Week 2 - Doing what is right. Doing what is right - Not only caring for ourselves but promoting the welfare of others and promoting what is considered.

Week 2 - Doing what is right

Doing what is right - Not only caring for ourselves but promoting the welfare of others and promoting what is considered valuable e.g. education, health. In business we should think about our career, company and social welfare. These can be in conflict so it’s not easy. Introduction

Framework A framework with principles can help guide decision making.

Neoclassical economics principles 1.People have rational preferences between outcomes that can be identified and associated with values. 2.Individuals maximize utility and firms maximize profits. 3.People act independently on the basis of full and relevant information. Neoclassical framework

A narrow framework but has had great influence on management theory and practice It suggests that by maximizing profits for shareholders they can do the best for themselves their company and promote overall welfare. Neoclassical framework

Wider and better for promoting ethical- organizational integrity. Stakeholder orientated framework

CSR activists in 60s and 70s – business persons should look beyond their economic interests to support and drive social causes like poverty or environmental issues. Milton Friedman – “ There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase it profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” Group Question - What do you think? Neoclassical account

Individual preferences define the advantage for the individual and the collective advantage is the sum of the individual advantages. People will only engage in transactions that they see as in their own interest and so individual preferences will be maximized. Pareto efficiency happens when one persons happiness cannot be increased without the other person being lowered. How to link profits and social welfare?

Managers should try to efficiently get products and services to those who are willing to pay the most for them. This satisfies consumer preferences. Shareholders get a return on investment. Successful companies attract capital to provide jobs and taxes contributing to social welfare. Consequently collective preference satisfaction is maximized. How to link profits and social welfare?

Managers are the wrong people to help solve societies problems like crime or poverty – managers have no training or expertise in that area - managers would not allocate resources efficiently due to favoritism. Neoclassical Model - Friedman

Freidman does not explain what moral rules companies are bound by (except to avoid fraud and deception) or why they would be bound by those rules. Freidman's idea on preferences has had philosophical criticism. Profitability for shareholders as an objective tends to reduce a managers attention to short term gains. Managers have shown that they can be effective at helping with societal problems. Criticisms

Is not forward looking enough to consider longer term opportunities and risks. These days is considered poor management. Balanced score card is one suggested alternative Given as a reason for the recent financial crisis. Even if financial success if the main objective this model doesn’t work well. Focusing on short term success

A new subcompact car to compete with foreign automakers Accelerated production – product development and tooling happened at the same time. Crash tests revealed a serious flaw in the gas tank Ford made a cost benefit analysis – it would cost $45million to pay compensation and $137 million to fix the flaw. So they made an unethical decision not to fix the flaw. Ford Pinto example

Johnson and Johnson “ customers come fist and shareholders last, when customer satisfaction is at the top of the list, shareholders do just fine.” Empirical data supports a positive link between a companies commitment to ethics and social responsibility and financial performance. Long term outlook

May not be experts but are not necessarily bad especially when working with other stakeholders together. Ford currently “have never lost sight of the social and environmental goals that are key elements of the business.” Ford global week of caring, Ford dreams, Automotive Industry Action Group. US financial institutions and non-profit group consumer action have launched Moneywise – free financial education. Managers are bad at social issues?

What narrow measurement does the neoclassical model suggest that managers should focus on? How can we link profits and social welfare? What are some criticisms of the neoclassical theory? Questions

Stakeholder management formalized in 1980s by RE Freeman – How managers should identify and align the interests of a wide range of individuals and groups. Has endured some criticisms –Ant capitalistic –Doesn’t provide an objective corporate function –Could be some favoritism behavior from the manager. Another approach – Stakeholder Management

Triple bottom line – financial, environmental and social performance are measured. http://www.economist.com/node/14301663 http://www.economist.com/node/14301663 Balanced scorecard approach. http://www.economist.com/node/12677043 Long term wealth production (Economic value added, Market value added, Shareholder value creation) Other options

Nowadays effective stakeholder management is seen as essential for long term company value production and success. William George “ Serving all your stakeholders is the best way to produce long-term results and create a growing prosperous company… there is no conflict between servicing all your stakeholders and providing excellent returns for shareholders. In the long term it is impossible to have one without the other.” Stakeholder management

General guiding stakeholder management strategies to be fitted to a specific industry. Properly identifying company stakeholders. Stakeholder = Any individual or group whose claim on a firms activities could promote or inhibit company value creation and ultimately company success. Step 1

Within each category in Figure 1.1 managers must identify the specific stakeholders with which they are related. E.g short term vs long term shareholders. Each different group makes a different kind of “claim” on the company. –Employees claim wages –Shareholders a financial return on their investment. –Activist groups may complain about environmental degradation or global warming Step 1

Fill in the specific stakeholder groups and identify the claims each group is making. In principle meeting the stakeholders claims adds value and processes should be established to do so. E.g. Failing to pay suppliers on time could lead to poor quality. It adds social capital “a capability that arises from the prevalence of trust in a society or in certain parts of it… if people who work together in an enterprise trust one another because they are all operating according to a set of ethical norms, doing business costs less.” Step 1

Sometimes even if the stakeholders don’t make a claim we could do what’s best for them and in turn our company. E.g. improving workplace health and safety or educating employees can boost company performance. Step 1

Improving on what a stakeholder can achieve (e.g. through education) in order to generate valuable outcomes and mutually drive company success. Mutual stakeholders – have a shared or joint interest in company success so developing their capabilities helps drive company success –Shareholders –Employees –Suppliers –Consumers Step 2

Ford actively works with suppliers and industry partners to encourage the development and implementation of environmental management systems, life-cycle product and tooling analysis, environmental modeling and other sustainability management tools. Capital one – financial literacy of consumers Deutsche bank – community arts, music and educational programs. Step 2

1 Help all stakeholders by underst anding and meeting their claims 2 Help mutual stakeholders by developing th eir capabilities. Two steps

1. Don’t ignore any group and take some action for 1 or 2. Don’t make “either - or” situations “Either we meet our shareholder claims or our employee claims” 2. Prioritize claims with regard to the potential for short and long term value production and competitive advantage. 3. Think creatively about how to best meet claims and develop capabilities. Also use benchmarking. 4. Establish processes to ensure continual improvement. Competing stakeholder demands

1. It’s not an easily measurable corporate objective function so managerial favoritism can happen. Counter argument - it can be tied to various performance metrics (we will see later). 2. All stakeholders must be treated equally. Counter argument - no stakeholder group ignored but managers can attend to stakeholder claims which better drive sustainable company success. 3. Stakeholder management requires democratic forms of corporate governance. Counter argument – all types of governance are ok. Response to Criticisms

Managers should do what is right for their company and social welfare. In the neoclassical model managers do what is right by optimizing profits for shareholders. However this model is too narrow, doesn't consider long term value creation and is risky. The stakeholder management model is a far better model which includes meeting stakeholders claims, developing capabilities and being socially and environmentally responsible. Summary

Who is a stakeholder of a company? What are the 2 steps of efficient stakeholder management? Give an example of how mutual stakeholders capabilities can be improved? What steps should a manager follow if there is a conflict between stakeholders claims? Questions

Rights, Duties and Obligations

We saw that managing for stakeholders can do what is best for the company and society. However sometimes we can violate important rights and be morally wrong for example underage labor. Management have a duty to do what is right which can conflict with what is perceived as morally good. We will try to identify rights and obligations.

Neoclassic Account Stakeholder management Account Conflict of rights and other obligations Rights held by stakeholders and corresponding managerial duties and obligations. Outline

If managers spend time and money on their own social objectives then they are violating shareholders constitutional, proprietary and fiduciary rights Constitutional rights – they have a kind of taxation without representation. However increasing costs without shareholder approval is an accepted managerial function. Neoclassic

Designed to prevent opportunistic exploitation of trust. Managers should maintain transparency, have truthful reporting and try the best to follow their job description. For example they should not take monetary gain at the companies expense. However as long as managers are genuinely trying to drive company success there is no issue here. Fiduciary Obligations

Shareholders are different that people who posses their own personal property. They do not have direct control over company assets so have an indirect influence on the company. So this is seen as Friedman's weakest argument. Proprietary rights

Can close off consideration of basic rights of employees, suppliers, consumers and communities. E.g. Ford Pinto. So the stakeholder orientated approach is more inclusive and helpful. The diversity of potential obligations makes managerial decision making more complicated. Only stock price view

Right = An entitlement to act in a certain way or be treated in a certain manner. E.g. If you owe someone money they have the right to be paid back. So the other person has a duty or obligation – to pay back the money. Rights based terms

Securities regulations Occupational health and safety regulations Product Liability laws Advertising laws Anti-trust laws. Codes of ethical conduct. Laws, regulations and codes

1.Legal and political rights – based on existing laws, minimal obligations. E.g. Civil rights. UN declaration on Human rights, International corporate law e.g. product safety. 2.Professional rights – View of experts in the field about how professionals should act. Organizations own view. Usually codified. Breaking the code can lead to internal sanctions. E.g. Anelka Types of rights

3. Moral rights – Usually not codified and no accepted general agreement. Different moral systems. Duty based ethics –Immanuel Kant, People have rational and autonomous thoughts. So rights are necessary for protecting and fostering the inherent worth and dignity of human beings, so obligations not to deceive or steal from others them and the duty to develop rationality and autonomy. Other philosophers- Without moral rights and duties social practices can cause mistrust, a lack of co-operation and solidarity and promote deceptive or violent behavior. E.g. Financial crisis. Types of rights

