Business Ethics new - Kenya Journals

Business Ethics, Dr. Geoffrey Kamau, Kabarak University [email protected] 1

Business Ethics

1. Course Outline................................................................................................................................ 4

2. Introduction to Business Ethics .................................................................................................... 5

2.1. Definition of terms .................................................................................................................... 6

2.1.1. Ethics .................................................................................................................................. 6

2.1.2. Morals and morality ........................................................................................................... 6

2.1.3. Morality versus prudence ................................................................................................... 6

2.1.4. Ethics, Morality and Law ................................................................................................... 6

2.1.5. Ethics and Christianity ....................................................................................................... 6

2.1.6. Ethics and Conscience ....................................................................................................... 7

2.1.7. Virtues ................................................................................................................................ 7

2.1.8. Norms, Culture and Traditions........................................................................................... 7

2.1.9. Principles and values .......................................................................................................... 7

2.1.10. Integrity ............................................................................................................................ 8

2.1.11. Accountability .................................................................................................................. 8

2.1.12. Transparency .................................................................................................................... 8

2.2. Significance of business ethics ................................................................................................. 8

2.3. Scope and areas of focus of business ethics .............................................................................. 8

2.4. Branches of ethics ..................................................................................................................... 8

3. Approaches to ethics ...................................................................................................................... 9

3.1. Consequentialism (Teleological) .............................................................................................. 9

3.2. Ethics of duty (Deontological) ................................................................................................ 10

3.3. Ethics of virtues (character based ethics) ................................................................................ 10

4. Nature and scope business ethics ................................................................................................ 10

4.1. Moral theories ......................................................................................................................... 10

4.1.1. Rights theories.................................................................................................................. 10

4.1.2. Virtue ethics ..................................................................................................................... 11

4.1.3. Justice based theories ....................................................................................................... 11

4.1.4. Non consequentilialism theories (Prima facie obligations) ............................................. 14

4.2. Capitalistic ethics .................................................................................................................... 15


4.3. ethics of care ........................................................................................................................... 15

4.3.1. Empathy ........................................................................................................................... 15

4.3.2. Feminism .......................................................................................................................... 15

4.3.3. Environmental ethics ........................................................................................................ 16

4.4. Narrative ethics ....................................................................................................................... 16

4.5. Humanism and existentialism ................................................................................................. 16

5. Ethical theories ............................................................................................................................. 16

5.1. ethical egoism ......................................................................................................................... 16

5.2. Relativism ............................................................................................................................... 17

5.2.1. Subjective relativism ........................................................................................................ 17

5.2.2. Cultural relativism............................................................................................................ 17

5.3. Utilitarian ................................................................................................................................ 17

5.3.1. Rule utalitarianism ........................................................................................................... 17

5.3.2. Act utalitarianism ............................................................................................................. 17

5.4. Kantianism .............................................................................................................................. 17

5.5. Social contract ......................................................................................................................... 17

5.6. Categorizing ethical theories ................................................................................................... 17

6. CSR in organizations today ......................................................................................................... 18

6.1. Understanding CSR................................................................................................................. 18

6.2. CSR Triple Focus .................................................................................................................... 19

6.3. Case for and Against CSR ...................................................................................................... 19

6.4. Strategies for CSR ................................................................................................................... 19

6.5. Types of CSR .......................................................................................................................... 20

6.6. Levels of CSR ......................................................................................................................... 20

6.7. Benefits of CSR ...................................................................................................................... 20

6.8. Ethics of governance (corporate governance) ......................................................................... 20

7. Moral Reasoning and Ethical Decision Making ........................................................................ 22

7.1. Developing Moral Judgment ................................................................................................... 22

7.2. Moral and ethical dilemma ..................................................................................................... 23

7.3. Ethical decision making models ............................................................................................. 24

7.4. Steps to making ethical decisions ........................................................................................... 24

7.5. Methods for easing moral disagreements ................................................................................ 25

8. ethics at workplace ....................................................................................................................... 25

8.1. Benefits of managing ethics at workplace .............................................................................. 26

8.2. Scope and focus of ethics at workplace .................................................................................. 26

8.2.1. Justice and love ................................................................................................................ 26

8.2.2. Justice to shareholders ..................................................................................................... 26

8.2.3. Justice to customers ......................................................................................................... 26

8.2.4. Justice to the public .......................................................................................................... 26

8.2.5. Morality in advertising ..................................................................................................... 26

8.2.6. time for leisure ................................................................................................................. 29

8.3. Ethical tools............................................................................................................................. 29

8.3.1. Ethical code of conduct .................................................................................................... 29

8.3.2. Ethical advocate ............................................................................................................... 30

8.3.3. Ethics officers or committees ........................................................................................... 30

8.3.4. Organizational Structures to Promote Ethics ................................................................... 30

8.3.5. Ethics training .................................................................................................................. 30


8.3.6. Systems to enforce ethics ................................................................................................. 31

8.3.7. Ethical compliance ........................................................................................................... 31

8.3.8. Whistle blower ................................................................................................................. 31

8.3.9. Written Policy and procedures ......................................................................................... 31

8.4. Developing ethics compliance programmes ........................................................................... 32

9. business and international morality ........................................................................................... 34

9.1. Source of Ethical Standards .................................................................................................... 34

9.2. Consequences of Ethically Questionable Strategies ............................................................... 34

9.3. Corporate culture and ethics ................................................................................................... 35

9.4. Globalization and ethics .......................................................................................................... 35

10. Current Issues in Ethics ............................................................................................................ 37


1. Course Outline

KABARAK UNIVERSITY

COURSE OUTLINE

BMGT 421: Business Ethics

C.F.3.0:45/0

Learning Objectives

The purpose of this course is to build on one’s understanding of ethics, its importance in business

and the using an ethical decision-making mode that integrates social responsibilities of individuals,

businesses and government. It examines traditional ethical systems and stakeholder issues and

biblical standards and principles of conduct in business.

Course Content

Definition and significance of the ethics, integrity, morality, principles and values; Honesty in

business and fair competition; Nature and scope business ethics (egalitarian ethics, utilitarian ethics,

ethics of care, capitalistic ethics, ethics of fairness and justice, etc.), Ethical theories (ethical

egoism, utilitarian, Social contract, Kantianism), Case Studies on ethical theories

(Consequentialism, Ethics of duty, Ethics of virtues), moral dilemma, CSR in organizations today,

Topical issues (concerns) on ethics at workplace (Justice and love at the work place; Justice to

shareholders; Justice to customers; Justice to the public), Ethical tools (Ethical code of conduct,

Ethics Help desk/Help line, Ethical training, etc.), business and international morality; Morality in

advertising; Work ethics, time for leisure; Virtues and values; A Christian worker in the business

world. Codes of conduct; Accountability and transparency.

Teaching Methodologies

Lectures, Case Studies, Seminars, critiques, and Term Papers.

Instructional Materials/Equipment

Audio and video DVD’s, computer software, projector etc.

ASSESSMENT

CATs 30%

Final Written Examination 70%

Total 100 %

Textbooks

1. Hosmer, L.T (2003), The ethics of management, (4th edn), Boston. McGraw-Hill,


2. Kidder, RM (1995), How good people make tough choices: Resolving the dilemmas of

ethical living, New York. William Morrow,

3. Preston, N & Samford. C with C. Connors 2002, Encouraging ethics and challenging

corruption, Sydney. The Federation Press,

4. Cooper, T.L 1998, The responsible administrator. An approach to ethics for the

administrative role, 4th edition, San Francisco. Jossey Bass.

