Business Final Exam Questions

What is the moral responsibility of a business? WHAT IS RESPONSIBILITY

is the ability and moral obligation to respond (in

action or verbally) to normative questions concerning the rightness and

wrongness of actions or state of affairs.

WHEN IS SOMEONE RESPONSIBLE FOR SOMETHING? - CONDITIONS THAT

CONSTITUTE RESPONSIBILITY:

Causality

Knowledge

Free will

Position / Function / Relationship

Ability and Power

Business-specific (company-specific) responsibility

means the

sum of responsibilities a given business has regarding its specific operations,

products, services, and stakeholders. This includes all ethically critical societal,

environmental, global, and future effects that result from the business's

activities and products.

Determining business-specific responsibilities based on an

Ethical Life Cycle Assessment (ELCA)

[STEP 1]

DENTIFY SOCIETAL, ENVIRONMENTAL, GLOBAL AND LONG-TERM IMPACTS

THAT RESULT FROM THE ENTIRE PRODUCT LIFE CYCLE:

Sourcing

Production

Distribution

Use

Disposal

Step II:

Step II: ETHICALLY EVALUATE THOSE IMPACTS – IDENTIFY ETHICAL ISSUES

CI PRINCIPLE B:

All involved in, and affected by, the product life cycle

should be treated with respect:

No one should be treated as mere object

Vulnerable groups should not be exploited

The moral rights of all should be respected (e.g. human rights)

UTILITARIAN PRINCIPLE:

Is overall happiness maximized?

VIRTUE PRINCIPLE B:

Do all involved in, and affected by, the product life

cycle benefit? Do all have opportunities to thrive?

NO HARM PRINCIPLE

Others should not be harmed; harm to others and the

environment should be minimized

Step III: TO WHAT DEGREE CAN THE BUSINESS BE HELD ACCOUNTABLE FOR THE

ISSUES IDENTIFIED IN STEPS I AND II?

CRITERIA:

□ To what extent did the business cause the issue?

□ To what extent did the business know or could have known that the issue

occurs?

□ How much ability, expertise, and power does the business have to

address the issue?

(always in comparison to other actors / parties involved)

Step IV: IDENTIFY STRATEGIES FOR THE BUSINESS TO ASSUME RESPONSIBILITY AND

TAKE ACTION

CRITERIA:

□ Activities should effectively address the ethical issues

□ Activities should match the degree of responsibility defined in Step III

□ Activities should be economically feasible and ideally support the

business success

ELCA method – summary

STEP I

IDENTIFY CRUCIAL SOCIETAL, ENVIRONMENTAL, GLOBAL, AND LONG-TERM IMPACTS OF

THE PRODUCT LIFE CYCLE

Sourcing – Production – Distribution – Use – Disposal

STEP II

ETHICALLY EVALUATE THOSE IMPACTS AND IDENTIFY CRITICAL ISSUES

Utilitarian principle, CI principle B, Virtue principle B, No-harm principle

STEP III

DETERMINE WHAT DEGREE OF RESPONSIBILITY THE BUSINESS HAS FOR THE ISSUES

To what extent did the business cause the issue?

Did the business know or could it have known that the issue would occur?

How much ability does the business have to address the issue?

STEP IV

IDENTIFY STRATEGIES FOR THE BUSINESS TO ASSUME RESPONSIBILITY AND TAKE ACTION

Activities should effectively address the ethical issues

Activities should match the degree of responsibility defined in Step III

Activities should be economically feasible and ideally support business success

CORPORATE SOCIAL RESPONSIBILITY (CSR):

Corporate Social Responsibility is a management concept whereby

companies integrate social and environmental concerns in their

business operations and interactions with their stakeholders. CSR is

generally understood as being the way through which a company

achieves a balance of economic, environmental and social

imperatives ("Triple-Bottom-Line-Approach"), while at the same time

addressing the expectations of shareholders and stakeholders."

How many of the largest 250 global companies issue CR reports?

A) More than 90%

B) About 75%

C) About 50%

D) About 25%

E) Less than 25%

More than 90%

CHANGE IN MODERN BUSINESS: COMPANIES ASSUME BROADER RESPONSIBILITIES 1

Higher expectations from stakeholders: more awareness for ethical aspects of

business operations

CHANGE IN MODERN BUSINESS: COMPANIES ASSUME BROADER RESPONSIBILITIES 2

Businesses are influential societal and global players: more responsibility and civil

engagement

CHANGE IN MODERN BUSINESS: COMPANIES ASSUME BROADER RESPONSIBILITIES 3

Businesses can only thrive in stabile societies, a stabile global world, and a healthy

environment.

