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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. Many businesses have gained a bad reputation just by being in business. To some people, businesses are interested in making money, and that is the bottom line. It could be calledcapitalism in its purest form. Making money is not wrong in itself. It is the manner in which some businesses conduct themselves that brings up the question of ethical behavior. Good business ethics should be a part of every business. There are many factors to consider. When a company does business with another that is considered unethical, does this make the first company unethical by association? Some people would say yes, the first business has a responsibility and it is now a link in the chain of unethical businesses. Many global businesses, including most of the major brands that the public use, can be seen not to think too highly of good business ethics. Many major brands have been fined millions for breaking ethical business laws. Money is the major deciding factor. 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. A business may be a multi-million seller, 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. Business ethics should eliminate exploitation, from the sweat shop children who are making sneakers to the coffee serving staff who are being ripped off in wages. 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. In the end, it may be up to the public to make sure that a company adheres to correct business ethics. If the company is making large amounts of money, they may not wish to pay too close attention to their ethical behavior. There are many companies that pride themselves in their correct business ethics, but in this competitive world, they are becoming very few and far between. There are a wide range of problems in business ethics. Those problems, however, are usually begin with five main concerns. In business school, students are usually taught a set of concepts that are considered core to corporate responsibility, though following these concepts creates ethical dilemmas. Such ethical dilemmas create the tension in the application of business ethics, due to inherent contradictions. Several types of problems arise from these contradictions stemming from the core corporate responsibilities to include problems with stakeholder equity, profit focus, quantitative emphasis, and accounting for externalities as well as the very interpretation of corporate responsibility. Stakeholder equity is a problem in business ethics because managers and executives are often under pressure to place the majority of that equity with shareholders, usually at the expense of other stakeholders in the organization. For example, a corporation might be pressured to pay out millions

in dividends to its shareholders in a given year, but to make that payment the corporation may need to downsize the workforce. Such a decision creates an ethical dilemma because one stakeholder is given preference over another without justification. Arguably, the workforce and shareholders contribute equally to the corporation, while both equally have a stake in the organization. Profit focus, therefore, often becomes the mandate among many business executives and managers. Creating sound, sustainable profit seldom produces problems in business ethics, but many businesses emphasize profit to the point that stakeholders are negatively affected. Problems of such nature are manifested in creating profits from quality reduction, creating profits through the decrease of operational expenses that result in failure to meet consumers needs, and retaining more profit by reducing employee pay and benefits or cutting some compensation measures all together. When some stakeholders profit at the expense of other stakeholders a contradiction of business ethics arises in that maximizing profit appears to encourage greed, rather than prudence, bringing into question whether even the interest of the business in served in the long term. Quantitative emphasis also tends to create many types of problems in business ethics, since while many types of decisions can be quantified, many cannot. Costs often can be assigned and quantified, but benefits are far more subjective. Therefore, when business decisions demand a focus on quantitative data to make decisions and avoid the arduous task of considering other benefits that cannot be directly measured, ethical issues are bound to present themselves. Take for example a business tasked with deciding whether to implement a safety program. Managers and executives face the ethical dilemma of justifying an expenditure that may cut into profit or implementing a program with potential benefits for the organization of which they cannot quantify. Externalities also present problems in business ethics, simply because figures on a balance sheet do not always tell the full story about a company. Defined as a liability that is not recorded on the business's financial records, externalities may not even be viewed, or considered, as liabilities since they do not appear on the record. Yet, liabilities can exist whether or not they are recorded. Many decisions involve externalities like environmental harm caused by production, health problems caused by lack of proper scientific research before releasing a product to market, and social problems caused by business decisions that neglect to account for social impact. Businesses that neglect to account for their actions other than direct impact on the objective of maximizing profit for shareholders create countless ethical dilemmas for managers and executives. Corporate responsibility often entails actions and decisions that are in the best interest of the business. Interpretation of that mandate is of vital importance, because if the focus is strictly on generating quantitative results designed to maximize profit in the present as the best interest of the business, then the business runs the risk of forfeiting not only its own future, but the future of many, if not all, of its stakeholders. Given the ethical issues faced with contradictory mandates and external realities, managers and executives face hard questions they must not only ask, but diligently seek for the right answers. Overcoming problems in business ethics means recognizing those contradictions and understanding why they exist and how to best apply ethical solutions to minimize harm to all stakeholders not just a select few as well as the social environment at large. Why Business Ethics? John Hooker

Carnegie Mellon University April 2003 Everyone agrees that business managers must understand finance and marketing. But is it necessary for them to study ethics? Managers who answer in the negative generally base their thinking on one of three rationales. They may simply say that they have no reason to be ethical. They see why they should make a profit, and most agree they should do so legally. But why should they be concerned about ethics, as long as they are making money and staying out of jail? Other managers recognize that they should be ethical but identify their ethical duty with making a legal profit for the firm. They see no need to be ethical in any further sense, and therefore no need for any background beyond business and law. A third group of managers grant that ethical duty goes further than what is required by law. But they still insist that there is no point in studying ethics. Character is formed in childhood, not while reading a college text or sitting in class. These arguments are confused and mistaken on several levels. To see why, it is best to start with the question raised by the first one: why should business people be ethical? Why Should One Be Ethical? There is already something odd about this question. It is like asking, Why are bachelors unmarried? They are unmarried by definition. If they were married, they would not be bachelors. It is the same with ethics. To say that one should do something is another way of saying it is ethical. If it is not ethical, then one should not do it. Perhaps when business people ask why they should be ethical, they have a different question in mind: what is the motivation for being good? Is their something in it for them? It is perfectly all right to ask if there is a reward for being good, but this has nothing to do with whether one should be good. It makes no sense to try convince people that they should be good by pointing to the rewards that may follow. One should be good because good is, by definition, that which one should be.

it treats profit and business success as means to a greater end: making the world a little better. 2 The Duty to Make Money Granting that a business person s ultimate objective is to make the world better.As for motivation. Think about it. assuming one wants to be good. Business ethics. Otherwise ethical people could go into business only with a high risk of failure. Finance does not teach one to want to be rich. meaning that one can succeed in business by being ethical. In other words. Doing Well by Doing Good Although ethics is not the same as self interest. there would be no need for ethics. People invented ethics precisely because it does not always coincide with self interest. but not every time. which is more likely to bring financial rewards over the long term. assuming one wants to be rich. It is like studying finance to find a reason to make money. too. So it is with ethics. business executives often want to be assured that it is the same. But good behavior cannot be grounded in tangible reward alone. We could simply act selfishly and forget about obligation. There is a deeper confusion here. addresses the opposite question: how can one do good by doing well? It begins with the premise that managers want to do something good with their lives and investigates how to accomplish this through business. It teaches one how to be rich. If it were always in one s interest to be good. Ethics teaches one how to be good. good behavior often brings a reward. People who are interested only in reward will behave ethically when it suits their purpose. however. An ethical company is more likely to build a good reputation. There is no denying that one can often do well by doing good. how is . It is important to know that one can normally do well by doing good. They want to make certain that one can do well by doing good. To look to ethics for motivation is to misunderstand what ethics is all about. but they will go astray whenever the incentives change.

. to maximize the company s profit. Case Studies in Business Ethics. The Social Responsibility of Business Is to Increase its Profits. New York Times Magazine (September 13. corporate officers have no right to do anything other than maximize profit. They lack the perspective and training to address complex social problems. Their sole task is to maximize profit for the company. 1970). marketing and operations management rather than waste time with ethics.. Prentice-Hall (19xx) 56-61. they in effect levy a tax on the company s owners. Reprinted in Thomas Donaldson and Al Gini. which is to say. which should be left to governments and social service agencies. 1 Milton Friedman. 1 According to Friedman. and more fundamentally.this best achieved? A common view is that it is achieved by making as much money as possible. They should therefore stick to finance. 4 th ed. Friedman advances two main arguments for this position. If they invest company funds to train the chronically unemployed or reduce emissions below legal limits. The Social Responsibility of Business Is to Increase its Profits. The best thing business people can do for society is to be good business people. subject to the limits of law and rules of the game that ensure open and free competition without deception or fraud. eds. 3 Second. or reducing pollution beyond that mandated by law. corporate officers have no obligation to support such social causes as hiring the hard-core unemployed to reduce poverty. Business people are expert at making money. not at making social policy. . Economist Milton Friedman articulates this view in an essay that is quite popular with business students. corporate executives and directors are not qualified to do anything other than maximize profit. First.

