BA107 The Social, Political and Ethical Environment of Business

1
BA107The Social, Political and Ethical
Environment of Business

• July 13, 2005
• Sanny Liao

2
Agenda

• Administrative stuff
• Corruption in international deals
• Theoretical background
• Child labor
• Conclusion

3
Administrative matters

• Please pass your journal article reviews to the
  front. I will return them to you next Monday.
• Remember to turn in your research paper topic to
  me via email by Monday. If you are confused, and
  just need help refining your topic, feel free to
  email/see me.
• New office hours M 11-12, W 1130-1230 in room
  F535, starting next week.

4
Transparency International Corruption Perception
Index

• 1 - Finland
• 2 - New Zealand
• 3 - Denmark, Iceland
• 5 - Singapore
• 6 - Sweden
• 7 - Switzerland
• 8 - Norway
• 9 - Australia
• 10 - Netherlands
• 11 - UK
• 12 - Canada
• 13 - Australia, Luxembourg
• 15 Germany
• 16 Hong Kong

• 17 Belgium, Ireland, USA
• 22 France, Japan
• 64 - Mexico
• 71 China, Saudi Arabia
• 90 India, Russia
• 108 Argentina, Palestine
• 145 Bangladesh, Haiti

Source Transparency International Corruption
Perception Index 2004 http//www.transparency.org/
pressreleases_archive/2004/2004.10.20.cpi.en.html
5
Survey

• Do you think paying 350,000 in consulting
  fees to foreign officials in order to secure a
  10 million-in-profit government contract is
  acceptable?
• Always acceptable
• Sometimes acceptable
• Never acceptable

6
What would you do?

• Suppose your company (company X) is bidding for
  a 250 million contract to create a computerized
  network for 500 branches of an Argentinean bank.
  You are put in charge of securing this bid. The
  competition is fierce. Your company, along with
  a few other top bidder, are offering similar
  services at similar prices. You receive a tip
  off from a local partner who is familiar with
  this type of bidding that you can claim the prize
  if you deposit 30 million in a few Swiss bank
  accounts.
• Keep in mind that this deal is extremely
  profitable, and bribery is much more common in
  Argentina than the U.S.. What would you do?

7
What if

• You were a Palestinian company?
• You were the legitimate top bidder, but you heard
  that another bidder (company Y) is planning on
  bribing the key bank official in charge of this
  deal so that they can win the deal.
• The Board of your company has vowed to use a
  large portion of the profits from this deal to
  provide computers for the underfunded public
  school system?

8
What actually happened?

• In 1995, allegations were made that IBM had paid
  37M in kickbacks and bribes to secure a 250M
  contract Argentinas state-run banco de la nacion
  in 1993.
• Among those charged were the former president of
  Banco de la Nacion, IBM Argentinas former
  Chairman, former COO, and former aide to the
  former presidents chief cabinet secretary.
  (Note the formers)
• IBM lost 41M in lawsuit settlements to Banco de
  la Nacion, and lost the contract, of course.
  Other Argentinean ministries also refused to
  renew contracts with IBM (another -500M)
• IBM said that they will never bid for any more
  government contracts in Argentina, and not even
  in Latin America if they were the sole bidder.

9
Deontological View

• Since no matter how much effort we exert, we
  cannot control the future, therefore one should
  not be judged on the consequence of ones
  actions, but the actions themselves.
• Kant argues that to judge the morality of an
  action, it is the nature of the action and the
  will of the agent that matters, not the final
  product achieved.
• How to judge an action? Kant Do unto others as
  you would have them do unto you
  (universalizability).

10
Distributive Justice

• John Rawl believes that ones place of birth,
  social status, and family background are matters
  of luck and thus should not the sole determinant
  of how much benefit one receives. Therefore,
  distributive justice is a practice that gives
  more benefit to the least endowed.

11
Utilitarian View

• An action is good if it brings about the greatest
  amount of happiness to the greatest number of
  people.
• Therefore, a person is acting ethically if she
  chooses an action that she believes will most
  likely make the greatest number of people happy.
• Advocated by Jeremy Bentham and John Stewart
  Mill.

12
Levi Strauss and child labor

• Levi Strauss has adopted a policy that prohibits
  any part of their supply chain to employ child
  labor. They find that 2 of their contractors in
  Bangladesh appear to be using workers under the
  age of 14, which is the international standard.
  However, there is no proof of age.
• Should the children be removed? Can you think of
  any reason for these children not to be removed?
  
• What is the right thing to do according to the
  deontological, utilitarian, or distributive
  justice views?
• What do you think?

13
What actually happened?

• LS hired physicians who used growth charts to
  determine the age of the suspected underage
  children, and they were removed from the factory.
• The contractor continued to pay these children
  wage as if they were still working, and LS paid
  for their uniform, tuition and books so they can
  attend school.
• They would be hired again when they reach 14.

14
Conclusion

• The ethicalness of an issue may differ when
  subject to different standards of judgment.
• Interesting question are certain groups of
  people more likely than others to adopt a certain
  view on how to judge whether an action is right?
• Reference point matters. Can you think of any
  other cases where the ethicalness of a decision
  varies by reference point?