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Business Ethics and Corporate Responsibility Essay

The dawn of the new millennium has ushered in an era of liberalization, privatization, globalization, digital technology and information super highways. The advancements in technology has pronounced the death of distance and speeded up communication resulting in instantaneous contact amongst people across the nations. In such a scenario a desirable paradigm on business ethics and corporate social responsibility for business organizations is a must.

Ethics can be defined as the conception of what is right and fair conduct or behavior. It can be equated with the concept of morals – one’s ability to choose between right and wrong, good and bad, acceptable and unacceptable. Morals, ethics, and corporate social responsibility are not mutually exclusive; rather, they are interrelated and somewhat interdependent. The earliest contribution to the modern discussion on social responsibility was made by Howard Bowen who suggested that business should consider the social implications of their business (Koontz 2004: 36).

World Business Council for Sustainable Development has defined corporate social responsibility comprehensively as “the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.”  In broad

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summary it is the ethical behavior of a company towards society.

The debate of whether business should be socially responsible or it should get on with what it does best: making profits continues. Business corporations operate in a pluralistic society. There is a high level of interaction and interdependence between the business, the government and the society. There are numerous reasons why profitable and successful corporations have a moral/ethical duty to be socially responsible and pay back to the society through charitable contributions.

To become competitive and profitable business organizations need quality resources like human resources, financial resources, infrastructure, and raw materials which come from the society. It is the loyal customers from the community who contribute to its profits by consuming its products and services. Businesses have the requisite financial and managerial resources to improve the quality of life of the underprivileged in the community who can be potential future customers or employees.

For example General Electric through its foundation has invested in programs for providing a quality education especially for individuals from under-represented and disadvantaged backgrounds. The company supports high-impact initiatives that improve the access, equity and quality of public education in GE communities around the world. Since industrial revolution business organizations have been consuming non-renewable resources and dumping sewage, production wastes and trash into air, rivers, streams and open land.

The impact of such corporate action has affected the community through environment pollution, acid rain, global warming and depletion of the ozone layer, and so the corporate businesses have an ethical responsibility to contribute to the betterment of the environment. For example Proctor and Gamble has been analyzing the effects that ingredients in their products have on the environment. The company remains committed to improving the environmental quality of its products, packaging, and operations around the world (Joyner, 2002).

Shareholders who own the company definitely have the first call on management. Contributions to charity and other social responsibility initiatives will actually lead to the creation of long-term value and better profits for shareholders. According to Professor Pratima Bansal, of the Richard Ivey School of Business, being socially responsible makes good business sense to companies. Such business corporations will be evaluated very favorably by the different stakeholders.

They will be able to acquire, talented and committed employees to work for their organizations, loyal and profitable customers to buy their products and services, sound investors to invest in their present business activities and their future growth initiatives and succeed easily in having government representatives to support their investment proposals through better infrastructure and tax benefits. All this will lead to the firms gaining competitive advantage over their rivals. Studies have also shown that a favorable evaluation of the company also results in the increase in the value of its share prices and less volatility in the share prices during volatile changes in the economy of the environment.

Competitive advantage will help the company to gain better market share and hence leading to improved profits.  Increase in share prices will increases the wealth of the shareholders. Some ethical decisions of companies towards social responsibility have resulted in direct profits to the companies. For example Shell to fulfill its social obligation towards business has focused its strategies to produce more with less energy and materials. It achieves this by adopting cleaner technologies, reducing emissions, recycling, reusing, minimizing waste and even turning waste into saleable products. These activities improve the efficiency of its operations, help reduce costs, avoid current and future costs of emissions and even create new income streams (Burnhut, 2002).

In conclusion it can be said that in the era of liberalization, privatization, globalization, digital technology and information super highways, corporations have a moral/ethical duty to be socially responsible and pay back to the society through charitable contributions.  Such contributions actually lead to the creation of long-term value and better profits for the shareholders if the companies adopt a strategic approach towards their social responsibility initiatives. Thus companies should treat contribution to charities and other social initiatives not as expense but as an investment to gain long-term profits for the company and a way to maximize shareholder wealth.


Burnhut, Stephen, (2002), Corporate Social Responsibility, with Pratima Bansal, Ivey

Management Services, March-April.

Hart, S. (1999), Beyond Greening: Strategies for a Sustainable World, Harvard Business

Review, January-February, pp.66-76.

Joyner & Brenda, E. (2002),  “Building Values, Business Ethics and Corporate Social

Responsibility into the Developing Organization”,  Journal of Developmental

Entrepreneurship, April

Koontz, Harold. & Weihrich, Heinz. (2004), Essentials of Management, NY: McGraw-Hill

Publishing Company, p.36.

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