This document discusses the relationship between ethics and business. It presents arguments that business' sole responsibility is to increase profits, as well as counterarguments that businesses also have responsibilities to stakeholders such as employees, customers, and society. It explores concepts like the invisible hand, stakeholder theory, and creating shared value. Overall, the document examines the debate around the social responsibilities of businesses beyond profit generation.

1. ETHICS & BUSINESS
AN OXYMORON?
WUNNHAFF A Baaltches 17/06/2009

2. GETTING USED TO IT
• Calvin :
• Did you read this? This movie star made over
twenty million last year!
• What would YOU do with twenty million bucks?
• Hobbes :
• Beats me. I think it is ridiculous that anyone makes
that kind of money
• Calvin :
• OK. Say you only made fifteen million
• Hobbes :
• Let’s say eighteen

3. BUSINESS
The Social Responsibility of
Business is to Increase its Profits
The New York Times Magazine, September 13, 1970
Milton Friedman
Nobel Memorial Prize in Economic Sciences, 1976

4. FRIEDMAN’S
ARGUMENTS
there is one and only one social responsibility of business - to use its resources and engage
in activities designed to increase its profits so long as it stays within the rules of the game,
which is to say, engages in open and free competition without deception or fraud.
What does it mean to say that "business" has responsibilities? Only people can have
responsibilities. A corporation is an artificial person ...
In a free-enterprise, private-property system, a corporate executive is an employee of the
owners of the business. He has direct responsibility to his employers. That responsibility is
to conduct the business in accordance with their desires, which generally will be to make as
much money as possible while conforming to the basic rules of the society.
In most of these cases, what is in effect involved is some stockholders trying to get other
stockholders (or customers or employees) to contribute against their will to "social" causes
favored by the activists...

5. ADAM SMITH: THE
INVISIBLE HAND
Every individual endeavours to employ his capital
so that its produce may be of the greatest value.
He generally neither intends to promote the public
interest, nor knows how much he is promoting it.
He intends only his own security, only his own
gain. And he is in this led by an invisible hand to
promote an end which was no part of his intention.
By pursuing his own interest he frequently
promotes that of the society more effectually than
he really intends to promote it.

6. ADAM SMITH: THE
INVISIBLE HAND
As every individual, therefore, endeavours as
much as he can both to employ his capital in the
support of domestic industry, and so to direct
that industry that its produce may be of the
greatest value; every individual necessarily
labours to render the annual revenue of the
society as great as he can. He generally,
indeed, neither intends to promote the public
interest, nor knows how much he is promoting it.
By preferring the support of domestic to that
Every individual endeavours to employ his capital of foreign industry, he intends only his own
so that its produce may be of the greatest value. security; and by directing that industry in such
He generally neither intends to promote the public a manner as its produce may be of the greatest
interest, nor knows how much he is promoting it. value, he intends only his own gain, and he is in
He intends only his own security, only his own this, as in many other cases, led by an invisible
gain. And he is in this led by an invisible hand to hand to promote an end which was no part of his
promote an end which was no part of his intention. intention. Nor is it always the worse for the
By pursuing his own interest he frequently society that it was no part of it. By pursuing his
promotes that of the society more effectually than own interest he frequently promotes that of the
he really intends to promote it. society more effectually than when he really
intends to promote it.
1776

7. SOME EXAMPLES
Enron
Nike
Parmalat
Sub-Prime
Madoff

8. ENRON
Old-fashioned business: selling energy
Generational change / J. Skilling & A. Fastow / Innovative
business model
New accounting rules
“Unanticipated” problems
Stock market, rating agencies and banks’ pressure
More “innovation” and collapse

9. NIKE
Business model: Design of sport shoes / offshore manufacturing
Child work
Nike: “We are not responsible for our suppliers business
practices”
Employees: “Actually, we should take that responsibility”
Process of reflection and new rules / influence

10. SUB-PRIME
“Every American should own their home”
House prices boom
Flexible mortgages
Securitization
Collapse

11. MADOFF
“The Madoff Strategy” (Split-strike strategy)
Clones less successful: guru, insider knowledge (“front-running”)
Sooner or later FED will close him down, but for now it’s a
good investment
“Feeder Funds”
Liquidity crisis and collapse

12. WISE WORDS

13. WISE WORDS
It seemed the world was divided into good and bad people.
The good ones slept better while the bad ones seemed to enjoy
the waking hours much more.

