LGST 001: ETHICS AND SOCIAL RESPONSIBILITY

Ethics & Social Responsibility Session Content & Key Points

Session #01: Introduction to Ethics The enabling environment for ethical violations: 1. Technology - Privacy Infringements - Insider trading - Licenses 2. Profit Maximization - Search for lower costs at all expense (Foxcon) - Use of child labor (Pfizer) - Expense of the environment (Shell) 3. Power without accountability - Changing political structures Front Burner Issues: 1. Assisted Suicide 2. Obesity & Advertising 3. Overfishing 4. Carbon Footprint & Sustainability 5. Whistleblowing Topic #01: Corruption in Financial Transactions The scourge of corruption: Bribery is an evil practice that threatens the foundation of any civilized society - Lord Templeman in AG of HK v Reid What is Bribery? When a person confers, or agrees to confer any benefit upon any employee, agent or fiduciary without the consent of the latters employer or principal, with the intent to influence his conduct in relation to his employers or principals affairs. Legal Perspective Prevention of Corruption Act Section 5 Corruptly give, solicit, receive or promise any gratification, inducement, reward or otherwise for doing or forbearing to do anything PCA 37(1): Provisions of this act in effect, in relation to citizens of Singapore outside or as well as within Singapore; Where an offence under this act is committed by a citizen of Singapore in any place outside Singapore, he may be dealt with in respect of that offence as if it had been committed in Singapore. Why should be care about Corruption? Political Impact (Refugees, civil war, dictatorships) Loss of business, loss of lives Large impact on poor and most vulnerable segments of society Misuse of public funds, not directed to institutions that benefit the common man but instead feed the lifestyles of corrupt officials. Corruption of large magnitudes often accompanied by ruthless oppression of personal freedom and civic liberties Breeds inefficiency lower GDP per capita because of less investment (business efficiency)

Companies as Moral Actors C (Corruption) = M (Monopoly Power) + D (Discretion) A (Accountability) To reduce corruption, (1) Control: reduce legal, electoral, educational system; (2) Exit or increase competition: eliminate subsidies, privatization; (3) Voice Strategy: Civil Society & NGOs, Publicizing scorecards (CPI, corruption perceptions index) A productive organization should enhance the long-term welfare of employees and consumers in the society in which it operates As such, it must not violate the minimum standards of justice and human rights in any society in which it operates. Concept of Principal-Agent relationship and a fiduciary duty to employer. Corruption infringes as a possible breach of these duties. Corrupt Payments versus Grease Payments Corrupt Payments: Payments given to influence the exercise of discretion by an official, so that action will be taken/given in favor of the person giving the payment. Grease Payments: Payments usually small, given to petty officials to expedite the performance of routine government activity like clearing a shipment through customs or speeding up the formation of a company. ** Distinction here is that while one is used to expedite a procedural issue, the other is used to influence the decision. Arguments FOR/AGAINST grease payments: Utilitarian Argument: Overall efficiency increased and welfare is maximized. Country and economy will not stagnate due to overwhelming bureaucracy. Grease payments are obvious and not hidden. Highlights the inefficiencies of the government so they can take steps to improve situation Sums of money are small; however, petty corruption can have subtle effects on viewpoints of citizens Long-run might be better to eliminate petty corruption for LR business efficiency 1

