Unit1- Business Ethics

1. Meaning of Business Ethics

What is ethics? And what is business ethics?

The word Ethics which is coined from the Latin word Ethics and Greek word Ethikos pertains to character. Ethics is thus said to be the science of conduct. As a matter of fact it deals with certain standard of human conduct and morals. The field of ethics involves systematizing, defending and recommending concepts of right and wrong behavior. Ethics is a mass of moral principles or set of values about what is right or wrong, true or false, fair or unfair, proper or improper what is right is ethical and what is wrong is unethical.

Defining Ethics
Peter F. Drucker writes There is only one ethics, one set of rules of morality, one code that of individual behavior in which the same rules apply to everyone alike. Philip Wheel Wright says Ethics is the branch of philosophy which is the systematic study of selective choice, of the standards of right and wrong and by which it may ultimately be directed. Ethics refers to the principles and standards of moral behaviour that are accepted by society as right versus wrong. To make the right choice, or at least the best choice from among competing alternatives, individuals must think through the consequences of their actions.

Ethics can be defined as a set of principles of right conduct. It can also be defined as a theory or a system of moral values. Ethics is the study of moral standards, the process of examining the moral standards of a person or society to determine whether these standards are reasonable or unreasonable in order to apply them to concrete situations and issues. The ultimate aim of ethics is to develop a body of moral standards that we feel are reasonable to hold standards that we have thought about carefully and have decided are justified standards for us to accept and apply to the choices that fill our lives.

Objectives of Ethics
The objectives of ethics are as below: 1. The very basic objective is to define the greatest good of man and establish a standard for the same. 2. Set/Establish moral standards/norms of behavior. 3. An overall study of human behavior: what is moral or immoral should be assessed. 4. Apply judgment upon human behavior based on these standard and norms. 5. Suggest moral behavior, Prescribes recommendations about Dos and Donts. 6. Ones opinion or attitude about human conduct is expressed in general.

Nature of Ethics
The nature of ethics can be explained by these points: 1. The concept of ethics is applied to human beings only as they have freedom of choice and means of free will. They can only decide the degree of ends they wish to pursue and the means to achieve the ends. 2. The study of ethics is nothing but a field of social science in which a set of systematic knowledge about moral behavior and human conduct is learned. 3. Ethics deals with human conduct which is voluntary not forced by circumstances or humans. So we can say that at the ground level ethics deals with moral judgment regarding set directed human conduct. 4. The science of ethics is a normative science. It is a search for an ideal litmus test of proper behavior. Normative science involves arriving at moral standards that regulate right and wrong conduct. Business ethics is the application of moral standards to business situations. Business ethics is a specialised study of moral right and wrong, as they apply to business institutions, organisations, and behaviours. Business ethics is a study of moral standards and how these apply to the social systems and organisations through which modern societies produce and distribute goods and services and to the behaviours of the people who work within these organisations. Business ethics, in other words, is a form of applied ethics. It not only includes the analysis of moral norms and moral values but also attempts to apply the conclusions of these analyses to that assortment of institutions, organisations, activities and pursuits that we call business. The 3 Cs of Business ethics:

1. Compliance: (The need for compliance of rules including): Laws principles of morality policy of the company 2. The Contribution (Business can make to the society): The core values Quality of products/services Employment Usefulness of activities to surrounding activities QWL 3. The Consequences of business activity: Toward environment inside and outside the organization Social responsibility toward shareholders, bankers, customers and emp loyees of organization. Good public image, sound activity- good image.

As this description of business ethics suggests, the issues that business ethics covers encompass a wide variety of topics. To introduce some order into this variety, it helps if we distinguish three different kinds of issues that business ethics investigates: systemic, corporate and individual. Systemic issues in business ethics are ethical questions raised about the economic, political, legal, and other social systems or institutions within which businesses operate. These include questions about the morality of capitalism or of the laws, regulations, industrial structures and social practices within which businesses operate. Corporate issues in business ethics are ethical questions raised about a particular organisation. These include questions about the morality of the activities, policies, practices or organisational structure which an individual company takes. Finally, individual issues in business ethics are ethical questions raised about a particular individual or particular individuals within a company and their behaviours and decisions. These include questions about the morality of the decisions, actions or character of such

individuals. It is helpful when analysing the ethical issues raised by a particular decision or case to sort out the issues in terms of whether they are systemic, corporate or individual issues.

What are the factors affecting business ethics? (Asked in End Term Exam2008)
personal code of behaviour/ individual characteristics companys policy Corporate culture and environment Leadership Governments Rules and regulations Legal environment ethical standards imposed on managers. ethical climate of the country etc

So then, what, is morality?

We can define morality as the standards that an individual or a group has about what is right and wrong, or good and evil. Moral standards include the norms we have about the kinds of actions we believe are morally right and wrong as well as the values we place on the kinds of actions we believe are morally good and morally bad. Moral norms can usually be expressed as general rules or statements, such as Always tell the truth, It is w rong to kill innocent people, etc. Where do these standards come from? Typically, a persons moral standards are first imbibed as a child from family, friends and various societal influences and associations. Later, as the person grows up, experience, learning and intellectual development may lead the maturing person to revise these standards. Some are discarded and new ones may be adopted to replace them. Through this maturing process, the person may develop standards that are more intellectually adequate and so more suited for dealing with the moral dilemmas of adult life.

What Are values?

Significance/ Importance/ Need / Benefits/ Advantages of Business Ethics

Why should businessmen be ethical in their conduct? Appearing to be ethical, it may be suggested, is simply good business. Other more specific significance of business ethics are as follows: Consumers are, arguably, more likely to buy from a company which can be seen to be acting ethically. Graduates are more likely to be attracted to companies which treat their mployees fairly and give customers a fair deal. Ethical business practice is a means of forestalling legislation and stringent government regulations. Business ethics requires companies doing their bit to contribute towards a just and fair society, while also ensuring that environmental pollution is brought under control. Another significance of business ethics stems from the fact that businesses need to retain the vast amount of social power entrusted to them by the public. Enhanced Goodwill and brand image Societal Welfare Long Term sustainability of business Increased profitability and market capitalization

Theories of Business Ethics

1. Stakeholder Theories The stakeholder theory of the firm is used as a basis to

analyse those groups to whom the firm should be responsible. In this sense, the firm can be described as a series of connections of stakeholders that the managers of the firm attempt to manage. A stakeholder is any group or individual who can affect or is affected by the achievement of the organisations objectives.

2. Social Contract Theory The social contract theory has a long tradition in ethical
and political theory. In general, this theory considers the society as a series of social contracts between members of society and society itself. The social contact theory in business ethics argues that corporate rights and responsibilities can be inferred from the terms and conditions of an imaginary contract between business and society.

3. Legitimacy Theory Legitimacy is defined as a generalised perception or

assumption that the actions of an entity are desirable, proper, or appropriate within some socially constructed system of norms, values, beliefs and definitions. There are three types of organisational legitimacy: Pragmatic Moral Cognitive.

