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Ethics Responsibility & Sustainability: Summary + Class notes (MBA - KUL Brussels)

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Course
Ethics, Responsibility And Sustainability (BKULHMA64A)

Institution
Katholieke Universiteit Leuven (KU Leuven)

ENGLISH SUMMARY FOR MBA PROGRAM at KUL Prof.: Dr. Kurt Devooght Textbook: Hartman, L., DesJardins, J. & MacDonald, C, Business Ethics. Decision Making for Personal Integrity & Social Responsibility, McGraw-Hill, Fourth Edition, 2018 This document contains a summary of the course content + clas...

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ers
ethics
responsibility
and sustainability
mba
kul brussel
business ethics
kul

Institution
Katholieke Universiteit Leuven (KU Leuven)
Education
Master Business Administration
Course
Ethics, Responsibility And Sustainability (BKULHMA64A)

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FACULTY OF ECONOMICS
& BUSINESS

Ethics, Responsibility,
Sustainability
MBA – Core Module

Prof. Dr. Kurt Devooght
Academic Year: 2020–2021

FACULTY OF ECONOMICS AND BUSINESS - CAMPUS BRUSSELS
WARMOESBERG 26 – B 1000 BRUSSELS BELGIUM

,TABLE OF CONTENT

1. Ethics and Business
2. Ethical Decision Making: Personal and Professional Context
3. Philosophical Ethics and Business
4. The Corporate Culture: Impact and Implications
5. Corporate Social Responsibility
7. Ethical Decision Making: Technology and Privacy in the Workplace
8. Ethics and Marketing (optional)
9. Business and Environmental Sustainability

1. ETHICS AND BUSINESS

Opening Decision Point
Zika Virus and Olympic Sponsors (HDM, 2-3) – move or postpone the Olympic games
- In 2016: Zika Virus, transmitted by mosquitos “If we bring in all these athletes and tourists to
Rio and they go back home → could spread the virus all over the world This can be avoided by
postponing it to another place/ time” Impact on main sponsors (logo, visibility, marketing
campaigns, …) → marketing efforts would be pointless
- No unanimity among experts: uncertainty of facts of spreading the virus
1. How much responsibility do sponsoring corporations (fe Coca Cola) bear for the outcomes of things
like the Olympic Games? All the sponsors are doing is paying money to have their logos featured at
Olympic venues and the right to use the Olympic logo in their advertising The Rio sponsors
wouldn’t be directly spreading Zika Does that indirectness matter, ethically?
2. One danger is that the decision would not be based on ethics at all, and that the organizations
involved would fall prey to a general “the Olympics must go on!” attitude (= a “can-do” attitude,
Challenger 1986) –> basing decision on attitude rather than ethics
3. Does the lack of full agreement between experts absolve Olympic sponsors of blame if the Rio
Olympics ended up contributing to the spread of the Zika virus? Would it be ethically correct of the
sponsors to say, after the fact, “We didn’t know for sure there would be a problem”?
–> Uncertainty about the facts about the risk of spreading it

Chapter objectives
After reading this chapter, you will be able to:
1. Explain why ethics is important in the business environment
2. Explain the nature of business ethics as an academic discipline
3. Distinguish the ethics of personal integrity from the ethics of social responsibility
4. Distinguish ethical norms and values from other business-related norms and values
5. Distinguish legal responsibilities from ethical responsibilities
6. Explain why ethical responsibilities go beyond legal compliance
7. Describe ethical decision making as a form of practical reasoning

“It takes 20 years to build a reputation and five minutes to ruin it If you think about
that you’ll do things differently” – Warren Buffett

