Business ethics

Stakeholders

- those groups who share or have any interest in a given business enterprise. STAKEHOLDERS: • are persons, groups or institutions with interests in a project or policy or who may be directly or indirectly affected by the process or the outcome • anyone with an interest, a "stake" • impacted by and impacting KEY STAKEHOLDERS: • are those who can significantly influence, or are important to the success of the project

Six principles of business ethics

1. Comply with a written code of business conduct. 2. Provide sufficient training to all personnel within their organization regarding personal responsibility under the code. 3. Encourage internal reporting of violations of the code with the promise of no retaliation for such reporting. 4. Self-govern their activities by implementing controls to monitor compliance with all applicable laws and regulations. 5. Share their best practices. 6. Be accountable to the public.

Board of Directors

A group of individuals who oversee governance of an organization. Elected by vote of the shareholders at the annual general meeting (AGM), the true power of the board can vary from institution to institution from a powerful unit that closely monitors the management of the organization to a body that merely rubber-stamps the decisions of the chief executive officer (CEO) and executive team.

Transparency

A characteristic of an organization that maintains open and honest communications with all stakeholders.

Organizational Integrity

A characteristic of publicly committing to the highest professional standards and sticking to that commitment.

Intranet

A company's internal Web site, containing information for employee access only.

Code of Ethics

A company's written standards of ethical behavior that are designed to guide managers and employees in making the decisions and choices they face every day.

Virtue ethics

A concept of living your life according to a commitment to the achievement of a clear ideal— what sort of person would I like to become, and how do I go about becoming that person?

Nonconsequentialist theories - duty based ethics

}Arguments in support: } Immediate sense of right and wrong } Humans had moral ideas before the existence of philosophers } Reasoning in morals is only used to confirm our intuitions }Arguments against: } Intuitions are wild guesses } No proof that we have innate moral sense } Intuitions can't be critiqued

Defining business ethics

• Business ethics is the application of ethical standards to business behaviour. • One can distinguish two perspectives: • a descriptive summation of the customs, attitudes, and rules that are observed within a business. (it is documenting what is happening) • a normative (or prescriptive) evaluation of the degree to which the observed custom, attitudes, and rules can be said to be ethical (it is recommended what should be happening).

Anti-theory Approach

• Cases have their own voices. • This gives us a very crucial criterion for evaluating moral theories. • A moral theory is accepted if it can make sense of and be compatible with our various intuitively appealing beliefs and ideas or firmly held judgments about morality. • Anti-theory approach (moral particularism): • No theory can meet the above criterion. • Moral precepts are only rules of thumbs with lots of loopholes and exceptions. There is no theory in ethics but only approaches. • Something like the case law approach should be adopted.

Code of ethics

• Codes of ethics (sometimes calls as - Codes of ethical conduct) are voluntary statements that commit organisations, industries, or professions to specific beliefs, values and actions and/or set out appropriate ethical behaviour for employees. • Code of ethics is a guide of principles designed to help professionals conduct business honestly and with integrity.

Cognitivism

• Cognitivism is used by philosophers to define the view that there are actual and objective moral truths and absolutes (i.e. we can make firm statements one way or another about whether something is good or bad, right or wrong). • According to this approach moral judgements are capable of being objectively true, because they describe some feature of the world. • e.g.: ethical naturalism which assume that ethical statements are truth-apt propositions, e.g. The Ten Commandments.

Consequentialism

• Consequentialism is based on two principles: 1. Whether an act is right or wrong depends only on the results of that act. 2. The more good consequences an act produces, the better or more right that act. • It gives us this guidance when faced with a moral dilemma: • A person should choose the action that maximises good consequences. • It gives this general guidance on how to live: • People should live so as to maximise good consequences.

Consequentialist theories - result based ethics

• Consequentialist theories focus on the result or consequences of behaviour. • It is also known as teleological approach deriving from the Greek words telos (end) and logos (the study of). • Hence the teleology is the study of ends. • Utilitarianism is the best known consequentialist theory. • Consequentialists hold that choices — acts and/or intentions — are to be morally assessed solely by the states of affairs they bring about. • Consequentialists thus must specify initially the states of affairs that are intrinsically valuable — often called, collectively, "the Good".

