Introducing Business Ethics PDF

# Introducing Business Ethics ## In this chapter we will: - Provide a basic introduction to, and definition of, business ethics. - Outline the relationship between business ethics and the law. - Distinguish between ethics, morality, and ethical theory. - Discuss the importance of business ethics a...

# Introducing Business Ethics ## In this chapter we will: - Provide a basic introduction to, and definition of, business ethics. - Outline the relationship between business ethics and the law. - Distinguish between ethics, morality, and ethical theory. - Discuss the importance of business ethics at both an academic level and in terms of practical management in organizations. - Consider ethical challenges in different types of organizations. - Present globalization as an important, yet contested, concept that represents a critical context for business ethics. - Discuss different international perspectives on business ethics, including European, Asian, and North American perspectives. - Present the 'triple bottom line' of sustainability as a key goal for business ethics. # Understanding Business Ethics ## What is Business Ethics? 'A book on business ethics? Well that won't take long to read!' 'You're taking a course on business ethics? So what do you do in the afternoon?' 'Business ethics? I didn't think there were any!' These are not very good jokes. Still, that does not seem to have stopped a lot of people from responding with such comments (and others like them) whenever students of business ethics start talking about what they are doing. And even if these are not particularly funny things to say, nor even very original, they do immediately raise an important problem with the subject of business ethics: some people cannot even believe that it exists! Business ethics, it has been claimed, is an oxymoron (Collins 1994). By an oxymoron, we mean the bringing together of two apparently contradictory concepts, such as in 'a cheerful pessimist' or 'a deafening silence'. To say that business ethics is an oxymoron suggests that there are not, or cannot be, ethics in business: that business is in some way unethical (i.e. that business is inherently bad), or that it is, at best, amoral (i.e. outside of our normal moral considerations). For example, in the latter case, Albert Carr (1968) notoriously argued in his article "Is Business Bluffing Ethical?" that the "game" of business was not subject to the same moral standards as the rest of society, but should be regarded as analogous to a game of poker, where deception and lying were perfectly permissible. To some extent, it is not surprising that some people think this way. Various scandals concerning undesirable business activities, such as the polluting of rivers with industrial chemicals, the exploitation of sweatshop workers, the payment of bribes to government officials, and the deception of unwary consumers, have highlighted the unethical way in which some firms have gone about their business. However, just because such mal-practices take place does not mean that there are not some kinds of values or principles driving such decisions. After all, even what we might think of as "bad" ethics are still ethics of a sort. And clearly it makes sense to try and understand why those decisions get made in the first place and discover whether more acceptable business decisions and approaches can be developed. Revelations of corporate malpractice should not therefore be interpreted to mean that thinking about ethics in business situations is entirely redundant. After all, as various writers have shown, many everyday business activities require the maintenance of basic ethical standards, such as honesty, trustworthiness, and co-operation (Collins 1994; Watson 1994). Business activity would be impossible if corporate directors always lied; if buyers and sellers never trusted each other; or if employees refused to ever help each other. Similarly, it would be wrong to infer that scandals involving corporate wrongdoing mean that the subject of business ethics was in some way naïve or idealistic. Indeed, on the contrary, it can be argued that the subject of business ethics primarily exists in order to provide us with some answers as to why certain decisions should be evaluated as ethical or unethical, or right or wrong. Without systematic study, how are we able to offer anything more than vague opinions or hunches about whether particular business activities are acceptable? Whichever way one looks at it then, there appears to be good reason to suggest that business ethics as a phenomenon, and as a subject, is not an oxymoron. Whilst there will inevitably be disagreements about what exactly constitutes "ethical" business activity, it is possible at least to offer a fairly uncontroversial definition of the subject itself. So, in a nutshell, here is what we regard the subject of business ethics as: Business ethics is the study of business situations, activities, and decisions where issues of right and wrong are addressed. It is worth stressing that by "right" and "wrong" we mean morally right and wrong, as opposed to, for example, commercially, strategically, or financially right or wrong. Moreover, by "business" ethics, we do