Business Ethics and Corporate Social Responsibility

A. Terminology
Ethics
Standards or rules of conduct that help us distinguish between right and wrong.
Can help individuals decide on the best course of action in situations where they
arent sure what to do.
Help us get along with others, living with ourselves and living out good character.
Based on individual beliefs, values, morals, and standards in society
They may vary from person to person, situation to situation and culture to culture.
Values
Tell us what we thin is important which helps us mae decisions about right and
wrong.
!"amples include# trustworthiness, honesty, respect, responsibility, empathy, good
citi$enship, perseverance
% person who values trustworthiness is unliely to betray a friend.
Morals
&ules we use to decide whats good and whats bad.
!"amples#
Stealing is bad because it harms the person you are stealing from
'ying is bad because it breas trust and harms relationships
Morals vs. Values
(e tend to )udge people more on their morals than their values
Sometimes our values conflict with our morals and we mae *uestionable decisions.
!"ample#
+ou might place a high value on friendships and wanting people to lie you
+ou may believe that you dont drin or drive or get into a car with someone who
drins and drives because irreparable harm and,or death may result
Conflict - +ou are at a party and you get into a car with someone you want to lie
you and this person has been drining.
Ethical Behaviour
Behaviour that conforms to ethics
Unethical Behaviour
(hen we mae decisions that run counter to our values and,or morals and do things
that our individual beliefs and social standards define as bad or wrong.
B. The Role o Business Ethics
Consider#
.ndividual ethics are personal/
Societys ethics are usually standards for decency and respect of others/
Business ethics are tied both to societys ethics and the ethics of the individuals
own, wor for and buy products from the company.
So0
How do you apply your personal beliefs in a business environment1
Should you )ust do what your employer tells you to do - especially since s,he is
paying you1
!. Business Code o Ethics"Conduct
Business Code of !thics
% document that outlines how employees and employers should respond in different
situations
Staeholders affected by business decisions include#
Customers
!mployees
Suppliers
Competition
Society
Business owners 2i.e. shareholders3
Society at large
The !nvironment - 2including future generations3
Sometimes a business code of ethics,conduct is embodied in a companys mission,
vision, or credo statement.
4oogles Code of Conduct
http#,,investor.google.com,conduct.html
5ohnson and 5ohnson - 6ur Credo
http#,,www.)n).com,connect,about7)n),)n)7credo,
5ohnson and 5ohnsons !thical Code for the Conduct of 8harmaceutical 9edicine
http#,,www.investor.)n).com,ethics.cfm
!thical Standards for the Teaching 8rofession
http#,,www.oct.ca,standards,ethical:standards.asp"1lang;en7C%
#. Mission Statement
9ission Statement
% brief description of a companys fundamental purpose.
% mission statement answers the *uestion, <(hy do we e"ist1=
.t articulates the companys mission for both those who wor in the company and the
public.
(ard, Susan. <9ission Statement=. %bout.com# Small Business Canada, 6ctober
>??@, A6nlineB. %vailable#
http#,,sbinfocanada.about.com,od,businessplanning,g,missionstatemen.htm
Canadian Tires 9ission Statement#
<Canadian Tire is a growing networ of interrelated businesses... Canadian Tire
continuously strives to meet the needs of its customers for total value by offering a
uni*ue pacage of location, price, service and assortment.=
$. Vision Statement
Sometimes called a picture of your company in the future
The vision statement answers the *uestion, <(here do we want to go1=
.t articulates the hopes and dreams for the business. .t reminds those in the
company of what you are trying to build.
(hile a vision statement doesnt tell you how youre going to get there, it does set
the direction for your business planning.
% vision statement is for members of the company, not for the customers or clients.
(hen writing a vision statement, the mission statement can be a valuable starting
point for articulating company values.
(ard, Susan. <Cision Statement=. %bout.com# Small Business Canada, 6ctober >??@, A6nlineB.
