Business Ethics 1:
• Defining ethics and business ethics
• Influences and approaches to business ethics
• Business ethics and Corporate Social Responsibility [CSR]
Lesson Objectives
Define business ethics
Identify the difference between business ethics and the law
Be aware of influences on business ethics
Recognise the importance of Business Ethics
Classify relationships between ethics and organisation
Explore approaches to business ethics
Know the links and difference between ethics and Corporate Social Responsibility
Distinguish ethical business practice through the supply chain
Review growing pressures for business to act ethically
Examine benefits and potential drawbacks of ethical business
What are Ethics?
Moral guidelines which govern
good behaviour.
What is behaving Ethically?
Ethical behaviour is doing what is
morally right.
Business ethics
•Business ethics are moral principles that guide the way a
business behaves. The same principles that determine an
individual’s actions also apply to business.
• it involves making decisions that align with that sense of
right and wrong, as well as with the law.
Business ethics
•The value of what should be done and what should not
be done from the business point of view.
•Business ethics involves adhering to legal, regulatory,
professional and company standards, keeping promises
and commitments and abiding by general principles like
fairness, truth, honesty and respect.
Nature of business ethics
Dynamic
- Dynamic nature of business
Subjective
Frameworks for ethical
decision making differ
from people to people and
organisation to
organisation
decision-making
Complex
No common
consensus
Interdependent
Ethical decision-making is
dependent on many
factors and one decision
affects others
We all have a moral compass!
All of us have a different moral compass. We have
different values and beliefs about what is right
and what is wrong, what is good and bad etc.
As you can imagine – even within organisations
and even whole industries there will be variations
between those perceptions.
Business ethics is a highly
subjective concept!
Significant difference between ethics and
the law
ETHICS
About what is right
and what is wrong
LAW
About what is
lawful and what is
unlawful
Depending on your moral compass you may come across various examples
where you feel a business is acting lawfully but not ethically!
So a business may act lawfully but (depending
on your moral compass) unethically
Payday loan companies
• Financial services business which are now increasingly regulated
following numerous scandals but many are still unregulated.
• Called pay day loans companies because they provide short-term
loans at extortionate rates to some of the most desperate and
vulnerable people of society. – many of whom have not other
access to access emergency or other finance.
Watch the video and read the case study about the Church of
England being discovered to have invested in payday loan company
Wonga. It was legal – but was it unethical?
Lawful but unethical?
Tax Avoidance
Ensuring that you don’t pay taxes you don’t have to pay is
entirely legal! Tax law is very complex but clear.
Multinationals like Google, Starbucks, Amazon and many
others are becoming increasingly criticised for their complex
tax planning arrangements to minimise the amount of tax
they pay.
Watch the video and read the case study on Starbucks government
investigation into their financial accountancy practices. MP Margaret
Hodge was quoted as saying “we are not accusing you of being illegal, we
are accusing you of being immoral”. Unethical?
Business ethics
vary enormously
“The higher
the buildings
the lower
the morals”.
Noel Coward
Remember within any
industry, within any
organisation, there will be
a variety of different
approaches to morals.
Perceptions surrounding business ethics
Rules, standards or Codes
governing an individual or
organisation
Being True to
Oneself
Character,
Conscience
Two key influences on business ethics
INDIVIDUALS
The behaviour of specific individuals acting
unethically has a damaging effect through to
individual management like a particular CEO
CULTURE
Ethics are to a large extent determined by the
organisational culture of the organisation.
Opposites
Country/
Family
region
Friends
Profession
Individual
conscience
Fellow
workers
Industry
Religious
beliefs
Society at
large
Employer
Sources of ethical norms
Many factors shape what individuals believe or feel is normal/acceptable
Approaches to business ethics
Amoral Business
Legalistic business
–seeks to win at all costs
- Will obey the law but no
more than that
- Anything is acceptable,
even breaking the law
Responsive
business
- Accepts that being
ethical can pay off
Ethical business
- Being ethical is at the
core of the business
This is a useful theoretical model in comparing and contrasting levels of ethical business practice within
organisations. Can you identify examples for each of the above with businesses operating within the UK?
Business ethics and CSR
• Clearly an overlap between CSR and business ethics
• A socially responsible firm should be an ethical firm
• An ethical firm should be socially responsible
• However there is a distinction:
- CSR is about responsibility to all stakeholders not just shareholders
- Ethics is about morally correct behaviour
As a result you will often see ethical codes of practice as part of CSR whereby companies
seeking to show their corporate social responsibility will publish their ethical codes of practice
to show how they achieve these objectives. Look out for ethical practices used as part of CSR.
