Ethics: Business Flashcards
Corporate social responsibility
a business has responsibility towards the community and environment.
Stakeholders
includes all the people and groups associated with a business such as employees, customers, the local community, the country as whole and governments.
Share holders/stock holder
Those who own the company and will make a profit if the company makes a profit.
A business has the responsibility to the following:
Employees: provide statutory pay, maternity leave, safe working conditions etc.
Customers: advertise responsibly, to label responsibly, to charge fair prices, to supply customer demand.
Local community: to provide food banks ( Tesco), to provide jobs for local people.
Government: to obey Government laws on whistleblowing , pay, environmental laws etc.
Country as a whole: take responsibility towards the environment, dump waste responsibly, provide jobs rather than move business abroad
Example 1: Nike
-1972 Nike was founded and had contracts with people in Taiwan and South Korea. Over the next 20 years the workers successfully campaigned for improved wages and labour unions.
- Moves their work to places like China where this is all illegal.
- Stories of child labour and wages below the poverty line. Physical abuse, exposure to dangerous chemicals are other stories. This drew attention from human rights groups.
- In 2002 Nike issued a company code of conduct to all its factories. In 2004 a Responsibility report established further health and labour standards. This is a massive benefit for workers, however according to the Educating for Justice group, between 50 and 100 % of Nike factories require more working hours than that permitted by the Code of Conduct.
Example 2: Apple
- More than a million workers and staff working 55 hour weeks.
- Poor conditions highlighted in 2010 when 14 workers killed themselves.
- Apple issued a statement about standards, which were then routinely ignored.
- Overtime seen to be involuntary with many unpaid meetings before and after work.
- Rooms were also cramped with up to 12 per room.
- Pegatron (an apple workhouse) put out a statement claiming that worker safety is of upmost concern.
- Tin from illegal mines was found in the apple supply chain
- Children were also found digging the tin out by hand with cases of miners being buried alive being relatively common.
- Apple chooses the easy path and continues to take these resources, knowing that the tin comes from illegal mines that use child labour.
Example 3: Bangladesh
- It may be difficult for companies to monitor what is happening in their factories across the world and this could lead to unethical practices.
- Fire in a Bangladeshi factory killed 112 workers.
- 5 months later another fire killed 1134 garment workers.
- The 2013 Accord on Fire and Building Safety in Bangladesh was a safety pact signed by global unions which makes the apparel companies accountable for safety.
- Building inspections and closures when buildings are considered unsafe have been introduced.
- In 2017, 21 workers died when a Bangladeshi factory that made clothes for H and M caught fire.
- The factories have poor health and safety standards.
- Some factories that make clothes for Tesco lack fire extinguishers and do not practice fire drills.
- Despite H + M claiming that the inspections have driven up safety standards in Bangladesh since 1988, there have been many subsequent fires.
- There are no international laws that regulate health and safety in Bangladesh, Cambodia and Indonesia.
Adam Smith
People are born with a moral sense, an innate conscience and a feeling of empathy and sympathy with others within the community.
- In business the ideal is that business is unconstrained by governments.
He believed that free market capitalism was the best way to encourage entrepreneurial idea in business
If an entrepreneurial business owner of a factory did well then this will enable him to employ more workers and they would have the stability of a good job. The whole community gains from higher employment levels. The good effects that come from the business owners is known as the trickle-down effect- this is guided by the “invisible hand”- it simply happens because business owners can make a profit within the free trade system and are innately good people. It brings more happiness to more people.
What is Free market capitalism?
This means that businesses have an open market system- they can sell and buy anything and this can make prices competitive. The customer is the priority because of supply and demand.
Karl Marx
- Marx did not like the idea that production in business was in control of individuals who controlled the labour forces by making profit from their work.
- He felt it undermined those who do not own the means of production- the working class whom he called the Proletariat.
- It put the capitalist class – the bourgeoisie- into a position where they could bargain for power over the working class.
- The working class are subservient to the capitalists because they only way they can try to escape their status is to work harder and earn more for the capitalists. Workers are exploited by the capitalists in other words.
Freidman
MAXIMISE PROFITS: the social responsibility of a business was to increase its profits.
- He claimed that Greed is good (see link) and that a free market enterprise was best and a capitalist society because it encouraged and allowed entrepreneurs to set up businesses.
- Only obligation of business is to maximise profits to help its shareholders (whose main priority is to make profit)
- “rules of the game” must be followed and argues these do constrain profit maximisation. He claimed that corporations should have no skills in the areas of supporting charities , health or educational projects in the communities in which they are based.
Robert Solomon
PRACTICE VIRTUES: argued that profit motive ( the idea that business should set out purely to make profit as its sole goal.
“we adopt a too narrow vision of what business is, e.g the pursuit of profits and then derive unethical or immoral conclusions form this.”
- Profit he claimed should be seen as a way of encouraging and rewarding hard work …building a better business and serving society better.”
- always act virtuously e.g with honesty, patience and fairness and that helps our communities.
- make a profit but by supplying quality goods to its customers, providing jobs and fitting into a community.
Good business should take the community into account and if it does it helps it make a profit and therefore increases productivity.
Anthony Weston - supports Solomon
Social responsibility and profit are important.
He gives the example of the pharmaceutical company Johnson and Johnson- which lists its responsibilities to groups of people in order. Firstly it has a responsibility to doctors, nurses and patients , mothers and fathers and all others who use its products. Then it lists its employees, the communities in which people live and work, and finally its stock holders
Weston’s J&J example
Johnson and Johnson took 22 million bottles of the shelf in response to this offered to exchange any already purchased bottles and took losses of over 100 million pounds. They reintroduced the drug in tamper resistant packaging and quickly reclaimed 80% of the market share in Weston wrote “proving that doing the right thing by stakeholders also benefits stockholders too”
Ted Synder
Business should set out to make profit foremost but social responsibility towards employees and stakeholders is important to some degree, although it is secondary to their purpose of profit making.
