BUS106 Ethics and Social Responsibility - from UNDERSTANDING CANADIAN BUSINESS, 7th Cdn Edition (custom publication for Seneca) ; published by McGraw-Hill

1. Week 4, Chapter 4
Ethics and Social Responsibility

2. Agenda
review
exercises
chapter 4
exercises

3. Learning Objectives
Explain why legality is only one step in behaving ethically.
Describe management’s role in setting ethical standards and
distinguish between compliance-based and integrity-based ethics
codes.
List the six steps that can be considered when setting up a
corporate ethics code.
Define corporate social responsibility and examine corporate
responsibility to various stakeholders.
Discuss the responsibility that business has to customers,
investors, employees, society, and the environment.

4. What is ethics?
http://www.youtube.com/watch?v=ZIaHxC7BT0A

5. Ethics is more than legality…it is “doing the right thing.” ethics is
the standards of moral behaviour that is accepted by society
right versus wrong)
In a country like Canada, with so many diverse cultures, you
might think it would be impossible to identify common standards
of ethical behaviour.

6. Ethical behaviour should be exhibited in our daily lives, not just in a
business environment.
Young people learn from the behaviour of
others.
a strong relationship was
found between academic
dishonesty among
undergraduate students
and dishonesty later when
these same students were
in the working world

7. Ethics Begins with Each of Us
We cannot expect society to
become more moral and ethical
unless we as individuals commit
to becoming more moral and
ethical ourselves.

8. Ethical Checklist
There are no easy solutions to ethical dilemmas.
Is it legal?
Is it balanced?
How will it make me
feel about myself?

9. Erin Brockovich
discovers a systematic cover-up of the
industrial poisoning (hexavalent
chromium) of the town of Hinkley's
water supply that threatens the health of
an entire community
discovers a 1966 document that ties a
conversation of a corporate executive in
the San Francisco PG&E headquarters to
the Hinkley station that knew the water
was contaminated but didn't do anything
about it and advised to keep it a secret
from the Hinkley neighborhood
Source: wikipedia.org

10. Managing Businesses Ethically and Responsibly
Organizational ethics
begin at the top.
The leadership and
example of strong top
managers can help
instill corporate
values in employees.
Some managers think
that ethics is a
personal matter—that
individuals either
have ethical
principles or they
don’t.

11. Setting Corporate Ethical Standards - compliance-based and
integrity-based (see Figure 4.5 page 91)
Compliance-Based
• Increasing control
and penalizing
wrongdoers
Integrity-Based
• Define guiding values
• Support ethical
behaviour
• Shared accountability

12. Six Steps to Improve Ethics
1. Top management support
2. Expectations begin at the top
3. Ethics imbedded in training
4. Ethics office set up
5. External stakeholders
informed
6. There must be enforcement
Six Steps to Improve Ethics

13. Exercise: Develop a code of ethics for classroom behaviour

14. Sarbanes-Oxley Act (SOX)
The major corporate and
accounting scandals in the United
Sates in the early 2000s (e.g.,
Enron, Tyco, Adelphia, and
WorldCom) gave rise to the
implementation of U.S. federal
legislation known as the
Sarbanes-Oxley Act (SOX).
The legislation established
stronger standards to prevent
misconduct and improve
corporate governance practices.

15. SOX applies to all publicly traded companies whose shares are
listed on the stock exchanges under the jurisdiction of the U.S.
Securities and Exchange Commission.
Since many Canadian companies operate in the U.S., they must
comply with SOX.
There are also many Canadian companies in Canada (which are
American subsidiaries) that must comply with SOX.

16. Whistleblowers: people who report illegal or unethical behaviour
among employees.
Whistleblowing Legislation in
Canada
Bill C-11: The Public Servants
Protection Disclosure Act -
there is no provision to protect
private-sector whistleblowers

17. Corporate Social Responsibility (also known as corporate
responsibility): the concern businesses have for the welfare of
society.
Includes everything from hiring
minority workers to making safe
products, minimizing pollution, using
energy wisely, and providing a safe
work environment—that is,
everything that has to do with acting
responsibly within society and toward
employees.

18. Not everyone thinks that CSR is a good thing.
Some critics of CSR
believe that a
manager’s sole role is
to compete and win
in the marketplace.
CSR defenders, on
the other hand,
believe that
businesses owe their
existence to the
societies they serve.

