COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF BUSINESS MANAGEMENT AND

MARKETING

BUSINESS ETHICS &

SOCIAL RESPONSIBILITY
HAND OUT
SECOND YEAR STUDENTS
DEGREE & DIPLOMA

Course Title: Business Ethics and Social Responsibility Course Code: MGT212
Academic Year 2014 - 2015
Course Objectives:
1. To enhance the awareness of Ethical issues in contemporary business management
2. To identify the important problems of stakeholders related with ethics in business
3. To impart social responsibility among business mangers
4. To explore how individuals, groups and firms solve managerial problems in organizations by coping
ethical decision making
5. To create professionalism in business with the help of business ethics
Course Outline: (Subject Modifications)
Chapter-1: Fundamental of Business Ethics: Business Ethics defined, Relationship of Ethics with
Management, Ethical Theories and Models, Ethical Dilemma and Ethics and Morality
Chapter-2: Corporate Citizenship: Introduction, Corporate social responsibility, Corporate social
responsiveness, Corporate social performance, Corporate citizenship, and social and financial
relationship.
Chapter-3: Current Issues On Ethical Business: Ethical Issues,Individuals, Group and organizational
Ethics and Issues on Moral Decisions
Chapter-4:Functional Areas of Business Ethics:Ethics and Financial Management, Ethics and
Marketing Management,Ethics and Human Resources Management, and Growing Importance of
Business Ethics
Chapter-5: Business ethics and Technology:Introduction, what is technology, benefits and side effects
of technology? And ethics and technology.
Chapter-6: External stakeholder Issues: The stake holder approach to business society and ethics,
Government, consumer and Community stake holders.
Chapter-7: Internal stakeholder issues:
Employee stakeholders: workplace issues, Employee
stakeholders: Privacy, safety and health.
Chapter-8: Strategic Management and corporate public policy: Understanding the concept of corporate
policy, strategic management process and four key strategic levels.
References:
1. Carroll &Buchhodtz, Business & Society- Ethics and Stakeholder Management, 5th Edition
2. Manuel G. Velasqus, Business Ethics Concepts and Cases, 5th Edition
3. Banerjee &Bani P, Foundation of Ethics in Management, Excel Books,New Delhi, 2005
4. Boatright John R, Ethics and the Conduct of Business, Pearson Education Asia, 2005
5. Jennings Maianne M, Business Ethics, Thomson, Australia- 2006
6. Mathur. U. C, Corporate Governance and Business Ethics: Text and Case, Macmillan & Co. Ltd., New
Delhi- 2009

Chapter-1: Fundamental of Business Ethics: Business Ethics defined, Relationship of Ethics with
Management, Ethical Theories and Models, Ethical Dilemma and Ethics and Morality
Definition of Ethics:
Ethics is a set of values and principles that we strongly believe and follow. It studies what is right or
wrong, and then doing the right thing.Ethics consists of the standards of behavior that our society
accepts and we strongly follow
The concept of business ethics has come to mean various things to various people, but generally it's
coming to know what is right or wrong in the workplace and doing what's right -- this is in regard to
effects of products, services and in relationships with stakeholders.
Origin of Business Ethics
Business ethics has come to be considered a management discipline, especially since the birth of the
social responsibility movement in the 1960s. An increasing number of people asserted that because
businesses were making a profit from using our country's resources, and part of that profit has to be
utilized to improve society. Many researchers, business schools and managers have recognized this
broader constituency, and in their planning and operations, they decided to replace the word
"stockholder" with "stakeholder," meaning to include employees, customers, suppliers, government
along with shareholders and there by wider community.
Today 90% of business schools teach business ethics. Ethics in the workplace can be managed through
use of codes of ethics, codes of conduct, roles of ethicists and ethics committees, policies and
procedures, policies to resolve ethical dilemmas through ethical training.
Ethics is the discipline that examines ones moral standards or the moral standards of society. It asks
how these standards apply to our lives and whether these standards are reasonable or unreasonable;
good or bad.
A person starts to do ethics when he or she takes the moral standards absorbed from family, the
society, the religion, from friends, coworkers and asks: What do these standards imply for the
situations in which I find myself?. Do these standards really make sense?
Meaning of Ethics and Business Ethics
Business ethics (also known as corporate ethics) is a form of applied ethics or professional ethics that
examines ethical and moral principles or ethical problems that arise in a business environment. It
applies to all aspects of business conduct and is relevant to the conduct of individuals and entire
organizations.
Business ethics has both normative and descriptive dimensions. As a corporate practice and a career
specialization, the field is primarily normative. Academicians attempt to understand business behavior
and ethical standards by employing descriptive methods. The range and quantity of ethical issues
reflects the interaction of profit-maximizing behavior with non-economic concerns. Interest in business

ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within
the academia. For example, today most major corporations promote their commitment to noneconomic values under headings such as ethical codes and social responsibility charters. Adam Smith
said, "People of the same trade seldom meet together, even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or in some contrivance to raise
prices." Governments use laws and regulations to point business behavior in what they perceive to be
beneficial directions. Ethics implicitly regulates areas and details of behavior that lie beyond
governmental control. The emergence of large corporations with limited relationships and sensitivity to
the communities in which they operate accelerate the development of formal ethics regimes.
Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental
purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing
profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally
considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the
rights and liabilities due to citizens as persons.
The term ethics has a variety of meanings
1. Personal ethics
2. Group ethics
3. Work ethics
4. Professional ethics
5. Social ethics
6. Accounting ethics
7. Ethics is the study of morality
Morality is the standards that an individual or a group has about what is right and wrong, or good
and evil. Human values and human benefits Ethics is the study of moral standards, moral judgements
based on that standards
Relationship of Ethics with Business Management
Business Ethics and Finance
Fundamentally, finance is a social science discipline. The discipline borders behavioral economics,
sociology, economics, accounting and management. It concerns technical issues such as the mix of debt
and equity, dividend policy, the evaluation of alternative investment projects, options, futures, swaps,
and other derivatives, portfolio diversification and many others. It is often mistaken to be a discipline
free from ethical burdens. The 2008 financial crisis caused critics to challenge the ethics of the
executives in charge of U.S. and European financial institutions and financial regulatory bodies.

Finance ethics is overlooked for another reasonissues in finance are often addressed as matters of law
rather than ethics.
Ethics and Marketing Management
Marketing Ethics came of age only as late as 1990s. Marketing ethics was approached from ethical
perspectives of virtue, deontology, Consequentialism, pragmatism and relativism. Ethics in marketing
deals with the principles, values and/or ideals by which marketers (and marketing institutions) ought
to act. Marketing ethics is also contested terrain, beyond the previously described issue of potential
conflicts between profitability and other concerns. Ethical marketing issues include marketing
redundant or dangerous products/services transparency about environmental risks, transparency
about product ingredients such as genetically modified organisms possible health risks, financial risks,
security risks, etc., respect for consumer privacy and autonomy, advertising truthfulness and fairness
in pricing & distribution
Business Ethics and Production
This area of business ethics usually deals with the duties of a company to ensure that products and
production processes do not needlessly cause harm. Since few goods and services can be produced and
consumed with zero risk, determining the ethical course can be problematic. In some case consumers
demand products that harm them, such as tobacco products. Production may have environmental
impacts, including pollution, habitat destruction and urban sprawl. The downstream effects of
technologies nuclear power, genetically modified food and mobile phones may not be well understood.
While the precautionary principle may prohibit introducing new technology whose consequences are
not fully understood, that principle would have prohibited most new technology introduced since
the industrial revolution. Product testing protocols have been attacked for violating the rights of
both humans and animals.
Business Ethics and Human Resource Management
Human

resource

management occupies

the

sphere

of

activity

of recruitment, selection,

orientation, performance appraisal, training and development, industrial relations and health and
safety issues.

