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Short summary

🧐 Why is acting morally right crucial in business? Acting ethically isn't just good manners—it's good business. It builds trust, avoids legal pitfalls, and keeps your company's reputation intact.

👟 What's an example of ethical challenges faced by successful companies like Nike? Nike, despite its success, outsourced production to sweatshops with poor conditions and child labor—legally permissible but morally dubious.

📚 What are business ethics, and how do they shape conduct? Business ethics are the unwritten rules of right and wrong shaped by societal values, guiding how businesses operate beyond just profits.

🚀 Why are business ethics more important now than ever? In today's hyper-connected world, unethical practices can go viral, damaging reputations overnight and inviting regulatory scrutiny.

⚖️ What forms does unethical behavior take in business? From manipulating information and exploiting workers to environmental degradation and corruption, unethical practices wear many masks.

🧮 How does the ethics of utility guide decision-making? It suggests choosing actions that provide the greatest good for the greatest number, though measuring such utility isn't always straightforward.

🧐 What limits the ethics of duties as a perspective? While it emphasizes universal principles, it doesn't account for negative outcomes that might arise from rigidly applying those maxims.

🏢 How can organizations foster ethical behavior? By hiring ethically-minded people, leading by example, establishing codes of conduct, and rewarding ethical decisions.

🛠️ What practical steps can individuals take to ensure they're acting ethically? Ask if the action is legal, aligns with company values, and if you'd be comfortable seeing it on the front page news.

💡 What's the key takeaway on business ethics? Ethics go beyond legalities; they're about doing what's right, fostering trust, and ensuring long-term success for both the company and society.

The Mirror Test: If you can't look yourself in the eye, rethink your choice.

The Newspaper Rule: Don't do anything you wouldn't want splashed across tomorrow's headlines.

The Ripple Effect: Ethical actions create positive waves; unethical ones cause tsunamis.

The Golden Rule: Treat others as you'd want to be treated—it's old wisdom that never gets old.

The Compass Metaphor: Let ethics be your true north, guiding every decision you make.

Summary of the CONTENT:

🧭 What are business ethics? Business ethics are norms, values, and beliefs shaped by societal processes that define right and wrong in business conduct, beyond legality or strategy.

🔍 Why are business ethics important? Ethical practices protect organizations from public backlash, regulatory penalties, and reputational damage while promoting stakeholder trust and sustainability.

⚖️ What are the four main ethical perspectives?

Utility Ethics: Maximize good for the most people.

Duty Ethics: Follow universal, unchangeable principles (Kantian).

Rights Ethics: Respect basic human rights.

Justice Ethics: Ensure fairness in decisions and outcomes.

🚨 What are common types of unethical behavior?

Information manipulation (e.g., hiding harmful research).

Anti-competitive practices (e.g., Microsoft bundling).

Environmental degradation (e.g., oil spills).

Corruption and bribery (e.g., Halliburton).

Substandard working conditions (e.g., Nike sweatshops).

💡 How do utility ethics work? Focus on maximizing overall benefits versus costs but struggle with fairness and quantifying non-monetary effects.

🌍 How can businesses foster ethical behavior? Create codes of conduct, reward ethical actions, hire based on personal ethics, promote role models, and establish ethics officers.

📝 What guidelines can ensure ethical decision-making? Ask: Is it legal? Does it align with values? Would I publish this in a newspaper? If unsure, keep questioning until clarity emerges.

👀 What’s the impact of public scrutiny? Public exposure of unethical practices (e.g., Nike, tobacco) forces businesses to adopt stricter ethical standards, even if legal compliance is met.

🏢 What role do leaders play in ethics? Ethical leaders set the tone by modeling integrity, enforcing policies, and fostering a culture of accountability.

🤔 Why are ethical frameworks limited? Each framework struggles with practical challenges like quantifying utility, defining fairness, or reconciling diverse cultural perspectives.

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Stories, Metaphors, Symbols, and Archetypes:

🏗️ The Sweatshop Mirror Nike’s sweatshop scandal mirrors how ignoring ethics, even when legal, can shatter reputations and demand transformation.

⚖️ The Ethical Scale Utility ethics are like a scale trying to balance benefits and harms but often fail to account for the hidden weights of inequality.

