What is a socially responsible business? Explain with examples.
Explain whether or not Grameen Bank is a socially responsible business enterprise.
What is ethical dilemma? Discuss with real and/or hypothetical examples of ethical dilemma.
Explain the ethical dilemma considering the accusations of a financial impropriety and so claimed highest interest rates charged by Grameen Bank.
What is social responsibility of business?
The term social responsibility of a business denotes the ethical behaviour and consideration of the institution and the stakeholders and contribution to the society and its economic and environmental issues (Cheng, Ioannou & Serafeim, 2014). A Social Responsible Business is for-profit business venture and has two objectives: first, to gain financial profits and second, to improve the base of the society by creating optimist changes to the community. The most important aspect of this kind of business is that it makes an attempt to improve various vicinities of the society including the cultural, economical and environmental sides. There is similarity in between the Social Responsible Business and Corporate Social Responsibility as intention of both the ventures is to make certain positive changes in the society by widening the community-based involvement (Tai & Chuang, 2014). However, the main aim of the Social Responsible Business is to create market space by forming partnership with local community or with non-governmental organisations.
One of the most suitable examples of Social Responsible Business is Grameen bank that has been originated in Bangladesh and founded by the Nobel laureate Mohammed Yunus (Schrempf-Stirling, Palazzo, & Phillips, 2016). The bank has played an important role in the micro credit system of Bangladesh and helped to recover the turbulent financial crisis. According to Mohammed Yunus, every company is required to be measured on the basis of triple bottom line (financial, social and environmental). Grameen bank has provided money to the poor villagers so that they can start new business and transform their livelihood and can avoid the curse of poverty ("Grameen Bank | Bank for the Poor", 2018). Therefore, it can be observed that the objective of Grameen bank is similar to the Social Responsible Business as the bank wants to expand their business by changing the lives of the poor villagers and abolish the curse of poverty (Hopkins, 2016).
The term Grameen Bank has derived its origin from the concept of village and works as a community development bank in Bangladesh. It provides micro credits to the poor villagers of Bangladesh and encourages the people to start up new businesses so that they can avoid the curse of poverty (Roodman, & Morduch, 2014).
The bank was founded by Mohammad Yunus in 1976. Considering the objective of the bank, it can be stated that it is a good example of Social Responsible Business. The bank has made an involvement with the local community, provided loan to the poor to set up their business, motivates them to reduce the curse of poverty and expand their business by backing up the financial structure of Bangladesh. The bank has launched the idea of micro credit system to the poor people for the first time in Bangladesh and won World Habitat Award for its low cost housing program. The bank has taken many initiatives to gear up the commerce and agriculture of Bangladesh and help the poor villagers to earn money and pay off the debt. The bank believed that the endless potentiality of the people can promote financial independence and to cherish the fact, it provides small loan to them. This helps the bank to earn profit by improving the social, cultural and economical standard of Bangladesh (Crane, & Matten, 2016).
Grameen Bank and its objective of poverty alleviation
Ethics is a part of philosophy that resolves a dispute in between the good and bad on the base of morality (Tasnim, 2014). Ethics can be divided into three parts such as meta-ethics that deals with the theoretical approach to moral proposition; normative ethics that deals with moral course of action and applied ethics that deals with the situation-base actions. However, certain situations can be cropped up where problem arises between possible moral imperatives and probability of situational conflicts can be raised. Literally, ethical dilemma points out the situation where there are more than one ethical solution and it becomes tough to choose any one of the existing options. Considering the nature of ethical dilemma, it can be stated that it forms a part of situational ethics.
Ethical dilemma can be cropped up at any time. The principle of this dilemma can better be understood by way of certain examples. Suppose, in a runaway, a train is running and all of a sudden a man come in between the lines. There are two options available for the driver, either to save the man by stopping the train or let the man be killed. Therefore, an ethical dilemma cropped up in this situation. If the driver wants to save the man, he has to stop the train immediately and there is a possibility that the train can be derailed by such sudden break and that may cause life threat to many passengers. This is a hypothetical instance of situational conflict.
