BUSINESS ETHICS

Lecturer: Dương Thị Hoài Nhung

Email: [email protected]

Phone number: 0985867488

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Sau chapter 3 thi Mid – term (lecture 9)

Mid – term test 15% MCQs + Short questions (50 minutes)

Group debate 15%

Final exam 60%

CHAPTER 1: AN INTRODUCTION TO BUSINESS ETHICS

1. What is ethics?
Ethics comes from the Greek words “ethikos" and "ethos" meaning character (of individual).

=> Ethics reflects the character of the individual and more contemporarily perhaps, the character of
individuals.

=> Ethical decisions also involve morals, which are society’s accepted standards of behavior.

There are 4 types of Ethics:

a) Philosophical ethics
Ethics itself as a discipline. Philosophical ethics ask:

1. What is meaning of moral term/judgments?

2. What is nature of moral judgment?

3. Why should I be moral?

Philosophical ethics don’t tell you how to carry out business negotiations in another country. (1 là 1, 2 là
2, phải tuân theo luật)

Ex: ‘stealing is wrong’ then we must be able to give the grounds for this assertion.

b) Normative ethics (đạo đức chuẩn mực)

Focuses on what ought or should be occurring

• how to resolve the dilemmas which may arise when making difficult decisions,

• what general rules and guidelines we should follow,

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 • how we should distinguish between right and wrong,

• what virtues we should develop.

The study of right and wrong, duty and obligation, moral norms, individual character, and
responsibility.

c) Practical ethics
It aims to examine and define principles for moral behaviour and apply them to real world scenarios.
d) Descriptive ethics
Focuses on what is occurring

• Descriptive ethics is frequently completely lacking in philosophical texts

• This approach looks at how individuals, groups and organisations approach ethical evaluation and
decision-making in practice.

2. Ethical terms in organizational contexts

- Business ethics

+ The study of right and wrong, duty and obligation, moral norms, individual character, and responsibility
– in the context of business (based on Normative ethics)

+ Corporate Social Responsibility (CSR) can be defined as the obligation companies have to develop and
implement courses of action that aid in social issues that impact society.

- Functional or professional ethics

We can differentiate by environmental context, it may also be useful to consider the ethical problems
which tend to arise within specific functional areas of an organisation.

MKT ethics How to treat customer ethically?

Human resource ethics How to treat employee ethically?
Accounting and finance ethics Who cares? Manager, investors, accountant, government,
community => treat them ethically?

3. Ethics and the law

Example of action that:

Ethical Unethical
Legal + starting a business + pollute the environment
+ obey traffic rules

Illegal + cross the traffic light but you can save + kill people

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 someone’s life + require employees work all the time (all
days)

The law requires ethical standards, often as a minimum level because government expect society and
firms can do further than they require. At the minimum level, people will be easy to follow.

- The law and ethics can overlap in many respects.

- The law is a reflection of what society thinks are minimal standards.

4. Role of ethics in business

Government will support the company that has a high responsibility; Customer will support you; Build
the trust from investors.

Why should business be ethical?

 Meet demands of business stakeholders

 Comply with legal requirements
 Enhance busniess performance (in short-term: low profit => long-term: high profit)
 Prevent or minimize harm (some companies want to go fastly => may take risk in long-term)
 Promote personal morality

5. Why Ethical problems occur in business

Conflict of interest

Conflicts between business and ethics: companies – employees (wants companies to create many well
paying jobs), customers (want to purchase goods and services at low prices), community (wants to reduce
pollution levels), government (wants to get more taxes and firm make more contribution to society).

Competitive pressures on profits

Pressure come from competitors and investors.

Personal Gain and Selfish interest

Want to become a rich man but do not harm anyone.

Cross-cultural contracdictions

Today, the policy makers and strategic planners in all multinational corporations, regardless of the nation
where they are head quartered, face this kind of ethical dilemma.

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CHAPTER 2: THEORIES OF ETHICS AND BUSINESS

Example 1: the moral side of murder.

Scenario 1: driver of trolley car has to make a decision: one is take the trolley car move forward and go
through 5 people in the railway (they will die), two is turn left and go through 1 person.

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Turn left: Life is fair to everyone. Turn left => active to do that, you involve in the situation, control your
action => not fair to one worker to sacrifice his life to save other worker’s life.

Straight ahead: Quantity is important: minimize the consequences. If the driver chooses turn left, this is
also an accident because he has no choices.

Scenario 2:

You are not the duty – not driver, you don’t have to think to stop the trolley car.

Intention to do sth: push the man into the railway => actively kill the man.

Scare to be the murderer => legal pushnishment.

How can you evaluate an ethical action? Làm ntn để đánh giá 1 hành động là có đạo đức?
Based on the moral reasoning. Dựa vào lý do đạo đức.

Moral reasoning:

1/ Consequentialist (người theo thuyết trọng quả): locates morality in the consequences of an act.

There are 2 theories that locate moral in the consequnces of an act including:

- Egoism : chủ nghĩa vị kỷ

- Utilitarianism : chủ nghĩa vị lợi

2/ Categoricalist (người theo thuyết tuyệt đối): locates morality in certain duties, rights, responsibility and
motive of action.

There are 2 theories that locate morality in certain duties and rights including the principle of morality -
Kant’s theory and the theory of justice - John Rawls.

Theory of justice: thuyết công lý

Principle of morality: thuyết đạo lý

Teleological frameworks (Consequentialist)

 Teleological frameworks focus on the results of the conduct of the individual.

 Derived from the Greek word for fulfillment, telos, these frameworks focus on the ramifications,
positive and negative, resulting from the actions and conduct of individuals.

 The two teleological frameworks are ethical egoism, utilitarianism.

