Corporate Social Responsibility

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Unit-1
Values
 Values are beliefs that guide, actions and judgments across variety of situations.
Milton Rokeach
 Values are the constellations of likes and dislikes, viewpoints, inner inclinations, rational and irrational judgements, prejudices and
association patters that determine a person’s view of the world.
Edward Springer
 Values represent basic conviction that specify mode of conduct is socially preferable to an opposite mode of conduct
 Values are manifested in thoughts, speech and actions
 Values are inherent in all cultures and societies
 Values guide people to take specific positions on societal issues
 Values are relatively stable and enduring as these are passed from one generation to another
 Values are the most central to the core of a person
 Values provide standards of morality
Types of values
 Graves has identified seven values ranging from the lowest (reactive) to the highest (existential)
 1 Reactive : Unaware of oneself and others as human beings, reacts to basic physiological need
 2Tribalistic: High degree of dependence, strongly influenced by tradition and the power exercised by authority figures: wants strong
directive leadership
 3 Egocentrism: Believes in rugged individualism, aggressive and selfish, responds primarily to power, desires individual;
responsibilities, wants to work alone in an entrepreneurial style
 4 Conformity: Lower tolerance for ambiguity, difficulty in accepting people with divergent values, desires
 5 Manipulative: Strives to accomplish goals by manipulating things and people, materialistic, actively seeks status and recognition
 6 Sociocentric:Desires to be liked and go along with others rather than get ahead, dislikes materialism, manipulation and conformity,
seeks primarily the social relationship which a job provides
 7 Existential: High tolerance for ambiguity and for people with divergent values, outspoken on inflexible systems, seeks full
expression of growth
 8 Terminal
o Is an ultimate goal or aim of a person, it might include comfortable life, family security, sense of accomplishment, self respect,
freedom
 A Comfortable Life a prosperous life
 An Exciting Life a stimulating, active life
 9 Instrumental
o Relates to the means for achieving the desired outcome or end
 Obedient dutiful; respectful
 Broad-minded open-minded

Formation of values
 People indoctrinate values from their parents, teachers, friends, media, television, radio, newspaper and all those whom they admire
and thus, try to follow
 Family factors: parents
 Social factors: school, religious, political
 Cultural factors
 Personal factors: intelligence, ability
 Organizational Factors: peers, boss, subordinate
Ethics & Behavior
 Greek root ‘ethos’ meaning character, guiding beliefs, standards or ideals that pervade a group, community or people
 “Ethics refers to a set of moral principles which should play a very significant role in guiding the conduct of managers and employees
in the operation of any enterprise”
 It is normative and perspective, not neutral
 Utilitarian –proposed course of action should be judged from the standpoint of the greatest good for the greatest number of people
 Moral indicates what people do, while ethics represent what people should do
Impact of Values on behavior of managers
 Perception of manager about the situation he faces
 Solutions faced by business enterprise
 Way in which manager interacts with other individuals
 Degree to which a business enterprise accepts the pressure from external forces
Values of Indian Managers
 As decision makers, managers have more opportunities than others to set ethical tone for company
 Man in the manger comes first. So, for proper human development along with leadership, negotiation, counselling, teaching healthy
human values carries more importance
 Assertiveness
 Future orientation
 Gender differentiation
 Uncertainty avoidance
 Power distance
 Individualism/collectivism
 In-group collectivism
 Performance orientation
 Human orientation

Managerial excellence through human values, development of ethics

Ethical decision making
 Ethical decision making involves taking into consideration ethical issues at various stages of decision making process
 The basic step involved in ethical decision making are the same as in normal decision making process
 PLUS APPROACH
 P=Policies
 L=Legal
 U=Universal
 S=Self
8 Steps to Ethical Decision Making In Business
 Step 1: Gather the Facts
Asking questions about the issue is important!
?) How did the situation occur?
?) What issues do both sides bring to the table?
?) Is there any background information I am given?

