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MGM Chapter 5 Notes: Ethics and Social Responsibility
Ethics is more than legality
•Ethical does not only mean legal. Many immoral and unethical acts fall well within laws.
However, following the law is a first step towards being ethical.
•Morals are beliefs that individuals have to determine right from wrong, while ethics is the societal
standard of moral behavior. Ethical thinking must override moral thinking in firms.
•Ethical behavior begins with you and me. We cannot expect society to be more moral unless we
as individuals commit to becoming more moral ourselves.
•When facing an ethical dilemma, ask: (1) Is it legal? (2) Is it fair and balanced? (3) How would
it make me feel about myself?
Managing Businesses Ethically and Responsibly
•Business ethics start at the top, so managers have to be conscious about their actions.
•Reasons to have good business ethics: maintain good reputation, keep existing customers, attract
new customers, avoid lawsuits, reduce employee turnover, to avoid government intervention, to
please customers, employees, and society, and to simply do the right thing.
•Compliance-based ethics codes emphasize preventing unlawful behaviour by increasing control
and by penalizing wrongdoers.
•Integrity-based ethics codes define the organization's guiding values and creates an environment
that supports ethically sound behavior.
•Six steps to improve business ethics:
1Top management must follow ethics code.
2Employees must understand that management follows the code, and they are expect to do so also.
3Everybody must be trained to consider ethical implication of all business decisions.
4An ethics office must be set up, with a way for whistleblowers to feel protected from retaliation or
exposure. Officers need strong communication skills and skills in investigation. EPAC (Ethics
Practitioners' Association of Canada) supports people who want to go into the career of business
5Inform stakeholders such as suppliers, contracters, and customers about the ethics code.
6Ethics code must be enforced in some way. (Most important point)
•The Sarbanes-Oxley Act of 2002 (SOX) is a US federal legislation aimed to ensure the accuracy
and reliability of published information. It does regulation and control activities. It also helps
protect whistleblowers by reinstating them pay after they are fired.
•In Canada, Bill C-11(Public Servants Protection Disclosure Act) protects whistleblowers.
•Federal Accountability act implemented in Canada to strengthen accountability and increase
transparency and oversight in government operations. But it is not working very well.
Corporate Social Responsibility
•Definition: a business' concern for the welfare of society as a whole.
•Judgement calls to corporate responsibility is determined by individual bias and cultures.
•Critics of CSR believe that the only responsibility of a corporation is to maximize profits for
investors, not to use investor money to benefit society. Other stakeholders' interests are only
considered if they would adversely affect profits if ignored.
•Defenders of CSR believe that societies owe their business to society, since they get their
resources from society. Also, they believe CSR makes more money to investors in the long run,
since an ethical business has more loyal employees and attracts more customers.
•Facets of Corporate Social Responsibility:
•Corporate philantrophy – making charitable donations to non-profit groups
•Corporate social initiatives – corporate philantrophy that involves direct action of something that
the corporation is good at. (UPS shipping supplies to Katrina victims)