Responsibility to stakeholders
A2 Economics and Business
Unit 3
By Mrs Hilton for revisionstation
Examiner
favourite subject
which comes up
often!
Lesson Objectives
• To be able to discuss the ethical decisions a
business may have to make before trading
internationally
• To be able to determine a possible conflict
with business objectives and ethical behaviour
to stakeholders
• To be able to answer past paper questions
based on the topic area
Starter
• Do you care where your face cream comes
from and if the producer has been paid a fair
wage?
Stakeholder groups
• These stakeholder groups all have an interest in
the business
• They all have objectives and often these can conflict
with the objectives of other stakeholders, the
shareholders or the business owners
• E.g. employees, managers, suppliers,
competitors, pressure groups, government,
shareholders, local community, consumers
• Interactive graphic:
http://www.gregglee.biz/ftp/student/BusinessOr
g/page_54.htm
Shareholder objectives vs ethical
objectives
Shareholder objectives
• High profits
• High dividends
• Growth
• A say in the business
• A positive corporate image
Ethical corporate objectives
• Low emissions
• Safe waste disposal
• Paying fair wage rates to
employees in other
countries
• Sourcing sustainable raw
materials
Business Ethics
Moral principals that govern how
a company does business. A
moral principal is one that knows
right from wrong.
• Video on exploited workers in
UK
• Exploited workers in UK on
£3.50 an hour
• Illegal workers
Ethical issues – business in India
• Video on Indian factory disaster
•
•
•
•
•
Bangladeshi workers paying the price for cheap clothes in the UK
Cost cutting
Safety abuses
Too much expansion
Sub contracting out to slums
Ethical issues – child labour to produce
cheap goods
• http://www.bbc.co.uk/news/world-asia20431529
• Do you have a job?
• Do you have to give your money to your family?
• http://www.bbc.co.uk/news/world-africa15930981
• Should they miss school?
Ethical business
• http://www.bbc.co.uk/news/uk-16235275
• Nestle again – promoting junk food on internet
• http://www.youtube.com/watch?v=PRk_mPJ7_Q
• Nestle – protest against deforestation
Ethical business behaviour
• Includes working towards the ending of child
labour, forced labour, and sweatshops, and
looking at health and safety, labour conditions
and labour rights.
• The branch of ethics that examines questions of
moral right and wrong arising in the context of
business practice or theory
Bitesize ethical behaviour video 5 mins
Ethical business behaviour
Primark child
Labour –
Panorama
clip
ETHICAL TRADE
• Ethical trade means that
retailers, brands and their
suppliers take responsibility
for improving the working
conditions of the people who
make the products they sell.
• Most of these workers are
employed by supplier
companies around the world,
many of them based in poor
countries where laws designed
to protect workers' rights are
inadequate or not enforced.
Ethical Trade Initiative
Corporate social responsibility
• A simple rush for short-run profits is often both damaging in
the long run and ethically wrong.
• CSR is a way of recognising that a company has a variety of
stakeholders, each of whom have different objectives.
• CSR obliges businesses to consider more than just profit, to
take account of the interests of workers, suppliers, customers
and the wider community as well as stakeholders
• They are generally expected to respect the environment, to
treat people fairly and to give something back to the local
community
• Some businesses treat CSR as a public relations exercise,
giving more priority to looking good than to doing well.
Stakeholders: Pressure groups
• A group that tries to influence either business or
government
• Stakeholders can influence the business.
• Pressure groups are organisations set up to try to influence
what we think about the business and its environment.
• A pressure group can challenge and even change the
behaviour of a business by:
–
–
–
–
writing letters to MPs
contacting the press
organising marches
running campaigns
• War on Want Pressure group website
McLibel
• Video (over 1 hour but great)
• MNEs have large resources of funds to fight against
pressure groups – see this case
• McDonald's Corporation v Steel & Morris [1997]
EWHC QB 366, known as "the McLibel case" was an
English lawsuit for libel filed by McDonald's
Corporation against environmental activists Helen
Steel and David Morris (often referred to as "The
McLibel Two") over a pamphlet critical of the
company. Each of two hearings in English courts
found some of the leaflet's contested claims to be
libellous and others to be true. The partial nature of
the victory, the David-and-Goliath nature of the
case, and the drawn-out litigation embarrassed
McDonald's.
• The original case lasted ten years, making it the
longest-running case in English history
Sample question 1
[9]
Answer question 1
Sample question 2
[9]
Answer question 2
Sample question 3
[8]
Answer question 3
Knowledge 1, Application 1, Analysis 2 per stakeholder group
Knowledge: 1 mark is available for identifying a stakeholder group, e.g.
employees, suppliers, competitors, pressure groups, government,
shareholders, local community/environment, consumers
Application: 1 mark is available for contextual answers e.g.
project will require local workers and suppliers in Patagonia/Chile,
flooding of pristine wilderness area in Patagonia
Analysis: up to 2 marks are available for identifying and
developing the consequences e.g. suppliers gain contracts increasing turnover
and profitability, long term benefits for businesses from cheaper power
supplies. Environmental damage may impact on tourism to area and reduce
local incomes
General – if only one stakeholder group, cap at 4 marks
Sample question 4
• [6]
Answer question 4
• Knowledge (2), Application (2), Analysis (2)
• Knowledge: up to 2 marks are available for
understanding the meaning of ethical behaviour and
profitability.
• Application: up to 2 marks are available for contextual
answers such as relating the nature of a company’s
trading activities to some degree of externalities
(evidence in stimulus material).
• Analysis: up to 2 marks are for developing the nature
of the conflict, e.g. attempting to correct the effects of
the externalities may increase costs and have adverse
effects upon profitability and competitiveness
Sample question 5
• [9]
How marks are awarded for Q5 [9]
Level
Mark awarded
1
1-2
Knowledge
2
3-4
Application
3
5-6
Analysis
4
7-9
Evaluation
Answer question 5
• e.g. define a pressure group/multinational/identify a
control e.g. consumer boycott
• e.g. legal challenge to the dam in Chile or another example
(such as the McLibel case) to show a connection between a
pressure group and a multinational
• e.g. organising a campaign to turn public opinion and how
this may affect sales and thus alter behaviour of the
multinational, use of protests/courts and legal challenges
to halt the project e.g. protests may have little effect on
sales (Primark), powerful multinationals like Coca-Cola can
finance legal challenges to overturn rulings, governments
may ignore pressure groups because of economic benefits
Revision Video