Protecting Employees And Shareholders Commerce Essay

Published: Last Edited:

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Pearson defines ethics as the standards of conduct and moral judgment. ethics is relatively easy compared to practicing ethics in the work place. Since the primary concern of most businesses is the bottom line, the ethical views may differ based on the type of business. Ethical views of employees may also differ from the views of the Avco Environmental Services. This can cause conflict among workers and management as Avco Environmental Services strive to improve the bottom line. Personal ethics may be compromised in an effort to keep a job.

For example, if the manager of a store paid his cleaning employee less than the going rate to clean his store, knowing exactly what the going rate is, several things could happen to damage the business.

Business Ethics defines values as beliefs shared by members of an entire culture, as opposed to ethics, which relate to individual belief systems. A culture's value system determines what influence "society" has on the individual's decision-making process. The belief system of the majority of the culture decides what's good and desirable for the society. For example, a company's CSR projects.

Importance of Business Ethics

Protecting employees and shareholders

Business ethics are required to protect the interest of employees, shareholders, competitors, dealers, suppliers. It protects them from exploitation through unfair trade practices.

Develops good relations

Business ethics are important to develop good and friendly relations between business and society. This will result in a regular supply of good quality goods and services at low prices to the society. It will also result in profits for the businesses thereby resulting in growth of economy.

Consumer satisfaction says the consumer is the king of the market. Any business simply cannot survive without the consumers. Therefore, the main aim or objective of business is consumer satisfaction. If the consumer is not satisfied, then there will be no sales and thus no profits too. Consumer will be satisfied only if the business follows all the business ethics, and hence are highly needed.

Creates good image

Business ethics create a good image for the business and businessmen. If the businessmen follow all ethical rules, then they will be fully accepted and not criticised by the society. The society will always support those businessmen who follow this necessary code of conduct.


Business ethics play an important role in a company's success or failure. A company has a special obligation to its customers to ensure that its decisions are legal and ethical. Management must set the example of a company's core values. The company will forever be known for how it handles business transactions and how it treats people. The choices a company makes speak volumes about its values.

2.2 Social Responsibility And Environmental Consideration

Corporate Social Responsibility (CSR) is a concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, employees, shareholders, communities and the environment in all aspects of their operations. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

With businesses focusing on generating profits, sustainability was not a popular concern among companies up until recently. Now, in an era of globalization, multinational corporations and local businesses are no longer able to conduct destructive and unethical practices, such as polluting the environment, without attracting negative feedback from the general public. With increased media attention, pressure from non-governmental organizations, and rapid global information sharing, there is a surging demand from civil society, consumers, governments, and others for corporations to conduct sustainable business practices. In addition, in order to attract and retain employees and customers, companies are beginning to realize the importance of being ethical while running their daily operations.

Key potential benefits for firms implementing CSR include: Better anticipation and management of an ever-expanding spectrum of risk. Effectively managing social, environmental, legal, economic and other risks in an increasingly complex market environment, with greater oversight and stakeholder scrutiny of corporate activities, can improve the security of supply and overall market stability. Considering the interests of parties conceded about a firm's impact is one way of anticipating and managing risk.

Improved reputation management Organizations that perform well with regard to CSR can build reputation, while those that perform poorly can damage brand and company value when exposed. This is particularly important for organizations with high-value retail brands, which are often the focus of media, activist and consumer pressure. Reputation, or brand equity, is founded on values such as trust, credibility, reliability, quality and consistency. Even for companies that do not have direct retail exposure through brands, their reputation as a supply chain partner both good and bad for addressing CSR issues can make the difference between a business opportunity positively realized and an uphill climb to respectability.

Some of the drivers pushing business towards CSR include

The shrinking role of government

Governments have relied on legislation and regulation to deliver social and environmental objectives in the business sector. Shrinking government resources, coupled with a distrust of regulations, has led to the exploration of voluntary and non- regulatory initiatives instead.

Demands for greater disclosure

There is a growing demand for corporate disclosure from stakeholders, including customers, suppliers, employees, communities, investors, and activist organizations.

Increased customer interest

Freeman, E. (1984) says there is evidence that the ethical conduct of companies exerts a growing influence on the purchasing decisions of customers. In a recent survey by Environics Internationals, more than One in five consumers reported having either rewarded or punished companies based on their perceived social performance.

