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Business Ethics Lecturer: Piet Westerhuis Windesheim University,Zwolle The Netherlands.

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Presentation on theme: "Business Ethics Lecturer: Piet Westerhuis Windesheim University,Zwolle The Netherlands."— Presentation transcript:

1 Business Ethics Lecturer: Piet Westerhuis Windesheim University,Zwolle The Netherlands

2 Introducing Business Ethics Lecture 1

3 Overview What is business ethics? Why is business ethics important? Globalization: a key context for business ethics? Sustainability: a key goal for business ethics?

4 What is business ethics? Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed.

5 Ethics and the law Ethics Law grey area

6 Defining morality, ethics and ethical theory Morality is concerned with the norms, values and beliefs embedded in social processes which define right and wrong for an individual or a community. Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for any given situation. These rules and principles are called ethical theories.

7 The relationship between morality, ethics and ethical theory …that can be applied to any situation. … to produce ethical theory … Ethics rationalize s morality … MoralityEthicsEthical theory Potential solutions to ethical problems

8 Why is business ethics important? 1.Power and influence of business in society 2.Potential to provide major contribution to society 3.Potential to inflict harm 4.Increasing demands from stakeholders 5.Lack of business ethics education or training 6.Continued occurrence of ethical infractions 7. Interesting and rewarding

9 Types of misconduct across sectors 24% 21% 19% 22% 20% 21% 27% 24% 25% Putting own interests ahead of org Lying to employees Abusive behavior Nonprofit Business Government © 2008 Ethics Resource Center Source: Ethics Resource Center (2008)

10 Observed ethical misconduct across sectors Source: Ethics Resource Center (2008) 46% 43% 49% 55% 46% 56% 55% 52% 57% 52% 60% 0% 25% 50% 75% © 2008 Ethics Resource Center Nonprofit Business Government

11 Differences across organizational types Shareholder orientation; size and complexity Financial integrity, employee/customer issues Formal, public relations and/or systems-based Shareholders and other stakeholders StakeholdersPublic sector organizations Main priorities in addressing ethical issues Responsible and/or accountable to Main constraints Approach to managing ethics Civil society organizations Small businesses Large corporations Rule of law, corruption, conflict of interest; procedural & accountability issues Delivery of mission to clients; integrity of tactics; legitimacy and accountability Financial integrity, employee/customer issues Formal, bureaucraticInformal, values- based Informal, trust- based General public, higher level government organizations Donors and clientsOwners Inertia, lack of transparency Lack of resources and formal training Lack of resources and attention

12 Globalization: a key context for business ethics?

13 What is globalization? is not the same asGlobalization is not the same as: –‘internationalization’ –‘westernization’ isGlobalization is: a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations. –‘deterritorialization’

14 Relevance of globalization for business ethics Cultural issues Legal issues Accountability issues Globalization can affect all stakeholders of the corporation

15 Ethical impacts of globalization Globalization provides potential for greater profitability, but also greater risks. Lack of regulation of global capital markets, leading to additional financial risks and instability. Corporations outsource production to developing countries in order to reduce costs in global marketplace - this provides jobs but also raises the potential for exploitation of employees through poor working conditions. Global products provide social benefits to consumers across the globe, but may also meet protests about cultural imperialism and westernization. Globalization can bring cheaper prices to customers, but vulnerable consumers in developing countries may also face the possibility of exploitation by MNCs. Suppliers in developing countries face regulation from MNCs through supply chain management. Small scale indigenous competitors exposed to powerful global players. Global business activities brings the company in direct interaction to local communities with possibility for erosion of traditional community life; globally active pressure groups emerge with aim to “police“ the corporation where governments are weak and tolerant. StakeholdersEthical impacts of globalization Shareholders Employees Suppliers & competitors Civil society (NGOs, etc) Government & regulation Consumers Globalization weakens governments and increases the corporate responsibility for jobs, welfare, maintenance of ethical standards, etc. Globalization also confronts governments with corporations from different cultural expectations about issues such as bribery, corruption, taxation, and philanthropy.

16 International perspectives on business ethics

17 Different approaches to business ethics Who is responsible for ethical conduct in business? Who is the key actor in business ethics? What are the key ethical guidelines for ethical behaviour? What are the key issues in business ethics? What is the most dominant stakeholder management approach?

18 Regional differences: Europe, North America, Asia The individual EuropeN. AmericaAsia Who is responsible for ethical conduct in business? Who is the key actor in business ethics? What are the key guidelines for ethical behaviour? What are the key issues in business ethics? What is the dominant stakeholder management approach? Top management Government, corporations Managerial discretion Corporate governance and accountability Implicit multiple stakeholder approach, benign managerialism The corporation Corporate codes of ethics Misconduct and immorality in single decisions situations Focus on shareholder value Social control by the collective Government, trade unions, corporate associations Negotiated legal framework of business Social issues in organizing the framework of business Formalised multiple stakeholder approach

19 Sustainability: a key goal for business ethics?

20 Defining sustainability Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. (World Commission on Environment and Development 1987) Sustainability refers to the long-term maintenance of systems according to environmental, economic and social considerations

21 The three components of sustainability EconomicSocial Environmental

22 Triple bottom line Coined by John Elkington Bottom line thinking suggests sustainability as a goal Three dimensions: –Environmental perspectives –Economic perspectives –Social perspectives

23 Corporate commitments to sustainability “At BP we define sustainability as the capacity to endure as a group: by renewing assets; creating and delivering better products and services that meet the evolving needs of society; attracting successive generations of employees; contributing to a sustainable environment; and retaining the trust and support of our customers, shareholders and the communities in which we operate.” “[Sustainability] means enhancing our relationship with host and partner governments, building consumer confidence in diamonds, and ensuring our activities contribute positively to … both present and future generations.” “Corporate responsibility (CR) at Nokia is a collective effort. We believe that management of CR issues is most effective when sustainability policies and programs are embedded in every aspect of our operations. ” “ [For Toyota, a guiding principle is] ‘contributing to the development of a prosperous society through the manufacture of automobiles.’ ‘Contributing to the development of a prosperous society’ means ‘contributing to the sustainable development of the earth.’” “Values, social responsibility and active sustainability are integral [to] our company culture. We are future-oriented in our approach to important issues such as climate change. We operate a broad range of [R&D] activities and provide trend-setting approaches to the mobility of tomorrow.” CompanySustainability statementSource BP DeBeers Nokia Toyota Volkswagen Sustainability Report,, 2009 CSR Report, 2007 Sustainability Report,, 2009

24 Summary Definition of business ethics Business ethics is vital for business in contemporary capitalism Global view is essential to understand ethical issues Different regions have distinctly different perspective on business ethics issues Sustainability is an important goal for business ethics

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