Business Ethics and Corporate Social

Responsibility
CH-1
Introduction to Business Ethics / Understanding Corporate Social
Responsibility
1.1. Introduction to Ethics and CSR
A. Ethics-Meaning and Definition
• The term ‘ethics’ is drives from the Greek word ‘ethos’ which means
character. Ethics are the principles of conduct governing an individual
or a group. Ethics concerns attempts to distinguish ‘right’ from
‘wrong’, ‘good’ from ‘bad’ and constitution of desirable conduct in a
particular set of social circumstances.
• Definition of ethics by Churchill “ethics as the application of moral
values or codes to complex problems using a rational decision making
process.
 Ethics (...)
Nature of Ethics Requirement of ethics study
• The nature of ethics is as follows: • The Need of study ethics can be:
1) A normative science 1. To recognize and resolve moral
2) Self-imposed dilemma.
3) Morality 2. To achieve moral autonomy.
3. Enhance the knowledge of relevant
4) Discipline
standards.
5) It is not a Religion
4. Develop an appreciation of ethical
6) It is not culturally accepted norms threats.
7) It is not a Science 5. Improve professional judgement. Etc.
Ethics
Golden Rule of Ethics:

The following are the forms of the golden rule in ethics. Each of

these forms the basis of all human values.

1. Everything you want others to do to you, you should do to others.

2. Do not do to others anything, which you do not with them to do to you.

3. Do not do anything to others that, if done to you, would cause harm to

you.
 B. BUSINESS ETHICS

Meaning of business ethics:

BE- is applied ethics. It is the application of our understanding of what is good and
right to those assortments of institutions, technologies, transactions, activities and
pursuits that we call business.

Definition of business ethics:

According to William Shaw “business ethics deals with morality in business

environment. It involves moral judgement based on understanding of the society. It
extends beyond the legal questions and involves goodness and badness of an act.”
 Business ethics...
Nature of Business ethics are as follows:
1) The rate of publicity
2) The rate of equivalent price
3) The rule of conscience in business
4) The rule of spirit of service
Need for Business Ethics are as follows:
1) Social contract
2) Principles for business conduct
3) Stressing the business
responsibilities
4) Developing socially responsible and
conscious business
5) Reconcile conflicting interest
Sources of Business Ethics:
Basic underlying principles of business
ethics:
As per other few researchers on business ethics there are six broad
principles on which business ethics is built:
(1) Harm principle
(2) Fairness principle
(3) Human rights principle
(4)Autonomy principle
(5)Reality principle
(6)Stakeholder principle
 cont...

Factors influencing Business Ethics: Importance of Business Ethics:

1) Moral consciousness
▪ Cultural differences 2) Self-interest
▪ Knowledge 3) Environmental pressure
▪ Organizational behavior 4) Legal imperative
Features of Business ethics:
The important features are as follows:-
1. Related to human aspects and conduct of business.
2. It is as old as human civilization and deep rooted to society.
3. It develops dignity to stakeholders.
4. Lays support to social welfare functions.
5. Provides code of business conduct and basic functional frame.
6. Acts as guiding principles of business.
Advantages of Business Ethics:
The advantages of business ethics are as follows:-
1. Enhancement of society
2. Maintaining moral course in turbulent period
3. Strong teamwork and productivity
4. Employee development
5. Guarantee that policies are legal
6. Compliance with law
7. Total quality management
8. Diversity Management
9. Strengthen the business
The types of business activities
Business Ethics
• It is to decide what is right or wrong in the business.
• Business ethics enables the leaders and employees to act at the time
of crises and confusion in the business. Therefore, business ethics
helps to deal with business ethical issues that are vague.
1.2. Definition of CSR
• Social Responsibility
• proposes that a private corporation has responsibilities to society
that extend beyond making a profit
• Friedman’s Traditional View of Business Responsibility
Argues against the concept of social responsibility
Primary goal of business is profit maximization not spending
shareholder money for the general social interest
 cont...
• Carroll’s Four Responsibilities of Business
1. Economic responsibilities
• produce goods and services of value to society so that the firm may
repay its creditors and increase the wealth of its share holders
2. Legal responsibilities
• defined by governments in laws that management is expected to
obey
3. Ethical responsibilities
• follow the generally held beliefs about behavior in a society
4. Discretionary responsibilities
• purely voluntary obligations a corporation assumes
Responsibilities of Business
Responsibilities of a Business Firm
• Social capital
• the goodwill of key stakeholders, that can be used for competitive
advantage
• opens doors in local communities
• enhances reputation with consumers
Benefits of Being Socially Responsible
• May enable firm to charge premium prices and gain brand loyalty
• May help generate enduring relationships with suppliers and
distributors
• Can attract outstanding employees
• Can utilize the goodwill of public officials for support in difficult times
Characteristics of Sustainability
 1.3. Corporate Citizenship

What is Corporate Social Responsibility?

• Distinguishing right from wrong; doing right
• Good corporate citizenship
• Make choices that contribute to society as well as the organization
Corporate Stakeholders
Organizational Stakeholders – any group that has a stake in the
organization’s performance
Stakeholders -have an interest in the business and affect or are affected by
the achievement of the firm’s objectives
Enterprise strategy- an overarching strategy that explicitly articulates the
firm’s ethical relationship with its stakeholders
Stakeholder analysis

• Stakeholder analysis
• the identification and evaluation of corporate stakeholders
• usually done in a three-step process
• The first step in stakeholder analysis is to identify primary
stakeholders.
• Primary stakeholders
• have a direct connection with the corporation and who have
sufficient bargaining power to directly affect corporate activities
• include customers, employees, suppliers, shareholders and
creditors
cont...
• The second step in stakeholder analysis is to identify the secondary
stakeholders.
• Secondary stakeholders
• have an indirect stake in the corporation but are also affected by
corporate activities
• include NGOs, activists, local communities, trade associations,
competitors and governments
• The third step in stakeholder analysis is to estimate the effect on each
stakeholder group from any particular strategic decision.
 Stakeholder Input

• Once stakeholder impacts have been identified, managers should

decide whether stakeholder input should be invited into the
discussion of the strategic alternatives.

• A group is more likely to accept or even help implement a decision if it

has some input into which alternative is chosen and how it is to be
implemented.
1.4. Social responsiveness and performance
Social Responsibility:
The duty to do what is best for the good of society.
Management’s consideration of profit, consumer satisfaction, and
societal well-being of equal value in evaluating the firm’s
performance.
Contributions to the overall economy, job opportunities, and
charitable contributions and service.