Moral Development (Asked in End Term Exam-2011)

We sometimes assume that a persons values are formed during childhood and do not change after. In fact, a great deal of psychological research, as well as ones own personal experience, demonstrates that as people mature, they change their values in very deep and profound ways. Just as peoples physical, emotional, and cognitive abilities develop as they age, so also their ability to deal with moral issues develops as they move through their lives. In fact, just as there are identifiable stages of growth in the physical development, so the ability to make reasoned moral judgments also develops in identifiable stages. The psychologist Lawrence Kohlberg, for example, who pioneered research in this field, concluded on the basis of over 20 years of research that there is a sequence of six identifiable stages in the development of a persons ability to deal with moral issues. Level one: Preconvention Stages Stage 1: Punishment and Obedience orientation (Obey rules to avoid punishment) Stage 2: Instrument and relativity orientation (Follow the rules only if in own interest, Let others also do the same, Conform to secure rewards)

Level Two: Conventional Stages Stage 3: Interpersonal Concordance orientation (Conform to meet expectations of others, please others, adhere to the stereotypical images) Stage 4: Law and Order orientation (Doing right is ones duty, obey the law , ,uphold the social contract and order) Level 3: Post conventional, Autonomous, Or Principled Stages Stage 5: Social Contract orientation (Current laws and values are relative laws and duty are obeyed on rational calculations to serve the greatest no) Stage6: Universal Ethical Principles Orientation (Follows self-chosen universal ethical principles . In events of conflicts principles override laws)

Moral Reasoning (Asked in End Term Exam-2011) Moral reasoning refers to the reasoning process by which human behaviours, institutions, or policies are judged to be in accordance with or in violation of moral standards. Moral reasoning always involves two essential components: An understanding of what reasonable moral standards require prohibits value or condemn; Evidence or information that shows that a particular person, policy, institution, or behaviour has the kinds of features that these moral standards require, prohibit value or condemn There are various criteria that ethicists use to evaluate the adequacy of moral reasoning. First and primarily, moral reasoning must be logical. Second, the factual evidence cited in

support of a persons judgment must be accurate, relevant and complete. Third, the moral standards involved in a persons moral reasoning must be consistent Note: (for details on Moral development and Moral Reasoning, refer to M G Velasquez Unit-2 page no 27)

Moral Responsibility and Blame

The term moral responsibility is sometimes used to mean moral duty or moral obligation. Moral reasoning, however, is sometimes directed at a different kind of judgment: determining whether a person is morally responsible for an injury or for a wrong. A judgment about a person's moral responsibility for wrongdoing is a judgment that the person acted intentionally and so should be blamed, punished, or forced to pay restitution. We are concerned here with the kind of moral responsibility a person has when we say a person is to blame for something. "Morally responsible is used to mean to blame. Note: (for details on Moral Responsibility and Blame, refer to M G Velasquez Unit-2 page no 46)

Code of Conduct
A code of conduct is a written statement setting forth the principles that guide an organisations decision. An effective code of conduct requires the following: Top management commitment Employee communications efforts Employee commitment to follow it Formal training programmes A system that supports reporting unethical or illegal actions at work A system of action.

2. Why Ethical Problems Occur in Business

What is Ethical Dilemma?

An Ethical Dilemma is a moral situation in which a choice has to be made between two equally undesirable alternatives. Dilemmas may arise out of various sources of behaviour or attitude, as for instance, it may arise out of failure of personal character, conflict of personal values and organizational goals, organizational goals versus social values, etc. An Ethical
dilemma is a complex situation that often involves an apparent mental conflict between moral

imperatives, in which to obey one would result in transgressing another. This is also called an ethical paradox A business dilemma exist when an organizational decision maker faces a choice

between two or more options that will have various impacts on a. the organizational profitability and competitiveness, b. and b. its stakeholders.
Structure of Ethical Dilemma Doing what is morally right A bad outcome or bad effects

Either

Results in

Or

Doing what is morally wrong

Results in

Good or at least better effects or outcome

There are various reasons that act as potential sources of ethical problems/ ethical dilemmas in business.

Other reasons could be Selfishness / Corrupted value system/ Failure of personal character Competitive pressure to increase profitability of business Conflict of Interest (between individual and corporate goals) Organizational Goals versus Social goals Cross-cultural contradictions in global business operations Sustainability of Business Newer Technologies, diverse religious, social and cultural beliefs Different ideologies, political systems etc.

Resolving an Ethical Dilemma

There are two basic approaches in resolving ethical dilemmas: deontological and teleological approach.
Teleological also known as Consequentialist approach (result oriented) under which it is claimed that actions should be judged according their consequences, and Deontological Approach (action-oriented) under which the opposing view is assumed, i.e. that rightness or wrongness is a judgement not dependent on consequences but rather on the intrinsic goodness of the action in and of itself.

The Centre for Ethics and Business offer a brief three step strategy in which both deontological and teleological approaches converge
STEP 1: ANALYZE THE CONSEQUENCES (Teleological ethics) STEP 2: ANALYZE THE ACTIONS(deontological ethics) STEP 3: MAKE A DECISION To resolve the ethical problems that may create an ethical dilemma, the manager should take into account the ethical principles of Utility, Rights, Justice and Care to evaluate the morality of any action or decision.

The Basis of the Moral Judgements should include the following to reduce or completely resolve ethical dilemmas:

Evaluations of social costs and benefits. Respect for individual rights. Just distribution of benefits and burdens. Caring for those in concrete relationships.

Note: (For details on ethical Dilemmas, refer A C Fernando Unit-3 pg-55)

Also firms are striving for winning awards and avail certifications for best practices from industry regulators or representative bodies like SEBI n CII.

3. Ethical principles in business

Ethical principles are guidelines based on morality than determine the lengths or boundaries a person or business sets for itself. Ethical principles are standards of conduct defining the kind of behavior an ethical person should and should not engage in. Ethical theories and principles are the foundations of ethical analysis because they are the viewpoints from which guidance can be obtained along the pathway to a decision.

A. Utilitarianism: Weighing Social Costs and Benefits

This approach is sometimes referred to as a consequentiality approach and sometimes as a utilitarian approach, because that course of action would have the most beneficial consequences. Hence, the name utilitarianism is used for any theory that advocates selection of that action or policy that maximises benefits (or minimises costs). Jeremy Bentham (1748-1832) is generally considered the founder of traditional utilitarianism. J Bentham sought an objective basis for making value judgments that would provide a common and publicly acceptable norm for determining social policy and social legislation Utilitarianism: A general term for any view that holds that actions and policies should be evaluated on the basis of the benefits and costs they will impose on society. The utilitarian principle assumes that we can somehow measure and add the quantities of benefits' produced by an action and subtract from them the measured quantities of harm the action will have and thereby determine which action produces the greatest total benefits or the lowest total costs. That is, the principle assumes that all the benefits and costs of an action can be measured on a common numerical scale and then added or subtracted from each other UTILITY: The inclusive term used to refer to any net benefits produced by an action. Characteristics: Advocates maximising utility. Matches well with moral evaluations of public policies Appears intuitive to many people Helps Explain why some actions are generally wrong and others are generally light. Influenced Economics An action is right if it produces the most utility for all persons affected by the action (including the person performing the action) Utilitarianism holds that, in the final analysis, only one action is right: that one action whose net benefits are greatest by comparison to the net benefits of all other possible alternatives. Both the immediate and all foreseeable future costs and benefits that each alternative will provide for each individual must be taken into account as well as any significant indirect effects.

Evaluating utilitarianism/ critics and response: Critics say not all values can be measured on common numerical scale Utilitarians respond that monetary and common sense measures can measure everything. (identification of Intrinsic, instrumental, non-economic goods) Critics say utilitarianism fails with rights and justice. Utilitarians respond that rule utilitarianism can deal with rights and justice.

COST BENEFIT ANALYSIS: Utilitarianism is also the basis of the techniques of economic costbenefit analysis. This type of analysis is used to determine the desirability of investing in a project (such as a dam, factory, or public park) by figuring whether its present and future economic benefits outweigh its present and future economic costs. EFFICIENCY: Operating in such a way that one produces a desired output with the lowest resource input. utilitarianism fits nicely with a value that many people prize: efficiency, Efficiency can mean different things to different people, but for many it means operating in such a way that one produces the most one can with the resources at hand NONECONOMIC GOODS: Goods such as life, love, freedom, equality, health, beauty, whose value is such that no quantity of any economic good is equal in value to the value of the noneconomic good. INSTRUMENTAL GOODS: Things that are considered valuable because they lead to other good things. INTRINSIC GOODS: Things that are desirable independent of any other benefits they may produce. RULE-UTILITARIANISM
The view that an individual action is right when it is required by correct moral rules and if the sum total of utilities produced if everyone were to follow the rule is greater than the sum total utilities produced if everyone did not follow the rule.

