BUSINESS ETHICS

UNIT – I

 What is ethics?

The word “ethics” is derived from the Greek word “ethos” which refers to character, guiding beliefs,
standards or ideals that pervade encompass a group, community or people. All individuals are
accountable to their community for their behavior. The community can exist in the forms of
neighborhood, profession, city, state, etc. in the present context; ethics is used in two ways:

1) As a field of study
2) As a behavioral pattern

As a field of study, ethics is a branch of moral philosophy – a sense of rightness or wrongness of

actions, motives and the results of these actions. In short, it is a discipline that identifies good or evil, just
or unjust, fair or unfair practices, about moral duty.

As a behavioral pattern, ethics relates to behavior that is ethical.

The system addresses the questions of the human morality, such as what should be a standard way for
people to live? Or what are the appropriate actions in the given situations? What should be an ideal
human conduct; etc.

Ethics is a set of standards, or a code, or value system, by which free human actions are
determined as ultimately right or wrong, good or evil. If an action agrees with these standards, it
is ethical; if it does not agree, it is unethical.

 Concept of business ethics

The field of business ethics focuses on examining and promoting appropriate conduct and policies within
the context of commercial enterprise, both at the individual and the organizational level.

Business ethics cover all levels of business activity, including the obligations and responsibilities of
businesses to customers, employees, other businesses, national and multinational governments, and
the environment.

 Definition of Business Ethics

“Business ethics comprises the principles and standards that guide behavior in the world of business.”
--O C Ferrell

“Business ethics is the study of business situations, activities and decisions where issues of right and
wrong are addressed.” -- Andrew Crane & Dirk Matten

“Business ethics can be defined as the principles and standard that determines acceptable conduct in
business organizations.” -- M P Vijay Kumar

 Differences between Ethics and Values

The fundamental differences between ethics and value are described in the given below points:
1. Ethics refers to the guidelines for conduct, that address question about morality where as Value
is defined as the principles and ideals, which helps them in making the judgment of what is more
important.
2. Ethics is a system of moral principles where as values are the stimulus of our thinking?
3. Values strongly influence the emotional state of mind. Therefore it acts as a motivator. On the
other hand, ethics compels to follow a particular course of action.
4. Ethics are consistent, whereas values are different for different persons, i.e. what is important for
one person, may not be important for another person.
5. Values tell us what we want to do or achieve in our life, whereas ethics helps us in deciding what
is morally correct or incorrect, in the given situation.
6. Ethics determines to what extent our options are right or wrong whereas value defines our
priorities for life.

 Nature of Business Ethics

Ethical values: business ethics is concerned with morality in business. In today’s world, business
community forms a large part of the society and its actions are bound to have a direct impact on the well
being and welfare of the society. Business affects society in terms of what it does and through what
products it supplies. Therefore, it is necessary that business community conducts its activities with self –
check, self- control, self- sacrifice, keeping always in mind the interest of community at large.
Relative terms: ethics is a relative terms i.e. the concept of morality and immorality differs from one
individual to other of society. What is moral in one society may be immoral in other.
Interest of society: business ethics implies that the business should do first good to the society and
then to itself. Business is an important institution and has a social responsibility t protect the interest of
all those groups like employees, shareholders, consumers who contribute to the success of business.
Businesses – society relationship: business ethics set the terms and standards to understand
business- society relationship. It indicates what society expects from business and what it thinks about
business.
Provide frameworks: like an individual, business is also bound by social rules and regulations.
Business is expected to confine its activities within the limits of social, legal, cultural, economic
environment.

 Evolving ethical values over Time

Business ethics refers to how ethical principles guide a business's operations. Common issues that fall
under the umbrella of business ethics include employer-employee relations, discrimination,
environmental issues, bribery and insider trading, and social responsibility. While many laws exist to set
basic ethical standards within the business community, it is largely dependent upon a business's
leadership to develop a code of ethics. Practicing strong ethics keeps a business within the parameters
of the law; as well as building goodwill and brand equity. Popular social issues largely drive business
ethics; as different issues come to the forefront, organizations respond by bringing their ethical tenets in
line with the new social norms.

Business Ethics in the 60s

The 1960s brought the first major wave of changes in business ethics. Cultural values were shifting, with
individualism and fierce dedication to social issues such as environmentalism and world peace coming
into vogue. While young workers were idealistic and wanted to make the world a better place, employers
found their work ethic, compared to that of previous generations, to be lacking. Drug use was rampant,
and the new focus on individualism caused many workers to look upon their employers with disdain.
Companies responded by beefing up human resources departments and establishing mission
statements and codes of conduct. In response to the changing desires of their employees, however,
businesses also began embracing social responsibility at a level not previously seen; the 1960s saw
companies trumpet environmental friendliness for the first time and find new ways to give back to their
communities.

