Ethics and Social Responsibility

Ragil Sriharto
 The Nature of Ethics

Ethics – The inner-guiding moral

principles, values, and beliefs that
people use to analyze or interpret a
situation and then decide what is the
right or appropriate way to behave
 The Nature of Ethics

Business Ethics – A specialized

study of moral right and wrong
that concentrates on moral
standards as they apply to
business institutions,
organizations, and behavior
 The nature of Ethics

nBusiness Ethics:
nPrinciples and standards that
determine acceptable conduct in
business
Ethics and the Law

Neither laws nor

ethics are fixed
principles
 Ethics and the Law
• Ethical beliefs • Laws can
lead to the
development of change or
laws and disappear as
regulations to
prevent certain ethical beliefs
behaviors or change
encourage
others
Laws and Regulations

§ Laws and regulations encourage businesses to

conform to society s basic standards, values, and
attitudes.
§ Sarbanes-Oxley Act, 2002
§ Troubled Assets Relief Program
 Ethical Issues

[ ]
An identifiable problem, situation, or opportunity
that requires a person to choose from among
several actions that may be evaluated as right or
wrong, ethical or unethical
Ethical Issues

§ Involve all organizational activities

• For profit businesses
• Non-profits
• Government
• Schools and universities
§ Learning to recognize and resolve ethical issues are important
in maintaining an ethical business climate
 The Concept of Moral Dilemmas
• Moral Dilemma: • Exploitation:
– A conflict of – The taking advantage
of someone or
interests something for personal
involving ethical gain.
choices.

• Private Morality:
– Our personal
moral standards.
Moral Standards
Moral Standards

Utilitarian Rule
• Decision that produces the greatest good
for the greatest number

– How do you measure the benefits and

harms that will be done to each
stakeholder group?
– How do you evaluate the rights and
importance of each group?
 Moral Standards
• Moral Rights rule
– Decision that best maintains and protects
the fundamental or inalienable rights and
privileges of the people affected by it
• Justice rule
– Decision that distributes benefits and harms
among people and groups in a fair,
equitable, or impartial way
 Moral Standards
Practical rule
- Decision that a manager has no
hesitation about communicating to
people outside the company because
the typical person would think it is
acceptable
 Why Must a Business
Focus on Ethics?

The public expects ethical behavior

from its business institutions.

Customers demand ethical behavior.

Employees want to work for companies

that meet high ethical standards.

Exemplary ethical behavior is the right thing to do.

Why should managers behave
ethically?
The relentless pursuit of self-
interest can lead to a collective
disaster when one or more
people start to profit from being
unethical because this
encourages other people to act
in the same way
• Paying for these activities raised the amount it invested in developing, testing, and now distributing Mectizan to well over $200 million, without counting the cost of manufacturing the
drug itself. By 2010, Merck had given away more than 2.5 billion tablets of Mectizan worth approximately $3.5 billion and was providing the drug for free to 80 million people a year in
Africa, Latin America, and the Middle East. (Velasquez)
• By 2010, over 300 million people had received Mectizan to treat elephantiasis and 70 million more received it the following year. (Velasquez)

People in the Third World “will remember” that Merck helped them, he commented, and will respond favorably to the company in the future. Over the years, the company had learned that such
ac- tions have strategically important long-term advantages. “When I first went to Japan 15 years ago, I was told by Japanese business people that it was Merck that brought streptomycin to
Japan after World War II to eliminate tuberculosis which was eating up their society. We did that. We didn’t make any money. But it’s no accident that Merck is the largest American
pharmaceutical company in Japan today. (Velasquez)
 The Importance of Ethics in Business

• The Micro Perspective: the importance

of ethics within an organization/person
– Obtaining trust
• Expectation of competence performance
• Expectation of fiduciary responsibility
– Trust in business will:
• Reduces cost
• Make life more pleasant
• Improves efficiency
– Business Sustainability
 The Importance of Ethics in Business

• The Macro Perspective: the importance

of ethics within the economic system
– The right to own and control private
property
– Freedom of choice in buying and selling
goods and services
– The availability of accurate information
concerning those goods and services
Effects of Ethical/Unethical Behavior
Determinants of Ethics
Societal Ethics

Standards that govern how members

of a society should deal with one
another in matters involving issues
such as fairness, justice, poverty, and
the rights of the individual
People behave ethically because they
have internalized certain values, beliefs,
and norms
Occupational Ethics

Standards that govern how members of a

profession, trade, or craft should conduct
themselves when performing work-related
activities

– Medical & legal ethics

Individual Ethics

Personal standards and values that

determine how people view their
responsibilities to other people and
groups
– How they should act in situations when
their own self-interests are at stake
Organizational Ethics

Guiding practices and beliefs through

which a particular company and its
managers view their responsibility
toward their stakeholders
– Top managers play a crucial role in
determining a company s ethics
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 Social Responsibility
Way a company views its duty or
obligation to make decisions that
protect, enhance, and promote
the welfare and well-being of
stakeholders and society as a
whole
The Pyramid of
Social Responsibility
Social Responsibility
Approaches to Social Responsibility
Approaches to Social Responsibility

Obstructionist approach –
Companies choose not to behave in a
social responsible way and behave
unethically and illegality
Approaches to Social Responsibility

Defensive approach – companies

behave ethically to the degree that
they stay within the law and abide
strictly with legal requirements
Approaches to Social Responsibility

Accommodative approach –
Companies behave legally and
ethically and try to balance the
interests of different stakeholders as
the need arises
Approaches to Social Responsibility

Proactive approach –
Companies actively embrace socially
responsible behavior, going out of
their way to learn about the needs of
different stakeholder groups and
utilizing organizational resources to
promote the interests of all
stakeholders