Question

(a) Do you think a focus on business ethics is contradictory to a focus on maximizing shareholders' wealth? Why or why not? Explain. [10 marks]

(b) Do you think instituting different regulations or laws is enough to ensure managers consider business ethics in their decisions? Why or why not? Explain. [5 marks]

Answer 1

Business Ethics

Business Ethics tells about some moral principles and guidelines for the business to perform its operations. Like some moral principles for individuals to perform, business also have soe values to be held throught the performance. It is ultimately deciding what is right and wrong for a business. Business has some social responsibility towards its stakeholders.

But sometimes a focus on business ethics is contradictory to a focus on maximizing shareholders' wealth. Because with a view to maximise the wealth, the business may dilute its ethics. The company may compromise the customer satisfaction, quality of the product, employee welfare, relationship with other stakeholders etc. Ultimately this will result in decline in sales and thereby profits. Nowadays some business firms are not performing any ethical activities, simply with an aim to make profits. This should not be happened. Since the business is a part of the society it should show some responsibility towards the society

When the firm focus on customer satisfaction and employee satisfaction, by ensuring product quality and fair package system, the production will increase, sales will improve and thereby it will be added to the profits.

Instituting different regulations or laws to ensure managers consider business ethics

Of course instituting some regulation and laws are essential to ensure ethics in the business organisations. But only those laws cannot ensure ethical business operations. The decisions of the managers are mostly driven by company policies and business conditions. So making the managers understand about the social responsibility is essential. Then managers can set a framework, within which he can take ethical decisions. It is advised that the managers can use Utilitarian method in decision making. It is a method which assess right or wrong, cost or benefit in a particular decision. Moreover he can encourage the people in the organisation who conducts some ethical activities. Apart from that the government can support the business in conducting some Corporate Social Responsibility in the society.