4.4.2 Business Ethics

• • Business ethics refers to the principles and norms that govern business behaviour.
• • A stakeholder is an individual or group that has an interest or can be affected by a business 
  • Different stakeholder have different levels of power and different priorities which inevitably creates the potential for conflict
• • The ethics of a business will determine how they operate and their decision making process.
• Unethical Ethical Decisions

  • damage the brand and result in a loss of profitability.
  • Unethical actions are usually pursued as they result in higher levels of profit for the business.
  • Customers are putting more and more pressure on brands to behave ethically.
• Management v workers conflict

  • Management may be more focused on output or reducing costs than on worker safety/ creating a positive working environment.
  • Workers want to be safe and have a comfortable environment in which to work.
• Management v owners conflict

  • The owners (shareholders) want management to maximise business profits and be less interested in well-being of the employees.
  • The management work daily with the employees and will often sacrifice some profit in interest of looking after their workers health and mental well-being.
• Company profits vs resource depletion

  • The owners (shareholders) aim to maximise output so as to generate increasing levels of profit.
  • Higher output requires more rapid usage of natural resources and generates more environmental damage.
• Working conditions

  • MNCs operate in countries with different employment regulations & conditions, so employees need to decide if they are going to comply with the regulations of the host country or home country.
• MNCs show unethical behaviour by exploiting workers in LEDCs by paying them lower wages.
• Working conditions

  • providing poor working conditions in order to cut costs.
  • Factories and warehouses with poor working conditions are referred to as ‘sweatshops’.
  • MNCs use child labour, where school aged children are working extremely long hours.
• MNCs are under increasing pressure from governments, customers, institutions (International Labour Organisation to take action to ensure products and services do not involve exploited labour.
• When developing marketing strategy, MNCs must consider the cultural and social differences in the countries in which they operate.
• Misleading labelling


  • Must comply with regulations of country.
  • The information must not include any false information aimed at generating higher sales.
  • misleading information about
  • Size
  • Content of the product 
  • Features 
  • Functionality
  • Damages brand identity
• Promotional activities should not be offensive or illegal.
• Waste management


  • LEDCs usually have less regulation and enforcement on waste management.
  • usually poor waste management infrastructure.
  • MNCs can dispose of waste in LEDCs at a cheaper cost - allows them to maintain their high profits.
• Emissions


  • Often released from factories or from products made by MNCs.
  •  Have negative impacts on local communities, causing health issues - asthma, cancer, skin irritations.
• • Many MNCs are now taking action to reduce unethical labour practices as part of their  Corporate Social Responsibility (CSR)