ETHICAL ROOTS AND RESPONSIBILITY OF BUSINESS

Business is criticized at almost every interface with the rest of society.

Business is criticized


For being unresponsive to consumer demands, employees needs, its own shareholders and the public.

 

Business is criticized


For enjoying a symbiotic relationship with a government that give it inordinate power to serve its own interest.

Business is criticized


For falling to provide employment for all who want to work

Business is criticized


For promoting a biased distribution of income

 

Business is criticized


For plundering the planet with it voracious appetite for resources

Business is criticized


For producing trivial products

Business is criticized


If only business people werent wholly and solely preoccupied with profit , the argument goes these criticisms would disappear.

Business is criticized The Solution.

 

The public expect the corporation to be socially responsible , behave ethically and have a conscience.

Origins of Business Ethics

 

Religious underpinning of BE 1. View wealth as Divine Favor 2. Merchants are stewards or trustees for the public good

Gathering wealth and acting as stewards to the less fortunate became symbolic of the religious dimension of business so much so that what has been called the divine right of businessmen God gave control; of property to men who would protect the labourer

The perspective of stewardship changed as America grew from family house hold operations to factory production -the use of machinery replaced the personal approach and individualism of the earlier business ethics

 

Survival of the fittest became more important than stewardship -Carnegie believe that only the wealth could endow society with what is necessary for cultural development Only wealth persons could contribute such things as a library that were needed for social improvement.

The wealth-not the poloiticians, or the common laborer could decide what is good for society in the long run

 

Resulted in -large scale confrontations between management and labor --signaled the death knell of the idea of stewardship.

Quick Quiz - When In Doubt, Ask Yourself...

Are my actions legal? Am I being fair and honest? Will my action stand the test of time? How will I feel about myself afterwards? How will it look in the newspaper? Will I sleep soundly tonight? What would I tell my child to do? If you are still not sure what to do, ask... and keep asking until you are certain you are doing the right thing.

Why Ethical Decisions are Difficult



 

1. Managers confront difference between facts and values. --Facts are statement of what is. --Values expresses what ought to be.

     

Ex: Medicine for the AIDS Cost to manufacture azidothymidine (AZT) is 30 cents Sold for $ 1.60 For AIDS victim annual cost $10000. Is it fair for the company to charge that price and make a profit which will be use to further research in other medicines

2 It is often the case that good and evil exist simultaneously Ex: Nestle sales of infant formula in countries such as Kenya and Zambia lead to infant deaths. --mother mixed powdered milk with contaminated local water causing babies to die of dysentery --save babies where mother not available.

 

3 Knowledge of consequences limited. Impact of business policy in a complex world is uncertain.

Table: Principle Causes of Ethical Compromises



    

1. Meeting overly aggressive financial or business objectives 2. Meeting Schedule Pressures 3. Helping the organization Survive 4.Rationalization that Others Do It 5. Resisting Competitive Threats 6. Saving Jobs

Influences on Ethical Behavior

      

1. 2. 3. 4. 5. 6. 7.

Personal Values Attitude/behavior of Supervisor Attitude/behavior of Senior Management Internal Drive to Succeed Performance Pressures No threats of punishment Friends/ coworkers

Reasons for NOT Reporting Observed Misconducts

    

1. Was afraid of not being considered a team player 2. Didnt believe corrective action would be taken 3. Feared retribution from supervisor or management 4. No one else cares about business ethics so why should I 5 Didnt trust organization to keep report confidential.

THE SOCIAL RESPONSIBILITY OF BUSINESS



WHAT ARE THE SOCIAL RESPONSIBILITY OF BUSINESS? WHAT ARE THE ETHICAL BEHAVIOUR OF BUSINESS CONSIST OF? CAN A CORPORATION HAVE A CONSCIENCE?

 

 

THE SOCIAL RESPONSIBILITY OF BUSINESS



BEFORE WE CAN ANSWER THE ABOVE QUESTIONS, WE NEED TO UNDERSTAND WHAT IS A BUSINESS, WHAT IS THE PURPOSE OF BUSINESS.

