Business Ethics PDF

Business Ethics Overview
CONTENTS
Chapter 1 Business Ethics – An Overview.................................................. 2
Chapter 2 Management of Business Ethics ............................................. 10
Chapter 3 Ethical Theories ....................................................................... 32
Chapter 4 Role of Ethical Managers ........................................................ 36
Chapter 5 Corporate Social Responsibility .............................................. 46
Chapter 6 CSR Strategies ......................................................................... 52
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CHAPTER 1
BUSINESS ETHICS – AN OVERVIEW
1. Definition and Nature of Business Ethics
Nature of Ethics refers to the normative standards of behaviour pertaining to the ideal code of
conduct of human beings. This is substantially different from that of our feeling.
The ethical choices get affected significantly by our feelings. Highly developed habits of some people
make them feel guilty after doing something wrong while others might seem unperturbed by any form
of wrongdoing.
Ethics also differs subsequently from the law. Although a law enforcement system tries to incorporate
ethical standards, it can deviate subsequently from the ethical guidelines.
1.1 What is ethics?
The word “ethics” is derived from the Latin word ‘Ethics’ and the Greek word ‘Ethikos’ that
both relate to character. Ethics is thus said to be the science of conduct. It deals with certain
standards of human conduct and morals.
Ethics is a set of moral principles or set of values about what is right and what is wrong,
fairness and unfairness, good and bad, duty and obligation, justice and injustice, proper or
improper, as well as moral responsibility and the values that should guide our actions.
Is capital punishment right or wrong? How about the quotas in hiring are they just or unjust?
The answers to these questions are value related. For example, some might indulge in the
argument that capital punishment is right because it is an appropriate retribution for crimes
such as murder. However, on the other hand, others might argue, that no govt. has the right
to take anyone’s life.
Values are what we choose as worthwhile or believe to have merit, in a general or broad
sense. Issues of right or wrong are related to one’s ‘values’ Values are our standard of right
and wrong. Whether something is right or wrong is not a matter of fact. It is a matter of
opinion. An action may be upheld by someone as very right while others might think the same
action to be very wrong.
Values have the following characteristics:
1. Values tend to be relatively stable and enduring. A significant portion of the values,
we hold is established in our early years from parents, teachers and others. So these
values are originally learned.
2. Values constitute the foundations of one’s character. They are at the core of
personality and a powerful force affecting behavior.
3. Values are abstract representation of what people believe to be right, proper and
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Overview Business Ethics
worth-while to pursue.
4. Some values are not fixed, but they change with time and situations.
5. Values have intensity and content attributes in which the content attribute says that
a mode of conduct or end-state of existence is important and the intensity attribute
explains how important it is.
6. The values which are internalized by an individual, becomes a part of his personality,
then they go beyond the zone of choice for the person concerned. His action based
on these values then become spontaneous and continuous, automotive and
instinctive.
Human behaviour that is right is categorized as ethical and behavior that is wrong is said
to be unethical. Some of the morals and values that are considered right include:
 Honesty
 Truthfulness
 Trustworthiness
 Integrity
 Fairness
 Cooperation
 Diligence
 Taking care not to harm other people and the environment
 Responsibility
 Accountability
 Empathy
 Respect
 Tolerance
 Benefiting others
 Loyalty/ fidelity
Ethics goes beyond the immediate facts (what the situation is) and addresses the question
- what the situation should be. As a result, ethical actions best serve the ideas of honesty,
integrity, morality and good management practices.
Most people see no real distinction between a person’s “morals” and a person’s “ethics.”
And almost everyone uses both the words “ethical” and “moral” for good people and right
actions, and the words “unethical” and “immoral” to speak about bad people and wrong
actions.
Though ethics is not the same as religion, religious morals are a primary force in shaping
ethics. Ethics gets idea from religion and thorough experiments it approves them as “code
of conduct.” The development of ethics is dependent on religious morality.
Ethics is also closely related to law. Law is a code of conduct which the authority in power
prescribes for society. It is concerned with the minimum regulation necessary for public
order.
People sometimes confuse legality and morality, but they are different things. On one
hand, breaking the law is not always or necessarily immoral. On the other hand, the
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legality of an action does not guarantee that it is morally right. Let’s consider these points
further.
1. An action can be illegal but morally right. For example, helping a Jewish family to hide
from the Nazis was against German law in 1939, but it would have been a morally
admirable thing to have done. Of course this was because the Nazis were evil.
2. An action that is legal can be morally wrong. For example, it may have been perfectly
legal for the chairman of a profitable company to lay off 125 workers and use three-
quarters of the money saved to boost his pay and that of the company’s other top
managers, but the morality of his doing so is open to debate.
1.2 What is business ethics?
Business ethics is the behavior that a business follows in its daily dealings with the world.
The ethics of a particular business can be diverse. They apply not only to how the business
interacts with the world at large but also to their one-on-one dealings with a single
customer.
To some people, businesses are interested in making money, and that is the bottom line.
Making
money is not wrong in itself. It is the manner in which some businesses conduct
themselves that brings up the question of ethical behavior.
In a nutshell, business ethics:
 is the study of what constitutes right and wrong (or good and bad) human conduct in a
business context.
• is the application of general ethical rules to business behavior.
• is a set of rules of business by which decorum of business activity may be judged
• is a concentration of moral standards as they apply to business policies, institutions and
behavior. It is a specialized study of moral right or wrong. It is a form of applied ethics.
The 3 C’s of Business ethics:
1. Compliance: (The need for compliance of rules including):

• Laws
• principles of morality
• policy of the company
2. The Contribution (Business can make to the society):

• The core values
• Quality of products/services
• Employment
3. The Consequences of business activity:

• Toward environment inside and outside the organization
• Social responsibility toward shareholders, bankers, customers and employees of
organization.
• Good public image.
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1.3 Features of Ethics
The characteristics or features of business ethics are:

 Code of conduct: Business ethics is a code of conduct. It tells what to do and what not to do
for the welfare of the society. All businessmen must follow this code of conduct.
 Based on moral and social values: Business ethics is based on moral and social values. It
contains moral and social principles (rules) for doing business. This includes self-control,
consumer protection and welfare, service to society, fair treatment to social groups, not to
exploit others, etc.
 Gives protection to social groups: Business ethics give protection to different social groups
such as consumers, employees, small businessmen, government, shareholders, creditors, etc.
 Provides basic framework: Business ethics provide a basic framework for doing business. It
gives the social cultural, economic, legal and other limits of business. Business must be
conducted within these limits.
 Voluntary: Business ethics must be voluntary. The businessmen must accept business ethics
on their own. Business ethics must be like self-discipline. It must not be enforced by law.
 Requires education and guidance: Businessmen must be given proper education and
guidance before introducing business ethics. The businessmen must be motivated to use
business ethics. They must be informed about the advantages of using business ethics. Trade
Associations and Chambers of Commerce must also play an active role in this matter.
 Relative Term: Business ethics is a relative term. That is, it changes from one business to
another. It also changes from one country to another. What is considered as good in one
country may be taboo in another country.
1.4 Ethical Behaviour in Business
1. HONESTY. Ethical executives are honest and truthful in all their dealings and they do not
deliberately mislead or deceive others by misrepresentations, overstatements, partial truths,
selective omissions, or any other means.
2. INTEGRITY. Ethical executives demonstrate personal integrity and the courage of their
convictions by doing what they think is right even when there is great pressure to do otherwise;
they are principled, honorable and upright; they will fight for their beliefs. They will not sacrifice
principle for expediency, be hypocritical, or unscrupulous.
3. PROMISE-KEEPING & TRUSTWORTHINESS. Ethical executives are worthy of trust. They are
candid and forthcoming in supplying relevant information and correcting misunderstandings of
fact, and they make every reasonable effort to fulfil the letter and spirit of their promises and
commitments. They do not interpret agreements in an unreasonably technical or legalistic manner
in order to rationalize non-compliance or create justifications for escaping their commitments.
4. LOYALTY. Ethical executives are worthy of trust, demonstrate fidelity and loyalty to persons and
institutions by friendship in adversity, support and devotion to duty; they do not use or disclose
information learned in confidence for personal advantage. They safeguard the ability to make
independent professional judgments by scrupulously avoiding undue influences and conflicts of
interest. They are loyal to their companies and colleagues and if they decide to accept other
employment, they provide reasonable notice, respect the proprietary information of their former
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employer, and refuse to engage in any activities that take undue advantage of their previous
positions.
5. FAIRNESS. Ethical executives and fair and just in all dealings; they do not exercise power
arbitrarily, and do not use overreaching nor indecent means to gain or maintain any advantage
nor take undue advantage of another’s mistakes or difficulties. Fair persons manifest a
commitment to justice, the equal treatment of individuals, tolerance for and acceptance of
diversity, the they are open-minded; they are willing to admit they are wrong and, where
appropriate, change their positions and beliefs.
6. CONCERN FOR OTHERS. Ethical executives are caring, compassionate, benevolent and kind;
they help those in need, and seek to accomplish their business objectives in a manner that causes
the least harm and the greatest positive good.
7. RESPECT FOR OTHERS. Ethical executives demonstrate respect for the human dignity,
autonomy, privacy, rights, and interests of all those who have a stake in their decisions; they are
courteous and treat all people with equal respect and dignity regardless of sex, race or national
origin.
8. LAW ABIDING. Ethical executives abide by laws, rules and regulations relating to their business
activities.
9. COMMITMENT TO EXCELLENCE. Ethical executives pursue excellence in performing their

duties, are well informed and prepared, and constantly endeavor to increase their proficiency in
all areas of responsibility.
10. LEADERSHIP. Ethical executives are conscious of the responsibilities and opportunities of their
position of leadership and seek to be positive ethical role models by their own conduct and by
helping to create an environment in which principled reasoning and ethical decision making are
highly prized.
11. REPUTATION AND MORALE. Ethical executives seek to protect and build the company’s good
reputation and the morale of its employees by engaging in no conduct that might undermine
respect and by taking whatever actions are necessary to correct or prevent inappropriate conduct
of others.
12. ACCOUNTABILITY. Ethical executives acknowledge and accept personal accountability for the
ethical quality of their decisions and omissions to themselves, their colleagues, their companies,
and their communities.
1.5 Causes of Unethical Behavior
1. Competition: When managers try to meet goals and have to cut corners at that moment this
acute competition at national as well as international level becomes an unavoidable reason for
unethical conduct.
2. Ambiguous Situations create the ethical dilemma for managers and leads them to select an
alternative which gives them higher return at the cost of losing integrity.
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3. Political corruption has also become a big issue now-a-days, as business cannot be aloof from
politics and most of the political parties demand gifts, donations and bribes from the business
men for their political gain.
4. The pressure of achieving results, to look good, to secure a promotion or a better position. The
desire to achieve results and prove oneself. “Cooking the books” to look good, to secure a
promotion or keep investors happy (short term).
5. Fear of failure, fear of losing our job, fear of disappointing the boss.
6. Greed for: more prestige, higher rank, profit, a better position with better pay or a better
evaluation.
7. Personal or sexual pleasure.
8. Laziness or convenience.
9. An intense desire to over-control and dominate subordinates.
10. Endanger employees or not pay the wages they deserve. Withholding benefits or poor work
conditions.
11. Knowingly market dangerous products or making false and misleading claims.
12. Rationalization (everyone does it, so I will also do it).
13. Lack of accountability.
14. A few people in the organization may be opportunists.
15. Out of unawareness
16. Wanting to go extra mile for internal / external customer
1.6 Ethical Abuses in Business
Ethical problems and phenomena arise across all the functional areas of companies and at all
levels within the company.
1. Ethics in Compliance
Compliance is about obeying and adhering to rules and authority. The motivation for being
compliant could be to do the right thing out of the fear of being caught rather than a desire to be
abiding by the law. An ethical climate in an organization ensures that compliance with law is
fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the laws
not only in letter but go beyond what is stipulated or expected of them.
However, there are many companies that have a lax attitude towards compliance. These
companies try to find loop-holes that will enable them to carry on mal-practices without getting
into trouble with the government and the law. Compliance to safety norms, accounting norms,
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compensation norms, legal norms, statutory norms, etc. are some of the areas where companies
are not always ethical.
2. Ethics in Finance
The ethical issues in finance that companies and employees are confronted with include:
 In accounting – window dressing, misleading financial analysis.

 Related party transactions not at arm’s length
 Insider trading, securities fraud leading to manipulation of the financial markets.
 Executive compensation.
 Bribery, kickbacks, over-billing of expenses, facilitation payments.
 Fake reimbursements
3. Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and implementing ethics.
Ethics should be a pivotal issue for HR specialists. The ethics of human resource management
(HRM) covers those ethical issues arising around the employer-employee relationship, such as the
rights and duties owed between employer and employee.
The issues of ethics faced by HRM include:
 Discrimination issues i.e. discrimination on the bases of age, gender, race, religion, disabilities,
weight etc.
 Sexual harassment.
 Affirmative Action.
 Issues surrounding the representation of employees and the democratization of the workplace,
trade unionization.
 Issues affecting the privacy of the employee: workplace surveillance, drug testing.
 Issues affecting the privacy of the employer: whistle-blowing.
 Issues relating to the fairness of the employment contract and the balance of power between
employer and employee.
 Occupational safety and health.
Companies tend to shift economic risks onto the shoulders of their employees. The boom of
performance-related pay systems and flexible employment contracts are indicators of these
newly established forms of shifting risk.
4. Ethics in Marketing
Marketing ethics is the area of applied ethics which deals with the moral principles behind the
operation and regulation of marketing. The ethical issues confronted in this area include:
 Pricing: price fixing, price discrimination, price skimming.
 Anti-competitive practices like manipulation of supply, exclusive dealing arrangements, tying
arrangements etc.
 Misleading advertisements
 Content of advertisements.
 Children and marketing.
 Black markets, grey markets.
5. Ethics of Production
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. Some of the more acute dilemmas in this area arise out
of the fact that there is usually a degree of danger in any product or production process and it is
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difficult to define a degree of permissibility, or the degree of permissibility may depend on the
changing state of preventative technologies or changing social perceptions of acceptable risk.
 Defective, addictive and inherently dangerous products and
 Ethical relations between the company and the environment include pollution, environmental
ethics, and carbon emissions trading.
 Ethical problems arising out of new technologies for eg. Genetically modified food
 Product testing ethics.
The most systematic approach to encouraging ethical behaviour is to build corporate cultures that
link ethical standards and business practices.
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Management in Business Ethics Business Ethics
CHAPTER 2
MANAGEMENT OF BUSINESS
ETHICS
2.0 Management of Ethics
‘Management Ethics’ is related to social responsiveness of a firm. It is “the discipline dealing with what
is good and bad, or right and wrong, or with moral duty and obligation. It is a standard of behaviour
that guides individual managers in their works”.
“It is the set of moral principles that governs the actions of an individual or a group.”
Business ethics is application of ethical principles to business relationships and activities. When
managers assume social responsibility, it is believed they will do it ethically, that is, they know what is
right and wrong.
2.1 Ethics Analysis: Hosmer Model
While some ethical issues are easily solved, for many there are no clearly right or wrong answers. The
ethical answers that managers choose depend on the ethical intensity of the decision, the moral
development of the manager, and the ethical principles used to solve the problem.
Managers don’t treat all ethical decisions the same. The manager who has to decide whether to give
some benefits to an employee on humanitarian grounds is going to treat that decision much more
seriously than the manager who has to deal with an assistant who has been taking compact discs’
home for personal use. The difference between these decisions is one of ethical intensity, which is
how concerned people are about an ethical issue.
Other considerations in an ethical decision are:
 Magnitude of consequences, which is the total harm or benefit derived from an ethical
decision.
 Social consensus, which is agreement on whether behavior is bad or good.
 Probability of effect, which is the chance that something will happen and then result in harm
to others.
 Temporal immediacy, which is the time between an act and the consequences the act
produces.
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Business Ethics Management in Business Ethics
 Proximity of effect, which is the social, psychological, cultural, or physical distance of a

