4th Edition by Andrew Crane and Dirk Matten
ISBN: 978-0-19-969731-1
PART A................................................................................................................................................ 3
I Introducing Business Ethics ...................................................................................................... 3
Business ethics ............................................................................................................................. 3
Globalization ................................................................................................................................ 4
Sustainability................................................................................................................................ 5
II. Framing Business Ethics ....................................................................................................... 6
Corporate Social Responsibility................................................................................................... 7
Strategies of CSR ......................................................................................................................... 8
Stakeholder theory ....................................................................................................................... 9
Corporate citizenship ................................................................................................................. 10
III. Evaluating Business Ethics ................................................................................................. 11
International views ..................................................................................................................... 11
Western modernist ethical theories ............................................................................................ 12
Egoism ....................................................................................................................................... 13
Utilitarianism ............................................................................................................................. 13
Ethics of duties ........................................................................................................................... 13
Ethics of rights and justice ......................................................................................................... 14
Limits of Western modernist theories ........................................................................................ 15
Ethical approaches based on character and integrity ................................................................. 15
Ethical Approaches based on relationship and responsibility.................................................... 15
Ethical approaches based on procedures of norm generation .................................................... 15
Ethical approaches based on empathy and moral impulse ......................................................... 16
IV. Making Decisions in Business Ethics ................................................................................. 16
Models of ethical decision-making ............................................................................................ 16
Individual influences on ethical decision-making ..................................................................... 17
Individual influences on ethical decision-making ..................................................................... 19
V. Managing Business Ethics................................................................................................... 21
Components of Business Ethics Management ........................................................................... 21
Setting Standards for Ethical Behavior ...................................................................................... 22
Global Codes of Ethics .............................................................................................................. 23
1
, Assessing Stakeholder Importance ............................................................................................ 23
Problems with stakeholder collaboration ................................................................................... 23
Social Accounting ...................................................................................................................... 24
Organizing for Business Ethics Management ............................................................................ 25
PART B .............................................................................................................................................. 27
VI Shareholders and Business Ethics ....................................................................................... 27
Shareholders as stakeholders: understanding corporate governance ......................................... 27
The role of financial professionals and market intermediaries .................................................. 30
Shareholders and globalization .................................................................................................. 30
Stakeholder democracy .............................................................................................................. 32
Shareholding for sustainability .................................................................................................. 33
VII. Employees and Business Ethics .......................................................................................... 34
Employee rights and duties ........................................................................................................ 34
VIII. Consumers and Business Ethics ...................................................................................... 40
Consumers as stakeholders ........................................................................................................ 40
Ethical issues, marketing, and the consumer ............................................................................. 40
Globalization and consumers: the ethical challenges of the global marketplace ....................... 42
Sustainable consumption............................................................................................................ 44
IX. Suppliers, Competitors, and Business Ethics ...................................................................... 44
Suppliers and competitors as stakeholders................................................................................. 44
Ethical issues and suppliers........................................................................................................ 45
Ethical issues and competitors ................................................................................................... 47
Globalization, suppliers and competitors ................................................................................... 48
The corporate citizen in the business community: ethical sourcing and fair trade .................... 48
Sustainability and business relationships: towards industrial ecosystems? ............................... 50
X. Civil Society and Business Ethics ....................................................................................... 50
Civil society organizations as stakeholders ............................................................................... 51
Ethical issues and CSOs ............................................................................................................. 51
Globalization and civil society organizations ............................................................................ 52
Civil society, business, and sustainability.................................................................................. 55
XI. Government, Regulation and Business Ethics .................................................................... 55
Government as a stakeholder ..................................................................................................... 55
Ethical issues in the relation between business and government ............................................... 56
Globalization and business-government regulation ................................................................... 58
Corporate citizenship and regulation ......................................................................................... 59
Governments, business, and sustainability ................................................................................ 59
2
, Business ethics is often claimed to be an oxymoron – it suggests that there are not, or cannot be,
ethics in business (that business is in some way unethical or amoral).
