Revisions - CSR & Business Ethics

Week 1 - Introduction
Do companies have social responsibilities?
Business reasons Moral reasons:
- Extra and/or more satisfied customers - Corporations cause social problems
- Employees may be more attracted/committed - Corporations should use their power responsibly
- Forestall legislation - All corporate activities have some social impacts
- Long-term investment which benefits - Corporations rely on contribution of all the
corporation stakeholders

CSR = Corporate, Social, Responsibility

The attempt by companies to meet the economic, legal, ethical & philanthropic demands of a given
society at a particular point in time.

How can CSR be studied ?

Carroll’s CSR Pyramid (1991)

 Archie Carroll’s 4 times of responsibility

Advantages: understand the core component of companies

Economic R: companies need to stay in business
Legal R: companies need to abide by the law
Ethical R: companies should do what is right and fair in the
absence of legal framework
Philanthropic R: be a good corporate citizen

Triple Bottom Line Elkington (1994,1998)

A way to measure & manage the impact & outcomes of business behaviors based on:
- Financial → Profit: Economic, growth, cost savings, development
- Social → People: all stakeholders who influence or are influenced by the company
- Environmental → Planet: environmental accountabilities of companies’ actions

Stakeholder Approach by Freeman (1984)

Stakeholders are groups & people who are being impacted by the actions of companies or who impact
companies through their own actions

To identify stakeholders => + precise def of “affects” & “affected by (Evan & freeman 1993)
- Principle of corporate rights – the corporation has the obligation not to violate rights of other
- Principle of corporate effect – companies are responsible for effects of their actions on others
Companies exposed to contradicting demands from different stakeholders
License to operate (SLO): The ongoing acceptance of a company's standard business practices & by its
employees, stakeholders, & the public

Recap :
- CSR: how companies understand and enact their responsibilities towards society
- Carrols CSR pyramid – different responsibilities build upon one another
- Triple Bottom Line – accounting for stakeholders and the environment
- Stakeholder approach – CSR through understanding firms’ interdependence with people/ group in
society
Stakeholders - reminder
1. Financial: Owners, shareholders, investors, creditors
2. Employees, including management (plus their social environment)
3. Civil society: including local, wider & global community & NGOs
4. Customers
5. Suppliers
6. Competition / industry partners
7. Governments & regulation; local, EU, & global

Doing CSR...from a company perspective

Spheres of Responsibilities:
- Community R: community engagement & impact (+ for small/ medium sized companies)
- Workplace R: Working conditions, even in highly regulated countries
- Marketplace R: upstream & downstream effects of company products & services
- Environmental R: direct & indirect impact of companies’ actions on environment, biproducts of
production, & resource use,

CSR Strategies
Traditional CSR
- Focus on risk. Reactive.
- No clear link to value creation & business model. CSR is distribution of created value.
Contemporary CSR
- Focus on reward. Proactive.
- Clear link to value creation and business model. CSR is value creation.

Business Ethics
Study of business situations, activities, decisions where issues of right/ wrong are addressed.
 Focus is on behaviors of businesses, moral Judgement of right and wrong

Relationship between Ethics & the Law

Why is business ethics important?

- Power & influence of business in society
- Potential to provide major contribution to society
- Potential for businesses to inflict harm on individuals, society, & the environment
- Increasing demands from stakeholders
- Lack of business ethics education or training
- Employees face pressures to compromise ethical standards
- There is a general trust deficit
- Evaluating different ways of managing business ethics
- Interesting & rewarding

Globalisation + Ethics
Cultural Issues - What is ethical/moral in one country may not be ethical in another
Legal Issues - A company leaving their home territory means opens complexity in managing different
laws & legal frameworks, but also benefit from them = Tax evasion of large companies (GAFA)
Accountability - The more global companies become, harder it is to hold them accountable (at least
legally), there is a growing demand for corporate accountability (now by social movement, NGOs, etc)
 Week 2 - Stakeholder Theory & Stakeholder Engagement
Perspectives on Relationships between Stakeholders
Traditional Management Perspective

Stakeholder Theory of the Firm - Edward Freeman

= Focus on corporations & responsibilities towards understanding CSR through its stakeholders, = not
managed for their shareholders.
• Legal Basis: the ‘stake’ in company is established through contracts
• Economic Basis: Externalities outside contractual relationship, & short-term interests of agents
over longer-term interests of managers, employees, customers.

Network Perspective on Stakeholders

Clashing Interests? Oftentimes, interests of various stakeholder’s clash
 compromises, greenwashing / hypocrisy, suppressing of interests, delay

Conducting a Stakeholder Analysis

Identification: Who are they? - Urgency: How urgent is the demand/need of the stakeholder?
Power: To what extent are the actors empowered to influence the situation?
Legitimacy: Do the actors have the authority to influence the situation?
Establish governance & ground rules. Purpose, scope, confidentiality, funding, terms of membership

Stakeholder Analysis
Duties and Responsibilities towards Employees - Primary stakeholder - Can vary but in general….
• Prevention of health risks at work
• Right to remuneration
• Right to a voice/participation
• Data rights & privacy? Holidays? Pension?
Duties & Responsibilities towards Consumers - Primary stakeholder - Prevention of health risks
• Transparency and honesty
• Data rights and privacy
• Waste management: Involvement in the recycling of products and their waste
Duties & Responsibilities towards Suppliers (Primary S) & Competitors (Secondary S)
Fine line btwn competitors & suppliers, because often suppliers can turn into competitors
• level of transparency towards suppliers is limited
• Benefits → cooperation (economies of scale), joint research projects

