Chapter Thirteen

Business Ethics and social Responsibility of organisations

Introduction
What is Social responsibility? Two views: The classical View:this view says that managements only social responsibility is to maximise profits. M.Friedman argues that managers primary responsibility is to operate the business in the best interests of the stockholders.
2

Introduction
The Socioeconomic view: The view that management s social responsibility goes beyond making profits to include protecting and improving societys welfare.This position is based on the belief that corporations are not independent entities responsible only to stockholders. They also have a responsibility to the larger society that endorses their creation through various laws and regulations and support them by purchasing their products and services.
3

Social Responsibility
CSR can no longer be ignored an ethical approach to doing business. CSR It is a relatively new line of study but its roots go back to some of the key philosophical debates over ethics, values, equity and equality.

Social Responsibility
Hartley (1993) interest of firm is best served by giving attention to public interest, & Seeking trusting relationship with various stakeholders Society best served firm has to consider a whole range of competing objectives
5

CSR
CSR is viewed as a comprehensive set of policies, practices and programs that are integrated into business operations, supply chains, and decision-making processes throughout the company -- wherever the company does business -- and includes responsibility for current and past actions as well as future impacts. In its simplest terms it is: what you do, how you do it, and when and what you say.
6

CSR
linked with the principles of Sustainable Development which argue that enterprises should be obliged to make decisions based not only on financial/economic factors (e.g. Profits, Return on Investment, dividend payments etc.) but also on the social, environmental and other consequences of their activities.
7

CSR
Interest in the role of businesses in society has been promoted by increased sensitivity to and awareness of environmental and ethical issues. Issues like environmental damage, improper treatment of workers, and faulty production that inconveniences or endangers customers are highlighted in the media.
8

CSR
There is a growing body of data -quantitative and qualitative -- that demonstrates the bottom-line benefits of socially responsible corporate performance.
-

Reduced Operating Costs Improved Financial Performance Enhanced Brand Image and Reputation Increased Sales and Customer Loyalty Increased Productivity and Quality Increased Ability to Attract and Retain Employees
9

CSR
Improved Financial Performance: Business and investment communities have long debated whether there is a real connection between socially responsible business practices and positive financial performance. A 2002 DePaul University study -- showed that overall financial performance of the 2001 Business Ethics Best Citizen companies was significantly better than that of the remaining companies in the S&P 500 Index, based on the 2001 BusinessWeek ranking of total financial performance. The ranking was based on eight statistical criteria, including total return, sales growth, and profit growth over the oneyear and three-year periods, as well as net profit margins and return on equity.
10

CSR
Reduced Operating Costs: Some CSR initiatives can reduce operating costs dramatically. For example, many initiatives aimed at improving environmental performance -- such as reducing emissions of gases that contribute to global climate change or reducing use of agrochemicals -also lower costs. Many recycling initiatives cut wastedisposal costs and generate income by selling recycled materials. In the human resources arena, flexible scheduling and other work-life programs that result in reduced absenteeism and increased retention of employees often save companies money through increased productivity and reduction of hiring and training costs.
11

CSR
Enhanced Brand Image and Reputation Customers often are drawn to brands and companies with good reputations in CSR-related areas. A company considered socially responsible can benefit both from its enhanced reputation with the public as well as its reputation within the business community, increasing a companys ability to attract capital and trading partners. A 2001 Environics International CSR Monitor survey showed that the factors most influencing public impressions of companies were social responsibility (49%); brand quality/reputation (40%); and business fundamentals (32%).

12

CSR
Increased Sales and Customer Loyalty A number of studies have suggested a large and growing market for the products and services of companies perceived to be socially responsible. While businesses must first satisfy customers key buying criteria -- such as price, quality, availability, safety and convenience -- studies also show a growing desire to buy (or not buy) because of other valuesbased criteria, such as sweatshop-free and child-labor-free clothing, lower environmental impact, and absence of genetically-modified materials or ingredients. A 2002 Cone Corporate Citizenship Study found that of U.S. consumers who learn about a firms negative corporate citizenship practices, 91% would consider switching to another company, 85% would pass the information to family and friends, 83% would refuse to invest in that company, 80% would refuse to work at that company and 76% would boycott that companys products.
13

CSR
Increased Productivity and Quality Company efforts to improve working conditions, lessen environmental impacts or increase employee involvement in decisionmaking often lead to increased productivity and reduced error rate. For example, companies that improve working conditions and labour practices among their suppliers often experience a decrease in merchandise that is defective or cant be sold.
14

CSR
Increased Ability to Attract and Retain Employees Companies perceived to have strong CSR commitments often find it easier to recruit and retain employees, resulting in a reduction in turnover and associated recruitment and training costs. Even in difficult labour markets, potential employees evaluate a companys CSR performance to determine whether it is the right fit. For example, a survey conducted by The Aspen Institute Initiative for Social Innovation through Business between 1999 and 2001 found more than half of MBA students would seek another job if they found that their values conflicted with the business where they 15 work.

