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Corporate Ethics and responsibility towards Stakeholders
Presented by
Nidhi Garg Tushar Joshi
Nibha Nalin
Sumeet Sourabh sareen
What is Ethics?
• Ethics– standards or moral values that dictate what is
right and wrong– culturally based – formed upon society’s expectations – vary by person, and by situation
3-2
Everyone develops their own “code of ethics”
Principles of Ethics
• Honesty• Respect• Responsibility• Fairness• Care
Business Ethics
Business + Ethics = Business Ethics• Business commonly referred to a commercial
activity aimed at profit motive.• Business ethics refers to moral principles and rules
of conduct which are applied to business. • Business Ethics means conducting all aspects of
business and dealing with all stakeholders in an ethical manner…
Corporate Ethics
• Based on principles of integrity and fairness • Focuses on -
Stakeholders, and employees.
Quality of product and services
Customer satisfaction.
Community and environment
Corporate Ethics are implemented to-
• Define the framework of the acceptable behavior.
• Follow high standards of practice. • Create benchmarks for self evaluation. • Enhance sense of community. • Create transparency in the business
activities. • Foster higher standards of business ethics. • Comply with government laws and norms.
Who is responsible for ethics in the company?
“Everyone”
Approaches to Bring a Code of Corporate Ethics to Life
• Emphasize values, in creating the code of corporate ethics supported by rules.
• Employees should be Educated about the corporate ethics code to make it relevant and real.
• Reinforce the code within and beyond the organization.• Encourage employees to become active participants in
upholding the corporate. ethics code and its values.• Gather feedback, measure effectiveness and
continually improve the code of conduct.
Corporate ethics: the Indian Perspective
• Indian business culture 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 does not always mesh well with the Indian value of loyalty.
Corporate Ethics: Individual’s Perspective
• Signs of ethical deterioration.• In business, people have made
immoral millions • In government, public officials
are involved in bribery.• In education, cheating scandals
among students are common.• under-the-table payments for
admission• People believe that they have to
cheat to win. • They believe that nice guys
finish last.
Case: Infosys Technologies
• Have a distinctive work culture and value system.
• Great importance on customer delight, leadership, integrity, transparency, fairness and pursuit of excellence.
• Open door policy. • Value employees and encourage them to
make decisions about their own work. • Treated as a flat organization when it comes
to communication and information sharing
Stakeholders• Anyone who affects or is affected by an
organisationFreeman
• Primary stakeholders - those without whom org cannot survive– shareholders, customers, employees
• Secondary– community, environment, opinion formers
Clarkson
Issues with stakeholders• Stakeholder scanning and identification
• Stakeholder consultation
• Stakeholder engagement
• Approach depends on view of the organisation and the need for a relationship with stakeholders
Stakeholder Typology: One, Two, or Three Attributes
POWER
LEGITIMACY
URGENCY
7
Definitive Stakeholder
5
Dangerous Stakeholder
3
Demanding Stakeholder
6
Dependent Stakeholder
4
Dominant Stakeholder
1
Dormant Stakeholder
2
Discretionary Stakeholder
8
Nonstakeholder
The Management of Stakeholders
• Four strategies– Reactive– Defensive– Accommodative– Proactive
Wartick and Cochran (1985)
• Depends on stage in life cycle• Fits idea of resource dependency
Jawahar and McLaughlin (2001)
Stakeholders of the Organization
Society in General
Strategicpartners
Government
Employees
Customers
Suppliers
LocalCommunity
Owners
Unions
Types of stakeholders
SOCIAL RESPONSIBILITY TOWARDS EMPLOYEES
The company should provide job security to its employees.
Employees should be paid proper and timely wages and other monetary incentives.
The company should take adequate measures to protect the health and life of the employees.
There should be proper grievance procedure to handle employees complaints.
SOCIAL RESPONSIBILITY TOWARDS SHAREHOLDERS
The shareholders expect optimum utilization of their funds.