Prepared by: Tee Chin Min Benjamin

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Questions to be asked in Approach to Problem Is there violation of duty to state/employer? Responsibilities and primacy of obligations Was there a breach of fiduciary duty? Is there an unspoken rule in the country? What are the resulting benefits and costs in engaging in corruption? (LR v SR consequences) Is the situation likely to be recurring or was it a oneoff transaction? Was the act hidden or in full purview of everyone? Summary of Arguments on Corruption Kantian: Corrupt payments like lying and not keeping promises are under some prima facie substantive duty because if everyone were corrupt and willing to bribe, the society cannot survive since honesty between government officials and public is a key element in keeping society together. Principal of Universality would sanction against paying the bribe as the briber cannot rationally allow the maxim of bribery to be universalized. Bribery when universalized would result in the lack of transparency in business dealings and reduce incentives for productive labor and transaction costs. As rational beings, one should follow the categorical imperatives so that there isnt a first mover disadvantage without paying the bribe. Bribery is an intentional violation of a binding moral duty owed exclusively to the principle. Inducing that breach of duty via bribery or engaging in the breach of duty by accepting the bribe are both morally wrong. Possible Maxims: Contracting officers should not receive payments other than what there are contracted to receive for their work One should not submit a bid that is unjust and unfair Utilitarian: Corrupt payment in a given situation would not lead to the best result for society as a whole. Consider the impact of corrupt payment distorting business efficiencies as the best product is not eventually chosen for the consumer. Companies with good products and practices would not be rewarded adequately in a corrupted business climate. Prospect of lawsuits against you and your company If listed on NYSE, subjected to prosecution under the US Foreign Corrupt Practices Act. If Singapore, look at PCA and repercussions locally Fines, Loss of reputation of company over ST gain Rule Utilitarian: Taking the position of the Chief Executive in the Chamber of Commerce, desired outcome would be to increase business efficiency and transparency in the country so as to increase output and total welfare for the economy.

Applying the Rule of: No grand or petty corrupt payments Increased business confidence in the fairness of the regulatory and legal system resulting in increased investment and desire for innovation and enterprise. Resulting long-term increase in the standard of living of citizens; good business = good products Need to enforce (1) Good administrative and court system, (2) Supervision and Enforcement However, development of such a system would also have positive externality effects on other domains of society such as political stability and low crime. Benefit of greater equality and equal opportunity for all citizens. (Fosters meritocracy and competition) Corruption has its most harmful effects in developing countries where much needed public resources are often diverted to the hands of public officials. Virtue Ethics: Two extremes identified: (1) Engage in corruption to get the maximum benefits from the proposed deal (2) Engage in ZERO corruption Middle ground: Difficult to establish because some corruption is akin to concede to all corruption. Corruption like a drop of ink which penetrates through a fluid till the whole fluid is contaminated. No corruption; but build strong relationships and networks within the context of proper business dealings to understand the decisional process involved so as to give your company best chance. Line not to cross: Relationship building which confers a benefit to the principle which influences his decision making process. Topic #02: Ethics in the Workplace Main Issues: Bullying, Sexual Harassment, Unfair Discrimination Instructions to do things which are wrong Privacy and Autonomy in hiring policies Personal Ethics v Organizational Ethics Personal policy v Company policy Executive Compensation Workers in the Vineyard: Should wages be determined entirely by contract? Concept of equal pay for equal work. What is fair pay? Legal Environment and Labor Changing nature of employment Relationship has gone from one where labor was obtained from people of certain status, to one where people are independent agents free to make contracts with whichever employer they choose. Not excluded from occupations because of status 2

LGST 001: ETHICS AND SOCIAL RESPONSIBILITY

Result of increased social mobility and abolishment of slavery laws.

Employment at Will model Employer or employee may terminate the employment at will unless disallowed under the terms of the contract and no permission is required from a government authority to terminate employment. Employment dictated by market forces to facilitate efficiency during downturn and boom cycles. Does little to protect job security and leaves contracting parties to agree on the conditions of employment termination. Government ensures sufficient social safeguards, regulatory agencies and labor unions to ensure employment is fair Concept of Vicarious Liability Employer is liable for the damages or wrongs done by the employee in the course of the business operations. Distinction drawn between an independent contractor and an employee Employer has the right to tell the person(employee) what must be done and also how it must be done and stipulate the range of subtasks one must follow. Independent contract is told what is expected and requirement would be to deliver the final product. How the job is done is not the concern of the client. Issues arising: To what extent can the employer legitimately monitor and control the behavior of the employee? While the doctrine of vicarious liability provides a justification for the employer to screen out unsuitable applicants, an employer may use this doctrine in matters which are not the business of the employer. Challenge to strike a balance between the checks and monitoring that an employer may conduct in order to prudently guard against wrongful misconduct without intruding on employee space. Challenges arising from Technology Proliferation Virtual Workplace: Presence of emails, mobile phones, internet and company issued devices allow work to be carried out anywhere and employee may be answerable to the employer almost all the time. Scope of control: Technology allows more freedom in the way work is delivered allowing employees to make use of technology in ways beyond dictated scope. Confidential information is now stored online and on company intranet and databases. Law implies that there is a duty of mutual trust between the employee and the employer. However, there is no explicit

obligation for the employee to pursue the interests of the employer. Outsourcing: Technology has allowed the outsourcing of work to different countries beyond local borders. This creates the issue of differing legal and ethical standards and the need for a good set of corporate code of conduct to govern actions.

