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Ethics & Corporate Social Responsibility
/ Maj Gen (Retd) Mohd Aminul Karim

Ethical standards have a very wide ambit that cover areas and levels such as international, national, societal, environmental, individuals, systemic, corporate, suppliers, customers, shareholders and so on . Ethics can broadly be defined as a person’s, since everything is contingent upon an individual’s ethical standards, and beliefs about what constitutes right and wrong behavior. Webster’s Ninth Collegiate Dictionary defines ethics as “the discipline dealing with what is good and bad and with moral duty and obligation”. It should conform to the generally accepted social and religious norms and values. Since all voluntary human activities are governed by ethics and because business is a voluntary human activity, ethics should also govern business. Business is a cooperative engagement whose very existence requires ethical behavior. Any business house would collapse if all its executives, supervisors, employees, and customers come to an unholy alliance that it is morally alright to steal from, lie to, or dishonor their agreements with the company. Bangladesh, ever since its golden days, was famously known or branded for its high quality social, family, and religious values. But of late, it is decaying and degenerating at an alarming pace. This degeneration tends to make everything dysfunctional. Ethical degeneration tends to make us less competitive in the world market or even in the domestic market. And this is having a direct impact on the economy, growth rate, employment both within and without, remittances, social tensions, environmentally sustainable development, transnational crimes etc.
Business ethics is the applied ethics discipline that addresses the moral features of commercial activities. However, in practice varying array of functional areas are covered under its rubric. According to Stanford Encyclopedia of Philosophy under heading “ Business Ethics” ( First Published April 16, 2008) mentions, “ Programs of legal compliance, empirical studies into the moral beliefs and attitudes of business people, a panoply of best practices claims ( in the name of their moral merit or their contribution to business success), arguments for (or against) mandatory worker participation in management, and attempts at applying traditional ethical theories, theories of justice, or theories of the state to firms or to the functional areas of business are all advanced as contributions to business ethics”. Clarence D. Walton in his edited book The Ethics of Corporate Conduct concludes, “Business ethics covers areas such as expectations of society, fair competition, advertising, public relations, social responsibilities, consumer autonomy, and corporate behavior in home country as well as abroad.” Business ethics is the analysis of moral norms and moral values; it also attempts to apply the conclusions of the analysis to the assortment of institutions, technologies, transactions, activities, and pursuits that we call business. Business ethics can be both a normative and descriptive discipline. As a corporate practice, it is generally normative. The range and quality of business ethical issues reflect the degree to which business is perceived to be at odds with non-economic social values. Today the corporate world lays stress on commitment to promoting non-economic social values under a variety of headings i.e. ethical codes, social responsibility charter etc. There is now a tendency to redefine the core values of big corporate houses in the light of business ethical considerations.
Code of ethics, comprised of corporate principles and standards of conduct, may direct business decisions and actions. These may be called fundamental or core values which are reflected in the policy manual and are translated into tangible actions by the actors operating in the corporate house. I have my reservations as to how much of these values are formalized and are flowed down the chain of command for its strict compliance. Now herein comes the ethical values of all the individuals like directors, officers, employees, representatives, agents, and may even be the consultants. Each one of them may be made personally responsible and accountable for compliance of the code. The integrity, reputation, transparency, accountability, and profitably would depend on how every individual of the business house follows and implements the code. I would say the situation is not that encouraging in Bangladesh society today. However, it is the private sector corporate houses which are, in fact, sustaining the economy of Bangladesh to a great extent. But there are again enough rooms for improvement.