Major Events in the 70s and 80s

During the 1970s and 1980s, two events shaped changes in business ethics: defense contractor
scandals that became highly publicized during the Vietnam War and a heightened sense of tension
between employers and employees. In response, the government implemented strict policies governing
defense contractors, and companies revamped contracts with employees to focus less on rigid
compliance and more on values; popular management philosophy shifted from pure authoritarianism to
more collaboration and working on equal footing.

The 90s and Environmentalism

The 1990s saw a rebirth of environmentalism, social responsibility reaching new heights and graver
legal ramifications for ethical missteps. Tobacco companies and junk food manufacturers faced
heightened scrutiny, along with several highly publicized lawsuits, over the public health ramifications of
their products. Oil companies and chemical companies had to contend with increasing public pressure to
answer for environmental damage. Class action lawsuits rapidly gained in popularity; in response,
businesses were forced to spend more on their legal departments.

The Online Realm

From the year 2000 forward, business ethics have expanded to the online realm. The big ethical
dilemmas of the 21st century have mostly centered on cybercrimes and privacy issues. Crimes such
as identity theft, almost unheard of 20 years ago, remain a huge threat to anyone doing business online
– a majority of the population. As a result, businesses face social and legal pressure to take every
measure possible to protect customers' sensitive information. The rise in popularity of data mining and
target marketing has forced businesses to walk a fine line between respecting customers' privacy and
using their online activities to glean valuable marketing data.

 Ethical Dilemmas
Meaning
You will recall that an ethical dilemma forces us to choose between two 'seemingly' right answers or
viable solutions. Formally speaking, an ethical dilemma is a conflict between two moral imperatives, in
which to obey one will result in transgressing the other. Dilemmas arise due to a conflict between the
fundamental ethical theories and one or more of the ethical principles.

Business Ethical Dilemmas

There are three questions you need to ask yourself as an employer before hiring someone. One, is it
legal and in accordance with the company and civil laws? Two, does it seem like a balanced decision
that keeps in mind fairness and creates a win-win situation for the organization and the employee?
Three, is it right i.e. how does it make you feel and what do you think other employers would do in your
position? With these examples of a business ethical dilemma, it will be easier to understand what we’re
talking about.

 Example 1

An employer X has been running a consulting business for a long time and needs to hire a person to
help her manage it. She does several interviews and finally employs a candidate Y for the job who is
asked to start work from the following week. In the mean time, X gets a call from her friend who
recommends her Z – an extremely talented and deserving person for the job. Although X refuses, her
friend insists. Z comes in with the perfect resume and is liked by the employer. Now, what? Dilemma lies
in choosing someone who is best for the business or someone who ethically has the first say.

 Solution: 

The solution to the above issue can be handled by referring to the three basic questions of ethical
dilemmas in business.

 Is it legal? There are two ways to look at this. If Y has already resigned from her previous job, it
makes it legal for the company to hire her and because she has already been made the offer, the
company is actually legally bound to make good the offer. If Y is still a part of her old job, then
there is ambiguity on her employment by X.
 Is it balanced? Yes. It is technically right for Y to start working but it might not necessarily be a win-
win situation for both since Z can bring better business for the company compared to Y.
 Is it right? It is right to employ Y as the word has already been given about her joining date and
hiring her can make the employer X feel that she’s doing the correct thing.

 Example 2
A new technology is being launched which is good for the company as well as the clients. But, if this is
brought into use, a lesser man-power is required for the organization. The entrepreneur is now in an
ethical dilemma whether he wants to better his clients with good services or be loyal to his employees
who have helped the company grow. The unpleasantness of the situation arises when neither the clients
nor the employees deserve to suffer and it is the entrepreneur’s call to take.

Solution:

The three questions are again brought into the picture here
 Is it legal? This decision needs to be cross checked with the company seniors and policies. Both
can be legally correct, depending upon the agreement that the firm has with its employee union. 
 Is it balanced? A win-win situation is attainable if the new technology adopted by the
entrepreneur benefits the clients and business. Afterall, what matters in the end are profits and
customer satisfaction?
 Is it right? Desperate times call for desperate decisions. There is nothing wrong about growing and
automating your firm. Technological backwardness cannot lead you anywhere hence adopting the
technology here will not be a wrong choice. However, the employer must take steps to mobilize his
human resources and transfer them to other areas to maintain his/her reputation – the company’s
goodwill might suffer a major setback in the job market owing to the mass retrenchment.

