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Business'Ethics'I:'Ethics'Foundations
TORSTEN*OLIVER*SALGE*|'Aachen
School*of*Business*and*Economics
TIME Research'Area'|*Innovation,'Strategy'and'Organization'Group'(ISO)
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
LEARNING OBJECTIVES
Outlining'the'objectives'of'this'video
! Understand'the'concept'and'relevance'of'business'ethics'
(BACKGROUND)
! Review'four'theoretical'perspectives'on'business'ethics
(THEORIES)
! Condense'key'insights'in'form'of'a'simple'decision'aid''''''''''''''''''''''''''''''''''''''
(DECISION*AID)
©'Torsten'Oliver'Salge 2
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Background
Discussing'the'growing'importance'of'business'ethics
! Focus*of*Business*Ethics
! Business'ethics'describes'the'set*of*accepted*principles,'i.e.'norms,'values'and'beliefs'
embedded'in'social'processes,'of'right'or'wrong'governing'the'conduct'of'business'people
! Business'ethics'is'the'study'of'business'situations,'activities,'and'decisions'where'issues*of*
right*and*wrong are'addressed'(morally'rather'than'commercially'or'strategically'right)
! Relevance*of*Business*Ethics
! Increasing'power*and*influence*of'business'in'society
! Business malpractices have'the'potential'to'inflict'enormous'harm
! Potentially'severe'regulatory or public sanctions for'ethical'malpractices
! Increasing'stakeholder demands for'ethical'behavior
! Need for guidelines to'make'ethically'acceptable'decisions
©'Torsten'Oliver'Salge 3
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*|'Background
Exploring'forms'of'unethical'behavior'in'the'car'industry
Thinking*about*the*automotive*industry,*what*types*of*unethical*
organizational*behavior have*been*reported*prominently*in*the*media?
YOUR*VIEW
©'Torsten'Oliver'Salge 4
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*|'Background
Exploring'forms'of'unethical'behavior'in'the'car'industry
Data'Manipulation ! Software'to'reduce'nitrogen'oxide'output'during'
regulatory'testing'only'to'meet'emission'standards
! RealYworld'emission'up'to'40'times'higher'(>'50'deaths)
! Around'11'million'cars'affected'that'need'to'be'recalled
September'2015 ! Stock'decline'by'30%'and'expected'costs'>15bn'EUR
Corruption ! Bribes'>50m'USD'to'foreign'officials'to'secure'
government'contract,'>200'transactions'in'22'countries
! “Corruption'and'bribeYpaying'at'Daimler'as'a'standard'
business'practice”
April'2010 ! 185m'USD'fine'in'settlement'with'SEC
Driver'Safety ! Unintended'acceleration'problem'due'to'issues'with'
floor'mats'and'accelerator'pedal'causing'accidents
! Deception'of'customers'and'authorities'regarding'cause''
! Toyota'“put'sales'over'safety'and'profit'over'principle”
November'2009 ! 9m'vehicles'recalled,'1.2bn'USD'fine,'15%'stock'decline'
©'Torsten'Oliver'Salge 5
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Theories
Introducing'the'Ethics'of'Utility
Characteristics Description
An'action'is'morally'right'if'it'results'in'the'greatest'amount'of'good'for'the'
Underlying* greatest'amount'of'people'affected'by'the'action
Assumptions
" ‘principle'of'greatest'happiness’
Primary*
Does'the'action'maximize'good'for'the'greatest'number'of'stakeholders?
Question
Dominant*
If'benefits'>'costs'" right'decision
Principles
Main* Quantification'of'costs'and'benefits
Limitations Distribution'of'utility'(what'about'minorities?)
Key* Jeremy'Bentham'(1748Y1832)
Thinkers John'Stuart'Mill'(1806Y1873)
©'Torsten'Oliver'Salge 6
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Theories
Introducing'the'Ethics'of'Duties
Characteristics Description
An'action'is'morally'right'if'it'is'consistent'with'certain'eternal'and'
Underlying* unchangeable'principles'or'maxims'
Assumptions
" ‘duty'to'act'in'a'certain'way‘
Primary* Is'it'desirable'for'the'same'action'to'be'taken'by'everyone'who'is'in'a'
Question similar'situation?
