3.4.4 business ethics

Question 1

define business ethics

Answer 1

Business Ethics looks at morality in decision-making
This infers doing what is ‘right’
Peoples’ views can differ on what is right or wrong

Question 2

Ethics in strategic decisions include:

Answer 2

Location decisions

• Ability to exploit workers
• Impact on the environment

Mergers, takeovers and retrenchment

• Impact on workers
• Ability to exploit customers or control suppliers
• Transparency of deals

Corruption

• Dealing with authorities
• Power over suppliers or customers

Working with suppliers

• Ethical sourcing e.g. Fairtrade
• Fair payment terms

Question 3

define trade offs

Answer 3

A trade-off is when one decision results in the loss of an alternative outcome, for each decision made there may be multiple trade-offs

Question 4

describe pay and reward

Answer 4

Pay and reward of employees and leaders
Pay of workers is governed by the living wage
Is it ethical to pay just the living wage?
Should London businesses pay above the living wage?
Remuneration of leaders can be seen as unethical if considered too high and disproportional to the success of the business or treatment of workers

Question 5

define Corporate Social Responsibility (CSR

Answer 5

Corporate Social Responsibility (CSR) is the continuing commitment by business to behave ethically and contribute to economic developments while improving the quality of life of the workforce and their families as well as of the local community and society at large”.

Question 6

describe Corporate Social Responsibility (CSR

Answer 6

CSR is a business’ decision to accept responsibility to its stakeholders for its social, environmental and ethical actions
Stakeholders include employees, customers, suppliers and the environment
One measure of CSR can be a business’ willingness to accept responsibility above and beyond its legal duty
A business will produce a Corporate Social Report to set targets that will be used to meet its social responsibilities and to assess how far it has met previous targets

Question 7

within Corporate Social Responsibility (CSR , Companies need to address two aspects of their operations, which are

Answer 7

1. The quality of their management - both in terms of people and processes (the inner circle)
2. The nature of, and quantity of their impact on society within a variety of areas (the outer circle)

Question 8

Reasons for CSR

Answer 8

Financial benefits

• Ability to attract investments
• Avoidance of fines and environmental taxes
• Mistakes and bad PR are expensive

HR benefits

• Recruitment and retention of staff - attract a wider pool of talent and skills
• Motivation of staff

Marketing benefits

• Greater customer loyalty
• Potential for differentiation and using CSR as a USP -allowing for premium pricing
• Positive rather than negative media attention and PR
• Recognition from external bodies e.g. Fair Trade -Foundation, Investors in People

Operational benefits

• Lower production costs through efficient procedures and recycling
• Positive relationship with suppliers

Question 9

reasons against CSR

Answer 9

Financial costs
-Looking after employees e.g. training, pay and working conditions
-Ethical suppliers, direct and throughout the supply chain
- Product safety
- Environmentally friendly practices throughout the
business’ operation
- Appointing a director to be responsible for CSR

Not meeting corporate objectives

• Short term shareholders’ returns
• Growth – entering new markets

Opportunity cost
-Time spent on CSR, policies, reports and monitoring
Day to day functions

Question 10

define Carroll’s Corporate Social Responsibility

Answer 10

A theory that highlights the four aspects of corporate social responsibility. Society expects businesses to meet their obligations in relation to all four aspects.

Question 11

state and explain Carroll’s Corporate Social Responsibility 4 aspects

Answer 11

Economic responsibility – society believes that businesses have an obligation to survive. However in so doing they have an obligation to pay a fair rate to employees and suppliers whilst rewarding investors

Legal responsibilities – to act in a way that means that the business is law abiding

Ethical responsibilities – to behave in a way that is seen to be morally correct

Philanthropic responsibilities – to do good i.e. be a good citizen. This is often shown through charitable acts

Question 12

Pressure can be put on businesses to behave in a socially responsible way:

Answer 12

Consumer actions 
Pressure groups
Government actions
Media coverage
Investors