Ethics and Business

Welcome to the minefield. In reality this is a vast topic, a sort of bottomless pit. Quite how OCR ever imagine that this forms only half a topic is beyond me. Potentially it is the largest issue you have to study at A2 and as the years go by it increases in size as new markets, new issues and new theories evolve. It seems best to confine yourself to the aspects of this study tackled in your text-book.

Below is a suggested ethical business model and all I can do here is to suggest areas of study rather than giving detailed ideas in each topic.

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Purpose of Business
The purpose of business is to maximise profits for the owners – Milton Friedman

But it is a good idea to know about the writings of Adam Smith 1723-1790 and two works The Theory of Moral Sentiments and Wealth of Nations. These two works underpin much of what we now regard as modern capitalism with surprising insights into modern ethical concerning accountability towards suppliers and workers as well as the environment.

Who owns the business
There are still family run businesses and here the owners finance the enterprise and seek a profitable return. In most cases though a company will be a limited company with shareholders. Make sure you know what this entails and consider how this might affect the running of the company. Increasingly these days Banks also have a financial interest in companies and they too may impose condition on the running of the enterprise.
In some cases – for example John Lewis Partnership, employees may also have a say in how the company is run. Make sure you can talk about these employee-run businesses.

Employees
This is essentially a two-way relationship these days.
Employees work on behalf of the business and have a responsibility to work hard and produce a quality result.

Management has a responsibility to maintain human rights and good working conditions. Workers must be able to feel that their grievances can be heard through unions, arbitration services such as ACAS and where there are abuses whistleblowers must be allowed for.

There has been much in the newspapers about whistleblowers in the National Health Service in the past twelve months and government is taking action to stop companies insertion gagging clauses into employment contracts and severance deals.

Suppliers
Ethical considerations here include payment of suppliers. If raw materials come from LEDCs then Fair Trade agreements are encouraged as a sign of good practice. When a major company fails it is worth remembering that suppliers not only lose their market but may also have money owing to them which they will have little chance of recouping.

Technology
This is very much a two-edged sword. Major businesses must keep abreast of improvements and advances in technology if they are to remain competitive. At the same time it is possible that improvements in technology may cause unemployment in the workplace. machines are able to do the job of several employees.

Politics
Clearly governments have an active interest in the world of business. It is a source of revenue and a very necessary part of national employment. At a time when budgets are being cut to local authorities, the role of private companies to provide employment is crucial.

Governments also may move to improve export links and in some cases may be responsible for closing certain markets, such as in the arms trade.

Globalisation
This is quite a topic. Trade, investments, capital, migration and technology are now global issues and have an effect on economies and the world of business.
Trade and effective markets have increased. If you go to any major city anywhere in the world, the names you see in the high street in the UK will be there.
Less economically developed countries (LEDCs) have seen increase in employment, an upsurge in technology, investment and development. This has been because they provide a pool of cheap labour, lower overheads and a welcome by the local population. Don’t forget issues of exploitation though.
Should LEDCs accept poor wages, substandard working conditions, unsafe/unregulated workplaces.
Should MEDCs accept unemployment and harsh economic measures because companies are simply interested in profit and cheap labour.

Environment
Businesses have an impact on the environment.
The way raw materials are used do companies put back as much/more than they take out (sustainability)
Pollution – disposal of waste, pollution of rivers and the sea, pollution of the atmosphere, global warming acceleration.
International conferences Kyoto 1997.
Frustration felt by many environmentalists about the failure of countries to sign up to international agreements and the failure of others to observe existing arrangements eg (Whaling)
Don’t overlook the work of organisations such as Greenpeace.To what extent are finished products environmentally friendly and the packaging recyclable.

Consumers
This is essentially a two-way relationship. Consumers are restricted by what companies produce. On the other hand companies can only sell what the consumers wish to purchase.

The finished product from the company must be “fit for purpose”, safe, appropriately labelled, accurately advertised and, where appropriate instructions for use must be provided. Pricing is also an issue. Companies need to make a profit, but consumers expect value for money.

From an ethical point of view much can be made of the way in which consumers influence business ethics.
Make sure you look up Shell over Brent Spar and Ogoniland.
Monsanto over GM food.
Nike and Gap over child labour.
BP over Deepwater Horizon oil spill.

It is also worth bearing in mind the ways in which consumers have certain expectations about large multi-national companies. Consumers dictate market trends, essentially what goes in or out of fashion.

Sometimes consumers may attempt to dictate how a company finances its work and where it invests its monies. Tridos is a bank that specialises in ethical investments and has seen a 78% increase in customer enquiries (Oct 2012).      Co-operative Bank saw a massive rise in customers in 2008 and even in 2012 reported a 43% increase in people switching their accounts to them.  (See BBC News http://www.bbc.co.uk/news/business-19929371  Consumers may also bring pressure to bear on companies that use tax avoidance measures. Starbucks UK agreed to pay Corporation Tax only after there had been evidence of consumer anger at their “tax avoidance measures.” ( See Guardian report http://www.guardian.co.uk/business/2012/dec/06/starbucks-to-pay-10m-corporation-tax)

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