Leadership and ethics Summary
Chapter X-X
Timo Verkade
,Week 35
- What does business ethics mean?
- Legality and morality
- What can we do?
Lecture 1
What is business ethics?
= It is ethics in the world of commerce/business
- Ethics = how we should act, given that we want to do the right thing
You should incorporate ethics from the start, not at a certain stage after having done a lot already.
In business you should make a profit, it is important to do that ethically/right (don’t harm others)
Legality vs. morality
Not all that is legal is moral
- Slavery was legal, but not moral (sometimes laws are not morally right)
Not all that is illegal is immoral
- How to paint your house from the outside/riding on the different side of the road
Not all that is immoral is illegal
- Law saying it is illegal to cheat (government interference in our life)
There are a lot of things to do (laws, being good people and reflecting it, hire ethics officer, check
science/the economics, case studies, think critically and structured about the problem/discuss)
,Week 36
- Learning goal 1
- Learning goal 2
- Learning goal 3
The Social Responsibility of Business is to Increase its Profits
A corporation is an artificial person, that may have artificial responsibilities, but business as a whole
cannot be said to have responsibilities in this vague sense.
What does social responsibility of business imply and for whom
A corporate executive = an employee of the owners of the business
- He has direct responsibilities to his employees (to conduct business in accordance with profit
desires while conforming the rules of the society (embodied in law and ethical custom)).
The executive is also a person that may refuse to work for particular companies (social
responsibilities). But this is money, time and energy he is spending, not the money, time and energy
of his employees.
What if he had social responsibilities?
If a corporate executive has social responsibilities, then he is to act in some way that is not in the
interest of his employers (reducing pollution beyond amount that is in best interest of the company,
hiring ‘hard-core’ unemployed, not raise prices to contribute to preventing inflation, etc.).
He is spending the stakeholders’ money, the customers’ money or the employees’ money.
Those parties could separately spend their own money on the particular action if they wished to do
so. He is imposing taxes if he does it himself, but this is a governmental function. How is he supposed
to know where to spend it on and how? It is not his field. Political machinery must be set up to guide
that. Union leaders would have to enforce things and that’s why they object against government
interference with the market.
Cloak
In practice the doctrine of social responsibility in business is frequently a cloak (attracting
attention/deducting of contributions).
The only social responsibility of business
In a free society, “there is one and only one social 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,
which is to say, engages in open and free competition without deception fraud.
, The Revival of Corporate Social Responsibility
CSR = practices that improve the workplace and benefit society in ways that go above and beyond
what companies legally are required to do. (it is a niche rather than strategy: it makes sense for some
firms in some areas under some circumstances)
+ Promotes social and environmental innovation by business (creating social benefits)
+ Enables citizens to express their own value and influence corporate practices by
“voting” their social preferences through what they purchase/work with/invest in
- Companies will only engage in it if it makes business sense for them (and only little)
Examples of corporate social responsibility (CSR):
- Ikea prohibiting the employment of children
- Starbucks selling only coffee bearing the Fair Trade label
- PepsiCo withdrawing investments from Burma because of human rights concerns
The supply of corporate virtue is made possible and is constrained by the market.
Many firms that have improved in some countries also cut back in other countries/departments.
Should Wal-Mart be considered responsible for providing low-priced goods or be considered
irresponsible for paying its employees low wages en driving out independent merchants?
CSR is growing in importance since the early 1990s. Most of this is linked to the expansion of global
and national markets.
Large multinational firms are more vulnerable than ever to pressure from consumers and activists
throughout the world.
- Many NGOs have taken advantage of this vulnerability—and of new communications
technologies, such as the Internet—to target such companies by organizing or threatening
boycotts and demonstrations or more generally by “naming and shaming” them into
changing their policies.
- NGO’s want large corporations’ executives on board (instead of politicians), since getting
them to change their policies is often easier than changing public policy.
The most important driver of corporate interest in CSR is that good corporate citizenship is also good
business. It delivers financial rewards (seen as a good investment/choice for customers/employees).
