Business Ethics and Social Responsibility

Chapter

2

LO 2.1 Explain the concepts of business ethics and social responsibility.

LO 2.2 Describe the factors that influence business ethics.

LO 2.3 Discuss how organizations shape ethical behaviour.

Learning Objectives

LO 2.4 Describe how businesses’ social responsibility is measured, and summarize the responsibilities of business to the general public, customers, and employees.

LO 2.5 Explain why investors and the financial community are concerned with business ethics and social responsibility.

Business Ethics Business ethics: standards of conduct and

moral values regarding right and wrong actions in the business environment Often shaped by the organization’s

ethical climate; social responsibility; balance between what’s right and what’s profitable

Often no clear-cut choices

Concern for Ethical and Societal Issues

Sarbanes-Oxley Act and Bill 198 This U.S. act added oversight for the

nation’s major companies and a special oversight board to regulate public accounting firms that audit the financial records of these corporations.

The provisions of this act apply to Canadian companies trading on U.S. stock exchanges.

Similar legislation has been enacted in Canada known as Bill 198 of 2003, which has come to be referred as “C-SOX” or the Canadian version of Sarbanes-Oxley.

Concern for Ethical and Societal Issues

The Contemporary Ethical Environment

High-profile investigations and arrests in headlines.

Vast majority of businesses are ethical.

New corporate officers charged with deterring wrongdoing and ensuring ethical standards.

Engage in traditional corporate philanthropy, which involves giving to worthy causes.

Anticipate and manage risks. Identify opportunities to create value by

doing the right thing.

See how Walmart highlights corporate responsibility on its website.

Business Approach to Ethics and Social Responsibility

A firm’s ability to behave ethically depends upona. the ethical values of the firm’s executives.b. the ethical values of the firm’s employees.c. a climate within the organization that promotes ethical conduct.d. all of the above

Test Your Knowledge

A firm’s ability to behave ethically depends upona. the ethical values of the firm’s executives.b. the ethical values of the firm’s employees.c. a climate within the organization that promotes ethical conduct.d. all of the aboveAnswer: D

Test Your Knowledge

Individuals can make the difference in ethical expectations and behaviour. Putting own interests ahead of the

organization Lying to other employees Misrepresenting hours Safety violations Internet abuse

Technology is expanding the range and impact of unethical behaviour.

Individuals Make a Difference

An individual’s stage in moral and ethical development is determined by many factors. Experiences Family Education Culture Religion Company environment

Individuals have different styles for deciding moral dilemmas.

Development of Individual Ethics

On-the-Job Ethical Dilemmas

Situation in which a

business decision

may be influenced

by personal gain.

Employee’s

disclosure of

illegal, immoral,

or unethical

practices in the

organization.

Telling the truth and

adhering to deeply

felt ethical principles

in business

decisions.

Businesspeople

expect employees

to be loyal, but

ethical conflicts

may arise if the

truth about a

company is not

favourable.

How Organizations Shape Ethical Conduct

Ethical Awareness

Code of Conduct: Formal

statement that defines

how the organization

expects and requires

employees to resolve

ethical questions.

Johnson & Johnson credo

Air Canada code of

conduct

Ethical Education

Codes of conduct cannot

detail a solution for

every ethical situation,

so corporations provide

training in ethical

reasoning.

Ethical Action

Helping employees

recognize and reason

through ethical

problems and turning

them into ethical

actions.

TI Ethics Quick Test

Ethical Leadership

Executives must

demonstrate ethical

behaviour in their actions.

use clear, explicit language

rather than euphemisms for

corrupt behaviour

encourage behaviour that

generates and fosters ethical

values

practise moral absolutism,

insisting on doing right even if

it proves financially costly

Acting Responsibly to Satisfy Society

Social Responsibility

Management’s consideration of profit, consumer

satisfaction, and societal well-being of equal value in

evaluating the firm’s performance.

Contributions to the overall economy, job opportunities,

and charitable contributions and service.

Organizations measure through social audits.

Starbucks reduces

environmental impact

Business’s Social Responsibilities

Responsibilities to the General Public Public Health Issues. What to do about

inherently dangerous products such as alcohol, tobacco, vaccines, and steroids.

Protecting the Environment. Using resources efficiently, minimizing pollution.

Green marketing Sustainability

Developing the Quality of the Workforce. Enhancing quality of the overall workforce through education and diversity initiatives.

Corporate Philanthropy. Cash contributions, donations of equipment and products, and supporting the volunteer efforts of company employees.

What is green marketing?a. A marketing strategy that promotes environmentally safe products and production methodsb. A colour-coded market strategy designed to improve employee moralec. A marketing strategy that promotes environmentally questionable products and production methodsd. None of the above

Test Your Knowledge

What is green marketing?a. A marketing strategy that promotes environmentally safe products and production methodsb. A colour-coded market strategy designed to improve employee moralec. A marketing strategy that promotes environmentally questionable products and production methodsd. None of the aboveAnswer: A

Test Your Knowledge

Responsibilities to Customers

Ability of

consumers to

express legitimate

complaints to the

appropriate parties.

Ability of

consumers to

choose the

products and

services they

want.

Safe operation of

products, avoiding

product liability.

Avoiding false or

misleading

advertising and

providing

effective

customer service.

Responsibilities to Employees Workplace Safety. Managed mostly at the provincial

level by organizations such as the Workplace Safety & Insurance Board in Ontario and the Workers’ Compensation Board of Alberta.

Quality-of-Life Issues. Balancing work and family through flexible work schedules, subsidized child care. Canada's Top Family Friendly Employers

Ensuring Equal Opportunity on the Job. Providing equal opportunities to all employees without discrimination regarding age, sexual orientation, physical disabilities, etc.; regulated by the Canadian Human Rights Commission.

Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual nature; equal pay for equal work without regard to gender.

Responsibilities to Investors

Obligation to make profits for shareholders.

Expectation of ethical and moral behaviour.

Protection of investors by provincial regulators such as the Ontario Securities Commission and the Alberta Securities Commission.