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Answers to Study Questions from the Business Ethics book

(Crane, A. and Matten, D., Business Ethics: Managing
corporate citizenship and sustainability in the age of
Business Ethics & Corporate Governance (Universiteit Twente)
globalization, Oxford University Press, 3rd ed, 2010).

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Business Ethics Study Questions Yvette ter Halle

STUDY QUESTIONS CHAPTER 1

 What is the relationship between business ethics and the law?

There is considerable overlap between ethics and the law. In fact, the law is essentially an institutionalization or
codification of ethics into specific social rules, regulations and restrictions. Nevertheless, the two are not the
same. Business law can be said to begin where the law ends, the grey areas.

Example: just as there is no law preventing you from being unfaithful to your partner, so there is no law in many
countries preventing business from testing their products on animals, an issue which many feel strongly about. In
addition, driving on the right side of the road is a law but it is not seen as an ethical issue.

 ‘Business ethics do not really matter to small firm owners. They will get away with whatever they can
in order to succeed’. Critically examine why such a view of small firms might be common and whether
it is likely to be accurate.
There is less social control on small firms compared to multinationals who have constant media attention. If an
ethical issue occurs at a multinational, media immediately covers this. Small business owners might believe that if
they do something unethical, no one is going to find out. Maybe it is true. Maybe they can get away with it on the
short term, but the past always catches up with you and this will have a negative effect on your business.
Moreover, if you as a small firm owner promote that you are ethical, no matter how small your client base is, it
will positively influence your business; increased productivity, greater customer loyalty, positive brand image,
avoiding negative publicity, opening up opportunities.

 (1) What is globalization and (2) why is it important for understanding business ethics?
(3) Select one multinational and set out the different ways in which globalization might have
implications for business ethics in that corporation.

(1) Globalization is a process which diminished the necessity of a common and shared territorial basis for social,
economic, and political activities, processes, and relations.

(2) Globalization as defined in terms of deterritorialization of economic activities is particularly relevant for
business ethics, evident in three main areas: culture, law, and accountability
 Cultural: although globalization results in the deterritorialization of some processes and activities, in
many cases there is still a close connection between the local culture, including moral values, and a
certain geographical region.
 Legal: if business ethics largely begins where the law ends, then deterritorialization increases the demand
for business ethics because deterritorialized economic activities are beyond control of the national
(territorial) governments.
 Accountability: globalization leads to a growing demand for corporate accountability.
The more economic activities get deterritorialized, the less governments can control them, and the less
they are open to democratic control by the affected people.

(3) The Dutch multinational Heineken has beer breweries all over the world. The issue of beer promoters working
in Cambodia under poor working conditions is an ethical issue caused by globalization.

 (1) What is sustainability? (2) To what extent do you think it is possible for corporations in the
following industry to be sustainable? A) Tobacco industry, B) Oil industry, C) Car industry.

(1) Sustainability refers to the long-term maintenance of systems according to environmental, economic and
social considerations..

A) No. Firstly, in some countries tobacco growing has lead to extensive land clearance and deforestation to make
room for new crops, and to provide timber to fuel the heaters used to dry the tobacco leaf following harvest.
Secondly, all phases of tobacco production have the potential to contribute to climate change, from farming to
curing the leaf (which for some kinds of tobacco requires the use of heat generated by wood, oil, coal or gas), and
the manufacturing process.

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B) Yes. We all use oil. We're all part of the problem. Therefore the "oil company" really only gets part of the
blame. And incidentally, oil is not all bad. It's pretty darn useful stuff.
So yes, an "oil company" can be more sustainable, but it's really more about can society as a whole get more
"sustainable". You can only expect so much from an oil company - or any company!

C) Yes. Honestly, when thinking about car makers clean technologies and sustainability aren’t the first thoughts
that come into someone’s mind. But times are changing! Besides some efforts in the development of hybrid or full
electric cars, currently numerous car producers switch to the implementation of bioplastics into their vehicles and
additionally explore the chances of different kinds of biofuels.