not mean only commercial businesses, but also government organizations, pressure groups, not-for-profit businesses, charities, and other organizations. For example, questions of how to manage employees fairly, or what constitutes deception in advertising, are equally as important for organizations such as Greenpeace, the University of Stockholm, or the German Christian Democrat Party as they are for Shell, Volvo, or Deutsche Bank (see pages 15-17 for detailed discussion of ethics in different types of organizations). ## Think Theory A good definition is an important starting point for any theory. The one we have given for business ethics is mainly a definition of business ethics as an academic subject. If you were trying to define an organization's business ethics, what definition would you use? Try writing it in the form, 'An organization's business ethics are..." ## Business Ethics and the Law Having defined business ethics in terms of issues of right and wrong, one might quite naturally question whether this is in any way distinct from the law. Surely the law is also about issues of right and wrong. This is true, and there is indeed considerable overlap between ethics and the law. In fact, the law is essentially an institutionalization or codification of ethics into specific social rules, regulations, and proscriptions. Nevertheless, the two are not equivalent. Perhaps the best way of thinking about ethics and the law is in terms of two intersecting domains (see Figure 1.1). The law might be said to be a definition of the minimum acceptable standards of behaviour. However, many morally contestable issues, whether in business or elsewhere, are not explicitly covered by the law. For example, just as there is no law preventing you from being unfaithful to your girlfriend or boyfriend (although this is perceived by many to be unethical), so there is no law in many countries preventing businesses from testing their products on animals, selling landmines to oppressive regimes, or preventing their employees from joining a union-again, issues which many feel very strongly about. Similarly, it is possible to think of issues that are covered by the law, but which are not really about ethics. ## An Ethical Dilemma No such thing as a free drink? A good friend of yours, who studies at the same university, has been complaining for some time to you that he never has any money. He decides that he needs to go out and find a job, and after searching for a while is offered a job as a bartender in the student bar at your university. He gladly accepts and begins working three nights a week. You too are pleased, not only because it means that your friend will have more money, but also because the fact is that you often go to the student bar already and so will continue to see him quite frequently despite him having the new job. The extra money is indeed much welcomed by your friend (especially as he has less time to spend it now too), and initially he seems to enjoy the work. You are also rather pleased with developments since you notice that whenever you go up to the bar, your friend always serves you first regardless of how many people are waiting. After a time though, it becomes apparent that your friend is enjoying the job rather less. Whenever you see him, he always seems to have a new story of mistreatment at the hands of the bar manager, such as getting the worst shifts, being repeatedly chosen to do the least popular jobs, and being reprimanded for minor blunders that go uncensored for the rest of the staff. This goes on for a short while and then one day, when you are in the bar having a drink with some of your other friends, your friend the bartender does something that you are not quite sure how to react to. When you go up to pay for a round of four beers for you and your other friends, he discretely only charges you for one. Whilst you are slightly uncomfortable with this, you certainly don't want to get your friend into any kind of trouble by mentioning it. And when you tell your friends about it, they of course think it is very funny and congratulate you for the cheap round of drinks! In fact, when the next one of your friends goes up to pay for some drinks, he turns around and asks you to take his money, so that you can do the same trick for him. Although you tell him to get his own drinks, your friend the bartender continues to undercharge you whenever it is your turn to go to the bar. In fact this goes on for a number of visits, until you resolve to at least say something to him when no one else behind the bar is listening. However, when you do end up raising the subject he just laughs it off and says, "Yeah, it's great isn't it? They'll never notice and you get a cheap night out. Besides, it's only what this place deserves after the way I've been treated." **Questions** 1. Who is wrong in this situation--your friend for undercharging you, you for accepting it, both of you, or neither of you? 2. Confronted by this situation, how would you handle it? Do nothing or ask your friend to stop undercharging you? If you take the latter option, what would you do if he refused? 3. To what extent do you think that being deliberately undercharged is different from other forms of preferential treatment, such as serving you in front of other waiting customers? 