1.2-ethics & business

8/6/2019 1.2-Ethics & Business

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ETHICAL ISSUES & BUSINESS

OPERATIONS

Business & Management

Course Companion, 2009. p31-41Oxford University Press


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Ethical Objectives

Ethics is the branch of philosophy concerned with

the rules of human behaviour.

It considers what is right and wrong and

examines how moral principles and values are

created and evolve.

Setting ethical objectives is therefore a process by

which organizations apply ethical values to theirtargets and establish basic principles about their

behaviour in achieving these targets.


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Ethical Objectives

Ethical values cover all aspects of business

conduct. This includes:

corporate strategies. treatment of employees.

treatment of suppliers.

sales and accounting practices

Most activities of business have some ethical

features.


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Ethical Behaviour

Ethical behaviour goes beyond the legal

requirements placed on a business, as it concerns

discretionarydecisions and behaviour; in other

words, what a business chooses to do, rather

than what it is forced to do.

Business ethics are relevant both to the conduct

of an individual within an organization and to theconduct of the organization as a whole.


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Strategic Questions & Ethical Issues

Is it ethical to reduce costs by exploiting

cheaper resources in less economically

developed countries? Eg: large WesternMNCs have been accused of using child

labour in some of their overseas

factories. Is it ethical to sell products that are legal,

but known to harm those who use them?

Eg: tobacco.


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Is it ethical to target young children

with advertising messages?

Is it ethical to manufacture products

that are used to kill? Eg: The arms

industry?

Is it ethical to look for loopholes in

the law to avoid paying tax?


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The previous questions are `big questions`

that elicit strong views, but there are many

smaller, tactical issues at an individual level,

which still have ethical dimensions.


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Individual Behaviour and

Ethical Questions

Examples of questions about individual

behaviour which contribute to the overall ethical

approach of an organization include: How do I manage my team?

Should I massage the truth?

Can I ever justify being disrespectful whenselling products or services to my customers?


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What makes it ethical or unethical?

In theory, business ethics are shared set ofattitudes, morals and rules of behaviour thatunderpin the decision making process.

However, in practice not everybody agrees onwhat is ethical and what is not.

After all, individuals in everyday life have very

different moral and ethical standards, so whyshould we expect individuals in organizationsto be any different?


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Do employees have to accept the

ethical expectations of a business?

Organizations often have identified and clearlystated corporate cultures, so anyone whovoluntarily joins the organization is signalling at

least some agreement with the existing cultureand the values attached.

Organizations may publish detailed ethical codesof practice, ethical policies or ethical guidelines,

which guide employees in their responses tosituations that potentially challenge their honestyand integrity.


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Ethical Guidelines or

Ethical Codes of Practice

Ethical guidelines set out general principlesabout the organizations beliefs on matterssuch as quality, treatment of staff, or the

environmental effects of the organizationsactivities.

They detail procedures to be used in specificethical situations, such as conflict of interestor situations where employees are offeredgifts or favors.


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STAGES IN DEVELOPING AN

ETHICAL POLICY

1. Set explicit ethical objectives supported by

appropriate policies and procedures.

2. Show the support of senior management forthese ethical policies and procedures.

3. Develop supporting training programmes

and courses.

4. Monitor the success of ethical programmes.


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STAGES IN DEVELOPING AN ETHICAL POLICY

1. Set Explicit Objectives

The organizations needs to establish detailed

codes of ethics and expectations, which are

explicit, clearly written and communicated to

employees and other stakeholders.

It is essential that following these codes

becomes part of day-to-day activities.


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2. Support ofSenior Management

Senior managers should demonstrate their

commitment to implementing and enforcing

ethical objectives by making them central to

business planning.

This can be achieved by building ethical success

criteria into employee appraisal and the award of

bonuses for meeting specific ethical targets. A clear disciplinary process should exist to punish

breaches of ethical responsibilities.


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3. Develop Training Programmes

To support ethical goals and policies, all employees andmanagers should participate in training courses wherethe organizations ethical objectives are carefullycommunicated.

This training must help employees recognize and makeethical decisions.

The same training may be offered to otherstakeholders groups such as suppliers and distributorsto make sure that all those involved in the marketingand distribution of an organizations goods or servicesact to the highest possible standards and do notundermine the organizations image.


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4. Monitor the success of programmes

It is an essential part of the success of ethical

codes of practice that they are monitored on a

day to day basis.

Many organizations create channels for

employees to report on ethical conduct and

promise anonymity for whistle blowers who

report unethical conduct.


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Why do organizations consider setting

ethical objectives?

Ethics in the market place and workplace arebecoming increasingly important asorganizations more into a period of intense

competition for public and consumer support. Organizations are under pressure to develop

and maintain policies on business ethics andsocial responsibility to ensure that they havethe support of employees and otherstakeholders.


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Competitive Advantage &

Ethical Objectives

To help create competitive advantage, mostorganizations want to be perceived asethical as this brings with it potential

commercial advantages. However, being an ethical business is a

relatively subjective assessment linked to theproducts or services that the business offers, itfounding vision, goals and values and itsreputation among it stakeholders.


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What does unethical behaviour mean

for a business?

Unethical behaviour and the resulting negative

press may have significant effect on sales, profits

and even the survival of the business.

Therefore organizations will seek to manipulate

perception through good marketing and PR.

