The importance of Business Ethics
* 1st part : Introduction
Ethics in General:
Ethics is simply how people try to live their lives according to a standard of what is good or bad. They apply these standards both in how they think and how the others behave. Two way relationship. Example : MY friend left his wife for someone else. How do you think ? Unethical, so I behave in a way to not to talk to him anymore. My friend considers what I did as unethical, we’ve been friend for years and you judge me. The situation is 1. 2 people act differently (one think it’s unethical and the other justified). Different people have a different perception of what’s ethical. They come from believes and values the society gives you : religion, family, friends, experiences, … Sometimes the media is also a factor.
Ethics in business
It’s similar. Business ethics involves the application of moral principles in the business sphere. In business, the first who decides what’s ethical is the business manager. In business situation there’s another actor who judges whether the action is ethical or not : unions, consumer, media, employees. In business situation being ethical is not something easy. They all have their own perception of what’s ethical. Business have to justify.
* 2nd part : who’s concerned and who’s affected by business ethics ? All the people mentioned have a name. Every group of people who is affected by the way the business is ran are called stakeholders. A stake means interest. Stakeholders hold an interest in the way the business is run. Stakeholders is bigger than shareholders. The first category is stockholders and shareholders, then the employees/suppliers/vendors, then creditors, then retailers and wholesailers, then the government, the community, and the media and NGO (non-governmental organization). Those people have an interest in the way the business is run. * Stockholders (are the one who buy actions) want the value of the action to grow * Shareholders want a dividend income
* Employees want stable employment and a fair pay. And a safe environment to work in * Consumers want a faire exchange (good value for money) and products to be safe and reliable. * Suppliers want to be paid in time
* Vendors want regular orders from the company
* The gov wants to receive taxes and the company to apply the law. * Creditors want to get their money back with interest payments. And pay their debts in time. * The community wants economic growth…
* NGOs and media advocate what people want.
All those people put a pressure on the company to be ethical. Some companies understand what’s important and sometimes some select a few of them and try to satisfy them. The way the company understand and take into consideration the expectation of stakeholders depends on 2 different businesses strategies
* 3rd part : From the shareholders business model to the stakeholder business model. Initially, there was a business model called the shareholders business model. They used to all follow this model, but recently companies replaced it with the stakeholders’ business model.
The shareholder’s business model : the US supreme court in 1919 made a decision which was that a business exists for the profit of shareholders and the board of directors should focus on that objective. It means that the firm has only one objective which is to make sure that shareholders make a profit and the rest doesn’t matters. This decision was understood by companies and many companies were just doing that. Milton Friedman (The manifest of the shareholders in the 60’s) is the father of the shareholder business model. For him, concentrating on profit is not unethical because when a company is profitable it offers jobs, products… So when we’re focusing on profit we’re doing our maximum contribution to society. The Friedman model is not history, his model didn’t die so quickly. Neoclassical still believe that....
Please join StudyMode to read the full document