1. Egoism
Putting yourself and your own interests before anything or anyone else.

Ethical egoism is based on the belief that every individual should act in a way to promote himself or
herself interests if the net result will generate, on balance, positive rather than negative results.

 We “should” act in our own self-interest.

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  It argues we have no duty except to do what is best for ourselves.

Ex:

- The basic capitalist system use “greed” and self-interest in profit to maximize and energize
economic activity and creativity.
- Private ownership of personal property (not state owned) is a stimulus to productive activity
(eg. writing, music, architects,…) expect individual result

Examples: when you are at home and you have a deadline for finishing your assignment then your friend
who is joining in the same class with you asks you for help, you look at the clock and the deadlines is
pretty close but your friend really want to help, he doesn’t know how to do the assignment. You have to
make a choice, if you are egoist, you will define that okay so my self – interest is get a good grade in this
class, so you decide to not help your friends.

Pros of Ethical Egoism

1. It would help establish a greater sense of personal identity in a community.

an individual will be able to understand his/her identity in a more profound manner. (tạo vị thế cho cá
nhân)

2. It ensures your basic personal needs will always be met.

A person who practices ethical egoism, using its construct of morality, would often meet his basic needs
over those of other people such as shelter, clothing, food and water.

3. It promotes a sustainable household.

This also means that the needs of the household will also be met effectively before the other needs
existing outside in the world.

Work hard to help family => sustainable household.

Cons of Ethical Egoism

1. It has the capability to destroy relationships:

Having a relationship under ethical egoism would not be healthy for both sides because pp will stop it
when the relationship doesn’t bring any benefit for them.

2. It would completely eliminate objectivity. (không có tính khách quan vì chỉ làm theo lợi ích của
mình) With this kind of philosophy, no one would truly care what other people think of them, as personal
interests would be the driver of every decision and action. Though there are times when the care of others
is emphasized in society, it would always be a last-resort decision, rather than a first.

3. It fails to bring benefits to society which is to restrain our selfish desires for the sake of peaceful
coexistence with others, not all human acts are selfish by nature, and some are truly altruistic.

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 2. Utilitarianism - Jeremy Bentham

2.1. Content of Utilitarian theory

1) Utilitarianism assumes we have responsibility for the consequences of our actions with the widest
possible scope and seeks to provide a practical methodology for balancing positive and negative effects.

 As a result, utilitarians will focus on the net result of their actions instead of the means or motives
that generated the reason for their actions

(same with egoism)

2) Bentham idea is simple idea: the right thing, the just thing to do is to maximize utility (benefit).

 He summed up in this slogan: “the greatest good for the greatest number”.

(different with egoism bcs more pp involve into your decision)

3) Maximizing utility as a principle not only for individuals but also for communities and for legislators.
Principle is maximizing the balance of happiness over suffering.

This announcement is used by companies and government all the time, under the name cost-benefit
analysis.

2.2. Advantages
 Greatest good – It does follow from the above that the right course of action is the one that leads
to the most happiness and least harm. It makes sense.

 Harm – Utilitarianism seems to be in line with our intuitions that harming people is intrinsically
wrong.

 Happiness - It seems right that happiness is given intrinsic value.

 Democratic – The fairest way to run a country is to balance everyone’s differing interests. We
see this happening in all modern democracies – governments use the principles of Utilitarianism
to determine what is right.

 Objective – The positive and negative consequences of our actions can be measured. This gives
us an objective, independent way of deciding on what is right and wrong.

 Universal – The principle of utility, reducing harming and increasing happiness, is universal, and
applies in every culture.

 Easy to use – Weighing up the positive and negative effects of our actions is straightforward –
we learn to do this from our early childhood onwards. Anyone can apply the principle of utility.

2.3. Objections to utilitarianism

Ex: suppose that a suspected terrorist was arrested on sep 10 th 2001 you have reason to believe that
the suspect had crucial information about an impending terrorist attack that would kill over 3,000 pp
and you couldn’t extract information.

Would it be just to torture the suspect to get the information or do you say no?

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  Disagree. You just have the reason to believe not an evidence so that if you torture the suspect, it
may be an action that is illegal. You are not sure that this person are guilty.
 Agree. It could save 3,000 pp.

Ignore about the majority. Who are protect me if I am a person who follow the majority.

a. Fails to respect individual/minority rights

By stating that the actions support the greatest good for the greatest number, it begs the question whether
the minority that does not receive the greatest good would be treated unfairly.

b. Not possible to aggregate all value into dollar

+ Whether it is possible to translate all values into a single uniform measure of value like dollar

We have some other examples related to cost-benefit analysis, but a lot of people were unhappy with
cost-benefit analysis when it came to placing a dollar value on human life.

+ Is not there a distinction between higher or lower pleasure?

Q1: Who agree with cost-benefit analysis from this apparent example? Who disagree?

Disagree bcs this model doesn’t mention about the income that pp die is, they are the key working
peson in their family.

Not mention: number of the labour force (down), pollution, household income, before pp die they get
sick and government has to pay for them, how pain that family have to suffer when more and more
pp get sick.

Q2: Is cost-benefit analysis a legitimate tool?

c. There is not a distinction between higher or lower pleasure

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+ Happiness and pain mean different things to different people and it is not clear how these key concepts
can be used in a practical way which reflects our inward emotions and feelings. An alternative approach
is to ignore these and base utility measurements on our observed actions, for example by observing our
buying habits in a market context. This leads to the idea of revealed preferences.

Discussion:

Considering the issue in ethical approach, What do you think about action: hiring child labor especially in
developing countries? Explaining based on studied ethical theories.

