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Ethics and International Business Summary

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  • Course
  • Ethics and IB (EBB608B05)
  • Institution
  • Rijksuniversiteit Groningen (RuG)
  • Book
  • Business Ethics: A Textbook with Cases

In this document you will find a summary of the theory for the course 'Ethics and International Business' given in the second year of the Bachelor's degree in International Business and the Pre-Master Finance. The summary includes key theory, persons, and examples from the book.

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  • June 6, 2022
  • June 13, 2022
  • 60
  • 2021/2022
  • Summary

Subjects

  • ethics
  • international business
  • business
  • utilitarian
  • libertarian
  • rawls
  • morality
  • morals
  • moral
  • corporations
  • normative theories
  • justice
  • economic distribution
  • capitalism
  • adam smith
  • consumers
  • environment
  • workplace
  • basic issues
  • moral choices
  • sexual harrasment
  • job

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  • Ethics and IB (EBB608B05)
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ETHICS AND INTERNATIONAL
BUSINESS




Pre-Master Finance
2021-2022

,Table of Contents
Week 1 ........................................................................................................................................ 2
Chapter 1) The Nature of Morality ..................................................................................................... 2
Chapter 5) Corporations ..................................................................................................................... 5
Week 2 ........................................................................................................................................ 9
Chapter 2) Normative Theories of Ethics ............................................................................................ 9
Week 3 ...................................................................................................................................... 17
Chapter 3) Justice and Economic Distribution .................................................................................. 17
Chapter 4) The Nature of Capitalism ................................................................................................ 21
Week 5 ...................................................................................................................................... 27
Chapter 6) Consumers ...................................................................................................................... 27
Chapter 7) The Environment ............................................................................................................. 32
Week 6 ...................................................................................................................................... 38
Chapter 8) The Workplace (1): Basic Issues ...................................................................................... 38
Chapter 9) The Workplace (2): Today’s Challenges .......................................................................... 45
Week 7 ...................................................................................................................................... 51
Chapter 10) Moral Choices Facing Employees .................................................................................. 51
Chapter 11) Job Discrimination......................................................................................................... 56




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,Week 1
Chapter 1) The Nature of Morality
• In this course we ask questions that typify business issues with moral significance. The answers
we give to them are determined (in large part) by our moral standards → the moral principles
and values we accept.
• Ethics deals with individual character and the moral rules that govern and limit our conduct. It
investigates questions of right and wrong, fairness and unfairness, good and bad, duty and
obligation, and justice and injustice, as well as moral responsibility and the values that should
guide our actions.
• Business ethics is the study of what constitutes right and wrong (or good and bad) human conduct
in a business context.
• The word business will be used here simply to mean any organization whose objective is to
provide goods or services for profit. Businesspeople are those who participate in planning,
organizing, or directing the work of business.
• An organization is a group of people working together to achieve a common purpose. The purpose
may be to offer a product or a service primarily for profit, as in business. But the purpose also
could be health care, as in medical organizations; public safety and order, as in law enforcement
organizations; education, as in academic organizations; and so on.
• We appeal to moral standards when we answer a moral question or make a moral judgment.
Three characteristics of moral standards distinguish them from other kinds of standards:
1. Moral standards concern behaviour that seriously affects human well-being, that can
profoundly injure or benefit people.
2. Moral standards take priority over other standards.
3. The soundness of moral standards depends on the adequacy of the reasons that support
and justify them.
• Etiquette refers to the norms of correct conduct in polite society or, more generally, to any special
code of social behaviour or courtesy.
o Good business etiquette typically calls for writing follow-up letters after meetings,
returning phone calls, and dressing appropriately. It is commonplace to judge people’s
manners as “good” or “bad” and the conduct that reflects them as “right” or “wrong”
(socially appropriate or inappropriate). In these contexts, such words express judgments
about manners, not about ethics.
o The rules of etiquette are prescriptions for socially acceptable behaviour. If you violate
them, you’re likely to be considered ill-mannered, impolite, or even uncivilized, but not
necessarily immoral.
• Legality should not be confused with morality. Breaking the law isn’t always or necessarily
immoral, and the legality of an action doesn’t guarantee its morality. There are four types of law:
1. Statutes are laws enacted by legislative bodies. For example, the law that defines and
prohibits reckless driving on the highway is a statute.
2. Limited in their time and knowledge, legislatures often set up boards or agencies whose
functions include issuing detailed regulations covering certain kinds of conduct—
administrative regulations.
3. Common law refers to the body of judge-made law that first developed in the English-
speaking world centuries ago when there were few statutes. Courts frequently wrote
opinions explaining the bases of their decisions in specific cases, including the legal
principles those decisions rested on. Each of these opinions became a precedent for later
decisions in similar cases.

