An introduction to Business

Ethics
CIM 2009
Dr. Alessia Contu
IROB-WBS
alessia.contu@wbs.ac.uk

Aims and content of the lecture

What is business ethics
The arguments against/for business ethics
Two different approaches to ethics:
consequentialists and normative theorie

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Business Ethics
Definitions:
Business Ethics is the discipline devoted to develop
scholarly studies and promote corporate social responsibility
Ethics is the field of knowledge concerned with morality and
moral conduct
Specifically, ethics regards:
What it means to be a good person
What it means to lead a good life by doing the right thing
towards ourselves and others

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Why has business ethics become significant in the

last decade or so?
Historical context:
Globalization and growing power of corporations
Corporate scandals
Environmental decline
Increase gap between rich and poor nations
Political context:
Demands for corporations to take responsibility of the total
impact they have (economic, social and environmental)
Growing importance of discourse of sustainability against
profit as the only measure of good performance
Broad acceptance of the human role in environmental
decline: climate change

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Cases Against Business Ethics &CSR

Milton Friedman (1970) The New York Times Magazine
The social responsibility of business is to increase its profit
"there is one and only one social responsibility of business - to use
it resources and engage in activities designed to increase its
profits so long as it stays within the rules of the game, which is
to say, engages in open and free competition without deception
or fraud
How can modern for profit organisations driven by the logic of
accumulation engage in ethical practices? Their structures are
undemocratic and geared towards economic interest achieved
through efficiency and effectiveness; executives are not
prepared for dealing with ethical issues of public interest. These
should be left to elected representatives
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The ethical cases for CSR&BE

Mintzberg, 1983
Only a conceptual ostrich with is head deeply buried in
economic theory, could possibly use the distinction
between economic and social goals to dismiss social
responsibility
Strategic decisions of large organizations inevitably involve
social as well as economic consequences. They are
inextricably intertwined. Hence, they have responsibility
towards society and public interest

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The sustainability case for BE & CSR

Brundtland Commission of the United

Nations i.e. UN - World Commission on
Environment and Development, 1983
sustainable development is development
that meets the needs of the present
without compromising the ability of future
generations to meet their own needs.
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Areas of actions
Customers:
marketing,
exclusion,
information
Community

Workers Rights,
Work/Life Balance,
Working Conditions,
Type of work
Compensation
Participation

Corporate
Governance:
remuneration,
insider trading
Suppliers
Competitors
monopoly,
spying

Civil Society Orgs

Governments
Corporate
Citizenship
Activism
Accountability
Collaboration/regul
ation/charity
Lobbying

TRIPLE BOTTOM LINE

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Some other cases for BE & CSR

The economic argument: Business Case for
Business Ethics
The growing consumer power and brand power.
CSR makes economic sense for the business.
The political argument: if we do nothing then
regulation will be introduced thwarting
competition and freedom of business to
pursue their agendas

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Until very recently, the argument was that

business is already the biggest force for
good society has ever known, generating
the prosperity on which everything else
depends. But in a changed world, will that
be enough? What should the good
company do?
Financial Times, January 17 2009

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Responsibility
Of Business

The Pyramid of CSR, Archie Carrolls Model

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Develop a stakeholder approach to

business practices
The Stakeholder Theory: a business has many
different actors/agencies which have a stake
in its failure and success. So, they all need to
be respected and considered.
Edward Freeman, 1984
A stake holder is any group or individual who can
affect or is affected by the achievements of a
corporations purpose
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Corporate Social Responsibility

CSR is a set of ideas and practices designed to indicate the
duty of care a business has towards its stakeholders.
In theory:
The business is responsible for the type and quality of
relations within the business but also with suppliers,
customers and the wider community etc.
The business is responsible for the effects and impact
that its operations, activities, products and services
have to the wider society and the environment

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CSR in practice:
Offices and divisions and management devoted to CSR
Creating and implementing ethical policies and guidelines
Engaging in auditing and reporting of ethical practices
Getting involved and/or create CSR programmes
inside/outside the company
Joining good causes: environmental, cultural, ending
poverty, etc.
Let everyone know the company is doing it.
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See an example at:

http://www.bp.com/home.do?categoryId=1

But plenty of controversies.

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These measures are important but questions

remain:
Window-dressing
White-washing
Cosmetic changes

Issues with internal or industry code of conduct

Self-regulation not enough
Accountability is limited : levels, systems, actors
involved are self-serving
Widespread movement questioning global
corporate power: alter or anti-globalisation
movement
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Attempts to create systems of effective

accountability:
Clearer laws and regulations
League tables
Institutions regulating corporations
and groups monitoring and evaluating actual
corporate behaviour (see corpwatch.org)
Campaigns and direct engagement and
dialogue with corporations
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To Recap

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Ethical Issues and Responsibility in

Business

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How do we know how to do the right thing?

How do we evaluate ethical behaviour?
Deontology and
Kantian ethics

Consequentialist
Theories :
Utilitarianism
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Two key theories for ethical behaviour:

Consequentialists theories:

Utilitarianism
Utilitarianism judges the moral worth of actions by the
utility (excess of benefit over costs) of their
foreseeable consequences for each and every
person affected by a certain set of actions
Velasquez, 1992

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Utilitarianism
To behave ethically one needs to:
Evaluate the consequences of an act or course of actions
Appeal to actual experiences, and do a cost/benefit analysis.
Choose what is best for increasing the total sum of utility/happiness
for all those involved.

Issues with utilitarianism:

Who decides what is the benefit and the cost and their value?
Who decides the alternatives?
What counts a consequence?
How do we make sure we know all the consequences?

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Normative Ethics
To behave ethically one needs to:
Act in conformity with the fundamental rules that regulate
moral conduct.
These are to be followed at any time and situation, regardless
of the consequences. One should disregard personal feelings,
needs or circumstances
What counts is the duty of doing the right thing
Deontology: deon (duty) + logos (study of)
How do we find the Golden Rule?

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Kants categorical imperative:

This is the principle of reason by which the necessity of
moral behaviour is established.
As all human beings are rational they have access to
the categorical imperative guiding moral conduct
In short:
Think of your actions as if they were universal
This means others will do the same to you! Therefore,
do not do to others what you would not like others to do
to you.
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Specifically two of Kants imperatives:

Treat others as ends in themselves not as means to your ends!
Treat them with dignity as they are capable of using reason and,
therefore, they engage in ethical conduct just as you do
For example:
Bribing or spying, delaying payments etc. are all behaviours to be
avoided unless you wish these actions to become the norm;
Victimizing, exploiting others naivety or lack of information are also
immoral conducts

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Ambiguities & contradictions

Business ethics has:
A pro-business agenda
A free-market agenda
A belief in the compatibility of profit and ethics
Staying alert & consider:
The decaf responsibility
Problems associated with the very foundation of the capitalist system:
the logic of pursuing profit
The responsibility of actions is ultimately of each individual taking
decisions in conditions of ambiguity and uncertainty
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Summary & Conclusions

Different arguments for and against CSR & Business
Ethics
Different approaches to understanding what is the
right thing to do
Questions on how to live a good life not only a
profitable life.
The importance of political aspects in ethical issues

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