MBA/EMBA Program East West University Course Plan: MBA 513/EMBA 509: Business Ethics

Course objective: The course is designed to help students understand the meaning and importance of ethics for the corporate world with the focus on the existing approaches and practices, including management of ethics at the company level, the relationship between ethics and social responsibility of business and the issues of ethics in various areas of business. Course Content: Topic 1:Definition of ethics; understanding ethics, the shareholders and stakeholders; needs for/importance of ethics in business, adopting the practice of business ethics; ethical standards and principles; factors impacting organizational ethics. Topic 2: Sources of ethics – value system, religion, culture, legal system; Myths about ethics: ethics are personal, Ethics do not mix with business, ethics are relative and good ethics mean good business, information is amoral and neutral. Topic 3:Management of ethics: ethical behavior, ethical management and management of ethics, strategies and policies, ethics officers, ethics training, role of management and leadership, standardizing ethical behavior: ethics guidelines and code of ethics, content of code of ethics, benefits and problems, activities in implementation; code of conduct of a multinational company Topic 4:Compliance: formal and informal dimensions, Corporate Social Responsibility: areas of social responsibility, arguments for and against CSR, the four stances of business organizations towards CSR, actions in implementing CSR: ethics committees, ethics training, whistle blowing, regulating ethics and CSR Topic 5:Ethics in specific issues – job discrimination, wages, safety and health, performance appraisal, restructuring and lay off, privacy, sexual harassment, and bribery Topic 6:Practices of business ethics – how ethical values emerge in organizations; treatment of organization by its employees, treatment of employees by their organization, treatment of other agencies by an organization and its employees Topic 7:Ethics and other areas of business – general issues; ethics of accounting information, human resource management, sales and marketing, production, intellectual property, knowledge and skills, and technology; religious views on business ethics; related disciplines, etiquette, manners, cultural difference Topic 8:International business and ethics – ethics of economic systems; theoretical issues and the practice, business ethics activities in global world Topic 9:Globalization and business ethics - Changes in world economic scenario associated with globalization, main drivers of globalization, the consequences of ‘free market reforms’, the public and private costs of trade liberalization Topic 10: Social Protection and the Concept of ‘Decent Work’ - Protection of labor, addressing labor standard and other social issues by WTO; failure of trade liberalization in addressing poverty, labor standards, education and culture, health and environment, liberalization and gender issues]
The total number of classes will be 15 including 12 for lectures, 2 for mid-term examinations and 1 for final examination. Students will have to prepare assignments, appear in quizzes, and make presentations on assigned topics, including on case studies. The last activity will demand additional classes to attend. Reading materials will be suggested in the class. Prof. S. M. Mahfuzur Rahman Course Teacher

Topic 1: Introduction to Business Ethics [Understanding business ethics: the definition and the shareholders and stakeholders perspectives; ethics issues and the needs for/importance of ethics in business, adopting the practice of business ethics; ethical standards and principles; factors impacting organizational ethics.] Definition of Ethics and Business Ethics Ethics is a science that studies moral principles and reasoning of what is right and what is wrong, distinguishing the good from the bad and analyzing the motives and consequences of human actions. Ethics studies moral standards (of a man, an organization, and a society as a whole), examines how these standards apply in our lives and whether these standards are reasonable. Five characteristics of moral standards are:      Involved with serious injuries or benefits Not established by law or legislature Should be preferred to other value, including self-interest Based on important considerations; and Associated with special emotions and vocabulary.

Business ethics is a specialized study of how moral standards apply to business i.e., it studies the good and evil, right and wrong and just and unjust actions of business persons (entities). In other words, business ethics is applied ethics that examines ethical principles and moral issues that arise in the different areas of business environment and is relevant to individuals and business organizations as a whole. In the business world, an organization’s culture may set standards for determining the difference between good and bad decision making and behavior and the definition for business ethics boils down to knowing the difference between right and wrong and choosing to do what is right. The phrase 'business ethics' can be used to describe the actions of individuals within an organization, as well as the organization as a whole. Thus business ethics can be defined as written and unwritten codes of principles and values that govern decisions and actions of individuals within an organization, as well as of the organization as a whole. Business ethics can be both a normative and a descriptive discipline. As a corporate practice and a career specialization, the field is primarily normative. In academia descriptive approaches are also taken. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds with non-economic social values. Business ethics is the behavior that a business adheres to in its daily dealings with the world. The ethics of a particular business can be diverse. They apply not only to how the business interacts with the world at large, but also to their one-on-one dealings with a single customer. There are two schools of thought regarding how companies should approach a definition for business ethics: the shareholder perspective and the stakeholder perspective. Shareholder Perspective Those who approach ethical decision making from a shareholder perspective focus on making decisions that are in the owners' best interest. Decisions are guided by a need to maximize return on investment for the organization’s shareholders. Individuals who approach ethics from this perspective feel that ethical business practices are ones that make the most money. Stakeholder Perspective Organizations that approach business ethics from a stakeholder perspective believe that their decisions have impact on all the different stakeholder groups inside and outside the organization and they should consider the needs and interests of the multiple stakeholder groups, not just

those with a direct financial stake in the organization’s profits and losses. The idea basically leads to the concept of corporate social responsibility. Stakeholders are individuals and groups who affect or who are affected by a company’s actions and decisions. Shareholders are definitely stakeholders, but they are not the only ones who fall under the definition of stakeholder. Stakeholders may include: employees, suppliers, customers, competitors, government agencies, the news media, community residents and others. The idea behind stakeholder based ethical decision making is to make sound business decisions that work for the good of all affected parties.

Issues of Business Ethics
Business ethics covers a lot of issues, from whether to hire a friend over a better qualified stranger, relationships within an organization, to bigger issues such as whether to be an environmentally friendly organization but loose profits, or take in large profits by not paying for environmental measures but get a bad reputation and in the long run cost tax payers more. It may also cover whole industries, such as pharmaceutical companies and whether it is ethical for them to charge extreme amounts of money for a life saving drug just because they own the rights, and therefore are the only manufacturers of the drug. Respect for ethics compels decision makers to consider several dimensions – economic, legal, moral and environmental – while making decisions.

General Issues:
 Overall philosophy of business and purposes of a company and the interests and rights of the parties involved Moral rights and duties of the company and of the shareholders – fiduciary responsibility, stakeholders interest, shareholders stands Relationship with other companies – hostile takeovers, industrial espionage etc Leadership issues – corporate governance, corporate social entrepreneurship Political contribution made by corporations – business policy, creating environment, national strategies Law reforms CSR, as well as misuse of CSR and marketing instruments

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Specific issues: Business ethics covers a lot of specific issues, from whether to hire a friend over a better qualified stranger, relationships within an organization, to bigger issues such as whether to be an environmentally friendly organization but loose profits, or take in large profits by not paying for environmental measures but get a bad reputation and in the long run cost tax payers more. It may also cover whole industries, such as pharmaceutical companies and whether it is ethical for them to charge extreme amounts of money for a life saving drug just because they own the rights, and therefore are the only manufacturers of the drug. Ethics is related to all disciplines of management like accounting information, human resource management, sales and marketing, production, intellectual property knowledge and skill, international business and economic system. The specific issues will be discussed in details where the focus would be on ethics of different areas of business. Needs for/Importance of Ethics in Business Ethics is important in all aspects of business including in business because businesses operate in a society and the society prescribes certain norms that are binding on business. Societal norms

and standard practices are to be given due consideration in all business transactions. Ethical expectation of businesses and professionals demand the customers, clients and employees to deliberately seek out those who define the basic ground, rules of their operations. Recognition of business ethics means abiding by a code of conduct that guides an individual in dealing with others based on the examination of ethical principles and moral or ethical problems that can arise in business environment. It deals with issues regarding the moral and ethical rights, duties and corporate governance between a company and its shareholders, employees, customers, media, government, suppliers and dealers. Practice of business ethics improves performance in all the aspects. The benefits are not just the implications of distinguishing the right from the wrong the ethical behavior in business serves individuals and the enterprise much better in long run. For example, consumers may buy the products of a company no matter how they feel about the producer or the seller but a valued company (maintaining ethical standards) appeals to its customers more than a product and thus earns a kind of customer loyalty most corporations only dream of. "Price is what you pay. Value is what you get" - Warren Buffet Managing ethics matters to employees, stakeholders and the public and managing ethically means saving billions on law suits, settlements and thefts. Costs of being unethical include deterioration of relationships, damage to reputations, declining employee productivity, creativity and loyalty, ineffective information flow throughout the organization and high absenteeism. Organizations that have a reputation of unethical conduct towards its employees have a difficult time recruiting competent employees. Managing ethically means managing with integrity, which cascades throughout an organization and shapes and influences the values, time and culture of the organization, the communications among all its members and their commitment and imaginations. Ethical management leads to better decision making and helps manager to take decisions that are in the interest of the public, the employees and of the organization itself. Unethical behavior where people deliberately intend to harm themselves or others, develops from and is reinforced by, destructive states of mind, including fear, greed, anger and jealously. Ethical behavior enhances the well-being of everyone because it is developed from and reinforced by strong motives and emotions. If a company does not adhere to business ethics and breaks the laws, they usually end up being fined. Many companies have broken anti-trust, ethical and environmental laws and received fines worth millions. The problem is that the amount of money these companies are making outweighs the fines applied. Billion dollar profits blind the companies to their lack of business ethics, and the dollar sign wins. Business ethics is an important characteristic of effective leaders today. In fact it is a “critical, essential and non-negotiable” characteristic of an effective leader. Strong business ethics is a pillar of strategic planning and strategic thinking. Companies are encouraged to develop a set of core values and guiding principles and publish them for their clients and stakeholders to know that this is the way they do business. They also need to make sure that the core values are demonstrated in all that they do. Running a business ethically is good for business. A successful and profitable business in itself can be a tremendous contributor toward the common good of society. Ethical considerations are consistent with business pursuits and ethically strong companies are profitable organizations, too. However, business leaders or department managers may not spend all their time worrying about

successful. lawsuits) Prisoner’s dilemma (a situation when two parties represented in prisoner’s dilemma as prisoners. A business or society that lacks ethical principles is bound to fail sooner or later. social. the other one gains more and if both do not cooperate. customers and suppliers it usually is awarded with a high degree of loyalty. sanctions and litigations. consumers and employees care about ethics) Ethics is consistent with profit seeking (practice of business ethics improves performance in all the aspects. A “good man or woman” who steadfastly tries to be ethical somehow always overtakes his/her immoral or amoral counterpart in the long run. Recent events in corporate America have demonstrated the destructive effects that occur when the leadership of a company does not behave ethically. and personal rewards in the long run. both loose)   The summary is: Ethical behaviors (a) enhance corporate reputation and brand image. increases loyalty and productivity of employees. A company that refuses to discriminate against older or handicapped employees often discovers that they are fiercely loyal. (b) improve risk and crisis management. Employees who are treated ethically will more likely behave ethically themselves in dealing with customers and business associates. One might wonder why highly educated. acceptability of businesses and the satisfaction with their services. (c) create a cohesive corporate culture and (d) helps the company to avoid fines. Management gurus believe that the answer lies in a profound lack of ethics. The reason is: doing the right thing often leads to the greatest financial. the individual finds it necessary to engage in exhausting subterfuge. cooperate. one cooperates and other do not. when practicing unethical behavior. their mind and energies are freed for maximum productivity and creativity. quality and productivity. As against that. and Adelphia got themselves into such a big mess. honesty. Tyco. Adopting the Practice of Business Ethics . which is profitability and running an efficient and effective organization. helps avoidance of fines and sanctions. Businesses that violate ethics often face lawsuits leading to fines and sanctions. Arguments in support of Business Ethics   Ethics applies to all human activities Business cannot survive without ethics (businesses do not operate in vacuum. The explanation is fairly simple: when individuals operate with a sense of confidence regarding the ethical soundness of their position. and business savvy corporate professionals at Enron. A business that behaves ethically induces other business associates to behave ethically as well. on the other hand. hard working and productive. If a company (or a manager) exercises particular care in meeting all responsibilities to employees. both gain. they earn profit because the society allows them to do the business. WorldCom.“doing good” for society and thereby divert attention from their real objective. resulting in diminished effectiveness and reduced success. Ethics is a good base for continuity in business relationship also. the companies and people who behave in a socially responsible manner are much more likely to enjoy ultimate success than those whose actions are motivated solely by profits. increases goodwill.