Business ethics
The study of business situations, activities, and decisions, where issues of right and wrong are
addressed.
There is considerable overlap between ethics and law, but they are not equivalent – the law is
essentially the institutionalization or codification of ethics into specific social rules, regulations and
proscriptions.
Business ethics begins where the law ends. It is primarily concerned with those issues not covered
by law, or when it is not clear if something is right or wrong. It’s about the ‘grey areas’ of business
or where ‘values are in conflict’. It is principally about developing good judgement.
There may not be a definitive ‘right’ answer to business ethics problems. It is often not just a matter
of deciding between right and wrong, but between courses of action that different actors, for different
reasons, both believe are right – or both believe are wrong.
Morality is concerned with the norms, values and beliefs embedded in a social processes, which
define right and wrong for an individual or a community.
Ethics is concerned with the study of morality and the application of reason to elucidate specific rules
and principles that determine morally acceptable courses of action. Ethical theories are the
codifications of these rules and principles.
Ethical ... that can be Potential solutions to
Morality ...to produce
Ethics ethical theory
applied to a
theory situation ethical problems
Why is business ethics important?
(1) Business has huge power within society.
(2) Business has the potential to provide a major contribution to our societies.
(3) Business malpractice has the potential to inflict enormous harm on individuals, communities
and the environment.
(4) The demands being placed on business to be ethical by its various stakeholders are becoming
more complex and challenging.
(5) Employees face significant pressure to compromise ethical standards.
(6) Business faces a trust deficit.
Small businesses usually differ in their attention and approach to business ethics compared to large
firms. Large corporations tend to have much more formalized approaches in managing business
ethics.
3
, Differences in business ethics across organizational types
Large Small Civil society Public sector
corporations businesses organizations (CSOs) organizations
Delivery of mission to Rule of law, corruption,
Main priorities Financial integrity,
clients; integrity of conflicts of interest;
in addressing employee/customer Employee issues
tactics; legitimacy and procedural issues,
ethical issues issues
accountability accountability
Formal, public
Approach to Informal, trust-
relations and/or Informal, values-based Formal, bureaucratic
managing ethics based
systems-based
Responsible General public, higher
Shareholders and
and/or Owners Donors and clients level government
other stakeholders
accountable to organizations
Shareholder Lack of
Main Lack of resources and Inertia, lack of
orientation; size and resources and
constraints formal training transparency
complexity attention
William Parrett: One effect of globalization has been that risk of all kinds has increased for
businesses, no matter where they operate.
Race to the bottom: A process whereby multinationals pitch developing countries against each other
by allocating foreign direct investment to countries that can offer them the most favourable conditions
in terms of low tax rates, low environmental regulation, and restricted workers’ rights.
Globalization
The ongoing integration of political, social, and economic interactions at the transnational level,
regardless of physical proximity or distance.
It entails that events, which have local roots, have knock-off effects far beyond in seemingly
disconnected places. Global climate change has gradually been acknowledged as critical problem to
address across the world. Global problems need global solutions.
Globalization is relevant for business ethics – three main areas:
1. CULTURAL ISSUES
Business is becoming less fixed territorially, so corporations increasingly engage in overseas
markets ⇾ new and diverse, sometimes even contradictory ethical demands.
Globalization makes regional difference less important, since it brings regions together and
encourages a more uniform ‘global culture’.
Glob. reveals economic, political, and cultural differences and confronts people with them.
2. LEGAL ISSUES
Economic transactions lose their connection to a certain territorial entity.
Globalized economic activities are beyond the control of national governments.
3. ACCOUNTABILITY ISSUES
Business ethics offers the potential for corporations to examine and respond to the claims made
on them by various stakeholders.
4
, Stakeholders Ethical impacts of globalization
Glob. provides potential for greater profitability, but also greater risks. Lack of regulation of
Shareholders
global financial market, leading to additional financial risks and instability.
Corporations outsource production to developing countries in order to reduce costs in global
Employees marketplace – this provides jobs but also raises the potential for exploitation of employees
through poor working conditions.
