All Slides Busd 2018 - Values & Ethics

Canadian Business and Society
ETHICS, RESPONSIBILITIES, AND SUSTAINABILITYAND

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT
© 2020 McGraw-Hill Education Limited 1-1

Learning Outcomes
1. Describe the complexity of the interrelationships between
business and society.
2. Define the terminology relating to the integrity of business
management and students.
3. Differentiate between the three main approaches to ethical
thinking.
4. Provide a brief description of the Canadian business system.
5. Explain the role of the corporation as the main economic
institution in the business system.

Learning Outcomes
Cont’d…
6. Recognize that business operates with the consent of society.
7. Summarize factors that influence society’s attitudes toward
business that lead to criticisms of the system.
8. Identify the groups that are mainly responsible for the
operation of Canadian businesses.
9. Describe the integration of business and society.

The Business and Society
Relationship
• Textbook emphasizes four things about Canadian
business system:
1. Increase awareness of system by describing Canadian
capitalism, stakeholders involved and society’s attitudes
2. Identify business’ response to its role in society
3. Learn how business corporations have responded to many
challenges in their environment
4. Address each of the above from perspective of manager or
owner to emphasize the dynamic nature of the
environment

The Business and Society
Relationship Cont’d…
• Shift occurring in what society believes business
responsibilities should be
• Corporations must consider the following:
➢ Meeting humanity’s needs without harming future generations
➢ Social responsibility and corporate sustainability reports should move
beyond being a public relations exercise
➢ Demanding accountability beyond economics
➢ Responses to social, ethical and environmental responsibilities
constitute a valuable intangible asset
➢ Executives must have the skills and competencies to manage these
additional responsibilities successful
➢ Responses to these responsibilities will determine corporations that
survive

Integrity in Business
• Integrity → appropriateness of a corporation’s behavior

and its adherence to moral guidelines acceptable to
society
• Managing with integrity:
➢ Business leaders behave in a manner consistent with their own
highest values and norms of behavior
➢ Values are self-imposed but not arbitrary or self-serving
• Responsible corporation → business undertaking that
responds to social, ethical and environmental
responsibilities in addition to economic obligations

Key Terminology Relating
to Integrity in Business
• Ethics of business • Corporate sustainability

• Stakeholder (CS)
• Corporate social • Triple bottom line
responsibility (CSR) • Corporate citizenship

Integrity of Business Students
• Post-secondary institutions facing increased demand to

prepare graduates to identify and address ethical
implications in business
➢ Graduates need a moral compass and sensitivity to integrity
issues
➢ Business schools must become aware of and address moral
dilemmas both from a staff and student perspective

Main Approaches to
Ethical Thinking LO 1.3
• Three dominant approaches to normative theories of

ethics:
➢ Deontological (rule-based) ethics
➢ Teleological or consequential theories
➢ Virtue ethics

Deontological Ethics
• Actions are ethical if done for sake of what is good
without regard for consequences of the act
• Decisions based upon duty and adherence to universal
principles
➢ Individuals have duty to do the right thing even if the
consequences of another action are preferable
• “Veil of ignorance”
© 2020 McGraw-Hill Education Limited 2 - 10

Teleological Ethics
• Focuses on outcomes or results of actions
• Utilitarianism → individuals make decisions based on
consequences of an action
➢ Decision believed to be good if end result is good
➢ Decisions should result in the greatest good for the
greatest number

Virtue Ethics
• Emphasizes individual’s character or identity
• Focuses on being instead of doing
• Morality based on development of good character
traits (virtues)
➢ Assumes “good” person will act ethically
• Absolute rules unlikey to apply in all situations

Business as an Economic
System
• Economic system→ arrangement using land, labour, and
capital to produce, distribute, and exchange goods and
services to meet the needs and wants of people in society
• Key terminology:
➢ Capitalism
➢ Free enterprise / private enterprise system
➢ Laissez-faire capitalism
➢ Responsible enterprise system
• Capitalism provides most goods and services but public
and non-profit sectors also involved

The Corporation and
the Business System
• Canadian business system is comprised of:
➢ Sole proprietorships
➢ Partnerships
➢ Incorporated entities
• Any individual may operate business if:
➢ They are capable of entering into binding agreement
➢ Business activity is lawful
➢ Individual respects legal principles governing persons,
property and obligations

The Corporation and
the Business System Cont’d…
• Two doctrines of incorporation:

➢ Concession doctrine → incorporation was conferred by public act
and could not be made by private agreements among several
persons to associate together for business purposes
➢ Freedom of association → association of individuals coming
together for some purpose is fundamental to forming a
corporation
• When a business incorporates, a separate legal entity is
created

Society’s Permission for
Business
• Legitimacy → belief in the rightness of an institution, in
this case the appropriateness of our business system to
supply the goods and services wanted by Canadian
society
➢ To be legitimate, the business enterprise system must
respond to the changing values and expectations in society
➢ Attitudes (criticisms) must be monitored
➢ Management should take actions to counter negative views

Society’s Permission for
Business Cont’d…
• Social licence → privilege of operating in society with
minimal formalized restrictions
➢ Based on maintaining public trust by doing what is acceptable
to stakeholders in the business and society relationship
➢ Must be earned and maintained—it is non-permanent
because society’s beliefs, perceptions, and opinions change
• To assess society’s permission, measure trust
Canadians have in business enterprise system

Attitudes
Toward Business
• Factors influencing attitudes toward business:
➢ Standard of living
➢ Decentralized decision making
➢ Allocation of resources
➢ Self-interest
➢ Business cycle
➢ Business wrongdoing
➢ Globalization
➢ Unemployment
➢ Technological innovation
➢ Media coverage
➢ Government

The People Who
Run Canadian Business
• Owners
➢ Direct ownership (e.g., shareholders); or
➢ Indirect ownership (e.g., mutual fund holders)
• Boards of Directors
➢ Elected by shareholders
➢ Concerned with shareholder’s primary objective, return on
investment
➢ Increasing focus on corporate social responsibility (CSR)
• Managers
➢ Hired by boards of directors & oversee operations

Integration of
Business and Society
• Business and society need each other
➢ Must be a shared value in which both business and society
benefit
➢ Goal is to reduce friction between society and business and
to increase the benefits for both
• Social contract → set of two-way understandings that
characterizes the relationship between two major
institutions
• Integration is the focus of textbook

Summary
• The relationship between business and society is complex. To
understand the relationship it is necessary to be knowledgeable
of the business system and of capitalism in particular. (LO 1.1)
• Business integrity is the appropriateness of a corporation’s

behaviour and its adherence to moral guidelines acceptable to
society such as honesty, fairness, and justice. (LO 1.2)
• The three main approaches to ethical thinking are deontological,

teleological, and virtue ethics. (LO 1.3)

Summary
• The Canadian business system is usually referred to as a form of
capitalism. The business system does have some defects, but is
constantly changing to reflect society’s demands. (LO 1.4)
• Several forms of business enterprise exist; the most common is

the incorporated enterprise (the corporation). The modern
corporation is accountable not only to the government, but
also to society in general. (LO 1.5)
• Society allows business to function as a system to provide

goods and services. Two concepts that help to understand this
consent are legitimacy and social licence. (LO 1.6)
Summary
• Society’s attitudes toward business vary over time, and its
views are influenced by several factors. Corporate wrongdoing
receives a lot of attention and creates negative views of
business. (LO 1.7)
• Owners, boards of directors, and managers are the three most

important stakeholders in the actual operation of the
corporation. (LO 1.8)
• Business and society are integrated. Business needs society

and society needs business. (LO 1.10)

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Enumerate and discuss the eight fundamentals of a
capitalist business system.
2. Define the right of private property and identify ethical
implications associated with it.
3. Explain individualism and economic freedom and the
related ethical implications.
4. Define equality of opportunity and elaborate upon the
ethical implications for business.
5. Describe the competition fundamental and link ethical
implications to it.
6. Understand profits and the associated ethical implications.

Learning Outcomes
Cont’d…
7. Link the work ethic to ethical implications.
8. Define consumer sovereignty and understand related
ethical implications.
9. Explain the role of government in a capitalist business
system and what the ethical implications are in this system.
10. Define Canadian capitalism, and recognize that capitalism
exists in different forms around the world.
11. Recognize the challenges to presenting the case for the
ethics of capitalism.

Introduction to
Fundamentals of Capitalism
• Canadian economic system largely composed of
business enterprises operating in a market system
• Theory of capitalism examines eight elements:
1. Right of private property
2. Equality of opportunity
3. Competition
4. Individualism and economic freedom
5. Profits
6. Work ethic
7. Consumer sovereignty
8. Role of government
The Right of Private Property
• The legal right to own and use economic goods, for

example land and buildings
• Ethical implications:
➢ Uneven distribution of wealth
➢ Use of taxation to redistribute wealth
➢ Intellectual property → umbrella term for patents, copyrights,
trademarks, industrial designs, etc.

Individualism and Economic
Freedom
• The individual, and not society or a collective, is
paramount decision maker in society
➢ Assumes that individual is inherently decent and
rational
• Economic freedoms → exist when the business system
operates with few restrictions on its activities
➢ Is communitarianism more important?
➢ Consider unions and co-ops
➢ To what extent should economic freedoms exist?

Equality of Opportunity
• Assumption that all individuals or groups have an even
chance at responding to some condition in society
➢Difficult to achieve in capitalistic system
➢Wealth created not distributed equally
➢Gap between the poor and the rich
➢Male versus female income disparity
➢How to increase equity and fairness in business
system?

