QB3004 Business Ethics and Corporate Social Responsibility

© Andrew Crane and Dirk Matten, 2016. All rights reserved
QB3004 Business Ethics and Corporate Social
Responsibility
Week 1 (2)
Ethics and Morality and Ethical Theory
Dr. Tatiana Gladkikh BA MA PhD MCIL SFHEA
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Lecture Outline
• The relationship between morality, ethics, and ethical
theory
• Globalisation as a context of business ethics
• Sustainability and the triple bottom line
• Ethical theory and its role in society
© Andrew Crane and Dirk Matten, 2016. All rights reserved
What is business ethics?
• Business ethics is the study of business situations,
activities, and decisions where issues of right and wrong
are addressed.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Ethics and the law
Ethics
Law
grey
area
© Andrew Crane and Dirk Matten, 2016. All rights reserved
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 explain specific rules and
principles that determine right and wrong for any given
situation.
• These rules and principles are called ethical theories.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
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
© Andrew Crane and Dirk Matten, 2016. All rights reserved
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
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Types of misconduct across sectors
24%
21%
19%
22%
20%
21%
27%
24%
25%
10
20
30
Putting own
interests ahead of
org
Lying to
employees
Abusive behavior
Nonprofit
Business
Government
© 2008 Ethics Resource Center
Source: Ethics Resource Centre (2008)
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Differences across organizational types
Shareholder orientation;
size and complexity
Financial integrity,
employee/
customer issues
Formal, public relations
and/or systems-based
Stakeholders Public sector
organizations
Main priorities in
addressing ethical
issues
Responsible
and/or
accountable to
Main constraints
Approach to
managing ethics
Civil society
organizations
Small
businesses
Large corporations
Rule of law, conflict of
interest; accountability
issues
Delivery of mission to
clients; legitimacy and
accountability
Financial integrity,
employee/
customer issues
Formal, bureaucratic
Informal, values-based
Informal, trust-based
General public, higher
level government
organizations
Owners
Inertia, lack of
transparency
Lack of resources and
formal training
Lack of resources
and attention
Shareholders and other
stakeholders
© Andrew Crane and Dirk Matten, 2016. All rights reserved
What is globalisation?
• According to Scholte (2005) globalization is not:
• ‘internationalisation’
• ‘liberalisation’
• ‘universalisation’
• ‘westernisation’
• Globalization is: a process which diminishes the necessity
of a common and shared territorial basis for social,
economic, and political activities, processes, and relations.
• ‘deterritorialisation’
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Relevance of globalization for business ethics
• Cultural issues
• Legal issues
• Accountability issues
Globalization can affect all stakeholders of the corporation
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Ethical impacts of globalization
Globalization provides potential for greater profitability, but also greater risks. Lack of
regulation of capital markets, leading to additional financial risks and instability.
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.
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 in developing countries face regulation from MNCs through supply chain
management. Small scale indigenous competitors exposed to global players.
Global activities bring 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.
Stakeholders Ethical impacts of globalization
Shareholders
Employees
Suppliers &
competitors
Civil society
(NGOs, etc)
Government &
regulation
Consumers
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.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
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?
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Regional differences: Europe, North America, Asia
The individual
Europe N. America Asia
Who is responsible for ethical conduct
in business?
Who is the key actor in business ethics?
What are the key guidelines for ethical
behaviour?
What are the key issues in business
ethics?
What is the dominant stakeholder
management approach?
Top management
Government,
corporations
Managerial discretion
Corporate governance
and accountability
Implicit multiple
stakeholder approach,
benign managerialism
The corporation
Corporate codes of ethics
Misconduct and immorality
in single decisions
situations
Focus on shareholder
value
Social control by the
collective
Government, trade unions,
corporate associations
Negotiated legal framework of
business
Social issues in organizing the
framework of business
Formalised multiple
stakeholder approach
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Sustainability: a key goal for business ethics?