CHANGE IN MODERN BUSINESS: COMPANIES ASSUME BROADER RESPONSIBILITIES 4

Businesses broadly recognize their new and expanded responsibilities in today's

world regarding their stakeholders and sustainability challenges (and given the

limitations of markets and government regulations).

WHY IS CR IMPORTANT FOR A MODERN BUSINESS (BUSINESS CASE)?

Improves stakeholder relationships

Crucial information for investors and shareholders

Attracts highly qualified employees

Proactive risk management

Contribution to strategic management

Innovation and efficiency gains

Identification of new markets and products

Builds reputation

Improved competitiveness

Pillar model of CR: The responsible company

---

CR analysis – method

Evaluating CR strategies I.

Basics about the company and its business

Type of business/industry?

Mission statement?

Core data about the company?

CR analysis – method

Evaluating CR strategies II.

Crucial elements and operationalization of the CR

What areas and activities are at the core of the CR?

How are CR activities operationalized?

Core data about CR?

CR analysis – method

Evaluating CR strategies III.

Critical evaluation of the CR strategy

1 Ethical criteria

2 Economic criteria

3 Formal criteria

1 ETHICAL CRITERIA

Does the CR-strategy

sufficiently address the business-specific responsibilities of the

company? Determine business-specific responsibilities. Evaluate whether the CR strategy sufficiently addresses the

business-specific responsibilities. Is the CR-strategy credibly maintained in all

business operations?

2 ECONOMIC CRITERIA

Does the CR-strategy support the business success of the

company?

improves stakeholder relationships

proactively manages risks

contributes to strategic management

results in innovation and efficiency gains

assists with identifying new markets

improves competitiveness

builds reputation

3 FORMAL CRITERIA

Does the company issue a CR report?

(ii) Does the CR report follow established reporting guidelines and

business norms, such as GRI standards, SASB standards, UN

Global Compact, UN SDGs, Human Rights Declaration, etc.?

(iii) Does the CR report provide data and well-defined goals?

(iv) Does the company provide external assurance for its CR data?

(v) Is the CR strategy well integrated into corporate governance

and other business ethics programs of the company?

ethical culture of an organization

is the sum of

explicit and implicit values, principles, and ethical reflections that

underlie, and are expressed by, the interactions and actions of its

members

Kantian principles

Respect and reasons

o Participation and open critical discourse

o Responsibility

Virtue ethical principles

Empowerment

o Thriving

o Community

Care principles

Care for individual wellbeing

o Respect and accommodate vulnerabilities

Principles of fairness and equality

REMEMBER THIS ONE

PROMOTING A STRONG ETHICAL CULTURE

Organizational design and formal mechanisms

o Well-defined rules, policies, and procedures

o Supportive incentives and rewards

o Effective ethics and compliance program

o Effective diversity and inclusion program

□ Ethical leadership

□ Integration with governance

□ Living and developing the culture

□ Support from society and stakeholders

ethics and compliance program

is a formal

internal mechanism that implements ethics and compliance

throughout an organization

ELEMENTS OF AN ETHICS AND COMPLIANCE PROGRAM

Code of conduct

□ Ethics and compliance training

□ Mechanisms for members to raise concerns and speak up

□ Mechanisms to address issues

□ Mechanisms for program evaluation

□ Oversight and leadership

REASONS FOR IMPLEMENTING AN ETHICS AND COMPLIANCE PROGRAM

Promoting a strong ethical culture (fairness, respect, responsibility)

□ Minimizing risks of employee misconduct

□ Minimizing conflicts with stakeholders and society

□ Minimizing internal frictions and conflicts

□ Professionally dealing with issues, concerns, and conflicts

□ Legal expectations, e.g., by the United States Sentencing Guidelines

Chapter 8 of the USSG incentivizes business ethics:

“[O]rganizations can act only through agents and, under federal criminal law,

generally are vicariously liable for offenses committed by their agents. […] This

chapter is designed so that the sanctions imposed upon organizations and their

agents, taken together, will provide just punishment, adequate deterrence, and

incentives for organizations to maintain internal mechanisms for preventing,

detecting, and reporting criminal conduct.” (USSC, 2021, Ch.8, Intro. Comment.)

