Social responsibility and ethics

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Module-5
Social reposibilities and ethics
Meaning of social responsibility of the business
it refers to the such decisions and activites of a business firm which provide for the welfare
for the society as a whole along with earning of the profit of the firm.
Definition of social responsibility of the business management
According to koontz and O donell, “ social responsibility is the personal obligation of
everyone, as he acts in his own interest, to assure that the rights and legitimate interest of
all others are not infringed”.
Corporate social responsibility programmes
 Government programmes
 Community interest and demands
 Environmental concern
 Share holder/ investors pressures
 Competitive advantage
 Factor condition
 Demand condition
 Related and supporting industries
MNE SOCIAL RESPONSIBILITIES
 Multinational Enterprises (MNEs) can enhance their reputations through advanced
social initiatives and management practices.
 These firms often locate facilities in developing countries s benefit from lax
environmental and social regulations and to reduce their operating costs NES can,
however, also contribute positively to the development of those countries through
corporate social responsibility (CSR) activities.
 Corporate responsibility describes positive ways through which multinational
companies may affect the society in which they operate.
 The World Bank and the World Business Council Sustainable Development (WBCSD)
define CSR as the commitment of business to contritbute to sustainable economic
development working with employees, their families, the local community and
society at large to improve their quality of life, in ways that are both good for
business and good for development"
CSR of MNE includes
 Ensuring that the private sector does not contribute to violations of human rights
and promotes the respect of these rights.
 The respect of core labor standards.

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 Ensuring that local communities benefit from large companies operations in
developing countries.
 Incorporation of social and environmental criteria in procurement decisions.
PHILANTHROPIC RESPONSIBILITY
Philanthropic responsibility can include things such as funding educational programs.
supporting health initiatives, donating to causes, and supporting community
beautification projects.
Benefits of Philanthropic Responsibility
 Stronger brand Image, recognition, and reputation: Philanthropic responsibility
adds value to firms by establishing and maintaining a good corporate reputation
and/or brand equity
 Increased customer loyalty and sales: Customers of a firm that practices
philanthropic responsibility feel that they are helping the firm support good
causes.
 Operational cost savings: Investing is the operational efficiencies results in
operational cost savings as well as reduced environmental impact
 Retaining key and talented employees: Employees often stay longer and are
more committed to their firm knowing that they are working for a business that
practices philanthropic responsibility
 Easier access to funding: Many investors are more willing to support a business
that practices philanthropic responsibility.
 Reduced regulatory burden: Strong relationships with regulatory bodies can help
to reduce a firm's regulatory burden.
ETHICAL RESPONSIBILITY
o Ethical responsibility is the ability to recognize, interpret and act upon multiple
principles and values according to the standards within a given field and/or
context.
o Many large companies have embraced the idea that they can operate their
business in an ethically responsible manner.
o Small businesses are increasingly getting on board, as wel Ethical responsibility
means maintaining even improving your bottom line, while setting a high bar for
making a positive contribution to society.
o In part, enlightened company leaders can challenge senior managers and other
employees to set goals for activities ranging from community philanthropy to
environmental excellence.
o Companies are also motivated by external expectations: customers,
shareholders, investors and the public at large may insist that companies go
above and beyond looking only at quarterly profits.

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o For example, when two African-American men were arrested in 2018 at a
Philadelphia Starbucks because they didn't buy anything, the story sparked a
tremendous backlash. Starbucks followed up by closing all of its shops for a time
and the company then trained their thousands of employees in how to be racially
sensitive to customers.
LEGAL RESPONSIBILITY
Legal responsibility means the rights and responsibilities to determine and control various
matters affecting a child's welfare and upbringing, other than routine daily care and control
of the child.
These matters include but are not limited to education, medical and dental care, religion
and travel arrangements. Legal responsibility may be held solely or may be divided or
shared.
Examples of Legal responsibility in a sentence
 Legal responsibility by vehicle ownership, registration, payment, or appeal of
citation,
 Legal responsibility of correct reporting of images lies with the Service Provider.
 Legal responsibility for the governance of the College is vested in the Board of
Trustees of Bard College.
 Legal responsibility for the governance of Simon's Rock is vested in the Board of
Trustees of Bard College.
 Legal responsibility of correct reporting of images lies with the service provider.
BUSINESS ETHICS
Meaning of Business Ethics
Ethics refers to a system of moral principles. It is the study of good and evil, right and wrong
and just and unjust actions for businessmen. Business ethics is an extension of values of
personal life to business. People in business are bound by the same ethical principles that
apply to others. Two theories of business ethics are:
a) Moral unity
b) Amorality
Definition of business ethics
In the words of W. O. Wheeler, "Business ethics is an art or science of maintaining proper
harmonious relationship with society and various groups and institutions as well as
recognizing the moral responsibility for the rightness or wrongness of business conduct".

