Managing a Business/asking question.


1. `Managers should hold and develop a deeper knowledge of the nature of ethical principles and concepts and an understanding of how these apply to ethical problems encountered in business’.  Explain.

2. Suppose you are working in a bank.  What kind of social audit process should the bank perform and why?

3. Suppose you are working in a creative/innovative organization.  Identify the characteristics of this organization.  Also find out how it has used its creativity as one of its strategies?

4.   `Managers should hold and develop a deeper knowledge of the nature of ethical principles and concepts and an understanding of how these apply to ethical problems encountered in business’.  Explain.


Principle 1. the responsibilities of businesses: beyond
shareholders toward stakeholders.

Principle 2. the economic and social impact of
business: toward innovation, justice, and
world community

Principle 3. business behavior: beyond the letter of law
toward a spirit of trust.

Principle 4. respect for rules

Principle 5. support for multilateral trade

Principle 6. respect for the environment

Principle 7. avoidance of illicit operations

Principle 8. customers

Principle 9. employees

Principle 10. owners/investors

Principle 11. suppliers

Principle 12. competitors

    Business  Principles of Ethics

Principle 1. the responsibilities of businesses: beyond
shareholders toward stakeholdcrs

The value of a business to society is the wealth and employment it
creates and the marketable products and services it provides to
consumers at a reasonable price commensurate with quality. To create
such value, a business must maintain its own economic health and
viability, but survival is not a sufficient goal.

Businesses have a role to play in improving the lives of all their
customers, employees, and shareholders by sharing with them the
wealth they have created. Suppliers and competitors as well should
expect businesses to honor their obligations in a spirit of honesty and
fairness. As responsible citizens of the local, national, regional, and
global communities in which they operate, businesses share a part in
shaping the future of those communities.

Principle 2. the economic and social impact of
business: toward innovation, justice, and
world community

Businesses established in foreign countries to develop, produce, or sell
should also contribute to the social advancement of those countries by
creating productive employment and helping to raise the purchasing
power of their citizens. Businesses also should contribute to human
rights, education, welfare, and vitalization of the countries in which
they operate.

Businesses should contribute to economic and social development not
only in the countries in which they operate, but also in the world
community at large, through effective and prudent use of resources,
free, and fair competition, and emphasis upon innovation in
technology, production, methods, marketing, and communications.

Principle 3. business behavior: beyond the letter of law
toward a spirit of trust.

While accepting the legitimacy of trade secrets, businesses should
recognize that sincerity, candor, truthfulness, the keeping of
promises, and transparency contribute not only to their own
credibility and stability but also to the smoothness and efficiency of  
business transactions, particularly on the international level.

Principle 4. respect for rules

,TO avoid trade friction and to promote freer trade, equal conditons
for competition, and fair and equitable treatment for all partcipants.
All   businesses should respect international and domestic
rules. In addition, they should recognize that some behavior,
although legal, may still have adverse consequences.

  Principle 5. support for multilateral trade

Businesses should support the multilateral trade systems of
World Trade Organization and similar international
agreements. They should cooperate in efforts to promote the
progressive and judicious liberalization of trade, and to relax those
domestic measures that unreasonably hinder global commerce,
while giving due respect to national policy objectives.

Principle 6. respect for the environment

A business should protect and, where possible, improve the
environment, promote sustainable development, and prevent the
wasteful use of natural resources.

Principle 7. avoidance of illicit operations

A business should not participate in or condone bribery, money
laundering, or other corrupt practices; indeed, it should seek
cooperation with others to eliminate them. It should not trade in
arms or other materials used for terrorist activities, drug traffic, or
other organized crime.

