CBSE Questions for Class 11 Commerce Business Studies Social Responsibilities Of Business And Business Ethics Quiz 6 - MCQExams.com

• Economic responsibility: A business enterprise is basically an economic entity and, therefore, its primary social responsibility is economic.
  
• Legal responsibility: Every business has a responsibility to operate within the laws of the land.
  
• Ethical responsibility: This includes the behavior of the firm that is expected by society but not codified in law
  

Improving the Company's Brand

Being a socially responsible company can bolster a company's image and build its brand. The public perception of a company is critical to customer and shareholder confidence in the company. By projecting a positive image, a company can make a name for itself for not only being financially profitable, but socially conscious as well. Also, by being active in the community, a company's employees are engaging with potential customers and in doing so, indirectly marketing the company in the process.

Engaging Customers

Building relationships with customers is the cornerstone of a successful company and having a social responsibility policy can impact the buying decisions of customers. Some customers are willing to pay more for a product if they know a portion of the profit is going to worthy cause. Also, if a company is active in the local community – for example, a bank that offers loans to low-income families – the company will be viewed positively by the community and perhaps boost the company's sales as a result. In short, building a positive relationship with customers and their communities can lead to increased sales and rising profits.

Retaining Top Talent

Many employees want to feel like they're part of something bigger. Social responsibility empowers employees to leverage the corporate resources at their disposal to do good. Some public corporation's employees number in the tens of thousands, and when they get behind an initiative, the results can be amazing.

Furthermore, being part of a strategy that helps the greater good can boost employee morale and lead to greater productivity in the workforce. Knowing a product and service is also helping with social causes can create a sense of pride and that pride shows in relationships with customers and fellow employees.

The negative aspects of corporate social responsibility.

The basic reason why a business is formulated is to make a profit. Corporate social responsibility insists on a corporation to make an effort to look out for stakeholders who are not shareholders only, but who have an interest on what an organization does and the outcomes of what it does. Despite of that, its not totally the duty of the corporation to look out for the many people who hold an interest in the company's activities. If the operations of the free market don’t solve the social problem, it is the duty of the government and not the businesses, to address the many issues faced by the society.

Some businesses are just not prepared to deal with social issues. The lack of preparations of a particular business to deal with societal issues needs the managers to be trained and well versed in dealing with the complex issues that many societies face, as this will give them the skills and the knowledge to be prepared to do so.

SCOPE OF BUSINESS ETHICS

Ethical problems and phenomena arise across all the functional areas of companies and at all levels within the company.

Ethics in Compliance

Compliance is about obeying and adhering to rules and authority. The motivation for being compliant could be to do the right thing out of the fear of being caught rather than a desire to be abiding by the law. An ethical climate in an organization ensures that compliance with law is fuelled by a desire to abide by the laws. Organizations that value high ethics comply with the laws not only in letter but go beyond what is stipulated or expected of them.

Ethics in Finance

The ethical issues in finance that companies and employees are confronted with include:

• In accounting – window dressing, misleading financial analysis.

• Related party transactions not at arm’s length

• Insider trading, securities fraud leading to manipulation of the financial markets.

• Executive compensation.

• Bribery, kickbacks, over billing of expenses, facilitation payments.

• Fake reimbursements

Ethics in Human Resources

Human resource management (HRM) plays a decisive role in introducing and implementing ethics. Ethics should be a pivotal issue for HR specialists. The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee.

The issues of ethics faced by HRM include:

• Discrimination issues i.e. discrimination on the bases of age, gender, race, religion, disabilities, weight etc.

• Sexual harassment.

• Affirmative Action.

• Issues surrounding the representation of employees and the democratization of the workplace, trade ization.

• Issues affecting the privacy of the employee: workplace surveillance, drug testing.

• Issues affecting the privacy of the employer: whistle-blowing.

• Issues relating to the fairness of the employment contract and the balance of power between employer and employee.

• Occupational safety and health.

Companies tend to shift economic risks onto the shoulders of their employees. The boom of performance-related pay systems and flexible employment contracts are indicators of these newly established forms of shifting risk.

Ethics in Marketing

Marketing ethics is the area of applied ethics which deals with the moral principles behind the operation and regulation of marketing. The ethical issues confronted in this area include:

• Pricing: price fixing, price discrimination, price skimming.

• Anti-competitive practices like manipulation of supply, exclusive dealing arrangements, tying arrangements etc.

• Misleading advertisements

• Content of advertisements.

• Children and marketing.

• Black markets, grey markets.

Ethics of Production

This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.

• Defective, addictive and inherently dangerous products and

• Ethical relations between the company and the environment include pollution, environmental ethics, and carbon emissions trading.

• Ethical problems arising out of new technologies for eg. Genetically modified food

• Product testing ethics.

The most systematic approach to fostering ethical behaviour is to build corporate cultures that link ethical standards and business practices.