 Step 2: Define the Ethical Issues
?) Why are people upset?
In most cases, one side or the other does not agree on what the issue really is. You need to define the ethical issue for yourself before you can
make a sound decision.
 Step 3: Identify the Affected Parties
The affected parties are anyone who is effected by the consequence of the ethical issue. Sometimes not all of the effected parties are
mentioned, however, they still need to be considered.
?) Who are all of the effected parties
 STAKEHOLDER: Those who have a stake in the organization and how it performs. These can include: Owners, managers, customers,
employees, suppliers, the community, the government, the natural environment, and of course stockholders.
 Step 4: Identify the Consequences
After you identify each party involved, identify the consequences for each party.
?) How does each party’s consequences fair when compared with the outcome?
 Long Term vs. Short Term Consequences
?) How will the ethical decision effect the parties in the long term… and the short term.
 Symbolic Consequences
Every decision and action sends a message.
?) What message will be sent by the ethical decision?
?) What will happen if it is misunderstood?
 Consequence of Secrecy
Sometimes a decision is made in private to avoid confrontation or negative reaction.
?) Is it a sound ethical decision if the decision must be hid from some stakeholders?
 Step 5: Identify the Obligations
When determining an ethical issue it is important to look at the obligations of the stakeholders and make sure that each is justified.
?) What are each parties obligations?
 Step 6: Consider Your Character and Integrity
Society defines what ethics is for us, however, the community of the stakeholders may have a different view than you. When making an
ethical decision you must consider the following…
?) Disclosure Rule: If you do not want others to know about it… then you should not be doing it!
 Step 7: Think Creatively about Potential actions
Before a final decision is rendered make sure you have unnecessarily forced yourself into a corner. Many ethical decision are not A or B
choices, get creative about other ways to solve the problem.
?) What is another way to solve the problem?
 Step 8: Check your Gut
?) How do you feel about the ethical decision?

?) Was the conclusion easy for you to come up with?
Stakeholder Management Approach Defined
 The stakeholder approach provides a framework that enables users to map and ideally, manage the corporation’s relationships, both
present and potential, with groups to reach win-win collaborative outcomes.
 It does not have to result from a crisis or controversial situation.
 It can be used as a planning method to anticipate and facilitate business decisions, events, and policy outcomes.
 Business units, teams, and groups can use this approach.
Three Issues Management Approaches
 First Approach: 6-Step Issue Management Process
 Most straightforward
 More appropriate for companies or groups trying to understand, manage, and control their internal environments
 Involves the following steps:
 Environmental scanning and issues identification
 Issues analysis
 Issues ranking and prioritizing
 Issues resolution strategizing
 Issues response and implementation
 Issues evaluation and monitoring
 Second Approach: 7-Phase Issue Development Process
 Issues are believed to follow a developmental life cycle
 Life-cycle stages suggested for tracking an issue:
 A felt need arises

 Media coverage is developed
 Interest group development gains momentum
 Policies are adopted by leading political jurisdictions
 The federal government gives attention to the issue
 Issues and policies evolve into legislation and regulation
 Issues and policies enter litigation
 Third Approach: 4-Stage Issue Life Cycle
 Thomas Marx observed that issues evolve from social expectations to social control through the following steps:
 Social expectations
 Political issues
 Legislation
 Social control
Two Crisis Management Approaches
 First Approach: Precrisis Through Resolution
 According to this model, a crisis consists of four stages:
 Prodromal (precrisis)
 Warning stage
 Acute
 Damage has been done
 Chronic
 Clean-up phase
 Resolved
 The crisis management goal
 Second Approach: Reaction Through Accommodation
 Five phases of corporate social response to crises related to unsafe products, or product crisis management include:

