GLOBALIZATION AND BUSINESS ETHICS

As technology and transportation have advanced, business has

become increasingly global. In addition to new challenges and
international tensions, purposeful expansion has brought new jobs,
customer audiences, and economic opportunity.
Globalization is the increase in the flow of goods, services, capital,
people, and ideas across international boundaries
An international business is any company that operates and produces
or sells goods between two or more countries. There are three ways a
business can be considered international:

1. It produces goods domestically and sells domestically and

internationally.
2. It produces goods in a different country but sells domestically.
3. It produces goods in a different country and sells domestically and
internationally.
If your business falls into one of these categories, there are two types
of international business models to consider: transnational and
multinational.

If your business falls into one of these categories, there are two types
of international business models to consider: transnational and
multinational.
Transnational corporations have offices in multiple countries, each
responsible for a different facet of the organization. For instance,
marketing may be based in London, research and development in
Bogota, and software development in New York.

An example of a successful transnational corporation is Nestlé, which

splits business operations for each of its brands by region. There are
over 100 Nestlé offices worldwide with distinct responsibilities. For
instance, the Nestlé Research Center is located in Switzerland, which
acts as the hub that oversees each brand-specific research and
development center, of which there are 23. All Nestlé offices operate
under the company’s headquarters in Switzerland.

Multinational corporations also have offices in multiple countries, but

unlike transnational corporations, each is a microcosm of the larger
organization. This means each office has, for example, its own
leadership, marketing, sales, research and development, technology,
and human resources teams. An example of a multinational
corporation is PepsiCo, which has 32 offices across 24 countries.

If you’re considering which international business model to

implement for your growing company, know that each has its pros
and cons. Transnational corporations typically have the benefit of
everyone on a specific team being located in the same office, although
this may change with the rise of remote work. Being in the same
office can decrease miscommunication and reinforce the idea that
each office is an integral part of the larger company. Multinational
companies may not beget this same mindset, but they benefit from
having someone from every team present in each office. This can
enable them to collaborate and tailor efforts to the audience in their
specific location without juggling time differences and language
barriers to collaborate with other teams.

FACETS OF GLOBAL BUSINESS TO CONSIDER

Globalization doesn’t just refer to the location of a firm’s offices and

customers—it also encompasses the nuances and economic factors of
conducting business internationally and existing in a global economy.
Even if your company operates domestically, globalization can
influence the way you do business. Here are a few factors to consider
when thinking about how global business impacts your organization:

 Politics and laws: International politics can color relationships

between nations and regulate what products are allowed in and out
of their borders. Keeping up with current events can help you
prepare for the business impacts of shifts in policy and foreign
affairs.
 The environment: There’s no global issue more pressing than
climate change. Unfortunately, globalization can contribute
significantly to its negative effects due to increased transportation
of materials and products, business travel, and the number of
factories. If you’re engaging in global business, keep sustainability
in mind to avoid contributing to climate change.
 Macroeconomics: Principles of macroeconomics can allow you to
compare countries’ financial health on a one-to-one basis and draw
connections between trends. Some metrics to know include:
o Gross domestic product (GDP)
o Unemployment rate
o Inflation rate
o Degree of income inequality
o Currency exchange rate
 Human rights: Because laws dictating human rights—including
labor laws—differ from country to country, operating as a global
business requires research and critical thought to ensure you’re not
exploiting people for labor, even if it’s technically legal. Ethics are
required for making decisions that may cost your business money at
the expense of protecting human rights.
 Cultural differences and language barriers: Operating a global
business requires knowing and respecting other cultures. Without
understanding the areas you do business in, you could
unintentionally offend someone and harm your working
relationships. In the case of language barriers, this may require you
to hire translators and multilingual employees to bridge the gap.

What Are the Benefits of Globalization?