Business

Ethicists

differ

in

their

orientation

towards

labor

ethics.

Issues

including employment itself, privacy, and compensation in accord with comparable worth collective
bargaining can be seen either as rights or as negotiable. Discrimination by age (preferring the young or
the old), gender/sexual harassment, race, religion, disability, weight and attractiveness are all based on
ethical issues. A common approach to remedying discrimination is affirmative action. Employers must
consider workplace safety, which may involve modifying the workplace, or providing appropriate
training

or

hazard

disclosure.

Larger

economic

issues

such

as immigration, trade

policy, globalization and trade unionism affect workplaces and have an ethical dimension, but are often
beyond the purview of individual companies.

Ethical Theories and Models

Theories are developed from concepts, generalizations and propositions through deductive reasoning.
At the same time, models are developed within the framework of inductive reasoning. A model is the
conversion of theory in to mathematical form or equation form. It is the depiction of things in to reality.
In business ethics many theories and models exist, the most important are discussed below:
Integrative Social Contracts Theory of Business Ethics
It is a normative theory of business ethics and it allows for moral diversity among various cultures
while maintaining certain universal norms. A social contract is an informal agreement regarding
behavioral norms that are developed from shared goals beliefs and attitudes of groups of people.
Corporations enhance the welfare of society through the satisfaction of consumer and interest of
workers by leveraging corporations special advantages.
This is the moral foundation; Social Contract also serves as a tool to measure the performance of
productive organizations. When such organizations fulfill the terms of the contract, they are morally
justified. When they do not, they should be condemned. Social Contracts Theory believes in hyper
norms, Macro norms and Individual norms. Hyper norms are universal and impose certain conditions
on all business, when they do not, they should be condemned. Hyper- norms are universal and impose
certain conditions on all business activity. The macro-social contract functions at the global level
provided specific conditions under which micro- -social contracts may be developed. Micro-social
contracts are community contracts developed to guide business activity. The essential elements of
Social Contracts Theory are shown:
Moral Reasoning Theories of Business Ethics
Moral reasoning deals with determining rightness of the acts. It tells about what individuals or
institutions ought to do. Moral theories deal with two components:
1). Theory of value or theory of good: It decides about what is good or valuable. Though it does not
make this explicit, it focuses on properties that we want to be realized in our actions. These properties
may be compliance with law of nature. Human freedom, social solidarity or a combination of one or
more of them.
2). Theory of the right: It does not tell about which properties are valuable tells about what individuals
and institutions should do by responding to valuable properties. .
Teleological Theories of Business Ethics
It is associated with utilitarianism, ethical egoism and other goal based approaches to
Consequentialism. These theories emphasis on goals and ends in determining moral quality of conduct
and character. It refers to the rightness of actions or moral values of character. It uses ends and goals to
justify virtues and actions.
Teleological theories hold that rightness or wrongness of action is always determined by its tendency
to produce certain consequences which are intrinsically good or bad. To assert that right actions are

those that have the best consequences. They give priority to good over right. According to them, all
actions that maximize the good are right actions. What is good is independent of what is right.
Teleological theories provide different views on what is good that should be promoted. According to
egoistic theories, good is the good of the person who is acting. According to universalistic theories,
Good is the good of all those who are affected by an action. Utilitarianism or universalistic is the best
known teleological theory. Jeremy Bentham, Johan Stuart Mill and Henry Sedgwick were the famous
utilitarianists who asserted that actions should be judged on the basis of the amount of pleasure they
produce on all those who are affected by those action
Utilitarian Theories of Business Ethics: Mills Approach to Utilitarianism
J.S. Mill, a political thinker, published his work Utilitarianism in 1863, He said that pleasures differ in
quantity as well as quality. Some pleasures are more desirable than others. Man should pursue those
actions whose pleasures are noble and dignified. He said, It is better to be a human being dissatisfied
than a pig satisfied. He views morality as internal and not external. Morality regards pleasures and
pains of others and not just ones own self. It is the desire to be in unity with others.
The principle of utility as outlined by John Stuart Mill is that one is obligated morally to produce the
greatest good for the greatest number. Mill identified the good with utility. In calculating whether an
action is right or wrong one needs to project the total consequences for good or ill and determine the
actions in which it is optimized according to situation.
Deontology Theory of Ethics of Business Ethics
Deontology is a theory of ethics advocated by Philosophers such as Kant, Ross and John Rawls. This
theory considers actions to be right or wrong regardless of their consequences. Actions that have moral
values are right; whether or not they are good. If telling lies is morally wrong; it remains wrong even if
it brings happiness to same people. Actions are, thus, right or wrong depending on whether they are
morally right or wrong, Irrespective of their consequences. What is right has priority over what is
good. Deontology is derived from the Greek word Deon, which means obligation or duty. It stresses
on what is obligatory and what one ought to do, whether or not it is good to do so.
Speaking truth may not bring good to some but, one must speak the truth as it is the moral duty of each
good to some but, one must speak the truth.
Ethical Dilemma in Business
An Ethical dilemma is a complex situation that will often involve an apparent mental conflict
between moral imperatives, in which to obey one would result in transgressing another. This is also
called an ethical paradox since in moral philosophy; paradox often plays a central role in ethics
debates. "Love your neighbor" (Gospel of Matthew 5:43) is sometimes in contradiction to an armed
rapist: if he succeeds, you will not be able to love him. But to pre-emptively restrain them is not usually
understood as loving. This is one of the classic examples of an ethical decision clashing or conflicting
with an organism decision, one that would be made only from the perspective of animal survival: an

animal is thought to act only in its immediate perceived bodily self-interests when faced with bodily
harm, and to have limited ability to perceive alternatives - see fight-or-flight response.
However, human beings have complex social relationships that can't be ignored: If one has an ethical
relationship with the neighbor trying to kill you, then, usually, their desire to kill you would likely be
the result of mental illness on their part, stories told to them by others. Such conflicts might be settled
by some other path that has strong social support. Societies formed criminal justice systems (some
argue also ethical traditions and religions) to defuse just such deep conflicts. Such systems always
impose trained judges who are presumed to have an ethical relationship and also a clear obligation to
all who come before them.
Ethical dilemmas are often cited in an attempt to refute an ethical system or moral code, as well as the
worldview that encompasses or grows from it
These arguments can be refuted in various ways, for example by showing that the claimed ethical
dilemma is only apparent and does not really exist (thus is not a paradox logically), or that the solution
to the ethical dilemma involves choosing the greater good and lesser evil (as discussed in value theory),
or that the whole framing of the problem is omitting creative alternatives (as in peacemaking), or (more
recently) that situational ethics or situated ethics must apply because the case can't be removed from
context and still be understood. See also case-based reasoning on this process.
Perhaps the most commonly cited ethical conflict is that between an imperative or injunction not to
steal and one to care for a family that you cannot afford to feed without stolen money. Debates on this
often revolve around the availability of alternate means of income or support, e.g. a social safety
net, charity, etc.
However, there are few legitimate ethical systems in which stealing are more wrong than letting one's
family die. Ethical systems do in fact allow for, and sometimes outline, tradeoffs or priorities in
decisions. Some have suggested that international law requires this kind of mechanism to resolve
whether WTO takes precedence in deciding whether a WTO notification is valid. That is, whether
nations may use trade mechanisms to complain about climate change measures. As there are few
economies that can operate smoothly in a chaotic climate, the dilemma would seem to be easy to
resolve, but since fallacious justifications for restricting trade are easily imagined - just as, at the family
level, fallacious justifications for theft are easily imagined - the seemingly obvious resolution becomes
clouded by the suspicion of an illegitimate motive. Resolving ethical dilemmas are rarely simple or
clear-cut and very often involves revisiting similar dilemmas that recur within societies:
According to some philosophers and sociologists, e.g. Karl Marx, it is the different life experience of
people and the different exposure of them and their families in these roles (the rich being constantly
stolen from, the poor in a position of constant begging and subordination) that creates social
class differences. In other words, ethical dilemmas can become political and economic factions that
engage in long term recurring struggles.