they are free to join civic organizations and donate as much of their own money as they please. when it would be wrong to do it personally? Of course not. but fiduciaries and hired managers have no such privilege. to tax the owners by charging less than the market will bear. At best. One .employees and customers in order to accomplish a social purpose.) Since this sort of price gouging is legal. again on the libertarian principles just described. But they have no right to spend other people s money on social welfare projects. on Friedman s view. It would be nice if the world were so simple. have a right to ask the buyer to pay more. even if it imposes a cost on company stakeholders? Friedman s reply is that they must not. (Something like this happened when Hurricane Andrew hit southern Florida. however. since the purchase decision is voluntary in a free market. it must be with an eye to increasing profit. the store manager has no right. Sole proprietors can spend the company s money any way they want. What happens. To refute this idea. Does ethical obligation to victims suddenly vanish? Is it permissible for the owner to exploit victims of disaster through agents. for example. There is a desperate need for portable electric generators. He does. perhaps by attracting better employees or improving the company s image. we can change the example.) Friedman admits that it is perfectly all right for a sole proprietor to sacrifice potential profit in order to be a decent human being. One is the idea that company officers somehow usurp authority when they act ethically at the expense of owners. only elected representatives of the people have such authority. when laws permit anti-social behavior? Should businesses not restrain themselves voluntarily. (If we cannot agree on this. since it is their money. But suppose the owner has turned the business over to professional managers. let us agree that it is wrong for an individual to exploit hurricane victims by demanding a high price. and the only local seller takes the opportunity to charge an exorbitant price. But suppose a hurricane hits a town and cuts off routes to the outside world. If they contribute corporate money to arts or community development. The owner cannot escape obligations simply by hiring someone to run the business. If they want to contribute to other social causes. This little example reveals two fallacies of Friedman s position.

particularly the older ones. This is not to say that managers should use company funds to support any cause that strikes the owners fancy. This is precisely why they should study business ethics as well as finance. They may have such an obligation as human beings. Although no one compels hurricane victims to purchase generators. whether they run the business themselves or through agents. The electric generators provide a clear counterexample. price gouging is coercive. The reason is that the owners have no obligation as business people to support these causes. He states that spending the owners money in the service of ethics is coercion and therefore wrong. It takes money from them no less surely than lower prices take money from the owners. It 4 forces the victims to choose between paying ridiculous prices and letting a warehouse full of food spoil. Managers must of course know how to recognize what sorts of obligations are imposed specifically by business ethics. they carry out duties that the owners are bound to observe. The business executive has a special obligation to owners. The point is even sharper when a company decimates a community by moving a plant abroad. while operating in a free market to increase their wealth compromises no one s freedom and is therefore permissible. Yet the company limits their choices by putting them out of work. they transfer only their business-related obligations. such as the Irish Republican Army or the Sierra Club.might as well argue that an organized crime boss can avoid responsibility for murder by hiring a hit man to do the deed. but it is not part of business ethics. Since owners hire managers specifically to run a business. such as the obligation not to exploit disaster victims by price gouging. It is based simply on the fact that the executive acts on . No one forced these people to work for the company in the first place. On the contrary. Agents who act ethically at company expense therefore do not usurp the authority of owners. To limit choices is to reduce freedom. It is clear that maximizing profit can tax the broader community no less than ethical choices can tax the owners. but it is not grounded in libertarian principles. marketing and operations! The second major fallacy in Friedman s position is his misapplication of libertarian principles. more than it limits stockholders choices by reducing their dividends.

until boycotts changed the financial equation. and babies often became ill. The Rules of the Game The task of business ethics. which provide for open and free . while breast feeding was primitive and third-worldish. they must pay attention to whether their business in fact has this kind of positive effect. On Friedman s theory. however. They are not experts in social policy. A famous case study describes how the Nestlé Corporation marketed its infant formula in parts of Africa by hiring nurses in local clinics to recommend formula over breast feeding. The inadequacy of Friedman s philosophy is particularly evident in international business. the company s intransigence was perfectly justified. They can accomplish this largely through the expertise of managers who can run an efficient operation in a competitive environment. even though it caused innocent babies to suffer. Although Friedman says little about this in his essay. Its directors had no right to withdraw a profitable and legal product. What are these duties? One can begin with the most basic ones mentioned by Friedman: the duty to obey the law and the rules of the game. The primary ethical duty of managers is to apply their business skills and keep up the good work. But this is one reason we have business ethics. Business people are not only at their best when making a profit. Unfortunately clean water was often unavailable to mix with the powdered formula. but in doing so they make an enormous positive contribution. The company continued its marketing efforts despite worldwide protests and relented only after years of massive consumer boycotts of its products. where there are fewer legal restrictions. Similar examples abound. worker exploitation in Southeast Asia sweat shops. There is clearly an important element of truth in Friedman s position. The nurses convinced mothers that using formula was sophisticated and Western. and bribery around the world. is to identify the duties that business people have as business people. then. such as pollution in Nigerian oil fields. businesses provide a vast array of products and services that make life far better for millions worldwide. and it is often unobvious how far their social obligations extend.behalf of the owners. At the same time.

he says. Carr defends: food processors that use deceptive packaging of numerous products . Using examples from the 1960s era in which he wrote the paper. When the executive told his wife about it. 2 Business.competition without deception or fraud. automobile companies that for years have neglected the safety of car-owning families. Carr analyzes the incident as follows: This wife saw the problem in terms of moral obligation as conceived in private life. Carr tells of a sales executive who made a political contribution he did not believe in. he says. As long as they comply with the letter of the law. The ethical rules of everyday life therefore do not apply to business. Carr. Harvard Business Review (January-February. The executive explained to her how he must humor clients to keep his job. In fact one must do so or lose the game. but within the rules it is permissible to 2 Albert Z. is like a poker game. utility companies that elude regulating government bodies to extract unduly large payments from users of electricity. As a player in a weak position. . Is Business Bluffing Ethical. her husband saw it as a matter of game strategy. 1968) 2-8. she was disappointed with her husband and insisted he should have stood up for his principles. Yet even these basic obligations are disputed. for example. as described in Ralph Nader s famous book Unsafe at Any Speed. to keep an important client happy. 5 bluff in order to mislead others. Albert Carr s very popular essay. There are rules. they are within their rights to operate their businesses as they see fit. he felt that he could not afford to indulge an ethical sentiment that might have cost his seat at the [poker] table. Is Business Bluffing Ethical? argues that deception. She understood the dilemma but concluded that something is wrong with business. is a legitimate part of business.

as was the Ford Pinto with its famous exploding gas tank. Carr agrees that this sort of behavior. What the poker analogy actually tells us. If a food processor places false labels on packaging. but business situations can be very ambiguous. he exposes himself to a grave psychological strain. it is hard to argue that they expect the car to be unsafe. In a poker game everyone knows the rules. however. on the other hand. no less than in poker. No one expects negotiators to put all their cards on the table. Hiding a card up one s sleeve. everyone says that. sometimes with deadly results. has a point. such as perversion of the political process. Bluffing is expected in many business contexts. One problem with Carr s poker analogy is that he overextends it. is truly deception because it breaks the rules of poker and no one is expecting it. page 8. Such practices are now illegal precisely because they genuinely deceived customers. 6 . which he calls malicious deception. it is highly unclear that consumers are in on the game and expect this sort of thing. So Carr does not actually defend deception. The 3 Carr. or advertisers to tell the whole truth about their product. is wrong. The example of the political contribution. like Friedman. If an executive allows himself to be torn between a decision based on business considerations and one based on his private ethical code. suggest that Carr is making an even stronger claim. If Mom and Dad take the kids to school in the family car. as well as several others in his article. Carr. is that deception is not really deception when everyone expects it as part of the game. He seems to argue that the business game justifies a whole range of activities beyond bluffing. Nobody is deceived when advertisers say their product is the best on the market.3 Carr not only expects the executive to make such choices but cautions him not to agonize over them.

it is illegal precisely because it is the wrong kind of game to play. without carefully reviewing the ethical situation. He is right to say that they must not let personal sentiment cloud their judgment. and it is called ethics. But suppose the game is a shakedown racket. This does not make it all right to participate in the racket. The right kind of competition. many seem to believe that there is no point in studying the subject. But he should never compromise his values without soul searching. Finance. The unavoidable fact is that some business games are good and some are bad. then indeed something is wrong with business. Hard decisions are part of life. They certainly should not be paralyzed by indecision and doubt. which is to say. while the wrong kind can be destructive. and even business law lend themselves to intellectual treatment.difficulty with this argument is that it proves too much. But they must nonetheless struggle with the alternatives. and everyone in town understands the rules: one must pay protection money or get roughed up by company thugs. for example. not something you think. The idea that ethics has no intellectual content is odd indeed. How does one know which game to play? There is a field that deals with this issue. It implies that executives can do anything they want if it is part of a business game in which people play by the rules. Ethics is something you feel. particularly when it comes to such unpleasant duties as laying off employees or shutting down a plant. When one plays the wrong game. Sometimes the game of business requires one to compromise oneself in order to make a larger contribution. but ethics does not. considering that some of the . Why Study Ethics? Even granting that business ethics is important. which it is not. Carr s assertion to the contrary is profoundly unwise. operations. marketing. even if it is legal. can allow everyone to come out ahead. Carr compounds his error when he advises executives not to agonize over business decisions. In fact. Perhaps the sales executive can promote an exciting new product only by putting up with little indignities like kowtowing to his clients.