Deontological philosophy - non- consequential theories

• Decision making process is based on universal principles, such as: • honesty • integrity • promise keeping • fidelity • fairness • caringothers • respect for others

The appeal of duty-based ethics

• Duty based ethics has a fundamental appeal. • This is, after all, how we tend to teach our children: lying is wrong, stealing is wrong, hurting other people is wrong, so don't do these things. • However, living life by strict adherence to this philosophy, whether your personal life or your workplace choices or both, can be quite challenging. • If your moral rule is Don't lie because lying is wrong, and if doing the right thing means always telling the truth, then a little 'white lie' is never acceptable, no matter how convenient it may be. • Do the right thing. • Do it because it's the right thing to do. • Don't do wrong things. • Avoid them because they are wrong.

Duty based ethics and results based ethics

• Duty-based ethics are based on the idea that a behaviour is right because of the feeling of responsibility to do the right thing, no matter what the cost -- doing the right thing because it is the "right thing to do". • Results-based ethics are based on the belief that a behaviour should be executed based upon the consequences of the act. For example, an act that produces more harm than good should be avoided, even if it is considered "the right thing to do".

Global Code of Conduct

A general standard of business practice that can be applied equally to all countries over and above their local customs and social norms.

Intrinsic Value

The quality by which a value is a good thing in itself and is pursued for its own sake, whether anything comes from that pursuit or not.

Thin Consent

Consent in which the employee has little choice. For example, when an employee receives formal notification that the company will be monitoring all e-mail and Web activity—either at the time of hire or during employment—and it is made clear in that notification that his or her continued employment with the company will be dependent on the employee's agreement to abide by that monitoring.

Why ethics is needed?

• We can think of ethics as the principles that guide our behaviour toward making the best choices that contribute to the common good of all. • Ethics is what guides us to tell the truth, keep our promises, or help someone in need. • There is a framework of ethics underlying our lives on a daily basis, helping us make decisions that create positive impacts and steering us away from unjust outcomes. • Ethics guides us to make the world a better place through the choices we make. Case 4: Why ethics is important?

Cyberliability

A legal concept that employers can be held liable for the actions of their employees in their Internet communications to the same degree as if those employers had written those communications on company letterhead.

Vicarious Liability

A legal concept that means a party may be held responsible for injury or damage even when he or she was not actively involved in an incident.

Culture

A particular set of attitudes, beliefs, and practices that characterize a group of individuals.

Extranet

A private piece of a company's Internet network that is made available to customers and/or vendor partners on the basis of secured access by unique password.

Ethics Officer

A senior executive responsible for monitoring the ethical performance of the organization both internally and externally.

"Comply or Else"

A set of guidelines that require companies to abide by a set of operating standards or face stiff financial penalties.

Value system

A set of personal principles formalized into a code of behavior.

"Comply or Explain"

A set of guidelines that require companies to abide by a set of operating standards or explain why they choose not to.

Conflict of Interest

A situation in which one relationship or obligation places you in direct conflict with an existing relationship or obligation

ethical dilemma

A situation in which there is no obvious right or wrong decision, but rather a right or right answer.

society

A structured community of people bound together by similar traditions and customs.

UN Global Compact

A voluntary corporate citizenship initiative endorsing 10 key principles that focus on four key areas of concern: the environment, anticorruption, the welfare of workers around the world, and global human rights

CATEGORICAL IMPERATIVE

Act only on those maxims (or rules of action) that you could at the same time will to be a universal law.

Universal ethics

Actions that are taken out of duty and obligation to a purely moral ideal rather than based on the needs of the situation, since the universal principles are seen to apply to everyone, everywhere, all the time

Deontology

Approach to ethics that judges the morality of an action based on the action's adherence to rules. Described as duty or obligation, because rules 'binds you to your duty'

Thick Consent

Consent in which the employee has an alternative to unacceptable monitoring. For example, if jobs are plentiful and the employee would have no difficulty in finding another position, then the employee has a realistic alternative for avoiding an unacceptable policy.

Instrumental Value

The quality by which the pursuit of one value is a good way to reach another value. For example, money is valued for what it can buy rather than for itself.

The golden rule

Do unto others as you would have them do unto you

Sustainable Ethics

Ethical behavior that persists long after the latest public scandal or the latest management buzzword.

Utilitarianism

Ethical choices that offer the greatest good for the greatest number of people.

Levels of Business Ethics

Four different levels of business ethics have been identified based on what type of business and how their actions are evaluated: 1. The society level, which defines ethical behavior and assesses the effect of business on society. 2. The industry level, which suggests that different industries have their own set of ethical standards (e.g., chemical industry vs. pharmaceutical industry) 3. The company level, under which different companies have their own set of ethical standards 4. The individual manager level, at which each manager and other corporate participants are responsible for their own ethical behavior

Ethical Relativism

Gray area in which your ethical principles are defined by the traditions of your society, your personal opinions, and the circumstances of the present moment.