Increasingly, organizations are putting in place

ethical policies to prevent ethical breaches andpreparing contingency plans to react to any

breaches that might damage their reputation.


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Ethical Practices and

Business Functions

It is usual for organizations to apply ethicalapproaches to all their business functions.

For instance, a business may produce ethical

guidelines and policies for HR, accountingpractices and financial reporting, sales andmarketing methods, production and thetreatment of intellectual property. These wouldbe published:

internally through departmental handbooks andprocedures.

Externally in annual reports and on business websites.


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Ethical Issues & Pressure Groups

Ethical considerations have become

particularly important element in the

corporate agenda, partly in response to the

success of pressure groups such as

Greenpeace and social campaigners, like Ralph

Nader in the US, and partly in response to

success of organizations that have adoptedmore ethical and social responsible policies.


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CORPORATE SOCIAL

RESPONSIBILITY (CSR)

CSR describes an organizations duties to itsinternal and external stakeholder groups, which itmay or may not willingly accept.

In other words, it is the way an organizationbehaves towards its shareholders, customers,employees, suppliers and society in general.

The last stakeholder group is very broad, and

therefore being socially responsible implies thatthe organization operates as a good corporatecitizen, both locally and globally.


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CORPORATE SOCIAL

RESPONSIBILITY (CSR)

CSR is an umbrella term under which theethical rights and duties existing betweencompanies and societyare examined.

There is a distinct crossover between ethicsand CSR, since CSR is often about doing ethicalthings.

In both cases the business attempts tomaximize its positive impacts on stakeholdersand society and minimize its negative impacts


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What is the difference

between ethics and CSR?

Ethics are the concerns of individual managers

and employees.

CSR is a concern of the entire organization.


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Legal Issues and CSR

All organizations will need to comply with the

legal requirements in day to day operations,

but CSR means going beyond these legal

duties and accepting that the sole function of

a business is not just making profit for its

shareholders.


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Is CSR just a marketing tool?

The question is whether acting responsibly ismerely a marketing tool or whether it is agenuine part of accepted set of values that

guides all that a business does. Perhaps the acid test of an organizations CSR

credentials is when the economy is inrecession and survival is a priority - Does thebusiness put social responsibilities beforeprofit then?


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Why should businesses act in socially

responsible manner?

Business Image

Its improves the image of the business and itsgoods and services and can provide it with

competitive advantage.Attracts New Customers & Customer Loyalty

Its attracts new customers and can createcustomer loyalty and repeat purchase behaviour.

Research has shown that customers are morelikely to choose products they perceive as beingproduced in a socially responsible manner.


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responsible manner?

Attracts like minded employees

Its attracts like-minded employees to join the

business.

Improves Motivation of existing employees

With increased motivation, staff turnover may falland productivity may increase.

Reduces possibility of Negative Publicity It reduces the likelihood that pressure groups will

act against the organizations interests.


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responsible manner?

Goodwill among stakeholder groups

It ensures goodwill among all stakeholder

groups, which may prove beneficial at times ofcrisis.

Eg: Suppliers and employees may be prepared

to wait for payment during a cash flow crisis,

because they feel a sense of loyalty to the

organization, which has treated them well.


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Short Term Costs

Long Term Benefits CSR

Like many other business decisions, acting

responsibly should be considered as a long

term benefit, that may have short term costs.

The question is whether the business is willing

to accept these short term costs when

competitors are not.


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Famous Quotes about CSR?

Conducting your business in asocially responsible way is good

business. It means that you canattract better employees andthat customers will know what

you stand for and like you for it(Anthony Burns, CEO Ryder Systems (1944-)


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SOCIAL AUDITING

The purpose of a social audit it to assess the impact ofan organizations operations on its stakeholders andwider society.

It is a similar process to a financial audit as theorganization generates a set of a `social accounts` thatevaluate social performance against non-financialcriteria and benchmarks.

However, unlike financial auditing there are no legal

obligations on an organization to carry out a socialaudit, although it helps the business address potentialproblems that might later lead to legal liability.


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SOCIAL AUDITING

A strong emphasis on health and safety may

mean the organization avoids prosecution for

any accidents caused by the negligence of the

organization and its employees.

Social auditing should also result in more

informed planning and better management.


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Who conducts social audits?

Social audits are usually conducted by an

independent group that prepares a published

report assessing the organizations wider

external impact.

This report helps clarify social objectives and

encourages the business to come up with

action plans to sort out any deficiencies thathave been identified.


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Practical Objectives &

Outcomes ofSocial Auditing

A business is not socially responsible just because

it carries out a social audit of its operations.

What counts is that its responds to the audit and

changes business practices where necessary,

even if that involves financial costs.

Social auditing is increasingly being considered

part of quality initiatives and integrated withinmanagement approaches, such as TQM.


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Social Auditing will result in new

objectives and targets relating to:

Environment

This includes, pollution, waste disposal, andresource depletion.

Energy use - business practices to improveenergy efficiency.

Human Resources

HR and the treatment of employees and other

individuals in the distribution chain this couldcover issues relating to recruitment, promotion,health, safety and remuneration.


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Social Auditing will result in new

objectives and targets relating to:

Community Programmes

The business helps organize or fund

community based initiatives in education, the

arts or the environment.

Product & Service Quality

There is an emphasis placed on the durability

and safety of the products sold and honesty of

services provided.

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