Business Ethics Flashcards
Define BUSINESS ETHICS
Business ethics considers the moral ‘rights and wrongs’ of a business decision, with an ethical decision being one that is both legal and meets the ethical standards of a community.
What are the factors that influence business ethics?
- Leadership style and personality of owner
- Corporate culture
- Employees
- Stakeholder influences
- Financial position
- Pressure group action and the resulting public perception
- Government intervention
- Competitor behaviour
- Type of product they sell or produce
Define a TRADE OFF
A trade off relates to a business decision regarding a choice. It occurs when two things cannot be fully achieved - having more of one thing means having less of another.
What are the advantages of behaving ethically?
- Builds a loyal customer base
- Improved brand image (distinctive capability which could lead to a competitive advantage)
- Attracts the best workers who want to work for a company with high standards.
- Improved worker morale, leading to increasing labour productivity and lower labour turnover.
- Lower costs through recycling and less waste.
What are the disadvantages of behaving ethically?
- Increased labour costs due to fair wages, employment conditions and training.
- Raw materials that are ethically sourced are likely o be more expensive, meaning the business will have lower profit margins.
- Loss of competitiveness to less ethical rivals
- Minimising environmental impact may increase costs
- Reduced growth prospects due to turning down unethical projects.
Define CORPORATE SOCIAL RESPONSIBILITY
Corporate social responsibility is a business’ decision to accept responsibility to its stakeholders for its social, ethical and environmental actions.
What are the advantages of CSR?
- Improves the image and reputation of a business
- Helps avoid government intervention
- Attracts and retains employees
- Reduces the negative impact of pressure groups
What are the disadvantages of CSR?
- The business’ only responsibility is to create shareholder value
- Doesn’t lead to the efficient use of resources
- Extra costs incurred are passed on to customers
- Chances of growth are reduced
What are examples of ethical issues?
Corruption and trading issues, treatment of animals and the environment, treatment of core workers, treatment of outsourced workers, treatment of suppliers, treatment of customers, level of executive pay.