Competition
• Condition in a market system in which many rival sellers
seek to provide goods and services to many buyers
➢ Ensures corporations provide goods and services desired by
society
➢ Oligopolies or monopolies can be created
➢ More difficult for some firms to enter certain industries
➢ Corporations might engage in anti-competitive activity

Profits
• Excess of revenues over expenses; closely associated
with competition
• Corporations compete for profits
➢Profits sometimes viewed with disdain or as immoral
➢Taxation of excessive profits and the rates of inflation
redistribute profits

The Work Ethic
• A code of values, or a body of moral principles,
claiming that work is desirable, a natural activity, and
good in and of itself
➢Government programs and society’s expectations
have influenced individuals’ attitudes toward work
➢Individuals now expect that more will be done for
them, by governments and corporations
✓ Better working conditions
✓ Fringe benefits
✓ Salaries
➢Desire to consumer is driving force
Consumer Sovereignty
• Consumers have and exercise power over producers
through the decisions they make in purchasing the
goods and services provided by corporations
➢Consumers not always aware of alternative products
available
➢Consumers’ preferences are shaped by advertising
➢Producers have power to ignore consumer wishes

Role of Government
• Laissez-faire approach (“leave us alone”) → minimal
involvement of government
➢Government now an influential stakeholder in
business
➢Governments restrict capital movements and natural
resource sales, impose product standards, prevent
businesses from shutting down plants
➢Legislation governs treatment of employees

Canadian and Other Forms
of Capitalism
• Capitalism → economic system that allows for private
ownership of the means of production (land, labour, and
capital)
➢Assumes economic decision making is in hands of
individuals or enterprises that make decisions expecting
to earn a profit
➢Canada does not have pure free-enterprise system
➢Different forms of capitalism exist throughout world

Common Forms of
Capitalism
• Consumer capitalism → government involvement is
limited, open borders and profit mentality exists (e.g.
Canada, Britain)
• Producer capitalism → emphasizes production,
employment and statist policies (e.g. France, Japan)
➢ Social market economy → regulated capitalist market
with generous social welfare (e.g. Germany)
• Family capitalism → extended clans dominate business
activities and control capital flows (e.g. Thailand,
Indonesia)

Common Forms
of Capitalism Cont’d…
• Frontier capitalism → fundamentals of business being
introduced; capitalism in its beginning stages (e.g.
Russia, China)
• State capitalism → economic system in which
governments manipulate market outcomes for political
and social purposes
➢ Does not result in most efficient use of resources

Ethics of Capitalism:
The Challenges
• Greed
• Economic downturns
• Business failures
• Income and wealth inequality
• Corporate crime and wrongdoing
• Stagnant incomes vs. increasing CEO salaries
• Damage to the environment
• Reliance on market system that seldom works perfectly

Capitalism as an Ethical
System
• Pros for capitalism:
➢ System that produces wealth, promotes prosperity, and provides
greater human well-being than other economic systems
➢ Allows creative and productive forces to operate
➢ Cooperation is encouraged despite competitive market
➢ Respects freedoms, including right for individuals to pursue
happiness
• Assumption exists that moral individuals operate the
business system and that they are in the majority
• Strong system of moral behaviour and integrity is
necessary

Summary
• Eight elements of Canadian capitalism: the right of private

property; equality of opportunity; competition; individualism &
economic freedom; profits; the work ethic; consumer
sovereignty; and the role of government. (LO 2.1)
• The right of private property facilitates the operation of
business, but some in society resent a few acquiring large
amounts. (LO 2.2)
• For capitalism to be acceptable to most, it must allow for
equality of opportunity to share in economic well-being even
though the results are not the same for everyone. (LO 2.3)

Summary Cont’d…
• To ensure that capitalism is regulated in the best interests of

stakeholders, competitive rivalry must exist. The difficulty is
that even in Canada’s form of capitalism competitive markets
do not exist. (LO 2.4)
• Individualism encourages people to participate in a capitalistic

system. Some resent the focus on individuals and believe the
economy should be directed more by governments. (LO 2.5)
• In theory, when profits become too high in an industry, more

businesses are attracted. Due to market imperfections such as
barriers of entry, this sometimes does not occur. (LO 2.6)

Summary Cont’d…
• To ensure that capitalism is regulated in the best interests of
stakeholders, competitive rivalry must exist. The difficulty is
that even in Canada’s form of capitalism competitive markets
do not exist. (LO 2.4)
• Individualism encourages people to participate in a capitalistic

system. Some resent the focus on individuals and believe the
economy should be directed more by governments. (LO 2.5)
• In theory, when profits become too high in an industry, more

businesses are attracted. Due to market imperfections such as
barriers of entry, this sometimes does not occur. (LO 2.6)

Summary Cont’d…mary
• The work ethic influences the ethics and responsibilities of a

corporation. (LO 2.7)
• The output of capitalism should be determined consumer choice,

however, this is restricted by various business practices and some
government regulations. (LO 2.8)
• Government role in a capitalistic system, should be only to protect

stakeholders unable to defend themselves and to provide the
infrastructure for the market system to operate effectively. (LO 2.9)

Chapter Summary Cont’d…y
• Capitalism exists in several forms and the way it

functions changes; however is does operate most of
the time with moral standards. (LO 2.10)
• The ethics of capitalism involve several challenges, but

an argument can be made that it is a moral system.
(LO 2.11)
© 2020McGraw-Hill Education Limited 2 - 45

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Recognize business as one institution in society and
understand that its activities are influenced by other
institutions and individuals referred to as stakeholders.
2. Define and identify the corporation’s stakeholders
generally and the stakeholders relating to particular
issues confronting the corporation.
3. Understand the dynamic nature of stakeholder
influence and that stakeholders have different goals
and influence.
© 2020 McGraw-Hill Education Ltd. 3- 47

Learning Outcomes
4. Recognize the role of managers in relation to

stakeholders.
5. Formulate arguments supporting and opposing the
stakeholder concept.
6. Define an issue, describe issues management, and
understand issue life cycle.
7. Learn the importance of managing issues that become
crises.

The Stakeholder Concept
and Business
• Pluralistic society → influence or power is decentralized
by dispersing it among a variety of institutions
➢ No one institution is completely independent of others
➢ Each institution has some autonomy to pursue own interests
• Stakeholder → individual, or group, who can influence
and/or is influenced by the achievement of an
organization’s purpose
➢ Managers need to identify stakeholders for two reasons:
• To obtain resources
• To maintain legitimacy of business

The Stakeholder Concept
and Business
• Freeman (1984):
➢ Managers must seek out stakeholders
➢ If “you want to manage effectively, then you must take your
stakeholders into account in a systematic fashion.”
• Relationships are two-way:
➢ Corporations must understand how activities influence
stakeholders
➢ Stakeholders must consider their responsibilities to the
corporation

Identifying Stakeholders
• Owners • Business Organizations
• Directors • Competitors
• Employees • Joint-Venture Participants
• Customers or
Consumers
• Lenders and Creditors
• Suppliers
• Service Professionals
• Dealers, Distributors,
and Franchisees
Identifying Stakeholders
Cont’d…
• Non-Governmental • Service, Fraternal,

Organizations (NGOs) Cultural, and Ethnic
• Society at Large Associations
• Educational Institutions • The Media
• Religious Groups • Government
• Charities • Other Possible
Stakeholders (e.g. animals)

The Dynamics of
Stakeholder Influence
• Why are stakeholders important to a firm?

• What can happen if managers do not properly identify
and satisfy the interests of their firm’s stakeholders?
• Why is it important to categorize stakeholders?
• Do stakeholders have differing goals and power /
influence over time?

Categorizing Stakeholders
• Frederick, Davis and Post:

➢ Primary interactions → with employees (unions),
shareholders, creditors, suppliers, customers, competitors,
wholesalers or retailers
➢ Secondary interactions → with local communities,
governments, social activist groups, media, business support
groups and the general public
• Difficult to ascertain who should be on each list

Categorizing Stakeholders
• Mintzberg:
➢ Stakeholders are categorized as being external vs. internal to
the organization
➢ Helps conceptualize power in and around organizations
• Phillips:
➢ Normative stakeholders → those to whom organization has
an obligation and from whom corporation accepts benefits
➢ Derivative stakeholders → those from whom corporation has
not accepted benefits, but they hold power over corporation

The Manager:
A Special Stakeholder
• Managerial responsibility:
➢ Identify stakeholders influenced by, or having an influence
on, the corporation
➢ Understand how corporation currently views stakeholders
➢ Examine how each stakeholder will or might influence
corporation
➢ Assess opportunities and threats, and magnitude
➢ Rank stakeholders by influence
➢ Prepare programs or policies detailing how to cope with
stakeholders

The Manager:
A Special Stakeholder Cont’d…
• High CEO compensation raises ethical implications
• Changing executive compensation:
➢ “Pay for performance” result in executives receiving large
cash salaries + stock and equity-linked incentives
➢ Executives focus on shareholders (vs. other stakeholders)
➢ Contributes to income inequity
• Sustainable pay → tying executive compensation to
environmental, social, and governance performance
targets

The Argument Against
the Stakeholder Concept
• Four main points against:
1. Problems of categorization - how to identify and prioritize
stakeholders
2. Challenges in meeting expectations - no clear statement of
stakeholder expectations and complex trade-offs
3. Dilution of top management focus – stakeholders divert
management attention away from measurable results
4. Impracticality of shared governance – impractical to have
competing and conflicting interests govern corporation

The Argument For
the Stakeholder Concept
• Responding to stakeholders = good business
• Ignoring stakeholder interests can have substantial
economic consequences
• Identifies the full range of individuals and groups from
whom loyalty is needed
• Provides systematic approach to recognizing
stakeholder expectations and deciding whether to
respond

Issues Relating to Ethics,
Responsibilities, and Sustainability
• Issue → point in question where different views are held
of what is or what ought to be corporate performance-
based management or stakeholder expectations
• Wartrick and Mahon expand:
a. Controversial inconsistency based on expectation gaps
b. Involving management perceptions of changing legitimacy
c. Occur with or between views of what is and/or what ought to
be corporate performance
d. Imply an actual or anticipated resolution that creates significant
impact on organization

Purpose of Issues
Management
• Issues management → systemic process by which the
corporation can identify, evaluate, and respond to
economic, social, and environmental issues that may
impact significantly upon it
• Purpose:
➢ Minimize surprises relating to events or trends in society by
serving as an early warning system
➢ Prompts managers to be more systematic in coping with
issues and stakeholder concerns
➢ Mechanism for coordinating and integrating management of
issues

