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Summary Ethics, Responibility and sustainability (Prof. Desmet)
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- Katholieke Universiteit Leuven (KU Leuven)
Summary of the courses.
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Ethics, responsibilities, and sustainabilityTable of Contents
1. ETHICS AND BUSINESS ........................................................................................................................ 5
1.1. LEVELS OF ETHICAL DECISION MAKING ..............................................................................................................5
1.2. GOALS OF BUSINESS ETHICS IN THE ACADEMIC FIELD ...........................................................................................5
1.3. ETHICS AND THE LAW ...................................................................................................................................6
1.4. RISK ASSESSMENT VS. ETHICS .........................................................................................................................6
1.5. PHILOSOPHY VS. SOCIAL SCIENCES VS. ETHICS ....................................................................................................6
1.6. HOW « WE » SHOULD LIVE ............................................................................................................................ 7
1.7. DISTINGUISHING ETHICS FROM OTHER PRACTICAL DECISIONS WITHIN BUSINESS ........................................................7
1.8. VALUES VS. ETHICS .......................................................................................................................................7
1.9. ETHICS AS PRACTICAL REASON ........................................................................................................................8
CLASS 1.1: WHY THIS COURSE? ................................................................................................................... 8
1.10. INTEGRITY ..................................................................................................................................................8
1.1. ISSUES OF RIGHT AND WRONG ........................................................................................................................9
2. ETHICAL DECISION MAKING................................................................................................................ 9
2.1. DECISION-MAKING PROCESS FOR ETHICS ........................................................................................................... 9
2.2. WHEN ETHICAL DECISION-MAKING FAILS ........................................................................................................10
2.3. ETHICAL DECISION MAKING IN MANAGERIAL ROLES ...........................................................................................11
CLASS 1.2: WHY THIS COURSE? ................................................................................................................. 11
2.4. ETHICAL LEADERSHIP ..................................................................................................................................11
2.4.1. 2.4.1 Models of leadership..........................................................................................................11
3. PHILOSOPHICAL ETHICS AND BUSINESS............................................................................................. 12
3.1. ETHICAL FRAMEWORKS ...............................................................................................................................12
3.1.1. Utilitarianism ...............................................................................................................................13
3.1.2. Deontology...................................................................................................................................14
3.1.3. 3.1.3 Virtue ethics .......................................................................................................................16
3.2. THE ETHICAL DECISION-MAKING MODEL REVISITED ...........................................................................................17
CLASS 1.3: WHY THIS COURSE? ................................................................................................................. 17
3.3. HOW DO RESPONSIBLE COMPANIES RESPOND TO ETHICAL DECISIONS? .................................................................17
3.4. KEY COMPONENTS OF BUSINESS ETHICS MANAGEMENT .....................................................................................17
4. CORPORATE CULTURE IMPACT ......................................................................................................... 18
4.1. WHAT IS (CORPORATE) CULTURE? ................................................................................................................18
4.1.1. Culture..........................................................................................................................................18
4.1.2. Corporate culture .........................................................................................................................19
4.2. CULTURE AND ETHICS .................................................................................................................................20
4.3. COMPLIANCE AND VALUES-BASED CULTURES ...................................................................................................20
4.4. SOURCES OF CULTURE.................................................................................................................................21
4.5. ETHICAL LEADERSHIP AND CORPORATE CULTURE ..............................................................................................21
4.6. BUILDING A VALUES-BASED CORPORATE CULTURE ............................................................................................22
, 4.6.1. Mission statement .......................................................................................................................22
4.6.2. Code of conduct ...........................................................................................................................22
4.7. DEVELOPING THE MISSION STATEMENT & CODE OF CONDUCT ............................................................................23
4.8. CULTURAL INTEGRATION .............................................................................................................................23
4.9. ASSESSING AND MONITORING THE CORPORATE CULTURE ...................................................................................24
4.10. MANDATING AND ENFORCING CULTURE .........................................................................................................25
5. CORPORATE SOCIAL RESPONSIBILITY ................................................................................................ 26
5.1. ETHICS AND SOCIAL RESPONSIBILITY...............................................................................................................26
5.1.1. The economic model ....................................................................................................................27
5.1.2. The stakeholder model ................................................................................................................28
5.1.3. The integrative model ..................................................................................................................29
5.2. SUSTAINABILITY .........................................................................................................................................29
5.3. OTHER REASON FOR CSR: ENLIGHTED SELF-INTEREST .......................................................................................29
CLASS 2.1: SUSTAINABILITY ...................................................................................................................... 30
5.4. CASE STUDY 1: BRENT SPAR DISPOSAL ...........................................................................................................31
CLASS 2.2 : STAKEHOLDER MANAGEMENT ................................................................................................ 32
5.5. STAKEHOLDER MANAGEMENT CAPABILITY.......................................................................................................32
5.6. STAKEHOLDER PHILOSOPHY..........................................................................................................................32
