CORPORATE SOCIAL
RESPONSIBILITY AND GOOD
GOVERNANCE
Chapter 1. Ethics and Business
All business organizations and the entire
society need ethics.
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
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Organizations shall be able to attain
long-term efficiency and betterquality performance, resulting in
attracting and retaining highly
qualified employees and satisfying
stakeholders such as customers,
suppliers, and investors.
Numerous organizations are not able
to execute ethics due to human nature
and mismanagement.
Implementing ethics requires a lot of
time and effort.
Nature of business
“Business is any enterprise which makes,
distributes or provides any service which
other members of the community need and
are willing to pay for it” – Urwick and Hunt.
By its nature, man has unappeasable and
innumerous wants. To satisfy his
unquenchable needs, he works harder to
maximize the use of limited resources around
him.
Making full use of meager resources to the
best satisfaction of human wants is known as
an economic activity. Economic Activities
are those undertaken by man to earn income,
money, and wealth for his life and to secure
the greatest satisfaction of want with
inadequate and limited means.
Categories of Economic Activities
1. Profession
 is an occupation carried out by
professional people like
doctors, lawyers, engineers,
teachers, and others. They

provide specialized services
in return for fees.
To become a professional, a
man requires specialized
knowledge and professional
qualifications.
2. Employment
 Under which one person
provides his services, physical
or mental, to someone else in
return for whom he gets a
salary or wage.
 The person who employs is
called employer and the
person who is employed is
called employee or worker.
3. Business
 Is an economic activity concerned
with
the
production
and
distribution of goods and services
to earn profit.
 It includes all those activities that
are
directly or
indirectly
concerned with the production,
purchase, and sale of goods and
services.
 Production,
marketing,
advertising,
warehousing,
insurance, banking, and others are
all business activities.
Important features and characteristics
of business
1. Production or acquisition of goods
 Every business, whether small- or
large-scale, deals with goods and
services.
 The goods may be produced,
manufactured, or procured and
then supplied for a cost to those
who need them.
 The goods may either be
consumer goods (cloth, books,
electronic appliances, medicine
and other) or producer goods
(machinery, tools and so on) or
services (courier or transport
services).
2. Generates Employment
 Business generates employment
in various sectors of society.
 It is also an activity that creates
utilities to satisfy human needs
and wants.
 Society gets income from
businesses that bring industrial
and economic growth and
development to the country.
3. Continuous process
 Business is not a single-time
operation.
 It is a recurring process of
production and distribution of
goods and services.
 A business should also constantly
engage
in
research
and
developmental
activities
to
achieve competitive advantage.
 A constant improvement strategy
helps to boost the profitability of
the business organization.
4. Profit is the basic motive.
 Profit is essential for the survival,
growth, and expansion of the
business.
 It is a sign of success and failure.
 It is a return on investment or the
compensation of all those
individuals
engaged
in
a
particular business.
 An efficient businessman tries to
double and redouble his effort and
creates plants to serve the
business community to gain more
profit.
5. Risk or uncertainty of future
 It is a reality that the future is
risky and uncertain.
 Risk and uncertainty are always
related to every business.
 The estimation and management
of the risk are essential to
guarantee the success
business organization.
of
a
6. Creative and Dynamic
 To satisfy the increasing and evershifting needs of customers, a
business must always come out
with new products and services.
7. Customer Satisfaction
 Today, the vital aim of all
economic activities is customer
satisfaction (consumer-oriented
approach).
 Providing quality products at
reasonable prices.
 Profit is secondary to customer
satisfaction.
8. Social Activity
 Business is also a Socioeconomic activity.
 To properly function they need
the assistance of different social
groups such as investors,
employees, customers, creditors,
and others by making goods and
services accessible to different
segments of society.
9. Government Control
 Rules and regulations are required
to be followed.
 The government makes sure that
businesses operate for social
good.
10. Optimum utilization of resources
 Inadequate resources are brought
into optimum use.
The Importance of Ethics in Business
Ethics tries to form the logic of right and
wrong. When the law fails, ethics may
