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NCRDs
Sterling Institute Of Management Studies
A REPORT
ON
Business EthicsSocial Economic Values & Responsibilities
Trusteeship Management
Submitted To: Submitted By:
Prof. Tasnim Swati Jadhav (19 )
Sumit Jagtap (20)
Ankur Jain (21)
Mohnish Joshi (22)
Vaidehi Joshi (23)
Sameep Kadakia
(24)
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Managerial Ethics
Managerial Ethics is a major factor affecting how socially responsive an enterprise will
be in the long term. Manager's ethical standards in the enterprise determine the type ofresponse it will make as it reacts to the tension between the; forces for change and
stability. Proactive responses are likely to be more ethical since they will go beyond
minimum legal requirements. They are more consistent with the high social expectations
as discussed earlier. Reactive responses on the contrary either conform only with the
minimum legal requirements or even attempt to avoid legal requirements through long
court cases, lobbying efforts to avoid responsibility and so forth. The ethics of an
enterprise's managers are a key factor in decision making and may be formed by many
forces.
The feed back can be classified into two types:
Positive feed back
Negative feed back
Positive feed back serves to reinforce and establish a tendency toward special
responsiveness firmly with an enterprise's mode of functioning. It indicates that the
type .of response action chosen was correct and effective. Negative feed back tends to
cause an enterprise to limit or withdraw further efforts at social responsiveness.
The feed back that an enterprise receives on its social responsiveness will help to
determine:
The type of response option chosen (including the choice to be primarily proactive or
reactive) The relative strength of forces for change and stability. An enterprise's current
capacity to respond.
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The various key stake-holder groups for an enterprise are:
Society
Suppliers
Owners
Governments
Competitors
Community
Customers
Employees
Society as a whole responds to events through :
Protests
Increasing expectations for enterprise social responsibility
Public policy debates
Changing or enacting new laws
Deregulation or new governmental regulations
In all the above, the owners of the enterprises involved are
concerned about economic viability and return on investment (on their
own). As far as the managers are concerned, the major result of the conflict between
stake holders' pressures for social responsiveness and for economic performance results
in increased complexity in decision taking. They can no longer concentrate on pursuing
a single goal for themselves or enterprise owners and consider the many and often
conflicting interests of all stake holders. These stake holder groups are directly linked to
the model of social responsiveness and form the major? Elements that comprise forces
for change or stability. Pressure a large stake-holder group does not always produce the
exact change that was intended. The government and its various regulator}* bodies
which comprise a major stake-holder in most enterprises, usually Serve as forces for
change in the direction of more social responsiveness. Other stake holders, such as
owners, are usually forces for stability hence less responsive. Managers serve as a major
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stake holder 5roup internal to an enterprise. Managers use corporate resources to Protect
themselves from public criticism. Their resistance to change the unwillingness to admit
potential problems shows that they are 'Kely to serve as major sources of enterprise
stability.
Four-Stage Continuum:
Archie B-carroll views social responsibility as a four-stage continuum.
Economic responsibility
Legal responsibility
Ethical responsibility
Discriminatory responsibility
Ethical responsibilities are additional behaviours and activities that are not necessarily
codified into law but nevertheless are expecte of business by society's members;
discriminatory responsibilities are not legally required or even demanded by ethics.
Corporations accep them in order to meet society's expectations.
Ethical responsibilities are additional behaviors and activities that are not necessarily
codified into law but nevertheless are expected of business by society's members;discriminatory responsibilities are not legally required.
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Social Responsibility
Social responsibility is an ethical or ideological theory that an entity whether it is a
government, corporation, organization or individual has a responsibility to society. This
responsibility can be "negative," in that it is a responsibility to refrain from acting
(resistance stance) or it can be "positive," meaning there is a responsibility to act
(proactive stance). While primarily associated with business and governmental practices,
activist groups and local communities can also be associated with social responsibility,
not only business or governmental entities.
There is a large inequality in the means and roles of different entities to fulfill their
claimed responsibility. This would imply the different entities have different
responsibilities, in so much as states should ensure the civil rights of their citizens, that
corporations should respect and encourage the human rights of their employees and that
citizens should abide with written laws. But social responsibility can mean more than
these examples. Many NGOs accept that their role and the responsibility of their
members as citizens is to help improve society by taking a proactive stance in their
societal roles. It can also imply that corporations have an implicit obligation to give back
to society (such as is claimed as part of corporate social responsibility and/or stakeholder
theory).
