B368 Business Issues and Ethics

1
B368 Business Issues and Ethics

• Group 7
• Final Revision
• C.S. Lai
• Jan. 2013

2
Welcome! todays agenda

• QA
• Examination and Review
• QA

3
Examination Review
4
Format

• Please refer to the Specimen Examination Paper.

5
Tips for preparing for the exam.

1. Read the Course Guide
2. Read the Course Guide
3. Read the Course Guide
4. Review the TMAs
5. Actively participate in the following activities
6. Relax, sleep well, and enjoy!

6
Topics to review

• Factoring affecting individual decisions
• Issue-related and context-related factors that
  influence moral decisions.
• Discrimination
• Foreign firms' operations
• Corporate governance
• Corporate responsibility
• Pricing issues
• Relationships between society and business ethics
• Buyer-seller relationships

7
Summary of Tutorial 1

• What is business ethics?
• Why is business ethics important?
• Globalization a key context for business ethics?
• Sustainability a key goal for business ethics?

8
What is business ethics?

• Business ethics is the study of business
  situations, activities, and decisions where
  issues of right and wrong are addressed.

9
Why is business ethics important?

1. Power and influence of business in society
2. Potential to provide major contribution to
   society
3. Potential to inflict harm
4. Increasing demands from stakeholders
5. Lack of business ethics education or training
6. Continued occurrence of ethical infractions
7. Evaluating different ways of managing business
   ethics
8. Interesting and rewarding

10
Models of ethical decision-making
11
Stages in ethical decision-making
Ethical decision-making process
Source Derived from Rest (1986), as cited in
Jones (1991).
12
Relationship with normative theory

• The role of normative theory in the stages of
  ethical decision-making is primarily in relation
  to moral judgement
• Moral judgements can be made according to
  considerations of rights, duty, consequences,
  etc.
• Commercial managers tend to rely on
  consequentialist thinking
• However, the issue of whether and how normative
  theory is used by an individual decision-maker
  depends on a range of different factors that
  influence the decision-making process

13
Influences on ethical decision-making

• Two broad categories individual and situational
  (Ford and Richardson 1994)
• Individual factors - unique characteristics of
  the individual making the relevant decision
• Given at birth
• Acquired by experience and socialisation
• Situational factors - particular features of the
  context that influence whether the individual
  will make an ethical or unethical decision
• Work context
• The issue itself including
• intensity
• ethical framing

14
Framework for understanding ethical
decision-making
15
Limitations of ethical decision-making models

• Models useful for structuring discussion and
  seeing the different elements that come into play
• Limitations
• Not straightforward or sensible to break model
  down into discrete units
• Various stages related or interdependent
• National or cultural bias
• Model is intended not as a definitive
  representation of ethical decision-making, but as
  a relatively simple way to present a complex
  process

16
European perspectives on ethical decision-making

• Research on individual factors influencing
  ethical decision-making has a strong US and Asian
  bias
• Consistent with choice within constraints
• Research on situational factors originated by
  European authors
• Consistent with concern for constraints themselves

17
Individual influences on ethical decision-making
18
Individual influences on ethical decision-making
19
Age and gender

• Age
• Results contradictory
• However experiences may have impact
• Gender
• Individual characteristic most often researched
• Results contradictory
• These categories too simplistic

20
National and cultural characteristics

• People from different cultural backgrounds likely
  to have different beliefs about right and wrong,
  different values, etc. and this will inevitably
  lead to variations in ethical decision-making
  across nations, religions and cultures
• Hofstede (1980 1994) influential in shaping our
  understanding of these differences our mental
  programming
• Individualism/collectivism
• Power distance
• Uncertainty avoidance
• Masculinity/femininity

21
Education and employment

• Type and quality of education may be influential
• E.g. business students rank lower in moral
  development than others and more likely to cheat
• Amoral business education reinforces myth of
  business as amoral

