Business ethics an introduction

BUSINESS ETHICS

1. AN INTRODUCTION

2013/2014 Ana Cláudia Campos 1º Semestre1

1.1 Morality, Ethics, and Business Ethics

1.2 The Emergence of Business Ethics: Globalization,

Sustainability, and Competitiveness

1.3 Conceptual Network: Stakeholders, Social

Responsibility and Corporate Governance

2

1.1 Morality, Ethics, and Business Ethics

3

Morality

“… is concerned with the norms, values,

and beliefs embeded in social processes

which define right (√) and wrong (×) for an

individual or a community.” (Crane & Matten, 2010)

4

Sources of Morality

RELIGION

5

SOCIETY

6

ETHICS

“… is concerned with the study of morality and

the application of reason to elucidate specific

rules and principles that determine right and

wrong for a given situation. These rules and

principles are called ethical theories.” (Crane & Matten, 2010)

9

“… deals with individual character and the

moral rules that govern and limit our

conduct. It investigates questions of right

and wrong, duty and obligation, and moral

responsibility.” (Shaw, 2011)

10

Theoretical/philosophical study that

analyses ethical theories

(Popkin & Stroll, 1956)

11

“… the wisdom of living or the art of living.” (Savater, 1991)

12

“ Ethics originates in

everyday life.” (Popkin & Stroll, 1956)

… in the moral dilemmas arising

in particular situations of

individuals’ lives, that challlenge

consciousness and claim the need

of a decision making 13

14

“An ethical dilemma is a situation that requires a

choice regarding a possible course of action that,

although offering the potential for personal or

organizational benefit or both, may be considered

unethical. It is often a situation in which action must

be taken but for which there is no clear consensus

on what is «right» and «wrong»”.

(Schermerhorn, 2002)

The ethical reflection of everyday life becomes a

philosophical investigation when transcends the

individual’s particular issues and questions and

develops a general approach to them.

15

Perspective Context

Particular

Should I lie to him or tell him the truth about

my whereabouts last night?

Can I have this baby under the present

circumtances?

This payoff is particularly advantageous in

face of my political ambitions? Should I

accept it?

Everyday life

General

Is lying morally acceptable under any

circumstances?

Is abortion morally defensible?

To buy off and be bought off are the two sides

of the same coin: the use of any means to

achieve the ends. Is any means worthy of

moral appraisal?

Philosophy

16

BUSINESS ETHICS

“… is the study of what constitutes right and

wrong (or good and bad) human conduct in

a business context.” (Shaw, 2011)

17

“… is the study of business situations,

activities, and decisions where issues of

right and wrong are addressed.” (Crane & Matten, 2010)

19

• By ‘right’ and ‘wrong’ it is meant ‘morally right’ and

‘morally wrong’, against ‘commercially’, ‘strategically’ or

‘finantially right or wrong’;

• Business Ethics covers issues related to business

organizations but also other types of organizations

(governmental organizations, non-governmental/non-

profit, pressure groups, etc.)

Comments

21

• Many people believe ‘ethics’ and ‘business’ don’t

match because businesses are either imoral

(against morality) ou non-moral (outside morality)

• However Business Ethics is increasingly becoming

a topic of attention for both scholars and

professionals in all fields

22

Reasons for the increasing importance ofBusiness Ethics

23

• The power and influence of business and firms in

society is increasing everyday

• Companies contribute to society (employment, taxes,

economic and personal development...) and it is

necessary to understand how this contribution occurs

• Bad business practices have the potential to cause

harm to individuals, communities and the environment

24

• Stakeholders (consumers, control and pressure

groups, the media, competition ...) increasingly require

businesses to behave responsibly and ethically

• There is lack of formal training in the area of ethics,

and this training may contribute to problem analysis

and more informed decision making

25

• Ethical violations (fraud, injustice at work, corruption,

abuse of trust ...) continue to happen in a daily basis

discipline and an ethical approach helps to understand

the reasons behind them

• Studies show that companies with best ethical

performance are also those with improved financial

performance, increased productivity and quality, higher

sales and customer loyalty

26

• An ethical attitude contributes to improving brand

image and corporate reputation, thus capturing more

easily the attention of investors and consumers and

facilitating the retention of employees

27

“Business ethics can be said to begin when the law ends.

Business ethics is primarily concerned with those issues

not covered by the law, or where there is no definite

consensus on whether something is right or wrong. (…)

For this reason, it is often said that business ethics is

about the ‘grey areas’ of business, or where values are in

conflict.”

(Crane & Matten, 2010)

28

29

• It is expected that all legal conduct is also ethical, however much

of what has once been legal is nowadays seen as immoral, non-

ethical (slavery, political inequality and so forth)

• On the other hand, a non-illegal action is not necessarily ethical,

which means ethics transcends legality:

� Is it ethical for an employee to take longer than the necessary to do a

job?

� Is it ethical to make personal telephone calls during working time?

� Is it ethical to call in sick to take a day off work?

� Is it ethical not to report a co-worker misconduct?

� …

1.2 The Emergence of Business Ethics:

Globalization, Sustainability, and

Competitiveness

30

31

“Globalization is a process which diminishes

the necessity of a common and shared

territorial basis for social, economic, and

political activities, processes, and relations.”


