Contemporary Business

Third Canadian Edition

Boone, Kurtz, Khan, Canzer

Chapter 2

Business Ethics and Social Responsibility

Copyright ©2020 John Wiley & Sons, Inc.

Learning Objectives

• LO 2.1 Explain the concepts of business ethics and social

responsibility.
• LO 2.2 Describe the factors that influence business ethics.
• LO 2.3 Discuss how organizations shape ethical behaviour.
• LO 2.4 Describe how businesses can act responsibly to satisfy
society.
• LO 2.5 Explain the ethical responsibilities of businesses to
investors and the financial community.

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Concern for Ethical and Societal Issues (1 of 2)

Business Ethics
• Business ethics: standards of conduct and moral values
regarding right and wrong actions in the business
environment
o Often shaped by the organization’s ethical climate; social
responsibility; balance between what’s right and what’s
profitable
o Often no clear-cut choices

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Concern for Ethical and Societal Issues (2 of 2)

Sarbanes-Oxley Act and Bill 198

• This U.S. act added oversight for the nation’s major
companies and a special oversight board to regulate public
accounting firms that audit the financial records of these
corporations
• The provisions of this act apply to Canadian companies
trading on U.S. stock exchanges
• Similar legislation has been enacted in Canada known as Bill
198 of 2003, which has come to be referred as “C-SOX” or the
Canadian version of Sarbanes-Oxley
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The Contemporary Ethical Environment

• High-profile investigations and arrests in headlines

• Vast majority of businesses are ethical
• New corporate officers charged with deterring wrongdoing
and ensuring ethical standards

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Business Approach to Ethics and Social
Responsibility
• Engage in traditional corporate philanthropy, which involves
giving to worthy causes
• Anticipate and manage risks
• Identify opportunities to create value by doing the right thing
• See how Walmart highlights corporate responsibility on its
website

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Test Your Knowledge (1 of 2)

A firm’s ability to behave ethically depends upon

a) the ethical values of the firm’s executives.
b) the ethical values of the firm’s employees.
c) a climate within the organization that promotes ethical
conduct.
d) all of the above
Answer: d

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Individuals Make a Difference

• Individuals can make the difference in ethical expectations

and behaviour
o Putting own interests ahead of the organization
o Lying to other employees
o Misrepresenting hours
o Violating safety regulations
o Abusing the internet
• Technology is expanding the range and impact of unethical
behaviour

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Development of Individual Ethics

• An individual’s stage in moral and ethical development is

determined by many factors
o Experiences
o Family
o Education
o Culture
o Religion
o Company environment
• Individuals have different styles for deciding moral dilemmas
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On-the-Job Ethical Dilemmas

FIGURE 2.3 Common Business Ethical Challenges

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How Organizations Shape Ethical Conduct

FIGURE 2.4 Structure of an Ethical Environment

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Ethical Awareness

Code of Conduct:
Formal statement that defines
how the organization expects
and requires employees to
resolve ethical questions

FIGURE 2.4 Structure of an Ethical

Environment
• Johnson & Johnson credo
• Air Canada code of conduct

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Ethical Education

Codes of conduct
cannot detail a
solution for every
ethical situation, so
corporations provide
training in ethical
reasoning
FIGURE 2.4 Structure of an Ethical
Environment

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Ethical Action

Helping employees
recognize and reason
through ethical problems
and turning them into
ethical actions
• TI Ethics Quick Test

FIGURE 2.4 Structure of an Ethical

Environment

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Ethical Leadership
Executives must demonstrate
ethical behaviour in their
actions
• Use clear, explicit language
rather than euphemisms
for corrupt behaviour
• Encourage behaviour that
generates and fosters
ethical values
• Practise moral absolutism,
insisting on doing right FIGURE 2.4 Structure of an Ethical
even if it proves financially Environment
costly

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Acting Responsibly to Satisfy Society

Social Responsibility
• Management’s consideration of profit, consumer satisfaction,
and societal well-being of equal value in evaluating the firm’s
performance
• Contributions to the overall economy, job opportunities, and
charitable contributions and service
• Organizations measure through social audits
• Starbucks reduces environmental impact

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Businesses’ Social Responsibilities

FIGURE 2.5
Businesses’ Social Responsibilities

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Responsibilities to the General Public

• Public Health Issues. What to do about inherently dangerous products

such as alcohol, tobacco, vaccines, and steroids
• Protecting the Environment. Using resources efficiently, minimizing
pollution
o Green marketing
o Sustainability
• Developing the Quality of the Workforce. Enhancing quality of the
overall workforce through education and diversity initiatives
• Corporate Philanthropy. Cash contributions, donations of equipment
and products, and supporting the volunteer efforts of company
employees
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Test Your Knowledge (2 of 2)
What is green marketing?
a) A marketing strategy that promotes environmentally safe products
and production methods
b) A colour-coded market strategy designed to improve employee
morale
c) A marketing strategy that promotes environmentally questionable
products and production methods
d) none of the above
Answer: a

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Responsibilities to Customers

FIGURE 2.6 Commonly Referred‐to Consumer Rights

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Responsibilities to Employees
• Workplace Safety. Managed mostly at the provincial level by
organizations such as the Workplace Safety & Insurance Board in
Ontario and the Workers’ Compensation Board of Alberta.
• Quality-of-Life Issues. Balancing work and family through flexible work
schedules, subsidized child care. Canada's Top Family Friendly Employers
• Ensuring Equal Opportunity on the Job. Providing equal opportunities
to all employees without discrimination regarding age, sexual
orientation, physical disabilities, etc.; regulated by the Canadian Human
Rights Commission.
• Sexual Harassment and Sexism. Avoiding unwelcome actions of a sexual
nature; equal pay for equal work without regard to gender.

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Responsibilities to Investors
• Obligation to make profits for shareholders
• Expectation of ethical and moral behaviour
• Protection of investors by provincial regulators such as the
Ontario Securities Commission and the Alberta Securities
Commission

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Copyright

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