Crane & Matten

Business Ethics

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 Introducing
Business Ethics
Lecture 1

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 Overview
• What is business ethics?
• Why is business ethics important?
• Globalization: a key context for business
ethics?
• Sustainability: a key goal for business
ethics?
• Europe: a key perspective on business
ethics?

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 What is business ethics?

Business ethics is the study of

business situations, activities, and
decisions where issues of right and
wrong are addressed.

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 Ethics and the law

Ethics

grey
area

Law
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 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.

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 The relationship between morality, ethics
and ethical theory

Ethics … to
rationalizes produce …that can be
morality … ethical applied to
theory … any situation.
Potential
Morality Ethics Ethical solutions to
theory ethical
problems

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 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 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

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 Types of misconduct employees
observed among co-workers
Type of Misconduct of Co-Workers Percentage of employees
observing misconduct
abusive or intimidating behaviour towards employees 21%
lying to employees, customers, vendors, or the public 19%
a situation that places employee interests over 18%
organizational interests
violations of safety regulations 16%
misreporting of actual time worked 16%
discrimination on the basis of race, colour, gender, age or 12%
similar categories
stealing or theft 11%
sexual harassment 9%

Source: Ethics Resource Center (2005)

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 Globalization: a key context for
business ethics?

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 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’

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 Relevance of globalization for
business ethics

• Cultural issues
• Legal issues
• Accountability issues

Globalization can affect all stakeholders of

the corporation

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 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
MNCs.
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.
communities)
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
philanthropy.

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 Sustainability: a key goal for
business ethics?

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 Corporate commitments to
sustainability
Company Sustainability Statement Source

BP “For BP, ‘sustainability’ means the capacity to endure as a group: by Sustainability

renewing assets; creating and delivering better products and services that Report, 2005
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.”
ICI “The ICI Board is committed to the principles of sustainable development Sustainability
… Why? Because we believe it is right, and because our stakeholders Report, 2005.
expect it. They value our products and admire our creative talent; but they
also fear that our activities might have harmful effects.”
Nokia “Nokia's vision of technology as an enabler of environmental www.nokia.com
sustainability is based on a strategy of eco-efficiency and life cycle
thinking.”
Shell “Contributing to sustainable development is part of our business The Shell Report,
principles.” 2004.
Volkswagen “The challenges facing society today can only be met by search and http://www.volks
decision-making processes that continuously re-balance the requirements wagen-ag.de
of economic performance, environmental protection and social justice…
For Volkswagen, sustainability is the basis for policy as well as part of a
living, breathing corporate culture.”
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 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

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 The three components of
sustainability

Economic Social

Environmental

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

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 Europe: a key perspective for
business ethics?

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 European vs alternative 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?

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 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
business
What is the Formalised multiple Focus on Implicit multiple
dominant stakeholder shareholder value stakeholder
stakeholder approach approach, benign
management managerialism
approach?

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 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
• Europe has a distinctly different perspective on
business ethics issues

© Oxford University Press, 2007. All rights reserved.

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