Growing investor pressure

Investor's are changing the way they assess companies' performance, and arc making decisions based on criteria that include ethical concerns.

Some of the positive outcomes that can arise when businesses adopt a policy of social responsibility include:

Company benefits

Enhanced brand image and reputation

Increased sales and customer loyalty

Greater productivity and quality

More ability to attract and retain employees

Reduced regulatory oversight

Workforce diversity

Product safety and decreased liability.

Benefits to the community and the general public

Charitable contributions

Employee volunteer programmers

Corporate involvement in community education, employment and homelessness programmers

Product safety and quality.

Environmental benefits

Greater material recyclability

Better product durability and functionality

Greater use of renewable resources

Integration of environmental management tools into business plans, including lifecycle assessment and costing, environmental management standards, and eco-labeling.


Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern arc environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future. The concept of CSR is underpinned by the idea that corporations can no longer act as isolated economic entities operating in detachment from broader society. Traditional views about competitiveness, survival and profitability arc being swept away.

2.3 Virtue And Stakeholder Theory

Stakeholder Theory

Freeman (1999) says stakeholder theory can be defined as "any group or individual who can affect or is affected by the achievement of the organization's objectives". Unlike agency theory in which the managers are working and serving for the stakeholders, stakeholder theorists suggest that managers in organizations have a network of relationships to serve this include the suppliers, employees and business partners. And it was argued that this group of network is important other than owner-manager-employee relationship as in agency theory.

The traditional investor shareholder interest is already well accommodated within firm decision making. A further traditional concern is with employees, although how to accommodate this interest is itself fraught with tensions and conflicts. These two are the main 'internal' stake-holders. Then there is a range of 'external' ones. Some of these are well constituted into a definable interest; others are not. Some have a contractual relationship with the company; others do not. There is a body of opinion that suggests only those with a contractual relationship with the company should legitimately be considered as stake-holders. Thus along with shareholder-investors and workers (including managers) would be included.

Suppliers, debt-holders and probably customers. This leaves out of account, however, others who might be considered stakeholders from a broader perspective if these organizations were to accept their social responsibilities. The unemployed could be considered as stakeholders,

where companies are large enough to affect the macro-economy or the regional economy; indeed, some firms do engage in co-operation with public agencies to provide advice and training to the unemployed, although much of this is now contractual. Similarly, some firms address environmental concerns, beyond their legal obligations, and report on these in their annual reports. However, as Corry (1997) argues, it may be wrong to extend the stakeholder framework to parties outside the corporation as it is the government that has the prime responsibility for overseeing the balance of interest between groups in the wider society. In the national context, this seems entirely sensible given the need for informed political choice to resolve competing claims where spillovers are present. In an international context it is less clear what role governments can play in respect of these issues.

Robert Phillips and Joel Reichart argue that stakeholder theory may give voice to environmental concerns by virtue of the interests that human stakeholders have in the environment. They argue that even though the natural environment should not be regarded as a stakeholder itself, stakeholder theory provides a moral reason to protect the environment because ordinary human stakeholders care about the environment. Phillips and Reichart also criticize Starik's theory as an example of "the problem of stakeholder identity run amok. 'Yet they seem to commit the same sin indirectly by arguing that environmental values will be legitimately expressed through the opinions of employees, managers, and per-haps other stakeholders of the business firm.


In the end, stakeholder theories of the firm cannot supply the necessary perspective on the most difficult moral questions in business, such as the obligation to obey the law and to manage in an environmentally responsible manner. Managers, employees, and others who have responsibility for making business decisions and setting business policy have the ethical duty as moral agents acting within an organization to make the best ethical as well as the best economic decisions that they can.

It is therefore important for those who wish to advance a coherent and respectable ethical position in the business world to recognize the conceptual limits of stakeholder theory. Stakeholder theory provides a useful expansion of the interests that are considered to have economic "stakes" at risk in a business enterprise to include non-equity owners, including employees, various types of creditors, and others. But a pitfall in many broad versions of stakeholder theory lies in what several scholars have called "the maddening variety" of who (and what) may count as a legitimate "stakeholder.