Week threeBusiness Ethics: Do organisations care?

By the end of this class you will have had the opportunity to:

Gain an understanding of business ethics and corporate social responsibility (CSR)

Examined examples of CSR in Aotearao New Zealand

Examined business ethics with regard to smoking, alcohol and arms production

Viewed social responsibility from four viewpoints: utilitarian, individual, moral rights and justice

Business ethics

Can a corporation have ethics? What social responsibilities does a

corporation have? To return a profit to the shareholders? To protect its stakeholders?

What are the ethical responsibilities of management?

Example: BP and the major oil spill off the coast of USA

What do we mean by ethical behaviour?

What is accepted to be ‘good’ or ‘right’ as opposed to ’bad’ or’ wrong’ in the context

Not what is legal or illegal Views on ethical behaviour:

The unfettered free market view (Milton Friedman)

The utilitarian viewThe individualist viewMoral rights viewThe justice view

Close to home

Ivon Watkins Dow New Plymouth produced 245T from 1963 to 1987. Contains dioxin a ‘human carcinogen’

Why? Rest of world stopped production in 1980sUsed in Vietnam as ‘Agent Orange’ a defoliant

with New Zealand serviceman affected.High incidence of cancer, Downs Syndrome and

Spina Bifida among families living near the IWD plant in New Plymouth

‘’We bulldozed big pits and dumped 1000s of tonnes of chemicals there.’

Twenty years on: New PlymouthMarfell Park playgroundDrums of dioxin come to the surface‘Not a public health risk’ spokesman for

NPCCParents ban kids from parkAgreement with local people

‘Big Tobacco’JIT-Macdonald Canadaour goal…if you are an adult and enjoy

smoking, we would like you to smoke our brand’

i.e. if you want to kill yourself, please use our cigarettes!

‘We do not market cigarettes to children’5m smokers in Canada‘

Targeting youth, minorities and women1999: spent record $8.4b on advertising and

promotion, a 22% increase on previous year2000: $9.6b2001: $11.4b

Marketing targets: minorities (Hispanic and Afro-Americans), youth and women

(cont)1996: smoking among Afro-Americans

doubled5x as many billboards in Afro-American

communities as white communitiesTarget: young women1991-99: number of high school girls

smoking went up from 27 -34%J R Reynolds (Malboro) company: ‘Dakota

for ‘virile females’Identified as ‘lower-socioeconomic, 18-24,

lower education, more likely to become pregnant

Smoking in New Zealand

‘Frighteningly high numbers of Maori women are smoking during pregnancy…’

50% of Maori smokeMaori young women are taking up smoking in

greater numbersWhy?

The good news: you are not alone!

Three quarters of all smokers in China are males. Smoking will kill a third of all young Chinese males.

Study of 1.25 million Chinese revealed largest number of smoking-related deaths in the world (2,000 people a day)

By 2050 predict this figure could rise to 8,000 a day or 3m a year!

So let’s make smoking more affordable!

In 2009 BATSNZ cut price of its three brands 50c to $1.10

Not illegal but the ethics?Government spends millions trying to

persuade people to stop smokingBATS entices people to smokeWhat do you make of that?Why doesn’t the Government make it much

more expensive? Exercise tax?

Binge drinking: The Way We Drink (ALARC)

PakehaUrbanMale 30 and over$70KWomen matching menQuarter of young people drinking to ‘get

drunk’Half parents do not know when kids

drinkingMaori drink less often but heavier

And to round off, the ethics of the arms business

2008: first time American military expenditure hit 1 trillion dollars

American expenditure on military greater then the rest of the world put together

England; BAE Al Yamamah Saudi scandalSerious Fraud Office drops investigationMinster of Defense: to win more export

contracts we need to adopt higher ethical standards…free from corruption.’

We are not short of funds; it is what we do with it that matters

REPORT: U.S. Military Spending Has Almost Doubled Since 2001

A new report released today by SIPRI, a Swedish-based think tank, reveals that U.S. military spending has almost doubled since 2001. The U.S. spent an astounding $698 billion on the military last year, an 81% increase over the last decade.

U.S. spending on the military last year far exceeded any other country. We spent six times more than China — the second largest spender. Overall, the world expended $1.6 trillion on the military, with the United States accounting for the lion’s share:

What would you do?

You are the manager of a city bookshopYou claim to give students the lowest

priced textbooksYou know however that your rival is

undercutting you by a significant marginStudents complainWhat would you do?

(cont)

Ignore the complaints?Drop your price?Justify your pricing strategy?Take the issue to your boss?Rely on student apathy!

Corporate social responsibility

“the obligation of an organisation to act in ways that serve the interests of its

stakeholders”

Who are stakeholders? Who were the stakeholders in the Enron case?Who are the stakeholders at the University of

Waikato?

What is the social responsibility of business?

The Milton Freidman view (right wing)Corporations are not people: people make decisions;

businesses do notManagers are agents of the owners – shareholders – and

are responsible to carry out their wishesThey have a fiduciary responsibility to maximise profits

within the context of what is generally agreed to be moral and ethical

They are not in the business of sorting out the ills of society: unemployment racial discrimination, protecting the environment, sustainability.

The New York Times Magazine, September 13, 1970. Copyright @ 1970 by The New York Times Company.

The utilitarian viewAssociated with the ideas of 19th century

philosopher such as John Stuart Mill Assess the moral implications of

decisions in term of consequences Ethical behaviour is that which delivers

the greatest good to the greatest number of people

e.g. making profits which are redistributed through the tax system to society

Individualism

Pursuit of long-term self interests (self-interest rules!)

In the long term, it won’t be in our self-interest as a corporation to lie and cheat

But in business, maybe we can push things to the limit?

Moral-rights view

Underpins the founding ideas of the American constitution

Associated with John Locke and Jefferson Behaviour that protects the fundamental

rights of the peopleRights to life, liberty and the pursuit of

happinessIn business; employee rights, privacy

health and safety

Justice view

Ethical decision should treat people fairly and impartially based on rules and standards

Procedural justice to ensure fairness e.g. sexual discrimination in the workplace

Distributive justice: people should be treated the same regardless of race, gender, age etc.

Interactional justice: people should be treated with dignity and respect

ConclusionA difficult area for organisations and

managers‘Whistle-blowing’ at the individual level? Simply rhetoric?Has to be viewed in context ie the culture.