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132243 Business & SocialResponsibilities

Ethics and Business

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About MyselfNattawoot KrongkajonsookEmail: fbusnwk@ku.ac.thHomepage :

http://fin.bus.ku.ac.th/16/nattawoot.htm

Mobile: 01- 6394990Office:Department of Finance, 4th Floor of Faculty of

Business Administration, Kasetsart UniversityTel: 02-9428777 Ext. 356

Office Hours:Monday and Wednesday 10.00 น. – 14.00น.

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New Scheme of Assessment

Attendance 10%Project 30%Report 20%Presentation 10%

Final Exam 60%T/F questionsShort essay questions

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Merch and Company

The company attempted to develop a cure for“River Blindness” disease, which attacked Africa,from its animal drugs called “Ivermectin”.

Question: Is this development worthwhile?It might be too costly.It might have bad business effects to the company

After some considerations, the company decidedto go ahead and successfully produced this curecalled “Mectizan”.

A lot of victims have been relieved from thecure and such ethical action benefits thecompany in long term.

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Issues from M&C case

Whether ethical actions are profitable?In the long run, perhaps!

Unethical behaviors may cause problems to thecompany in long term.Loss of customersDishonesty of employees

Unfortunately, being ethical is always costly.Being ethical is not always rewarded.Not being ethical is not always punished.

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Issues from M&C case (cont.)

The company’s manager faces a conflict.Whether such action is ethical to public?Whether such action is ethical to the

company’s shareholders? Which view is more reasonable?

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Business Ethics and ItsIssues

MoralEthicsBusiness EthicsApplying Ethics to Corporate OrganizationsGlobalization, Multinationals, and Business

EthicsBusiness Ethics and Cultural DifferencesTechnology and Business Ethics

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Introduction

Ethical is very subjective to a personalpoint of view.One definition: the principles of conduct

governing an individual or a groupEthics is NOT the same as morality.Ethics is an investigation of morality.

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Morality

Definition: the standards that an individual hasabout what is right and wrong, or good and bad.

These standards are absorbed in a person sincehis/her childhood via family, friends, socialinfluences, etc.

These standards can change as a personmatures.

A person may not always act according to whathe/she believe to be morally right.

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Morality (cont.)

Non-moral standards VS moral standardsPeople sometimes choose to follow non moral

standards (e.g. standards of the law, language,etiquette, aesthetics, athletics standards etc.) insteadof the moral ones.

Moral standards are (1) standards that deal withmatters that we think are of serious consequence,are (2) based on good reasons and not on authority,(3) override self-interest, are (4) based on impartialconsiderations, and that are (5) associated withfeelings of guilt and shame and with a special moralvocabulary

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Ethics

Definition: the discipline that examinesone’s moral standards or the moralstandards of a society.Ethics asks how moral standards can be

applied in real life.A person starts to do ethics when he/she

asks questions likeWhat moral standards imply in such events?Whether it is reasonable to pursue moral course

of actions?

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Ethics (cont.)

Ethics is a normative study.It aims to reach conclusions about what

actions are right or wrong.Social science (e.g. anthropology,

sociology, and psychology) is a descriptivestudy.An investigation that attempts to describe or

explain the world without reaching anyconclusions about whether the world is as itshould be.

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Business EthicsMembers of a society achieve common ends by

establishing the relatively fixed patterns ofactivity called “Institutions” (e.g. family,economy, politics, educations)Economic institutions has 2 ends that are to produce

and to distribute good and services.

Business organizations are the primaryeconomic institutions that:provide the fundamental structures in production

processes (e.g. land, labor, capital, and technology).Provide the channels in distribution processes (e.g. in

the form of consumer products, salaries, return,taxes).

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Business Ethics (cont.)

Corporations are the most significant kinds ofmodern business organizationsOrganizations that the law endows with special legal

rights and powersCharacteristics of modern corporations:Are immortal fictitious persons,Have the right to sue and to be sued,Own and sell property and enter into contracts,All in their own name

Modern corporations consist of (1) stockholdrs,(2) directors and officers, and (3) employees.

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Business Ethics (cont.)

