Social Responsibility and Ethics in Business

RIM ► Blackberry loss of service. Is this a dilemma or an ethical dilemma?

► What is social responsibility in business? ► What are ethics and why is it important?

► Ethics – the rules that help us tell the difference between right and wrong and encourage us to do the right thing. ► Values – tell us what we think is important ► Morals – are the rules we use or believe to decide what’s right and wrong.

► Individual Ethics- personal beliefs about what is good and bad ► Business Ethics- tied to both society’s ethics and the ethics of the individuals who work for, and buy products from the company

► Example: You own a large corporation that that produces millions of bottles of over the counter headache and cold medication. An employee in one of your processing plants intentionally put poison into some of your pill bottles leading to the deaths of 7 people What would you do?

► Establishing a code of ethics helps different people approach problems in the same way. ► Code of ethics- a document that explains specifically how employees should respond in different situations.

► Dilemma – a situation where there is a difficult choice between two or more options. Dilemmas have good points and bad points. ► Ethical Dilemma – a moral problem with right or wrong answers

► Which example below is an example of a dilemma ► A business decision about where to locate a factory ► A friend asks you to write down that he worked 2 hours more than he actually did on his time sheet.

Whistle-blowing ► Whistle-blowing – is the decision of an employee to inform officials or the public about legal or ethical violation ► Examples of issues that a whistle-blower might report are; ► Someone submitting false information on an expense report ► A business that is ignoring hiring procedures for minorities ► A business that’s knowingly ignoring workplace safety codes ► A business that’s not observing mandated health codes

Bre-X ► Canadian mining company ► Reported that they were sitting on an enormous gold mine ► Shares went from under $1/share to $286/share. A $1000 investment would have made you $286,000. ► It was massive fraud because there was no gold. ► Bre-X was bankrupt less than 7 years later

Enron ► Biggest accounting scandal of all time ► Was one of the worlds largest electricity, natural gas, and communications companies. ► In 2001 Enron went bankrupt because an audit revealed that the assets and the profits of Enron had been grossly inflated and in some cases non-existent. ► Accused of inflating income by over $586 million in a 4 yr. period. ► Over 20,000 people lost their jobs ► Millions of investors lost $60 billion dollars!! ► Senior executives faced criminal charges and jail sentences ► The auditors Arthur Anderson Inc. also went bankrupt.

Scenario ► Lets say that you are an executive for McDonalds (mmmmm….Mc Donalds) and you learned in a meeting that an accounting scandal about your company is about to hit the newspapers tomorrow. As a result share prices of your company are going to drop, so you decide to sell your shares immediately. Is this legal? What do we call this?

► Insider trading- buying or selling shares in a company based on confidential information. It is illegal! ► How do we catch insider trading? ► Sophisticated computer systems that look at abnormal trading patterns

► Repercussions for insider trading ► Fines of up to $1 million dollars ► Forced to turn over profits ► 2 year jail sentence ► Banned from future trading

Corporate Social Responsibility ► What do you think makes a business socially responsible?

► A socially responsible business provides goods and services in line with society’s values. ► CSR Principles  Provide a safe and healthy work environment  Adopt fair labour policies  Donate to charity  Protect the environment  Avoid price discrimination  Truthful advertising

► Duty to report – corporations must disclose all important information to shareholders, business partners, lenders, insurers, communities, regulators, consumers and employees ► Why is it necessary for businesses to report their true financial situation?

Laws that Govern Corporate Ethics ► In Canada there are many laws that guide ethical behavior. ► Workplace safety ► Antidiscrimination issues ► Accessibility issues for people with disabilities ► Environmental responsibility ► Labour practices

Laws that Govern Corporate Ethics ► 1)Workplace Safety ► Occupational Health and Safety Act (OHSA) - Gives rights and responsibilities to workers ► 3 rights  The right to refuse unsafe work  The right to participate in the workplace health and safety activities  The right to know about the actual hazards in the work place

► 2). Antidiscrimination  an employee cannot be singled out or treated differently because of his or her race, religion, gender, or sexual orientation  Glass ceiling – invisible barriers to senior leadership positions

Antidiscrimination Continued ► Harassment- refers to those behaviors that are found to be threatening or disturbing.  Examples ► Bullying ► Stalking ► Sexual harassment (verbal or physical) ► Threats ► Insults ► Abusive comments

► 3. Accessibility Issues – this law helps identify how much they need to do for disabled workers. ► Duty To Accommodate_- employers obligation to meet the needs of disabled employees in the workplace

► 4. Environmental Responsibility- ► Environmental acts in Canada  Environmental Protection act ► Established in 1999 after Exxon oil spill off west coast of Canada ► Whistle-blower protection ► Give citizens the right to sue where CEOA violation results in harm to the environment ► Contribute to sustainable development through pollution prevention

Environmental Responsibility Cont. ► Kyoto Protocol (Kyoto Accord)  Agreement formed in 1990  Carbon emissions are to be reduced 5% by 2012  Canada may not reach this goal due to the cost of businesses to reduce their emissions

► Why do you think there is such slow progress in businesses reducing carbon emissions?

Labour Practices ► 5. Labour Practices –  Employment Standards Act ► Sets out certain mandatory minimum conditions of employment (ex. hours of work, overtime, minimum wage, holidays, benefit plans, pregnancy and parental leave etc.  Pay Equity Legislation ► designed to prohibit gender pay discrimination ► research shows that women make 20%-30% less than men

Labour Practices Cont. ► Privacy Laws  Personal Information Protection and Electronic Documents Act – January 1, 2004  This law requires businesses to explain what personal information is required from employees or customers and why the need it.  Businesses are accountable for all information that they obtain.  What does this mean?

► Fair Trade  the practice of helping producers in developing countries bypass expensive middlemen so they can sell their goods in other countries for a fair profit. ► TransFair Canada  Non-profit organization that ensures companies claiming to be fair trade are properly certified and that the purchases are benefiting the producers and workers.