Glob. can bring cheaper prices to customers, but vulnerable consumers in developing
Consumers
countries may also face the possibility of exploitation by MNCs.
Suppliers and Suppliers in developing countries face regulation from MNCs through supply chain
competitors management. Small scale indigenous competitors are exposed to powerful global players.
Civil society Global business activity brings the company in direct interaction with local communities,
(pressure groups, raising the possibility for erosion of traditional community life. Globally active pressure
NGOs, local groups emerge with aim to ‘police’ the corporation in countries where governments are weak
communities) and corrupt.
Glob. weakens governments, increases the corporate responsibility for jobs, welfare,
Government and maintenance in ethical standards, etc. Glob. confronts governments with corporations from
regulation regions with different cultural expectations about issues such as bribery, corruption, taxation,
and philanthropy.
Regional differences from a business ethics perspective
Europe North America Asia
Who is responsible for
Social control by the
ethical conduct in The individual Top management
collective
business?
Who is the key actor in Government, trade unions, Government,
The corporations
business ethics? corporate associations corporations
What are the key
Negotiated legal framework
guidelines for ethical Corporate codes of ethics Managerial discretion
of business
behavior?
What are the key issues in Social issues in organizing Misconduct and immorality Corporate governance
business ethics? the framework of business in single decisions situations and accountability
What is the dominant Implicit multiple
Formalized multiple
stakeholder management Focus on shareholder value stakeholder approach,
stakeholder approach
approach? benign managerialism
Glob. has resulted in a rapid and comprehensive move towards deregulation of business activities.
Economies in transition are typically characterized by a weak state and deficit in law enforcement,
which leave a growing number of ethical issues
A few impacts (sustainability):
- environmental pollution, climate change, waste disposal, ‘throwaway culture’
- plant closures, ‘downsizing’, ‘outsourcing’
- mass tourism
Sustainability
The long-term maintenance of systems according to environmental, economic, and social
considerations.
It also raises considerations of intergenerational equity.
5
ISBN: 978-0-19-969731-1
PART A................................................................................................................................................ 3
I Introducing Business Ethics ...................................................................................................... 3
Business ethics ............................................................................................................................. 3
Globalization ................................................................................................................................ 4
Sustainability................................................................................................................................ 5
II. Framing Business Ethics ....................................................................................................... 6
Corporate Social Responsibility................................................................................................... 7
Strategies of CSR ......................................................................................................................... 8
Stakeholder theory ....................................................................................................................... 9
Corporate citizenship ................................................................................................................. 10
III. Evaluating Business Ethics ................................................................................................. 11
International views ..................................................................................................................... 11
Western modernist ethical theories ............................................................................................ 12
Egoism ....................................................................................................................................... 13
Utilitarianism ............................................................................................................................. 13
Ethics of duties ........................................................................................................................... 13
Ethics of rights and justice ......................................................................................................... 14
Limits of Western modernist theories ........................................................................................ 15
Ethical approaches based on character and integrity ................................................................. 15
Ethical Approaches based on relationship and responsibility.................................................... 15
Ethical approaches based on procedures of norm generation .................................................... 15
Ethical approaches based on empathy and moral impulse ......................................................... 16
IV. Making Decisions in Business Ethics ................................................................................. 16
Models of ethical decision-making ............................................................................................ 16
Individual influences on ethical decision-making ..................................................................... 17
Individual influences on ethical decision-making ..................................................................... 19
V. Managing Business Ethics................................................................................................... 21
Components of Business Ethics Management ........................................................................... 21
Setting Standards for Ethical Behavior ...................................................................................... 22
Global Codes of Ethics .............................................................................................................. 23
1
, Assessing Stakeholder Importance ............................................................................................ 23
Problems with stakeholder collaboration ................................................................................... 23