These two examples are typical business ethical dilemmas. Some decisions in business, as in life, are
extremely difficult to take but remember – you’ve got to do what you’ve got to do – there’s no indecisive
way out of such dilemmas!
 UNIT – 2

(Work life in Indian philosophy)

Introduction

Work – life in Indian philosophy consists of the following;

 In spite of Indians having an ancient culture and philosophy about work-life, we in India have not
yet to manage to develop our management style with regard to our own culture ethos and have
been importing management systems from foreign countries.
 Indian philosophy regards work as worship and customers as God.
 Gandhi ji has said that we are not doing a favour to the customer by serving him rather the
customer is doing a favour by giving us an opportunity to serve him.
 According to Bhagwat – Gita, a detached mind is essential because only a calm mind without
any attachment can take clear decision.

Work Ethos/culture

Work ethos or work culture is the involvement of a workman with work. However, the degree of his
involvement affects his performance to give productivity, high or low quality. In other words, work ethos
refers to certain norms of behavior. These norms govern the conduct of workers involved in the work to
achieve desired objectives. Sometimes work culture is also concerned with a worker’s loyalty and sense
of belonging to the organization.

Work ethos at different levels of management

It can be defined at different levels as under:

At the Basic Level: work ethos at the basic level is about:

1. Discipline
2. To maintain punctuality
3. Coming to work on time
4. Behaving properly with superior, colleagues and subordinates
5. Not wasting time during working hours
6. To do things those are morally good or right.

At the Top Level: work ethos at the top level is about:

1. Work culture
2. Loyalty
3. Commitment and responsibility
4. Sense of belongingness
5. Protecting the interest of organization
6. No adverse comment about the organization in public.
Guidelines for improving Work Ethos/Culture

Sense of belonging and ideal work ethos will develop an attitude in work situations on the following
universal thoughts:

1. Think, that you are lucky to get hob and have opportunity to work in a good position. There are
millions of unemployed in the country.
2. You must be grateful for whatever has been done for your by the organization.
3. It is your duty to help subordinates and peers in enabling them to do their best for overall welfare
of the organization. But It should not be your business to decide judgment over actions.
4. You should not get depressed if things do not happen favourably. You should remind the law or
karma which ensures a perfect balance between what I give to others and what I received from
others.
5. You should have feeling that if any person show negative attitude towards you, the real cause for
that lies in yourself and rest in that person.
6. Instead of cursing God for being cruel, it is always desirable to find out the cause for it.
7. If you discharge your duties properly, your rights will automatically be fulfilled or protected sooner
or later.

Reason for poor work ethos/culture

The following factors are responsible for poor work culture in an business organization:

1. Lack of commitment to the work.

2. Lack of discipline
3. Poor working conditions.
4. Political interference
5. High rate of absenteeism
6. Non-recognition of merits by management
7. Decline in moral standards

Improving work culture:

1. In order to improve work ethos, wages should be linked with productivity. Higher wages for higher
productivity should be the policy of the organization. It will certainly increase the higher degree of
work involvement by the worker in an organization.
2. In order to reduce absenteeism, attendance bonus should be introduced. Those employee, whose
attendance at work is vent percent, should be given attendance bonus either in form of cash or in
kind.
3. In order to increase efficiency of workers, they should be properly rewarded. In other words, efficient
workers should get incentives.
4. Some sort of prayers should be introduced to boost the morale of workers.
5. Every employee should be given a copy of rules and regulation and instructions should be given that
compliance of these is essential.
6. Workers should be given opportunity for participation in management decisions. Their views should
be honored.
7. Respect for all will enhance peace and harmony in the organization. This will certainly improve work
culture.
8. Good working environment at work place should be ensured to improve the belongingness of worker
to the work.
9. There should not be political interference in the day to day operation of the business.
Work – Place Ethics

Introduction

The famous Indian scripture Bhagawad Gita focuses on ‘Karma’, or work, and considers it to be the
sacred duty of every person. Work is considered as an offering to t he ‘supreme’, therefore, all work is
sacred and should be done with utmost dedication, for spiritual growth and not for material gains. The
work, as a duty, is to be performed regularly with non-attachment. The traditional Indian values are
being influenced by native and other cultures with education and exposure through satellite based
communications, which allow people to be exposed to global cultures, values, styles, and behavior.
Unlike the past, people are becoming more individualistic, and keep self-interest above the interest of
the community or society and, in some cased, above the interest of their joint family. However, there are
still people who focus on their karma, are sincere, and contribute to organization and county’s
productivity, but there are others who lack accountability and fall short of their duties and responsibilities,
not due to lack of ability but due to the attitude and lax (careless) performance management system in
the organization. It many said that an organization is a sub-system of the society; therefore societal
values are reflected in the organizational behavior. But each organization has its own values, and
wherever these values are institutionalized, it is found that the organization is able to achieve its goals
effectively.