Have highest priority and ought always be respected. 1. Protect something that is vitally important. A. Necessary for promoting individual respect (Human rights) B. Protect private property, liberty, fair competition and ensure shareholder rights (Contracts) 2. Subject to significant and recurring threats 3. Fairly distribute the economic distribution of duties they impose. - If a company cannot respect fundamental rights it is fair to impose economic sanctions. Fundamental rights and duties

Non- discrimination Physical security Freedom of speech Political participation Subsistence Fundamental rights and obligations

“Depend for their importance on an instrumental contribution toward achieving some other good” Not legally or practically essential for indivual integrity and may be infringed upon if in conflict with other rights. Privacy e.g. Doctor- Patient, it can be justifiably infringed upon if there is a strong cause e.g. preventing a crime. Search “Warrant” An employees privacy might be infringed upon if the private information is relevant to their job performance. Derivative rights and duties

What are a managers fiduciary obligations to Shareholders? Give an example of how managers only thinking about increasing the stock price might infringe on someone's fundamental rights? What is the difference between legal rights and professional rights? What is the difference between fundamental and derivative rights? Questions

Some forms of respecting rights involve action others inaction. Negative duties – inaction, e.g. not censoring a movie – respecting freedom of speech. Positive duties – action to support someone who’s rights are being violated. E.g. security forces help those whose right to free speech is being violated. Negative and positive duties

Relationships with stakeholders lead to both negative and positive fundamental and derivative rights and duties. Fundamental right to non-discriminatory treatment –Positive obligation – companies should ensure that they have policies and procedures to protect against discrimination. Derivative right to privacy - Positive obligation – HR department should use security enhanced information technologies to protect employee information.. Negative and positive duties in business

Derivative obligation to protect the environment - Positive obligation – Companies should engage in sustainable business practices. Negative and positive duties in business

Arise when there is a high degree of vulnerability and dependence. E.g Child and Parent, Client and Lawyer. The needier party can be open for opportunistic exploitation. So the benefactors take on special obligations to protect the well being of their subordinate. Special obligations

Manager-Shareholder - Shareholders rely on managers for reports and information. So managers could opportunistically exploit their trust. Managers have a fiduciary responsibility to promote company success, even if it means they cannot make a comprehensive environmentally sustainable business plan. Vulnerability of desperate employees. Vulnerability of trusting consumers. Special obligations in business

Stakeholder rights can conflict. Use the rights-based terminology to help managers prioritize claims. Provide more moral clarity and a helpful framework. Stakeholder Rights and Obligations

First, identify fundamental stakeholder rights and corresponding negative and positive duties. Stakeholders have fundamental rights even if they don’t express them. Identify special obligations - relationships with a high degree of vulnerability. Second identify and prioritize derivative stakeholder claims and corresponding negative and positive rights and duties. Derivative rights can be overridden but that should be justified e.g. privacy rights. Figure 2.1. Stakeholder Rights and Obligations

Right – Fair competition Duties – Always keep laws relating to anti-trust, anti- corruption. Make a formal ethics and legal compliance system. Competitors

Right – Fair return on investment Duties – Fiduciary responsibility e.g. put company success ahead of other interests (except fundamental rights), don’t take too much salary, honest reporting, try to make more democratic governance structures. Shareholders

Rights -Fundamental rights and right to privacy and meaningful work. Duties – Protect fundamental rights, promote meaningful work, ensure that decisions about promotion and demotion are related to job performance. Ensure that private information is related to job performance. Employees

Rights – Safe, non-defective products, honest advertising. Duties – Disclose all safety risks, don’t deceive the consumer, make a quality management system, be extra careful with children's products. Consumers

Rights – Respect contractual terms. Duties – Respect contractual terms, negotiate fairly, promote healthy and safe working conditions down the supply chain. Suppliers

Rights – Legal compliance, fundamental rights, right to healthy and safe environments. Duties – Follow the law, pay reparations if violate fundamental rights, try to engage in CSR initiatives. Government and communities

Give an example of a negative obligation, a positive obligation and a special obligation. What obligations do managers have when dealing with employees? Questions:

Ethics Programs

Ethics “The branch of philosophy that defines what is good for the individual and for society and establishes the nature of obligations, or duties, that people owe themselves and one another. In modern society, ethics define how individuals, professionals, and corporations choose to interact with one another”.

Introduction Lack of practical or philosophical consensus regarding doing what is right so we learnt a framework. Managers drive company long-term success and social welfare by understanding and meeting stakeholder claims, developing and leveraging mutual stakeholder capabilities. They have to remember there are some things they should always do and should never do. They should realize which rights and duties can be justifiably waived when there are stronger competing obligations.

Introduction The third issue is to develop moral character and motivating ethical conduct. Practical decision making with little time information or resources. Mangers might lack the motivation or organizational resources to do the right thing.

Ethics program The goal of an ethics program should be to provide a practical framework to implement ethical-organizational integrity that allows individuals to overcome the practical barriers that stop them from coming to and acting upon ethical decisions.

Becoming ethical We should exercise our mind by learning and practice (discerning particulars) in order to know what ethics requires and we need certain character traits to be a person who acts on ethical obligations. Ethics is not only about applying rules but transforming ourselves and our behavior to reflect higher ideals about what is right.

Aristotle - Ethics People desire or aim at having friends and family, working and acquiring money, being proud of what they accomplished, having sense of self-worth, being entertained, humored and experiencing pleasure and being on the side of what is just and right. Excessively focusing on work and money may inhibit our ability to maintain meaningful relationships. Greed. Vice – failing of excellence.

Aristotle Virtue – balanced character traits. Virtuous people rationally assess situations, react appropriately, learn from their mistakes and develop their character. For example if they give away money they would give it to the right person at the right time in the right amount. They do not let out emotions cloud our moral vision.

Excess, Virtues and Vices Recklessness, Courage and Cowardice Gluttony, Moderation and Abstinence Wasting Money, Generous, Stingy See table 3.1

Right judgment and action 1. Learning – e.g studying the mechanics of a bike or how to ride well. Studying leadership. 2. Habitual action e.g Practicing riding a bike. Leading teams. Don’t exploit children Vs How should we structure our supply chain to prevent exploiting children. Supply chain - intellectual knowledge will not provide a conclusive answer to that question.

Right judgment and action Also some business persons fail to act even though they know what is ethical. Ethical business people require knowledge, practical experience and correct character traits. We should make a culture, organizational practices and other environmental conditions to support this kind of improvement.

BB&T values Individuals character is very important Employees should act consistently with values. 1. Reality 2. Reason 3. Independent thinking 4. Productivity 5. Honesty

BB&T values 6. Integrity 7. Justice 8. Pride 9. Self-Esteem 10. Teamwork

Ethics programs Designing processes for continual moral and intellectual development. Legal Vs Ethical, Compliance programs Vs Ethics programs Compliance – rule definition, dissemination, detection and punishment. Ethics – incentivizing ethical behavior, encouraging active executive leadership and support, ethics training

US federal sentencing guidelines Connection between well-defined, shared and culturally embedded organizational values and ethical commitments and lawful conduct Large organizations should encourage small organizations to implement effective compliance and ethics programs, even across national and cultural boundaries. Guidelines give suggestions for structuring compliance and ethic programs

International Organization for Standardization: Quality orientated approach to management sys. 1. Leadership creates and environment where stakeholders are involved in organizational change and provides a clear and inclusive vision of the company’s future. 2. Goals are best achieved when persons and resources are managed within clearly established organizational processes. 3. Processes are part of a management system. 4. Commitment to continual improvement 5. Plan-do-measure improvement cycle

Ethics program 1. Planning and documenting clear expectations and objectives. 2. Responsible, accountable, process and systems orientated actions. 3. Measurement and assessment. 4. Systematic commitment to becoming ethical.

Documentation Relevant information for employees as well as the principles guiding the ethics of the organization. Stakeholder input needed.

Ethics vision statement 1. Long-term success linked to ethical and legal conduct. 2. Importance of stakeholders e.g. commitments to product quality and safety. 3. Character traits e.g. honesty 4. Executive commitment to ethics program 5. Framework for developing more specific objectives 6. Reference supporting documents e.g. code of conduct

Higher ideas http://www.ti.com/corp/docs/investor/gov/statement.shtml

Ethics code of conduct 1. State executive commitment to promoting ethics. 2. Clearly spell out duties and obligations, highlighting fundamental rights, special obligations and legal compliance duties. 3. Specifically relate to job functions. E.g. sales and marketing, referring to ethics codes for professional groups. http://www.smei.org/?16 4. Use examples of how to solve common issues

Ethics code of conduct 5. Be clear about repercussions 6. Direct employees to an ethics officer if they have an issue they can’t solve by themselves. 7. Reference other ethics documentation

Everyday documentation Organizational procedures, work instructions, forms etc. Closing a sale – should include rules about disclosure and non-deception. Mortgage lenders -Customers rights. Selecting and evaluating suppliers – what are sweatshop conditions.

Questions 1. Give an example of excess, virtue and vice according to Aristotle. 2. What 3 things do ethical business people require? 3. What is the difference between a compliance program and an ethics program? 4. Give 3 things that should be in an ethical vision statement? 5. Give 3 things that should be in an ethical code of conduct?

