Outline: Ethics and Social Responsibility

Definition of Ethics Sources of Ethics Care for Ethics in Business Myths about Business Ethics Managing Ethics Corporate Ethics and the Concept of CSR Some specific issues of ethics in business

1. Ethics - Definition 
A system of moral principles ± a sense of right and wrong, the goodness and badness of actions and motives and consequences of these action.  In business: Ethics is the study of good and evil, right and wrong, just and unjust actions of business persons.

2. Sources of Ethics: Value System with Reciprocity and Mutual Help Religion Legal System Culture

Business Ethics

religions believe that ethics is an expression of divine will All great religions agree on fundamental principles secular ethical doctrine and the principle of reciprocity. preach the necessity for an orderly social system. emphasize social responsibility for general welfare .1: Religion One of the oldest sources of ethical inspiration Despite doctrinal differences.2.

and ‡ acted upon to produce behaviors that fall within acceptable limits . to agricultural stage.2: Cultural Experience A source of ethics because Culture is a set of values. rules and standards ‡ transmitted among generations ± from hunting and gathering stage.2. to industrial stage.

and Are expected to be adhered to by businesses ‡ ‡ ‡ ‡ ..2. approved by legislatures that Guide human behavior in any society Codify ethical expectations Are reactive i.3: The Legal System Laws are rules of conduct. keep changing as new evils emerge.e.

including profit earning.3. companies prevent deterioration of relationships. . damage to reputation. working in harmony with society that prescribes certain norms that are binding on business and ‡ Ethically strong companies are profitable organizations. Care for Ethics in Business: Why do Ethics Matter in Business? ‡ Ethics matter to employees. creativity and loyalty ‡ Managing ethically means managing with integrity and better decision making. stakeholders and public ‡ Employers save billions on law suits. too since ethical considerations are consistent with business pursuits. decline in employee productivity. settlements and thefts.

4. Myths about Business Ethics 5 Myths ‡ Ethics is personal ‡ Business and ethics do not mix ‡ Business ethics is relative ‡ Good business means good ethics ‡ Information is neutral and amoral .

.1: Ethics is Personal.4. Confined to Self Every citizen has/should have the constitutional right to decide what is right and what is wrong But individual¶s choice of right and wrong cannot be absolute ‡ It is constrained by public interest abuse and also the demands of the organization (its norms. organizations do not commit crimes. culture and standards) ‡ Organizational ethics are the summation of moral beliefs of individual employees. individuals do.

it is an integral part of the society.4. norms and values and cannot allow businesses to act amorally and create chaos . which has principles.2: Business and Ethics do not go Together ‡ The notion now-a-days: ³Honesty is the best policy´ ± but not in business ‡ Businesses operate in a free market and strive hard to earn profit ‡ Management of a business is based on µscientific¶ not ethical principles But the argument is not acceptable: Business cannot operate in vacuum.

3: Ethics in Business is Relative What is right or wrong is determined by what the society says is right or wrong: something right (ethical) in one place or context is wrong (unethical) in another place or context. let each person¶s values remain valid for him or her. transactions and negotiations. communications.4. But the relativist ethos is not acceptable in international business: relativism may be carried to any logical extreme and create complications in interactions. . businesses must try to create a synergy of the value systems.

4. legal means are de facto ethical However. considerations and sympathy and usually. there is no correlation between µgoodness¶ and µmaterial success¶ .4: Good Business Means Good Ethics Executives and organizations that maintain a good corporate image. practice equitable dealings with customs and employees and earn profits by legitimate. Organizations pursuing profit making cannot be expected to display moral characteristics like honesty.

5 Information is Neutral and Amoral Information and computing are considered amoral as forms of control.4. too: Exposure to information can help empowerment and enlightenment and increased efficiency . But information and computing have productive and positive dimensions. exposure of children to pornography and the like. targeting of consumers for fraudulent advertising. power and manipulation and open access to information results in questionable use of data bases. violation of privacy. pirating of intellectual property.

and interests of the stakeholders . Management of ethics: managing activities that are required of a firm or its employees to behave ethically. policies and values consistent with fairness and commitment in relation to conditions at the workplace. racial justice.5. Managing Ethics Ethical management: Acting ethically as a manager. Unethical management or ethical misconduct has ended several promising careers. managing the rules. procedures. external environment. actions of few individuals severely harmed and even destroyed some businesses. human rights. by doing the right thing.

‡ Transfer pricing (setting prices of goods and services sold by one member of a corporate family to another.5. face problems of a host country where industries are relocated to avoid problems in the home country.1: Ethical Dilemmas One of the most important activity in managing ethics is the resolving of ethical dilemmas emanating from ‡ Transfer of operations of a company from one country to another (when cultures differ). ‡ Transfer of technology (should a country buy the technology even if it has no use of it?) ‡ Fixation of wages by a multinational company to employees of the host country (how to establish parity?) . such as from a parent to its subsidiary in a foreign country (because of difference in taxation).

Enacting legislation outlawing unethical conduct . Having a Code of Ethics 3. Commitment from top management 2.5. Constituting Ethics Committees 4.2: Strategies in Managing Ethics 6 significant strategies: 1. Conducting Ethics Training Programs 5. Having a whistle blowing system in place 6.

3: Code of Ethics Key points of a Code of Ethics ‡ Respect basic human rights and freedom ‡ Minimize any negative impact on local policies ‡ Maintain high standards of local social involvement ‡ Transfer technology and promote R & D ‡ Protect the environment ‡ Ensure consumer protection ‡ Follow fair employment practices including more employment opportunities for local people and security of their jobs .5.

