Business Ethics

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UNIVERSITY OF MUMBAI PROJECT SPECIALISATION IN Business Ethics SUBMITED BY MR. . Rajesh Gujjar T.Y.B.M.S PROJECT GUIDE: PROF. MS. KAVITA IN PARTIAL FULFILLMENT FOR THE DEGREE COURSE IN THE BACHELOR MANEGEMENT STUDIES 2009-2010 MAHATMA EDUCATION SOCIETY PILLAI’S COLLEGE OF ARTS, COMMERCE AND SCIENCE, NEW PANVEL

ACKNOWLEDGEMENTS

I would like to express my sincere gratitude to my project guide prof. Prerna Sharma for her immense support and co-operation. They directly and indirectly contributed their time and talent in enriching my knowledge during this period.

This project has been a tremendous learning experience and sincere attempt on my part. I also ensure that I have made a good utilization of my time and have gained a lot of knowledge from it.

I am sure that the knowledge imparted by them is definitely going to shape my future and professional career.

DECLARATION I Rajesh Gujjar of Pillai’s College of Arts, Commerce and Science, New Panvel of TYBMS (semester v) hereby declare that I have completed the project report on Business Ethics in the academic year 2009-2010. The information submitted by me is true and original to the best of my knowledge.

( RAJESH GUJJAR Signature of the student

)

PILLAIS COLLEGE OF ARTS COMMERCE AND SCIENCE

CERTIFICATE

This is to certify that Master. Rajesh Gujjar of TYBMS (semester v) of Pillais College of Arts Commerce and Science, New Panvel has completed the project on Coffee Industry in the academic year 2009-2010. The information submitted is true and original to the best of my knowledge and belief.

PROJECT GUIDE

PROJECT GUIDE

PROJECT GUIDE { UNIVERSITY EXAMINER }

Executive Summary

Business ethics is a form of applied ethics that examines ethical principles and moral 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 business organizations as a whole. Applied ethics is a field of ethics that deals with ethical questions in many fields such as medical, technical, legal and business ethics. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Businesses can often attain short-term gains by acting in an unethical fashion; however, such behaviours tend to undermine the economy over time. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt).

Contents



1 Overview of issues in business ethics
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1.1 General business ethics
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1.1.1 Ethics of accounting information 1.1.2 Ethics of human resource management 1.1.3 Ethics of sales and marketing 1.1.4 Ethics of production 1.1.5 Ethics of intellectual property, knowledge and skills 1.2.1 International business ethics 1.2.2 Ethics of economic systems

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1.2 International business ethics and ethics of economic systems
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2 Theoretical issues in business ethics
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2.1 Conflicting interests 2.2 Ethical issues and approaches 3.1 Corporate ethics policies 3.2 Ethics officers



3 Business ethics in the field
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4 Religious views on business ethics 5 Related disciplines 6 See also 7 References 8 Further reading 9 External links

Overview of issues in business ethics General business ethics


This part of business ethics overlaps with the philosophy of business, one of the aims of which is to determine the fundamental purposes of a company. If a company's main purpose is to maximize the returns to its shareholders, then it should be seen as unethical for a company to consider the interests and rights of anyone else.



Corporate social responsibility or CSR: an umbrella term under which the ethical rights and duties existing between companies and society is debated. Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept v. shareholder concept. Ethical issues concerning relations between different companies: e.g. hostile takeovers, industrial espionage. Leadership issues: corporate governance. Political contributions made by corporations. Law reform, such as the ethical debate over introducing a crime of corporate manslaughter. The misuse of corporate ethics policies as marketing instruments.





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See also: corporate abuse, corporate crime. Ethics of accounting information Main article: accounting ethics
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Creative accounting, earnings management, misleading financial analysis. Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal) manipulation of the financial markets. Executive compensation: concerns excessive payments made to corporate CEO's and top management.





Bribery, kickbacks, facilitation payments: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anticompetitive or offend against the values of society.

Ethics of human resource management The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee.


Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness. See also: affirmative action, sexual harassment.



Issues arising from the traditional view of relationships between employers and employees, also known as At-will employment. Issues surrounding the representation of employees and the democratization of the workplace: union busting, strike breaking. Issues affecting the privacy of the employee: workplace surveillance, drug testing. See also: privacy. Issues affecting the privacy of the employer: whistle-blowing. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery,[4] indentured servitude, employment law. Occupational safety and health.





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All of the above are also related to the hiring and firing of employees. A employee or future employee can not be hired or fired based on race, age, gender, religion, or any other disciminatory act. Ethics of sales and marketing

Marketing, which goes beyond the mere provision of information about (and access to) a product, may seek to manipulate our values and behavior. To some extent society regards this as acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with media ethics, because marketing makes heavy use of media. However, media ethics is a much larger topic and extends outside business ethics.
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Pricing: price fixing, price discrimination, price skimming. Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. See: anti-competitive practices, antitrust law.



Specific marketing strategies: greenwash, bait and switch, shill, viral marketing, spam (electronic), pyramid scheme, planned obsolescence. Content of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful Children and marketing: marketing in schools. Black markets, grey markets.



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Ethics of production This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.


Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping). Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading





Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health. Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.



See also: product liability Cases: Ford Pinto scandal, Bhopal disaster, asbestos / asbestos and the law, Peanut Corporation of America.

Ethics of intellectual property, knowledge and skills Knowledge and skills are valuable but not easily "ownable" as objects. Nor is it obvious who has the greater rights to an idea: the company who trained the employee, or the employee themselves? The country in which the plant grew, or the company which discovered and developed the plant's medicinal potential? As a result, attempts to assert ownership and ethical disputes over ownership arise.
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Patent infringement, copyright infringement, trademark infringement. Misuse of the intellectual property systems to stifle competition: patent misuse, copyright misuse, patent troll, submarine patent. Even the notion of intellectual property itself has been criticised on ethical grounds: see intellectual property. Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess. The practice of employing all the most talented people in a specific field, regardless of need, in order to prevent any competitors employing them. Bioprospecting (ethical) and biopiracy (unethical). Business intelligence and industrial espionage.







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Cases: private versus public interests in the Human Genome Project

Ethics and Technology The computer and the World Wide Web are two of the most significant inventions of the twentieth century. There are many ethical issues that arise from this technology. It is easy to gain access to information. This leads to data mining, workplace monitoring, and privacy invasion. Medical technology has improved as well. Pharmaceutical companies have the technology to produce life saving drugs. These drugs are protected by patents and there are no generic drugs available. This raises many ethical questions. International business ethics and ethics of economic systems The issues here are grouped together because they involve a much wider, global view on business ethical matters. International business ethics While business ethics emerged as a field in the 1970s, international business ethics did not emerge until the late 1990s, looking back on the international developments of that decade. Many new practical issues arose out of the international context of business. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. Other, older issues can be grouped here as well. Issues and subfields include:
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The search for universal values as a basis for international commercial behaviour. Comparison of business ethical traditions in different countries. Comparison of business ethical traditions from various religious perspectives. Ethical issues arising out of international business transactions; e.g. bioprospecting and biopiracy in the pharmaceutical industry; the fair trade movement; transfer pricing.

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Issues such as globalization and cultural imperialism. Varying global standards - e.g. the use of child labor. The way in which multinationals take advantage of international differences, such as outsourcing production (e.g. clothes) and services (e.g. call centres) to low-wage countries.



The permissibility of international commerce with pariah states.

Foreign countries often use dumping as a competitive threat, selling products at prices lower than their normal value. This can lead to problems in domestic markets. It becomes difficult for these markets to compete with the pricing set by foreign markets. In 2009, the International Trade Commission has been researching anti-dumping laws. Dumping is often seen as an ethical issue, as larger companies are taking advantage of other less economically advanced companies.

Ethics of economic systems This vaguely defined area, perhaps not part of but only related to business ethics, is where business ethicists venture into the fields of political economy and political philosophy, focusing on the rights and wrongs of various systems for the distribution of economic benefits. John Rawls and Robert Nozick are both notable contributors. Theoretical issues in business ethics Conflicting interests Business ethics can be examined from various perspectives, including the perspective of the employee, the commercial enterprise, and society as a whole. Very often, situations arise in which there is conflict between one or more of the parties, such that serving the interest of one party is a detriment to the other(s). For example, a particular outcome might be good for the employee, whereas, it would be bad for the company, society, or vice versa. Some ethicists (e.g., Henry Sidgwick) see the principal role of ethics as the harmonization and reconciliation of conflicting interests. Ethical issues and approaches

Philosophers and others disagree about the purpose of a business ethic in society. For example, some suggest that the principal purpose of a business is to maximize returns to its owners, or in the case of a publicly-traded concern, its shareholders. Thus, under this view, only those activities that increase profitability and shareholder value should be encouraged, because any others function as a tax on profits. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. However, some point out that self-interest would still require a business to obey the law and adhere to basic moral rules, because the consequences of failing to do so could be very costly in fines, loss of licensure, or company reputation. The noted economist Milton Friedman was a leading proponent of this view. Some take the position that organizations are not capable of moral agency. Under this, ethical behavior is required of individual human beings, but not of the business or corporation. Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders, and that these duties consist of more than simply obeying the law. They believe a business has moral responsibilities to so-called stakeholders, people who have an interest in the conduct of the business, which might include employees, customers, vendors, the local community, or even society as a whole. Stakeholders can also be broken down into primary and secondary stakeholders. Primary stakeholders are people that are affected directly such as stockholders, where secondary stakeholders are people who are not affected directly such as the government. They would say that stakeholders have certain rights with regard to how the business operates, and some would suggest that this includes even rights of governance. Some theorists have adapted social contract theory to business, whereby companies become quasi-democratic associations, and employees and other stakeholders are given voice over a company's operations. This approach has become especially popular subsequent to the revival of contract theory in political philosophy, which is largely due to John Rawls' A Theory of Justice, and the advent of the consensus-oriented approach to solving business problems, an aspect of the "quality movement" that emerged in the 1980s.

