MGM4137 - Ethics and Social Responsibility written recalls a dangerously defective product is

by ZeYaAm acting in an ethical way

Part A (Case Study) 60 marks converted to 30% ➔ To be considered ethical, business must
Part B (Choose 2 out of 4) draw its ideas about proper behaviour from
the same sources as everyone else in
society
Chapter 5 - Ethics and Ethical Reasoning ➔ Business should not try to make up its own
definitions of what is right and wrong
Ethics
➔ Moral principles that guide a person’s Differences of Personal Ethics and Behaviour Ethics
behaviour
➔ A conception of right and wrong conduct
➔ Whether our behaviour is moral or immoral Aspect Personal Ethics Business Ethics
➔ Morals are shaped by social norms, cultural
practices and religious influences Definition Individual beliefs Principles guiding
about business conduct
➔ Ethical dilemma is a situation in which there what is right and
seems to be a conflict between following wrong
one's own morals and not following them
Scope Applies to personal Applies to business
behaviour practices
Ethical Principles (guides to moral behaviour) and decisions and corporate
behaviour
➔ Rules of standards of good behaviour which
serve as guides by which we live and make Influence Influenced by Influence by laws,
decisions personal values, regulations
➔ Guides our behaviour and these principles upbringing and and corporate culture
religion
come from our own values
➔ Example: Lying, cheating and harming Focus Individually integrity Ethical behaviour in
others and considered as unethical and and moral conduct business operations and
strategy
immoral while honesty, helping others and
keeping promises are considered ethically Decision Based on personal Based on ethical
and morally desirable behaviours Making values guidelines, corporate
and moral principles policies and laws
➔ Religious beliefs are a major source of
ethical guidance for many people Accountabil Personal Corporate responsibility
ity responsibility and accountability to
Business Ethics and accountability stakeholders
➔ The application of general ethical ideas to
Examples Honesty, loyalty, Fair trade, transparency,
business behaviour respect corporate social
➔ A principle and standards that guide the in personal responsibility
interactions
behaviour of individuals and groups in the
business world Consequen Affects personal Affect businesses
➔ Consists of organisational principle, values ces reputation reputation,
and norms that may originate from and relationships legal standing,
profitability
individualism organisations or the legal
system that guide individuals and group Enforceme Self-regulated by Regulated by internal
behaviour in business nt the policies, industry
individual’s values standards, laws
➔ Managers, employees, consumers, industry
associations, government regulators, Conflicts Internal conflicts Conflicts resolved by
business partners, special interest groups all resolved balancing profit with
by personal values ethical standards
contribute to business ethics
➔ Example: If dishonesty is considered to be
unethical and immoral, anyone from
business who is dishonest with others is
acting unethically and immorally
➔ Example: If protecting others from harm is Ethical Relativism
considered ethical, then the company that
 ➔ A belief that ethical right and wrong are prevent fines and maintain its business
defined by various periods of time in history, operations in international markets.
a society’s traditions, specific circumstances
of the moment or personal opinion 3. To meet demands of business stakeholders
➔ A theory that holds that morality is relative to
the norms of one’s culture ➔ Example: Investors and customers
➔ Whether an action is right or wrong depends usually expect businesses to act in an
on the moral norms of the society in which it honest way. Ethical behaviour in a business
practised can help it attract investments while
➔ The same action may be morally right in one maintaining shareholder trust. One way for a
society but be morally wrong in another company to build trust with its customers is
➔ Example: to make sure that its financial reports are
1. Child Labour in Bangladesh is clear.
relatively common, especially in the clothing
industry. Families often rely on the income
generated by their children to survive. Due to
economic hardship, child labour is culturally Normative Reasons - Arguments based on
tolerated even though it is technically illegal philosophical theories about what is right and wrong
under national law
2. Meanwhile, laws in the United 1. To prevent or minimise harm
States strictly prohibit child labour. The use
of child labour is considered highly unethical ➔ Example: An organisation may
and is associated with exploitation and the choose to impose strict safety procedures
denial of education and childhood. If a in order to protect workers from workplace
business engages in child labour incidents, even if doing so goes beyond
exploitation, it will face severe legal what is required by law. This is based on
consequences and public backlash the moral concept of benevolence, which
places emphasis on avoiding injury. For
Why Should Business Be Ethical? instance, to safeguard the health and
safety of its employees, a manufacturing
Practical Reasons - Strategic and economic facility would spend money on modern
arguments that will help an organisation meet its safety equipment.
business objectives

1. To enhance business performance

2. To promote personal morality
➔ Example: A strong corporate social
responsibility (CSR) programme can help a ➔ Example: A business leader may
business's image, bring in and retain choose to treat all workers equally and with
customers, and boost morale among respect, ensuring they have equal
employees, all of which can help the opportunities and are free from
business make larger profits. For example, a discrimination, based on the idea of justice
business that uses sustainable methods and personal moral beliefs about equality.
could gain an advantage over its competitors For example, a CEO who believes diversity
by appealing to people who care about the is important might hire people from all
environment. backgrounds and encourage an attitude of
respect and equality at work.
2. To comply with legal requirements

➔ Example: Applying anti-corruption

rules properly can help a company avoid
expensive fines and court cases. For
instance, a global company adheres to the
Foreign Corrupt Practices Act (FCPA) to
 Why Ethical Problems Occur in Business?

3. Conflict of Interest

➔ Occurs when someone has a personal interest that

1. Personal Gains and Selfish Interest could interfere with their duty to act in another
person's or organisation's best interest.
➔ Desire for own (personal) gains or even greed can ➔ Conflict of interest especially a concern for accounting
cause ethical problems firms
➔ Companies sometimes employ people who will put their ➔ Example: Amjad is a hiring manager at SheLawo
Sdn.Bhd, his company is looking to hire a new finance
own welfare ahead of others regardless of the harm
executive, and Amjad is part of the hiring committee.
done to other employees, the company or society. His sister, Syahirah, applies for the job and is one of
➔ Ethical egoist is an employee/manager puts his/her the candidates for the applied position. Amjad has a
own self-interest above all other considerations (self- personal interest in helping his sister get the job.
promotion, selfishness, greed) However, he also has a professional duty to
➔ Altruism is the act of selflessly helping others without guarantee the hiring of the most qualified candidate.
expecting anything in return, such as donating blood to
in-need patients and working for an NGO purely to help 4. Cross-Cultural Contradictions
others
➔ Occurs when corporations do business in other
countries where the ethical standards in the societies
2. Competitive Pressures on Profits differ from those at home country
➔ Example: In Thailand, cannabis is legal for both
➔ Businesses normally engage in unethical practices medical and recreational use. Companies can legally
when they face tough competition grow, sell, and market cannabis products. For
example, a Thai cannabis company might openly
➔ They engage in unethical practices to protect their
operate dispensaries and market their products within
profits Thailand.
➔ Managers of poor financial performers and companies ➔ Meanwhile, in Malaysia, cannabis is illegal and
with financial uncertainty are more prone to commit subject to strict penalties, including long prison
illegal acts sentences and heavy fines. The same Thailand
➔ Intense competitive pressure in global marketplace has company operating in Malaysia would face severe
resulted in unethical activity such as price fixing, legal consequences if they tried to sell or promote
cannabis products.
falsifying documents or the use of kickbacks or bribes
Core Elements of Ethical Character: Managers’
Values Core Elements of Ethical Character: Stages of Moral
Development
● Ethical analysis and resolution of ethical
dilemmas in the workplace significantly
depend on the ethical character and moral ● Stages of Moral Development refers to a
development of managers and other sequential pattern of how people grow and
employees develop in their moral thinking, beginning
● Good ethical practices not only are possible with a concern for the self and growing to a
but also become normal with the right concern for others and broad-based
combination of these components principles
● Managers are the key to whether a company
● From childhood to mature adulthood people
and its employees will act ethically or
unethically move up in their moral reasoning
● Managers create an ethical tone for their ● Earliest stages of reasoning are ego-centred
company. For instance, an employee who ● Most developed stages are principle-centred
see their manager making a company claim ● Most managers make decisions based on
for an amount that exceeds the manager the criteria in level 3 and 4
actually spends may also do the same thing ● Company’s executives reasoning has wide
implications both inside and outside of the
Core Elements of Ethical Character: Spirituality organisation

● Person’s Spirituality refers to personal belief

in a supreme being, religious organisation,
power of nature or some other life-guiding
force
● People who are more religious are found to
have higher ethical values
● Religion teaches individuals values which
guide their ethical behaviour
● Organisations have responded to the
increased attention to spirituality at work by
attempting to accommodate their employees
such as prayer rooms and tazkirah pagi for
Muslims
● However, there are some people who
disagree with the trend towards a stronger
presence of religion in the workplace. They
hold the traditional belief that business is
secular, that is a nonspiritual institution. They
believe that business is business and
spirituality is best left to churches, mosques,
etc and not in the office.

Individual Factors: Stages of Moral Development

(Kohlberg’s Model)

● People progress through the previous six

stages
● Cognitive moral development should be
viewed as a continuum/continuation
● People’s moral beliefs and behaviour change
as they gain education and experience
● There are universal values by which people
in the highest level of moral development
abide
 Stage 5: Moral Beliefs (Principle-centred
Stage 1: Punishment Avoidance (Ego-centred reasoning)
reasoning)
Explanation: Individuals understand that laws are
Explanation: Morality is based on avoiding based on social contracts and should promote the
punishment and obeying authority. greatest good for the greatest number.

