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What is the relationship between business ethics and law

Law concerned with whats right and wrong
Ethics is what is morally right and wrong
Law minumum acceptable standards. Many issues not covered in law.
Business ethics begins where the law ends.
Business ethics is about a grey area of business no definitive answers pros and cons.
4. Business ethics do not really matter to small firm owners. They will get away with
whatever they can in order to succeed. Critically examine why such a view of small
firms might be pervasive and whether its likely to be accurate.

Similar ethical misconduct occurs across organizations of all sizes

Small organizations lack time and resources available to focus on ethics their
employees are their most important stakeholder
Large organizations have resources to develop sophisticated ethics management
programmes their focus is on profitability and shareholder value.

5. What is globalization and why is it important for understanding business ethics?

Select one multinational corporation based in your home country and set out the
different ways in which globalization might have implications for business ethics in
that corporation.

Is globalization good or bad for society? Who have been the winners and losers?
Low-cost communications and seamless, interconnected global air travel, have
reduced the impact of long distance between people.
Political regional integration has reduced barriers to movement of people and
Globalization is a process which diminishes the necessity of a common and
shared territorial basis for social, economic and political activities, processes and
Deterritorialization: examples include global communications, global products,
global financial systems and capital markets.
Cultural issues:
Globalization encourages a more uniform global culture. But, when a
firm enters into a foreign market, its home country culture often differs
from culture of the host country.
Legal issues:
A firm (except US firms) operating outside of its home jurisdiction is
beyond the reach of its domestic law. US law has extra-jurisdictional
effect, following US firms everywhere they may be. Ethics plays a bigger
role in business decision-making when expat managers cannot rely on
local laws/regulations to solve ethical problems.

Accountability issues:
MNCs exercise significant economic and political clout
MNCs managers are accountable to their shareholders
MNCs are not legally accountable to the communities where they operate
they can unilaterally decide to re-locate factories to other countries to

benefit from lower costs of production; without a legal obligation to

indemnify the communities that they abandon
MNCs are not open to democratic control by the affected people, whereas,
globalization affects all the stakeholders of a corporation.

The study of business ethics has been largely from an American perspective
The ROW has had a different perspective shaped by their respective cultures
(Values, Norms and Beliefs) and historical contexts.
Do not automatically assume that the American approach applies.

6. What is sustainability? To what extent do you think it is possible in the following


Sustainable development: development that meets the needs of the present

without compromising the ability of future generations to meet their own needs
Sustainability comprises environmental, economic and social components
Sustainability refers to the long-term maintenance of systems according to
environmental, economic and social considerations.
Business has multiple goals not just adding economic value, but adding
environmental and social value too.
Environmental perspectives/ethical issues:
Impacts of industrialization on biodiversity
Continued use of non-renewable resources
Production of damaging environmental pollutants
Environmental cost of economic growth
Economic perspectives/ethical issues:
Limits to economic growth before standards of living start to decline
How to develop, produce and market products that secure the long-term
economic performance of the corporation (leading to long-term rise in
share price, revenues, and market share)
Tax avoidance, tax competition and tax havens erode the development and
maintenance of stable public infrastructure that is needed to support longterm economic sustainability

Social perspectives/ethical issues:

Eight Millennium Development Goals
Eradicate extreme poverty & hunger
Achieve universal primary education
Promote gender equality and empower women
Reduce child mortality
Improve maternal health
Combat HIV/AIDS, malaria, other diseases
Ensure environmental sustainability
Develop a global partnership for development
When evaluating business practices, one should consider performance and tradeoffs using the triple bottom line, duly considering environmental, economic and
social sustainability and the respective stakeholders.

Chapter 2
1. What are the main implications of the legal status of corporations for notions of
corporate social responsibility

A legal entity that is distinct from its employees, managers, shareholders and
A corporation (not its shareholders) owns its assets; shareholders own a share in
the company, entitling them to a dividend and a say in decisions affecting the
Corporations are artificial persons, having legal rights and responsibilities in
Corporations are owned by shareholders, but independent of them and not
responsible for debts or damages caused by the corporation
Managers and directors have a fiduciary responsibility to protect the investment
of shareholders, acting in best interests of shareholders

2. Only human beings have a moral responsibility for their actions. Critically assess this
proposition in the context of attempts to ascribe moral responsibility to corporations,.

Joel Bakan (2004) The Corporation feature film

The legal status of the corporation makes it unable to act except in
thoroughly self-interested ways
Corporations are not able to act morally to refrain from harming others;
However, it can be argued that Corporations do have a moral agency that shape
their decisions:
The existence of a corporate internal decision structure (i.e. corporate
policies and a governance structure to support decision-making)
demonstrates that corporate actions cannot be assigned to any individuals
decisions and responsibility alone.
Corporations have an organizational culture a set of values and beliefs
that influences an individuals ethical decision-making and behaviour.