Globalization impacts businesses in many different ways. But those
who decide to take on international expansion find several benefits,
including:
1. Access to New Cultures
Globalization makes it easier than ever to access foreign culture,
including food, movies, music, and art. This free flow of people,
goods, art, and information is the reason you can have Thai food
delivered to your apartment as you listen to your favorite UK-based
artist or stream a Bollywood movie.
2. The Spread of Technology and Innovation
Many countries around the world remain constantly connected, so
knowledge and technological advances travel quickly. Because
knowledge also transfers so fast, this means that scientific advances
made in Asia can be at work in the United States in a matter of days.
3. Lower Costs for Products
Globalization allows companies to find lower-cost ways to produce
their products. It also increases global competition, which drives
prices down and creates a larger variety of choices for consumers.
Lowered costs help people in both developing and already-developed
countries live better on less money.
4. Higher Standards of Living Across the Globe
Developing nations experience an improved standard of living—
thanks to globalization. According to the World Bank, extreme
poverty decreased by 35% since 1990. Further, the target of the first
Millennium Development Goal was to cut the 1990 poverty rate in
half by 2015. This was achieved five years ahead of schedule, in
2010. Across the globe, nearly 1.1 billion people have moved out of
extreme poverty since that time.
5. Access to New Markets
Businesses gain a great deal from globalization, including new
customers and diverse revenue streams. Companies interested in these
benefits look for flexible and innovative ways to grow their business
overseas. International Professional Employer Organizations (PEOs)
make it easier than ever to employ workers in other countries quickly
and compliantly. This means that, for many companies, there is no
longer the need to establish a foreign entity to expand overseas.
6. Access to New Talent
In addition to new markets, globalization allows companies to find
new, specialized talent that is not available in their current market.
For example, globalization gives companies the opportunity to
explore tech talent in booming markets such as Berlin or Stockholm,
rather than Silicon Valley. Again, International PEO allows
companies to compliantly employ workers overseas, without having
to establish a legal entity, making global hiring easier than ever.
What are the Challenges of Globalization?
While globalization offers many benefits, it’s not without
challenges. Velocity Global’s 2020 State of Global Expansion™
Report: Technology Industry reveals some of the top challenges that
U.S. and UK tech leaders face when taking their companies global,
and leaders of other companies likely face the same obstacles.
Some of the hurdles companies face when going global include:
1. International Recruiting
It’s not surprising that 30% of U.S. and UK tech leaders
cited international recruiting as their most common challenge.
Recruiting across borders creates unknowns for HR teams. First,
companies create a plan for how they will interview and thoroughly
vet candidates to make sure they are qualified when thousands of
miles separate them from headquarters. Next, companies need to
know the market’s demands for salaries and benefits to make
competitive offers. To ensure successful hires, HR teams must factor
in challenges like time zones, cultural differences, and language
barriers to find a good fit for the company.
2. Managing Employee Immigration
Immigration challenges cause a lot of headaches internally, which is
why 28% of U.S. and UK tech leaders agreed it was one of their top
challenges. Immigration laws change often, and in some countries, it
is extremely difficult to secure visas for employees that are foreign
nationals. The U.S., for example, is getting stricter with granting H-
1B visas, and Brexit makes the future of immigration to the UK
uncertain.
 3. Incurring Tariffs and Export Fees
Another challenge both U.S and UK tech leaders said they face in the
report is incurring tariffs and export fees—29% agreed this is a
challenge for their global businesses. For companies looking to sell
products abroad, getting those items overseas can be expensive,
depending on the market.
4. Payroll and Compliance Challenges
Another common global expansion obstacle is managing overseas
payroll and maintaining compliance with changing employment and
tax laws. This management task gets even more difficult if you’re
trying to manage operations in multiple markets.
5. Loss of Cultural Identity
While globalization has made foreign countries easier to access, it has
also begun to meld unique societies together. The success of certain
cultures throughout the world caused other countries to emulate them.
But when cultures begin to lose their distinctive features, we lose our
global diversity.
6. Foreign Worker Exploitation
Lower costs do benefit many consumers, but it also creates tough
competition that leads some companies to search for cheap labor
sources. Some western companies ship their production overseas to
countries like China and Malaysia, where lax regulations make it
easier to exploit workers.
7. Global Expansion Difficulties
For businesses that want to go global and discover the benefits of
globalization, setting up a compliant overseas presence is difficult. If
companies take the traditional route of setting up an entity, they need
substantial upfront capital, sometimes up to $20,000, and costs of
$200,000 annually to maintain the business. Additionally, global
businesses must keep up with different and ever-changing labour laws
in new countries. When expanding into new countries, companies
must be aware of how to navigate new legal systems. Otherwise,
missteps lead to impediments and severe financial and legal
consequences.
8. Immigration Challenges and Local Job Loss
The political climates in the United States and Europe show that there
are different viewpoints on the results of globalization. Many
countries around the globe are tightening their immigration rules, and
it is harder for immigrants to find jobs in new countries. This rise in
nationalism is mainly due to anger from the perception that foreigners
fill domestic jobs or at companies moving their operations abroad to
save money on labour costs.

How Globalization Changes Your Daily Businesses Operations

Both the benefits and challenges of globalization change how a
business operates in different ways. When companies decide to go
global, they must be ready and willing to change internal processes.
This helps to accommodate new markets and make their global
workforce feel comfortable and accepted at work.

Some operational changes companies should expect from

globalization include:
1. Global Communication Challenges
Before starting to branch out from headquarters, firms have to put an
established internal communication plan in place since global
employees likely work in a different time zone and have a different
native language.
Software and other digital tools help smooth global communication
hurdles and allows teams to connect easily. Zoom, Slack, and Google
all provide valuable tools for companies trying to manage employees
in multiple offices, countries, and time zones.
2. International Employee Expectations
Foreign employees have different expectations when it comes to
things like salary and benefits, as well as how they manage their daily
work schedules. Companies that want to take advantage of
globalization and hire foreign workers need to accommodate them as
much as possible. HR teams must also ensure their offers are
competitive and on-par with local expectations during the hiring
process.
3. Supporting Foreign Customers
Similar to communication changes with employees, companies must
also plan for how they run customer service and support in new
countries. Customers in the new market where you offer your
products or services might not speak your native language or be close
to your time zone.
4. Increased Competition
International companies have to adjust more than internal operations.
Going global opens up new revenue streams and increases availability
to talent. Because of these attractive benefits, and the ease of going
global due to services like International PEO, the global marketplace
is competitive. As globalization becomes the norm, many companies
often seek the same foreign markets, which increases competition for
businesses.
5. Marketing and Communication Changes
Just like hiring employees in different countries creates internal
communication challenges, marketing your products or services to a
completely new audience creates obstacles for companies. Businesses
need to adjust their marketing strategies to communicate the benefits
of their product in a way that resonates with a foreign audience. You
cannot assume that a marketing campaign targeting an American
audience (or wherever your HQ location is) attracts consumers in
Europe, Asia, or any other popular market, as the consumers there
have very different wants and needs.

EPRG framework was introduced by Wind, Douglas and

Perlmutter. This framework addresses the way strategic decisions
are made and how the relationship between headquarters and its
subsidiaries is shaped.
Perlmutter’s EPRG framework consists of four stages in the
international operations evolution. These stages are discussed below.
Ethnocentric Orientation

The practices and policies of headquarters and of the ope++++

+rating company in the home country become the default standard to
which all subsidiaries need to comply. Such companies do not adapt
their products to the needs and wants of other countries where they
have operations. There are no changes in product specification, price
and promotion measures between native market and overseas
markets.
The general attitude of a company's senior management team is that
nationals from the company's native country are more capable to
drive international activities forward as compared to non-native
employees working at its subsidiaries. The exercises, activities and
policies of the functioning company in the native country becomes
the default standard to which all subsidiaries need to abide by.
The benefit of this mind set is that it overcomes the shortage of
qualified managers in the anchoring nations by migrating them from
home countries. This develops an affiliated corporate culture and aids
transfer core competences more easily. The major drawback of this
mind set is that it results in cultural short-sightedness and does not
promote the best and brightest in a firm.

Regiocentric Orientation+

In this approach a company finds economic, cultural or political

similarities among regions in order to satisfy the similar needs of
potential consumers. For example, countries like Pakistan, India and
Bangladesh are very similar. They possess a strong regional identity.