prevent organizations from destroying
society or the environment.
1. Satisfying basic needs
 One of the basic human needs is
being fair, honest, and ethical.
outcomes resulting in
unethical
practices
businesses.
some
from
2. Building Credibility
 Propelled by moral values is
highly respected in society.
 Employees and good reputation
are two vital assets of a company
that need to be enhanced.
3. Connecting leaders and employees
 Moral values are well regarded by
its employees too.
 The best way to promote success
on all levels is to integrate ethics
within the business operations.
4. Enhancing decision-making
 The future of an organization is
the total number of all its
decisions throughout its lifetime.
5. Continuing gains
 Ethical businesses guided by
moral values are profitable for a
long time.
The Morality of Profit
 Every individual lives with
double-purpose intentions, which
are survival and flourishing.
 Survival is perpetuating one's
biological being and averting to
experience poverty, downfall, and
death.
6. Protecting society
 Often ethics succeeds the law in
safeguarding the society.
 Law as machinery is often found
acting as a mute witness,
incapable of saving society and
the environment.
 Flourishing is to control and
manage material reality and take
advantage of more elements for
self-love to un-stick oneself from
a present situation and make a
start to grow as a human being.
The relationship between ethics and
business
 A man survives if his gains equal
his expenses, while he flourishes
if his gains are greater than his
expenses.
 Ethics should start from the time
the goals and intentions are
being framed at the beginning of
the venture.
 It should also be a part of the
internal infrastructure and the
management structure of any
business.
 There must always be a motive to
contribute some social benefits
despite the primary objective of a
business to produce a profit.
 Nowadays,
immediate
society
desires
satisfaction
and
 The only way to flourish is to gain
profit.
 Profits come in different shapes
such as intellectual profits, gains
of
knowledge,
gains
of
skill/technical,
material
profits/property,
physiological
profits, social profits, etc.
 Monetary profit draws the
greatest criticism as it can easily
control everything in the quest for
the greatest diversity of end. It
cannot buy absolutely everything,
yet it can help in fulfilling one’s
life objectives.
 A man may generate profits in
two ways: 1) He can take an
action that is beneficial to himself
but is immaterial to the rest of the
people. 2) He may secure
participation and team with other
people to attain an objective that
is helpful to everyone.
 Man needs to be free in obtaining
profits.
 Laissez-faire capitalism is a
political, social, and economic
system that allows everyone to do
profit-seeking activities without
any
complications
or
interventions.
 Anyone has the autonomy to
decide on the value he will give to
each kind of profit, the manners
he will use to gain said profit and
kinds of connections he will
pursue with others to flourish.
 One must monitor and remove
arbitrage opportunities that come
from extensive inaccuracies of
opinion to gain profit and may be
able to correct market flaws and
balance supply and demand.
 Arbitrage opportunity is an
investment strategy that gives
way to a positive profit with
positive likelihood but without
any risk disadvantage.
 Mandatory economic rules would
stop every individual from
discovering how to flourish on his
own approach, other people might
be harmed.
 Market flaws may come back,
remain, and shall keep on
resulting in
resources.
misappropriated
 Sadly, numerous people will
discontinue improving and will
not flourish, resulting in great
losses due to the useless and
damaging rigid system.
 If flourishing is moral and
improving oneself is moral, then
the pursuit of profit is the same. If
pursuing profit is moral, men
could do economic activities
freely. Hence, with this line of
logic, everyone supports the
highest economic autonomy
under the principle of laissez-faire
capitalism.
Profit for Christians
 The Bible is the base-ethics of all
Christians.
 Profit is a difficult issue as the
Christians have a viewpoint that
the Word of God says any point of
it is unethical.
 In the present time, profit is a
reward for doing something
helpful to other people.
 Humans are not all-knowing;
hence profit serves as an
important signal to good
stewardship.
 Making profit is not a sin. Earning
profit through dishonest means
makes it immoral. Profit is
necessary in support to Christian
stewardship.
What makes profit unethical?
The choice of unethical practices such as
deceiving customers through dishonest
advertising, cutting down incentives for
employees, selling low-quality products, or
damaging the natural environment may result
in tarnishing brand reputation or disloyalty
among consumers.
biological properties of the
atmospheric air.