g. For example. they may not wish to pay too close attention to their ethical behavior. It could be called capitalism in its purest form. BP's "beyond petroleum" environmental tilt). The social responsibility movement arose particularly during the 1960s with increased public consciousness about the role of business in helping to cultivate and maintain highly ethical practices in society and particularly in the natural environment. Business ethics should eliminate exploitation. such behaviors tend to undermine the economy over time. Simultaneously. In some cases. corporations have redefined their core values in the light of business ethical considerations (e. and that is the bottom line. To many people businesses are interested in making money. Business ethics can be applied to everything from the trees cut down to make the paper that a business sells to the ramifications of importing coffee from certain countries. Also many have been fined millions for such unethical practices. and the dollar sign wins. If the company is making large amounts of money. can be seen not to think too highly of good business ethics. ethical and environmental laws. In the increasingly conscience-focused marketplaces of the 21st century. community. CSR is a process by which businesses negotiate their role in a society (employees. ethics codes. But the amount of money these companies are making outweighs the fines applied. including most of the major brands that the public use. today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (e. Businesses can often attain short-term gains by acting in an unethical fashion. Ethical Standards relate to Perceived impropriety (the condition of being improper) Responsibilities to the employer Conflict of interest Social Responsibility Principles Focus on the Community Diversity in actions Environment conservation . social responsibility charters). higher UK road tax for higher-emission vehicles). This is where the real thinking over business ethics started. it may be up to the public to make sure that a company adheres to correct business ethics. Making money is not wrong in itself. the demand for more ethical business processes and actions (known as ethicism) is increasing. A business may be a multi-million seller. In the end. for which many major brands have been found to break anti-trust. However.g. however. It is the manner in which some businesses conduct themselves that brings up the question of ethical behavior. both within major corporations and within academia.Historically. businesses have gained a bad reputation just by being in business. from the sweat shop children who are making sneakers to the coffee serving staff who are being ripped off in wages.g. they are becoming very few and far between. but does it use good business ethics and do people care? There are popular soft drinks and fast food restaurants that have been fined time and time again for unethical behavior. the social responsibility movement is but one aspect of the overall discipline of business ethics. But interest in business ethics accelerated dramatically during the 1980s and 1990s. Many global businesses. Billion dollar profits blind the companies to their lack of business ethics. There are many companies that pride themselves in their correct business ethics. Money is their major deciding factor. Ethical Standards and Principles of Social Responsibility of Business Business Ethics and Social responsibility of business (frequently termed corporate social responsibility – CSR) are often regarded as the same concepts. but in this competitive world. environment and the government) and often CSR and ethics go together. pressure is applied on industry to improve business ethics through new public initiatives and laws (e.

disadvantaged and minority-owned businesses Professional competence National and international supply management conduct Responsibilities to the profession Ethics Financial responsibility Human rights Safety (at workplace and of clients) .Issues of influence Confidential and proprietary information Supplier relationships Reciprocity Applicable laws Small.

There are many factors to consider. does this make the first company unethical by association? Some people would say yes. there are many specific factors that impact ethical decisions in business and they include: • • • • • • • • • • • • • Corporate culture Existence and application of a written code of ethics Formal and informal policies and rules Norms for acceptable behavior Financial reward system System for recognizing accomplishment Company attitude toward employees How employees are selected for promotions Hiring practices Applications of legal behavior Degree to which professionalism is emphasized The company’s decision making processes Behaviors and attitudes of the organization’s leaders . the first business has a responsibility and it is now a link in the chain of unethical businesses. When a company does business with another that is considered unethical. Apart from such general approach.Factors Impacting Organizational Ethics Good business ethics should be a part of every business.

religion. 294 – 298 . legal system. ethics are relative and good ethics mean good business. culture. ethics do not mix with business. pp.Topic 2: Sources of Ethics and Myths about Ethics [Sources of ethics: value system. information is amoral and neutral] Use materials of “International Human Resources Management”. Myths about ethics: ethics are personal.

strategies and policies. standardizing ethical behavior: ethics guidelines and code of ethics. the ethics practices are more likely to be integrative: the company links rewards to managerial behavior to reinforce ethical ideals. legal and government regulations and environment.. framing attitudes for acceptable behavior. ethical behavior is made a public relation tool. activities in implementation. Sometimes businesses of such category go beyond regulatory or even cultural limits to become an ethically ‘good’ business. training. this is the foundation of ethical decision making. firms bind members together through myriad rules.. shareholders. remuneration and retention of employees. policies and other guides and this acceptance requires a perception of fairness and commitment. Most companies now believe that “Good ethics is good business” and this has a relevance to the famous quotation: "Noncorporation with the evil is as much a duty as is co-operation with good" .Mahatma Gandhi. promotion. monetary/non-monetary motivation. ethics training.e. deciding the policies for recruiting. Ethical Management and Management of Ethics Ethical Management means doing the right thing i. norms. The ethical issues in business have become more complicated because of the global and diversified nature of many large corporation and because of the complexity of economic. Thus. the adapted practices are not integrative: the company can have memos. code of conduct of a multinational company] Ethical behavior in corporate culture Businesses can either voluntarily develop appropriate policies (of ethical behavior) or can be forced to do so by public opinion. customers. When external pressure is the reason for ethics programs. setting high standards. political. benefits and problems. what measures and actions are taken. global. social. induction. natural. media and society in an honest and fair way by knowing the difference between right or wrong and choosing what is right. However the other methods can be creating a common interest by favorable corporate culture. government. content of code of ethics. reminders and some unintegrated policies.e. Internally. ethics officers. ethical management and management of ethics.Topic 3: Managing Ethics [Management of ethics: ethical behavior in corporate culture. selecting. a manager should treat his employees. making written code of ethics to be abided by at all levels from top to bottom. Managers have to remember that leading by example is the first step in fostering a culture of ethical behavior in the companies. what tools and systems are used and what organizational set up is in place to ensure this ethical management. . Effective organizational functioning depends on gaining the acceptance of rules. The role of management in general Management of ethics is acting effectively in situations that have an ethical dimension and these situations occur in both the internal and the external environment of a business firm. role of management and leadership. procedures. hence the company must decide whether to adhere to constant ethical principles or to adjust to domestic standards and culture. when we say that the management of a business organization is ethical we mean that the management is doing the right things but management of ethics means how this has been done i. But if ethics planning comes from the top management. policies and values that must be carefully managed.

There can be no compromise of ethics. A strong unwavering commitment to core values and guiding principles of a company or organization will lead to the right ethical decisions and actions. Policy makers. One way of dealing ethical dilemmas is by using the four way test to evaluate decisions. employees are likely to act in a like manner. but the distinctions between moral right and wrong are not always so clear. Different people have different beliefs about what constitutes ethical behavior. Personal values and ethical behavior is taught at an early age by parents and educators. this does not mean that a company should lose flexibility in adjusting its cost structure during bad economical times. No matter what the formal policies say or what they are told to do. Managers who want employees to behave ethically must exhibit ethical decision making practices themselves. and Adelphia ethical meltdowns. In many situations lines between right and wrong are blurred. if employees see managers behaving unethically. as well as the managers and (senior) level employees of a company need to ask these questions: “How ethically vulnerable is the company?” “What are the core values and guiding principles of the company?” “Is the company committed to living and exhibiting the core values in everything it does?” The answers to these questions will define the state of ethics in the business. Tyco. Doing what is right is absolutely critical to personal and business ethics. Decisions like that should be made with empathy and support (financially) to those who will be affected by it. or change technology in ways that would require fewer people to do the work. The law defines what is and is not legal. When faced with ethical dilemmas. In the absence of these actions. fair or unfair. WorldCom. A company’s leaders are responsible for setting standards for what is and is not acceptable employee behavior. replace old factories by new ones.In business world the organization's culture sets standards for determining the difference between good or bad. The best way to promote ethical behavior is by setting a good personal example. This test involves asking four questions: . Such situations can lead to ethical dilemmas. The role of leadership Leadership in business must set the standard and “walk the talk” when it comes time to ethical behavior. they will believe that the company wants them to act in a like manner. Knowing what is right is very important to personal and business ethics. right or wrong. it’s important to consider outcomes of the decision-making process. It’s vital for managers to play an active role in creating a working environment where employees are encouraged and rewarded for acting in an ethical manner. there will be no more Enron. Managers have to remember that leading by example is the first step in fostering a culture of ethical behavior in their companies. all one has is good intentions and that simply is not enough for effective leadership. Senior executives of companies who freeze their salaries or take a personal pay cut in a problematic year rather than lay off employees to cut costs deserve our utmost respect. but understanding ethics does not necessarily result in behaving ethically. If leaders are committed to that high standard. There can be no “waiver of ethics. People at the top of an organization are expected to share the burden of cost reductions and belttightening during difficult times. However. A company’s managers play an important role in establishing its ethical tone.” A leader must constantly keep his or her actions above reproach. Teaching an employee ethics is not always effective. One can explain and define ethics to an adult. If managers behave as if the only thing that matters is profit.

Many companies assess the environmental factors that can lead employees to engage in unethical conduct. In the end. It is hoped that having such a policy will lead to greater ethical awareness. if you would not want these individuals to learn about your actions. percolate down to lower levels in the organization Having a code of ethics Constructing ethics committees Conducting ethics training programs Having a whistle-blowing in place.g. consistency in application. they may not wish to pay too close attention to their ethical behavior. it may be up to the public to make sure that a company adheres to correct business ethics. they are becoming very few and far between. Businesses can often attain short-term gains by acting in an unethical fashion. such behaviors tend to undermine the economy over time. and other people find out what you did. you probably need to rethink your decision. pressure is applied on industry to improve business ethics through new public initiatives and laws (e. many companies formulate internal policies pertaining to the ethical conduct of employees. Is my decision a truthful one? Is my decision fair to everyone affected? Will it build goodwill for the organization? Is the decision beneficial to all parties who have a vested interest in the outcome? When these four questions can truthfully be answered with a “yes. and Enacting legislations outlawing unethical conduct Ethics Policies As part of more comprehensive ethics programs. higher UK road tax for higher-emission vehicles). Simultaneously. Some companies even require their employees to sign agreements stating that they will abide by the company's rules of conduct. If you would be comfortable having your parents. specific case studies. but in this competitive world. However. 2. and the avoidance of ethical disasters. the demand for more ethical business processes and actions (known as ethicism) is increasing. These policies can be simple exhortations in broad. Strategies in Ethics Management Commitment from top management – charity begins at home. Lying has become . however. They are generally meant to identify the company's expectations of workers and to offer guidance on handling some of the more common ethical problems that might arise in the course of doing business.1. highly-generalized language (typically called a corporate ethics statement). Another way of making sure decisions are truly ethical is by using the publicity test. An increasing number of companies also require employees to attend seminars regarding business conduct. A competitive business environment may call for unethical behavior. 4. Understanding whether a company is ethical in conducting business In the increasingly conscience-focused marketplaces of the 21st century. chances are that your decision is an ethical one. grade school teachers. There are many companies that pride themselves in their correct business ethics. which often include discussion of the company's policies. and legal requirements. Ask yourself how you would feel if your actions were published in your hometown newspaper. containing specific behavioral requirements (typically called corporate ethics codes). or they can be more detailed policies. 3.” it is likely that the decision is an ethical one. If the company is making large amounts of money.