 Reaction
 A crisis has occurred
 Defense
 The company is overwhelmed by public attention
 Insight
 Most agonizing time
 Accommodation
 Addressing public pressure and anxiety
 Agency
 Company attempts to understand the causes
 Suggestions that corporations can follow to respond more effectively to crises include:
 Face the problem
 Take your lumps
 Recognize that there is no such thing as a secret or private crisis
 Stage war games
 Use the firm’s philosophy, motto, or mission statement
 Use the firm’s closeness to customers and end users for early feedback
 Issues and crisis management methods and preventive techniques are effective in corporations only if:
 Top management is supportive and participates
 Involvement is cross-departmental
 The issues management unit fits with the firm’s culture
 Output, instead of process, is the focus
Relevance of Business Ethics
Arguments against Bringing Ethics into Business
 The Milton Friedman’s Argument
o The managers should single-mindedly pursue profit to the exclusion of all else (morality included)
 The Argument from Incentives
o The only practical way to encourage ethical behavior is to install financial and legal incentives
o Bs people do not respond o ethical lectures
 The Gut Feeling Argument
o One cannot study ethics in any meaningful sense anyway.
o It is something you feel not something you think about
 The Moral Development Argument

o Moral character is formed in early childhood not while sitting in ethics class.
o It’s too late by the time students enter the college
 Loyal Agent's Argument
o A loyal agent's duty is to serve his/her employer as the employer wants to be served.
o An employer wants to be served in whatever ways will advance his/her self-interest.
o Therefore, as loyal agents of their employers (stockholders) managers have a duty to serve their employers in whatever
ways advance their employers self-interest.
Business ethics is essentially just obeying the law
o Wrongful business practices are those forbidden by law.
o Therefore following the law is sufficient to prevent wrongful conduct in & by businesses
o There is a prima facie moral obligation to obey the law
The Case For Ethics in Business
 Simple Argument
o Ethics should govern all human activities.
o Business is a human activity.
o Therefore, ethics should govern business too.
 Argument from Businesses Need for Ethics
o Businesses can't survive without ethics
 business requires at least a minimal adherence to ethics on the part of those involved in the business: e.g., the
honoring of contracts by customers, managers, & employees
 business requires a stable society in which to carry on its dealings: morality is a stabilizing force in society.
o Therefore it is in the best interests of businesses to promote ethical behavior (and practicing it is the best way to promote
it).
 Argument from the Consistency of Ethical Considerations with Business Pursuits (of profit)
o Observed evidence
 Business can have exemplary ethics & still be very profitable
 No studies have found a negative correlation between socially responsible behavior and profits.
o Reasons behind the profitability of ethical behavior: ethical behavior cultivates good will & loyalty
 among customers
 among employees
 Game theoretic considerations: "the prisoner's dilemma" lesson: "when people deal with each other repeatedly, so that each can
later retaliate against or reward the other party, cooperation is more advantageous than continually trying to take advantage of the
other party."
 Unethical businesses become targets of moral outrage which works to their detriment.
Spiritual Values

Ethical issues & dilemmas
 Feedback about performance
 Truth telling to peers
 Fair treatment of customers
 Pressure from Management
Each company's culture is different, but some companies stress profits and results above all else. In these environments,
management may turn a blind eye to ethical breaches if a worker produces results, given the firm's mentality of "the end justifies the
means." Whistle-blowers may be reluctant to come forward for fear of being regarded as untrustworthy and not a team player.
Therefore, ethical dilemmas can arise when people feel pressured to do immoral things to please their bosses or when they feel that
they can't point out their coworkers' or superiors' bad behaviors.
 Ambition and Discrimination
Individual workers may be under financial pressure or simply hunger for recognition. If they can't get the rewards they seek through
accepted channels, they may be desperate enough to do something unethical, such as falsifying numbers or taking credit for another
person's work to get ahead.
Though diversity is an important part of business, some people may not be comfortable with people from different backgrounds and
possibly be reluctant to treat them fairly. This kind of discrimination is not only unethical but illegal and still remains common.
 Negotiation Tactics
While these factors can cause ethical dilemmas for workers within their own companies, doing business with other firms can also
present opportunities for breaches. Pressure to get the very best deal or price from another business can cause some workers to
negotiate in bad faith or lie to get a concession. Negotiators may also try to bribe their way to a good deal. While this is illegal in the