when there is no time to think. after all. If the suggestion here is that college-level study does not change behavior. They introduce one to such specialized areas as product liability. Character is formed in early childhood. Their emphasis on case studies helps to make one aware of the potential consequences of one s actions.). The Western tradition in particular has given rise to sophisticated deontological. at one s leisure. Where is the evidence for this view? The early origins of character do not prevent finance and marketing courses from influencing behavior. people often say that studying the field will not change behavior. This is again a curious view.most famous intellectuals in world history have given it a central place in their thought (Confucius. employment. They present ethical that theories help define what a valid ethical argument looks like. and cross-cultural management. They teach one to make distinctions and avoid fallacies that are so common when people make decisions. No one theory explains everything satisfactorily. Aristotle. Why cannot ethics courses also have an effect? 7 Ethics courses have a number of features that seem likely to influence behavior. complex ethical issues that are likely to arise later. environmental protection. None of this convinces one to be good. Thomas Aquinas. not during a professor s lecture. we should shut down the entire business school. but studying ethics cannot. They give one practice at articulating an ethical position. Presumably the claim. Ethics is in fact a highly developed field that demands close reasoning. since ethics is the one field that deals explicitly with conduct. Even when they grant that ethics has intellectual content. Maimonides. intellectual property. They provide a language and conceptual framework with which one can talk and think about ethical issues. but the same is true. in the natural sciences. which can help resist pressure to compromise. then. not only the ethics course. vocabulary and conceptual equipment to . How many of the recent business scandals would have occurred if subordinates had possessed the skills. It may also improve business conduct in general. They give one an opportunity to think through. is that studying finance and marketing can influence one s conduct. but it is useful to those who want to be good. etc. teleological and consequentialist theories of right and wrong. Plato.

it is not likely that philosophers can teach anyone to be ethical. Although being moral may save a company from some legal and public relations nightmares. and (3) avoid actions that are bad for the company image. while ethics operates in the general context of the world. (2) avoid action that may result in civil law suits against the company. This may be more than a tight-budgeted business bargained for.000 years philosophers have systematically addressed the issue of right and wrong conduct. The job of teaching morality rests squarely on the shoulders of parents and one s early social environment. Business management is all about making the right decisions. 1. a business could address these three concerns by assigning corporate attorneys and public relations experts to escort employees on their daily activities. Management operates in the specialized context of the firm. it is too late to change the moral predispositions of an adult. This is why business managers should study ethics. Perhaps reluctantly. morality in business is also costly. Businesses are especially concerned with these three things since they involve loss of money and company reputation. even if philosophers could teach morality. By the time philosophers enter the picture. and humane working conditions. ideal moral . truthful advertising. but the two fields are closely related.raise an ethical issue with their coworkers? Ethics not only should be studied alongside management. APPROACHES TO BUSINESS ETHICS When business people speak about business ethics they usually mean one of three things: (1) avoid breaking the criminal law in one s work-related activity. Ethics is all about making the right decisions. In theory. So what is the difference between the two? Management is concerned with how decisions affect the company. scrupulous marketing. Business ethics is management carried out in the real world. For over 2. the experts would guide him back. philosophers can teach employees a basic understanding of morality will keep them out of trouble. environmental impact. Also. their recommendations are not always the most financially efficient. Anytime an employee might stray from the straight and narrow path of acceptable conduct. However. A business manager cannot make the right decisions without understanding management in particular as well as ethics in general. then. Presumably. We cannot easily resolve this tension between the ethical interests of the money-minded businessperson and the ideal-minded philosopher. Obviously this solution would be a financial disaster if carried out in practice since it would cost a business more in attorney and public relations fees than they would save from proper employee conduct. Management is therefore part of ethics. businesses turn to philosophers to instruct employees on becoming moral. In most issues of business ethics. while ethics is concerned about how decisions affect everything. A morally responsible company must pay special attention to product safety.

it is profitable to make safe products since this will reduce product liability lawsuits. To understand what is at stake. In short. the strong version can be expressed in the dictum that good business results in good ethics. As more and more businesses compete for the same market. Robert F. short-term profits will dictate the decisions of many companies simply as a matter of survival. Hartley argues that the long-term best interests of businesses are served by seeking a trusting relation with the public (Hartley. since it assumes that consumers or workers will demand the morally proper thing. Business Ethics. which is the converse of the above dictum. in a competitive and free market. Hartley's book. we will look at three different ways of deriving standards of business ethics. takes this approach. Second. if customers demand safe products. such as with laws against killing. those moral business practices that are good for business depend upon what at that time will produce a profit. which simply means that moral businesses practices are profitable. the same practices might not be economically viable.principles will be checked by economic viability. For example. Business Ethics Restricted to Following the Law. however. In a different market. even though doing so places their own lives and the lives of their passengers at greater risk. A second approach to business ethics is that moral obligations in business are restricted to what the law requires. argue that this would happen in the United States if the government would allow a truly competitive and free market. or workers demand privacy. Using 20 case studies as illustrations. Similarly. Similarly. and most importantly. since this will improve morale and thus improve work efficiency. not every moral business practice will simply emerge from the profit principle as suggested by either the weak or strong views. This weak version. some moral business practices may not be economically viable even in the long run. it may be in the best financial interests of businesses to respect employee privacy. But this strong view also has problems. many moral business practices will have an economic advantage only in the long run. any overlap that exists between morality and profit is both limited and incidental. Deriving Business Ethics from the Profit Motive. the profit motive will in fact bring about a morally proper environment. The strong version of this profit approach takes a reverse strategy and maintains that. Thus. Proponents of this view. Businesses that do not heed these demands will not survive. . has problems. That is. 1993). The weak version is often expressed in the dictum that good ethics results in good business. Some businesspeople argue that there is a symbiotic relation between ethics and business in which ethics naturally emerges from a profitoriented business. Since this view maintains that the drive for profit will create morality. Third. as opposed to replacing them with younger and more efficient workers. workers may forego demands of privacy at work if they are compensated with high enough wages. There are both weak and strong versions of this approach. consumers might prefer a cheaper car without air bags. In fact. First. For example. This provides little incentive for businesses that are designed to exclusively to seek short-term profits. this might be the case with retaining older workers who are inefficient. For example. The most universal aspects of Western morality have already been put into our legal system. such as Milton Friedman. which is morally irresponsible. then they will buy from or work for only those businesses that meet their demands. consumers may opt for less safe products if they know they will be saving money.

Confucianism has a strong emphasis on filial piety. national. in Muslim countries that are not necessarily ruled by Islamic law. contains a broad range of moral requirements such as an alms mandate. therefore. clearly. it is unreasonable to expect business people to be obligated to principles which appear to be optional. prohibitions against sleeping partners that collect unearned money. the unifying moral force of businesses within our diverse society is the law itself. Moral principles beyond what the law requires or supra-legal principles -. Similarly. In short. Corporations that assume an obligation beyond the law. supra-legal moral obligations in our society appear to be optional. and fair hiring and firing practices.local. the individual businesses may be bound by the obligations of their subgroups. there is a strong source of external morality that would be binding on Muslim businesses apart from what their laws would require. but such obligations are contingent upon one's association with these social subgroups. which includes the following: Social Mission -. In fact. particularly for relief aid. either in their corporate codes or in practice. and international. safe working conditions. Even within Christianity. in Chinese and other Confucian societies. the diversity of denominations and beliefs prevents it from being a homogeneous source of Christian values. For any specific issue under consideration. and restrictions on charging interest for certain types of loans. for example. and these obligations are in the law. such as determining what counts as responsible marketing or adequate privacy in the workplace. The unreasonableness of such a moral requirement in our society becomes all the more evident when we consider societies that do have a strong external source of morality. One reason is because of our cultural pluralism and the presence of a wide range of belief systems. thus. unreasonable to expect businesses to perform duties about which there is so much disagreement and which appear to be optional. Islam.To operate the company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad community -. or at least in the United States.stealing. fraud. the obligations within those subgroups are not binding on those outside the subgroups. and. In our culturally pluralistic society. without a widely recognized system of ethics that is external to the law. or reckless endangerment. we lack a counterpart to an external source of morality as is present in Muslim or Confucian societies. such as with a business that is operated by traditional Muslims or environmental activists. product safety. we will find opposing positions on our supra-legal moral obligations. it is reasonable to expect their businesses to maintain a respect for elders even if it is not part of the legal system. In these cases. take on responsibilities that most outsiders would designate as optional. . These include a range of guidelines for honesty in advertising. It is. In Western culture. then its only moral obligations will be those within the context of society at large. A good example is found in the mission statement of Ben & Jerry's Ice Cream. Beyond the law we find that the moral obligations of businesses are contextually bound by subgroups. the only business-related moral obligations that are majority-endorsed by our national social group are those obligations that are already contained in the law. harassment. And. If a business does not belong to any subgroup.appear to be optional since philosophers dispute about their validity and society wavers about its acceptance. Thus.

