Ethics in Business Reading Group

Despite numerous efforts at the European and national levels, an unadjusted gender pay gap of around 13 % is still evident within the EU. For this reason, the EU now wants to improve the existing legislation to effectively reduce the gender pay gap. As a result, the Directive on Pay Transparency was adopted in May 2023. These recent regulatory efforts on the European level no longer focus solely on the employment period but also cover the pre-employment period and, thus, particularly the salary negotiation phase. Prior to the Directives’ regulations, there were no harmonized minimum standards governing the salary negotiation phase. The EU is thus creating a whole new regulatory approach to reduce the gender pay gap. This paper will assess the impact of these new pre-contractual regulations on the negotiation dynamics between employers and applicants. In this regard, what shall be explored particularly is the influence of these regulations on the balance of power between the parties. This allows for a prediction of the probable impact of those rules on the gender pay gap. Furthermore, the paper also addresses possibilities to circumvent the regulations’ set-up requirements and non-gender-related effects on the overall power distribution in negotiations. This is necessary, as only a comprehensive analysis can reveal the actual possible impact of the new Directive. Moreover, the novel regulatory approach encompassing the negotiation phase will be put in the broader context of recent regulatory tendencies of the EU and national regulators who have increasingly sought to achieve regulatory objectives by opting for the limitation of the freedom of negotiation over the freedom of contract.

The chief goal of corporate criminal law is to prevent crime. Enforcement authorities, business leaders, and academics all agree that “effective compliance” is the most reliable tool for getting employees to obey the law. It usually involves systems and processes—employee training, quality audits, reporting channels, etc.—targeted at the violation of concern. Long-standing federal guidelines instruct prosecutors and judges to offer lenient treatment to corporations with effective compliance and to compel corporations without effective compliance to implement it. Despite its name, effective compliance is disappointingly ineffective. Corporate crime increases yearly, and corporate recidivism is the order of the day. This paper proposes, theoretically motivates, and empirically validates a counter-intuitive approach: side-channel compliance. The basic idea is that corporations could positively impact employee behavior indirectly through institutional commitments to unrelated pro-social endeavors. For example, a corporation that worries its employees will engage in bribery could reduce the risk of violations by becoming a leader in gender equity or ecological stewardship. Side-channel compliance might work by raising the reputational costs of misbehavior or by inspiring employees to consider the social impact of their business decisions. As proof of concept, the paper reports a novel study of corporate criminals’ scores on various ESG metrics. The study demonstrates that lower scores correlate with criminal propensity. Side-channel compliance should be a welcome, even if  unexpected, tool to combat corporate crime.

The introduction of Artificial Intelligence (AI) to accelerate and automate decision-making has strained the standard ethical approaches to understand the ethical issues around business, work, and employment. Unique attributes of AI and AI research – reinforcing power dynamics while further marginalizing vulnerable stakeholders; surreptitious yet pervasive data collection— directly create ethical issues regarding the dispersal of power and control in society. We argue that questions of power and control, particularly in regard to terms of work and business decision-making, can be better addressed through an ethics of care approach that raises the voice of marginalized stakeholders by prioritizing the relationships between actors and their unique vulnerabilities and circumstances. The goal of this article is to critically examine AI and its ethical implications in terms of work and business, with a focus on the harmful exercises of power and marginalized groups. We will identify key ethical issues related to vulnerable stakeholders and the use of AI and propose the ethics of care as an ethical framework to approach these issues. 

In this paper, I critique Heath’s market failures approach as incomplete, although immensely valuable. I will argue that while his description of free markets as an engine of economic efficiency is correct, he misunderstands the nature of business by taking the efficiency-enhancing aspect of business as fully describing the whole of business. Business, I will argue, does not exist as a stand-alone social institution but rather, business emerged from and remains embedded in the complex social life of communities. Business transactions do not take place in a hypothetical “noplace” – the ceteris paribus world of economic theory – among participants each of whom (like electrons) is indistinguishable from one another and whose only characteristic is that each is a profit-maximizing entity. Rather business takes place in a particular community with a particular “custom and usage” among participants who are flesh and bones human beings with unique histories and characters in relationships of trust with one another. Business ethics then must recognize that its raison d’etre is to provide advice to real businesspeople conducting business in real communities composed of human beings, not to economic bots operating in game space. To accomplish this aim, business ethics must draw both from the norms of fair competition that Heath identifies, as well as from other norms present in business relationships that reflect other values.

Justice- and profit-based reasons for diversity are familiar, but Adam Gjesdal defends an additional type of reason for diversity based on legitimacy. Legitimacy-based reasons hold that diversity is instrumental to justifying managerial power over stakeholder groups.