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2.Social responsibilities of an organisation
Social responsibility is an ethical or ideological theory that an entity whether it is a government, corporation, organization or individual has a responsibility to society. This responsibility can be “negative,” in that it is a responsibility to refrain from acting (resistance stance) or it can be “positive,” meaning there is a responsibility to act (proactive stance). While primarily associated with business and governmental practices, activist groups and local communities can also be associated with social responsibility, not only business or governmental entities. (Wikipedia, 2008)
Business is expected to create wealth and employment, while society is expected to provide a favourable environment for the business to flourish. The value and ethical standards that a company adopts are the long-term assets of the organization. There are a number of tasks that a business has to fulfil to the society. These include the financial task, political task, environment task, adaptive task, economic task, and social tasks. Financial tasks include laying down policies and guidelines for the proper functioning of the financial systems.
The environmental tasks include the responsibility of an organization towards the environment. With the perceptions of the consumers changing towards products that are harmful to the environment, companies have to show their concern for the environment by producing environmentally friendly products. The maintenance tasks include the involvement of organizations with non-profit organizations in providing service to the society.
Social task include providing equal opportunity for all the members of the society by organizations and taking into consideration the basic human rights of an employee. The way an organization responds to its responsibility to the society has been discussed with special reference to the enlightenment matrix. Further the social challenges of an organization have been discussed with community involvement choice flow. It is a process that guides an organization in fulfilling its role to the society. (ICMR Case studies, 2007)
The 10 Best Corporate Citizens for the year 2007 in Sri Lanka were (in alphabetical order)
§ Aitken Spence
§ Nestle Lanka
§ Sampath Bank
The awards honour the corporate community for their efforts in promoting Corporate Social Responsibility (CSR) and evaluate its applicants on five categories before selecting the “Best Corporate Citizen. Leading up to the grand award, best practices in Community Relations, Employee relations, Customer relations, Economic Performance, and Environment will be rewarded with awards to the top three Corporate Citizens. Awards will also be given to the winners of each stakeholder category and to the Top Ten Best Corporate Citizens.
(Sunday Times, 2008)
2.1 Code of conduct
A statement and description of required behaviours, responsibilities, and actions expected of employees of an organization or of members of a professional body. A code of conduct usually focuses on ethical and socially responsible issues and applies to individuals, providing guidance on how to act in cases of doubt or confusion. In simple it’s a set of rules to guide behaviour and decisions. (B-Net Business Dictionary, 2008)
2.2 Stakeholders and Business responsibilities towards them
A company has responsibilities to a wide range of interested parties, people who have a ‘stake’ in what the company does. A company’s ‘stakeholders’ so defined include not only its customers, owners, workforce, suppliers and their families, but also those living near its sites, as well as special interest groups, and of course society as a whole, including society in its role as ‘steward’ of the environment.
(Times Newspapers Ltd and MBA Publishing Ltd, 2008)
In terms of understanding the objectives of a business or other organisation, there are two traditional views.
1. The Shareholder Concept
In the theory of accounting and finance, it is assumed that the objective of the business is to maximise the value of a company. Put simply, this means that the managers of a business should create as much wealth as possible for the shareholders. Given this objective, any financing or investment decision that is expected to improve the value of the shareholder’s stake in the business is acceptable. In short, the objective for managers running a business should be profit maximisation, both in the short and long-term.
2. The Stakeholder Concept
In recent years, a wider variety of goals have been suggested for a business. These include the traditional objective of profit maximisation (in other words – the shareholder concept has not been abandoned). However, they also include goals relating to earnings per share, total sales, numbers employed, measures of employee welfare, manager satisfaction, environmental protection and many others.
A major reason for increasing adoption of a Stakeholder Concept in setting business objectives is the recognition that businesses are affected by the “environment” in which they operate. Businesses come into regular contact with customers, suppliers, government agencies, families of employees, special interest groups. (Tutor2u, 2007)
Therefore stake holders can be categorized as internal and external.
