Business Ethics

Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR)

The idea that a business has responsibilities towards the community and environment.

Shareholders

Those who invest money in the business.

Stakeholders

An individual or group which is either harmed or benefits from the corporation or whose rights can be violated, or have to be respected, by business.

Milton Friedman

1. Argued that businesses do not have responsibilities.

“There is one and only one social responsibility of business - to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”.

Milton Friedman on Social Responsibility

1. CSR is a distraction from the purpose of a business, which is to make money.

2. It is a mistake to imply that the pursuit of profit is immoral.

3. If the business is successful in making money then there are benefits to the community as employees have some money and are able to use it for good.

4. If money is taken away from shareholders for CSR projects, it is like stealing from the company and stealing dividends from the shareholders.

FTSE4Good Index Series

1. The FTSE4Good Index Series is designed to measure the performance of companies demonstrating specific Environmental, Social and Governance (ESG) practices.

2. This is one way businesses can be judged on in order to establish how responsible they are.

Edward Snowden

1. Former intelligence consultant in the NSA.

2. He released top secret NSA documents and was charged under the Espionage Act.

3. He sought asylum in Russia and lives in Moscow.

“I do not want to live in a world where everything I do and say is recorded… My sole motive is to inform the public as to that which is done in their name and that which is done against them” 2013.

Whistleblowing

When an employee discloses unethical or illegal business practices to the employer or the public.

Examples of such practices:

1. Tax avoidance within a business.

2. Environmental issues within a company.

3. Cheating.

4. Discrimination or bias in recruitment or promotion procedures.

UK Law on Whistleblowing

The Interest Disclosures Act 1998 - protects whistle-blowers from detrimental treatment by their employer.

Disadvantages to Whistleblowing

1. Loss of friendships.

2. Lengthy legal process.

3. Lack of evidence.

4. Poor treatment from managers.

5. Potential loss of job.

6. Unlikely promotions.

7. Reference for future jobs.

Utilitarianism in Businesss

1. Cost-benefit analysis - the process used to measure the benefits of a decision (financial, human, environmental) minus the costs associated with taking that action.

2. This is essentially utilitarianism.

Pro Utilitarianism in Business Ethics

1. If businesses are solely driven by profit, then they must be utilitarianism, doing everything for profit.

2. It means companies must have CSR as they bring the greatest happiness to the greatest number of people.

Against Utilitarianism in Business Ethics

1. This could lead to removal of whistleblowing and CSR if they negatively effect profit.

2. Can justify corruption and bad practice if it provides greater good to the stakeholders and customers - ends justify the means.

3. Can allow false advertisement, as they will buy it regardless.

4. No regulation

5. Difficult to measure the pleasure-pain analysis.

Kant on Business

1. For Kant, duty takes precedence over money.

2. Motive is important for Kant, you cannot treat people as a means to an end, taking the example of a shopkeeper, can you have any workers?

3. Kant would take CSR very seriously.

4. He would also value honesty as a duty:

• No false advertising

• Whistleblowing could therefore be seen as legitimate to fulfil the maxim of truth telling.

Rawls - Kantian

If you apply Rawl’s veil of ignorance, two rules would be applied to ensure justice in the world.

1. Each person to have equal access to basic rights and liberties.

2. Social and economic inequalities to be arranged so that they have the greatest benefit for the disadvantaged, and equal opportunity for the disadvantages to achieve high office and position on merit.

3. This is Kantian as you would have a set of universal duties.

Kant on CSR

1. An action is only truly good if it comes from goodwill and not anything else.

2. When business make CSR decisions, this is because they have a duty to do it, not because it is profitable.

Kant on Whistleblowing

1. Duty to tell the truth.

2. Duty of loyalty to the company you work for and promise-keeping to shareholders.

3. These would need to be weighed up against each other.

Defending Kant in Business

1. Principle of universal law means that we are consistent in our ethical decision making, allowing us to treat people equally and fairly.

2. Treating people as ends ensures that stakeholders are not treated as just data or numbers.

3. Importance of motives, ensures that CSR is genuine, and not just for show.

Counter Kant in Business Ethics

1. Very abstract, doesn’t always translate well into real-world situations, e.g. naïve to think that profit isn’t a motive for business.

2. Universal law doesn’t help in business, where each case is different.

3. Motives/intentions are hard to prove.

4. Conflicting duties due to the significant amount of stakeholders in business.

Globalisation

The integration of economies, industries, markets, cultures and policy making around the world.

