Business Ethics and Social Responsibilities

Hey everyone! Welcome to your study notes for "Business Ethics and Social Responsibilities". This might sound like a very serious topic, but it's actually one of the most interesting and important parts of business. We're going to explore what it means for a business to 'do the right thing' and why being good is actually good for business. Let's get started!


Section 1: What Are We Talking About? Key Definitions

First, let's make sure we understand the two big ideas of this chapter. Don't worry, they are simpler than they sound!

1. Business Ethics

Think of this as the 'moral compass' of a company. It’s the set of moral principles and standards that guide how a business and its employees should behave.

  • It’s about knowing the difference between right and wrong in business situations.

  • It covers everything from being honest in advertising to treating employees fairly.

Analogy: Just like you have personal ethics that stop you from cheating on a test, a business has ethics that guide its decisions.

2. Social Responsibilities

This is about a business's duty to act in a way that benefits society, not just itself. It's about being a 'good corporate citizen'.

  • It goes beyond just following the law; it's about actively contributing to the community and environment.

  • Examples include donating to charity, reducing pollution, or ensuring products are safe for everyone.

Quick Review:
Ethics = The rules/principles of right and wrong.
Social Responsibility = The actions a business takes to be a good member of society.

Did you know? Many big companies in Hong Kong, like MTR Corporation and CLP Group, publish detailed annual reports on their social responsibility activities, showing how important this has become!

Section 2: Stakeholders - Who Must a Business Be Responsible To?

A business doesn't exist in a vacuum. Many different groups of people are affected by its actions. These groups are called stakeholders.

IMPORTANT: A common mistake is to confuse stakeholders with shareholders. A shareholder owns part of the company (shares). A stakeholder is anyone who has an interest (a 'stake') in the company's activities. All shareholders are stakeholders, but not all stakeholders are shareholders!

Let's look at the key stakeholders and the ethical responsibilities a business has towards them.

Why and How a Business Should Be Responsible to Stakeholders:

1. To Owners / Shareholders

  • Why? They have invested their money and taken a risk.

  • How? By working to generate a reasonable profit, providing accurate and transparent financial information, and managing the business's resources efficiently to ensure a good return on their investment.

2. To Employees

  • Why? They are the heart of the business and dedicate their time and skills.

  • How? By providing a safe working environment, paying fair wages, offering equal opportunities for promotion (no discrimination!), respecting their rights, and providing training.

3. To Customers

  • Why? Without them, the business has no revenue and cannot survive.

  • How? By providing safe and high-quality products, offering fair prices, using honest advertising, providing good customer service, and protecting their personal data.

4. To Suppliers

  • Why? They provide the raw materials and services needed for production.

  • How? By paying bills on time, honouring contracts, and dealing with them fairly and honestly.

5. To Creditors (e.g., Banks)

  • Why? They provide the loans and capital needed to grow the business.

  • How? By repaying loans and interest on time and providing truthful information about the company's financial health.

6. To the Community / Society

  • Why? A business uses community resources and its actions impact the public.

  • How? By minimising pollution and environmental damage, creating jobs for local people, supporting community projects or charities, and operating in a way that respects local culture.

7. To the Government

  • Why? The government sets the legal framework for all businesses to operate in.

  • How? By obeying all laws and regulations (e.g., labour laws, environmental protection laws), paying taxes honestly and on time, and avoiding bribery or corruption.

Key Takeaway for Section 2

A successful and respected business has to perform a balancing act. It needs to consider the needs and interests of all its different stakeholders, not just focus on making a profit for its owners. Being responsible to all these groups builds trust and leads to long-term success.


Section 3: How Ethics and Social Responsibility Affect Business Decisions

Okay, we know what ethics and social responsibility are, and who they apply to. But how do they actually change what a business does day-to-day? Let's see how they influence decisions in different areas.

1. Marketing Decisions

When a company decides how to sell its products, ethics and social responsibility play a huge role.

  • Ethical Decision: Should we use an advertisement that makes our product look much better than it actually is? An ethical business would choose honest advertising. Example: A fast-food chain using a realistic photo of their burger, not a perfect but fake one.

  • Social Responsibility Decision: Should we use plastic packaging that is cheap but bad for the environment? A socially responsible business might choose more expensive, but recyclable materials. Example: A coffee shop encouraging customers to bring their own cups by offering a discount.

2. Production / Operations Decisions

This is about how a company makes its products or provides its services.

  • Ethical Decision: Should we buy our raw materials from the cheapest factory, even if we know they treat their workers badly? An ethical business would choose to source from ethical suppliers who provide safe conditions and fair wages.

  • Social Responsibility Decision: Should we release waste water into a nearby river to save money on treatment? A socially responsible business would invest in pollution control technology to protect the environment. Example: A factory in Hong Kong installing equipment to reduce air pollution, complying with the Air Pollution Control Ordinance.

3. Human Resources (HR) Decisions

This covers everything related to employees, like hiring, firing, and promotion.

  • Ethical Decision: Should I promote my nephew, or the most qualified candidate for the job? An ethical manager would make the decision based on merit and fairness, avoiding favouritism.

  • Social Responsibility Decision: Should we only hire from one specific group, or should we encourage diversity? A socially responsible business promotes equal opportunity and builds a diverse workforce.

4. Finance and Accounting Decisions

How a company manages its money is a key area for ethical behaviour.

  • Ethical Decision: Should we hide some of our company's losses to make our financial reports look better to investors? An ethical business practices transparency and presents its financial situation honestly.

  • Social Responsibility Decision: How should we use our profits? A socially responsible business will pay its taxes fairly to the government and may decide to reinvest in the community or donate to charitable causes.

Key Takeaway for Section 3

Considering ethics and social responsibility isn't a separate task; it's a part of every single business decision. Making the ethical and responsible choice might sometimes seem more expensive or difficult in the short term, but it builds a strong reputation, earns customer loyalty, attracts talented employees, and leads to sustainable success in the long run.

You've made it through! This chapter is all about understanding that businesses have a big role to play in our world, and with their power comes the responsibility to act ethically and for the good of society. Keep these ideas in mind, and you'll have a great foundation for understanding modern business!