Ethics are a system of moral principles and a branch of philosophy which defines what is

good for individuals and society.

What is ethics?

At its simplest, ethics is a system of moral principles. They affect how people make decisions
and lead their lives.

Ethics is concerned with what is good for individuals and society and is also described as moral
philosophy.

The term is derived from the Greek word ethos which can mean custom, habit, character or
disposition.

Ethics covers the following dilemmas:

 how to live a good life

 our rights and responsibilities
 the language of right and wrong
 moral decisions - what is good and bad?
Our concepts of ethics have been derived from religions, philosophies and cultures. They infuse
debates on topics like abortion, human rights and professional conduct.

Approaches to ethics
Philosophers nowadays tend to divide ethical theories into three areas: metaethics, normative
ethics and applied ethics.

 Meta-ethics deals with the nature of moral judgement. It looks at the origins and meaning of
ethical principles.
 Normative ethics is concerned with the content of moral judgements and the criteria for what
is right or wrong.
 Applied ethics looks at controversial topics like war, animal rights and capital punishment

What use is ethics?

If ethical theories are to be useful in practice, they need to affect the way human beings behave.

Some philosophers think that ethics does do this. They argue that if a person realises that it
would be morally good to do something then it would be irrational for that person not to do it.
But human beings often behave irrationally - they follow their 'gut instinct' even when their head
suggests a different course of action.

However, ethics does provide good tools for thinking about moral issues.

Ethics can provide a moral map

Most moral issues get us pretty worked up - think of abortion and euthanasia for starters.
Because these are such emotional issues we often let our hearts do the arguing while our brains
just go with the flow.

But there's another way of tackling these issues, and that's where philosophers can come in - they
offer us ethical rules and principles that enable us to take a cooler view of moral problems.

So ethics provides us with a moral map, a framework that we can use to find our way through
difficult issues.

Ethics can pinpoint a disagreement

Using the framework of ethics, two people who are arguing a moral issue can often find that
what they disagree about is just one particular part of the issue, and that they broadly agree on
everything else.

That can take a lot of heat out of the argument, and sometimes even hint at a way for them to
resolve their problem.

But sometimes ethics doesn't provide people with the sort of help that they really want.

Ethics doesn't give right answers

Ethics doesn't always show the right answer to moral problems.

Indeed more and more people think that for many ethical issues there isn't a single right answer -
just a set of principles that can be applied to particular cases to give those involved some clear
choices.

Some philosophers go further and say that all ethics can do is eliminate confusion and clarify the
issues. After that it's up to each individual to come to their own conclusions.

Ethics can give several answers

Many people want there to be a single right answer to ethical questions. They find moral
ambiguity hard to live with because they genuinely want to do the 'right' thing, and even if they
can't work out what that right thing is, they like the idea that 'somewhere' there is one right
answer.
 But often there isn't one right answer - there may be several right answers, or just some least
worst answers - and the individual must choose between them.

For others moral ambiguity is difficult because it forces them to take responsibility for their own
choices and actions, rather than falling back on convenient rules and customs.

Ethics and people

Ethics is about the 'other'

At the heart of ethics is a concern about something or someone other than ourselves and our own
desires and self-interest.

Ethics is concerned with other people's interests, with the interests of society, with God's
interests, with "ultimate goods", and so on.

So when a person 'thinks ethically' they are giving at least some thought to something beyond
themselves.

Ethics as source of group strength

One problem with ethics is the way it's often used as a weapon.

If a group believes that a particular activity is "wrong" it can then use morality as the justification
for attacking those who practice that activity.

When people do this, they often see those who they regard as immoral as in some way less
human or deserving of respect than themselves; sometimes with tragic consequences.

Good people as well as good actions

Ethics is not only about the morality of particular courses of action, but it's also about the
goodness of individuals and what it means to live a good life.

Virtue Ethics is particularly concerned with the moral character of human beings.

Searching for the source of right and wrong

At times in the past some people thought that ethical problems could be solved in one of two
ways:

 by discovering what God wanted people to do

 by thinking rigorously about moral principles and problems
If a person did this properly they would be led to the right conclusion.
 But now even philosophers are less sure that it's possible to devise a satisfactory and complete
theory of ethics - at least not one that leads to conclusions.

Modern thinkers often teach that ethics leads people not to conclusions but to 'decisions'.

In this view, the role of ethics is limited to clarifying 'what's at stake' in particular ethical
problems.

Philosophy can help identify the range of ethical methods, conversations and value systems that
can be applied to a particular problem. But after these things have been made clear, each person
must make their own individual decision as to what to do, and then react appropriately to the
consequences.

Are ethical statements objectively true?