Global leaders and the customers: There are a few examples of

companies where geocentrism is in force for instance KFC has “a
vegetarian thali (a mixed meal with rice and cooked vegetables)
and Chana Snacker (burger with chickpeas) to cater to
vegetarians in India” and Viacom's MTV channels are “branded
accordingly as ...
Polycentric Orientation

In this approach, a company gives equal importance to every

country’s domestic market. Every participating country is treated
solely and individual strategies are carried out. This approach is
especially suitable for countries with certain financial, political and
cultural constraints.

Not only in India, but the interchange of world views and ideas has
resulted in a major transformation of the lifestyle and living standard
of people globally. Indian culture is no bar to this transformation
process. Our deep rooted traditions and customs have loosened up
their hold with the emergence of globalization. India has a rich
cultural background and pride of its culture is famous throughout the
world. Globalization has not only inculcated the westernization in
India, but conversely the Indian culture has also spread its impact
globally

IndianCulture

The culture of any country does not only portray the region and
language of the region, but it starts with the mindset and mentality of
the residing citizens. Indian culture is quite rich with respect to its
heritage and resources, and more importantly due to the welcoming
approach of its citizens. India is bouquet of flowers varying religion,
dialect, edibles, tradition, custom, music, art and architecture etc,
bundled into a single unit of patriotism and unity. The common
factor within all these diversities is the Indian mindset of welcoming,
greeting, celebrating in a united way with immense affection and
togetherness. This is the rich essence of the Indian culture that has
attracted many foreigners to stay back in India and mingle into its
eternal fragrance.

When we analyse this rich culture with the globalization point of

view, we can find many punch holes of westernization and mixing of
other traits and cultures into our beautifully woven blanket.
FamilyStructure

Let us start with the key attraction of Indian joint family culture. The
joint families have become a strange surprise to the Indians
especially to those residing in the metropolitan cities in the small flat
culture with the nuclear families blooming up like mushrooms in the
rain. We have lost the patience to get adjusted into the joint family,
imbibing the values of the elders and getting the young ones brought
up under the shadow of their grandparents. Children have started
treating grandparents like guests or visitors, and such an upbringing
is one of the main reasons of increasing old age homes, as those
children consider their own parents as burden in their state of
adulthood
MarriageValues

Similarly, marriages have also lost their values. It is very much

evident from the increasing number of divorce cases and the extra-
marital affairs reported every now and then. Marriage used to be
considered as bonding of the souls which will be linked even after
the death; but today marriage is like a professional bond or a so-
called commitment to share life without compromising their self-
interests. The ego factor into the Indian youth is again a product of
globalization

SocialValues

We have the incorporated values of treating the guests as God, warm-

hearted welcoming, greeting elders with due respect and a
celebrating every small festival with great colour of enjoyment and
togetherness. Such a wide gathering with full hue and light can
hardly be seen today. People have highly restricted themselves in
social interaction. The interaction in present generation is highly
diplomatic considering the financial status and wealth. We have lost
our social values and cheerful blessing of togetherness. The present
 generation are happier celebrating Valentine’s Day rather than Holi
and Diwali.
Food,ClothingandDialect

Indian food, clothing and languages are varied with respect to

different states. The food varies in its taste, but every food has its
own nutrient value and every region is specified and rich in its
medicinal preparations with the home remedies. Even the clothing
varies in different states which is very much particular in maintaining
the dignity of woman. The varies cuisines from all over the world
though have different flavours to add, still the food ingredients that
have inflicted with much popularity are the junk food items which
has increased the health disorders in the country. Again the dressing
like the suitings for the males are an inappropriate match for the
Indian type of climate. 

 Shrinking Agricultural Sector: Agriculture now contributes only

about 15% to GDP. The international norms imposed by WTO and
other multilateral organizations have reduced government support to
agriculture. Greater integration of global commodities markets leads
to constant fluctuation in prices.
 This has increased the vulnerability of Indian farmers. Farmers are
also increasingly dependent on seeds and fertilizers sold by the
MNCs.
 Globalization does not have any positive impact on agriculture. On
the contrary, it has few detrimental effects as government is always
willing to import food grains, sugar etc. Whenever there is a price
increase of these commodities.
 Government never thinks to pay more to farmers so that they produce
more food grains but resorts to imports. On the other hand, subsidies
are declining so cost of production is increasing. Even farms
producing fertilizers have to suffer due to imports. There are also
threats like introduction of GM crops, herbicide resistant crops etc.

 Access to education: On one hand globalisation has aided in the

explosion of information on the web that has helped in greater
awareness among people. It has also led to greater need for
specialisation and promotion of higher education in the country.
 On the flip side the advent of private education, coaching classes and
paid study material has created a gap between the haves and have-
nots. It has become increasingly difficult for an individual to obtain
higher education.
 Growth of cities: It has been estimated that by 2050 more than 50%
of India’s population will live in cities. The boom of services sector
and city centric job creation has led to increasing rural to urban
migration.
 Indian cuisine: is one of the most popular cuisines across the globe.
Historically, Indian spices and herbs were one of the most sought
after trade commodities. Pizzas, burgers, Chinese foods and other
Western foods have become quite popular.
 Clothing: Traditional Indian clothes for women are the saris, suits,
etc. and for men, traditional clothes are the dhoti, kurta. Hindu
married women also adorned the red bindi and sindhur, but now, it is
no more a compulsion. Rather, Indo-western clothing, the fusion of
Western and Sub continental fashion is in trend. Wearing jeans, t-
shirts, mini skirts have become common among Indian girls.
 Indian Performing Arts: The music of India includes multiples
varieties of religious, folk, popular, pop, and classical music. India’s
classical music includes two distinct styles: Carnatic and Hindustani
music. It remains instrumental to the religious inspiration, cultural
expression and pure entertainment. Indian dance too has diverse folk
and classical forms.
 Bharatanatyam, Kathak, Kathakali, Mohiniattam, Kuchipudi, Odissi
are popular dance forms in India. Kalarippayattu or Kalari for short is
considered one of the world’s oldest martial art. There have been
many great practitioners of Indian Martial Arts including
Bodhidharma who supposedly brought Indian martial arts to China.
 The Indian Classical music has gained worldwide recognition but
recently, western music is too becoming very popular in our country.
Fusing Indian music along with western music is encouraged among
musicians. More Indian dance shows are held globally. The number
of foreigners who are eager to learn Bharatanatyam is rising. Western
dance forms such as Jazz, Hip hop, Salsa, Ballet have become
common among Indian youngsters.
 Nuclear Families: The increasing migration coupled with financial
independence has led to the breaking of joint families into nuclear
ones. The western influence of individualism has led to an
aspirational generation of youth. Concepts of national identity, family,
job and tradition are changing rapidly and significantly.
 Old Age Vulnerability: The rise of nuclear families has reduced the
social security that the joint family provided. This has led to greater
economic, health and emotional vulnerability of old age individuals.
 Pervasive Media: There is greater access to news, music, movies,
videos from around the world. Foreign media houses have increased
their presence in India. India is part of the global launch of
Hollywood movies which is very well received here. It has a
psychological, social and cultural influence on our society.
 McDonaldization: A term denoting the increasing rationalization of
the routine tasks of everyday life. It becomes manifested when a
culture adopts the characteristics of a fast-food restaurant.
McDonaldization is a reconceptualization of rationalization, or
moving from traditional to rational modes of thought, and scientific
management.
 Walmartization: A term referring to profound transformations in
regional and global economies through the sheer size, influence, and
power of the big-box department store WalMart. It can be seen with
the rise of big businesses which have nearly killed the small
traditional businesses in our society.