14. WISE WORDS
It seemed the world was divided into good and bad people.
The good ones slept better while the bad ones seemed to enjoy
the waking hours much more.
Woody Allen

15. WISE WORDS
It seemed the world was divided into good and bad people.
The good ones slept better while the bad ones seemed to enjoy
the waking hours much more.
Woody Allen

16. BAHA’I WRITINGS
... the fundamental cause of this world unrest is attributable, not so much to the
consequences of what must sooner or later come to be regarded as a transitory
dislocation in the affairs of a continually changing world, but rather to the failure
of those into whose hands the immediate destinies of peoples and nations have
been committed, to adjust their system of economic and political institutions to
the imperative needs of a rapidly evolving age? Are not these intermittent crises
that convulse present-day society due primarily to the lamentable inability of the
world’s recognized leaders to read aright the signs of the times, to rid themselves
once for all of their preconceived ideas...
The World Order of Bahá'u'lláh, Shoghi Effendi
The Guiding Principles of World Order
Pages 34-38

17. MANAGEMENT
EDUCATION
Bad Management Theories Are
Destroying Good Management
Practices
(2005)
SUMANTRA GHOSHAL (1948-2004)
Advanced Institute of Management Research (AIM), UK and
London Business School

18. GHOSHAL’S CRITIQUE
“Scientific” approach
Ideology-based gloomy vision, partial analysis,
unbalanced assumptions, pretense of knowledge
Negative assumptions about human nature
Self-fulfilling prophecies

19. WISE WORDS #
His lack of education is more than
compensated for by his keenly
developed moral bankruptcy.

20. GHOSHAL ON
SHAREHOLDER VALUE
Assumptions
Perfectly efficient labor markets
Wages necessarily represent fair value, otherwise workers can immediately
and costlessly move to another job
Shareholders carry the greater risk and their return must be maximized
Truth is of course exactly the opposite:
Most shareholders can sell their shares far more easily than workers can
change jobs
Workers’ contribution is far more valuable; equity (capital) is a commodity

21. PRINCIPLES FOR
RESPONSIBLE BUSINESS
CAUX ROUND TABLE
Moral Capitalism for a better world
PRINCIPLES FOR RESPONSIBLE BUSINESS
PRINCIPLE 1 - RESPECT STAKEHOLDERS BEYOND SHAREHOLDERS
PRINCIPLE 2 – CONTRIBUTE TO ECONOMIC, SOCIAL AND ENVIRONMENTAL DEVELOPMENT
PRINCIPLE 3 – RESPECT THE LETTER AND THE SPIRIT OF THE LAW
PRINCIPLE 4 – RESPECT RULES AND CONVENTIONS
PRINCIPLE 5 – SUPPORT RESPONSIBLE GLOBALISATION
PRINCIPLE 6 – RESPECT THE ENVIRONMENT
PRINCIPLE 7 – AVOID ILLICIT ACTIVITIES
(published: March 2009)

22. 10 GLOBAL COMPACT
VALUES
Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human
rights; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour Standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the
right to collective bargaining;
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Environment
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies.
Anti-Corruption
Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
•

23. THE STAKEHOLDER
CONCEPT

24. THE STAKEHOLDER
CONCEPT
Organization

25. THE STAKEHOLDER
CONCEPT
Shareholdes
Organization
Employees Management

26. THE STAKEHOLDER
CONCEPT
Clients
Shareholdes Local
Suppliers
community
Organization
Employees Management
Environment Government

27. THE STAKEHOLDER
CONCEPT
Common Good
Clients
Shareholdes Local
Suppliers
community
Organization
Employees Management
Environment Government

28. EBBF CORE VALUES
1. Ethical business practices
2. Social responsibility in business
3. Values-based leadership
4. Sustainable development
5. A new paradigm of work
6. Partnership of women and men in all fields of endeavour
7. Non-adversarial decision making through consultation

29. THE TRIPLE
BOTTOM-LINE
The Triple Bottom Line
[A] sustainable corporation is one that
• creates profit for its shareholders while
• protecting the environment and
• improving the lives of those with whom it interacts…
It operates so that its business interests and the interests of the
environment and society intersect.
Andrew Savitz, The Triple Bottom Line: How Today's Best-Run Companies Are Achieving Economic, Social and Environmental Success --
and How You Can Too

30. MORAL LEADERSHIP
Service
Truth
Nobility
Transformation
Transcendence
Capabilities Life-long learning

31. CORPORATE CULTURE
!

32. INITIATIVES
Micro-finance
UN Global Compact
Global Ethics Forum
Organizations like EBBF
Self-control and ISO 26000
Sustainability and CSR audits

33. SUCCESSES
2003: Grameen Bank and its founder Mohammad
Yunus jointly receive the Nobel Peace Prize
making Grameen Bank the first business to be awarded this honor
Norway: quota of women on boards
Many single examples of responsible businesses or
initiatives

34. More than any other time in history, mankind faces a
crossroads. One path leads to despair and utter
hopelessness. The other, to total extinction. Let us pray
we have the wisdom to choose correctly.

35. HOW ABOUT YOU AND I?
What can we do?
DISCUSS!