Do ethical statements provide information about anything other than human opinions and
attitudes?

 Ethical realists think that human beings discover ethical truths that already have an
independent existence.
 Ethical non-realists think that human beings invent ethical truths.
The problem for ethical realists is that people follow many different ethical codes and moral
beliefs. So if there are real ethical truths out there (wherever!) then human beings don't seem to
be very good at discovering them.

One form of ethical realism teaches that ethical properties exist independently of human beings,
and that ethical statements give knowledge about the objective world.

To put it another way; the ethical properties of the world and the things in it exist and remain the
same, regardless of what people think or feel - or whether people think or feel about them at all.

On the face of it, it [ethical realism] means the view that moral qualities such as wrongness, and
likewise moral facts such as the fact that an act was wrong, exist in rerum natura, so that, if one
says that a certain act was wrong, one is saying that there existed, somehow, somewhere, this
quality of wrongness, and that it had to exist there if that act were to be wrong.
R. M Hare, Essays in Ethical Theory, 1989

Four ethical 'isms'

When a person says "murder is bad" what are they doing?

 That's the sort of question that only a philosopher would ask, but it's actually a very useful way
of getting a clear idea of what's going on when people talk about moral issues.

The different 'isms' regard the person uttering the statement as doing different things.

We can show some of the different things I might be doing when I say 'murder is bad' by
rewriting that statement to show what I really mean:

 I might be making a statement about an ethical fact

 "It is wrong to murder"
 This is moral realism
 I might be making a statement about my own feelings
 "I disapprove of murder"
 This is subjectivism
 I might be expressing my feelings
 "Down with murder"
 This is emotivism
 I might be giving an instruction or a prohibition
 "Don't murder people"
 This is prescriptivism
Moral realism
Moral realism is based on the idea that there are real objective moral facts or truths in the
universe. Moral statements provide factual information about those truths.

Subjectivism
Subjectivism teaches that moral judgments are nothing more than statements of a person's
feelings or attitudes, and that ethical statements do not contain factual truths about goodness or
badness.

In more detail: subjectivists say that moral statements are statements about the feelings, attitudes
and emotions that that particular person or group has about a particular issue.

If a person says something is good or bad they are telling us about the positive or negative
feelings that they have about that something.

So if someone says 'murder is wrong' they are telling us that they disapprove of murder.
 These statements are true if the person does hold the appropriate attitude or have the appropriate
feelings. They are false if the person doesn't.

Emotivism
Emotivism is the view that moral claims are no more than expressions of approval or
disapproval.

This sounds like subjectivism, but in emotivism a moral statement doesn't provide information
about the speaker's feelings about the topic but expresses those feelings.

When an emotivist says "murder is wrong" it's like saying "down with murder" or "murder,
yecch!" or just saying "murder" while pulling a horrified face, or making a thumbs-down gesture
at the same time as saying "murder is wrong".

So when someone makes a moral judgement they show their feelings about something. Some
theorists also suggest that in expressing a feeling the person gives an instruction to others about
how to act towards the subject matter.

Prescriptivism
Prescriptivists think that ethical statements are instructions or recommendations.

So if I say something is good, I'm recommending you to do it, and if I say something is bad, I'm
telling you not to do it.

There is almost always a prescriptive element in any real-world ethical statement: any ethical
statement can be reworked (with a bit of effort) into a statement with an 'ought' in it. For
example: "lying is wrong" can be rewritten as "people ought not to tell lies".

Where does ethics come from?

Philosophers have several answers to this question:

 God and religion

 Human conscience and intuition
 a rational moral cost-benefit analysis of actions and their effects
 the example of good human beings
 a desire for the best for people in each unique situation
 political power
God-based ethics - supernaturalism
 Supernaturalism makes ethics inseparable from religion. It teaches that the only source of
moral rules is God.

So, something is good because God says it is, and the way to lead a good life is to do what God
wants.

Intuitionism
Intuitionists think that good and bad are real objective properties that can't be broken down into
component parts. Something is good because it's good; its goodness doesn't need justifying or
proving.

Intuitionists think that goodness or badness can be detected by adults - they say that human
beings have an intuitive moral sense that enables them to detect real moral truths.

They think that basic moral truths of what is good and bad are self-evident to a person who
directs their mind towards moral issues.

So good things are the things that a sensible person realises are good if they spend some time
pondering the subject.

Don't get confused. For the intuitionist:

 moral truths are not discovered by rational argument

 moral truths are not discovered by having a hunch
 moral truths are not discovered by having a feeling
It's more a sort of moral 'aha' moment - a realisation of the truth.

Consequentialism
This is the ethical theory that most non-religious people think they use every day. It bases
morality on the consequences of human actions and not on the actions themselves.

