Business Ethics Learning outcome: Understand the implications of businesses operating ethically P2

Starter

Stakeholders  A party that has an interest in the organization.  Stakeholders are groups or individuals who can affect or be affected by the achievements of a business  The primary stakeholders in a typical corporation are its owners / investors, employees, customers and suppliers.  However, modern theory goes beyond this conventional notion to embrace additional stakeholders such as the community, government, trade associations, media, competitors, non-governmental organizations (NGOs) and others  Business is about managing key stakeholder relationships

Stakeholders Internal Directors Managers Employees Connected Shareholders Customers Suppliers Advisors Consultants Competitors External Government Local community Media

StakeholderMain InterestPower and influence Shareholders / OwnersProfit, growth, share price growth, dividends Election of directors Banks & other lendersInterest and principal to be repaid, maintain credit rating Enforce loan contract Withdraw banking facilities Directors and managersSalary, share options, job satisfaction, status Make decisions, have detailed information EmployeesSalaries & wages, job security, job satisfaction & motivation Staff turnover, industrial action, service quality SuppliersLong term contract, prompt payment, growth of purchasing Pricing, quality, product availability CommunityEnvironment, local jobs, local impact Indirect influence via local planning and opinion leaders GovernmentOperate legally, tax receipts, jobsRegulation, subsidies, taxation, planning

Implications  Adapting business behavior  Responding to ethical pressures  Implementing ethical practices  Influence of stakeholders and pressure groups  Impact on competitiveness  Reputation & Public image  Ethical trade  Complying with legislation and codes of practice  UN Declaration on Human Rights  UN Global Compact  Economic activity

Adapting Business Behavior  Businesses need to modify the way they act based on the set of ethics they follow.  The changes may include:  Profit loss  Job loss  Organizational restructuring

Ethical Pressure  Businesses face internal and external ethical pressures  Internal and/or external stakeholders may pressure a business to change the way it operates

Ethical Practices  In order to adapt ethical practices organizations may change:  Staff  Technology  Business partners  Customer segment  Products

Competitiveness  When adopting ethical behavior, organizations take a huge risk. As this adoption may cost the organization its competitive edge.  On the other hand organizations may gain a competitive edge by being the only ethically correct one in the market.

Reputation & Public Image  Operating ethically has proven to improve an organization's reputation in the market.  Customers, investors, governments and partners respond positively to ethical organizations.

Ethical Trade  “The assumption of responsibility of retailers, brands, and suppliers to improve the working conditions of the disadvantaged people in its supply chains”  Ethically trading companies gain less profits as they are sharing their profits with the producers.

Compliance  Regulatory and governing bodies set how businesses must operate  Sometimes these rules mandate that organizations must change the way it operates.  When the changes are major, organizations face a difficult ethical dilemma.

Universal Declaration of Human Rights  A declaration adopted by the United Nations General Assembly on 10 December 1948 at the Palais de Chaillot, Paris. The Declaration arose directly from the experience of the Second World War and represents the first global expression of rights to which all human beings are inherently entitled.

UN Global Compact  A call to companies to align strategies and operations with universal principles on human rights, labour, environment and anti-corruption, and take actions that advance societal goals.

Economic Activity  The aim of any profit-oriented business is making money.  Making money may be achieved via ethical and unethical ways.  Businesses need to find the ethical activities it can take in order to make money.

Activity  Toyota is one of the world’s biggest car marker. Toyota annually sells millions of cars across the world. Toyota has factories in many different countries.  Explain to Toyota who are their stakeholders  Explain to Toyota 3 implications that may happen to them if they operate ethically.  For each ethical issue provide an example.