CHAPTER 6: MORAL RIGHTS IN THE WORKPLACE GOVERNMENT
• By providing subsidies and incentives to employers or by direct
INTRODUCTION: EMPLOYEE RIGHTS
WORK
• A highly valued human activity to secure primary goods
• Essential part of human well-being
• Work and moral rights are connected because opportunities to
work can be jeopardized by the actions of others
RIGHT
• Something that a person is or should be morally and legally
allowed to have, get, or do.
• Greater rights = greater obligations
EMPLOYEE RIGHTS (same as moral rights)
• General moral entitlements that employees have to certain
goods (or protection from certain harms) within the workplace
• Establish the basic moral framework for employer-employee
relations
• Function to prevent employees from being placed in what
would be a fundamentally coercive position of having to choose
between these moral goods and their job
SENSES OF EMPLOYEE RIGHTS
(1) LEGAL RIGHTS – based from legislation or judicial rulings
(e.g.: right to a minimum wage, right to equal opportunity, right to
bargain collectively as a union, etc.)
(2) CONTRACTUAL RIGHTS – goods that employees are entitled to
are based on contractual agreements with employees
• Negotiated in good faith or a result of a policy or a procedure
(e.g.: right to specific health care package, paid holidays,
pension funds, etc.)
(3) OTHER RIGHTS – entitlements to which employees have claim
independent of any particular legal or contractual factor (e.g.:
freedom, equality, autonomy)
THE RIGHT TO WORK
MEANINGS OF RIGHT TO WORK
(1) RIGHT TO WORK WITHOUT BEING REQUIRED TO JOIN A
LOCAL UNION
• This prohibits “free riders,” who reap the benefits of union
membership without sharing the burdens
• This also protects the entire collective bargaining system by
preventing employers from hiring only those workers who
promise not to join the union.
• RIGHT-TO-WORK LAW – legislation that prohibits requirement
to join unions
FREE-RIDER ARGUMENT
• “FREE-RIDERS” – those who reap the benefits of union
membership without sharing the burdens.
• Based on a reasonable understanding of fairness
o If one receives benefits from a process that entails
cost, it is fair that you share the costs.
• Benefits and burdens are allocated in a fair and equal manner
COLLECTIVE BARGAINING
• Wages and benefits are more appropriately determined
through the process of individual bargaining between a
collection of employees and a single employer
• Bargaining is fair only when the parties are equal
• Fair bargaining requires an equal incentive to compromise in
the give and take of negotiation
o EQUALITY – free to accept or reject the employment
conditions
(2) RIGHT TO JOB
RATIONALES FOR THIS CLAIM
• WORK IS A PRIMARY MEANS TO ENDS (i.e. food, shelter,
clothing and health care) – one has right to any work that
supplies a living wage, no matter how tedious or unchallenging
• EACH INDIVIDUAL HAS A RIGHT TO WORK BECAUSE
WORK IS AN EXPRESSION OF A MEANINGFUL HUMAN
LIFE – requires a type of work that is capable of elevating and
humanizing workers
WHO SHOULD AND COULD PROVIDE JOBS TO EVERY PERSON?
“Not everything that is valuable and highly desired can be claimed as a
right.” This means that rights imply responsibility on the part of others to
provide what is claimed by the right (e.g.: if one has a right to a job,
someone or an institution must have a responsibility to supply that job)
PRIVATE EMPLOYERS
• Providing any and all people with jobs is simply not something
that a private employer can do and remain economically viable
• Unprofitable business can’t provide jobs
employment
• Government is better situated to fulfill this responsibility than
private business
• Government has direct responsibilities to their citizens in ways
that private employers do not. However, they could not provide
every citizen with a job
• Government has the responsibility to provide jobs compatible
with qualifications to those who are able to work but unable to
find jobs in the private sector
• Employer of Last Resort
• Has the responsibility to provide a social “safety net” of
economic support
• Government has a responsibility to encourage, through such
things as fiscal and monetary policy and tax incentives, private
sector employment for all its citizens.
(3) NOT A RIGHT TO JOB, BUT THE RIGHT, ONCE HIRED, TO
HOLD THAT JOB WITH SOME DEGREE OF SECURITY
• RIGHT TO DUE PROCESS – right to keep that job, or in other
terms, the right not to be fired without just and sufficient cause
• MEANINGFUL WORK – work that is structured in ways that
respect the rights of workers.
EMPLOYMENT AT WILL
• An important legal doctrine that effectively denies the validity of
employment rights
• Employees are free to quit their job at any time for any reason
and employers are free to terminate an employee at any time
and for any reason.
• “AT WILL” CONTRACT – one that exists only so long as both
parties consent or, conversely, can be broken at the discretion
of either party.
• If employment at will governs the workplace, if employees can
be dismissed for morally wrong reasons without violating the
law, then the concept of employee rights is, at least in the legal
sense, meaningless.
• Legitimate claims to certain goods or to protection against
certain harms in the workplace
• This is a tradeoff for the elimination of slavery and indentured
servitude
• Applied only to private sector, non-contractual employees
o Government workers and union employees are
exempted from the at-will rule
STATE LAWS AND JUDICIAL EXEMPTIONS THAT RESTRICT
EMPLOYERS FROM DISMISSING THEIR EMPLOYEES
• Civil rights laws protecting employees from being fired based
on race, sex, etc.
• Laws protecting employees who blow the whistle on certain
illegal or unethical acts committed by their employer (i.e.
reporting a crime)
• “PUBLIC POLICY” EXEMPTION – to protect an employee’s
job when the dismissal would violate an important public policy
• “IMPLIED CONTRACT” EXEMPTION – to provide employees
with protections that are implied in employee handbooks, job
descriptions, and job advertisements
• “IMPLIED COVENANT OF GOOD FAITH” EXEMPTION –
more open-ended protection against employment practices that
violate a “good faith” condition (i.e. fired employee to avoid
payment of earned annual bonus)
Despite such laws and exemptions, the legal burden of proof rests with
employees who believe that they have been unjustly fired. But the due
process would require that employees can be dismissed only for just
cause, and the employers would bear the burden of establishing such
cause.
DUE PROCESS IN THE WORKPLACE
• This principle can be traced to the Magna Carta’s doctrine of
per legem terrae (by the law of the land), which established the
limitations of the king’s authority
• This would mean that employees have a right to be protected
from the arbitrary use of managerial authority
• DUE PROCESS
o While employees can be dismissed for “good cause,”
they cannot be dismissed “for no cause, or even for
cause morally wrong”
o Establish procedures (the “process”) that an
employer must go through to ensure that the
dismissal is not arbitrary
• A just cause is required
• Establish the criteria for that justification either by outlining just
cause conditions (“an employee can be fired for reasons a, b,
or c) or by creating procedural safeguards (“before terminating
an employee, employers must do a, b, and c”)
• An attempt to balance power* in the workplace and that
employees can’t be bought or sold
 • The strongest defense of an employee’s right to due process
appeals to the fundamental ethical concepts of respect and
fairness — Due process demands nothing more than the
exercise of power be justified.
o POWER – the ability to impose one’s will on another
o AUTHORITY – exists when power is justified or
legitimate
• Without due process in the workplace, society is sanctioning an
institution that allows individuals to exercise the power they
have over others without restraint
COUNTERARGUMENTS TO THE RIGHT OF DUE PROCESS — these
would defend the employment-at-will rule
• FREEDOM – claims that due process involves an illegitimate
restriction on the employee’s freedom to establish their work
conditions
• FAIRNESS – argues that if employees are free to quit for any
reason, it is only fair that employers can fire for any reason as
well
• PROPERTY RIGHTS – due process is an illegitimate restriction
to business owner’s property rights
• EFFICIENCY – without the fear of dismissal as motivation,
employees will be unproductive/inefficient
PARTICIPATION RIGHTS
What gives business owners and managers authority, rather than mere
power, over employees?
• John McCall: Managerial authority must also be derived from
the consent of the governed, in this case the employees.
PRO: PARTICIPATION RIGHTS (by John McCall) — based on respect
and fairness
(1) INDIVIDUALS BE TREATED AS AN AUTONOMOUS DECISION
MAKERS, FREE FROM COERCIVE INTERFERENCE BY
OTHERS
• Human dignity is tied to the ability of humans to guide their own
life and activities
• Respect for dignity prohibits workers from being treated merely
as replaceable resources in the production process
• Employees should have rights to co-determine any policy that
has a significant impact on their work lives
(2) THE FUNDAMENTAL OBJECTIVE OF ANY MORALITY — THE
IMPARTIAL PROMOTION OF HUMAN WELFARE
• When decisions are made, the interests of every party affected
by that decision must be given due consideration.