decision maker to those affected by his or her decisions.
Finally, whereas the magnitude of consequences is the total effect across all people, concentration of
effect is how much an act affects the average person.
According to Professor Larue Hosmer, a number of different ethical principles based on the theories
of various philosophers can be used to make business decisions:
What these ethical principles have in common is that they encourage managers and employees to
take others’ interests into account when making ethical decisions. At the same time, however, these
principles can lead to very different ethical actions.
The
following case can be used to demonstrate Hosmer’s model of ethical decision making.
One winter morning, Richard Addessi (an IBM employee) showered, shaved and dressed for the
office. Before he could get to his car, he fell dead on the garage floor due to a sudden heart attack.
Addessi was four months short of his thirtieth anniversary with the company, at which he could
have retired. Given that he was only four months short of full retirement, do you award full
retirement benefits to Addessi’s wife and daughters? If yes, they will receive his full retirement
benefits of $1800/month and free lifetime medical coverage. If no, they will receive only
$340/month and will have to pay $473 a month just to continue their current medical coverage.
What would be the ethical thing to do?
If we apply each principle of Hosmer’s model to arrive at a decision in this case, we will understand
that:
 Under the Principle of Long-term Self-interest, which talks about never taking any action not
in your organization’s long-term self-interest, IBM should NOT offer the retirement benefits
to Mrs. Addessi, since IBM always has thousands of employees this close to retirement.
 Under the Principle of Personal Virtue, which talks about never doing anything that is not
honest, open, and truthful that you would not be glad to see reported in the newspapers or
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on TV, IBM would have to quietly offered the benefits to Mrs. Addessi, ensuring that it was
not reported by the media because it was actually a deviation from normal procedure. So it
would mean going against this principle.
 Under the Principle of Religious Injunctions, which states never to take any action that is not
kind and that does not build a sense of community, IBM should offer the benefits to Mrs.
Addessi out of compassion and kindness.
 Using the Principle of Government Requirements, which states never to take any action that
violates the law (because the law represents the minimal moral standard), IBM would deny
full benefits to Mrs. Addessi, since her husband did not qualify for them.
 Using the Principle of Utilitarian Benefit, which talks about never taking any action that does
not result in greater good for society, IBM should deny benefits, since by doing so with
regularity might result in cutting stock dividend, thereby hurting millions of people.
 Using the Principle of Individual Rights, which talks about never taking any action violates
others’ agreed-upon rights, IBM should deny benefits, since offering them could be perceived
as violating the rights of other employees who had to wait 30 years to receive the same
benefits.
 Using the Principle of Distributive Justice, which states never to take any action that harms
the poor, the uneducated and the unemployed, IBM should first verify that Mrs. Addessi and
her family are indeed poor and unemployed before awarding her full benefits.
One of the “real world” aspects of ethical decisions is that no matter what you decide, someone
or some group will be unhappy with the decision. This corollary is also true: No matter how you
decide, someone or some group will be unhappy.
Consequently, despite the fact that all of these different ethical principles encourage managers to
balance others’ needs against their own, they can also lead to very different ethical actions. So,
even when managers strive to be ethical, there are often no clear answers when it comes to doing
“the” right thing.
2.2 What is an ethical dilemma? What are the Steps / considerations in resolving ethical dilemma?
Dilemmas involve hard-to-identify issues normal ethical problems are generally easy to identify.
Assigning right/wrong, good/bad are quite easy for ethical issues but for dilemmas there are
multiple values with multiple opinions. What is right for one party may be wrong for the other. An
ethical dilemma has many situational factors embedded in it.
The most important difference between an ethical issue and an ethical dilemma is that when a
person finds himself in ethical dilemma, he wants to do the right things but does not know what
to do nor has the means to do it but in a normal ethical issue, an individual can easily decide the
right thing to do and can act if they want to do and have the right intentions.
An Ethical dilemma occurs when a person faces certain choices in an ethical question, all of which
seem to be the right thing to do. So, it ultimately becomes a question of choosing one right thing
to do out of several, using ethics as the benchmark.
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Kidder’s Four Paradigms for Understanding Ethical Dilemmas:
1. Truth vs. Loyalty: Truth, for most people, is conformity with facts or reality. Loyalty involves
allegiance to a person, corporation or body of people, a government, or set of ideas to which one
owes fidelity. It is right to stand on truth. It is right to be loyal.
2. Individual vs. Community: Individualism assumes that in a society where each person vigorously
pursues his own interests, the social good would automatically emerge. As such, the rights of the
individual are to be preserved. By “community” it is meant that the needs of the majority outweigh
the interests of the individual. Communities speak to us in a moral voice. They lay claims on their
members. It is right to consider the individual. It is right to consider the community.
3. Short-Term vs. Long-Term: Short-term concerns are usually associated with the satisfaction of
current needs in such a way as to preserve the possibility of a future. Long-term concerns are usually
defined by the projection of future interests in such a way that there will be ample means to meet
future required needs. It is right to think and plan short-term. It is right to think and plan long-term.
4. Justice vs. Mercy: Justice urges us to stick by our principles, hold to the rules despite the pressures
of the moment, and pursue fairness without attention to personalities or situations. Mercy urges us
to care for the peculiar needs so individuals case by case and to seek benevolence in every way
possible. It is right to be merciful. It is right to enforce justice.
In general’ we say ethical dilemmas are complex judgments on the balance between the economic
performance and the social performance of an organization. An ethical dilemma has some of the
following salient features:
1. Uncertain outcomes - One can’t he sure about the consequences that result from most ethical
choices.
2. Multiple choices and Alternatives – Unlike in ethical issues where there are simply two choices
‘yes’ or ‘no’, in an ethical dilemma, the situation is different. Decision makers find more than two
alternatives which have to be considered.
3. Mixed consequences – When decisions are taken in ethical dilemmas , one party will find the
decision favorable while the other party finds the decision unfavorable.
4. Direct/indirect involvement - Ethical decision are more difficult to make when persons are
personally involved in it. For example, what would you do when your immediate boss wants from
you to make false TA/DA bills and transfer the benefits to him? So would you follow him or blow
the whistle against him? In both the cases you will be in problem.
It is a general belief that ethical decisions reduce economic profits of the company but they don’t
directly impact on managers’ salary or their other prospects. So executives sometimes choose the
path where profit margin might reduce, keeping themselves on safer sides.
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Thus to conclude we say that ethical dilemmas are very complex in nature. Selection of any one choice
among several is quite difficult as well as risky.
Once the dilemma is identified it is often very helpful to understand how one thinks about ethical
decisions.
Ways of Thinking:
Kidder draws from the field of Moral Philosophy to describe different ways of thinking about ethical
decision making. He describes three:
1. Ends Based: Known to philosophers as “utilitarianism”, this principle is best known by the maxim
“Do whatever produces the greatest good for the greatest number”.
2. Rules Based: This principle is best know as the “categorical imperative”. Rules exist for a purpose,
they promote order and justice and should be followed. Follow the principle that you want others to
follow. “Stick to your principles and let the chips fall where they may”.
3. Care Based: Putting love for others first. It is most associated with the Golden Rule: “Do unto
others as you would have them do unto you.
Once it is determined that the problem is not a right vs. wrong, that indeed an ethical dilemma exists.
One examines how one is thinking about the situation and begins to try and resolve the dilemma.
The Ethical Decision Making Process: [NOTE TO STUDENT: YOU MAY USE ANY ONE OF THE
FOLLOWING PROCESSES IN THE EXAM]
Kidder lays out nine (9) checkpoints for Ethical Decision Making:
1. Recognize there is a moral issue;
2. Determine the actor (who does the problem belong to?);
3. Gather the relevant facts;
4. Test for right vs. wrong issues;
5. Test for right vs. right paradigms;
6. Apply the resolution principles;
7. Investigate the “trilemma” option;
8. Make the decision;
9. Revisit and reflect on the decision.
The paradigms describe ethical problems as an “either/or”, either Truth or Loyalty, either Justice or
Mercy. Frequently, as stated in step 7 of the checkpoints, there is a third option. Kidder calls this the
“Trilemma” option. Is there a third option that addresses the questions and supports both sides in
this “right vs. right” argument? Can I create a “Win-Win” in this situation? “Win-Win” is the best
obvious choice and step 7 is especially important to the process.
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Step 8 is also extremely important and is the most frequently overlooked step in the process. People
tend to process the problem but never make a decision or act. It is important to come to a conclusion,
decide, and act, then revisit and reflect.
Other ethical/moral considerations:
Acting vs. failing to act, or commission vs. omission--sometimes we do wrongly when we act, other
times when we fail to act. Many moral codes emphasize only wrong actions, not wrong inactions.
Moral courage: ethics is about not just what we believe to be correct but also about whether we have
the strength and courage to do what we know is right; and this dimension is intensified when we factor
risk into the equation. The more risk, the harder to do what is right even when we know it is right.
Velasquez : Seven Step Method for Ethical Decision Making
Another convenient method for analyzing ethical situations is to follow the Seven Step Method for
deciding what action to take in a situation. The method involves answering seven “what” questions:
1. The Facts?
2. The Ethical Issues?
3. The Alternatives?
4. The Stakeholders?
5. The Ethics of the Alternatives?
6. The Practical Constraints?
7. Actions to Take?
One reason for using the seven step method is to provide a mental checklist to ensure
completeness in making the ethical analysis. A person making an ethical decision needs a
procedure to follow to insure that she makes her decision with rationality and respect--a decision
procedure that can insure that she has considered all the relevant factors and have taken into
account the interests of others as well as herself.
Velasquez has developed a seven step method for this purpose. Most decision makers, when
confronted with an ethical decision, would consider most of the relevant factors. The seven step
method provides a mental checklist to insure that the essential factors are included:
1. Identify the problem or dilemma.
Does a problem or dilemma actually exist?
Is this an ethical, legal, moral, professional, or clinical problem?
Is it a combination of more than one of these?
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How can you know the nature of the problem?
Would you consult at this early stage as you are identifying the problem?
How might you begin the process of consultation with your client about the nature of the
problem?
2. Identify the potential issues involved.
How might you best evaluate the rights, responsibilities, and welfare of all those involved and
those who are affected by the decision, including your own welfare as a practitioner?
How can you best promote your client's independence and self-determination?
What actions have the least chance of bringing harm to the stakeholders?
What decision will best safeguard the stakeholders’ welfare?
How can you create a trusting and collaborative climate where the stakeholders can find their own
answers?
What principles can you use in prioritizing the potential issues involved in this situation?
Are there any ways to encourage the stakeholders to participate in identifying and determining
potential ethical issues?
3. Review the relevant ethical codes.
What guidance can you find on the specific problem under review by consulting with the
professional codes?
Are your values in agreement with the specific ethical code in question?
How clear and specific are the codes on the specific area under consideration?
Are the codes consistent with applicable laws?
4. Know the applicable laws and regulations.
Are there any laws or regulations that have a bearing on the situation under consideration?
What are the specific and relevant state and federal laws that apply to the ethical dilemma?
What are the rules, regulations, and policies of the organization where you work?
5. Obtain consultation.
Do you know where to go to obtain consultation with professionals who are knowledgeable
about ethical issues?
Assuming that vou will consult with a colleague or a supervisor, what would you expect from
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this consultation?
What kinds of questions do you want to ask of those with whom you consult?
With whom do you seek consultation? Do you consult only with those who share your
orientation, or do you look for consultants with different perspectives?
How can vou use the consultation process as an opportunity to test the justification of a course of
action you are inclined to take?
What kinds of information do you document when you consult?
When you do make use of a consultation process, do you inform your client about this? Are there
any ways you might include the client in this consultation process?
6. Consider possible and probable courses of action.
What are some ways that you can brainstorm many possible courses of action?
Do you have a systematic method for analyzing ethical obligations and possible courses of action?
Are you willing to involve the stakeholders in the discussion of the various courses of action?
What might you document pertaining to discussions with your client about probable courses of
action?
7. Enumerate the consequences of various decisions.
How can you best evaluate the potential consequences of each course of action, before
implementing a particular action plan?
What ethical principles can you use as a framework for evaluating the consequences of a given
course of action?
Examine the consequences of various decisions for the stakeholders.
8. Decide on what appears to be the best course of action.
After carefully considering all the information you have gathered, how do you know what seems
to be the best action to take?
Do you solicit the input of the stakeholders in making this decision at this phase?
Once you have formulated a plan of action, do you ask for feedback from a colleague or
supervisor?
Once the course of action has been implemented, what are some ways that you might evaluate
the course of action?
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Are you willing to follow up to determine the outcomes and see if further action is necessary?
2.3 Ethics in Practice - Professional Ethics for Functional Managers
GUIDELINES FOR MANAGERS FOR ETHICAL DECISION MAKING

1. Individual codes of conduct —
Here we mean by a man’s personal code of ethics. What one finds moral, right and ethical.
He/she will choose that option.
2. Industry ethical codes —
The ethical climate in the industry provides inspirational guidelines and a list of do not’s
like —
• Non deceptive ads.
• Fair dealing with customers
• Safety measures
• Quality products.
3. Professional managers who are more ethical do not go for any compromises.
4. Sometimes govt. rules and regulations bound people to follow all laws as well as ethics.
5. Corporate code of ethics —
Companies own rules, values and beliefs guide managers to follow ethics path in decision
making.
6. If the decision makers understand the following process they would definitely follow ethics
Larger the organization Higher the ethical conduct
Long term survival Result in great public

