UNIT 2

Ethics CSR and Corporate Behavior

 Case study 1
• A manufacturing company provides jobs for many people in a small
town where employment is not easy to find. The company has stayed
in the town even though it could find cheaper workers elsewhere,
because workers are loyal to the company due to the jobs it provides.
Over the years, the company has developed a reputation in the town
for taking care of its employees and being a responsible corporate
citizen.
• The manufacturing process used by the company produces a by-
product that for years has flown into the town river. The by-product
has been considered harmless but some people who live near the river
have reported illnesses. The by-product does not currently violate any
anti-pollution laws.
• What are the issues of integrity, ethics and law posed in the case
study? What options does the company have, and what should it do
and why? 
 What are ethics and business ethics?
• The etymology of the word ‘ethics’ comes from the Latin word ‘ethos,’ which means character.

It is defined as “rules and regulations that have been formed to allow an individual to work

according to moral principles.

• Ethics essentially involves how we act, live, lead our lives, and treat others. Our choices and

decision-making processes and our moral principles and values that govern our behaviors

regarding what is right and wrong are also part of ethics.

• A set of principles of right conduct.

• A system of moral standards or values.

• Normative ethics refers to the field of ethics concerned with our asking

how should and ought we live and act? 

• Business ethics is applied ethics that focuses on real-world situations and the context and

environment in which transactions occur—How should we apply our values to the way we

conduct business?
 What Is Business Ethics?
• Business ethics studies appropriate business policies and practices
regarding potentially controversial subjects, including corporate
governance, insider trading, bribery, discrimination, corporate
social responsibility, fiduciary responsibilities, and much more.

• The law often guides business ethics, but at other times business
ethics provide a basic guideline that businesses can follow to gain
public approval.
• Business ethics ensure that a certain basic level of trust
exists between consumers and various forms of market
participants with businesses.
• For example, a portfolio manager must give the same
consideration to the portfolios of family members and small
individual investors as they do to wealthier clients. These
kinds of practices ensure the public receives fair treatment.
 Principles of Business Ethics
• There are generally 12 business ethics principles:

• Leadership: The conscious effort to adopt, integrate, and emulate the other 11 principles

to guide decisions and behavior in all aspects of professional and personal life.

• Accountability: Holding yourself and others responsible for their actions. Commitment to

following ethical practices and ensuring others follow ethics guidelines.

• Integrity: Incorporates other principles—honesty, trustworthiness, and reliability.

Someone with integrity consistently does the right thing and strives to hold themselves to

a higher standard.

• Respect for others: To foster ethical behavior and environments in the workplace,

respecting others is a critical component. Everyone deserves dignity, privacy, equality,

opportunity, compassion, and empathy.

• Honesty: Truth in all matters is key to fostering an ethical climate. Partial truths,

omissions, and under or overstating don't help a business improve its performance. Bad

news should be communicated and received in the same manner as good news so that

solutions can be developed.

• Respect for laws: Ethical leadership should include enforcing all local, state, and federal

laws. If there is a legal grey area, leaders should err on the side of legality rather than

exploiting a gap.

• Responsibility: Promote ownership within an organization, allow employees to be

responsible for their work, and be accountable for yours.

• Transparency: Stakeholders are people with an interest in a business, such as

shareholders, employees, the community a firm operates in, and the family members of

the employees. Without divulging trade secrets, companies should ensure information

about their financials, price changes, hiring and firing practices, wages and salaries, and

promotions are available to those interested in the business's success.

• Compassion: Employees, the community surrounding a business, business partners, and

customers should all be treated with concern for their well-being.

• Fairness: Everyone should have the same opportunities and be treated the same. If a

practice or behavior would make you feel uncomfortable or place personal or corporate

benefit in front of equality, common courtesy, and respect, it is likely not fair.

• Loyalty: Leadership should demonstrate confidentially and commitment to their

employees and the company. Inspiring loyalty in employees and management ensures

that they are committed to best practices.

• Environmental concern: In a world where resources are limited, ecosystems have been

damaged by past practices, and the climate is changing, it is of utmost importance to be

aware of and concerned about the environmental impacts a business has. All employees

should be encouraged to discover and report solutions for practices that can add to

damages already done.

 Business Ethics – 13 Main Characteristics

• 1. Business ethics are based on social values, as the generally accepted norms of good or

bad and ‘right’ and ‘wrong’ practices.

• 2. It is based on the social customs, traditions, standards, and attributes.

• 3. Business ethics may determine the ways and means for better and optimum business

performance.

• 4. Business ethics provide basic guidelines and parameters towards most appropriate

perfections in business scenario.

• 5. Business ethics is concerned basically the study of human behaviour and conducts.