The USSG encourage the implementation of ethics and compliance programs to

reduce internal misconduct. If nevertheless some misconduct happens, a well-designed

ethics and compliance program may reduce the punishment for the organization:

The two factors that mitigate the ultimate punishment of an organization are: (i) the

existence of an effective compliance and ethics program; and (ii) self-reporting,

cooperation, or acceptance of responsibility.” (USSC, 2021, Ch.8, Intro. Comment.)

what does the USSG do

The USSG encourage organizations to actively promote an ethical culture. The USSG provide specific recommendations for the implementation of an ethics

and compliance program into an organization's governance structure:

ESG

s a business ethics approach that considers

environmental, social, and governance aspects of a business with

regards to its strategy, success, and impacts.

Environmental (ESG)

refers to the environmental aspects and performance of a company,

such as GHG emissions, energy and resource use, water footprint, ecological footprint,

impact on biodiversity, waste, among others (including supply chains).

Social (ESG)

refers to the societal aspects and performance of a company. This includes, for

instance, employee satisfaction, ethical culture, diversity, ethics and compliance, child

labor cases, human rights violations, accidents/injuries, stakeholder engagement, etc

Governance (ESG)

refers to the mechanisms and processes of directing a company. This

includes power structures, management system, rules and policies, actions, and

decision processes within a company. Crucial questions for ESG are: How well are responsibilities for environmental and societal performance

implemented in the governance of the company?

□ How well are responsibilities for internal ethics and ethical culture implemented

in the governance or the company?

ETHICAL AND BUSINESS ASPECTS

Promoting responsible business practice

□ Promoting business as a positive force

□ Proactively addressing environmental and societal risks

□ Strategically positioning a company toward sustainability issues (see also Chapter 7)

□ Meeting stakeholder expectations

□ ESG overall supports business success (Friede et al., 2015)

Ethics of consumption: consumption

the use of goods and services to satisfy needs and wants

Ethics of consumption Ethics:

the study of the right and the good

Ethics of consumption

How does consumption relate to wellbeing (the good)?

(ii) How does consumption relate to doing right?

INDIVIDUAL ROLES IN THE ECONOMY / BUSINESS / ORGANIZATIONS:

Consumer

Investor

Entrepreneur

Employer

Employee

Leadership roles

Member of a certain profession

Specific role in an organization

MORAL RIGHTS

Rights are fundamental claims that are grounded in ethical reasons and

demand general recognition

□ Rights protect crucial interests and wellbeing

MORAL RIGHTS KANTIAN ETHICS

everyone has the right to be respected as ends in

themselves and beings endowed with reason

MORAL RIGHTS VIRTUE ETHICS:

everyone has the right to thrive and develop the own

potential towards excellence

MORAL RIGHTS ETHICS OF CARE:

Everyone has the right that their vulnerability and lack

of power, ability, or knowledge is not ignored or abused, but cared for. Everyone has the right not to be harmed in person or property

POTENTIAL MORAL RIGHTS OF EMPLOYEES

Right to equal, fair, and respectful treatment in the workplace

□ Right to reason-based treatment

□ Right to participation

□ Right to privacy

□ Right to meaningful work and supportive work environment

□ Right to not get harmed

Examples for legal rights in the US:

Minimum wage

o Protection against discrimination (e.g., Civil Rights Act; ADA;

ADEA; Equal Pay Act; etc.)

o Workplace safety (OSHA)

Examples for legal rights in other countries:

Protections against arbitrary firing

o Paid vacation & paid sick leave

o Paid parental leave

DUE PROCESS

Guarantees fair, equal, and transparent treatment; provides

reasons for actions (in line with Kantian ethics)

□ For instance, well-defined rules and procedures for

evaluations, pay rises, promotions, getting fired

PARTICIPATION

Respects rational individuals as ends in themselves

□ Inclusion in decision-making processes

□ Compare different corporate governance models (e.g., EU;

US; Benefit corporation)

EMPLOYEE RESPONSIBILITIES

Performance

□ Professionalism

□ Ethical and legal conduct

□ Avoiding harm to the organization

□ Supporting the success of the organization

DEFINING GREAT LEADERSHIP

Great leadership is leadership that is effective

and ethical

Ethical Leadership

Great ethical leadership

WHAT ARE ETHICAL FOUNDATIONS OF LEADERSHIP?

Ethical leadership is grounded in ethical principles

□ Ethical principles for leadership can be deduced from ethical theory

TEN PRINCIPLES OF ETHICAL LEADERSHIP

Principle 1: Ethical leadership is based on the fundamental values of a free and equal

society of autonomous, rational persons

Principle 2: Ethical leadership serves some common good

Principle 3: Ethical leadership is respectful

Principle 4: Ethical leadership is grounded in reasonable principles rather than in

oppressive or authoritarian power mechanisms

Principle 5: Ethical leadership requires only the minimum amount of power necessary to

lead

Principle 6: Ethical leadership is transparent, participatory, and empowering

Principle 7: Ethical leadership is responsible

Principle 8: Ethical leadership empowers individual responsibility of followers

Principle 9: Ethical leadership promotes excellence

Principle 10: Ethical leadership cares about followers

PROFESSION:

A profession is a well-defined vocation whose expertise serves a specific

public interest. A profession is typically based on extensive qualification, develops own

standards and criteria, and is self-regulated.