Goodwill and high profits image
Managers hold positions of authority that make them accountable for the ethical conduct of those
who report to them. They fulfil this responsibility by making sure employees are aware of the
organization's ethical code and have the opportunity to ask questions to clarify their understanding.
Managers also monitor the behavior of employees in accordance with the organization's expectations
of appropriate behavior. They have a duty to respond quickly and appropriately to minimize the
impact of suspected ethical violations. Lastly, managers make themselves available as a resource to
counsel and assist employees who face ethical dilemmas or who suspect an ethical breach.
Of course, managers are responsible for upholding ethical standards in their own actions and
decisions. In addition to following the organization's ethical code, managers may be obligated to
follow a separate professional code of ethics, depending on their role, responsibilities, and training.
Fiduciary duty is an example that applies to some managerial roles. A fiduciary must put the interests
of those to whom he is accountable ahead of any interests, and must not profit from his position as a
fiduciary unless the principal consents.
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Many managers have responsibility for interacting with external stakeholders such as customers,
suppliers, government officials, or community representatives. In those encounters, managers may
be called on to explain a decision or a planned action in terms of ethical considerations. The
stakeholders will be interested to hear how the organization took ethics into account, and in those
cases it is the manager's duty to speak on the company's behalf.
Additionally, managers may be responsible for creating and/or implementing changes to an

organization's ethical codes or guidelines. These changes may be in response to an internal
determination based on the experience of employees; for instance, additional clarification may be
needed about what constitutes nepotism or unfair bias in hiring. Alternatively, new regulations,
altered public perceptions and concerns, or other external factors may require the organization to
make adjustments.
Areas of unethical behavior are: authority and power, handling information, influencing the behavior
of others, and setting goals.
Unethical management behavior occurs when managers personally violate accepted principles of right
and wrong. The authority and power inherent in some management positions can tempt managers
to engage in unethical practices. Since managers often control company resources, there is a risk that
some managers will cross over the line from legitimate use of company resources to personal use of
those resources. For example, some managers have used corporate funds to pay for extravagant
parties, lavish home decorating, jewelry, or expensive pieces of art.
Handling information is another area in which managers must be careful to behave ethically.
Information is a key part of management work. Managers collect it, analyze it, act on it, and
disseminate it. However, they are also expected to deal in truthful information and, when necessary,
to keep confidential information confidential. Leaking company secrets to competitors, "doctoring"
the numbers, wrongfully withholding information, or lying are some possible misuses of the
information entrusted to managers.
A third area in which managers must be careful to engage in ethical behavior is the way in which they
influence the behavior of others, especially those they supervise. Managerial work gives managers
significant power to influence others. If managers tell employees to perform unethical acts (or face
punishment), such as “faking the numbers to get results,” then they are abusing their managerial
power. This is sometimes called the “move it or lose it” syndrome. “Move it or lose it” managers tell
employees, “Do it. You’re paid to do it. If you can’t do it, we’ll find somebody who can.”
Setting goals is another way that managers influence the behavior of their employees. If managers
set unrealistic goals, the pressure to perform and to achieve these goals can influence employees to
engage in unethical business behaviors.
Managers can encourage ethical behaviors by:
– using resources for company business only

– handling information confidentially
– not influencing others to engage in unethical behavior
– not creating policies that reward employees for unethical behavior
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– setting reasonable goals
2.4 Ethics in Practice - Ethics as a Strategic Response in Business
1. Strong ethical policies that go beyond upholding the law can add great value to a brand, whereas
a failure to do the right thing can cause social, economic and environmental damage, undermining a
company’s long-term prospects in the process.
2. Once they have adopted an ethical approach, companies will often find there are bottom line
benefits from demonstrating high ethical standards.
3. The ethical tone comes from the top.
4. High quality management information on social, environmental and ethical performance is vital for
monitoring the environmental and social impacts of a company and for compiling connected reports
showing how effective its governance arrangements are.
5. Corporate communications and reporting on sustainability need to do more about environmental
issues. They need to provide hard evidence of the positive impact on society, the environment and
the strategic returns for the business, and how any negative effects are being addressed.
6. Management accountants have a particular ethical responsibility to promote an ethics based
culture that doesn’t permit practices such as bribery.
Businesses can be tempted to make short-term gains by turning a blind eye to ethics. Despite codes
of practice, regulatory oversight and ever-increasing public pressure, many firms routinely ignore
ethical considerations. Some even claim that a business simply needs to abide by the law without
concerning itself with broader ethical issues. Yet such disregard can undermine the wider economy
and, in time, cause irreparable damage. Lessons must be learned from the corporate collapses of the
past decade: myopic strategies can create massively profitable entities, yet impressive initial results
may turn out to be unsustainable.
There is a strong business case for running companies in an ethically responsible way and for finance
professionals to facilitate this. A socially and environmentally ethical approach ensures a company’s
ability to thrive in the long-term by protecting its reputation, its license to operate, its supply chain,
its relationships with partners and its ability to recruit talent. It’s about avoiding corporate collapse as
a result of litigation or fraud.
While some firms consistently fail to consider ethical factors, others have given themselves a
competitive edge by establishing strong credentials in this area. For instance, Toyota, which is now
the world’s largest car maker, boosted its global standing with its pioneering work in the nineties on
the hybrid Prius model. Coca-Cola thought it commercially worthwhile to take a minority stake in the
UK fruit drinks firm Innocent, which boasts that it gives away a tenth of all its profits. And McDonald’s
is investing heavily in activities aimed at associating it with ethical and environmental awareness as it
rebuilds its brand and attempts to overcome decades of negative publicity.
Ethical businesses are not a new phenomenon, of course. During the industrial revolution many
companies in the US and Europe thrived on a strong philanthropic tradition. What is new is the way in
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which ethics now needs to be seen as a core part of companies’ strategies and how it is being
embedded into management culture at all levels. There are numerous explanations for this new
prominence. For example, thanks to modern communications technology and an increase in living
standards, young people in particular seem to be much more aware of the social and environmental
effects that businesses can have around the world – and more critical of those that they see as part of
the problem.
With ethics now centre stage globally, there’s a chance to create a win-win situation in which
companies can find out how a sustainable approach benefits the bottom line, thereby convincing even
the most profit hungry of investors. This is what UK retailer Marks & Spencer did with its ‘Plan A’, set
around 100 measurable commitments around the five pillars of climate change, waste, sustainable
raw materials, fair partner and health.
For nearly two decades the UK’s Co-operative Banking Group has consistently positioned itself as an
‘ethical bank’, rejecting business because of a firm’s involvement in fossil fuel extraction, the arms
trade, animal testing, engagement in financial practices regarded as unsound, or connection
with oppressive governments. The bank has had an annualised growth rate of 14% since adopting such
policies and experienced continued growth during the global banking crisis.
Encouraging businesses to listen to public opinion is a step in the right direction. But inevitably there
have been accusations that their stated commitment to corporate social responsibility may be
opportunist or only skin deep. Environmentalists argue that firms have seen the new interest in
ecological issues as simply another chance to market products as ‘environmentally friendly’ to
consumers.
The BP oil disaster in early 2010 in the Gulf of Mexico has prompted many questions about the
meaningfulness of voluntary corporate responsibility reporting and its analysis by investors. BP, which
for a time positioned itself as a champion of sustainability through its Beyond Petroleum campaign,
has since been seen as having had serious gaps in its risk analysis and safety procedures.
The costs of not investing appropriately in these areas and the resultant media storm and US
government condemnation of the loss of life as well as the devastating effects on the environment
and livelihoods of local communities were almost catastrophic for the company. Share prices plunged
and its reputation faced ruin – a burden BP will shoulder for years to come. By July 2010 costs had
exceeded US$8 billion and BP had set aside US$32.2 billion to cover ongoing estimated
costs linked to the spill.
Another problem, which was highlighted by the financial crisis in the west, is that shareholders cannot
be relied upon to defend their own interests. The fashionable drive to maximise shareholder value has
seen investors and business leaders combine in a quest for short-term advantage. Far from being
champions for sustainable business, the equity markets have imposed huge pressures on senior
managers for quick returns. Today it could be seen that one of the duties of a tough CEO is to resist
such pressure by delivering more realistic financial results in the short-term, if need be.
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Leadership is the key factor that establishes whether a company is long-sighted and able to integrate
ethics successfully into strategy – the tone comes from the top. Only effective and dynamic leadership
can set a corporate culture that goes beyond merely averting the reputational damage risked by
unethical behaviour. It can also transform the dangers posed by ethical challenges into commercial
opportunities, thereby ensuring that the organisation is fit for the future.
Leaders who fail to understand the changing context in which they operate are not providing a
sustainable foundation for their companies. Specifically, leaders need to recognise the threats
and opportunities posed by factors such as climate change, the declining reserves of fossil fuels and
the negative economic impact of bribery in certain sectors and regions.
A failure to understand these factors has already become evident in some industries – it’s arguably a
major reason behind the crisis that engulfed US car-makers last year. Competitors such as Honda
anticipated the increase in petrol prices and benefited from this. Similar scarcity trends are predicted
in water, land and food. If companies are to survive these changes to the balance of supply and
demand, their leaders must both understand the threats and see the opportunities.
Case study 1: Kimberly-Clark – a century of core values
Kimberly-Clark, a personal products producer, was founded in the US more than 100 years ago on
principles that included: making the best product; serving customers and vendors well; dealing fairly
with employees and being financially and fiscally responsible. Today these principles translate as their
core beliefs of ‘authenticity, accountability, innovativeness and caring’.
Business ethics have always been central in their business model. In order to safeguard reputation and
good practice, as the company expanded globally it sought to act ‘above compliance’ with local laws
and regulation. Its commitment to financial and fiscal responsibility has seen it through the current
economic crisis.
Kimberly-Clark first set corporate-wide environmental goals in the 1990s – five yearly cycles were
introduced with targets to measure progress and channels to create shared learning. The initial focus
was on energy efficiency, water usage and chemical waste. After the first review in 2000, strong cost
savings were in evidence, leaving the benefits for the bottom line in no doubt. Methodology for
tracking, analysing and reporting on environmental impact data are now well embedded. Initially a
demanding task, it was made easier by the sharing and learning from peer practice globally. As a
division in one region of the world found ways to track capability, others would follow, or innovate
further.
In 2004 Greenpeace launched a global campaign against Kimberly-Clark, focusing on issues of

deforestation and the supply chain. Significantly, the corporation opened a face to face dialogue with
their adversary, not only to understand the issues and the ways they could address them better but
also to explore ways they could even work together. This led to the joint creation of fibre-sourcing
standards, issued in 2009, which have influenced sourcing practices in the wider market. This shows
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the value of collective action when private sector, civil society and, as necessary, government work
together for joint goals.
The sustainability agenda is highly valuable in connecting people across the business, by motivating
and engaging staff. It has also been a direct enabler of innovation and customer initiatives. Global
initiatives such as ‘big things, small steps’ engage staff to make positive changes in personal practices.
It attracted 7,000 staff worldwide within months of its launch in 2010, further embedding
understanding of the issues and reinforcing the firm’s values.
At a national level, Yuhan-Kimberly, a joint venture in South Korea, is behind ‘Keep Korea Green’, one
of the most well-known and successful domestic environmental campaigns. Running since 1984, 39
million trees have already been planted. A key component has been tree planting campaign for
newlyweds.
Yuhan-Kimberly is also recognised by the general public as a highly respected employer because of its
good management practices and strong labour-management relationships. The company recently
launched a product with a higher percentage of bio-degradable materials and although more
expensive it has been very successful in the market – underlining the important relation between trust
in a brand and customer loyalty based on values and business ethics.
Case study 2: Brandix – garments without guilt
With headquarters in Colombo, Sri Lanka, the Brandix Group has grown over four decades from a small
company to a leading clothing conglomorate for some of the world’s leading brands. These include
Victoria’s Secret, Pink, Gap, Marks & Spencer, Tommy Hilfiger and Abercrombie & Fitch.
Commitment to their partners, their people and the environment have been central to the group’s
success. Their corporate image is underpinned by their ‘Garments without guilt’ concept widely
promoted by Sri Lankan clothing manufacturer; International Labour Organisation-inspired labour
practices, global standardisation and certification to improve processes and an awareness of social
and environmental issues.
‘Going Green’ is not just a corporate buzzword for Brandix: the group has an enduring and proven
commitment to eco-friendly manufacturing across their 27 manufacturing locations in Sri Lanka, India
and Bangladesh. This not only maximises value for the customer but also enables the best possible
use of resources. In its endeavours to reduce its carbon footprint, the Brandix group has become
possibly the first clothing manufacturer to declare its carbon footprint for every item it produces.
Their efforts to adopt green manufacturing processes not only have substantially reduced their carbon
footprint but have generated significant savings in energy and water use, minimised the amount of
solid waste going to landfill and promoted the replenishment of natural resources.
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Amongst many accolades in 2009 was winning the national winner for Sri Lanka in the worldwide
Energy Globe World Awards. Their eco-centre in Seeduwa, Sri Lanka, is the highest rated clothing
manufacturing facility in the world in terms of environmental impact.
Case Study 3: Vodafone UK
Vodafone has grown rapidly since it was originally formed in 1984. It has responsibilities to its 60,000
staff and 151 million customers and shareholders. It also believes it has a responsibility to society. The
company aims to continue to grow. Economies of scale improve efficiencies, enhancing the company's
performance. This increases returns to shareholders and makes money available to improve services
to customers. In order to grow, Vodafone must attract new customers and retain those it currently
has. Serving customers well relies on the ability to attract and retain good quality staff. Both these
stakeholder groups care about the company's ethics.
Vodafone has carried out extensive research which confirms what the company believed - operating
ethically generates clear benefits. The results showed that customers are loyal to companies they
trust. They also favour companies that operate in a responsible manner. Vodafone operates in a
competitive market; its competitors also want to grow. In order to achieve competitive advantage,
Vodafone must understand its position relative to its competitors. Research below shows the
company's strong position.
Companies' actions are influenced by other stakeholders including pressure groups and government
regulators. A business that did not care about ethics would simply seek to maximise revenues
regardless of how its products affected society. It is unlikely that such a business would continue to
grow because, for example:
 regulators would punish their actions e.g. imposing fines and revoking operating licences
 pressure groups would highlight unethical actions, adversely affecting what customers think.
Ethical companies do the right thing and concern themselves with the long term. This may damage
financial performance in the short term. Ethics guide decisions. When Vodafone first included
moderators into young people's chat rooms to create a safe environment for chat, the number of
users dropped significantly. This led to reduced revenues for the company. However, the company
believed that this was the right thing to do. The growing esteem in which the company is held by the
wider public justifies this approach.
Vodafone takes a strategic approach to its ethics and business decisions. This involves managers
considering the impact of important decisions in the long-term. By discussing options managers are
more likely to achieve agreement. Goals that are agreed are more likely to be met.
Vodafone has six global goals. One of these is 'to be a responsible business'. This includes the issues
of ethics. Companies develop strategies to meet their goals. Vodafone has eight key Corporate Social
Responsibility (CSR) strategies. These form part of the companies approach to meeting its global goal
of being a responsible business. One of these is responsible marketing: an example would be the
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company's decision not to send bulk unsolicited (i.e. un-requested) emails or SMS messages to its
customers, they have to choose to opt- in to receive communications.
Vodafone's employees implement company strategies in a fast changing competitive environment.