Ethics and Morality

Principles or rules of moral conduct that people use to decide what is right or wrong Morality is
concerned with the social practices defining right and wrong. Ethical theory and moral philosophies
provide guidelines for justification of right or wrong actions when settling human conflict. No one
moral philosophy is accepted by everyone. Rules of prudence promote self-interest, doing what is
prudent for oneself. Rules of morality promote the interest of other people. Morality and prudence
should generally work hand-in-hand if a business is to succeed. Public's agency for translating morality
into explicit social guidelines and practices and for stipulating punishments for offenses
Managers will evaluate the moral dimensions of a decision before making it. The moral yardsticks used
to evaluate a decision consist of the moral standards of a societys culture. Business ethics involve the
use of moral standards when making decisions.
Moral standards consist of specific moral norms and general moral principle moral norms prohibit
certain types of behavior such as lying, stealing and killing. moral principles provide more general
guidelines for behavior and are applicable to decision

Chapter-2: Corporate Citizenship: Introduction, Corporate social responsibility, Corporate social responsiveness, Corporate social
performance, Corporate citizenship, and social and financial relationship.

Chapter 3: Current Issues in Ethical Business: Ethical Issue- Individuals, Group and organizational
Ethics-Issues on Moral Decisions
Ethical Issues Relating to Business
In recent years, corporate face many ethical issues in connection with honest, unfair competition,
unequal compensation, respecting the rights of others, poor information, bad modeling, lack of positive
labeling, fraudulence of executives and lack of virtue ethics. Since consumer is treated as the king in
every business, the foremost ethical issues are related to consumerism. The fundamental issues related
to consumer stakeholders are: product information issues, product and services issues and natural
environmental issues.
a). Product Information Issues
The product information issues include: advertising issues, warranties, packaging, and other product
information issues.
Advertising Issues
The advertising issues relate with ambiguous advertising, concealed facts, exaggerated claims,
psychological appeals, competitive advertising, Use of women in advertising, advertising to children,
advertising of alcoholic beverages, cigarettes advertising, health and environmental claims, etc.
Warranties
Warranties were initially used by manufactures to limit the length of time that they were expressly
responsible for products; they came to be viewed by consumers as devises to protect the buyer against
faulty or defective products. Warranties should be understandable to consumers but in many cases
consumers face ethical issues related with warranties or guarantees.
Packaging and labeling
Abuses in the packaging and labeling areas were fairly frequent and it is mainly related with health
and environmental issues.
Other product information issues
They include sales technique in which direct sellers use deceptive information. The Federal Trade
Commission Act recommends self regulation in advertising.
b). Product and Services Issues
The product and services issues are directly related with quality and safety of products. The issues of
quality include: performance, features, reliability, conformance, durability, serviceability, aesthetics,
and perceived quality. The issues of safety include: product liability, product tampering and product
extension. In the United States, the Consumers Product Safety Commission Act was passed in 1972 to
protect the product as more safe to consumers. In 1980 the Food and Drug Administration Act (FDA)
was passed and the FDAis taken care of the activities such as analysis, surveillance and correction.
c). Natural Environmental Issues
Protection of environment is the most serious ethical issues of today. It includes the protection entire
nature such as water, land, all kinds of mineral resources, the layered gas such as nitrogen and oxygen,
the animals, birds and others creatures as well as the human beings. Water pollution, air pollution,
deforestation, pollution of human life through the continuous ejection of carbon, carbon monoxide,
solid and hazardous wastes, degradation of marine environment, biological disequilibrium, land
degradation are all the environmental issues due to the avoidance of ethical and moral standards in
business. Global warming is the live example of unethical practices in business due to unscientific

industrialization since 1970s. Environmental ethics might be considered to be those actions and
behaviors related to the natural environment that has to agree with societal norms. The cost-benefit
analysis has been used in the areas related public and private capital budgeting and investment
especially to observe the ethical issues of individuals, group and organizations.
Individuals, Group and Organizational Ethical Issues
The basic theme of organizational business in any form is to study analyze how individuals and groups
in an organization functions.
Individual Ethical Understanding
Concepts of right and wrong, fair play, respect for rights of others, honesty, personal integrity
Best learned in the home at an early ageand follow-up is needed throughout life
Institutions (churches, schools, etc.) can help
Difficult to back fill in adulthood
Application of Individual Ethics in Business
a) Fraudulent practices, misleading advertising, unfair competition have to be avoided.
b) Ethics should be taught in management education and organizationsprovided students have
a personal understanding of ethics
c) Taught by modeling (cases and personal example are helpful)
d) Can be reinforced by policies, codes of ethics, training
Ethical Courage
It is not sufficient to simply understand ethical principles. One must have the courage to pay a price
for being ethical. Examples can be helpfulcase studies showing people willing to stand up for ethical
principles. Again, it helps to have practiced ethical behavior over many yearsespecially in small
things
Personal Ethical Understanding
Right/wrong, Fairness, Honesty, Personal Integrity, Respect for Others. The ability and willingness to
encourage others to behave ethically must be trained. Can be taught through cases, problem solving,
study of successful organizations includes:
1) Developing an organizational climate that fosters ethical behavior
2) Structuring policies that encourages ethics
3) Behaving ethically while facing the pressures of leadership
When our Obligations, Ideals and Effects Conflicts?
When two or more of our moral obligations or duties conflict; we recommend to use the stronger one.
When two or more ideals conflict, or when ideals conflict with obligations, honors the more important
one if effects are mixed, choose the action that produces the greatest good and the least harm.
Rights and Duties Theories of Business Ethics
The outcome of a specific decision is irrelevant and what matters is whether the decision is ethical. The
rules provide the guide to ethical decision-making. Unlike rule utilitarianism, these rules are based on
reason, not consequences. Rights & Duties (Non-Consequentialism) principles are either Rights
Principles or Justice Principles.

