current epoch began gaining attention since the 1970s. Historically, firms started highlighting their ethical stature since the late 1980s and early 1990s, as the world witnessed serious economic and natural disasters because of unethical business practices. The Bhopal disaster is an instance of major disasters triggered by bad corporate ethics. It should be noted that the idea of business ethics caught the attention of academics, media and business firms by the end of the Cold War in America. Cold wars, seen through pages of history, were fought through and fought for American business firms abroad. The war in Iraq is one recent examples of overt violence by corporations. Knowing what is right and wrong is focal point of Business Ethics. For example, the use of lead paint on children's toys is unethical from a business stand point. And allowing them to be shipped to your Country is an example of unethical social acceptance of a controlling unethical Government.
Overview of issues in business ethics
General Business Ethics: This part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company's main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else. Financial Ethics: Fundamentally, finance is a social science discipline. The discipline shares its border with behavioural science, sociology, economics, accounting and management. It is concerned with technical issues such as the optimal mix of debt and equity financing, dividend policy, and the evaluation of alternative investment projects, and more recently the valuation of options, futures, swaps, and other derivative securities, portfolio diversification and so on. It is often mistaken to be a discipline free from ethical burdens. However, frequent economic meltdowns that could not be explained by theories of business cycles alone have brought ethics of finance to the forefront. Finance ethics is overlooked for another reason; issues in finance are often addressed as matters of law rather than ethics. Looking closer into literature concerning finance ethics, one can be convinced that as the case with other operational areas of business, the ethics in finance too is being called into question. Examples of unethical instances of Finance are Creative accounting, earnings management, misleading financial analysis, Insider trading, securities fraud, bucket shops, forex scams, executive compensation,
bribery, kickbacks etc. Certain companies such asSatyam and Enron have been involved in financial scandals. Human Resources Management Ethics: 'Human resource management' occupies the sphere of activity of recruitment selection, orientation, performance appraisal, training and development, industrial relations and health and safety issues where ethics really matters. Predictably, ethics of human resource management is a contested terrain like other sub-fields of business ethics. Business Ethicists differ in their orientation towards labour ethics. One group of ethicists influenced by the logic of neoliberalism propose that there can be no ethics beyond utilizing human resources towards earning higher profits for the shareholders. The neoliberal orientation is challenged by the argument that labour well being is not second to the goal of shareholder profiteering. Some others look at human resources management ethics as a discourse towards egalitarian workplace and dignity of labour. The issues focused under HRM Ethics are as follows;
• • • • • •
Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness. Issues arising from the traditional view of relationships between employers and employees, also known as At-will employment. Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking. Issues affecting the privacy of the employee: workplace surveillance, drug testing. Issues affecting the privacy of the employer: whistle-blowing. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery, indentured servitude, employment law. Occupational safety and health.
• Sales/Marketing Ethics: Marketing Ethics is a subset of business ethics. Ethics in marketing deals with the principles, values and/or ideals by which marketers (and marketing institutions) ought to act. Marketing ethics too, like its parent discipline, is a contested terrain. Discussions of marketing ethics are focused around two major concerns: one is the concern from political philosophy and the other is from the transaction-focused business practice. On the one side, following ideologists like Milton Friedman and Ayn Rand, it is argued that the only ethics in marketing is maximizing profit for the shareholder. On the other side it is argued that market is responsible to the consumers and other proximate as well as remote stakeholders as much as, if not less, it is responsible to its shareholders. The ethical prudence of targeting vulnerable sections for consumption of redundant or dangerous products/services, being transparent about the source of labour (child labour, sweatshop labour, fair labour remuneration), declaration regarding fair treatment and fair pay to the employees, being fair and transparent about the environmental risks, the ethical issues of product or service transparency (being transparent about the ingredients used in the product/service – use of genetically modified organisms, content, 'source code' in the case of software), appropriate labelling, the ethics of declaration of the risks in using the product/service (health risks, financial risks, security risks, etc.), product/service safety and liability, respect for stakeholder privacy and autonomy, the issues of outsmarting rival business through unethical business tactics etc., advertising truthfulness and honesty, fairness in pricing & distribution,
and forthrightness in selling, etc., are few among the issues debated among people concerned about ethics of marketing practice. The following are the issues focused in Marketing; • Pricing: price fixing, price discrimination, price skimming. • Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law. • Specific marketing strategies: greenwash, bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence. • Content of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful • Children and marketing: marketing in schools. • Markets: Black markets, grey markets.