Shareholders are important to the business, because they have a primary stake in the business. Organization’s responsibilities towards the stakeholders are: to provide professional management, fair returns on their investment, disclose relevant information, protect shareholders assets etc.
The organizations responsibility towards employees are improving working conditions, maintaining open and honest communications, welcoming suggestions/complaints, providing equal opportunity etc. Management plays a key role in balancing the multiple claims of stakeholders.
Therefore the responsibility of management involves maintaining healthy relationships among the stakeholders. The organizations responsibilities towards consumers include offering quality goods, providing prompt services, treating customers fairly etc. Good relations with suppliers will determine the profitability of the company.
The company must treat its suppliers with respect. Suppliers /creditors must be paid promptly. Companies must also follow ethical competitive practices. Finally, the responsibilities of the organization are, respecting human rights, improving workplace safety and economic well being etc. (ICMR Case studies, 2007)
2.3 Investors rights
As a shareholder in a company, you can enjoy certain rights:
§ To receive the share certificates, on allotment or transfer as the case may be, in due time.
§ To receive copies of the abridged Annual Report, the Balance Sheet and the P&L A/c and the Auditors’ Report.
§ To participate and vote in the general meeting, either in person or in proxy.
§ To receive dividends in due time once approved in General Meetings.
§ To receive corporate benefits such as rights, bonus, etc. once approved.
§ To apply to the Company Law Board (CLB) to call or direct the Annual General Meeting.
§ To inspect the minute books of the General Meetings and to receive copies thereof.
§ To proceed against the company by way of civil or criminal proceedings.
§ To apply for the company’s winding-up.
§ To receive the residual proceeds.
Group rights: Besides these rights you enjoy as an individual shareholder, you also enjoy the following rights as a group:
§ To requisition an extra-ordinary general meeting.
§ To demand a poll on any resolution.
§ To apply to CLB to investigate the company’s affairs.
§ To apply to CLB for relief in cases of oppression and/or mismanagement.
Debenture holder: As a debenture-holder, you have the right to:
§ Receive interest/redemption in due time.
§ Receive a copy of the trust deed on request.
§ Apply for the company’s winding up if it fails to pay its debt.
§ Approach the Debenture trustee with your grievance.
The above mentioned rights may not necessarily be absolute. For instance, the right to transfer securities is subject to the company’s right to refuse transfer according to the statutory provisions.
Your responsibilities: While you may be happy to learn of your rights as a stakeholder in the company that should not lead you to satisfaction; because you have also certain responsibilities:
To remain informed.
To be vigilant.
To participate and vote in general meetings.
To exercise your rights on your own or as a group.
(The Hindu Business Line, 2001)
2.4 Ethical and Moral dilemmas face by businesses
One of the defining features of an ethical conflict is that it involves being pulled between two or more objectives, values, or ideals which often draw strong emotional reactions. The competing objectives or values may both be ethical in nature, as in the conflict between loyalty to a friend and duty to report that friend’s unlawful behaviour. Alternately, one of the competing values may be ethical (e.g., the desire to help a person in need or in danger) while the other is pragmatic (e.g., financial prudence or self-protection). In either situation, a moral or ethical conflict more than other conflicts often has a strong emotional component. One of the challenges decision makers face in such situations is the need to integrate their emotional reactions to different choice options with their cognitive evaluations of the possible or expected outcomes of these options. Following this definition of an ethical decision, ethical or moral decisions do not simply constitute a specific content domain of decisions that parallels and complements other content domains such as financial decision making or recreational decision making(Weber, Blais, & Betz, 2002). Instead, ethical decisions can occur in any substantive content domain; putting it differently, many decisions across content domains include ethical aspects or considerations. The factors that contribute to whether a specific decision is being construed as an ethical issue or a health or financial issue are themselves an important topic of experiential investigation that have implications for the ethical training and education.