%vailable#http#,,sbinfocanada.about.com,od,businessplanning,g,visionstatement.htm
!"ample#
(ithin the ne"t five years, DDD Tours will become the premier eco7tour company in the
world, increasing revenues to E million dollars in >?FE by becoming internationally
nown for the comfort and e"citement of the whale7watching tours it offers.
Business Code of !thics Challenges
Grawing the line between right and wrong is not always easy.
Hor e"ample#
4iving a gift to a valued client - gift or bribery1
% politician phones a ban on behalf of a friend who is seeing a loan - legitimate
character reference or political influence for personal gain1
Code of !thics will not necessarily address every possible situation.
C. Resolving Ethical %ilemma&s
!"amples of Business !thical Gilemmas#
Gisposal of to"ic waste
8ollution control
Gownsi$ing staff
Gepletion and allocation of scarce natural resources
Changes in law and technology 2privacy issues3
!mployee rights 2i.e. worplace safety3
Giscrimination against women and minorities
8roduct safety
&esolving !thical Gilemma &e*uirements#
Honesty
The ability to wor collaboratively or cooperatively
&espect for others
8rides in ones wor
(illingness to learn and admit when you are <wrong=
Gependability
&esponsibility for ones actions
.ntegrity
'oyalty
(hen the Code of !thics is not clear or does not e"ist, consider the following *uestions#
.f . tae this action#
F. (ho are the staeholders1
>. (ho will be helped by what you do1 How so1
E. (ho will be hurt by what you do1 How so1
I. (hat are the benefits and problems of such a decision1
J. (ill the decision survive the test of time1
%. The 'a( and Resolving Ethical %ilemmas
%ctions may be considered unethical, but they still may be legal
Consider 9ayor 'arry 6Brien Trial K
The 4lobal !conomic Crisis
'aws are created to address acceptable business practices, but a company can still
behave unethically, without actually breaing the law.
Unethical and )llegal Business *ractices + ,RAU%
Hraud
The crime of lying or pretending
The Competition %ct >??> bans these type of deceptive business practices#
F. Halse or misleading advertising
>. %dvertising merchandise for a bargain price, but not having a reasonable *uantity
available for sale 2bait and switch selling3
E. 8lacing two different price tags on a product and selling it to the consumer at the
higher price 2double ticeting3
Common Hraud !"amples
Ban Hraud
% ban officer maes a fraudulent loan to a non7e"istent business and then pocets
the money.
Consumer Hraud
% business trics customers into buying goods or services they dont really need
through unethical advertising or false claims.
Contract Hraud
% business or individual uses temptations, such as bribes or icbacs, to create a
contract.
.nsurance Hraud
% business or individual falsely claims lost, damaged, or stolen property in order to
receive insurance settlements
9ail Hraud
%n individual uses the postal service for fraudulent purposes, such as mailing phony
)ob opportunities, chain letters, or inheritance scams.
8yramid Scheme Hraud
% person participating in the scheme recruits others in order to receive more money
than she or he invested in the scheme.
Stoc 9aret Hraud
%n individual uses insider trading or other techni*ues to buy and sell stocs at
artificial values.
Telemareting Hraud
% company uses high7pressure phone calls to get customers to buy now or to
donate funds to bogus charitable causes.
(elfare Hraud
%n individual receives benefits without being eligible.
E. Accounting Scandals
%ccounting Gefined
The process of identifying, measuring, classifying and communicating financial
information about a business so that informed )udgments and decisions can be
made based on that information.
Accounting )normation
Three formal statements that report financial information of a company are a
companys#
F. Balance Sheet
>. .ncome Statement or Statement of 6perations
E. Cash Hlow Statement
These statements will be found in corporations annual reports also called,
shareholders reports.
!. Balance Sheet
&eports a companys %ssets, 'iabilities and !*uity.
States the financial position of a company on a certain date.
