Business Ethics Summary (Crane & Matten, (2010); Chapters

1 through 5)
Table of Contents
Chapter 1. Introducing Business Ethics...............................................................2
Chapter 2: Framing Business Ethics....................................................................4
Chapter 3: Evaluating Business Ethics................................................................7
Chapter 4: Making Decisions in Business Ethics................................................11
Chapter 5: Managing Business Ethics...............................................................14

Chapter 1. Introducing Business Ethics

Ethics and law
Business ethics is the study of business situations, activities, and decisions where issues
of right and wrong are addressed
The law = minimum acceptable standards of behavior, but many morally contestable
issues are not covered by law.
Answers to ethics questions are often equivocal: There is no definitive right answer
Ethics and morality
Morality is concerned with the norms, values and beliefs embedded in social processes
which define right and wrong for an individual or a community.
Ethics is concerned with the study of morality and the application of reason to elucidate
specific rules and principles that determine right and wrong for a given situation. These
rules and principles are called ethical theories.
A good understanding of ethics is important because:
1. The power of business in society is greater than before
2. Business has the opportunity to provide a major contribution to societies, now
more than ever
3. Business malpractices can inflict enormous harm on individuals, communities and
environment
4. Stakeholder demands on business to be ethical are becoming more complex and
more challenging
5. Few businesspeople have received formal business ethics education or training
6. Ethical violations continue to occur in business, across countries and across sectors
7. Business ethics can provide us with the ability to assess the benefits and problems
associated with different ways of managing ethics in organizations
8. Business ethics is extremely interesting in that it provides us with knowledge that
transcends the traditional framework of business studies and confronts us with
some of the most important questions asked by society.
Business ethics in different organizational contexts
Ethics in large vs. small companies
Small organizations often little resources available to focus on ethics
Large organizations have more formalized approaches to ethics management, however
constrained by the need to focus on profitability and shareholder value, as well as their
size and complexity of operations.
2

Private, public and civil society organizations

Private sector responsibility primary towards shareholders/owners
Civil society organizations responsibilities to constituencies they serve (and to their
donors). Informal approach, emphasizing mission and values, limited in resources and
training.
Public sector responsibilities to higher general government and to the general public:
bureaucratic and formalized approach to ethics management. Aim: Preventing conflicts of
interest, corruption, etc.
Globalization a key context for business ethics
Cultural issues: moral values taken for granted in one place are not understood
elsewhere. This can cause friction and confrontations.
Legal issues: beyond borders, legal systems change. Business ethics starts where law
ends, but law is not the same in different countries
Accountability issues: companies, often as large as entire nations in terms of GDP,
have much more limited accountability, only towards their small group of shareholders.
Globalization leads to a growing demand for corporate accountability.
Homogenizing effects of globalization: it creates a new deterritorialized
space where business faces similar ethical questions worldwide.
International differences in business ethics
Who is responsible
for ethical
conduct?
Who is the key
actor in business
ethics?
What are the key
guidelines for
ethical behavior?
What are the key
issues in business
ethics?
What is the
dominant

Europe
Social control by
the collective

North America
The individual

Asia
Top management

Government,
trade unions,
corporate
associations
Negotiated legal
framework of
business
Social issues in
organizing the
framework of
business
Formalized
multiple

The corporation

Government,
corporations

Corporate codes
of ethics

Managerial
discretion

Misconduct and
immorality in
single decisions
situations
Focus on
shareholder value

Corporate
governance and
accountability
Implicit multiple
stakeholder
3

stakeholder
management
approach?

stakeholder
approach

approach, benign
managerialism

Sustainability:
Core components:

Economic

Environmental

Social

Triple bottom line: People, Planet, Profit

Chapter 2: Framing Business Ethics

Corporations:

Are typically regarded as artificial persons in the eyes of the law

Are notionally owned by shareholders, but exist independently of them
Managers and directors have a fiduciary responsibility to protect the investment
of shareholders

Milton Friendman (1970): The social responsibility of business is to increase its profits.