B. Rights and Duties: Rights are the individual entitlements to freedom of choice and
well- being. It analysis the morality of actions from the point of view of the individual. A

person has a right when that person is entitled to act in a certain way or is entitled to have others act in a certain way towards him or her. CHARACTERISTICS OF RIGHTS:

A right is an individuals entitlement to something. Rights derived from legal systems are limited by jurisdiction Moral or human rights are based on moral norms and are not limited by jurisdiction.

LEGAL RIGHT: An entitlement that derives from a legal system that permits or empowers a person to act in a specified way or that requires others to act in certain ways toward that person. MORAL RIGHTS/HUMAN RIGHTS: Rights that human beings of every nationality possess to an equal extent simply by virtue of being human beings. CHARACTERISTICS OF MORAL RIGHTS:

Tightly correlated with duties. Provide individuals with autonomy and equality in the free pursuit of their interests. Provide a basis for justifying ones actions and for invoking the protection or aid of thers.

KINDS OF MORAL RIGHTS:

Negative rights require others leave us alone Positive rights require others help us Contractual or special rights require other to keep agreements.

NEGATIVE RIGHTS: Duties others have to not interfere in certain activities of the person who holds the right (Duties of Non-interference- requires others to leave us alone). POSITIVE RIGHTS: Duties of other agent to provide the holder of the right with whatever he or she needs to freely pursue his or her interests. (Duties of positive performance- requires others to help us). CONTRACTUAL/SPECIAL RIGHTS Contractual rights and duties (sometimes called special rights and duties or special obligations) are the limited rights and correlative duties that arise when one person enters an agreement with another person. For example, if l am contracted to do something for you, then you are entitled to my performance: You acquire a contractual right to whatever I promised; and I have a contractual duty to perform as I promised.

CHARACTERISTICS OF CONTRACTUAL RIGHTS It is attached only to specific individuals It depends on publically accepted system of rules that defines transactions (social institution of contracts It defines special duties or obligations. KANTS CATEGORICAL IMPERATIVE: Immanuel Kant advocated the requirement that everyone should be treated as a free person equal to everyone else. Everyone has the moral right to such a treatment and everyone has the correlative duty to treat others in this way. MAXIM: The reason a person in a certain situation has for doing what he or she plans to do. UNIVERSALIZABILITY: The persons reasons for acting must be reasons that everyone could act on atleast in principle. REVERSABILITY: The persons reasons for acting must be reasons that he or she would be willing to have all others use, even as a basis of how they treat him or her. KANTS CATEGORICAL IMPERATIVE FORMULAS:

Never do something unless you are willing to have everyone do it. Never use people merely as means, but always respect and develop their ability to choose for themselves.

CRITICISMS OF KANT:

Categorical Imperatives are unclear Kants rights can conflict Kants theory implies some mistaken moral conclusions

C. Justices and Fairness. Ethical executives strive to be fair and just in all dealings. They
do not exercise power arbitrarily nor do they use overreaching or indecent means to gain or maintain any advantage nor take undue advantage of anothers mistakes or difficulties. Ethical executives manifest a commitment to justice, the equal treatment of individuals, tolerance for and acceptance of diversity. They are open-minded; willing to admit they are wrong and, where appropriate, change their positions and beliefs. Issues involving questions of justice and fairness are usually divided into three categories as mentioned below. TYPES OF JUSTICE:

Distributive Justice: Just distribution of benefits and burdens Retributive Justice: Just imposition of punishments and penalties. Compensatory Justice: Just compensation for wrongs or injuries.

DISTRIBUTIVE JUSTICE: Distributing societys benefits and burdens fairly. The fundamental principle of distributive justice is that equals should be treated equally and un-equals should be treated unequally.

PRINCIPLES OF DISTRIBUTIVE JUSTICE:

Fundamental: Distributive benefits and burdens equally to equals and unequally to unequals. Egalitarianism: Distribute equally to everyone. Capitalist Justice: Distribute by Contribution Socialism: Distribute by need and ability. Libertarian: Distribute by Free Choices/Justice as freedom Rawls: Justice as fairness. Distribute by equal liberty, equal opportunity, and needs of disadvantaged.

EGALITARIANISM: Every person should be given exactly equal shares of a societys or a groups benefits and burdens. Egalitarians emphasised upon political and economic equality of people whereby political equality refers to: Equal participation in, and treatment by, the political system. And economic equality refers to: Equality of income, wealth and opportunity. CAPITALIST Capitalist theorists emphasized upon work effort and puritan ethic , they emphasized upon the productivity and work efforts as the criteria to distribute profits among people. Work Effort: The view that values individual effort and believes that hard work does and should lead to success. The harder one works the more one deserves. This is the assumption behind the Puritan ethic.

 Puritan Ethic: The view that every individual has a religious obligation to work hard at his calling (the career to which God summons each individual). Productivity: The amount a person produces. SOCIALISM Work burdens should be distributed according to the peoples abilities, and benefits should be distributed according to the peoples needs. LIBERTARIAN PHILOSOPHERS: The libertarians hold that no particular way of distributing goods can be just or unjust apart from the free choices individuals make. Robert Nozick believed that freedom from human constraint is necessarily good and that all constraints imposed by others are necessarily evil except when needed to prevent the imposition of greater human constraints. The only distribution that is just, according to Nozick, is one that results from free individual choices. Any distribution that results from an attempt to impose a certain pattern on society (example taking from haves and giving to the have nots) will therefore be unjust. JOHN RAWLS Justice as fairness is associated with John Rawls; the belief that the distribution of benefits and burdens in a society is just only if each person has an equal right to the most extensive basic liberties compatible with similar liberties for all, and social and economic inequalities are arranged so that they are both to the greatest benefit of the least advantaged and attached to offices and positions open to all fairly and equally. He gave the following principles: PRINCIPLE OF EQUAL LIBERTY: The claim that each citizens liberties must be protected from invasion by others and must be equal to those of others. DIFFERENCE PRINCIPLE: The claim that a productive society will incorporate inequalities, but takes steps to improve the position of the most needy members of society. PRINCIPLE OF FAIR EQUALITY OF OPPORTUNITY: The claim that everyone should be given an equal opportunity to qualify for the more privileged positions in societys institutions. ORIGINAL POSITION: An imaginary meeting of rational self interested persons who must choose the principles of justice by which their society will be governed. VEIL OF IGNORANCE:

The requirement that persons in the original position must not know particulars about themselves which might bias their choices such as their sex, race, religion, income, social status etc., RETRIBUTIVE JUSTICE: Blaming or punishing persons fairly for doing wrong. Three issues in retributive justice are: If people do not know or freely choose what they are doing, they cant justly be punished or blamed for it. Penalties should be based upon complete evidence. Punishments should be consistent and proportioned to the wrong done.

COMPENSATORY JUSTICE: Compensatory justice concerns the justice of restoring to a person what the person lost when he or she was wronged by someone. Issues in compensatory justice are: There are no hard and fast rules in determining absolute compensation in few cases, like loss of life limb etc. The amount of restitution should be actually equal to the loss the wrongdoer knowingly inflicted on the victim.