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, 4. Constitutional law refers to court rulings on the requirements of the Constitution and the
constitutionality of legislation. Although courts cannot make laws, they have far-reaching
powers to rule on the constitutionality of laws and to declare them invalid if they conflict
with the Constitution.
➢ To a significant extent, law codifies a society’s customs, ideals, norms, and moral values.
Changes in law tend to reflect changes in what a society takes to be right and wrong, but
sometimes changes in the law can alter people’s ideas about the rightness or wrongness
of conduct. However, The law cannot cover all possible human conduct, and in many
situations it is too blunt an instrument to provide adequate moral guidance.
• Somewhere between etiquette and law lie professional codes of ethics. These are the rules that
are supposed to govern the conduct of members of a given profession. Adhering to these rules is
a required part of membership in that profession. Violation of a professional code may result in
the disapproval of one’s professional peers and, in serious cases, loss of one’s license to practice
that profession.
• Morality must be distinguished from etiquette (rules for well-mannered behaviour), from law
(statutes, regulations, common law, and constitutional law), and from professional codes of ethics
(the special rules governing the members of a profession).
• Obviously, many things influence what moral principles we accept: our early upbringing, the
behaviour of those around us, the explicit and implicit standards of our culture, our own
experiences, and our critical reflections on those experiences.
• For philosophers, the important issue is not where our moral principles came from, but whether
they can be justified.
• Divine command theory → if something is wrong (like killing an innocent person for fun), then
the only reason it is wrong is that God commands us not to do it.
• Morality is not necessarily based on religion. Although we draw our moral beliefs from many
sources, for philosophers the issue is whether those beliefs can be justified.
• Some people do not believe that morality boils down to religion but rather that it is merely a
function of what a particular society happens to believe. This view is called ethical relativism, the
theory that what is right is determined by what a culture or society says is right.
• Ethical disagreement does not imply that all opinions are equally correct.
• Ethical relativism is the theory that right and wrong are determined by what one’s society says is
right and wrong. There are many problems with this theory. Also dubious is the notion that
business has its own morality, divorced from ordinary ideas of right and wrong.
• When a principle is part of a person’s moral code, that person is strongly motivated to act as the
principle requires and to avoid acting in ways that conflict with the principle. The person will tend
to feel guilty when his or her own conduct violates that principle and to disapprove of others
whose behaviour conflicts with it.
o Accepting a moral principle is not a purely intellectual act like accepting a scientific
hypothesis or a mathematical theorem.
• Our conscience evolved as we internalized the moral instructions of the parents or other authority
figures who raised us as children.
• Accepting a moral principle involves a motivation to conform one’s conduct to that principle.
Violating the principle will bother one’s conscience, but conscience is not a perfectly reliable guide
to right and wrong.
• Morality restrains our self-interested desires. A society’s moral standards allow conflicts to be
resolved by an appeal to shared principles of justification.



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,• The paradox of hedonism → people who are exclusively concerned with their own interests tend
to have less happy and less satisfying lives than those whose desires extend beyond themselves.
• It is helpful to distinguish between morality in a narrow sense and morality in a broad sense:
o Morality in the narrow sense concerns the principles that do or should regulate people’s
conduct and relations with others.
o Morality in the broad sense concerns the values, ideals, and aspirations that shape our
lives.
Individual Integrity and Responsibility
• Several aspects of corporate structure and function work to undermine individual moral
responsibility. Organizational norms, pressure to conform (sometimes leading to groupthink), and
diffusion of responsibility inside large organizations can all make the exercise of individual
integrity difficult.
o The shared acceptance of organizational norms and rules is one of the major
characteristics of an organization. One’s degree of commitment – the extent to which one
accepts group norms and subordinates self to organizational goals – is a measure of one’s
loyalty to the team. Pressure to meet corporate objectives, to be a team player, and to
conform to organizational norms can sometimes lead people to act unethically.
o Almost all groups require some conformity from their members, but in extreme cases the
demand for conformity can lead to what social psychologists call “groupthink.”
Groupthink happens when pressure for unanimity within a highly cohesive group
overwhelms its members’ desire or ability to appraise the situation realistically and
consider alternative courses of action.
o Diffusion of responsibility inside an organization leads individuals to have a diluted or
diminished sense of their own personal moral responsibilities. They tend to see
themselves simply as small players in a process or as cogs in a machine over which they
have no control and for which they are unaccountable.
▪ Bystander apathy → the phenomenon that in emergencies, we seem naturally to
let the behaviour of those around us dictate our response.
▪ In any large group or organization, diffusion of responsibility for its actions can
lead individuals to feel anonymous and not accountable for what happens.
Submerged in the group, the individual may not even question the morality of his
or her actions.
• Often, however, the problem facing people in business and other organization contexts is not that
of doing what they believed to be right but rather of deciding what the right thing to do is.

