Business ethics on CSR

2. Objective:
To explore the changes that the ethics
trends have brought to the expectation
framework, as well as the developments
that have arisen in response to those
changes.

3.  Businesses live within society and the interrelation
between businesses and stakeholders takes place
within a social environment.
 an environment which affect the basic values,
behaviours, and preferences of the society - all of
which have an effect on business decisions.
Why should we learn Ethics Environment for Business?

4. Who are the
STAKEHOLDERS?

20. Factors Affecting Public
Expectations for
Business Behavior

21. Environmental
Concerns

22.  believe that humans are a part of society as well as
other living creatures, which includes plants and
animals.
Environmental Ethics
 These items are a very important part of the
world and are considered to be a functional part
of human life.
 Thus, it is essential that every human being
respect and honor this and use morals and ethics
when dealing with these creatures.

23. Environmental Ethics (Business Sense)
 concerned with a company's
responsibility to protect the
environment in which it operates

24. What are the
Environmental Issues
we face today?

25.  often harm or kill fish and birds (394), and can cause illness
in children (395). Too much pesticide is dangerous to adults, so
only safe levels are allowed keeping adults in mind, but such
levels chare still probably too dangerous for children.
 A 2011 study by UC Berkeley has shown that prenatal
exposure of pesticides in pregnant women can also lower the IQ
of their children.
Pesticides

26. Contaminates the air, despoils vegetation and crops, corrodes construction
materials, and threatens our lives and health (ibid.).
 A 2011 study by the EPA claims that the Clean Air Act saved over 160,000
lives in 2010, but many people still suffer illness and die from air pollution
and more lives can be saved by stricter standards.
We generally assume we get sick from allergies, bacteria, or viruses; but
pollution is a very common cause of illness as well.
Air
Pollution

27. The ozone layer was
damaged from
chloroflourocarbons

28. Carbon dioxide (and
other greenhouse
gasses) are causing
global warming

29. Toxic chemicals in
our environment
cause many
health issues

30. Nuclear power plants require
minding, processing, and
transporting of nuclear materials
that causes cancer in many people,
and it’s unclear that our methods
of disposing of nuclear waste are
entirely safe .

31. Environmental ethics considers the ethical relationship between
people and the natural world and the kind of decisions people have
to make about the environment:
Should we continue to cut down the rain forests for the sake of human
consumption?
Should we continue to manufacture petrol-driven cars when we have the
technology to make cars which do not pollute the environment?
 Should we knowingly cause the extinction of other species?
What are our environmental obligations to future generations?
Should humans be forced to live a simpler lifestyle in order to protect and
preserve the environment?

32. Moral Sensitivity
Fairness, Equity and Less Discrimination

33.  the ability to see an ethical dilemma, including
how our actions will affect others
Moral Sensitivity
 An ethical dilemma is a situation in which one must choose
between two conflicting but arguably valid sides. All ethical
dilemmas have a common theme: the conflict between the rights
of two or more important groups of people.

34.  Unfair treatment or given privileges to persons on the base of
race, age, sex, nationality or religion. It’s failures to treat all
persons equally.
Behavior of the management toward customers / stakeholders
 Ensuring Equal Opportunity on the Job. Providing equal opportunities
to all employees without discrimination
Age Discrimination. (protects workers age 40 or older)
 Feminism: sexual harassment, equal opportunity for pay and promotion
Minorities: discrimination
Health, safety and well-being

35.  Consumer Potection
The Right to Be Safe, be Informed, to Choose and be Heard
 Drug problems – privacy vs. safety
 Supplier employees – no sweat shop or child
labor

36. Bad Judgments & Activist
Stakeholders

37.  Directors, executives, and managers are
human, and they mistakes. (Bad Judgments)
 Sometimes the public, or specific groups,
take offense at these instances of bad
judgment and take action to make the
directors and management aware that they do
not approve. (Activist Stakeholders)

38. An activist stakeholder is one using an equity stake in a corporation to put
public pressure on its management.
activism can encourage firms to become more responsive to social and
environmental needs.
Example:
1. Boycotts are a familiar, high-profile “external” form of activism, which
often results from a breakdown in the firm’s ability to manage contentious
stakeholders and social issues.
• It generate negative media attention and threaten the reputation of the
targeted companies

39. 2. Proxy proposals, or shareholder resolutions, which are written proposals
that are voted upon at a company’s annual meeting.
o Proxy proposals can be used by shareholders to bring a wide range of
social issues to the attention of a company’s management.
oThis form of “internal” activism can shake investor confidence in a
company and is so effective that many social movement organizations now
operate activist investing units, buying stakes in a company so that they
will be able to submit a proxy proposal to draw attention to the issues they
care about.

