4.4.2 Ethics

Question 1

What stakeholder issues do consumers have?

Answer 1

• misleading advertising
• product safety, such as involving tainted meat that reaches consumers in the supply chain.
• conflicts of interest , such as where an energy firm manipulates the markets , resulting in consumers paying more than they otherwise would have.

Question 2

What stakeholder issues do employees have?

Answer 2

• employee safety , ensuring health and safe conditions avoiding failings that might lead to injury or death
• employee redundancies, a company may need to reduce staff numbers to regain profitability or they may choose to outsource some work for cheaper returns
• pay and conditions

Question 3

What stakeholder issues do shareholders have?

Answer 3

• conflicts of interest between management and the shareholders
• short-term versus long-term returns on shares. Shareholders invest for many reasons one many reason is seeking a return on their investments through dividends. A business needs to convince shareholders that investing to earn profits in the future is more beneficial than paying out dividends in the short term.

Question 4

What stakeholder issues do countries or communities have?

Answer 4

• Safety, where people’s well-being is compromised
• Environmental concerns where the activates of the business pollute or damage the environment.
• resource depletion where a company’s extraction objectives conflict with the best possible future for that country. For example , if a resource is depleted before it can be replenished.

Question 5

What are environmental considerations a business has to make?

Answer 5

• Emissions
• waste disposal

Question 6

What are supply chain considerations a business has to make?

Answer 6

• Exploitation of labour
• Child labour

Question 7

What are marketing considerations a business has to make?

Answer 7

• Misleading labelling
• inappropriate promotional activities

Question 8

What are ethics

Answer 8

Moral rule or principles of behaviour that should guide members of a profession or organisation and make them deal honestly and fairly with each other and with their stakeholders

Question 9

Institutional framework?

Answer 9

The system of formal laws , regulations and procedures, and informal conventions customs and norms that shape activity and behaviour.

Question 10

What is code of conduct

Answer 10

A set of rules outlining the proper practises of an organisation that contributes to the welfare of key stakeholders and respects the rights of all affected by its operations.

Question 11

What are stakeholders

Answer 11

Groups or individuals who can affect or be affected by the actions of a business.

Question 12

MNC objectives vs stakeholders

Answer 12

Owners seek high profits…
• High profits means keeping wages low which means that workers may not be paid a living wage
• High profits means keeping costs as low as possible so working conditions may suffer
• High profits mean that labour laws may not be kept to
• High profits mean that work might be subcontracted out to third parties who use child labour or forced labour

Question 13

Shareholder objectives vs ethical objectives

Answer 13

Shareholders objective :
• High profits
• High dividends
• Growth
• Return on their investment
• A positive corporate image

Ethical corporate objectives:
• Low emissions
• Safe waste disposal
• Paying fair wage rates to employees in other countries
• Sourcing sustainable raw materials

Question 14

What is a Supply chain ?

Answer 14

• A supply chain is a system of businesses, people, activities, information, and resources involved in moving a product or service from supplier to customer.

Question 15

Problems with a supply chain?

Answer 15

• Having part of a supply chain in a developing nation can be a problem for the MNCs
• Many garment factories or labour intensive production processes outsource to slums, refugee camps and unlicensed back street businesses with poor working conditions

Question 16

Benefits of behaving ethically?

Answer 16

• 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

Question 17

Drawbacks to behaving ethically?

Answer 17

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