Business Ethics
The influence of values and
beliefs upon the conduct and
operation of businesses.
Business & Management
Some characteristics of ethical
businesses?
Produce products that are not harmful to
people.
Minimise negative environmental impacts.
Not corrupt.
Take care of their employees.
Make efforts to contribute positively to
society.
Business & Management
Ethical behaviour: A complex
issue
Quite often businesses are faced with ethical
dilemmas.
– Is it right to pollute a river if it means that people’s jobs
are made more secure?
– Should children be used in the workplace when the
alternative may be starvation or sexual exploitation?
– Should pharmaceutical firms reduce the prices of drugs
to help people with AIDS, when doing so means they
have less money to invest in developing new drugs?
Business & Management
Benefits of ethical behaviour
More customers (and sales). More and more
people take into account how a firm ‘behaves’
before deciding to buy products from them. An
ethical approach may attract such customers.
Bodyshop has benefited in this way.
Improved recruitment and retention of staff .
People are attracted to working for ‘good'
businesses. In addition they are likely to stay
longer, reducing costs of recruitment and training.
Business & Management
Benefits of ethical behaviour
Increased employee motivation. People gain
more satisfaction from working for ‘good’
businesses.
Reduced legal costs. Ethical businesses are less
likely to be sued.
Positive Public Relations boosts the firm’s
corporate image and helps to promote it. A more
negative image leads to increased costs (eg time
and money spent on improving public relations).
Business & Management
Benefits of ethical behaviour
An ethical approach to business can help a
firm differentiate itself from its competitors
(develop its USP).
An ethical firm may be able to charge
premium prices for its products as some
customers will have demand that is less
price elastic. (eg fair trade coffee).
Business & Management
Benefits of ethical behaviour
Improved customer loyalty.
Reduced opposition from pressure groups.
Ethical firms may pre-empt new legislation.
They bring out new products earlier, and
gain an advantage over competitors as a
result.
Business & Management
Benefits of ethical behaviour
Improved relationships with governments
can help the firm obtain planning
permission, or other assistance.
Local communities may be more welcoming
and less opposed to the company setting up
a facility.
Provides long term benefits for society and
the environment
Business & Management
Benefits of ethical behaviour
Ultimately, Sales and profits will
improve in the long-term!
Business & Management
Problems of ethical behaviour
Some costs will increase in the short term. E.g.
installing filters at power stations.
Profits may fall in the short term E.g. if the firm
decides against buying cheap supplies from a
supplier that uses child labour.
Conflict between stakeholder groups. E.g.
Shareholders seeking higher profits may object to
the business donating money to charities
Business & Management
Problems of ethical behaviour
Cynicism from the Media and the General
Public who may question the firm’s motives. It
could be using an ethical approach to deflect
attention from other parts of the business.
Any competitive advantage gained through
such a policy could be lost if competitors follow
suit. If costs remain high the firm may suffer!
Business & Management
Problems of ethical behaviour
Firms presenting themselves as being
ethical can come under greater scrutiny.
This can highlight failings that could create
bad publicity.
So in the short-term, costs will probably
increase.
Business & Management
The growth of Corporate
Responsibility
More and more businesses are adopting a
more ethical approach.
It is difficult to know whether this is due to a
genuine shift in firms’ values and beliefs, or
whether they have found such an approach
to be more profitable.
Business & Management