Principle 8. customers

We believe in treating all customers with dignity, irrespective of
whether they purchase our products and services directly from us
or otherwise acquire them in the market. We therefore have a
responsibility to:

• provide our customers with the highest quality products and
services consistent with their requirements;

•      treat our customers fairly in all respects of our business
transactions, including a high level of service and remedies for their

•      make every effort to ensure that the health and !Wety of our
customers, as well as the quality of their environment, will be
sustained or enhanced by our products and services;

•      assure respect for human dignity in products offered, marketing,
and advertising; and respect the integrity of the culture of our

Principle 9. employees

We believe in the dignity of every employee and in taking
employee interests seriously. We therefore have a responsibility

provide jobs and compensation that improve worker's living

  provide work conditions that respect each employee's health and

be honest in communications with employees and open in sharing
information, limited only by legal and competitive restraint;

listen to and, where possible, act on employee suggestions, ideas,
requests, and complaints;

engage in good faith negotiations when conflict arises;

avoid discriminatory practices and guarantee equal treatment and
opportunity in areas such as gender, age, race, and religion;

promote in the business itself the employment of differently abled
people in places of work where they can be genuinely useful;

protect employees from avoidable injury and illness in the

encourage and assist employees in developing relevant and
transferable skills and knowledge; and

be sensitive to serious unemployment problems frequently associated
with business decisions, and work with the government, employee
groups, other agencies and each other in addressing these

Principle 10. owners/investors

We believe in honoring the trust our investors place in us. We
therefore have a responsibility to:

apply professional and diligent management in order to secure a fair
and competitive return on our owners' investment;

disclose relevant information to owners/investors subject only to
legal requirements and competitive constraints;

conserve, protect, and increase the owners/investors' assets; and

respect owners/investors' requests, suggestions, complaints, and
formal resolutions.

Principle 11. suppliers

Our relationship with suppliers and subcontractors must be based
mutual respect. We therefore have a responsibility to:

seek fairness and truthfulness in all of our activities, including
pricing, licensing, and rights to sell;

ensure that business activities are free from coercion and unnecessary

foster long term stability in the supplier relationship in return
for value, quality, competitiveness, and liability;

share information with suppliers and integrate them into our
planning processes;

  •   pay suppliers on time and in accordance with agreed terms of

•      seek, encourage, and prefer suppliers and subcontractors whose
employment practices respect human dignity.

Principle 12. competitors

We believe that fair economic competition is one of the basic
requirements for increasing the wealth of the nations and,
ultimately, for making possible the just distribution of goods and
services. We therefore have a responsibility to:

•      foster open markets for trade and investments;

•      promote competitive behavior that is socially and
environmentally beneficial and demonstrates mutual respect among

•      refrain from either seeking or participating in questionable
payments of favors totecure competitive advantages;

•      respect both tangible and intellectual property rights; and

•      refuse to acquire commercial information by dishonest or
unethical means, such as industrial espionage.

Principle 13. communities

We believe that as global corporate citizens, we can contribute to
such forces of reform and human rights as are at work in the
communities in which we operate. We therefore have a
responsibility in those communities to:

•      respect human rights and democratic institutions, and promote
them wherever practicable;

• recognize government's legitimate obligation to the society at
large and support public policies and practices that promote
human development through harmonious relations betweei
business and other segments;

• collaborate with those forces in the community dedicated raising
standards of health, education, workplace safety, economic well¬

• promote and stimulate sustainable development and play leading
role in preserving and enhancing the physical environment and
conserving the earth's resources;

•      support peace, security, diversity, and social integration"

•   respect the integrity of local cultures;

•      be a good corporate citizen through charitable donations,
vocational and cultural contributions, and employee participating  in
community and civic affairs.


