Business ethics

Question 1

Describe the intro to Milton Friedman and business ethics?

Answer 1

o In the 70’s, economist Milton Friedman wrote an article in the New York Times Magazine titled ‘The Social Responsibilities of Business is to Increase its Profits’. He was reacting against the idea that businesses have social responsibilities to improve their workers’ lives or help the community they operate in.
o For him this was socialism, a social system that he argued made capitalism less effective and restricted the rights of individuals to improve their lives. He thought that the best way to ensure this happened was or let businesses focus on making more profit. Everything that was good would then follow as a result of this principle.

Question 2

What are the business responsibilities? (corporate social responsibilities)

Answer 2

• -Investors are able to buy shares in the business itself becomes its own owner. Investors are able to buyshares in the business and if the business does well those ‘shareholders’ are paid dividends.
• -The people managing the business have a duty towards shareholders: it’s their responsibility to act in the interest of the shareholders and in many businesses the shareholders are able to have some say about how the business is run.
• -So when Friedman says businesses have no other responsibility but to increase their profits, he made the point that it was unethical to do anything else: taking money away from making profits to fund corporate social responsibility projects was the equivalent of stealing money from shareholders.

Question 3

Why do businesses take on corporate social responsibilities?

Answer 3

• -Businesses take on social responsibilities as they think these will improve their image with customers, or with a certain type of investor to a certain type of employee.
• -Others may take on these responsibilities as they fear that if they don’t, they’ll be viewed badly by customers. Businesses may improve facilities for employees or offer discounts for employees to stop them from working for the competition.
• -Another negative reason for corporate social responsibility is fear that without adopting self-regulating, businesses will face far more restrictive regulation on their activates from the government.

Question 4

What are stakeholders?

Answer 4

–‘Crane and Matten, Business Ethics: A European Prespective’ (2004) define stakeholders as “an individual or group which either is harmed by, or benefits from the corporation; or whose rights can be violated or have to be respected, by the corporation.

Question 5

What are stakeholders responsibilities? (corporate social responsibility)

Answer 5

–The stakeholder’s responsibilities are more likely to be obligations that businesses can’t reject without serious reputational damage. For example, if a transnational corporations wants to shut down their steel works in the UK as it’s unprofitable, this is a decision that its shareholders would be likely to back, as otherwise their investments in the transitional corporation will be negatively affected. However, this decision would affect thousands of current UK workers, many UK suppliers, entire communities based around the steelworks and the economy of the whole country, since the loss of steelworks would reduce tax payments in to the government and increase employment benefits made by the government. So the transnational corporation would be under intense social pressure to consider the interests of all these stakeholders and act to lessen the negative impact of its decision, even if this involved significant loss of profits.

Question 6

Explain what businesses who tend to have mixed approaches to their social and stakeholder responsibilities do?

Answer 6

–Although some businesses try always to do the right thing, most tend to have amix of approaches to their social and stakeholder responsibilities. The same businesses that champion their environmental credentials qualifications for example, may be forced by public opinion into accepting their social responsibility for the well-being of their suppliers in low-wage countries. Business are both choosing to act ethically & being required to face up to their social responsibilities. Perhaps business ethics is best described as a process.

Question 7

What is a Kantians response to corporate social responsibility?

Answer 7

• -Kant’s ethics focused on the need to treat people as ends and not just means for some other purpose as they’re beings of dignity- autonomous and rationale.
• -This leads to a no. of possible applications to the question of business ethics. First there is the quest of trusting in human autonomy and rationality. Companies which control and monitor employees don’t respect the dignity of human beings. Companies that don’t ensure safe and fair working conditions and payment for employees would seem to be using them for some end other than the interest of the employee.
• -The balance between the interest of the company and the interest of the employee would be important for a Kantian perspective. This affects how companies treat costumers- not fixing a defective product that could cause harm to the consumer, or misleading them with false information about the benefits of the products (such as health food which aren’t in fact so healthy), are all examples of treating people merely as a means to an end.

Question 8

What is a Utilitarians response to corporate social responsibility?