Consequentialism teaches that people should do whatever produces the greatest amount of good
consequences.

One famous way of putting this is 'the greatest good for the greatest number of people'.

The most common forms of consequentialism are the various versions of utilitarianism, which
favour actions that produce the greatest amount of happiness.

Despite its obvious common-sense appeal, consequentialism turns out to be a complicated

theory, and doesn't provide a complete solution to all ethical problems.

Two problems with consequentialism are:

 it can lead to the conclusion that some quite dreadful acts are good
 predicting and evaluating the consequences of actions is often very difficult
Non-consequentialism or deontological ethics
Non-consequentialism is concerned with the actions themselves and not with the consequences.
It's the theory that people are using when they refer to "the principle of the thing".

It teaches that some acts are right or wrong in themselves, whatever the consequences, and
people should act accordingly.

Virtue ethics
Virtue ethics looks at virtue or moral character, rather than at ethical duties and rules, or the
consequences of actions - indeed some philosophers of this school deny that there can be such
things as universal ethical rules.

Virtue ethics is particularly concerned with the way individuals live their lives, and less
concerned in assessing particular actions.

It develops the idea of good actions by looking at the way virtuous people express their inner
goodness in the things that they do.

To put it very simply, virtue ethics teaches that an action is right if and only if it is an action that
a virtuous person would do in the same circumstances, and that a virtuous person is someone
who has a particularly good character.

Situation ethics
Situation ethics rejects prescriptive rules and argues that individual ethical decisions should be
made according to the unique situation.

Rather than following rules the decision maker should follow a desire to seek the best for the
people involved. There are no moral rules or rights - each case is unique and deserves a unique
solution.

Ethics and ideology

Some philosophers teach that ethics is the codification of political ideology, and that the function
of ethics is to state, enforce and preserve particular political beliefs.

They usually go on to say that ethics is used by the dominant political elite as a tool to control
everyone else.

More cynical writers suggest that power elites enforce an ethical code on other people that helps
them control those people, but do not apply this code to their own behaviour.
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Are there universal moral rules?

One of the big questions in moral philosophy is whether or not there are unchanging moral rules
that apply in all cultures and at all times.

Moral absolutism
Some people think there are such universal rules that apply to everyone. This sort of thinking is
called moral absolutism.

Moral absolutism argues that there are some moral rules that are always true, that these rules can
be discovered and that these rules apply to everyone.

Immoral acts - acts that break these moral rules - are wrong in themselves, regardless of the
circumstances or the consequences of those acts.

Absolutism takes a universal view of humanity - there is one set of rules for everyone - which
enables the drafting of universal rules - such as the Declaration of Human Rights.

Religious views of ethics tend to be absolutist.

Why people disagree with moral absolutism:

 Many of us feel that the consequences of an act or the circumstances surrounding it are
relevant to whether that act is good or bad
 Absolutism doesn't fit with respect for diversity and tradition
Moral relativism
Moral relativists say that if you look at different cultures or different periods in history you'll
find that they have different moral rules.

Therefore it makes sense to say that "good" refers to the things that a particular group of people
approve of.

Moral relativists think that that's just fine, and dispute the idea that there are some objective and
discoverable 'super-rules' that all cultures ought to obey. They believe that relativism respects the
diversity of human societies and responds to the different circumstances surrounding human acts.

Why people disagree with moral relativism:

 Many of us feel that moral rules have more to them than the general agreement of a group of
people - that morality is more than a super-charged form of etiquette
 Many of us think we can be good without conforming to all the rules of society
 Moral relativism has a problem with arguing against the majority view: if most people in a
society agree with particular rules, that's the end of the matter. Many of the improvements in
the world have come about because people opposed the prevailing ethical view - moral
relativists are forced to regard such people as behaving "badly"
 Any choice of social grouping as the foundation of ethics is bound to be arbitrary
 Moral relativism doesn't provide any way to deal with moral differences between societies
Moral somewhere-in-between-ism
Most non-philosophers think that both of the above theories have some good points and think
that

 there are a few absolute ethical rules

 but a lot of ethical rules depend on the culture

SOCIAL RESPONSIBILITY

Friedman (1970): ‘the social responsibility of business is to increase its profits’. That means:
- Use resources and capabilities to increase profits for shareholders
- Stay within the rules of the game
- Fiduciary responsibility of employees to owners, i.e. shareholders
So:
- CSR activities are equal to theft
- Equal to imposing tax
- Unless, there is a business case, e.g. increase goodwill, retain employees
Differences between business ethics and CSR:
Ethics: good or bad conduct according to moral standards
CSR: integrating economic, social and environmental targets in one strategy
Business ethics is a key tool for CSR. Sustainability is a key goal for business ethics.
Drivers of CSR:
- Civilization, developing moral
- Deregulation, more market
- Increasing size and economic power of companies
- Increasing ecological impacts
- Increasing expectations towards companies
- Globalization
- Communication technologies
- Increasing CSR market
Motivation for responsible or ethical behavior:
- Profit
- Reputation
- Anticipating legislation
- Competition
- Developing new markets
- Cost reduction
- Professional and industry standards
- Culture
- Moral standards

Business ethics: the study of business situations, activities, and decisions where issues of
right and wrong are addressed.

