Outline:

Ethics and Social Responsibility

Definition of Ethics
Sources of Ethics
Care for Ethics in Business
Myths about Business Ethics
Managing Ethics
Corporate Ethics and the Concept of CSR
Some specific issues of ethics in business
 1. Ethics - Definition
 A system of moral principles – a sense of
right and wrong, the goodness and
badness of actions and motives and
consequences of these action.
 In business: Ethics is the study of good
and evil, right and wrong, just and unjust
actions of business persons.
2. Sources of Ethics: Value System
with Reciprocity and Mutual Help

Religion

Legal
Culture
System
Business
Ethics
 2.1: Religion
One of the oldest sources of ethical inspiration
Despite doctrinal differences, religions believe
that ethics is an expression of divine will
All great religions agree on fundamental
principles secular ethical doctrine and the
principle of reciprocity, preach the necessity
for an orderly social system, emphasize social
responsibility for general welfare
 2.2: Cultural Experience
A source of ethics because
Culture is a set of values, rules and
standards
• transmitted among generations – from
hunting and gathering stage, to
agricultural stage, to industrial stage, and
• acted upon to produce behaviors that fall
within acceptable limits
 2.3: The Legal System
Laws are rules of conduct, approved by
legislatures that
• Guide human behavior in any society
• Codify ethical expectations
• Are reactive i.e., keep changing as new evils
emerge; and
• Are expected to be adhered to by businesses
 3. Care for Ethics in Business:
Why do Ethics Matter in Business?
• Ethics matter to employees, stakeholders and public
• Employers save billions on law suits, settlements and
thefts; companies prevent deterioration of
relationships, damage to reputation, decline in
employee productivity, creativity and loyalty
• Managing ethically means managing with integrity
and better decision making, working in harmony with
society that prescribes certain norms that are binding
on business and
• Ethically strong companies are profitable
organizations, too since ethical considerations are
consistent with business pursuits, including profit
earning.
 4. Myths about Business Ethics

5 Myths
• Ethics is personal
• Business and ethics do not mix
• Business ethics is relative
• Good business means good ethics
• Information is neutral and amoral
 4.1: Ethics is Personal,
Confined to Self
Every citizen has/should have the constitutional right
to decide what is right and what is wrong
But individual’s choice of right and wrong cannot be
absolute
• It is constrained by public interest abuse and also the
demands of the organization (its norms, culture and
standards)
• Organizational ethics are the summation of moral
beliefs of individual employees; organizations do not
commit crimes, individuals do.
 4.2: Business and Ethics
do not go Together
• The notion now-a-days: “Honesty is the best policy”
– but not in business
• Businesses operate in a free market and strive hard to
earn profit
• Management of a business is based on ‘scientific’ not
ethical principles
But the argument is not acceptable:
Business cannot operate in vacuum, it is an integral
part of the society, which has principles, norms and
values and cannot allow businesses to act amorally
and create chaos
4.3: Ethics in Business is Relative
What is right or wrong is determined by what the
society says is right or wrong: something right
(ethical) in one place or context is wrong (unethical)
in another place or context.
But the relativist ethos is not acceptable in
international business: relativism may be carried to
any logical extreme and create complications in
interactions, communications, transactions and
negotiations; let each person’s values remain valid for
him or her, businesses must try to create a synergy of
the value systems.
4.4: Good Business Means Good Ethics
Executives and organizations that maintain a good
corporate image, practice equitable dealings with
customs and employees and earn profits by
legitimate, legal means are de facto ethical
However,
Organizations pursuing profit making cannot be
expected to display moral characteristics like
honesty, considerations and sympathy and usually,
there is no correlation between ‘goodness’ and
‘material success’
 4.5 Information is Neutral and Amoral
Information and computing are considered amoral
as forms of control, power and manipulation and
open access to information results in questionable
use of data bases, violation of privacy, targeting of
consumers for fraudulent advertising, pirating of
intellectual property, exposure of children to
pornography and the like.
But information and computing have productive and
positive dimensions, too: Exposure to information
can help empowerment and enlightenment and
increased efficiency
 5. Managing Ethics
Ethical management: Acting ethically as a manager,
by doing the right thing. Unethical management or
ethical misconduct has ended several promising
careers; actions of few individuals severely harmed
and even destroyed some businesses.
Management of ethics: managing activities that are
required of a firm or its employees to behave
ethically; managing the rules, procedures, policies
and values consistent with fairness and commitment
in relation to conditions at the workplace, external
environment, racial justice, human rights, and
interests of the stakeholders
 5.1: Ethical Dilemmas
One of the most important activity in managing ethics is the
resolving of ethical dilemmas emanating from
• Transfer of operations of a company from one country to
another (when cultures differ), face problems of a host
country where industries are relocated to avoid problems
in the home country;
• Transfer pricing (setting prices of goods and services sold
by one member of a corporate family to another, such as
from a parent to its subsidiary in a foreign country
(because of difference in taxation);
• Transfer of technology (should a country buy the
technology even if it has no use of it?)
• Fixation of wages by a multinational company to
employees of the host country (how to establish parity?)
 5.2: Strategies in Managing Ethics