• ⚠︎overall responsibility over the supply chain

• Social criteria (prevention of slavery, child labor & forced labor)
• Ecological criteria: Consideration of Greenhouse Gas Protocol & Global Reporting Initiative
Duties & Responsibilities towards Financial Stakeholders - Primary stakeholders
• Equity capital VS debt capital / Shareholders VS banks
• 1st interest = financial sustainability & profitability of company
• Some investment funds apply a “reactive strategy” in the sense that they will exclude companies
Corporation
 terms of legal status & the ownership of assets, ‘owned’ by shareholders, exist independently of them
Corporations & Social Responsibilities?
Milton Friedman’s “social responsibility of business is to increase profits” (1970) = critical
- Managers responsibility to act in interests of shareholders (Principal Agent Theory)
- Social issues & pb = responsibility of states rather than corporate managers
- For Adam Smiths ‘invisible hand’ = markets will regulate themselves to maximize social & economic
benefits, so companies don’t need to.

A rebuttel to Friedman.... Managers responsibility to their shareholders....

1. Legitimate criticism of CSR, but legal cases take other stakeholders into consideration
2. Pepsico’s performance with a purpose - CSR stands to correct information asymmetries (by
increasing transparency) & is designed to address negative externalities (social & environmental).
3. If markets worked perfectly – no CSR - Businesses, in form of political support & lobbying have
been involved in ‘business of government’. CSR can increase accountabilities of governments

Can corporations be morally responsible?

Every organization has a corporate internal decision structure which directs decisions in line with
goals: all organizations manifest a set of beliefs and values that lay out what is generally regarded as right
or wrong in the corporation: Legal Identity, Agency, Organizational Culture, Functional Identity

Corporate Citizenship Back to Friedman: corporations shouldn’t engage with social policies & programs
- Governments retreating from catering to social needs, cannot predict future needs/problems
- Regulation delay (think: new forms of organisation)

3 Perspectives on Corporate Citizenship

Extended view of Corporate Citizenship
• Corporations act in areas such as: social rights, civil rights,
political rights
• NOTE: Corporate citizenship can be the result of
voluntary & self-driven, compulsory/pressure driven

Corporate Citizenship…. brings corporate accountability?

Corporate accountability refers to whether corporation is answerable in some way for csq of its actions
• Firms have begun to take on the role of ‘political’ actors – taken up many of the functions
previously undertaken by government bc → governmental failure, increasing power & influence
• Corporate power on the rise: liberalization & deregulation = more power & choice for private
actors, privatization of ‘public’ services, globalization, …

The PB of Accountability
 Who controls corporations? To whom are corporations accountable? What is the relationship
between philanthropic funders and receivers? Key to corporate accountability is transparency.
Transparency is the degree to which corporate decisions, policies, activities & impacts are
acknowledged & made visible to relevant stakeholders

Corporate Citizenship (CC) as a Framework for Business Ethics

Extended view of CC adds something significant that helps frame business ethics in new ways:
 Helps us better see the political role of the corporation, clarifies demand for corporate accountability,
helps to understand business in relation to common citizenship rights within different cultures & some
of the challenges posed by globalization, the rights of citizenship have strong links to the goal of
sustainability, provides a critical perspective on corporations’ social role that is more in keeping with
non-US ways of thinking about business ethics
 Week 3 - Evaluating Business Ethics – Normative Ethical Theories
Normative Ethical Theories
↳ Rules, guidelines, principles, & approaches that determine right or wrong.
Ethical theories help to clarify different presumptions of individuals. Businesses may take different
approaches, which may or may not be based on different ethical theories. They ‘rationalize’.

2 extremes: Absolutism vs Relativism

Ethical Absolutism: universally applicable moral principles. Right & wrong is objective.
Ethical Relativism: morality is context dependent and subjective
Ethical Pluralism? Values can be incompatible, but equally legitimate, openness to different realities

Consequentialist Ethics => Teleological, Goal oriented, base moral judgement on the outcomes of the
act. If the outcome is desirable, then the action that leads to this outcome is right. Focus on intended
outcomes, goals & aims. Major theories: Ethical Egoism & Utilitarianism

Ethical Egoism: Act° morally right if all decision makers freely decide to pursue their short-T
desires/long-T interests. Criticism: Egoism = pursuing 1’s own interest, but not at the expense of others.

Utilitarianism → Morality as collective welfare, based on a cost-benefit

 Consequentialist – measurement of the consequences of an action that makes the actions moral
 Hedonism/Eudemonistic- pleasure in the absence of pain, pleasure is good, pain reduces pleasure
 Maximalism - right action = not good for all – net benefit taking into consideration pain from others
 Universalism - consequences for everyone needs to be considered
Act utilitarianism = single actions & bases moral judgement on the amount of pleasure & pain it cause.
Applied to business → Stakeholder analysis, Social, environmental, community impact

Criticisms with
• Subjectively – how do you define pleasure & pain?
• Equal Weighting – everyone's pleasure & pain are equal, all must be
• Quantification & Calculation – can you apply monetary value to everything
• Distribution of Utility – can overlook minorities, long term vs. short term

Principle Based Theories = set of universal basic principles of right & wrong, having basis in religion.
Ethics of Duty Emmanuel Kant (1724-1804)
↳ abstract/unchangeable obligations defined by established moral rules Humans = rational actors with
free will, duty lies at the heart of morality. BUT principles of right & wrong can be derived to guide this.

