Business Ethics and Corporate Social Responsibility

Unit-1

Concept of Values:

Values have been defined as ideals or beliefs that a person holds desirable or
undesirable.

Values are fundamental belief about ‘what is important’

Values are things that people care about.

Values are what matter to us. They are what motivate our behavior.
They ground our judgments about what is good or bad, desirable or undesirable.
A value has its worth and importance.
A value is subject, community and national oriented.
Value is a desired preference.
Value is a cherished idea.
Value is a strong belief put to action.
Value is an internalised idea or thought.
Value gives direction to human action.
Values are the desirable ends, goals or modes of action which makes human
behaviour selective.
Value not only orients but also determines human behaviour

CHARACTERISTICS OF VALUES

In formulating a conception of values Rokeach (1973) makes five assumptions

about the nature of human values:

1. Values are organized into value systems;

2. The total number of values that a person possesses are relatively small;
3. All men everywhere possess the same values in different degrees;
4. The antecedents of human values can be traced to human culture, society
and its institutions and personality;
5. The consequences of human values will be manifested in virtually all
phenomena that social scientists may consider worth investigating

Values (What is Important?) vs Ethics (What is Right?)

• Ethics and values are important in every aspect of life, when we have to
Notes Compiled by Dr. Sunita Singhal
 make a choice between two things, wherein ethics determine what is right,
values determine what is important.
• For example: If making money is a value cherished by a society and if the
society is not that bothered about how that money is made, that can lead to
unethical practices.
• If we talk in Business Terms, Business ethics can provide the general
guidelines within which management can operate. Values, however, offer
alternatives to choose from.
• For Example: Philanthropy as a business guideline is optional. Values of
Entrepreneur will decide the degree of action.

Guidelines for Managers

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The most important thing that organisation need to do when interviewing
someone is understand his or her workplace values. After all, you can train people
to cover skills gaps, and you can help people gain experience. But it's really hard to
get people to change their values; and they will be "problem workers" until they
do.

Types of Values
(Please note that values can fit into any number of categories, however, major
categorizations are below.)

Spranger's classification

• Theoretical, (dominant interest is the discovery of truth)

• Economic, (interested in what is useful)

• Aesthetic, (highest value is form and harmony)

• Social, (highest value is love of people)

• Political, (interest is primarily in power)

• Religious, (highest value is unity)

Gandhi Ji's Classification

• Non violence

• Truth

• Freedom

• Democracy

• Equality

• Self-realization

• Purity of ends and means

• Self-discipline
Parker's Classification
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• Biological values

• Economical values

• Affective values

• Social values

• Intellectual values

• Aesthetic values

• Moral values

• Religious values

General classification of Values

In general, values may be classified as personal, social, moral, spiritual and
behavioral values.

Personal values
They refer to those, which are desired and cherished by the individual
irrespective of his social relationship. The individual determines his own
standards of achievement and attains these targets without explicit interaction
with any other persons. Ex- Achievement, Adventure, Courage, Creativity,
Dependability, Determination, Friendship,Health, Fun etc.
Social values
‘Social’ is a relative term. Social values refer to those, which are oriented and
concerning to society. These values are practiced because of our association with
others. Ex-A system of laws, Responsibility, Loyalty in relationship. Social values
helps in maintaining the social order.

Moral values
Moral values related to individual's character and personality conforming to what
is right and virtuous.
Think about….
The sympathy and empathy we experience when we perceive the suffering of
others or The admiration we feel toward those who exhibit courage and
compassion.

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Spiritual values
The ultimate ethical value is called spiritual value. Spiritual value is the awareness
of itself.

Behavioural values
Behavioral values refer to all good manners that are needed to make our life
successful and joyous. These are the values, which are exhibited by our conduct
and behaviour in our daily life.

Other Categories
1. Individual Vs Collective Values
Individual values:
Collective values: Justice, Freedom, Honesty, Equality, Sociableness

2. Terminal values and instrumental values (Rokeach’s Values Survey)

Note: (Important)
Rokeach’s Values Survey is a tool created by Milton Rokeach to help individuals
understand their values. By prioritizing a list of 18 terminal values (where you
want to end up) and 18 instrumental values (how you want to get there) you can
develop self awareness.