Ethical business practices include assuring that the highest legal and moral standards are observed in your relationships with the people in your business community. This includes the most important person in your business, your customer. Short term profit at the cost of losing a customer is long term death for your business.
A reputation for ethical decisions builds trust in your business among business associates and suppliers. Strong supplier relationships are critical to a successful business. Consider the problems you might have if you could not supply what the customer the time that they need it.
The entrepreneur is the role model for employees. If your behavior includes lying to customers, taking money out of the cash register, or taking home some of the inventory or supplies, you cannot be surprised if your employees follow your lead. Your family members may see the business as their own and take things that really belong to the business. Employees may see this as being dishonest, or as a conflict with their needs for a raise in pay.
The community expects your business to operate in an ethical manner that enhances the image of the community as a whole. If you are located in a mall, for example, your code of ethics will help or hinder customer traffic for the other businesses too. A reputation for telling customers anything they want to hear, regardless of the truth, eventually hurts your business and other businesses around you. It usually isn't illegal to lie to customers, but it isn't good business.
Ethical behavior is merely making good business decisions based on an established "code of ethics". Entrepreneurs should establish a written code of ethics that can serve as a framework for decisions to be made by the entrepreneur as well as the employees. In developing this code of ethics you should consider the following items:
1. Identify your general principles that would lead to fair business practices.
2. Check with your industry association for basic standards to review
3. Allow for the fact that ethical questions do not always have a unique, faultless answer.
4. Write out specific statements that will assist you and others in making day-to-day ethical decisions.
5. Apply your code of ethics to a written policy and procedure manual identifying the major rules for operating your business.
6. Train your employees (and family members) to make ethical decisions about the business.
Your code of ethics will apply to all types of business operations including the following. What others can you add to this list?
* Handling cash and checks from customers
* "Negotiating" special prices for a friend without permission
* Accepting gifts from suppliers and business associates
* Selling damaged merchandise
* Warranties on products
* Merchandise return policies for customers
* Returning merchandise to suppliers
* Handling shoplifters
* Accounting procedures for cash sales
* Employee theft
* Insurance coverage adequate to protect the business and employees
* Supporting your advertising promises
* Checking in merchandise when received from suppliers
* Keeping the premises clean and free from harmful substances or germs.
* Handling employee performance problems
* Telling customers the truth

The day-to-day operations of a business require everyone to make decisions all the time. Practice in developing a code of ethics and then applying it to situations is important to establishing an ethical business image.
Consider how the decision-making process will help you improve the success of your business:
1. Define the problem requiring a decision. Often we jump to conclusions about a situation without even taking time to clarify the problem
2. Consider alternative solutions to the problem. There is always more than one solution to any problem. Practice thinking about possibilities before taking action.
3. Identify the consequences of alternative solutions. There are many different consequences possible for choosing different alternatives. Entrepreneurs need to think about both the short-term and long-term consequences likely to result from their decisions.
4. Collect information if you do not have enough to make the right decision. This is where a company policy and procedure guide may help employees check out their approach to a problem.

Ask the class to form small groups of about 8 persons to work on ideas for ethical decision-making. Provide them with information about a business to use for the activity. This could be a local business, a business idea of your choice or theirs, or a business plan sample that they have been working with in the class. Ask each group to do the following:
1. Identify problems the entrepreneur might encounter in running this business in an ethical manner.
2. Develop a 10-point code of ethics for the business.
3. Discuss policies and procedures appropriate for this business that would support the code of ethics.
4. List as many ethical problems as possible that might be faced by employees during a normal work day. Discuss the possible solutions for the problems. Consider how a procedure guide might help employees to make the best decisions.
5. Members of the group should then role-play the process of handling an ethical issue with a customer, with a supplier, with a competitor, and with the son of the owner. Discuss the results of the role-playing exercise. If necessary you may want to modify your code of ethics at this time.
6. Each group should present their code of ethics to the class and discuss major outcomes of their discussion.
The advantages of ethical behaviour include:
•   Higher revenues – demand from positive consumer support
•   Improved brand and business awareness and recognition
•   Better employee motivation and recruitment
•   New sources of finance – e.g. from ethical investors

Ethics is two things.
First, ethics refers to well based standards of right and wrong that prescribe what humans ought to do, usually in terms of rights, obligations, benefits to society, fairness, or specific virtues. Ethics, for example, refers to those standards that impose the reasonable obligations to refrain from rape, stealing, murder, assault, slander, and fraud. Ethical standards also include those that enjoin virtues of honesty, compassion, and loyalty. And, ethical standards include standards relating to rights, such as the right to life, the right to freedom from injury, and the right to privacy. Such standards are adequate standards of ethics because they are supported by consistent and well founded reasons.

Secondly, ethics refers to the study and development of one's ethical standards. As mentioned above, feelings, laws, and social norms can deviate from what is ethical. So it is necessary to constantly examine one's standards to ensure that they are reasonable and well-founded. Ethics also means, then, the continuous effort of studying our own moral beliefs and our moral conduct, and striving to ensure that we, and the institutions we help to shape, live up to standards that are reasonable and solidly-based.