However, for breach of code, it is not the corporate houses who are to blame but the entire societal system that may include, as often reported in the press, our bureaucracy, political activists, legal system, political culture, customs, immigration, police and above all the corruption culture that permeates through each and every tier and segment of our society . Corporate houses are helpless and many a times handicapped when they have to deviate from the code. But still then they can probably overcome the under and over-invoicing practice, it at all, in the export credit system. It is reportedly known that some of the exporters do not even bring back their revenues earned from exports. A nexus may also be working here. Another case in point could be our industrialists, operating along the bank of the River Buriganga, the River Sithalakhala, and, the River Turag, can help resuscitate these almost dead / polluted rivers by adhering to the code of non-polluting the environment. A Daily Star report on 2 October 2010 on River Turag (Titled, “Indiscriminate Dumping of Waste Vitiates Turag River”)) shows that “the value of Electric Conductivity (EC) was 98mg/1 in 2006 but in 2010 the value has increased a lot to 1800. The level of chloride was only 3 mg/1 in 2006 but in 2010 it has increased to 34”.Many other values have also increased. The author concludes, “If we consider the changes that have been brought about to the values of all the parameters of water of the Turag over the past five years it needs no telling that its quality has been deteriorating day by day alarmingly……it is a matter of fortune that the pollution level of the Turag has not yet gone beyond treatability and that the river has not experienced the massive grasp of encroachments like the Buriganga and Shitalakhya.” Yet another case in point could be: our real estate businessmen may not clog the wetlands and flood-zone areas surrounding Dhaka city for the construction of buildings, markets, stadium etc. These are reportedly done in connivance with the corrupt government or semi-government officials. There could be syndicates operating in such practice. Here the nexus may not allow the implementation of the ethical code. Corruption in almost every stream may be the stumbling block in implementing the ethical standards.
This paper attempts to highlight some of such broad policy issues at different levels and dimensions with special emphasis on Bangladesh. The paper basically provides a conceptual framework linking ethics with CSR. And here the ethics is confined to business ethics.
General Business Ethics
• Although it is generally understood that the objective of any business is to maximize profits but if it solely relies to maximize returns to its shareholders then that could be construed unethical for the company to deny the rights and interests of other stakeholders. Right balance is deemed to be part of ethical behavior.
• CSR, which is linked to business ethics and can be integrated, is being studied subsequently in the paper.
• Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility, stakeholder concept versus shareholder concept.
• Ethical issues within the corporate world like hostile take-overs, mergers, corporate intelligence/espionage etc. One may not tend to see everything ethically wrong in such endeavors. However, the method and procedure of doing these may be scrutinized from ethical point of view.
• Leadership issues like relation between the board and the top executives, styles and types of leadership and overall corporate governance come under the rubric of ethics. Corporate culture also reflects ethical standard. If culture goes unethical, the corporate glue would become weaker resulting in organizational disarray.
• Corporate or general law reform so far as it relates to the ethical issues/debates in the corporate world. It may also have transnational ramifications which are covered later in the paper.
• There are tendencies for the corporate houses to have political linkages. This may be difficult for the corporate houses to overlook; that’s even a reality in the developed world corporate culture. These may be called politico-corporate nexus. However its degree and intensity have to be monitored in order to put an ethical benchmark. Recent bail-out plans in billions of dollars for the big corporate houses at the cost of the taxpayer’s money, in the developed countries, may be viewed by many as unethical.
Ethical issues may also encompass areas such as excessive pay, perks, and privileges given to corporate Chief Executive Officer (CEO) and top management compared to other staff and workers, bribery, kick-backs, facilitation payments which may be seen as anti-competitive or against the values of society, discrimination, when it entails human resource management, based on age, gender, race, religion, disabilities, weight, attractiveness, and sexual harassment. Many of these issues have much relevance in the Bangladesh corporate culture especially in areas of Human Resources Management (HRM) and pay structure. Ethics in production directs a company to ensure that its products and production processes do not cause harm like providing defective, addictive, and inherently dangerous products and services such as tobacco, alcohol, weapons, motor vehicles, chemical manufacturing, and environmental ethics and pollution, as already pointed out, degenerating our River Buriganga and other rivers.
This may also be true in respect of genetically modified food, cell phone radiation, and health hazards. Ethics of intellectual property, knowledge, skill like patent infringement, copyright infringement, trademark infringement or misuse of intellectual property systems to stifle competition such as patent misuse, copyright misuse, patent troll etc. International business ethics are applicable to the investors coming from abroad. There are instances such as they violate local ethical traditions or pollute the environment as they did in Magurchara in Sylhet or they might dislocate a big community of people, without ensuring adequate compensatory or rehabilitation program, if they go for open-pit mining in Fulbari area of Dinajpur. International Oil Companies (IOCs) have signed production Sharing Contracts (PSCs) with Bangladesh where 72% of revenue earnings in foreign currency go to the foreign companies which they take back home while Bangladesh, in whose territory the gas is stored, is paid a paltry sum of 28%. Some of the experts in Bangladesh even predict that in next few years time 70%-80% of the gas fields located both on and off shore in Bangladesh would be controlled by the IOCs. This may then give them greater leverage to dictate the economic/industrial policies of the government. Similar is probably the situation with some of the reputed mobile companies. One such company was fined twice, as reported in the press, for unethical behavior. There could be the possibilities of unethical transactions between the foreign companies and so called consultants/ facilitators, as Professor Steighleigh has branded in his book Making Globalization Work.