Only human beings have a moral responsibility for their actions

It is managers responsibility to act solely in the interests of shareholders
Social issues and problems are the proper province of the state rather than
corporate managers

Does a corporation have a moral responsibility? Yes:

1. The legal framework of most developed countries treat companies as a legal or
artificial person that has responsibility for its actions.
2. Corporations have moral agency (internal decision structures & organizational
cultures) of sorts that shapes the decisions made by those in the corporations
Corporate Social Responsibility
Two key questions:
1. Why do corporations have social as well as financial responsibilities?
Often boils down to enlightened self-interest. This implies taking on social responsibilities
insofar as doing so promotes its own self-interest. For example: increased customer
satisfaction, avoiding boycotts, becoming more attractive to employees, avoiding
legislative retaliatory action, creating an improved and stable competitive context in
which to do business on the long term.
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It is often argued that this is merely profit maximization under the cloak of social
responsibility. However, what matters are the primary motivations of the decision-maker.
Was this profit or altruism? This is often difficult to determine.
There are also moral arguments for CSR:

Corporations cause problems, and hence have a responsibility to solve these

As powerful social actors, corporations should use their power responsibly in
society
All corporate activities have social impacts of one sort or another, whether through
the provision of products and services, the employment of workers or other
corporate activities. Hence, corporations cannot escape responsibility for those
impacts.
Corporations rely on the contribution of a much wider set of stakeholders than just
shareholders, and hence have a duty to take into account the interests and goals
of these stakeholders as well as those of shareholders.

2. What is the nature of these social responsibilities?

Carrolls four-part model of CSR:

Economic responsibility companies have shareholders who demand a reasonable return

on their investments, have employees who want to earn wages, and customers who want
quality products against fair prices.
Legal responsibility companies must abide by the law and play by the rules of the
game.

Ethical responsibility these responsibilities oblige companies to do what is right, just and
fair even when not compelled to do so by the legal framework. For example, societies
expect companies to do something against climate change.
Philanthropic responsibility activities desired by society that improve the quality of life
of employees, communities, and society in general.
2 problems with the model: (1) biased towards US context, (2) does not take into account
what should happen when two responsibilities are in conflict.
In every part of the world, emphasis is put on different parts of the CSR
pyramid. The model is still very vague and arbitrary, which forces us to ask not
so much the question of whether to do CSR, but of how to do it.
Corporate social responsiveness a more strategic concept
4 philosophies or strategies towards social responsiveness by Caroll
1. Reaction corporation denies any responsibilities for social issues
2. Defense corporation admits responsibilities, but fights it.
3. Accommodation corporation accepts responsibility and does what is demanded
of it by relevant groups
4. Pro-action corporation seeks to go beyond industry norms and anticipates
future expectations by doing more than is expected
Outcomes of CSR: corporate social performance

Social policies explicit and pronounced corporate social policies stating the
companys values, beliefs and goals with regards to its social environment
Social programmes specific social programmes of activities, measures and
instruments implemented to achieve social policies
Social impacts social impacts can be traced by looking at concrete changes the
corporation has achieved through the programmes implemented in any period.
Often difficult to measure

Stakeholder theory looking at the various groups towards which a company has a
responsibility
Companies are not managed by the interests of shareholders alone, but a wide range of
groups, or stakeholders, also has a legitimate interest in the corporation as well
Principle of corporate rights companies have the obligation to not violate the rights of
others
Principle of corporate effect companies are responsible for the effects of their actions on
others
6

A stakeholder fits in one or both of the above principles.

Why do stakeholders have a legitimate claim?
-

There are negative externalities resulting from business actions

The agency problem: many shareholders have predominantly short-term interests
in share prices, while employees, suppliers and customers have much more longterm interests.