Professors Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business, which they call Integrative Social Contracts Theory. They posit that conflicting interests are best resolved by formulating a "fair agreement" between the parties, using a combination of i) macro-principles that all rational people would agree upon as universal principles, and, ii) micro-principles formulated by actual agreements among the interested parties. Critics say the proponents of contract theories miss a central point, namely, that a business is someone's property and not a mini-state or a means of distributing social justice. Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards, as in the case of multinational companies that operate in countries with varying practices. The question arises, for example, ought a company to obey the laws of its home country, or should it follow the less stringent laws of the developing country in which it does business? To illustrate, United States law forbids companies from paying bribes either domestically or overseas; however, in other parts of the world, bribery is a customary, accepted way of doing business. Similar problems can occur with regard to child labor, employee safety, work hours, wages, discrimination, and environmental protection laws. It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical practices drive out good ethical practices. It is claimed that in a competitive business environment, those companies that survive are the ones that recognize that their only role is to maximize profits. Business ethics in the field Corporate ethics policies As part of more comprehensive compliance and ethics programs, many companies have formulated internal policies pertaining to the ethical conduct of employees. These policies can be simple exhortations in broad, highly-generalized language (typically called a corporate ethics statement), or they can be more detailed policies, containing specific behavioral requirements (typically called corporate ethics codes). They are generally meant

to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business. It is hoped that having such a policy will lead to greater ethical awareness, consistency in application, and the avoidance of ethical disasters. An increasing number of companies also requires employees to attend seminars regarding business conduct, which often include discussion of the company's policies, specific case studies, and legal requirements. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct. Many companies are assessing the environmental factors that can lead employees to engage in unethical conduct. A competitive business environment may call for unethical behavior. Lying has become expected in fields such as trading. An example of this are the issues surrounding the unethical actions of the Saloman Brothers. Not everyone supports corporate policies that govern ethical conduct. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment. Others believe that corporate ethics policies are primarily rooted in utilitarian concerns, and that they are mainly to limit the company's legal liability, or to curry public favor by giving the appearance of being a good corporate citizen. Ideally, the company will avoid a lawsuit because its employees will follow the rules. Should a lawsuit occur, the company can claim that the problem would not have arisen if the employee had only followed the code properly. Sometimes there is disconnection between the company's code of ethics and the company's actual practices. Thus, whether or not such conduct is explicitly sanctioned by management, at worst, this makes the policy duplicitous, and, at best, it is merely a marketing tool. To be successful, most ethicists would suggest that an ethics policy should be:

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Given the unequivocal support of top management, by both word and example. Explained in writing and orally, with periodic reinforcement. Doable....something employees can both understand and perform. Monitored by top management, with routine inspections for compliance and improvement. Backed up by clearly stated consequences in the case of disobedience. Remain neutral and nonsexist.

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Ethics officers Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. One of the catalysts for the creation of this new role was a series of fraud, corruption and abuse scandals that afflicted the U.S. defense industry at that time. This led to the creation of the Defense Industry Initiative (DII), a pan-industry initiative to promote and ensure ethical business practices. The DII set an early benchmark for ethics management in corporations. In 1991, the Ethics & Compliance Officer Association (ECOA) -- originally the Ethics Officer Association (EOA)-- was founded at the Center for Business Ethics(at Bentley College, Waltham, MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. The membership grew rapidly (the ECOA now has over 1,100 members) and was soon established as an independent organization. Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991, which set standards that organizations (large or small, commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Although intended to assist judges with sentencing, the influence in helping to establish best practices has been far-reaching. In the wake of numerous corporate scandals between 2001-04 (affecting large corporations like Enron, WorldCom and Tyco), even small and medium-sized companies have begun to appoint ethics officers. They often report to the Chief Executive Officer and are responsible

for assessing the ethical implications of the company's activities, making recommendations regarding the company's ethical policies, and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. This trend is partly due to the Sarbanes-Oxley Act in the United States, which was enacted in reaction to the above scandals. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions. The effectiveness of ethics officers in the marketplace is not clear. If the appointment is made primarily as a reaction to legislative requirements, one might expect the efficacy to be minimal, at least, over the short term. In part, this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior, a culture and climate that usually emanates from the top of the organization. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behaviour: a more systemic programme with consistent support from general management will be necessary. The foundation for ethical behavior goes well beyond corporate culture and the policies of any given company, for it also depends greatly upon an individual's early moral training, the other institutions that affect an individual, the competitive business environment the company is in and, indeed, society as a whole. Religious views on business ethics The historical and global importance of religious views on business ethics is sometimes underestimated in standard introductions to business ethics. Particularly in Asia and the Middle East, religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values. Examples include:
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Islamic banking, associated with the avoidance of charging interest on loans. Traditional Confucian disapproval of the profit-seeking motive.



Quaker testimony on fair dealing.

Related disciplines Business ethics should be distinguished from the philosophy of business, the branch of philosophy that deals with the philosophical, political, and ethical underpinnings of business and economics. Business ethics operates on the premise, for example, that the ethical operation of a private business is possible -- those who dispute that premise, such as libertarian socialists, (who contend that "business ethics" is an oxymoron) do so by definition outside of the domain of business ethics proper. The philosophy of business also deals with questions such as what, if any, are the social responsibilities of a business; business management theory; theories of individualism vs. collectivism; free will among participants in the marketplace; the role of self interest; invisible hand theories; the requirements of social justice; and natural rights, especially property rights, in relation to the business enterprise. Business ethics is also related to political economy, which is economic analysis from political and historical perspectives. Political economy deals with the distributive consequences of economic actions. It asks who gains and who loses from economic activity, and is the resultant distribution fair or just, which are central ethical issues.

What is business ethics?

Good business ethics should be a part of every business. There are many factors to consider. When a company does business with another that is considered unethical, does this make the first company unethical by association? Some people would say yes, the first business has a responsibility and it is now a link in the chain of unethical businesses.

Many global businesses, including most of the major brands that the public use, can be seen not to think too highly of good business ethics. Many major brands have been fined millions for breaking ethical business laws. Money is the major deciding factor. If a company does not adhere to business ethics and breaks the laws, they usually end up being fined. Many companies have broken anti-trust, ethical and environmental laws and received fines worth millions. The problem is that the amount of money these companies are making outweighs the fines applied. Billion dollar profits blind the companies to their lack of business ethics, and the dollar sign wins. A business may be a multi-million seller, but does it use good business ethics and do people care? There are popular soft drinks and fast food restaurants that have been fined time and time again for unethical behavior. Business ethics should eliminate exploitation, from the sweat shop children who are making sneakers to the coffee serving staff who are being ripped off in wages. Business ethics can be applied to everything from the trees cut down to make the paper that a business sells to the ramifications of importing coffee from certain countries. In the end, it may be up to the public to make sure that a company adheres to correct business ethics. If the company is making large amounts of money, they may not wish to pay too close attention to their ethical behavior. There are many companies that pride themselves in their correct business ethics, but in this competitive world, they are becoming very few and far between.

What are some examples of business ethics? Business ethics covers a lot of issues, from whether to hire a friend over a better qualified stranger, relationships within an organization, to bigger issues such as whether to be an environmentally friendly organization but loose profits, or take in large profits by not paying for environmental measures but get a bad reputation and in the long run cost tax payers more.

It may also cover whole industries, such as pharmaceutical companies and whether it is ethical for them to charge extreme amounts of money for a life saving drug just because they own the rights, and therefore are the only manufacturers of the drug. Why Business Ethics? Everyone agrees that business managers must understand finance and marketing. But is it necessary for them to study ethics? Managers who answer in the negative generally base their thinking on one of three rationales. They may simply say that they have no reason to be ethical. They see why they should make a profit, and most agree they should do so legally. But why should they be concerned about ethics, as long as they are making money and staying out of jail? Other managers recognize that they should be ethical but identify their ethical duty with making a legal profit for the firm. They see no need to be ethical in any further sense, and therefore no need for any background beyond business and law. A third group of managers grant that ethical duty goes further than what is required by law. But they still insist that there is no point in studying ethics. Character is formed in childhood, not while reading a college text or sitting in class. These arguments are confused and mistaken on several levels. To see why, it is best to start with the question raised by the first one: why should business people be ethical?

Why Should One Be Ethical? There is already something odd about this question. It is like asking, “Why are bachelors unmarried?” They are unmarried by definition. If they were married, they would not be bachelors. It is the same with ethics. To say that one should do something is another way of

saying it is ethical. If it is not ethical, then one should not do it. Perhaps when business people ask why they should be ethical, they have a different question in mind: what is the motivation for being good? Is their something in it for them? It is perfectly all right to ask if there is a reward for being good, but this has nothing to do with whether one should be good. It makes no sense to try convince people that they should be good by pointing to the rewards that may follow. One should be good because “good” is, by definition, that which one should be. As for motivation, good behavior often brings a reward, but not every time. Think about it. If it were always in one’s interest to be good, there would be no need for ethics. We could simply act selfishly and forget about obligation. People invented ethics precisely because it does not always coincide with self interest. 2 Doing Well by Doing Good Although ethics is not the same as self interest, business executives often want to be assured that it is the same. They want to make certain that “one can do well by doing good,” meaning that one can succeed in business by being ethical. There is no denying that one can often do well by doing good. An ethical company is more likely to build a good reputation, which is more likely to bring financial rewards over the long term. But good behavior cannot be grounded in tangible reward alone. People who are interested only in reward will behave ethically when it suits their purpose, but they will go astray whenever the incentives change. There is a deeper confusion here, too. To look to ethics for motivation is to misunderstand what ethics is all about. It is like studying finance to find a reason to make money.