22
Psychological factors

• Cognitive moral development (CMD) refers to the
  different levels of reasoning that an individual
  can apply to ethical issues and problems
• 3 levels (details next slide)
• Criticisms of CMD
• Gender bias
• Implicit value judgements
• Invariance of stages
• An individuals locus of control determines the
  extent to which they believe that they have
  control over the events in their life

23
Psychological factorsStages of cognitive moral
development
Source Adapted from Ferrell et al. (2002)
Kohlberg (1969) Trevino and Nelson (1999)
24
Psychological factorsStages of cognitive moral
development
Level Level Stage Stage Explanation Illustration
III Postconventional 5 Social contract and individual rights Individuals go beyond identifying with others expectations, and assesses right and wrong according to the upholding of basic rights, values and contracts of society. The public affairs manager of a food manufacturer may decide to reveal which of the firms products contain genetically modified ingredients out of respect for consumers rights to know, even though they are not obliged to by law, and have not been pressurised into by consumers or anyone else.
III Postconventional 6 Universal ethical principles Individuals will make decisions autonomously based on self-chosen universal ethical principles, such as justice, equality, and rights, which they believe everyone should follow. A purchasing manager may decide that it would be wrong to continue to buy products or ingredients that were tested on animals because he believes this doesnt respect animal rights to be free from suffering.
25
Personal values, integrity moral imagination

• Personal values
• an enduring belief that a specific mode of
  conduct or end-state of existence is personally
  or socially preferable to an opposite or converse
  mode of conduct or end-state (Rokeach 19735)
• Personal integrity
• Defined as an adherence to moral principles or
  values
• Moral imagination
• Concerned with whether one has a sense of the
  variety of possibilities and moral consequences
  of their decisions, the ability to imagine a wide
  range of possible issues, consequences, and
  solutions (Werhane, 199876)

26
Situational influences on decision-making
27
Situational influences on ethical decision-making
28
Moral Intensity

• Jones (1991374-8) proposes that the intensity of
  an issue will vary according to six factors
• Magnitude of consequences
• Social consensus
• Probability of effect
• Temporal immediacy
• Proximity
• Concentration of effect

29
Moral framing

• The same problem or dilemma can be perceived very
  differently according to the way that the issue
  is framed
• Language important aspect of moral framing
• E.g. Layoff restructuring
• Moral muteness (Bird Walters 1989) because of
• Harmony
• Efficiency
• Image of power and effectiveness

30
How ethical decisions are justified
rationalization tactics
31
Systems of reward

• Adherence to ethical principles and standards
  stands less chance of being repeated and spread
  throughout a company when it goes unnoticed and
  unrewarded
• What is right in the corporation is not what is
  right in a mans home or in his church. What is
  right in the corporation is what the guy above
  you wants from you. Thats what morality is in
  the corporation (Jackall, 19886)

32
Authority and Bureaucracy

• Authority
• People do what they are told to do or what they
  think theyre being told to do

• Bureaucracy
• Jackall (1988), Bauman (1989, 1993) and ten Bos
  (1997) argue bureaucracy has a number of negative
  effects on ethical decision-making
• Suppression of moral autonomy
• Instrumental morality
• Distancing
• Denial of moral status

33
Work roles and organisational norms culture

• Work roles
• Work roles can encapsulate a whole set of
  expectations about what to value, how to relate
  to others, and how to behave
• Can be either functional or hierarchical

Organisational norms and culture

• group norms delineate acceptable standards of
  behaviour within the work community
• E.g. ways of talking, acting, dressing or
  thinking etc.