🕊️ The Human Rights Anchor Rights ethics serve as an anchor, grounding morality in universal principles, but risk imposing a Western perspective globally.

🌱 The Tree of Justice Justice ethics resemble a tree striving to distribute resources fairly, yet its roots struggle in rocky soil (practical fairness).

📜 The Invisible Contract Duty ethics ask, “Would you sign a universal contract for this action?”—a test of whether your choice should be a universal law.

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How do we ensure that we act morally correct, and how can we incorporate this behavior also in organizational settings?

In this video, we're shedding light on ethical theories and translating them into practice.

Learning Objectives of the Video:

Reflecting upon the growing importance of business ethics.

Understanding the challenge of ethical decision-making.

Learning about four distinct theoretical views on ethics.

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Example of Ethical Challenges in Business:

Let’s take a deeper dive into behavior that perhaps is not legal wise uncorrect but ethically at least questionable

Let's take the example of Nike, around 20 years ago. Nike was a very successful company, generating over $12 billion in annual revenue and operating in more than 140 countries. However, Nike outsourced its manufacturing to subcontractors employing over half a million people in 600 factories worldwide, mostly in developing countries. These factories, often called "sweatshops," had hazardous working conditions, that were not very in favor for their health and so on, had extremely low wages, they could not sustain a living with this, and they employed child labor.

Legally, Nike and its subcontractors did not violate any laws, in most or in all Western countries at that, and the subcontractors in their countries were not as well.

However, this was morally questionable. A series of exposés revealed these poor working conditions, which forced Nike to reexamine its policies. A lot of newspaper articles, many campaigns against Nike, and public awareness of the working conditions in these sweatshops, increased pressure on the company, ultimately leading to the establishment of a new code of conduct. Importantly, this code of conduct went beyond legal requirements. While legally unnecessary, then this public awareness and this ethical questioning of these activities in the the Sweatshop really forced Nike to think about it and to establish a new code of conduct.

The interesting thing here is truly that Nike was not doing anything that was strategically wrong or legal-wise wrong. The issue arose because public and media watchdogs found the practices unacceptable. And this is truly the case of business ethics. So in business ethics we are talking about a set of accepted principles

Key takeaway: Ethics go beyond legality. Ethical behavior is shaped by societal norms, values, and beliefs, which define what is right or wrong.

Business Ethics

Business ethics refers to a set of accepted principles, norms, values, and beliefs developed through a social process. These define what is right and wrong and influence how businesspeople conduct their activities.

Business ethics are not about commercially or strategically correct decisions. Instead, they focus on the morality of behaving correctly or wrongly in business situations. So norms, values, and beliefs that are discussed by the public, developed in a social process that somehow defines what is right and what is wrong, and thereby affects the conduct of business people: how they conduct their business, how they do business in their respective industry. So it's not about commercially or strategically correct decisions, as Crane here puts it in the second definition, but it's more about the morally correct issues of behaving correct or wrong in a given business situation.

So why are business ethics so important in organizations? There are different factors that highlight the relevance of business ethics. For example, it increases powers and influence of businesses in society. At the moment, businesses are increasingly discussed in society; they are increasingly becoming public. So this increasing publicity is forcing organizations to act in an ethical way.

Business malpractices have the potential to inflict enormous harm on organizations. For example, taking the example with Nike, knowing about the child labor, knowing about the miserable working conditions in the sweatshops, this can of course harm Nike as an overall organization, and this is why business ethics are so important. But obviously it can not only harm Nike as a firm but also people, right? Children working there under bad conditions that might also harm their health and their individual development, both physically but also psychologically, right?

And taking again the organizational perspective, of course this can also have severe regulatory or public sanctions for ethical malpractices. So whenever the public or the regulatory bodies are becoming aware of this, this might then result in sanctions, and this again is bad for the overall business.

Of course, it also increases stakeholder demands for ethical behavior. In modern times, highly combined with the public awareness of organizations, stakeholders have a higher increasing demand on ethical behavior of organizations, and the need for guidelines to make ethically acceptable decisions is also increasing. That's why organizations have to clearly invest in ethical decision making.

So we see that business ethics and doing business in an ethical way becomes more and more important. Let's look at what is unethical then, and look at different forms of unethical behavior that we have seen and observed in the last decades in businesses and industries around the globe.

