PRINCIPLES OF BUSINESS

ETHICAL AND LEGAL ISSUES IN

BUSINESS
Quote of the day
 Specific Objectives
At the end of the lesson students
should be able to:
⚫ Explain the ethical and legal
issues in the establishment and
operation of a business.
⚫ Explain the principles that must
be adapted in the establishment
and operation of a business.
⚫ Explain the consequences of
unethical and illegal practices
in business.
Ethical and Legal Issues in the
Establishment and operation of a
business
Legal issues refer to activities that are guided by the law
of a country that businesses have to abide by.
Business ethics – is concerned with businesses doing the
“right things”, and behaving in a fair and honest way in
the daily operations of the business.
⚫ Being “unethical” is not necessarily illegal, but it is
“not the right thing to do”.
Outline ways in which business engage in
unethical practises?
 Elements of Unethical Business Practice
⚫Some firms produce misleading
advertisements conveying false
information which could result in
harm to citizens.
⚫Unethical disposal of waste -
Some firms pollute rivers and
seas by dumping their wastes in
them
⚫Not abiding to zoning
regulations.
 Elements of Unethical Business Practice
⚫Some supermarkets do not
give the full weight for dry
ingredients such as flour,
sugar and rice, making
thousands in profits yearly
from this exercise.
⚫With-holding tax –
businesses collecting
money on behalf of the
government by
deducting from their
employees wages taxes
such as national
insurance and income
tax and do not pass it on
to the government.
Businesses should ensure
⚫The capital invested into the business is derived from
legitimate sources and not tainted with illegal
operations as a source of funding.
⚫The business is a legitimate firm and not used as a
front or ‘shell company’ to hide money laundering or
other illicit activities.
What are the consequences of
businesses engaging in
unethical/illegal practises?
 Consequences of Unethical and Illegal
Practices in Business
⚫ Unethical disposal of waste – pollution which can
lead to loss of lives and the endangering of the health
and lives of employees, customers and other
stakeholders.
⚫ Breaking laws can lead to costly legal battles.
⚫ Witholding of taxes – fines for breaching laws; shut
down of business; imprisonment.
⚫ Mis-leading advertisement - Loss of customer
loyalty; lawsuits.
⚫ Business lose its reputation and credibility
⚫ Loss of important contracts from customers who
have no tolerance for illegal and/or unethical
activities.
Code of ethics. What is it?
 Principles that must be adopted in the
establishment and operation of a
business
⚫The adoption of an This covers:
organization code of ethics – ⚫complying with the law,
this clarifies the organization not engaging in corruption
mission, values and principles and bribery and respecting
linking them with standards of the environment.
professional conduct. This ⚫being honest, respectful
serves as a reference for and have a high level of
managers and employees integrity.
when making decisions at
work.
 Principles that must be adopted in the
establishment and operation of a
business
⚫ The adoption of policies on ⚫ Policy for handling
environmental issues – an personal information –
environmental policy employees personal file
outlines how a company must be kept confidential,
deals with environmental health related matters,
issues such as eliminating contract of employment
waste, recyling materials, and transactions with
reducing enery use, reuse suppliers and customers.