Example: A child refrains from hitting their sibling out Example: A person supports a law change to allow for
of fear of parental punishment. more equitable healthcare access, recognising that
while laws are important, they must also be just and
fair.

Stage 2: Reward Seeking (Ego-centred reasoning)

Stage 6: Universal Principles (Principle-centred
Explanation: Individuals recognise that others have reasoning)
different perspectives, and that right behaviour means
acting in one's own best interest. Explanation: Morality is based on abstract reasoning
using universal ethical principles. Justice serves as
Example: A child performs their chores with the the foundation for the validity of laws.
understanding that they will receive an allowance,
thereby benefiting themselves. Example: An executive might decide to pay wages
above the minimum required by the law because this
is the morally just thing to do.
Stage 3: Social Group (Group-centred reasoning)
Understanding Managers' Moral Reasoning
Explanation: Morality is about living up to social
expectations and roles, with an emphasis on Stages 3 and 4 (Common Among Managers)
relationships and being "nice".
● Stage 3: Managers often make decisions
Example: A teenager helps a friend with homework to based on what will keep their relationships
be seen as a good friend and to gain social approval. and reputation good within the company.
● Stage 4: They also follow company rules and
laws to maintain order and stability.
Stage 4: Society at Large (Society and law-centred
reasoning) Challenges in Ethics

Explanation: Morality is about maintaining law and ● Sometimes, managers need to go beyond
order, following rules, and respecting authority. just following their own interests (Stage 1
and 2) and the company's interests (Stage
Example: An adult follows traffic laws strictly, not just 3).
to avoid punishment, but because they believe it ● They even need to move beyond just
maintains social order. following society's rules and laws (Stage 4).
Higher-Level Moral Reasoning (Stage 5 and 6) How can managers apply Kohlberg’s Moral
Development?
● Stage 5: Managers should consider what is
fair and just for everyone, not just what is ● Since most of us at the conventional level
good for the company. (Stage 3 and 4), organisations must have
● Stage 6: They should make decisions based policies and strategies that will guide
on universal principles like human rights and employees’ behaviour
justice, caring about everyone affected by ● Knowing the stages will enable managers
their decisions. understand how their employees reason
when faced an ethical issue and provide
Impact of Upper-Level Managers guidance to the employees to make the right
decision
● Upper-level managers, who set company
policies, have a huge impact on both the
company and society.
● Their decisions can influence the company's Ethical Issues in Business
culture and its impact on the community and
the world. ● An ethical issue is a problem, situation or
opportunity requiring an individual, group, or
Situational Example: organisation to choose among several
actions that must be evaluated as right or
Imagine a company facing an ethical decision about wrong, ethical or unethical.
environmental practices: ● Normally involves a situation where 2 or
more values are in conflict such as truth and
● Stage 3: A manager might decide to adopt loyalty
eco-friendly practices to look good and ● Ethical issues are such as honesty and
maintain positive relationships with fairness, lying, conflict of interest,
employees and customers. fraud/cheating and abuse of power
● Stage 4: They might follow environmental
laws to avoid penalties and keep the
company running smoothly.
● Stage 5: They would consider the broader Analysing Ethical Dilemmas in Business
impact on the environment and future
generations, choosing practices that are fair ➔ Business managers and employees need a
and sustainable. set of decision guidelines that will shape
● Stage 6: They would prioritise protecting the their thinking when on-the-job ethics issues
planet and respecting the rights of all people occur
to a healthy environment, even if it means ➔ Examples of ethical principles
higher costs for the company. 1. Do not harm; be compassionate
2. Fair and just
In short, the best managers think beyond immediate 3. Honest; respect others’ rights
benefits and legal requirements. They care about 4. Do your duty/act responsibly
fairness, justice, and the well-being of everyone ➔ These guidelines should help them to:
affected by their decisions. 1. Identify and analyse the nature of
an ethical problem
➢ Based on Kohlberg’s Moral Development, 2. Decide which course of actions is
we can conclude that: likely to produce and ethical result
1. Most of us: To avoid punishment,
To receive some reward
2. Many of us: To be responsive to
family, friends and superiors and To
be a good citizen
3. Very few of us: To do what is right,
pursue some ideal
 ➔ A person who uses virtue ethics to guide
his/her decisions would think how a virtuous
4 Methods of Ethical Reasoning person would react in the same situation

➔ A right action is the action a virtuous person

would do in the same situation

4 Methods of Ethical Reasoning

1. Virtue Ethics (Alim)

➔ It focuses on character traits to define a
good person, theorising that values will direct ➔ Situation Example:
a person toward good behaviour
➔ According to Plato and Aristotle, the values Situation: Generosity in the Workplace
that they would have:
1. Courage Scenario: John is a successful senior executive at a
2. Self-control large corporation. He has accumulated significant
3. Generosity wealth and has a reputation for being a hard-working
4. Magnificence and skilled professional. One day, he learns that
5. High-mindedness several of his colleagues in lower-paying positions are
6. Gentleness struggling financially due to unforeseen medical
7. Friendliness expenses and rising living costs.
8. Truthfulness
Virtue Ethics Approach: Generosity
➔ The idea of virtue ethics tells people what kind
of characteristics and behaviours they should ● Virtue: Generosity.
try to build. ● Action: John decides to anonymously create a
fund to assist his colleagues with their financial
burdens. He contributes a substantial amount of
 his own money to this fund and encourages other produced) but others that are less tangible
senior executives to do the same. Additionally, (Employee morale, Psychological satisfaction,
John implements a policy within the company to Worth of a human life) are trickier
match employee contributions to the fund, thus 2. Overlook the rights of minority
amplifying the overall support available. ● Majority override the rights of those in the minority
(Covid drugs)
Explanation: ● Since utilitarian reasoning is primarily concerned
with the end results of an action, managers using
● Generosity: John’s decision to use his wealth to this reasoning process often fail to consider the
help his colleagues in need exemplifies the virtue of means taken to reach the end
generosity. He selflessly gives without expecting 3. Looks at the end results such
anything in return and seeks to make a positive ● Look at whether the action bring happiness
difference in the lives of others. ● It does not care how the end results were
● Impact: John's generosity not only provides achieved
immediate financial relief to his colleagues but also
fosters a culture of caring and support within the ➔ Situation Example:
company. His actions inspire others to be more
generous and considerate, improving the overall Situation: Company Downsizing Decision
work environment.
Scenario: Emily is the CEO of a medium-sized
Outcome manufacturing company that has been facing financial
difficulties due to increased competition and declining
By acting generously, John strengthens the bonds sales. To save the company from bankruptcy, Emily
within his workplace, demonstrates moral leadership, needs to make a tough decision about downsizing,
and sets a powerful example for others to follow. His which will inevitably affect employees' jobs and
actions show that true success includes the livelihoods.
willingness to help and uplift those around you,
embodying the virtue of generosity in a meaningful Utilitarianism Approach:
way.
● Principle: The greatest benefit for the greatest
2. Utilitarianism number.
➔ An action is ethical when it brings the greatest good ● Action: Emily conducts a thorough analysis to
to the greatest number of people affected by the determine the most effective way to downsize while
situation minimising overall harm. She decides to close one
➔ Example: The ethically right choice is the one that underperforming plant and lay off 100 employees
produces the most happiness and the least instead of reducing wages for all 1,000 employees
unhappiness for the greatest number of people across the company, which could lead to
➔ Sometimes referred to a cost-benefit analysis widespread financial struggles and lower morale.
because it compares the costs and benefits of a
decision, policy or action Explanation:
➔ Cost/Benefit = Economic ($) + Social (Effect on
society), Human (Psychological/Emotional Impact) ● Greatest Good: By closing the underperforming
➔ An alternative where the benefits outweighs the cost plant and laying off a specific number of employees,
is an ethically preferred solution because it Emily aims to save the entire company from
produces the greatest good for the greatest number bankruptcy. This decision ensures that 900
of people in society employees retain their jobs, and the company
➔ Benefits > Costs = Ethical Solution remains viable in the long term.
● Minimising Harm: Although laying off 100
Limitations of Utilitarian Approach employees is painful, this action prevents more
extensive harm that would occur if the entire
1. Difficult to accurately identify both costs and company failed, potentially leaving all 1,000
benefits employees without jobs.
● Some things can be measured in terms of
monetary terms (Sales, Payrolls, Goods
So, Emily’s decision reflects the utilitarian principle of ➔ Situation Example:
seeking the greatest good for the greatest number. By
focusing on the long-term survival of the company Situation: Workplace Surveillance
and the well-being of the majority of employees, she
makes a decision that, while difficult, aims to produce Scenario: A company decides to implement
the best overall outcome. In this example, the surveillance cameras in the workplace to prevent theft
utilitarian approach helps Emily justify a decision that and ensure safety. However, employees are
maximises overall benefits while minimising harm. concerned that this measure might infringe on their
right to privacy.
3. Rights
➔ An ethical approach emphasising a Rights Involved:
person/group’s entitlement to something or to be
treated in a certain way, such as the right to life, 1. Employer’s Right to Protect Assets
safety or to be informed ➔ The company has a legitimate interest in
➔ A right means that a person or group is entitled protecting its property and ensuring a safe
to something or is entitled to be treated in a working environment. Surveillance cameras
certain way can help deter theft and enhance security.
➔ Rights range from right to safety to right to self- 2. Employee’s Right to Privacy
development or the pursuit of happiness ➔ Employees have a right to privacy and may
➔ Example of rights: Right of freedom, right to life, feel that constant monitoring is invasive and
right to choose, right of religion, right to safe creates a stressful work environment.
products, the right to be free from slavery, the
right of pursue happiness Balancing the Rights:
➔ A decision is considered ethical when the rights
of the individual/group that is affected is ● Procedural Justice: The company should
protected implement a clear and fair policy about the
➔ A decision is considered unethical when the use of surveillance cameras, explaining the
decision fails to protect their rights or the rationale, locations of cameras, and the
affected group is denied that right extent of monitoring.
● Interactional Justice: Management should
➔ There are universal rules: communicate openly with employees about
● It is wrong to kill the new policy, addressing their concerns
● It is wrong to steal and treating them with respect. Providing a
● It is wrong to tell lies forum for feedback and suggestions can help
● It is right to keep promises employees feel heard and respected.
➢ Some kinds of action are wrong or right in ● Distributive Justice: The company should
themselves, regardless of the consequences ensure that the surveillance is conducted in
a manner that balances the security benefits
➔ Someone who follows right ethics should do the with employees' privacy rights. For example,
right thing, even if that produces more harm (or cameras could be placed in common areas
less good) than doing the wrong thing rather than private spaces like restrooms or
➔ People have a duty to do the right thing, even if break rooms.
it produces a bad result for the majority
Outcome:

