Social Responsibility and Ethics

"The word ethics commonly refers to principles of behaviour that distinguish between what is good, bad, right and wrong." (verne. E. Henderson: The Ethical Side of Enterprise.) Ethics helps managers to take sound managerial decisions relating to consumers, organisations, employees of the firm and the organisation as a whole, "The importance of ethics increases in proportion to the consequences of the outcome of a decision or behaviour." (Ivancevich and others: Management — Principles and Functions). These statements tell us that the role of ethics in business has become a growing concern among managers.

The dictionary meaning of ethics say that it is a science of morals; moral principles or code. The meaning of moral is "concerned with right and wrong conduct or duty to one's neighbour, capable of the notion of duty, practicing virtue, conformed to or required or justified by conscience if not law, virtually or practically or in effect though not formally." Thus the dictionary meaning says that "ethics is an individual's own personal attitude and beliefs concerning what is right or wrong, good or bad." Ethics is a relative term and is influenced by socially accepted norms. Therefore, what is ethical to an individual or society may be unethical to another individual or another society.

Ethical values are influenced by:

(i) Family circumstances,

(it) Situational factors,

(iii) Experiences,

(iv) Values and morals and

(v) Peer influences, influence by people of equal status.

Individual ethics will have an impact on organisational or managerial ethics. It may create conflict or it may be complimentary.

The present analysis is mainly concerned with organisational ethics and social responsibility of business. The employees in the organisation have to implicitly follow the organisational policies and programmes and should not mix personal values with organisational values. Many a time, an individual employees will have to follow the managerial ethics stipulated by the firm, much against his will and values. "Ethical managerial behaviour conforms with local law and local moral principles. Three critical areas of managerial ethics identified are: (i) relationship of the firm to the employee (ii) relationship of the employee to the firm and (iii) relationship of firm to other economic agents." (Gene Burton — Manab Takur Management — Today)

Every day we hear scandals in business enterprises. These scandals have occurred due to unethical practices by the business houses. The managers in business enterprise have been pressurised to commit ethically questionable acts. One survey in 1987 in U.S. indicates that "out of 1500 top-middle and bottom line managers interviewed, more than 40 per cent of the respondents reported they had compromised their personal principles to meet an organisation demand." (Barry Z. Posner and Warren H. Sehmidt: Ethics in American Companies). This fact indicates that there is a deterioration in ethical standards of American business. India is no excuse for this. Several malpractices are coming to the limelight in the Indian business house. I.T.C., one of the leading business houses of India was in news recently for cheating the government several cores of rupees regarding excise duty. The chairman was arrested. Similarly many irregularities in Indian business houses are noticed. Now the companies are realising that unethical business practices of the management or employees may take a heavy toll. This also harms the interest of the society. Heavy penalty has to be paid by the management for the ethical misconduct of the managers or management.

However, what is ethical and what is not ethical is very difficult to determine. The task is easy on some occasions. But in business environment, where quality of thinking is very poor, business houses have to bribe for the smooth running of business operations. Sometimes it becomes a question of survival and are forced to resort to these malpractices. Not only bribing, other malpractices like defalcation of accounts, wrong allocation of funds, deviation of funds allotted for specific purpose, dishonest advertising practices, etc. also form the unethical business practices. In such a situation, the administrators will have no answer for the questions raised. Even the audited accounts will be fake and owners are cheated. Inflated profits are exhibited in the income statements of corporate enterprise. This statement is prepared according to the whims and fancies of the directors or chairman.

At times, the managers are also not in a position to identify what are ethical acts and what are unethical acts. Many ethical issues are debated in business environment. Ethics of managerial decision-making are often complex and managers disagree on what comprises an ethical decision. To avoid this situation many firms are publishing written code of ethics. This code gives a direction to the managers to take decisions within its framework. This written code clearly indicates values and ethical standards that are to be followed by decision-makers.

Parameters of Ethical Standard

Fig.3.2 Parameters of Ethical Standard

Decision-making takes place in two to three levels in a firm (i) Top managements, (ii) Middle management and (iii) First line management. The top managements which is a policy-making body should greatly commit to ethical ¡tandards within their companies and it should reflect in their policy programmers. Middle and first-line management are having executive functions and they have to strictly follow the written code of ethics which exhibit the management expectations regarding ethical aspects to be followed by every ¡mployee of the firm. The issues normally covered in written code of ethics are:

(i) What not to be done regarding kickbacks and bribe.

(ii) The ceiling on contribution to political parties or the general principles to be followed to give contribution to political parties.

