Thursday, 13 January 2011

What are the issues in business ethics?

Business Ethics - What are the issues?

What are the responsibilities of employees, employers and on a wider level businesses? Production and distribution of goods? How profits be handled? Who should run markets? What is the fairest type of market?

Purpose of businesses

The purpose of a business determines what are the rights and wrongs of a business and how it acts. As everyone has various opinions on what is the purpose of a business, for A2 OCR RS, three important theories should be learnt. The first is Shareholder theory which is advocated by the famous economist Milton Friedman. He believed the sole purpose of business is to profit maximise , ‘There is one and only one social responsibility of increase its profits so long as it stays within the rules of the game’. So just from this theory we can see how the purpose of a business determines how a business runs e.g. if we follow stakeholder then employees should be paid as less as possible in order to maximise profits. The second theory is Shareholder theory and is perhaps the most popular. It is supported by Havard Business School and Preference utilitarian Peter Singer. This theory suggests that the sole purpose of a business is to satisfy its stakeholders and hence contribute to the well-being of society. The last theory is perhaps arguably the most abstract, it is Contractarian theory. This theory is advocated by John Rawls, Dunfee and Donaldson and presents the idea that ‘business is a means fir distributing justice’. This means that businesses should work with two principles: liberty and social justice.

This is the act of speaking out of any anti-competitive of illegal behavior being carried out by firms. For whistle-blowing case studies please see .
Welfare of employees

Welfare of employees, predominately in the West, is a major ethical issues. In the UK we have various laws which do this. In the UK, 1978, the Advisory Conciliation and Arbitration Service (ACAS) was set up. Its purpose is to negotiate in disputes and arguable has been very successful, as there have been few major employee disputes. Ethics can guide to us to get a good balance between interests of employees and employers.

Information awareness

This is an important issue which we consider when looking at the relationship between businesses and consumers. Is it unethical for firms not to inform their consumers or manipulate the information? Should advertising exist?

Corporate social responsibility 

This is a fairly new objective that firms pursue. It is mainly driven through demand from consumers for an environmentally aware firm. This is another branch of business ethics which is important for example, should a firm be ‘green’ as a response to consumer demand or for the environment itself.

There are many other areas such as use of cheap labor overseas, fair trade and other important case studies for example the Ford Pinto case which you will see in my other posts!

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