34
National and cultural context

• Instead of looking at the nationality of the
  individual making the decision now we are
  considering the nation in which the decision is
  actually taking place, regardless of the
  decision-makers nationality
• Different cultures still to some extent maintain
  different views of what is right and wrong

35
Summary

• Discussed the various stages of and influences on
  ethical decision-making in business
• Presented basic model of decision-making
• Outlined individual and situational influences on
  ethical decision-making
• Suggested that some individual factors such as
  cognitive moral development, nationality and
  personal integrity are clearly influential
• Suggested that in terms of recognising ethical
  problems and actually doing something in response
  to them, it is situational factors that appear to
  be most influential

36
Can a corporation have social responsibilities?

• Milton Friedman 1970 classic article The social
  responsibility of business is to increase its
  profits
• Vigorously argued against the notion of social
  responsibilities for corporations based on three
  main arguments
• Only human beings have a moral responsibility for
  their actions
• It is managers responsibility to act solely in
  the interests of shareholders
• Social issues and problems are the proper
  province of the state rather than corporate
  managers

37
Can a corporation be morally responsible for its
actions?

• Evidence to suggest that legal designation of a
  corporation makes it unable to be anything but
  self-interested (Bakan 2004)
• Long and complex debate but generally support
  from literature for some degree of responsibility
  accredited to corporations
• Argument based on
• Every organisation has a corporate internal
  decision structure which directs corporate
  decisions in line with predetermined goals
  (French 1979)
• All organisations manifest a set of beliefs and
  values that lay out what is generally regarded as
  right or wrong in the corporation
  organizational culture (Moore 1999)

38
Traditional ethical theories

• Generally offer a certain rule or principle which
  one can apply to any given situation
• These theories generally can be differentiated
  into two groups

Motivation/ Principles
Action
Outcomes
Consequentialist Ethics
Non-consequentialist Ethics
Source Crane and Matten (2007)
39
(No Transcript)
40
Typical Perspective
41
Pluralistic Perspective
42
Framework for understanding ethical
decision-making
43
Stakeholder theory of the firma network model
44
Individual influences on ethical decision-making
45
Individual influences on ethical decision-making
46
Age and gender

• Age
• Results contradictory
• However experiences may have impact
• Gender
• Individual characteristic most often researched
• Results contradictory
• These categories too simplistic

47
National and cultural characteristics

• People from different cultural backgrounds likely
  to have different beliefs about right and wrong,
  different values, etc. and this will inevitably
  lead to variations in ethical decision-making
  across nations, religions and cultures
• Hofstede (1980 1994) influential in shaping our
  understanding of these differences our mental
  programming
• Individualism/collectivism
• Power distance
• Uncertainty avoidance
• Masculinity/femininity

48
Education and employment

• Type and quality of education may be influential
• E.g. business students rank lower in moral
  development than others and more likely to cheat
• Amoral business education reinforces myth of
  business as amoral

49
Psychological factors

• Cognitive moral development (CMD) refers to the
  different levels of reasoning that an individual
  can apply to ethical issues and problems
• 3 levels (details next slide)
• Criticisms of CMD
• Gender bias
• Implicit value judgements
• Invariance of stages
• An individuals locus of control determines the
  extent to which they believe that they have
  control over the events in their life

50
Psychological factorsStages of cognitive moral
development
Source Adapted from Ferrell et al. (2002)
Kohlberg (1969) Trevino and Nelson (1999)
51
Psychological factorsStages of cognitive moral
development
Level Level Stage Stage Explanation Illustration
III Postconventional 5 Social contract and individual rights Individuals go beyond identifying with others expectations, and assesses right and wrong according to the upholding of basic rights, values and contracts of society. The public affairs manager of a food manufacturer may decide to reveal which of the firms products contain genetically modified ingredients out of respect for consumers rights to know, even though they are not obliged to by law, and have not been pressurised into by consumers or anyone else.
III Postconventional 6 Universal ethical principles Individuals will make decisions autonomously based on self-chosen universal ethical principles, such as justice, equality, and rights, which they believe everyone should follow. A purchasing manager may decide that it would be wrong to continue to buy products or ingredients that were tested on animals because he believes this doesnt respect animal rights to be free from suffering.
52
Personal values, integrity moral imagination