Categorical Maxim 1: Consistency - Act only if you can at the same time will that it should become a universal law.
Imperative Maxim 2: Human Dignity - Act so that you treat humanity (you/another), as an end, not as means only.
Maxim 3: Universality - Act only so that the will could regard itself as universally lawgiving

Pb with Kantianism → Undervalue motivation, outcomes, assumption of rationality, individualistic

Ethics of Rights - Focus on concept of universal human rights - John Locke, JJ Rousseau
Human rights are basic, inalienable, unconditional, no exceptions. With rights, comes duties.
Duties → based on pre-established rights, not derived from categorical imperative = basis of constitutions
 United Nation Declaration of Human Rights (1948) - UNDHR
 European Convention on Human Rights (1953)
Corporations = judged on human rights records
 4 themes: Human Rights, Labor, Environment, Anti-Corruption

The UNDHR also outlines rights of employment....

 UN Working Group on Business and Human Rights (HR)
 UN Guiding Principles on HR (state = duty to protect HR/ business: corporate responsibility to
respect HR, prevent, mitigate and remedy/ judiciary…)

Ethics of Justice → focus on fair treatment of individuals, Result in everyone getting what they deserve.
Fair Procedure (procedural justice) is everyone free to acquire rewards for their efforts?
Fair Outcomes (distributive justice) = csq distributed in a fair manner, following specified principles?

Social Contract Theory - Jean-Jacques Rousseau (1712-1778)

People are generally peaceful, kind, good. Social organization is needed to handle resource scarcity, in
form of strong democratic principles:
 Social Contract Theory: hypothetical agreement btwn individuals society & those who govern it
= establishes fair relationships, rights & responsibilities
Business → involved in social contract = benefit from stability, rule of law, infrastructure. When they
participate in society, they are given a license to operate, & accept requirements

John Rawls - So how do we decide what should be included in the social contract?
We need to use the veil of ignorance
 Individuals in society make decisions without knowing their own role in society.
 This leads to a social contract based on:
o Extensive & inclusive basic rights and liberties
o The difference principle, the greatest benefit for the least advantaged*
o The principle of equal opportunity, access to all positions in society.

2 alternative theories
Virtue Ethics = individual
 Focused on characteristics of the person doing the action
 To be a moral (= intellectual & moral virtues) person you must have good traits, virtues, character.
 Ethical Solutions based on => context, culture, community
= Moral guidelines, motivation to be a good person
Ethics of care
 Responsibility of meeting needs of others
 Moral emotions are necessary for reason & morality
 Morality is not universal (subjective)
 Private sphere is considered due to interdependence
 Humans are social (interdependence with others)

Limits of Theories These theories = all based on Western traditions. So: too abstract, too narrow, too
objective & elitist, too impersonal too rational & codified, too imperialist
 Week 4: Descriptive Ethical Theories
Descriptive Ethical Theory
↳ How ethical decisions are made in businesses & explains what factors influence the process &
outcomes of those decisions.

What is an Ethical Decision? If → ‘right’ & ‘wrong’ = moral decision. How do you decide what is right?
Ethical decision making - Rationalist perspective
Awareness: Judgement: Intent: Behavior: Engage
recognise make moral Establish in moral behaviour
moral issue judgement moral intent
The issue of whether & how normative theory is used by an individual decision-maker depends on a
range of factors that influence the decision-making process
People from different culture → diff beliefs & values… = variations in ethical decision-making

Group Dynamics
Asch Conformity Experiment
↳ if & how individuals yielded to a majority group the effect of such influences on beliefs & opinions =
evidence for power of conformity (ppl publicly endorsing group response even if it’s incorrect)
People conform: to fit in with the group (normative influence = willingness to conform publicly to
attain social reward, avoid social punishment) & believe group = better informed (informational infl°).
Groupthink
↳ Phenomenon that occurs within a group of people where the desire for harmony or conformity in the
group results in an irrational or dysfunctional decision-making outcome

Brown Eye, Blue Eye Experiment

 Small cues from authority enough to start discrimination
 Perf° of “better” group ↑ whereas that of “lower” group ↓ = aggravates group divide
 Demonstrates how completely “normal” people can be influenced to act against their own principles

Milgram Experiment
 Ordinary people are likely to follow orders given by an authority figure (even to kill an innocent)
 Extreme willingness of adults to go to almost any lengths on the command of an authority constitutes
the chief finding of the study
Autonomous state – direct their own actions, & take responsibility for results of actions
Agentic state – allow others to direct their actions & pass responsibility for csqs = agents. 2 things must
be in place: who give orders = legitimate + believe that authority accept responsibility for what happens.

