ETHICS AND SOCIAL RESPONSIBILITY By: Mrs. Belen Apostol
Ethics • Ethics refers to the study of morals and moral choices of human being. • The behavior of individuals and groups which are governed by standards, rules, and codes of conduct consist of the subjects covered by ethics.
What is Business Ethics? • The moral principles defining right and wrong behavior of businesspersons and their agents • It implores them to adhere to certain ethical conduct when dealing with anybody especially those affected by their business activities.
The Need for Ethical Behavior • Ethical behavior is needed to make the “playing field” free and orderly. If the business person does not adhere to ethical principles, public opinion may pressure the government to act. It may turn out, later, that the business person will be in a worse situation then when no law is passed to force him to act ethically.
Areas of Concern for Business Ethics • Ethics covers all areas encompassed by business transactions. The ethical conduct of a business person may be measured against how the following are adhered to: 1.Laws and regulations promulgated by the government; and 2. Specific ethical conduct not yet passed into law
Laws and regulations requiring ethical behavior • Product safety and quality; • Fair employment practices; • Fair marketing and selling practices; • The use of confidential information for personal gain; • Community involvement; • Bribery; and • Illegal payments to foreign governments to obtain business.
Fair employment practices;
Bribery Illegal payments to foreign governments to obtain business.
Current Issues in Ethics • Owners of food stalls serving spoiled food to customers; • Business owners making “fictitious insurance claims”; • School awarding diplomas to undeserving persons; • A contractor bribing a government official to manipulate the bidding of contracts; • A drug manufacturer making false claims regarding the efficacy of his product; and • A television station copying the format of a rival station’s show.
Coverage of Company Sponsored Ethics Program • A very important listing of problem areas which may be used as a basis for formulating company policies on ethical conduct is as follows: • Drug and alcohol abuse • Employee theft • Conflict of interest • Quality control • Misuse of proprietary information
Coverage of Company Sponsored Ethics Program • Abuse of expense accounts • Plant closings and layoffs • Misuse of company assets • Environmental pollution • Methods of gathering competitor’s information • Inaccuracy of books and records • Receiving excessive gifts and entertainment • False or misleading advertising
The Improvement of Ethical Performance Improvement in the ethical conduct of business and those involved in it may be made through any of the following ways: • Ethics training • Ethical advocates • Ethical codes; and • Whistle blowing.
Ethics Training Learning takes two forms: • Through formal classroom instruction, and • Through actual hands-on experience and observation
Ethical Advocates An ethical advocate is a person who is knowledgeable about business ethics, employed by the company, and acts as the company’s conscience. He sits at the board of directors and sees to it that every policy adapted conforms to ethical standards.
Ethical Codes A code of ethics is a formal document that provides clear direction to management and employees in the performance of their duties.
Whistle-Blowing There are instances when employees are helpless that they cannot implement the right ethical conduct required in specific situations. When almost everybody from top to lower management acts outside of ethical norms, the employee who feels he must do something that resorts to reporting the perceived unethical practice to outsiders such as the press, government agencies like the ombudsman and the Presidential Anti-Graft commission, or public interest groups.
What is Social Responsibility Social responsibility refers to the concern of business for the welfare of the society. • that the firm must perform its function without harming the community • improve the quality of life • produce goods or services that will not adversely affect any component of the society • make profits but not to the public detriment of society.
Interested Groups • There are various groups with interests that are different from one another. These interests must be properly considered by the business firm it will have to be successful.
Owners The interest of the owners (the sole proprietor, the partners, or stockholders) is expected to be of highest priority.
Consumers Consumers, like any other group, have rights. The basic rights of consumers include those concerning representation, information, a healthy environment, safety, basic goods and services, choice, consumer education and redress.
Employees Among the specific points of interest in caring about employees are: • Health and safety; • Appropriate salaries and employee benefits; • Right to speak out; • Right to privacy; and • Right to job security except when discipline is concerned. (security of tenure)
Minority Groups Management must avoid treating them outright as inferior so as not to affect their employment and promotion chances.
Women • The view that management must have is to regard women as a force with potentials “to lead” as much as “to follow”
Older People • Older people have distinct needs that must be the concern of business. Many of them are highly qualified and able to perform special tasks which younger persons cannot do.
The Handicapped • The firm’s management must be responsible for removing hazards and obstacles which prevent them from doing their jobs effectively.
The Community at large • There are business activities that may affect any of the widely diverse interest of people. The modern manager must have multiple abilities and an open mind if he wants to succeed in his endeavor.
Benefits and costs of Social Actions • Benefits • Improved employee satisfaction and motivation • Company becomes more aware of changing consumer tastes and preferences; • Greater demand for the company’s products or services;
Benefits and costs of Social Actions • Preference by investors to buy the firm’s stocks; and • Elimination of possible legislative controls on business activities.
Benefits and costs of Social Actions • Costs • The money spent in direct support of social projects; • Reduction of competitive power; and • The private provision of social services and programs may later on, be also regulated by the government.
Social Responsibility Strategies The approaches are expressed in four basic social responsibility strategies as follows: • Reaction strategy • Defense strategy • Accommodation strategy, and • Proactive strategy
Reaction Strategy • The company allows a condition or potential problems to go unresolved until the public finds out about it. When a problem is brought before the company, the firms reacts by denying responsibility, then attempts to resolve the problem, deal with its consequences, then continue doing business to minimize the negative impact.
Defense Strategy • The company tries to minimize or avoid additional obligations. Among the tactics used are legal maneuvering and seeking the support of groups that prefer the company’s way of doing business.
Accommodation Strategy • This is done when special interest groups are taking the side of the opposition, or when the business perceives that if it does not react, a law will be passed by Congress to ensure compliance. This means that the company is forced to accept its economic, legal, and ethical responsibilities.
Proactive Strategy • the firm goes beyond what is legally and ethically required. There are a number of companies using the proactive strategy. This is undertaken through sponsorship of cultural shows offered free to the public, scholarship to financially-handicapped but deserving students, providing financial support to the upkeep of endangered animal species, and many other similar concerns.
Social Audits • A social audit refers to the systematic examination of all the activities achieving social goals such as employment of the handicapped and those belonging to the cultural minorities, adaption of anti-pollution campaign, improvement of working conditions, community development, donations to worthy causes, and various consumer issues.
Social Audits A social audit may be done through the preparation of the following: • A summary of program areas, such as consumer affairs, as well as the reasons for undertaking certain social activities and not others. • A report of specific programs and the priorities for each set of activities.
Social Audits 3. A listing of objectives for each priority activity and a description of how the organization is striving to reach the objective. 4. A summary report of the costs of each program area and activity to the company 5. A summary using quantitative measures, whenever possible, of the extent of achievement of each social objective.