Business Ethics and Learning Outcomes
Corporate Social At the end of this lesson, you will be able to:
Responsibility (CSR) • Define Ethics and Corporate social responsibility
• Identify the unethical practices in personal & corporate level.
• Evaluate the claims that CSR is “good” for business
MGS 1101 • Discuss the responsibilities toward different stakeholders
LESSON 04
By: Ms. A.S.Shiromy
Department of Management Studies
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What Is Ethics?
• Ethics is the set of moral principles by which people conduct themselves
personally, socially, or professionally.
Business • Business ethics is a set of laws about how a business should conduct itself.
• In general, for any business to be successful, it must operate legally and humanely.
Ethics • Organizations should be Balanced between what’s right and what’s profitable.
• Running the business without adopting unfair practices, being honest and truthful
about quality of goods, charging fair prices, abiding to laws, paying taxes, duties
and fees to the government honestly are some of the ethical behaviour of business.
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• There is a difference between legal compliance and moral excellence.
• What is legal is not necessarily ethical. Conversely, what is ethical is not
Unethical Behavior in the Workplace
necessarily legal.
• Ethics in connection with law is that the laws themselves are meant to express Unethical behavior in business runs the extent from simple victimless crimes to
some moral view. huge travesties that can hurt large numbers of people.
Examples of unethical behavior can be found in all types of businesses and in
many different areas.
Ethics Free • Theft at the Workplace
Law
Choice
• Gifts from Vendors
• Bending the Rules
Legal Standard Social Standard Personal
• Environmental Impacts and Risks
Standard
• Wages and Working Conditions
A personal responsibility?
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Unethical Behavior Among Businesses - Examples
• Dumping pollutants into the water supply rather than cleaning up the pollution
properly.
• Releasing toxins into the air in levels above what is permitted by the
Environmental Protection Agency.
• Coercing an injured worker not to report a work injury to workers' compensation
by threatening him with the loss of a job or benefits.
• Refusing to give an employee a final paycheck for hours worked after the
employee leaves the company & not paying an employee for all of the hours
worked.
• Engaging in price fixing to force smaller competitors out of business.
• Using bait and switch or false advertising tactics to lure customers in or
convince them to buy a product.
• Refusing to honor a warranty claim on a defective product.
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Unethical Behavior Among Individuals
Unethical Behavior by Professionals (legal)
Stealing money from the petty cash drawer at work.
Doctors, dentists and lawyers dating their clients in the working hours.
•
•
• Lying on your resume in order to get a job.
• Not telling a patient his true diagnosis because the physician didn't know the
Talking about a friend behind his back.
details of the diagnosis.
•
• Taking credit for work you did not do.
• Using a patient as a teaching tool for students for long periods of time without
Cheating on a school paper by copying it off the Internet.
the permission of the patient or patient's family.
•
• Taking money out of your friend's wallet when he is sleeping.
• A lawyer will not return money or provide a which was being held for a client.
• Using your position of power at work to sexually harass someone.
• Selling a house and not disclosing known defects to the buyers. • A lawyer represents parties on both sides of a legal transaction.
• Selling a car and lying about the vehicle's accident history.
• Taking office equipment for personal needs.
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Important Ethical Questions
If Unethical?
• Unethical business practices can affect your business indirectly. • Is it against the law? Does it violate company or professional
• The amount you make in profits from one unhappy customer can translate policies?
into a lot more lost because of missed repeat business.
• Treating employees unethically can also backfire. • What if everyone did this? How would I feel if someone did this
• Mistreating employees leads to a high turnover rate. This increases the to me?
cost of hiring and training new employees.
• Am I sacrificing long-term benefits for short-term gains?
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Making Decisions on Ethical Issues
Does it violate the law or policies? YES UNETHICAL
NO 1.Identify the ethical dilemma.
What if everyone did this, but it’s bad? YES UNETHICAL 2.Discover alternative actions.
NO 3.Decide who might be affected.
Would this sacrifice long-term benefits for
short-term gain? YES
MAY BE
UNETHICAL 4.List the probable effects of the alternatives.
NO 5.Select the best alternative.
ETHICAL DECISION
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Ethical Environment Practices in an Organization
The foundation of an ethical climate in an organization is ethical awareness.
In order to make ethical awareness, every organization has Code of
Conduct/Ethics.
A code of ethics is a set of strict guidelines for maintaining ethics in the
workplace.
Codes of conduct cannot detail a solution for every ethical situation, so
corporations provide training in ethical reasoning.
Helping employees recognize and reason through ethical problems and
turning them into ethical actions.
Executives must demonstrate ethical behavior in their actions.
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Synonyms for CSR
Corporate • Corporate Social Responsibility (CSR),
• Corporate Citizenship,
Social • Corporate Environmental Management,
Responsibility • Business and Society,
• Business and Governance,
• Business and Globalization,
• Stakeholder Management.
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Corporate Social Responsibility (CSR)
Defining “Corporate Social Responsibility”
‘The essence of corporate social responsibility as applied to
• In general terms, CSR encompasses the responsibilities that businesses
have to the societies within which these businesses operate. businesses concerns a company’s duty to operate in an honorable
• The European Commission defines CSR as “a concept whereby manner, provide good working conditions for employees, be a good
companies decide voluntarily to contribute to a better society and a steward of the environment, and actively work to better the quality of
cleaner environment.”
life in the local communities where it operates and in society at large’
• Specifically, CSR suggests that a business identify its stakeholder groups
and incorporate their needs and values within its strategic and Thompson et al (2006: 261)
operational decision-making process.