Rights Principles
Rights principles grant a person certain moral or human rights by virtue of being a human being. These
rights are closely associated with duties. It is ones duty not to violate the rights of others just as it is
the duty of others not to violate his rights.
The development of moral rights is generally attributed to Immanuel Kant (1724-1804),
He argues that an action is morally right only if you would be willing to have everyone at the same
way in a similar situation.
Kants second principle states, Act so that you treat humanity, whether in your own person, or in that
of another, always as an end and never as a means only. People should never be treated only as a
means to an end but as ends themselves. Thus when using people to accomplish your purpose, you
have a duty to respect them as human beings.
Kant considered this categorical imperative to be a moral law. It is an unconditional law to all To
Kant, they are absolute duties and a moral act is performed out of duty only.
Gerald Cavanaugh has cited six rights that are basic to business activity. These include:
1) Life and safety,
2) Truthfulness,
3) Privacy,
4) Freedom of conscience,
5) Free speech,
6) Private property
Prima Facie Duty
A prima facie duty is always to be acted on unless it conflicts with an equal or stronger duty on a
particular occasion. Thus, A prima facie duty is always right or binding all other things being
equal.Many ethicists regard principles, duties, and rights not as unbending standards but rather as
strong prima facie moral standards that may be validly overridden in circumstances of competition with
other moral claims.Prima facie duties reflect the complexity of the moral life, in which a hierarchy of
rules and principles is impossible. The problem of how to weight different moral principles remains
unresolved, as does the best set of moral principles to form the framework of bioethics.
Two Basic Rights
a). Positive Right: A right to receive something. The right to well-being is a positive right. To honor a
positive right someone has to provide something. For instance, providing health care when the wellbeing of a person is affected by illness or injury.
b). Negative Right: A right not to be interfered with. The right to liberty is a negative right, the right not
to have ones freedom interfered with. It is negative because no one has to do anything to honor it.
Thus one has the negative right to refuse treatment, and forcing treatment on someone who declines it
would be to violate his or her autonomy.
Paternalism
It means treating a person the way that a parent (father) treats his or her child. The intentional limitation
of one persons autonomy by another. This limitation is done to benefit the person whose freedom is
being limited.The essence of paternalism is an overriding of a persons autonomy on grounds of
providing that person with a benefit - in medicine, a medical benefit. Paternalism is attacked by those
who emphasize the importance of patient autonomy, and it is defended by others in situations where
the patient would benefit from intervention

Groups in Organizations
A group in any organization shows a group of workers at the bottom, peer groups, middle level line
managers, departmental groups, and groups of firms in an industry, shareholders group, ethical
committees, and competing groups. The group has to create WE values instead of me values.
Companies can respect human dignity by creating and sustaining a corporate culture in which
employees, customers, and suppliers are treated as people whose intrinsic value must be
acknowledged, and by producing safe products and services in a safe workplace through the group
values. They can respect basic rights by acting in ways that support and protect the individual rights of
employees, customers, and surrounding communities, and by avoiding relationships that violate
human beings rights to health, education, safety, and an adequate standard of living. Companies can
be good citizens by supporting essential social institutions, such as the economic system and the
education system, and by working with host governments and other organizations to protect the
environment with us values. The core values establish a moral compass for business practice and they
help companies identify practices that are acceptable and those that are intolerable.
Organizational Ethics
An organization is any form of business having individuals and groups who works together to
accomplish the organization goals by keeping the core values expressed in their mission and vision
statements. At the Organizational level, there are here layers of management such as top, middle and
the bottom level managers. The organizations project their values by keeping ethical values. Ethics and
values give us anchors, stakes in the ground and they serve as stabilizers and shields which empower
and inspire them.
Some Real Problems with Values and Ethics
1) We dont always know our own values
2) The problem of bad faith
3) The problem of self-deception
4) Values, ethics and action
Values and ethics help us to focus on the right questionsthe hard questionsif we are honest with
ourselves. In turbulent times we need a conception of business leadership that puts values and ethics
front and center. The ethical issues related to individuals, group and organizations include:
1. Honesty communication and behavior consistent with facts
a) Disclosure of information
b) Promises/commitments
c) Laws and professional standards
d) Representation of others like shareholders (applies to board members)
2. Unfair competition
a) Refrain from bribes and excessive gifts (that sway judgment)
b) Avoid quid pro quo transaction
c) Comply with anti-trust laws (these relate to pricing, monopolistic practices)
3. Just compensation
a) Respect intellectual property (product piracy)
b) Treat employees fairly
4. Respecting rights of others

a) Treat others with fairness and respect regardless of age, religion, ethnic group, sex,
economic status, etc., especially children, women, and subordinates
b) Respect the community you operate in by paying fair share of
c) Why Ethical Behavior Adds Value?
5. Better information
a) Trust from investors
b) Lower costs for audits, controls, investigations
c) Better allocation of resources
d) Customers will be more loyal (RC Willey example)
e) Lower costs from suppliers (automotive company example)
f) Attracting and retaining better employees
6. Bad Modeling/Lack of Good Modeling
a) Makes up our news more explicit than ever
b) Focus of TV/movies
c) Dishonest leaders
d) Sports, business, entertainment heroes
e) Good models are rare
7. Lack of Positive Labeling
a) Home.average family spends 10 hours less time together a week than 20 years ago
b) Vocabulary of kindergarten children
c) Schools
d) Churches
Confession of Fraudulent Executive
Even when put in jail, I didnt feel like a criminal. I somehow felt we were different and I started
noticing every white collar guy I did talk to begin every sentence with: all I did was. Once youre in
jail and you start feeling the animosity the other prisoners have toward white-collar guys, where they
say to you, youre no different than us, youre just a thief, you use other words. Even the word
embezzlement is a nice wordthey said youre a thief, you lie to people and take their money,
thats what I do to and that hit me like a ton of bricks.
Issues on Moral Decisions
Moral standards consist of specific moral norms and general moral principle moral norms prohibit
certain types of behavior such as lying, stealing and killing. Moral principles provide more general
guidelines for behavior and are applicable to decision.
Virtue Ethics
Virtue ethics identifies certain character traits, such as courage, compassion, sincerity, reliability, and
industry as being morally virtuous and advantageous for the good life. Virtue ethics focuses on
persons and their character traits rather than actions. A virtue person is not virtuous simply out of
habit, but is motivated to be virtuous out of a concern for morality.
The Virtues
a). Intellectual Virtues
1) Wisdom, Understanding, Prudence
2) Taught through instruction
b). Moral Virtues
Prudence, Justice, Fortitude, Temperance
1) The result of habit should be ethical

2) Not natural or inborn but acquired through practice

3) Habit or disposition of the soul (our fundamental character) which involves both feeling and
4) Virtues and Community
5) Virtues are defined and lived in community
6) Sharing a common identity and story
7) Modelling the Virtues
8) Importance of Moral Exemplars (Saints and Heroes)
The Ethics of Care
The ethics of care focuses on a set of character traits, such as sympathy, compassion, fidelity, love, and
friendship, that people prize in deep personal relationships. It replaces the impartiality of utilitarianism
and deontological ethics with attachment - care and concern for people we love and care about. An
ethics of care is suspicious of abstract principles that are supposed to regulate correct moral behavior in
every context in the same way. Rather, each situation calls for a different set of responses.
Autonomy
Autonomy means freedom from external constraint that, with understanding criteria relevant to
making choices, permits an individual to make a free choice, to engage in voluntary behavior.
Autonomy is an important moral principle since it recognizes the value of persons and their freedom to
make individual choices, as long as such choices do not violate the rights of others. Autonomy is
rooted in the liberal moral and political tradition of the importance of individual freedom and choice.
Beneficence
Beneficence is the quality or state of being beneficent, and that is doing or producing well; performing
acts of kindness and charity. The goal of health care is the welfare of the patient promoting health by
cure or prevention of disease, and doing no harm to the patient. The positive benefits to a patient that
physicians and nurses are obligated to seek all involve alleviation of disease and injury, if hope of cure
is reasonable. Things that are to be prevented, removed, minimized, and avoided include a patients pain,
suffering, and disability due to injury and/or disease. Physicians and nurses may also not harm their
patients unnecessarily.
Strengths of Virtue Ethics
a) Importance of the Person, Motive, Heart, Conscience
b) Connection to Community
c) Realization that morality is not defined by moments but by a long-term process
d) Allowance for grey areas, varying contexts, different levels of moral maturity and life contexts.
Trade Secrets
It is a formula, practice, process, design, instrument, pattern, or compilation of information which is not
generally known or reasonably ascertainable, by which a business can obtain an economic advantage
over competitors or customers. In some jurisdictions, such secrets are referred to as "confidential
information" or The precise language by which a trade secret is defined varies by jurisdiction (as do
the particular types of information that are subject to trade secret protection). However, there are three
factors that, although subject to differing interpretations, are common to all such definitions: A trade
secret is information that: 1. It is not generally known to the public; It confers some sort of economic
benefit on its holder (where this benefit must derive specifically from its not being generally known, not
just from the value of the information itself);It is the subject of reasonable efforts to maintain its secrecy.

