Business Ethics

• Capitalism

  economic system based on the private ownership of how things are made and sold, in which businesses compete freely with each other to make profits
• Shareholder


  person who has invested money in a business in return for a share of the profits
• Corporate Social Responsibility 


  sense that businesses have wider responsibility than simply to their shareholders, including the communities they live and work in and to the environment
• Whistle-Blowing

  when an employee discloses wrongdoing to the employer or the public
• Globalisation

  integration of economies, industries, markets, cultures and policymaking around the world
• Stakeholder

  person who is affected by or involved in some form of relationship with a business
• Consumerism

  set of social beliefs that put a high value on acquiring material things
• A business that makes nothing but money is a poor kind of business 


  Said by Henry Ford (1863-1947). He kept cost of cars down as he believed that profit wasn't anything. Believed that employers should improve the lives of employees
• Bourneville, Cadbury:

  • village south side of Birmingham
  • created due to the concern of the workers health in Birmingham -> industrial revolution caused overcrowding which allowed Cholera to spread
  • the location was chosen because it was cleaner => less air pollution
  • George Cadbury was a Quaker ==> no pubs
• "There is one and only one responsibility of business, to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game"

  Milton Friedman (economist, 1912-2006)

  • "rules of the game" -> whatever is lawful
  • minimum wages, health and safety, environmental issues
• Business Responsibilities:

  • different types of businesses sole traders and giant transnational corporations (TNC'S)
  • bigger businesses -> companies are treated as entities
  • shareholders are paid dividends and businesses have a duty towards shareholders
  • Friedman argued that businesses have no other responsibilities to make profit -> inspired Ronald Reagan and Margaret Thatcher to allow businesses to be separate and for growth to trickle down
  • increased responsibilities of businesses like the environment
• Why do businesses take on corporate social responsibilities:

  • businesses take on social responsibilities to improve their image with customers
  • some investors only invest into businesses that are 'ethical' -> FTSE4Good Index Series provides good examples of these businesses -. in 2014 the UN invested $34 trillion into funds committed to ethical practices in businesses
  • reduce greenhouse gases
  • if they don't accept responsibility they may be negatively viewed by the public -> loss of customers or tighter government restrictions
• fiduciary duty: a duty of loyalty and trust that is owed by a trustee to the beneficiary
• Companies Act 2006: legislation that governs companies in the UK in just about every way a company is managed, run and financed and the company is seen as an entity
• Stakeholders:

  • owners ~ internal
  • employees ~ internal
  • customers ~ external
  • suppliers ~ external
  • shareholders ~ internal
  • the local community ~ external
  • the nation ~ external
  • the government ~ external
  • competitors ~ external
• Stakeholder interest may overlap. The consumer wishes for lower prices, whereas the owner and shareholders wish for the greatest profit. This may cause disagreements.
• The more stakeholders, the more vulnerable the businesws
• Kantian response to corporate social responsibility:

  • focused on the need to treat people as ends and not just means for some other purpose
  • trusting in human anatomy -> companies control and monitor employees without respect for the dignity of human beings
  • balance between the employee and the companies interest is important
• Utilitarian response to corporate social responsibility:

  • greatest profit or good principle
  • focuses on consequences
  • support national economy
• Example of slavery in the Old Testament:

  • Jewish scriptures
  • known in the modern world as modern-slavery
  • Leviticus 25:44-46
  • "Your male and female slaves are to come form the nations around you"
  • "make them slaves for life"
• Reasons for globalisation:

  • improved + cheaper transport links
  • free trade agreements
  • cost incentive
  • communication
  • consumer lef
• Impact of Globalisation:

  • economist Philippe Hugon claims that 2/3's of all global products and international trade is controlled by transnational companies
  • developed the economies of poorer countries like China -> 1978 -> 800 million lifted from poverty
  • goods can be made and bought anywhere in the world
  • globalisation removes some of the identity of individual companies
• Advantages of Globalisation:

  • cheap production -> cheap goods for the west
  • more employment --> SoL
  • improved transport infrastructure
  • tech advancements
• Disadvantages of Globalisation:

  • loss of identity
  • exploitation of developing countries -> low pay conditions
  • increase in industrialisation -> pollution
  • loss of education
  • job loss in agriculture and the west
  • profit to TNC's not the country
• Globalisation, more than anything else, has reduced the number of extreme poor in India by two hundred million and in China by three hundred million since 1990


  Jeffrey Sachs, The End of Poverty -> 2005
• Transnational corporations develop the global economy, and they take advantage of communication revolutions. Moving mass production to developing nations, lower wages and less health and safety. Although low wages, it is higher than the agricultural sector in these countries.
• Case Studies: Nike