6 significant strategies:
1. Commitment from top management
2. Having a Code of Ethics
3. Constituting Ethics Committees
4. Conducting Ethics Training Programs
5. Having a whistle blowing system in place
6. Enacting legislation outlawing unethical
conduct
 5.3: Code of Ethics
Key points of a Code of Ethics
• Respect basic human rights and freedom
• Minimize any negative impact on local policies
• Maintain high standards of local social involvement
• Transfer technology and promote R & D
• Protect the environment
• Ensure consumer protection
• Follow fair employment practices including more
employment opportunities for local people and security
of their jobs
 5.4: Ethics Committees, Ethics Training,
Whistle-blowing and Laws
• Companies can form ethics committees,
sometimes high level ones, for advise on ethical
issues
• All large companies in developed countries now
provide training in ethics for their employees
• Whistle-blowing enables an employee to tip off
the top management about misdeeds of any
person; protect the identity of the caller
• Laws represent a society’s attempt to formalize or
to reduce to written rules, ethical principles; every
country does have its own laws
 6. Social Responsibility
While ethics is a system of moral principles – a sense of
right and wrong, the goodness and badness of actions
and motives and consequences of these action, social
responsibility of business (CSR) is its obligation to
take actions that protect and improve the welfare of
the society as a whole, as well as of itself.
Every business decision (takeover, diversification,
opening a new branch, closure of a unit, automation
and the like) has social implication;
CSR is the commitment to contribute to sustainable
development, working with employees and their
families, the local community, and the society to
improve their quality of life in a way that are good for
business.
 6.1: Why CSR?
CSR is not merely a philanthropy: 4 interdependent factors and the areas
(under them) influenced by CSR activities
Factor conditions: the availability of trained workers, high quality
institutions of science and technology, adequate physical infrastructure,
transparent and efficient administrative processes and natural resources

Context for strategy and rivalry: rules, incentives

and norms governing competition in a nation or Demand conditions: sophistication
region that influences productivity; policies that and size of the local market, and
encourage investment, protect intellectual property appropriateness of product standards
open up local markets for trade, reduce corruption
to make a location attractive for business

Related and support industries: Add to the productivity of an organization

by facilitating easy access to high quality industries and services; increases
capability of local suppliers instead of promoting outsourcing.
 6.2: Case against CSR
CSR relates to public expectations and makes it easy for
corporations to operate in a new environment. But the idea of
CSR is opposed also because CSR may:
• Transfer costs to consumers and shareholders
• Prompt mandatory requirements
• Invite bureaucrate overseeing and demands on businesses
• Cause a fall in economic efficiency of businesses
• Is illegitimate because social issues are concerns not of
businesses but of the government
• Is not a function of businesses and should be left to non-
business organizations
 7: A few specific issues of
ethics in business

Bribery and Sexual

Job discrimination
corruption harassment

Restructuring and Ethics

layoff Dimensions
Wages

Privacy Performance appraisal Safety and health

 7.1: Job Discrimination
A discriminatory decision
• Is based on group membership, not on individual merit
• Is the result of prejudice or false stereotype
• Somehow harms those it is aimed at
Four common discriminatory practices
1. Individuals can intentionally discriminate out of prejudice
2. Organizations can discriminate having a prejudiced policy
3. Discrimination may be on the basis of sex or race
4. There can be workplace harassment, for example of women
 7.2: Sexual Harassment
Sexual harassment means unwelcome sexual advances, requests
for sexual favors, and other verbal or physical conduct of a
sexual nature. Three types:
1. Sexual threats – forces women to comply, lest their jobs are
at stake
2. Sexual offers – against incentives of jobs, pay rise or
promotion
3. Hostile work environment – sexual nature of conduct of the
co-workers causes a women to feel highly uncomfortable
and affect performance; flirting, sexy jokes and sexual
references are too common in workplace where men and
women work together
 7.3: Wages
An ethical issue is the parity between remuneration of
employees in home country with that of employees
working in a foreign location, as well as between
remuneration of a local employee and a foreign one
of same qualifications and working in the same
organization with same responsibilities
Another ethical issue indirectly related with wages is
the imposition of restrictions on free movement of
labor in a world where other factors of production –
capital, technology and machines move with much
less or almost no restrictions across the globe.
 7.4: Safety and Health
Business ethics require
A. Taking guard against accidents in work place caused by
• High speed and noisy machinery
• Production processes requiring high temperature
• An increasing reliance on chemical compounds
• The nature of such works as construction, underground and
under-water tunneling, drilling and mining
B. Prevention of cumulative trauma and disorders in jobs (wrist
pain, weakened eye sight, job stress and other health hazards)
Life is better than death, health is better than illness and
body integrity is better than injury
 7.5 Performance Appraisal
The assessor is expected to
• be objective and fair i.e., free of biases
• Avoid underrating or overrating employees
• Use ethics as the corner-stone of performance
evaluation, and
• Provide an honest assessment of the
performance and mutually develop a plan to
improve the ratees’ effectiveness
 7.6 Privacy
Privacy refers to protecting an employee’s private life
(religious beliefs, political and social beliefs, personal
life style) from intensive and unwarranted actions;
privacy empowers and enables people. Interventions
in privacy:
• Information technology
• AIDS testing
• Whistle-blowing (without sufficient grounds, and
also keeping unattended)
• Drug-testing
• Genetic testing (for one’s inherited characteristics and
certain illness)
 7.7 Restructuring and Layoff
There are ethical implications in the process by which
termination decisions are made and actions taken.
Issues on consequence in closure of a plant:
• How the plant for closure is chosen?
• How the news will be communicated?
• What will be the time-frame for completing the
layoffs?
• How the affected employees will be compensated?
 7.8 Bribery
Bribe is a remuneration for the performance of an act
that is inconsistent with the work contract or the
nature of work one is expected to perform; it is
payment made with an intention to corrupt.
Besides being morally wrong, bribery is economically
undesirable, too. The reasons are:
• An economy based on bribery does not provide open
access to all competitors on equal terms
• Bribery prone economies become less efficient –
resources are wasted, costs rise and along with costs,
prices too tend to hike.