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.
Ethical theories: the rules and principles you can use to determine right and wrong.
 Ethics rationalizes morality, to produce ethical theory, that can be applied to any
situation.

Why is business ethics important?

- Power and influence of business in society
- Potential to provide major contribution to society
- Potential to inflict harm
- Increasing demands for stakeholders
- Lack of business ethic education or training
- Continues occurrence of ethical violations
- Evaluating different ways of managing business ethics
- Interesting and rewarding
Ethical impacts of globalization:
- Stakeholders: globalization provides potential for greater profitability, but also greater
risks. Lack of regulation of global 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 raise 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 and competitors: suppliers in developing countries face regulation from
MNCs through supply chain management. Small scale indigenous competitors
exposed to powerful global players.
- Civil society (NGOs, etc.): global business activities brings the company in direct
interaction to local communities with possibility for erosion of traditional community
life; globally active pressure groups emerge with aim to “police“ the corporation where
governments are weak and tolerant.
- Government and 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.

ustainability: the long-term maintenance of systems according to environmental, economic

and social considerations.
 Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.
There are three dimensions of sustainability:
1. Economic sustainability: sufficient cashflow and persisten above average return.
2. Environmental sustainability: use natural resources at a rate below natural
production, do not cause emissions beyond the capacity of the natural system, do not
degrate eco-system
3. Social sustainability: add value to communities, increase human capital, foster
societal capital

Can a corporation have social responsibilities? Milton Friedman argued against this notion.
He said corporations don’t have social responsibilities. Three main arguments:
1. Only human beings have a moral responsibility for their actions
2. It is managers’ responsibility to act solely in the interests of shareholders
3. Social issues and problems are the proper province of the state rather than corporate
managers
Arguments against Friedman. Why do corporations have social responsibilities?
- Business reasons (enlightened self-interest)
o Extra and/or more satisfied customers
o Employees may be more attracted/committed
o Pre-empt legislation
o Long-term investment which benefits corporation
- Moral reasons:
o Corporations cause social problems
o Corporations should use their power responsibly
o All corporate activities have some social impacts
o Corporations rely on the contribution of a wide set of stakeholders in society,
not just shareholders.
Carroll’s four-part model of corporate social responsibility:
Corporate social responsibility: includes the economic, legal, ethical and philanthropic
expectations placed on organizations by society at a given point of time
 1. Philanthropic responsibilities (desired)
2. Ethical responsibilities (expected)
3. Legal responsibilities (required)
4. Economic responsibilities (required)

Differences between CSR in the US and elsewhere in the world exist with respect to all CSR
levels:
- Economic responsibility: focus in the US on shareholders/France has extensive
responsibility for employees; India has tradition of investment in the local community
- Legal responsibility: state seen in Europe as key enforcer of rules/elsewhere
government seen with more skepticism (e.g. corrupt, interfering with liberty)
- Ethical responsibility: wide range of local ethical values and preferences;
expectations vary
- Philanthropic responsibility: Europe tends to compel giving via legal
framework/elsewhere (e.g. US, India, China) companies are expected to share their
wealth.
Stakeholder theory of the firm  theory developed by Edward Freeman (1984).
Stakeholder: any group or individual who can affect, or is affected by, the achievement of the
organization’s objectives.
According to Friedman, businesses should only be run in the interests of their owners.
Others have a legitimate claim on the corporation:
- Legal perspective: ‘stake’ in corporation already protected legally in some way
- Economic perspective: externalities (outside contractual relationships) and agency
problem (short term interests of ‘owners’ vs. long term interests of managers,
employees, customers etc.
Saliency: the degree to which a firm positively responds to a specific stakeholder request.
A distinction can be made on the basis of:
1. Power: relative access to resources for the stakeholder group with respect to the firm
being targeted
2. Legitimacy: degree to which there is a general perception of assumption that a
stakeholder’s actions are desirable, proper or appropriate
3. Urgency: the degree to which a specific stakeholder request calls for immediate
action
There are different forms of stakeholder theory (Donaldson & Preston, 1995):
1. Normative stakeholder theory: attempts to provide a reason why corporations should
take into account stakeholder interests
2. Descriptive stakeholder theory: attempts to ascertain whether (and how) corporations
actually do take into account stakeholder interests
3. Instrumental stakeholder theory: attempts to answer the question of whether it is
beneficial for the corporation to take into account stakeholder interests.
Normative ethical theories: theories that propose to prescribe the morally correct way of
acting.
Descriptive ethical theories: theories that seek to describe how ethical decisions are actually
made in business.
Traditional ethical theories: generally offer a certain rule of principle which one can apply to
any given situation. These theories can be differentiated into two groups:
1. Non-consequentialist ethics
2. Consequentialist ethics