Issue #01: Sexual Harassment in Asia Background: In many Asian countries, there is an imbalance in the number of men and women due to the Asian preference for males over females. This leads to the presence of honor killings in Asia and also discrimination against women in the workplace. 1. Courtship (Employer advances on employee) 2. Sexual Harassment (Two forms) Hostile work environment one that belittles or degrades because of gender and the abuse of power by the employer resulting in oppression Quid pro Quo Sexual favors in order to be appointed to a position, get a pay increase or get a good job evaluation American Context (Harris v Forklift Systems): There must be continuous abuse and degrading actions No grave psychological trauma necessary, just (1) Objective condition: reasonable perception that behavior is hostile and abusive and (2) Subjective condition: employee in fact so perceives it. To avoid liability, employer must show that: (1) exercised reasonable care to prevent and correct promptly any sexually harassing behavior (2) victim employee unreasonably failed to take advantage of preventive/corrective opportunities to avoid harm. Summary of Arguments for Sexual Harassment: Kantian: Categorical imperative of the Principle of Humanity states that all humans are to be treated with respect. Sexual Harassment infringes on the right to be treated with respect and is akin to treating women as a sexual object in a degrading and hurtful manner. Part of a larger duty for employers to provide a fair and safe working environment for employees. Violating human dignity transgresses a basic social norm relating to the respect of the modesty of women. Employers have a duty to provide a safe and fair working environment for their employees. Veil of Ignorance: Theory of Justice suggests that all employees be given equal opportunity to hold careers and to advance them without having to submit to unwanted advances or sexual harassment. 3

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Utilitarian: Negative effects on the company severely outweigh any positive effects: Subordinates would be unwilling to work for a boss who has a reputation for sexual harassment. Time and energy devoted to improving the companys profitability and performance is wasted in sexual pursuits by the predator as well as the victim having to fend off unwanted advances. Results in negative reputation of the company and also a corruption of the values of meritocracy in job progress. Issue #02: Discrimination in the Workplace Discrimination: We all agree that human beings are equal in the sense that no one has a greater intrinsic moral value than another but we concede that human beings are not equal in the sense of being equally gifted. Credentials, recommendations and psychological tests are directed to find a fit between the employee and the employer. Discrimination occurs when the employer uses his/her own prejudices, values and standards to evaluate an employee for hiring or firing decisions Is there a gap between the law and ethics; law does not explicitly prohibit discrimination. There are laws that protect employees such as health, safety, minimum wage but no law on discrimination. Multiethnic and multicultural nature of Asia results in numerous people groups and cultures. Differences between groups result in the formation of prejudices, stereotypes and eventually give rise to discrimination. Ethics of Discrimination Employer is allowed to pass judgment on applicants based on their qualifications and skills and experiences required for the job Where the decision fringes on race, religion, gender or disability for reasons other than job requirements, employers should be careful not to discriminate against applicants. Types of Discrimination 1. Intentional discrimination: Employer intentionally and consciously takes into account a non-job related criterion in a hiring, firing or promotion decision 2. Disparate-Impact discrimination: Discrimination demonstrated by statistical evidence Summary of Arguments for Workplace Discrimination Kantian: Discrimination violates the principle of humanity. People have a right to be judged on the basis of their abilities and job performance and not on the basis of a stereotype. People are treated as means and not an end

