Unit 1.pptx : Introdution to Ethics in Business

CSR and CG

1. CHAPTER 1 INTRODUCTION

2. Concept of Business Ethics “Business situations, activities, and decisions where the issue of right and wrong are addressed… [meaning] morally right or wrong as opposed to, for example, commercially, strategically, or financially right or wrong.” (Crane and Matten, 2010) Ethical responsibilities embody those activities, standards, norms, and practices that concern for what consumers, employees, shareholders, and the community regard as fair, just, or in keeping with the respect or protection of stakeholders’ moral rights.

3. Important Agendas of Business Ethics Fair employment practices. Fair wages Safe working conditions Product safety and quality Honest advertising Telling truth while serving customers Make a profit through honest pricing Provide accurate financial data to stakeholders Reasonable return on invested capital No cheating in commercial dealings. Fair supply chain management. Use natural resources sustainably. Honesty in environmental issue Respect human rights Law abiding.

4. Importance of Ethics in Business Prevent from effect of malpractices Business malpractices have the potential to inflict enormous harm on….. Stop business malpractices Promote ethical stance Avoiding negative publicity Ensure smooth functioning Payback from ethical business Builds trust in customer relationships, supplier relationships, employee relations Benefits from ethical business “Attract and Retain” – customers, employees, investors. Away from legal penalties and interferences. Sustainable Business.

5. Myths about Business Ethics BE is an oxymoron It’s easy to be ethical More about religion than management Hire only ethical people, So BE is not needed in future Discipline led by philosophers, academics and theologians Ethics can’t be managed We’re ethical because we did not break the law BE and Social responsibility are same. BE is superfluous Business of a business is business

6. Moral reasoning Moral reasoning means process of determining right and wrong in a given situation It is a reflection of moral development level (Heinz’s dilemma) Level 1:  Preconventional Level Stage 1 : Obedience and punishment orientation Fear of punishment and obedience to authority. Stage 2: Self Interest orientation Pursuit of personal rewards and needs. Level 2:  Conventional Level Stage 3: Interpersonal accord and conformity Seeking social approval and being a "good person". Stage 4: Authority and social order maintaining orientation Adherence to social rules and laws for maintaining social order. Level 3:  Postconventional or Principled Level Stage 5: Social contract orientation Considering individual rights and the flexibility of laws for the greater good. Stage 6: Universal ethical principles Acting based on self-chosen ethical principles that are universal and abstract.

7. Level Stage Definition Response to Heinz Dilemma Preconventional 1. Avoiding Punishment Moral reasoning is based on direct consequences. Heinz should not steal the drug because stealing is illegal, and he could be punished.   2. Self-Interest Actions are seen in terms of rewards rather than moral value. Heinz should not steal the drug because stealing is illegal, and he could be punished. Conventional 3. Good boy attitude Good behavior is about living up to social expectations and roles. Heinz should steal the drug because, as a good husband, he is expected to do whatever he can to save his wife.   4. Law & Order Morality Moral reasoning considers societal laws. Heinz should not steal the drug because he must uphold the law and maintain societal order. Postconventional 5. Social Contract Rules are seen as social agreements that can be changed when necessary. Heinz should steal the drug because preserving human life is a more fundamental value than property rights.   6. Universal Principles Moral reasoning is based on universal ethical principles and justice. Heinz should consider non-violent civil disobedience or negotiation with the pharmacist. The decision reflects a conflict between property rights and the sanctity of human life.

8. The Morality of Profit Motive Understanding the nature and morality of the profit-motive starts with the examination of some given factors and assumptions in which the idea of profit-motive operates. These factors are the following: Profit-motive in business is an ethical Issue. Since business is an integral part of society, its activities including profit-making, must be examined from the perspective of morality. Profit- motive as an ethical issue operates within the two important aspects of our human conduct-freedom and the structure of business. The element of freedom implies that businessman have the right to decide on the amount of profit they want to earn in the process of selling goods and services to customers

9. Good and Bad Side of Profit ( Moga , S.J. (2004)) The Good Side of Profit-Motive 1. Profit-motive motivates people to do something meaningful. 2. Profit-motive promotes ingenuity and cleverness in running a business. 3. Profit-motive makes people productive. 4. Profit-motive generates potential capital for the business. The Bad Side of Profit-Motive 1. Profit-motive promotes rivalry among competitors. 2. Profit-Motive makes people focus only on making money. 3. Profit-motive turns the businessman from being a reflective and a questioning person because he focuses his attention only on the practical activity of making money. 4. Profit-motive promotes self interest rather than the common good

10. Ethical Considerations of Profit-Motive in Business Profit as a Valid Business Goal Earning profit is essential for the viability of any business. Profit-motive is a fundamental driver of commercial activities. Ethical consideration is necessary when pursuing profit, including fairness to customers and consideration of various cost factors. Caution Against Excessive Profit Excessive profits are seen as negative due to fostering greed, avarice, and potential customer manipulation. Profit Isn't Everything Profit should not be the sole focus of business. Other important factors include customer satisfaction, environmental responsibility, enhancing quality of life, and preserving society.

11. Ethics and Philosophy

12. ETHICS VS MORALITY Exhibits: Lawyer’s Duty Abortion

13. BENEFITS OF BUSINESS ETHICS Employee Commitment and Trust Includes job satisfaction, monetary rewards, social status, position, working environment Reduces Ambiguity with regards to roles and behaviors of employees Provides clear sense of expectations Employees strongly value their identity and membership with the firm Develop commitment and loyalty towards organization Investor Loyalty and Trust Involves transparency on standards of conduct Ethical business is foundation for efficiency, productivity, profits and sustainable growth Ethical investment- Integration of ethical values and social and environmental considerations intoi investment decisions, rather than based solely on financial calulations .

