Glo-bus Chapter 9 notes – Flashcards
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Business ethics
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concerns the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.
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CORE CONCEPT According to the school of ethical universalism
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common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives rise to universal ethical standards that apply to the members of all societies, all companies, and all business people.
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According to the school of ethical universalism,
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the most fundamental concepts of what is right and what is wrong are universal and transcend most all cultures, societies, and religions.2 For instance, being truthful (or not lying or not being deliberately deceitful) strikes a chord of what's right in the people of all nations.
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adherents of the school of ethical universalism maintain
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it is entirely appropriate to expect all members of society (including all personnel of all companies worldwide) to conform to universal ethical standards.
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CORE CONCEPT According to the school of ethical relativism,
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differing religious beliefs, historic traditions and customs, core values and beliefs, and behavioral norms across countries and cultures give rise to multiple sets of standards concerning what is ethically right or wrong. These differing standards mean that whether certain business-related actions or behaviors are ethically right or wrong depends on the prevailing local ethical standards.
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According to the school of ethical relativism,
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while there are a few universal moral prescriptions—like being truthful and trustworthy—that apply in most every society and business circumstance, there are meaningful variations in what societies generally agree to be ethically right and wrong in the conduct of business activities.
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the underlying thesis of ethical relativism is that whether certain actions or behaviors are ethically right or wrong depends on what a local country or culture decides is ethically right or wrong
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when there are cross-country or cross-cultural differences in ethical standards, it is appropriate for local ethical standards to take precedence over ethical standards elsewhere.
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The Use of Underage Labor
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Strict adherence to the principles of ethical relativism leads to the untenable conclusion that child labor is ethically impermissible in countries where it is contrary to local custom, but it is ethically permissible in countries where the use of child labor is common practice.
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The Payment of Bribes and Kickbacks
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A particularly thorny area facing multinational companies is the degree of cross-country variability in paying bribes.10 In many countries, it is common for companies to pay bribes to government officials to win a government contract, obtain a license or permit, or facilitate an administrative ruling.
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The Payment of Bribes and Kickbacks 2
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Companies that forbid the payment of bribes and kickbacks in their codes of ethical conduct and that are serious about enforcing this prohibition face a particularly vexing problem in those countries where bribery and kickback payments are an entrenched local custom and are not considered unethical.
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Using the Principle of Ethical Relativism to Create Ethical Standards Is Problematic for Multinational Companies
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Managers in multinational enterprises have to figure out how to navigate the gray zone that arises when their company operates in two or more countries or cultures with differing customs and ethical standards. Having multiple standards that vary by locale is equivalent to having no standard. Applying multiple sets of ethical standards without a higher-order moral compass is scarcely a basis for holding company personnel to high standards of ethical behavior.
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Integrative social contracts theory
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provides yet a middle position between the opposing views of universalism (that the same set of ethical standards should apply everywhere) and relativism (that ethical standards should be governed by local custom and practice).
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CORE CONCEPT According to integrated social contracts theory,
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universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals, groups, organizations, and businesses in all situations have a duty to observe. So long as the boundaries of this social contract are observed, there is legitimate room for local cultures or groups to prescribe what other actions may or may not be ethically permissible. However, according to integrated social contracts theory, adherence to universal or "first-order" ethical norms must always take precedence over local or "second-order" norms.
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the ethical standards a company should try to uphold are governed both by
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(1) a limited number of universal ethical principles widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not.
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Ethics and Integrative Social Contracts Theory
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universal ethical norms always take precedence over local ethical norms. These mostly uniform and universal agreements about what is morally right and wrong form a "social contract" or contract with society that is binding on all individuals, groups, organizations, and businesses in terms of establishing right and wrong and drawing the line between ethical and unethical behaviors. some ethical norms are more authentic or universally applicable than others, meaning that in many instances of cross-country differences one side may be more "ethically correct" or "more right" than another. Just because bribery flourishes in a country does not mean it is an authentic or legitimate ethical norm.
