Business Ethics

Definition of Business Ethics

Business Ethics: Principles that direct moral decision-making and behaviours in business contexts.

• Emphasises assessing right versus wrong actions to uphold integrity.
• Illustrative Example: A company choosing not to engage in deceptive advertising to maintain customer trust over time.

Professionalism in Business

Professionalism: Demonstrating integrity, responsibility, and excellence in business practices.

• Is dependent on strict adherence to ethical guidelines.
• Key characteristics include: Reliability, Accountability, and compliance with ethical standards.
• Example: A manager assumes responsibility for the team's outcomes, ensuring high standards are achieved.

Importance of Ethics and Professionalism

Ethics and professionalism are essential for:

• Establishing trust to ensure long-term success.
• Reducing adverse effects of unethical conduct.

Stakeholder	Positive Impact of Strong Ethics	Negative Impact from Lack of Ethics
Consumers	Greater trust and dedication	Distrust, resulting in business loss
Employees	Enhanced motivation and contentment	Disengagement and high turnover
Community	Boosted reputation and goodwill	Public backlash and adverse publicity

Key Elements of Ethical Business Practices

• Accountability: Acknowledging responsibility for actions.

• Reliability: Consistently honouring commitments.
• Transparency: Upholding openness and honesty in all interactions.
• Fairness: Guaranteeing equal treatment for all individuals.

Diagram Context: This diagram illustrates how core elements such as accountability, reliability, transparency, and fairness establish a comprehensive ethical framework. These relationships may be assessed in exams via case studies or scenario questions.

Examples of Ethical Business Practices

Fair Advertisements

• Concept Explanation: Ethical advertising emphasises truthfulness and clarity.
• Example: Patagonia's "Don't Buy This Jacket" campaign educates consumers on sustainability, enhancing brand perception.

Payment of Fair Wages

• Concept Explanation: Promotes just compensation through equitable wages.
• Examples:
  • IKEA: Adjusts employee wages according to local living costs, fostering employee satisfaction and trust.
  • Ben & Jerry's: Advocates for transparency in wages.

Regular Payment of Taxes

• Concept Explanation: Tax compliance supports community infrastructure and social projects.
• Example: Google channels tax funds into community projects, enhancing societal welfare.

Respect for Employees and Consumers

• Concept Explanation: Encourages equitable service and upholds dignity in interactions.
• Example: Unilever implements policies promoting inclusivity and non-discrimination, resulting in a positive work environment.

Corporate Social Responsibility (CSR)

• Concept Explanation: CSR aims for social welfare beyond mere compliance.
• Example: TOMS Shoes' "One for One" initiative donates products, demonstrating socio-economic impact.

Examples of Unethical Business Practices

Unfair Advertising

• Unfair Advertising: Deceptive actions aimed at misleading consumers by using false claims or omitting crucial information.
  • Case Study Example: A prominent beverage company falsely promoted health benefits of its products.
  • Outcome: The company paid significant fines due to lawsuits, severely eroding consumer trust.

Underpayment and Wage Theft

• Wage Theft: Illegitimate withholding of deserved wages for employees.
  • Industry Analysis: Common in sectors like hospitality and retail.
  • Case Study: A retail chain was exposed for systematically undercompensating employees.
  • Outcome: Public outcry led to policy reforms within the company.

Tax Evasion and Fraud

• Tax Evasion: Illegally evading taxes through unethical means.
  • Real-world Examples: High-profile executive convictions highlight the gravity of tax fraud.

Exploitation in Supply Chains

• Supply Chain Exploitation: Unethical practices such as child labour and unfair compensation.
  • Vulnerable Sectors: Agriculture, textiles, and electronics.
  • Case Study: An apparel brand was uncovered for using child labour, resulting in a consumer boycott.

Challenges to Ethical and Professional Business Practices

Corruption

• Repercussions: Legal actions and loss of trust.

Workplace Harassment

• Example: The Harvey Weinstein incident highlighted global harassment issues.

Pricing Ethics

• Strategies: Ethical pricing structures in industries like pharmaceuticals.

Misuse of Company Resources

• Encompasses using company financial resources for personal gain.

Creating an Ethical Culture

Development Guidelines

• Stakeholder Engagement: Enhances trust through thorough ethical guidelines.
• Training Programmes: Ensures consistent adherence to ethics.

Strategy Development

Framework for Strategy Design:

1. Evaluate organisational needs.
2. Develop policies and training initiatives.
3. Execute and monitor.

Role of Leadership

Leadership's Influence:

• Ethical Climate: Leaders set the ethical direction.
• Strategies: Develop practices that harmonise profit with ethics.

Conclusion

Ethical and professional practices are vital for sustaining trust, long-term success, and responsibility within a business. Implementing these principles promotes accountability, reliability, and transparency across an entire organisation.