PART TWO: PLANNING

Cha • Ethics and corporate social responsibility

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Cha • Strategic analysis

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• Strategic planning and strategy

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Cha • Fundamentals of decision-making

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 CHAPTER FOUR: ETHICS AND
CORPORATE SOCIAL
RESPONSIBILITY
Learning objectives:

• Explain the four principles of corporate citizenship;

• State the importance of ethics for organisations and their employees;
• Describe four forces that influence the ethical behaviour of individuals and
corporate social responsibility;
• Describe three approaches that people use when making ethical judgments;
 CHAPTER FOUR: ETHICS AND
CORPORATE SOCIAL
RESPONSIBILITY
Learning objectives (cont.).

• Explain the role of stakeholders in managing corporate social responsibility;

• Explain how an organisation, by being socially responsible, can increase their
sustainability;
• Explain how the concerns of stakeholders’ influence managers’ ethical
decisions;
• Describe how individuals can contribute to improving ethical conduct in the
work setting;
• Describe how organisations can contribute to improving ethical conduct in
the work setting.
 4.1 Corporate citizenship
• Corporate citizenship:
• Creating a contract between an organisation and the society in
which it operates
• Four main principles of corporate citizenship:
• Minimise harm
• Maximise benefits
• Be accountable and responsive to key stakeholders
• Support strong financial results.

READ: ‘Clover SA – ethics policy’

Accessible from: [Link] (last accessed on 5 December
2017)
Key concepts: Corporate citizenship and Stakeholders
Corporate citizenship: organisations consider the interests of society by behaving in an
ethical manner and taking responsibility for the impact of their activities on customers,
suppliers, employees, shareholders, communities and other stakeholders.
Stakeholders: individuals or groups with interests and rights in, or ownership of, an
organisation and its activities.
 Corporate citizenship
• Corporate citizenship refers to a company's responsibility to
actively contribute to the well-being of society, the
environment, and the economy.
• It involves ethical business practices, social responsibility,
environmental sustainability, and community engagement.
• Corporate citizenship goes beyond profit-making to include
initiatives such as philanthropy, ethical labor practices,
environmental protection, and supporting local communities.
• Strong corporate citizenship helps businesses build trust with
stakeholders, enhance brand reputation, and contribute to
long-term success while making a positive social impact.
Four main principles of corporate citizenship:

• The four main principles of corporate citizenship outline a

company's responsibility to society, balancing ethical conduct,
stakeholder interests, and financial success. Here's what each
principle means:
1. Minimise Harm – Companies should actively reduce negative
impacts on society and the environment. This includes ethical
business practices, reducing pollution, ensuring fair labor
conditions, and avoiding exploitative practices.
2. Maximise Benefits – Businesses should contribute positively to
the communities they operate in, whether through job
creation, environmental sustainability efforts, philanthropy, or
innovation that improves lives.
 Four main principles of corporate
citizenship:
3. Be Accountable and Responsive to Key Stakeholders –
Companies must engage with employees, customers,
investors, suppliers, and communities, ensuring
transparency and ethical decision-making.
Responsiveness involves listening to stakeholder concerns
and adapting policies accordingly.
4. Support Strong Financial Results – While corporate
citizenship involves ethical responsibility, financial
performance remains crucial. A sustainable business
model ensures long-term success, benefiting both
shareholders and society through continued growth and
innovation.
 Four main
Four mainprinciples ofcorporate
principles of corporate citizenship:
citizenship:

• Minimise harm
Treat employees fairly and ensure that
there are will protected
 Suppliers must supply safe and high
quality products
• Maximise benefits
Sponsor educational and health activities to
disadvantaged communities.
Promote economic well-being of poor and low-income
communities by investing resources that benefit them.
Provide stable employment and paying fair wages
Four main principles of corporate citizenship:

• Be accountable and responsive to key stakeholders

 All organisations should operate according to a
written code of conduct.
 The must be transparent to the stakeholders
and be social responsible.
• Support strong financial results.
 Organisations are expected to return a profit to their
shareholders.
 Strong financial results enables an organisation to
engage in community outreach activities and pay
their employees market related salaries.
 4.1 Corporate citizenship (cont.).
Corporate
citizenship