Journals

1. International Journal of public sector

2. Journal of Business Ethics

3. Austrarian Journal of Public Administration

2. Introduction to Business Ethics

“Ethics is not an optional add-on to ‘normal’ business, nor it is a ‘soft’ issue. All business strategies

and operations have an ethical dimension that we cannot escape — as we cannot escape our own

shadow. Ethics holds enormous risks for companies, but ― more importantly ― creates

reputational and competitive opportunities.”

Role of business in society:

• The Classical Economic Model (Adam Smith): An “invisible hand” (i.e., the efforts of

competing entrepreneurs) promoted the public welfare when individuals tried to maximize

short-run profits in pursuit of their own economic self-interests.Equates short-run profitability

to social responsibility.

• The Socioeconomic Model: Business has an obligation to meet the needs of the many groups in

society besides stockholders in its pursuit of profit. Stakeholder audit: Systematically

identifying all the parties that could possibly be affected by the company’s performance


Business ethics is concerned in principles and standards that guide behavior in the world of business

to determine right or wrong, acceptable or unacceptable behavior within the business organization

when dealing with its key stakeholders. Business ethics provides a set of laws about how a business

should conduct itself.

2.1. Definition of terms

2.1.1. Ethics

ETHICS – a sub-discipline of philosophy concerned with issues of right and wrong in human

conduct. It is concerned with good and bad; what is authentic and not authentic; and with the

notions of duty, obligation, and moral responsibility. ETHICS provides an objective basis upon

which judgments are rendered regarding right or wrong behavior.

Ethics originates from the Greek word "Ethos" which means custom, character or the normal state

of a person or group. i.e. the characteristic spirit, values, beliefs, practices, attitudes, aspirations of

a social group or culture. Examples: an Aristocratic ethos; a materialistic ethos. Ethics involves

study of moral obligation involving the distinction between right and wrong. Therefore, Business

Ethics: refers to ethics on right or wrong in the workplace – value management.

2.1.2. Morals and morality

MORALS – Actions, behavior, and the principles that guide them. Morals can result from Religion,

Philosophy and Family teachings, among others.

Morality: The word “morality” comes from the Latin word "mores" which is a translation of Greek

word "ethos". Mores are customary ways of behaving and believing; commonly held moral beliefs

and practices. Therefore morality is concerned with the social practices defining right and wrong.

Morals provide a means of preserving a people and ensuring stable social order. Ethics on the other

provides a critical reflection on morality by allowing us to step back and examine, analyze, and

organize basis of choice of good or bad in order to enhance morality (more abstract). It looks for

consistency, logic, order, coherence, conflicts in choices, etc.

Ethical theory and moral philosophies provide guidelines for justification of right or wrong actions

when settling human conflict. No one moral philosophy is universally accepted by everyone!

2.1.3. Morality versus prudence

Rules of prudence promote self-interest, doing what is prudent for oneself. However, rules of

morality promote the interest of other people. Nevertheless, morality and prudence should generally

work hand-in-hand if a business is to succeed.

2.1.4. Ethics, Morality and Law

Morality and ethics begin where the law is unclear or not defined! The law often represents an

ethical minimum. Ethics often represents a standard that exceeds the legal minimum.

2.1.5. Ethics and Christianity

A Christian is a person who has identified with the cause of Jesus and a member of a community of

those who seek to follow Christ as his disciples by embodying God’s reign on earth. Christian

Ethics therefore, re-frame the basic moral question: “What should we live for and how?” If focuses

on the reason and justification of action and values to be ultimate love for God and his creation.

Christian faith is a starting point for Christian Ethics but its faith does not replace ethical reflection

instead Christian ethics provides a process of critically engaging our moral experience in light of


Christian faith. Faith informs the ethical reasoning of Christians and reason gives shape to faith by

making it operative and providing feedback. The goal of Christian Ethics is to provide a rational

basis of Faith based on Christian Virtues to reason out on what is good or wrong in the light of God.

The power and richness of Christian tradition has been its ability to integrate knowledge from faith

sources, such as Scripture, with knowledge gained with secular reason, such as Greek philosophy.

Christian tradition holds the two sources in tension by refusing to allow one to eclipse or destroy the

other.

2.1.6. Ethics and Conscience

Ethical conscience is the inner sense of what is right or wrong in one's conduct or motives impelling

one towards a certain action. However, conscience is subjective and may vary from person to

person and time to time and it is altered by circumstance, religious belief, life experiences, and

training, and may not be consistent from day to day. Therefore, moral justification must then be

based on a source external to conscience itself.

2.1.7. Virtues

2.1.8. Norms, Culture and Traditions

NORMS – Group or societal standards or generally held criteria for acceptable conduct. Sources of

ethical norms include:

2.1.9. Principles and values

VALUES – Individual beliefs which motivate and guide behavior. These are abstract ideals that

shape an individual’s thinking and behavior by imposing a moral compass where one beliefs that

one process or end state to be more preferable than another. The values can be instrumental or

terminal. Instrumental values accede that a certain way of behaving is appropriate in all situations –

“means”. While terminal values is the enduring belief in the attainment of a certain end state –

“ends”.

Moral principles are standards of behaviour of right and wrong that are accepted by an individual or

social group. It may be based on precept that rule personal conduct or categorical imperative that

behaviour should be determined by duty.


2.1.10. Integrity

2.1.11. Accountability

2.1.12. Transparency

2.2. Significance of business ethics

• Focus on business ethics by business organizations is becoming crucial because of

contemporary business problems such as:

• Consumer trust of businesses is declining

• No sector is exempt from ethical misconduct

• Stakeholders demands for ethics initiatives: Investors, Employees, Customers, Interest

groups, Legal system, and General Business Community

• Reports of unethical behavior are on the rise

• Pronounced society’s evaluation of right or wrong affects its ability to achieve its business

goals through civil society and other institutions

• Individual ethics alone is not sufficient

• Studying business ethics helps identify ethical issues to key stakeholders

2.3. Scope and areas of focus of business ethics

• A living wage

• Consumer’s Bill of Rights

• Bribery and fraud

• Deceptive advertising

• Price collusion

• Product safety

• The environment

• Ethical Legal compliance

• Self-regulation

• Free trade

2.4. Branches of ethics

1. Descriptive ethics - Descriptive ethics deals in how people actually live. It involves describing,

characterizing and studying morality

“What is”. It provides a factual description and explanation of moral behavior and beliefs, as

performed by anthropologists, sociologists, and historians.

Referred to as the scientific study of ethics.

2. Normative ethics - It is involves reflection, discourse, and study concerning how people ought to

live. It involves supplying and justifying moral systems

“What should be”. It is also referred to as Prescriptive approach and it attempts to formulate and

defend basic moral norms or standards by determining what ought to be done versus what is being

done. Non normative ethics therefore include Metaethics and Descriptive ethics. Metaethics focuses

on analysis of concepts such as "ought" "right" and "wrong", "good" and "bad", duty,

responsibility, etc. analysis about how people come to, reason about, and justify their normative

ethics.