making recommendations regarding the company's ethical policies. a panindustry initiative to promote and ensure ethical business practices. Not everyone supports corporate policies that govern ethical conduct. which set standards that organizations (large or small. This led to the creation of the Defense Industry Initiative (DII). To be successful. corruption and abuse scandals that afflicted the U. A related trend is the introduction of risk assessment officers that monitor how shareholders' investments might be affected by the company's decisions. and that they are mainly to limit the company's legal liability. WorldCom and Tyco). • Remain neutral and nonsexist. The DII set an early benchmark for ethics management in corporations.100 members) and was soon established as an independent organization. or to curry public favor by giving the appearance of being a good corporate citizen. even small and medium-sized companies have begun to appoint ethics officers. An example of this is the host of issues surrounding the unethical actions of the Saloman Brothers.something employees can both understand and perform. with periodic reinforcement.expected in fields such as trading.was founded at the Center for Business Ethics (at Bentley College. at worst. which was enacted in reaction to the above scandals. One of the catalysts for the creation of this new role was a series of fraud. the Ethics & Compliance Officer Association (ECOA) -. Although intended to assist judges with sentencing.originally the Ethics Officer Association (EOA) -.. Others believe that corporate ethics policies are primarily rooted in utilitarian concerns. This trend is partly due to the Sarbanes-Oxley Act in the United States. this makes the policy duplicitous. commercial and non-commercial) had to follow to obtain a reduction in sentence if they should be convicted of a federal offense. Another critical factor in the decisions of companies to appoint ethics/compliance officers was the passing of the Federal Sentencing Guidelines for Organizations in 1991. Sometimes there is disconnection between the company's code of ethics and the company's actual practices. and disseminating information to employees. They are particularly interested in uncovering or preventing unethical and illegal actions. In 1991. at best. Waltham. The membership grew rapidly (the ECOA now has over 1. They often report to the Chief Executive Officer and are responsible for assessing the ethical implications of the company's activities. with routine inspections for compliance and improvement. the company will avoid a lawsuit because its employees will follow the rules. Ethics officers Ethics officers (sometimes called "compliance" or "business conduct officers") have been appointed formally by organizations since the mid-1980s. • Monitored by top management. In the wake of numerous corporate scandals between 2001-04 (affecting large corporations like Enron. . the company can claim that the problem would not have arisen if the employee had only followed the code properly.. whether or not such conduct is explicitly sanctioned by management. • Doable. by both word and example. • Explained in writing and orally. Some claim that ethical problems are better dealt with by depending upon employees to use their own judgment. it is merely a marketing tool. Should a lawsuit occur. most ethicists would suggest that an ethics policy should be: • Given the unequivocal support of top management. MA) as a professional association for those responsible for managing organizations' efforts to achieve ethical best practices. defense industry at that time. Thus.S. • Backed up by clearly stated consequences in the case of disobedience. the influence in helping to establish best practices has been far-reaching. Ideally.. and.

at least. Code of ethics comprises a set of principles developed in advance and not of the ‘choices made reflexively’ at the moment of an ethical lapse. and The guidelines lead companies to beyond “simply doing the right things”. often styled as a code of professional and social responsibility. But businesses can and should create an environment of ethical practices and the motivations of businesses to have guidelines on how to create such ethics are:      Guidelines created by companies are less problematic than those created by the government Such guidelines stimulate firms to operate according to the same principles (contributing to development of a level playing field for all organizations) Ethical conduct is needed in an increasingly interdependent world Norms of ethics reduce operating uncertainties. In part. this is because ethical business practices result from a corporate culture that consistently places value on ethical behavior. Some set out general principles about an organization's beliefs on matters such as quality. The Company Code of Ethics typically explains the ‘why’ of a global ethic. If the appointment is made primarily as a reaction to legislative requirements. . They hardly ‘hedayet’ the business people Standardizing Ethical Behavior: Guideline and Code of Ethics Guideline There are no global governance mechanisms to regulate and discipline companies that violate ethical standards. …far behind.such as conflicts of interest or the acceptance of gifts.The effectiveness of ethics officers in the marketplace is not clear. employees or the environment. Some codes of ethics are often social issues. helps it resist temptation and becomes the basis for making ethically sensitive decisions. a culture and climate that usually emanates from the top of the organization. Mollas in Bangladesh are far. The code defines the standards of right and wrong for the company who develops it. if so. what remedies should be imposed. Large multinationals introduced formal code of ethics in early 1990s. Having a code of ethics in companies or even in personal life (an individual also can have a personal code which can be as simple as a few sentences or as long as many pages). and delineate the procedures to determine whether a violation of the code of ethics occurred and. Ethics Training:  Multinational companies offer employees the training on how to cope with ethical dilemmas (they are concerned about their interests abroad)  Local business enterprises also need the training so that they are aware about what is ethical and what is not In western countries the priests have a great role in practice of ethics in business. most companies develop internal ethics code of ethics by looking at codes collected by specialized centers like ‘Ethics Resource Center’ in Washington or the ‘Institute of Business Ethics’ in London. over the short term. The mere establishment of a position to oversee ethics will most likely be insufficient to inculcate ethical behavior: a more systemic program with consistent support from general management will be necessary. which may dispense with difficult issues of what behavior is "ethical". Others set out the procedures to be used in specific ethical situations . Code of Ethics Almost all ‘good’ companies are now in a process of developing or have already developed their own ethical code (company code of ethics). one might expect the efficacy to be minimal.

be it official or unofficial. Violations of a private organization's code of ethics usually can subject the violator to the organization's remedies (in an employment context. in a membership context. 10. this can mean termination of employment. security of proprietary information. child labor. or even street gangs. 12. 5. 7. political activities. The top management is adopt and follow the Code of Ethics regarding it something ‘more than a written document’ and has to have the commitment towards reward and sanctions based on the codes providing statements about the following important variables 1. and contracting Trading in securities and use of inside information Payments to obtain business Acquiring and using information about others Security and political activities Environment protection Intellectual property or use of proprietary information Internet and e-commerce activities The effectiveness of such codes of ethics depends on the extent to which management supports them with sanctions and rewards. receiving gifts Legally and generally accepted standards – workplace safety. 6. it may prevent failures  If codes exist. 11. billing. sexual harassment etc Others – natural environment. Examples could be hackers. human rights. 4. thieves. it is important to be cautious that the Code of Ethics . and religion of a whole society.Ethical Codes are often not part of any more general theory of ethics but accepted as pragmatic necessities. certain acts that constitute a violation of a code of ethics may also violate a law or regulation and can be punished by the appropriate governmental organ. 3. 15. 13. Benefits of codes of ethics  Code of ethics may ensure success and even if it is flawed. workplace health and safety procedure Conflicts of interest Employment practices Fair practices in selling and marketing and selling/providing services Financial reporting Supplier relationships Pricing. 2. They are distinct from moral codes that may apply to the culture. mangers do not guide the firms into ethical morass or individuals will not rely on conflicting personal ethics when acting on behalf of the firm. Even organizations and communities that may be considered criminal may have their own ethical code of conduct. education. 14. Despite the fact that Code of Ethics is an useful and essential document for firms to develop and follow. bribery. this can mean expulsion). Problems with the Code of Ethics General problems having relevance more to the national context: 1. The content of the Company Code of Ethics usually covers the following areas: Contracts – conflict of interest. Of course. Fundamental honesty and adherence to law Product safety and quality. 8. 9.

2. Global ethics may serve to depress innovation (since some will hesitate to act in absence of clear guidelines) – how to overcome the problem. Audit results for ‘feed-through to next step’ processes. Does not fail because of not providing a framework for communication with external communities about the success or failures of the company in achieving the Code’s objectives 6.2. in medical science? Important activities in implementation of Code of Ethics 1. 4. Monitor ethical behavior. Is not converted into a public relation tool rather than it’s being a behavioral guide 3. include notice of sanctions for ethical violations. the organizations need to change the approach and attitudes– how to sustain the rules in such a dynamic environment? 4. especially the developing ones. . 3. include periodical inspections or progress reports. to the extent possible. The rules are developed by firms from ‘westernized’ countries and reflect western rules and it is not easy to reconcile them with patterns in most participating nations and sustain them in environment of these nations. Integrates code compliance very well into the organizational procedure 5. Global rules are likely to emerge from a negotiation process but they are unlikely to reflect values and habits of all cultures 2. in being part of an integrated process of decision making Problems/challenges having relevance more to the international context: 1. Link ethics to rewards. for example. Can overcome difficulties. integrate ethics code into everyday activities. Does not lack specific content (a perennial problem with documents of such type) or ignore rights of key stakeholders in their dealings with other organizations 4. Global ethics is in fact an end and not a beginning point but the practice of global ethics is not static: when conditions change. Communicate with employees so that they understand what behaviors are expected and why. 3.

ethnic origin or political affiliation Respect personal freedom (religion or opinion) Respect local cultural values and norms Minimize any negative Impact on Local Economic Policies Conform to local economic and development policies Avoid adverse effects on currencies and balance of payments Follow policies regarding local equity participation Provide truthful information for accurate taxation Pay fair taxes Source raw materials locally Reinvest profits in local economy Maintain High Standards of Local Political Involvement Avoid illegal involvement of local politics Do not pay bribes or make other improper payments Do not interfere in local government internal relations Transfer Technology Enhance the transfer of technology to developing nations Adapt technologies to local needs Conduct local R&D when possible Grant fair licenses to use technology Protect Environment Follow local environment protection laws Actively protect the environment Repair damages to the environment done by the company operations Help develop local standards Provide accurate assessments of environmental impacts of the company operations Provide complete disclosure to of the environmental effects of operations Develop standards to monitor environmental effects Protect Consumers Follow local consumer protection laws Ensure accurate and proper safety disclosures Follow Proper Employment Practices Follow relevant manpower policies and employment laws of the host nation Help create jobs in the needed areas. security and privacy Do not discriminate on the basis of race. gender. religion. match/improve local standards of employment Provide training opportunities at all levels for local employees Respect local collective bargaining rights. language. liberty. increase local employment opportunities and standards Provide local workers job security. promote local nationals to management positions Promote equal employment opportunities.The Code of Conduct for a Multinational Company: an illustration Respect Basic Human Rights and Freedoms Respect fundamental human rights of life. cooperate with local collective bargaining units Give notice to plant closings Do not use threat of leaving country in collective bargaining dealings Provide income protection to terminated workers Protect employees with adequate health and safety standards  Provide employees the information on job related health hazards .

the local community and society at large. compliance usually refers to behavior in accordance with legislation and too often. (c) demand conditions. sub-contracting or outsourcing) and every action he or she contemplates has social implications. protect intellectual property. and (d) related and support industries. Rather. There has been a long history of business and government excesses and subsequent legal. specifications. Arguments in favor of CSR Social actions benefit society. whistle blowing. CSR needs a comprehensive set of policies. open up local markets for trade. Over the last 40 years. compliance means whther the organization actually implements what it is committed to in terms of its ethical obligations. regulating ethics and CSR] Compliance is either a state of being in accordance with established guidelines. it the outcome of a commitment of business to contribute to sustainable social and economic development. and the Federal Sentencing Guidelines. on opening up a new branch. this is looked into in terms of the areas of social responsibility of business and the formal and informal dimensions of CSR. incentives and norms governing competition in a nation or region that influences productivity. but they also earn money for the companies because social actions bestow competitive advantage comprising four interdependent factors: (a) factor conditions. Factor conditions: the availability of trained workers. (b) context for strategy and rivalry. One key issue in compliance is the approach of business organizations towards their obligations to the society. actions in implementing CSR: ethics committees. Response to criminal misconduct has resulted in legal sanctions. Corporate Social Responsibility Corporate social responsibility (CSR) is understood as the obligation of decision makers to take actions that protect and improve the welfare of the society as a whole. Conventionally. adequate physical infrastructure. it is found that there is a fairly widespread lack of understanding about what is required for a company to be in compliance with new legislation. areas. CSR can have a strong influence on creating a more productive and transparent environment for competition. automation etc or even routine matters like night shifts. governance practices. the Committee of Sponsoring Organizations. programs and practices and it not mere philanthropy. Every decision a business person makes (say. transparent and efficient administrative processes and natural resources. to improve their quality of life in ways that are good for business. For a business organization with an ethics program. of social responsibility. working with employees and their families. ethics training. along with their own interests. public and political reaction. compliance standards and cultural transformation. several major events in world business and subsequent legislation and regulation have shaped the way organizations do their business. Context for strategy and rivalry: rules.Topic 4: Compliance and Corporate Social Responsibility [Compliance: Corporate Social Responsibility: arguments for and against and the four stances of business organizations towards CSR. . policies that encourage investment. all of which are influenced by CSR activities. break-up or prevent the formation of cartels and monopolies and reduce corruption to make a location attractive for business. Some such events with the most significant impact and influence in the development of compliance programs in the USA are the Foreign Corrupt Practices Act. closure of an existing unit. high quality institutions of science and technology. or legislation or the process of becoming so. In the legal system.

