06/03/2022 Business Ethics

By Fabrizio Marrazza

Fabrizio Marrazza
EU BUSINESS SCHOOL
 Table of contents

It is managers’ responsibility to act solely in the interest of shareholders (Milton

Friedman, 1970): discuss this statement giving arguments for and against it. ........... 2

Corporate citizenship ........................................................................................................ 4

Carroll’s pyramid ............................................................................................................... 5

Utilitarian fast fashion ....................................................................................................... 8

Bibliography ....................................................................................................................... 9
 It is managers’ responsibility to act solely in the interest of
shareholders (Milton Friedman, 1970): discuss this statement
giving arguments for and against it.

For

According to Friedman, the only social responsibility firm is to maximize profits. With this

concept Friedman emphasizes that it does not matter the way but a company must think

only of its own interests even if this means not always behaving ethically even if all the

laws are respected. A company that implements this concept to be followed is often able to

maximize profits since it can save money on some areas such as ensuring safety within

the work environment by exploiting its employees by not guaranteeing them a contract and

underpaying them. An example of companies that have this type of behaviour are clothing

companies. This is because their goods are produced in poor countries, where individuals,

including children, are willing to work knowing that they are risking their lives because they

are not guaranteed safety at work and at the same time accept to be underpaid. For this

reason, companies are able to save money since they are able to cut costs and resell their

products in rich countries at three times the value with which they were produced. As a

result, the company gets richer and richer behind the backs of the poor. It is deduced that

the only advantage of this statement is the maximization of profit. (Schwartz, A., 2020)

Against

There are several reasons why a company must have good business ethics:
1. It will attract the most prepared human talent: For young talents, salary is no

longer the key element, but what interests new potential employees is to find a job

that suits the vision of ethics and their ideals.

2. It will build trust among potential clients: Sustainability in products is a

fundamental element since the customer is interested in helping to protect the

environment and consequently is willing to choose less convenient products or

services.

3. It will be interesting for investors and shareholders: good business ethics is

often synonymous with the future or, more than synonymous, one of the

requirements. For this reason it is more likely to find investors or shareholders,

willing to invest money in this type of company.

4. It will improve staff satisfaction: If employees feel that they are doing their job for

a greater good or are helping an important cause with their efforts, they will be more

motivated to do so. As a result, productivity within the company will increase as

employees are satisfied.

5. Access to social benefit: companies that undertake initiatives of this type can

normally enjoy social benefits. One of them is, for example, the possibility of

deducting taxes.

6. The company will be a model: Companies that introduce good business ethics

tend to be seen as a role model since business ethics can give a competitive

advantage therefore it will attract both consumers and the best human talent and as

a result other companies will adopt good business ethics.(Schwartz, A., 2020)
 Corporate citizenship

Corporate citizenship refers to the responsibility of a company towards a community. The

purpose of companies is to improve living conditions within a community by making

ethical decisions while maintaining profitability with their stakeholders.

today the mission of companies combines the achievement of profit with the creation of

shared value for society. Compared to the past, doing business is a completely different

thing and this thanks to the radical change in relations between business, consumers,

markets and society. The engine of this great change is corporate citizenship, a very

topical issue with which more and more companies of all sizes have to deal with. This is

because on the one hand consumers are increasingly careful in assessing business

ethics; on the other hand, companies have understood that they can no longer measure

themselves only through the calculation of economic value but must integrate social and

environmental aspects. The enterprise and society are inseparably linked, and the actions

of one will always have effects on the other. (Hayes, H., 2020)

The roles of corporate citizenship are mainly 3

1. Social rights: the company has the task of taking care of every individual in difficulty

such as giving food to the poor, increasing jobs to help the unemployed, improving

neglected neighborhoods. This can be done through awareness campaigns where

companies can collect donations to solve these problems and at the same time make

their customers aware of these inconveniences so that everyone can contribute to

making the community in which they are a place improve and make sure that everyone

has the same opportunities. (Euruni.edu. n.d)

2. Civil rights: corporations can encourage governments to take responsibility in case

there should be any injustice at the same time comrades can or violate individuals

directly without the help of the government. An example of a company that violates the

privacy of individuals is Facebook in fact has undergone several processes precisely

because it infringed the privacy of its customers and consequently violated civil rights.

