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

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.

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.

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.

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.

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.

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.

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.

Individual Ethical behaviour

• All corporations consists of individual personalities, if individuals within a business take unethical decisions, these may have negative effects.

Ethical Issues

P1 help Explain the ethical issues a business needs to consider in its operational

activities

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?

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.

Environment

• Environmentally friendly.

• Pollution.

• Global warming.

• Why is this important?

Sustainability

Our planet cannot sustain (keep up) for too long increasing levels of industrial development.

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.

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.

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

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.

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.

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.

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

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