32

“… one of the most powerful and pervasive

influences on nations, businesses,

workplaces, communities and lives...”

(Kanter, 1995 )

33

Globalization’s most influential factors

EconomicEconomic

Technological Political

34Globalization… Economic relations

Information Job market/workplace

Social andfamily relations

35

Positive Aspects Negative Aspects

Economic growth

Global well-being

Cultural relativism

Democracy

World peace

Enclavic poverty

Restricted access to the planet’s resources

Market interdependence

Dissemination of financial crises

Westernization of the patterns and systems

of values, thought and behavior / culture

shock

Global dissemination of effects (social,

political, economic) of events occurred

locally

Increased risk of unethical conduct in

international business (corruption, child

labor, cheap labor ...)

36

Different ethical demands

Moral values

Local cultures

Businesses escape the

control of national

governments

Different legal frameworks

and territorially

disseminated

Which stakeholders are organizations

accountable to?

Globalization and Ethics

37

“Sustainability refers to the long-term

maintenance of systems according to

environmental, economic, and social

considerations.”


38

“Competitiveness is the ability of a firm or a nation

to offer products and services that meet the quality

standards of the local and world markets at prices

that are competitive and provide adequate returns

on the resources employed or consumed in

producing them.”

(http://www.businessdictionary.com/definition/competitiveness.html#ixzz2eXJkFcHf)

39

“Competitive advantage (…) refers to the utilization

of a core competency that clearly sets an

organization apart from its competitors and gives it

an advantage over them in the marketplace.”

(Schermerhorn, 2002)

• Product

• Price

• Service

• Cost efficiency

• Quality

• Brand image

• Ethical management and CSR…

40

1.3. Conceptual Network: Stakeholders,

Social Responsibility, and Corporate

Governance

41

“Organizational stakeholders (are) those

persons, groups, and other organizations

directly affected by the behavior of the

organization and holding a stake in its

performance.” (Schermerhorn, 2002)

42

“A stakeholder of a corporation is an

individual or a group which either: is harmed

by, or benefits from, the corporation; or

whose rights can be violated , or have to be

respected, by the corporation.”


43

Organization

Society

Employees

Government

Opinion leaders

Customers

NGOs

Universities

Competitors

Funding institutions

Directors

Media

Shareholders

Suppliers

Unions

44

Stakeholders Impactos éticos da globalização

Shareholders Greater finantial risks and instability

EmployeesExploitation of employees (poor workingconditions)

Consumers Cultural imperialism and westernization of nations

Suppliers andCompetition

Small scale competitiors more exposed to MNbusinesses

Civil Society(pressure groups,NGOs, localcommunities)

Erosion of local communities traditional life

GovernmentDecrease of government responsibility towardsemployment, wellfare and ethical patterns

(Adapted from Crane & Matten, 2010)

45

“Corporate social responsibility is defined as

an obligation of the organization to act in

ways that serve both its own interests and

the interests of its many external

stakeholders.” (Schermerhorn, 2002)

46

“Corporate social responsibility includes the

economic, legal, ethical, and philantropic

expectations placed on organizations by

society at a given point in time.”

(Crane and Matten, 2010)

47

EconomicResponsibilities

Legal Responsibilities

EhticalResponsibilities

PhilantropicResponsibilities

(Carroll, 1991)

48

“Should the firm feel any responsibility

towards problems outside itself, occuring in

the social environment?” (Neves, 2008)

49

The firm’s primary responsibility

To protect the owners’ /shareholders investment

and to act in their best interest…

50

M. Friedman’s (1970) arguments against

Corporate Social Responsibility

• Only human beings have a moral responsibility for their

actions (he excludes organizations)

• Managers’ responsibility is to act solely in the interests of

stakeholders (he excludes other stakeholders)

• Social issues and problems are the province of the state

rather than corporate managers (he excludes social goals)

51

Organizational Arguments for CSR

Greater customer satisfaction, related to brand reputation

Attraction of the best and more committed employees

Avoidance or forestalling of industry regulation and legislation, assuring greater

business independance from government

CSR is a long-term investment in a safer, more educated, and equitable

community (stable competitive environment)

Ethical Arguments for CSR

Firms cause social and environmental problems (impacts), following production

activities, and therefore should take on the responsibility for solving them

Companies should use power and resources responsibly

Companies should include in their business vision the interests and objectives

of all stakeholders

(Adapted from Crane & Matten, 2010)

52

Corporate Social Responsibility Actions

• Patronage / Philanthropy (social, cultural, environmental, scientific and

technological, and educational and sports initiatives involving donations

in cash or in kind)

• Charity (social initiatives involving the raising of money or goods to the

benefit of socially disadvantaged groups)

• Social marketing (adaptation of marketing techniques to programs

designed to influence and change the behavior of stakeholders, gain or

benefit is to the public and society at large and the business perspective

(earnings) may be (or is) completely absent

• Community Integration (actions that support the creation of infrastructure

and public services in the local community where the company is

located, as villages, day care centers, schools or hospitals)

• Reforms in the company’s internal environment

53

“Corporate governance (…) is the system of

control and performance monitoring of top

management that is maintained by boards of

directors and other major stakeholders

representatives.” (Schermerhorn, 2002)

Business ethics an introduction

Technology

Transcript of Business ethics an introduction