OECD Guidelines for Multinational Enterprises

Guidelines that promote principles and standards of behavior in the following areas: human rights, information disclosure, anticorruption, taxation, labor relations, environment, competition, and consumer protection; a governmental initiative endorsed by 30 members of the Organization for Economic Cooperation and Development and 9 nonmembers (Argentina, Brazil, Chile, Estonia, Israel, Latvia, Lithuania, Romania, and Slovenia).

Applied ethics

The study of how ethical theories are put into practice.

Steps in Analysing Stakeholders

Identify • Identify important stakeholders and their interests Assess • Assess the influence and importance of stakeholders in relation to the unethical behaviour Start • Start to identify risks from stakeholders Develop • Develop strategy for building participation and stakeholder commitment

Three Models of Management Ethics

Immoral Management-An approach devoid of ethical principles and active opposition to what is ethical Moral Management- Conforms to high standards of ethical behavior or professional standards of conduct Amoral Management- § Intentional: does not consider ethical factors § Unintentional: casual or careless about ethical factors

Definition - Morality

Morality (from the Latin moralitas means „manner, character, proper behaviour") has three principal meanings: 1.morality means a code of conduct held to be authoritative in matters of right and wrong, whether by society, philosophy, religion, or individual conscience. 2.in normative and universal sense, morality refers to an ideal code of conduct, one which would be espoused in preference to alternatives by all rational people, under specified conditions. 3.'Morality' is sometimes synonymous with ethics, the systematic philosophical study of the moral domain.

Corporate Governance

The system by which business corporations are directed and controlled.

Ethical Reasoning

Looking at the information available to us in resolving an ethical dilemma, and drawing conclusions based on that information in relation to our own ethical standards.

Organizational Culture

The values, beliefs, and norms that all the employees of that organization share.

Reactive Ethical Policies

Policies that result when organizations are driven by events and/or a fear of future events.

Proactive Ethical Policies

Policies that result when the company develops a clear sense of what it stands for as an ethical organization.

Telecommuting

The ability to work outside of your office (from your home or anywhere else) and log in to your company network (usually via a secure gateway such as a virtual private network, or VPN).

Corporate Social Responsibility (CSR)

The actions of an organization that are targeted toward achieving a social benefit over and above maximizing profits for its shareholders and meeting all its legal obligations. Also known as corporate citizenship and corporate conscience.

Oxymoron

The combination of two contradictory terms, such as "deafening silence" or "jumbo shrimp.

Ethics

The manner by which we try to live our lives according to a standard of "right" or "wrong" behavior—in both how we think and behave toward others and how we would like them to think and behave toward us.

Social contract approach

The perspective that a corporation has an obligation to society over and above the expectations of its shareholders.

Instrumental Approach

The perspective that the only obligation of a corporation is to maximize profits for its shareholders in providing goods and services that meet the needs of its customers.

Stakeholders' interests

stockholders- Growth in the value of company stock. Divided income. employees- Stable employment at a fair rate of pay. A safe and comfortable working environment. customers- Fair exchange. Safe and reliable products. suppliers- Prompt payment for delivered goods. Regular orders. retailers/wholesalers- Accurate deliveries of quality products on time and at a reasonable cost. government- Tax revenue. Operation with all relevant legislation. creditors- Principal and interest payments. Repayment of debt according to the agreed schedule. community-Employment of local residents. Economic growth. Protection of the local environment.

Challenges to Morality

• Egoism • Psychological egoism: Human actions are motivated by their self-interests. • Ethical egoism: One should only promote one's own interests, or it is alright for everyone to do so. • Relativism • Descriptive relativism: People of different cultures follow different norms and have different conceptions of the good. • Ethical relativism: What makes an act morally right and wrong or something morally good or bad depends on the cultural context in which the question is raised. • Moral skepticism • Why should I be moral? It is impossible to give a non-question begging answer. • We can never justify our moral beliefs and ideas. • This is the relativist viewpoint, stating that ethical standards are not universal but are relative to one's culture and time. • Moral Nihilism • Ethical claims are either fictitious (according to error theories) or neither true nor false. • They are not answerable to any reality. • There is no such thing called "morality".

Egoism

• Egoism means that you decide whether something is right or wrong referring to your short or long term interests. • Egoism - what is the best for an individual. • But it does not mean you are insensitive for the others. • When you do not respect the others you are selfish.

