Chapter Four:

Social Responsibility &

Business Ethics
 Social Responsibility
 The awareness that business activities have an
impact on society and the consideration of that
impact by firms in decision making.
Consumers

Employees Business Environment

Activities

Investor
 Responsibility to Consumers
 Firms trying to provide products that satisfy the needs
of their customers, since dissatisfied customers
eventually take their business elsewhere.
 
 
 Consumerism includes the activities of individuals,
groups and organizations aimed at protecting
consumer rights.
 In U.S President john F. Kennedy established the
consumer “bill of rights” in 1960s.

 
 Responsibility to Consumers…
 Four Rights of Consumer-
 The Right to Safety – Right to products that are safe to
possess and use. To ensure safety of goods, manufacturers
should test them and provide buyers with explicit directions for
use.
 The Right to be Informed – Right to receive information
available about a product before they purchase it. E.G.
Ingredients, instructions for use.
 
 The Right to Choose – Right to choose and make purchases
from a variety of products at competitive prices. Also the right
to expect quality service at a fair price.
 
 The Right to be Heard – Right to have their (consumers)
opinions considered in the formation of government policies
and in business firm’s decisions that affect them.
 Responsibility to Employees
 Employees hold certain expectations of
business firms.
 They expect safe working conditions, fair
compensation, equal opportunities (regardless
of age, race, gender, religion or national origin)
and adequate benefits (e.G. Health insurance,
vacation etc).
 Occupational Safety and Health Administration
(OSHA)
 Equal Employment Opportunity Commission
(EEOC)
 Responsibility to Environment
 Pollution – contamination of air, water and land

 Water pollution– caused by dumping of chemicals,

sewage and garbage into rivers etc and by using
pesticides and fertilizers etc.

 Land pollution– results from strip mining of coal and

minerals, forest fires, garbage disposal and dumping of
industrial wastes including chemicals and medical
supplies such as used hypodermic needles.

 Often results in land pollution.

 Recycling – reusing materials such as paper, plastic, glass
and aluminum to make other products.
 Responsibility to Environment…
 Air Pollution– Caused by carbon monoxide and
hydrocarbons that come from motor vehicles and by
smoke and other pollutants from manufacturing plants
(emission standards for automobiles, factories,
catalytic converters are there to help control air
pollution).
**Ozone layer– Shields the planet from the sun’s deadly
ultraviolet rays. This is being destroyed with a global
warming trend as a result (major cause is
Chlorofluorocarbons (CFCs) that are used to cool
refrigerators and air conditioners).
**Acid rain– When sulphur dioxide is pumped into the
air (often by manufacturing and power plants burning
high sulphur coal) and mixes with air, rain with a high
acid content is created.
 Responsibility to Investors
 Business firms have responsibility to the people who
invest money in them.
**Proper Management of Fund
**Access to Information
**Excessive compensation

 There are problems such as mishandling of investor’s

funds, insider trading (the practice of buying and
selling stock on the basis of information gained
through positions or contacts with others that is not
available to other investors or the general public)
 Excessive compensation of executives.
 Business Ethics
 Ethics– The principles of behavior that distinguish
between right and wrong.
 
 Business Ethics– The evaluation of business
activities and behavior as right or wrong
 
 Ethical standards in business are based on commonly
accepted principles or behavior established by the
expectations of society, the firm, the industry and an
individual’s personal values
 A violation of ethics makes trust and goodwill difficult
to maintain
 Factors Influencing Ethical Behavior

The Business Environment

 Business managers are challenged to meet

sales quotas, cut costs, increase efficiency or
overtake competitors (survive by deception or
cheating)
 
 Conflict of interest (offer special favors or gifts,
bribes) damages the organization in the long
run
Factors Influencing Ethical Behavior…

The Organization

 Individuals learn from ethical and unethical

behaviors by interacting with other in the
organization

 By rewarding for ethical conduct and punishing

unethical behavior may help the organization to
promote ethical behavior among the employees
Factors Influencing Ethical Behavior…

The Individual

 A person’s own moral philosophy influences his

or her ethical behavior
 
 Moral philosophy – the set of principles
(learned from family, school, co-workers,
friends) that dictate acceptable behavior
 Developing Moral Philosophy

 Individuals can follow two approaches:

1.  Humanistic Philosophy

 A set of moral principles focusing on individual

rights and values

 
 Individuals & organizations adopting this

philosophy would honor their moral duties to

customers and workers
 Developing Moral Philosophy

2.  Utilitarian Philosophy

 A set of moral principles focusing on the
greatest good for the largest number of people

 CNG case in Bangladesh

 Vaccine Tests on Children

 Encouraging Ethical Behavior

 Many organizations take positive steps to

encourage ethical behavior. E.g. Ethics training
programs etc.

 A basic way for an organization to encourage

ethical behavior is to establish a code of ethics
(a statement spelling out exactly what an
organization considers ethical behavior)
 Encouraging Ethical Behavior…

 Whistle Blower – an employee who informs

superiors, the media or a government
regulatory agency about unethical behavior
within an organization (they often risk great
professional and personal danger by reporting
the unethical behavior of others

 Efforts to encourage ethical behavior will e

effective only with the support of top-level
management