4. Does the fact that your friend feels aggrieved at the treatment he receives from his boss condone his behaviour at all? Does it help to explain either his or your actions? For example, the law prescribes whether we should drive on the right or the left side of the road. Although this prevents chaos on the roads, the decision about which side we should drive on is not an ethical decision as such. In one sense then, business ethics can be said to begin where the law ends. Business ethics is primarily concerned with those issues not covered by the law, or where there is no definite consensus on whether something is right or wrong. Discussion about the ethics of particular business practices may eventually lead to legislation once some kind of consensus is reached, but for most of the issues of interest to business ethics, the law typically does not currently provide us with guidance. For this reason, it is often said that business ethics is about the 'grey areas' of business, or where, as Treviño and Nelson (2007: 3) put it, 'values are in conflict'. Ethical Dilemma 1 presents one such situation that you might face where values are in conflict. Read through this and have a go at answering the questions at the end. As we shall see many times over in this book, the problem of trying to make decisions in the grey areas of business ethics, or where values may be in conflict, means that many of the questions posed are equivocal. What this suggests is that there simply may not be a definitive 'right' answer to many business ethics problems. And as is the case with issues such as the testing of products on animals, executive compensation packages, persuasive sales techniques, or child labour, business ethics problems also tend to be very controversial and open to widely different points of view. In this sense, business ethics is not like subjects such as accounting, finance, engineering, or business law where you are supposed to learn specific procedures and facts in order to make objectively correct decisions. Studying business ethics should help you to make better decisions, but this is not the same as making unequivocally right decisions. ## Defining morality, ethics, and ethical theory Some of the controversy regarding business ethics is no doubt due to different understandings of what constitutes morality or ethics in the first place. Before we continue then, it is important for us to sort out some of the terminology-we are using. In common usage, the terms 'ethics' and 'morality' are often used interchangeably. This probably does not pose many real problems for most of us in terms of communicating and understanding things about business ethics. However, in order to clarify certain arguments, many academic writers have proposed clear differences between the two terms (e.g. Crane 2000; Parker 1998b). Unfortunately, though, different writers have sometimes offered somewhat different distinctions, thereby serving more to confuse us than clarify our understanding.¹ Nonetheless, we do agree that there are certain advantages in making a distinction between 'ethics' and 'morality', and following the most common way of distinguishing them, we offer the following definitions: Morality is concerned with the norms, values, and beliefs embedded in social processes which define right and wrong for an individual or a community. Ethics is concerned with the study of morality and the application of reason to elucidate specific rules and principles that determine right and wrong for a given situation. These rules and principles are called ethical theories. According to this way of thinking, morality precedes ethics, which in turn precedes ethical theory (see Figure 1.2). All individuals and communities have morality, a basic sense of right or wrong in relation to particular activities. Ethics represents an attempt to systematize and rationalize morality, typically into generalized normative rules that supposedly offer a solution to situations of moral uncertainty. The outcomes of the codification of these rules are ethical theories, such as rights theory or justice theory. A word of caution is necessary here. The emergence of the formal study of ethics has been aligned by a number of authors (e.g. Bauman 1993; Johnson and Smith 1999; Parker 1998b) with the modernist Enlightenment project, and the idea that moral uncertainty can be "solved" with recourse to human rationality and abstract reasoning. As we shall show in Chapters 3 and 4, this has come under increasing attack from a number of quarters, including feminists and postmodernists. However, it is important at this stage to recognize that ethics is about some form of rationalization of morality. The importance of this distinction will hopefully therefore become clearer, and will certainly become more pertinent, as we start to examine these and other theories (in Chapter 3), as well as assessing how they feed into ethical decision-making in business (in Chapter 4). Indeed, contributing to the enhancement of ethical decision-making is one of the primary aims of this book, and of the subject of business ethics more generally. In the next section, we shall briefly review this and