Mohammad Yunus is not only the founder of Grameen Bank, but he is considered as the father of micro finance too. The financial concept of Grameen Bank has been praised by many countries and Economists (Novitaningrum, & Amboningtyas, 2017). He is able to change the concept of human potentiality by improving their standard and provided small loan to them. However, the bank is facing certain ethical dilemma now regarding the interest rate riddle (Islam, Sathye & Hu, 2015). The Prime Minister of Bangladesh has commented that the loan concept of the bank is sucking the blood of thee poor villagers. The aid funding system of the bank has been challenged for the first time in a documentary telecasted by the Norwegian television where it was alleged that the rate of interest of the bank is being used in different purpose and that does not support the poverty alleviation of professor Mohammad Yunus. A political pressure has been made on professor and it was suggested to affiliate the bank under government control. Further, the life changing plans of the bank has able to make revolutionary changes in the village lifestyle and become an apple of discord in the political sector in Bangladesh. Many politicians imposed charges against Prof. Yunus regarding high interest rate of the bank and his financial proprietorship over the bank. The ethical dilemma in this case is to choose the right option between terminations of Professor Yunus from the Managing Director of the bank as he is old enough for the post or let the bank being operated by him with certain financial consideration.
Ethical dilemma faced by Grameen Bank
Bangladesh has democratic republic governance system and framework of the country is based on Parliamentary system. The government of Bangladesh has three branches such as executive, legislative and judiciary and the nature of legislature is unicameral. The executive branch is headed by Prime Minister and the Supreme Court holds the apex position in Bangladesh from the aspect of judiciary. Like the entire democratic republic system, President is considered as the Head of state in Bangladesh. He appoints the Prime Minister and the Chief Justice of Supreme Court of the country. Prime minister takes all the important decisions regarding the administrative matters of the Country and Supreme Court takes final judicial decision regarding a case (Tasnim, 2014). However, the governance system of Bangladesh symbolises an underdeveloped polity. The political perspective of Bangladesh is governed by the money giants and goons and most of the politicians have no strong political base. Considering the low grade political system, Bangladesh holds the first position regarding the worst governance in the world for five years consecutively. The endemic corruption has swallowed up the entire society of Bangladesh. Further, the unchangeable nature of the political rulers becomes a threat to the democratic system and makes the common people as passive voter. Much independence has not been given to the judiciary and administrative interference is a common matter in case of judicial decisions. The condition of the human rights is also unsatisfactory and politicization of public democracy creates adverse impacts on overall performance.
Grameen bank has changed the thought regarding the standard of the poor villagers and brought a revolution by the concept of micro credit system. Nobel laureate Prof. Mohammad Yunus is the founder of the bank and he has started the concept of micro credit loan to the poor villagers, women and illiterate people so that they can start their own business and can avoid the curse of poverty. Micro credit is a small loan service provider and supports the poor people to change their livelihood by upgrading their boot strap (Gallenstein, 2017). The micro credit system has able to replicate around the world and able to achieve huge success regarding its objective. However, Prof. Yunus was victimised by the underdeveloped political governance system of Bangladesh in the year 2007 when it was alleged by the government of Bangladesh that the financial proprietorship of the bank is based on autocracy and does not follow the banking rules of the country. The Prime Minister of Bangladesh, Sheikh Hasina had considered the bank as a blood sucker of the poor villagers. A political pressure has been created on Professor to resign from the post of Managing Director of the bank and it has been stated by many politicians that he has completed the age criteria for the post of Managing Director (60) and therefore, he should resigned from his post. The political tyranny over the Grameen bank left the whole world in shock and many countries had raised their voice against the unethical termination of Prof. Yunus from the bank founded by him. One of the most corrupted governments of the world has ill-treated Mohammad Yunus and forced him to resign from his post. According to the Bangladesh government, the bank should come under the control of government so that they can make possible changes in the financial terminologies and take the credit of the bank’s international fame. According to the report made by the government-sponsored review, changes will be made regarding the composition of the bank’s governance structure. Miscarriage of justice has been observed by the hostile takeover of the bank which is known as one of the prime microfinance institution. The main strength of the bank is the poor villagers who owned 96.5% of the capital structure and also the shareholders of the bank. Human dignity is the main pillar of Grameen bank and the hostile takeover of the same has assisted to accept its demise and goes against the best interest of Bangladesh (Cai et al., 2015). It has further been observed that the bank has provided much support and respect to the women and abolish the male dominated system of Bangladesh. Among 12 Board of Directors of the bank, 9 are women. The economic contribution of the women has been improved and active participation of women has made a huge social change in Bangladesh. However, the change in the composition of the bank by present government has denied the efforts of Prof. Yunus and the women on a large basis and it will create negative impact on the society.