Benefits of
Issues Management
• Corporations more likely to maintain competitive

advantage
• Behaviour more consistent with societal expectations
• Less likely to make a serious social or ethical mistake
• Detect issues earlier and develop appropriate
responses
• Reduces vulnerability and enhances credibility

Issue Life Cycles
• Issues can be viewed in two dimensions:
➢ Over time
➢ Degree of awareness
• Stages in degree of awareness:
➢ None or little
➢ Increasing
➢ Prominent
➢ Peak
➢ Declining
© 2020 McGraw-Hill Education Ltd. Figure 3.1 3- 63

Crises Management
• Crisis → turning point, a crucial time, and a situation

that has reached a critical point
• Fink’s “anatomy of a crisis”:
➢ Crisis is an unstable time but outcome may not be
bad
➢ Crisis management → approach involving planning
and removing much of the risk and uncertainty,
allowing the corporation to achieve more control
over events

Crises Management:
Fink’s Anatomy of a Crisis
Figure 3.2
Crises Management
Cont’d…
• Corporations will experience crises
➢ Important to be prepared
➢ Proactively invest in approaches to deal
• Includes a discussion on communications
➢ All key stakeholders must be identified and contacted
➢ Transparency is stressed
➢ Key ingredient is honesty
➢ Disclose facts and show empathy for any stakeholders
harmed
➢ Apologize when necessary

Summary
• A stakeholder is an individual, or group, that has some

share, interest, or “stake” in the business system and the
activities of corporations. (LO 3.1)
• The stakeholder names or participants have to be

customized for each corporation. (LO 3.2)
• The dynamic nature of the relationships between business

and stakeholders means that the importance of other
stakeholders will vary by corporation and over time.
(LO 3.3)
Summary Cont’d…
• Each stakeholder has different goals and expectations
of the corporation. Sometimes conflict exists among
stakeholders. Overseeing the various stakeholder
interests is an important aspect of the modern
manager’s job. (LO 3.3)
• Managers play a key role in the relationship between

the corporation and stakeholders. Manager or CEO
compensation is an issue and it proposed that
executive compensation should be tied to ethical,
social and environment criteria. (LO 3.4)

Summary Cont’d…
• Today most managers believe that the stakeholder
concept is a systematic approach to understanding
and responding to various influences in the
corporation’s environment. (LO 3.5)
• The identification and management of economic,

ethical, and environmental issues that may confront
the corporation is described. Issues always involve
stakeholders, and their appropriate identification and
management is important. Issue life cycles should be
identified. (LO 3.6)
Summary Cont’d…
• Some issues lead to crises and the response must be

timely and comprehensive. Crises in business have
been described and crisis management frameworks
developed that enable the corporation to take
appropriate actions in such situations. (LO 3.7)

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Explain stakeholder analysis
in an organization.
2. Describe stakeholder
management capability.
3. Understand stakeholder
matrix mapping.
4. Discuss the diagnostic
typology of organizational
stakeholders.

Learning Outcomes
5. Apply the stakeholder identification and salience

typology.
6. Explain the application of stakeholder influence
strategies.
7. Identify the use of stakeholder collaboration
approaches.
8. Learn about approaches to issue analysis.

Stakeholder and Issue
Analysis
• Stakeholder engagement → efforts by corporation to
understand and involve relevant individuals, groups, or
organizations by considering their moral concerns
• Issue analysis → effort to understand the source, nature,
and extent of a question or matter in dispute facing
corporation
➢ Will result in addressing or resolving the matter

Basic Stakeholder Analysis
• Corporations can increase understanding of stakeholders

by asking the following:
1. Who are our stakeholders?
2. What are their stakes?
3. What opportunities and challenges are presented to our firm?
4. What responsibilities does our firm have to all its stakeholders?
5. What strategies or actions should our firm use deal with
stakeholder challenges and opportunities?

Freeman’s Stakeholder
Management Capability
• Stakeholder management capability → ability of
managers to:
➢ Identify stakeholders and their influence
➢ Develop the organizational practices to understand
stakeholders
➢ Undertake direct contact with stakeholders

Stakeholder Matrix
Mapping
• Matrix mapping → technique of categorizing an
organization’s stakeholders by their influence according to
two variables and plotting them on a two-by-two matrix:
➢ Y Axis: Oppose or support corporation
➢ X Axis: Importance of stakeholders
• Allows managers to:

➢ Assess power of stakeholders to achieve their demands
➢ Whether they have means or resources to influence

The Position / Importance
Stakeholder Matrix
FIGURE 4.1

Stakeholder Matrix
Mapping Cont’d…
• Four categories of stakeholders result from this analysis:

➢ Problematic stakeholders - those who would oppose the
organization’s course of action and are relatively unimportant to
the organization
➢ Antagonistic stakeholders - those who would oppose or be
hostile to the organization’s course of action and are very
important to the organization

Stakeholder Matrix
Mapping Cont’d…
➢ Low priority stakeholders - those who support the organization’s

course of action and are relatively unimportant to the
organization.
➢ Supporter stakeholders - those who would support the
organization’s course of action and are important to the
organization
• After categorization complete, managers can develop
tactics and strategies to most appropriately deal with
each stakeholder

The Diagnostic Typology of
Organizational Stakeholders
• Two assessments are critical:
➢ Stakeholders’ potential to threaten the organization
➢ Their potential to cooperate with it
• Stakeholders can be classified into four types:

➢ Type 1: Supportive stakeholder and strategy
➢ Type 2: The marginal stakeholder and strategy
➢ Type 3: The non-supportive stakeholder and strategy
➢ Type 4: The mixed-blessing stakeholder and strategy
Source: Savage et al., 1991

The Diagnostic Typology of
Organizational Stakeholders Cont’d…
• Stakeholder management process:
1. Identify key organizational stakeholders by considering factors
such as relative power, specific context and history of
relationship and specific issues
2. Diagnose stakeholders according to critical dimensions of
potential for threat or cooperation
3. Formula appropriate strategies to enhance or change current
relationships with key stakeholders
4. Implement strategies, attempting to transform the stakeholder
relationship from less favourable to a more favourable one
Stakeholder
Identification and Salience
• Salience → degree to which managers give priority to
competing stakeholder claims
• Stakeholder identification and salience based upon
stakeholder possession of one or more of three attributes:
➢ Power → a relationship among social actors in which one social
actor, A, can get another social actor, B, to do something that B
would not otherwise do
➢ Legitimacy → Perception or assumption that actions of an entity
are are desirable, proper, or appropriate
➢ Urgency → degree to which stakeholder’s claim or relationship
calls for immediate attention Source: Mitchell et al., 1997
Stakeholder Identification
and Salience Cont’d…
• Classes of stakeholders:
a) Dormant, discretionary, or demanding stakeholders
b) Dominant, dangerous or dependence stakeholders
c) Definitive stakeholders
• Enables managers to perform systemic categorization
of stakeholder-management relationships
➢ Allows managers to deal with multiple stakeholder influences

Stakeholder
Influence Strategies
• Frooman (1999) → how do stakeholders try to act to

influence the organization’s decision making / behaviour?
➢ Resource dependence → exists when a stakeholder is supplying a
resource and can exert some form of control over it
• Two general means of control over an organization:
➢ Withholding strategies → stakeholder discontinues providing a
resource with intention of changing a certain behaviour
➢ Usage strategies → stakeholder continues to supply resource but
specifies how it is to be used i.e. attaches conditions
Source: Frooman, 1999
Stakeholder
Influence Strategies Cont’d…
• Resource dependence also arises from relationships
between stakeholders:
➢ Influence pathway → where withholding and usage strategies
could be used by an ally of the stakeholder with whom the
organization has a resource dependence
• Four influence strategy possibilities:
1. Indirect / usage
2. Indirect / withholding
3. Direct / withholding
4. Direct / usage
Source: Frooman, 1999
Stakeholder Collaboration
• Collaboration (vs. “management”) → establish and

maintain relationships that allows organization to tap into
powerful source of energy, ideas and wider network
➢ More integrated and company-wide
➢ Responsibility for stakeholder collaboration assigned to senior
executive(s)
Source: Svendsen, 1999

Approaches to Corporate-
Stakeholder Relations
Stakeholder Management Stakeholder Collaboration
Fragmented among various
Integrated management approach
departments
Focus on managing relationships Focus on building relationships
Emphasis on buffering the Emphasis on creating
organization opportunities and mutual benefits
Linked to short-term business
Linked to long-term business goals
goals
Idiosyncratic implementation Coherent approach driven by
dependent on division interests business goals, mission, values,
and personal style of manager and corporate strategies
TABLE 4.2
Stakeholder Collaboration
Cont’d…
• FOSTERing → framework for organizations to develop
collaborative stakeholder relationships
• Involves six steps:
➢ Creating a foundation
➢ Organizational alignment
➢ Strategy development
➢ Trust building
➢ Evaluation
➢ Repeat the process
Issue Analysis
• Two approaches to issue analysis:

➢ The issues management process
➢ Issue salience (materiality) analysis

The Issue Management
Process
• Involves six steps:
1. Identification of issues
2. Analysis of issues
3. Ranking or prioritizing of issues
4. Formulating issue response
5. Implementing issue response
6. Monitoring and evaluating issue response
Sources: Carroll, 1989; Bryson, 1988

Issue Materiality
• Issue materiality (sustainability materiality) → question or
matter that is sufficiently important to warrant
management’s attention
• An aspect or issue should be reported if it meets these
criteria:
➢ Reflects the organization’s significant economic, environmental,
and social impacts
➢ Substantively influence the assessments and decisions of
stakeholders

Issue Materiality Matrix:
Example
FIGURE 4.2

Issue Materiality
Matrix Cont’d…
• Issues are plotted and ranked in decreasing order of
importance
➢ Priority issues for management would be upper right-hand corner
➢ Next priority would be issues located in the upper left and lower
right corners
➢ Their influence on operations and the ease or difficulty of
addressing the issues would be deciding factors for rating
➢ Issues in the lower left corner are of little importance to
stakeholders or management

