Lecture 1 (Chapter1)

Introduction to Business EthicsIntroduction to Business Ethics (Based on Chapter 1: Introducing Business Ethics)(Based on Chapter 1: Introducing Business Ethics)

Business Ethics (BUS 401)Business Ethics (BUS 401)

North South UniversityNorth South University

Lecture 1Lecture 1

Instructor: SduInstructor: Sdu

What is What is Business EthicsBusiness Ethics? ?

““Business EthicsBusiness Ethics is the study of business is the study of business situations, situations, activitiesactivities and decisions where and decisions where

issues of morality, of ‘issues of morality, of ‘right and wrongright and wrong’ are ’ are addressed”addressed” (Crane & (Crane &

Matten, 2007 p 5)Matten, 2007 p 5)

"The earth is not dying, it is being "The earth is not dying, it is being killed, and killed, and the peoplethe people killing it have killing it have

names and addresses." names and addresses." (Bruce "Utah" Phillips)(Bruce "Utah" Phillips)

““The The business of businessbusiness of business should not just be should not just be about making money, it should be about about making money, it should be about

responsibility. It should be about public good, responsibility. It should be about public good, not private greednot private greed””

Anita Roddick, Founder of the Body ShopAnita Roddick, Founder of the Body Shop

The Body ShopThe Body Shop and Ethical Consumerism and Ethical Consumerism

Ethical ConsumersEthical Consumers want to buy products and want to buy products and services which do not exploit labour or pollute services which do not exploit labour or pollute environment environment

The Body Shop The Body Shop values and ethical principlesvalues and ethical principles, at a , at a glance:glance:

No Animal Testing No Animal Testing

Responsible sourcing and promoting fairtrade Responsible sourcing and promoting fairtrade

No harm to environment and climate No harm to environment and climate

Defend human rightsDefend human rights

Source : www.thebodyshop.comSource : www.thebodyshop.com

Fairtrade is based on the partnership between producers Fairtrade is based on the partnership between producers (mainly of the developing countries) and the buyers, which (mainly of the developing countries) and the buyers, which offers the producers a better deal and improved terms of trade. offers the producers a better deal and improved terms of trade.

The FAIRTRADE Mark is a registered certification label for The FAIRTRADE Mark is a registered certification label for products sourced from producers in developing countries.products sourced from producers in developing countries.

Fairtrade customers have high expectations of companies’ Fairtrade customers have high expectations of companies’ socialsocial, , economic economic and and environmentalenvironmental responsibilities responsibilities

Almost three quarters of the surveyed shoppers expect Almost three quarters of the surveyed shoppers expect companies to be more accountable and fair in dealing with companies to be more accountable and fair in dealing with developing country producersdeveloping country producers (The global consumer survey on Fairtrade was carried out by (The global consumer survey on Fairtrade was carried out by GlobeScan with a sample size of 15,000 consumers in 15 countries. Source: GlobeScan with a sample size of 15,000 consumers in 15 countries. Source: FLOI, Annual Report 2008-09FLOI, Annual Report 2008-09))

Example:Example: Ben & Jerry’s sources its Fairtrade ingredients such as Ben & Jerry’s sources its Fairtrade ingredients such as bananas from Ecuador, vanilla from India and coffee from bananas from Ecuador, vanilla from India and coffee from Mexico.Mexico.

FairtradeFairtrade – – promoting promoting Ethical ConsumerismEthical Consumerism

http://www.fairtrade.org.uk/http://www.fairtrade.org.uk/

Fairtrade FoundationFairtrade Foundation– – promoting Fairtradepromoting Fairtrade

Ben & Jerry’s - Ben & Jerry’s - promoting Fairtradepromoting Fairtrade

http://www.benjerry.co.uk/http://www.benjerry.co.uk/

McDonaldsMcDonalds – – Supersizing the World??.....Supersizing the World??.....the ethical debate the ethical debate about corporationsabout corporations

Super Size MeSuper Size Me is a 2004 is a 2004 American documentary film American documentary film directed and starred by directed and starred by Morgan Spurlock Morgan Spurlock

The Film explores the fast The Film explores the fast food industry's corporate food industry's corporate influence, including how it influence, including how it encourages encourages poor nutritionpoor nutrition for for its own profit its own profit The increasing spread of obesity throughout the U.S. society has The increasing spread of obesity throughout the U.S. society has been termed as an ‘Epidemic’ been termed as an ‘Epidemic’

The film has clearly influenced popular The film has clearly influenced popular ethical debate about the ethical debate about the role of corporations on the societyrole of corporations on the society Sources Sources

www.wikipedia.comwww.supersizeme.comCrane & Matten, 2007Crane & Matten, 2007

Business Ethics (!!!)Business Ethics (!!!) in Bangladesh – how far are in Bangladesh – how far are we from this practice???we from this practice???

