1. Ethics and CSR

8/8/2019 1. Ethics and CSR

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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


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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 unjustactions of business persons.


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2. Sources of Ethics: Value Systemwith Reciprocity and Mutual Help

BusinessEthics

Legal

SystemCulture

Religion


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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 fundamentalprinciples secular ethical doctrine and the

principle of reciprocity, preach the necessity

for an orderly social system, emphasize socialresponsibility for general welfare


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2.3: The Legal System

Laws are rules of conduct, approved bylegislatures 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


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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 andthefts; companies prevent deterioration ofrelationships, damage to reputation, decline inemployee productivity, creativity and loyalty

Managing ethically means managing with integrityand better decision making, working in harmony withsociety that prescribes certain norms that are binding

on business and Ethically strong companies are profitable

organizations, too since ethical considerations areconsistent with business pursuits, including profitearning.


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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


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4.1: Ethics is Personal,Confined to Self

Every citizen has/should have the constitutional right todecide what is right and what is wrong

But individuals 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 andstandards)

Organizational ethics are the summation of moralbeliefs of individual employees; organizations do notcommit crimes, individuals do.


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4.2: Business and Ethicsdo 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 integralpart of the society, which has principles, norms andvalues and cannot allow businesses to act amorallyand create chaos


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4.3: Ethics in Business is Relative

What is right or wrong is determined by what thesociety 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 ininternational business: relativism may be carried toany logical extreme and create complications ininteractions, communications, transactions and

negotiations; let each persons values remain validfor him or her, businesses must try to create asynergy of the value systems.


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4.4: Good Business Means Good Ethics

Executives and organizations that maintain a goodcorporate 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


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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


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5.1: Ethical Dilemmas

One of the most important activity in managing ethics is theresolving of ethical dilemmas emanating from

Transfer of operations of a company from one country toanother (when cultures differ), face problems of a hostcountry where industries are relocated to avoid problems

in the home country; Transfer pricing (setting prices of goods and services soldby one member of a corporate family to another, such asfrom a parent to its subsidiary in a foreign country(because of difference in taxation);

Transfer of technology (should a country buy thetechnology even if it has no use of it?)

Fixation of wages by a multinational company toemployees of the host country (how to establish parity?)


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5.2: Strategies in Managing Ethics

6 significant strategies:

1. Commitment from top management

2. Having a Code of Ethics3. Constituting Ethics Committees

4. Conducting Ethics Training Programs

5. Having a whistle blowing system in place

6. Enacting legislation outlawing unethical

conduct


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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


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5.4: Ethics Committees, Ethics Training,

Whistle-blowing and Laws

Companies can form ethics committees,sometimes high level ones, for advise on ethicalissues

All large companies in developed countries nowprovide training in ethics for their employees

Whistle-blowing enables an employee to tip offthe top management about misdeeds of any

person; protect the identity of the caller

Laws represent a societys attempt to formalize orto reduce to written rules, ethical principles; everycountry does have its own laws


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6. Social Responsibility

While ethics is a system of moral principles a sense ofright and wrong, the goodness and badness of actionsand motives and consequences of these action, socialresponsibility of business (CSR) is its obligation totake 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, automationand the like) has social implication;

CSR is the commitment to contribute to sustainabledevelopment, working with employees and theirfamilies, the local community, and the society toimprove their quality of life in a way that are good forbusiness.


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6.1: Why CSR?

CSR is not merely a philanthropy: 4 interdependent factors and the areas(under them) influenced by CSR activities

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.

Factor conditions: the availability of trained workers, high qualityinstitutions of science and technology, adequate physical infrastructure,transparent and efficient administrative processes and natural resources

Demand conditions: sophisticationand size of the local market, andappropriateness of product standards

Context for strategy and rivalry: rules, incentivesand norms governing competition in a nation orregion that influences productivity; policies thatencourage investment, protect intellectual propertyopen up local markets for trade, reduce corruptionto make a location attractive for business


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6.2: Case against CSR

CSR relates to public expectations and makes it easy forcorporations to operate in a new environment. But the idea of

CSR is opposed alsobecause 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


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7: A few specific issues of

ethics in business

Bribery and

corruption

Restructuring and

layoff

Privacy

Job discrimination

Performance appraisal

Sexual

harassment

Wages

Safety and health

Ethics

Dimensions


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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 practices1. 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


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7.2: Sexual Harassment

Sexual harassment means unwelcome sexual advances, requestsfor 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 sexualreferences are too common in workplace where men and

women work together


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7.3: Wages

An ethical issue is the paritybetween remuneration ofemployees 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 sameorganization with same responsibilities

Another ethical issue indirectly related with wages is the

imposition ofrestrictions 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.


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7.4: Safety and Health

Business ethics requireA. 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


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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 toimprove the ratees effectiveness


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7.6 Privacy

Privacy refers to protecting an employees private life(religious beliefs, political and social beliefs, personallife style) from intensive and unwarranted actions;privacy empowers and enables people. Interventionsin privacy:

Information technology AIDS testing

Whistle-blowing (without sufficient grounds, and alsokeeping unattended)

Drug-testing Genetic testing (for ones inherited characteristics and

certain illness)


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7.7Restructuring and Layoff

There are ethical implications in the process by whichtermination 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?


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7.8 Bribery

Bribe is a remuneration for the performance of an actthat is inconsistent with the work contract or thenature of work one is expected to perform; it ispayment made with an intention to corrupt.

Besides being morally wrong, bribery is economicallyundesirable, too. The reasons are:

An economy based on bribery does not provide openaccess 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.

1. Ethics and CSR

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