Social responsibility is voluntary; it is about going above and beyond what is called
for by the law (legal responsibility). It involves an idea that it is better to be proactive
toward a problem rather than reactive to a problem. Social responsibility means
eliminating corrupt, irresponsible or unethical behavior that might bring harm to the
community, its people, or the environment before the behavior happens.
In todays society a business must maintain ethical principles in order to be
successful. (Kaliski, 2001) Businesses can use ethical decision making to strengthen
their businesses in three main ways. The first way is to use their ethical decision making
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to increase productivity. This can be done through programs that employees feel directly
enhance their benefits given by the corporation, like better health care or a better pension
program. One thing that all companies must keep in mind is that employees are
stakeholders in the business. They have a vested interest in what the company does and
how it is run. When the company is perceived to feel that their employees are a valuable
asset and the employees feel they are being treated and such, productivity increases.
A second way that businesses can use ethical decision making to strengthen their
businesses is by making decisions that affect its health as seen to those stakeholders that
are outside of the business environment. (Kaliski, 2001) Customers and Suppliers are
two examples of such stakeholders. If we were to look at companies like Johnson &
Johnson, their strong sense of responsibility to the public is well known. (Hogue, 2001)
In particular, take for instance Johnson & Johnson and the Tylenol scare of 1982. When
people realized that some bottles of Tylenol contained cyanide they quit buying Tylenol,
stocks dropped and Johnson & Johnson lost a lot of money. But they chose to loose even
more money and invest in new tamper resistant seals and announce a major recall of
their product. There was no certain amount for this situation; Johnson & Johnson had
to lose money to be socially responsible. But in the long run they gained the trust of their
customers. Now when people look at other products, there is a sense of faith and trust in
that Johnson & Johnson would not allow a product to harm people just to meet their ownbottom line.
A third way that business can use ethical decision making to secure their businesses
is by making decisions that allow for government agencies to minimize their
involvement with the corporation. (Kaliski, 2001) For instance if a company is proactive
and follows the EPA guidelines for admissions on dangerous pollutants and even goes an
extra step to get involved in the community and address those concerns that the public
might have; they would be less likely to have the EPA investigate them for
environmental concerns. A significant element of current thinking about privacy,
however, stresses "self-regulation" rather than market or government mechanisms for
protecting personal information (Swire , 1997) Most rules and regulations are formed
due to public outcry, if there is not outcry there often will be limited regulation
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CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility (CSR) can be defined as the "economic, legal, ethical,
and discretionary expectations that society has of organizations at a given point in time"
(Carroll and Buchholtz 2003, p. 36). The concept of corporate social responsibility
means that organizations have moral, ethical, and philanthropic responsibilities in
addition to their responsibilities to earn a fair return for investors and comply with the
law. A traditional view of the corporation suggests that its primary, if not sole,
responsibility is to its owners, or stockholders. However, CSR requires organizations to
adopt a broader view of its responsibilities that includes not only stockholders, but many
other constituencies as well, including employees, suppliers, customers, the local
community, local, state, and federal governments, environmental groups, and other
special interest groups. Collectively, the various groups affected by the actions of an
organization are called "stakeholders." The stakeholder concept is discussed more fully
in a later section.
Corporate social responsibility is related to, but not identical with, business ethics.
While CSR encompasses the economic, legal, ethical, and discretionary responsibilities
of organizations, business ethics usually focuses on the moral judgments and behavior of
individuals and groups within organizations. Thus, the study of business ethics may be
regarded as a component of the larger study of corporate social responsibility.
Carroll and Buchholtz's four-part definition of CSR makes explicit the multi-faceted
nature of social responsibility. The economic responsibilities cited in the definition refer
to society's expectation that organizations will produce good and services that are needed
and desired by customers and sell those goods and services at a reasonable price.
Organizations are expected to be efficient, profitable, and to keep shareholder interests in
mind. The legal responsibilities relate to the expectation that organizations will comply
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with the laws set down by society to govern competition in the marketplace.
Organizations have thousands of legal responsibilities governing almost every aspect of
their operations, including consumer and product laws, environmental laws, and
employment laws. The ethical responsibilities concern societal expectations that go
beyond the law, such as the expectation that organizations will conduct their affairs in a
fair and just way. This means that organizations are expected to do more than just
comply with the law, but also make proactive efforts to anticipate and meet the norms of
society even if those norms are not formally enacted in law. Finally, the discretionary
responsibilities of corporations refer to society's expectation that organizations be good
citizens. This may involve such things as philanthropic support of programs benefiting a
community or the nation. It may also involve donating employee expertise and time to
worthy causes.