Main objective of the business in Bangladesh is Main objective of the business in Bangladesh is maximization of profit…businessman has no conscience and maximization of profit…businessman has no conscience and morality morality

(Champion in adulteration , The Daily Star , 2008)(Champion in adulteration , The Daily Star , 2008)

Businessmen often indulge in nefarious activities like Businessmen often indulge in nefarious activities like adulteration, hoarding, black-marketing, smuggling etc adulteration, hoarding, black-marketing, smuggling etc which are very detrimental to the economy and societywhich are very detrimental to the economy and society

Death of 27 children after taking Death of 27 children after taking paracetamol syrup made by RID pharma paracetamol syrup made by RID pharma proves that proves that our business ethics and our business ethics and morality are gradually falling only for morality are gradually falling only for monetary gainsmonetary gains

Child labourChild labour & & SweatshopSweatshop - still are common problems - still are common problems in the country in the country

All our rivers will die in the next 20 years !!All our rivers will die in the next 20 years !!

Source : The daily star, various issues of year 2008, Source : The daily star, various issues of year 2008, 20092009

Ethics in Business – is it a reality?Ethics in Business – is it a reality?

1867: 1867: Karl MarxKarl Marx (German Socialist Philosopher) in his (German Socialist Philosopher) in his Book Book Das CapitalDas Capital argued that argued that “ “Capital is dead Capital is dead labour, that, vampire-likelabour, that, vampire-like, only lives by sucking , only lives by sucking living labour, and lives the more, the more labour it living labour, and lives the more, the more labour it sucksuck……”……”

1970: 1970: Milton FriedmanMilton Friedman (Nobel Prize Winner in (Nobel Prize Winner in Economics) argued that the “Economics) argued that the “only business of only business of business is businessbusiness is business””

1970: 1970: The The only social responsibility of businessonly social responsibility of business is is to increase its profitsto increase its profits (NYT Magazine, September 13, (NYT Magazine, September 13, 1970) 1970)

1994: 1994: Collins, J.WCollins, J.W argued that “ argued that “Business Ethics is an Business Ethics is an OxymoronOxymoron (two apparently contradictory (two apparently contradictory concepts)”. Example – “Cheerful Pessimist” or concepts)”. Example – “Cheerful Pessimist” or “Deafening silence”“Deafening silence”

Friedman’s Blind spot:Friedman’s Blind spot: what kind what kind of businesses do we of businesses do we

want?want? 2005-06: socially responsible investments in the UK 2005-06: socially responsible investments in the UK

grew by 31%grew by 31%

The Body Shop began to threaten the strategic The Body Shop began to threaten the strategic position of other cosmetic giants such as P&Gposition of other cosmetic giants such as P&G

Today, customers could purchase organic products in Today, customers could purchase organic products in all UK supermarkets (e.g. Yeo Valley products)all UK supermarkets (e.g. Yeo Valley products)

In 2005-06, Fairtrade food and drink sales in the UK In 2005-06, Fairtrade food and drink sales in the UK increased by 53%increased by 53%

The UK’s ethical market (i.e. consumer spending on The UK’s ethical market (i.e. consumer spending on ethical products and services) is worth £35bn ethical products and services) is worth £35bn (The Co-(The Co-operative Bank 2008)operative Bank 2008)

The ethical market ranges from organic and fair trade The ethical market ranges from organic and fair trade foods to responsible holidays, energy efficient foods to responsible holidays, energy efficient products, ethical banking, and ethical clothes. products, ethical banking, and ethical clothes.

