Professional Documents
Culture Documents
One of the most controversial issues that has been widely debated
over the last two decades is the corporate social responsibility of
organizations.
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but also to customers, employees, suppliers, and the general public.
This broader view places emphasis not only on profits but also on the
impact of business decisions on society. Recently, increasing numbers
of managers and firms have adopted the socioeconomic model and
they have done so for at least three reasons. First, a business is
dominated by the corporate form of ownership and the corporation is
a creation of society. Second, many firms are beginning to take pride
in their social responsibility records. Third, many business people
believe it is in their best interest to take the initiative in this area, prior
to their competitors. According to them, in the long run, the socio-
economic view might be the best approach for the company to adopt
in running the business.
The merits of the economic and the socioeconomic models have been
debated for years by business owners, managers, customers, and
government officials. Each side seems to have four major arguments
to reinforce its viewpoint. Proponents of the socioeconomic model
maintain that a business must be more than simply seek profits to
support their position and they offer that businesses cannot ignore
social issues because a business is a part of our society. Moreover, a
business has the technical, financial, and managerial resources that are
needed to tackle today's complex social issues. Additionally, by
helping resolve social issues, business can create a more stable
environment for long-term profitability. Finally, proponents of
socially responsible decision making practices argue that these types
of tactics can prevent increased government intervention, which
would force businesses to do what they fail to do voluntarily. All
these arguments are based on the assumption that a business has a
responsibility not only to stockholders but also to customers,
employees, suppliers and the general public.
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responsibility of government officials who are elected for that purpose
and who are accountable to the voters for their decision. These
arguments are obviously based on the assumption that the primary
objective of business is to earn profits, whereas government and social
institutions should deal with social problems.
Proposition 1
Proposition 2
Proposition 3
Proposition 4
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Proposition 5
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A growing awareness about the need for ecological sustainability and
the New Economy framework, with an unprecedented stress on
communication and image merchandising, have paved the way for a
new generation of business leaders concerned about the responses of
the community and the sustainability of the environment or the
corporate social responsibility.
Business perspective
Eco-social perspective
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stakeholders (including employees, consumers and affected
communities).
Rights-based perspective
There are three broad areas in which business companies can, and
should, discharge their social responsibility. These three areas are:
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(iii) The desire to establish a strategic relationship with the State or
society led some corporate bodies to invest in the establishment
of institutions that fulfill the specific requirements of the
community,
Ethical business
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how a business is conceptualized,
how a business is operated,
the notion of fair profit.
E. Social Responsiveness
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approach, and (3) the social responsiveness approach. Each of the
three approaches contains behavior that reflects a somewhat different
attitude with regard to businesses performing social responsible
activities. The social obligation approach, for example, considers
business as having primarily economic purposes and confines socially
responsible activity mainly to conformance to existing laws The social
responsibility approach sees business as having both economic and
societal goals. The social responsiveness approach considers business
as having both societal and economic goals as well as the obligation to
anticipate upcoming social problems and to work actively to prevent
their appearance.
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corporate social responsibility on a company’s bottom line, especially
since so many variables simultaneously influence financial
performance.
What about the proverbial flip side of the social responsibility coin?
Specifically, is there a “crisis” value to a firm’s reputation for social
responsibility, in which the benefit of social responsibility comes not
from increases in financial performance, but rather from insulation
from negative financial performance? Some research suggests that
firms having reputations for social responsibility may better withstand
crises and experience fewer economic losses than will firms lacking
such good reputations.
Those who are skeptical to CSR anticipate that, such initiative may
incur additional costs and hence would jeopardize overall
performance and sustainability of an organization. On the other hand,
those who advocate the adoption of CSR policies strongly feel that
such practices may instead, enhance reputation and subsequently
enable companies to reap long-term strategic benefits of maintaining
its legitimacy, competitiveness and sustainability in the market.
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On the other hand, it would give a cleaner societal reputation and
socially responsible identity to companies, involving the companies
and their employees in the long-term process of positive social
transition.
For Against
Public expectations Violation of profit
Long-run profits maximisation
Ethical obligation Dilution of purpose
Public image Costs
Better environment Too much power
Discouragement of further Lack of skills
governmental regulation Lack of accountability
Balance of responsibility and
power
Stockholder interests
Possession of resources
Superiority of prevention over
cure
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Chapter II
Managerial Ethics And Social Responsibility
Ethical issues can arise when companies must comply with multiple
and sometimes conflicting legal or cultural standards, as in the case of
multinational companies that operate in countries with varying
practices. The question arises, for example, should a company obey
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the laws of its home country, or should it follow the less stringent
laws of the developing country in which it does business?
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The third area in which ethical management practices can enhance
corporate health is in minimizing regulation from government
agencies. Where companies are believed to be acting unethically, the
public is more likely to put pressure on legislators and other
government officials to regulate those businesses or to enforce
existing regulations.
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1. The Golden Rule: Act in a way you would want others to act
toward you.
2. The utilitarian principle: Act in a way that results in the
greatest good for the greatest number.
3. Kant's categorical imperative: Act in such a way that the action
taken under the circumstances could be a universal law, or rule,
of behavior.