3. Applied Ethics: making moral judgments about actions and conditions. Three Principles that

come into play (1) Rights, 2) Justice and 3) Beneficence)


Rights: Rights (promoting autonomy/freedom): Usually perceived to "trump" (take priority over)

justice & beneficence principles. It could have negative concerns such as freedoms from repression;

to life, liberty, pursuit of happiness and positive concerns such as freedoms to...(food, clothing,

shelter).

Justice: Rendering to each their due such as: Penal Justice: the guilty get punished, Distributive

justice: how burdens and benefits, goods, services, preferred jobs and salaries are distributed.

Beneficence (concern for the commonwealth): Concerned with the common good, and re. the

obligation to promote good over evil. Here the concern is for norms of value: what is good? What

is bad? What is the highest good?

From Rights, Justice and Beneficence Principles, people deduce more general rules

Environmental e.g.s:

Right to clean water/air. Don't violate related laws.

Environmental justice. Don't make the poor bear an undue burden of our society's pollution:

distribute pollution sites in affluent as well as poor neighborhoods.

Beneficence. Pursue an environment in which all species, including humans, can flourish.

From Principles & Rules people make more specific judgments: both evaluations of conditions, and

action prohibitions and prescriptions.

Rights e.g.: Coerced contraception violates human liberties.

Justice e.g.: Environmental Justice requires affluent nations to limit their consumption and help pay

for contraceptive services for the poor

Beneficence e.g.: Garrett Hardin's argument that "lifeboat ethics" justify coercive measures to

prevent immigration in the North and to promote contraception in the South.

4. Conceptual approach - analyzes meanings of central terms in ethics such as right, obligation,

justice, good, virtue, and responsibility.

3. Approaches to ethics

Act-oriented Theories:

1. Consequentialist Approaches (Teleology)

2. Rule-based Approaches (Deontology/Duty based)

Character-based Theories:

3. Character and Virtue (Based on teachings of Aristotle)

The first two approaches address the question of how we ought to act, the third approach responds

to the question of what kind of person we should be. Character based focuses on what kind of

person ought I to try to be?

3.1. Consequentialism (Teleological)

An approach that focuses on the consequences of the action, one that conceives of ethics as

concerned with measuring the amount of goodness, or badness, arising from behavior. Attention is

directed towards assessing the consequences of a particular action rather than examining the act

itself. It is based on Aristippus and Epicurus (Hedonism) and Bentham Utilitarianism where ethics

pursued should yield the Greatest Happiness for the Greatest Number of people. Consequentialist

theories (aka "Teleological theories") focus on "ends" (goals, conditions). Examples: Natural Law

theories (e.g., Aristotle/Aquinas). Environmental ethics stressing the protection of environmental


processes (such as evolution) as the central goal (can be bio- or eco- centric)The theories involved

include:

• Psychological hedonism

• Ethical hedonism

• Principle of utility

3.2. Ethics of duty (Deontological)

Rule-based approach, focusing on obligation and duty, similar to the orientation found in the Bible.

Since attention is directed to the act itself, this approach is non-consequentialist. Rule-based is

based on obligation or duty and attention directed to the act itself Focus: what is right.

Deontological theories focus on "means" (rules of action, duties). Deontological ethics claim some

actions are right or wrong in and of themselves. (E.g., Kant)

3.3. Ethics of virtues (character based ethics)

Virtue Ethics-- Focus on traits or character: the good person can know and do the right thing.

Sometimes virtue ethics are seen as a distinct third theory

sometimes they are woven into deontological or consequentialist/teleological theories.

4. Nature and scope business ethics

The ultimate goal of moral philosophy:

• Virtue ethics

• Deontology

• Utilitarianism

• Existentialism

• Ethics of care

4.1. Moral theories

A moral theory based on the concept there is a common morality that all people share by virtue of

communal life. The greatest obligation in any given circumstance must be found based on the

greatest balance of right over wrong in that particular context. Obligations and rights are not

inflexible standards, but rather strong prima facie moral demands that may be overridden in

circumstances of competition with equal or stronger moral claims.

4.1.1. Rights theories

A moral theory based on the concept that all people have human rights that form the justifying basis

of obligations because they best express the purpose of morality, which is the securing of liberties

or other benefits for a right-holder. Human rights are held independent of membership in a state or

other social organization. Human rights evolved from the notion of natural rights.

Natural rights are rights that belong to all persons purely by virtue of their being human. Negative

rights pertain to the obligations on the part of other people to refrain from interfering with our

freedom of action. Positive rights impose obligations on people to provide other people with goods

or services. A primary problem with this theory is that there is no hierarchy for right’s claims:

“How does someone determine which right takes precedence or has more value over other rights?”


4.1.2. Virtue ethics

This moral theory suggests that morality is comprised of virtue, which has to do with a person's

character and the types of actions that emanate from that character. Some typical virtuous traits in

the business arena would be integrity, honesty, truthfulness, courage, loyalty, courteousness, and

conscientiousness. Virtuous traits are acquired and developed throughout our life experiences. A

primary problem with this theory is that people have varying definitions of what traits are

considered virtuous.

Categories of human rights:

• Negative rights: Those that reflect the vital interests that humans have in being free from

outside interference (such as the freedom of speech, assembly, religion, etc.)

• Positive rights: Those that reflect the vital interests that humans have in receiving certain

benefits (such as the right to education, medical care, equal job opportunity, etc.)

Nonconsequentialism in an organizational context:

• Moral decision making involves the weighing of different moral factors and considerations.

• This theory acknowledges that the organization has its own legitimate goals to pursue.

• It stresses the importance of moral rights and especially human rights.

Criticisms of non-consequentialism:

• Ross maintained that moral truths are known intuitively, i.e. they are self-evident. Critics

question whether intuition is always a reliable guide for establishing moral truths.They say that

appeals to intuition should be critically assessed.

• It is not always clear how issues with conflicting rights and principles ought to be resolved.

4.1.3. Justice based theories

Justice is about the distribution of society's burdens and benefits. There are different principles

underlying different conceptions of justice such as: Usually inequalities are allowed when they are

the result of relevant differences between persons. However, the problem is to determine what are

relevant differences?

4.1.3.1. Justice as fairness (John Rawls 1971)

theory is about distributive justice. What is the ethically correct way to distribute benefits and

burdens in society? Rawls’ theory is a version of social contract theory. It supports State of nature,

law of nature, creation of civil society to improve/secure quality of life; and is consistent with

historical social movements such as US Declaration of Independence – “When in the Course of

human events it becomes necessary for one people…to assume among the powers of the earth, the

separate and equal station….” principles in that establish a people's Constitution – “We the

people…do ordain and establish….”. Rawls asks, “What principles of justice would people chose

at the founding of society?”. A moment when people know nothing about their future. Would they

choose; Class or social status, Intelligence or other capabilities, Social place in terms of gender,

race, etc or wealth? Allocation conducted under ‘veil of ignorance’ - leads to position of less well

off in society being maximised. Rawls theory assumes total risk averseness - ‘bottomless pit’

argument. Think yourself back to the original position and put yourself behind the veil of ignorance.

Ask yourself whether a proposed rule for distributing benefits and burdens is acceptable to you. If

not, then it cannot be fair, and therefore it cannot be just – so, the rule must be rejected.


Justice = satisfying two general principles:

“First: each person is to have an equal right to the most extensive basic liberty compatible with a

similar liberty for others.”

