BUSINESS ETHICS & CORPORATE SOCIAL RESPONSIBILITY

5 1 Explain the concepts of

business ethics and social responsibility.
Describe the factors that influence business ethics. List the stages in the development of ethical standards. Identify common ethical dilemmas in the workplace.

Discuss how organizations shape ethical behavior. Describe how businesses social responsibility is measured. Summarize the responsibilities of business to the general public, customers, and employees. Explain why investors are concerned with business ethics and social responsibility.

Business Ethics
The value of what should be done and what should not be done from the business point of view

Ethical issues for business

Product safety standards Advertising contents Working environment Unauthorized payments Employees privacy Environmental issues

Genesis (Origin) of Ethics

Ethics is a Greek word, it means Character or manners.

Ethics is about sense of belongingness to society of business. Formed with a limited vision for economic generation but should resolve conflict with society by servicing the community.

Ethical Consciousness
Stage 6 corporate citizenship
Ethical standards Vary between cultures And countries. From /amongst Entrepreneurs/ Corporations.

Stage 5 Stake holder concept

Stage 4 Profit Maximization in the long term Stage 3 Profit Maximization In the short term. Stage 2 Anything for Profit

Long term profitability and Attractiveness Is key to competitive strategy Both attractiveness & competitive Position can be shaped i.e. challenging and electrifying

Stage 1 Jungle Law

Inventory of Ethical Issues in Business

Employee-Employer Relations Employer-Employee Relations Company-Customer Relations Company-Shareholder Relations Company-Community/Public Interest

Publics Opinion of Business Ethics

Gallup Poll finds that only 17 percent to 20 percent of the public thought the business ethics of executives to be very high or high To understand public sentiment towards business ethics, ask three questions
Has business ethics really worse? Are the media reporting ethical problems more frequently? Are practices that once were socially acceptable no longer socially acceptable?
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Business Ethics: What Does It Really Mean?

Business Ethics:Today vs. Earlier Period
Societys Expectations of Business Ethics
Ethical Problem Actual Business Ethics

Ethical Problem

1950s

Time
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Early 2000s

Business Ethics: What Does It Really Mean?

Definitions
Ethics involves a discipline that examines good or bad practices within the context of a moral duty Moral conduct is behavior that is right or wrong Business ethics include practices and behaviors that are good or bad
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Business Ethics: What Does It Really Mean?

Two Key Branches of Ethics
Descriptive ethics involves describing, characterizing and studying morality
What is

Normative(Norms) ethics involves supplying and justifying moral systems

What should be

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Sources of Ethical Norms

Fellow Workers Fellow Workers

Regions of Country

Family

Profession

The Individual
principles Friends Employer

The Law

Religious Beliefs

Society at Large

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Ethics and the Law

Law often represents an ethical minimum Ethics often represents a standard that exceeds the legal minimum
Frequent Overlap

Ethics

Law

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Making Ethical Judgments

Behavior or act that has been committed compared with Prevailing norms of acceptability

Value judgments and perceptions of the observer

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Four Important Ethical Questions

What is? What ought(should) to be? How to we get from what is to what ought to be? What is our motivation for acting ethically?

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 Person going from one side of the canyon to the other a lot of clouds like fog. The point is going from one way of doing business to another is very tough. Theres a lot uncertainty. It takes a lot of skill, but we have to lift ourselves beyond that, above the fog, and thats not going to be a simple exercise. CSR is about seeing the forest, the fog, and seeing how we can get on the other side, and how we can be well-equipped for doing that. So probably we need to develop additional skills, knowledge, and understanding.

The message is that whatever we do today will have an impact on future generations. Its not just my kids or your kids or somebody elses. Its future generations. We should not hope that the walls we build to protect ourselves will be tall enough to protect our children. Only with very conscious effort we can make the world for them a better place to liveeven if we address our most selfish needs we have to address the needs of the next generation. Thats what CSR is about.

Definition of Corporate Social Responsibility

CSR is about how companies manage the business processes to produce an overall positive impact on society.

Definition
Achieving commercial success in ways that honour ethical values and respect people, communities, and the natural environment

Definitions: Practice
WBCSD (World Business Council for Sustainable Development) The continuing commitment by business to behave ethically and contribute to sustainable economic development while improving the quality of life of the workforce and their families as well as of the local community and society.

Definitions: Concept
Philip Kotler & Nancy Lee (2005) a commitment to improve community well-being through discretionary(flexible) business practices and contributions of corporate resources.

Corporate Social Responsibility (CSR)

CSR in Equation Form Is the Sum of:
Economic Responsibilities (Make a profit) Legal Responsibilities (Obey the law) Ethical Responsibilities (Be ethical) Philanthropic Responsibilities (Good corporate citizen) CSR

Historical Perspective

From the 1950s to the present the concept of CSR has gained considerable acceptance and the meaning has been broadened to include additional components

Social Responsibility
Managements consideration of profit, consumer satisfaction, and societal well-being of equal value in evaluating the firms performance. Contributions to the overall economy, job opportunities, and charitable contributions and service. Organizations measure through social audits.

Corporate Social Responsibility (CSR)

Evolving (growing) Viewpoints CSR considers the impact of the companys actions on society CSR requires decision makers to take actions that protect and improve the welfare of society as a whole along with their own interests

Phases of Corporate Social Responsibility

Frederick provides expanded framework for understanding the evolution of CSR concept Divided into 4 phases: Corporate social stewardship or position, 1950s 1960s Corporate social responsiveness, 1960s 1970s Corporate/business ethics, 1980s 1990s Corporate/global citizenship, 1990s 2000s

Drivers of CSR
The shrinking role of government Demands for greater disclosure(innovation/discovery) Growing investor pressure Competitive markets

Benefits of CSR
Strengthened brand positioning. Enhanced corporate image. Increased ability to attract, motivate, and retain employees. Increased sales and market share. Increased appeal to investors and financial analysts.

