Crane and Matten

Business Ethics (3rd Edition)

Chapter 1
ntroducing
Business Ethics
Lecture 1
;er;iew
What is business ethics?
Why is business ethics important?
Globalization: a key context for business
ethics?
Sustainability: a key goal for business ethics?
What is business ethics?
Business ethics is the study of business
situations, acti;ities, and decisions
where issues of right and wrong are
addressed.
Ethics and the law
thics
Law
grey
area
efining morality, ethics and ethical
theory
4raIity is concerned with the norms, ;alues
and beliefs embedded in social processes
which define right and wrong for an indi;idual
or a community.
thics is concerned with the study of morality
and the application of reason to elucidate
specific rules and principles that determine
right and wrong for any gi;en situation.
These rules and principles are called ethicaI
the4ries.
The relationship between morality,
ethics and ethical theory
.that can
be applied
to any
situation.
. to
produce
ethical
theory .
Ethics
rationalize
s morality
.
Morality Ethics Ethical
theory
Potential
solutions to
ethical
problems
Why is business ethics important?
1. Power and influence of business in society
2. Potential to pro;ide major contribution to society
3. Potential to inflict harm
4. ncreasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. E;aluating different ways of managing business
ethics
8. nteresting and rewarding
Types of misconduct across sectors
24%
21%
19%
22%
20%
21%
27%
24%
25%
0
10
20
30
Putting own interests
ahead of org
Lying to
employees
Abusive behavior
onprofit
Business
Go;ernment

2
0
0
8

E
t
h
i
c
s

R
e
s
o
u
r
c
e

C
e
n
t
e
r
Source: Ethics Resource Center (2008)
bser;ed ethical misconduct across
sectors
Source: Ethics Resource Center (2008)
46%
43%
49%
55%
46%
56%
55%
52%
57%
57%
52%
60%
0%
25%
50%
75%
2000 2003 2005 2007

