DRAFT TRAINING MANUAL

FOR
GENERAL ENTREPRENEURSHIP COURSES IN
UNIVERSITIES

COURSE 2: VENTURE CREATION AND GROWTH

MODULE 6: ETHICS AND SOCIAL RESPONSIBILITY

Editors:
Prof .Murtala S. Sagagi
Prof. Sarah Anyanwu
Dr. Sola Aliu &
Dr. Oluremi Abimbola

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 MODULE 6: ETHICS AND SOCIAL RESPONSIBILITY

Learning Outcomes

Upon the completion of this module, the learner would have:

 understood the concepts of business ethics and social responsibility;

 learnt the ethical principles for entrepreneurs;

 understood the importance of ethics in business;

 discussed the application of the above concepts to the operations and success of

ventures; and

 discussed social responsibility among business organizations in Nigeria.

Content

a. The concepts of business ethics and social responsibility.

b. Ethical principles for entrepreneurs.

c. Importance of ethics in business.

d. Application of business ethics and social responsibility to the operations and success

of ventures.

e. Social responsibility among business organizations in Nigeria.

Concepts of Business Ethics and Social Responsibility

Ethics, in the simplest term, involves learning what is right or wrong. When this word

is applied to the world of business it is called business ethics. Simply put, business ethics

involves knowing what is right or wrong in a business environment and doing what is right

with regard to effects of products or services and in relationships with stakeholders (Gebler,

2012).

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 Business ethics is the applied ethics discipline that addresses the moral features of

commercial activity. According to Wikipedia (2012a), business ethics otherwise referred to

as corporate ethics represent a form of applied ethics or professional ethics that examines

ethical problems that arise in a business environment. It applies to all aspects of business

conduct. The range and quality of business ethical issues reflect the interactions of profit –

maximizing behaviour with non-economic concerns. Business ethics and the resulting

behaviour are in state of constant evolution. It is a form of applied ethics that examines just

rules and principles within a commercial context, the various moral or ethical problems that

can arise in a business setting and any special duties or obligations that apply to persons who

are engaged in commerce. Generally speaking, business ethics is a normative discipline

whereby particular ethical standards are advocated and then applied (Tabije, 2012).

On the other hand, social responsibility is an aspect of business ethics concerned with

the need for business to try and serve their local community and help its employees lead

better life. Social responsibility requires that the entrepreneur looks beyond making profits

alone but pays attention also to how to relate with the host community of his venture and his

employees in a way that promotes good will. This may take the form of sinking water

borehole within the company’s premises and extending the taps outside the walls of the

company so that members of the community can source their drinking water there from.

According to Uadiale and Fagbemi (2011), corporate social responsibility (CSR) is a

strategy for demonstrating good faith, social legitimacy, and a commitment that goes beyond

the financial bottom line. This definition appears to be further amplified by Yusuf (2012) in

his description of the concept of CSR. According to him, CSR is a form of self-regulation,

conscious attempts and self-efforts undertaken by organizations for self preservation and

enhancement of their operations. CSR, according to him, is usually integrated into a business

model for an organization to be able to live in harmony with its operating environment. Yusuf

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further explained that CSR policy functions as a built-in, self-regulating mechanism for a

business entity to monitor and ensure its adherence to laws, ethical standards, and norms and

nuances of its environment. CSR when proactively undertaken promotes the public interest

by encouraging community growth and development, and by voluntarily eliminating

practices that harm the public sphere, regardless of legality. It is the deliberate inclusion of

public interest into corporate decision-making and the honouring of a triple bottom line

known as People, Planet and Profit (Yusuf, 2012).

In a nutshell, social responsibility otherwise referred to as corporate social

responsibility (CSR) is a mode of ethics that implores the entrepreneur to act in a way to

benefit society (Pairier, 2012). It is a subcategory of business ethics. Entrepreneurs who

adhere to the principles of social responsibility make business related decisions based on the

principle that the best decision is the one that will do the most for the community hosting

their ventures and the society at large even if that means sacrificing their own personal wants

and/or needs. The goal of CSR is to embrace responsibility for the company’s actions and

encourage a positive impact through its activities on the environment, consumers, employees,

communities, stakeholders, and all other members of the public sphere who may also be

considered as stakeholders (Wikipedia, 2012b).

Features of Business Ethics

The following are the features of business ethics as identified by Akrani (2011):

1. Code of conduct: Business ethics is a code of conduct. It tells what to do and what not

to do for the welfare of the society.

2. Based on moral and social values: Business ethics is based on moral and social

values. It contains moral and social principles (rules) for doing business. This includes

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 self-control, consumer protection and welfare, service to society and fair treatment to

social groups amongst others.