Veil of Ignorance: One has to bear in mind that the individual could be a member of a disfavored ethnic group, religion, caste or gender. The least advantaged would prefer to live in a system of equal opportunity and meritocracy. Discrimination violates the requirements of equal freedom and equal opportunity which John Rawls requires for a society to be considered just. Issue #03: Employee Privacy Privacy is said to be of value because of the role it plays in developing and maintaining a healthy sense of personal identity. It has an important role in society in promoting a high degree of individuality and freedom of action among members in the society. Definitions of privacy: (1) Right to be left alone within a personal zone of solitude (unwanted publicity) and (2) Privacy as a right to control information about oneself (3) Privacy is a state where certain facts about oneself are not known to others Breach of privacy (in Singapore): Information had to possess the necessary quality of confidence Information had to be imparted in circumstances importing an obligation of confidentiality Unauthorized use of information to the detriment of the party Issues of Privacy in Business No true privacy and no absolute ability to be left alone in solitude. Workers cannot claim the right to be free from supervision in the workplace. Need to limit the concept of privacy involving selected information and not stretching to cover all intrusions into personal life. Privacy is the claim of individuals to control for themselves, when, how and to what extent information about them is communicated to others. Privacy is not correlated to control so you can lose privacy without losing control (voluntary divulge information) Scope limited to undocumented personal information because certain facts about oneself are available as public records and can easily be retrieved. No loss of privacy when it comes to legal qualifications and legal compliance for records. Pre-employment screening and selection. To what extent does the employer have the right to demand personal and private information?

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Information monitoring and intrusiveness: Googles tracking of consumer preferences and profiling of the consumer for targeted advertising.

Types of Privacy: (1) Physical Privacy: Persons enjoyment of space from which others can be excluded and within which his activities are not monitored without his consent (2) Informational Privacy: Persons control over access of information relating himself or herself (3) Decisional Privacy: Right of a person to make decisions and act on those decisions free from any unwanted interference from others Summary of Arguments for Privacy in the Workplace Ethical issues arise in the process of gathering information, usage of information and whether the employer has the right to information deemed as private or personal. Kantian: Based on the autonomy of individuals and the respect for persons. Both arguments violated with the invasion of privacy because autonomy implies that a person has the moral right to make a rational choice as an autonomous being without interference from others. Respect implies that others give due recognition to a persons right as equal and autonomous person. Extent of autonomy and respect given should be in line and weighted in light of any contrasting duties and obligations (e.g duty to the state; duty to family) Utilitarian: Based on evaluating the consequences of actions and weighing the resulting costs and benefits: Great harm done to individuals when inaccurate or incomplete information is collected by an employer and is used as the basis for making important personnel decisions. Great harm done to individuals when personal or private information is used against the employee for purposes that the individual didnt intend for others to know. Increases tension and atmosphere of distrust in the workplace which results in diminished workplace satisfaction. Argument rests on the unproven assumption that more harm than good will result when employers amass files of personal information, hence there is a need to realistically balance harm done to employees by crossing privacy lines against the benefits that such practices produce for employers. Contrast negative impact of increased monitoring with improved productivity, minimized damage to the firm caused by negative actions by employees, low cost of implementation to monitoring (wide range of affordable monitoring equipment)

However, some practices are inherently considered to be morally wrong even when they do not produce negative consequences (monitoring with hidden cameras, or tapping phone conversations) Objection is overcome by more sophisticated utilitarian arguments that focus on the fact that a certain amount of privacy is needed for the enjoyment of some activities, hence monitoring or concession of privacy rights can change the experience and prevent satisfaction.

Social Contract Theory: Though every person has the right to autonomy, that right is said to be restricted by a social contract in our culture that prevents us from infringing on another persons right to personal autonomy. Reciprocal obligation an individual who receives respect for his personal autonomy has a reciprocal obligation to respect the autonomy of others. Social contracts can be observed in culturally specific manners as well as part of a companys system of values and code of conduct. When an employee agrees to be a part of the company, he agrees to act in line with the values and conduct that the company respects. Thomas Donaldson & Thomas Dunfee Hypernorms: fundamental core values across all cultures known as Hypernorms as well as those that allow free moral space within local communities which are not Hypernorms. Suggest that we look for a convergence of religious, cultural and philosophical beliefs around certain principles to identify Hypernorms. Hypernorms include: Freedom of Speech, Right to personal freedom, Freedom of Opinion, the Right to physical movement and informed consent. Specific Arguments for Workplace Privacy Workplace privacy is violated when: 1. Employers infringe on personal decisions that are irrelevant to the employment contract (breach of Decisional Privacy) 2. Personal information that is irrelevant to the contract is collected, stored or used without informed consent. (Informational Privacy) Employees need to be able to challenge all information collected and to be informed about what type of information is being collected and its purpose Onus is on the employer to show and justify the need for collecting such information Access to information dependent on the type of information and the state of relationship between parties.