some of the other reasons why studying business ethics is becoming increasingly important today across the globe. ## Why is business ethics important? Business ethics is currently a very prominent business topic, and debates and dilemmas surrounding business ethics have attracted a lot of attention from various quarters. For a start, consumers and pressure groups have increasingly demanded that firms seek out more ethical and ecologically sounder ways of doing business. The media has also kept a constant spotlight on corporate abuses and malpractices. And even firms themselves appear to be increasingly recognizing that being ethical (or at the very least, being seen to be ethical) may actually be good for business. Ethical issues confront organizations whatever line of business they might be in. Ethics in Action 1.1, for example, provides an illustration of how Sam Roddick has taken the unusual step of opening an ethical "erotic boutique" aimed at the luxury end of the sex toys and erotic lingerie market. There are therefore many reasons why business ethics might be regarded as an increasingly important area of study, whether as students interested in evaluating business activities or as managers seeking to improve their decision-making skills. In summary, we can suggest the following reasons why a good understanding of business ethics is important: - The power and influence of business in society is greater than ever before. Evidence suggests that many members of the public are uneasy with such developments (Bernstein 2000). For instance, one recent poll of more than 20 leading economic nations revealed that almost 75% of residents believed large companies had too much influence on the decisions of their government (Cywinski 2008). Business ethics helps us to understand why this is happening, what its implications might be, and how we might address this situation. - Business has the potential to provide a major contribution to our societies, in terms of producing the products and services that we want, providing employment, paying taxes, and acting as an engine for economic development, to name just a few examples. How, or indeed whether, this contribution is made raises significant ethical issues that go to the heart of the social role of business in contemporary society. As a 2008 global survey conducted by McKinsey shows, about 50% of business executives think that corporations make a mostly or somewhat positive contribution to society, whilst some 25% believe that their contribution is mostly or somewhat negative (McKinsey Quarterly 2008). - Business malpractices have the potential to inflict enormous harm on individuals, on communities and on the environment. Through helping us to understand more about the causes and consequences of these malpractices, business ethics seeks, as the founding editor of the Journal of Business Ethics has suggested (Michalos 1988), "to improve the human condition". - The demands being placed on business to be ethical by its various stakeholders are constantly becoming more complex and more challenging. Business ethics provides the means to appreciate and understand these challenges more clearly, in order that firms can meet these ethical expectations more effectively. - Few businesspeople have received formal business ethics education or training. Business ethics can help to improve ethical decision-making by providing managers with the appropriate knowledge and tools to allow them to correctly identify, diagnose, analyze, and provide solutions to the ethical problems and dilemmas they are confronted with. - Ethical violations continue to occur in business, across countries and across sectors. For example, a recent survey of over 1,000 UK employees working in public and private sectors found that one in three workers did not consider their employers to be fair.2 Another survey of nearly 2,000 Hong Kong executives revealed that more than 40% of those with operations in China had encountered fraud.3 Business ethics provides us with a way of looking at the reasons behind such infractions, and the ways in which such problems might be dealt with by managers, regulators, and others interested in improving business ethics. - Business ethics can provide us with the ability to assess the benefits and problems associated with different ways of managing ethics in organizations. ## Ethics on Screen 1 ### Blood Diamond Blood Diamond means well, but it also means box-office business. Blood Diamond, a thriller set against the backdrop of the civil war in Sierra Leone in the 1990s, provides a fast-paced, action-filled Hollywood-style perspective on the issues surrounding "conflict diamonds". Defined by the United Nations as "... diamonds that originate from areas controlled by forces or factions opposed to legitimate and internationally recognized governments", conflict diamonds are essentially those mined and traded by rebel military forces in order to fund conflict in war-torn areas, particularly in central and western Africa. The proceeds from the sale of conflict diamonds go towards purchasing arms and other illegal activities that sustain rebel militia units. Brutal conflicts in Angola and Sierra Leone brought conflict diamonds to the United Nations' attention