2. Business Ethics and Social Responsibility2
Chapter
Business Ethics and Social Responsibility

3. Learning Objectives
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.
LO 2.4 Describe how businesses can act responsibly to satisfy society.
LO 2.5 Explain the ethical responsibilities of businesses to investors and the financial community.

4. Concern for Ethical and Societal Issues
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

5. Concern for Ethical and Societal Issues (cont’d)
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

6. 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

7. Business Approach to Ethics and Social Responsibility
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

8. Test Your Knowledge A firm’s ability to behave ethically depends upon
a) 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
Answer: d

9. Individuals Make a Difference
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

10. Development of Individual Ethics
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

11. On-the-Job Ethical Dilemmas
Situation in which a business decision may be influenced by personal gain.
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.
Employee’s disclosure of illegal, immoral, or unethical practices in the organization.
FIGURE 2.3 Common Business Ethical Challenges

12. How Organizations Shape Ethical Conduct
FIGURE 2.4 Structure of an Ethical Environment

13. Ethical Awareness
Code of Conduct: Formal statement that defines how the organization expects
and requires
employees to resolve ethical questions
FIGURE 2.4 Structure of an Ethical Environment
Johnson & Johnson credo
Air Canada code of conduct

14. Ethical Education
Codes of conduct cannot detail a solution for every ethical situation, so corporations provide training in ethical reasoning
FIGURE 2.4 Structure of an Ethical Environment

15. Ethical Action
Helping employees recognize and reason through ethical problems and turning them into ethical actions
TI Ethics Quick Test
FIGURE 2.4 Structure of an Ethical Environment

16. 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
FIGURE 2.4 Structure of an Ethical Environment

17. 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

18. Businesses’ Social Responsibilities
FIGURE 2.5
Businesses’ Social Responsibilities

19. 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

20. Test Your Knowledge What is green marketing?
a) A marketing strategy that promotes environmentally safe products and production methods
b) A colour-coded market strategy designed to improve employee morale
c) A marketing strategy that promotes environmentally questionable products and production methods
d) none of the above
Answer: a

21. Responsibilities to Customers
Ability of consumers to express legitimate complaints to the appropriate parties.
Safe operation of products, avoiding product liability.
Avoiding false or misleading advertising and providing effective customer service.
Ability of consumers to choose the products and services they want.
FIGURE 2.6 Commonly Referred‐to Consumer Rights

22. 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.

23. 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

24. Copyright
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