Consistent with this mission. it applies only to countries such as our own whose business-related laws are morally conscientious. it is not even binding on Ben & Jerry s itself since. in recent years. The third approach to business ethics is that morality must be introduced as a factor that is external from both the profit motive and the law. This would be a continuing problem since changes in products. The law merely specifies the lowest common denominator of acceptable behavior. the law will lag behind our moral condemnation of certain unscrupulous. as prescribed by law." they explain. and is expressed most clearly in the following from a well known business ethics essay: Proper ethical behavior exists on a plane above the law. yet the practice will be legal. Nevertheless. Strictly following this legal approach to business ethics may indeed prompt businesses to do the right thing. This is the approach taken by most philosophers who write on business ethics. "because we believe that most American corporations overpay top management. For example. in the past." In spite of the merits of this pay scale policy. and underpay entry-level employees -. Deriving Business Ethics from General Moral Obligations. there are two key problems with restricting morality solely to what the law requires. the highest paid employees of Ben & Jerry's would not earn more than seven times more than the lowest paid full-time employees. "Business Ethics: A Manager's Primer. "We do this. drug companies could make exaggerated claims about the miraculous curative properties of their products. Fairness principle: business should be fair in all of their practices. yet legal business practices. Now government regulations prohibit any exaggerated claims. even in the best legal context. In fact. technology. Five fairly broad moral principles suggested by philosophers are as follows: Harm principle: businesses should avoid causing unwarranted harm. and would not be a binding obligation. there will be a period of time when a business practice will be deemed immoral. The situation may be different for some developing countries with less sophisticated laws and regulatory agencies." 1983) The most convenient way to explore this approach is to consider the supra-legal moral principles that philosophers commonly offer. . Thus. Ben & Jerry s had to abandon its own ideal pay scale in an effort to attract a CEO with the right skills to expand their company. it clearly lacks majority endorsement in our national social group. (Gene Laczniak.and because everyone who works at Ben & Jerry's is a major contributor to our success. and marketing strategies would soon present new questionable practices that would not be addressed by existing legislation. at best. prior to the enactment of a law. A second problem with the law-based approach is that. First.

or the community. Everyone must be considered as an individual. should the stockholders' interests have special priority? If we take this route. the men and women who work with us throughout the world. These principles do not tell usspecifically what counts as harm. Because they are abstract. or a violation of human rights. A stakeholder is any party affected by a business practice. stockholders. It may be expressed in the following: Stakeholder principle: businesses should consider all stakeholders' interests that are affected by a business practice. and focus instead on concrete situations that affect the particular interests of consumers.Human rights principle: businesses should respect human rights. Veracity principle: businesses should not be deceptive in their practices. they will be difficult to apply to concrete situations and consequently not give clear guidance in complex situations. customers. unfairness. competitors. governments. the problem with these principles is that they are too general. Alternatively. the stakeholder approach to business ethics emphasizes that we should map out of the various parties affected by a business practice. The recent stakeholder approach to business ethics attempts to do this systematically. Does all damage to the environment constitute harm? Does it violate an employee's right to privacy if an employer places hidden surveillance cameras in an employee lounge area? Does child-oriented advertising mislead children and thus violate the principle of veracity? The above principles are abstract in nature. The attraction of these principles is that they appeal to universal moral notions that no one would reasonably reject. . and political contributions. That is. Compensation must be fair and adequate. They must have a sense of security in their jobs. We must respect their dignity and recognize their merit. suppliers. Accordingly. bribes. and communities. Should all stakeholders' interests be treated equally from the largest stockholder down to the garbage man who empties the factory dumpster? Probably no defenders of the stakeholder approach would advocate treating all interests equally. and broadly endorse autonomy. conflicts of interest. including employees. An alternative approach is to forget the abstract. Another way of looking at concrete moral obligations in business is to list them issue by issue. Autonomy principle: businesses should not infringe on the rationally reflective choices of people. they broadly mandate against harm. This is the strategy behind corporate codes of ethics that address specific topics such as confidentiality of corporate information. But. Consider the following issues from Johnson and Johnson's Credo: We are responsible to our employees. But this approach is limited since proponents of this view give us no clear formula for how to prioritize the various interests once we map them out. then the stakeholder principle is merely a revision of the profit principle. workers. creditors.

We must be mindful of ways to help our employees fulfill their family responsibilities. following any of the above three approaches to business ethics will bring us closer to acceptable moral behavior than we might otherwise be. comes with its own set of problems. such as the harm principle. But.and working conditions clean. The practical advantage of this approach is that it directly stipulates the morality of certain action types. it also helps to examine stories of businesses that have been morally irresponsible. we should expect to find controversies when applying ethics to the specific practices of business. environmental irresponsibility. Although corporate codes of ethics are often viewed cynically as attempts to foster good public relations or to reduce legal liability. So. we ve seen. Ethics is a complex subject and its history is filled with diverse theories that are systematically refuted by rival theories. We can indeed find additional moral guidance by looking at the laws that apply specifically to businesses. or reckless attitudes of businesses. In gray areas of moral controversy that are not adequately addressed profit motives and the law. we will not likely find any. we can learn by example what we should not do. the limitation of the corporate code model is that the principles offered will appear to be merely rules of prudence or good manners unless we can establish their distinctly moral character. without becoming ensnared in the problem of deriving particular actions from more abstract principles. However. or unsafe products. and we ve seen that all three have limitations. Such cases often reveal blatantly crude. a corporate code of ethics is a reasonable model for understanding how we should articulate moral principles and introduce them into business practice. By citing specific cases deceptive advertising. Conclusion. we can turn for guidance to a variety of general and specific moral principles. We ve looked at three approaches to business ethics. Study Questions for Approaches to Business Ethics Introduction (1) What three things do business people usually mean by business ethics ? (2) Why can t philosophers teach people to be ethical? Deriving Business Ethics from the Profit Motive (3) What is the weak version of theory that connects business ethics to the profit motive? . If we hope to find an approach to business ethics that is free from conceptual problems. Close attention to one s profit motive and the moral interests of consumers might in fact generate some morally responsible business decisions. insensitive. which we can view as warning signs of unethical conduct. orderly and safe. And this requires relying on more general principles of ethic described above. In addition to the above three approaches to business ethics. which.

the moral expectations of the host country are as stringent as our own. When we think of moral dilemmas that multinationals face we usually think of the pressure on companies to bribe government officials in third world countries. governments and special interest groups. though. and exploiting third world countries. and multinationals are tempted to lower their standards when situations permit. (12) What is the problem with deriving business ethics from broad moral principles? (13) What is a stakeholder? (14) What is the problem with articulating good business behavior in corporate codes of ethics? Conclusion (15) What are some benefits of all three approaches to business ethics? (16) What can we learn by looking at case studies in business ethics? 2. Bribery in Third World Countries. In developed countries. The moral challenge is even more intense for multinational companies who need to live up to moral expectations both in the US and in host foreign countries. the moral expectations often more lax. influencing foreign governments. In this chapter we will look at three areas of moral concern for multinationals: bribery.(4) What are problems with the weak version? (5) What is the strong version of theory that connects business ethics to the profit motive? (6) What are problems with this? Business Ethics Restricted to Following the Law (7) Define supra-legal principle. consumers. With third world host countries. DOING BUSINESS IN FOREIGN COUNTRIES The moral challenge for businesses here in the United States it difficult enough when balancing one s profit interests against the needs of employees. (8) Why is it unreasonable to expect businesses to follow supra-legal moral principles? (9) What are some supra-legal moral principles that are binding in Muslim countries? (10) What are the problems with restricting business ethics to what the law requires? Deriving Business Ethics from General Moral Obligations (11) Give an example of a broad moral principle suggested by philosophers. .