• 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
© Andrew Crane and Dirk Matten, 2016. All rights reserved
The three components of sustainability
Economic Social
Environmental
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Triple bottom line
• Coined by John Elkington
• Bottom line thinking suggests sustainability as a goal
• Three dimensions:
• Environmental perspectives
• Economic perspectives
• Social perspectives
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Corporate commitments to sustainability
“At BP we define sustainability as the capacity to endure as a group: by renewing assets; creating
and delivering better products and services that meet the evolving needs of society; …contributing
to a sustainable environment; and retaining the trust and support of our customers, shareholders
and the communities in which we operate.”
“[Sustainability] means enhancing our relationship with host and partner governments, …and
ensuring our activities contribute positively to … both present and future generations.”
“Corporate responsibility (CR) at Nokia is a collective effort. We believe that management of CR
issues is most effective when sustainability policies and programs are embedded in every aspect
of our operations. ”
“ [For Toyota, a guiding principle is] ‘contributing to the development of a prosperous society
through the manufacture of automobiles.’ ‘Contributing to the development of a prosperous society’
means ‘contributing to the sustainable development of the earth.’”
“Values, social responsibility and active sustainability are integral [to] our company culture. We are
future-oriented in our approach to important issues such as climate change. We operate a broad
range of [R&D] activities and provide trend-setting approaches to the mobility of tomorrow.”
Company Sustainability statement Source
BP
DeBeers
Nokia
Toyota
Volkswagen
Sustainability
Report, 2007
www.debeersgroup.c
om, 2009
CSR Report, 2007
Sustainability
Report, 2008
www.volkswagenag.
com, 2009
© Andrew Crane and Dirk Matten, 2016. All rights reserved
The role of ethical theory
• Highlight international differences in perspectives
• Provide critical overview of traditional ethical theories
• Explore contemporary ethical theories
© Andrew Crane and Dirk Matten, 2016. All rights reserved
What are normative ethical theories?
• Ethical theories are the rules and principles that determine
right and wrong for any given situation Crane and Matten (2010)
• Normative ethical theories are those that propose to
prescribe the morally correct way of acting
• As opposed to descriptive ethical theories which seek to
describe how ethics decisions are actually made in business
© Andrew Crane and Dirk Matten, 2016. All rights reserved
The role of ethical theory
• Two extreme positions (De George 1999)
• Ethical absolutism claims there are eternal, universally
applicable moral principles
• Right and wrong are objective qualities, can be rationally
determined
• Typically traditional ethical theories
• Ethical relativism claims morality is context-dependent
and subjective
• No universal right and wrongs that can be rationally determined;
depends on person making the decision & culture in which they
are located
• Typically contemporary ethical theories
© Andrew Crane and Dirk Matten, 2016. All rights reserved
North American and European origins and differences
• Differences between Anglo-American and European
approaches based on philosophical arguments
• Individual versus institutional morality
• US tend to individualistic perspective
• Europe towards wider economic and governing institutions
• Questioning versus accepting capitalism
• US tend to accept the capitalist framework
• Europe tend to question the ethical justification of capitalism
• Justifying versus applying moral norms
• US tend to focus on application of morality
• Europe focus on justification and ethical legitimation of norms
• In contrast, Asian perspectives tend to be based on religion
(e.g. Islam, Buddhism)
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Normative Ethical Theories and Religion
• Religious and philosophical theories tend to have the same
aim: to inform us about the right things to do.
• Two main differences:
• Sources of rules & principles.
• Religions typically invoke deities or organized systems of belief as the
origins of norms. Philosophy typically stems from belief in human reason
to derive norms.
• Consequences of morality (or immorality)
• Philosophy typically sees consequences as a matter of creating tangible
social benefits or harms for others. Religions also point to spiritual
consequences, including enlightment, reincarnation, damnation, and
salvation.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Western modernist ethical theories
• Traditional ethical theories
• Generally offer a certain rule or principle which one can apply to
any given situation
• These theories generally can be differentiated into two groups
Motivation/
Principles Action Outcomes
Consequentialist Ethics
Non-consequentialist Ethics
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Major normative theories
Nonconsequentialist
Nonconsequentialist
Type Consequentialist Consequentialist
Man is a being that
is distinguished by
dignity
Man is a rational
moral actor
Man is controlled by
avoidance of pain
and gain of
pleasure(“hedonist”)
Man as an actor
with limited
knowledge and
objectives
Concept of
human
beings
Respect for human
beings
Categorical
imperative
Act/rule
utilitarianism
Maximization of
desires/self interest
Rules
Individual desires or Collective welfare Duties Rights
interests
Focus
John Locke
John Rawls
Jeremy Bentham Immanuel Kant
John Stuart Mill
Contributors Adam Smith
Egoism Utilitarianism Ethics of duties Rights & justice
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Egoism
• Theory of egoism – an action is morally right if the decisionmaker freely decides an action to pursue either their (shortterm) desires or their (long-term) interests.