• Personal values
• an enduring belief that a specific mode of
  conduct or end-state of existence is personally
  or socially preferable to an opposite or converse
  mode of conduct or end-state (Rokeach 19735)
• Personal integrity
• Defined as an adherence to moral principles or
  values
• Moral imagination
• Concerned with whether one has a sense of the
  variety of possibilities and moral consequences
  of their decisions, the ability to imagine a wide
  range of possible issues, consequences, and
  solutions (Werhane, 199876)

53
Ethical issues in the firm-employee relation
54
Management of human resources an ethical
problem between rights and duties

• The term human resource management and its
  implications have been a subject of intense
  debate in business ethics
• Humans treated as important and costly resource
• Consequently, employees are subject to a strict
  managerial rationale of minimising costs and
  maximising the efficiency of the resource

55
Rights of employees as stakeholders of the firm
56
Duties of employees as stakeholders of the firm
Employee duties Issues involved
Duty to comply with labour contract Acceptable level of performance Work quality Loyalty to the firm
Duty to comply with the law Bribery
Duty to respect the employers property Working time Unauthorized use of company resources for private purposes Fraud, theft, embezzlement
57
Discrimination

• Discrimination in the business context occurs
  when employees receive preferential (or less
  preferential) treatment on grounds that are not
  directly related to their qualifications and
  performance in the job
• Managing diversity prominent feature of
  contemporary business
• Extensive legislation
• Institutional discrimination discrimination
  deeply embedded in business

58
Sexual and racial harassment

• Issues of diversity might be exploited to inflict
  physical, verbal, or emotional harassment
• Regulation reluctant
• Blurred line between harassment on one hand and
  joking on the other
• Influenced by contextual factors such as
  character, personality, and national culture
• Companies increasingly introduced codes of
  practice and diversity programmes (Crain and
  Heischmidt 1995)

59
Equal opportunities and affirmative action

• How should organizations respond to problems of
  discrimination?
• Equal opportunity programme
• Generally targeted at ensuring procedural justice
  is promoted
• Affirmative action (AA) programmes deliberately
  attempt to target those who might be currently
  under-represented in the workforce
• Recruitment policies
• Fair job criteria
• Training programmes for discriminated minorities
• Promotion to senior positions

60
Reverse discrimination

• In some cases, people suffer reverse
  discrimination because AA policies prefer certain
  minorities
• Justification for reverse discrimination
• Retributive justice past injustices have to be
  paid for
• Distributive justice rewards such as job and pay
  should be allocated fairly among all groups
  (Beauchamp 1997)
• Stronger forms of reverse discrimination tend to
  be illegal in many European countries

61
Globalization a key context for business ethics?
62
What is globalization?

• According to Scholte (2000) globalization is not
• internationalization
• liberalization
• universalization
• westernization
• Globalization is the progressive eroding of the
  relevance of territorial bases for social,
  economic and political activities, processes and
  relations
• deterritorialization

63
Relevance of globalization for business ethics

• Cultural issues
• Legal issues
• Accountability issues
• Globalization can affect all stakeholders of the
  corporation

64
Ethical impacts of globalization
65
Globalization as a context for business ethics

• First aspect of globalization is that much
  corporate activity takes place in multiple
  national contexts
• Exposes companies to different cultural and legal
  environments
• Second aspect of globalization creates a social
  space beyond the power of single nation states
• For many business ethics problems, no single
  nation state is able to regulate and control
  corporate actors

66
Shareholders as stakeholders

• Understanding corporate governance

67
Crucial problem separation of ownership and
control

• Peculiarities of corporate ownership
• Locus of control
• Fragmented ownership
• Divided functions and interests

68
Rights and duties in firm-shareholder relations

• Rights of shareholders
• The right to sell their stock
• The right to vote in the general meeting
• The right to certain information about the
  company
• The right to sue the managers for (alleged)
  misconduct
• Certain residual rights in case of the
  corporations liquidation
• Duties of managers
• Duty to act for the benefit of the company
• Duty of care and skill
• Duty of diligence

69
Corporate governance

• Corporate governance definition
• Describes the process by which shareholders seek
  to ensure that their corporation is run
  according to their intentions. It includes
  processes of goal definition, supervision,
  control, and sanctioning. In the narrow sense it
  includes shareholders and the management of a
  corporation as the main actors in a broader
  sense it includes all actors who contribute to
  the achievement of stakeholder goals inside and
  outside the corporation

70
Corporate governance a principal-agent relation
Principal Shareholder
Seeks profits, rising share price, etc.
Agent Manager
Seeks remuneration, power, esteem etc.

