CORPORATE SOCIAL

RESPONSIBILITY AND
ETHICAL ISSUES IN BUSINESS
A Entry to “IMED Intercollegiate Paper Presentation Competition On
Corporate Social Responsibility And Ethical Issues In Business” of
Bharati Vidyapeeth University Institute Of Management And
Entrepreneurship Development
3/14/2009 Nilesh Chandra Sinha
mr.n.c.sinha@gmail.com
Contact No.: 9769380102

SBM, NMIMS UNIVERSITY

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For the cause that lacks assistance!

For the wrong that needs resistance!
For the future in the distance!
And the GOOD that I can DO!
Dipankar Gupta

Introduction: - Corporate social responsibility or Business Ethics as we very often hear these
days are not some out of the world thing or something that has come into existence in very recent
times. The concept of Corporate Social Responsibility or CSR as it is referred as was there from
time in memorial. Similarly, the term Business Ethics is also not a very contemporary term. Then
why these terms sounds so new to the world???? Simple reason is, they were there but were
having different other nomenclature attached to them. In the present scenario when we are
encountering cases like Enron and Satyam it has become more and more important for the
companies to involve themselves into CSR and related practices so that the stakeholders don’t
lose their trust from them. Essentially, CSR is the deliberate inclusion of public interest into
corporate decision-making, and the honoring of a triple bottom line.

What is Corporate Social Responsibility?

Business has an obligation to society that extends beyond its narrow obligation to its owners,
what an organization does to positively influence the society of which it is a microcosm, Society
or larger community as a ‘stakeholder’ has to be given the identity. There is an ongoing debate
with strong proponents on both the sides whether to consider the people, the society as
shareholders of the company or to consider them as stakeholders. Moot point is the timeframe,
when the companies understand the reality is crucial because that is ultimately going to affect the
future of the coming generations. Profitability is only one of the many aspects of any business,
one of the other important aspects is sustainability of the business or enterprise, and that is what
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actually matters in the long run. Interests of all stakeholders are likely to converge in the long
run, people will definitely be moving towards the companies which are fairer in their practices.
Corporate Social Responsibility or CSR is operating business in a manner which meets or excels
the ethical, legal, commercial and public expectations that a society has from business. We can
sum it up as:-
“Corporate Social Responsibility is a concept whereby Companies integrate social and
environmental concerns in their business operations and in their interactions with their
stakeholders on a voluntary basis”.
It is an approach to business that creates shareholder value by embracing opportunities and
managing risks deriving from economic, environmental and social developments. Sustainable
Development is advancement of economic development while maintaining the quality of
environmental and social systems. Culture, Integrity and Ethics are the foundation for
sustainable value and hence CSR cannot be ignored.

What is the importance of CSR for your business?

In this era of WWW (i.e. dot com age) Internet has rapidly become the tool of choice for
spreading information about companies around the world. The thing every company fears most
is becoming the target of a powerful single-issue campaign group. So, rather than wait for it to
happen, it is better to take pre-emptive action in the form of environmental product development
and labeling, or engaging in such ideas as codes of conduct and social audits. Cause marketing,
development partnerships and environmental concerns make good business sense - particularly
in terms of recycling materials, employee satisfaction and morale, building up reputational
capital and as a distinctive brand marketing tool. There are various other reasons that are
important:-
Large size of the modern day corporations:-
Out of the 100 largest economies of the world, 51 are corporations and only 49 are nation states;
this can very well through light on how important it is for the companies to involve themselves
in the area of Corporate Social Responsibility.
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Rolling back of the state:-

States now consider on account of both liberalization and shrinking resources that the companies
should feel the responsibility to look for the upliftment of the left behind and sustained
development of those in the
Recognition of business benefits of CSR practices:-
Companies now very well understand the benefits associated with Corporate Social
Responsibility. Benefits like enhanced brand image, customer loyalty and retaining employees
are luring the companies to go for it. Companies are trying to involve themselves with CSR
activities in one way or the other.
Increasing pressures from:-
There is increased pressure on companies from all sides, may it be from customers, employees,
investors or other stakeholders. There are groups and countries which have laid down some
norms and standards that they will not be buying from companies which don’t follow those
standards. So, it is becoming more and more of mandatory kind of a thing than the wish of the
company.
Human resources:-
A CSR program can be an aid to recruitment and retention particularly within the competitive
graduate student market. Potential recruits often ask about a firm's CSR policy during an
interview, and having a comprehensive policy can give an advantage. CSR can also help to
improve the perception of a company among its staff, particularly when staff can become
involved through payroll giving, fund raising activities or community volunteering.
Risk management:-
Managing risk is a central part of many corporate strategies. Reputations that take decades to
build up can be ruined in hours through incidents such as corruption scandals or environmental
accidents. These events can also draw unwanted attention from regulators, courts, governments
and media. Building a genuine culture of 'doing the right thing' within a corporation can offset
these risks.
Brand differentiation:-

