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External Influences 4
Business Ethics, Moral
and Environmental Issues
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External Influences
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Business Ethics
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Business Ethics
• Rules or standards governing
the conduct of a business
• Moral code – what is ‘right’
and what is ‘wrong’?
• Highly subjective nature
• Tension between different
stakeholders
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Stakeholders
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Stakeholders
Responsibilities to stakeholder groups:
• Shareholders – Generate profits
and pay dividends
• Customers – provide good quality products
at reasonable prices. Safety, honesty, decency
and truthfulness
• Employees – health and safety at work,
security, fair pay
• Suppliers – pay on time, pay fair rates
for the work done, provide element of security
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Stakeholders
• Local Community – provide employment,
safe working environment, minimise pollution
and negative externalities – provide external
benefits?
• Government – abide by the law, pay taxes,
abide by regulations
• Management – their aims versus those
of the organisation as a whole
• Environment – limit pollution, congestion,
environmental degradation, development, etc.
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Moral Behaviour
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Business Ethics
Tensions:
• Profits versus higher wages
• Expansion versus development
• Production versus pollution
• Supplier benefits versus consumer
prices/lower costs
• Survival of the business versus
needs of stakeholders
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Business Ethics
Examples:
• Production of children's toys
• Coffee industry
• Baby milk
• Music industry
• Multi-national operations
• McDonalds – food quality, litter
• Chocolate industry
• Jewellery – diamonds and gold
• Chemical industry
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Business Ethics
Solutions:
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Taxation
Self Regulation
Subsidies
Government/EU regulation
Legislation
Pressure Groups
Improve competition and contestability
of markets
– Social and Environmental Audits
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Social and Environmental Audits
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Environment
• Urban blight – excessive development,
inappropriate development,
use of greenbelt land
• Waste – land-fill? re-cycling? burning?
• Energy use – renewable energy,
non-renewable resources
• Global Warming – fact or fiction?
• Pollution:
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Noise
Air
Land
Sea
Water
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Externalities
• Impact on a third party
of a business decision
– Those affected not involved
in the decision
– Negative externalities – negative
effects of business activity –
pollution, urban development, etc
– e.g. out of town shopping centres –
impact on city centres
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Externalities
• Positive Externalities:
– Benefits to third parties of business activity
– e.g. new infrastructure as a result of
development, side effects of research and
development, technology (the Internet?),
convenience, improved standards of living
– Out of town shopping centres – greater
ease of access, everything in one place,
pleasant environment to shop in, etc.
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Externalities
• Out of town shopping centres:
– Highlights complexity
of the interaction of positive
and negative externalities
• Government policies – encourage
business activity that leads
to positive externalities
and discourage those that lead
to negative externalities
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