Corporate Governance, Social Responsibility,

and Business Ethics

(3rd Meeting)

Presented By
Sirajuddin Omsa

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 Objective of the 3rd Meeting
After meeting, the students should be able to:
• Define Corporate Governance (CG)
• Highlight the Component of CG
• Explain Social Responsibility of Strategic
Decision Makers
• Discuss Ethics, Morality & Law
• Describe CSR in recent decade
• Discuss CSR Versus Profitability

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 Definition of Corporate Governance
Corporate governance consists of the legal (hukum),
and implicit frameworks (kerangka) that define the
exercise of power (pelaksanaan kekuasaan) within a
company, influence decision making, allow the
stakeholders to assume their responsibilities, and
ensure that their rights and privileges (hak istemewa)
are respected.

Source: Research Foundation of CFA Institute (2005)

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 Component of Good Corporate Governance

❑ Transparent
❑ Participative
❑ Accountable
❑ Responsiveness

Source: UN Commission on Human Rights

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 Social Responsibilities of Strategic
Decision Makers

• What are the responsibilities of a business firms and

how much of them should be fulfilled?
1. Fredman’s Traditional View of Business
Responsibility
2. Carroll’s Four Responsibility of Business

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 Fredman’s Traditional View of Business
Responsibilities

• There is no one and only one social

responsibility of business-to use its resources
and engage in activities designed to increase
its profits so long as it stays with in the rules
of the game, which is to say, engage in open
and free competition without deception or
fraud.

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 Carroll’s Four Responsibilities
of Business

1. Economic: To produce goods and services of value to society.

2. Legal: Defined by government laws that management is
expected to obey (race, gender, color, political, and religion).
3. Ethical: To follow the generally held beliefs about behavior in
a society.
4. Discretionary: Purely voluntary obligations (Philanthropic
contribution).

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 Ethics, Morality, and Law
What are the differences among ethics, morality, and
law?
• Ethics: The consensually accepted standards of
behavior for an occupation, trade, and profession.
• Morality: The precepts of personal behavior based on
religious or philosophical ground.
• Law: Formal codes that permit or forbid certain
behaviors and may or may not enforce ethics or
morality.

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 Ethical Decision Making
Fact: Survey done by Ethics Resource Centre of 1,324
employees of 747 American Companies.
• 48% said that had engaged unethical actions.
• 16% cutting corners on quality
• Covering up incidents (14%)
• Abusing/Lying about sick days (11%)
• Lying customers (9%)
Task: Find out unethical action that are usually
engaged in Indonesian companies.

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 CSR in Recent Decade
• Reasons why CSR is implemented by
companies:
1. Business globalization
2. Customer power
3. Environment Awaking Pressure

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 CSR Vs Profitability

• Economic cost & benefit (measurable)

• Social cost & benefit (Not measurable)
1. Some CSR activities doesn’t need fund
2. CSR is not standard
3. CSR affects efficiency

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