They have to make effective tactical decisions. To do this they need a consistent and shared set of
values. The company's values are driven by its four passions.
Customers
 marketing products and services responsibly
 communicating openly and honestly
 protecting customers.
People
 recruiting and retaining the best people
 investing in improving skills
 involving and motivating employees.
Results
 setting clear goals
 focussing on achieving goals
 rewarding staff for achievements.
The world around the company
 investing in local and national charities via The Vodafone UK Foundation
 monitoring and actively reducing the impact of the business on the environment e.g. recycling
mobile phones, reducing waste, energy reduction activities
 listening to any concerns local communities, pressure groups, customers and other interested
parties may have about the company's impacts, and working to address these concerns.
 Vodafone's staff are empowered and ethical. They share these passions. This helps them make
better decisions when reacting to changes.
Ethics guide companies in reacting to changes in the environment. Managers can use a number of
different tools to understand the environment. This understanding is important. It helps managers to
make better decisions. SLEPT analysis is one of these tools and which looks at changes in five areas:
Social - trends in society
Legal - legal restrictions and considerations
Economic - the health of the economy, inflation, etc
Political - government policy
Technological - developments in computing, etc.

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The following sections provide some examples of each factor, which are relevant to Vodafone.
Social factors
Society is concerned about under 18s being at risk. Parents may have concerns about their children
being contacted (using mobile phones) by paedophiles or other adults. Society is also concerned about
adult content being available via mobile phones to under 18s. Adult content includes gambling, violent
games, erotic material etc. Further issues related to 'social' include the rise of mobile phone theft.
Legal factors
Some laws regulate all businesses e.g. The Sale of Goods Act 1974 stating all products must be fit for
the purpose they are intended. A mobile phone must therefore work. Certain laws are created to
regulate particular industries. Examples include the ban on using holding a phone while driving
introduced in 2003.
Independent industry regulatory body:
OFCOM - the Office of Communications. OFCOM is the independent body for regulating the
communication industry - www.ofcom.org.uk.
Vodafone goes beyond government regulation, working with its competitors in self-regulation.
However, to retain its leading position in the industry Vodafone believes it must exceed both legal
regulations and industry self-regulation.
Economic factors
The state of the economy, for example levels of growth can impact companies. Companies' activities
also contribute to the overall economy. Companies should remain true to their ethical values. If they
do not, customers may question the company's beliefs.
Political factors
Government policy indicates that it wants the mobile phone industry to create self-regulating controls
in relation to content. The government also shares public concern about unwanted contact and
content.
Technological factors
The mobile phone industry has seen a great deal of technological change and will continue to do so.
Mobile phones were originally used for telephone conversations. Text messaging became available
and usage has increased dramatically. However, most of the texts were between people who already
knew each other and had swapped contact numbers. In other words, the users were happy to
communicate with each other.
As technology developed, it has become possible to swap information between mobiles and other
devices via Bluetooth technology. This can be used inappropriately to send anonymous and unwanted
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texts. This practice is known as Blue jacking and can be distressing particularly if the recipient is a child
or young person.
The advent of 3rd generation (3G) mobile phone technology is bringing with it a richer mix of content
and providing more services. This further raises the issue of ethics as Vodafone (and other suppliers)
can now offer a wide variety of content to mobile phones with this new technology. Naturally, 3G will
help the companies to increase their sales revenues. However, Vodafone recognises that it brings
additional responsibility. This includes the need to protect young people from inappropriate contact,
including violent games, gambling and erotic material.
Ethical responses
Vodafone's ethical approach drives its response to changes in the environment. Whilst described
above in self-contained sections, many issues crossover, e.g. the advent of 3G technology and video
content is related to society's concern about adult material reaching under 18s.
Vodafone UK's research has revealed that parents do not know the types of content available via
mobile phones. A survey of all adults showed, however, that they believed restricting access to adult
content on mobile phones was very important. Together with other UK mobile phone operators, in
July 2004 Vodafone UK launched a joint Code of Practice for self-regulation. The Code requires
operators to stop under 18s from accessing commercial content classified as being unsuitable for
them. Operators must also offer parents the opportunity to apply a filter to Internet access services.
When developing this Code of Practice for content, Vodafone gave phones to researchers working for
children's charities. The charities could see the sort of content available. They could also check that
the restrictions were effective.
Vodafone was the first company in the UK to introduce a network bar that effectively blocks access to
all forms of content that has been rated as 18. This bar, called Content Control, was introduced in
2004. This prevents access to 18 rated content for children and young people. It is automatic and the
bar is lifted only if customers can demonstrate they are 18 or over.
Vodafone led the UK mobile industry in ensuring that proper restrictions and controls are in place for
its customers to prevent access to adult content by under 18s.
While working on the Code of Practice, which is self-regulatory, Vodafone had the opportunity to
consider what its ethical stance should be. It could interpret the requirement to block access as having
either an:
 opt in policy - i.e. everyone would be barred from accessing over 18 material and would have
to make a conscious choice to receive this content or
 opt out policy - everyone could access the material and request to have the bar applied to 18
rated content.
Vodafone, through its work with the children's charities determined that an opt in policy was the more
appropriate and responsible position to take in the UK. Vodafone seeks to reduce spam text messages
by locating their source. Its customers can help by sending these messages to Vodafone on the
company's VSpam service. Vodafone also watches network traffic for the sources of unwanted
messages. The efforts in this area have led to a very significant fall in customer complaints.
In the UK Vodafone works in partnership with the government, police and others in the industry to
help combat mobile phone crime. It also advises customers and the broader community on how to
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protect their phones and prevent fraudulent use. Actions taken include setting up a register of
equipment to block stolen phones. For a number of years, prior to the ban on holding a phone while
driving, Vodafone UK has strongly discouraged this practice. The company devised practical actions to
help its customers, which included discounts on car kits to allow them to use their phones legally and
clear advice on the research relating to the use of mobile phones in cars.
The mobile telecommunication industry is relatively young, compared to industries such as oil and
manufacturing. Vodafone is a leading player in this sector and has grown quickly, like the industry
itself. Such a growth presents challenges and the company's approach to ethics guides its continued
growth. Ethics are central to the company's development. They guide staff through change.
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2.5 Values and Vision in the Strategic Management Process
Vision, mission and values are key elements of an organization’s strategic planning. They must be
approved by the board of directors and should be communicated to staff, volunteers, members and
other stakeholders.
Vision
The vision sets out what the organization wants to accomplish, and should inspire members, staff and
supporters. Vision statements may describe:
• how things would be different as a result of the organization’s activities
• how the organization wants to be seen by others
For example, Tata Steel’s vision is:
“We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship”
Good visions are aspirational. Some are hard‐to‐reach ideals while others are more modest or describe
objectives that are achievable in the near future. In either case, the vision helps establish the unique
contribution that the organization makes to society.
From a practical perspective a vision can be a quick, memorable way to describe the organization’s
reason for being. This can be valuable in times of crisis when it helps to remember what is really
important. The vision and mission are often published in the organization’s annual reports, brochures
and fund‐raising materials.
Having a vision and communicating it (over and over again) is critical for an organization’s focus and
for ultimately adding value to that organization.
• A vision articulates a desired future for a company.
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• Vision is a critical element of strategic planning, strategic management, and strategy

implementation. Without a sense of what a company’s vision is, it is difficult, if not impossible, to
determine a management focus.
• A company’s vision is the catalyst or “spark” to developing the other elements of the plan – the
mission (of which the vision is part), the primary excellence goals, the objectives, and the strategies.
• Merely developing and agreeing to a vision is only the first step. A vision without a specific plan to
achieve it is an empty combination of uplifting words.
• A vision is also a motivational driver.
Values
Shared values influence everything an organization does, as well as its relationships with stakeholders
and its reputation. Values may be expressed as beliefs, guidelines or rules, and may be set out in a
code of conduct.
For example, The Tata Group has always been driven by five core values:
Integrity : We must conduct our business fairly, with honesty and transparency. Everything we do
must stand the test of public scrutiny.
Understanding : We must be caring, show respect, compassion and humanity for our colleagues and
customers around the world, and always work for the benefit of the communities we serve.
Excellence : We must constantly strive to achieve the highest possible standards in our day-to-day
work and in the quality of the goods and services we provide.
Unity : We must work cohesively with our colleagues across the group and with our customers and
partners around the world, building strong relationships based on tolerance, understanding and
mutual cooperation.
Responsibility : We must be responsible and responsive to the countries, communities and

environments in which we work, always ensuring that what comes from the people goes back to the
people many times over.
A statement of values can provide guidance when tough decisions must be made, for example in
allocating scarce resources, or when presented with a donation from a group which may be
incompatible with the organization’s mission.
The values, mission and vision are key elements of a not‐for‐profit organization’s strategic planning
process, and will guide the development and delivery of program services and activities.
Research finds that individual values are a driving force behind personal responsibility; is the same
true for corporate values and responsibility? A Booz Allen Hamilton/Aspen Institute survey found that
89 percent of companies surveyed globally possess written values statements. Note, however, that
Enron and Lehman Brothers had value statements but engaged in fraud leding to financial crises.
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Any Organization’s performance depends upon the strategies that are used to achieve company’s
vision. Leadership assimilates the strategy with vision to enrich the capability of the firm to perform
well or according to the need.
Strategy implementation depends upon efficient decision making. Leadership influences three areas
of organization first, the vision, Secondly the strategies itself and finally the values. These three
components jointly create the culture of the organization. It is the responsibility of the leader to
introduce a clear understanding of the vision throughout the organization. Everyone should know
where the company wants to be in future. Vision should be simple so that everyone can easily
understand it. Vision is the hub of the organization and is the heart of strategic management process.
Leadership is responsible for development of strategies to achieve the vision. Basically strategy
formulation means is to provide road map and this road map should be clear and focused. It is the
duty of leadership to relate the strategy process with the vision. It should develop a culture of learning
by providing a clear set of values for the organization. Values demonstrate the behavior of the
organization and lead the organization towards right. Both vision and strategies should reflect these
values. Once the leader understand the importance of values the process of strategy formulation and
implementation becomes easy.
Strategies are considered as set of plans or directions required to achieve vision. Strategy is used to
create and execute business plans to get positive outcomes. We can say that strategy is critical for the
overall success of organization.
Leaders provide the vision and set the goals for long run and short run. After determining the vision
their intentions shift towards development of plans or towards strategy formulation. First, leaders are
responsible to create vision that must be attached with the firm’s values and also vision must be
supportive and understandable. Vision tells the strategist about future and values tells about the past.
The most important task of leadership is to align an organization’s vision with its goals and objectives
so that organization can compete with dynamic environment efficiently and too trained and motivates
the people to achieve the vision. At the end leadership has to evaluate the whole process to make
sure the efficiency of whole process, this will help to find out the flaws as well as helps to refresh the
strategies according to change. Further this evaluation facilitates the continuous improvement in the
organization.
Case Study 1: GE’s Ecomagination Vision

To illustrate how vision and values are weaved into strategy and put into practice, take the case of Jeff
Immelt, CEO of General Electric, who launched aggressive moves toward “green technology” in 2002
with GE’s ecomagination campaign. In our interview at GE headquarters, he explained his
personal motivations:
“One of my passions was to see if you could really build a great and a good company. That has just
been a pervasive thought I’ve had for most of my working life. I think people who run companies have
to have their own kind of inner core belief about what they want to see done. I want to see if you can
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be an ultra-competitive company and still one that has compassion. I may be wrong, but we’re going
to find out.”
Under Immelt, GE is being transformed from the Jack Welch-era finance-based firm back into the
innovation-driven company envisioned by its founder Thomas A. Edison. GE’s repurposing has been
most visible the past eight years in its doubling of R&D spending on environmentally friendly
technologies, the hiring of thousands of PhDs, new research projects in the fields of nanotechnology,
hydrogen power, photo batteries and such, plus new laboratories in Munich, Shanghai, and Bangalore.
These are not all new business lines for GE, but what is new is that GE is basing its growth strategy on
greening them.
One method involved bringing the outside in—engaging not only customers but a full range of
corporate stakeholders in conversations about how to connect the company to their interests in
society. Before launching its green strategy, GE invited stakeholders to two-day “dreaming sessions”
where they envisioned life in 2015 and what they would want from GE. The combination of high
energy prices and expected limits on greenhouse gas emissions, plus booming energy demand from
Asian economies and consumer preferences for cleaner technology, translated into a spectacular
business opportunity for GE. The company expanded its stakeholder engagements from 2006 through
2010 in major cities around the globe.
Although strategic visioning may have led GE’s drive toward sustainability, its mission, vision, and
practices were in alignment. A closer look reveals that, besides greening, GE has reformulated its code
of conduct, revamped its corporate governance structure, redefined its community involvement
strategy, increased its transparency, made public its political contributions, and still remained highly
profitable. Of course this transformation has not been without missteps, examples of misconduct, and
a few dips in quarterly earnings that led some to call for Immelt’s ouster. How does he answer his
critics on Wall Street? “I think you can run good businesses, but also solve big problems. Typically,
profits are created by businesses that are doing things that ultimately have real societal benefits.”
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Ethical Theories Business Ethics
CHAPTER 3
ETHICAL THEORIES AND
BEYOND
3.0. Scope of Business Ethics:
Business ethics is a form of applied ethics. In broad sense ethics in business is simply the application
moral or ethical norms to business. Business ethics refers to a 'code of conduct' which businessmen
are expected to follow while dealing with others. 'Code of conduct' is a set of principles and
expectations that are considered binding on any person who is member of a particular group. The
alternative names for code of conduct are 'code of ethics' or 'code of practice'. Business ethics
comprises the principles and standards that guide behaviour in the conduct of business.
3.1. Theories in Ethics:

