Professional Documents
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03 Handout 1 PDF
03 Handout 1 PDF
Some companies, feeling a "social responsibility" toward the common good, may seek to
limit their pollution more than the law requires.
4. Abide by Labor Laws
Businesses that hire employees must abide by a slew of laws relating to how they treat their
employees. These include laws related to how much an employee can be paid, how many
hours he may work, and the criteria under which he can be hired and fired.
5. Avoid Restrictive Trade Practices
Companies are forbidden from engaging in certain kinds of restrictive trade practices that
limit competition. For example, most companies may not develop monopolies within a
particular sector or provide substantial barriers for new companies to compete with them.
Restrictive trade practices of this kind can often reduce the quality of products available to
consumers and drive up prices.
6. Disclose Financial Statements
Companies must disclose a number of financial statements to the government in the form of
tax returns, and, if the company makes ownership of shares of stock commonly available, to
the public as well. This financial transparency helps to ensure that the company is not
violating any laws, such as withholding taxes and to aid the public in deciding whether to
invest in the company.
7. Avoid Corruption
The commercial organization should not take any type of favor from government officials by
bribing or influencing them.
8. Assist in Implementing Socio-Economic Policies
The government expects co-operation and help from the business sector to help in
implementing programs and policies relating to social and economic development.
9. Help Earn Foreign Exchange
The government also expects from a business organization that it will earn foreign currency
by exporting goods in the foreign market. The government requires this foreign currency for
importing valuable and important products.
10. Advise the Government
The business organization has to provide timely advice to the government in respect of
framing important policies such as Industrial policy, Import & Export policy, Licensing
policy, etc.
11. Contribute to Government Treasury
The commercial organization must contribute the funds to the government during
emergencies and natural calamities like floods, earthquakes, etc.
12. Contribute to Political Stability
The commercial organizations should work towards the political stability of the country. The
stable government often brings more return and peace in a democratic country.
Shareholders should be kept fully informed about the working of the company for healthy
growth of the business. The Companies Act 1956 also requires the company to give full
disclosure in the published statements.
3. Strengthen Share Prices
The company should strengthen the share prices by its growth, innovation, and
diversification. At the same time, shareholders should also offer wholehearted support and
co-operation to the company to protect their own interests.
Quality goods should be produced and supplied. Distribution system should make goods
easily available "to avoid artificial scarcities and after-sales service should be prompt.
Buying capacity and consumer preferences should be taken into consideration while deciding
the manufacturing policies.
2. Ensure Consumer’s Health and Safety
A key consumer issue is the quality and safety of products. Customers need clear instructions
for safe product use, including assembly and maintenance. To avoid customer harm and
danger, anticipate potential risks of your product and services in the design stage and
throughout the product lifecycle, from R & D to manufacturing, storage, and distribution, use
and disposal, reuse and recycling. Whether or not legal safety regulations exist, products
should be safe for their intended use and if mi used in a way that can be foreseen.
3. Provide Free Training
The commercial organization should arrange to train the customers either free or for a fee. It
must be in the case of computers, etc.
4. Be Fair with Prices
The customers should not be cheated by charging high prices. It is not possible to fool the
customer at all the time. Thus, fair price converts a customer into a permanent customer.
5. Be Honest in Advertising and Marketing
The customers want to know the facts, features, advantages, side-effects, etc, of the product.
The advertisement conveys this information. Thus, the company must see that the
advertisement is not being misleading and it must be done by providing the true and actual
information.
6. Be Honest in Dealings
Never lie to your customers. It is foolish to cook false stories. You will be caught. In today's
world, where information is just a click away, everyone does his/her thorough research
before purchasing something. Unnecessarily you will lose your respect in front of them. If
you can't deliver something, please mention it clearly. They might not invest in that
particular product but believe me, would definitely come back to you in near future just
because you were honest, and guided them correctly. It is pointless to badmouth your
competitors.
7. Attend to Complaints
The consumer complaints must be attended immediately. When major issues occur, employ a
system for making quick and accurate decisions on steps and measures to take while placing
top priority on not inconveniencing the customers.
8. Service Even After Sales
The company is expected to provide after sale service for maintenance of goods during the
period of warranty. Efficient and effective after sale service helps to establish a good
relationship between the customers and the company.
9. Respect Customers’ Time
Respect your customer's time. Do not decide the time and venue as per your availability and
comfort. If the customer wants to meet you at 6 in the evening, make sure you are there on
time. Neither arrives too early nor too late. Do not keep your customers waiting. Do not
forget that there are several options available in the market. Your loss is someone else's gain.