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The Principles of Integrated Social Contracts Theory Work Well for Multinational Companies
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Integrated social contracts theory offers clear guidance for the managers of multinational companies in resolving cross-country ethical differences
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Three categories of managers stand out with regard to ethical and moral principles in business affairs
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The moral manager. Standards The immoral manager. no regard The amoral manager. Laws and regulations
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CORE CONCEPT Amoral managers believe that businesses ought to be able to do
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whatever current laws and regulations allow them to do without being shackled by any ethical considerations. They think that what is permissible and what is not are governed entirely by prevailing laws and regulations, not by societal concepts of right and wrong.
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Evidence of Managerial Immorality in the Global Business Community
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sizable majority of managers are either amoral or immoral.
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What Are the Drivers of Unethical Strategies and Business Behavior?
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Overzealous pursuit of wealth and other selfish interests. Heavy pressures on company managers to meet or beat performance targets. A company culture that puts profitability and good business performance ahead of ethical behavior.
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Why Should Company Strategies Be Ethical?
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(1) because a strategy that is unethical in whole or in part is morally wrong and reflects badly on the character of the company personnel involved and (2) because an ethical strategy is good business and in the self-interest of shareholders.
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The Moral Case for an Ethical Strategy
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pursuing ethically principled strategic actions is morally correct and represents "the right thing to do," whereas undertaking unethical strategic actions is morally incorrect and "the wrong thing to do." it reflects well on a manager's character to insist that every strategic action be able to pass moral scrutiny, and it reflects badly on a manager's character to initiate or condone strategic actions that are shady and outside the boundaries of what qualifies as ethical
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The Moral Case for an Ethical Strategy 2
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The moral case for ethical strategy making is predicated on the belief that crafting and pursuing a wholly ethical strategy is the only "right" or "morally correct" way to run a business; a strategy with unethical elements cannot withstand moral scrutiny and is therefore "wrong."
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The Business Case for Ethical Strategies
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Conducting business in an ethical fashion is in a company's enlightened self-interest. While one can point to companies and individuals that have profited from unscrupulous behavior (because it went undetected or unpunished), it is hard to argue convincingly that ethical misconduct pays off or that it is smart for business people to do whatever they think they can get away with.
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Figure 9.1 Visible costs
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Government fines and penalties civil penalties arising from class-action lawsuits and other litigation aimed at punishing the company for its offense and the harm done to others The costs to shareholders in the form of a lower stock price (and possibly lower dividends)
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Figure 9.1 Internal administrative costs
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Legal and investigative costs incurred by the company The costs of providing remedial education and ethics training to company personnel Costs of taking corrective actions Administrative costs associated with ensuring future compliance
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Figure 9.1 Intangible or less visible costs
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Customer defections Loss of reputation Lower employee morale and higher degrees of empoyyee cynicism Higher employee turnover Higher recruiting costs and difficulty in attracting talented employees Adverse effects on employee productivity The costs of complying with often harsher government regulations
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Shareholders suffer major damage when
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a company's unethical behavior is discovered and punished. Making amends for unethical business conduct is costly, and it takes years to rehabilitate a tarnished company reputation.
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Connecting High Ethical Standards to the Task of Crafting and Executing Strategy
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the litmus test of whether a company's code of ethics are cosmetic or real is the extent to which they are embraced in crafting strategy and in how the company's daily operations are conducted.
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Executives committed to high standards make a point of considering three sets of questions whenever a new strategic initiative or policy or operating practice is under review:
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Is what we are proposing to do fully compliant with our code of ethics? Is there any aspect of the strategy (or policy or operating practice) that gives the appearance of being ethically questionable? Is there anything in the proposed action that customers, employees, suppliers, stockholders, competitors, community activists, regulators, or the media might consider as ethically objectionable?
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CORE CONCEPT The notion of social responsibility as it applies to businesses concerns a company's duty to operate honorably,
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provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.
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As depicted in Figure 9.2, socially responsible behavior and good corporate citizenship also entails:
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Striving to employ an ethical strategy and observe ethical principles in operating the business. Making charitable contributions, supporting worthy organizational causes, participating in community service activities, helping to make a difference in the lives of the disadvantaged, and trying to better the quality of life in society at large. Taking actions to protect or enhance the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities. Creating a work environment that enhances employees' quality of life and makes the company a great place to work. Building a workforce that is diverse with respect to gender, race, national origin, and perhaps other aspects that different people bring to the workplace.
