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Chapter 5

COMMERCE 1B03 Chapter Notes - Chapter 5: Business Ethics, Positive Tone, Corporate Social Responsibility

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Chapter 5 - Ethics and Social Responsibility
ethics - standards of moral behaviour; that is, behaviour that is accepted by society as right
versus wrong
questions to ask when facing an ethical dilemma:
1. is it legal?
2. is it balanced?
3. how will it make me feel about myself?
an ethic of justice is based on principles such as justice, fairness, equality, or authority. people
who prefer this style see ethical dilemmas as conflicts of rights that can be solved by the
impartial application
advantage: look at the problem logically and impartially
disadvantage: people who rely on it may lose sight of the immediate interests of
particular individuals
an ethic of care is based on a sense of responsibility to reduce actual harm or suffering. people
who prefer this style see moral dilemmas as conflicts of duties or responsibilities.
advantage: responsive to immediate suffering and harm decisions that seem not simply
subjective, but arbitrary
organizational ethic begins at the top, and the leadership and example of strong managers can
help instill corporate values in employees.
compliance based ethic codes - ethical standards that emphasize preventing unlawful behaviour
by increasing control and by penalizing wrongdoers
integrity based ethic codes - ethical standards that define the organization's guiding values,
create an environment that supports ethically sound behaviour, and stress a share
accountability among employees
The following 6-step process can help improve business ethics:
1.Top management must adopt and unconditionally support an explicit corporate code of
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
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 (people who report illegal or unethical behaviour) must
feel protected from retaliation as oftentimes this exposure can lead to great career and personal
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.
no matter how well intended a company's ethics code is, it is worthless if it is not enforced
effective ethic officers are important factor in the success of enforcing an ethics code - set a
positive tone, communicate effectively and relate well to employees at every level, trusted to
maintain confidentiality
Ethics Practitioners' Association of Canada (EPAC) mission is 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"
SOX - Sarbanes-Oxley Act - goal is to ensure the accuracy and reliability of published financial
protects whistleblowers from any company retaliations as it requires all public
corporations provide a system that allows employees to submit concerns regarding accounting
and auditing issued both confidentially and anonymously
purpose is to motivate employees to report any wrongdoing
corporate social responsibility (CSR) - a business' concern for the welfare of society
it is based on commitment to integrity, fairness and respect
corporate philanthropy - dimension of social responsibility that includes charitable
corporate social initiatives - dimension of social responsibility that includes enhanced forms of
corporate philanthropy that are more directly related to the company's competencies
corporate responsibility - dimension of social responsibility that includes everything from hiring
minority workers to making safe products
corporate policy - dimension of social responsibility that refers to the position a firm takes on
social and political issues
there are 2 different views of corporate responsibility to stakeholders:
1. The strategic approach - stakeholders have the right to expect management to work in
their best interests, to optimize profits
2. the pluralist approach - recognizes the moral responsibilities of management that
apply to all human beings. this view says that corporations can maintain their economic viability
only when they fulfill their moral responsibilities to society as a whole.
consumers have four basic rights
1. the right to safety
2. the right to be informed
3. the right to choose
4. the right to be heard
unethical behaviour may seem to work for the short term, but it guarantees eventual failure,
especially financial damage
insider trading - an unethical activity in which insiders use private company information to further
their own fortunes or those of their family and friends
company treats employees with respect, they usually will respect the company as well
the loss of employee commitment, confidence, and trust in the company and its management
can be very costly to the company
business' responsibilities to society is to create new wealth
for companies to prosper, they need to provide customers with safe products
responsible for promoting social justice
charity is not enough - their social contributions include cleaning up the environment, building
community toilets, providing computer lessons, caring for the elderly, and supporting children
from low income families.
responsibility to the environment - a company must measure its positive social contributions and
subtract its negative social impacts
social audit - a systematic evaluation of an organization's progress toward implementing
programs that are socially responsible and responsive
triple-bottom line (TBL, 3BL, People, Planet, Profit) - a framework for measuring and reporting
corporate performance against economic, social, and environmental parameters
4 types of groups that serve as watchdogs:
1. socially conscious investors - insist that a company extend its own high standards to