Copyright © 2014 McGraw-Hill Ryerson Ltd. Canadian Business and Society: Ethics, Responsibilities & Sustainability Chapter One The Relationship Between Business and Society Prepared by Dr. Peter Constantinou, York University Copyright © 2014 McGraw-Hill Ryerson Ltd.

Copyright © 2014 McGraw-Hill Ryerson Ltd. Chapter Outline LO 1.1 Complexity of Business & Society: Objectives LO 1.2 Integrity in Business: Key Terminology LO 1.3 Three Approaches to Ethical Thinking LO 1.4 Canadian Business System: Key Terminology LO 1.5 Corporations: The Main Economic Institutions LO 1.6 The People Who Run Canadian Business LO 1.7 Factors Influencing Attitudes Toward Business LO 1.8 The Consent of Society LO 1.9 Academic Integrity LO 1.10 Integration of Business and Society Copyright © 2014 McGraw-Hill Ryerson Ltd.

Complexity of Business & Society: Objectives 1. Increase awareness of the Canadian business system 2. Identify business’s response to its role in society 3. Learn how business corporations have responded to environmental challenges 4. Focus on the perspective of the manager or owner of a corporation Canadian business is comprised of many pieces who all influence business decision making. Book identifies several thing about the Canadian busineess system with 4 goals in particular LO 1.1 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Integrity in Business: Key Terminology Ethics of business: rules, standards, codes, or principles that provide guidance for morally appropriate behaviour in managerial decision making relating to the operation of the corporation and business’s relationship with society. Stakeholder: individual, or group, who can influence and/or is influenced by the achievement of an organization’s purpose Corporate social responsibility (CSR): the way a corporation achieves a balance among its economic, social, and environmental responsibilities in its operations so as to address shareholders and other stakeholders expectations. Corporate sustainability (CS): corporate activities demonstrating the inclusion of social, environmental, and economic responsibilities in business operations as they may impact all stakeholders to ensure the long-term survival of the corporation. Shareholders are those who own a business or who own shares in a business LO 1.2 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Integrity in Business: Key Terminology concl. Triple bottom line (3E): evaluation of a corporation’s performance according to a summary of the economic, ethical (social), and environmental value the corporation adds or destroys. Triple bottom line (3P): a variation, which is an evaluation of the corporation’s performance according to profits, people, and planet. Corporate citizenship: corporation demonstrating that it takes into account its role in and complete impact on society and the environment as well as its economic influence. Copyright © 2014 McGraw-Hill Ryerson Ltd.

Three Approaches to Ethical Thinking Deontological or rule-based theories Approach to ethics that determines goodness/rightness from examining the acts, rather than from the consequences of the acts Teleological or consequential theories Approach to ethics that focuses on outcomes, or results of actions Virtue ethics Emphasizes the individual’s character or identity, and focuses on being instead of doing Chapter 1. p.7, Table 1.2 identifies limitations LO 1.3 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Canadian Business System: Key Terminology Economic system: arrangement using land, labour, and capital to produce, distribute, and exchange goods and services to meet the needs and wants of people in society. OBJECTIVE: use a society's resources to meet the society’s needs Capitalism: economic system that allows for private ownership of the means of production (land, labour, and capital) and assumes that economic decision making is in the hands of individuals or enterprises who make decisions expecting to earn a profit Free enterprise system: economic system characterized by ownership of private property by individuals and enterprises; the profit motive; a competitive market system; and a limited involvement by government Laissez-faire capitalism: economic system operating with absolute minimum interference by the government LO 1.4 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Canadian Business System: Key Terminology concl. Responsible enterprise system: economic system operating as a free enterprise system but incorporating the element of accountability Stakeholder capitalism: economic system in which corporations accept broader obligations beyond financial ones for shareholders Clean capitalism: “economic system in which prices fully incorporate social, economic and ecological costs and benefits, and actors are clearly aware of the consequences of their marketplace actions” Copyright © 2014 McGraw-Hill Ryerson Ltd.

Corporations: The Main Economic Institutions The Canadian business system comprises business enterprises varying from sole or single proprietorships to partnerships and incorporated entities (corporations). Doctrine of Incorporation: Freedom of association: The association of individuals coming together for some purpose is fundamental to forming a corporation. When a business incorporates, a separate legal entity is created, therefore owners aren’t personally liable. LO 1.5 Copyright © 2014 McGraw-Hill Ryerson Ltd.

The People Who Run Canadian Business Owners Direct ownership (e.g., shareholders); or Indirect ownership (e.g., mutual fund holders) Boards of Directors Elected by shareholders Must fulfill legal and fiduciary obligations Managers Top Managers are hired by boards of directors Oversee operations of corporation All three of these stakeholders are more aware than ever of the ethics of business and the resulting implications. This awareness also includes monitoring society’s attitudes towards business LO 1.6 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Factors Influencing Attitudes Toward Business Standard of living provided by the business: as standards of living increase, the more likely society will view business in a positive manner Decentralized decision making: decision ,making independently of one another, ensuring that a wide variety of goods and services are available. Viewed favourably by consumers Allocation of resources: Self-interest: Inequities in society: ***p. 15 LO 1.7 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Factors Influencing Attitudes Toward Business Business cycle Business wrongdoing Globalization Unemployment Innovation The Media Government LO 1.7 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Copyright © 2014 McGraw-Hill Ryerson Ltd. The Consent of Society Legitimacy: belief in the rightness of an institution, in this case the appropriateness of our business system to supply the goods and services wanted by Canadian society. Social licence: is the privilege of operating in society with minimal formalized restrictions based on maintaining public trust by doing what is acceptable to stakeholders in the business and society relationship. LO 1.8 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Copyright © 2014 McGraw-Hill Ryerson Ltd. Academic Integrity What percent of students cheat? 53 percent of students admit to cheating in written assignments (Maclean’s, 2007) 56 percent of business students admit to cheating (Maclean’s, 2007) Will the lack of academic integrity have an influence on business integrity? It could very well lead to poor ethical decisions in the workplace. Students must get used to handling ethical problems before they enter the workplace Changes have to be made by students and faculty members LO 1.9 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Integration of Business and Society Must be a shared value in which both business and society benefit Goal is to reduce friction between society and business and to increase the benefits for both Integration is the focus of the textbook/course “an act or instance of combining into an integral whole” Essentially, business and society must be one rather than two separate beings LO 1.10 Copyright © 2014 McGraw-Hill Ryerson Ltd.

Integration of Business and Society ADDED Business needs a healthy society in which education and health care exist Carefully developed gvnmt. Policies increase business efficiency Creates demands for products and services Society needs successful companies Jobs, wealth, innovation --- leads to increased standard of living If a company is weakened by gvnmt./NGO’s, jobs disappear, competitiveness is lost, wages stagnate, and wealth declines There must be a shared value in which business and society both benefit. The direction of the ethics and responsibilities of business is towards reducing the frictions and increasing the benefits Copyright © 2014 McGraw-Hill Ryerson Ltd.

Copyright © 2014 McGraw-Hill Ryerson Ltd. Chapter Summary To understand the relationship between business and society, it is necessary to be knowledgeable of the business systems. Businesses need to be responsive to society’s expectations of its social and economic responsibilities. Copyright © 2014 McGraw-Hill Ryerson Ltd.