Introduction to Business Module No. 005 Business Ethics and Social Responsibility By Muhammad Shahid Iqbal What is Ethics ⚪ ⚪ ⚪ ⚪ Ethics: Principles, values, and beliefs that deﬁne what is right and wrong decisions and behavior. Business ethics is the application of ethical behavior in a business context. Acting ethically in business means more than simply obeying applicable laws and regulations: It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers. If you’re in business you obviously need a strong sense of what’s right and wrong. You need the personal conviction to do what’s right, even if it means doing something that’s difﬁcult or personally disadvantageous. Views of Ethical Behavior ⚪ ⚪ ⚪ ⚪ Utilitarian View: Where moral behavior is that which delivers the greatest good to the greatest number of people. It denominated business decision making because it’s consistent with goals like efﬁciency, productivity and high proﬁts Individual View: The value of individualism is based on independence and making choices for oneself. An individual has “the right to act as an autonomous agent” Moral-Rights View: Where moral behavior is that which respects fundamental rights shared by all human beings. Justice View: Where moral behavior is that which is impartial, fair, and equitable in treating people and making decision (Procedural and Distributive Justice). The goal is to equitably distribute beneﬁts and costs. Ethical dilemmas ⚪ ⚪ ⚪ An ethical dilemma occurs when someone must decide whether or not to pursue a course of action that, although offering the potential of personal or organizational beneﬁt or both, may be considered potentially unethical. Most ethical dilemmas involve conﬂicts with superiors, customers, and subordinates. These are situations real or imagined where a person must choose between courses of action, all of which are morally unacceptable. Issues of Honesty and Integrity: Honesty is a good policy. i.e. is it OK to accept a pair of sports tickets from a supplier? Conﬂicts of Interest and loyalty: occur when individuals must choose between taking actions that promote their personal interests over the interests of others. i.e. can I buy ofﬁce supplies from my brother-in-law? Ethical dilemmas ⚪ ⚪ Bribes versus Gifts: It’s not uncommon in business to give and receive small gifts of appreciation, but when is a gift unacceptable? When is it really a bribe? i.e. is it appropriate to donate company funds to a local charity? Whistle-Blowing : an individual who exposes illegal or unethical behavior in an organization. i.e. if I ﬁnd out that a friend is about to be ﬁred, can I warn her? How ﬁrms can shape ethical conduct ⚪ ⚪ ⚪ Hiring Criteria: the place to begin with hiring. Job applicants differ in their personal ethical standards. Tests, interviews, and references used in the employee selection process should include ethical issues as well as technical aspects of the job. For example Integrity tests which measures applicant’s dependability, carefulness, responsibility and honesty. Behavior of senior Managers: Ethical standards ﬂow from top of the organization. What seniors mangers say and do goes a long way towards setting a ﬁrm’s ethical climate. They should address ethical issues that ensure that their behavior act as role model for other. Code of ethics: this is a formal document that states organization's primary values and ethical rules it expects its employees to follow. These codes specify that everyone is expected to obey all laws and then address issues. How ﬁrms can shape ethical conduct ⚪ ⚪ Employee protection mechanism: effective ethics programs create protection mechanisms for employees who reveal unethical practices. The organization needs to provide formal mechanisms so that employees can discuss ethical dilemmas and report unethical behavior without fear. This might include creation of ethical counselors, or ethical ofﬁcers, a clearly worded statement which indicate that organization will take no punitive action who report unethical practice or blow the whistle on violators. Offer ethical training: Set up seminars, workshops, and similar ethical training programs. Use these training sessions to reinforce the organization’s standards of conduct, to clarify what practices are and are not permissible, and to address possible ethical dilemmas. How ﬁrms can shape ethical conduct ⚪ ⚪ Employee Goals: care need to be taken in setting employee goals. When management sets unrealistic high expectations. It puts pressure and stress on employees. This can lead an attitude that can undermine ethical standards. Goals should be challenging but never so high as to encourage employees to achieve ends regardless of means. Performance Evaluation Criteria: Performance appraisals of managers should include a point-by-point evaluation of how his or her decisions measure up against the organization’s code of ethics. Appraisals must include the means taken to achieve goals as well as the ends themselves. People who act ethically should be visibly rewarded for their behavior. Just as importantly, unethical acts should be punished. Code of Ethics Code of Ethics Code of Ethics From Obligations to Responsiveness to Responsibility ⚪ ⚪ Social Obligation: is when a ﬁrm engages in social actions because of its obligation to meet certain economic and legal responsibilities. The organization does what it’s obligated to do and nothing more.. e.g. Government regulations bound: Proper disposal of Tanneries Waste, non discrimination against employees. It reﬂects the classical view. Social Responsiveness: is when a company engages in social actions in response to some popular social need. Managers are guided by social norms and values and make practical, marketoriented decisions about their actions. e.g. PSO program for reduction of pollution; Ariel’s campaign for SOS villages, Child care centers, Ford Motor endorse a federal ban on sending text messages while driving. From Obligations to Responsiveness to Responsibility ⚪ ⚪ Social Responsibility: A socially responsible organization views things differently. It goes beyond what it’s obligated to do or chooses to do because of some popular social need and does what it can to help improve society because it’s the right thing to do. We deﬁne social responsibility as a business’s intention, beyond its legal and economic obligations, to do the right things and act in ways that are good for society. This deﬁnition assumes that a business obeys the law and cares for its stockholders, but adds an ethical imperative to do those things that make society better and not to do those that make it worse. A socially responsible organization does what is right because it feels it has an ethical responsibility to do so.