The political governance system of Bangladesh
The objective of good corporate governance is to create market confidence and commercial integrity so that a positive environment can be established for the access of equity capital regarding long term investment (Novitaningrum, & Amboningtyas, 2017). The equity capital is important for the future growth of the companies and it makes a balance between the leveraging. Therefore, good corporate governance is helpful to back the financial stability of a country. The principle of good corporate governance is also motivating the people to take active participation in the corporate wealth creation. It is important to make an effective framework for the corporate governance for promoting transparent market segmentation and concentrating on the consistency between different authorities. Further, the rights of the shareholders are also identified by this system.
However, in this case, it has been observed that the political governance system of Bangladesh is creating an adverse situation regarding the business resources. The Bangladesh government is corrupted one where the rights and interest of the common people are being denied. The money giants are the main decision maker in this country and there is no place for ethics and morality under this governance system. It has been observed that the excessive interference of the executives on the other two branches of the parliamentary system has made the whole system corrupted. The international investors are less interested to invest their capital in this country because of this turmoil political spats and autocratic mentality of the government. The parochial mentality of the government is come to the lights in the case of Grameen bank (Islam, Sathye, & Hu, 2015). The unethical takeover of the bank by the government had remained the whole world silent and the negative response of the local government has welcomed the miscarriage of justice. The Bangladesh government should make an ideal commercial environment for the business and should motivate the investors for long term investment. The equity capital is necessary to generate more job security as well as job opportunity to the citizen of Bangladesh. Concurrently, the changes in the composition of the bank had denied the rights and interest of the existing shareholders, which is against the moral objective of good corporate governance. Therefore, the government of Bangladesh is required to change their political mentality and should accept the importance of equity capital by creating positive business environment to attract the national and international investors to gear up the business market and to back the financial condition of the state as well.
Grameen Bank and its battle for survival
A good corporate governance has certain essentials that have to be maintained at all circumstances. According to the essentials, the framework of the corporate governance should be based on the fair market policy and should protect the rights and interest of the shareholders. It has been observed that the objectives of Grameen Bank, at the time of its incorporation were quite similar to this framework and the founder of the bank had taken many useful steps to improve the standard of the poor villagers and the women. The rights of the shareholders were secured and after the huge success in the field of micro credit system, the bank had get many international investors and support. Prof. Yunus had taken all the important decisions by consulting with the Board of Directors of the bank (Bank, 2017). However, negative implication of the bank has started when political pressures have been created on the founder and Managing Director of the bank with an intention to terminate him from the post and grab the power and fame of the bank by the government. Agitations have been made by many political leaders against him and the government has forced him to resign. The changes made by the government regarding the internal composition of the bank have mortified the rights and interest of the existing shareholders. Therefore, it is suggested not to deny the basic needs of the fair market policy and the initiatives of the bank and the government should be based on good corporate governance.
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