“Second: social and economic inequalities are to be arranged so that they are both (a) reasonably

expected to be to everyone’s advantage and (b) attached to positions and offices open to all.”

Rawls 1st Principle

The basic liberties for all citizens:

• Political liberty (right to vote and be eligible for public office).

• Freedom of speech and assembly.

• Liberty of conscience and freedom of thought.

• Freedom regarding your own person.

• Right to hold personal property.

• Freedom from arbitrary arrest and seizure as these are understood under the rule of law.

Holding positions of authority and offices of command open is clear enough.

For example, no hereditary positions.

• No exclusions based on gender, race, etc.

• No “tests” based on wealth or property.

• Arranging social and economic inequities so that everyone benefits is less clear.

However, Rawls provides the framework for thinking about this – original position and veil of

ignorance. The basic rights and liberties for all principle has first priority and takes precedence.


This means, among other things, that you cannot justify a decrease in liberty on the basis of

increased social or economic benefit.

4.1.3.2. Classical distributive justice

4.1.3.2.1. Egalitarian

Egalitarian: “To all the same.” Examples: Access to health center, Right to file grievances, Use of

sports facilities, Entrance to hockey games. Equal shares in the distribution of a commodity. Issues

of what health services?, - according to what criteria - need, age, etc.? are not clear. Equity not

necessarily equality. It is concerned with ‘fairness' ‘justice’ (i.e. ethical theories) and may not

necessarily entail equality such as minimum standards of care, ‘postitive’ discrimination. However,

equity usually synonymous with equality of something. Equity may be vertical or horizontal or

both. In vertical equity, unequals are treated unequally. It applies especially to finance such as

income taxation. Horizontal equity has it that equals should be treated equally. It applies especially

to delivery of health care to ensure equal resources and utilization access per head basis.

In egalitarian all are to be considered in end of happiness. Happiness ought not be at expense of

other's misery. Its combination of egoism & altruism: reflects common sense. Allows people to

pursue their own interests as well as the common good. "Seeks greatest amount of individual

liberty compatible with the greatest among of public liberty."

4.1.3.2.2. Socialist

“From each according to their ability, to each according to their need.”: Financial aid, Tutorial

support. Premise: human potential is realized in creative work in co-operation with other people; it

is not realized in consumption. Therefore, work should be done according to one's creative abilities,

and benefits distributed according to needs. Problem: Such distribution erodes productive efficiency

and can’t work given competitive human nature. Moreover, with socialism the freedom to choose a

vocation may be eroded, because you should do that which contributes most to others, rather than

pursue one’s your own passions. (Of course, all societies have limited amounts of preferred jobs, so

vocational choice is always limited.)

4.1.3.2.3. Meritocratic

Meritocratic (or, Capitalist): “To each according to their merit.”: The grades you get, Housing

priority, Quality of job at graduation. Socio-economic burdens/benefits ought to be distributed

based on merit, as long as the competition is fair (i.e., as long as there is equal opportunity).

Critiques: It is not proven that disadvantaged persons will or should accept an procedural equality,

which empirical evidence does not demonstrate as reality. I.e., why accept a hypothetical (and

mythical) equality of opportunity, over a potential equality of condition.

4.1.3.2.4. Libetarian and entitlement

The theory is attributed to Robert Nozick 1974. “From each what they freely choose to contribute,

to each what they have made or others have freely chosen". A just society is one free of any

coercion, where the freely entered contract is the only norm. (Rights = freedom from the coercion

of others.). Critique: Those without wealth or power enter any bargaining at a disadvantage so they

cannot make choices with the same freedom as those already privileged. Individuals ‘entitled’ to

what they have acquired ‘justly’ i.e. within a market situation. Stresses freedom of choice and

property rights - minimal state involvement. This theory is similar to utilitarianism. Conflicts are to

be resolved by procedures upon which rational people will agree. Basic principle: equal treatment.

Each person has a right to the most liberty compatible with the most liberty for all. This theory can

extend into philosophical liberalism where conflicts are to be resolved by procedures upon which

rational people will agree on the basic principle of equal treatment. Each person has a right to the

most liberty compatible with the most liberty for all.


4.1.3.3. Priorities between rights, justice and benifence

Rights take precedence (if they are implicated). Beneficence/utilitarian principles are usually seen

as the least important ones. However, many believe utilitarian considerations can override other

principles if the gains or the prevention of harm is important enough.

4.1.3.4. Remedies to violations of rights or social justice

• (Re)distributive Justice: redistribute burdens / benefits according to a given moral standard (e.g.

economic equality, equal liberty, equal treatment [fair procedures]).

• Retributive Justice: When perpetrator knowingly violates moral statute, if punishment is no

greater than needed for deterrence.

• Compensatory Justice: Theorists have different views about which conditions must be met. 1)

Injurious action must be wrong or negligent; the person's injury must be the real cause of the

injury; and the person must have voluntarily inflicted the injury. Such conditions

generally must be met in today's law. 2) Compensation is due if real injury or real privilege is

based on the past actions of one's group, otherwise injustice wins.Is nature due compensatory,

“restorative” action because humans have harmed her?

4.1.3.5. Justice as Equality

Justice as Equality. There are no relevant differences between people, therefore all should share

benefits / burdens equally or the limited equalitarian thought: all should be equal as far as

subsistence needs being met before surplus goods are distributed on any other basis.) The problem

however is that people differ in all characteristics; and most believe that need, ability and effort are

relevant characteristics.

4.1.3.6. Justice as Contribution

(e.g., to the group, society, humanity). The problem is that this can ignore human needs.

4.1.4. Non consequentilialism theories (Prima facie obligations)

W. D. Ross (1877–1971): British scholar who held that our moral experiences are too complex to be

reduced to the principle of utility or the categorical imperative. His beliefs:

• We have various duties that oftentimes come into conflict with each other.

• There are no universal rules for the resolution of conflicts of duties.

• Different situations generate different priority orders of duties.

Prima facie obligation: Can be overridden by a more important duty in specific circumstances.

Example:

• We are in conflict over the duty to keep our promise to a friend and the duty to help a person in

need.

• We may have to override the promise and favor the more important duty to help the person.

• But in some other circumstances we ought to do the opposite.

Basic prima facie obligation:

• Duties of fidelity.

• Duties of reparation.

• Duties of gratitude.

• Duties of justice.

• Duties of beneficence.

• Duties of self-improvement.


• Duties not to injure others.

Assisting others: Non-consequentialists believe that we have a much stronger obligation to refrain

from violating people’s rights than to promote their happiness or well-being. Moral philosophers

argue that utilitarianism fails to distinguish between morally required acts and supererogatory acts

(i.e., those acts that exceed the call of duty).

Moral rights: A right is an entitlement to act or have others act in a certain way. Some moral rights

derive from special relationships, roles, or circumstances in which we happen to be. Moral rights

that are not the result of particular roles, special relationships, or specific circumstances are called

“human rights.”

Key features of human rights:

• Human rights are universal.

• Human rights are applied equally to all.

• Human rights are inalienable and not transferable.

• Human rights are natural in that they do not depend on human institutions.

4.2. Capitalistic ethics

4.3. ethics of care

4.3.1. Empathy

Concept of the Self, Reason and emotion, and Desirable forms of emotion.

