Chapter Four:

Social Responsibility &

Business Ethics

Social Responsibility
The awareness that business activities have an impact on
society and the consideration of that impact by firms in decision
making.
Consumers

Employees

Business
Activities

Investor

Environment

Responsibility to Consumers
Firms trying to provide products that satisfy the needs
of their customers, since dissatisfied customers
eventually take their business elsewhere.

Consumerism includes the activities of individuals,

groups and organizations aimed at protecting
consumer rights.

Responsibility to Consumers
Four Rights of Consumer The Right to Safety Right to products that are safe to possess and
use. To ensure safety of goods, manufacturers should test them and
provide buyers with explicit directions for use.
The Right to be Informed Right to receive information available
about a product before they purchase it. For example - Ingredients,
instructions for use, manufacturing date, expiry date.
The Right to Choose Right to choose and make purchases from a
variety of products at competitive prices. Also the right to expect quality
service at a fair price.

The Right to be Heard Right to have their (consumers) opinions

considered in the formation of government policies and in business firms
decisions that affect them.

Responsibility to Employees
Employees hold certain expectations of
business firms.
They expect safe working conditions, fair
compensation, equal opportunities (regardless of age,
race, gender, religion or national origin) and adequate
benefits (Health insurance, vacation etc).

Responsibility to Environment
Pollution contamination of air, water and land
Water pollution caused by dumping of chemicals, sewage

and garbage into rivers etc and by using pesticides and

fertilizers etc.

Land pollution results from strip mining of coal and

minerals, forest fires, garbage disposal and dumping of

industrial wastes including chemicals and medical supplies such
as used hypodermic needles.

Land pollution often results in water pollution because toxic

wastes drain into water supplies.

Recycling reusing materials such as paper, plastic, glass and
aluminum to make other products.

Responsibility to Environment
Air Pollution Caused by carbon monoxide and
hydrocarbons that come from motor vehicles and by
smoke and other pollutants from manufacturing plants
(emission standards for automobiles, factories, catalytic
converters are there to help control air pollution).

**Ozone layer Shields the planet from the suns deadly

ultraviolet rays. This is being destroyed with a global
warming trend as a result (major cause is
Chlorofluorocarbons (CFCs) that are used to cool
refrigerators and air conditioners).
**Acid rain When sulphur dioxide is pumped into the air
(often by manufacturing and power plants burning high
sulphur coal) and mixes with air, rain with a high acid
content is created.

Responsibility to Investors
Business firms have responsibility to the people who invest
money in them.
**Proper Management of Fund
**Access to Information

**Executive compensation
There are problems such as mishandling of investors funds,
insider trading (the practice of buying and selling stock on the
basis of information gained through positions or contacts with
inside parties that is not available to other investors or the
general public)
Excessive compensation of executives.

Business Ethics
Ethics The principles of behavior that distinguish between
right and wrong.
Business Ethics The evaluation of business activities and
behavior as right or wrong.

Ethical standards in business are based on commonly accepted

principles or behavior established by the expectations of

society, the firm, the industry and an individuals personal
values.
A violation of ethics makes trust and goodwill difficult to
maintain.

Factors Influencing Ethical Behavior

The Business Environment

Business managers are challenged to meet sales

quotas, cut costs, increase efficiency or overtake
competitors (survive by deception or cheating).

Conflict of interest (offer special favors or gifts, bribes)

damages the organization in the long run.

Factors Influencing Ethical Behavior

The Organization
Individuals learn from ethical and unethical behaviors
by interacting with others in the organization.
By rewarding for ethical conduct and punishing
unethical behavior may help the organization to
promote ethical behavior among the employees.

Factors Influencing Ethical Behavior

The Individual
A persons own moral philosophy influences his or her
ethical behavior
Moral philosophy the set of principles (learned from
family, school, co-workers, friends) that dictate
acceptable behavior.

Developing Moral Philosophy

Individuals can follow two approaches:
1. Humanistic Philosophy
A set of moral principles focusing on individual rights
and values
Individuals & organizations adopting this philosophy
would honor their moral duties to customers and

Developing Moral Philosophy

2. Utilitarian Philosophy
A set of moral principles focusing on the greatest good
for the largest number of people
CNG case in Bangladesh

Vaccine Tests on Children

Encouraging Ethical Behavior

Many organizations take positive steps to encourage
ethical behavior. (Ethics training programs etc.)

A basic way for an organization to encourage ethical

behavior is to establish a code of ethics (a statement
spelling out exactly what an organization considers
ethical behavior)

Encouraging Ethical Behavior

Whistle Blower are employees who inform superiors,
the media or a government regulatory agency about
unethical behavior within an organization (they often
risk great professional and personal danger by
reporting the unethical behavior of others)
Efforts to encourage ethical behavior will be effective
only with the support of top-level management.