D. Ethics of Care Concern For Others. Ethical executives are caring, compassionate,
benevolent and kind. They always consider the business, financial and emotional consequences of their actions on others and seek to accomplish their business objectives in a manner that causes the least harm and the greatest positive good. An ethic that emphasizes, caring for the concrete wellbeing of those near to us. This view that we have an obligation to exercise special care toward those particular persons with whom we have valuable close relationships, particularly relations of dependency is a key concept in an ethic of care, an approach to ethics that many feminist ethicists have recently advanced Advocates the concept of communitarian ethics, whereby the communitarian ethics is described below. Compassion, concern, love, friendship, and kindness ate all sentiments or virtues that normally manifest this dimension of morality. Thus, an ethic of care emphasises two moral demands: We each exist in a web of relationships and should preserve and nurture those concrete and valuable relationships we have with specific persons. We each should exercise special care for those with whom we are concretely related by attending to their particular needs, values; desires, and concrete well-being as

seen from their own personal perspective, and by responding positively to these needs, values, desires, and concrete wellbeing, particularly of those who are vulnerable and dependent on our care. Characteristics Claims ethics need to be impartial. Emphasizes preserving and nurturing concrete valuable relationships. Says we should care for those dependent on and related to us. COMMUNITARIAN ETHIC An ethic of care, therefore, can be seen as encompassing the kinds of obligations that a socalled communitarian ethic advocates. A communitarian ethic is an ethic that sees concrete communities and communal relationships as having a fundamental value that should be preserved and maintained. What is important in a communitarian ethic is not the isolated individual, but the community within which individuals discover who they are by seeing themselves as integral parts of a larger community with its traditions, culture, practices, and history Two additional issues are important to note. First, not all relationships have value, and so not all would generate the duties of care. Relationships in which one person attempts to dominate, oppress, or harm another; relationships that are characterised by hatred, violence, disrespect, and viciousness; and relationships that are characterised by injustice, exploitation, and harm to others lack the value that an ethic of care requires. An ethic of care does not obligate us to maintain and nurture such relationships. Second, it is important to recognise that the demands of caring are sometimes in conflict with the demands of justice. Objection to Care Approach to Ethics:

Charge: Ethic of care can degenerate into favouritism. Response: Conflicting moral demands are an inherent characteristic of moral choices. Charge: Ethic of care can lead to burnout Response: Adequate understanding of ethic of care will address the need to care for the caregiver.

Integrating Utility, Rights, Justice, and Caring

Utilitarian standards must be used when we do not have the resources to attain everyone's objectives, so we are forced to consider the net social benefits and social costs consequent on the actions (or policies or institutions) by which we can attain these objectives. Our moral judgments are also partially based on standards that specify how individuals must be treated or respected. These sorts of standards must be employed when our actions and

policies substantially affect the welfare and freedom of specifiable individuals. Moral reasoning of this type forces consideration of whether the behaviour respects the basic rights of the individuals involved and whether the behaviour is consistent with one's agreements and special duties. Third, our moral judgments are also in part based on standards of justice that indicate how benefits and burdens should be distributed among the members of a group. These sorts of standards must be employed when evaluating actions whose distributive effects differ in important ways. The moral reasoning on which such judgments are based will incorporate considerations concerning whether the behaviour distributes benefits and burdens equally or in accordance with the needs, abilities, contributions, and free choices of people as well as the extent of their wrongdoing Fourth, our moral judgments are also based on standards of caring that indicate the kind of care that is owed to those with whom we have special concrete relationships. Standards of caring are essential when moral questions arise that involve persons embedded in a web of relationships, particularly persons with whom one has close relationships and particularly relationships of dependency.

Our morality, therefore, contains four main kinds of basic moral considerations, each of which emphasises certain morally important aspects of our behaviour, but no one of which captures all the factors that must be taken into account in making moral judgments. Utilitarian standards consider only the aggregate social welfare but ignore the individual and how that welfare is distributed. Moral rights consider the individual but discount both aggregate well-being and distributive considerations. Standards of justice consider distributive issues but they ignore aggregate social welfare and the individual as such. Although standards of caring consider the partiality that must be shown to those close to us, they ignore the demands of impartiality. These four kinds of moral considerations do not seem to be reducible to each other, yet all seem to be necessary parts of our morality. That is, there are some moral problems for which utilitarian considerations are decisive, whereas for other problems the decisive considerations are the rights of individuals or the justice of the distributions involved, and for others the most significant issue is how those close to us should be cared for. This suggests that moral reasoning should incorporate all four kinds of moral considerations, although only one or the other may turn out to be relevant or decisive in a particular situation. One simple strategy for ensuring that all four kinds of considerations are incorporated into one's moral reasoning is to inquire systematically into the utility, rights, justice, and caring involved in a given moral judgment. One might, for example, ask a series of questions about an action that one is considering:

 Does the action, as far as possible, maximise social benefits and minimise social injuries? Is the action consistent with the moral rights of those whom it will affect? Will the action lead to a just distribution of benefits and burdens? Does the action exhibit appropriate care for the well-being of those who are closely related to or dependent on oneself? At this time, we have no comprehensive moral theory capable of determining precisely when utilitarian considerations become sufficiently large to outweigh narrow infringements on a conflicting right, a standard of justice, or the demands of caring. Nor can we provide a universal rule that will tell us when considerations of justice become important enough to outweigh infringements on conflicting rights or on the demands of caring.

C. An Alternative to Moral Principles: Virtue Ethics

Moral Virtue is an acquired disposition that is valued as part of the character of morality good human being and that is exhibited in the persons habitual behaviour. A person has a moral virtue when the person is disposed to behave habitually in the way and with the reasons, feelings, and desires that are characteristic of a morally good person.A more adequate approach to ethics, according to few ethicists, would take the virtues (such as honesty, courage, temperance, integrity, compassion, self-control) and the vices(such as dishonesty, ruthlessness, greed, lack of integrity, cowardliness)as the basic starting point for ethical reasoning. As we see, there are virtues that are correlated with utilitarianism (e.g., the virtue of benevolence), virtues that are correlated with rights (e.g., the virtue of respect), and virtues that are correlated with justice and caring. The virtues, then, should not be seen as providing a fifth alternative to utility, rights, justice, and caring. Instead, the virtues can be seen as providing a perspective that surveys the same ground as the four approaches but from an entirely different perspective. What the principles of utility, rights, justice, and caring do from the perspective of action evaluations, an ethic of virtue does from the perspective of character evaluations. THEORIES OF MORAL VIRTUE:

Aristotle: Habits that enable a person to live according to reason. Aquinas: Habits that enable a person to live responsibly in this world and be united with God in the next life. MacIntyre: Disposition that enables a person to achieve the good at which humanpractices aim. Pincoff: Dispositions we use when choosing between persons or potential future selves.

VIRTUE THEORY:

The theory that the aim of the moral life is to develop those general dispositions called moral virtues, and to exercise and exhibit them in the many situations that human life sets before us. The key action-guiding implication of virtue theory, then, can be summed up in the claim that an action is morally right if in carrying out the action the agent exercises, exhibits, or develops a morally virtuous character, and it is morally wrong to the extent that by carrying out the action the agent exercises, exhibits, or develops a morally vicious character. VIRTUE THEORY CLAIMS:

We should exercise, exhibit, and develop the virtues. We should avoid exercising, exhibiting, and developing vices. Institutions should instil virtues not vices.

