Chap5

Thursday, January 25, 2024 12:53 PM

Ethics, Corporate Social

Responsibility, and
Sustainability
LO 5-1
Understand the ethical issues faced by international bsinesses.
Ø Ethics - accepted principles of right or wrong that govern
Ø the conduct of a person
Ø the members of a profession
Ø the actions of an organization
Ø Business ethics - accepted principles of right or wrong
governing the conduct of business people Ø Ethical strategy -
a strategy, or course of action, that does not violate these
accepted principles

Ø The most common ethical issues in business involve

1. employment practices

Ex: Nike
- VN use child labor -> Nike guilt by association
 - VN use child labor -> Nike guilt by association
Ex: Volt Swagon
- Engineers manipulate the performance of the engine -> polluting 40x
times -> got fined
Ex: Nike
- Worse/worser situation :

2. human rights

Ex: 1.6 people of the world's population have no say in how they are
gorverned
Ex: immigrants have no health protection

3. environmental pollution

Tragedy of the commons : use the natural resources without care

Global tragedy of the commons

4. corruption

Ex: facilitating payments known as speed money or grease payments, facilitating

payments are not pay- ments to secure contracts that would not otherwise be secured, nor
are they payments to obtain exclusive preferential treatment Foreign corrupt practices
act (FCPA)

5. moral obligations of multinational

companies

LO 5-3
Identify the causes of unethical behavior by managers.
- PERSONAL ETHICS : parents, school, religion, media

- DECISION-MAKING PROCESSES
Summary: Improving Ethical Decision-Making in Multinationals

Key Points:
Problem: Business decisions often lack ethical considerations, leading to unintentional
unethical behavior (e.g., Nike's subcontractor choice).
Assumptions to Challenge:
People make ethical decisions at work the same as at home (not true due to
organizational pressures).
Different cultures make ethical decisions similarly (not true due to varying emphasis on
factors like organizational loyalty vs. individual ethics).
Solution:
Better understand individual decision-making processes in organizational contexts.
Recognize the influence of organizational pressures and cultural differences on ethical
choices.
Overall: The passage emphasizes the need to move beyond simplistic models of ethical
decision-making and integrate ethical considerations into business processes while
acknowledging the role of organizational settings and cultural contexts.

- ORGANIZATIONAL CULTURE
Value and norms that are shared among employees of an organization

Key Points:
 Certain organizational cultures can stifle ethical decision-making by prioritizing purely
Certain organizational cultures can stifle ethical decision-making by prioritizing purely
economic concerns and downplaying business ethics.
Organizational culture: Shared values and norms influencing employee behavior within a
company.
Example: Bribery being "standard business practice" at Daimler due to ingrained norms
and values within the organization.
Argument: Widespread unethical practices suggest implicit condoning through the
company's values and norms.
Overall: The passage highlights how an organization's culture can significantly impact
ethical decision-making, with cultures prioritizing profit over ethics creating an
environment conducive to unethical behavior.

- UNREALISTIC PERFORMANCE GOALS

- The combination of an organizational culture that legitimizes unethical behavior, or at
least turns a blind eye to such behavior, and unrealistic performance goals may be
particularly toxic

- LEADERSHIP
- Leaders help establish the culture of an organization, and they set the example, rules,
and guidelines that others follow as well as the structure and processes for operating
both strategically and in daily operations. Employees often operate and work within a
defined structure with a mindset very much similar to the overall culture of the
organization that employs them.

- SOCIETAL CULTURE
- High on masculinity and power distance are more likely to behave unethically ( pikachu )

LO 5-4
Describe the different philosophical approaches to ethics.
STRAW MEN
You asks something, then they answer something else

- "You need to be on class on time"

- "You are discrimination against ppl live far away"
Business ethics scholars use "straw man" approaches to show their flaws as guidelines for
multinational companies. These approaches include:
multinational companies. These approaches include:

- Friedman doctrine: Focuses solely on maximizing profits within legal limits, ignoring
ethical concerns.
- Cultural relativism: Adapts to local ethical standards, potentially condoning practices
like sweatshops.
- Righteous moralist: Imposes home-country ethics regardless of cultural differences,
causing friction.
- Naive immoralist: Follows local practices to gain advantage, even if unethical.