Milton Rokeach did some interesting work on personal values that is still relevant
and popular today. In his research, he segregated personal values into two types:
Terminal values (also called Intrinsic Values) and instrumental values.

Intrinsic/Terminal Values refer to the goals that a person would like to achieve
during his or her lifetime.
Instrumental Values refer to preferable modes of behavior, or means of achieving
the terminal values.

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 Sources of Value Formation

A value is a view of life and judgement of what is desirable that is very much
part of a person’s personality and a group’s morale. Personal Values are
imbibed from parents, teachers and elders, and as an individual grows, values
are adapted and refined in the light of news knowledge and wisdom. Within
an organisation, values are imparted by the founder entrepreneur or a
dominant chief executive and they remain in some form, even long after that
person’s exit.

Sources of Value Formations are given below.

Life Experience:
Many values originate out of the experiences of the individual and those of his
fellow men. Men constantly keep on determining what values they must follow
to find happiness and fulfill their destiny as human beings.
These source orientations are conformed by Shri Radhakrishnan (1950) who
observed, "Values in education although they find their source in philosophy,
have a second source in society, the people, their culture and their ideals".

Family Factors: The immediate family of an individual exercises the earliest

and strongest influence on his values.

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 Society/Social Factor – Human being is a social animal. Social environment
and social institutions influence the value system of a person. Society has
evolved some social values to make human life more ordered, safe, and
comfortable. These values are – Social Conformity, Discipline, Sensitivity,
Adjustment, Justice

Religious background: In its pursuit of truth religion is also concerned with

values. Many basic values are common to all religions.

Culture- Culture includes everything that is learned and passed on from

generation to generation. Every culture has some values which are cherished by
the individuals following that culture. “Culture is like water for fish.” The
Cultural background determines a person’s attitude towards money, relationship
and life. For Ex-
• Americans want everything now, have little patience with waiting.
• Japanese workers tend to be more patient with waiting for job promotions
and are willing to stay with the company for a long run.
• Germans believe more in analytic decision making, with less interest in
brainstorming and quick decision making.

Scientific background:
It helps us to make value judgments only to the extent that we relate it to
value assumptions.

Organisational Factor: The organization in which individuals work for a

long period develops and shapes his value system. Example of Core Value
organisations
1. American Express: Customer Commitment:
2. Google: Focus on the user and all else will follow.
3. Coca Cola: Leadership

Values and Behaviour

Desire and Action: Values the beliefs that an individual find desirable and thus
act according the values he/she possess.
Personal factors and Action: Values influences the attitudes, motives and
perception which further leads to influencing behaviour.

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Selection of Goals: Value system lays foundation for choosing goals which leads
to behavior in accordance with the goals
Accessibility: Values which are more accessible influences the behaviour the most.
Judging People: Values influences the way in which an individual looks at other
individuals, i.e. values become basis for interpersonal interactions
Helpful in Prediction: An understanding of values of individuals in helpful in
predicting their behaviour in reactions to managerial policies and programmes.
Public Image: Ethical Organisational values when shared by members enhance the
public image of the organization.

Values of Indian Managers

Erosion in Values:
In India, today, we see commerce through corruption, administration through
bribery and politics through blackmail. We have already entered into the age of
computers and robots where human hands are sought to be eliminated. The race of
production and distribution has brought forth a lust for profit all around. Ends rule
supreme and means are secondary. Management has been reduced to a handmade
of profiteering. The maximization of profits becomes the ultimate goal, to the
exclusion of all other considerations. This technology is fragmented rather than
holistic, dependent on manipulation and control rather than cooperation,
self-assertive rather than integrative. It has become increasingly clear in recent
years that management must work consciously to develop organizational values
that are not only indigenous in nature but also more suited to the India psyche.
The resident director of TELCO in 1975 in his keynote address at the compay’s
management training center, said , “to be a good manager, one has to be a good
man”.
S. K. Chakraborty in his book ‘Management by Values Towards Cultural
Conguence’ suggests that Indian Managers should understand the human values
which are deep rooted in our culture and society.