Environments Impinging Ethics
• Since business has gone global, competitiveness is on the rise, and therefore companies have to make decisions in a global context. This, at times, affects the employees or customers. Multinational companies take advantage of poorly paid workers in the third world countries. Herein gives rise to the debate over sweatshop labor. Even the substandard products are produced using the brand-name of a reputed company, as part of franchise concept.
• Political environment obtainable at the national, regional, and international levels may affect the corporate laws and regulations that may run contrary to local customs, values, and traditions. Hierarchy of needs may have difference in a third-world country from that of a developed country. Over here a balance has to be worked out. All kinds of imposition may be resisted.
• Socio-cultural environment, especially in the advanced countries, is undergoing sea changes being influenced by immigration patterns and its social impacts. Changes are also discernible in the third-world countries due to huge migration of rural population to urban areas and overuse of natural resources. The immigration and migration pattern may give rise to myriad types of crimes such as drugs, human trafficking, prostitution, gun running etc which may directly impact the societal values, and ethics.
• Technological revolution has made the communications readily available both regionally and globally and as such it has affected the work environment and productivity. Same is true to genetic engineering. The pollen of species of corn that was engineered to kill certain pests, was later found to be also killing certain butterflies. Now the question comes: is it ethical for businesses to market and distribute such unpredictable engineered organisms throughout the world?
• Economic environment like recession, alleged Renimbi devaluation, bail-out plans, resources crunch make significant disruptions in national and regional economies. Role of IMF in handling Southeast Asian financial crisis in 1997 was dubious and some of the countries even rebuffed its interference. Southeast Asian countries learnt a good lesson after the financial crisis; they are now trying to go for more viable integration, at least in the economic field.
Politics and socio-cultural environment that are constantly undergoing changes provide opportunities to certain countries to use technologies and economic clout to exert pressure on certain governments to change rules and regulations, such as allowing gay marriages, changing the age of retirement, banning smoking in public restaurants, interference in domestic politics, companies’ interference in ethnic and tribal conflict, violence etc. A historical example can be cited here: East India Company interfered in the internal affairs of the Bengal Nawabs, initially mainly for commercial purpose, in the mid-Eighteenth Century which culminated in their taking over the reins of entire India. Due to their endemic unethical practices when Bengal was one of the richest regions in the world in the Eighteenth Century turned out to be one of the most pauperized today.
CSR and Business Ethics
CSR and business ethics are gradually converging. Ethics is a crucial element of CSR. Ethical principle, as already highlighted in the paper, concern individuals, societies, environment (natural), greatest good for the greatest number of people (Utilitarianism), and responsibility for the consequences of any actions. No corporate house can be called socially responsible if any aspect of its operations is conducted unethically. Business for Social Responsibility (BSR), the San Francisco-based CSR membership organization defines social responsibility as, “achieving commercial success in ways that honor ethical values and respect people, communities, and natural environment.” There are generally common foundations of CSR and business ethics while there may be different areas of practical focus and application. This is borne out by Mollie Painter-Morland, Director of the Centre for Business and Professional Ethics at the University of Pretoria, South Africa when he says,
CSR and ethics management are underpinned by the same principles i.e. accountability, transparency, honesty, sustainability etc. Whereas ethics management focuses on individual behavior and organizational structures that influence those behaviors within the organization, CSR engages society and a broader group of stakeholders based on exactly the same principle.
CSR and business ethics may not be integrated at the functional level; there can be integrated strategies with the full involvement and support of directors and senior management. Corporate houses should build cultures in which legal compliance, ethical conduct, and social responsibility would be their business outcomes. CSR should be seen as an essential part of generating societal economic value rather than a philanthropic sideshow; however, philanthropic activities cannot be underemphasized. There should be coherent and effective strategies for ensuring ethically and socially responsible business practices. One, however, needs to appreciate that in Bangladesh many of the companies are extending laudable services to the teeming millions in areas such as building hospitals, schools, providing scholarship, tree plantation and other social services.
