3.4.4 Business Ethics

Question 1

What are business ethics?

Answer 1

• Moral principles & values that govern the way companies & individuals engage in business activity - goes beyond legal requirements to establish a code of conduct that drives employee behavior at all levels & helps build trust between a business and its customers.

Question 2

Ethical priorities will feature heavily in what parts of the business?

Answer 2

• Recruitment documentation & HR procedures
• Induction and training programmes
• Performance management cycles & rewards systems
  Promotional literature & other communications

Question 3

What current ethical concerns are there regarding pay?

Answer 3

The gender pay gap:
- In UK the gender pay gap stands at around 10% which means on average women earn 10% less than men per hour

Minimum wages:
- Many businesses pay workers the legally required minimum wage
- To supplement their earnings many low-paid workers are entitled to benefits such as Tax Credits which are a significant cost to the economy

Executive bonuses:
In 2022 the pay of CEOs of FTSE 100 companies jumped by an average of 25% largely as a result of record bonus payments

At the same time many businesses were restricting pay increases for employees to help them cope with increasing levels of inflation

Question 4

Define corporate social responsibility.

Answer 4

Involves conducting business activity in an ethical way & balancing the interests of shareholders with those of the wider community

Question 5

What examples are there of social responsibility?

Answer 5

• Sustainable sourcing of raw materials & components
• Responsible marketing
• Protecting the environment
• Responsible customer service

Question 6

What are the benefits of corporate social responsibility? (CSR)

Answer 6

• CSR can enhance the business image and reputation
• CSR is attractive to many stakeholders
• CSR can be very profitable as it adds value for many stakeholders
• CSR may improve employee motivation & productivity
• CSR can help recruit strong candidates for jobs advertised
• CSR may help to solve social problems, e.g. resource depletion

Question 7

What are the drawbacks of CSR?

Answer 7

• Increases business costs as making the right decision is usually considered above less expensive yet questionable options
• Ethical businesses face high levels of media scrutiny & are likely to receive particularly damaging criticism if they fall short
• As much as leaders express a commitment to ‘doing the right thing’, their ethical principles are very likely to be watered-down or dismissed in favour of making as much profit as possible-
• Social responsibility could be seen as a PR tool in order for the business to look better in the industry when they acc arent