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Is there a social responsibility of business? CSR Today
What is the early concept of a corporation/business? The following were cited in a poll throughout eight Western, developed countries by
• Definition for a corporation in 1906 submitted by Ambrose Bierce in his citizens as the main reasons why firms want to be socially responsible, good citizens.
Devil’s Dictionary: a corporation is • Reduced risk
• Market reputation/brand image
“an ingenious device for obtaining individual profit without
• Relations with stakeholders (attracting & retaining employees, morale,
individual responsibility.”
expedited permits, happy regulators)
• Individuals who engage in business “incorporate,” is to create a legal • Putting something back
corporate shield by which to protect themselves from personal liability for the
• The right thing to do/corporate values
liabilities of the new corporation.
• Offers social capital or license to operate or grow (give and take)
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Arguments against CSR:
“Nestlé chief rejects the need to ‘give back’ to communities” To whom does business owe this social
• “Companies shouldn’t feel obligated to ‘give back’ to communities because
responsibility?
they haven’t taken anything away,” said Nestlé S.A. CEO Peter Braeck- • Firms exist in relationships with many stakeholders and these relationships
Letmathe can create a variety of responsibilities.
• “Companies should only pursue charitable endeavors with the underlying • It may not be possible to satisfy the needs of each and every stakeholder in a
intention of making money.” situation.
• “It is not our money we’re handing out but our investors’.” • Therefore, social responsibility would require decisions to prioritize competing
• “A company’s obligation is simply to create jobs and make products. What and conflicting responsibilities.
the hell have we taken away from society by being a successful company that
employs people?”
Do you agree?? 5-23 5-24
Prioritization of Stakeholders The Nature of “Responsibility”
• Reference to corporate social responsibility denotes those duties or
• The prioritization of stakeholders is often determined by a company’s
restrictions that bind us to act in one way rather than another.
mission, practice, board or custom.
• Responsibilities are those things that we ought, or should, do, even if we
• All too often, however, the prioritization is presumed rather than would rather not.
intentionally discussed and challenged, which might lead to
• Responsibilities bind, or compel, or constrain, or require us to act in certain
entrenchment rather than enhancement of the firm.
ways.
• To talk about business’s social responsibilities is to be concerned with
society’s interests that restrict or bind business’s behavior.
Social “responsibility” is what a business should or
ought to do for the sake of society.
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What should a business do? Types of Social Responsibility
• Business has the social responsibility to obey the law. Economic – the duty of managers, as agents of the
• Philosophers would contend that we have responsibilities beyond the company owners, to maximize stockholder wealth
law and they distinguish between different types of responsibilities, on Legal – the firm’s obligations to comply with the laws that
a scale from more to less demanding and binding.
regulate business activities
• First, we have responsibilities not to cause harm to others.
• A second, perhaps less binding responsibility, is to prevent harm even in Ethical – the company’s notion of right and proper business
those cases where one is not the cause. behavior.
• Finally, there might be responsibilities to do good.
Discretionary – voluntarily assumed by a business
organization.
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Evaluating CSR Social Responsibilities Towards Different Business
Discretionary Responsibility: Groups
Contribute to the Community
(Might do)
To the General Public
Ethical Responsibility: Be
Ethical. Do What is Right. Avoid
Harm (Should do)
To the
Investors and
Legal Responsibility: Business’s Social To the
the Financial
Obey the Law (Have to do) Responsibilities Consumer
Community
Economic Responsibility: Be Profitable (Must do)
To the Employee
Adapted from: Carroll (1991: 42), Schwartz and Carroll (2003)
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Responsibilities to the Customers
Responsibilities to the General Public
• The Right to Be Safe
• Product liability:- It refers to the responsibility of manufacturers for injuries and damages caused
• Avoid Public- Health Issues
by their products.
• Example:- Alcohol, tobacco, vaccines, and steroids.
• The Right to Be Informed
• Protecting the Environment
• Avoiding false or misleading advertising and providing effective customer service
• Example:- protecting the rain forest and world’s oceans, green
• The Right to Choose
products, environmentally friendly activities
• Ability of consumers to choose the products and services they want
• Developing the Quality of the Workforce
• The Right to Be Heard
• Corporate Philanthropy • Example:- Set up a consumer appeals board to resolve service complaints.
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Responsibility to Customers Responsibilities to Employees
• Workplace Safety
Example OVER-THE-COUNTER MEDICINE LABEL
• The Safety and health of workers while on the job is now an important business
responsibility.
• Quality-of-Life Issues
The FDA governs • Example:- Strong family-friendly culture and programmes On-site kindergarten, car cleaning
advertising and labeling
of over-the-counter • Ensuring Equal Opportunity on the Job
medicines.
• ‘Providing equal opportunities to all employees without discrimination
Analyze why the FDA • Sexual Harassment and Sexism
officials might feel that
regulation of advertising • Example:- Issuing a specific policy statement prohibiting sexual harassment, equal pay for
and packaging labels is equal work without regard to gender
necessary.
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Responsibilities to Investors and the
Questions?
Financial Community
• A fundamental goal of any business is to make a profit for its
shareholders, investors, and the financial community.
• Businesses should behave ethically as well as legally in handling their
financial transactions.
• They must be honest in reporting their profits and financial performance
in order to avoid misleading investors.
• Investors are protected by regulation by the Securities and Exchange
Commission and state regulations.
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