40. The decision by Shell UK to scuttle the Brent Spar Oil Storage Vessel in a deep part of the
ocean rather than take it apart on shore led to demonstrations in support of Greenpeace,
which tried to stop the scuttling, and to the boycott of Shell gas stations in Europe.
Nestlé products were boycotted in North America and Europe to stop the free distribution of
baby formula powder to African mothers who were mixing it with contaminated water, thereby
killing their babies.
Nike and other companies’ products were boycotted through the efforts of concerned
individuals and groups to stop the use of sweatshop and child labor, particularly in foreign
countries.
People for the Ethical Treatment of Animals (PETA), which reports holding stock in more
than 80 companies that they have targeted with animal rights campaigns.
 Catholic Church opposition against the open pit mining of Sagittarius Mining, Inc.
Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay
for equal work without regard to gender.

41. Over time, activism and incremental shifts in corporate practices have changed
the private sector’s approach to activist challenges.
Research confirms that social movements are indeed capable of influencing
corporate behavior, ranging from curbing harmful toxic emissions to granting
employees same-sex domestic partnership benefits to divesting from politically
risky countries.
“If there is no struggle, there is no progress”
African-American social reformer, abolitionist, orator, writer, and
statesman
Frederick Douglass

42. Economic & Competitive
Pressures

43. Does economic
and competitive
pressures
destroy ethical
behavior?

44. And so some, engages in open and free competition with deception or fraud
 Unfair Trade Practices
Battle Neck Competition (A point of congestion in a system that occurs when workloads
arrive at a given point more quickly than that point can handle them.)
Falsification of transactions and documents
Exploitation of environment or workers
Environmental or financial malfeasance
 Global competition drives even large corporations to find ways to reduce costs,
increase productivity and improve customer service.

45. Once one firm in a market begins engaging in such behavior, other firms
must follow suit, even if the people controlling them regard the behavior as
wrong. If they don’t, they will suffer a competitive disadvantage that could
eventually put them out of business.
In some cases,
unethical behavior
can lower a firm’s
costs (e.g., using
child labor)
increase its revenues
(e.g., universities
commercializing faculty
research)

46. Financial Scandals:
The Expectations Gap &
the Credibility Gap
Economist, Milton Friedman says:
“The social responsibility of business is to
increase its profits.”

47. “…in a free society there is one and only
one social responsibility of business – to
use its resources and engage in activities
designed to increase its profits so long
as it stays within the rules of the game,
which is to say, engages in open and free
competition without deception or
fraud."

48. Top Ten Financial Scandals

59. The public has become cynical about the financial integrity of corporations
Expectation Gap
 the difference between what the public think it is getting in audited
financial statements and what it is actually getting
Credibility Gap
difference between high expectations aroused by unrealistic claims, and
the actual performance of a product or service

60. Governance Failures and
Risk Assessment

61.  Set of Policies, Practices, Procedures, Laws and
Customs under which a company is administered
and controlled
Includes the interrelationships among the many
stakeholders involved: Shareholders, Board of
Directors, Management, Employees, Customers,
Creditors, Suppliers, Regulators
 Ensure Accountability
 Shareholder protection
CORPORATE GOVERNANCE

62. Corporate directors have been expected to ensure that their corporations
have been acting in the interests of investors within the range of activity
deemed suitable by the societies in which they operated. (and not
enriching themselves at the public’s expense)
Corporate Governance Policy for Financial Institutions should be covered by regulatory
requirements
 Clear delegations of authority and responsibility at senior management level and
through the organization
 Financial supervisors need to undertake a robust assessment of governance and
have the power to intervene as necessary
 All violations of safe and sound practices must be brought to Board’s and
management’s attention with clear time frame for resolution
 There should be a clear separation of duties and authority between Chair and CEO or
President
Operational controls and policies, practices and procedures are in line with the
strategy and risk tolerance of the institution

63. Going in the right direction?
 Do the company govern the activities well to protect the
investors?
Do they take good care of the capital invested in them?
Do they protect the public interest?
 How about the health environment and welfare of the
workers and the public?

64. Increased Accountability and
Transparency Desired

65.  The lack of trust in corporate processes and activities also
spawned the desire for increased accountability and transparency on
corporate matters by investors and particularly by other stakeholders.
Companies around the world have responded by publishing more
information on their websites and free-standing reports on their
corporate social responsibility (CSR) performance, including such
subjects as environmental, health and safety, philanthropic, and
othersocial impacts.

66. Synergy among Factors and
Institutional Reinforcement

67. • combined efforts of the media
(newspapers, radio and television) to
feature a financial fiasco, a product
safety issue, an environmental
problem or an article on gender
equity or discrimination.