Organizational Processes – Ethics in everyday operations 1. Regularly document flow of organizational processes and identify stakeholder interactions, expectations and rights within these processes. 2. Regularly conduct gap analysis between theory and practice. 3. Prevent unethical conduct before it occurs. Checking and reducing the likelihood is preferable to increasing the means of detection.

Organizational Processes 4. Management should come up with a list of measurable (tied to financial metrics) objectives and initiatives relative to each organizational process and assign responsibility for their completion.

Measurable objectives and initiatives –Improving stakeholders perceptions about ethical performance –Comply with internationally recognized environmental and social standards. –Promote supplier compliance with standards –Reducing cases of illegal conduct. –Employee awareness training and moral development. –Ethical conduct is considered in issues of hiring, promotion

Ethical decision making and moral philosophy Principles or rules that people use to decide what is right or wrong –Presents guidelines for determining how to settle conflicts in human interests –Guides businesspeople in formulating strategies and resolving ethical issues No single moral philosophy is accepted by everyone

Teleology Considers acts as morally right or acceptable if they produce some desired result such as pleasure, knowledge, career growth, the realization of a self interest, or utility Assesses moral worth by looking at the consequences for the individual, called consequentialist

Deontology Refers to moral philosophies that focus on the rights of individuals and on the intentions associated with a particular behavior –Believe that individuals have certain absolute rights Rule deontologists believe that conformity to general moral principles determines ethicalness Act deontologists hold that actions are the proper basis on which to judge morality.

Cultural Relativism From the relativist perspective, ethical behavior is gained subjectively from experience Descriptive relativism relates to observing cultures Metaethical relativists understand that people naturally see situations from their own perspectives –No objective way of resolving ethical disputes between cultures Normative relativists assume that one person’s opinion is as good as another’s

Virtue Ethics What is moral in a given situation is what the situation requires and what a person with a “good” moral character would deem appropriate

Justice Involves evaluations of fairness or the disposition to deal with perceived injustices of others Distributive justice: An evaluation of the results of a business relationship Procedural justice: Based on the processes and activities that produce the outcomes or results Interactional justice: Based on an evaluation of the communication processes used in business relationships

Ethical decision making procedure 1.Gather the facts 2.Identify all stakeholders 3.Identify stakeholder claims 4.Think about long and short term consequences 5.Identify obligations to stakeholders

Ethical decision making procedure 6. Consider your character and integrity 7. Think creatively about potential actions (best practice) 8. Form an argument that supports your decision – An argument is a set of premises or statements that logically lead to a conclusion.

Example of an argument Forcing employees to stand at their workstation for over 12 hours without a break is consistent with accepted definitions of torture. The right not to be tortured is a fundamental human right.

Ethical Continual improvement From recycling to a sustainable company. Honest and critical self-reflection Commitment to eliminating the causes of unethical behavior Act on processes in ways to promote ethical conduct.

Ethical continual improvement Have regular audits. Anonymous stakeholder feedback systems for reporting unethical conduct. E.g. ethics hotlines. Implement a system of corrective action (prevent problems from happening again). E.g “5 whys”, purchasing “kickbacks” – systematic changes in hiring and supplier evaluation process.

Ethical continual improvement Regular reviews of ethic program effectiveness by executive managers. E.g GRI report framework for economic social and environmental sustainability.

Leadership All employees should lead by example and actively promote an ethical organizational culture. Cosmopolitan leadership models – inquisitiveness, learning, critical reflection and deliberation, a sense of belonging and purpose, a sense of mutual recognition and interdependence.

Leadership Transformative leadership model – Leader as a mentor who recognizes individual importance and uniqueness, promotes intellectual stimulation, conveys an overreaching sense of purpose, acts with the upmost integrity and serves as a role model.

Leadership Styles Coercive leaders Authoritative leaders Democratic leaders Pacesetting leaders Coaching leaders

Leadership and conflict Strategic action – exert influence through inducements or threats. Can damage the sense of solidarity and integrity. Communicative actions – Attempts to reach mutual understanding and co-ordinate behavior in terms of a collective agreement as to the way things should be. Can build a sense of solidarity and integrity.

Leadership and conflict Rules for conversations: –Respect other participants –Able to “put yourself in their shoes” –Respect absent stakeholders –Allow participants to speak freely –Speaking truthfully –Find values and norms supported by all affected and put them into practice.

Leadership and conflict Best solution is conversation and debate, making strong fact-based arguments and rhetoric. Agree on what is right and fair. The result of the conversation should be used for future ethical documentation. Can be challenging to implement in practice but is an important stakeholder management ability. Sometimes strategic action could be needed.

Summary There are intellectual and motivational limits to ethical behavior. An effective ethics program will create a culture to act with integrity using a systematic and process orientated approach to intellectual and character development.

Questions 1.Give a practical example of how ethics can be included in an organizational process? 2.Give 2 examples of how to promote ethical continual improvement? 3.What is the difference between strategic and communicative actions? 4.What is the best way to solve conflict over an ethical decision?

Moral Philosophy and Fairness

1.Would you turn the trolley down the side track? Why? Discussion

2. Would you push the Fat man over the bridge? How is it different to the first situation? Discussion

3. Would take out the organs from the 1 healthy person to save 5 patients needing transplants? Discussion

4. Would you kill the goatherds? Discussion

5. Suppose a bomb has been planted in New York City, and it will explode in twenty-four hours unless the police are able to find it. Would it be right, as a last resort, for the police to use torture to extract information from the suspected bomber about the location of the bomb? Discussion

6. Would you use an atomic bomb on Japan to end the war quickly? Discussion

Consequentialist moral reasoning locates morality in the consequences of an act. Will there be more happiness in the world that will result from the thing you do. Maximize utility Consequentialist moral reasoning

7. Consider the example of the Romans throwing people to lions in the Coliseum. If enough cheering spectators derive great pleasure from this violent practice, is this ok for a utilitarian? Discussion

Categorical moral reasoning locates morality in certain absolute moral requirements in certain categorical duties and rights regardless of the consequences. Categorical Moral Reasoning

There are certain fundamental individual rights that are so important that no government can override them. Such as life liberty and property Libertarians

Persons should not be used merely as means to the welfare of others, because doing so violates the fundamental right of self- ownership. My life, labor, and person belong to me and me alone. They are not at the disposal of the society as a whole. Libertarians

Aristotle - the whole point of law is to shape character, to cultivate the virtue of citizens, to make possible a good way of life. Kant - the purpose of law, the point of a constitution, is not to promote virtue. It's to set up a fair framework of rights within which citizens may be free to pursue their own ideas of the good for themselves. Kant

Immanuel Kant (1724–1804) - An alternative account of duties and rights. It depends on the idea that we are rational beings, worthy of dignity and respect. Kant’s emphasis on human dignity informs present-day notions of universal human rights. Kant

Respecting human dignity means treating persons as ends in themselves. E.g. lying to your mother out of concern for her feelings would arguably use her as a means to her own contentment rather than respect her as a rational being. This is why it is wrong to use people for the sake of the general welfare, as utilitarianism does. Pushing the heavy man onto the track to block the trolley uses him as a means, and so fails to respect him as an end in himself Kant

If we act out of some motive other than duty—doing something because it’s right, not because it’s useful or convenient, such as self-interest, for example, our action lacks moral worth. E.g. A child, goes into a grocery store to buy a loaf of bread. The grocer could overcharge and the child would not know. The grocer realizes that, if others discovered he took advantage of the child in this way, word might spread and hurt his business. For this reason, he decides not to overcharge the child. The shopkeeper acts honestly only for self interest. Kant

Freedom - Kant would call this heteronomous determination— doing something for the sake of something else, for the sake of something else, and so on. E.g. going to College to get a higher paid job. Kant

When asked about a murderer at the door looking for his brother he replied: Lying to the murderer is wrong, not because it harms him, but because it violates the principle of right: “Truthfulness in statements that cannot be avoided is the formal duty of man to everyone, however great the disadvantage that may arise therefrom for him or for any other.” Kant

When the Emperor asked Kant not to speak publicly about religion he replied: “As your Majesty’s faithful subject, I shall in the future completely desist from all public lectures or papers concerning religion.” Kant

8. Are there things that money shouldn’t be able to buy? What are they? Discussion

We would not sacrifice our fundamental rights and liberties for social and economic benefits. Rawls

“The difference principle” Only those social and economic inequalities are permitted that work to the benefit of the least advantaged members of society. E.g. Paying doctors more than bus drivers - we could improve the situation of those who have the least—by increasing access to health care for the poor. Rawls

“Difference principle” Corrects for the unequal distribution of talents and endowments without handicapping the talented. It encourages the gifted to develop and exercise their talents, but with the understanding that the rewards these talents get in the market belong to the community as a whole. Rawls

1.Feudal or caste system: fixed hierarchy based on birth. 2. Libertarian: free market with formal equality of opportunity. 3. Meritocratic: free market with fair equality of opportunity. 4. Egalitarian: Rawls’s difference principle. Theories of distribution justice

We do not deserve our place in the distribution of native talents. We do not deserve the superior character than enables us to make the effort to cultivate our abilities for such character depends in good part upon family and social circumstances in early life for which can claim no credit. So if the tax system requires the lucky to hand over some portion of their income to help the disadvantaged, it doesn’t deprives them of something they morally deserve. Rawls