• Features of agency relations
• Inherent conflict of interest
• Informational asymmetry

71
Ethical issues in corporate governance
72
Executive accountability and control (I)

• A separate body of people that supervises and
  controls management on behalf of shareholders
• Dual structure of leadership
• executive directors are actually responsible for
  running the corporation
• non-executive directors are supposed to ensure
  that the corporation is being run in the
  interests of the shareholders
• Anglo-Saxon model single-tier board
• European model two-tier boards, lower tier
  executive directors, and upper tier
  supervisory board

73
Executive accountability and control (II)

• The central ethical issue here is the
  independence of the supervisory, non-executive
  board members
• No directly conflicting interests ensured by
• Typically drawn from outside the corporation
• No personal financial interest in the corporation
• Appointed for limited time
• Competent to judge the business of the company
• Sufficient resources to get information
• Appointed independently

74
Executive remuneration

• Fat cat salary accusations
• E.g. average CEO salary in Britain 6.5m (highest
  CEO salaries in 2008 Europe, 77m, USA, 84m)
• E.g. average annual pay rise for CEOs 11
• CEO increases outstrip shareholder returns
• Ethical problems with executive pay
• Performance-related pay leads to large salaries
  that cause unrest within corporations
• Influence of globalisation on executive pay leads
  to significant increases
• Board often fails to reflect shareholder (or
  other stakeholder) interests

75
Ethical aspects of mergers and acquisitions

• Acceptable if results in transfer of assets to
  owner who uses them more productively
• Central concern is managers who pursue interests
  not congruent with shareholder interests
• Executive prestige vs. profit and share price
• Two ethically-questionable options for managers
  (Carroll and Buchholtz, 2008)
• Seduced with golden parachute for cooperation
• Greenmailing to secure post-merger job
• Hostile takeovers concern when shareholders do
  not want to sell
• Intentions and consequences of mergers and
  acquisitions
• Restructuring and downsizing

76
The role of financial markets and insider trading

• Speculative faith stocks
• dot-com bubble (companies not made any profit
  but worth billions on the market)
• Ethical issue bonds based entirely on
  speculation without always fully revealing amount
  of uncertainty
• Insider trading
• Insider trading occurs when securities are bought
  and sold on the basis of material non-public
  information (Moore 1990)
• Ethical arguments (Moore, 1990)
• Fairness
• Misappropriation of property
• Harm to investors and the market
• Undermining of fiduciary relationship
• Insider trading can erode trust in the market in
  the long term hence its illegality

77
The role of financial professionals and market
intermediaries

• Two crucial professions Accountants credit
  ratings agencies
• Task is to provide a true and fair view of the
  firm i.e. bridge informational asymmetry
• Five main problematic aspects of financial
  intermediarys job
• Power and influence in markets
• Conflict of interest (e.g. cross-selling)
• Long-term relationships with clients
• Size of the firm
• Competition between firms (danger of
  corner-cutting)

78
Private equity and hedge-funds

• Rise of private equity and hedge funds exacerbate
  issues around transparency and shareholder
  control
• Most general concern
• There are no longer many obligations for public
  information about a company once it has been
  taken private
• Hedge funds do not have to report to regulators
  in the same way as other investment firms
• Dont even have to report fully to own investors
• Suggestion is this lack of transparency hides
  systemic risk