Corporate social Sustainable

Business ethics
responsibility development

Key concepts: Ethics; Moral principles; Corporate social responsibility; Sustainable

development
Ethics: a set of values and rules that define right and wrong behaviour
Moral principles: prescribe general rules of acceptable behaviour
Corporate social responsibility: organisation’s / manager’s duty/obligation to make decisions
that nurture, protect, enhance and promote welfare and well-being of stakeholders and
society as a whole
Sustainable development: organisation takes societal and environmental concerns into
consideration by protecting the natural environment, still progressing economically (i.e.
meeting the requirements of the triple bottom line). Stakeholder (multi-stakeholders)
engagement, accountability and sustainable reporting are also important to sustainability.
 Corporate citizenship

Ethics
• Ethics refers to the moral principles and values that
guide individual and organizational behavior.
• In a business context, ethics involves making
decisions that are fair, honest, and aligned with
societal norms and expectations.
• Ethical business practices include transparency,
integrity, accountability, and respect for
stakeholders such as employees, customers,
investors, and the community.
 Corporate citizenship

Corporate Social Responsibility (CSR)

• CSR is a business approach that goes beyond profit-making to
include social and environmental responsibilities.
• It involves companies voluntarily taking steps to improve society
and minimize negative impacts on the environment. CSR
initiatives may include:
• Environmental sustainability (e.g., reducing carbon footprints,
sustainable sourcing)
• Philanthropy (e.g., donating to charities, supporting community
projects)
• Ethical labor practices (e.g., fair wages, safe working conditions)
• Community engagement (e.g., education programs, healthcare
support)
 Corporate citizenship
• Sustainable development in corporate citizenship refers to a
company's commitment to conducting business in a way that
meets present needs without compromising the ability of future
generations to meet their own needs.
• It involves integrating economic, social, and environmental
considerations into corporate strategies, decision-making, and
operations.
• Companies practicing sustainable development as corporate
citizens aim to balance profitability with social responsibility and
environmental stewardship.
• This includes ethical business practices, reducing carbon
footprints, investing in community development, ensuring fair
labor practices, and promoting long-term economic growth that
benefits all stakeholders.
 4.2 Importance of ethics and
corporate social responsibility
• Contemporary managers must create & sustain conditions in
which people conduct themselves with integrity
• Why? Employee and customer evaluations of organisations based
on certain criteria:
Employees evaluation of organisations Customer evaluation of organisations

Non-discriminatory employment selection Offering quality goods and services on a

and promotion (merit-based) continuous basis
Extent of workforce diversity Extent of offering innovative products and
services that meet customer needs
Payment of market-related wages Not selling faulty / unsafe products or
services
Workplace safety and privacy Reasonable pricing policies and practices

Availability of workplace training and Honest advertising

development
 4.2 Importance of ethics and
corporate social responsibility
(cont.).
• Including social responsibility in the business strategy has
significant benefits:
• Improved financial performance
LISTEN: ‘Unpacking
• Enhancing brand image and reputation Corporate Social
• Increasing productivity, quality and sales Responsibility with
• Customer loyalty Katie Andrews’
accessible from:
[Link]
• There are also important advantages: 19
• Competitive advantage (last accessed on 12
January 2018)
• Attracting investors
• Attracting potential employees and retain current employees
• Improving staff morale and culture
• Building up a good reputation of being socially responsible
 4.3 Forces that shape ethical
conduct
• Systems viewpoint Figure 4.1

Societal

Legal Organisational

Individual
 Forces that shape ethical conduct

Societal Norms and Culture:

• Societal norms : Are the unwritten rules and expectations that govern
behavior within a society.
• These norms influence how people interact, dress, communicate, and
behave in different situations.
• They can be formal (laws and regulations) or informal (customs, and
traditions).
• Culture is the shared set of beliefs, values, traditions, customs,
language, and behaviors that define a group of people.
• It shapes how individuals perceive the world, interact with one
another, and pass down knowledge and traditions across generations.
• Culture includes aspects such as religion, art, food, music, and social
structures.
 4.3 Forces that shape ethical
conduct
• 4.3.1 Societal norms and culture
• Social norms, or values are the unwritten rules of
behaviour that are considered acceptable in a group or
society.
• Any viewpoint on ethics comes from the society in which
that behaviour occurs.
• Most organisations are committed to promoting the
following social-responsibility issues:
- Employment equity and affirmative action
- Job creation and development of SMEs
- Community development and corporate social investment
- Health and wellness, including the fight against HIV/Aids