Chapter X-X
Timo Verkade
,Week 35
- What does business ethics mean?
- Legality and morality
- What can we do?
Lecture 1
What is business ethics?
= It is ethics in the world of commerce/business
- Ethics = how we should act, given that we want to do the right thing
You should incorporate ethics from the start, not at a certain stage after having done a lot already.
In business you should make a profit, it is important to do that ethically/right (don’t harm others)
Legality vs. morality
Not all that is legal is moral
- Slavery was legal, but not moral (sometimes laws are not morally right)
Not all that is illegal is immoral
- How to paint your house from the outside/riding on the different side of the road
Not all that is immoral is illegal
- Law saying it is illegal to cheat (government interference in our life)
There are a lot of things to do (laws, being good people and reflecting it, hire ethics officer, check
science/the economics, case studies, think critically and structured about the problem/discuss)
,Week 36
- Learning goal 1
- Learning goal 2
- Learning goal 3
The Social Responsibility of Business is to Increase its Profits
A corporation is an artificial person, that may have artificial responsibilities, but business as a whole
cannot be said to have responsibilities in this vague sense.
What does social responsibility of business imply and for whom
A corporate executive = an employee of the owners of the business
- He has direct responsibilities to his employees (to conduct business in accordance with profit
desires while conforming the rules of the society (embodied in law and ethical custom)).
The executive is also a person that may refuse to work for particular companies (social
responsibilities). But this is money, time and energy he is spending, not the money, time and energy
of his employees.
What if he had social responsibilities?
If a corporate executive has social responsibilities, then he is to act in some way that is not in the
interest of his employers (reducing pollution beyond amount that is in best interest of the company,
hiring ‘hard-core’ unemployed, not raise prices to contribute to preventing inflation, etc.).
He is spending the stakeholders’ money, the customers’ money or the employees’ money.
Those parties could separately spend their own money on the particular action if they wished to do
so. He is imposing taxes if he does it himself, but this is a governmental function. How is he supposed
to know where to spend it on and how? It is not his field. Political machinery must be set up to guide
that. Union leaders would have to enforce things and that’s why they object against government
interference with the market.
Cloak
In practice the doctrine of social responsibility in business is frequently a cloak (attracting
attention/deducting of contributions).
The only social responsibility of business
In a free society, “there is one and only one social 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,
which is to say, engages in open and free competition without deception fraud.
, The Revival of Corporate Social Responsibility
CSR = practices that improve the workplace and benefit society in ways that go above and beyond
what companies legally are required to do. (it is a niche rather than strategy: it makes sense for some
firms in some areas under some circumstances)
+ Promotes social and environmental innovation by business (creating social benefits)
+ Enables citizens to express their own value and influence corporate practices by
“voting” their social preferences through what they purchase/work with/invest in
- Companies will only engage in it if it makes business sense for them (and only little)
Examples of corporate social responsibility (CSR):
- Ikea prohibiting the employment of children
- Starbucks selling only coffee bearing the Fair Trade label
- PepsiCo withdrawing investments from Burma because of human rights concerns
The supply of corporate virtue is made possible and is constrained by the market.
Many firms that have improved in some countries also cut back in other countries/departments.
Should Wal-Mart be considered responsible for providing low-priced goods or be considered
irresponsible for paying its employees low wages en driving out independent merchants?
CSR is growing in importance since the early 1990s. Most of this is linked to the expansion of global
and national markets.
Large multinational firms are more vulnerable than ever to pressure from consumers and activists
throughout the world.
- Many NGOs have taken advantage of this vulnerability—and of new communications
technologies, such as the Internet—to target such companies by organizing or threatening
boycotts and demonstrations or more generally by “naming and shaming” them into
changing their policies.
- NGO’s want large corporations’ executives on board (instead of politicians), since getting
them to change their policies is often easier than changing public policy.
The most important driver of corporate interest in CSR is that good corporate citizenship is also good
business. It delivers financial rewards (seen as a good investment/choice for customers/employees).
