Politics, Ethics and Social Responsibility of Business

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RESPONSIBILITY AND ACCOUNTABILITY |

powers or conferring rights to carry out those duties. Next comes the causal responsibility to use mechanisms

for accountability and due recognition. Accountability and due recognition generally operate in tandem.

15.3 CORPORATE RESPONSIBILITY

Corporate responsibility has been seen arises from business ethics and has three dimensions:

1. Good governance,

2. Corporate social responsibility and

3. Environmental accountability.

This is how business ethics becomes an all-pervading inf uence in the governance of business. The top

management is not only responsible to envision such a change but also responsible to translate this vision

into practices and to make sure that they adopt a balanced approach towards three dimensions. It should be

evidenced from the conduct of business for it is not easy for them to get away from this by indulging only in

lip service.

15.3.1 GOOD GOVERNANCE

The corporations are formed based on the division of ownership and control, in which the investor or

owner relies on the manager, that is, CEO to manage the business on his/her behalf which implies that

principal–agent relationship exists between investor and manager, which causes the room for asymmetric

information. In other words, there is always a gap between the information possessed by the manager vis-àis

the investors. This situation calls for a good and transparent governance, that is, corporate governance. The

shareholders must have full and authentic information. There should be transparency in processes, so that

the agent (manager) cannot mismanage or take the advantage of the asymmetric information. The objective

of good governance is to have such system of controlling and managing so that the interest of owner may be

protected. For this to be successful, f rst of all, whatever hurdles are there in the processes are to be removed.

The processes are necessary to prohibit the manager to push their own agenda or self-interest, that is, the

managers, as working in the capacity of agent, might have their own individual goals to pursue which are not

in line with organisational goals. Such processes are to be institutionalised which protect the interest of the

owner, that is, prof t maximisation and wealth maximisation. Therefore, ethical structure has the implication

for good governance, which means better prof ts. It is important to make prof ts within ethical framework.

There is a shift in the psychology of investors that they are curious not only to know how much prof t the

company has booked, but also to know how this prof t has been earned, that is, ethically or unethically.

Therefore, business has to be done ethically, the prof ts are to be taken seriously, if not, it would be interpreted

as if the business is not indulging into good governance.

15.3.2 CORPORATE SOCIAL RESPONSIBILITY (CSR)

Second ethical dimension of CSR includes the social practices where the company is discharging its

responsibility towards community at large, that is, stakeholders. Stakeholders are the ones who can inf uence

or can be inf uenced by the actions, decisions, policies, practices and goals of the company. Apart from

shareholders, it includes employees, consumers, suppliers, government competitors and community at large.

Traditionally, so far business was treated purely from the viewpoint of private–personal pecuniary motive.

Now, a company has acknowledged its responsibilities to society that goes beyond the production of goods

and services at a prof t. It involves the idea that the corporate governance has a broader constituency to serve

than that of shareholder alone. In more recent years, the term stakeholder has been widely used to express

this broader set of responsibilities. By now, it has been accepted that corporations are more than economic