CHAPTER – 1

INTRODUCTION

Concept of Business Ethics

 Ethics refers to the study of behavior regarding issues of right and wrong conduct.
 It is the branch of philosophy that studies about systems, norms, and values that
distinguishes between what is good and bad or fair and unfair or right and wrong
conduct.

 Business ethics can be defined as a subject of corporate behavior that deals with the
fair and unfair action of the business.

 It is the system of the moral principles and rules of the conduct applied to the
business.

 According to Crane and Matten, “Business ethics is the study of business situations,
activities, and decisions where issues of right and wrong are addressed.”

 Business being a social organ shall not be conducted in a way determined to the
interest of the society and the business sector itself.

 Every profession or group frame certain do’s or don’ts for its members.

Importance of Business Ethics (Benefits)

1. Basic Human Needs

2. Creditability in the pubic
3. Creditability within the employees
4. Better decision-making
5. Profitability
6. Protection of the society
Myths about Business Ethics

1. Business ethics is an oxymoron:

 This myth argues that there is no place for ethics in business.

 It implies that greed is the foundation of all business; such that for profit
making, companies neglect integrity.

 However, it is not rational to say business ethics is oxymoron as there is a

pivotal role of ethics in business that is a part of the social system.
2. It’s easy to be ethical:

 This myth ignores the complexity that surrounds the ethical decision-making,
particularly within the business organizations.

 In reality, facing ethical issues and making ethical decisions is not an easy
task.
3. Business ethics is more about religion than management:

 This myth undermines the real context of applied ethics.

4. Hire only ethical people, so further time on business ethics is not needed:

 This myth believes that if company’s employees are ethical, we should not
focus our valuable time to business ethics.

 Even ethical people can be unethical with change in time, every business
should have ethical policies and practices.
5. Business ethics is a discipline best led by philosophers, academics and
theologians:

 This myth does not consider the subject as applied ethics.

 However, ethical decisions are a part of everyday life for the ones who work
in an organization, still we can’t ignore the roles of philosophers and
academics for their work.
6. Ethics can’t be managed:

 This myth has some sort of serious reality; ethical issues recorded in the
globally reputed multinational companies.
  International businesses generate a large variety of ethical issues that maybe
difficult to manage, but it is not impossible.

7. We’ve never broken the law so we must be ethical:

 This myth argues that organization that never broke law is never in trouble,
they are always ethical.

 However, fulfilling the law is not a complete ethical course.

 A real ethical dilemma exists when the clauses of the law ends.
8. Business ethics and social responsibility is the same thing:

 This myth is based on simple thinking of layman.

 Social responsibility is one aspect of the business ethics.
9. Business ethics is superfluous- it only asserts the obvious (do good):

 This myth fails to realize the inherent complexity of the business environment.
10. The business of a business is the business:

 This myth expresses that business and ethics are two separate domains; ethical
language is simply not the language of business.

Moral Reasoning

 It is the process of determining right or wrong in a general situation.

 It is a cognitive process that people use in making ethical decisions.
 Moral reasoning is a reflection of the moral development level.
 Moral reasoning, thinking process and cognitive process changes over time.
 Acting ethically, it requires well-developed moral reasoning ability.

Stages of Moral Reasoning Process

(Model of Cognitive Development)

 1. Obedience and punishment orientation: Obedience to rules of authority to avoid
punishment.
2. Self-interest orientation: Distinguish right or wrong as that which serves his/her own
interest or need.
3. Interpersonal accord and conformity: Awareness of other’s expectations and
determination of actions accordingly.
4. Authority and social-order maintaining orientation: Distinguish right or wrong in
due respect to the law and order of the society.
5. Social contract orientation: Acceptance of different opinions and that they should be
respected.
6. Universal ethical principle: Rights is determined by universal ethical principles that
everyone should follow.

The Morality of Profit Motive

#MERITS:
1. Shareholder’s return
2. Corporate social responsibility (CSR)
3. Business expansion
4. Increase in GDP

#DEMERITS:
1. Decrease in quality
2. Black market
3. Over-exploitation of resources

Ethics and Philosophy

ETHICS:

 Ethics is a branch of philosophy.

 Ethics deals with what is morally right or wrong.
 Ethics is moral philosophy.
 Ethics deals with human actions.
 PHILOSOPHY:

 Philosophy deals with reasons and logics.

 Philosophy is an attempt to understand reality and answer fundamental questions
about existence, knowledge, life, power, morality, human nature, etc.
 (Universe, world and society)

Ethics and Morality

ETHICS MORALITY

Ethics refer to rules provided by an external Morals refers to an individual’s own principles
source, e.g., codes, professional ethics, or conscience regarding right and wrong.
principles in religions, or social system. Therefore, it comes from the internal source.
Ethics are governed by professional and legal Morality transcends cultural norms.
guidelines within a particular time and place.
Ethics can be defined as a code of behavior Morality or else morals, on the other hand, are
with reference to group or entity. more personal in nature.
Much diversity is possible in daily life in Relatively more consistent in daily life.
different work environments.

Code of Conduct

 Code of conduct is known as a formal statement that describes what an organization

expects of its employees or members.

 It outlines specific behaviors that are required or prohibited as a condition of ongoing

employment.

 Code of conduct is typically issued by a board of directors or top-level management

that determines the social norms, regulations and responsibilities.

BASIS FOR CODE OF ETHICS CODE OF CONDUCT

COMPARISION
Meaning An inspirational document, issued A directional document containing
by the board of directors specific practices and behavior that are
containing core ethical values, followed or restricted under the
 principles and ideals of the organization.
organization.
Nature General Specific
Scope Wide Narrow
Governs Decision-making Actions
Length Short Comparatively longer
Disclosure Publicly disclosed Employees only
Focused on Values or principles Compliance and rules
Corporate Social Responsibility (CSR)

 A business practice that involves participating in initiatives that benefit society.

 CSR is the continuing commitment by business to behave ethically and contribute to
economic development while improving the quality of life of the workforce and their
families as well as of the local community and society at large.

 CSR is the management concept whereby companies integrate social and

environmental concerns in their business operations and interactions with their
stakeholders.

Importance of CSR

Stakeholders Stakeholder’s concerns that CSR addresses.

Employees Rates of pay, job security, compensation, respect, truthful
communication, participation on profit.
Customers Reasonable price, quality assurance, customer care, ethical products,
honest advertisement.
Suppliers Continuity in business, disciplined payment schedule, equitable
business opportunities.
Creditors Good credit score, new contracts, liquidity, scheduled repayment.
Shareholders Profitability, return on investment, sustainable growth, reputation,
succession planning, social prestige, value maximization.
Government Taxation, VAT, legislation, employment, truthful reporting, legalities,
externalities.
Community Job opportunities, philanthropy, involvement, environmental
protection, shares, and truthful communication.
Trade Unions Fair wages, worker protection, healthy working environment.
Business Gain power, social prestige, protection, strong pressure group.
Associations
Intergovernmenta Human right, fair labor management, social justice, environmental
l Organizations justice, anti-corruption.
A Moral Argument of CSR

1. Shareholder’s wealth
2. Symbiotic relationship with society
3. Concern of future generations
4. Negative externalities
5. Corporate power

#Moral Arguments against CSR

1. Operational problems
2. Limited power
3. Responsibility overload
4. Decreased profitability
5. Contrary to basic function of business

Increasing Relevancy of CSR

1. The tragedy of the commons:

 It describes how shared environmental resources are overused, and eventually

depleted.