Limitations of Using Rights

By clearly explaining the purpose and scope of the
surveillance policy (procedural justice), treating
➔ Difficulty to balance conflict rights
employees respectfully and addressing their concerns
Example: An employee’s right to privacy may be at
(interactional justice), and balancing security needs
odds with an employer’s right to protect the
with privacy rights (distributive justice), the company
firm’s assets by testing the employee’s honesty
can implement its surveillance measures in a way that
➔ The list of moral rights is widely debated
respects the rights of all parties involved.
Example: Do we all agree on all rights?
 ➔ Situation Example:

Situation: Employee Performance Reviews and

Promotions

Scenario: A company is conducting its annual

performance reviews to decide on promotions and
salary increases.

4. Justice Procedural Justice:

➔ Look at the decision in terms of fairness (All

● Fair Processes: The company has
humans should be treated equally)
established a clear, transparent process for
➔ A decision is considered ethical when it is
performance reviews, which includes
fair (All humans being are treated equally or
standardised evaluation criteria and multiple
if unequally, then fairly based on some
evaluators to ensure fairness.
standards that is defensible)
● Example: Each employee is evaluated based
on set criteria such as productivity,
➔ To evaluate whether the decision is fair,
teamwork, and skills development. The
need to look at 3 perspectives
criteria are communicated to all employees
1. Procedural Justice - Were the policies
at the beginning of the year, and the
used to make the decision fair?
evaluation process involves both self-
Example: If a company decides to promote
assessments and peer reviews to minimise
an employee, procedural justice would
bias.
involve ensuring that the promotion
process is based on clear, consistent
Interactional Justice:
criteria and that all candidates are given
equal opportunity to compete for the
● Respectful Treatment: During the review
position.
process, managers treat employees with
respect, provide constructive feedback, and
2. Interactional Justice - Was the person
offer explanations for their decisions.
treated fairly in the past? Was the person
● Example: A manager conducts performance
treated with respect?
review meetings in a private setting, listens
Example: When giving feedback to an
to the employee's perspective,
employee, a manager who practises
acknowledges their efforts, and explains the
interactional justice would do so in a
rationale behind their performance rating and
respectful manner, providing constructive
any promotion decisions.
and respectful communication.
Distributive Justice:
3. Distributive Justice - Is the outcome fair?
Example: If a company provides bonuses,
● Fair Outcomes: The final decisions on
distributive justice would assess whether
promotions and salary increases are made
the bonuses are fairly distributed based
based on the fair and consistent application
on performance, ensuring that employees
of the evaluation criteria, ensuring that
feel the rewards are proportionate to their
rewards are proportionate to performance.
contributions.
● Example: Employees who have consistently
exceeded their performance targets and
➔ It is difficult to agree on 3 perspectives used
demonstrated strong leadership skills
to evaluate fairness
receive promotions and salary increases.
➔ It is difficult to decide which of the 3
The distribution of rewards is perceived as
perspectives of justice should be given
fair by the employees, as it aligns with their
importance
contributions and the established criteria.
Outcome: 5. The Newspaper Rule
● Would I be embarrassed to have my decision
By ensuring that the performance review process is disclosed to the media and to my family?
fair and transparent (procedural justice), treating ● Would I mind my action being broadcast on
employees with respect and providing clear the news?
explanations (interactional justice), and distributing ● Could I justify my actions to my family and
rewards based on consistent and fair criteria close friends?
(distributive justice), the company fosters a sense of
fairness and trust among its employees.

Which Guidelines To Use?

4 ethical approaches lead to different decisions: Moral Intensity

1. Decide which approach is important to your ➔ A person’s perception of how morally severe
organisation/you - Utilitarian, Justice/Rights an ethical issue is
● What are my moral beliefs? What do I stand ➔ Generally, issues that have high moral
for? intensity, evoke greater ethical attention and
● What we decide and do in given ethical consideration by the decision make than
situation depends on our moral beliefs, issues with low moral intensity
principles, values and virtues
● Am I setting a good example or a bad ➢ Factors contributing to moral intensity of an
example? issue (Six Dimensions)
1. Magnitude of consequences
2. What is the ethical climate in your -The sum of the harms/benefits done to the
organisation? victims/beneficiaries of the moral act
● Does it emphasise rules and regulations?
● Sensitive to people’s needs and rights? 2. Proximity
● Does it look at taking care of individual needs? -The feeling of nearness (social,
psychological, physical) that the moral
3. Is it legal? act has for the victims/beneficiaries
● Look at the laws of your country, international
laws 3. Social consensus
-The degree of social agreement that a
4. Would I want someone to do this to me? How proposed act is evil/good
would you feel if someone did the same thing -Seems to be more like “social concern”
to you
4. Probability of effect
 -Probability that the act will take place and profits to environmental causes, and advocate
the act will cause the harm/benefit for sustainable practices
predicted
Egoism Company (e.g. Brazilian company Vale
5. Temporal immediacy Mining)
-Length of time between the present and the - More likely to think first of promoting the
onset of the consequences company’s profit
- Striving for growth at all costs
6. Concentration of effect - Fast fashion companies: These companies
-The concentration of effect of the moral act prioritize low production costs and rapid product
is an inverse function of the number of turnover to maximize profits. This often comes at
people affected by an act of given the expense of worker well-being, environmental
magnitude impact, and product quality.

Chapter 6 - Organisational Ethics Business Ethics Across Organisational Functions

- Business operations can be highly
Corporate culture: A blend of ideas, customs, specialised, leading to ethical challenges
traditional practices, company values, and shared related to those functional areas.
meanings. - Professional ethical standards may conflict
with the ethical standards within the
Ethical climate: The unspoken understanding among organisation.
employees of what is and is not acceptable - Example of functional areas:
behaviour. ● Accounting Ethics
- Based on the expected standards and ● Financial Ethics
norms. ● Marketing Ethics
- Multiple climates (or subclimates) can exist ● Information Technology Ethics
within one organisation. ● Supply Chain Ethics