(3) EMPLOYEE PARTICIPATION IS LIKELY TO HAVE SEVERAL
BENEFICIAL CONSEQUENCES
• Participatory management will create conditions of self-respect
for employees
• Employees who participate in and contribute to decision
making are less likely participation can be an effective means
for bringing meaning and value into one’s work life and this can
counter both physical and psychological harms
• One effective means to counter political apathy is to create
social institutions that encourage rather than discourage
individual participation
ANTI: OBJECTIONS TO PROPOSAL FOR EMPLOYEE
PARTICIPATION RIGHTS
(1) EMPLOYER PROPERTY RIGHTS
• A private business owner has property rights that include rights
to manage and direct the business
• Corporate business owners fo not have a legitimate claim on
directing and managing the day-to-day operation of the
business
(2) MANAGERIAL EXPERTISE
• Workers lack the expertise and knowledge to manage a
business competitively
(3) CONSIDERATIONS OF EFFICIENCY IN EMPLOYEE DECISION
MAKING
• Widespread consultation and participation could hinder and
delay decision making, thus leading to higher costs
• Employees will tend to make decisions for their own benefit
rather than for the benefit of the firm
• Conflicts can exist between the interests of the firm and the
interests of employees
EMPLOYEE HEALTH AND SAFETY
• One of business’s major ethical responsibilities
• WHEN IS A WORKPLACE SAFE? UNSAFE?
o HEALTHY – a state of flawless physical and
psychological well-being
o SAFE – completely free from risk
o Employers cannot be responsible for providing an
ideally safe and healthy workplace
APPROACHES TO WORKPLACE HEALTH AND SAFETY ISSUES
(1) ACCEPTABLE RISKS NEED TO BE DEFINED
• RISK – probability of harm
• RELATIVE RISKS – comparing probabilities of harm in various
activities
• PROBLEMS:
o This approach treats employees disrespectfully by
ignoring their input
o Assumes that health and safety are mere
preferences that can be traded off against competing
values
o Assumes an equivalence between workplace risks
and other types of risks when there are significant
differences between them
(2) INDIVIDUAL BARGAINING BETWEEN EMPLOYERS AND
EMPLOYEES
• Employees would be free to choose the risks that they are
willing to face by bargaining with employers
• Can also sanction compensatory payments to injured workers
when it can be shown that employers were negligently liable for
causing the harms. — incentive for employers to maintain a
reasonable safe and healthy workplace
• PROBLEMS:
o Labor markets are not perfectly competitive and free
o Employees seldom if ever possess the kind of perfect
information required by markets q
PRIVACY IN THE WORKPLACE
GENERAL UNDERSTANDINGS OF PRIVACY
(1) PRIVACY AS A RIGHT TO BE “LET ALONE” WITHIN A
PERSONAL ZONE OF SOLITUDE
• Right to control information about oneself
• Privacy establishes boundaries
• Workplace violations (according to Desjardins)
o Infringes on personal decisions that are irrelevant to
work contract
o Personal information that is irrelevant to work
contract that is collected, stored or used without
consent
o Polygraphs, drug tests, surveillance, background
checks, psychological tests
(2) PRIVACY AS THE RIGHT TO CONTROL INFORMATION ABOUT
ONESELF
TYPES OF INVASION OF PRIVACY
• INTRUSION OF SOLITUDE – includes intercepting phone
calls, peeping, taking photos/videos of victim without
knowledge or consent
• APPROPRIATION OF NAME OR LIKENESS – includes
advertisement company using an actor’s photo for
endorsements even if he refused to
• PUBLIC DISCLOSURE OF PRIVATE FACTS – includes
photos/videos intended for educational purposes/later use but
is released to others
• FALSE LIGHT
EXAMPLES OF PRIVACY IN THE WORKPLACE
• If the employer has a written policy stating that random
searches of desks or lockers will be performed
o If the employer can provide a compelling reason it
suspected the employee of wrongdoing that lead him
to searching through the employee’s desk
• Putting of surveillance cameras in restrooms
• Most employers are not allowed to monitor or record
employees’ private calls, as they have an expectation of
privacy in phone conversations
o If the employer has a policy prohibiting private phone
calls while employees are on duty, an employee may
still be terminated for breaking the rule
CHAPTER 7: EMPLOYEE RESPONSIBILITIES
DISCUSSION CASE: Conflicts of Interest in Subprime Mortgages and
Goldman Sachs and Enron
GOLDMAN SACHS
• Goldman Sachs is hired by clients to manage their investment
portfolios
• Thus, financial professionals at Goldman Sachs should make
decisions in the clients’ best interests
• Yet these finance professionals are also employees of
Goldman Sachs, a firm that has its own financial interests at
stake
• Keeping these interests aligned, serving the firm’s interests by
serving clients interests, was the corporate culture so
appreciated by Greg Smith
• However, Goldman culture systematically and intentionally
shifted away from this alignment
• Instead of being served by the agents they hired, clients were
disparaged as “muppets” to be manipulated for the financial
gain of Goldman Sachs
• Employees received promotions and huge bonuses based not
on how well they served clients, but on how much money they
made off of these clients
ENRON
(3) Created in July 1985, Enron evolved from a gas and energy supplier
to an energy-trading company
• To minimize risks in the highly volatile energy industry, traders
commonly ”hedged” their positions, effectively entering into
futures contracts that balanced current risks
• Senior management at Enron balanced risks by entering into
agreements with companies that its own executives created for
that very purpose
• Enron’s relationships with these “special purpose entities”
(SPEs) was at the heart of the company’s corruption and
collapse
• Accounting regulations:
o Allowed anyone with a minimum of 3 percent equity
share to be identified as an SPE’s owner
o Held that as long as Enron owned less than 50
percent of an SPE’s voting stock, its debts did not
have to be accounted for on Enron’s books
o Enabled SPEs to technically be separate business
entities
• The entire process allowed Enron to record a lowering of its
liabilities (as its debts were paid off) without also recording the
corresponding increased liability (which had been shifted to the
SPEs
• Aspects of these relationships that were particularly egregious:
1. Enron’s SPEs had little use other than to shift debt
and risk off balance sheets, and the entire financial
stability of Enron was supported only by its ability to
shift debt onto SPEs
2. The person managing these SPEs was Enron’s CFO
3. Enron was supported through all of this by its
accounting firm: Arthur Andersen, which provided
allegedly unbiased and accurate financial reports
• Enron began collapsing in early 2001
• Enron Vice President Sherron Watkins warned the CEO and
other Enron executives about serious accounting improprieties
• Enron’s senior executives were selling Enron stock at a furious
rate
• Arthur Andersen realized its mistake and acted to cover up its
action
• October 16, 2001: Enron announced a $618 million quarterly
loss
• November 8, 2001: Enron acknowledged that widespread
accounting errors in four previous years had overinflated its’
stock by $600 million
• December 2, 2001: Enron filed for bankruptcy
WHAT DO I OWE OTHER PEOPLE?
• Most reasonable answer would be IT DEPENDS
• Workers are employees and the employment relationship
establishes a variety of responsibilities that employees owe to
their employers
• Managers, while employees, are agents of the corporation
and have specific responsibilities to the stockholders and to
others
• MILTON FIREDMAN – “In a free-enterprise, private property
system a corporate executive is an employee of the owners of
the business. He has direct responsibility to his employers.
That responsibility is to conduct the business in accordance
with their desires, which generally will be to make as much
money as possible while conforming to the basic rules of
society, both those embodied in law and those embodied in
ethical custom . . . The key point is that, in his capacity as a
corporate executive, the manager is the agent of the individuals
who own the corporation . . . and his primary responsibility is to
them.” (narrow view)
• A manager may also be a professional who has professional
responsibilities as well.
o Ex. Sherron Watkins was not only an Enron VP, but
also an accountant.
NARROW VIEW: EMPLOYEES AS AGENTS
• AGENT-PRINCIPAL CONCEPT
o An agent is a person who act on behalf of another
person
o Not all agents are employees
o Common law in the U.S. historically has treated all
employees as agents of employers, establishing a
fiduciary responsibility
o As an agent, employee is hired to perform certain
tasks and has a duty to act on behalf of the principal
o Agency relationships variety in the latitude of
decision making
o Law has traditionally described normal employer-
employee connection as a master-servant
relationship
• Managerial employees have greater discretion and
responsibility than other employees
• Managerial employees are free from close oversight
• The law holds that employee-agents owe legal duties of loyalty,
trust, obedience and confidentiality to the employer-principal
• These duties override employee personal interest
o Is this narrow view ethically defensible?
