Unit 3

Business Ethics and Social

Responsibility
 Chapter Outlook
• Ethical issues in management
• Roots of unethical behaviour
• Philosophical approaches to ethics
• Social responsibility of business
• Arguments for social responsibility and
• Friedman doctrine.

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 CONCEPT OF BUSINESS ETHICS
• Ethics means the acceptable principles, beliefs,
conscience, and morals.
• Ethics is the situation of integrity on actions and beliefs,
actions and principles and actions and set policies.
• It deals with moral principles and social values.
• Ethics in day to day life helps to classify, what is good and
what is bad?, what is right and what is wrong?
• Business ethics tells us to do good things and avoid doing
bad things for benefits of others.
• business ethics is adapting only right practices in real
sense suitable for their customers are beneficial for their
consumers
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 FEATURES OF BUSINESS ETHICS
• Code of conduct
• Framework for business activities
• Moral and social values based
• Relative term
• Focus on protection to stakeholders
• Voluntary
• Comprehensive
• Comparatively new concept
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 SIGNIFICANCE OF BUSINESS ETHICS
• Prevents malpractices
• Improved confidence
• Survival and growth of business
• Protection of consumers rights
• Develops good relations
• Good organization image
• Protects employees and shareholders
• Healthy competition
• Smooth functioning
• Supportive employees
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 ETHICAL ISSUES IN MANAGEMENT
• Unethical leadership
• Discrimination and harassment
• Unrealistic and conflicting goals
• Misuse of technology
• Manipulating information
• Anticompetitive behavior
• Health and safety
• Privacy
• Corporate spying
• Corruption and bribe
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 ROOTS OF UNETHICAL BEHAVIOR
• No code of ethics
• Fear of punishment
• Impact of peer influence
• Ignorance of management
• Setting a bad example
• Poor balance of authority and responsibility
• Overall culture
• Poor regulation

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 PHILOSOPHICAL APPROACHES TO BUSINESS
ETHICS
• The Utilitarianism (or Kantianism) approach
• The Rights approach
• The Justice and fairness approach
• The Virtue approach
• Caring approach

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 SOCIAL RESPONSIBILITY OF BUSINESS

• Social responsibility is the obligation of decision

makers on behalf of organization, to take decision
that assures actions, protect and improve the
welfare of the society along with their own
interest.
• It implies safeguarding the interest of stakeholders
of the entire society such as investors, customers,
employees, government and community.

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 APPROACHES OF SOCIAL RESPONSIBILITY

• Social obstruction approach

• Social obligation approach
• Social response approach
• Social contribution approach

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 AREA OF SOCIAL RESPONSIBILITY

A. Responsibility toward consumers

B. Responsibility towards investors
C. Responsibility towards employees
D. Responsibilities towards government
E. Responsibilities towards community

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 FRIEDMAN’S DOCTRINE OF SOCIAL
RESPONSIBILITY
• The Friedman Doctrine holds that business decisions regarding the
social responsibility rest on the shareholders, not the decision
makers in the organization.
• This means that the business decision makers always analyze
whether the shareholders decide to such an effect and accept the
social responsibility of the organization.
• In Nepalese context, most of the business organizations hire senior
managers (Chief Executive Officers) to take care the whole business.
• They may or may not participate in Board of Directors to make the
long term decisions regarding social responsibility of the business.
• Thus, CEOs wait and expect the clear directions and guideline by
their shareholders regarding social responsibility of the business.
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Influence of Friedman Doctrine
• Friedman Doctrine’s influences the corporate
decision regarding the social responsibility of the
business.
• As decision maker wait the decision of shareholders,
and the main interest of shareholders rests in their
wealth maximization, social responsibility focus of
the company remains low.
• This doctrine emphasizes on increasing profitability
of the business as the primary interest of the
shareholders is profit maximization.

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Criticism of the Friedman Doctrine
• The doctrine has focus on individualistic approach,
especially from the societal perspective.
• This doctrine has not considered the different
dimensions of social responsibility, for example,
legal compliance, moral value and virtue,
economic, social and financial perspective.
• One of the strongest critics is that this doctrine
gives highest priority and rights to the
shareholders regarding whether organization need
to invest in social responsibility or not.
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