Business Ethics Exam
Virtue ethics
Consider moral character Ethical dilemmas are too idiosyncratic for universal laws/rules - we evaluate people's 'character' through observing habitual behaviour - "An action will be morally right if the person exercises, exhibits or develops a morally virtuous character"
Postmodern ethics
Consider moral impulse Rationality denies our source of morality: • suppression of moral autonomy • instrumental morality • distancing • denial of moral status Thus, individuals should determine morality by looking toward their emotional 'moral impulse' toward others • listen to, follow emotions and 'gut feelings' • question everyday practices, rules, authority, maxims (shareholder max.) Postmodern business ethics emphasises: • no separation between private and professional/business roles • looks to examples rather than principles as context negates universalism
Kantian ethics/ethics of duty
Consider motivations It is moral only if the person possesses goodwill - "persons should make the right decisions for the right reasons" • Should act out of duty: when we respect the moral law o Categorical imperative: act only on maxims you could will to be a universal law (Kant's improvement on Golden Rule) Is it ethical to adopt a CSR strategy because it will increase profits?
Utilitarianism
Consider social consequences Purpose of morality is to promote human welfare by minimizing harm and maximizing benefits - moral worth is determined by consequences • Greatest happiness principle - "an action is 'right or good' if it produces the greatest good for the greatest number of people" • Utility: pleasure, happiness, pluralistic o Act utilitarianism - greatest good only for specific dilemma o Rule utilitarianism - establish universal rule for all similar dilemmas
Legal construction of business ethics - Australian law
Corporations act - directors have a duty to act in the best interests of the company - shareholder primacy principle - must act in the best interests of the shareholders over all other
Legal construction of BE - corporations and the law
Corporations are a separate legal entity - artificial person status - own priveliges and liabilities distinct from those of members
Theoretical mediating factors for BE BC
Cost and risk reduction - engaging in certain CSR activities will reduce costs and risks, demands of stakeholders present potential threats Gaining competitive advantage - differentiation trategy, stakeholder demands are seen as opportunities and not threats Developing reputation and legitimacy - sanction the firm to operate in society Seeking win-win outcomes through synergistic value creation - exploiting opportunities by reconciling differing stakeholder demands
Pragmatism
Crane and Matten argue that for the practical purpose of making effective decisions in business: • no one theory or one approach is the best or true view of a moral dilemma • all of these theoretical approaches provide some insight on the same problem (pluralism) o complementary rather than mutually exclusive o each in its own context o there is still a place for traditional theories
4 Ps of marketing - marketing comms
Deception Misleading claims Intrusiveness Promotion of materialism Creation of artificial wants Perpetuating dissatisfaction Reinforcing stereotypes Rights involved: Right to honest and fair communications Right to privacy
Rationalisation tactics
Denial of responsibility - no other choice Denial of injury - no one was harmed Denial of victim - they deserved it Social weighting - condemn the condemner, selective social comparison Appeal to higher loyalties - for a higher-order value Metaphor of the ledger - accrued credits in their jobs
Individual factors - national and cultural characteristics
Differences in ethical beliefs including business issues e.g. cultural values, religion
Directors duties
Directors have a fiduciary duty to proactively and critically evaluate the material financial risks (and opportunities) to their corporation (fund) associated with climate change. And maybe other CSR issues? Corporations act s181: directors have a duty to act in the best interests of the company, prohibited from improperly using their position to gain an advantage for themselves or someone else or to cause detriment to the corporation Trust/loyalty plus competence
4 Ps of marketing - pricing
Excessive pricing Price fixing Predatory pricing Deceptive pricing Rights involved: Right to fair prices
Stakeholder approach BE BC
FIrms are dependent upon all stakeholders for critical resources, stakeholders rewarding and penalising behaviours are triggered by issues, trusting relationships can provide better information and a buffer against negative action --> competitive advantage
Power and vulnerability
Free will: does the consumer have the free will to make an informed choice to say yes or no • Free will resides in the consumer's ability to use their cognitive filter to assess the marketer's message
Conclusion to shareholder view