Dominant*
Universality'and'human'dignity
Principles
Main*
Possibility'of'negative'consequences'of'actions'consistent'with'maxims
Limitations
Key*
Immanuel'Kant'(1724Y1804)
Thinkers
©'Torsten'Oliver'Salge 7
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Theories
Reviewing'Kant’s'maxims
! Kant’s*First*Maxim:*“Universalisierungsformel”
! German:'“Handle'nur'nach'derjenigen'Maxime,'durch'die'du'zugleich'wollen'kannst,'dass'sie'
ein'allgemeines'Gesetz'werde.
! English:'“Act'only'according'to'that'maxim'by'which'you'can'at'the'same'time'will'that'it'
should'become'a'universal'law.”
! Hans'Jonas Version:' Act so'that the effects of your actions are compatible with the
permanence of genuine'human'life on'earth.”
! Kant’s*Second*Maxim:*“Selbstzweckformel”
! German:'“Handle'so,'dass'du'die'Menschheit'sowohl'in'deiner'Person,'als'in'der'Person'
eines'jeden'anderen,'jederzeit'zugleich'als'Zweck,'niemals'bloß'als'Mittel'brauchest.
! English:'“Act'so'that'you'treat'humanity'always'as'end'and'never'as'a'means'only.”
©'Torsten'Oliver'Salge 8
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Theories
Introducing'the'Ethics'of'Rights
Characteristics Description
An'action'is'morally'right'if'it'is'consistent'with'natural'rights,'i.e.'certain'
Underlying* basic,'unalienable'entitlements'that'should'be'respected'and'protected'at'
Assumptions all'time
" ‘declaration'of'human'rights‘
Primary*
Does'the'action'respect'fundamental'rights?
Question
Dominant*
Compliance'with'natural'rights
Principles
Main* Compliance'with'rights'sufficient'condition'for'ethical'behavior?
Limitations Reliance'on'Western'view'of'morality?
Key*
John'Locke'(1632Y1714)
Thinkers
©'Torsten'Oliver'Salge 9
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Theories
Introducing'the'Ethics'of'Justice
Characteristics Description
An'action'is'morally'right'if'all'individuals'in'a'given'situation'are'treated'
Underlying* fairly,'such'that'everybody'gets'what'he/she'deserves
Assumptions
" ‘procedural'and'distributive'justice’
Primary*
Are'decisionYmaking'procedures'and'outcomes'fair?
Question
Dominant*
Procedural'justice'and'distributive'justice
Principles
Main* Practical'difficulty'to'assess'fairness'and'define'“just”'decisionYmaking'
Limitations procedures
Key*
John'Bordley Rawls'(1921Y2002)
Thinkers
©'Torsten'Oliver'Salge 10
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*FOUNDATIONS*| Decision'Aid
Proposing'a'set'of'pragmatic'steps'to'evaluate'ethical'problems
1. Is*the*action*legal?
If'not,'stop'immediately
2. Does*it*comply*with*our*values?
If'it'does'not,'stop
3. If*you*do*it,*will*you*feel*bad?
Ask'you'own'conscience'if'you'can'live'with'it
4. How*would*this*look*in*the*newspaper?
Ask,'if'this'goes'public'tomorrow,'would'you'do'it'today?
