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Business and

Economics
Ethics

Session 9

Prof. Marek Hudon


Academic Year 2016-2017

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Table of Content

1. Introduction to ethical issues


2. Moral principles: Core theories
3. Emergence of corporate responsibility and
ethical standards
4. Business & Environment

Chapter 5 of Velasquez

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Why would we care?
What does it mean for business?

Risk of
Instrumental

Environment
& Rights
Livable Ecological approach;
environment Non-humans have
intrinsic value
Extreme: ban on pollution
What does it mean for business?

Risk of
Instrumental

Mission-based

No reason that
Nature gets less Intrinsic
Why would we care? (Brennan and Lo, 2011)

Intrinsic (ends in themselves) vs. instrumental


(as mean) value
Important since agreed that intrinsic generates
moral duty
Anthropocentric more related to instrumental
value of nature. E.g. nature has made all things
specifically for the sake of man (Aristotle)
Enlightened anthropocentrism (Humans should
give consideration to the needs of nature, although
human needs always take precedence over natures
needs) because of the inhabitants of the earth 6
The context: Planetary Boundaries (Rockstrom et
al., 2009 in Nature)

Nitrogen
Biodiversity
Cycle
Losses
(Extinction
Rate)
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Exercise: Climate Change

Emissions from North, first countries affected are


in Africa and Asia
Huge investments needed
Change of behaviors to fix it
Questions (15 minutes preparation):
Do we have a responsibility towards the
future generations?
Is there a duty compensate the South? How
much? (Who should pay the costs of climate
change?)
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Responsibility towards Future generations

Some argue they have equal rights than us:


Leave the world no worse than we found it
Care: Leave our children a world no worse
Attfield/ Utilitarianist: Output left is no less
than from previous generations (but not the
same)
When we calculate, what is the discount rate?
Same nature or same level of welfare? Steady-
state or similar (or at least)?
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Others object:
Do not exist yet, therefore no duty related to rights, no
way to punish them
If they would have rights, could sacrifize our civilisation
for their sake?
Rights exist only if their holders have an interest to
protect. Do not know what rights future people might
have; will they care about environment?Maybe prefer
more consumption, less the environment?
With technology, we could get back or leave same
world

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Issues (Meyer, 2008)

Assymetry in power-relationship between


generations
Future generation may have some rights since
they will exist and will have rights and we affect
them
Since we dont know their preferences, these
rights would be related to their status of human
beings (subsistence etc.)
At least not harm (but bringing him into
existence is harm?)
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Duty to compensate the South?

We did not create it! Libertarian


Free transfer,

Welfare (market for our Utilitarian


companies, cost of
adaptation > budget)?

We created it! Moral right (universal,


reverse)
Do I have a special
relationship with
inhabitants from the Care
South? 13
More emphasis on Decreasing here rather than
paying for decrease in South?
Polluter payer principle
But externalities, how to internalise?
Efficiency argument (L. Summer thinking that
cheaper thus more efficient to outsource our
trash)
More efficient than paying for energy efficient
solution, should increase general welfare, what
leads to environmental behavior
More population in South More total utility to
work in the South
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The Myth of Decoupling
Source: Prosperity without growth, Tim Jackson (London, Earthscan 2009)

x 130 improvement

CO2/$ < zero by 2100?

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How to solve it?

Key issue is which nature should we leave?


Same, similar?
Can we provide other goods providing same
amount of utility and how to be sure that they will
be provide this utility?
What type of issue is it? Systemic? Company
issue?
Models of sustainable development (weak vs.
strong sustainability, de-growth)?

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How to solve it?

http://www.youtube.com/watch?v=1af08PSlaIs
How to solve it?
http://www.youtube.com/watch?v=1af08PS
laIs

Question any ressource Waste does not exist. Any


regarding its necessity for by-product is the source
production. for a new product

Sustainability

Injects money back into


Full use of all its available the local economy, and
resources cascades to offers high quality
higher levels of efficiency products at a lower cost
price
How to solve it?

Include externalities! How to do it?


How to infer responsibility?

From short-termism to long term sustainability

Behavioural lock-in/ habits (evolutionary


economics) Company cars
Tools & incentive
Rationale of subsidies!
How to solve it?