Values at workplace

 Dedication
 Accountability
 Integrity
 Collaboration
 Conduct

Indian values for the workplace

 Strong work ethics

 Dependability and responsibility
 Possessing a positive attitude
 Adaptability
 Honesty and integrity
 Self- motivated
 Motivated to grow and learn
 Strong self- confidence
 Professionalism
 Loyalty
Work-Life Balance

Concept

The expression work – life balance was first used in United Kingdom in the late 1970s to describe the
balance between an individual’s work and personal life. Over the past twenty five years, there has been
a substantial increase in work. It may be due to information technology and by competitive work
environment. This is having an adverse effect on the performance of workers. This has created stress
among the workers. Between 46 and 59 percent of workers feel that stress is affecting their personal life.
Hence, a study of work life balance becomes important.

Meaning

Work life balance is a broader concept including proper prioritizing between Work (career and ambition)
and Life (health, pleasure, family and spiritual development). Today the deadlines are getting tighter and
an individual’s job is not only to match that deadline but also to give quality output. Due to this work
pressure, it becomes exceedingly difficult to maintain a family life. It becomes very difficult to have the
engagement of mind with the engagement of body. In every individual’s life there are four stakeholders-
own personality, job, family and society. It is very important to give equal consideration to these
stakeholders.

According to the work foundation, “work-life balance is about individuals having a measure of control
over when, where and how they work, leading them to be able to enjoy an optimal quality of life.”

Guidelines for improving Work-Life Balance

 Identify employee’s needs

 Focus on organizational culture
 Improve personal and organizational efficiency
 Set up Work-Life policies
 Inform and train managers for policy implementation
 Communicate the policies and benefits
 Evaluate work life balance success
 UNIT 3

(Relationship between Ethics and Corporate Excellence)

Introduction

In the new millennium, every element of business environment in India has been changing. this
transformation may be the result of new economic policy (LPG) the has been introduced in 1991, in the
process of this transformation, every organization started searching for new ways and means of
achieving excellence.

Corporate Excellence is defined as the ability of the company to overcome competitors consistently over
a long period of time. In this context, successful organizations are different from excellent organizations.
Success may be of one dimension but excellence is of multiple dimensional in the company.

Critical Areas that facilitate excellence

1. Business Process Reengineering

As the business scenario is fast changing day by day, to meet the ever changing demand of the market
the organizations need to restructure & redesign their business processes. As, striving to become
excellent is a continuous process, corporate excellence can’t be a Destination, it is a Journey.

2. Growth- Sustainable Development

Many organizations are growing at a rapid speed, but they failed to develop consistently. Hence, the
companies need to redefine their objectives towards sustainable development.

3. Core-Competence

A unique strength either in technology or in the processing of functional areas, that an organization
enjoys exclusively and which can’t be copied by the competitors is called- Core competence.

E.g. Honda has got its core competence in the design and manufacturing of automobile engines.

4. Resource Utilization

Excellence in organization can be achieved through proper utilization of the basic human, physical &
financial, resources.

5. E-commerce

As the competition in business area is growing rapidly the business organizations started redefining their
business activities. According to Fortune Magazine, “Electronic commerce is the new industrial order; it
will change the relationship between consumers and producers.”

As Electronic Commerce involves the exchanges of products, services, and information of payment
through the electronic medium of computers & networks, it facilitates the continuum relation between the
company and customer.

6. CRM (Customer Relationship Management)

In the process of achieving corporate excellence in the present day highly competitive market, the
organization’s ability to compete depends on its relationship with its target customers.

