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AO1 You need to be able to: Demonstrate knowledge and understanding. Command terms, these terms require students to learn and comprehend the meaning of information: Define, Describe, Outline, State

Ethical objectives

Ethics are the moral principles and values that underpin human behaviour. Morals are concerned with what is 'right' or 'wrong'.

Business ethics are, therefore, the moral principles that underpin business behaviour. Whether actions carried out by organisations and their employees are morally acceptable must, however, be judged in the context of the society and the times in which they operate.

An ethical business is one which applies a set of moral principles to all interactions with stakeholders, such as its treatment of employees, customers, suppliers and shareholders. Being ethical means a business goes beyond merely complying with laws and regulations, but makes choices about what it is prepared to do, and what it will not. Therefore, an ethical business strategy may exclude behaviour, which is legal, but conflicts with the businesses ethical policy.

Setting ethical objectives is the process by which organisations apply ethical values to their targets and the actions by which they will achieve them. These ethical values should cover all the actions of the organisation from tactical to strategic.

Businesses may be faced with some of the following issues, which have ethical dimensions:

  • Should we produce in a low-cost developing economy?
  • Should we promote products that might damage health?
  • Should we seek to undermine our competitors?
  • Should we pay minimum wage rates to our employees?
  • Should we employ migrant labour to cut costs?
  • Should we transfer our production units to countries with less strict health and safety laws?

Texas.pngTexas Instruments

Ethics is the cornerstone of TI

Our reputation at TI depends upon all of the decisions we make and all the actions we take personally each day. Our values define how we will evaluate our decisions and actions and how we will conduct our business. We are working in a difficult, demanding, ever-changing business environment. Together, we are building a work environment on the foundation of integrity, innovation and commitment.

Together, we are moving our company into a new century one good decision at a time. Our high standards have rewarded us with an enviable reputation in today's marketplace: a reputation of integrity, honesty and trustworthiness. That strong ethical reputation is a vital asset, and each of us shares a personal responsibility to protect, preserve and enhance it. Our reputation is a strong, but silent partner in all business relationships. By understanding and applying the values presented here, each of us can say to ourselves and to others, "TI is a good company and one reason is that I am a part of it."

Know what's right. Value what's right. Do what's right.

For more on the values and ethics of Texas Instruments and to read about its 'quick ethics test select the following links:


Ethical Objectives and Profits

As with any business decision, much will rest on whether it is cost-effective to adopt an ethical stance. Some firms, for example Body Shop, made an ethical stance part of their unique selling point (USP) and some investment funds are now doing the same. However, the majority of large corporations claim to have high ethical standards and have a range of policies on their websites that support their claims and so it is now harder to use ethics as a USP.

Follow the links below to read the ethical polices of the following organisations:

Corporate Culture and Ethical Objectives

To be effective in applying ethical standards a business needs to make certain that an ethical corporate culture exists, is known by all employees and is evenly applied by all responsible for decisions relevant to the code of ethics.

If this approach is not followed the company runs the risk of having clashes between its values and their application.

If the company does adopt an ethical approach, it may have a number of benefits including:

  • Improved motivation among employees - feel good factor - many employees will be more committed if they can see an ethical approach adopted by the company
  • Reduced labour turnover - improved motivation is also likely to result in improvements in the recruitment and retention of staff ,who will be more loyal to an ethical company
  • Improved customer perception - consumers will often react positively to a more ethical approach and this may be used (as it is by many FairTrade companies) as a unique selling point for the business. It also helps provide the brand with a more positive association, which should enhance brand values.

Ethical Objectives and Investors

A growing number of investors do not want to invest in companies which pollute or damage the environment, deal in the arms trade, or support oppressive regimes.

Many also don't want to support tobacco companies or those that profit from gambling, pornography or the production of alcohol.

As a consequence there are a growing number of companies that specialise in ethical investments. They promise to examine the ethical credentials before they invest their clients' funds. One such firm is F&C, which lays out its investment criteria in its guide to ethical investing.

However, an ethical approach to business operations may have a number of potential problems. These may include:

  • Higher costs - using ethically sourced raw materials, or producing in a way that is more ethical, is likely to raise costs. If the company is able to use the ethical considerations to develop the brand, then this may not be a problem, but if they are in a highly price competitive market then it may be more of an issue.
  • Problems with suppliers - suppliers may not hold the same ethical views as the firm and this may lead to possible conflicts. It may also make sourcing supplies more problematical.
  • Lower profit - if the higher costs cannot be passed on to the consumer, then this is likely to lead to lower profitability for the firm.
  • Stakeholder conflict - not all stakeholders will be keen on an ethical approach if it compromises their objectives. For example, some investors may withdraw if they feel that the ethical stance of the company is affecting its long-term viability or profitability.

Remember that ethics may be a subjective concept, varying from country to country and culture to culture and, of course, from individual to individual. Even within a single firm there will be a huge range of opinions about what is right and what is wrong. The only difference though between a business and everyday life, is that employees should know a little about the firms values before they join, and to some extent are signing up to these.

Ethics also covers different areas than that covered by the law. It is possible for a business to act legally, but in a manner that many would consider unethical. Selling cigarettes or weapons, for instance, fits into this category.