ACC 704 BUSINESS ETHICS GOVERNANCE TOPIC 1

ACC 704: BUSINESS ETHICS & GOVERNANCE TOPIC 1: ETHICS & CORPORATE SOCIAL RESPONSIBILITY (CSR) T 1 2017 1 1

Evaluate the relationship between ethics and CSR Business Ethics Public’s interest in business ethics increased during the last four decades Public’s interest in business ethics spurred by the media. Inventory of Ethical Issues in Business Employee – Employer Relations Employer – Employee Relations Employee – Employee Company – Customer Relations Company – Shareholder Relations Company – Community/Public Interest (LIST NOT EXHAUSTIVE) 2

What is Ethics? Ethics is the study and practice of • How to live a good life • How to build good families and communities But what is good life, and what is good relationship, family, and community? We can start with • The individual or • The family/community

Business Ethics: What Does It Really Mean? EXPECTATION GAP Expected and Actual Levels of Business Ethics Society’s Expectations of Business Ethical Problem = E/Gap Ethical Problem 1950 s 4 Actual Business Ethics Time Early 2000 s

Business Ethics: What Does It Entail? There is a fine line between ETHICS and MORAL v. Ethics involves a discipline that examines good or bad practices within the context of a moral duty v. Moral conduct is behavior that is right or wrong that had been taught to you v. Business ethics include practices and behaviors that are good or bad in business 5

Sources of Ethical Norms Fellow Workers Peers Family Regions of Country Profession The Individual Friends The Law 6 Conscience Employer Religious Beliefs Society at Large

Making Ethical Judgments Behavior or act that has been committed compared with Value judgments and perceptions of the observer 7 Prevailing norms of acceptability

Ethics and the Law üLaw often represents an ethical minimum – cannot put everything into law üEthics often represents a standard that exceeds the legal minimum. Frequent Overlap ETHICS Law There are some ethical behaviour that can not be written in law. Example: Hygiene – brush teeth daily/shower daily/change your clothes 8

Ethics, Economics, and Law 6 -14

Four Important Ethical Questions What is? II. What ought to be? III. How to we get from what is to what ought to be? IV. What is our motivation for acting ethically? I. 10

WHY STUDY BUSINESS ETHICS? Ethics concern an individual's moral judgements about right and wrong. Decisions taken within an organisation may be made by individuals or groups, but whoever makes them will be influenced by the culture of the company. The decision to behave ethically is a moral one; employees must decide what they think is the right course of action. This may involve rejecting the route that would lead to the biggest short-term profit. 11

WHY STUDY BUSINESS ETHICS? Managing a business takes a lot of knowledge and experience. Obviously you need knowledge about accounting, finance and marketing, as well as at least a working knowledge of the industry the business is in. Equally important to have a real understanding that how you operate your business reflects not just on you, but impacts your neighbors and the larger community as well. 12

WHY STUDY BUSINESS ETHICS? Business ethics means recognizing that there is right and wrong in business as well as your personal life. Running a business is not just about making money, it is about doing the right thing and making money through that process. Conceptualizing business ethics starts with the idea that owners/managers desire to do something good on both the personal and community level and determine how to accomplish good through a business. Simply obeying the law but trying to squeeze every possible penny out of every transaction is not practicing good business ethics. Doubling the prices of your bottled water and generators when there is hurricane warning is not good business ethics. Example Budget address 13

WHY STUDY BUSINESS ETHICS? Studying business ethics changes outlooks and influences behavior. Ethics provides a set of terminology and a conceptual framework with which you can think and talk about ethical issues. 14 Studying business ethics will help you weigh the potential consequences of your business decisions, and it will teach you to make moral distinctions and avoid common fallacies that people often fall into when making decisions.

WHY STUDY BUSINESS ETHICS? Ethical behaviour and corporate social responsibility can bring significant benefits to a business. Example: Attract customers to buy the firm's products, thereby boosting sales and profits Unethical behaviour or a lack of corporate social responsibility, by comparison, may damage a firm's reputation and make it less appealing to stakeholders. Profits could fall as a result. Example: Volks Wagon - Germany 15

WHY STUDY BUSINESS ETHICS? SOME FIJIAN EXAMPLES NEED FOR BUSINESS ETHICS v. NBF – approving loans on no existent property or chattel as security. v. Suncourt Hardware Ltd – agricultural scam 16

WHY STUDY BUSINESS ETHICS? We need to be ethical in our business dealings and not think of making a quick profit. Example: ANCO Investment in Walu Bay Fijians Helping Fijians in Business (Cooperative) 17

ETHICS contributes to Investor Loyalty ØEthical conduct result in shareholder loyalty ØContributes to success that support broader social causes and concerns ØInvestor concerned with ethical and social responsibility that create the reputation of the company in which they invest. Example: VW – gas emmision from cars exhaust 18

Corporate Social Responsibility (CSR) Preliminary definitions of CSR The impact of a company’s actions on society Requires a manager to consider his acts in terms of a whole social system, and holds him responsible for the effects of his acts anywhere in that system. CSR policy functions as a self-regulatory mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards and international norms. With some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law. CSR aims to embrace responsibility for corporate actions and to encourage a positive impact on the environment and stakeholders including consumers, employees, investors, communities, and others.

Corporate Social Responsibility (CSR) CSR is the integration of business operations and values, whereby the interests of all stakeholders including investors, customers, employees, the community and the environment are reflected in the company's policies and actions. EXAMPLE Mitsubishi Corporation Foundation for the Americas Dedicates $1 Million to Protect Amazonian Watersheds Posted: Dec 15, 2014 – 02: 00 PM EST NEW YORK, Dec. 15 /CSRwire/ - The Board of Directors of the Mitsubishi Corporation Foundation for the Americas (MCFA) have approved a $1 Million grant over the next 5 years to the Wildlife Conservation Society for its Amazon Waters Initiative. . .

Corporate Social Responsibility (CSR) Historical Perspective a) Economic model – the invisible hand of the marketplace protected societal interest Recall Adam Smith Economist – Market should determine the price. Legal model – laws protected societal interests b) Modified the economic model • Philanthropy • Community obligations • Paternalism c) What was the main motivation? • To keep government at arms length From the 1950’s to the present the concept of CSR has gained considerable acceptance and the meaning has been broadened to include additional components

Corporate Social Responsibility (CSR) Carroll’s Four Part Definition Understanding the Four Components Responsibility Legal Societal Examples Expectation Required Be profitable. Maximize sales, minimize costs, etc. Required Obey laws and regulations. Ethical Expected Economic Discretionary Desired/ (Philanthropic) Expected Business and Society: Ethics and Stakeholder Management, 5 E • Carroll & Buchholtz Copyright © 2003 by South-Western, a division of Thomson Learning. All rights reserved Do what is right, fair and just. Be a good corporate citizen. 2 -16

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