4.3.2. Feminism

Typical traits would include sympathy, compassion, fidelity, love, friendship, and the like.

This theory grew out of two feminist presuppositions:

• The subordination of women is as wrong as it is common.

• The experiences of women are worthy of respect and should be taken seriously.

There are many different types of feminists. All of them typically believe that some version of the

following statements is true:

1. Part of the structure of the world has been and still is patriarchy—a system where groups of

men have more power than groups of women and where groups of men have more access to

what societies esteem.

2. Under patriarchy, sexist oppression (or domination or subordination) occurs.

3. Sexist oppression is morally wrong.

4. Sexist oppression ought to be ended, and we should work toward a post-patriarchal (or post-

feminist) world.

Feminist theories of justice are related to feminist approaches to ethics:

1. Care-based approaches.

2. Power-based approaches.

Feminist theories of justice tend to focus more on participatory justice and identity or recognition

justice, rather than strictly distributive justice.

An argument against this theory is that the focus is on how power is used to oppress women only,

whereas traditional ethics is based on the assumption that its values and rules apply to all rational

persons equally.


4.3.3. Environmental ethics

Environmental philosophy

• What is our place in the natural world?

• What do we mean when we talk about nature?

• How can we respond to environmental challenges?

• How can we improve the relationship between the natural world and human technological

advancement?

Environmental ethics include:

Environmental philosophy includes:

• Environmental ethics

• Ecofeminism

• Environmental aesthetics

• Environmental hermeneutics

• Environmental theology

4.4. Narrative ethics

Four different dimensions

• Narrative ethicists view of human relationships

• Complex

• Changing

• Emergent

• Always changing

4.5. Humanism and existentialism

Humanism: The view that people are capable of free choice, self-fulfillment, and ethical

behavior—and the world is a good place in which we can flourish.

Existentialism: The view that people have free will and are responsible for their own behavior—but

our existence is lonely in a universe that seems to care little for what is best in us. Read: Beyond

Good and Evil: Nietzsche; and Analyzing Nietzsche on Morality.

5. Ethical theories

A moral theory based on the concept there is a common morality that all people share by virtue of

communal life.

5.1. ethical egoism

A moral theory that contends all choices either involve or should involve self-promotion as their

sole objective. Everyone is always motivated to act in his or her own perceived self-interest.

The main argument against egoism is that there may be no purely altruistic moral motivation to help

other people unless there is personal gain. The only valid standard of conduct is the obligation to

promote one's own well being above everyone else's. Ethical egoists believe that people should not

be their brother’s keeper, because people do not completely understand the true needs of others. It’s

every man for himself in this world!


5.2. Relativism

5.2.1. Subjective relativism

5.2.2. Cultural relativism

An ethical theory that claims right and wrong is subjectively determined by each culture. What is

good is socially accepted and what is bad is socially unacceptable in a given culture. There is no

such thing as universal truth in ethics, there are only the various cultural codes and nothing more.

An argument against cultural relativism is that there are some basic moral principles that all

societies will have in common, because those rules are necessary for society to exist.

5.3. Utilitarian

Moral theories that assert an action’s rightness is determined by the actual or probable

consequences that the action will have for the greatest number of people affected by that action.

Utilitarian theories hold that the moral worth of actions or practices are determined solely by their

consequences. An action or practice is right if it leads to the best possible balance of good

consequences over bad consequences for all the parties affected.

5.3.1. Rule utalitarianism

Argues that in all situations the utility of an action should be based on an act that leads to the

greatest good for the greatest number. It treats rules as the useful guidelines to help determine

ethical behavior. For example a rule utilitarian will break a moral rule if breaking the rule leads to

the greatest good for the greatest number.

5.3.2. Act utalitarianism

Argues that in all situations the utility of an action is based on an act that leads to the greatest good

for the greatest number. Treats rules as useful guidelines to help determine ethical behavior. Will

break a moral rule if breaking the rule leads to the greatest good for the greatest number.

5.4. Kantianism

A moral theory that holds the maxim that you should follow only those rules which would be

universal laws for everyone, including yourself. It is based on the principle of Categorical

Imperative (CI) that states that, "I ought never to act, except in such a way that I can also will that

my maxim should become universal law". The principle is categorical because it admits of no

exceptions and is absolutely binding, and is imperative because it gives instruction on how one

must act. It also upholds the principle of respect-for-persons that states that persons should never be

used as a means to an end. Kant believed that morality should follow absolute rules that admit no

exceptions, which has been a major argument against this theory. Another argument against Kantian

theories is that they are narrow and inadequate to handle various problems in the moral life.

5.5. Social contract

5.6. Categorizing ethical theories

1. Distributive justice - “political” or “social” philosophy - concerned with outcome.

• Political philosophy - societal focus e.g. John Rawls.


• Interaction e.g. utilitarianism - social utility maximised by each individual maximising own

utility

2. Procedural justice - “moral” philosophy - concerned with process used in achieving the outcome.

• Moral philosophy - individual focus e.g. Kantian Categorical Imperative

6. CSR in organizations today

6.1. Understanding CSR

Corporate Social responsibility is the duty for an organization to do what is best for the good of

society. Corporations are increasingly viewed as moral agents that are accountable for their conduct

to stakeholders. Laws and regulations are necessary to provide formal structural restraints and

guidance on ethical issues. The ethical obligations of a business are to:

• Provide safe products

• Create jobs

• Protect the environment

• Contribute to the standard of living in society

Problem of conflict of interest often arise when a business is tempted to put profits before social

welfare.


6.2. CSR Triple Focus

1- Economic Responsibilities: The only Social Responsibility = Profit-Maximizing.

2- Social Responsibility = Obeying the Law and meeting social needs of people (as well as making

a profit). To be ethical, an organization should seek a higher standard than merely obeying the law:

e.g., Act with equity, fairness, and impartiality; Respect the rights of individuals; Act for the

common good. Protect consumers from dangerous or falsely advertised products. They are expected

to provide employees with safe working conditions, equal treatment, and fair pay.

3- Rules that protect the environment and control pollution.

6.3. Case for and Against CSR

• Self-defense - If business is not proactive, the public or government will press for more

regulation

• Obligation - Business exists due to being sanctioned by society - owes debt to society

• Self-interest - S.R. good for business in long run

• Increased reputation and buyer patronage

• Reduced risk of reputation-damaging incidents

• Lower turnover costs and enhanced employee recruiting and workforce retention

• Increased opportunities for revenue enhancement due innovation in support of sustainability

and CSR

• Support for the long-term interests of shareholders

Arguments For

• Business is unavoidably involved in social issues.

• Business has the resources to tackle today’s complex societal problems.

• A better society means a better environment for doing business.

• Corporate social action will prevent government action.

Arguments Against

• Profit maximization ensures the efficient use of society’s resources.

• As an economic institution, business lacks the ability to pursue social goals.

• Business already has enough power.

• Because business managers are not elected, they are not directly accountable to society.

6.4. Strategies for CSR

Social Responsibility Strategies

• Reactive Strategy: Denying responsibility while striving to maintain the status quo by resisting

change.

• Defensive Strategy: Resisting additional social responsibilities with legal and public relations

tactics.

• Accommodation Strategy: Assuming social responsibility only in response to pressure from

interest groups or the government.