In 2006, Shell was fined by a Nigerian Court to pay In 2006, Shell was fined by a Nigerian Court to pay $1.5bn in damages for polluting the Niger Delta$1.5bn in damages for polluting the Niger Delta

Friedman’s Blind spot:Friedman’s Blind spot: what kind what kind of businesses do we of businesses do we

want?.........contd.want?.........contd. The last few years have witnessed significant growth in The last few years have witnessed significant growth in

what might be regarded as ‘business ethics’ industry, i.e. what might be regarded as ‘business ethics’ industry, i.e. corporate ethics officers, ethics consultants, ethical corporate ethics officers, ethics consultants, ethical products and services etc. products and services etc.

Most of the MNCs now hire Business Ethics or CSR Most of the MNCs now hire Business Ethics or CSR Consultant (Example – Consultant (Example – Norwegian Petroleum FundNorwegian Petroleum Fund, World’s , World’s largest institutional investor hired a business ethics largest institutional investor hired a business ethics specialist who advised them to sell all shares of Wal-Mart)specialist who advised them to sell all shares of Wal-Mart)

Growing number of Business schools across the world Growing number of Business schools across the world have included ‘Business Ethics’ as a core course in their have included ‘Business Ethics’ as a core course in their curriculum. curriculum.

According to According to The TimesThe Times newspaper, ‘business schools are newspaper, ‘business schools are talking up their ethics courses in the wake of recent talking up their ethics courses in the wake of recent corporate scandals’ (Dearlove, 2006) corporate scandals’ (Dearlove, 2006)

Movies such as the Hollywood feature Movies such as the Hollywood feature Blood DiamondBlood Diamond raise a number of critical business ethics issues and have raise a number of critical business ethics issues and have played them out to millions of viewers across the globe.played them out to millions of viewers across the globe.

What do the Ethical Consumers want/do not want What do the Ethical Consumers want/do not want these days?.......these days?.......results of consumer surveysresults of consumer surveys

Only 4% consumers feel strongly that companies behave Only 4% consumers feel strongly that companies behave ethicallyethically

93% feel that companies should be responsible for 93% feel that companies should be responsible for improving the social impacts of their products and improving the social impacts of their products and servicesservices

44% wants environment a priority focus for companies 44% wants environment a priority focus for companies (2001: 34%)(2001: 34%)

38% have made five or more ethical purchases (fair trade 38% have made five or more ethical purchases (fair trade goods, organic eggs etc)goods, organic eggs etc)

83% say that company’s social responsibility is important 83% say that company’s social responsibility is important consideration when purchasing a product or serviceconsideration when purchasing a product or service

16% of all consumers in UK have boycotted a certain 16% of all consumers in UK have boycotted a certain productproduct

50% of consumers have chosen one product over another 50% of consumers have chosen one product over another because of its environmentally friendly packagingbecause of its environmentally friendly packaging

Business ethics…the issues and challengesBusiness ethics…the issues and challenges

Ethical ConsumerismEthical Consumerism

EnvironmentalismEnvironmentalism

Corporate Social Responsibility (CSR)Corporate Social Responsibility (CSR)

The Corporate Citizen and its StakeholdersThe Corporate Citizen and its Stakeholders

SustainabilitySustainability

Government and RegulationGovernment and Regulation

The Context of GlobalizationThe Context of Globalization

What is What is Business EthicsBusiness Ethics? ?

““Business Ethics is the study of business Business Ethics is the study of business situations, situations, activitiesactivities and decisions where and decisions where

issues of morality, of ‘issues of morality, of ‘right and wrongright and wrong’ are ’ are addressed”addressed” (Crane & (Crane &

Matten, 2007 p 5)Matten, 2007 p 5)

Is Ethics more than law? Is Ethics more than law?

Law and EthicsLaw and Ethics

Considerable overlap between ethics and lawConsiderable overlap between ethics and law Law is a form of codification, institutionalisation of ethics Law is a form of codification, institutionalisation of ethics

into rules & regulationsinto rules & regulations But Law and Ethics are not the sameBut Law and Ethics are not the same Law only covers basic, minimum regulationsLaw only covers basic, minimum regulations Business ethics begins where the law and legal Business ethics begins where the law and legal

considerations endconsiderations end Business ethics is concerned with those issues not Business ethics is concerned with those issues not

covered by the lawcovered by the law E.g.: it is legal to sell landmines, to test products on E.g.: it is legal to sell landmines, to test products on

animals, to sack workers in poor regions….but are these animals, to sack workers in poor regions….but are these ethical?ethical?