Friedman says "to make as much money as possible while conforming to the basic rules of the society, both those embedded in law and those embodied in ethical custom" • However: ethical custom has changed, and there is evidence to say CSR can be profitable • "In the present climate of opinion..., [CSR] is one way for a corporation to generate goodwill as a by-product of expenditures that are entirely justified in its own self-interest." (Friedman, 2006, Reason magazine) today's CSR is 'neo-Friedmanite' CSR currently winning battle of ideas, partially due to: • ethical reasons: society now has greater expectations regarding business' social and environmental performance; and • business reasons: business has a new understanding that CSR is consistent with best management practices of profit-maximisation
Extended view of corporate citizenship
Helps explain new expectations and criticisms of business Business has entered realm formerly occupied by government (due to privatisation and globalisation), comes with new expectations, criticisms and responsibilities
Shareholder view
Milton Friedman - "the social responsibility of business is to increase its profits
Vulnerability - mood
Mood relatively long lasting emotional state Life transitions periods of identity confusion and emotional vulnerability (e.g., grief, divorce) Motivation ability to resist ordinary temptations and enticements Practical capacity momentary capacity to absorb and digest marketing
Individual factors - psychological factors
Moral development (Kohlberg's Rights Stages From ego-centred to principle centred Managers generally are reward seeking, self interested (ego-centred), to social groups/conformity (group centred)
Individual factors - personal values
Moral foundations theory: care/harm, fairness/cheating, liberty/oppression, loyalty/betrayal, authority/subversion, sanctity/degradation
Situational factors - issue related factors
Moral intensity - magnitude of consequences, concentration and probability of effect, proximity etc. Moral framing - use of moral language, moral muteness etc.
Situational factors - work context-related factors
Most changeable and main factors in organisational ethics Systems of reward and punishment, authority, bureaucracy (suppression of moral autonomy, distancing), work roles, groupthink, functional boundaries (creating silo-ing
Degrowth maths
Need to decarbonise by 8-10% - but more than 3-4% is incompatible with GDP growth - need de-growth
New imaginings of the corporate form
New corporate models are possible and being developed • Looking backward: o Alternative market management - regulations o Alternative ownership models - govt/public, family, cooperatives Social enterprise: An umbrella term for any form of organisation that innovates or trades for a social purpose Hybrid legal structures: • support increasing in Aust • Looking forward: o Alternative 'soft' market regulations - Fairtrade o Alternative mission model - social enterprise
The business case for CSR
On average, there is a business case for CSR, but it might be stronger of weaker for individual firms and industries, depending on mediating factors CSR should be regarded as indeterminate or long-term investment similar to advertising or R&D - assumed but unsure benefits Nevertheless, CSR strategy is optimal for navigating complex economic and ethical market constraints Limits on it mean: we cannot depend on all organisations to do the right thing for their own good (in contrast to conclusion of govt. inquiries) CSR movement may help, but won't solve the more serious issues
Testing the business case
On average, there is a case for CSR according to academic research - but some firms that do bad, do even 'better' - vice fund
Situational factors definition
Particular features of the context that influence whether the individual will make an ethical or unethical decision
CSR is pro-business rebuttal
Partly true, but there are some good firms that are in the process of improving - UN study CSR is a pragmatic attempt to reduce harms within a system of dominant corporate power and business ideology - radical flank effect needs CSR consultants and WWF's Theory of Change
Persuasion vs. manipulation
Persuasion: to induce (someone) to do something through reasoning or argument (Oxford dictionary online). Manipulation: when one is trying to "control or influence (a person or situation) cleverly or unscrupulously" and "...alter or present (data) so as to mislead" (Oxford dictionary online). Psychological manipulation extends to influencing someone with the aim of changing their perception or behaviour through underhanded, deceptive, or even abusive tactics. • Is it manipulation when: Marketers use MRI machines or ZMET (Zaltman Metaphor Elicitation Technique) to understand your deep motivations and design more effective marketing programs? • Facebook targets 'insecure' young people
Vulnerability - individual characteristics
Physical development weakness that increases safety concerns (e.g., small, immature) Psychological development maturity, emotional resilience and self esteem. Also, understanding of personal process of preference and desire Cognitive ability ability to process information Practical knowledge experience and understanding of value in the focal product category
4 Ps of marketing - product policy