Virtue ethics is a broad term for theories that emphasize the role of character and virtue in moral philosophy rather than either doing ones duty or acting in order to bring about good consequences. A virtue ethicist is likely to give you this kind of moral advice: Act as a virtuous person would act in your situation. Most virtue ethics theories take their inspiration from Aristotle who declared that a virtuous person is someone who has ideal character traits. These traits derive from natural internal tendencies, but need to be nurtured; however, once established, they will become stable. For example, a virtuous person is someone who is kind across many situations over a lifetime because that is her character and not because she wants to maximize utility or gain favours or simply do her duty. Unlike deontological and consequentialist theories, theories of virtue ethics do not aim primarily to identify universal principles that can be applied in any moral situation. And virtue ethics theories deal with wider questions How should I live? and What is the good life? and What are proper family and social values? Since its revival in the twentieth century, virtue ethics has been developed in three main directions: Eudaimonism, agent-based theories, and the ethics of care. Eudaimonism bases virtues in human flourishing, where flourishing is equated with performing ones distinctive function well. In the case of humans, Aristotle argued that our distinctive function is reasoning, and so the life worth living is one which we reason well. An agent-based theory emphasizes that virtues are determined by common-sense intuitions that we as observers judge to be admirable traits in other people. The third branch of virtue ethics, the ethics of care, was proposed predominately by feminist thinkers. It challenges the idea that ethics should focus solely on justice and autonomy; it argues that more feminine traits, such as caring and nurturing, should also be considered. Another distinguishing feature of virtue ethics is that character traits are stable, fixed, and reliable dispositions. If an agent possesses the character trait of kindness, we would expect him or her to act kindly in all sorts of situations, towards all kinds of people, and over a long period of time, even when it is difficult to do so. A person with a certain character can be relied upon to act consistently over a time. The development of moral character may take a whole lifetime. But once it is firmly established, one will act consistently, predictably and appropriately in a variety of situations.

Knowing virtue is a matter of experience, sensitivity, ability to perceive, ability to reason practically, etc. and takes a long time to develop. The idea that ethics cannot be captured in one rule or principle is the uncodifiability of ethics thesis. Ethics is too diverse and imprecise to be captured in a rigid code, so we must approach morality with a theory that is as flexible and as situation-responsive as the subject matter itself. As a result some virtue ethicists see themselves as anti-theorists, rejecting theories that systematically attempt to capture and organize all matters of practical or ethical importance. Criticism: Here are some common objections to virtue ethics. Its theories provide a self-centred conception of ethics because human flourishing is seen as an end in itself and does not sufficiently consider the extent to which our actions affect other people. Virtue ethics also does not provide guidance on how we should act, as there are no clear principles for guiding action other than act as a virtuous person would act given the situation. Lastly, the ability to cultivate the right virtues will be affected by a number of different factors beyond a persons control due to education, society, friends and family. If moral character is so reliant on luck, what role does this leave for appropriate praise and blame of the person?

Ethical principles focus on evaluating actions as the basic subject matter of ethics (action based focus but ignores the character of the agent who carries out the action. However the virtue ethics focus on what one ought to be-agent based focus which evaluates the persons moral character that whether it exhibits virtues or vice.

Hence, there is no conflict between theories of ethics that are based on principles and theories of ethics based on virtues. However, a theory of virtue differs from an ethic of principles in the perspective from which it approaches moral evaluations. A theory of virtue judges actions, for example, in terms of the dispositions that are' associated with those actions, whereas an ethic of principles judges dispositions in terms of the actions associated with those dispositions. For an ethic of principles actions are primary, whereas for an ethic of virtue dispositions are primary. An ethic of virtue, then, is not a fifth kind of moral principle that should take its place alongside the principles of utilitarianism, rights, justice, and caring. Instead, an ethics of virtue fills out and adds to utilitarianism, rights, justice, and caring by looking not at the actions people are required to perform, but at the character they are required to have.

5. Morality in International Contexts

Multinational corporations operate in foreign host countries whose laws or government decrees, common practices, levels of development, and cultural understandings are sometimes much different from those of their home counties. These differences, we argued, do not provide adequate justification for the theory of ethical relativism. How should the

moral principles of utilitarianism, rights, justice, and caring be applied in foreign countries that differ in so many ways from our own? Common practices can also differ markedly among nations. Multinationals also often operate in countries at very different level of development. Some countries have very high levels of technological, social, and economic resources available, whereas the resources of other countries in these and other areas are quite undeveloped. Technological sophistication, unions, financial markets, unemployment insurance, social security, and public education are widespread in' more developed nations but are virtually unknown in Third World countries. When confronted with a foreign context, in which laws and government decrees., prevailing practices, levels of development, and cultural understandings are very different from those of the manager's home country, what should the manager of a multinational do? For example, when operating in a foreign country, should the manager of the multinational adopt the practices of its home country or those prevalent in the host country? Some have claimed that, when operating in less developed countries, multinationals from more developed home countries should always follow those practices prevalent in the more developed country, which set higher or more stringent standards. But this claim ignores the possibility that introducing practices that have evolved in a highly developed country into one that is less, developed may produce more harm than good-a violation of utilitarian standards of ethics. For example, if an American company operating in Nigeria pays local workers U.S. wages, it may draw all the skilled workers away from local Nigerian companies that cannot afford to pay the same high salaries. As a consequence, Nigeria's efforts to develop local companies may be crippled while havoc is wreaked in local labour markets. Again, if American companies operating in Nigeria are required to operate in Nigeria according to the more costly wage, consumer, environmental, and safety standards prevalent in the United States, they will have no reason to invest in Nigeria and Nigeria's development will be retarded. Precisely because they need and want foreign investment and technology, the governments of many less developed nations, genuinely interested in advancing the interests of their people, have insisted on less costly standards that can attract foreign companies. Thus, it is clear that local conditions, particularly developmental conditions, must at least be considered when determining whether to import practices from a developing country into a less developed one and that it 'is a mistake to accept the blanket claim that one must always adopt the "higher" practices of the more 'developed home country. Some have gone to the opposite extreme and argued that multinationals should always follow local practices, whatever they might be, or that they should do whatever the local government wants, because it is the representative of the people. But it is often unethical to go along with local practices as government requires sometimes than it is to oppose them. The lower environmental standards of Nigeria for example, may be so low that they permit pollution levels that cripple the health of or even kill those living near chemical plants, producing flagrant violations of these people's basic human rights. Therefore, the blanket claim that local practices should always be adopted is also mistaken.

It is clear, then, that although local laws or government decrees, prevalent practices, levels of development, and cultural understandings all must be taken into account when evaluating the ethics of business policies and actions in a foreign country, the local status quo cannot simply be adopted without question by the multinational manager but must still be subjected to ethical analysis. What factors should be considered when evaluating the ethics of an action or policy in a foreign context? The foregoing discussion suggests that the following questions should be asked about any corporate action or policy under consideration by a company operating in a foreign country. 1. What does the corporate policy or action really mean in the context of the local culture? When viewed in terms of its local cultural meaning, is the policy or action ethically acceptable, or does it violate the ethical standards of utilitarianism, rights, justice, and caring to such an extent that it should not be undertaken? From the perspective of virtue, does the action or policy encourage the exercise or the development of morally good character? 2. Taking into account the nation's level of technological, social, and economic development and what its government is doing to promote this development, does the corporate policy or action produce consequences that are ethically acceptable from the point of view of utilitarianism, rights, justice, and caring or from the point of view of moral character? Can the more stringent legal requirements or practices common in more developed nations be implemented without damage to the host country and its development, and in context would such implementation be more consistent with the ethical standards of utilitarianism, rights, justice, and caring? Would such implementation encourage the exercise or the development of morally good character? 3. If the corporate action or policy is allowed or required by the laws or the decrees of the local government, does this government truly represent the will of its people? Does the corporate action or policy nevertheless violates the principles of utilitarianism, rights, justice, or caring or is it commendable from the perspective of the normal character? If so, and if the action or policy is legally required to do business in the host country, then is the ethical violation significant enough to require with drawl from that country? 4. If the corporate action or policy involves the local common practice that is morally questionable by the home countries standards (such as sexual discrimination or bribery) , is it possible to conduct business in host country without engaging in the practice? If not, then does the practice violate the principles of utilitarianism, rights, justice, or caring to a degree significant enough to require with drawl from that country? Is the practice so pernicious from the perspective of the moral character as to require with drawl from that country.

