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University of Toronto St. George
Rotman Commerce
John Oesch

Chapter 3  Ethics: individual standards or moral values regarding what is right and wrong or good and bad  Ethical behaviour: behaviour that conforms to individual beliefs and social norms about what is right and good  Unethical behaviour: behaviour that individual beliefs and social norms define as wrong and bad  Business ethics: ethical or unethical behaviour by a manager or employee of an organization  Ethical and unethical behaviour is determined by individual and by culture  Jeitinho: Brazilian word meaning “to find a way” businesses use personal connections and bend the rules  We develop values and morals that contribute to ethical standards (i.e. if you put money as your priority, you may develop a code of ethics that supports the pursuit of material comfort)  Because ethics are both personally and culturally defined, differences of opinion can arise as to what is ethical or unethical  Managerial ethics: standards of behaviour that guide individual managers in their work o Behaviour toward employees: i.e. hiring, firing, wages, working conditions, etc o Behaviour toward the organization: i.e. conflict of interest- occurs when an activity benefits an individual at the expense of the employer (i.e. making long distance calls from work) o Behaviour toward other economic agents: includes customers, competitors, stockholders, etc. (i.e. charging high prices for drugs—those who need it, can’t afford)  Price gouging: increasing prices in response to rise in demand  A 3 step model can be used to assess ethical behaviour o Gather the relevant factual information o Determine the most appropriate moral values o Make an ethical judgment based on the rightness or wrongness of the proposed activity or policy  The 4 ethical norms use these to determine whether an act is ethical or not o Utility: does the act optimize the satisfaction of all constituencies: o Rights: does it respect the right and duties of the individuals involved? o Justice: is it consistent with what we regard as fair? o Caring: is it consistent with people’s responsibilities to each other?  The most effective way a company can promote ethical behaviour is to demonstrate top management commitment to high ethical standards (i.e. when Maple Leaf Foods’ products were contaminated with listeria, the top management took the ethical action and gave a formal, public apology)  2 most common approaches to formalizing commitment are adopting written codes and instituting ethics programs  Code of ethics: formal, written acknowledgment of a company’s intent to do business in an ethical manner o Codes of ethics are designed to increase public confidence, stem out gov’t regulation (instead, have self-regulation), improve internal operations by providing consistent standards of ethical and legal conduct, and help managers respond to problems regarding ethics  Core principles and organizational values should not change, organizational objectives can change occasionally, and strategies and practices can be revised frequently  It is widely believed that companies must take the chief responsibility for educating employees about ethical behaviour  Corporate social responsibility (CSR): refers to the way in which a business tries to balance its commitments to organizational stakeholders—those that are directly affected by the practices of an organization and therefore have a stake in its performance  Managerial capitalism: a view that supports that a company’s only responsibility is to make as much money as possible for its shareholders, as long as it doesn’t’ break any laws o This used to be a popular view, but this view is increasingly being challenged o The opposing view says that companies must be responsible to a variety of stakeholders, including customers, employees, investors, suppliers, and the local communities in which they do business  Most firms must confront 4 areas of concern: o Responsibility toward the environment: involves how the business relates to its physical environment  Pollution: the injection of harmful substances into the environment  Carbon credits: companies can buy these which give them the right to pollute the atmosphere with carbon dioxide and the money collected is used to help fund clean-air projects in China and other developing countries  Global warming: increase in the Earth’s average temperature  Toxic wastes: dangerous chemical and/or radioactive by-products of various manufacturing processes (it cannot be simply destroyed and so it must be stored somewhere, but where?)  Recycling: conversion of certain waste materials into useful products  Some materials, like wooden pallets, are actually cheaper to produce then recycle and so many companies throw old ones away and buy new ones, without recycling them  Biomass: plant and animal waste that can be recycled to produce energy o Responsibility toward customers: social responsibility toward customers fall into one of 2 categories: providing quality products and pricing those products fairly  Customer problems are much cheaper to solve, as most problems can be avoided if companies obeyed the laws, avoided illegal pricing practices and behave ethically  Consumerism: a social movement that seeks to protect and expand the rights of consumers in their dealings with businesses  Consumers have the following rights:  The right to safe products  The right to be informed about all relevant aspects of a product (i.e.
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