Social Accounting ...................................................................................................................... 24
Organizing for Business Ethics Management ............................................................................ 25
PART B .............................................................................................................................................. 27
VI Shareholders and Business Ethics ....................................................................................... 27
Shareholders as stakeholders: understanding corporate governance ......................................... 27
The role of financial professionals and market intermediaries .................................................. 30
Shareholders and globalization .................................................................................................. 30
Stakeholder democracy .............................................................................................................. 32
Shareholding for sustainability .................................................................................................. 33
VII. Employees and Business Ethics .......................................................................................... 34
Employee rights and duties ........................................................................................................ 34
VIII. Consumers and Business Ethics ...................................................................................... 40
Consumers as stakeholders ........................................................................................................ 40
Ethical issues, marketing, and the consumer ............................................................................. 40
Globalization and consumers: the ethical challenges of the global marketplace ....................... 42
Sustainable consumption............................................................................................................ 44
IX. Suppliers, Competitors, and Business Ethics ...................................................................... 44
Suppliers and competitors as stakeholders................................................................................. 44
Ethical issues and suppliers........................................................................................................ 45
Ethical issues and competitors ................................................................................................... 47
Globalization, suppliers and competitors ................................................................................... 48
The corporate citizen in the business community: ethical sourcing and fair trade .................... 48
Sustainability and business relationships: towards industrial ecosystems? ............................... 50
X. Civil Society and Business Ethics ....................................................................................... 50
Civil society organizations as stakeholders ............................................................................... 51
Ethical issues and CSOs ............................................................................................................. 51
Globalization and civil society organizations ............................................................................ 52
Civil society, business, and sustainability.................................................................................. 55
XI. Government, Regulation and Business Ethics .................................................................... 55
Government as a stakeholder ..................................................................................................... 55
Ethical issues in the relation between business and government ............................................... 56
Globalization and business-government regulation ................................................................... 58
Corporate citizenship and regulation ......................................................................................... 59
Governments, business, and sustainability ................................................................................ 59
2
, Business ethics is often claimed to be an oxymoron – it suggests that there are not, or cannot be,
ethics in business (that business is in some way unethical or amoral).
Business ethics
The study of business situations, activities, and decisions, where issues of right and wrong are
addressed.
There is considerable overlap between ethics and law, but they are not equivalent – the law is
essentially the institutionalization or codification of ethics into specific social rules, regulations and
proscriptions.
Business ethics begins where the law ends. It is primarily concerned with those issues not covered
by law, or when it is not clear if something is right or wrong. It’s about the ‘grey areas’ of business
or where ‘values are in conflict’. It is principally about developing good judgement.
There may not be a definitive ‘right’ answer to business ethics problems. It is often not just a matter
of deciding between right and wrong, but between courses of action that different actors, for different
reasons, both believe are right – or both believe are wrong.
Morality is concerned with the norms, values and beliefs embedded in a social processes, which
define right and wrong for an individual or a community.
Ethics is concerned with the study of morality and the application of reason to elucidate specific rules
and principles that determine morally acceptable courses of action. Ethical theories are the
codifications of these rules and principles.
Ethical ... that can be Potential solutions to
Morality ...to produce
Ethics ethical theory
applied to a
theory situation ethical problems
Why is business ethics important?
(1) Business has huge power within society.
(2) Business has the potential to provide a major contribution to our societies.
(3) Business malpractice has the potential to inflict enormous harm on individuals, communities
and the environment.
(4) The demands being placed on business to be ethical by its various stakeholders are becoming
more complex and challenging.
(5) Employees face significant pressure to compromise ethical standards.
(6) Business faces a trust deficit.
Small businesses usually differ in their attention and approach to business ethics compared to large
firms. Large corporations tend to have much more formalized approaches in managing business
ethics.