 It occurs when members of the society neglect the well-being of the society
for personal gains.
2. Complaints facing the companies:

 Many complaints of the companies with regards to CSR.

 Those complaints impact negatively in the sustainability of the corporate
houses.
3. Firm based positivity of CSR:

 CSR offers a number of business benefits through excellence in stakeholder

management as well as social issue participation.
CSR Domains

CSR is multifaceted discipline, and there is scant of unanimity about domains and approaches
among the scholars and practitioners.

I. Four Domains Argued by Carroll (1979,1991)

Philan
thropi
c
Respo
nsibili
ties
Ethical Responsibilities

Legal Responsibilities

Economic Responsibilities

ECONOMIC – Be profitable.
LEGAL – Rules & regulations, law & order must be followed without self- interest.
ETHICAL – Do good, right and be fair.
PHILANTHROPIC (Discretionary) – Be a good corporation.

II. The Triple Bottom Line by Elkington (1997)

TBL is intended to advance the goal of sustainability of business practices, in which the focus
of companies is extended beyond profits to include social and environmental issues to
measure the total cost of doing business.

3Ps – People, Planet & Profit.

1. Economic prosperity
2. Social justice
3. Environmental quality
III. Three Domain Model Argued by Schwartz & Carroll (2003)

iii. Purely
Ethical

iv. Economic/ vi. Legal/

Ethical Ethical

vii. Economic/
Legal/ Ethical

i. Purely ii. Purely

Economic v. Economic/ Legal
Legal
 CHAPTER – 2

ETHICAL ISSUES AND DILEMMAS

Ethical Issues

Ethical issue refers to a situation that requires an individual, group, or dome entity to choose
among several courses of actions that must be evaluated as right or wrong, ethical or
unethical from a different perspective.

Ethical Dilemma

 Ethical dilemma is a problem or situation that requires a person or an organization has

to choose between several wrong or unethical actions.

 It means there may exist two or more ethical standards that apply to a situation but are
in conflict with each other.

# 3 conditions that must be present to be considered an ethical dilemma:

1. When individuals must make a choice or decision.

2. There must be different courses of actions to choose from.
3. No matter what course of action is taken, some ethical principle is compromised. No
perfect solution.

The Problem of “Just” Wage

 The term “Just” denotes ‘treating people in a way that is considered morally right.’
 Just wage means a fair wage for the human contribution/ labor works.
 There still exist different malpractices among the government as well as private
organizations in paying wages.

 The issue of just wage is closely linked with different phases of industrial revolutions.
  The problem of just wage is now becoming one of the global level issues and the
concern is carrying largely by ILO.

Sexual Harassment

 It refers to an unwanted conduct of a sexual nature or other conduct based on sex

affecting the dignity of women and men at work.

 It is a sex-based behavior that is unwelcome and offensive to the recipient.

# Types of Sexual Harassment

1. Physical Harassment includes unwelcome touching in a sexual manner like

kissing, patting, pinching, glancing, and staring with lust.
2. Verbal Harassment includes unwelcome comments about a person’s private life,
body parts or appearance, sexually suggestive jokes and comments.
3. Gestural Harassment includes sexually suggestive body language and/or
gestures, repeated winks, licking lips and gestures with fingers.
4. Written or Graphic Harassment includes displays of pornographic materials,
sexually explicit pictures, screen savers or posters and harassment via emails and
other modes of electronic communication.
5. Psychological/Emotional Harassment consists of persistent proposals and
unwelcome requests, unwanted invitations to go out on dates, insults, taunts and
innuendos of a sexual nature.

Gift Giving and Bribery

 The practice of giving gifts is an ancient way to express gratitude, appreciation and
love.

 A gift is something of value given without the expectation of return.

 A bribe is the same thing given in the hope of influence or benefit.
 Gifts and bribes can be monetary, actual items or they can be tickets to a sporting
event, entertainment, travel, or restaurant meal.
  Bribery and corruption have long been perceived as a major obstacle for socio-
economic development, distorting national and international economic relations.

 There are two facets of bribery: one is demanded and other is supplied.

The Morality of Advertisement

Advertising is one of the powerful means to inform about the product and services as well as
company’s total offer. Advertisers should have to be especially careful to act ethically all
times, taking extra care when advertising to children, advertising potentially harmful products
and using psychological tactics to stimulate demand.

The Morality of advertising focuses mainly on the issues of false or misleading

advertisements. Some advertisement even it is false may be lawful. But some maybe illegal.
Most common misleading advertisements can be:

1. Puffery:

 Puffery is a promotional statement or claim that expresses subjective rather than

objective views, which no reasonable person would take literally.

 Puffery often uses superlatives like “best”, “fastest”, “tastiest”, or “freshest”.

 It is a legal way of promoting a product through hyperbole statements that can’t be
objectively verified.

 Advertisers use exaggeration and hyperbole to get people’s attention and make their
message memorable.

2. Implied falsity:

 Falsity simply means something false.

 Implied falsity in advertising denotes the message has a tendency to mislead, confuse
or deceive the public.

 Advertising claims that use of implied falsity are those that are literally true, but
imply another message that is false.

3. Literal falsity:

 Literal falsity denotes the claim on its face is untrue.

  If the claim in the advertisement is factually incorrect, it is literally false and it is
clearly deceiving the consumers.

 Literally false advertising claims are illegal.

Office Romance

 Office romance generally denotes workplace romance.

 Workplace romances can have a range from neutral, positive to negative impacts,
temporary to permanent consequences on the personal and the organizational level.

 At times, workplace romances present a threat to organizational effectiveness through

their negative effects on participants and co-workers.

 At times, workplace romances enhance the organizational effectiveness through their

positive effects on participants enhancing workflow. It is because employees are more
innovative and productive.

 Negative consequences of office romance include increased gossip, complaints,

hostility in the work group, distorted communication, threatened the image of the unit,
lowered morale, lowered productivity, slowed decision-making, favoritism, and acts
of retaliation toward the romantic participants.

 Positive impacts of office romance include increased coordination, lowered tensions,

improved teamwork, productivity and workflow.

# Classification of Office Romance

I. Companionate Romance:

It means having the manner of companions. In this type of relationship, each member
involved in the relation has a sincere love and passionate motive.

II. Fling Romance:

In this type of relationship, both partners have ego motives and are seeking to let all the
organization members know about it.
 III. Utilitarian Romance:

In this type of relationship, there is a bi-directional motive related to the job.

IV. The Peer-to-Peer Workplace Romance:

This is the case when a mutually desired relationship evolves between the employees who
work in similar positions in terms of the organizational hierarchy.

V. Higher Level & Subordinate Workplace Romance:

Romances involving individuals at different levels in hierarchical position are usually seen
inappropriate and unfair to the other employees that know about this relationship.

VI. Romance when one or both employees are married:

If one or both of the employees are married, negative outcomes for the individuals involved
and the organization can be further increased.

