LESSON 1

GLOBALIZATION
AND THE NEED FOR
ETHICS

(Weeks 7 & 8)

“We must ensure that the global

market is embedded in broadly
shared values and practices that
reflect global social needs, and
that all the world's people share
the benefits of globalization.”
- Kofi Annan-

Topics in the Lesson

I. The Global Business Place as a Field of Applied Ethics
II. The Need for Corporate Reporting
III. 7 Basic Perspectives for Ethical and Socially Responsible Business

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 Lesson’s Intended Learning Outcomes
At the end of the lesson, you will be able to:
1. recognize the role of ethics in the economic globalization of the business place;
2. pinpoint the role of corporate reporting nowadays; and
3. analyze the basic perspectives for ethical and socially responsible business.

Let’s Get Started

I. The Global Business Place as a Field of Applied Ethics

Globalization is defined by the National Geographic society as “a term used to

describe how trade and technology have moved the world into a more connected and
interdependent place”. One of the dimensions of globalization is “economic globalization”
this dimension includes the worldwide movement of production, finance, markets,
technology, organizational regimes, institutions, corporations, and labor. This advent in the
field of business has pushed interested parties to push for initiatives worldwide to ensure that
businesses are conducted ethically. Business ethics is a form of applied ethics or the practical
form of moral consideration. Turning the market into a “global village” entails strengths and
weaknesses that need to be looked into. Global business places require Global Institutions
that should

- Enhance Freedom
- Improve Efficiency
- Promote Economic Growth
- Support Sustainability & Distributive Justice
- Provide international goods essential for living and collaborating in the global village
- Strengthen fairness in labor markets
- Ensure basic health care and education
 Question: Who has the responsibility to shape globalization according to
universal and ethical standards?

Answer: The so called big players. They include powerful nations, union of states as well as
the multinational corporations,

Kumar, Reddy, Ramaiah (2014) in their study of the importance of business ethics to
globalization, emphasized that ethics is needed to business for several reasons. They have
cited the following reasons below:

1. Ethics corresponds to basic human needs: It is a human trait that man desires to be
ethical; not only in his private life but also in his business affairs. It is people wo rule the
company and it is also people who make the company moving. Being just and fair in
all dealings of the company give employees a sense of pride and their owners a sense
of achievement.
2. Ethics create credibility with the public: A company perceived by the public to be
ethically and socially responsive will be honored and respected even by those who
have no intimate knowledge of its actual working.
3. Ethics give management credibility with employees: Values are supported to be a
common language to bring leaderships and its people together. Organizational
ethics, when perceived by employees as genuine, create common goals, values and
language.
4. Ethics help better decision making: Another point of great importance is that an
ethical attitude helps the management make better decisions, i.e., decisions which
are in the interest of the public, their employees and the company's own long term
goal even though decision making is slower.
5. Ethics and profits go together: A company which is inspired by
ethical conduct is also a profitable one. a reputation for ethical business activities can
be a major source of competitive advantage. High standards of organizational ethics
can contribute to profitability by reducing the cost of business transactions, building a
foundation of trust with stakeholders, contributing to an internal environment of
 successful teamwork, and maintaining social capital that is part of an organization’s
market-place image (Mcmurrian & Matulich, 2006).
6. Law cannot protect society, ethics can: Ethics is important because the government,
law and lawyers cannot do everything to protect society. Technology develops faster
than the government can regulate. People in an industry often know the dangers in a
particular technology better than the regulatory agencies. An ethically-oriented
management takes measures to prevent pollution and protection of workers' health
even before being mandated by law.