4. The professional ethic: Take actions that would be viewed as
proper by a disinterested panel of professional peers.
5. The TV test: Always ask, "Would I feel comfortable explaining
to a national TV audience why I took this action?"
6. The legal test: Ask whether the proposed action or decision is
legal. Established laws are generally considered minimum
standards for ethics.
7. The four-way test: Ask whether you can answer "yes" to the
following questions as they relate to the decision: Is the
decision truthful? Is it fair to all concerned? Will it build
goodwill and better friendships? Will it be beneficial to all
concerned?
D. Ethical Principles
Beneficence
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This principle is mainly associated with the utilitarian ethical theory.
An example of "doing good" is found in the practice of medicine in
which the health of an individual is bettered by treatment from a
physician.
Least harm
There are, however, two ways of looking at the respect for autonomy.
In the paternalistic viewpoint, an authority prioritizes a dependent
person's best interests over the dependent person's wishes. For
example, a patient with terminal cancer may prefer to live the rest of
his life without the medication that makes his constantly ill. The
physician, on the other hand, may convince the patient and his family
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members to make the patient continue taking his medication because
the medication will prolong his life. In this situation, the physician
uses his or her authority to manipulate the patient to choose the
treatment that will benefit him best medically. As noted in this
example, one drawback of this principle is that the paternalistic figure
may not have the same ideals as the dependent person and will deny
the patient's autonomy and ability to choose his treatment. This, in
turn, leads to a decreased amount of beneficence.
Justice
E. Ethical Theories
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the guidelines within the ethical theory itself. People usually base
their individual choice of ethical theory upon their life experiences.
Deontology
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does it protect the welfare of others from the deontologist's decision.
Since deontology is not based on the context of each situation, it does
not provide any guidance when one enters a complex situation in
which there are conflicting obligations.
Utilitarianism
As with all ethical theories, however, both act and rule utilitarianism
contains numerous flaws. Inherent in both are the flaws associated
with predicting the future. Although people can use their life
experiences to attempt to predict outcomes, no human being can be
certain that his predictions will be true. This uncertainty can lead to
unexpected results making the utilitarian look unethical as time passes
because his choice did not benefit the most people as he predicted. For
example, if a person lights a fire in a fireplace in order to warm his
friends, and then the fire burns down the house because the soot in the
chimney caught on fire, then the utilitarian now seems to have chosen
an unethical decision. The unexpected house fire is judged as
unethical because it did not benefit his friends.
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Another assumption that a utilitarian must make is that he has the
ability to compare the various types of consequences against each
other on a similar scale. However, comparing material gains such as
money against intangible gains such as happiness is impossible since
their qualities differ to such a large extent.
A third failing found in utilitarianism is that it does not allow for the
existence of supererogation or heroes. In other words, people are
obligated to constantly behave so that the most people benefit
regardless of the danger associated with an act. For instance, a
utilitarian who sacrifices her life to save a train full of people is
actually fulfilling an obligation to society rather than performing a
selfless and laudable act.
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Rights
In the rights ethical theory the rights set forth by a society are
protected and given the highest priority. Rights are considered to be
ethically correct and valid since a large or ruling population endorses
them. Individuals may also bestow rights upon others if they have the
ability and resources to do so. For example, a person may say that his
friend may borrow the car for the afternoon. The friend who was
given the ability to borrow the car now has a right to the car in the
afternoon.
Casuist
One drawback to this ethical theory is that there may not be a set of
similar examples for a given ethical dilemma. Perhaps that which is
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controversial and ethically questionable is new and unexpected. Along
the same line of thinking, a casuistical theory also assumes that the
results of the current ethical dilemma will be similar to results in the
examples. This may not be necessarily true and would greatly hinder
the effectiveness of applying this ethical theory.
Virtue
The virtue ethical theory judges a person by his character rather than
by an action that may deviate from his normal behavior. It takes the
person's morals, reputation and motivation into account when rating
an unusual and irregular behavior that is considered unethical. For
instance, if a person plagiarized a passage that was later detected by a
peer, the peer who knows the person well will understand the person's
character and will be able to judge the friend. If the plagiarizer
normally follows the rules and has good standing amongst his
colleagues, the peer who encounters the plagiarized passage may be
able to judge his friend more leniently. Perhaps the researcher had a
late night and simply forgot to credit his or her source appropriately.
Conversely, a person who has a reputation for scientific misconduct is
more likely to be judged harshly for plagiarizing because of his
consistent past of unethical behavior.
One weakness of this ethical theory is that it does not take into
consideration a person's change in moral character. For example, a
scientist who may have made mistakes in the past may honestly have
the same late night story as the scientist in good standing. Neither of
these scientists intentionally plagiarized, but the act was still
committed. On the other hand, a researcher may have a sudden change
from moral to immoral character may go unnoticed until a significant
amount of evidence mounts up against him or her.
