1.Definations

1．D efinitions

Business Ethics

Business ethics is centrally concerned with conduct. Ethical questions are essentially questions about whether we ought or ought not to perform certain kinds of actions; about whether those actions are good or bad, right or wrong, virtuous or vicious, worthy of praise or blame, reward or punishment, and so on. Business ethics can: offer a framework that individuals can use to help them determine what they believe to be …correct? or acceptable behaviour within the workplace. T o encourage and facilitate a process of self-reflection regarding both past behaviour, current issues and future actions, contributing to both the development of the individual and business organisation. The potential value of business ethics is recognised and an attempt is made to institutionalise ethics, it can provide a mechanism for organisational change and development

Ethical elements

Notice in the company mission statements the combination of virtue and principle.

Notice in the Apple statement on Steve Jobs the combination of virtue and utilitarianism.

“Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted.” Albert Einstein

In relation to Drucker?s view that if it can?t be measured, it can?t be managed, where does ethical theory lead us?

In relation to Roosevelt?s view on the necessity of morality, what do ethical theories teach us about business?

Defining CSR

Corporate social responsibility encompasses the economic, legal, ethical, and philanthropic expectations placed on organizations by society at a given point in time. The CSR became increasingly prominent within company, government and civil society writing. CSR operate on the assumption that the adoption of CSR policies by business is rational and profitable in the long run because these policies attract product demand and factors of production such as labour and capital. With regard to product demand, CSR can be seen as one element in larger branding strategy. By engaging in CSR programmers, marketing them and auditing the, CSR can attract demand from market segments particularly interested in social issues. For example, a MORI poll(2000) showed that 58% of Europeans agreed that … industry and commerce do not pay enough attention to their responsibilities?. The role of CSR as a market signal can also be been in labour markets as well as in product markets. On the labour demand side, companies post their values on the employment web pages to encourage self-sorting of ethical employees. On the labour supply side, CSR signalling is seen both to influence the decision to join the company and to affect human resource policies of employees once inside the company. CSR is in the wider developmental context. The CSR appears to signal a new form co-operation between government, business and civil society in the promotion of social objectives. CSR benefits by both extending regulatory control and devolving actual implementation to business.

Stakeholder

The stakeholder model - it is the organisation?s stakeholders that grant its licence to operate. Stakeholders include: owners, customers, consumer advocates, competitors, protest groups, employees, suppliers, environmentalists, government, local community organisations, and the media. A stakeholder of a corporation is an individual or 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. Problems with stakeholder theory: The decision-making process may become lengthy is all competing claims of stakeholders have to be considered. How are bosses to be judged if they are accountable to many stakeholders? If other stakeholders are put before shareholders, this may reduce share values and may bring less willingness to invest.There seems to be no clear decision rule when attempting to adjudicate between rival claims of stakeholders.

Utilitarianism

According to utilitarianism, an action is morally right if it results in the greatest amount of good for the greatest amount of people affected by the action.Assess ethics by looking at the outcome of an action for all parties.Ethical acts are those which maximise utility (usefulness/happiness) and minimise disutility. Act utilitarianism looks to single actions and bases the moral judgement on the amount of pleasure and the amount of pain this single action causes. Rule utilitarianism looks at classes of action and asks whether the underlying principles of an action produce more pleasure than pain for society in the long run.Difficulty of predicting outcomes. Measurement difficulties - how do you quantify happiness? May be unjust and abuse individual rights. Kantianism

Ethical acts are those which are carried out for duty?s sake, determin ed by reasoned consideration. Duty is defined as obedience to the categorical imperative (moral law): Universality - what is right for one person must be right for anyone else in the same position. Respect for persons - people should be treated as ends in themselves, never as means to ends and Universally law giving – would everyone agree to a law based on what you have done?When risk taking crosses the line between the responsible entrepreneurship we want to celebrate and irresponsible risk taking, then we have to take action to ensure that markets work in the public interest to reflect shared values." "Wealth creation is not just a privilege but a responsibility. And that is why we back the work ethic; we support effort and enterprise and responsible risk taking. These are the morals markets need," Gordon said.Only acts driven by the categorical imperative are ethical – what about outcomes? Assumption that we are all autonomous rational beings prepared to reason at this level. How should conflicting duties be resolved? No account taken of personal relationships.No account of temporal or cultural differences.

