Business ethics Flashcards
Corporate social responsibility
a business has responsibility towards the community and environment
Stakeholder
all the people and groups associated with a business such as employees, customers, the local community, the country as whole and governments.
Shareholder
those who own the company and will make a profit if the company makes a profit.
Maitland
Argues that if workers in LED countries freely choose their work then there is no problem with jobs. Also, the income they are paid for working for international companies is more than they would be payed if they worked for local companies.
Weaknesses of Maitland
- it is not a free choice if they are the only companies available or are the ones that pay the most - if you need to feed your family you will get whatever job you can. Also, since they are mostly uneducated it is not a free choice because they do not have the option of better jobs.
- it doesn’t matter if they are payed more than the local companies, they are still not being payed enough to live, and so their wages should still be higher.
Adam Smith
People are born with a moral sense, an innate conscience and a feeling of empathy and sympathy with others within the community.
* The ideal is that business is unconstrained by governments, and so free market capitalism is the best way to encourage entrepreneurs
* Trickle-down economics - the benefits they make then flow down into the community, e.g. If a factory owner does well, this enables him to employ more workers, giving them job security
* This is guided by the invisible hand - it just happens because business owners are able to make a profit in a free market
Karl Marx
Critiqued capitalism in Das Capital. Marx did not like the idea that production in business was in control of individuals who controlled the labour forces by making profit from their work. He felt it undermined those who do not own the means of production - the working class whom he called the Proletariat. It put the capitalist class – the bourgeoisie- into a position where they could bargain for power over the working class.
Friedman
He claimed that the social responsibility of a business was to increase its profits - “the only rule of business is business”. He claimed that “Greed is good” - the world runs on individuals fulfilling their self interests, and the only cases in which the masses have escaped poverty are in capitalist societies - and that a free market enterprise was best and a capitalist society because it encouraged and allowed entrepreneurs to set up businesses. “Rules of the game” must be followed.
Shareholder theory - Friedman
The one and only obligation of business is to maximise its profits while engaging in “open and free competition without deception of fraud”
Robert Solomon (inspired by Aristotle)
The pursuit of profit is one of the main goals in business but not the only one. He wrote “we adopt a too narrow vision of what business is, e.g the pursuit of profits and then derive unethical or immoral conclusions form this.” Profit he claimed should be seen as a way of encouraging and rewarding hard work …building a better business and serving society better. A business should set out to make a profit by supplying quality goods to its customers, providing jobs and fitting into a community - good business should take the community into account, and when it does this productivity and profits are increased
Virtue and profit must thrive together
Anthony Weston
Social responsibility and profit are important. He gives the example of pharmaceutical company Johnson and Johnson - it lists its responsibilities to its stakeholders in order, placing shareholders at the bottom. In 1981, 7 people were poisoned by cyanide laced pills in Chicago, causing the company to take 22 million bottles off of the shelves in response. They also offered to exchange any already purchased bottles, and took huge losses through these actions. When they reintroduced the product it had tamper resistant packaging. Weston wrote that Johnson and Johnson was “proving that doing the right thing by stakeholders also benefits shareholders”
Ted Snyder
A business should set out to make profit foremost but social responsibility towards employees and stakeholders is important to some degree, although it is secondary to their purpose of profit making. His research suggests that moving to LEDCs benefits markets and businesses.
Sandel
- Corporations have a moral responsibility to protect the human rights of their workers and look out for their wellbeing
- The law cannot always provide a basis for the way that business should treat their workers - if they are operating in a country that doesn’t have good laws protecting their welfare, this doesn’t mean that companies should use their to their advantage - they should still treat them well and go beyond the legal obligations to do this
- The purpose of a corporation is to contribute to the common good, but this is more than just making a profit and contributing goods, it is also about protecting workers
- The declaration of human rights should be expanded and adapted to protect workers’ rights - we should aim to establish moral principles that can be upheld by everyone
Singer
Animals and humans all have a preference to feel pleasure and avoid pain - this should be considered by businesses and they should not be used as a means to an end
David Attenborough
We need to consider the environment very seriously indeed. Businesses’ impact on the environment needs to be seriously considered - climate change is very rapid and this is destroying the earth and animals.
Alan Sugar
So as long as you make profit that’s what matters. If you choose to be ethical then it’s to make profit. If you choose to be cheap to make more profit then workers will be exploited, this is inevitable.
Robert Reich
Argues that triple bottom line (when companies make themselves accountable for their social responsibility by recording what they have done) and the enhanced business review (r, where businesses demonstrate how they have taken account of corporate social responsibility in their dealings on a global scale) are not enough, there need to be international laws holding companies accountable, it should not be a choice that they are left to make.
Stakeholder theory - Freeman
Corporations should be run for the benefit of all stakeholders, not just shareholders - so executives must simultaneously try to promote the interests of all stakeholders and balance their interests appropriately when they conflict
British American Tobacco case study?
The tobacco industry in Indonesia is very problematic - many young people smoke and this leads to many deaths due to lung cancer both directly and due to second-hand smoke. The companies often advertise near schools even though they have agreed with governments not to do this.
The main company advertising tobacco products is British American Tobacco, and their suppliers use young children in tobacco fields to pick the leaves, even though this is highly dangerous work.
The Indonesian government has not signed the UN framework to stop big tobacco industries because they acquire a lot of revenue from the industry (10% of state revenue) and it provides around 10 million jobs.
What are advertisements for?
Advertisements are designed to increase sales, and attempt to change the attitudes, cognitions and behaviours of consumers through targeted advertising. Adverts for children often work best because they are highly impressionable.
What laws govern advertising?
- Consumer Protection From Unfair Trading Regulations - this states that you cannot mislead or harass consumers, e.g. By including false or deceptive messages, leaving out important information, or using aggressive sales tactics.
- Business Protection from Misleading Marketing Regulations - this states that as well as being accurate and honest, you must not make misleading comparisons with competitors.
What are arguments for ethical advertising?
- Promotes the positive use of products.
- Gives consumers the information they need to make an informed decision on what products to buy and how these may enhance their lives.
- Proves that companies have morals and care about customer needs.
- Will attract more customers.
Arguments against ethical advertising?
- Companies might be lying about how ethical they actually are, e.g. H&M putting out environmental campaigns even though they are a fast fashion company that uses cheap labour.
- More profits can be made if adverts are not ethical.
How does Amazon treat its employees?
Employees working for amazon are notoriously treated badly - they have to work 55 hour weeks, and they are often so exhausted by the targets they have to reach that they fall asleep standing up. Their toilet breaks are timed, and some workers even had to be attended to by ambulance crews due to them collapsing on shift.
How does Google treat its employees?
They know that their employees want to be part of something with no hidden agendas, so they are very transparent, giving their workers an honest perspective no matter what. Their employees feel valued and engagement typically follows this.
Arguments for treating employees well?
- They are people who deserve respect and to not be exploited. Basic human rights should be upheld, including the protection of livelihood and health.
- People need jobs to survive
- Well-rested workers are more efficient and accurate - Breaks, sick pay and holidays can help improve productivity.
- It is important to be empathetic in all aspects of life, both in and out of work, e.g. by giving maternity leave.
- Morale will be improved
- If your workers don’t get injured, then they are able to work more.
- Care for workers helps to turn more of a profit as it encourages good work, exploiting them actually will not help with this.