79
Corporate Social Responsibility
80
Why do corporations have social responsibilities?

• Business reasons (enlightened self-interest)
• Extra and/or more satisfied customers
• Employees may be more attracted/committed
• Forestall legislation
• Long-term investment which benefits corporation
• Moral reasons
• Corporations cause social problems
• Because they are powerful, corporations should
  use their power and resources responsibly
• All corporate activities have social impacts of
  one sort or another
• Corporations rely on the contribution of a wide
  set of stakeholders in society rather than just
  shareholders

81
Activity

• Pick an organization that youre familiar with
• Identify the activities that this organization
  have done in order to fulfill its social
  responsibilities.
• E.g.
• Diageo is promoting responsible drinking (Ethics
  in Action 2.1)
• CLP is planting trees.
• If you re the boss of that organization, will
  you support the social responsibility initiatives
  by contributing and time? Why and why not?

82
What is the nature of corporate social
responsibilities?

• Corporate social responsibility encompasses the
  economic, legal, ethical, and philanthropic
  expectations placed on organizations by society
  at a given point in time
• (Carroll Buchholtz 200035)

83
Carrolls four-part model of corporate social
responsibility
Desired by society
Philanthropic Responsibilities
Expected by society
Ethical Responsibilities
Required by society
Legal Responsibilities
Required by society
Economic Responsibilities
Source Carroll (1991)
84
CSR in a European context

• CSR particularly strong concept in US and only
  more recently become so influential in Europe
• Difference due to explicit CSR is US and implicit
  CSR in Europe
• Could argue that all levels of CSR play a
  different role in Europe
• Economic responsibility
• USA strongly focused on responsibility to
  shareholders
• Europe focused on the economic responsibility to
  employees and local communities as well
• Legal responsibility
• State accepted as prominent force in enforcing
  rules of the game rather than as interfering in
  it
• Ethical responsibility
• Europeans tend to exhibit greater mistrust of
  modern corporations than US
• Philanthropic responsibility
• In Europe mostly been implemented compulsorily
  via the legal framework rather than via
  discretionary acts of successful companies (US)

85
CSR and strategy corporate social responsiveness

• Corporate social responsiveness refers to the
  capacity of a corporation to respond to social
  pressures (Frederick 1994)
• 4 philosophies or strategies of social
  responsiveness (Carroll 1979)
• Reaction
• Defence
• Accommodation
• Proaction

think about the activity you just donewhich
strategy the organization you mentioned was using?
86
Outcomes of CSR corporate social performance

• Outcomes delineated in three concrete areas
• Social policies
• Social programmes
• Social impacts

87
Ethical issues and the consumer
88
Ethical issues, marketing and the consumer
89
Ethical issues in marketing management - pricing

• Pricing issues are central to the notion of a
  fair exchange between the two parties, and the
  right to a fair price - key rights of consumers
  as stakeholders
• 4 types of pricing practices where ethical
  problems may arise
• Excessive pricing
• Price fixing
• Predatory pricing
• Deceptive pricing

90
Civil Society and Business Ethics
91
Overview

• Show how the role played by various types of
  civil society organisations in society
  constitutes them as important stakeholders of
  corporation
• Examine the tactics that such groups might employ
  towards corporations to achieve their purposes
• Discuss the impacts of globalisation on the
  nature and extent of the role played by civil
  society towards corporations
• Discuss the appropriate relationships between
  business and civil society
• Assess the role of civil society in providing for
  enhanced corporate sustainability

92
Civil Society as third sector
State sector Government
Market sector Business
Civil society sector Including NGOs, pressure
groups, charities, unions, etc
93
Civil society organisations

• Civil society organisations include a whole
  plethora of pressure groups, non-governmental
  organisations, charities, religious groups, and
  other actors that are neither business nor
  government organisations, but which are involved
  in the promotion of certain interests, causes,
  and/or goals

