Business Ethics Social Responsibility Environmental Sustainability SALMAN PIRACHA

Business Ethics/ Social Responsibility/ Environmental Sustainability SALMAN PIRACHA 1

SEQUENCE What are business ethics? What are some of the approaches of dealing with ethics? Utilitarianism Universalism Rights Why should companies be concerned with ethic? Which theories should be used? Competitive Advantage Code of Business Principle 2

Some Surveys International Survey of more than 300 companies worldwide – top ethical issues Employees conflict of interest 91% Wall Street J survey of 1400 working women Managers lying, expense-account abuses, office nepotism, taking credit for other work 3

Business Ethics means conducting all aspects of business and dealing with all stakeholders in an ethical manner… 4

Common examples Individual values and the company Receiving or offering kickbacks Stealing from company Padding expense accounts to obtain reimbursements for questionable expenses Divulging confidential information or trade secrets Using company property and materials for personal use Conflict of interest 5

Language of Ethical Lapse Everybody else does it Not a valid choice – specially if law is being broken If we don’t do it, someone else will We‘ll wait until the law enforcers tell us it’s wrong What’s legal may not be ethical It does not really hurt anyone The system is unfair 6

Individual determinants Religion Belief that the divine reveals the nature of right and wrong in various areas of life Ex: Reciprocity, promise keeping, fairness, charity and responsibility to others – all found in Confucianism, Hinduism, Buddhism, Judaism, Christianity and Islam 7

Other determinants Moral philosophy Lawrence Kohlberg's stages of development Kantian Ethics on morality Cultural differences Ethical philosophies 8

Lawrence Kohlberg’s Six stages Pre-Conventional 1. Obedience and punishment orientation (How can I avoid punishment? ) 2. Self Interest Orientation Conventional 3. Interpersonal accord and conformity (social norms) 4. Authority and Social order maintaining Orientation (law and order morality) Post Conventional 5. Social contract Orientation 6. Universal ethical principles 9

Common approaches to Business ethics Utilitarianism – basic premise is that an action is judged as right or wrong depending on the consequences of the action Universalism – the means justify the ends of an action, not consequences Rights – based on entitlements and unquestionable claims 10

Problems with Utilitarianism Not always possible to calculate utility or to analyze massive amount of information Ignores distribution of good – is it uniformly distributed or favours specific group? No common definition of what is good? Assumes that all can be measured in a common numerical scale Action that produces the greatest balance of value for greatest number of people. 11

Kantian Ethics Universality – it counters the natural temptation to make exceptions for ourselves or to apply double standards Also provides hypothetical answers underlying the common question “What if everyone did that”? Provides a strong foundation for rights 12

Weaknesses Does not lend itself to precise method for decision making Difficult to think of all humanity each time a decision has to be made Places greater emphasis on welfare of every person, but does not really draw a line Hard to receive conflicts when criteria has to treat everyone equally – decisions typically involve conflicts of interests 13

Why Ethics? Laws are insufficient and do not cover all aspects or gray areas of a problem Free – market and regulated – market mechanism do not effectively inform owners and managers about how to respond to complex crises 14

Social Responsibility Actions an organization takes beyond what is legally required to protect or enhance the well-being of living things 15

Globalization, Business Ethics & Competitive Advantage Globalization has brought about greater involvement with ethical considerations and most importantly achieving competitive advantage through business ethics. Globalization and business ethics are linked as they affect a company’s ability to commit to its shareholders, in particular to external investors, and preserve the trust needed for further investment and growth. 16

“Ethics of Scandal” Versus “Ethics of Strategy” It is increasingly important for companies to deal with ethics as a corporate strategy that, if uniquely implemented, could achieve competitive advantage for the company rather than waiting to react to possible ethical issues of importance to the targeted stakeholders. It is the necessity of being ethically proactive company rather than being ethically reactive company. 17

Business Ethics as Competitive Advantage As the speed of comparable tangible assets acquisition accelerates and the pace of imitation quickens, firms that want to sustain distinctive global competitive advantages need to protect, exploit and enhance their unique intangible assets, particularly INTEGRITY (building firms of integrity is the hidden logic of business ethics). 18