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Issue #04: Conflict of Interest Conflict of interest arises when ones personal interests comes into conflict with his duty to act in the interest of another; or when ones personal interests interferes with his ability to act in the interests of another when he has the obligation to do so. Business related COI: Fiduciary duty; Principal-Agent relationship When an employee is engaged in carrying out a task on behalf of the company while at the same time harboring a private interest that is either antagonistic to the best interest of the company or has the potential to affect his independent judgment. Situations Arising: Biased Judgment: when professionals (agents) do not use their best judgment in the interest of the principal (accepting a bribe) Direct Competition: when employees engage in direct competition with his employer (Moonlighting) Misuse of Position: Where you use the position to advance personal interest (Personal Favors) Violation of Confidentiality: Disclosure of information that is privy to the principal (Insider Trading) Types of Conflict of Interest (1) Actual Conflict of Interest Person actually discharges his or her duties to the employer or some other person in a way that is prejudicial to their interests out of his selfinterest (2) Potential Conflict of Interest When there is a possibility that person will fail to perform a duty to act in the interest of another, even though he has not yet done so Whether the particular interest creates potential conflict depends on the strength of the influence exerted on the person (3) Apparent Conflict of Interest May sometimes overlap with potential conflict of interest. In this situation, there might or might not be a conflict of interest but an onlooker might think there is one because the circumstances of the situation suggest so Issue #05: Bonuses for Bankers Is there fair compensation with regard to the intrinsic value of the job? Intrinsic value referring to value added to society Can argue that bankers are paid the market rate (how the market values them), but markets can be argued to be imperfect. (Nurses are severely underpaid in relation to intrinsic value they give)

Healthy economy depends on healthy banks. Good bankers lead to healthy banks (assumed)

Summary of Arguments for Bankers Bonuses Veil of ignorance What is the fair social contract we want to achieve justice? No one group should be receiving exorbitant bonuses at the expense of others (state-funded bailouts at Too Big To Fail banks) Since we all do not know which profession we will end up in, then we have no reason to accept the high bonuses that bankers receive. Hence bank bonuses are UNETHICAL Deontology Maxim: bankers have fiduciary duty to act in the best interest of the company Since bankers have a duty to act in the best interest of the company, regardless of the bonus structure, the rationale of having high banking bonus to ensure bankers work hard is flawed and UNETHICAL. Its like paying for more than what you are entitled to. Virtue Ethics 2 extremes: excessive reward for good performance and zero reward for good performances What virtues do bonuses instill in bankers? Will bonuses make better bankers? Good performances should be rewarded with bonuses. Excessive incentives cloud good judgment, and bankers need good judgment. More importantly, excessive incentives breed greed, and greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by some form of loss. Since high bonuses lead to greed and cloud judgment, it is unethical to deviate too far from the mean. Rule Utilitarianism Recurring situation: Payment of annual bonuses Hat: Head of bankers association Desired outcome: Attract and retain talent pool in the industry Rule: Attractive pay packages that reward good performances Bonuses are ETHICAL Deontology Maxim: Employees should be adequately compensated for their efforts to the company in line with their contract.