o Why would anyone believe this view?
• FIRST - managerial employees in particular play a particular
role within the economic system, which works to everyone’s
benefit, thus the special role-specific responsibilities that
employees take on within that system override other ethical
considerations
• SECOND - managerial employees in particular must
PROTECT the PROPERTY RIGHTS OF OWNERS and
PREVENT ECONOMIC HARMS they might suffer from other
employees
o Non-managerial employees have a responsibility to
obey only when employer demands are reasonable,
job-related and do not violate legal or ethical duties
• FINALLY - We have to consider what non-managerial
employees “owe” to their employers, in terms of work effort
• The narrow view of employee responsibilities is more plausible
when the employees hold positions of managerial authority
• In general, managerial employees have an ethical
responsibility to act in the best interests of their employers – to
a limited degree
• There are cases in which ethical responsibilities take second
place to role-specific responsibilities, e.g. physicians and
lawyers
• But does the role of a manager, like the role of a physician and
a lawyer, serve social ends important enough that people in
those roles can sometimes be exempt from ethical
responsibilities?
• Protect vulnerable parties from potential harm by those who
can exercise some control over them; the party with greater
power and authority has greater responsibility
• Law creates responsibilities for the agent to act on the
employer’s behalf
PROFESSIONAL ETHICS & GATEKEEPER FUNCTION
• Our responsibilities are a function of the relationships that we
have with others
• Professionals have very specialized knowledge or expertise
that serves the public good; certification by some public agency
is usually involved
• Professional duties flow from the special knowledge/expertise
that professions have
• Ordinarily, an employee has a responsibility not to harm the
employer’s financial interests
• Within the business and economic context, some professions
have evolved to serve important functions: attorneys, auditors,
accountants and financial analysts = GATEKEEPERS:
o AUDITORS – verify a company’s FS so that investor
decisions are free from fraud/deception
o ANALYSTS – evaluate a company’s financial
prospects/creditworthiness for banks/investors can
make informed decisions
 o ATTORNEYS – ensure that decisions and
transactions conform to the law
o BOD – intermediaries between stockholders and
executives, and should ensure that executives act on
behalf of the stockholders’ interest
• Many of these professionals are paid by the business that they
are responsible for watching over
• Real conflicts of interest exist between professional duties and
a professional’s self- interest
• But KNOWING what one’s duties are and FULFILLING those
duties are two separate issues
• What does the word “REASON” mean?
o In one sense, a reason refers to the LEGITIMACY
OR JUSTIFICATION FOR ACTING IN A CERTAIN
WAY
o In another sense, reason refers to
PSYCHOLOGICAL STATE IN WHICH WE ACT,
LIKE MOTIVATION
• Acting on principle sometimes can require real courage – or
discipline – or will-power
• Our habits are developed over time and influenced by our
surroundings
• If we recognize that it can be difficult for individuals to fulfill their
gatekeeping function, then society has a responsibility to make
changes
• Emphasizes the professions as conventionally understood to
point out that business managers often have conflicting
responsibilities
MANAGERIAL RESPONSIBILITY & CONFLICTS OF INTEREST
• Return to Enron...
o Who are the owners of Enron?
o How many different “desires” existed in Enron at the
time of the scandal?
o What is the “cult of the shareholder? How did it
become the biggest reason behind the accounting
scandal at Enron?
o If the varied interests of various stakeholders are the
interests that a business manager ought to serve,
how does the manager prioritize these interests, and
what interests might inappropriately conflict with
these?
o What are the costs stakeholders endured as a result
of managerial decisions?
OWNER-MANAGER RELATIONSHIP
• Managers have a responsibility to a variety of stakeholders
• Given this variety, it is clear that desires of owners can and do
conflict
• Managers have a responsibility to represent the best interest of
the company, and not just the financial desires of investors
• Survive as a fiscally stable enterprise providing:
o Goods and services to consumers
o Wages and benefits to employees
o Competitive rate of return on investment to
stockholders
• Every decision that a business manager makes imposes costs
on someone
• Responsible manager will balance the competing demands of
various stakeholders
• KICKBACK - is an illegal payment that occurs when a portion
of some payment is paid back to the payer as an incentive to
make the original payment
• SOFT MONEY - occurs when financial advisors receive
payments from a brokerage firm to pay for research and
analysts services that should be used to benefit the clients of
those advisors.
o Abused practice, becomes unethical conflict of
interest when money is used for the personal benefit
of the advisor
o Client can no longer trust the integrity of the
professional judgment of their financial advisor
o Importance of trust in relationships of business
managers with various stakeholders
TRUST AND LOYALTY IN THE WORKPLACE
• To trust someone is to be confident in and rely upon their
judgment when one is vulnerable to their decisions.
o TRUSTWORTHY MANAGERS - develop and
maintain professional competence and expertise
• LOYALTY - in business, is understood as a willingness to
make personal sacrifices in the interest of the firm.
o Often claimed that employees have an ethical
responsibility to be loyal to employers
o To what degree do employees have a responsibility
to make personal sacrifices for the firm?
• RONALD DUSKA - argues employees have no responsibility
of loyalty to their employers
o Characterizes loyalty as a WILLINGNESS TO
SACRIFICE THAT IS BASED ON RELATIONSHIPS
OF MUTUAL ENRICHMENT
o One can be loyal only to those person and
institutions with whom one is engaged in a project of
common benefit
o EMPLOYMENT RELATIONSHIP is simply a
contractual arrangement that serves the individual
self-interests of the parties
o Particularly concerned that loyalty in business too
often is a one-way street --- seldom do firms willingly
a sacrifice for employees
o Lack of reciprocity between employers and their
employees underlies Duska’s claim that A
COMPANY IS AN INAPPROPRIATE OBJECT OF
LOYALTY
o Duska underestimates the possibility that some
businesses are committed to the benefit of their
employees
o Claims for loyalty by the firm can often be little more
than a disguised way to exploit employees’
willingness to make sacrifices for the firm
• However, until and unless the firm is willing to sacrifice for
employees, those employees have little reason to demonstrate
loyalty to the firm
• Is the case different for managerial employees?
o Sherron Watkins
o Andrew Fastow
• IF LOYALTY MEANS WILLING TO SACRIFICE ONE’S OWN
INTERESTS BY GOING ABOVE AND BEYOND ORDINARY
RESPONSIBILITY, THEN WE OUGHT TO BE SUSPICIOUS
OF CALLS FOR EMPLOYEE LOYALTY. (Duska)
• Must also recognize that some employees commit themselves
to make such sacrifices when they agree to act as the legal
agents of business
o Workplace loyalty is better understood as a
WILLINGNES TO REMAIN FAITHFUL TO ONE’S
COMMITEMENTS EVEN AT THE COST OF LOST
PERSONAL BENEFITS
o Business firm ought to be able to trust that
employees will keep their commitments, but has no
ethical basis to expect them to go beyond this and
sacrifice for the firm
RESPONSIBILITIES TO THIRD PARTIES:
HONESTY
• Are there situations in which dishonesty is common and
acceptable?
• There are three reasons to explain the ethical responsibility to
be honest:
o Dishonesty undermines the ability of people to
communicate
o Honesty and trust create essential preconditions for
all cooperative social activities
o A dishonest person must have more than one
identity, which undermines his integrity
• ALBERT CARR
o Deception and bluffing (including manipulation and
lying) are acceptable strategies within business –
like poker
o Suggests that “A FALSEHOOD CEASES TO BE A
FALSEHOOD WHEN EVERYONE INVOLVED
KNOWS ABOUT IT”
ETHICAL RESPONSIBILITY TO BE HONEST
1. UTILITARIAN RATIONALE – dishonesty undermines the ability of
people to communicate and thus will have adverse social
consequences
2. KANTIAN TRADITION – dishonesty treats others as a means to
our own ends and thus disrespects the dignity of other persons.
3. THIRD ETHICAL PERSPECTIVE – looks at what dishonesty does
to the dishonest person (lacks moral integrity)
• Dishonest person must maintain two identities/personas:
i. The one shown to the “victim” of dishonesty
ii. One who carries out the deception and remains
hidden from the victim
• If practiced habitually, can undermine one’s own integrity
• INTEGRITY
o Involves a moral wholeness, authenticity, and
coherence.
o Plays an important role in establishing own
identity and self-worth
 • A bluff can only work as a bluff if the person being bluffed
believes that it is true (is being deceived)
• While a dishonest act can have beneficial social
consequences, routine dishonesty erodes the trust that seems
essential to social cooperation.

