Business Ethics and Corporate Social Responsibility - Essay Example

Contents a) Critical assessment of ‘Business Ethics’ and ‘Corporate Social Responsibility’ 2 b) Business Ethics taken up by the London Stock Exchange organisation 4 c) The impact of Corporate Social Responsibility activities of LSE and NYSE on the key stakeholders 9 References 13 a) Critical assessment of ‘Business Ethics’ and ‘Corporate Social Responsibility’ There are many similarities between these two terms and often they are used interchangeably as well. However, Corporate Social Responsibility (CSR) and business ethics are two business features which have distinct characteristics, some of which are similar and some of which are mutually exclusive in nature. Three similarities Business ethics is based on moral behaviour and aims at conducting business activities in a just and fair manner. Corporate Social Responsibility (CSR) refers to the duty or obligation of a company towards the people, societies, communities and environment that may be affected by the activities of the business (Fafaliou and Donaldson, 2003). For example, reducing the environmental impacts of the operations of a business is one common aim of the business, especially in cases of companies whose operations affect the environment in a hazardous way like the automobile companies. In short, both terms are based on the social concepts of morality and responsibility. Business ethics involve the application of moral and ethical values in a business and CSR is an extended from of business ethics in which these values are expressed and embedded in the organization through programmes and policies involving the stakeholder groups. CSR involves conducting ethical activities and business ethics involves conducting activities ethically. So, the underlying essence of the two remains similar. Both business ethics and CSR are necessary for creating sustainability and competitive advantage across all types of industries and across all geographical locations (Ryan and Gasparski, 2012). Three differences Corporate Social Responsibility (CSR) is a term related to the social responsibilities that a company has towards the community in which it operates. In contrast, business ethics is based on the factor of conscience. Business ethics is related to morality and differentiating between right and wrong and conducting the business operations by focusing on the rights and avoiding the wrongs. Using ethics in business implies that the company is obliged to set business policies, rules and conduct its activities in a just and right manner so that the activities of the company lead to the good of every entity which is directly and indirectly related to the business (Kitson and Campbell, 2006). These entities include all the internal and external stakeholder groups of the company and the society as a whole. Business ethics, in the modern business environment has emerged as a preliminary necessity that should be taken up by every company, irrespective of the industry or its level of operation in order to conduct its business in a legally and socially complaint manner. Corporate Social Responsibility (CSR), on the other hand, is the additional responsibilities that a business should take up in order to create sustainability and a positive brand image for itself. Corporate Social Responsibility (CSR) is seen as a way of showing that a company is willing to take up the responsibility of the society in which they are functioning and is also giving back something to create value for the society in return of the resources that it is sourcing from the external community (Donaldson, 2009). Business ethics is a necessary condition for a business to remain legally complaint. Though, it is not legally mandatory for a company to take up Corporate Social Responsibility (CSR), yet in the modern global business scenario, all types of businesses have to invest in some type of Corporate Social Responsibility (CSR) activities in order to ensure sustainability, success and reputation. b) Business Ethics taken up by the London Stock Exchange organisation In this section we will evaluate the ways in which the LSE has focused on delivering value to its stakeholders through the implementation of the business ethics principles in different dimensions of the organization. As per the first difference identified between CSR and business ethics, CSR is based on responsibility and business ethics is based on morality. The organization has been moral in its business approaches including the core philosophies and the ancillary business activities. For this purpose we have to first study how far the exchange has been successful in embedding these principles in its activities and philosophy and the future plans for the same. The London Stock Exchange (LSE) is one of the largest stock exchanges in the world. It is located in London in the United Kingdom. As estimated in 2012, the London Stock Exchange (LSE) has a market capitalization of USD 3.26 trillions. The FTSE 100 is a part of this stock exchange and has been an active entity in developing a wide range of sustainability related information and values. Trust and integrity lies at the core of all the operations, policies and management of the London Stock Exchange Group. The group has operated as per the banner “My word is my bond” so as to establish itself as a globally renowned, reliable, trusted and independent entity. The London Stock Exchange Group has recognised the critical role that it plays in the international markets and as such focuses on not only the performance and commercial objectives but also the social, environmental and governance (SEG) principles and responsibilities for the same. The approach to the business ethics principles of the organization has been greatly enhanced and developed over the years to keep them in line with the growth of the business on an accelerating inherent scale of operations. These activities have been taken up to make the organization operate in a strictly compliant and value adding manner so that the strategic role of ethical compliance and social responsibility can be suitably acknowledged. The group ensures that it established itself as a corporate citizen in all the communities and societies in which the holding company and the subsidiaries function. The organization aims to create a dependable and satisfied base of internal stakeholders and puts emphasis on developing trust among the employee groups and other business partners. Ethicality within the business is maintained through