So let's start with what we call information manipulation. There are organizations that deliberately manipulate data or accounts to get an advantage out of it. So for instance, organizations could manipulate their financial data, resulting in an accounting scandal, as we have seen with Wirecard in recent years. Or they could suppress internal research that clearly links organizational behavior to certain negative outcomes for people in this world. So as have done tobacco companies in the past by not making public that they already knew that smoking is related to health problems, especially cancer. Or as many companies in the oil and gas industry did not make their research public on the outcomes of CO₂ in the atmosphere on climate change and especially global warming.

Another form of unethical behavior could also be, for example, anti-competitive behavior, because we know that competition is kind of the baseline of doing business. So anti-competitive behavior might, for example, be if Microsoft uses its dominant position in operating systems to force manufacturers to bundle Internet Explorer with Windows. This is then not the open market as organizations are wishing for by developing their own competitive advantage, but one company or one organization using their position and then forcing other companies to align with them. This is what's called anti-competitive behavior.

Another form is environmental degradation, especially if you do it not just as a coincidence or as bad luck, but if you do it more or less in a planned way, like the large-scale logging of precious wood in the Brazilian rainforest by certain timber companies, or when oil and gas companies like BP pollute certain marine areas, or if an oil transport ship is cleaning its tanks in the ocean with salt water, thereby not paying for it in the next harbor.

Another form of unethical behavior might be corruption. A very good example is, for example, Halliburton, that was part of a consortium that paid around $80 million US dollars in bribes to win a lucrative contract for a natural gas plant in Nigeria, or Siemens, for example, and its corruption scandal. Corruption is a way of paying for what you want to have at the end that could also be handled in a more democratic or competitive way.

And corruption is quite related to our next example, that's opportunistic exploitation. For instance, a firm like Boeing was trying to change the terms of their contract with their supplier Titanium Metals. At that time, Titanium had already spent more than a hundred million to enlarge its production capacity, especially for working with Boeing, and if Boeing then changes the terms of the contract, this is exploiting Titanium because they did so, building up the production capacity while thinking that the terms of the contract were as they were written before.

And the last form of unethical behavior that we want to present here is substandard working conditions, and we already talked about that when giving the Nike example, because once again Nike established operations in countries that lack the workplace regulations found in the United States, their headquarter country. This is exactly what we also talked about with the sweatshop, so that there are working conditions in place that would have never been allowed in the home country, but this is why they are then using other countries, being aware of the conditions there.

So now that we have seen a definition of business ethics, that we have seen different forms of unethical behavior, we want to dive deeper into different theoretical perspectives that could explain to us what is seen as ethical behavior or when something is seen as ethical behavior.

And the first, let's say, theoretical view or perspective that we want to introduce is the ethics of utility. And here the definition or the assumption of what is okay to do, what is morally right, is that if we do something where the greatest amount of good for the greatest number of people is secured, if you do this, this is morally right. So that's the principle of greatest happiness. How can we maximize the good for the greatest number of stakeholders? Is the total benefit greater than the total cost? Then we have a right decision.

The key problem here is the quantification of costs and benefits, right? So how can we quantify the total costs and the total benefits of certain actions? How can we also include effects that we cannot directly perhaps present in a monetary value or directly measure? And the second problem is how is the utility then distributed? Is it fairly distributed? What about minorities? Are they perhaps exploited?

So ethics of utility is one way to look at ethical behavior or unethical behavior in organizations. A second thinking approach about how to take ethical decisions is the idea of ethics of duties, and this idea is actually based on Immanuel Kant, who said that an action is morally right if it is consistent with certain external and unchangeable principles or maxims.

What does this mean? This means that it is desirable for the same action to be taken by everyone who is in a similar situation. So whenever you're thinking about acting in a certain way, the question behind that should be: Do I want everybody to act in the same way? If the answer is no, then in this line of thought, this is not an ethical decision. If you're saying, okay, for me it would be okay if everybody is acting in the same way, then based on this it would be an ethical decision.

The main limitation here is the possibility of negative consequences of actions consistent with these maxims. So this universality, how we are also calling it, might of course then have in the long run negative consequences, and this is then the main limitation when thinking about ethics of duties.