Egoism: an action is morally right if the decision-maker freely decides an action to pursue
either their (short-term) desires or their (long-term) interests
- Adam smith: 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
Utilitarianism: an action is morally right if it results in the greatest amount of good for the
greatest number of people affected by the situation
- Also called the ‘greatest happiness principle’
- Based on cost-benefit analysis
Problems with utilitarianism:
- Subjectivity: this has led to refinement of the theory
o Act utilitarianism (the individual act): looks to single actions and bases the
moral judgement on the amount of pleasure and the amount of pain this single
action causes
o Rule utilitarianism (general rules): 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
- Issues around quantification and distribution of utility
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: ‘if everyone would behave like
that…’
- 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: ‘show
some respect…’
- Maxim 3: universality  act only so that we will through its maxims could regard as
universally lawgiving (would others agree?): ‘don’t tell anyone please... ‘
Ethics of rights and justice:
Natural rights: certain basic, important entitlements that should be respected and protected in
every single action.
- Based on consensus about nature of human dignity
- Strongly based in western view of morality
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)
There are some limitations of these traditional theories:
- Too abstract
- Too reductionist
- Too objective and elitist
- Too impersonal
- Too rational and codified
- Too imperialist
Therefore, there came alternative perspectives on ethical theories.
1. Approaches based on ethics and responsibility
o 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
2. Approaches based on procedures of norm generation
o Discourse ethics: aims to solve ethical conflicts by providing a process of
morn 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
3. Approaches based on empathy and moral impulse
o Postmodern ethics: 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 listed 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.
o Postmodern business ethics emphasizes:
 Holistic approach
 Examples rather than principles
 ‘think local, act local’
 Preliminary character
Crane and Matten 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

Motivation/principles Action = non-consequentialist ethics (Duties, Rights &Justice)

Action  Outcomes = consequentialist ethics (Egoism, Utilitarianism)

Major normative theories:

Consequentialist:
- Egoism: Adam Smith
- Utilitarianism: Jeremy Bentham & John Stuart Hill
Non-consequentialist:
- Ethics of duties: Immanuel Kant
- Rights & Justice: John Locke & John Rawls
Descriptive business ethical theories seek to describe how ethics decisions are actually
made in business, and what influences the process and outcomes of those decisions.
The main factors in ethical decision making:
- Concerned with decision about right and wrong
- Decision will have an effect on others
- There are alternative actions possible
- It is perceived as ethically relevant by one or more parties
Analysing an ethical/CSR-issue:
- What is the CSR issue?
- Who are the main stakeholders, what are the stakes?
- What are the management options? What are the potential impacts and results?
- Evaluate using different ethical theories
- Evaluate from a business perspective
- Decide
So, the stages in ethical decision-making are:
Recognize moral issue  make moral judgement  establish moral intent  engage in
moral behavior.
In other words: ‘I can see there is an issue’  ‘I do not approve’  ‘I want to change’  ‘I am
acting’.
Influences on ethical decision-making.
There are two broad categories: individual and situational
1. Individual factors: unique characteristics of the individual making the relevant
decision.
o Given at birth
o Acquired by experience and socialization
2. Situational factors: particular features of the context that influence whether the
individual will make an ethical or unethical decision
o Work context
o The issue itself, including:
 Intensity
 Ethical framing
These factors have impact on the stages in ethical decision-making as described above.
Examples of individual influences on ethical decision-making:
- Age and gender (0)
- National and cultural characteristics (++)

- Education and employment (+)