Product safety Fitness for purpose Rights involved: Right to safe and efficacious products
Business case for environmental responsibility
• operational, cost improvements - Walmart cutting miles from delivery routes of trucks - saved $$$ • anticipating and influencing climate change regulations • accessing new sources of capital • improving risk management • elevating corporate reputation • identifying new market opportunities • enhancing human resource mgmt
Limits of traditional theories
• too abstract - don't help managers • too reductionist - focus on one aspect of morality • too objective and elitist - only specialists can determine ethics • too impersonal - don't consider feelings and relationships • too rational and codified - suppress moral autonomy and emotions
Why don't we accept the science - us
What is the next thing you plan to buy? Which statement do you most identify with? "I am a citizen" or "I am a consumer"? Marketing plays 2 roles in climate change: 1. it causes the crisis by encouraging rampant, limitless consumption 2. it distracts us from the fact that we have a planetary emergency
Moral imagination
"a sense of the variety of possibilities and moral consequences of their decisions, and the ability to imagine a wide range of possible issues, consequences and solutions" - requires disengagement and critical evaluation of the situation and the dominant operative mental models
Feminist ethics limitations
(1) Caring burnout - although 3rd level of Gilligan's phases includes balancing care for others with care of self (2) Nepotism (unjust favouritism) - those we are not in a relationship with (future generations) (3) 'Helicopter' caring
Rights limitations
(1) Conflicting/overlapping rights (e.g. obese on planes) requires hierarchy of rights (2) Western individualistic viewpoint
Utilitarianism limitations
(1) Difficult to measure some human and social costs (abstract costs - a life, unknowable future events) (2) Majority may disregard rights of minority - means of achieving ends - atrocities can be made moral (torture)
Virtue limitations
(1) Does not explicitly guide actions in ethical dilemmas (2) Competing virtues
3 ways of complexity in business case
(1) Dual paths - increasing passive CSR is more rewarding than increasing active CSR - avoid bad rather than do good (2) Different CSR activities and levels of investment - enviro programs have higher payoff than social, strategic firm level is better than tactical (3) stakeholders make decisions on the whole marketing strategy, relative to competitors CSR and marketing strategies
Kantian ethics limitations
(1) Motivations - undervalues outcomes (2) Determining motivations - Makes acting on sympathy/compassion immoral, Which motivation is paramount in win: win scenarios? Is looking after yourself as well as others immoral?
Justice limitations
1) difficult to measure benefits and costs (as with Utilitarianism) (2) lack of agreement on fair shares (e.g., needs, abilities, contributions, etc.) (3) competing forms of justice
Postmodern limitations
1. lack of prescription 2. subjectivity biases emotional reactions - 'gut feelings' can be wrong, and we invent rationalisations or grab on to half-baked ideas and non-generalizable anecdotes to prove we're right 3. bureaucratic rules are often focused on protection, stopping unethical behaviour (e.g., bribery, nepotism, conflict of interest) 4. rules may support/guide individuals; they still leave room for interpretation
Climate change
Already warmed 1.07 degrees 4 degrees is where we are headed 1-5 - 2 degrees - target limits agreed Carbon bubble - stranded assets causing GFC Will cost money - 2.5tn off financial assets Climate injustice - will affect those most vulnerable/poor
Regulatory environment
Australian Consumer Law - ACCC between marketer power (industry assoc.) and consumer power (CHOICE Australian consumers assoc., media, blogs, reviews)
Business reasons for SR
B/c it will maximise profits Based on reality of stakeholder theory • there are opportunities/ rewards for being sustainable/SR • there are risks/ penalties for not
Political reasons for SR
B/c it will protect the systems that firms and people rely on to thrive Based on sustainability and systemic understanding • firms rely on a healthy economy, society and natural environment
Ethical reasons for SR
B/c it's the right thing to do Based on ethical theories of right conduct • firms should do no harm • they should use their power and resources responsibly
Critical view of corporate power
Business is oftentimes more powerful than government, whether through resource relativity, ideological co-optation, individual rent-seeking in public and behind closed doors has led to imbalanced aggregate societal outcomes with unsustainable consequences business > state > individual
Traditional view of corporate citizenship
Business is viewed as an extension of the self, and state has political legitimacy
Individual factors - education and employment
Business students more egoistic, lower moral development - business education reinforces myth of business as amoral
Arguments for businesses having social responsibilities
Business, ethical and political reasons