94
Diversity in CSO characteristics
Scope Individual Grass-roots Local Regional Nation
al Transnational Global
Type Community group Campaign group Research
organization Business association Religious
group Trade union Technical body
CSOs
Structure Informal Formal Co-operative Professiona
l Entrepreneurial Network
Activities Academic research Market
research Policy research Information
provision Campaigning Protests demos Boycott
co-ordination
Focus Natural environment Social
issues Development Poverty alleviation Human
rights Animal welfare
Source adapted from McIntosh and Thomas (2002
31)
95
Civil society organisations as stakeholders
96
Civil society organisations as stakeholders

• The stake hold by CSOs is largely one of
• Representing the interests of individual
  stakeholders
• Representing the interests of non-human
  stakeholders

97
Different types of CSOs
Sectional groups Promotional groups
Membership Closed Open
Represent Specific section of society Issues or causes
Aims Self-interest Social goals
Traditional status Insider Outsider
Main approach Consultation Argument
Pressure exerted through Threat of withdrawal Mass media publicity
98
Ethical issues and CSOs
99
Recognising CSO stakes

• Many of these groups tend to self-declare
  themselves as stakeholders in a particular issue
  (Wheeler et al. 2002)
• Issuing statements
• Launching campaigns
• Initiating some kind of action towards the
  corporation
• Self-declaring does not necessarily lead to
  recognition

100
CSO tactics

• Indirect action
• Provision of misleading information
• Violent direct action
• Often illegal
• Tends to generate the most publicity
• Is this action civil at all?
• Non-violent direct action
• Demonstrations and marches
• Protests
• Boycotts
• Occupations
• Non-violent sabotage and disruption
• Stunts
• Picketing

101
Boycotts

• A boycott is an attempt by one or more parties to
  achieve certain objectives by urging individual
  consumers to refrain from making selected
  purchases in the marketplace
• Four different purposes for boycotts
• Instrumental boycotts
• Catalytic boycotts
• Expressive boycotts
• Punitive boycotts

102
Some well-known boycotts in Europe
103
CSO accountability

• CSO stakeholders might be said to include
• Beneficiaries
• Donors
• Members
• Employees
• Governmental organisations
• Other CSOs
• General public (especially those who support
  their ideals)
• Recently, growing number of organizations similar
  to CSOs being initiated within business
• Accountability of CSOs to their supposed
  beneficiaries that tends to raise the most debate
• Force agendas on beneficiaries without
  understanding needs
• Limited involvement of beneficiaries in decision
  making
• CSO donor interests receive higher priority
• Lack of effective mechanisms for beneficiaries to
  feedback on CSO performance

104
Globalisation and civil society organisations
105
Globalisation and civil society organisations

• Globalization reshaping relations between
  corporations and CSOs
• Engagement with overseas CSOs
• Potentially new set of unfamiliar groups
• Many developing and transitional economies lack
  strong and institutionalized civil society
• Global issues and causes
• Problems that transcend national boundaries (e.g.
  climate change and human rights
• Critique of globalization
• Globalisation of CSOs
• the resistance will be as transnational as
  capital
• Global civil society

106
Corporate citizenship and civil society

• Charity, collaboration, or regulation?

107
Charity and community giving

• Starting point for a consideration of business
  involvement in civil society
• One-way support benefits communities and civil
  action but does not usually allow them much voice
  in shaping corporate action
• Scale of significant giving considerably greater
  in USA, because (Reingold, 1993)
• US corporations enjoy generous tax breaks on
  charitable donations
• US corporations tend to pay less in terms of
  taxation to support social welfare
• American companies give much more to organised
  religion

108
Business-CSO collaboration

• Closer and more interactive relations between
  civil society and corporations
• Sometimes called social partnerships
• Limitations of business-CSO collaboration
• Difficulties managing relations between such
  culturally diverse organisations
• Difficulties ensuring consistency and commitment
• Partnership appear to mask continuing hostility
  and/or power imbalances between the partners
• The question of power imbalance
• The distribution of the benefits of partnerships
• CSO independence