Chapter 2. – Social Responsibility
Social responsibility is an ethical ideology or theory that an entity, be it an organization or individual, has an obligation to act to benefit society at large. This responsibility can be passive, by avoiding engaging in socially harmful acts, or active, by performing activities that directly advance social goals. Corporate Social Responsibility is an ethical or ideological theory; a doctrine, how an entity whether it is a government, corporation, organization or individuals has a responsibility to society and can be defined as, “the obligation of business to pursue those policies, to make those decisions or to follow those lines of actions which are desirable in terms of the objectives and values of your society”. Thus, every business must have a code of conduct as a guideline which directs human behavior and helps to them differentiate between good and bad, right and wrong, fair and unfair, professional and unprofessional as well as determining universal rules and laws of a behavior. It can be seen within the company in various departments like Human Resource Management (recruitment, selection, induction, training, promotion, payroll, retention and motivation); Marketing Management (sales, distribution, advertising, promotion, public relation, publicity); Finance (auditing, risk management, taxation, cost analysis); Production(logistics, warehousing, supply chain, quality control), thus it is an inseparable management activity/function. A social business is a non-loss, non-dividend company designed to address a social objective. The profits are used to expand the company’s reach and improve the product/service. Social business is a cause-driven business. In a social business, the investors/owners can gradually recoup the money invested, but cannot take any dividend beyond that point. Purpose of the investment is purely to achieve one or more social objectives through the operation of the company, no personal monetary gain is desired by the investors. The company must cover all costs and make revenue, at the same time achieve the social objective, such as, healthcare for the poor, housing for the poor, financial services for the poor, nutrition for malnourished children, providing safe drinking water, introducing renewable energy, etc. in a business way. The impact of the business on people or environment, rather than the amount of profit made in a given period measures the success of social business. Sustainability of the company indicates that it is running as a business. The objective of the company is to achieve social goals. Examples of Companies with Corporate Social Responsibility: 1. Infosys Technologies Ltd.: Infosys Foundation has worked to support the underprivileged in society and enrich their lives. Promoted by Infosys Technologies Limited, the Foundation began its work in Karnataka, India, gradually extending its activities to the states of Tamil Nadu, Andhra Pradesh, Maharashtra, Orissa and Punjab. Making high-quality healthcare the norm is an ongoing challenge. Since its inception, the Foundation has initiated several activities that benefit the rural and urban poor. Apart from constructing hospital wards, donating hi-tech equipment and organizing health camps, the Foundation also distributes medicines to economically-weaker sections in remote areas. Whether it is organizing an annual mela that empowers destitute women or building orphanages that give children a better life, the Foundation's activities address the needs of society's most neglected. The Foundation has organized unique annual melas in different parts of the country, including Bangalore and Sedam in Karnataka, and Chennai in Tamil Nadu, to distribute sewing machines to destitute women and help them earn a livelihood. The Foundation also offers an edge to deprived and rural students, through its
activities In what is one of the largest rural education programs in the country, the foundation has donated 10,200 sets of books in Karnataka alone, and in Andhra Pradesh, Karnataka, Orissa and Kerala, under its Library for Every Rural School project. Through this program, the Foundation has set up more than 10,150 libraries in rural government schools. A minimum of 200 books, depending on the strength of the school, is provided. 2. Intel Technology India Pvt Ltd.: Launched in 2002, the Intel ‘Involved in the Community’ program started as a small-scale informal employee initiative, which focused on activities such as tree planting and blood donation drives. By 2004, Intel Involved was fully incorporated into the company’s corporate culture through the development of team volunteering activities, with programs focusing in the areas of education, technology inclusion and health. Some of the key initiatives include: Centre for Economic Empowerment of Intellectually Challenged (CEEIC) - In conjunction with AMBA, a local NGO, Intel provides the intellectually-challenged community with training to learn computer skills. The Centre then helps procure employment from various companies for the participants, empowering them to earn a regular income. This initiative has now grown to 15 centres in 12 cities across the country. HIV/AIDS Awareness Program - Intel has established a program for raising awareness levels on HIV/AIDS to high prevalence areas in the community. In partnership with NGOs, voluntary counseling and testing agencies, the HIV/AIDS peer education program has reached out to 15,000 adolescents in Bangalore. Also Intel believes that climate change is a serious economic, social and environmental challenge. Activities include celebrating Global Earth Day, World Environment Day and the Environment Research Contest. Over the last five years, Intel employees have planted and nurtured more than 6,000 trees in and around Bangalore while the “Intel for a Better Bannerghatta” project resulted in a plastic and litter-free biological park and also created a learning space for the local community with the setup of information kiosks. Meanwhile, a Solid Waste Management Program in partnership with TERI (The Energy Resources Institute) is currently underway in Annasandrapalya, Bangalore. 3. Standard Chartered Bank: Standard Chartered Bank believes in contributing to the society and have tried to achieve so by way of some key initiatives that they support in India - Living with HIV, the environmental social networking project ‘Go Green’, the Standard Chartered Marathon, GOAL, and Seeing is Believing to name a few. Their ‘Seeing is Believing’ programme has helped restore sight to two million people globally and by 2013 it is their aim that the programme will have reached it’s target of US$20 million to provide sustainable eye-care services for 20 million people in deprived communities in 20 cities. In India, since 2004, Seeing is Believing has benefited over half a million people across the country through cataract surgeries. By the end of 2010, they expect another 1.4 million people in the country to benefit through primary eye care services and cataract surgeries. GOAL - In many parts of the developing world, women lack the opportunities and role-models to take control of their lives and contribute to society. Empowering women is part of their strategy for improving social and economic development in the country. Goal is one of Standard Chartered Bank's community investment initiatives that aims to empower young women for personal and economic development in underprivileged areas of India, where the government has identified improving gender equality as a priority. Goal uses a combination of life skills education and netball to increase confidence, self esteem and develop key skills such as communication, decision making, and leadership. The programme educates girls on important topics such as health and well-being, sexual health and rights, and financial literacy. Each community has its own netball team so the girls can engage in regular physical activities and learn to play as a team in a safe environment. Goal is run in partnership with the International Federation of
Netball Associations, the Naz India Trust Foundation and various local non-governmental organisations (NGOs).
• A Companion to Business Ethics. – R. E. Frederic • The Role of Ethics in Finance. – John Dobson • Caring and Doing for Others: Social Responsibility in the Domains of Family, Work, and Community. - Alice Rossi • The Social Responsibility of Business - Rupal Jain • http://www.mybangalore.com/article/1210/top-3-companies-for-excellence-in-csr.html • http://en.wikipedia.org/wiki/Business_ethics
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