There are 3 general kinds of treatment that organizations can use in response to office
romance:

1. No action at all
2. Punitive action like warning, transfer, termination
3. Positive action like open discussion, guidance, advice

The Problem of Fair Pricing

 Price is the value which a buyer passes on to the seller in lieu (acceptance) of the
product or service provided.

 Price must match the utility offered by the product or service.

 Fair pricing generally denotes a selling price that is fair to both parties (seller and
buyer) considering quality, performance, supply situation, delivery time, and payment
options.

There are many factors that play a role in setting up prices of the product. Examples include:

• Pricing objective
• Product cost

. Nature of customers' demand and utility

•Elasticity of demand

• Government and legal regulations

Following is some of the examples of unethical pricing practices:

1. Price gouging: Price gouging is a term that refers to the practice of raising the price of
goods, services, or commodities, to an unreasonable or unfair level.

2. Price-fixing: Price-fixing is an act of colluding in fixing price of commodity or service.

Colluding simply means to act together through a secret agreement, especially with evil or
harmful intent.

3. Predatory pricing: Predatory pricing is the act of setting prices low in an attempt to
eliminate the competition. It makes markets more vulnerable to a monopoly.

# Price Discrimination and its Arguments

Price discrimination is a pricing strategy that charges customers different prices for the same
product or service. In more common forms of price discrimination, the seller places
customers in groups based on certain attributes, and charges each group a different price.

Some of the popular types of price discrimination are:

1. 1st degree price discrimination- charging the maximum price consumers are willing
to pay.
2. 2nd degree price discrimination- charging different prices depending on the
quantity consumed.
3. 3rd degree price discrimination- charging different prices depending on a particular
market segment, e.g., age profile, income group, time of use and the like.

There are different arguments about the fairness of price discrimination.

  Someone can argue plainly that the act of charging different prices for identical items
cannot be considered as ethical. However, there are many accepted and well-practiced
evidences of price discrimination available at market. It is because customers place
prices within the context of perceived value which lead to both physical and
psychological satisfaction.

 Marketers argue, commonly, the act of charging different prices for identical items
cannot be argued plainly as unethical. No doubt, discrimination on some basis like,
gender, ethnicity, religion, nationality can be unethical.

Trade Secrets

A trade secret is s confidential, commercially valuable information that helps to

generate enormous benefit to a company with a competitive advantage.

 Those secrets can include engineering information; the ingredients or chemical

composition of a product, methods, the design of a machine, the details of a
manufacturing process, methods of quality control, tolerances and formulae; business
and financial information; unpublished patent applications; business plans; methods
of calculating costs and pricing, internal marketing data; specifics concerning
customers and suppliers; and other confidential information relating to a company's
business.

 Some of the well-known examples of trade secrets include the formula for Coca-Cola,
the recipe for Kentucky Fried Chicken, and the algorithm used by Google's search
engine.

 Trade secrets can be defined simply as information used in the conduct of business,
and are not commonly known by others.

 In the business practices, trade secrets used to be considered as confidential and

proprietary information. It is because the information that qualifies as a trade secret is
confidential information.

# Maintaining trade secrets

Following points are some of the important practicalities of maintaining trade secret
information:
  Materials containing trade secrets must be marked, stored, and handled with sufficient
care to maintain their confidentiality.

 Documents, physical objects, and undocumented information (such as processes)

containing or constituting trade secrets must not be left in plain view and must not be
accessible to any random person.

 Documents containing trade secrets must be maintained in secure locations.

 Trade secret information stored in computers, on magnetic media, or on other devices
should be the password of copy protected and/or encrypted, and must not be accessible
to unauthorized persons.

 Unnecessary copies, whether electronic or paper, containing trade secrets should be

destroyed.

 Visitors to the company's facilities should be required to sign in and to sign out, should
be escorted by a company employee at all times, and must wear "Visitor" badges at all
times.

 Employees may not download or otherwise transfer or transmit trade secrets to their
home computers, remove materials containing trade secrets from the company
premises, or disclose trade secrets.

Corporate Disclosure

 Corporate disclosure is an act of publicly reporting the corporate financial as well as

non-financial conduct by the company.

 It shows the degree of the organization’s proactive social responsiveness.

 It can be made through the press, by the announcement on websites and so on.

# Types of Corporate Disclosure

1. Mandatory disclosure:

 Mandatory disclosure refers to those aspects and information which must be

published as regulated or directed by statutory stipulations.
  The main aim of statutory stipulation for mandatory disclosure is to satisfy the user’s
informational needs, ensuring transparency of corporate conducts.
2. Voluntary disclosure:

 Voluntary disclosure is the provision of information by a company's management

beyond statutory requirements.

 It includes strategic information such as company characteristics, strategy,

research & development, non-financial information and extra financial
information like stock price information, risk factors and analysis.

 It supports to complete the mandatory reporting process that often seems to be

inadequate to satisfy the user’s needs.

# Issue of Transparency in Disclosure

Information Asymmetry is an imbalance between parties in their knowledge of relevant
factors and details; also referred as information failure.

Product Misinterpretation & Caveat Emptor

Product misinterpretation is a condition of misunderstanding about the product or

interpreting it incorrectly. Because of misinterpretation, the buyer may have to face failure in
need satisfaction or loss due to defects in the goods or property being bought.

Caveat emptor, a Latin term used in trading to mean "let the buyer beware", meaning that
when a buyer buys goods, it is up to him or her to examine what he or she is buying and
ensure that it is of the required quality and correct price.

Caveat subscriptor is a Latin term used in trading to mean "let the seller beware" and in
legal language to refer to the obligations of a contract signer. When signing a contract, the
individual automatically agrees to the conditions stated within it, regardless of whether they
have read and/or understood them.

The Morality of Labor Strikes

 Labor strikes denotes work stoppage caused by the mass refusal of employees to
work.
  It is an organized effort of employees in an industry compel the employer to comply
with certain demand.

 Strikes are sometimes used to pressurize governments to change policies.

 Most strikes are undertaken by labor unions during collective bargaining as a last
resort.

A trade/labor union is a membership-based organization that works to:

1. Negotiate wages and working condition terms

2. Regulate relations between employees and employer

3. Take collective action to enforce the terms of collective bargaining

4. Help settle the grievances of the workforce

Whistle-Blowing

 Whistle-blowing is the act of releasing information by existing or former employees

of an organization about illegal and/or unethical activity, or other wrongdoing of their
associated organization.

 It is a deliberate non-obligatory act of disclosure by the member of an organization

about some significant kind of misconduct on the part of an organization or some of
its members.

 The main objective of whistle-blowing is drawing public attention.

 It’s the disclosure or reporting of wrongdoing, including but not limited to corruption;
criminal offences; breaches of legal obligation; miscarriages of justice; specific
dangers to public health, safety or the environment; abuse of authority; unauthorized
use of public funds or property; gross waste or mismanagement; conflict of interest;
and acts to cover up of any of these.

# Classification of Whistleblower (Stated by Fernando):

1. Internal to Internal Whistleblower:

An employee of the organization who reports misconduct or non-compliance of
organizational unit on a fellow employee or superior within their company is the INTERNAL
WHISTLEBLOWER.