A framework for understanding ethical decision making

Individual → age, gender, education, national/culture, locus of control, personal

values/integrity, CMD.
Situational → Issue related, moral intensity & framing, context related, rewards,
authority, bureaucracy, work roles, organizational, culture, national context

Moral intensity vary according: magnitude of consequences, social consensus, probability of effect,
temporal immediacy, proximity, concentration of effect.
Moral framing = Language = important aspect
Moral muteness - failing to associate morality with their behavior bc of concerns regarding perceived
threats to: Harmony, Efficiency & Image of power and effectiveness

Organizational Influences
Work roles → expectations about what to value, how to relate to others, behave/ functional or hierarchical
 Organizational norms & culture → group norms delineate acceptable standards of behavior within work
community (talking, acting, dressing, or thinking)
Bureaucracy - Max Weber
formal organizational type based on rationality, hierarchy, rules & procedures & a fixed division of tasks
 bureaucracy has several negative effects on ethical decision-making
Locus of Control - Trevino & Nelson
Internal locus of control → I make things happen (active)
External locus of control → Things happen to me (passive)

Personal Values
Personal values Personal integrity Moral imagination
Specific mode of conduct is personally or socially Adherence to moral Sense of variety of possibilities &
preferable to an opposite mode of conduct principles or values moral csq of their decisions

Whistleblowing What happens when you witness an unethical act?

 action of whistleblowing = revealing to public about unethical acts associated with an organization.
o Overtly or covertly, can cause harm to employee = time to come forward
Whistleblowing “ethical, counter-organizational behavior”
↳ disclosure by organization members (former or current) of illegal, immoral, or illegitimate practices
under the control of their employers, to persons or organizations that may be able to effect action.
Internal whistleblowing: whistleblower reports misconduct to another person within the organization
External whistleblowing: whistleblower reports misconduct to a person outside organization

Authority => Using power to compel a subordinate to act in a certain way.

Psychological Factors Cognitive moral development (CMD) Lawrence Kohlberg

3 levels of reasoning we can apply to ethical issues & pb, depending on their cognitive capacity:
Pre-conventional: basic morality, to avoid punishment/for instrumental purposes
Conventional: morality based on conformity, expectations
Post Conventional: autonomous decision making based on concept of rights, & universal eth° princip°.
Criticisms → gender bias (implicit value judgements, invariance of stages) + cognitive inconsistency

Rationalizing Unethical Behavior

 Denial of responsibility, injury, victim, weighting, appeal to higher loyalties, metaphor of the ledger

Power Dynamics
Power: ability of one person (or group) to influence & change the attitudes/behavior of others, which they
wouldn’t have without our intervention
Influence: informal aspect of P. To emphasize psycho°, & mostly unconscious, aspect of a relationship
Authority: formal aspect of P. Right to influence another with rules, laws & regulations, gov° institution.

Position Power VS Personal Power

Position P→ legitimate (formal authority), Personal P → expert (high level of expertise), information
reward (salary increases, bonuses), coercive (fear (access to specific information), referent (interpersonal attraction,
of consequences) charisma)

Effects of Power
- promotes stereotyping, devaluing others, selfishness, & aggression
- leads individuals to focus on goal-relevant aspects of a situation, ignore impediments to goal
attainment, & minimize the size of constraints
 Week 5 - Working Conditions: White Collar Perspective
Who is an employee?
When evaluating the stakeholders group “employees” → not all who work for a company are employees
Rights: Rights of workers based on a general understanding of HR + codified in employment law.
Duties: Obligations of workers towards their employer = individual contracts + wider employment laws.

Payment & Remuneration Determining fair wages = expectations placed on employee + perf° (goals)
Pb of performance-related pay (PRP) = salaries & benefits become less secure, Pygmalion effect,
 Increasing focus on income equality
Ethical issue = Fairness: when people perceive equity btwn their worth & input of individual
 Fair/Living wages, wage inequality, wage gaps btwn employees
Gender Pay Gaps
Facts: Gap widens with age, highest gaps = financial & insurance activities, higher in private sector
Reasons: Sectoral segregation, unequal share of paid and unpaid work, glass ceiling, pay discrimination

Maslow Hierarchy of Needs Full time?

 Nb of working hours (35h / 40h week)
 Time as a commodity
o Pb with new in technology & automation
o Leads to high levels of ‘presentiism’ or ‘bodies in chairs’
 No direct correlation btwn working hours & productivity
 Spare time boost economy
 Supposed link btwn working hours, numbers of workers and
unemployment rates often less straightforward in practice:

21h Work-week - Reducing working hours, but keeping the same pay = "new model of wealth creation,
based on equality, diversity & economic stability”
 employees happier, engaged, focused, BUT lose social aspects. Employers = loss in productivity.

Workplace Discrimination
 Preferential treatment on the grounds of some enduring human characteristic, other than merit, that is
irrelevant to the effective performance of the job in question (gender, race, age, familial obligations)
 Rawls’ Theory of Justice: Social & economic inequalities are to be arranged so that they are attached
to offices & positions open to all under conditions of fair equality & opportunity.
Intersectionality:
↳ how different aspects of an individual’s identities contribute or compound and reinforce discrimination.