Ethical theories are based on the previously explained ethical principles. They each emphasize
different aspects of an ethical dilemma and lead to the most ethically correct resolution according to
the guidelines within the ethical theory itself. People usually base their individual choice of ethical
theory upon their life experiences.
Deontology
The deontological theory states that people should adhere to their obligations and duties when
analyzing an ethical dilemma. This means that a person will follow his or her obligations to another
individual or society because upholding one's duty is what is considered ethically correct. For instance,
a deontologist will always keep his promises to a friend and will follow the law. A person who follows
this theory will produce very consistent decisions since they will be based on the individual's set duties.
Deontology provides a basis for special duties and obligations to specific people, such as those within
one's family. For example, an older brother may have an obligation to protect his little sister when
they cross a busy road together. This theory also praises those deontologists who exceed their duties
and obligations, which is called "supererogation".
Utilitarianism
The utilitarian ethical theory is founded on the ability to predict the consequences of an action. To a
utilitarian, the choice that yields the greatest benefit to the most people is the choice that is ethically
correct. One benefit of this ethical theory is that the utilitarian can compare similar predicted solutions
and use a point system to determine which choice is more beneficial for more people. This point
system provides a logical and rationale argument for each decision and allows a person to use it on a
case-by-case.
There are two types of utilitarianism, act utilitarianism and rule utilitarianism. Act utilitarianism
adheres exactly to the definition of utilitarianism as described in the above section. In act
utilitarianism, a person performs the acts that benefit the most people, regardless of personal feelings
or the societal constraints such as laws. Rule utilitarianism, however, takes into account the law and
is concerned with fairness. A rule utilitarian seeks to benefit the most people but through the fairest
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Business Ethics Ethical Theories
and most just means available. Therefore, added benefits of rule utilitarianism are that it values justice
and includes beneficence at the same time.
Casuist
The casuist ethical theory is one that compares a current ethical dilemma with examples of similar
ethical dilemmas and their outcomes. This allows one to determine the severity of the situation and
to create the best possible solution according to others' experiences.
One drawback to this ethical theory is that there may not be a set of similar examples for a given
ethical dilemma. Perhaps that which is controversial and ethically questionable is new and
unexpected. Along the same line of thinking, a casuistical theory also assumes that the results of the
current ethical dilemma will be similar to results in the examples. This may not be necessarily true and
would greatly hinder the effectiveness of applying this ethical theory.
Virtue
This ethical theory judges a person by his character rather than by an action that may deviate from his
normal behavior. It takes the person's morals, reputation and motivation into account when rating an
unusual and irregular behavior that is considered unethical. For instance, if a person plagiarized a
passage that was later detected by a peer, the peer who knows the person well will understand the
person's character and will be able to judge the friend.
If the plagiarizer normally follows the rules and has good standing amongst his colleagues, the peer
who encounters the plagiarized passage may be able to judge his friend more leniently. Perhaps the
researcher had a late night and simply forgot to credit his or her source appropriately. Conversely, a
person who has a reputation for scientific misconduct is more likely to be judged harshly for
plagiarizing because of his consistent past of unethical behavior. One weakness of this ethical theory
is that it does not take into consideration a person's change in moral character. For example, a scientist
who may have made mistakes in the past may honestly have the same late night story as the scientist
in good standing. Neither of these scientists intentionally plagiarized, but the act was still committed.
3.2. What Are the Causes of Unethical Behavior in the Workplace?
Unethical practices in the Health Care Sector

There are three common unethical practices in the Health Care Sector. The first is refusing to provide
health care services to the patients who have no medical insurance. Some Health Centres do not admit
patients who have no insurance unless they can provide evidence that they have the ability to pay for
the health service. The second unethical practice in the health care sector is over treating patients to
boost income. The third is doing surgery at surgical centres instead of the hospital so that the doctors
do not have to ―pull call at any hospital.
Insider Trading
Insider trading is an unethical behavior which occurs when a person who has access to confidential
information uses or shares the information for securities trading purposes or any other purpose except
the conduct of regular company business. The confidential information of the company are not to be
used for achieving personal gain neither are they to be disseminated directly or indirectly, to friends,
family members and other outsiders who may in turn trade on or misuse the information.
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Ethical Theories Business Ethics
Discrimination and Harassment

Discrimination involves not providing equal opportunity in employment on merit but on other basis
such as race, sex, national origin, age, religion, or any other basis not related to the job. Harassment
is a derogatory comment or unwelcome sexual advances
3.3 Work ethics
Work ethic is a value based on hard work and diligence. It is also a belief in the moral benefit of work
and its ability to enhance character. Workers exhibiting a good work ethic in theory would be selected
for better positions, more responsibility and ultimately promotion. Workers who fail to exhibit a good
work ethic may be regarded as failing to provide fair value for the wage the employer is paying them
and should not be promoted or placed in positions of greater responsibility.
Five Characteristics of a Good Work Ethics
Reliability
Reliability goes hand in hand with a good work ethic. If individuals with a good work ethic say they are
going to attend a work function or arrive at a certain time, they do, as they value punctuality.
Individuals with a strong work ethic often want to appear dependable, showing their employers that
they are workers to whom they can turn. Because of this, they put effort into portraying – and proving
-- this dependability by being reliable and performing consistently.
Dedication
Those with a good work ethic are dedicated to their jobs and will do anything they can to ensure that
they perform well. Often this dedication leads them to change jobs less frequently, as they become
committed to the positions in which they work and are not eager to abandon these posts. They also
often put in extra hours beyond what is expected, making it easy for their employers to see that they
are workers who go beyond the rest of the workforce and truly dedicate themselves to their positions.
Productivity
Because they work at a consistently fast pace, individuals with a good work ethic are often highly
productive. They commonly get large amounts of work done more quickly than others who lack their
work ethic, as they don't quit until they've completed the tasks with which they were presented. This
high level of productivity is also due, at least in part, to the fact that these individuals want to appear
to be strong workers. The more productive they are, the more beneficial to the company they appear
to those managing them.
Cooperation
Cooperative work can be highly beneficial in the business environment, something that individuals
with a strong work ethic know well. Because they recognize the usefulness of cooperative practices -
- such as teamwork -- they often put an extensive amount of effort into working well with others.
These individuals commonly respect their bosses enough to work with any individuals with whom they
are paired in a productive and polite manner, even if they do not enjoy working with the individuals
in question.
Character
Those with a good work ethic often also possess generally strong character. This means they are
self-disciplined, pushing themselves to complete work tasks instead of requiring others to intervene.
They are also often very honest and trustworthy, as they view these traits as befitting the highquality
employees they seek to become. To demonstrate their strong character, these workers embody these
positive traits daily, likely distinguishing themselves from the rest.
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Business Ethics Ethical Theories
3.4. Ethics and Corporate Management
In making ethics work in an organization it is important that there is synergy between vision
statement, mission statement, core values, general business principles and code of ethics. A
commitment by corporate management to follow an ethical code of conduct confers a variety of
benefits. An effective ethics program requires continual reinforcement of strong values.
Organizations are challenged with how to make its employees live and imbibe the organization
codes and values. To ensure the right ethical climate, a right combination of spirit and structure is
required.
Corporate Ethics is much needed to stress the importance of sustainability, social development,
stakeholders, consumer satisfaction and service orientation in place of profit orientation. Ethics
point out what is good and what is bad, so also what is right or wrong. It brings to the notice of the
business community the importance of honesty, sincerity and fairness which makes them alert and
socially conscious. This also expedites a better relation between business and the society. It reconciles
conflicting interest of various sections of the society such as workers, shareholders, consumers,
distributors, suppliers, competitors and government.
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Role of Ethical Managers Business Ethics
CHAPTER 4
ROLE AND FUNCTIONS OF
ETHICAL MANAGERS
4.0 Ethics for Manager
In a broad construction of the ethical role of the manager, managing and leading can be said to be
inherently ethics- laden tasks because every managerial decision affects either people or the natural
environment in some way—and those effects or impacts need to be taken into consideration as
decisions are made.
A narrower construction of the ethical role of the manager is that managers should serve only the
interests of the shareholder; that is, their sole ethical task is to meet the fiduciary obligation to
maximize shareholder wealth that is embedded in the law, predominantly that of the United States,
although this point of view is increasingly accepted in other parts of the world. Even in this narrow
view, however, although not always recognized explicitly, ethics are at the core of management
practice.
The ethical role of managers is broadened beyond fiduciary responsibility when

consideration is given to the multiple stakeholders who constitute the organization being managed
and to nature, on which human civilization depends for its survival. Business decisions affect both
stakeholders and nature; therefore, a logical conclusion is that those decisions have ethical content
inherently and that managerial decisions, behaviors, and actions are therefore inherently ethical in
nature.
Whenever there are impacts due to a decision, behavior, or action that a leader or manager makes,
there are ethical aspects to that decision or situation. While some skeptics claim that business ethics
is an oxymoron, the reality is that decisions and actions have consequences, and that reality implies
some degree of ethics, high or low. Thus, ethics and the managerial role cannot realistically be teased
apart.
4.1. Ethical Leadership
The ethical role of managers, or what the business ethicist Linda Trevino and her colleagues call ethical
leadership, is a combination of being a moral person and being a moral manager. Being a moral person
rests on a combination of key traits such as integrity, honesty, and trustworthiness. Integrity involves
not only forthrightness and honesty or truthfulness but also consideration for the soundness of the
whole entity that one manages as well as of the society in which the organization is located. Integrity
also means firm adherence to a code, such as an ethical code of conduct. Thus, being a moral person
suggests that the individual has integrity and can be trusted.
In addition to these traits, being a moral person also involves behaviors such as doing the right thing,
concern for people, being open, and standards of personal integrity. The essence of ethics, of course,
is doing the right thing, especially under difficult circumstances, and that involves being able to reason
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Business Ethics Role of Ethical Managers
well about what the right thing to do actually is. To be able to reason well about a difficult ethical
situation, a person needs to be open to learning from multiple sources about the situation while taking
care not to harm people and actually attempting to treat people well in the decision-making process
or when decisions are being implemented. To be able to make good decisions ethically, an individual
needs to have thoughtfully developed his or her personal set of standards or values, a personal code
of conduct or integrity. Personal standards allow an individual to think through a decision with a clear
rationale in mind.
4.2 Code of Ethics
To establish and to encourage ethical conduct formal codes of ethics for organization members must
be framed. These corporate codes of ethics vary in quality and substance. Some of these consist of a
set of specific rules, a list of do’s and don’ts.
A code of ethics states an organization’s basic and primary values and the ethical rules, so the rules
of conduct are like a general value statement which lacks a framework of meaning and purpose.
Many companies use the phrases 'ethical code' and 'code of conduct' interchangeably but it may be
useful to make a distinction. A code of ethics will start by setting out the values that underpin the code
and will describe a company's obligation to its stakeholders. The code is publicly available and
addressed to anyone with an interest in the company's activities and the way it does business. It will
include details of how the company plans to implement its values and vision, as well as guidance to
staff on ethical standards and how to achieve them. However, a code of conduct is generally addressed
to and intended for employees alone. It usually sets out restrictions on behavior, and will be far more
compliance-focused or rules-focused than value or principle focused. Also this code is good for non-
governmental organizations. Code of conduct are not merely rules and regulations, their scope is
somewhat different. A code cannot list and mandate every form of ethical and unethical conduct. A
good corporate code of values and conduct should include certain managerial and employee
guidelines for making ethical decisions.
‘Frank Doly’ of Northrop Grumman has suggested—“Codes of conduct should be policies that are easy
to read, who don’t like to read can’t read, easily understood by people or respond much better to
visual information.” Some organizations have reduced huge codes of conduct to just a few core values.
For example, Texan Instruments a global semiconductor company, ended up their codes of conduct
with just 3 words–Integrity, Innovation and Commitment.
THE CRT PRINCIPLES

Through an extensive and collaborative process in 1994, business leaders developed the Caux Round
Table (CRT) Principles for Responsible Business. The CRT Principles for Business are a worldwide vision
for ethical and responsible corporate behavior and serve as a foundation for action for business
leaders worldwide. As a statement of aspirations, The CRT Principles aim to express a world standard
against which business behavior can be measured.
PRINCIPLE 1 - RESPECT STAKEHOLDERS BEYOND SHAREHOLDERS

 A responsible business acknowledges its duty to contribute value to society through the
wealth and employment it creates and the products and services it provides to consumers.
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 A responsible business maintains its economic health and viability not just for shareholders,
but also for other stakeholders.
 A responsible business respects the interests of, and acts with honesty and fairness towards,
its customers, employees, suppliers, competitors, and the broader community.
PRINCIPLE 2 – CONTRIBUTE TO ECONOMIC, SOCIAL AND ENVIRONMENTAL DEVELOPMENT

 A responsible business recognizes that business cannot sustainably prosper in societies that
are failing or lacking in economic development.
 A responsible business therefore contributes to the economic, social and environmental
development of the communities in which it operates, in order to sustain its essential
‘operating’ capital – financial, social, environmental, and all forms of goodwill.
 A responsible business enhances society through effective and prudent use of resources, free
and fair competition, and innovation in technology and business practices.
PRINCIPLE 3 – BUILD TRUST BY GOING BEYOND THE LETTER OF THE LAW

 A responsible business recognizes that some business behaviors, although legal, can
nevertheless have adverse consequences for stakeholders.
 A responsible business therefore adheres to the spirit and intent behind the law, as well as
the letter of the law, which requires conduct that goes beyond minimum legal obligations.
 A responsible business always operates with candor, truthfulness, and transparency, and
keeps its promises.
PRINCIPLE 4 –RESPECT RULES AND CONVENTIONS

 A responsible business respects the local cultures and traditions in the communities in which
it operates, consistent with fundamental principles of fairness and equality.
 A responsible business, everywhere it operates, respects all applicable national and
international laws, regulations and conventions, while trading fairly and competitively.
PRINCIPLE 5 – SUPPORT RESPONSIBLE GLOBALISATION

 A responsible business, as a participant in the global marketplace, supports open and fair
multilateral trade.
 A responsible business supports reform of domestic rules and regulations where they
unreasonably hinder global commerce.
PRINCIPLE 6 – RESPECT THE ENVIRONMENT

 A responsible business protects and, where possible, improves the environment, and avoids
wasteful use of resources.
 A responsible business ensures that its operations comply with best environmental
management practices consistent with meeting the needs of today without compromising the
needs of future generations.
PRINCIPLE 7 – AVOID ILLICIT ACTIVITIES

