Business Ethics
&
Social Responsibility
CHAPTER - 2
Business ethics?
●
●
Business ethics is the moral principles, policies,
and values that govern the way companies and
individuals engage in business activity.
It goes beyond legal requirements to establish a
code of conduct that drives employee behavior at
all levels and helps build trust between a business
and its customers.
Development of Individual Ethics
●
According to psychologist Lawrence Kohlberg,
moral reasoning, the basis for ethical behavior has
three development stages and each has greater
adequacy at responding to moral dilemmas.
Development of Individual Ethics
Stage 1
Stage 2
Stage 3
Preconventional
Conventional
Postconventional
Individual is mainly
looking out for his or
her own interests.
Rules are followed
only out of fear of
punishment or hope
of reward
Individual considers
the interests and
expectations of
others in making
decisions. Rules are
followed because it is
a part of belonging
to the group
Individual follows
personal principles
for resolving ethical
dilemmas. He or she
considers personal
group, and societal
interest
Ethical Challenges
Solving ethical dilemmas is not easy. In many cases,
each possible decision can have both unpleasant
consequences and positive benefits that must be
evaluated.
There are four most common ethical challenges that
businesspeople face -
Ethical Challenges
1.
2.
Conflict of Interest: Situation in which employee
must choose between business’s welfare and
personal gain.
Honesty & Integrity: An employee who is honest
can be counted on to tell the truth. An employee
with integrity goes beyond truthfulness.
Integrity means adhering to deeply felt ethical
principles in business situations.
Ethical Challenges
3.
4.
Loyalty vs Truth: Employees are expected to be
loyal and act in the best interest of the company.
However, if something untruthful goes on within
the organization, they may have to decide between
loyalty and truthfulness.
Whistle-blowing: Employees disclosure to company
official’s, government authorities, or the media of
illegal, immoral, or unethical practices committed
by an organization.
Structure of ethical Environment
Development of a corporate culture to support
business ethics happens in four levels -
Structure of ethical Environment
Ethical Awareness: The foundation of ethical
climate is ethical awareness.
- Code of conduct: It is a formal statement that
defines how the organization expects employees to
resolve ethical questions.
A.
B.
Ethical Education: Many companies have either
instituted their own ethics training programs or
hires organizations which provides outsources
ethics and compliances programs.
Structure of ethical Environment
C.
D.
Ethical Action: Companies must provide structures
and approaches that allow decisions to be turned
into ethical actions.
- One common tool is employee hotline..
Ethical Leadership: Executives must not only talk
about ethical behavior but also demonstrate it
through their actions.
Social Responsibility
Social responsibility is management’s acceptance of
the obligation to consider profit, consumer satisfaction,
and societal well-being of equal value in evaluating
performance.
Two contrasting views define the range of an
organization’s attitude toward social responsibility.
These are -
Social Responsibility
1.
2.
Socioeconomic Model: The belief that business, as
part of its role, owes its existence to improving
society in which it operates.
Economic Model: It is the one in which businesses
believe strongly that their role is to maximize
profits and increase values to shareholders.
Triple Bottom Line
It is a strategic approach used by companies to
evaluate performance by placing equal value on
financial, social and environmental factors.
In other words it places equal value on three Ps:
People, Planet & Profit.
Social Responsibilities of Business
To the
Customers
To the
General
Public
Social
Responsibilities
To the
Community
To the
Employees
Social Responsibilities of Business
1.
2.
Responsibilities to the General Public: It includes
dealing with public health issues, protecting
environment, and developing the quality of the
workforce
Responsibilities to Customers: Consumers have
the right to be safe, the right to be informed, the
right to choose and the right to be heard.
Social Responsibilities of Business
3.
4.
Responsibilities to Employees: Includes workplace
safety, quality-of-life issues, ensuring equal
opportunity on the job, age discrimination, sexism,
Responsibilities to the Community: Businesses
have responsibilities to support charitable and
social causes and organizations that work toward
the greater public good. In other words, they
should support the communities in which they
earn profit.
The End!