A Framework for Thinking Ethically  in  decision  making
This  information  is designed as an introduction to thinking ethically. We all have an image of our better selves-of how we are when we act ethically or are "at our best." We probably also have an image of what an ethical community, an ethical business, an ethical government, or an ethical society should be. Ethics really has to do with all these levels-acting ethically as individuals, creating ethical organizations and governments, and making our society as a whole ethical in the way it treats everyone.
What is Ethics?
Simply stated, ethics refers to standards of behavior that tell us how human beings ought to act in the many situations in which they find themselves-as friends, parents, children, citizens, businesspeople, teachers, professionals, and so on.

It is helpful to identify what ethics is NOT:
•   Ethics is not the same as feelings. Feelings provide important information for our ethical choices. Some people have highly developed habits that make them feel bad when they do something wrong, but many people feel good even though they are doing something wrong. And often our feelings will tell us it is uncomfortable to do the right thing if it is hard.
•   Ethics is not religion. Many people are not religious, but ethics applies to everyone. Most religions do advocate high ethical standards but sometimes do not address all the types of problems we face.
•   Ethics is not following the law. A good system of law does incorporate many ethical standards, but law can deviate from what is ethical. Law can become ethically corrupt, as some totalitarian regimes have made it. Law can be a function of power alone and designed to serve the interests of narrow groups. Law may have a difficult time designing or enforcing standards in some important areas, and may be slow to address new problems.
•   Ethics is not following culturally accepted norms. Some cultures are quite ethical, but others become corrupt -or blind to certain ethical concerns (as the United States was to slavery before the Civil War). "When in Rome, do as the Romans do" is not a satisfactory ethical standard.
•   Ethics is not science. Social and natural science can provide important data to help us make better ethical choices. But science alone does not tell us what we ought to do. Science may provide an explanation for what humans are like. But ethics provides reasons for how humans ought to act. And just because something is scientifically or technologically possible, it may not be ethical to do it.

Why Identifying Ethical Standards is Hard

There are two fundamental problems in identifying the ethical standards we are to follow:
1. On what do we base our ethical standards?
2. How do those standards get applied to specific situations we face?
If our ethics are not based on feelings, religion, law, accepted social practice, or science, what are they based on? Many philosophers and ethicists have helped us answer this critical question. They have suggested at least five different sources of ethical standards we should use.

Five Sources of Ethical Standards

The Utilitarian Approach
Some ethicists emphasize that the ethical action is the one that provides the most good or does the least harm, or, to put it another way, produces the greatest balance of good over harm. The ethical corporate action, then, is the one that produces the greatest good and does the least harm for all who are affected-customers, employees, shareholders, the community, and the environment. Ethical warfare balances the good achieved in ending terrorism with the harm done to all parties through death, injuries, and destruction. The utilitarian approach deals with consequences; it tries both to increase the good done and to reduce the harm done.

The Rights Approach
Other philosophers and ethicists suggest that the ethical action is the one that best protects and respects the moral rights of those affected. This approach starts from the belief that humans have a dignity based on their human nature per se or on their ability to choose freely what they do with their lives. On the basis of such dignity, they have a right to be treated as ends and not merely as means to other ends. The list of moral rights -including the rights to make one's own choices about what kind of life to lead, to be told the truth, not to be injured, to a degree of privacy, and so on-is widely debated; some now argue that non-humans have rights, too. Also, it is often said that rights imply duties-in particular, the duty to respect others' rights.

The Fairness or Justice Approach
Aristotle and other Greek philosophers have contributed the idea that all equals should be treated equally. Today we use this idea to say that ethical actions treat all human beings equally-or if unequally, then fairly based on some standard that is defensible. We pay people more based on their harder work or the greater amount that they contribute to an organization, and say that is fair. But there is a debate over CEO salaries that are hundreds of times larger than the pay of others; many ask whether the huge disparity is based on a defensible standard or whether it is the result of an imbalance of power and hence is unfair.