PROFESSIONAL ETHICS:

Specific professional expertise comes with specific ethical

responsibilities. If you are an expert in a certain field, others rely on you and trust you.

You are responsible for properly using your expertise.

CORE PRINCIPLES OF PROFESSIONAL ETHICS

Competency: Stay up to date of professional knowledge; only work in areas of

own competency

□ Objectivity: Adhere to established professional methods and norms; avoid

personal bias and external influence

□ Responsibility: Use expertise in a responsible way with regard to all parties

affected and professional standards

□ Integrity: Uphold professional principles and avoid conflicting and

contradicting actions

□ Public interest: Consider public expectations and public welfare related to

professional work

ACCOUNTING

involves gathering, classifying, summarizing, and reporting financial

information about an entity to interested users such as stockholders, creditors, potential

investors and creditors, governments, and other stakeholders."

MARKETING:

Linking business to existing and potential markets / customers

FIELDS OF MARKETING:

Advertising

□ Market research

□ Pricing

□ Sale

□ Internet and database marketing

□ Social media marketing

ETHICAL ISSUES IN MARKETING - EXAMPLES:

VW diesel car marketing: VW diesel ad

□ "Red Bull gives you wings"

□ Big data analysis and marketing

□ Advertisement to children

AREAS OF MARKETING AND RELATED ETHICAL ASPECTS - OVERVIEW:

□ Advertising – truthfulness, proper targeting, no manipulation

□ Pricing – fairness, transparency

□ Sale – fairness, transparency, respect

□ Internet and database marketing – privacy, transparency

□ Social media – no manipulation, privacy, transparency, respect

□ Market research – transparency, respect

ETHICAL INTELLIGENCE: TRAINING AI TO CONSIDER ETHICAL ASPECTS?

Ethical training based on empirical data [might perpetuate (past) biases]

□ Training in normative ethics: AI could apply ethical methods, e.g., utilitarian

method, CI method, virtue method, etc.

□ AI would probably be particularly good in applying utilitarianism

Analysis + Action = Solution

ANALYSIS:

□ Identifying the ethical issue

□ Identifying solutions

II. ACTION:

□ TYPE OF ISSUE: individual, organizational, regulatory? Is the issue controversial or

undisputed?

□ POSITION: management, consultant, employee, owner, etc.?

□ CONTEXT: organizational culture, policies, procedures?

□ COMMUNICATION AND PSYCHOLOGICAL ASPECTS: Whom to address? Ways to raise

concerns? Potential barriers?

(External) Whistleblowing

is the intentional act of a

member of an organization calling public attention to

some wrongdoing of the organization. Whistleblowing is a measure of last resort - an option to address serious cases if

there is no other resonable option left

□ It is important to recognize that this option exists for any individual person as an

ultimate reference point for morality

□ In some cases, whistleblowing can be considered as moral obligation of a

professional

ethical dilemma

is a situation in which one must

choose between two conflicting ethical values, norms,

or principles.

WHEN IS WHISTLEBLOWING JUSTIFIED?

Checking the facts: Is there enough unbiased evidence

about the wrongdoing/issue and its magnitude?

(Is there really a serious issue?)

2. Checking other ways to address the issue: Is there no

internal way to sufficiently deal with and fix the issue

within the organization?

3. Checking ethical justification: Has the ethical argument

been carefully considered? Are there strong ethical

reasons for blowing the whistle?

o Ethical reasons

o Professional ethics

o Fundamental principles

PERSONAL ASPECTS: whistleblowing

Personal risks and benefits

□ Professonal and personal responsibilities

□ Individual ethical decision: Speak up, leave the organization, or blow the whistle

ORGANIZATIONAL ASPECTS: whistleblowing

Organizations need internal mechanisms to avoid serious issues and potential

whistleblowing

□ Organizations should ensure a strong ethical culture and ways to speak up and

raise concerns internally

□ Lack of proper internal mechanisms is potentially dangerous to the organization,

its members, and society

SOCIETAL ASPECTS: whistleblowing

Society has an interest in whistleblowers who serve societal interests

□ Societal support for whistleblowers: laws, protection, rewards

 False Claims Act: covers fraud to governmental programs; 15-30% of

recovered sum goes to the whistleblower

 Whistleblower Protection Act: protection of federal employees that blow the

whistle

 Tax Relief and Health Care Act (2006): reward to whistle-blowers: up to

30% of recovered tax

 Sarbanes-Oxley Act: whistleblower protection; protection against retaliation

ETHICAL ISSUES IN THE GLOBAL ECONOMY:

