Corporate Social Responsibility and
Ethical Business
Ms. Panagiota Skoulariki Adjunct Lecturer
Business Administration and Economics Department
Welcome to The International Faculty of the
University of Sheffield
Business Administration and Economics Department
CSR and Ethics
• Business and Societal
Relationship
• Society as the
Macroenvironment
• Factors in Society
• Business Criticism and
Corporate Response
• Development of CSR and related notions
• Stakeholders
• Ethics
• Technology and Ethics
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Outline
Business Administration and Economics Department
Business and Society
Business The collection of private, commercially oriented organizations ranging in size from sole proprietorships to corporate giants.
Society A community, a nation, or a broad group of people with common traditions, values, institutions, and collective activities and interests.
Business and society interrelate in a macroenvironment as stakeholders.
A macroenvironment is the complete societal context in which the organization resides.
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Business Administration and Economics Department
Macroenvironment-Pluralism
A diffusion of power among a society’s many groups.
Involves decentralization and diversity of power concentration.
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Strengths Weaknesses
Prevents concentration of power.
Pursuit of self-interest.
Maximizes freedom of expression and action.
Proliferates organizations and groups with overlapping goals.
Disperses individual allegiances.
Forces conflicts to center stage.
Creates diversified set of loyalties.
Promotes inefficiency.
Provides checks and balances.
Business Administration and Economics Department
Special Interest Groups
• Make life more complex for business and government
• Can number in the tens of thousands in some societies
• Pursue their own focused agendas
• Are active, intense, diverse and focused
• Can attract a significant following
• Often work at cross purposes, with no unified goals
A special-interest society is pluralism taken to the extreme
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Business Criticism
• Little concern for the consumer
• Cares nothing about the deteriorating social order
• Has no concept of ethical behavior
• Indifferent to the problems of minorities and the environment
What responsibility does business have to society? Business for Social Responsibility (BSR) is a
consulting firm and global business network helping organizations to develop sustainable business strategies and solutions.
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Business Power
•The ability or capacity to produce an effect or to bring influence to bear on a situation or people.
Iron Law of Responsibility
•In the long run, those who do not use power in a manner society considers responsible will tend to lose it.
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Use and Abuse of Power
Business Criticism
Business Administration and Economics Department
Levels and Spheres of Corporate Power
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Macro Level
Intermediate Level
Micro Level
Individual Level
Economic
Social/Cultural
Individual
Technological
Environmental
Political
Levels Spheres
Business Administration and Economics Department
Society’s Expectations Versus Business’ Actual Social Performance
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Society’s
Expectations
of Business
Performance
Soci
al
Perf
orm
an
ce:
Exp
ecte
d a
nd
Act
ual
1960s Time 2010s
Social
Problem
Business’s Actual
Social Performance
Social Problem
Business Administration and Economics Department
Factors in the Social Environment leading to societal expectations
• Affluence and education • Higher expectations of major institutions.
• Growing public awareness through television, film, and Internet.
• Revolution of rising expectations • Expectations vs. performance gap.
• Entitlement mentality
• Rights movement
• Victimization philosophy
• Business scandals 12
Business Administration and Economics Department
Social Environment, Business Criticism and Corporate Response
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Factors in the Social Environment
Affluence Education Awareness
Rising Expectations Rights Movement
Entitlement
Mentality
Victimization
Philosophy
Business Criticism
Increased Concern for the
Societal Environment A Changed Social Contract
Business Administration and Economics Department
Corporate Social Responsibility (CSR)
Corporate Social Responsibility
•Seriously considering the impact of a company’s actions on society.
Requires the individual to consider his or her acts in terms of a whole social system, and holds him or her responsible for the effects of his or her acts anywhere in that system.
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Historical Perspective on CSR
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Economic Model
Legal Model
Social Model
Stakeholder Model
Business Administration and Economics Department
Modification of the Economic Model
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Philanthropy
Community obligations Paternalism
Motivation:
Keep government at arm’s length
Business Administration and Economics Department
CSR’s Acceptance and Broadening of
Meaning • From the 1950s to the present, the concept of CSR
has gained acceptance.
• The meaning has been broadened to include specific issues, such as: • Corporate governance
• Product safety
• Honesty in advertising
• Employee rights
• Affirmative action
• Environmental sustainability
• Ethical behavior
• Global CSR 17 Business Administration and Economics Department
Evolving Meanings of CSR
1. Corporate social responsibility is seriously considering the impact of the company’s actions on society.
2. The obligation of decision makers to take actions that protect and improve the welfare of society as a whole, along with their own interests.