9. It’s not fair if the children of poor parents have much lower prospects in life than the children of rich parents merely because of the family they were born into; therefore, steep inheritance taxes are justified. Do you agree? Discussion

The narrative conception of the self “Once you accept this narrative aspect of moral reflection, you will notice that we can never seek for the good or exercise the virtues only as individuals. We all approach our circumstance as bearers of particular social identities. I am someone's son or daughter, a citizen of this or that city. I belong to this clan, that tribe, this nation…What is good for me has to be the good for someone who inhabits these roles.” Macintyre

“I inherit from the past of my family, my city, my tribe, my nation a variety of debts, inheritances, expectations and obligations. These constitute the given of my life, my moral starting point. This is, in part, what gives my life its moral particularity." Macintyre

10. Do you agree that there is a kind of obligation of solidarity or membership? Patriotism is not a virtue but a vice, a prejudice in favor of one's own kind that we should try to overcome." Do you agree? Discussion

11. What is moral character? Is it what you tend to do, or is it your beliefs and your attitudes? Discussion

Crisis Management

What should we do in a crisis? Learning Objective

Not paying attention to ethics in crisis management can cause the collapse of firms. How to create a corporate culture to deal with a crisis. Analyze the BP oil spill. Outline

Union Carbridge in India – poisonous gas leak caused the deaths of 1000s. The firm has paid $470m in compensation and several executives have been convicted. Starbucks – Charged emergency response teams for bottles of water after the 9/11 attack – internet based consumer boycott. Negative Examples

Johnson and Johnson – nationwide recall of all faulty products. Turned out to be an isolated criminal act. Now Tylenol is one of the most trusted brands in the market. Starkist – “Dolphin safe” labels in 1990 gave it a competitive advantage. Positive examples

“A decisive moment caused by a severe ethical lapse requiring the firm and its leadership to decide whether to react based on a set of ethical values and principles or based primarily on financial objectives.” Product defect Environmental disaster Illegal conduct Breaches of human rights Ethical crisis

There is an opportunity for organizations to strengthen and communicate their commitment to responsible management They can emerge stronger and more productive Opportunity

Explosion on Deep sea oil drill killing 11 workers 5 million barrels of oil released into the ocean Environmental damage to wildlife Damage to fishing and tourism Collapse in share value BP

Honesty, keeping promises, integrity, transparency and loyalty. Management failures in communication, procedures, training and supervision of employees, supervising contractors and appreciating risk. All undermined trust in BP Bp has set up Opentalk a confidential helpline for people to speak up when the code of conduct is being violated. Trustworthiness

Not trying to shift blame for your mistakes. Apologize and prepare to compensate those that have been harmed by your mistakes. BP – tried to blame first the rig owner and then the cement contractor Halliburton. BP – Tried to make residents give up their right to sue. Responsibility

Before the crisis they failed to install a safety device. Before the accident a survey showed that 46% of workers feared reprisals if they raised safety concerns about the drilling. Mr. Hayward went out on his yacht during the recovery effort. Caring

Taking reasonable steps to help protect the environment and helping your community. Oil and gas trade body API lobbies against reform and modernization of safety regulations. So an industry self-policing body might not work well. Citizenship

One offshore veteran “If you got hurt they just pushed you aside and put someone else in”. Putting profit before people. Drilling vessels contracted on days rates. Relentless demands to speed up the process. Respect

BP made a $20billion fund to help pay for the disaster. Have spent about $40billion. Not yet clear whether that is fair or not yet. BP has revenues of $240billion a year. Fairness

1. Establish ethical values 2. Implement an ethics program 3. Give ethical leadership. Ethical corporate culture

Be honest and transparent with information Remain visible Accept fault if you are at fault and apologize Take reasonable steps to fix the problem and stop it from happening again Demonstrate sensitivity to those harmed Ensure the natural environment and local community are protected Respect the rights of all stakeholders Ensure timely and fair compensation Crisis management principles

Everything done by the company and communicated to the stakeholders should always be based on core ethical values like trustworthiness, responsibility, caring, citizenship, respect and fairness. Excessive reliance on profit maximization has led to many crises, e.g. Nike. A firm can have an opportunity to show its higher core ethical values in a crisis. Summary

Give 3 examples of causes of ethical crises? Give 3 examples of mistakes that were made by BP? Give 3 common examples of ethical leadership failures and the antidotes? Questions

Corporate governance

Discuss developments in Anglo-American corporate governance since the ‘90s Review international standards for corporate responsibility and accounting. Discuss corporate accountability in relation to bribery and corruption Learning Objective

Organizations are run by managers not shareholders. Corporate governance – systems put in place to monitor the managers and ensure that the organizations obligations are met. Since 1990’s increasing attention on CG due to scandals such as Enron. Corporate governance is also an issue for government companies and public private partnerships. Introduction

The agency effect assumes that people are at heart untrustworthy. The managers of a company have a duty to work for the owners benefit. Managers have control over information and can use this for their own advantage e.g. large pay packages. Introduction

Failure of large corporations harm society. E.g RBS, Olympus. Positive organizational ethics VS psychopaths (no conscience, empathy or concern for others) Improving organizational performance. Reasons for corporate governance

To check the corporate governance performance of a company. Go to http://finance.yahoo.com/q/pr?s=MSFT Here you can see the corporate governance score for Microsoft on the right of the page. To understand the score click on the link below or go to. http://issgovernance.com/quickscore Choose a company that you are interested in and find their corporate governance score by typing its name into the "get profile for" search box near the top of the page. http://finance.yahoo.com/q/pr?s=MSFT http://issgovernance.com/quickscore Question

Table 7.1 Organisational principles and human behaviour

Table 7.2 A selection of studies analysing corporate governance and corporate performance (Continued)

Figure 7.1 Significant recent reports and developments in corporate governance

Cadbury committee – increased use of non executive directors to counter the agency effect and splitting the roles of the CEO and chairperson. Greenbury committee – failed to deal with the issue of executive pay. Stock options for executives misused. Hampel committee – ‘combined code’ for listing on London stock exchange. Board of directors responsibility for relations with stakeholders but responsible directly to shareholders. Developments in corporate governance

Sarbanes-Oxley Act – Specific responsibilities on CEO and CFO on signing accounts. Limiting auditors “other accounting services” Myners’ committee – Institutional investors should be more active. OECD principles – Similar to UK combined codes. Higgs and Smith committee – Non-executive directors(NED) and Audit committees. Developments in corporate governance

1. The majority of Enron's board were NED’S so is that really effective? 2. NEDs spend less time than executive directors, does that not mean more power for executive directors? 3. The vast majority of NED’s are executive directors at other companies. Are they trustworthy? Generally developments in CG have been mainly focused on disregard for shareholders with little reform. As yet unanswered questions about NEDs

Table 7.3 Average increases in the remuneration of the directors of the FTSE 100 companies for 2000–2 compared with movements in the FTSE 100 share index over the same period

Figure 7.2 Other interesting developments in corporate governance that have not impacted upon UK and USA stock exchange listing requirements.

Table 7.5 Fatalities as a result of injuries at work in the UK.

“Corporate governance is concerned with holding the balance between the economic and social goals and between individual and community goals.. The aim is to align as nearly as possible the interests of individuals, corporations and society. “ The King report on CG- South Africa

Standards set a minimum benchmark of behavior against which organizations can be compared and judged. Organizations often receive a badge. Organizations need to show their customers that they behave in a corporately responsible way. International standards in CG

Global Reporting Initiative- Economic, Social, Environmental Factors. Accountability 1000 - quality assurance standard bases on systems e.g. planning and auditing. Social Accountabilty 8000 – recent standard for corporate behavior. Ethics compliance management system – a code of ethics and a code of conduct- process orientated. International standards

CG needs to be driven by active shareholders who hold their company to account. Many investors with small shareholdings = little influence. Issues like executive remuneration, board elections, environmental issues have attracted shareholder activism. Resolutions at general meetings or voting against initiatives or talking to the media. Institutional investors – issues with interest and executive networks Shareholder activism

How to judge how bad a bribe is 1. Does the briber gain an unfair advantage? 2. Is the amount of the bribe greater than what is customary for gifts etc? 3. Is it illegal? 4. Does it cause a loss of trust in society? Governance, Bribery and corruption

Demand side approach – Change the climate in countires where bribery is widespread so that people do not ask for bribes. Supply-side – Encourage companies to act with integrity and refuse to pay bribes. This approach is more popular. UK bribery act 2010 – all companies operating in the UK which pay bribes are subject to prosecution. Failing to prevent an agent from bribing is also an offence. ‘Facilitation payments’ also banned. Hospitality allowed. Reducing bribery

Corporate manslaughter act 2007 – –Special offence of corporate killing –Only when corporations conduct fell below what was ‘reasonably expected’ –Caused by ‘Management failure’ –Individuals can still be liable for killing. Corporate Manslaughter

Corporate mens rea – not that any individual in the company could have foreseen the harm but rather that in a properly structured and organized company the risk should have been obvious. Health and safety – Work accidents. Council of Europe proposal – assumes guilt of the accused and the accused should show evidence of its due diligence. Corporate manslaughter

What is the main difference between anglo-american corporate governance and South African? Compare 2 international standards of corporate governance. What are the strengths and weakness of the Corporate manslaughter act, the council of Europe proposals and the application of ‘mens rea’? Questions

