Business ethics Flashcards
What is Business ethics?
Examines how people and institutions should behave in the world of commerce e.g. appropriate limits in self interest or profits or firms and when the actions of individuals or firms affect others.
Companies may publish codes codes of conduct for the corporation or individuals which may include responsibilities towards the environment and developing world created by globalisation of markets and free trade between countries.
How can a business be unethical?
If it ignores the unethical practises by its suppliers like child and forced labour, production in sweatshops or dangerous environments, violation of the basic rights of workers, ignoring health, safety and environmental standards. Ethical businesses are concerned with the behaviour of all businesses in the supply chain: suppliers, contractors, distributors and sale agents.
What did Adam Smith think about business ( Scottish philosopher and economist)?
The relationship between employers and employees is symbiotic based on need, need of employers for labourers and need for employees for work. Business allows society to prosper and the employers serve the needs of their employees alongside making profit.
Every individual is always trying to find out the most advantageous employment for whatever capital can command, he naturally prefers employment most advantageous to the society.
Man is always seeking profit e.g. only gives capital in support of industry he thinks will come to have a high value or to gain money or other goods.
What was his invisible hand theory?
The invisible hand connotes the self regulating behaviour of the business marketplace, businesses often have little control on what happens in the market place and are led by the invisible hand.
You can’t see it, just how the business as a concept operates - e.g. if there are shortages in the marketplace, the invisible hand is a metaphor for the price mechanism that increases prices to accommodate for the shortages
Some businesses like large supermarket chains discuss the lowest prices of other companies and attempt to match them, which leads to illegal control of the market..
Who drives the market according to Smith?
The consumer is a win win situation. we desire fair prices and good quality, which rewards good quality and fairly priced businesses. ‘win win’ = utilitarian.
Ethical egotism, self interest isn’t for selfishness, because by putting your company first you can help serve the common good of others. To maintain flourishing company, businessman products would have to be in demand, well made and competitively priced,. Created jobs and helping expand general economy, profiting industry.
What policy should the government take?
A hand off policy and allow private citizens economic freedom, which could establish the growth of a nation’s wealth.
What did Milton Friedman ( an American economist, wrote Capitalism and freedom) think about business?
The purpose of business is to maximise its profits, business can’t survive unless it carries out activities with increased profits.Companies have a duty to only their shareholders, society shoudl set the other ethical rules.
What did Ted Synder( professor of economic and management at Yate school of management) think about business?
Supported Friedman profit most important, but business have some social responsibility towards their employers and stakeholders secondary to making profit. by moving business outlets to less developed countries benefits the workers in those countries more than those in the western nations.
What did Karl Marx think?
Disputed Smith's description of the relationship between employer and employee as being based on need, in a capitalist business model founded on profit competition the proletariat reliant on the bourgeoisie for work are trapped without tools under the bourgeoisie, Came up with Marxism: all human societies progress through class struggle, between an ownership class that controls production and a dispossessed labouring class that provides the labour for production.
What was his theory of surplus values?
Wrote about it in his book Das Kapital.
Objected to capitalistic system that was grossly unfair to the worker.
Theory of surplus values - intricate relationship between the worker and his product and the employer and his profit.
The worker only received as salary only a small part of the value of the good produced, The difference between the cost of labour and the price at which a product was sold led to the employer’s profit. “surplus value” all the money the employer maid after paying the worker.
E.G. A pair of shoes may cost a consumer £100, the worker may have been paid £10 to make them, earning £90 for the employer, this £90 is the surplus value. Implied whatever profits the capitalist class employers gained was stolen from the workers.
The means of production and exchange should be given to the workers not the capitalists, working class would be producing and exchanging good for itself collectively so no problem of surplus value.
Does ethical behaviour benefit business?
Yes: Business gains revenue due to greater demand form supportive and content consumers. Improved local,national international awareness due to positive reputation.
Better staff morale and recruitment.
New sources of investment as a larger number of sources will contract the company.
No: Higher costs e.g. sourcing fair trade. Higher overheads e.g. staff training costs and communication with public about ethical practise.
Danger of building up false expectations and people thinking the business is ethical in every aspect.
Is ethical living possible?
Keith Tondeur - people can become more ethical in how they live, especially how they relate to money and services.