3. Gives protection to social groups: Business ethics give protection to different social

groups such as consumers, employees, small businessmen, government, shareholders,

creditors, etc.

4. Provides basic framework: Business ethics provide a basic framework for doing

business. It gives the socio-cultural, economic, legal and other limits of business.

Business must be conducted within these limits.

5. Voluntary: Business ethics must be voluntary. The businessmen must accept business

ethics on their own. Business ethics must be like self-discipline. It must not be enforced

by law.

6. Requires education and guidance: Businessmen must be given proper education and

guidance before introducing business ethics. The businessmen must be motivated to use

business ethics. They must be informed about the advantages of using business ethics.

Trade Associations and Chambers of Commerce must also play an active role in this

matter.

7. Relative Term: Business ethics is a relative term. That is, it changes from one

business to another. It also changes from one country to another. What is considered as

good in one country may be taboo in another country.

The Need for Business Ethics

The points below discuss the need for ethics in business:

1. Stop business malpractices: Some businessmen engage in business malpractices by

indulging in unfair trade practices like black-marketing, artificial high pricing,

adulteration, cheating in weights and measures, selling of duplicate and harmful

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 products, hoarding, etc. These business malpractices are harmful to the consumers.

Business ethics help to stop these business malpractices.

2. Improve customers' confidence: Business ethics are needed to improve the customers'

confidence about the quality, quantity, price, etc. of the products. The customers have

more trust and confidence in the businessmen who follow ethical rules.

3. Survival of business: Business ethics are needed for the survival of business. The

businessmen who do not follow it will have short-term success, but they will fail in

the long run when discovered by the customers.

4. Protecting employees and shareholders: Business ethics are required to protect the

interest of employees, shareholders, competitors, dealers, suppliers, etc. It protects

them from exploitation through unfair trade practices.

5. Develops good relations: Business ethics are important to develop good and friendly

relations between business and society.

6. Creates good image: Business ethics create a good image for the business and

businessmen. If the businessmen follow all ethical rules, then they will be fully

accepted and not criticised by the society. The society will always support those

businessmen who follow this necessary code of conduct.

7. Smooth functioning: If the business follows all the business ethics, then there will be

absence of disruption in the relationship among employees, shareholders, consumers,

dealers and suppliers. This will result in smooth functioning of the business. So, the

business will grow, expand and diversify easily and quickly. It will have more sales

and more profits.

8. Consumer satisfaction: Today, the consumer is the king of the market. Any business

simply cannot survive without the consumers. Therefore, the main aim or objective of

business is consumer satisfaction. If the consumer is not satisfied, then there will be

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 no sales and thus no profits too. Consumer will be satisfied only if the business

follows all the business ethics.

9. Importance of labour: Labour, i.e. employees or workers play a very crucial role in

the success of a business. Therefore, business must use business ethics while dealing

with the employees. The business must give them proper wages and salaries and

provide them with better working conditions. The employees must also be given

proper welfare facilities.

10. Healthy competition: The business must use business ethics while dealing with the

competitors. They must have healthy competition with the competitors. They must not

do cut-throat competition. Similarly, they must give equal opportunities to small-scale

business.

Ethical Principles for Entrepreneurs

Ethical Principles are ethical values translated into active language establishing

standards or rules describing the kind of behavior on ethical person should and should not

engage in (Josephson Institute, 2010). The following principle represents the kind of

behaviours expected from every ethical entrepreneur (business executive) as presented by

Josephson Institute (2010).

1. Honesty

The virtues of honesty and truthfulness are the hallmark of ethical executives. Such

entrepreneurs do not deliberately mislead or deceive others by misrepresentations,

over-statements, partial truths, selective omissions, or any other means.

2. Integrity

In a nutshell, ethical entrepreneurs are principled, honourable and upright. They

courageously fight for their beliefs. They exhibit personal integrity and the courage of

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 their convictions by doing what they consider to be right even in the face of pressure

to do otherwise.

3. Promise-keeping and trustworthiness

Ethical entrepreneurs make a very reasonable effort to fulfill the letter and spirit of

their promises and commitments. They are trustworthy. They call a spade by its name.

They do not interpret agreements in an unreasonably technical or legalistic manner as

a means of rationalizing non-compliance, or creating justifications for escaping their

commitments.

4. Loyalty

Ethical entrepreneurs are ever loyal to persons in their business organization and the

organization they are working for. They demonstrate friendship in adversity, and

support and devotion to duty. They do not divulge confidential information no matter

what they personally stand to gain by so doing. Such executives ensure they do not

compromise their right to independent professional judgment by guarding against

undue influences and conflict of interest. They cannot accept another employment

without providing reasonable notice to their former employer. They will ever refuse to

seek cheap popularity with their new organization through castigation of their former

employers or engaging in any activities that take undue advantage of their previous

positions.