Managers must balance the fiduciary responsibility to look after shareholders interests
with the competing interests of other stakeholders. In this light, one can argue that there
is a case for some model of stakeholder democracy. The model of corporate governance
must be altered to include the voices of various stakeholder groups.
Different types of stakeholder theory:
Normative stakeholder theory attempts to provide a reason why corporations
should take into account stakeholder interests
Descriptive stakeholder theory attempts to ascertain whether (and how)
corporations actually do take into account stakeholder interests
Instrumental stakeholder theory attempts to answer the question of whether it is
beneficial for the corporation to take into account stakeholder interests.
Corporate accountability the firm as a political actor
More and more power flows from politics to corporations. Are corporations answerable in
some way for the consequences of their actions?
This yields considerable risks, and governments are often not anymore able to protect
their citizens against these threats (BSE, SARS, Chernobyl incident, bird flu).
Governments are losing power, causing a weakened state, while at the same time there
is a massive rise in corporate power.
To enable democratic accountability, companies need to maintain transparency. They
must acknowledge and make visible corporate decision, policies, activities and impacts to
relevant stakeholders.
Corporate citizenship
Three perspectives on definitions of CC:
-

A limited view of CC equates CC with corporate philanthropy

An equivalent view of CC equates CC with CSR
An extended view of CC acknowledges the extended political role of the
corporation in society. Citizenship results in three entitlements resulting from the
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liberal tradition: Social rights (freedom to participate in society), Civil rights

(freedom from abuses and interference by third parties) and Political rights
(right to vote or participate in governance beyond his or own privacy). Corporate
citizenship describes the corporate function for governing these citizenship rights
for individuals.
Social role of the corporation in governing citizenship
Social rights
Civil rights

Political rights

Corporation as either provider or ignorer

Corporation as either disabler or enabler

-

Corporation as either channel or blockage

Chapter 3: Evaluating Business Ethics

A business wants to base its ethical decisions on a systematic, rational, and widely
understandable argument so that they can be adequately defended, justified, and
explained to relevant stakeholders. This is where normative ethical theories come into
play.
Ethical theories are the rules and principles that determine right and wrong for a
given situation.
There are two extreme positions towards ethical theory:

Ethical absolutism: There are eternal, universally applicable moral principles.

According to this view, right and wrong are objective qualities that can be
rationally determined.
Ethical relativism: Morality is context-dependent and subjective. Relativists
believe that there are no universal right and wrongs that can be rationally
determined it depends on the person taking the decision and the culture in which
they are located. Ethical relativism is different from descriptive relativism. The
latter merely suggests that different cultures have different ethics; the former
proposes that both sets of beliefs can be equally right. Ethical relativism then is
still a normative theory.

Pluralism: a middle ground between absolutism and relativism.

Two important assumptions by Kaler (1999):

Morality is a social phenomenon. In order to make good business decisions, we

need to develop knowledge of the different moralities that we are likely to be faced
with.
Morality is about harm and benefit.

Differences in Northern American and European views on business ethics:

8

Individual versus constitutional morality in North America, there is a more

individualistic perspective on morality, while in Europe there is a greater focus on
the economic system and the wider governing institutions.
Questioning versus accepting capitalism In the US, ethical problems are
seen as occurring within the capitalist system, which treats it as a given. In Europe,
relevant parts of business ethics focus on questioning the ethical justification of
capitalism.
Justifying versus applying moral norms The challenge in Europe for business
ethics consists to a strong degree of the justification and ethical legitimation of
norms, resulting from a strong pluralism of moral convictions and values (e.g. in
the Netherlands, Germany and Sweden). In the US as far as the white, Christian
majority is concerned these values are not questioned but are fixed. They focus
more on the application of morality to business situations.

