ETHICS AND SOCIAL RESPONSIBILITY

Chapter 2
Chandana Fonseka

What are Ethics?

What are Managerial Ethics?

Organizations are expected to follow ethics Ethics are codes of moral principles and values that govern the behaviour of a person or group with respect to what is good or bad
Ethics set standards with regard to the conduct (how to behave?) and decision making (how to arrive at decisions?) Ethics include values Values shape up both corporate culture and social responsibility

Examples of Few Ethical Practices

Investors: Ensuring safety of their money and timely payment of interest Employees: Provision of fair opportunities in promotions and training, good working conditions, and timely payment of salaries

Fair Trading by The Body Shop

What is Ethical Trade? Ethical Trading is retailers and suppliers taking responsibility for the working conditions of the people who make the products they sell. It's about making sure that workers are treated fairly, with dignity and respect. Our passionate commitment to human rights has always shaped how we trade with our suppliers around the world. We build close relationships with those suppliers and work together to ensure ethical trading is at the heart of our, and their, business. We believe this is the way business should be done. Through our Ethical Trade programme we work with our suppliers on a continuous journey to improve the working conditions of the people who make our products. By engaging with them, we ensure they implement our supplier code of conduct into their workplace.

Examples of Few Ethical Practices

Investors: Ensuring safety of their money and timely payment of interest Employees: Provision of fair opportunities in promotions and training, good working conditions, and timely payment of salaries Customers: Complete information of the service and product should be made available. Personal information of the customers should not be used for personal gain Competition: Crooked tactics and methods should be avoided while handling competitors

Examples of Few Ethical Practices

Investors: Ensuring safety of their money and timely payment of interest Employees: Provision of fair opportunities in promotions and training, good working conditions, and timely payment of salaries Customers: Complete information of the service and product should be made available. Personal information of the customers should not be used for personal gain Competition: Crooked tactics and methods should be avoided while handling competitors

Environment: Polluting industries should ensure compliance with the norms regarding air, water and noise pollution

Colombo residents demand halt to toxic pollution By G. Senaratne 29 November 2000

Water Pollution in Ekala

Residents of Ekala, an industrial suburb of the Sri Lankan capital Colombo, last month launched a protest campaign against hazardous environment pollution caused by chemical waste from a Union Carbide plant. Because of the campaign, the government's area Medical Health Officer commenced a court case against the company on November 13, but the case has been adjourned until July 22 next year, leaving residents anxious and furious. On the night of October 16, Union Carbide's binding gum-producing factory discharged chemicals, including poisonous ethyl acrylate, into an open drain in the heavily-populated suburb, seriously harming at least 100 people, including 25 children. The discharge immediately sparked angry protests because residents have complained for five years about the dangerous pollution in Ekala, about 25 kilometres north of Colombo city. The leak affected the water and air over a two-square kilometre area. Residents suddenly suffered sore eyes, headache, vomiting, breathing problems, choking and rising temperatures. Children were taken to nearby hospitals, with some serious cases transferred to Colombo's national hospital the next day. More than 500 people gathered outside the factory during the night and demanded its immediate closure. Security officers admitted that the company, a subsidiary of the US multinational, had released contaminated water into the drain but claimed that the incident had ended. They refused to allow residents into the plant to see for themselves. However, the protest

Ethical Standings
Human behaviour, in a civilized society, is governed by 3 categories of guidelines:

Codified Laws Legal standard

High

Ethics Moral standard

Free Choice Personal standard

Low

Degree of behavioural control No specific laws, yet it does have standards of conduct based on shared principles and values about moral conduct that guide an individual or company

Values and standards are written (coded) into the legal system and enforced in the courts

No laws can be imposed and a person can select his or her decision/behaviour freely

Identification of Laws, Ethics and Free Choices

1.
2. 3. 4. 5. 6. 7. 8.

9.
10.

Driving a vehicle after drinking alcohol Wearing fancy dresses at funerals Using office vehicle for a personal matters without getting proper permission Blasting a subordinate in front of all other peer employees Deliberately delaying the settlement of debts Including incorrect data/information in a CV Use some others Credit Card and withdraw money without the card owners permission Deciding on a leisure hotel to take your family members Smoking in public places Watching pornographic pictures in the office

Ethical Dilemma??

Since ethics are not codified people sometimes find it difficult to arrive at decisions whether a particular behaviour is right or wrong

Criteria for Ethical Decision Making

When ethical decisions are taken based on established norms and values it is sometimes called Normative Strategy There are 4 different approaches in normative strategy: Utilitarian approach
Decision maker considers the effect of each decision alternative on all parties and select the one that optimizes the satisfaction for the greatest number of people optimizing happiness

Individualism approach

Acts are moral (accepted) if they promote individuals best long term interests

Moral-rights approach

Human beings have fundamental rights and liberties that cannot be taken away by an individuals decision (e.g. Right to speak, learn, live, take decisions, etc.)

Justice approach

Decisions should be based on fairness and impartiality

Corporate Social Responsibility

The formal definition of CSR is managements obligation to

make choices and take actions that will contribute to the welfare and interests of society as well as the organization
It includes 4 types of responsibilities vested on corporate

entities
Legal Responsibility
Be profitable Obey the law Be ethical

Discretionary Responsibility
Contribute to the community and quality of life

Economic Responsibility

Ethical Responsibility

Total Corporate Social Responsibility

Managing company ethics and social responsibility

Retaining or keeping an organization on ethical footing is not that easy There are mainly 3 pillars (frames) on which the ethical organization gets supported:

Ethical individuals Act with integrity Behave honestly Treat people right Play fair Have high level of moral development

Ethical leadership Be a role model Communicate about ethics and values Reward ethical behaviour

Structure and systems Good corporate culture Follow code of ethics Ethics committee Training on ethics

Organizational Stakeholders
Stakeholder is any group within or outside the

organization that has a stake in the organizations performance

Provide examples of stakeholders and their interests towards the organization

The organizations performance affects stakeholders, but

stakeholders can also have an effect on the organizations performance

Socially responsible company does take serious attention

to look after the stakeholders and their interests

The End