5.7. STAKEHOLDER MATRIX ................................................................................................................................32
5.8. WHO AND WHAT REALLY COUNTS .................................................................................................................33
5.9. THEORY OF STAKEHOLDER IDENTIFICATION .....................................................................................................33
5.10. THEORY OF STAKEHOLDER SALIENCE ..............................................................................................................33
5.11. CASE 2: STAKEHOLDER ENGAGEMENT ...........................................................................................................34
6. EMPLOYER RESPONSIBILITIES AND EMPLOYEE RIGHTS ...................................................................... 35
6.1. THE CURRENT ENVIRONMENT.......................................................................................................................35
6.2. DEFINING THE EMPLOYMENT RELATIONSHIP ....................................................................................................36
6.3. DUE PROCESS, JUST CAUSE & FAIR TREATMENT ...............................................................................................36
6.3.1. Due process ..................................................................................................................................36
6.3.2. Just cause .....................................................................................................................................37
6.3.3. Fair treatment ..............................................................................................................................37
6.4. PRACTICAL EXAMPLE: DOWNSIZING ..............................................................................................................37
6.5. HEALTH AND SAFETY...................................................................................................................................38
6.5.1. Approach 1: Acceptable risk ........................................................................................................38
6.5.2. Approach 2: Market control.........................................................................................................39
6.5.3. Approach 3: Government control ................................................................................................39
6.6. RIGHTS AND RESPONSIBILITIES IN CONFLICT .....................................................................................................40
6.7. THE GLOBAL WORKFORCE AND GLOBAL CHALLENGES ........................................................................................40
6.7.1. Living wages.................................................................................................................................41
6.7.2. Child labor ....................................................................................................................................41
6.7.3. Discrimination ..............................................................................................................................41
6.7.4. Diversity .......................................................................................................................................42
6.8. AFFIRMATIVE ACTION .................................................................................................................................42
7. TECHNOLOGY AND PRIVACY ............................................................................................................. 43
7.1. THE RIGHT TO PRIVACY................................................................................................................................43
7.2. DEFINING PRIVACY .....................................................................................................................................44
, 7.3. SOURCES OF THE RIGHT TO PRIVACY ...............................................................................................................44
7.3.1. Ethical sources .............................................................................................................................44
7.3.2. Legal sources (US) ........................................................................................................................44
7.4. GLOBAL APPLICATIONS................................................................................................................................46
7.5. INFORMATION AND PRIVACY ........................................................................................................................47
7.6. MONITORING EMPLOYEES ...........................................................................................................................48
7.6.1. Technology usage monitoring .....................................................................................................48
7.6.2. Drug testing .................................................................................................................................49
7.6.3. Other forms of monitoring ...........................................................................................................50
7.7. BUSINESS VS. MONITORING .........................................................................................................................50
7.8. BALANCING INTERESTS ................................................................................................................................50
7.9. REGULATION OF OFF-WORK ACTS..................................................................................................................51
7.10. PRIVACY RIGHTS SINCE 9/11/2001 ..............................................................................................................52
8. ETHICS AND MARKETING.................................................................................................................. 53
8.1. ETHICAL ISSUES IN MARKETING .....................................................................................................................53
8.2. RESPONSIBILITIES FOR PRODUCTS: SAFETY AND LIABILITY ...................................................................................55
8.2.1. Product safety ..............................................................................................................................55
8.2.2. Ethical debates on product liability .............................................................................................56
8.3. RESPONSIBILITIES FOR PRODUCTS: ADVERTISING AND SALES ...............................................................................57
8.3.1. Ethical issues in advertising .........................................................................................................57
8.4. MARKETING ETHICS AND CONSUMER AUTONOMY ............................................................................................58
8.5. MARKETING TO VULNERABLE POPULATIONS ....................................................................................................59
8.6. SUPPLY CHAIN RESPONSIBILITY .....................................................................................................................60
9. ENVIRONMENTAL SUSTAINABILITY ................................................................................................... 60
9.1. BUSINESS ETHICS AND ENVIRONMENTAL VALUES ..............................................................................................61
9.2. THE MARKET APPROACH..............................................................................................................................62
9.3. THE REGULATORY APPROACH .......................................................................................................................63
9.4. THE SUSTAINABILITY APPROACH....................................................................................................................63
9.5. THE BUSINESS CASE FOR A SUSTAINABLE ECONOMY ..........................................................................................65
9.6. PRINCIPLES FOR A SUSTAINABLE BUSINESS ......................................................................................................65
