Won’t post slides

Business Ethics - Need to read articled

- Trolley case for next class
- Assignment for last class

Assignment and grading

- Group work – 60%
o 5 per group
o Poster session (lecture 3 – 21.11.19) – 10-20%
o Final presentation 30% + report 50% (lecture 5 – 12.12.19)
- In class exam (lecture 4 – 28.11.19) – 40%
o Easy: check if got basic concepts
o 20 questions
- Individual participation +/-2 points !!!

Agenda
1. Introducing Global Business Ethics
2. The social responsibility of multinational corporations
3. Environmental issues in global business
4. The political role of MNCs and Corruption
5. Wrap up, Group Presentation and Feedback

1. Introduction

What do you know about global business ethics?

- CSR
- Industries -> textile
- Environmental issues
- Child labour
- Corruption
- Legal vs. ethical/moral Prof. doesn’t make
o Moral a big distinction
§ More universal between the two
o Ethics
§ Specific
- Practical (Why? How? What should we do? In which ways should we act?)

- Fighting poverty worldwide

o E.g. corporations should offer products for affordable prices
- Exploiting distant others
o E.g. Bangladesh textile factory crashed
§ There were reactions because of that
§ Is one of the two response better? US or European or are both not
good enough?
 o What fair value chain
o Global fiscal policy
- Using natural resources
o E.g. burning forest in Amazonas
o Natural resources
- Trading with non-democratic regimes
o E.g. should work with China? – like Google should they provide data of
Chinese for the Chinese government
- Global fiscal policy
o E.g. Apple

Global Ethics issues

- When agents, institutions, practices, activities in one or more countries affect
negatively or could bring a benefit or reduction in harm to residents in one or more
countries
- Agents one or more countries should take certain actions
- Solving problems require coordination across countries
o E.g. Prisoner dilemma
o Asymmetric information – Information need to be shared/coordinated

Multinational corporations
1. Walmart
2. Sinopec Group Walmart and
3. Royal Dutch Shell oil industry
4. China National Petroleum
5. State Grid
…
9. VW
10. Toyota

Defining MNCs (or TNC)

= An entity composed of a parent enterprise that controls assets of entities in countries
other than its home country plus these foreign affiliates (legal approach, UNCTAD)
- MNE: economic entity that may not have legal standing

25% of worlds GDP 2010 (based on VA)

The global 500

- Generated §32,7 trillion in revenue 2018
- Represented by 34 countries (maybe in terms of headquarters)
è Huge

Intra-firm trade
- Huge part of trade is inter-firm trade
 MNCs- 30% of global trade
1. About 1/3 of world trade is intra-firm
2. Both trade in intermediate and final goods
3. Intra-firm in services in also important
4. Intra-firm trade increases mainly for services

As big as states?
- E.g. Shell
- MNCs are as big as states

MNCs comparable to medium states

MNCs core to global business ethics

- Are global and powerful
- Negatively affect others globally
- Could benefit others/ reduce harm
- Should they?

2. Defining Ethics

Definition of ethics
- What should I/we do?
- What is right and what wrong
- Legal: written down
o E.g. in US can shoot somebody when enter property unasked

What is ethics?
What should I/we do?

Positive law
= Are the laws duly enacted by a property instituted branch of government
- Provide important conduct-guiding info
- Should be responsive to the idea of (normative) idea of justice

google - bening neglect (denying)?

- Civil disobedience – think law is unjust and go against law (illegally) in order to
change a law e.g. environmental (sitting strikes), Hongkong
o Depends on the quality of the democratic process
§ The less democratic the process the more it seems right to go against
it (civil disobedience)
§ The more democratic the less right/justified it seems
o How much it is supported by the public
 Learn these
Normative justice
- Desirable principle for organising social institutions which regulate human
interaction
- Justified in social contract theory
- Grounded in value of equity (equal moral worth of all)
- Norms that we are willing to enforce by law

Enough to follow law?

- Unjust laws (e.g. apartheid)
- Legal vacuum (non-compliance, law lagging behind societal changes, coordination
issues, cost…) in particular at global level

- Not all things are concluded in law

- Law can’t address all issues because it is lagging behind e.g. no global guidelines for
environment (lack legal guidelines)
- Ethical NOT THE SAME as legal!!!