Ethics of Rights and Justice

We all possess moral rights. These are our human or …natural? rights. Negative rights: life, physical security, personal freedom, free speech, freedom of conscience, consent, privacy, property. Positive rights: food and drink, shelter, work, basic education, healthcare, legal advice and representation, safe environment.Justice orientations represent “the prevailing gro unding for moral judgments” (French and Weis 2000, 126)in western societies. Justice emphasizes individual autonomy, choice and freedom, ensured through the

preservation of equality, and enacted through rules that must be followed by all to ensure fairness. “The simultaneously fair treatment of individuals … with the result that ev erybody gets what they deserve”. Based on: 1. Fair outcomes, 2. Fair procedures

Virtue ethics

Let us suppose that, unlike technical or scientific problems, moral problems have no answers or solutions just waiting to be discovered. What if there were no single right answers to many of the moral problems confronting us? Besides despair, is any alternative open to us? I would like to suggest that there is, and that we can be guided to this alternative by Aristotle (DesJardins, 1984). A character-based ethical theory,“What sort of person should I be”?V irtues are learned by experience, Aristotelian virtues dealt with leaders only:courage, justice, wisdom, temperance, Modern day virtues: friendship, conscientiousness, faithfulness, kindness, cooperativeness,Good for fostering ethical organisations - foster ethical employees.JP Morgan Chase: Behaviours' and principles that describe what we stand for –integrity and respect – and what we deliver – excellence and innovation.Integrity– Striving at all times to do what?s right and adhere to the highest ethical standards. Respect – V aluing the perspectives and expertise of all to surface the best ideas and insights. Excellence –Achieving high-quality results by continuous improvement and superb execution. Innovation –Going beyond the commonplace to break new ground.Criticisms of V irtue Theory: Unethical acts can be acceptable if done by a virtuous individual. Is everyone capable of learning virtues? Does everyone want to be virtuous? Difficulty in defining a list of virtues, Different societies may need and value different virtues. Codes of Ethics

Codes of ethics are voluntary statements that commit organizations, industries, or professions to specific beliefs, values, and actions and/or set out appropriate ethical behaviour for employees. Four main types of ethical codes: Organizational or corporate codes of ethics, Professional codes of ethics，Industry codes of ethics,Programme or group codes of ethics.Increasingly common: Substantial rise in usage during 1990s and 2000s, 2/3 of large UK firms have some kind of formal ethical code whilst almost all large US firms have a code of ethics, Less prevalent in Europe, and in SMEs. Critiques of ethical codes:Clear prescription for employees means lack of flexibility, Difficulty with multiple/novel situations, particularly cross-cultural, V ague,

generalised statements of obligation , PR device, Questionable control mechanisms that potentially influence employee beliefs, values and behaviours,…suppress? individual moral instincts and emotions in order to ensure bureaucratic conformity and consistency.

Stakeholder

Instrumental perspective: …Stakeholder impact analysis enables a company to identify the stakeholders most crucial to its survival and to make sure that the satisfaction of their needs is paramount?. Three key attributes likely to determine perceived importance or salience of stakeholders: Power, Legitimacy, and Urgency.Types of stakeholder relationship:Challenge, Sparring partners, One-way support, Mutual support, Endorsement, Project dialogue, Strategy dialogue, Task force, Joint venture or alliance.Problems with stakeholder collaboration: Resource intensity, Culture clash, Schizophrenia, Uncontrollability, Co-optation, Accountability, and Resistance. Sustainable consumption is: ‘the use of goods and services that respond to basic needs and bring a better quality of life, while minimising the use of natural resources, toxic materials and emissions of waste and pollutants over the life-cycle, so as not to jeopardise the needs of future generations’. Steps towards sustainable consumption:Producing environmentally responsible products,e.g. Eco-labels are important.Product recapture, See Figure, next slide. Service replacements for products,Selling (e.g.) mobility rather than cars, or leasing photocopiers. Product sharing, Examples: car-sharing, washing-machine-pooling. Reducing demand, Example of China’s ban on fr ee plastic bags. Implementing the polluter pays principle to create financial incentive for lower consumption.

