BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY FOR .

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European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)BUSINESS ETHICS AND CORPORATE SOCIAL RESPONSIBILITY FOR BUSINESSSUCCESS AND GROWTHGodfrey Adda, Dr. John Bosco Azigwe, Aboteyure Roger AwuniSchool of Business, Bolgatanga Polytechnic, P. O. Box 767, U.E.R, GhanaABSTRACT: The concepts of ethical behavior and corporate social responsibility have come tothe fore in recent years in both developed and developing countries as a result of growing senseof corporate wrongdoing. These two concepts can bring significant benefits to a business. Theidea that business enterprises have some responsibilities to society beyond that of making profitsfor shareholders has been around for centuries. The paper addresses the concepts of businessethics and corporate social responsibility. From the perspectives of MBA students andmanagers, it came out that business ethics and social responsibility are very important fororganizational growth and success. Specifically, they consider business ethics to lead to positiveemployee, customer and community relations. Not only that but also, they perceive that betterpublic image/reputation; greater customer loyalty; strong and healthier community relations caninure to the benefit of corporations that are socially responsible. Implications of the findings arefinally drawn.KEYWORDS: Business Ethics, Corporate Social Responsibility, and Business Growth.INTRODUCTIONEthical behavior and corporate social responsibility can bring significant benefits to a business.The idea that business enterprises have some responsibilities to society beyond that of makingprofits for shareholders has been around for centuries (Barry, 2000). This partly accounts for thereason why the concept of Corporate Social Responsibility (CSR) has continued to grow inimportance and significance (Carroll & Shabana, 2010). One of the core beliefs is that businessorganizations have a social and ethical responsibility, as well as, the economic mission ofcreating value for shareholders or owners of businesses (Carroll, 1989). Whereas, the economicresponsibilities of a business are to produce goods and services that society needs and wants at aprice that can perpetuate the continuing existence of the business, and also satisfy its obligationsto investors; ethical responsibilities are those behaviors or activities expected of businesses bysociety and other stakeholders such as employees (Ferrell & Fraedrich, 1997).This paper seeks to answer the following: What are the perceptions of students in BusinessSchools on the benefits of CSR and ethics to corporations? What do the business community andorganizations get out of CSR and ethical behavior? That is, how do they benefit tangibly fromengaging in CSR policies, activities and ethical practices? The paper also seeks to articulate whatsocial responsibility and ethics means, and why it makes good business sense to integrate the twoconcepts into strategic decisions, policies and practices of businesses. Specifically, we gauge theperceptions of MBA students and managers on the following:26ISSN 2053-4019(Print), ISSN 2053-4027(Online)

European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)1)Business ethical behavior and how ethics can be integrated into corporations for mutualbenefits.2)Some of the forces relating to CSR and how CSR can be integrated into sustainablebusiness strategies.In next to follow, we review the literature on CSR and business ethics to put the study inperspective. We first explore the concepts of business ethics and CSR; and the relevantstakeholder groups (internal and external of the firm) involved. This is followed by themethodology through which data was collected to illuminate the research. Then we present ourfindings, discussions and conclusions.LITERATURE REVIEWUnethical behavior or inability to demonstrate corporate social responsibility can damage afirm's reputation and make it less appealing to relevant stakeholders (Daft, 2001). The conceptsof business ethics and social responsibility are often used interchangeably, although each has adistinct meaning (Carroll, 1989; Daft, 2001; Shaw & Barry, 1995). Whereas business ethicsincludes the moral principles and standards that guide behavior in the world of business;corporate social responsibility (CSR) is an integrative management concept, which establishesresponsible behavior within a company, its objectives, values and competencies, and the interestsof stakeholders (Meffert & Münstermann, 2005). Companies that consistently demonstrateethical behavior and social responsibility generate better results (Carroll, 1989).Business ethicsEthics are codes of values and principles that govern the action of a person, or a group of peopleregarding what is right versus what is wrong (Levine, 2011; Sexty, 2011). Therefore, ethics setstandards as to what is good or bad in organizational conduct and decision making (Sexty, 2011).It deals with internal values that are a part of corporate culture and shapes decisions concerningsocial responsibility with respect to the external environment. The terms ethics and values arenot interchangeable (Mitchell, 2001). Whereas ethics is concerned with how a moral personshould behave; values are the inner judgments that determine how a person actually behaves.Values concern ethics when they pertain to beliefs about what is right and wrong.In the business setting, being ethical means applying principles of honesty and fairness torelationships with coworkers and customers (Daft, 2001). Business or corporate ethics is a formof applied ethics or professional ethics that examines ethical principles, and moral or ethicalproblems that arise in a business environment (Stanwick & Stanwick, 2009). It is an umbrellaterm that covers all ethics-related issues that come up in the context of doing business. Businessethics is defined as the rules, standards, codes, or principles that provide guidance for morallyappropriate behavior in managerial decisions relating to the operations of the corporation, andbusiness relationship with the society (Sexty, 2011). It applies to all aspects of business conductand is relevant to the conduct of individuals and the entire organization (Mitchell, 2001).Furthermore, business ethics is the behavior that a business adheres to in its daily dealings with27ISSN 2053-4019(Print), ISSN 2053-4027(Online)