U.S., it still sometimes happens; in other nations, it is more common, and sometimes even expected, which can put negotiators in a
difficult position.
 Solutions
These ethical dilemmas can be difficult for workers to grapple with, especially if they don't know what the company's official
guidelines are. Therefore, it is in an organization's best interest to provide ethical training to its employees, to help them identify
unethical behavior and give them tools with which to comply. Every company should have an ethical policy that spells out its
penalties for infractions. Moreover, management must lead by example, showing that the company takes ethics seriously and that
violators will be punished according to the organization's policies, including possible suspension or termination.
Corporate Social Responsibility

Ethical Principles for Managers
1. HONESTY. Be honest in all communications and actions. Ethical executives are, above all, worthy of trust and honesty is the cornerstone of
trust. They are not only truthful, they are candid and forthright. Ethical executives do not deliberately mislead or deceive others by
misrepresentations, overstatements, partial truths, selective omissions, or any other means and when trust requires it they supply relevant
information and correct misapprehensions of fact.
2. INTEGRITY. Maintain personal integrity. Ethical executives earn the trust of others through personal integrity. Integrity refers to a
wholeness of character demonstrated by consistency between thoughts, words and actions. Maintaining integrity often requires moral
courage, the inner strength to do the right thing even when it may cost more than they want to pay. The live by ethical principles despite great
pressure to do otherwise. Ethical executives are principled, honorable, upright and scrupulous. They fight for their beliefs and do not sacrifice
principle for expediency.
3. PROMISE-KEEPING. Keep promises and fulfill commitments. Ethical executives can be trusted because they make every reasonable effort to
fulfill the letter and spirit of their promises and commitments. They do not interpret agreements in an unreasonably technical or legalistic
manner in order to rationalize non-compliance or create justifications for escaping their commitments.
4. LOYALTY. Be loyal within the framework of other ethical principles. Ethical executives justify trust by being loyal to their organization and
the people they work with. Ethical executives place a high value on protecting and advancing the lawful and legitimate interests of their
companies and their colleagues. They do not, however, put their loyalty above other ethical principles or use loyalty to others as an excuse for
unprincipled conduct. Ethical executives demonstrate loyalty by safeguarding their ability to make independent professional judgments. They
avoid conflicts of interest and they do not use or disclose information learned in confidence for personal advantage. If they decide to accept
other employment, ethical executives provide reasonable notice, respect the proprietary information of their former employer, and refuse to
engage in any activities that take undue advantage of their previous positions.
5. FAIRNESS. Strive to be fair and just in all dealings. Ethical executives are fundamentally committed to fairness. They do not exercise power
arbitrarily nor do they use overreaching or indecent means to gain or maintain any advantage nor take undue advantage of another’s mistakes
or difficulties. Ethical executives manifest a commitment to justice, the equal treatment of individuals, tolerance for and acceptance of
diversity. They are open-minded; willing to admit they are wrong and, where appropriate, they change their positions and beliefs.