3. Supposes that the corporation has economic and legal obligations as well as responsibilities to society that extend beyond these obligations.
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Arguments Against CSR
• The classical economic view that business’ only goal is the maximize profits for owners.
• Business is not equipped to handle social activities.
• It dilutes the primary purpose of business.
• Businesses have too much power already .
• It limits the ability to compete in a global marketplace.
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CSR
Business Administration and Economics Department
Arguments For CSR
• It addresses social issues brought on by business, and allows business to be part of the solution.
• Enlightened self-interest: businesses must take actions to ensure long-term viability.
• Wards off future government intervention.
• It addresses issues by using business resources and expertise.
• It addresses issues by being proactive.
• The public supports CSR.
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The CSR Equation
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Economic Responsibilities
Legal Responsibilities
Ethical Responsibilities
Philanthropic Responsibilities
Total
Corporate
CSR
= +
+
+
A stakeholder perspective focuses on the CSR
pyramid as a unified whole.
Business Administration and Economics Department
Corporate Citizenship Concepts
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Corporate Social…
Responsibility
Performance
Responsiveness
Emphasizes…
obligation, accountability
outcomes, results
action, activity
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Corporate Social Responsiveness
Alternative Views
Sethi’s Three-Stage Schema
Social obligation, social responsibility, and social responsiveness.
Frederick’s CSR1, CSR2, and CSR3
• CSR1 is accountability-focused.
• CSR2 is responsibility-focused.
• CSR3 refers to corporate social rectitude.
Epstein’s Process View
• Emphasizes the process of social responsiveness.
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Corporate Social Responsiveness
Alternative Views
Sethi’s Three-Stage Schema
Social obligation, social responsibility, and social responsiveness.
Sethi, P.(1975) Dimension of Corporate Social Performance: An Analytical Framework. California Management Review, Spring 1975, p.58-64.
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Corporate Social Responsiveness
Alternative Views (cont)
Frederick’s CSR1, CSR2, and CSR3
• CSR1 is accountability-focused.
• CSR2 is responsibility-focused.
• CSR3 refers to corporate social rectitude.
Frederick, W. (1994) from CSR1 to CSR2: The Maturing of Business–and-Society Thought. Business and Society, 33(2), p.150-164.
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Corporate Social Responsiveness
Alternative Views (cont)
Epstein’s Process View
• Emphasizes the process of social responsiveness.
Epstein, E.(1987) The Corporate Social Policy Process: Beyond Business Ethics, Corporate Social Responsibility and Corporate Social Responsiveness.California Management Review, Vol.XXIX (3), p.104.
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Corporate Social Performance: Extensions, Reformulations, Reorientations
Wartick and Cochran’s CSP Extensions
Wood’s Reformulated CSP Model
Swanson’s Reorientation of CSP
Wartick, S. and Cochran, P. (1985) The Evolution of the Corporate Social Performance Model. Academy of Management Review,Vol.10, p.765-766.
Wood, D. (1991) Corporate Social Performance Revisited. Academy of Management Review,October (1991), p.691-718.
Swanson, D. (1995) Addressing A Theoretical Problem by Reorienting the Corporate Social Performance Model. Academy of Management Review,Vol.20 (1), p.43-64.
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Corporate Citizenship
Corporate citizenship
•Embraces all the facets of corporate social responsibility, responsiveness, and performance.
• Serves a variety of stakeholders.
Companies have certain responsibilities that they must fulfill in order to be perceived as good corporate citizens.
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Business Administration and Economics Department
Corporate Citizenship (continued)
Broad View
•A reflection of shared moral and ethical principles.
•A vehicle for integrating individuals into the communities in which they work.
•A form of enlightened self-interest that balances stakeholders’ claims and enhances a company’s long-term value.
Narrow View
•Corporate community relations 31
Business Administration and Economics Department
The Drivers of Corporate Citizenship
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Internal Motivators External Pressures
Traditions and values Customers and consumers
Reputation and image Expectations in the
communities
Business strategy Laws and political
pressures
Recruiting and retaining
employees
Business Administration and Economics Department
Benefits of Corporate Citizenship
Improved employee relations
Improved customer relationships
Improved business performance
Enhanced marketing efforts
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Global Corporate Citizenship
• Multinational enterprises are expected to be good corporate citizens in the countries in which they do business.
• Are expected to tailor their initiatives to conform to the cultural environment.
• International academics and business people do research on and advocate CSR and corporate citizenship concepts.