(iii) To maintain integrity and honesty regarding the maintenance of books of accounts of the firm.

(iv) Not to tamper the office records.

(v) To maintain healthy relationship with customers and public.

(vi) To have a straight and honest deal with the suppliers.

(vii) Honest management of company assets.

(viii) Secrecy regarding corporate information, (ix) Conflict of interest etc.

But many corporate enterprises do not have written code of ethics. "There s no way to assure ethical behaviour with written policies or policy statements, ethical behaviour will be an integral part of the organisation, a way of life that s deeply ingrained in the collective corporate body. The employees of the firm will conduct the affairs of the business in a manner consistent with the highest standards of ethical behaviour." This system also works. It has been noticed in he corporate enterprises of long standing. The operations are passed on from one generation to another generation. The ethical values imbibed in the corporate enterprises of long standing. The operations are passed on from one generation o another generation. The ethical values imbibed in such business houses by heir founders who possessed great integrity and honor during their times are >till found in the organisations. These values are perpetuated by careful selection )f people, from time to time, who would lead the organisation. Time and again workability is examined. It may be difficult for the companies to maintain ;ethical standards evolved by their founders. But it is necessary for continued growth, profitability and success of the company.

Written code of ethics may fail at times. Employees may view the written ;ode casually. Therefore ethical aspects are to bé incorporated in the work culture. "Dos" and "Donots" should be clearly informed to all employees. The employees may be trained in business ethics of their firm. It may be in the form )f workshop or seminar and are to be conducted periodically.

Besides training in business ethics, employees may be given incentives and awards for their maintenance of ethical standards.

Nichols and Day (1982) in an article published in "Academy of Management Journal" observes that ethical behaviour can be maintained through the following activities.

(i) The personality characteristics of persons seeking job in an organisation has to be evaluated. The persons who are prone to unethical behaviour should be appointed. If appointed the firm's rules must regulate their unethical behaviour.

(ii) Importance of ethical behaviour should be made known through public statements.

(iii) Ethical expectations of the firm should be reflected in its policies.

(iv) Ethical behaviour should be rewarded and unethical behaviour should not be punished.

(v) Ethical behaviour should not be punished and unethical behaviour should be rewarded.

(vi) While placing employees in competitive situation assess their potency to unethical behaviour.

(vii) Consider that, when decisions require moral judgment, group decision-making usually results in higher levels of moral reasoning than individual decision-making.

As stated in previous paragraphs, social responsibility deals with decisions of a business firm which provide for the welfare of the society as a whole. Business ethics deals with the moral standards of the firm and the employees without maintaining high ethical values, the firm cannot discharge its responsibility to the society in a standard way.

The Tools of Ethics

Ethics tells as to how a decision of an individual affects others in the society. Ethics deals with people's rights, duties, the moral rights and rules that people apply in making decisions and the nature of relationships among people. Ethical reasoning of people can be improved by analyzing ethical terms or tools regularly. These associated tools are (i) Values (ii) Rights (iii) Duties (iv) Moral rules.

1. VALUES: These are permanent desires that every one want them to happen in themselves. Values answer the question "why". For a 'why', answer goes on and stops at point and that point is the value. For corporates; they run the business Why? To make profit. Here the profit is the value. For an individual Peace, Goodwill etc. may be values.

2. RIGHTS: This is a "spere of autonomy" which entails a person to take an action. Rights are not absolute and are related to the rights of others.

3. DUTIES: It is a specific obligation to take a specific step by an individual. Say, for example, the step taken to pay tax, tantamount to obeying the order. I

4. MORAL RULES: They are the rules at behaviour, that often become internalized as moral values. They arc "tic-breakers" or guidelines for resolving disagreements.

Ethical Dilemma-the Concept

Every manager in business or non-business organisations has to perform several roles. In the process, he has to take some critical decisions which may-oppose the management philosophy or ones own conscience. The manager may ask the self whether he is telling a lie or may make self-introspection by asking the self "Is it wrong to tell a lie?" He should be in a position to measure whether his action or decision is "right'' or "wrong". Many questions, for himself or herself, such as 'Have I avoided even the appearance of conflict of interest in my decision?" "Would ray action infringe on the liberty of management or others concerned?" Would put him in dilemma on such ethical issues. Manager, as a spokesperson of the organisation may speak to outsiders which is opposed to certain ethical aspects. But that action is essential for the growth of the organisation. The situation in which the manager is fixed, wherein he cannot take decisions but at the same time cannot keep quiet is called ETHICAL DILEMMA.

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