2. Internal to External Whistleblower:

An organizational member who reports misconduct or non-compliance of organizational unit

to some of the external stakeholders is the EXTERNAL WHISTLEBNLOWER. In case of
information’s severity and nature, whistleblowers may report to lawyers, media, police, or
federal agencies.

3. Extrinsic to External Whistleblower:

This type of whistleblower doesn’t belong to the organization, but they do have intimate
knowledge about business and can report their misconduct to some of the external
stakeholders is the EXTRINSIC WHISTLEBLOWER.

Unfair Competition

 Competition is the rivalry between companies selling similar products and services
with the goal of achieving revenue and market-share growth.
 Market competition motivates companies to increase sales volume by utilizing the
components of the marketing mix.
 Unfair competition is considered as one of the unethical and illegal commercial
conduct that may include under invoicing activities, misleading advertisement, trade
secret infringement, trademark infringement and misappropriation.
 It is a deceptive business practice that causes economic harm to other genuine
businesses or to consumers.

# Common Practices of Unfair Competition

1. Predatory pricing: It is a risky and dubious pricing strategy where a product or service is
set at a very low price, intending to drive competitors out of the market or create barriers to
entry for potential new competitors.

2. Trademark infringement: It is a violation of the exclusive rights attached to a trademark

without the authorization of the trademark owner or any licenses. Use of identical or
confusingly similar trademark like “ADIDAS” for “ADDIDAS”.
3. Misappropriation of trade secrets: Trade secret means any valuable commercial
information that provides a business with an advantage over competitors who do not have
that information.

4. Trade libel: It is also known as defamation. It means the communication of a false

statement that harms the reputation of an individual person, business, product, group,
government, religion, or nation.

5. Tortuous interference: Tortuous interference simply means intentional interference with

the contractual relationship between others.

Money Laundering

 It refers to the process of cleaning illegal earning.

 The act of washing black money into white; which is illegal and unethical.

# Stages of Money Laundering

1. Placement Stage

 Physical disposal of cash earned through illegal activities.

 Deposits in domestic banks, buying of high value goods that can be resold later.

2. Layering Stage

 Converting the proceeds into monetary instruments in different layers.

 Dividing the money into different investments to make it difficult to uncover the
laundering activity.

3. Integrating Stage

 Integration of the divided money into financial system so that they can be used in
anyway.

 To reunite the money layered in such a way that it appears to be earned from a
legitimate source.
  Example: creating fictious activities like false loan, import/export invoices, capital
gains, deeds, contracts, financial statements, disguise ownership of assets, third party
transactions and so on.

Conflict of Interest

It refers to the situation in which an individual or some other entity must choose whether to
promote own interest, or obligation to those of the working organization/profession or clients.

Managing Conflict of Interest

Some of the ways by which professional groups, public and private entities can manage
conflicts of interest are:

 By identifying objectivity clearly in the professional codes.

 Making mandatory to disclose classified matters periodically.
 Through priority rules and policies.
 By classifying the nature and seriousness of conflict of interest.
 Establishing independent complaint management cell.
 Establishing reward, punishment, and norms of competition.
 Through ethical training.

Insider Trading

Insider trading is a financial term that describes the buying or selling of a public company
stock or other securities by individuals with access to confidential or non-public information
about the company.
Privacy Issue

 Privacy is a fundamental human right as recognized in the UN's Universal Declaration

of Human Rights (UDHR and many other multilateral and regional treaties.

 Privacy refers to the state of being apart from other people or the state of being free
from unwanted or undue intrusion or disturbance in one's private life or affairs. In
short, it means freedom to be let alone.

 It represents individual's right of freedom from damaging publicity, public scrutiny,

secret surveillance, or unauthorized disclosure of one's personal data or information,
as by a government, corporation, or individual.

Discrimination

Discrimination refers to the unfair or unequal treatment of an individual (or group) based on
certain characteristics, including ethnicity, gender, national origin, race, religion, age,
disability, sexual orientation, and political or another opinion.

Discrimination in the Workplace

Discrimination in the workplace addresses principally the issues of unfair or unequal

treatment to the employees. It is an ethical issue that surrounds in Human Resource
Management (HRM)

Different forms of discrimination in the workplace can be enumerated as follows:

1. Discrimination on the basis of gender

2. Discrimination based on marital status and sexual orientation

3. Discrimination based on religion

4. Discrimination based on national origin

5. Age discrimination

6. Discrimination against the handicapped

7. Discrimination on the basis of political affiliation

Corporate Intelligence

Corporate intelligence can be introduced as a subject of delivering relevant and reliable

information about the business, based on the analysis of pertinent data. Corporate intelligence
is comprised of information that contains patterns, relationships, and trends about customers,
suppliers, business partners, and employees.

Benefits of Corporate Intelligence

The potential benefits of corporate intelligence programs include:

 Accelerating and improving decision making

 Optimizing internal business processes
 Increasing operational efficiency
 Driving new revenues
 Gaining competitive advantages over business rivals
 Helps companies to identify market trends and spot business problems that need
addressed
 Helps to maximize value of the firm
 CHAPTER – 3

ETHICAL THEORIES

Basic Terminologies of Ethical Theories

1. Meta-Ethics: Meta-ethics is the branch of the philosophy of ethics that seeks to

understand the nature of ethical properties, statements, attitudes, and judgments.

2. Normative Ethics: Normative ethics is the study of our ethical behavior in different
circumstances. It attempts to determine the basis of our moral behavior by examining the
rightness and wrongness of actions.

a. Teleological Ethics: As a branch of normative ethics, teleological ethics is a theory of

ethics according to which the rightness of an act is determined by its end. The word teleology
is derived from the Greek word telos, which refers to end or purpose.

i. Utilitarianism: This theory holds that the best moral action is the one that maximizes

utility.

ii. Ethical egoism: This theory holds that all actions of individual are motivated by self.

interest.

b. Deontological Ethics: Deontological ethics holds that rightness of an act is determined by

the action's adherence to independent moral rules or duties regardless of their consequences.

c. Virtue Ethics: Virtue ethics is also a part of normative ethical theories which emphasize
the virtue of mind and character, which is most commonly associated with the name of the
philosopher: Aristotle.

3. Descriptive Ethics: Descriptive ethics is a type of non-normative ethics that simply

reports what people believe, how they reason, and how they act. It is also known as
comparative ethics.

4. Applied Ethics: Applied ethics is the attempts to use philosophical methods to identify the
morally correct course of action in various fields of everyday life.
Scholastic Philosophy

 Scholastic philosophy works by asking very basic questions about the nature of
human thought, the nature of the universe, and the connections between them.

 It can be considered as one of the main sources of knowledge and wisdom.

 It is a medieval school of philosophy taught by the academics of medieval universities
and cathedrals in Europe from about 121 to 16t century.

 It refers to a tool and method for learning which emphasized dialectical reasoning to
extend knowledge by inference and to resolve contradictions.

The Kantian Ethics

 The ethical theories of German philosopher Immanuel Kant (1724 - 1804) is known
as The Kantian Ethics.

 The Kantian ethics, as a normative ethics, refers to a deontological ethical theory. So,
it can be interpreted as Duty-Based Morality.

