Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Chapter 5 Ethics and Social Responsibility

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Learning Goals 1. Explain why legality is only the first step in behaving ethically and ask the three questions one should answer when faced with a potentially unethical action. 2. Describe management’s role in setting ethical standards and distinguish between compliance- based and integrity-based ethics codes. 3. List the six steps in setting up a corporate ethics code. 4. Define corporate social responsibility and examine corporate responsibility to various stakeholders. 5. Discuss the responsibility that business has to customers, investors, employees, society and the environment.

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Question Can you think of an example of business and questionable ethics?

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Ethics Check Questions o Is it legal? o Is it balanced? o How will it make me feel about myself?

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Why Should Businesses be Managed Ethically? o To maintain a good reputation o To keep existing customers o To attract new customers o To avoid lawsuits o To reduce employee turnover o To avoid government intervention o To please customers, employees and society o TO DO THE RIGHT THING!

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Codes of Ethics  Compliance-Based Increase control and penalize wrongdoers  Integrity-Based Define guiding values Support ethical behaviour Shared accountability

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson 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

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Responsibility Defined  Corporate Social Responsibility (CSR) The concern businesses have for the welfare of society. Corporate Philanthropy – charitable donations to non-profit groups. Corporate Social Initiatives - enhanced forms of corporate philanthropy. i.e., Johnson & Johnson sends medical supplies to disaster areas. Corporate Responsibility – acting responsibly within society Corporate Policy – position on social and political issues

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Levels of Corporate Responsibility  Responsibility to Customers  Responsibility to Investors  Responsibility to Employees  Responsibility to Society  Responsibility to the Environment

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Social Auditing  Socially conscious investors  Environmentalists  Union officials  Customers

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson International Ethics and Social Responsibility  Federal Accountability Act (Canada)  Kyoto Protocol (International)  Socially responsible expectations of international partners, suppliers  Inter-American Convention Against Corruption  International Standards Organization (ISO)

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson Conundrums of Doing Business Globally  What do you do when: You are forbidden to trade – US to 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