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In crowded marketplaces, companies strive for a unique selling proposition that can separate
them from the competition in the minds of consumers. CSR can play a role in building customer
loyalty based on distinctive ethical values. Several major brands, such as The Co-operative
Group, The Body Shop and American Apparel are built on ethical values. Business service
organizations can benefit too from building a reputation for integrity and best practice.
License to operate:-
Corporations are keen to avoid interference in their business through taxation or regulations. By
taking substantive voluntary steps, they can persuade governments and the wider public that they
are taking issues such as health and safety, diversity or the environment seriously, and so avoid
intervention. This also applies to firms seeking to justify eye-catching profits and high levels of
boardroom pay. Those operating away from their home country can make sure they stay
welcome by being good corporate citizens with respect to labor standards and impacts on the
environment.
Why Corporate Social Responsibility is opposed by some???
The practice of CSR is subject to much debate and criticism. Critics argue that CSR distracts
from the fundamental economic role of businesses; others argue that it is nothing more than
superficial window-dressing; others argue that it is an attempt to pre-empt the role of
governments as a watchdog over powerful multinational corporations. Among various reasons
proposed by the critics, some are
Violations about shareholders’ property rights:-
Corporations exist to provide products and/or services that produce profits for their shareholders.
Milton Friedman a noble laureate who says “BUSINESS OF BUSINESS IS BUSINESS” and
others take this a step further, arguing that a corporation's purpose is to maximize returns to its
shareholders, to them, only people can have social responsibilities, corporations are only
responsible to their shareholders and not to society as a whole. CSR imposes hidden costs passed
on to the stakeholders.
CSR as an extra cost:-
CSR imposes extra cost on companies and as such making them less competitive to the
companies not involved in CSR activities. Companies struggling to survive in bad times cannot
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afford it. This is the situation when one is unable to see the thin line between CSR and
Philanthropy.
Social responsibility rests with the government and the state:-
The general perception till date is that everything has to be done by the government, if
government is not doing anything then why any corporate should come forward and take the
initiative or do something that need to be done by the government.
Companies themselves in deficit cannot go for CSR:-
It sounds very rosy that this company is spending this much for CSR so; the other company
should also spend. But when we go through the balance sheets of various companies we find that
the pictures are not that colorful, the financial picture of different companies is different, lower
economic efficiency and profits do not allow them to go for CSR activities.
Requires social skills which business may lack:-
CSR is not something that can be getting involved into in just a day or a week. It require a lot of
preparation to be done on the part of the company, in many cases the companies lack the basic
social skills and the thrust that is required to go for this thing. CSR places responsibility on
business rather than individuals.

How to measure Corporate Social Responsibility?

Well the companies are involved in various CSR activities but, from where will come the
accountability in this CSR. As ‘the thing that cannot be measured cannot be accounted’. To
encounter this problem the concept of triple bottom line reporting. Triple bottom line reporting
include:-
Economic dimension– Sustainable Business model, Code of conduct, Corporate governance,
Compliance and Governance CRM, Risk Management, Ethical products and services, supply
chain, quality , Brand. These are some of the various parameters on which companies are
evaluated; companies which are better complying with these norms are rated above the
companies scoring less on the scale.