Psychological Impact on Indian Society

 Development of Bicultural Identity: The first is the development of

a bicultural identity or perhaps a hybrid identity, which means that
part of one’s identity is rooted in the local culture while another part
stems from an awareness of one’s relation to the global world.
 The development of global identities is no longer just a part of
immigrants and ethnic minorities. People today especially the young
develop an identity that gives them a sense of belonging to a
worldwide culture, which includes an awareness of events, practices,
styles and information that are a part of the global culture. Media such
as television and especially the Internet, which allows for instant
 communication with any place in the world, play an important part in
developing a global identity.

A good example of bicultural identity is among the educated youth in

India who despite being integrated into the global fast paced
technological world, may continue to have deep rooted traditional
Indian values with respect to their personal lives and choices such as
preference for an arranged marriage, caring for parents in their old
age.

1. Growth of Self-Selected Culture: means people choose to form

groups with like-minded persons who wish to have an identity that is
untainted by the global culture and its values. The values of the global
culture, which are based on individualism, free market economics,
and democracy and include freedom, of choice, individual rights,
openness to change, and tolerance of differences are part of western
values. For most people worldwide, what the global culture has to
offer is appealing. One of the most vehement criticisms of
globalization is that it threatens to create one homogeneous
worldwide culture in which all children grow up wanting to be like
the latest pop music star, eat Big Macs, vacation at Disney World, and
wear blue jeans, and Nikes.
2. Emerging Adulthood: The timing of transitions to adult roles such as
work, marriage and parenthood are occurring at later stages in most
parts of the world as the need for preparing for jobs in an economy
that is highly technological and information based is slowly extending
from the late teens to the mid-twenties. Additionally, as the traditional
hierarchies of authority weaken and break down under the pressure of
globalization, the youth are forced to develop control over their own
lives including marriage and parenthood. The spread of emerging
adulthood is related to issues of identity.
3. Consumerism: Consumerism has permeated and changed the fabric
of contemporary Indian society. Western fashions are coming to
India: the traditional Indian dress is increasingly being displaced by
western dresses especially in urban areas. Media- movies and serials-
set a stage for patterns of behavior, dress codes and jargon. There is a
changing need to consume more and more of everything.
 .

Education Sector: There are significant effects in academic sector

because of globalisation like higher literacy rate and foreign
universities collaborating with different Indian universities. The
Indian academic system faces challenges of globalisation through
info-technology although it offers opportunities to evolve new
paradigms shifts in developmental education. Globalization promotes
new tools and techniques such as E-learning, flexible learning,
distance education programs and overseas training programs.

 Increasing Health-Care costs: Greater interconnections of the world

has also led to the increasing susceptibility to diseases. Whether it is
the bird-flu virus or Ebola, the diseases have taken a global turn,
spreading far and wide. This results in greater investment in
healthcare system to fight such diseases.
 Child Labour: Despite prohibition of child labor by the Indian
constitution, over 60 to a 115 million children in India work. While
most rural child workers are agricultural laborers, urban children work
in manufacturing, processing, servicing and repairs. Globalization
most directly exploits an estimated 300,000 Indian children who work
in India’s hand-knotted carpet industry, which exports over $300
million worth of goods a year.

Indian Business Culture: The foreign culture has both constructive

and contrary impact on individuals and business firms. New ways of
thinking and working has developed leading to higher efficiency.
Indian organizations have embraced international accounting
standards, Just-in-time and other more effective methods of stock
control, flexitime and new practices of human asset
administration, social duty and business morals thoughts,
improvement in corporate governance practices, customer
relationship management practices, inflow of outside assets and
healthy competition with foreign products.
The business area in India is profoundly encouraging in the present
situation. The effect of globalization has changed the business system
in India in terms of psychology, approach, innovation, attitude, work
culture and so on.
As a consequence of globalisation Indian industries are adapting
themselves to newer challenges and taking benefit from the new and
better opportunities making their business all the more profitable with
prospects of future growth. The colossal populace of India has made a
huge unsaturated market of customers.

This is one reason why worldwide organizations are particularly

inspired in doing business in India. In the post globalization period
this degree has expanded enormously for worldwide multinational
organizations as Government of India has likewise played an
exceptionally essential and steady part in this regard through changed
liberalized strategies and administrative structure.
A few situations that have arisen in India post liberalization era
are as follows:
 urbanisation and people of rural areas preferring to shift to urban
areas,
 Agriculture workers shifting to industry sector,
 trade market getting opened,
 boom in international import and export,
 big open saturated market for products,
 a growing market for high quality and
 low price product,
 gradual increase of organized retail chain,
 growing range of merger and acquisitions and
 lucid license policies for overseas multinational corporation.
 High growth rate is showing economic prosperity in India.
Indian market leaders are going global.

