Introduction to ethics and

CSR
Chapter One

By Ana Abdi
Objectives

 Introduction to Ethics and CSR

 Definition of CSR
 Corporate citizenship
 Social responsiveness and performance
What is Ethics?
 Ethics is the branch of philosophy that studies the
value and behavior of a person

 Ethics is a standard that measuring right or wrong

 moral principles that govern a person's behavior or

the conducting of an activity

Conduct:- the manner in which a person behaves,

especially in a particular place or situation

 Ethics focus on a person rather than the general

public
Ethics can be distinguish in three categories:

1. Normative ethics:- used to regulate the right

and wrong behavior of individuals- they are
norms/rules

2. Descriptive ethics (applied ethics):- is used to

consider controversial issues such us abortion,
animal right, capital punishment and nuclear war

3. Meta-ethics:- focused on the issues of

universal truth, ethical juegments and the
 Ethics and The Law

 In fact, the law is essentially an

institutionalization or codification of ethics
into specific social rules, regulations, and
proscriptions. Nevertheless, the two are not
equivalent.
 Perhaps the best way of thinking about ethics and
the law is in terms of two intersecting domains
 For example, just as there is no law preventing
you from being unfaithful to other (although
this is perceived to be unethical)
 There is no law in many countries
preventing businesses from testing their
products on animals or preventing their
employees from joining a union
 Similarly, it is possible to think of issues that are
covered by the law but which are not really
about ethics

 For example, the law prescribes whether we should

drive on the right or the left side of the road

 Although this prevents chaos on the roads, the

decision about which side we should drive on is not
an ethical decision
 ETHICS

LAW
The relationship between ethics and the law
 What is business ethics?
 Why business ethics is important?
 Business ethics is not like subjects such as accounting,
finance, engineering, or business law where you are
supposed to learn specific procedures and facts in
order to make objectively correct decisions

 Rather, it is about gathering relevant evidence, and

systematically analyzing it through particular lenses
and tools in order to come to an informed decision
that has taken account of the most important
considerations
 So studying business ethics should help you
to make better decisions

Generally
 Business ethics is principally about
developing good judgement
BUSINESS ETHICS DEFINITION

 Is the study of business situations, activities, and

decisions where issues of right and wrong are
addressed
 Is a set of principles and standards that
determine acceptable conduct in business in
terms of fairness, integrity, commitment to
agreements, broad-mindedness, responsible
citizenship, accountability…..
 Moreover, by ‘business’ ethics, we do not
mean only commercial businesses, but
also government organizations, not-for-profit
businesses, charities, and other organizations
 Many companies are starting to recognize that
making profits are not sufficient criteria
to be a responsible members of society
 It is important to be socially responsible
 Who can judge acceptability of
behaviors in business?

 Customers
 Competitors
 Government regulatory
 Interested group
 The public
 Each individuals personal moral principle and values
Concepts of Business

 An organization or enterprising entity

engaged in commercial, industrial, or
professional activities
 Is an activity of earning income either by
production or purchase, sale and exchange
goods and service to satisfy the needs of
people and to earn profit
Characteristics of Business

 Economic activity

 Buying and Selling

 Creative and Dynamic
 Continuous process
 Customer satisfaction
 Profit Motive  Social Activity
 Risk and Uncertainties
 Government control

 Optimum utilization of

resources
 Responsibilities of business towards
different interested group

 Take a minute to think about who can be

considered as an interested group
(stakeholder) for any kind of business and
what is the business responsibilities towards
this group?
Responsibility towards owners

 Run the business efficiently

 Proper utilization of capital and other
resources
 Growth and appreciation of capital
 Regular and fair return on capital invested
Responsibility towards
investors

 Ensuring safety of their investment

 Regular payment of interest
 Timely repayment of principal amount
 Ensuring long term profitability of the
business
Responsibility towards employees

 Timely and regular payment of wages and salaries

 Proper working conditions and welfare amenities

 Opportunity for better career prospects

 Job security as well as social security like facilities of

provident fund group insurance, pension, retirement
benefits…..

 Better living conditions like housing, transport……..

 Timely training and development

Responsibility towards
suppliers

 Giving regular orders for purchase of goods

 Dealing on fair terms and conditions
 Availing reasonable credit period
 Timely payment of dues
 Responsibility towards customers

 Products and services must be able to take care of the needs

of the customers

 There must be regularity in supply of goods and services

 Price of the goods and services should be reasonable and

affordable

 All the advantages and disadvantages of products as well as

procedure to use the products must be informed do the
customers

 There must be proper after-sales service

 Grievances of the consumers, if any, must be settled quickly

 Responsibility towards
competitors
 Not to offer exceptionally high sales
commission to distributors, agents, etc….
 Not to offer to customers heavy discounts
and, /or free products in every sale
 Not to defame competitors through false or
ambiguous advertisements
 Responsibility towards
government
 Setting up units as per guidelines of government
 Payment of fees, duties and taxes regularly as well as
honestly
 Not to indulge in monopolistic and restrictive trade
practices
 Conforming to pollution control norms set up by
government
 Not to indulge in corruption through bribing and other
Responsibility towards society
 to help the weaker and backward sections of the
society

 to preserve and promote social and cultural values

 to generate employment

 to protect the environment

 to conserve natural resources and wildlife

 to promote sports and culture

 To provide assistance in the field of developmental

 Ethics in the functional area of a
business

 Marketing
 Management and development
 Human resource
 Production
 Finance
CSR (Corporate social responsibility)