Accounting Ethics
Ethical Focus of Organisation Society
Criteria Individual Person - Financial records must be audited by a
certified professional accounting firm.
Egoism (self- Self-interest Company Economic efficiency - Requirements of the accounting function:
centred interest
● Honesty
approach)
● Transparency
● Integrity
Benevolence Friendship Team interest Social responsibility ● Accuracy
(concern for-
others - Conflict with self-interest (of the accounting
approach) firm) and the interests of others
(shareholders and the public).
Principle Personal morality Company rules Laws and
(integrity and procedures professional codes
- For example, an accountant might be
approach) tempted to manipulate financial statements
to make a client's financial situation appear
better than it actually is, if the accountant
Benevolence Company (e.g. Duracell)
benefits financially from the client's success
- Emphasise friendly relations with its employees
(e.g., performance bonus tied to client
- Stress the importance of team play and
satisfaction).
cooperation for the company benefits
- For this reason, Sarbanes-Oxley Act has
- Recommend socially responsible course of
limits the offering consulting services by the
action
auditing firm
- Patagonia: This outdoor clothing company is
known for its environmental activism. They use
Financial Ethics
recycled materials, donate a portion of their
 - Responsibilities to manage the firm’s assets - Institute for Supply Management (ISM)
and raising capital (e.g.. By issuing principles and standards:
stock/bonds) ● Avoid impropriety.
- Example of ethical issues: JPMorgan Chase ● Be responsible.
agreed to pay $920 million and admitted ● Protect confidentiality.
misconduct tied to manipulation of precious ● Follow the law.
metal and treasury markets in 2020.
- Self-regulation as the best path for ethical Two Ethics Approaches
compliance. ● Compliance-based approach:
- Seeks to avoid legal sanctions.
- Emphasises the threat of detection and
punishment.
- Compliance-based ethics programs
increased employees willingness to seek
ethical advice and sharpened their
awareness of ethical issues at work
● Integrity-based approach:
- Combines concern for law with employee
Marketing Ethics responsibility.
- Marketing: advertising, distributing, and - Promotes acting with integrity and conducts
selling products or services. business with honesty and fairness.
- Two issues in marketing ethics emphasise - Integrity-based program, increased sense of
honesty and transparency in advertising. integrity, commitment to the organisation,
- Example: Outcome Health misled their willingness to deliver bad news to supervisor
customers. and their perception that better decisions
- American Marketing Association (AMA) code were made
of ethics: Both approaches have been found to lessen unethical
● Do no harm. conduct, but in somewhat different ways.
● Foster trust.
● Embrace ethical values. Here's an analogy:
Information Technology Ethics
- Ethical challenges in this field involve: ● Compliance-based: You follow the traffic
● Invasions of privacy. light because you don't want a ticket.
● The collection and storage of, and access to, ● Integrity-based: You follow the traffic light
personal and business information. because it's the safe and responsible thing to
● Confidentiality of electronic mail do, even if no one is watching.
communication.
● Copyright protection regarding software, Ethics Programs and Policies
music, and intellectual property. ● Top Management Commitment and
● Cyberbullying. Involvement:
- Example: Vtech collected personal - “Tone at the top” or ethical leadership means
information from children without parental top management demonstrate appropriate
consent. conduct through personal actions and
interpersonal relationship
Supply Chain Ethics - Critical to fostering employee ethical
- Supply Chain: production and operations behaviour.
functions needed to create a product or
service. ● Ethics Policies or Codes:
- Issues in supply chain ethics emphasises - As a guidance to managers and employees
integrity, value and loyalty in business to solve ethical dilemmas.
dealings. - In U.S. policies tend to be instrumental,
- Example: Kobe Steel Limited misled their providing rules and procedures.
customers. - In Japan, policies tend to be a combination
of legal compliance and company values.
- Ethics programs must be widely distributed - Improves employees understanding
and associated with ethics training. on compliance regulation
- Example: 3M’s Code of Conduct. - Prevent future issue or misconduct
- Ethics policies cover issues such as; - Meet audit or certification
- developing guidelines for accepting requirement
or refusing gifts from suppliers - Keep information secure and
- avoiding conflicts of interest, protected
maintaining the security of - Improve the skills on senior leader
proprietary information and manager
- avoiding discriminatory personnel - Improve training effectiveness
practices.
- Companies must circulate ethics policies - Organisational Benefit of Employee Ethics
frequently and widely among employees and Training
external stakeholder groups (e.g., - Reduces legal liability
customers, suppliers, or competitors). - Increase reporting/speaking up
- Many companies use posters, quick - Improves trust in leadership
reference guides, and brochures to raise - Improves employee morale
awareness and importance of their code. - Improves mastery of ethics and
compliance issue
● Ethics and Compliance Officers:
- Many were created as early as the 1980s. Ethics in a Global Economy
- Membership in the professional association, - Doing business in a global context brings up
Ethics and Compliance Officers Association a host of complex ethical challenges.
(ECOA), doubled between 2000 and 2004. - Bribery: a questionable or unjust payment
- Recently ECOA and Ethics Resource Center often to a government official to ensure or
merged into the Ethics Compliance Alliance. facilitate a business transaction.
- International watchdog agency,
● Ethics Reporting Mechanisms: Transparency International, publishes a
- Often called the “helpline” or “hotline.” survey of countries’ levels of corruption.
- Purposes: - Bribe-taking is more likely in countries with
- To provide interpretations of proper low per capita income, low salaries for
ethical behaviour. government officials, and less income
- To create an avenue for reporting variation.
unethical conduct.
- To provide information-sharing tools Efforts to Curtail Unethical Practices
for employees and stakeholders. - Dow Jones Anti-Corruption Survey states
- Executives tend to use the helpline more that 71% of respondents stopped or delayed
often than middle managers. business dealings with corrupt partners.
- Numerous efforts to prohibit bribery:
● Ethics Training Programs: - Malaysian Anti-Corruption
- Generally the most expensive and time- Commission (MACC).
consuming element of an ethics program. - The United Kingdom’s Bribery Act
- Found regularly in larger business prohibits bribery.
organisations. - Anti-Bribery Law in Brazil, India and
- Small and medium businesses are more Mexico.
likely to offer training in alignment with - Organization’s culture and ethical work
regulatory guidelines. climate play a central role in encouraging
- Example: “Giving Voice to Values” program. employees to act ethically.
- Objectives and Motivations for Employee
Ethics Training Programs
- Comply with laws and regulation
- Create a culture of ethics and
respect
Chapter 7 – Business Government Relation to one of conflict, with various stages in
between.
- The relationship is constantly changing. A
cooperative relationship on one issue does
How Business and Government Relate
not guarantee cooperation on another issue.

The relationship between business and government is

Legitimacy Issues
dynamic and complex.
- When dealing with a global economy,
Collaborative Partnership:
business may encounter governments
whose authority or right to be in power is
- Government and business can work together
questioned.
to achieve mutually beneficial goals.
- Political leaders may illegally assume
- See each other as key partners and work
lawmaking or legislative power, which can
openly to achieve common objectives.
become economic power over business.
- This partnership is often based on societal
- Example: Elections can be rigged, or military
values and customs.
force can be used to acquire governmental
control.
Examples by Region:
- Business managers may face the dilemma of
whether to do business in such a country,
- Asia: Society is viewed as a collective family
where their involvement would indirectly
(including government and business),
support this illegitimate power. Sometimes,
leading to a collaborative approach
they may choose to become politically
benefiting both government and business.
active, or refuse to do business in this
- Europe: Relationship between government
country until a legitimate government is
and business often has been collaborative.
installed.
Includes a sense of teamwork and mutual
aid; unions often participate in administrative
boards.
Government's Public Policy Role

Working in Opposition to Government

Role of Government: Governments play a crucial
role in society, addressing fundamental needs and
- Sometimes welcome government regulation
ensuring societal functions.
and involvement and sometimes oppose it.
- Companies often prefer to operate without
Basic Needs: Governments provide safety and
government constraints (might be costly and
protection through the military, homeland security,
restrict innovation)
police, and fire departments. These services are seen
- Business and government objectives can
as public goods that are most effectively provided on
conflict, leading to opposition.
a community-wide basis by the government.
- Regulations can also help business, by
setting minimum standards that all firms
Public Policy
must meet, building public confidence in the
safety of a product, creating a fair playing
- Purpose: Public policy is a government's
field for competition, or creating barriers to
plan of action to address issues affecting a
entry to maintain a business's competitive
substantial portion of its citizens.
advantage.
- Nature: Public policy varies by nation but
- How a specific company reacts to a specific
generally includes goals, plans, and actions
government policy often depends on their
aimed at serving the public interest.
assessment of whether they would be
- Activation: Governments act in public policy
helped or hurt by that rule.
areas when issues affect a large segment of
- The relationship between government and
the population and aim to achieve public
business can range from one of cooperation
purposes.
 - Scope: Can range from broad societal aims
(e.g., full employment, equal opportunity) to
narrow, self-serving interests.
- National Values: Policies often reflect
values like freedom, democracy, and
economic prosperity.
Sources of Public Policy Authority - Example Specifics: Policies on distracted
driving aim to prevent harm to drivers,
- Democratic Systems: In democracies, passengers, and pedestrians, enhancing
citizens elect leaders who then appoint public safety.
officials to manage various public services,
from local (e.g., water, fire protection) to Public Policy Tools
national (e.g., public education, homeland
security). - Mechanisms: Combinations of incentives
- Legal Frameworks: The authority to make and penalties used to influence citizen and
public policy often comes from the nation’s business behaviours.
constitution and common law, as seen in the - Regulatory Power: One of the strongest
U.S. tools available to governments to enforce
- Non Democratic Systems: In public policy.
nondemocratic countries, government power
may come from monarchies, military Public Policy Effects
dictatorships, or religious authorities.
- Outcomes: Results from government
Global Political Dynamics actions, which can be intended or
unintended.
- Interactions and Changes: Various - Challenges: Balancing between achieving
sources of government power can interact, desired policy outcomes and managing
leading to mixed authority structures. negative side effects.
Significant political changes and shifts - Example: Regulations on workplace toxic
toward or away from democracy are substances aim to reduce health risks but
observed globally. may lead to unintended discrimination, as
- Regional Pressures: Even in democratic seen in cases involving lead exposure.
countries, there are pressures from regions
seeking independence or more autonomy,
such as Quebec in Canada.

Elements of Public Policy: Inputs, Goals, Tools,

Effects

Public Policy Inputs

- Definition: External pressures that influence

government policy decisions and strategies.
- Influences: Economic concerns, domestic
political pressure, technical information, and
media attention.
- Example: The rise in distracted driving due
to technological advancements has led
governments to consider regulations on the
use of electronic devices by drivers.

