This document discusses ethics, stakeholders, and corporate social responsibility. It provides definitions of ethics, ethical and unethical behavior, and ethical dilemmas. It also discusses how ethical standards can guide behavior and decision making. The document outlines stakeholders and their interests, as well as the concept of corporate social responsibility and ways companies can fulfill their social obligations. Managers must balance the interests of various stakeholders when making decisions.

1. ETHICS, STAKEHOLDERS AND CORPORATE
SOCIAL RESPONSIBILITY

2. Students should be able to:
 Grasp the meaning and sources of ethics and business
ethics
 Differentiate between ethical and unethical behaviour
 Explore basic ethical issues and the concept of ethical
dilemma
 Examine how ethical behaviour in organisations can be
ensured
 Grasp the stakeholder concept, the stakeholders (their
interests and power)
 Evaluate the corporate social responsibility concept

3. Every decision a manager takes impacts on members of
the society in which they operate.
Society expects businesses to be good corporate citizens
in all respects.
The way managers view their responsibility to society is
central to ethics, social responsibility and organisational
performance.

4. Ethics is difficult to define in a precise way.
Ethics is the code of moral principles and values that
govern the behaviour of a person or group with respect to
what is right or wrong (Daft & Marcic, 2001)
Set of standards of conduct and moral judgement that
helps people to determine right and wrong behaviours
(Bohlander et al., 2001)

5. Ethical Behaviour- behaviour that conforms to principles
of morality or rules of conduct, which are generally
accepted in society.
Unethical Behaviour- behaviour that violates generally
accepted principles of morality and values in society.

6. Ethical issue is a situation, problem or an opportunity in
which an individual must choose among several
alternatives on the basis of the prevailing ethical standards
or values of the firm and the society in which the firm
operates.
Some of the ethical issues faced by managers include:
Fairness and honesty
Conflict of interest
Communication and advertisement
Organisational relationship with stakeholders

7. Difficulty to determine exactly what is or is not ethical.
An ethical dilemma is a situation that arises when all
alternative choices or behaviours have been deemed
undesirable because of potential negative ethical
consequences, making it difficult for one to distinguish
right from wrong (Daft & Marcic, 2001).

8. Jim, a fifty-six year old middle manager with
children in college, discovers that the owners of
his company are cheating the government out
of several thousand dollars a year in taxes. Jim
is the only employee who would be in position
to know this. Should Jim report the owners to
Internal Revenue Service at the risk of
endangering his own livelihood, or should he
disregard the discovery in order to protect his
family’s livelihood?

9. Bob has done a sound job for over a year. Bob’s
boss learns that he got the job by claiming to
have a college degree, although in reality he
never graduated. Should his boss dismiss him
for submitting a fraudulent resume or overlook
the false claim since Bob has otherwise proven
to be conscientious and honourable, and since
making an issue of the degree might ruin Bob’s
career?

10. Ethical standard is a principle, rule or value that guides
individuals and groups in deciding what is right or wrong.
It is a guideline for business conduct.
Usually determines what ethical behaviour is.

11.  Apportioning harms and benefits among stakeholders is a major
consideration for making ethical decisions.
Grover Starlings (1980), has identified four standards for guiding
management in making ethical decisions:
 The utilitarian approach (altruism): an action or behaviour is ethical
only when it produces the greatest benefit for the greatest number of
stakeholders.
 The individualism approach (egoism): It defines acceptable
behaviour as one which maximises the individual decision maker’s
long term interests.
◦ The assumption underlying this approach is that if everyone does the
same thing, the well-being of society as a whole would increase.

12.  The procedural justice approach (obligation to formal
principles): contends that a given behaviour is moral only
when that behaviour is based on standards of equity,
fairness and impartiality.
 The moral rights approach (protection of fundamental
human rights): focuses on the rights of people.
◦ According to the approach, people have fundamental rights and
liberties that one can not overlook by his or her decision.
◦ If a decision will interfere with the fundamental human rights of
the people involved, then such a decision is unethical and must be
avoided.

13. Managerial ethics are the standards of behaviour that guide individual
managers in decision-making, and determining appropriate responses to
situations they encounter.
Managers make decisions based on the generally accepted norms of
stakeholders, in trying to avoid unethical behaviours.
 Gareth et al. (2000) propose questions a manager must answer:
1. Does my decision fall within the accepted values or standards that
typically apply in the organisational environment?
2. Am I willing to see the decision communicated to all stakeholders
affected by it. For example, having it reported in newspapers or on
television?
3. Would the people with whom I have significant personal relationship,
such as family members, friends, or even managers in other
organisations approve of the decision?