On the other hand, there are companies like Google that protect individuals by

speaking publicly against unethical decisions made by the government. (Euruni.edu. n.d)

3. Political rights: Individuals now tend to want to participate more actively in political

life, but individuals often criticize companies rather than the government. For example,

during a protest against obesity McDonald was heavily targeted by critics rather than

decisions made by the government. As a result, companies must act as spokespersons

and represent all its stakeholders and present the different issues to be addressed

directly. (Euruni.edu. n.d)

Carroll ’s pyramid
Carroll was the first to introduce the topic of corporate social responsibility into

management theories (1979). The author, focusing on the classification of the

relationships that can exist between business and society, theorized the "pyramid of

Corporate Social Responsibility", presented in figure 1. (Thacker, H., 2019)

At the base of the pyramid there is what concerns the fundamental or founding aspect of

companies, that is, to pursue positive economic results and remunerate primary

stakeholders (Economic responsibility). This is represented as the foundation of the

pyramid and therefore also of companies in fact it is what is expected of them. In the

business of water case between 1993 and 2004 Coca-Cola thought exclusively about

making profits and neglected the citizens of India by consuming most of the water reserves

to produce Coca-Cola and satisfy its customers. (Euruni.edu. n.d)

On the second step of the pyramid there is the legal responsibility of companies.

Companies must and can operate exclusively following the laws of the country to which

they belong both in terms of production cycle and with regard to the treatment of

personnel, the laws on safety, waste disposal, and the fulfillment of tax and contribution

obligations.

In the pyramid the legal responsibility is emphasized because, although it may seem

superfluous, unfortunately it happens that there are "regulatory holes" that leave too much

discretion of interpretation to companies that translates into behaviors at the limit of legality

difficult to identify, oppose and sanction.

For example, in the business of water case, a court in southern Kerala has ordered the

closure of Coca-Cola bottling plant in the village of Palchimada. In addition, Coca-Cola has

introduced a tanker service to guarantee water to individuals located near the plantations,

However the court has ordered Coca-Cola to reorganize the distribution of water to include

other regions of India since it is a common good. (Euruni.edu. n.d)

Going up to the third step there is the ethical responsibility that concerns precisely the

aspects related to society and to what is more right to do or not to do thinking beyond the

boundaries of the company or expanding the perspective towards the community that

surrounds it, the needs that may arise perhaps in certain places and not in others but that

in any case "do good" to society. The ethical company, having a fundamental role in

society, pursues certain values and shares them with society itself.

Coca Cola, for example, in 2006 reduced water use by 24% and introduced 26 rainwater-

harvesting systems within plantations with the aim of not using drinking water. (Euruni.edu.

n.d)

on the last step there is the philanthropic responsibility that concerns all those actions that

the company does voluntarily and non-profit to improve the living conditions of the whole

society starting from internal employees to the most distant community. Coca-Cola has

become a leader in water management in fact it has introduced a far-reaching Global

Stewardship Initiative. In fact, he promised that he would replace all the groundwater

used. It has started a collaboration with WWF with the aim of giving back to communities

and the environment the equivalent amount of water used to produce its drinks. It has also

launched other initiatives of this kind throughout countries where it has used water, for
example it has allocated 30 million for the "Replenish Africa Initiative". Since 1997 he

participates in various collaborations and initiatives with various NGOs and has

successfully participated in several projects in Angola, Mozambique, Ethiopia, Nigeria,

Rwanda. (Euruni.edu. n.d)

Utilitarian fast fashion

fast fashion should expand fast fashion should stop

Stakeholders
pros cons pros cons
More damage the less profit
Companies profit reputation of the
company
/
Job Potential bad Do not Jobs decrease
growth reputation work in bad
Employees conditions

Increase Damage better Decrease in

in reputation of working economic growth
economic government, conditions
poor countries growth since workers do
not have good
working
conditions.
The Less economic
economic growth
Economy growth / /
improve
More pollution is Less
Environment
condition / produced pollution is
produced
/
 More Bad quality Less clothes are
clothes clothes individuals available
are wouldn't
available wear bad
quality
clothes and
would
Customers
discourage
the
exploitation
of workers
which work
in bad
condition
Less land would More land
be available, would be
Agricultural
workers / since new
company would
available
/
set up
5 6 5 5
-1 0
(Euruni.edu. n.d)

Overall through the utilitarian, reported above, it can be deduced that fast fashion should

be stopped since the cons of fast fashion outweigh the benefits. In addition, fast fashion is

not able to respect human rights. In fact, in this type of company workers are exploited and

they are not guaranteed safety at work. In addition, these companies cause extensive

damage to the environment as more waste is produced and consequently release more

CO2 into the atmosphere contributing to increased global warming.

Bibliography

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2. Hayes, H., 2020. Corporate Citizenship: What You Should Know. [online] Investopedia. Available at:
<https://www.investopedia.com/terms/c/corporatecitizenship.asp> [Accessed 6 March 2022].
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