Canadian Business and Society

ETHICS, RESPONSIBILITIES, AND

Fifth
SUSTAINABILITYAND
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.

© 2020 McGraw-Hill Education Limited 1-2

 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.

© 2020 McGraw-Hill Education Limited 1-3

 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

© 2020 McGraw-Hill Education Limited 1-4

 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
© 2020 McGraw-Hill Education Limited 1-5
 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

© 2020 McGraw-Hill Education Limited 2-6

 Key Terminology
Relating to Integrity in
Business
• Ethics of business • Corporate sustainability
• Stakeholder (CS)
• Corporate social • Triple bottom line
responsibility (CSR) • Corporate citizenship

© 2020 McGraw-Hill Education Limited 1-7

 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

© 2020 McGraw-Hill Education Limited 2-8

 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

© 2020 McGraw-Hill Education Limited 1-9

 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

© 2020 McGraw-Hill Education Limited 2 - 11

 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

© 2020 McGraw-Hill Education Limited 2 - 12

 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

© 2020 McGraw-Hill Education Limited 2 - 13

 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

© 2020 McGraw-Hill Education Limited 1 - 14

 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

© 2020 McGraw-Hill Education Limited 1 - 15

 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

© 2020 McGraw-Hill Education Limited 1 - 16

 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

© 2020 McGraw-Hill Education Limited 1 - 17

 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

© 2020 McGraw-Hill Education Limited 1 - 18

 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

© 2020 McGraw-Hill Education Limited 1 - 19

 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

© 2020 McGraw-Hill Education Limited 1 - 20

 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)

© 2020 McGraw-Hill Education Limited 1 - 21

 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)

© 2020 McGraw-Hill Education Limited 1 - 22

 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)

© 2020 McGraw-Hill Education Limited 1 - 23