Business Ethics: An

Overview
S K Tapasvi
Professor of Public Policy and Management
MDI Gurgaon
Overview
• What is business ethics?
• Why is business ethics important?
• Globalization: a key context for business ethics?
• Sustainability: a key goal for business ethics?
What is business ethics?
Business ethics is the study of business situations, activities,
and decisions where issues of right and wrong are
addressed.
Ethics and the law

Ethics

grey
area

Law
Defining morality, ethics and ethical theory

• Morality is concerned with the norms, values and

beliefs embedded in social processes which define
right and wrong for an individual or a community.
• Ethics is concerned with the study of morality and
the application of reason to elucidate specific rules
and principles that determine right and wrong for
any given situation.
• These rules and principles are called ethical
theories.
 The relationship between morality, ethics and ethical
theory

Ethics … to
rationalize produce …that can
s morality ethical be applied
… theory … to any
Potential
Morality Ethics Ethical situation.
solutions to
theory ethical
problems
Why is business ethics important?
1. Power and influence of business in society
2. Potential to provide major contribution to society
3. Potential to inflict harm
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Evaluating different ways of managing business ethics
8. Interesting and rewarding
 Types of misconduct across sectors
30

© 2008 Ethics Resource Center

27%
25%
24% 24%
20 22%
21% 21%
20%
19%

10
Nonprofit

Business

Government

Putting own interests Lying to Abusive behavior

employees
ahead of org

Source: Ethics Resource Center (2008)

 Observed ethical misconduct across sectors
75%

© 2008 Ethics Resource Center

60% 57% 57%
52%
52% 56%
55%
50% 46%
55%
46%
49%

43%

Nonprofit

25%
Business

Government

0%

2000 2003 2005 2007

Source: Ethics Resource Center (2008)

Differences across organizational types

Stakeholders Large Small Civil society Public sector

corporations businesses organizations organizations
Main priorities in Financial integrity, Financial integrity, Delivery of mission Rule of law,
addressing employee/customer employee/customer to clients; integrity of corruption, conflict of
ethical issues issues issues tactics; legitimacy interest; procedural &
and accountability accountability issues

Approach to Formal, public Informal, trust- Informal, values- Formal, bureaucratic

managing ethics relations and/or based based
systems-based

Responsible Shareholders and Owners Donors and clients General public, higher
and/or other stakeholders level government
accountable to organizations

Main constraints Shareholder Lack of resources Lack of resources Inertia, lack of

orientation; size and and attention and formal training transparency
complexity
Globalization: a key context for business
ethics?
What is globalization?
• According to Scholte (2005) globalization is not:
• ‘internationalization’
• ‘liberalization’
• ‘universalization’
• ‘westernization’
• Globalization is: a process which diminishes the
necessity of a common and shared territorial basis
for social, economic, and political activities,
processes, and relations.
• ‘deterritorialization’
 Relevance of globalization for business ethics

• Cultural issues
• Legal issues
• Accountability issues

Globalization can affect all stakeholders of the

corporation
Ethical impacts of globalization
Stakeholders Ethical impacts of globalization
Globalization provides potential for greater profitability, but also greater risks. Lack of
Stakeholders
regulation of global capital markets, leading to additional financial risks and instability.
Corporations outsource production to developing countries in order to reduce costs in
Employees global marketplace - this provides jobs but also raises the potential for exploitation of
employees through poor working conditions.
Global products provide social benefits to consumers across the globe, but may also meet
protests about cultural imperialism and westernization. Globalization can bring cheaper
Consumers prices to customers, but vulnerable consumers in developing countries may also face the
possibility of exploitation by MNCs.
Suppliers & Suppliers in developing countries face regulation from MNCs through supply chain
competitors management. Small scale indigenous competitors exposed to powerful global players.

Global business activities brings the company in direct interaction to local communities
Civil society
with possibility for erosion of traditional community life; globally active pressure groups
(NGOs, etc) emerge with aim to “police“ the corporation where governments are weak and tolerant.
Globalization weakens governments and increases the corporate responsibility for jobs,
Government & welfare, maintenance of ethical standards, etc. Globalization also confronts governments
regulation with corporations from different cultural expectations about issues such as bribery,
corruption, taxation, and philanthropy.
International perspectives on business
ethics
 Different approaches to business ethics

• Who is responsible for ethical conduct in business?

• Who is the key actor in business ethics?
• What are the key ethical guidelines for ethical behaviour?
• What are the key issues in business ethics?
• What is the most dominant stakeholder management approach?
 Regional differences: Europe, North America, Asia

Europe N. America Asia

Who is responsible for ethical Social control by the The individual Top management
collective
conduct in business?

Who is the key actor in business Government, trade The corporation Government,
unions, corporate corporations
ethics? associations

What are the key guidelines for Negotiated legal Corporate codes of Managerial
framework of business ethics discretion
ethical behaviour?
What are the key issues in Social issues in Misconduct and Corporate
organizing the immorality in single governance and
business ethics? framework of business decisions situations accountability

What is the dominant Formalised multiple Implicit multiple

Focus on shareholder
stakeholder approach stakeholder
stakeholder management value
approach, benign
approach? managerialism
Sustainability: a key goal for business
ethics?
Defining sustainability
• Sustainable development is development that meets the needs of
the present without compromising the ability of future generations to
meet their own needs. (World Commission on Environment and
Development 1987)
• Sustainability refers to the long-term maintenance of systems
according to environmental, economic and social considerations
The three components of sustainability

Economic Social

Environmental
Triple bottom line
• Coined by John Elkington
• Bottom line thinking suggests sustainability as a goal
• Three dimensions:
• Environmental perspectives
• Economic perspectives
• Social perspectives
 Corporate commitments to sustainability
Company Sustainability statement Source
“At BP we define sustainability as the capacity to endure as a group: by
renewing assets; creating and delivering better products and services that
BP Sustainability
meet the evolving needs of society; attracting successive generations of
Report, 2007
employees; contributing to a sustainable environment; and retaining the trust
and support of our customers, shareholders and the communities in which we
operate.”
“[Sustainability] means enhancing our relationship with host and partner www.debeersgr
DeBeers governments, building consumer confidence in diamonds, and ensuring our oup.com, 2009
activities contribute positively to … both present and future generations.”
“Corporate responsibility (CR) at Nokia is a collective effort. We believe that
Nokia management of CR issues is most effective when sustainability policies and CSR Report,
programs are embedded in every aspect of our operations. ” 2007
“ [For Toyota, a guiding principle is] ‘contributing to the development of a
Toyota prosperous society through the manufacture of automobiles.’ ‘Contributing to Sustainability
the development of a prosperous society’ means ‘contributing to the Report, 2008
sustainable development of the earth.’”
“Values, social responsibility and active sustainability are integral [to] our
company culture. We are future-oriented in our approach to important issues www.volkswage
Volkswagen
such as climate change. We operate a broad range of [R&D] activities and nag.com, 2009
provide trend-setting approaches to the mobility of tomorrow.”
Summary
• Definition of business ethics
• Business ethics is vital for business in contemporary capitalism
• Global view is essential to understand ethical issues
• Different regions have distinctly different perspective on business
ethics issues
• Sustainability is an important goal for business ethics