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We must respect the rights of investment bankers. They obtained bonuses as entitled in their contracts as dictated by the free market. Hence bank bonuses are ETHICAL

Rule Utilitarianism: Recurring situation as increasing number of companies engage in global operations Hat: Fair Labor Association (FLA) apparel industry certification group. Desired Outcome: Consumers are aware that the products that they buy are made under acceptable working conditions. Businesses enjoy cost savings within the boundaries of ethical labor practices and safe working conditions. FLA members agree to abide by the ass ociations Code of Conduct which prohibits: Forced labor, child labor Physical, verbal, sexual or psychological abuse Discrimination on the basis of gender, race, religion Unsafe and unhealthy working conditions Code requires members to: Recognize and respect the right of employees to bargain collectively Pay employees the local or minimum wage Maintain reasonable hours of work and give workers adequate rest and overtime pay. To support this desired outcome, companies should ensure adequate monitoring of factories; promote world trade and competition, certification of manufacturing operations through trade organizations, providing aid to improve the infrastructure and working environment in developing countries. Veil of Ignorance: Under the current situation, we observe that corporations are making considerable profits at the expense of overworked and underpaid laborers in developing countries. Inequitable distribution of profits which are reinvested to develop the brand name through marketing/branding rather than improving working conditions of workers. Going behind the veil, one must bear in mind that he could be a child laborer in a sweatshop and hence, resources (profits) should be reallocated in a manner that benefits the least member of society. Virtue Ethics: Identify two extremes and seek to understand the value in choosing the middle ground: Two extremes identified would be: (1) Firms seek to achieve profits at all costs exploiting available labor resources and (2) Strict standards against the exploitation of labor with regulation and monitoring. Having extremely cheap products promotes materialism and consumerist mindset. Middle ground would be sufficient monitoring to ensure standards are not compromised, consumers learn the true value of ethically produced goods. 7

Conclusion If you look at the issue from a micro perspective, bank bonuses are ethical. If looking from a macro perspective, considering societys welfare as well, bank bonuses are unethical. We believe in free-market principles, yet recognize that markets are not perfect. Banks are an integral part of society; hence they should be subjected to some form of public scrutiny. Topic #03: Supply Chain Ethics and Environment Ethics Globalization has made it possible for production to be outsourced leading to companies with supply chains that span half the world. Rise of new ethical issues: Responsibility of Production, Labor rights and safety standards, sustainability in production How far should companies go to ensure that their products are ethically sourced? Arguments in Supply Chain Ethics: Human Rights and the Condition of Employment in Overseas Factories Kantian: Ethical obligations and duties of the firm and the right of workers to equitable pay and fair employment conditions When in Rome do as the Romans do is a form of relativism in Ethics. If companies were to abide by this principle, the ethical boundaries for operations in overseas countries would lie in the hands of the government of these countries. Such a principle cannot be universalized and applied across all countries. Following from Kants Principle of Humanity, unfair labor contracts and working conditions results in workers being treated as a means to an end. Their safety and dignity would be compromised. Economic process must respect basic human dignity and human rights Transgression of the second categorical imperative results in deviant business practices like sweatshops and pressure cooker conditions. All companies should ensure fair compensation and safe working conditions for their employees Although this would result in higher costs for the corporation, such a view is deemed necessary as the basic minimum rights accorded to individuals employed by the multi-national corporation.

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Environment Ethics The environment does not exist in isolation as a sphere separated from human actions and ambition, but is closely related to development. Many development paths of industrialized nations are clearly unsustainable and development decisions (economic or political) will have a profound impact on the ability to achieve sustained progress. Pollution: Undesirable or unintended contamination of the environment by manufacture or use of commodities. Resource Depletion: Overconsumption of finite or scarce resources To be ethical in general means to do the right thing in everything we do. In relation to the environment, it follows that we must live in harmony with our fellowmen and with nature in a way that will bring about happiness to all in the present and future generations. Key Issues in Environment Ethics: Tradeoff between development and economic growth: Developing countries pursue growth at the expense of the environment. Government Responsibility: Short Term v Long Term (Term of office) Should governments seek the long term interests of their people or seek to ensure reelection? (Inter-temporal Decisions) Cross-border disputes: Environment is a shared responsibility and resource. Action A from country A results in B on country B. Who is responsible? Developing nations cite the historical actions of developed nations and use it as a justification for their current actions. Relocation of Production: Globalization has enabled multinational corporations to shift production from one jurisdiction to another. Under whose laws should the firm operate? Are there any global standards in doing so? Summary of Arguments in Environmental Ethics Kantian: The Kantian view purports that we must act according to certain moral principles regardless of their consequences. We have duties that we must fulfill based on the categorical imperative where a logical person would agree that it is valid. All humanity has an equal claim to the environment and has obligations toward it. No one should claim more than their fair share or do anything that would have a detrimental effect to another. However, this strict definition would seem to lean on the side of zero pollution. We need to balance this argument with the need to pursue development to counter the issues of poverty, hunger and underdevelopment. Kantian 3 levels of obligations: Cause no harm, prevent harm and do good