the development of stringent regulations and policies which all the companies willing to list their stocks on this exchange have to mandatorily comply with. In all the countries that this group operates, the management aims to create sustainable growth through the delivery of world class services and through the effective management of human resources (Hammer and Champny, 2001). The business ethics principles of the group also include high commitment towards the adherence to the international and local regulations and requirements of functioning in the financial sector. As an eminent technology and knowledge organization, the London Stock Exchange relies excessively on the commitment, talent and skills of the employee groups and thus supports and develops the critical thinking and creativity of the employees through continuous mentoring, guidance and training and development. This has been a critical success factor for the organization and played an active role in creating long term success and sustainability for the organization (Klein, 2000). The economic function of the group for providing efficient and stable markets has been a major consideration for the group while developing the business ethics principles, policies and guidelines. These principles are aimed at making economic profits while at the same time giving back to the society through wealth creation and through additional beneficial factors like the creation of job opportunities. This is particularly significant at a time when funding has emerged as an important driver of economic growth (Ryan and Gasparski, 2012). The ability of the group to promote just and fair practices through properly formulated ethical principles and corporate governance practices can be recognized as an important corporate strategy, especially in a global business background wherein the sustainability and corporate governance principles and mechanisms of every company is under high levels of scrutiny and inspection. The vision of London Stock Exchange Group has been to create an ethical and transparent capital market in the country through the involvement and inclusion of ethically compliant and socially responsible companies in the trading environment of this sector. Also, the organization has strived to attract varied and dynamic companies and investors from the emerging markets into the capital market of London in which they can invest in a beneficial position due to the respected mechanisms and regimes of corporate governance in the market,. The ethical practices of the London Stock Exchange has acted as an important barrier for the corporate fraud and bribery activities, thus ensuring the investor groups that there is no place for any unethical and irresponsible company in the capital market of the United Kingdom (Fafaliou and Donaldson, 2003). The stringent regulations imposed by the group on all the companies which are willing to list their shares on the London Stock Exchange has made it clear that they have to embrace the defined high standards of ethicality and transparency in their reporting principles as well as business activities in order to access inclusion and continue being a constituent of this exchange. The launch of the Corporate Responsibility Exchange (CRE) services by the LSE in 2004 is seen as major step taken by the LSE to integrate corporate responsibility practices and adherence in not only the exchange but also in the reporting procedures of all the companies listed in this exchange. This service provides the fund managers, analysts and the research agencies with online support mechanisms and tools that will protect the institutional investors’’ interests by providing accurate and up to date information about the companies whose stocks are listed ion this stock exchange. This has helped to improve the ethical approach of the exchange by ensuring more transparency between the companies and the clients and better compliance of the ethical and regulatory standards (Manifest, 2004). Since the corporate values of collaboration, integrity and innovation are clearly defined in the code of conduct of the group, therefore, it ensures that the entities functioning in direct or indirect relation to this organizing have to focus on adhering to ethical, environmental, governmental and social functionalities (Donaldson, 2001). The whistle blowing arrangements set up in the organization helps the management to monitor the unethical activities and take strict actions against these. Since, the stakeholders are appropriately informed about the code of conduct and ethical principles of the organization on account of transparency, therefore, these mechanisms have helped to create a responsible and reputed image for the London Stock Exchange Group in the minds of all types of stakeholders including the employees, business partners, regulators, shareholders, government, society, communities, clients and inclusive companies. Also, since the organization functions in an apolitical nature, it also helps it to keep up a clear image when it comes to political issues like corporate lobbying practices (Flannery, 2000). The initiatives of implementing corporate values including the business ethics and CSR perspectives of the London Stock Exchange Group (LSEG) can be further supported by the study of an article published in The Guardian in 2014. This article includes a publication of the steps taken up by the LSEG to collaborate with a private trading floor of Nigeria, GTI Capital Group with the aim of integrating the global financial markets and the Nigerian capital market (Olajide, 2014). The long term objective of this initiative on the part of the LSEG is to boost the capital formation that is necessary to unlock the ample investment opportunities available in the resource rich country of Nigeria. The collaborative venture can be recognised as a prominent step taken by LSEG to create value for the underdeveloped economy of Nigeria and seems to be completely in line with the ethical and responsible philosophy followed by the organization. This initiative is a profound example to solidify the statement that the LSEG is a globally leading organization with respect to promoting ethicality and social responsibility in the business activities processes and practices. Other organizations operating in the same type of industry like the New York Stock Exchange (NYSE) also focus on developing proper business ethics and CSR functions. The New York Stock Exchange follows an established code of conduct in its business which acts as the main