➔ Business drives the economy of a nation

➔ The economic system in Canada is a private enterprise system

◆ Rewards firms for effectively and efficiently meeting the wants and needs of customers
◆ Basic rights of a private enterprise system:
● Private property
● Freedom of choice
● Profits
● Competition
○ A company can acquire some kind of resource and can use them to make some sort of profit (eg
hotel on land generates profit)
➔ Six distinct time periods define North American business history
◆ Colonial (before 1776)
● Agricultural production
◆ Industrial revolution (1760 - 1850)
● The advent of the factory system and mass production
◆ Industrial Entrepreneurs (Late 1800s)
● Risk takers and inventors; advances in technology
◆ Production (Late 1800s - 1920s)
● Assembly lines, producing greater quantity faster
◆ Marketing (Since 1950s)
● Consumer orientation
◆ Relationship (From 1990s)
● Strategic alliances between customers, supplies
➔ The workforce of today:
◆ Aging population
◆ Shrinking labour pool
◆ Increasing diversity
● Companies want people who think differently; approach a problem from different perspectives (ie
financial, creative perspectives working together)
◆ Outsourcing and the changing nature of work
◆ Flexibility and mobility
◆ Innovation through collaboration
● Solve problems, come up with ideas = at the core of mst companies
● Companies are all about SOLVING PROBLEMS
➔ The Canadian private sector forms of business ownership
◆ Sole proprietorships
◆ Partnership
● General
● Limited
◆ Corporation
● Under federal laws
● Under provincial laws
◆ Cooperative
◆ Franchises - specialized form of business ownership
➔ Sole proprietorship (SPs)
● The simplest form of business organization available to any individual who is legally able to enter into a
binding contract
● SPs fall under provincial and municipal jurisdiction
● Filing a name declaration is not required proved the proprietorship operates under a person’s name
● Owned and operated by one person
◆ Advantages:
 ● Easy and cheap to start
● Secrecy
● Flexibility and control;
● Pride of ownership
● Distribution and use of profit
● No special taxes
● No government regulation
○ The owner and the business are essentially the same thing (owner is taxed at the income tax
rate, no real distinction between the two)
○ Tight integration → because they own it they are making all of the decisions
◆ Disadvantages
● Unlimited liability
● Limited financial resources
○ Limited potential to grow, banks don’t really want to loan money without the owner
guaranteeing it (ie if you want to buy x, the gov will say put y as collateral)
● Limited skills pool
● Overwhelming time commitment
● Few fringe benefits
● Limited growth
● Limited life span
○ We don’t see proprietorships in limited jurisdiction
◆ Partnerships
● An arrangement whereby two or more persons combine some or all of their resources in a business
undertaking with a view to sharing profits among partners
● Provincial laws require that a partnership must legally register its name and give information about the
partners
○ Accounting firms, legal firms, engineering firms (people coming together to practice their
careers)
◆ General partnership
● Partners are not only liable in equal share for the debts of the partnership (jointly liable), but in addition,
each partner is liable for the full amount (jointly and severally liable)
● Each member can bind the partnership without consent of other partners
◆ Limited partnership
● Composed of one or more general partners who conduct the business, and one or more persons who
contribute an amount in actual cash (special or limited partners)
● The special partner's liability is normally limited only to the amount of the cash they contributed to the
partnership
○ Can sign a contract that has a whole partnership involved in some initiative or has purchase some
piece of equipment
○ They can only be sued to the amount they put in
◆ Usually done with a very large partnership of many people
● Silent partners
○ Known to the public, no active management role
● Secret partners
○ Unknown to the public, but take an active role in management
● Nominal partners
○ Lend their name for public relations, but are actually not involved
● Dormant partners
○ Neither known to the public nor active in management
● Advantages to partnerships
○ Ease of organization
 ○ More financial resources (capital and credit)
○ Shared management
○ Combined knowledge and skills
○ Faster decision making
○ Few regulatory controls
● Disadvantages
○ Unlimited liability
○ Partners are responsible for the business activities of all others
○ Division of profits
○ Disagreements among partners
○ Life of a partnership
◆ Doctors, for eg will have an office, build up patients, and sell that partnership share to
someone else
➔ Corporation
◆ Recognized as a separate legal entity under the law
◆ A corporation can be incorporated federally or provincially
● Has to pay taxes, responsibility in the regulatory environment (much more structure)
● First time the federal level is brought in
◆ A corporation incorporated under the laws of Canada (a federally incorporated business) can carry on business in
all parts of Canada