Finance does not teach one to want to be rich. It teaches one how to be rich, assuming one wants to be rich. So it is with ethics. Ethics teaches one how to be good, assuming one wants to be good. It is important to know that one can normally do well by doing good. Otherwise ethical people could go into business only with a high risk of failure. Business ethics, however, addresses the opposite question: how can one do good by doing well? It begins with the premise that managers want to do something good with their lives and investigates how to accomplish this through business. In other words, it treats profit and business success as means to a greater end: making the world a little better. The Duty to Make Money Granting that a business person’s ultimate objective is to make the world better, how is this best achieved? A common view is that it is achieved by making as much money as possible. The best thing business people can do for society is to be good business people, which is to say, to maximize the company’s profit. They should therefore stick to finance, marketing and operations management rather than waste time with ethics. Economist Milton Friedman articulates this view in an essay that is quite popular with business students, “The Social Responsibility of Business Is to Increase its Profits.”1 According to Friedman, corporate officers have no obligation to support such social causes as hiring the hard-core unemployed to reduce poverty, or reducing pollution beyond that mandated by law.

Their sole task is to maximize profit for the company, subject to the limits of law and “rules of the game” that ensure “open and free competition without deception or fraud.” Friedman advances two main arguments for this position. First, corporate executives and directors are not qualified to do anything other than maximize profit. Business people are expert at making money, not at making social policy. They lack the perspective and training to address complex social problems, which should be left to governments and social service agencies. 1 Milton Friedman, “The Social Responsibility of Business Is to Increase its Profits,” New York Times Magazine (September 13, 1970). Reprinted in Thomas Donaldson and Al Gini, eds., Case Studies in Business Ethics, 4th ed., Prentice-Hall (19xx) 56-61. 3 Second, and more fundamentally, corporate officers have no right to do anything other than maximize profit. If they invest company funds to train the chronically unemployed or reduce emissions below legal limits, they in effect levy a “tax” on the company’s owners, employees and customers in order to accomplish a social purpose. But they have no right to spend other people’s money on social welfare projects. At best, only elected representatives of the people have such authority. Sole proprietors can spend the company’s money any way they want, since it is their money, but fiduciaries and hired managers have no such privilege. If they contribute corporate money to arts or community development, it must be with an eye to increasing profit, perhaps by attracting better employees or improving the company’s image. If

they want to contribute to other social causes, they are free to join civic organizations and donate as much of their own money as they please. It would be nice if the world were so simple. What happens, for example, when laws permit anti-social behavior? Should businesses not restrain themselves voluntarily, even if it imposes a cost on company stakeholders? Friedman’s reply is that they must not, again on the libertarian principles just described. But suppose a hurricane hits a town and cuts off routes to the outside world. There is a desperate need for portable electric generators, and the only local seller takes the opportunity to charge an exorbitant price. (Something like this happened when Hurricane Andrew hit southern Florida.) Since this sort of price gouging is legal, the store manager has no right, on Friedman’s view, to “tax” the owners by charging less than the market will bear. He does, however, have a right to ask the buyer to pay more, since the purchase decision is voluntary in a free market. This little example reveals two fallacies of Friedman’s position. One is the idea that company officers somehow usurp authority when they act ethically at the expense of owners. To refute this idea, let us agree that it is wrong for an individual to exploit hurricane victims by demanding a high price. (If we cannot agree on this, we can change the example.) Friedman admits that it is perfectly all right for a sole proprietor to sacrifice potential profit in order to be a decent human being. But suppose the owner has turned the business over to professional managers. Does ethical obligation to victims suddenly vanish? Is it permissible for the owner to exploit victims of disaster through agents, when it would be wrong to do it personally? Of course

not. The owner cannot escape obligations simply by hiring someone to run the business. One might as well argue that an organized crime boss can avoid responsibility for murder by hiring a hit man to do the deed. Agents who act ethically at company expense therefore do not usurp the authority of owners. On the contrary, they carry out duties that the owners are bound to observe, whether they run the business themselves or through agents. This is not to say that managers should use company funds to support any cause that strikes the owners’ fancy, such as the Irish Republican Army or the Sierra Club. The reason is that the owners have no obligation as business people to support these causes. They may have such an obligation as human beings, but it is not part of business ethics. Since owners hire managers specifically to run a business, they transfer only their business-related obligations, such as the obligation not to exploit disaster victims by price gouging. Managers must of course know how to recognize what sorts of obligations are imposed specifically by business ethics. This is precisely why they should study business ethics as well as finance, marketing and operations! The second major fallacy in Friedman’s position is his misapplication of libertarian principles. He states that spending the owners’ money in the service of ethics is coercion and therefore wrong, while operating in a free market to increase their wealth compromises no one’s freedom and is therefore permissible. The electric generators provide a clear counterexample.

Although no one compels hurricane victims to purchase generators, price gouging is coercive. It 4 forces the victims to choose between paying ridiculous prices and letting a warehouse full of food spoil. It takes money from them no less surely than lower prices take money from the owners. The point is even sharper when a company decimates a community by moving a plant abroad. No one forced these people to work for the company in the first place. Yet the company limits their choices by putting them out of work, particularly the older ones, more than it limits stockholders’ choices by reducing their dividends. To limit choices is to reduce freedom. It is clear that maximizing profit can “tax” the broader community no less than ethical choices can “tax” the owners. The business executive has a special obligation to owners, but it is not grounded in libertarian principles. It is based simply on the fact that the executive acts on behalf of the owners. The inadequacy of Friedman’s philosophy is particularly evident in international business, where there are fewer legal restrictions. A famous case study describes how the Nestlé Corporation marketed its infant formula in parts of Africa by hiring nurses in local clinics to recommend formula over breast feeding. The nurses convinced mothers that using formula was sophisticated and Western, while breast feeding was primitive and third-worldish. Unfortunately

clean water was often unavailable to mix with the powdered formula, and babies often became ill. The company continued its marketing efforts despite worldwide protests and relented only after years of massive consumer boycotts of its products. On Friedman’s theory, the company’s intransigence was perfectly justified. Its directors had no right to withdraw a profitable and legal product, even though it caused innocent babies to suffer, until boycotts changed the financial equation. Similar examples abound, such as pollution in Nigerian oil fields, worker exploitation in Southeast Asia sweat shops, and bribery around the world. There is clearly an important element of truth in Friedman’s position. Business people are not only at their best when making a profit, but in doing so they make an enormous positive contribution. Although Friedman says little about this in his essay, businesses provide a vast array of products and services that make life far better for millions worldwide. They can accomplish this largely through the expertise of managers who can run an efficient operation in a competitive environment. The primary ethical duty of managers is to apply their business skills and keep up the good work. At the same time, however, they must pay attention to whether their business in fact has this kind of positive effect. They are not experts in social policy, and it is often unobvious how far their social obligations extend. But this is one reason we have business ethics. The Rules of the Game

The task of business ethics, then, is to identify the duties that business people have as business people. What are these duties? One can begin with the most basic ones mentioned by Friedman: the duty to obey the law and the “rules of the game,” which provide for “open and free competition without deception or fraud.” Yet even these basic obligations are disputed. Albert Carr’s very popular essay, “Is Business Bluffing Ethical?” argues that deception, for example, is a legitimate part of business.2 Business, he says, is like a poker game. There are rules, but within the rules it is permissible to Albert Z. Carr, “Is Business Bluffing Ethical,” Harvard Business Review (JanuaryFebruary, 1968) 2-8. 5 bluff in order to mislead others. In fact one must do so or lose the game. The ethical rules of everyday life therefore do not apply to business. Using examples from the 1960s era in which he wrote the paper, Carr defends:  food processors” that use “deceptive packaging of numerous products”; “ “automobile companies” that “for years have neglected the safety of car-owning families,” as described in Ralph Nader’s famous book Unsafe at Any Speed; “utility companies” that “elude regulating government bodies to extract unduly large payments from users of electricity.” “As long as they comply with the letter of the law,” he says, “they are within their rights to operate their businesses as they see fit.”

Carr tells of a sales executive who made a political contribution he did not believe in, to keep an important client happy. When the executive told his wife about it, she was disappointed with her husband and insisted he should have stood up for his principles. The executive explained to her how he must humor clients to keep his job. She understood the dilemma but concluded that “something is wrong with business.” Carr analyzes the incident as follows: This wife saw the problem in terms of moral obligation as conceived in private life; her husband saw it as a matter of game strategy. As a player in a weak position, he felt that he could not afford to indulge an ethical sentiment that might have cost his seat at the [poker] table.3 Carr not only expects the executive to make such choices but cautions him not to agonize over them. “If an executive allows himself to be torn between a decision based on business considerations and one based on his private ethical code, he exposes himself to a grave psychological strain.” Carr, like Friedman, has a point. Bluffing is expected in many business contexts, no less than in poker. No one expects negotiators to put all their cards on the table, or advertisers to tell the whole truth about their product. What the poker analogy actually tells us, however, is that “deception” is not really deception when everyone expects it as part of the game. Nobody is deceived when advertisers say their product is the best on the market; everyone says that. So Carr does not actually defend deception. Hiding a card up one’s sleeve, on the other hand, is truly deception because it breaks the rules of poker and no one is expecting it. Carr agrees that this sort of behavior, which he calls “malicious deception,” is wrong.

One problem with Carr’s poker analogy is that he overextends it. In a poker game everyone knows the rules, but business situations can be very ambiguous. If a food processor places false labels on packaging, it is highly unclear that consumers are “in on the game” and expect this sort of thing. If Mom and Dad take the kids to school in the family car, it is hard to argue that they “expect” the car to be unsafe, as was the Ford Pinto with its famous exploding gas tank. Such practices are now illegal precisely because they genuinely deceived customers, sometimes with deadly results. The example of the political contribution, as well as several others in his article, suggest that Carr is making an even stronger claim. He seems to argue that the business game justifies a whole range of activities beyond bluffing, such as perversion of the political process.

6 difficulty with this argument is that it proves too much. It implies that executives can do anything they want if it is part of a business game in which people play by the rules. But suppose the game is a shakedown racket, and everyone in town understands the rules: one must pay protection money or get roughed up by company thugs. This does not make it all right to participate in the racket, even if it is legal, which it is not. In fact, it is illegal precisely because it is the wrong kind of game to play.