 Public Health Issues. What to do about inherently dangerous products such as alcohol, tobacco etc. Protecting the Environment. Using resources efficiently, minimizing pollution.

Recycling. Reprocessing used materials for reuse.

Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives. Corporate Philanthropy/Support. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees.

 The Right to Be Safe. Safe operation of products, avoiding product liability.

The Right to Be Informed. Avoiding false or misleading advertising and providing effective customer service. The Right to Choose. Ability of consumers to choose the products and services they want.

The Right to Be Heard. Ability of consumers to express legitimate complaints to the appropriate parties.

 Workplace Safety. Monitored by Occupational Safety and Health Administration. Quality-of-Life Issues. Balancing work and family through flexible work schedules, subsidized child care, and regulation such as the Family and Medical Leave Act of 1993. Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination; many aspects regulated by law. Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers age 40 or older. Sexual Harassment. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender.

 Obligation to make profits for shareholders.

Expectation of ethical and moral behavior. Investors protected by regulation by the Securities and Exchange Commission and state regulations.

Corporate Social Responsibility in India

India may become the worlds first country to make corporate social responsibility mandatory.
The statement advocates that those companies with net worth above Rs. 500 crore, or an annual turnover of over Rs. 1,000 crore, shall earmark 2 percent of average net profits of three years towards CSR. In the draft Companies Bill, 2009, the CSR clause was voluntary, though it was mandatory for companies to disclose their CSR spending to shareholders. It also suggested that company boards should have at least one female member.

Examples of Corporate Social Responsibility in India

 Tata Group Tata Group in India has a range of CSR projects, most of which are community improvement programs. For example, it is a leading provider of maternal and child health services, family planning, and has provided 98 percent vaccination in Jamshedpur. The company also endorses sports as a way of life. It has established a football academy, archery academy, and promotes sports among employees. It offers healthcare services all over the country with programs like rural health development.

 Infosys Infosys is aggressively involved in a variety of community growth programs. In 1996, the company created the Infosys Foundation as a not-for-profit trust to which it contributes up to 1 percent of profits after tax every year. Moreover, the Education and Research Department at Infosys also works with employee volunteers on community development projects.

 Mahindra & Mahindra At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the purpose of promoting education. Its vision is to renovate the lives of people in India through education and financial assistance across age groups and across income strata. The K. C. Mahindra Education Trust undertakes a number of education plans, which make a difference to the lives of worthy students. The Trust has provided more than Rs. 7.5 crore in the form of grants, scholarships and loans. It promotes education mostly by the way of scholarships. The Nanhi Kali (children) project has over 3,300 children under it and the company aims to increase the number to 10,000 in the next two years by reaching out to the underprivileged children, especially in rural areas.

 Listed below are a handful of initiatives that will give a fair indication of the CSR commitment of various organizations in the country:

 Reliance Industries and two Tata Group firms Tata Motors and Tata Steel are the countrys most admired companies for their corporate social responsibility initiatives in the field of education, environment conservation and public health, according to a Nielsen survey. Under its Corporate Service Corps (CSC) programme, IBM joined hands with the Tribal Development Department of Gujarat for a development project aimed at upliftment of tribals in the Sasan area of Gir forest.

 Towards curbing of carbon footprints at office, 2010 witnessed various initiatives including application of renewable energy technologies, moving to paperless operations, and recognition of environmental standards. Financial organizationswhere paper usage is comparatively higher than other sectorsincluding HSBC India, Max New York Life and Standard Chartered Bank continued with the year-before resolution of asking their customers to shift to estatements and e-receipts. Telecom operators including Airtel, Aircel, Vodafone and Idea, too, pushed their efforts to shift as many customers to e-bill and save paper.

 National Thermal Power Corporation (NTPC) announced that it will set up a medical college and an engineering college in Orissa as part of its CSR activities. In recognition of its commitment to energy conservation and efficiency, Jindal Steel and Power Limiteds (JSPL) Raigarh (Chhattisgarh)-based plant has been conferred with the National Energy Conservation Award (NECA) 2010.

Companies in trouble

Dasani mineral water (part of Coca-Cola).

Cokes sale was banned as the result of tests, including those by the Indian government, which found high concentrations of pesticides. Communities in India , around Coca-Cola's bottling operations are facing severe shortages of water as a result of the cola major sucking huge amounts of water from the common groundwater source.

Issues at NIKE

Nike Inc producer of footwear, clothing, equipment and accessory products for the sports and athletic market. Selling to approximately 19,000 retail accounts in the US, and approximately 140 countries around the world. Manufactures in China, Taiwan, Korea, Indonesia , Mexico as well as in the US and in Italy. People working - 58% young adults between 20 and 24 years old, 83% - women. Few have work-related skills when they arrive at the factory. Issue- unhealthy work environment debates heated arguments, verbal abuse , 7.8% of workers reported receiving unwelcome sexual comments, and 3.3% reported being physically abused. In addition, sexual trade practices in recruitment and promotion were reported

Private Sector Perspective

Corporate Social Responsibility is not a cosmetic; it must be rooted in our values. It must make a difference to the way we do our business.

CSR A New Paradigm(Model)

To think comprehensively and systematically about The role of business in development The manner in which the business is conducted Corporate Governance Poverty alleviation Corporate contribution to peace and war against terror Business, government and civil society partnership- common ground and collective action

Thank You!