Corporate Ethics: The Moral element

of business
 SOCIAL RESPONSIBILITY
TOWARDS EMPLOYEES
 The company should provide job security to its
employees.
 Employees should be paid proper and timely
wages and other monetary incentives.
 The company should take adequate measures
to protect the health and life of the employees.
 There should be proper grievance procedure to
handle employees complaints.
 SOCIAL RESPONSIBILITY
TOWARDS SHAREHOLDERS
 The shareholders expect optimum utilization of their funds.
 The management should make a proper disclosure regarding the
affairs of the company.
 The shareholders expects periodic information about important
happenings or developments in the company.
 The shareholders expects fair conduct of company meetings.
 The shareholders expects a fair return on their investment.
 SOCIAL RESPONSIBILITY
TOWARDS CUSTOMERS
 The company should produce quality goods.
 The company should charge fair price.
 The company should make the goods
available regularly and not create artificial
shortage to raise prices.
 The firm must provide after-sale-service and
R&D.
 SOCIAL RESPONSIBILITY
TOWARDS SOCIETY

 The company should take all possible measures

to prevent air, water, and soil pollution.
 The business firms should make indiscriminate
use of the scarce resources in the interest of the
society.
 The society expects that companies should make
efforts to uplift backward areas by starting and
developing industries in such areas.
 The society expects from business firms to
donate generously to various social causes such
as eradication of poverty, illiteracy, etc.
 SOCIAL RESPONSIBILITY
TOWARDS GOVERNMENT
 The government expects co-operations and
financial assistance from the business sector in
implementing socio-economic programs.
 The government expects the business sector to
pay taxes and duties regularly.
 The business firms should strictly observe
government’s rules and regulations.
 The business firms should avoid seeking unfair
favor from government authorities.
 The corporate sector should provide assistance to
the government during natural calamities.
 SOCIAL RESPONSIBILITY
TOWARDS SUPPLIERS

 The company should maintain good

relations with suppliers.
 Payment of credit amount must be done on
time.
 The company should not force the suppliers
to provide unreasonable terms.
 The companies should not disclose any
secret information about its suppliers to
others.
 SOCIAL RESPONSIBILITY
TOWARDS FINANCIAL
INSTITUTIONS

 The payment of loans and interest installments

must be made on time.
 They should not bribe bank officials in
sanctioning loans.
 Provide regular reports to the financial
institutions.
 They should not convert bank loans into bad
debts.
 SOCIAL RESPONSIBILITY
TOWARDS COMPETITORS

 The company should avoid unfair practices,

such as duplicating the products of the
competitors
 Respect the competitors and treat them as
challenges and not enemies
 They should ensure free entry, and not
block entry of competitors
Defining Ethics
• Understanding of right and wrong
• Ability to distinguish between the
right and the wrong.
• Integral part of life
• Running a business is a part of life
Corporate Ethics
• Based on principles of integrity and
fairness
• Focuses on -
• Stakeholders, and employees.
• Quality of product and services
• Customer satisfaction.
• Community and environment
 Corporate Ethics are implemented
to-
• Define the framework of the acceptable
behavior.
• Follow high standards of practice.
• Create benchmarks for self evaluation.
• Enhance sense of community.
• Create transparency in the business
activities.
• Foster higher standards of business
ethics.
• Comply with government laws and norms.
Who is responsible for ethics
in the company?

“Everyone”
 Approaches to Bring a Code of
Corporate Ethics to Life
• Emphasize values, in creating the code of
corporate ethics supported by rules.
• Employees should be Educated about the
corporate ethics code to make it relevant and
real.
• Reinforce the code within and beyond the
organization.
• Encourage employees to become active
participants in upholding the corporate. ethics
code and its values.
• Gather feedback, measure effectiveness and
continually improve the code of conduct.
 Corporate ethics: the Indian
Perspective

• Indian business culture puts a premium

on favors, friendship and clanship.
• Friendship is highly valued, whether
based on multigenerational family
friendships, school friendships or personal
friendships.
• The Western concept of conflict of interest
does not always mesh well with the
Indian value of loyalty.
Corporate Ethics: Individual’s
Perspective
• Signs of ethical deterioration.
• In business, people have made
immoral millions
• In government, public officials
are involved in bribery.
• In education, cheating scandals
among students are common.
• under-the-table payments for
admission
• People believe that they have to
cheat to win.
• They believe that nice guys
finish last.
Case: Infosys Technologies
• Have a distinctive work culture and value
system.
• Great importance on customer delight,
leadership, integrity, transparency,
fairness and pursuit of excellence.
• Open door policy.
• Value employees and encourage them to
make decisions about their own work.
• Treated as a flat organization when it
comes to communication and information
sharing
UNDERSTANDING ETHICAL
DECISION MAKING
The Key Components of the Ethical Decision Making:
1. Ethical Issues Intensity
 Influence decision making process

 Influenced by the values, beliefs, needs and perceptions of the

decision maker
 Reflects the sensitivity and triggers the decision making
process
 Rewards and punishments, code of conduct, and
organizational values
2. Individual Factors
 Evaluation and resolution of ethical issues

 Individual’s personal moral philosophy

- Moral philosophies-the principles or rules that

individuals use to decide what is right or wrong.
 Stage of Moral Development
- The pre-conventional stage
- The conventional stage
- The principled stage
3. Organizational Factors
 Organizational culture

- shared set of values, beliefs, goals, norms, and ways to solve

problems.
 The Influence of Coworkers and Supervisors

- help people deal with unfamiliar tasks in both formal and

informal contexts.
 Opportunity

- provide rewards for financial gain, recognition, the

opportunity for unethical conduct may be encouraged or
discouraged.
STAKEHOLDER MODEL
Stake holders can be viewed as:
 Internal stakeholders - functional departments,
employees, etc.

 External stakeholders - consumers, competitors, etc.

 Primary stakeholders - customers, investors, etc.

 Secondary stakeholders - trade associations, etc.