1

,Making the Case for Business Ethics
• Business ethics is a process of responsible decision making
– Scandals are brought about by ethical failures → people doing bad things
– Homework: familiarize yourself with the following cases:
▪ Enron/ Arthur Andersen: misled the public of the financial health of the firm, they
wanted to show healthy financial balance sheets to the public by setting up a daughter
company and putting all depts on their balance sheets. They ended up with more than
100 of these daughter companies. Enron eventually went bankrupt.
▪ Madoff: financial pyramid investment system, offering huge amounts of interest by
using incoming money. This collapsed.
▪ BP Deep Water Horizon; drilling for oil in the Mexican Golf. Not simply an accident.
▪ Volkswagen: Dieselgate VW was seen as one of the best ethical and environmental firms,
but they had cheating-software (emission) and were lying about how clean their wars were
• This text provides a decision-making model that can help avoid future ethical failures
• As an introduction to this model, this chapter reflects on the intersection of ethics and business (eg the
Adam Smith problem: (1) The Wealth of Nations: economic handbook about selfishness and following
own interest. (2) The theory of moral sentiments: focus on sympathy and benevolent, have to care for
each other and work together –> How can you combine harsh business- and soft ethical handbook?
• Shift from whether ethics should play a role in business decisions to how to most effectively do so
– Which values and principles should guide business decisions?
– Origins of this shift: the serious consequences of unethical behavior for many people and org
eg Madoff: initially you would think only a few rich and stupid people were affected, but this
was not the case. Also +100 non-profit organizations who invested in Madoff, they were going
bankrupt. The whole world was feeling the consequences (hospitals, universities)
• Responsible decision making must move beyond concern for stockholders to consider the impact on all
stakeholders (= Anyone who affects or is affected by decisions made within the firm, for better or worse)

Reality check: How does the law support ethical behavior? Adopted since the Enron-scandal (p8)
Ethics and law are not the same, but they overlap in many ways. Good laws become law precisely because
they promote important ethical values. Sometimes: laws are adopted to support ethical behavior in a
different way, namely by drawing the attention of business leaders to the need to work hard on ethical
behavior in their organizations, e.g. by adopting a code of ethics.

• The case/ reasons for (studying) Business Ethics:
– Unethical behavior might affect a wide range of people including ourselves (as managers
involved, or as employees, consumers, citizens, …)
– ‘Bad’ companies can lose in the marketplace (e.g., customer boycotts) or even go out of
business and employees might end up in jail (f.e. Nike involved in child labor in Pakistan)
– ‘Good’ companies might create an ethical competitive advantage through a good
reputation, attracting and holding good employees, values like trust, …
– As future managers/leaders we will have to manage the ethical behavior of others and will
be seen as role models (e.g. Prince Bandar Bin Sultan secretly received commissions, AIG
were on the brink of bankruptcy in 2008; US gov saved them, but weeks after the executives
went to California on week-long retreat and luxurious hotel and spend half a million $)
• Summary:
– Legal requirements: Unethical behavior creates legal, financial and marketing risks
– Maintaining an ethical advantage aids success: Ethical reputations provide a competitive edge
– Ethical management (transparent) may aid organizational structure and efficiency
– For business students, ethics is an important field of study
– Leaders need to know how to manage ethical behavior of others
– Business must take ethics into account and integrate ethics into its organizational structure
2

, – But what is ethics?

“Ethics is the new competitive environment”
– Peter Robinson, CEO, Mountain Equipment Co-op (2000 – 2007)

Business Ethics as Ethical Decision Making
• Our approach to business ethics focuses on ethical decision making (method), not just on
information and knowledge about ethics
• The authors’ fundamental assumption is that a process of rational decision making can and will
result in behavior that is more reasonable, accountable, and ethical
• Ethics refers to how human beings should properly live their lives
• Even if an ethics course does not change your capacity to think, we believe that it could stimulate
your choices of what to think about (more options from different perspectives)
• Caution: no manipulation (influence someone’s behavior) but reasoning to attempt to produce more
ethical behavior among students who enroll. Influencing, manipulation, threats, guilt, pressure, bullying,
intimidation, … do not belong in an ethical classroom. Persuading through reasoning however does!
• Our role [as teachers] should not be to preach our own ethical beliefs to a passive audience, but
instead to treat students as active learners and to engage them in an active process of thinking,
questioning, and deliberating. Teaching ethics must challenge students to think for themselves!

