3.4.4 - Business Ethics

Question 1

What are ethics

Answer 1

(ethics) Moral principles that govern a person’s behaviour or the conducting of an activity

(morals) Standards of behaviour; principles of right and wrong

Question 2

Shareholders and Ethics

Answer 2

• Shareholders are interested in the profit performance of the business and any potential dividend payout from it
• They are less concerned with costly ethical issues and may even discourage ethical initiatives on financial grounds

Question 3

Stakeholders and Ethics

Answer 3

• Stakeholders are interested in the way that suppliers of materials and components to the business are treated – for example; fair wages and good working conditions
• Pressure groups are interested in the use of child labour and sweatshops in the production process

Question 4

What is CSR?

Answer 4

CSR means that a business considers the impact that its decisions have on us as citizens
• The business also considers what responsibilities they have towards society as stakeholders
• It is generally accepted that CSR principals are incompatible with profit maximisation objectives
• However many businesses now use their CSR credentials as a selling feature of their products, services or brands

Question 5

Advantages of CSR

Answer 5

• Happy customers; more loyal to a CSR business
• Happy staff; more motivated and productive workers who are proud of the business
that they work for
• Happy investors; more funding and investment will become available, many investors seek CSR businesses
• New products new markets; working in a CSR way will stimulate innovation (in ways to save energy for example)
• Good PR; public relations which show the business in a positive light
• Happy community; trusted relationships built with the local communities
• Happy suppliers; who may choose a CSR business because of their ethical stance
• Cost reductions; in not having to re-hire staff, in energy saving in reducing waste, in keeping loyal customers

Question 6

Disadvantages of CSR?

Answer 6

• Fad?; Many business writers speculate that CSR is the latest fad and soon consumers will tire of it and move on to something else
• Motive?; Some businesses may have a CSR policy specifically for the good PR that it creates, the evidence for this is a CSR job would be working inside a PR department of a large organisation
• Cost?; Is the cost larger than the benefits for a business? If the competition are not bothering with CSR that does not necessarily give completive advantage it could just make for a more expensive product
• Care?; Do consumers care that the farmer that grew the coffee beans was paid a fair wage, or will they buy the coffee based on price or a nice looking jar?