3.4 Business Ethics

3.4 Business Ethics

1. What are Ethics?

   • Moral guidelines which govern acceptable behaviour
   • Ethical standards play a crucial role in decision-making:
     • Used by individuals to make choices about how to behave
     • They define acceptable conduct in business
     • Should underpin decision making
     • An ethical decision is one that is both legal and meets the shared ethical standards of the relevant business community
     • Note: different countries and cultures have different attitudes to what constitutes acceptable ethical behaviour!

2. Benefits

   • Higher revenues - demand from positive consumer support
   • Improved brand and business awareness and recognition
   • Better employee motivation and recruitment
   • New sources of finance - e.g. ethical investors

3. Drawbacks

   • Higher costs - e.g. sourcing from Fairtrade suppliers rather than lowest price
   • Higher overheads - e.g. training and communication of ethical policy
   • A danger of building up false expectations

4. Ethics and Business Decisions

   • Ethical issues arise most commonly in business areas such as:
     • Pay and rewards
     • Advertising and other promotion
     • Personal selling
     • Supplier contracts
     • Treatment of employees
     • Pricing