External Influences 4

1. External Influences 4 Business Ethics, Moral and Environmental Issues

2. External Influences

3. Business Ethics

4. Business Ethics • Rules or standards governing the conduct of a business • Moral code – what is ‘right’ and what is ‘wrong’? • Highly subjective nature • Tension between different stakeholders

5. Stakeholders

6. Stakeholders Responsibilities to stakeholder groups: • Shareholders – Generate profits and pay dividends • Customers – provide good quality products at reasonable prices. Safety, honesty, decency and truthfulness • Employees – health and safety at work, security, fair pay • Suppliers – pay on time, pay fair rates for the work done, provide element of security

7. Stakeholders • Local Community – provide employment, safe working environment, minimise pollution and negative externalities – provide external benefits? • Government – abide by the law, pay taxes, abide by regulations • Management – their aims versus those of the organisation as a whole • Environment – limit pollution, congestion, environmental degradation, development, etc.

8. Moral Behaviour

9. Business Ethics Tensions: • Profits versus higher wages • Expansion versus development • Production versus pollution • Supplier benefits versus consumer prices/lower costs • Survival of the business versus needs of stakeholders

10. Business Ethics Examples: • Production of children's toys • Coffee industry • Baby milk • Music industry • Multi-national operations • McDonalds – food quality, litter • Chocolate industry • Jewellery – diamonds and gold • Chemical industry

11. Business Ethics Solutions: • Taxation • Self Regulation • Subsidies • Government/EU regulation • Legislation • Pressure Groups • Improve competition and contestability of markets • Social and Environmental Audits

12. Social and Environmental Audits

13. Environment • Urban blight – excessive development, inappropriate development, use of greenbelt land • Waste – land-fill? re-cycling? burning? • Energy use – renewable energy, non-renewable resources • Global Warming – fact or fiction? • Pollution: • Noise • Air • Land • Sea • Water

14. Externalities • Impact on a third party of a business decision • Those affected not involved in the decision • Negative externalities – negative effects of business activity – pollution, urban development, etc • e.g. out of town shopping centres – impact on city centres

15. Externalities • Positive Externalities: • Benefits to third parties of business activity • e.g. new infrastructure as a result of development, side effects of research and development, technology (the Internet?), convenience, improved standards of living • Out of town shopping centres – greater ease of access, everything in one place, pleasant environment to shop in, etc.

16. Externalities • Out of town shopping centres: • Highlights complexity of the interaction of positive and negative externalities • Government policies – encourage business activity that leads to positive externalities and discourage those that lead to negative externalities