CHAPTER-03 ETHICS AND CORPORATE SOCIAL RESPONSIBILITY Dr. Gehan Shanmuganathan, (DBA) 1
Feb 25, 2016
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CHAPTER-03
ETHICS AND CORPORATE SOCIAL RESPONSIBILITY
Dr. Gehan Shanmuganathan, (DBA)
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NESTLE INDIA AND SOCIAL RESPONSIBILITY…..
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NESTLE INDIA AND SOCIAL RESPONSIBILITY….. Vested in solving nation’s water problem while producing its
products locally Nestle cater to Indian market with milk products, prepared
dishes, cooking aids, and some beverages that are staples to Indian consumers
The company has introduced a water education program, bored wells for nearly 100 village schools for children and teaches hygiene programs
Nestle wants to create value for its shareholders and generate long-term values for society
Social responsibility leads to long term profits through corporate brand equity
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OBJECTIVES
1 Identify the philosophical principles behind business ethics.2 Explain how values relate to ethics.3 Identify factors contributing to lax ethics and common ethical
temptations.4 Apply a guide to ethical decision making.5 Describe the stakeholder viewpoint of social responsibility and
corporate social performance.6 Present an overview of social-responsibility initiatives.7 Summarize how managers can create an environment that
fosters ethically and socially responsible behavior and the benefits of such activity
CHAPTER OBJECTIVES…
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BUSINESS ETHICS
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DEFINITION Business Ethics is the study of right and
wrong and off the morality of the choices individuals make. An ethical decision or an action is one that is right according to some standard of behavior. Business ethics is duplication of moral standards to business situations.
Ethics is the study of moral obligation, or separating right from wrong
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WHAT RESEARCH FINDINGS SAY… Ethics is subjective- head-on advertising in the US Customers, suppliers, and employees prefer to deal with
ethical companies Majority of full-time workers said that it is critical to
work for an organization that is ethical More than one in three workers said they have left a job
because of ethical misconduct by fellow employees or managers
82% of workers said they would like to receive less pay if they worked for an ethical company
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MORAL INTENSITY The magnitude of an unethical act
A person might behave unethically if the magnitude of the consequence is low and versa vice-versa
Manager’s plagiarism on someone’s speech or unauthorized copy of software could be considered as ethical
Same manager might hesitate to sexually harass a business intern
The social consensus- degree of peer agreement One would be hesitant to engage in an act if his or her peers
think it is unethical
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PHILOSOPHICAL PRINCIPLES UNDERLYING BUSINESS ETHICS
PHILOSOPHICAL PRINCIPLES OF BUSINESS ETHICS
When attempting to decide what is right and wrong, managers can focus on:
Consequences - If no one gets hurt, the decision is ethical.Duties, obligations, and principles - If a decision violates a universal principle, it is unethical.Integrity - If the person in question has good character, a genuine motivation and intention.
4.2
Cognitive area-Pertinent
Experiencestimulus Perception attitude
PSYCHOLOGICAL BASIS FOR ETHICAL BEHAVIOR
First, second, and third hand experiences
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SOME CONCEPTS UNDER CONSEQUENCES BASED ETHICALITY Pragmatism
focusing on consequences “the belief is that there are no absolute principles or standards, and no objective truth and no objective reality”
“The reality is whatever that works” E.g- Bernard L.Madoff the former Nasdaq chairman
thought that lying to customers was pragmatic Utilitarianism
The utility of the decision The net balance of good consequences verses bad
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VALUES AND ETHICS
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VALUES AND ETHICS Values are closely related to ethics Values are clear statements of what is critically
important Ethics become the vehicle for converting
values into actions E.g- we put people before profits (value) Avoiding delay payments to employees, and suppliers Excellent customer service (value) and infrastructure
for performance
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VALUES AND ETHICAL BEHAVIOR
Values Ethical Behavior
Competitive Advantage
Quality Customer serviceEcological consciousness Social responsibility Cost consciousness Teamwork
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SOURCES OF UNETHICAL DECISIONS AND BEHAVIOR
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RESEARCH REVEALS (SURVEY OF 2852) Lying to employees (19%) Engaging in conflicts of interest (16%) Lying to outside stakeholders (12%) Engaging in health and safety violations
(11%) Producing poor product quality (9%) Stealing (9%) Sexual harassment (7%)
FACTORS CONTRIBUTING TO ETHICAL PROBLEMS
An individual’s desire to maximize self-gain at the expense of others
An organizational atmosphere that condones unethical behavior
Moral laxity - slippage in moral behavior because other issues seem more important
Pressure from higher management to achieve organizational goals
Strength of relationships among people
4.3
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ETHICAL TEMPTATIONS AND VIOLATIONS
ETHICAL TEMPTATIONS AND VIOLATIONS
Accepting bribes for
doing business
with other companies
Misuse of corporate resources
Divulging confidential information Conflict of
interest
Stealing from
employers & customers
Illegally copying software
Treating people unfairly
4.4
Sexual harassment
Corporate espionage
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BUSINESS SCANDALS AS ETHICAL VIOLATIONS
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BUSINESS SCANDALS AS ETHICAL VIOLATIONS Internet fraud Identity theft Work-at-home (such as making you as an agent
for transferring funds received from customers) Consequences of these scandals are,
Job losses Wiping out pension funds Investments losses Bankruptcy
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A GUIDE TO ETHICAL DECISION MAKING
A GUIDE TO ETHICAL DECISION MAKING
1 Is it right?2 Is it fair?3 Who gets hurt?4 Would you be comfortable if the details of
your decision were reported on the front page of your newspaper or throughout the company?
