1. Chapter-03 Ethics and Corporate Social Responsibility
Dr. Gehan Shanmuganathan, (DBA)

2. Nestle India and social responsibility…..

3. Nestle India and social responsibility…..
Vested in solving nation’s water problem while producing its products locally
Nestle cater to Indian market with milk products, prepared dishes, cooking aids, and some beverages that are staples to Indian consumers
The company has introduced a water education program, bored wells for nearly 100 village schools for children and teaches hygiene programs
Nestle wants to create value for its shareholders and generate long-term values for society
Social responsibility leads to long term profits through corporate brand equity

4. Objectives

5. Chapter Objectives…
Identify the philosophical principles behind business ethics.
Explain how values relate to ethics.
Identify factors contributing to lax ethics and common ethical temptations.
Apply a guide to ethical decision making.
Describe the stakeholder viewpoint of social responsibility and corporate social performance.
Present an overview of social-responsibility initiatives.
Summarize how managers can create an environment that fosters ethically and socially responsible behavior and the benefits of such activity 2

6. Business ethics

7. Definition
Business Ethics is the study of right and wrong and off the morality of the choices individuals make. An ethical decision or an action is one that is right according to some standard of behavior. Business ethics is duplication of moral standards to business situations.
Ethics is the study of moral obligation, or separating right from wrong

8. What research findings say…
Ethics is subjective- head-on advertising in the US
Customers, suppliers, and employees prefer to deal with ethical companies
Majority of full-time workers said that it is critical to work for an organization that is ethical
More than one in three workers said they have left a job because of ethical misconduct by fellow employees or managers
82% of workers said they would like to receive less pay if they worked for an ethical company

9. Moral Intensity The magnitude of an unethical act
A person might behave unethically if the magnitude of the consequence is low and versa vice-versa
Manager’s plagiarism on someone’s speech or unauthorized copy of software could be considered as ethical
Same manager might hesitate to sexually harass a business intern
The social consensus- degree of peer agreement
One would be hesitant to engage in an act if his or her peers think it is unethical

10. Philosophical Principles Underlying Business Ethics

11. Philosophical Principles of Business Ethics
4.2
Philosophical Principles of Business Ethics
Consequences - If no one gets hurt, the decision is ethical.
When attempting to decide what is right and wrong, managers can focus on:
Duties, obligations, and principles - If a decision violates a universal principle, it is unethical.
Integrity - If the person in question has good character, a genuine motivation and intention. 3

12. Psychological basis for ethical behavior
Cognitive area-
Pertinent
Experience
stimulus
Perception
attitude
First, second, and third hand experiences

13. Some concepts under consequences based ethicality
Pragmatism
focusing on consequences “the belief is that there are no absolute principles or standards, and no objective truth and no objective reality”
“The reality is whatever that works”
E.g- Bernard L.Madoff the former Nasdaq chairman thought that lying to customers was pragmatic
Utilitarianism
The utility of the decision
The net balance of good consequences verses bad

14. Values and Ethics

15. Values and Ethics Values are closely related to ethics
Values are clear statements of what is critically important
Ethics become the vehicle for converting values into actions
E.g- we put people before profits (value)
Avoiding delay payments to employees, and suppliers
Excellent customer service (value) and infrastructure for performance

16. Values and ethical behavior
Competitive Advantage
Values
Quality
Customer service
Ecological consciousness
Social responsibility
Cost consciousness
Teamwork

17. Sources of Unethical Decisions and Behavior

18. Research reveals (survey of 2852)
Lying to employees (19%)
Engaging in conflicts of interest (16%)
Lying to outside stakeholders (12%)
Engaging in health and safety violations (11%)
Producing poor product quality (9%)
Stealing (9%)
Sexual harassment (7%)

19. Factors Contributing to Ethical Problems
4.3
Factors Contributing to Ethical Problems
An individual’s desire to maximize self-gain at the expense of others
An organizational atmosphere that condones unethical behavior
Moral laxity - slippage in moral behavior because other issues seem more important
Pressure from higher management to achieve organizational goals
Strength of relationships among people 4

20. Ethical Temptations and Violations

21. Ethical Temptations and Violations
4.4
Ethical Temptations and Violations
Stealing from employers & customers
Illegally copying software
Accepting bribes for doing business with other companies
Treating people unfairly
Misuse of corporate resources
Sexual harassment
Divulging confidential information
Corporate espionage
Conflict of interest 5

22. Business Scandals as Ethical Violations

23. Business Scandals as Ethical Violations
Internet fraud
Identity theft
Work-at-home (such as making you as an agent for transferring funds received from customers)
Consequences of these scandals are,
Job losses
Wiping out pension funds
Investments losses
Bankruptcy