The Common Good Approach
The Greek philosophers have also contributed the notion that life in community is a good in itself and our actions should contribute to that life. This approach suggests that the interlocking relationships of society are the basis of ethical reasoning and that respect and compassion for all others-especially the vulnerable-are requirements of such reasoning. This approach also calls attention to the common conditions that are important to the welfare of everyone. This may be a system of laws, effective police and fire departments, health care, a public educational system, or even public recreational areas.

The Virtue Approach
A very ancient approach to ethics is that ethical actions ought to be consistent with certain ideal virtues that provide for the full development of our humanity. These virtues are dispositions and habits that enable us to act according to the highest potential of our character and on behalf of values like truth and beauty. Honesty, courage, compassion, generosity, tolerance, love, fidelity, integrity, fairness, self-control, and prudence are all examples of virtues. Virtue ethics asks of any action, "What kind of person will I become if I do this?" or "Is this action consistent with my acting at my best?"

WE  Put  the Approaches Together  IN  MAKING   ETHICAL    BUSINESS  DECISIONS

Each of the approaches helps us determine what standards of behavior can be considered ethical. There are still problems to be solved, however.
The first problem is that we may not agree on the content of some of these specific approaches. We may not all agree to the same set of human and civil rights.
We may not agree on what constitutes the common good. We may not even agree on what is a good and what is a harm.
The second problem is that the different approaches may not all answer the question "What is ethical?" in the same way. Nonetheless, each approach gives us important information with which to determine what is ethical in a particular circumstance. And much more often than not, the different approaches do lead to similar answers.
organisation I  am  referring to

The  organization, I am  familiar  with  is  a
-a  large  manufacturer/ marketer of  safety products
-the products  are  used  as  [personal  protection safety] [ industrial  safety]
-the products  are  distributed through  the distributors as well as  sold directly
-the  products  are  sold  to various  industries like  mining/fireservices/defence/
as  well  as  to  various  manufacturing  companies.
-the  company employs  about  235  people.
-the  company  has  the following  functional   departments
*finance/ administration
*human resource
*customer  service
*warehousing/  transportation

Making Decisions
Making good ethical decisions requires a trained sensitivity to ethical issues and a practiced method for exploring the ethical aspects of a decision and weighing the considerations that should impact our choice of a course of action. Having a method for ethical decision making is absolutely essential. When practiced regularly, the method becomes so familiar that we work through it automatically without consulting the specific steps.
The more novel and difficult the ethical choice we face, the more we need to rely on discussion and dialogue with others about the dilemma. Only by careful exploration of the problem, aided by the insights and different perspectives of others, can we make good ethical choices in such situations.
We have found the following framework for ethical decision making a useful method for exploring ethical dilemmas and identifying ethical courses of action.
A Framework for Ethical Decision Making
Recognize an Ethical Issue
1. Is there something wrong personally, interpersonally, or socially? Could the conflict, the situation, or the decision be damaging to people or to the community?
2. Does the issue go beyond legal or institutional
concerns? What does it do to people, who have dignity, rights, and hopes for a better life together?
Get the Facts
3. What are the relevant facts of the case? What facts are unknown?
4. What individuals and groups have an important stake in the outcome? Do some have a greater stake because they have a special need or because we have special obligations to them?

5. What are the options for acting? Have all the relevant persons and groups been consulted? If you showed your list of options to someone you respect, what would that person say?
Evaluate Alternative Actions From Various Ethical Perspectives
6. Which option will produce the most good and do the least harm?
Utilitarian Approach: The ethical action is the one that will produce the greatest balance of benefits over harms.
7. Even if not everyone gets all they want, will everyone's rights and dignity still be respected?
Rights Approach: The ethical action is the one that most dutifully respects the rights of all affected.
8. Which option is fair to all stakeholders?
Fairness or Justice Approach: The ethical action is the one that treats people equally, or if unequally, that treats people proportionately and fairly.
9. Which option would help all participate more fully in the life we share as a family, community, society?
Common Good Approach: The ethical action is the one that contributes most to the achievement of a quality common life together.
10. Would you want to become the sort of person who acts this way (e.g., a person of courage or compassion)?
Virtue Approach: The ethical action is the one that embodies the habits and values of humans at their best.
Make a Decision and Test It
11. Considering all these perspectives, which of the options is the right or best thing to do?
12. If you told someone you respect why you chose this option, what would that person say? If you had to explain your decision on television, would you be comfortable doing so?
Act, Then Reflect on the Decision Later
13. Implement your decision. How did it turn out for all concerned? If you had it to do over again, what would you do differently?
The following list describes various types of benefits from managing ethics in the workplace.