Look at the intentions of the firm in driving its actions

Possible Maxims: Businesses have a responsibility to ensure long-term growth and sustainable development Everyone has a right to a clean environment Based on the notion that the firm is an ongoing concern and that it needs to operate for the foreseeable future Duty of firms to the citizens of the country in ensuring sustainable production

Utilitarianism: Seeks to achieve the greatest happiness for the greatest number. Short-term view versus long term view: Short-term view will justify corporation to exploit natural resources as long as it can make a profit for both shareholders and stakeholders. However, this is countered in that resources are finite and limited and this act is not sustainable in the long run. Long-term view acknowledges the impact on the environment and thus the firm will need to weigh its actions on the various stakeholders, taking into account present gains as well as the future gains and costs to future generations. Consider maximizing future benefits and minimizing future injury to the environment. Veil of Ignorance: Rawls proposes a society that recognizes its members as free and moral individuals. Questions of justice arise when equal persons attempt to advance their interests and come into conflict with other pursuing self-interests Creation of institutions of society that distribute the benefits and burdens of mutual cooperation done under the veil of ignorance Social and economic inequalities are to be arranged so that they are for the greatest benefit of the least advantaged. As such, there should be fair distribution of benefits and burdens in relation to the environment. Firms that benefit from polluting the environment should be responsible for minimizing the negative consequences that arise out of doing so. Firms should also be consistent in operating in different states. Globally recognized corporations with the necessary resources should take the initiative to develop a credo or standard of conduct that guides its supply chain in a manner that is consistent with the values and standards that itself seeks to uphold.

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Topic #04: Ethics in Advertising and Marketing Advertising: Paid non-personal communication about an organization and its products that is transmitted to the target audience through a mass medium. Under the umbrella of the ethics of communication Important Question: extent of the effect on consumer behavior and the effect of continuous exposure to advertising Shift toward an attempt to change perspectives, attitudes toward certain key issues Key Elements: Form of mass communication Information with regard to a commercial product Element of Choice for the consumer Justifications for Advertising Facilitates transactions in the marketplace Contributes to efficiency of markets Promotes personal informed choices for consumers Contentions to Advertising Deceptive, misleading or false communication High possibility for manipulation Exploits consumers by forcing them to buy things that they do not need and may not want. Deception of market illiterates (people who are uneducated over available goods in free market) Violates principle of Humanity as successful advertising treats humans as a means to higher profits and sales rather than as an end in providing fair utility for enjoyment. Summary of Arguments on Issues in Advertising: 1. Truth v Deception Objective of advertising should be to promote product, provide relevant information to the product and persuade consumers to buy the product to meet their need. Increasingly difficult to ascertain the truth of the statements made in advertisements Difficult to conclude that there is an expectation that every factual assertion about the product must be true to the point of exactitude If an advertisement makes a verifiably false claim, which the advertiser knows to be false but purposely attempts to mislead or deceive, than the advertisement becomes immoral. (intention) Not all assertions in advertisements are statements, some are held to be exclamations, questions or interjections. Hard to categorize all the advertisements and tease out the truth of the statements, use of metaphors in statements not easily ascertainable

Subjective nature of advertising also means a wide spectrum of interpretation and it is difficult to decide collectively what a false message is and what a true message is. Most of the information is hidden beneath metaphors and subtle advertising slogans Test of Reasonableness: Using the legal concept of a reasonable man; to distinguish whether the deception in advertising is due to the advertisement itself (verifiably deceptive) or whether it is due to the personal interpretation of the matter. Deceptive advertising also includes half -truths where there is a focus on the unsaid, silent effect. It is often difficult to expect that an advertisement conveys the full truth in limited time

