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History of Business
Ethics
Chris Doran
Maxwell 328
[email protected]
Differences between Business Ethics
and Corporate Social Responsibility
Business Ethics
CSR
Differences between ethics and CSR
Business Ethics
The whole encompassing behaviour of
businesses
CSR
CSR as an element business ethics
Business Ethics is the VERY broad field CSR is more narrowly about a
of study concerning good ethical
company’s SOCIAL obligations…that is,
decision-making in commercial contexts. a company’s obligations to society in
general.
Business Ethics is concerned with not
just social obligations, but also
obligations to employees, customers,
suppliers and competitors.
CSR is about the extent to which
companies owe something to “society at
large” (i.e., those who do not have a
direct involvement with the business).
Business ethics is more about “good” or
“bad” conduct according to moral
standards
CSR : integrating economic, social and
environmental targets in one strategy…
Terms are difficult to define and these inconsistences mean debate on the differences
Differences between business ethics
and CSR
Some people claim that the two overlap interchange and even
mean the same. Others claim they are in direct and stark contrast
• Difference between Business Ethics and Social Responsibility
• Though business ethics and social responsibility seem to be overlapping, there
has always been a contradiction between the two. Companies, though they are
committed to be socially responsible for their behaviour have been found to be
engaging in acts that cannot be called ethical.
• What is good for the society is sometimes not good for the business, and what is
good for the business is almost always not good for the society.
• If the society is conscious, it responds in such a way that businesses are forced
to behave responsibly. The same applies to the administration and the judiciary
of any country.
• Selling of liquor and tobacco in any society is not against business ethics though
it may be against the principles of social responsibility. The same applies to
lotteries and gambling. But it is certainly against business ethics as well as
against social responsibility to entice minors to engage in smoking and drinking.
Sustainability
We did not inherit this world from our parents, we borrowed it from our
children.
One day we will return it to them. When we do, it should be every bit as
bountiful as it was when we found it.
This is what sustainability means. (Ireland Pavilion, Milano Expo 2015)
Business Ethics is Nothing New
• Some philosophers have argued that moral concepts are
timeless, limited and unchanging, others emphasise that
moral concepts change as social life changes (MacIntyre:
2009:1). This is supported by Loucks (1986) who has
argued that business ethics dilemmas have been prevelant
since 560 B.C. Loucks refers to the Greek thinker Chilon,
who registered the opinion that “a merchant does better to
take a loss than to make a dishonest profit.” (Loucks,
1986:2) His reasoning was that a loss may be painful for a
while, but dishonesty hurts forever. This case identifies
that although societal issues change the business ethics has
always been prevalent in some form.
Three Synergies of Business Ethics
Moral in
History
Business
Ethics in
academia
Business
Ethics as a
movement
Three Synergies of Business Ethics
Morals in history
Business ethics in
academia
Ethics as a movement
the application of
everyday moral or
ethical norms to
business (De George,
2005).” Early
examples of ethics in
business can be seen
in the Bible’s Ten
Commandments,
Plato’s Republic, and
Aristotle’s Politic. As
ethical philosophies
took a more modern
approach other views
began to arise like
that of Adam Smith
and Karl Marx.
The 1960’s brought forth a
new generation of social
consciousness toward
business. Vietnam, Civil
Rights, and Environmental
Issues all became important.
Corporations looking to
minimize public outcries
formed social responsibility
programs. Business schools
began developing courses
designed to address these
social responsibilities. In the
1970’s the birth of “Business
Ethics” as an academic field
came into its own and by
1990 business ethics was
deeply rooted in academia.
Ethics as a movement, the final
path, shows how a business
interweaves ethics into the
structures of the organization
through the creation of ethics
codes, officers, committees and
training. The business ethics
movement began when new
legislation was passed that
targeted businesses. These laws
included the Civil Rights Act of
1964, Occupational Safety and
Health Act of 1970, and the
Environmental Protection Act.
Non-compliance with these laws
could bring lawsuits upon
organizations.