14. Customer satisfaction and trust Enhanced Reputation and Trust: Ethical business practices build a positive reputation and trust, which are crucial for customer satisfaction. Customer Loyalty: Ethical behavior leads to customer loyalty, resulting in repeat business. Positive Word-of-Mouth: Satisfied customers are more likely to recommend your business, leading to organic growth. Competitive Advantage: Ethical businesses can stand out in a competitive market, attracting more customers. Improved Employee Morale: Ethical practices lead to happier employees who provide better customer service. Stronger Stakeholder Relationships: Ethical behavior builds trust with stakeholders, which can benefit customers indirectly. Ethical Innovation: Ethical considerations can drive innovative products and services, meeting customer values.

15. Contributes to enhance Profit Most executives and conglomerate leaders believe there is positive correlation between ethics and long-run profitability. Ethical behavior helps to: Avoid fines and legal expenses. Build public Trust Attract business from customers who appreciate ad support corporate policies Support economic viability of the communities in which it operates Attract and keep employees of highest aliber

16. CODE OF CONDUCT A code of conduct is  a set of values, rules, standards, and principles outlining what employers expect from staff  within an organization. When designing a code of conduct policy for an organization: Alignment with Values and Mission: Ensure that the code reflects the organization's core values and mission, serving as a guide for employees to uphold these principles. Legal and Regulatory Compliance: Make sure the policy complies with all relevant laws and regulations in the jurisdictions where the organization operates. Clarity and Simplicity: Write the code in clear and understandable language, avoiding complexity to ensure easy comprehension. Responsibility and Accountability: Clearly outline who is responsible for enforcing the policy and what consequences individuals may face for violations. Be transparent about the reporting process. Training and Education: Develop training programs to educate employees about the code of conduct. Ensure that all employees, including new hires, receive proper training. Accessibility: Make the policy easily accessible to all employees through various channels, such as the company intranet, employee handbook, and physical copies if necessary. Regular Review and Updates: Commit to regularly reviewing and updating the code of conduct to adapt to changing laws, industry standards, and organizational needs.

17. Meaning of CSR Arguments: Responsibility towards 3Ps (People, Planet, Profit) Conjoint with sustainable management, corporate citizenship, triple bottom line, environmental and social stewardship, stakeholder management, corporate philanthropy, or strategic(cause-related) marketing. According to Milton Friedman in capitalism and Freedom, There is only one social responsibility of business- to use in resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.

18. Importance of CSR To: Stakeholders Employees Customers Creditors Shareholders Government Community Trade Unions Business Associations Intergovernmental Organization

19. Evolution of CSR

20. A Moral Argument of CSR 1. Argument based on Shareholder’s wealth 2. Argument based on symbiotic relationship with society 3. Argument based on concern for future generation 4. Argument based on negative externalities 5. Argument based on corporate power

21. Rights-based Perspective Rights-based ethics centers on the protection and respect for individual rights. CSR can be seen as morally necessary from this perspective because it safeguards and respects the rights of various stakeholders, including employees, consumers, and the community. For example, ensuring fair wages, safe working conditions, and nondiscriminatory practices in the workplace upholds employees' rights. Similarly, providing accurate product information and ensuring product safety respects consumers' rights. By honoring these rights, corporations fulfill their moral duty to respect the inherent dignity and autonomy of individuals and groups affected by their actions.

22. Utilitarian Perspective Utilitarianism is a moral theory that evaluates actions based on their ability to maximize overall happiness or minimize suffering. From a utilitarian viewpoint, CSR is morally justified because it can lead to greater overall well-being. When companies engage in CSR activities such as supporting local communities, reducing environmental harm, or promoting fair labor practices, they contribute to a more just and sustainable society. This, in turn, can lead to increased social harmony, reduced poverty, and improved environmental conditions, ultimately benefiting the greatest number of people and maximizing overall happiness.

23. Deontological Perspective Deontological ethics, often associated with philosophers like Immanuel Kant, emphasizes the importance of moral duties and principles. From a deontological standpoint, CSR is justified because it aligns with the moral duty of corporations to act ethically and responsibly. Corporations have a duty not only to maximize profits but also to respect human rights, protect the environment, and contribute positively to society. By fulfilling these moral obligations, companies uphold their duty-based ethical responsibilities, making CSR morally imperative.

24. Virtue Ethics Perspective Virtue ethics focuses on the character and virtues of individuals and organizations. From a virtue ethics standpoint, CSR is morally justifiable because it helps cultivate virtuous corporate behavior. Engaging in socially responsible activities encourages companies to develop virtuous qualities such as compassion, empathy, and integrity. These virtues not only benefit the company itself by enhancing its reputation and fostering trust among stakeholders but also contribute to a more virtuous and ethical business culture in society.

25. Increasing relevancy of CSR Earning profit by serving the society. 1. Tragedy of the commons 2. Complaint faced by the companies 3. Firm based positivity

26. CSR and Business Ethics Social responsibility vs ethics Carroll (1979) positioned ethical responsibility. CSR and Business Ethics- Overlapping entities yet conflicting. Various models of CSR (discussed in next slide)

27. Carroll Four Domains/ Pyramid of CSR: Given in 1979; Revised in1991

28. TRIPLE BOTTOM LINE Elkington(1997)

29. THREE DOMAIN MODEL Schwartz and Carroll (2003)