5. for advise on ethical issues ‡ All large companies in developed countries now provide training in ethics for their employees ‡ Whistle-blowing enables an employee to tip off the top management about misdeeds of any person. Ethics Training. sometimes high level ones. protect the identity of the caller ‡ Laws represent a society¶s attempt to formalize or to reduce to written rules. ethical principles. every country does have its own laws . Whistle-blowing and Laws ‡ Companies can form ethics committees.4: Ethics Committees.

social responsibility of business (CSR) is its obligation to take actions that protect and improve the welfare of the society as a whole. opening a new branch. as well as of itself. the local community. Every business decision (takeover. working with employees and their families. and the society to improve their quality of life in a way that are good for business. automation and the like) has social implication. the goodness and badness of actions and motives and consequences of these action. Social Responsibility While ethics is a system of moral principles ± a sense of right and wrong. CSR is the commitment to contribute to sustainable development.6. diversification. . closure of a unit.

and appropriateness of product standards Related and support industries: Add to the productivity of an organization by facilitating easy access to high quality industries and services. transparent and efficient administrative processes and natural resources Context for strategy and rivalry: rules. high quality institutions of science and technology. .6. protect intellectual property open up local markets for trade. incentives and norms governing competition in a nation or region that influences productivity. reduce corruption to make a location attractive for business Demand conditions: sophistication and size of the local market. policies that encourage investment. adequate physical infrastructure.1: Why CSR? CSR is not merely a philanthropy: 4 interdependent factors and the areas (under them) influenced by CSR activities Factor conditions: the availability of trained workers. increases capability of local suppliers instead of promoting outsourcing.

But the idea of CSR is opposed also because CSR may: ‡ Transfer costs to consumers and shareholders ‡ Prompt mandatory requirements ‡ Invite bureaucrate overseeing and demands on businesses ‡ Cause a fall in economic efficiency of businesses ‡ Is illegitimate because social issues are concerns not of businesses but of the government ‡ Is not a function of businesses and should be left to nonbusiness organizations .6.2: Case against CSR CSR relates to public expectations and makes it easy for corporations to operate in a new environment.

7: A few specific issues of ethics in business Bribery and corruption Job discrimination Sexual harassment Restructuring and layoff Ethics Dimensions Wages Privacy Performance appraisal Safety and health .

Organizations can discriminate having a prejudiced policy 3.1: Job Discrimination A discriminatory decision ‡ Is based on group membership. Discrimination may be on the basis of sex or race 4.7. There can be workplace harassment. for example of women . not on individual merit ‡ Is the result of prejudice or false stereotype ‡ Somehow harms those it is aimed at Four common discriminatory practices 1. Individuals can intentionally discriminate out of prejudice 2.

requests for sexual favors. sexy jokes and sexual references are too common in workplace where men and women work together . Sexual threats ± forces women to comply. flirting. Sexual offers ± against incentives of jobs. Three types: 1.7.2: Sexual Harassment Sexual harassment means unwelcome sexual advances. Hostile work environment ± sexual nature of conduct of the co-workers causes a women to feel highly uncomfortable and affect performance. and other verbal or physical conduct of a sexual nature. lest their jobs are at stake 2. pay rise or promotion 3.

3: Wages An ethical issue is the parity between remuneration of employees in home country with that of employees working in a foreign location.7. technology and machines move with much less or almost no restrictions across the globe. as well as between remuneration of a local employee and a foreign one of same qualifications and working in the same organization with same responsibilities Another ethical issue indirectly related with wages is the imposition of restrictions on free movement of labor in a world where other factors of production ± capital. .

job stress and other health hazards) Life is better than death. health is better than illness and body integrity is better than injury . Prevention of cumulative trauma and disorders in jobs (wrist pain. Taking guard against accidents in work place caused by ‡ High speed and noisy machinery ‡ Production processes requiring high temperature ‡ An increasing reliance on chemical compounds ‡ The nature of such works as construction.7. weakened eye sight. underground and under-water tunneling. drilling and mining B.4: Safety and Health Business ethics require A.

e. and ‡ Provide an honest assessment of the performance and mutually develop a plan to improve the ratees¶ effectiveness .5 Performance Appraisal The assessor is expected to ‡ be objective and fair i. free of biases ‡ Avoid underrating or overrating employees ‡ Use ethics as the corner-stone of performance evaluation..7.

6 Privacy Privacy refers to protecting an employee¶s private life (religious beliefs.7. Interventions in privacy: ‡ Information technology ‡ AIDS testing ‡ Whistle-blowing (without sufficient grounds. privacy empowers and enables people. personal life style) from intensive and unwarranted actions. and also keeping unattended) ‡ Drug-testing ‡ Genetic testing (for one¶s inherited characteristics and certain illness) . political and social beliefs.

7. Issues on consequence in closure of a plant: ‡ How the plant for closure is chosen? ‡ How the news will be communicated? ‡ What will be the time-frame for completing the layoffs? ‡ How the affected employees will be compensated? .7 Restructuring and Layoff There are ethical implications in the process by which termination decisions are made and actions taken.

too. The reasons are: ‡ An economy based on bribery does not provide open access to all competitors on equal terms ‡ Bribery prone economies become less efficient ± resources are wasted. bribery is economically undesirable. costs rise and along with costs. it is payment made with an intention to corrupt.8 Bribery Bribe is a remuneration for the performance of an act that is inconsistent with the work contract or the nature of work one is expected to perform. Besides being morally wrong.7. . prices too tend to hike.