Corporate Governance

Increasing attention since the 1980s: corporate scandals, Performance weaknesses, Differentiation between performance and executive compensation Corporate failures and regulatory initiatives have placed corporate governance systems under closer scrutiny than ever: Roles of non-executive directors, Disclosure practices, Companies? relationships with auditors, Executive remuneration issues, Roles of institutional investors, etc. Separate the roles of Chairman and Chief Executive Officer. The independence and effectiveness of Non Executive Directors should be strengthened. Short-term contracts for executive directors, etc. “…the process of supervision and control intended to ensure that the company?s management acts in accordance with the interests of shareholders”.“… the governance role is not concerned with the running of the

business of the company per se, but with giving overall direction to the enterprise, with overseeing and controlling the executive actions of management and with satisfying legitimate expectations of accountability and regulation by interests beyond the corporate boundaries” . “ … the system by which companies are directed and controlled” .

Agency Theory

Views the board as a monitoring mechanism & the senior executives trying to max personal welfare and min personal risk.The theory: Describes the potential for conflicts of interest that arise from the separation of ownership and control in organizations. Principal- agent problem: Agency theorists see the primary function of boards as monitoring the actions of “agents” managers- to protect the interests of principals- “owners”.

The Board of Directors (BoD)

The Board of Directors includes the representatives of the owners and has the responsibility to oversee the direction of the organization chosen by the CEOs. The board consists of its chairman/President, chief executive officer (CEO) and the directors (“functional” Board members either executive or non executive). Board of directors is responsible for the governance of their companies. The Board of Directors leads and controls the company. Two-tier (Dual) Model: the German model uses the supervisory board as a non-executive layer. There is also the Executive Board of Management,Shareholders appoint the members of the Supervisory Board, while the Supervisory Board appoints the members of the Management Board. Unitary Model: The UK model uses a single board, but mixes non-executive with executive directors and separates the Chairman?s role from that of CEO. The American model is also unitary but tends to combine the two top roles.The Board should have regular meetings, with an agenda, and there should be formal schedule of matters over which the Board has the right to make decisions. There should be appropriate reporting procedures defined for the Board and its subcommittees. It is vital that directors have access to reliable information on a timely basis. It is essential feature of good CG that the Board will be accountable to shareholders and provide them with relevant information so that decision making processes are transparent. Roles/Functions of BOD: CONTROL: To Monitor Managers As Fiduciaries Of Stockholders. Tasks Include Hiring /Firing the CEOs/TOP Managers, Establishing Executive Pay, SERVICE: To Advice the CEOs & TMT on Administrative & Managerial Issues Plus Initiating & Formulating Strategy, RESOURCE DEPENDENCE: Facilitating the Acquisition of Resources

Critical to the Firm?s Success. MONITORING: Refers directly to the responsibility of directors to monitor managers on behalf of shareholders. PROVISION OF RESOURCES: Refers directly to the ability of the board to bring resources to the firm, resources being “anything that could be thought of as a strength or weakness of a given firm”. The board?s role is a focal point in corporate governance. The control role of the board is usually associated with the “principal–agent” problem which particularly addresses the incentive conflict, between managers and shareholders (owners/investors).Under this perspective, the monitoring of top management has received most attention in comparative corporate governance research. Yet, a review of the literature clearly indicates that boards have additional strategy and service roles, such as tying firms to external resources or offering strategic advice. INSIDE DIRECTORS: Directors Having Managerial Positions In Conflict With The Monitoring Functions Of The Board. Agency Theorists Advocate Their Inclusion In Order The Information Asymmetry Between The Boards And The CEOs To Be Reduced. OUTSIDE DIRECTORS : Non-executive Directors The Proposition of Out/Ins Directors Has Been Viewed as a Measure Of Board Independence AFFILIATED Vs. INDEPENDENT DIRECTORS: Affiliated Represent Organizations With Substantive Relationships With The Focal Organisation.

