A2 Business Ethics

A2Business Ethics

http://www.youtube.com/watch?v=CUCSK1QFwts

Watch this film clip. Note down the ethical issues that it raises for businesses?

• Ethicists do not always agree about the purpose of business in society – some see the main purpose of business is to maximise profits for its owners or its shareholders.

• Others consider that businesses have moral responsibilities to their stakeholders; including employees, consumers, the local community and even society as a whole.

• Other ethicists have adapted social contract theory to business, so that employees and other stakeholders are given a voice as to how the business operates.

“Good ethics is good business”

Do you agree?

http://news.bbc.co.uk/1/hi/business/8521514.stm

How might a company act ‘ethically’?

What companies can you think about that have sound ethical principles?

Unethical business?

• Businesses that are believed to be acting unethically may be publicised in the press, and pressure groups that oppose the activities of certain businesses are better organised, better financed and so better able to attach such businesses.

• E.g. Huntingdon Life Sciences in Cambridge where the Animal Liberation Movement set up a group called SHAC (Stop Huntingdon Animal Cruelty) to try to close the company down, often using ethically dubious methods; threatening employees etc.

• The campaigners understood business and its weak points very well as the company nearly went bust.

• However, the company changed tactics and the public reacted against the extreme methods of SHAC.

Q: Is it okay to act unethically in order to promote ethics?

Cost/Benefit analysis

• Consequentialist• Maximise pleasure (Bentham) or

happiness (Mill)• Calculate empirically balance of pleasure

over pain or happiness over misery• Tends to ignore individual rights, classic

criticism – minority is sacrificed for majority• Does Mill’s rule utilitarianism get round this

problem?

We start by viewing a clip on the Ford Pinto. What are three key facts you can find?

What were Ford’s priorities?

http://www.youtube.com/watch?v=rX-Zk_LNZWg

Style over safety?

• Cheap: The Pinto had to sell for $2,000.

• To increase the size of the luggage compartment, the gas tank was relocated to the car’s rear (Strobel, 1994)

This fault meant that Ford’s own test result = explosion in 8/11 tests

Some cost /benefit facts

• The piece of plastic cost $11 a car to fit• Estimated cost of fitting $137m• Estimated cost of casualties $48m in

compensation• But ….. a problem with utilitarian ethics is

we cannot know precisely what the consequences will be….

• Actual compensation cost was millions, and in 1978 a recall took place anyway.

Reputation and ethical outcomes

• 500 burn fatalities in crashes (Dowie, 1977). Two million Pintos were sold.

• In September 1978, Ford issued a recall for 1.5 million 1971-76, making it the largest recall in the industry up to that time.

• One result was the largest personal injury judgment ever ($6.6m awarded).

• In the 1979 landmark case State of Indiana v. Ford Motor Co., Ford notoriously became the first American corporation ever prosecuted on criminal homicide charges. Ford was found not guilty in March 1980 (Schwartz, 1991).

Evaluate

• Is cost/benefit analysis to blame – or poor cost/benefit analysis based on Government figures ($200,000 per human life)?

• Is utilitarian ethics to blame? Or a failure to do a proper analysis of likely consequences based on known facts – that in two-thirds of rear end crash tests the tank exploded?

• http://stevenclark.com.au/2010/03/13/business-academics-stop-promoting-the-pinto-myth/

Homework

• Research a company that you can use as a case study and prepare an A3 sheet for others to use:– Eg: Amazon, Ebay (recent taxation issues)– Cigarette manufacturers– Horsemeat scandal– Nike/Gap (child labour)– Monsanto (GM food)– Banker baillouts

Discuss

• Should businesses be forced to act ethically? Why?

• If so, how?

• How do you think ethical theorists would respond?

The Relationship between Business and Consumers

Employees

Suppliers

Shareholders

Environment

Management

Government

Local Community

Customers

The Business

Who are stakeholders?

• Consumers now influence business ethics, and have been instrumental in bringing about change: consumers expect businesses to demonstrate ethical responsibility in its widest sense – affecting the treatment of employees, the community, the environment, working conditions etc.

• http://www.youtube.com/watch?v=OWio7NVOnaI

• Some companies have been the focus of the consumer criticism and forced to change their practices, e.g:– Nike, Gap and Primark over child labour– Shell over Brent Spar and Ogoniland– Monsanto over GM food– http://www.youtube.com/watch?v=hUSsG_tDDY0

• http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/5099816/Ethical-clothing-sales-quadruple-says-Mintel.html

• http://www.frankandfaith.com/ethical/

• Is this a good thing?