Morality can be defined as a system of judging acts in light of an ideal or a code of conduct. Moral judgments involve judgments about what somebody (either the decision maker or another person) should do in a certain situation. Haidt (2001) defines moral judgments as judgments about the actions or character of other people, using as a standard of comparison the moral prescriptions and ideals of one’s culture or subculture, which are frequently formalized in written or unwritten codes of conduct. Most scholars agree that moral or ethical decisions need to be intentional and in response to a sense of obligation that is shaped by an ideal. (Blasi, 1987)
Mainly there are four types of psychological processes when behaving morally.
- interpret the situation in terms of the actions possible, and the effects of these actions on the self and others;
- judge which course of action is morally right;
- give priority to what is morally right over other considerations;
- demonstrate the strength and skills to follow through on the intention to behave morally.
(L.K Trevino, 1992)
Here is a good example explaining above facts.
A woman called Shani works for a company that treats people simply as a means for making profits. Customers are appreciated and engaged solely for the purpose of adding to the bottom line. She has found it difficult to find other employment, and has a family to provide for – one of her highest values. One day Shani is pressured by her boss to increase her performance (“get more customers using any means possible”) or she will be terminated. The conflicting values for her are:
Providing for her family;
Providing an honest day’s work for an honest day’s pay;
Valuing people over profits. At this point she is clearly faced with a moral dilemma.
The dilemma was not quickly or easily resolved, but here is what Shani did;
§ She made a decision to never violate her second and third values. In her mind people always come before profits. She also wants to be known as a good employee with a strong work ethic who works hard and gets the job done. She made a conscious decision to do her best in fulfilling her bosses instructions (i.e. get more customers) without violating her value of people over profits. Her production improved as she worked harder and she knew she was contributing to the organization in ethical ways.
§ She also stepped up her job search. That day she came to the realization that the company’s values and hers did not mesh. She knew that she would have to change venues in order for her to be able to feel comfortable in her work while providing for her family. Today she does a similar job for a different company, and loves it. In her job search she made sure she asked important questions about how the company’s values would fit with her own. In her new company she is able to be productive, value the customer over company profits, and provide for her family.
2.5 Organisations encourage ethical behaviour
As an airline company directors and employees in Jet Airways should attempt to promote ethical behaviour and to encourage employees to report evidence of illegal or unethical behaviour to appropriate Company personnel. It is the policy of the Company to not allow retaliation against any employee who makes a good faith report about a possible violation of this Code.
Suspected violations of this Code may be reported to the Chairman of the Board or the Chairman of the Audit Committee. All reported violations will be appropriately investigated. When in doubt of the best course of action in a particular situation, employees are encouraged to talk promptly to their supervisor, managers or the Head of Human Resources. Employees are expected to fully cooperate in internal investigations of misconduct.
(Jet Airways Sri Lanka, 2006)
Patients, consumers, doctors and governments want to use medicines from companies that they trust. Therefore, ethics policies require all GSK employees to meet the highest standards of ethical and legal compliance in their work. Company has led efforts to create the first marketing code for the Sri Lanka Chamber of the Pharmaceutical Industry based on the IFPMA Code. These are some of the policies they conduct to encourage ethical behaviour;
- GSK’s 12,000 managers completed self-certification confirming that they comply with our Code of Conduct.
- All new sales and marketing staff in the US completed ethics training and over 9,000 existing staff received two hours of annual refresher training.
- Employees are encouraged to seek help and to report any concerns or suspected cases of misconduct. They can do this through their line management, our network of compliance officers, or through our confidential Integrity Help lines.
2.6 Rights and responsibilities of employers and employees
Employers and employees have responsibilities to each other where they should also expect their rights to be upheld. These rights and responsibilities relate to areas such as Health and Safety, the provision of Terms and Conditions of Employment, Equal Opportunities and the right to be paid a Minimum Wage. The Health and Safety at Work Acts set out responsibilities and rights for both employees and employers. Employees are expected to carry out their work in a way that has regard to the safety of others. Employers are expected to abide by a range of requirements governing such aspects as providing safe machinery and equipment, carrying out regular health and safety checks, ensuring the training of employees in health and safety issues, and carrying out a risk assessment to assess the dangers of particular work activities. There are also specific regulations about the way in which potentially harmful substances should be used and stored. There are a number of requirements about the minimum temperature at work, and other aspects of working conditions.