6. CARING. Demonstrate compassion and a genuine concern for the well-being of others. Ethical executives are caring, compassionate,
benevolent and kind. They understand the concept of stakeholders (those who have a stake in a decision because they are affected by it) and
they always consider the business, financial and emotional consequences of their actions on all stakeholders. Ethical executives seek to
accomplish their business objectives in a manner that causes the least harm and the greatest positive good.
7. RESPECT FOR OTHERS. Treat everyone with respect. Ethical executives demonstrate respect for the human dignity, autonomy, privacy,
rights, and interests of all those who have a stake in their decisions; they are courteous and treat all people with equal respect and dignity
regardless of sex, race or national origin. Ethical executives adhere to the Golden Rule, striving to treat others the way they would like to be
treated.
8. LAW ABIDING. Obey the law. Ethical executives abide by laws, rules and regulations relating to their business activities.
9. COMMITMENT TO EXCELLENCE. Pursue excellence all the time in all things. Ethical executives pursue excellence in performing their duties,
are well-informed and prepared, and constantly endeavor to increase their proficiency in all areas of responsibility.
10. LEADERSHIP. Exemplify honor and ethics. Ethical executives are conscious of the responsibilities and opportunities of their position of
leadership and seek to be positive ethical role models by their own conduct and by helping to create an environment in which principled
reasoning and ethical decision making are highly prized.
11. REPUTATION AND MORALE. Build and protect and build the company’s good reputation and the morale of it’s employees. Ethical
executives understand the importance of their own and their company’s reputation as well as the importance of the pride and good morale of
employees. Thus, they avoid words or actions that that might undermine respect and they take affirmative steps to correct or prevent
inappropriate conduct of others.
12. ACCOUNTABILITY. Be accountable. Ethical executives acknowledge and accept personal accountability for the ethical quality of their
decisions and omissions to themselves, their colleagues, their companies, and their communities.
UNIT-2
Corporate Governance
Corporate governance
Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the
distribution of rights and responsibilities among different participants in the corporation (such as the board of directors, managers,
shareholders, creditors, auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate
affairs. Governance provides the structure through which corporations set and pursue their objectives, while reflecting the context of the
social, regulatory and market environment. Governance is a mechanism for monitoring the actions, policies and decisions of corporations.
Governance involves the alignment of interests among the stakeholders
Principles of corporate governance
 Rights and equitable treatment of shareholders:[15][16][17]
Organizations should respect the rights of shareholders and help
shareholders to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating
information and by encouraging shareholders to participate in general meetings.
 Interests of other stakeholders:
[18]
Organizations should recognize that they have legal, contractual, social, and market driven
obligations to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and
policy makers.
 Role and responsibilities of the board:
[19][20]
The board needs sufficient relevant skills and understanding to review and challenge
management performance. It also needs adequate size and appropriate levels of independence and commitment.
 Integrity and ethical behavior:[21][22]
Integrity should be a fundamental requirement in choosing corporate officers and board
members. Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible
decision making.

 Disclosure and transparency:[23][24]
Organizations should clarify and make publicly known the roles and responsibilities of board and
management to provide stakeholders with a level of accountability. They should also implement procedures to independently verify
and safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should
be timely and balanced to ensure that all investors have access to clear, factual information
IMPORTANCE OF CORPORATE GOVERNANCE
1. Changing Ownership Structure : In recent years, the ownership structure of companies has changed a lot. Public financial
institutions, mutual funds, etc. are the single largest shareholder in most of the large companies. So, they have effective control on
the management of the companies. They force the management to use corporate governance. That is, they put pressure on the
management to become more efficient, transparent, accountable, etc. The also ask the management to make consumer-friendly
policies, to protect all social groups and to protect the environment. So, the changing ownership structure has resulted in corporate
governance.
2. Importance of Social Responsibility : Today, social responsibility is given a lot of importance. The Board of Directors have to protect
the rights of the customers, employees, shareholders, suppliers, local communities, etc. This is possible only if they use corporate
governance.
3. Growing Number of Scams : In recent years, many scams, frauds and corrupt practices have taken place. Misuse and
misappropriation of public money are happening everyday in India and worldwide. It is happening in the stock market, banks,
financial institutions, companies and government offices. In order to avoid these scams and financial irregularities, many companies
have started corporate governance.
4. Indifference on the part of Shareholders : In general, shareholders are inactive in the management of their companies. They only
attend the Annual general meeting. Postal ballot is still absent in India. Proxies are not allowed to speak in the meetings.
Shareholders associations are not strong. Therefore, directors misuse their power for their own benefits. So, there is a need for
corporate governance to protect all the stakeholders of the company.
5. Globalisation : Today most big companies are selling their goods in the global market. So, they have to attract foreign investor and
foreign customers. They also have to follow foreign rules and regulations. All this requires corporate governance. Without Corporate
governance, it is impossible to enter, survive and succeed the global market.
6. Takeovers and Mergers : Today, there are many takeovers and mergers in the business world. Corporate governance is required to
protect the interest of all the parties during takeovers and mergers.
7. SEBI : SEBI has made corporate governance compulsory for certain companies. This is done to protect the interest of the investors
and other stakeholders.

Corporate Social Responsibility

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