7. Business Ethics

In order to achieve excellence, the companies should have basics positive values and attitudes. Ethics
deals with what is wrong and what is right in various disciplines of the organization.

a) Excellence through manufacturing

b) Excellence through marketing mix
c) Excellence through HRM
d) Excellence through information

Ways to Achieving Corporate Excellence

1. Corporate Mission Statement

2. Code of Ethics
3. Organizational Culture
4. Total Quality Management (TQM)

1. Corporate Mission Statement

A mission statement can help an organization to endorse its activities to the needs of the society. We
can say that mission is a statement which defines the role that an organization plays in the society.
Organizations relate their existence to satisfy a particular need of the society.

Characteristics of mission statement

1. Feasibility
2. Precise
3. Clarity
4. Distinctive
5. Motivating
6. It should indicate major components of strategy
7. It should indicate how objectives are to be achieved

Formation of Mission Statements

1. National priorities should be considered before formulating mission statement.

2. Mission statements could be formulated on the basis of the organizational purpose.
3. Corporate philosophy, which the organization follows in its operational activities, should be taken into
consideration at the time of shaping mission statements.
4. Mission statements should be reviewed regularly because it may become unclear as the origination
grows and adds to new products, market and technologies to its activities.

2. Code of Ethics

A code of ethics is a tangible guide to ethically desirable behavior. It is prepare in the light of custom,
belief, values and laws prevailing in a society. There may be three types of codes in business. These
are as under:

1. Policy Guidelines: every industry may develop and establish ethical guidelines for management
decisions. Actions are taken accordingly by the member firms.
2. Company philosophy: it refers to the guidelines evolved by and enterprise to guide the behavior of
its staff. It reflects the moral standard of top management. It crates link between moral values of the
company and ethical standards of society.

3. Professional code of conduct: professional bodies like Institute of Chartered Accountants of India-
ICAI, All India Management Association-AIMA, Institute of Company Secretaries of India- ICSI, Institute
of Cost and Works Accountant of India- ICWAI, etc., have established codes of conduct. These codes of
conduct are binding on all the members of the concerned professional body.

3. Organizational Culture

3.1 Concept of organization’s culture

The words “culture” has been derived from the idea of “cultivation”, the process of developing land.
When we talk about culture, we are typically referring to the pattern of development reflected in a
society’s system o knowledge, ideology, values, laws and social norms.

Charles O’ Retlly,” Organizational culture is the set of assumptions, beliefs, values and norms
that are shared by an organization’s members.”

3.2 Characteristics of organizational culture:

1. Risk taking and innovation

2. People Orientation
3. Outcome Orientation
4. Team Orientating
5. Attention to detail
6. Stability
7. Aggressiveness
3.3 Types of Culture

1. Dominant culture and Subcultures:

A dominant culture is a set of core values shared by a majority of the organization’s members.
A sub-culture is a set of values shared by a small minority it organization’s members.

2. Strong Culture and Weak Culture:

Organizational culture can be strong or weak. A strong culture will have the following features:
 Strong values and strong leadership.
 A strong culture is always widely shared with majority of the organization’s members.
 A strong culture will have a great influence on the behavior of its members.

3. Mechanistic and organic cultures:

In the mechanistic type of culture, people restrict their careers to their own specializations only and
organizational work is concerned as system of narrow specialization. it comprises of a traditional form of
organization where the authority flows from the top level to the lower levels in the organization.
Organic culture is just in contrast of mechanistic culture. There are no prescribed communication
channels, departmental boundaries, hierarchies of authority of formal rules and regulation. In this form of
culture more stress is on flexibility, consultation, change and innovation.

4. Authoritarian and Participative Cultures:

In authoritarian culture, power is centralized in the leader and all the subordinates are expected to obey
the orders strictly.
The participative culture is based on the assumption that when all the people working in the organization
participate in the decision making, they are likely to be more committed to the decisions rater than to
those decisions which are imposed on them by one authoritarian leader.

5. National Culture Vs. Organizational Culture:

Organizational culture is always influenced by the culture of the land, irrespective of the origin of the
company.

3.4 Functions of culture

Culture performs a number of functions within an organization. A few of these are as given below:

1. The first function of culture is that it has a Boundary-Defining rile which means the culture helps to
crate distinctions between one organization and others.
2. Culture helps to create a sense of identity for the organization’s members.
3. Culture facilitates the generation of commitments to something larger than one’s individual self
interest.
4. Culture enhances the Social System Stability.

3.5 Dysfunction of culture/ Demerits

1. Barrier to Change
2. Barrier to Diversity
3. Barrier to Mergers and Acquisitions

4. Total Quality Management (TQM)

TQM means an organization culture to satisfy totally the customer needs and desires through an
integrated system of tools, techniques and training. This involves reorganizing management system,
reengineering process of production and distribution, radical changes in the organization structure and
processes. Such continuous improvements will give us high quality products and services.

