Business Ethics and Social Responsibility

Meaning

The Social responsibility of business refers to the obligation of business to follow those lines of action which are desirable in terms of the objectives and are valuable to the society.

In real sense, the assumption of social responsibilities implies recognition and understanding the aspirations of society and the determinations to contribute to its achievement.

Different Ethical Views on Social Responsibilities

Communist View

Advocates the imposition of social responsibilities through the instrumentality of the state.

Communists hold that free industrial civilization is not good because its values are of the wrong order, and the Business is concerned only with material gain.

Capitalist View

Business has an unrestrained and uncontrolled right to make money free from all sorts of social responsibilities.

With profit objective, the business gratifies its personal desires and at the same time satisfies the needs of the society.

Therefore, business should not have any responsibilities beyond obeying certain legal codes in achieving its goals

Pragmatic View

Acknowledges the importance of profit but simultaneously stress the need for social responsibility.

An organization’s first responsibility is to keep the business solvent. A sick company can not contribute toward society.

Hence the business must voluntarily assume the responsibilities towards the society.

Trusteeship View

Advocated the retention for personal use so much as is necessary & the utilization of the rest for the welfare of the society.

The slogan is ‘ Enjoy the wealth by renouncing it’, says earn by all means but understand that your wealth is not yours, it belongs to people.

Obligation Towards Different Groups

Responsibility towards shareholders/ Owners

Reasonable DividendSound Financial PositionCommunication of InformationProtection of assets

Responsibilities toward workers

Fair wagesGood Working conditionsAdequate service benefits

Like Insurance, medical facilities etc.Coopertaion

For the smooth running of the business

Opportunities for growth Providing training, education etc

Responsibilities towards customers

Need satisfactionRegular flow of goods

Right : Quality, people, time, placeGrievance Handling

To be prompt and courteousRight information

Specially advertisements and promotionsFair practices

Should avoid unethical practices

Responsibilities towards suppliers

To create win-win positionFair transactions and healthy relations

Responsibilities towards Creditors

To provide accurate information regarding the financial position of the org.

Make prompt paymentsFairness in transactions

Responsibilities towards Government

To abide by the laws of the nationTo pay taxes honestlyTo avoid corrupting government employeesTo encourage fair trade practices

Responsibilities towards Society/ Community

Socio economic objectives The society expects that the business uses the scarce

factors of production efficiently and effectively for the satisfaction of the needs of the society

Improvement of local environmentEmployment opportunitiesWelfare activitiesBusiness ethics

Fair trade practices Not to indulge in black marketing Not to issue misleading advertisements

Arguments for Social Responsibility

1. Changed Public Expectations of Business2. Better environment for business

A better society produces environmental conditions more favorable for business

Labor recruiting will be easier and the labor quality will be higher with less turnover and absenteeism.

3. Public image More customers, better employees and more

benefits in the financial market

4. Balance of responsibility with power Business do affect the economy and the society and hence this

power should be balanced with social responsibility5. Moral Responsibility

Because the org posses a big portion of the resources in the economy, they should devote some of it for the betterment of society.

6. Citizenship argument Corporations are institutional members of the society, and

members do have an obligation to improve the society.7. Prevention is better than cure

If business delays to deal with the social problems now, it may find itself constantly occupied with putting out social fires that it has no time to accomplish its routine objective.

Arguments against Social Responsibility

1. Profit maximization The business is most socially responsible when it attends to

its interests and leaves other activities to other institution2. Society has to pay the cost

The cost may be passed on the society Can the society bear the additional costs?

3. Lack of social skill Managers are best at managing the things and they are

hired for that. They may lack social responsibilities.4. Business has enough power already

Therefore it should not be given any more power by entering into social issues

4. Social overhead costs It is the cost on social responsibility which will not benefit the

business immediately Why to spend money on an object the benefits of which only to be

realized in future?5. Lack of accountability

It is impractical to give responsibility where there is no accountability Unless there is some mechanism developed which can provide

accountability, business must stand clear of social activities and pursue its goal of profit where it is directly accountable

6. Lack of broad support The concept lacks support from all groups in society, which may

create friction is the business gets involved There is lack of agreement among general public, intellectuals, in the

government and even in the businessmen.