Business Ethics Through the Ages
• The history of business ethics is probably as old as business itself. Even in
prehistoric societies there were most likely rules governing acceptable trade
practices.
• Certainly the oldest known written legal code, the Code of Hammurabi (1700s
B.C.), dealt considerably with issues concerning commerce, tariffs, and
pricing.
• By the 4th century B.C., ethical issues related to business and trade had
begun to receive academic treatment in the philosophies of Plato and
Aristotle. Plato's preoccupation with justice and morality in such works as the
"Republic" often had significant implications for trade and commerce.
• The history of business ethics also has its formative years in the reformation.
Reformation figures like Martin Luther and John Calvin, in the 15th and 16th
centuries A. D., applied religious and moral considerations to trade and
economics leading to the development of the Protestant work ethic. But in the
following two centuries, Enlightenment thinkers such as John Locke and
Adam Smith began to separate religious doctrine from moral and ethical
considerations commerce and business.
Business Ethics Timeline
1960s
1970s
1980s
1990s
2000s+
Ethical climate/
Environmental
Employee
Bribery and
Unsafe work
Emerging
culture
issues
militancy (us vs.
illegal
practices in third
technology
them
contracting
world countries
issues: cyber
practices
crime, privacy
Major ethical
Employer/
Human rights
Deceptive
Increased
Intellectual
dilemmas
employee
issues (forced
advertising
corporate
property theft
tensions
labour, low wages,
liability for
work environment)
personal damage
Civil rights &
Firms start practice
Financial fraud
Financial
International
race relation
of covering up not
(savings & loan
mismanagement
corruption
issues
confronting issues
scandals)
& fraud
Changing work
Federal Corrupt
Transparency
Federal
Sarbannes
ethics
Practices Act
issues arise
Sentencing
Oxley Act
Guidelines for
(2002)
passes (1977)
Org. (1991)
Drug use
Compliance &
Defence Industry
Global Sullivan
UN Convention
escalated
legal to values
Initiatives
Principles (1999)
Against
orientation
(1986)
Corruption
(2003)
History of Business Ethics
Cadbury
http://www.quakerinfo.com/quak_cad.shtml
Lever Bros
http://www.unilever.co.uk/aboutus/ourhistory/?WT.GNAV=Our_history
Port Sunlight
Port Sunlight Factory
Key Information About Cadbury and Lever Bros
Cadbury
Unilever
SELECTION
RECRUITMENT
Key Information About Cadbury and Lever Bros
Cadbury
Unilever
Quaker family – members of temperance society
Quaker family – members of congressionalist church
John Cadbury – 1824 invented drinking choc as
alternative of alcohol. Believed that alcohol led to
poverty.
William Hesketh Lever, created Sunlight soap (1st mass
market soap) Products focused on social impact
In 1879 created Bournville or Garden city. Town had
gardens and factory has sports fields, kitchens and
pools. Considered a model village
Bournville provided homes for workers.
Also offered health schemes, pensions and health
and safety (not common at the time)
Education – set up schools in community
Training – staff asked to attend night school
Cadbury led campaign to ban chimney sweeps
Set up anti-animal cruelty society leading to RSPCA
SELECTION
Wanted to sort out factory conditions, health and
hygiene in Victoria Britain. Products based on personal
care, nutrition and vitamins.
Port Sunlight (near Chester) built for employees (18881914) offered high quality houses for workers (330
acres)
Tied cottages – lots of power with company, if you list
your job you would loose house
In total over 400 houses provided around factory.
Intrusive rules, especially in social life, mandatory
participation in activities, social life was policed.
RECRUITMENT
1st company in UK to introduce half day Saturdays
and bank holidays
Set up work councils for men and women
Both companies believed in equality for all, and a social responsibility and social reform.
History of Business Ethics (in academia)
• Business ethics only became a subject taught from the
1960s and this was predominantly in the USA.
• Became important as issues were arising over
organisations conduct and behaviour.
