Theme 3 - 3.4.4 - Business Ethics Flashcards
Is it possible to be ethical and profitable ?
In some businesses it is not possible to be ethical and profitable because being ethical sometimes requires spending more money
What is the definition of ethics ?
Ethics are moral principles that govern a persons behaviour or the conducting of an activity
And morals are standards of behaviour -principles of right and wrong
Can you always make ethical decisions ?
Businesses want to appear to be doing the ‘right thing’ and being ethical but this is not always possible if they want to make a profit
Often there is a trade-off between ethics and profitability - so if you want to be ethical there is a trade-off by not maximising profit
Give examples of ethics vs profitability
Deep water company - they cut costs by not investing in training and health and safety for staff therefore the staff wasn’t properly trained and they did some mistakes and the oil rig caught fire and 11 men lost their life - it would have been ethical to invest in training but this would have not been ethical but it would have been more profitable for them
Nestle - they would rather be more profitable, and they have been voted the least ethical company - this is because they do cheap labour
What is CSR ?
Corporal social responsibility
How do the CSR views of shareholders and stakeholders differ?
Shareholders are interested in the profit performance of the business and any potential dividend payout from it - therefore they are less concerned with the costly ethical issues and might even discourage ethical initiatives as this will give them a smaller dividend payout
Stakeholders are interested in the way that suppliers of materials and components to the business are treated - so like the cocoa bean suppliers to nestle - making sure they are paid fairly
What is CSR?
CSR means that a business considers the impact that its decisions have on us as citizens
• The business also considers what
responsibilities they have towards society as stakeholders
• It is generally accepted that CSR principals are incompatible with profit maximisation objectives
• However many businesses now use their CSR credentials as a selling feature of their products, services - as you could say the USP is the fact that it is very ethical etc green etc
What is the CSR approach ?
Some of the biggest MNCs struggle top achieve their own CSR objectives
Whats are some of the parts of the CSR approach ?
- reduce climate change
- Reduce negative environment impact
- Positive regard for human rights in employment - good working conditions, good pay etc
- Ethical trading policies
- Using sustainable resources - less climate change - more environmentally friendly
- Positive links with community
What are the advantages of a CSR approach ?
• Happy customers; more loyal to a CSR business
• Happy staff; more motivated and productive workers who are proud of the business that they work for
• Happy investors; more funding and
investment will become available, many
investors seek CSR businesses
• New products new markets; working in a CSR way will stimulate innovation (in ways to save energy for example)
• Good PR; public relations which show the business in a positive light
• Happy community; trusted relationships built with the local communities
• Happy suppliers; who may choose a CSR business because of their ethical stance
• Cost reductions; in not having to re-hire staff, in energy saving in reducing waste, in keeping loyal customers
What are the disadvantages of a CSR approach ?
• Fad?; Many business writers speculate that CSR is the latest fad and soon consumers will tire of it and move on to something else
• Motive?; Some businesses may have a CSR policy specifically for the good PR that it creates, the evidence for this is a CSR job would be working inside a PR department of a large organisation
• Cost?; Is the cost larger than the benefits for a business? If the competition are not bothering with CSR that does not necessarily give
completive advantage it could just make for a more expensive product
• Care?; Do consumers care that the farmer that grew the coffee beans was paid a fair wage, or will they buy the coffee based on price or a nice looking jar?
Where might the interests stake holders and share holders clash ?
For example if the shareholders want dividends and the stake holders might be the employees so they mighht want more wages but this conflicts as the shareholders would then have smaller dividends as the company then has less profits as they might have to pay higher wages