Business Ethics

Ethics

The word is derived from the Greek word ‘ ethos’ which refers to character, guiding beliefs, standards.

Ethics is that branch of philosophy concerned with moral human character and conduct, it defines the mass moral principles that define what ought to be.

Ethics is A set of standards, or code, or value system Worked out from human reason and experience By which free human actions are determined as

ultimately right or wrong, good or evil

Shift to Ethics

Shift to Ethics

Unlike in the earlier times, business have been observed practicing unethical behaviour.

We are Probably living in the time of ‘Ethics crisis’

Business ethics has been declined for more than last 2 decades.

And the blame for unethical behaviour may shift to the line manager or the competitive markets.

As a result, the public confidence declined.

Shift to Ethics

The present need is to shift to ethics and reposition it.

HOW????

Shift to Ethics

Factors to raise ethical standards1. Public disclosure and publicity2. The increased concern of a well informed public

These factors should be followed by government education and by customer education

Provisions must be made for the enforcementEffective ethical code enforcement requires

demonstration of consistent ethical behaviour support from top management

Tools of Ethics

ValuesRights and DutiesMoral rulesHuman relationshipsCommon moralityMorality of care

Values

Values are set of emotional rules people follow to help make right decisions in life

Values in a sense of integrity, honesty and diligence in people.

Values are used in everyday decision making at work & at home.

Without values people would become corrupt, dishonest and undependable as an individual

Values are related to norms of a culture but they are more general than norms Flying national flag on 15th August is a norm but it reflects the

values of patriotism Corporations also have values, such as size, profitability, or

making a quality product

Rights and Duties

‘Right’ is a concept that describes an action which any individual is entitled to take without any prior consent.

‘Right’ grants a moral sanction to an individual to take a specific action should they choose to do so.

‘Duties’ can be defined as an act of course of action that is required of one by position, social custom, law or religion

Rights are correlated with duties. Whenever someone has right, he has duty to respect it. A duty is an obligation to take specific steps- to pay taxes, for example, and to obey the law in other respects.

Moral Rules

Moral rules are behaviour often become internalized as values.

Morales are often part of a religionSometimes moral codes give way to legal

codes which couple corrective actions with particular practices.

“Do not lie”, “ Do not cheat your friends”

Human relationships

Based on love, like, business or social interactions.

These relationships involve some level of interdependence.

The individual constantly consciously decides how to maintain the relationships.

These actions reflect values, ethics and morals.

Management is all about relationships which has large ethical component.

Common Morality

Common morality is the body of moral rules governing ordinary ethical problems.

BASIC PRINCIPLES OF COMMON MORALITYPromise Keeping

Most people want to have some assurance that other people will do what they say.

Without simple convention of promise keeping, business would be impossible.

Every moral theory thus asserts that the human beings should keep their promises most of the time.

Common Morality

No malevolence Rights and duties provide ways of preventing violent

conflict. If we constantly would have to worry about physical

safety, we would much less willing to trust other people and engage complex dealings that may involve conflicts.

Hence the moral theories require that most of the people most of the time should refrain from harming other human beings

Common Morality

Mutual aid According to the mutual aid, individuals should help

one another if the cost of doing so is not so great. E.g. Blood Donations

Respect for persons Taking other people seriously and not as a means to

our needs. Accepting their interests as legitimate and regarding

their desires as important.

Common Morality

Respect for property Most of the people, most of the time should get the

consent of others before using their property.

Morality of Care

There are two factors of the theory. Justice Perspective

Common among men Emphasizes separateness from others and autonomous

life. They want to protect their right that preserve separation.

Care perspective Common among women It is characterized by sense of connection to others, a life

of love and caring. Views that moral problems arise from conflicting

responsibilities, which often require delicate and conscious interpretation of relationship.

Justice Care

Orientation Separation, Autonomy Attachment, Interdependence

Mode of thinking

Formal; Abstract Contextual, Narrative

Idea of morality

Fairness, rights, equality, primacy of individual “ Formal logic of fairness”

Care, responsibility, primacy of individual “psychological logic of relationships’

Conflict resolution

Balancing rights Communication, protecting relationship

Metaphor of relationship

Hierarchy or balance Network or web