C1 Ch.3 Business Ethics and Social Responsibilities Flashcards
What are stakeholders?
The stakeholders of a firm are the people or groups that affect and can be affected by the firm’s decisions and behaviour.
What are the major stakeholders of a firm?
- Owners or shareholders.
- Employees.
- Customers.
- Suppliers
- Distributors.
- Creditors.
- The Government.
- The community.
- Competitors.
What are social responsibilities?
Social responsibilities are a firm’s responsibilities to take actions that benefit society, including various stakeholders. These actions should go beyond any legal requirements.
Why should a firm by socially responsible to its stakeholders?
- Fulfil obligations to society. Firms seek to obtain profits from society. It is the obligation of every firm to contribute to society.
- Gain support from community. A firm’s continuing operation depends on the support of the community.
- Enhance image and reputation. Being socially responsible to stakeholders may enhance a firm’s image and reputation. This can help attract more investments from shareholders and purchases from customers, especially those who are concerned about social responsibilities.
- Enhance employees’ morale and loyalty. If a firm is socially responsible to its employees, it may enhance their morale and loyalty to the firm. This will in turn increase the employees’ and the firm”s productivity.
- Maintain good relationships with suppliers and distributors. If a firm is socially responsible to its suppliers and distributors, it can maintain good relationships with them. Helps to ensure smooth operation.
- Avoid more stringent laws and regulations.
How can a firm be socially responsible to owners or shareholders ?
- Safeguard owners’ or shareholders returns. To be socially responsible to them, a firm should safeguard their returns by considering long term interest of the business. It should not make decisions that can lead to short term gain but would harm the firm in long term.
- Make decisions in the interests of all shareholders.
A limited company should also disclose relevant information that may affect shareholders’ decisions making ina timely manner, and make decisions in the interest of shareholders.
How can a firm be socially responsible to their employees?
- Provide fair and reasonable monetary rewards like offer competitive or even attractive salaries and rewarding employees’ good performance with bonuses.
- Provide employee benefits that can enhance employees’ well-being or security like providing flexible work arrangements and providing comprehensive medical insurance.
- Provide a safe and pleasant working environment like providing a spacious workplace and ensuring that equipment and materials used in production are safe.
- Support employees’ personal and career development like subsidising employees to pursue further studies and providing training courses.
- Ensure that employees are treated fairly and equitably like adopt fair staff recruitment and performance appraisal systems and adopting anti discrimination policy at the workplace.
How can a firm be socially responsible to customers?
- Ensure that good are reasonably priced and are of good quality.
- Provide goods and services that meet customers’ requirements.
- Provide necessary and accurate product information to customers.
- Provide good after sale service.
- Offer support to customers with special needs.
How can a firm be socially responsible to suppliers?
- Offer reasonable prices and terms like large firms should not take advantage of their size and force suppliers to reduce their prices.
- Pay suppliers on time. The firm should not delay or default payment to its suppliers.
- Treat suppliers fairly. Retail firms such as supermarkets should not charge their suppliers a high slotting fee for placing the suppliers’ products on the shelves.
How can a firm be socially responsible to distributors?
- Ensure that the products supplied to distributors are of good quality. The firm should not provide defective goods to its distributors. This will affect the distributors’ reputation.
- Provide assistance to distributors to help them sell or promote its products. For example, it may teach the distributors’ salesperson how to use a certain electronic product.
How can a firm be socially responsible to creditors?
- Repay debt on time. Delaying payments would adversely affect creditors’ impression of the firm. The creditors may then refuse to grant credit to the firm again, which may cause the firm to face financial difficulties.
- Provide accurate financial information for assessing risk. The firm should not exaggerate its financial position and its ability to pay debts.
How can a firm be socially responsible to the government?
- Cooperate with government officials and law enforcement.
- Pay a fair amount of tax. The firm should not avoid tax by concealing earnings and assets intentionally.
- Adopt ethical business advocated by the government but not regulated by laws.
How can be a firm be socially responsible to the community?
Socially responsibilities to the community involve protecting the environment, safeguarding the interests of people in the community and building a better community.
1. Minimising the damage from its operations on the environment.
2. Minimising disturbances from its operations on the local community.
3. Organise and support charitable and community activities.
How can be a firm be socially responsible to the competitors?
- Treat and compete with them fairly, honestly and with respect.
- Avoid damaging the industry’s image.
What is business ethics?
Business ethics are a set of guiding moral principles, values and beliefs which govern a firm’s behaviour, decisions or actions.
State the importances of business ethics.
- Damaging reputation and reducing customers’ confidence. Since unethical practices may damage the image and reputation, customers may lose confidence in the firm and stop purchasing from it. The firm’s sales would decrease.
- Losing credibility and therefore the trust and support of owners/shareholders, suppliers, distributors and creditors. If the firm loses the supports of owners/ shareholders and creditors, it may have difficulty obtaining capital and its operations would be affected. Its share price may decrease as well Losing the support of suppliers and distributors would also affect its daily operations.
- Lowering employees’ morale and loyalty. This would lower employees’ productivity and increase the staff turnover rate.
- Compensation and penalties. If the unethical practice is also illegal, the affected stakeholders may take legal action and claim compensation from the firm. The government may also impose penalties on the firm.