Triple bottom lines

Ecological bottom lines, social bottom lines, organizational sustainability defined.

SCP ( Sustainable consumption and production) Implication of challenges to SCP for business: 1. Financial, changes in fiscal and tax regimes to internalize environmental and social costs resulting in higher cost of capital and more rigorous lending requirements. 2. Regulatory and legal: increased regulatory constraints as governments seek to protect degraded ecosystem services and human health. 3. Reputation risk to reputation, brand equity, and license to operate for business most directly linked with threatened ecosystems, resources or risks to health and wellbing.4. Operational, substantial increase in cost of important inputs, increased vulnerability of assets to floods or other natural disasters, conflict and corruption that may arise increase plagued by scarcity of ecosystem services.

Deliver better products and services which reduce the environmental impacts from the use of energy, resources, or hazardous substances and use cleaner,

more efficient production processes. Facilitate the mainstreaming of sustainable consumption through: choice influencing, choice editing, and reducing demand.

GREENWASH

The act of misleading consumers regarding the environmental practices of a company or the environmental benefits of a product or service. Greenwash misleads the public by stressing the environmental credentials of a person, company or product when these are unfounded or irrelevant. The seven sins of Greenwashing: Sin of the hidden trade-off, sin of no proof, sin of vagueness, sin of irrelevance, sin of lesser of two evils, sin of fibbing, sin of worshiping false labels.

BUSINESS ETHICS

Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. It is worth stressing that by …right?and …wrong?we mean morally right and wrong, as opposed to, for example, commercially, strategically, or financially right or wrong. Moreover, by …business?ethics, we do not mean only commercial businesses, but also government organizations, pressure groups, not-for- profit businesses, charities, and other organizations.

Making Decisions in Business Ethics

Descriptive business ethics theories seek to describe how ethical decision is actually made in business, and what influences the process and outcomes of those decisions. The decision is likely to have significant effects on others. The decision is likely to be characterized by choice, in that alternative courses of action are open. The decision is perceived as ethically relevant by one or more parties. There are four stages in ethical decision-making. Firstly, recognize a moral issue. Secondly, make some kind of moral judgment about that issue. Thirdly, establish an intention to act upon that judgment. Lastly, act according to their intentions. There are two factors influences on ethical decision-making. Individual factors: These including factors that are given by birth and those acquired by experience and socialization. Situational factors: These include

factors associated with the work context and those associated with the issue itself.

Managing Business Ethics

Business ethics management is the direct attempt to formally or informally manage ethical issues pr problems through specific policies, practices, and programmers. There are three main areas in the business ethics management. Firstly, set standards of ethical behavior. Secondly, manage stakeholder relations. Lastly, assess ethical performance.

Setting standards of ethical behavior: designing and implementing codes of ethics. Codes of ethics are voluntary statements that commit organizations, industries, or professions to specific beliefs, values, and actions and/or that set out appropriate ethical behaviors for employee. There are four main types of ethical codes: organizational or corporate codes of ethics. Professional codes of ethics. Industry codes of ethics. Programmer of group codes of ethics. These are primarily focusing on four main issues: prevalence of corporate codes of ethics, content of codes of ethics, effectiveness of codes of ethics, possibilities for global codes of ethics.