Notes Compiled by Dr. Sunita Singhal

 1. Respect for the individual
2. An atmosphere of cooperation and Trust
3. Purity of emotions and feelings
4. Work is worship
5. Self-discipline and Self restrained
6. Creativity
7. Customer Satisfaction
8. Detachment from the fruits of action.
9. Control over greed
10. Avoid jealousy which is harmful to mental health.
There is a widespread feeling that the value system of Indian Managers is not up-to
mark and needs improvement. In researches, a wide difference was found in the
value system of Indian Managers and Western Managers.
Difference between Values of Indian Managers and Western Managers

Value Indian Managers Western Manager

Respect for Time Low respect for others person’s High

time
High
Low Punctuality

Respect for Low respect for Deadlines High respect

Contractual
Obligations

Professionalism Low High

Work Discipline Poor Good

Respect for Rules Low High

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& Regulations

Accountability Low High

Dignity of Labour Low High

Responsibility Low High

towards
environment

Loyalty towards High Low

Family

Suggestions to improve value system by Indian Managers

1. Vision (Long term vision instead of short term orientation for profit)
2. Commitment to work (Nishkam Karm)
3. Leadership (Focusing on development of man)
4. Concern for everyone (Do the action which not only benefit you but also
society at large)
5. Excellence (in utilization of resources)
6. Integrity (Honesty & Management by Consciousness)
7. Hard Work (avoiding short cuts)
8. Responsibility (Winning trust of customers and society)

Business Ethics

• The word “ethics” derived from the Greek word “ethos.

• Ethics is a branch of philosophy that is concerned with human conduct.
• Ethics is related to issues of rightness and wrongness. What is right is ethical
and what is wrong is unethical

• “Business Ethics is generally coming to know what is right or wrong in the

work place and doing what is right. This is in regard to effects of
products/services and in relationship with the stake holders.” —Cater
Mcnamara

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• “Business ethics in short can be defined as the systematic study of ethical
matters pertaining to the business, industry or related activities, institutions
and beliefs. Business ethics is the systematic handling of values in business
and industry.” —John Donaldson

In short business ethics are related to-

• morally right and wrong behavior,
• in the business context,
• including questions of fairness, justice, and equity,
• which require application of moral standards by persons in the organizations, and
• the moral standards that are not separate, but derived from society.

Why should business act Ethically?

Ethics is closely related to Trust. If a company is able to maintain these trust

relationship, then we can call that company as an ethical company.

Ethics are needed in Business…

To protect its own interest
To protect the interest of the business community as a whole so that the public will
have trust in it.
To keep its commitement to society to act ethically
To meet stakeholders expectations
To prevent harm to the general public
To protect themselves from the abuse of unethical employees and competitors
To protect their own reputations

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To protect their own employees
To create an environment in which workers can act in ways consistent with their
values.

Management Process and Ethics

In respect of organizations, three managerial approaches have been identified.
They are briefly outlined here.
• The stockholder theory holds that managers are agents of the stockholders, and
their only ethical responsibility is to increase the profits of the business without
violating the law or engaging in fraudulent practices (legal and economic
approach).
• The social contract theory states that companies have ethical responsibilities to
all members of society, which allow corporations to exist based on a social
contract.
What to do? The first condition of the contract requires companies to enhance the
economic satisfaction of consumers and employees. They must do that without
polluting the environment or depleting natural resources, misusing political power,
or subjecting their employees to dehumanizing working conditions.
What not to do? The second condition requires companies to avoid fraudulent
practices, show respect for their employees as human beings, and avoid practices,
which systematically worsens the position of any group in society. The theory,
proposes that ethical decisions should be based on empirical (what is) and
normative (what should be) factors.
This view on ethics is based on the integration of two “contracts”; the general
social contract that allows businesses to operate and defines the acceptable ground
rules, and a more specific contract among members of community that addresses
acceptable ways of behavior.
For instance, in deciding what wage to pay to workers in a new factory,
management would base the decision on existing wage levels in the community
(Social approach).
• The stakeholder theory maintains that managers have an ethical responsibility
to manage a firm for the benefit of all of its stakeholders, which are all individuals
and groups that have a stake in or claim on a company. Sometimes the term is