CSR-Corporate Social Responsibility

Sometimes referred to as corporate citizenship World Business Council for Sustainable Development defines CSR as the business commitment and contribution to the quality of life of employees, their families and the local community and society overall to support sustainable economic development. Concept is not restricted to corporations but rather is intended for most types of organizations, such as associations, labour unions, organisations that serve the community for scientific, educational, artistic, public health or charitable purposes, and governmental agencies.
16

CSR -cases
CIEL GROUP Social responsibility and community welfare are important values for Ciel Group and in year 2004, the group has taken long term commitment by launching Fondation Nouveau Regard. The object of the foundation is to help the underprivileged and the drop-outs to recover their dignity and place in the Mauritian community and to become fully fledged citizen of our country. The foundation will work closely with NGOs which through their specific actions also promotes universal values such as tolerance, non discrimination and equal opportunity. The foundation sphere of actions includes: relief of poverty, education & training, health, drugs, alcohol and handicap. The foundation will, whenever possible and relevant invite NGOS to provide training and awareness on their objects to the personnel of the Ciel group and the later will be invited to participate in volunteer work and actions. Financial assistance will only be considered on application.

17

CSR -Cases
Barclays Mauritius
Programme is spending 1% of its profits before tax towards community projects. Barclays sponsorship is about people. There are three schemes from which the communities can benefit which involve the employees Rupee for Rupee Matching: Funds between Rs 1,000 & 30,000 raised by each employee three times per year during an event, are matched (=doubled). Volunteer 2Day: Each employee can benefit from two free days per year to do volunteering work. This scheme was launched in May 2004 during our PAMOJA campaign to motivate our staff. Pamoja is a Swahili word that means 'Together we can'. We are organising a 'bank of volunteers' that we shall plug in the needs of the organisations around us. Make A Difference Day: each team of 5 staff benefit form funds to help. In 2003, more than 200 Barclays employees participated in this activity in 12 places around the island & in Rodrigues. They were involved in painting, creating vegetable garden, fixing furniture We are working with other companies under the initiative of the Joint Economic Council on a project that looks at improving the situation of ZEP schools. PILS is benefiting from Rs 568,000 for a 7 Days Nationwide Campaign. APEIM (Association de Parents d'Enfants Besoins Spciaux) received a Rs 1.2m donation for new buildings in 2003.

18

CSR -Cases
Infosys Foundation, the philanthropic arm of Infosys Technologies Ltd., came into existence on 4th December 1996 with the objective of fulfilling the social responsibility of the company by supporting and encouraging the underprivileged sections of society. In a short span of time, the Foundation has implemented numerous projects in its chosen areas. The Foundation has undertaken various initiatives in providing medical facilities to remote rural areas, organizing novel pension schemes and in aiding orphans and street children. It has undertaken a large rural education program titled "A library for every school" under which 5500 libraries have been set up in government schools spread across many villages. Other activities include the reconstruction of old school buildings, setting up of rural Science Centers and schemes to provide support to dying traditional art and 19 culture forms.

Ethics
Ethics (from the Ancient Greek "ethikos", meaning "arising from habit"; also Morality), a major branch of philosophy, is the study of value, or morals and morality. It covers the analysis and employment of concepts such as right, wrong, good, evil, and responsibility. Hoofman and Moore (1990) define ethics as the study of what is good or right for people.
20

Ethics
Business ethics is a form of the art of applied ethics that examines ethical rules and principles within a commercial context, the various moral or ethical problems that can arise in a business setting, and any special duties or obligations that apply to persons who are engaged in commerce. what is good and right to business. Debate: There is common perception that the priority of business is to maximise profits (Friedman, 1970)
21

Managerial Ethics
The term ethics refers to rules and principles that define right and wrong conduct.Many decisions that managers make require them to consider who may be affected in terms of result as well as the process.

22

Four views of ethics

Utilitarian view: A view of ethics that says that ethical decisions are made solely on the basis of their outcomes or consequences. The utilitarian view of ethics says that ethical decisions are made solely on the basis of their outcomes or consequences. Utilitarian theory uses a quantitative method for making ethical decisions by looking at how to provide the greatest good for the greatest number.E.g a manager laying off 20% of its workforce is justified because it will increase profitability, improve job security for 80% and be in the best 23 interest of stockholders.

Four views of ethics

Rights view of ethics A view of ethics that is concerned with respecting and protecting individual liberties and privileges such as the rights to privacy, freedom of conscience, free speech, life and safety. This would include, e.g, protecting the free speech rights of employees who report legal violations by their employers.
24

Four views of ethics

Theory of justice view of ethics A view of ethics which managers impose and enforce rules fairly and impartially and do so by following all legal rules and regulations.E.g a manger deciding upon providing the same rate of pay to individuals who are similar in their levels of skills, performance or responsibility and not based on gender, personality, race or personal favorites.
25

Four views of ethics

Integrative social contracts theory- A view of ethics that proposes that ethical decisions be based on existing ethical norms in industries and communities in order to determine what constitutes right and wrong.E.g a manager deciding on the pay rate for new employees will have to consider the existing wage levels in the community.(integrative social contracts)
26

Ethical Considerations
More and more companies are, rightly, developing and publishing value statements and code of ethics. Ethics codes : Guiding principles Ethical standards expected by employees, examples:
Conflicts of interest (Not allowed to do the same business) The giving and receiving of gifts (PBL) Confidentiality Environmental pollution Health and safety Equal opportunities Political activity etc

27

Types of Unethical Misconduct in the Workplace

Abusive or intimidating behavior (most common among senior managers) Misreporting of hours Lying Withholding much needed information
28

What a formal ethics program should include

Written standards of ethical conduct. Training on standards on conduct. An ethics office or telephone advice line. A means to report misconduct anonymously
29

Improving Ethical Behaviour

Managers can do a number of things if they are serious about reducing unethical behaviours in their organizations. They can seek to hire individuals with high ethical standards, establish codes of ethics and decision rules, lead by example, delineate job goals and performance appraisal mechanisms, provide ethics training, conduct social audits and provide support to individuals facing ethical dilemmas.
30