WHISTLEBLOWING
• A whistleblower is an employee or other insider who informs
the public or a government agency of an illegal, harmful, or
unethical activity done by their business or institution.
o Whistleblowing puts the employee at risk
o Whistleblowing pits responsibilities to third parties at
odds with employees responsibilities to their
employer
• RICHARD DeGEORGE argues THREE CONDITIONS MUST
BE MET BEFORE WHISTLEBLOWING IS ETHICALLY
PERMISSIBLE:
(1) THERE MUST BE A REAL THREAT OF HARM THAT
NEEDS TO BE ADDRESSED

(4) THE WHISTLEBLOWER SHOULD FIRST SEEK TO

PREVENT THE HARM THROUGH CHANNELS

(5) THE WHISTLEBLOWER, IF POSSIBLE, SHOULD

EXHAUST ALL INTERNAL PROCEDURES FOR
PREVENTING THE HARM

INSIDER TRADING
• Insider Trading generally refers to the practice of buying or
selling securities on the basis of nonpublic information that one
has obtained as an “insider”.

THREE ARGUMENTS ARE CITED IN ETHICAL CRITICISM OF

INSIDER TRADING:
(1) UNFAIR TO OTHER SECURITY TRADERS since those
outsiders lack the same information and thus are unfairly
disadvantaged in the marketplace (UNFAIRNESS CLAIMS)
(2) INFORMATION USED IS PROPERTY OF FIRM thus when
used by insiders without permission and in ways that harm
other stockholders, they have done something unethical
(PROPERTY RIGHTS)
(3) VIOLATES THE TRUST IMPLIED BY THE FIDUCIARY
RELATIONSHP BETWEEN A FIRM & ITS EMPLOYEES
(FIDUCIARY DUTIES)