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broadened to include all groups who can affect or be affected by the corporation,
such as competitors, government agencies, special interest groups, and the media.
Balancing the claims of conflicting stakeholders is obviously not an easy task for
managers. It requires balancing political, legal, economic, technological and social
factors (Integrated approach).
Management Functional Department and Ethics
Within an organization, one would find a broad spectrum of ethical issues based on
the functions of a business organization like Strategy Management, Financial
Management, Human Resource Management, and Marketing Management and
Production Management.
• Corporate Strategy issues like selection of the type of plant, technology,
decisions like reconciling the expectations of different stakeholders in
formulating and developing strategies, the role of business in society and in
the economy, corporate social responsibility, and ethical issues at the
individual level in organizations.
• Finance and Accounting issues like insider trading, hostile takeover,
acquiring non-performing assets through surplus funds. Value maximization
of the owners, has its limitations and is often in conflict with the traditional
concept of morality.
• Human Resource Management issues related to dealing with unions and
labor negotiations; responsibilities to employees like safety and occupational
health hazards, managing cross cultural teams, workforce diversity, gender
equality, privacy of employees, impact of new technology on employees and
their families, fair compensation, proper working environment, enforcing
ethical standards in the work place, resolving conflicts of individual
employee values and of organizations through systematic training, creating
an equitable and empowering corporate culture etc.
• Marketing Management issues, often culture specific, such as marketing
of baby milk in developing countries, misleading or deceptive
advertisements, the effect of advertising on children, the connection
between packaging and the environment, whether the poor really pay more,
Surrogate marketing , Stereotyping , Misleading Claims etc.

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 • Production and Operations Management issues like impact of
technology on employees, process safety, quality of production, pollution,
etc

ETHICAL DECISION MAKING

Ethical Dilemma
• Ethical dilemmas, also known as a moral dilemmas, are situations in which
there is a choice to be made between two options, neither of which resolves
the situation in an ethically acceptable fashion.
• In such cases, societal and personal ethical guidelines can provide no
satisfactory outcome for the chooser.
• While dealing the ethical dilemmas, remember that you cannot resolve all
dilemmas to the satisfaction of all parties or address al aspects of the issue
involved. Sometimes you may have to choose the best among the worst.
• The idea is you should feel good and satisfied for having taken that decision
under the given circumstances and environment you are placed into.
• When there is a difficult decision to make, make it based on what would
create long-term value instead of gaining the short-term win.
• Sometimes the things we think could really hurt us or embarrass us end up
being the things that become our shining, most glorious moments.
• Loyalty and longevity still matter.

Approaches to Ethical Standards

Utilitarian Approach
What the possible solutions to the problem are, and what benefits and harms
result from each and whom they affect?

The Rights Approach

This approach also assumes that everybody has the duty to respect other’s
rights.
What rights each of the parties to the problems has?
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Fairness or Justice Approach
The fairness approach assumes that people should be treated equally regardless
of their station in life, that is, they should not be subject to discrimination.
What solutions to the problem treat all parties equally

Common Good Approach

The common good approach suggests that ethical actions are those that benefit
all members of the community.
What course of action promotes the common good ?

The Virtue Approach

The virtue approach describes an assumption that there are higher orders of
goodness to which man should aspire, and that only moral actions will help us
achieve that higher level.

A Framework for Ethical Decision Making Process

A. Understand and analyze the problem.

1. What are the relavant facts of the case?
What facts are not known?
Can we learn more about the situation?
Do we know enough to make a decision?
2. What individuals and groups have an important stake in the outcome?
Are some concerns more important? Why?
3. Have all the relavent persons and groups have been consulted?
B. Evaluate alternative actions.
1. Which option will produce most good and do the least harm?
2. Which option best respects the rights of all who have a stake?
3. Which option treats people equally?
4. Which option best serves the community as a whole and just some
members?
5. Which options leads to act as a sort of person you want to be?
6. Which action makes you feel happy and satisfied?

C. Make a decision by evaluating pros and cons.

1. Considering all these approaches, which option does best addresses the
situation?
2. Share your concerns and decisions with others in similar situation and

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 observe their reaction and suggestions.
3. Re-examine and modify if necessary.

D. Act and check the outcome.

1. Implement the decision taking care to communicate it to all concerned
with the issue and the decision.
2. Does the option take care not to harm other stakeholders’ interest? If not
so, what extra measures are being proposed to mitigate the loss of interest?

E. Implement the learning points in the organization.

Share your experience ethical decision making on important organizational
issues with collegues, peers and bosses at suitable training platform.