American companies are involved in bribery scandals twice as often companies from other countries. Thus. although bribery is more common in some foreign countries than in the United States. which in the 1970s was caught offering a quarter of a billion dollars in bribes overseas. organization. law enforcement officials in those countries do take bribery violations seriously and punish offenders. agrees to be paid to act as dictated by an interested party. whereas bribery has no victim. in middle east countries. the receiver of a gift needs to be confident that he remains impartial in conducting his official duties. or legal system. and if foreign businesses engage in bribery and US firms do not. if caught bribing. as seen from the fact that. it is reasonably clear that the legal penalties of international bribery outweigh the possible business benefits. Although few business people publicly defend bribing officials in third world countries. which is where an official requires payment to perform his otherwise normal duties. such as law enforcement. which includes neither implicit nor explicit agreements. To avoid doing wrong. By contrast.000 in fines and five years in prison. Extortion has a victim. First. Payoffs can prevent delays that might otherwise throw a company into financial ruin. it is rare and severely punished. These penalties are so severe that critics contend that it restricts ordinary well-intentioned business activity because of the fear business people might have of entering a gray area of activity that is actually legal. Further. A major US defense contractor. . and there is a feeling that it is normal practice to bribe government officials. there s nothing morally wrong with participating in bribery. especially if the institution itself is in question. In any event. and sometimes genuine friendships are formed that involves exchanging gifts. Often foreign government officials are so corrupt that it is virtually impossible to do business without playing by the unspoken rules. Under US law. there is a common attitude within multination organizations that condones bribery on several grounds. such as a government like Nazi Germany. We also need to distinguish bribery from gift giving. Second. there are strictly financial considerations. bribery happens with greater frequency in third world countries. We need to distinguish bribery from extortion. Both the financial and practical arguments above reflect a naïve view of doing business in third world countries. For example an agent of the FDA may extort a company by approving of a product that passes approval standards anyway. It is also central that the person being bribed implicitly agreed to abide by the rules of his government. a company may be subject to a 1 million dollar fine. and executives may be subject to $10. the Foreign Corrupt Practices Act of 1977 establishes that. such as a government offical. there are practical considerations owing to what appears to be the universal nature of bribery in third world countries. The US government also takes oversees bribery seriously. even if the giver intends the gift as an inducement. then US firms will be at a competitive disadvantage and will ultimately lose to foreign business. In some occupations.Although bribery of government officials also takes place in the United States. What is central to the notion of a bribe is that an agreement is made. rather than doing what is required of him in his official employment. A dramatic example of bribery naivete involves the Lockheed Corporation. Americans in particular are naïve about his. In a truly capitalistic environment. we need an even playing field. gift giving in foreign countries is often part of a needed business ceremony. We may succinctly define a bribery as condition in which a person. Bribery is in fact outlawed in every country around the world and. An official may accept a gift innocently. established codes often forbid gifts since it is too important to risk losing impartiality through gift giving. even if the act itself is never performed and the payment is never made.

Rolls Royce went bankrupt. restricted in their speech. In these cases. and Spain. Lockheed s chairman and president were forced to resign. The US government commissioned the company to design a hybrid aircraft. irrespective of the benefit that local people derive from that government s left-wing policies. including the Netherlands. the business might be tempted to oppose or even undermine that government.S. To get the contracts. Japan. and transportation networks. They also discovered that Lockheed offered bribes that totaled 10 times more than the bribes made by other US companies. court systems. and divestment would . such as law enforcement agencies. Blacks were segregated. Politically. to avoid compromising national defense the US government chose not to cancel its contracts with Lockheed. By doing so. U. they lost money on the projects. which would otherwise not be supported by socially conscious people. Businesses lobby for fewer regulations. An example of the first extreme businesses endorsing right wing governments is the presence of American multinationals in South Africa. Influencing. The white Apartheid government at the time endorsed a policy of what amounted to institutionalized slavery of its black citizens. after one crashed. big businesses have an intimate relation with governments. Businesses also depend on government offices. called for complete divestment of American business interests from South Africa. whatever helped South Africa's economy helped Apartheid. the white Afrikaners controlled the vast majority of the country s economic wealth. The harshest critics. Economically. they requested a loan of 200 million dollars from the US government. The white Afrikaners justified their Apartheid policy by arguing that it was God's plan that Afrikaners are in Africa. and Lockheed lost 300 million in canceled orders. They believed that the solution to their financial woes was to expand their oversees sales. Lockheed received other contracts based on bids that they made that were far lower than the cost of producing the project. Whether in the US or in foreign countries. and constantly under threat from white policing forces. though. governmental subsidies. US multinationals all recognized the inherently immoral nature of the Apartheid government and that. and Opposing Foreign Governments. Still on the verge of bankruptcy. they implicitly support these governments. sometimes multinationals find themselves in left wing countries that are hostile to the business s capitalistic interests. business in South Africa offered legitimacy to the Apartheid government. which involves the normal lobbying efforts that we have here in the US. there is the normal course of doing business in developing countries. Saudi Arabia. Iran. So. This involves at least attempting to influence governments of third world countries. at minimum US businesses in South Africa needed to be sensitive to the oppressed condition of the blacks. permit offices. when a US company sets up base in a foreign country. but.Lockheed fell on hard times for both economic and technological reasons. especially during the 1970s and 1980s. jobs. which meant opening their records for scrutiny. and access to natural resources. As a consequence. Multinationals often locate in countries with repressive right wing governments since these tend to be more politically stable. At the other end of the spectrum. and movements. its interaction with government creates the possibility for unpleasant situations. Government investigators discovered the extent of Lockheed s bribery. Between these two extremes. Although constituting less than 10% of the country s population. the government canceled orders. However. Italy. and it is God s plan to divide people into groups. lighter taxes. They tried to move into the commercial jet aircraft market by making planes with engines built by Rolls Royce. they made a series of payoffs to middlemen from various countries. Endorsing.

he nationalized ITT s Chilean property. The situation is made worse when multinationals coerce foreign governments especially in Third World countries. Allende did not nationalize other firms. and ITT later sued for losses. For example. which would be good for blacks since it would reduce overall unemployment and inflation. People around the world see the United States as an economic imperialist. and in retaliation. and critics world wide attacked ITT for interfering in the activity of a foreign government.cripple the South African economy. we noted that problems also emerge when American businesses locate in countries with left-wing countries of communist leanings that are hostile to capitalist ventures. even though some had to sell the government shares of its stock. Companies whose products directly benefit both can go either way. (2) equal employment practices. The situation of South Africa illustrates what can happen when American businesses set up camp in countries with oppressive right-wing governments. Allende was elected anyway. companies whose products directly benefit Blacks should not divest. with 350. The South American country of Chile was poor. At the time. and improve education. paying them at a fair market price. US presence in South African would bolster its economy. but politically stable politically. Further. the Polaroid Company chose to leave South Africa since they could not control the flow of their product into government hands. and American companies would be vital sources of peaceful change. including housing. including Chile. (3) equal pay. recreation. schooling. Allende was assassinated shortly after. part of which involved an offer of 1 million dollars to the CIA for support. such as those the make police weapons. Some of ITT s property was even bombed in protest. The actions of American multinationals in foreign markets have a direct effect on the image on the U. A vivid illustration of this is International Telephone and Telegraph s interference in the Chilean government during the 1970s. a government might nationalize or simply take ownership of the company with no compensation. At the other extreme. Severing ties with South Africa would at best be a symbolic act. other businesses argued that continued American involvement in South Africa was actually a good thing. However. However. ready to gobble up the resources of small foreign countries. itself. and (6) improving employees lives outside work. A presidential candidate named Salvador Allende campaigned on a communist platform. (4) training programs for blacks. They are. an Afro-American on General Motors board of directors.000 employees in 80 countries. American companies in South Africa had a history of civil rights abuses towards blacks. a government might buy controlling shares of private companies. Government acquisition policies work two ways. First. The Apartheid government was making some progress toward racial integration. In this vein. and health. transportation. (1) nonsegregation in eating. Leon Sullivan. with little or no economic clout since all products made by U. and indicating a desire to take control of privately owned Chilean telephone companies because of their inefficiency. such as use in passbook pictures that regulated the movement of the black South Africans. ITT feared the worst and tried to stop Allende from being elected. ITT was the 8th largest fortune 500 company. recommended several principles for operating in South Africa.S. Alternatively. and work facilities. (5) more blacks in management. Also.S. restroom. as happened with private businesses in Cuba and Peru during their communist takeovers. emphasizing the issue of land reform. however. firms could be bought elsewhere. More moderate critics maintained that companies whose products directly benefit the government should divest. The scandal surfaced. .