Visit the following webpages and read the recent news http://www.ecgi.org/ www.icgn.org http://www.bbc.com/capital/story/20140416-cowardly- corporate-lionshttp://www.bbc.com/capital/story/20140416-cowardly- corporate-lions Internet tasks

Network governance

Look at the criticisms of the current system of corporate governance and suggest an alternative. Learning Objective

Current CG system -A cold view of individuals and firms based mainly on economics. -Mainly a top-down, transactional approach Network governance –A more humanistic approach involving multiple stakeholders in the governance process. –Introducing various boards at different levels. –These act as checks and balances and cultivate transparency and trust. Main idea

Transaction costs – people can abuse the system in their own interests. To reduce this we can make short term incentives to encourage people to work well for the company e.g. a bonus based on profits. So a transactional leader sets goals and makes incentives and ensures compliance. Transactional leader

People are relationship focused. They are guided by human values and prioritize long term relationships. People are trying to balance their interests with the interests of people around them while following their values. People want personal recognition and personal growth. People are more motivated if included in decision making. So we can make committees or boards at all levels. Humanistic Leadership

Communication breakdowns – information can get lost in hierarchical layers, can be misinterpreted, biased or false. Whistle blowers can be fired especially when the companies reputation is at stake. Individual biases and group dynamics – Overconfidence, anchoring, escalation of commitment, Group think, Group shift. Lack of eternal accountability and control – appoint own auditors and set their own pay. Information overload – Not enough time or not educated enough. Criticisms of current CG system

Minimized communication risks – Cross checking improves communications. Separation of powers – Info more diverse and balanced. Reduced information overload – see graphic. Organizational thermostats Network governance

Corporate Social Responsibility

Outline Introduction Financial benefits of being green. Voluntary standards for green companies, investors an d lenders. Case Study ICBC and ANZ. Conclusions

Introduction International treaties and agreements and national laws. Banks can implement voluntary environmental standards f or their company, investments and lending. Difference between banks in developed and emerging mar kets.

Financial benefits of being green Improving reputation Attracting private investment Risk management

Improving reputation Improving reputation correlated with financial performance and attracting and retaining employees. Orlitzky ’03 and M cKinsey ‘09 Especially in emerging markets financial benefits can be g ained as recognized leaders. EIRIS ’09 Avoiding scandals.

Risk management Increasing regulation can mean a huge extra financial cost. Emerging market investment managers regarded risk man agement as the most important benefit. IFC ‘09

Attracting investment Green securities Active green funds Green index products - Dow Jones Sustainability indices, FTSE4GOOD, The CSI ECPI China ESG 40 Equity Index Green fixed-income securities (bonds) Green private equity

Attracting investment Assets under management (AUM) by UN Principles of Re sponsible Investment (PRI) signatories: $15tr from $60tr. I FC ‘Sustainable’ AUM: $6.5tr, in Emerging Markets : $58-300 bn. IFC 75% of investors factor climate change information into th eir investment decisions. CDP

Voluntary standards for companies OECD Guidelines for Multi-National Enterprises (2003) ISO 14001 Environmental Management System (EMS) (1996) UN global compact Global Reporting Initiative (GRI) (2002)

Voluntary standards for investors UN Principles of Responsible Investment (2006) “We will incorporate Environmental Social Governance (E SG) issues into investment analysis and decision-making processes.”

Voluntary standards for lenders GRI Financial Services Sector Supplement (2008) The Equator principles (IFC) (2006)

The Equator Principles Project finance deals >$10m. Covers 85% of this financing globally. Involves the following stages: 1.Screening and categorization. 2.Social and environmental assessment. 3.Risk management planning. 4.Monitoring.

GRI Financial Services Sector Suppl. 1. Procedures for screening clients Industry Classification Client screening tool Client Environmental Information data base and Classification System 2. Processes for monitoring clients' compliance. 3. Processes for improving staff competency

Rating agencies and indexes VIGEO - Ethibel index SAM - Dow Jones Sustainability Index EIRIS/KLD – Footse4good Index CDP - CDP leadership index

SAM EIRISVIGEOCDP Comprehensiveness of EMS (ISO 14001). ★★★★ Quantity of green house gas emissions in one year. ★★★★ Quantity of energy consumed in one year. ★★★ Comprehensiveness and scope of environmental policy. ★★★ Interaction with environmental policy makers and published information on environmental issues. ★★★ Hierarchical level of the highest placed person with environmental responsibilities ★★★ Infringement of laws and regulations. ★★★ Environmental standards of suppliers. ★★★ Common rating agency factors

Case Study – ANZ and ICBC Australia New Zealand Bank (ANZ) - No.1 bank on the Do w Jones sustainability Index since ’07. Industrial and Commercial Bank of China (ICBC) – No.1 on e among the Chinese large mainland banks in ESG.

Companies in China -Poor environmental standards compared to other emergin g market economies. -View ‘Green’ as compliance. -Laws on environmental protection are not always impleme nted locally.

Comprehensiveness of EMS ANZ: -ISO14001 -Assesses impact on the environment and sets performance targets. -Measures and reports progress ICBC: - No EMS reported.

GHG emissions and energy use ANZ: -Detailed data for GHG emissions. -Data for energy use broken down by type e.g. fossil fuels ICBC: -Basic data for GHG emissions just business transport. -Only energy use data for head office reported.

ANZ: -Specific policies for forests; water; mining and minerals; and greenhouse and energy. -Use international standards (e.g. the Forest Stewardship Council). ICBC: -Restricts loans to 14 high polluting and energy consuming industries and promotes credit to energy saving and environmental protection industries. -Based on national government agencies. Comprehensiveness of Environmental Policy

Interactions with policy makers ANZ: -Membership and participation in international bodies. -Regular discussion with elected representatives, policy makers and regulators. ICBC: - Close communication with relevant state bodies on environmental issues on a national level.

Green Credit– Industry Classification ANZ: -‘Integrated sustainability analyses’ -Four environmental indicators - greenhouse gas emissions, primary energy use, managed water use and land disturbance calculated for 135 sectors of the economy. -Separated into high low or medium risk. ICBC: - “two high” classification. -14 industries with high energy use and polluting industries described as high risk.

Sustainability

Sustainable development tries to make sense of the interactions of three complex systems: the world economy, the global society, and the Earth’s physical environment. Sustainable development calls for socially inclusive and environmentally sustainable economic growth. Introduction

What causes economic growth? Why does poverty persist? What happens when billions of people are suddenly interconnected through markets, technology, finance, and social networks? Is there a way to combine economic development with environmental sustainability? Some Questions

The world population continues to rise rapidly, by around 75-80 million people per year. There will be 8 billion by the 2020s, and perhaps 9 billion by the early 2040s. Population

The world economy is vast, growing rapidly (by 3-4 percent per year in scale). It is highly unequal in the distribution of income within countries and between countries. The poorest of the poor face the challenges of insufficient nutrition, lack of health care, unsafe shelters, and the lack of safe drinking water and sanitation. Economy

Humanity is changing the Earth’s climate; the availability of fresh water; the ocean chemistry; and the habitats of other species. The Earth itself is undergoing changes in the functioning of key processes – such as the cycles of water, nitrogen, and carbon – upon which life depends. The environment

Core functions of government: Social services such as healthcare and education; infrastructure such as roads, ports, and power; protection from crime and violence; promotion of basic science and new technologies, implementation of regulations to protect the environment. Governance

Multinational companies are often the most powerful actors. They should: Obey the law, respect the natural environment, and help the communities in which they operate. However they often carry out: Bribery of officials to bend regulations or tax policies in their favor; tax evasion; money laundering;environmental damage. Governance

What is the current world population? What is sustainable development? Questions

Economic development

World bank (GDP per capita) High income > $12,615 Middle income > $1,035 Low income < $1,035 Income

To take price-level differences into account, the GDP per capita is sometimes measured using a common standard of international prices, such as prices for foodstuffs, rent, haircuts, movie tickets, legal fees etc. This unit of account is called GDP per capita at Purchasing Power Parity. (PPP) GDP per capita at Purchasing Power Parity

The richer parts of the world tend to be more urban; the poorer parts of the world tend to be more rural. The Americas are very highly urbanized societies, with generally 80% or more of the population living in urban areas. Tropical Africa is still quite rural, with around 25% - 35% of the population living in urban areas Urban/Rural Divide

All future population growth on the planet is urban population growth. The proportion of the world living in urban areas is going to rise from around 53% in 2013 to around 60% by 2030 and 67% by 2050. Prosperous, healthy, and resilient cities are going to be a core challenge of sustainable development. Future

The Gini coefficient varies between 0.0 and 1.0, with 0.0 meaning complete equality of income (every person or household has the same income), and 1.0 signifying complete inequality (all income is owned by one person or household, with all the rest having no income). Income inequality within countries

History – Slaves, indigenous populations. Access to education Urban-rural divide Discrimination Government policies – favored insiders Reasons for inequality

Human Development Index HDI It uses the logarithm of income per capita. Using the logarithm, each higher level of income boosts the HDI by a smaller increment. The HDI also uses indicators of educational attainment, such as mean and expected years of schooling, and indicators of health, e.g. life expectancy Measuring wellbeing

27 th in GDP per capita 12 th in the HDI Kuwait is 3 rd in GDP per capita and 54 th in the HDI South Korea

World happiness report

Industrial revolution – divergence Imperialism – divergence End of Imperialism after World War 2 – convergence Technological developments – convergence Economic reforms – convergence e.g. China now $10,000 GDP per person. Convergence or divergence?

