Crane and Matten

Business Ethics (3rd Edition)

Chapter 1

Introducing
Business Ethics
Lecture 1

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

Ethics

grey
area

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

to
produce
ethical
theory

Ethics
rationalize
s morality

Morality

Ethics

Ethical
theory

that can
be applied
to any
situation.

Potential
solutions to
ethical
problems

Why is business ethics important?

Power and influence of business in society
Potential to provide major contribution to 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
8. Interesting and rewarding
1.
2.
3.
4.
5.
6.
7.

Types of misconduct across sectors

27%

20

25%

24%

24%
22%

21%
20%

21%
19%

10

2008 Ethics Resource Center

30

Nonprofit
Business
Government

0
Putting own interests

Lying to
employees

Abusive behavior

ahead of org

Source: Ethics Resource Center (2008)

Observed ethical misconduct across

sectors
60%

57%

57%

52%
56%

52%

55%

50%

46%

55%

46%
49%
43%

2008 Ethics Resource Center

75%

Nonprofit

25%

Business
Government

0%
2000

2003

2005

2007

Source: Ethics Resource Center (2008)

Differences across organizational types

Stakeholders
Main priorities
in addressing
ethical issues

Large
corporations
Financial integrity,
employee/customer
issues

Formal, public
Approach to
managing ethics relations and/or

Small
businesses

Civil society
organizations

Public sector
organizations

Financial integrity,
employee/customer
issues

Delivery of mission
to clients; integrity of
tactics; legitimacy
and accountability

Rule of law,
corruption, conflict of
interest; procedural &
accountability issues

Informal, trustbased

Informal, valuesbased

Formal, bureaucratic

Owners

Donors and clients

General public, higher

level government
organizations

Lack of resources
and attention

Lack of resources
and formal training

Inertia, lack of
transparency

systems-based

Responsible
and/or
accountable to

Shareholders and
other stakeholders

Main constraints Shareholder

orientation; size and

complexity

Globalization: a key context for

business ethics?

What is globalization?
According to Scholte (2005) globalization is not:
not

internationalization
liberalization
universalization
westernization

Globalization is:
is a process which diminishes the
necessity of a common and shared territorial
basis 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

Ethical impacts of globalization

Stakeholders
Stakeholders
Employees

Ethical impacts of globalization

Globalization provides potential for greater profitability, but also greater risks. Lack of
regulation of global capital markets, leading to additional financial risks and instability.
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 &
competitors

Suppliers in developing countries face regulation from MNCs through supply chain
management. Small scale indigenous competitors exposed to powerful global players.

Civil society
(NGOs, etc)

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 where governments are weak and tolerant.

Government &
regulation

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

International perspectives on
business ethics

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

Regional differences: Europe, North

America, Asia
Europe

N. America

Asia

Social control by the

collective

The individual

Top management

Who is the key actor in business

ethics?

Government, trade
unions, corporate
associations

The corporation

Government,
corporations

What are the key guidelines for

ethical behaviour?

Negotiated legal
framework of business

Corporate codes of
ethics

Managerial
discretion

What are the key issues in

business ethics?

Social issues in
organizing the
framework of business

Misconduct and
immorality in single
decisions situations

Corporate
governance and
accountability

What is the dominant stakeholder

management approach?

Formalised multiple
stakeholder approach

Focus on shareholder
value

Implicit multiple
stakeholder
approach, benign
managerialism

Who is responsible for ethical

conduct in business?

Sustainability: a key goal for

business ethics?

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 three components of

sustainability

Economic Social

Environmental

Triple bottom line

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

Corporate commitments to
sustainability
Company

Sustainability statement

Source

BP

At BP we define sustainability as the capacity to endure as a group: by

renewing assets; creating and delivering better products and services that meet
the evolving needs of society; attracting successive generations of employees;
contributing to a sustainable environment; and retaining the trust and support
of our customers, shareholders and the communities in which we operate.

Sustainability
Report, 2007

DeBeers

[Sustainability] means enhancing our relationship with host and partner

governments, building consumer confidence in diamonds, and ensuring our
activities contribute positively to both present and future generations.

www.debeersgr
oup.com, 2009

Nokia

Corporate responsibility (CR) at Nokia is a collective effort. We believe that

management of CR issues is most effective when sustainability policies and
programs are embedded in every aspect of our operations.

CSR Report,
2007

Toyota

Volkswagen

[For Toyota, a guiding principle is] contributing to the development of a

prosperous society through the manufacture of automobiles. Contributing to
the development of a prosperous society means contributing to the
sustainable development of the earth.
Values, social responsibility and active sustainability are integral [to] our
company culture. We are future-oriented in our approach to important issues
such as climate change. We operate a broad range of [R&D] activities and
provide trend-setting approaches to the mobility of tomorrow.

Sustainability
Report, 2008

www.volkswag
enag.com, 2009

Summary
Definition of business ethics
Business ethics is vital for business in
contemporary capitalism
Global view is essential to understand ethical
issues
Different regions have distinctly different
perspective on business ethics issues
Sustainability is an important goal for
business ethics