BUS100 / 2024

TOPIC 7 – Ethics in business and society

Class discussion – suggested solution

(1) PLUS TOOL

P – Policy – Are the decisions/proposed actions in line with company policy?

If answer is NO, STOP. If answer is YES, ask the 2nd question:

L – Law – Are the decisions/proposed actions legal?

If answer is NO, STOP. If answer is YES, ask the 3rd question:

U – Universal – Is it fair to all stakeholders? Can we make it a universally accepted

practice? What are the consequences for the stakeholders?
If answer is NO, STOP. If answer is YES, ask the 4th question:

S – Self-test – Can the decisions/proposed actions be disclosed?

Public disclosure – front page of newspaper?
Private disclosure – do I feel comfortable with decision?
If answer is NO, STOP. If answer is YES, the decision is ethically sound.

Proposed actions / decisions:

BOD decision to retrench 40% of the staff + increase salaries of executive team
by 20%

POLICY?
The company policy is included in MW Business Principles. It guides the company in
its decisions and actions. Three standards or principles are relevant to ethics:
1) We adhere to high standards of corporate governance
2) We are socially responsible and care for our community
3) We respect the dignity of each employee
1) Corporate governance:
MW must adhere to King IV. No guidance in King IV on employee dismissal.
BOD must adhere to RAFTIC principles in all its decisions.
Also, BOD must see to it that company is a good corporate citizen that ensures that
decisions and actions contribute to economic, social and environmental sustainability.
BOD must consider whether their decision is fair and responsible to other
stakeholders and towards society. Decisions on dismissal cannot be taken as a first
resort and can only be taken after the impact of the dismissal on both the employees
and the society has been considered. BOD must be able to justify decision with regard
to standards of corporate governance.
2) Socially responsible:
BOD must balance the interests of the company with the interests of the community
in which the company operates.
Economic downturn = negative impact on community
BOD must therefore consider the impact of the decision to dismiss staff on the
community.
3) Dignity of employees:
BOD’s decisions must not violate the dignity of staff.
Loss of job = loss of income + negative psychological impact, thus affecting
employees’ self-worth and dignity.

LEGAL?
Basic Conditions of Employment Amendment Act recognises that “operational
requirements” of employees constitute valid grounds for dismissal of employees.
Economic needs of employer (to safe costs / expenses) = operational requirement.
Thus, the dismissal of employees is legal.
Paying an increase to executive management team is also legal.

FAIRNESS?
How does decision impact all stakeholders that are affected by the decision?
Engage with stakeholders or use moral imagination (try to imagine how the situation
might be experienced or perceived by others).
First, identify stakeholders = shareholders, executive managers, employees and
local community.
Shareholders = those interested in short term financial returns = happy with decision
Shareholders = focusing on triple bottom line = might be concerned about social
performance (less staff might result in weak productivity)
Executive managers = responsible for dismissal of employees = stressful situation
Employees = those dismissed - loss of income; loss of self-worth
= those who remain = low staff morale, negative feelings towards
company
Community: loss of income (shops, schools, churches)
Choose decision that will be fair for most stakeholders.

DISCLOSURE?
Public disclosure + private disclosure
Public disclosure eg media conference – can they answer/justify the difficult
questions? Could the BoD not have used the money spent on salary increases for
executives to save more jobs for ordinary workers? OR Aren’t executives who failed
to steer company through the recession, now being rewarded, whilst innocent
workers are being punished? Does BoD feel confident and comfortable in answering
these questions?
Private disclosure eg mirror test / telling a close friend/ relative – do you experience
emotional discomfort = moral red light! While emotional ease = moral green light
(2) ETHICS MANAGEMENT FRAMEWORK
To: Board of directors
From: A Student
Subject: Ethics management framework
Date: 2 May 2024
We hereby suggest that you develop and implement a formal ethics management
framework for MW as follows:
COMPONENT
1 Leadership commitment
2 Governance structures
3 Ethics management process:
a. Ethics risk assessment
b. Ethics strategy
c. Codes and related policies
d. Institutionalisation of ethics
e. Monitoring and reporting ethics
performance
4 Independent assessment and external
reporting
EXPLANATION
There should be a tone-at-the-top.
The governing body should take
responsibility for managing ethics
within the organisation.
A social and ethics committee at the
strategic level, an ethics office at
the systems level and ethics
champions at the operational level
should manage ethics within the
organisation.
A formal ethics management
process must be in place.
Ethics risks must be identified and
assessed.
An ethics strategy or plan must be
formulated.
A code of conduct or code of ethics
must be developed together with
related policies such as the gifts
policy, conflicts of interests,
entertainment policies.
The ethics office must take
responsibility for imbedding ethics
into the organisation (making ethics
real – walking the talk).
The ethics office must monitor
ethics performance and report on
ethics interventions such as ethics
training and the ethics helpline.
The ethics office must report the
ethics performance of the
organisation in its integrated report.
The external auditors (or consulting
firm) must perform an independent
assessment or audit on the ethics
performance of the organisation.