Normative ethics
- Ethics is the real of what is “above and beyond the law”
o Includes thinking of law
o All part of ethics
o Values (sometimes values you don’t want to make legal)
- Ethics answers to question “What should I/we do” beyond the requirements of the
law
- Self-imposed norms
Defining Global business ethics
- Global Business Ethics deals with Global moral issues faced by firms and managers,
often MNCs
It includes:
- Global corporation social responsible (CSR) as the extra-legal responsibilities of firms
vis-à-vis their global stakeholders and world societies at large
- International management ethics defined as the moral role and responsibilities of
managers
Learn this!!!!
Normative description
Ethical thinking is normative, not descriptive:
- Descriptive statement: describe what is. It is typically the discourse of science: “A is
so and so…”
o E.g. the goal of ECB is an inflation rate of 2%
- Normative statement: it describes a moral requirement, what should be. It is
typically the discourse of normative ethics and normative justice: “It is ethical/just to
do B”
o Explain what think is the right thing to do
o How things should be
o Assessing what happen is right or wrong
o E.g. women should be payed equally
è Give your view of normative statement! NOT descriptive!!!!! For group presentation

The Trolley problem

- No way to stop train – 5 will die if train moves on
- Bystander by switch that can save 5 people
- But on other side one innocent person
è What right thing to do?

- If switch up situation, principles can change

o Push fat man to save the others (actively involved)
o 1 to 1 million – who save?
o If kids are on the one side

è Dilemma: Ethics is harder than it seems

 - Sophie
- Assessment 3rd lecture – Poster 21.11 - Rita
- SC test 4th lecture – 28.11 - Alma
- Group presentation + report 12.12 - Matthias
(basically present paper)
24.10.1
Lecture 2: The social responsibility of MNCs

Agenda
- What do you remember from last class?
- Poster and group project …

MUST know following definitions: ethics, positive law, business ethics, CSR
è Need for exam (SC, maybe one open question)
è Can be about the case in the lecture (2nd lesson)

Poster and group project

(see slides, will be posted) LAST CLASS
- Issue about MNC or global issue (problem)
- Need to provide assessment on question
- Needs to be a recent topic (issue that is still debated)
e.g. is it ok for a social media like Facebook to set up a own currency (Libra =
Facebook currency)
-> can be provocative
- Need to be a global issue

- 5 persons per group

- Presentation
- Need to write report about 3000 words -> need to present report in last class

- 10% group grade about topic -> Poster (for next time)
o Write question on poster
o Present in 2min (elevator speech)
o Can show 10 second video

Wrap up Trolley Case:

Moral principles
- Plurality of principles
o Saving net lives (interchangeable): utilitarianism
o Not killing deontology Deontologie = Lehre der
o Respecting people’s rights: deontology ethischen Pflichten
o Not letting people die (duty of rescue)
o Partially (favour) toward close ones vs. distant others
§ E.g. favour family member over others
o Responsibility of those involved (cf. luck egalitarianism)
- Ordering of principles
o So as to get an ordered set of principles that seems to offer consistent
guidelines in various circumstances
 § People started to struggle if there are two equally strong principles

Nature – the autonomous car

- That is why Trolley Case is a business case
è Real debate at the moment

1. Moral Theories Need to learn these 3

theories
Two moral theories (look only on first two)

1. Utilitarianism (consequentialist)
- Utility for the society
2. Kant’s deontology (duty theory)
3. Moral rights (duty theory)

Utilitarianism (consequentialist)
The greatest good for the greatest number Maximizing the overall welfare

- One consequentialist ethical theory

- Bentham, Mill (18th-19th century) Peter Singer today
- What is objectively good in the “greatest good for the greatest number”
(Bentham)
- Good= pleasure/pain or aggregated welfare (or utility)
- Act utilitarianism (Bentham) vs. rule utilitarianism (Mill)

è Creating welfare for society

è Should not judge every act we should judge rules

Application of utilitarian ethics

How would a utilitarian manager assess the decision of employing on child? Is it
ethically permissible Why?

1. Employing children 2. Not employing children

+ A wage + no work-related harms

+ Some economic activity - Work possible replaced by more
- Possible physical harms harmful activities
- No education, loss of higher wealth - A loss in terms of ec. activity (less
creation preference satisfaction)

CRITISISM Utilitarianism (a + b):

a) Non-egalitarian implications?
• Aggregate welfare counts, not distributions
 - Looks at collectivism and not at every single person (individuum is not as
important)

b) The problem of sacrifice

• It is ok to let someone die – to sacrifice someone for the good of all

How can still explain Utilitarianism – how justify rights

• Way of coordinating society
• Society without rules -> everyone would kill each other
• And thus, society creates more welfare

Kantianism
• A duty theory or deontology (morality based on specific, foundational principles of
obligation)
• Classic formulation by Immanuel Kant (1724-1804)
• Behaving ethically means acting for reason of principle, out of duty (out of “Good
Will”)

Categorical imperative
• “Act in such a way that you always treat humanity… never simple as means, but
always at the same time as an end” Foundation of the Metaphysics of morals 1875
• Person are autonomous; should be respected for their own ends; they not should
not only serve other persons ends

- Other people have also aims to archive in their life’s

- Autonomy + respect -> key words in Kantianism
- Should respect other human beings, because humans know how to set their
own aims and know what is why or wrong
- Should NOT use people as tools

Implications
• Sacrifice is morally prohibited
How would a Kantian manager assess:
• The fact of hiring people?
o Depends on working conditions
o Hiring isn’t wrong, depends on how and in what form
• The fact of employing children?