referencing guideline for promoting ethical practices within the organization (Donaldson, 2009). The business ethics principles are embedded through the establishment of suitable measures to reduce conflicts of interest between all types of stakeholder groups, ensuring fair dealing and confidentiality of the clients and employees, the proper use and protection of the assets of the listed companies, ensuring compliance with the global and local laws of trading in the capital markets, encouraging the immediate reporting and resolution of unethical practices or violation of the code of conduct and by assuring that only legitimate interests of the stakeholders are taken into consideration by the organization (New York Stock Exchange, 2014). c) The impact of Corporate Social Responsibility activities of LSE and NYSE on the key stakeholders In this section, the CSR activities of the LSE will be evaluated with respect to different publications regarding the same by referring to the core differences identified between CSR and business ethics in the first section of this paper. The London Stock Exchange Group (LSEG) is a prominent organization located in one of the most efficient and competitive global financial centres of the world. This creates a privileged position for the group to promote ethicality, sustainability and corporate social responsibility. For the creation of a pre eminent market that helps to foster sustainable growth and value generation for all the stakeholder groups, the organization has started embedding four Corporate Social Responsibility pillars within its core beliefs and values (Figure 1). Figure 1: The pillars of CSR in the London Stock Exchange Group. (Source: London Stock Exchange Group, 2014) The Markets: The London Stock Exchange Group aims to provide efficient, low cost, transparent, open access and resilient capital and financial markets that support economic growth through the creation of job opportunities and wealth creation for all the stakeholder groups and communities. The Services: The London Stock Exchange Group provides services and functionalities that foster and encourage the corporate entities to comply with the disclosure requirements in a properly monitored and efficient manner, enables the investors to take proper investment decisions by analyzing the situations of the market and supports the market participants and entities to evaluate and manage risks and makes it possible to ensure more efficient and open access to the markets for the intermediaries involved in this sector. The People: The organization also recognizes and embraces the advantages of creating and managing a global and diverse employee community. As such, it promotes the vales of partnership, cooperation, integrity, excellence and innovation in order to fulfil its long term objectives and global ambitions. The Communities: The organization has also established business ethics policies and principles that aim to benefit the global communities. The London Stock Exchange Group focuses on engaging with the governments and inter-governmental organizations as well as the international regulatory institutions so as to promote the Environmental, Social and Governmental (ESG) sustainability practices and disclosure of the companies which are a part of this group. As per a report by the CSR Ukraine Organization prepared and published in 2014, the LSE has partnered with the United Nations in order to focus on the project of developing sustainable stock exchanges. This initiative of the stock exchange seems to be an advancement in the way of extending its social responsibility initiatives on a globalized platform. The Sustainable Stock Exchange Initiative taken up by the United Nations is an important project that is likely to bring about major modifications in the way the stock exchanges across the world focus towards adopting sustainable business s practices. The participation of the LSE in this initiative is a proof of the seriousness of the exchange to conduct the business in an environmentally, socially and communally responsible manner (CSR Ukraine Organization, 2014). From the above analysis on impact of CSR initiatives on stakeholders of the stock exchanges, it can be said that both LSE and NYSE have taken up philanthropic activities as a part of their corporate philosophy and sustainability strategies. The consideration of these organizations regarding the weak global economies and social needs in different geographical locations of the world have made it possible for these stock exchanges to create more value and reputation through their ethical principles and responsible behaviours (London Stock Exchange Plc., 2014). Also, since these exchanges seek to understand the requirements and needs of the stakeholders as well as the impact of their business operations on the societies and environment, therefore, their responsible behaviours have transformed their market presence into valuable opportunities for all the stakeholder groups and other entities related with these entities. References CSR Ukraine Organization. 2014. London Stock Exchange Partners with United Nations Sustainable Stock Exchanges Initiative. [Online]. Available at http://csr-ukraine.org/en/news/london-stock-exchange-partners-with-united-nations-sustainable-stock-exchanges-initiative/. [Accessed 16 January 2015]. Donaldson, J., 2001. Multinational enterprises, employment relations and ethics. Employee Relations. Vol. 23(6), pp. 627-641. Donaldson, J., 2009. Codes, stakeholders and business philosophy. International Journal of Value-Based Management, Vol. 12(2), pp. 241-256. Fafaliou, I. & Donaldson, J. 2003. 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[Accessed 16 January 2015]. Manifest. 2004. London Stock Exchange: Corporate Responsibility Exchange launched. [Online]. Available at http://archive.manifest.co.uk/manifest-i/2004/0409September/040909LSE.htm. [Accessed 16 January 2015]. New York Stock Exchange. 2014. Code of business conduct and ethics. [Online] Available at http://nysemanual.nyse.com/lcm/Help/mapContent.asp?sec=lcm-sections&title=sx-ruling-nyse-policymanual_303A.10&id=chp_1_4_3_11 [Accessed 16 January 2015]. Olajide, B. 2014. London Stock Exchange, GTI Capital to cooperate on market development. [Online]. Available at http://www.ngrguardiannews.com/business/capital-market/189687-london-stock-exchange-gti-capital-to-cooperate-on-market-development. [Accessed 16 January 2015]. Ryan, L.V. & Gasparski, W. W. 2012. Business focus on ethics. London: Transaction Press. Read More