● Federally incorporated business include 150 of the 200 largest corporations in Canada
● A federal company cannot be prevented by a provincial government from exercising the powers that have
been validly conferred on the company by federal authority (eg doing business in a province)
◆ A private corporation:
● The right to transfer shares is restricted
● Number of shareholders limited to 50
● May not sell shares or debentures (bonds or debt instruments) to the e public
○ Restrictions as to who can buy the shares (for eg tech start up companies)
○ Average person can’t buy shares of a private corp because risk is higher → gov restricts who can
buy them
◆ People who invest must have at least 1 mill $ in net worth (bc if they lose that $ they can
probably afford to)
◆ Eg Bitcoin
◆ A public corporation:
● Sells shares to the public on a stock exchange
● Is subject to stricter regulations for filing financial reports, must follow certain audit procedures
○ Creates a document about the company, anyone can buy shares and look at the document to see
if they want to invest
● Must file a prospectus if shares are being sold to the investing public
○ Most strict
○ Shareholders are much broader in nature, vs proprietorship is just one entity
○ The general public can now lose money, so the oversight is much stricter
● Advantages:
○ More money for investment
○ Limited liability
○ Separation of ownership from management
○ Ease of ownership change
○ Perpetual life
◆ Eg Hudson’s Bay
○ Size
○ Perceived legitimacy
 ● Disadvantages:
○ Initial cost
○ Paperwork
○ Two tax returns
○ Termination difficult
○ Double taxation
◆ When a corporation has a profit, it gets taxed at a corporate level
◆ Shareholders have to pay taxes
○ Greater expectations for social responsibility and ethical conduct from stakeholders)
➔ Cooperatives
◆ An organization that emphasizes working together as a way of building community involvement by supplying
needed goods and services at a lower cost (eg producer coop, consumer coop, financial coop, service cop, housing
coop)
● Combining of people who are trying to lose some kind of cost (sharing resources)
● Mostly in agricultural area
● Housing coop = everyone shares the cost of maintenance, shoveling, etc
○ Reduces overall cost
➔ Franchises
◆ A business established or operated under an authorization to sell or distribute a company’s goods or services in a
particular area
● Eg business for elderly people in their homes
○ Spent 2 years documenting the way it was run (what people should say, website design, etc) and
now have several franchise in Canada
○ Somebody has a business model that works → replicate it in other places
◆ Top 10 US Franchises in 2007: Subway, Dunkin Donuts, Jackson Hewitt Tax Services, 7 Eleven
◆ Top 12 US Franchises in 2012: Hampton Hotels, Subway, 7 Eleven, Servpro
➔ Corporate governance: definition
◆ The processes, structures, and relationships through which the shareholders, as represented by a board of
directors, oversee the activities of the business enterprise
● Eg shareholder of general motors → board of directors acts on their behalf
● Structure of how they’re going to act
➔ Governance
◆ How an organization steers itself
◆ Themes:
● Values
● Rules
● Processes
● Impact
● Accountability
● Responsibility
➔ Owner Stakeholders and Corporate Governance
◆ Governance: the full set of relationships between a company’s management, board, shareholders and other
stakeholders such as its employees and the community in which it’s located
◆ OECD (Org for Economic Coop and Dev)
● Governance is the full set of relationships between a company’s management, its board, its shareholders
and its other stakeholders, and its other stakeholders such as its employees and the company it’s located
◆ According to the OECD, governance concerns the rights and responsibilities of a company’s management, its board,
shareholders, and various stakeholders
◆ Three key players in corporate governance
● Shareholders
○ The de facto owners of corporation
 ○ Interested in return on investment
○ Heading to the direction of CSR
● Board of directors
○ Responsible for governance
○ Elected by shareholders to represent shareholder interests
○ Responsibilities:
◆ Accountability
◆ Management control systems
◆ Disclosure
◆ Financial reporting
◆ Shareholder and stakeholder rights
◆ Risk
◆ Performance
○ Fiduciary duties
◆ Highest standard of care at either equity or law
◆ Can get sued if they don’t do it properly
◆ Duties given in trust to an individual as a director
● To act in good faith
● To exercise powers people for the purpose for which they are conferred
○ Eg can the president hire relatives
● To avoid conflict of interest
● To prevent improper payments
◆ Obligations of directors to shareholders that are prescribed by laws or regulations
◆ To make decisions in the best interest of the company (which are not always in the best
interest of the shareholder)
◆ Consider other stakeholders
◆ Equal consider to all shareholders
◆ No personal profits at company expense
◆ Declare conflicts of interest
● Officers
○ Senior employees who oversee daily operations
◆ President
◆ Chief Operating Officer
◆ Members of the senior management team
● Governance failures
○ Enron
○ World Com