STUDY QUESTIONS CHAPTER 2

 What are the main implications of the legal status of corporations for notions of CSR?
Corporations are separate entities in their own right. The corporation itself usually owns the assets.

Corporations do indeed have some level of moral responsibility that is more than the responsibility of the
individuals constituting the corporation. Not only does the legal framework of most developed countries treat the
corporation as a ‘legal’ or ‘artificial’ person that has a legal responsibility for its actions, but the corporation also
appears to have moral agency of sorts that shape the decisions made by those in the corporation.

In order to assign responsibility to corporations, it is necessary to show that a corporation has:

1. Legal independence from their members
2. Agency independence from their members

 ‘Only human beings have a moral responsibility for their actions.’ Critically assess this proposition in
the context of attempts to ascribe a moral responsibility to corporations.

A corporation exists of a group of people working under the same roof. People working in the corporation are
making the decisions, not ‘the corporation’. Therefore, also the corporation has moral responsibility for their
actions, as the actions are made by people.

 What is enlightened self-interest? (2) Compare and evaluate arguments for CSR based on enlightened
self-interest with more explicitly moral arguments.

(1) Enlightened self-interest is when to corporation takes on social responsibilities insofar as doing so promotes its
own self-interest.

(2) Corporations cause social problems (such as pollution), and hence have a responsibility. However, they are
getting rewarded (better brand image, loyal customers etc.) for solving problems they’ve caused.

 What are the 4 levels of CSR? How relevant is this model in a European, Asian, or African context?

Philanthropic responsibilities: desired by society.  Be a good corporate citizen.

Example: because corporate taxes are higher in Europe than in the US, activities such as funding/donating is less
common in Europe than i the US.

Ethical responsibilities: expected by society.  Avoid harm. Obligation to do what is right and fair.
Example: In North-America, where unlike in Europe, a consistent regulatory framework for climate change has yet
to be developed. Nevertheless, companies feel pressure from stakeholders leading to voluntary initiatives. In the
developing world, ethical expectation are less widespread compared to economic and philanthropic.

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Legal responsibilities: required by society.  Obey the law

Example: In developing countries with weak or corrupt government, the legal level is not a reliable standard of
responsible behaviour. In addition, Europeans tend to have more concern (for greater mistrust) in corporations
than other parts of the world.

Economic responsibilities: required by society.  Make profit

Example: responsibility in the US is strongly focused on profitability and thus especially looks at the responsibility
to shareholders. In Europe and Asia tends to define economic responsibility far more broadly and focuses, at least
the same extent (if not more), on the economic responsibility of corporations to employees and local communities
as well. In Africa, philanthropic responsibilities are nearly as important as the economic level.

 Explain the difference between normative, descriptive, and instrumental version of stakeholder
theory. To what extent do stakeholders have intrinsic moral rights in relation to the management of
the corporation?

Normative stakeholder theory: attempts to provide a reason why corporations should take into account
stakeholder interest.

Descriptive stakeholder theory: attempt to make sure whether (and how) corporations actually do take into
account stakeholder interests.

Instrumental stakeholder theory: attempts to answer the question whether it is beneficial for the corporation to
take into account stakeholder interests.

Stakeholder theory can be justified on normative grounds, specifically its power to satisfy the moral rights of
individuals. The theory of the firm must be reconceptualized "along essentially Kantian lines." This means each
stakeholder group has a right to be treated as an end in itself, and not as means to some other end, "and
therefore must participate in determining the future direction of the firm in which [it has] a stake.

 Define the extended view of corporate citizenship. Give examples to illustrate the concept.

The extended perspective on CC – which ultimately sees the corporation as a political actor governing the
citizenship of individual stakeholders – helps up to conceptualize the emerging role of corporations in the global
economy, as well as to clarify the ethical expectations (corporate accountability) increasingly placed upon them.

1. Social rights (a.k.a. positive rights) provide the individual with the freedom to participate in society.
Examples: the right to education and healthcare.