While the above relates to the first argument in favor of CSR. they are free to do so individually. basic education etc. But the idea of CSR is opposed also because CSR may: • • • • • • Transfer costs to consumers and shareholders Prompt mandatory requirements Invite bureaucrate overseeing and demands on businesses Cause a fall in economic efficiency of businesses Is illegitimate because social issues are concerns not of businesses but of the government Is not a function of businesses and should be left to non-business organizations Milton Friedman opposed CSR on the basis of two principles: one. support to not-for-profit foundations such as museums.e. make operations including hiring of talents or reaching media easier and absenteeism minimal. It adds to the productivity of an organization by facilitating easy access to high quality industries and services. . Some even say that businesses pay the government well and the government should do its job leaving the businesses alone to do their job. with their dividends/own money. there is another argument: social issues are the concern not of business but of the government. their sole duty is to maximize the financial return to the stockholders and if they spend money for social purposes. organizations offering public health. nor do they have time to devote to them complying with the law and the social system. Proximity enhances responsiveness. leaving social responsibility to non-business organizations. the efficiency of the market mechanism will be undermined and resources will be misallocated within the economy) and the other legal (because managers are legal agents of the stockholders. Also. philanthropy. they essentially steal it from the owners). employees and investors The natural environment General social welfare – charity. Arguments against CSR CSR relates to public expectations and makes it easy for corporations to operate in a new environment. Related and supporting industries: CSR can foster the development of clusters and the strengthening of supporting industries. and appropriateness of product standards that enhance a region’s competitiveness by providing organizations with insights into emerging customer needs and the requisite pressure for innovation. The line is further reiterated by the argument: businesses become most responsible when they attend to their interests and leave other activities to other institutions. Dhirubhai Ambani believed in building a sound and profitable company. fire him first”. The third important argument is: social actions help create a better environment for businesses to operate in a society. economic 9if managers spend corporate funds on projects not intended to maximize profits. increases capability of local suppliers instead of promoting outsourcing. Peter Drucker: “If any executive talks about social responsibility. and lowering costs of transportation and inventory. The Areas of Social Responsibility are:    Organizational stakeholders – customers. if the stockholders want to spend money on social cause. Friedman suggested. business leaders have neither social skills to manage social activities. exchange of information and innovation.Demand conditions: comprise size and sophistication of the local market. the second argument is: businesses exist only because the satisfy the valuable needs of the society i. the society gives charter to the businesses to exist and the charter can be amended and revoked any time if the businesses fail to live up to the society’s needs reflecting its changing expectations..

such a firm may install pollution control device/equipment as required by law. but solicitors have to convince the organization that the programs are worthy of their support. infant morality. be noted that organizations do not always fit neatly in one category. They however denied violations. Globally. this is however. voluntarily agree to participate in social programs. Many will respond the requests for donations. businesses help rainforests survival in LA. Instead. comply with CSR laws rather than fight. one step better than the obstructionist stance but since such companies also stick to the ‘principle of doing profit’. Defensive stance. argued that their actions were all technically acceptable. The point is: clients are to seek actions of the firms in CSR. Obstructionist stance. no or as little activities as possible to address social/environmental problems. Fight CSR/lobby against legal changes. primary school environment and HIV/AIDS in Uganda. An organization can take 4 stances concerning its obligations to the society: A. literacy. those adopting defensive stance intend to either avoid or do the minimum CSR functions and may find it difficult to thrive. The remaining two types of firms articulate social value objectives. government policies in Botswana. It may however. and . their attitude towards CSR is hostile. life expectancy in Afghanistan. Accommodative stance. sponsorships etc. lead businesses with best practices. B. forgo morality and look for ‘gaps’ in the requirements for CSR and excuses for non-compliance. Proactive stance. they would not install only a ‘minimum capacity’ equipment which might not be sufficient. Trust in capital market in USA. Meet legal requirements. and environment and logging interests in New Zealand. Firms adopting obstructionist stance in CSR are unlikely to survive in the long-run because they engage in illegal behavior. they provided mothers in West Africa free samples (violating another norm about labeling standards). C. Nestle and Danone were accused of violating international agreement (1981) on controlling the marketing of infant formula that serves as substitutes of breast milk. do the legally required but nothing more. Civil War in Congo. For example. Defensive stance Accommodative stance Proactive stance Compliance of Ethics and CSR Some people believe that 1. These companies earn acceptability and with that a better prospect for survival and growth. also go beyond in selective cases. and balance profit with social objectives. and D. take the CSR functions to heart and act proactively to contribute to the society by actively seeking the opportunity for that. Integrate social objectives with business goals. Obstructionist stance Profit motives put ahead of all objectives. Requiring managers to promote social goals (profit making for the business) in addition to economic goals may cause managers to lose focus. corruption in China and Korea. but conform to law to the extent which is unavoidable. Some firms match contributions made by their employees to selected charitable causes.

ethical compliance and philanthropic giving. free medical supplies. But compliance is perhaps the most critical component which has both formal and informal dimensions. and they were criticized for . society as a whole. the other institutions that affect an individual.e.can use CSR activities in attracting. which demonstrate good citizenship. compliance regulations needed to be followed may cover issues relating to personnel hiring. Philanthropic giving donation of funds for example. market and the civil society develop ways to handle needs of the different groups and work on ensuring the compliance.. c. Philanthropic giving however. Multinational companies try to find a balance between the roles and behaviors expected by their home governments and those expected by all in the host countries where they operate.. But wide majority now consider that the corporate sector should practice ethics and social responsibility functions because although the society allowed/granted them the license to operate and earn profit i. indeed. Ethical compliance The extent to which the organization follows basic ethical (along with the legal) standards of behavior. contribution to construction of a hospital or an educational establishment etc. b. relate more to ethical conduct of the owners and employees and are often ‘formalized’ through adopting ‘code of ethics’ or formation of ethics committee. as well as banking or environment regulations. health etc.are believed to have unique talents and resources to solve the society’s ills. CSR should be viewed as a major challenge that requires careful planning. cannot have unconstrained pursuit of profit. The state. they have fiscal responsibility. social and environmental sustainability outperform the global index (of success in business) because CSR creates (i) acceptability of the company in the community. the competitive business environment the company is in and. sometimes it is difficult to balance image and action: Procter and Gamble and Honda Motor donated supplies in the aftermath of 9/11 . e. retaining and motivating people they want to work with and keeping the employee moral high.2. d. consideration and evaluation. Compliance is a difficult issue.e. decision making. The CSR movement rests on a ‘fundamental misunderstanding’ of the functioning of free market. (ii) a degree of ease in decision making and (iii) a good working environment leading to higher productivity. education or livelihood skills training. but they also have social responsibility i. workplace safety. as well as the government of the country where it operates. pay. national and international laws. Formal and Informal Dimensions The foundation for ethical behavior goes well beyond corporate culture and the policies of any given company.they decided not to publicize.. and above all. should treat CSR not as a substitute of profitability but as a means of achieving profitability – companies that pursue a triple bottom line of economic. for breast cancer research. Formal dimensions include legal compliance. the responsibility of responding to the needs of the society and environment and they a. Legal compliance The extent to which the organization conforms to regional. does not enhance corporate reputation if the company (awarding it) (a) fails to live up to its philanthropic image or (b) if consumers perceive philanthropy to be manipulative (Phillip Morris charity is for the company’s advertisement of tobacco products. Organizations need to fashion their CSR the same way they develop any other business strategy. hiring. are under the scrutiny of the community/public who is more informed about business activity and view CSR as positive activity. for it also depends greatly upon an individual's early moral training.

6. community groups. 5. In the present context of ‘cutbacks’. The top management may ‘insist’ and ‘instigate’ employees by persuading that ‘customers. Engage with stakeholders: Responsible treatment of stakeholders (primary stakeholders – owners.g. Managers should acknowledge and actively monitor the concerns of all legitimate stakeholders and should take their interests appropriately into account in decision making and operation. . government organizations) is an important element in CSR initiatives. 4. Managers should recognize the interdependence of efforts and rewards among stakeholders. articulate set of principles to guide employees throughout all subsidiaries and affiliates. 2. But the actions in implementing CSR (other than philanthropic giving) are: 1. The degree of compliance is a major indicator of how companies respond to their CSR responsibilities. Articulating social value objectives: make CSR part of articulated belief and the objectives of the firm. Managers should adopt processes and modes of behavior that are sensitive to the concerns and capabilities of each stakeholder constituency. 1999] 1. appropriately compensated. 3. Managers should work cooperatively with other entities. People who disclose such things are the ‘whistle blowers’. employees. whistle-blowing. Leadership practices and organizational culture Also identified as initiative by top management. would be patently unacceptable to relevant stakeholders. Managers should avoid altogether activities that might jeopardize inalienable human rights (e. right to live) or give rise to risks. Whistle-blowing Disclosure by an employee of illegal or unethical conduct any employee or member of the management team or even the owners of a business organization and the way the organization responds to it. many corporations limit their charitable gifts and trim their budgets. stakeholder relationships have a direct impact on financial performance and positive connections with key stakeholders can improve firm profitability. customers. and should attempt to achieve a fair distribution of the benefits and burdens of corporate activity among them taking into account their respective risks and vulnerabilities. employees and the communities where the firm operates and the shareholders are all important’ and their stakes are to be taken care of.‘doing nothing’). suppliers. labor unions. managers should listen to and openly communicate with stakeholders about their respective concerns and contributions and about the risks that they assume because of their involvement with the corporation.. statement of commitment is not enough. 2. Two major informal dimensions of compliance are leadership practices and organizational culture. pressure from stakeholder groups to improve or change conduct is a challenge for the company managers. both private and public to ensure that the risks and harms arising from corporate activities are minimized and when they cannot be avoided. which is clearly understood. secondary stakeholders – NGOs. Starbuck Coffee Company has a short document: “Starbuck’s Commitment – to do our part” on how the company intends to contribute to improvement in the lives of the people in coffee producing countries. Clarkson Principles of Stakeholder Management [The Clarkson Center. the leadership practices can go a long way toward defining CSR of an organization and planning their implementation in stages. social activists.

Cause-related marketing: Donate apportion of sales of selected products to charitable organizations. it connects businesses with social goods. examples that others can follow in CSR (in areas such as environment protection. ratified by 34 countries till 2007) – eliminate bribery in international business transactions. third party view. 3. world wide safety standards. prevention of social injustice. satisfaction of social needs such as Special Olympics. insisting by local government). disaster relief. Human rights initiatives: Develop a comprehensive code of conduct to ensure that workers making their product anywhere in the world work in safe condition and are treated with dignity and respect. a best known leader in this aspect is Levi Straus – the first multinational to adopt guidelines covering worker treatment. . processes. and where necessary. of social objectives with business motives. The Anti-Bribery Convention of the OECD (2000. most often these are efforts in poverty alleviation. Check how familiar the current and new employees with guidelines/code of ethics. The Alien Tort Claims Act (USA. 4. Cause-based partnership (CBP): Alliances between businessmen and non-profit organizations that simultaneously respond to values of civil society or address organizational needs. by a ‘corporate social audit’. Managers should acknowledge the potential conflicts between (a) their own role as corporate stakeholders and (b) their legal and moral responsibilities for the interest of the stakeholders and should address such conflicts through open communication. grassroots efforts or even sometimes. Conclusion: CSR activities are integrative mechanisms for adopting people.. such initiative enhances public’s view of the organization.. Apply the concept of control to CSR. Regulating Ethics and CSR There are many laws and regulations. by force (say. 5.7. it can generate best practices. their employees and agents from paying or offering bribes to any foreign government official to influence official actions. declare – “a part of sale proceeds goes to the World Wildlife Fund”. appropriate reporting and incentive systems. for example. CBP management is difficult because CBP may come about by chance or design. Evaluation of CSR activities of firms      Investigate whether the CSR efforts have produced the desired benefits. creates managerial linkages and therefore. a few of them are: The Foreign Corrupt Practices Act (USA. recent issues are health and education. educational and digital inequalities. often initiated by organizational leaders. and global structures. increases complexity in scope and pattern.g.e. child labor. CBP can involve (at a time) two or more. even many organizations of different size and scope. 1789) – US multinationals may be responsible for human rights abuses by foreign governments if the companies benefit from those abuses. e. child labor. outside influences. protection/preservation of environment. job creation. Conduct formal evaluation of the effectiveness of CSR. 1977) – prohibits US firms. Find whether there is any follow-up system within the firm to respond to CSR needs. healthcare and the like) 6. Lead the industry with CSR best practices: If CSR practice comes from the belief of company leaders in effectiveness of integrating morality and profit i.