Public Policy Goals

Types of Public Policies Example: Ongoing debates on how to improve and
fund healthcare services to meet citizens' needs.
Major Types: Economic and Social policies.
Government Regulation on Business
Economic Policies
Purpose of Regulation: To implement public policy
1. Fiscal Policy: Involves government revenue by establishing rules for the conduct of citizens and
collection and expenditure to support or stimulate organisations.
the economy. It includes spending on public
services like education, safety, and infrastructure. Levels of Government: Regulations stem from
- Example: During the Great Depression, fiscal multiple levels, including federal, state, and local,
policy through public works projects helped creating a complex regulatory environment for
stimulate economic recovery by creating jobs and businesses.
boosting consumption.
2. Monetary Policy: Deals with managing the Reasons for Regulation
nation's currency supply, demand, and value,
which influences economic stability. The Federal 1. Market Failure:
Reserve (the Fed) in the U.S. plays a crucial role - Definition: Occurs when the market does not
by adjusting interest rates to influence economic account for the full costs of a firm's behaviour,
activity. leading to undesirable outcomes.
- Example: During the Great Recession, the Fed - Example: If a company doesn’t voluntarily invest
lowered interest rates to near zero to encourage in pollution control because it's not economically
borrowing and stimulate the economy. beneficial or demanded by customers, the true
environmental costs are ignored by the market.
3. Trade Policy: Governs international trade, 2. Negative Externalities:
alternating between free-trade approaches and - Definition: Unintended costs (economic, physical,
the imposition of trade barriers like tariffs and or psychological) borne by stakeholders other than
duties to protect or stimulate domestic industries. the business itself.
- Government Role: To regulate businesses to
4. Taxation and Industrial Policies: minimize these externalities, ensuring that all
○ Taxation Policy: Involves adjusting taxes to industry players adhere to minimum standards of
influence economic behavior, with significant safety and environmental impact.
impacts on national revenue and economic
activity. 3. Natural Monopolies:
○ Industrial Policy: Directs resources towards the - Definition: Occur in industries where high
development of specific sectors to strengthen the infrastructure costs make it inefficient for multiple
economy. competitors to operate.
○ Example: The 2017 tax reform intended to - Examples: Utilities, cable TV, broadband Internet,
stimulate the U.S. economy but led to a significant and railroads.
shortfall in projected revenue. - Regulatory Action: Government regulates prices
and access to prevent monopolistic abuses.
Social Policies
4. Ethical Arguments:
- General Scope: Focuses on enhancing the - Rationale: Beyond economic reasons, ethical
well-being of citizens through services like considerations such as fairness, justice, and
healthcare, education, and welfare support. safety are crucial in regulation.
- Global Trends: Both advanced and - Example: Ensuring safe working conditions is not
developing nations are improving social only an economic investment but also a moral
services, influenced by international obligation.
standards and best practices.
- Healthcare Policy: A major area of focus
worldwide, dealing with the provision and
financing of healthcare services.
Regulatory Implications - Scope: Applies across all industries and includes
laws related to health, safety, environmental
● Businesses and Regulation: Businesses protection, and job discrimination.
often require specialised staff like lawyers - Significant Legislation: The 2009 health care
and public affairs specialists to navigate and reform in the U.S. aimed at overhauling health
comply with regulations. care coverage.
● Public Protection: Whether through self-
regulation or government mandates, the Regulatory Agencies and Mechanisms
ultimate goal of regulation is to protect public
interests and welfare. - Regulators: Comprise various government
agencies and the executive branch, with
additional oversight by the judiciary.
- State-Level Regulation: Many business
Regulatory Debate: Economic and ethical arguments behaviours are also regulated at the state
are both used to support or oppose regulatory level, complementing federal guidelines.
measures.
Effects of Regulation
Government Intervention: Sometimes, the potential
consequences of unregulated activities are so severe - Intended Consequences: Regulations are
that government intervention becomes necessary to designed to bring about specific beneficial
safeguard public health and safety. outcomes, such as safer work environments
or fair market practices.
Government Regulation - Unintended Consequences: Sometimes
regulations can lead to unforeseen results,
Purpose: To enforce public policy and ensure orderly such as increased costs for businesses or
conduct in society. restricted managerial freedom.
- Balancing Act: The challenge for regulators
Types of Government Regulation is to ensure that the benefits of regulations
outweigh their costs and to manage any
1. Economic Regulations: negative impacts effectively.
- Objective: To modify market operations and
address distortions caused by monopolies or
undesirable market outcomes.
- Forms: Includes price control, resource allocation, Costs and Benefits: The effectiveness and
service territory definition, participant regulation, economic impact of regulations are crucial
and resource rationing. considerations.
- Example: The Dodd-Frank Act (2010) introduced
to oversee and reform financial activities post- Modern Economy Challenges: The complexity of
2008 recession. the modern economy makes the cost, effectiveness,
and unintended consequences of regulations
2. Antitrust Regulation: significant issues for both government and
- Purpose: To preserve market competition and businesses.
protect consumer interests.
- Enforcement: Managed by the U.S. Department
of Justice and the Federal Trade Commission.
- Penalties: Can include fines, private damages,
and both structural and conduct remedies.
- Current Issues: Recent focus on the monopolistic
behaviours of large tech companies like Facebook
and Google.

3. Social Regulations:
- Goals: Focus on protecting consumers, the
environment, and ensuring safe work conditions.
 regulatory cooperation across countries to
protect national interests and ensure fair
Cost and benefits of regulations competition.

Costs of Regulation Challenges of Regulation

- Economic Impact: Regulations inevitably - Size and Scope: Criticisms often focus on
bring costs which someone must bear, the expansive size of the regulatory
affecting businesses, especially small ones, apparatus and its implications for
and the wider economy. government size and control.
- Administrative Burden: The enforcement - Balancing Act: A significant challenge for
and monitoring of regulations require a regulators is balancing the direct costs of
significant administrative apparatus. For regulation against the broader benefits to
instance, the number of federal employees society, including preventing potential harms.
involved in regulation grew from under
60,000 in 1960 to over 277,000 by 2015.
- Growth in Costs: Costs associated with
federal regulations have increased
significantly, particularly in areas of social
regulation such as environmental health, Regulation and Business
occupational safety, and consumer
protection. - Business Strategy: Understanding and
navigating regulation is crucial for business
Benefits of Regulation survival and success.
- Cooperation with Government: Effective
- Public Protection: Regulations protect management of and cooperation with
public interests, including health, safety, and regulatory processes can enhance a
economic welfare. business's economic environment and
- Market Fairness: They ensure a level financial health.
playing field in the marketplace, preventing
monopolies and fostering fair competition.
- Consumer Confidence: Effective
regulations build consumer trust in products
and services, crucial for a functioning
market.

Cost-Benefit Analysis

- Decision Making Tool: Cost-benefit

analysis helps assess whether the benefits
of regulations justify the costs, guiding policy
decisions.

Regulatory Cycles

- Deregulation vs. Reregulation: Regulatory

intensity tends to be cyclical, influenced by
political ideologies and administrative
priorities. For example, deregulation was
prominent during the Reagan administration,
while reregulation occurred in response to
the financial crises in the late 2000s.
- Global Context: The complexity of
international commerce necessitates
Chapter 10 – Managing for Sustainability
Statistics: Urban areas like Kuala Lumpur frequently
experience poor air quality due to high vehicle and
Purpose of Regulation: Governments regulate
industrial emissions.
business activities to protect the environment.
Necessity of Regulation: Individual firms have little
Major Law: The Environmental Quality Act of 1974,
incentive to minimise pollution if competitors do not,
which includes provisions for air quality management
due to the cost disadvantage.
and control of industrial emissions.
Criteria Pollutants: Includes particulates, nitrogen
Standard Setting: By establishing common
dioxide, carbon monoxide, sulphur dioxide, and lead.
standards, governments can remove the cost of
pollution control as a competitive factor, ensuring a
Special Concern: Haze from forest fires and open
level playing field.
burning, especially transboundary haze affecting
Malaysia and neighbouring countries, leading to
Supportive Measures: Governments can provide
significant health and environmental issues.
economic incentives, legal frameworks, and
administrative systems to encourage pollution
2. Water Pollution
reduction and resolve disputes.
Sources: Contamination from industrial discharges,
Collective Effort: Government's role is crucial in
agricultural runoff, and untreated sewage.
facilitating collaboration between businesses and civil
society towards sustainability.
Impact: Degrades aquatic ecosystems, affects
human health (e.g., through waterborne diseases),
Major Federal Environmental Laws:
and reduces agricultural productivity.
- Air: Regulations focusing on the quality and
Major Incidents: Periodic water pollution crises
pollution levels of atmospheric air.
affecting the water supply in several states, often
- Water: Rules governing water pollution and
leading to water rationing and significant public
the protection of waterways.
outcry.
- Solid and Hazardous Waste: Guidelines for
the management and disposal of solid and
Major Law: The Water Services Industry Act of 2006
hazardous materials.
and the Environmental Quality Act of 1974, which
- Cross-Media: Regulations addressing
govern the discharge of pollutants into water bodies
pollution sources that affect air, water, and
and set standards for water quality.
land simultaneously.

