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Outline:Ethics and Social Responsibility
Definition of Ethics
Sources of Ethics
Care for Ethics in Business Myths about Business Ethics
Managing Ethics
Corporate Ethics and the Concept of CSR
Some specific issues of ethics in business
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1. Ethics - Definition
A system of moral principles a sense of
right and wrong, the goodness and
badness of actions and motives and
consequences of these action.
In business: Ethics is the study of good
and evil, right and wrong, just and unjustactions of business persons.
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2. Sources of Ethics: Value Systemwith Reciprocity and Mutual Help
BusinessEthics
Legal
SystemCulture
Religion
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2.1: Religion
One of the oldest sources of ethical inspiration
Despite doctrinal differences, religions believe
that ethics is an expression of divine will
All great religions agree on fundamentalprinciples secular ethical doctrine and the
principle of reciprocity, preach the necessity
for an orderly social system, emphasize socialresponsibility for general welfare
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2.3: The Legal System
Laws are rules of conduct, approved bylegislatures that
Guide human behavior in any society
Codify ethical expectations
Are reactive i.e., keep changing as new evils
emerge; and
Are expected to be adhered to by businesses
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3. Care for Ethics in Business:Why do Ethics Matter in Business?
Ethics matter to employees, stakeholders and public
Employers save billions on law suits, settlements andthefts; companies prevent deterioration ofrelationships, damage to reputation, decline inemployee productivity, creativity and loyalty
Managing ethically means managing with integrityand better decision making, working in harmony withsociety that prescribes certain norms that are binding
on business and Ethically strong companies are profitable
organizations, too since ethical considerations areconsistent with business pursuits, including profitearning.
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4. Myths about Business Ethics
5 Myths
Ethics is personal
Business and ethics do not mix
Business ethics is relative
Good business means good ethics
Information is neutral and amoral
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4.1: Ethics is Personal,Confined to Self
Every citizen has/should have the constitutional right todecide what is right and what is wrong
But individuals choice of right and wrong cannot be
absolute It is constrained by public interest abuse and also the
demands of the organization (its norms, culture andstandards)
Organizational ethics are the summation of moralbeliefs of individual employees; organizations do notcommit crimes, individuals do.
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4.2: Business and Ethicsdo not go Together
The notion now-a-days: Honesty is the best policy but not in business
Businesses operate in a free market and strive hard to
earn profit Management of a business is based on scientific not
ethical principles
But the argument is not acceptable:
Business cannot operate in vacuum, it is an integralpart of the society, which has principles, norms andvalues and cannot allow businesses to act amorallyand create chaos
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4.3: Ethics in Business is Relative
What is right or wrong is determined by what thesociety says is right or wrong: something right(ethical) in one place or context is wrong (unethical)in another place or context.
But the relativist ethos is not acceptable ininternational business: relativism may be carried toany logical extreme and create complications ininteractions, communications, transactions and
negotiations; let each persons values remain validfor him or her, businesses must try to create asynergy of the value systems.
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4.4: Good Business Means Good Ethics
Executives and organizations that maintain a goodcorporate image, practice equitable dealings with
customs and employees and earn profits by
legitimate, legal means are de facto ethical
However,
Organizations pursuing profit making cannot be
expected to display moral characteristics like
honesty, considerations and sympathy and usually,
there is no correlation between goodness and
material success
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5. Managing Ethics
Ethical management: Acting ethically as a manager,by doing the right thing. Unethical management or
ethical misconduct has ended several promising
careers; actions of few individuals severely harmed
and even destroyed some businesses.
Management of ethics: managing activities that are
required of a firm or its employees to behave
ethically; managing the rules, procedures, policies
and values consistent with fairness and commitment
in relation to conditions at the workplace, external
environment, racial justice, human rights, and
interests of the stakeholders
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5.1: Ethical Dilemmas
One of the most important activity in managing ethics is theresolving of ethical dilemmas emanating from
Transfer of operations of a company from one country toanother (when cultures differ), face problems of a hostcountry where industries are relocated to avoid problems
in the home country; Transfer pricing (setting prices of goods and services soldby one member of a corporate family to another, such asfrom a parent to its subsidiary in a foreign country(because of difference in taxation);
Transfer of technology (should a country buy thetechnology even if it has no use of it?)
Fixation of wages by a multinational company toemployees of the host country (how to establish parity?)
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5.2: Strategies in Managing Ethics
6 significant strategies:
1. Commitment from top management
2. Having a Code of Ethics3. Constituting Ethics Committees
4. Conducting Ethics Training Programs
5. Having a whistle blowing system in place
6. Enacting legislation outlawing unethical
conduct
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5.3: Code of Ethics
Key points of a Code of Ethics Respect basic human rights and freedom
Minimize any negative impact on local policies
Maintain high standards of local social involvement Transfer technology and promote R & D
Protect the environment
Ensure consumer protection
Follow fair employment practices including more
employment opportunities for local people and security
of their jobs
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5.4: Ethics Committees, Ethics Training,
Whistle-blowing and Laws
Companies can form ethics committees,sometimes high level ones, for advise on ethicalissues
All large companies in developed countries nowprovide training in ethics for their employees
Whistle-blowing enables an employee to tip offthe top management about misdeeds of any
person; protect the identity of the caller
Laws represent a societys attempt to formalize orto reduce to written rules, ethical principles; everycountry does have its own laws
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6. Social Responsibility
While ethics is a system of moral principles a sense ofright and wrong, the goodness and badness of actionsand motives and consequences of these action, socialresponsibility of business (CSR) is its obligation totake actions that protect and improve the welfare of
the society as a whole, as well as of itself.Every business decision (takeover, diversification,
opening a new branch, closure of a unit, automationand the like) has social implication;
CSR is the commitment to contribute to sustainabledevelopment, working with employees and theirfamilies, the local community, and the society toimprove their quality of life in a way that are good forbusiness.
