ISM University Business Ethics and Sustainability Lecture 1 PDF

ISM University Business Ethics and Sustainability Lecture 1 Topic 1 - Ethics: Scope and Purpose Lecturer: Dr. Victor Oltra Degree in International Business and Communication Vilnius, 5 September 2024 The materials provided by th...

ISM University Business Ethics and Sustainability Lecture 1 Topic 1 - Ethics: Scope and Purpose Lecturer: Dr. Victor Oltra Degree in International Business and Communication Vilnius, 5 September 2024 The materials provided by the instructor in this course are for the use of the students enrolled in Fall Semester 2024. Copyrighted course materials may not be further disseminated. To ensure the free and open discussion of ideas, students may not record classroom lectures, discussions and/or activities.  Topic 1. Ethics: Scope and Purpose 2 1.1. Ethics through history - some influences 1.2. Concept of Ethics 1.3. Concept and importance of Business Ethics 1.4. Concept and importance of Sustainability 1.5. Globalization and Business Ethics  1.1. Ethics through history - some influences 3 Ancient Mesopotamia Hammurabi’s code. Old Testament Law of Moses - Ten Commandments. Servants have a right for a sabbath (resting day). Roman Catholic Church Cannon Law in the Middle Ages – defining what is “right” and what is “wrong”  often oriented towards defining fair prices and wage. Rise of Protestantism Questioning the doctrine of papal infallibility. Church was no longer intermediary between God and humanity. Rise of Capitalism Urbanization - migration from the countriside to the city. Victorian era & colonialism/imperialism. (Source: An Introduction to Business Ethics,Chryssides & Kaler,1993)  1.2. Concept of ethics 4 Morality (from Latin moralitas - "proper behaviour/character") Norms, values & beliefs (embedded in social processes) which define what is right and wrong for an individual (also for a community). Answers (beliefs based on practices or teaching) that people have developed in ancient times in different cultural circles. - Examples: The Ten Commandments, The Golden Rule. Ethics (from Greek ethos - "character/habit”) Sum of norms, values and principles as well as rites, confessions and customs of a social system - Examples: economic (ethos), working (ethos) … that Ethics … to can be rationalizes produce applied to morality … ethical any theory … Ethical situation Potential Morality Ethics solutions theory to ethical problems (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)  5 1.3. Concept and importance of business ethics Ethics Study of morality and the application of reason to elucidate specific rules and principles that determine morally acceptable behaviour. Ethical theories  codifications of these rules and principles. Reflection on and checking of existing morality (proper behaviour, character) / Ethos (character, custom, habit) – emphasis on society. Ethics can be understood as an inquiry into the morality. Aim: Healthy, good, and humane living together in a community. Business ethics The study of business situations, activities, and decisions where issues of right and wrong are addressed  implies evaluating different ways of tackling ethical issues in business. Grey area: Ethical dilemma that cannot be resolved by simply applying ethical standards (e.g., these standards may conflict with the law, or there are no clearly applicable ethical guidelines). Ethical codes: corporate guidelines aimed at reducing grey areas. (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019 / An Introduction to Business Ethics, Chryssides & Kaler,1993)  6 1.3. Concept and importance of business ethics Reasons for the importance of business ethics Power and influence of business organizations in society Potential for business organizations to contribute better to society. Potential for business organizations to inflict harm on individuals, society and the environment. Increasing demands from stakeholders. Deficit of business ethics education or training. Employees face significant pressure to compromise ethical standards. Continued occurrence of ethical infractions, and trust deficit faced by business organizations. Business ethics is interesting and rewarding. (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)  7 1.3. Concept and importance of business ethics  8 1.3. Concept and importance of business ethics Fraud is harmful for business Worsened corporate reputation and image. Risks for not directly fraud-participating business partners. Unfair competition – inefficiency of the markets, the economy, etc. Reasons for ethics deficits Structural reasons. Missing values towards addressing injustice. “Grey zones”. Organizational culture mirrors society values – and their evolution. (Source: An Introduction to Business Ethics, Chryssides & Kaler,1993)  9 1.3. Concept and importance of business ethics https://images.transparencycdn.org/images/CPI-2023-Report.pdf TI - corruption vs.corruption perception index (2022) (Source: https://www.transparency.org/en/cpi/2021)  