Business Ethics as Personal Integrity and Social Responsibility
• Ethical business leadership is precisely this skill: to create the circumstances (= corporate culture)
within which good people are able to do good, and bad people are prevented from doing bad
• How should we live? What is good or bad?
– Philosophers emphasize that ethics is normative, dealing with our reasoning about how we
should act (choose, behave and do things)
– Social sciences also examine human decision making/actions but these sciences are
descriptive rather than normative. They provide an account of how and why people do act
the way they do – they describe
– As a normative discipline, ethics seeks an account of how and why people should act a
certain way, rather than how they do act (take a step back, consequences on stakeholders?)
– Philosophical ethics merely asks us to step back from implicit everyday decisions to examine
and evaluate them. More than 2,000 years ago Socrates gave the philosophical answer to
why you should study ethics: “The unexamined life is not worth living”

How should “we” live? (2 perspectives)
If defining “We” individually If defining “We” collectively
• Ethics is based on our own personal value • Sometimes referred to as social ethics
structures, defined by our moral systems • Here, we judge companies from a social
(f.e. religion, family traditions) and, referred perspective; for their social responsibility
to as morality or personal integrity (our responsibility to follow the rules, norms
and values from that society; we should live
according to social expectations)

Managerial decisions involve both aspects of ethics: personal integrity and social responsibilities
(both are not always overlapping; see textbook question 4 on p.24 – think of examples of decision
which are valuable as social policies but bad as a matter of personal ethics – f.e. against animal testing
versus covid testing – this is what is expected but goes against my personal views OR decision is good

3

, from personal point of view, but bad from a collective point of view, acting against social
responsibility expected by society – f.e. helping illegal immigrants to cross border; political insensitive

• The normative approach to business is at the center of business ethics Step back from the facts to ask:
– What should I do? What ought I do?
– What rights and responsibilities are involved?
– What good will come from this situation?
– Am I being fair, just, virtuous, kind, loyal, trustworthy, honest, …?
– The words above in italic are the basic categories, concepts and language of ethics
– Homework: read ‘Ethics after an Oil Spill’ and answer the questions
– Homework: answer question 4, HDM page 24
• Ethics is a normative discipline as it deals with norms:
– Those standards of appropriate and proper (or “normal”) behavior (not written down)
E.g.: “Don’t hurt anyone”; “Don’t steal”, “Work hard”; “Don’t lie”; “Don’t discriminate”; …
– Not all norms are ethical norms e.g. etiquette, fashion, accounting, …
E.g. “Don’t talk during the lectures”; “Come on time for a meeting”; “Wear skinny jeans”;
“Greet your colleagues”; “Follow the accounting norms”; …
– Norms appeal to certain values (we find important)
E.g.: respect for the other and his properties, life, health, truth, equality, …
E.g.: respect for teacher and students, efficiency, beauty, being part of the group, …

Distinction Between Values and Ethics
• Values are the underlying beliefs that cause us to act or to decide one way rather than another
(and motivates us to do things)
– Many different types of values (what one values) can be recognized: financial (reason to work),
religious (go to church), legal, historical, political (vote), aesthetic (read a book), scientific (learn)
– Individuals have their own personal values and businesses also have values – shown in the
company’s culture → 2 don’t overlap: Alpro don’t use GMO’s (business value), I don’t think
GMO is bad for the planted (personal value)
– However, an individual’s or a corporation’s set of values may lead to either ethical or
unethical results. E.g. Enron and its financial values → Values? Yes. Ethical results? No.
– One way to distinguish values is in terms of the ends or goals they serve: monetary ends,
spiritual ends, ends of beauty; legal values serve law, order and justice … What ends do
ethical values serve? (“I work hard” as a norm, the financial means is the value, “why do I
need money” is the financial end)
• Ethical values serve the ends of human well-being. Ethical values are those values – those decision-
guiding beliefs – that impartially promote human well-being!
– But what is human well-being? (fundamental elements in life)
Happiness, Health, Respect, Life, Dignity, Integrity
Companionship/Friendship/Love, Freedom/Autonomy, Knowing the truth, …
– “Don’t kill” (norm), “Protecting life” (value), “Life” (human well-being)
– But what is meant by impartially? Ethical acts and choices should be acceptable and
reasonable from all relevant point of views (all parties/ stakeholders involved), not only from
my personal and selfish well-being point of view
[Notice that this is a universal – not only apply for Christians for example – but also a very
anthropocentric approach – human-centric approach]

“If moral behavior were simply following rules, we could program a computer to be
moral” – Captain Samuel P Ginder