Space, Science and Technology: India has created a distinct place in

the field of space science and technology viz. launch services, earth
observation, communication & navigation and application of space
technology for national development.
Today, India stands one amongst the top six space faring nations in
the world.
The areas that are benefitted/ seemingly to be benefitted with the use
of space technology and its applications embrace – resource
monitoring, weather forecasting, telecommunication,
broadcasting, rural connectivity, health & education, governance,
disaster management support, location based services, space
commerce together with host of social applications

Conclusion: India is obtaining a worldwide recognition and slowly

moving towards to become a significant economic and political
strength. Market economic policies are spreading around the world,
with greater privatization and liberalization than in earlier decades.
Globalisation has resulted in growing global markets in services.
People can now execute trade services globally -- from medical
advice to software writing to data processing that could never really
be traded before.
India features a consumer base of 1.14 billion people. The mobile
subscriber base has grown up from 0.3 Million in 1996 to over 250
million currently.
In the cities Internet facility is everywhere. Extension of internet
facilities has extended even to rural areas.
Global food chain /restaurants have already found a large market
within the urban areas of India.

Lavish multiplex movie halls, big shopping malls and high rise
residential buildings are seen in every city.
Software Industries and telecommunication sectors are enjoying a
tremendous boost in India. Bollywood movies are distributed and
accepted worldwide.
Programming and software Industries, telecommunications and media
segments are getting benefits out of a gigantic lift of this sector in
India.
 Entertainment sector in India has made a significant place for itself in
the global market. Indian television channels and serials are watched
and liked by people of different countries all over the world.
New technologies are being used in agriculture sector resulting in
improved yield of crops. Though the development is progressing
rapidly, still many basic problems like prevailing poverty in rural
areas, menace of corruption and instability of the government in the
political arena are a cause of concern and steps should be taken to
bring solution to such problems so as to reap the benefits of
globalisation in the best possible manner.

Global Code of conduct for Business Ethics

Code of conduct in business is important to organize certain business
activities. These days code of conduct in business are developed by
many business houses and also by the corporate sector(see, for
example, the code of conduct in business of Jet Airways, Coca Cola
Company, Dow, and so on All codes of conduct in business are based
on the core values of the company, its mission and vision. Core values
are the guiding practices of the company and they are meant to be
strictly adhered to by its employees and stakeholders
The basic purpose of code of conduct in business is to ensure a proper
ethical behaviour in the conduct of the business.
Different companies may have different code of conduct in business;
however, the basic business
codes remain the same. The following are the standard codes of
conduct in business:
● Compliance with laws, rules and regulations.
● Working with honesty, integrity and diligence and on the basis of
work ethics.
● Respect and honour for human rights.
● everybody should follow the policy of the company and nothing
should be done against the
Company.
● Confidentiality should be maintained and there should be no
disclosure of confidential information
at any cost.
● Maintenance of company’s goodwill, assets and property.
● There should no manipulation, abuse or misuse of power and
position and non-acceptance of
Bribery and favour from others.
● Political connection and subscription to political parties are
discouraged.
● No discrimination and harassment against any employee or
stakeholders.
● Competition with another company can be done with honesty and
fair trade practices.
● Non-development of cartels and monopoly practices.
● No insider trading.
● there should be accountability and transparency.
● adequate disclosure of useful information inside the company is
needed.
● The company should serve well the consumers and ensure adequate
after-sales services.
● Goods to be produced by the company should be qualitatively good,
reliable and moderately
priced.
● To maintain adequate and effective health and safety measures and
employees’ privacy.
● The company employees are to protect the environment and help
the government in the
achievement of sustainable development.
● The company has to carry out the corporate social responsibilities.
● The whole business will be run on ethical principles for all
concerned.
The aforesaid codes will have to be strictly observed by all concerned
and if there is any willful
violation of the code, the offender will run the risk of departmental
enquiry and even dismissal from
the service. Any confl ict in this matter may be brought to the notice
of the supervisor. If any other
regulation comes in confl ict with the code of conduct in business, the
code will be overpowering.
We commit to inspiring our talented professionals to deliver
outstanding value. Respect, diversity and fair treatment
• We foster a culture and working environment where our people
treat each other with respect, courtesy and fairness, promoting equal
opportunity for all.
• We encourage and value a diverse mix of people, viewpoints,
talents, and experiences
. • We create inclusive working environments that not only address
individual needs, but allows our people to utilize
their unique strengths.
• We do not tolerate discrimination or harassment of any nature on
the grounds of gender, race, religion, age, disability, gender identity,
sexual orientation, or those categories protected by local law in any
of our working environments. Professional development and support
• We invest in our people to develop the professional knowledge and
skills necessary for them to effectively perform their roles.
• We help our people reach their potential through investments in
personal and professional development and support programs.
• We provide a safe work environment for our people and expect our
clients to do the same

We commit to contributing to society as a role model for positive

change.
Anti-corruption
• We are against corruption and neither make bribes nor accept
them, nor induce or permit any other party to make or receive bribes
on our behalf.
• We support efforts to eradicate corruption and financial crime.
Responsible supply chain
• We do not condone illegal or unethical behaviour by our suppliers,
contractors and alliance partners.
• We select suppliers through fair procurement processes. Social
responsibility
• We contribute to society and communities by engaging with non-
profit organizations, governments, and other businesses to make a
positive impact on local, national or global challenges.
• We support our communities in a variety of ways, such as donating
money, providing pro bono client services and supporting the
volunteering of time by our people.
• We support efforts to drive sustainable development, and we
respect human rights standards. • We recognize that our business
operations and our provision of services may at times impact the
environment and we work to reduce harmful effects they might have.
Responsible supply chain
• We do not condone illegal or unethical behaviour by our suppliers,
contractors and alliance partners.

• We select suppliers through fair procurement processes.