Moral Reasoning
• An argument is a group of statements, one of which (called the conclusion) is claimed to follow
from the others (called the premises).
o Valid argument → an argument whose premises logically entail its conclusion.
o Invalid argument → an argument whose premises do not entail its conclusion. In an
invalid argument, I can accept the premises as true and reject the conclusion without any
contradiction.
• A counterexample is an example that is consistent with the premises but is inconsistent with the
conclusion.
• Sound arguments have true premises and valid reasoning. Unsound arguments have at least one
false premise, or invalid reasoning, or both.



4

,• Moral arguments can be defined simply as arguments whose conclusions are moral judgments.
The first premise in each of these arguments is a moral standard, the second an alleged fact, and
the conclusion a moral judgment.
• Moral judgments should be supported by moral standards and relevant facts.
• Moral reasoning and argument typically appeal both to moral standards and to relevant facts.
Moral judgments should be entailed by the relevant moral standards and the facts, and they
should not contradict our other beliefs. Both standards and facts must be assessed when moral
arguments are being evaluated.
• Philosophical discussion generally involves the revision and modification of arguments; in this way
progress is made in the analysis and resolution of moral and other issues.
• Requirements for moral judgements:
o Moral judgements should be logical
▪ Moral judgments should follow logically from their premises
▪ Moral judgments should be logically compatible with our other beliefs (avoid
inconsistency)
o Moral judgements should be based on facts
o Moral judgements should be based on acceptable moral principles
▪ Reliable moral judgments must be based on sound moral principles—principles
that are unambiguous and can withstand close scrutiny and rational criticism.
• Moral judgments should be logical and based on facts and acceptable moral principles. Conformity
with our considered moral beliefs is an important consideration in evaluating moral principles.

Chapter 5) Corporations
• A modern corporation is a three-part organization, made up of (1) stockholders, who provide the
capital, own the corporation, and enjoy liability limited to the amount of their investments; (2)
managers, who run the business operations; and (3) employees, who produce the goods and
services.
• Corporations are legal entities, with legal rights and responsibilities similar but not identical to
those enjoyed by individuals. Business corporations are limited-liability companies—that is, their
owners or stockholders are liable for corporate debts only up to the extent of their investments.
o A small group of investors may own all the outstanding shares of a privately owned, profit-
making corporation (a privately held company)
o Or stock may be traded among the general public (a publicly held company). All
companies whose stocks are listed on the New York and other stock exchanges are
publicly held corporations.
• If corporations are moral agents, then they can be seen as having obligations and as being morally
responsible for their actions, just as individuals are.
• Corporate internal decision (CID) structures amount to established procedures for accomplishing
specific goals. The CID structure lays out lines of authority and stipulates under what conditions
personal actions become official corporate actions. The CID structure, like an individual person,
collects data about the impact of its actions. It monitors work conditions, employee efficiency and
productivity, and environmental impacts.
• The question of corporate moral agency is whether a corporation is the kind of entity that can
make moral decisions and bear moral responsibility for its actions. Philosophers disagree about
whether CID structures make it reasonable to see corporations as morally responsible agents.
• The debate over corporate moral agency bears on the question of corporate punishment.
o Whether or not corporations are moral actors, the law can fine them, monitor and
regulate their activities, and require the people who run them to do one thing or another.