Example companies: many companies have pursued initiatives formerly within the province of the welfare
state: feeding homeless people, helping teachers in management school budgets, enhancing
employability of the unemployment. Shell, Nike and Levi have improved the working conditions in
sweatshops, ensuring employees a living wage, providing schools and medical centres.
rd
2. Civil rights (a.k.a. negative rights) provide freedom from abuses and interference by 3 parties (especially
the government).
Examples: the rights to own property, to engage in ‘free’ markets, or exercise freedom of speech.

Example Shell: Shell discourages governments to live up to their responsibility by possible role in the
restriction of civil rights in Nigeria.

3. Political rights enables the individual to participate in the process of governance beyond the sphere of his
or her own privacy.
Examples: the right to vote or the right to hold office.

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STUDY QUESTIONS CHAPTER 3

 What are ethical theories and why, if at all, do we need them?

Ethical theories are the rules and principles that determine right and wrong for a given situation.

We need ethical theories because (1) in a business context, there is often a need for decisions to be based on a
systematic, rational, and widely understandable argument so that they can be adequately defended, justified, and
explained to relevant stakeholders. Similarly, (2) if we believe that what an organization has done is wrong, we
need some concrete basis from which to argue our case.

 Is ethical theory of any practical use to managers? Assess the benefits and drawbacks of ethical theory
for managers in a global economy.

Yes, ethical theories are of practical use to managers.

Benefit: managers can use ethical theories in a business context because there is often a need for decisions to be
based on a systematic, rational, and widely understandable argument so that they can be adequately defended,
justified, and explained to relevant stakeholders.

Drawback: ethical theories differ per country and this can give different perspectives of what is right or wrong.

 Define ethical absolutism, ethical relativism, and ethical pluralism. To what extent is each perspective
useful for studying and practicing business ethics?

Ethical absolutism assumes that there are eternal, universally applicable moral principles and right and wrong are
objective qualities that can be rationally determined.

Ethical relativism claims that morality is context-dependent and subjective.

- Ethical relativism is different from descriptive relativism:
Descriptive relativism suggests that different cultures have different ethics (e.g. religion), while ethical
relativism proposes that both sets of beliefs can be equally right.

For practical purposes of making effective decisions in business, both of these positions are not particularly useful.

Ethical pluralism occupies a middle ground between absolutism and relativism. Pluralism accepts different moral
convictions and backgrounds, while at the same time suggesting that a general agreement on basic principles and
rules in certain social context can, and should, be reached.

 What are the two main families of Western modernist ethical theories? Explain the difference between
these two approaches to ethical theory.

Consequentialist theories base moral judgement on the outcome of a certain action. If these outcomes are
desirable, then the action in question is morally right; if the outcomes of the action are not desirable, the action is
morally wrong.

Non-consequentialist theories base the moral judgement on the underlying principles of the decision maker’s
motivation. An action is right or wrong, these theories suggest, not because we like the consequences they
produce, but because the underlying principles are morally right.

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STUDY QUESTIONS CHAPTER 4

 What is the difference between descriptive and normative ethical theories?

Descriptive business ethics seek to describe how ethical decisions are actually made in business, and what
influences the process and outcomes of those decisions.

Descriptive ethical theories provide an important addition to the normative theories. Rather than telling us what
businesspeople should do (which is the intention of the normative theory), descriptive theories seek to tell use
what businesspeople actually do and why they do it.

 Set out the four stages in Rest’s ethical decision-making process. What are the relationships between
each stage?

1. Recognize moral issue

2. Make moral judgement
3. Establish moral intent
4. Engage in moral behaviour

The stages are intended to be conceptually distinct, such that although one might reach one stage in the model,
this does not mean that one will necessarily move onto the next stage.

 Is the prevalence of unethical behaviour in business due to a few ‘bad apples’ or is it more a case of
good apples in bad barrels? How would your answer differ for government of civil society
organizations?