Exploitation

Human rights violations

Environmental harm

Social and environmental injustice

UNDERLYING CAUSES ROOTED IN THE CHARACTERISTICS OF THE GLOBAL

ECONOMIC SYSTEM:

Large asymmetries in power, capabilities, and wealth

Lack of proper regulation around the world

Complexity of the global economic system

BASIC GLOBAL BUSINESS ETHICS

Uphold global norms and fundamental rights, Adhere to one's own ethical

principles and core values.Respect other cultures

and cultural values. at the heart is ethical reflection

ADVANCED GLOBAL BUSINESS ETHICS

Use business to be a positive force in the world

 Create win-win

 Participation

 Empowerment

 Development

The Anthropocene

the age of human dominance on earth

information about humans and the earth

Humans have become the dominant force on earth (Crutzen & Stoermer 2000; IPBES 2019)

Human activities are significantly impacting major earth systems: climate, freshwater,

biodiversity, oceans, fertile land, forests, ... (IPCC 2021; UNEP 2019; IPBES 2019; MEA 2005)

Overuse of earth's resources and sinks: climate change, biodiversity loss, water scarcity,

loss of rain forests, land degradation, overfishing, ... (IPCC 2021; UNEP 2019; IPBES 2019)

Sustainability as major challenge of the Anthropocene

"Sustainability means the ability to sustain systems, processes, and entities that are crucial

for the wellbeing of contemporaries, future generations, and nature" (Becker & Hamblin 2021)

"The concept of sustainability addresses the overall challenge of transforming technological,

societal, and economic systems to avoid further overuse of the planet and ensure thriving of

humans and nature in the long run" (Becker 2021)

sustainability facts and evaluations

Self-interest and sustainability

Ethical underpinnings of sustainability

Doing right to ...

... future people

... people around the world

... nature and non-human species

New ethical challenges: responsibilities, rights, obligations in the sustainability context

Sustainable economy and sustainable business

Transforming the economy toward a sustainable economy is key for a sustainable future

Factual and ethical challenges for the economy of the Anthropocene

Implications for sustainable business

Ethics of capitalism:

markets coordinate individual self-interests to promote societal

wellbeing (Smith 1776)

Individual freedom; choice; opportunities

Societal benefits: efficiency; growth; innovation

"Systemic ethics" of the capitalist market economy; everyone is better off

Limitations of Ethics of capitalism:

Exclusion of nature, future beings, many contemporaries

sustainable economy

is an economy that serves the wellbeing of

contemporaries, future generations, and nature in a systematic and well-defined way

and, by this, has the ability to continue in the long run without larger frictions or crises

sustainable business

is a business that systematically considers all

environmental, societal, global, and future impacts of its business operations and

products and, by this, improves its competitiveness and long-term success

HOW TO TRANSFORM A COMPLEX GLOBAL ECONOMIC SYSTEM?

Bottom-up approaches: responsibilities and actions of consumers, investors, businesses,

communities, etc.

The role of businesses

Capability: power, dynamic, and global reach

Responsibility

Action: Transition is already happening and shapes future business

Companies assume broader environmental and societal responsibilities: Corporate

Responsibility, sustainability strategies, supply-chain responsibility, ESG

Triple bottom line: improving financial, environmental, and societal performance

WHY SHOULD BUSINESS CARE ABOUT SUSTAINABILITY? ethical

Business needs to consider societal and global norms/values

Economic activities have been a major factor in causing sustainability issues

Responsibility: everyone is responsible for one's own actions and its effects on others

Business should ideally be a positive force in the world and needs to realize this ideal in

the broader sustainability context

WHY SHOULD BUSINESS CARE ABOUT SUSTAINABILITY? economic

REPUTATION, RISK, AND STRATEGIC MANAGEMENT:

Need for strategic positioning toward increasingly scarce materials and energy, as

well as changing investor and consumer expectations, changing preferences, and

future regulations

BUSINESS OPPORTUNITIES: Sustainability provides business opportunities, such as

efficiency gains and new markets

SUSTAINABILITY AS BUSINESS OPPORTUNITY - EXAMPLES:

Sustainable landscaping

Sustainable construction and development

Sustainable cars / transportation

DEFINING GREAT LEADERSHIP