5. If*you*know*it*is*wrong…
Don’t'do'it
6. If*you*are*not*sure…
Ask'
And'keep'asking'till'you'get'an'answer
©'Torsten'Oliver'Salge 11
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
CONTACT*US*
Contact'details'and'disclaimer
©'Torsten'Oliver'Salge 12
EMBRACING*SOCIAL*RESPONSIBILITY
Business'Ethics'II:'Ethics'Applications
TORSTEN*OLIVER*SALGE*|'Aachen
School*of*Business*and*Economics
TIME Research'Area'|*Innovation,'Strategy'and'Organization'Group'(ISO)
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
LEARNING OBJECTIVES
Outlining'the'objectives'of'this'video
! Examine'how'to'respond'to'allegations'of'organizational'misbehavior
(MINI*CASE)
! Discuss'hypothetical'decision'scenarios'with'an'important'ethical'dimension
(SCENARIOS)
! Explore'what'organizations'can'do'to'promote'ethical'behavior'
(POLICIES)
©'Torsten'Oliver'Salge 2
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Mini'Case
Expanding'the'Tesla'Fremont'plant'and'encountering'problems
©'Torsten'Oliver'Salge Source:'Twitter'(2016) 3
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Mini'Case
Explicating'the'allegations'made'by'Mercury'News
! For'expansion*of*its*Fremont*plant
Tesla'hired'German'firm'Eisenmann
! Eisenmann started'construction'in'
Fremont'with*subcontractor*from'
eastern'Europe
! In'the'course'of'investigations'after'a'
work'accident,'Mercury'News'claimed'
that'subcontractor’s'workers'
! stayed'in'the'U.S.'with'
questionable*visas
! were'paid'substandard*wages of'
around'5'USD'per'hour
! According'to'Eisenmann,'there'was'an'
agreement*with*the*subcontractor*to'
ensure'standard'wages'for'all'workers'
at'Tesla’s'construction'site
©'Torsten'Oliver'Salge Source:'Mercury'News'(2016) 4
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Mini'Case
Discussing'the'situation'and'developing'an'action'plan
Assuming*the*claims*are*true,*should*Tesla*be*held*responsible?*
Is*it*a*question*of*legal*or*ethical*responsibility?*
How*should*Tesla*respond?
YOUR*VIEW
©'Torsten'Oliver'Salge 5
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Mini'Case
Tracing'Elon Musk’s'social'media'response
©'Torsten'Oliver'Salge Source:'Tesla'(2016) 6
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Mini'Case
Presenting'a'formal'response'to'the'Mercury'News'article
CAt T.sla w. aspir. to op.rat. on th. prin,ipl.s of har- work an- .x,.ptional
p.rforman,. but alwaAs t.mp.r.- bA fairn.ss justi,. an- kin-n.ss. […] '.
ar. taking a,tion to a--r.ss this in-ivi-ual's situation an- to put in pla,.
a--itional ov.rsight to .nsur. that our workpla,. rul.s ar. follow.- .v.n bA sub-
sub,ontra,tors to pr.v.nt su,h a thing from happ.ning again. […] This is not a
l.gal issu. it is a moral issu.. As far as th. law go.s T.sla -i- .v.rAthing
,orr.,tlA. […] If th. ,laims ar. tru. T.sla will tak. a,tion to .nsur. that th.
right thing happ.ns an- all ar. tr.at.- fairlA. Cr.ating a n.w ,ar ,ompanA is
.xtr.m.lA -iffi,ult an- fraught with risk but w. will n.v.r b. a ,ompanA that bA
our a,tion -o.s or bA our ina,tion allows th. wrong thing to happ.n
just to sav. mon.A.C
©'Torsten'Oliver'Salge Source:'Tesla'Motors'(16'May'2016) 7
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Scenarios
Favoring customer'safety'or'firm'survival?
Scenario Question
You'are'the'manager'in'charge'of'the'Tesla'Model' ! What*choices*of*action*do*you*
3.'Your'engineers'notice'problems*with*the* have?
ignition*switches.'Given'the'high'number'of'pre^
orders'and'the'ambitious'delivery'targets,'there'is' ! How*do*the*pros*and*cons*of*each*
little time to'identify'the'root'cause.'A'quick'fix' choice*influence*your*organiX
appears'to'be'working'and'the'first'100,000*Tesla* zation,*the*external*parties*and*
Model*3*cars*are'equipped'with'the'ignition'switch' yourself?
you'approved.'You'then'receive'a'confidential'
customer*report*indicating*that'the'Model'3' ! How*can*you*justify*your*actions*
loses'power'when'the'keys'are'bumped.'As'a' from*an*ethical*point*of*view?
result,'power'braking,'steering'and'airbags'might'
stop'working.'Recalling'all'Model'3'cars'would'
cause'a'major*reputation*and*financial*crisis,'
Tesla'might'not'survive.'But'keeping'the'cars'on'
the'street'risks'the'chance'of'severe*accidents.
©'Torsten'Oliver'Salge 8
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Scenarios
Building'relationships'with'government
Scenario Question
You'are'the'newly'appointed'manager'in'charge'of' ! What*choices*of*action*do*you*
Tesla*South*America*headquartered'in'Buenos'
have?