. especially those relating to child labor.Conventions of ILO. including ban on the worst form of child labor.

sexual harassment. 2. and • Provide an honest assessment of the performance and mutually develop a plan to improve the ratees’ effectiveness . it is payment made with an intention to corrupt.e. political and social beliefs. free of biases • Avoid underrating or overrating employees • Use ethics as the corner-stone of performance evaluation.. privacy. Bribery Bribery and corruption Restructuring and layoff Privacy Job discrimination Performance appraisal Wages Safety and health Sexual harassment Bribe is remuneration for the performance of an act that is inconsistent with the work contract or the nature of work one is expected to perform. Restructuring and Lay-off There are ethical implications in the process by which termination decisions are made and actions taken. 3. safety and health. 6. personal life style) from intensive and unwarranted actions. wages. and bribery] 1. 5. performance appraisal. 4. 8. costs rise and along with costs. Interventions in privacy: • Information technology • AIDS testing • Whistle-blowing (without sufficient grounds. and also keeping unattended) • Drug-testing • Genetic testing (for one’s inherited characteristics and certain illness) Performance Appraisal The assessor is expected to • be objective and fair i. Issues on consequence in closure of a plant: • How the plant for closure is chosen? • How the news will be communicated? • What will be the time-frame for completing the layoffs? • How the affected employees will be compensated? Privacy Privacy refers to protecting an employee’s private life (religious beliefs. restructuring and lay off. 7. prices too tend to hike. bribery is economically undesirable. Besides being morally wrong. The reasons are: • An economy based on bribery does not provide open access to all competitors on equal terms • Bribery prone economies become less efficient – resources are wasted. privacy empowers and enables people.Topic 5: Ethics and a few specific issues of concern in business [Ethics as an issue in – job discrimination. too.

pay rise or promotion 3. Organizations can discriminate having a prejudiced policy 3.Job Discrimination A discriminatory decision • Is based on group membership. requests for sexual favors. Sexual offers – against incentives of jobs. sexy jokes and sexual references are too common in workplace where men and women work together . for example of women Wages An ethical issue is the parity between remuneration of employees in home country with that of employees working in a foreign location. Another ethical issue indirectly related with wages is the imposition of restrictions on free movement of labor in a world where other factors of production – capital. Sexual threats – forces women to comply. Discrimination may be on the basis of sex or race 4. underground and under-water tunneling. Taking guard against accidents in work place caused by • High speed and noisy machinery • Production processes requiring high temperature • An increasing reliance on chemical compounds • The nature of such works as construction. technology and machines move with much less or almost no restrictions across the globe. lest their jobs are at stake 2. Hostile work environment – sexual nature of conduct of the co-workers causes a women to feel highly uncomfortable and affect performance. drilling and mining B. flirting. weakened eye sight. job stress and other health hazards). Prevention of cumulative trauma and disorders in jobs (wrist pain. as well as between remuneration of a local employee and a foreign one of same qualifications and working in the same organization with same responsibilities. health is better than illness and body integrity is better than injury Sexual harassment Sexual harassment means unwelcome sexual advances. Safety and Health Business ethics require A. and other verbal or physical conduct of a sexual nature. There can be workplace harassment. Individuals can intentionally discriminate out of prejudice 2. Life is better than death. Three types: 1. not on individual merit • Is the result of prejudice or false stereotype • Somehow harms those it is aimed at Four common discriminatory practices 1.

Nestle – bought fruit juices fro South America but these suppliers rely heavily on child labor (especially in harvesting fruit). treatment of other agencies by an organization and its employees] Towards a better understanding of business ethics In order to have a broader understanding of the concept and its various aspects. How do businesses that you know treat their employees. Why is it necessary to apply business ethics? 9. such as: 1.Topic 6: Practice of Ethics in Business [Practices of business ethics – how ethical values emerge in organizations. practices). Minute Maid. firms behave in a way not acceptable on different grounds. semantic. consumers get products and services. But in instances businesses companies. Tropicana. 6. What are consequences of greed in term of politics or economy of the country? 7. 7. 5. Is business ethics a part of company activities. (b) normative ethics and (c) applied ethics is best for making business decisions and why? 6. psychological presumptions and commitment). Can anyone examine critically the inevitability of ethics in business activities? 5. beliefs. . The employees towards their organization and c. First consideration is ethical behavior (standard norms. one can look for answers to a number of the following type: 1. 2. Ethical standards vary in different cultural environment and need to be standardized in a cross cultural context. How can the public make sure that a company adheres to correct business ethics? 3. Can anyone do my business ethics homework for me? Rather than doing the work myself and gaining an understanding of ethics that would help me better navigate the business world? 4. Which moral philosophy you feel is best suited for making business decisions and why? 8. Do you prefer social isolation? 2. Which one of (a) metaethics (analytical ethics. we deal with the behavior of a. 3. but the harm is already done. Organization to its employees b. The employees and organization towards other economic agents Cases: a. treatment of employees by their organization. epistemological. or it is merely ‘a response’ to society’s call’? 10. While talking about ethics in business. treatment of organization by its employees. parents may not oppose. 4. What Are Workplace Ethics? What Is an Ethics Officer? What does "You Reap What You Sow" Mean? What is a Business Process? What are Banking Ethics? What is Informed Consent? What is Capitalism? The questions may be of another type. attempt to understand metaphysical. workers earn incomes. values. or care for the community and environment? Businesses create value Investors earn profit.

.. Managers do more than sign off on an ethics plan – they can not behave unethically to demoralize employees or even provoke them to leave their jobs. there might be problems with wage ranges and benefits. “others follow the leader” while managers are to create examples. mission or values. Secrecy and confidentiality c. often with written statements such as the organization’s vision. women and labor rights. career prospects and child. not everything is written. also. behaviors (e. unsafe working conditions. Nike – child labor abuse. padding expense accounts etc] . they are to design a reward system that does not patronize unethical behavior. Treatment of the organization by its employees (how employees treat their organization): a. address the issues of child labor or work safety. Compensate for the loss of job positions for employees at home (because of shifting production abroad) Treatment of employees by their organization (how an organization treats its employees): a. Child labor in sewing soccer balls in San Miguello (Mexico). What is the issue in (international) business? Define appropriate ethical standards. Honesty and integrity [making long distance phone calls by using the office line. needs like treatment. obeying national laws and regulations. the employee will do bad purchases or divulge company information to competitors] b. beliefs.b. businesses do conform them in their actions. managers shape organizational culture. operate in a socially responsible way. practices. How ethical values emerge in organizations? Organizational ethics and responsibility are shaped by national culture – most businesses develop within nations by adopting dominant national cultural values. both laws and norms reflect national cultural values and together. purpose. Conflicts of interest [suppliers offering gift to a company employee influences purchases which may not be the best. positive cultures by articulating organizational purpose in terms of a combination of social and business goals. stealing supplies. top managers create ethics. Respect personal rights and dignity of each employee However.g. employee may accept the ‘favor because he has festivals. children are earning. conforming to national norms). something to offer to the family or friends. Provide appropriate compensation and benefits c. violations of local regulations in manufacturing products in contracts with independent operators in Asia. they outline ‘right’ and ‘wrong’ business behavior. working conditions and the environment. but earning low and are not going to school c. or recovery of losses in gambling etc. Hire the best people to provide ample opportunities for skills an career development b. Top managers influence organizational ethics – top managers’ values are evident at an organization’s founding or with a new CEO.

invites petting the trade unions and so on. candles. General Mills. Handling suppliers and dealers. g. need to decide on whether and how to apply the Guidelines/Code of Ethics prepared for home countries in countries where they have subsidiaries. and (c) pro-labor Large companies like Phillips. they loose the moral right to insist ethical norms for others. violence. manipulation of share prices. . Toyota. suppliers. If they violate. a serious issue in CSR b. labor unions and all other stakeholders. sex c. Distribution of dividends against shares/stocks. Product quality – effect of the product on health. (b) pro-industry. Handling labor unions – a special issue in ethics. psychology and social norms – diseases. Pricing – escalating prices on every available grounds. Johnson & Johnson have written guidelines on how to treat suppliers. customers. Unfair practices or corruption/bribery escalates cost. Sensitive products – scarcity and price – pharmaceutical. f. sale of products and services. These companies however. fuel. Company behavior with government and local people in starting and operating business. Daewoo. competitors. change in mindset. e. Whirlpool. Hewlett Packard have developed Code of Ethics: written statement of values and ethical standards that guide the firm’s actions. calls for manipulation in management and the associated strains.How employees and organization treat other economic agents: customers. environment. Siemens. labor unions may be (a) pro-self. Organizational practice and corporate culture    Top leaders to play role models in ethics. Nissan. kerosene. competitors and other constituents.drugs. a. salt d.

ethics of accounting information. religion. related disciplines. Issues arising from the traditional view of relationships between employers and employees. More specifically. Corporations do have political contributions. If a company's main purpose is to maximize the returns to its shareholders. etiquette. religious views on business ethics. weight and attractiveness. including discrimination on the bases of age (ageism). not participating in the market] forex scams [any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. securities fraud. Bribery. the customer is betting against the bucket shop operator. Without an actual underlying transaction. Moral rights and duties between a company and its shareholders are to be looked at in consideration of: fiduciary responsibility. concerns (criminal) manipulation of the financial • • markets. such as corporate governance. as well the leadership issues. facilitation of payments: while these may be in the (short-term) interests of the company and its shareholders. Insider trading. intellectual property. Ethics of Human Resource Management The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship.g. There should always be the scope of law reform. Corporate ethics policies may be misused as marketing instruments. cultural difference] General Issues • • • • • • • Every business has its own philosophy dominated by the fundamental purposes of a company. bucket shops [brokerage firm that “books" retail customer orders without actually having them executed on. misleading financial analysis. an operation in which the customer is sold a security but there is no transaction made on any exchange. sales and marketing. manners. Executive compensation: concerns excessive payments made to corporate CEO's and top management. these practices may be anti-competitive or offend against the values of society. stakeholder concept v. There are ethical issues concerning relations between different companies: e. Ethics of Accounting Information • • Creative accounting.Topic 7: Ethics and other Areas of Business [General issues. earnings management. . race. hostile takeovers. shareholder concept. industrial espionage. knowledge and skills. and technology. production. gender. human resource management. such as the rights and duties owed between employer and employee. then it is unethical for it to consider the interests and rights of anyone else. especially for resolving ethical debates such as the one over the crime of corporate manslaughter. disabilities. the issues are • • Discrimination issues. kickbacks. Ethical rights and duties existing between companies and society are debated in the context of interpretation of the concept of corporate social responsibility or CSR. The transaction goes 'in the bucket' and is never executed.

religion. violation of antitrust law. weapons. Specific marketing strategies: greenwash (practices of companies spinning their products and policies as environment friendly such as by presenting cost cuts as reduction in use of resources). shill (associate. Black markets. but the ethical line is to be drawn somewhere. To some extent society regards this as acceptable. gender. Ethics of production This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. the trade of goods and services are illegal themselves and/or distributed through illegal channels). Issues affecting the privacy of the employee: workplace surveillance. drug testing. Content of advertisements: attack ads. addictive and inherently dangerous products and services (e. or any other discriminatory act. sex in advertising. while legal. viral marketing (marketing network that uses preexisting social networks to achieve other marketing objectives such as product sales through self-replicating viral process. unsolicited or unintended by original. tobacco. pyramid scheme. Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery. or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.• • • • • Issues surrounding the representation of employees and the democratization of the workplace: union busting. strike breaking. alcohol. indentured servitude. subliminal (hidden) messages. However. bait and switch (a form of fraud – advertising a product or service for sale at a unprofitably low price but customers reveal that the advertised good is not available while a substitute is). Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility. media ethics is a much larger topic and extends outside business ethics. Some specific issues are • Defective. in case black market. employment law. Occupational safety and health. Issues affecting the privacy of the employer: whistle-blowing. motor vehicles. Employees can not be hired or fired based on race. The major ethical issues of marketing are: • Pricing: price fixing. . Marketing ethics overlaps strongly with media ethics. age. price discrimination. usually a person assuming the air of an enthusiastic customer of a good or service of a company/business with he pretends to have no relation whatsoever). electronic spam (abuse of electronic system to send unsolicited bulk messages indiscriminately). anti-competitive practices. are unofficial. chemical manufacturing).g. analogous to the spread of pathological and computer viruses). • • • • • Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains. grey markets (trade of a commodity through distribution channels. planned obsolescence. Ethics of Sales and Marketing Marketing goes beyond the mere provision of information about (and access to) a product and may seek to manipulate the values and behavior. price skimming [pricing strategy in which a marketer sets a relatively high price for a product or service at first. products regarded as immoral or harmful Children and marketing: marketing in schools. All of the above issues are also related to the hiring and firing of employees. because marketing makes heavy use of media. then lowers the price over time].