and subsequently led to targeted UN sanctions prohibiting the importing of diamonds originating from rebel sources. It is in this context that the events in the movie Blood Diamond are situated. The narrative centres around the discovery of a huge pink diamond by a Sierra Leonean fisherman, Solomon Vandy (played by Djimon Hounsou), who has been taken from his family and forced to work in the diamond fields. Following an attack by government troops on the rebel mining camp, Vandy is forced to hide the diamond in the jungle before being captured and thrown into jail. It is here that he meets Danny Archer (Leonardo DiCaprio), a cynical Zimbabwean diamond smuggler, linked through a South African mercenary to a Western diamond company. Archer and Vandy agree an uneasy alliance to retrieve the diamond, and set off on a perilous journey back into the conflict zone. Blood Diamond does not go into detail on the issues surrounding conflict diamonds, but uses the issue as a springboard for developing an exotic action adventure with plenty of thrills and spills and even a slice of romance in the form of a beautiful American journalist, played by Jennifer Connelly, who Archer meets along the way. In so doing, it clearly brings a relatively obscure business ethics issues to a wide mainstream cinema audience in a way that a book, a news segment, or factual documentary never could. In watching the film, the terrible consequences of civil war, and the role of the diamond trade in fuelling such conflict, simply cannot be ignored. Critics, however, have also criticized the film for its rather crude politics and easy moralizing, its simplistic portrayal of the complex issues involved, and its readiness to reduce African problems to Hollywood-style solutions. The release of the film also met some controversy within the global diamond industry. With its Christmas theatrical release in the US coinciding with the main diamond-buying season in the world's largest diamond jewelry market, the diamond industry launched an estimated $15m public-relations and education campaign to combat the movie's negative images of the industry. The World Diamond Council (WDC) created a website, DiamondFacts.org, to communicate to the public about reforms in the 2000s that led to a substantial decline in the global trade in conflict diamonds. As a result of a UN-backed initiative called the Kimberley Process that was launched in 2003, the share of conflict diamonds in the global industry is estimated to have fallen to less than 1% of total trade from a high of around 4% at the end of the 1990s when Blood Diamond is set. The WDC also distributed information packs for retailers and customers and hired a crisis-management firm to direct its educational efforts, including full-page ads in US newspapers such as the Los Angeles Times, The New York Times, and USA Today. In a particularly successful PR coup, the industry enlisted Nelson Mandela to talk about the economic benefits of diamond mining for the African population. For their part, the studio behind the film's release maintained that it was a fictionalized account set at particular time in history, whilst the director, Edward Zwick, was widely reported to have refused to add a disclaimer requested by the WDC to inform audiences that voluntary reforms had since stamped out most conflict diamonds. Blood Diamond went on to box office success and even garnered Oscar nominations for the two male leads. Perhaps most importantly, it also brought some critical ethical issues into the mainstream. Whilst the movie itself employs little subtlety in highlighting the problems of conflict diamonds, it shows that business ethics can even prove to be a hit at the multiplex-providing you are prepared to disguise it as an action adventure and lace it with a typical Hollywood ending. ## Think Theory If, as we have argued, business ethics is not an oxymoron, then is it necessarily true of any business, regardless on the industry it is in? Think about the reasons for and against regarding Coco de Mer as an ethical organization. Would the same arguments hold for an "ethical" land mine manufacturer, or an "ethical" animal testing laboratory? ## Business Ethics in Different Organizational Contexts It should be clear by now that whatever else we may think it of it, business ethics clearly matters. But it matters not just for huge multinational corporations like McDonald's, Nestlé, Shell or HSBC, but also for a range of other types of organizations. Some of the issues will inevitably be rather similar across organizational types. Figures 1.3 and 1.4, for example, show that employees from business, government, and civil society organizations (by this we mean non-profit, charity, or non-governmental organizations) observe similar types of ethical misconduct in the workplace-and at similar intensities. Indeed, despite some historical differences, the level of ethical violations observed by employees in different sectors appears to be converging. Nonetheless, there are also a number of critical differences, which are worth elaborating on a little further (and which are summarized in Figure 1.5). ## Business Ethics in Large Versus Small Companies Small businesses (often referred to as SMEs or small