Business Ethics

Business Ethics

1. Globalism

   • Viewing the world on a global basis rather than in terms of nations.
   • Concerned with the way in which particular political, moral, and economic values become the norm for different societies around the world. It is about an attitude in which the needs of the world supersede the needs of the individual nation.

2. Globalisation

   • The process by which businesses develop international influence or start operating on an international scale.
     • Impact of globalisation on international markets
       • Abolition of border controls to allow free movement of labour. Standardization of taxes and laws affecting companies
       • Philippe Hugon - The value of global trade has dramatically increased in the last 60 years. There is big money to be made if you are a transnational corporation, as they seem to control approximately two-thirds of all global products and the international trade sells them.
     • The effects on less economically developed countries
       • Local economies benefit and become more prosperous.
       • Local communities benefit through employment, technological advantages, investment in the community, and trade development.
     • The ethics of globalisation
       • Kermal Dervis - “Globalisation has fundamentally altered the world economy, creating winners and losers. Reducing inequalities both within and between countries, and building more inclusive globalisation is the most important development challenge of our time”
       • One ethical criticism is that globalisation discriminates against those workers in LEDCs who work at a wage that is pittance compared to workers in more economically developed counties MEDC.
       • Globalisation creates an underclass of people who feel disenfranchised or alienated from society
       • Fewer jobs in manufacturing sectors in MEDC as companies use cheaper labour from LEDC

3. Business and the environment: the problem of growth

   • Economic growth can bring enormous benefits to society. However the constant pursuit for economic growth can result in harm to the environment.
   • Environmental damage is a natural consequence of industry and business growth.
   • Human societies need industrial growth but this can bring devastating ecological harm. The natural habitat is destroyed when factories are built and pollution ensues.

4. Relationship between employers and employees

   • Whistle Blowing
     • The worker reports perceived immoral or illegal activities to the media or authorities.
     • It can be argued that it is a necessary feature of modern business practice in a democratic society. Businesses hate it, yet without it both the consumer and the judicial system would be largely ignorant of corrupt or dangerous practices.
   • Profit vs Principle
     • Ted Snyder - Supports Friedman and believes that profit is more important than general matters of principle. However, he believes that businesses do have an element of social responsibility towards their employees and stakeholders, but that this responsibility is secondary to the requirements of making profit. His research into emerging markets suggests that profiting by moving business outlets to less developed countries benefits the workers in those countries even more than it would have benefited those left behind in the western nations.
     • Should a company hire younger staff as they will make more profit, or is this unacceptable?
   • Nature of the relationship
     • Adam Smith - Smith’s theory of free market competition explored the ways that employers could best serve the interests of their employees. The community would prosper as employment would be high and people could live well on their wages. Smith also saw the employer as having responsibility to employ people fairly and justly and avoid selfishness. This relationship was based upon the need of the employer for labourers and the need of the employee for work.
     • Karl Marx - Disputed that the role was equivocal; he believed that the employer (Bourgeoisie - The middle-class industrial owners who have the proletariat working for them) could find almost anyone to do the work, but unless the worker (Proletariat - The workers and lower wage earners who depend on the bourgeoisie for employment.) agreed to work on the employers terms then he would go without. Therefore the employers control the market and the employees have no bargaining tools except their labour, which must be given if they are to live and survive.