The Categorical Imperative

The categorical imperative is the central philosophical concept in the deontological moral
philosophy of Kant. It is referred to as Kantian deontology.

 Individual autonomy (freedom) is a central value in the Kantian ethics.

 Only the autonomy can facilitate self-legislation or self-governance.
 Our individual autonomy must be recognized as self-legislation or self-governance.
 One should always respect the humanity in others, and that one should only act in
accordance with rules that could hold for everyone.
Criticisms of the Kantian Ethics

 It solely dishonors the outcome as a valid factor in evaluating the morality of an

action.

 Kant's categorical imperative is not actually free from consequentialism because, its
motivation is also oriented toward the consequence, i.e., universality. Individual
autonomy suppressing their expectations of growth is also one of the complex
phenomena. Some critics argue tha one can survive indeed in this world with single
dimensional ethical thinking rigidly it respects.

The Machiavellian Principle

 Niccolo Machiavelli (1469-1527) was an Italian political and military theorist. He has
often been called the founder of modern political science.

 According to Machiavelli, politics is amoral and that any means however

unscrupulous can justifiably be used in achieving political power.

 Machiavellian principles were more focused on the qualities of political ruler and
highlighted policy based on retaining power rather than pursuing ideals.

Criticisms of Machiavellian Principle

Most of the dictionaries interpreted Machiavellian as a synonym of inappropriate an

unscrupulous practice. Leo Strauss (1957) called Machiavelli a "teacher of evil" on the
ground that he counseled leaders to avoid the common values of justice, mercy, temperance,
wisdom and love of their people, and to use cruelty, violence, fear, and deception.

Utilitarianism of Jeremy Bentham and John Stuart Mill

The fundamental view of Utilitarianism is: Acts should be judged as right or wrong according
to their consequences. As a consequence, happiness is the only thing that is good in itself. As
prescribed by Bentham, several variables (which he called "circumstances") are to be
considered while evaluating the goodness of an action.
These are:

 Intensity: How strong is the pleasure?

 Duration: How long will the pleasure last?
 Certainty or uncertainty: How likely or unlikely is it that the pleasure will occur?
 Propinquity or remoteness: How soon will the pleasure occur?
 Fecundity: The probability that the action will be followed by sensations of the same
kind.

 Purity: The probability that it will not be followed by sensations of the opposite kind.
 Extent: How many people will be affected?

Criticisms of the Utilitarianism of Bentham and Mill

Opponents use to ask following critical questions against Utilitarianism of Bentham and Mill:

• Is cheerful hedonism really the only way of life that is valuable in itself?

• Can utilitarianism accommodate our personal projects, desires, values and commitments?

• Can utilitarianism account for justice and fairness?

• Is there any space for personal integrity in utilitarianism?

• Is there any space for humanity in utilitarianism?

•Can it address unjust inequalities in society? How can it address for minorities?

Moral Positivism of Thomas Hobbes

Hobbes explained that if individuals within a society continually lived by their own self-s,
they would continue to hurt each other and be stuck in a "state of war." If the rs of a society
were made to live within certain bounds which made it impossible for harm each other, the
members of that society would be in a "state of peace."
Social Contract Theory of Hobbes

In moral and political philosophy, the social contract or political contract is a theory which
typically addresses the questions of the origin of society and the legitimacy of the authority of
the state over the individual.

Hobbes' argument lies in the fact that specific desires and appetites arise in the human body,
and are experienced as discomforts or pains which must be overcome. In the absence of
political order and law, everyone would have unlimited natural freedoms, including the "right
to all things" and thus the freedom to plunder, rape, and murder and alike. As a result, there
would be an endless "war of all against all."

On Hobbes's view, the formation of the Commonwealth creates a new, artificial person (As
presented by Hobbes, "Leviathan" is a symbolic figure of that sovereign person) to whom
individuals give their power and all responsibility for social order and public welfare is
entrusted through the social contract. That person will be the sovereign and who would
provide peace and order in society by making laws deriving from laws of nature and by
punishing guilty people. The sovereign is nothing more than the institutional embodiment of
orderly government.

Criticisms of Hobbes's Theory

 Opponents argue that his approach to the human behavior is very pessimistic and
based on the false idea that people are selfish and cruel creatures.

 There is no space in Hobbes' theory regarding people to question the origin and
content of established social contract. They must fulfill their duties determined in the
previously made social contract. Hobbes' ideal state is an absolute monarchy and
people do not have chance to question or object to the deeds and decisions of the
sovereign person.

Divine Command Ethics

  Divine command ethics is an ethical view based on theism or the belief that God
exists.

 Accordingly, the theory of divine command ethics asserts that actions are right or
wrong depending on whether they follow God's commands or not. God's will alone
decide what is right and wrong and human reason has no authority, God has absolute
authority.

The advocates of divine command ethics strongly argue that:

 God is eternal. God created the universe and everything in it, including human beings.
 If God created human beings, then God has an absolute claim on our obedience.
 If God has an absolute claim on our obedience, then we should always obey God's
commands.
 Therefore, the Divine Command theory is true.

Criticisms of Divine Command Ethics

One objection, among others, is that the believers of different religion have their own
interpretations of the nature and commands of God (or their gods). Furthermore, in a single
religion, there are different schisms (e.g., Theravada (Hinayana), Mahayana, and Vajrayana
in Buddhism; Roman Catholic, Orthodox, and Protestant in Christianity; in the same way,
Hinduism and Islam have also different branches). No one can justify that only one religion is
correct.

Virtue Ethics

 Virtue ethics focuses on the character of a person rather than on specific actions. It
presupposes at ethical action depends on virtue and a virtuous person will naturally
act ethically.

 Prominent philosophers are consistent about the four classic cardinal virtues as basics
to understand the virtue ethics. All other virtues hinge on these four: Temperance,
Prudence, courage, and Justice.
Temperance: It represents self-control. It involves the ability to modulate oneself in regard
to pleasure, emotion, desire, and self-fulfillment. Temperance gives us the ability to control
ourselves in terms of what we want and desire. Some philosopher argues temperance as

"Wholeness'.

Prudence: It represents "practical wisdom" as opposed to the wisdom of a theoretical

philosopher. So, it is also termed as "Wise Judgment".

Courage: It means fortitude. It represents virtues of self-efficacy. It denotes the ability to

persist in our goals despite pain, suffering, hardship, discouragement, obstacle and personal

risk.

Justice: It represents fair-mindedness (Impartiality). Temperance, prudence, and courage

serve as the basis for justice.

Golden Mean

Golden Mean is very popular terminology in virtue ethics theory as a philosophy of moderate
position. In philosophy, especially that of Aristotle, golden mean is the desirable middle
between two extremes, one of excess and the other of deficiency.

Criticisms of Virtue Ethics

Virtue ethics is criticized to its emphasis on the vague nature of ethics. It fails to give us any
help with the practicalities of how we should behave. It fails to be action-guiding in particular
and stands only as philosophy. There is also the question of how to apply virtue theory to
moral dilemmas. Virtue theory tells us to exhibit virtues, to act as the virtuous person would
act, but if we don't already know that it is difficult to work out. For example, what is the
virtuous stance to take on the issue of abortion? So, it gives no specific guidance about how
we are to act.
 CHAPTER – 4

APPLICATION OF ETHICAL STANDARDS

Concept of the Chapter

Ethical standard refers to the principles of honesty, fairness, and integrity to perform
activities by individuals or entities. Application of ethical standard addresses the practicing of
such rationales in everyday human conducts.