Okay, let's take a look at some other perspectives. We have the ethics of rights. Here the idea is something is morally correct if it is consistent with certain natural rights. So what do we mean by natural rights? Any basic and indisputable entitlements that should be respected and protected by everybody at all times, something like the Declaration of Human Rights by the United Nations.

So if we see something as a human right, as a fundamental right that everybody has, then we should comply with these natural rights, these fundamental rights. Then the question is whether these rights are sufficient conditions for ethical behavior. Is it sufficient just to comply with these rights? And the question is whether this is just a Western view of morality, whether this is a view of certain countries and certain perhaps cultures that is then imposed on the global world.

A fourth idea of how to look at ethical behavior is the idea of ethics of justice. In the ethics of justice, the assumption is that an action is morally right if all individuals in a given situation are treated fairly such that everybody gets what he or she deserves. And here is also the big problem with it, because who deserves what and who is deciding on who deserves what? So the ethics of justice are basing their ideas on something that is fair.

So the primary question is: Are decision-making procedures and outcomes fair? And if the general answer is yes, it is fair, then it would be morally right or ethically right. If it's not fair, then it wouldn't be ethically right. However, as I already said, procedural justice and distributive justice is very hard to measure, and practical difficulties to assess fairness are present. So fairness is kind of a vague definition and a vague terminology. What is fair? And this is then, of course, also at the end the main problem with the ethics of justice.

Fairness obviously lies in the eye of the beholder, right? So how can we then foster ethical behavior in organizations? For instance, we could have certain organizational policies, for instance, policies for hiring and promoting. So there could be a policy that says, okay, we only select those people with strong personal ethics, so people that have a certain ethical standpoint and follow this standpoint in their behavior in their daily working.

We could assess this through personal interviews when we have applications at our organization. We could talk to those people, confront them with certain ethical or ethically questionable situations, and see how they respond to these questions. We could take a look at their references. We could talk to them about case studies, about cases of unethical behavior as we just outlined them and see how they react.

Then, if we have people in our organization, we could, when assessing people and their work performance, also take into account ethical criteria when it comes to promoting, right? So we would promote those people who show strong ethical conduct during work. And finally, we could also fire people, lay off people whose behavior does not meet our internally or generally accepted ethical standards. Those who do not comply with our culture, our cultural values inside the firm, we could try to get rid of them and weed them out in our organization.

And culture and cultural values is a very good point, because culture and leadership is another form or another way of fostering ethical behavior in organizations. So to build an organizational culture that places high values in ethical behavior and moral courage, that is something where ethical behavior can really be incorporated in an organization. This can be done, for example, by formulating a code of conduct that articulates values and behaviors that everybody then has to follow, or of course also when top management is leading by example.

So when the management is also acting in a very ethical way and is serving as examples in the organization. Of course, we can also set up incentives to reward ethical behavior. So whenever an employer is acting in a strongly ethical way, then of course this can be highlighted, this can be spoken about, in order to then have the incentive for the individual employer but also for the overall organization to again have an example and lead by example.

Leading by example could also be done through certain ways of decision-making, and this is our next area where we could implement an organizational policy that gives us a moral compass to think ethically during decision-making. So we could examine our existing decisions critically and ask ourselves: Do our decisions fall within the accepted values of our organization? Am I willing to communicate this decision to everybody that has a stake in our company, to every stakeholder? Or is it the case that I think, okay, this stakeholder group I really think I cannot communicate to them this here because this would end up in conflict or in protest or whatever? If that's the case, then think again about your decision or your preferred alternative in that decision.

Would my family, friends, other managers approve my decision, or would they say, okay, that's really questionable what you're doing there? And if you answer those questions, or if you're not sure about those questions, that's perhaps a good indication that you should walk away from a certain alternative, a certain option that might be profitable for the organization but seems to be at least questionable or is really unethical.

And another form of how to foster ethical behavior in organizations might also be to have ethics officers. So what does it mean? Establish ethics officers to make sure all employees are trained to be ethically aware. So you could really think about having persons in place that are there for teaching, for learning with others to act in an ethical way, and to encourage all the employees to act as internal unit persons, so that everybody is itself an ethics officer, or you really take people that have the role of doing so and of helping others with ethical decision making.

