BUSI 3351 Business Ethics

Chapter 1: Introducing Business Ethics

College of Business Administration

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 Overview
• What is business ethics?
• Why is business ethics important?
• Globalization: a key context for business ethics?
• Sustainability: a key goal for business ethics?

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 What is business ethics?
• Business ethics is the study of business situations,
activities, and decisions where issues of right and
wrong are addressed.

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 Ethics and the law

grey
Ethics Law
area

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 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.

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 The relationship between morality, ethics
and ethical theory

Ethics … to
rationalizes produce …that can
morality … ethical be applied
theory … to any
Potential
Morality Ethics Ethical situation.
solutions to
theory ethical
problems

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 Why is business ethics important?

1. Power and influence of business in society

2. Potential to provide major contribution to society
3. Potential for businesses to inflict harm on individuals, society
and the environment
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Businesses face a trust deficit
8. Evaluating different ways of managing business ethics
9. Interesting and rewarding
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 Ethical Issues in Different Industries

• Chemical industry – competitive practices,

environmental responsibility, health and safety and
human rights
• Information and mobile technology industry –
competitive practices, fair pricing, global production
methods, data protection, protection of consumer
from harmful materials and energy and CO2 usage
• Financial services – weak regulations, financial
crime, responsible lending, sales practices and
consumer protection, tax evasion and avoidance

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 Differences across organizational types
Stakeholders Large Small Civil Society Public Sector
Corporations Businesses Organisations
Main priorities Financial integrity, Employee, Delivery of Rule of law,
in addressing employee/custom customer/commu mission to clients; conflict of interest;
ethical issues er issues nity issues legitimacy and accountability
accountability issues
issues

Approach to Formal, public Informal, Informal values Formal,

managing relations and/or relationship and based bureaucratic,
ethics systems-based trust based regulated

Responsible Shareholders and Owners and Donors and General public,

and/or other family members clients higher level
accountable to stakeholders government
organisations

Main Shareholder Lack of Lack of resources Inertia, lack of

constraints orientation; size resources, and formal transparency
and complexity including time training
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Globalization: a key context for
business ethics?

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 What is globalization?
• Globalization is: a process which diminishes the
necessity of a common and shared territorial basis
for social, economic, and political activities,
processes, and relations.

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 Relevance of globalization for business
ethics

• Cultural issues
• Legal issues
• Accountability issues

Globalization can affect all stakeholders of the corporation

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 Ethical impacts of globalization
Stakeholders Ethical impacts of globalization
Stakeholders Globalization provides potential for greater profitability, but also greater risks. Lack of regulation of capital markets,
leading to additional financial risks and instability.

Employees 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.

Consumers 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 & Suppliers in developing countries face regulation from MNCs through supply chain management. Small scale
indigenous competitors exposed to global players.
Competitors
Civil Society (e.g. Global activities brings the company in direct interaction to local communities with possibility for erosion of
traditional life; globally active pressure groups emerge with aim to “police“ the corporation where governments are
NGO’s) weak and tolerant.

Government & 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
Regulation expectations about issues such as bribery, corruption, taxation, and philanthropy.

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International perspectives on
business ethics

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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
behavior?
• What are the key issues in business ethics?
• What is the most dominant stakeholder
management approach?

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 Regional differences: Europe, North
America, Asia
Europe North America Asia
Who is responsible for Social control by the collective The Individual Top Management
ethical conduct in
business?

Who is the key actor in Government, trade unions, The Corporation Government, corporations
business ethics? corporate associations

What are the key Negotiated legal framework of Corporate codes of ethics Managerial discretion
guidelines for ethical business
behaviour?

What are the key issues in Social issues in organizing the Misconduct and immorality in Corporate governance and
business ethics? framework of business single decision situations accountability

What is the dominant Formalised multiple stakeholder Focus on shareholder value Implicit multiple stakeholder
stakeholder management approach approach, benign managerialism
approach?

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Sustainability: a key goal for
business ethics?

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 Defining sustainability
• Sustainable development is the 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

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The three components of sustainability

Economic Social

Environmental

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UNESCO- SDG

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 Corporate commitments to
sustainability
Company Sustainability Commitment/Policy

The Volkswagen Group The Volkswagen Group has made a commitment to sustainable, transparent and
responsible management. In line with the recommendations of the German
Corporate Governance Code, we practice Group-wide sustainability coordination
and forward-looking risk management and ensure a clear framework for the
future-oriented handling of environmental issues, responsibility towards our
employees and social engagement by our brands and in the various regions.

Shell Sustainability at Shell means providing energy in a responsible manner,

respecting people, their safety and the environment.

Marks and Spencer's Plan A is our way to help build a sustainable future by being a business that
enables our customers to have a positive impact on wellbeing, communities and
the planet through all that we do.

Alibaba Group At Alibaba, we believe acting in a socially responsible way is part of our business
model. Since our founding, we have been highly committed to supporting and
participating in charitable and socially responsible projects that align with our
core values and mission, and to establishing a technology-driven charitable
ecosystem to extend the benefits of our technological capabilities to the
community at large.
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