PRESENTATION TOPIC:

Business Ethics And Social Responsibility.

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GROUP MEMBERS:

Farhan Ahmad (2729)Muhammad Ishaq (2750)Rezwan Ullah (2753)Shafqat-ullah Jan (2755)Izhar Ahmad (2771)

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INTRODUCTION

Businesses organized in the country are subject to its laws.

They are also subject to the laws of other countries in which they operate.

Business persons owe a duty to act ethically in the conduct of their affairs in that particular society.

Businesses owe a social responsibility not to harm society where it is operating.

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LAW AND ETHICS

Ethics –Ethics – A set of moral principles or values that governs the conduct of an individual or a group.

What is lawful conduct is not always ethical conduct. The law may permit something that would be

ethically wrong.

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MORAL THEORIES AND BUSINESS ETHICS

Ethical RelativismEthical Relativism

Ethical Ethical FundamentalismFundamentalism

UtilitarianismUtilitarianism

Kantian EthicsKantian EthicsRawls’s Social Rawls’s Social Justice TheoryJustice Theory

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THEORIES OF ETHICS – SUMMARY (1 OF 2)

TheoryTheory DescriptionDescription

Ethical Ethical fundamentalismfundamentalism

Persons look to an outside source or central Persons look to an outside source or central figure for ethical guidelines.figure for ethical guidelines.

UtilitarianismUtilitarianism Persons choose the alternative that would Persons choose the alternative that would provide the greatest good to society.provide the greatest good to society.

Kantian ethicsKantian ethics A set of universal rules establishes ethical A set of universal rules establishes ethical duties. The rules are based on reasoning duties. The rules are based on reasoning and require (1) consistency in application and require (1) consistency in application and (2) reversibility.and (2) reversibility.

Copyright © 2004 by Prentice-Hall. All rights reserved.

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THEORIES OF ETHICS – SUMMARY (2 OF 2)

TheoryTheory DescriptionDescription

Rawls’s social Rawls’s social justice theoryjustice theory

Moral duties are based on an implied social Moral duties are based on an implied social contract. Fairness is justice. Rules are contract. Fairness is justice. Rules are established from an original position.established from an original position.

Ethical relativismEthical relativism Individuals decide what is ethical based on Individuals decide what is ethical based on their own feelings as to what is right or their own feelings as to what is right or wrong.wrong.

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THE SOCIAL RESPONSIBILITY OF BUSINESS

Business does not operate in a vacuum.

Decisions made by business have far-

reaching effects on society.

In the past, many business decisions were

made solely on a cost-benefit analysis.

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WHAT IS SOCIAL RESPONSIBILITY?

A business obligation to maximize its positive

impact and decrease its negative impact on a

society.

Doing the right thing in business by making

decisions that are right for the

environment,consumer,employees,communit

ies,stakeholders and all other memebers of

thepublic sphere.

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Ethics BriefEthics Brief

Corporations that conduct social Corporations that conduct social audits will be more apt to prevent audits will be more apt to prevent unethical and illegal conduct by unethical and illegal conduct by managers, employees, and managers, employees, and agents.agents.

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THE SOCIAL RESPONSIBILITY OF BUSINESS (CONTINUED)

Corporations are considered to owe some degree

of social responsibilitysocial responsibility for their actions.

Ethics is a function of history, culture, religion,

and other factors.

Therefore, ethical standards vary from country to

country.

The Caux Round TableCaux Round Table promulgated an

international ethics code called the Principles for Principles for

International BusinessInternational Business.

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THE CAUX ROUND TABLE PRINCIPLES: Principle 1Principle 1 The Responsibilities of Business

Beyond Shareholders Toward Shareholders

Principle 2Principle 2 The Economic and Social Impact of Business: Toward Innovation, Justice, and World Community

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THE CAUX ROUND TABLE PRINCIPLES: (CONTINUED)

Principle 3Principle 3 Business Behavior: Beyond the

Letter of Law Toward a Spirit of Trust

Principle 4Principle 4 Respect for Rules

Principle 5Principle 5 Support for Multilateral Trade

Principle 6Principle 6 Respect for the Environment

Principle 7Principle 7 Avoidance of Illicit Operations

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THEORIES OF SOCIAL RESPONSIBILITY

Maximizing Maximizing ProfitsProfits

Moral Moral MinimumMinimum

Stakeholder Stakeholder InterestInterest

Corporate Corporate CitizenshipCitizenship

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MAXIMIZING PROFITS

A theory of social responsibility that says a corporation owes a duty to take actions that maximize profits for shareholders.

