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Introduction to Business Ethics

•Ethics:- The word ‘ethics’ has originated from the word ‘ethos’ which implies
character or manners.

•Ethics is thus , a science of morals, a treatise on rules of conduct which may be

referred as “moral principles”.

•In the context of business, “ethics” may be defined as the study of good and
bad, right and wrong or just and unjust action of the business men and the
Introduction to Business Ethics

• “Business Ethics, thus, refers to set of rules of conduct applied to business

which is acceptable to society at large without any hitch/reservation.

• In practice business ethics is used to describe do’s and don’ts for business, the
various things that corporate’s should or should not do.
• What is business ethics?
• Why is business ethics important?
• Globalization: a key context for business ethics?
• International variety in approaches to business ethics?
• Sustainability: a key 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.
Ethics and the law


Grey area

Defining morality, ethics and ethical

• 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
The relationship between morality,
ethics and ethical theory

Ethics … to
rationalizes produce …that can
morality … ethical be applied to
theory … any
situation. Potential
Morality Ethics Ethical solutions to
theory ethical
Why is business ethics important?

1. Power and influence of business in society

2. Potential to provide major contribution to society
3. Potential to inflict enormous harm
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Evaluating different ways of managing business ethics
8. Interesting and rewarding
Globalization: a key 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
• ‘de-territorialization’

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Relevance of globalization
for business ethics

• Cultural issues
• Legal issues
• Accountability issues

Globalization can affect all stakeholders of the corporation

Ethical impacts of globalization
Stakeholders Ethical impacts of globalization

Shareholders Globalization provides potential for greater profitability, but also greater risks. Lack of regulation of
global 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
Suppliers and Suppliers in developing countries face regulation from MNCs through supply chain management.
Competitors Small scale indigenous competitors exposed to powerful global players.
Civil society Global business activities brings the company in direct interaction to local communities with
(pressure groups, possibility for erosion of traditional community life; globally active pressure groups emerge with aim to
NGOs, local “police“ the corporation in countries where governments are weak and tolerant.
Government and Globalization weakens governments and increases the corporate responsibility for jobs, welfare,
regulation maintenance of ethical standards, etc. Globalization also confronts governments with corporations
from different cultural expectations about issues such as bribery, corruption, taxation, and
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Press, 2007. All
rights reserved.
International variety in approaches to business
Differences in business ethics between Europe, the US & Asia
Europe United States Asia
Who is responsible Social control by The individual Top management
for ethical conduct the collective
in business?
Who is the key Government, trade The corporation Government,
actor in business unions, corporate corporations
ethics? associations
What are the key Negotiated legal Corporate codes of Managerial
guidelines for framework of ethics discretion
ethical behaviour? business
What are the key Social issues in Misconduct and Corporate
issues in business organizing the immorality in single governance and
ethics? framework of decisions situations accountability
What is the Formalised multiple Focus on Implicit multiple
dominant stakeholder shareholder value stakeholder
stakeholder approach approach, benign
management managerialism
© Oxford University Press, 2007. All
rights reserved.
Sustainability: a key goal
for business ethics?

© Oxford University Press, 2007. All

rights reserved.
Defining sustainability
• 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
The need of sustainability
• Environmental pollution- in particular the effects on climate change
caused by production, transportation and use of
chlorofluorocarbons(CFCs) there by depleting ozone layer.
• Waste disposal- due to throwaway culture
• Plant closings and downsizing of staff- leading to individual &
community problems
• Erosion of local cultures & environment due to Internet intrusion,
influx of mass tourism etc.
The need of sustainability- cont
Sustainability emphasizes on
• The needs of future generations
• Intergenerational equity and
• Ethics in action at each business decision
The three components of sustainability
by John Elkington

Economic Social

Triple bottom line (TBL)
• Coined by John Elkington
• Bottom line thinking suggests sustainability as a goal
• Three dimensions:
• Environmental perspectives
• Economic perspectives
• Social perspectives