3. Solid and Hazardous Waste

Local Jurisdiction: Regional, state, and local
agencies also play roles in environmental
Statistics: Increasing volumes of solid waste
governance, each with specific jurisdiction over
correlated with urban growth, with efforts underway to
environmental matters within their areas.
enhance waste management and recycling.
Major Areas of Environmental Regulation
Impact of Pandemic: Similar to global trends, there
has been an increase in medical and plastic wastes
Three Major Areas of Environmental Regulation
due to health and safety measures.
1. Air Pollution
Major Law: Solid Waste and Public Cleansing
Sources: Largely from industrial activities, vehicular Management Act of 2007, which emphasises waste
emissions, and occasional open burning, with minor reduction, segregation, and recycling. The
contributions from natural events like forest fires. Environmental Quality (Scheduled Wastes)
Regulations 2005 manage hazardous waste handling.
Impact: Affects public health (e.g., respiratory
ailments), deteriorates buildings, diminishes
agricultural yields, and degrades scenic landscapes.
Environmental Justice: Concerns exist about waste
disposal facilities being disproportionately located
near lower-income communities. Ongoing debates
about the placement of facilities reflect environmental
justice issues.

● Comparative International Initiatives: Market-Based Mechanisms

While Malaysia looks towards models like
the U.S. for developing its regulatory ● Shift in Approach: Movement towards
framework, it also adapts these models to mechanisms that integrate market dynamics
local needs and conditions, such as into pollution control.
addressing transboundary haze and urban ● Cap-and-Trade Systems: Although not as
pollution challenges. prevalent as in some countries, there is
● Business Responses: Malaysian potential for Malaysia to adopt systems
businesses are increasingly adopting where companies can buy and sell pollution
greener practices due to regulatory rights. This could encourage overall
pressures and growing environmental emissions reduction by allowing firms that
awareness among consumers. emit less than their cap to sell the remainder
● Regulatory Dynamics: The Malaysian to those exceeding their limits.
government has been updating and ● Emissions Charges/Fees: Proposals have
strengthening environmental regulations to been considered to charge companies based
address modern challenges, including those on the volume of pollutants they emit,
posed by rapid industrialization and adhering to the principle "the more you
urbanisation. pollute, the more you pay."
- Impact: Creates financial incentives for
pollution reduction, though not yet widely
Alternative policy approaches to environmental implemented.
regulation
Incentives and Positive Reinforcement
Governments employ various strategies to manage
environmental pollution, historically relying on ● Procurement Preferences: The
regulatory standards but increasingly using market- government may prefer to deal with
based and voluntary methods. companies that meet specific environmental
standards.
● Financial Incentives: Includes tax
Command and Control Regulation incentives, such as potential tax breaks for
companies investing in pollution control
● Definition: Traditional regulatory approach equipment.
where the government sets and enforces ● Support for Environmental Upgrades:
specific environmental standards. Possible financial or technical assistance to
● Environmental-Quality Standards: firms adopting cleaner technologies.
Geographical limits on the amount of a
pollutant permissible in the air or water, Trends and Future Directions
typically enforced by the Department of
Environment (DOE). ● Increasing Flexibility: Malaysia is exploring
● Emission Standards: Direct limits on the more adaptable and economically sensitive
amount of pollutants a business can emit; methods to achieve environmental goals.
often requires use of the best available ● Balancing Regulation and Incentives: The
technology for pollution reduction. trend is towards blending strict regulations
● Enforcement: Implemented by with incentives that encourage voluntary
administrative agencies that ensure improvements in environmental
compliance through legislation such as the performance.
Environmental Quality Act of 1974.
 ● Local Adaptations: Adjustments to Civil and Criminal Enforcement
international models like cap-and-trade to fit
local economic and environmental contexts. ● Penalties for Violations: Stringent penalties
are enforced for non-compliance with
environmental laws in Malaysia, including
fines and potentially criminal charges for
severe infractions.
● Deterrent Effect: The threat of significant
penalties, such as fines and imprisonment,
acts as a deterrent against environmental
Information Disclosure violations.
● Example: Companies found violating
environmental regulations in Malaysia can
Information Disclosure: Regulation by Publicity face heavy fines and criminal proceedings,
reflecting strong enforcement practices.
● Definition: Promoting pollution reduction
through public disclosure of pollutants
emitted by companies, known as "regulation
by embarrassment."
● Mechanism: Mandatory reporting on
pollutants, made accessible to the public,
pressures companies to lower emissions to
avoid negative public perception.
● Example: Malaysia may implement similar
provisions to those in the U.S. Community
Right-to-Know Law, encouraging
transparency about toxic emissions. While
there's no direct equivalent to the Toxics
Release Inventory (TRI), public
environmental reports and audits are part of
the disclosure strategy.
Costs and Benefits of Environmental Regulation

● Economic Impact: Compliance with Stages of Corporate Environmental Responsibility

environmental regulations entails significant
expenditures but is considered crucial for 1. Compliance: Meeting minimum legal
long-term environmental and public health requirements to avoid fines and litigation.
benefits. 2. Beyond Compliance: Implementing
● Job Creation and Loss: Regulations might practices that surpass legal requirements,
result in job losses in certain sectors; focusing on long-term sustainability.
however, they also create opportunities in 3. Leadership in Sustainability: Innovating
emerging sectors like renewable energy and and leading in environmental stewardship,
environmental management. setting benchmarks for the industry.
● Economic Stimulation: Environmental
regulations can stimulate economic Organisational Approaches to Sustainability
efficiency by encouraging businesses to
adopt energy-saving measures and reduce ● Corporate Sustainability Leaders: Firms
expenses related to health issues caused by that adopt environmental stewardship as a
pollution. core responsibility, striving for operations
● Long-term Economic Benefits: that do not compromise the biosphere's
Investments in environmental compliance capacity.
are expected to foster job growth in the ● Net Zero Commitments: Aim to achieve net
"green" sectors, aligning with global trends zero carbon emissions by balancing emitted
towards a sustainable economy. greenhouse gases with an equivalent
amount offset or removed.

● Resource Management: Utilising resources

at a rate that does not exceed their
replenishment; implementing efficient
Managing sustainability in business production and waste management
practices.
Legal Compliance: Businesses adhere to ● Collaborative Efforts: Engaging with other
environmental regulations to avoid penalties, but businesses, governments, and organisations
many are moving beyond mere compliance towards to collectively achieve environmental goals.
proactive sustainability management.
Example of Sustainability Leadership
Sustainability Goals: Companies are integrating
sustainability into all areas of operations, aiming to ● Interface, Inc.: Initiated transformative
improve environmental performance not just to meet, actions toward becoming a sustainable
but to exceed regulatory standards. corporation by introducing product leasing
and recycling, reducing waste, and achieving
carbon neutrality in its products.
 ● Top Management Commitment: Crucial for
fostering a culture of sustainability within the
organisation. Malaysian business leaders
are increasingly recognizing the value of
Strategic Competitiveness Through Sustainability sustainable practices not only for compliance
but for long-term viability.
● Competitive Advantage: Managing for ● Board Involvement: Corporate boards in
sustainability can enhance a company’s Malaysia are more frequently overseeing
strategic position by aligning with consumer sustainability initiatives, recognizing the
preferences for eco-friendly products and importance of environmental and social
practices. governance (ESG) factors in risk
● Innovation and Efficiency: Sustainability management.
drives innovation and efficiency, reducing
costs and improving market differentiation. Employee Engagement and Culture
● Reputation and Customer Loyalty:
Sustainable practices can enhance brand ● Employee Involvement: Successful
reputation and build customer loyalty, sustainability initiatives involve contributions
attracting environmentally conscious from employees at all levels. For example,
consumers. some Malaysian companies have adopted
internal platforms similar to Cisco Systems'
Challenges and Future Directions GreenHouse, which encourage sustainable
practices among employees.
● Barriers to Full Sustainability: Achieving ● Impact of Engagement: These efforts can
complete sustainability is challenging due to lead to substantial environmental benefits,
technological and regulatory limitations. such as significant reductions in waste and
● Necessity of Supportive Policies: energy use, aligning with national goals for
Successful sustainability efforts often require reducing carbon emissions.
supportive government policies and a
cooperative industry environment. Aligning Incentives with Sustainability Goals

Sustainability Management Practices ● Rewards and Recognition: Tying

Emerging Roles and Structures compensation and public recognition to
sustainability performance is becoming more
● Chief Sustainability Officer (CSO): A role common in Malaysian businesses. This
becoming increasingly prevalent in alignment encourages employees and
Malaysian firms, particularly those engaged executives to prioritise and achieve specific
in international or environmentally sensitive environmental targets.
sectors. The CSO oversees the integration ● Examples of Incentive Structures: Leading
of sustainability across core business Malaysian companies are beginning to link
processes, a concept introduced globally by executive pay with environmental
DuPont in 2004. performance, mirroring practices of global
● CSO Responsibilities: In Malaysia, CSOs firms like Mars Inc. This is seen particularly
often coordinate efforts across functions in industries like manufacturing and energy,
such as R&D, marketing, and supply chain to where environmental impact is significant.
meet sustainability goals.
● Organisational Support: CSOs usually Strategic Importance
report directly to the CEO, highlighting the
strategic importance placed on sustainability ● Business Value: Emphasising sustainability
within Malaysian companies. can enhance a company's competitive
advantage in Malaysia, where there is
Characteristics of Effective Sustainability growing consumer and regulatory demand
Management for environmentally responsible business
practices.
 ● Innovation and Leadership: Malaysian
companies that adopt sustainable practices
not only comply with local regulations but
also lead in innovation, setting standards for
the industry and influencing policy
development.
Sustainability Management as a Competitive
Environmental Auditing and Reporting Advantage