Egoism: hiring child labor is cheaper for manager => they can save money but not effective in the long
run bcs grow enough. Society can … the business. Low productivity. Cost of injured employee.

Utilitarianism: children can go to school instead of getting injure or accident.

Lesson 4

Case Mother hood for sale

The case was decided by the court:

1. The lower court ruled that the contract was enforceable.

Neither party had a superior bargaining position. The price for the service was struck and the bargaining
was reached. One side did not force the other neither had proportionate bargaining power. Then it went to
New Jersey Supreme court.

2. The Supreme court. They said this contract was not enforceable.

They did grant custody (trao quyền giám hộ) to Mr Stern as the father. Because they thought that would
be the best interest of the child, but they restored the right of Whitehead and left it the lower court to
decide exactly what visitation rights should be.

They invoked 2 different kinds of the reasons:

First, there was not sufficiently informed consent, the court argued. “Under the contract the natural
mother is irrevocably committed before she knows the strength of her bond with her child. She never
makes a truly voluntary, informed decision, for any decision prior to the baby’s birth is, in the most
important sense, uninformed”.

Second, the court objects anything be sold: “This is the sale of a child, or, at the very least, the sale of
mother’s right to her child… Whatever idealism may motive the participants; the profit motive
predominates (chiếm ưu thế), permeates, and ultimately governs the transaction”.

Objections to enforcing surrogacy contracts

1. Tainted or flawed consent (sự thỏa thuận biến chất hay có sai sót)
- Lack of information
2. Dehumanizing (vô nhân đạo)

Summary:

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 - There are many modes of valuation beyond you and certain goods are not properly valued if they
are treated simply as objects of use.
- Certain goods are properly valued in a way higher than more use: respect, appreciation, love,
honor, awe, sanctity, trust.

3. Theory of morality – Immanuel Kant

Immanuel Kant who offers a different account of why we have a categorical duty to respect the dignity
of persons and not to use person as means merely even for good ends. (bổn phận tôn trọng phẩm giá của
con người, k lấy con người làm phương tiện để đạt được mục đích dù là mục đích tốt)

but it’s important to try figure what he’s saying, because what the book discussed that supreme principle
of morality, what the freedom really is?

In his book Foundations of the Metaphysics o f Morals “Phê phán lý tính thuần túy” (1785), Immanuel
Kant discussed ethical decisions based on the free will of the individual. Kant argued that the free will to
make decisions that were considered rational needed to be converted into a universal will.

3.1. Kant’s objections to Utilitarianism

a) Kant rejects Utilitarianism, he thinks that the individual person, all human being have a
certain dignity that commands our respect . (mỗi con người có phẩm giá nhất định mà chúng
ta phải tôn trọng)

The reason the individual is sacred or the bearer of rights, according to Kant, doesn’t stem from the idea
that we own ourselves, but instead from the idea that we are all rational beings. We are all rational
beings, which simply means that we are beings who are capable of reason. We are also autonomous of
beings, which is to say that we are beings capable of acting and choosing freely.

b) This capacity for reason and freedom isn’t the only capacity we have, we also have capacity for
pain and pleasure, for suffering and satisfaction. Kant admits the utilitarians were half right.
Kant does not deny this. What he does deny is Bentham’s claim that pain and pleasure are our
sovereign master, he thinks that is wrong.

 Kant thinks that it’s our rational capacity that make us distinctive, that make us special, that sets us
apart from and above mere animal existence. It make us something more than just physical creatures with
appetites.

3.2. Kant’s conception of freedom

What do you think about freedom?

- Generally, people think about freedom as the following: Freedom as simply consisting in doing what we
want or in the absence of obstacles to getting what we want, that’s one way of thinking about freedom.

Kant’s idea of freedom.

 Kant has more stringent demanding notion of what it mean to be free.

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  When people like animal, seek after pleasure, or satisfaction of our desires or avoidance of pain,
when we do that we are not acting really freely. Why not? Because we really acting as the slaves
of those appetites and impulses. I did not choose particular hunger or that particular appetites and
so when I act to satisfy it, I’m just acting according to natural necessity. And for Kant, freedom
is opposite to necessity.

According to Kant, freedom means as following:

To act freely = to act autonomously = to act according to a law I give myself

(Not according to physical law of nature or the law of cause and effect)

Lesson 5: (24/8)

Summary

1. What aspects does Kant reject

Utilitarianism: care about majority

>< Kant respect

Concern about the motive of action >< concern about the result.

Kant: choosing freely. We not only have capacity for pain and pleasure, we are all rational beings who are
capable of reason, acting and choosing freely >< do the right thing, the just thing to do is to maximize
utility.

2. What freedom really is?

3. What is kind of a law I give myself?

Moral law.

4. What makes an action morally worthy if it consists not in the consequences?

Moral worth of an action depends on motive (do the right thing for the right reason)

5. What kind of motive is?

Moral worth on an action is the motive of the duty. Only action done for the sake of the moral law, for the
sake of the duty that have the moral worth.

3.3. Kant’s conception of imperative

Imperative = duty.

Hypothetical imperative:

 Kant referred to this kind of the duty as a hypothetical imperative because it is of the form if you
want to do x, do y. Sometimes we do something so that we may get something else.

Ex: study for Scholarship, got job, etc.

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Categorical imperative:

 Kant says categorical imperative is the supreme principle of morality.

 Moral should follow categorical imperative.

Ex: study because of my duty.

 Kant formulated categorical imperatives based on 2 ways:

3.4. The formula of universal law (Quy luật phổ quát)

(Since Kant believed that every action has a maxim, we are to ask what would happen if the principle
(maxim) of your action were a universal law (one that everyone acted on).

Maxim: principle.

