Managing Ethics in

Business : Accountability,
responsibility and
corporate governance
Facilitator: Ravin Baburam
LEARNING OUTCOMES:
At the end of this lesson, the student will be able to:

• Evaluate business ethics from a business point of view

• Critique two views of the relationship between business and

society in a Capitalist, free market system

• Demonstrate knowledge of the validity of transferring notions

of individual responsibility to corporate responsibility

• Evaluate proposals to improve corporate governance

(accountability in business organizations)
INTRODUCTION:
• Responsible: who
does the work or
action
• Accountable: who
answers for the
outcome
• E.g. a chef is
responsible for
cooking a meal, but
the restaurant
manager is
accountable to the
customer for a burnt
meal.
Popular and unexamined
notions about business
ethics:
• Ethics is a personal and
individual affair, not a
public or a debatable matter
• Business and ethics do not
mix
• Ethics in business is relative
• Good business means good
ethics
https://www.linkedin.com/pulse/ethics-profit-dipesh-rajput
Two Opposing Views:
• The ‘Business of Business is Business’ View:
• The classical view of business as expounded by Adam Smith in
his Wealth of Nations (1776) referred to the ‘hidden hand’ –
the more a person pursued self-interest the more the person
would unwittingly enrich society.

• The Social Contract View

• The social contract view argues that business serves as the
justification for the existence of the corporation. Corporations
exist by cooperation and commitment of society. Business
draws its employees from society, sells its goods to society
and is given its status and licence to operate, by society.
Stakeholder Theory:
• Stakeholder was invented in the early 1960s as a deliberate
play on the word stockholder / shareholder signifying that
there are other parties having a stake in the decision-making
of the modern publicly held corporations in addition to those
holding equity positions.
• A stakeholder in an organization is defined as any group or
individual who can affect or be affected by the achievement of
the organisation’s objectives.
• Examples of stakeholder groups beyond shareholders and
directors are employees, suppliers, customers, creditors,
competitors, governments, communities and the
environment.
Individual and Corporate Responsibility
• Ownership in corporations are held in indirect forms of
shareholdings not legally identified with people.
• They are separate from people and are treated as
‘juristic’ persons, with perpetual succession – the
company has no expiry date and can last forever.
• The company has the legal right to use its assets as led
by management regardless of who the shareholders
are.
• Another feature is that shareholders and employees
enjoy limited liability and absolve themselves from any
debts which become that of the corporation.
Source: https://pediaa.com/what-is-the-difference-between-social-responsibility-and-corporate-social-responsibility/
Individual and Corporate Responsibility (cont.):
• Friedman states that only people, (individuals, proprietors
and managers), not businesses, have responsibilities.
• He maintained that when stockholders bring a company into
existence through purchasing stocks, and it is the function of
the corporate managers to make a profit for the shareholders
• It is a moral obligation for managers to serve as fiduciaries
for profit making for investors – not to use stockholders’
money for social responsibility purposes.
• It was his view that if shareholders want to give to social
causes they can make their own decisions to use their money
to do so.
Individual and Corporate Responsibility (cont.):
• Managers are seen as trustees or agents of shareholders who
in turn are principals whose interests’ managers must serve.
• Managers carry out actions that ideally should be carried out
by shareholders themselves.
• Another debatable matter is that of the other interests of
managers that take precedence over interests of shareholders.
• How do shareholders monitor managers’ actions?
• How do shareholders guarantee that managers have obeyed
and made correct decisions?
Accountability and Responsibility:
• Goodpaster & Matthews disagree with the view that
responsibilities of ordinary persons and those of artificial
persons like corporations, are separate.
• They regarded these views as impediments to the
development of business ethics “both as a field of inquiry and
as a practical force in managerial decision-making” (Chryssides
& Kaler : 267).
• Corporate behaviour can be evaluated according to ethical
standards just as individual behaviour is.
• Corporations act with intentionality and should be held
accountable for their actions not only because they are legally
and morally liable for their actions but they should also
perform socially responsible acts in their capacity as good
citizens.
https://www.niagarainstitute.com/blog/responsibility-and-accountability-in-management
 PESTEL ANALYSIS:

