CHAPTER 7 BUSINESS ETHICS AND SOCIAL

RESPONSIBILITY

7.1 CONCEPT OF BUSINESS ETHICS

7.1.1 NATURE OF BUSINESS ETHICS
7.2 NEED FOR ETHICS IN BUSINESS
7.3 FACTORS GOVERNING BUSINESS ETHICS
7.4 ETHICAL ISSUES FACED BY MANAGERS
7.5 CONCEPT SOCIAL RESPONSIBILITY
7.5.1 NATURE OF SOCIAL RESPONSIBILITY
7.6 CASE FOR AND AGAINST SOCIAL RESPONSIBILITY
7.6.1 CASE FOR SOCIAL RESPONSIBILITY
7.6.2 CASE AGAINST SOCIAL RESPONSIBILITY
7.7 SOCIAL RESPONSIBILITY TOWARDS DIFFERENT GROUPS
7.8 CONSCIENTIOUS COMMERCE
 ETHICS AND BUSINESS ETHICS..
• Ethics means the set of rules or principles that the organization should follow.
Ethics is a “consideration and application of frameworks, values and
principles for developing moral awareness and guiding behaviour and action”.
• In business, ethics refers to a code of conduct that businesses are expected to
follow while doing business. The ethics that are formed in the organization are
not rocket science. They are based on the creation of a human mind. That is
why ethics depend on the influence of the place, time, and the situation.
• John Donaldson defines Business Ethics as “the systematic study of ethical
matters pertaining to the business, industry or related activities, institutions
and beliefs. Business ethics is the systematic handling of values in business
and industry.”
• In the words of Cater Mcnamara, Business Ethics “is generally coming to
know what is right or wrong in the work place and doing what is right. This is
in regard to effects of products/services and in relationship with the stake
holders”.
 NATURE OF BUSINESS ETHICS
• Business ethics is a code of conduct. It tells what to do and what not to do for the welfare of the
society.
• Business ethics is based on moral and social values. This includes self-control, consumer
protection and welfare, service to society, fair treatment to social groups, not to exploit others, etc.
• Business ethics give protection to different social groups such as consumers, employees, small
businessmen, government, shareholders, creditors, etc.
• Business ethics provide a basic framework for doing business. It gives the social cultural,
economic, legal and other limits of business. Business must be conducted within these limits.
• Business ethics must be voluntary. The businessmen must accept business ethics on their own.
Business ethics must be like self-discipline. It must not be enforced by law.
• Businessmen must be given proper education and guidance before introducing business ethics.
The businessmen must be motivated to use business ethics. Trade Associations and Chambers of
Commerce must also play an active role in this matter.
• Business ethics is a relative term. That is, it changes from one business to another. It also changes
from one country to another. What is considered as good in one country may be taboo in another
country.
• Business ethics is a newer concept. It is strictly followed only in developed countries. It is not
followed properly in poor and developing countries.
NEED FOR ETHICS IN BUSINESS
Part of Society

