Introduction to Business

Management
Unit 10: Corporate Social
Responsibility

Introduction to Business Management 1

 Learning Objectives
• Understand what is meant by business ethics.
• Identify the types of ethical concerns that arise in the business world.
• Discuss the factors that affect the level of ethical behavior in organizations
• Explain how ethical decision making can be encouraged
• Describe how our curren t views on the social responsibility of business have
evolved.
• Explain the two views on the social responsibility of business and understand the
arguments for and against increased social responsibility.
• Discuss the factors that affect the level of ethical behavior in organizations.
• Identify the types of ethical concerns that arise in the business world.

Introduction to Business Management 2

 Introduction
• Business organisations are responsible for meeting interests of
stakeholders. To avoid unfairness and conflicts of interests among
stakeholders, the corporate of governance is also required.
• Businesses often face ethical issues which are often uneasy to decide
whether it is right or wrong. Ethical standards or norms must be
established in a firm in order to face with such controversial and moral
issues. Ethical code of conduct can be developed in order to keep the
highest standards of a business organization.
• A business organization is not only to behave ethically but also to look
into the possible contribution and active participation in the societal
affairs, such as environmental problems, human rights and welfare.

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 Business Ethics Defined
• Ethics
– The study of right and wrong and of the morality of
the choices individuals make
– An ethical decision is one that is “right” according to
some standard of behavior

• Business ethics
– The application of moral standards to business
situations

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 Ethical Issues
• Fairness and honesty
– Businesspeople are expected to refrain from knowingly deceiving,
misrepresenting, or intimidating others.

• Organizational relationships
– A businessperson should put the welfare of others and that of the
organization above his or her own personal welfare.

• Conflict of interest
– Issues arise when a businessperson takes advantage
of a situation for personal gain rather than for the
employer’s interest.

• Communications
– Business communications that are false, misleading,
or deceptive are both illegal and unethical.
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Factors Affecting Ethical Behavior

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 Factors Affecting Ethical Behavior
(cont.)
• Three general sets of factors appear to influence the standards of
behavior in an organization.
– Individual factors
• Individual knowledge of an issue
• Personal values
• Personal goals
– Social factors
• Cultural norms
• Coworkers
• Significant others
• Use of the Internet
– Opportunity
• Presence of opportunity
• Ethical codes
• Enforcement
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 Encouraging Ethical Behavior
• External to a specific organization
– Governmental legislation and regulations
• Sarbanes-Oxley Act of 2002
– Trade association guidelines
• Within an organization
– Code of ethics
• A written guide to acceptable and ethical behavior as defined by an organization; it outlines policies,
standards, and punishments for violations
– Organizational environment
• Management direction
• Employee training
• Ethics officer
• Whistle-blowing
– Informing the press or government officials about unethical practices within one’s organization

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 Social Responsibility
• The recognition that business activities have an impact
on society and the consideration of that impact in
business decision-making

– Social responsibility
costs money but is also
good business.

– How socially responsible

a firm acts may affect
the decisions of customers
to do or continue to do
business with the firm.

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Guidelines for Making Ethical Decisions
 The Evolution of Social
Responsibility in Business
• Early 1900s: Caveat Emptor
– A Latin phrase meaning “let the buyer beware.”
• What you see is what you get, and if it’s not what you
expected, too bad.

– Most people believed that competition and the

marketplace would correct abuses.
– The government became involved only in cases of obvious
abuse.

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 The Evolution of Social
Responsibility in Business (cont.)
• The Great Depression and beyond
– Pressure mounted for the government to help with
the economy and social conditions.

– Franklin D. Roosevelt instituted economic and

social programs.

– Laws were passed to correct business abuses.

– As government has increased, so has everyone’s awareness of

the social responsibility of business.

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Two Views of Social Responsibility
• Economic model
– Society will benefit most when business is left alone to produce
and market profitable products that society needs.

– Managerial attitude: social responsibility is someone else’s job;

the firm’s primary responsibility is to make a profit for its
shareholders.

– Firms are assumed to fulfill their social responsibility indirectly

by paying the taxes that are used to meet the needs of society.

– Social responsibility is the problem of government,

environmental groups, and charitable foundations.

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Two Views of Social Responsibility (cont.)

• Socioeconomic model
– Business should emphasize not only profits but also the impact
of its decisions on society.

– The corporation is a creation of society and it must act as any

responsible citizen would.

– Firms take pride in their social responsibility obligations.

– It is in the best interest of firms to take the initiative in social

responsibility matters.

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 The Pros and Cons of
Social Responsibility
Arguments for increased social responsibility:
1. Because business is part of our society, it cannot ignore social
issues.

2. Business has the technical, financial, and managerial resources

needed to tackle today’s complex social issues.

3. By helping resolve social issues, business can create a more

stable environment for long-term profitability.

4. Socially responsible decision-making by firms can prevent

increased government intervention, which would force
businesses to do what they fail to
do voluntarily.
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 The Pros and Cons of
Social Responsibility (cont’d)
Arguments against increased social responsibility:
1. Business managers are primarily responsible to stockholders, so management
must be concerned
with providing a return on owners’ investments.

2. Corporate time, money, and talent should be used to maximize profits, not to
solve society’s problems.

3. Social problems affect society in general, so

individual businesses should not be expected to
solve these problems.

4. Social issues are the responsibility of government officials who are elected for
that purpose and who
are accountable to the voters for their decisions.

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A Comparison of Economic and Socioeconomic Models of
Social Responsibility as Implemented in Business

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 Consumerism
The Six Basic Rights of Consumers
Consumer Rights

The Right to Safety The products consumers purchase must be safe for their
intended use, must include thorough and explicit directions for
proper use, and must be tested by the manufacturer for product
quality and reliability.

The Right to Be Informed Consumers must have access to complete information about a
product before they buy it.

The Right to Choose Consumers must have a choice of products, offered by different
manufacturers and sellers, to satisfy a particular need.

The Right to Be Heard Someone must be available who will listen and take appropriate
action when customers complain.

The Right to Consumer Education People are entitled to be fully informed about their rights as
consumers.

The Right to Courteous Service Consumers are entitled to convenience, courtesy, and
responsiveness from manufacturers and sellers.

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 Summary
• Every business organisation must behave ethically . Ethical behavior is influenced by many
factors; individual and social as well as opportunity. Ethical behavior needs to be promoted by not
only the organization itself, but also various institutions such as government and trade associations.
• A part of ethical behjaviour for businesses is to adopt the concept of social responsibility. Social
responsibility recognizes that business activities have an impact on soci­ety and the consideration of
that impact in business decision making. A socially responsible business organization keeps the
interest of the society where they operate and contributes to the benefits of the members.
• Two views of corporate social responsibility are economic model view and socio-economic model
view. The first view assumes that the business are mainly responsible to utlilse the resources
efficiently and to generate profits through efficiency. Thus, the interest of community and society
was excluded. The second view , however, asserts that businesses are required also to serve the
interests of the society whilst they are undertaking their business activities.
• Every business must focus on satisfaction of consumers’ needs and wants. Beside that, every
business must understand that consumers are having their own rights which was claimed by the
Bill of Consumer Rights.

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