Manufacturing: Duties of Manufacturer

Manufacturing denotes the process of converting raw materials, components, or parts into
finished goods that meet a customer's expectations or specifications. Manufacturing
commonly employs a man-machine setup with the division of labor in a large-scale
production.

A person, an enterprise, or an entity (natural or legal person) that manufactures something is

known as a manufacturer. The fundamental duties of manufacturer are:

1. To maintain safe manufacturing environment

2. To maintain harmonious and secure workplace

3. To reduce environmental effects

4. To honor clients right

Consumer Rights

Consumer rights simply denote the legal and moral duties of protection owed to a purchaser
of goods or services by the supplier. Therefore, a legal or moral entitlement in favor of
consumer is known as consumer rights.

1. The right to satisfaction of basic needs

2. The right to safety

3. The right to be informed

4. The right to choose

5. The right to be heard

6. The right to redress

7. The right to consumer education

8. The right to healthy environment

Informed Consumers

The consumer must get a fair chance of choosing from the range of goods and services
available in the market place. Only the informed consumers can enjoy this right. Therefore, it
is the first and foremost duty of producer that the consumer must be provided with complete,
unambiguous and explicit knowledge about the products. An informed consumer is capable
of making sensible decisions, gains an insight about a product prior to its purchase.

Consumer Politics

Consumer politics is a term which is related to the movement of the consumers expressing
through critical consumption, in the form of a pledge of allegiance to the goals of certain
social movements. Solidarity is the ultimate way of consumer politics. The best and most
effective action is through cooperative efforts through the formation of consumer/citizen
groups who together can have the strength and influence to ensure that adequate attention is
given to the

consumer interest.

Consumer Privacy

Consumer privacy restricts the public from accessing the personal details about a consumer.
It is a fundamental human right of consumer. The right to privacy is articulated in all of the
major international and regional human rights instruments.
Ethical Consumption

Ethical consumption means tendency of choosing to purchase goods for consumption that are
ethically sourced, ethically made and ethically distributed. This type of consumer behavior is
usually known as ethical consumerism, ethical purchasing, moral purchasing, ethical
shopping or green consumerism. It can be defined as the practice of purchasing products and
services produced in a way that minimizes social and/or environmental damage, while
avoiding products and services deemed to have a negative impact on society or the
environment.

Classification of Unethical Behavior

Unethical behavior simply denotes activities or conducts that violate the ethical principles. It
is an action that falls outside of what is thought morally appropriate for a person, a
profession, a job or a company. Individuals can act unethically, as can businesses or
companies, professionals, and politicians can.

It can be classified and describe from different perspectives based on the following criteria:

• Based on universal ethical principle

• Based on normative ethical theories

•Based on relativism

•Based on constituents of society

• Legal versus Moral and Ethics

Ethics refer to rules provided by an external source, e.g., codes of conduct in workplaces or
principles in religions. Morals refer to an individual's own principles regarding right and

wrong.

Business Ethics in Market Place

A marketplace simply can be defined as the place in which market operates, and it facilitates
manufacturers to approach with customers and vice versa. In this modern IT driven world
marketplace represents not only physical space but also online e-commerce marketplace.

As far as the "Business ethics in marketplace" is concerned, it deals categorically with the

"Marketing ethics". It is one of the subsections of applied ethics which deals with the moral
and ethical principles behind the operation and regulation of marketing. It seeks to promote
honesty, fairness, and responsibility in all marketing activities.

There are six ethical values that marketers are expected to uphold, and these are: honesty,
responsibility, fairness, respect, transparency, and citizenship.

Product Positioning and Competing

Product positioning refers to the placing of the product or service in a particular perceptual
position within the mind of the consumer. For this sake, a product or service offered at the
porker wet be differentiated with some sort of associated special feature and it must be
publicized well. Product differentiation is the fundamental idea that a marketer can apply for
successful product positioning and competing. It is the process of distinguishing a product or
service from others, to make it more attractive to a particular target market.

• Ethical Concern with Positioning and Competing

Some of the issues that must be considered with respect to the product positioning and
competing, those are:

• Why do consumers prefer environmentally friendly products?

• Why do they prefer the products labeled as "organic?"

• Why do they prefer different ethical attributes in the product?

• Why do consumers recognize socially responsible company's brand?

What is the increasing relevance of green brand positioning and green marketing strategy?

Pricing Procedure

Setting the price is the challenging job of the marketer. According to Kotler (2002), while
setting a product's price, marketers should have to follow a six-step procedure as follows:
1. Selecting the pricing objective

• Survival
• Maximum current profit
• Maximum market share
• Maximum market skimming
• Product quality leadership

2. Determining demand

3. Estimating costs

4. Analyzing competitors' costs, prices, and offers

5. Selecting the pricing method

6. Selecting the final price

Ethical Concern with Pricing

The pricing of a product or service plays a large part in how well it sells. Management must
consider the possible impact of pricing, and rationally think about the following questions
regarding the consequences:

 How will it affect the corporate image?

 How will it affect the internal stakeholders?
 How will distributors and dealers feel about it?
 Will the sales force be willing to sell at that price?
 How will competitors react?
 Will suppliers raise their prices when they see the company's price?
 Will the government intervene and prevent this price from being charged?
 Can it be justified in the ethical ground?
Packaging and Labeling

Packaging is an attempt of enclosing or protecting products for distribution, storage, sale, and
ultimate use. Protection, promotion, information, convenience, unitization, handling, waste
reduction are the major functions of packaging and labeling.

Package labeling is any written, electronic, or graphic communication on the package or on a

separate but associated label. Labels serve to capture the attention of shoppers (purchasers) as
well as provide useful information regarding the product such as Manufacturer of the product,
country of origin, date of manufacture, date of expiry, its ingredients, how to use the product,
and its handling.

Ethical Concern with Packaging and Labeling

Important tips about environmentally friendly packaging are as follows:

 Reusable packaging design

 Made of recyclable material
 Biodegradable packaging
 Avoiding hazardous materials in coloring and printing
 Harmonizing with the product
 Disposing of instruction in package label
 Supportive to go green slogan

Brand Management and Imperatives

Brand management is one of the functions of marketing that focuses to increase the perceived
value of a product line or brand over time. It is the process of maintaining, improving, and
upholding a brand so that the name is associated with positive results.

Kotler (2002) stated that whether it is a name, trademark, logo, or another symbol, a brand is
essentially a seller's promise to deliver a specific set of features, benefits, and services
consistently to the buyers. Therefore, brand management is a continuous process of
maintaining the image in a sustainable way and for that reason; a brand manager has to
oversee overall corporate performance. A successful brand can only be created if the brand
management system is competent and ethically aware.