Convergence in global CSR approaches will continue as the world economic stage becomes the common environment within which businesses function.
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Business Criticism and Response Cycle
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Factors in the Societal Environment
Criticism of Business
Increased Concern
for the Social Environment
A Changed
Social Contract
Business Assumption of
Corporate Social Responsibility
Social Responsiveness, Social
Performance, and Corporate Citizenship
A More Satisfied Society
Fewer Factors Leading to
Business Criticism
Increased Expectations
Leading to More Criticism
Business Administration and Economics Department
Business’ Interest in Corporate Citizenship
Non-academic research
•Fortune's ranking of “Most Admired” and “Least Admired” corporations
•Conference Board’s Ron Brown Award for Corporate Leadership
•CRO Magazine Awards
•Chamber of Commerce of the U.S. Corporate Citizenship Awards.
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Sustainability
• Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs.
• Has become one of businesses’ most pressing mandates.
• Includes the following criteria: • Environmental
• Economic
• Social
Concerns businesses’ abilities to survive and thrive over the long term.
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“Triple Bottom Line” Perspective
Key Spheres of Sustainability 1.Economic
2.Social
3.Environmental
Corporate sustainability is the goal.
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Socially Responsible or Ethical Investing
• Emerged in the 1970s
• Over $2.7 trillion in socially responsible investments in the U.S.
Social Screening
• A technique used to screen firms for socially-responsible investment purposes.
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Reasons for the Upsurge in Socially Responsible Investing
1. More reliable research on CSP
2. Investment firms using social criteria have solid track record
3. The socially conscious 1960s generation is making investment decisions
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Stakeholders
Stakeholders
•Individuals or groups with which business interacts and who have a vested interest in the firm.
External stakeholders
Internal stakeholders
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Urgent versus Enduring Issues
Short-Term
•Issues or crises arise on the spur of the moment and management must formulate quick responses.
Long-Term
•Issues or problems are a long-term concern and management must develop a thoughtful organizational response.
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Stakeholders (cont)
Business Administration and Economics Department
Stakeholder Bottom-Line Perspective
• The view that a firm has multiple bottom lines that benefit for corporate social performance.
• The impacts of benefits of social performance cannot be fully measured or appreciated by considering only the impact on the financial bottom line.
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Stakeholders (cont)
Business Administration and Economics Department
Developing an ethical and socially responsible managerial approach
• What business are we in or ought we be in?
• What changes are occurring or will occur in society’s expectations of business that mandate business’s taking the initiative with respect to particular societal or ethical problems?
• Did business, in general, or our firm, in particular, have a role in creating these problems?
• Can we reduce broad social problems to a size that can be effectively addressed from a managerial point of view?
• What are the specific problems, alternatives for solving these problems, and implications for management’s approach to dealing with social issues?
• How can we best plan and organize for responsiveness to socially related business problems?
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Business Ethics
Ethics •Refers to issues of right, wrong, fairness, and justice.
Business Ethics •Focuses on ethical issues that arise in the commercial realm.
Ethics questions permeate business’s activities as it attempts to interact with major stakeholder groups.
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Business Ethics
• The public’s interest in business ethics is at an all-time high, spurred by headline-grabbing scandals.
• The Enron scandal impacted business to greatly it is called “The Enron Effect.”
• Business will never be the same.
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High-Profile Ethics Scandals
Enron Era
•Worldcom
•Tyco
•Arthur Andersen
Wall Street Financial Scandals Era
•AIG
•Bear Stearns
•Lehman Brothers
•Fannie Mae/Freddy Mac
•Bernard Madoff 48
Business Administration and Economics Department
Inventory of Ethical Issues in Business
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Employee-Employer Relations
Employer-Employee Relations
Company-Customer Relations
Company-Shareholder Relations
Company-Community/Public Interest
Business Administration and Economics Department
Business Ethics Today versus Earlier Periods
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Ethical Problem
Ethical Problem
Society’s Expectations
of Business Ethics
Actual
Business Ethics
1960s 2012 Time
Exp
ecte
d a
nd
Act
ual
Lev
els
of
Bu
sin
ess
Eth
ics
Business Administration and Economics Department
Levels at Which Ethical Issues May be
Addressed
Personal level •Situations faced in our personal lives outside the context of our employment.
Organizational level •Workplace situations faced by managers and employees.
Industry or profession level •A manager or organization might experience business ethics issues at the industry or professional level.
Societal and global levels •Managers acting in concert through their companies and industries can bring about constructive changes.