WATCH: ‘Social Responsibility in South Africa - Volkswagen offers “help for

self-help”’ Accessible from
 Forces that shape ethical conduct
• Legal

• A legal regulation is a rule made by the

government to control how things are
done.
• It helps keep order, protect people, and
make sure everyone follows the law.
• If someone breaks a regulation, they
might face penalties or fines.
 4.3 Forces that shape ethical
conduct (cont.).
• 4.3.2 Laws and regulations Table 4.1
•

Legislation Social-responsibility issues

Employment Equity Act • Protects the rights of all south Africans to
equality and provides specific measures to
be taken to address historical inequalities
Skills Development Act • Encourages the development of employees’
skills through education, training and
development of career paths.
Basic Conditions of Employment Act • Regulates fair labour practices in terms of
time, payment and leave conditions
Labour Relations Act • Regulates the fundamental rights of workers
and employers, right to join the trade union
or to strike
• Regulates the handling of unfair dismissals
or labour practises
Occupational Health and safety Act • Offers protection to employees’ health and
 4.3 Forces that shape ethical
conduct (cont.).
• 4.3.2 Laws and regulations (cont.) Table 4.1

Compensation for Occupational • Provides payment of compensation to employees

injuries and diseases Act or their next of kin as a result of occupation
accidents, injuries or diseases
Consumer Protection Act • Protects consumers by insisting that prices of items be
displayed
• Allows a consumer cooling-off period
• Promotes the supply of safe products and services
• Regulates Franchise agreements
• Protects consumers against unwanted direct marketing

Mineral Resources Act • Aims to promote equitable access to the nation’s

mineral resources and expand opportunities for
historically disadvantaged people

Black Economic Empowerment • The government measures all tenders against a

Act balanced BEE scorecard
 Forces that shape ethical conduct
• Organisational Practices refer to the formal and informal
rules, policies, procedures, and routines that shape how
work is done within an organisation.
• These include leadership styles, decision-making processes,
communication methods, employee engagement strategies,
and performance management systems.
• Organisational Culture is the shared values, beliefs,
attitudes, and behaviors that influence how employees
interact with each other and approach their work.
• It reflects the company's identity, traditions, and overall
work environment.
• Culture is shaped by leadership, company history, and social
norms within the organisation.
 4.3 Forces that shape ethical
conduct (cont.).
• 4.3.3 Organisational practices and culture
• Formal & informal guidelines shape ethical behaviour
• Formal sources:
• Policies
• Codes of ethics
• Speeches
• Training programmes
• Disciplinary actions taken
• Informal sources:
• Behaviour of top and middle management
• Effective ethical leadership demands:
• Focused on purpose and consistent in action
• Possess knowledge on how to judge/act prudently
• Power and authority to make decisions and act
• Inspire trust
 Forces that shape ethical conduct
• Individual perspectives refer to the unique ways
in which people view and interpret the world
based on their personal experiences, beliefs,
values, and emotions.
• These perspectives shape how individuals
understand situations, make decisions, and
interact with others.
• They are influenced by factors such as culture,
upbringing, education, and personal experiences.
 4.3 Forces that shape ethical
conduct (cont.).
• 4.3.4 Individual perspectives
• Personal value systems
• Ethical conduct is shaped by:
• Personal moral philosophy
• Stage of moral development
• Children: simple reasoning (e.g. I would do the wrong
thing if I knew that I would not be punished for it)
• Adults: complex reasoning
• Doing one’s duty
• Showing respect for authority
• Maintaining the social order
• Standards of ethical behaviour change over time (awareness,
safety, confidence etc)
DO: Class activity – Divide into groups of two. You both have accidentally been
sent the memorandum for the next class test. What would you do? Consider
how each of the four forces that shape ethical conduct would influence your
individual and combined decision.
 4.4 Approaches to making ethical
judgements
Moral rights Combined
Utilitarian model Justice model
model approach

