BUSINESS ETHICS
Key Thinkers
MILTON FREIDMAN
Important economist
governments should not intervene in the economy , free market to regulate itself
this was also known as monetarianism
He rejects the notion that businesses have a corporate social responsibility
the only social responsibility businesses have is to increase profits
accidental benefits, india call centre example
ADAM SMITH
sounds a bit like utilitarianism
advocated the division of labour
good ethics = good business
if you divide up the production you can make more
IMMANUEL KANT
good ethics is about duty
not just whether it's good for business
Whistleblowing
Whistleblowing is where employee or stakeholders calls out an issue which they see a ethical or a legal concern.
Globalisation
the integration of economies, industries, markets, culture and policymaking around the world
MEDCs, LEDCs AND EITHCS
LEDCs can produce goods cheaper and easier - so they benefit through jobs, investment etc.
However, they can be exploited by MEDCs
MEDCs have to pay workers more, the cost of living is higher
Some multinationals choose to move parts of manufacturing to LEDCS - TAX AVOIDANCE
Corporate Social Responsibility
the idea that businesses are not just there to make money but also have wider ethical responsibilities to all stakeholders and their wider community
challenged by economist Milton Friedman
argues that whilst individuals in their own time may choose as people to take on social responsibilities or do charitable things, as employees they must serve the corporation or company, and that company cannot have responsibilities.
So when a stakeholder or CEO makes money then them as an individual can donate money but it's not the companies responsibility
he also believes that a free market may allow for an increase in wages
Friedman argues that this involves an acceptance of socialism not capitalism.
Not everyone agrees with Freidman
good reasons for thinking that businesses do have responsibilities other than making money
corporate social responsibilities may be motivated by
pragmatic approach that suggests ‘good ethics is good business
Duty and Kant
A Religious sense of responsibility in how we treat humans and the rest of creation
Eg. Cadburys built schools and parks for its workers, believed that this was their duty towards their workers
FTSE4Good index
Companies are given an ESG (Environmental, Social, Governance) rating
Adam Smith
takes a slightly softer view than Friedman
good ethics is good business
utilitarian approach
may benefit us in the short term to overcharge customers or pay low wages
but this will ultimately harm our reputation and may make less money ultimately
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.
He is primarily focused on how businesses can make money and two of his most famous ideas illustrate this
law of supply and demand
The division of labour makes factory production more efficient.
good ethics matters more than good business
example of a shopkeeper
charges others fairly because he knows that this is good for business
He concludes that this is not sufficient for the action to count as morally good
shopkeeper is acting in his own interest
that it is not possible to divide business from the rest of life
Robert Solomons
people's behaviour in their business lives bears no relation to how they act outside of work
types of whistleblowing
Private - the whistleblower raises concerns internally within the company in question
Public - the whistleblower raises concerns outside the organisation in question
resorting to whistleblowing an employee has to balance their loyalty to their company with any wider public issues and their need to live with their own conscience, They know that there may be follow up if they behave unethically
EFFECTS OF GLOBALISATION
The rise of multinational corporations with divisions in various countries (⅔ of all businesses) Eg. car manufacturing
Increased competition in manufacturing and services - it is often possible to get things done cheaper in other countries. eg Primark and their sweatshops in India
Lower wages or loss of jobs in developed countries such as Britain and the USA as manufacturing can be done more cheaply abroad
EG. Primark with sweatshops in India
In developing countries such as those in Africa and Asia economic growth has been achieved as these countries are competitive economically
Loss of culture or national identity where global brands are seen on every high street. eg. McDonalds
Ethical Theories And Business
Kantian Ethics
Applying KE
Kantian ethics also has implications for the employee.
It challenges the widespread culture of overclaiming on expenses or using company items for personal business.
Not only do employees have a duty of honesty towards their employers, but it also is not possible to universalise these actions.
The requirement to treat persons as ends are very powerful. This leads to the idea of rights within the workplace and for consumers. It also leads to the ideas of giving autonomy and dignity in the workplace.
Supportive of whistleblowing where there are significant ethical concerns, Although employees have a duty to their company they also have wider ethical responsibilities.
in summary, Duty over profit, Duty of employee and persons of ends
KE states that we should do our duty regardless of or possible consequences or loss of money. Eg Kant’s shopkeeper example
Assessing KE
The theory gives priority to rights over profits. This is at first glance a good thing but it is debatable whether it is always realistic to ignore profits
Kantian Ethics has a helpful focus on treating persons as end
Universal Law not really fitting for this
Kantian Ethics focuses on motive and the idea of doing the right thing for the right reason and motives are hard to measure and track
The idea of duties to all the various stakeholders is fine in theory but in practice may lead to conflicting duties. We may not be able to satisfy everyone. Friedman's idea that we should just focus on profit is at least clearer.
Utilitarianism
Applying Util
the classical Utilitarians 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
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
Act utilitarian may make 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.
We should be free to run our businesses as we choose without interference
But behaving ethically may be the most profitable course of action in the long run
In cases involving whistleblowing the utilitarian has to make a judgement regarding the risks and benefits for all concerned
could broadly support increased globalisation by pointing 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
Utilitarianism 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.
It is more difficult that it appears to be objective when weighing the right course of actions. We often see situations differently depending on our point of view.
Can Humans really flourish in a consumer-driven Capitalist society?
Capitalism is based on private ownership and free trade: people flourish when they pursue their own desires within a free market place
It is not for the government to intervene to help failing businesses or to give overly complicated employment laws. These conditions sort themselves out as a business that is run badly or pays employees poorly either corrects this or goes out of business. This leads to some observations.
society is also 'consumer driven.' Material goods are seen as valuable
Capitalism seems to positively encourage individualism and self-interest
Socialists and some religious thinkers worry that this selfishness of 'every man or woman for themselves' is a real weakness in capitalist thinking
Also the capitalist system is based on competition between businesses - this creates inequalities. There will always have to be winners and
losers
Capitalism actually ends up producing bad businesses
Privatisation of businesses means that
their sole aim is to make a profit
At times this means that providing a service becomes a secondary thought. Railway companies and energy providers have been accused of this in
recent years
Adam Smith (1723-1790) would argue that it is perfectly possible for people to do well under capitalism as good ethics is good business
It is only by employers and businesses thinking about how consumers or employees can flourish that better business will occur.
So although
in theory capitalism may lead to all sorts of horrors, in practice it rarely does
Karl Marx (1818-1883) famously criticised the capitalism of his day after seeing rich factory
owners oppressing their workers.
To make an excessive profit is effectively theft. If the worker's efforts create £200 worth of product but she is only paid £50 for the day and the rest goes to the business owner as profit, this is unfair
Marx argues that the whole system
needs to be overthrown and replaced with a communism where everyone is equal
n Kantian ethics it could be argued that the word 'consumer' implies a means to an end
relationship -
ikewise the phrase "human resources' in employment rather than personnel. Kantian Ethics might worry, similarly to Marx, that capitalism leads to the dehumanisation of workers.