Business Ethics & Managers in PLCs (AQA A Level Business Paper 1: Example 25 Mark Essay)

Here is an example essay for the AQA Paper 1 25 mark essay title below. Examiner commentary is provided in italics at the end of each part of the response together with an overall comment at the end.

The managers of a public limited company believe that it is important for the business to behave ethically. To what extent do you think that an ethical approach to business is now essential for managers in public limited companies? (25 marks)

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Has there ever been a more important time than NOW for managers of public companies to make their decision making ethical? It is hard to imagine there has, given the intense scrutiny of public company directors and the damage to shareholders when companies are found to have acted unethically. Indeed, it might be argued that ethics has become more important than maximising profit for public companies.

Unusual start to the response, the first sentence will catch the eye of the reader by posing a question related to the one set. The following answer demonstrates implicit understanding of a range of terms by using the terms effectively and accurately. The final sentence has a judgemental tone from which the answer can build.

One compelling reason why it is essential managers of public companies use ethical decision making is to protect shareholder value. In most public companies, there is a divorce between ownership and control, so shareholders look to managers to take the best decisions to protect and improve the value of their shares. The market capitalisation of public companies is affected by many financial factors (e.g. revenue growth, net profit) but also, increasingly the reputation of a business. Ethically-strong businesses can enjoy strong customer loyalty, attract better-quality employees and attract finance from funds that prefer to invest in companies with strong ethics (so-called ethical investing). By contrast, the recent cases of GSK, Rolls-Royce and VW show how a firm’s reputation can be damaged when unethical decision making by managers is exposed, leading to significant costs and falls in share prices, thereby damaging shareholder value. Of course, some public companies can eventually recover from such scandals particularly if new leadership is brought it, however it takes time to rebuild an ethical reputation, especially with customers.

This section of the response is a long paragraph which covers many points. It demonstrates a high level of selectivity which could only come from giving thought to a plan prior to starting. The answer does not waste time developing each point, but has focused on developing those of greatest relevance to the question set, for example the sentence starting "Ethically-strong businesses" covers three distinct points to lay the ground for the more detailed points in the remaining part of the paragraph. The final two sentences then refer well to three good examples – without needless detail, this allows the response to focus on the consequences of the unethical decisions rather than the decisions themselves.

Others argue that profit maximisation is still more important today than ethical decision making. Managers in public companies who share this view would probably agree with Milton Friedman who argued that “the business of business is business” and that managers only responsibility to society is to operate within the law. It might be that managers running firms like Sports Direct and Uber take this approach, focusing on profit and growth rather than building an ethical reputation. Has negative publicity about their decision making on employee working conditions & pay affected business performance? Not really. There must, therefore, still be many public companies where profit maximisation and other financial objectives are viewed by managers as more important than ethics.

This counter argument makes good use of relevant theory – through Friedman, but then relates this to a couple of topical examples to form a good argument. The question and self-answer approach is used again here – though I wonder if this point is also related to the type of customers being targeted.

Overall I believe that in the current business environment ethical decision making has become more important for managers of public companies. Whether ethics can be said to be essential depends on the importance that the firm’s stakeholders (e.g. shareholders, government and customers) place on it. For example, in personal financial services, ethical decision making is now essential to avoid the huge costs and reputational damage suffered by well-known public companies who engaged in mis-selling and interest rate-rigging. Failure to have ethical decision making in such industries has the potential to destroy a public company as well as the personal reputation of managers who condone unethical behaviour.

The concluding paragraph starts well by refocusing on the way the original question is phrased. Overall this is an effective conclusion that brings in a new point rather than building on points analysed previously (both approaches can be effective if done well). This is effective as the point is made clearly and has been planned to be raised at this stage. The important point regarding stakeholders is new – and could have been mentioned earlier, but the depth of analysis here together with a clear contextual development.

Overall this is a concise answer to a question – it is selective and remains focused throughout. It has a clear structure which must have been the result of some thought / planning.