1. Attention to business ethics has substantially improved society.
A matter of decades ago, children in our country worked 16-hour days. Workers’ limbs were torn off and disabled workers were condemned to poverty and often to starvation. Trusts controlled some markets to the extent that prices were fixed and small businesses choked out. Price fixing crippled normal market forces. Employees were terminated based on personalities. Influence was applied through intimidation and harassment. Then society reacted and demanded that businesses place high value on fairness and equal rights. Anti-trust laws were instituted. Government agencies were established. Unions were organized. Laws and regulations were established.

2. Ethics programs help maintain a moral course in turbulent times.
As noted earlier in this document, Wallace and Pekel explain that attention to business ethics is critical during times of fundamental change -- times much like those faced now by businesses, both nonprofit or for-profit. During times of change, there is often no clear moral compass to guide leaders through complex conflicts about what is right or wrong. Continuing attention to ethics in the workplace sensitizes leaders and staff to how they want to act -- consistently.

3. Ethics programs cultivate strong teamwork and productivity.
Ethics programs align employee behaviors with those top priority ethical values preferred by leaders of the organization. Usually, an organization finds surprising disparity between its preferred values and the values actually reflected by behaviors in the workplace. Ongoing attention and dialogue regarding values in the workplace builds openness, integrity and community -- critical ingredients of strong teams in the workplace. Employees feel strong alignment between their values and those of the organization. They react with strong motivation and performance.

4. Ethics programs support employee growth and meaning.
Attention to ethics in the workplace helps employees face reality, both good and bad -- in the organization and themselves. Employees feel full confidence they can admit and deal with whatever comes their way. Bennett, in his article "Unethical Behavior, Stress Appear Linked" , explained that a consulting company tested a range of executives and managers. Their most striking finding: the more emotionally healthy executives, as measured on a battery of tests, the more likely they were to score high on ethics tests.
5. Ethics programs are an insurance policy -- they help ensure that policies are legal.
There is an increasing number of lawsuits in regard to personnel matters and to effects of an organization’s services or products on stakeholders. As mentioned earlier in this document, ethical principles are often state-of-the-art legal matters. These principles are often applied to current, major ethical issues to become legislation. Attention to ethics ensures highly ethical policies and procedures in the workplace. It’s far better to incur the cost of mechanisms to ensure ethical practices now than to incur costs of litigation later. A major intent of well-designed personnel policies is to ensure ethical treatment of employees, e.g., in matters of hiring, evaluating, disciplining, firing, etc. note that “an employer can be subject to suit for breach of contract for failure to comply with any promise it made, so the gap between stated corporate culture and actual practice has significant legal, as well as ethical implications.”

6. Ethics programs help avoid criminal acts “of omission” and can lower fines.
Ethics programs tend to detect ethical issues and violations early on so they can be reported or addressed. In some cases, when an organization is aware of an actual or potential violation and does not report it to the appropriate authorities, this can be considered a criminal act, e.g., in business dealings with certain government agencies, such as the Defense Department. The recent Federal Sentencing Guidelines specify major penalties for various types of major ethics violations. However, the guidelines potentially lowers fines if an organization has clearly made an effort to operate ethically.

7. Ethics programs help manage values associated with quality management, strategic planning and diversity management -- this benefit needs far more attention.
Ethics programs identify preferred values and ensuring organizational behaviors are aligned with those values. This effort includes recording the values, developing policies and procedures to align behaviors with preferred values, and then training all personnel about the policies and procedures. This overall effort is very useful for several other programs in the workplace that require behaviors to be aligned with values, including quality management, strategic planning and diversity management. Total Quality Management includes high priority on certain operating values, e.g., trust among stakeholders, performance, reliability, measurement, and feedback. Eastman and Polaroid use ethics tools in their quality programs to ensure integrity in their relationships with stakeholders. Ethics management techniques are highly useful for managing strategic values, e.g., expand marketshare, reduce costs, etc. McDonnell Douglas integrates their ethics programs into their strategic planning process. Ethics management programs are also useful in managing diversity. Diversity is much more than the color of people’s skin -- it’s acknowledging different values and perspectives. Diversity programs require recognizing and applying diverse values and perspectives -- these activities are the basis of a sound ethics management program.