Aires,'Argentina.'After'a'few'months'you'realize'that'
you'will'reach'your'ambitious*sales targets in'key' ! How*do*the*pros*and*cons*of*each*
markets'only'if'governments'decide'to'put'in'place' choice*influence*your*organiX
substantial'incentive*schemes*for'electric'vehicles.' zation,*the*external*parties*and*
Government'officials'signal'that'they'might'be'
yourself?
willing'to'put'in'place'such'regulations'in'return'for'a'
special discount and'a'few'free extra features on' ! How*can*you*justify*your*actions*
the'Model'S.'This'would'also'help'build'strong' from*an*ethical*point*of*view?
relationships to government,'which'are'essential'
for'the'long^term'success'of'Tesla'in'South'America.'
These'costs'could'be'declared'as'“marketing*
expenses”.'Attempting'to'build'the'market'without'
government'support,'though,'is'unlikely'to'succeed.'
©'Torsten'Oliver'Salge 9
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*|'Policies
Encouraging'ethical'behavior
According*to*you,*how*could*ethical*behavior
be*fostered*within*organizations?
Your*view
©'Torsten'Oliver'Salge 10
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
ETHICS*APPLICATIONS*| Policies
Encouraging'ethical'behavior
POSSIBLE*ORGANIZATIONAL*POLICIES*TO*
ENCOURAGE*ETHICAL*BEHAVIOR
©'Torsten'Oliver'Salge 11
TIME Research'Area'|'Innovation,'Strategy'and'Organization'Group'(ISO)
CONTACT*US*
Contact'details'and'disclaimer
Phone:*+49'241'80'99197
Mail:*info.iso@time.rwth^aachen.de
Web:*www.time.rwth^aachen.de/iso
©'Torsten'Oliver'Salge 12
EMBRACING*SOCIAL*RESPONSIBILITY
Conclusion
TORSTEN*OLIVER*SALGE*|*Aachen
School*of*Business*and*Economics
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
LEARNING OBJECTIVES
Outlining*the*objectives*of*this*video
! To*reflect*upon*the*tension*between*responsibility*and*profitability
(SYNTHESIS)
! To*summarize*the*key*insights*of*this*session*
(SUMMARY)
©*Torsten*Oliver*Salge 2
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
CONCLUSION |*Synthesis
Systematizing*the*tension*between*profitability*and*responsibility
Attribute Shareholder*View*********vs********Stakeholder*View
Emphasis*on Profitability*over*responsibility Responsibility*over*profitability
©*Torsten*Oliver*Salge Source:*De*Wit*&*Meyer*(2014) 3
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
CONCLUSION |*Synthesis
Reconciling*the*tension*between*profitability*and*responsibility
Sharing*with*others*to*serve*both*humanity*and*profitability?
©*Torsten*Oliver*Salge 4
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
CONCLUSION |*Synthesis
Revisiting*Tesla’s*decision*to*freely*share*its*patent*portfolio*
CONCLUSION*| Synthesis
Rethinking*technology*leadership
CONCLUSION*| Synthesis
Redefining*the*competition
CONCLUSION*|*Summary
Summarizing*key*insights*of*the*session
Social*Responsibility Business*Ethics
! Business*and*Society.*********************
2 ! Ethics*Foundations.* 4
Reflect*upon*the*role*of* Review*philosophical*
business*in*society*and* approaches*that*help*
identify*its*contributions* inform*ethical*decision*
to*the*public*good making
! Corporate*Social* 3 ! Ethics*Applications.*************5
Responsibility.*Unpack* Discuss*ethical*decision*
organizations’*broader* making*in*the*context*of*
social*responsibilities business*practice
6
Appreciate*the*importance*of*ethics*in*business
©*Torsten*Oliver*Salge 8
TIME Research*Area*|*Innovation,*Strategy*and*Organization*Group*(ISO)
CONTACT*US*
Contact*details*and*disclaimer
Phone:*+49*241*80*99197
Mail:*info.iso@time.rwthJaachen.de
Web:*www.time.rwthJaachen.de/iso
©*Torsten*Oliver*Salge 9