5. Links to the course

   • Virtue Ethics
     • The traditional virtues of compassion, courage, or pragmatism are not necessarily at the forefront of most business practices, yet implementation of these ideas could prove a good moral basis for ethical business.
     • Virtue ethics requires moral agents to develop themselves to become more moral. If business practices were measured along the lines of Aristotle’s requirements to pursue and to achieve Eudaimonia, then many business techniques could be see to be more on line with the vice of deficiency or of excess rather than the virtues.
   • Kantian Ethics
     • In approaching business ethics from Kant’s perspective it would be vital to only follow a course of action that everyone should have to follow.
     • Treat people as an end in themselves rather than a means to an end.
     • It is difficult to approach most areas of business from a Kantian perspective, as universalising actions and ensuring people are valued are not necessarily profitable. However using the principles of Kant’s teachings on duty and goodwill can provide an excellent platform for exploring potential problems of globalisation. If all stakeholders are intrinsically valued in themselves, it is possible to provide a good basis to ensure that equality and trust are central to moral and ethical business approaches.
     • In most cases financial gain for the company would be one of self-interest and relying on a good profitable outcome for their stockholders. It would seem that the requirements of business to make profits would be in conflict with the ideal that customers and stakeholders are being used as means to an end to facilitate the increase in profit for the company.
   • Utilitarianism
     • Utilitarian's take the view that there are intrinsic beliefs in consumers rights but that sometimes these rights must be removed for the general welfare. The consumer cannot expect perfection from the goods and services provided. What is provided must be reasonable. The consumer has rights, but they must be reasonable.
     • Act Utilitarianism - (Quantity) It would be possible to suggest that thousands of children making trainers will maximise the happiness of consumers in western nations who desire the latest designs. Yet the pay and conditions of the children may not be considered as they are the minority and their happiness is secondary to the pleasure of the consumers and stockholders elsewhere.
     • Rule Utilitarianism (Quality) - A qualitative approach would consider the quality of pleasure gained by ht material pleasure experienced by the multi-national companies as a lower pleasure compared to the higher pleasure being deprived from the young workers. The consequentialist approach may try to justify the scenario by claiming that the pay received but the children is generous compared to other jobs they may end up doing instead.
     • Preference Utilitarianism - Would say that a fair trade approach would be more Utilitarian and bring more qualitive happiness to all stakeholders, rather than just those gaining material and financial pleasure. If fair trade ethics were applied, then a country would have more say in their country’s resources (including raw materials and the workforce) and the profit to their economy could be reinforced by the multi-national company’s investment in more just and Utilitarian practices.

6. Relationship between business and consumer

   • Consumer Rights
     • A person has a natural right to expect a certain standard for the money provided.
     • Human rights influence consumer rights. The consumer has a right to expect that no goods will harm the purchasers life.
   • Nature of the relationship
     • Micro-ethics deals with the intentions, promises, obligations, and individual rights that form the relationship between businesses and consumers.
     • Social responsibility is central to an understanding of this relationship between businesses and consumers. The actions of the business affect not only the stakeholders but also the wider stakeholders.
     • Milton Friedman - Claimed that ‘the social responsibility of businesses is to increase its profits.’ He claimed that social responsibility in business was a delusion; for him the only responsibility for corporations was to their stakeholders.
   • Legal requirements
     • Businesses have a legal requirement to ensure that their products are safe and they contain guidance for their use. If the product is not label correctly, and this results in harm, it will be the responsibility of the business.

7. Case Studies

   • Nestle
     • Promoted infant formula with misleading and harmful strategies that violate the International Code of Marketing of Breastmilk Substitutes and put babies at risk.
     • Used suppliers that violate human rights (e.g. buying cocoa from suppliers that use child labour) and destroyed the environment (e.g. palm oil from rainforest)
     • Promoting unhealthy food, especially for young children.
     • Trade Union busting activities and denying the rights of workers to collectively bargain.
   • Nike
     • No minimum wages
     • Lack of proper working conditions
     • Lack of adequate health and safety.
     • Accepted child labour
     • Ignored sexual harassment in its factories
   • Hinkley Groundwater Contamination
     • Pacific Gas and Electric - Contamination of Hinkley's groundwater due to gas pipelines.

8. Key Words

   • Micro ethics - This deals with the smaller details that constitute an ethical approach
   • Social responsibility - A belief that businesses have a responsibility towards society as well as their own interests
   • Stakeholders - Those people who own the company and also its employees, its consumers and the wider community
   • Bourgeoisie - The middle-class industrial owners who have the proletariat working for them
   • Proletariat - The workers and lower wage earners who depend on the bourgeoisie for employment.
   • Whistle blowing - Revealing to the public some sort of corruption or wrongdoing in business
   • LEDC - Less economically developed country
   • MEDC - More economically developed country