3. What is enlightened self-interest? Compare and evaluate arguments for corporate

social responsibility based on enlightened self-interest with more explicitly moral

Why do corporations have social responsibilities?

They take on social responsibilities because it is in their self-interest ;
business arguments for include:
to build a better brand reputation
to become an employer of choice
to stall legislation or reduce government intervention
to improve their local communities (more economic stability)
Milton Friedman says these are actions to support profit-maximization under
guise of CSR
Moral arguments for CSR:
Corporations have a moral obligation to solve problems (i.e. pollution)
that they create

Corporations should use their significant resources and power responsibly

in society
All corporate actions have social impacts for which corporations should be
held responsible
Corporations rely on the contributions of more than shareholders (i.e.
stakeholders include employees, consumers, suppliers, local communities)
to whom they owe a duty of due consideration when making decisions
affecting stakeholders

4. According to Archi Carll, what are the four levels of corporate social responsibility?
How relevant is this model in a European, Asian, or an African context?

Archie Carroll (1979): Four-part model of corporate social responsibility has 4

inter-related aspects
Ethical and
Philanthropic responsibilities.
For there to be true social responsibility all four levels must be met.
Provides framework for categorizing social responsibilities.
Does not explain trade-offs (profits v. social costs)
Is strongly biased towards US context
Economic responsibility
To be profitable and stay in business
Legal responsibility
To play by the rules; abide my the law
Ethical responsibilities
Do what is right, just and fair even when not required by law (voluntary
Philanthropic responsibility
Act to improve the quality of life of stakeholders
Economic responsibility:
In US, focus is on profitability and responsibility to shareholders
In EU, responsibility extends to employees and local communities
In India, larger corporations give back to the local community by
investing in local infrastructure educational and social projects
Legal responsibility:
In US, government regulations are perceived as interference with private
In EU, the state is expected to enforce accepted rules of the game
Ethical responsibility:
In US, there is a greater trust in corporations than in Europe to act in a
socially responsible manner
In Africa, focus is on good governance & avoiding corrupt practices.
Philanthropic responsibility:
A long-standing US tradition of successful companies; whereas, in EU,
higher taxes are expected to fund the arts, social services

In China & India, companies are expected to share their wealth with local
5. Explain the difference between normative, descriptive, and instrumental versions of
stakeholder theory. To what extent do stakeholders have intrinsic moral rights in relation
to the management of the corporation?

Normative stakeholder theory:

Explains why corporations should consider stakeholder interests
Descriptive stakeholder theory
Explains how corporations consider stakeholder interests
Instrumental stakeholder theory
Explains if it is beneficial for the corporation to consider stakeholder
interests (Friedman would argue it is in the best self-interests of the
corporation to consider the interests of stakeholders

6. Define the extended view of corporate citizenship. Give examples to illustrate the

In mid-1990s, corporate citizenship (CC) was a new term used to address the
social role of the corporation.
There are 3 different perspectives on CC:
A limited view (CC is corporate philanthropy)
An equivalent view (CC is CSR)
An extended view (the corporation is also a political actor)

Limited View
The main stakeholder is the local community; philanthropic actions are part of
being a good corporate citizen.
The corporation gives back to the community because a healthy community
would be better for business.
Corporate citizenship means engaging in philanthropic deeds for ones local
Equivalent view of CC
Corporate citizenship is means the same as CSR where businesses meet the economic,
legal, ethical and discretionary responsibilities imposed on them by their stakeholders.
An extended view of CC
Liberalized citizenship comprises 3 different aspects of entitlements:
Social rights
Freedom to participate in society (right to education)
Civil rights
Freedom from abuses and interference by third parties (the
government); right to own property, free speech
Political rights
Individual has right to vote, hold office
With failure of governments to fulfill their tradition functions, corporations have
increasingly become political actors protecting, facilitating and enabling the
foregoing citizen rights this is the extended view of CC

Social rights (corporation as provider/ignorer):

Corporations have
improved working conditions in sweatshops
Ensured employees a living wage
Provided schools, medical centers, roads
Civil rights (corporation as dis-/enabler):
Corporations have lobbied government to respect civil rights (i.e.
apartheid in South Africa)
Political rights (corporation as channel/blockage):
Political action has been aimed at corporations rather than government to
achieve change (i.e. McEurope and the anti-obesity campaign, see Chapter