8. Ethics programs promote a strong public image.
Attention to ethics is also strong public relations -- admittedly, managing ethics should not be done primarily for reasons of public relations. But, frankly, the fact that an organization regularly gives attention to its ethics can portray a strong positive to the public. People see those organizations as valuing people more than profit, as striving to operate with the utmost of integrity and honor. Aligning behavior with values is critical to effective marketing and public relations programs. Consider how Johnson and Johnson handled the Tylenol crisis versus how Exxon handled the oil spill in Alaska. Bob Dunn, President and CEO of San Francisco-based Business for Social Responsibility, puts it best: “Ethical values, consistently applied, are the cornerstones in building a commercially successful and socially responsible business.”

9. Overall benefits of ethics programs:
Donaldson and Davis, in “Business Ethics? Yes, But What Can it Do for the Bottom Line?”  explain that managing ethical values in the workplace legitimizes managerial actions, strengthens the coherence and balance of the organization’s culture, improves trust in relationships between individuals and groups, supports greater consistency in standards and qualities of products, and cultivates greater sensitivity to the impact of the enterprise’s values and messages.

10. Last - and most -- formal attention to ethics in the workplace is the right thing to do.
One Description of a Highly Ethical Organization
the following four principles for highly ethical organizations:
1. They are at ease interacting with diverse internal and external stakeholder groups. The groundrules of these firms make the good of these stakeholder groups part of the organizations' own good.
2. They are obsessed with fairness. Their groundrules emphasize that the other persons' interests count as much as their own.
3. Responsibility is individual rather than collective, with individuals assuming personal responsibility for actions of the organization. These organizations' groundrules mandate that individuals are responsible to themselves.
4. They see their activities in terms of purpose. This purpose is a way of operating that members of the organization highly value. And purpose ties the organization to its environment.

Doug Wallace asserts the following characteristics of a high integrity organization:
1. There exists a clear vision and picture of integrity throughout the organization.
2. The vision is owned and embodied by top management, over time.
3. The reward system is aligned with the vision of integrity.
4. Policies and practices of the organization are aligned with the vision; no mixed messages.
5. It is understood that every significant management decision has ethical value dimensions.
6. Everyone is expected to work through conflicting-stakeholder value perspectives.

5.   Suppose you are working in a bank.  What kind of social audit process should the bank perform and why?
A social audit is a way of measuring, understanding, reporting and ultimately improving an organization's social and ethical performance. A social audit helps to narrow gaps between vision/goal and reality, between efficiency and effectiveness. It is a technique to understand, measure, verify, report on and to improve the social performance of the organization.

Social auditing creates an impact upon governance. It values the voice of stakeholders, including marginalized/poor groups whose voices are rarely heard. Social auditing is taken up for the purpose of enhancing local governance, particularly for strengthening accountability and transparency in local bodies.

Advantages of social audit
(a) Trains the community on participatory local planning.
(b) Encourages local democracy.
(c) Encourages community participation.
(d) Benefits disadvantaged groups.
(e) Promotes collective decision making and sharing responsibilities.
(f) Develops human resources and social capital