Corporations as legal entities must maximize profits for owners and shareholders, and also
respond to political, economic, social, technological, legal and environmental claims of a host
of stakeholders. They can do this by completing a proper PESTEL analysis.

https://www.niagarainstitute.com/blog/responsibility-and-accountability-in-management
Corporate Governance:
• Some argue that corporations are accountable only to their
Boards of Directors who are shareholders who should entrust
their governance to their CEOs and other leaders, view the
corporation as private property. As joint holders of shares
they are entitled to receive full proceeds.
• If the corporation is a public institution sanctioned by the
State for some social good the right to incorporate is a
privilege granted by the State and the corporate property has
an inherent public aspect.
• It is not merely a private association created for the purpose
of personal enrichment, but a public enterprise intended to
serve some larger social good e.g. Telkom, Transnet, etc.
Qualities of ‘acceptable’ managers:
• Aware of the importance of good
principles and ethical standards in the
company.
• Are serious about business ethics and
corporate social responsibility.
• Proactive in working out business https://www.forbes.com/sites/carolinecastrillon/2021/07/18/this-is-how-to-transition-from-
manager-to-leader/?sh=756eb5d91123

strategies that could be linked to ethics

and be able to balance non-economic
values with economic interests.
• Steer clear of ethically questionable
business opportunities or individuals.
• Ensure that the values and behaviour
of employees and new recruits match
those of the company with integrity
and high ethical standards. https://www.forbes.com/sites/karlynborysenko/2019/01/04/ten-things-new-
managers-need-to-know/?sh=3041eaf86b9a
Social Responsibility:
• The social responsibilities of business are also located in its
basic economic functions around matters of production,
provision of jobs and general economic growth. These also
carry social responsibilities, e.g. safety standards of products,
well-being of workers and serving consumers.
• Business has to be sensitive to changing social values and
priorities, e.g. environmental conservation, employment
policies, expectations of customers, etc.
• In addition to all this, business should become involved in
actively improving society.
Ways that business can show social responsibility:
• By being ethically aware and articulating non-economic
values
• By contributing to non-governmental and non-profit
organizations that strive to improve the plight of society
invariably under trying circumstances
• By making every effort to maintain highly desirable standards
of operation as these affect products, employees, consumers,
the environment, etc.
• By being proactive and including social responsibility and
accountability into strategic plans and policies and by having
policies and procedures in place to deal with social issues. E.g.
due to load shedding, traffic increases and companies can
allow a later start for employees e.g. 8:30am or even 9am.
Examples:
• Oil spills from tankers around coastlines that cause incredible
environmental damage, e.g. the fate of thousands of penguins
along the coast of Cape Town.
• Who is accountable? The captain? The oil companies?
• A growing number of unsolved disasters of plane and train
crashes, bus and coach accidents, in all of which thousands of
lives are lost.
• Are these due to human error or are there other causes not
revealed?
• Gas explosions in S.A. mines have claimed hundreds of lives.
While government regulations exist and the cause of
explosions is known, much more responsibility has to be
taken by mining companies to mitigate risk.
 OIL SPILL
AT SEA

https://www.nationalgeographic.com/science/article/bp-oil-spill-still-dont-know-effects-decade-later
Summary:
• This section focused on the corporation (used interchangeably
with terms such as company, firm and business organization)
in a capitalist economy in relation to ethical questions and
issues.
• Social responsibility, corporate governance and accountability
were examined as affected by changing patterns of ownership
and control.
• The two opposing views of business and society discussed,
offered a clear terrain in which pros and cons of issues of
responsibility, accountability and governance could be argued.
RACI Model / Chart:
Example of who is Responsible, Accountable, Consulted or
Informed for building a website
ACTIVITY:

Scenario:

• Discuss who is really to blame for the Eskom load shedding

disaster.

• How do we as a country fix this problem?

• Who should be involved?

• Where should the funds or finances come from?