• Involves misappropriating private resources for personal gain in

a way that harms the firm’s investors
 CHAPTER 8: MARKETING ETHICS: PRODUCT SAFETY AND • Business has only the responsibility to uphold its end of the
PRICING bargain by providing a good or service at an agreed-upon price
• Every purchase was assumed to involve the informed consent
of the buyer and was therefore assumed to be ethically
INTRODUCTION: MARKETING AND ETHICS legitimate
MARKETING • Assumes that consumers do adequately understand and judge
• Marketing itself is a core discipline of business, but only products so that they can reasonably be expected to protect
recently has become a focus within business ethics themselves
• Essence of Marketing: FOUR P’s • If courts were going to assume that consumers had been given
o PRODUCT an implied warranty of safety, manufacturers could avoid
o PRICE responsibility by expressly limiting or denying any warranty
o PLACE
o PROMOTION NEGLIGENCE
• What, how, why, and under what conditions is something • Provides a second avenue for consumers to hold producers
produced? responsible for their products
• What price is acceptable, reasonable and fair? o CONTRACT LAW – responsible only to duties that
• How can the product be promoted to support and enhance taken explicitly and voluntarily
sales? o TORT LAW – responsibility to general duties and not
• Where, when, and under what conditions should the product be put others at risk and harm
placed in the marketplace? • Involves a type of ethical neglect, specifically, neglecting one’s
duty to exercise reasonable care not to harm other people
• Failure to exercise reasonable care or ordinary vigilance that
ETHICAL ISSUES IN MARKETING results in injury to another
OVERVIEW o COMMISSION – doing something ought not
• Prima facie ethically legitimate - two parties freely agree to their o OMMISSION – failing to do that should have done
exchange • Involves the ability to foresee the consequences of our acts
• Kantian Perspective - upholding respect by treating each other and failing to take steps to avoid the likely harmful
as people capable of pursuing their own ends consequences
• Utilitarian Perspective - agreement translates to an increase in • Hole people liable for future harms they saw occurring
happiness o Unthoughtful people cannot be negligent
CONCERNS REASONABLE PERSON STANDARD
To what degree are the participants respected as free and • People are expected to act reasonably and are held liable
autonomous agents rather than being treated simply as means to when they do not
the end of making a sale? • Would require people to avoid harm that, even if they haven’t
(1) Person must freely consent to the transaction actually thought about, they should have thought about had
• Is the exchange voluntary? they been reasonable
• A reasonable person does what we would expect the ordinary,
(2) Consent must also be INFORMED average person to do
• Is the consent to exchanged really informed? • Assumes a standard of thoughtful, reflective, and judicious
• NO lack of information decision making
• NO deception o The problem with this is that we might be asking
• NO complicated information more of the average consumers than they are
capable of giving
To what degree does the transaction provide actual as opposed to o More appropriate when applied to producers than to
merely apparent benefits? consumers
• Are people truly benefited?
• Purchases that do not result in actual benefit:
o Impulse buying due to consumerism LIFE CYCLE RESPONSIBILITY
o AFFLUENZA - greater consumption can lead to • aka EXTENDED PRODUCER RESPONSIBILITY
unhappiness • A business that creates a product must take responsibility for
o Injuries (hidden defects) in the product managing its entire life to prevent ethical and environmental
harms from occurring in the design, production, distribution,
What other values might be at stake in the transaction? marketing, use, until the eventual disposal of the product
• Do competing values override?
• Primary social values as fairness, justice, health, and safety VIEWS IN LIFE CYCLE RESPONSIBILITY
• Just because someone wants to buy something and someone CRADLE TO GRAVE
else is willing to sell it doesn’t mean that the transaction is • Early version
ethically legitimate • Responsibility from the design and creation to the end-of-life
• Who else would be affected? What social goods are promoted, disposal of the product
and which are threatened by marketing this product? • The product must be able to fulfil its function

What are the true costs of production? CRADLE TO CRADLE

• EXTERNALITIES
o Costs that are not integrated within the exchange
between buyer and seller
o Even if both parties receive actual benefits from the
exchange, other parties external to the exchange
might be adversely affected
o pollution, Environmental degradation, external
transaction pero affected ka pa rin (**
macroeconomics)
ETHICAL RESPONSIBILITY FOR PRODUCTS
RESPONSIBILITY
• The state or fact of having a duty to deal with something or of
having control over someone
• Three senses:
o CAUSE – the situation, saan nanggaling
o LIABLE - assigning blame or fault, who is responsible
for having created that situation
o ACCOUNTABILITY (“taking care of”) - one can be
accountable without any suggestion of culpability,
fault, or blame; how it should be resolved, who
should answer for it
CAVEAT EMPTOR
• "Let the buyer beware"
• Recent Model
• Until the product is recycled back into the resource pool
• (E.g.: Bottle) — one way of maintaining the sustainability of the
environment
PRO
• Provide an incentive for manufacturers to design products that
are more easily recycled or reused, less toxic, and last longer
• By including recycling costs in the original costs of the product,
life-cycle responsibility would also internalise costs that
otherwise would have been passed on to others and thereby
correct for market failures
ANTI (why LCR is not good for some)
• Some existing durable products and components have a life-
cycle that could easily outlast the existence of a manufacturer
• Requiring individual manufacturing firms to take back
dangerous products increase risk as these products are spread
widely rather than collected in a centralised location
• Added cost to consumers and the impossibility of
manufacturers’ controlling what a consumer might do with a
product after purchasing it
To what degree can and should we hold a business responsible for
harms in the creation, use, and disposal of every component of a
particular product?
STRICT PRODUCT LIABILITY
• Focuses on the performances of the product itself and not on
the negligence of the people involved
• “product accountability”
• Harm can occur through accidents
• “who will be liable for harm caused by these accidents?
o Producers
• Producers are not always liable
• Manufacturers can also be exempted
• Some products are inherently dangerous

3 OPTIONS OF ACCOUNTABILITY:
(1) CONSUMER - “Tough luck”
(2) SOCIETY - Generally accountable

(3) PRODUCERS - McCall: not as costly and won’t generate much

lawsuits

McCall:
• Injured are externalities that fairness requires
o These should be paid for by those who benefit from
the exchange
• Understands this as a process of compensation than a liability

ETHICS AND PRICING

GENERAL ETHICAL CONCERNS as guiding principles:

(1) Respect for individual autonomy

• Lack of informed consent
o PRICE GOUGING – occurs when the buyer, at least
temporarily, has few purchase options for a needed
product and the seller uses this situation to raise
prices significantly
o MONOPOLISTIC PRICING - seller prices a product
to maximize his or her profits under the assumption
that he or she does not need to worry about
competition.
o PRICE FIXING - the maintaining of prices at a certain
level by agreement between competing sellers.
• Price is fair if there is:
o CONSUMER FREEDOM
o AVAILABLE COMPETION

(2) Provision of actual benefits to the parties involved

• Low prices aren’t always better
o Small businesses against large competitors
o More competitive local economy