The areas of assessment, Ethical: Often a focus on internal management systems. Environmental: Impact on natural environment. Social: Broader remit, often including impact on stakeholders. Sustainability: Focus on triple bottom line. Social accounting is the voluntary process concerned with assessing and communicating organisational activities and impacts on social, ethical, and environmental issues relevant to stakeholders.

Employees and Business Ethics

Employees are, in principle, managed by the human resources department- a term which already indicates a first problem from an ethical perspective.The term …human resource management? and its implications have been a subject of intense debate in business ethics.Humans treated as important and costly resource. Consequently, employees are subject to a strict managerial rationale of minimising costs and maximising the efficiency of the …resource?. We should stress that these rights are all more or less directly deduced from the general notion of human rights, and most of them are in some way or other codified in various acts and laws.

The majority of diversity issues have been subject to extensive legislative efforts in most industrialized countries. Consequently, the mere issue of discrimination in most cases should just involve the application of existing legislation to a particular business situation. Discrimination in essence is a violation of the second principle of Rawls?Theory of Justice, that …social and economic inequalities are to be arranged so that they are attached to offices and positions open to all under conditions of fair equality of opportunity?. Sexual and racial harassment: Issues of diversity might be exploited to inflict physical, verbal, or emotional harassment. Regulation reluctant: Blurred line between harassment on one hand and …joking? on the other. Companies increasingly introduced codes of practice and diversity programmes. Equal opportunities and affirmative action: recruitment policies, fair job criteria, training programmes for discriminated minorities, promotion to senior positions. Consumers and Business Ethics

Consumers are obviously one of the most important stakeholders for any organization, since without the support of customers of some sort, such as through the demand for or purchase of goods and services, most organizations would be unlikely to survive of very long. My university, for example, is just as much a consumer as you or we are, in that it buys furniture, stationery, books, journals, cleaning services, and various other products and services in order to go about its business of providing teaching and research. Hence, whilst our main focus will be on private individual consumers such as you or us, we will also at times refer to the broader category that includes the whole chain of internal and external constituencies that receive goods or services through exchange. Consumer rights are inalienable entitlements to fair treatment when entering in exchanges with sellers. They rest upon the assumption that consumer dignity should be respected, and that sellers have a duty to treat consumer as end in them, and not only as means to the end of the seller.

Most ethical issues concerning business-consumer relations refer to the main tools of marketing management, commonly known as the …marketing mix?- product polices, marketing communications, pricing approaches, and distribution practices.Ethical issues in marketing management –product policy:At the most basic level, consumers have a right to products and services which are safe, efficacious, and fit for the purpose for which they are intended. Manufacturers ought to exercise due care in establishing that all reasonable steps are taken to ensure that their products are free from defects and safe to use .Consumers? right to a safe product is not an unlimited right . Safety is also a function of the consumer and their actions and precaution. Criticisms of advertising broken down into two levels: Individual, Concerned with misleading or deceptive practices that seek to create false beliefs about specific products or companies in the individual?s consumers? mind. Social, Concerned with the aggregate social and cultural impacts, such as promoting

materialism. Misleading and deceptive practices-Marketing communications aimed to: inform consumers about goods and servicesA-Persuade consumers to purchase.“Deception occurs when a marketing communication either creates, or takes advantage of, a false belief that substantially interferes with the ability of people to make rational consumer choices”. The UK?s Advertising Standards Authority says ads should be “legal, decent, honest and truthful.Globalization also raises prospect of firms targeting products to low income consumers, …Bottom of the pyramid? concept.Examples of successful initiatives: Microcredit institutions (e.g. Brazil), High nutrition yoghurt company, One Laptop per Child, Criticism, Bottom of the pyramid is a mirage: profit opportunities limited, Social purpose and CSR probably more important than profit motive in developing inclusive markets.Concept suggests that under perfect competition, consumers drive market: Two ethical limitations based on fairness, Consumer sovereignty – customer is king, Consumer sovereignty has three elements, Consumer capability, Information Choice.Ethical consumption is the conscious and deliberate decision to make certain consumption choices due to personal moral beliefs and values