• Adam Smith (1793): pursuit of individual interest morally
acceptable as invisible hand of market creates benefit for all
• Relies on free competition and good information
• ‘Enlightened egoism’
• However, markets do not function perfectly
• Anti-globalisation movement
• Sustainability debate
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Utilitarianism
• According to utilitarianism, an action is morally right if it
results in the greatest amount of good for the greatest
number of people affected by the action
• Also called the ‘greatest happiness principle’
• Based on cost-benefit analysis
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Problems with Utilitarianism
• Subjectivity
• This has led to refinement of theory
• Act utilitarianism
• Rule utilitarianism
• Issues around quantification and distribution of utility
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Act- and Rule-Utilitarianism
Act utilitarianism
• Looks to single actions and bases the moral judgement on the
amount of pleasure and the amount of pain this single action
causes.
Rule utilitarianism
• looks at classes of action and asks whether the underlying
principles of an action produce more pleasure than pain for
society in the long run.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Ethics of duties
Categorical Imperative’ (Kant)
• Maxim 1: Consistency
• Act only according to that maxim by which you can at the same time will
that it should become a universal law
• Maxim 2: Human Dignity
• Act so that you treat humanity, whether in your own person or in that of
another, always as an end and never as a means only
• Maxim 3: Universality
• Act only so that the will through its maxims could regard itself at the same
time as universally lawgiving (would others agree? Would you be happy to
see your decision reported in the press?)
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Ethics of rights and justice
Human rights
• Basic, inalienable entitlements that are inherent to all human
beings, without exception.
• Based on consensus about nature of human dignity.
• Increasingly important: enshrined in principles of UN Global
Compact and the “Ruggie Principles”.
Justice
• The simultaneously fair treatment of individuals in a given situation
with the result that everybody gets what they deserve
• Fair procedures (procedural justice)
• Fair outcomes (distributive justice)
© Andrew Crane and Dirk Matten, 2016. All rights reserved
1. Each person is to have an equal right to the most extensive
total system of basic liberties compatible with a similar
system of liberty for all.
2. Social and economic inequalities are to be arranged so that
they are both:
a. to the greatest benefit of the least advantaged;
b. attached to offices and positions open to all under conditions of
fair equality of opportunity.
John Rawls’s ‘Theory of Justice’
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Limits of traditional theories
• Too abstract –
• too theoretical for day to day use
• Too reductionist –
• focussing on only one aspect of morality when all are important
• Too objective and elitist –
• specialist ethicists with no experience of the situation
• Too impersonal –
• does not account for personal relationships that shape our thoughts of right
and wrong
• Too rational and codified –
• degrades the importance of our moral feelings and emotions
• Too imperialist –
• assumption that ethical theories from the West are suitable everywhere
else in the world.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Alternative perspectives on ethical theory
Approaches based on character and integrity
Virtue ethics
• Contends that morally correct actions are those
undertaken by actors with virtuous characters. Therefore,
the formation of a virtuous character is the first step
towards morally correct behaviour
Acquired traits
• Intellectual virtues
• Moral virtues
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Alternative perspectives on ethical theory
Approaches based on ethics and responsibility
Feminist ethics
• An approach that prioritizes empathy, harmonious and healthy social
relationships, care for one another, and avoidance of harm above abstract
principles
Key elements
• Relationships
• Decisions taken in context of personal human interrelations
• Responsibility
• Active ‘taking’ of responsibility, rather than merely ‘having’ it
• Experience
• Learn and develop from experience
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Alternative perspectives on ethical theory
Approaches based on procedures of norm generation
Discourse ethics
• Aims to solve ethical conflicts by providing a process of norm
generation through rational reflection on the real-life experiences of
all relevant participants
Key elements
• Ultimate goal of ethical issues in business should be the peaceful
settlement of conflicts
• Different parties in a conflict should sit together and engage in a
discourse about the settlement of the conflict, and ultimately provide
a situation that is acceptable to all
• ‘ideal discourse’ criteria
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Alternative perspectives on ethical theory
Approaches based on empathy and moral impulse
Postmodern ethics
• An approach that locates morality beyond the sphere of
rationality in an emotional ‘moral impulse’ towards others.