(3) Values other than served by the exchange itself

• FAIRNESS and EQUAL OPPORTUNITY
o Small businesses
o Retails and suppliers
• PREDATORY PRICING
o Price of a product is lower than actual costs to drive
out other businesses
• SOCIAL COSTS
o High prices in the long run
• POLITICAL COSTS
o Government subsidies
 CHAPTER 9: MARKETING ETHICS: ADVERTISING AND TARGET
MARKETING Generic brands are widely available to the public and are cheap but high
cost brands are still bought over generic brands. This is because of the
INTRODUCTION: ETHICS OF SALES, ADVERTISING, AND PRODUCT effectiveness of advertising.
PLACEMENT
DECEPTIVE MARKETING
SALE • Intention of deceiving people in order to manipulate their
• Main goal of all marketing buying behaviour
• The eventual exchange between marketer and consumer • Treating them as a mere means to one’s own ends (J&J)
• Major element of marketing: PROMOTION – attempt to • Focused on the marketing practices that actually deceive (Old
influence the buyer to complete a purchase Frothingslosh) — Ivan Preston threatened a lawsuit over a beer
o “The pale stale ale for the pale stale male”
ELEMENTS OF PRODUCT PLACEMENT o Only beer with foam on the bottom
TARGET MARKETING
• Seeks to determine which audience is most likely to buy It really depends on the consumer to be either reasonable or relatively
• Targeting the considered and rational desires is one thing; ignorant.
targeting their fears, anxiety, and whims is another
REASONABLE CONSUMER STANDARD
MARKETING RESEARCH • Most fair and reasonable
• Seeks to determine which audience is most likely to be • To create and apply the optimum standard for each product,
influenced by product promotion marketing practice and/or target market creating a standard for
• Seeks to learn about the psychology of potential customers only certain products and not create a generic standard for all
• Assumes the best about consumers and doesn’t hold
INFLUENCING THE CUSTOMERS marketers to an extreme standards, but also abandons the
ETHICAL – when market exchanges respect individual autonomy and protection of those consumers who deserve it
liberty
• Persuading MARKETING ETHICS AND CONSUMER AUTONOMY
• Asking WHAT DOES ADVERTISING DO TO PEOPLE?
• Informing (e.g.: pictures of effects of smoking in cigarette • People learn about the products
boxes) • There can be indirect and direct influence of marketing
• Advising
CONSUMER AUTONOMY
UNETHICAL – when market exchanges violate individual autonomy and DEPENDENCE EFFECT
liberty • Creation of wants stands the law of supply and demand on its
• Threats head
• Coercion • Creation of irrational and trivial consumer wants, which distorts
• Deception the economy
• Manipulation • Creation of consumer wants violates consumer autonomy
• Lying
AUTONOMY – involves making reasoned and voluntary choices
MANIPULATION AS CENTRAL TO THE ETHICAL ISSUES
MANIPULATION – guiding or directing someone or something’s ADVERTISING doesn’t guarantee consumer autonomy
behaviour without their explicit consent or conscious understanding
• Contrasted with persuasion and other forms of rational, DOES ADVERTISING CONTROL CONSUMER BEHAVIOR?
autonomy-respecting influence Psychologically speaking, yes,
• One way of manipulation is DECEPTION – an outright lie
AUTONOMOUS DESIRES
• The more one learns about customer psychology (motivation,
interests, desires, belief, dispositions), the better one will be • Behavior is not controlled as much as our autonomous desires
able to satisfy their desires and therefore manipulate them are
• Advertising creates the wants and desires of consumers
• Guilty, pity, desire to please, anxiety, fear, low self-esteem,
pride, and conformity can all be powerful motivators
NON-AUTONOMOUS DESIRES
ETHICAL THEMES • Desires that are not voluntary and we do not freely and
KANTIAN TRADITION rationally choose (e.g.: a drug addict who desires more heroin)
• Offers the strongest objections to manipulation
Some think that these desires can originate from advertising
• Treating him as a means to my own ends
• Advertising provides information from which we can learn and
• Treating him as an object to be used rather than as an
on the basis of which we can freely choose to desire something
autonomous person in his or her own right
• Because the evil rests with the intention to use another as a
FIRST-ORDER DESIRES
means, even unsuccessful manipulations are guilty of this
• those wants that er just happen to have at any given time **
ethical wrong
SECOND-ORDER DESIRES
UTILITARIAN TRADITION
• DESIRES ABOUT desires
• Offers a more conditional critique of manipulation
• Desire to change the process
• Tend to erode bonds of trust and respect between persons &
one’s self-confidence
AUTONOMOUS DESIRES – desires that are not rejected upon reflection
• Can hinder the development of responsible choice making
Does advertising create non-autonomous first-order wants?
• Since most manipulation is done to further the manipulator’s
• No, but advertising might control behaviour or produce
own ends at the expense of the manipulated, Utilitarians are
compulsive behaviour
inclined to think that manipulation lessens overall happiness
• Marketing influences us by appealing to independent desires
REGULATING DECEPTIVE AND UNFAIR SALES AND ADVERTISING • Advertising does not violate autonomy
FEDERAL TRADE COMMISSION (FTC) – regulates deceptive and unfair
marketing practices
TARGETING THE VULNERABLE: MARKETING AND SALES
COMMERCIAL AND ECONOMIC HARMS OF MANIPULATION
• In the case of Tylenol, they wanted customers to believe that
hospitals were dispensing Tylenol in large numbers because
they believed that Tylenol was the best treatment for pain — in
short, they wanted their customers to believe in something that
was not true.
• Consumers are harmed by such deception when they end up
purchasing a product that they might not otherwise have
bought, and often at a price higher than they might have
otherwise paid
• When a consumer is deceived, competitors get cheated out of
the chance to compete fairly in the marketplace just because
the deceptive practice has succeeded
 CHAPTER 10: BUSINESS’S ENVIRONMENTAL RESPONSIBILITIES
CORPORATE SOCIAL RESPONSIBILITY AND THE ENVIRONMENT
CORPORATE SOCIAL RESPONSIBILITY
• is a management concept whereby companies integrate social
and environmental concerns in their business operations and
interactions with their stakeholders
• CSR is generally understood as being the way through which a
company achieves a balance of economic, environmental and
social imperatives, while at the same time addressing the
expectations of shareholders and stakeholders.
• Examples of CSR: Doing community work, participating in
charitable giving, investing in a more environmentally friendly
machines, cars, materials
ECONOMIC MODEL
• On the other hand, the economic model describes that the
business’s only responsibility is to maximize profit within the
law
• A UTILITARIAN MODEL -- serves the greater overall good;
satisfying consumer preferences within the law
• The problem with this model is that it results in market failure.
As companies aim to satisfy their customers, negative
externalities are created along the way.
• NEGATIVE EXTERNALITIES - a cost that is suffered by a third
party as a consequence of an economic transaction
• More market failures:
o When no market exists to create a price for social
goods (good that benefits the largest number of
people in the largest possible way), this leads to
more environmental harm. Failure to raise
awareness
o E.g. Clean air, education, biodiversity, animal
preservation, stable climate, healthy ocean fisheries
o Most of the time, endangered species are traded in
the black market, which creates even more problems
(e.g. rhinoceros horns, tiger claws, elephant tusks)
What should businesses do?
• Businesses should strive to achieve a balance between
maximizing profit and at the same time, making sure that their
operation does not harm the environment
• At the same time, the government should implement stricter
regulations for the preservation of the environment
BUSINESS’S RESPONSIBILITY AS ENVIRONMENTAL REGULATION
• A broad consensus in the 1970s in the US stated that