4 Ps of marketing - distribution
Buyer-seller relationships Gifts and bribes Slotting fees Rights involved: Right to engage in markets Right to make a free choice
Stakeholder perspective
CSR can be defined by the expectations and evaluations of the organisation's stakeholders
ISO26000
Comprehensive, stakeholder-based account 'Social Responsibility' is the responsibility of an organisation for the impacts of its decisions and activities on society and the environment, through transparent and ethical behaviour. Standards that provide guidance on how businesses can act in a socially responsible way
Feminist ethics/ethics of care
Consider caring and relationships Critiques traditional theories as rational, impartial, equal: • context of power relationships (e.g. vulnerable consumers) • impartiality does not respect the individual's needs, abilities • feelings, beliefs, attitudes of those involved are important Thus, we have an obligation to exercise special care toward those with whom we have valuable and close relationships, particularly relations of dependence • encourage character traits valued in interpersonal and community relationships
Rights theory
Consider entitlements of others Using other people for your own purposes is unethical if you deny them their goals and purposes - "individuals should be treated as valuable ends in themselves just because they are human beings" • Positive rights - obligation to others (e.g., wellbeing) • Negative rights - don't interfere with others (e.g., freedom)
Justice theory
Consider fairness In comparison to utilitarianism, justice asks who pays the costs and who receives the benefits? • benefits and costs should be distributed 'equitably', according to accepted needs, abilities, efforts and contributions
Why dont we accept the climate science? (DIscount)
o People discount global threats for several reasons (Richard Eckersley, 2013): human bias towards optimism - she'll be right, we've overcome problems like this before perceived uncertainty - there is a history of failed predictions of global collapse, and experts disagree system justification - a tendency to believe in and justify the way things are, and to not want to change the familiar status quo
Why don't we accept the science? politicisation
o Politicisation - deniers are conservatives - belief is an identity issue
other situational factors
organisational norms and culture group norms prescribing acceptable behaviour - businesses set up to nurture committment to shared goals
Optimal self-interest
motivation of self-interest increases performance, but when it crosses a threshold and becomes excessive greed it focuses upon short term gain and encourages too much risk-taking
Why don't we accept the science? emotional
o Emotional issue the constraints of human psychology - it's scary scepticism suggests there might be a way out
Moral courage
principled, danger, endurance, risk loss of prosperity
Arguments against CSR and rebuttals
Property rights the manager is the agent of the owners of the business (fiduciary duty) managers use CSR for their own 'pet projects' misrepresentation others also contribute property and effort Utilitarianism corporations contribute best to society when they do what they do best unjust who receives the benefits and who pays the costs Government's responsibility / Manager's social role social issues and problems are the proper province of the state taxing and spending while not elected, no mandate, no expertise undermined & irrelevant responsibility to support govt's social initiatives, pay full taxes in globalised world, govts are often incapable Puts manager's job at risk CSR is a cost - customers and employees will go elsewhere misunderstands instrumental benefits doing 'good' leads to doing 'well'; CSR certainly doesn't cost
Ethical decision-making process
Recognise moral issue --> make moral judgement --> establish moral intent --> engage in moral behaviour
Consumer rights and responsibilities
Right - Marketer responsibility - Consumer responsibility Right to safety Do not cause harm Don't use product in a manner it was not designed for Right to be informed Provide truthful information Recognise ads are meant to persuade Right to choose Provide value offerings Shop around for quality and price Right to be heard Provide complaint procedures Complain when necessary (and reasonably) Right to privacy Respect and protect personal information Be careful about who you give personal info to
Why is it now in firms self interest to be socially responsible
Self-regulation: In the past business has been getting away with 'externalising' social and enviro costs with the understanding that this provides net benefits however awareness of externalities has increased, this argument of net benefits is less accepted Enlightened self-interest: now in firms' best interests to avoid harms, identify opportunities and protect the systems they need
Stakeholders mediating role - BE BC
Stakeholders establish EXPECTATIONS of org performance, EXPERIENCE effects of org performance, EVALUATE effects, ACT upon evaluations e.g. shareholders can buy/sell shares, customers can boycott, civil society - shaming campaigns - media also