• As a response organisations started to donate money
to charity to show their attitudes to ethics (Philanthropy)
• These programs were ad hoc in nature and usually
localised. It also varied based on interpretation of
beliefs, values and ethics and on the industry
Concepts of Ethics
Developed by moral philosophers
over generations
Used to distinguish ethical from
unethical behavior
Each has problems
http://www.timelineindex.com/content/select/91/912,9
1?pageNum_rsSite=1&totalRows_rsSite=78
Relativism
Egoism
The 4
Concepts of
Ethics
Utilitarianism
Deontologism
Relativism
• There is no universal standard by which morality
can be judged
• What is correct for one society may be wrong for
another
• Ethics and morality are relative
• Leads to conclusion - each person’s opinion is
correct
• Nothing that anyone does is morally wrong
Egoism
• One ought to act in his or
her own self interest
• Ethical behavior is that
which promotes one’s
own self interest
• Does not mean should not
obey laws - only do so if in
self interest
Utilitarianism
• The morality of an action can
be determined by its
consequences
• An action is ethical if it
promotes the greatest good
for the greatest number
• "the greatest good for the
greatest number“
• Can lead to unjust
consequences
Deontologism
• Derived from the Greek word for Duty
• Actions are not justified by their consequences.
Factors other than good outcomes determine the
rightness of actions
• It is a duty never to lie
• The act itself irrespective of results is the issue at
hand
• Utilitarianism - The ends justify the means
• Deontologism - It is the means which are important
• These two types of ethics can be seen as
opposites
Examples – which of the 4 concepts are these?
• Robbing a Bank
• Driving Above the Speed Limit
• Cheating on an Exam
• Promote environmental concern for political
reasons
• Eating the last animal on the planet to feed 5
people
BUSINESS ETHICS
WEEK 2 Role of
Ethical theory
Week 2 Part 2 - Topics
• Agency theory versus Stakeholder theory
• John Mahoney - Ethical Business Circles with
Ben and Jerry
• Carroll’s model of CSR
• The Cultural Web
• The Reidenbach and Robin Model
• Chris Arnold – The Ethical Sphere
Milton
Friedman, 1970
“It is the social responsibility of
businesses to make as much
money as possible for the
owners, within the law and the
rules of competition. If this
definition of purpose is accepted
then for a company to spend
shareholder funds in ways that
cannot be shown to be
consistent with maximising
owner wealth is unethical”
Agency Theory or Shareholder TheoryFriedman
• It is the social responsibility of business to
make as much money as possible for the
shareholders, within the rules of the game(fair
competition, no deception or fraud)
• This is where directors of a company are seen
as agents who are duty bound to act in
whatever means to maximise the interests of
the owners.
Stakeholder Theory- Cannon
• There exists an implicit contract between
business and the community in which it
operates. Business is expected to create
wealth; supply markets; generate employment;
innovate and produce a sufficient surplus to
sustain its activities and improve its
competitiveness while contributing to the
maintenance of the community in which it
operates. Society is expected to provide an
environment in which a business can develop
and prosper so surely the organisation should
repay?
Name some examples of stakeholders
Organisational Stakeholders
• Employees
• Providers of finance
• Consumers
• Community and the environment
• Government
• Other organisations or groups (suppliers,
trade unions, business associates and
competitors)
Stakeholders define ethical issues in business
INTEREST
GROUPS
MASS MEDIA
CUSTOMERS
GOVERNMENT
COMMUNITY
TRADE
ASSOCIATIONS
PRIMARY STAKEHOLDERS
EMPLOYEES
COMPANY
SHAREHOLDERS
SUPPLIERS
COMPETITORS
SECONDARY STAKEHOLDERS
Ethical Business Circles – Mahoney 2003
Inside the company
Discriminations, confidentiality,
loyalty
Customer relations
and marketingPricing and
advertising of goods
Relations with other
companies- payment of
suppliers, insider trading,
mergers and work
practices
The company and
the communityself-regulation,
bribery, the
environment,
community
relations
Ben and Jerry’s Homemade Inc.
Its founders created a ‘Value’ led business and
integrated a social mission into its operations
Many flavours have a social, ethical
or environmental message.
Fossil
fuel raises awareness of energy
and alternative sources of power. It is
made with green energy and is a
carbon-curbin start.