3
, Differences in business ethics across organizational types
Large Small Civil society Public sector
corporations businesses organizations (CSOs) organizations
Delivery of mission to Rule of law, corruption,
Main priorities Financial integrity,
clients; integrity of conflicts of interest;
in addressing employee/customer Employee issues
tactics; legitimacy and procedural issues,
ethical issues issues
accountability accountability
Formal, public
Approach to Informal, trust-
relations and/or Informal, values-based Formal, bureaucratic
managing ethics based
systems-based
Responsible General public, higher
Shareholders and
and/or Owners Donors and clients level government
other stakeholders
accountable to organizations
Shareholder Lack of
Main Lack of resources and Inertia, lack of
orientation; size and resources and
constraints formal training transparency
complexity attention
William Parrett: One effect of globalization has been that risk of all kinds has increased for
businesses, no matter where they operate.
Race to the bottom: A process whereby multinationals pitch developing countries against each other
by allocating foreign direct investment to countries that can offer them the most favourable conditions
in terms of low tax rates, low environmental regulation, and restricted workers’ rights.
Globalization
The ongoing integration of political, social, and economic interactions at the transnational level,
regardless of physical proximity or distance.
It entails that events, which have local roots, have knock-off effects far beyond in seemingly
disconnected places. Global climate change has gradually been acknowledged as critical problem to
address across the world. Global problems need global solutions.
Globalization is relevant for business ethics – three main areas:
1. CULTURAL ISSUES
Business is becoming less fixed territorially, so corporations increasingly engage in overseas
markets ⇾ new and diverse, sometimes even contradictory ethical demands.
Globalization makes regional difference less important, since it brings regions together and
encourages a more uniform ‘global culture’.
Glob. reveals economic, political, and cultural differences and confronts people with them.
2. LEGAL ISSUES
Economic transactions lose their connection to a certain territorial entity.
Globalized economic activities are beyond the control of national governments.
3. ACCOUNTABILITY ISSUES
Business ethics offers the potential for corporations to examine and respond to the claims made
on them by various stakeholders.
4
, Stakeholders Ethical impacts of globalization
Glob. provides potential for greater profitability, but also greater risks. Lack of regulation of
Shareholders
global financial market, leading to additional financial risks and instability.
Corporations outsource production to developing countries in order to reduce costs in global
Employees marketplace – this provides jobs but also raises the potential for exploitation of employees
through poor working conditions.
Glob. can bring cheaper prices to customers, but vulnerable consumers in developing
Consumers
countries may also face the possibility of exploitation by MNCs.
Suppliers and Suppliers in developing countries face regulation from MNCs through supply chain
competitors management. Small scale indigenous competitors are exposed to powerful global players.
Civil society Global business activity brings the company in direct interaction with local communities,
(pressure groups, raising the possibility for erosion of traditional community life. Globally active pressure
NGOs, local groups emerge with aim to ‘police’ the corporation in countries where governments are weak
communities) and corrupt.
Glob. weakens governments, increases the corporate responsibility for jobs, welfare,
Government and maintenance in ethical standards, etc. Glob. confronts governments with corporations from
regulation regions with different cultural expectations about issues such as bribery, corruption, taxation,
and philanthropy.
Regional differences from a business ethics perspective
Europe North America Asia
Who is responsible for
Social control by the
ethical conduct in The individual Top management
collective
business?
Who is the key actor in Government, trade unions, Government,
The corporations
business ethics? corporate associations corporations
What are the key
Negotiated legal framework
guidelines for ethical Corporate codes of ethics Managerial discretion
of business
behavior?
What are the key issues in Social issues in organizing Misconduct and immorality Corporate governance
business ethics? the framework of business in single decisions situations and accountability
What is the dominant Implicit multiple
Formalized multiple
stakeholder management Focus on shareholder value stakeholder approach,
stakeholder approach
approach? benign managerialism
Glob. has resulted in a rapid and comprehensive move towards deregulation of business activities.
Economies in transition are typically characterized by a weak state and deficit in law enforcement,
which leave a growing number of ethical issues
A few impacts (sustainability):
- environmental pollution, climate change, waste disposal, ‘throwaway culture’
- plant closures, ‘downsizing’, ‘outsourcing’
- mass tourism
Sustainability
The long-term maintenance of systems according to environmental, economic, and social
considerations.
It also raises considerations of intergenerational equity.
5