9.6.1. Eco-efficiency ...............................................................................................................................65
9.6.2. Closed loop production ................................................................................................................65
9.6.3. Service-based economy................................................................................................................66
9.7. SUSTAINABLE MARKETING ...........................................................................................................................66
9.7.1. Product.........................................................................................................................................66
9.7.2. Price .............................................................................................................................................66
9.7.3. Promotion ....................................................................................................................................66
9.7.4. Placement ....................................................................................................................................66
10. ETHICAL DECISION MAKING: CORPORATE GOVERNANCE, ACCOUNTING AND FINANCE................... 67
10.1. PROFESSIONAL DUTIES AND CONFLICTS OF INTEREST .........................................................................................67
10.2. THE SARBANES-OXLEY ACT OF 2002 .............................................................................................................68
10.3. THE INTERNAL CONTROL ENVIRONMENT .........................................................................................................68
10.4. ETHICAL BOARD MEMBERS ...........................................................................................................................69
10.4.1. Legal duties of board members ...................................................................................................69
10.4.2. Beyond the law, there is ethics. ...................................................................................................70
10.5. CONFLICTS OF INTEREST IN ACCOUNTING AND THE FINANCIAL MARKETS ...............................................................70
10.6. EXECUTIVE COMPENSATION .........................................................................................................................71
, 10.7. INSIDER TRADING .......................................................................................................................................72
11. POSSIBLE EXAM QUESTIONS ......................................................................................................... 73
11.1. CHAPTER 1 ...............................................................................................................................................73
11.2. CHAPTER 2 ...............................................................................................................................................73
11.3. CHAPTER 3 ...............................................................................................................................................73
11.4. CHAPTER 4 ...............................................................................................................................................73
11.5. CHAPTER 5 ...............................................................................................................................................74
11.6. CHAPTER 6 ...............................................................................................................................................74
11.7. CHAPTER 7 ...............................................................................................................................................74
11.8. CHAPTER 8 ...............................................................................................................................................75
11.9. CHAPTER 9 ...............................................................................................................................................75
11.10. CHAPTER 10 ........................................................................................................................................75
,1. Ethics and Business
“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
Ethics is an important field of study for business students, why?
- Business ethics is a process of decision making: business must take ethics into account and
integrate ethics into its organizational structure.
- Scandals are brought about by ethical failures and unethical decisions: this text provides a
decision-making model that can help analyze avoid future ethical failures.
Separation thesis = belief that ordinary ethical standards should be kept separate from, and not be
used to judge, business decisions because business has its own standards of good and bad.
This belief remains common in business!
Assumption: business ought to be governed by some ethics and some values.
However, both the existence of a firm and the conditions under which it operates require that
decision makers consider the impact of those decisions on a wide range of stakeholders.
A stakeholder = anyone who affects or is affected by decisions made within the firm, for better or
worse.
1.1. LEVELS OF ETHICAL DECISION MAKING
• Individual level: each person interacts with businesses as customers, as employees, and as
citizens of the countries in which they operate.
• Organizational level: organizational culture and corporate leadership have important roles to
play in decision making.
• Social and governmental level: individual businesses' and industries' decisions are influenced
by social, economic, and political environments.
1.2. GOALS OF BUSINESS ETHICS IN THE ACADEMIC FIELD
→ Developing the knowledge base and skills needed to identify ethical issues.
→ Understanding how and why people behave unethically.
→ Deciding how one should act, what one should do, and the type of person one should be as
an individual.
→ Creating ethical organizations.
→ Thinking through the social, economic, and political policies that we should support as
citizens.
“Ethics is the new competitive environment.” - Peter Robinson, CEO, Mountain Equipment Co-op
(2000 to 2007)
, 1.3. ETHICS AND THE LAW
Deciding what one should do in business does require consideration of what the law requires,
expects, or permits.
Legal norms and ethical norms are not identical! Is compliance with the law enough to behave
ethically?
- Is the law itself ethical?
- The law may prevent harm, but does it promote "good"?
- Only complying with the law may lead to more regulation.
- Laws may not be in place for new situations.
- Laws may be ambiguous.
Ethical considerations demonstrate that business cannot avoid making ethical judgments, even if it
is fully committed to obeying the law.
Many corporations establish ethics programs and hire ethics officers who are responsible for
managing corporate ethics programs.
Laws offer general rules clarified by legal precedent. There is no unambiguous answer for those
wishing only to obey the law.
1.4. RISK ASSESSMENT VS. ETHICS
Risk assessment = a process to identify potential events that may affect the entity and manage risk
to be within its risk appetite.
- To provide reasonable assurance regarding the achievement of entity objectives.
- When the risks involve potential harms and benefits to a variety of stakeholders, it is a
judgment that involves ethics as well.
- Business must take ethics into account and integrate ethics into its organizational structure.
- But what is ethics?
→ Responsible decision making and deliberation will result in more responsible behavior.
Ethics refers to how human beings should properly live their lives. 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.
Teaching ethics must challenge students to think for themselves.
1.5. PHILOSOPHY VS. SOCIAL SCIENCES VS. ETHICS
• Philosophers emphasize that ethics is normative, dealing with our reasoning about how we
should act.
• Social scientists also examine human decision making and 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.
Ethics involves asking an important question—how should we live? As a normative discipline, ethics
seeks an account of how and why people should act a certain way, rather than how they do act.
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