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Lecture 12

AFM 131 Lecture 12: Ethics and Social Responsibility Notes

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Accounting & Financial Management
AFM 131
David H A

Ethics and Social Responsibility Ethics Is More Than Legality: • Uncommon to hear instances where business people are involved in unethical behaviour • WestJet Airlines Ltd. admitted to spying on Air Canada by accessing a confidential Air Canada website designated for resignations. Practice was undertaken with the knowledge and direction of high levels of management • Voters complained that they have received phone calls on behalf of Elections Canada directing them to the wrong polling stations. Pattern of phone calls was reported in which voters identified as not supporting the Conservatives were targeted with robocalls. Seven people in ridings asked from results to overturned. Judge found that fraud was a factor but results was not overturned. In 2014, Conservative Party staffer was found guilty under the of willfully preventing a voter from casting a vote. Ethical Standards Are Fundamental: • Ethics – standards of moral behaviour; that is, behaviour that is accepted by society as right vs. wrong • Many people today have few moral absolutes (seem to think that what is right is whatever works best for the individual) Ethics Begins with Each of Us: • Plagiarizing is most common form of cheating in post-secondary institutions • To decrease cheating, heavier consequences like certain number of hours of community service • Ethical Dilemmas – choice between equally unsatisfactory alternatives • Questions to ask yourself when facing an ethical dilemma: 1. Is my proposed action legal? 2. Is it balanced? 3. How will it make me feel about myself? Managing Businesses Ethically and Responsibly: • Business should be managed ethically: o Maintain a good reputation o Keep existing customers and attract new ones o Reduce employee turnover o Avoid lawsuits o Avoid government intervention in the form of new laws and regulations controlling business activities o Please customers, employees, and society o Simply to do the right thing Setting Corporate Ethical Standards: • Compliance-Based Ethics Codes – ethical standards that emphasize preventing unlawful behaviour by increasing control and by penalizing wrongdoers • Integrity-Based Ethics Codes – ethical standards that define the organization’s guiding values, create an environment that supports ethically sound behaviour, and stress a shared accountability among employees • Whistleblowers – people who report illegal or unethical behaviour • Last step in the six-step process below is most critical • To enforce an ethics code, you need an ethics officer • Ethics Practitioners’ Association of Canada (EPAC) o Mission – to enable individuals to work successfully in the field of ethics in organizations by enhancing the quality and availability of ethics advice and services across Canada o This organization supports ethics officers, consultants, educators, students, and others who are interested in the field of ethics as applied to organizations of all kinds Six-Step Process that Help Improve Business Ethics: 1. Top management must adopt and unconditionally support an explicit corporate code of conduct 2. Employees must understand that expectations for ethical behaviour begin at the top and that senior management expects all employees to act accordingly 3. Managers and others must be trained to consider the ethical implications of all business decisions 4. An ethics office must be set up. Phone lines to the office should be established so that employees who don’t necessarily want to be seen with an ethics officer can inquire about ethical matters anonymously. Whistleblowers must feel protected from retaliation as oftentimes this exposure can lead to great career and personal cost 5. Outsiders such as suppliers, subcontractors, distributors, and customers must be told about the ethics program. Pressure to put aside ethical considerations often comes from the outside, and it helps employees to resist such pressure when everyone knows what the ethical standards are 6. The ethics code must be enforced. It is important to back any ethics program with timely action if any rules are broken. This is the best way to communicate to all employees that the code is serious The Sarbanes-Oxley Act of 2002 (SOX): • Implemented due to the major corporate and accounting scandals in the US in the early 2000s • Established stronger standards to prevent misconduct and improve corporate governance practices • SOX applies to all publicly traded companies whose shares are listed on the stock exchanges under the jurisdiction of the US Securities and Exchange Commission • Goal of SOX – ensure accuracy and reliability of published financial information • Protects whistleblowers by requiring public corporations to provide a system where employees can submit concerns regarding accounting and auditing issues both confidentially and anonymously • Canada has implemented similar corporate governance legislation Whistleblower Legislation in Canada: • No legislation in place that protects all workers – public sector and private sector – across the country • Federal Accountability Act (FAA) o Lists a wide range of measures to help make the Canadian federal government more accountable and to increase transparency and oversight in government operations o Protect employees who come forward, so they do not need to fear reprisal o However, it does not provide adequate funding for whistleblowers’ legal services, and that it requires the whistleblower to prove retaliation has occurred • No protection for private sector whistleblowers Corporate Social Responsibility: • Corporate Social Responsibility (CSR) – a business’s concern for the welfare of society • Differences in cultural values can contribute to varying perspectives • Critics believe invest to CSR is stealing from investors • Corporate Philanthropy – dimension of social responsibility that includes charitable donations • Corporate Social Initiatives – dimension of social responsibility that included enhanced forms of corporate philanthropy that are more directly related to the company’s competencies • Corporate Policy – dimension of social responsibility that refers to the position a firm takes on social and political issues • News coverage has a powerful impact • Companies allow employees
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