Traditional Confucian disapproval of the profit-seeking motive. Even the notion of intellectual property itself has been criticized on ethical grounds Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess. attempts to assert ownership and ethical disputes over ownership arise. trademark infringement. Medical technology has improved as well. copyright infringement. Nor is it obvious who has the greater rights to an idea: the company who trained the employee. associated with the avoidance of charging interest on loans. Religious views on business ethics The historical and global importance of religious views on business ethics is sometimes underestimated in standard introductions to business ethics. or the employee themselves? The country in which the plant grew or the company which discovered and developed the plant's medicinal potential? As a result. These drugs are protected by patents and there are no generic drugs available. Particularly in Asia and the Middle East. The practice of employing all the most talented people in a specific field. and privacy invasion. • • • • • • • Patent infringement. Ethics and Technology The computer and the World Wide Web are two of the most significant inventions of the twentieth century. religious and cultural perspectives have a strong influence on the conduct of business and the creation of business values. patent troll. use of economically disadvantaged groups (such as students) as test objects. Business intelligence and industrial espionage. mobile phone radiation and health. This raises many ethical questions. Pharmaceutical companies have the technology to produce life saving drugs. This leads to data mining. submarine patent. Examples include: • • • Islamic banking. knowledge and skills Knowledge and skills are valuable but not easily "ownable" as objects. carbon emissions trading Ethical problems arising out of new technologies: genetically modified food. Product testing ethics: animal rights and animal testing. Misuse of the intellectual property systems to stifle/suppress competition: patent misuse. Bioprospecting (ethical) and biopiracy (unethical). . copyright misuse. in order to prevent any competitors employing them.• • • Ethical relations between the company and the environment: pollution. workplace monitoring. Quaker testimony on fair dealing. It is easy to gain access to information. There are many ethical issues that arise from this technology. Ethics of intellectual property. environmental ethics. regardless of need.

Business ethics is also related to political economy. if any. (b) deontology – holds that acts are inherently .. free will among participants in the marketplace.Related disciplines Business ethics should be distinguished from the philosophy of business. and ethical underpinnings of business and economics. which are central ethical issues. theories of individualism vs. in relation to the business enterprise. the branch of philosophy that deals with the philosophical. business management theory. collectivism. such as libertarian socialists. Political economy deals with the distributive consequences of economic actions.those who dispute that premise. political. are the social responsibilities of a business. It asks who gains and who loses from economic activity. Three branches of normative theory: (a) virtue ethics – emphasizes character rather than rules or consequences and suggests that if the person is good follow whatever s/he does no matter taking it granted that the consequence cannot be bad. the role of self interest.. invisible hand theories.. which is economic analysis from political and historical perspectives. Theories Utilitarianism · Consequentialism · Deontology · Virtue ethics Philosophers Plato · Aristotle · Confucius · Mencius · Thomas Aquinas · Baruch Spinoza · David Hume · Immanuel Kant · Georg W. and is the resultant distribution fair or just. Hegel · Arthur Schopenhauer · Jeremy Bentham · John Stuart Mill · Søren Kierkegaard · Friedrich Nietzsche · John Rawls · Peter Singer · more. The philosophy of business also deals with questions such as what. especially property rights. (who contend that "business ethics" is an oxymoron) do so by definition outside of the domain of business ethics proper. for example. that the ethical operation of a private business is possible -. and natural rights. F. Business ethics operates on the premise.. A brief list of related areas • • • • • • • • • • Bribery Business culture Business law Corporate behavior Corporate crime Corporate social responsibility Corruption Ethicism Ethics Ethical code Ethical job • • • • • • • • • • • Ethical implications in contracts Ethical consumerism Ethical code Ethical job Fiduciary Journal of Business Ethics Management Optimism bias Political economy Strategic misrepresentation Strategic planning Ethics Subfields Normative ethics · Meta-ethics · Descriptive ethics · Medical ethics · Professional ethics · Evolutionary ethics · Ethics of care · Sexual ethics · Bioethics · Cyberethics · Neuroethics · Engineering ethics · Environmental ethics · Legal ethics · Media ethics · Business ethics · Marketing ethics · Ethics in religion Concepts Freedom · Autonomy · Rights · Value · Morality · Responsibility · Care · Humane · Justice · Principles · Virtue · Happiness · Equality · Trust · Free will · Consent · Moral right · Moral responsibility · Human rights · Just War · Axiology · more. the requirements of social justice.

in the interests of social advancement rather than a concern for others. but also may cause the bride and groom to suspect that the guest in pajamas is expressing amusement. as old-fashioned or elite. Etiquette may be wielded as a social weapon. it is a word that has gradually grown plural. Western business etiquette The etiquette of business is the set of written and unwritten rules of conduct that make social interactions run more smoothly. disparagement. In Britain. the word etiquette has its roots in the eighteenth century. A rule of etiquette may reflect an underlying ethical code. or it may reflect a person's fashion or status.) may be equally revealing to the social historian. the notion of etiquette. 49% of employers surveyed in 2005 by the American National Association of Colleges and Employers found that non-traditional attire would be a "strong influence" on their opinion of a potential job candidate. and (c) consequentialism. no service" is a notice commonly displayed outside stores and cafés in the warmer parts of North America. Both office and business etiquette overlap considerably with basic tenets of etiquette. Office etiquette in particular applies to coworker interaction. Like "culture". . or disrespect towards them and their wedding. especially by those unfamiliar with etiquette's social foundations and functions. Others feel that a single. In America. These rules are often echoed throughout an industry or economy. but aspects of etiquette have been codified from time to time. Manners tell one what to do when your neighbor doesn't". is occasionally disparaged. and their justifications as logical ("respect shown to others" etc. or group. or a painter's characteristic "manner". though the term itself is not commonly used. social class.good or bad and everybody has the duty to do those things that are inherently good (for example. The outward adoption of the superficial mannerisms of an in-group. though. others consider such a philosophy to be espoused only by the unschooled. For instance. like mythology. the unmannerly and the rude. Manners involve a wide range of social interactions within cultural norms as in the "comedy of manners". wearing pajamas to a wedding in a cathedral may indeed be an expression of the guest's freedom. becoming a universal force in the nineteenth century to the extent that it has been described as the one word that aptly describes life during the reign of Queen Victoria. basic code shared by all makes life simpler and more pleasant by removing many chances for misunderstandings and by creating opportunities for courtesy and mutual respect. is considered by many a form of snobbery. realizing that these may not be universal. Thus. no shirt. For instance. lacking in virtue. it is now possible to refer to "an etiquette" or "a culture". Some such individuals consider etiquette to be an unnecessary restriction of freedom of personal expression. excluding interactions with external contacts such as customers and suppliers. Etiquette Etiquette is a code of behavior that influences expectations for social behavior according to contemporary conventional norms within a society. a like-code concerned only with apparently remote directives such as "which fork to use". Etiquette may be enforced in pragmatic ways: "No shoes. have buried histories especially when they seem to have little obvious purpose. Manners "Etiquette tells one which fork to use. especially in a multi-ethnic society with many clashing expectations. being of French origin and arising from practices at the court of Louis XIV. Rules of etiquette are usually unwritten. truth telling) without bothering what the consequences can be. Etiquette and manners. Rules of etiquette encompass most aspects of social interaction in any society.

stylishly and fastidiously. The code of conduct is still highly respected in Germany today and is used primarily in the higher society. as a compliment to the quality of the cooking.Cultural differences Etiquette is dependent on and evolves with culture.C. 2414–2375 B. and new titles Etiquette for Girls and Manners for Men act as guides for those who want to combine a modern lifestyle with traditional values. An important book about etiquette is Galateo. Louis XIV established an elaborate and rigid court ceremony. Il Cortegiano ("The Courtier"). rules for participating in an online forum. beginning with a behavior code by Ptahhotep. in a book by Baldassare Castiglione. and so on. In the UK. which governs the drafting of email. what is excellent etiquette in one society may shock another. The immense popularity of advice columns and books by Letitia Baldrige and Miss Manners shows the currency of this topic. overo de' costumi by Monsignor Giovanni della Casa. called the Knigge. Etiquette is a topic that has occupied writers and thinkers in all sophisticated societies for millennia. in Italian.). In China. including ancient Greece and Rome. in fact. Even more recently. . In Germany. Debrett's is considered by many to be the arbiter of etiquette. with his fingers. etiquette is generally called galateo (or etichetta or protocollo). there is an "unofficial" code of conduct. the rise of the Internet has necessitated the adaptation of existing rules of conduct to create Netiquette. based on a book of high rules of conduct written by Adolph Freiherr Knigge in the late 18th century entitled exactly Über den Umgang mit Menschen (On Human Relations). Traditional publications such as Correct Form have recently been updated to reflect contemporary society. a vizier in ancient Egypt's Old Kingdom during the reign of the Fifth Dynasty king Djedkare Isesi (ca. developed rules for proper social conduct. All known literate civilizations. but distinguished himself from the high bourgeoisie by continuing to eat. a person who takes the last item of food from a common plate or bowl without first offering it to others at the table may be seen as a glutton and insulting the generosity of the host. their guides to manners and form have long been the last word among polite society. Early modern conceptions of what behavior identifies a "gentleman" were codified in the sixteenth century. its codification of expectations at the Este court remained in force in its essentials until World War I. In the American colonies Benjamin Franklin and George Washington wrote codes of conduct for young gentlemen. In America a guest is expected to eat all of the food given to them. Etiquette can vary widely between different cultures and nations. Confucius included rules for eating and speaking along with his more philosophical sayings.

