Ethics and Social Reasonability Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Learning Goals Explain why legality is only the first step in behaving ethically and ask the three questions one should answer when faced with a potentially unethical action. Describe management’s role in setting ethical standards and distinguish between compliance-based and integrity- based ethics codes. List the six steps in setting up a corporate ethics code. Define corporate social responsibility and examine corporate responsibility to various stakeholders. Discuss the responsibility that business has to customers, investors, employees, society and the environment. Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Ethics is more than legality Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Ethics are the standards of moral behavior that is accepted by society as right versus wrong. Ethical behavior should be exhibited in our daily lives, not just in business situations. We can’t expect “society” to become more moral and ethical unless we as individuals commit to become more moral and ethical. Sometimes there is no desirable alternative, a situation referred to as ETHICAL DILEMMAS. Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Ethics Check Questions Is it legal? Is it balanced? How will it make me feel about myself? Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Why Should Businesses be Managed Ethically? To maintain a good reputation To keep existing customers To attract new customers To avoid lawsuits To reduce employee turnover To avoid government intervention To please customers, employees and society TO DO THE RIGHT THING! Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Codes of Ethics Compliance-Based Integrity-Based Increase control and penalize wrongdoers Integrity-Based Define guiding values Support ethical behaviour Shared accountability Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Six Steps to Improve Ethics Top management support Expectations begin at the top Ethics imbedded in training Ethics office set up External stakeholders informed There must be enforcement Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Some thoughts? Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Responsibility Defined Corporate Social Responsibility (CSR) The concern businesses have for the welfare of society. Corporate Philanthropy – charitable donations to non-profit groups. Corporate Social Initiatives - enhanced forms of corporate philanthropy. i.e., Johnson & Johnson sends medical supplies to disaster areas. Corporate Responsibility – acting responsibly within society Corporate Policy – position on social and political issues Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Two views Strategic Approach: Requires the management’s primary orientation be toward the economic interest of shareholders. Pluralist Approach: Recognizes the special responsibility of management to optimize profits, but not at the expense of stakeholders. The current guiding philosophy has been some quasi version of the pluralist approach. Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Levels of Corporate Responsibility Responsibility to Customers Responsibility to Investors Responsibility to Employees Responsibility to Society Responsibility to the Environment Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Consumers Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Investors Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Employees Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Society Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Environment Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Social Auditing Socially conscious investors Environmentalists Union officials Customers Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

International Ethics and Social Responsibility Federal Accountability Act (Canada) Kyoto Protocol (International) Socially responsible expectations of international partners, suppliers Inter-American Convention Against Corruption International Standards Organization (ISO) Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson

Conundrums of Doing Business Globally What do you do when: You are forbidden to trade – US to Cuba Ethical norms of the host country violate the laws of the home country Social responsibility has whole new meaning Environmental practices differ from the home company Nickels 6e/Copyright © 2007 McGraw-Hill Ryerson