Social Responsibility and Ethical Behavior by a Corporation

Introduction

Ethical responsibility involves behavior that is not necessarily regulated by law and does not always serve the direct economic interests of the corporation. A company that makes ethical decisions respects the rights of its employees and treats them equally, except in cases where organizational goals and objectives require it. In a broad sense, business ethics is a set of moral principles and norms that should guide the activities of organizations and their members in the field of management and entrepreneurship.

Social Responsibility and Ethical Behavior by a Corporation

How ethical behavior impacts business decisions by corporations

Many ethical problems, ranging from fair compensation to providing a safe and healthy work environment, must be considered when deciding how workers will be treated. The decisions made demonstrate the company’s ethical responsibility towards its employees. If decisions that devalue employees are consistently made, the resulting lack of motivation can cause their work to offer less and less value to one’s company (Singh, 2017). Decisions concerning a business’s social behavior can affect its success. People will be optimistic about a company’s brand if actions help the community, industry, or society. Consequently, ethical behavior affects the decisions made for business since it directly helps to improve the company’s image.

Why organizations today need to demonstrate social responsibility to be considered ethical

When a corporation works ethically, sustainably and mindfully of its environmental and social consequences, this is referred to as corporate social responsibility. This concept entails considering human rights and the community, environment, and society in which the business operates (Collier, 2018). Customers are becoming more conscious of the importance of social responsibility and actively seek out products and services from ethical businesses.

Social responsibility indicates that the company cares about more than only the issues that affect profit margins, attracting clients that share the same values. As a result, operating sustainably can be beneficial to the business despite the higher costs these additional activities tend to incur. Companies that disregard social responsibility put their reputation and brand in danger if cases of their unethical behavior are discovered. Having a damaged social and environmental reputation may have a significant negative impact on a company’s overall profitability and performance.

Describe some of the ethical issues faced by organizations

One of the most significant ethical issues affecting the business world is discrimination. In the last few years, many corporations have received substantial criticism for lacking a diverse workforce, lacking equal opportunities for women, and similar issues. Harassment, which is frequently linked to racism or sexism, is the second main ethical problem businesses face. Verbal abuse, sexual abuse, racial insults, and bullying are often implicitly tolerated within a company as long as the employee engaging in them is valuable enough. Harassment can also originate from anybody in the organization, including its customers. Health and safety are other sorts of ethical concerns that are frequently covered by the law. Companies may choose to cut corners and expose its workers to health hazards to save money or complete work more quickly.

Describe the process organizations use to establish a code of ethics to encourage ethical behavior

Employees should comply with the organizational code of ethics to guarantee that the company’s values are represented in all commercial dealings. Regardless of the firm’s size, properly established standards and thoroughly monitored transactions are necessary to prevent violations of the law, whether intentional or otherwise, and to make the workplace a place where people feel safe while acting in accordance with their moral compass (Collier, 2018).

The code of ethics may include documentation demonstrating management support for the values and principles. Open door policies for reporting ethics violations and a mechanism for anonymously reporting any code of ethics concerns can be included in the code. A statement about each employee’s personal obligations to respect the code of ethics is also included. This might consist of information on the legal and moral consequences of an employee breaking the code.

The obligation to report any violations is usually included in the personal responsibility section of the ethics code. It demonstrates that conforming to the values and principles may not be enough; employees must also help ensure that the code of ethics is followed by reporting violations. In order for a company to establish a code of ethics, it needs to take several steps. One is analyzing the business’s papers, such as the firm’s goal statement and any particular policies provided to new recruits as part of their orientation (Singh, 2017). Another is considering the ethical problems that the company, as well as its competitors, confront. Lastly, it is beneficial to involve employees in the creation of the code of ethics.

Discuss ways in which a corporation’s stakeholders influence its policies on social responsibility

As community citizenship and social responsibility become increasingly incorporated into company management, stakeholders’ impact on how firms operate has grown. Customers, workers, communities, and business partners are some of the major stakeholder groups that can affect how the company operates (Popa & Salanță, 2016).

Essential components of social responsibility may include measurements of how the business treats its employees in terms of pay, benefits, and levels of workplace safety and the relation of these statistics to stakeholders’ requirements, requests, and expectations. The company’s interactions with customers (in terms of product quality, advertising truth, and price), suppliers, and the government also serve as valuable indicators. Moreover, it includes the ways in which a company interacts with the community, such as through charity contributions, environmental responsibility, and others.

Stakeholders are often a diverse set of groups who have entirely different views and interests. Thus, it is almost impossible to meet the everyone’s demands at once, which gives rise to various ethical problems mentioned above. However, there is a specific range of matters that are of particular value for a given stakeholder and need to be accomplished first and foremost. For example, an organization’s owners’ or shareholders’ interest is primarily in ensuring that the company maximizes its profit, which is conventionally done by meeting market needs (Popa & Salanță, 2016). For consumers and third-party people, the interests are that the organization follows specific moral principles while also delivering a satisfactory product. In both cases, the organization should strive to meet these requirements since failing to do threatens its continued existence.

Recent Ethical Violation by a Corporation

Luckin Coffee is a Chinese company that manufactures and sells coffee while also running its own coffee shop chain. It was founded in Beijing in 2017 and has been able to grow substantially since. On January 8, 2020, Luckin Coffee held a press conference dedicated to its success (Block, 2020). The central announcement was that since its creation, the company had opened 4507 locations, which made them the most prominent coffee brand in China above the international giant Starbucks (Block, 2020). The report suggested unprecedented success and growth for the company, but the reasons for it were not necessarily clear.

Shortly after, a short-selling company published an 89-page report stating that Luckin Coffee’s claims were fraudulent and based on falsified data. It claimed that the amount of goods sold was overestimated by 88% at some points (Block, 2020). Effectively, Luckin Coffee deceived its investors and the broader public to fake a success story and secure further investment. The company then announced that Jian Liu, its chief operating officer, had fabricated its sales without the other leaders’ knowledge, though the veracity of this claim is in doubt. The report resulted in Luckin being delisted from the US stock market and later filing for bankruptcy at its US branch.

The result of this scandal was the initiation of changes in US legislation to prohibit American pension funds from investing in Chinese companies. The most direct effect was that Luckin’s shares declined dramatically in value, harming both the company and its shareholders. However, most importantly, the company lost the trust of investors, customers, and the authorities. The effects were not severe enough to drive Luckin to bankruptcy, at least in China, but the company’s narrative of rapid growth was destroyed. In addition to ruining its future prospects with the severe reputation damage, it also hurt the overall Chinese publicly traded sector with its actions.

Conclusion

Current economic conditions dictate the need to coordinate the economic interests, the economic behavior of an organization with the interests of society, which was rarely done previously. The organization needs to integrate an entrepreneurial profit orientation and corporate social responsibility to win public trust.

The social involvement of the organization is consistent with its interests, as it creates a better society and a superior environment for doing business. In addition, socially responsible and ethical management prevents or reduces the tension between the company and state and municipal authorities. By solving the issues the business creates and improving the communities in which it operates, it can secure and retain customer goodwill, which is becoming increasingly important at this time.

References

Block, C. (2020). Luckin Coffee: Fraud + fundamentally broken business. Muddy waters research. Web.

Collier, E. (2018). The importance of corporate social responsibility for your business. High speed training. Web.

Popa, M., & Salanță, I. (2016). The social responsibilities of stakeholders who can and should influence the organizations’ socially responsible behavior. Managerial challenges of the contemporary society, 8(1), 15-24.

Singh, C. (2017). Code of ethics in an organisation. International journal of application or innovation in engineering & management, 6, 138-142.