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Basic Concepts of Economic Value
Economic value is one of many possible ways to define and measure value.
Although other types of value are often important, economic values are useful to
consider when making economic choices choices that involve tradeoffs in allocating
resources.
Measures of economic value are based on what people want their preferences.
Economists generally assume that individuals, not the government, are the best judges of
what they want. Thus, the theory of economic valuation is based on individual
preferences and choices. People express their preferences through the choices and
tradeoffs that they make, given certain constraints, such as those on income or available
time.
The economic value of a particular item, or good, for example a loaf of bread, is
measured by the maximum amount of other things that a person is willing to give up to
have that loaf of bread. If we simplify our example economy so that the person only
has two goods to choose from, bread and pasta, the value of a loaf of bread would be
measured by the most pasta that the person is willing to give up to have one more loaf of
bread.
Thus, economic value is measured by the most someone is willing to give up in other
goods and services in order to obtain a good, service, or state of the world. In a market
economy, dollars (or some other currency) are a universally accepted measure of
economic value, because the number of dollars that a person is willing to pay for
something tells how much of all other goods and services they are willing to give up to
get that item. This is often referred to as willingness to pay.
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The economic concept of value is that value is human driven (i.e., it is
anthropocentric), meaning that goods and services are not considered to have value
unless humans place value on them [willingness to pay].
From a strict economic perspective, there is no such thing as intrinsic or natural
value. Of course, this focus on human-based value leads economists to measure market
and nonmarket values using monetary instruments such as dollars.
In general, when the price of a good increases, people will purchase less of that
good. This is referred to as the law of demandpeople demand less of something when
it is more expensive (assuming prices of other goods and peoples incomes have not
changed). By relating the quantity demanded and the price of a good, we can estimate
the demand function for that good. From this, we can draw the demand curve, the
graphical representation of the demand function.
It is often incorrectly assumed that a goods market price measures its economic
value. However, the market price only tells us the minimum amount that people who
buy the good are willing to pay for it. When people purchase a marketed good, they
compare the amount they would be willing to pay for that good with its market price.They will only purchase the good if their willingness to pay is equal to or greater than
the price. Many people are actually willing to pay more than the market price for a
good, and thus their values exceed the market price.
In order to make resource allocation decisions based on economic values, what we
really want to measure is the net economic benefit from a good or service. For
individuals, this is measured by the amount that people are willing to pay, beyond what
they actually pay. Thus, two goods that sell for the same price may have different net
benefits.
The economic benefit to individuals is often measured by consumer surplus. This is
graphically represented by the area under the demand curve for a good, above its price.
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The economic benefit to individuals, or consumer surplus, received from a good will
change if its price or quality changes. For example, if the price of a good increases, but
peoples willingness to pay remains the same, the benefit received (maximum
willingness to pay minus price) will be less than before. If the quality of a good
increases, but price remains the same, peoples willingness to pay may increase and thus
the benefit received will also increase.
Economic values are also affected by the changes in price or quality of substitute
goods or complementary goods . If the price of a substitute good changes, the economic
value for the good in question will change in the same direction. For example, wheat
bread is a close substitute for multi-grain bread. So, if the price of multi-grain bread
goes up, while the price of wheat bread remains the same, some people will switch, or
substitute, from multi-grain to wheat bread. Therefore, more wheat bread is demanded
and its demand function shifts upward, making the area under it, the consumer surplus,
greater.
Similarly, if the price of a complementary good, one that is purchased in conjunction
with the good in question, changes, the economic benefit from the good will change inthe opposite direction. For example, if the price of butter increases, people may buy less
of both bread and butter. If less bread is demanded, then the demand function shifts
downward, and the area under it, the consumer surplus, decreases.
Producers of goods also receive economic benefits, based on the profits they make
when selling the good. Economic benefits to producers are measured by producer
surplus, the area above the supply curve and below the market price. The supply
function tells how many units of a good producers are willing to produce and sell at a
given price. The supply curve is the graphical representation of the supply function.
Because producers would like to sell more at higher prices, the supply curve slopes
upward.
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If producers receive a higher price than the minimum price they would sell their
output for, they receive a benefit from the salethe producer surplus. Thus, benefits to
producers are similar to benefits to consumers, because they measure the gains to the
producer from receiving a price higher than the price they would have been willing to
sell the good for.
When measuring economic benefits of a policy or initiative that affects an
ecosystem, economists measure the total net economic benefit. This is the sum of
consumer surplus plus producer surplus, less any costs associated with the policy or
initiative.