Monitoring of Employees = Surveillance & control of workers (computer) = Invasion of privacy

Ethical issue = Employee Privacy: ability to control information about themselves, & how & if
information about themselves is shared. Types of privacy we may want to protect - Simms 1994
 Physical: ‘right to one’s own space’, cameras in rest areas?
 Social: private vs. work life, be liable for behavior outside the office
 Informational: how and when private data is used, monitoring private social media
 Psychological: attempting to control/force to share private thoughts = how employees must behave

Hawthorne Effect → reactivity in which individuals modify an aspect of their behavior in response to
their awareness of being observed
- study to see if its workers become + productive in higher/ lower levels of light
- worker’s productivity seemed to improve when changes were made, & slumped when study ended
- Suggestion → productivity gain occurred bc of motivational effect on workers of interest

Reference to the Panopticon Experience with prisoners: they were only monitored by a guard, without
knowing when they were being monitored = regulated themselves for fear of being watched every time
 led to mental disease = mechanism of surveillance as a tool of oppression and social control
In business: each employee's contribution to the prod° process = objective data, + important for managers
to be able to analyze work rather than analyze people. Diff: Watchtower in Panopticon visible to inmates,
whereas controlling mechanisms of technology = invisible

Employee’s Duties: Deviant Behavior

Workplace Deviance: intentional desire to cause hard to an organization. Types:
- Organizational Deviance
- Silence, withholding information
- Cyber Loafing - Stealing/Theft

Theoretical Explanation for Deviant Behavior

Psychological Contract
- The perceptions of both parties to the employment relationship, organization and individual, of the
reciprocal promises and obligations implied in that relationship
Psychological Contract Breach
- Perception that duties of employer are not met
- Perception of mistreatment
- A form of negative reciprocity
When good employees go bad....& then turn good again → Whistleblowing

Dehumanized Workplaces
- Impact of technology, rationalized workplaces & division of labor has meant many employees
simply repeat the same monotonous and stupefying actions over & over again
- In large multi-nationals, it can be hard to see the ‘bigger’ picture and impact of your work
- Little meaning and satisfaction in their lives, Around 60% of people are emotionally detached at
work (Gallup World Poll 2022), companies with detached workers are 23% less productive
compared to companies with engaged workers.

Re-humanized Workplaces
Attempts to re-humanize the workplace: ‘empowering’ the employee, ‘job enlargement’, ‘job enrichment’
 more effective in some cultures
 ESG metrics, report on ‘people’, but often only demographics and pay, not on wellbeing.
 Leadership plays a key role, giving an employee a sense of meaning in their work

Meaningful Work → work that feels significant = happier, + engaged, better mental health

Bhutan & Gross National Happiness (GNH): philosophy that guides the government o
 Index which is used to measure the collective happiness and well-being of a population
4 pillars: Sustainable & equitable socio-economic development, Environmental conservation,
Preservation and promotion of culture, good governance

Ethical issue → discrimination = fairness => reflect deep seated pb in organizational justice
o Procedural Justice – the process in which decisions are made
o Distributive Justice – fairness in the distribution of rewards/resources
Solutions → Legislation & legal proceedings, applying procedural justice, affirmative action
Challenges → difficult to determine to what extent certain physical charact° = necessary for a position
→ reverse discrimination, worse if the person less qualified
Understand/justify Retributive Justice: making up for past injustices
Distributive Justice: rewards are allocated fairly among groups
 Week 6 - Working Conditions Gig Economy, Migrant Workers, & Modern Slavery
Gig Economy
Temporary work (or gigs) refers to an employment situation where the working arrangement is limited to
a certain period based on the needs of the employing organization
Temporary employees = used across many industries, hired for a particular task. Increase economic risk
& uncertainty, & lack social welfare structures → Moving towards dismantling employment rights

It changes employment relationship → open rather closed employed, earners can set their own
schedules, work for competitors, less supervisory control …
 Cause different dependency of workers, based on the level of dependence for their survival. Lack of
employee classification = lawsuits (uber) Platform companies also seen as profitable due to unfair
market conditions (due to lack of or ignoring of, regulations).

Uber → american multinational transportation network company (TNC) offering services that include
peer-to-peer ridesharing, ride service hailing, & food delivery.
 Most drivers = independent contractors: affect taxation, work hours, & overtime benefits.
 Lawsuits = by drivers alleging that they are entitled to rights of being considered "employees"

Issues with platforms & ‘Air BNB effect’

Air BNB → largest real estate companies (0 housing stock), platform that allow individuals to list homes
for short term rents (like a hotel).
PB: Fight against regulations + leave legal responsibility/ compliance to the users, destroy housing
market for local communities, hotels complained too + lack of local employment,…
Food Delivery Platforms = very high rates to restaurants, low pay for employees, dark stores

Working Conditions: A global perspective

Race to the bottom
MNCs play a role in changing standards in countries
- Globalization allows corporations to have broad range of choice of location
- Developing countries compete to attract foreign investment
- Large investors tend to choose country with most ‘preferable’ conditions
o Lowest level of regulation and social provision for employee
- Leads to ‘race to the bottom’ in environmental and social standards
o Argument that MNEs have a duty to promote minimally just social & political institutions
where they operate if these do not exist, bc of duty to avoid harm (Nien-hê Hsieh, 2009)

Migrant Labor
Growing mobility of workers is a recent phenomenon of globalization
- Typically, north-south, can also be in other regions (e.g. UAE)
- Workers can also be attracted to particular industries in areas where there is no local labor
Migrant labor often puts the corporations in a position to provide social infrastructure: housing, transport,
healthcare, & education

2 vastly different types of contracts: expatriates & migrant workers

 Expatriates = skilled employees that enjoy lots of benefits when taking up position abroad. They can
leave and ‘go home’ if they need or want too.
 Migrant workers are typically classified as those coming from poor countries being employed in low
skilled and low-salary jobs
Due to bad economic circumstances in their home country, migrant workers may be willing or forced to
work in otherwise unacceptable work conditions