○ Adversely affect many parties, both direct and indirect
● Shareholders
● Employees
● Suppliers
● Pension funds
● Communities
● Government
● Civil society
○ Eg Volkswagen couldn’t pass emission tests, put software that made
the emissions work
◆ What exactly is CSR?
● The degree of moral obligation that may be attributed to corps beyond just obedience to laws
● It’s an organization’s obligation to maximize its positive impact and minimize negative effects by being a
contributing member to society, thinking about society’s long run needs and wants
 ○ Means being a good steward of society’s economic and human resources
● It restrains destructive activities no matter how profitable they are and leads in the way of positive
contributions to the betterment of humans
● The way a corporation achieves a balance among it economic, social and environmental responsibilities in
its operations so as to address shareholder and other stakeholder expectations
● The capacity of a corporation to respond to social pressures
○ Eg the Maple Leaf beef = salmonella
◆ Case for social responsibility
● Businesses must satisfy society’s needs
● CSR prevents public criticism and government speculation
● Business and society are interdependent
● It’s good for the bottom line (net earnings?)
● Investors and consumers support CSR
● Addressing social problems can become financial opportunities (eg pollution abatement)
● Corporations have the know how to solve societal problems
● If most companies are unethical, no one would want to work there
● Social impact investing = shareholders doing CSR
◆ Case against corporate social resp
○ Profit maximization is the main purpose of business
◆ Shareholders take 100% of the profits - isn’t charity cheating the shareholders then?
◆ Business is responsible to shareholders
○ Business involvement in social matters increases costs
○ No reliable guidance for business in CSR matters
○ Business can’t be held accountable unlike social institutions
○ There is divided support in business community for social involvement
○ Social policy is role of government
○ Business lacks training in social issues
○ CSR would give too much power to business
○ Isn’t CSR the role of the government? Do we really want companies to do it?
◆ Eg ford motor company - built communities (schools homs etc) around factories
● Would send inspectors to the company made houses
● If they didn’t display enough patriotism, they would be fired
● Ford decided what was the best interest in society
➔ Pyramid of corporate social responsibility
➔ Social responsibility theories
◆ Amoral view
● Traditional view of business as merely profit making entity
◆ Personal view
● Corporations are like people and can therefore be held accountable for their actions
◆ Social view
● Corporations are social institutions with social responsibilities
➔ Contemporary Corporate Social Responsibility Concepts
◆ Corporate sustainability
● Corporate activities demonstrating the inclusion of social, environmental and economic
responsibilities in business operations as they impact all stakeholders
● Five levels
○ Compliance driven: following government regulations and responding to charity and
stewardship considered appropriate by society
◆ A minimalist approach
○ Profit driven: consider social, ethical and environmental aspects of business operations
insofar as they contribute to the bottom line
 ◆ A tactical approach
○ Caring: initiatives go beyond legal compliance and profit considerations; economic,
social and environmental concerns are balanced
◆ An accommodating approach
○ Synergistic: well balanced and functional solutions are sought that create value in the
economic, social and environmental areas that result in gains for all stakeholders
◆ A collaborative approach
○ Holistic: full integration of corporate sustainability embedded in every aspect of the
corporation’s activity as this is important to the quality and the continuation of life on
this planet
◆ A utopian approach
● Corporate sustainability is recognized by the financial markets because it creates long time
shareholder value by embracing opportunities and managing risks relating to economic, social
and environmental develops
○ We need to be profitable, but also need to look at overall impacts on the general
environment (people)
◆ Reputational management
● Any effort to enhance the corporation’s image and good name
○ Focus has moved away from media, public relations and crisis management to
developing relations with all stakeholders
● Reputational management involves several stages in its development
○ Identify the desired perception of the corporation
○ Recognize the significance of image with all stakeholders
○ Be aware of the influence of interactions with all stakeholders on the corporation’s
reputation
○ Manage relationships with stakeholders continuously
◆ Social impact management
● Methodology → think in terms of cause and effect (if we do this, what will be the impact?)
● Bilateral situations (iterations; impacts that affect other impacts)
○ If we do this, how will society react, how will the government react, how will we react
● Stresses the need for business to recognize and understand this interdependence if business and