You could do this by: Modelling yourself on good people.
Live more singly - use public transport, recycle and grow your own produce.
Invest directly and with organisation with a good ethical reputation.
find out more about affairs and LEDCS.
Use your influence e.g. write to maps.
Carefully chose the companies you buy from.
Problems: as consumers can we always buy fair trade products? Can we really find out about the background of business we deal with?
What are examples of ethical businesses?
After being labelled as unethical gap has been named 2015 world’s most ethical company by the ethisphere institute for the ninth consecutive year. “ We value and strive for ethical behaviour and responsible practise in every role and function at gap inc.”
Body Shop - set up by Anita Roddick, became a great success in the mid 1980s following a change in how beauty products were tested looking for alternative ways.
The cooperative bank - The coop launched its ethical policy in 1992, allowing for customers to have their say on issues that matter to them like human rights, animal welfare, fair trade and the environment. Withheld £1.2 billion of funding from business activities that its customers said are unethical, increased commercial lending to ethical business to almost £9 billion.
What are examples of unethical business?
Apple - criticised for being highly unethical e.g. In China reported China rely on child labour 24 hour days and unsafe conditions. Just starting to become more ethical, launching investigations and dropping factories unethical.
Ford Pinto - the design and production of these cars was rushed to sell the car for under $2000 meaning a fault, correcting this would mean recalling all the cars. Ford thus decided to pay out lawsuit instead for injuries and deaths caused by the fault.
Primark - use of child labour outed in BBC documentary 2008, halted all bsuienss with those suppliers cancelling orders.
Since 2008 new ethical code and appointed ethical trade director.
What are the legal requirements and power of the consumer?
Businesses have a requirement to ensure safety of products. If somebody gets hurt it will be the responsibility of the company. As a consumer if you don’t buy a companies product they won’t make profits.
What do employees want?
An engaging job in a safe environment.
Good pay and benefits.
Long term contract with protection is case of redundancy.
To be consulted on changes to the business.
Training to develop skills.
Possibility of promotion.
Secure pension.
What do employers want?
Satisfied customer who return.
High sales with low cost.
Retain quality.
Competitive prices.
Well trained and motivated workers.
Investors who gain a good return on their investment.
The business surviving in bad times and growing in good times.
Do employers have an obligation to their employees?
For relationship between them to be successful there must be a balance of interests: the employer wants to plan for the future of the business, make profits and keep employees motivated, the employee wants the best possible conditions and living standards. Unhappy employees means a high turnover in poor time keeping and absenteeism, reducing profits,
In the stakeholder theory generally accepted employees is most undervalued.
What is the policy in the UK?
An employee has the right to be safe at work, earn at least a minimum wage and have a certain amount of holiday not evident in every country. Companies like John Lewis give their employees a state of ownership in the company and each receive a share of profits at the end of year.
Valuing employees has a positive effect on their well being and well being of the company as employees more likely to stay longer and work harder. Fair wage should be provided although reducing profit margin.
Why does Josephson think there is a moral obligation between employer and employee?
Mutually dependent and the impact of the actions has a great impact on the people involved.
Employees and employers should be treated with respect and build relationships of trust and loyalty.
Employees should be treated respectfully to pay them fairly and provided good working conditions, shouldn’t be treated as a means to an end.
Big changes should be treated with carting and sensitivity, the employee should be of genuine concern to the employer. They shouldn’t be mistreated or abused. The concept of profit and employee’s welfare should be on equal footing.
Exploitation and abuse can’t be abused, people above profit, duty to ensure moral obligations kept.
What the reasons for and against whistleblowing?
Prevents harm to consumers or producers, Can offer legal protection. However can destroy business’ reputation. people will lose their jobs as a result of the business dealing.
What are examples of whistleblowing?
CIA agent went to different company and sold articles to journalists. Leaked to the media details of extensive internet and phone survelliance by American intelligence violating espionage act. Revealed thousands of NSA documents to journalists.
Flew to Moscow for asylum.
“ We are stateless, imprisoned or powerless.” Argued trying to protect constitution.
Jeffrey Wigard - Exposed company for which he was vice president of Brown and Williamson on a CBC news programme 60 minutes and stated they had intentionally manipulated tobacco belnd to increase nicotine levels. Claimed he was then harassed and death threats, 1999 film the insider.. Fired 1993, syas fired as he knew that high ranking corporate executives knowingly approved the addictive to their cigarettes that were known to be carcinogenic and addictive.