 A responsible business does not participate in, or condone, corrupt practices, bribery, money
laundering, or other illicit activities.
 A responsible business does not participate in or facilitate transactions linked to or supporting
terrorist activities, drug trafficking or any other illicit activity.
 A responsible business actively supports the reduction and prevention of all such illegal and
illicit activities.
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The Caux Round Table’s (CRT) Stakeholder Management Guidelines supplement the CRT Principles for
Responsible Business with more specific standards for engaging with key stakeholder constituencies.
The key stakeholder constituencies are those who contribute to the success and sustainability of
business enterprise. Customers provide cash flow by purchasing good and services; employees
produce the goods and services sold, owners and other investors provide funds for the business;
suppliers provide vital resources; competitors provide efficient markets; communities provide social
capital and operational security for the business; and the environment provides natural resources and
other essential conditions.
In turn, key stakeholders are dependent on business for their well-being and prosperity. They are the
beneficiaries of ethical business practices.
1. CUSTOMERS
A responsible business treats its customers with respect and dignity. Business therefore has a
responsibility to:
a. Provide customers with the highest quality products and services consistent with their
requirements.
b. Treat customers fairly in all aspects of business transactions, including providing a high level
of service and remedies for product or service problems or dissatisfaction.
c. Ensure that the health and safety of customers is protected.
d. Protect customers from harmful environmental impacts of products and services.
e. Respect the human rights, dignity and the culture of customers in the way products and
services are offered, marketed, and advertised
2. EMPLOYEES
A responsible business treats every employee with dignity and respects their interests. Business
therefore has a responsibility to:
a. Provide jobs and compensation that contribute to improved living standards
b. Provide working conditions that protect each employee's health and safety.
c. Provide working conditions that enhance each employee’s well-being as citizens, family
members, and capable and caring individuals
d. Be open and honest with employees in sharing information, limited only by legal and
competitive constraints.
e. Listen to employees and act in good faith on employee complaints and issues.
f. Avoid discriminatory practices and provide equal treatment, opportunity and pay in areas
such as gender, age, race, and religion.
g. Support the employment of differently-abled people in places of work where they can be
productive.
h. Encourage and assist all employees in developing relevant skills and knowledge.
i. Be sensitive to the impacts of unemployment and work with governments, employee groups
and other agencies in addressing any employee dislocations.
j. Ensure that all executive compensation and incentives further the achievement of long- term
wealth creation, reward prudent risk management, and discourage excessive risk taking.
k. Avoid illicit or abusive child labor practices.
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3. SHAREHOLDERS
A responsible business acts with care and loyalty towards its shareholders and in good faith for the
best interests of the corporation. Business therefore has a responsibility to:
a. Apply professional and diligent management in order to secure fair, sustainable and
competitive returns on shareholder investments.
b. Disclose relevant information to shareholders, subject only to legal requirements and
competitive constraints.
c. Conserve, protect, and increase shareholder wealth.
d. Respect shareholder views, complaints, and formal resolutions.
4. SUPPLIERS
A responsible business treats its suppliers and subcontractors with fairness, truthfulness and mutual
respect. Business therefore has a responsibility to:
a. Pursue fairness and truthfulness in supplier and subcontractor relationships, including pricing,
licensing, and payment in accordance with agreed terms of trade.
b. Ensure that business supplier and subcontractor activities are free from coercion and threats.
c. Foster long-term stability in the supplier relationships in return for value, quality,
competitiveness and reliability.
d. Share information with suppliers and integrate them into business planning.
e. Seek, encourage and prefer suppliers and subcontractors whose employment practices
respect human rights and dignity.
f. Seek, encourage and prefer suppliers and subcontractors whose environmental practices
meet best practice standards.
5. COMPETITORS
A responsible business engages in fair competition which is a basic requirement for increasing the
wealth of nations and ultimately for making possible the just distribution of goods and services.
Business therefore has a responsibility to:
a. Foster open markets for trade and investment.
b. Promote competitive behavior that is socially and environmentally responsible and
demonstrates mutual respect among competitors.
c. Not participate in anti-competitive or collusive arrangements or tolerate questionable
payments or favors to secure competitive advantage.
d. Respect both tangible and intellectual property rights.
e. Refuse to acquire commercial information through dishonest or unethical means, such as
industrial espionage.
6. COMMUNITIES
As a global corporate citizen, a responsible business actively contributes to good public policy and to
human rights in the communities in which it operates. Business therefore has a responsibility to:
a. Respect human rights and democratic institutions, and promote them wherever practicable.
b. Recognize government’s legitimate obligation to society at large and support public policies
and practices that promote social capital.
c. Promote harmonious relations between business and other segments of society.
d. Collaborate with community initiatives seeking to raise standards of health, education,
workplace safety and economic well-being.
e. Promote sustainable development in order to preserve and enhance the physical
environment while conserving the earth's resources.
f. Support peace, security and the rule of law.
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g. Respect social diversity including local cultures and minority communities.

h. Be a good corporate citizen through ongoing community investment and support for
employee participation in community and civic affairs.
4.3 Ethics and Profitability
The planet has finite resources but a growing population; without ethics, those resources are used for
purely individual gain at huge cost both to current and future generations.
When a business is started, making as much money as possible is probably a goal. Similarly, any
partners, financial investors or creditors would like you to maximize profits. However, it is important
to weigh profit objectives with potential ethical issues at the onset of your operation to avoid public
backlash and negative long-term implications.
There is, without doubt, a sense of pride and a sense of justice that goes with being ethical. At the
same time, any business needs to be viable in its operations and profitable in its results. Thankfully,
these two attitudes are not mutually exclusive.
Ethical business can have a hugely positive effect on the bottom line and an invaluable effect in the
long term.
Any manufacturer, service provider or product supplier which acts with consideration, honesty and
integrity will be a far more attractive proposition than a competitor who is missing these qualities. A
relationship of trust with customers who know that they rely on the honour of their business partner
is worth a thousand discounts.
In reality, there will always be companies which believe they will profit more by abandoning all ethics,
from child labour and environmental responsibility to fraud and corruption, but there are now
concerted efforts in this region to enforce transparency and accountability. This may not be the best
way to instil ethics, but it is a start and best of all – ethics are contagious.
More and more companies recognize the link between business ethics and financial performance.
Companies displaying a “clear commitment to ethical conduct” consistently outperform companies
that do not display ethical conduct. Business ethics leads to the following, which in turn leads to
profitability:
1. Attracting and retaining talent

People aspire to join organizations that have high ethical values. Companies are able to attract the
best talent and an ethical company that is dedicated to taking care of its employees will be rewarded
with employees being equally dedicated in taking care of the organization. The ethical climate matter
to the employees. Ethical organizations create an environment that is trustworthy, making employees
willing to rely, take decisions and act on the decisions and actions of the co-employees. In such a work
environment, employees can expect to be treated with respect and consideration for their colleagues
and superiors. It cultivates strong teamwork and Productivity and support employee growth.
2. Investor Loyalty
Investors are concerned about ethics, social responsibility and reputation of the company in which
they invest. Investors are becoming more and more aware that an ethical climate provides a
foundation for efficiency, productivity and profits. Relationship with any stakeholder, including
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investors, based on dependability, trust and commitment results in sustained loyalty.
3. Customer satisfaction
Customer satisfaction is a vital factor in successful business strategy. Repeat purchases/orders and
enduring relationship of mutual respect is essential for the success of the company. The name of a
company should evoke trust and respect among customers for enduring success. This is achieved by
a company that adopts ethical practices. When a company because of its belief in high ethics is
perceived as such, any crisis or mishaps along the way is tolerated by the customers as a minor
aberration. Such companies are also guided by their ethics to survive a critical situation. Preferred
values are identified ensuring that organizational behaviours are aligned with those values. An
organization with a strong ethical environment places its customers’ interests as foremost. Ethical
conduct towards customers builds a strong competitive position. It promotes a strong public image.
4. Regulators
Regulators see companies functioning ethically as responsible citizens. The regulator need not always
monitor the functioning of the ethically sound company. The company earns profits and reputational
gains if it acts within the confines of business ethics.
When a company begins to act responsibly and honourably it utilises the benefits and as its
competitors lag behind. This leads to:
 Long-term growth: sustainability comes from an ethical long-term vision which takes into
account all stakeholders. Smaller but sustainable profits long-term must be better than higher
but riskier short-lived profits.
 Cost and risk reduction: companies which recognise the importance of business ethics will
need to spend less protecting themselves from internal and external behavioural risks,
especially when supported by sound governance systems and independent research
4.4. Contemporary Ethical Challenges in Business:
The new economy has brought greater transparency and greater flexibility but also greater complexity
and therefore new and greater risks. It has become very crucial to look at how the new economy had
brought greater complexity to the business environment changing the ethical dimension and raising
new ethical issues.
There are many dimensions of the new economy like globalization, technology, assets, framework,
recruiting and retaining talent.
1. Globalization
The growing integration of economies and societies around the world and the ethical challenges
associated with it has been a rising concern over the past few years. Many forces are driving
globalization—Communication, improved infrastructure, technology, regulation, free trade and free
movement of people. Rapid growth and poverty reduction in India, China and other countries that
were poor 20 years ago, has been positive aspect of globalization. On the other hand, globalization
has also generated significant international opposition over concerns that it has increased inequality
and environmental degradation.
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Ethics, morality and globalization are connected with each other the ethical dimension of globalization
is beginning to be debated world widely. Issues include human rights violations by companies that
have manufacturing units in third world countries, dumping of sub-standard goods in poorer nations
by unscrupulous companies, marketing of drugs with harmful side-effects worldwide, etc.
So at a business level, we talk of globalization when companies decide to take part in the emerging
global economy and establish themselves in foreign markets.
To meet the objectives first they adapt their products and services to the final user's linguistic and
cultural requirement, which is not all an easy task. Managers have to manage the workforce in
different languages, different cultures, and different tax procedures. This leads to various ethical
dilemmas and controversies.
The basic need in the globalization era is to control the ethical conflicts to its minimum level though
its not so easy to achieve. Though some ways can be suggested like—
• Sensitive and sympathetic attitudes towards local customs.

• Awareness about world pressure groups.
• Know and comply with local laws related to tax, employment and finance.
• Manage diversity within and across the national boundaries.
2. Technology
Technology is a driving force helping business organization to face the challenges of today's
competitive business environment. It is revolutionizing the nature and speed of communication within
and between companies.
All the functional areas of organization—Marketing, finance, HR, production etc. are being facilitated
by it.
The global development of companies is very much affected by technology. Technology has been
catalyst for this development.
Though there are some social and ethical issues related to technology:
(a) Complexity and integrity

(b) Software piracy
(c) Monitoring
(d) Harassment
(e) Employment
(f ) Privacy
(g) Accessibility
These are some yardsticks, following which the managers can tackle some ethical risks attached to
technology:
• Take care of the flow of information about data in and out of the organization.
• The monitoring of the use of e-mail and uses of internet in an effective way
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• Participative management development as to discuss the practicalities and get the

feedback.
3. Intangible Assets
“Everything that can be counted does not necessarily count; everything that counts cannot necessarily
be counted.” [Albert Einstein (1879–1955), American theoretical physicist]
The most valuable assets as far as an organization context in the new economy are intangible assets.
Intangible assets are non-scarce; these increase in values when used as they are not subject to
diminishing returns as the tangible assets, but have increasing returns.
As all intangibles (customer, employee, leadership, culture, strategy, brand, innovation, knowledge,
intellectual property rights) are future oriented so they create future value.
The ethical points of discussions related to intangible assets are:
(a) Intangibles are difficult to manage and exclusively control
(b) Intangibles investments are typically more risky
(c) Intangibles cannot be directly measured and their value
As a result, there are many legal and ethical complications related to intangible assets.
4. The War for Talent
As talented, skilled, knowledgeable people with innovative ideas are among the most valuable assets,
recruitment, selection as well as retaining talented people is a big challenge before every organization.
Companies are often not ethical in the way in which they try to attract talent from rival companies
into their own company. They flout international codes of ethics and often their own company’s codes
of ethics as well.
This kind of recruitment wars can start right from the campus level, where I.T. companies hire talented
students and then ‘bench’ them just to ensure that other companies cannot hire them. Again,
companies can unethically approach employees of rival companies to get them on board, even when
those employees are contractually bound to the companies where they are then working.
Again, new generation employees have unique personalities. They are highly talented, skilled with a
valuable ethical value system, set of attitudes, self confident, immediate authority. Companies who
do a better job of addressing these needs of the new and future generations will be better able to
sustain themselves. Their relationship with their employer must be mutual friendly and win-win type.
These people will remain in the type of organization where they find a true alignment between their
own value system and organization’s value and beliefs. However, companies who do not have
recruitment and retaining strategy will soon find themselves spending much more money to attract
the best talent. Studies show that the companies that are most responsive to employees need have
lower turnover in staff.
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So if organizations want to retain their talent ethically, it is essential to follow some practical steps:
• Discover the needs, wants of talented people behind joining a firm or being there.
• Calculate the total package which must include the total tangibles elements and just compare
it against the competitors.
• Assess the gaps which come out from the expectations of employees and the realities.
• Find out the reasons, why people leave the organization and try to avoid the same reasons for
the future, learn from them.
• Try to generate a healthy balance between employee’s work and their other portion of life.
Simply telling people or merely teaching managers about ethics will not encourage ethical conduct in
the organization, some extra efforts are needed. In fact, the basic and foremost importance is to
develop commitment to ethics.
4.5. Profitability & Ethics
Corporate temptation to stretch ethical behavior in revenue generation and reporting is universal.
From excessive cost-cutting to expand short-term market-share, to outright lies about revenue to
positively affect stock price, it's easy to see why an otherwise intelligent, educated corporate officer
can end up behind bars for condoning such behavior. To overcome these temptations, revenue-
related managers must establish and maintain a firm stance on ethical marketing, advertising, selling
and reporting. This requires regular dissemination and enforcement of codes of conduct.
High level of internal trust

The level of trust within a company should reflect the level of trust the company solicits from
customers. If customers are encouraged to put their complete trust in the product or service, then
company teams must do the same with each other. Management must guide this internal process. An
increase in trust is a reduction in risk and uncertainty, which in turn will keep the revenue generation
process flowing smoothly. Another advantage of running a high-trust organization is improved internal
flexibility and creativity. Instead of being constantly monitored, the person to whom a task is assigned
can accomplish it the best way possible. The outcome is never in doubt because of the trust the team
shares.
Formal and active compliance program

Ethical profitability is far more than merely operating within the boundaries of the law. Legal
compliance limits unethical behavior, but it does not define ethical behavior. An organizational ethics
doctrine does have legal benefits. Properly written, published and disseminated ethical codes will
reduce corporate risk if an employee creates a criminal or civil problem because of poor ethical
behavior.
Transparency in business
Transparency is an important part of this process. Transparency means the business is open to people
seeing how it manages its relationships with suppliers. In turn, suppliers‖ practices also need to be
transparent. The alternative would be for an organization to ignore ethical behaviour. However, this
would rapidly lead to a decline in brand reputation and consumers could move to purchasing from
competing retailers behaving more ethically. Operating in the 'right way' is therefore not just
appropriate for ethical reasons, but is also good business practice.
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CSR Business Ethics
CHAPTER 5
CORPORATE SOCIAL
RESPONSIBILITY
5.1. What is Philanthropy?
The most conventional modern definition is "private initiatives, for public good, focusing on quality of
life". Instances of philanthropy commonly overlap with instances of charity, though not all charity is
philanthropy, or vice versa. The difference commonly cited is that charity relieves the pains of social
problems, whereas philanthropy attempts to solve those problems at their root causes (the difference
between giving a hungry person a fish, and teaching them how to fish).
Example
PepsiCo
Pepsi is a food and beverage powerhouse, which is why its philanthropy prioritizes related causes,
including:
 Healthy lifestyles
 Affordable nutrition
 Access to clean water
 Sustainable agriculture
 Job readiness
 Empowering women
Pepsi offers to match gifts up to $10,000 per year per employer, and it matches at a 2:1 ratio if the
employee volunteers more than 50 hours with a single organization. Otherwise, Pepsi matches 1:1.
Pepsi employees strive to improve communities through a number of programs including:
1. PepsiCorps: This skill-based volunteer program places Pepsi employees in communities from
Ghana, to India, to New Mexico, to aid with projects that relate to Pepsi’s corporate giving
initiatives.
2. Mother Water Cellar Project in Greater China Region: Pepsi volunteers helped to construct a
water purification tower for the benefit of over 700 students and teachers at a school in
southwest China.
3. Food for Good: Started by employees in 2009, Food for Good has served over 1.6 million free,
nutritious meals to inner-city children.
Pepsi also prides itself on strategic grants, through which it donates about $25 million per year. The
company loves to support water sanitation efforts, and tends to give large gifts to organizations that
are established enough to deliver potable water to millions of people.
5.2 What is Conventional CSR ?