Why do some countries stay poor?

Geography – Temperate zones or costal zones developed faster. Disease areas. Imperialism Clinical economics

The modern economist - Instead of offering one simplistic diagnosis (“stop your corruption”), one prescription (“cut government spending”), or one referral (“go the IMF for treatment”), the effective development practitioner should make a diagnosis that is accurate for the conditions, history, geography, culture, and economic structure of the country in question. Clinical economics

1.Poverty trap e.g. Africa 2.Bad economic policies 3.Financial insolvency of government. 4.Physical geography e.g. Haiti 5.Poor governance 6.Cultural barriers 7.Geopolitics e.g. Afghanistan Poverty Checklist

Geography

Landlocked – Build roads, internet and relations Water stressed - Irrigation Heavy disease burden – Public health Natural Hazards – Detection and preparation Lack of fossil fuels – energy efficiency and renewable energy Policy

Culture

Pisa Education rankings

On list (2) bad policies; (3) financial insolvency; (5) poor governance; and (7) adverse geopolitics. Role of politics

Role of government in Infrastructure development e.g. China Health, education and social services Rule of law e.g. deregulation of finance.

Corruption perceptions index

Sub – Saharan Africa Landlocked countries e.g. Afganisatan, Nepal, Mongolia, Laos Countries still in poverty

Environment

Planetary boundaries

Because of industrial activity, the GHG concentrations have risen dramatically in the past century, and the earth has already warmed by around 0.9 degrees C (centigrade) compared with the temperatures before the Industrial Revolution. On current trends, the Earth will warm by several degrees C by the end of the 21st century. CO2 is the inevitable byproduct of burning fossil fuels. Fossil fuels have created the modern economy. Climate change

The carbon dioxide in the atmosphere dissolves in the ocean, producing carbonic acid (H2CO3). Carbonic acid dissociates to an H+ ion and a HCO3- ion (bicarbonate). The rise of H+ signifies the increased acidity of the oceans. This rising acidity threatens various kinds of marine life, including corals, shellfish, lobsters and very small plankton, by making it hard for these species to form their protective shells. Ocean Acidification

Ocean pH changes

Ozone depletion

The ozone level in the upper atmosphere protects human beings from receiving too much ultraviolet radiation from the sun. Without the scientific discoveries, technological insights, and global agreements, ozone depletion would be a grave threat to humanity. Ozone depletion

Farmers must put nitrogen, phosphorus, and other nutrients into the farm soils in order to ensure decent yields on their crops. Without fertilizers, yields would still be around 500kg to 1 ton per hectare, rather than the 3-5 tons or more that farmers can achieve on their grain production. The process of “eutrophication” (high nutrient concentrations leading to algal blooms and then hypoxia) is already occurring in more than 100 estuaries around the world. Pollution of nitrogen and phosphorus

Of the total amount of freshwater that humanity uses, about 70% is used for agricultural production; about 20% is used by industry; and the remaining 10% is for household use, meaning cooking, hygiene, and other household uses. Farmers around the world are tapping into groundwater aquifers, taking water out of the ground faster than it is being recharged by rainfall. US Midwest, northern China, and the Indo-Gangetic plains of Northern India and Pakistan. Overuse of freshwater resources

Human land use change, whether for farms, pastures, or cities, is causing a massive disruption to ecosystems and species survival in many parts of the world. Land use and biodiversity

The Living Planet Index of Biodiversity

When we burn coal, biomass, diesel fuels, and other sources of pollution, small particles called aerosols are put into the air. Very fine particles of diameter less than 2.5 micrometers (written as PM 2.5) can cause life-threatening lung disease. Aerosol loading

Beijing – Smoggy morning

Environment and growth

C02 in Atmosphere

Because of our fossil fuel reliance, we would be seeing a great increase in frequency of the heat waves already evident in the maps. We would mostly likely be seeing mega-droughts, mega- floods, more extreme storms, more species extinction, more crop failures, a massive sea level rise over time, and a massive acidification of the oceans as that CO2 dissolves into the ocean and produces carbonic acid. Problem

“Deep decarbonization” of the energy system 1.Energy efficiency 2.Electrification 3.Low-carbon electricity Solution

Just as we are going to need to find a new energy pathway based on energy efficiency and low carbon energy supplies, we are also going to need to find new farm systems, adapted to local ecological conditions and causing much less ecological damage. What is common to nearly all of the world’s major farm regions is that the farm systems are still not sustainable. Agriculture and the environment

There is also good reason to believe that lower fertility rates would be the truly preferred choice of most households if they have affordable and convenient access to family planning; education for their girls; child survival; and decent jobs and the absence of discrimination for women. Population and the environment

Sustainable development goals

At Rio+20, leaders from all over the world took stock of 40 years of international environmentalism and 20 years of three big environmental treaties. What they realized was very unsettling. All of the evidence showed that the diagnosis first made back in 1972 was fundamentally correct: that the challenges of combining economic growth with social inclusion and especially environmental sustainability were still unmet, and indeed were intensifying. UN Conference on Environment and Development (UNCED)

“SDGs should be action-oriented, concise and easy to communicate, limited in number, aspirational, global in nature and universally applicable to all countries while taking into account different national realities, capacities and levels of development in respecting national policies and priorities. We also recognize that the goals should address and be focused on priority areas for the achievement of sustainable development, being guided by this outcome document. Governments should drive implementation with the active involvement of all relevant stakeholders, as appropriate. SDGs

SDG 1: End extreme poverty including hunger. SDG 2: Achieve economic development within planetary boundaries SDG 3: Ensure effective learning for all children and for youth for their lives and their livelihoods. SDG 4: Achieve gender equality, social inclusion, and human rights for all SDG 5: Achieve health and wellbeing at all ages. SDGs

SDG 6: Improve agricultural systems and raise rural productivity. SDG 7: Empower inclusive, productive and resilient cities. SDG 8: Curb human-induced climate change and ensure sustainable energy. SDG 9: Secure ecosystem services and biodiversity and ensure good management of water and other natural resources. SDG 10: Transform governance for sustainable development. The public sector, business and other stakeholders should commit to good governance SDGs

Good governance for sustainable development includes transparency, accountability, access to information, participation, an end to tax havens, and efforts to stamp out corruption. The international rules governing international finance, trade, corporate reporting, technology and intellectual property should be made consistent with achieving the SDGs. The financing of poverty reduction and global public goods including efforts to head off climate change should be strengthened and based on a graduated set of global rights and responsibilities. No. 10

“By defining our goal more clearly, by making it seem more manageable and less remote, we can help all people to see it, to draw hope from it and to move irresistibly towards it.” JFK

The first of those tools is called backcasting. Rather than forecasting (or guessing!) what will happen in 2040 or 2050, one sets the target for a certain date, and then analyzes the problem from the target to the present (backwards in time) in order to chart a course between today and the future goal. Backcasting is about asking: How can we get from here to there? Backcasting

What does the policy terrain really look like? What are the big challenges? What are the technological barriers to overcome between now and 2030 or other future dates? International Technology Roadmap For Semiconductors, where leaders in the industry get together and map out the steps ahead needed to ensure the continuation of Moore’s Law in the upcoming decades. Technology road mapping

There are four major dimensions of sustainable development. There are the traditional three – economic development, social inclusion and environmental sustainability. Those three require in all cases the underpinning of a fourth dimension: good governance. Good governance will play a central role in the eventual success or failure of the Sustainable Development Goals Conclusion

Globalization and MNCs

By using concepts such as systems, competition and connectivity, we can get very close to an understanding of what globalization is and how it works. We can look at maps of airplane routes, shipping routes, or Facebook communications across the globe. We can look at the undersea cable system that makes the internet possible. Globalization

A process that promotes profits around the world in various markets. Surveillance of the world‘s electronic communications by intelligence agencies. A way to implement rules and regulations that will reduce poverty and labor exploitation,prevent the overfishing of the oceans, and slow the relentless warming of the Earth's atmosphere. How do we see globalization?

