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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Strategic Questions & Ethical Issues
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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Strategic Questions & Ethical Issues
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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STAGES IN DEVELOPING AN ETHICAL POLICY
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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STAGES IN DEVELOPING AN ETHICAL POLICY
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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STAGES IN DEVELOPING AN ETHICAL POLICY
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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Why should businesses act in socially
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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Why should businesses act in socially
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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