The unavoidable fact is that some business games are good and some are bad. The right kind of competition, for example, can allow everyone to come out ahead, while the wrong kind can be destructive. When one plays the wrong game, then indeed “something is wrong with business.” How does one know which game to play? There is a field that deals with this issue, and it is called ethics. Carr compounds his error when he advises executives not to agonize over business decisions. He is right to say that they must not let personal sentiment cloud their judgment, particularly when it comes to such unpleasant duties as laying off employees or shutting down a plant. They certainly should not be paralyzed by indecision and doubt. But they must nonetheless struggle with the alternatives. Hard decisions are part of life. Sometimes the game of business requires one to compromise oneself in order to make a larger contribution. Perhaps the sales executive can promote an exciting new product only by putting up with little indignities like kowtowing to his clients. But he should never compromise his values without soul searching, which is to say, without carefully reviewing the ethical situation. Carr’s assertion to the contrary is profoundly unwise. Why Study Ethics? Even granting that business ethics is important, many seem to believe that there is no point in studying the subject. Ethics is something you feel, not something you think. Finance, marketing, operations, and even business law lend themselves to intellectual treatment, but ethics does not.

The idea that ethics has no intellectual content is odd indeed, considering that some of the most famous intellectuals in world history have given it a central place in their thought (Confucius, Plato, Aristotle, Maimonides, Thomas Aquinas, etc.). Ethics is in fact a highly developed field that demands close reasoning. The Western tradition in particular has given rise to sophisticated deontological, teleological and consequentialist theories of right and wrong. No one theory explains everything satisfactorily, but the same is true, after all, in the natural sciences. Even when they grant that ethics has intellectual content, people often say that studying the field will not change behavior. Character is formed in early childhood, not during a professor’s lecture. If the suggestion here is that college-level study does not change behavior, we should shut down the entire business school, not only the ethics course. Presumably the claim, then, is that studying finance and marketing can influence one’s conduct, but studying ethics cannot. This is again a curious view, since ethics is the one field that deals explicitly with conduct. Where is the evidence for this view? The early origins of character do not prevent finance and marketing courses from influencing behavior. Why cannot ethics courses also have an effect? 7 Ethics courses have a number of features that seem likely to influence behavior. They provide a language and conceptual framework with which one can talk and think about ethical issues. Their emphasis on case studies helps to make one aware of the potential consequences of

one’s actions. They present ethical that theories help define what a valid ethical argument looks like. They teach one to make distinctions and avoid fallacies that are so common when people make decisions. They give one an opportunity to think through, at one’s leisure, complex ethical issues that are likely to arise later, when there is no time to think. They introduce one to such specialized areas as product liability, employment, intellectual property, environmental protection, and cross-cultural management. They give one practice at articulating an ethical position, which can help resist pressure to compromise. None of this convinces one to be good, but it is useful to those who want to be good. It may also improve business conduct in general. How many of the recent business scandals would have occurred if subordinates had possessed the skills, vocabulary and conceptual equipment to raise an ethical issue with their coworkers? Ethics not only should be studied alongside management, but the two fields are closely related. Business management is all about making the right decisions. Ethics is all about making the right decisions. So what is the difference between the two? Management is concerned with how decisions affect the company, while ethics is concerned about how decisions affect everything. Management operates in the specialized context of the firm, while ethics operates in the general context of the world. Management is therefore part of ethics. A business manager cannot make the right decisions without understanding management in particular as well as ethics in general. Business ethics is management carried out in the real world. This is why business

managers should study ethics.

ETHICS ARTICLES Respect, Responsibility, Results Who's responsible for acting ethically? You are! It isn't the "company." It isn't just the business owner. It isn't only your manager. It is every person. Ultimately, each of us is responsible for our own actions, including being ethical. Considering the "3R's" will point you and your employees in the right ethical direction. 'Little Things' Mean A Lot

Business ethics involves a lot more than compliance with company policies, laws and financial regulations. These are major concerns with high visibility. It makes headlines when these are not obeyed. For those reasons, most organizations do not have problems with these issues. Instead, it's the “little things” that cause problems. Know What Cannot Be Compromised

Every business owner knows that there are some aspects of work that are discretionary and other aspects with procedures that must be followed exactly. Do your people know what these discretionary and non-discretionary areas are? How To Say 'NO' With Tact

You may be faced with a situation in which a partner or co-owner proposes an action that you believe is not ethical or outright wrong. Perhaps an employee comes to you with this situation. What do you do? What do you tell your employee? Business Scandals Make Headlines

It seems every day there are new stories about businesses and organizations being accused or investigated for ethical violations. These events around the world have heightened everyone's awareness of ethical business practices.

Doing

What's

Right

As a businessperson, you have the ultimate responsibility for your actions. You are the person who decides if you should act ethically. If you are a supervisor or manager, you need provide the means that allow your people to act ethically. This is how an organization supports the ethical actions of its employees. When In Doubt About Ethics Questions ASK!

There's a common phrase in business that encourages people to display initiative. It suggests that they determine ways to overcome the obstacles of bureaucracy, of "red tape," and to move a project ahead. This phrase is: It is easier to ask for forgiveness than to ask for permission. Check Yourself Out

Self-evaluation is a critical component of business ethics. People should spend as much time looking in the mirror as they do watching and judging the behavior of others. Periodically examine and reflect on your own behaviors to ensure you are staying on the ethical track. Everything Counts

Think about it. When is it okay to be unethical? The answer is NEVER! What are the parts of your job - and your human interactions - to which fairness, honesty, respect, and "doing right" don't apply? THERE ARE NONE! Ethics is not a sometimes thing. It's an all the time thing - and it's reflected in everything you do.

Business Ethics and Organizational Values Organizational values are extremely topical, as private and public organizations are not only evaluated according to their products and profits, but also according to the circumstances of the product – labour conditions, materials, risks, human rights and social

responsibilities. Faced with dramatic innovations in modern societies, ideas of right and wrong are changing. No simple moral intuition is able to solve new dilemmas. No fixed rules can handle organizational learning processes. Constantly values are clashing with no objective solution. Instead, values are defining the identity of organizations, and organizations are engaged in ongoing discussions of values, integrating new values as premises for their decision making.

Business Ethics and Organizational Values operates on three levels – society, organization and values. First, the dynamics of modern society are analyzed. Secondly, organizations are viewed an autopoietic systems constantly engaged in value debates with its stakeholders. Thirdly, values are placed in a business context presenting conflicting stakeholder values and showing how values make organizations sensitive to their environment. A practical method, Ethical Accounting, is outlined, making it possible to measure the degree of values fulfilment. Also the dark side of values is discussed under the headline of hypocrisy. Business students, managers in private and public organizations will face a wholly new vision of the interrelations between society, organizations and values.

Business Culture Of India The business culture of India is a reflection of the various norms and standards followed by its people. Indians have various cultural yardsticks, which extend to their business culture too. Thus, it is important that a person visiting the country has an idea of the business culture of India. Thus, it is important that a person visiting the country has some basic idea regarding the business ethics and customs followed here. Having a good grasp on Indian business culture will ensure that you succeed in maintaining a well-earned affinity with your business counterparts. If you are unsure of how to deal with an Indian when it comes

to business, we are here to simplify the task. Read on to know about the things that are to be strictly adhered to, while forming any kind of business associations with Indians.


The 'namaste' forms an important part of Indian etiquette and is generally used

while greeting and saying good-bye. This gesture is akin to the act of genuflection in some countries and is formed by pressing the palms of both hands together (fingers up). The folded hands are placed below the chin and accompanied with a bow. However, educated Indian men and women, who are acquainted with western customs, prefer shaking hands. Moreover, while greeting any individual use his or her title (if he has any). To mark respect, you may also suffix 'ji' to the name of a person.


A sound knowledge of India's cultural practices and business etiquettes is necessary

for any trade or business venture within the country. A proper understanding of culture and business etiquette would not only demonstrate a respect for India but will also create a feel good factor amongst the prospective clients.


In India guests are treated with utmost respect and courtesy. International travelers

can expect to enjoy the Indian hospitality. At the same time culturally and as a mark of politeness, Indians have difficulty in saying no, this could be a stumbling block in negotiations and in closing contracts.


The notion of time, time management, punctuality is still an anathema in India. It is

more to do with the mindset and ingrained in the Indian culture. It would not be surprising if meetings are postponed, re scheduled, cancelled or organized at a very short notice.


The proficiency over the English language for the average middle class is

commendable. Official communication-letter faxes, emails are generally received without any hitch, but it would be prudent to cross check if the transmission has reached the receiver.


Bureaucratic hurdles and a laidback approach to work in the government circles

could result in delays in processing, overload of paperwork and a general lack of confidence in the system. Therefore immense patience is very much necessary for any business transaction in India.


In India, Companies follow the hierarchical system and decision making is usually

from the top to bottom. It could at times be time consuming, International companies show

respect to this. The lack of infrastructure and inadequate supply chain management can also act as bottleneck for foreign investment.

Business ethics in India – is Tata’s crown slipping? Bimal Arora examines how Tata Motors has gone about developing a factory in West Bengal, which demonstrates that even India’s corporate responsibility champion is adopting too narrow an approach to ethical issues In countries where institutional and public champions promoting corporate responsibility are weak, companies tend to have a narrow approach to business ethics. Such a narrow approach to corporate responsibility can take several forms, but in essence boils down to a limited response to the concerns of communities where a company operates. Issues of general concern – such as the environment or labour issues – may be addressed, but not the specific matters affecting stakeholder communities.

A broad approach to corporate responsibility, conversely, means consideration of social responsibility in all business decisions and processes, and across business functions, within and without the organisation.

The narrow approach can stifle emergence of new insight, stimuli and sources of learning. It can become what strategy guru C K Prahlad calls a dominant logic or established belief. And so to India, where corporate responsibility has become an over-used catchphrase. Some close scrutiny, however, throws-up a somewhat unique situation. It is pretty hard to find companies that follow a broad approach to these issues. A good illustration of this is the recent crisis faced by Tata Motors, a major part of the Tata Group.