Why don't we accept the science? vested interests
Successful PR campaign suggesting scientists' self-interest - absurd claim given academic context, lobbying by oil, coal and aluminium industries
Legal construction of business ethics
THe invisible friend - limited liability - investors are legally immune from harm and criminal acts committed in the pursuit of profits managers not personally responsible - unless actions are not in corp interest corporation - law holds corporations criminally responsible, but it is difficult to prove, and punishment is constrained
Marketing strategy ethical problems and rights involved
Targeting vulnerable consumers Consumer exclusion Right to be free from discrimination Right to basic freedoms and amenities
Broader issues of CSR
Tension is caused by two main CSR views: narrow CSR and broad CSR
Creating shared value and 3 key ways
The competitiveness of a company and the health of the communities around it are mutually dependent 3 key ways business engages with society 1. Responsible business - do no harm to society and the company 2. Shared value - social problems can be solved with a business approach 3. Community investment - business needs sustainable societies to thrive - give back and strengthen societal foundations
Defining CSR intro
There is no signle accepted definition of CSR, however ISO26000, CSV and extended view of corporate citizenship can be used
Ethical decision-making model
Understanding the individual and situational factors can help firms identify and fix weaknesses that could have resulted in ethical misconduct and firm crisis
Individual factors definition
Unique characteristics of the individual making the relevant decision
Individual factors - personal integrity
adherence to principles regardless of inducements
Broad CSR
broader social role is an investment in the long-term viability of the firm, both: - directly (via employee productivity and brand risk management) - indirectly (health of society and environment the firm depends on) even when research is unable to quantify ROI
Critical views - CSR is pro-business
business will only be socially responsible if it also pays - win-win CSR favours interest of business over legitimate concerns, demands and expectations of wider society CSR and stakeholder theory hide the power relation between dominant corporations and dominated communities and citizens - have to paint social and env. welfare in their language in the hope that it will be accepted
egoism and economics
economics assume humans are carefully calculating maximisers of their personal benefit
Strategic perspective
ethical arguments may arrive from any perspective when critiquing organisational performance → managers need to be aware
the market needs rules and morals
evidence from neuroscience, social science, biology, law and philosophy - modern market exchange works only because most people, most of the time, act virtuously formal institutions - laws prohibiting and enforcing informal institutions - dont do unethical things because constrained by notions of fairness, conventions, customs, rules and norms
egoism
individuals should act exclusively in their own self-interest psychological egoism - we are self-interested ethical egoism - we should be self-interested
Actions: mitigation and adaptation
mitigation: how can we stop it getting worse adaptation: it will get worse, so how can we adapt? carbon price through emissions scheme best way to make change "tragedy of the commons" - collective action problem anglo individualisation and promotion of self-interest not helping for finding solutions
aus govt. enquiries
question: should the law of directors duties be changed to require directors to take into account the interests of stakeholders other than shareholders when making corporate decisions? conclusion: no change • The business case for CSR is "beyond debate" o → managerial issue - govt should not legislate good management "You don't need to legislate to make people do things that are in their own self-interest" o Rebuttal: naïve - crime sometimes pays: limits of the business case → confusing legislating for CSR and against CSiR at the very least, directors/managers should not maximise shareholder returns at the 'unreasonable' expense of other stakeholders • Does the current legislation constrain business adoption of CSR? o "No" - sect. 181 allows instrumental consideration of other stakeholders Rebuttal: also allows unethical behaviour... if it pays • Problem of accountability o if managing for all stakeholders, how do you tell if mngr is doing a good job? o could be counterproductive → less accountable to shareholders and no more accountable to other stakeholders Rebuttal: good point, but they are currently unaccountable to stakeholders o managing for all stakeholders impossibly complex - defining, prioritising o Rebuttal: they are the best paid members of society; ideological argument • Don't want to burden courts with new source of conflict o Rebuttal: judiciary is 'burdened' by assessing reasonableness in other cases • Legislation should be targeted at "the mischief in question" o Rebuttal: good, do it; however, changing DNA of firms may be more effective and efficient
