OBS 114
Fundamentals of business management
Unit 7; Chapter 4: Ethics and social responsibility
1. THE NATURE OF ETHICS
Ethical The quandary people find themselves in when they have to
dilemmas decide if they should act in a way that might help another
person or group even though doing so might go against their
own self-interest
Ethics Inner guiding moral principles/ values
Used to analyse situation then decide what is the right
way to behave
No absolute/ indisputable rules
Ethics and Laws govern how business should be conducted within a
the law company.
These laws are created through ethical beliefs of groups
of individuals who lobby for their ethical beliefs to be
passed as a law.
Just because something is unethical does not mean it is
illegal
Laws and ethics both change over time
Changes in Certain acts such as murder and theft are illegal and are
ethics over likely to stay illegal for the rest of time but certain other
time acts, such as the consumption of cannabis products, are
subject to change.
Ethical beliefs change over time.
For example, cannabis has been made illegal due to its
intoxicating nature and the fact that it may lead to
experimentation with more dangerous drugs such as
heroine.
In recent years, however, it has been legalised in many
parts of the world as there are medicinal uses for such
products
2. STAKEHOLDERS AND ETHICS
Stakeholder The people and groups that supply a company with its
s productive resources and, so, have a claim on and a stake in
the company
Shareholders
Managers
Employees
Suppliers and distributors
Customers
Community
Shareholder They buy the company’s stock or shares and becomes its
s owners
Shareholders are interested in how a company performs
, financially in order to maximise the return on their
investment
They also want to ensure managers are behaving
ethically to maintain the company’s reputation
Managers Responsible for the company’s financial, capital, and
human resources to increase its performance
They expect a good return or reward for their investment
of time, expertise, and experience.
Managers need to uphold good ethical standards when
making tough decisions while also maximising the return
for all stakeholders of the company
Unethical managers often maximise their own return and
benefits from the company while making decisions which
decrease the return for other stakeholders
Non-profit Unethical behaviour takes place in NPO’s as well as profit
organisation organisations.
s There are a number of new regulations in place to
decrease the unethical behaviour of managers in NPO’s
Employees Employees expect to receive rewards consistent with their
performance and company’s need to treat them fairly in order
to remain ethical
Suppliers Company’s rely on each other for the supply of services and
and materials. Companies need to pay their suppliers fairly and
distributors timeously to remains ethical.
Customers Customers are regarded as the most critical stakeholder
to a business as they are needed for a business to
continue to make sales
Companies need to offer quality products at a fair price to
customers to remains ethical
Community Businesses need to treat the infrastructure around it
fairly in order to remain ethical.
This includes the environment, the labour force, the
homes its employees live in, the schools, colleges and
hospitals that assist the business on some level
Ethical Utilitarian Rule
decision An ethical decision is made to produce the greatest good
making for the greatest number of people
Problems arise when benefits for different stakeholders
cannot always be measured and compared
Moral Rights Rule
An ethical decision is the one that best maintains and
protects the fundamental or inalienable rights and
privileges of the people affected by it
Problems arise when a decision will protect the rights of
some stakeholders while hurting the others
Justice Rule
An ethical decision distributes benefits and harms among
people and groups in a fair, equitable and impartial way
Managers may struggle to determine the fair rules and
treatment of stakeholders
Practical Rule
Fundamentals of business management
Unit 7; Chapter 4: Ethics and social responsibility
1. THE NATURE OF ETHICS
Ethical The quandary people find themselves in when they have to
dilemmas decide if they should act in a way that might help another
person or group even though doing so might go against their
own self-interest
Ethics Inner guiding moral principles/ values
Used to analyse situation then decide what is the right
way to behave
No absolute/ indisputable rules
Ethics and Laws govern how business should be conducted within a
the law company.
These laws are created through ethical beliefs of groups
of individuals who lobby for their ethical beliefs to be
passed as a law.
Just because something is unethical does not mean it is
illegal
Laws and ethics both change over time
Changes in Certain acts such as murder and theft are illegal and are
ethics over likely to stay illegal for the rest of time but certain other
time acts, such as the consumption of cannabis products, are
subject to change.
Ethical beliefs change over time.
For example, cannabis has been made illegal due to its
intoxicating nature and the fact that it may lead to
experimentation with more dangerous drugs such as
heroine.
In recent years, however, it has been legalised in many
parts of the world as there are medicinal uses for such
products
2. STAKEHOLDERS AND ETHICS
Stakeholder The people and groups that supply a company with its
s productive resources and, so, have a claim on and a stake in
the company
Shareholders
Managers
Employees
Suppliers and distributors
Customers
Community
Shareholder They buy the company’s stock or shares and becomes its
s owners
Shareholders are interested in how a company performs
, financially in order to maximise the return on their
investment
They also want to ensure managers are behaving
ethically to maintain the company’s reputation
Managers Responsible for the company’s financial, capital, and
human resources to increase its performance
They expect a good return or reward for their investment
of time, expertise, and experience.
Managers need to uphold good ethical standards when
making tough decisions while also maximising the return
for all stakeholders of the company
Unethical managers often maximise their own return and
benefits from the company while making decisions which
decrease the return for other stakeholders
Non-profit Unethical behaviour takes place in NPO’s as well as profit
organisation organisations.
s There are a number of new regulations in place to
decrease the unethical behaviour of managers in NPO’s
Employees Employees expect to receive rewards consistent with their
performance and company’s need to treat them fairly in order
to remain ethical
Suppliers Company’s rely on each other for the supply of services and
and materials. Companies need to pay their suppliers fairly and
distributors timeously to remains ethical.
Customers Customers are regarded as the most critical stakeholder
to a business as they are needed for a business to
continue to make sales
Companies need to offer quality products at a fair price to
customers to remains ethical
Community Businesses need to treat the infrastructure around it
fairly in order to remain ethical.
This includes the environment, the labour force, the
homes its employees live in, the schools, colleges and
hospitals that assist the business on some level
Ethical Utilitarian Rule
decision An ethical decision is made to produce the greatest good
making for the greatest number of people
Problems arise when benefits for different stakeholders
cannot always be measured and compared
Moral Rights Rule
An ethical decision is the one that best maintains and
protects the fundamental or inalienable rights and
privileges of the people affected by it
Problems arise when a decision will protect the rights of
some stakeholders while hurting the others
Justice Rule
An ethical decision distributes benefits and harms among
people and groups in a fair, equitable and impartial way
Managers may struggle to determine the fair rules and
treatment of stakeholders
Practical Rule