and medium-sized enterprises) typically differ in their attention and approach to business ethics. As Laura Spence (1999) suggests, these differences include the lack of time and resources small business managers have available to focus on ethics, their autonomy and independence with respect to responsibilities to other stakeholders, and their informal trust-based approach to managing ethics. They have also been found to assess their employees as their single most important stakeholder (Spence and Lozano 2000). Large corporations, on the other hand, tend to have much more formalized approaches with considerably more resources available to develop sophisticated ethics management programmes. That said, they are constrained by the need to focus on profitability and shareholder value, as well as the very size and complexity of their operations. ## Business Ethics in Private, Public, and Civil Society Organizations Whilst private sector companies will tend to be responsible primarily to their shareholders or owners, the main responsibilities of civil society organizations (CSOs) are to the constituencies they serve (and also to their donors). In the public sector, more attention is paid to higher level government and the general public. Typical ethical issues prioritized by government agencies will be those of rule of law, corruption, conflicts of interest, public accountability, and various procedural issues involved in ensuring that resources are deployed fairly and impartially (Moilanen and Salminen 2007). This is usually reflected in a formalized and bureaucratic approach to ethics management. CSOs, on the other hand, will often be more informal in their approach, emphasizing their mission and values. CSOs may be limited in terms of the resources and training they may typically be able to deploy in relation to managing ethics, whereas, on the other hand, government organizations are often restricted by a heavy bureaucracy that breeds inertia and a lack of transparency to external constituencies. This rather quick sketch of the variation of business ethics across organizational contexts should give you some of the flavour of the challenges that managers may face in each type of organization. In this book, we will generally focus more on large corporations than the other types-principally because most of our readers will probably end up working in such an organization. However, as we go through, we will also highlight issues pertinent to small firms, and in the latter part of the book in particular, we will discuss in much fuller detail business ethics and CSOs (Chapter 10) and government (Chapter 11). Before we move on though, we need to consider another important context-namely the global nature of business ethics today. ## Globalization: a key context for business ethics? Globalization has become one of the most prominent buzzwords of recent times. Whether in newspaper articles, politicians' speeches, or business leaders' press conferences, the 'G-word' is frequently identified as one of the most important issues in contemporary society. In the business community, in particular, there has been considerable enthusiasm about globalization. For instance, as chairman of Goldman Sachs in 2001, Hank Paulson talked of "the gospel of globalization" in praising the increasingly interconnected world economy and its benefits for economic growth, global welfare, democracy, and world peace (Paulson 2001). However, Paulson also had the pleasure of witnessing the more ambiguous "blessings" of globalization in his role as US Treasury Secretary in 2008, when he was in charge of taming the disastrous effects of the global financial crisis on the US economy. It is hardly surprising then to learn that business leaders have also started to recognize the increased risks that globalization can bring to their operations. As William Parrett, the Chief Executive Officer at Deloitte Touche Tohmatsu (one of the "Big Four" accounting firms), commented at the 2006 World Economic Forum (WEF) in Davos: "One effect of globalization has been that risk of all kinds-not just fiscal, but also physical-have increased for businesses, no matter where they operate. Information travels far and fast, confidentiality is difficult to maintain, markets are interdependent and events in far-flung places can have immense impact virtually anywhere in the world." So, globalization clearly has some downsides, even for the business community. But beyond this, it is significant that we have witnessed the rise of a new worldwide culture of "anti-globalization" campaigners and critics. Various meetings of the World Economic Forum, the WTO, the IMF, and the World Bank, as well as the summits of G8 or EU leaders, have been accompanied by criticism and occasionally even violent protest against the "global world order", "global capitalism", the "dictate of the multinationals", and so on. Riots in Seattle, Davos, Prague, and Genoa in the late 1990s and early 2000s made the public aware that globalization was a hotly contested topic on the public agenda, and successive battles over fair trade, poverty, food prices, water access, and financial stability have kept the ethical spotlight on the process of globalization. In the context of business