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Understanding Business Ethics
Unit 37 – P1 Explain the ethical issues a business needs to consider in its
operational activities- P2 Explain the implications for the
business and stakeholders of a business operating ethically
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Aims of the Unit• In this unit, you will take an in-depth look at the
ethical issues surrounding the work of one or more businesses.
• You will consider the ways in which business practices are affected by ethical considerations, how different stakeholders may influence business decisions and how a business’s ethical standards affect the community.
• Your assessment work may be presented in a variety of forms, from written reports through to visual presentations.
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Business Ethics - Definition
Ethics are to do with what is ‘right’ and ‘wrong’.
"Business Ethics" can be defined as the critical, structured examination of how people & institutions should behave in the world of commerce.
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Ethical Business
• An ethical business has a broad agenda and focuses on making a positive contribution to the community.
• An ethical bank such as the Co-operative Bank, states that it seeks to make the world a better place by taking a different approach to banking.
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Operational Activities
• Business operations refer to anything a business does in order to achieve its aims.
• Issues connected to ethics in business arise because some businesses make poor operational or strategic decisions and these affect stakeholders.
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Values of Business
• Personal values are not written down anywhere because they are, in fact, a state of mind.
• In a business context, the values of held by certain key individuals are often translated into specific corporate behaviour – as was seen by Anita Roddick.
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Anita Roddick
• Dame Anita Roddick, DBE (23 October 1942 – 10 September 2007
• Founder of the Body Shop
• The company was one of the first to prohibit the use of ingredients tested on animals and one of the first to promote fair trade with third world countries.
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Professional Ethics
• Professional ethics relates to how people behave in relation to their chosen careers.
• Professionals are governed by the rules of conduct laid down by professional institutes.
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Individual Ethical behaviour
• All corporations consists of individual personalities, if individuals within a business take unethical decisions, these may have negative effects.
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Ethical Issues
P1 help Explain the ethical issues a business needs to consider in its operational
activities
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Corporate Governance
• The people and procedures for taking major decisions within a business.
• Who makes decisions?• Are the shareholders involved?• How do the directors know what the managers
are doing?
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Corporate Social Responsibility (CSR)
• The policy of a business towards all stakeholders that takes their interest into account.
• All businesses are expected to think about what they do.
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Environment
• Environmentally friendly.
• Pollution.
• Global warming.
• Why is this important?
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Sustainability
Our planet cannot sustain (keep up) for too long increasing levels of industrial development.
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Human Rights• Human rights revolve around some very important
questions, many having to do with discrimination.
• For instance, it is illegal in the UK to treat people differently on the grounds of race, gender, religion, sexual orientation or disability.
• Other human rights are also built into our legal system. We are entitled to a contract of employment, to work part time, to be able to join a union and to have a hearing against wrongful dismissal.
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Trading Fairly
• Fair trade is where:– business is carried on in an open manner – competition takes place on grounds that are equal for all parties – consumers can feel secure that the goods and services they are
buying are going to be of satisfactory quality.
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Legal and regulatory compliance• There are several areas of law that businesses must
follow.
• These are designed to protect a business’s consumers, its employees and others in the wider environment.
• These include: Consumer Law, Consumer Protection Act, the Sales of Goods Act and the Trades Description Act. Distance selling regulations
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Business Practices• Every business manager has a degree of pressure to
meet targets
• These pressures can sometimes result in neglect or malpractice.
• A business manager may neglect to comply fully with health and safety regulations, because to do so would cause delay. An accident caused as a result of this will have serious consequences for the business.
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Working Conditions• This includes; hours, holiday entitlement, privacy,
harassment and discrimination.
• It is up to employers to create working conditions that are fair, just and open.
• Trade unions have the traditional role of defending worker rights against bad employers.
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Individual ethical responsibilities • Management is responsible for staff working in a business.
• The human resources (HR) function tries to employ the right people who will carry out their job roles well.
• It is up to HR specialists, as well as line managers across a business, to make sure that staff follow the ethical guidelines of a firm.
• However, it is up to individuals to follow their own ethical principles at all times.
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P2 - Explain the implications for the business and stakeholders of a business operating ethically
• For P2 you will need to choose a business and examine the impact on the business and its stakeholders of the way the business operates.
• There may be a conflict of interest between the different stakeholders, and learners will need to explain the reasons for this.
• There will also be benefits and drawbacks to the business on the way in which it is operating and you will need to give reasons and support with examples
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Evidence your work
• P1 - Explain the ethical issues a business needs to consider in its operational activities
• Explain the implications for the business and stakeholders of a business operating ethically
• Use your own examples – research what interests you and make it interesting