Answer 8

• -Utilitarian ethics focuses on the consequences for the greatest good. The greatest good could be interested in terms of the greatest profit, which leads to a ruthless attempt to maximize income at all costs.
• -But utilitarianism as the greater good principle to try to set aside selfish interest for the broader interest of many more people than oneself. This would mean not just acting in the interests of shareholders, but also in the interests of workers and all other stakeholders, including the communities in which the businesses operate, the national economy that it supports and the environmental impacts it might have on a global scale.

Question 9

Is whistle-blowing ethical?

Answer 9

• -In most cases in the UK, whistle-blowers are protected by the law and in the UK laws they’re treated as witnesses, which means they’re not required to provide evidence of what they’re reporting. It’s also possible for people to whistle-blow anonymously, although this can make investigating the claim more difficult.
• -Social commentators argue that encouraging whistle blowing helps convince businesses to take their corporate social responsibilities seriously, as otherwise their unethical practices are likely to be revealed by one of their own employees.

Question 10

Is whistle-blowing ever unethical?

Answer 10

• -Whistle-blowing is not protected by people who work for the armed or intelligence services. This is because whistle-blowing could risk national security, which can have a negative impact on the public or on public trust in those who are supposed to be protecting them from harm.
• -Contracts between employer and employee are the ethical foundation of a business. Norman Bowie states that ‘whistle—blowing violated a ‘prima facie’ duty of loyalty to one’s employer’ (Bowie, Business ethics, 1991). ‘Prima facie’ means ‘from a first impression’, which Bowie takes to mean until and unless proven otherwise so whistle-blowing that turned out to serve the public good would be the right thing to do. But for him it’s more ethical for an employee to make every effort to solve the problem through the business’ own complaints procedures first, rather than resorting straight to whistle-blowing.

Question 11

What is a Kantians approach to whistle blowing?

Answer 11

• -Kantian ethics emphasizes the importance of honest and promise- keeping through the categorical imperative. A Kantian employee would find it hard to allow a situation where a company broke the rules in what it did, in general, companies are expected to follow the rules.
• -But an employer sticking to a contract seems close to the sense that people should keep their promise which they’ve made for their business.Whistle blowing in a sense involves breaking those promises, going outside the agreed system.
• -But if a company was putting at risk or unfairly exploiting its customers, or some if its employees or even the community it works in (such as not paying taxes) then a Kantian might view this as humans not being treated as ends not only as means for private greed.

Question 12

What is a Utilitarians approach to whistle blowing?

Answer 12

–If a company was putting at risk or unfairly exploiting its customers, or some if its employees or even the community it works in (such as not paying taxes) then a utilitarian’s might resist it, depending on how much harm was done by the particular instance of an activity that was unethical or illegal,
–They would have to weigh the balance of good or harm for all those with an interest or stake in the business continuing to do well, and whether this outweighed what was done or put at risk by the infringement.
–It might be justified for a company to break some rules to succeed in a particular instance, to create greater happiness through the success of the company at that point or on that occasion.
 Here rule and act utilitarian’s will differ. A rule might feel there was a greater good of having companies in general always follow the rules to keep the system of companies ethical, even if it created more happiness to not blow the whistle.

Question 13

What does ‘good ethics is good business’ mean?

Answer 13

o The idea that good ethics is good business- that good business decisions are good ethical decisions.
o Because customers like to do business with companies they trust, it seems obvious that good business will also be good ethics. Businesses that’s act with integrity, honor their agreements, do not cheat their suppliers or act rudely towards their customers should, so, have more customers and make more revenue than business that do not act in the same way.
o But this isn’t the experience that most of us have of businesses. If businesses always practiced good ethics, then why would so many people have been sold expensive insurance products that they were never going to need?
o When a business acts with complete integrity and offers an honest price for an honest job, why do other businesses quickly pounce and entice their customers away with cheaper deals? This self-interest leads many business away from ‘doing the right thing’; the self-interest that is driven by the desire to increase profits, and supported by the business’ shareholders.

Question 14

Is good ethics bad business?

Answer 14

o Competition is the driving force of our capitalist economy: businesses compete with each other for market share, for talented employees and for investors. If being ethical risks increasing costs and reducing profits, then most businesses will take a ‘hard-headed’ decision to stay competitive.
o Customers and investors have very little loyalty to one business if another one produces something they like more, or sells something at a cheaper price. Rather than all business becoming ethical businesses, ethics seems a branding choice that some businesses make in a bid to be noticed.