- Psychological factors (+)
o Cognitive moral development
o Locus of control
- Personal value (+)
- Personal integrity (+)
- Moral imagination (+)
Examples of situational influences on ethical decision-making:
- Issue related:
o Moral intensity (+)
o Moral framing (0)
- Context-related:
o Rewards (+)
o Authority (+)
o Bureaucracy (+)
o Work roles (0)
o Organizational culture (+)
o National context (0)
People from different cultural backgrounds are likely to have different beliefs about right and
wrong, different values, etc. and this will inevitably lead to variations in ethical decision-
making across nations, religions and cultures.
Hofstede was influential in shaping our understanding of these differences, our ‘mental
programming’. His 5 dimensions are:
- Individualism/collectivism
- Power distance
- Uncertainty avoidance
- Masculinity/femininity
- Long-term/short-term orientation
Levels of cognitive moral development
1. Pre-conventional
a. Obedience and punishment: individuals define right and wrong according to
expected rewards and punishments from authority figures
b. Instrumental purpose and exchange: individuals are concerned with their own
immediate interests and define right according to whether there is fairness in
the exchanges or deals they make to achieve those interests.
2. Convential
a. Interpersonal accord, conformity and mutual expectations: individuals live up
to what is expected to them by their immediate peers and those close to them.
b. Social accord and system maintenance: individuals’’ consideration of the
expectations of other broadens to social accord more generally, rather than
just the specific people around them.
3. Post-conventional
a. social contract and individual rights: individuals go beyond indentifying with others’
expectations, and assesses right and wrong according to the upholding of basic
rights, values and contracts of society.
b. Universal ethical principles: individuals will make decisions autonomously based
on self-chosen universal ethical principles, such as justice, equality, and rights,
which they believe everyone should follow.
Business ethics management is the direct attempt to formally or informally manage ethical
issues or problems through specific policies, practices and programmes.
Typical components of business ethics management:
- Mission or values statements
- Code of conduct
- Hotlines, special staff, consultants
- Risk management
- Stakeholder dialogue
- Auditing and reporting
Codes of ethics are voluntary statements that commit organizations, industries, or
professions to specific beliefs, values, and actions and/or set out appropriate ethical behavior
for employees.
There are 4 main types of ethical codes:
- Organizational or corporate codes of ethics
- Professional codes of ethics
- Industry codes of ethics
- Programme and group codes of ethics
Prevalence of codes and ethics:
- Increasingly common
- Substantial rise in usage
- Almost all large US firms have a code of ethics
- Was less prevalent in Europe
Global codes of ethics: can organizations devise one set of principles for all countries in
which they operate?
- Consider some examples
o Gift giving in Japan vs. the UK
o Equal opportunity commitments in India vs. UK
- MNEs should be guided by 3 principles:
o Respect for core human values
o Respect for local traditions
o Belief that context matters when deciding right and wrong
- Global codes should define minimum ethical standards-
o E.g. OECD Guidelines for Multinational Enterprise, UN Global Compact
Areas of assessment:
- Ethical: often a focus on internal management systems
- Environmental: impact on natural environment
- Social: broader remit, often including impact on stakeholders
- Sustainability: focus on triple bottom line
Social accounting is the voluntary process concerned with assessing and communicating
organizational activities and impacts on social, ethical, and environmental issues relevant to
stakeholders.
Why do organizations engage in social accounting?
There are both practical and moral reasons. Four main issues:
- Internal and external pressure
- Identifying risks
- Improved stakeholder management
- Enhanced accountability and transparency
Disincentives for social accounting:
- Perceived high costs
- Insufficient information
- Inadequate information systems
- Lack of standards
- Secrecy
- Unwillingness to disclose sensitive or confidential data
UN Global Compact
Human rights
1. Businesses should support and respect the protection of internationally proclaimed
human rights
2. Businesses should make sure that they are not complicit in human rights abuses
Labour standards
3. Businesses should uphold the freedom of association and the effective recognition of
the right to collective bargaining
4. The elimination of all forms of forces and compulsory labour
5. The effective abolition of child labour
6. The elimination of discrimination in respect of employment and occupation
Environment
7. Businesses should support a precautionary approach to environmental challenges
8. Undertake initiatives to promote greater environmental responsibility
9. Encourage the development and diffusion of environmentally friendly technologies
Anti-corruption
10. Businesses should work against all forms of corruption, including extortion and
bribery.

Corporate governance: the process by which shareholders seek to ensure that ‘their’
corporation is run according to their intentions. It includes processes of goal definition,
supervision, control and sanctioning.