4.1 Features of TQM

 TQM is a Pragmatic long-term systems approach

 TQM is initiated and driven by top management
 TQM aims at bringing about a Total Cultural Change in every facet of the organization.
 TQM interlinks and integrates the various subsystems of the organization.
 TQM requires involvement, participation and cross-functional management.
 TQM aims at meeting the dynamic needs of the customer and creates loyal and diversified
customer base
4.2 Potential benefits of TQM

 TQM helps to focus clearly on the needs of the market.

 It facilitates to aspire for a top quality performer in every sphere of activity.
 It channelizes the procedures necessary to achieve quality performance.
 It helps examine critically and continuously all processes to remove non-productive activities and
waste.
 It gears organizations to fully understand the competition and develop an effective combating
strategy.
 It helps to develop good procedures for the communication and acknowledging good work.
  It helps to review the process needed to develop the strategy of never ending improvements.

4.3 The Three Aspects of TQM Efforts

1. Internal Service Quality

Employees involved in each process have to regard those working in the next process as their
customers. Every process from the beginning to the end must be accurate to produce a quality product.
Internal service quality is the first pillar of TQM. Every activity in the organization has an internal
customer.

2. Problem Solving Tools

These tools are applied so that facts are dealt with instead of opinions and comments. There are seven
tools. Persons should be trained in the use to these tools, e.g., graphs, histograms, control charts,
check sheets, scatter Diagrams, cause and effect diagram, Pareto chart. These are all statistical in
nature and require data analysis. They should be widely used in industry.

3. Total Involvement of all personnel (Bottom to top)

The third vital pillar of TQM is total involvement of all personnel from the operators onwards right up to
the chief executive officer (CEO) to and fro.

4.4 Linkages:

Processes at the lowest level are connected to higher level processes, first within the functional area,
e.g., production, finance and marketing departments, and then the link is established cross-functionally.
The total system shows integration and unity and the individuals are fully aware of meeting the mission,
vision, goals and objective of the organization.

UNIT 4
 (Gandhian Philosophy of Wealth Management)
Introduction

In 1919, a new star rise in the political sky of India, Mohandas Karamchand Gandhi. He was the high
priest of the Indian freedom struggle against the colonial rule of Britain. No single individual has had a
greater influence on the nationalist movement than Gandhi. He provided this dynamic leadership in a
successful political struggle. He gave a message about every aspect of life to the world.

Gandhian philosophy of wealth management

Gandhian Philosophy about wealth management is based on the following values:

 Gandhian philosophy of wealth management is based on the ‘Servodaya’ principles of Truth,
Non-Violence and Trusteeship.
 According to Gandhiji, mangers and proprietors of business firms are only the trustees of wealth
of society.
 The idea of trusteeship advocated by Gandhiji, is based on Bhagaved Gita-in the principle of
‘Aparigraha’ (non-possession) and ‘Sambhawa’ (equalism) which were passionately followed by
Mahatma Gandhi.
 My ideal is that capital and labour should supplement and help each other. They should be a
great family living in unity and harmony.
 Gandhi assigned a paternalist role to management in their dealings with labour.
 Gandhiji considered trade unions to be means of workmen’s material and moral development.
 He declared that a strike is an inherent right of the working man for the purpose of securing
justice.
 If conflict arises between labour and management, the weapon proposed by gandhiji is
Satyagraha.
 Trusteeship principle is foundation of philosophy of wealth management.

Gandhi’s Philosophy on Trusteeship

1. Economic equality:
Economic quality is the master key to non-violent independence. Working for economic equality means
abolish the rising conflict between capital and labor. It means down the few rich in whose hands nation’s
wealth is concentrated.
2. Non-violent Way:
By the non-violent way, we want to destroy capitalism, not the capitalists. The capitalist should regard
himself as a trustee.
3. Community Welfare:
I am inviting those people who consider themselves as owners today to act s trustees i.e., owners, not in
their own right, but owners in the right of those whom they have exploited. I must know that all that
wealth does not belong to me; what belongs to me is the right to and honorable livelihood not better than
that enjoyed by millions of others, the rest of my wealth belongs to the community and must be useful for
the welfare of the community.
4. No Make-Shift:
My theory of “trusteeship” is not make-shift. I am confident that it will survive all other theories. It has the
sanction of philosophy and religion behind it.
5. Acquisition of Wealth:
Those who own money now, are asked to behave like trustees holding their riches on behalf of the poor.
Essential principles of Gandhi’s philosophy
The four essential principles of Gandhi’s philosophy are:
1. Trust
2. Ahinsa (non-violence)
3. Trusteeship
4. Constructive Action