Human rights or moral rights

• A duty theory: moral rights -> moral duties
• Connected to the Kantian tradition
• Autonomous person have an intrinsic value that ought to be respected
 • Rights may be acknowledged or declared (Declaration of the Rights of Man and of
the Citizen, Universal Declaration of Human Rights)

- Law not always connected to human morality AND that is why look at morals
and not law (see last lecture)

From her own research:

- finance – more deontology (Kant)
- marketing – more utilitarianism

2. Four conceptions of CSR

- Definitions about CSR
- There is no ONE view what CSR means!!!
- Responsibility is a social category
- We do not all share same social/moral values

Responsibility of business in society?

Learn for test
Several responses
1. The shareholder theory of the firm (1970)
2. The stakeholder theory of the firm (1980)
3. The model of CSR as self-regulation (2010s)
4. The model of CSR as corporate citizenship (2010s)

1. Shareholder primary (Friedman, 1970)

“The Social Responsibility of Business is to Increase its Profit”
- Usually profit, but not always profit
- Social responsibility of the manager -> managers have moral responsibility and NOT
the whole company
- It is about the desire of the shareholders

- Limit: law and ethical customs in business

Shareholder primary
• The role of managers is to serve owners desires, usually profit (or any other interest,
charitable or social)
• Within the bounds of the law and conforming to ethical custom
• No extended social responsibility (fighting inflation, discrimination, pollution, …)
• No CSR unless there is a business case. Calling it CSR is “hypocritical”

Justifications First two points important

• Agency argument (libertarian):
 o Managers have voluntary agreed to be shareholders agents -> duty to meet
the desire of business owners
• Usurpation argument:
o Managers implementing CSR tax shareholders, usurping states prerogatives
o Problems: competence? Democratic? Self-Serving?
§ Corporation have to play a role in CSR
• CSR inefficient (utilitarian):
o less efficient firms and social policies
§ corporations are not efficient in putting foreword CSR

- Freeman addresses following critique: corporations should not decide about policies
BCAUSE citizens should decide (role of stay NOT role of private company)

Video:
4 ways to spend money
Where is CSR for Freeman?
- If spend own money for yourself tries to get most out of it
è Most efficient way to use money
- When spend for someone else, careful not to pay too much and pays not as much
attention
- Can spend someone else’s money e.g. boss money, careful to get good things for
money, but not care about price
- Spend someone’s money on somebody else, is not careful to spend somebody else’s
money
è CSR: does not use own money and spend it on someone else

- This view very homo oeconomicus view (can criticise this about Freeman)
- This view says also that state is inefficient because spend money of someone else on
someone else
- Could argue against Freeman that people are not only self-interested

2. The normative stakeholder theory (80s)

• “Kantian Capitalism” (Evan and Freeman):
• Consider all stakeholders Focus on the Kantian ethics of respect for persons:
“each person has the right to be treated, not as a means to corporate ends, but as an
end in itself”
 • Implications: stakeholders participation on boards
o “Business”: Fairtrade
o “Governance”: stakeholders participation on boards; rights
§ Who should have a seat on the board
• Utopian? Real example
o “business”: Fairtrade
o “governance”: Codetermination

- Kantian theory applied to business

Implication and limits

• Issues
o Management issues
o Control issues
§ How going to access that management is doing what they should do (if
serve interest of shareholders)
• Examples
o “Business”: Fairtrade
o “Governance”: stakeholders participation on boards; rights

Critique of the two dominant models

1. The shareholder theory – not enough
• Fails to deal with externalities
• Fails to address legal loopholes…
- Too limited
- Externalities that are not taking into account
2. The stakeholder theory – too demanding
• Requires a “thick” ethics that all may not share

3. The model of CSR as self-regulation (2010s) Did not do this, this time
è Covered on
A minimalist CSR as self-regulation 21.11.2019
• Minimalist CSR as self-regulation
• Behave as if desirable missing laws and regulations were out there
• Respect the spirit of the law, do not exploit market failures, do not game the rules
• Value in the background: justice
• Realistic? For big, not smaller, firms

- Should have a more limited view of CSR

- Never enough to just do what law requires, because of the loop wholes
- As a company should I take advantage of loopholes or should I take advantage?
- Self-regulation: not only about law in itself, it is ALSO about spirit of the law
- Mrs. Blanc find this view the most realistic
o Bigger corporations could life up to these “bigger” responsibilities (realistic
for bigger corporations)
 o If everyone else is doing it, no choice but also doing it e.g. if Apple and other
big companies are doing it, then also smaller would have to do it (do because
competitor do it)
o Realistic dependent on the players

4. The model of CSR as corporate citizenship (2010s)

• A new and controversial concept
• “voice”: if self-regulation proves impossible, managers should lobby and inform the
state in a positive way, to improve laws and close loopholes
• Addressing the failure of weak states, for instances safeguarding fundamental social
political rights (Scherer and Palazzo)

- “thinnest” view of CSR -> should voice concerns, as one organization or whole
industry

OVERVIEW: LEARN for

test!!!!!