International arrangements called for close cooperation between nation-states, as opposed to the destructive economic competitions between nations of the 1930s. New international financial agreements and institutions, such as the International Monetary Fund and the World Bank, provided a new kind of global financial stability. Post WW11 globalization

The expansion of the welfare state has been made possible by government regulation that created a balance of power between governments, large corporations, and the financial sector. Post WW11 globalization

Neoliberal market globalism. This is based upon a deregulation of the corporate sector, the privatization of public enterprises and institutions, tax reductions for businesses and individuals, the setting of limits on the powers of labor unions, reducing the role of government in the formulation of social policies, and deregulating capital flows. Post 1970s globalization

NGOs, such as Human Rights Watch, Amnesty International, Transparency International, and Greenpeace, among many others. Global responsibilities to poor and vulnerable people as well as to the endangered planet we all inhabit. Post 1970s globalization

Why are global financial regulation and deregulation such important issues? Discussion question

Maritime - there are about 100,000 large ships carrying cargo and passengers on the oceans of our planet. State- owned Chinese companies control one fifth of the global container fleet. Air - it is estimated that air travel accounts for up to 5% of the warming effect of greenhouse gas emissions. Transportation networks

Thomas Friedman argues that technological connectivity could accomplish nothing of value in the absence of social, political, and cultural connections that create some real understanding across these boundaries. Media and the internet

How could global media do more to create a greater sense of global community and reduce conflict between different cultures and societies? Discussion Question

The goal of cyber censorship is the development of a domestic internet--a self-contained world that offers, for example, Chinese versions of many of the online services and entertainments offered by major social networking sites like Facebook. The non-democratic states, at the World Conference, defended state control of electronic media. Cyber control

Many governments feel that like the phone network, the internet should be administered under a multilateral treaty. ICANN, in their view, is an instrument of American control over cyberspace. Its private sector approach favors the United States, while Washington retains oversight authority. Cyber control

Political conflict over the nature of media freedom. Google in China China – Internet being used to make unjust accusations against China. The important thing is the preservation of social stability Global communications governance

Should national governments control the access their citizens have to the global Internet? DISCUSSION QUESTION

NSA (US), GCHQ(Britian) combined operation exercises a control over global communications traffic that makes the powers of ICAN look almost insignificant. Connectedness is often identified with the presumed benefits of cultural exchange or community cohesion. Connectedness can also be synonymous with invasion of privacy. Cyber surveillance

How do the revelations in 2013 about electronic data collection by the U.S. National Security Agency (NSA) involve the relationship between the nation-state and multinational corporations? Discussion Question

Governance

Global markets frequently undermine the capacity of governments to set independent national policy objectives and impose their own domestic standards. Therfore we should accept the decline of the nation state as a sovereign entity. The nation-state

1.Global market for commodities and cultural products. 2.Global markets for corporate enterprises. 3.Global markets can reward a small group of citizens while inflicting hardship on a larger group. 4.MNCs lack of loyalty to the state. E.g. Colgate, GE 5.Global labor market. 6.Unrestricted movement of investment capital not concerned with social consequences. 7.MNCs tax avoidance schemes Challenges to nation states

Greider – a redefinition of national interest, at least for the United States, in which government policy assumes that advancing the well being of shareholders in global firms as opposed to the general population,workers, and communities, provides the highest overall benefit. Balance of power

It is nation states, not corporations, that are charged with protecting their citizens from crime, discrimination, the abridgment of basic rights, unemployment, and impure food and drugs, among other hazards to safety and well being. A Euro barometer survey released in May 2008 showed that nine out of 10 of those interviewed identified with their native countries, while only half felt a similar attachment to the EU. Balance of power

Can multinational corporations inspire the same degree of loyalty in most people as nation-states can? What can the nation-state do for its citizens that multinational corporations cannot do? DISCUSSION QUESTION

The European Union could be seen as a kind of prototype of a globalized world in which nation states are required to accept a great deal of regulation and standard-setting by a central authority. Regulations, directives and decisions, recommendations. The EU

Environmental Policy, Privacy rules, Humans rights. Loss of national sovereignty. The EU

State capitalism can mean direct state ownership and management of companies or the promotion of national champions that are privately owned but receive overt or covert support from the government in power. State capitalism

In addition to creating laws, rules, and regulations, governments have aided the private business sector through loans, bailouts, and legislation that benefits domestic corporations at the expense of their foreign competitors. During the financial crisis of 2007/2008, the US government invested well over $1 trillion in the auto industry, the two federal mortgage companies, "too big to fail" banks, the "too big to fail" insurance company, AIG, and the Troubled Asset Relief Program. State Capitalism

State capitalism has become an attractive alternative to the recent failures of liberal capitalism to maintain global economic stability. The Chinese state is a majority shareholder in the largest Chinese companies, and the regime's politicians exercise tremendous influence over economic policies and practices. E.g. Most bank loans go to state companies. State capitalism

The government makes a decision that special resources are going to be invested in this particular corporation because it represents a promising enterprise, and one that is going to be able to compete well in the international market with other big multinationals. It is likely to be better developed, wealthier and technologically more sophisticated than most other corporations. A national champion

1.It appears to be a safer alternative to the stresses and strains and risks of market globalism. 2.It appears to offer a way to accelerate economic development in societies they're far behind in terms of being able to invest in social and economic development. 3.It hands a great deal of power to politicians in authoritarian governments who are used to exercising unchecked power. 4.It makes it easier for emerging economies to learn from the rest of the world Reasons for state capitalism in emerging economies

1.Lack of incentives for managers to invest well. 2.Lack of incentives for the state to regulate. 3.Opportunities for cronyism and corruption. 4.Lack of openness to innovation and foreign thinking. Reasons against state capitalism

What are the advantages and disadvantages of state capitalism as an economic strategy? Do state capitalist enterprises tend to increase or decrease the power possessed by nation-states? DISCUSSION QUESTIONS

Globalization and MNCs (2)

Globalization is said to promote, among other good things, economic growth, job creation, democracy, the global market, information flows, cultural contact, and travel. Disadvantages are said to include the enriching of the privileged and the impoverishing of the rest, poor working conditions, environmental degradation, the erosion of social safety nets, and outsourcing. Capitalism and social justice

- Social justice is he achievement of decent living conditions, gainful employment, civil liberties, and social opportunity for all people, rather than for a particular social class or elite. - Origins and consequences of extreme types of inequality are included in the globalization process. Social justice

“Globalization has harmed the developing world by promoting destabilizing loans and investments, by failing to stop the growth of poverty, by exporting to rich societies many of the best-educated members of poor societies, and by maintaining agricultural subsidies in rich countries where the average European cow gets a daily subsidy greater than what more than half of the people in the developing world have to survive on.” Joe Stiglitz

The offshore world is not a bunch of independent states exercising their sovereign rights to set their laws and tax systems as they see fit. It is a set of networks of influence controlled by the world's major powers, notably Britain and the United States. Offshore tax havens

Britain's financial elite makes big profits from the expired empire's assortment of island statelets, such as Bermuda and the Caymans, and a micro territory like Gibraltar. Offshore tax havens

They are places, whether it's on an island or whether it's in the middle of the city, where people are allowed to conduct financial transactions essentially in secret, keep things off the books, often be untraceable, and not be vulnerable to the collection of taxes. Offshore tax havens

2013, the Tax Justice Network, a reform group based in Britain, released an estimate of the wealth that is hidden offshore. Their overall figure for the end of 2010 was $32 trillion. Offshore tax havens

UBS handed over 4,450 client names to the US Department of Justice and paid a fine of $780 million for having enabled US clients to evade paying taxes on their Swiss deposits. Recently Credit Suisse paid a fine of $2.6 billion http://www.bbc.com/news/business-27478532 Offshore tax havens

The International Consortium of Investigative Journalists, a Washington-based group, released 2.5 million files documenting the offshore bank accounts and shell companies of wealthy clients and tax dodging corporations. This WikiLeaks-like action produced instant results in forcing states to become more proactive in stopping for tax avoiders. E.g. Luxembourg said its bank secrecy policy would expire in 2015. Offshore tax havens

Prime Minister David Cameron, tried to make a 10-point plan to combat global tax evasion for the G8. However in 2011 Cameron's government had passed a law that excused UK-based corporations from paying tax on their offshore earnings, an action one commentator called a corporate coup d'etat. Offshore tax havens

No G8 country supported Britain's call for registries of beneficial ownership of companies to be made public. He could not get Russia and Germany to publish national action plans to combat tax evasion. And he failed to get the G8 leaders to agree that an agreement on automatic exchange of tax information should be open immediately to developing countries. Offshore tax havens

Prime Minister Cameron did manage to get all 10 of Britain's Overseas Territories and Crown Dependencies to sign on to a set of core principles for the sharing of tax information. The G8 declaration, that called on global officialdom to fight the scourge of tax evasion, rang hollow. Offshore tax havens

In the US the tiny state of Delaware has enjoyed legendary status as the ultimate and tax shelter for corporations. As of 2012, Delaware was home to almost a million corporate entities, public and private. Offshore tax havens

Developing countries, according to Shaxson, lost up to $1 trillion dollars in illicit financial outflows just in 2006. $10 for every dollar of foreign aid flowing in. Many Africans see the globalization project as a form of colonialism in disguise. Offshore tax havens

African Policy Group had proposed three topics for the G8 agenda, a global system of tax information sharing, the identification of the real owners of bank accounts, and public reports by multinational corporations about their tax payments in all of the countries in which they conduct business. G8 misgivings about handing over sensitive tax details to countries not deemed competent or trustworthy enough to handle it with care Offshore tax havens

Why do offshore tax havens represent a form of social injustice? Discussion Question

Time will tell whether public outrage over offshore tax evasion will eventually force the hands of the Western politicians who have shown so little interest in consigning the offshore system to the dustbin of history. Offshore tax havens

Global Regulation

Regulation is a process that occurs over stages that include agenda setting, negotiation, implementation, monitoring, and enforcement. Regulation

Global regulatory initiatives can originate with international organizations such as the United Nations, the World Health Organization, the International Whaling Commission, or the World Anti-Doping Agency. Global regulation

Specialized agencies of the United Nations having regulatory responsibilities include the International Maritime Organization, the International Civil Aviation Organization, the Food and Agricultural Organization, the International Labor Organization, the International Telecommunications Union, and the Universal Postal Union. Global regulation

Global regulation can also be undertaken or supported by various Nongovernmental Organizations, or NGOs, such as Greenpeace, Amnesty International, Human Rights Watch, or Transparency International. Global regulation

Regulatory ambitions are often associated with value systems, ethical judgments, and standards of decent conduct. International organizations such as the United Nations were created to represent ideal norms of this kind. Global regulation