2
0
0
8

E
t
h
i
c
s

R
e
s
o
u
r
c
e

C
e
n
t
e
r
onprofit
Business
Go;ernment
ifferences across organizational types
Shareholder
orientation; size and
complexity
Financial integrity,
employee/customer
issues
Formal, public
relations and/or
systems-based
Shareholders and
other stakeholders
Stakeholders Public sector
organizations
Main priorities
in addressing
ethical issues
Responsible
and/or
accountable to
Main
constraints
Approach to
managing
ethics
ivil society
organizations
Small
businesses
Large
corporations
Rule oI law,
corruption, conIlict oI
interest; procedural &
accountability issues
Delivery oI mission
to clients; integrity oI
tactics; legitimacy
and accountability
Financial integrity,
employee/customer
issues
Formal, bureaucratic InIormal, values-
based
InIormal, trust-
based
General public, higher
level government
organizations
Donors and clients Owners
Inertia, lack oI
transparency
Lack oI resources
and Iormal training
Lack oI resources
and attention
Globalization: a key context for
business ethics?
What is globalization?
According to Scholte (2005) globalization is not is not:
'internationalization'
'liberalization'
'uni;ersalization'
'westernization'
Globalization is is: a process which diminishes the
necessity of a common and shared territorial
basis for social, economic, and political
acti;ities, processes, and relations.
'deterritorialization'
Rele;ance of globalization for
business ethics
Cultural issues
Legal issues
Accountability issues
Globalization can affect all stakeholders of the
corporation
Ethical impacts of globalization
Globalization provides potential Ior greater proIitability, but also greater risks. Lack oI
regulation oI global capital markets, leading to additional Iinancial risks and instability.
orporations outsource production to developing countries in order to reduce costs in global
marketplace - this provides jobs but also raises the potential Ior exploitation oI employees
through poor working conditions.
Global products provide social beneIits to consumers across the globe, but may also meet
protests about cultural imperialism and westernization. Globalization can bring cheaper
prices to customers, but vulnerable consumers in developing countries may also Iace the
possibility oI exploitation by MNs.
Suppliers in developing countries Iace regulation Irom MNs through supply chain
management. Small scale indigenous competitors exposed to powerIul global players.
Global business activities brings the company in direct interaction to local communities
with possibility Ior erosion oI traditional community liIe; globally active pressure groups
emerge with aim to 'police' the corporation where governments are weak and tolerant.
Stakeholders Ethical impacts oI globalization
Stakeholders
Employees
Suppliers &
competitors
ivil society
(NGOs, etc)
Government &
regulation
onsumers
Globalization weakens governments and increases the corporate responsibility Ior jobs,
welIare, maintenance oI ethical standards, etc. Globalization also conIronts governments
with corporations Irom diIIerent cultural expectations about issues such as bribery,
corruption, taxation, and philanthropy.
nternational perspecti;es on
business ethics
ifferent approaches to business
ethics
Who is responsible for ethical conduct in
business?
Who is the key actor in business ethics?
What are the key ethical guidelines for ethical
beha;iour?
What are the key issues in business ethics?
What is the most dominant stakeholder
management approach?
Regional differences: Europe, orth
America, Asia
%he individual
Europe N. America Asia
Who is responsible Ior ethical
conduct in business?
Who is the key actor in business
ethics?
What are the key guidelines Ior
ethical behaviour?
What are the key issues in
business ethics?
What is the dominant stakeholder
management approach?
%op management
Government,
corporations
Managerial
discretion
orporate
governance and
accountability
Implicit multiple
stakeholder
approach, benign
managerialism
%he corporation
orporate codes oI
ethics
Misconduct and
immorality in single
decisions situations
Focus on shareholder
value
Social control by the
collective
Government, trade
unions, corporate
associations
Negotiated legal
Iramework oI business
Social issues in
organizing the
Iramework oI business
Formalised multiple
stakeholder approach
Sustainability: a key goal for
business ethics?
efining sustainability
$ustainabIe deveI452ent is de;elopment
that meets the needs of the present without
compromising the ability of future generations
to meet their own needs. (World Commission
on En;ironment and e;elopment 1987)
$ustainabiIity refers to the long-term
maintenance of systems according to
en;ironmental, economic and social
considerations
The three components of
sustainability
conomic Social
nvironmental
Triple bottom line
Coined by John Elkington
Bottom line thinking suggests sustainability as
a goal
Three dimensions:
En;ironmental perspecti;es
Economic perspecti;es
Social perspecti;es
Corporate commitments to
sustainability
'At BP we deIine sustainability as the capacity to endure as a group: by
renewing assets; creating and delivering better products and services that meet
the evolving needs oI society; attracting successive generations oI employees;
contributing to a sustainable environment; and retaining the trust and support
oI our customers, shareholders and the communities in which we operate.
'|Sustainability| means enhancing our relationship with host and partner
governments, building consumer conIidence in diamonds, and ensuring our
activities contribute positively to . both present and Iuture generations.
'orporate responsibility (R) at Nokia is a collective eIIort. We believe that
management oI R issues is most eIIective when sustainability policies and
programs are embedded in every aspect oI our operations.
' |For %oyota, a guiding principle is| contributing to the development oI a
prosperous society through the manuIacture oI automobiles.` ontributing to
the development oI a prosperous society` means contributing to the
sustainable development oI the earth.`
'Values, social responsibility and active sustainability are integral |to| our
company culture. We are Iuture-oriented in our approach to important issues
such as climate change. We operate a broad range oI |R&D| activities and
provide trend-setting approaches to the mobility oI tomorrow.
ompany Sustainability statement Source
BP
DeBeers
Nokia
%oyota
Volkswagen
Sustainability
Report, 2007
www.debeersgr
oup.com, 2009
SR Report,
2007
Sustainability
Report, 2008
www.volkswage
nag.com, 2009
Summary
efinition of business ethics
Business ethics is ;ital for business in
contemporary capitalism
Global ;iew is essential to understand ethical
issues
ifferent regions ha;e distinctly different
perspecti;e on business ethics issues
Sustainability is an important goal for
business ethics