6. Moral Issues In Business: Workers And Employees Rights and Responsibilities

The individual in the organisation dwells on 3 main parts of an organisation which are: o The traditional model of an organisation o The political structure of an organisation o The organisation as a network of personal relations. The Rational Organisation An organisation is the rational coordination of the activities of a number of people for the achievement of some common explicit purpose or goal, through a division of labour and function and through a hierarchy of authority and responsibility. What is the glue that holds together the organisations many layers of employees and managers and that fixes these people onto the organisations goals and formal hierarchy? Contracts.By virtue of this contractual agreement, the employee has a moral responsibility to obey the employer in the course of pursuing the organisations goals, and the organisation in turn has a moral responsibility to provide the employee with the economic support it has promised. The Political Organisation The political model of the organisation sees the organisation as a system of competing power coalitions and formal and informal lines of influence and communication that radiate from these coalitions. In place of the neat hierarchy of the rational model, the political model postulates a messier and more complex network of clustered power relationships and criss-crossing communication channels. The Caring Organisation So far we have looked at organisations as having two aspects. First, we have considered organisations as hierarchical collections of autonomous individuals who are connected to each other and to the organisation by contractual agreements. The employee signs a contract agreeing to carry out the tasks spelled out in the job description in return for a wage that the employer agrees to pay. Employees take their orders from ranked tiers of managers arranged in a hierarchy of authority, at the top of which sit the CEO and topmanagement staff and at the bottom of which stand the workers who perform the actual labour of the organisation. The whole organisation pursues the goal of profit. We have called this aspect of the organisation the rational organisation. Criss-crossing the rational organisations formal lines of authority is a second system of power, which we have called the political organisation. The political elements of the organisation consist of the network of power relationships, coalitions, and informal lines of communication through which individuals seek to achieve their personal goals and seek to get others to help them achieve their personal goals through the exercise of power. It is possible to conceive of organisations as consisting of yet another, quite different set of relationships. Recent thinkers have suggested that organisations can and should be thought of as networks of relationships in

which connected selves form webs of on-going personal relationships with other connected selves. In this aspect of the organisation, the focus of employees is not on the pursuit of profit and personal goals, but on caring for those particular individuals who make up the organisation and those with whom the organisation interacts.

Employees And Workers Rights

Right to fair wages and compensation Right to fair working conditions: Health and Safety Right to fair working conditions: Job satisfaction (jobs must be expanded along five dimensions: Skill Variety, Task Identity, Task Significance, Autonomy, Feedback) Right to privacy Right to be treated as free and equal person Right to equal opportunities for growth The right to consent (employees must be given opportunity to give or withhold their consent before the private aspects of their lives are investigated) The right to freedom of speech The right to freedom of conscience (individuals must not be forced to cooperate in activities that they conscientiously believe are wrong). Whistleblowing: disclosing wrongdoing in or by the organization. The right to participate and participatory management The right to due process (versus employment at will): due process refers to the fairness of the process by which decision makers impose sanctions on their subordinates. It ensures that employees are not treated arbitrarily, capriciously, or maliciously by their superiors in the administration of the firms rules, and it sets a moral limit on the exercise of the superiors power. Right to information (related to risks involved in job, plant shut- down etc) Right to organize, associate and form unions Right to rest and leisure, including reasonable limitation of working hours and periodic holidays with pay etc.

Employees And Workers Responsibilities

The obligation of the employee to obey organisational superiors, Loyally pursue the organisations goals, and avoid any activities that might threaten that goal Avoiding conflict of interest they must not use their position as leverage to force illicit benefits out of others through extortion or commercial bribery. Fulfilling the contractual duties well Not accepting gifts: cash or kind for giving benefits to others

 Not using companys resources for personal use without the consent of its rightful owner ex: electronic gadgets, client information, computer softwares and data, stationery items etc. Avoiding unauthorized access to confidential information, trade secrets etc. and not leaking or publically disclosing the same Not indulging in the act of insider trading on any grounds/ Strictly avoiding Insider trading etc. Note: (for details on employees rights and responsibilities, refer MG Velasquez unit-8)

7. Common Indicators for Measuring Business/ Corporate Social Performance (CSP)

The effective translation of an institution's social goals into practice in line with accepted social values; these include sustainably serving increasing numbers of poor and excluded people, improving the quality and appropriateness of financial services, improving the economic and social conditions of clients, and ensuring social responsibility to clients, employees and the community they serve. Traditional evaluation has focused on end results and impact. However, impact is just one element of social performance. Social performance looks at the entire process by which impact is created. It therefore includes analysis of the declared social objectives of institutions, the effectiveness of their systems and services in meeting these objectives, related outputs (for example, reaching larger numbers of very poor households) and indeed success in effecting positive changes in the lives of clients.

WHAT DO WE MEAN BY TRIPLE BOTTOM LINE?

Organisations that focus on their single bottom line are exclusively concerned with their financial returns. Notwithstanding the importance of profits as a prerequisite for continuity of the business, organisations that want to contribute to sustainable development should take a more holistic approach to performance. Businesses that focus on their triple bottom line include economic, social and environmental effects that their activities generate. TBL can be defined as a construct that emphasizes a companys responsibilities to multiple stakeholders, such as employees and the community at large, in addition to its traditional responsibilities to economic shareholders. . However, measuring CSP has proven to be a daunting task because it represents a broad range of economic, social, and environmental impacts caused by business operations and thus requires multiple metrics to fully cover its scope. It cover areas of environmental performance, social contribution, corporate governance, and controversial business involvement. Because of the qualitative nature of CSP, the assessment of CSP relies mostly on soft measures related to management

practices, rather than the harder measures (e.g., tons of CO2 emission or of toxic releases). Common CSP measures include, for example, labour right protection and the transparency of social and environmental performance reporting etc. Hence the common indicators for measuring business/corporate social performance are : Economic (direct and indirect economic impacts/value creation), Environmental (energy, water, biodiversity, effluents- emissions-waste treatment etc) and Social. The Social category is broken down further by Labor, Human Rights, Society and Product Responsibility subcategories.

1. Trade, Investment and Linkages: Common indicators are as follows Total revenues Value of imports vs. exports Total new investments Local purchasing

2. Employment Creation and Labour Practices: Common indicators are as follows Total workforce with breakdown by employment type, employment contract and gender (workplace diversity) Employee wages and benefits with breakdown by employment type and gender Total number and rate of employee turnover broken down by gender Percentage of employees covered by collective agreements 3. Technology and Human Resource Development: Common indicators are as follows Expenditure on research and development Average hours of training per year per employee broken down by employee category Expenditure on employee training per year per employee broken down by employee category

4. Health and Safety : Common indicators are as follows Cost of employee health and safety Work days lost due to occupational accidents, injuries and illness

5. Government and Community Contributions: Common indicators are as follows Payments to Government Voluntary contributions to civil society

6. Corruption: Common indicators are as follows Number of convictions for violations of corruption related laws or regulations and amount of fines paid/payable

Source: http://unctad.org/en/Docs/iteteb20076_en.pdf http://informeanual.abengoa.com/web/2011/en/Responsabilidadsocialcorporativa/I ndice/desempenosocial/index.html

Other key performance indicators (KPIs) to measure corporate social performance are: Sponsoring social and charitable causes Focus on human element Protecting and promoting stakeholders interest (consumers, employees, owners) Creation of wealth Good corporate governance Abiding by rules and laws Rendering social service Promotion of common welfare programmes Philanthropy Ensuring ecological balance Improve productivity Supplement state efforts Expenditure on employees training, education and development Awards and accolades for corporate citizenship Transparency in reporting social responsibility measures in annual reports Active participation in forums or conferences that seek to promote corporate citizenship etc.