ethics, this controversy over globalization plays a crucial role. After all, corporations-most notably multinational corporations (MNCs)-are at the centre of the public's criticism on globalization. They are accused of exploiting workers in developing countries, destroying the environment, and, by abusing their economic power, engaging developing countries in a so-called "race to the bottom". This term describes a process whereby MNCs pitch developing countries against each other by allocating foreign direct investment to those countries that can offer them the most favourable conditions in terms of low tax rates, low levels of environmental regulation, and restricted workers' rights. However true these accusations are in practice, there is no doubt that globalization is the most current and demanding arena in which corporations have to define and legitimate the "rights and wrongs" of their behaviour. ## What is globalization? Globalization is not only a very controversial topic in the public debate; it is also a very contested term in academic discourse. Apart from the fact that-mirroring the public debate-the camps seem to be divided into supporters and critics, there is some doubt about whether globalization is really even happening at all. So, for example, some argue that there is nothing like a "global" economy, because roughly 90% of world trade only takes place either within or between the three economic blocs of the EU, North America, and Asia, leaving out most other major parts of the globe (World Trade Organization 2008). Obviously, we have to examine the "globalization" buzzword more carefully, and to develop a more precise definition if we want to understand its character and its implications for business ethics. Globalization as a new phenomenon has often been mixed up or confounded with a host of other related phenomena (Scholte 2005). One aspect is "internationalization", which is a part of globalization, but not a new process as such: at the end of the nineteenth century, the percentage of cross-border transactions worldwide was not considerably lower than at the end of the twentieth century (Moore and Lewis 1999). Others see globalization essentially as some form of "Westernization", since it seemingly results in the export of Western culture to other, culturally different, world regions. Again, this is not a new phenomenon at all: the era of colonization in the nineteenth century resulted in the export of various facets of Western culture to the colonized countries, evidenced for example by the British legacy in countries such as India, the Spanish legacy in South America, and the French legacy in Africa. All of these views of globalization describe some of the more visible features of globalization. They are certainly important issues, but as Jan Aart Scholte (2005) shows, they do not characterize the significantly new aspects of globalization. If we want to get a grip on the decisive features of globalization, he suggests we can start by looking at the way social connections have traditionally taken place. These connections, be they personal relations with family members or friends, or economic relations such as shopping or working, previously took place within a certain territory. People had their family and friends in a certain village; they had their work and business relations within a certain town or even country. Social interaction traditionally needed a certain geographical space to take place. However, this link between social connections and a specific territory has been continuously weakened, with two main developments in the last few decades being particularly important. The first development is technological in nature. Modern communications technology, from the telephone, to radio and television, and now the internet, open up the possibility of connecting and interacting with people despite the fact that there are large geographical distances between them. Furthermore, the rapid development of global transportation technologies allows people to easily connect with other people all over the globe. While Marco Polo had to travel for many months before he finally arrived in China, people today can step on a plane and, after a passable meal and a short sleep, arrive some time later on the other side of the globe. Territorial distances play a less and less important role today. The people we do business with, or that we make friends with, no longer necessarily have to be in the same place as we are. The second development is political in nature. Territorial borders have been the main obstacles to worldwide connections between people. Only 20 years ago, it was still largely impossible to enter the countries in the Eastern bloc without lengthy visa procedures, and even then, interactions between people from the two sides were very limited. With the fall of the iron curtain, and substantial liberalization efforts elsewhere (for instance within the EU), national borders have been eroded and, in many cases, have even been abolished. In Europe, you can drive from Lapland to Sicily without stopping at a single national border. These two developments mainly account for the massive proliferation and spread in supra-territorial connections. These connections may