Social responsibility
• We contribute to society and communities by engaging with
nonprofit organizations, governments, and other businesses to make a
positive impact on local, national or global challenges.
• We support our communities in a variety of ways, such as donating
money, providing pro bono client services and supporting the
volunteering of time by our people.
• We support efforts to drive sustainable development, and we
respect human rights standards. •
We recognize that our business operations and our provision of
services may at times impact the environment and we work to reduce
harmful effects they might have.

Unit 4: Corporate Social Responsibility (CSR)

4.1 CSR and business ethics
 4.2 CSR and corporate governance
4.3 CSR models; drivers of CSR

What is CSR?

CSR is the responsibility of the corporate sector to contribute to

some activities that increase social welfare.
The following are a few important definitions of CSR :.
CSR “refers to the obligations of businessmen to pursue those
policies, to make those decisions or to follow those lines of actions
which are desirable in terms of the objectives
and value of our society”. (Bowen, p. 6).

CSR “is the ethical behaviour of a company towards society”.

CSR “is the continuing commitment by business to behave ethically

and contribute to economic development while improving the quality
of life of the workforce and their families as well as of the local
community and society at large”.

CSR “is understood as the obligation of decision-makers to take

actions which protect and improve the welfare of society as a whole
along with their own interests”.
The Research and Policy Committee of the United States defined
CSR in the following way:
“Private business functions by public consent, and its basic purpose is
to serve constructively the needs of society to the satisfaction of the
society” (Webb, Ch. 28).

TYPES AND NATURE OF SOCIAL RESPONSIBILITIES

CSR can be understood in both micro and macro perspectives.

In the micro perspective, it is the responsibility of one business unit

or company; in the macro perspective, CSR encompasses the whole
gamut of corporate social activities where the entire corporate sector
is engaged, and also in some cases, the involvement of government is
ensured.

There are the following three basic constituents of CSR:

1. One part of CSR is to supply socially necessary products, create
employment opportunities and contribute towards a sustainable
economic development.
2. To make the desirable social changes and respond to the changing
values and priority patterns of the society.
3. Actively contribute towards the improvement of social environment
and discontinue or internalise all the negative externalities (harmful
impact).
There are+ basically the following five types of social
responsibilities:
1. Responsibilities towards the Society
2. Responsibilities towards the Government
3. Responsibilities towards Employees
4. Responsibilities towards Shareholders
5. Responsibilities towards Consumers
Table 17.1 highlights the various types of social responsibilities.

Apart from the aforesaid five basic areas of CSR, some minor areas
are also taken note of by many authorities. For instance, Joseph W.
Weiss (2009, pp.126-140) considers ethical advertising as a part of
corporate social responsibility. As a matter of fact, unethical
advertising has become so problematic for consumers that they feel
cheated by the business houses
There are basically six strategies in the adoption of CSR:
First, the firm shows reluctance to adopt any social work or project
(rejection strategy).
Second, the firm vehemently opposes any CSR based project unless
and until the pressure comes from external sources. This strategy is
called adversary strategy.
Third, in the case of resistance strategy, the firm works slowly and
tries to show that it cannot carry on corporate social responsibility due
to a lack of certain factors. However, if the firm is pressurized by the
government, then it yields and accepts the project.
Fourth, once the CSR is accepted the firm follows the compliance
strategy and tries to finish
the project.
Fifth is the accommodation strategy. This strategy helps the fi rm to
accommodate the requests of the shareholders or Government
agencies to work in certain ways for the fulfilment of CSR.
Sixth, is the proactive strategy to go ahead with the project and
complete it according to the priority pattern of the firm.

MODELS OF CORPORATE SOCIAL RESPONSIBILITY

There are a few models available on CSR. In this section, these will
be discussed and the outline for a new model will be provided:
1. Friedman Model
2. Ackerman Model
3. Carroll Model
4. Environmental Integrity and Community Health Model
5. Corporate Citizenship Model
6. Stockholders and Stakeholders Model
7. towards a New Model of CSR
Friedman Model
Milton Friedman, a renowned economist, is of the view that to ask a
businessman to contribute towards social development is to ask him
to steal from the shareholder’s money to perform social responsibility.
According to Friedman, a businessman has no duty other than
developing his business. If he looks after his business well, he is
performing a social as well as a moral duty.
Friedman, perhaps, develops the idea of Kantian deontic philosophy
by saying that one should perform his duty well as is required by his
profession.
So, a businessman has no other social responsibility to perform
except to serve his shareholders and stockholders.
This view has been made clear by him at many places (1962 & 1973).

Ackerman Model
Robert Ackerman and Robert Bauer developed a model in 1976.
The model has emphasised on the internal policy goals and their
relation to the CSR.
This model depicts four critical stages to arrive at the evaluation of
the social performance audit stage. The four stages involved in CSR
are briefly explained below:
The first stage is marked by the identification of the project that will
be chosen for social Delivery. It also formulates strategies for the
project. The top managers of the company get to know the most
common social problem and then express a willingness to take a
particular project which will solve some social problems.
The second stage is devoted to the intensive study of the problem by
hiring experts and getting their suggestions to make it operational. Till
this stage, the company does not declare the adoption of the project. It
is not made public. The intention to take up the project remains only
internal to the firm.-
The third Stage is very critical for the project as it is not only made
public but is also implemented.
However, at the initial stage, the work for the social project goes on
very slowly until the Company gets advised by the public body
(government). Ackerman advises the managers to take up the project
actively and work hard at the early stage so that managerial discretion
can play its proper role over the entire period of the social project.

The fourth Stage is the stage of evaluation. In this stage the needs of
the society are considered vey minutely and problems and issues are
addressed.
In the Ackerman model, there is an explicit recognition of various
types of learning strategies
for the fulfilment of the project. There are specialized learning,
administrative learning,
Organizational commitment and institutionalisation of the project
philosophy, and also a systematic evaluation of the firm’s
performance of the social responsibility.