The Indian government quickly arrested plant managers and eventually spent 40 million on various disaster relief projects. With a population of 700. Although the Indian factory had safety features to prevent disasters. and the tank blew up. Banks and financial institutions do not hire the local people. Union Carbide s laissez-faire policy of decentralizing subsidiaries was not appropriate . regulations in Germany required a similar Union Carbide plant in that company to restrict its tank size to 100 gallons. Indian investors owned almost half of the shares of the Indian plant. Also. Larger tanks are economically efficient since they hold more gas. which suggest a double standard of labor value.000 people. The temperature in the tank rose in a chain reaction. Long term medical problems for the survivors included respiratory ailments and neurological damage. perhaps done as an act of sabotage by a disgruntled employee. Since many of these natural resources are in finite supply. but they pose greater risks in case of a tank leak. The temperature alarm was shut down. instead the refrigeration unit was not working and it was at room temperature. For his reason. several of the safety systems were not functioning. A fog of the gas drifted through the streets of Bhopol. The size of the tanks themselves was a problem. The tank that exploded in the Indian plant was supposed to be refrigerated to zero degrees centigrade. and a flare tower was out of service. the tragedy raised serious questions about the parent company s views on safety in third world countries. which diminishes the amount of good land that the locals can use for their own food needs. In 1984. the gas scrubber was shut off. Agricultural businesses often take the best land and use it for export crops. all of the above types of businesses destroy the local culture by introducing an American climate. The explosion started when someone added water to a 600 gallon tank of the chemical. Bhopal is the capital of Madhya Pradesh. a pesticide factory owned by Union Carbide in Bhopal India exploded killing 2. which was supposed to burn escaped gas. Union Carbide Stock plummeted with losses totaling almost a billion-dollars. If they pay wages to third world employees that are higher than what indigenous businesses can pay.500 people and injuring and additional 300. then they attract the best workers. and Indians operated the plant. Even though Indians ran the Bhopal plant.000 people. yet these businesses benefit by bringing in local money. Mining industries exploit the wealth of the country for only a few rich landowners. The company eventually paid half a billion dollars to victims. developing countries have little hope of relying on them for future security once they are used up. which hurts employers in surrounding businesses. which often results in disaster. Critics frequently accuse multinational corporations of exploiting the resources and workers of third world countries. Union Carbide sales were also impacted for several years. The city is geographically divided between rich and poor sections. killing people on the spots that they stood. The active ingredient for the pesticide was stored in 600 gallon tanks. They typically pay much less to third world employees than to Americans. one of India s poorest and least developed states. Manufacturing and service industries introduce poverty to many areas by attracting more people to a factory than they can employ. which was supposed to neutralize escaped gas. Although the US parent company acted quickly and compassionately to the disaster. Drug companies and hazardous chemical industries take advantage of more lax safety regulations. with the factory located in the poor section. Although it was a multinational.Exploiting Third World Countries. Two cases illustrate the disastrous effects of exploiting third world countries.

There are also ecological effects of flue-cured tobacco production that requires fire. we should not equate US standards with universal moral standards. which particularly bad in countries with large numbers of people living at subsistence levels. OSHA. some business people argue that. As deceptive and uncaring as they have been in the US. this position is unrealistic especially in view of the growing economic interdependence of countries around the world. Further. outside countries are less inspired to support the business ventures of that third world country. This bad since firewood accounts for 90% of the heating and cooking fuel in developing countries. globally. less acreage is available for domestic food production. and let those countries manage their resources as they see fit for themselves. tobacco tar levels have decreased. This position is also undesirable from the standpoint of the interests of the third world countries themselves. tobacco companies buy 20% of all advertising time. it is on a rise in third world countries and.S. By growing tobacco. US tobacco companies create strong incentives for local growers to shift to tobacco production by paying startup costs to farmers. for example. underwriting loans. A second case illustrating exploitation in third world countries concerns the tobacco industry. In third world countries. and should not give cost cutting the highest priority. safety standards worldwide. but in third world countries they have increased. On the other extreme. but not morally required of all businesses around the world. For example. FDA. they are even worse in third world countries. although issues of exploitation are sociologically interesting. . The tragic lesson is that multinational should follow U. and less than half the third world countries do. Most large companies today have multinational interests. advertising and sales. these interests will increase. especially when they require some control of the company. if anything. Almost all developed countries have tobacco legislation. Information about the atrocious activities of US tobacco companies over the years is continually being made public. Governments by and large set the agenda for what businesses can and cannot do. they are not moral issues. which requires one tree for every 300 cigarettes. In Argentine. and guaranteeing purchases. There are three basic positions to take on the problem of businesses exploiting third world countries. In developed countries. and. Without restrictions to cigarette production. they also accept responsibility. cigarette companies expand the bounds of third world markets with no thought of the health hazards they create for consumers. By accepting control. Thus. Although well intended. cigarette consumption is growing faster than population. Isolationist economic policies are typically ineffective. The harshest critics of third world exploitation argue that we should just stay out of third world countries altogether. wood fires are a main method for curing tobacco. and minimum wage standards are good. local governments in the host country must also accept responsibility for what happens. If a third world country blocks off outside capitalist ventures.in matters of safety. On this view. although cigarette smoking is on a decline in developed countries. A third and middle ground position on exploitation is that multinationals from rich countries can operate effectively in third world countries when adhering to basic moral principles. which is partly the result of cigarette companies heavy lobbying efforts. In the next section we will look at some suggested moral principles for multinationals.

However. This means that businesses should not operate in countries with human rights violations unless they can be catalysts for democratic reform. which are moral norms of the market place. Cultural relativism implies that moral values are completely defined by cultural contexts. multinationals should follow principles of honesty and trust. So. These are required as foundational for any business operations. some cultures kill their elderly. philosophers point out that many seemingly diverse standards of behavior in fact reflect common values. The above-discussed problems of interference in foreign government. Third. a society simply could not continue. stealing. and prohibitions against drinking alcohol or eating types of meat. and murder. perhaps the most important is whether companies should adopt the attitude that When in Rome. and exploitation all raise a range of ethical questions. which is a practice that we find abhorrent. and this is a principle that we too have. then. Many cultural practices are unquestionably shaped by cultural environments. However. which are advocated in all societies. bribery. As long as we stay within our own cultural environment. if a society permitted murder. Philosopher Norman Bowie recommends three universal moral standards that are appropriate to the activities of multinationals. and the systematic violation of moral norms of the marketplace would be selfdefeating. Business depends on economic liberty. we must accept the whole liberty package. putting the elderly to death is based on the principle that children should see to the happiness of their parents. This is the issue of cultural relativism. multinationals should follow the norms that constitute a moral minimum. there seem to be some foundational principles that appear uniformly. namely. without them. if we grant that there is some commonality to moral values around the world. multinationals face the problem of relativism directly by placing one foot in the moral context of American culture. and there is no universal standard of morality that applies to all people at all times. whether moral values vary from society to society. Second. First. multinationals have moral responsibilities that cross cultural boundaries. Some philosophers argue that these principles appear universally in societies since. which is part of political and civil liberty in general. such as basic liberty rights. However. if we accept economic liberty. rape. prohibitions against assault. multinationals should not violate human rights. So. this is no problem since we simply act morally as our society dictates. we would all move out of town and live in seclusion. For example. Is cultural relativism true? Philosophers have debated this question for over two thousand years. such as rules requiring women to covering their heads in public. multinationals will be tempted to adopt the least costly moral principles that a given cultural context will allow. Driven by the profit motive. and another foot in the moral context of a foreign culture. such as obligations to care for one s children and elderly parents. De George offers a more specific set of guidelines for the following: · · · · Do no intentional direct harm to the host country Produce more good than bad for the host country Contribute to the host country's development Respect the human rights of its employees . For example. Philosopher Richard T.Cultural Relativism and Universal Moral Principles. to that extent. do as the Romans. Also.

and how does it differ from extortion and gift giving? (2) What are the two main arguments usually given in favor of bribery? (3) What is the main problem with both of the arguments for bribery? (4) What penalty did Lockheed pay when it was caught in a bribery scandal? Endorsing. though. Fortunately. which makes it all the more necessary for businesses to adherence to moral standards. and rely mainly on the threat of bad publicity to bring about change. we may wonder how realistic many of these cross-cultural moral principles are. businesses may set them aside for reasons of profit.· · · Pay one s fair share of taxes Respect the local culture and work with it Cooperate when local governments reform social institutions. De George believes that third world countries lack adequate background institutions. Study Questions for Doing Business in Foreign Countries Bribery in Third World Countries (1) What is the definition of bribery. which managers of multinationals can probably figure out on their own. In more recent times. But even this is effective since most large businesses believe that their reputation is their biggest asset. Influencing. News organizations. social contract theorists argue that fear of punishment from governments is the only thing that will motivate us to follow moral principles. Until a few hundred years ago. and environmental groups all take special interests in seeing that multinationals live up to high standards. In view of how strong the profit motive is to businesses. such as land and tax reform. though. such as regulatory agencies. such as those offered by Bowie and De George. All of these organizations have limited clout. We can see the moral responsibility of multinationals in the same light. the United Nations. most philosophers believed that moral principles were pretty useless unless people believed in God and were afraid that God would punish them for evil deeds. international human rights groups. Perhaps we can generalize from these views and say that we may not follow even the best moral principles unless an external authority monitors our actions and punishes us when we go wrong. Without an external monitoring authority. several external mechanisms are already in place to punish irresponsible multinationals. and Opposing Foreign Governments (5) What problems might arise when a multinational sets up in right-wing country and left wing foreign countries respectively? . There are reasonable moral guidelines that multinationals should follow.