Note: (Also refer hand written notes for details on CSR and A C Fernando Ch-9 pg-226 to 231 for indicators for measuring CSP)

8.

Reporting Social Responsibility Measures in Annual Report

Sustainability reporting, alternatively known as CSR reporting, is the annual process whereby companies - public, private; large and small - report on their sustainability performance. Reports typically cover social, environmental, economic and ethical performance and incorporate information on a company's environmental impact or carbon footprint, staff satisfaction, community investment etc. As the climate change and governance debates heat up, sustainability reporting is becoming increasingly important as a tool companies can use to demonstrate accountability to their stakeholders Reporting is perhaps the most visible aspect of CSR activity, because reports, published annually, are issued to communicate how the business is recognising and dealing with their impacts beyond their financial performance. Ideally, the CSR report needs to explain both how a business contributes to the economic, social and environmental aims of sustainability, and it also needs to suggest how the business is going about improving those contributions. Recent years have witnessed a remarkable resurgence of academic, professional and corporate interest in the area of social and ethical accounting, auditing and reporting (SEAAR).Drawing a parallel to the existing financial reporting framework that provides principles underlying the usefulness of companies reported information, the following quality criteria should be taken into account in selecting indicators that meet the common needs of a wide range of users of corporate responsibility reporting:

Comparability; Balance Relevance and materiality; Clarity /Understand ability; and Reliability and verifiability. Accuracy Timeliness

Comparability: Users should be able to compare the indicators over time and between enterprises to enable them to identify and analyse the outcome of changes in policy and management. Balance: The report should reflect positive and negative aspects of the organization s performance to enable a reasoned assessment of overall performance. Relevance and materiality: To be useful, information should be relevant in meeting the needs of users in forming an opinion or decision. Information has the quality of relevance when it influences the opinion or decision of users by helping them to evaluate past, present or future events, or confirming or correcting their past evaluations. Information is material if its omission or misstatement could influence users decisions. Materiality

depends on the size of the item or error judged in the particular circumstances of its omission or misstatement. Thus, it provides a threshold or cut-off point rather than being a primary qualitative characteristic which information must have if it is to be useful. Understand ability: The information on corporate responsibility must be understandable to the reader. This means that the manner of presentation has to be in keeping with the knowledge and experience of users, and should include the following: (a) a good design; (b) systematic classification of topics and indicators; (c) concise use of language; and (d) an explanation of unknown terms in the text, or the inclusion of a glossary to enhance understand ability. Reliability and verifiability: Information has the quality of reliability when it is free from material error and bias, and when it gives a true, complete and balanced view of the actual situation. The information should be faithful and representative of the actual situation in the business, complete within the boundaries of what is relevant, well balanced on both positive and negative events, presented in the right context, and free of material misstatement. It should be neutral (free from bias). Timeliness Reporting occurs on a regular schedule and information is available in time for stakeholders to make informed decisions. The concept of CSR reporting is almost as flexible as the concept of CSR itself. Just like every company can define to itself what CSR means, it can also choose how to communicate its CSR progress in whatever way it finds suitable. Three phases can be identified in the development of CSR reporting. The first, dating from the early 1970s, was seen to be composed of advertisements and annual reports that focused on environmental issues but were not linked to corporate performance. The second phase, in the late 1980s, was characterised by the introduction of social audits, which examined the performance of companies in the areas of social responsibility with respect to communities, employees, customers, suppliers and investors. The third phase, dating from the late 1990s, saw the strengthening of social auditing through the introduction of externally set and verified standards. Some see reporting as an effective communication and reputation management tool, building loyalty with customers, investors and suppliers around important values and issues. CSR reporting could also bring market advantage by putting firms in a better position.

Most of the CSR related standards produced in recent years requires corporations to voluntarily develop and implement policies and practices in consonance with suggestive performance standards on various CSR issues. In recent years a limited number of standards has been developed, which instead of providing substantive recommendations for implementation of specific CSR policies and practices, are designed to provide guidance for

companys which seek to report on their social, environmental and economic performance. In many cases, these performance standards and reporting standards are complementary in nature.

The global reporting initiatives (GRI) AA1000 Accountability Social Accountability 8000
The Cauxround table CRT OECD United Nationa Global compact Asia pacific Economic Cooperation Global Sullivan principles etc.

GRI, AA 1000 n SA 8000 are most widely used standards. They are more of reporting standard rather than a performance standard.

GRI -G3.1 (The G3.1 Guidelines are an update and completion of the third generation of GRI's Sustainability Reporting Guidelines, G3.)
The GRI is a multi-stakeholder process and independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. These guidelines are for voluntary use by organisations for reporting on the economic, environmental, and social dimensions of their activities, products, and services. The GRI reporting framework is designed for use by organisations of any size, sector, or location, and takes into account the practical considerations faced by a diverse range of organizations from small enterprises to those with extensive and geographically dispersed operations. The GRI has been developed and is used, and monitored, with active participation from representatives of business, accountants, investors, environmental campaigners and researchers, human rights organisations, academics and labour unions from around the world. Started in 1997, GRI became independent in 2002, and is an official collaborating centre of the United Nations Environment Programme (UNEP). GRI also works in cooperation with the UN Global Compact. GRIs Sustainability Reporting Guidelines were last released in 2002. Over the past four years hundreds of organisations have used the Guidelines as the basis for their reporting, and thousands of stakeholders have used information in reports issued by the organisations they are interested in or have a relationship with.

The G3 Guidelines are made up of two parts. Part 1 features guidance on how to report. Part 2 features guidance on what should be reported, in the form of Disclosures on Management Approach and Performance Indicators. The guidelines consist of principles for defining report content and ensuring the quality of reported information, as well as standard disclosures. The guidelines also include help with specific technical issues in reporting and are divided into a number of areas: Part 1: Report Content, Boundary and Quality Part 2: Standard Disclosures Part 3: Guidelines use and report compilation

The GRI Reporting Framework is intended to serve as a generally accepted framework for reporting on an organizations economic, environmental, and social performance. It is designed for use by organizations of any size, sector, or location. It takes into account the practical considerations faced by a diverse range of organizations from small enterprises to those with extensive and geographically dispersed operations. The GRI Reporting Framework contains general and sector-specific content that has been agreed by a wide range of stakeholders around the world to be generally applicable for reporting an organizations sustainability performance.

AA1000 Accountability In October 2008 Accountability launched new AA1000 standards designed to put the voice of stakeholders at the heart of the assurance process. First released in 1999 the sustainability assurance standards now consist of a guidance document and three key standards:

AA1000 Accountability Principles Standard (2008); AA1000 Assurance Standard (2008); AA1000 Stakeholder Engagement Standard (2005), a revision of which is currently underway.

The standard was developed consultatively through 20 international consultations, numerous sector briefings and an online wiki used by more than 4,500 people from 90 countries.

The AA1000 series is the only assurance standard specifically developed for sustainability reporting. The other standard, the ISAE 3000, used within the accounting industry applies to all non-financial reporting, not just sustainability. In key changes, the standards focus on three primary principles - inclusivity, materiality and responsiveness. They encourage organisations to involve a wide range of stakeholders in their decision making which can provide powerful insight into unintended consequences as well as innovative ideas - a powerful resource in difficult times. In addition, they encourage organisations to focus on those issues that have the greatest impact, an important tool in prioritising smaller budgets and ensuring that corporate responsibility effort is focused on the areas of greatest potential value.