.
Ethical Issues of Current Business Environment

1. Technology and Business Issues

New Technology of present century, what is called information technology raise
new ethical issues related to risk, privacy and property rights.
A. Risk:
Are the risk of new Technology Predictable?
How large are the risks and are they reversable?
Are the benefits worth the potential risks?
Do those persons on whom the risks will fall know about the risk etc etc etc

B. Protecting Client Privacy

It seems every week another company announces that customers' confidential data
has been exposed or hacked.
Sometimes it can't be helped: hackers are very good at what they do.
But in most of the cases these hacks are preventable and only happen because of
corporate negligence i.e. just to avoid additional cost burden.

C. Intellectual Property Rights

• Technology has also raised difficult ethical issues about the nature of the right
to intellectual property.

Notes Compiled by Dr. Sunita Singhal

D. Social Media Issues
Using social media is a good way for companies to promote their business, but it
can create ethical issues in business regarding its use at work and in private.
However, the most prominent ethical dilemma involving social media is firing
employees for posts that reflect personnel character flaws, like racism,
inappropriate behaviors, and memberships in controversial social organizations
breach of confidentiality, conflicts of interest, misuse of company resources

2. Globalisation and Business Issues

A. Discrimination and Harassment

Racial discrimination, sexual harassment, wage inequality – these are all costly
ethical issues that employers and employees encounter on a daily basis across the
world.
Maximizing the value of each employees' contribution is a key element in your
business's success.

B. Substandard working conditions

Manufacturing in the new global economy has shifted from "well regulated,"
high-paying, often unionized plants in the industrial countries to very low wage,
unregulated and non-union production facilities in the developing world, each
competing with one another for maximum "competitive advantage.“
Many countries, such as Indonesia and Guatemala, have extremely limited or very
general regulations on occupational health and safety. While others, like Mexico
and China, have legal requirements that are not enforced in any meaningful way.

C. Introduction of inappropriate technologies into developing countries

D. Environmental Degradation
In Ghana,hundreds of thousands of tons of used electronics—mainly from Western
Europe and the United States—are delivered in huge containers. They are often
labeled as secondhand consumer products, health experts said, so they are not
strictly considered waste. But their impact is noxious all the same.

3. Other Ethical Issues in Business

a. Self Dealing
In this an official who controls an organization causes it to enter into a transaction
with the official, or with another organization that benefits the official, i.e., the
official is on both sides of the “deal”.

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b. Finance/Information Manipulation
Enron
Satyam

C. Anticompetitive behaviour
Such behaviour is aimed at harming control or potential competitors.
For example: Microsoft used its Monopoly in operating systems to force pC
makers to bundle its web brower.

D. Opportunistic Exploitation

• This means a company using its power to exploit suppliers and distributors.
Some unethical Issues in India

Bribery
Corruption
Black Money
Coercion
Tax Evasion
Conflicts of Interest
Pollution

Ethos of Vedanta in Management

• Ethos is a set of beliefs, ideas, etc., about social behaviour and relationship of a
person or group.

• Indian ethos refers to the principles of self-management and governance of

society, entity or a system by wisdom as revealed and brought-forth by great
scriptures like Veda, Upanishads, Gita, Mahabharata, Bible and Quran.

• Indian ethos in management draws heavily from Vedantic wisdom. Rigveda

(ancient Indian text) says ‘let noble thoughts come to us from every side’.

• This implies that new ideas can be generated through interaction, assimilation,
and transformation processes.
Notes Compiled by Dr. Sunita Singhal
• Indian culture is a confluence of different cultures due to its long heritage and
historical developments.

• Himadri Barman has compared the modern management concepts with that of
ancient Indian ethos in management, which can be summarized as
follows:

Profitability In terms of money, social costs not In terms of good public image,
included in Balance Sheet social costs internalized.
Trust of the customers
and society

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 Hygiene Attention only on job enrichment Primary emphasis on mind
factor enrichment

Rights and Emphasis on taking not on giving. Emphasis on giving not on

duties Rights become primary. taking. Duties given great
Duties become subsidiary importance and Rights
assume secondary value

Marketing Keen competition to capture and Through cooperation by

retain demand, market driven playing complementary
economy role. Social awareness in
marketing

The Salient ideas from ancient scriptures

• According to our scriptures, there are four ways of dealing with people.