International Business Ethics
In these days of globalization when market forces are overarching, and almost deciding the destinies of human kind, international business environment impacts day-to-day realities, even in the developing countries. When national cultures and values are, in no way, put in the backburner a common minimum values and standards should be in place to harmonize better business transactions. When you are in Rome behave like a Roman, it is true in matters of etiquette but it can be also true in respect of ethics; however ethical universality is duly recognized. There could be a dilemma here. One has to be careful about the host country’s morally repugnant norms. In the developed countries also, bribery to officials could be a routine matter in order to get the business deals done. But a country with a strong ethical standard may not permit such practice to one of its corporate houses while operating overseas. In order to take care of such dilemmas, United Nations Universal Declaration of Human Rights or the United Nations Global Compact can be seen as a guide to such conduct. The UN Global Compact
enjoins firms to support and respect internationally recognized human rights, avoid complicity in human rights abuses, uphold freedom of association and collective bargaining, eliminate forced and compulsory labor, eliminate child labor, eliminate all forms of discrimination in employment, support a precautionary approach to environmental challenges, promote greater environmental responsibility, encourage the development of environmentally friendly technologies, and work against corruption in all its forms, including extortion and bribery
Many of these directives are already enshrined in the Bangladesh Constitution and Bangladesh is also a signatory to Universal Declaration of Human Rights. So Bangladesh has enough statutory support to enforce these ethical standards when it relates either to a multinational or a local corporate house. But if certain values or standards are compromised deliberately down the line in a society, then the basket of ethics fall flat. We are talking here about a preferred moral theory, a preferred theory of justice or some combination of these factors. In Bangladesh, as understood, there are fault lines both in the procedural and distributive justice system. Both these types of justice procedures contribute greatly to effective and efficient management. Richard De George in his book Competing with Integrity in International Business advocates ten guidelines for the conduct of multinational firms doing business in less developed countries which can be of value in our discourse. These guidelines call for avoiding harm, doing good, respecting human rights, respecting local culture, cooperating with just governments and institutions, accepting ethical responsibility for one’s actions, and making hazardous plants and technologies safe.
Such ethics can better be enforced where ethical standard of the country concerned is high. Otherwise a nexus develops and that eats into the protein of its society as already highlighted. When profit making becomes sole overriding factor, such ethics may not be strictly enforced by the corporate governance and the society at large. In such a situation value generation and regulation enforcement mechanisms are the ways forward. There is now a new realization that regulatory bodies need to play more watchdog role with stronger statutory support. Public awareness role played by the press could be the other way forward.
Concluding Remarks
There is no scope to de-emphasize the importance and relevance of ethical practices in the corporate houses of Bangladesh when many societal gamuts of activities are plagued by unethical and value-deficient practices. This calls for motivation, training and regenerating the age-old values, both social and religious, for the employees, employers and all other stakeholders. Bangladesh suffers from image crisis and it needs a positive branding. Ethical standards, if properly sustained, can take the country to a much greater height of development. It is a difficult proposition but nothing else can compensate it. A good image or goodwill itself can be as an asset for any corporate house. Making quick money is no solution; business has to be sustained nationally, internationally, and environmentally. Sustainability has to be ensured through ethical competitive advantage. And for that ethical standards can in no way be compromised. In this globalized competitive world, one would just vanish if one adheres to the practices of deceit, plagiarism, fraud, dishonesty, injustice, bluffing, hypocrisy, and solely profit seeking. In decision making also ethics have to be considered before its implementation. Decision-making can be programmed, non-programmed, under conditions of certainty, uncertainty, or risks and in all such scenarios ethics should be factored. Leadership or management personnel should be trained and motivated to work ethically under such complexities. Sustainable economic and social values have much to do with the management of 3R’s i.e. Reputation, Relationships, and Risks. Overall the final message would be to institutionalize ethics by applying the concepts into action. This can be achieved by codifying ethics in the corporate or government policy, there could be ethics officers or committees, and by teaching ethics in management development programs. Having a code of ethics is probably a better viable option.
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