A practical regulatory function might be assumed to be the administration of a global technology-based system, such as shipping or aviation or telecommunications. An idealistic regulator would presumably be concerned about human rights or human health. Global regulation

Global regulation is a necessary idea that possesses neither an infallible unitary doctrine nor an absolute mandate to impose itself on international disputes. Global regulation

Which kinds of organizations sponsor global regulations, and why do they do so? Discussion Question

About five million people die each year due to tobacco-related illness. In short, there appear to be grounds for declaring tobacco a global menace that should not be tolerated anywhere on Earth. Global regulation - Tobacco

The story of how the global tobacco industry has prospered despite the regulatory measures enforced by the WHO and by many countries is a lesson in how political power is exercised in the age of market globalism. It is where the goals of a set of multinationals are clearly in conflict with public health and welfare, and where globalization of values such as accountability and corporate responsibility are under severe pressure. Global regulation – Tobacco

The tobacco industry's defense of the global smoker has taken the form of lawsuits filed against countries that try to pass anti-smoking legislation. Australian Packaging Law of 2012 – British American Tobacco and Japan Tobacco International, filed suit against the Australian government claiming that the Tobacco Plain Packaging Act amounted to an acquisition of property. Global regulation - Tobacco

In 2010, for example, Philip Morris International sued the government of Uruguay on the grounds that it was over-regulating tobacco. The Philip Morris lawyers claim that Uruguay's placement of disturbing pictograms and expanded health warnings on cigarette packages violated a bilateral investment treaty. Global regulation - Tobacco

Tobacco companies had made efforts to prevent implementation of public health policy and efforts to reduce funding of tobacco control within UN organizations. The industry's strategies included discrediting key individuals, lobbying journalists. Cultivating relationships with WHO staff, consultants and advisers, placing industry consultants in positions at WHO, thereby compromising the integrity of policy making at WHO. Manipulating the scientific and public debate about the health effects of tobacco, and secret monitoring of WHO meetings and conferences. Global regulation - Tobacco

The history and politics of the Antarctic whaling dispute present us with a particularly interesting case study in the complications of global regulation. Global regulation - Whaling

The international whaling commission, or IWC, was formed in 1946 in accordance with the International Convention for the Regulation of Whaling. After decades of inaction, whale populations were drastically declining, and the IWC adopted a moratorium on commercial whaling. Global regulation - Whaling

Greenpeace, according to a 2008 statement, will continue to act to defend the whales, but will never attack or endanger the whalers. Greenpeace takes partial credit for the 1982 moratorium on commercial whaling that put an end to the whaling activities of the Soviet Union, Brazil, Peru, Chile, and Spain, thereby saving thousands of whales from harpooning and death. Global regulation - Whaling

The International Whaling Commission, like many other transnational regulatory bodies, is an international organization whose 89 members are all nation states, its transnational authority derives from the authority conferred on it by nation states. The 1982 United Nations Convention on the law of the sea operates on the same principle, since it confers authority to take action in defense of marine life only on sovereign states. Global regulation - Whaling

Since a moderate NGO like Greenpeace can be challenged by a radical NGO like the Sea Shepherds, there are styles of global regulation that correspond to a variety of temperaments and a variety of regulatory ambitions that are rooted in ethical or spiritual values. Global regulation - Whaling

International bureaucrats who fly first class to meetings and five star hotels are not likely to be eager reformers. Less privileged idealists will be less attached to the status quo, and will be more willing to shake things up. Think Greenpeace. The radical idealist, like Paul Watson, or think Julian Assange, are in a class by themselves. Global regulation - Whaling

Does the performance of the International Whaling Commission legitimate the aggressive tactics of the Sea Shepherd Conservation Society that are directed against the Japanese whaling fleet in the Antarctic Ocean? DISCUSSION QUESTION

ADA, is a non-governmental organization. It's a world anti-doping code is a non-governmental document. Neither WADA nor the National Anti-Doping Agencies possess the police powers that governments do. This situation has motivated WADA to pursue relationships with governmental police agencies that have the power to make searches and arrests. Global regulation - Sports

The founding of WADA represented a cooperative arrangement between the IOC and a number of interested governments. Its declared objectives are to provide comprehensive leadership in the anti- doping campaign, to persuade anti-doping in international sports organizations to comply with the WADA code, to promote the involvement of public authorities and leaders in the anti-doping struggle, to encourage anti-doping education, to create a scientific research program in support of anti-doping, to ensure that anti-doping laboratories meet international standards. Global regulation - Sports

In other words, WADA's function as a world agency is to play an inspirational role, to motivate people and institutions with real power to do their part to combat doping. David Howman – “We cannot win the war – that’s just not possible. we can win battles along the way.” Global regulation - Sports

Nationalism, the idea that nations gain in stature by developing world class athletes has subverted doping control for decades in two ways. Global regulation - Sports

How can anti-doping officials persuade elite athletes that they are duty bound to abstain from this rising tide of enhancements? How can these officials convince them that they have an obligation to compete drug free to preserve the integrity of their own subculture Global regulation - Sports

WADA's alliances with law enforcement agencies against international drug traffickers are not an effective strategy to control doping by elite athletes, because there are too many global trafficking networks to keep track of. Global regulation - Sports

WADA's regulatory objectives are being undermined by the dramatic expansion of pharmacological enhancements throughout modern and emerging societies. We are currently experiencing an expansion and a normalization of pharmacological enhancements along with the resulting favorable attitudes. Global regulation - Sports

How would you estimate the chances of success for the global anti- doping campaign against the use of performance-enhancing drugs by elite athletes? What do you think are the principal obstacles to success? Question

Human rights and MNCs

National institutions, including national courts, often apply international human rights norms directly to the acts of private parties. This may be developed at the international level in order to overcome the inability or the unwillingness of States to control non- State actors. Threat of economic globalization to regulatory capacity of States. Introduction

Developed countries are in favor of a Code protecting MNCs from discriminatory treatment. Emerging countries are trying to ensure that MNCs would be better regulated, and in particular would be prohibited from interfering either with political independence of the investment-receiving States or with their nationally defined economic objectives. Developed Vs Emerging countries

International Labor Organization - Tripartite Declaration OECD Guidelines These impose on States certain obligations of a procedural nature. Under the OECD Guidelines, States must set up national contact points (NCPs) in order to promote the Guidelines and to receive ‘specific instances’, or complaints by interested parties in cases of non-compliance by companies. Current international agreements

The Global Compact - based on ten principles By 2013, more than 10,000 companies had joined, from some 130 countries, which makes this by far the broadest corporate social responsibility initiative measured by its number of participants. http://www.unglobalcompact.org/AboutTheGC/TheTenPrinciples/in dex.html Current international agreements

UN Guiding Principles on Business and Human Rights This is a soft law instrument, clarifying certain expectations for States and companies, but doesn’t impose new, binding obligations. Recent developments

Focused on gaining broad consensus across the different stakeholder groups for a normative framework and authoritative policy guidance to bring greater coherence, larger-scale effects, and cumulative change than the prior patchwork of limited and uncoordinated business and human rights schemes was able to generate. UN Guiding Principles on Business and Human Rights - Objective

The GPs comprise thirty-one principles, each with commentary elaborating its meaning and implications for law, policy, and practice. They encompass all internationally recognized rights, and they apply to all states and all business enterprises. UN Guiding Principles on Business and Human Rights

1. The state duty to protect against human rights abuses by business, through appropriate policies, regulation, and adjudication. 2. An independent corporate responsibility to respect human rights, which means that business enterprises should act with due diligence to avoid infringing on the rights of others and to address adverse impacts with which they are involved. 3. Greater access by victims to effective remedy, judicial and non- judicial. UN Guiding Principles on Business and Human Rights

On 13 September 2013, calling the Guiding Principles on Business and Human Rights a 'first step' on which further initiatives should be build, the permanent representative of Ecuador to the UN, Luis Gallegos, on behalf of a group of States, presented a declaration calling for the adoption of a legally binding instrument within the UN for regulating MNCs and holding them accountable for human rights abuses. Case

Requires States Parties to monitor and regulate the operations of business enterprises under their jurisdiction, including when acting outside their national territory. Requires States Parties to provide for access to an effective remedy by any State concerned. Provides for an international monitoring and accountability mechanism. Provides for protection of victims, whistle-blowers and human rights defenders. Ecuador's proposal

The key issue is that the category of business and human rights is complex e.g. human rights law, labor law, anti-discrimination law, humanitarian law, investment law, trade law etc. The point is that the human rights treaty would have to be so abstract that it is hard to imagine it providing a basis for meaningful legal action. John Ruggie’s answer

Inadequate enforcement is the main shortcoming of the current system. Would it require establishing an international court for corporations? Or would it be enforced by states? Developed and emerging economies disagree that the treaty would apply equally to MNCs and domestic companies. John Ruggie

What are the advantages and disadvantages of these proposals – the classic route of an intergovernmental, legally binding instrument proposed by Ecuador, or the route grounded in 'polycentric governance', as advocated by John Ruggie during his tenure as the Special Representative of the UN Secretary-General on the issue of human rights and transnational corporations and other business enterprises? Question

Week 2 - Doing what is right. Doing what is right - Not only caring for ourselves but promoting the welfare of others and promoting what is considered.

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Week 2 - Doing what is right. Doing what is right - Not only caring for ourselves but promoting the welfare of others and promoting what is considered.

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