F. Summary
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For example, a utilitarian may use the casuistic theory and compare
similar situations to his real life situation in order to determine the
choice that will benefit the most people. The deontologist and the rule
utilitarian governor who are running late for their meeting may use the
rights ethical theory when deciding whether or not to speed to make it
to the meeting on time. Instead of speeding, they would slow down
because the law in the rights theory is given the highest priority, even
if it means that the most people may not benefit from the decision to
drive the speed limit. By using ethical theories in combination, one is
able to use a variety of ways to analyze a situation in order to reach
the most ethically correct decision possible (1).
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Chapter III
Value-based management
A. Introduction
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A few key events have shaped VBM into a financial management
framework. The seminal event was the movement from accounting-
based measures of performance such as net income to value-based
metrics, such as economic profit. Traditional accounting-based
measures such as net income provide information on a company's
book returns but do not address how much economic capital was
invested, or amount of risk exposed to, to generate the returns on the
investment. Economic profit addresses these shortcomings by
including a capital charge. A capital charge is in essence a rental
charge for the capital used to generate the firm's profits. To calculate
the capital charge, you multiply the investment in the business by the
investors' expected percentage returns. If your profits are more than
the capital charge, then value is being created since investor
expectations were exceeded. Alternatively, if the profits do not cover
the capital charge then value is destroyed since the profits did not
cover the capital charge.
Let's take a quick look at a simple example to gain some insight into
the benefits of economic profit. We will build on the example from
above where we had the opportunity to earn Rs.10000/-. Let's assume
that instead of one opportunity that we actually have two opportunities
to earn Rs.10000/-. Should we pursue one, both, or neither?
If we are just concerned with growing net income, then our decision is
easy. We would pursue both projects if each had positive net income.
However, if we are concerned with value creation, we must find out
how much we have to invest in each project and the expected return.
Suppose the first project requires an investment of Rs. 50000/- while
the second project requires an investment of Rs.100000/-. We also
find out that both investments are of similar risk and require a 10%
return. Let's now look at the analysis and make a decision:
Project 1
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Project 2
It did not take long for practitioners to realize that on its own, a
performance-based metric was interesting, but for it to truly take hold,
incentive programs would need to be redesigned. Thus, incentive
plans were redesigned to pay people for value creation represented by
improvement in economic profit.
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Step 1. Gain Senior Management Commitment
Anything less than the full commitment of the senior team will
ultimately cause the initiative to fail and simply become another
"program of the month" that does not achieve the intended results. If
VBM does not have the backing of senior management and the Board
of Directors, do not pursue it, your organization will spend a lot of
money, time, and energy without receiving adequate returns from
your VBM investment.
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Performance measurement
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around all of its key management practices so that improvement
in economic profit over the long-term is the goal of the
organization. A good exercise during the budgeting and
planning process is to have business units calculate what level
of bonus will be paid out if projected performance is met. This
is an excellent way to move from a "manager" mindset to an
"owner" mindset.
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your company to a place where everyone in the organization can
answer the above questions, you are well on your way towards
developing a culture focused on value creation.
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Chapter IV
The “Greening” of Management
A. The Concept
Going green need not be daunting, complex or even costly, but it will
entail making changes in the way we live, work and produce goods
and services.
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Along with the concept of pollution prevention and efficient use of
resources, comes the 3R’s of waste management. Reduce, Reuse, and
Recycle. Reduction is the most beneficial and desirable. It is the idea
of using less raw material (wood, metal, water, energy, chemicals,
etc.) from the start, to produce as little waste as possible, save energy
and resources, the next best thing is to reuse it if possible. Finally if
you are unable to prevent waste from the start or to reuse the waste
created then, recycling can be considered. Although recycling does
help conserve resources and reduce wastes, there are economic and
environmental costs from the waste collection and recycling
processes.
B. Benefits of Greening
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Safer Conditions for Workers
Greening can sometimes eliminate the need for special permits and
reporting. Not having to prepare lengthy reports can save the business
money.
Environmental Protection
Quality Improvement
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C. How to undertake greening?
Getting Started
Environmental Team
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full impact of ideas and suggestions on all affected areas can be
understood. Your team members should also be environmentally
committed, creative, unbiased, and enthusiastic. Team members
should be assigned specific tasks, allowing each member to make a
valuable contribution. Meetings should be held on a regular basis to
share information, results, concerns and to ensure everyone is working
toward the same goals.
For the smaller business, the process is the same. The owner will be
the coordinator and the environmental team. How much of the
program you decide to implement will depend on your level of
commitment and available time. Most business greening efforts start
small, but once a person starts making changes, there is often a
snowball effect. By taking action wherever you can, you can make a
significant difference.
The goals in the environment protection plan are key. They specify
what is important to your business and what you hope to achieve.
They give a real result to be reached and once achieved, are causes for
celebration. They help to focus efforts and help create a team
environment as people come together to achieve them.
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are being made, and make sure there is full understanding of the new
policy and procedures. Make available a list of the committee
members so everyone knows whom they can contact.
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faced with too many changes in a short space of time since it may be
overwhelming for some people.
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conserve electricity and reduce energy use. Production processes
continue to be improved and new technologies are being developed to
curtail the required amounts of industrial water and various material
inputs. These combined efforts have made Samsung an industry leader
in reducing the environmental load.
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