24. A Guide to Ethical Decision Making

25. A Guide to Ethical Decision Making
4.5
A Guide to Ethical Decision Making
Is it right?
Is it fair?
Who gets hurt?
Would you be comfortable if the details of your decision were reported on the front page of your newspaper or throughout the company?
Would you tell your child to do it?
How does it smell? Based on intuition 6

26. Corporate Social Responsibility

27. Corporate social responsibility
The idea that firms have obligations to society beyond their economic obligations to owners or stockholders and also beyond those prescribed by law or contract

28. Three components of social responsibility
Cognitive component
Thinking about the organization’s relationships with its parties at interest
Linguistic component
Explaining the organization’s reasons for engaging in certain activities and how it goes about sharing these explanations with others
Conative component
What the firm actually does along with the commitment and consistency it shows in conducting its acts of social responsibilities

29. Stockholder versus Stakeholder Viewpoints

30. Stockholder versus Stakeholder Viewpoints
Stockholder viewpoint
The traditional perspective on social responsibility that a business organization is responsible only to its owners and stockholders
Stakeholder viewpoint
The viewpoint of social responsibility contending that firms must hold themselves responsible for the quality of life of the many groups affected by the firm’s actions

31. The Stakeholder Viewpoint of Social Responsibility
4.6
The Stakeholder Viewpoint of Social Responsibility
Owners
Stockholders
Internal Stakeholders
Employees
The Organization
Board of Directors
Customers
Suppliers
Creditors
Labor Unions
External Stakeholders
Competitors
Special Interest Groups
Customer Groups
Government Agencies
Financial Institutions
Adapted from Exhibit 4.4 7

32. Corporate Social Performance

33. Corporate Social Performance
The extent to which a firm responds to the demands of its stakeholders for behaving in a socially responsible manner
Discuss how Wal-Mart controls its supplies in order to achieve their cost advantage as an irresponsible corporate citizen in performing its social responsibility (lay-offs of employees of suppliers) discuss the bargaining power of Wal-Mart

34. Corporate Social Responsibility Initiatives

35. Social Responsibility Initiatives
4.7
Environmental Management
Work/Life Programs
Compassionate Downsizing
Social Responsibility Initiatives
Acceptance of Whistle Blowers
Creating opportunities for
Diverse workforce
Community Redevelopment Projects 8

36. Corporate social responsibility initiatives
Philanthropy
Donate money to charity and other various causes
Work/Life Programs
Programs that the employees could balance the demands of work and personal life
Community Redevelopment Project
Investing on rebuild distressed communities
Acceptance of Whistle-Blowers
Employees who disclose organizational wrongdoing to parties who could take actions
Compassionate Downsizing
Controlling the downsizing to the minimum level
Opportunities for diverse workforce

37. Environmental Protection

38. Environmental Protection
Environmental protection is a concern the organization have in managing sustainable environment or “going green”
Going green is an approach to defining and creating processes that are
Environmentally friendly
Economically viable
Pragmatic in the long run

39. Some methods to manage
Commit to lowering carbon dioxide and other hazardous emissions
Developing green supply chain
Make sustainability and eco-friendly policies in the business plan
Implement four-day workweek
Manufacture and sell products with recycled materials
Invest heavily in recycling
Plant a rooftop garden on your office building or factory

40. Creating an Ethical and Socially Responsible Workplace

41. Creating an Ethical and Socially Responsible Work Place
4.8
Creating an Ethical and Socially Responsible Work Place
Create formal mechanisms to monitor ethics
Provide written codes of conduct
Offer training programs
Confront ethical deviations
Lead by example
Talk about the issues 9

42. Benefits Derived from Ethics and Social Responsibility

43. Virtuous circle
The relationship between investment on social responsible projects and financial performance where corporate social performance and corporate financial performance feed and reinforce each other

44. Virtuous circle Investments on Socially responsible Financial Projects
Performance

45. What we learned….
Identify the philosophical principles behind business ethics.
Explain how values relate to ethics.
Identify factors contributing to lax ethics and common ethical temptations.
Apply a guide to ethical decision making.
Describe the stakeholder viewpoint of social responsibility and corporate social performance.
Present an overview of social-responsibility initiatives.
Summarize how managers can create an environment fosters ethically and socially responsible behavior and the benefits of such activity 2

46. Questions…….

47. Write five key things (areas) that you can critically remember in today’s discussion

48. Weekly assignment- 03
“Organizations have to be much profit oriented than being socially responsible, especially during an economic depression”. Do you agree or disagree? Discuss.