Individual = bad apple

Moral issue bad case
Organizational environment = bad barrel

I believe unethical behaviour is due to both: bad apples and bad barrels. As the theory in the book suggest. Ethical
decision-making is influenced by individual factors such as age, gender, education, employment, culture,
nationality, psychological factors (CMD and locus of control, personal values, personal integrity and moral
imagination. However, ethical decision-making is also influenced by situational factors related to issue such as
moral intensity and moral framing, and context-related such as rewards, authority, bureaucracy, work role,
organization culture and national context.

My opinion is that in civil society organizations (compared with government) situational factors tend to have less
influence than individual factors. Mainly because employees of civil society organizations are working there for a
reason: to contribute to society. Therefore I assume their personal values, personal integrity and moral
imaginations is more ethical than people working at the government.

 Describe the theory of cognitive moral development and critically evaluate its contribution to our
understanding of ethical decision-making in organizations. What are the main implications of the
theory for business leaders?

Cognitive moral development refers to the different levels of reasoning that an individual can apply to ethical
issues and problems.

It contributes to our understanding of ethical decision-making because it is not so much what is decided, but how
the decision is reached.

The main implications of the theory for business leaders is the fact that the situational context in which
employees might find themselves within their organization is likely to be very influential in shaping their ethical
decision-making, e.g. be liked by your colleagues can influence a decision. In addition, individuals high in CMD are
more likely to engage in whistle-blowing behaviour.
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 What are the two main types of issue-related factors in ethical decision-making? What is the
significance of these factors for managers seeking to prevent ethical violations in their organizations?

Moral intensity: how important the issue is to the decision-maker.

This intensity varies according to 6 factors:
1. Magnitude of consequences (importance)
2. Social consensus (sum of harms/benefits)
3. Probability of effects
4. Temporal immediacy (speed with which the consequences are likely to occur)
5. Proximity (how close the decision-maker is with the issue)
6. Concentration of effect

Moral framing: how the issue is actually represented within the organization

Managers seeking to prevent ethical violations have to be aware of the two above mentioned concepts. Some
issues can be very important to the manager (high moral intensity), while employees don’t recognize this
importance and take decision-making regarding this issue less serious. In addition, moral framing can be used by
employees to make unethical decisions seem less important. Managers have to recognize this in order to penalize
unethical behaviour.

6 strategies that can be used in moral reframing are:

1. Denial of responsibility
2. Denial of injury
3. Denial of victim
4. Social weighting
5. Appeal to higher loyalties
6. Metaphor of the ledger

 What are the main impacts of bureaucracy on ethical decision-making? How would you suggest that a
highly bureaucratic organization could enhance its employees’ ethical decision-making?

The main (negative) impacts of bureaucracy on ethical decision-making are:

1. Suppression of moral autonomy (zelf-regulering/bestuur)
2. Instrumental morality
Bureaucracy focuses on achieving goals so morality will only be made meaningful in terms of conformity
to established rules for achieving those goals.
3. Distancing
Bureaucracy distances us from the consequences of our actions, and thus suppresses our morality.
4. Denial of moral status
Bureaucracy has been argued to consider moral objects, such as people or animals as things.

In order to enhance employees’ ethical decision-making in a highly bureaucratic organization, I would suggest to
turn the above mentioned negative impacts into positive impacts. Rules can be loosened in order to free
employees from suppression of moral autonomy. Instead of using morality to establish rules, only make rules
concerning standard procedures and do not develop rules concerning decision-making. Furthermore, don’t
consider animals and humans as things or traits.

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QUESTIONS CHAPTER 5

 What are the main elements of business ethics management? Discuss and account for the extent to
which they are likely to be used in large versus small companies.