unregulated markets are inadequate to deal with environmental
challenges.
• Thus, the only solution was for the government to intervene
through governmental regulations
• The significant legislation enacted in the US were:
o The Clean Air Act of 1970
o Federal Water Pollution Act of 1972
o Endangered Specie Act of 1973
• However, before all these legislations, the only solution before
was the TORT LAW:
o States that remedy a wrong done to a person and
provide relief from the wrongful acts of others,
usually by awarding monetary damages as
compensation
o The problem with this law is only individuals who
could prove that they had been harmed by pollution
could raise legal challenges -- without proof, their
appeal is nothing
o Even more so, the law does not address the main
problem, which is the degradation of the
environment. It merely provides compensation in the
form of money to those that were directly affected
• Thus, the laws imposed in the 1970s paved the way for
establishing a minimum standard to ensure air and water
quality, and species preservation.
• In the Philippines, some of the laws that were enacted for the
preservation of the environment are:
o Presidential Decree no. 1586 - to facilitate the
attainment and maintenance of rational and orderly
balance between socio-economic development and
environmental protection
o Waste Control Act of 1990 - the law aims to
regulate restrict or prohibit the importation,
manufacture, processing, sale, distribution, use and
disposal of chemical substances and mixtures that
present unreasonable risk to human health.
o Clean Air Act of 1999 - law aims to achieve and
maintain clean air that meets the National Air Quality
guideline values for criteria pollutants, throughout the
Philippines, while minimizing the possible associated
impacts to the economy.
o Solid Waste Management Act of 2000 - law
ensures proper segregation, collection, storage,
treatment and disposal of solid waste through the
formulation and adaptation of best eco-waste
products.
o Clean Water Act of 2004 - law aims to protect the
country's water bodies from pollution from land-
based sources (industries and commercial
establishments, agriculture and community/
household activities).
GINA LOPEZ
• An environmentalist and philanthropist
• Served as Secretary of the Department of Environment and
Natural Resources (DENR)
• Most known for spearheading and initiating the rehabilitation of
the Pasig River and the reforestation of the La Mesa
Watershed Reservation, which was the last remaining major
rainforest in Metro Manila
• Also known for:
o Managing director of ABS-CBN Foundation
o Bantay Kalikasan Patrol - aired in the early 2000s
to encourage compliance to environmental laws as it
exposed individuals, agencies and companies who
abuse the environment. It likewise highlights good
practices that promote environmental awareness and
conservation
o Sineskwela - aims to educate children about
science, math, values, and history
BUSINESS ETHICS AND SUSTAINABLE ECONOMICS
CIRCULAR FLOW MODEL
• Illustrates the nature of economic transactions in terms of a
flow of resources from businesses to households.
o Business produces goods and services in response
to the demands of households in the market.
o Goods and services are shipped out to the
household in exchange of payments.
o Payments are sent back to households in the form of
wages, salaries, rent, profits and interests.
o Payments are received by households as a
reciprocity for labour, land, capital and
entrepreneurial skills used by business to produce
goods and services.
• Natural resources undifferentiated from the other factors
of production.
o Resources are simply owned by households from
which they can be sold to business.
o “As economists and consumers, we are interested in
the particular services that resources yield, not in the
resources themselves” - Julian Simon
o Services can be provided in many ways and by
substituting different factors of production.
o Resources are treated as infinite.
• Treats Economic growth as not only the solution for social
strains, but also as limitless
o Increase in population → Economic growth
o Economic growth → Reduction in poverty, hunger
and disease
• CHALLENGES THIS MODEL FACES INTO THE NEAR
FUTURE
(1) A large percentage of the world population today lives
in total privation
 (2) The world’s population during this period will continue
to increafse significantly
o Particularly in the most impoverished and already
highly populated regions.
o Assuming a reduced rate of growth, the worldwide
population will likely double in the future.
o The economic activity to meet the basic needs of
world’s population in the near future should increase
proportionately.
(3) The only sources of economic activity are the natural
resources itself
o Resources like clean air, drinkable water, fertile soil
and food cannot be replaced.
o We cannot utilize these resources on labour, capital
or entrepreneurial skill alone.
o The world’s environment is already under stress from
current economic activities and the future looks bleak
unless major economic changes occur.
o It is a must to create an economic system that
provide for the needs of the world’s population
without harming the environment in the process.
NEOCLASSICAL ECONOMICS
o Emphasizes economic growth as the goal of
economic policy
o Daly argues that this model will inevitably fail to meet
challenges unless it recognizes that the economy is
but a subsystem within Earth’s biosphere.
o All economic activities takes place within the
biosphere and cannot expand beyond.
o Proved unstable if resources move through this
system at a rate that outpaces the productive
capacity of the earth or of the earth’s capacity to
absorb the wastes and by-products.
▪ Needs to develop an economic system that
uses resources only at a rate that can be
sustained in the long run and that recycles
or reuses both by-products and products
themselves.
• Economy exists within a finite biosphere that
encompasses little more band a few miles wide
surrounding the earth’s surface.
o According to the first law of thermodynamics, we
recognize that neither matter nor energy can be
created.
• Energy is lost at every stage of economic activity.
o From the second law of thermodynamics, the amount
of usable energy decreases over time.
o “Waste energy” leaves the economic system and a
new low-entropy energy flows into the system.
▪ Only source of low-entropy energy is the
sun.
• Natural resources are not treated as an undifferential and
unexplained factor of production.
o Natural resources come from the biosphere and
cannot be created out of nothing.
• Wastes are produced at every stage of economic activity
and dumped back into the biosphere.
Conclusion
• In the long run, resources and energy cannot be used, same as
waste produced, at rates which the biosphere cannot replace
or absorb without jeopardizing its ability to sustain life.
o Biophysical limits to growth
• The biosphere can produce resources and absorb wastes
indefinitely, but only at a certain rate
• and type of economic activity.
• Finding the rate and type of economic activity, creating a
sustainable business practice , is the ultimate environmental
responsibility of a business.
o The goal of sustainable development
BUSINESS ETHICS IN THE AGE OF SUSTAINABLE DEVELOPMENT
THREE PILLARS OF SUSTAINABILITY (criteria in judging the
sustainable business practices)
(1) ECONOMICALLY SATISFACTORY – sustainable business
practices must be able to meet the needs of the present without
compromising the ability of future generations to meet their own
needs
• Business’ responsibility to adequately meet the economic
expectations of society (i.e., jobs, income, and goods and
services) in an efficient manner
(2) ENVIRONMENTALLY SATISFACTORY – sustainable business
practices must be able to meet such needs without harming the
ability of the biosphere to sustain life over the long term
• Business’ responsibility to support, rather than degrade, the
ability of the biosphere to sustain life, especially but not
exclusively human life, over the long term
(3) SOCIALLY SATISFACTORY – sustainable business practices must
address the real needs of people, particularly those hundreds of