Chapter 4: Functional Areas of Business Ethics - Ethics and Financial Management, Ethics and Marketing
Management, Ethics and Human Resources Management, and Growing Importance of Business Ethics
Ethics and Financial Management
Business ethics comprises the moral principles and standards that guide the behavior in the nature of
business. It is the application of general ethical principles and standards to business behavior. It is with
various moral or ethical problems that can arise in a business setting. Thus business ethics relates to
application of values in the corporate decision making process and to find out how values in
management affect various interest groups customers, employees, government, shareholders,
prospective customers and public. Broadly, business ethics is a normative discipline, where the
application of particular accepted ethical standards are accepted and then applied. It makes specific
judgments about what is right or wrong, which is to say, it makes claims about what ought to be done
or what ought not to be done. While there are some exceptions, business ethicists are usually less
concerned with the foundations of ethics or with justifying the most basic ethical principles, and are
more concerned with the practical problems and applications and any specific principles that might
apply to business relationships. If dishonesty is considered unethical, any dishonest response in the
business situation particularly for pecuniary gains from customer, supplier, employees, government,
investors, and social institutions would be unethical.
Fairness in trading practices, trading conditions, financial contracting, sales practices, consultancy
services, tax payments, internal audit, external audit and executive compensation also fall under the
umbrella of finance and accounting. Particular corporate ethical/legal abuses include: creative
accounting, earnings

management,

misleading

financial

analysis insider

trading, securities

fraud, bribery/kickbacks and facilitation payments. Outside of corporations, bucket shops and FOREX
scams are

criminal

manipulations

of

financial

markets.

Cases

include accounting

scandals, Enron WorldCom and Satyam Computers in India. Without ethics, financial management no
longer exists. Every fund flow and cash flow statement strictly based on ethical financial management.
Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental
purposes of a company. If a company's purpose is to maximize shareholder returns, it should be from
ethical angles.
Economist Milton Friedman writes that corporate executives' "responsibility... generally will be to make
as much money as possible while conforming to their basic rules of the society, both those embodied in
law and those embodied in

ethical

custom".

Similarly

author business

consultant Peter

Drucker observed, "There is neither a separate ethics of business nor is one needed", implying that
standards of personal ethics cover all business situations. In the US and most other nations corporate
entities are legally treated as persons in some respects. For example, they can hold title to property, sue

and be sued and are subject to taxation, although their free speech rights are limited. This can be
interpreted to imply that they have independent ethical responsibilities. Duska argues that
stakeholders have the right to expect a business to be ethical; if business has no ethical obligations,
other institutions could make the same claim which would be counterproductive to the corporation.
Ethics and Marketing Management
Marketing Ethics came of age only as late as 1990s. Marketing ethics was approached from ethical
perspectives of virtue, deontology, consequentialism, pragmatism and relativism. Ethics in marketing
deals with the principles, values and/or ideals by which marketers (and marketing institutions) ought
to act. Marketing ethics is also contested terrain, beyond the previously described issue of potential
conflicts between profitability and other concerns. Ethical marketing issues include marketing
redundant or dangerous products/services transparency about environmental risks, transparency
about product ingredients such as genetically modified organisms possible health risks, financial risks,
security risks, etc., respect for consumer privacy and autonomy, advertising truthfulness and fairness
in pricing & distribution
Marketing allegedly can influence individuals' perceptions of and interactions with other people,
implying an ethical responsibility to avoid distorting those perceptions and interactions. Marketing
ethics involves pricing practices, including illegal actions such as price fixing and legal actions
including price discrimination and price. Marketing ethics is related with ethical production, protection
of property, safeguarding intellectual property rights.
Ethical Production
This area of business ethics usually deals with the duties of a company to ensure that products and
production processes do not needlessly cause harm. Since few goods and services can be produced and
consumed with zero risk, determining the ethical course can be problematic. In some case consumers
demand products that harm them, such as tobacco products. Production may have environmental
impacts, including pollution, habitat destruction and urban sprawl. The downstream effects of
technologies nuclear power, genetically modified food and mobile phones may not be well understood.
While the precautionary principle may prohibit introducing new technology whose consequences are
not fully understood, that principle would have prohibited most new technology introduced since
the industrial revolution. Product testing protocols have been attacked for violating the rights of
both humans and animals.
Protection of Property
The etymological root of property is the Latin 'proprius' which refers to 'nature', 'quality', 'one's own',
'special characteristic', 'proper', 'intrinsic', 'inherent', 'regular', 'normal', 'genuine', 'thorough, complete,
perfect' etc. The word property is value loaded and associated with the personal qualities of propriety
and respectability, also implies questions relating to ownership. A 'proper' person owns and is true to
herself or himself, and is thus genuine, perfect and pure. One argument for property ownership is that

it enhances individual liberty by extending the line of non-interference by the state or others around
the person. Seen from this perspective, property right is absolute and property has a special and
distinctive character that precedes its legal protection. Blackstone conceptualized property as the "sole
and despotic dominion which one man claims and exercises over the external things of the world, in
total exclusion of the right of any other individual in the universe".
Private property has never been a universal doctrine, although since the end of the Cold War is it has
become nearly so. Some societies, e.g., Native American bands, held land, if not all property, in
common. When groups came into conflict, the victor often appropriated the loser's property. The
rights paradigm tended to stabilize the distribution of property holdings on the presumption that title
had been lawfully acquired. Property does not exist in isolation and so property rights too. Bryan
claimed that property rights describe relations among people and not just relations between people and
things Singer holds that the idea that owners have no legal obligations to others wrongly supposes that
property rights hardly ever conflict with other legally protected interests. Singer continues implying
that legal realists "did not take the character and structure of social relations as an important
independent factor in choosing the rules that govern market life". Ethics of property rights begins with
recognizing the vacuous nature of the notion of property.
Safeguarding Intellectual Property Rights
Intellectual property (IP) encompasses expressions of ideas, thoughts, codes and information.
"Intellectual property rights" (IPR) treat IP as a kind of real property, subject to analogous protections,
rather than as a reproducible good or service. Boldrin and Levine argue that "government does not
ordinarily enforce monopolies for producers of other goods. This is because it is widely recognized that
monopoly creates many social costs. Intellectual monopoly is no different in this respect. The question
we address is whether it also creates social benefits commensurate with these social costs."
International standards relating to Intellectual Property Rights are enforced through Agreement on
Trade Related Aspects of Intellectual Property Rights (TRIPS). In the US, IP other than copyrights is
regulated by the United States Patent and Trademark Office.
The US Constitution included the power to protect intellectual property, empowering the Federal
government "to promote the progress of science and useful arts, by securing for limited times to authors and
inventors the exclusive right to their respective writings and discoveries". Boldrin and Levine see no value in
such state-enforced monopolies stating, "we ordinarily think of innovative monopoly as an oxymoron.
Further they comment, 'intellectual property' "is not like ordinary property at all, but constitutes a
government grant of a costly and dangerous private monopoly over ideas. We show through theory
and example that intellectual monopoly is not necessary for innovation and as a practical matter is
damaging to growth, prosperity, and liberty" Steelman defends patent monopolies, writing, "Consider
prescription drugs, for instance. Such drugs have benefited millions of people, improving or extending
their lives. Patent protection enables drug companies to recoup their development costs because for a