Businesses can have a positive impact on society and development through three main avenues:
(a) Employment benefits,
(b) Community development and philanthropy, and
(c) Core business CSR strategy.
The first two avenues can be broadly grouped together as traditional/Conventional CSR.
 Traditional CSR activities that encompass Journal of Economics and Sustainable Development
community development and philanthropy are usually seen as distinct and unrelated to core
business operations.
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 Business could have a CSR programme of education and healthcare while they continue
polluting the environment and treating workers poorly.
Thus traditional CSR is differentiated in motivation, implementation, and impact from Strategic CSR.
5.3 What is Strategic CSR?
The organisation needs to establish its CSR footprint and understand the impact it has on the
environment and society from every angle and in every step in the value chain. The intelligently
sustainable organisation moves beyond offering marketing hype and works out how it can create a
value proposition that includes having a social impact of benefit to itself and society. Inside-out
linkages refer to the impact a company has on society through the normal course of business. By
working through each step of the value chain, the company can work out positive and negative
consequences of its actions eg hiring practices; waste disposal. Outside-in linkages refer to external
social conditions that may affect an organisation – availability of talent; intellectual property
protection; rule of law etc. The company needs to work out what it can and can’t influence. From here,
it must then choose which social issues to address.
Ex : Toyota is probably a good example – the Prius, the increasingly popular hybrid car – is an
intersection between Toyota’s business and environmental benefits (less emissions; happy customers;
cleaner roads, air etc).
Similarly, Mexican construction company, Urbis, builds houses for disadvantaged buyers using
different payment options such as flexible mortgages made through payroll deductions. The social
impact is clearly around helping the disadvantaged afford decent homes whilst, at the same time,
Urbis as a business benefits.
What are Environmental issues and Social issues in CSR?
Companies increasingly desire to appear “green.” Toyota and Bank of America have new buildings that
are Gold-certified by the US Green Building Council.
Dell Computer allows customers to buy carbon offsets when they purchase a new computer. Despite
creeping concerns that some of these actions may be mere “green wash,” for the most part they are
welcomed by employees, consumers, investors, regulators, and the public.
Environmental CSR addresses two main questions.
 First, what drives firms to engage in CSR?
 Second, what are the welfare effects of CSR?
Numerous explanations have been advanced for the recent surge of environmental CSR. Perhaps
pollution is symptomatic of broader production inefficiencies, and pollution reduction and cost
reduction go hand in hand to create “win/win” opportunities in today’s economy. Perhaps a new
generation of “green” consumers is willing to pay higher prices for clean products, and firms are simply
responding to this shift. Or perhaps business has become savvier about the workings of the political
system, taking proactive steps to avert political conflict (e.g., regulatory threats, enforcement
pressures, boycott threats from nongovernmental organizations [NGOs]) rather than reacting to
public pressure.
The labour market also provides incentives for CSR. Most employees want to feel good about the
company where they work, and want to be able to tell their children they are working to make the
world a better place. One way companies try to attract and retain the best employees is by making
environmental commitments that are aligned with these employees’ environmental values
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CSR Business Ethics
Social Issues
CSR performance can significantly impact the operational, reputational, and financial success of its
companies. There is more pressure than ever for companies to implement practices Like :
 Promote transparency,
 Avoid corruption,
 Advance environmental sustainability,
 Protect human rights,
 Facilitate “local content” objectives in the supply chain.
 Labour relations and regaining worker trust and
 Revenue transparency.
In response, more companies are grappling with how to set clear expectations, establish assurance
mechanisms, and balance cost implications of managing their supply chain.
These are some issue which effect every one and hence form a social CSR issue which has to be
addressed.
Labour and related issues
Codes of conduct which address labour practices have become a key element in the debate over
improving worker rights and working conditions worldwide
 Reasonable working environment

 Compliance the laws
 No discrimination or
 Harassment compensation
 No child labour
 No forced labour
 Provision of training
 Working hours
 Freedom of association and
 Collective bargaining
5.4. Describe the Ethical and Governance issues in CSR ?
It is a well known fact that management plays a vital role in shaping the future of any organization as
the optimum utilization of all resources hinges upon the efficacy of the management. The core of a
successful management lies in its Clarity of Vision, Plan of Action and more importantly Execution of
the Plan of Action – the real gamut of operations as it were, and it is here that the importance of
Corporate Governance and Ethics comes into being. Organisations are managed by Policies, Guidelines
and Systems. These are dynamic instruments, and therefore need to be reviewed from time to time
to gauge their efficacy to the said organization.
This review is all the more necessary when a lapse or an untoward incident takes place. It could happen
that the review undertaken reveals that the said policy is very much sound and in place, however over
a period of time wrong practices have come into being, and which are the reasons for the problems
that have occurred, therefore corrective steps need to be taken forthwith.
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A review could also reveal that the problems have occurred in spite of the policy in place, and which
means that the policies would need to be modified or amended as the case may be in the best interest
of the organization. Normally, decisions are being taken within the framework of the policies and
guidelines in place. Now, there could be critical situations wherein the policy in question would need
to be slightly deviated from, in order to take the right decision, in the best interests of the organization.
In such situations, a very clear and precise note should be brought out giving the reasons which
necessitated the said deviation from the policy.
The said note should also contain the implications to the organization if the decision was not taken.
This would serve as a very Transparent and an Objective analysis, bringing out the need for deviation
from the policy on this “case specific” issue, whereas the said policy in principle would continue on an
as is where is basis.
Board Members must embrace Corporate Ethics by creating a climate of Integrity and Responsibility
within the company, expressed in both the written code and by living example i.e. both Directors &
Promoters need to come together to Build a strong Ethical Culture for the Company, that would ensure
Correct Behaviour/ the Right Behaviour, when policies are either unwritten, unclear or are
unenforced.
“Ethics & Corporate Governance” are not just Moral or Compliance Issues. In the long term they are
Essential Behavioural Traits for the Organisation, that strengthen the Organisation’s “Brand Equity”
and help ensure Stable Sustainable Growth.
5.5. What is the Social responsibility of business stakeholders?
In the case of shareholders, these being some of the most important stakeholders in a corporation,
they generally want good returns on their investments, and thus demand high profits, growth and
share prices. If these are not achieved, they put pressure on management, via the shareholders'
committee, or they simply sell their shares. In other words, the actions of shareholders constitute a
major restrictive factor on a corporation's activities. On the other hand, there have been actions taken
by shareholders in the context of CSR, and the roles of socially responsible investment (SRI) funds can
be given as an example in this respect.
SRI funds have an approach to investment that involves taking social and environmental factors into
account in addition to financial performance when selecting the companies with which to invest, and
these funds maintain a strong position, especially among institutional investors such as pension funds.
One of the tools used by SRI funds for selection of companies in which to invest is called 'negative
screening'. This involves comparing companies with ethical criteria, and eliminating companies
engaged in ethically unacceptable corporate activities. Such activities include paying low wages,
having unsafe and/or unhygienic working conditions, using child labour, discriminating against ethnic
minorities, polluting the environment, and supporting dictatorial regimes. If the fund judges a
company to be problematic in one or more of these respects, the fund eliminates it from its list of
investment-worthy companies.
When these options are taken into consideration, shareholders, as stakeholders, can also be seen to
function as restrictive factors on CSR
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How Can We Involve stakeholders?
 Level 1 - Basic Value Proposition

At this most basic level, the entrepreneur or manager needs to understand how the firm can make
the customer better off, and simultaneously offer an attractive value proposition to employees,
suppliers, communities, and financiers. • How do we make our stakeholders better off? • What do we
stand for?
 Level 2 - Sustained stakeholder cooperation

The competitive, macro-economic, regulatory, and political environments are so dynamic they
necessitate constant revision of the initial stakeholder arrangements. Each revision upsets the delicate
balance struck in the basic value propositions to various stakeholders. Managers must have a deep
understanding of how these trade-offs affect each stakeholder, the amount of sacrifice a given
stakeholder will accept, and how these current sacrifices can be compensated. • What are the
principles or values on which we base our everyday engagement with stakeholders?
 Level 3 - An understanding of broader societal issues

Today’s managers must recognize and respond to a rising number of international issues, without the
moral compass of the nation, state or religion as a guide. Managers may need to take positions on
issues that apparently are not purely business related. A proactive attitude is necessary towards all
stakeholder groups, both primary, i.e., those that have direct business dealings with the company, and
secondary, such as NGOs and political activists, who can affect the operations of the company. • Do
we understand how our basic value proposition and principles fit or contradict key trends and opinions
in society?
 Level 4 – Ethical leadership

Recent research points to a strong connection between ethical values and positive firm outcomes
such as sustained profitability and high innovation.7 Proactive ethical leadership is possible only if
there exists a deep understanding of the interests, priorities, and concerns of the stakeholders. • What
are the values and principles that inform my leadership? • What is my sense of purpose? What do I
stand for as a leader? There are 10 general principles that collectively develop a “mindset” necessary
for entrepreneurs and managers to understand and practice all four levels of Company Stakeholder
Responsibility
5.6. What is the response of Indian firms towards CSR ?
Methodology of Corporate Social Responsibility

CSR is the procedure of assessing an organization’s impact on society and evaluating their
responsibilities. It begins with an assessment of the following aspects of each business:
 Customers
 Suppliers
 Environment
 Communities
 Employees
Triumphant CSR plans take organizations ahead of compliance with legislation and lead them to
respect moral values and respect people, communities and the natural environment. Corporate social
responsibility is sustainable – involving activities that an organization can uphold without negatively
affecting the business goals
CSR is not only about ecological accountability or having a recycling policy. It is about considering the
whole representation of the company, from internal processes to your clients, taking in every step
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Business Ethics CSR
that a business takes during day-to-day operations. Rising economies such as India have also observed
a number of companies enthusiastically engaged in CSR activities. Organizations in India have been
quite sensible in taking up CSR initiatives and integrating them in their business processes. It has
become progressively projected in the Indian corporate setting because organizations have
recognized that besides growing their businesses, it is also important to shape responsible and
supportable relationships with the community at large. Companies now have specific departments
and teams that develop specific policies, strategies and goals for their CSR programs and set separate
budgets to support them. Most of the time, these programs are based on well-defined social beliefs
or are carefully aligned with the companies’ business domain.
Few Examples of a few Indian companies involved in CSR activities
Infosys
Infosys is aggressively involved in a variety of community growth programs. In 1996, the company
created the Infosys Foundation as a not-for-profit trust to which it contributes up to 1 percent of
profits after tax every year. Moreover, the Education and Research Department at Infosys also works
with employee volunteers on community development projects. The management team at Infosys
continues to set examples in the area of corporate citizenship and has involved itself vigorously in key
national bodies. They have taken initiatives to work in the areas of research and education, community
service, rural outreach programs, employment, healthcare for the poor, education, arts and culture,
and welfare activities undertaken by the Infosys Foundation.
Mahindra & Mahindra

At Mahindra & Mahindra, The K. C. Mahindra Education Trust was established in 1953 with the
purpose of promoting education. Its vision is to renovate the lives of people in India through education
and financial assistance across age groups and across income strata. The K. C. Mahindra Education
Trust undertakes a number of education plans, which make a difference to the lives of worthy
students. The Trust has provided more than Rs. 7.5 crore in the form of grants, scholarships and loans.
It promotes education mostly by the way of scholarships. The Nanhi Kali (children) project has over
3,300 children under it and the company aims to increase the number to 10,000 in the next two years
by reaching out to the underprivileged children, especially in rural areas.
ITC Ltd
India's Best Companies for CSR 2014: Here's how ITC's social outreach programme works The
consumer goods cigarette-hospitality firm's social investments have won plenty of accolades. The
company has been able to generate sustainable livelihood opportunities for around 6 million people
through its CSR initiatives. ITC has also achieved the unique global distinction of being carbon positive
for nine successive years, water positive for 12 consecutive years and solid waste recycling positive
for the last seven years. The famed e-Choupal initiative led by the agri-business division is a major
sourcing base for the company's packaged food and FMCG business, while its social forestry
programme supports the paper and paperboard business. ITC has, in the last few years, undertaken
massive animal husbandry initiatives covering ten lakh milch animals which will form the base for the
proposed foray into the dairy business early next year. The company has spent considerable money
on developing renewable energy infrastructure. And now, renewable energy meets almost 38% of
ITC's total energy requirements which is indeed remarkable considering the huge manufacturing base
and hotels. The target is to increase this to 50% over the next five years. All the premium luxury hotels
are certified green buildings making ITC the greenest luxury hotel chain in the world.
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CHAPTER 6
STRATEGIES FOR CSR;
CHALLENGES AND
IMPLEMENTATION
6.0 How is Consumerism and CSR related?
We live in a world that is on the leading edge of a major business transformation, but like any
widespread change, the shift away from the industrial model will take time. The change to social
business… threatens a great many concepts that we were brought up believing.
A wake-up call for all marketers, Consumers are demanding socially responsible business models –
not just the implementation of Corporate Social Responsibility policies designed to garner press
coverage, but real changes that benefit society as a whole.
 These “insurgent” companies are committing to the policy of transparency and sustainability
for which consumers are already clamouring.
 Companies are moving away from Corporate Social Responsibility and embracing terms like
“corporate consciousness
 Rather than a reputation-boosting afterthought, corporate consciousness is a new way of
doing business. Consumers are no longer willing to accept mediocre improvements or
company efforts to “be a little less bad.” They are looking for sweeping changes.
 Jonathan Linton (from the University of Ottawa) finds consumers are willing to pay more for
some green products but less for others.
 Tim Devinney (University of Technology, Sydney) and colleagues show that consumers care
about ethical features—as long as they don’t compromise quality or function. Assuming the
shoes fit comfortably or the ink cartridge prints smoothly, three out of five people would
spend more for the product that is ethically produced.
 C.B. Bhattacharya (European School of Management and Technology) show that innovative
firms engaging in CSR have more satisfied customers than innovative companies that don’t
invest in CSR
 If you told consumers that other people in their same situation reused their towels(in hotels).
The researchers saw a 10% increase in the number of people reusing their towels simply by
appealing to the herd mentality.
 June Cotte (Richard Ivey Business School) find that a credible reputation enables you to charge
higher prices for ethical products.
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6.1 What are the Unethical issues in functional aspects of management?
In Marketing
Markets present a clash of interest between various players. There is competition for resources,
customers and price etc, which breeds ground for activities that may not get ethical sanctions. A
certain code of conduct, policies and practices called ethics are required to manage markets and
marketing. Marketing is the heart of all businesses and all other functions depend upon the same for
keeping the business moving. It is one business function that interacts the most with markets, in fact
markets are meant to sell and they exist only when they sell! In such a scenario there are bound to be
multiple players and a clash is inevitable. Such clash leads to malpractices like hoarding, price
competitions, brand wars and use of unfair tactics, which is precisely where marketing ethics come
into play.
 Ethics means principle or values by which marketing ought to be conducted in the market
place. Logically also when there are huge number of transactions involved, a certain code or
guiding principles are required to ensure that operations and industry competitiveness is fair
and beneficial to the end user. There are different philosophies or schools of thought for
ethics in marketing, one is the political philosophy and the other is the transaction focused.
 Whereas one school of thought says that all marketing efforts should be focused on
maximizing the shareholder value and that this is the only marketing ethics
 Other believes that that marketing and market is equally responsible to consumers, other
stake holders and the shareholders.
 The tactic of targeting targeted segments, creating needs that were inexistent till now,
transparency about the source of labour and environmental risks, transparency about the use
of source and the ingredients, appropriate labeling, mentioning associated health risks,
advertising jurisprudence and not making false promises fall within the ambit of marketing
ethics.
 Lots of marketing and promotion was carried out for goods and services that were not a need
till yesterday and only a luxury.
 Today cell phones have become a need and a status symbol! These are issues that are being
discussed in marketing ethics nowadays.

