Class 3 17 January 2012 Topic: Ethics and Social responsibility of Business CLASS OVERHEADS

Ethical assessment is complicated by differing cultural and national outlooks on what is ethically appropriate and influenced by the nuances of culture, religion and economics Ethical Relativism or Cultural Relativism: because different countries or cultures have different ethical belief systems there is no supranational way of determining whether an action is right or wrong a. Often used to argue that ethical decisions are confined within the boundaries of a given country or culture. b. Ethical relativism asserts that the correctness of an action is to be measured by whatever a majority within a society believes is morally correct. i. These assumptions are descriptive not normative in nature: example not is bribery wrong, but citizens of most civilized nations believe that bribery is wrong

MAJOR THEORIES OF ETHICS IN THE BUSINESS CONTEXT:

1-ETHICAL FUNDAMENTALISM: person looks to an outside source for ethical rules: Bible, Koran or a person (e.g., Karl Marx) o Problem: does not allow person to make decision for self o What if the current situation is not covered? o Following too strictly could lead to what some would consider unethical actions: eye for an eye

2-UTILITARIANISM: looks to the consequences of a decision or an action to determine if it was ethically appropriate. RULE = must follow action that provides the greatest good to society Cost/Benefit Analysis is a type of simplified Utilitarianism. o Attempts to monetize the ethical determination by placing a dollar value on the benefits and costs of an action from the narrow perspective of the decision maker. o Has potential downfalls because does not take into account the non- monetary costs True utilitarian analysis attempts to weigh all direct and indirect effects from perspectives of all parties affected and not just from perspective of the decision maker. o expand to take in as many effects and parties as possible. o seek out alternatives that minimize costs (harm) and increases the net benefit.

 Many problems: o Not measurable so difficult to calculate o Some concerns always take precedence o Some issues are so basic as to be dominant consideration

3-KANTIAN ETHICS: belief that there are absolute duties (or rights) that cannot be changed despite the consequences created by such a duty. A moral theory that says that people owe moral duties that are based on universal rules, such as the categorical imperative do unto others as you would have them do onto you (Golden Rule) System of belief that there are absolute duties (or rights) that cannot be changed despite the consequences created by such a duty = categorical imperatives. Based on 2 important principles: Consistency: all cases are treated alike with no exceptions and Reversibility: actor must abide by the rule he or she uses to judge the morality of someone elses conduct. Difficulty: difficult to reach a common consensus on the universal rules

4-RAWLSSSOCIAL JUSTICE THEORY: says each person is presumed to have entered into a social contract with all others in society to obey rules that are necessary for people to live in peace and harmony. fairness is the essence of justice Problem is no common understanding in single society, particularly modern and global

5-ETHICAL RELATIVISM: individuals must decide what is ethical based on their own feelings as to what is right or wrong.

6- RIGHTS AND DUTIES: Views morality from the perspective of the individual. A moral right of someone creates a matching simultaneous moral duty of others not to interfere in the exercise of that right. Thinks there are basic inalienable rights (US bill of individual rights, UN Declaration of Human Rights) Views morality from perspective of the individual, whereas utilitarianism measures morality form a societal perspective.

7-ETHICS OF CARE focuses on the importance of preserving of web of relationships. Take into account certain concrete relationships. Says that the actor owes an obligation to some more than to others.

CODES OF CONDUCT: Most multi-national companies have these. c. EXAMPLE: Unocals approach to ethical Decision Making reflects some of these theories: UNOCAL CORPORTIONS LANGUAGE: Unocal believes that we have a responsibility to society, especially in relation to the impact of our operations. All employees must respect the dignity of others. We will respect human rights in all our activities. We recognize there are no globally accepted legal or ethical standards for business operations and activities.

ETHICAL APPROACH: Utility Calculation for expanded Utilitarianism

Kantian Ethics

Rights and Duties

Duties/Relativism

FOUR THEORIES OF SOCIAL RESPONSIBILITY OF BUSINESS Maximizing Profits: highest moral standard is for companies to make profits for its stockholders Moral Minimum: corporations duty is to make a profit while avoiding causing harm to others Stakeholder Interest: corporation must consider the effects its actions have on persons other than its stockholder: employees, suppliers, customers, , creditors, local community , etc., i.e. expand concept of stakeholders Corporate Citizenship: business has a responsibility to do good

Host-Home Country Standards: companies must resolve problems arising form different standards. Can choose: ONE: Decide that company is ethically and legally obligated to apply only host country standards to its activities within that country TWO: Apply the higher standards of home countrys laws and regulations, critical when harm is foreseeable consequence of the activity THREE: While higher standard may be preferred not be ethically required in all instances allows taking into account host country stage of development

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