Ex 1: promise keeping

Suppose I need money, $100 desperately, and I know I can’t pay it back anytime soon. I come to you and
make you a promise, a false promise, one I know I can’t keep. “Please give me $100 today, lend me the
money, I will repay you next week” I say.

promise: you do what you say.

In this case, I don’t do what I say => don’t act like the principle of promise. Promises mean everything
but once they’re broken sorry means nothing => break the universal law => unethical.

 “Act only on that maxim whereby you can at the same time will that it should become a
universal law”.

 “Chỉ hành động theo quy tắc khi bạn thấy rằng nó trở thành quy tắc phổ quát”

 Act only on maxims which you can will to be universal laws of nature.

 Briefly, if we are considering whether a particular action is morally right we should imagine that this
action becomes an instance of a general rule which is adopted by everyone at all times.

Discussion 1:

Suppose that an employee, angry at the boss for some justified reason, considers stealing from the firm.

Could a maxim which permitted stealing be universalized?

No bcs if a maxim that permitted stealing be universalized, there could be no private property.

Discussion 2:

Suppose that 2 parties (buyer & seller) agree to sign in the contract negotiating the price. Then the buyer
wants to demand price reductions from negotiated contracts with seller. In this way, the buyer can cut
costs and contributed to its bottom line.

Could a maxim which permitted contract breaking be universalized?

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 No bcs if a maxim that permitted contract breaking were universalized, there could not be no contracts
and contract cease to exist. No one would enter into a contract if he/she believed other party had no
intention of honoring it.

3.5. The formula of humanity as end- Quy luật con người là mục đích
 “Act in such a way that you always treat humanity, whether in your own person or in the person
of any other, never simply as a means, but always at the same time, as an end” Immanuel Kant

 “Hành động theo cách mà luôn đối xử với con người, cho dù chính bản thân mình hoặc là người
khác không đơn giản chỉ coi đó là phương tiện mà đồng thời là mục đích”.

 Always treat the humanity in a person as an end, and never as a means merely.

Discussion:

 People have been deeply concerned about the massive layoff created by the downsizing of
corporation in the economic crisis (2008-2014).

 How do you justify the moral worth of layoff?

 Explanation this argument based on Kantian formulation of humanity as an end.

In this case, the company do not follow humanity as an end because when they layoff someone, they
cannot earn money and take care their family, etc. When they layoff in large scale => employment rate
may increase => government has to pay for these employees.

 Case study: Confidentiality

Questions:

 Do you reveal this information to your cousin but violate the privacy and confidentiality that you
have sworn yourself to and are legally obliged to maintain?

 Or do you keep the information to yourself but jeopardize the health and life of your cousin by
preserving the deception by her fiancé?

 Identifying how many choices to deal with situation do you consider?

 Justifying each your choice based on theory of Utilitarianism and Kant’s ethics

Utilitarianism Cost – Benefit Analysis

Choices Total pleasure Total pain Total utility

1. Keep silent
2. Tell her cousin the
truth
3. Talk to the fiancé

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Keep silent: duty for protecting your career, company but not your family.

Tell: vice versa

Talk to the fiancé => choose this one.

4. Theory of justice – John Rawls

John Rawls wrote his book A Theory of Justice, published in 1971. It's one of the most widely cited and
discussed books of political philosophy of the 20th century.

 John Rawls worked out in great detail and account of hypothetical contract as a basis of justice.

 Theory of Justice has received considerable interests in a variety of different academic disciplines
including psychology, philosophy, business and law.

4.1 Foundation of justice theory

Rawls’ theory of justice in broad outline is parallel to Kant’s in 2 important respects.

First, like Kant, Rawls was critic to utilitarianism.

“Each person possesses an inviolability founded on justice that even the welfare of society as a
whole can’t override…. The rights secured by justice are not subject to political bargaining or to the
calculus of social interests” John Rawls

“Mỗi người đều có quyền bất khả xâm phạm trên cơ sở công lý không thể phủ quyết cho dù là vì
mục đích chung của cả xã hội đi chăng nữa… Những quyền được đảm bảo bởi công lý không phụ thuộc
vào sức mạnh chính trị hay những giải pháp chung cho lợi ích của xã hội”.

 Kant says just laws arise from a certain kind of social contract. But the contract he tells us is
of an exceptional nature. What makes the contract exceptional is that it is not an actual contract
that happen when people come together and try to figure it out what the constitute should be.

 Kant points out that the contract generates justice, what he calls an idea of reason (ý niệm lý
tính).

Second, in which Rawls follow Kant’s is on the idea that principle of justice properly understood can be
derived from a hypothetical (social contract), not an actual one.

4.2 Moral force of actual contract

What is moral force of actual contract?

Example 1: harvesting lobsters

What do you say? What morally can you point to that obligates me?

How does the actual contract obligate?

Want to cancel => do I own you anything?

How does the actual contract bind or obligate?

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(Làm thế nào khế ước thực ràng buộc tôi?)

There are 2 different ways in which actual contract generates obligations.

 Benefit-basedReciprocity

The first element of the moral force of contract arguments which has to do with the sense in
which actual contracts are instruments of mutual benefits and this point toward the ideal of reciprocity. I
can have obligation to you, in so far that obligation can arise, as you do something to me.

Actual contract:

 How does the actual contract bind or obligate?

(Làm thế nào khế ước thực ràng buộc tôi?)

 Consent-based Autonomy

Sự thỏa hiệp (consent-based) Tự nguyện (autonomy)

The second element of actual contract obligating has to do with the active consent as a voluntary
act and it points (a Kantian idea) the ideal of autonomy. When I make a contract, the obligation is one that
it is self-imposed and that carries a certain moral weight, independent of other considerations.

