Business Ethics

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Ethicists do not always agree about the purpose of business in society – some see the main purpose of business is to maximise profits for its owners or its shareholders.

Many of the ethical issues in business are covered by codes. Employers for example should treat their workers well, train them and develop their careers and take care of health and safety issues.

Businesses also tend to have an environmental policy that aims at sustainability. However, just because a business has a policy, does not mean that it will always behave in an ethical way. e.g) child labour and sweat shops

Others consider that businesses have moral responsibilities to their stakeholders; including employees, consumers, the local community and even society as a whole.

A business cannot aim to be ethical if it ignore unethical practices by its suppliers such as:- child/forced labour or violation of basic rights to workers or production in sweatshops or other hazardous environments or ignoring health and safety

Other ethicists have adapted social contract theory to business, so that employees and other stakeholders are given a voice as to how the business operates.

An ethical business has to be concerned with all the businesses that operate in the supply chain – suppliers, contractors, distributors and sale agents.

Does ethical behaviour help a business?

What is the Purpose of Business?

Some believe the key purpose is to

maximise profit for the company and shareholder. This view is held by Milton

Friedman who famously said: “The social responsibility of

business is to increase its profits”.

If

a business believes it can make more profit by employing someone who is

younger, most of us would say this is unacceptable as it is ageist, yet it is

perfectly legal and possible to do so.

Others

believe the purpose is to be morally responsible to stakeholders and have

Corporate Social Responsibility (CSR).

Ted

Snyder supports Friedman in the belief that profit is more important than

principle but he believes businesses do have an element of social

responsibility.

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Unethical Ethical Business

•Businesses that are believed to be acting

unethically may be publicised in the press, and pressure groups that oppose the

activities of certain businesses are better organised, better financed and so

better able to attach such businesses.

•e.g. Huntingdon Life Sciences in Cambridge where the Animal Liberation Movement set up a group called SHAC (Stop Huntingdon Animal Cruelty) to try to close the company down, often using ethically dubious methods; threatening employees etc.

•The campaigners understood business and its weak points very well as the company nearly went bust.

•However, the company changed tactics and the public reacted against the extreme methods of SHAC.

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The Relationship Between Employees and Employers

Whistleblowing

When

a business behaves unethically, an employee may decide whether to inform the

authorities or not, this is known as whistleblowing.

If

someone finds a company to be acting unethically, do they have a

responsibility? They may lose their job and not be compensated for this, they

may also harm risking the business and ultimately many of their friends and

co-workers.

Other risks include a lack of trust between them and their employer during the future.

In the stakeholder theory it is

generally accepted that the most undervalued member of the circle is the

employee. The employee is to a certain extent only another commodity of the

business.

There are several large companies

that have ethical business approaches towards their employers, most famously

John Lewis and the Co-operative.

Psychologists

suggest that investing in and valuing employees has a positive effect on their

well-being and also the well-being of their company.

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Relationship Between Business and Consumers

Consumers now influence business ethics,

and have been instrumental in bringing about change: consumers expect

businesses to demonstrate ethical responsibility in its widest sense –

affecting the treatment of employees, the community, the environment, working

conditions etc.

Customers may

take action against:-

1.Businesses

they consider to be unethical in some way (e.g. animal fur)

2.Businesses

acting irresponsibly

3.Businesses

that use business practices they find unacceptable

Customer

rights – quality, safety, price and customer service were once the most

important concerns in business.

Customer action therefore can be

very effective, if a consumer stops buying, the business will be forced to

change or go bust.

•Some companies have been the focus of the

consumer criticism and forced to change their practices, e.g:

–Nike,

Gap and Primark over child labour

–Shell

over Brent Spar and Ogoniland

–Monsanto

over GM food

A stakeholder is any individual or group who has a stake in the success

or failure of the company, they can be internal or external but any business is

accountable to its stakeholder.

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The Relationship Between Business and Globalisation

Globalisation = “The

reduction of difference between one economy and another so trade all over the

world becoming increasingly similar and connections are increased”.

It is now possible to buy a

McDonalds or Coco-cola whilst in Chile, Croatia, South Korea or Singapore.

A child born in the UK, America or France

will consume, waste and

pollute

in a lifetime 50 times more than children in developing countries.

Globalisation

has brought ethical problems such as justice towards poorer countries as trade

is not always fair and wages in LEDCs

are

much lower than in the West, and safety may not be upheld

e.g) The Bhopl

disaster in 1984 where there was a gas leak in India due to lack of safety. Over

2,000 died immediately and in the weeks that commenced over 12,000 others died.