Cyber-crime and surveillance

• Governments worry about the loss of control and private citizens worry about an excess of control over their behaviour.

• Private papers used to be in people’s houses of place of business, but now they are on computer disks which are lost by government employees. Banks, insurance companies, employers etc now know everything about us and we have little control over how they use the information.

• Surveillance covers many technologies e.g. international ECHELON screens e-mails for key words in the name of national security. This is done without our consent or knowledge – it would seem that information is considered more important than people.

• ID cards are used in many countries, in the armed forces, in schools and universities etc. to allow legitimate access to building and information. As these cards carry more information, they leave us open to identity theft.

• Websites use forms of surveillance to find out about their users e.g. log in info

• There area also subtle methods such as loyalty cards in supermarkets which collect information about our purchases.

• We need to consider whether privacy is of greater value than the needs of the state, national security or business.

Is this ethically right/wrong/neutral?Is this ethically right/wrong/neutral?

• J.S.Mill defined liberty as autonomy and considered it to be the most important attribute. He said that the state should not interfere within the private lives of individuals unless it is to protect them from harm.

• In contrast to this, the totalitarian Marxist view rejects any private ownership of property, including rights over one’s body.

Good or Bad?• David Lyon, Professor of Sociology at Queens University, Canada,

stresses that surveillance is about social sorting, so that different groups of people can be treated differently; whether as a higher risk/threat or for insurance or simply by postcode so that ‘suitable’ spam is sent to that address.

• Lyon says that surveillance is about predicting the future, and this means that we so not need to see the use of the new technologies as necessarily evil, but we should not see them as neutral either as they have the most severe consequences for those who are already marginalised society.

• We need to ask whether the utilitarian/capitalist approaches to surveillance are necessarily right – does it make most of us happy because a terrorist might be caught??

Discuss

• What rights SHOULD consumers have?

• What do you think different ethicists would believe?– Utilitarian, Virtue, Kantian

The Relationship between Employers and Employees

What would be an ethical

relationship between an

employer and employee?

Employer/Employee relations…

• For them to be successful there has to be a balance of interests; the employer wants to plan for the future, make profits, keep the employees motivated.

• What do employee’s want from the relationship?

What happens when it goes wrong?

Whistle-blowing

Whistleblower: ‘an informant who exposes wrongdoing within an organisation in the hope of

stopping it’

Whistleblower: ‘an informant who exposes wrongdoing within an organisation in the hope of

stopping it’

What are the difficulties faced by whistle-blowers? Is it ethically right?

• Danger of job loss

• Looked down upon

• Lack of trust in future

Case Study: Erin Brockovichhttp://www.youtube.com/watch?v=kC5L4IJoERM

In 1993, American legal clerk and environmental activist who

had no formal law school education was instrumental in bringing a case against Pacific

Gas and Electric Company (PG&E). The case alleged

contamination of drinking water . It was alleged that this caused

high rates of cancer in the area. The company settled in 1996 for

$333million dollars.

In 1993, American legal clerk and environmental activist who

had no formal law school education was instrumental in bringing a case against Pacific

Gas and Electric Company (PG&E). The case alleged

contamination of drinking water . It was alleged that this caused

high rates of cancer in the area. The company settled in 1996 for

$333million dollars.

Case Study: Watergate Scandal

Co

The Watergate scandal happened when United States President Richard Nixon, a Republican was tied to a crime in which former FBI and CIA agents broke into the offices of the Democratic Party. Nixon’s helpers listened to phone lines and secret papers were stolen. This was against the law. He repeatedly lied and covered-up his involvement. A whistleblower (codenamed Deepthroat) was instrumental in bringing the crime to light. Nixon resigned.

The Watergate scandal happened when United States President Richard Nixon, a Republican was tied to a crime in which former FBI and CIA agents broke into the offices of the Democratic Party. Nixon’s helpers listened to phone lines and secret papers were stolen. This was against the law. He repeatedly lied and covered-up his involvement. A whistleblower (codenamed Deepthroat) was instrumental in bringing the crime to light. Nixon resigned.