10. Treat Customers well
Treat your customers as kings and do not think of them only when you have a pressure to
meet your targets within the stipulated time frame. Understand that a customer buys your
products or services only when he/she trusts your brand and most importantly believes in
you. Understand the needs and requirements of your clients. Find out as to why they need a
particular product and how your product would benefit them. You need to build a strong
relationship with your customers for them not only to remain your loyal clients but also bring
more people along with them. It is the responsibility of the organization to give correct
suggestions and feedbacks to customers. Avoid making fake promises and commitments
which you yourself know are difficult to fulfill.
Major Ethical Issues in Entrepreneurship (as cited in Jerusalem, Palencia, & Palencia, 2017)
act in good faith concerning your partner. The better course of action may be to simply buy
out his interest in the business.
2. Gross Negligence – Suppose you are on the board of directors for a publicly traded
corporation. You and your fellow board members, in hopes of heading off early for the
holidays, rush through the investigatory process involved in a much-anticipated merger. As a
board member, you have a duty to exercise the utmost care respecting decisions that affect
the corporation and its shareholders. Failing to properly investigate a matter that affects their
interests could be viewed as gross negligence supporting a breach of your ethical and legal
duty of care.
C. Distribution dilemmas – Ethics is a prime concern in marketing, and the areas of price,
placement, and promotion are no exception. Pricing refers to the way in which prices are set
for consumers considering the cost of inputs, distribution, and overhead. Placement involves
the strategic positioning of products within retail stores. Promotions involve short-term price
discounts or giveaways. Each of these areas presents its own set of ethical dilemmas,
challenges, and legal guidelines to navigate.
1. Pricing Strategy Ethics – Price collisions can be a major source of ethical pressure in many
industries, and artificial price-fixing is illegal in a wide range of countries. Price collusion
exists when a number of competitors agree to set prices at a certain level, bypassing the
natural market forces of supply and demand and creating an unfair advantage over
consumers.
2. Product Placement Ethics – End-caps, point-of-sale displays, and demo kiosks are all
examples of positioning techniques that are inherently harmless, but which can be used in
arguably unethical ways.
3. Ethics and Promotions – Promotions are designed to boost short-term sales by providing
irresistible value propositions to consumers. Coupons, holiday sales events, mail-in rebates,
and giveaways all fall under the promotions category. The “bail and switch” tactic is widely
considered unethical, yet many companies still practice this promotions technique.
D. Fraud – in business takes up so many forms and sizes. It can be in the form of financial
misconduct or misrepresentation.
Examples of financial misconduct include price-fixing, or an illegal agreement between
industry competitors to “fix” the price of a product at an artificially inflated level; physicians
who refuse to treat non-insured patients, or perform unnecessary procedures to make more
money; tax evasion; tax fraud; and “cooking the books” to make the company look more
profitable than it is.
Corporate misrepresentation can take many forms. It can be as simple as a salesman who lies
about his company’s products, or it can be false or misleading advertising. Misrepresentation
can involve a cover-up of illegal workplace conditions or transactions; falsified data in a
shareholder report; lying to a union about corporate profits, or hiding or denying safety
problems with a product.
5. Tortious Interference – when one competitor convinces a party having a relationship with
another competitor to breach a contract with, or duty to the other competitor.
6. Anti-competitive practices – prevent or reduce competition in a market.
7. Dumping – Foreign countries often use dumping as a competitive threat, selling products at
prices lower than their normal value. This can lead to problems in domestic markets. It
becomes difficult for these markets to compete with the pricing set by foreign markets,
leading to local producers and the local economy to suffer a result.
8. Exclusive dealing – A retailer or wholesaler is obliged by contract to only purchase from the
contracted supplier.
9. Price fixing – companies collude to set prices, effectively dismantling the free market.
10. Refusal to deal – two companies agree not to use a certain vendor.
11. Dividing territories – an agreement by two (2) companies to stay out of each other’s way
and reduce competition in the agreed-upon territories.
12. Limit pricing – is set by a monopolist at a level intended to discourage entry into a market.
13. Tying – products that aren’t naturally related must be purchased together.
14. Resale price maintenance – resellers are not allowed to set prices independently.
15. Religious/minority group doctrine – business must apply tribute to a significant normally
religious part of the community in order to engage in trade with that community.