Fiscal responsibility - Global tax avoidance

What should be the contribution of MNCs
• Pay tax were located -> problem digital companies can go anywhere with their
“goods”
e.g. Google, Apple, etc. loose tax money
• Countries lose money through this tax system
• E.g. France tax on sale/turn-over (NOT profit) – so how much they sold in France
o BUT there is no global agreement
o Could happen that corporations need to double pay – not good for system
(uncoordinated change in tax system by number of countries)

OECD
• That is why OECD stepped in created BE: Baseersion (how to address this
“uncoordinated change in tax system by number of countries”
 o PS: profit shifting
è Try to create a Global tax regime

• Idea corporation should be taxed on what company sale in specific country

è Tax on sales
o Scope: MNCs
o Discussion if should only be digital companies OR if it should apply to all
companies e.g. finance companies
• Use sale to see where tax should be payed
• Threshold: should be company that sells over 750million globally -> than tax system
would apply
• Tax on benefit BUT right to tax on benefit is on sale

NGO disagrees
• Profit
- Residual
- Routine
è Whole profit should be taxed and not only sales in the countries (sales advantage
of developed/marked countries)
è Also OECD proposal would disadvantage developing countries that is why should
also use other criteria and not only sales e.g. employees, raw material

Propose own proposal

1. Why argue for one specific proposal?
2. What should corporations do?
3. Legal framework and corporation responsibility (side of regulator and other side)
Look online for what got posted
relevant for exam

21.11.2019

Lecture 3 Environmental Issues

Agenda
1. What do you remember from last class?
2. Tax avoidance & OECD case – wrap up
3. Four conceptions of CSR (continued) -> part of exam
4. Poster session
5. Environmental issued in global business

Global tax avoidance

è Simple question related to case in test

OECD Proposal
• Have part of benefits on MNCs be taxed where the goods are sold, not on the
(current) basis on physical presence
• Scope: firms beyond a revenue threshold, including digital business, which have
a link with the final consumer (not B2B, banking unclear)
• In countries where revenue is generated beyond a (variable) threshold-routine
profits taxed according to the former taxation

Developing countries NGOs /proposal

• Scope: all MNCs
• Allocate taxing rights on all benefits based on a key that would be a combination
of revenues, number of employees and consumption of natural resources

Questions
1. OECD proposal
a. Scope
b. Principles
c. harmonization
2. What fiscal responsibility?

è Discussed papers we had to send in per mail the last time

1.b. principles
Our paper:
- Libertarianism (Matthias et al.)
o “freedom of trade”
o Taxing is like stealing
o Right to privacy
- Utilitarianism
o Endangers the development of digital services
 Other paper:
- Not enforceable system (not possible technical speaking)

1.c. Harmonizing tax

- A lot said “yes”, because it is “fairer”
- No one argued with no

2. The tax responsibility of MNCs

- None
o Citizens decide policies, so MNCs no responsibility
- Some/full
o There should be some social responsibility
o MNCs responsible to pay their taxes
4.2. Alternative tax scheme
- Taxation according to materials and labour force, principle of fairness
- Global fiscal justice, requires allocation of taxation
- Welfare increase, even if double taxation (utilitarian “flavour” here)

1. A just corporate tax system

• Its aim
o Fairness (or cooperative justice): contribute in proportion to how much you
benefit (employees, natural resources…)
o Distribution justice
o Efficiency: guide investments/internalize externalities’
§ Tax way to guide the system
o Freedom and liberties (no tax)
§ people should not be taxed at all

è Need to be aware of how argues because then can only use specific values (cannot
argue with all the oints mentioned above)
è All group used the principle of fairness

• Its features/characteristics
o Efficient (tax system)
o Equality: treat similar situations similarly (people/firms)

Before talked about what corporate tax for

And next move to global question:

1. A just global system?

• Allocation taxing rights
o Use of resources (people, natural resources…)
o Distributive justice across countries
o Consumers (principle?)
• Harmonized tax levels or decided by states?
o State fiscal autonomy
 § State should be autonomous
o Fair tax competition between states (luring vs. poaching)
§ Poaching: Illegal hunting -> if you hunt on someone’s else land
§ Luring: trying to get the profit to you e.g. with lower tax rates

A just global tax system

Repetition/finishing Will be in exam -> look above for

this to last lesson
4 conceptions of CSR