Summary
• The appropriate identification of stakeholders is very
important to business corporations as one approach to
understanding the environment in which they operate.
(LO 4.1)
• Freeman’s stakeholder management capability provides a

good starting point for understanding stakeholder
relationships. (LO 4.2)
• The various stakeholder matrix mapping methodologies

give managers a practical approach to assessing the
influence of stakeholders. (LO 4.3)
Summary Cont’d…
• The diagnostic typology of organizational stakeholders

attempts to understand stakeholder influence by
assessing the potential threat or potential for
cooperation. (LO 4.4)
• The salience stakeholder typology increases the

complexity of analysis by using three attributes to
assess stakeholder importance: power, legitimacy, and
urgency. (LO 4.5)

Summary Cont’d…
• Frooman’s influence strategies provide another

perspective on understanding stakeholders. He argues
that managers should appreciate that stakeholders can
influence one another and the corporation in direct
and indirect ways and by withholding or specifying
usage conditions. (LO 4.6)

Summary Cont’d…
• The most sophisticated approach to understanding

stakeholders is through collaboration or engagement.
Collaboration changes the approach from managing
stakeholders to dialoguing with them. (LO 4.7)
• Issue materiality analysis has a logical connection to

stakeholder analysis. Examining stakeholders and
issues together increases management understanding
of the environment in which the corporation operates.
(LO 4.8)
Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Define the ethics of business.
2. Understand the different approaches managers and
businesspersons take to assessing the ethical
implications of their decisions.
3. Identify the influences on ethical behaviour and define
ethical relativism.
4. Describe the seven common theoretical bases for
ethical conduct.
5. Outline a sequence of moral reasoning.
6. Appreciate the challenges of ethics in business.
© 2020 McGraw-Hill Education Ltd 5 - 100
Introducing the
Ethics of Business
• Business ethics → rules, standards, codes, or principles
that provide guidelines for morally right behaviour and
truthfulness in specific situations
➢ Means different things to different managers

Levels of Ethical
Assessment
FIGURE 5.1
Assessment of Ethical
Implications in Business Decisions
• Value judgments → subjective evaluations of what is

considered important
➢ Based on how managers intuitively feel about the goodness
or rightness of various goals
• Moral standards → the means by which individuals
judge their actions and the actions of others
➢ Based upon accepted behaviour in society

Influences on Ethical
Behaviour
• Influences become bases for an individual’s value
judgments and moral standards that determine behaviour
➢ Five categories:
1. Influences of Individuals
2. Corporate or Organizational Influences
3. Economic Efficiency Influences
4. Government and Legal System Influences
5. Social Influences
• Ethical relativism → belief that ethical answers depend
on the situation and no universal standard or rules exist
to guide or evaluate morality
Distinguishing among
Values, Morals, and Ethics
Value Judgments Moral Standards Ethical Principles
Managers use value judgments Managers turn to moral Managers can examine standards
when they must decide what is standards of behaviour in of behaviour and choice of goals
right or wrong decision making by using the fundamental logic of
ethical principles of analysis
Subjective evaluations of what Represent the expectations of
managers think is important; society and the means by which Ethics is the study of what is good
based upon a manager’s own managers judge their actions or right in human beings
values
Vary with individuals and by Ethics is a way of thinking about
The way managers intuitively culture, country, organization, morality in a logical and
feel about right or wrong and time systematic manner
Can be thought of as priorities Are subjective gauges of Do not differ between people and
or preferences and are variable conduct, and are the way remain the same
managers bring intuitive feelings
Used along with moral about right or good into decision Are the foundation of moral
standards when confronted making philosophy
with a complex managerial
dilemma Are not objective, consistent, or Are the fundamental rules by
timeless, as are ethical principles which moral standards and value
judgments can be examined
© 2020 McGraw-Hill Education Ltd TABLE 5.1 5 - 105
The Theoretical Basis
for Ethical Conduct
• Moral problems should be defined as resulting in
harms to some and benefits to others
➢ Introduces more realism in the business context
• Seven most cited principles of ethical analysis: self-

interest, personal virtues, caring, utilitarian benefits,
universal rules, individual rights, and justice
➢ Ethical principles are applied the same way in any context →
not subjective measures rather objective statements

Self-Interest Ethic
(Ethical Egoism)
• Individuals or corporations set their own standards for
judging the ethical implications of their actions
➢ Individual’s values and standards are the basis for actions
• Problems with self-interest ethic:

➢ Considered easy way out because person relies on own beliefs
without more complicated analysis
➢ Viewed as selfish behaviour
➢ Leads to absolutism; failing to take into consideration interest of
others

Self-Interest Ethic
(Ethical Egoism) Cont’d…
• It is acceptable for an individual to be appropriately self-

concerned as long as interests of others are considered
➢ Enlightened egoist – attentive to needs of others, and self-
interest provides an incentive to restrain one’s self-interest
• Maximization of profits is acceptable as long as interests
of relevant stakeholders are considered
➢ Corporation must stay within rules of operation provided in
society through government

Personal Virtues Ethic
• An individual’s or corporation’s behaviour is based upon
being a good person or corporate citizen
➢ Emphasizes traits (virtues) such as courage, honesty, wisdom,
temperance, and generosity
➢ People should act in ways to convey honour, pride and self-worth
➢ Virtues are acquired through learning and practice, and will
become habits
• “Does this action represent the kind of person I am or
want to be, or present the desired corporate image or
reputation?”
Ethics of Caring
• Gives attention to specific individuals or stakeholders

harmed or disadvantaged and their particular
circumstances
➢ Responsibility for reducing harm or suffering of others
➢ Solutions designed to respond to needs of particular individuals
or stakeholders
• Managers and corporations should act toward others in a
way they would expect others to act toward them
➢ Golden rule: “Do unto others as you would have them do unto
you”

Ethics of Caring
• Advantages:
➢ Responsive to immediate suffering or harm
➢ It allows for flexibility, enabling the manager to respond quickly
to changing circumstances
➢ Precedents are not a concern
• Problems:
➢ Lose sight of the bigger picture thus unintentionally harming
some other stakeholder
➢ Caring actions rely on subjective criteria that limit understanding
of all the factors involved

Utilitarian Ethic
• Focuses on the distribution of benefits and harms to all
stakeholders with the view to maximizing benefits
➢ “The greatest good for the greatest number.”
• Problems:
➢ Does not account for what is just
➢ What should be maximized to result in community’s
happiness?
➢ Cannot accurately measure some costs and benefits (and/or
risk of miscalculating them)
➢ No method for distributing costs or benefits

Universal Rules Ethic
• Ensures that managers or corporations have the same

moral obligations in morally similar situations
➢ “What individuals believe is right for themselves, they should
believe is right for all others”
➢ Persons should be treated as end in themselves, worthy of
dignity and respect and never as a mean’s to one’s own ends
➢ Categorical imperative ethics → rules and morals in society
should be fair to everyone, they should universally apply and
apply over time

Universal Rules Ethic
Cont’d…
• Problems:
➢ Difficult to determine if someone is being used merely as a
means to an end
➢ Not possible to always work to universal rules i.e. exceptions
exist
➢ No scale between actions that are considered morally right or
wrong

Individual Rights Ethic
• Relies on a list of agreed-upon rights for everyone that
will be upheld by everyone and that becomes the basis
for deciding what is right, just, or fair
➢ Examples: Rights to safety, information, privacy, property
➢ Governments identify rights in constitutions
• Problems:
➢ Determining and agreeing upon the list of rights
➢ Rights and/or holders of those rights can be in conflict
➢ Rights are not absolute and overemphasis on one might result in
injustice
Ethic of Justice
• Considers that moral decisions are based on the primacy

of a single value: justice which will result in fair outcome
➢ Ethical dilemmas are a conflict among rights that can be
resolved by the impartial application of some general principle
• Different types of justice:
➢ Procedural justice
➢ Corrective justice
➢ Retributive justice
➢ Distributive justice

Ethic of Justice
• Advantages:
➢ Looks at dilemmas logically and impartially
➢ All are perceived to have an equal right to equitable treatment
• Problems:
➢ Difficult to decide, outside of the law, who has the moral
authority to reward or punish whom
➢ Ensuring benefits distributed fairly is challenging
➢ Interests of particular stakeholders may be overlooked
➢ Perceived as being impersonal, inflexible, cold and uncaring

Ethical Dilemmas
• Situation or problem where a person has to make a
difficult choice between two alternatives, neither of
which resolves an issue or problem in an ethically
acceptable fashion
• Approach to handling:
➢ Identify the ethical principles involved
➢ Review or analyze the problem using one of the ethical
principles outlined above
➢ Examine the problem from an ethical perspective different
from the one(s) used initially

Moral Reasoning
• Systematic approach to thinking or reasoning through the
implications of a moral problem or issue
• Steps to moral reasoning:
➢ Define moral issue or decision
➢ Gather all relevant information
➢ Identify the stakeholders involved
➢ Develop possible alternative solutions
➢ Consider applicable value judgments, moral standards, principles
➢ Identify harms/benefits to stakeholders
➢ Determine practical constraints
➢ Decide on action

Approaches to Considering
Ethical Implications in
Business Decisions
TABLE 5.2
Kohlberg’s Stages
of Moral Development
• Individuals have identifiable cognitive skill levels that they

use in resolving moral dilemmas
➢ Developed over time as result of educational experience and
the socialization process in maturing from childhood to
adulthood
➢ Six stages of moral development divided into three levels:
• LEVEL I: Pre-Conventional Level (Self)
• LEVEL II: Conventional Level (Others)
• LEVEL III: Post-conventional Level (Humankind)