19. Corporate Philanthropy: charitable donations
Strategic philanthropy involves companies making
long-term commitments to one cause, such as the
Canadian Tire Foundation for Families. Since the
Canadian Tire Foundation for Families was
launched in 1999, over $27 million has
been donated to help
people in the greatest
need with the necessities of life.
Image source: http://www.newviewsociety.org/

20. Corporate social initiatives include enhanced forms of corporate
philanthropy that are more directly related to the company’s
competencies.
“Our thoughts are with the victims and families that
have been affected by flooding in Pakistan,” said Rick
Waugh, Scotiabank President and Chief Executive
Officer. “The suffering and property damage has
affected many communities and rebuilding efforts will
continue for many months. We are glad to play a role in
that effort.”
*donated $100,000

21. Corporate Responsibility in the 21st Century - There are two
different views of corporate responsibility to stakeholders:
The Strategic Approach
• requires that
management’s primary
orientation be toward the
economic interests of
shareholders
• as owners, shareholders
have the right to expect
management to work in
their best interests; that
is, to optimize profits
The Pluralist Approach
• recognizes the special
responsibility of
management to optimize
profits, but not at the
expense of employees,
suppliers, and members
of the community
• corporations can maintain
their economic viability
only when they fulfill their
moral responsibilities to
society as a whole

22. Stakeholders
Customers
Investors
EmployeesSociety
Environment

23. Responsibility to Customers
One responsibility of business is to
satisfy customers by offering them
goods and services of real value.
This responsibility is not as easy to
meet as it seems…more than half
of new businesses fail—perhaps
because their owners failed to
please their customers.

24. Responsibility to Investors
Ethical behaviour is good for shareholder
wealth. It doesn’t subtract from the
bottom line, but rather adds to it.
On the other hand, unethical behaviour
does cause financial damage.
Image source: http://antwerp.files.wordpress.com/2006/07/enron.jpg

25. Responsibility to Investors
Insider Trading - involves insiders
using private company information
to further their own fortunes or
those of their family and friends.

26. Ethics
Programs
Responsibility to Employees
The factor that most influences a company’s effectiveness and
financial performance is human resource management

27. One of business’s responsibilities to society is to create new wealth,
which is disbursed to employees, suppliers, shareholders, and other
stakeholders. If businesses don’t create wealth, who will?

28. Objectionable?
Image source: http://www.adrants.com
"It's a provocative ad but it is provoking things that
really are not what we want to have provoked. We
don't need any more violence“
Kim Gandy, National Organization for Women

29. Responsibility to Society - Non-profit organizations (NPOs)
play an important role in distributing the funds they receive from
donors, governments, and even their own investments in billions of
shares in publicly held companies
as those stock prices increase, more funds are available to benefit
society

30. Responsibility to the Environment
Businesses are often criticized for their role in damaging
the environment.

31. Ethical Decision Resolved Through:
Religious Teachings
Individual Rights
Legislation
Court Decisions
WRONG RIGHT

32. Reaction to the New Social Responsibility
Many companies have
undertaken a social audit, a
systematic evaluation of the
company’s position and progress
on social issues
Shareholders and other
stakeholders have actively
encouraged companies to
become proactive on social
issues.

33. Social Auditing - systematic evaluation of an organization’s
progress toward implementing programs that are socially
responsible and responsive
socially conscious investors
– social responsibility investing (SRI)
environmentalists
union officials
customers

34. Triple-Bottom Line (TBL, 3BL, or “People, Planet, Profit”) - used as
a framework for measuring and reporting corporate performance
against economic, social, and environmental parameters.
Social
EnvironmentEconomic
Sustainable
Viable

35. Interface Carpets - A Sustainability Champion
Vision: To be the first company that, by its deeds, shows the
entire industrial world what sustainability is in all its
dimensions: people, process, product, place, and profits — by
2020 — and in doing so we will become restorative through the
power of influence.
Ray Anderson: believes that if Interface, a petro-
intensive company, can get it right, it will never have
to take another drop of oil from the earth.
http://www.interfaceglobal.com

36. International Ethics & Responsibility
Ethics Not Unique To U.S. -
Leaders Accountable
Demand for Socially
Responsible Behaviour
Inter-American Convention
Against Corruption
Image source: http://www.chiefasiainspector.com

37. Doing business globally – what do you do when...
You are forbidden
to trade? – e.g.,
Cuba
Ethical norms of
the host country
violate the laws of
the home country?
Social
responsibility has
whole new
meaning
Environmental
practices differ
from the home
company?

38. Chapter Summary
Explain why legality is only one step in behaving ethically.
Describe management’s role in setting ethical standards and
distinguish between compliance-based and integrity-based ethics
codes.
List the six steps that can be considered when setting up a
corporate ethics code.
Define corporate social responsibility and examine corporate
responsibility to various stakeholders.
Discuss the responsibility that business has to customers,
investors, employees, society, and the environment.

40. 40
Homework