not always necessarily have a global spread in the literal sense of worldwide coverage. The new thing though about these connections is that they no longer need a geographical territory to take place and they are not restricted by territorial distances and borders any more. Scholte (2005) thus characterizes globalization as "deterritorialization", suggesting that we can define globalization as follows: Globalization is a process which diminishes the necessity of a common and shared territorial basis for social, economic, and political activities, processes, and relations. Let us have a look at some examples of globalization according to this definition: - Due to the modern communication infrastructure, many of us can closely follow the 2010 FIFA World Cup in South Africa live on TV-regardless of where we are located at the time that it takes place. Such events are global not in the sense that they actually happen all over the world, but in the sense that billions of people follow them, and to some extent take part in them, regardless of the fact that they are standing in Milan, Manchester, or Manila. - We can potentially drink the same Heineken beer, drive the same model of Toyota car, or buy the same expensive Rolex watch almost wherever we are in the world-we do not have to be in Amsterdam, Tokyo, or Geneva. Certain global products are available all over the world and going for a "Chinese", "Mexican", or "French" meal indicates certain tastes and styles, rather than a trip to a certain geographical territory. - Our banks no longer store or provide access to our money in a single, geographic location. We can quite easily have a credit card that allows us to withdraw money all over the world, we can pay our bills at home in Europe, via internet banking while sitting in an internet café in India, or even order our Swiss private banking broker to buy an option on halved pigs at the Chicago exchange without even moving our feet from the sofa. On the downside, as we saw in the late 2000s, a country's economic security is linked as much to global financial interactions as it is to national laws and policies. Global communications, global products, and global financial systems and capital markets are only the most striking examples of deterritorialization in the world economy. There are many other areas where globalization in this sense is a significant social, economic, and political process. As we shall now see, globalization also has significant implications for business ethics. ## Globalization and business ethics: a new global space to manage Globalization as defined in terms of the deterritorialization of economic activities is particularly relevant for business ethics, and this is evident in three main areas-culture, law, and accountability. ### Cultural Issues As business becomes less fixed territorially, so corporations increasingly engage in overseas markets, suddenly finding themselves confronted with new and diverse, sometimes even contradictory ethical demands. Moral values that were taken for granted in the home market may get questioned as soon as corporations enter foreign markets (Donaldson 1996). For example, attitudes to racial and gender diversity in Europe may differ significantly to those in Middle Eastern countries. Similarly, Chinese people might regard it as more unethical to sack employees in times of economic downturns than would be typical in Europe. Again, whilst Europeans tend to regard child labour as strictly unethical, some Asian countries might have a more moderate approach (for further examples, see Kline 2005). Consider the case of Playboy, the US adult magazine, which had to suspend its Indonesian edition and vacate the company premises in 2006 in the wake of violent protests by Islamic demonstrators-even though the Indonesian edition was a toned-down version that did not show nudity.5 The reason why there is a potential for such problems is that whilst globalization results in the deterritorialization of some processes and activities, in many cases there is still a close connection between the local culture, including moral values, and a certain geographical region. For example, Europeans largely disapprove of capital punishment, whilst many Americans appear to regard it as morally acceptable. Women can freely sunbathe topless on most European beaches, yet in some states of America they can be fined for doing so-and in Pakistan would be expected to cover up much more. This is one of the contradictions of globalization: on the one hand, globalization makes regional difference less important since it brings regions together and encourages a more uniform "global culture". On the other hand, in eroding the divisions of geographical distances, globalization reveals economic, political, and cultural differences and confronts people with them. This dialectical effect has been a growing subject for research over the past decade (see, for instance, Boli and Lechner 2000). ## Think Theory Capital punishment and topless sunbathing are interesting issues to think about globalization theory and cultural dimensions of ethics, but have little to do with business responsibility as such. Can you think of some similar examples that a business might have to deal with