Ethics and Corporate Social Responsibility

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Questions and Answers

What is the primary focus of corporate social responsibility (CSR)?

To enhance corporate profits at all costs.

To enforce strict regulations on business practices.

To define ethical standards for all employees.

To address the obligations of businesses to their communities. (correct)

What is the ultimate goal of applying business ethics in an organization?

To increase profit margins without accountability.

To maintain a competitive edge by any means necessary.

To achieve a culture that encourages legal and ethical behavior. (correct)

To reduce operational costs.

Which of the following is NOT a source that influences understanding of ethics?

Social upbringing

Religion or spiritual beliefs

Personal role models

Global economic trends (correct)

Which of the following best defines business ethics?

The application of ethical principles in a business context. Signup and view all the answers

Why is business ethics considered crucial for stakeholders?

It ensures stakeholders' interests and concerns are met. Signup and view all the answers

What is a potential consequence for shareholders when a corporation engages in unethical acts?

Decline in stock price Signup and view all the answers

How can unethical corporate behavior specifically impact the community?

Destruction of the local environment Signup and view all the answers

What can happen to employees as a result of unethical practices within a corporation?

Loss of employment Signup and view all the answers

What is a likely impact on creditors when a company engages in illegal acts?

Inability to collect loan principal and interest Signup and view all the answers

Which of the following represents a type of illegal act committed by a corporation?

Tax evasion Signup and view all the answers

What is a potential effect on customers when unethical practices are present within a company?

Substandard and unsafe products Signup and view all the answers

What should a corporation do before implementing its code of ethical conduct?

Communicate it to all interested stakeholders Signup and view all the answers

Which of the following is NOT a consequence of corporate unethical behavior indicated in the content?

Increased profits and cash flows Signup and view all the answers

Which of the following is NOT a common method for communicating the ethical code within a company?

Monthly sales targets Signup and view all the answers

What is a primary objective of a code of ethical conduct?

To provide a company profile Signup and view all the answers

Which unethical action falls under the category of procurement?

Buying materials from one’s own firm at inflated costs Signup and view all the answers

Which of the following is an instance of unethical behavior clearly defined in the code of ethical conduct?

Personal use of company resources Signup and view all the answers

What should employees do when they encounter ethical issues according to the code?

Report them according to the specified process Signup and view all the answers

How is the process of resolving ethical conflicts implied to be structured?

A documented process specified in the ethical code Signup and view all the answers

What kind of unethical act is associated with the marketing department?

Making false representations about a product Signup and view all the answers

Which one of the following would NOT typically be included in a code of ethical conduct?

Employee salary structures Signup and view all the answers

Study Notes

Ethics

Ethics is derived from the Greek word "ethos" and encompasses belief systems and actions that guide individuals on how to live their lives in relation to others.
Ethics deals with truthfulness, justice, moral duties, and obligations.
It focuses on promoting what is good for others and avoiding what is harmful.
Sources of ethical understanding include religion or spiritual beliefs, family and friends, ethnic background, social upbringing, media, and personal role models.

CSR addresses the responsibilities and obligations businesses have toward people, communities, and society.
It's not just about enhancing corporate image but has become crucial for achieving a competitive edge in today's business environment.

Business Ethics

Business ethics applies ethical principles and standards to the business environment.
It aims to address inappropriate attitudes and actions that could harm the company.
It seeks to create a corporate culture that encourages legal and ethical conduct.
The lack of business ethics negatively affects stakeholders by failing to meet their interests and concerns.

Negative Impact of Unethical Acts to Stakeholders

Shareholders: Decline in revenue, profits, and cash flows; decline in stock price; corporate bankruptcy.
Community: Lack of corporate support to the community; lack of job opportunities; destruction of the local environment.
Government: Insufficient tax collections; increase in violations of laws and regulations.
Employees: Loss of employment, job dissatisfaction, demoralized workforce, insufficient personal income.
Vendors: Delayed payments for goods received; kickback and bribery.
Creditors: Inability to collect loan principal and interest, poor credit rating.
Customers: Substandard and unsafe products, exorbitant prices, customer dissatisfaction.

Illegal Acts

These are actions by a corporation, its officers, and employees that violate prevailing laws and regulations.
Consequences include monetary fines and penalties for the company and guilty individuals.
Examples: tax evasion, money laundering, cybercrimes, patent infringement, violation of labor and social security laws, violation of environmental laws, insider trading.

Communication of the Code of Ethical Conduct

Before implementing the company's code of conduct, it must be communicated effectively to all stakeholders.
Communication methods include employee orientation programs, company website, newsletters, publications, bulletins, official memoranda, and employee manuals.

Examples of Unethical Acts in Various Company Departments

Marketing: Making false representations or improper claims about product features.
Production: Temporary patching of defective products and concealing defects.
Research and Development: Divulging confidential information about product ingredients.
Human Resources: Falsifying employee competence and qualifications .
Internal Audit: Failing to report audit findings to the audit committee.
Procurement: Procurement manager purchasing materials from their own trading firm at inflated costs.
Accounting: Understating bad debts expense to artificially inflate net income.
Board of Directors/Senior Management: Approving major projects where they have a commission.

Code of Ethical Conduct

It should be tailored to the company's specific business, industry, size, products, services, and other relevant factors.
Major components include:
- Company profile
- Objectives of the code
- Ethical principles adopted by the company
- List of unethical acts
- Process for identifying and determining the significance of unethical acts
- Resolving ethical conflicts
- Reporting ethical issues and concerns
- Sanctions for violations
- Approval of the code.

Prohibited Unethical Behaviors in the Code of Ethical Conduct

Divulging confidential information and trade secrets
Personal use of company vehicles and equipment
Unauthorized commissions and consulting fees
Conflicts of interest and outside business activities
Reimbursement of personal expenses
Bribery

Resolution of Ethical Issues in Accounting

Any behavior or act explicitly prohibited in the company's code of ethical conduct is inherently unethical.

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Description

Explore the foundations of ethics and its application in business through this quiz. Delve into the principles guiding individual actions and the responsibilities corporations have toward society. Understand how ethics can promote positive outcomes for stakeholders.