Based on respect, trust each other.

 How do they bind or obligate?

(Làm thế nào khế ước thực ràng buộc tôi?)

 There are 2 different ways in which actual contract generates obligations.

Why the actual contract cannot assure the equality?

Limitations of actual contracts

+ The ideal of autonomy may not be realized because there may be different in the bargaining
power of the parties.

+ The ideal of reciprocity may not be realized because there may be a difference of knowledge
between the parties and so they may misidentify what really counts as having equivalent value.

Conclusion

In real-world bargaining contexts, some people usually have more power or knowledge than others. This
can render the contracts unfair, because they don't live up to the ideals of autonomy and reciprocity in the
original bargaining position.

 Therefore the actual contract cannot assure the equality

4.3 A hypothetical contract

The hypothetical contract is the only way to gain equality.

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That is the idea behind Rawls’ claim that the way to think about justice is from the standpoint of a
hypothetical contract because the hypothetical contract will be do at the original position, behind of the
veil of ignorance, which temporarily abstracts from or brackets, hides from us who in particular we are:
ourr race, our class, our place in society, our strengths, our weaknesses where we are healthy and
unhealthy.

At this position, people have equality of bargaining power and knowledge.

Theory of justice mentions 2 terms:

- Original position (Vị trí khởi thủy)

- A veil of ignorance (Bức màn vô minh)

4.4 Two principles of Justice theory

 Rawls’ theory focuses:

 NOT on foreseeable results of an action;

 NOT on right or wrong principles motivating the action; but

 ON SOCIAL INSTUTITONS WITHIN WHICH ACTIONS AND POLICIES ARE

DETERMINED.

 Theory of Justice discusses the rights and duties of different members of the society based on the
standard of justice.

 Theory of Justice believes in fairness as justice

Principle 1: Each person has an equal right to the same basic liberties that are compatible with similar
liberties for all Principle of equal Liberty. (mọi người phải được trao quyền tự do tối đa có thể miễn
là quyền tự do đó không ảnh hưởng đến quyền tự do của bất kỳ ai khác.)

It states that certain rights are protected and must be equally applied to all. These liberties include:

 the right to vote,

 freedom of speech and thought,

 freedom to own personal property, and

 freedom from arbitrary arrest.

Why do citizens would select principle of equal liberty?

Principle 2: Social and economic inequalities are to satisfy two conditions.

2A) They are to be attached to offices and positions open to all under conditions of fair equality of
opportunity  The equal opportunity principle

 Everyone should have the same chance to qualify for offices and jobs.

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  Job discrimination based on race, gender, or ethnic origin is forbidden.

 Further, all citizens ought to have access to the training and education needed to prepare for
these positions.

??? Why do citizens would select principle of equal opportunity?

Because if they turned out to be the most talented societal members, they would not be held back by low
social standing or lack of opportunity.

Cocacola follow equal opportunity => base on the point 2.

Principle 2: Social and economic inequalities are to satisfy two conditions.

2B) They are to be to the greatest benefit of the least advantaged (những ng yếu thế) members of society
 The difference principle

 It recognizes that inequalities exist but that priority should be given to meeting the needs
of the disadvantaged.

?? Why do citizens would select the Difference principle?

Because they want to be supported by the government.

Justice based on social stituation.

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 CHAPTER 3:
STAKEHOLDERS AND CORPORATE SOCIAL RESPONSIBILITY (CSR)
1. Stakeholders

1.1. Stakeholder Theory Development

 Berle (1931)

 all the powers given to a corporation are to be used to create benefits to the interests of
the shareholders

 Argued that managers within a corporation should consider themselves trustees and
guardians of the investments made by the shareholders

 Dodd (1932):

 Not only should the interests of the shareholders be considered, but corporations also
need to recognize their obligations to the community, to their workers, and to the
consumers

 Argued that corporations are allowed to become legal entities because they serve a
purpose to the community instead of just providing opportunities for financial gain by its
owners.

 Freeman (1984)

 a stakeholder was any individual or group that can impact or be impacted by the actions
of the firm

 Definition encompasses any individual or group that has a vested interest in the
operations of the firm

1.2. The stakeholder concept

 Edward Freeman believed that a stakeholder was any individual or group that can impact or be
impacted by the actions of the firm.

A typical list of stakeholder categories for a business might be:

Major stakeholders

- Company owner or stockholder

- Employees
- Customers
- Suppliers

Secondary stakeholders (other related persons and organizations)

- The Government
- Other consumers
- The media

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 - Competitors
- Non-government organizations

Case: Milk product contamination involving the Sanlu Group in 2008

1. Who are stakeholders of the Sanlu Group?

2. How did the stakeholders impact on the Sanlu Group?

3. What lessons do you learn from the case?

1.3. Stakeholder Impact on Organization

- Stakeholders establish expectations (explicit or implicit) about corporate performance
- Stakeholders experience the effects of corporate behaviors
- Stakeholders evaluate the effects of corporate behaviors on their interests or reconcile the effects
of those behaviors with their expectations
- Stakeholders act upon their interests, expectations, experience, and evaluations.

2. Corporate Social Responsibility

2.1. Definition of CSR
 Friedman (1970)
 “The Social Responsibility of Business is to Increase its Profits”
 in a free market system in which people are allowed to own property, the executives of
the company need to be considered as the employees of the shareholders
 the only social responsibility that a manager has is to ensure that the company’s resources
are optimized to enhance the level of profitability of the firm

 CSR: The obligation companies have to develop and implement courses of action that aid in
social issues that impact society.

 Carl Rawls believes that the society expects businesses to take up social responsibilities in four
major areas. They include:

 economic responsibility,

 legal responsibility,

 ethical responsibility,

 charitable responsibility.