5. Fairness

Ethical entrepreneurs are fair, just, and treat individuals equally. They tolerate and

accept diversity, are willing to admit they are wrong and, where appropriate, are to

change their positions and beliefs. They do not exercise power arbitrarily, and neither

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 use overreaching nor indecent means to gain or maintain any advantage. They do not

take undue advantage of another’s mistakes or difficulties.

6. Concern for Others

Ethical entrepreneurs strive to achieve their business objectives in a manner that

causes the least harm and t he greatest positive good. They treat others the way they

would like to be treated. They are caring compassionate, benevolent and kind.

7. Respect for Others

One of the traits of ethical entrepreneurs is respect for others. They show great respect

for the human dignity, autonomy, privacy, rights and interests of all stakeholders in

their decisions. They are imbued with the sense of courtesy. They treat all persons

with equal respect and dignity irrespective of gender, race, socio -economic status and

race.

8. Law abiding

Ethical entrepreneurs meticulously abide by laws, rules and regulations guiding their

business activities.

9. Commitment to Excellence

Ethical entrepreneurs are sticklers to excellence. In the performance of their duties

they are informed and prepared and always striving to increase their proficiency in all

areas of responsibility.

10. Leadership

Ethical entrepreneurs appreciate the responsibilities and opportunities of their position

of leadership. In keeping with this they strive to be positive role models by their own

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 conduct and by helping to create an environment in which principled reasoning and

ethical decision making are highly prized.

11. Reputation and morale

Ethical entrepreneurs appreciate the need to maintain their organizations’ good

reputation while at the same time building the morale of their employees. They do

these by engaging in no conduct that might undermine respect and taking whatever

actions are necessary to correct or prevent inappropriate conduct of others.

12. Accountability

Ethical entrepreneurs are willing to be held accountable for the ethical quality of their

decisions and omissions to themselves, their colleagues, their companies, and their

communities.

Importance of Ethics in Business

The importance of ethics in business cannot be overemphasized. The importance are

as follows:

1. Provision of moral compass

During times of fundamental change, values that were previously taken for granted

tend to be strongly questioned. Many of such values are no longer adhered to. Leaders

and staff at such periods are left with no clear moral compass to guide them through

complex dilemmas about what is right or wrong in the business environment. It is at

such moments of crises and confusion that the beauty of business ethics manifests

since the ethics provide them with the moral compass to navigate the troubled times.

2. Ethics implicitly regulate area and details of behaviour that lie beyond

governmental control.

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 This is necessary because much as governments use laws and regulations to point

business behaviour in what they perceive to be beneficial directions, not all areas and

details of business lie within such controls. For example, governments may establish

minimum wage but how much a worker is paid beyond the minimum wage is

expected to be addressed by business ethics.

3. To meet stakeholder’s expectation

Stakeholders have the right to expect a business to be ethical. If business has no

ethical obligation, other institutions could make the same claim which would be

counterproductive to the corporation (Duska, 2007).

4. Definition of the rights and duties between a company and significant others.
Business ethics help to define the rights and duties between a company and its

employees, suppliers, customers and neighbours. They also help to define the

company’s fiduciary responsibility to its shareholders (where applicable) as well as

how companies should relate to other companies or business ventures.

5. Enhancement of business performance

Studies have shown that good CSR correlates positively with good business

performance in the long run. It must be noted that CSR is an aspect of business ethics

hence this positive correlation is seen as one between business ethics and

performance.

6. Others

Other values accruing firm business ethics in general and CSR in particular include

the following identified by Akinjide – Balogun (2001).

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  Building long – term shareholder value, corporate financial stability and

sustainability.

 Consumer and customer approval and loyalty;

 Promoting self-regulation and deterring government regulatory intervention; and

 Enhancing corporate reputation.

Application of Business Ethics and Social Responsibilities to the Operations and Success

of Ventures.

In general, business ethics and social responsibility find their respective application in

day –to- day operations of ventures. With regard to business ethics, the need arises daily for

the entrepreneur to make specific judgments about what is right or wrong; what ought to be

done and what ought not to be done. These decisions call for action based on ethical

principles of the venture as well as those of the entrepreneur involved. Sometimes, the

scenario may not just be as simple as deciding on what is right or wrong. It could take such

complexity as in the case of deciding on situations where there may be conflict between the

interests of the employee, the commercial enterprise, and society as a whole. In this case,

serving the interest of one party may be detrimental to the other(s). For example, the

entrepreneur’s decision may be good for the venture and probably the employees but against

the welfare of the larger society and vice versa. It is at such points as above that business

ethics are fallen back on to harmonize and reconcile conflicting interests.

