ETHICS

The importance of business ethics is growing. The purpose of business is to make profit. But
its not enough, the company has also to be ethical.

What is legal is not always ethical. When you go for a doctor you will not only see if he has
all his degree but also about his moral and how he does his work. Or for a supermarket, you
will look for a supermarket, which has the best products, the best politic etc.

Ethics is more about reputation. And this reputation is an asset, which we will have to carry
on. When you are selling something, if the company is successful with good reputation, you
can have a better price.

Why should a business entity be ethical?

Sears auto centers case: when customizer went to check their car, a lot of client ended up
paying more than excepted because every time they were telling client that they needed things
that they don’t even needed just to make more money.

Arthur Andersen: overstated they didn’t declare the real amount of money.
The pb wasn’t that they wanted more money but more corporate politic.
New regulations: you cannot have accounting services with consulting services.
Reasons to the collapse: legal loophole, sophisticated way to cover bad things, wanting to
keep clients at all costs, focused on the quantity than the quality.
 Positive development: wake up call for those companies, that the profit is not the main
objective. Not combining consulting and auditing. For competition side, they raised their fees
because of their reputation, they can do that.

31 January

Lawful but not ethical: ryannair  cheap flight but you have to add for luggage, seat etc

Philosophies of ethics:

 Utilitarianism:

The main emphasis is not on rules but on the results itself. So it does not matter what you do,
only the result matters. Ex: kill 1 person to save 10 persons. The means justify the end. It is
not about religion.
Example: this principle should be used to right legislation. 2 divisions  look at all different
rules, and we will write a rule that will please to everyone and not just to some people.
Motorway: easy, ecological etc but what about the habitants living next to it. so for the
greatest of people it will be good, and there is only 50 people living there.
Its used everywhere  legislation – companies to see what would be better, cheaper for
shareholders or employees – marketing etc
It doesn’t tell us what is good or what is bad, it only talks about the result. For example:
animal testing. Its good because it would allowed to produce a medication to save life but on
the other hand, its horrible for animals.
  Social justice:

3 fevrier matin 50 min

 Virtue theory:

Utilitarian look at the result, deontology looks at the action. Here, we look at what a virtuous
person would do, we look at the behaviour of what this person may do.
Lying is wrong because its not what a honest person would do.
Episteme:
Phronesis: that’s what Aristotle believes. You are only going to learn when you do it yourself.
You have to write it yourself no matter what how you read about ethic. Unless you are an
ethical person, having an ethical knowledge is not enough to be ethical.
Eudemonia: state of happiness  means living the best kind of life and not just some
moments.
Virtue: its something that you do all the time. Being virtuous gives a better life because you
will be content because you will be helping people. It has to be a tendency not something you
do once. We acquire virtue and we become ethical when we practice those different virtues in
a daily basis.
Utilitarian: kill an enemy is ok because he hurts people
Deontoligal: killing is bad
Virtuous: don’t wanna be a murderer
3 issues  people can have different notion of virtous action – how is it relevant for
companies
Josephson: set up a list of virtous that is relevant wherever you are in the world. Last one is
valuable for business also. Looked for values in different countries and came up with 6
values.
Those values apply to individual and businesses. He designed a model to follow for ethics
behaviour.

Criticism:

 Deontology:

Completely different from utilitarian. It concerns with the duties and not the results.
Everybody is equal, everybody has the same right and duties. We need to consider our duties
by everybody in the world. The act has to be right.
Example: if someone is hiding in your house, you need to tell the truth, even if this person
will be killed. For utilitarian, its ok to lie in order to save a person.
The duty is to your friend hiding or duty to not lie? There is nothing to tell us which duty
should be respected. The main criticism is that we don’t know which duty should prevail over
another?

Carlos Ghosn: he needs to be a leader model and face the charges against him.