  • global headquarters is located in Beaverton, Oregon, USA Nike employs more than 700,000 contract workers in over 700 factories worldwide
  • 75% of the workforce is based in Asia
  • 40 000 workers in India
  • subcontracts or uses independently owned factories in different countries to produce its products
  • have been criticized for the working conditions and low wages at these factories, with many critics accusing the company of profiting from sweatshop labour
• Case Studies: bangladesh factory collapse in 2013

  • April 24th 2013, the Rana Plaza building in Bangladesh collapsed
  • 1100 people died and 2500 injured
  • shops on the first floor reported cracks, but factory workers on the higher floors were forced to continue to work
  • factory owners were put under pressure, unauthorised floors had been built on top, TNC's had not given money or help to the factory
  • Primark, Wal-Mart and Benetton
  • Primark has paid $14m in aid and in both short and long-term
  • Pashe Achi project. improve the capabilities vulnerable recipients
• Kantian responses to Globalisation:

  • everyone deserves freedom
  • impacts of globalisation on stakeholders do appear to be the strong ruthlessly -> imposing their will on the weak
  • against globalisation as it takes away peoples freedoms
• Bowie -> meaningful work means:

  • work that is freely chosen and provides opportunities to exercise autonomy
  • supports the autonomy and rationality of human beings
  • salary is sufficient
  • work should not undermine a worker's moral development

  the Firm should:

  • consider all stakeholder affected when making decisions, ensure no stakeholders take priority
  • ensure the relations are governed by the rules of justice, profit has beneficence
• Justifying globalisation:

  1. Free Choice Defence:

  • "Working for an American multinational, you make eight times the average wage, that's why people are lining up to get these jobs"

  2. Better than Nothing Defence:

  • "because a lousy job is better than none at all"
• Anti globalisation:

  • Amnesy International Campaigns for a global human rights framework --> based on the UN Norms for Business -> try to improve SoL for people in other countries
  • WCC (World Council of Churches) --> need for responsible lending and unconditional debt cancellation
  • No Sweat Movement --> fight against sweatshop exploitation, solidarity for sweatshop workers, stand for workers' self organisation and right to improve people lives
• Nature of the Employees and Employers Relationship:

  • philosopher Adam Smith said the free market could best serve the interests of employees
  • law of supply and demand -> employment would be high and people could live well on their wages
  • relationship was mutual -> employers need workers and therefore have to be fair --> workers need jobs
• Nature of the Employees and Employers Relationship:

  • Karl Marx believed that the employer had all the power
  • all the worker had was his labour to sell if he was to survive
• Adam Smith:

  • specialisation —> businesses can split up jobs, more money and bosses have to become more responsible in showing their workers their purpose
  • consumer capitalism —> luxury is important, wealth is used to look after the poorer
  • how to treat the rich —> rich want honour + respect + vanity —> ego givs them status, they didn’t want riches
  • educate consumers —> our appetites are the problem, we want things constantly -> needs to change —> profitable civilised
• Karl Marx:

  • capitalism needs to be reformed
  • modern work is allienated —> people need so see themselves in what they made, too specialised means disconnection
  • modern work is insecure —> easy to get let go, fear of abandonment
  • workers get paid little —> primitive accumulation profit is theft
  • capitalism is unstable —> crisis occur too much
  • capitalism is bad for capitalists —> forced to but economy first commodity
  • conformists, no private property and free eduction
• Employer obligations:

  • stakeholder theory -> most undervalued person is the employee
  • they are viewed as a commodity linked to supply and demand
  • UK living wage should be £12
  • the actual wages:

  21+ = £11.44

  18-20 = £8.60

  16-17 = £6.40

  Apprentice = £6.40

  • some employers adapted social contract theory to business -> success of the business is in the interest of both the employer and employee
  • some companies have agreements between employees and employers giving them a voice
  • seen with John Lewis
• John Lewis Partnership:

  • united shared responsibility
  • driven by ambition to make the world a better place
  • the founder started the experiment
  • fairer and more sustainable for all partners
• Economist Ted Snyder:

  • supports Friedman’s view that profit is more important than principle
  • however -> doesn accept some level of social responsibilities —> second to profit
  • research into emerging markets —> moving businesses to less developed countries benefits them more
  • But look at Port Talbot in which moving the steelworks to India has caused 2800 job losses in Wales
• Profit or Principle:

  • employers can in essence employ who they want to where they want to