Kohlberg’s Stages of Moral
Development Cont’d…
• LEVEL I: Pre-conventional (Self)
➢ Stage 1 – Punishment and obedience orientation
➢ Stage 2 – Individual instrumental purpose/ exchange
• LEVEL II: Conventional Level (Others)
➢ Stage 3 – Mutual interpersonal expectations
➢ Stage 4 – Law and order orientation
• LEVEL III: Post-Conventional Level (Humankind)
➢ Stage 5 – Social contract orientation
➢ Stage 6 – Universal ethical principle orientation

Ethics in Business:
Some Challenges
• Too simplistic approaches:
➢ Indicating “just do the right thing” is not satisfactory
• Myths:
➢ It’s easy to be ethical
➢ Unethical behaviour in business is simply result of “bad apples”
➢ People are less ethical than they used to be
• Lack of awareness:
➢ Most people believe that they behave ethically towards others,
but self-perception often falls short
➢ Four biases: prejudice, favouritism, overclaiming credit and
conflict of interest
Summary
• An extensive examination of ethical behaviour has
occurred not only as it relates to business and the
corporation but also as it impacts the various
interrelationships among business, society, and
stakeholders. (LO 5.1)
• The preferred phrase ethics of business is defined as the

rules, standards, codes, or principles that provide
guidance for morally appropriate behaviour in
managerial decision making relating to the operation of
the corporation and business’s relationship with society.
(LO 5.1)
Summary Cont’d…
• The three levels of assessing ethical assessment are:
1. Awareness of moral or ethical implications
2. Ethical implications assessed upon individual,
organizational, economic efficiency, governmental,
and societal influences, described as value
judgments and moral standards
3. Implications assessed upon use of ethical principles
(LO 5.2)

Summary Cont’d…
• The multitude of influences on ethical behaviour range
from educational and religious backgrounds to professional
organizations and governments. These influences lead to
ethical relativism, the belief that ethical answers depend
on the situation and that no universal standards or rules
guide or evaluate morality. (LO 5.3)
• Seven theoretical bases, or ethics, for understanding

ethical conduct are described: self-interest, personal
virtues, caring, utilitarian benefits, universal rules,
individual rights, and justice. (LO 5.4)

Summary Cont’d…
• Kohlberg’s theory of the stages of moral development is
outlined in regard to its application to the ethics of
business. The pre-conventional, conventional, and post-
conventional levels and the six stages illustrate the attitude
that managers may have toward assessing the implications
of ethics in the business environment. (LO 5.5)
• The consideration of the ethical implications of the

responsibilities of business is prevalent in what
corporations do. The theoretical basis for ethics has been
outlined and sets the stage for further examination. But,
there are several challenges to ethical behaviour in
corporations. (LO 5.6)
Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Recognize appropriate ethical leadership.

2. Define and describe the pros and cons of a statement of
values.
3. Make the distinction between codes of conduct and
codes of ethics.
4. Appreciate the purpose of ethics training in an
organization.
5. Define an ethics audit and explain the role of ethics
officers and ethics committees.
© 2020 McGraw-Hill Education Ltd. 6 - 129

Learning Outcomes Cont’d…
6. Understand how ethics reporting systems work and
define whistleblowing.
7. Know who is responsible for managing the ethics of
business.
8. Identify the approaches to ethics programs.
9. Evaluate ethics programs and list their benefits.
10. Recognize that ethical misbehaviour may occur despite
management efforts and the implementation of ethics
programs.

Ethical Leadership Forms
• Research on leadership identifies three possible forms
applicable to the ethics of business and corporate social
responsibility:
➢ Ethical → communicate ethical standards and encourage ethical
conduct
➢ Responsible → narrow orientation focused on financial
performance and extended orientation with stakeholder view
➢ Servant leadership → emphasizes concern for others, and
combines motivation to lead with the need to serve others
• Includes the design and implementation of corporate ethics
programs

Statement of Values
• A description of the beliefs,
principles, and basic assumptions
about what is desirable or worth
striving for in an organization.
• Key components to value
statements:
➢ Key stakeholder interests to be
satisfied and balanced
➢ Emphasis on quality
➢ Efficiency
➢ Work climate
➢ Observance of codes of conduct
Codes of Conduct
and Ethics
• Code of conduct → explicitly states what appropriate
behaviour is by identifying what is acceptable and
unacceptable
• Code of ethics → a statement of principles or values
that guide behaviour by describing the general value
system within which a corporation attempts to operate
in a given environment

Distinction between Codes of
Conduct and Codes of Ethics
Codes of Conduct Codes of Ethics
Enforced by an external power and Codes of ethics suggest guidelines to
authority; convey rules that tell follow and empower individuals to act
people what they must or must not according to their consciences.
do. Members of organizations must Penalties are not imposed and writers
obey or face penalties for failing to do emphasize the qualities they think
so. members should have.
Key characteristics: Key characteristics:
•Imposed by others •Self-imposed
•What must be done or what must •Who we are
not be done •What we stand for
•Rules •Guidelines or guiding principles
TABLE 6.1

Codes of Conduct and
Codes of Ethics Cont’d…
• Types of codes:
➢ Corporate or business enterprise
➢ Professional organizations
➢ Industry and sector
➢ Single issue
➢ Codes from national and international bodies
• Codes institutionalize ethical behaviour by:
➢ Increasing awareness
➢ Discouraging ethical apathy
➢ Facilitating ethical decision making
➢ Making it easier to refuse an unethical request
Content of Codes of
Conduct and Codes of Ethics
A general statement of ethics, values, or philosophies
Criteria for decision making and compliance with laws

Responsibility toward employees, including items such as health and safety, diversity, a respectful workplace,
and privacy
Conflicts of interest, their identification, and how to handle them
Protection of corporate assets, including accurate accounting and record keeping, security or property, and
insider information
Appropriate business practices, including honesty, fairness, obeying the law, and information disclosure
Appropriate conduct on behalf of the corporation; for example, relationships with customers, suppliers,
competitors, creditors, and government
Responsibilities to society at large, including contribution to political parties, lobbying government, responses
to media, treatment of communities, and concern for environmental protection
Implementation procedures, including familiarity with the code, reporting of violations, refusing unethical
requests, and seeking help on ethical matters
Specification of enforcement/compliance procedures and the penalties for inappropriate or illegal behaviour.
TABLE 6.2
Codes of Conduct and
Codes of Ethics Cont’d…
• Content of codes has evolved over time and through
five generations:
➢ First generation → conflict of interest
➢ Second generation → commercial conduct
➢ Third generation → employee rights and motivation of the
workforce
➢ Fourth generation → wider responsibility, with attention on
environment and respect for communities
➢ Fifth generation → international concerns, including human
rights, the rule of law and labour conditions

Criticisms
• Unenforceable standard
• Unnecessary, as most corporations operate at ethical level
above code
• Only necessary for the less scrupulous
• Penalties may be insignificant
• Convincing everyone to comply is not easy
• Often idealistic and written in meaningless generalities
• Merely to control competitive conduct among
corporations, designed to prevent government legislation
• Serve as a response to public criticism

Ethics Training
• Involves teaching employees about the values and

policies on ethics they should follow in their decision
making
• Teaching sessions can involve:
➢ Managers or outside consultants
➢ Addressed to all levels of employees, with emphasis on
management
➢ Online exercises
➢ Practical checklists and tests to evaluate actions

Checklists and Tests
• Nash → plainly worded questions should be used by
managers when examining ethics of a business decision
➢ Examples: Have you defined the problem accurately? How did this
situation occur in the first place? Etc.
• Pagano model (1987) → identifies six tests that provide
insights into the ethics of a business’ actions:
1. Is it legal
2. Benefit/cost test
3. Categorical imperative
4. Light of day test
5. Do unto others
6. Ventilation test
Understanding
Conflicts of Interest
• Conflict of interest → situation in which an individual

has a private or personal interest that is sufficient to
appear to influence the objective exercise of that
individual’s duties
• Three types of conflict:
1. Real
2. Apparent
3. Potential

Common Conflicts
of Interest
Self-dealing—Exists where a manager or employee takes an action in an official capacity that involves
dealing with oneself in a private capacity and that confers a benefit to oneself. Today this extends to
one’s spouse, family members, and business partners.
Accepting gifts or benefits—Involves the acceptance of some benefit.
Influence peddling—The practice of soliciting some form of benefit; for example, asking for a kickback
or gift from a supplier if a purchase is made.
Using employer’s property—The inappropriate use of an employer’s property; for example, taking
office supplies for home use.
Using confidential information—The use for personal or private purposes of confidential information
obtained from some other source, for example customers or suppliers, to gain some benefit.
Outside employment or moonlighting—The work or activity in which an employee engages outside
normal working hours for additional remuneration.
Post-employment—Subsequent or future employment where information or contacts obtained
during employment results in some benefit.
Personal conduct—The situation where an employee’s behaviour in private life may reflect adversely
on the employer.
TABLE 6.3
Ethics Audits,
Managers, and Committees
• Systematic effort to discover actual or potential

unethical behaviour in an organization
➢ Designed to uncover unethical behaviour and identify existing
opportunities for unethical behaviour
➢ Useful in conjunction with a code of ethics
➢ Conducted by consultants → advise management on how to
put “integrity” into corporate culture

Ethics Audits, Managers,
and Committees Cont’d…
• Ethics officer → independent manager who:
➢ Reports to the board of directors or CEO
➢ Reviews complaints or information from anyone in the
organization or any stakeholder
➢ Studies situation and recommends action if necessary
• Compliance officer → ensures all employees are familiar
with corporation’s policies and codes, and with government
laws and regulations
• Ethics committees → group of directors, managers or staff
formed to monitor ethical standards and behaviour

Ethics Reporting Systems
and Whistleblowing
• Corporations have established reporting systems so that

they can become aware of issues and concerns relating to
corporate ethical conduct
➢ Most common = hotlines
• Whistleblowing → act of voluntary disclosure of
inappropriate behaviour or decisions to persons in
positions of authority in an organization
➢ Many ethical issues related to whistleblowing have ethical
implications for whistleblowers and managers

Whistleblowing: Ethical
Implications
• Issues:
➢ Remain silent, quit, or disclose wrongdoing?
➢ Range of concerns from clearly illegal to maybe illegal to issue of
morality
➢ Does obligation to employer supersede obligation to self,
profession, or industry?
➢ Will the whistleblower be believed?
➢ Is the whistleblower a hero or a snitch?
➢ When and who to tell?
➢ What will the consequences be?