Water Pollution
 It is any alteration of the
physical,
chemical,
and
biological properties of a
body of water resulting in the
impairment of its purity or
quality.

Noise Pollution
 It is the excessive sound that
causes hearing loss, stress,
fatigue, irritability, tension,
headaches, and high blood
pressure.

Soil Pollution
 It is chiefly caused by
chemicals in pesticides such
as poisons that are used to kill
agricultural pests like insects
and herbicides that are used to
get rid of weeds.
Employees
 Reducing or not providing benefits
for employees by minimizing costs is
one of the most common unethical
practices.
 Payroll is one of the largest
percentages of expense in the
industry.
 Cutting costs at the expense of
employees may move a business
down a risky route toward
bankruptcy.
Marketing
 A strong marketing may increase
brand awareness, pulling customers
to produce profits.
 Some unethical issues in marketing
include sexy advertisements to attract
male customers particularly in liquor,
advertisements in wine products
targeting young people, and making
use of violence in presenting
advertisements.
Environmental
 Some
unethical
issues
in
environments include increasing
pollutants,
water
supply
contamination, and deforestation.
 The
common
problem
for
environmental issues is cost.
 It is highly costly for companies to
positively impact the environment,
especially small businesses.
Environmental pollution could be in the
form of:

Air Pollution
 It is any alteration of the
physical,
chemical,
and
Quality
 The practice of maximizing profit at
the cost of quality may stain the
company’s
brand
name
and
reputation.
 Unethical practice leads to the loss of
respect, trust, and loyalty of
customers. It also leads to slow
growth and reduced revenue.
Ethics and Morality in Business
 Ethics decides whether certain
actions, conduct, and behavior are
right or wrong, good or bad, moral or
immoral, and just or unjust.
 Ethics creates the rules and standards
that direct proper behavior.
 Morals are judgments, standards, and
rules of right conduct in society.
 Morals provide direction to people on
acceptable behavior regarding basic
values.
 It changes from one business to
another, and from one country to
another.
 What is considered good in one
country may be taboo in another.
Features of Business Ethics
Business ethics is a form of applied ethics,
which studies ethical principles, morals, and
problems that happen in the business
environment.
1. Code of Conduct
 It tells us what to do and what not
to do for the welfare of society.
2. Based on Moral and Social Values
 This
includes
self-control,
consumer protection and welfare,
service to society, fair treatment
to social groups, and not to exploit
others.
3. Gives protection to social groups.
 Protection to groups such as
consumers, employees, small
businessmen,
government,
shareholders, creditors, and other
stakeholders.
4. Provides basic framework
 It suggests legal, social, moral,
economic, and cultural limits
within which a business must be
operated.
 It suggests what is good and what
is bad in business.
5. Voluntary
acceptance
for
enforcement
 Must be like self-discipline. It
must not be enforced by law and
should come from within
businessmen.
6. Requires Education and Guidance
 Businessmen must be motivated
to follow ethical practices.
 Trade
Associations
and
Chambers of Commerce must
also play an active role in this
matter.
7. Relative Term
8. Not against profit-making
 However, it is against profiteering
by cheating and exploiting
consumers,
employees,
or
investors.
 It supports the expansion of
business activities but by fair
means and not through illegal
activities or corrupt practices.
Sources of Business Ethics
Religion
A religion is a custom and observance of a
conception on what is real and significant. It
is the belief that wrongdoing, vice,
disillusionment, and illusion may be defeated
by grace, prayer, and practices along with
harmony, unity, or friendship.
It is one of the oldest foundations of ethical
standards. It is believed that ethics is a sign of
the Divine and so it draws a line between
good and bad.
Culture
Culture is the set of significant
understandings that members of a community
share that are transferred from one generation
to another.
It also refers to the pattern of development
reflected in a society’s pattern of knowledge,
ideology, values, laws, social norms, and
everyday rituals.
Law
Are procedures and conduct laid down by the
legal system of the state. It is meant to guide
human behavior and is binding to society.
Law breaking activities include tax evasion,
hoarding, adulteration, poor quality and highpriced products, environment pollution, etc.