1- too expensive and wants to make benefits time consuming. Its justified under
unilaterian theory. Because they are thinking of the wealth of the company and taking
care of this pb will cost them more money. Here the action of not recalling the car
caused death so here the actions didn’t justify the result.
 2- Go to authorities, not to lie, notify the authority in order to fix the pb. Respect the law
and the consumers.
3- Lying is wrong and that’s not what a honest person would do. Its lying by omission.
Responsibility: to take all the necessary action to protect the people
Truthfulness: notify the client about the pb so they don’t use the cars and call the
authorities.

Five steps:
1. Consumers – families – employees
Consumers: responsibility and fairness
Customer: we apply all the values  look at the greatest core of values

Pinto: to recall the vehicules it will be very expensive but if they don’t, they will cost them
less money  They put a less value on people life. Its less expensive to pay the injuries than
to recall. Unilaterian approach cost benefits basis.

SOCIAL RESPONSIBILITY

3 février aprem

Encourages leader to think beyond the profit: education – happiness of the employee
Benefits:
The main objective of corporation is profit but they have to take into account the environment
otherwise everybody will suffer and there is no other planet.

Public relations: publicity, marketing etc to sell more.

To understand more the companies, we need to do more research.

Ben and jerry: 2eme partie

Companies don’t want legal action because they have an unethical and irresponsible
behaviour.

4 février matin:
Sharholder primacy model  case important because it is establishing shareholders
supremacy

Its not the executive to think on behalf of shareholders  Milton

The company can make as much profits as it wants as long as its not harming anybody in a
legal sense and not doing anything illegal.

Business executive have no right to decide which donation the company has to choose,
because they are only employees and its shareholders that have to decide where the money
has to go in a social perspective.

Who are the stakeholders: impact on the customers, community, suppliers etc. once the
company makes money and pay the employees, the company has to take into consideration
such as supplier customers etc. some companies that are doing very well, and have enough
money to think about the impact on other factors. Same logic as the Pyramid of needs.
The company can gain more if they apply this stakeholders theory.

There is an interdependence b/n all the shareholders  tableau slide 39

2 instruments: OCD declaration

CSR: if you were a business owner would you do the CSR?

CORPORATE GOVERNANCE

Focus on the 3 models of CG.

Different approaches to CG.

 Shareholder approach
 Stakeholder approach

3 models:
 Anglo-US Model: shareholder oriented approach. The C works for the interests of
shareholders. The main characteristic  strong mechanism to make sure to respect
shareholders’ interest. The main objective of CG is to make sure that those interests
are balanced. They spend a lot of time in the selection of the board director  they
have to be independent. The board of directors is a single tiered  one board. No need
to study disclosure.
 Japanese model: in the US or UK, the board is composed with outsiders to evit
conflict whereas here the board is composed with insiders bcs they don’t consider that
there can be any conflict of interest. Its composed with people that are here for a very
long time. Its based on trust that everybody is working for the same goal, for them
they don’t think that people are here for their own interests but for the company’s
interests. Key players: managers – board – shareholders (Anglo model) but in the
Japanese model, 4 players that are linked together. Interaction:
 German model: here there is 2 boards: supervisory board and management board they
work together. The number of the member is set by law and cannot be changed by the
shareholders. Insiders: employee representatives are not insiders. Affiliated: The
purpose is to know what is happening in the company and give advice.

Shareholders is not as good because it takes only into account the shareholders’ interests.
They don’t consider the other’s interests such as the employee, the suppliers etc.

Article on CG:

 France: this system does not apply to French system.

  Germany:
 Japan:

Because countries work a lot together, they need to show to foreign investors that they have a
good CG. To do so, international organization started to work on the framework.

The OECD: published principles of CG. They are important because they have the first set of
acceptable standards of CG.

You can use these standards if its not a publicly company but its more focused for them.

Standards are only recommendation, they are non binding. Just a set of standard. No power of
implementation.

Even if models are different, we can identify some similarities.

What the EU has done regarding CG:

 Green paper
 Directive

Shareholders directive: significant directive because it sets a number of shareholders rights.

ANTI-CORRUPTION