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Social dimensions– Labour practices, HR, Health and Safety, Diversity, Women empowerment,
welfare, community service, volunteering, corporate citizenship, and support to key societal
issues, NGO and civil society. These are some of the social parameters on which the companies
are evaluated; companies which are better complying with these norms are rated above the
companies scoring less on the scale. A company may be very good but if not scoring well on this
scale can face serious consequences.
For example- products of NIKE were boycotted in FIFA world cup on account of the fact that
company was using child labor for the production of those products.
Environmental Dimension – “Greening” of business processes – ecology, energy conservation,
alternative fuels, emission reductions, waste reduction, recycling / reuse, product life cycle,
supply chain, bio-diversity, eco-audits / compliance, beyond compliance – alternative solutions,
global causes, global best practices. Greening does not just mean planting a few trees, it means
attempting not to reduce the existing green, trying using more and more of renewable sources of
energy etc. The company should keep in mind the after effects of whatever it go for, the people
in the nearby area, the ecology of the area everything. We have witnessed the cases where DDT
was used to kill the mosquitoes, but it somehow entered the whole food chain of a particular area
and had adversely affected not only the existing population but the future generations as well.
What is Business Ethics???
Ethics is a branch of philosophy. Its objective is to study both moral and immoral behavior in
order to make well-founded judgments and to arrive at adequate suggestions or
recommendations.
Business ethics is a form of applied ethics that examines ethical principles and moral or ethical
problems that arise in a business environment.
Business Ethics promotes good business by generating significant support within the
organization as well as outside it. Business ethics functions are based on a stakeholder theory of
entrepreneurship. The significant stakeholders of which are the shareholders, workers, managers,
customers, dealers and creditors. Business Ethics is not some abstract desirable idea, it is a need.
A society is able to function if its members adopt a code of behavior under which individuals
restrict their self-interest for the greater long-term good of the society.
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Why it is required????
In the increasingly conscience-focused marketplaces of the 21st century, the demand for more
ethical business processes and actions is increasing. Simultaneously, pressure is applied on
industry to improve business ethics through new public initiatives and laws (e.g. higher UK road
tax for higher-emission vehicles). Businesses can often attain short-term gains by acting in an
unethical fashion; however, such antics tend to undermine the economy over time. In the last two
decades only, we have encountered so many cases of ethical issues relating business that
underlines the importance why it is required. Some very important cases relating to business
ethics that gathered the attention of everyone are:- Copy Right Issues and Napster Case, Who
owns natural resources, Fire in Uphar Cinema, money talks everywhere, Harshad Mehta story,
Home Trade goes bust, M S Shoes Case and Ethical issues in Genome Research.
Practicing business ethics ensure that the organization holds a leadership position in the eyes of
the public, it increase capital of its employees as the trust of the people in company increases,
brings about greater degree of corporate integrity and transparency at all levels, institutes a
system that binds every functionary of the organization into an ethical unit and over all to resolve
ethical dilemmas in accordance with company values.

Overview of issues in business ethics

General business ethics
➢ This part of business ethics overlaps with the philosophy of business, one of the aims of
which is to determine the fundamental purposes of a company. If a company's main
purpose is to maximize the returns to its shareholders, then it should be seen as unethical
for a company to consider the interests and rights of anyone else.
➢ CSR: an umbrella term under which the ethical rights and duties existing between
companies and society is debated.
➢ Issues regarding the moral rights and duties between a company and its shareholders:
fiduciary responsibility, stakeholder concept v. shareholder concept.
➢ Ethical issues concerning relations between different companies: e.g. hostile take-over,
industrial espionage.

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➢ Leadership issues: corporate governance.

➢ Political contributions made by corporations.
➢ Law reform, such as the ethical debate over introducing a crime of corporate
manslaughter.
➢ The misuse of corporate ethics policies as marketing instruments.

Ethics of accounting information

➢ Creative accounting, earnings management, misleading financial analysis.
➢ Insider trading, securities fraud, bucket shops, forex scams: concerns (criminal)
manipulation of the financial markets.
➢ Executive compensation: concerns excessive payments made to corporate CEO's and top
management.
➢ Bribery, kickbacks, and facilitation payments: while these may be in the (short-term)
interests of the company and its shareholders, these practices may be anti-competitive or
offend against the values of society.
➢ Cases: accounting scandals, Enron, WorldCom
Ethics of human resource management
The ethics of human resource management (HRM) covers those ethical issues arising around the
employer-employee relationship, such as the rights and duties owed between employer and
employee.
➢ Discrimination issues include discrimination on the bases of age (ageism), gender, race,
religion, disabilities, weight and attractiveness. See also: affirmative action, sexual
harassment.
➢ Issues surrounding the representation of employees and the democratization of the
workplace: union busting, strike breaking.
➢ Issues affecting the privacy of the employee: workplace surveillance, drug testing. See
also: privacy.
➢ Issues affecting the privacy of the employer: whistle-blowing.

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➢ Issues relating to the fairness of the employment contract and the balance of power
between employer and employee: slavery, indentured servitude, employment law.
➢ Occupational safety and health.

