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Business Ethics Lecture One

Introducing Business Ethics

[Shd]

Overview
Introducing Business Ethics
What is business ethics? Why is business ethics important? Globalization: a new context for business ethics? Sustainability: a new goal for business ethics?

What is business ethics?


Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. ( Crane and Matten, 2004:8)

Ethics and the Law


Ethics Ethics = Law

Law

Defining morality, ethics and ethical theory ____________________________


Morality is concerned with the norms, values and beliefs embedded in social processes which define right and wrong for an individual or a community. Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for any given situation. These rules and principles are called ethical theories.

The relationship between morality, ethics and ethical theory


Ethics

rationalizes morality
Potential solutions to ethical problems

Morality

Ethics

Ethical theory

Power and influence of business in society Potential to inflict harm Increasing demands from stakeholders Lack of business ethics education or training Continued occurrence of ethical infractions Evaluating different ways of managing business ethics Interesting and rewarding

Why is business ethics important? ____________________________

Globalization: a new context for business ethics

What is globalization?
According to Scholte (2000) globalization is not:
internationalization liberalization universalization westernization

Globalization is: the progressive eroding of the relevance of territorial bases for social, economic and political activities, processes and relations deterritorialization

Relevance of globalization for business ethics ____________________________

Cultural issues Legal issues Accountability issues Globalization can affect all stakeholders of the corporation

Stakeholders Shareholders Employees

Impact of globalization (Crane and Matten, 2004,20, fig 1.3) Lack of regulation of global capital markets, leading to financial risks and instability Corporations outsource production to LDCs in order to reduce costs in global marketplace; raised potential for exploitation of employees with different cultural backgrounds and divergent moral standards Global products face protests about cultural imperialism and westernization. Vulnerable consumers in LDCs face possibility of exploitation by MNCs Suppliers in LDCs face regulation from MNCs through supply chain management. Small scale indigenous competitors exposed to powerful global players Global business activities brings the company in direct interaction to local communities with possibility for erosion of traditional community life; globally active pressure groups emerge with aim to police the corporation in countries where governments are weak and tolerant Globalization weakens governments and increases the corporate responsibility for jobs, welfare, maintenance of ethical standards, etc.

Consumers

Suppliers and Competitors Civil Society (pressure groups, NGOs, local communities) Government and regulation

Sustainability: a new goal for business ethics

Company BP

Sustainability Statement We are committed to respond to the challenges posed by the objective of sustainable development. In our view sustainable development is a long term strategic issue that will involve business in considerations beyond its normal responsibilities Carlsberg Breweries seeks to meet the needs of its consumers, customers and employees in an environmentally sound and sustainable manner. Global industries are moving towards operating by social and ethical principles, such as environmentally sustainable practices. We wholeheartedly support this development and also participate actively in the global initiatives that support it. Shell companies are committed to contribute to sustainable development. Volvos environmental programmes shall be characterised by a holistic view, continuous improvement, technical development and resource efficiency. Volvo shall, by these means, gain competitive advantage and contribute to a sustainable development.

Source Environmental and Social Review, 2000

Carlsberg Breweries Nokia

Environmental Report, 1998-2000 http://www.nokia.com

Shell

People, Planets and Profits: The Shell Report, 2000 Environmental Report, 2000

Volvo

Defining sustainibility
Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs (World Commission on Environment and Development 1987)
Sustainability refers to the long-term maintenance of systems according to environmental, economic and social considerations (Crane and Matten, 2004: 24)

The three components of sustainability ____________________________


Economic Social

Environmental
Source: Crane and Matten, 2004, fig 1.5 p.22

Triple bottom line


Coined by John Elkington Bottom line thinking suggests sustainability as a goal Three dimensions:
Environmental perspectives Economic perspectives Social perspectives

Summary
Definition of business ethics Business ethics is vital for business in contemporary capitalism Global view is essential to understand ethical issues Sustainability is an important goal for business ethics