4 Would you tell your child to do it?6 How does it smell? Based on intuition
4.5
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CORPORATE SOCIAL RESPONSIBILITY
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CORPORATE SOCIAL RESPONSIBILITY
The idea that firms have obligations to
society beyond their economic
obligations to owners or stockholders
and also beyond those prescribed by
law or contract
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THREE COMPONENTS OF SOCIAL RESPONSIBILITY Cognitive component
Thinking about the organization’s relationships with its parties at interest
Linguistic component Explaining the organization’s reasons for engaging in certain
activities and how it goes about sharing these explanations with others
Conative component What the firm actually does along with the commitment and
consistency it shows in conducting its acts of social responsibilities
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STOCKHOLDER VERSUS STAKEHOLDER VIEWPOINTS
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STOCKHOLDER VERSUS STAKEHOLDER VIEWPOINTS Stockholder
viewpoint
The traditional perspective on social responsibility that a business organization is responsible only to its owners and stockholders
Stakeholder viewpoint
The viewpoint of social responsibility contending that firms must hold themselves responsible for the quality of life of the many groups affected by the firm’s actions
THE STAKEHOLDER VIEWPOINT OF SOCIAL RESPONSIBILITY
4.6
The Organizatio
n
OwnersStockholdersEmployeesBoard of Directors
CustomersSuppliersCreditorsLabor UnionsCompetitorsSpecial Interest GroupsCustomer GroupsGovernment AgenciesFinancial Institutions
Adapted from Exhibit 4.4
Inte
rnal
St
akeh
olde
rs
Exte
rnal
St
akeh
olde
rs
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CORPORATE SOCIAL PERFORMANCE
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CORPORATE SOCIAL PERFORMANCE The extent to which a firm responds to the
demands of its stakeholders for behaving in a socially responsible manner
Discuss how Wal-Mart controls its supplies in order to achieve their cost advantage as an irresponsible corporate citizen in performing its social responsibility (lay-offs of employees of suppliers) discuss the bargaining power of Wal-Mart
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CORPORATE SOCIAL RESPONSIBILITY INITIATIVES
Compassionate Downsizing
Work/Life Programs
Acceptance of Whistle Blowers
Creating opportunities
for Diverse
workforce
Social Responsibility
Initiatives
Environmental Management
Community Redevelopment
Projects
4.7
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CORPORATE SOCIAL RESPONSIBILITY INITIATIVES Philanthropy
Donate money to charity and other various causes Work/Life Programs
Programs that the employees could balance the demands of work and personal life
Community Redevelopment Project Investing on rebuild distressed communities
Acceptance of Whistle-Blowers Employees who disclose organizational wrongdoing
to parties who could take actions Compassionate Downsizing
Controlling the downsizing to the minimum level Opportunities for diverse workforce
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ENVIRONMENTAL PROTECTION
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ENVIRONMENTAL PROTECTION Environmental protection is a concern the
organization have in managing sustainable environment or “going green”
Going green is an approach to defining and creating processes that are Environmentally friendly Economically viable Pragmatic in the long run
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SOME METHODS TO MANAGE Commit to lowering carbon dioxide and other
hazardous emissions
Developing green supply chain
Make sustainability and eco-friendly policies in the
business plan
Implement four-day workweek
Manufacture and sell products with recycled materials
Invest heavily in recycling
Plant a rooftop garden on your office building or factory
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CREATING AN ETHICAL AND SOCIALLY RESPONSIBLE WORKPLACE
CREATING AN ETHICAL ANDSOCIALLY RESPONSIBLE WORK PLACE
4.8
Create formal mechanisms to monitor ethics
Provide written codes of conduct
Offer training programs
Confront ethical
deviations
Lead by example
Talk about the issues
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BENEFITS DERIVED FROM ETHICS AND SOCIAL RESPONSIBILITY
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VIRTUOUS CIRCLE The relationship between investment on
social responsible projects and financial performance where corporate social performance and corporate financial performance feed and reinforce each other
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VIRTUOUS CIRCLE
Investments onSocially responsible Projects
Financial Performance
1 Identify the philosophical principles behind business ethics.2 Explain how values relate to ethics.3 Identify factors contributing to lax ethics and common ethical
temptations.4 Apply a guide to ethical decision making.5 Describe the stakeholder viewpoint of social responsibility and
corporate social performance.6 Present an overview of social-responsibility initiatives.7 Summarize how managers can create an environment fosters
ethically and socially responsible behavior and the benefits of such activity
WHAT WE LEARNED….
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QUESTIONS…….
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WRITE FIVE KEY THINGS (AREAS) THAT YOU CAN CRITICALLY REMEMBER IN TODAY’S DISCUSSION
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WEEKLY ASSIGNMENT- 03
“Organizations have to be much
profit oriented than being socially
responsible, especially during an
economic depression”. Do you
agree or disagree? Discuss.