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Some examples of business-CSO collaborations
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Drivers towards business-CSO partnerships
Drivers for business engagement with CSOs Drivers for CSO engagement with business
Consumer expectations Growing interest in markets
NGO credibility with public Disenchantment with government as provider of solutions
Need for an external challenge Need for more resources
Cross-fertilisation of thinking Credibility of business with government
Greater efficiency in resource allocation Cross-fertilisation of thinking
Desire to head off negative public confrontation and protect image Access to supply chains
Desire to engage stakeholders Greater leverage
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Civil Regulation

• Civil regulation is the ability and power of CSOs
  to shape, influence or curb business practice
• Focus on relations and outcomes
• Key drawback is that regulation is voluntary
• Key point - civil society can act as a conduit
  through which individuals citizens can exert some
  kind of leverage on, or gain a form of
  participation in, corporate decision-making and
  action

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Civil society, business, and sustainability
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Balancing competing interests

• Civil society wide variety of disparate actors
  promoting different issues
• Business must take account of these different
  issues simultaneously
• E.g. energy industry wind power
• Groups supporting wind power as clean source of
  renewable energy that supports local areas
  financially
• Groups against wind power because they despoil
  the countryside

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Towards participation and empowerment

• Organizationsthat affect you and your
  community, especially when they affect the
  material foundations of your self-determination,
  must be able to be influenced by you and your
  communityWhat are required are new forms of
  democratic governance so that people can
  determine their own futures in a sustainable
  environment
• (Bendell, 2000249)

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Summary

• Discussed the role that civil society has played
  in business ethics
• Taken a fairly broad definition of what
  constitutes civil society
• The representational nature of CSO stakes makes
  their claim rather more indirect than for other
  constituencies
• Gradual shift in the nature of business-CSO
  relations from primarily confrontational to a
  more complex multifaceted relationship that still
  involves confrontation, but also charitable
  giving, collaboration and aspects of civil
  regulations

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Ethical issues and suppliers
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Ethical issues

• Misuse of power
• The question of loyalty
• Preferential treatment
• Conflicts of interest
• A conflict of interest occurs when a persons or
  organisations obligation to act in the interests
  of another is interfered with by a competing
  interest that may obstruct the fulfilment of that
  obligation

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Ethical issues (2)

• Gifts, bribes and hospitality
• Consider the intention of the gift giver
• Look at the impact on the receiver
• Focus on the perception of other parties
• Many large organisations have a formal purchasing
  code of ethics
• Guidelines provided by professional bodies such
  as the International Chartered Institute of
  Purchasing and Supply

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Ethics of negotiation

• Ethics and negotiation oil and water?
• Reitz et al. (1998) list ten popular negotiating
  actions
• Lies
• Puffery
• Deception
• Weakening the opponent
• Strengthening ones own position
• Non-disclosure
• Information exploitation
• Change of mind
• Distraction
• Maximisation

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Ethics of negotiation (2)

• According to Reitz et al. (1998) a more ethical
  approach to negotiating should steer clear of
  these tactics.
• Because
• Right thing to do
• Such practices incur costs for the negotiator
• Rigid negotiating
• Damaged relationships
• Sullied reputation
• Lost opportunities

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Activity

• Ethical Dilemma 9 A beautiful Deal

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• Ethical Issues
• Fairenss, relationship, loyalty, other
  responsiblities Vs. Costs, Animal testing
• Conflict of interest Personal relationship with
  a/c manager
• Ethical Theories
• Consequentialist (cost and benefit of the
  decision maker)
• Utilitarian (Overall costs benefit to consumers,
  societyetc.)
• Rights (of existing suppliers, animal
  rightsetc.)
• Justice , rights
• Main considerations
• Due process (in contracting)
• Fair distribution of benefits
• Rights of various stakeholders (existing
  supplier, new supplier, the firm, consumers,
  animalsetc.)
• Cost benefits, long term vs. short term
• How to proceed?
• Maintains balance!