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Three Models of Management Ethics
Immoral Management •An approach devoid of ethical principles and an active opposition to what is ethical. •The operating strategy of immoral management is focused on exploiting opportunities for corporate or personal gain.
Moral Management •Conforms to high standards of ethical behavior or professional standards of conduct.
Amoral Management •Intentional: Does not consider ethical factors. •Unintentional: Casual or careless about ethical factors.
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Factors Affecting the Morality of Managers
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Society’s Moral Climate
Business’s Moral Climate
Industry’s Moral Climate
Individual
One’s Personal
Situation
Superiors
Policies
Peers
Organization’s Moral Climate
Business Administration and Economics Department
Factors Affecting the Organization’s Moral
Climate
1. Behavior of superiors
2. Ethical practices of one’s industry or profession
3. Behavior of one’s peers in the organization
4. Formal organizational policy (or lack of)
5. Personal financial need
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Concerns about the compliance orientation
1. Could undermine the ways of thinking or habits of mind that are needed in ethics thinking.
2. Can squeeze out ethics.
3. Managers many not consider tougher issues that a more ethics-focused approach might require.
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Business Ethics
Business Administration and Economics Department
Four Important Ethical Questions
1. What is? 2. What ought to be?
3. How do we get from what is to what ought to be?
4. What is our motivation in all this?
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To be put at individual, organizational, industry or professional, societal and global levels.
Business Administration and Economics Department
Improving Ethical Culture
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Top
Management
Leadership
Moral
Management
Ethics Programs
and Officers
Realistic
Objectives
Ethical Decision-
Making Processes
Codes of
Conduct
Effective
Communication
Ethics Training
Corporate
Transparency
Whistle-Blowing
Mechanisms
Ethics Audits and
Risk Assessments
Board of Directors’
Oversight
Discipline of
Violators
Business Administration and Economics Department
Business Ethics: Types
Descriptive Ethics
•Involves describing, characterizing, and studying morality.
•Focuses on what is occurring.
Normative Ethics
•Concerned with supplying and justifying a coherent moral system of thinking and judging.
•Focuses on what ought or should be occurring.
58 Business Administration and Economics Department
Three Approaches to Business Ethics
Conventional Approach
•Based on how common society today views business ethics and on common sense.
Principles Approach
•Based upon the use of ethics principles to justify and direct behavior, actions, and policies.
Ethical Tests Approach
•Based on short, practical questions to guide ethical decision making and behavior and practices. 59
Business Ethics: Approaches
Business Administration and Economics Department
Conventional Approach
The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal
norms.
Ethical Egoism
•An ethical principle based on the idea that the individual should seek to maximize his or her own self interests as a legitimate factor.
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Decision, Behavior,
or Practice
Prevailing Norms
of Acceptability
Business Administration and Economics Department
Sources of Ethical Norms
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Fellow
Workers
Family
Friends
The Law
Regions of
Country
Profession
Employer
Society at
Large
Local
Community
Religious
Beliefs
The Individual
One’s Self-
Interest and
Conscience
Business Administration and Economics Department
Types of Ethical Principles or
Theories
Teleological theories
•Focus on consequences or results.
Deontological theories
•Focus on duties.
Aretaic theories
•Focus on virtue. 62
Business Administration and Economics Department
Principles Approach to Ethics
Major principles of ethics
•Utilitarianism
•Kant’s Categorical Imperative
•Rights
•Justice
•Principles of care
•Virtue ethics
•Servant leadership
•Golden Rule
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Business Administration and Economics Department
Utilitarianism A teleological principle that focuses on acts that produce the greatest good for the greatest number.
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Strengths Weaknesses
Forces thinking about the
general welfare of stakeholders
Ignores actions that may be
inherently wrong
Allows personal decisions to fit
into situational complexities
May conflict with the notion of
justice
Difficult to formulate
satisfactory rules for decision
making
Ethical Principles
Business Administration and Economics Department
Kant’s Categorical Imperative
• A duty-based, deontological, principle.
Formulations: 1. Act only on rules that you would be willing to see
everyone follow.
2. Act to treat humanity in every case as an end and never as a means.
3. Every rational being is able to regard oneself as a maker of universal law. We do not need an external authority to determine the nature of the moral law.
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Ethical Principles
Business Administration and Economics Department
Principle of Rights Moral rights
•Rights that we ought to have based on moral reasoning.
Principle of rights
•Focuses on examining and possibly protecting individual moral or legal rights.
•A negative right is the right to be left alone.