The interests of other constituencies are not important in and of themselves.

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MORAL MINIMUM

A theory of social responsibility that says a corporation’s duty is to make a profit while avoiding harm to othersavoiding harm to others.

As long as business avoids or corrects the social injury it causes, it has met its duty of social responsibility.

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MORAL MINIMUM (CONTINUED)

The legislative and judicial branches of

government have established laws that

enforce the moral minimum of social

responsibility on corporations.

e.g., Occupational safety laws

e.g., Consumer protection laws for product safety

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STAKEHOLDER INTEREST

A theory of social responsibility that says a

corporation must consider the effects its

actions have on persons other than its other than its

stockholdersstockholders.

This theory is criticized because it is difficult

to harmonize the conflicting interests of

stakeholders.

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OTHER STAKEHOLDERS OF A BUSINESS

CustomersCustomers

EmployeesEmployees SuppliersSuppliers

Local Local CommunityCommunity

CreditorsCreditors

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CORPORATE CITIZENSHIP

A theory of responsibility that says a business has a responsibility to do good.

Business is responsible for helping to solve social problems.

Corporations owe a duty to promote the

same social goals as do individual members

of society.

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CORPORATE CITIZENSHIP (CONTINUED)

This theory argues that corporations owe a debt to society to make it a better place. This duty arises because of the social power

bestowed on corporations.

A major criticism of this theory is that the

duty of a corporation to “do good” cannot be

expanded beyond certain limits.

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THEORIES OF SOCIAL RESPONSIBILITY – SUMMARY

TheoryTheory Social ResponsibilitySocial Responsibility

Maximizing profitsMaximizing profits To maximize profits for stockholders.To maximize profits for stockholders.

Moral minimumMoral minimum To avoid causing harm and to compensate for To avoid causing harm and to compensate for harm caused.harm caused.

Stakeholder interestStakeholder interest To consider the interests of all stakeholders, To consider the interests of all stakeholders, including stockholders, employees, customers, including stockholders, employees, customers, suppliers, creditors, and local community.suppliers, creditors, and local community.

Corporate citizenshipCorporate citizenship To do good and solve social problemsTo do good and solve social problems

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THE CORPORATE SOCIAL AUDIT

Corporate audits should be extended to include the

moral healthmoral health of the corporation.

Corporations that conduct social audits will be more

apt to prevent unethical and illegal conduct by

managers, employees, and agents.

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THE CORPORATE SOCIAL AUDIT (CONTINUED)

The audit would examine how well:

Employees have adhered to the company’s code of ethics;

and

The corporation has met its duty of social responsibility.

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THE CORPORATE SOCIAL AUDIT (CONTINUED)

Such audits would focus on the corporation’s efforts to: Promote employment opportunities for members

of protected classes Worker safety Environmental protection

Consumer protection

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THE CORPORATE SOCIAL AUDIT (CONTINUED)

Companies should institute the following Companies should institute the following procedures when conducting a social audit:procedures when conducting a social audit:

An independent outside firm should be hired to conduct the audit. This will ensure autonomy and objectivity.

The company’s personnel should cooperate

fully with the auditing firm while the audit is

being conducted.

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THE CORPORATE SOCIAL AUDIT (CONTINUED)

Procedures for conducting the audit Procedures for conducting the audit

(continued):(continued):

The auditing firm should report its findings

directly to the company’s board of directors.

The results of the audit should be reviewed

by the company’s board of directors.

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THE CORPORATE SOCIAL AUDIT (CONTINUED)

Procedures for conducting the audit Procedures for conducting the audit (continued):(continued):

The board of directors should determine how the company can: Better meet its duty of social responsibility; and

Use the audit to implement a program to correct

any deficiencies it finds.

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UNITED NATIONS CODE OF CONDUCT FOR TRANSNATIONAL CORPORATIONS

Respect for National Sovereignty Adherence to Socio-Cultural Objectives and Values

Respect for Human Rights and Fundamental

Freedoms Abstention from Corrupt Practices

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