Counter-arguments: Advertising is like poetry and other literary devices and its aim is to influence audiences; affect perceptions and sensibilities and perhaps even to effect a change of heart. However, unlike poetry, advertisement promises a certain functionality as it involves the sale of a commercial product for consumption. Hence there needs to be an element of truth in the advertisement. Common proponent for advertising says that the free market will regulate unethical advertising and misinformation as the market has built in mechanisms of control which expose deceptive advertisements and bring unethical advertising out into the light. (Question efficiency of market forces) 2. Promotes False Values Evolution of advertisements which seem to portray a certain set of values and ideals Instead of selling a product, advertisers increasingly target a universal need such as the need to be popular, need to be loved and admired Product is framed in a manner that appeals to these universal needs which may not be grounded on truth Results in the formation of ideals and social stereotypes defining concepts such as beauty and success 3. Irrational Persuasion in Advertising Advertising creates wants in consumers and the shaping of consumer demand fringes on the violation of consumer autonomy Freedom of Choice Where do we draw the line in deciding whether a consumer remains rational in making a purchase decision?

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Moral Objection: Persuasion of advertising is not the ethical contention, but the manipulation and coercion of audiences under the guise of persuasion; irrational persuasion. Manipulation: trickery or exploitation, unfair advantage over people by exploiting deep seated emotions or sense of persuasion Arguments against irrational persuasion: Advertising irrationally persuades by playing on natural human desires for security, acceptance, selfesteem etc. Advertising invokes powerful visual images which bypasses rational thought processes Pervasive nature of advertising intrudes into our everyday life (billboards, newspapers, and internet) which has a cumulative psychological impact that undermines our ability to judge as free agents. Vance Packard: Advertisers draw on motivational and psychological research to discover subconscious needs, yearnings and play on cravings that stimulate human desires and emotions Jeffery Robinson: psychological research helped advertising companies transform goods into communicators of meaning, selling back to the consumer their own intrinsic insecurities John Galbraith: Advertising was initially supposed to feed information to existing demand but the form of irrational advertising has led to the unnatural creation of demand. Manipulative advertising challenges the concept of autonomy, consent and choice in the free market. Counterarguments: Consumers have a freedom to choose whether they are taken in by advertisements Jerry Kirkpatrik: Advertisers do not have the obligation to answer or rebut charges of overtly active imaginations because there is no evidence that advertisers are motivated as such. Humans are beings of volitional consciousness who have the capacity to reason. Advertisements only serve to make consumers more aware of their needs and that these needs are already inherent in the consumers. Caveat Emptor Principle: Buyer Beware. The onus is on the buyer to conduct due diligence and conduct sufficient checks on the purchase before engaging in a purchase decision. 4. Exploitative Advertising Advertisement aimed at capturing the attention of vulnerable sectors: Children: Unable to make a reasoned judgment at a young age. Parents disallow, but the

advertisement creates an innate desire in the mind of the child. Commercials that promote food high in calories I want what I cannot have The Elderly: Advertisers target intrinsic needs and fears such as safety, security, health and loneliness. The Addicted: People who have an innate desire to keep coming back for more. Especially observed in Alcohol, Tobacco and Food advertisements where advertisers exploit a need/vulnerability of these individuals which may be not be in the best interests of the consumer.

Summary of Arguments in Advertising Ethics: Kantian: Looks at the Principle of Humanity and whether the consumer has been treated as a means to an end. Deception violates the right of an individual to know the truth, also results in people acting unknowingly on false beliefs. Short circuits a persons ability to engage in free, reasoned choice. Manipulation and disablement of a persons critical judgment ability clearly violates the respect due to every individual Intent of the advertisement (Puffery or aimed to covey truth) Truth in advertising Rule Utilitarian: Recurring Situation Advertisements and the communication of information from the manufacturer to the consumer. Hat Advertising Authority of Singapore Desired Outcome Effective advertising which increases the efficiency of the free market. Consumers make informed choices when purchasing goods and producers are able to communicate effectively the strengths of their product.

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