What is globalisation?
The process of increasing connections between people, companies and countries around the world.
Key feature = growth of huge corporations that dominate markets. Rapid developments in IT have enabled companies to operate across the world more easily, buy a mcdonald’s or coca cola in Chile, Croatia, France., South Korea, Singapore, Thailand, Austria etc.
Why has globalisation happened?
Technological change especially in communications tech, internet.
Transport is faster and cheaper.
Increase in privation, no longer in the hands of the people, no longer funded by the government gaining profit, countries able to own businesses in other countries.
Removal of capital exchange controls - money can now be moved easily form 1 country to another.
Free trade - trade barriers, remove of many by groupings like the EU.
Consumer tastes have changed, people more willing to try foreign products.
What are the benefits of globalisation?
Diversity.
Cheap rpodcuts.
More jobs i less developed countries.
Links between countries and businessses.
Blanace, a company has to work in teh world as it is, bnot as oit ideally ought to be.
“ a lousy job is better than none at all” National centre for policy analysis.
What are the negatives of globalisation?
Loss of culture - Americanisation.
Open to exploitation.
Injustice especially in poorer countries. Low wages and long hours.
Job loss in developed countries, outsourcing.
Trade between countries not nescessarily ffair.
In Bangladesh gvmts have limited funds to deal with pollution.
Safety standards ,may not be upheld often with disastrous results like Bhopal disaster 1984.
What groups are there that are anti globalisation?
Amnesty international campaigns for a global huamn rights framework for business based on the Un norms for business.
The world council of churches campaigns for responsible lending and unconditional debt cancellation.
No sweat campaign against sweatshops, fights for well being and protection of sweatshop labourers.
Do businesses have a responsibility to the environment?
All businesses emit pollution, produce waste and use resources.
Anglo American Mining company - heavily involved in mining and quarrying. - 3 positive effects: In the areas where the mine is located, it carriers out its operations with care and improve lives of local people e.g. minimising noise and pollution.
In the area immediately surrounding the mine active in conservation and improvement.
In the wider region around the mine, it contributes financially to local communities and helps generate new businesses.
E.g. in Tarmac’s Langford quarry planted reed beds and streams and ponds surrounding the quarry, reed beds are an endangered habitat and local people worked with Tarmac to plant the first 10,000 reeds.
Supermarkets green credentials important, concerns about food miles, plastic and packaging growing. Responding to consumer preferences, helping the environment, profitability and corporate social responsibility go together.
What are the advantages of business being ethical?
Better image globally. Appeals to consumers, better profit margins.
By being ethical, expensive and embarrassing public relations disaster avoided.
Better employee motivations as can be proud of their jobs working in a sustainable.
Higher revenues,, demand from positive consumer support.
Improved brand and business awareness and recognition.
Better employee motivation and recruitment, new sources of finances form ethical investors.
What are the disadvantages of business being ethical?
Expensive e..g higher wages to employees.
If the business really wants to be ethical they will have to change all the suppliers in the chain to reach the standard, which can be timely, costly and hard if you struggle to find ethical suppliers that fits in with factors like cost and location.
What is the relationship between business and consumers?
Consumers may be against: Businesses they see as unethical e.g. animal fur, business acting unresponsibly, business using unacceptable business practise.
Consumer action can support businesses with a good ethical stance and record e.g. fairtrade.
What are the stakeholders in a business/
Internal - managers, employers and shareholders and external - local community, customers, suppliers, local authorities, government, other countries.
E,g, existence of a Tesco shop ,may mean local shopkeepers do better if more people visit or worse if business taken away. Stake in the future.
Any business is accountable to its shareholders and ethically responsible.
Stakeholder theory suggests the interests of all the stakeholders should be considered in any decision.
Stakeholder - shareholders, business needs to 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 and fair pay.
Suppliers - pay on time, pay fair rates fir work done, security.
Local community - provide employment, safe working environment, minimise pollution and negative externalities.
Government - business abide by the law, pa taxes, regulations.
Management - arms vs those of the organisation as a whole considered.
Environment - limit pollution, congestion, environmental degradation and development etc.