Question 15

Explain why good ethics is only sometimes good business

Answer 15

o The worldwide recession of 2008 could have been prevented. Although there was nothing illegal about the way international finance went on polling up investments that were inextricably tied into the selling of sub-prime mortgages, it was obviously unethical. This was because the sub-prime mortgages were being sold to people who it was clear didn’t have the means to repay their debt if they couldn’t keep up with their mortgage payments.
o What would have been better, in retrospect, was good ethics, even had that meant lower economic growth, fewer people owning their own homes, lower consumer spending and so fewer jobs.
o If a permanent commitment are too high and ethical standards seem unrealistic in our capitalist culture, then perhaps business should commit instead to involving ethical expertise when important decision for choices are being made.

Question 16

What is a utilitarians approach to the idea that good ethics is good business?

Answer 16

o Utilitarianism fits well with business decision-making as businesses are used too making ‘cost-benefit’ decision.
o Although powerful and easy to integrate into existing business practices, the complexity of business operations and the number of variables involved in business decisions could make a utilitarian approach to ethical business too large for fast-paced business environments. Since businesses are used to putting a number on cost and benefit, businesses might struggle to say how much pleasure or how much pain a decision would cause to each stakeholder involved.

Question 17

What is globalization?

Answer 17

o Globalization describes the integration of economies, industries, markets, cultures and policy-making around the world. Transnational corp. have been key to the development of the global economy: mega- businesses that have taken advantage of communication revolutions that allow investment and products to move seamlessly between countries to locate the different functions opt their businesses in most profitable parts of the world. The size of these businesses means the range of their stakeholders extends form national governments to child workers in developing countries.

Question 18

Explain wages in terms of globalization?

Answer 18

o While the wages paid by transitional corp. in countries like China and India are far lower than the wages that the transitional corp. would need to pay in Western countries, they’re still much higher than what peasant farmers in those countries earn. This has had large economics benefits for stakeholders in these emerging economies.
o Moving production to low-wage countries has had major impacts on stakeholders in the US and Europe. But the shift in manufacturing to low-wage countries has vanished in most developed countries.

Question 19

Explain working conditions in terms of globalization? (give an example of a factory)

Answer 19

o Whilst global business have the power to bring investment to poorer countries, these countries have often had weak government regulations, allowing unsafe working conditions.
o On April 2013, a poorly-made Bangladeshi factory collapsed. The factory had supplied Primark and other companies, like Wal-Mart and Benetton, with low-cost clothing. Over 11000 people died and more then 2500 injured.

Question 20

What is a utilitarians point of view on globalization?

Answer 20

o For Utilitarian’s, the creation of the greatest good can be understood in global terms. 800 million Chinese people have been lifted out of poverty since China began to open up its economy in 1978.
o Supporters of globalisation argue its benefits in utilitarian terms: the good it does massively outweighs its disadvantages, as proved by the extremely small no. of countries that decide to keep trade barriers to block globalisation and protect their own businesses from global competition.
o Critics of globalisation argue that this utilitarianism is the self-justification of the rich countries that want poor countries to open their markets to Western goods produced at the lowest price by their own workers. Instead of making the greatest good for the greatest no., such critics would say that globalisation deepens global inequalities.

Question 21

What is a kantians point of view on globalization?

Answer 21

o Kantian ethics argues that everyone should have the same degree of freedom. He accepted that governments would restrict people’s freedom but only to ensure that everyone had the same freedom. Without government control, humans would act like other animals- the strongest would dominate and the weakest would lose everything.
o Transitional corp. are often more powerful and wealthier than national government, and this has inevitably led some corp. into unethical practices.
o Bowie (Business Ethics: A Kantian Perspective, 1999) suggests Kantian thinking can inform all businesses on how they should organise meaningful work. The Kantian idea of meaningful work means:
–Work that’s freely chosen and provides opportunities for the worker to exercise autonomy on the job.
–Work that supports the autonomy and rationality of human begins; if work reduces autonomy or rationality then it’s immoral.
–Work that should provide a salary sufficient to exercise independent living, and also ensure physical well-being and satisfaction for at least some of the worker’s wishes.
–Work that shouldn’t undermine a worker’s moral development.