Crane and Matten - Business Ethics

1. Technological - Communication and travel have meant that businesses can reach further and trade more widely.

International trade can be done in days in terms of movement of goods and be paid for in seconds over the internet, as opposed to taking months by boat.

2. Political - No country is completely self-sufficient, each needs goods produced by others.

Economic issues in one country often affect other countries.

Rana Plaza Disaster Case Study

1. In 2013, the collapse of the Rana Plaza building in Bangladesh which held some factories killed over 1000 people, and injured more the 2500.

2. This was mainly due to employers ignoring hazardous work conditions.

Globalisation Discourages Ethical Action

1. Businesses are keen to cut costs, and can exploit foreign workers.

2. The wealth gap is growing.

3. Kant would see globalisation as treating people as a means to an end.

4. Neo-colonialism - western countries are imposing their values on other cultures.

Globalisation Encourages Ethical Action

1. Reduces poverty - ‘globalisation has reduced the number of extreme poor in India by 200 million and China by 300 million since 1990’ - Jeffery Sachs, the End of Poverty.

2. Whistle blowers can use social media.

Occupy Wall Street

1. Marched against economic inequality.

2. Had slogan, “We are the 99%”

Capitalism

An economic system based on private ownership and free trade, with minimal government involvement.

Socialism

More direct government involvement and many of the means of production are publicly owned.

Capitalism

A system where government has total control over the economy.

Adam Smith

1. One of the key founder of capitalism.

2. Wrote ‘the Wealth of Nations’, essentially capitalist manifesto.

3. Argues that individuals make moral decisions based upon their own self-interest, ethical egoism.

4. Based on competition and supply and demand.

Capitalism and Smith

1. Businesses have to pay attention to how efficiently they produce things.

2. Introduced the idea of a ‘conveyer belt’ - system, that splits production into stages to be more efficient.

3. Mark criticised this be saying that it means people become alienated from their work.

Humans Cannot Flourish in a Capitalist Consumerist Society

1. Capitalism leads to competition, which can bring out the worst in people, incentivises greed, act out of self-interest.

2. Marx criticised capitalism after seeing how rich factory owners were oppressing their workers, CEO’s being paid bonuses while those at the bottom struggle.

3. Goes against religious beliefs, leads to damage to environment, we are made in the image of God, we have higher purpose.

4. Treats us as consumers is a means to an end, Kant would be against this.

Humans Can Flourish in a Capitalist Consumerist Society

1. Societies that are capitalist tend to grow economically, people are richer.

2. Smith’s ideas are utilitarian, greater good and happiness for the majority.

3. Mishneh Torah, Neighbour 6:8, “A stranger from another country, who comes to open a shop or a bathhouse close to one that is there already, may be prevented. But if he has contributed along with the other citizens toward payment of the royal tax, he cannot be prevented.”

Judaism and Competition

1. Better Prices or Merchandise - The Rama said that a new competitor may be allowed if his prices are reasonable, and if the old competitor is charging higher prices, the new competitor may charge more reasonable ones. If the old merchant was charging a reasonable price, such that lowering his price would prevent him from profiting, a new competitor may not open.

2. Necessary Monopolies - Chatam Sofer rules that industries which require monopoly protection receive it.

3. Teaching Torah - Bava Batra 21b-22a states that even Rav Huna permits unrestricted competition in the area of Torah study, since competition fosters improved Torah knowledge.

Smith on Relationship between Ethics and Business

1. Smith believes that businesses have symbiotic relationships (two things that rely on each other for mutual benefit).

2. Businesses/consumers - businesses benefit from good customer service as customers are more likely to return.

3. Business/employees - Workers who work hard will feel more appreciated, so be loyal. Businesses benefit from greater productivity as a result.

Facebook Data Scandal

1. Cambridge Analytica, a political consulting firm, obtained data from millions of Facebook users without their explicit consent.

2. The data was used to create psychological profiles of users and influence their behaviour, especially during political campaigns (such as the 2016 U.S. presidential election and the Brexit referendum).

3. Facebook broke the symbiotic relationship between the consumer and business by violating their privacy.

Good Ethics is Good for Business

1. Adam Smith - our own self-interest will lead us to treat customers well, otherwise you risk harming your reputation and profit making abilities.

2. From a utilitarian perspective, this would be correct as the consequence of bad ethical decisions can often outweigh the benefits. A reputation that can be ruined in seconds, can take years to recover.

Good Ethics are Bad for Business

1. Milton Friedman - Businesses should prioritise money over being ethical.

2. Immanuel Kant - Good ethics is duty, success in business is not, example of the shopkeeper.