2.3B- Business Ethics Flashcards
(26 cards)
Corporate and social responsibility
-Corporate social responsibility is the idea that businesses are not just there to make money but also have wider ethical responsibilities to all stakeholders and their wider community.
- The idea of corporate responsibility was most famously challenged by the economist Milton Freidman. Freidman’s ideas have proved very influential in both the UK and USA since the 1970s.
Freidman and corporate responsibility
-He argues that whilst individuals in their own time may choose as persons to take on social responsibilities or do charitable things, as employees they must serve the corporation or company, and that company cannot have responsibilities.
-If the business makes money then stockholders, CEOs, etc. may decide to spend their money benefitting the community, but this is not a responsibility of the corporation.
-Likewise a free market may allow higher wages.
-If we want businesses to benefit society then we make them into public employees not private companies.
-Friedman argues that this involves an acceptance of socialism not capitalism.
An alternative view on corporate responsibility against Freidman
-There are good reasons for thinking that businesses do have responsibilities other than making money.
-Belief in corporate social responsibilities may be motivated by: A pragmatic approach that suggests ‘good ethics is good business’, a Kantian sense of duty, or a religious sense of responsibility in how we treat humans and the rest is creation.
-In the past, companies such as Cadbury built schools and parks for its workers; they believed that this was their duty towards their workers.
Friedman- Good ethics as good business
-Milton Freidman argues that good ethics may or may not be good business. Provided a business plays by the legal rules, it does not have to be ethical if this stands in the way of its profits.
Smith- Good ethics as good business
Adam Smith, one of the fathers of capitalism, takes a slightly softer view that Freidman.
-He shows that very often good ethics is good business.
-Smith’s approach is essentially utilitarian.
-Businesses have a symbiotic relationship with both their customers and their employees.
-Although it may benefit us in the short-term to overcharge customers or pay low wages, we will ultimately harm our reputation and may make less money ultimately.
-Hence when we provide good service to others, Smith argues that we do so out of self-interest knowing that we will benefit in the end.
-Nevertheless, Smith is primarily focused on how businesses can make money and two of his most famous ideas illustrate this: The law of supply and demand, and the division of labour.
Kantian Ethics is terms of Business Ethics
-Immanuel Kant would argue that good ethics, doing our duty, is more important than good business.
-Kant uses the example of a shopkeeper who always charges others fairly because he knows that this is good business. Kant concludes that even if this is not sufficient for the action to count as morally good. The shopkeeper is acting in his own interest. It is only if he charges people fairly out of duty that this becomes a good action.
Robert Solomons
-Solomons argued similarly to Kant, and said that it is not possible to divide business from the rest of life.
-Too often people’s behaviour in their business lives bears no relation to how they act outside of work. This should not be the case.
What is whistleblowing?
-The term whistleblowing refers to any situation where an employer, or in some cases other stakeholders, raises concerns of an ethical or legal nature about how an organisation is behaving.
-It is an ethical concern rather than a personal grievance.
-It differs from a normal concern in that they are likely to have gone above their immediate management or outside the organisation.
Different types of whilstleblowing
-Whistleblowing can be private or public.
-Private whistleblowing is when the whistleblower raises concerns internally within the company in question. For example, a black teacher is given a written warning for having spoken to students inappropriately. They become aware that a white colleague who is also a senior manager received no punishment for a similar offence. A concerned colleague uses the college whistleblowing policy to raise this with governors as a case of racial discrimination.
-Public whistleblowing is when the whistleblower raises concerns outside the organisation in question- for example, by alerting the media. For example, a hospital doctor is concerned that a new procedure introduced by managers is putting patients’ lives at risk. Following failed attempts to explain the issue to managers and having seen an increase in patient deaths, they contact the newspapers.
Whistleblowing and the law
-In most cases in the UK, whistle-blowers are protected by law, The Public Internet Disclosure Act (1998).
-Whistleblowers are treated as witnesses and therefore they are not required to provide evidence of what they are reporting.
-It is possible to whistle-blow anonymously, although this can make investigating the claim more challenging.
-There is an equivalent act in the US: The Sarbanes-Oxley Act (2002).
-If business executives retaliate against whistle-blowers they can be jailed for up to 10 years.
-A famous example of this is the ‘Watergate Scandal’ of 1972 in the US.
Why might someone be a whistleblower?
-breach of company rules
-bullying/harassment of employees
-illegal activity
-discrimination
-danger of the public
The cost of whistleblowing
-Whistleblowers take a great risk in raising concerns, even though there are laws to protect whistleblowers, including anonymous procedures in some companies.
-In reality, they can face retaliation from colleagues, legal action and, in some cases, lose their job and future earnings.
-The 2015 ‘Freedom to Speak Out’ report into NHS whistleblowing found that 30% of whistleblowers felt unsafe and some had contemplated suicide.