specific period of time they have the sole right to manufacture and distribute the products they have
invented." The court cases by 39 pharmaceutical companies against South Africa's 1997 Medicines and
Related Substances Control Amendment Act, which intended to provide affordable HIV medicines has
been cited as a harmful effect of patents.
One attack on IPR is moral rather than utilitarian, claiming that inventions are mostly a collective,
cumulative, path dependent, social creation and therefore, no one person or rm should be able to
monopolize them even for a limited period. The opposing argument is that the benefits of innovation
arrive sooner when patents encourage innovators and their investors to increase their commitments.
Roderick Long, a libertarian philosopher, observes, "Ethically, property rights of any kind have to be
justified as extensions of the right of individuals to control their own lives. Thus any alleged property
rights that conflict with this moral basislike the "right" to own slavesare invalidated. In my
judgment, intellectual property rights also fail to pass this test. To enforce copyright laws and the like is
to prevent people from making peaceful use of the information they possess. If you have acquired the
information legitimately then on what grounds can you be prevented from using it, reproducing it,
trading it? Is this not a violation of the freedom of speech and press? It may be objected that the person
who originated the information deserves ownership rights over it. But information is not a concrete
thing an individual can control; it is a universal, existing in other people's minds and other people's
property, and over these the originator has no legitimate sovereignty. You cannot own information
without owning other people". Machlup concluded that patents do not have the intended effect of
enhancing innovation. Self-declared anarchist Proudhon, in his 1847 seminal work noted, "Monopoly is
the natural opposite of competition," and continued, "Competition is the vital force which animates the
collective being: to destroy it, if such a supposition were possible, would be to kill society"
Mindeli and Pipiya hold that the knowledge economy is an economy of abundance because it relies on
the "infinite potential" of knowledge and ideas rather than on the limited resources of natural
resources, labor and capital. Allison envisioned an egalitarian distribution of knowledge. Kinsella
claims that IPR create artificial scarcity and reduce equality. Bouckaert wrote, "Natural scarcity is that
which follows from the relationship between man and nature. Scarcity is natural when it is possible to
conceive of it before any human, institutional, contractual arrangement. Artificial scarcity, on the other
hand, is the outcome of such arrangements. Artificial scarcity can hardly serve as a justification for the
legal framework that causes that scarcity. Such an argument would be completely circular. On the
contrary, artificial scarcity itself needs a justification" Corporations fund much IP creation and can
acquire IP they do not create, to which Menon and others object. Andersen claims that IPR has
increasingly become an instrument in eroding public domain.
Ethical and legal issues include:

Patent infringement,

Copyright infringement,

Trademark infringement,

Patent and copyright Misuse ,

Submarine patents,

Gene patents,

Patent,

Copyright and trademark trolling,

Employee raiding and monopolizing talent,

Bio prospecting,

Bio piracy and industrial espionage,

Digital rights management.

Ethics and Human Resources Management

Human

resource

management occupies

the

sphere

of

activity

of recruitment selection,

orientation, performance appraisal, training and development, industrial relations and health and
safety issues. Business Ethicists differ in their orientation towards labor ethics. Some assess human
resource policies according to whether they support an egalitarian workplace and the dignity of labor.
Issues

including employment

itself

are

privacy,

compensation

in

accord

with comparable

worth, collective bargaining (and/or its opposite) can be seen either as inalienable rights or as
negotiable.

Discrimination by

age

(preferring

the young or

the old), gender/sexual

harassment, race, religion, disability, weight and attractiveness. A common approach to remedying
discrimination is affirmative action.
Potential Employees have ethical obligations to employers, involving intellectual property protection
and whistle-blowing.
Employers must consider workplace safety, which may involve modifying the workplace, or providing
appropriate training or hazard disclosure.
Larger economic issues such as immigration, trade policy, globalization and trade unionism affect
workplaces and have an ethical dimension, but are often beyond the purview of individual companies.
Trade unions
Unions for example, may push employers to establish due process for workers, but may also cost jobs
by demanding unsustainable compensation and work rules.
Unionized workplaces may confront union busting and strike breaking and face the ethical
implications of work rules that advantage some workers over others

Growing Importance of Business Ethics

Business ethics reflects the philosophy of business, one of whose aims is to determine the fundamental
purposes of a company. If a company's purpose is to maximize shareholder returns, then sacrificing
profits to other concerns is a violation of its fiduciary responsibility. Corporate entities are legally
considered as persons in USA and in most nations. The 'corporate persons' are legally entitled to the
rights and liabilities due to citizens as persons.
Growing importance of Business Ethics in recent years has to discussed and verified with the following
factors in every retail business.
1. Price
2. Quality Maintenance
3. maintenance of Proper Weights and Measures
4. Avoidance of Adulteration
5. Provision for After Sales Services
6. Generate Awareness to Customers Regarding the use of Products
7. Empowerment of Customer Satisfaction
8. Provision for Customer Grievances System
The importance of Business Ethics should be observed from level of adherence of the Government rules
and regulations on the part of entrepreneurs with reference to certain selected variables such as:
1. License for Commencing Business
2. Pollution Control
3. Safety and Welfare Measures
4. Maintenance of Muster Roll and Wage Register
5. Employee benefits like ESI & EPF
6. Maintenance of Proper Accounts
7. Payment of Proper Tax Just -in -Time
The assessment of customer satisfaction in retail units in connection with Business Ethics has to be
analyzed with the selected variables such as:
1. Price Pattern
2. Quality
3. Adulteration
4. Weights and Measures System
5. Hoarding
6. After sales Services

7. Proper Information about the Handling of Products to Customers

8. Customer Grievances and Redressal System
9. Behavior of Employees inside the Retail Units
10. Display Management
The growing importance of Business Ethics in recent years has to discussed and verified with the
following factors viz:
1. Safety and Welfare Measures
2. Payment System
3. Perquisites
4. ESI Facility
5. EPF Facility
6. Bonus
7. Leave Facility
8. Work Scheduling
9. Job Rotation
10. Interpersonal Relationship
Therefore, it is true that Ethics is a set of values and principles that we strongly believe and follow. It is
the learning of what is right or wrong and then doing the right thing.The concept of business ethics has
come to connote various things to various people, but generally it describes what is right or wrong in
the workplace and doing what is right with regard to the effects of products/services and in
relationships with stakeholders. The study of ethics in management is very important to achieve longterm sustainable results at personal, professional and organizational planes. Ethics are the principles of
right and wrong that are accepted by an individual, community, social group, corporate entities or a
social group. Some of the positive values and virtues of good conduct are honesty, commitment,
obedience, humility, purity, thoughtfulness, fairness, pursuit of excellence, respect for others, etc.
Similarly some of the negative values are untruth, falsification, anger, hatred, jealousy, excessive
pride, greed etc. Most people would agree that positive values are admirable guidelines for behavior
and negative values get reflected in undesirable behavior. However, in a situation where in one value
overrules others, the ethics becomes a complicated ball game to understand and apply. Thus ethics is
the system of rules that helps in ordering of values. As a result of this certain principles of right and
wrong i.e., ethics emerge that are accepted by an individual or a social group. Ethics can be viewed as
an input that catalyses and energizes managers and leaders to contribute their best assigned roles, as
socially responsible human beings. The relevance of ethics in management started becoming a critical

