Business Ethics

Question 1

Define BUSINESS ETHICS

Answer 1

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.

Question 2

What are the factors that influence business ethics?

Answer 2

• 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

Question 3

Define a TRADE OFF

Answer 3

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.

Question 4

What are the advantages of behaving ethically?

Answer 4

• 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.

Question 5

What are the disadvantages of behaving ethically?

Answer 5

• 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.

Question 6

Define CORPORATE SOCIAL RESPONSIBILITY

Answer 6

Corporate social responsibility is a business’ decision to accept responsibility to its stakeholders for its social, ethical and environmental actions.

Question 7

What are the advantages of CSR?

Answer 7

• Improves the image and reputation of a business
• Helps avoid government intervention
• Attracts and retains employees
• Reduces the negative impact of pressure groups

Question 8

What are the disadvantages of CSR?

Answer 8

• 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

Question 9

What are examples of ethical issues?

Answer 9

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.