Ethics in manufacturing

• Ethical Production • An ethical business ensures all parts of their product production is safe, efficient, and focuses on the health of the workers. • Ethical Energy • An ethical business ensures all parts of their product production is energy efficient and as safe for the environment as possible. • Ethical Products • At the bottom line, an ethical business produces safe products. An ethical business cares for the health of their customers, stringently testing for safety to eliminate harmful contaminants or effects. Products from ethical companies are safe, legal, and even proactively texted in order to combat unexpected effects.

What is Ethical Manufacturing?

• Ethical manufacturing is a holistic approach to the manufacturing process that focuses on good health for all involved in this process. • Ethical business care about every part, every aspect, of their company. • From production to the customer, ethical business manufacture safe products safely.

Ethical theories

• Ethical theories seek to provide rational basis for moral judgements and ethical behaviour. • One of the most important ethical question is: Is it possible to know right from wrong? • The aim of ethical theories is, among other things, to present and defend systematic answers to the two following questions: 1. What moral standards (norms and values) should we consider when we assess actions, decisions and institutions? 2. How should such moral standards be justified?

Ethics and management

• Ethics management is concerned with aligning organisational strategies and operations with basic ethical standards of what is good, right and fair. • An organisation has a duty to create and communicate the expected ethical standards of conduct. • The organisation must ensure that a culture that will support the standards and expectations is created and sustained. • All employees (including leaders) must meet those standards and report observed misconduct (or failures to meet these standards). • The American Society for Quality Control identified five managerial mistakes which ultimately damage the integrity of an organisation: 1. Favouring the company's interests over the interests of its stakeholders. 2. Rewarding behaviour that violates ethical standards. 3. Creating a corporate environment that encourages separate standards of behaviour at work and at home. 4. Allowing individuals to abuse power to further their own interests. 5. Creating managerial values that undermine integrity.

What is Ethics?

• Ethics refers to the value system by which a person determines what is right or wrong, fair or unfair, just or unjust. • It is expressed through moral behaviour in specific situations. • An individual's conduct is measured not only against his or her conscience but also against some norms of acceptability that has been societal, professionally, or organisationally determine

Moral philosophy

• It is the study of what actions are right, or morally defensible, and what actions are wrong, or morally unworthy. • Moral philosophers investigate ethical questions by looking for underlying moral principles and the justification for why they are ethical. • Moral principles guide our behaviours.

Ethical leadership

• Leaders in an organisation set the ʻethical toneʼ. Good and ethical leaders build, maintain and revise the systems that support ethics in the workplace. • Ethical leaders: • Through their actions, promote an organisational culture that supports ethical conduct and rewards employees for acting in ways consistent with the organisationʼs values and ethical standards. • Set high standards and communicate them loudly and repeatedly in public and private. • Act swiftly and firmly when someone violates the standards. • Take responsibility, and are accessible and honest.

Kant's Duty Ethics

• Moral rules are established by reasoning alone, not a higher power, according to: • Logical consistency • Universalizability • The good will • Any moral rule will have, at its heart, goodwill

Moral standards

• Moral standards are principles based on religious, cultural or philosophical beliefs by which judgments are made about good or bad behavior. • These beliefs can come from many sources: friends, family, ethnic background, religion, school, the media, etc. • Our personal set of morals represents a collection of all these influences as they are built up over our lifetime. • Morality is very subjective. What is moral for one person might be immoral for another one.

Morality and the law

• Morality (ethics) and the law are not the same. • We can think of many examples of morally right actions that are against the law (for example, crossing a red traffic light in order to save someone's life on the other side of the street). • There are also examples of the opposite, morally wrong actions that are legally permitted (lying to a friend, exploiting a loophole in the law to avoid paying taxes). • Therefore, it can indeed be morally right, and even indicated, to break the law in certain situations. • Legal but immoral actions are quite common. • For example, it is legal to search for tax law loopholes and to try to game the system in order to reduce one's taxes. This can go so far that companies will move their international headquarters to improbable places like some Caribbean islands or Ireland, just to avoid paying regular taxes in their real country of origin (and business). • Although such behaviour is legal, it is clearly immoral. A company that makes billions of dollars from consumers in a particular country is morally obliged to pay taxes in that country, and in this way to contribute to that country's social security systems, public infrastructure, healthcare, schools and so on. Escaping this responsibility, even if it's legal, is not morally right. • So we can see that legal and moral rightness are two entirely different things. • There are actions that are legally right but morally wrong. • There are actions that are morally right but illegal. • There are also more or less wide areas of regulations where the legal and the moral coincide. • So it's not correct to say, for example, abortion is morally wrong because it is against the law. This is a bad argument, because the law itself might, in this case, be an immoral law. • One might, of course, believe that abortion is morally wrong (or right), but that will have to be justified with an argument that is based on ethical theories and not by just referring to the laws of a particular place.