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6.1: Why CSR?
CSR is not merely a philanthropy: 4 interdependent factors and the areas(under them) influenced by CSR activities
Related and support industries:Add to the productivity of an organization
by facilitating easy access to high quality industries and services; increases
capability of local suppliers instead of promoting outsourcing.
Factor conditions: the availability of trained workers, high qualityinstitutions of science and technology, adequate physical infrastructure,transparent and efficient administrative processes and natural resources
Demand conditions: sophisticationand size of the local market, andappropriateness of product standards
Context for strategy and rivalry: rules, incentivesand norms governing competition in a nation orregion that influences productivity; policies thatencourage investment, protect intellectual propertyopen up local markets for trade, reduce corruptionto make a location attractive for business
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6.2: Case against CSR
CSR relates to public expectations and makes it easy forcorporations to operate in a new environment. But the idea of
CSR is opposed alsobecause CSR may:
Transfer costs to consumers and shareholders
Prompt mandatory requirements Invite bureaucrate overseeing and demands on businesses
Cause a fall in economic efficiency of businesses
Is illegitimate because social issues are concerns not of
businesses but of the government Is not a function of businesses and should be left to non-
business organizations
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7: A few specific issues of
ethics in business
Bribery and
corruption
Restructuring and
layoff
Privacy
Job discrimination
Performance appraisal
Sexual
harassment
Wages
Safety and health
Ethics
Dimensions
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7.1: Job Discrimination
A discriminatory decision Is based on group membership, not on individual merit
Is the result of prejudice or false stereotype
Somehow harms those it is aimed at
Four common discriminatory practices1. Individuals can intentionally discriminate out of prejudice
2. Organizations can discriminate having a prejudiced policy
3. Discrimination may be on the basis of sex or race
4. There can be workplace harassment, for example of women
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7.2: Sexual Harassment
Sexual harassment means unwelcome sexual advances, requestsfor sexual favors, and other verbal or physical conduct of a
sexual nature. Three types:
1. Sexual threats forces women to comply, lest their jobs are
at stake
2. Sexual offers against incentives of jobs, pay rise or
promotion
3. Hostile work environment sexual nature of conduct of the
co-workers causes a women to feel highly uncomfortable
and affect performance; flirting, sexy jokes and sexualreferences are too common in workplace where men and
women work together
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7.3: Wages
An ethical issue is the paritybetween remuneration ofemployees in home country with that of employees
working in a foreign location, as well as between
remuneration of a local employee and a foreign one
of same qualifications and working in the sameorganization with same responsibilities
Another ethical issue indirectly related with wages is the
imposition ofrestrictions on free movement of
labor in a world where other factors of production capital, technology and machines move with much
less or almost no restrictions across the globe.
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7.4: Safety and Health
Business ethics requireA. Taking guard against accidents in work place caused by
High speed and noisy machinery
Production processes requiring high temperature
An increasing reliance on chemical compounds The nature of such works as construction, underground and
under-water tunneling, drilling and mining
B. Prevention of cumulative trauma and disorders in jobs (wrist
pain, weakened eye sight, job stress and other health hazards)Life is better than death, health is better than illness and
body integrity is better than injury
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7.5 Performance Appraisal
The assessor is expected to
be objective and fair i.e., free of biases
Avoid underrating or overrating employees
Use ethics as the corner-stone of performance
evaluation, and
Provide an honest assessment of the
performance and mutually develop a plan toimprove the ratees effectiveness
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7.6 Privacy
Privacy refers to protecting an employees private life(religious beliefs, political and social beliefs, personallife style) from intensive and unwarranted actions;privacy empowers and enables people. Interventionsin privacy:
Information technology AIDS testing
Whistle-blowing (without sufficient grounds, and alsokeeping unattended)
Drug-testing Genetic testing (for ones inherited characteristics and
certain illness)
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7.7Restructuring and Layoff
There are ethical implications in the process by whichtermination decisions are made and actions taken.
Issues on consequence in closure of a plant:
How the plant for closure is chosen? How the news will be communicated?
What will be the time-frame for completing the
layoffs?
How the affected employees will be compensated?
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7.8 Bribery
Bribe is a remuneration for the performance of an actthat is inconsistent with the work contract or thenature of work one is expected to perform; it ispayment made with an intention to corrupt.
Besides being morally wrong, bribery is economicallyundesirable, too. The reasons are:
An economy based on bribery does not provide openaccess to all competitors on equal terms
Bribery prone economies become less efficient resources are wasted, costs rise and along with costs,prices too tend to hike.