• Proactive Strategy: Taking the initiative in formulating and putting in place new programs that

serve as role models for industry.


6.5. Types of CSR

6.6. Levels of CSR

Level of Concern---àLikely Behavior

Discretionary-------------------àPro-action

Ethical-------------------àAccommodation

Legal------------------àDefensive Behavior

Economic-------------àAnything for profit

6.7. Benefits of CSR

1. Altruism: The unselfish devotion to the interests of others

2. Research and development: There is a positive correlation between industry leadership on a

socially responsible issue (pollution control) and profitability.

3. Corporate social responsibility is a competitive advantage in recruiting.

4. Enlightened Self-Interest

5. A business ultimately helps itself by helping solve social problems.

6. An Array of Benefits for the Organization

• Tax-free incentives to employees

• Retention of talented employees

• Help in recruiting the talented and socially conscious

• Help in swaying public opinion

• Improved community living standards

• Attracting socially conscious investors

• A nontaxable benefit for employees from company donations to charitable causes

6.8. Ethics of governance (corporate governance)

There is need to focus on ethics of governance because:

• Scandals in corporates have reduced trust in businesses


• An Ethics Program Can Help Avoid Legal Problems

• Understanding the factors that influence ethical decision-making can help companies encourage

ethical behavior

• Employees are not legal experts and need guidance

• Organizations should develop an organizational ethics program by establishing,

communicating, and monitoring uniform ethical values and legal requirements

Corporate governance focuses on:

Often contain six core values

1. Trustworthiness

2. Respect

3. Responsibility

4. Fairness

5. Caring

6. Citizenship

Corporate ethics are driven by:

1. Conscience: Intellectual honesty; avoids conflict of interest; independence of mind

2. Care: Devotes serious attention to affairs of company; acquires all relevant information needed

for effective control and direction

3. Competence: Has knowledge and skills; develops competence

4. Commitment: Diligent in performing duties

5. Courage: Courage to take risks associated with directing a successful sustainable enterprise and

to act with integrity

• The board should ensure that the company is and is seen to be a responsible corporate citizen.

• The board should ensure that the company’s ethics is managed effectively.

• The board should ensure that the company is and is seen to be a responsible corporate citizen.

Company as collective citizen, analogous to natural person

Discharges duties in manner sensitive to triple context: (Economic, Social, and Natural

environment). It means that company builds trust by respecting rights Universally recognised

human rights and Constitutional rights.

It focuses on:

• Proactive: Building Trust, Reputation

• Defensive: Preventing Fraud, corruption, theft, Cartels, insider trading, Conflicts of interest


7. Moral Reasoning and Ethical Decision Making

7.1. Developing Moral Judgment

Internal Sources of a Manager’s Values

• Respect for the authority structure

• Loyalty

• Conformity

• Performance

• Results

Kohlberg’s Experiment

Interviewed children of various ages

Interviewed adults of different ages

Presented them with a moral dilemma

See overhead example of Fred & Marcy

There is no “correct” answer

Answer is irrelevant to Kohlberg

Kohlberg noted HOW an answer was being arrived at

What reasoning did they use to decide?


7.2. Moral and ethical dilemma

Making decisions under stress or dealing with complex issues that have no clear indication of what

is right or wrong. Ethical dilemmas: Situations involving conflict between ethical principles or

normative priorities. Dilemmas have deep impact on the evolution of ethical reflection. Solving

ethical dilemmas involves: Appeal to theoretical constructs.

Reevaluation of established moral standards and inherited intuitions.

Resolving ethical conflicts (Three Approaches):

• Conventional: Conventional approach to ethics involves a comparison of a decision or practice

to prevailing societal norms. The pitfall would be ethical relativism, where there is a pull


between Decision or Practice versus the Prevailing Norms.

• Principles:

• Ethical tests

7.3. Ethical decision making models

1. Utilitarian Model: An ethical decision is one that produces the greatest good for the greatest

number of people.

2. Moral Rights Model: An ethical decision is one that best maintains and protects the

fundamental rights and privileges of the people affected by it.

3. Justice Model: An ethical decision is one that distributes benefits and harms among individuals

in a fair, equitable, or impartial way.

7.4. Steps to making ethical decisions


7.5. Methods for easing moral disagreements

• Obtaining objective information

• Definitional clarity

• Example-counterexample

• Analysis of arguments and positions

8. ethics at workplace

Common unethical conduct in workplace include:

• Misrepresenting hours worked

• Employees lying to supervisors

• Management lying to employees, customers, vendors or the public

• Misuse of organizational assets

• Lying on reports/falsifying records

• Sexual harassment

• Stealing/theft

• Accepting or giving bribes or kickbacks

• Withholding needed information from employees, customers, vendors or public

Common cause of unethical behaviour in work place:

• Pressure

• Fear

• Greed

• Convenience

• Following boss’s directives

• Meeting overly aggressive business/financial objectives

• Helping the organization survive

• Meeting schedule pressures

• Be a team player (group think)

• Rationalizing that others do it

• Resisting competitive threats

• Advancing own career


Models of ethical leadership Immoral Leadership—A style devoid of ethical principles and active opposition to what is ethical.

Moral Leadership—Conforms to high standards of ethical behavior.

Amoral Leadership

Intentional - does not consider ethical factors

Unintentional - casual or careless about ethical considerations in business

8.1. Benefits of managing ethics at workplace

• Improves society.

• Maintains a moral course in turbulent times.

• Cultivates employee teamwork, productivity, morale and development.

• Acts as an insurance policy

• Establishes values for quality management, strategic planning and diversity management.

• Promotes strong public image.

• It is the RIGHT thing to do!

As individual one can develop ethics by:

• Establish personal values.

• Be aware of ethical events.

• Develop critical thinking techniques.

• Be reflective.

• Make it a priority every day.

8.2. Scope and focus of ethics at workplace

8.2.1. Justice and love

8.2.2. Justice to shareholders

8.2.3. Justice to customers

8.2.4. Justice to the public

8.2.5. Morality in advertising

At the most basic level, consumers have a right to products and services which are safe, efficacious,

and fit for the purpose for which they are intended

Manufacturers ought to exercise due care in establishing that all reasonable steps are taken to ensure

that their products are free from defects and safe to use

Consumers’ right to a safe product is not an unlimited right

Safety also a function of the consumer and their actions and precautions

Criticisms of advertising broken down into two levels

Individual

Concerned with misleading or deceptive practices that seek to create false beliefs about specific

products or companies in the individual’s consumers’ mind

Social

Concerned with the aggregate social and cultural impacts, such as promoting materialism


Ethical marketing product policy

At the most basic level, consumers have a right to products and services which are safe, efficacious,

and fit for the purpose for which they are intended

Manufacturers ought to exercise due care in establishing that all reasonable steps are taken to ensure

that their products are free from defects and safe to use

Consumers’ right to a safe product is not an unlimited right

Safety also a function of the consumer and their actions and precautions

Ethical marketing communications policy

Misleading and deceptive practices

Marketing communications aimed to:

Inform consumers about goods and services

Persuade consumers to purchase

“Deception occurs when a marketing communication either creates, or takes advantage of, a false

belief that substantially interferes with the ability of people to make rational consumer choices”

Ads should be “legal, decent, honest and truthful”

Social and cultural impact on society

Objections that marketing communications:

Are intrusive and unavoidable

Create artificial wants

Reinforce consumerism and materialism

Create insecurity and perpetual dissatisfaction

Perpetuate social stereotypes

Such criticisms have been common for at least the last 30 years

Pricing:

Pricing issues are central to the notion of a fair exchange between the two parties, and the right to a

fair price - key rights of consumers as stakeholders

4 types of pricing practices where ethical problems may arise:

Excessive pricing

Price fixing

Predatory pricing

Deceptive pricing

Distribution

Concerned with relations between manufacturers and firms, and firms and market

Primary concern is product supply chain

Example: retailers demanding ‘slotting fees’ from manufacturers in order to stock their products.