It encourages individual actors to question everyday
practices and rules, and to listen to and follow their
emotions, inner convictions and ‘gut feelings’ about what
they think is right and wrong in a particular incident of
decision-making.
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Alternative perspectives on ethical theory
Postmodern business ethics
• Postmodern business ethics emphasises (Gustafson, 2000:21)
• Holistic approach
• Examples rather than principles
• ‘Think local, act local’
• Preliminary character
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Typical Perspective
Single normative consideration
for solving the ethical dilemma
Ethical
Dilemma
‘Lens’ of ethical theory
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Pluralistic Perspective
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Pluralism?
Crane and Matten (2010) argue that for the practical purpose
of making effective decisions in business:
• Not suggest one theory or one approach as the best or
true view of a moral dilemma
• Suggest that all these theoretical approaches throw light
from different angles on one and same problem
• Complementary rather than mutually exclusive
Advocate position of pluralism
• Middle ground between absolutism and relativism
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Considerations in making ethical decisions:
summary of key insights from ethical theories
© Andrew Crane and Dirk Matten, 2016. All rights reserved
Consideration Typical question you might ask yourself Theory
One’s own interests Is this really in my, or my organization’s, best long-term interests? Would it be
acceptable and expected for me to think only of the consequences to myself in this
situation ?
Egoism
Social consequences If I consider all of the possible consequences of my actions, for everyone that is
affected, will we be better or worse off overall? How likely are these
consequences and how significant are they?
Utilitarianism
Duties to others Who do I have obligations to in this situation? What would happen if everybody
acted in the same way as me? Am I treating people only to get what I want for
myself (or my organization) or am I thinking also of what they might want too?
Ethics of duty
Entitlements of
others
Whose rights do I need to consider here? Am I respecting fundamental human
rights and people’s need for dignity?
Ethics of rights
Fairness Am I treating everyone fairly here? Have processes been set up to allow everyone
an equal ch ance? Are there major disparities between the ‘winners’ and ‘losers’
that could be avoided?
Theories of justice
Moral character Am I acting with integrity here? What would a decent, honest person do in the
same situation?
Virtue ethics
Care for others and
relationships relationships
How do (or would) the other affected parties feel in this situation? Can I avoid
doing harm to others? Which solution is most likely to preserve healthy and
harmonious relationships among those involved?
Feminist ethics
Process of resolving
conflicts
What norms can we work out together to provide a mutually acceptable solution
to this problem? How can we achieve a peaceful settlement of this conflict that
avoids ‘railroading’ by the most powerful player?
Discourse ethics
Moral impulse and
emotions
Am I just simply going along with the usual practice here, or slavishly following
the organization’s code, without questioning whether it really feels right to me?
How can I get closer to those likely to be affected by my decision? What do my
emotions or gut feelings tell me once I’m out of the office?
Postmodern ethics
© Andrew Crane and Dirk Matten, 2016. All rights reserved
For the tutorial
• Research:
• Thomas Hobbes
• Jeremy Bentham
• John Dewey
• Aristotle and Plato
• Kant
• Also you might want to take a look at the on-line student resources
for:
• Blowfield, M. & Murray, A. (2014) http://global.oup.com/uk/orc/busecon/business/blowfield_murray3e/
• Crane, A. & Matten, D. (2016) http://global.oup.com/uk/orc/busecon/business/cranebe4e/
• Morrison, J. (2015) https://www.macmillanihe.com/companion/morrison-business-ethics/

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