General
Public
Investors,
and
financial
community
Business’s
Social
Responsibilities
Employees
Core arena’s of Social Responsibility
Customers
Responsibilities to the general public
Public Health Issues. What to do about inherently dangerous products such as
alcohol, tobacco, vaccines, and steroids.
Protecting the Environment. Using resources efficiently, minimizing pollution.
Recycling. Reprocessing used materials for reuse.
Developing the Quality of the Workforce. Enhancing quality of the overall workforce
through education and diversity initiatives.
Corporate Philanthropy. Cash contributions, donations of equipment and products,
and supporting the volunteer efforts of company employees.
Responsibilities to customers
The Right to Be Safe. Safe operation of products, avoiding product liability.
The Right to Be Informed. Avoiding false or misleading advertising and providing
effective customer service.
The Right to Choose. Ability of consumers to choose the products and services they
want.
The Right to Be Heard. Ability of consumers to
express legitimate complaints to the appropriate parties.
Responsibilities to employees
Workplace Safety. Monitored by Occupational Safety and Health Administration.
Quality-of-Life Issues. Balancing work and family through flexible work schedules,
subsidized child care, and regulation such as the Family and Medical Leave Act of
1993.
Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees
without discrimination; many aspects regulated by law.
Age Discrimination. Age Discrimination in Employment Act of 1968 protects workers
age 40 or older.
Sexual Harassment and Sexism. equal pay for equal work without regard to gender.
Responsibilities to employees
Provide adequate monetary , psychological rewards as well as job security
Selection of employees should be made fairly
Providing educational opportunities & training to the employee at company’s
expense
Working conditions should be safe & pleasant
Responsibilities to Investors
Investors protected by regulation by the Securities and Exchange Commission and
state regulations.
Resources available are used for the benefit of the owners/shareholders
Stability of the enterprise
Ensure that the company grows, so that the shareholder gains from increase in the
market price of his shares
Boots case study
Explore Boot’s website and examine the many strategies and initiatives in which they are caring for their community. Who is
their community? What approach to ethics do they take?
Ethics and the supply chain
• A business cannot claim to be ethical if it ignores unethical practices by it’s suppliers – e.g.
- Use of child labour and/or forced labour
- Production in sweatshops
- Violations of the basic rights of workers
- ignoring health, safety and environmental standards
• An ethical business has to be concerned with the behaviour of all businesses that operate in the supply
chain – i.e.
- Suppliers
- Contractors
_ Distributers and sales agents
Pressures to act ethically
Influence of pressure groups
Consumer action
•Pressure groups – are external
stakeholders
• Consumers may take action against
• Tend to focus on activities and
ethical practice of multinationals or
industries with ethical issues
•Combination of direct and indirect
action can damage the target
business or industry
• - businesses acting irresponsibly
• - Businesses they consider to be
unethical (e.g. animal furs)
• - Businesses using practices they find
unacceptable
• Consumer action can also be positive –
supporting businesses with a strong
ethical stance!
Pressure groups exerting increasing
influence
Increasing consumer boycotts
Nestle’ world Boycott
Visit the website and explore the
ethical issues this campaign highlights
about Nestle’ and how consumers are
attempting to boycott their business
through their unethical marketing of
baby milk particularly in developing
countries.
Is their business practice unethical?
How powerful has the boycott been?
How has it damaged Nestle’?
Benefits and drawbacks of ethical
behaviour
BENEFITS
POTENTIAL DRAWBACKS
• Higher revenue – demand from
positive consumer support
•Higher costs – e.g. sourcing from
Fairtrade suppliers rather than
lowest price
• Improved brand image and
business awareness recognition
•Better employee motivation and
recruitment
•New sources of finance – e.g.
ethical investors
•Higher overheads – e.g. training &
communication of ethical policy
•A danger of building up false
expectations
World’s most ethical companies’
The Ethisphere Institute is the global
leader in defining and advancing the
standards of ethical business
practices. Their annual awards 2015
recognizes 132 companies spanning
21 countries and five continents that
embrace the correlation between
ethical business practices, public
trust and improved company
performance.
analyse the results and examples of
good practice – click picture below:
Costly consequences from being found to
have acted unethically
Lloyds bank PPI breaks through £10bn
barrier
news of the world phone hacking
conspiracy
Reflection….
•Can businesses behave unethically expect to satisfy shareholders in the
long-term?
•Should a business be allowed to act unethically provided that it delivers
what customers want?
•Do you agree that big businesses can no longer be relied upon to behave
ethically?
•What is more important – profit or ethics?
Common areas where ethics are tested
Business ethics are embedded both
within individuals and the culture of
any organisation therefore business
ethics enters into every aspect of
business operation and behaviour.
However, there are certain issues
more commonly tested and reported
about than others…
Main categories
of ethical
judgement/
investigation