IBSE

BUSS 5034

Session-2: Business in an environment of

contested values
Ethics
Business in an environment of contested values

What comes to mind?

ENRON

Collapsed due to behaviours of executives, employees, auditors, bankers, lawyers

Global Financial Crisis 2008…..
Many players contributed to this…

• Rating agencies – S&P, Moody’s

• Risk managers and boards of financial community – AIG, Citigroup, Merrill Lynch,
Lehman Brothers, Bear Stearns were ‘blind’
• Most of these companies were bailed out by the US govt as they were deemed
“too big to fail”
• Huge salaries and incentives of bank CEOs and Wall Street traders
• Role regulators and legislators – SEC, LIBOR etc.
• Members of Congress for deregulating the financial industry
“Das Auto”
Sustainability 1989
1986
Chernobyl
Exxon Valdez
1984
Bhopal

2010
BP’s Oil Spill in the
Gulf of Mexico

1995 2011
Brentspar Fukushima

Environmental
crisis
Human rights
Mid-90’s
child maquilas

Human rights
crisis
Cynicism - a lack of trust?
• Surveyed 30,000 college students worldwide – half
trusted businesses less then they did 4 tears ago (2012
Edelman Trust Barometer)

• 91% consumers purchase form businesses they trust

• Trust not declined only in BRIC countries
• Media also responsible – news and movies focus on
businesses behaving badly
Loss of trust in business leadership

► Challenge to rebuild public trust

Consequences of a lack of trust?
•
•

•
•

•
•
Delegitimization – business can lose licence to
operate

2001
Genoa

Financial Times, Oct. 6, 2011

Even the ‘good ones’ can be attacked!

https://www.timberland.com/re
sponsibility.html
Business ethics
A clear sense of purpose and ethics must be at the heart of every business, however:

• Increased focus on business ethics is a response to

high-profile scandals and failures
• “behaviour that is consistent with principles, norms &
standards of business practice agreed by society”
• At the same time businesses are excepted to do more,
and better, to help tackle some of the world’s most
pressing problems
Ethics and Law
• Law reflects society’s minimum Ethics
norms and standards

• But, is law-abiding the same as

ethical behaviour?

• Many standards agreed by society Law

not codified in law
 CORPORATE SOCIAL PERFORMANCE
 SOCIAL MARKETING

 CORPORATE SOCIAL INVESTMENT  RESPONSIBLE LEADERSHIP

 BUSINESS ETHICS  ORGANIZATIONAL CITIZENSHIP

 CORPORATE SOCIAL RESPONSIVENESS

 CORPORATE CITIZENSHIP
 CORPORATE PHILANTHROPY

 ORGANIZATIONAL ETHICS
 SOCIAL RESPONSIBILITY OF BUSINESS

 CORPORATE SOCIAL RESPONSIBILITY

 TRIPLE BOTTOM LINE

 SUSTAINABLE DEVELOPMENT
 MANAGEMENT BY VALUES
 SOCIALLY RESPONSIBLE INVESTMENT
 SOCIAL RESPONSIBILITY OF BUSINESSMAN

 SOCIAL IMPACT INVESTMENT

 SOCIAL ACCOUNTABILITY  SUSTAINABLE BUSINESS
Responsibility pyramid
Social, environmental, political
Be a good corporate citizen Impact on society Desired

Ethical
Be ethical Expected
Ethical obligations & societal norms

Be legal Legal
Laws & regulations Required

Be profitable Economic
Required
Market and competition

18
Adapted from Schwartz & Carroll, Business Ethics Quarterly, 2003: 504
Why be ethical? Why bother & who cares?
• Individuals care
• Employees care
• Executive leaders care
• Industries care
• Society cares
How to succeed in an environment of
contested values?
• Active stakeholder engagement
• Ethical business practices
• Environmental stewardship
• Good citizenship
• Doing good – and no harm
Multiple push effect
International Organizations

Consumers NGOs

Employees Regulators

Executives Governments

Companies Investors
Financial Markets
Working responsibly with multiple stakeholders
Promoting human rights; providing
equal employment opportunities Offering PwC
and a fair, healthy & safe products
Giving back to society
safe work environment
Clients
Employees Creating
Community social value

Complying
with laws Markets Managing Contributing to
& regulations Stakeholder Civil Society solving
Diversity problems in
society
Acting as a good
Building fair Suppliers corporate citizen
relationships Planet
within the
supply chain Financiers Future
Generations
Respecting eco-
diversity
Protecting the environment
also for future generations
How to ensure long-term sustainability of
business?
Businesses around the world have recognised that they can only
have long term success if they create value for shareholders and for
society at large at the same time. This is one of the central lessons
of the financial crisis. It calls for a fundamental change in the
meaning of the societal responsibility of business.
Businesses are part of society and it is in the own interest to be in
the business of society…
In sum
• Ethics is essential for business success and survival
• Doing the right thing is always the right thing to do
• But what is the ‘right’ thing in an environment of
contested values?
• In this course you will learn how to navigate
successfully and responsibly in a multi-stakeholder
environment