14. There are three basic areas:
i. Firm’s relationship to the employee
ii. Employee’s relationship to the firm
iii. Firm’s relationship to other economic agents in the
environment
Managers are required to approach each of these
relationships from an ethical perspective.

15. The relationship of the firm to the Employees
 Most frequently tested area.
 Some ethical issues:
Hiring and firing
Wages and working conditions
Privacy and respect
The relationship of the employees to the firm
Most common issues:
Conflict of interest
Honesty
Secrecy and confidentiality
The relationship of the firm and the environment
Some of these economic agents include customers, competitors, suppliers,
stockholders, unions and physical environment

16. Individuals’ ethics are formed through a combination of
factors.
Gareth et al. (2000) state these factors as:
1. Family influence
2. Peer influence
3. Lifetime experience
4. Basic moral values

17. Generally, business ethics comprises the moral principles and standards
that guide behaviour in the world of business.
Sources of Business Ethics
Can be derived from three principal sources in the organisational
environment:
- Societal ethics: are the values and standards embodied in laws and
customs of the society.
- Professional ethics: are often required to govern organisational members
such as lawyers, accountants and managers when making decisions about
specific moral situations and these ethical rules often become part of the
professional work in the organisation.
- Individual ethics: Individual ethics are personal standards or values that
govern how individuals interact and behave towards one another.

18. Let employees know exactly what beliefs and behaviours the
company supports and those it does not tolerate.
Measures employed to encourage and maintain ethical
behaviours in organisations include:
- Development of visible and explicit code of ethics
- Appropriate rewards and punishment
- Ethics training programmes
- Formation of ethics review committees

19. A stakeholder: an individual or a group with direct and
indirect interest(s), involvement or investment in an
organisation and whose actions can have an effect on the
individual (group), the organisation or both.
There are two forms: the primary stakeholders and the
secondary stakeholder
Primary stakeholders have a direct interest
Secondary stakeholders have indirect interest

20. Primary stakeholders have interest and power
They include:
 Shareholders/owners/investors
 Employees
 Customers
 Suppliers
Secondary stakeholders also have interest and power
They include:
 The community
 The government and her regulatory agencies
 The media
 Competitors
 Employee unions

21. Social responsibility- a set of obligations an organisation
has to protect and enhance society (Rick, 1999)
particularly within which it operates.
It is the obligation of management to make decisions or
take actions that will protect and enhance the welfare and
interests of the organisation as well as society (Daft &
Marcic, 2001)

22. • Many firms are embracing the concept.
• Such firms tend to be more profitable, comparatively. But,
What does CSR mean for differing organisations?
How obligated is the firm towards CSR?
Basic contrasting viewpoints that are considered:
1. The social obligation viewpoint (the economic model)
2. The social reaction viewpoint
3. The social responsiveness viewpoint

23.  To employees (workplace responsibility)
equal opportunities, training, respect, safe working conditions
 To consumers and customers
safe products and services, reasonable pricing
 To investors and financial community
accurate reporting, no bribes or insider trading
 To the general public
avoid unlawful competition, ensure social welfare and
philanthropic donations
 To the natural environment
prevent pollution of all kinds

24. 1. It contributes to solving societal problems
2. Firms have obligations as citizens in a society
3. It supplements government’s budget
4. It improves reputation
5. The business, government and the public are co-partners in
developing society
6. It reduces government interventions by compelling
organisations to do what they voluntarily failed to do

25. 1. Primary responsibility is towards stockholders
2. Societal issues are government’s responsibility
3. Corporations might become too powerful
4. Potential for conflict of interest
5. Lack of expertise to solve social problems

26. Four (4) significant criteria are used (Carrol):
The economic responsibility of a business
The legal responsibility of business
The ethical responsibility of business
The discretionary responsibility of business

27. Sandra Holmes (1977), outlined the following:
1. Assistance to charities
2. Assistance to public or private education
3. Recruitment and managerial development of racial or ethnic minorities
4. Participation in community affairs
5. Pollution abatement
6. Recruitment and managerial development of women
7. Improvement of the quality of working of employees
8. Conservation of resources including energy
9. Hiring of hard-core unemployed
10. Assistance in minority enterprise
11. Urban renewal and development
12. Assistance to the Arts
13. Consumer protection
14. Protection of viable political and government systems

28. END