Business Studies – External Influence - Ethics And Social R

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Business Studies Steve Emma Rudd BMA
Business Studies ­ External Influence Ethics and Social Responsibility
Notes
Ethics may be defined as a code of behaviour, which is considered morally correct. A
business's social responsibilities are the duties it has to employees, customers,
society and the environment, as well as to its shareholders. These two concepts are
becoming linked in modern businesses. Any business taking a morally correct decision
is likely to be taking other groups in society into account.
Social Responsibility
Any firm meeting its social responsibilities will manage its affaires by taking into
account the interests of society in general and of those groups and individuals with a
direct interest in the business. Thus, a socially responsible business attempts to
fulfil the duties that it has towards its employees, customers, suppliers and other
interested groups. Collectively these individuals and groups are termed a business's
stakeholders.
Stakeholders and Business
Businesses have become much more aware of varying expectations of stakeholder
groups. Previously managers operate businesses largely in the interests of the
shareholders. A growing awareness of business activities and the rise of
consumerism has complicated the task of the management team. Today's managers
have to attempt to meet the conflicting demands of a number of stakeholder
groups.
The terms stakeholders and social responsibility are interrelated and difficult to
distinguish. Social responsibility is a philosophy proposing that firms should behave as
good citizens. Socially responsible businesses should not only operate within the law,
but should avoid pollution, the reckless use of limited resources or the
mistreatment of employees or consumers. Some businesses willingly accept these
responsibilities partly because their managers want to do so, partly because they
fear a negative public image.
Stakeholder and Shareholder Concepts
Many businesses have accepted that they should manage their business in a socially
responsible manner and not merely concentrate on profits and legal requirements.
Multinational businesses are recognising that reputation is an important competitive
weapon. Reputation depends upon how society views the business. There are
important commercial reasons why businesses should be, and be seen to be, socially
responsible.
The stakeholder approach can lead to many benefits for organisations and may, if
successful, improve the image and longterm profitability of the business.
Stakeholder Concept Shareholder Concept
Under this concept the business attempts The view makes managers solely
to satisfy the needs of all groups and responsible to the owners of the
individuals associated with the business. organisation ­ the shareholders.

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Business Studies Steve Emma Rudd BMA
Advantages: Advantages:
If successful, the business may It avoids conflicting objectives ­
enjoy higher longterm profits. managers simply take decisions in
It is likely to improve a business's the interests of the shareholders.
public image as it receives This approach may improve short
favourable coverage in the media. term profitability as funds are not
The business may attract investors used for community projects etc.
seeking a socially responsible and
ethical investment.…read more

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Business Studies Steve Emma Rudd BMA
Working for the Community
Firms can gain considerable benefits from behaving responsibly with regard to the
wider community.
Voluntary Work
Meeting their responsibilities to employees can be costly but also has the potential
to offer considerable benefits to businesses. Firms can fulfil these responsibilities by
providing job security, good working conditions and training to develop their skills and
interests.
Working for the Environment
Environmental responsibilities are high on the agenda for most companies and
governments.…read more

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Business Studies Steve Emma Rudd BMA
Ethical behaviour requires businesses to operate within certain moral guidelines and
to do the `right thing' when taking decisions. An ethical decision would take into
account the moral dimension, but not everyone would agree on what is ethical. Some
may argue that it is not ethically wrong for supermarkets to charge high prices for
basic foodstuffs others would disagree. Differing moral values mean ethical
decisionmaking is tricky.…read more

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Business Studies Steve Emma Rudd BMA
Unethical actions by businesses are likely to be covered in the media and to influence
the public's view of the business. Such stories are increasingly newsworthy at a time
when consumer's expectations of business behaviour are increasing. This is placing
great pressure on businesses to be seen to be ethical and socially responsible.
One important development in modern businesses is that ethical accountability has
become an issue for top managers.…read more

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