Gandhi’s Seven Greatest Social Sins

It takes sacrifice to serve the needs of other people- the sacrifice to our own pride and prejudice, among
the other things. Pride and selfishness will destroy the union between God and man, man and women,
man and man. Gandhiji described the following as greatest sins. These are seven as under:

1. Politics without Principle

Politics without principle is common today. You can see politicians spending huge money to create an
image. However, it is artificial lacking substance in order to get votes and gain office. Gandhiji is
assumes this as one of the greatest sins. He favored that there should be some principles for doing
politics.

2. Science without Humanity

The second greatest sin suggested by Gandhiji is “science without humanity”. Science brings techniques
and technologies for the benefit of human- beings. It should not degenerate into man against humanity.
The majority of the scientists who ever lived or living today has brought about a scientific and
technological explosion in the world without considering humanity.

3. Religion without Sacrifice

Religion without sacrifice cannot be imagined. Gandhiji said that without sacrifice we many become
active in a religious place but remain inactive in its gospel. Sacrifice is needed to serve the people. It
should be noted here that if religion is seen as just another system, its members would not have a sense
of service. The great leaders have inner religion. They sacrifice their pride and share their power.

4. Business without Ethics

Gandhiji said that doing business without ethics is a sin. According to Adam Smith, “if we ignore the
moral foundation and allow economic system to operate without moral foundation we will soon create an
amoral, if not immoral society and business.” Economic and political systems are ultimately based on a
moral foundation.

5. Knowledge without Character

As we know that a little knowledge is a dangerous thing. But we can say that much knowledge without
character and principles is more dangerous. Hence, character and values should be adopted along with
knowledge.

6. Wealth without Work

This refers to the practice of getting without doing anything. Gandhiji assumes this practice as one of the
seven greatest sins. Fraudulent schemes get risk quick schemes, speculations, market manipulations
are some of the examples of wealth without work.

7. Pleasure without Conscience

Many people look for pleasure without sense of responsibility. They always as ask “will this please me?”
will it ease me?” it is one of the key temptations for today’s executive.
UNIT 5
 (Corporate Social Responsibilities)

Concept of social responsibilities

The concept of social responsibility is not new. This concept is based on the presumption that a
business firms is more than an economic institution. It is an organ of society and its activities exercise
decision influence on social welfare. Hence, business must work beyond the narrow goal of profit
making and should operate in the overall interest of society.

According to Howard Bowen, “social responsibilities refer to the obligation to pursue those policies, to
make those decisions, or to follow those lines of action which are desirable in terms of objectives and
values of our society.” thus, businessmen should recognize and understand the aspirations of society
and they should conduct themselves in such a way as to fulfill these aspirations.

Causes of growing Social Responsibilities

Modern businessmen are more conscious of their social responsibilities on account of the following
factors:
1. Trade Union Movement: Due to increasing strength of organized labour, businessmen are required
to give a fair deal to workers. Human relation and labour legislations have helped trade unions in this
regards.

2. Education: education has led businessmen to be more concerned with the quality of life. Self
enlightened business leaders have been persuading business community to realize its social
obligations.

3. Public Relations: every businessman, today, knows that his survival and growth depends on a good
public image. In order to improve image in the public mind, businessman keep in touch with public.
Businessmen have come to realize that socially responsible behavior is in the long term interest of
business.

4. Consumerism: today, consumers have become more conscious about their rights. The
establishments of consumer organizations have made business more responsive to needs and desires
of consumers.

5. Managerial Revolution: separation of ownership from control in large organizations has resulted in
professionalization of management; a professional manager is well-educated and aware of society’s
expectations. In order to ensure long term welfare of the enterprise, he tries to meet the expectation of
customers, employers, shareholders and the government.

6. Public Opinion: The public interference through government has forced businessmen to consider
their social responsibilities.

Argument in favour of social responsibility

1. To Protect Long-Term Interest: the wise businessmen realize now that it is in their own interest to
fulfill the demands and aspirations of the society.

2. To avoid Government interference: if the business fails to respond to social needs voluntarily, the
government may force businessman to discharge their social obligations through legislation. Legislative
regulations many reduce the freedom and flexibility of business. Therefore, it is in the interest of
business community to voluntarily fulfill its obligations to the society.
3. To fulfill the Social Demands: as we know that business is set up to earn profits by supplying goods
and services to the members of the society. Hence, business is the creation of society and its primary
aim is to fulfill the needs of the people.