Employees are expected to receive the terms and conditions of their work setting out when their work commences, what their main duties are, who they are accountable to, rates of pay, and other entitlements.
Equal Opportunities legislation sets out that all employees should receive the same pay and conditions for carrying out the same or broadly similar work. There are also laws against sexual, racial and disability discrimination.
The Minimum Wage Act sets out the Minimum Wage that workers can expect to receive which today is more than a £5 an hour. The Minimum Wage is regularly reviewed and will increase over time. There is also European Union requirements governing the maximum number of hours that workers will be expected to work in a typical week which is currently set at 48 hours.
Employers and employees are expected to meet minimum legal requirements for such areas as Health and Safety at Work, and minimum standards and conditions related to hours, and the treatment of people in the workplace. Along with rights for employees there are corresponding responsibilities such as the expectation to work in a safe way and to have regard for the safety of work colleagues.
(Times Newspapers Ltd and MBA Publishing Ltd, 2008)
2.7 Ethical issues caused by information technology
Ethics and the Information Revolution, De George (2003) describes his approach to the ethical questions he will discuss. He locates the issues within a common and universal framework of ethical norms. Murder, stealing and other such acts are generally inconsistent with societal norms across societies despite their cultural differences. Within a society, norms exist for many practices that bear certain similarities to new and emerging practices made possible by information technologies. This suggests a two-step method. First, when evaluating a new practices such as monitoring e-mail, one can use analogical reasoning from similar practices and norms; for example, opening and reading private correspondence.
He applies his method of analysis to the general system of IT taken as the basis for the information society. Here he argues that core values of an information-centric society are truthfulness, accuracy, information sharing, and trust. While important in other types of society (agricultural, industrial), these values take on greater role in an information economy, in contrast to punctuality, for example, which is critical in an assembly-line industrial economy.
Ruth Rikowski (2006) pointed out that computers are changing the face of the work scene. For some people, their jobs are becoming redundant or they have to play quite different roles, and others are suffering increasing levels of stress from work pressures. Others are, obviously, reaping the benefits of having more rewarding jobs, and there is certainly more emphasis on knowledge, information and I.T. skills than ever before. However, this all clearly poses various ethical issues. Should those that lose their jobs be compensated? How can the pressure be eased on those that are suffering stress? Is it acceptable for computer programmers to be made redundant ‘on the spot’ etc? There are many ethical issues that need to be addressed here.
Clearly writing and spreading virus programs are unethical acts. They have very serious consequences, and cause systems to crash and organisations to cease operating for certain periods. One of the most concerning consequences of such actions is when viruses interrupt the smooth functioning of an organisation such as a hospital, which could in extreme cases even cause people to die. Logic bombs are also sometimes planted. There is obviously a lot of anti-virus software on the market now though that helps to deal with this ever-growing problem.
Many different computer crimes are committed, which clearly poses ethical questions for society. Various illegal acts are performed on computers, such as fraud and embezzlement. This includes, for example, using imaging and desktop publishing to create, copy or alter official documents and graphic images. There are also various ethical dilemmas, such as whether copying such files is as bad as stealing something.
So, this conflict might mean that companies do not, in reality, give enough consideration to the ethical issues in I.T., as the drive to create new products and upgrade products, thereby raising the profit margin, takes precedence over moral considerations. Some of the ethical issues in I.T. are being tackled more effectively though (although there is obviously always room for improvement). Great efforts are being made in regard to finding ways to deal with viruses, for example, and more and more attention is now being given to ergonomic and health issues.
