The moral principles that guide how a business behaves — what it does and refuses to do
CSR: Corporate Social Responsibility — voluntary actions beyond legal requirements
ESG: Environmental, Social & Governance — the investor lens on ethical performance
Ethical frameworks: how philosophers say businesses SHOULD decide
Corporate governance: structures that keep businesses accountable
Whistleblowing: internal & external reporting of wrongdoing
Ethics questions appear in all three A-Level papers — often as 25-mark essays
Examiners want frameworks + examples + evaluation — not just "it's good/bad PR"
Legal = what you must do (minimum standard set by law)
Ethical = what you should do (higher standard based on moral values)
A business can be legal but unethical — e.g. legal tax avoidance, zero-hours contracts
A business can break an unjust law for ethical reasons — rare, but possible
The application of moral principles to business decisions and behaviour
Covers: treatment of workers, suppliers, customers, environment, and competitors
Ethics is contested — reasonable people disagree on what's right
Philanthropic — be a good corporate citizen (donate, community projects)
Ethical — do what is right, avoid harm
Legal — obey the law
Economic — be profitable (the base — without this, nothing else is possible)
Builds brand loyalty — consumers increasingly choose ethical brands
Attracts and retains talent — employees want purposeful work
Reduces risk — avoids regulatory fines, boycotts, reputational damage
Long-run profitability — sustainability reduces costs over time
Milton Friedman (1970): the only social responsibility is to increase profits for shareholders
Spending on CSR is spending shareholders' money without consent
Government — not business — should solve social problems via taxation
ESG = Environmental, Social, Governance — criteria used by investors to assess non-financial risk
Investors increasingly screen companies on ESG scores before investing
Poor ESG = higher perceived risk = higher cost of capital
Carbon footprint, water use, waste, climate targets, biodiversity
Worker rights, supply chain labour, diversity, community impact, data privacy
Board independence, exec pay, audit quality, shareholder rights, anti-corruption
CSR = voluntary actions by the business toward society
ESG = external measurement by investors of business risk & ethics
Both matter — but ESG is increasingly tied to access to finance
Greatest good for greatest number. Judge actions by their consequences.
Certain rights are inviolable. Some actions are always wrong regardless of outcome.
Focus on character. Would a virtuous person do this? Build good habits.
Balance interests of ALL stakeholders — not just shareholders. (Freeman, 1984)
Don't just name the framework — apply it to the scenario in the question
Utilitarian: "Closing the factory harms 500 workers but saves 2,000 jobs elsewhere..."
Rights: "Workers have a right to safe conditions regardless of cost savings..."
Stakeholder: "Suppliers, workers and local communities must all be considered..."
The system by which companies are directed and controlled (Cadbury Report, 1992)
Addresses the principal-agent problem: shareholders (principals) hire directors (agents) — interests may diverge
Directors may prioritise short-term bonuses over long-term shareholder value
| Role | Responsibility |
|---|---|
| CEO | Day-to-day management and strategy execution |
| Chair | Leads the board; should be separate from CEO role |
| Executive Directors | Full-time company employees on the board |
| Non-Executive Directors (NEDs) | Independent oversight; challenge management; audit/remuneration committees |
Comply-or-explain basis — listed companies must follow or justify deviation
Requires: board balance, audit committee, transparent remuneration, shareholder engagement
Independent of management — not full-time employees of the company
Provide challenge and scrutiny: "Why are we really doing this?"
Sit on key committees: Audit, Remuneration, Nomination
Criticism: may lack deep knowledge of the business; "groupthink" still possible
Reviews financial statements for accuracy and compliance
Oversees relationship with external auditors
Helps prevent financial fraud and misreporting (e.g. Enron scandal)
Sets executive pay — designed to align incentives with shareholder interests
Long-term incentive plans (LTIPs) link pay to 3–5 year targets
Controversy: CEO pay has grown 200× faster than median worker pay in 40 years
Pay ratio disclosure now required — CEO pay vs median employee
Reporting wrongdoing by an organisation to an internal or external authority
Wrongdoing includes: illegal acts, health & safety violations, financial fraud, cover-ups
| Type | Route | Outcome |
|---|---|---|
| Internal | Ethics hotline, line manager, board audit committee | Issue may be resolved privately; less damaging to reputation |
| External | Regulator (FCA, HSE), media, MPs | Public scrutiny; potential prosecution; reputational damage |
Public Interest Disclosure Act 1998 — protects workers from dismissal for whistleblowing
Must be in "good faith" and relate to a "qualifying disclosure"
Many whistleblowers still face informal retaliation — protection is imperfect
Businesses with strong ethics culture: open-door policy, anonymous reporting, no-retaliation pledge
Tone from the top matters — senior leaders model ethical behaviour
Competitive pressure: rivals cutting costs unethically forces response
Short-termism: quarterly targets vs long-term reputational effects
Leadership culture: ethical CEOs signal norms to entire organisation
Stakeholder pressure: consumers, NGOs, and media holding firms to account
Regulation: minimum ethical floor — law sets the baseline
Short run: ethical behaviour often costs more (e.g. fair-trade suppliers, safe factories)
Long run: unethical behaviour costs more (fines, boycotts, talent attrition, litigation)
Evidence: ESG-screened portfolios have matched or outperformed market indices
BUT: causality unclear — profitable firms may have MORE resources to spend on ethics
VW installed "defeat devices" to cheat emissions tests — illegal AND unethical
Result: $30bn+ in fines; CEO resigned; brand trust destroyed in key markets
Framework: utilitarian (millions of customers misled) + rights (customers deceived)
Outdoor brand built on sustainability — "Don't buy this jacket" campaign
In 2022 founder gave the company to a charity trust to fight climate change
Ethics as genuine strategy — not just PR
Staff paid below minimum wage via docking for time to pass security checks
Legal initially — but major public backlash forced changes
Shows: legal ≠ ethical; stakeholder pressure can force change
A clothing company discovers its supplier uses child labour. The practice is legal in that country. A manager argues: "The greatest good is served by keeping costs low and giving jobs to local families." Which ethical framework is the manager using?
Which of the following BEST describes the role of a Non-Executive Director (NED)?
A bank employee discovers that their line manager has been falsifying loan documents. They report it to the Financial Conduct Authority (FCA) rather than internally. This is an example of: