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Chapter 4 – Ethics and Social Responsibility
Ethics is more than legality
A society gets in trouble when it considers ethics and legality to be the same. Ethics and
legality are two very different things. Ethics reflects people’s proper relations with one
another. Legality is narrower. If revers to laws we have written to protect ourselves from
fraud, theft and violence.
Ethical standards are fundamental
Ethics: standards of moral behavior; that is, behavior that is accepted by society as right
People seem to think that what is right is whatever works best for them, that each person
has to work out form themselves the difference between right and wrong. That is the kind
of thinking that has led to the recent scandals in government and business.
Among sources from many different times and places you’ll find the following moral values:
integrity, respect for human life, self-control, honesty, courage and self-sacrifice are right;
cheating, cowardice and cruelty are wrong.
Golden rule: Do unto others as you would have them do unto you.
Ethics begin with each of us
Less people donating, more being donated.
“Techno sting” – posting false answers to an accounting exam on a web site – 12 used them.
Two studies found that there is a strong relationship between academic dishonesty among
undergraduate students and dishonesty later when they were in the working world.
Ethical dilemmas – must choose between equally unsatisfactory alternatives. Ask yourself
the following questions when facing an ethical dilemma:
1. Is it legal?
2. Is it balanced?
3. How will it make me feel about myself?
Managing businesses ethically and responsibly
Organizational ethics begin at the top. It is caught more than taught.
Any trust and co-operation between workers and managers must be based on fairness,
honesty, openness and moral integrity.
A business should by manage 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 and to do the
Ethics has everything to do with management.
Setting corporate ethical standards
Ethics codes vary greatly, but can be classified into two major categories:
Compliance-based ethics codes: ethical standards that emphasize preventing
unlawful behavior 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 behavior, and
stress a shared accountability among employees.
Six step procedure can 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 behavior begin at the top
and senior management expects all employees to act accordingly.
3. Managers and others must be trained to consider the ethical implications of all
4. Ethics office must be set up.
Whistleblower: people who report illegal or unethical behavior.
5. Outsiders must be told about the ethics program.
6. The ethics code must be enforced.
Ethics Practitioners’ Association of Canada’s 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.
The Sarbanes-Oxley act of 2002
The legislation 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
The goal of SOX is to ensure the accuracy and reliability of published financial information,
and therefore the main part of the legislation requirements deal with the proper
administration routines, procedures and control activities.
Whistleblowing legislation in Canada
Public sector workers are protected, but there is no provision to protect private sector
Corporate social responsibility
Corporate social responsibility (CSR): a business’s concern for the welfare of society as a
Not everyone thinks CSR is a good thing. Some critics believe that a manager’s sole role is
to compete and win in the marketplace.
Milton Friedman said that the only social responsibility of business is to make money for
stockholders and that anything else was moving dangerously close to socialism.
CSR critics believe that managers who pursue CSR are doing so with other people’s money.
They view spending money on CSR activities as stealing from investors.