4. To Respect Social Consciousness: today, the consumers are well informed. They expect higher
quality of products at reasonable price. They organize together in case a business resorts to
malpractices like adulteration and black-marketing. Employee associations, labour laws and social
securing measures all compel the businessmen to look after the interests of the working class.

5. To improve Public Image: a business unit can develop credibility with the public by fulfilling the
demands of society. Good public opinion is precondition for the success of any business.

6. To Recognize Socio-Cultural Norms: A business enterprise operates within a framework of socio-

cultural norms. No society allows a business to maximize profit at the cost of the society. Hence,
business should operate in such a way that it does not violate the values and norms of the society.

Arguments against Social Responsibilities

1. Loss of incentive: There is no substitute for self-interest which makes people work. Hence,
assumption of social responsibility results in the erosion of the drive to use recourse efficiently.

2. Lack of Yardstick: profits are the yardstick against which the performance of business can be
evaluated. As a businessman moves away from the simple rule of profit maximization the guides his
judgment, he has no guide for efficient decision making.

3. Burden on consumers: social responsibilities like pollution control devices are very costly and
require huge amount of capital investment. Most of the businessmen would like to pass the cost of social
action to consumers in form of higher prices.

4. Lack of Social Skills: sometimes, businessmen so not possess the sensitivity, insight and
experience required to solve social problems. They should take the help of experts to solve the social
problems. However, social problems should be solved by specialized agencies as business is not
qualified for this job.

5. Dilution of Profit Maximization: Business is an economic institution and therefore, economic value
is the sole criteria by which success of business should be measured.

6. Distortion of Market Mechanism: The doctrine of social responsibility is based upon implied
assumption that market mechanism is not the appropriate way to allocate scarce resources to
alternative uses and it should, therefore, be replaced by political mechanism, this will lead to loss of
productivity and efficiency.

7. Power without Accountability: With huge financial resources at their command, businessmen may
dominate major social institutions, like religious, educational, military and government. Once the
business is allowed to intervene in social affairs, it will introduce its own value system to detriment of the
society.

Social Responsibilities toward Different Groups

1. Responsibility towards Shareholders:

 A fair return on investment.
 Safety of investment
 Steady appreciation of capital.
2. Responsibility towards Employees:
  Fair wages and salaries.
 good and safe working conditions
 workers participation in decision-making
 Opportunities for education, training and promotion.

3. Responsibility towards Customers:

 Charge reasonable price of product.
 Regular supply of right quality goods at right time and place.
 Quick redressal of customer’s grievances.
 Prompt, adequate and continuous service.
 True and fair information through advertisement.
 Avoid unfair and unethical practices like adulteration, hoarding and black marketing.

4. Responsibility towards Community:

 To provide maximum possible employment opportunities.
 To make efficient use of society’s resources.
 To keep environment health and free from all types of pollution.
 To contribute to the upliftment for the weaker sections of the society.
 To improve public health, education and cultural life in the community.

5. Responsibility towards Government:

 To pay taxes honestly in time.
 To abide by the laws
 To avoid corruption public officials.
 To encourage fair trade practices.
 To avoid monopoly and concentration of economic power.

Social Audit

The discussion on social responsibility raised the question of how social performance ought to be
evaluated. This led to the concept of “social audit” first proposed by Howard Bowen in 1990s. Social
audit is a commitment to systematic assessment of ethical behavior and action and reporting on some
meaningful activities of the company having social impact, e.g., pollution control, social programmes,
product performance requirements, etc.

Suggestions of Sachar Committee

This committee (1978) looked into the social responsibilities of companies. The committee favoured,”
openness in corporate affaires” for securing responsible behavior. Adequate disclosure of information for
the benefit of shareholders, creditors, workers and community, should be ensured.
The committee made the following suggestions in addition to the above:

 A majority of the population of the country lives in the rural areas and its well being is essential.
Hence, a company should establish its business in these areas.
 Social responsiveness of the company may be judged from its employment policy. If companies
provide more employment to physically handicapped and weaker sections of the community, it
will certainly be regarded as socially discharged obligation.
 Spread of adult education may also be another area of social responsibility that companies can
respond.
 It should be obligatory in a company to give a social report every year showing to what extent it
has been able to meet its social obligations.
 The companies Act should be suitably amended requiring social report along with director’s
report.