Bohemian
Raspberry is designed to
honour Freddy Mercury and for every
sale a percentage of the profit goes to
The Mercury Phoenix Trust-fighting aids
worldwide.
Ben and Jerry’s programme of social
integration
BUSINESS
PRACTICES
WORKPLACE
•TRUST
•WALK THE TALK
•SHARING THE WEALTH
•CARING COMMUNITY
•OPEN/INCLUSIVE
•CARING CAPITALISM
•COMMUNITY & DECISIONMAKING
•CREATING ECONOMIC
OPPORTUNITY
COMPANY
VALUES
ENVIRONMENT
•STEWARDSHIP OF NATURAL
RESOURCES
•MINIMISE ENVIRONMENTAL
IMPACT
•SUPPORT AGRICULTURE
SOCIAL MISSION
•IMPROVE QUALITY OF LIFE
OF BROAD COMMUNITY
•SOCIAL AUDIT/ANNUAL
REPORT
•SUPPORT
EMPLOYEES/EDUCATION
Philanthropic Responsibilities
Be a good corporate citizen
Contribute resources to the
community; improve quality of life
Ethical Responsibilities
Be ethical
Obligation to do what is right, just and
fair. Avoid harm
Legal Responsibilities
Obey the law
law is society’s codification of right and wrong, Play
by the rules of the game
Economic Responsibilities
Be profitable
The foundation upon which all others rest.
Fig 1; The Pyramid of CSR (Source: Archie B. Carroll (1996) Business and Society, Cincinnati, OH, South-Western College publishing:
p39)
Compare and contrast the ethical Business
circles model and Carroll's Pyramid of CSR
•SIMILARITIES
•DIFFERENCES
Legal
Responsibilities
Economic
Responsibilities
Obey the law
Be profitable
law is society’s
codification of right
and wrong, Play by
the rules of the game
The foundation
upon which all
others rest.
Fig 1; The Pyramid of CSR (Source: Archie B. Carroll (1996) Business and Society, Cincinnati, OH, South-Western College publishing:
p39)
THE CULTURAL WEB- JOHNSTON AND
SCHOLES 2005
THE CULTURAL WEB EXPLAINED
 Stories
 What stories do people currently tell about your organization?
 What reputation is communicated amongst your customers and
other stakeholders?
 What do these stories say about what your organization believes
in?
 What do employees talk about when they think of the history of
the company?
 What stories do they tell new people who join the company?
 What heroes, villains and mavericks appear in these stories?
THE CULTURAL WEB
• Rituals and Routines
• What do customers expect when they walk in?
What do employees expect?
What would be immediately obvious if changed?
What behaviour do these routines encourage?
When a new problem is encountered, what rules do people apply when they
solve it?
What core beliefs do these rituals reflect?
• Symbols
• Is company-specific jargon or language used? How well known and usable
by all is this?
Are there any status symbols used?
What image is associated with your organization, looking at this from the
separate viewpoints of clients and staff?
CULTURAL WEB
• Organizational Structure
• Is the structure flat or hierarchical? Formal or informal? Organic or
mechanistic?
Where are the formal lines of authority?
Are there informal lines?
• Control Systems
• What process or procedure has the strongest controls? Weakest controls?
Is the company generally loosely or tightly controlled?
Do employees get rewarded for good work or penalized for poor work?
What reports are issued to keep control of operations, finance, etc...?
• Power Structures
• Who has the real power in the organization?
What do these people believe and champion within the organization?
Who makes or influences decisions?
How is this power used or abused?
The Reidenbach and Robin Model
• Commercial life is increasingly hedged around with choices about
profits and ethics.
• How can organisations sensibly develop an ethical position?
• It is important to note that a multi-divisional organisation may occupy
several stages at the same time, and companies may also regress from
higher to lower levels.
• Stage 1 Amoral
• At the base are the amoral or ethically challenged companies. They are around
strictly for the short term, and are characterised by winning at all costs.
• Obedience is valued and rewarded and there is little concern for employees other
than their value as an economic unit of production.