Ethics and Whistleblowing
-This is all to encourage whistle-blowing as something that serves the public interest.
-The government and society see it as good that people are able to pass on information about wrongdoing or risks to safety so that issues can be put right.
-Allowing whistleblowing ensure that companies take their corporate social responsibilities seriously as they know that there may be follow up if they behave unethically.
-Whistleblowing encourages integrity from employees. If I know that a colleague may report any over-claiming on expenses I am less likely to behave dishonestly.
-There are situations where loyalty to the company is the most important thing. This is one reason why Edward Snowden’s revelations about US intelligence were so controversial. Snowden worked for the National Security Agency (NSA) and told US and British newspapers that the NSA was routinely monitoring the communications of millions of ordinary citizens in the US, UK and many other countries, without their consent or knowledge.
-In Kantian Ethics one must carry out one’s duty as an employee; however, there are occasions when wider duties to our fellow human beings may override these. In some professions such as medicine and teaching, there are certain duties that are integral to the profession regardless of what an individual hospital or school may be saying.
-For Utilitarians, whistleblowers have to make calculations about the greater good or harm that may come from choosing to speak out or to remain silent.
Norman Bowie and whistleblowing
-Employees sign a contract with their employer setting out the moral expectations each has of the other. Contracts between employers and employees form the ethical foundation of a business.
-Norman Bowie states that whistleblowing violates the ‘Prima facie duty of loyalty to one’s employer’ (Bowie, Business Ethics, 1991).
-Bowie does believe that it is more ethical for employees to try and solve the problem through business’ won complaints procedure first.
Kantian responses to Whistleblowing
-Kantian Ethics emphasises the importance of honesty and promise-keeping through the categorical imperative.
-A Kantian employee would find it difficult to allow a situation where a company broke the rules in what it did, as in general, companies are expected to follow the rules. This does not sound like universality, something important to Kantians.
-However, an employer sticking to a contract seems close to the sense that people should keep their promises they have made in business. Whistleblowing in a sense involves breaking those promises, going outside the agreed system.
-But if a company was putting at risk or unfairly exploiting its customers, or some of its employees or even the community (Not paying proper taxes), then a Kantian might interpret this as human beings not being treated as ends but only as a means for private greed.
-There may be a sense that beyond the specifics of a contract, there is a wider sense of duty that must sometimes inspire someone to take a personal risk, even endanger themselves by going to the authorities, where this might be dangerous.
Utilitarian responses to Whilsteblowing
-Utilitarians might resist whistleblowing, depending how much harm was done by the particular instance of an activity that was unethical or illegal.
-The utilitarian would have to weight the balance of good or harm for all those with an interest or stake in the business continuing to do well, and whether this outweighed what was done or put at risk by the infringement.
-It might be justified for a company to break some rules to succeed in a particular instance, to create greater happiness through the succeeds of the company at that point or on some other occasion.
-Here, rule and act Utilitarians might differ. A rule utilitarian might feel that there was a greater good of having companies in general always follow the rules to keep the system of companies ethical, even if in a particular instance it created more happiness to not blow the whistle.
What is globalisation?
-Globalisation refers to the integration of economies, trading and political movements around the world.
-On a simple understanding, we may say that ‘the world is getting smaller’. Our ability to make connections is both quicker and more widespread than our ancestors, who would have done most business within their local town.
-Modern life has raised interesting possibilities. Technologically, we can communicate with all manner of people in various locations immediately. Politically and economically, countries are open to trade and very few countries have closed borders or are totally self-sufficient: North Korea being one possible exception. Culturally, we are more connected. We are able to purchase the same brands wherever we are and able to enjoy worldwide food in our own high streets.
-Thanks to the power of the internet, most of us have functioned as global traders.
The effects of Globalisation
Globalisation has produced a number of effects:
-The rise of larger multinational corporations with divisions in various countries.
-Increased competition in manufacturing and services- it is often possible to get things done cheaper in other countries.
-Lower wages or loss of jobs in developed countries such as the UK and the USA as manufacturing can be done more cheaply abroad.
-In developing countries, such as those in Africa and Asia, economic growth has been achieved as these countries are competitive economically.
-A loss of culture or national identity where global brands are seen on every high street.
Ethics and Globalisation
-Given that different countries have different health and safety requirements, government regulations and wages, globalisation enables businesses to ‘shop around’.
-In the UK, we have a minimum wage and this leads some manufacturers to make products abroad.
-Manufacturers may be tempted to resort to the lowest common denominator and cut corners in terms of workers’ rights in order to get products made cheaply.
-A utilitarian may point to the benefits of globalisation as millions of people have been lifted out of poverty in countries such as China as a result of global trade.
