Corporate Ethics and responsibility

towards Stakeholders

Presented by
Nidhi Garg
Tushar Joshi
Nibha
Nalin
Sumeet
Sourabh sareen
3-2

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

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
organisation
Freeman

• 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 1
Dormant
Stakeholder
LEGITIMACY
4
Dominant
Stakeholder
5
7 2
Dangerous Definitive Discretionary
Stakeholder Stakeholder Stakeholder

6
Dependent
Stakeholder
3
Demanding
URGENCY 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

Customers

Owners Employees

Unions Suppliers

Local
Government Community

Strategic Society in
partners General
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
Stakeholder Group Examples of Concerns
 Owners and  Financial Soundness
Investors  Consistency in meeting shareholder
expectations
 Sustained profitability
 Timely and accurate disclosure of
financial information
Stakeholders’ Concerns (cont.)
Stakeholder Group Examples of Concerns
 Customers  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.)
Stakeholder Group Examples of Concerns
 Employees  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.)
Stakeholder Group Examples of Concerns
 Society  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.)
Stakeholder Group Examples of Concerns
 Society  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