4

,Ethics and the Law (DISTINCTION!)
• Legal norms and ethical norms are not identical (overlap is possible; “don’t kill”, but not always the
case “treating employees with respect” – ethical norm but not legally required or firing people)
• Is compliance with the law enough to behave ethically? – No, ethics & laws don’t always overlap
1. Is the law itself ethical? (In Africa, rule of discrimination of gender/ sexual orientation)
2. The law may prevent harm, but does it promote “good”? (doesn’t stimulate goodness)
3. Only complying with the law (great people, love your children) may lead to more regulation
(can’t control this)
4. Laws may not be in place for new situations – f.e. computer; electronic signature the same
as physical signature; laws always come too late to regulate new situations (AI)
5. Laws may be ambiguous (not always clear what they mean – f.e. make reasonable
accommodation for employees with disabilities; does this include obesity, depression,
dyslexia → how should you accommodate them then?
• Laws offer general rules clarified by legal precedent (makes interpretations clear)
• “Is this legal?” is asking, “Are these circumstances similar enough to past cases that the
conclusions reached in those cases will also apply here?”
• There is no unambiguous answer for those wishing only to obey the law
• Even following the law, managers often face decisions that challenge their ethical judgments:
what should I do?

Ethics as Practical Reason
• Ethics is a vital element of practical reasoning – reasoning about what we should do (decision making)
• And is distinguished from theoretical reasoning, which is reasoning about what we should
“believe”/ accept as truth. Theoretical reason is the pursuit of truth (what is right/ wrong)
• There is no single methodology that works in all situations, but guidelines provide direction and
criteria for decisions
• The next chapter introduces a model for making ethically responsible decisions (CH2)
• Ethical theories explain and defend various norms, standards, values, and principles used in ethical
decision making (CH3) – how to defend when something is good/ bad

5

, 2. ETHICAL DECISION MAKING: PERSONAL AND PROFESSIONAL CONTEXT

Opening Decision Point
• Found iPod: What Would You Do? (HDM, 38)
– What are the key facts you should consider before making a decision, as either the person who
discovered the iPod, the friend, or a member of a disciplinary panel?
– Is this an ethical issue? What exactly are the ethical aspects involved in your decision?
Is this finding or stealing an object from someone else, am I honest?
– Who else is involved, or should be involved, in this decision? Who has a stake in the outcome?
Person who lost their Ipod, the person who found it, the name of the university (community)
– What alternatives are available to you? What are the consequences of each alternative?
Bring it to lost & found, secretary, student representative – impact on other people involved
– How would each of your alternatives affect the other people you have identified as having a stake
in the outcome?
– Where might you look for additional guidance to assist you in resolving this particular dilemma?

Chapter objectives
After reading this chapter, you will be able to:
1. Describe a process for ethically responsible decision making
2. Apply this model to ethical decision points (2 case studies)
3. Explain the reasons why “good” people might engage in unethical behavior
4. Explore the impact of managerial roles on the nature of our decision making

“It is very important to know who you are (what do you stand for, your values). To
make decisions. To show who you are (through your decisions)”
– Malala Yousafzai, co-recipient of the 2014 Nobel Peace Price

A Decision-Making Process for Ethics (7 step process)
An initial sketch of an ethical decision-making process
1. The first step is to determine the facts of the situation
• Let us return to the iPod case: would these different facts change your decision?
– Suppose you already owned an iPod, and you don’t need another one
– Suppose you found the (broken) iPod intentionally discarded in a wastebasket
– Suppose you know who has lost the iPod (e.g. you saw it falling from a backpack)
• Perceptual differences can explain many ethical disagreements: we all perceive and interpret
the world through our own understanding and concepts, i.e. our conceptual framework →
business managers always want to gain money [‘Numbers never speak for themselves’] = 2%
increase of profits doesn’t mean anything, compare it to past performances or the industry
sector; by using a conceptual framework it result in different interpretations
• Unpacking our own and others’ conceptual schemata (what is your ideology; socialist, liberal,
religious person) plays an important role in making ethically responsible decisions
[‘Do economists behave differently?’] – profit maximization, gain money, reduce costs, doing
better than competitors (way of thinking) installs an egoïstic approach to society (ethical dilemmas)
• Can you imagine a situation in which what looks like an ethical disagreement turns out to be a
disagreement over the facts? [eg Brent Spar; oil platform operated by Shell; decided to sink the
oil platform to the North-sea but Greenpeace was against this → chemicals bad for sea vs
dismantling would be more harmful due to air pollution → discussing about the facts; good/bad?]
• There is a role for (social) sciences (and critical thinking) in ethics [eg Zika virus: disagreement
on the impact of the spreading of the virus from scientist to come with objective facts]
6

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