Western modernist ethical theories

Absolute by nature they offer rules or principles to apply. They start with assumptions
about the nature of the world, and then more specific assumptions about the nature of
human beings. The main advantage is that they have a rather well-defined rule of
decision, and therefore provide us with a fairly unequivocal solution to ethical problems.
2 Groups:
Consequentialist (teleological) ethics: If the outcome of an action is desirable, then the
action itself is morally right; if the outcome of the action is not desirable, the action is
morally wrong.
Non-consequentialist (deontological) ethics: base moral judgement on the underlying
principles of the decision-makers motivation. An action is right or wrong because the
underlying principles are morally right/wrong, not because of its consequences.

Motivation/Principl
es

Action

Non-consequentialist ethics

Outcomes

Consequentialist ethics

Consequentialist ethics:

Egoism: Focus on maximization of individual desires and interests. A decision is

morally right when the decision-maker freely decides in order to pursue either their
short term desires or their long-term interests. Man has only limited insight into the
consequences of his actions. Egoism selfishness. Limitation: action of one has
direct consequences on others: market failure.
Utilitarianism: Focus on collective welfare, man avoids pain and looks to gain
pleasure (hedonist). An action is morally right if it results in the greatest amount of
good for the greatest amount of people affected by the action. Utility
maximization, takes shape in a cost-benefit analysis of some sorts. Act
utilitarianism: looks at single transactions and their results on the pleasure/pain
balance. Rule utilitarianism: looks at classes off action and asks whether underlying
principles of an action produce more pain or pleasure for society in the long run.

Non-consequentialist ethics
Stem often from religious views, they ground ethical behavior in some eternally valid
principles, which are derived from a duty to others, or to a specific deity.

Ethics of duties: Developed by Kant. Morality is a question of certain eternal,

abstract and unchangeable principles that humans can apply to all ethical
problems. 3 rules:
- Act only to that maxim by which you can at the same time will that it should
become a universal law
- Act so that you treat humanity, whether in your own person or in that of
another, always as an end and never as a means only
- Act only so that the will through its maxims could regards itself at the same
time as universally lawgiving
According to Kant, an action was only moral if it has passed the above three tests.
Great similarity with the Golden rule in almost all religions: treat others as you
wanted to be treated yourself. Problems: Over-optimistic, Complexity and
undervaluing outcomes (they are not taken into account, only the duties are.

Ethics of right and justice: Conceptualized by Locke, it claims that humans are
entitled to certain natural rights or moral claims, such as rights to life, freedom
and property, freedom of speech, conscience, consent, privacy and entitlement to
a fair legal process. These natural rights are a certain basic, important and
unalienable entitlements that should be respected and protected in every single
action. These rights are sometimes seen as related to duties, since the rights of
one person can impose duties on another. Examples:
- Declaration of the Rights of Man
10

- American Constitution
- United Nations Declarations of Human Rights
Limitation: the notions of rights are quite strongly located in a Western view of
morality.

Justice
Fair treatment of individuals in a given situation with a result that everyone gets what
they deserve. Two views:
-

Fair procedures
Fair outcomes

Distribution of wealth in an economical system

-

Egalitarian approach: justice is the same as equality, burdens and rewards should
be distributed equally and deviations from equality are unjust. Problem: does not
take into account differences between people, and offers no incentives for hard
work and innovation.
Non-egalitarian approach: justice in economic systems is ultimately a product of
the fair process of free markets.

Solution lies in between. The Theory of justice by Rawls (1971) proposes 2 tests for
whether an action could be called just:
1. Each person is to have an equal right to the most extensive total system of basic
liberties compatible with a similar system of liberty for all.
2. Social and economic inequalities are to be arranged so that they are both:
(a) To the greatest benefit of the least advantaged; and
(b) Attached to offices and positions open to all under conditions of fair equality of
opportunity
Limits of Western modernist theories
-

Too abstract: too theoretical and philosophical, not practically applicable in

business
Too reductionist: theories focus on one aspect of morality (duties, consequences,
rights) when all matters at the same time
Too objective and elitist: only specialist ethicists and philosophers can
pronounce the right and wrongs of other people without any experience of the
actual situation they are faced with.
Too impersonal: do not take into account personal bonds and relationships
Too rational and codified: feelings and emotions are not taken into account
11

Too imperialist: why would Western theories be suitable for business people all
over the world?