Precautionary principle (Velasquezs formulation)

If a practice carries an unknown risk of catastrophic


and irreversible consequences;

but it is uncertain how large that risk


Is
Practice should be rejected until it is certain that
the risk is non existent or insignificant
Readings

Two articles on UV
One on climate change compensation by Daniel
Farber (2007)
Overview of environmental ethics by Brennan
and Lo (2011)

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Issues (D. Farber in UV)
Is compensation warrented? Which claim?
Catastrophic event? Only measurable? Mid-range
impact (natural system, sea level, water)
Informational and symbolic claims
Back to moral responsibility question
Which institutional process (litigation)?
Beyond clean-up and property devaluations,
environmental values
Private insurance but not for catastrophic risk, litigation
(but need for proof of negligence), government (special
case)
Who pays? Beneficiaries? Poluter? Public? Climate change
winners? 22
Table of Content

1. Introduction to ethical issues


2. Moral principles: Core theories
3. Emergence of corporate responsibility and
ethical standards
4. Business & Environment
5. Ethical stakeholder framework (based on
Enron)
Chapter 3 of Wicks et al.

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From separation to integration

Any business has ethical content/ implications


Integrative thesis: Most business decisions, or
statements about business, have some implicit
ethical view. Most ethical decisions, or
statements about ethics, have some implicit view
about business
Assumption that most people, most of the time,
want to and do accept responsibility for the
effect of their actions on others.

Source: Wicks et al.


Three levels of Stakeholder Framework

Purpose Values/Aspirations The Basic Business


and Making SH Better Off or
1 Values Legacy Value Proposition

Questions:
ENDS

What do we stand for? Needs to be clear!!


Stakeholders What are our aspirations?
and For whom do we want to create value?
Principles How do we make each stakeholder better off?
What do we want to leave behind for others?

Societal Context Ex: J & J: Alleviate pain and


And diseases
Responsibility
Three levels of Stakeholder Framework

Questions:
Principles for Stakeholder Cooperation:

Purpose
What are the major tradeoffs that we make
and
in managing our stakeholder relationships?
Values
What are we doing to improve these
tradeoffs?

Stakeholders Principles underlying Values driven


MEANS

all stakeholders
2 and Principles for specific
Stakeholder
Principles stakeholders Management

What principles, values and policies are


we committed to so that stakeholders can
Societal Context
count on our support and our actions?
And
Responsibility Are there principles, values and policies
that underlie all our stakeholder
relationships?
Three levels of Stakeholder Framework

Questions:
What are our most vocal critics saying about
Purpose us?
and Is there a way of opening a dialogue with our
critics so that we can learn from them how to
Values
realize our purpose and principles in a better
Internallly - focused

way?
What issues are on the horizon in society that
will affect the kind of company that we want to
Stakeholders be in the next ten years?
and What obligations, principles, and governance
Principles mechanisms do we want to use to interact with
stakeholders who have become our critics (or
stakeholders we have not explicitly
recognized earlier)?

Societal Context Societal Trends Stakeholder Dialogue


3 And Critics and
Responsibility Governance Engagement

Moral and legalEthical


constraints
Leadership
Three levels of Stakeholder Framework
Commitments

Purpose
and
The Basic Value Proposition (goals/ ends)
Values

Stakeholders Principles for Sustained Stakeholder


and Cooperation (how/ means/ community needed)
Principles

Societal Context
And Understanding the Broader Societal
Responsibility Standards of Conduct/ Principles (values)
Table of Content

1. Introduction to ethical issues


2. Moral principles: Core theories
3. Emergence of corporate responsibility and
ethical standards
4. Business & Environment
5. Ethical stakeholder framework (based on
Enron)
6. Fair Price (salary)

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According to the article, in 2012, the
average multiple of CEO compensation to
that of rank-and-file workers was 204, up
20% since 2009. In other words, the
average CEO made 204 times what the
average worker earned in wages and
benefits.

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Great sportsmen !
But indecent salary?
Fair Wage of sportsmen
* Low social value (SROI) %
wage?
* Why thousands time more
than engineers?

* Bring money to basket club


* Equality of chance (everybody
could be M. Jordan!)
* Voluntary transfer (supporters buy
freely)
*Well-being (happiness of
supporters etc.)
* Talent
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What is then a fair salary?

You are hired as expert on the question:

What should/could the governement/regulator do


on this issue?

What should be done by companies?

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Some issues

Maximum salary? In which companies?

Minimum salary? In which companies?

Differential inside company

Privacy vs. transparency

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Which criteria for wages in companies?
Choices Mesurable
Seniority, Social mission

Skillset, History of institution

Age, Former job

Competition,
Painful
Studies
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