Lecture 3 Social responsibility & ethics

 Social responsibility is the awareness that business activities have an impact on society and firms should consider some voluntary responsibilities besides emphasizing in profits. ◦ Examples: Initiatives for planting trees, encourage in elder education, setting up social ventures, health clinics/ free medical checkups, awarding scholar students, raising funds for the homeless children, recycling reusable containers, etc.

 To whom are we responsible?  How far we should go to satisfy our customers?  Will our decisions affect any individual or group of the society?  Does our business activities jeopardize the environment and area?  Are we doing the right thing?

Consumers Shareholders EmployeesEnvironment Business activities

 Consumers have the right to safety. ◦ Ensure the safety of goods  Consumers have the right to be informed. ◦ Should mention all the information of goods and services  Consumers have the right to choose. ◦ Can buy from anyone at a fair price  Consumers have the right to be heard. ◦ Have the voice to provide an opinion or feedback about any product or service. Business can provide feedback forms or toll free calls to provide opinions or complaints.

 Safety in the workplace ◦ Should comply with the safe working standards  Equality in the workplace ◦ Should treat employees equally regardless of age, race, gender, religion and nationality.  Harmonious environment in the workplace ◦ Should have a good culture of cooperation & respect in the organization so that employees feel better working.

 People are now more concerned about where they live and how they live. Thus having a better environment is one of their priorities.  Business firms have the responsibility that their activities doesn’t affect the environment. ◦ Water pollution ◦ Air pollution ◦ Land pollution ◦ Noise pollution

Environmentally appropriate production technologies Products with Eco-friendly packaging Use smaller resource quantities Products with recyclable materials Eco-centric Management Encourage low energy loss

 Business firms also have a responsibility to the people who invest in them. ◦ Proper management of funds ◦ Fair profits for shareholders ◦ Access to information to shareholders ◦ Avoid insider trading in stock markets ◦ Executive compensation ◦ Manage operational costs rationally

 Community support ◦ Business firms should have provisions for supporting the community by donating to the cause of betterment for the community.  Safety signs for children, sponsoring social programs, academic scholarships, building parks, etc.  Self regulation ◦ Self regulation means having a own regulation. Firms should also have a self standard in their operations and management.  Facing complaints, Customer service, etc.

 Ethics: The principle of behavior that distinguishes between right and wrong.  Business firms should understand the importance of ethics and should be honest with customers.  Violating the trust of customers and others will lead to a failure of that business.  A business ethic will comprise the organization and the individuals who works for that organization. So they should understand what is right or wrong.  A business should also have a code of ethics.

 Organizations must be explicit regarding their ethical standards and expectations ◦ Golden rule  Organizations must have a golden rule of thumb that will be applicable to everyone. Such as: “this will happen if you do that”. ◦ Accepted business practice  Firms can also use a accepted business practice that ”this is the best practice…and we always follow the best practice”.

Financial concerns take priority over ethical considerations Ethics considered from legal or public relations viewpoint Emphasis on short- term revenues Danger Signs No written code of ethics Shareholders concerns take precedence over other constituencies Lack clear procedures for dealing with ethical problems Desire for “quick fix” solutions

Ethical Responsibilities Be ethical Legal Responsibilities Obey the law Economic Responsibilities Be profitable Voluntary Responsibilities Be a good corporate citizen