F. Unfair Communication
Here are some examples of unfair communication in business practices.
1. Matthias Rath is a vitamin entrepreneur who used to be a doctor and is considered to be the
most powerful of all “crackpots”. He recommends vitamin pills to cure even serious
ailments. In UK ads, he claimed that 90% of cancer patients die within several months of
starting chemo, arguing that corporations let them die for profit. Yet, he uses his lies to sell
an HIV/AIDS “miracle cure”, saying that HIV doesn’t cause AIDS and antiretroviral drugs
won’t work, leading to the spread of infections in South Africa.
2. Johnson & Johnson to pay $417m in cancer lawsuit - A Los Angeles jury ordered Johnson
& Johnson to pay a record $417 million to Echevarria, a hospitalized woman who claimed
in a lawsuit that the talc in the company's iconic baby powder causes ovarian cancer when
applied regularly for feminine hygiene.
“The annual Global RepTrak® 100 spotlights the companies that truly understand what they
stand for and how to reinforce the emotional bond with their stakeholders across all the markets
they serve”, said Michele Tesoro-Tess, RI executive partner. “This year’s Top 10 companies
come from different sectors: reputation is a cross-industry asset and companies continuously
invest on it because their leadership finally recognized its impact on business performance.”
RI’s RepTrak® System measures the general public’s perception of the world’s top companies
on seven key rational dimensions of reputation: products and services, innovation, workplace,
governance, citizenship, leadership, and performance. An “Excellent” reputation is represented
by an overall RepTrak® Pulse score of 80 or higher. For the first time, the company with the
highest rating and the top spot (Rolex) falls into the “Excellent” range. A RepTrak® Pulse score
of 70-79 is considered “Strong,” while 60-69 is “Average.” None of the companies in 2017
RepTrak® Top 100 scored below 64.
Regarding specific stakeholder expectations, respondents identified Rolex as the global leader
in products and services, and LEGO Group as best in governance, while, Google was perceived
as leading in 5 dimensions: innovation, workplace, citizenship, leadership, and performance.
In the tech sector, Intel returned to the top 10 (to 8th place) in 2017 after a one-year absence.
Meanwhile, Google (5th place) fell two spots, Microsoft fell out of the top 10 to 11th, and
Apple slipped 10 spots to 20th place with a drop of 1.7 points. Samsung posted the most notable
decline with its RepTrak® Pulse score dropping 4.0 points vs. 2016 and is now in 70th place
overall.
Among automakers, both BMW Group (12th place) and Daimler (27th place) both fell out the
top 10, while Toyota, Honda, Ford and GM all showed modest gains vs. 2016. Meanwhile,
Volkswagen, who continues to deal with the aftermath of its emissions scandal nonetheless
returned to the top 100 (in 100th place) and saw its RepTrak® Pulse score recover by 3.4 points
to 64.73 – one of the largest increases in 2017.
“For brands looking to benchmark how their reputation compares to industry peers, our Global
RepTrak® 100 is the place to start”, said Allen Bonde, RI chief marketing officer.
“Looking at top performers, it’s clear that offering high-quality products, standing behind them,
and meeting customer needs is foundational to delivering on the brand promise. But our data
also shows that companies with a strong sense of purpose who are committed to improving on
all dimensions of reputation – especially governance and citizenship – tend to be the most
highly regarded.
1. Users
2. Employees
3. Advertisers and other customers
4. Investors
5. Governments
6. Communities
The list above is arranged to indicate the priority or importance of the stakeholders based on
Google’s CSR efforts. These stakeholders affect the company by pushing for the satisfaction of
their interests. Google considers users as the most significant in terms of their effect on the firm.
B. Employees
Employees are the second priority among Google’s stakeholders. Employees are interested in
proper compensation and a rewarding experience in working for the company. For example,
many workers want to work for Google because the company is perceived as one of the best
firms to work for. This stakeholder group is important because they define the company’s
capabilities, such as the capability to innovate rapidly.
Google’s CSR efforts address the interests of its employees as a major stakeholder group through
competitive compensation and a fun workplace design. The company’s compensation strategy
includes high salaries and various incentives and benefits, such as free meals and flexible
workflows. Google’s facilities are also fun workplaces where workers can exercise, play games
and enjoy sharing ideas with each other. Also, the company indirectly addresses the working
conditions of suppliers’ employees through the Google Supplier Code of Conduct, which covers
concerns on employment practices and occupational health and safety. Thus, Google’s CSR
efforts effectively satisfy the interests of employees as stakeholders in the business.