Expectations of Public

Improves Customers’ Confidence

Survival of business

Safeguarding Consumers’ rights

Protecting Employees & Shareholders

Develops Good Relations

FACTORS GOVERNING BUSINESS
ETHICS

Political Factors

Cultural Values

Social Values

Personal Values

Economic Factors

Organizational Factors
ETHICAL ISSUES FACED BY
MANAGERS

Human Resource Issues

Employee Working Conditions

Supplier & Customer Relations

CONCEPT OF SOCIAL
RESPONSIBILITY
• According to Peter F Druker, “Social responsibility requires managers to consider whether their actions are likely to
promote the public good, to advance the basic belief of society, to contribute to its stability strength and
harmony.” Social responsibility refers to the voluntary efforts on the part of the business to contribute to the social
well-being.
• Social responsibility means that individuals and companies have a duty to act in the best interests of their environment
and society as a whole. Social responsibility, as it applies to business, is known as Corporate social
responsibility(CSR).
• The NAA Committee (1977) has identified four major areas of social performance- community development, human
resources, physical resources and environmental contribution, and product or service contributions. The
responsibility of business itself indicates the desire to ensure the optimum use of resources, development and
expansion, operation and manage­ment, promotion of research environment, and environmental management etc.
• “Social responsibility of business refers to the obligations of businessmen’s decisions and actions taken for reasons at
least partially beyond the firm’s direct economic and technical interest.” —Keith Davis
• The term Social Responsibility of Business reflects the impact of a corporation’s activities on society. This embodies
the performance of its economic function and other actions taken to contribute to the quality of life. These activities
may extend beyond meeting the letter of law due to the pressures of competition or the requirements of contracts.
• ‘Corporate Social Responsibility of a business is operating in a manner which meets or excels the ethical, legal,
commercial and public expectations that a society has from the business.’ The term corporate social responsibility
refers to the concept of business being accountable to how it manages the impact of its processes on stakeholders on a
voluntary basis.
 NATURE OF SOCIAL RESPONSIBILITY
• Social responsibility is a personal attitude. An organization can discharge its
social responsibility only through the individuals who manage & control it.
• Social responsibility is an interpersonal & reciprocal relationship. Just as a
company owes responsibility towards social groups, every social group is, in
turn, responsible to the company.
• The concept of social responsibility is not inconsistent with the profit
objective. An organization can’t fulfil its social obligations unless it survives &
grows with earning profits.
• Social responsibility is a continuing obligation. Any business enterprise
remains responsible to society throughout its continued existence.
• The standards of social obligations can be fixed keeping in view social norms
& expectations. The extent of these obligations differs from society to society.
CASE FOR SOCIAL RESPONSIBILITY

Rationale for Existence

Symbiotic Relationship

Availability of Resources

Reputation

Society’s Expectations

To ensure business growth

To avoid Govt. regulation

To solve problems created

Long term business interest

CASE AGAINST SOCIAL RESPONSIBILITY

Contrary to the basic function of business

Violation of maximization of profit revenue

Side effects on consumers

Lack of social skills

Personal resistance

Distortion in resource allocation

Inefficiency in the system

Operational Problems
SOCIAL RESPONSIBILITY TOWARDS DIFFERENT GROUPS

CSR TOWARDS OWNERS

CSR TOWARDS INVESTORS

CSR TOWARDS EMPLOYEES

CSR TOWARDS SUPPLIERS

CSR TOWARDS CUSTOMERS

CSR TOWARDS COMPETITORS

CSR TOWARDS GOVERNMENT

CONSCIENTIOUS COMMERCE

• Conscientiousness is the personality trait of being careful, or diligent. Conscientiousness

implies a desire to do a task well, and to take obligations to others seriously. The words
“conscious”, “conscientious” are sometimes used interchangeably. The
word conscious means “aware, able to use one’s senses and mental powers” whereas the
word conscientious means “taking care to do things carefully and correctly”.
• Conscientious commerce may be defined as becoming and behaving, ethically, socially and
environmentally aware, responsible and engaged as individuals, consumers, investors,
business-persons, managers and as corporations. Cultivating consciousness around
consumption means developing awareness around the true impact on other people and the
planet.
• Conscious Business is an integral business model for business leaders who are aware of the
impact of their actions on others.
• They consciously follow principles of the triple bottom line and Value Stakeholder Model to
proactively align their organizations and provide positive value for their employees, business
stakeholders, and the planet while creating a good short-term and long-term
profit. Companies must take the lead in bringing business and society back together. Most
conscious businesses subscribe to a triple bottom line model of success.
THREE CORE PRINCIPLES OF
CONSCIENTIOUS COMMERCE

DEEPER PURPOSE

STAKEHOLDER ORIENTATION

CONSCIOUS LEADERSHIP

CONSCIOUS CULTURE