The management should make a proper disclosure regarding the affairs of the company.
The shareholders expects periodic information about important happenings or developments in the company.
The shareholders expects fair conduct of company meetings.
The shareholders expects a fair return on their investment.
SOCIAL RESPONSIBILITY TOWARDS CUSTOMERS
The company should produce quality goods. The company should charge fair price. The company should make the goods available
regularly and not create artificial shortage to raise prices.
The firm must provide after-sale-service and R&D.
SOCIAL RESPONSIBILITY TOWARDS SOCIETY
The company should take all possible measures to prevent air, water, and soil pollution.
The business firms should make indiscriminate use of the scarce resources in the interest of the society.
The society expects that companies should make efforts to uplift backward areas by starting and developing industries in such areas.
The society expects from business firms to donate generously to various social causes such as eradication of poverty, illiteracy, etc.
SOCIAL RESPONSIBILITY TOWARDS GOVERNMENT
The government expects co-operations and financial assistance from the business sector in implementing socio-economic programs.
The government expects the business sector to pay taxes and duties regularly.
The business firms should strictly observe government’s rules and regulations.
The business firms should avoid seeking unfair favor from government authorities.
The corporate sector should provide assistance to the government during natural calamities.
SOCIAL RESPONSIBILITY TOWARDS SUPPLIERS
The company should maintain good relations with suppliers.
Payment of credit amount must be done on time.
The company should not force the suppliers to provide unreasonable terms.
The companies should not disclose any secret information about its suppliers to others.
SOCIAL RESPONSIBILITY TOWARDS FINANCIAL
INSTITUTIONS
The payment of loans and interest installments must be made on time.
They should not bribe bank officials in sanctioning loans.
Provide regular reports to the financial institutions. They should not convert bank loans into bad debts.
SOCIAL RESPONSIBILITY TOWARDS COMPETITORS
The company should avoid unfair practices, such as duplicating the products of the competitors
Respect the competitors and treat them as challenges and not enemies
They should ensure free entry, and not block entry of competitors
SOCIAL RESPONSIBILITY TOWARDS OWNERS
The number of owners and the roles they carry out differ according to the size of the firm
In small businesses there may be only one owner (sole trader) or perhaps a small number of partners (partnership)
In large firms there are often thousands of shareholders, who each own a small part of the business
SOCIAL RESPONSIBILITY TOWARDS MANAGERS
Organize Make decisions Plan Control They are accountable to the owner(s)
ETHICS & STAKE HOLDER THEORY
• Maximize stake holder value. Develop ethical responsible behavior of managers.
• Managerial decisions should also reflect ethical responsibilities- distribution of benefit and allocations of costs in a manner that is considered right, just by the stake holders..
Stakeholders’ Concerns
Owners and Investors
Examples of ConcernsStakeholder Group
Financial Soundness Consistency in meeting
shareholder expectations Sustained profitability Timely and accurate
disclosure of financial information
Stakeholders’ Concerns (cont.)
Customers
Examples of ConcernsStakeholder Group
Product/service quality, innovativeness, and availability
Responsible management of defective or harmful products/services
Safety records for products/services
Pricing policies and practices Honest, accurate, and
responsible advertising
Stakeholders’ Concerns (cont.)
Employees
Examples of ConcernsStakeholder Group
Nondiscriminatory, merit-based hiring and promotion
Wage and salary levels and equitable distribution
Availability of training and development
Workplace safety and privacy
Stakeholders’ Concerns (cont.)
Society
Examples of ConcernsStakeholder Group
Environmental issues• Environmental sensitivity in
packaging and product design• Recycling efforts and use of
recycled materials• Pollution prevention• Global application of
environmental standards
Stakeholders’ Concerns (cont.)
Society
Examples of ConcernsStakeholder Group
Community involvement• Percentage of profits
designated for cash contributions
• Innovation and creativity in social welfare
• Product donations• Availability of facilities and
other assets for community use
• Support for employee volunteer efforts