Business Ethics

Lecturer: Nguyen Thi Thu Ha, PhD

Institute of Business Administration
 CONTENTS

Chapter 1: Introducing Business Ethics

Chapter 2: Corporate Social Responsibility
Chapter 3: Business Ethics and Internal Stakeholders
Chapter 4: Business Ethics and External Stakeholders
 Chapter 4: Business Ethics and External Stakeholders

4.1. Government as a stakeholder

4.2. Business thics and consumers

4.3. Business ethics and suppliers

4.4. Business ethics and competitors

 Objectives

 Understand the definitions of government, laws, and regulations.

 Describe the ethical issues and problems faced in business–
government relations;
 Describe the ethical issues and problems faced in business–
consumer relations.
 Describe the ethical issues and problems that arise in an
organization’s dealings with its suppliers and competitors.
 ……
 4.1. Government as a stakeholder
4.1.1. Definitions of government, laws and regulations

Government

Government consists of a variety of institutions and actors at

different levels that share a common power to issue and enforce
laws (Crane & Matten, 2016).
 4.1. Government as a stakeholder
4.1.1. Definitions of government, laws and regulations

Laws

A law is a rule, usually made by a government, that is used to order the

way in which a society behaves (Cambridge Dictionary).

Laws serve as a codification into explicit rules of the social consensus

about what a society regards as right and wrong.
 4.1. Government as a stakeholder
4.1.1. Definitions of government, laws and regulations

Laws

Looking specifically at laws codifying right and wrong business

practices, it is important to recognize that the law is only one aspect
of the broader area of regulation of business.
 4.1. Government as a stakeholder
4.1.1. Definitions of government, laws and regulations
Regulations

Regulation is all about the rules governing business behaviour. It

includes laws and acts, but also pertains to other forms of formal or
informal rule-making and enforcement.

This includes broader governmental policies, concepts,

goals, and strategies, all of which ultimately enable or
restrict the activities of business actors.
 Regulations

Imperative Private
regulation regulation
Rules that are issued by Rules that are issued by
governmental actors and business, business
other delegated authorities associations, or civil
to constrain, enable, or society actors to
encourage particular standardize and
business behaviours. It harmonize ethical
includes rule definition, business practices. Their
laws, mechanisms, force normally relies on
processes, sanctions, and market mechanisms.
incentives.
4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government
4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

Governments of all countries try to protect and facilitate the growth

of their businesses. In addition to benefiting from these regulations,
companies are also accountable to their governments.
 4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

Business transactions run smoothly when clear regulations and laws are
issued When businesses comply with the law, society will be stable
and develop sustainably social stability will also support effective
business operations.
 4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

The government imposes various taxes on business entities, such as

sales, corporate, excise, etc. With the revenue from these taxes, the
government strives to improve infrastructure and other welfare facilities.
Avoidance and delay in payment obligations, mainly taxes, are also
considered law violations.
 4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

The government protects the interests of stakeholders and investors.

Stakeholders are protected from unfair business practices, while
corporate regulations govern shareholders. Businesses should also avoid
associating with or supporting groups, organizations, or individuals that
cause political instability in the country.
4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

Policies of the government aim to regulate business activities within

a framework that does not cause harm or pose risks to society and
the environment. Therefore, when a business violates the law, it will
be dealt with within the corresponding penalty framework to remedy
the consequences of shortcomings in its conduct towards
consumers and the community.
 4.1. Government as a stakeholder
4.1.2. Ethical issues in the relationship between business
and government

Businesses provide accurate economic-financial-technical or

political inputs to the government that support the creation of
appropriate policies (which also benefit businesses themselves).
When regulations and laws are enacted based on accurate and
reliable inputs, the likelihood of success is also higher.
 4.2. Business ethics and consumers
4.2.1. Roles of consumers

A consumer is a person or an organization that buys goods or

services from a store or business (Oxford Dictionary).

The customer is the object of service, who shows the needs, uses
goods and services, assesses quality, develops financial resources
for the business.
 4.2. Business ethics and consumers
4.2.1. Roles of consumers

Consumers are obviously one of the most important stakeholders

for any organization, since without the support of customers of
some sort, such as through the demand for or purchase of goods
and services, most organizations would be unlikely to survive for
very long.
 4.2. Business ethics and consumers
4.2.2. Ethical issues, marketing, and the consumer

The main corporate functions responsible for dealing with consumers

are sales and marketing, and it is evident that these professions have
long been subjected to a great deal of ethical criticism.
4.2. Business ethics and consumers
4.2.2. Ethical issues, marketing, and the consumer
 Ethical issues in marketing management
Product policy
Bussinesses: deliver unsafe products to customers, they will suffer great disadvan-
tages such as affecting their health, life and dignity => Safe and high qualified prod-
ucts

