business ethics

1. Crane et al.
© Crane et al., 2019. All rights reserved.
Crane et al.
Business Ethics (5th Edition)
Chapter 1

2. Crane et al.
© Crane et al., 2019. All rights reserved.
Introducing
Business Ethics
Lecture 1

3. Crane et al.: Business Ethics, 5th edition
Overview
• What is business ethics?
• Why is business ethics important?
• Globalization: a key context for business
ethics?
• Sustainability: a key goal for business ethics?

4. Crane et al.: Business Ethics, 5th edition
What is business ethics?
Business ethics is the study of business
situations, activities, and decisions
where issues of right and wrong are
addressed.

5. Crane et al.: Business Ethics, 5th edition
Ethics and the law
Ethics
Law
grey
area

6. Crane et al.: Business Ethics, 5th edition
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.

7. Crane et al.: Business Ethics, 5th edition
The relationship between morality, ethics
and ethical theory
…that can
be applied
to any
situation.
… to
produce
ethical
theory …
Ethics
rationalizes
morality …
Morality Ethics Ethical
theory
Potential
solutions to
ethical
problems

8. Crane et al.: Business Ethics, 5th edition
Why is business ethics important?
1. Power and influence of business in society
2. Potential to provide major contribution to society
3. Potential for businesses to inflict harm on individuals,
society and the environment
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Businesses face a trust deficit
8. Evaluating different ways of managing business ethics
9. Interesting and rewarding

9. Crane et al.: Business Ethics, 5th edition
• Chemical industry – competitive practices,
environmental responsibility, health and safety and
human rights
• Information and mobile technology industry –
competitive practices, fair pricing, global production
methods, data protection, protection of consumer
from harmful materials and energy and CO2 usage
• Financial services – weak regulation, financial
crime, responsible lending, sales practices and
consumer protection, tax evasion and avoidance
Adapted from Schaefer (2013)
Ethical Issues in Different Industries

10. Crane et al.: Business Ethics, 5th edition
Differences across organizational types
Stakeholders Large
Corporations
Small
Businesses
Civil Society
Organisations
Public Sector
Main priorities
in addressing
ethical issues
Financial integrity,
employee/custom
er issues
Employee,
customer/commu
nity issues
Delivery of
mission to clients;
legitimacy and
accountability
issues
Rule of law,
conflict of interest;
accountability
issues
Approach to
managing
ethics
Formal, public
relations and/or
systems-based
Informal,
relationship and
trust based
Informal values
based
Formal,
bureaucratic,
regulated
Responsible
and/or
accountable to
Shareholders and
other
stakeholders
Owners and
family members
Donors and
clients
General public,
higher level
government
organisations
Main
constraints
Shareholder
orientation; size
and complexity
Lack of
resources,
including time
Lack of resources
and formal
training
Inertia, lack of
transparency

11. Crane et al.: Business Ethics, 5th edition
Globalization: a key context for
business ethics?

12. Crane et al.: Business Ethics, 5th edition
What is globalization?
• According to Scholte (2005) globalization is not:
– ‘internationalization’
– ‘liberalization’
– ‘universalization’
– ‘westernization’
• Globalization is: a process which diminishes the
necessity of a common and shared territorial
basis for social, economic, and political
activities, processes, and relations.
– ‘deterritorialization’

13. Crane et al.: Business Ethics, 5th edition
Relevance of globalization for business
ethics
• Cultural issues
• Legal issues
• Accountability issues
Globalization can affect all stakeholders of the
corporation

14. Crane et al.: Business Ethics, 5th edition
Ethical impacts of globalization
Stakeholders Ethical impacts of globalization
Stakeholders Globalization provides potential for greater profitability, but also greater risks. Lack of regulation of 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 &
Competitors
Suppliers in developing countries face regulation from MNCs through supply chain management. Small
scale indigenous competitors exposed to global players.
Civil Society
(e.g. NGO’s)
Global activities brings the company in direct interaction to local communities with possibility for erosion of
traditional 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.

15. Crane et al.: Business Ethics, 5th edition
International perspectives on
business ethics

16. Crane et al.: Business Ethics, 5th edition
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?

17. Crane et al.: Business Ethics, 5th edition
Regional differences: Europe, North
America, Asia
Europe North America Asia
Who is responsible for
ethical conduct in
business?
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 decision 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

18. Crane et al.: Business Ethics, 5th edition
Sustainability: a key goal for
business ethics?

19. Crane et al.: Business Ethics, 5th edition
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

20. Crane et al.: Business Ethics, 5th edition
The three components of sustainability
Economic Social
Environmental

21. Crane et al.: Business Ethics, 5th edition
Triple bottom line
• Coined by John Elkington
• Bottom line thinking suggests sustainability as
a goal
• Three dimensions:
– Environmental perspectives
– Economic perspectives
– Social perspectives

22. Crane et al.: Business Ethics, 5th edition
Corporate commitments to sustainability
Company Sustainability Commitment/Policy Source
The Volkswagen Group The Volkswagen Group has made a commitment to sustainable,
transparent and responsible management. In line with the
recommendations of the German Corporate Governance Code, we
practice Group-wide sustainability coordination and forward-looking
risk management and ensure a clear framework for the future-oriented
handling of environmental issues, responsibility towards our
employees and social engagement by our brands and in the various
regions.
https://www.volkswagenag.c
om/en/sustainability/policy.ht
ml (2019)
Shell Sustainability at Shell means providing energy in a responsible
manner, respecting people, their safety and the environment.
https://www.shell.com/sustaina
bility/our-
approach/sustainability-at-
shell.html (2019)
Marks and Spencer's Plan A is our way to help build a sustainable future by being a
business that enables our customers to have a positive impact on
wellbeing, communities and the planet through all that we do.
https://corporate.marksandspe
ncer.com/plan-a (2019)
Alibaba Group At Alibaba, we believe acting in a socially responsible way is part of
our business model. Since our founding, we have been highly
committed to supporting and participating in charitable and socially
responsible projects that align with our core values and mission, and
to establishing a technology-driven charitable ecosystem to extend the
benefits of our technological capabilities to the community at large.
https://www.alibabagroup.com/
en/about/sustainability (2019)

23. Crane et al.: Business Ethics, 5th edition
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