Business Ethics

Lecture one
Introducing Business Ethics

Overview
Introducing Business Ethics
What is business ethics?
Why is business ethics important?
Globalization: a new context for business ethics?
Sustainability: a new goal for business ethics?

What is business ethics?

Business ethics is the study of business
situations, activities, and decisions
where issues of right and wrong are
addressed.
(Crane and Matten, 2004: 8)

Ethics and the law

Ethics

Grey area

Law

Defining morality, ethics and ethical

theory
Morality is concerned with the norms, values and

beliefs embedded in social processes which define

right and wrong for an individual or a community.
Ethics is concerned with the study of morality and
the application of reason to elucidate specific rules
and principles that determine right and wrong for
any given situation.
These rules and principles are called ethical
theories.

The relationship between morality,

ethics and ethical theory
to
produce
ethical
theory

Ethics
rationalizes
morality

Morality

Ethics

that can be
applied to
any situation.

Ethical
theory

Potential
solutions to
ethical
problems

Why is business ethics

important?
Power and influence of business in society
Potential to inflict harm
Increasing demands from stakeholders
Lack of business ethics education or training
Continued occurrence of ethical infractions
Evaluating different ways of managing

business ethics
Interesting and rewarding

Globalization: a new context for

business ethics

What is globalization?
According to Scholte (2000) globalization is not:

internationalization
liberalization
universalization
westernization
Globalization is: the progressive eroding of the
relevance of territorial bases for social, economic
and political activities, processes and relations
deterritorialization

Relevance of globalization for

business ethics
Cultural issues
Legal issues
Accountability issues

Globalization can affect all stakeholders of

the corporation

Stakeholders
Impacts of globalization
Shareholders

Lack of regulation of global capital markets, leading to financial risks and instability

Employees

Corporations outsource production to LDCs in order to reduce costs in global marketplace; raised
potential for exploitation of employees with different cultural backgrounds and divergent moral standards

Consumers

Global products face protests about cultural imperialism and westernization. Vulnerable consumers in
LDCs face possibility of exploitation by MNCs

Suppliers and Competitors

Suppliers in LDCs face regulation from MNCs through supply chain management. Small scale indigenous
competitors exposed to powerful global players

Civil society (pressure

groups, NGOs, local
communities)

Global business activities brings the company in direct interaction to local communities with possibility for
erosion of traditional community life; globally active pressure groups emerge with aim to police the
corporation in countries where governments are weak and tolerant

Government and regulation

Globalization weakens governments and increases the corporate responsibility for jobs, welfare,
maintenance of ethical standards, etc.

(Crane and Matten, 2004, 20, fig 1.3)

Sustainability: a new goal for

business ethics

Company

Sustainability Statement

Source

BP

We are committed to respond to the challenges posed by the objective of

sustainable development. In our view sustainable development is a long term
strategic issue that will involve business in considerations beyond its normal
responsibilities

Environmental and Social Review,

2000.

Carlsberg
Breweries

Carlsberg Breweries seeks to meet the needs of its consumers, customers, and
employees in an environmentally sound and sustainable manner.

Environmental Report, 1998-2000.

Nokia

Global industries are moving towards operating by social and ethical principles,
such as environmentally sustainable practices. We wholeheartedly support this
development and also participate actively in the global initiatives that support it.

http://www.nokia.com

Shell

Shell companies are committed to contribute to sustainable development.

People, Planets and Profits: The

Shell Report, 2000.

Volvo

Volvos environmental programmes shall be characterised by a holistic view,

continuous improvement, technical development and resource efficiency. Volvo
shall, by these means, gain competitive advantage and contribute to a sustainable
development.

Environmental Report, 2000.

(Crane and Matten, 2004, 21, fig 1.4)

Defining sustainability
Sustainable development is development that meets

the needs of the present without compromising the ability

of future generations to meet their own needs. (World
Commission on Environment and Development 1987)
Sustainability refers to the long-term maintenance of
systems according to environmental, economic and
social considerations (Crane and Matten, 2004: 24)

The three components of

sustainability

Economic

Social

Environmental
Source: Crane and Matten (2004), Figure 1.5, page 22

Triple bottom line

Coined by John Elkington
Bottom line thinking suggests sustainability as

a goal
Three dimensions:
Environmental perspectives
Economic perspectives
Social perspectives

Summary
Definition of business ethics
Business ethics is vital for business in

contemporary capitalism
Global view is essential to understand ethical
issues
Sustainability is an important goal for
business ethics