D. Investors
Since it went public in 2004, Google now considers investors as a major stakeholder group
influencing CSR activities. Investors are interested in ensuring that Google grows its profits.
Investors are important stakeholders because they determine the availability of capital that the
company uses in its business.
Google’s CSR efforts generally focus on providing useful products. While these efforts satisfy
stakeholders like users and advertisers or customers, they also satisfy Google’s investors. The
usefulness of these products makes them popular, widely used, and profitable. In addition,
Google’s research and development strategies can be considered as part of the firm’s holistic
approach to its corporate social responsibilities. These R&D strategies aim to provide useful
products that are profitable.
E. Governments
Governments are a major stakeholder group. They affect Google through regulations. The
company deals with many governments because its business is global. As stakeholders,
governments are interested in ensuring Google’s regulatory compliance. These stakeholders are
important because they can approve or prohibit Google’s business operations in their
jurisdictions.
Google’s holistic CSR approach involves an emphasis on following the law. The company’s
business philosophy states: You can make money without doing evil. To follow this philosophy,
the firm ensures that all of its business activities comply with regulatory requirements. Thus,
Google’s CSR policies satisfy the interests of governments as stakeholders.
F. Communities
Communities are also stakeholders in Google’s business. Communities are interested in direct or
indirect benefits that they get from the company. Theoretically, firms can benefit communities
through charity programs, philanthropy, and related activities. Communities are important
stakeholders because they can affect customers’ perception and response to Google’s products.
Google’s CSR efforts include charity programs through Google.org, which has already provided
more than $100 million in grants and investments. Google.org aims to address climate change,
global public health, and global poverty. In addition, to address the stakeholder group of
communities, Google also includes international environmental standards and ethics in its
Supplier Code of Conduct. These efforts also relate to the firm’s philosophy: You can make
money without doing evil. Thus, the company’s CSR efforts have considerable effectiveness in
satisfying the interests of the stakeholder group of communities.
These responsibilities are ordered from bottom to top in the following illustration.
a. Economic responsibilities:
The first criterion of social responsibility is economic responsibility. The business institution is,
above all, the basic economic unit of society. Its responsibility is to produce goods and services
that a society wants and to maximize profit for its owners and shareholders. Economic
responsibilities, carried to the extreme, are called profit maximizing view; it was advocated by
Nobel economist Milton Friedman. This view argued that a company should be operated on a
profit-oriented basis, with its sole mission to increase its profits so long as stay within the rule of
the game.
b. Legal responsibilities
All modem societies lay down ground rules, laws and regulations that businesses are expected to
follow. A legal responsibility defines what society deems as important with respect to
appropriate corporate behavior. Businesses are expected to fulfill their economic goals within the
legal framework. Legal requirements are imposed by local councils, state and federal
governments and their regulating agencies. Organizations that knowingly break the law are poor
performers in this category. Intentionally manufacturing defective goods or billing a client for
work not done is illegal. Legal sanctions may include embarrassing public apologies or corporate
'confessions'.
c. Ethical responsibilities
Ethical responsibility includes behavior that is not necessarily codified into law and may not
serve the organization's direct economic interests. To be ethical, organization's decision makers
should act with equity, fairness, and impartiality, respect the rights of individuals and provide
different treatments of individual only when differences between them are relevant to the
organization's goals and tasks. Unethical behavior occurs when decisions enable an individual or
organization to gain expense of society.
d. Discretionary responsibilities
Discretionary responsibility is purely voluntary and guided by an organization's desire to make
social contributions not mandated by economics, laws, or ethics. Discretionary activities include
generous philanthropic contributions that offer no payback to the organization and are not
expected. Discretionary responsibility is the highest criterion of soda' responsibility because it
goes beyond societal expectations to contribute to the community’s welfare.
Reference:
Jerusalem, V., Palencia M, & Palencia J. (2017). Business ethics and social responsibility:
concepts, principles, & practices of ethical standards. Manila, Philippines:
FASTBOOKS Educational Supply, Inc.
Orjalo, V. & Frias S. (2016). Business ethics and social responsibility: principles, policies,
programs, and practices. Quezon City, Philippines: The Phoenix Publishing House, Inc.
Cortez, F. (2016). Business ethics and social responsibility. Quezon City, Philippines: Vibal
Group, Inc.