Milton Friedman South African Constitution All three models have

What should we do?
strengths and weaknesses

All activities are assessed Respect for others

relative to business
performance Distributive justice
principle (zero Efficiency = short term
Life and safety discrimination)
Ethical norms linked to
achieving organisational
goals,
Truthfulness and privacy Fairness principle (obey
Morals and justice = long
organisational directives
term
under certain conditions)
efficiency;
Freedom of conscience and
speech
Using all three = increased
Natural duty principle probability that decisions
and avoiding conflicts of Counterweight to (universal) and behaviour will be
interest Utilitarian model judged as ethical
 4.4 Approaches to making ethical
judgements (cont.).
Key concepts: Utilitarian model; Efficiency; Moral rights model; Justice model; Distributive
justice principle; Fairness principle; Natural duty principle
Utilitarian model: action focused; choose courses of action based on the benefits of the
greatest number of people; requires organisations to make ethical decisions in relation to
organisational goals, efficiency and reduced conflict of interest.
Efficiency: is a state accomplished by simultaneously minimising inputs (e.g. labour, land and
capital) and maximising the quantity of products produced/sold or the quality of services
rendered.
Moral rights model: decisions should be consistent with fundamental rights and privileges
(e.g. life, freedom, health etc)
Justice model: is a way of assessing decisions and behaviour with regard to how equitably
they share benefits and costs among individuals and groups. Three core principles
underscore this model, namely: the distributive justice principle; the fairness principle and
the natural duty principle
Distributive justice principle: requires that individuals not be treated differently on the basis
of arbitrarily defined characteristics
Fairness principle: requires employees to support the rules of the organisation when two
conditions are met: a) the organisation is just (fair) and b) the employees have voluntarily
accepted benefits or opportunities offered by the organisation
Natural duty principle: decisions and behaviour be based on universal principles associated
with being a responsible member of society.
 4.5 Managing corporate social
responsibility
• 4.5.1 Stakeholders
• Primary stakeholders: employees, customers, government
regulators and society (local community)
• Secondary stakeholders: public opinion leaders, political
action groups, media
• Figure 4.2
 4.5 Managing corporate social
responsibility (cont.).
• 4.5.2 Stakeholder concerns
• Customers
• Cost-saving
• Quality improvements
• TQM
• Employees
• Empowered employees
• Employee development, mentoring and coaching
• Remuneration
• Share incentive schemes
• Attracting highly skilled workers
• Society
• Invest in what could be defined as government responsibilities
• Owners and shareholders
• Shareholders invest to make a return on investment
• Conflicting shareholder vs employees interests?
• Commonality: both concerned with survival of the organisation.
 4.6 Management tools for
encouraging ethical conduct
Key concepts: Code of ethics;
Code of Ethics committee; Whistle-blower
ethics /
Code of
Code of ethics: is a formal
conduct statement of an organisation’s
principles concerning ethics and
social values
Ethics committee: consists of a
group of employees who oversee all
Whistle-
blowing Tools Ethics
committee aspects relating to ethics in the
organisation, well-being of
stakeholders and society as a whole
Whistle-blower: are employees who
report unethical or illegal actions of
Ethics
training their fellow employees to other
people or organisations that are
capable of taking corrective action.
 Management in reality
Case study: South African whistle-
blower – Bianca Goodson, former
CEO of Trillian

Clip-to-case: Watch the following clip:

• ‘Trillian state capture - Bianca
Goodson interview’:
[Link]
v=pBGVLUcqutI
 Class activity
 Divide into groups of 3-5 members.

 Investigate the specific types of community activities that Pick

‘n Pay supports.
Principle-
 Does this organisation’s approachFlexible
to corporate responsibility
led
viewpoint
represent a sincere concern about its role in society or viewpoint
are the
motives behind the company’s activities primarily
New
commercial? viewpoints

 Work out at least 3 reasons for your answer to the above

question.

 Report back to the class.

 Chapter Summary

Importance of ethics and Forces shaping ethical

Corporate citizenship
CSR conduct

Management tools for

Approaches to making
encouraging ethical Managing CSR
ethical judgements
conduct

Now that we know how ethics

and CSR can be linked to
sustainability, we can look into
strategic analysis and other
important strategic concerns in
Chapter 5.