3. Industrial relations
3.1 Trade unions
The field of industrial relations (also called labour relations) looks at the relationship between management and workers, particularly groups of workers represented by a union. Sri Lanka has approximately 1000 Trade Unions. Out of these about 20 have more than 100,000 members. Out of these 1000 Trade Unions, 750 are in Government Departments where labour laws do not apply. These workers come under the establishment code. Only 30 per cent of the country’s workforce is organized in Trade Unions. Here are some trade unions in Sri Lanka.
- All Ceylon United Motor Workers’ Union
- Ceylon Federation of Labour
- Ceylon Mercantile Union
- GCSU Sri Lanka
- United Corporations and Mercantile Union
3.2 Enterprise bargaining
Enterprise bargaining is an about introducing change in the workplace – with everyone sharing the benefits. It is an opportunity for an employer and his/her employees, either directly or through their union representatives, to undertake cooperative negotiations. Enterprise bargaining is a way to discuss how work is performed, conditions and productivity improvements that will benefit both employer and employees. This can foster a culture of change in the workplace which can be a valuable tool in the process of continuous improvement. It can assist in the creation of vital, responsive and flexible enterprises and improve productivity and efficiency.
3.3 Industrial disputes
Industrial dispute means any dispute or difference between anemployer and a workman or between employers and workmen orbetween workmen and workmen connected with the employment ornonemployment,orthetermsofemployment,orwiththeconditionsoflabour, or the termination of the services, or the reinstatement inservice, of any person, and for the purposes of this definition“workmen”includesatradeunionconsistingofworkmen. (BOI, 2008)
The Industrial Disputes Act (IDA) provides for the prevention, investigation and settlement of industrial disputes and for connected/incidental matters. The IDA also specifies the methods by which the Commissioner of Labour is empowered to help settle an industrial dispute. These methods are as follows.
- with reference to a Collective Agreement where such an agreement is in force between employers and workmen;
- Through conciliation at ‘conference’ either by the Commissioner himself or an authorized officer (usually attached to the Industrial Relations Branch in the Department of Labour);
- Through voluntary arbitration.
Where the parties to the dispute do not consent to reference of the dispute to an arbitrator, the Minister is empowered to refer the dispute for settlement by arbitration to an arbitrator or to a labour tribunal. The Minister can also refer any industrial dispute to an Industrial Court for settlement.
The ideal process would be for a time span to be fixed between the making of a complaint to the Labour Department and a reference to arbitration, tying up the processes of arbitration and conciliation so that the whole dispute could be settled within a reasonable length of time instead of the parties having to wait for years in order to see an end to the dispute. It may also be worth looking at the possibility of establishing an Appeal Court to go into positions of dissatisfied parties within a short period of the arbitrators award so that settlement could be reached speedily.
(Globalization and Industrial Relations in Sri Lanka, 2000)
3.4 Awards systems
Sri Lanka Institute of Marketing (SLIM) carries out two major award systems in Sri Lanka.
Ø Peoples Awards
This includes people from all walks of life advocating their favourite personality, brand, company, advertisement, film, teledrama, song etc. Men and women throughout the island, excluding the North and the East, take part enthusiastically. To ensure that the results represent the diverse population of Sri Lanka, the interviews are carried out in all the provinces excluding North and East. SLIM Nielsen Peoples Awards is based on a sample survey conducted by The Nielsen Company encompassing a sample of 5,050, equally split between males and females, and between the ages of 16-65 years living in both urban and rural areas. The survey will go on for a period of 5 consecutive months with a random sample of 1,010 per month conducted through face to face interviews at an all island level (excluding north and East). The Nielsen Company assures quality and clarity of answers given by the respondents. To ensure accurate feedback, its stringent quality control measures adhere to the WatchBuilder standards, a process, globally unique to the Nielsen Company.