Understand Operating Environment
•   An auditor evaluates the leadership abilities, ethical qualities and business practices of a corporation's senior management team to understand operating conditions and factors that affect the organization's social activities. An auditor discusses industry developments and job performance needs with lower- and mid-level employees, and reads industry publications and corporate annual reports to gauge levels of social involvement. An auditor also could use a three-stage approach to acquire knowledge about an organization's operating environment: corporate guidelines, departmental policies and segment procedures.
Understand Corporate Policies
•   An auditor could acquire knowledge about a business entity's or an non-profit organization's social policies by inquiring from accounting, finance, charitable activities, human resource and governance departments. An auditor also could partner with external accountants and regulators to increase such knowledge. An auditor obtains relevant and appropriate "evidential matter" by applying auditing standards generally accepted in the industry in which a firm operates. Evidential matter is proof or evidence upon which an auditor provides an opinion.
Test Corporate Policies
•   An auditor tests a business entity's social policies to ensure that appropriate controls, procedures and guidelines exist, and that such controls comply with regulatory mandates, industry practices, corporate guidelines and ethical standards. An auditor also evaluates whether social policies are adequately designed and are operating effectively. Policies are adequate if they detail step-by-step procedures and mechanisms for task performance, management's decision processes and lines of hierarchy in social and philanthropic activities.
Test Account Balances
•   An auditor performs tests of "social" account balances in a business entity's financial statements to ensure that such balances are "fair" and "complete", and that they comply with accounting principles generally accepted in industries in which the entity operates. Social accounts could relate to activities involved in philanthropic donations, political contributions or other types of social undertakings. Fairness means objective or accurate in accounting, finance or audit parlance. Complete financial statements include a balance sheet, a statement of profit and loss, a cash flows statement and a statement of stockholders' equity.
Test Account Details
•   An auditor tests details of a corporation's social accounts to ensure that such accounts are not "materially" misstated, and that they are fair and complete. Such tests are referred to as substantive tests. Material in accounting parlance means substantial or significant. For example, an auditor reviewing Bank ABC's social procedures could verify that amounts recorded as charitable donations or environmental support contributions are accurate

Initial Steps of the Audit - Notification, Planning, Opening Meeting and Fieldwork
•   The 10 steps of the audit process begins with notification. The notification process alerts the party to be audited of the date and time of the process. The notification also will list the documents that the order wishes to review in order to understand the organization of the company. The next step, planning, is the steps the auditor takes, before the audit, to identify key areas of risk and areas of concern. This step is usually accomplished in a series of meetings with auditing staff. This leads up to the opening meeting between the auditing staff and senior management of the auditing target as well as administrative staff. The auditors will describe the process they will undertake. Management will describe areas of concern to them and the schedule of the employees that must be consulted. The next step, fieldwork, begins after the results of the meeting are used to adjust the final audit plans. Employees are notified of the audit, schedules are drawn up regarding the activities of the audit staff, and initial investigation is begun after learning of business procedures, interviewing key staff, testing current business practices by sampling, reviewing the law and testing internal rules and practices for reasonableness.
The Audit Itself - Communication, Draft Audit, Management Response
•   Communication is the next step. The audit team should consistently be in contact with the corporate auditor to clarify processes, gain access to documents and clarify procedures. At the completion of the audit, the next step, the draft audit, is prepared. The draft audit will detail what was done and what was found, a distribution list of parties to receive preliminary results, and a list of concerns. The draft is given to management to review, edit and suggest changes, probe areas of concern and correct errors. Upon making final corrections, the report is given to management for the seventh step, the management response. Management is requested to answer the report by stating whether they agree with the problems cited, the plan to correct noted problem and the expected date by which all issues will have been addressed.
Ending the Auditing Process-Final Meeting, Report Distribution, Feedback
•   The final meeting is designed to close loose ends, discuss the management response and address the scope of the audit. The ninth step is the report distribution, where the final audit report is sent to appropriate officials inside and outside the audit area. The last step is the audit feedback whereby the audited company implements the recommended changes and the auditors review and test the quality, adherence and effects of the adopted changes. This continues until all issues are adopted and the next audit cycle begins.

6.   Suppose you are working in a creative/innovative organization.  Identify the characteristics of this organization.  Also find out how it has used its creativity as one of the inherent for ideas from


Managing a Business

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Leo Lingham


In Managing a business, I can cover all aspects of running a business--business planning, business development, business auditing, business communication, operation management, human resources management , training, etc.


18 years of working management experience covering such areas
as business planning, business development, strategic planning,
marketing, management services, personnel administration.


24 years of management consulting which includes business planning, strategic planning, marketing, product management, training, business coaching etc.




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