● Trends: Starting in the 1990s, Malaysian 1. Cost Savings:

companies have increasingly adopted
environmental audits to assess their Efficiency and Waste Reduction: Malaysian
performance against sustainability goals. companies, such as those in the manufacturing
● Integration of Reporting: It's now common sector, have realised significant cost savings by
for companies in Malaysia to merge social reducing waste and improving operational efficiency.
and environmental reporting into a single Practices like recycling, reusing materials, and
comprehensive sustainability report. optimising production processes are common.
● Global Adoption: Reflecting global norms, a
large number of Malaysian firms now issue Real Estate and Resource Management: Firms in
sustainability reports that adhere to Malaysia are also optimising their assets to save
standards developed by the Global money and improve environmental performance,
Reporting Initiative (GRI), with many also often using technology to enhance energy efficiency
undergoing external audits for accuracy. in buildings.
● Inclusion in Financial Reports: Following
global trends, Malaysian companies are 2. Brand Differentiation:
increasingly incorporating sustainability data
into their annual financial reports, signalling Eco-friendly Products and Services: Companies in
a shift towards integrated reporting that Malaysia that develop and market environmentally
includes both financial and non-financial friendly products often gain a competitive edge by
data. appealing to the growing number of environmentally
conscious consumers.
Environmental Partnerships
Market Trends: The demand for sustainable products
● Collaborative Approach: In Malaysia, is increasing in Malaysia, mirroring global trends
businesses often form partnerships with where consumers are willing to pay a premium for
environmental organisations and products that are marketed as sustainable.
government bodies to enhance sustainability
initiatives. These partnerships leverage 3. Technological Innovation:
unique strengths and resources to achieve
shared environmental goals. Leading through Innovation: Proactive Malaysian
● Example: Malaysian companies collaborate companies are often at the forefront of technological
with local environmental NGOs and innovations that reduce environmental impact, such
governmental agencies to promote as developing greener alternatives to traditional
sustainable practices and environmental materials or improving waste management
conservation efforts, such as reforestation technologies.
projects and wildlife protection.
4. Reduction of Risks:

Regulatory Compliance: Companies in Malaysia

that advance in sustainability are better equipped to
comply with increasingly stringent local and
international environmental regulations, gaining a
strategic advantage in both domestic and global
markets.
Mitigation of Liability and Climate Risks: By
managing environmental risks proactively, companies
can avoid potential fines, legal actions, and other
consequences of non-compliance.

Competitive Advantages of Sustainability

Strategic Planning for Sustainability Management

● Purpose: To assess the full range of a firm's 1. Cost Reduction: Implementing sustainable
environmental impact, going beyond practices can lead to significant cost savings
compliance to proactive sustainability by reducing waste and improving efficiency.
management. 2. Market Attractiveness: Companies known
● Techniques Used: Involves complex for sustainability attract environmentally
auditing and forecasting to anticipate conscious customers and can enter new
external influences including ecological, markets more easily.
market, and technological changes. 3. Innovation Leadership: Sustainable
● Example: Toyota's early development and practices often require innovative solutions,
success with the hybrid Prius model which can lead to technological
demonstrate the effective anticipation of advancements and new product
market demand for efficient, less polluting developments.
vehicles. 4. Risk Management: Proactive sustainability
management helps firms anticipate and
Integration into Strategic Planning adapt to regulatory changes, reducing
potential liabilities.
● Corporate Adoption: A significant number
of companies have formally integrated Ethical and Normative Considerations
sustainability into their strategic planning
processes. This integration helps companies ● Normative Argument: Beyond the business
align their operations with future market benefits, there is a moral imperative for
trends and environmental standards. companies to act sustainably. This
● Evidence of Success: Research, including perspective views environmental and social
studies by Harvard Business School, shows stewardship as valuable in themselves,
that firms with strong sustainability practices fulfilling a responsibility to protect the
outperform others in financial and stock interests of current and future generations.
market returns. ● Instrumental Argument: Posits that
sustainability leads to tangible business
benefits, including enhanced competitive
advantage and financial performance.
Material Sustainability Issues
Role of Collaboration
Definition: Issues that are significant for evaluating a
firm's sustainability management relative to its ● Multi-Stakeholder Involvement: Achieving
industry. a sustainable economy requires efforts from
government, businesses, and civil society.
Impact on Performance: Companies that effectively While the government sets minimum
manage material sustainability issues tend to standards through regulations, businesses
outperform those that do not. This is particularly can gain competitive advantages by
evident in industries where certain sustainability exceeding these standards.
issues are more critical (e.g., greenhouse gas ● Beyond Compliance: Proactive companies
emissions in transportation). recognize that sustainable operations are not
just about meeting regulatory requirements
but are crucial for long-term competitiveness
and ethical responsibility.
Chapter 14 – Consumer Protection - Federation of Malaysian Consumer
Federation (FOMCA)
Rights of Consumers ( I Suka Comel Hensem - Malaysian Aviation Commission
Pandai) (MAVCOM) - untuk aviation shj
- Consumers' Association of Penang
1. The right to be informed: Protection against (CAP)
fraudulent, deceitful, or grossly misleading
information, advertising, and labelling, and to be How Government Protects Consumers
given the facts to make an informed purchasing
decision. - The role of government protecting
2. The right to safety: Protection against the consumers is extensive
marketing of goods that are hazardous to health or - Consumer protection laws are designed to
life. safeguard the five rights of consumers.
3. The right to choose: Assurance of access to a - Goals of Consumer Laws
variety of products and services at competitive 1. To provide consumers with better
prices. information when making purchases.
4. The right to be heard: Assurance that consumer - Hazardous home appliances must have
interests will receive full and sympathetic warning label
consideration in government policy and the courts. - Automobiles must carry label showing
5. The right to privacy: Assurance that information detailed breakdown of price and related
disclosed in a commercial transaction or when costs
using social media or searching online is not - Tobacco advertisement and alcoholic
shared with others. beverages have to carry health warning
label
- Warranties must specify the terms of
guarantee and the buyers rights
Four Methods of Protecting Consumers - Food and beverages have to show
complete nutritional information
2. To protect consumers against possible
hazards.
- National speed limits on highway are
specified
- Hazardous toys and games are banned
- Pesticide residue in food is allowed only if
it poses negligible risks
- Hazardous, defective and ineffective
product can be recalled
3. To promote competitive pricing.
- Unfair pricing, monopolistic practices
4. To promote consumer choice.
- When injured by a product, consumer
Self-Advocacy for Consumer Interests can seek legal redress
5. To protect privacy.
● Consumers have tried to protect their - Limited collection of information online
interests when they go to the marketplace to from and about children is allowed
buy goods and services.
● Consumerism/consumer movement:
Collective efforts by consumers in many
countries to safeguard their own rights in
many nations.
● Malaysia advocacy organisations e.g.
 - The consumer may be denied opportunities,
such as credit, based on their online profiles.
- Information collected by behavioural
advertisers may not be kept private and
Consumer Protection Agency secure.

How to protect consumer privacy while fostering

Agency Major Responsibilities
Internet commerce?
National Tak sure…
Consumer Consumer self-help:
Complaints
Centre - Internet users should use technologies that enable
them to protect their own privacy.
Persatuan Halal products - Use specialised software can block cookies and
Pengguna Islam
Malaysia (PPIM)
ads
- Use encrypt email and text messages
Malaysia Cyber pembangunan masyarakat siber yang bijak dan Industry self-regulation:
Consumer selamat, melindungi hak dan kepentingan pengguna - Internet-related businesses advocate being
Association siber, dan memperjuangkan dasar dan undang-
(MCCA) undang yang melindungi pengguna siber allowed to regulate themselves.
- But, a few companies often made money from
Malaysia Palm Oil Harga kelapa sawit selling personal information to advertiser
Board (MPOB)
Privacy legislation:
- Favour new government regulations protecting
consumer privacy online.
- EU’s General Data Protection Regulation
Deceptive Advertising
Using the Courts and Product Liability
- Deceptive advertising: refers to manufacturers
making false or misleading claims about their own - Product Liability: the legal responsibility of a firm
product or a competitor’s product, withholding for injuries caused by something it made or sold.
relevant information, or creating unreasonable - Consumers have the right to sue and collect
expectations. damages if harmed by unsafe products.
- Illegal in most countries. - Consumer advocates and trial attorneys have
supported these legal protections.
Consumer Privacy in the Digital Age - By contrast, some in the business community
have argued courts and juries have unfairly
- Rapidly evolving information technologies in the early favoured plaintiffs and have called for reform.
21st century led to the issue of consumer privacy:
- New technologies enabled businesses to collect and Strict liability
use vast amounts of personal data about their
customers. - Manufacturers are responsible for injuries
- The dangers: resulting from use of their products, whether they
- Information might rarely be used fraudulently. were negligent or breached a warranty.
- Unwarranted violation into personal privacy. - May be held liable, whether or not they
knowingly did anything wrong.
- Behavioural advertising: advertising that is targeted - E.g. Johnson & Johnson case, asbestos was
to particular customers, based on their observed found in talcum baby powder, however there’s
online behaviour; intended to be tailored to a user’s no asbestos added but they recalled the product
interests and preferences. and discontinued while pay $2.1 billion to all
- Benefits: plaintiffs
- The buyer is more likely to receive messages - Product liability systems of other nations differ
that are relevant. significantly,
- The seller is more likely to reach prospective - In Europe, judges (not juries) hear cases:
customers. - Punitive damages are not allowed, so get
- Risks: smaller reward
 - Victims’ health expenses are not an issue as - Handle consumer inquiries and complaints
they are covered by national health insurance. about a company’s products and services
- Historically, product liability cases have been through:
exceedingly rare in China. - Consumer hotlines.
- But, in 2009, in China there were cases of - Interactive web sites.
tainted-milk scandal, milk producer add - Software that pulls customer
melamine inside milk knowing can boost protein feedback from multiple channels,
formula. - e.g.; surveys, social media,
and unsolicited feedback.
Alternative Dispute Resolution (ADR)