which shields the earth from the sun s life-destroying ultraviolet rays. and deforestation. Fluorocarbon gasses used in making domestic products such as refrigerators and styrofoam depletes the earth's ozone layer. BUSINESS AND THE ENVIRONMENT The greatest damage done to the environment is inflicted by business and industry. Some of these problems are expensive nuisances. such as carbon dioxide production and the release of fluorocarbon gasses. (8) What are some ways that multinationals exploit third world countries? (9) What were the principal irresponsible actions of Union Carbide in the Bhopal explosion? (10) What actions of the Tobacco companies in third world countries are especially exploitive? (11) What reasons do some multinationals give for not abiding by US standards in third world countries? Cultural Relativism and Universal Moral Principles (12) Define cultural relativism (13) What are some moral values that seem to be held by all cultures? (14) What are Norman Bowie s three recommended moral principles for multinationals? (15) What external monitoring organizations help assure that multinationals act responsibly? 3. In this chapter we will look at some of the causes of environmental irresponsibility in businesses. air and water pollution. which in turn becomes harmful for human consumption. toxic waste. and some theories about why businesses should be more responsible. Oil spills from petroleum industries destroy shorelines and kill millions of sea animals. Others. some critics argued that US companies should leave South Africa.(6) During the 1970s and 1980s. gas and coal produces excess carbon dioxide. and not from domestic activities. . though. Increasing amounts of industrial toxic waste contaminates ground water. What were some of their reasons? (7) What were the negative consequences of ITT interfering in Chile s government in the 1970s? Exploiting Third World Countries. Businesses extract the greatest tolls in terms of energy consumption. such as oil spills and toxic waste. which adds to global warming through a greenhouse effect. The burning of fossil fuels such as oil. threaten the survival of life on our planet.

are limited in what they can do in imposing restrictions on businesses. television sets and shopping malls. businesses are driven by the motive to make a profit. But this is only partially effective. Recommendations from world organizations. Third. It doesn t seem wrong to pollute the air if. such as air and water. it is not surprising that they contribute heavily to this tragedy. For example. and now we simply take it for granted that we all are responsible for maintaining the integrity of the environment. If businesses showed special concern for the environment beyond what the law requires. businesses lobby for support at all levels of government. Underdeveloped countries are trying to catch up to the economic level of industrialized countries. such as the US. and agencies such as the EPA must be politically compromising. First. To protect their financial interests. businesses feel that the EPA restricts them too much. in turn.Businesses Resistance to Environmental Responsibility. such as the United Nations. Typically. a disaster that happens to things that are held in common. and certainly have a right to do so. such as automobiles. technically. that is. and this mandate transfers down through the management hierarchy. many of the environmental offenders are businesses in third world countries. which in many cases is worse than it needs to be. with few immediate financial rewards. However. government environmental watchdog agencies. Environmental problems are intensified in third world countries because of growth in population. Since the 1960 s. our society has become increasingly more environmentally conscious. try to assist developing countries by offering them free technology. skyscrapers. no one owns the air and the particular damage that I do isn t too noticeable. Sometimes developed countries. Although laws are strict concerning environmental regulation. That is. Agencies such as the EPA say that they know that they do their jobs correctly when everyone is angry with them. They take pieces of nature and reshape them into things that didn t exist before. which. they cannot play catch up in a way that is both economically feasible and environmentally responsible. Although businesses don t consciously set out to harm the environment. and environmental responsibility is highly costly. they give two distinct arguments for their views. However. Second. large businesses and industries are inherently imposing on nature. they are not perfect and they allow for many kinds of environment judgement calls. On a global level. and environmental advocates such as the Sierra Club will feel that the EPA does too little to protect the environment. Maintaining a balance between economic development and energy conservation is far more difficult for poorer countries than it is for wealthier ones. Finally. Part of making a profit is to reduce costs. and in that sense unnatural. It is not effective to simply encourage developing countries to do better. they argue that businesses do not have an obligation to protect the environment above what the law requires. First. leads to deforestation. such as the Environmental Protection Agency. such as the United States. Increased population places increased demand on the utilization of land. but developing countries cannot do so easily. which doubles about every 70 years. Environmentalists sometimes refer to this phenomenon as a tragedy of the commons. developed countries can shift to energy sources that give off less pollution. Given the size and complexity of businesses in industrial countries. Not only are the end products artificial. several factors create an unfortunate situation. Stockholders demand a return on their investment. but the means of producing these things are taxing on natural resources. it is easy to disregard natural resources that are held in common and seem abundant. conservative businesses people commonly feel that their responsibility to the environment is limited. have only limited leverage. then this would interfere with their ability to .

When cases of conflict arise between the environment and profit motive. If consumers are not interested in favoring businesses that have environmentally friendly policies. my purchase decision might still be motivated only by the price tag. In 1970s they became the target of the investigation by the newly formed Environmental Protection Agency. Union Carbide refuse to participate public discussions about the problem and ignored a governmental request for an on site inspection. which resulted in increased incidents of respiratory disease among local residents. Mountains on both sides of the valley trap in soot. threatening to cut jobs if they had to be environmentally responsible. what is best for the environment is not always financially best for business. The problem with this view is that environmental responsibility cannot be left to what consumers are willing to tolerate. which instructed Union Carbide on several pollution control measures. Although most companies are guilty of varying degrees of environmental irresponsibility. They might also update older energy-hungry heating or production units if the investment has the right payoff. businesses need to save consumers from succumbing to their most thrifty inclinations. ash. The company soon became a symbol of corporate resistance to pollution control. Union Carbide built a series of metal and chemical plants in the Ohio valley. Critics charged that Union Carbide s tactics amounted to environmental blackmail. Examples of Environmentally unsound Business Practices. they might push recycling. the nuclear power industry has been under attack by environmentalists and few new plants have been started. Union Carbide restructured their company and adhered to pollution control standards. A first case involves resistance to air pollution control measures. if businesses agree that they have an environmental responsibility beyond what the law requires.compete. Ultimately. Also. irrespective of moral considerations surrounding the manufacturing of those products. and cheap alternative to coal and oil. However. which they can indicate on their packaging and thereby attract environmentally conscious consumers. such as antifreeze. Union Carbide was less susceptible to consumer boycotts since only 20% of its products were direct consumer goods that we might purchase in a department store. Union Carbide responded by shutting down a boiler plant and laying off workers. some extreme cases vividly illustrate irresponsibility at its worst. Ultimately. they argue. Part of their resistance owes to the fact that the environment was not an issue in the 1950s and new pollution control measures were both expensive and untested. In the early 1950s. which are notoriously . the original intent of nuclear power was to provide a safe. A second case of environmental irresponsibility involves nuclear power accidents. claiming that was the only way they could comply with the required pollution reduction. they often take a good ethics is good business approach and emphasize areas of environmental responsibility that will generate a profit. During the 1960s. as noted above. environmental responsibility rests with consumers. providing about 15% of the world s electricity. For example. clean. the good ethics is good business approach quickly appears deceptive and shallow. between Ohio and West Virginia. This is so too with my motivation to purchase products that are manufactured by environmentally unfriendly companies. In a sense. For the past few decades. There are currently around 400 nuclear power plants world wide. Even if I knew that a pair of tennis shoes was manufactured in a third world sweatshop. then it is not up to businesses to champion environmental policies on their own. Second. Ironically. and other air pollutants. Most consumers will be attracted to the least expensive consumer products.