Alternative approaches on ethical theory

-

Ethical approaches based on character and integrity: Virtue ethics contends that
morally correct actions are those undertaken by actors with virtuous characters.
Therefore, the formation of a virtuous character is the first step towards morally
correct behavior.
Ethical approaches based on relationships and responsibility: Feminist ethics
starts from the assumption that men and women have fairly different attitudes
towards organizing social life, with significant impact on the way ethical conflicts
are handled. Feminist ethics is an approach that prioritizes empathy, harmonious
and healthy social relationships, care for one another, and avoidance of harm
above abstract principles. Focus on Relationships, Responsibility and Experience.
Ethical approaches based on procedures of norm generation: Discourse ethics
aims to solve ethical conflicts by providing a process of norm generation (on the
spot, democratic agreement) through rational reflection on the real life experience
of all relevant participants.
Ethical approaches based on empathy and moral impulse: Postmodern business
ethics. Modern theories such as capitalism, communism, socialism etc. are too
ambitious, reductionist, optimistic and can therefore not explain the complex
reality of human existence. Postmodern business ethics is an approach that locates
morality beyond the sphere of rationality in an emotional moral impulse towards
others. It encourages individual actors to question everyday practices and rules,
and to listen to and follow their emotions, inner convictions, and gut feelings
about what they think is right and wrong in a particular situation. Therefore, it does
not provide us with rules, principles or recipes for ethical decision-making.
Characteristics
o Holistic approach
o Examples rather than principles
o Think local, act local
o Preliminary character

Page 129: Summary of theories

Chapter 4: Making Decisions in Business Ethics

Stages in ethical decision-making
Four-stage model by James Rest (1986), in which individuals move through a process
whereby they:
1. Recognize a moral issue
2. Make some kind of moral judgment about that issue
normative theories

Focus of
12

3. Establish an intention to act upon that judgment

4. Act according to their intentions
Influences on ethical decision-making
Individual factors: The unique characteristics of the individual making the decision
(age, gender, experience, socialization). Research on this originates mainly from the US,
as the North American focus is often on choice within constraints.
Situational factors: Features of the context that influence whether the individual will
make an ethical or an unethical decision (work context features such as reward systems,
job roles, organizational culture and issue features such as the intensity of the moral
issue or the ethical framing of the issue). Research on these factors originates mainly
from Europe, as the European concern is often more with the constraints themselves.
Individual influences on decision-making:
-

Age and gender: hard to distinguish, depends on experiences

National and cultural characteristics: different backgrounds have different
views. Hofstedes 5 dimensions have a significant impact on acting upon ethical
questions in business:
o Individualism/collectivism
o Power distance
o Uncertainty avoidance
o Masculinity/femininity
o Long-term/short-term orientation
Education and employment: there are definite differences between those with
different educational and professional experience present
Psychological factors
o Cognitive moral development: refers to the different levels of reasoning that
an individual can apply to ethical issues and problems. Three levels:
1. Level one (preconventional): the individual exhibits a concern with
self-interest and external rewards and punishments. Stage 1:
Obedience & Punishment >> Stage 2: Instrumental purpose and
exchange
2. Level two (conventional): the individual does what is expected of
them by others. Stage 3: Interpersonal accord, conformity and mutual
expectations >> Stage 4: Social accord and system maintenance
3. Level three (postconventional): the individual is developing more
autonomous decision-making based on principles of rights and justice
rather than external influences. Stage 5: Social contract and
individual rights >> Stage 6: Universal ethical principles
Most important critiques:
-