•A positive right is the right to something.
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Ethical Principles
Business Administration and Economics Department
Principle of Justice
• Involves considering what alternative promotes fair treatment of people.
Types of justice
• Distributive
• Compensatory
• Procedural
• Rawlsian
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Ethical Principles
Business Administration and Economics Department
Justice Principle In Work Place
Due Process - Process Fairness
1.Have employees been given input into the decision process?
2.Do employees believe the decisions were made and implemented in an appropriate manner?
3.Do managers provide explanations when asked? Do they treat others respectfully? Do they listen to comments being made?
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Ethical Principles
Business Administration and Economics Department
Rawls’s Principles of Justice
1. Each person has an equal right to the most basic liberties compatible with similar liberties for others.
2. Social and economic inequalities are arranged so that they are both:
Reasonably expected to be to everyone’s advantage, and
Attached to positions and offices open to all.
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Ethical Principles
Business Administration and Economics Department
Ethic of Care and Virtue Ethics Ethic of care/Principle of caring
•Traditional ethics focus too much on the individual self.
•Views the individual as relational, not individualistic– similar to stakeholder theory.
Virtue ethics
•Focuses on individuals becoming imbued with virtues. If being is virtuous, actions will likely be virtuous.
•Based on Aristotle and Plato.
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Ethical Principles
Business Administration and Economics Department
Servant Leadership
Servant leadership
•Based on the moral principle of serving others first, such as employees, customers, and community.
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Ethical Principles
Business Administration and Economics Department
Characteristics of Servant Leaders
• Listening
• Concern/Caring/Empathy
• Healing
• Awareness
• Foresight
• Conceptualization
• Commitment to the growth of people
• Stewardship
• Building community 72
Ethical Principles
Business Administration and Economics Department
The Golden Rule
• Do unto others as you would have them do unto you.
The Golden Rule is:
1. Accepted by most people.
2. Easy to understand.
3. A win-win philosophy.
4. A compass when you need direction. 73
Ethical Principles
Business Administration and Economics Department
Ethical Tests Approach
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Test of One’s Best Self
Test of Making Something Public
Test of Ventilation
Test of Common Sense
Test of the Purified Idea
Big Four (greed, speed, laziness, or haziness)
Gag Test
Business Administration and Economics Department
Ethics and Technology
Benefits of Technology Increase production of goods and services
Reduce amount of labor needed to produce goods and services
Make labor easier and safer
Increased productivity
Higher standard of living
Increased life expectancy
It can be difficult to spread the benefits of technology beyond the developed world.
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Ethics and Technology: Challenges of Technology
• Spreading it to undeveloped world.
• Side Effects of Technology
Environmental pollution
Depletion of natural resources
Technological unemployment
Creation of unsatisfying jobs 76
Business Administration and Economics Department
Technology and Ethics
Two Key Issues
•Technological determinism
• What can be developed will be developed.
•Ethical lag
• Occurs when the speed of technological change far exceeds that of ethical development.
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Symptoms of Society’s Technology Intoxication
1. We favor the quick fix.
2. We fear and worship technology.
3. We blur the distinction between what is real and fake.
4. We love technology as a toy.
5. We live our lives distanced and distracted.
Find the right balance! 78
Business Administration and Economics Department
Bibliography
1. Buchholtz, A.K. and Carroll, A.B. (2011) Business And Society. 8th Int. Edition. Cengage Delmar Learning.
2. Soucher, S.J. (2007) Teaching the moral leader: a literature - based leadership course. 1st edition. Routledge.
3. Rainey, D.L. (2006) Sustainable business development: inventing the future through strategy, innovation and leadership. 1st edition. Cambridge University Press.
4. Cairncross, F. (1992) Costing the earth: the challenges for governments, the opportunities for business. 1st edition. Harvard Business School Press.
5. Dunning, J.H. (2003) Making globalisation good: the moral challenges of global capitalism. 1st edition. Oxford University Press.
6. Renouard, C. (2011) Corporate Social Responsibility, Utilitarianism, and the Capabilities Approach. Journal of Business Ethics, 98 (1), p85-97.
7. Shum, P. and Yum, S. (2011) Ethics and Law: Guiding the Invisible Hand to Correct Corporate Social Responsibility Externalities. Journal of Business Ethics, 98 (4), p549-571.
8. Swanton, C. (2010) Heideggerian Environmental Virtue Ethics. Journal of Agriculture & Environmental Ethics, 23(1/2), p145-166.
Business Administration and Economics Department