While none are ideal, companies sometimes adopt them due to their simplicity or perceived
benefits.

UTILITARIAN AND KANTIAN ETHICS

- Utilitarianism: to ethics hold that the moral worth of actions or practices is determined
by their consequences. An action is judged desirable if it leads to the best possible
balance of good consequences over bad consequences.
- Kantian Ethics: Values treating people with dignity and never purely as means to an end.

RIGHTS THEORIES
Rights theories recognize that human beings have fundamental rights and privileges that
transcend national boundaries and cultures.

Article 23 of this declaration, which relates directly to employment, states:

1. Everyone has the right to work, to free choice of employment, to just and favor- able
conditions of work, and to protection against unemployment.
2. Everyone, without any discrimination, has the right to equal pay for equal work.
3. Everyone who works has the right to just and favorable remuneration ensuring for
himself and his family an existence worthy of human dignity, and supplemented, if
necessary, by other means of social protection.
4. Everyone has the right to form and to join trade unions for the protection of his
interests.34

JUSTICE THEORIES
1. A just distribution is one that is considered fair and equitable
2. The theory is attributed to philosopher John Rawls
 3. veil of ignorance : everyone is imagined to be ignorant of all of his or her particular
characteristics, for ex- ample, race, sex, intelligence, nationality, family background,
characteristics, for ex- ample, race, sex, intelligence, nationality, family background, and
special talents.
a. The first principle is that each person be permitted the maximum amount of basic
liberty compatible with a similar liberty for others
b. The second principle is that once equal basic liberty is ensured, inequality in basic
social goods—such as income and wealth distribution, and opportunities—is to be
allowed only if such inequalities benefit everyone. ( job insurance, homeless,…)

LO 5-5
Explain how managers can incorporate ethical considerations into their decision
making.

• (1) favor Hiring and Promotion people with a well-grounded sense of personal ethics
• (2) build an Organizational Culture and exemplify Leadership behaviors that place a high
value on ethical behavior
• (3) put Decision-Making Processes in place that require people to consider the ethical
dimension of business decisions

1. Stakeholder identification and analysis:

Businesses should identify all stakeholders (individuals or groups affected by their decisions)
and understand their interests and expectations.
This includes internal stakeholders (employees, shareholders) and external stakeholders
(customers, communities).
Stakeholder analysis involves considering how decisions impact each group and requires
"moral imagination" to put oneself in their shoes.

2. Ethical decision-making process:

A five-step process is recommended for ethical decision-making:

Step 1: Identify stakeholders and their potential impacts.
Step 2: Judge the decision's ethical implications, considering fundamental rights and
principles.
Step 3: Establish moral intent, prioritizing ethical concerns over solely economic ones.
Step 4: Implement the decision ethically.
Step 5: Audit the decision to ensure adherence to ethical principles and identify areas for
improvement.
3. Importance of ethical principles and considerations:

Businesses should base decisions not only on profitability but also on ethical principles
outlined in codes of ethics and societal values.
Moral principles like respecting fundamental rights and avoiding harm should guide
decisionmaking.
Top management has a crucial role in setting the tone and prioritizing ethical behavior.

• (4) institute Ethics Officers in the organization

Ethics officers have a wide range of responsibilities, including:

1. Assessing ethical risks and program needs.
2. Developing and distributing a code of ethics.
3. Conducting ethics training for employees.
4. Managing a confidential service for employee inquiries about ethical issues.
5. Ensuring compliance with laws and regulations.
6. Monitoring and auditing ethical conduct.
7. Taking action on potential ethical violations.
8. Reviewing and updating the code of ethics.

• (5) develop Moral Courage

• (6) make Corporate Social Responsibility a cornerstone of enterprise policy
• (7) pursue strategies that are sustainable.