. Dumping is often seen as an ethical issue. e. Issues such as globalization and cultural imperialism. and society as a whole.e.. Ethics of Economic Systems This vaguely defined area. or vice versa. the fair trade movement. a particular outcome might be good for the employee. Foreign countries often use dumping as a competitive threat. The way in which multinationals take advantage of international differences. as larger companies are taking advantage of other less economically advanced companies. transfer pricing. Some ethicists (e. the International Trade Commission has been researching anti-dumping laws. or the company Business ethics can be examined from various perspectives.g.g. business ethics activities in global world] The issues here are grouped together because they involve a much wider. is where business ethicists venture into the fields of political economy and political philosophy. clothes) and services (e.g. This can lead to problems in domestic markets.g. whereas. Theoretical issues such as cultural relativity of ethical values receive more emphasis in this field. the use of child labor. situations arise in which there is conflict between one or more of the parties. older issues can be grouped here as well. selling products at prices lower than their normal value. global view on business ethical matters. While business ethics emerged as a field in the 1970s. including the perspective of the employee. theoretical issues and the practice. Issues and subfields include: • • • • • • • • The search for universal values as a basis for international commercial behavior. It becomes difficult for these markets to compete with the pricing set by foreign markets. collecting and deriving genetic materials from samples of biodiversity that can be commercialized) and biopiracy in the pharmaceutical industry. Very often.g. Comparison of business ethical traditions from various religious perspectives. Other. the commercial enterprise. The permissibility of international commerce with pariah states.Topic 8: International Business and Ethics [International business and ethics – ethics of economic systems. looking back on the international developments of that decade. In 2009. Varying global standards . Comparison of business ethical traditions in different countries. it would be bad for the company. such as outsourcing production (e. Ethical issues arising out of international business transactions. such that serving the interest of one party is a detriment to the other(s). Many new practical issues arose out of the international context of business. society. Henry Sidgwick) see the principal role of ethics as the harmonization and reconciliation of conflicting interests. For example. perhaps not part of but only related to business ethics. Theoretical Issues in Business Ethics Conflicting interests: from whose perspective to look at – employee. call centers) to low-wage countries. bioprospecting (searching for. international business ethics did not emerge until the late 1990s. focusing on the rights and wrongs of various systems for the distribution of economic benefits.

its shareholders. ought a company to obey the laws of its home country. and employees and other stakeholders are given voice over a company's operations. loss of licensure. and some would suggest that this includes even rights of governance. using a combination of i) macro-principles that all rational people would agree upon as universal principles. but not of the business or corporation.Ethics – a strong basis for CSR     Ethics encourages ethical behavior worldwide Ethical behavior helps organizations adopt external expectations Ethics are grounded in a moral philosophy that helps people discern between right and wrong Ethics is the study of morally appropriate behavior and decisions examining “what should be done”. as in the case of multinational companies that operate in countries with varying practices. Ethical issues and approaches: what to give priority – profit maximization or the stakeholders’ interests. Some take the position that organizations are not capable of moral agency. which is largely due to John Rawls' A Theory of Justice. because any others function as a tax on profits. Primary stakeholders are people that are affected directly such as stockholders. for example. ethical behavior is required of individual human beings. vendors. or should it follow the less stringent laws of the developing country in which it . Under this. or company reputation. customers. The question arises. Some believe that the only companies that are likely to survive in a competitive marketplace are those that place profit maximization above everything else. ii) micro-principles formulated by actual agreements among the interested parties. Stakeholders can also be broken down into primary and secondary stakeholders. They posit that conflicting interests are best resolved by formulating a "fair agreement" between the parties. whereby companies become quasi-democratic associations. For example. because the consequences of failing to do so could be very costly in fines. or even society as a whole. Thus. and. Critics say the proponents of contract theories miss a central point. Philosophers and others disagree about the purpose of a business ethic in society. This approach has become especially popular subsequent to the revival of contract theory in political philosophy. which might include employees. some suggest that the principal purpose of a business is to maximize returns to its owners. under this view. They would say that stakeholders have certain rights with regard to how the business operates. which they call Integrative Social Contracts Theory. only those activities that increase profitability and shareholder value should be encouraged. an aspect of the "quality movement" that emerged in the 1980s. or in the case of a publicly-traded concern. that a business is someone's property and not a mini-state or a means of distributing social justice. They believe a business has moral responsibilities to so-called stakeholders. and the advent of the consensus-oriented approach to solving business problems. Some theorists have adapted social contract theory to business. the local community. Other theorists contend that a business has moral duties that extend well beyond serving the interests of its owners or stockholders. people who have an interest in the conduct of the business. Professors Thomas Donaldson and Thomas Dunfee proposed a version of contract theory for business. some point out that self-interest would still require a business to obey the law and adhere to basic moral rules. However. and that these duties consist of more than simply obeying the law. Ethical issues can arise when companies must comply with multiple and sometimes conflicting legal or cultural standards. where secondary stakeholders are people who are not affected directly such as the government. namely.

e. if it is a standard practice in a host country (e. Business ethics activities in a global world .. (b) to implement the ethical guideline. however. wages. (b) the burden to write new rules that often requires a dense set of compliance statements and specialized legal language of each country. It is not right to assume that with accompany going international its values also automatically cross borders. Ethical relativism have some challenges and problems: (a) managerial transfers requiring managers to develop culturally relative values that change depending on place. accepted way of doing business. Ethical absolutism means “they adapt to us” – an approach that puts home company interests first. in other parts of the world. The growing need for global ethics initiative International organization may sometimes like to operate in an ‘out of sight out of mind’ context. Public now increasingly demand that businesses be socially responsible and ethical. incorporate more diverse values into decision making process and take care of values of wider groups of stakeholders and diverse moral philosophy. Ethics in an international context – how home grown values play in international market International business is in fact interaction of nations. Crossing border means that the organizational leaders need to manage more difference. and (c) one may adapt to rules and laws of a host country but adaptation may not help managers understand or learn about the culture and its underlying values’. such firms are called ethnocentric firms and ethical problems with ethnocentrism become noticeable when and host country cultures differ. These paths are grouped as ethical absolutism and ethical relativism. do as the Romans do”. But business are no more invisible now and there is a growing public concern about how businesses contribute to global problems. pay bribes or speed money). Firms often need to follow adaptive ethical paths when they go international.does business? To illustrate. Ethical values and norms of one country cannot be expected to be treated well in another country. United States law forbids companies from paying bribes either domestically or overseas. Similar problems can occur with regard to child labor. discrimination. and (c) to monitor behavior or organize compliance efforts through assigned agencies. a ‘true’ sense of ethics at one place may appear false in another one. what the businesses can and should do to address the problems. those companies that survive are the ones that recognize that their only role is to maximize profits.g.. Ethical relativism means “the company adapts” i. It is sometimes claimed that a Gresham's law of ethics applies in which bad ethical practices drive out good ethical practices. It is claimed that in a competitive business environment. and environmental protection laws. “when you are in Rome. employees of the host country/culture are to adapt to the cultural norms and values of the employer. ethical relativism increases costs especially (a) to prepare and disseminate formal ethical guideline. bribery is a customary. including even those which they did not create. They do cross but they may not be accepted. These require that an organization going international needs to have strong ethical corporate culture. cultural ignorance prevent mangers from tracking activities in a nation. work hours. sometimes may go extreme. legal compliance offers too little managerial insight. employee safety.

e. Managers search for principles for action that transcend national borders and the cultural values and modes of operation that will achieve the broad purposes of the company on a long-term and sustainable basis. .Global businesses respond to global shifts and demands through a mechanism of internal integration.. values vary widely. universal ethical principles are not thick on the ground because people share few values worldwide i. However.

illiterate and unskilled have lost out  LDCs remain excluded from the benefits of globalization  Indigenous people are particularly vulnerable. main drivers of globalization. change in equations of the three centers of imperialism. reorientation of business locations throughout the world. change in China-US relationship. Chile) and majority industrially developed countries (with strong initial economic base. globalization is a threat to local cultures. (c) privatization of a broad range of enterprises and reduction in government expenditures. Changes in world economic scenario associated with globalization  The post-war world (since 1945) has seen massive transformation and restructuring of economic activities in unprecedented scale and speed and in even more rigorous force in the last two decades (the story of decolonialization. These impacts are dramatic in the sense that the ‘free market reform’ for trade liberalization and globalization brought economic growth to some countries that could implement fast reforms/restructuring but growth led to increasing disparities and the gaps between the rich and the poor meaning that liberalization may lead to economic growth but not necessarily to social development. the public and private costs of trade liberalization] Globalization is the expansion of international trade and foreign investment (by multinational companies and corporations) and intensification of links of national economies with global economy through transactions – movements of capital. as well as by domestic designs of structural adjustment programs  Main drivers of globalization    Transformation of a patchwork of national economies into a more integrated global economy Development of global level institutions to support and regulate it Increase in international transactions (scope and volume) and in a faster rate. especially with growth of outsourcing The consequences of ‘free market reforms’: Globalization has innumerable impacts but in the given context. the consequences of ‘free market reforms’. the electronic revolution in communication. Trade liberalization is the main vehicle of globalization. abundance of capital and skill and technological leadership) are well placed and reaped the benefits of globalization. fall of USSR.changes in world economic scenario associated with globalization. China. A minority of developing countries (India. including indigenous cultures  . the emerging East Asia and the newly industrialized economies. while the poor. the discussion will limit itself within some aspects of globalization that has relevance with ethics and CSR. industry and business) Shifts in economic policy – broadly consistent throughout the world and restoration economic equilibrium through (a) liberalization of markets (b) reduction in state control/intervention in the economy. (d) changes (reductions) in social services and subsidies on consumer goods (e) bringing changes under pressure from international creditors. Mexico. labor and technology.Topic 9: Globalization and Business Ethics [Globalization and business ethics .

    Women working in rural farms are grossly affected No universal perception for the best approach to trade liberalization could be established Growth benefits from capital account liberalization (FDI. and the like. other capital flows) are small Short-term speculative flows have been damaging The public and private costs of trade liberalization International business. livelihoods and incomes. trade and investment create disparity in income. However. consumption patterns (which has a chain effect in terms of affecting peoples’ jobs). Also. improve socio-economic security. China and Thailand. especially in developing countries: (a) some countries become more dynamic than others in taking advantage of global trade opportunities through stronger investment links that encourage absorption of new production and managerial skills. reduce inequality.g. social and environmental sustainability. government and military bureaucrats etc) as well as in policies towards regulation or subsidies. In many countries some groups of workers (e. instabilities arise because of changes in the structure of the government or interest groups (business people. increase income and reduce poverty. inequality and poverty intensified Globalization has affected peoples’ lives: change in economic structure. globalization increases global interconnectivity and the awareness of global and local disparities. Adjustment is associated with change. which can be disruptive and have different impacts on different groups/communities. Japan or even Korea. The heavy social costs of globalization are associated with the gap between the expectations from and the reality of the process. But the reality did not match everywhere with the expectations: despite sustained growth in China. there was the Asian financial crisis. improvement in international competitiveness. there is the problem of ‘trickling down’ of the effects of crisis in ‘big’ nations like the USA. The expectations are: globalization should benefit all countries and should raise the welfare of all people throughout the world. These are private costs of adjustment. These are public costs of trade reforms. Liberalization does not ensure increase in employment and output since import competing industries operating behind protecting walls and government intervention may not be able to sustain capacity utilization and in such case. politicians. both workers and the entrepreneurs face hardships. the country faces transitional unemployment. create new employment opportunities. improves democracy and forges a greater sense of global community. relative prices. and (b) forces within countries use their growth opportunities in differentiated pattern.. This leads to a . raise rate of economic growth in poor countries. redistribution of income in favor of those who can successfully manipulate their role in the globalized environment. in jute and textiles sectors in Bangladesh) are adversely affected by trade liberalization. imbalances between international and domestic prices continue to remain. The reality shows that the consequences of globalization are dramatic:      Primary incomes of the poor are down Number of people living below poverty went up Social income (access to public services) has decreased Targeted interventions meant to protect the poor and the vulnerable groups from the worst aspects of adjustments never reach all the poor and seldom reach most of the poor Unemployment rates. speed up development and ensue economic.

