Organisational objectives 3 On completing this chapter you should be able to: Know and understand

Maximising short-term sales revenue
This could bene
fi
t managers and sta
ff
when salaries and bonuses are dependent on sales 
revenue levels. However, if increased sales are achieved by reducing prices, the actual 
pro
fi
ts of the business might fall.
Maximising shareholder value
Management, especially in public limited companies, take decisions that aim to increase 
the company share price and dividends paid to shareholders. These targets might be 
achieved by pursuing the goal of pro
fi
t maximisation. This shareholder value objective 
puts the interests of shareholders above those of other stakeholders.
Ethical objectives
Ethical
objectives are targets based on a moral code for the business – for example, ‘doing 
the right thing’. The growing acceptance of corporate social responsibility has led to 
businesses adopting an ‘
ethical code
’ to in
fl
uence the way in which decisions are
taken.
Most decisions have an ethical or moral dimension. For example:
• Should a toy company advertise products to young children so that they ‘pester’ their 
parents into buying them?
• Is it acceptable to take bribes in order to place an order with another company?
• Should a bank invest in a company that manufactures weapons or tests new chemicals 
on animals?
• Is it acceptable to feed genetically modi
fi
ed food to cattle?
ethics:
moral guidelines 
that determine decision-
making
ethical code (code of 
conduct):
a document 
detailing a company’s rules 
and guidelines on staff 
behaviour that must be 
followed by all employees

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Business organisation and environment
44 
1.3
• Do we accept lower pro
fi
ts in the short term by purchasing less-polluting production 
equipment?
• Should directors receive substantial pay hikes and bonuses when other workers in the 
business might be being made redundant?
• Is it acceptable to close a factory to save costs and increase pro
fi
ts even though many 
jobs will be lost and workers may 
fi
nd it hard to get other jobs?
• If legal controls and inspections are weak in a country, is it acceptable to pay very low 
wages for long hours of work since this policy will reduce the 
fi
rm’s costs?
• Should a business employ child labour to reduce costs compared with employing adults?
• Should a business continue to produce potentially dangerous goods as long as ‘no one 
fi
nds us out’?
These are all examples of ethical dilemmas. The way in which employees behave and 
take decisions in these cases should be covered and explained by a company’s ethical 
code of conduct. To what extent should businesses take ethics into consideration when 
making decisions? There is now considerable evidence that more and more companies 
are considering the ethical dimension of their actions – not just the impact they might 
have on pro
fi
ts.
Di
ff
erent people will have di
ff
erent answers to these dilemmas. Some managers will 
argue that any business decision that reduces costs and increases pro
fi
ts is acceptable 
as long as it is legal – and some might argue that even illegal actions could be justi
fi
ed 
too. Other managers will operate their business according to strict ethical rules and will 
argue that, even if certain actions are not illegal, they are not right. Morally, they cannot 
be justi
fi
ed even if they might cut costs and increase sales.