2.2. Components of CSR

 Economic Responsibilities

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  Based on the underlying foundation of why a firm has been creates, which is to develop
economic value

 Firm has a responsibility to use the resources available to produce goods and services for
society

Examples:

 Provides reasonably priced products and services to the society that fulfill social needs

 Operates in ways that promote profit-making

 Maximizes profit

 Maintains strong market competitiveness

 Maintains highly effective operations

 Strives to be a successful company that consistently yields profits

 Legal Responsibilities

 The laws and regulations that all firms are expected to abide by as they perform their
daily functions.

Examples:

 The model of operation follows the laws that control government business activities

 Abide by regulations laid down by various levels of government

 Emphasizes itself as a law-abiding company entity

 Focuses on becoming a successful and legally responsible company

 Provides products that fulfill minimum requirements as set out in the law

 Ethical Responsibilities

 Change over time because they are based on expectations of society.

Obey the law and do beyond that (give employees comfortable condition >< safe workplace based on the
law)

Customers: offer them good quality and safety => not only product, customers can receive more (service)

Examples:

 Works in ways that fulfill the society’s ethical expectations and norms

 Ascertains and respects the increasingly accepted new moral/ethical norms in society

 Does not need to change moral rules to meet company targets

 Intends to become an excellent corporate entity that takes care of the interests of various
stakeholders, and conduct activities that are moral or ethical.
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 Charitable Responsibilities

 Those responsibilities in which society does not have a clear message to present to
businesses as to what their courses of action should be

 Left in the hands of managers to make the proper judgment

Examples

 Works in ways that meet social expectations in charity and charitable behaviour

 Supports developments in art and culture

 Encourages management personnel and staff to join voluntary or charitable work in the
community

 Seeks opportunities to support private or public education

 Voluntarily supports various projects that promote social “quality of life”, and becomes
an excellent corporate citizen that contributes positive to society

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CHAPTER 4. ETHICS AND MARKETING

What are the most important stakeholders of a company?

 The customer.

1. Fundamentals of marketing ethics

Normative marketing ethics are prescriptions of the values, principles and ideals which marketing
professionals should hold. It is interesting to ask if these are context dependent and whether they refer to
individual marketing decision makers or to organisations.

The importance of marketing ethics:

We can give many reasons but will notify some:

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 • When an organization behaves ethically, customers develop more positive attitudes about the
firm, its products, and its services.

• To create values or trust with key stakeholders.

• To build good image about the organization in the minds of customer, employees, shareholders
and the society.

2. The ethical problem in marketing

+ Considering ethical Marketing issues based on Utilitarianism.
Concern about Mutual benefit of stakeholders => maximize the utility of them.
+ Considering ethical Marketing issues based on Morality theory.
Concern about the motive of duty, give correct information for customers include the customers who do
not care about your products bcs it is your duty.
+ Considering ethical Marketing issues based on theory of Justice.
Concern about the fairness, treat customer fairly.
2.1. Ethics in marketing practices (Consumer – related issues)
5 cases (file doc)
Ethical issues related with rights of consumers.

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Ethical
- Treats the customers as equal partners in the transaction.
- The customer specifies the needs and expectations of the transaction, and is treated fairly;
- The company’s decision concerns the provision of fair prices, full access to information,
reasonable protection and satisfaction to customers;
- Fairly interprets and respects the rights of the consumer;
- Actively compensates the losses of customer (utilitarianism (bring happiness over suffering),
differences (protect least adv pp)).
2.2. Ethical considerations when decising advertising strategies
a) The definition of Advertisement
Advertising is the broadcast of messages through a suitable media to a target through paid means by an
organization or an individual, aiming at reaching intended effects.
These effects may include conveying of messages, elicitation of action (for example: consumption), and
image-building.
b) Type of advertisements
+ Commercial advertisements: Commercial advertisements aim at selling products and mainly provide
consumers with information on commercial products.
+ Cultural advertisements: Advertisements that aim at conveying information about science, culture,
education, and news and publishing.
+ Social advertisements: advertisements that provide social services, for example social welfare,
medicine and health, social security, or the seeking of marriage partners, lost persons, lost items and new
employees.
+ Government announcements: Announcements made by Government departments, which also carry an
advertising function. For example: public information released by public departments involving security,
traffic, legal, financial, taxation, commercial and industrial, and public health.
c) Aims of advertisements
Advertisements aim at achieving three levels of purposes including

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 - communication of information
- convincing the consumer to make purchases
- constructing certain values
Ethical issues in advertising
 Concealment of Facts (hide the facts)
 When consumers are deprived of comprehensive information about a product, their choices are
limited and distorted
 Concealing facts misleads people and undermines truth
q Advertisements using children (not growing enough to understand the product is good or
not, parent may not want children use the product.)
q Subliminal advertising
Subliminal messages are pieces of information which occur so quickly, or are so small or
unnoticeable, that we do not actually perceive them consciously—but our SUB-conscious mind
notices everything, and DOES perceive it.
Ex: use sexy image to the product.

 Usage of Inappropriate Stereotypes

Sử dụng các khuôn mẫu không phù hợp.
Ex: gender stereotypes.

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  Puffery => tell lie
Advertisers often throw in a lot of unnecessary positive adjectives into their ads, and possibly
even other words that exaggerate the quality of the product. Words like “best”, “finest”,
“ultimate”, “most”, or even words like “courage” and “trust”.

 Surrogate advertising
Banned products mask under another product under same brand name.