Vulnerabilities → open in wake of COVID (lock downs, unable to work/social distance/go home)
 Some governments mandated that workers still be provided with food & accommodation, many didn’t
comply. Many workers have debt/bondage that they still need to repay

Migrant Workers in Europe

 Due to colonial ties & proximity to eastern Europe, Western Europe has long been a major destination
for migrant workers
 Waves of illegal immigration and the rise of anti-immigration ideologies means the struggles of
migrant workers are often overlooked.
 First-generation immigrants face considerably higher levels of unemployment compared to native
born individuals. They also tend to be under employed.
 Most who arrive illegally face issues and are most likely to be in industries such as domestic work,
agriculture, manufacturing, & construction.
 Many victims are foreign nationals from countries such as Romania, Poland, Albania & Nigeria

Migrant Workers in the Middle East and Gulf

- Migrant workers in a particularly vulnerable situation due to distance to family & social circles,
language barriers & legal status
- In Qatar & UAE, more than 80% of the population consists of non-nationals (=contractors)
Recruitment agents: workers’ pay a fee to agent that creates a dependency through the debt, low wages
make it impossible to repay loans.

Maslow’s Hierarchy of Needs => Working conditions may not even meet basic human needs

Modern Slavery 50 million people are living in modern slavery (= forced to work, owned/controlled by
an “employer”, dehumanized & threatened as a resource, physically constraint, underpayment)
 86% of forced labor is linked to the private sector in industries (manufacturing, construction,
agriculture, domestic work).

The Corporate Citizen and Employee Relations in a Global Context

Continental Europe => takes interest of employees + than Anglo-American model (‘Co-determination’)
In developing countries: level of regulation (or at least enforcement) = poor, corporate actions therefore
often voluntary ‘good citizenship’ providing more than required
 Week 7 – Shareholders, social media, Digitalization, and AI
Shareholders as stakeholders
 Most large companies separate ownership & management = fragmented ownership
Rights → sell their stock, vote, information about the company, residual rights (in liquidation)
Duties of Managers → Act for the benefit of the company, care & skill: managers must use professional
& effective ways of running the company, duty of diligence: active engagement in company affairs
Conflicts btwn rights of shareholders & duties of managers focus on the nature of corporate governance

Corporate Governance or Principle Agent Theory

↳ rules, processes/ structures in which corporations are direction & controlled in interests of shareholders.

Ethical Issues → independence of supervisory board (non-executive board members who purpose to
ensure the interests of principals). No conflict of interest if: non-executives come from outside, no
personal financial interest in company, + reasonable remuneration, limited & independent appointment
time (by shareholders), sufficient resources are available to research & understand the company

Ethical Issues: Executive Remuneration

Executive pay → debate about inequality & fairness of pay systems around the world (executive wages)
Addressing a key agency pb: to make sure managers act in the best interest of their agents (shareholders),
then their compensation should be in the same ‘currency’ of shareholders (stock options).

Board Diversity → range of skills, backgrounds, age, gender, ethnicity, & sexual orientation represented
on the board of directors = better/successful boards, financial performance, corporate governance

Mergers & Acquisitions

Acceptable if results in transfer of assets to owner who uses them more productively
 Central concern is managers who pursue interests not congruent with shareholder interests
(Executive prestige VS. profit & share price)
 Some mergers focus only on 1 aspect (specific technology), leaving other parts liquidated.
 Hostile takeovers: Purchasing a majority stake against the wishes of the board
Ethical concern: shareholders who don’t want to sell their shares, & essentially may end up with a
majority owner who is interested in asset stripping. = interferes with property rights of other shareholders.

Financial Markets: Insider Trading

 occurs when securities are bought & sold based on material non-public information
Ethical arguments: fairness, misappropriation of property, harm to investors & market, under mining of
fiduciary relationship, insider trading can erode trust in the market in the long term; hence its illegality

(Speculative) Faith Stocks = companies did not make any profit but worth billions on the market
Ethical issue: bonds based entirely on speculation without always fully revealing amount of uncertainty

High frequency trading & Short Selling

HFT → occurs when brokers buy financial assets for microsec° & gain from minimal changes in asset
value. Ethical issue: depending on hardware, players have info° ahead of others & algorithms use
increased risk of market crashes
Short selling → Process where investor borrows a security & immediately sells it in hope of purchasing
security back at later date at a lower cost. Ethical issues: risky process + raises also ethical questions
regarding individuals & organizations profiting from firms’ decline

Financial Professionals → attempt to bridge asymmetrical information btwn shareholders & managers.
Actors: accounting firms & credit rating agencies.
 modern trends in accounting firms is to assess both past & ‘future potential’ of firms performance.
 How audit firms frame the ‘future potential’ of the firms.
Credit rating agencies provide credible assessments of financial products. They attempt to provide
comparability in rather deregulated international financial markets.