Business ethics is a study of moralstandards and how these apply to thesocial systems and organizations throughwhich modern societies produce anddistribute goods and services and to thebehaviors of the people who work withinthese organizations

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Issues That Business EthicsInvestigates

Systematic:Ethical questions raised about the economic,

political, legal, and other social systems orinstitutions within which businesses operate.E.g. morality of capitalism, or of the laws,

regulations, industrial structures, and socialpractices.Solutions for dealing with this issue might

involve many different social groups.

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Issues That Business EthicsInvestigates (cont.)

Corporate:Ethical questions raised about a particular

organization.E.g. morality of the activities, policies,

practices, or organizational structure of anindividual company taken as a whole.Corporate ethical issues can be solved only

through corporate or company solutions. Thismight involve a lot of individuals thatconstitute the company.

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Issues That Business EthicsInvestigates (cont.)

Individual:Ethical questions raised about a particular

individual or particular individuals within acompany and their behaviors and decisions.Morality of the decisions, actions, or

character of an individual.Individual ethical issues need to be solved

through individual decisions and, perhaps,individual reform.

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Applying Ethics to CorporateOrganizations

Question: can we really say that the actsof organizations are moral or immoral inthe same sense that the actions of humanindividuals are?No, because organizations are fictitious

persons.Yes, being fictitious or not does not matter,

they are still persons according to the law.

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Applying Ethics to CorporateOrganizations (cont.)

The book’s view:Corporate organizations and their acts depend on a

qualified group of individuals. It is these individualswho must be seen as the primary bearers of moralduties and moral responsibilities.

Corporate organizations have moral duties and aremorally responsible in a secondary sense.

A corporation is morally responsible for somethingonly if some of its members are morally responsiblefor what happened.

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Globalization, Multinationals,and Business Ethics

Globalization: worldwide process by whichthe economic and social systems ofnations have become connected togetherso that goods, services, capital,knowledge, and cultural artifacts aretraded and moved across national bordersat an increasing rate.Multinational corporation is the heart of

this process.

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Globalization, Multinationals,and Business Ethics (cont.)Globalization brings economic benefits.Jobs, skills, income, and technology are brought to

underdeveloped regions.Allow nations to export and produce goods and services

that they can produce efficiently, and trade for goodsthat they are not skilled at producing.

Threats associated with globalization:Income gap between countries is widened.Quick shift of operations from one country to another

might be problematic.Multinationals transfer technologies or product into

developing countries that are not ready to exploit themMultinationals may not act according to norms set by

the country they are operating at.

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Business Ethics and CulturalDifferences

Ethical relativismWhen in Rome, do as the Romans do.

Criticisms on ethical relativismThere must be some moral standards that any

society must accept to survive.Philosophers point out that when two people have

different beliefs, at least one view is wrong.If ethical relativism were correct, it would make no

sense to criticize the practieces of our own or othersocieties so long as such practices conformed to ourown or their own standards.

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Technology and BusinessEthicsSeveral major changes of technologies:Agricultural RevolutionFarming technologiesSurplus of foods grows trade, commerce, and the

first businesses.

Industrial RevolutionElectromechanical machines powered by fossil fuelsResults in a birth of large corporationsEthical issues: possibilities of exploiting the workers,

manipulating financial markets, and producingdamage to the environment.

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Technology and BusinessEthics (cont.)

Several major changes of technologies:Revolutions in biotechnology called

“Information Technology”Ethical issues: privacy, right to property

Nanotechnology: a new field thatencompasses the development of tinyartificial structures only nanometersEthical issues: nanoparticles could be harmful to

humans

Biotechnology especially genetic engineeringEthical issues: copyright, hazards from

engineered species to natural species.

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Moral DevelopmentKohlberg’s theoryPreconventional level: right and wrong are defined in

terms of avoiding punishment and doing whatpowerful authority figures say.Justifications are persuasive only to the person.

Conventional level: right and wrong are defined interms of the conventional norms of their socialgroups or the laws of their nation or society.Justifications are persuasive only to the group to which the

person belongs.

Postconventional level: right and wrong are definedin terms of moral principles they have chosen forthemselves as more reasonable and adequate.Justifications can appeal to any reasonable person.

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Moral Development (cont.)

Males tend to deal with moral issues in terms ofimpersonal, impartial, and abstract moral rules,whilst females are concerned with sustainingrelationships between themselves and thosethey care.

Gilligan’s female approachPreconventional level: caring only for herselfConventional level: caring for others, and sometimes

neglecting themselvesPostconventional level: a balance between caring for

others and caring for oneself

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Moral Development (cont.)

