Explanation : Four popular theories of business ethics that help in the field of normative ethics are as follows:
1. Utilitarian theory 2. Theory of Rights
3. Theory of Justice 4. Theory of Care.
1. Utilitarian Theory: It suggests that plans and actions of business should be evaluated by their consequences. It is based on the concept of minimum cost and maximum benefits. Business plans and actions must provide for the greatest good of the greatest number of people. It involves
ethics like telling truth, honesty is the best policy, keeping one’s promises, higher productivity targets.
2. Theory of Rights: Social or legal or human rights of an individual should not be violated by any policies or actions of business e.g., right to work, right to fair wages, right to property, right to unite, etc. Right of each segment of the society must be honored by business as a part of
3. Theory of Justice: The business decision must be impartial, fair, and equitable to all the parties. They must satisfy the requirements of (i) distributive justice
(ii) retributive justice and compensatory justice.
(i) Distributive Justice: It requires fair and equitable distribution of the wealth of the society. Equals are treated with equality. Social benefits and
burdens must be equally distributed.
(ii) Retributive Justice: It ensures distributive justice by imposing penalties without any discrimination on those who do not observe the rules
of distributive justice.
(iii) Compensatory Justice: Fair compensation to each according to his needs, ability, and capabilities.
4. Theory of Care: Business plans, policies, and actions must take care of the interests of the workers. It must improve their morale, provide them good working conditions, fair wages, and good human relations. It must provide them opportunities to grow and share the prosperity of business. Businesses must take care of each worker as well as each customer at every time and all the time.
Explanation : The Concept of Trusteeship: Mahatma Gandhi’s philosophy of trusteeship is also helpful in making social responsibility operational. The managers of a company control capital which they do not fully own. Therefore, they become trustees of this capital. The owners of capital also hold it in trust for the society. Therefore, management becomes the trustee not only of shareholders but of the entire society. Gandhiji’s theory of trusteeship suggests that all property should be held in trust for the society no matter who possesses it or what its nature or quantity is. If managers accept this theory they will act in the interest of not only the shareholders but of all other groups in society.
Explanation : Kumar Mangalam Birla Committee on Corporate Governance
The Securities and Exchange Board of India (SEBI) formed a committee in 1999 to promote and raise the standard of corporate governance in listed companies in India, Mr. KM Birla headed this committee and it is known by his name. SEBI accepted the recommendations of this committee in January 2000 and to implement them, a new clause - Clause 49 - was inserted into the listing agreement for new companies.