Freedom to Care

Organisations have now been set up to protect whistleblowers. Freedom to care promotes our ethical right to accountable behaviour from large

organisations. It argues that employees have an ‘ethical right’ to express serious public concerns in the workplace and if necessary, go public.

Organisations have now been set up to protect whistleblowers. Freedom to care promotes our ethical right to accountable behaviour from large

organisations. It argues that employees have an ‘ethical right’ to express serious public concerns in the workplace and if necessary, go public.

Work through the issues:• Complete the case studies questions in

pairs:

HomeworkHomework

• Case Study. Chocolate and Coal. Read and answer the questions.

Discuss:Discuss:

• What kind of responsibilities do you have towards your employer?

The Relationship between Business and Globalisation

http://www.youtube.com/watch?v=3kZUv1YjZ3c

Homework

• Make notes from both textbooks answering the questions as you go through.

• Remember that next lesson, you are presenting your case studies and ethical theories!

Have a guess?

• How many restaurants does Mcdonalds have?

• How many people does Mcdonalds employ?

• How many countries have a McDonalds?

How has life changed over the last 100 years because of Globalisation?

How has life changed over the last 100 years because of Globalisation?

The reasons for globalisation

1. Technological change – especially in communications technology (switchboards in India)

2. Transport is faster and cheaper

3. Deregulation – increase in privatisation, so countries now able to own businesses in other countries

4. Removal of capital exchange controls – money can now be moved easily from one country to another

5. Free trade – many trade barriers have been removed; many by grouping such as the EU

6. Consumer tastes have changed – people are now more willing to try foreign products

Globalisation: good or bad?

Good

•Cheaper products•Provide jobs for those in less developed countries•Makes links between counties and businesses

Bad

•Open to exploitation

Exploitation Vs Benefits

Globalisation and Unfair Trade

Free Choice Defence

“In a typical developing nation, if you’re able to work for an American multinational, you make eight times the average wage. That’s why people are lining up to get these jobs.”

- Johan Norberg – In Global Defence of Capitalism

• The choice isn’t always a free one – there is no real alternative (but not physically forced)

• But, are we powerless to offer other choices?• The individual has autonomy – are we limiting this?

Better than Nothing Defence

“.......because a lousy job is better than none at all.”

- National Centre for Policy Analysis

• The question is, what if the alternative is nothing?

e.g. Junk food is better than no food

Is it a good idea to pull out when a supplier is found to be immoral?

No Sweat Movement

http://www.nosweat.org.uk/

No Sweat exists to fight against sweatshop exploitation. We organise solidarity for sweatshop workers from the UK to the four corners of the world. We stand for workers' self-organisation, international solidarity and for the right to organise in every workplace.

Legality Defence

• There is a tendency to comply with regulation and assume that this is enough. Is it?

• Lots of things are legal, but not necessarily ethical

e.g. Tax evasion Vs Tax avoidance

Anti-globalisation

The WCC (World Council of Churches) campaigns for responsible lending and unconditional debt cancellation.This project brings churches and partners together to reflect on the connections between poverty, wealth and ecology; act against economic injustice; address just trade, ecological debt, and decent work:http://www.youtube.com/watch?v=ryqZY3ADUsU

‘Globalisation is the best approach for all stakeholders

in multi-national business’

Discuss?

Business and the Environment

All businesses impact on the environment: they emit pollution, they produce waste and use resources. Businesses, however, are continually being encouraged to improve their approach to environmental issues.

Every year there is a prestigious award, the Business Commitment to the Environment Award, and in 2007 the Co-operative was one of the winners for its response to global climate change. Some of its efforts for the environment include: the reduction by 86% of its CO2 emissions, use of 98% green electricity and the ethical investment policy of the Co-operative bank.

Case Study: Anglo American

They are one of the twenty largest UK based companies, heavily involved in mining and quarrying. When Anglo American carries out its mining operations it tries to have a positive effect in three areas:

• In the area where the mine is located, it carries out its operations with care and tries to improve the lives of local people e.g. Minimising noise and other types of pollution.

• In the area immediately surrounding the mine, it is active in conservation and improvement.

• In the wider region around the mine, it contributes financially to local communities and helps generate new businesses.

http://www.youtube.com/watch?v=cTWSlOmeoMo

Utilitarian ethics offers the best approach to the morality of

business ethics? (35 marks)