Private Equity & Hedge Funds

Rise of private equity & hedge funds exacerbate issues around transparency & shareholder control
 no longer many obligations for public information about a company once it has been taken private
Hedge funds do not have to report to regulators in the same way as other investment firms
 no report fully to own investors + lack of transparency hides systemic risk

Cryptocurrency → digital currency that uses encryption techniques to verify secure transactions
Benefits → affordability, security, inclusive. Lack of regulation & high risks, large environmental costs

Sharing Economy - New era started (NOT gig economy – diff: employees & labor markets)
economic system built around the sharing of human & physical resources through peer-to-peer networks
“Access over ownership”.
1st mission: mitigate hyper-consumption & truly build community connections => shifted towards
convenience, price, & transactional efficiency: “community” as commodity. Key to reducing hyper
consumption & making use of ‘idling’ assets.
 Growing risk of sharewashing. Not unpb with insurances/ employee rights, lots of legal grey area…

Key to Sharing Economy is: Trust

 Interpersonal trust: willingness of a party to be vulnerable to the actions of another based on
assessments about the characteristics of the trustee such as ability, benevolence, & integrity.
 System trust: Reliance on the integrity, ability, or character of a system (government)

Social Control
Society uses sanctions to enforce a standard of behavior that is deemed socially acceptable. Individuals
and institutions utilize social control to establish social norms and rules, which can be exercised by peers
or friends, family, state and religious organizations, schools, and the workplace.
o Goal: maintain order in society & ensure conformity in those who are deemed as deviant or
undesirable in society
 Small scale/informational social controls: Reinforcement of norms and agreements through
reputation & group membership/exclusion
 Large scale/ formal social controls: Reinforcement through official laws and sanctions

Informed Consent → process for getting permission before conducting intervention on a person, or for
disclosing personal information
 Can be said to have been given based upon a clear appreciation and understanding of the facts,
implications, and consequences of an action
 To give informed consent, the individual concerned must have adequate reasoning faculties and be
in possession of all relevant facts
o Most terms & conditions too long and complex to give an actual informed consent
o Some aspects of ‘permissions’ are not clear
Micro-targeting
= used by political parties & election campaigns (=direct marketing data mining techniques = involve
predictive market segmentation
 Uses various means of communication such as direct mail, calls, home visits, television, radio
 = transmitting a tailored msg to subgroup of electorate based on unique info° about that subgroup
 Combination of microtargeting, psychometrics and online advertising is a paradigm shift in
advertising broadly and election campaigning

Week 8 – Consumers
Consumer Issues by Industry
Multinational Drug companies
Fast food and soft-drink companies

Consumers as Stakeholders
Definition: Inalienable entitlements to fair treatment when entering into exchanges with sellers
UN Guidelines for Consumer Protection; example “right to truthful information”
 Not always easy to implement, as claims made by manufacturer may not be factually untrue, but
still might end up misleading consumers

“Caveat emptor” principle = “buyer beware”

Consumer’s sole right was to veto purchase & decide not to buy something
 The burden for protecting the consumer’s interest lay with the consumer
 Assumption that consumer dignity should be respected
 sellers have a duty to treat consumers as ends in themselves, and not only as means to the end of
the seller.
o Who does this sound like?
o But...what constitutes fair treatment? (Kant’s 2nd Maxim)
o In the past, consumer rights based on caveat emptor
 Consumers responsibility for the consumption of the product
 But Caveat emptor eroded by changing expectations & consumer laws
Consumers Duties
 Larger consumers ..... Taking unfair advantage from suppliers
 Individual consumers.....
o Lying about products
o Returning used products
o Stealing products and services
o Leaving untruthful online reviews?
 o Consumption? (UK Modern Slavery Act)
Caveat Empire
 Consumer protection & consumer rights are legally protected in many countries, even in international
guidelines (like the UN)
 Business ethics starts where the law ends and companies can become ‘creative’ in the way they
market their products.

Rights & Duties- Safety

Producers- Duties Consumers- Duties
Obliged to provide products and services that are Obliged to use the product as intended
safe, efficient and fit for purpose
Unlimited safety isn’t possible it is a balance btwn due care, product labelling & consumer awareness

Ethical Issues in Marketing

Producers and Consumers.....
 It will always be a balancing act between the lengths that producers go to selling safe products, and
the way consumers use them.
o Obliged to provide products & services that are safe, efficacious & fits for purpose
 Linked to companies interest in relation to competitiveness
o What lengths should producers of goods & services go in order to make them safe for use?
o To what extent are producers responsible for the consequences of their consumers’ use of their
products?
 Consumers’ right to a safe product is not an unlimited right
 Safety is also a function of the consumer and their actions and precautions
 Usually can be aligned by: due care, product labelling.

Ethical Issues in Advertising

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 (to buy more!)
 Social: concerned with the aggregate social and cultural impacts, such as promoting materialism.
Reinforcing stereo types/ racism in society.

Misleading and deceptive practices

Marketing communications aimed to:
– Inform consumers about goods and services
– Persuade consumers to purchase

The problem with persuasion

 Deception occurs when the ability of people to make rational consumer choices is interfered with by
marketing communications that rely on false beliefs (Boatright, 2012)
o When advertisers move towards taking advantage of a belief that is untrue
o Limits the ability to make a rational choice
 The UK’s Advertising Standards Authority says ads should be “legal, decent, honest and truthful”

The problem with persuasion

Advertising industry pushes towards self regulation
 Assessing deception will depend on
o The degree of interference in a persons rational decision making
o How can we separate fact and fiction
o And what is the potential harm done

Social and cultural impact on society

Criticisms that marking communications:
- Are intrusive and unavoidable
 - Create artificial wants
- Reinforce consumerism and materialism
- Create insecurity and perpetual dissatisfaction
- Perpetuate social stereotypes
Such criticisms have been common for at least the last 30 years