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FOREIGN CORRUPT PRACTICES ACT
The Foreign Corrupt Practices Act targets corruption and bribery internationally.
Paying foreign officials for expediting legal processes or obtaining contracts was a
common business practice around the world well into the 1970s.
In some countries, in fact, corporations routinely wrote-off bribes as normal business
expenses when filing their tax returns, Being common, however, does not make this
behaviour desirable or ethical.
The Foreign Corrupt Practices Act of 1977 was enacted for the purpose of making it
unlawful for certain classes of persons and entities to make payments to foreign
government officials to assist in obtaining or retaining business.
Specifically, the anti-bribery provisions of the FCPA prohibit the willful use of the
mails or any means of instrumentality of interstate commerce corruptly in
furtherance of any offer, payment, promise to pay, or authorization of the payment
of money or anything of value to any person, while knowing that all or a portion of
such money or thing of value will be offered, given or promised, directly or indirectly,
to a foreign official to influence the foreign official in his or her official capacity,
induce the foreign official to do or omit to do an act in violation of his or her lawful
duty, or to secure any improper advantage in order to assist in obtaining or retaining
business for or with, or directing business to, any person.
Since 1977, the anti-bribery provisions of the FCPA have applied to all U.S. persons
and certain foreign issuers of securities.
With the enactment of certain amendments in 1998, the anti-bribery provisions of
the FCPA now also apply to foreign firms and persons who cause, directly or through
agents, an act in furtherance of such a corrupt payment to take place within the
territory of the United States.
Violating the Foreign Corrupt Practices Act
o The Securities and Exchange Commission (SEC) and the Department of Justice
(DOJ) are jointly responsible for enforcing the Foreign Corrupt Practices Act.
o For its part, the SEC created a special unit within its enforcement division to
focus on matters that fall under the auspices of the FCPA. Violators of the act
can face substantial sanctions and penalties, and both criminal and civil actions
may be charged.
o Punishments include fines as much as twice the amount of the benefit expected
to be received from the bribery.
o Corporate entities found guilty of breaching the act may be forced to accept the
oversight of an independent auditor to ensure future compliance.

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o Individuals involved in breaking this law can face imprisonment for as many as
five years.
CASES ON FOREIGN CORRUPT PRACTICES ACT
The SEC publishes current violations of the act, along with its enforcement actions, on
the SEC website in press release format. The agency also redacts a summary list,
organized by calendar year, of individuals and firms that violated the tenets of the act.
For example, in 2019, some of the SEC's rulings included actions against:
1. Ericsson (NASDAQ: ERIC),
the Stockholm based multinational telecommunications company, agreed to pay
more than $1 billion to the SEC and DOJ to resolve charges that it violated the FCPA
by engaging in a large-scale bribery scheme involving the use of sham consultants to
secretly funnel money to government officials in multiple countries.
2. Microsoft (NASDAQ: MSFT)
agreed to pay more than $24 million to settle SEC charges related to FCPA violations
in Hungary, Thailand, Saudi Arabia, and Turkey, and criminal charges related to
Hungary.
3. Tim Leissner,a former executive of Goldman Sachs (NYSE: GS), agreed to a
settlement with the SEC that includes a permanent bar from the securities industry
for violating the FCPA by engaging in a corruption scheme, in which he obtained
millions of dollars by paying unlawful bribes to various government officials to secure
lucrative contracts for Goldman Sachs.
4.The SEC charged Walmart Inc.(NYSE: WMT) with violating the books, records, and
internal accounting controls provisions of the FCPA by failing to operate a sufficient anti-
corruption compliance program for more than a decade as the retailer experienced
rapid international growth. Walmart agreed to pay more than $144 million to settle the
SEC's charges and approximately $138 million to resolve parallel criminal charges by the
DOJ for a combined total of more than $282 million.