n the narrow sense it includes shareholders and the management of the corporation as the
main actors. In a broader sense it includes all actors who contribute to the achievement of
stakeholder goals inside and outside the corporation.
The crucial problem in corporate governance is the separation of ownership and control.
Peculiarities (=merkwaardigheden) of corporate ownership:
- Fragmented ownership
- Divided functions and interests
There is a principal-agent relation with corporate governance.
Principal = shareholder
Agent = manager
seeks remuneration, power, esteem etc.
Principal Agent
seeks profits, rising share price, etc.
Features of agency relations:
- Inherent conflict of interest
- Informational asymmetry
The solution to this is executive accountability and control.
There is a board: a separate body of people that supervises and controls management on
behalf of shareholders.
There is a dual structure of leadership:
- Executive directors: are actually responsible for running the corporation
- Non-executive directors: are supposed to ensure that the corporation is being run in
the interests of the shareholders.
The Anglo-Saxon has the single-tier board.
The European model has the two-tier board (lower tier = executive directors, upper tier =
‘supervisory board’)
Ethical investment: the use of ethical, social and environmental criteria in the selection, and
management of investment portfolios, generally consisting of company shares.
SRI = sustainable and responsible investing.
The main concerns with the SRI movement are:
- Quality of information: most information is provided by firms themselves and is difficult
to verify
- Dubious criteria: e.g. also companies who produce oil
- Too inclusive
- Strong emphasis on returns
Friedman: ‘the social responsibility of business is to increase its profits’.
That means:
- Use resources and capabilities to increase profits for shareholders
- Stay within the rules of the game

- Fiduciary responsibility of employees to owners, i.e. shareholders

Why is there a tension between doing good and doing well?
The dominant paradigm is the theory of the firm as a nexus-of-contracts: the single aim of the
firm is wealth creation. Maximizing shareholder wealth also maximizes social welfare:
providing employment, goods and services, paying taxes, etc.
There are two concerns about social initiatives:
1. Misappropriation of corporate resources: diverting them from rightful claimants
2. Misallocation of resources: companies are not good at solving ‘social misery’; this is
the task of the government
Ambec & Lanoie speak of a win-win rhetoric:
Satisfying various stakeholder groups is instrumental for financial performance. Most studies
find a positive relationship between social/environmental performance and financial
performance. A positive win-win relation strengthens the shareholder value model.
Management of human ‘resources’: an ethical problem between rights and duties.
Humans are treated as important and costly resource. Consequently, employees are subject
to a strict managerial rationale of minimizing costs and maximizing the efficiency of the
‘resource’.
Employees have 8 rights as stakeholders of the firm:
1. Right to freedom from discrimination
(equal opportunities, affirmative action, reverse discrimination, sexual and racial
harassment)
2. Right to privacy
(health and drug testing, work-life balance, presenteeism, electronic privacy and data
protection)
3. Right to due process
(promotion, firing, disciplinary proceedings)
4. Right to participation and association
(organization of workers in works councils and trade unions, participation in the
company’s decisions)
5. Right to healthy and safe working conditions
(working conditions, occupational health and safety)
6. Right to fair wages
(pay, industrial action, new forms of work)
7. Right to freedom of conscience and speech
(whistleblowing)
8. Right to work
(fair treatment in the interview, non-discriminatory rules for recruitment)
An employee also has duties as stakeholders of the firm:
1. Duty to comply with labour contract
(acceptable level of performance work quality, loyalty to the firm)
2. Duty to comply with the law
(bribery = corruptie)
3. Duty to respect the employer’s property
(working time, unauthorized use of company resources for private purposes, fraud,
theft, embezzlement)
Discrimination in the business context occurs when employees receive preferential treatment
on grounds that are not directly related to their qualifications and performance in the job.
Managing diversity is a prominent feature of contemporary business.
Reverse discrimination: in some cases people suffer from reverse discrimination because
policies prefer certain minorities. Justification for reverse discrimination:
- Retributive justice: past injustices have to be ‘paid for’
- Distributive justice: rewards such as job and pay should be allocated fairly among all
groups.
Stronger forms of reverse discrimination are illegal in many European countries.
Right to healthy and safe working conditions is one of the very first ethical concerns for
employees. There is a network of health, safety and environmental regulation (HSE). The
main issue here is enforcement and implementation. Newly emerged HSE issues relate to
changing patterns of work.
The ethical issues are in context of:
- Excessive working hours and presenteeism:
o Thought to impact the employee’s overall state of physical and mental health
o Presenteeism: phenomenon of being at work when you should be at home
due to illness or even just for rest and recreation.
- Flexible working patterns: non-standard work relationships
o Part-time work, temporary work, self-employment and teleworking
o Less secure legal status for periphery workers
o Potential for:
 Poorer working conditions
 Increased insecurity
 Lower pay
 Exclusion from training and other employment benefits
The freedom of conscience and freedom of speech in the workplace are normally guaranteed
by governments. There are situations in business where freedom of speech might face
certain restrictions, for example speaking about ‘confidential’ matters related to the firm’s
R&D, marketing or accounting plans:
- This is usually unproblematic, since most rational employees would find it in their own
best interests to comply with company policy
- Some cases where those restrictions could be regarded as a restriction of employee’s
rights
Different cultures will view employee rights and responsibilities differently. This means that
managers dealing with employees overseas need to first understand the cultural basis of
morality in that country. This raises the question of whether it is fair to treat people differently
on the basis of where they live. Two views:
- Relativism: view of ethics must always be relative to the historical, social and cultural
context
- Absolutism: ethical principle must be applicable everywhere
Some yardsticks for ethical decision-making:
- Start with human rights as a basic compass for providing direction
- Differences in the treatment of employees on a global scale depend on the relative
economic development of the country in which the practice is taking place.
The race to the bottom:
Many critics argue that MNCs play a role in changing standards in countries. Globalization
allows corporations to have broad range of choice of locations. Developing countries
compete to attract foreign investment. Large investors tend to choose the country with most
‘preferable’ conditions (lowest level of legislation and social provision for employee). This
leads to race to the bottom in environmental and social standards
Work-life balance:
- Increasing incursion of working hours into social life
- Growing pressure for longer hours
- Most notable amongst professionals
- Healthy work-life balance is difficult to maintain
- Some solutions:
o Sabbatical schemes
o Home-based teleworking
 Social benefits
 Economic benefits
 Ecological advantages
Ethical issues with consumers
Commonplace argument is that businesses are best served by treating their customers well.
So, why are there continued ethical abuses of consumers and poor reputation of marketing
and sales professions? Examples of organizations accused of treating customers in a
questionable manner are:
- Multinational drug companies
- Fast food and soft drink companies
- Banks and credit card companies
Consumer rights can be seen as:
- Inalienable entitlements to fair treatment when entering into exchanges with sellers
- They rest upon the assumption that consumer dignity should be respected, and that
sellers have a duty to treat consumers as ends in themselves, and not only as means
to the end of the seller.
Ethical issues:
- Marketing management
o Product policy
 Product safety (right to safe and efficacious products)
 Fitness for purpose
o Marketing communications