Honour

and

crisis

It is indeed ironic that on 2 December 2006, while Ratan Tata, chairman of the Tata Group, was being honoured for “Responsible Capitalism” by the Princess Royal in London, in an obscure Singur neighbourhood in the Indian state of West Bengal, thousands of farmers and labourers were being attacked by armed police. Newspaper reports said that at least 80 people, including women and children, were injured.

The Singur farmers were protesting against the forced acquisition of their lands by the government so that Tata’s latest dream project – a plant to build India’s “one lakh car” (100,000 rupees or just over $2000) – could become a reality.

Tata had decided to locate their small-car plant at Singur, about 40 kilometres north of Kolkata, and wanted to get hold of about 500 hectares of land. The plan is for the cars to be in full production by 2008.

For the Left Front chief minister of West Bengal, securing this project has been an issue of prestige, especially considering the competition from several other industry-friendly Indian states. Land grab

The problems started immediately after the government announced, in May 2006, its intention to acquire land under the Land Acquisition Act (1894), which allows the government to acquire any property for the greater public interest.

More than 5,000 families in 11 villages have been evicted. The news reports suggest only 1,600 farmers agreed to sell their land. Rebutting the government’s claim to the contrary, protestors maintain that as much as one-third of the land has been acquired forcibly.

Tata, however, has chosen to maintain a silence on the matter, leaving the government with a deadline to complete the acquisition and handover the land, and ignoring petitions by campaigning organisations.

Sudip Bandopadhyay, chairman of West Bengal’s standing committee on commerce and industry, was quoted in local newspapers, in October 2006, requesting that Tata consider a shift to an alternative site.

In response, Ravi Kant, managing director of Tata Motors, wrote that the “Singur site was chosen because of its locational and connectivity attributes … We have been responsible corporate citizens wherever we have gone.” Kant invited Bandopadhyay to Tata’s factory in Pune to see “concepts and practices of participating in the development of the community”. Tata’s benchmark

Tata has cultivated, and now enjoys, an outstanding image in India, and beyond, of being a very socially responsible group. Many companies in India perceive Tata’s corporate responsibility as a benchmark to emulate.

Besides all the usual business innovations and consistent growth, Tata’s name is associated with nation building, ethical practice and philanthropy.

With the number of awards and recognitions that different companies in the group receive every year, one may be tempted to believe that many broad approaches to corporate responsibility would be evident in the company’s actions.

However, as the Singur case demonstrates, Tata Motors seems to be caught up in a narrow approach, where social responsibility begins only after the land is handed over and the plant is commissioned.

So, this case raises a number of issues. When and where does the responsibility of companies begin and end? Does over-reliance on community development make a company responsible?

It is high time companies in India start reflecting upon their corporate practices and look beyond traditional community development and a simple focus on compliance.

Using Ethics to Build an Industry Ethics professors like me are fond of what we call "state of nature" thought-experiments. If you want to understand the value of a particular ethical standard (or the value of ethics in general) try to imagine what life would be like "in the state of nature" — that is, try to imagine what life would be like in a world without it. For example, if you want to understand the importance of telling the truth, imagine a world in which no one ever felt required to tell the truth — a world in which no one ever felt any compulsion to be truthful. Sometimes, of course, our imaginations fail. We're so used to taking certain ethical standards for granted that it makes it hard to imagine life without them. That's especially true with regard to business ethics: the standards are often complicated and the role they play in commerce often isn't obvious. In some cases, though, we don't need to rely on our imaginations, because we can look to less-developed economies where business ethics in the formal sense is still being developed.

Government in general has an obligation to protect consumers. But when your company or industry is perceived as ethical, you can make a much better argument in favour of government taking a hands-off approach and allowing industry a significant degree of selfregulation. Of course, industries don't always do a good job of making and enforcing their own rules; only time will tell how well the Indian pharmaceutical industry does in this regard. But in this story we see a nice example of the very genesis of a set of ethical rules

within an industry, and an illustration of the idea that business ethics isn't just about putting external constraints on businesses but also very often about the kinds of rules to which businesses have good reason to commit themselves.

Business Ethics in a Global World: India's Changing Ethics

The

20th

century

was

driven

by

governments in advanced nations, but the 21st will be dominated by free market economies in emerging nations. Jagdish Sheth, executive director of the India, China and America Institute and a professor of marketing at Emory University, made this point in his address to the Markkula Center for Applied Ethics’ fourth biennial business ethics conference on March 9. The topic of the conference was Business Ethics in a Global World, with a focus on China and India. Jagdish chats with conference participants Sheth offered his perspective on why China and India are poised to dominate the 21st century, how Indian business practices differ from Western ones and what the consequences are for business ethics on a global basis. The collapse of Communism is one of four forces that are driving the shift from the 20th century global business model to the 21st, Sheth said. He argued that the best capitalistic Sheth, center,

countries are former Communist countries, such as China: Communism imposed discipline on citizens, created greater gender equality and invested heavily in technical education. Another driving force is that affluent nations are aging, and their traditional industries will not generate as many jobs in the future. Even in the U.S., which is not aging as fast as other affluent countries, General Motors stands as an example of a company that is hiring only one new employee for every eight who retire. In addition, economic pragmatism means those in power have discovered economics’ crucial role in elections. Sheth cited the fall of George Bush Sr., who went from being wildly popular to losing his re-election bid when the economy faltered. Finally, Sheth cited the idea that “the world is flat”: the IT revolution has leveled the playing field between emerging and advanced economies. And so Sheth forecast that the world is moving from the 1800s, which were the European century, and the 1900s, which were the American century, into the Asian century. He noted that Asian countries are trading with each other, and said both China and India are poised to become innovative economies, not just locations for low-end jobs. This shift will redefine business practices. Sheth discussed several ways in which Indian business practices are unique – and may give rise to ethical behavior that may or may not be compatible with the prevailing Western viewpoint. Indian business culture, he said, 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, he said, does not always mesh well with the Indian value of loyalty to one’s group. Sheth noted that Western business has its own versions of these ideas: Procurement departments in U.S. companies are more likely to buy from the company’s customers, for example.

In terms of government rules and regulations, Sheth said that in India, the government acts as a gatekeeper rather than an enabler, with slow approval, a complex bureaucracy and corruption. Enforcement is also lax.There is a strong belief in corporate social responsibility in India, Sheth said. He also noted how Indian management style differs from that in the West: Decisions are made by the person at the top, not in a participatory way. And there is what he called a caste system by education. What are the implications of these differences – and of India’s rise – for business ethics? Sheth cited, among other ideas, a shift from a focus on shareholders to a focus on stakeholders. He predicted that ethics will be anchored to the idea of business as a profession, similar to the way the field of medicine is now. And he said there will be global standards of governance, but their application will be adapted to local conditions.

Institute of Business Ethics The Institute of Business Ethics or IBE is a non-profit professional organization based in London, which encourages high standards of business behaviour based on ethical values. They raise public awareness of the importance of doing business ethically, and collaborate with other UK and international organisations with interests and expertise in business ethics. Overview The IBE help organisations to strengthen their ethics culture to encourage high standards of business behaviour based on ethical values. IBE assists in the development, implementation and embedding of effective and relevant ethics and corporate responsibility

policies and programmes. Along with helping organisations provide guidance to staff and build relationships of trust with their principal stakeholders. Ultimately they facilitate the sharing of good practice in business ethics. History The Institute of Business Ethics was founded in 1986. Originally, it operated as a fund within the Christian Association of Business Executives (CABE), a registered charity established to promote the study and application of Christian moral principles in the conduct of business. In 2000, the Institute obtained separate charitable status; its charitable article being "to advance public education in business ethics and related subjects with particular reference to the study and application of ethical standards in the management and conduct of industry and business generally in the United Kingdom and elsewhere". Since its founding over 20 years ago, the IBE has published over 20 books on business ethics topics; conducted surveys on the use of codes of ethics within companies; developed training programmes in business ethics, from induction programmes to the board room; worked with academics and business schools to promote the study of business ethics within MBA and business studies courses; and offered advice and support to business ethics practitioners and their companies. Religious views on business ethics Many faiths have extensive literature and legal code on the accumulation and use of wealth; and many businesses rely on these ethical guidelines, both as a result of the religious beliefs of owners and managers, and as a way of ensuring that their actions meet the otherwise unwritten ethical standards of local communities. Business ethics in the world's major religions Christian business ethics

Christ drives the Usurers out of the Temple, a woodcut by Lucas Cranach the Elder in Passionary of Christ and Antichrist In Christianity, the basis of this theology is the Old Testament and the New Testament. For example, Jesus asked his disciples, "If you lend to those from whom you hope to receive, what credit is that to you?" Luke 6:34. Although this may be a general injunction to disinterested benevolence, it has also been read as a condemnation of interest or usury. Jesus referenced this especially when one lends to another believer, the idea being that, as a Christian with an eternal mindset, ultimately God is our rewarder and lending to a fellow believer should be left to God to reward over collecting nominal interest. The Protestant Ethic and the Spirit of Capitalism is a book written by Max Weber, a German economist and sociologist, in 1904 and 1905 that began as a series of essays. Weber felt that Protestants were more prone to individualism and had been active supporters of capitalism. However, there is also a Catholic tradition of business ethics, as seen in the social doctrine of the Church, the organization Legatus, and the encyclicals Rerum Novarum and Centesimus Annus. Researchers in the theory of religious economy have found insight in the 1985 paper Market Economy and Ethics by then Cardinal Joseph Ratzinger, which attempts to