Conclusion - is greed good? what is the ethical position of egoism
self-interest motivates production, but too much greed motivates unethical behaviours arguments and evidence critiquing assumption of psychological egoism in academia (esp. economics
Narrow CSR
strictly adhering to those SRs that can be shown to directly impact profitability (neo-friedmanite view)
Why does business commit so many wrongs
systemic - structured criminogenic nature lack of accountability
groupthink
tendency for cohesive groups to avoid a realistic appraisal of alternative courses of action in favour of unanimity, prevents groups from challenging
Why don't we accept the science? role of the media
treat climate change science as a political issue in which two sides should be given an equal voice
against psychological egosim
ultimatum game - sense of fairness will override opportunism evolutionary science - humans rule because they are the only animals that can cooperate in large numbers evidence that people often act in own self-interest - but variable - NEEDS TO BE INTEGRATED INTO MODELS AND THEORIES
egoism limitations
widely regarded as amoral to not consider others intention of ethics is to encourage the good variability within and between individuals - cannot predict interest - so how to respond
Sustainable business: megatrends
• 1. Methane: getting to the meat • Food that looks and tastes just as good as meat or dairy products but is made from plants has attracted heavy investment, including Bill Gates, Eric Schmidt (Google), the US's biggest meat processor, Tyson, Danone, Nestlé and the Chinese Govt • 2. Renewable energy: time to shine Production costs for solar panels and wind turbines have plunged: solar by 90% in the past decade. In many parts of the world they are already the cheapest electricity available: two-thirds of all new power in 2016 was renewable. 3. King Coal is dead • 4. Electric cars: in the fast lane • China is selling as many electric cars every month as Europe and the US combined, with many from home-grown companies such as BYD. As well as Tesla, virtually all major carmakers have committed to an electric future. Jaguar and Range-Rover announced they will cease production of all fossil-fuelled cars within three years. • 5. Batteries: lots in store • Prices for lithium-ion batteries are down 75% over the past six years with expected further falls of 50-66% by 2030 and a massive increase in battery storage.
Consumer vulnerability
• Class-based vulnerability o less able to understand persuasive process market illiterates, children, elderly but, they are not always vulnerable • State-based vulnerability o recognises individual and situational variability, such as: cognitive ability to evaluate claims understanding of personal process of preference and desire practical experience to evaluate claims practical capacity to evaluate claims o but, impractical to expect business to evaluate each consumer's ability
Persuasion game
• Consumer power o technology assists consumers reclaim power o consumers become more cognitively aware of advertisers techniques of persuasion • Advertisers response o competitive advertisers don't accept this new paradigm without a fight, seeking to devise new methods to make consumers vulnerable o they are like athletes and support teams who, when officials devise new methods to catch drug cheats, find new ways to gain an advantage o Stealth marketing - aims to influence us in ways that we are not aware of, and thus we can't choose to resist even if we wanted to
Free, prior and informed consent
• Rights are not impinged when consent is free, prior and informed • Ethical market exchange is conditional upon: Is consent truly free? • is it voluntary? • are there alternatives? • anxiety and stress in some situations • price-fixing, monopolies, etc. • targeted and vulnerable consumers Is it 'informed'? • lack of information • deception • complicated information Are people truly benefiting? • is it unsafe? • is problem 'contrived' and exaggerated by seller? • will short-term benefits really increase happiness?
Why aren't we acting? Context
• Scientific consensus - IPCC - Intergovernmental Panel on Climate Change (est. 1988) - a scientific intergovernmental body tasked by the UN with evaluating the risk of climate change caused by human activity o 97.5% of climatologists who actively publish research on climate change responded 'yes'. o As the level of active research and specialisation in climate science increases, so does agreement that humans are significantly changing global temperatures.
Roadmap for natural capitalism
• Stage 1 - Increase productivity of natural resources, dramatically! o whole system design, industrial ecology o adopt innovative technology • Stage 2 - Redesign production biologically o closed loop manufacturing, circular economy o cradle-to-cradle, zero waste • Stage 3 - Change the business model o from producing and selling things to providing solutions and leasing services o the sharing economy • Stage 4 - Reinvest in natural capital o restore and sustain ecosystems