European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)its stakeholders (e.g., employees, customers, suppliers, immediate community and society ingeneral) (Dombin, 2012).The growth of business organization relies on its sound ethical code of conduct set to guide bothmanagement and employees in its daily activities (Steve, Steensma, Harrison & Cochran, 2005).The logic supporting ethics as a good practice, is that, ethical contexts will create the properclimate which will aid to drive the development of ethical human resource practices (Buckley etal., 2001). The result is a shared value system that channels, shapes, and directs behavior atwork. The advantages of ethical behavior in business include the following (Mitchell, 2001):1)Build customer loyalty: A loyal customer base is one of the keys to long-range businesssuccess. If consumers or customers believe they have been treated unfairly, such as beingovercharged, they will not be repeat customers. Also, a company’s reputation for ethicalbehavior can help it create a more positive image in the marketplace, which can bring in newcustomers through word-of-mouth referrals. Conversely, a reputation for unethical dealings hurtsthe company’s chances to obtain new customers. Dissatisfied customers can quickly disseminateinformation about their negative experiences with the company.2)Retain good employees: Talented individuals at all levels of an organization want to becompensated fairly for work and dedication. Companies who are fair and open in their dealingswith employees have a better chance of retaining the most talented people.3)Positive work environment: Employees have a responsibility to be ethical. They must behonest about their capabilities and experience. Ethical employees are perceived as team playersrather than as individuals. They develop positive relationships with coworkers. Their supervisorstrust them with confidential information.4)Avoid legal problems: It can be tempting for a company’s management to cut corners inpursuit of profit, such as not fully complying with environmental regulations or labour laws,ignoring worker safety hazards or using sub-standard materials in their products. The penalties ifcaught can be severe, including legal fees and fines or sanctions by governmental agencies. Theresulting negative publicity can cause long-range damage to the company’s reputation that caneven be more costly than the legal fees or fines.Three levels of ethical standardsThere are three levels of ethical standards i.e., the law, policies and procedures, and moralstandards of employees (Josephson, 1988): 1) the law, which defines for society as a whole thoseactions that are permissible and those that are not. The law merely establishes the minimumstandard of behavior. At the same time, actions that are legal may not be ethical. Therefore,simply obeying the law is insufficient as a guide for ethical behavior; 2) Organizational policiesand procedures, which serve as specific guidelines for people or employees as they make dailydecisions; 3) the moral stance that employees take when they encounter a situation that is notgoverned by law or organizational policies and procedures. A company’s culture can serve toeither support or undermine its employees’ concept of what constitutes ethical behavior.28ISSN 2053-4019(Print), ISSN 2053-4027(Online)