-Yet not everyone wins as a result of globalisation; there is evidence that the gap between rich and poor is increasing.
-In addition, the utilitarian does not have a clear notion of rights and may see the greater good of globalisation as worth the price of some individual suffering.
-A Kantian may be concerned that globalisation may increase the exploitation of persons in developing countries where multinationals dictate the terms of business. This may be seen almost as neo-colonial (foreign business from a powerful country setting up in another part of the world and dictating about rights in a weaker country), which may lead to the loss of identity in developing countries.
-Likewise, in developed countries, jobs may be lost as things can be made more cheaply elsewhere.
-A further issue of globalisation is the environment. There is little incentive to have rigorous environmental standards if the neighbouring country worries less about global warming.
Utilitarianism and Business
-Utilitarianism is a popular theory to apply to business ethics as it seems to treat each situation differently.
-An Act Utilitarian may take decisions on a case-by-case basis but a Rule Utilitarian may view that the long-term benefits of having a minimum wage or holiday entitlements may mean that a rule should be made on this issue regardless of individual cases.
-The value of ‘utility’ or usefulness means that utilitarianism is flexible as an ethical theory and weighs up individual situations considering economic benefits of the various options.
In the words of Crane & Matten “utilitarianism comes close to what we know as cost-benefit analysis” (Crane & Matten, Business Ethics, p.84).
-The classical utilitarian’s, Bentham and Mill, were very much in favour of freedom and minimal state intervention. This fits in well with Adam Smith’s idea of enlightened self-interest. We should be free to run our businesses as we choose without interference, but we must bear in mind that behaving ethically may be the most profitable course of action in the long run.
-In cases involving whistleblowing, the utilitarian has to make judgement regarding the risks and benefits for all concerned.
-The utilitarian could broadly support increased globalisation by point to the growth of economies in developing countries as a result of increased trade.
-However, this support would be on the assumption that the economic benefits are enjoyed by the majority of that country’s citizens.
Assessing Utilitarianism on Business Ethics
-Utilitarians gives a significant amount of freedom: this leaves businesses free to consider situations for themselves and do what they calculate to be right.
-It can be argued that society flourishes best when lots of individuals flourish. This requires a variety of possible options rather than having rigorous rules imposed by governments.
-Utilitarianism depersonalises issues. This may be a good thing as it enables us to look logically rather than becoming emotionally attached. Alternatively, this can mean that we consider numbers and profit before we consider people and their rights. Bentham famously described the idea of rights as “nonsense on stilts”.
Kantian Ethics and business
-Kantian Ethics is perhaps the harder to apply to business than utilitarianism and is to some extent more demanding.
-Kantian Ethics states that we should do our duty regardless of our inclination or possible consequences. This includes possible loss of profit.
-In Kant’s shopkeeper example, the shopkeeper would have been required to be honest even if this was not good for business.
-Kantian Ethics also has implications for the employee. It challenges the widespread culture of over-charging on expenses or using company items for personal business.
-Not only do employers have a duty of honesty towards their employers, it is not possible to universalise these dishonest actions. The requirement to treat people as ends is very powerful. This leads to the idea of rights within the workplace and for consumers.
-It also leads to the idea of giving autonomy and dignity in the workplace (trade unions).
-This can be used to argue that excessive and intrusive monitoring of workers would be morally wrong.
-Treating people as ends would apply to all stakeholders in a business, including customers.
-Kantian Ethics would most likely be supportive of whistleblowing where there are significant ethical concerns. Although employers have a duty to their company, they also have wider ethical responsibilities.
Assessing Kantian Ethics on Business
-The theory gives priority to rights over profits.
-This is at first glance a good thing but it is debateable whether it is always realistic to ignore profits.
-Kantian Ethics has a helpful focus on treating people as ends.
-Universal law does not seem to give much help. This is because it is trying to do something that business does not do. Businesses make specific decisions in specific situations.
-Kantian ethics focuses on motive and the idea of doing the right thing for the right reason. However, motives are hard to asses. Who knows the real reason why the shopkeeper in Kant’s own example is behaving honestly?
Is corporate responsibility genuine?
-Some businesses are genuine in their ethical actions and their whole business model is based on ethical concerns.
-However, for other businesses, there is an element of calculation in their action. Good ethics leads to good publicity, which is good for business.
-Several perspectives might be relevant in determining whether this is hypocritical.
-Utilitarians might approve of this calculation. This motive does not matter but money is made and good deeds are done so everyone wins.
-Kantians would want the motive to be genuine. If the motive is not genuine then it is not truly good.
-Friedman, who provides a neo-conservative approach, would see the debate as irrelevant. There are no social responsibilities. If a business chooses to do ethically good actions because it leads to greater profits, this is fine, but it has no obligation to do so.
