Understanding Business Ethics

5 December 2014

Assessment: Case studies in Business Ethics

• Explain the ethical issues a business needs to consider in its operational activities (p1)

• Explain the implications for the business and stakeholders of a business operating ethically. (p2)

• Describe the social implications of business ethics facing a selected business in its different areas of activity (P3)

Stakeholders

• All business have a number of stakeholder groups, each with different interests in what the business does.

• Business should be managed with the interests of all stakeholders in mind.

• It has become fashionable thing for business to try to be the friend of all stakeholders.

Shareholders• Shares in UK businesses might be held by private

individuals or institutions.

• If a business in performing well then the share value will rise, as will the value of the business.

• It is important for a business to make the correct decisions so that the shares keep their value and look after their shareholders.

Employees

• Provide labour force

• Satisfactory working conditions

• It is illegal to employ children

• Minimum wage

Customers

• If you have a favourite takeaway near you it becomes quite an important issue if the business is suddenly sold.

• If you are a regular customer of any business, it can be assumed that you are satisfied with the service received.

• You are naturally a stakeholder because the business is serving your needs and you hope that you can continue to be satisfied.

Suppliers and Competitors

• The existence of some businesses can be affected by the success or performance of another.

• If one significant firm fails or takes dramatic decisions about strategy, there can be a whole network of other related firms, especially suppliers, which are affected.

• The decisions of one can have a major impact on the others, even if they are competitors.

Citizens

• Business activity occurs within a community.

• So it is important that the local population is considered in major business decisions.

• Many firms adopt a specific company mission to do ‘good work’ in the community (such as Proctor & Gamble).

• This is in part why public relations is such a key feature of business.

Conflicts

• Businesses today have to balance the aims of a number of stakeholders.

• This is sometimes difficult because the interests of stakeholder groups can conflict with each other.

• Shareholders vs. Environmentalists

Social Implications (P3)

• Social implications refer to those actions of business that have an effect on society as a whole. These issues relate to a number of areas of activity.

Social Implications (P3)

• The areas of activity we will look at are:

• Ethics in finance

• Ethics in human resource management

• Ethics in production

• Ethics in sales and marketing

• Ethics in intellectual property

Ethics in Finance

In financial dealing and payments, there is scope for several kinds of unethical behaviour. Regulations and voluntary codes try to make sure that ethical practices are observed.

Bribery - This is a form of corruption. It is the straightforward use of financial muscle to gain unfair advantage over others.

Ethics in Finance

Executive pay - Should top executives be paid rises that are unrelated to effort?

Companies in the US now have to include in their annual reports a single figure for the total pay of their executives.

This tells shareholders exactly what their top executives are earning.

Ethics in Finance

Insider trading - This refers to illegal use of privileged information in dealing on a stock exchange.

Detected in the UK by the Securities and Investment Board (SIB)

Ethics in Finance

Lobbying - This means to approach an MP or minister with requests for actions or information.

The intention is to persuade politicians to adopt a particular cause or issue to benefit it.

It can be a source of corruption.

Ethics in Finance

Ethics in Human Resource Management

• The law is used to ensure that when jobs are advertised, there is no discrimination.

• People are entitled to feel that job selections are made on the basis of merit rather than on the basis of race, nationality, gender or other unfair grounds.

• This is why human resources professionals are trained to avoid discrimination of all kinds.

Ethics in Human Resource Management

• Worker surveillance can be an important question in some organisations.

• The question is, to what extent is it reasonable for a member of staff to be watched, to have their emails checked, to have calls listened in to?

• There are important questions of privacy involved. How safe will staff feel if their management 'snoops' on them?

Ethics in Production

• The production of goods can lead to ethical problems for business, e.g. animal testing -British law requires that any new drug must be tested on at least two different species of live mammal.

• The Animals Act 1986 insists that no animal experiments should be conducted if there is a realistic alternative.

Ethics in Production

• Planned Obsolescence - Businesses try to convince people, partly through advertising and promotions, that they need products.

• There is nothing unethical in this. However, it is not in the interests of business to produce goods that last forever.

• Planned obsolescence is the deliberate development of products that will need replacing after a time (e.g. Microsoft, Iphone)

Planned Obsolescence

Ethics in Sales and Marketing

Sometimes businesses employ unethical means to try and generate sales. They can do this in a number of ways:

• Spoofing

• Spamming

• Raising their own status

• Greenwashing

Ethics in Intellectual Property

• Intellectual property (IP) law allows people to own their creative work in the same way that they can own physical property.

• The owner of intellectual property can control and be rewarded for its use.

• This encourages further innovation and creativity to the benefit of everyone.

Ethics in Intellectual Property

The four main types of IP are:

• Patents for inventions

• Trade marks for brand identity

• Designs for product appearance

• Copyright for material

Ethics in Intellectual Property

This means that those individuals or business organisations that have invested their time, resources and talents to create something useful or enjoyable for others, have rights to protect it from being stolen.

• This applies to computer software as well as to music records.

Downloading music

Have you ever seen this?

Apple videos

Apple vs Samsung

Just Checking

• Explain the ethical issues a business needs to consider in its operational activities (p1)

• Explain the implications for the business and stakeholders of a business operating ethically. (p2)

• Describe the social implications of business ethics facing a selected business in its different areas of activity (P3)

• Apply to your assessed work