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social responsibility strategy.
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The particular combination of socially responsible endeavors a company elects to pursue defines its
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CORE CONCEPT A company's social responsibility strategy is defined by
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the specific combination of socially beneficial and community citizenship activities it elects to support with its contributions of time, money, and other resources
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Figure 9.2 A Company's Social Responsibility Strategy
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Actions to ensure the company has an ethical strategy and operates honorably and ethically Actions to support charitable causes, participate in community service activities, and contribute to the overall betterment of society Actions to protect and sustain the environment Actions to enhance employee well-being and make the company a great place to work Actions to promote work force diversity
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CORE CONCEPT A company's environmental sustainability strategy consists of
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its deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet.
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Social Responsibility Strategies and the Triple Bottom Line
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Growing numbers of companies are recognizing the merits of measuring their performance in the social responsibility arena and have set formal performance targets in three areas: "profit, people, and planet"—often referred to as the company's "triple bottom line" or TBL.
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The Moral Case for Corporate Social Responsibility and Environmentally Sustainable Business Practices
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Every action a company takes can be interpreted as a statement of what it stands for
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good business reasons why companies should be public spirited and devote time and resources to social responsibility initiatives, environmental sustainability, and good corporate citizenship:
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Such actions can lead to increased buyer patronage. A strong commitment to socially responsible behavior reduces the risk of reputation-damaging incidents. Socially responsible actions yield internal benefits (particularly concerning employee recruiting, workforce retention, and training costs) and can improve operational efficiency. Well-conceived social responsibility strategies work to the advantage of shareholders.
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There's little hard evidence indicating share-holders are disadvantaged in any meaningful way by a company's actions to be socially responsible;
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on the contrary, a social responsibility strategy that packs some punch and is more than rhetorical flourish can produce outcomes beneficial to shareholders.
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KEY POINTS According to the school of ethical universalism,
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common moral agreement about right and wrong actions and behaviors across multiple cultures and countries gives rise to universal ethical standards that apply to members of all societies, all companies, and all businesspeople.
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KEY POINTS According to the school of ethical relativism,
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different societal cultures and customs have divergent values and standards of right and wrong. Thus, what is ethical or unethical must be judged in the light of local customs and social mores and can vary from one culture or nation to another.
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KEY POINTS According to integrated social contracts theory,
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universal ethical principles or norms based on the collective views of multiple cultures and societies combine to form a "social contract" that all individuals in all situations have a duty to observe. Within the boundaries of this social contract, local cultures or groups can specify what other actions may or may not be ethically permissible. However, universal ethical norms always take precedence over local ethical norms.
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KEY POINTS Three categories of managers stand out regarding their prevailing beliefs in, and commitments to, ethical and moral principles in business affairs:
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the moral manager; the immoral manager, and the amoral manager
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KEY POINTS the population of managers is said to be distributed among all three types in a bell-shaped curve,
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with immoral managers and moral managers occupying the two tails of the curve, and the amoral managers, especially the intentionally amoral managers, occupying the broad middle ground.
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KEY POINTS three other factors prompt unethical business behavior:
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(1) overzealous pursuit of wealth and other selfish interests, (2) heavy pressures on company managers to meet or beat earnings targets, and (3) a company culture that puts the profitability and good business performance ahead of ethical behavior.
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KEY POINTS A company's strategy should be ethical because a strategy that is unethical in whole or in part is
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A company's strategy should be ethical because a strategy that is unethical in whole or in part is
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KEY POINTS Corporate social responsibility concerns
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a company's duty to operate honorably, provide good working conditions for employees, be a good environmental steward, and actively work to better the quality of life in the communities where it operates and in society at large. The particular combination of socially responsible endeavors a company elects to pursue defines its social responsibility strategy.
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KEY POINTS The moral case for corporate social responsibility and environmental sustainable business practices boils down to a simple concept:
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It's the right thing to do. A business is obligated to act as a responsible citizen and do its fair share to promote the general well-being of society and the environment.
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KEY POINTS There are solid reasons why socially responsible behavior is good business
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it is conducive to greater buyer patronage; it reduces the risk of reputation-damaging incidents; it promotes greater operating efficiency; and it is in the long-term best interests of shareholders.
