Chapter 4:

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. Responsibility to Consumers Employees Environment Investors A socially responsible firm makes deliberate, regular effort to increase its impact on society while reducing its negative impact.

RESPONSIBILITY TO CONSUMERS

A customer that buys a product votes for its approval and the company providing it. Satisfied customers buys the product again and recommend others to buy it. Dissatisfied customers take business elsewhere.

Customers interests go beyond goods and services evaluating company policies and action on issues like Environmental protection Involvement in weapons production (particularly nuclear weapons) Promotion of women and minorities to upper management positions. Availability of employee benefits, e.g., corporate day-care centres, charitable contributions, etc.

RESPONSIBILITY TO CONSUMERS
Consumerism Includes activities of individuals, groups and organizations aimed at protecting consumer rights. Consumer groups perform many activities Testing and reporting on safety and performance of products and service firms. Informing public and government issues Advocating legislation

RESPONSIBILITY TO CONSUMERS
Four Rights of Consumer 1. 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.

2. The Right to be Informed Right to receive information available about a product before they purchase it. For example - Ingredients, instructions for use, side effects, manufacturing date, expiry date.

RESPONSIBILITY TO CONSUMERS
3. The Right to Choose Right to choose and make purchases from a variety of products at competitive prices. Right to expect quality service at a fair price. 4. The Right to be Heard Right to have consumers opinions considered in the formation of government policies and in business firms decisions that affect them. Responsible firms attempt to address consumer complaints in a satisfactory manner.

RESPONSIBILITY TO EMPLOYEES
Business firms need to incorporate employees expectations into their policies and practices. 1. Safety in the work place Ensuring health safety Protection from fire hazard Safe design of plant layout. 2. Equality in workplace Fair compensation Equal opportunities (regardless of age, race, gender, religion or national origin) Adequate benefits (Health insurance, vacation etc).

RESPONSIBILITY TO ENVIRONMENT
Address peoples concern over business decisions and actions over ecology and environment around the world. Pollution Water pollution- caused by dumping of chemicals, sewage and garbage into rivers etc. and by using pesticides and fertilizers etc. Land pollution- resulting 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. **Greenhouse effect-Emission of CO2 heating atmosphere and raising sea level

RESPONSIBILITY TO INVESTORS
Business firms have responsibility to the people who invest money in them. Proper Management of Fund Access to Information 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 behaviour established by the expectations of society, the firm, the industry and an individuals personal values. Violation of ethics makes trust and goodwill difficult to maintain.

FACTORS INFLUENCING ETHICAL BEHAVIOR

1. The Business Environment Business managers are challenged to meet sales quotas, cut costs, increase efficiency or overtake competitors Business managers often resort to surviving by deception or cheating. Conflict of interest - offering special favors or gifts, bribes damages the organization in the long run.

FACTORS INFLUENCING ETHICAL BEHAVIOR

2. The Organization Individuals learn from ethical and unethical behaviors by interacting with others in the organization. Reward for ethical conduct and punishment for unethical behaviour may stop recurrences of unethical conducts and help promote ethical behaviour among the employees. 3. The Individual A persons own moral philosophy (a set of principles that dictate acceptable behaviour

FACTORS INFLUENCING ETHICAL BEHAVIOR

Developing Moral Philosophy 1. Humanistic Philosophy A set of moral principles focusing on individual rights and values Individuals & organisations adopting this philosophy would honour their moral duties to customers and workers Replacing faulty product. 2. Utilitarian Philosophy A set of moral principles focusing on the greatest good for the largest number of people May adversely affect few but beneficial for the greater mass.

ENCOURAGING ETHICAL BEHAVIOR

Many organizations take positive steps to encourage ethical behavior. (Ethics training programs etc.) Code of ethics Statement spelling out exactly what an organisation considers ethical behavior. Whistle Blowers Employees who inform superiors, the media or a government regulatory agency about unethical behaviour within an organisation 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.