• The ethical climate of a stage one organisation can be summed up by phases like
• "They’ll never know", "Everybody does it", and
• "We won't get caught".
• At the heart of this organisation is the philosophical conviction that business is not
subject to the same rules as individuals and that there is no set of values other than
greed.
• Stage 2 Legalistic
• Legalistic firms obey the law, though ethical concerns are judged on the basis of
adherence to the letter if not the spirit of it. No breach of law often means no
breach of ethics.
• The argument goes that 'If its legal, its OK', 'and if we are not sure, have the lawyers
check it out' typifies the legalistic approach. Economic performance dominates
evaluations and rewards.
• A legalistic company's code of ethics - if it exists - would be dominated by don't do
anything to harm the organisation statements.
• Some legalistic companies have no ethics code, and do not accept the necessity.
Often they see little purpose in expressing explicit ethical standards, and indeed
some feel any such statements could lead to difficulties and complication.
• Stage 3 Responsive
• Managers understand the value of not acting solely on legal basis.
• Although a reactive mentality may remain, it is coupled with a growing sense of balance between profits
and ethics.
• Nonetheless, the basic premise still may be a somewhat cynical of ethics paying.
• Management begins to test and learn from more responsive actions. A responsive company's ethics code
would reflect a concern for other stakeholders, but additional ethics support vehicles, such as hotlines,
are less likely to be found.
• Most stage two companies would leave ethical concerns aside until they become a problem only then
would they consider remedial action.
• Stage 4 Emerging Ethical
• Managers have an active concern for ethical outcomes:
• We want to do the right thing. Values are shared across the organisation. Ethical perception has focus but
may still lack organisation and long term planning.
• Ethical values in such companies are part of the culture. Codes of ethics are action documents, and
contain statements reflecting core values.
• These organisations accept that their code of ethics is a starting point - any code not monitored and
enforced rapidly becomes a dead letter.
• One leading UK bank has put in place a range of instruments for enlisting staff commitment to its code,
including ethics hotlines and regular assessment of code effectiveness.
• Stage 5 Ethical Companies
• This stage represents what the researchers call the ethics organisation.
• Here there is a total ethical profile, with carefully selected core values (and an approach to hiring, training,
firing and rewarding) reflect it.
• The answer is not to attempt to turn staff and companies into saints, but rather to strike a suitable ethical
balance in business operations, in order to minimise reputational risk.
• Although the concept of social responsibility may change from time to time, the pyramid model gives us a
framework for understanding the evolving nature of the firm's economic, legal, ethical and philanthropic
performance.
Chris Arnold – The Ethical
Sphere, 2009.
16
1
2
1
15
3
14
4
KEVs
13
KEY
14
5
9
ETHICAL
VALUES
12
6
11
7
2
10
9
8
1. Fairtrade
2. Supports Charity
3. Less water
4. Sustainability
5. Not tested on animals
6. Lower carbon footprint
7. Chemical free
8. Less Energy Used
9. Local
10. Organic
11. Natural
12. Healthy
13. Recycled
14. Less packaging
15. Supports communities
16. Socially responsible
Balancing KEVs and
Traditional Methods
There are over 50 different ethical values that can be used to
map around any product or company. Though this process
between 1-4 are selected as KEVs. These are finally reduced to
1 or 2 which are blended with the companies traditional values
Key Ethical
Values
(KEVs)
New
Proposition
Traditional
Company
Values
Coca-Cola Ethical History
Nicholas the Wonderworker. He had a reputation for secret gift-giving, such as
putting coins in the shoes of those who left them out for him, and thus became the
model for Santa Claus, whose English name comes from the Dutch Sinterklaas.
Please note there is no evidence that tap water was used in Dasani
Seminar Session – Coke Wars
 http://www.youtube.com/watch?v=XqEJRdP4B
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 http://www.youtube.com/watch?v=sx0i7WgBOv
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 http://www.youtube.com/watch?v=LM9rA4LbO
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 http://www.youtube.com/watch?v=IXDSWhobbf
c&feature=related