%ssets
.tems that a business owns 2building, land, e*uipment, supplies, cash, money owed
by customers called receivables.3
'iabilities
Gebts,money owed by the business to other businesses including bans
!*uity
Hor a company, other than a coporation, it is called 6wners !*uity
Hor a corporation it is called Shareholders !*uity and &etained !arnings
Hor an individual it is called Let (orth

%SS!TS - '.%B.'.T.!S ; L!T (6&TH
#. )ncome Statement"Statement o -perations
Hinancial statement that shows all the revenues coming into a business and all the
e"penses associated with earning those revenues over a specific period of time.
Between 5anuary F and Gecember EF of >??M total revenues were NF million and
total e"penses were NJ??,???.
&evenues 7 !"penses ; Let .ncome,8roft
&O! ; Let 8rofit
&P! ; Let 'oss
$. Cash ,lo( Statement
Hinancial statement that outlines where all the cash that is coming into the business
is coming from and/
(here all the cash that is leaving the business is going to over a specific period of
time.
Users o ,inancial )normation
!mployees
9anagement
Bans
Creditors - businesses who e"tend credit 2short term loans3 to other businesses
Shareholders
8otential investors
The government
Accounting Scandals
%ccounting Scandal
Crime involving accountants and,or senior e"ecutives of an organi$ation who alter
accounting records for personal benefit.
Type of fraud
Horensic %ccountant
%n independent person brought in from outside a company to investigate the legal
and financial documents of a company and find out what happened if a scandal has
been uncovered.
!mbe$$lement
.s a type of accounting fraud in which an accountant or senior e"ecutive invents
phony accounts and redirect money into them for personal gain
6ften occurs in smaller businesses
<Cooing the Boos=
%n common e"pression used to indicate corporate fraud
6ften involves
misusing or misdirecting funds
overstating revenues
understating e"penses
overstating the value of corporate assets to the public shareholders
under7reporting liabilities
%uditors - Help to detect fraud and,or accounting scandals
.ndividuals whose )ob is to chec the financial records of a company to determine if
the information presented is accurate, reliable, and fair
!nsure the company is following the correct accounting procedures set up to help
ensure that theft, fraud, and embe$$lement does not occur
Big corporations often have their own internal auditors
%ll public and crown corporations, however, are re*uired by law to be audited
annually by outside, independent auditors to ensure public accountability
.t is often the outside auditors who stumble upon and,or discover accounting
irregularities and call in a forensic accountant.
Case# Canadian Sponsorship Scandal
.nsider Trading
6ccurs when someone maes an investment decision based on confidential
information that is not available yet to the general public thereby giving
themselves an advantage over all other investors.
!"ample#
+ou learn from a friend who wors for a corporation in which you own shares, that an
accounting scandal about the company is going to hit the papers tomorrow. (hen the
news becomes public, frightened shareholders will want to sell of their shares and
conse*uently the price of the shares will drop.
To avoid losing money on the shares you own, you sell off your shares the day before
this public announcement is made.
Case# Consider 9artha Stewart
Getecting .nsider Trading
8rovincial Securities Commission is the organi$ation that regulates the Stoc 9aret
to ensure fair and legal trading.
Computers programs are used to search for abnormal patterns of the sale or
purchase of stocs.
.nsider trading violations are prosecuted by the 8rovincial Securities Commission
and those convicted may face fines up to NF million, be forced to turn over their
profits, face )ail sentences and could be banned from furture stoc maret trading.
(histle7Blowing
The decision of an employee to inform officials or the public about a legal or ethical
violation.
.s it right1 !thical1 .f so, how should it be done1
(ill,Should the whistle7blower be rewarded or punished or protected1
Case Studies
!nron
Canadian Sponsorship Scandal
Bre7"
Canadian victims of disgraced Lew +or financier Bernard 9adoff, who admitted to
stealing billions from hundreds of clients. .n 5une, >??@ he was sentenced to FJ?
years in prison.
!arl 5ones Hinancial 8on$i scheme in Quebec