Ethics: Who is Responsible?
• Boards of directors have two tasks in relation to ethics:
➢ To collectively identify values that determine acceptable
behaviour in the firm
➢ Put in place a process that ensures values are reflected in action
• Success of any ethics programs depends on commitment

of top management:
➢ Announce the program
➢ Champion its development and implementation
➢ Aspire to lead in an ethical manner

Management and Leadership
Models
Immoral Amoral Moral
• A posture or approach that is devoid • A posture or approach that is without • Conform to high
of ethical principles and actively ethics, but not actively immoral standards of ethical
opposed to what is moral • Two types: intentionally or behaviour or professional
• Management’s motives are selfish unintentionally amoral standards
and it cares only about the • Intentionally amoral leaders do not • Aspire to succeed only
individual’s or the organization’s consider ethics, as they believe within confines of ethical
gains business activity lies outside of moral principles; for example
• Management to some degree knows judgments; neither moral nor fairness, justice, and due
right from wrong and chooses to do immoral, as different rules apply to process
wrong business • Concerned with letter
• May be motivated by greed and • Unintentionally amoral leaders are and spirit of the law
profitability, and organizational (or morally careless, unaware of or • Prefer standards that are
personal) success is the goal to be inattentive to impact of their higher than the minimum
achieved at any price decisions on others set by the law
• Do not care about claims or • They lack ethical perception, • Assume leadership when
expectations of others sensitivity, or awareness ethical dilemmas arise
• The law is regarded as a barrier to • May be well-intentioned but unaware • Make ethics a driving
be overcome and will circumvent if of harms from their actions force of the organization
it will achieve their ends • “Ethical gears in neutral”
• Do not make good corporate citizens • Use letter of the law instead of spirit
• Cannot make good corporate citizens TABLE 6.4
Ethics Programs: Approaches
• Classification of programs:
➢ Formal approach → based on organizational norms that are
written as a code of conduct
➢ Monological approach → allows organizational managers and
employees to determine for themselves what is right or
wrong
➢ Dialogical approach → emphasizes communication before
decisions are made and implemented

Compliance versus
Values-based Programs
Compliance-based Values-based
Rules, laws, policies Values, ethics, guiding principles
Conformity with externally imposed standards Self-governance to chosen standards; self-imposed
Prevent criminal misconduct Enable responsible conduct
Lawyer-driven Management-driven
Educational approach: policies and rules, Educational approach: policies and rules, but also
legalistic guidelines/awareness through leadership
Employee discretion: limited Employee discretion: increased
Control: auditing, penalties Control: accountability, systems, decision processes
Code of Conduct: Code of Ethics:
•Specific •General
•Prescriptions/directives •Values/principles
•Uniformity •Judgment
•Enforceable statements of specific behaviour •“Empowering” and “aspirational”
TABLE 6.5
Ethics Programs: Evaluation
• Implicit ethics programs are implemented through:

➢ Organization’s culture, reward systems, valued behaviour,
promotion policies, management example, general practice and
performance measures
• Criteria for an effective ethics program:
➢ Visibility
➢ Ownership
➢ Fit
➢ Balance

and Benefits Cont’d…
• Benefits of programs to manage ethics:
➢ Business practices more beneficial to society
➢ Increased awareness of ethics
➢ Alignment of corporate behaviour with values
➢ Heightened ethical sensitivity of employees and managers
➢ Sensitizes managers and employees to legal requirements
➢ Avoidance of criminal acts
➢ Integration of values with quality and strategic management
➢ Implications of management decisions on stakeholders
➢ More favourable public image

• Four types of executive ethical leadership:

➢ Hypocritical leader = strong moral manager and weak moral
person
➢ Unethical leader = weak moral manager and weak moral
person
➢ Ethical leader = strong moral manager and strong moral person
➢ Ethically silent leader = weak moral manager and either a weak
or strong moral person

• Guidelines for effective ethics management:
FIRST: Understand the Existing Ethical Culture
SECOND: Communicate the Importance of Ethical Standards
THIRD: Focus on the Reward System
FOURTH: Promote Ethical Leadership Throughout the Firm
• Corporate culture → complex set of values, beliefs,
assumptions and symbols that define the way in which an
organization conducs its business
➢ Ethical corporate culture → “subset” of the organizations
broader culture

Why Ethical Leadership
and Programs Fail
• Managers are morally imperfect
• Self-interest
• Rationalization and self-delusion
• Threat of formal sanctions
• Threat of informal sanctions
• Tolerance to risk-taking behaviour
• Pressure in particular situations

Summary
• Corporations must take deliberate actions to reinforce

the importance by considering ethical implications in
decision making. Key to this is the appropriate form of
ethical leadership. (LO 6.1)
• The components of a corporation’s ethics program to

accomplish are described. The initial stage should be a
statement of values or the equivalent that states in
general terms the behaviours expected. These values
become the foundation for the corporation’s ethics
program. (LO 6.2)
Summary Cont’d…
• A code of ethics reflects the values of an organization.

A distinction should be made from a code of conduct,
which focuses on compliance to rules or regulations
instead of values. (LO 6.3)
• Today, corporations are not leaving an understanding of

morality to chance and are engaged in a variety of
training for everyone in the organization. (LO 6.4)

Summary Cont’d…
• Ethics audits are becoming more common as an approach

to assessing the ethical implications of a corporation’s
practices. Usually such audits are conducted by outside
consultants, who can also provide a range of advice about
ethics programs. In larger corporations, there is a trend
toward an ethics officer of some type being responsible for
all aspects of compliance and morality in the organization.
Ethics committees in many corporations facilitate the
implementation of ethics programs. (LO 6.5)

Summary Cont’d…
• Ethics reporting systems are being established. Several
complicated issues are associated with whistleblowing and
whistleblowers. Managers must carefully monitor the
practice to make sure its benefits outweigh the drawbacks.
(LO 6.6)
• Someone must take responsibility for the development and

implementation of ethics programs. The board of directors
and top management must signal their commitment to any
program if it is to be successful. A “moral” leadership model
is necessary to achieve this. (LO 6.7)
Summary Cont’d…
• Approaches to ethics programs are described. The formal

approach is most common; the dialogical the least. Most
corporations have programs that are a combination of these
approaches. Also, the components of programs can be identified
as being compliance-based versus values-based. (LO 6.8)
• The components of an ethics program are either compliance-

based, following rules and requiring conformance, or values-
based, emphasizing values as a way to influence behaviour. In
most corporations today, a combination of these approaches is
used and referred to as integrity management. (LO 6.9)

Summary Cont’d…
• There are several explanations for why ethical leadership

and programs fail despite the best efforts and intentions of
the corporation and its managers. An ethical corporate
culture is necessary for ethics programs to be successful.
(LO 6.10)

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Describe corporate social responsibility (CSR).

2. Debate the pros and cons of corporate social
responsibility in Canadian business.
3. Appreciate the various foundations of social
responsibility theories.
4. Explain Carroll’s pyramid of corporate social
responsibility.

Learning Outcomes Cont’d…
5. Define the four contemporary CSR concepts: corporate

sustainability, reputation management, social impact
management, and triple bottom line (TBL).
6. Describe corporate and business citizenship.
7. Explain the complexity of corporate social responsibility
by understanding a unifying CSR framework.

Describing Corporate
Social Responsibility (CSR)
• 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

Key Elements of CSR
• Five key elements found in most CSR definitions:

➢ Corporations have responsibilities beyond the production of
goods and services
➢ These responsibilities involve helping to solve social problems,
especially those they have helped create
➢ Corporations have a broader constituency than just
shareholders alone
➢ Corporations have impacts that go beyond simple marketplace
transactions
➢ Corporations serve a wider range of human values than can be
captured by a sole focus on economic values

Describing CSR Cont’d…
• Basic idea of CSR is that business and society are

interwoven rather than distinct entities
• Expectations are placed on business due to its three roles:
➢ As an institution in society
➢ As corporation or organization in society
➢ As individual managers who are moral actors within corporation
• These three roles can be expressed in terms of three
principles of corporate social responsibility: legitimacy;
public responsibility; and managerial discretion
Source: Wood, 1991

Wood’s Principles of CSR
Principle of Public Principle of Managerial
Principle of Legitimacy
Responsibility Discretion
• External focus on • Beyond general • Involves individual
expectations of society expectations of society, choice or managerial
• Society grants the right that is, at the discretion
to business to operate corporation level • Individual decision
• Adherence to social • Determined by makers or managers
norms of society uniqueness for determine
• Pressures particularly circumstances of the • Relates to latitude of
strong on some corporation action possible by
corporations, e.g. large • Resource dependence management
ones or consumer determines • Focuses on range of
products • Involves managing strategic options
relationships with available to
immediate environment management
TABLE 7.1
The CSR Debate
• Case for involvement:

➢ Corporations are part of an interdependent “system” within
society → business must satisfy society’s needs and expectations
➢ CSR prevents public criticism and discourages further
government involvement and regulation
➢ Social problems can become opportunities i.e. CSR is good for
the bottom line
➢ Businesses should be given opportunity to solve social problems
➢ Businesspersons are concerned humans; it is not appropriate for
them to ignore social matters

The CSR Debate Cont’d…
• Case against involvement:
➢ Profit maximization is the primary purpose of business → to
have any other purpose is not socially responsible
➢ Corporations are responsible to shareholders and, in effect, have
no authority to operation in the social area
➢ Social policy is role of government, not business
➢ Business involvement in social matters increases costs
➢ Businesses cannot be held accountable for their actions in a way
sufficient to satisfy demands for social involvement
➢ Managers are not morally perfect and self-interest can overtake
decision making