 Corporate social responsibility is a business model

that helps a company be socially accountable to
itself, its stakeholders, and the public
Key features of a corporation

 A corporation is essentially defined in terms of legal

status and the ownership of assets

 Legally, corporations are regarded as independent from

those who work in them, manage them, invest in them,

or receive products or services from them

1. Corporations are separate entities in their own

right

2. The corporation owns its own assets. The

 Corporations are typically regarded as ‘artificial persons’ in

the eyes of the law

 Corporations are notionally ‘owned’ by shareholders, but

exist independently of them

 Managers and directors have a ‘fiduciary’ responsibility to

protect the investment of shareholders

 This means that senior management is expected to hold

shareholders’ investment in trust and to act in their best

interests.
Can a corporation be morally responsible for its
actions?
1. Legal identity. From the legal perspective because
corporations have a distinct legal identity

 including paying taxes, ensuring the safety of their products and

meeting environmental obligations

2. Agency. Corporations can also be said to decide and act

independent of their members

 every organization has a corporate internal decision structure

that directs corporate decisions in line with predetermined goals
3 Organizational culture. A further argument
supporting the moral dimension of corporate
responsibility is the fact that all companies not
only have an organized corporate internal
decision structure, but also a set of beliefs
and values that set out what is generally
regarded as right or wrong in the corporation
4. Functional identity. On general level we observe that
corporations present themselves and interact with
customers and other stakeholders as if they were
distinct persons
 Often associated with their brand, companies interact
with customers as objects of affection

(e.g. McDonalds’ ‘I’m lovin’ it’ slogan)

 Therefore we can conclude
that

 Corporations do indeed have some level

of moral responsibility that is more
than the responsibility of the
individuals constituting the corporation
What are corporations social responsibilities?

 Enhance (long-term) revenues

 Reduce costs
 Manage risk and uncertainty
 Maintaining the social license to operate
 Supporting charity and philanthropy initiatives
 Going beyond legal requirements in adopting
progressive human resource management programs
 Not testing product on animals
 Recycling
 Preventing pollution
 Supporting local businesses
 Endorsing products with social attributes or
characteristics
CSR Pyramid
Outcomes of CSR: Corporate Social
Performance
 If we are able to measure, rate, and classify
companies on their economic performance, why
should it not be possible to do the same with
its social performance as well?

 Corporate social performance can be observed

as
ӿ The principles of CSR

ӿ The processes of social responsiveness

ӿ The outcomes of corporate behavior

These outcomes are delineated in three concrete
areas

1. Social policies:— Explicit and pronounced

corporate social policies stating the company’s
values, beliefs, and goals with regard to its
social environment
 For example, most major firms now explicitly
include social objectives in their mission
statements and other corporate policies
2. Social programs:— Specific social programs
of activities, measures, and instruments
implemented to achieve social policies
 For example, many firms have implemented
programs to manage their environmental
impacts
3. Social impacts:— Social impacts can be
traced by looking at concrete changes that the
corporation has achieved through the
programs implemented in any period
Corporate Citizenship

 Towards the middle of the 1990s, the term

‘corporate citizenship’ emerged as a new
way of addressing the social role of the
corporation
 However, as the literature on CC is relatively
new, there seems to be quite a variety of
usages of the terminology
 In a ‘limited view’ of CC many refer to
philanthropy as the main activity of a
virtuous corporate citizen that shares its
wealth with its ‘fellow citizens’
 Others refer to CC in a way that mainly is
synonymous to CSR, equating good
neighborly behavior to a responsible role of
business in society
 Corporate citizenship is how a company
exercises its rights, obligations,
privileges, and overall corporate
responsibility within our local and
global environments.
 Corporate citizenship is growing increasingly
important.
 Both individual and institutional investors
begin to seek out companies that have
socially responsible orientations such as
their environmental, social, and governance
practices.
The Development of Corporate
Citizenship
 The five stages of corporate citizenship are
defined as:

1. Elementary

2. Engaged

3. Innovative

4. Integrated

5. Transforming
1. Elementary Stage

 Basic and undefined activities

 Because there are scant corporate awareness

and little to no senior management involvement

 Small businesses, in particular, tend to linger in this

stage

 They are able to comply with the standard health,

safety, and environmental laws, but they do not
have the time nor the resources to fully develop
greater community involvement
2. Engagement Stage

 In these stage, companies will often

develop policies that promote the
involvement of employees and
managers in activities that exceed
rudimentary compliance to basic laws
3. Innovative Stage

 Citizenship policies become more

comprehensive in the innovative stage
 Increased meetings and consultations with
shareholders
 Participation in forums and other outlets that
promote innovative corporate citizenship
policies
4. Integrated stage

 Citizenship activities are formalized

 Blend in fluidly with the company’s
regular operations
 Performance in community activities is
monitored, and these activities are driven
into the lines of business
5. Transforming stage

 Once companies reach the transforming stage,

they understand that
 Corporate citizenship plays a strategic part
in fueling sales growth and expansion to
new markets
 Economic and social involvement is a regular
part of a company’s daily operations in