Case Study: McDonald's

McDonald's operates over 31,000 restaurants worldwide, employing more than 1.5

million people.

McDonald's operates in more than 119 countries on six continents.

The reasons for globalisation

1.Technological change – especially in

communications technology (switchboards in India)

2.Transport is faster and cheaper

3.Deregulation – increase in privatisation,

so countries now able to own businesses in other countries

4.Removal of capital exchange controls –

money can now be moved easily from one country to another

5.Free trade – many trade barriers have

been removed; many by grouping such as the EU

6.Consumer tastes have changed – people are

now more willing to try foreign products

Exploitation

Free

Choice Defence

“In a typical developing

nation, if you’re able to work for an American multinational, you make eight

times the average wage. That’s why people are lining up to get these jobs.”

- Johan Norberg – In Global Defence of Capitalism

•The choice isn’t always a free one –

there is no real alternative (but not physically forced)

•But, are we powerless to offer other

choices?

•The individual has autonomy – are we

limiting this?

Better

than Nothing Defence

“.......because a lousy job is better than none at all.”

- National Centre for Policy

Analysis

•The question is, what if the alternative

is nothing?

e.g. Junk food is better than no food

As

the cheap production of goods is so much easier to obtain now from LEDCs, it

would seem likely that local economies would benefit and they would become more

prosperous. They benefit from employment, technical advances and investment in

communities.

Yet

companies still choose to increase their profits through exploitation

of

this cheap labour.

Perhaps

the LEDCs don’t

benefit as much as they may seem

to, especially if they were to trade their own products,

they

could exploit their own economic potential rather than doing it through large

corporations.

Does globalisation discriminate against workers in LEDCs? They get a pittance in

comparison to MEDCs but in response it is acknowledged that the cost of living

is much lower in these countries so in relation it is many times higher than

the average wage (sometimes up to 4 or 5 times higher.)

Is it

a good idea to pull out when a supplier is found to be immoral?

No

Sweat exists to fight against sweatshop exploitation. We organise solidarity

for sweatshop workers from the UK to the four corners of the world. We stand

for workers' self-organisation, international solidarity and for the right to

organise in every workplace.

http://www.nosweat.org.uk/

Legality

Defence

•There is a tendency to comply with

regulation and assume that this is enough. Is it?

•Lots of things are legal, but not

necessarily ethical

e.g. Tax evasion Vs Tax avoidance

Possibility

Defence

“Ought implies can.”

- Immanuel Kant

•One only ought to do what one can do

•It is about having a balance: a company

has to work in the world as it is, not as it ideally ought to be

Anti-globalisation movements campaign

against the bad effects of globalisation:

Amnesty

International campaigns for a global human rights framework for business based

on the UN Norms for Business.

The

WCC (World Council of Churches) campaigns for responsible lending and

unconditional debt cancellation.

Ultimately, to really be ethical a

business may have to change its whole business practice and organisational

culture.

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Cyber-crime and surveillance

•Governments

worry about the loss of control and private citizens worry about an excess of

control over their behaviour.

•Private

papers used to be in people’s houses or place of business, but now they are on

computer discs which are lost by government employees. Banks, insurance

companies, employers etc. now know everything about us and we have

little control over how they use the information.

•Surveillance

covers many technologies e.g. international ECHELON screens e-mails for keywords in the name of national security. This is done without our consent or

knowledge – it would seem that information is considered more important than

people.

•ID cards are used in many countries, in

the armed forces, in schools and universities etc. to allow legitimate access

to building and information. As these cards carry more information, they leave

us open to identity theft.

•Websites use forms of surveillance to

find out about their users e.g. log in info

•There are also subtle methods such as

loyalty cards in supermarkets which collect information about our purchases.

•We need to consider whether privacy is of

greater value than the needs of the state, national security or business.

J.S.Mill defined liberty as autonomy and

considered it to be the most important attribute. He said that the state should

not interfere within the private lives of individuals unless it is to protect

them from harm.

In contrast to this, the totalitarian Marxist view rejects any private ownership of

property, including rights over one’s body.

•David Lyon, Professor of Sociology at

Queens University, Canada, stresses that surveillance is about social sorting,

so that different groups of people can be treated differently; whether as a

higher risk/threat or for insurance or simply by postcode so that ‘suitable’

spam is sent to that address.