 Deception
 Misleading claims (right to honest and fair communications)
 Intrusiveness
 Promotion of materialism
 Creation of artificial wants
 Perpetuating dissatisfactions
 Reinforcing stereotypes
o Pricing
 Excessive pricing (right to fair prices)
 Price fixing
 Predatory pricing
 Deceptive pricing
o Distribution
 Buyer-seller relationships (right to engage in markets)
 Gifts and bribes
 Slotting fees (right to make a free choice)
- Marketing strategy
 Targeting vulnerable (right to be free from discrimination)
 Consumers (right to basic freedoms and amenities)
 Consumer exclusion
Objections that marketing communications:
- Are intrusive and unavoidable
- Create artificial wants
- Reinforce consumerism and materialism
- Create insecurity and perpetual dissatisfaction
- Perpetuate social stereotypes
Consumer sovereignty: customer is king. This has 3 elements:
- Consumer capability: freedom from limitations in rational decision making
- Information: availability and quality of relevant data
- Choice: opportunity for switching
Sustainable consumption:
- Linear flow of resources
Extraction  manufacture  distribution  consumption  disposal
- Circular flow of resources
Ethics of negotiation
There are some popular negotiation actions, which can be challenged on ethical grounds:
- Lies
- Deception
- Weakening the opponent
- Non-disclosure
- Information exploitation
- Change of mind
- Distraction
- Maximization

he ethical problem of ‘race to the bottom’: lower costs are often accompanied by ‘sweatshop’
conditions:
- Poorer labour conditions
- Less environmental protection
- Lower attention to health and safety
Civil society
It is seen as the third sector:
- State sector (government)
- Market sector (business)
- Civil society sector (NGOs, pressure groups, charities, unions, etc.)
There are different NGO tactics:
1. Indirect action: sometimes criticized for providing misleading information
2. Violent direct action: often illegal, tends to generate the most publicity. Is this action
civil at all?
3. Non-violent direct action:
o Demonstrations and marches
o Protests
o Boycotts
o Occupations
o Non-violent sabotage and disruption
o Stunts
o Picketing
Government
Unlike many other stakeholders, government in principle represents an entire community
since it is elected by the citizens of a certain town, region, country or even continent. There
are elected representatives of citizens’ interests.
The main source of ethical problems around government stems from fiduciary relation to
society in general. Government has a bipolar situation, it is between business and society.
Lecture 6
Individual factors that influence on ethical decision making:
- Personal values: significant influence; some empirical evidence citing positive
relationship
- Personal integrity: significant influence likely, but lack of inclusion in models and
empirical tests
- Moral imagination: a new issue for inclusion with considerable explanatory potential
- Locus of control: limited effect on decision-making, but can be important in predicting
the apportioning of blame/approbation