and countries throughout Europe claimed losses into the hundreds of millions of dollars. A third and final case of environmental disaster involves large-scale oil spills. In 1989. Pennsylvania. Oil poured from the ship and. and. nuclear power plants create other environmental problems that involve nuclear waste disposal. The captain of the ship.06.damaging to the environment. both the result of safety violations and human error. Nuclear power produces no smoke or carbon dioxide. and handling of wastes.000 injured from direct exposure to radioactive material by means of inhaling radioactive gasses and dust. which made the situation worse. The ship was so large that it took a full minute to respond to steering changes. Radiation was released into the local community. and ingesting contaminated food or water.the disaster had a decisive impact on the entire nuclear power industry. and remains toxic for a very long time. A much more serious nuclear power disaster occurred in 1986 in the Ukrainian city of Chernobyl. a series of mechanical and human failures contributed to a partial core meltdown to one of its reactors. The cleanup was also .and not private industry -. First occurred at the Three Mile Island nuclear power plant in Harrisburg.000 times. which an ineffective radar system failed to detect earlier. the piloting officer miscalculated and ran the ship into a reef. In addition to the risks of catastrophic disasters such as Chernobyl. 31 people were killed and 1. Partly from negligence and partly from design problems. They also argue that nuclear waste sites need to confine wastes for only a few thousand years since after 1. He had a reputation as a drinker. Financial losses reached $3 billion. 42 year old Joseph Hazelwood. and solar technology. though. such as coal. similar to how airline travel has increased while their accident rate has decreased. defenders say that we can reasonably expect a decrease in nuclear accidents even if we increase nuclear power use. The tanker trip was part of a routine convoy from Alaska to Long Beach California that was successfully made by other tankers over 8. when the weather changed. and a systematic closing of the ones currently in use. Initially viewing it as only a public relations problem. which some departments at Exxon knew about.000 years the ingestion toxicity is comparable to that of the original uranium from which the wastes were derived. Although the Soviet government owned the Chernobyl plant -. The spill had a terrible impact on plant and animal life in the area. and at the time of the disaster his blood alcohol level was . After Three Mile Island and Chernobyl. Icebergs were in the path of the ship. and only harmless steam. Nuclear waste is deadly to animal life. critics called for a moratorium on the construction all future nuclear power plants. hundreds of square miles of land was contaminated. It also doesn t require environmentally intrusive mining or drilling efforts. Defenders. an Exxon oil tanker called the Valdez struck a reef in Alaska s Prince William Sound and created the largest crude oil spill in US waters. Defenders recommend that clustered reactors provide better operational support. Attempting to navigate around an iceberg. argue that nuclear energy is necessary in view of the limitations of alternative energy sources. Two major disasters contributed to the now tarnished image of the nuclear power industry. Exxon was slow to respond with cleanup efforts. a steam explosion and fires threw tons of radioactive material into the environment. a family of a Down s Syndrome child received 1 million dollars in compensation. was with Exxon for 20 years. then part of the Soviet Union. Hazelwood assigned the piloting of the vessel to a less experienced officer and then retired to his quarters. Finally. although connections with health problems were difficult to prove. oil. which the news media vividly captured in pictures and on television. security.000 people were evacuated from the surrounding area. In 1979. it sloshed onto the beaches for hundreds of miles. and the long term health effects of the accident are still being assessed. 135.

cats. Some have argued that our indirect environmental duties derive both from the immediate benefit which living people receive from the environment. just as significantly. a duty that is derived from human interests.000 Exxon credit card holders destroyed their cards. and the benefit that future generations of people will receive. cows. and chimpanzees. such as chickens. with a punishment of 1000 hours of community service in the cleanup. such as dogs. The third theory is that of ecocentrism. Exxon paid in excess of 2 billion dollars in the cleanup efforts and. and that its beauty and resources are preserved so human life on earth continues to be pleasant. environmental responsibility derives from the interest of all morally significant persons. that it is deserving of . Hazelwood was ultimately fired for not being on the bridge at the time of the disaster and was convicted of negligent discharge of oil. the average cost of rehabilitating a seal was $80. we still have a moral responsibility to those collections anyway. The first of these theories is anthropocentric. or human centered. then. Environmental anthropocentrism is the view that all environmental responsibility is derived from human interests alone. Singer describes this inequity toward animals as speciesism. either higher or lower. which is that we have direct responsibilities to environmental collections. each of which yields substantially different conclusions about the environmental responsibility of businesses. Thus. Nevertheless. strictly speaking. critics have maintained that since future generations of people do not yet exist. Three Philosophical Theories of Environmental Responsibility. For Singer. dolphins. the mistreatment of animals is analogous to racism and slavery since it gives unequal treatment to beings with equal interests. higher animals qualify as morally significant creatures. Since the environment is crucial to human well-being and human survival. 40. The assumption here is that only human beings are morally significant persons and have a direct moral standing. then. which includes both humans and at least some animals. some businesses argue that their environmental responsibility is confined to what the law requires and what will yield a profit. hinges on the environmental interests of animals. A second general approach to environmental responsibility is to base it on the moral consideration that we owe to animals. But. as well as the environmental interests of humans. then we have an indirect duty towards the environment. We will consider three of these theories. they cannot have rights any more than a dead person can have rights. Even if there is no direct human consequence of destroying environmental collections. deserve equal moral consideration insofar as they are capable of experiencing physical pleasure and pain.000. horses. pigs.expensive. This involves the duty to assure that the earth remains environmentally hospitable for supporting human life. They suggest that the environment has direct rights. Animal rights advocate Peter Singer goes a step further and argues that even lower animals. that is. a position that we will call the animal rights view. On this view. just as we have direct responsibilities to humans. As noted earlier. suffered an almost irreplaceable loss of reputation because of the disaster. ethicists typically argue that businesses need to look beyond profit motive and legal regulations to find more persuasive reasons for environmental responsibility. that it qualifies for moral personhood. both parties to this dispute acknowledge that environmental concern derives solely from human interests. just as humans are. Ecocentrists use various terms to express this direct responsibility to the environment. Our responsibility toward the environment. However. such as animal species and rain forests.

" This involves a radical shift in how humans perceive themselves in relation to the environment. and that it has inherent worth. "The land ethic simply enlarges the boundaries of the community to include soils. toxic waste. He calls this final phase the land ethic. Leopold argues that we are on the brink of a new advance in morality that regulates conduct between humans and the environment. From the anthropocentric perspective. animals. such as they might do through animal testing. as reflected in the Golden Rule. and the environment is a member of the moral community. this would not touch the concerns of the animal rights and ecocentrist. Finally. air and water pollution. Implications for Businesses. From the animal rights perspective. and ecocentric interests overlap. as reflected in the Ten Commandments. excess carbon dioxide. instead we should prefer a sterility chemical. and animals. businesses have an obligation not to damage the environment in ways that negatively impact on human life. Typically. For example. Each of the above theories has different implications on business s responsibility to the environment. or collectively: the land. suppose that a business considered building a factory on a site that. businesses will automatically be bound by the environmental regulations that are required by . and damage to the environment harms animals more than it harms humans. this reasoning ignores the needs of animals and the integrity of the ecosystem itself. we should not control pests through poisoning. For Leopold. or inhumane food production techniques. For all three of these phases in the evolution of ethics. they may restore the stream. For example. though. Originally we saw ourselves as conquerors of the land. The earliest notions of morality regulated conduct between individuals. This is especially pertinent given that the environment is the immediate habitat of animals. and release of fluorocarbons equally affect humans. which might cost them less money. Later notions regulated conduct between an individual and society. sometimes when businesses are found legally responsible for polluting a stream.a direct duty. the business would only need to take into account the recreational value that the bird breeding ground would have to human bird watchers. In view of these various theories of environmental obligation. First. since this causes animals to suffer. animal rights. or they may pay off a community in compensation for living with the polluted stream. such as they might do by destroying animal environments. the main premise of morality is that the individual is a member of a community of interdependent parts. To use another example. waters. several corrective options may be open to them. though. Common to all of these claims. if constructed. Although the anthropocentrist will be satisfied with paying off the community. the interests of the three do not overlap. would destroy a breeding ground for birds. businesses have a direct obligation to protect the environment since it is wrong to harm members of the moral community. businesses have an obligation to avoid harming animals either directly or indirectly. For example. plants. from the anthopocentrist position. They need to avoid harming animals indirectly. In many cases the anthropocentric. and environmental collections. They need to avoid harming animals directly. what should businesses do? First. Leopold explains that morality evolved over the millennia. is the position that the environment by itself is on a moral par with humans. In many cases. though. Now we need to see ourselves as members of a community that also includes the land. which costs a lot of money. from the ecocentrist perspective. For the animal rights advocate and ecocentrist. Aldo Leopold first articulated econcentrism in his highly influential essay "The Land Ethic" (1949).

If companies don t respond properly. it doesn t cover everything. Many of the ethical issues that face IT professionals involve privacy. Although this covers much ground. as a matter of good public relations and even survival. and.law. to ensure that sensitive company information isn t being disclosed? Is it okay to read employees e-mail to ensure that company rules (for instance. businesses should at least be sensitive to environmental concerns from both the anthropocentric and animal rights perspectives.which intensifies negative public opinion towards a company. which greatly harms their reputation. For example: y Should you read the private e-mail of your network users just because you can? Is it okay to read employees e-mail as a security measure. Many environmental problems lend themselves to graphic portrayal by the media -such as sea animals covered in oil -. Second. they appear arrogant and uncaring. companies need to take this into account. should you disclose that policy to them? Before or after the fact? Is it okay to monitor the Web sites visited by your network users? Should you routinely keep logs of visited sites? Is it negligent to not monitor such Internet usage. Animal rights and environmental lobby groups today are becoming increasingly more influential. against personal use of the e-mail system) aren t being violated? If you do read employees e-mail. to prevent the possibility of pornography in the workplace that could create a hostile work environment? Is it okay to place key loggers on machines on the network to capture everything the user types? Screen capture programs so you can see everything that s displayed? Should users be informed that they re being watched in this way? Is it okay to read the documents and look at the graphics files that are stored on users computers or in their directories on the file server? y y y .