demonstrate the relationship between trust-based economies and faith-based morality. Press articles have argued that Ratzinger's paper was the first to predict the 2008-2009 economic crisis. Jewish business ethics The basis of all Jewish law is the Torah; here there are more commandments concerning the kashrut (fitness) of one's money than the kashrut of food. These laws are developed and expanded upon in the Mishnah and the Talmud (particularly in Order Nezikin), and are then delineated in the major codes of Jewish law (e.g. Mishneh Torah, 12th c.; Shulkhan Arukh, particularly Choshen Mishpat, 16th c.). A wide array of topics on business ethics are discussed in the responsa literature. The literature also addresses the ethical dimension. Rabbi Yisrael Lipkin Salanter (19th century), founder of the Mussar movement in Eastern European, taught that just as one checks carefully to make sure their food is kosher, so too should one check to see if their money is earned in a kosher fashion (Chofetz Chaim, Sfat Tamim, chapter 5). The teachings go much further: there is a widely quoted tradition (see for e.g. Kitzur Shulkhan Arukh 62:1; originating in Talmud Shabbat 31a) that in one's judgement in the next world, the first question asked is: "were you honest in business?" Muslim business ethics For Islam, the basis of these laws is the Qur'an, and they are amplified in the Hadith. Muslim wealth ethics include avoidance of the exploitation of people in need through lending them money at interest (riba) and prohibitions against false advertising; under Islamic law, if a vendor sells an item by making false claims about it, the customer has the right to have the transaction cancelled. Buddhist business ethics There is also a history of applying Buddhist principles to business. E. F. Schumacher (best known for Small is Beautiful (1972), a Buddhist approach to economics) wrote Good Work

in 1979 where he explored business ethics particularly from the perspective of employees. Schumacher suggested a number of alternate approaches to conventional business, including the example of a company (the Scott-Bader Corporation) where the owner transferred the shares of the corporation into a trust, with instructions to the trustee that the company should be run to benefit the employees. Other Buddhist texts emphasise the role that work can take in gaining enlightenment - one of the elements of the Noble Eightfold Path set out by the Buddha is 'Right Livelihood' which prohibits occupations associated with violence (such as arms dealing), but all the elements (conduct, speech etc.) will apply to the daily conduct of any person in their work. Applied ethics Applied ethics is, in the words of Brenda Almond, co-founder of the Society for Applied Philosophy, "the philosophical examination, from a moral standpoint, of particular issues in private and public life that are matters of moral judgment". It is thus a term used to describe attempts to use philosophical methods to identify the morally correct course of action in various fields of human life. Bioethics, for example, is concerned with identifying the correct approach to matters such as euthanasia, or the allocation of scarce health resources, or the use of human embryos in research. Environmental ethics is concerned with questions such as the duties of humans towards landscapes or species. Business ethics concerns questions such as the limits on managers in the pursuit of profit, or the duty of 'whistleblowers' to the general public as opposed to their employers. As such, it is a study which is supposed to involve practitioners as much as professional philosophers. Applied ethics is distinguished from normative ethics, which concerns what people should believe to be right and wrong, and from meta-ethics, which concerns the nature of moral statements. Modern approach Much of applied ethics is concerned with just three theories:

1) utilitarianism, where the practical consequences of various policies are evaluated on the assumption that the right policy will be the one which results in the greatest happiness, 2) notions based on 'rules,' and 3) an assumption that there is an obligation to perform the 'right' action, regardless of actual consequences, epitomized by Kant's notion of the Categorical Imperative, and virtue ethics, derived from Aristotle's and Confucius's notions, which asserts that the right action will be that chosen by a suitably 'virtuous' agent. One modern approach which attempts to overcome the seemingly impossible divide between deontology and utilitarianism is case-based reasoning, also known as casuistry. Casuistry does not begin with theory, rather it starts with the immediate facts of a real and concrete case. While casuistry makes use of ethical theory, it does not view ethical theory as the most important feature of moral reasoning. Casuists, like Albert Jonsen and Stephen Toulmin (The Abuse of Casuistry 1988), challenge the traditional paradigm of applied ethics. Instead of starting from theory and applying theory to a particular case, casuists start with the particular case itself and then ask what morally significant features (including both theory and practical considerations) ought to be considered for that particular case. In their observations of medical ethics committees, Jonsen and Toulmin note that a consensus on particularly problematic moral cases often emerges when participants focus on the facts of the case, rather than on ideology or theory. Thus, a Rabbi, a Catholic priest, and an agnostic might agree that, in this particular case, the best approach is to withhold extraordinary medical care, while disagreeing on the reasons that support their individual positions. By focusing on cases and not on theory, those engaged in moral debate increase the possibility of agreement.

Corporate social responsibility Corporate social responsibility (CSR), also known as corporate responsibility, corporate citizenship, responsible business, sustainable responsible business (SRB), or

corporate social performance, is a form of corporate self-regulation integrated into a business model. Ideally, CSR policy would function as a built-in, self-regulating mechanism whereby business would monitor and ensure its adherence to law, ethical standards, and international norms. Business would embrace responsibility for the impact of their activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere. Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decisionmaking, and the honoring of a triple bottom line: People, Planet, Profit. The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development Business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. In the increasingly conscience-focused marketplaces of the 21st century, the demand for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia,

descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia. For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e.g. ethics codes, social responsibility charters). In some cases, corporations have re-branded their core values in the light of business ethical considerations (e.g. BP's "beyond petroleum" environmental tilt). The term CSR came in to common use in the early 1970s, after many multinational corporations formed, although it was seldom abbreviated. The term stakeholder, meaning those impacted by an organization's activities, was used to describe corporate owners beyond shareholders as a result of an influential book by R Freeman in 1984. Whilst there is no recognized standard for CSR, public sector organizations (the United Nations for example) adhere to the Triple Bottom Line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities. Approaches Some commentators have identified a difference between the Continental European and the Anglo-Saxon approaches to CSR. And even within Europe the discussion about CSR is very heterogeneous. An approach for CSR that is becoming more widely accepted is community-based development projects, such as the Shell Foundation's involvement in the Flower Valley, South Africa. Here they have set up an Early Learning Centre to help educate the community's children, as well as develop new skills for the adults. Marks and Spencer is also active in this community through the building of a trade network with the community guaranteeing regular fair trade purchases. Often alternative approaches to this is the establishment of education facilities for adults, as well as HIV/AIDS education programmes. The majority of these CSR projects are established in Africa. A more

common approach of CSR is through the giving of aid to local organizations and impoverished communities in developing countries. Some organizations do not like this approach as it does not help build on the skills of the local people, whereas communitybased development generally leads to more sustainable development. Procurement of Fair Trade tea and coffee has been adopted by various businesses: KPMG CSR manager commented, "Fairtrade fits very strongly into our commitment to our communities." Social accounting, auditing, and reporting Taking responsibility for its impact on society means in the first instance that a company accounts for its actions. Social accounting, a concept describing the communication of social and environmental effects of a company's economic actions to particular interest groups within society and to society at large, is thus an important element of CSR A number of reporting guidelines or standards have been developed to serve as frameworks for social accounting, auditing and reporting:


AccountAbility's AA1000 standard, based on John Elkington's triple bottom line (3BL) reporting Accounting for Sustainability's Connected Reporting Framework. Global Reporting Initiative's Sustainability Reporting Guidelines GoodCorporation's Standard developed in association with the Institute of Business Ethics Green Globe Certification / Standard Social Accountability International's SA8000 standard The ISO 14000 environmental management standard The United Nations Global Compact promotes companies reporting in the format of a Communication on Progress (COP). A COP report describes the company's implementation of the Compact's ten universal principles.

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The United Nations Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting (ISAR) provides voluntary technical

guidance on eco-efficiency indicators, corporate responsibility reporting, and corporate governance disclosure.


Verite's Monitoring Guidelines

The FTSE Group publishes the FTSE4Good Index, an evaluation of CSR performance of companies. In some nations legal requirements for social accounting, auditing and reporting exist (e.g. in the French bilan social), though agreement on meaningful measurements of social and environmental performance is difficult. Many companies now produce externally audited annual reports that cover Sustainable Development and CSR issues ("Triple Bottom Line Reports"), but the reports vary widely in format, style, and evaluation methodology (even within the same industry). Critics dismiss these reports as lip service, citing examples such as Enron's yearly "Corporate Responsibility Annual Report" and tobacco corporations' social reports. Potential business benefits The scale and nature of the benefits of CSR for an organization can vary depending on the nature of the enterprise, and are difficult to quantify, though there is a large body of literature exhorting business to adopt measures beyond financial ones (e.g., Deming's Fourteen Points, balanced scorecards). Orlitzky, Schmidt, and Rynes found a correlation between social/environmental performance and financial performance. However, businesses may not be looking at short-run financial returns when developing their CSR strategy. The definition of CSR used within an organization can vary from the strict "stakeholder impacts" definition used by many CSR advocates and will often include charitable efforts and volunteering. CSR may be based within the human resources, business development or public relations departments of an organisation, or may be given a separate unit reporting to the CEO or in some cases directly to the board. Some companies may implement CSRtype values without a clearly defined team or programme.

The business case for CSR within a company will likely rest on one or more of these arguments: Human resources A CSR programme can be an aid to recruitment and retention, particularly within the competitive graduate student market. Potential recruits often ask about a firm's CSR policy during an interview, and having a comprehensive policy can give an advantage. CSR can also help improve the perception of a company among its staff, particularly when staff can become involved through payroll giving, fundraising activities or community volunteering. Risk management Managing risk is a central part of many corporate strategies. Reputations that take decades to build up can be ruined in hours through incidents such as corruption scandals or environmental accidents. These can also draw unwanted attention from regulators, courts, governments and media. Building a genuine culture of 'doing the right thing' within a corporation can offset these risks. Brand differentiation In crowded marketplaces, companies strive for a unique selling proposition that can separate them from the competition in the minds of consumers. CSR can play a role in building customer loyalty based on distinctive ethical values. Several major brands, such as The Co-operative Group, The Body Shop and American Apparel are built on ethical values. Business service organizations can benefit too from building a reputation for integrity and best practice. License to operate Corporations are keen to avoid interference in their business through taxation or regulations. By taking substantive voluntary steps, they can persuade governments and the wider public that they are taking issues such as health and safety, diversity, or the

environment seriously as good corporate citizens with respect to labour standards and impacts on the environment. Criticisms and concerns Critics of CSR as well as proponents debate a number of concerns related to it. These include CSR's relationship to the fundamental purpose and nature of business and questionable motives for engaging in CSR, including concerns about insincerity and hypocrisy.