Ethical Basis for CSR
• Managers have different motivations when responding to
sustainability → results in different sustainability
management initiatives
➢ Four different kinds of business cases of or for sustainability:
• Reactionary – focusing on profit-seeking behaviour and minimizing
costs
• Reputational – how the business is portrayed in media or society
• Responsible – striving for business excellence where corporation’s
success is measured by economic, environmental, and social
indicators
• Dialogue-based - engagement with broad range of stakeholders leads
to collaboration and understanding of initiatives that will have social,
environmental, and economic benefits
Social Responsibility
Theories: Three Categories
• Amoral View:
➢ Traditional view of business as merely profit-making entity
• Personal View:
➢ Corporations viewed as collectives that act as individuals; they
exist as legal persons and can be held responsible for their
actions
• Social View:
➢ Corporations are social institutions in society, with social
responsibilities
Source: Klonoski, 1991

The Pyramid of CSR
• Carroll’s pyramid (1991):

➢ Four kinds of social responsibility depicted in a pyramid -
economic responsibilities at bottom, followed by legal, ethical
and philanthropic higher up
➢ Pyramid is basic building-block, with economic performance as
foundation
➢ Corporation should strive to:
• Make a profit
• Obey the law
• Behave ethically and
• Be a good corporate citizen

Contemporary CSR Concepts
• Corporate sustainability (CS) → activities demonstrating
inclusion of social, environmental, and economic
responsibilities in business operations as they impact all
stakeholders presently and in future
➢ Five levels of CS:
• Compliance-driven CS - following government regulations
• Profit-driven CS – some consideration given to CS provided it
contributes to bottom line
• Caring CS - beyond legal compliance and profit (right thing to do)
• Synergistic CS – well-balanced solutions sought to create value
• Holistic CS – fully integrated and embedded in corporation

Reputation Management
• Any effort to enhance corporation’s image and good

name
➢ Several stages to successful implementation:
• Identification of desired perception of corporation
• Recognition of the significance of image with all stakeholders
• Awareness of influence of interactions with stakeholders on
corporation’s reputation
• Continuous efforts at maintaining relationships with stakeholders
➢ Reputations take a long time to establish and can be destroyed
quickly

Social Impact Management
• Field of inquiry at the intersection of business needs and

wider societal concerns that reflects and respects the
complex interdependency between the two
• Evaluates three aspects of business:
1. Purpose: What is the purpose of a business?
2. Social Context: Are the rights and responsibilities of multiple
stakeholders considered?
3. Metrics: How performance and profitability measured?

Triple Bottom Line (TBL)
• Triple-E (economic, ethical, and environmental) bottom

line → evaluates a corporation’s performance according
to a summary of the economic, social, and environmental
value the corporation adds or destroys
➢ Variation = triple-P bottom line: people, planet, profit
➢ Framework for measuring corporate performance against
economic, social, and environmental indicators
➢ Criticized as being of limited value i.e. provides smokescreen for
corporations to avoid ethical and environmental responsibilities
and reporting

Views on Corporate and
Business Citizenship
• Corporate citizenship → corporation demonstrates that it
takes into account its complete impact on society,
environment and economic influence
➢ Provides business benefits in eight areas:
• Reputation management
• Risk profile and risk management
• Employee recruitment, motivation and retention
• Investor relations and access to capital
• Investor Learning and innovation
• Competitiveness and market positioning
• Operational efficiency
• License to operate
Approaches to
Corporate Citizenship
• Three views of corporate citizenship:
➢ Limited → giving back to society and is considered enlightened self-
interest
➢ Equivalent → concerned with what society expects are the
responsibilities of business
➢ Extended → shared understanding of basic social, civil, and political
rights: Social role of the corporation in administering citizenship rights
↓
Social rights: The corporation as a provider
+
Civil rights: The corporation as an enabler
+
Political rights: The corporation as a channel

Approaches to
Corporate Citizenship Cont’d…
• Business view:
➢ Business citizenship → includes the responsibilities of
corporate citizenship on a local and national basis and
extends it to a global or universal scope
➢ Corporations are responsible players in local environments,
involved with volunteerism, charity, and rights and duties in
and for the community
➢ Also responsible for global or universal actions

The VBA Model: An
Integration of CSR Concepts
• Integrates and unifies five common frameworks based

on three core concepts: value, balance, and
accountability
➢ Corporate Social Responsibility (CSR)
➢ Business Ethics (BE)
➢ Stakeholder Management (SM) VBA Model
➢ Sustainability (SUS)
➢ Corporate Citizenship (CC)
Value + Balance + Accountability = Proper Role of Business in Society

Summary
• Corporate social responsibility is a reflection of the fact that

business and society are interwoven and can be expressed in
terms of three principles: legitimacy, public responsibility, and
managerial discretion. (LO 7.1)
• The debate as to whether social responsibility is an

appropriate concept is summarized in arguments for and
against corporate social involvement. Arguments for and
against corporate social involvement are provided and an
ethical basis for CSR described. (LO 7.2)

Summary
• These arguments are reflected in Klonoski’s summary of

social responsibility theories, categorized according to three
alternative views of the corporation as amoral, personal, and
social. (LO 7.3)
• A pyramid of corporate social responsibilities is presented,

based on economic, legal, ethical, and philanthropic
responsibilities. A hierarchy of responsibilities exists:
economic and legal obligations are primary and basic. In
recent years, the ethical and philanthropic responsibilities
have received more attention. (LO 7.4)

Summary
• Social responsibility has evolved and today other terminology

is being used to describe the concept, including corporate
sustainability, reputation management, social impact
management, triple bottom line, and corporate citizenship.
(LO 7.5)
• Corporate citizenship is another term used interchangeably

with CSR. It is an inclusive term to capture the economic,
social, and environmental responsibilities of the corporation
and relies on stakeholder theory. (LO 7.6)

Summary
• The VBA model is an attempt at unifying and integrating the

various frameworks within CSR around three core concepts:
value, balance, and accountability. (LO 7.7)

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes
1. Understand the background to

measuring and reporting CSR
performance.
2. Define corporate reputation and
understand its relationship to
corporate social responsibility.
3. Identify the stakeholders who
influence CSR reporting.
4. Describe the relationship
between CSR and corporate
profitability.

Learning Outcomes
5. Enumerate and discuss the types of criteria used in social

auditing.
6. Recognize the surveys that evaluate Canadian CSR
reporting.
7. Outline how CSR and sustainability results are
communicated to stakeholders.
8. Explain the role of business schools in CSR reporting.
9. Discuss the future of CSR and CSR reporting.

Auditing CSR
• First step in measurement of CSR involves some type of

auditing
➢ Social auditing → systematic assessment that identifies,
measures, evaluates, reports, and monitors the effects an
enterprise has on society that are not covered in the traditional
financial reports
• Purpose of social auditing is to provide:
➢ Information to stakeholders about the impact of the enterprise
on society
➢ Basis of accountability for the social consequences of corporate
activities
©2020 McGraw-Hill Education Limited 9 - 189

Auditing CSR Cont’d…
• Many approaches to social auditing:

➢ Inventory
➢ Program management
➢ Process
➢ Cost or outlay
➢ Social responsibility accounting
➢ Social indicators

• Trend towards more sophisticated social auditing

approaches:
➢ Social objective setting
➢ Triple bottom line reporting
➢ Social reports
➢ Sustainable guidelines
➢ Externally verified social reports
➢ Consultation with stakeholders

• Results of auditing process become basis for social

reporting
➢ CSR reporting → management function that documents the
corporation’s economic, ethical/social, and environmental
responsibilities and initiatives, and communicates this to
relevant communicates this information to relevant
stakeholders
➢ Also known as corporate sustainability reporting

Trends in Measuring
• Measurement of social responsibility constantly changing

and managers must keep up with developments
• Three reasons why reporting becoming increasingly
necessary:
➢ To help maintain the corporation’s reputation
➢ To meet demands of stakeholders
➢ To sustain corporate profitability

Corporate Reputation and CSR
• Corporate reputation → “perceptual representation of a
corporation’s past actions and future prospects that
describes the corporation’s overall appeal to all of its key
constituents [stakeholders] when compared with other
leading rivals.” (Fombrun, 1996)
➢ Often associated with corporate image, especially as promoted
through public relations
➢ Today related more to “character” of corporation
➢ Drivers include: customer service, ethical conduct, community
involvement, employee relations, quality of products & services,
innovativeness, and environmental stewardship

Stakeholders Expect
CSR Accountability
• Most influential stakeholders:

➢ Shareholders and financial ➢ Non-governmental
institutions agencies (NGOs)
➢ Employees ➢ Charities
➢ Consumers ➢ Media
➢ Society at large ➢ Government
➢ Service professionals

CSR and Profitability
• Relationship between profitability and CSR has been
extensively studied, but with mixed conclusions:
➢ Expenditures on CSR do not contribute to profits
➢ Expenditures on CSR do contribute to profits
➢ Expenditures on CSR might contribute to profits
• Network for Business Sustainability (NBS) → initiatives with

positive impacts fall into one of three categories:
➢ Firm processes
➢ Firm outcomes
➢ External outcomes

Corporate Social Reporting
Guidelines
• Several comprehensive guidelines provide illustrations of
the criteria used to assess the ethics of business and
identify socially responsible initiatives:
➢ Global Reporting Initiative (GRI) Standards
➢ The International Integrated Reporting Council (IIRC)
➢ The Sustainability Accounting Standards Board (SASB)
➢ OECD Guidelines for Multinational Enterprise
➢ United Nations Global Compact
➢ ISO 26000 CSR Standard

Global Reporting Initiative
(GRI)
• GRI is most comprehensive and widely used guideline:
➢ Independent international undertaking to establish reporting
criteria to help businesses and governments to understand and
communicate their impact on sustainability issues
➢ Main activity is to develop Sustainability Reporting Standards
that are made available as a free public good
• GRI standards can be used for three purposes:
1. Benchmarking and assessing sustainability performance
2. Understanding how organization influences and is influenced by
expectations about sustainable development
3. Comparing performance within and between organizations