Quảng cáo phim nhưng quảng cáo thêm hãng bia ở dưới (có thể bị cấm ở Ấn Độ)
 Improper language usage
3. Code of conduct for marketing ethics

q Responsibilities of the marketer to all relevant publics (consumers, organizations, and society)
q Honesty and fairness, uphold integrity, honor, and dignity of the marketing profession
q Rights and duties of participants in the marketing exchange process (including 4p”s and
marketing research)
q Ethical behavior in organizational relationships

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 CHAPTER 5: ETHICS AND HUMAN RESOURCE MANAGEMENT

1. What Ethics in HR?

Ethics in HRM is a subset of business ethics, and it is dedicated to professional development,

professional responsibility, ethical leadership, fairness, justice, ethical handling of conflicts of interests,
the right use of information sorts of practices.

Ethics in HR is responsible for channelizing the human resources of an organization via a code of ethical
and professional standards to get immaculate solutions to all ethical issues and ensure the ethical success
of the organization.

2. Role of Ethics in HRM

Ethics in HR basically deals with the affirmative moral obligations of the employer towards employees
for ensuring equality and equity justice.

 HRM ethics is responsible for

1. Basic human rights
2. Civil and employment fight
3. Safety in the workplace
4. Privacy
5. Justifiable treatment to employees like equity and equal opportunity
6. Respect, fairness, and honesty based process
The rights of employees should be respected by employers:
Rights to reasonable rewards, reasonable working conditions, equal opportunity employment, rights to
personal privacy, avoid discrimination, rights to be respected and rights to personal freedom.
3. How HRM can Promote HR Ethics?
- Improving recruitment and selection tests
 HRs should follow the ethical recruitment policy that provide equal employment opportunities for
all candidates
 Using Selection testing to scan unethical behavior
 HRs should also make sure that situational factors like economic, social, technological factors are
followed. The process of selection should be done in a planned manner and illegal questions
should be avoided.
- Channelizing ethics training
 Training should be given to the employees in the organization to do their HR work as per the HR
ethics.

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  Training about code of conduct for employees
 HRs should also offer equal chances of training to employees
- Incorporating rewards, disciplinary, fair, and transparent system
 HRs should have proper reward management programs. They should also facilitate and improve
two-way communication.
 Human resource managers should avoid any kind of discrimination among the employees based
on specific factors such as color, caste, culture, appearances, religion, etc.
 HRM should ensure equal opportunities for every employee for their effective development and
advancement.
 Measuring the effectiveness of employee safety is also part of HR ethics.
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CHAPTER 6. ETHICS IN ENVIRONMENT

1. What is environmental ethics?
Environmental ethics considers the ethical relationship between people and the natural world and the
kind of decisions people have to make about the environment.

Environmental ethics simply tries to answer the questions of:

 how humans should relate to their environment

 how we should use the Earth’s resources

 how we should treat other species, both plant and animal.

2. Business ethics and environmental values

What values are supported by the natural environment?
All human beings depend on the natural environment in order to survive.
 Humans need clean water to drink,
 healthy air to breathe,
 fertile soil and
 oceans to produce food,
 an ozone layer to screen out solar radiation, and
 a biosphere that maintains the delicate balance of climate in which human life can exist.
The Top Ten fundamental environmental issues:
1. Climate Change: global warming creates the Greenhouse effect - the prevention of solar heat absorbed
by our atmosphere from returning to space, causing an unprecedented rate of warming.
2. Energy: energy inefficiency, wasting nonrenewable sources of energy.

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3. Water: Both quality and quantity of water endangered.
4. Biodiversity and Land Use: The variation of life forms inside an ecosystem, serves as a key indicator of
its health. It is being lost at an unprecedented rate
5. Chemicals, Toxics, and Heavy Metals: Chemicals or compounds that may cause damage to the nervous
system, reproductive and developmental problems, cancer and genetic disorders - & the environment.
6. Air Pollution
Outdoor Air pollution - Acid Rain, Global Warming, Smog, Depletion of the ozone layer, Serious
respiratory illnesses
Indoor Air Pollution – Comes from oil, gas, kerosene, coal, wood and tobacco products, building
materials & furnishings, damp carpets, household cleaning products and lead-based paints. Long term
effects , respiratory diseases, heart disease and cancer, can be fatal.
7. Waste Management
8. Ozone Layer Depletion: Ozone is harmful near the surface of the earth, but vital in the atmosphere.
Ozone Layer Depletion causes skin cancer.
9. Oceans and Fisheries- The oceans are running out of fish to meet human needs.
10. Deforestation: Humans depend on forests for building materials, fuel, medicines, chemicals, food,
employment and recreation.
3. Business’s environmental responsibility
3.1. A market-based approach
1. If the best approach to environmental concerns is to trust them to efficient markets, then the
responsible business manager simply ought to seek profits and allow the market to allocate resources
efficiently.
 Maximize profit within the law
 Utilitarian: Greater overall good of optimally satisfying consumer preference
Eg: Whether we are concerned with the allocation of scare non-renewable resources such as gas and oil,
or the earth’s capacity to absorb industrial by-products such as CO2 or PCB, environmental challenges
can be addressed through efficient markets.
2. If it considers that environmental problems are economic problems that deserve economic solutions.
William Baxter argues that there is an optimal level of pollution (mức độ ô nhiễm tối ưu) that would best
serve society’s interests.
 No perfect “state of health”
 Allow market to balance risk and benefits
(eg. Air safe enough to breath, water safe to drink without costing to much)
 This optimal level is best attained by leaving it to a competitive market.