Business Ethics as Competitive Advantage (Cont. ) “both inside and outside of the organization behavior that is trusting, trustworthy, and cooperative, not opportunistic, will give the firm a competitive advantage. ” Sustainable global competitive advantage occurs when a company implements a value-creating strategy which other companies are unable to imitate. For example, a company with superior business leadership skills in enhancing integrity capacity increases its reputation capital with multiple stakeholders and positions itself for competitive advantage. The purpose of ethics is to enhance our lives and our relationships 19

The Code – Our impact on all stakeholders, internally and externally Impact on Society Responsible Management Practices Competition Consumers Business Partners Innovation Public Activities Community Shareholders Standard of Conduct Mutually Beneficial Relationships Employees Environment Obeying The Law Business Integrity Foundation of Trust Conflict of Interest 20

Standard Of Conduct • Be open in your communication • Respect others, guarding against oppressive behaviour • Treat people fairly and equally; no favouritism • Manage Organisation’s and your own reputation 21 Foundation of Trust

Obeying the Law – We must obey the laws of the country • Obeying the country’s law is the minimum standard you are expected to follow • Manage your personal conduct • Adhere to proper corporate conduct • Pleading ignorance is no defense 22 Foundation of Trust

Business integrity – We must never give or receive bribes or improper advantages • Improper advantages include things like gifts over a certain amount, excessive entertainment, consulting fees • Make sure there is proper accounting, including accurate financials, data integrity 23 Foundation of Trust

Conflict of interest – Our personal activities should not conflict with our responsibilities to the company • Ensure there is no conflict of interest in recruiting family members or people you have personal connections with • Ensure there is no conflict of interest when providing business opportunities to people you are connected with • You have a duty to protect proprietary information • Do not abuse your Organisation position for personal gain 24 Foundation of Trust

Community involvement – Organisation must strive to be a good corporate citizen and work in partnership with the communities in which we operate • Have strong tradition of doing well by doing good • Have a robust CSR programme of campaigns, partnerships and ongoing activities • Conduct brand imprints Mutually Beneficial Relationship 25

Business partners – Expect business partners to behave in a way that is consistent with the business principles! • Ask business partners to obey the law and respect our Code & encourage them to sign up to it as well • We conduct due diligence on our business partners • We source alternative partners Mutually Beneficial Relationship 26

Business partners – The basic requirements all should follow • Obey the law • Do not take, give or encourage bribery • Respect employees’ dignity • Recognize the right to freedom of association • Ensure safe and healthy working conditions • Ensure product safety • Care for the environment Mutually Beneficial Relationship 27

Employees – Respect the basic rights of employees & the dignity of colleagues Practice respectful management methods • Do not discriminate-gender, sex, race, religion, age • Do not harass or bully – and do not accept it (physical or psychological) • You have a right to air your views Mutually Beneficial Relationship 28

Employees – Beliefs) • Communicate and consult with employees • Encourage and appreciate diversity, mutual trust and respect • Develop individuals’ skills and capabilities Mutually Beneficial Relationship 29

Shareholders – Provide all shareholders with reliable information on activities and financial performance • Practice international standards of corporate governance • Ensure timely and accurate disclosure of material information • Non compliance can lead to wide ranging consequences Responsible Management Practices 30

Innovation Our scientific innovations need to respect the concerns of our consumers and of society. We must ensure the health of consumers We must ensure the highest standards of product safety Responsible Management Practices 31

Competition – Organisation should believe in vigorous, yet fair competition • We manage fairly our pricing, promotion and sale of products (no illicit agreements that distorts market) • We manage fairly our relationships with suppliers and competitors • We follow global guidelines to ensure compliance with competition/anti-trust laws Responsible Management Practices 32

Consumers – committed to offering products that offer good quality and value • Ensure that products are safe and clearly and accurately advertised and labeled • Products are designed to increase the quality of life • We aim to foster complete trust 33