ethical issues in business

Ethical issues arising from the nature of markets

- The 18th Century economist Adam Smith demonstrated how in a free market the se
lf interest of producers and
consumers will produce an outcome desirable to all concerned
- But the market can also lead to inequality of income, wealth and market power:

Monopoly suppliers can exploit consumers

Monopsony buyers can exploit supply firms
World wide inequality of income can result in unethical practices such as the ch
ild labour

Ethical issues and society - examples

Involvement in the community
Honesty, truthfulness and fairness in marketing
Use of animals in product testing
Agricultural practices e.g. intensive faming
The degree of safety built into product design
Donation to good causes
The extent to which a business accepts its alleged responsibilities for mishaps,
spillages and
leaks
The selling of addictive products e.g. tobacco
Involvement in the arms trade
Trading with repressive regimes

Ethical issues arising from internal and industry practices - examples

treatment of customers - e.g. honouring the spirit as well as the letter of the
law in respect to warranties
and after sales service
The number and proportion of women and ethnic minority people in senior position
s
The organisation s loyalty to employees when it is in difficult economic condition
s
Employment of disabled people
Working conditions and treatment of workers
Bribes to secure contracts
Child labour in the developing world
Business practices of supply firms

Unethical practices in marketing - examples

Pricing lack of clarity in pricing
Dumping selling at a loss to increase market share and destroy competition in or
der to subsequently raise prices
Price fixing cartels
Encouraging people to claim prizes when they phoning premium rate numbers
Bait and switch selling - attracting customers and then subjecting them to high pr
essure selling techniques to switch
to an more expensive alternative
High pressure selling - especially in relation to groups such as the elderly
Counterfeit goods and brand piracy
Copying the style of packaging in an attempt to mislead consumers
Deceptive advertising
Irresponsible issue of credit cards and the irresponsible raising of credit limi
ts
Unethical practices in market research and competitor intelligence

Unethical practices relating to products - examples

Selling goods abroad which are banned at home
Omitting to provide information on side effects
Unsafe products
Built in obsolescence
Wasteful and unnecessary packaging
Deception on size and content
Inaccurate and incomplete testing of products
Treatment of animals in product testing
Ethics and the supply chain
- It would be hypocritical to claim to be a ethical firm if it turned a blind to
unethical practices by suppliers in the
supply chain. In particular:

The use of child labour and forced labour

Production in sweatshops
Violation of the basic rights of workers
Ignoring of health, safety and environmental standards
An ethical producer has to be concerned with what is practiced by all firms (ups
tream and downstream) in the supply chain.
Bribery

This is a key ethical issue in business

It first needs to be stated that bribery to secure a contract (especially a cont
ract with a public sector body) is against
the law and severe penalties can result
However, it is sometimes seem (wrongly) as a victimless crime and is often ratio
nalised in terms of
if we don t offer a bribery, others will
From a moral or ethical perspective it should be approached not in terms of can w
e get away with it but is it right
to offer a bribe to secure a contract
Institute of Business Ethics Suggestions for Good Practice
The Institute recommends that organisations issue statements of ethical practice
in respect of:
Relations with customers
Relations with shareholders and other investors
Relations with employees
Relations with suppliers
Relations with the government and the local community
The environment
Relations with competitors
Issues relating to international business
Behaviour in relations to mergers and takeovers
Ethical issues concerning directors and managers
Compliance and verification
What is an Ethical code?
- This is a set of principles governing morality and acceptable behaviour
It is likely to cover:
Personal behaviour e.g. when dealing with customers and suppliers
Corporate behaviour e.g. when negotiating deals
Behaviour towards society e.g. when recruiting
Behaviour towards the environment e.g. when deciding on process
Ethical audit
- This is an audit of all the firms activities
Purpose:
To check that ethical principles are being pursued
To check the extent to which actions are consistent with the organisation s stated
ethical intentions
And to establish action plans if they are not

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