Vulnerable customers

Criticisms when there is a perceived violation of the consumers right to be treated fairly (duty of

care):

Targeting vulnerable consumers

Consumers may be vulnerable because;

Lack sufficient education or information

Easily confused or manipulated due to old age and senility

Are in exceptional physical or emotional need

Lack the necessary income

Too young

Perceived harmfulness of the product

Examples: cigarettes and alcohol

Here, the focus shifts from rights/duties to consequences

Customer exclusion

Takes variety of forms

Access exclusion

Condition exclusion

Price exclusion

Marketing exclusion

Self-exclusion

Main issue is possible threats posed to the consumer’s right to privacy

Recent areas of concern:

Personal information available online


Example: Phorm’s advertising targeting service, which British Telecom trialled without consent

Use of genetic testing results by insurance companies

Predict likelihood of an individual’s genetic predisposition to certain conditions and illnesses

‘genetic discrimination’?

8.2.6. time for leisure

8.3. Ethical tools

Today many companies are making conscious efforts to integrate ethics in Business by:

• Developing a code of ethics.

• Communicating code and bake it into culture top-down.

• Treating ethics as a process.

• Creating open lines of communication.

• Setting good examples through role models

• Educating employees – frame issues through storytelling.

• Use of punishment and commuting offense to forgiveness for reformed offenders.

8.3.1. Ethical code of conduct

A code of ethics is a set of strict guidelines for maintaining ethics in the workplace. Code of Ethics

is a formal statement of the company's values concerning ethics and social issues. The Code of

Ethical Conduct is the centerpiece of an effective compliance program

Topics and Organization:

• Leadership Statement

• Inspirational provisions such as mission statement, guiding ethical principles, values statement

• Explains who is covered

• Standards of conduct

• Discipline and enforcement

• Reporting (obligations), whistleblower, non-retaliation.

A code of ethics can be principle-based or policy based. A principle based code of ethics is

designed to enable the employee to make ethical decisions based on appropriate values such as

“treat people fairly” or “don’t be dishonest”. Policy-based code of ethics on the other outline how to

act in specific ethical situations (reducing the need for thinking or shared values). It handles

concerns of (for example):

• Conflicts of interest

• Proprietary information

• Political gifts

• Equal opportunities

Ethical code of conduct presents a set of ideals (I) that reflect exemplary professional practice and

by a set of principles (P) describing practices that are required, prohibited, or permitted. The ideals

reflect the aspirations of practitioners. The principles guide conduct and assist practitioners in

resolving ethical dilemmas.Both ideals and principles are intended to direct practitioners to those

questions which, when responsibly answered, can provide the basis for conscientious decision

making. While the Code provides specific direction for addressing some ethical dilemmas, many

others will require the practitioner to combine the guidance of the Code with professional judgment.


The ideals and principles in this Code present a shared framework of professional

responsibility that affirms our commitment to the core values of our field. The Code publicly

acknowledges the responsibilities that we in the field have assumed, and in so doing supports

ethical behavior in our work. Practitioners who face situations with ethical dimensions are normally

urged to seek guidance in the applicable parts of Code of Conduct and in the spirit that informs the

whole. Often “the right answer”—the best ethical course of action to take—is not obvious. There

may be no readily apparent, positive way to handle a situation. When one important value

contradicts another, we face an ethical dilemma. When we face a dilemma, it is our professional

responsibility to consult the Code and all relevant parties to find the most ethical resolution.

Code of Ethical Conduct Style:

• Audience/Culture

• Q and As and Resources

• Acknowledgment of Receipt?

• Publicly available?

8.3.2. Ethical advocate

An ethics specialist who plays a role in top management’s decision making.

8.3.3. Ethics officers or committees

Ethics officers or committees are responsible for oversight of the ethics/compliance program

• Assess the needs and risks that an ethics program must address

• Develop, revise, and disseminate the code

• Conduct training programs for employees

• Develop effective communication

• Establish audits and control systems

• Review and modify the program to improve effectiveness

8.3.4. Organizational Structures to Promote Ethics

• Ethics committee: group appointed to monitor company ethics

• Ethics Help desk/help lines -

• Hot line: employees can report questionable behavior, possible fraud, waste, or abuse( i.e.,

Blow the Whistle”)

• Ethics training programs

• Whistle blowers: The disclosure by an employee of illegal, immoral, or illegitimate practices by

a concerned employee.

8.3.5. Ethics training

Must start with a foundation, a code of ethics, a procedure for airing ethical concerns, and executive

priorities on ethics. Reasonable and practical steps must be taken to disseminate information about

the organization’s compliance program and its policies and processes. Training should be provided

to the governing body, high level executives, employees and, where appropriate, the organization’s

agents. (May be required by law, e.g. Medicaid, Human Subjects Research).

Amoral managers: Managers who are neither moral nor immoral, but ethically lazy

Key features of effective ethics programs

• Support of top management

• Open discussion


• A clear focus on ethical issues

• Integration of ethics into the organization

• A mechanism for anonymously reporting ethical violations

• Rewarding of ethical conduct

8.3.6. Systems to enforce ethics

An effective ethics program employs many resources to monitor ethical conduct and measure the

program’s effectiveness

• Observing employees

• Internal audits

• Surveys

• Reporting systems

• Investigations

• Independent audits

8.3.7. Ethical compliance

8.3.8. Whistle blower

Why people fear being whistle blowers:

• Didn’t believe action would be taken.

• Feared retaliation from mgmt.

• Didn’t trust confidentiality.

• Feared not being a team player.

• Feared retaliation from co-workers.

• Didn’t know who to contact.

• Nobody cares, why should I?

Guidelines:

• Be sure you are right (keep accurate records)

• Try to resolve the situation in-house first

• Consult an attorney before contacting the media, etc.

• Realize you could be fired

• Don’t expect to profit financially

8.3.9. Written Policy and procedures

• Explain legal requirements so that employees understand their obligations and how to conform

their behavior to meet them;

• Encourage managers and employees to report suspected fraud and other improprieties without

fear of retaliation, and

• Should be made easily available (e.g. policy webpage)


8.4. Developing ethics compliance programmes

Compliance is a comprehensive program that helps institutions and their employees conduct

operations and activities ethically; with the highest level of integrity, and in compliance with legal

and regulatory requirements. To have an effective compliance program, an organization must

establish and maintain an organizational culture that “encourages ethical conduct and a commitment

to compliance with the law.”

Compliance Programs

• Fiduciary Responsibility

• Financial Reporting and Internal Control Standards

• Legal and Regulatory requirements and organizational policies

Enterprise Risk Management Programs

• Standard & Poor’s- Credit Ratings

Reasons for developing compliance programmes:

• Foster a culture of ethics and compliance that is central to all of the institution’s operations and

activities.