part of formal management education in the seventies and attracted great relevance in eighties. It is
expected that role of ethics in management would keep on becoming more and more critical in the
twenty-first century.
Concerned with the principle of right and wrong, every society and organization operates on certain
basic moral principles which lead to mutually beneficial interdependence and interactions. Without
high moral standards, an organizations existence would be at stake. However, over and above certain
widely acceptable moral principles, every organization has certain specific moral standards applicable
to it at certain times.
Being ethical in business is as being ethical in private life or other dimensions of life. Thus, basic
principles and concepts in business ethics are the same as those used in other dimensions of life.
However, it is important to recognize that there may be business situations that might not get easily
addressed by ordinary ethical rules. In handing present complex business situations, need for
establishing ethical corporate climate and culture that can insulate it from unethical and illegal
conduct, is imperative. It is a well-defined value system that enables an organization to effectively
respond to uncertainty and stick to the pursuit of long-term success, even at the cost of sacrificing
short-term gains.

Chapter-5: Business ethics and Technology: Introduction, what is technology, benefits and side effects of technology? And ethics and technology.

Chapter-6: External stakeholder Issues: The stake holder approach to business society and ethics, Government, consumer and Community stake
holders.

Chapter-7: Internal stakeholder issues: Employee stakeholders: workplace issues, Employee stakeholders: Privacy, safety and health.

Chapter 8: Strategic Management and corporate public policy: Understanding the concept of
corporate policy, strategic management process and four key strategic levels.
AN INTRODUCTION TO STRATEGIC MANAGEMENT:
Good ethics is good business. Bad ethics can derail even the best strategic plans. This chapter provides
an overview of the importance of business ethics in strategic management. Business ethics can be
defined as principles of conduct within organizations that guide decision making and behavior. Good
business ethics is a prerequisite for good strategic management; good ethics is just good business! A
rising tide of consciousness about the importance of business ethics is sweeping the United States and
the rest of the world. Strategists such as CEOs and business owners are the individuals primarily
responsible for ensuring that high ethical principles are espoused and practiced in an organization. All
strategy formulation, implementation, and evaluation decisions have ethical ramifications.

Strategic
management
is
defined as the art of a firm of
formulating,
implementing
and evaluating and controlling
functional and cross functional
decisions that make possible a
firm to attain its objectives.

Though strategic planning is old concept, the process is widely

practiced today in the business world. It was very popular
between 1950s and mid 1960s. During these years, much of
cooperates were widely believed with strategic planning, at the
same time it was practiced to be the answer for all problems. In
the 1980s, as planning models of strategic management did not
yield good returns it was cast aside. The 1990s, however, bring the
revival of strategic planning.

The word strategy is derived form, the Greek word Strategia.

The word strategia meant science of guiding and directing
military forces. A good strategic plan is necessary for corporate,
as a football team and cricket team needs a good game plan to compete successfully. Any firm's ability
to survive and prosper depends on choosing and implementing a good strategy. A strategic plan is, in
essence, a companys plan that indicates how to choose opt managerial choices among numerous
alternatives, policies, procedures, and operations. Today many educational institutions are offering
strategic management as a course in business administration and it became a wide used concept.
"Without a strategy, an organization is like a ship without a rudder, going around in circles. Its like a tramp; it
has no place to go."
Joel Ross and Michael Kami
"Plans are less important than planning."

Dale McConkey

Porter (1996) Strategy is about being different. It means deliberatelychoosing a different set of activities to
deliver a unique mix of value.
--Porter
Strategic management is defined as the art of a firm of formulating, implementing and evaluating and
controlling functional and cross functional decisions that make possible a firm to attain its objectives. It
is understood as formulating objectives of an organization and developing methods to achieve them.
Integrating management functions such as marketing, finance, production and operations, research and
development and information systems key focus of strategic management. In addition it is used to

exploit and create new opportunities for business tomorrow, making long term plans, to gain
competitive advantages and searching for future trends. A key function of strategy is to provide
coherence to organizational action. A clear and explicit concept of strategy can foster a climate of tacit
co-ordination that is more efficient than most administrative mechanisms.A good strategy is a strategy
that actually generates such advantages. Strategic management also likes as systematic approach to
develop the necessary procedure and operations to achieve the future as it moves towards its vision.
The following are the important statements of strategic management:
Mission
: The reason for existence of an organization
Vision
: In future, where the organization need to be
Strategy
: A plan for achieving organizational goals
Tactics
: The actions taken to accomplish strategies
Decisions
: Day to day decisions to support tactics.
According to Mintzberg a strategy should have 5Ps Plan, Pattern, Position, Ploy, and Perspective.
A plan, a how do I get there
A pattern, in constant actions over time
A position that is, it reflects the verdict of the firm to offer particular goods or services in
particular markets.
A ploy, a maneuver intended to outwit a competitor
A perspective that is, a vision and direction, a view of what the company or organization is to
become.
RELATIONSHIP OF ETHICS TO STRATEGIC MANAGEMENT
Although consideration of ethics is implicit in corporate public policy discussions, it is useful to make
this relationship more explicit by special mention here. Over the years, a growing number of writers
have stressed this point. Kenneth R. Andrews for example, is well known for his emphasis on the moral
component of corporate strategy. In particular, he highlights the leadership challenge of determining
future strategy in the face of rising moral and ethical standards. He argues that coming to terms with
the morality of choice may be the most strenuous undertaking in strategic decision making. This is
particularly stressful in the inherently amoral corporation.
The challenge of linking ethics and strategy was moved to center stage by R. Edward Freeman and
Daniel R. Gilberth, Jr., in their book Corporate Strategy and the Search of Ethics. The authors argued
that if business ethics was to have any meaning beyond pompous moralizing, it must be linked to
business strategy. Their view is that we can revitalize the concept of corporate strategy by linking ethics
to strategy. This linkage permits the most pressing management issues of the day to be addressed in
ethical terms.
The concept of corporate public policy and the linkage between ethics and strategy better understood
when we think about (1) the four key level at which strategy decisions arise and (2) the steps in the
strategic management process.
LEVELS OF STRATEGY:
A firm should have four types of strategies at each level of its hierarchy. They are corporate strategy,
business strategy, functional strategy and operational strategy.

