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ASSIGNMENT FOUR

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Demonstrating Ethical Behavior and Social Responsibility


Presented To: Tasnima Aziza Presented By: Nusrat Azim Class ID: 822 Batch: 16th Department of Business Administration Submission Date: 12/06/2007

1. When faced with ethical dilemmas, what questions can you ask yourself that might help you make ethical decisions? Ans. The purpose of making ethical decisions is to demonstrate us to keep ethics in mind while making business decisions. The options are often very difficult. Sometimes the obvious solution from an ethical point of view has drawbacks from a personal or professional point of view; sometimes there is no desirable alternative. Such solutions are called ethical dilemmas, as we are to select between equally unsatisfactory alternatives. So it seems quite useful to ask ourselves the following questions when facing an ethical dilemma:
I. Is it legal? Am I violating any law or company policy?

Whether we are thinking about having a drink and then driving home, gathering marketing intelligence, designing a product, hiring or firing employees, planning on how to get rid of waste, or using a questionable nickname for an employee, it is necessary to think about the legal implications of what we do. This question is the most basic one in behaving ethically in business, but it is only the first.
II. Is it balanced? Am I acting fairly? Would I want to be

treated this way? Will I win everything at the expense of another party? Win-lose situations often end up as lose-lose situations. There is nothing like a major lose to generate retaliation from the loser. In the stock market today, many companies that were merely suspected of wrongdoing have seen their stock drop dramatically. Every situation cannot be completely balanced, but it is important to the health of our relationships that we

avoid major imbalances over time. An ethical businessperson has a win-win attitude. In other words, such a person tries to make decisions that benefits all parties involved.
III. How will it make me feel about myself? Would I feel

proud if my family or friends learned my decisions? Would I be able to discuss the proposed situation or action with my immediate supervisor? The companys clients? How would I feel if my decision were announced on the evening news? Will I have to hide my actions or keep them secret? Has someone warned me not to disclose my actions? Am I feeling unusually nervous? Decisions that go against our sense of right and wrong make us feel bad ---- they corrode our selfesteem. That is why an ethical businessperson does what is proper as well as profitable. Ethical dilemmas have no easy solutions. Individuals and companies that develop a strong ethics code and use the three ethics-check questions just presented have a better chance than most of behaving ethically. 2. What are the six steps to follow in establishing an effective ethics program in a business? Ans. Ethics goes beyond obeying laws. It is defined as the standards of moral behavior that is accepted by society as right versus wrong. So it is necessary to establish an effective ethics program in a business. The six-step process that can help improve the business ethics are described below: I. Top management must adopt and unconditionally support an explicit corporate code of conduct.

II. Employees must understand that expectations for ethical behavior begin at the top and that senior management expects all employees to act accordingly. III. Managers and others must be trained to consider the ethical implications of all business decisions. IV. An ethics office must be set up. Phone lines to the office should be established so that employees who dont often want to be seen with an ethics officer can inquire about ethical matters anonymously. Whistleblowers must feel protected from retaliation. In 2002, President George W. Bush signed the Corporate and Criminal Fraud Accountability (Sarbanes-Oxley) Act that contains historic protections for corporate whistleblowers. V. Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program. Pressure to put aside ethical considerations often comes from the outside and it helps employees resist such pressure when everyone knows what the ethical standards are. VI. The ethics code must be imposed. It is important to back any ethics program with timely action if any rules are ignored. That is the best way to communicate to all employees that the code is serious. The most critical is the last step; no matter how well intended a companys ethics code is. It is worthless if not enforced. 3. What is corporate social responsibility, and how does it relate to each of businesss major stakeholders? Ans. Corporate social responsibility is the concern businesses have for the welfare of society. It goes well beyond merely being ethical. Just as we need to be good citizens, contributing what we can to society, corporations need to be good citizens as well.

Corporate social responsibilities relate widely to each of businesss major stakeholders such as: customers, investors, employees and society and environment in general. This concept is described below: Responsibility to Customers One responsibility of business is to satisfy customers by offering them real valued goods and services, but it is not so easy to meet, as it seems. Normally three out of five new businesses failperhaps because their owners failed to please their customers. One of the surest ways of failing to please customers is to be dishonest with them. The payoff for socially conscious behavior could result in new business as customers switch from rival companies simply because they admire the companys social effortsa powerful competitive edge. Consumer behavior studies show that, all else being equal, a socially conscious company is likely to be viewed more encouragingly than less socially responsible companies. The most important point is that customers prefer to do business with trusted companies and even more important, do not want to do business with companies they dont trust. Responsibility to Investors American economist Milton Friedman made a classic statement when he said that corporate social responsibility means making money for stockholders. Ethical behavior is good for shareholder wealth, it doesnt subtract from the bottom line; it adds to it. Those cheated by financial wrongdoing are the shareholders themselves. Unethical behavior may seem profitable for the short term, but it guarantees eventual failure.