• Understand the nature of risks and potential exposures.

• Identify and manage risks that impact the institution’s reputation.

• Integrate the compliance program into ERM Framework

Factors affecting organizations ethical compliance:

• Board and Audit Committee: Independent and engaged?

• Management’s Philosophy and Operating Style: Communicates by word and action there is

support for compliance and commitment to ethics Code of Conduct

• HR Practices and Policies: Recruitment and hiring; orientation; evaluation, promotion and

compensation; disciplinary actions

• Organizational Structure: Centralized vs. Decentralized

• Assignment of Authority and Responsibility

• Risk Culture (Appetite and Tolerance)

Eight (8) Elements of an effective compliance programme:


• High level company personnel who exercise effective oversight and have direct reporting

authority to the governing body or appropriate subgroup (e.g. Audit Committee);

• Written policies and procedures;

• Training and education

• Lines of communication

• Standards enforced through well-publicized disciplinary guidelines

• Internal compliance monitoring

• Response to detected offenses (including remediation of harm caused by criminal conduct) and

corrective action plans (including assessment and modification of the compliance and ethics

program); and

• Periodic Risk Assessments

Day to Day Responsibility

• May be a Chief Compliance Officer (GC, IA, or Independent) and /or Compliance Committee;

• Must have overall responsibility for day to day operations of the compliance program;

• Must have prompt access to the Board to report instances of criminal conduct;

• Must report annually to the Board on compliance and ethics program;

• Must have access to effective high level management and executive oversight

The Organization’s Governing Body Should:

• Be knowledgeable about the program;

• Exercise effective and ongoing oversight;

• Promote the program.

Areas of periodic risk assessment:

• Efficiency: risk assessments allow you to maximize the utility of scarce resources by directing

them to the most significant compliance issues faced by your institution.

• “Buy-in” and Ownership: when individuals who have day to day administrative responsibilities

participate in identifying compliance risks and developing mitigation plans they are more

likely to actively participate in the compliance process.

• Coordination: most compliance risks have potential significance across multiple functions, so

risk management encourages coordination and consensus building, particularly in organizations

with distributed/decentralized management.

• Keep the risk management process simple.

• Build into existing business processes

• Complex processes feel like red tape

• Start small and build over time.

• Don’t overload administrators with too many projects

• Additional projects and processes can be added over time

Procedure for ethical risks assessment:

1. Organizational Context: What are your organization’s objectives, structure and operations?

2. Risk Identification: What are the possible risk events your organization faces?

3. Risk Assessment: What is the likelihood of the risk event happening? What is the potential

impact of the risk event?

4. Risk Evaluation- Having assessed the risks: What is your organizations “appetite” for risk?

What are the most important risks to address?

5. Risk Treatment: What steps must be taken to mitigate the risks Identified?


6. Monitoring, Review and Corrective Action, Are internal controls working effectively to

mitigate risk? Is there any corrective action needed?

7. Communication: Throughout the Organization

The organization shall take reasonable steps, including monitoring and auditing, to:

Ensure that the organization’s compliance and ethics program is followed;

Periodically evaluate the effectiveness of the organization’s compliance program.

9. business and international morality

9.1. Source of Ethical Standards

Every strategic action of a firm must pass the Ethics Code Litmus Test:

• Is what we are proposing to do fully compliant with our code of ethics? Are there areas of

ambiguity?

• Is this action in harmony with our core values? Are any conflicts or potential problems

evident?

• Is there anything in the action that is ethically objectionable? Would our stakeholders, our

competitors, the SEC, or the media view this action as ethically objectionable?

These ethical standards can come from:

• The School of Ethical Universalism: Holds that common understandings across multiple

cultures and countries about what constitutes right and wrong give rise to universal ethical

standards that apply to all societies, all firms, and all business people. Whether a business-

related action is right or wrong is judged by universal standards.

• The School of Ethical Relativism: Holds that differing beliefs, customs, and behavioral norms

across countries and cultures give rise to multiple sets of standards of what is ethically right or

wrong. Whether business-related actions are right or wrong depends on local ethical standards.

• Integrated Social Contracts Theory: Provides a middle-ground balance between universalism

and relativism. It posits that the collective views of multiple societies form universal (first

order) ethical principles that all persons have a contractual duty to observe in all situations.

Within the contract, cultures or groups can specify locally ethical (second-order) actions.

Adherence to universal ethical norms takes precedence over local norms. A local custom is not

ethical if it violates universal ethical norms. Application of codes of ethics should first follow

universal standards with allowance for local ethical diversity and influence.

9.2. Consequences of Ethically Questionable Strategies

• Sizable civil fines and stockholder lawsuits


• Devastating image and public relations hits

• Sharp stock price drops as investors lose confidence

• Criminal indictments and convictions

9.3. Corporate culture and ethics

Ethical culture describes the component of corporate culture that captures the values and norms

that an organization defines as appropriate conduct

9.4. Globalization and ethics

Issues of globolarization and ethics:

Globalization has brought a new set of problems and issues relevant to consumer stakeholders

Different standards of consumer protection

Consumer protection varies widely in terms of government regulation and company standards

Example of tobacco

Exporting consumerism and cultural homogenization

Global brands’ huge success has led to increasing concerns over standardization and uniformity

Considerable debate around role of advertising in promoting consumerism in emerging and

transitional economies

Ethics deal with the “oughts” of life

Although economics dominate business decision-making, business decisions also have

consequences for people

International business ethics: unique ethical problems faced by managers operating across national

boundaries

More complex as different cultures do not agree on what one “ought” to do

Globalization also raises prospect of firms targeting products to low income consumers

‘Bottom of the pyramid’ concept

Examples of successful initiatives:

Microcredit institutions (e.g. Brazil)

High nutrition yoghurt company (Bangladesh)

One Laptop Per Child

Criticism

Bottom of the pyramid is a mirage: profit opportunities limited

Social purpose and CSR probably more important than profit motive in developing inclusive

markets

Ethical consumption is the conscious and deliberate decision to make certain consumption choices

due to personal moral beliefs and values

Recent 51-market survey on consumer attitudes:

70% of global consumers said their purchase decision could be influenced by a product supporting a

worthy cause

But socially-desirable answers may not correspond to behaviour

Consumer activism on increase – positive

Downside of ethical consumption

Motives of corporations will be primarily economic rather than moral

Consumers may decide they no longer want to or can afford to pay extra for these ethical

‘accessories’


If purchases are ‘votes’ then rich get more power than poor

Sustainable consumption is: ‘the use of goods and services that respond to basic needs and bring a

better quality of life, while minimising the use of natural resources, toxic materials and emissions of

waste and pollutants over the life-cycle, so as not to jeopardise the needs of future generations’

(European Environment Agency definition)

Steps towards sustainable consumption

Producing environmentally responsible products


e.g. Eco-labels are important

Product recapture

See Figure, next slide

Service replacements for products

Selling (e.g.) mobility rather than cars, or leasing photocopiers

Product sharing

Examples: car-sharing, washing-machine-pooling

Reducing demand

Example of China’s ban on free plastic bags

Implementing the polluter pays principle to create financial incentive for lower consumption

10. Current Issues in Ethics

Business Ethics new - Kenya Journals

Documents

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