Gender bias: model mostly tested on male subjects

13

Implicit value judgments: rights and justice are chosen to prevail

above numerous other bases of morality, such as responsibilities and
relationships, virtues and moral impulse.
- Invariance of stages: there is also context dependency involved in
making ethical decisions
o Locus of control: determines the extent to which he or she believes that they
have control over the events in their life.
High locus of control: I can shape my own future
Low locus of control: My future depends on others actions, luck and
fate
Personal values: an enduring belief that a specific mode of conduct or end state
of existence is personally or socially preferable to an opposite or converse mode of
conduct or end state
Personal integrity: an adherence to moral principles or values
Moral imagination: does one have a variety of possibilities and moral
consequences of their decisions, the ability to imagine a wide range of possible
issues, consequences, and solutions.

Situational influences on decision-making:

-

Issue-related factors
o Moral intensity
Magnitude of consequences
Social consensus
Probability of effect
Temporal immediacy
Proximity
Concentration of effect
o Moral framing: how is the moral issue described?
Managers tend to rationalize their behavior, out of fear of losing:
Harmony by provoking confrontation and finger-pointing
Efficiency in decision making
Their image of power and effectiveness

Context-related factors
o Reward systems: people tend to do what they are rewarded for, e.g.
maximizing sales. When ethical behavior is not rewarded, it will often not be
conducted.
o Authority: people do what they are told to do, or what they think they are
being told to do.
o Bureaucracy: A number of negative effects on decision-making:
Suppression of moral autonomy
Instrumental morality
Distancing
Denial of moral status
14

o
o

Work roles: people quickly adopt the roles that are assigned to them, and
will act in correspondence with these roles The Stanford Experiment
Organizational culture: some norms are determined by shared values, beliefs
and behaviors within the organization, which can act both as barriers as well
as enhancers of ethical behavior. Therefore, an ethical culture is needed.
National context: different cultures maintain different views of what is right
and wrong (different on the Hofstede perspective, which focuses on the
individual instead of the national culture in which the issue is taking place).

15

Chapter 5: Managing Business Ethics

Business ethics management is the direct attempt to formally or informally manage
ethical issues or problems through specific policies, practices, and programmes.
Components of business ethics:
-

Mission or value statements

Codes of ethics
Reporting/advice channels
Risk analysis and management management of financial and reputational risk
Ethics managers, officers and committees
Ethics consultants
Ethics education and training
Stakeholder consultation, dialogue and partnership programmes
Auditing, accounting and reporting

Three focal areas:

-

Setting standards of ethical behavior

Managing stakeholder relations
Assessing ethical performance

Setting standards of ethical behavior: designing and implementing codes of

ethics
4 types:
-

Organizational or corporate codes of ethics

Professional codes of ethics
Industry codes of ethics
Programme or group codes of ethics

Prevalence of codes of ethics

2/3rds of large companies have codes of ethics
Content of codes of ethics
a. Define principles or standards that the entity wants to uphold
b. Set out practical guidelines for employee behavior, either generally or in
specific situations (such as accepting gifts, treating customers, etc.)
Effective codes of ethics should contain both specific values and specific content and
frameworks.
Effectiveness of codes of ethics

16

Management must be role models. There must be participation from employees in the
development to increase involvement and buy-in. Companies must be willing to
discipline employees found in breach of the codes. Also, follow-through is very
influential on employee behavior. To achieve this, codes must be translated into a
standardized and quantified audit instrument for clear assessment, and code compliance
must be linked to managers performance evaluation.
Managing stakeholder relations
Assessing stakeholder importance: an instrumental perspective
Three relationship attributes to determine the perceived importance of stakeholders
-

Power: power to influence organizational action

Legitimacy: whether the organization perceives the stakeholders actions as
desirable, proper or appropriate
Urgency: the degree to which stakeholder claims are perceived to call for
immediate attention

Types of stakeholder relationship

Antagonistic as well as co-operative behavior is possible with stakeholders
Stakeholder relationships can take a variety of different forms, including the following:
-

