Business Ethics

1. Business Ethics, Governance and
Social Responsibility
Lecture One
An Introduction to ethics Pt. 1

3. “A noble man compares and estimates himself
by an idea which is higher than himself; and a
mean man, by one lower than himself. One
produces aspiration; the other ambition,
which is the way in which a vulgar man
aspires”.
Marcus Aurelius - Meditations

4. Once upon a time...
• Aristotle was a Greek philosopher
• Tutored Alexander (the Great – Macedonian King) and Ptolemy
(encouraging the former to invade the east!)
• Aristotle argued that ethics was a practical (rather than theoretical)
subject – i.e. it was about doing good, not identifying good
• Aristotle argued that the function of a person was the fulfilment of the
soul (including well-being)

5. Where does ethics come from?
• Aristotle first used the term ethics to name
aspects of morality and judgement offered by
Socrates and Plato
• Aristotle stated that the consideration of
ethics must begin with "the that" or "the fact
that“ – i.e. context!

6. Character = Ethos = Ethics?
• Aristotle identified that the means of persuasion
is divided into three aspects
– Ethos – Character (authority)
– Pathos - Emotion
– Logos – Logic
• Ethos is often cited as the ‘ethical’ appeal of the
individual
• Ethos was a descriptor for the credibility or
authority of the individual making the argument

7. Ethics is....
……a system of moral principles
“…accepted principles of right or
wrong that govern the conduct of a
person, members of a profession or
the actions of an organisation.” Hill,
2007

8. Areas of ethical study
• Meta-Ethics
– The nature or morality and judgement (abstract)
– Where do our principles come from?
• Normative Ethics
– The contextual nature of right and wrong
– What is right and what is wrong?
• Applied Ethics
– The application of moral judgements upon a specific
issue
– Is a specific action morally justified?

9. Issues of Ethical Responsibility
• Employment
– Work conditions being considered inferior
– Which standards to apply?
• Human Rights
– Right of association, speech, assembly, political choice
• Environmental Considerations
– Reduced cost of adhering to lesser legal standards
• Corruption
– Facilitating payments to coerce
• Moral Judgement
– Exploiting lack of education standards

10. What is Ethical Responsibility?
• What is right and wrong?
• Governing the conduct of business and
individuals
• Context vs. Social norms
• Strongly affected by culture and customs
• Social responsibility

11. Driving Ethical Behaviour

12. Where do norms come from?
• Moral Catalogues
• Dogmatic termination of substantiation:„holy books“ e.g. Bible
• Sustainable development
• Human Rights
Codes of conduct, e.g. US Model Business Principles
 Is universalism possible?
• Dialogue ethics
• Procedural norms (universal)
• Shared norms through dialogue
• Combination
– Existing norms/catalogues as basis for dialogue

13. But what does this mean?
• Ethics is a intangible construct
• Based on personal or societal beliefs of right
or wrong
• Dynamic (as society itself is dynamic)

14. “It is a ridiculous thing for a man not to fly
from his own badness, which is indeed
possible, but to fly from other men's badness,
which is impossible”.
Marcus Aurelius - Meditations

15. Integrity?
• What is integrity?
• Can we define integrity?
• Can we classify integrity?
• Can we identify it in ourselves?
• Can we identify it in others?

16. • professional behaviour is often described as
behaving appropriately, doing the right thing,
acting with integrity or acting in a way that
maintains or improves the trust that others
have in you (RICS)
– laws, rules and technical standards are very much
concerned with what you have to do to comply or
meet those requirements; ethics or professional
behaviour are about asking what is the right thing
to do (RICS)

17. Ethics begins where the law ends!
• The law represents a (potentially) ethical
minimum
• Ethical responsibility often exceeds minimum
legal mandates/expectations
• But which law?

18. • The problem is that sticking to the law is not
always that simple, because;
(1)Differences in national laws and lack of international
law! Which law to abide by, the home- or the host-
country’s?
(2) Acting according to the law does not always prevent
MNEs from getting into trouble? E.g. the South
Africa/apartheid example earlier; -- so is there still a
reason for firms to act “ethically”? So one very
pragmatic reason is that firms run into conflicts if they
don’t start to act ethically – that’s not a very ethical
reason, but it’s a good argument for the necessity of
corporate ethics

19. Legitimate Illegitimate
Legal
(MNEs as “good corporate citizens“)
Illegal
I II
III IV
Ethics and the Law

20. Shaping ethics
• Regional approaches
• Institutional shifts
• Corporate scandals
• Globalisation and regulation
• (source, crane & matten 2004)

22. Why bother.....?
“The social responsibility of business
is to increase its profit.”
(Milton Friedmann 1970)

23. • Friedmann suggests that :
• Everybody who suggests that firms should not only pursue profits is a
socialist
• Managers of MNEs are usually employees of the owners/shareholders,
so their responsibility is towards no-one else than the
owners/shareholders
• Ethics might still have a place, but only if it pays off, e.g. body shop.
• Ethics has no place where being ethical reduces profits, I.e. share-
holder value ALSO Cause related marketing
• Good corporate citizenship does not come cheap – and the cost is
borne by society at large
• Concept of ethics, fighter jet producing company – the only thing the
company should do is produce jet that have the highest destruction
power and thus make profits to serve its owner and employees; if the
state doesn’t like it, it has to have regulation to prevent it.