Importance of Brand Management

Some of the positive benefits, through effective brand management, can be observed as
follows:

 Brand management helps in building a corporate image

 Strong brand organizations have a high market share
 Convey brand message vividly
 Create customer loyalty
 Persuade the buyer for the product
 Establish an emotional connectivity with the customers
 Forms customer perceptions about the product
 Create differentiation
 Strong brands reduce customers' perceived monetary, social and safety risks in buying
goods or services

 The customers can better imagine the tangible and intangible characteristics of goods
or services

Advertising and Communication

In particular, advertising can be considered as a part of the marketing communications mix.

The marketing communications mix consists of advertising, sales promotion, public relations
and publicity, personal selling, and direct marketing. Beyond these activities, modern
marketers argue that each and every activity that deliver an impression that can affect
customer's view of the company can be considered as components of marketing
communications mix. The product's style, price, shape, and color, packaging and labeling
contents, the salesperson's manner and dress, the place's decor -all communicate and deliver
impression something to buyers. Thus, entire marketing activities must be integrated into a
communication mix to deliver a consistent message.

A marketer must follow the following steps while developing marketing communications in
an effective way:

 Identify the target audience

 Determine the communication objectives
 Design the message
 Select the communication channels
 Establish the total communications budget
 Decide on the communications mix
 Measure the communications' results
 Manage the integrated marketing communication process

Ethical Concern with Advertising and Communication

Following is some of the ethical concern about advertising and communication:

1. Comparative advertising

2. Exaggeration

3. Surrogate advertising

4. Puffery

5. Unverified claims

6. Women in advertising

7. Exploiting innocence of children

Exploitative Nature of Advertising

The exploitative nature of advertising is one of the ethical issues associated with marketing
communications. It is an act of unfairly using men, women, children or a group for
advertising product or services that will exploit consumers' most personal feelings.

The next exploitative nature of advertising is focused largely on women. Exploiting female
mages in advertising is widely used for promoting goods and services of many globally
recognized as well as domestic companies.

Gender offensive exploitation in advertising is highly debated issue regarding marketing

communication. Showing female in ad as a sex symbol is also one of the exploitative natures
of the advertisements. The next seriously debated ethical issue is cosmetic producer’s ad
contents that portrayed light skin superiority.

Finance and Value

Since finance is a subject of monetary matters, apparently, "value" comes along with.
However, here are different notions of value. In finance, the value is used to quantify the
worth of something, and different types of value can be applied to explain various situations.
For example, the value of a company can be described in terms of its intrinsic value, book
value, actual cash value or market value. In the same way, time value of money is one of the
basics of business finance, and net present value is used as a fundamental parameter for
financial

assessment.

in ethics, 'value' denotes the degree of importance of something with the aim of determining
what actions are best to do or what way is best to live (normative ethics), or to describe the
significance of different actions. Value can also relate to how people feel about something,
describing how something is regarded and its importance to the individual.

Financial Accounting and Standards

Financial accounting is the process of recording, summarizing and reporting the financial
transactions resulting from business operations over a specified period of time.

Due to the advancement of computer-based accounting software packages, financial

accounting as well as reporting is now becoming more comfortable than before.
Accounting Standards

An accounting standard is a systematic principle that guides and standardizes accounting and
reporting practices. It makes technical unanimity in recording, summarizing, and reporting
procedure of the business transactions.

Financial accounting is governed by both local and international accounting standards.

Accounting standards specify how transactions and other events are to be recognized,
measured, presented and disclosed in financial statements.

The emergence of International Financial Reporting Standards Foundation IRS Foundation)

is a great attempt to facilitate the growing global stakeholders of the businesses through the
accounting standards internationally.

Ethical Concern with Financial Accounting and Reporting

Ethics in accounting are concerned with how to perform duty morally in regard to the
preparation, presentation and disclosure of financial information. In the literature of ethics, i
well-known as accounting ethics

Responsibilities of Financial Institutions

Financial institutions simply denote the entities those are engaged in the business of dealing
with monetary services in financial market.

1. Depository and lending institutions: Under this category, banks, building societies fie
like saving and credit cooperatives in Nepal), credit unions, trust companies, and mortgage
companies come into account.

2. Contractual saving institutions: As financial institutions, contractual saving institutions

are insurance companies and pension funds. Insurance companies are financial institutions
and play a role as intermediaries because they link the funds from the policyholders to the
financial markets.
3. Investment institutions: Investment institutions include mainly the investment banks
underwriters, mutual funds, and brokerage firms. Investment banks specialize in providing
services designed to facilitate business operations, such as capital expenditure financing and
equity offerings.

Ethical Aspect of the Financial Institutions

The sustainability of financial institutions is largely determined by their ethical stance. It is

because, whether it is a common person, private entities or government organization, all of
them are directly connected with some of the financial institutions.

Capital Market and Its Regulator

Capital markets are the markets for the corporate stocks and long-term debt. It is one of the
sections of financial market. Primary markets and secondary markets are two important areas
of capital markets: Primary markets, where new stock and bond issues are sold to investors,
and secondary markets, which trade existing securities.

Realizing the need of regulating body for the sustainable development of capital market in
Nepal, Securities Board of Nepal (SEBON) was established by the Government of Nepal on
June 7, 1993.

Ethical Aspect of the Capital Markets

The capital market is considered as a very fragile market. Therefore, the existence of the
modem capital market is not possible without specific regulations. All stakeholders must
follow these rules and ethics to the letter. The financial system runs actually on trust,
reputation, knowledge and ethics. Any intent to deviate from these fundamentals must be
very seriously viewed as this potentially collapse the entire system.

Mainly, the ethical lapses of some of the participants may invite great crisis. There are many
pieces of evidence of the scams and scandals in capital markets of developed as well as
developing countries. Front running, market manipulation, and insider trading are the
common ethical issues associated with the capital market.
 CHAPTER – 5

STRATEGIC CONTEXT OF CSR

Theoretical Background of Strategic CSR

Corporate authorities must distinguish following three forms of CSR to understand

corporation's role and to decide on the parameters and legitimacy of CSR.

• Ethical CSR
• Altruistic CSR, and
• Strategic CSR

Ethical CSR is morally mandatory and also goes beyond fulfilling a firm's economic and
legal obligations to its responsibilities to avoid or minimize harms or social injuries, even if
the business might not benefit from this.

Altruistic CSR is optional, and it is an unselfish concern for other people's happiness and
welfare rather than just for oneself.

So far, the strategic context of CSR is concerned, it aims largely at the corporate value,
accommodating stakeholder value and ecological right doing. Therefore, the inclination of
strategic CSR is mainly entitled to the stockholder theory.

Strategic CSR

Strategic CSR is one of the modern approaches to business management. It is one of the
phenomena associated with the business strategy. As far as the strategic context of SR is
concerned, it aims largely at the corporate value, accommodating stakeholder value and
ecological right doing. The most popular phrase "Win-Win" is entertainingly associated with
the strategic context of CSR. Generally, it can be characterized as follows:

1. Operations-Driven CSR strategy: Companies following this strategy may actively

engage in strategic and innovative actions to enhance the performance and reputation of their
partners, which they see as a critical part of their own success.
2. Compliance-Driven CSR strategy: A compliance-driven SR strategic platform focuses
on achieving high levels of compliance with a broad range of requirements, including
environment, health, and safety (EHS) program.