• 6. Business ethics is a philosophy to determine the standards and norms to make mutual

interactions and behaviour between individual and group in organisation.

• 7. Business ethics offers to establish the norms and directional approaches for

making an appropriate code of conducts in business.

• 8. Business ethics are based on the concepts, thoughts and standards as

contributed as well as generated by Indian ethos.

• 9. Business ethics may be an ‘Art’ as well as ‘Science’ also.

• 10. Business ethics basically inspire the values, standards and norms of

professionalism in business for the well-being of customers.

• 11. Business ethics is to motivate and is consistently related with the concept of

service motives for the customers’ view point.

• 12. Business ethics shows the better and perspective ways and means for most

excellences in customisation.

• 13. Business ethics aims to emphasise more on social responsibility of business

towards society.
 Approaches to BE
• 1. Teleological approach: (Utilitarianism)

• Also known as consequentiality approach, it determines the moral conduct on the basis of the

consequences of an activity. Whether an action is right or wrong would depend upon the judgement about

the consequences of such an action. The idea is to judge the action moral if it delivers more good than

harm to society. For example, with this approach, lying to save one’s life would be ethically acceptable.

• Some of the philosophers supporting this view are nineteenth century philosophers John Stuart Mill and

Jeremy Bentham. They proposed that ethics and morality of an act should be judged on the basis of their

ultimate utility.

• An act would be considered moral if it produced more satisfaction than dissatisfaction for society. It must

be understood that this satisfaction or happiness should be for the society in general and not to the people

committing the act or the people who are directly involved in the act.

• For example, not paying the money to someone whom you owe may make you happy but it disrupts the

social system of fairness and equity thus making the society as a whole unhappy. Accordingly, this would

not be considered as a ethical act.

• 2. Deonotological approach:
• While a “teleologist” focuses on doing what will maximize societal welfare, a
“deonotologist” focuses an doing what is “right” based an his moral principles.
Accordingly, some actions would be considered wrong even if the consequences of
these actions were good.
• The term deontology is derived from the Greek deon, “duty,” and logos, “science.” It
is only about following the rules and does not require weighing the cost and benefits
of the situation.
• This approach has more of a religious undertone. The ethical code of conduct has
been dictated by the Holy Scriptures. The wrongs and rights have been defined by
the word of God. This gives the concept of ethics a fixed perception. Since the word
of God is considered as permanent and unchangeable, so is the concept of ethics.
• To compare the two philosophies, we can say that utilitarianism says that
any act that achieves happiness through consideration of all sides should
be considered good (not killing the man in your living room, but also
making sure your family is safe).

• While deontology states that some actions are still morally wrong even if
the outcome is good, but you should do them anyway because of your
sense of duty to others (kill the man in your living room because it is your
duty to protect your family and not your problem what happens to him).
• Holy Scriptures like those of the Bible, the Holy Quran, Bhagwad Gita and Guru Granth
Sahib are considered to be the words of God and hence must be accepted in their
entirety and without question. In similar thinking, though based upon rationality,
rather than religious command, Emmanuel Kant, an eighteenth century German
philosopher suggested morality as universally binding on all rational minds.
• According to him, “Act as if the maxim of thy action were to become by thy will a
universal law of nature.” This mode of thinking asks whether the rationale for your
action is suitable to become a universal law or principle for everyone to follow. For
example, “not breaking a promise” would be a good principle for everyone to follow.
This means that morality would be considered unconditional and applicable to all
people at all times and in all cases.
• This approach suggests that moral judgments be made on the determination of
intrinsic good or evil in an act which should be self evident. For example, the Ten
Commandments would be considered as one of the guidelines to determine what is
intrinsically good and what is intrinsically evil.
• 3. Emotive approach:

• This approach is proposed by A.J. Ayer. He suggests that morals and ethics are just the personal

viewpoints and “moral judgements are meaningless expressions of emotions.” The concept of

morality is personal in nature and only reflects a person’s emotions.

• This means that if a person feels good about an act, then in his view, it is a moral act. For

example, using loopholes to cheat on income tax may be immoral from societal point of view,

but the person filing the income tax returns sees nothing wrong with it.

• Similarly, not joining the army in time of war may be unethical and unpatriotic from the point of

view of the society and the country, but the person concerned may consider war as immoral in

itself. According to this approach, the whole idea about morality hinges on the personal view

point.

• An extension of Emotive theory puts focus an the integrity of the person. While the person is

looking for his own “long term” benefit, he must have a “virtue ethics perspective” which

primarily considers the person’s character, motivations and intentions.