5 types of Economic Values
Direct Use Value - Output of forest products, from timber to animal furs
Indirect Use Value - Ecological functions of the ecosystem like watershed protection
and carbon sequestration
Option Value - Something like an insurance policy premium which people are
willing to pay in order to insure the supply of something, the availability of which would
otherwise by uncertain
Bequest value - A willingness to pay to preserve a resource for the benefit of one's
descendants
Existence value - Values conferred by humans on the ecosystem regardless of its use.
The sum of the above five values is the Total Economic Value of the ecosystem.
A) Understanding economic models of natural resource utilization.
Natural resources provide many goods and services for our society. Forests provide
lumber for building houses and natural ecosystems for hiking and picnics; soil provides a
medium for growing agricultural products; fisheries provide food and recreation. The
first part of this course concentrates on reviewing how economic systems allocate these
resources to potential users. After covering how markets are supposed to work, the
course then focuses on market failure. Markets often fail to incorporate aesthetic or
recreational values when allocating natural resources. In many cases, these market
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failures cause environmental conflicts. By understanding how markets work, and how
they fail, we can begin to see the advantages and disadvantages of using market systems
to improve environmental conditions.
B) Understanding market failures.
We will focus on four main types of market failure in this course:
1. Failure due to the presence of common property resources
2. Failure due to the presence of externalities
3. Failure due to the presence of public goods
4. Failure due to unaccounted for risk and information asymmetries
It is important to understand where markets fail and how they fail before asking what
should be done to eliminate the results of market failure.
C) Understanding the potential and limitations of economic policy to correct market
failure.
With an understanding of how markets operate and how they fail, the course turns to
a discussion of how policy can incorporate economics. Here we will learn about thefollowing ways in which economics is used in environmental policy:
Valuation of environmental or non market resources: Contingent valuation, travel
cost, and hedonic approaches.
Benefit-Cost analysis: What is it and how is it done?
Mechanisms for correcting market failures: Command and control regulation,
taxes, and tradable discharge permits.
D) Understanding how concepts apply to environmental problems.
Case studies -- or examples from the real world -- will be used throughout the web
units. They will provide you with an opportunity to learn about actual environmental
problems and how economics might be used to help solve these problems. Through these
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examples you will learn what questions are important to ask, what analysis must be
performed before policies are enacted, and what policies are best for a given situation.
Objectives
At the end of this course, students should be able to:
Identify critical economic factors in environmental issues
Detail the social benefits and costs of environmental policy
Understand economic methods for valuing social benefits and costs
Apply environmental valuation studies to policy
Critically analyze an environmental benefit-cost analysis
Understand several contemporary environmental issues
The framework of natural resource and environmental economics
The science of economics is concerned with the allocation of resources, and
especially those resources that are scarce or limited in their availability. If a resource is
not scarce, then there is no need to ration, or allocate, it among economic agents.
Economics provides a framework for allocating scarce resources efficiently, where
efficiency is defined in a very specific way (to be discussed later). From this
perspective, economics is well suited to addressing environmental issues becauseenvironmental quality, like many other goods and services, is now considered to be a
scarce resource. And, because many environmental issues involve complex tradeoffs
between degradation (such as air or water pollution) and other economic goals (such as
economic growth and job creation), economics can be used to help determine the
efficient allocation.
In short, the science of economics is built around the idea that it can evaluate the
potential tradeoffs among different goods and services in terms of monetary units,
including environmental goods and services. It is important to realize that nearly all our
decisions in life involve the evaluation of tradeoffs, whether small and simple (as in
example 1 below) or large and complex (as in example 2). The principles behind how
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economists evaluate problems are generally the same no matter how complex the
problem might be -- its just the specifics of the quantitative analyses that might.
How is economic value measured?
The economic concept of value is that value is human driven (i.e., it is
anthropocentric), meaning that goods and services are not considered to have value
unless humans place value on them. From a strict economic perspective, there is no such
thing as intrinsic or natural value. Of course, this focus on human-based value leads
economists to measure market and nonmarket values using monetary instruments such as
dollars.
Philosophers, environmentalists, and recently even some economists, have
suggested that a complete focus on anthropocentric valuation may be an improper way to
value environmental resources. Their argument is that environmental resources have
value regardless of whether or not humans place values on them. This is often referred
to as intrinsic value. This debate is likely to continue for some time, although the vast
majority of economists continue to agree that natural resource values arise primarily
from anthropocentric sources
Using dollars as a common measure to value environmental resources provides
an opportunity to make the comparisons between very different objects or courses of
action. This approach provides a common reference point, allowing policy makers to
compare alternatives in terms of the values they are familiar with.
