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Business ethics an introduction


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Business ethics an introduction

  1. 1. BUSINESS ETHICS 1. AN INTRODUCTION 2013/2014 Ana Cláudia Campos 1º Semestre 1
  2. 2. 1.1 Morality, Ethics, and Business Ethics 1.2 The Emergence of Business Ethics: Globalization, Sustainability, and Competitiveness 1.3 Conceptual Network: Stakeholders, Social Responsibility and Corporate Governance 2
  3. 3. 1.1 Morality, Ethics, and Business Ethics 3
  4. 4. Morality “… is concerned with the norms, values, and beliefs embeded in social processes which define right (√) and wrong (×) for an individual or a community.” (Crane & Matten, 2010) 4
  5. 5. Sources of Morality RELIGION 5
  6. 6. SOCIETY 6
  7. 7. 7
  8. 8. 8
  9. 9. 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 a given situation. These rules and principles are called ethical theories.” (Crane & Matten, 2010) 9
  10. 10. “… deals with individual character and the moral rules that govern and limit our conduct. It investigates questions of right and wrong, duty and obligation, and moral responsibility.” (Shaw, 2011) 10
  11. 11. Theoretical/philosophical study that analyses ethical theories (Popkin & Stroll, 1956) 11
  12. 12. “… the wisdom of living or the art of living.” (Savater, 1991) 12
  13. 13. “ Ethics originates in everyday life.” (Popkin & Stroll, 1956) … in the moral dilemmas arising in particular situations of individuals’ lives, that challlenge consciousness and claim the need of a decision making 13
  14. 14. “An ethical dilemma is a situation that requires a choice regarding a possible course of action that, although offering the potential for personal or organizational benefit or both, may be considered unethical. It is often a situation in which action must be taken but for which there is no clear consensus on what is «right» and «wrong»”. (Schermerhorn, 2002) 14
  15. 15. The ethical reflection of everyday life becomes a philosophical investigation when transcends the individual’s particular issues and questions and develops a general approach to them. 15
  16. 16. Perspective Context Should I lie to him or tell him the truth about my whereabouts last night? Particular Can I have this baby under the present circumtances? Everyday life This payoff is particularly advantageous in face of my political ambitions? Should I accept it? Is lying morally circumstances? acceptable under any Is abortion morally defensible? General Philosophy To buy off and be bought off are the two sides of the same coin: the use of any means to achieve the ends. Is any means worthy of moral appraisal? 16
  17. 17. BUSINESS ETHICS “… is the study of what constitutes right and wrong (or good and bad) human conduct in a business context.” (Shaw, 2011) 17
  18. 18. 18
  19. 19. “… is the study of business situations, activities, and decisions where issues of right and wrong are addressed.” (Crane & Matten, 2010) 19
  20. 20. 20
  21. 21. Comments • By ‘right’ and ‘wrong’ it is meant ‘morally right’ and ‘morally wrong’, against ‘commercially’, ‘strategically’ or ‘finantially right or wrong’; • Business Ethics covers issues related to business organizations but also other types of organizations (governmental organizations, non-governmental/nonprofit, pressure groups, etc.) 21
  22. 22. • Many people believe ‘ethics’ and ‘business’ don’t match because businesses are either imoral (against morality) ou non-moral (outside morality) • However Business Ethics is increasingly becoming a topic of attention for both scholars and professionals in all fields 22
  23. 23. Reasons for the increasing importance of Business Ethics 23
  24. 24. • The power and influence of business and firms in society is increasing everyday • Companies contribute to society (employment, taxes, economic and personal development...) and it is necessary to understand how this contribution occurs • Bad business practices have the potential to cause harm to individuals, communities and the environment 24
  25. 25. • Stakeholders (consumers, control and pressure groups, the media, competition ...) increasingly require businesses to behave responsibly and ethically • There is lack of formal training in the area of ethics, and this training may contribute to problem analysis and more informed decision making 25
  26. 26. • Ethical violations (fraud, injustice at work, corruption, abuse of trust ...) continue to happen in a daily basis discipline and an ethical approach helps to understand the reasons behind them • Studies show that companies with best ethical performance are also those with improved financial performance, increased productivity and quality, higher sales and customer loyalty 26
  27. 27. • An ethical attitude contributes to improving brand image and corporate reputation, thus capturing more easily the attention of investors and consumers and facilitating the retention of employees 27
  28. 28. “Business ethics can be said to begin when the law ends. Business ethics is primarily concerned with those issues not covered by the law, or where there is no definite consensus on whether something is right or wrong. (…) For this reason, it is often said that business ethics is about the ‘grey areas’ of business, or where values are in conflict.” (Crane & Matten, 2010) 28
  29. 29. • It is expected that all legal conduct is also ethical, however much of what has once been legal is nowadays seen as immoral, nonethical (slavery, political inequality and so forth) • On the other hand, a non-illegal action is not necessarily ethical, which means ethics transcends legality: Is it ethical for an employee to take longer than the necessary to do a job? Is it ethical to make personal telephone calls during working time? Is it ethical to call in sick to take a day off work? Is it ethical not to report a co-worker misconduct? … 29
  30. 30. 1.2 The Emergence of Business Ethics: Globalization, Sustainability, and Competitiveness 30
  31. 31. “Globalization is a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations.” (Crane & Matten, 2010) 31