Many people believe that it makes both financial and moral sense to invest in companies that are planning ahead to create a better environment. By choosing to put their money into companies whose goods and services benefit the community and the environment, investors can improve their own financial health as well as the societys. A few investors, known as inside traders, have chosen unethical means to improve their own financial health. Insider trading involves insiders using private company information to further their own fortunes or those of their family and friends. It isnt limited to company executives and their friends. Prosecutors are placing increased emphasis on the prosecutions of insider trading cases in order to ensure that the public is able to conduct business in a securities market that is fair and equally accessible to all. Companies can misuse information for their own benefit at investors expense as well. Responsibility to Employees Businesses have several responsibilities to employees. First, they have a responsibility to create jobs if they want to grow. The best social program in the world is a job. Once a company creates job, it has an obligation to see to it that hard work and talent are fairly rewarded. Employees need pragmatic hope of a better future, which comes only through a chance for upward mobility. People need to see that integrity, goodwill, hard work, ingenuity and talent pay off. Studies have shown that the factor that most influences a companys effectiveness and financial performance is human resource management. If a company treats employees with respect, they usually will respect the company as well. When employees feel theyve been treated unfairly, they often strike back. Getting even is one of the most powerful incentives for good people to do bad things. Not many displeased workers are desperate enough to resort to violence in the workplace, but a

great number do relieve their frustrations in more delicate ways, such as blaming mistakes on others, not accepting responsibility for decision making, manipulating budgets and expenses, making commitments they intend to ignore, hoarding resources, doing the minimum needed to get by, and making results look better than they are. The loss of employee commitment, confidence, and trust in the company and its management can be very expensive indeed. Responsibility to Society One of businesss major responsibilities to society is to create new wealth. More than a third of working Americans receive their salaries from non-profit organizations that in turn receive their funding from others, who in turn receive their money from business. Foundations, universities, and other non-profit organizations own billions of shares in publicly held companies. As those stock prices increase, more funds are available to benefit society. Businesses are also partially responsible for promoting social justice. Business is perhaps the most crucial institution of civil society. For its own well-being, business depends on its employee being active in politics, law, churches and temples, arts, charities and so on. Many companies believe that business has a role in building a community that goes well beyond giving back. To them, charity is not enough. Their social contributions include cleaning up the environment, building community toilets, providing computer lessons, caring for the elderly, and supporting children from lowincome families. Responsibility to the Environment

Businesses are clearly taking responsibility for helping to make their own environment a better place. Environmental efforts may increase the companys costs, but they also may allow the company to charge higher prices, to increase market share, or both. But not all environmental strategies prove to be as financially beneficial to the company. Environmental quality is a public good; that is, everyone gets to enjoy it regardless of who pays for it. The trick for companies is to find the right public good that will appeal to their target market. Many corporations are publishing reports that document their net social contribution. To do that, a company must measure its positive social contributions and subtract its negative social impacts. Therefore, the discussion above implies how corporate social responsibility relates to businesss each major stakeholders for the welfare of the society. 4. What is a social audit, and what kinds of activities does it monitor? Ans. Organizations seem nice when they are more socially responsible and also encouraging to see some efforts made toward creating safer products, cleaning up the environment, designing more honest advertising and treating women and minorities fairly. The term that represents the measurement of the social responsibilities an integral part of top managements decision making of the organizations is social auditing. A social audit is a systematic evaluation of an organizations progress toward implementing programs that are socially responsible and responsive.

One of the major problems of conducting a social audit is establishing procedures for measuring a firms activities and their effects on society. An outline of business activities that could be considered socially responsible is given below: Community related activities such as participating in local fund-raising campaigns, or donating executive time to various nonprofit organizations or participating in urban planning and development. Employee-related activities such as establishing equal opportunity programs, offering flextime and other benefits, promoting job enrichment, ensuring job safety and conduct employee development program. Political activities such as taking a position on nuclear safety, gun control, pollution control, consumer protection, and other social issues and working more costly with local, state and federal government officials. Support for higher education, the arts and other nonprofit social agencies. Consumer activities such us ensuring product safety, creating truthful advertising, handling complaints promptly, setting fair prices, and conducting extensive consumer education programs. So, these are the sort of activities that could be considered socially responsible in short that social audit monitors.

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