• 4. Moral-rights approach:

• This approach views behaviour as respecting and protecting fundamental human

rights, equal treatment under law and so on. Some of these rights are set forth in

documents such as Bill of Rights in America and U.N. Declaration of Human Rights.

From ethical point of view, people expect that their health and safety is not

endangered by unsafe products.

• They have a right not to be intentionally deceived on matters which should be

truthfully disclosed to them. Citizens have a fundamental right to privacy and

violation of such privacy would not be morally justifiable.

• Individuals have the right to object and reject directives that violate their moral or

religious beliefs. For example, Sikhs are allowed to wear turbans instead of putting

on a hat as required by Royal Canadian Police, because of their religious beliefs.

• 5. Justice approach:

• The justice view of moral behaviour is based on the belief that ethical
decisions do not discriminate people on the basis of any types of
preferences, but treat all people fairly, equitably and impartially,
according to established guiding rules and standards.

• All mankind is created equal and discriminating against any one on the
basis of race, gender, religion, nationality or any such criteria would be
considered unethical.

• From organizational point of view, all policies and rules should be fairly
administered. For example, a senior executive and an assembly worker
should get the same treatment for the same issue.
CSR & Corporate Reputation
 What is Corporate Reputation?
• Corporate reputation is arguably a company’s most valuable intangible asset.

• Underestimating the importance of corporate reputation can be fatal to your business.

• A positive corporate reputation is extremely difficult for competitors to replicate or

overcome and can have a huge impact on a company’s bottom line.

• One of the keys to building and maintaining a good corporate reputation is keeping your

stakeholders in the front of your mind.

• Corporate reputation can be shaped by search engine results, the content on your site,

reviews, news coverage and public actions taken by your company and its leaders.

• Corporate reputation is something that has to be monitored and fostered.

 “A company’s corporate reputation is the
sum of all the views and beliefs held about
the company based on its history and
future prospects, in comparison to close
competitors.”
• Most successful corporate leaders don’t achieve
their level of accomplishment by listening to
everything that everyone tells them or says about
them.
• Sometimes it’s the act of going against the tide
and taking risks that turns out to be the best
move.
• But once you’re at the top of the heap and
overseeing a business, it becomes increasingly
important to have your ear to the ground and be
keenly aware of your corporate reputation – your
stakeholders’ perception of your company.
What else drives corporate reputation?

• Company values
• Quality of products or services offered
• Employee sentiment and workplace
environment
• Business methods
• Customer service
• Market value
• Goodwill, brand recognition, brand search
results, reviews and ratings and business
methodologies are examples of intangible
assets that directly contribute to a
corporation’s reputation.
• Your reputation is a powerful asset that can be
greater than the sum of its parts.
 How CSR Impacts Corporate Reputation

• The links between CSR and a company’s

reputation have now been clearly established.
• As we know, when a company has a strong
and effective CSR policy (and makes it known),
its reputation and brand image improve.
• And on the contrary, when the perception of a
company’s CSR is bad, its image deteriorates.
 GOOGLE
• First, the company is known as one of the most eco-friendly companies in the Internet

industry: it was second just behind Apple in the ranking published by Greenpeace on this

subject.

• This score is the result of a vast investment program in green energy, which allows the web

giant to power its data center with 100% renewable electricity.

• Google has also made a buzz with its philanthropic foundation, Google.org, which has

several hundred billion dollars of funds to fight poverty and grow sustainable development.

• But most importantly, the image that consumers retain of Google is that of a young,

dynamic company with a real wellness program at work and a real strategy allowing its

employees to be more productive (high salaries, cultural or sports infrastructures dedicated

to their employees, services provided by the company, etc.).

• Second in the ranking, another web giant, Microsoft, whose reputation is also

widely taken up by investments in renewable energy and a proactive policy on

well-being at work and welfare of employees (ranked 7th in Great Place to Work).

• Microsoft is also known for its philanthropic actions, and the name of the

company is also often associated with that of its founder Bill Gates, who gave

several billion dollars to the philanthropy and development of the countries of the

South.

• It is Walt Disney Company that completes the podium, a natural position for a

company whose image is spotless, and whose strategy on ethics, governance, and

citizenship is widely recognized.

• In the rest of the top 10, we can find BMW, Lego, Daimler, Apple, Rolls Royce,

Rolex, and Intel. 

• Of course, this list does not indicate which are the most responsible

companies.

• It merely reflects the consumer perception of these issues.

• If these companies are well ranked, they have succeeded in communicating

effectively on their CSR strategies, but that does not necessarily mean that

these strategies are the most effective in the world!

• And above all, the ranking excludes de facto certain companies (SMEs or

companies that are little known to the general public).

• But, this is one more proof that CSR is synonymous with reputation, and

therefore with economic and financial performance!