10 1.3. Concept and importance of business ethics Source: Transparency International (www.transparency.org/cpi/2023)  11 1.3. Concept and importance of business ethics (Source: https://www.transparency.org/en/cpi/2021)  12 1.3. Concept and importance of business ethics (Source: https://www.transparency.org/en/cpi/2021)  13 1.3. Concept and importance of business ethics Corporations are not isolated: importance of stakeholders Shareholders Competitors Customers Natural End users Environment of products Local Environment Suppliers (Society) Employees (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)  14 1.3. Concept and importance of business ethics Business ethics: Differences across organizational types Civil society Public sector Stakeholders Large corporations Small business organizations organizations Delivery of mission to Rule of law,corruption, Main priorities in Financial integrity, Employee and clients; integrity of conflict of interest; addressing ethical employee/customer community issues tactics; legitimacy and procedural & issues issues accountability accountability issues Informal,personal Approach to Formal, public relations and/ or system-based relationship and trust- Informal,values-based Formal, bureaucratic managing ethics based General public, higher Responsible and/or Shareholders and Owners and family Donors and clients level government accountable to other stakeholders members organizations Shareholder Lack of resources Lack of resources and Inertia,lack of Main constraints orientation; size and including time formal training transparency complexity (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)  15 1.3. Concept and importance of business ethics Business ethics: A comparative approach Europe United States Asia Who is responsible for Social control by the ethical conduct in The individual Top management collective business? Government,trade Who is the key actor in Government, unions,corporate The corporation business ethics? corporations associations What are the key Negotiated legal Corporate codes of guidelines for ethical Managerial discretion framework of business ethics behavior? Social issues in Misconduct and What are the key issues Corporate governance organizing the immorality in single in business ethics? and accountability framework of business decisions situations What is the dominant Implicit multiple Multiple stakeholder Focus on shareholder stakeholder stakeholder approach, approach value management approach? bening managerialism (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)  16 1.4. Concept and importance of sustainability Sustainable development “We should organise our economy in a way that we won’t suffer scarcity [of timber], and where it is lumbered we should strive for young growth at its place”. (von Carlowitz, 1713) “Development that meets the needs of the present without compromising the ability of future generations to met their own needs” (Our Common Future: Report of the World Commission on Environment and Development, 1987 – Brundtland Report ) Sustainability Long-term maintenance of systems according to environmental, economic and social considerations. Sustainability is the destination, an end-state, and sustainable development is a means of getting there (Source: An Introduction to Business Ethics, Chryssides & Kaler,1993)  1.4. Concept and importance of sustainability 17 Sustainable development in practice (Source: An Introduction to Business Ethics, Chryssides & Kaler,1993)  1.4. Concept and importance of sustainability 18 Sustainability in mission statements – some examples Goldman Sachs “Our Environmental, Social and Governance Report highlights our commitment to sustainability and describes our work on behalf of our clients and the communities we seek to serve.As a leading global financial services firm, we are positioned to help address environmental and social challenges and to support opportunities for economic growth.” Shell “Sustainability at Shell touches on all areas of our operations. We aim to deliver the energy needed for a growing population in a responsible way - respecting people, their safety and the environment. It is essential to the longevity of our business and our role as a member of society.” Volkswagen “Sustainability means simultaneously striving for economic, social and environmental goals in a way that gives them equal priority. We want to create enduring value, provide good working conditions and handle the environment and resources with care… VW has failed to meet its own standards in a number of respects…We are doing everything in our power to make sure that the same thing never happens again.” (Source: An Introduction to Business Ethics, Chryssides & Kaler,1993)  1.4. Concept and importance of sustainability 19 Sustainability “Triple Bottom Line” Model equitable (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019) 1.5. Globalization and business ethics 26 (Source: Business Ethics, Crane, Matten, Glozer & Spence, 2019)