business ethics lecturer: piet westerhuis windesheim university,zwolle the netherlands
TRANSCRIPT
Business Ethics
Lecturer: Piet Westerhuis
Windesheim University,Zwolle
The Netherlands
Introducing Business Ethics
Lecture 1
Overview
• 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, activities, and decisions where issues of right and wrong are addressed.
Ethics and the law
Ethics
Law
grey area
Defining morality, ethics and ethical theory
• Morality is concerned with the norms, values and beliefs embedded in social processes which define right and wrong for an individual or a community.
• 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 any given situation.
• These rules and principles are called ethical theories.
The relationship between morality, ethics and ethical theory
…that can be applied to any situation.
… to produce ethical theory …
Ethics rationalizes 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 provide major contribution to society
3. Potential to inflict harm
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Interesting 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
Nonprofit
Business
Government
© 2
008
Eth
ics
Res
ourc
e C
ente
r
Source: Ethics Resource Center (2008)
Observed 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
008
Eth
ics
Res
ourc
e C
ente
r
Nonprofit
Business
Government
Differences 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
Civil society organizations
Small businesses
Large corporations
Rule of law, corruption, conflict of interest; procedural & accountability issues
Delivery of mission to clients; integrity of tactics; legitimacy and accountability
Financial integrity, employee/customer issues
Formal, bureaucratic Informal, values-based
Informal, trust-based
General public, higher level government organizations
Donors and clientsOwners
Inertia, lack of transparency
Lack of resources and formal training
Lack of resources and attention
Globalization: a key context for business ethics?
What is globalization?
• Globalization is not the same asis not the same as:– ‘internationalization’ – ‘westernization’
• Globalization isis: a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations.– ‘deterritorialization’
Relevance 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 for greater profitability, but also greater risks. Lack of regulation of global capital markets, leading to additional financial risks and instability.
Corporations outsource production to developing countries in order to reduce costs in global marketplace - this provides jobs but also raises the potential for exploitation of employees through poor working conditions.
Global products provide social benefits 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 face the possibility of exploitation by MNCs.
Suppliers in developing countries face regulation from MNCs through supply chain management. Small scale indigenous competitors exposed to powerful global players.
Global business activities brings the company in direct interaction to local communities with possibility for erosion of traditional community life; globally active pressure groups emerge with aim to “police“ the corporation where governments are weak and tolerant.
Stakeholders Ethical impacts of globalization
Shareholders
Employees
Suppliers & competitors
Civil society (NGOs, etc)
Government & regulation
Consumers
Globalization weakens governments and increases the corporate responsibility for jobs, welfare, maintenance of ethical standards, etc. Globalization also confronts governments with corporations from different cultural expectations about issues such as bribery, corruption, taxation, and philanthropy.
International perspectives on business ethics
Different 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
behaviour? • What are the key issues in business ethics? • What is the most dominant stakeholder
management approach?
Regional differences: Europe, North America, Asia
The individual
Europe N. America Asia
Who is responsible for ethical conduct in business?
Who is the key actor in business ethics?
What are the key guidelines for ethical behaviour?
What are the key issues in business ethics?
What is the dominant stakeholder management approach?
Top management
Government, corporations
Managerial discretion
Corporate governance and accountability
Implicit multiple stakeholder approach, benign managerialism
The corporation
Corporate codes of ethics
Misconduct and immorality in single decisions situations
Focus on shareholder value
Social control by the collective
Government, trade unions, corporate associations
Negotiated legal framework of business
Social issues in organizing the framework of business
Formalised multiple stakeholder approach
Sustainability: a key goal for business ethics?
Defining sustainability
• Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (World Commission on Environment and Development 1987)
• Sustainability refers to the long-term maintenance of systems according to environmental, economic and social considerations
The three components of sustainability
Economic Social
Environmental
Triple bottom line
• Coined by John Elkington• Bottom line thinking suggests sustainability
as a goal• Three dimensions:
– Environmental perspectives– Economic perspectives– Social perspectives
Corporate commitments to sustainability
“At BP we define sustainability as the capacity to endure as a group: by renewing assets; creating and delivering better products and services that meet the evolving needs of society; attracting successive generations of employees; contributing to a sustainable environment; and retaining the trust and support of our customers, shareholders and the communities in which we operate.”
“[Sustainability] means enhancing our relationship with host and partner governments, building consumer confidence in diamonds, and ensuring our activities contribute positively to … both present and future generations.”
“Corporate responsibility (CR) at Nokia is a collective effort. We believe that management of CR issues is most effective when sustainability policies and programs are embedded in every aspect of our operations. ”
“ [For Toyota, a guiding principle is] ‘contributing to the development of a prosperous society through the manufacture of automobiles.’ ‘Contributing to the development of a prosperous society’ means ‘contributing to the sustainable development of the earth.’” “Values, social responsibility and active sustainability are integral [to] our company culture. We are future-oriented in our approach to important issues such as climate change. We operate a broad range of [R&D] activities and provide trend-setting approaches to the mobility of tomorrow.”
Company Sustainability statement Source
BP
DeBeers
Nokia
Toyota
Volkswagen
Sustainability Report, 2007
www.debeersgroup.com, 2009
CSR Report, 2007
Sustainability Report, 2008
www.volkswagenag.com, 2009
Summary
• Definition of business ethics• Business ethics is vital for business in
contemporary capitalism• Global view is essential to understand ethical
issues• Different regions have distinctly different
perspective on business ethics issues• Sustainability is an important goal for
business ethics