(GRI) Standards
Universal Standards
GRI 101 Foundation–Background on sustainability reporting and reporting principles.
GRI 102 General Disclosure–Report contextual information about the organization including its
strategy, ethics and integrity, governance, stakeholder engagement, and reporting practice.
GRI 103 Management Approach–Management’s approach to each topic and explanation to
material topic and its boundary.
Economic Standards
GRI 200 Series—Topics covered in economic performance, market presence, indirect market
impacts, procurement practices, anti-corruption, and anti- competition.
Environment Standards
GRI 300 Series—Environmental standards, materials, energy, water and effluents, biodiversity,
emissions, effluents and waste, environmental compliance, supplier environmental assessment.
Social Standards
GRI 400 Series—Employment, labour/management relations, occupational health and safety,
training and education, diversity and equal opportunity, non-discrimination, freedom of association
and collective bargaining, child labour, forced or compulsory labour, security practices, rights of
Indigenous Peoples, human rights assessment, local communities, public policy, customer health
and safety, marketing and labelling, customer privacy, and socioeconomic compliance.
TABLE 9.1
Evaluating Canadian CSR
Reporting
• CSR and sustainability reports cover the corporation’s
economic, social, and environmental responsibility
initiatives as identified in the auditing process
➢ Several ways to improve process:
• Codes or standards should be more transparent
• Measures should be better explained and weightings justified
• Efforts made to reduce compliance costs by better designed forms
and measures
• Data used should be improved, with less reliance on information
supplied by management
• Measurements of social indicators should use sophisticated
methodology (as does financial performance measurement)

CSR Reports: Best Practices
• Identify stakeholders
• Describe trends, risks, challenges, opportunities
• Identify and prioritize issues
• Identify major stakeholders and approaches to engage them
• Describe reporting guidelines or standards used
• Include objectives for the future and report on objective
accomplishments
• Use visuals to enhance appearance and readability
• Identify manager(s) responsible for CSR

Communicating CSR
and Sustainability Results
• Efforts must be made to communicate CSR reports to
stakeholders
• How to inform employees:
➢ Articles in newsletters
➢ Information on employee intranet
➢ Agenda item at meetings
➢ Corporate reputation committees
• Corporations must “manage the message
• Communicating CSR is a continuous process

Communicating CSR and
Sustainability Results Cont’d…
• Communication with other stakeholders:

➢ Customer invoices or billings (or other correspondence)
➢ Corporate websites
➢ Newspaper, magazine articles and television
➢ Word of mouth
• Key attributes to make sustainability information useful:
➢ Credibility
➢ Balance
➢ Integration with strategy
➢ Comparability

Business Schools and
Sustainability Reporting
• Business schools facing demands from society and business

to prepare grads to identify and address ethical implications
• Association to Advance Collegiate Schools of Business
(AACSB) → global, non-profit organization devoted to
advancement of management education
➢ Assists business schools with continuous improvement of their
business programs, including areas of business ethics and social
responsibility
• Corporate Knights magazine - annually prepares “Better
World MBA Results”

Continuum of Future
Commitment to CSR
Possible
Corporate Commitment
Future CSR
Superficial and marginal, may be required by law
CSR Lite Concerned mainly about responsiveness to complaints
May use indicators such as GRI and think they are in compliance
Voluntarily take on environmental and social obligations to maintain licence to
CSR Compliant operate
Keep abreast of emerging standards and norms of CSR
Become compliant with standards and then create niches in areas more strategic
to the corporation
CSR Strategic
May use CSR as key to survival by providing goods and services acceptable to
society
Believe the need to take social and environmental impacts and opportunities into
account.
CSR Integrated
Comprehensive CSR policies and operationalizing CSR principles through rigorous
standards and objectives Source: Strandberg, 2002
Business model where mission is to improve social or environmental conditions
Deep CSR
Move to addressing trade-offs between different elements of triple bottom line
© 2020 McGraw-Hill Education Limited TABLE 9.2 9 - 205
The Future of CSR
and Social Reporting Cont’d…
• “CSR progress will be slow over the next ten years, but
will become increasingly mainstreamed by business”
• Three potential scenarios to future of CSR:
➢ Fad-and-fade scenario
➢ Embed-and-integrate scenario
➢ Transition-and-transformation scenario

Summary
• Corporate reporting of social responsibility and

sustainability has become a management function in
many organizations. Social auditing is performed and the
results become the basis for social reporting. (LO 9.1)
• An important reason for social reporting is to sustain the

corporation’s reputation. Today, corporate reputation
rather than image has become important to a successful
corporate strategy. (LO 9.2)

Summary
• Today, CSR reporting is expected, and even demanded, by

several stakeholders, in particular shareholders,
employees, consumers, society at large, service
professionals, NGOs, charities, the media, and
government. (LO 9.3)
• The relationship between CSR and profitability has been

extensively studied. A majority of studies have found a
positive relationship, but the research approaches and
techniques used are being questioned. (LO 9.4)

Summary
• Several organizations are establishing standards to be used

in social auditing, which in turn determine the contents of
CSR reports. Organizations assisting managers in this area
include the Conference Board of Canada, the Accountability
Project, and the Global Reporting Initiative. (LO 9.5)
• The CSR reports produced by Canadian corporations are

evaluated by newspapers, magazines, consulting firms, and
professional organizations. This evaluation provides best-
practice examples for corporations beginning to develop
CSR reports. (LO 9.6)
Summary
• The act of producing the CSR report is necessary to

communicate the results to stakeholders in various formats
and delivery modes. (LO 9.7)
• Few business schools produce a CSR report on themselves.

But they are being evaluated in terms of how they are
integrating corporate social responsibility and the ethics of
business into programs, courses, faculty activities, and
student initiatives. (LO 9.8)

Summary
• The future of CSR and reporting is undergoing change. It is

thought that it will become a required management
function with a minimum baseline standard being
established. What happens to CSR will determine the
changes in social measuring, reporting, and
communicating approaches. (LO 9.9)

Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes

performance.
profitability.

Learning Outcomes

auditing.
reporting.

Auditing CSR

auditing
financial reports
on society
activities


➢ Inventory
➢ Process
➢ Cost or outlay


approaches:
➢ Social reports


reporting
stakeholders

Trends in Measuring

necessary:


Stakeholders Expect
CSR Accountability



➢ Firm processes
➢ Firm outcomes

Guidelines

(GRI)

(GRI) Standards
Universal Standards
Economic Standards
Social Standards
TABLE 9.1
Reporting
and measures

accomplishments

Communicating CSR
stakeholders


➢ Word of mouth
➢ Credibility
➢ Balance
➢ Comparability


responsibility

Continuum of Future
Commitment to CSR
Possible
Future CSR
to the corporation
CSR Strategic
society
account.
CSR Integrated
Deep CSR
The Future of CSR

Summary



Summary



Summary


Summary



Summary


Fifth Edition
CHAPTER 1
The Relationship
between Business
and Society
Prepared By:
Renée Majeau, NAIT

Learning Outcomes

performance.
profitability.

Learning Outcomes

auditing.
reporting.

Auditing CSR

auditing
financial reports
on society
activities


➢ Inventory
➢ Process
➢ Cost or outlay


approaches:
➢ Social reports


reporting
stakeholders

Trends in Measuring

necessary:


Stakeholders Expect
CSR Accountability



➢ Firm processes
➢ Firm outcomes

Guidelines

(GRI)

(GRI) Standards
Universal Standards
Economic Standards
Social Standards
TABLE 9.1
Reporting
and measures

accomplishments

Communicating CSR
stakeholders


➢ Word of mouth
➢ Credibility
➢ Balance
➢ Comparability


responsibility

Continuum of Future
Commitment to CSR
Possible
Future CSR
to the corporation
CSR Strategic
society
account.
CSR Integrated
Deep CSR
The Future of CSR

Summary



Summary



Summary


Summary



Summary


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Canadian Business and Society

ETHICS, RESPONSIBILITIES, AND SUSTAINABILITYAND

© 2020 McGraw-Hill Education Limited 1-1

© 2020 McGraw-Hill Education Limited 1-2

© 2020 McGraw-Hill Education Limited 1-3

© 2020 McGraw-Hill Education Limited 1-4

© 2020 McGraw-Hill Education Limited 1-5

• Integrity → appropriateness of a corporation’s behavior

© 2020 McGraw-Hill Education Limited 2-6

• Ethics of business • Corporate sustainability

© 2020 McGraw-Hill Education Limited 1-7

• Post-secondary institutions facing increased demand to

© 2020 McGraw-Hill Education Limited 2-8

• Three dominant approaches to normative theories of

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• Two doctrines of incorporation:

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• Business integrity is the appropriateness of a corporation’s

• The three main approaches to ethical thinking are deontological,

© 2020 McGraw-Hill Education Limited 1 - 21

• Several forms of business enterprise exist; the most common is

• Society allows business to function as a system to provide

• Owners, boards of directors, and managers are the three most

• Business and society are integrated. Business needs society

© 2020 McGraw-Hill Education Limited 1 - 23

© 2020 McGraw-Hill Education Limited 2-24

© 2020 McGraw-Hill Education Limited 2 - 25

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• The legal right to own and use economic goods, for

© 2020 McGraw-Hill Education Limited 2 - 28

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• Eight elements of Canadian capitalism: the right of private

© 2020 McGraw-Hill Education Limited 2 - 41

• To ensure that capitalism is regulated in the best interests of

• Individualism encourages people to participate in a capitalistic

• In theory, when profits become too high in an industry, more

© 2020 McGraw-Hill Education Limited 2 - 42

• Individualism encourages people to participate in a capitalistic

• In theory, when profits become too high in an industry, more

© 2020 McGraw-Hill Education Limited 2 - 43

• The work ethic influences the ethics and responsibilities of a

• The output of capitalism should be determined consumer choice,

• Government role in a capitalistic system, should be only to protect