Carroll Model
It is one of the most popular models developed by A.B. Carroll in
1991. The mode is based on the idea that there are four levels of
social responsibility. These are:
● Philanthropic
● Economic
● Legal
● Ethical
The philanthropic requirement necessitates good works including
donation, gifts, helping the poor and so on, so that the goodwill of the
company is spread out in the community.
These activities are not required by the business but it promotes
social welfare and goodwill.
Ethical responsibility requires that the firm is following certain moral
standards and ethical values to deal with its stakeholders including the
employees, customers, suppliers and the like.
At the very basic level, each firm has an economic responsibility to
maximise net profits so that it can pay reasonably well to provide
returns on the investment, to pay the shareholders and other investors.
This is an essential social responsibility. Another social responsibility
is to remain legal by abiding the laws of the land. Every firm needs to
obey the government rules and regulations relating to their business
activities.
Environmental Integrity and Community Health Model
This model has been recommended by corporate firms in recent years
in the United States (Redman,2005). There is a hidden business
agenda inbuilt in this model. Business people believe that if the
corporate sector can positively contribute to the environmental
integrity and human health, there will be greater opportunities for the
expansion of business in general and this will, in turn, maximise
profits. Healthy people can work more and earn more. So, consumers’
spending will increase and so will the profit. Therefore, in the same
form CSR is beneficial for the corporate sector. What then is required
is the socially responsible investment portfolio, and a good
relationship with the community which is always beneficial for the
business. Thus, CSR in a particular form is welcome.
Corporate Citizenship Model
The model posits that when a business behaves in a way that satisfies
philanthropic, legal and economic responsibilities well in the
corporate world, it is entitled to corporate citizenship (Maignan et al.
1999, p. 457). To be a corporate citizen, a corporate firm has to satisfy
four conditions: consistently satisfactory and sustainable economic
performance, ethical actions and behaviour beyond the minimum
requirements of law of the land, and voluntary social actions that
enhance the reputation of the company. A particular fi rm’s
commitment to corporate citizenship requires the fulfilment of certain
social responsibilities. Such a citizenship stems from a particular type
of philosophy, and depending on the extent to which it is followed by
a firm, it may or may not qualify to have a corporate citizenship.
Stockholders and Stakeholders Model
The model (see Figure 17.1) discusses (Buono and Nichols, 1990)
two types of social orientations of a firm towards its economic
stockholders and social stakeholders. There are two types of motives
that underlie these two orientations. These motives are: self-interest
and moral duty. Productivism and philanthropy are the two
orientations of the stockholders. Progressivism and ethical idealism
are the orientations of stakeholders. Productivists believe that the only
mission of a corporation is to maximise the self-interest (profit). They
are motivated by the idea of free market ethics and it is argued that
free market generates many important social advantages, as was the
view of Adam Smith. Philanthropists who entertain stockholders’
views propose that helping the poor and the needy can be justified in
terms of morality. However, their motive towards CSR is dominated
by moral obligations and not self-interest. But, they believe that the
primary social duty of a corporation is to obtain profits. In the
stakeholder’s model the dominant ideas are progressivism and ethical
idealism. To ethical idealists, the line of demarcation between
business and society is rather thin, and they believe in the sharing of
corporate profits for humanitarian activities. According to ethical
idealists, CSR is justified when business corporations support
stakeholders’ interests. Progressivists are of the opinion that although
corporate behaviour is basically motivated by self-interest, yet there
should some scope for a social change that can transform the society
towards becoming more humanistic.
Progressivists are in favour of enlightened self-interest where, in spite
of self-interest, socially good works can be undertaken. It is
interesting to note that each of the four modes of the model (see Fig.
19.1) explain social responsibilities in terms of different systems of
beliefs.
Towards a New Model of CSR
An outline of a model of CSR will be discussed here. This model will
concentrate on two critical factors that make the undertaking of CSR
possible or impossible. These two factors are: a company’s
financial capability and its ethical rooting or its absence. Obviously,
the financial prowess of a company is a positive function of its net
profit such that the higher the net profit, the higher is the
financial capability of a company to undertake CSR. However, it is
not alone the financial capability that makes the undertaking of CSR a
reality. There is another factor, the ethical rooting.
If the company is ethically rooted and it is explicitly recognised in its
mission/vision statements,
2the organization can and does undertake CSR.
Precisely, there are five stages in an organizational continuum that
determines the time span of
CSR, if at all undertaken. These five stages (processes) are:
● ethical rooting,
● identifi cation of CSR project,
● policy design and
● decisions.
● implementation of the project and, ethical/social auditing
(evaluation).
In order to decide whether or not a CSR will be undertaken, the
interaction between two factors
will be decisive: the ethical rooting and the fi nancial capability of the
company. If the ethical
rooting and financial capabilities are strong, most probably, the
corporation will undertake CSR.
One must assume in this case the absence any negative externality infl
fencing the decision about
the project. If one arranges the information in a matrix form (shown in
Fig.17.2), one can get the
following four situations:
1. CASE I: Ethical Rooting Strong + Financial Capability
Strong: CSR Undertaken (+)

2.CASE II: Ethical Rooting Strong but Financial Capability Poor:

CSR Not Undertaken (−)
3. CASE III: Ethical Rooting Poor but Financial Capability Strong:
CSR Not Undertaken (−)
4. CASE IV: Rooting Poor + Financial Capability Poor: CSR Not
Undertaken (−)
The idea of CSR is rather new. It started as an organized movement
and a code of business conduct in the 1960s in the United States. In
the 1970s, the code was formally approved and accepted. It was an
overall reaction against corporate dishonesty and scandals in many
countries including both developing and the developed ones. CSR is a
gesture of showing the company’s concern and commitment towards
a society’s sustainability and development. CSR reporting is a method
of communicating with the society of the company’s desired action or
the action actually performed by it. On the basis of such feedbacks,
the company can mould, change or partially or wholly modify its
contemplated CSR plan. The reporting has triple bottom lines that can
be expressed by three Ps (profit, people and planet).
CSR is an ethical issue and, therefore, is normative in character. CSR
will be different for
Different types of business institutions and also for different levels of
society. There is no straightjacket formula for CSR. In a sense, CSR is
a relative concept.
There are, indeed, many CSR principles, strategies and models. One
of the best principles for discharging corporate social responsibility is
to have respect for human rights. This respect should be explicitly
shown in the public. There should also be non-discrimination and
social capital formation. Most of the models (except the Friedman
model) emphasise on the commitment and ethicality of the company.
The model presented by the present author lays more stress on the
ethical rooting and the financial prowess of the company. There is no
unique and ideal practice of CSR. It is conditioned by many political,
social, institutional, economic and cultural issues. It is a type of
community investment and a process of creating social capital. CSR
has been accepted as one of the basic responsibilities of businesses
throughout the world. The need for CSR has been felt by different
sections of society like consumers, employees, government, suppliers
and stakeholders.
The Sachar Committee is of the opinion that the Company Act should
be amended in a suitable
manner so that every company will be compelled to send a social
report along with the director’s
report to indicate all the CSR activities carried out by it every year.
It is gratifying to note that in the 1980s, a signifi cant trend was
noticeable in the area of CSR in
India. Among others, the TISCO invited many experts to prepare a
social audit for the company
368 Business Ethics and Corporate Governance
and the fi ndings were made public. In recent years, it is observed that
many established Indian
 companies are motivated by philanthropic considerations and
regularly spend a signifi cant amount
of their earnings on CSR.