Ethics of sales and marketing

Marketing which goes beyond the mere provision of information about (and access to) a product
may seek to manipulate our values and behavior. To some extent society regards this as
acceptable, but where is the ethical line to be drawn? Marketing ethics overlaps strongly with
media ethics, because marketing makes heavy use of media. However, media ethics is a much
larger topic and extends outside business ethics.
➢ Pricing: price fixing, price discrimination, price skimming.
➢ Anti-competitive practices: these include but go beyond pricing tactics to cover issues
such as manipulation of loyalty and supply chains. See: anti-competitive practices,
antitrust law.
➢ Specific marketing strategies: green wash, bait and switch, shill, viral marketing, spam
(electronic), pyramid scheme, planned obsolescence.
➢ Content of advertisements: attack ads, subliminal messages, sex in advertising, products
regarded as immoral or harmful
➢ Children and marketing: marketing in schools.
➢ Black markets, grey markets.
➢ Cases: Benetton.

Ethics of production
This area of business ethics deals with the duties of a company to ensure that products and
production processes do not cause harm. Some of the more acute dilemmas in this area arise out
of the fact that there is usually a degree of danger in any product or production process and it is
difficult to define a degree of permissibility, or the degree of permissibility may depend on the
changing state of preventative technologies or changing social perceptions of acceptable risk.
➢ Defective, addictive and inherently dangerous products and services (e.g. tobacco,
alcohol, weapons, motor vehicles, chemical manufacturing, bungee jumping).

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➢ Ethical relations between the company and the environment: pollution, environmental
ethics, carbon emissions trading
➢ Ethical problems arising out of new technologies: genetically modified food, mobile
phone radiation and health.
➢ Product testing ethics: animal rights and animal testing, use of economically
disadvantaged groups (such as students) as test objects.
➢ Cases: Ford Pinto scandal, Bhopal disaster, asbestos / asbestos and the law, Peanut
Corporation of America.
Ethics of intellectual property, knowledge and skills
Knowledge and skills are valuable but not easily "ownable" as objects. Nor is it obvious that has
the greater rights to an idea: the company who trained the employee or the employee
themselves? The country in which the plant grew or the company which discovered and
developed the plant's medicinal potential? As a result, attempts to assert ownership and ethical
disputes over ownership arise.
➢ Patent infringement, copyright infringement, trademark infringement.
➢ Misuse of the intellectual property systems to stifle competition: patent misuse, copyright
misuse, patent troll, submarine patent.
➢ Even the notion of intellectual property itself has been criticized on ethical grounds: see
intellectual property.
➢ Employee raiding: the practice of attracting key employees away from a competitor to
take unfair advantage of the knowledge or skills they may possess.
➢ The practice of employing all the most talented people in a specific field, regardless of
need, in order to prevent any competitors employing them.
➢ Bioprospecting (ethical) and biopiracy (unethical).
➢ Business intelligence and industrial espionage.
➢ Cases: private versus public interests in the Human Genome Project
Conclusion

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Corporate Social Responsibility and Business Ethics are very closely related to each other, they
complement each other, the existence of Corporate Social Responsibility cannot be imagined
without the existence of business ethics and similarly, we cannot imagine the existence of
business ethics if the company doesn’t believe in the concept of CSR. If the company believes
CSR as a wastage of its resources or something that needs to be done by the government, then
they will hardly take any heed of it. One other case is the use of CSR activities for window
dressing or to hide something unethical that they are doing, as in case of McDonalds. There is
another group of companies like Times group which are involved in activities like Lead India
campaign, Teach India campaign etc. which are helping the society in a great way and improving
the status of youth. These programs are enlightening the youth with their responsibilities towards
the society.
Now the question arises, why some companies are involved in these activities and some are not.
Is it just to earn a name for themselves or are the companies really understanding their
responsibility towards the society. This is a question which all the companies want to skip when
asked and the companies which answers the question, declare themselves the most ethical and
socially responsible company of the world but, the realty shows its face when the world
encounter something like a “Golden Peacock Award” winner company for global governance
coming up with a debacle like this (Satyam fiasco). So, where we are, when we talk about
Corporate Social Responsibility and Ethical Issues in Business. It’s still a BIG QUESTION
needed to be answered before it is too late….

“A corporate unit is not just a site where profits are made, and jobs are performed, it is also a
culture-producing unit.”
Dipankar Gupta

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BIBLIOGRAPHY

 www.bsr.org Business Social Responsibility

 www.csrforum.com Corporate Social Responsibility Forum
 www.infochangeindia.org Info Change India
 www.undp.org.in United Nations Development Program
 www.bitc.org.uk Business in the Community
 www.wikipedia.org Wikipedia resources on CSR and some other related facts.

A Entry to IMED Paper Presentation on CSR and Business Ethics of BVP