Ethics in practice: diversity, data, and governance
Modern businesses face ethical challenges in how they treat people, use data, and govern themselves.
Diversity, equity, and inclusion
Many organisations pursue diversity (a workforce reflecting varied backgrounds), equity (fair access to opportunities), and inclusion (an environment where everyone can contribute). Research links diverse teams to wider perspectives and innovation, though results depend on inclusive management. DEI programmes have become politically contested in the US since 2023.
Anti-discrimination law
In the US, laws such as Title VII of the Civil Rights Act (1964), the Americans with Disabilities Act (1990), and the Age Discrimination in Employment Act (1967) prohibit employment discrimination. The Equal Employment Opportunity Commission (EEOC) enforces these laws. Similar laws exist in many countries, such as the UK's Equality Act 2010.
Data privacy
Businesses collect vast amounts of personal data. Ethical and legal use requires transparency, consent, security, and limiting collection to what is needed. The EU's General Data Protection Regulation (GDPR, effective 2018) imposes strict rules and fines up to 4% of global annual turnover; California's Consumer Privacy Act (2020) gives residents rights over their data.
Artificial intelligence ethics
Businesses increasingly use AI for hiring, lending, customer service, and more. Ethical concerns include bias (AI trained on past data can reproduce discrimination), transparency, accountability, privacy, and effects on jobs. The EU AI Act, adopted in 2024, sets risk-based rules for AI systems.
Corporate governance
Corporate governance is the system by which companies are directed and controlled. Shareholders elect a board of directors, which oversees managers on shareholders' behalf. Good governance includes independent directors, audit committees, transparent reporting, and executive pay linked to long-term performance.
The agency problem
Managers (agents) may pursue their own interests rather than those of shareholders (principals), for example by empire-building or short-term decisions that boost bonuses. Governance tools such as independent boards, audits, and stock-based pay try to align interests, though poorly designed incentives can encourage risk-taking.
Supply chain responsibility
Companies are increasingly held responsible for conditions in their supply chains, including forced labour and child labour. Laws such as the UK Modern Slavery Act (2015) require large companies to report on steps taken to prevent slavery, and the US Uyghur Forced Labor Prevention Act (2021) restricts imports linked to forced labour.
Worked example
A company uses an AI tool to screen job applications. Because it was trained on past hiring data from a mostly male workforce, it ranks women's applications lower. Even without intent, this could violate anti-discrimination law and harm the company's reputation. Auditing the tool for bias, keeping human review, and documenting decisions reduce the risk.
Key takeaways
DEI aims at diverse, fair, and inclusive workplaces but is debated. Title VII, the ADA, and other laws prohibit discrimination, enforced by the EEOC. GDPR and the CCPA protect personal data. AI raises bias, transparency, and accountability issues; the EU AI Act (2024) regulates it. Corporate governance relies on boards, audits, and transparency. The agency problem arises when managers' interests differ from shareholders'. Companies are increasingly accountable for supply chain abuses.
Flashcard
Workforce with varied backgrounds
Check your understanding
What is the 'agency problem' in corporate governance?