CHAPTER
1 15
Business Ethics and Corporate
Social Responsibility
Learning Outcomes
At the end of this chapter, you should be able to:
•Differentiate between ethics and business ethics
•Describe the concept of ethical behaviour in business and how companies
can benefit from having ethical stakeholders
•Explain the significance of corporate social responsibility (CSR)
•Discuss activities under corporate social responsibility and how it impacts
businesses
•Recognize the differences between Islamic and conventional ethical systems
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Business Ethics
• The principles of conduct defining what is right and
wrong governing an individual or a group.
• Business ethics is the principles and standards that
determine the acceptable and right conduct in
business dealings and transactions.
• It is also concerned with moral judgments for
decisions taken in business dealings.
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Ethics and Technopreneurs
• In daily interactions, technopreneurs and their
employees are faced with temptations to commit
wrongdoing such as:
• Offering/ taking of bribes/ kickbacks
• Short-changing weights when selling products
• Using sub-standard products as genuine originals
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Factors Affecting Ethical
Behaviours
• Personal values and social background especially of top
management
• External forces including bottom line performance figures
• Internal environment of the company including its policies
and business practices
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Business Ethics Issues
• Ethics in finance
• Ethics in marketing and sales
• Ethics in dealing with intellectual property
rights
• Ethics in employee relations
• Ethics in production
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Management of Ethics in
Enterprises
The code of ethics is normally prepared by human
capital.
The code of ethics is to be displayed prominently in the
company.
The code of ethics must be given to all employees and
stakeholders.
The code of ethics is to be enforced fairly.
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Ethics Programmes
• Form ethics and integrity committees at division levels
• Set up SOPs for reporting and follow up
• Appoint an ethics ombudsman/ officers
• Set up training programmes on ethical behaviour
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Islamic Business Ethics
Islam as a way of life. Ethics governs all aspects of a
Muslim’s life.
In the Quran, Allah describes successful people in life
as those who are ‘inviting all that is good (khayr),
enjoining what is right (ma’ruf) and forbidding what is
wrong (munkar)’
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Islamic Ethical Behaviour
• There are different factors that may affect an individual’s
ethics, the most important being the individual himself.
The others include
• the individual’s values and moral attitudes
• personality and character of individual
• family and peer influences
• situational factors
• Life experiences All Rights Reserved
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Differences From Other
Conventional Systems
Islamic ethics are for guidance throughout life based on
teachings of Al-Quran and sayings and actions of
Prophet Muhammad (pbuh)
In conventional (secular) system in, interpretations of
laws are based on current judgments and
contemporary values and standards. This can cause
biases of personalities involved.
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Corporate Social Responsibility
(CSR)
• Open and transparent business practice that is based on
ethical values and respect for the community,
stakeholders, including the government.
• Integrating ethical practices into a company’s strategies
and operations
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Corporate Social Responsibility
(CSR) (cont.)
Company’s Social Responsibility
•Besides profits, companies must also concern
themselves with positive/negative effects of their
operations on the population, society and the
environment.
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Corporate Social Responsibility
(CSR) (cont.)
• Economic responsibility
• Legal responsibility
• Ethical responsibility
• Philanthropic or voluntary responsibility
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Corporate Social Responsiveness
• Investors looking for socially responsible companies
• Investors look for sustainable development
• Muslim investors looking for Syariah-compliant
companies
• Millennials like to work in companies that take their
CSR seriously.
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Malaysia’s Socially Responsible
Corporations
• The Government has encouraged CSR activities for
Companies and Ministries and NGOs.
• Many companies are already involved.
• Amongst them are: PETRONAS, AMBANK, Bank
Islam, AXIATA, Universiti Kuala Lumpur, Nestle and
General Electric.
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Malaysia’s Socially Responsible
Corporations (cont.)
Areas of CSR by Malaysian Companies
•Education and skills building for children from poor
backgrounds
•Flood relief and rehabilitation
•Environmental, e.g. Mangrove habitat, Wetlands
•Human capital development for young people
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Ethical Practices in Malaysia
• In Malaysia, the public is more concerned with corruption.
• The Government has set up the Anti-Corruption Agency
(now renamed Malaysian Anti-Corruption Commission).
• The private sector established the Corporate Integrity
Pledge (CIP) to stamp out corruption in business dealings.
• There has been attempts to stop money politics, but with
not much success till now.
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Summary
• It is imperative that companies pay special attention to
ethical behaviours of their stakeholders, particularly top
management.
• By becoming good citizens with their CSR activities,
they can also improve their profits and performance.
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