Non-cognitivism

• Non-cognitivism states that morality is purely subjective or is bound up with the specific cultural context of individuals. • Non-cognitivists say that there are no moral absolutes, only beliefs, attitudes and opinions. • Moral knowledge is impossible. • Truth emerge from a process of dialogue, negotiation and debate where individuals eventually agree on a particular moral truth. • E.g. You represent non-cognitive approach when you say: I do not accept any cheating of the teacher during the exam.

Examples of unethical practice of HRM

• Off-shoring and exploiting 'cheap' labour markets; • Using child labour; • Reneging on company pension agreements; • Longer working hours; • Increasing work stress; • The use of disputed and dubious practices in hiring and firing of personnel.

Types of ethical code of ethics

• Organisational or corporate codes of ethics - see as an example: Samsung Electronics Global Code of Conduct • Professional codes of ethics - see as an: Public Relations Society of America Member Code of Ethics • Industry codes of ethics - see as an example: Franchising Code of Conduct • Programme or group codes of ethics - see as an example: Volunteer Code of Conducts

The appeal of results-based ethics

• Results-based ethics plays a very large part in everyday life because it is simple and appeals to common sense: • It seems sensible to base ethics on producing happiness and reducing unhappiness. • It seems sensible to base ethics on the consequences of what we do, since we usually take decisions about what to do by considering what results will be produced. • It seems easy to understand and to be based on common sense.

Stakeholder analysis

• Stakeholder analysis is a technique you can use to identify and assess the importance of key people, groups of people, and institutions that may influence the success of your activity or project. • To use this methods means: • identify people, groups, and institutions that will influence the achievement of project outcomes (either positively or negatively) • understand the viewpoints of these groups and the reasons behind the influence they have on the project • develop strategies to get the most effective support possible for the project and reduce any obstacles to successful implementation

Codes of practice which are important in HRM

• The Global Compact, launched by the United Nations in July 2000, encourages companies to incorporate nine human rights into their strategies and business dealings, and to consider a broad range of stakeholders in setting strategy; • The International Labour Organisation (ILO) has prepared a Declaration of Fundamental Principles and Rights at Work (1998). This focuses on eliminating forced labour, child labour, freedom of association and the right to work free from discrimination; • The Organisation for Economic Co-operation and Development (OECD) Guidelines for Multinational Corporations cover standards of behaviour in employment and industrial relations; environmental impact; combating bribery; consumer interests; science and technology; competition and taxation.

Ethics in finance

• The finance function of an organisation can be divided into three areas: • The financial transactions - flow of money form the customers to employees, suppliers, creditors and to create the profit; • The accounting function - documenting the money coming in and money going out and balancing the accounts; • The auditing function - the balance must be reported to numerous institutions - government agencies for reporting taxes, to stakeholders in special financial reports, etc.

Ethics in human resources (HR)

• The human resources function is directly involved in the relationships between the company and the employees: • The creation of the job description • The recruitment and selection • The creations of w career development • The motivation of employees and payment • Human Resource Management is a business function that is concerned with managing relations between groups of people in their capacity as employees, employers and managers. • Inevitably, this process may raise questions about what the respective responsibilities and rights of each party are in this relationship, and about what constitutes fair treatment. • These questions are ethical in nature. • All HR practices have an ethical foundation. • HR deals with the practical consequences of human behaviour.

Ethics in marketing

• The marketing process, which includes advertising and sales, is responsible for ensuring that the product reaches the hands of a satisfied customer. • Referring to the utilitarianism and universal ethics answer the questions: • Can you explain that marketing is an unethical process? • Can you explain that marketing is ethical process?

Utilitarian philosophy - utilitarianism

• This philosophy takes into account the utility or expected outcome of a decision in order to decide what is the right thing to do. (Jeremy Bentham, John Stuart Mill) • The consequences of a decision are used to measure the moral worth of an action, so ethical principles are defined by consequences or predicted outcomes. • The actions must be judged by the effects that they have. Thus decision maker must consciously consider the impact of their actions. • A right action is one that causes more benefit than harm. • What is the best for everyone.

Kantʼs formula

• Two things fill the mind with ever new and increasing admiration and awe, the more often and steadily we reflect upon them: the starry heavens above me and the moral law within me. • Immanuel Kant (1724 - 1804)