CSR and the nature of business Milton Friedman and others have argued that a corporation's purpose is to maximize returns to its shareholders, and that since (in their view), only people can have social responsibilities, corporations are only responsible to their shareholders and not to society as a whole. Although they accept that corporations should obey the laws of the countries within which they work, they assert that corporations have no other obligation to society. Some people perceive CSR as incongruent with the very nature and purpose of business, and indeed a hindrance to free trade. Those who assert that CSR is incongruent with capitalism and are in favor of neoliberalism argue that improvements in health, longevity and/or infant mortality have been created by economic growth attributed to free enterprise.
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Critics of this argument perceive neoliberalism as opposed to the well-being of society and a hindrance to human freedom. They claim that the type of capitalism practiced in many developing countries is a form of economic and cultural imperialism, noting that these countries usually have fewer labor protections, and thus their citizens are at a higher risk of exploitation by multinational corporations. A wide variety of individuals and organizations operate in between these poles. For example, the REALeadership Alliance asserts that the business of leadership (be it

corporate or otherwise) is to change the world for the better. Many religious and cultural traditions hold that the economy exists to serve human beings, so all economic entities have an obligation to society (e.g., cf. Economic Justice for All). Moreover, as discussed above, many CSR proponents point out that CSR can significantly improve long-term corporate profitability because it reduces risks and inefficiencies while offering a host of potential benefits such as enhanced brand reputation and employee engagement. CSR and questionable motives Some critics believe that CSR programs are undertaken by companies such as British American Tobacco (BAT), the petroleum giant BP (well-known for its high-profile advertising campaigns on environmental aspects of its operations), and McDonald's (see below) to distract the public from ethical questions posed by their core operations. They argue that some corporations start CSR programs for the commercial benefit they enjoy through raising their reputation with the public or with government. They suggest that corporations which exist solely to maximize profits are unable to advance the interests of society as a whole. Another concern is when companies claim to promote CSR and be committed to Sustainable Development whilst simultaneously engaging in harmful business practices. For example, since the 1970s, the McDonald's Corporation's association with Ronald McDonald House has been viewed as CSR and relationship marketing. More recently, as CSR has become mainstream, the company has beefed up its CSR programs related to its labor, environmental and other practices. All the same, in McDonald's Restaurants v Morris & Steel, Lord Justices Pill, May and Keane ruled that it was fair comment to say that McDonald's employees worldwide 'do badly in terms of pay and conditions' and true that 'if one eats enough McDonald's food, one's diet may well become high in fat etc., with the very real risk of heart disease.' Shell has a much-publicised CSR policy and was a pioneer in triple bottom line reporting, but this did not prevent the 2004 scandal concerning its misreporting of oil reserves, which seriously damaged its reputation and led to charges of hypocrisy. Since then, the Shell

Foundation has become involved in many projects across the world, including a partnership with Marks and Spencer (UK) in three flower and fruit growing communities across Africa. Critics concerned with corporate hypocrisy and insincerity generally suggest that better governmental and international regulation and enforcement, rather than voluntary measures, are necessary to ensure that companies behave in a socially responsible manner. Others, such as Patricia Werhane argue that CSR should be looked more upon as a Corporate Moral Responsibility, and limit the reach of CSR by focusing more on direct impacts of the organization as viewed through a systems perspective to identify stakeholders. Motivations Corporations are motivated to adopt CSR practices by several different factors. Ethical consumerism The rise in popularity of ethical consumerism over the last two decades can be linked to the rise of CSR. As global population increases, so does the pressure on limited natural resources required to meet rising consumer demand (Grace and Cohen 2005, 147). Industrialization in many developing countries is booming as a result of technology and globalization. Consumers are becoming more aware of the environmental and social implications of their day-to-day consumer decisions and are beginning to make purchasing decisions related to their environmental and ethical concerns. However, this practice is far from consistent or universal. Globalization and market forces As corporations pursue growth through globalization, they have encountered new challenges that impose limits to their growth and potential profits. Government regulations, tariffs, environmental restrictions and varying standards of what constitutes labour exploitation are problems that can cost organizations millions of dollars. Some view ethical issues as simply a costly hindrance. Some companies use CSR methodologies as a strategic

tactic to gain public support for their presence in global markets, helping them sustain a competitive advantage by using their social contributions to provide a subconscious level of advertising. (Fry, Keim, Meiners 1986, 105) Global competition places particular pressure on multinational corporations to examine not only their own labour practices, but those of their entire supply chain, from a CSR perspective. Social awareness and education The role among corporate stakeholders to work collectively to pressure corporations is changing. Shareholders and investors themselves, through socially responsible investing are exerting pressure on corporations to behave responsibly. Non-governmental organizations are also taking an increasing role, leveraging the power of the media and the Internet to increase their scrutiny and collective activism around corporate behavior. Through education and dialogue, the development of community in holding businesses responsible for their actions is growing (Roux 2007). Ethics training The rise of ethics training inside corporations, some of it required by government regulation, is another driver credited with changing the behaviour and culture of corporations. The aim of such training is to help employees make ethical decisions when the answers are unclear. Tullberg believes that humans are built with the capacity to cheat and manipulate, a view taken from (Trivers 1971, 1985), hence the need for learning normative values and rules in human behaviour (Tullberg 1996). The most direct benefit is reducing the likelihood of "dirty hands" (Grace and Cohen 2005), fines and damaged reputations for breaching laws or moral norms. Organizations also see secondary benefit in increasing employee loyalty and pride in the organization. Caterpillar and Best Buy are examples of organizations that have taken such steps (Thilmany 2007). Increasingly, companies are becoming interested in processes that can add visibility to their CSR policies and activities. One method that is gaining increasing popularity is the use of well-grounded training programs, where CSR is a major issue, and business simulations can play a part in this.

One relevant documentary is The Corporation, the history of organizations and their growth in power is discussed. Corporate social responsibility, what a company does to in trying to benefit society, versus corporate moral responsibility (CMR), what a company should morally do, are both important topics to consider when looking at ethics in CSR. For example, Ray Anderson, in The Corporation, takes a CMR perspective in order to do what is moral and he begins to shift his company's focus towards the biosphere by utilizing carpets in sections so that they will sustain for longer periods. This is Anderson thinking in terms of Garret Hardin's "The Tragedy of the Commons," where if people do not pay attention to the private ways in which we use public resources, people will eventually lose those public resources. Laws and regulation Another driver of CSR is the role of independent mediators, particularly the government, in ensuring that corporations are prevented from harming the broader social good, including people and the environment. CSR critics such as Robert Reich argue that governments should set the agenda for social responsibility by the way of laws and regulation that will allow a business to conduct themselves responsibly. The issues surrounding government regulation pose several problems. Regulation in itself is unable to cover every aspect in detail of a corporation's operations. This leads to burdensome legal processes bogged down in interpretations of the law and debatable grey areas (Sacconi 2004). General Electric is an example of a corporation that has failed to clean up the Hudson River after contaminating it with organic pollutants. The company continues to argue via the legal process on assignment of liability, while the cleanup remains stagnant. (Sullivan & Schiafo 2005). The second issue is the financial burden that regulation can place on a nation's economy. This view shared by Bulkeley, who cites the Australian federal government's actions to avoid compliance with the Kyoto Protocol in 1997, on the concerns of economic loss and national interest. The Australian government took the position that signing the Kyoto Pact would have caused more significant economic losses for Australia than for any other OECD nation (Bulkeley 2001, pg 436).On the change of government following the election in November 2007, Prime Minister Kevin

Rudd signed the ratification immediately after assuming office on 3 December 2007, just before the meeting of the UN Framework Convention on Climate Change. Critics of CSR also point out that organisations pay taxes to government to ensure that society and the environment are not adversely affected by business activities. Denmark made a law on CSR. 16 December 2008, the Danish parliament adopted a bill making it mandatory for the largest Danish companies, investors and state owned companies to include information on corporate social responsibility (CSR) in their annual financial reports. The reporting requirements became effective on 1 January 2009. The information shall include:


information on the companies’ policies for CSR or socially responsible investments (SRI) information on how such policies are implemented in practice and information on what results have been obtained so far and managements expectations for the future with regard to CSR/SRI.

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CSR/SRI is still voluntary in Denmark, but if a company has no policy on this they must state information to that effect explicitly in their annual financial report.

Crises and their consequences Often it takes a crisis to precipitate attention to CSR. One of the most active stands against environmental management is the CERES Principles that resulted after the Exxon Valdez incident in Alaska in 1989 (Grace and Cohen 2006). Other examples include the lead poisoning paint used by toy giant Mattel, which required a recall of millions of toys globally and caused the company to initiate new risk management and quality control processes. In another example, Magellan Metals in the West Australian town of Esperance was responsible for lead contamination killing thousands of birds in the area. The company

had to cease business immediately and work with independent regulatorys bodies to execute a cleanup.