• Saam (Diplomacy)

• Daam (Reward)

• Dand (Punishment)

• Bhed (Divide and rule)

There are three character sets, namely

Satwik (wise and posses Purity, radiance, calmness) ;

Rajas (forceful and posses impulsiveness, restlessness, active) ;
Tamas- (Simpleton and posses dullness, laziness, lethargy)

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If we combine the four styles with the three character sets, we get the following
framework.

NEED AND RELEVANCE OF INDIAN ETHOS

1. Maintain Holistic Universe:

The basic unity of life cannot be broken. Love, sacrifice therefore emerges as the
only means for a meaningful living. On the basis of this holistic vision, Indians
have developed work ethos of life. This helps in living life to the fullest.

2. Elucidate Motivation:

Concept of motivation can be explained holistically by Indian ethos. Considering

motivations as internal, every human being has the same divine atman with
immense potentialities within. Vedanta brings infinite expansions of the mind,
breaks down all the barriers and brings out the God in man. Motivation is to be
internal and not external. Such motivation involves the inner beauty and does not
promote any greed in an individual to have more and more in return for his work.

3. Welfare:

Indian ethos teaches welfare of all (yagna spirit). “Atmano Mokharth Jagat Hitay
Cha” (serve your personal interest but do not forget others). This philosophy is
needed in modern times

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4. Unique Work Culture: Indian ethos helps in development of unique work
culture. Work is considered as duty or Sadhana and there is no difference between
Karma(work) and Dharma(religion). The term Dharma does not indicate any
particular religion. Dharma is a duty to be performed in a given situation. Thus,
Dharma is possible through Karma only.

5. Evenness of Mind: Indian ethos helps in evenness of mind. Means are equally
important as the ends. Thus, society acceptable values are to be followed in
determining the objectives as well as in the process of achieving these objectives

6. Self-development:
Integrated human personality of self-developed manager can assure best and
competent management of any enterprise, involving collective works and efforts.
The refined or higher consciousness will adopt holistic attitude. It will bring out
the divine in man. It will achieve perfection or excellence in whatsoever sector of
work. One shall achieve peace, harmony and prosperity within and without, i.e., in
the internal world and in the external world simultaneously.

7. Provides Concentration:
Vedanta provides the ways and means of controlling the mind. It helps to
concentrate, increase efficiency, productivity and prosperity. It is not religion of
resignation and retirement. One cannot renounce their action. As the Gita says
“You have to be a man of action, do not run away from your action or Karma but
the same should be according to your Dharma”. The second aspect, is while doing
the Karma; do not be tempted by worldly pleasures, materialism and the results.
One has to be man of action, working in a spirit of renunciation. Renunciation does
not mean living a life of isolation or living in a forest. One has to face the world
and should not run away from your action. Do not get attached to anything.

8. Establishes Value System:

Many of the present ills are the results of decline in our value system and loss of
character. Forces of fierce competition in the technology driven era of globalisation
have taken a heavy toll of traditional values. People need to re-imbibe the sanatan
values of honesty, integrity, compassion, care and cooperation. There is again a
need to establish conduct, based on truth and non-violence, peace, and harmony.
One needs to promote a secular ethos that entails ‘sarva-dharm-sambhav’. That
alone will promote enshrined in our ancient maxim of ‘Vasudhaiv Kutumbakam’.
That will be India’s unique contribution towards enrichment of content of
globalisation which today has its focus only on trade and commerce.

Notes Compiled by Dr. Sunita Singhal

 Relevance of Ethics and Values in Business
1. Trust and Reputation
• As billionaire investor Warren Buffett once said
• “It takes 20 years to build a reputation and five minutes to ruin it. If you
think about that, you'll do things differently.”
2. The Power of Ethical Consumption
• A Morgan Stanley survey suggests that they ethics play role
• The survey found, 62% of consumers used good ethics as “part of their
shopping criteria” in 2016, up from 53% in 2010. And ethics were more
important to younger respondents, suggesting the trend is likely to continue
3. Financial Outperformance
• Some studies have also found that ethical firms outperform their
competitors.
4. Employee Satisfaction
• People want to work for a company that does the right thing
5. Improvement of Society
6. Facilitates Change
7. Adherence to Law
8. Positive Public Image
9. Strategic Advantage

Notes Compiled by Dr. Sunita Singhal