Faculty of economic and social sciences

Business English lessons.

Corporate ethics

Business ethics. Business ethics is a form of applied ethics (applied mainly to business) that examines ethical principles and moral or ethical problems that can arise (come up) in a business environment. In the increasingly (growing) conscience-focused marketplaces of the 21st century, the demand (exigence) for more ethical business processes and actions (known as ethicism) is increasing. Simultaneously, pressure is applied on industry to improve business ethics through new public initiatives and laws (e.g. higher UK road tax for higher-emission vehicles). Business ethics can be both a normative (following a set of norms) and a descriptive discipline. As a corporate (concernining companies) practice and a career specialization, the field is primarily normative. The range and quantity of business ethical issues reflects the degree to which business is perceived to be at odds (not a common practice) with non-economic social values. Historically, interest in business ethics accelerated dramatically during the 1980s and 1990s, both within major corporations and within academia (academic studies). For example, today most major corporate websites lay emphasis on commitment to promoting non-economic social values under a variety of headings (chapters) (e.g. ethics codes, social responsibility charters). In some cases, corporations have redefined their core (central, main) values in the light of business ethical considerations.

Overview of issues in business ethics General business ethics  Corporate social responsibility or CSR: the ethical rights and duties existing between companies and society (human development, child labour, ecology, ethical investment…)  Issues regarding the moral rights and duties between a company and its shareholders: fiduciary responsibility…  Ethical issues concerning relations between different companies: e.g. hostile take-overs, industrial espionage, price fixing Ethics of accounting information    

Creative accounting misleading (false/ intended to deceive) financial analysis. Insider trading, securities fraud, manipulation of the financial markets. Executive compensation: concerns excessive payments made to corporate CEO's. Bribery, kickbacks, facilitation payments…: while these may be in the (short-term) interests of the company and its shareholders, these practices may be anti-competitive or offend against the values of society.

Ethics of human resource management The ethics of human resource management (HRM) covers those ethical issues arising around the employer-employee relationship, such as the rights and duties owed between employer and employee.

 Discrimination issues include discrimination on the bases of age (ageism), gender, race, religion, disabilities, weight and attractiveness.  Issues surrounding the representation of employees and the democratization of the workplace: union busting (disintegration), strike breaking.  Issues affecting the privacy of the employee: workplace surveillance, drug testing. Issues affecting the privacy of the employer: whistle-blowing (denouncing illegal practices).  Issues relating to the fairness of the employment contract and the balance of power between employer and employee: slavery, indentured servitude (agreement to work for s.o for a period of time in exchange for learning a skill), employment law.

Ethics of production This area of business ethics deals with the duties of a company to ensure that products and production processes do not cause harm. Some of the more acute dilemmas in this area arise out of the fact that there is usually a degree of danger in any product or production process and it is difficult to define a degree of permissibility, or the degree of permissibility may depend on the changing state of preventative technologies or changing social perceptions of acceptable risk.  Defective, addictive and inherently dangerous products and services (e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing)  Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading  Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health.  Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.

Ethics of intellectual property, knowledge and skills Knowledge and skills are valuable but not easily "ownable" objects. Nor is it obvious who has the greater rights to an idea: the company who trained the employee or the employee themselves? The country in which the plant grew, or the company which discovered and developed the plant's medicinal potential? As a result, attempts to assert ownership and ethical disputes over ownership arise.

 Patent infringement, copyright infringement, trademark infringement.  Misuse of the intellectual property systems to stifle competition: patent misuse, copyright misuse…  Even the notion of intellectual property itself has been criticised on ethical grounds: see intellectual property.  Employee raiding: the practice of attracting key employees away from a competitor to take unfair advantage of the knowledge or skills they may possess.  The practice of employing all the most talented people in a specific field, regardless of need, in order to prevent any competitors employing them.  Business intelligence and industrial espionage.

ORAL COMPREHENSION I-Andy Hammerton works for the Co-operative Bank in Manchester, England. The bank is well-known for its policy of ethical investment. Listen to the interview and answer these questions. 1-What‘s the bank’s ethical policy?

2-How does the bank show that its policy is still ethical?

3-What examples does Andy give of businesses the bank will not invest in?

4-What kinds of businesses does the bank like?

II-Listen to the second part. Are the following statements true of false, according to Andy? 1-Business activity does not necessarily affect the environment and society. 2-It’s easy to see how the financial services sector can affect society.