Stakeholder priorities Increasingly, corporations are motivated to become more socially responsible because their most important stakeholders expect them to understand and address the social and community issues that are relevant to them. Understanding what causes are important to employees is usually the first priority because of the many interrelated business benefits that can be derived from increased employee engagement (i.e. more loyalty, improved recruitment, increased retention, higher productivity, and so on). Key external stakeholders include customers, consumers, investors (particularly institutional investors, regulators, academics, and the media. Business ethics is the behavior that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer. Many businesses have gained a bad reputation just by being in business. To some people, businesses are interested in making money, and that is the bottom line. It could be called capitalism in its purest form. Making money is not wrong in itself. It is the manner in which some businesses conduct themselves that brings up the question of ethical behavior While most people have taken the time to define their personal morals, the concept of business ethics has only recently begun to come under intense scrutiny. After Enron was at the center of a scandal involving its irregular accounting practices in 2001, it seemed like a high profile business executive was in the news almost every day being accused of greed, deceit, and corruption. In response to public outrage, the business community at large began to focus more on encouraging ethical behavior. Now, it is common for both large

and small businesses to have a formalized listing of ethical guidelines for employees to follow. Naturally, any successful corporation must remain focused on earning a profit. With no profit, the company loses value and the employees eventually lose their jobs. However, business ethics do not allow a company to do whatever is necessary to make money. Corporate social responsibility dictates that businesses must provide safe working conditions and use manufacturing practices that do not unnecessarily harm the environment. Business ethics also require that companies provide accurate financial data to stockholders and avoid advertising their products and services to consumers under false pretenses. The study of business ethics is sometimes referred to as applied ethics because it attempts to translate utilitarianism, social contract theory, deontology, and other theoretical principles into acceptable rules for conduct in various real world situations. At the college level, many schools now have programs to encourage students to develop an awareness of business ethics. These classes typically use case studies as the basis for discussions on what constitutes ethical behavior. Lower level classes are sometimes required for an undergraduate business degree, while students working towards an MBA may be able to specialize in leadership and business ethics. While many people do feel classes discussing ethics are beneficial, others say it’s hard to predict how students will behave once they are out of school and into the working world

Good business ethics should be a part of every business. There are many factors to consider. When a company does business with another that is considered unethical, does this make the first company unethical by association? Some people would say yes, the first business has a responsibility and it is now a link in the chain of unethical businesses.

Many global businesses, including most of the major brands that the public use, can be seen not to think too highly of good business ethics. Many major brands have been fined millions for breaking ethical business laws. Money is the major deciding factor. If a company does not adhere to business ethics and breaks the laws, they usually end up being fined. Many companies have broken anti-trust, ethical and environmental laws and received fines worth millions. The problem is that the amount of money these companies are making outweighs the fines applied. Billion dollar profits blind the companies to their lack of business ethics, and the dollar sign wins. A business may be a multi-million seller, but does it use good business ethics and do people care? There are popular soft drinks and fast food restaurants that have been fined time and time again for unethical behavior. Business ethics should eliminate exploitation, from the sweat shop children who are making sneakers to the coffee serving staff who are being ripped off in wages. Business ethics can be applied to everything from the trees cut down to make the paper that a business sells to the ramifications of importing coffee from certain countries.

Why are ethics important? Recent events in corporate America have demonstrated the destructive effects that occur when the leadership of a company does not behave ethically. One might wonder why highly educated, successful, and business savvy corporate professionals at Enron, Tyco, WorldCom, and Adelphia got themselves into such a big mess. The answer lies in a profound lack of ethics. Running a business ethically is good for business. However, "business ethics" if properly interpreted means the standards of conduct of individual business people, not necessarily the standards of business as a whole.

Business leader are expected to run their business as profitably as they can. A successful and profitable business in itself can be a tremendous contributor toward the common good of society. But if business leaders or department managers spend their time worrying about “doing good” for society, they will divert attention from their real objective which is profitability and running an efficient and effective organization.

Applying ethics in business makes good sense. A business that behaves ethically induces other business associates to behave ethically as well. If a company (or a manager) exercises particular care in meeting all responsibilities to employees, customers and suppliers it usually is awarded with a high degree of loyalty, honesty, quality and productivity. For examples, employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates. A supplier who refuses to exploit its advantage during a seller's market retains the loyalty and continued business of its customers when conditions change to those of a buyer's market. A company that refuses to discriminate against older or handicapped employees often discovers that they are fiercely loyal, hard working and productive.

It is my firm belief that a “good man or woman” who steadfastly tries to be ethical (i.e. to do the “right thing", to make appropriate ethical decisions, etc.) somehow always overtakes his immoral or amoral counterpart in the long run. A plausible explanation of this view on ethical behavior is that when individuals operate with a sense of confidence regarding the ethical soundness of their position, their mind and energies are freed for maximum productivity and creativity. On the other hand, when practicing unethical behavior, the individual finds it necessary to engage in exhausting subterfuge, resulting in diminished effectiveness and reduced success.

The best way to promote ethical behavior is by setting a good personal example. Teaching an employee ethics is not always effective. One can explain and define ethics to an adult, but understanding ethics does not necessarily result in behaving ethically. Personal values and ethical behavior is taught at an early age by parents and educators.

I am quite certain that well-educated business professional like Kenneth Lay, Martha Stewart, Dennis Kozlowski or the former CEO of General Motors who received a multimillion dollar salary and bonus package in 1987 at a time when the company was closing plants and was laying off thousands of people know and understand ethics. They either were too far removed from the “nitty gritty” that ethical standards did not resonate with them or they simply did not care.

People at the top of an organization are expected to share the burden of cost reductions and belt-tightening during difficult times. Senior executives of companies who freeze their salaries or take a personal pay cut in a problematic year rather than lay off employees to cut costs deserve our utmost respect. However, this does not mean that a company should lose flexibility in adjusting its cost structure during bad economical times, replace old factories by new ones, or change technology in ways that would require fewer people to do the work. Decisions like that should be made with empathy and support (financially) to those who Conclusion Ethics are important not only in business but in all aspects of life because it is an essential part of the foundation on which of a civilized society is build. A business or society that lacks ethical principles is bound to fail sooner or later. will be affected by it.

Ethics is important not only in business but in all aspects of life because it is the vital part and the foundation on which the society is build. A business/society that lacks ethical principles is bound to fail sooner or later. According to International Ethical Business Registry, "there has been a dramatic increase in the ethical expectation of businesses and professionals over the past 10 years. Increasingly, customers, clients and employees are

deliberately seeking out those who define the basic ground, rules of their operations on a day today...." Ethics refers to a code of conduct that guides an individual in dealing with others. Business Ethics is a form of the art of applied ethics that examines ethical principles and moral or ethical problems that can arise in business environment. It deals with issues regarding the moral and ethical rights, duties and corporate governance between a company and its shareholders, employees, customers, media, government, suppliers and dealers. Henry Ford said, "Business that makes noting but money is a poor kind of business". Ethics is related to all disciplines of management like accounting information, human resource management, sales and marketing, production, intellectual property knowledge and skill, international business and economic system. As said by Joe Paterno once that success without honor is an unseasoned dish. It will satisfy your hunger, but won't taste good. In business world the organization's culture sets standards for determining the difference between good or bad, right or wrong, fair or unfair. "It is perfectly possible to make a decent living without compromising the integrity of the company or the individual, wrote business executive R. Holland, "Quite apart from the issues of rightness and wrongness, the fact is that ethical behavior in business serves the individual and the enterprise much better in long run.", he added. Some management guru stressed that ethical companies have an advantage over their competitors. Said Cohen and Greenfield, "Consumers are used to buying products despite how they feel about the company that sells them. But a valued company earned a kind of customer loyalty most corporations only dream of because it appeals to its customers more than a product". The ethical issues in business have become more complicated because of the global and diversified nature of many large corporation and because of the complexity of economic, social, global, natural, political, legal and government regulations and environment, hence the company must decide whether to adhere to constant ethical principles or to adjust to domestic standards and culture.

Managers have to remember that leading by example is the first step in fostering a culture of ethical behavior in the companies as rightly said by Robert Noyce, "If ethics are poor at the top, that behavior is copied down through the organization", however the other methods can be creating a common interest by favorable corporate culture, setting high standards, norms, framing attitudes for acceptable behavior, making written code of ethics implicable at all levels from top to bottom, deciding the policies for recruiting, selecting, training, induction, promotion, monetary / non-monetary motivation, remuneration and retention of employees. "Price is what you pay. Value is what you get" - Warren Buffet Thus, a manager should treat his employees, customers, shareholders, government, media and society in an honest and fair way by knowing the difference between right or wrong and choosing what is right, this is the foundation of ethical decision making. REMEMBER: GOOD ETHICS IS GOOD BUSINESS. "Non-corporation with the evil is as much a duty as is co-operation with good" - Mahatma Gandhi.

The importance of business ethics Running a business requires adequate consideration to a number of issues outside the traditional scope of making money, of which ethics is most certainly one. As our business grows and becomes more significant, we impact on the lives and circumstances of people in ways we can only imagine - through bringing jobs, creating wealth and inspiring others to grow their businesses. An important part of engaging in this process is understanding your business ethics, which if not up to scratch can leave you with a bad reputation and can even ruin your business, not to mention alienating employees, suppliers and the local community. Ethics is something of a subjective topic, but it is nevertheless of immense importance across all areas of business. From the way in which sales and marketing is handled through to product development and customer service, and even to some extent finance, ethics has a significant role to play in ensuring business success and ultimately living up to the

corporate social responsibility. Thus adopting a ethics-specific approach to doing business is critical towards ensuring a legitimate business model with long term potential. Business ethics is especially important in dealing with customers. Maintaining integrity in the customer facing side of your business is crucial to building client relationships, to assisting the overall branding efforts. Likewise, it's an important step in minimising returns and protecting business goodwill, which will have a tangible effect on the success or otherwise of your business.

Ethics wise, it's also important to consider how you deal with customer issues and customer service. While some businesses are prepared to sacrifice customer service for pound signs, there is not only a sensible business reason for providing adequate support but also strong ethics and moral reasons for providing help and assistance to your customer base. On the administrative and strategic side of your business, it's also important to adopt an ethical approach which takes account of your various responsibilities as a business - to shareholders, employees and the community at large. Embracing these concepts of ethics as part of the way you do business is vital to ensuring your run an honest, successful business with the potential to grow and develop over time, and is one way of ensuring that you develop relationships across all aspects of your business that are conducive to success and profitability over the long term.

Ethics is no doubt an important business subject for any entrepreneur to study, but it also has a wider application throughout organisations. One man's concept of what is ethical and for the best may be completely different from another man's concept, and so it's important to establish a collective set of ethics that represent the entire organisation rather than just adopting a piecemeal approach. This can be installed through training, through creating business policies and even through careful selection at the HR stage, although it's important that there are also enforcement mechanisms within the business concerned, and that ethics remain a forefront consideration in day-to-day trade to ensure a unified, morally sound approach to doing business.

Bibliography Newspaper: The Economic Times Web Sites: www.google.com www.management paradise.com www.yahoo.com www.wikipedia.org

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