3.4.4. Business Ethics Flashcards
Ethics of strategic decisions
- Moral aspects of decisions considered
- Level of risk and who bears the risk
Trade offs between ethics and profits
-Taking an ethical approach may increase costs and reduce overall profits if prices cannot be raised to compensate.
-However, choosing to adopt ethical principles usually attracts long term loyalty from employees and customers.
-Ethical behaviour may include spending on workers conditions without expecting financial return.
-Clear trade off between what is morally right and what is most profitable.
- Doesn’t mean profit=unethical
Pay and rewards
Major ethical issue related to pay is the disparity between pay of bosses vs workers
Executive bonuses when disproportionately high are an ethical issue.
Corporate social responsibility
-CSR describes the desire to run a business in a morally correct way, attempting to balance the needs of all stakeholders.
Reasons for CSR
-Companies that behave in this way towards stakeholders gain:
1.Marketing advantages- customers who have enough disposable income will often pay premium from businesses with clear ethical values. Way to differentiate.
2.Positive effects on workforce- Staff motivation enhances as they are happier working in a business with clear sense of moral purpose. Good reputation of business is attractive to applicants
Reasons against CSR
Shareholders and other stakeholders may reject:
1.Reduced profitability- higher costs, lower revenues with suppliers paid fair price and selling prices at reasonable levels.
2.Reduced growth prospects- Some business population turned down if they involve compromising their morals
- CSR often used as a marketing tool rather than an inherent shift in corporate culture which serves no valid purpose. ie. if it means increasing price of food that low income consumers need to eat healthily perhaps it’s better to sacrifice needs of suppliers to ensure low income customers needs are met. Potential trade off?