These are some examples for organizational policies that can be implemented. However, we can also follow a few very straightforward guidelines and pragmatic steps to really become ethical in an organization. So we could ask ourselves certain questions such as: Is the action legal? And if it's not, stop immediately. Does it comply with our values? If it does not, stop it.

If you do it, will you feel bad? Ask your own concerns if you can live with it. How would this look like in the newspaper? Ask: If this goes public tomorrow, would you do it today? If you know it is wrong, don't do it. If you are not sure, ask, and if you're still not sure, keep asking until you get an answer.

So what did we learn in this video? In this video, we described business ethics as the set of accepted principles, for example norms, values, and beliefs embedded in social processes. We also talked about ethics and that they are discussed from four different theoretical perspectives. We talked about ethics of utility, duties, rights, and justice, and we talked about the basic assumptions between these different forms of view, and of course also about the limitations.

And we discussed ways of implementing ethics and organizational policies and in decision making, including guidelines for decision makers. Thanks a lot for watching.

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Importance of Business Ethics

Growing Influence of Businesses: Businesses increasingly influence society and gain publicity. This forces organizations to act ethically.

Harm of Malpractices: Business malpractices can harm both the organization and individuals. For example, in Nike's case, child labor and poor working conditions damaged the company’s reputation and harmed workers’ physical and psychological health.

Sanctions for Malpractices: Regulatory bodies or public awareness can lead to sanctions that harm businesses.

Stakeholder Demands: Modern stakeholders demand higher ethical standards. This increases the need for guidelines to ensure ethically acceptable decisions.

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Forms of Unethical Behavior

Information Manipulation: Examples include financial scandals (e.g., Wirecard) or suppression of research linking organizational behavior to negative outcomes, such as tobacco companies hiding smoking-related health risks.

Anti-Competitive Behavior: For instance, Microsoft used its dominant position to force manufacturers to bundle Internet Explorer with Windows, hindering fair competition.

Environmental Degradation: Planned large-scale logging in rainforests or pollution by oil and gas companies (e.g., BP) are examples.

Corruption: Bribery scandals, like Halliburton’s $80 million payment to secure a gas plant contract in Nigeria, are unethical practices.

Opportunistic Exploitation: Boeing exploited its supplier, Titanium Metals, by changing contract terms after the supplier had made significant investments to meet production demands.

Substandard Working Conditions: Nike’s use of sweatshops in developing countries, which lacked workplace regulations, is another example.

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Theoretical Perspectives on Ethics

Ethics of Utility:

Actions are morally right if they maximize good for the greatest number of people.

Challenges include quantifying costs and benefits and ensuring fair distribution.

Ethics of Duties (Kant):

Actions are ethical if they align with universal principles applicable to everyone.

Limitation: Universal principles may lead to negative long-term consequences.

Ethics of Rights:

Morality is consistent with respecting fundamental rights (e.g., human rights).

Limitation: It may impose a Western-centric view of morality.

Ethics of Justice:

Actions are ethical if all individuals are treated fairly and receive what they deserve.

Limitation: Fairness is subjective and difficult to measure.

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Fostering Ethical Behavior in Organizations

Organizational Policies:

Hire individuals with strong personal ethics.

Use ethical criteria in promotions.

Dismiss employees who violate ethical standards.

Culture and Leadership:

Build a culture emphasizing ethical behavior and moral courage.

Formulate codes of conduct and lead by example.

Decision-Making Frameworks:

Critically examine whether decisions align with organizational values.

Ensure decisions can be openly communicated to stakeholders.

Ethics Officers:

Train employees to be ethically aware.

Encourage employees to act as internal ethics monitors.

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Guidelines for Ethical Decisions

Is the action legal? If not, stop.

Does it comply with organizational values? If not, stop.

Will it cause personal discomfort or bad feelings? If so, reconsider.

How would it appear in the media? If negatively, reconsider.

If unsure, ask for guidance until clarity is achieved.

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Summary

Business ethics are a set of accepted principles defining right and wrong. These principles are essential as businesses gain societal influence and face ethical scrutiny. Ethics are discussed from four perspectives—utility, duties, rights, and justice—each with its assumptions and limitations.

Organizations can implement ethics through policies, culture, and leadership, supported by decision-making frameworks and ethical guidelines.

Thank you for watching.

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