5

, o If corporations are moral agents, then the law can deter them with the threat of
punishment, and it can force them to make restitution
o Retribution, as a goal of punishment, however, seems to have little application to
corporations. And obviously corporations cannot be jailed for breaking the law. Even
imposing fines on them can be problematic. Financial penalties stiff enough to have an
impact can easily injure innocent parties, for example, if they lead to layoffs, plant
closures, or higher prices for consumers.
• Some might argue that regardless of whether corporations as artificial entities can properly be
held morally responsible, the nature and structure of a modern corporate organization allows
nearly everyone in it to share moral accountability for what it does. In practice, however, this
diffusion of responsibility can mean that no particular person or persons are held morally
responsible. Inside a corporation it may often be difficult, even impossible, to assign responsibility
for a particular outcome to any single individual because so many different people, acting within
a given CID framework, contributed to it in small ways. (vanishing individual responsibility)
• Individual responsibility can tend to vanish inside large, impersonal corporations. One response is
to attribute moral agency to the corporation itself. Another is to refuse to let individuals duck their
personal responsibility.
• Despite continuing controversy over the concept of corporate moral agency, the courts, the
general public, and many companies find the notion of corporate responsibility useful and
intelligible— either in a literal sense or as shorthand for the moral obligations of individuals in the
corporation.
• The debate over corporate responsibility is whether it should be construed narrowly to cover only
profit maximization or more broadly to include acting morally, refraining from socially undesirable
behaviour, and contributing actively and directly to the public good.
o the narrow view of corporate responsibility → business has no social responsibilities
other than to maximize profits.
▪ Proponents of the narrow view, such as Milton Friedman, contend that diverting
corporations from the pursuit of profit makes our economic system less efficient.
Business’s only social responsibility is to make money within the rules of the
game. Private enterprise should not take on social goals or public responsibilities;
these should be left to government.
o the broader view of corporate responsibility → corporations have other responsibilities
besides making a profit—to consumers, to employees, to suppliers and contractors, to the
surrounding community, and to society at large.
▪ Sometimes called the social entity model or the stakeholder model, this broader
view maintains that a corporation has obligations not only to its stockholders but
also to other constituencies that affect or are affected by its behaviour—that is,
to all parties that have a legitimate interest (a “stake”) in what the corporation
does or doesn’t do.
▪ Proponents of the broader view, such as Keith Davis, stress that modern business
is intimately integrated with the rest of society.
• Defenders of the broader view maintain that corporations have responsibilities that go beyond
making money because of their great social and economic power. Business is governed by an
implicit social contract that requires it to operate in ways that benefit society. In particular,
corporations must take responsibility for the unintended side effects of their business transactions
(externalities) and weigh the full social costs of their activities.
o externalities: the unintended negative (or in some cases positive) consequences that an
economic transaction between two parties can have on some third party.

6

, o On the one hand, basic fairness requires that the factory’s waste no longer be dumped
onto third parties. On the other hand, from the economic point of view, requiring the
factory to internalize the externalities makes sense, for only when it does so will the price
of the widgets it sells reflect their true social cost.
o Advocates of the broader view believe that business must internalize its externalities
and consider the social costs of its activities.
• Advocates of the narrow view stress that management’s fiduciary duty to the owners
(stockholders) of a corporation takes priority over any other responsibilities and obligates
management to focus on profit maximization alone. Critics challenge this argument. They also
point out that the assumption that stockholders own or control the corporation is dubious.
o The narrow view holds that management’s responsibility to maximize shareholder wealth
outweighs any other obligations. The managers of a corporation do indeed have a
fiduciary responsibility to look after the interests of shareholders.

Debating Corporate Responsibility
• We can pursue the debate over corporate responsibility further by examining three arguments in
support of the narrow view: the invisible-hand argument, the let-government-do-it argument, and
the business-can’t-handle-it argument. Advocates of the broader view of corporate responsibility
reject all three.
o The invisible-hand argument: Adam Smith claimed that when each of us acts in a free-
market environment to promote our own economic interests, we are led by an
invisible hand to promote the general good. → If businesses are permitted to seek
self-interest, their activities will inevitably yield the greatest good for society as a
whole.
▪ The invisible-hand argument seems economically unrealistic. In addition,
corporations today find it in their interest to acknowledge values other than
profit
o The let-government-do-it argument: the strong hand of government, through a
system of laws and incentives, can and should bring corporations to heel.
o the business-can’t-handle-it argument: corporations are the wrong group to be
entrusted with broad responsibility for promoting the well-being of society. They are
not up to the job for two reasons: (1) they lack the necessary expertise and (2) in
addressing noneconomic matters, they inevitably impose their own materialistic
values on the rest of society.
• Finding flaws in each of these arguments, critics maintain there is no solid basis for restricting
corporate responsibility to profit making.

Institutionalizing Ethics within Corporations
• Society permits corporations to exist and, in turn, expects them to act in a socially responsible
way.
• To make ethics a priority, corporations should do four things:
o Acknowledge the critical importance of conducting business morally.
o Encourage their members/employees to take moral responsibilities seriously. This
commitment would mean ending all forms of retaliation against those who buck the
system and rewarding employees for evaluating corporate decisions in their broader
social and moral contexts.
o Be open to public discussion and review. Actively solicit the views of stockholders,
managers, employees, suppliers, customers, local communities, and even society as a


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