E.g.: in some countries, trade unions and consumer E.g.: in some countries, trade unions and consumer protest are illegal……are trade unions and consumer protest are illegal……are trade unions and consumer groups therefore unethical?groups therefore unethical?

Child Labour from the context of a developed and Child Labour from the context of a developed and developing country……..why its different???developing country……..why its different???

Understanding Legal vs. Ethical Understanding Legal vs. Ethical ((Royal Dutch Shell controversiesRoyal Dutch Shell controversies ) )

Sources: Sources: http://en.wikipedia.org/wiki/Controversies_surrounding_Royal_Dutch_Shell

www.greenpeace.orgwww.greenpeace.org

Shell in 1995 decided to dispose of its Brent Spar oil Shell in 1995 decided to dispose of its Brent Spar oil platform in the North Sea. platform in the North Sea.

It had the full agreement of the Law as well as It had the full agreement of the Law as well as permission of the British Government permission of the British Government (Legal but was it (Legal but was it an ethical decision????)an ethical decision????)

However, fell victim to a vigorous anti-Shell campaign However, fell victim to a vigorous anti-Shell campaign across the World. across the World.

Their decision was challenged by many groups Their decision was challenged by many groups including the Greenpeace. Even the consumers including the Greenpeace. Even the consumers worldwide started to boycott Shell’s products. worldwide started to boycott Shell’s products.

Shell eventually agreed to disassemble it onshore in Shell eventually agreed to disassemble it onshore in Norway, although it has always maintained that its Norway, although it has always maintained that its original plan to sink the platform was safer and better original plan to sink the platform was safer and better for the environment.for the environment.

Why Why Business EthicsBusiness Ethics so important? so important?

i) i) According to According to David JS WinfieldDavid JS Winfield, CEO of the , CEO of the International Centre for Leadership in Finance International Centre for Leadership in Finance (ICLIF), (ICLIF), Ethics is a prerequisite for becoming an Ethics is a prerequisite for becoming an effective business leader todayeffective business leader today

ii) ii) The power and influence of business in society, The power and influence of business in society, politics and economic activities is greater than ever politics and economic activities is greater than ever before.before.

iii) iii) Business has the potential to provide a major Business has the potential to provide a major contribution to our societies, e.g. they pay taxcontribution to our societies, e.g. they pay tax

iv) iv) Business malpractices have the potential to inflict Business malpractices have the potential to inflict enormous harm on individuals, on communities and enormous harm on individuals, on communities and on the environmenton the environment

v) v) Stakeholders demand on business for being ethical Stakeholders demand on business for being ethical are constantly becoming more complex and more are constantly becoming more complex and more challengingchallenging

Why Why Business EthicsBusiness Ethics so important ? so important ?...contd. ...contd.

vi)vi) Business ethics provides managers with the Business ethics provides managers with the appropriate knowledge and tools which appropriate knowledge and tools which helps them to improve ethical decision helps them to improve ethical decision makingmaking

vii) vii) Business ethics is a pillar of an effective Business ethics is a pillar of an effective strategic planning of a companystrategic planning of a company

viii) viii) Business ethics provides us with the Business ethics provides us with the ability to assess the benefits and problems ability to assess the benefits and problems associated with different ways of managing associated with different ways of managing ethics in organizationsethics in organizations. .

ix)ix) Study of business ethics could help us to Study of business ethics could help us to understand modern societies in a more understand modern societies in a more systematic waysystematic way

RecapRecap of what we’ve discussed so far.. of what we’ve discussed so far..

Business ethics is an emerging concept.Business ethics is an emerging concept.

Worldwide consumers and general people are Worldwide consumers and general people are becoming more concerned about the becoming more concerned about the “responsible behaviour” and “ethical practices” “responsible behaviour” and “ethical practices” of businesses. of businesses.

Business ethics are concerned about those Business ethics are concerned about those issues not covered by law.issues not covered by law.

To become a successful leader one must have To become a successful leader one must have thorough knowledge and understanding about thorough knowledge and understanding about the concepts of business ethics and their the concepts of business ethics and their application in real life situation.application in real life situation.