Week 4 Flashcards
What is ethics (and business ethics):
Ethics is concerned about what is right behavior and what is wrong behavior
Business ethics - applies ethics to actions and decisions that companies take.
“what ethical principles do companies or managers follow or are expected to follow”
“what ethical issues and problems can company face and why”
Ethical universalism:
It holds the assumption that considering what is “good” and what is “bad” is very universal and valid everywhere in the world and is not based on culture and religion.
Rather it states that it is based on the mixed ideas of different cultures and many ethical principles can be formulated in a way that all companies should follow.
Ethical relativism:
traditions, religions, and customs lead to different standards on what is considered ethical and what is not.
In case different ethical standards are met, companies consider the local ethical standards as more important than those of their home market.
Integrated social contract theory:
Macro-level - here the universal ethical standards are usually valid and are based on macro contracts
Micro-level - considers local community, department, or organisation and acts within the boundaris of the general ethical standards, but additional standards may emerge at the local level based on micro contracts
Poor governance (cause of unethical behavior):
Lack of manager monitoring by supervisory board can lead to poor governance, which can lead to unethical behavior. Need to have diverse stakeholders in the supervisory board.
Toxic corporate culture (cause):
Usually where there is extreme focus on profit or money, it may create toxic corporate culture. May become difficult to oversee how employees are evaluated, what they are valued for, or to know which employees have a higher status in the company.
Short-term thinking (cause):
When companies place excessive pressure to meet short-term goals, they engage in unethical practices. Often happens in publicly traded companies. Less frequent financial reporting or more integrated fillings may help.
Unethical behavior costs:
Visible costs: fines, penalties, civil penalties following litigation, and reduction in stock price
Internal costs: having to train/retrain employees, administrative costs associated with compliance, and costs to supervise and conduct internal investigations
Intangible costs: losing customers, cost of adopting to law changes, loss of reputation, loss or morale, problems in attracting talent, and higher employee attrition.
Should companies behave in an ethical way:
Moral argument - yes, because unethical behavior is not consistent with humanity and profit is not everything
Economic argument - yes, because there are financial reasons to behave ethically, as unethical behavior causes costs.
Stakeholders:
Primary stakeholders - suppliers, customers, employees, financing institutions, and local communities.
Secondary stakeholders - competitors, NGOs, media, government officials and regulators, customer advocate groups, union leaders, and special interest groups
Stakeholder theory:
States that the primary goal of a firm is to meet its stakeholders demands. Emphasizes that shareholders is only one type of stakeholders, focus on the company should be value maximization.
Stakeholder power/interest grid:
High power of stakeholder/Low needs of stakeholder - meet needs, engage with them, ask for input, as could be risk to your activities
High power/High needs - key player, manage closely, involve in projects, engage on regular basis and work to maintain relation.
Low power/Low need - low priority, monitor them, communicate with them in general terms, keep updated.
Low power/High need - keep informed, use their interest by involving/consulting them on their focal interests, use as ally.
ISO 26000:
An international standard for CSR that uses stakeholder theory.
Principles - accountability, respect for human rights, transparency, ethical conduct, respect for the law, consideration for stakeholder interests, and compliance with the international standards of business conduct.
Key topics: human rights, consumer affairs, good organisational governance, working conditions, doing business honestly, community involvement and development, and the environment.
CSR:
is focused on balancing strategic decisions which serve the company’s shareholders with the duty to be a “good” company. Have to perform at the triple bottom line.
Triple bottom line:
Focused on how companies perform while satisfying the 3Ps: people, planet, and profit.