1. Mission or values statements All large and many small- and medium-sized organizations have it
(often fail to set out a very specific social purpose).
2. Code of ethics It has been suggested that almost all large firms have a code of
ethics of some kind. In SME, codes are less prevalent.
3. Reporting/advice channels Something like 50% of large firms have instituted channels of this
kind, although some EU countries such as Germany and France
prohibit certain features of hotlines due to privacy restrictions.
4. Risk analysis and Most companies not yet developed an integrated approach to risk
management and ethics.
5. Ethics managers, officers, and In US common, in Europe and Asia less common. Large companies
committees now have ethics or CSR committee.
6. Ethics consultants
7. Ethics education and training
8. Stakeholder consultation, Are increasingly become accepted.
dialogue, and partnership
programmes
9. Auditing, accounting, and In Europe common, in US uncommon (e.g. BodyShop, Shell)
reporting

 What are codes of ethics and how useful are they for the management of business 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 behaviour for employees.

Codes of ethics are useful for management of business ethics because they can set out the minimum expectations
placed on organizations and their member. They are seen by managers as a pragmatic necessity for running an
organization in a complex society in which moral concept play an important part.

 Set out the main types of relationship that corporations can have with their stakeholders. Are any of
these types preferable? Explain your answer with reference to examples from current business
practice.

1. Challenge  based on mutual opposition and conflict;

2. Sparring partners  based on ‘healthy conflict’ and periodic bouts of conflict.
3. One-way support  based on philanthropy, sponsorship, or other forms of resource
contribution from one party to the other.
4. Mutual support  based on formal and informal two-way support.
5. Endorsement  based on paid/unpaid public approval granted from one partner to the
other in relation to a specific product or programme.
6. Project dialogue  based on discussion between partners regarding specific project or
proposal.
7. Strategy dialogue  based on discussion between partners over longer-term issues and
development of overall strategy for organizations, industries, or regulatory regimes.
8. Task force  based on cooperation to achieve a specific task.
9. Joint venture or alliance  based on formal partnership involving significant mutual
resource commitment to achieve specific goals.

In my opinion, sparring partners is preferable because you compete against each other in a friendly way that
improves your company. One-way support can improve your company’s image. Mutual support s also preferable.
Actually, everything is preferable except for challenge.

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 What is social accounting, and why do companies engage in it?

Social accountability is the voluntary process concerned with assessing and communicating organizational
activities and impacts on social, ethical, and environmental issues relevant to stakeholders.

Companies engage in social accountability because:

1. Internal and external pressure
2. Identifying risks
3. Improved stakeholder management
New channel of communication to stakeholders: organizations might seek to improve their reputation
4. Enhanced accountability and transparency

 Assess the relative benefits and drawbacks of different approaches to ethics management. Would you
recommend that an organization emphasized a formal or informal approach to business ethics
management?

Formal ethics programmes

1. Compliance orientation
Preventing, detecting, and punishing violations of the law
2. Values orientation
Defining organizational values and encouraging employee commitment to certain ethical aspirations
3. External orientation
Satisfying external stakeholders; what is acceptable to key external constituencies
4. Protection orientation
Protecting top management from blame for ethical problems or legal violations.

These four approaches are not mutually inconsistent; most organizations are likely to combine two or more
approaches. Values orientation is the most effective single orientation for encouraging ethical behaviour.

Without a supportive culture, formal programmes are unlikely to significantly influence behaviour. So, in
organizing for business ethics management, it is important to also consider the ethical culture of the organization!

Informal ethics management: ethical culture and climate

Culture change
Organizations can and should proactively develop an ethical organizational culture, and that organizations with
‘ethics problems’ should take a culture change approach to solve them (seeking conformity to a single set of
values).

Cultural learning
Focus on smaller sub cultural groups within the firm and enabling employees to make their own ethical decisions.

 Identify a well-known business leader and critically examine the case that he or she is an ethical
leader.

Steve Jobs was not an ethical leader.

Jobs was a genius. He was also cruel, rude, obsessive and controlling. He hurt many people both personally and
professionally. In the pursuit of a goal, he let no one stand in his way and would not hesitate to run down, push
aside or destroy anyone who got in this way. As CEO he had the power to do something about the fact that Apple
as a company prevents free speech and had authoritarian labor relations in its Chinese factory that approached
sweatshop conditions. Apple admitted that its suppliers used underage workers, a practice Apple has been
attempting to eradicate, including firing one factory supplier.

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