society wish to thrive
● Two aspects: society’s influence on the corporation, and the corporation’s influence on the social
and environmental concerns of society
● Social impact management evaluates three aspects of business:
○ Its purpose (in both societal and business terms)
◆ Is it not to solve problems? Problems that civilians have?
● Eg Canada has an abundance of fresh water: opportunity for business
in problem solving
○ Social context (are stakeholders considered?)
○ Metrics (how is performance and profitability measured?)
◆ Key performance indicators; think in terms of 1) how things are done as well as
the 2) end results
◆ It’s not just about short term profits
➔ Triple-E Bottom Line (TBL)
◆ Evaluates a corporation’s performance according to a summary of the economic, social (ethical) and
environmental value the corporation adds or destroys
◆ Now forms the basis for corporate reporting of economic, ethical, and environmental responsibilities
● How does a corporation measure itself against the larger impacts that it has on society?
Economic, social and environmental? Is it negative or positive?
➔ Corporate citizenship
 ◆ The demonstration by a corporation that takes into account its complete impact on society and the
environment as well as its economic influence
◆ A term recently becoming commonly used to describe the role of business in society
◆ Corporations should stand alongside citizens
● We want organizations to be profitable/sustainable over time
● Corporate citizenship is a newer concept
○ What rights and responsibilities should they have?
○ Instances in which corporations can take a stance on political events
○ Social media companies removing objectionable material from their sites
◆ Should corporations be saying x type of material is objectionable
◆ Or should they let the individual decide
● Corporations are stepping up and having a debate about what’s good for society (this is
unacceptable we will remove this; or this jurisdiction is doing unacceptable things so we will
change our business practices)
◆ Good corporate citizenship can provide benefits in eight areas:
● Reputation management
● Risk profile and risk management
● Employee recruitment, motivation and retention
○ How do we make sure that we’re recruiting the right people? No bias to location?
● Investor relations and access to capital
● Learning and innovation
● Competitiveness and market positioning
● Operational efficiency
● Licence to operate (greater leeway when problems occur)
➔ The natural environment and business
◆ Natural environment issues
● Ozone depletion
● Global warming
● Solid and hazardous wastes
● Freshwater quantity and quality
● Degradation of the marine environment
● Deforestation
● Land degradation
● Endangerment of biological diversity
○ How do corporations provide solutions + improve their practices
◆ Responses of governments in Canada
● Canadian Environmental Protection Act (Federal gov)
● Air quality legislation (provincial gov)
● Water quality legislation (fed gov)
○ Canada water act
○ Fisheries act
○ Navigable waters protection act
○ Arctic waters protection act
○ Arctic waters pollution prevention act
○ Canada shipping act
○ Dominion Water power act
● Land related legislation
◆ Canadian government creates legislation in response to citizen’s interests, and
businesses must respnd accordingly
◆ After the Exxon Valdez oil spill the CERES organization was formed; CERES developed ten principles that
have been advanced as models for businesses to express and practice environmental sensitivity
 ◆Many major companies have endorsed these principles, such as:
● Coca Cola, American Airlines, General Motors, Sunoco
◆ CERES principles:
● Protection of the biosphere
● Sustainable use of natural resources
● Reduction and disposal of waste
● Energy conservation
● Risk reduction
● Safe products and services
● Environmental restoration
● Informing the public
● Management commitment
● Audits and reports
➔ Two views of environmentalism (the way they respond to government regulations, like the Marineland law)
◆ Standard environmentalism
● Occurs when government regulation / intervention is required to remedy the market’s failure to
provide sufficient environmental protection
◆ Market environmentalism
● Occurs when economic incentives created by the market are more effective at protecting the
environment than government intervention
○ Go beyond the bare minimum when there’s a $ incentive
○ Eg tests in the Netherlands to take plastic and use it to make roads
○ In Ontario, incentives for the solar power industry

Sample short answer question: Corporate social responsibility: should we require corporations to do that? Appears to be opinion
based, but the yes/no answer is not viable. Must use logical reasoning. Make sure you include examples.

- In the long run, solving these social problems will benefit the shareholders
- To avoid social media backlash

No:

- Let the public decide what’s right and wrong

- If we did legislate CSR, it would be very difficult to measure
- We can measure accounting data (financial statements, balance sheets, etc - financial strength)
- But we are not at the point that we can measure CSR in a standardized way