Ø Brand Excellence
The SLIM Brand Excellence Awards is a celebration of brand excellence at national level and rewards the outstanding efforts of outstanding marketers. Through this event, SLIM endeavours to not only encourage best practices in branding, but also to raise local brands to global standards, to enhance the image of marketing in the country and that of SLIM in the region. This event translates as industry recognition of the motivation, dedication and hard work that great marketers have demonstrated in making brand champions. Each year panel of judges evaluates the contenders for each category of award, looking for those elusive qualities which elevate a brand above the sea of nondescript products. For the Brand Excellence Awards to be truly successful there must be industry-wide, representative participation which will ensure healthy competition. (SLIM, 2008)
4. Sri Lanka and international business
4.1 Trends in Sri Lankan trade
Sri Lanka’s exports grew 14.7 percent helped by strong prices for tea, while apparel exports grew by a slow 5.3 percent where the trade deficit expanded 92 percent on higher oil and capital goods imports. The Central Bank said April export earnings increased 14.7 percent to 610 million US dollars with agricultural and industrial exports contributing 59 percent and 37 percent. According to official data, agriculture exports grew 46.5 percent in April 2008 compared with a year ago on the back of increased export prices of tea. The average export price of tea was four US dollars a kilogram, the highest recorded up to then. Industrial exports grew by 6.9 percent supported by increased exports of garments, food, beverages, tobacco, rubber products, petroleum products and ceramics, official data showed.
Cumulative exports during January to April 2008 grew 11.3 percent to 2,488 million US dollars.
Expenditure on imports in April increased 37 percent to 1,269 million US dollars. The Central Bank said import expenses on consumer goods such as food expanded significantly in April 2008 owing to increased expenditure on rice and sugar. Import expenditure on intermediate goods which increased 38 percent from a year ago contributed 64 percent to the increase in import expenditure in April 2008. The Central Bank said import expenditure increased owing to high crude oil and fertilizer prices. Imports of investment goods such as transport equipment, machinery and building materials have also recorded a growth of 33.5 percent.
The cumulative expenditure of imports during the first four months of 2008 amounted to US dollars 4,533 million, an increase of 37.4 percent from a year ago.
The Central Bank said higher oil and capital goods imports have widened the trade balance from 394 million US dollars in April 2007 to 659 million US dollars in April 2008.
The overall balance of payments recorded a surplus of 320 million US dollars from January to April 2008 increasing the gross official reserves to 3,383.8 million US dollars by endApril2008, which is sufficient to finance around 3.3 months of imports.
(LBO, June 16,2008)
4.2 Trading partners
Major trading partners;
§ Export (% of total, customs basis): US 28.2%, UK 11.5%, India 9.0%, Germany 4.1%.
Export Commodities: Textiles & garments, tea, diamonds & jewellery, petroleum.
§ Import (% of total, customs basis): India 18.5%, China 10.5%, Singapore 8.7%, Hong Kong 4.2%.
Import Commodities: Mineral products, textiles, machinery & transport equipment, base metals.
Ø United Kingdom
Trade and Investment with the UK
UK imports from Sri Lanka have consistently exceeded UK exports to Sri Lanka. Exports have declined during the period 2001 to 2004 from £142.4 million to £138.8 million and imports have steadily increased from £400.8 million to £466.9 million during the period 2001 to 2004. The UK’s net investment in Sri Lanka has averaged some £50 million per annum over the last 20 years. The UK is the largest European investor in Sri Lanka and second overall in terms of projects. Further progress in the peace process would lead to more opportunities for British companies in Sri Lanka.
Cultural Relations with the UK
The British Council has English Teaching Centres in Colombo (one of the fastest growing in the network with well over 3000 students) and Kandy, and is involved in English language projects throughout the island. It also runs busy libraries at the teaching centres, and maintains a lively arts programme.
The Council runs an education information service that offers detailed information on all aspects of the British education system, and administers exams in Colombo and Kandy. In Sri Lanka the Council also works closely with the Ministry of Education on its education reform agenda, particularly at Primary level.
The Trade and Investment Framework Agreement (TIFA), signed by the USA and Sri Lanka on 25th July 2002 in Washington DC, provides an ideal platform for the two Governments to maintain a closer dialogue on a number of areas / fields that are of mutual interest to them.
On the Sri Lankan side:
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