Social Accountability 8000

It is one of the worlds first auditable social certification standards for decent workplaces, across all industrial sectors. It is based on conventions of the ILO, UN and national laws. The SA8000 standard spans industry and corporate codes to create a common language for measuring social compliance. Those seeking to comply with SA8000 have adopted policies and procedures that protect the basic human rights of workers. The management system supports sustainable implementation of the principles of SA8000: child labor, forced and compulsory labour, health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary practices, working hours, remuneration. Note: (Also refer hand written notes for details on reporting social responsibility measures in annual report or A C Fernando Ch-9 pg-231 to 233)

9. Business Ethics In Indian Perspective

(For details pls. refer the handwritten notes or A C Fernando Ch-13 pg-366 to 374 or Assignment number 1)

10. Transactional Ethics (Asked In End Term Examination 2009)

A Transaction can be defined as 1. An agreement between a buyer and a seller to exchange an asset for payment. 2. In accounting, any event or condition recorded in the book of accounts.

Transactional Ethics Asymmetrical relations of unequal claims and conflicting interests do not exhaust the arsenal of possible action patterns. The concept of common interests needs to be specified because of different types of common interests can be distinguished. Common Is used in the senseof occurring simultaneously. Their communality is that they occur at one and the same time and place, without, however, dependent on another. All parties involved in the action pattern have interests that happens to coincide in time but that do not affect each other. I am pursuing my affairs, as he pursue his affairs. We both are aware of others existence, but that is all the relationship we have - a very relationship. There is morality involved In this relation. In order to let each partys transaction run smoothly, all parties have to accept the principle of equality. Implying that every agent should allow every other the same amount of freedom or action he claims for himself. The moral principle of equality tells us where to refrain from Intrusions In the freedom action of others while following ones own affairs, which Is negative principle, as well as basic. Interests can also be common In the stronger sense of being connected. It can also be noted that If connected interests are at stake the Interests of both cannot be realised (without the Interest of the other being satisfied as well). Both parties are needed to arrive at the Intended result [a cooperative arrangement for mutual benefit). Every party is indispensable, every party is equally entitled to an appropriate share In the outcome of the arrangement- All market transactions fall within this category.

Example: I need vegetables from vegetable vendor. The vendor want customers like me for survival so we both are dependent on each other as long as we both contribute appropriately, together we generate a surplus that none of us on his own is able to produce. In order to let things run smoothly, again adherence to two specific moral principles is required- Principle of honesty, i.e.. one should operate In good faith fairly and equitably, not betraying the confidence received. Principle of reciprocity i.e. one should avoid free riding one somebody elses efforts. The domain of ethics covering transactions that are performed or the basis of simultaneous or connected interests and that are general by the principles of equality, honesty and reciprocity is indicated as the domain of transactional ethics.

Glossary
capitalist justice the belief that benefits should be distributed according to the value of the contribution made by the individual to a group. the requirement that I must act such that the maxim of my action could be made universal law (or the requirement that in acting I always treat others as ends in themselves and never as a means to an end). concrete communities and communal relationships have fundamental value that should be preserved and maintained. the belief that persons should have restored to them what they lose as the result of another's wrong action. analyzes desirability of a project by comparing present and future economic benefits to present and future economic costs. productive societies incorporate inequalities, but work to improve the position of the neediest. concerned with the fair distribution of society's benefits and burdens; the belief that individuals who are similar in all relevant respects should be given similar benefits and burdens. producing desired output with lowest resource input. equality of income and wealth, and equality of opportunity. the belief that every person should be given exactly equal shares of a group's benefits and burdens. emphasizes care for the well-being of those close to us. evaluates the moral character of individuals or groups.

categorical imperative

communitarian ethic

compensatory justice cost-benefit analysis

difference principle distributive justice

Efficiency economic equality egalitarian justice ethic of care ethic of virtue

instrumental goods intrinsic goods Justice justice as fairness

goods valued only because they lead to other good things. things desired independently of any benefits they may produce. how benefits and burdens are distributed among people. associated with John Rawls; the belief that the distribution of benefits and burdens in a society is just only if each person has an equal right to the most extensive basic liberties compatible with similar liberties for all, and social and economic inequalities are arranged so that they are both to the greatest benefit of the least advantaged and attached to offices and positions open to all fairly and equally. entitlements derived from a legal system. the belief that freedom from human constraint is necessarily good, and thus that constraints imposed by others are necessarily evil. the reason a person in a certain situation has for doing what she or he plans to do. rights possessed by all human beings simply by virtue of being human. an acquired disposition that is valued as part of the character of a morally good human being and that is exhibited in the person habitual behavior. duties others have to not interfere in certain activities of the person who holds a given right. goods such as life, love, and freedom, whose value cannot be equaled by any quantity of any economic good. according to Rawls, the situation of a group that would say a principle is morally justified; they must be rational selfinterested persons who know they will live in a society governed by the principles they accept but who do not know the race, sex, religion, social position, interests, or abilities that they will have. equal participation in, and treatment by, the means of controlling and directing the political system. the duty of some other agents to provide the rights-holder with whatever is needed to pursue the rights-holders interests. each citizens liberties must be protected and must equal the liberties of each other citizens.

legal rights Libertarianism

Maxim moral rights moral virtue

negative rights noneconomic goods "original position"

political equality positive rights

principle of equal liberty

principle of fair equality of everyone deserves equal opportunity to qualify for opportunity privileged positions. Productivity the better the quality of a persons contribution, the more

the person should receive. puritan ethic retributive justice Reversibility Rights each individual is obliged to work hard at his or her calling. the belief that agents should be punished or blamed for wrongdoing. parties choose principles that will apply to themselves. in general, an individual's entitlement to something; legal rights are those dictated by a system of laws; moral rights are those that permit or allow all humans to do or to have something done for them; negative rights prohibit others from interfering with an individual's actions; positive rights grant others the duty to provide an individual with something she or he needs. the view that an individual action is right when it is required by correct moral rules and if the sum total of utilities produced if everyone were to follow the rule is greater than the sum total utilities produced if everyone did not follow the rule. the belief that benefits should be distributed according to need and burdens according to ability. principles must apply equally to everyone. the view that actions are right when they produce the greatest net benefits or the lowest net costs. any net benefits produced by an action. in Rawls original position, the rational persons ignorance of his or her own status. belief that the aim of the moral life is to develop moral virtues, and to use them. the high value placed on individual effort; belief that hard work leads to success.

rule-utilitarianism

socialist justice Universalizability Utilitarianism Utility veil of ignorance virtue theory work ethic

Normative ethics is the branch of philosophy concerned with moral obligation and intrinsic value in the actions and character of human beings. The term normative refers to theoretical ideals - norms - against which we are able to evaluate practices. The two main branches of normative ethics are virtue ethics and rule-based ethics.

Virtue ethics focuses on the formation of ones character to equip one for good citizenship in an organized community, in the belief that a community made up of people of good character would be a good community. Virtues are therefore what we would think of as good habits, e.g. courage, generosity, or loyalty;

vices may be seen as bad habits, e.g. dishonesty, cowardice, or selfishness. Aristotle taught that people should adopt the doctrine of the mean, whereby a virtuous act is seen to be the mean that falls between two vices - one of excess and one of deficiency. An example of such a mean is courage it is the mean between foolhardiness (excess vice) and cowardice (deficient vice). Rule-based ethics seeks to evaluate moral considerations against a set of rules that constitute a moral theory, which determines what acceptable behaviour is. These rules may be divided into two main categories, namely consequentialism (also known as teleology-(result oriented) under which it is claimed that actions should be judged according their consequences, and deontology (action-oriented) under which the opposing view is assumed, i.e. that rightness or wrongness is a judgement not dependent on consequences but rather on the intrinsic goodness of the action in and of itself. Meta-ethics meta-ethics is the study of ethics itself. It attempts to fathom the meaning of terms such as right, good, and ought. A meta-ethical view of a problem is not concerned with determining what the right action is, but rather with the validity of the underlying moral theory.

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