Ethics begins when one move from theearlier stages to the higher stagesThe latter stages of moral development

are better not because they come at alater stage, but because moral principlesare supported by better and strongerreasons.

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Moral Reasoning

Definition: the reasoning process bywhich human behaviors, institutions, orpolicies are judged to be in accordancewith or in violation of moral standardsComponents of moral reasoningUnderstanding of what moral standards

require, prohibit, value, or condemnEvidence or information to support the

decisions

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Moral Reasoning (cont.)

Figure 1.1: 3 components of moral reasoningMoral standards: a society is unjust if it does not

treat minorities equal to whites.Fact: In American society, 41% of Negroes fall below

the poverty line as compared with 12% of Whites.Moral judgment: American society is unjust.

Unfortunately, moral standards are often notmade explicit because they are generallypresumed to be obvious.

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Analyzing Moral Reasoning

Moral reasoning is adequate when it is logical, and the arguments can be

displayed and subject to criticisms,the factual evidence must be accurate,

relevant, and complete, andthe moral standards involved in a person’s

moral reasoning must be consistent.Example: I believe that (1) it is wrong to disobey

my boss, and (2) it is wrong to kill othersMy boss orders me to kill one of his enemies. Inconsistency arises, so my moral standards must

be modified.

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Arguments Against BusinessEthics

In a free market economy, the pursuit of profitwill ensure maximum social benefit.Are industrial markets really perfectly competitive?Several ways of maximizing profits really injure

society.A manager’s most important obligation is to the

company.this moral standard is acceptable?There are limits to the manager’s duties (laws).

Business ethics is limited to obeying the lawUnethical = illegal?

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Arguments For BusinessEthics

Ethics applies to all human activities.Business cannot survive without ethics.Think about a situation when all business

parties are dishonest to each other.Ethics is consistent with profit seeking.Take MC case for an example

Customers and employees care aboutethics.Prisoner’s dilemma

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Prisoner’s Dilemma

1

1

0

3

Don’t Confess

3

0

2

2

Confess

Don’t ConfessConfessB

A

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Prisoner’s Dilemma (cont.)

To follow or not to follow the rules ofethics situations create prisoner’s dilemma incentives not to cooperate or not tobe ethical.But this example is based on one night

stand relationshipHowever, business interactions with other

parties are repetitive and on-going. Cooperation or being ethical seems to be a

rational choice in the long run

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Moral Responsibility andBlameA person is to be blamed for his/her

immoral acts whenHe/she caused or helped cause it, or failed to

prevent it when he/she could and shouldhave; andYou could save starving people’s life by donating.

But if you don’t, you wouldn’t be held responsible.He/she did so knowing what he/she was

doing; andDeliberately staying ignorant to escape

responsibility is an exception.A person may be ignorant of either the relevant

facts or the relevant moral standards.

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Moral Responsibility andBlame (cont.)

He/she did so of his/her own free will.Acts deliberately or purposefullyNot the result of some uncontrollable mental

impulse or external force

the absence of any of these will completelyeliminate a person’s responsibility for aninjury.

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Moral Responsibility andBlame (cont.)

A person’s responsibility can be lessened incircumstances thatMinimize but do not completely remove a person’s

involvement; andLeave a person uncertain but not altogether unsure

about what he or she is doing; andMake it difficult but not impossible for the person to

avoid doing it.How much a person’s responsibility can be

lessened depends on the seriousness of thewrong.

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Corporate ResponsibilitySituations in which a person needs the actions

of others to bring about a wrongful corporateact are no different in principle from situationsin which a person needs certain externalcircumstances to commit a wrong.Guns don’t kill people, people kill people.Not just the corporate group but also individuals who

knowingly and freely joins his actions together withthose of others, intending thereby to bring about acertain corporate act, will be morally responsible forthat act.

Mitigating factors can also be applied in this case.

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Subordinates’ Responsibility

Subordinates have no obligation to obey anorder to do what is immoral.

When a superior orders an employee to carryout an act that both of them know is wrong,thenthe employee is morally responsibleThe superior is also morally responsible because the

superior is knowingly and freely bringing about thewrongful act through the instrumentality of theemployee.

Pressures from the superior can lessen theemployee’s responsibility, but they do not totallyeliminate it.

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