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Trusteeship management of assets
Nowadays it is a vital issue not only to save but also multiply the previously earned
capital.
The most simple way to accumulate funds is the bank deposit. However the bank rate
is lower or at the best case can be compared with the current inflation.
By investing money on the stock market one may receive the earning yield
considerably outstripping the inflation, however individual control over the securities
portfolio requires professional knowledge which far not everyone can command and
considerable consumption of time.
It is appropriate to avail of such services as individual trusteeship management of the
investment company OEMK-Invest. This line of activity has been mastered by the
Company since 1999.
Trusteeship management is preferred by those who are lack of sufficient experience
for taking decisions on control over the portfolio independently.
Both natural persons and legal entities, residents and non-residents can become
Clients of our Company.
The main priority of the Companys work is to minimize risks of the trusteeship
management promoter by investing money.
Having submitted assets to trusteeship management you trust the Company to make
operations of purchase/sale of securities in your interests. All deals decisions are taken
by the trusteeship manager, but the main direction of his actions is set by the trusteeship
management promoter, making the investment declaration. Here the trusteeship
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management promoter can stipulate the securities list and securities shares in the
portfolio managed by the trusteeship manager, and also can specify other requirements.
All deposited funds of the trusteeship management promoter is kept on the separate
account of the trusteeship manager separately from the Companys internal funds, and
used only in conformity with the investment declaration.
Paper investment is an uneasy task, demanding special knowledge and
professionalism. The Client who has solved to work on the stock market independently,
should devote almost all time to it, after all the investment efficiency depends on
timeliness of decision-making and correctness of situation estimation. Trusting funds
management to our Company, the Client frees himself to solve other problems, besides
he receives professional control over assets, regular reports on investment situation,
investment confidentiality.
The Company adheres to an individual approach to each Client, discussing
investment strategy in details, developing the very approach that fully suits to the
Clients representations about admissible risks.
Today this line of the companys activity is developing dynamically. As of the end of
2006 more than 1000 trusteeship management agreements have been concluded.
Need to be mentioned following benefits of the trusteeship management: Potentiality of high income receipts;
Opportunity to choose investment strategies which satisfy Clients requirements at
the best;
Opportunity to choose simultaneously number of investment strategies and validity
periods;
Comprehensive reporting of all actions carried out by the trusteeship manager;
Depositing and withdrawal of funds at any time in course of the trusteeship
management.
As of the end of 2006 volume of funds invested in the trusteeship management
increased 12,7 times and amounted to RUR 6 781 million which has been an all-time
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high since 1999. For comparison in 1999 it was submitted RUR 36 million to trusteeship
management provided by the Company.
Volume of funds submitted to trusteeship management
Specialists in the trusteeship management using their working experience make
operations on investment of Clients funds in the most perspective securities both on the
leading exchange floors and on the over-the-counter market with consideration of
Clients individual requirements to reliability, earning yield and liquidity of investments.
The main objective of Clients funds management is their saving and incrementing.
Net earning yield from funds in trusteeship management in 2006 was in the range of
12-20 % for natural persons and 8-13 % for legal entities depending on the chosen
investment strategy minus commission charges and taxes.
Revenue earned in process of Clients funds management in form of dividends,
interests and realized profit are invested into market instruments.
Owing to their high liquidity the return of funds is always possible. In managing the
property we provide absolute transparency and give regular reports to Clients regardingperformed operations.
Trusteeship, on the other hand, involves the administration of resources already
under control. Trustee management tends to become more essential as the organization
becomes more successful and its resources increase, such that these resources become
established and must be managed more effectively. In reconciling the vision with the
realities of surviving in the health care market, academic nursing centers must combine
elements of both entrepreneurial and trustee management wisely and effectively.
Emergent strategic action, based upon the premise that the environment is not
controllable and indeed chaotic, is typical of entrepreneurial management, because it
allows for organizations to respond to this chaos. Emergent strategy is a critical method
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for organizations to adapt to unexpected plans and opportunities because it encourages
action, allows opportunities for learning from these experiences, and transfers lessons
learned to other components of the organization. Typically, academia has focused on the
more traditional method of deliberate strategy characteristic in trusteeship management,
and is often uncomfortable with the faster pace of decision making demanded by the use
of emergent strategy characteristic of entrepreneurial management. Emergent strategy is
a critical method for organizations to adapt to unexpected plans and opportunities
because it encourages action, allows opportunities from learning from these experiences,
and transfers lessons learned to other work within the academic enterprise.