Furthermore, ethical issues can arise when business ventures have to generate and

succeed in an environment with conflicting legal or cultural standards. For example an

entrepreneur may be operating a business venture in a part of the country where child labour

is an acceptable practice as opposed to the situation in the entrepreneur’s home state or region

where such practice is abhorred. The question in this case may be which of the two divergent

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cultures the entrepreneur would subscribe to for the business to be successful. This again is a

matter to be resolved with predetermined business ethics.

In the same token as above, social responsibility may be applied by the entrepreneur

to successfully operate his /her business venture. A number of approaches are available for

the entrepreneur who wishes to operate his/her venture to apply CSR. These include

philanthropy, incorporating the CSR strategy directly into the business strategy of his/her

organization, and creating shared value (CSV).

The philanthropy approach involves monetary donations and aid given to local

organizations and impoverished communities. However, this seems to breed dependence

hence its modification often times to community development helps in which the donor

partners with the host community to plan, implement, monitor and evaluate projects capable

of developing the community’s human resources.

Incorporating the CSR into the company’s business strategy may take the form of

keeping a policy that makes the business venture source certain cadres of its manpower from

the host community. This creates a commensally relationship between the business venture

and the host community.

The last but not the least approach is the CSV. The shared value model is based on the

idea that corporate success and social welfare are interdependent. This approach appreciates

the need to invest in developing local manpower through scholarship schemes with a view to

creating an informed citizenry capable of enthroning good governance needed for the

successful operation of their ventures.

Social Responsibility among Business Organizations in Nigeria

CSR among business organizations in Nigeria can be assessed across all cadres of

business in Nigeria ranging from the small, micro, and medium to large business enterprises.

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However for the purpose of this discourse, let us focus on the large-scale business enterprises.

Within this are the companies operating in the Nigerian oil sector, the banking sector, and the

manufacturing sector.

The most active sector in Nigeria is the oil industry. Over 70 per cent of Nigeria’s

revenue comes from this sector. The sector has such big players as Shell, Chevron –Texaco,

Exxon Mobil, Total Elf, among others. The age long struggle by the Niger Delta people

which produced scores of militant groups agitating for social responsibility from the oil

giants operating in their areas speaks volume of their CSR failure.

The above, however, does not suggest that the oil companies are doing nothing

regarding CSR. The truth however is that a few things they are currently doing do not yet add

up to what they could have done were they operating in their parent countries. A few

instances of CSR from the oil sector have been documented.

Tuodolo (2009) observed that Shell. ENI, EXXonMobil, Chevron Texaco, Total

FinaEIF and other oil transnational corporations (TNCs) are contributing to economic growth

and development through community development programmes in health, education,

transportation and agriculture amongst others in local communities.

Among the TNCs operating in the oil sector of Nigeria, Shell cannot easily be ignored

hence we will try to use their CSR in Nigeria to highlight the CSR practices in this sector in

Nigeria. Shell has the largest area of operation in Nigeria and accounts for about half of the

total oil production in Nigeria (Tuodolo, 2009).

Perhaps the greatest evidence of Shell’s CSR activities is in its community

development programmes in the local communities. Through the community development

programmes, Shell contributes to the development of education. It does so by awarding

primary, post –primary, and university scholarships to local people, building classrooms,

providing equipment and sometimes paying the allowance of post-primary school teachers.

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The corporation also provides or sponsors training in such basic skills as craftsmanship,

joinery, mechanics and tailoring for some communities.

Shell also plays active role in such other areas as transportation, road construction,

building of jetties, donation of speed boats and cars, agriculture, micro credit schemes for

farmers, and donation of farming equipment to local communities. Others include training of

farmers, electricity, and donation of power plants, supply of diesel and sinking of water

boreholes amongst others. Be these as they may be however, there still remains a sore point

in Shell’s CSR practice in the Niger Delta. This is her failure to play by the rules in areas of

environmental protection. The case of the Ogoni people that culminate in the death of the

playwright Ken Saro Wiwa and others comes to the fore. Till date, the people of the Niger

Delta pays the cost of environmental degradation in return to the above community

development aid offered by Shell and other TNCs involved in the oil sector.

The case of the Nigerian banking sector appears to be different. There has always

existed a symbiotic relationship between Nigerian banks and the society over the years

(Ademosu, 2008). Banks in Nigeria perceive and practice CSR as a corporate philanthropy

aimed at addressing socio-economic development challenges (Amaeshi, Ogbechi, Amao, &

Adi 2006). Even without having any social responsibility objectives enshrined in their

corporate philosophy, most banks have demonstrated understanding in their practices,

behaviors and operations (Nwankwo, 1990).

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 References

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Nigerian Banking System. A paper delivered at the 2008 conference of the Federation of
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