  32. 32. “… one of the most powerful and pervasive influences on nations, businesses, workplaces, communities and lives...” (Kanter, 1995 ) 32
  33. 33. Globalization’s most influential factors Technological Political Economic 33
  34. 34. Information Job market/workplace Social and family relations Economic relations Globalization… 34
  35. 35. Positive Aspects Negative Aspects Economic growth Enclavic poverty Global well-being Restricted access to the planet’s resources Market interdependence Dissemination of financial crises Westernization of the patterns and systems of values, thought and behavior / culture Cultural relativism shock Democracy Global dissemination of effects (social, political, economic) of events occurred World peace locally Increased risk of unethical conduct in international business (corruption, child labor, cheap labor ...) 35
  36. 36. Globalization and Ethics Businesses escape the control of national governments Different legal frameworks and territorially disseminated Different ethical demands Moral values Local cultures Which stakeholders are organizations accountable to? 36
  37. 37. “Sustainability refers to the long-term maintenance of systems according to environmental, economic, and social considerations.” (Crane & Matten, 2010) 37
  38. 38. “Competitiveness is the ability of a firm or a nation to offer products and services that meet the quality standards of the local and world markets at prices that are competitive and provide adequate returns on the resources employed or consumed in producing them.” ( 38
  39. 39. “Competitive advantage (…) refers to the utilization of a core competency that clearly sets an organization apart from its competitors and gives it an advantage over them in the marketplace.” (Schermerhorn, 2002) • Product • Price • Service • Cost efficiency • Quality • Brand image • Ethical management and CSR… 39
  40. 40. 1.3. Social Conceptual Network: Responsibility, and Stakeholders, Corporate Governance 40
  41. 41. “Organizational stakeholders (are) those persons, groups, and other organizations directly affected by the behavior of the organization and holding a stake in its performance.” (Schermerhorn, 2002) 41
  42. 42. “A stakeholder of a corporation is an individual or a group which either: is harmed by, or benefits from, the corporation; or whose rights can be violated , or have to be respected, by the corporation.” (Crane & Matten, 2010) 42
  43. 43. NGOs Competitors Society Unions Suppliers Shareholders Employees Universities Organization Government Directors Opinion leaders Customers Media Funding institutions 43
  44. 44. Stakeholders Impactos éticos da globalização Shareholders Greater finantial risks and instability Employees Exploitation conditions) Consumers Cultural imperialism and westernization of nations Suppliers Competition and Small scale competitiors more exposed to MN businesses of employees (poor working Civil Society Erosion of local communities traditional life (pressure groups, NGOs, local communities) Government Decrease of government responsibility towards employment, wellfare and ethical patterns (Adapted from Crane & Matten, 2010) 44
  45. 45. “Corporate social responsibility is defined as an obligation of the organization to act in ways that serve both its own interests and the interests of its many external stakeholders.” (Schermerhorn, 2002) 45
  46. 46. “Corporate social responsibility includes the economic, legal, ethical, and philantropic expectations placed on organizations by society at a given point in time.” (Crane and Matten, 2010) 46
  47. 47. Philantropic Responsibilities Ehtical Responsibilities Legal Responsibilities Economic Responsibilities (Carroll, 1991) 47
  48. 48. “Should the firm feel any responsibility towards problems outside itself, occuring in the social environment?” (Neves, 2008) 48
  49. 49. The firm’s primary responsibility To protect the owners’ /shareholders investment and to act in their best interest… 49
  50. 50. M. Friedman’s (1970) arguments against Corporate Social Responsibility • Only human beings have a moral responsibility for their actions (he excludes organizations) • Managers’ responsibility is to act solely in the interests of stakeholders (he excludes other stakeholders) • Social issues and problems are the province of the state rather than corporate managers (he excludes social goals) 50
  51. 51. Organizational Arguments for CSR Greater customer satisfaction, related to brand reputation Attraction of the best and more committed employees Avoidance or forestalling of industry regulation and legislation, assuring greater business independance from government CSR is a long-term investment in a safer, more educated, and equitable community (stable competitive environment) Ethical Arguments for CSR Firms cause social and environmental problems (impacts), following production activities, and therefore should take on the responsibility for solving them Companies should use power and resources responsibly Companies should include in their business vision the interests and objectives of all stakeholders (Adapted from Crane & Matten, 2010) 51
  52. 52. Corporate Social Responsibility Actions • Patronage / Philanthropy (social, cultural, environmental, scientific and technological, and educational and sports initiatives involving donations in cash or in kind) • Charity (social initiatives involving the raising of money or goods to the benefit of socially disadvantaged groups) • Social marketing (adaptation of marketing techniques to programs designed to influence and change the behavior of stakeholders, gain or benefit is to the public and society at large and the business perspective (earnings) may be (or is) completely absent • Community Integration (actions that support the creation of infrastructure and public services in the local community where the company is located, as villages, day care centers, schools or hospitals) • Reforms in the company’s internal environment 52
  53. 53. “Corporate governance (…) is the system of control and performance monitoring of top management that is maintained by boards of directors and other major stakeholders representatives.” (Schermerhorn, 2002) 53