Chapter 10: Terms Flashcards
KC: Business ethics
Business ethics is the concern for moral standards and individual choices of right and wrong in the conduct of business affairs. Business ethics is a function of individual values, corporate culture, prevailing social norms and the laws of the land. As a result we can see variations across cultures and changing standards operating at different times. Business ethics sets the framework for the operation of CSR and attention to both are believed to contribute towards business success, although causal links are difficult to prove.
Transcendental ethics or ethical absolutism
assumes that there are absolute concepts of right and wrong, which apply across all societies. Most world religions claim a univer-sal moral code, albeit with variations between them, which is a form of transcendental ethics.
Utilitarianism
is a pragmatic approach to transcendental ethics and is a position that argues that an action is morally right if it produces the greatest good for the greatest num-ber of people. Supporters of the utilitarian position would argue that it is justifiable to lay off a proportion of the workforce to save the company from bankruptcy and protect the jobs of the other employees. Opponents would argue this is an unfair and unethical action upon those losing their jobs.
Ethical relativism or social ethics
ssumes that ethical standards will vary between societies, reflecting their histories and influences. Hence ethical relativism can be dem-onstrated by the fact that the death penalty is acceptable in some societies but not in others. In some countries paying bribes or offering gifts to government officials is a necessary precursor to doing business in that country, while in others it is illegal and potentially damaging to successful business outcomes. There are those who maintain that all ethical standards are socially constructed and that no absolute standards exist. Others would argue that just because a practice like child labour is acceptable in some societies does not make the practice ethical. In business, ethical issues have become more complex as multinational firms operate in countries with different cultures, laws and institutions and there are few universals. There are strong links here with globalization.
Tactical ethics
assumes that people pursue ethical standards because it suits them so to do. Drivers who slow down when they see a speed camera, not out of any belief in the speed limit but to avoid getting caught and paying a fine, are practising tactical ethics. In busi-ness, managers can make rapid improvements to work places prior to a health and safety inspection but ignore health and safety issues thereafter. Many companies produce codes of practice and corporate statements identifying ethical intentions, yet for some this is simply a public relations exercise to gain reputation, when the reality is that such issues are ignored in the practices pursued by the company.
Standards in business
- the values of individuals working in organizations
- the corporate culture created by top management
- codes of conduct operating in individual organizations
- the social norms of the society within which the organization is located
- the prevailing laws, which may vary from country to country.
KC: Corporate social responsibility
CSR involves the application of business ethics. CSR is concerned primarily with the firm and its relationships with its various stakeholders. These include shareholders, employees, customers, suppliers, the community, and society and government. There is also a responsibility towards the sustainability of the environment. The assumption is that such relationships are conducted morally and ethically.
Areas of activity of CSR
- business ethics
- legal compliance
- philanthropy and community investment
- environmental management
- sustainability
- animal rights
- human rights
- employee rights and welfare
- market relations
- corruption
- corporate governance.
The pyramid of corporate social responsibility
- philanthropic responsibility
- ethical responsibility
- legal responsibility
- economic responsibility
Philanthropic responsibility
This is deemed to be discretionary and involves contribut-ing company resources to the community to improve the quality of life. This can include making donations to charities and educational causes, sponsoring the arts, and managers and employees engaging in charitable work in local communities.
Ethical responsibility
is that which goes beyond legal requirements and, according to Carroll, is expected. This involves achieving corporate goals by behaviour that is consis-tent with the ethical values of society.
Legal responsibility
through adherence to the laws of a particular country or, in the case of global firms, different countries is required.
Economic responsibility
to such as shareholders for a return on their investment, to suppliers, customers and employees is also required. This involves being profitable, maxi-mizing earnings per share, maintaining a strong competitive position and being efficient. Carroll recognizes that it is only through these outcomes that an organization can satisfy the needs of its various stakeholders.
Identifying groups
- Shareholders
- Financial institutions
- Customers
- Employees
- Suppliers
- Competitors
- The community
- Society in general
- Government and the law
- The environment
Four perspectives on businesses being socially responsible:
- the moral argument
- business case
- strategic case
- critical perspective