3-the bank has been actively involved in the following areas. (circle the right answers) -landmine removal

-human rights

-fair trade

-bonuses

III-Complete these extracts: -The only true successful businesses will be those that achieve a ____________ _____________between their own interests and those of society and ________ _____________ _________

-Our position has enabled us to____________ _____________, develop our brand and have ___________ _______________ on the bank’s bottom line.

-Higher trust creates _______________ _____________. First, because customers trust you, they are less likely to ______________ _____________ in the first place. Second, if you do make a mistake, they are more likely to ____________ _______________

IV-vocabulary study: circle the best answer It’s worth explaining: Important unnecessary useless

Guidelines: Strategies side effects consequences Energy efficiency policy: Related to economy related to saving energy effective energy They have a say in how to deal with bonuses: They said nothing they need to express their opinions they say they’re against bonuses I’m likely to believe you: I can’t believe you I must believe you I may believe you The bank’s bottom line: The bank’s least preoccupation the bank’s most important criteria the bank’s bad results

Written comprehension Clean, wholesome and American? Nov 1st 2007/ From The Economist print edition

A storm over the use of child labour clouds Gap's pristine image REPORTS of the use of child labour in India could hardly have come at a worse time for Gap, one of America's biggest fashion retailers. Glenn Murphy, the chief executive, has been in his job for only a few months. Sales in September were 7% lower than a year before. And the outlook for the end-of-year shopping season is gloomy. According to a report released on October 30th by the Conference Board, a market-research firm, American consumer confidence fell for the third month in a row in October. Gap reacted swiftly when evidence appeared in the Observer, a British newspaper, that an unauthorised subcontractor had used child workers to make blouses for GapKids at a factory in Delhi. On October 28th Gap said that as soon as it became aware of the practices it cancelled the order, barred sales of the blouses and called for an urgent meeting with local suppliers. “We strictly prohibit the use of child labour,” said Marka Hansen, head of Gap North America. Since the beginning of the decade Gap has tried hard to be American retailing's ethical model. In January 2006 it was one of several big companies that teamed up with Bono, an activist rock star, to launch Product Red, a new global brand, a portion of the profits from which go towards fighting AIDS in Africa. Gap's suppliers are supposed to adhere to one of the most rigorous codes of conduct in the industry. Their workers must be aged at least 14. They must comply with all childlabour laws on hiring, working hours, overtime and working conditions. Last year Gap stopped doing business with 23 factories that did not meet its standards. Even so, policing contractors and subcontractors in faraway places is not easy. A big proportion of the company's clothes are made in India, which has become the world's capital of child labour. Of the estimated 218m labourers worldwide who are younger than 14, some 40m-50m are in India, according to the International Labour Organisation (ILO), a United Nations agency, and they account for around 20% of the country's GDP. Gap says it employs 90 people across the globe to supervise compliance with its rules. But Geir Myrstad, head of the ILO's programme to eliminate child labour, does not buy the argument that monitoring is difficult. If companies are capable of supervising the quality of their products, they should also be able to police their production, he suggests. The ILO is negotiating with the Indian government about carrying out a child-labour survey in the next couple of years. But the government is reluctant to draw attention to the problem. India's commerce minister, Kamal Nath, suggested this week that scare stories about child labour were being used to justify protectionism. Gap is keen to limit the damage of the revelations in India quickly, with the help of a new policy on violations of its child-labour rules. Rather than simply cutting off factories employing children, Gap imposes an enlightened form of punishment: it requires suppliers to stop using child workers and to provide them with schooling instead, while continuing to pay them regularly and guaranteeing them a job once they reach the legal age. But how much financial damage will the revelations cause? Howard Davidowitz, a retail consultant, thinks that consumers ignore retailers' ethical credentials. “They want the right look at the right time at the right price,” he says. In his view Gap's main problem is that its products no longer appeal to consumers. Paul Lejuez, a retail analyst at Credit Suisse, predicts that the childlabour allegations will not hurt Gap's image. The group is standing out as a retailer that acts quickly to combat violations of its code of conduct, he says. Mr Lejuez is also optimistic about Mr Murphy's efforts to turn the company around. But analysts and economists agree that retailers face a difficult few months because of America's tumbling housing market, rising food and fuel prices, and fears of recession. “Everything is working against the consumer,” says Mr Lejuez. And not much is going right for Gap.

Written comprehension

Clean, wholesome and American? 1-what’s Gap’s problem?

2-how did the board react? Is it the only solution adopted so far?

3-What’s Gap done recently in order to show it follows a strict code of conduct? Sum up, in your own words, the ethical standards defended by GAP.

4-How difficult is it to implement such a code?