Social Responsibility and Ethics

 Written by Lena Eisenstein
The goal of business is to get the maximum profit for owners and
shareholders. That’s a simple statement that doesn’t describe how
companies can and can’t go about their business. The pursuit of
profitability doesn’t give companies the liberty to override the law or
harm groups or individuals in the process. The two terms are often
used interchangeably, but they have different meanings.
The difference between business ethics and social responsibility is an
important issue for every business consider. While the forms that
ethics and social responsibility take will vary significantly from one
company to another, each of them has a place within every
organization.

What Is the Difference Between Business Ethics and

Social Responsibility?

Defining Business Ethics

Ethics comes from the Greek word, ethos, which means moral

character. Ethics means knowing the difference between right and
wrong and continuing to do the right thing. Ethical business decisions
can be based on your conscience or based on principle. In either case,
individuals make their own decisions according to the laws of the land
or according to their core beliefs.
In a business sense, corporate leaders must follow the right behavior
to benefit the good of everyone including the shareholders,
stakeholders, employees, customers, and the community. Business
activities shouldn’t harm people, products, or services and they should
help to protect the reputation of the company.
Consultants Doug Wallace and John Pekel from the Twin Cities in
Minnesota say that business ethics are critical in times of fundamental
change such as we are in now. During good and stable times, it’s
common for good values to be taken for granted. By contrast, during
times of crisis or confusion, people’s ethics tend to guide their
behavior. The general response to that is to question and scrutinize
behavior to ensure that good ethics are being played out in the
workplace

Defining Social Responsibility

Social responsibility refers to businesses doing what they can to

benefit their communities. Societies set their own acceptable norms.
To be successful, businesses have to adhere to social norms and
expectations. Some values have eroded over time and that has left no
moral compass to guide leaders through complex social dilemmas
over right and wrong. That means that businesses are on their own to
decide the ways that they can best demonstrate social responsibility
and give back to their communities.

Bringing Business Ethics and Social Responsibility into

the Workplace

To ensure good business ethics and social responsibility, many

companies establish an ethics management program that’s in keeping
with their mission, vision, and values. Each ethics program is unique
to the organization. A corporate ethics program is designed to teach
employees the values and policies which set the behavioral standard
for those who work and in and around the company.
A company’s mission, vision, and values form a credo that describes
the highest set of values that a company operates under. They
describe the types of thoughts and behaviors that employees and other
stakeholders should aspire to. A formal code of ethics is a little
different. It’s a policy that states what employees and others should
not do. A code of ethics is specific to those who work under it. For
large companies, they may establish specific codes of ethics for
individual departments and have one general code of ethics that
everyone must abide by.

Human resource departments and legal departments typically

collaborate on devising an appropriate code of ethics. At the same
time, codes of ethics are more than a legal mechanism. Ethical
behavior is part of the corporate culture and the appropriate language
and behavior start at the top.
Business ethics can be challenging because our decisions are often a
reflection of our own beliefs and cultures in addition to the corporate
culture. Relationships are complicated and there’s not always one
clear-cut appropriate answer. Cultural assessments can be a valuable
part of understanding whether certain behaviors are in keeping with a
company’s code of ethics.

Social Responsibility in Business

We live in a more socially responsible period than ever before.

Corporate social responsibility is connected to what today’s
companies call ESG—environmental, social, and governance. ESG is
a practice that incorporates sustainability into a company business
model.

Companies that embrace ESG find that it improves their brand and
ultimately increases profitability. Customers of today are more
inclined to buy from socially responsible companies and employees
are more interested in working for socially responsible companies.
In research by Cone Communications, the study found that over 60%
of Americans looked favorably on companies that pursued social and
environmental change whether it was regulated or not. Almost 90% of
consumers in the survey indicated they’d be inclined to purchase a
particular product if it supported an issue that was close to their heart.
The study also showed that 75% of consumers refused to buy
anything from a company if it supported an issue they were against.
As the economy improves, society is beginning to expect corporations
to give back to their environments and communities. Besides going a
long way to boost a company’s branding and image, sustainable
practices can aid the financial bottom line. Using less packaging and
less energy in production helps to reduce production costs and
increase revenue.

There are four general and specific ways that companies can join their
efforts between business ethics and social responsibility. They
include:

1. Environmental efforts
2. Philanthropy
3. Ethical labor practices
4. Volunteering

Concluding Thoughts on the Difference between

Business Ethics and Social Responsibility

The expectations for good business ethics and corporate social

responsibility are at an all-time high. Most likely, those expectations
will continue to grow in the future. Since they are here to stay, it’s
wise to give employees a voice in what those expectations look like in
practice. To ensure that your company’s efforts are seen as genuine,
it’s important to review your expectations to ensure they dovetail with
the company’s mission and vision. Your involvement in such issues is
something to be proud of so be certain to promote your efforts and
make sure your customers are aware of it. Attention to business ethics
and corporate social responsibility creates a win-win situation for all
stakeholders.