Corporate strategy corporate strategy is relates to the future formula and structure of the company
and companys overall direction towards growth by managing business and product lines? Which
include stability, growth and retrenchment?
For example, Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local
bottling units to emerge as the market leader.
Business strategy Business strategyor competitive strategy concerns how business attempts to
achieve its mission and emphasizing theimprovement of competitive position of a firms products or
services in an industry or marketsegment served by that business unit. Business strategy falls in the in
the realm of corporatestrategy.
For example, Apple Computers uses a differentiation competitive strategy that emphasizes innovative
product with creative design. In contrast, ANZ Grindlays
merged with Standard Chartered Bank to emerge
competitively.
Functional strategy how different functions of business
support corporate and business strategies. It is designed to
achieve corporateand business unit objectives and strategies
by maximizing resource productivity. Developing and
nurturing a distinctive competence to provide the firm with a
competitive advantage is major concern.
For example, Procter and Gamble spends huge amounts on
advertising to create customer demand.
Operational strategy - It is concerned to the corporate,
business and functional -level strategies in terms of resources,
processes and people. Operational strategies are used at
departmental level to set periodic and short-term targets.
STRATEGIC MANAGEMENT PROCESS:
The strategic management process is a sequential set of analyses and choices that can amplify the
likelihood that a firm will choose a good strategy
1. Defining Mission, vision and Objectives:- Defining existing mission, vision, objectives and
purpose of the organization is the logical starting point as they are key and foundation of strategic
management. Every organization has mission, vision and objectives, even if these elements are not
consciously designed, written and communicate.
A vision is a picture of the organization; it is clear description of what the organization wish to
become in the year ahead.
A mission statement specifies what an organization is and why it exists. Objective is the end point;
it is the end point of efforts. It is the destination to be reached. It may be long term objectives and
shot term objectives.
2. Environmental Analysis: Every organization build around certain environments, these are internal
environment and external environment. These are to be analyzed to 1) Identify changes in
environments 2) Identify present and future threats and opportunities 3) assess critically its own
strength and weakness. Environment can influence the organization the positively and negatively.
The analysis of environmental factors may help to build substantial competitive advantages. The
following figure depict the environment to be analyzed
3. Strategic Alternatives and Choices:- Many alternative strategies are formulated based on possible
options and in the light of organizational analysis and environmental appraisal. The alternative

strategies will be ranked based on SWOT analysis. The best alternative strategy will be chose.
Corporate level Strategy: Growth/Expansion/Diversification strategy, Stability Strategy,
Retrenchment Strategy, Combinations strategy. Functional Level Strategies: R & D Strategy,
Operational strategy, financial strategy, Marketing strategy, Human Resource strategy.
4. Strategy Selection Criterias: They are responsive to external environment.
They offer substantial competitive advantages.
They provide adequate flexibility.
They conform to organizational missions, vision and long term objectives.
5. Strategy Implementation:- The logically developed strategy to be put into action. The organization
cannot get the benefits of strategic management unless the strategy is effectively implemented. The
managers who implement the strategies of an organization should have ideal about the
organizations missions vision and idea about competitors strategies, organizations culture, the
skills of managers of in charge of implementation. The following picture shows how a strategy can
be implemented.
6. Strategic Evaluation and control:-This steep focus on monitoring and evaluating the strategic
management process in order to improve it and ensure that it function properly. The managers
must understand process of control and the role of strategic audit to perform the task of control
success fully . There are 3 basic steps to the strategic control process are.
Measuring performance
Comparing performance with objectives and standards.
Corrective actions, if necessary.
CORPORATE POLICIES
Changes in a firms strategic direction do not occur automatically. On a day-to-day basis, policies are
needed to make a strategy work. Policies facilitate solving recurring problems and guide the
implementation of strategy. Broadly defined, policy refers to specific guidelines, methods, procedures,
rules, forms, and administrative practices established to support and encourage work toward stated
goals. Policies are instruments for strategy implementation. Policies set boundaries, constraints, and
limits on the kinds of administrative actions that can be taken to reward and sanction behavior; they
clarify what can and cannot be done in pursuit of an organizations objectives. For example, Carnivals
Paradise ship has a no smoking policy anywhere, anytime aboard ship. It is the first cruise ship to ban
smoking comprehensively. Another example of corporate policy relates to surfing the Web while at
work. About 40 percent of companies today do not have a formal policy preventing employees from
surfing the Internet, but software is being marketed now that allows firms to monitor how, when,
where, and how long various employees use the Internet at work.
Policies let both employees and managers know what is expected of them, thereby increasing the
likelihood that strategies will be implemented successfully. They provide a basis for management
control, allow coordination across organizational units, andreduce the amount of time managers spend
making decisions. Policies also clarify whatwork is to be done and by whom. They promote delegation
of decision making to appropriate managerial levels where various problems usually arise. Many
organizations have a policy manual that serves to guide and direct behavior. Wal-Mart has apolicy that
it calls the 10 Foot Rule, whereby customers can find assistance within 10 feet of anywhere in the
store. This is a welcomed policy in Japan, where Wal-Mart is trying to gain a foothold; 58 percent of all
retailers in Japan are mom-and-pop stores and consumers historically have had to pay top yen rather
than discounted prices for merchandise.

Policies can apply to all divisions and departments (for example, We are an equal opportunity
employer). Some policies apply to a single department (Employees in this department must take at
least one training and development course each year). Whatever their scope and form, policies serve
as a mechanism for implementing strategies and obtaining objectives. Policies should be stated in
writing whenever possible. They represent the means for carrying out strategic decisions.
Some Issues That May Require a Management Policy
To offer extensive or limited management development workshops and seminars
To centralize or decentralize employee-training activities
To recruit through employment agencies, college campuses, and/or newspapers
To promote from within or to hire from the outside
To promote on the basis of merit or on the basis of seniority
To tie executive compensation to long-term and/or annual objectives
To offer numerous or few employee benefits
To negotiate directly or indirectly with labor unions
To delegate authority for large expenditures or to centrally retain this authority
To allow much, some, or no overtime work
To establish a high- or low-safety stock of inventory
To use one or more suppliers
To buy, lease, or rent new production equipment
To greatly or somewhat stress quality control
To establish many or only a few production standards
To operate one, two, or three shifts
To discourage using insider information for personal gain
To discourage sexual harassment
To discourage smoking at work
To discourage insider trading
To discourage moonlighting
DEVELOPMENT OF SOCIAL AUDIT:
In the context of corporate social performance or corporate public policy, the idea of a social audit, or
social performance report, as a technique for providing control has been experimented with for a
number of years. Although the term social audit has been used to describe a wide variety of
activities, in this discussion we define it as,
The social audit is a systematic attempt to identify, measure, monitor, and evaluate an organizations
performance with respect to its social efforts, goals, and programs.
In the context of strategic control, the components of the social audit include identification,
measurement, monitoring and evaluation. The identification function is included as a part of the
definition because experience has shown that companies often are not completely aware of all that they
are doing in the social or ethics arena. Any serious effort to determine what a company is doing
requires the development of measure by which performance can be reported, analyzed, and compared.
Monitoring and evaluation stress that the effort is continuous and aimed at achieving certain standards
or goals the company may have in mind.
Social Accounting:
Another term, social accounting, is frequently used in reference to social auditing and disclosure and
has been defined as follows:

The measurement and reporting, internal or external of information concerning the impact of an entity and its
activities on society
Framework for social auditing and disclosure:
This framework involves continuous improvement via the implementation of a cyclical audit loop,
steps or stages in the framework include:
Policy review
Determination of audit scope
Agreement of standards and performance indicators
Stakeholder consultation
Stakeholder surveys
Internal audit
Preparation of accounts and internal reports
Verification
Publication of statement
Stakeholder dialogue
One final indicator of the increasing popularity of social auditing in the 1990s is the appearance of
consulting and research firms willing to help companies to conduct audits.
For example:
Smith OBrien Services, offers as a core service called Corporate Social Responsibility Audit (CSRA).
The company describes its audit as, a multidisciplinary methodology for indentifying and eliminating
often-overlooked negative effects of a companys operations on its stakeholders, and thus reducing
legal exposure, production inefficiencies, and reputational risk.
Walker Informations Reputation and Stakeholders Assessment (WIRSA), this is a comprehensive tool
for measuring and managing stakeholder relationship. Through its assessment process, Walker gathers
information from multiple stakeholder groups and provides the company with a scorecard summary
of how these groups perceive or evaluate the companys reputation. Among other measures, the
scorecard shows a companys reputation relative to that of the competition and of world-class leaders
in other industries.