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Limitation of market approach:
- Cost of such things as pollution are borne by third parties to the economic exchange, free market
exchanges cannot guarantee optimal results.
- No market exists to create a price for important social goods (threatened animals – Rhinoceros, tigers,
elephants, clean air and ocean fisheries)
- Buying is an individual decision consequences are borne by group
- Important ethical and policy questions can be missed if we leave policy decisions solely to the outcome
of individual decisions.
- Market does not respond until there is a major screw up.
3.2. A regulatory-based approach
 Each law enacted during the 1970s established standards that effectively shifted the burden from
those threatened with harm to those who would cause the harm. Governmental regulations were
seen as the better way to respond to environmental problems.
 Government established regulatory standards to try to prevent the occurrence of pollution or
species extinction rather than compensation after the fact.
 These laws established minimum standards to ensure air and water quality and species
preservation.
 Business was free to pursue it own goals as long as it complied with the side constraints
established by this minimum standards.
 Philosopher Norman Bowie argued that, apart from the duties to cause no avoidable harm to
humans and to obey the law, business has no special environmental responsibility.
Limitation of a regulatory-based approach:
 Underestimate business ability to influence law making
 Underestimates business ability to influence consumers
 Law is a crude tool
 Models used to deal with corporate social responsibility underestimates managerial discretion
3.3. The sustainability-based approach
 Beginning in the 1980s, a new model for environmentally responsible business began to take
shape, one that combines financial opportunities with environmental and ethical responsibilities.
 The concept of sustainable development and sustainable business practice suggests a radically
new vision for integrating financial and environmental goals, compared to the growth model that
preceded it.
 These three goals, economic, environmental, and ethical sustainability, are often referred to as the
“Three Pillars of Sustainability.”

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“Sustainable development is development that meets the needs of the present without
compromising the ability of future generations to meet their own needs.”
“Three Pillars of Sustainability” - Triple bottom line
 Economically, environmentally and socially satisfactory
 Meet the needs of those future generations
 Meet the needs of those who lack food, water, and other necessities
Business’ opportunities for the sustainability – based approach
1. Sustainability is a prudent long-term strategy.
2. There is a huge unmet market potential among the world’s developing economies that can only be met
in sustainable ways.
3. Significant cost savings can be achieved through sustainable practices.
4. Competitive advantages exist for sustainable businesses.
5. Sustainability is a good risk management strategy.
 Principles for a Sustainable Business
The precise implications of sustainability will differ for specific firms and industries; but three general
principles will guide the move towards sustainability.
1. Firms and industries must become more efficient in using natural resources;
2. They should model their entire production process on biological processes; and
3. They should emphasize the production of services rather than products.
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CHAPTER 7. ACCOUNTING AND FINANCE ETHICS

1. Ethics and Accounting
1.1 Roles of Accounting
Recording financial data, its analysis, the communication of information and the support of the decision-
making process.
Accounting offers us a system of rules and principles which govern the format and content of financial
statements.
Accounting, is a system of principles applied to present the financial position of a business and the
results of its operations and cash flows.
 It is hoped that adherence to these principles will result in fair and accurate reporting of this
information.
 Accountants are considered as “Gatekeepers”

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1.2 Ethical issues in accounting
- Leaving out key items of information may be as damaging to the interests of stakeholders as
presenting false information .
- Presenting information in ways be likely to mislead shareholders and other providers of finance
- Potentially misleading, though not illegal, accounting practices which take advantage of grey
areas in the law to present a firm’s activities in a way which furthers management’s current
objectives “Creative accounting”

2. Ethics and Auditing

2.1 Role of auditing
- Be conducted each fiscal year for companies that are publicly traded

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- An inspection of the accounting records and other information deemed necessary to express an opinion
on the fairness and adequacy of the financial statements
2.2 Conflicts of interests in auditing process
- Auditor-Firm Conflicts of Interest
The firm will always want the financial statements to show how well the executives at the top are
managing the firm. As a result, the firm could potentially put pressure on the auditor to sign a “clean
audit” regardless o f any concerns the auditor has with the statements.
The auditor has a financial incentive to please the firm because the firm is a revenue-producing client for
the auditing firm
- Shareholder-Management Conflicts of Interest
The firm wants its external stakeholders and especially its shareholders to be given the financial
statements o f the firm without any conditional issues having been raised by the auditors. Because the
shareholders do not want any negative issues relating to the firm’s financial statements, the managers o f
the firm will want to present “clean” financial statements to the shareholders.
However, the auditor also has a duty to the shareholders to review objectively the financial transactions
of the firm because the shareholders, via the board of directors, have selected and assigned payment
levels to the external auditors.
- Self-interest-Professional Standards Conflicts of Interest
The auditor may face a situation where he or she can benefit by violating the professional standards
established by accounting organizations.
For example, if an auditor has a financial interest in the firm, there would be a self-interest incentive to
disregard financial transactions that have a negative impact on the firm.
 trust is essential to the workings of a market economy and the continuing provision of reliable
information feeds trust. The reliability of the external auditing process as well as justifiable trust in the
probity of internal management accountants as well as managers leads to a more effective market
economy.
3. How Ethical Theories Relate to Accounting and Auditing

 Utilitarianism leans towards companies that provide goods and services while doing the least
harm, and condemns companies that cause more harm than benefit to others.
 Egoism creates complications because there are going to be times within your career when you
are not the best person to help a client. You have to make the decision to send them to another
accountant, and by doing so you will lose their business. Doing this is not the best decision for
you, but it is the best decision for the client.
 Deontological ethics applies to accountants and auditors because they have to maintain a fair and
consistent relationship with all their clients. They must also ensure that they are following
through with their commitments. If they do not do this, clients will lose trust in them, and it will
be difficult for them to find new clients.

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 Categorical Imperative relates to auditors because if they are upholding a high moral standard,
they will encourage the people working for them, as well as their clients, to do so as well.

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