Kumar, et al. (2014) also explained six areas of business ethics as follows:
1. Dealing poor quality products: It is the duty of every entrepreneur to ensure that he
gives products of the highest quality to his customers.
2. Keeping promises: It is in the enlightened self-interest of entrepreneurs to honor the
promises they make, because business is built on trust and relationships which will get
eroded the moment an entrepreneur is seen lacking in integrity and honesty.
3. Window dressing: a technique used by companies and financial managers to
manipulate financial statements and reports to show more favorable results for a
period. Companies resorting to window dressing to attract investments and those
fudging the balance sheet to cheat the workers of their rightful entitlements. Present
consumers need transparency in business concern's financial statements.
4. Supra Normal Profits: The objective of a business is not just to
maximize the shareholder's values, but rather to deliver balanced value in a manner
that benefits all the stockholders and society. Milking the customers can give benefits
in the short run. But will end up ruining the relationship built over a long period of time.
Several studies in the US report that it costs six times as much to develop a new
customer as it does to sell to an existing one.
5. Compliance with laws and statutes: Laws prohibit theft, enforce contracts, set limits to
advertising and reinforce many other moral norms. Often the law underscores only the
non-negotiable minimum.
6. Concern for the local community: In the area, in which your factories and offices are
located, it pays to develop a harmonious relationship with the local community apart
 from providing employment to local people and in addition, every company can
contribute to some social cause.

II. The Need for Corporate Reporting

As mentioned in the previous topics, companies should mind how it’s image is being
projected to the demanding public. The expectations of the public on how companies
respond to social needs and their relationship with the stakeholders have increased causing
pressure to operations in business. Nowadays, Non-Governmental Organizations (NGOs)
have took stead in initiating actions to demand responsibility from corporations.
A CSR report (or corporate social responsibility report) is a periodical (usually annual)
report published by companies to report their corporate social responsibility actions and
results. It is, therefore, a document that synthesizes and makes public all the information on
the actions implemented by companies regarding their contribution to the principles
of sustainable development (YouMatter).
According to the Global Reporting Initiative, “A sustainability report is a report
published by a company or organization about the economic, environmental and
social impacts caused by its everyday activities. A sustainability report also presents the
organization’s values and governance model, and demonstrates the link between its
strategy and its commitment to a sustainable global economy.”
CSR reports produces a lot of benefits for both the internal and external operation of
the corporation. Internal benefits include employee retention because programs of the
company become clear to its employees resulting to trust relationships. It also results to
product or service innovation knowing how could it better offer its product to customers.
External benefits include better engagement with interested parties which may result to
more investments.

Question: Are CSR reports mandatory?

Answer: In most countries, and in the Philippines, it is NOT. However, reporting on and
monitoring of corporate responsibilities have gained momentum as greatly facilitated by the
Internet. Hundreds of websites present CSR report for the public. But does the public bother
to check? Does public become critical in the assessment of the programs? Are corporations
transparent in their reports?

III. 7 Basic Perspective for Ethical and Socially Responsible Business

G.R. Laczniak and P.E. Murphy, (2006) suggested these 7 basic perspective for ethical
and socially responsible business:
1. Ethical business puts people first.
2. Ethical business must achieve a behavioral standard in excess of the law.
3. Businessmen are responsible for whatever they intend as a means or ends with a
business action.
4. Business organizations should cultivate better (that is higher) moral imagination in their
managers and employees.
5. Business should articulate and embrace a core set of ethical principles.
6. Adoption of a stakeholder orientation is essential to ethical decisions.
7. Business organizations ought to delineate an ethical decision-making protocol

Principles should address ethical issues concerning the rightness or fairness of various
business strategies. These are the ethical principles referred to in no. 5.
Principle of “non-malfeasance”
- Business should never knowingly do harm when discharging business duties.

Principle of “non-deception”
- Business ought to never internationally mislead or unfairly manipulate consumers

Principle of “distributive justice”

 - Suggest that there is an obligation in the part of all business organizations to assess
the fairness of business place consequences flowing from their collective business practices.

Principle of “stewardship”
- Reminds business of their social duties to do the common good
Managers are obligated to ensure that their operations will not impose external costs on
society, especially the physical environment that result in their internal operations.

Let’s Step It Up

Watch this Video Presentation

Globalization and Ethics

https://www.youtube.com/watch?v=gBqZDd7nUOQ)

Write a Reaction Paper on the video.

Do not forget to include the following:
❑ A summary of what was presented.
❑ What do you agree or disagree with?
❑ How do you feel about the situation?
❑ Can you relate to the situation?
❑ Your insights.