European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)Establishing an ethical frameworkThe ethics of a business depends on the company’s culture or moral behavior (Long & Sedley,1987). The decision to do activities ethically is an example of moral behavior. All corporationshave to decide what to do and how to do it, in order to align their behavior with their ethicalvalues. An organization that places ethics at the center of all that it does has an ethicalframework (International Monetary Fund, 2008). To cope successfully with many potentialethical decisions they face, corporations, companies or entrepreneurs must develop a workableethical framework to guide themselves and the organization. Such a framework ensures thatethical concerns are not dismissed as tangential, distracting, or inconsequential. Developing anethical framework can involve a four-step process (IDEA, 2008).Step 1: Recognize the ethical dimensions involved in the dilemma or decision. Before makinginformed ethical decisions, it is important to recognize that an ethical situation exists. Thisenables the definition of the specific ethical issues involved. To have a complete view ofdecisions concerning ethics and to avoid ethical quagmires, it is important to consider the ethicalforces at work in any situation, i.e., honesty, fairness, respect for the community, concern for theenvironment, and trust.Step 2: Identify the key stakeholders involved and determine how the decision will affect them.The business can influence, and be influenced by a multitude of stakeholders (e.g., employees,customers, community needs). The demands of these stakeholders may conflict with one another,thus putting a business in the position of having to choose which groups to satisfy or not. Beforemaking a decision, managers must sort out the conflicting interests of various stakeholders bydetermining which ones have important stakes in the situation.Step 3: Generate alternative choices and distinguish between ethical and unethical responses.When generating alternative courses of action and evaluating the consequences of each one.Asking and answering questions and ensuring a balance between the choices can ensure thateveryone involved is aware of the ethical dimensions of the issue.Step 4: Choose the best or plausible ethical response and implement it. At this point, there likelywill be several ethical choices from which managers can pick. Comparing these choices with theideal ethical outcome may help in making the final decision. The final choice must be consistentwith the company’s goals, culture, and value system as well as those of the individual decisionmakers. Although an ethical behavior may not be profitable all the time, an unethical behaviorfrequently generates substantial losses, especially on a long term (Baron, 1996). Therefore, it isimportant for organizations to understand that, regardless the nature of some unethicalconsequences and the timing horizon to which they report, on a long term, they representconsiderable costs. Thus, whereas business ethics focuses on the role and responsibilities ofmanagers and employees as business agents, corporate social responsibility, on the other hand, ismore focused on the corporation (or organization) and its obligations and behavior to otherstakeholders in the larger social system (Daft, 2001).29ISSN 2053-4019(Print), ISSN 2053-4027(Online)