Like other ethical disciplines, marketing ethics is also looked up from various perspectives. There is
the perspective of virtue, expediency and other perspectives. But like other ethics there is also the
difficulty of deciding the agency responsible for ethical practice.
Marketing ethics unlike other business ethics is not only restricted to the field of marketing alone. It
influences many aspects of our life and especially in developing perceptions in the minds of people
and creating identities, classes and sections in the society. The visual channels of communication used
for marketing sometimes lead to closure of knowledge, opinions, ideas and beliefs. It creates
prejudices in the mind of people.
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Ethical Issues in Hr
 Cash and Compensation Plans
There are ethical issues pertaining to the salaries, executive perquisites and the annual
incentive plans etc. The HR manager is often under pressure to raise the band of base salaries.
There is increased pressure upon the HR function to pay out more incentives to the top
management and the justification for the same is put as the need to retain the latter. Further
ethical issues crop in HR when long term compensation and incentive plans are designed in
consultation with the CEO or an external consultant. While deciding upon the payout there is
pressure on favouring the interests of the top management in comparison to that of other
employees and stakeholders.
 Race, gender and Disability
In many organisations till recently the employees were differentiated on the basis of their
race, gender, origin and their disability. Not anymore ever since the evolution of laws and a
regulatory framework that has standardised employee behaviours towards each other. In
good organisations the only differentiating factor is performance! In addition the power of
filing litigation has made put organisations on the back foot. Managers are trained for aligning
behaviour and avoiding discriminatory practices.
 Employment Issues
Human resource practitioners face bigger dilemmas in employee hiring. One dilemma stems
from the pressure of hiring someone who has been recommended by a friend, someone from
your family or a top executive.
Yet another dilemma arises when you have already hired someone and he/she is later found
to have presented fake documents. Two cases may arise and both are critical. In the first case
the person has been trained and the position is critical. In the second case the person has
been highly appreciated for his work during his short stint or he/she has a unique blend of
skills with the right kind of attitude. Both the situations are sufficiently dilemmatic to leave
even a seasoned HR campaigner in a fix.
 Privacy Issues
Any person working with any organisation is an individual and has a personal side to his
existence which he demands should be respected and not intruded. The employee wants the
organisation to protect his/her personal life. This personal life may encompass things like his
religious, political and social beliefs etc. However certain situations may arise that mandate
snooping behaviours on the part of the employer. For example, mail scanning is one of the
activities used to track the activities of an employee who is believed to be engaged in activities
that are not in the larger benefit of the organisation.
Similarly there are ethical issues in HR that pertain to health and safety, restructuring and
layoffs and employee responsibilities. There is still a debate going on whether such activities
are ethically permitted or not. Layoffs, for example, are no more considered as unethical as
they were thought of in the past.
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Ethical Issues in Production
Deals with products and production process

Depends on preventative technology
Relations between the company and the environment
Problems arising due to new technologies
Product testing ethics.
Example BHOPAL GAS TRAGEDY
On Dec. 3rd, 1984
Thousands of people in Bhopal, India, were gassed to death, after a catastrophic chemical leak at
Union Carbide pesticide plant. The reason for this was that none of the 6 safety systems of plant were
functional.
Ethical Issues in Information Technology
There are a great variety of ethical issues in I.T.:
1 Ethical dilemmas
There are various ethical dilemmas in relation to I.T. that need to be addressed. What are and are not
ethical issues in I.T.? In regard to hackers, for example, are they testing the system or performing an
immoral action? Will genetic engineering improve the quality of peoples’ lives or start to destroy it?
How do we recognise when an ethical dilemma exists? There are, indeed, many grey ethical areas.
2 Plagiarism
Plagiarism is where the work of others is copied, but the author presents it as his or her own work.
This is a highly unethical practice, but happens quite frequently, and with all the information that is
now available on the Internet it is much easier to do and is happening more often.
3 Piracy Piracy,
The illegal copying of software, is a very serious problem, and it is estimated that approximately 50%
of all programs on PCs are pirated copies. Programmers spend hours and hours designing programs,
using elaborate code, and surely need to be protected. Although some might argue that some pirating
at least should be permitted as it can help to lead to a more computer literate population. But, for
corporations, in particular, this is a very serious issue, and can significantly damage profit margins.
4 Hacking
Hackers break into, or ‘hack’ into a system. Hacking can be undertaken for a variety of reasons, such
as the wish to damage a system or the wish to understand how a system works, so that money can be
made out of it. Alternatively, there might be a desire to alert people to the fact that a system is
insecure and needs improving. Due to this some argue that there are ‘hacker ethics’. Hacking can
present a moral dilemma. This is because ‘reformed hackers’ sometimes offer their expertise to help
organisations protect themselves against other hackers. Hackers cannot just wander into a system, as
they could into an unlocked door. Instead, it requires a lot of skill. With this skill hackers can
demonstrate that a system is insecure and needs improving. In this way, it could be argued that
hackers play a valuable role. Many argue that hacking might lead to some improvements.
5 Computer crime
Many different computer crimes are committed, which clearly poses ethical questions for society.
Various illegal acts are performed on computers, such as fraud and embezzlement. This includes, for
example, using imaging and desktop publishing to create, copy or alter official documents and graphic
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images. There are also various ethical dilemmas, such as whether copying such files is as bad as
stealing something.
6 Viruses
Clearly writing and spreading virus programs are unethical acts; they have very serious consequences,
and cause systems to crash and organisations to cease operating for certain periods. One of the most
concerning consequences of such actions is when viruses interrupt the smooth functioning of an
organisation such as a hospital, which could in extreme cases even cause people to die. Logic bombs
are also sometimes planted. There is obviously a lot of anti-virus software on the market now though
that helps to deal with this ever-growing problem.
7 Job displacement/work pressures

Imposed on computer professionals Computers are changing the face of the work scene. For some
people, their jobs are becoming redundant or they have to play quite different roles, and others are
suffering increasing levels of stress from work pressures. Others are, obviously, reaping the benefits
of having more rewarding jobs, and there is certainly more emphasis on knowledge, information and
I.T. skills than ever before. However, this all clearly poses various ethical issues. Should those that lose
their jobs be compensated? How can the pressure be eased on those that are suffering stress? Is it
acceptable for computer programmers to be made redundant ‘on the spot’ etc? There are many
ethical issues that need to be addressed here.
8 Digital divide
The digital divide poses a serious problem today. A new breed of haves’ and ‘have nots’ are being
created, between those that have access and can use a computer and the Internet, and those that do
not have such access. There are clearly serious ethical implications here. Those that do not have such
access may well be discriminated against, feel ‘socially excluded’ and miss out on many life
opportunities.
6.2 What is the wider concept of social responsibility?
Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of
stakeholders, besides shareholders and investors. Key areas of concern are environmental protection
and the wellbeing of employees, the community and civil society in general, both now and in the
future.
The concept of CSR is underpinned by the idea that corporations can no longer act as isolated
economic entities operating in detachment from broader society. Traditional views about
competitiveness, survival and profitability are being swept away.
Some of the drivers pushing business towards CSR include:
1. The shrinking role of government
In the past, governments have relied on legislation and regulation to deliver social and environmental
objectives in the business sector. Shrinking government resources, coupled with a distrust of
regulations, has led to the exploration of voluntary and non-regulatory initiatives instead.
2. Demands for greater disclosure
There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers,
employees, communities, investors, and activist organizations.
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3. Increased customer interest
There is evidence that the ethical conduct of companies exerts a growing influence on the purchasing
decisions of customers. In a recent survey by Environics International, more than one in five
consumers reported having either rewarded or punished companies based on their perceived social
performance.
4. Growing investor pressure
Investors are changing the way they assess companies' performance, and are making decisions based
on criteria that include ethical concerns. The Social Investment Forum reports that in the US in 1999,
there was more than $2 trillion worth of assets invested in portfolios that used screens linked to the
environment and social responsibility. A separate survey by Environics International revealed that
more than a quarter of share-owning Americans took into account ethical considerations when buying
and selling stocks. (More on socially responsible investment can be found in the 'Banking and
investment' section of the site.)
5. Competitive labour markets
Employees are increasingly looking beyond pay checks and benefits, and seeking out employers whose
philosophies and operating practices match their own principles. In order to hire and retain skilled
employees, companies are being forced to improve working conditions.
6. Supplier relations
As stakeholders are becoming increasingly interested in business affairs, many companies are taking
steps to ensure that their partners conduct themselves in a socially responsible manner. Some are
introducing codes of conduct for their suppliers, to ensure that other companies' policies or practices
do not tarnish their reputation.
Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility
include:
1. Company benefits:
 Improved financial performance;

 Lower operating costs;
 Enhanced brand image and reputation;
 Increased sales and customer loyalty;
 Greater productivity and quality;
 More ability to attract and retain employees;
 Reduced regulatory oversight;
 Access to capital;
 Workforce diversity;
 Product safety and decreased liability.
2. Benefits to the community and the general public:
 Charitable contributions;
 Employee volunteer programmes;
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 Corporate involvement in community education, employment and homelessness

programmes;
 Product safety and quality.
3. Environmental benefits:
 Greater material recyclability;

 Better product durability and functionality;
 Greater use of renewable resources;
 Integration of environmental management tools into business plans, including life-cycle
assessment and costing, environmental management standards, and eco-labelling.
What is the Cost-benefit analysis of corporate social responsibility and good corporate citizenship?
The role of new manager in 21st century is very crucial in corporate field nowadays. Corporate Social
Responsibility (CSR) is a process with the aim to embrace responsibility for the company's actions and
to encourage a positive impact through its activities on the environment, consumers, employees,
communities, stakeholders and all other members of the public sphere who may also be considered
stakeholders. The corporate has to spend at least 2 percentages for the activities of CSR.
Corporate social responsibility CSR, also called corporate conscience, corporate citizenship, social
performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-
regulation integrated into a business model. CSR policy functions as a built-in, self-regulating
mechanism whereby a business monitors and ensures its active compliance with the spirit of the law,
ethical standards and international norms. In some models, a firm's implementation of CSR goes
beyond compliance and engages in "actions that appear to further some social good, beyond the
interests of the firm and that which is required by Law.
The term "corporate social responsibility" became popular in the 1960s and has remained a term used
indiscriminately by many to cover legal and moral responsibility more narrowly construed. Proponents
argue that corporations make more long term profits by operating with a perspective while critics
argue that CSR distracts from the economic role of businesses.
McWilliams and Siegel16'17 demonstrated that when the model is properly specified; that is, when
you control investment in Research and Development, an important determinant of financial
performance, CSR has a neutral impact on financial outcomes.
Some argue that CSR is merely window-dressing, or an attempt to pre-empt the role of governments
as a watchdog over powerful multinational corporations. Political sociologists became interested in
CSR in the context of theories of globalization, neo-liberalism and late capitalism.
Development business ethics is one of the forms of applied ethics that examines ethical principles and
moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized
international standard for CSR.
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Business Ethics Overview

Chapter 1 Business Ethics – An Overview.................................................. 2

Chapter 2 Management of Business Ethics ............................................. 10

Chapter 3 Ethical Theories ....................................................................... 32

Chapter 4 Role of Ethical Managers ........................................................ 36

Chapter 5 Corporate Social Responsibility .............................................. 46

Chapter 6 CSR Strategies ......................................................................... 52

1. Definition and Nature of Business Ethics

1.1 What is ethics?

Values have the following characteristics:

1.2 What is business ethics?

In a nutshell, business ethics:

The 3 C’s of Business ethics:

1. Compliance: (The need for compliance of rules including):

2. The Contribution (Business can make to the society):

3. The Consequences of business activity:

1.3 Features of Ethics

The characteristics or features of business ethics are:

1.4 Ethical Behaviour in Business

9. COMMITMENT TO EXCELLENCE. Ethical executives pursue excellence in performing their

1.5 Causes of Unethical Behavior

7. Personal or sexual pleasure.

9. An intense desire to over-control and dominate subordinates.

12. Rationalization (everyone does it, so I will also do it).

13. Lack of accountability.

14. A few people in the organization may be opportunists.

15. Out of unawareness

16. Wanting to go extra mile for internal / external customer

1.6 Ethical Abuses in Business

 In accounting – window dressing, misleading financial analysis.

3. Ethics in Human Resources

2.1 Ethics Analysis: Hosmer Model

Other considerations in an ethical decision are:

 Proximity of effect, which is the social, psychological, cultural, or physical distance of a

Kidder’s Four Paradigms for Understanding Ethical Dilemmas:

1. Recognize there is a moral issue;

2. Determine the actor (who does the problem belong to?);

3. Gather the relevant facts;

4. Test for right vs. wrong issues;

5. Test for right vs. right paradigms;

6. Apply the resolution principles;

7. Investigate the “trilemma” option;

8. Make the decision;

9. Revisit and reflect on the decision.

Other ethical/moral considerations:

Velasquez : Seven Step Method for Ethical Decision Making

2. The Ethical Issues?

5. The Ethics of the Alternatives?

6. The Practical Constraints?

1. Identify the problem or dilemma.

Does a problem or dilemma actually exist?

Is this an ethical, legal, moral, professional, or clinical problem?

Is it a combination of more than one of these?

How can you know the nature of the problem?

2. Identify the potential issues involved.

What decision will best safeguard the stakeholders’ welfare?

3. Review the relevant ethical codes.

Are the codes consistent with applicable laws?

4. Know the applicable laws and regulations.

about ethical issues?

orientation, or do you look for consultants with different perspectives?

action you are inclined to take?

What kinds of information do you document when you consult?