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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 aren’t 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 think is important which helps us make decisions about right and wrong. • Examples include: trustworthiness, honesty, respect, responsibility, empathy, good citizenship, perseverance • A person who values trustworthiness is unlikely to betray a friend. Morals • Rules we use to decide what’s good and what’s bad. Examples: • Stealing is bad because it harms the person you are stealing from • Lying is bad because it breaks trust and harms relationships Morals vs. Values • We tend to judge people more on their morals than their values • Sometimes our values conflict with our morals and we make questionable decisions. Example: • You might place a high value on friendships and wanting people to like you • You may believe that you don’t drink or drive or get into a car with someone who drinks and drives because irreparable harm and/or death may result • Conflict – You are at a party and you get into a car with someone you want to like you and this person has been drinking. Ethical Behaviour • Behaviour that conforms to ethics Unethical Behaviour • When we make 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.

com/ethics. or credo statement.cfm Ethical Standards for the Teaching Profession • http://www.e.jnj.investor. The Role of Business Ethics Consider: • Individual ethics are personal. So… • How do you apply your personal beliefs in a business environment? • Should you just do what your employer tells you to do – especially since s/he is paying you? 1.aspx?lang=en-CA . Business Code of Ethics/Conduct Business Code of Ethics • A document that outlines how employees and employers should respond in different situations • Stakeholders affected by business decisions include:  Customers  Employees  Suppliers  Competition  Society  Business owners (i.com/conduct. • Society’s ethics are usually standards for decency and respect of others.google. Google’s Code of Conduct • http://investor.oct.jnj. • Business ethics are tied both to society’s ethics and the ethics of the individuals own.ca/standards/ethical_standards. work for and buy products from the company.B.html Johnson and Johnson – Our Credo • http://www. shareholders)  Society at large  The Environment – (including future generations) Sometimes a business code of ethics/conduct is embodied in a company’s mission. vision.com/connect/about-jnj/jnj-credo/ Johnson and Johnson’s Ethical Code for the Conduct of Pharmaceutical Medicine • http://www.

not for the customers or clients..com/od/businessplanning/g/missionstatemen.htm Canadian Tire’s Mission Statement: “Canadian Tire is a growing network of interrelated businesses. Canadian Tire continuously strives to meet the needs of its customers for total value by offering a unique package of location. Mission Statement Mission Statement • A brief description of a company’s fundamental purpose. • When writing a vision statement. Vision Statement • Sometimes called a picture of your company in the future • The vision statement answers the question. About.2. October 2009. . Susan. “Mission Statement”. ZZZ Tours will become the premier eco-tour company in the world.com/od/businessplanning/g/visionstatement. About. price. Ward. Available:http://sbinfocanada.about. • A mission statement answers the question. Business Code of Ethics Challenges • Drawing the line between right and wrong is not always easy. service and assortment. For example: • Giving a gift to a valued client – gift or bribery? • A politician phones a bank on behalf of a friend who is seeking a loan – legitimate character reference or political influence for personal gain? Code of Ethics will not necessarily address every possible situation. October 2009. it does set the direction for your business planning.” 3. • A vision statement is for members of the company.com: Small Business Canada. the mission statement can be a valuable starting point for articulating company values.com: Small Business Canada. “Why do we exist?” • It articulates the company’s mission for both those who work in the company and the public. Ward.htm Example: Within the next five years. increasing revenues to 3 million dollars in 2013 by becoming internationally known for the comfort and excitement of the whale-watching tours it offers. Available: http://sbinfocanada. Susan. [Online]. [Online].. It reminds those in the company of what you are trying to build. “Where do we want to go?” • It articulates the hopes and dreams for the business. • While a vision statement doesn’t tell you how you’re going to get there.about. “Vision Statement”.

FRAUD Fraud The crime of lying or pretending The Competition Act 2002 bans these type of deceptive business practices: 1. but they still may be legal • Consider Mayor Larry O’Brien Trial & • The Global Economic Crisis • Laws are created to address acceptable business practices. without actually breaking the law. 3. but a company can still behave unethically.C. Will the decision survive the test of time? D. False or misleading advertising Advertising merchandise for a bargain price. Who will be hurt by what you do? How so? 4. workplace safety) • Discrimination against women and minorities • Product safety Resolving Ethical Dilemma Requirements: • Honesty • The ability to work collaboratively or cooperatively • Respect for others • Pride’s in one’s work • Willingness to learn and admit when you are “wrong” • Dependability • Responsibility for one’s actions • Integrity • Loyalty When the Code of Ethics is not clear or does not exist. Resolving Ethical Dilemma’s Examples of Business Ethical Dilemmas: • Disposal of toxic waste • Pollution control • Downsizing staff • Depletion and allocation of scarce natural resources • Changes in law and technology (privacy issues) • Employee rights (i. Unethical and Illegal Business Practices . consider the following questions: If I take this action: 1. but not having a reasonable quantity available for sale (bait and switch selling) Placing two different price tags on a product and selling it to the consumer at the higher price (double ticketing) . 2. Who will be helped by what you do? How so? 3. The Law and Resolving Ethical Dilemmas • Actions may be considered unethical. What are the benefits and problems of such a decision? 5. Who are the stakeholders? 2.e.