European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)Corporate Social Responsibility (CSR)Companies or corporations are facing increasing demands that, they look beyond their owninterests and prioritize those of the societies in which they operate (Broomhill, 2007). The notionthat, business enterprises have responsibilities to society beyond that of making profits forshareholders has been around for centuries (Carroll, & Shabana, 2010). This is becausebusinesses host their operations within society, and in return, society expects business to showresponsibility for aspects of their operations (Bichta, 2003). It is no longer acceptable for a firmor corporation to experience economic prosperity in isolation from the stakeholders within itsimmediate and as well the wider environment (D’Amato et al., 2009). Accordingly, the qualityof relationships that an organization has with its employees and other key stakeholders (e.g.,customers, investors, suppliers, public and governmental officials, activists, and communities) iscrucial to its success.Corporate Social Responsibility (CSR) can be understood as an integrative management concept,which establishes responsible behavior within a company, its objectives, values andcompetencies, and the interests of stakeholders (Meffert & Münstermann, 2005). It refers to abusiness system that enables the production and distribution of wealth for the betterment ofstakeholders through the implementation and integration of ethical systems and sustainablemanagement practices (Frederick, 2006). Furthermore, CSR refers to the responsibility ofenterprises for their impacts on society; and the consequences for the integration of social,environmental, ethical, human rights, and as well consumer concerns into business operationsand core strategy, in close collaboration with stakeholders (European Commission, 2011).The concept of social responsibility is often expressed as the assumption of voluntaryresponsibilities that go beyond the purely economic and legal responsibilities of companies(Joseph, 1963:144; Henry & Henry, 1972:5). It also refers to the voluntary activities or policiesthat organizations engage in for the purpose of causing positive social change and environmentalsustainability (Aguilera et al., 2007). More specifically, CSR refers to the selection ofinstitutional objectives and evaluation of results, not only by the criteria of profitability andwelfare organization, but by the ethical standards or judgments of social desirability. In thisview, the exercise of social responsibility must be consistent with the corporate goal of earningsatisfactory level of benefits, but also implies a willingness to relinquish some degree of benefit,in order to achieve non-economic objective (John, 2003:373).Also, the concept of CSR has generated considerable debate in recent decades. On the one hand,one view holds that, the sole purpose of business is profit. Friedman (1970:32-33) stated that theresources devoted to CSR are better spent, from a social perspective, if they increased firmefficiency. Carson (1993:3-32) explained that, managers are put in the place of unelectedofficials, when they participate in CSR, hence support has been significantly provided to theconcept of corporate social responsibility. Davis (1974:19) argued that, the public visibility ofcorporate actions are necessary to become socially responsible managers and that companies, asan essential component of society, has a responsibility towards the solution of social problems.30ISSN 2053-4019(Print), ISSN 2053-4027(Online)

European Journal of Business and Innovation ResearchVol.4, No.6, pp.26-42, December 2016Published by European Centre for Research Training and Development UK (www.eajournals.org)Freeman (1984: 88-106) defended this point of view, and developed the theory of thestakeholder. According to the author, companies have relationships with many constituentgroups and persons (stakeholders) that affect and are affected by the actions of the company.Also, CSR is achieved when the firm goes beyond compliance and engages in “actions thatappear to further some social good, beyond the interests of the firm and that which is required bylaw, to the firm’s relevant stakeholders (McWilliams et al., 2006, p: 4).Consequently, the stakeholder theory became the dominant paradigm in corporate socialresponsibility (McWilhams & Siegel, 2001). A well established model of CSR is the ‘Four-PartModel of Corporate Social Responsibility’ which was initially proposed by Carroll (1979), andlater refined in subsequent publications (i.e., Carroll, 1991; Carroll & Buchholtz, 2000). ForCarroll, CSR is a multi-layered concept that can be categorized into four inter-related aspects(economic, legal, ethical and philanthropic responsibilities) (Carroll, 1991). These categorizedresponsibilities are presented as consecutive layers within a pyramid, and that, ‘true’ socialresponsibility requires the meeting of all four levels consecutively. Hence, for Carroll andBuchholtz (2000:35), “Corporate social responsibility encompasses the economic, legal, ethical,and philanthropic expectations placed on organizations by society at a given point in time.”CSR has both economic and legal components/responsibilities for the firm (Carroll, 1991).Economic: a) it is important to perform in a manner consistent with maximizing earnings pershare; b) it is important to be committed to being as profitable as possible; c) it is important tomaintain a strong competitive position; d) It is important to maintain a high level of operatingefficiency; and e) it is important that a successful firm be defined as one that is consistentlyprofitable. Legal: a) it is important to perform in a manner consistent with expectations ofgovernment and law; b) it is important to comply with various federal, state, and localregulations; c) it is important to be a law-abiding corporate citizen; d) it is important that asuccessful firm be defined as one that fulfills its legal obligations; and e) it is important toprovide goods and services that at least meet minimal legal requirements.Furthermore, adhering to CSR principles has benefits to the organization (Carroll & Shabana,2010; Cavico & Mujtaba, 2012): a) it help

ethics and corporate social responsibility. From the perspectives of MBA students and managers, it came out that business ethics and social responsibility are very important for organizational growth and success. Specifically, they consider business ethics to lead to positive employee, customer and community relations.

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