5-how efficient are the measures taken by some governments? Discuss their position.

6-What about the future for GAP?

What do you think about child labour? What measures should be taken? What’s GDP?…………………………………………………… ILO…………………………………………………

Ethical capitalism

How good should your business be? Jan 17th 2008 From The Economist print edition

Corporate social responsibility has great momentum. All the more reason to be aware of its limits HOW wonderful to think that you can make money and save the planet at the same time. “Doing well by doing good” has become a popular business mantra: the phrase conjures up a Panglossian best-of-allpossible-worlds, the idea that firms can be successful by acting in the broader interests of society as a whole even while they satisfy the narrow interests of shareholders. The noble sentiment will no doubt echo around the Swiss Alps next week as chief executives hobnob with political leaders at the World Economic Forum in Davos. For these are high times for what is clunkingly called corporate social responsibility (CSR). No longer is it enough for annual reports to have a philanthropic paragraph about the charity committee; now companies put out long tracts full of claims about their fair trading and carbon neutralising. One huge push for CSR has come from climate change: “sustainability” is its most dynamic branch. Another has been the internet, which helps activists scrutinise corporate behaviour around the globe. But the biggest force is the presumption that a modern business needs to be, or at least appear to be, “good” to hang on to customers and recruit clever young people. Thus for most managers the only real question about CSR is how to do it. Our special report this week looks at their uneven progress in that regard. But it is also worth repeating a more fundamental question this paper has asked before: is the CSR craze a good thing for business and for society as a whole? Begin with business, where the picture is mixed. Much good corporate citizenship is a smug form of public relations. Public relations is part of business. A bad name has seldom been more expensive, especially when there is a war for talent and customers can look at your supply chain in Vietnam on YouTube. Public companies, remember, are creations of the state. In return for the privilege of limited liability, society has always demanded vaguely good behaviour from them. The cost of this implicit social franchise, whether shareholders like it or not, has risen. Companies as varied as Nike in clothing, GlaxoSmithKline in pharmaceuticals and Wal-Mart in retailing have had to change their ways quickly to avoid consumer or regulatory backlashes. And it is not just a question of fending off disaster. CSR has got more focused: there are fewer opera houses, more productive partnerships with NGOs. Greenery, in particular, has paid off for some companies' shareholders. Toyota stole a march on other carmakers by appearing greener. European power companies which helped set up the continent's carbon-trading system did extremely well out of it. Some people complain that this sort of “good corporate citizenship” is merely another form of selfinterest. Correct—and good. They should be happy that this category has grown. The difficulties with CSR come when companies get it out of proportion. For instance, there is a lot of guff about responsibility being at the core of a firm's strategy. But even the business gurus who promote the idea admit that examples are scarce. And being a champion at responsibility does not guarantee great financial results, as recent setbacks at Starbucks and Marks & Spencer have shown. An inconvenient truth for advocates of CSR is that the connection between good corporate behaviour and good financial performance is fuzzy at best. The latest academic research suggests that a positive link exists, but that it is a weak one. Of course, it's not clear which way the causality runs—whether profitable companies feel rich enough to splash out on CSR, or CSR brings profits.

Either way, there is no evidence to suggest that CSR is destroying shareholder value, as Milton Friedman and others feared. But nor is it obviously the most productive way for managers to spend their energies. Caution is especially called for at a time when the CSR bandwagon is on a roll.

Caveat voter If companies need to be vigilant about the limits of CSR, the same applies even more to society as a whole. A dangerous myth is gaining ground: that unadorned capitalism fails to serve the public interest. Profits are not good, goes the logic of much CSR; hence the attraction of turning companies into instruments of social policy. In fact, the opposite is true. The main contribution of companies to society comes precisely from those profits (and the products, services, salaries and ideas that competitive capitalism creates). If the business of business stops being business, we all lose. Most of the disasters have come from politicians seeking to offload public problems onto business: American health care is one sad example. But companies are increasingly keen on public policy. Take for instance, the vogue for “multi-stakeholder initiatives”—firms getting together with competitors, activists and others to set rules for a particular area of business (diamonds, project finance, extractive industries and so on). In some impoverished places such “soft law” helps to fill a void. But be wary: businesses do not always adhere to voluntary rules; they naturally want ones that help them make money. Above all, it is governments, not firms, that should arbitrate between interest groups for the public interest. So the apparent triumph of CSR should prompt humility, not hubris. There is money to be made in doing good. But firms are not there to solve the world's political problems. It is the job of governments to govern; don't let them wiggle out of it.

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