68. Public awareness impacts politicians, who react by preparing new laws or
the tightening of regulations.
• U.S. Sentencing Guidelines of 1991 (companies should provide
enough guidance to their personnel about proper behavior)
•Transparency International’s influence on the Organization for
Economic Cooperation and Development (Anti-Bribery Legislation)
• International accounting Standards Board and the International
Financial Reporting Standards and the Code of ethics for
Professional Accountants

69. Everyone should move toward higher levels of corporate accountability
and ethical performance.
How can you enrich or enhance equality and fairness
in your company?
How can you eliminate discrimination and control
unethical behavior in the company?

70. 70
Society’s Expectations Versus
Business’s Actual Social Performance
Society’s
Expectations
of Business
Performance
SocialPerformance:
ExpectedandActual
1960s
2000s
Time
SocialSocial
ProblemProblem
Business’s Actual
Social
Performance
SocialSocial
ProblemProblem
Greenpeace
Coalition for Environmentally
Responsible Economies
Pollution Probe
Consultants

71. What are the New
Expectations for
Business?

72. CorporateCorporate
Social ResponsibilitySocial Responsibility
Social AuditsSocial AuditsSocial AuditsSocial Audits
Cause-RelatedCause-Related
MarketingMarketing
Cause-RelatedCause-Related
MarketingMarketing
PhilanthropyPhilanthropyPhilanthropyPhilanthropy
RecyclingRecycling
ProgramsPrograms
RecyclingRecycling
ProgramsPrograms
MedicalMedical
ResearchResearch
MedicalMedical
ResearchResearch
Worthy CausesWorthy CausesWorthy CausesWorthy Causes
CharitiesCharitiesCharitiesCharities
HumanitarianHumanitarian
AidAid
HumanitarianHumanitarian
AidAid
EducationEducationEducationEducation

73. Balancing Business
and Stakeholders’ Rights
BusinessBusiness
SafeSafe
ProductsProducts
ProductProduct
ChoiceChoice
ConsumersConsumers
InformedInformed
PurchasePurchase
EmployeesEmployees
EquityEquity
Health & SafetyHealth & Safety
InvestorsInvestors
ProfitsProfits
Fair DisclosureFair Disclosure
SocietySociety
CleanClean
EnvironmentEnvironment

74. Responsibility
Toward Consumers
Freedom of ChoiceFreedom of Choice
Right to Be HeardRight to Be Heard
Accurate InformationAccurate Information
Product SafetyProduct Safety

75. ResponsibilityResponsibility
Toward InvestorsToward Investors
Fair ProfitFair Profit
DistributionDistribution
Fair ProfitFair Profit
DistributionDistribution
EthicalEthical
BehaviorBehavior
EthicalEthical
BehaviorBehavior
SocialSocial
ResponsibilityResponsibility
SocialSocial
ResponsibilityResponsibility

76. Ethical Behavior & Developments
in Business ethics: A Philosophical
Approach to ethical Behavior

77. Aristotle
(Ancient Greek
Philosopher &
Scientist)
The goal of life is happiness, and
happiness is achieved by leading a
virtuous (integrity, honor, loyalty,
courage and forthrightness) life in
accordance with reason.

78.  The directors, executives, and accountants should
demonstrate integrity in all their business dealings
 should honor the terms of contracts rather than look for
loopholes
 should be loyal to their employees, customers, and
suppliers
 should have the courage to be candid and transparent in
their dealings with relevant stakeholders
 should be forthright when providing explanations of good
and bad business behavior.

79. People are ethical when they do not
use other people opportunistically,
and when they do not act in a
hypocritical manner demanding a high
level of conduct for everyone else,
while making exceptions for
themselves.Immanuel Kant
(Christian Humanist )

80.  Some treat employees, customers, and
suppliers merely as a means, exploiting
them for some short-term goal.
 Often businesses are rightly accused of
hypocrisy when they fail to live up to their
own internally generated codes of conduct.

81. The goal of life is to maximize
happiness and/or to minimize
unhappiness or pain, and the goal
of society is to maximize the net
social benefits to all people.
Degrees of happiness can be both
physical and psychological.
John Stuart Mill
(English philosopher, political
economist, feminist, and civil
servant)

82.  theory implies that the goal of business is to contribute to
increasing the physical and/or psychological benefits of
society.
This does not means that the goal of business is to
maximize its profits; rather, the goal of business is to
contribute to the overall good of society.
 Business does so by providing goods and services
required by society.

83. contends that society
should be structured so
that there is a fair
distribution of rights and
benefits, and that any
inequalities should be to
everyone’s advantage.
John Rawls
(Moral & Political Philosopher)

84.  Businesses act in an ethical manner when they do not
have discriminatory prices and hiring systems. Nor should
businesses provide goods and services to one segment of
society at the expense of other segments of society.
Polluting and exploiting developing countries so that
developed nations can have a very comfortable lifestyle is
not to everyone’s advantage.