•Lyon says that surveillance is about

predicting the future, and this means that we do not need to see the use of the

new technologies as necessarily evil, but we should not see them as neutral

either as they have the most severe consequences for those who are already

marginalised society.

•We need to ask whether the

utilitarian/capitalist approaches to surveillance are necessarily right – does

it make most of us happy because a terrorist might be caught?

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Green Business

All businesses impact on the environment:

they emit pollution, they produce waste and use resources. Businesses, however,

are continually being encouraged to improve their approach to environmental

issues.

Environment

damage is a consequence of business growth as growth leads of energy demands.

Is

there an ethical responsibility for business to consider the impact on the

environment?

All

businesses impact the environment:- they emit pollution, produce waste and use

resources.

Every year there is a prestigious award, the Business Commitment to the

Environment Award, and in 2007 the Co-operative was one of the winners for its

response to global climate change. Some of its efforts for the environment

include: the reduction by 86% of its CO2 emissions, use of 98% green

electricity and the ethical investment policy of the Co-operative bank.

Case Study: Anglo-American

They

are one of the twenty largest UK based companies, heavily involved in mining

and quarrying. When Anglo American carries out its mining operations it tries

to have a positive effect in three areas:

In the area immediately

surrounding the mine, it is active in conservation and improvement.

In the wider region around the mine, it contributes financially to

local communities and helps generate new businesses.

In the area where the mine is located, it carries out its operations

with care and tries to improve the lives of local people e.g. Minimising noise

and other types of pollution.

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Body Shop example

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Co-operative example

The

Co-operative Bank = They launched their ethical policy in 1992 after extensive

consultation with customers and was a first among UK high street banks. It

allows customers to have a say on issues that matter to them.

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Freedom to Care example

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Case Study: Erin Brockovich

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Case Study: Brian Kelly

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Case Study: Watergate Scandal

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Ford Pinto Example

Ford Pinto = The design and

production of Ford Pinto cars were rushed to sell the car for under $2000,

which resulted in a fault with where the engine was. It would have meant

recalling all the cars and spending between $10 - $20 on each car with an overall

bill estimated at $137 million… Ford calculated the number of accidents

resulting from this fault would be 180 deaths, 180 serious burns and 2,100

vehicles lost and the cost in law suits would be an approximate $49.5 million.

So it other words it would be cheaper to not recall the cars and to pay out

when people started dying.

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Primark Example

Primark

= Use of child labour was ‘outed’

in 2008 in a documentary, Primark halted all business with these suppliers,

cancelling millions of pounds worth in orders and stated that suppliers had

deceived Primark. Since 2008, they have implemented a new ethical code and

appointed an Ethical Trade Director to train and check up on new and existing

suppliers to prevent there being future problems. Primark is now slowly

regaining its lost reputation.

If

customers do not buy a business’

products then it will not make profit. Therefore it is within the businesses

best interest to listen to its customers.

Nevertheless,

consumers may find it harder to make a difference against large multi-nationals

than a local butchers for example.

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Nestle Example

Nestle = The corporation has been

criticised over a period of 30 years concerning its policy of providing

powdered milk for sale in less developed countries where water is not usually

clean enough to drink. The controversy is though that they give the milk

initially for free and then once they were on the milk and breast milk had

dried up, Nestle began to charge for it.

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Is Ethical Living Possible?

The economist Keith Tondeur believes that people should become more ethical in how they live their lives, especially in how they relate to money and services. His suggestions for living a more ethical life are:

model yourself on good people e.g. Mother Teresa

live more simply e.g. use public transport, recycle, grow your own produce, buy only what you need

invest wisely and only with organisations that have ethical investment records

find out about current affairs and the economy of the less developed world

use your influence e.g writing to members of parliament about ethical issues

choose the companies you buy from carefully - they should have records on environmental issues and human rights e.g. no child labour

Challenges to this approach:

Do consumers always have a choice to buy only fair trade products?

Can consumers really find out the truth about the background of businesses?

What is a 'good' person?

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Key Terms

Bourgeoisie - middle class industrial owners who have the proletariat working for them

Globalisation - integration of economies, cultures, governmental policies and political movements around the world

Micro-ethics - deals with smaller details that constitute as an ethical approach

Proletariat - workers and low wage earners who depend on the bourgeoisie for employment

Social responsibility - belief that businesses have a responsibility towards society as well as their own interests

Stakeholders - people who have an influence on the success of a business e.g. business owners, employees, consumers and wider society

Whistleblowing - revealing to the public the details of some sort of corruption or wrongdoing in a business