millions of people who lack adequate food, water, and other
necessities
• Business’ responsibility to address minimum demands of social
justice
We must move away from the view that these responsibilities are a
constraint to profitability. We must recognise that there are avenues to
profitability that are environmentally prudent and sensible. One way to
visualise that is by showing a model for environmentally sustainable
business practices.
NATURAL CAPITALISM
• Proponents: Paul Hawken, Amory Lovins, and Hunter Lovins
• Provides a conceptual model & examples of environmentally
sustainable business practices
FOUR GUIDING PRINCIPLES FOR THE REDESIGN OF BUSINESSES
(1) ECOEFFICIENCY — the productivity of natural resources must and
can be dramatically increased
(2) BIOMIMICRY or CLOSED-LOOP DESIGN — business must be
redesigned to model biological processes
• By-products that go to waste and pollution must be eliminated
• By-products must be reintegrated into production process
• By-products must be returned as a benign or beneficial product
to the biosphere
(3) Traditional models of business as producer of goods should be
replaced with a model of business as provider of services
• The old economy focuses on producing goods (e.g.: light bulbs
and carpet), when consumer demand really focuses on
services (e.g.: illumination and floor-covering)
(4) Business must reinvest in natural capital
• In traditional economic models, they have neglected to include
this as part of prudent business practice
FIRST PRINCIPLE: ECOEFFICIENT MANAGEMENT
• Discovering ways to reduce the rate at which natural resources
flow through the economic system
• Aims to meet the needs of the poorest by increasing efficiency
and decreasing resource and energy use
• EXAMPLES:
o A housing developer who designs a neighbourhood
with cluster housing, green spaces, habitat corridors,
and biking trail
o Energy efficient windows, lighting, motors, and
insulation in the design and upgrade of every
building would greatly reduce overall energy use
while still meeting present production targets.
SECOND PRINCIPLE: BIOMIMICRY
• Eliminate the wastes produced by even eco-efficient production
processes
• Business managers have a responsibility to seek ways to
integrate former wastes back into production system, transform
wastes into biologically beneficial elements, or minimally,
produce wastes at rates no faster than the biosphere can
absorb them
 • Ultimate goal: eliminate wastes rather than reducing them
• Mimicking biological processes
EVOLUTION OF BUSINESS STRATEGY TOWARDS BIOMIMICRY
First phase: TAKE-MAKE-WASTE
• Business takes resources, makes products out of them, and
discards whatever is left over
Second phase: CRADLE-TO-GRAVE RESPONSIBILITY or LIFE-
CYCLE RESPONSIBILITY
• Business is responsible for the entire life of its products,
including the ultimate disposal even after the sale (e.g.:
business is liable for groundwater contamination caused by its
products even years after they had been buried in a landfill)
Third phase: CRADLE-TO-CRADLE RESPONSIBILITY
• Business is responsible for incorporating the end results of its
products back into the productive cycle
• This would in turn create incentives to redesign products so
that they could be recycled efficiently and easily
• Environmental design company McDonough and Braungart
o Arch. William McDonough & chemist Michael
Braungart
o Redesigned Ford Motor Company’s Rouge River
manufacturing plant
THIRD PRINCIPLE: REPLACING PRODUCTION OF GOODS WITH
PROVIDER OF SERVICES
• Requiring a greater paradigm shift in business management
• Reinforcing the principles of ecoefficiency and biomimicry
• This would produce incentives for product redesigns that create
more durable (long-lasting) and more easily recyclable
products
• Interface — from selling carpets to leasing floor-covering
services
o Once customers become dissatisfied with the colour
or style or once it becomes worn, customers dispose
it in landfills.
o Because of the shift, the company accepts
responsibility for the entire life cycle of the products.
o The product redesign has improved production
efficiencies and reduced material and energy costs
significantly
FOURTH PRINCIPLE: REINVESTING IN NATURAL CAPITAL
• Business has a responsibility not to use resources at rates
faster than what can be replenished by the biosphere, and
especially ought not to destroy the productive capacity of the
biosphere itself
• Challenge to this principle is the implementation
• Should be subject to government regulation since the
productive capacity of the biosphere is a true public good
o Tax incentives to encourage such investment
o Tax penalties for uncompensated resource extraction
• Ford Rouge factory
o Roof is covered with ivy-like sedum plants:
▪ Reduce water runoff
▪ Add insulation value
▪ Converting carbon dioxide to oxygen
• Ex. Ocean Fishing industry
(2) THE HUGE UNMET MARKET POTENTIAL AMONG THE WORLD’S
DEVELOPING ECONOMIES CAN ONLY BE MET IN SUSTAINABLE
WAYS
• Enormous business opportunities
• Base of the economic pyramid is the largest and fastest
growing economic market in human history
• Size of such market makes it impossible to meet demands due
to environmentally damaging industrial practices of the 19th
and 20th centuries
(3) SIGNIFICANT COST SAVINGS CAN BE ACHIEVED THROUGH
SUSTAINABLE PRACTICES
• Cost savings with ECO-EFFICIENCY
o Glavič et al., 2012 - is a management strategy of
doing more with less
o UN ESCAP, 2009 - a key element for promoting
fundamental changes in the way societies produce
and consume resources, and thus for measuring
progress in green growth.
o Government of Canada, 2013 - Is achieved through
three objectives:
▪ Increasing product/service values
▪ Optimizing the usages of resources
▪ Reduce environmental impacts
• As with energy and material use, thus reducing environmental
wastes
• Minimizing waste makes sense on financial grounds and
environmental
(4) COMPETITIVE ADVANTAGES EXIST FOR SUSTAINABLE
BUSINESSES
• Those ahead of the sustainability curve will have advantage of
serving ENVIRONMENTALLY CONSCIOUS CONSUMERS
• Competitive advantage of attracting workers who take pride
and satisfaction in working for PROGRESSIVE firms
(5) SUSTAINABILITY IS A GOOD RISK MANAGEMENT STRATEGY
• Avoid FUTURE GOVERNMENT REGULATIONS
• Firms that take an initiative to move towards sustainability will
mostly likely be the ones that set the standards of best
practices in the field
• Thus play a role in the development of future regulations to be
imposed
• Avoid LEGAL LIABILITY for unsustainable products
• Legal system may soon begin punishing firms that are
negligent in failing to foresee harms caused by their
unsustainable practices
• Avoid CONSUMER BOYCOTTS of unsustainable firms
“[This] concept can no longer be considered on the fringe of
business activity. Sustainability’s integration of economic,
environmental, and ethical bottom lines provides a model for the
future.” - DeJardins

THE “BUSINESS CASE” FOR SUSTAINABILITY

SUSTAINABILITY
• Has moved to the strategic core of corporate activity
throughout the world/business sector
• Emerged as a driving force in marketing focus on LIFE-CYCLE
RESPONSIBILITY for consumer products
• Central idea involved in Globalization topics
• Business Revolution

PATRICK CESCAU (2007), Chief Executive of Unilever

• “Today social responsibility and environmental sustainability
are core business competencies, not fringe activities. We have
come a long way since the early eighties when the godfather of
free market economics Milton Friedman proudly proclaimed
that the only obligation which business had to society was ‘to
make a profit and pay its taxes’”
• Sustainable business model does NOT create a divide
between environmental and financial responsibilities
o Good financial sense to pursue sustainable policies,
practices, and products

ARGUMENTS FOR A “BUSINESS CASE” PURSUING SUSTAINABLE

PRACTICES
(1) SUSTAINABILITY IS A PRUDENT LONG-TERM STRATEGY
• Supply of resources is declining as the demand for such
increases, as does worldwide population and consumption
• Sustainable practices must be adapted to ensure long-term
survival
• Failure to adapt puts firms at risk of discontinuance