   

WHAT IS A BUSINESS
      

A business consist of i. Capital Owners ii. Employees iii. Consumers All three co-produce the product. All three form an integrated interdependent system

  

Owners risk capital and expect to be paid fair profit Employees supply energy, knowledge and imagination in exchange for appropriate monetary and psychological income Consumers supply the essential revenues out of which come wages and profits.

  

If the system members dont get what they expect , they reduce the quality or quantity of their contribution.

Together and only together can they produce the output they subsequently share

What each member receives is constrained by what other members require No member in the long run can enjoy a disproportionate share They are ALL interdependent.

 

 

  

Besides being interdependent, the members of the system are entirely EQUALLY in important The capital providers claim that they are the most important because they provide the fuel for the business. The consumers think that they are the most important because the whole point of the business is to provide goods and services for them.

 

However no member of a system is primary. The contribution of every member is necessary and no single contributor is sufficient, therefore they are all equal.

 

 

If managers do not manage business as a system and only give profit the priority, then some members of the system will reduce the value of their contribution economic performance will suffer and societys purpose for the business institution will be compromised.

    

Managements values govern how the business is run. It pervades all aspects of the business operation. It is a key responsibility of business leadership, therefore to manage these values throughout the organization so that they are effective in every action.

Some people claim that the values of business people are on par with the general values in American culture- no better no worse. If that is true, its too bad. Business leaders should have more strongly held values than the rest of society because they have fiduciary responsibility - a position of trust with employees, stockholders and customers, in short with society. Business have responsibility to the society.

 

Business-Government-Society
 

BUSINESS - encompassing a broad range of actions and institutions ---enterprises ranging from a burger stand to a multinational corporation.

 

Government -the structures and processes which public policies, programs and rules are authoritatively made for society. ---local, state and federal governments

SOCIETY. A network of human relations with three interrelated parts. 1. Ideas 2. Institutions 3 material things.

  

Ideas ---intangible objects of thought --------values and ideologies

 

Institutions ----formal patterns of relations that link people together to accomplish a goal Ex: labor union, corporations

Material things


Includes Natural Resources Land Manufactured goods ---these help shape and are partly the products of ideas and institutions.

   

BGS- importance
  

A business must be responsive to both Economic Non economic environment

A company works within a society. ---If society does not accept a companys actions ---------company punished and constrained.

 

In 1911 Standard Oil forced to split up. In Ma Bell Forced to split up Microsoft????

 

STAKEHOLDER VERSUS STOCKHOLDER MODEL

 

Corporations affect positively or negatively peoples lives. Individuals may benefit or are harmed by the corporations activities. Therefore , Corporations have stakeholders.

 

The stakeholders are groups and individual who benefited from or are harmed by, and whose rights are violated or respected by the Corporations activities.

The notion of the stakeholder is built on two principles, the Principle of Corporate Rights and the Principle of Corporate Effect.

Principle of Corporate Rights



The corporate and its managers may not violate the legitimate rights of others to determine their own future.

The Principle of Corporate Effect



The corporation and its managers are responsible for the effects of their action on others.

The traditional business model

     

Corporations task to dominate its environment in order to maximize stockholder wealth .

The purpose of the corporation is to benefit one group of stakeholdersits owners, the stockholders.

In the STAKEHOLDER MODEL - the welfare of each stakeholder must be considered. Stakeholder model asserts that the management has a moral duty to look beyond profits and see a range of stakeholders interest.

 

Primary Stakeholders have an immediate and continuous and powerful impact on the corporation ----they are:- stockholder(owners), customers, employees, communities and governments as well as suppliers and creditors.

Secondary Stakeholders have less power to influence the corporations activities but are affected by its operations ----they are :- environmentalists, the media, trade associations, universities

 

Why do stockholders have special claims on the firm ----they are its owners

Why do stakeholders have rights to claim over the corporation? --the stakeholders interest have an impact on the corporation --the corporation has a moral obligation not to harm those whom its action affect.