Page 156 - Microsoft Word - 00 ACCA F1 Notes Prelims.docx

Chapter 10

Business ethics and their importance

1.1 Introduction

Ethics is the system of moral principles that examines the concept of
right and wrong.

Business ethics is the application of ethical values to business behaviour.

An ethical dilemma involves a situation where a decision-maker has to decide what is
the ‘right’ or ‘wrong’ thing to do.

Examples of ethical dilemmas can be found throughout all aspects of business
operations.

Accounting issues:

 Creative accounting to boost or suppress reported profits

 Directors’ pay arrangements

 Insider trading

Production issues:

 Should the company produce certain products at all? E.g. guns, tobacco

 Should the company test its products on animals?

Sales and marketing issues:

 Price-fixing and anti-competitive behaviour may be overt and illegal or may be
more subtle

 Is it ethical to target advertising at children? E.g. fast food or for expensive toys

Personnel (HRM) issues:

 Employees should not be favoured or discriminated against on the basis of
gender, race, religion, age, disability etc.

 The contract of employment must offer a fair balance of power between
employee and employer.

150