Consumers: take some responsibility for acting hazardously or misusing the

product. For example, surely we cannot blame a manufacturer of ice cream if a
consumer eats so many tubs in one go that they make themselves sick from over
consuming the product.
 Ethical issues in marketing management

Ethical issues in marketing communications

Misleading or deceptive practices Consumer deception

Seek to create false beliefs about specific products 1 When a marketing
or companies in the consumer’s mind, primarily in communication either creates,
order to increase the propensity to purchase or takes advantage of, a false
2 belief that substantially
Creation of artificial interferes with rational
wants consumer decision-making.
Firms generate artificial
wants in order to create
3 Reinforce consumerism
demand for their products
An attitude that makes consumption
Create insecurity and 4 the centre of meaning and identity
construction
perpetual
dissatisfaction 5 Perpetuate social stereotypes
Marketing communications create
constant dissatisfaction with our Marketing communications spread socially
undesirable stereotypes of certain
lives and institute a pervading
sense of insecurity and
6 categories of person and lifestyle.
inadequacy
 Ethical issues in marketing management

Ethical issues in pricing

Excessive Predatory Deceptive

Price fixing
pricing pricing pricing

A firm adopts the

price gouging, the idea opposite course of Firms price in such a
The maintaining of
of an ‘excessive’ price action, and rather than way that the true cost
prices at a certain
rests on the assumption charging above market to consumers is
level by agreement
that the fair price for rate, sets a price deliberately obscured.
between competing
goods and services has significantly below the
sellers.
been exceeded. market rate in order to
force out competition.
 Ethical issues in marketing management

Ethical issues in distributions

Bribe is dishonestly persuading someone to act in one's

favour by a gift of money or other inducements.
4.2. Business ethics and consumers
4.2.3. Ethical challenges of the global marketplace

• Different standards of consumer protection.

• Exporting consumerism and cultural homogenization.
• The role of markets in addressing poverty and development
 4.3. Business ethics and suppliers
4.3.1. Ethical issues and suppliers
A supplier is a person or a company who provides goods or services to another person or entity. For every
business transaction. There’re 2 parties. One party is seller and other a buyer. The seller is mostly referred to as
the supplier while the receiver is the buyer.

Indeed, organizations and their suppliers can be seen to be mutually

dependent on each other for their own success: just as suppliers rely
on their customers for the orders which keep them in business, the
purchasing firms rely on their suppliers to provide them with the
products and services they need to carry on their operations.

Supplier is a company, person,… that provides things that people want or need,
especially over a long period or time.
 4.3. Business ethics and suppliers
4.3.1. Ethical issues and suppliers

3
1 Conflicts of
Misuse of power interest
5
Ethics in
negotiation

2 4 Distinguishing
The question of personal
loyalty inducements
4.3. Business ethics and suppliers
4.3.1. Ethical issues and suppliers
 4.3. Business ethics and suppliers
4.3.2. Strategies for ethical sourcing

Ethical sourcing (ethical trade or responsible supply-chain management)

is the inclusion of explicit social, ethical, and/or environmental criteria into
supply-chain management policies, procedures, and programmes.
 4.3. Business ethics and suppliers
4.3.2. Strategies for ethical sourcing

 Ethical sourcing occurs when a supply-chain member introduces social

and environmental criteria into its purchase decisions in order to support
certain practices and/or suppliers.

 Much like ethical consumption ethical sourcing represents the idea that
firms (rather than individual consumers) use their buying power to
influence the practices of those they purchase from.
 4.3. Business ethics and suppliers
4.3.2. Strategies for ethical sourcing

Supply-chain pressure has been a key factor in prompting suppliers to

seek various social and environmental certifications of one sort or
another, even when they are not necessarily perceived as intrinsically
valuable. These include accreditations such as the staff training and
development award.
 4.4. Business ethics and competitors
4.4.1. Ethical issues and competitors

 Overly Aggressive Competition - Where a company goes beyond acceptable

behaviour in its direct relationship with a competitor, thereby harming the
competitor in a way that is seen as unethical.

 Insufficient Competition – Where the actions of one or more companies acts

to restrict competition in a market thereby harming consumers in a way that is
seen as unethical.
4.4. Business ethics and competitors
4.4.1. Ethical issues and competitors

Intelligence gathering and

industrial espionage

Overly
Aggressive
Competition

Anticompetitive
‘Dirty tricks’ behaviour
4.4. Business ethics and competitors
4.4.1. Ethical issues and competitors

Insufficient
Competition

Abuse of
Collusion & Dominant
Cartels Position
 4.4. Business ethics and competitors
4.4.2. Recommendations for fair trade

Fair trade is a system of exchange based on guaranteeing

producers in development countries a living wage, decent working
conditions, and opportunities for community development.