Reaching consensus on how proceed for changing the face of globalization is difficult in an environment when  The ideological positions are fragmented in a variety of social interests. and  International development commitments go largely unfulfilled. Steps for achieving short-term equilibrium hardly address social issues and are aimed at (a) bringing down the demand or (b) expanding the supply through increased capacity utilization. The obstacles in the process are: a. But reaching consensus is ‘the most’ important precondition for effectively addressing the social issues of globalization. Lack of global availability of resources Constraints to investments stemming from inefficiency in allocation of resources. Long-term sustainable solution to the problem requires addressing the following issues:  Reversing ‘desocialization’ of social actors and the community people who turn attention to ‘coping with growing economic hardship’ in their individual capacities. which requires more knowledge of the economy and more reflections of sequencing policy instruments of structural adjustment measures. Little has been achieved so far. the social dimensions of globalization have become prominent part of the interregional and international negotiations and agreements.  Impact on women such as the loss of capacity of households to provide safety nets to those who are economically displaced by restructuring and forced to join labor force  Complying with policy directives of donors and financial institutions deepening social problems. no matter whether one calls the world ‘unipolar’or ‘free of cold war’  The will for consensus is still very weak  Key international negotiations are deadlocked. and  Reversing the damaging trends that widen inequality and increase poverty. The avenues for optimism are:   Experience demonstrates the value and power of dialogue as an instrument for change There is ample scope of expanding the space for dialogue aimed at building consensus for action . allow (consciously or unconsciously) disruption of social bonds and live in a situation where social tensions lead to new forms of intra and inter-group conflicts. b.pressure on the international community to address the effects of globalization and an understanding of the facts that   The continuing spread of global market economy and production system has still to be matched by a parallel development of institutions for its governance Globalization had demonstrated great productive capacity but generated very unbalanced outcomes both between and within countries (rise of India and China is now looked at as a threat for the other countries) The overriding challenge now is the growing inequality within and among countries – an issue that threats distributive justice  Therefore.

even if has taken place in some cases. Break the current impasse by focusing on concerns and aspirations of people and the ways to better harness the potential of globalization itself . and Institutional efforts are gradually increasing to forge agreements among a broad spectrum of actors on the course of action.  Common grounds may be achieved through listening patiently and respectfully to diverse views and interests. Industrially developed countries may be better off in this regard but many in these countries also suffer from the problem of relative poverty intensified by restructuring. Following is a more comprehensive list of what the global community sees to happen for the globalization process to be helpful in addressing the social issues: 1. The proposals on rethinking adjustment suggest focusing on reduction of poverty and inequality and to     Promote social development Set broad international norms and specific targets Redefine goals of adjustment. Stabilization. There are attempts of addressing social problems in structural adjustment models trying to give restructuring “a human face” by (a) Giving increased attention to social issues. could reach a very small proportion of the vulnerable population and could contribute little in terms of enhancing sufficient growth to solve the social problems since the growth. fiscal crisis. including child prostitution. One special proposal is based on the concept of 20/20. was not accompanied by    More equitable distribution of the benefits of growth.the acceptable social costs of adjustment. People in East European countries are increasingly becoming victims of polarization. which calls for earmarking 20% of the national budgets and 20% of the international aid for priority social needs.and what are not . Evidences of the above are demonstrated in countries like China and Korea and in East Europe. (b) Becoming more flexible in conditionalities associated with structural lending and (c) Searching ways for directly alleviate problems of the most vulnerable groups. worsening of environmental degradation and the like. the developed countries forgot their commitment of giving 1% of their GDP as foreign aid to the poor countries. withdrawal of girls from schools to do unpaid family work. problems of job security and lack of welfare services under constraints of public budgets. However. spread of crime and prostitution. increase in child labor. and Establish what are . and Increase in efficiency. “social investment funds” were set up to channel funding for development projects for the most vulnerable groups But these had only limited impacts. China and Korea suffer from rapid rise in unemployment and underemployment of rural population moving to towns and cities. increase in polarization.

the resources and means in hand 4. national. regional and global resources. Change the current path by expanding benefits of globalization to more people and share them better between and within countries 3. Finally. . parliaments. empowerment of local communities and gender equity Sustain a democratically effective state and manage integration with global economy keeping an eye on gaining the most of social and economic opportunities and strengthening security Try to attain sustainability through strengthening interdependent and mutually reinforcing pillars of economic and social development and environment protection at the local. labor standards. gender equity and other social goals and make the best use of the available local. regional and global levels Develop productive and equitable markets through development of sound institutions to promote opportunity and enterprise Play with fair rules to offer equitable opportunity and access (to resources) with recognition of diversity in development needs and capacities of different countries/nations Show solidarity to countries and peoples excluded from or disadvantaged by globalization and assist them Establish a greater accountability to people and make the public and private actors accountable for their actions Promote a deeper partnership among IOs. Involve many more voices for ensuring share of benefits of globalization. incorporate policies and concrete actions in national plans and programs a pragmatic focus on employment. environment. businesses. governments. human rights. Seek a process of process of globalization with a strong social dimension based on universally shared values and respect for human rights and individual dignity and create a situation with fair.2. education. inclusive and democratically governed institutions and to this end focus on people and respect their rights. cultural identity and autonomy promote ‘decent work’. labor organizations and civil societies 5.

Elimination of all forms of forced and compulsory labor. slow growth. to jobs and the strategies of social protection. it may play an important role in defining the political feasibility and sustainability of trade reforms provided that the policies adhere to and strengthen core labor standards reflecting:        Basic human rights. enterprise development. addressing labor standard and other social issues by WTO. environment protection and creation/promotion of decent work. security. Reforms are now needed to be planned and implemented as integrated programs of supporting growth. rights of workers – all are affected by patterns of internal investments and the cross border movements of capital and workers. liberalization and gender issues] Protect labor by using ‘protectionism’ In the competitive international economy there is greater vulnerability to sudden change than in protected national markets. incomes. The reality is:  80% of the world’s families have little or no social protection (because of financial strain. national budgetary restrictions often compounded with demographic changes). Right to collective bargaining. Effective abolition of child labor. as already discussed have many sins but if the adjustments can be implemented with a positive set of policies. The concept of decent work emphasizes not only the existence of a good work place environment and proper practice of providing all due benefits to employees but also the social protection. ILO adopted a “Declaration on Fundamental Principles and Rights at Work” in 1998 but the declaration is not enough: trade sanctions to promote adherence to core labor standards remain highly controversial. But protection is not an efficient means of sustaining employment: jobs saved in protected industries are often offset by viable jobs foregone elsewhere in the economy. Countries cannot achieve employment goals on their own Jobs. education and culture. including especially the policy of equitable redistribution of income earned through increased employment and output attained by liberalization. the fundamental rights at work and all aspects of social justice. labor standards. Adjustments take time and require public policy interventions to support the restructuring of production systems and the creation of new opportunities. health and environment. Freedom of association and promotion of expression of free choice. child labor issue remained unresolved and the developments only confirm that trade interventions are not an optimum instrument to abolish exploitative child labor and expand human capital. Structural adjustment. Globalization triggers the need for frequent adjustments to national production processes and hence. failure of trade liberalization in addressing poverty. . poverty reduction. Elimination of discrimination in respect of employment and occupation. and Healthy functioning of market processes.Topic 10: Social Protection and the Concept of ‘Decent Work’ [Protection of labor.   Many incline to resist liberalization and adopt a policy of protectionism.

December 1999). health and education. there was almost no progress in the area. whatever there had been. who are sometimes even ‘humiliated’ by stern attitudes and comments. the developing countries.Addressing labor standard and other social issues by WTO WTO (established in 1995) was supposed to make operational the “Trade and Environment Committee” formed by its predecessor GATT. Four African countries (Benin. gender and empowerment and so on) were not in the purview and the developing countries were against being party to decision on anything ‘partial’ or ‘incomplete’. agreed in the Singapore meet to allow WTO and ILO to work out ways for ensuring international labor standards. The developing countries are not happy to see their developed counterparts in international trade that the later continue to use all excuses in maintaining the traditional system of international trade instead of really ‘liberalizing’ in favor of the developing countries. These were also on the table in WTO’s Doha Ministerial level meeting (November 2001) but since the least developed countries practically did not have any interest. But demonstrators and activists organized a strong protest and the Seattle Meet ended without any resolution. are enjoyed by the industrialists. rich farmers and the urban intellectual Trade liberalization increased the disparity between the rich and the poor Trade liberalization raised the question: whether growth is equivalent to development? . Burkina Faso. The developed and the developing countries however. Failure of trade liberalization in addressing poverty       International trade is still run in a way that it is against the poor. Social issues in international trade were supposed to be in the agenda of the Seattle Meet (of Ministers. Also. Trade liberalization has pushed the developing countries to a more marginalized position The poor in the developing countries have become poorer The benefits of trade liberalization. poverty and unemployment. Chad and Mali) raised a relevant issue in the Kankoon (Ministerial level) Meet in September 2003: USA and some other rich countries give excessive subsidy to cotton growers at home but are constantly advising the developing countries to withdraw subsidies in their agriculture and instead of discussing the issue (and the problems of cotton growers in Africa) the ‘powerful’ continues their line of imposing decisions on the weak Africans. But the committee had limited mandates. Both groups also agreed that the comparative advantage of the developing countries because of low wages I them would not be an issue in considering labor standards. especially the LDCs had the problem of confidence on the developed ones who had seemingly failed to demonstrate that they were sincere in fulfilling the commitments they had been making in the international forums. USA and France proposed to include social issues in the agenda of WTO in its Singapore meet (1996) but apprehending that the developed countries would create provisions and use them in their own interests the developing countries opposed the proposal. the families and the communities. The reason why most developing countries remained reluctant and many of them were actively against the initiative of the developed countries in ‘resolving social issues in international trade’ has been the fact that the term ‘social issue’ was centered around ‘labor standards’ and most other issues (environment surrounding the workplace. businessmen.

especially demonstrated in use of information technology. But important issues beyond the age limit are:        Working hours Leave of different kinds Documentation of the different types of appointment (terms of appointments. and commercialization’ of education and culture in the name of making ‘pragmatic’ or ‘enabling’ education in the ‘competitive’ world. TRIPS and S&DT (special and differential treatment) covers many issues of health services and import and export of pharmaceuticals but there are still many issues that need to be solved through coordination of drug policies and trade liberalization packages. Minority and disadvantaged groups are getting more access but at the same time. Education and culture Globalization and the changes in the pattern of international trade bring changes in education and culture.The reasons for the above state of affairs are:      The poor remains out of reach of the benefits of liberalization Poor people (farmers. Health and environment Health services have become more commercialized. Important to note: capital moves to countries where it finds cheap labor. they are forced to impose less tariffs (customs duties) on their agricultural and non-agricultural products than what the industrially developed countries can do and their products are sold in the third country markets at cheaper prices which may increase some export but that has a limit and does not lead to increase in the net gain Labor standards So far the labor standards remained confined within the ‘age limit for workers’ but many poor countries cannot afford to agree on the ‘standard’ age limits for regular work and for work under conditions. particularly through ensuring that . new communication system and forms and methods of education and training. appointment letters) Rules for termination from jobs Health services at work place Rest and recreation opportunities at workplace Career prospects/prospects of pay escalations etc. entrepreneurs) do not have adequate access to the required financing Poor farmers and entrepreneurs ‘fail to prove their worth’ as effective agents of development Trade liberalization has no concern about distribution of income or the ‘increase in assets’ of the disadvantaged groups The poor countries have low bargaining power and the pay ‘high’ for their membership in WTO. capital is not ‘interested in losing the advantages’ developed countries may lose job positions in some industries at home but their gains from trade allow them to create new jobs in other industries. Poor countries face tremendous difficulties in catching up. local/indigenous traditions and cultures are facing the threat of extinction.

take care of the members of the family Restructuring under trade liberalization may result in decline or even closure of industries causing loss of jobs for the women and therefore. cafeteria and canteens. Women labor are less educated. society and the environment Trade liberalization and gender issues  Liberalization restructured economic activities in many countries leading to growth in export industries. many countries now have EPZs but these new types of export industries. Further. they also feed their families. although the wage issue is sometimes floated under some social pressure. which they are hardly given. and There is a sound management of drugs that are hazardous for health. less efficient and have lower opportunity cost but are ‘good’ in work since it is easy to exploit them and they produce ‘low cost products or provide low cost services’ (sewing garments) because they are paid low. recreation facilities and the like. including those in the EPZs do not properly follow the labor laws that affect the employees most of whom are women. environment at the workplace.     Add: Redefining globalization and trade liberalization . little attention is paid to healthcare of the women workers. give milk to their children.   Drugs remain within purchasing capacity of the poor people. women workers need orientation and also training for alternative work. especially the ventilation and sanitation system. people of the poor countries There is a balance of intellectual property rights (in the interest of the entrepreneurs) and the interests of the mass consumers. services like day care centers for the children of working mothers. Women workers are not attended with the care they need – they are not only workers.