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Ethical and social responsibilities of business

6.1: Introduction

The majority of businesses recognise the cost of socially and ethically responsible actions as a necessary expense and make a commitment to socially and ethically responsible business.

6.2: Ethical Responsibilities of Business

Business ethics is the application of moral standards to business behaviour.

There are four main ethical issues a business may be faced with:

	Fairness and honesty
	Communications
	Workplace relations
	Conflict of interest

A Corporate Code of Conduct is a set of ethical standards for managers and employees to abide by. It is useful in encouraging ethical behaviour in a business.

The differing expectations of stakeholders put pressure on business owners/managers when making decisions. Stakeholders with an interest in business decisions include:

	Shareholders
	Management
	Consumers
	Employees
	Society
	Governments
	Shareholders

6.3: Social Responsibilities of Business

A business's social responsibility includes obligations to the community, above and beyond making a profit, obeying laws or honouring contracts.

There are two views of social responsibility:

The traditional or economic view- society will gain the most benefits if business is left alone to produce and market products that are in demand.

The socioeconomic or non-traditional view- the business has a responsibility not only to owners but also to employees, suppliers, customers and society. This is the now the most popular view because:

	Society now has greater expectations of corporate behaviour.
	Many businesses are taking pride in their record of social responsibility.
	Many business owners believe it is in their own interest to become socially responsible.

A social audit is a way of assessing a business's corporate responsibility- it is a comprehensive report of what a business has done, and is doing, with regard to social issues that affect it.

6.4: Responsibilities to shareholders, managers, employees and consumers

	Responsibilities to shareholders: the main responsibility is to maximise profits, hold an Annual General Meeting, allow shareholders to buy and sell their shares as they wish and to divide surplus assets upon the company's closure.
	Responsibilities to managers: the business has to support the actions of its management- adequate resourcing levels, clear lines of communication and delegation of authority.
	Responsibilities to employees- safe and psychologically rewarding work environment, privacy, rewards and recognition, management development, leadership, teamwork, OHS, equal opportunity
	Responsibilities to consumers- to provide safe products, accurate product information and descriptions, full disclosure of the terms of sale and warranties and guarantees are honoured.
	Consumerism: consists of all those activities that protect the rights of consumers in their dealings with business.
	Responsibilities to society- give back to the community something of what they take out in generating profits.

6.5: Reconciling conflicting interests of stakeholders

Different stakeholders have different priorities which will often be in conflict. Management needs to find ways to reconcile these differences. E.g. the tension between shareholders and society, or shareholders and employees.