Business Ethics and

Social Responsibilities

To analyse the impact of ethical behaviour on business activities

To analyse and evaluate business’ social responsibility to stakeholders

Learning Objectives

Definition: Ethics are the moral principles that should underpin decision making.

Business ethics can provide moral guidelines for conduct of business affairs.

2 influences that shape moral behaviour of businesses:

Individuals – have own moral codes, values and beliefs

Corporate culture

Business Ethics

Business ethics help firms decide what actions are right or wrong in certain circumstances.

E.g. Should a firm relocate to a country paying lower level of wages?Should a firm release a life-saving drug after limited testing?Should advertising aimed at children be restrained?

A document that sets out the way a business believes its employees should respond to situations that challenge their integrity or social responsibility

Introduced to improve the behaviour and image of businesses

Ethical code of practice

Advantages:

• Marketing advantages – increasing number of consumer taking into account a firm’s ‘behaviour’ when buying products. Business may develop their behaviour into a USP

• Improvement in recruitment and retention of staff

• Improve employees motivation

Disadvantages:

• Increase costs

• Loss of profits

• Conflict with existing policies

The duties a business has to employees, customers and other stakeholders as well as to its shareholders

Social Responsibilities

Smile Magazine Ltd

Shareholders Employees Creditors

Suppliers

Local community

Consumers

Government

Providing information Working for the community Working for the environment

Social audit – independent investigation into firm’s activities and its impact on society

Meeting social responsibilities

Shareholder VS Stakeholder

Managers are solely responsible to owners of the organisation

Advantages:

• Avoid conflicting objectives

• Improves short-term profitability

Business attempts to satisfy the needs of all stakeholder groups

Advantages:

• If successful – may enjoy higher long term profits

• Improve reputation and image

• Attract investors

1) Analyse the ethical issues surrounding the decision made by Leah to move production to Spain. (8 marks)

2) To what extent has Smile acted in a socially responsible manner to its employees and one other stakeholder. (15 marks)

1) Analyse the ethical issues surrounding the decision made by Leah to move production to Spain. (8 marks)K 2 P 2 A 4

2) To what extent has Smile acted in a socially responsible manner to its employees and one other stakeholder. (15 marks)K 3 P 3 A 4 E 5

Allocation of marks