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Ethics and International Business summary
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Ethics and International Business summary midterm and final exam
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Week 1Chapter 1:
Key words: ethics, morality, globalization, deterritorialisation, corporate accountability,
Sustainability, Triple bottom line (TBL)
Business ethics: moral principles in the business. It is about the grey areas of business between law
and ethics. It is about morally wrong and right. It is not about making the right decision but about
making the better one. It is about right and wrong and what are the motives of people that make
wrong decisions.
Law is the definition of the minimum acceptable standards of behavior, but morally issues are not
explicitly covered by law.
Morality: norms, values and beliefs in social processes which define right and wrong for an individual
or a community.
Ethics: is about study of morality and the application of reason to explain specific rules and principles
that determine right and wrong for a given situation ethical theories. Thus ethics is some form of
rationalization of morality.
So morality is something that all individual and communities have, but ethics is a way to make
morality systematic and rational into normative rules that offer solutions to situations in which
morality is uncertain. This results in ethical theories. For example if you do something that won’t
harm anybody like swimming naked is morality but not ethics.
Morality ethics ethical theory solutions to ethical problems.
Importance of business ethics: influence and power of business is greater than ever before. Business
can contribute to our society. Misconduct by business can harm communities and individuals.
Expectations of stakeholders become complex. There has been little ethics educations. There are
significant ethical violation. To evaluate (dis)advantages of the management of ethics. It can also
provide us knowledge about important issues in the societies.
Small businesses often lack the time, autonomy and independence to focus on ethics.
Large businesses have more available resources and so more ability for ethics. But main constraints
are the size and complexity.
Public sector has lack of transparency because of formal bureaucratic.
Civil society organization (CSO) lack of resources and formal training.
Link between social connections and a specific territory has been wakened because of technological
progress modern communications and transportations. Also political development
(liberalization) it is easier to travel to other countries.
Globalization: process which diminishes the necessity of a common and shared territorial basis for
social, economic, political, processes and relations. Examples are: global communications, global
products and global financial systems.
Globalization = deterritorialisation diminishing of reduced importance of national borders in
today’s global world.
Globalization is important for business ethics in 3 major areas:
1. Culture: because of globalization there are less restrictions for organizations to certain
territories. So they face other ethics and culture.
, 2. Law: globalization also leads to escape of economic transactions to the control of the
government of a region. so deterritorialisation increases the demand for business ethics
because it becomes difficult to decide which legal framework the operations are part of.
3. Accountability: multinational companies (MNC’s) are dominant in the global world. They
may be equally powerful as the government in the economy. the larger the degree of
globalization the lower the influence of government on economic activities and the less
they can be controlled by the people affected by their operations. Increasing of globalization
calls for greater demand for corporate accountability.
Globalization provides shareholders greater profits but also greater risks. Employees can have more
job but there is also more exploitation. Social benefits to consumers and cheaper but also protests
and exploitation. Small businesses face big companies. Globalization also wakens government
increases corporate responsibility for jobs etc.
Race to the bottom: process in which multinational corporations (MNC’s) use developing countries
against each other to obtain the most favorable investment and business climate for their operations
in terms of taxation, environmental legislation and employee rights.
In different parts of the world we can discuss 6 key questions about ethical dilemmas in business:
- Who is responsible for ethical conduct in business? In Europe by collective (government), in
US the individual and in Asia the top management. In developing countries also top
management.
- Who is the key actor in business ethics? Corporations in US and government and
corporations in Asia and government, trade unions and corporate associations in Europe. in
developing countries it is the non-government organizations.
- What are they key guidelines for ethical behavior? In Europe are legal business framework. In
Asia managerial discretion and in US corporate self instead of the government.
- What are the key issues in business ethics? In US Organizations are responsible and not the
state. In Europe social aspects and in Asia corporate governance.
- What is the dominant stakeholder management approach? European corporations are
smaller than in US. In US more focus on shareholder value maximization. Asian organizations
more cultural norms and trust. In India and Latin America more smaller firms and employee
is the key stakeholder.
Many differences in business ethics are from cultural, economic and religious histories. The Calvinist-
protestant religion in US ahs placed focus on individual. Hinduism and Buddhism lead to more
flexible ware of dealing with ethical issues in business in Asia. In Muslim world is about justice, trust
and integrity.
Sustainable development: development that meets the needs of the present without compromising
the ability of future generations to meet their own needs.
Sustainability refers to the long-term maintenance of systems according to
Environmental;
Economic;
social considerations.
intergenerational equity: equality between one generation and another.
Triple bottom line (TBL): organizations have multiple goals adding economic(profit),
environmental(planet) and social(people) value.
Environmental perspective: effective management of resources for use in the future.
, Economic perspective: it is about the long-term performance of the organization cartels for
example are harmful for functioning of the market in the long-run.
Social perspective: from this perspective social justice is the key to sustainability for example
poverty, education, gender equality, mortality, cure diseases.
To achieve sustainability for the complete TBL is extremely difficult. Even achieving one of them is
hard enough.
Chapter 2:
Key words: Milton friedman, corporate social responsibility (CSR), Four-part model of CSR by
carroll, Corporate social responsiveness (CSR), Corporate social performance (CSP), stakeholder
theory, fiduciary relationship, externalities, agency problem, stakeholder democracy, different
forms of stakeholder theory, Corporate accountability, government fail, corporate power on the
rise, Democratic accountability, Transparency, Corporate citizenship(CC), Extended view of CC.
Corporation: legal status and the ownership of assets. Corporations are perpetual succession they
can survive the death of any individual investor, employee or customer. The corporation itself owns
its assets. Legal framework of corporations:
- artificial persons in the eye of the law this means that they have certain rights and
responsibilities in society just as an individual citizen might.
- Nationally owned by shareholders but shareholders have limited liability.
- Managers have fiduciary responsibility to protect the investment of shareholders.
Milton Friedman: had 3 arguments against social responsibilities of corporations:
1. Only human beings have responsibilities for their actions.
2. It is managers ‘responsibility to act only in the interests of shareholders.
3. It is not up to corporations to decide what is best for society, it is government his
responsibility.
There are also arguments against Milton Friedman which state that corporations do have some
social and moral responsibilities:
- Corporate internal decision structure: corporate decisions in line with pre-determined goals.
So majority of corporate actions cannot be associated with one individual.
- Organizational culture: beliefs and values that set out what is wrong and right in a
corporation. This also influence the individual decision making.
Business reasons why firms have corporate social responsibility (CSR): it is al because of self-
interest.
- Extra and more satisfied customers
- Employees may be more attracted and committed.
- Legislation advantage from government
- Long-term investment which benefits corporation.
Moral reasons why firms have corporate social responsibility (CSR):
- Corporations cause social problems like pollution.
- They should use their power and recourses responsibly in society.
- Every corporate activity has social consequences.
- Corporations rely on stakeholders from society so they have to act in the interest of them.
Four-part model of CSR by carroll: CSR includes four responsibility parts in the pyramid: (from low to
high)
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