Persuasion for good? Inclusive Marketing

● A means of incorporating and considering diversity in marketing

Pricing
Fair Pricing
Central idea: Products and services should be offered at a fair price
 Perceived fairness can depend on relative costs to producer as well.
Neoclassical economics assumption: Prices will set at a market equilibrium
 Assumption: Buyers and sellers can leave the market any time
 Only valid when there are number of competing offerings
 Information asymmetries
In many countries regulated through cartel offices

Pricing issues are central to the notion of a fair exchange btwn 2 parties, & the right to a fair price - key
rights of consumers as stakeholders. 4 types of pricing practices where ethical problems may arise:

Marketing Strategies
State of being unable to make informed, reasoned decisions about a product purchase
1. Lack of sufficient education
2. Consumers who are easily confused or manipulated due to old age or senility
3. Consumers who are in exceptional physical or emotional need due to illness, bereavement, or
some unfortunate circumstance
4. People who lack the necessary income
5. People who are too young to make independent decisions

Advertising to Children
- strong regulations protecting children against certain types of advertisements
- Companies rely on the ‘pestering power’ of children to adults
- Companies design packaging/product placements to target children

Consumer Exclusion
Certain groups of consumers may be discriminated against and excluded from being able to gain access to
products that are necessary for them to achieve a reasonable quality of life
Inclusive Marketing = diversity in all forms, reflect wide range of ppl in society – & potential customers

Market Research
Main issue is possible threats posed to the consumer’s right to privacy
Recent areas of concern :
- Continuous collection of data by tech giants, for example, data collection via peoples’
smartphones
- Use of genetic testing results by insurance companies
o Predict likelihood of an individual’s genetic predisposition to certain conditions and
illnesses ‘genetic discrimination’?
- Social media data used to calculate individual creditworthiness

Globalization
Level of consumer protection varies greatly amongst different countries
 Offers companies the opportunity to exploit these differences
o Higher standards of protection in developed markets can be seen as an added cost burden
o Example of tobacco, fewer restriction on marketing in developing countries
 Companies are not only exporting products, but ultimately exporting a whole set of cultural values
o Known as cultural homogenization
o Hegemonic influence of global (American) brands on local markets
o Considerable debate around role of advertising in promoting consumerism in emerging
and transitional economies

Low Income Consumers

Globalization raises prospect of firms targeting products to low income consumers
 ‘Bottom of the pyramid’ concept. Examples of successful initiatives:
o Microcredit institutions
o High nutrition yoghurt company
o One Lap Per Child
 Criticism
o Bottom of the pyramid is a mirage: profit opportunities limited
o Social purpose and CSR probably more important than profit motive in developing
inclusive markets

Micro Credit
 Providing small loans to individuals who cannot access normal credit
 Many people giving small amounts -> disperses risk
 High repayment success
 Can target specific groups of people
 Banking based on trust, not assets
 As the industry matures, so do allegations of exploitation, & moving away from ‘investing in
entrepreneurs’ towards a focus on profit making off the backs of the worlds poor.

Unbanked.....as of 2017 = Mostly women (increases with poverty). China & India = largest population of
unbanked people.
BUT
 Since 2011, the population of those with bank account has increased by 25%
 Gender inequality IS reducing
 Linked with level of education
 Financial literacy still lacks

Grameen in the developed world

- Focus on entrepreneurial support
- Access to women, undocumented people, marginalised groups
- Not just loans, but also financial training, peer support, bank accounts, credit building
- Based on a three year, randomizes control trial, a recent study has shown a document increase in
business ownership, net income, credit scores, and higher savings.

Consumer Sovereignty
Is Consumer Sovereignty a Solution?
 Concept suggests that under perfect competition, consumers drive market
 Two ethical limitations based on fairness
 Consumer sovereignty – customer is king
o Consumer sovereignty has three elements (Smith, 1995)
 Consumer capability, information, choice
 How is consumer sovereignty to be assessed?
o Consumer sovereignty test

The Sovereignty Test

Sustainable Consumption
 Consumption is a clear barrier to sustainable societies and sustainable businesses
 Particularity problematic as resource consumption is set to double as the consumption power of
poorer countries continues to increase
 Consumer society is based on two underlying premises
o Consumption can increase because there are resources are non finite
o The wait of products created by products can be disposed of indefinitely
 Macro Market – recognising broader social & environmental csqs of market° & consumption.
 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’
(European Environment Agency definition)
Steps to Sustainable Consumption
1. Producing environmentally responsible products
2. Service replacements for products
3. Product sharing
4. Reducing demand

(UN) sustainable consumption

Key Issues
○ Resources used to create products
○ Lack of adequate disposal
What about ‘donation bins’? ‘second hand industries’ Lack of adequate disposal has a human impact
(seen in Blood, Urine, Milk) and an environmental impact (Air, Soil)

Session 9: Consumers, suppliers and supply chains

Suppliers
Global Production Network GPN
According to a GPN model, decisions regarding how firms deal with any single other firm can impact on
other members of its business network, including suppliers, potential suppliers & competitors
- are in turn affected by institutional context and global distribution processes
- impact workers & consumers
- can bring people together in unprecedented ways across cultures, classes, ages, genders &
ethnicities, creating new webs of social relationships (Reinecke et al 2018)

The Global Production Network