CHAPTER-03
ETHICS AND CORPORATE SOCIAL
RESPONSIBILITY
1
Dr. Gehan Shanmuganathan, (DBA)
NESTLE INDIA AND SOCIAL
RESPONSIBILITY…..
2
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
3
OBJECTIVES
4
CHAPTER OBJECTIVES…
1
Identify the philosophical principles behind business ethics.
2
Explain how values relate to ethics.
3
Identify factors contributing to lax ethics and common ethical
temptations.
4
Apply a guide to ethical decision making.
5
Describe the stakeholder viewpoint of social responsibility and
corporate social performance.
6
Present an overview of social-responsibility initiatives.
7
Summarize how managers can create an environment that
fosters ethically and socially responsible behavior and the
benefits of such activity
BUSINESS
ETHICS
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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
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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
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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
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PHILOSOPHICAL PRINCIPLES
UNDERLYING BUSINESS ETHICS
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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.
PSYCHOLOGICAL BASIS FOR ETHICAL BEHAVIOR
stimulus
Cognitive areaPertinent
Experience
Perception
First, second, and third hand
experiences
attitude
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
13
VALUES AND ETHICS
14
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
15
VALUES AND ETHICAL BEHAVIOR
Values
Quality
Customer service
Ecological consciousness
Social responsibility
Cost consciousness
Teamwork
Ethical
Behavior
Competitive
Advantage
16
SOURCES OF UNETHICAL
DECISIONS AND BEHAVIOR
17
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%)
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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
ETHICAL TEMPTATIONS AND
VIOLATIONS
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ETHICAL TEMPTATIONS AND VIOLATIONS
Accepting
bribes for
doing business
with other
companies
Stealing from
employers &
customers
Treating
people
unfairly
Misuse of
corporate
resources
Divulging
confidential
information
Illegally
copying
software
Sexual
harassment
Conflict of
interest
Corporate
espionage
4.4
BUSINESS SCANDALS AS
ETHICAL VIOLATIONS
22
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
23
A GUIDE TO ETHICAL DECISION
MAKING
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4.5
A GUIDE TO ETHICAL DECISION MAKING
1
Is it right?
2
Is it fair?
3
Who gets hurt?
4
Would you be comfortable if the details of your
decision were reported on the front page of
your newspaper or throughout the company?
4
Would you tell your child to do it?
6
How does it smell? Based on intuition
CORPORATE SOCIAL
RESPONSIBILITY
26
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
27
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
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STOCKHOLDER VERSUS
STAKEHOLDER VIEWPOINTS
29
STOCKHOLDER VERSUS STAKEHOLDER
VIEWPOINTS

Stockholder
viewpoint

Stakeholder
viewpoint
The traditional
The viewpoint of social
perspective on social
responsibility contending
responsibility that a
that firms must hold
business organization is
themselves responsible for
responsible only to its
the quality of life of the
owners and stockholders
many groups affected by
the firm’s actions
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Internal
Stakeholders
THE STAKEHOLDER VIEWPOINT
OF SOCIAL RESPONSIBILITY
4.6
Owners
Stockholders
Employees
Board of Directors
The
Organization
Customers
External
Stakeholders
Suppliers
Creditors
Labor Unions
Competitors
Special Interest Groups
Customer Groups
Government Agencies
Financial Institutions
Adapted from Exhibit 4.4
CORPORATE SOCIAL
PERFORMANCE
32
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
33
CORPORATE SOCIAL
RESPONSIBILITY INITIATIVES
34
4.7
Environmental
Management
Compassionate
Downsizing
Work/Life
Programs
Social
Responsibility
Initiatives
Creating
opportunities for
Diverse
workforce
Acceptance of
Whistle Blowers
Community
Redevelopment
Projects
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
36
ENVIRONMENTAL PROTECTION
37
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
38
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
39
CREATING AN ETHICAL AND
SOCIALLY RESPONSIBLE
WORKPLACE
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4.8
CREATING AN ETHICAL AND
SOCIALLY RESPONSIBLE WORK PLACE
Create formal
mechanisms to
monitor ethics
Offer training
programs
Confront ethical
deviations
Provide written
codes of conduct
Lead by example
Talk about the
issues
BENEFITS DERIVED FROM
ETHICS AND SOCIAL
RESPONSIBILITY
42
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
43
VIRTUOUS CIRCLE
Financial
Performance
Investments on
Socially responsible
Projects
44
WHAT WE LEARNED….
1
Identify the philosophical principles behind business ethics.
2
Explain how values relate to ethics.
3
Identify factors contributing to lax ethics and common ethical
temptations.
4
Apply a guide to ethical decision making.
5
Describe the stakeholder viewpoint of social responsibility and
corporate social performance.
6
Present an overview of social-responsibility initiatives.
7
Summarize how managers can create an environment fosters
ethically and socially responsible behavior and the benefits of
such activity
QUESTIONS…….
46
WRITE FIVE KEY THINGS (AREAS)
THAT YOU CAN CRITICALLY
REMEMBER IN TODAY’S
DISCUSSION
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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.
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