Challenge mutual opposition and conflict

Sparring partners relationship based on healthy conflict and periodic bouts of
conflict
One-way support relationship based on philanthropy, sponsorship or other
contribution
Mutual support formal or informal two-way support (e.g. strategic philanthropy)
Endorsement relationship based on paid/unpaid public approval to a partner in
relation to a specific product, or programme (e.g. labeling and accreditation
schemes)
Project dialogue relationship based on discussion between partners regarding
specific project or proposal, such as stakeholder dialogue accompanying major
regeneration or construction projects
Strategy dialogue discussion of long-term issues and developing an overall
strategy for organizations, industries or regulatory regimes
Task force relationship based on co-operation to achieve a specific task, such as
a research project or new product/system development
Joint venture or alliance - relationship based on formal partnership involving
significant mutual resource commitment to achieve specific goals.

Problems with stakeholder collaboration

17

1. Resource intensity: time-consuming and expensive compared to normal decision

making
2. Culture clash: different values and goals
3. Schizophrenia: conflict and collaboration at the same time may result in
schizophrenic behavior
4. Uncontrollability: no guarantee that a mutually acceptable outcome will be reached
5. Co-optation: greenwashing or bluewashing by allying with certain
organizations/labels
6. Accountability: if decisions are made behind closed doors, accountability may be
compromised
7. Resistance: as a result of these or other concerns, other stakeholders may try to
resist the development of a collaborative relationship.

Assessing ethical performance

-

Reports labeled ethical will focus on the individual-level aspects of the business,
such as compliance with codes of ethics, legal violations, etc.
Reports labeled environmental will focus on the organizations impact on the
natural environment
Reports labeled social will focus a more broad range of topics, including employee
conditions, health and safety, equal opportunities, human rights, corporate giving
and community relations.
Reports labeled sustainability are often concerned with the triple bottom line
(People, Planet, Profit).

Social accounting will be used as the generic term.

Defining social accounting
-

It focuses on issues other than (though not necessarily excluding) financial data
The intended audience consists of stakeholders other than (though not necessarily
excluding) shareholders
Unlike financial accounting, social accounting is not (at least as yet) required by
law in most jurisdictions

Social accounting is the voluntary process concerned with assessing and communicating
organizational activities and impacts on social, ethical and environmental issues relevant
to stakeholders.
Why do organizations engage in social accounting?
-

Internal and external pressure

Identifying risks
Improved stakeholder management
Enhanced accountability and transparency
18

There are also numerous disincentives, such as perceived high costs, insufficient
information, lack of standards, or unwillingness to disclose sensitive or confidential data.
What makes for good social accounting?
-

Inclusivity
Comparability
Completeness
Evolution: a commitment to learning and change
Management policies and systems
Disclosure
External verification
Continuous improvement

Important schemes in place that seek to tackle specific aspects of social accounting. For
example:
-

Auditing and certifying

Reporting
Reporting assurance

Organizing for business ethics management

Formal ethics programmes
-

Compliance orientation emphasis on preventing, detecting and punishing

violations of the law, not of ethical codes.
Values orientation defining organizational values and encouraging employee
commitment to certain ethical aspirations.
External orientation focus on satisfying external stakeholders. What is regarded
as right is what is expected or acceptable
Protection orientation protecting top management from blame for ethical
problems or legal violations

US: Compliance approaches

Europe & Asia: Values and external approaches
Informal ethics management: ethical culture and climate
Culture change is very popular, though very difficult to implement.
Cultural learning is a different approach. It focuses on smaller subcultural groups
within the firm and enabling employees to make their own ethical decisions.
Business ethics and leadership

19

To cope with change, leadership is required instead of management. The leaders role in
bringing about a culture change is to set an example and be a moral person and a
moral manager. In supporting cultural learning, the leaders role is more a facilitating,
participating and empowering one.

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