- One approach to settling disagreements between

companies and consumers, other than going to ● Product recalls:
court. - Occurs when a company, either
- Can take the form of: voluntarily or under an agreement
● Mediation: a voluntary process to settle disputes with a government agency, takes
using a third party neutral. back all items found to be
● Arbitration: the use of an impartial individual to hear dangerously defective.
and decide a case outside of the judicial system. - Problem: the public may not be
- It is a faster and less expensive way to resolve aware of them, so dangerous
company-consumer disputes and does not tie up products continue to be used.
the judicial system with minor issues. - The four major agencies
- A controversial aspect of consumer ADR is the use of responsible for most recalls:
mandatory arbitration clauses that limit consumers’ - KPDN
right to sue. - PUSPAKOM.
- National Pharmaceutical
Positive Business Responses to Consumerism Regulatory Agency (NPRA)
- Cosmetic Notification Holder
● Quality management: all the measures an (CNH)
organisation takes to assure quality.
- Taking steps at all stages of the production Consumers today benefit:
process to ensure consistently high quality
has many benefits. - Better information about the goods
- Building products right reduces the risk of and services they purchase.
liability lawsuits and builds brand loyalty. - More aware of their rights when
- Managing product and service quality is an something goes wrong.
attempt by a business to address its - Better protected against inflated
customers’ needs. advertising claims, hazardous or
● Complex issue: When a safe and high ineffective products, and unfair
quality product is used in illegal or pricing.
dangerous ways.
● Voluntary industry codes of conduct:
- Businesses in some industries have
banned together to agree on voluntary
codes of conduct, spelling out how they will
treat their customers.
- Example: Persatuan Kebangsaan
Pekebun-pekebun Kecil Malaysia (PKPKM)
adopted voluntary guidelines for small
farmers, so that they can sell at the same
price.
● Consumer affairs departments:
- Manage a complex network of contacts
with customers.
Chapter 18 - The Community and The Corporation

➔ Community Stakeholders
● A community includes members of society or
a group of people who live in the same area
(such as a city, town or neighbourhood) or a
group of people who have the same
interests, religion or culture ➔ Business is vital to the community because they:
● Community are stakeholders of an ● Create jobs in the community
organisation when they are aware of, ● Produce economic effects when it
concerned about, or in some way affected by buys and supplies raw materials
the operations and output of the organisation and other services/goods to/from
● There are expectations on both sides (what other firms in the area
the business expects from the community ● Bring in new technology and
and what the community expects from the infrastructure
business)
The Business Case for Community Involvement
The Firms and Its Communities
➔ Civic engagement refers to the active
involvement of businesses and individuals in
Community Interest changing and improving communities
➔ Why should businesses be involved in the
Site community Geographical location of a company’s
community?
operations, offices or assets
● Civic engagement is a major way for
Fence-line community Immediate neighbours organisations to act in a responsible way
● To win local support by business activity. A
Virtual communities People who buy from or follow the company must earn its informal licence to
company online operate (the right to do business)
● Helps to build social capital
Communities of Groups that share a common interest with
● Social capital refers to the norms and networks
interest the company
that enable collective action; goodwill
engendered by social relationships
Employee community People who work near the company

Community Relations

➔ The organised involvement of business with the

What the Community and Business Want from Each communities in which it conducts operations
Other ➔ The organisational function dedicated to building
and maintaining relationships and trust with the
community
➔ Community relations manager is a manager
delegated with local citizens, develop community
programs, manage donations of goods and
 services, work with local governments and causes through donations of gifts, grants
encourage employee volunteerism etc
➔ Companies engage in community relations by ● Corporations can give directly through
engaging in activities that support local establishing corporate foundations
community usually through philanthropic ● Forms of corporate giving:
activities ➢ Charitable donations (gifts of money)
➔ Organisations can help community through: ➢ In-kind contributions (gifts of products
1. Economic development or services)
2. Housing ➢ Volunteerism (Employees donate time
3. Aid to minority, women, and in support of social causes)
disabled veteran-owned enterprises ● Strategic philanthropy involves both
4. Disaster, terrorism and war relief financial and and non financial
➢ However it’s challenging to managers contributions to stakeholders, but both
because they have to find ways to fulfilling the company and the stakeholder benefit
the community expectations while ensuring from the gift
the company is profitable ● It is made directly from the company to
community organisations, not through
Development (Corporate Community Involvement) foundation

➔ Definition: Intended to bring new business into the Strategic Philanthropy VS Traditional Philanthropy
area or develop workforce skills
Strategic Philanthropy Traditional Philanthropy
➔ Examples:
1. Corporate Community Involvement - Donations and related Donations and related activities
Housing activities are aligned with the are not aligned with strategic
● PR1MA was established under the strategic goals and resources goals and resources of the firm
PR1MA Act 2012 to plan, develop, of the company
construct and maintain affordable lifestyle
housing for middle-income household in Has a solid integration with Companies have good intentions
organisational resources and but no solid integration with
key urban areas
objectives organisational resources and
objectives
2. Aid to Minority, Women and Disabled
Veteran-Owned Enterprises
● Many organisations provide help to these
groups through financial aid Strategic Philanthropy
● They do business in economic locations
where high crime rates, poor ● Benefit both companies and societies that aligned
transportation, low-quality public services with company’s vision and mission

3. Disaster, Terrorism and War Relief 1. Factor conditions - Activities involve supply of
● International relief efforts are becoming trained workers, physical infrastructure and natural
more important as communications resources
improve and people around the world are
able to witness horrors of natural Example: Providing training programs or scholarships
disasters, terrorism and war to low-income and disadvantaged youth in the skills
● Corporate involvement such as efforts is that are needed by the company
an extension of the natural tendency of
people to help one another when tragedy 2. Demand conditions - Activities affect the demand
strikes for a company’s products or services, increase
customer base and affect demand for a product and
4. Corporate Giving/Corporate Philanthropy enhance the name recognition in the firm’s target
● Involves corporate giving to non profit population of customers
organisation Providing support for worthy
Example: Milo Truck come to schools during sports ➔ Focus your organisation’s philanthropic
day (increase brand recognition) activities on the mission of the organisation
➔ For example in terms of
3. Context for strategy and rivalry - Activities that environmental/education
are designed to support policies that create a more
productive competitive environment

Example: People are using pirate software. Therefore,

providing financial support to organisations that are
related to protecting Intellectual Property (IP) will be
useful. For instance, establishing a forum can help
spread awareness about IP protection.

Another example is, fighting and preventing corruption

from wasting the country's resources.

4. Related and supporting industries - Strengthen

related sectors of the economy, may also help
companies. A company’s productivity can be greatly
enhanced by having high-quality supporting industries Measuring the return on social investment
services nearby.
➔ A continuous cycle starting from the inputs,
Example: Nestle Malaysia collaborated with the local outputs, impacts and value creation
farmer’s association board at Bukit Awang, Pasir
Puteh, Kelantan to produce Maggi Chilli Sauce. Both 1. Inputs - resources companies provide/use to
parties benefit from the production of Nestle products, run programme such as cash contributions,
which also creates job opportunities for the farmers. employee time, products and services or
logistics support

2. Outputs - measures the activities that took

3 Strategies to help companies get the most benefit place such as how many students/schools
from their contributions were involved? (figure)

1. Draw on unique assets and competencies 3. Impacts - represent the difference the
of the business program made, and the actual benefits
gained to the communities served, such as
➔ Companies that have special skills that KKM organising an awareness campaign
enable them to make a contributions that about obesity in schools, and then collecting
other could not data to determine whether there is a
➔ Example: Microsoft has specialised expertise reduction in the number of obese students in
to protect its intellectual property the school

2. Align priorities with employee interests 4. Value creation - benefits to the business of
the programme conducted
➔ Let employees have a say on who will
receive their contributions
➔ This will strengthen ties between company
and workers
➔ Example: Ask the employees about
charitable organisations

3. Align priorities with core values of the

firm
Situation Example of Strategic Philanthropy to identify
4 return on social investment

Cisco Systems, a manufacturer of hardware for the

Internet has established a networking academy to
train computer network administrators. This initiative
includes 10,000 sites in 180 countries and has trained
almost 8 million students.

The academy benefits communities by providing job

training for young people who go on to successful
careers in system administration. But it also benefits
Cisco by assuring a supply of IT professionals who
can operate Cisco’ complex equipment. Companies
and governments are also more likely to buy Cisco
products because they are confident that skilled
technicians are available.

Input - the hardware, the software, the employees

time used in the training, financial resources to build
academy

Output - skilled technicians, 8 million students, 180

countries

Impact - successful job (employment), career

progression (those who attend, high income), higher
percentage of to go into university

Value creation - companies and government most

likely to buy Cisco products because there are skilled
technicians available (brand reputation etc)