Question 22

What does Bowie go on to suggest about the features of a business?

Answer 22

–Consider all affected stakeholders when decision-making.
 Ensure that no stakeholders automatically take priority in any decision.
–Not simply consider the number of stakeholders affected when the interests of one group must be set against another (for instance in deciding that some employees must be made redundant).
–Ensure that profit-making has some duty of beneficence (Actions done for the good of others).
–Ensure that relations with stakeholders should be governed by rules of justice.
(Bowie point about not simply considering the no. of stakeholders affected is a clear swipe at utilitarian ethics).

Question 23

Is corporate social responsibility nothing more than ‘hypocritical window-dressing’ covering the greed of a business intent on making profit?

Answer 23

• -Some businesses market themselves as ethical. They do this by arguing that their products are more moral than others, such as environmentally friendly power generation companies, or products that carry the fair trade logo, indicating they give a fairer wage to the product of the raw material.
• -Although some businesses are deeply motivated buy social concerns, such as green producers, for most, their association with social issues comes from a calculation that this association will help them increase their profits through building up a positive brand image with the customers they want to attract.
• -There have been many cases in which businesses have promoted a public image that has proven to be odds with their actual activities: for example, car manufacturers that have promoted their cars as environmentally friendly when in fact the low emissions of the cars involved were obtained by cheating emissions tests. But, the result of this emissions-test changing being uncovered was that car companies were forced to change their practices.
• -Car producers who had cheated suffered a decrease in sales and loss of trust form the public, while the ones that didn’t cheat received the opposite. There is an external pressure on business to act ethically.
• -Milton Friedman’s argument that ‘the social responsibility of business is to increase its profits’ was that everyone benefits more if businesses do just focus on making money, and that a business isn’t like an individual: a business can’t accept responsibility. For him, it’s hypocritical of society to expect anything else of business than to be intent on making profits.
• -But a lot has changed since Friedman’s 1970 article as environmental concerns mean that it no longer seems right for businesses only to peruse profits without considering the environmental impact. Globalisation means that some transitional businesses can make decisions that impact directly on people, whole communities or even the global economy itself.

Question 24

Can we flourish in the context of capitalism and consumerism?

Answer 24

• -Consumerism grants us to make choices and acquire more products, in which in turn drives the economy. This drive has been behind many technological developments; it had increasingly enabled is to express our responsibility with increasing ownership of private objects. The creation of a mass market for consumer products has revolutionised Western economies.
• -The problem with this approach is that it encourages us (and businesses) to pursue wealth and become greedy. Thecapitalist system reduces the experience of our life to that of an essential materialistic consumer, gaining more things arguably at the expense of human relationships, morality and spirituality.
• -“An infectious greed seemed to grip much of our business community… it is not that humans have become any more greedy than in generations past. It is that the avenue to express greed have grown so enormously” (Alan Greenspan, ‘Infectious Greed: How Deceit and Risk Corrupted the Finical Markets’, 2003).

Question 25

Does globalisation encourage or discourage the pursuit of good ethics as the foundation of good business?

Answer 25

o The transnational corp. embrace the concept of globalisation in their business slogan and missions statements, such as Toyota’s ‘global vision’: ‘Toyota will lead the way to the future of mobility, enriching lives around the world with the safest and most responsible ways of moving people’.
o In the developed West, the industrial revolution of the 19th century was known for its poor working ethics. However know that this has changed, companies are moving to LEDC countries where they are free to pursue this unfair work ethic. Instead of spreading the most basic foundations of ethical business from the developed world to the developing one, globalisation seems instead to have allowed Western businesses to return to a 19th century view of business practice.
o In his book ‘Hard Times’, Charles Dickins criticised this utilitarian approach to business, where every kind of human misery was excused on the basis that industry was bringing the greatest good to the greatest number.
o Many argue that good ethics is a way to stop Western customers from thinking too much about the person who made their products or clothing’s, and at what cost to that person’s dreams and goals.
o Some transnational corp. have made sincere efforts to live up to their mission statements. Such as Microsoft who have donated over $1 billion to charity since 1983. Also not all transnational corp. are Western companies: many of the biggest are now Asian business that have operations in countries worldwide.
o As societies demand more corporate social responsibility form transnational corp., perhaps good ethics will become good global business.