3. Customer-Driven CSR strategy: In this model, the SR initiatives are prominently

directed towards and driven by customer and community attitudes and perspectives.

Firm's Environmental Context

Every business firm operates in a distinctive environment as it cannot exist in isolation. There
is a symbiotic relationship between business and environment. In this line, one must be
acquainted with the salient features of the business environment. Those are Dynamic,
Complex, Uncertain, Multi-faceted, Far-reaching impact, and Relative.

Internal Environment

Internal environment consists of the factors which exist within the organization, imparting
strength or causing weakness to the organization. It includes:

 Value system
 Vision and mission
 Objective
 Organization's structure
 Corporate culture
 Shareholders
 Human resources
 Labor union
 External Environment

External Environment

External Environment consists of those factors which provide opportunity or pose threats to
the business. It includes:
• Micro Environment: The immediate periphery of the business that has a continuous and
direct impact. It includes suppliers, market, intermediaries, customers, competitors, etc.
which are specific to the business.

• Macro Environment: It influences the functioning and performance of every business

organization, in general. It comprises of demographic, socio-cultural, technological, political,
legal, and global environment.

The Five Driving Forces of CSR

Driving force denotes someone or something that has the power to make things happen.
There are many internal and external factors that influence the decisions and policies an
organization makes to stay competitive. Those five driving forces, as mentioned below, are
widely recognized in the corresponding literature.

1. Growing affluence: Affluence simply means prosperity and a good standard of living.
CSR becomes more relevant as economies grow and become stable.

2. Sustainability: The terms Sustainable and Sustainability are used to describe many
different approaches toward improving our (including generations to come way of life. It
means taking the long-term view of how our actions affect future generations and making
sure we don't deplete resources or cause pollution at rates faster than the earth is able to
renew

them.

3. Globalization: Globalization refers to the integration of markets in the global economy.

Globalization is the tendency of investment funds and businesses to move beyond domestic
and national markets to other markets around the globe, thereby increasing the
interconnection of the world.

4. Free flow of information: Business is a larger part of the society. The present-day context
of growing global business is undoubtedly the result of the free flow of information through
the internet. The healthy relationship between business and society largely depends on the
interlinked free flow of information.

5. Development of corporate conscience: Conscience is the sense or consciousness of the

moral goodness or responsibility of one's own conduct, intentions, or character together with
a feeling of obligation to do right or be good.
Moral Principles of CSR

Moral principles indicate what agents (individuals or entity) morally ought to do or are
morally allowed doing; or what deserves moral praise and admiration. Therefore, the major
concerns of moral principles are related with: What deserves to be promoted, praised, or
approved; or what deserves to be opposed, criticized, or disapproved. There are different
normative thoughts that give moral directions. For instance, teleological and deontological
principles of moral philosophy can be considered as basic guidelines.
 CHAPTER – 6

BUSINESS ETHICS AND CSR IN NEPAL

Business Ethics of Nepalese Firms

Business ethics is fairly a new field of study and emerging discipline in the business literature
and practices in Nepal. According to the study report of NBI:

 Most business people have some basic knowledge of business ethics. But there is lack
of proper in-depth understanding among businesses regarding it.

 Only a few businesses have owned code of conduct, many are developing them.
Business

 code of conduct of FNCCI 2061 is remarkable in this regard.

 All (sample) companies feel that a joint initiative or campaign led by private sector
for ethical business practices is absolutely necessary in current situation.

 Doing business ethically is highly challenging and even more so when it comes to
dealing with corruption and tax-related issues.

 Success rate in the company's effort to mitigate challenges in ethical business

practices is low.

 Anti-corruption, Tax, and Labor are the priority areas where immediate intervention is
needed.

Ethical Standards

An ethical standard simply denotes the codes that guide individuals and the organization to
act in an honest and trustworthy manner. The commonly used terms of fixing ethical
standards are codes of ethics and code of conduct

Codes of ethics are voluntary statements that commit organizations, industries, or professions
to specific beliefs, values, and actions and/or that set out appropriate ethical behavior for
employees." Codes of ethics can be categorized into different types as Organizational codes
of ethics, Professional codes of ethics, and Industry codes of ethics and the like.
Ethical Issues and Dilemmas in Nepalese Business Organizations

Nepalese business organizations of every size and type are not apart from the multitude d
ethical issues that also exist in many other countries.

In addition, different reports and media coverage signify the fact that there are a number of
ethical issues and lapses associated with Nepalese business organizations, together with the
lack of integrity in political as well as bureaucracy in Nepal for several decades.

1. Bribery and Gift Giving

2. Issues of Government Tax

3. Issues of Working Environment

4. Issues of Consumer Protection

5. Environmental Issues

6. Other Issues

 Issues of transparency and disclosure

 The problem of just wage
 Harassment and discrimination
 Conflict of interest
 Unfair competition
 Money laundering
 Insider trading
 Privacy issues
 Child labor issue
 Misuse of organization's resources, etc.

Consumer Protection in Nepal

 'Consumer protection' is a set of laws and organizations designed to ensure the rights
of consumers as well as fair trade, competition and accurate information in the
marketplace.

 Consumer protection laws are a form of government regulation, which aim to protect
the rights of consumers.
Unfair Trade Practices

"Unfair trade practice" means the sale or supply of consumer goods or services by making
false or misleading claims about their actual quality, quantity, price, measurement, design,
make etc, or the sale or supply of consumer goods produced by others by affecting their
quality, quantity, price, measurement, design, make, etc.

Protection and Promotion of Consumer Rights

As Mentioned in Section 6 of the Consumer Protection Act, 2054 (1998), there are different
rig of the consumers and Government of Nepal shall issue necessary directives to the Council
order to create an atmosphere favorable for the protection and promotion of the rights
consumers mentioned in this section.

According to the section 8 of Consumer Protection Act, 2054 (1998), Government of Nepal
shall make necessary arrangements in order to effectively implement the provisions
concerning the protection of the rights and interests of consumers, regulation of the supply
system, and control of the prices and quality of consumer goods and services.

CSR Domains

As categorized by Carroll (1979, 1991):

1. Economic Responsibility
2. Legal Responsibility
3. Ethical Responsibility
4. Philanthropic/ Discretionary Responsibility

As categorized by Lantos (2001, 2002):

1. Ethical Responsibilities
2. Strategic Responsibilities
3. Altruistic Responsibilities
Among many others, NBI has published following major papers regarding CSR:

• A Guide for Executives: Responsible Business in Nepal

• Awareness-Raising Questionnaire on SR

• Guide to Communicating about CSR

• Introduction to CSR for SMEs

Major Problems

 Lack of conceptual clarity about SR, up until now, is one of the main problems in
Nepal.

 Most of the companies do not have trained manpower and technical know-how to
develop effective CSR strategies.

 Rampant corruption is next serious problem with respect to responsible business in

Nepal.

 The weak execution of the act, law, and bylaws in Nepal is next problem associated
with CSR.

Prospects

Recognition in academia

Proactive role of NBI

Mead yo

Initiation of regulations

Visible SR initiatives at present

Efforts of intergovernmental organizations

Increasing debar about CSR audit and reporting