damaged. Insurance Fraud • A business or individual falsely claims lost. to create a contract. or stolen property in order to receive insurance settlements Mail Fraud • An individual uses the postal service for fraudulent purposes. or inheritance scams. Stock Market Fraud • An individual uses insider trading or other techniques to buy and sell stocks at artificial values. Contract Fraud • A business or individual uses temptations. . Consumer Fraud • A business tricks customers into buying goods or services they don’t really need through unethical advertising or false claims. chain letters. Telemarketing Fraud • A company uses high-pressure phone calls to get customers to buy now or to donate funds to bogus charitable causes. Pyramid Scheme Fraud • A person participating in the scheme recruits others in order to receive more money than she or he invested in the scheme. such as mailing phony job opportunities. Welfare Fraud • An individual receives benefits without being eligible.Common Fraud Examples Bank Fraud • A bank officer makes a fraudulent loan to a non-existent business and then pockets the money. such as bribes or kickbacks.

classifying and communicating financial information about a business so that informed judgments and decisions can be made based on that information. • States the financial position of a company on a certain date. • Between January 1 and December 31 of 2008 total revenues were $1 million and total expenses were $500. Balance Sheet • Reports a company’s Assets. supplies. money owed by customers called receivables. 1. Cash Flow Statement These statements will be found in corporations’ annual reports also called. Accounting Scandals Accounting Defined • The process of identifying. Revenues . Accounting Information Three formal statements that report financial information of a company are a company’s: 1. cash.E. equipment. measuring. Balance Sheet 2. other than a coporation. Income Statement or Statement of Operations 3.Expenses = Net Income/Proft R>E = Net Profit R<E = Net Loss .000. shareholder’s reports. Liabilities and Equity. land. Income Statement/Statement of Operations • Financial statement that shows all the revenues coming into a business and all the expenses associated with earning those revenues over a specific period of time.) Liabilities • Debts/money owed by the business to other businesses including banks Equity • For a company. Assets • Items that a business owns (building. it is called Owner’s Equity • For a corporation it is called Shareholder’s Equity and Retained Earnings • For an individual it is called Net Worth ASSETS – LIABILITIES = NET WORTH 2.

Cash Flow Statement • Financial statement that outlines where all the cash that is coming into the business is coming from and. Embezzlement • Is a type of accounting fraud in which an accountant or senior executive invents phony accounts and redirect money into them for personal gain • Often occurs in smaller businesses “Cooking the Books” • An common expression used to indicate corporate fraud • Often involves  misusing or misdirecting funds  overstating revenues  understating expenses  overstating the value of corporate assets to the public shareholders  under-reporting liabilities .3. • Where all the cash that is leaving the business is going to over a specific period of time. • Type of fraud Forensic Accountant • An 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. Users of Financial Information • Employees • Management • Banks • Creditors – businesses who extend credit (short term loans) to other businesses • Shareholders • Potential investors • The government Accounting Scandals Accounting Scandal • Crime involving accountants and/or senior executives of an organization who alter accounting records for personal benefit.

To avoid losing money on the shares you own. frightened shareholders will want to sell of their shares and consequently the price of the shares will drop. reliable. Case: Consider Martha Stewart Detecting Insider Trading • Provincial Securities Commission is the organization that regulates the Stock Market to ensure fair and legal trading. Case: Canadian Sponsorship Scandal Insider Trading • Occurs when someone makes 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. . • Computers programs are used to search for abnormal patterns of the sale or purchase of stocks. In June. independent auditors to ensure public accountability • It is often the outside auditors who stumble upon and/or discover accounting irregularities and call in a forensic accountant. however. fraud. face jail sentences and could be banned from furture stock market trading. • Insider trading violations are prosecuted by the Provincial Securities Commission and those convicted may face fines up to $1 million. who admitted to stealing billions from hundreds of clients. 2009 he was sentenced to 150 years in prison. you sell off your shares the day before this public announcement is made. • Is it right? Ethical? If so. When the news becomes public. be forced to turn over their profits. are required by law to be audited annually by outside. Whistle-Blowing • The decision of an employee to inform officials or the public about a legal or ethical violation.Auditors – Help to detect fraud and/or accounting scandals • Individuals whose job is to check the financial records of a company to determine if the information presented is accurate. and fair • Ensure the company is following the correct accounting procedures set up to help ensure that theft. Example: You learn from a friend who works for a corporation in which you own shares. that an accounting scandal about the company is going to hit the papers tomorrow. how should it be done? • Will/Should the whistle-blower be rewarded or punished or protected? Case Studies • Enron • Canadian Sponsorship Scandal • Bre-x • Canadian victims of disgraced New York financier Bernard Madoff. and embezzlement does not occur • Big corporations often have their own internal auditors • All public and crown corporations.

• Earl Jones Financial Ponzi scheme in Quebec .