Textbook Notes (363,041)
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RSM100Y1 (431)
Chapter 2

RSM100Y1 Chapter 2 Notes

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University of Toronto St. George
Rotman Commerce
Michael Khan

RSM100Y1 Textbook Notes Chapter 2  In 2010, Industry Canada began a new voluntary standard on social responsibility, known as ISO SR26000. o Focuses on seven principles:  Accountability  Transparency  Ethical Behaviour  Stakeholder Interests  Rule of Law  International Norms of Behaviour  Human Rights o Has led to more firms paying attention to creating clearer standards and procedures for ethical behaviour.  Business ethics: standards of conduct and moral values regarding right and wrong actions in the business environment.  Corporate social responsibility (CSR): how companies manage the business processes to produce an overall positive impact on society. o Primary objective is to enhance society’s well-being through philosophies, policies, procedures, and actions (find balance between doing what is right and what is profitable).  The ethical values of executives and individual employees at all levels can influence a business’s decisions and actions.  Business ethics are also shaped by the ethical climate within an organization or even within a country (i.e. working age).  A recent study found that 49% of employees surveyed “witnessed misconduct on the job” in 2009, down from 56% in 2007.  Walmart Canada has grouped its social responsibility priorities into four broad categories: o Environment o People o Responsible Sourcing o The Community  Sarbanes-Oxley Act of 2002: U.S. federal legislation designed to deter and punish corporate and accounting fraud and corruption. It is also designed to protect the interest of workers and shareholders by requiring enhanced financial disclosures, criminal penalties for CEOs and CFOs who defraud investors, and safeguards for whistle-blowers. The act also established a new regulatory body for public accounting firms. o Bill 198 (C-SOX): Canadian equivalent established in 2003.  Ethics compliance officers are responsible for conducting employee training programs that help spot potential fraud and abuse, investigating sexual harassment and discrimination charges, and monitoring potential conflicts of interest.  Three-pronged approach to ethics and social responsibility: o Engaging in traditional corporate philanthropy, such as giving to worthy causes o Anticipating and managing risks o Identifying opportunities to create value by doing the right thing  Acting unethically or illegally on the job can include putting your own interests ahead of the organization, lying to employees, misreporting hours worked, Internet abuse, and safety violations.  Technology may have expanded the range and impact of unethical behaviour (i.e. PSN hack).  Nearly every employee, at every level, faces ethical questions at some time.  An individual’s moral and ethical development is the result of many factors including: o Experiences o Family o Educational Background o Cultural/Religious Background o Environment within a firm  Businesses sometimes refuse to purchase goods or services from a particular country because of civil rights abuses by that country’s government (i.e. gems from Myanmar).  The ethical issues that face manufacturers who have unsold merchandise are one example of many different types of ethical situations in the workplace.  Four of the most common ethical challenges that businesspeople face: Honesty Conflict of Interest and Integrity Whistle- Loyalty versus Blowing Truth  Conflict of interest: a situation in which an employee must choose between a business’s welfare and personal gain. o May pose ethical challenges when they involve the businessperson’s own interests and the interests of a person or party to whom the businessperson has a duty. o May also exist between someone’s personal interests and the interests of an organization or its customer (i.e. accepting bribes for special treatment). o May also occur when one person holds two or more similar jobs in two different workplaces. o Can be handled ethically by:  Avoiding them  Disclosing them  Integrity: behaving according to one’s deeply felt ethical principles in business situations. o Inspires trust. o Can help to build long-term relationships with customers, employers, suppliers, and the public. o Some people misrepresent their academic standing and previous work experience on their resumes or job applications. o Some employees steal from their employers by taking home supplies or products without permission or by carrying out personal business when they are being paid to work (i.e. Internet misuse).  Businesspeople expect their employees to be loyal and to act in the best interests of the company. o Some people place the highest value on loyalty, at the expense of truth. o Others avoid volunteering negative information but answer truthfully when asked a direct question. o Some may emphasize truthfulness and actively disclose negative information.  Whistle-blowing: disclosure to company officials, government authorities, or the media of illegal, immoral, or unethical practices committed by an organization. o Bill C-25 (The Public Servants Disclosure Protection Act) was introduced in 2004.  Was intended to protect people who expose problems in the government’s bureaucracy.  Government said it would help ensure “transparency, accountability, financial responsibility and ethical conduct.” o Whistle-blowing and other ethical issues are rare in firms that have strong organizational climates of ethical behaviour.  Most organizations have established standards of conduct that strongly influence the choices that employees make.  A corporate culture that supports business ethics develops on four levels: 1. Ethical awareness 2. Ethical reasoning 3. Ethical action 4. Ethical leadership  If any of these factors are missing, the ethical climate in an organization will weaken.  Code of conduct: a formal statement that defines how an organization expects its employees to resolve ethical issues (ethical awareness). o At the most basic level, it may simply be the ground rules for acceptable behaviour, such as the laws and regulations that employees must obey. o Some companies use theirs to identify key corporate values and provide frameworks that guide employees as they resolve moral and ethical dilemmas. o Other firms incorporate similar codes in their policy manuals or mission statements (some issue a small card for employees to carry around with a statement or code of conduct; i.e. HD).  Businesses must provide the tools employees need to evaluate the options and arrive at suitable decisions (when there is no black-and-white answer). o Many firms have started their own ethics training programs.  It is helpful because employees can practise applying ethical values to sample situations before they face real-world situations. o Other firms hire third-party organizations who provide outsourced ethics programs to business. o Sometimes anonymous hotlines are offered to employees as well.  Firms must also provide structures and approaches that allow decisions to be turned into ethical actions (i.e. Texas Instruments’ reference card given to employees). o Businesses often set goals for the whole business and for individual departments and employees (unrealistic goals can lead to cheating). o Ethical decisions often require careful and quiet thought, which can be a challenging task in today’s fast-paced business world. o One common tool used by companies to encourage ethical action is an employee hotline.  A telephone number that employees can call anonymously for advice or to report unethical behaviour they have seen.  Executives must not just talk about ethical behaviour; they also need to show it in their actions. o Employees need to be personally committed to the company’s core values, and they must be willing to base their actions on those values. o “Ethical mavericks” follow a moral code with three simple characteristics:  Use clear, explicit language rather than euphemisms for corrupt behaviour  Encourage behaviour that generates and fosters ethical values  Practise moral absolutism insisting on doing right, even if it proves financially costly o Each employee at every level should be charged with the responsibility to be an ethical leader. o Because the damage from ethical misconduct can powerfully affect a firm’s stakeholders, businesses are pressured to act in acceptable ways.  Social responsibility: management’s acceptance of its obligation, when evaluating firm performance, to consider profit to be of equal value as qualitative indicators, such as employee satisfaction, consumer satisfaction, and social well-being.  To demonstrate their social responsibility, many corporations highlight their charitable contributions and community service in their annual reports and on their websites.  Social audits: formal procedures that identify and evaluate all company activities that relate to social issues, such as conservation, employment practices, environmental protection, and philanthropy. o Tells management how well the company is performing in these areas.  The Canadian Business for Social Responsibility (CBSR): offers CSR assessments that examine the internal activities of a company and compare them to industry CSR best practices (also offer advisory services to assist firms in creating a companywide CSR strategy).  Business’s social responsibilities can be divided by their relationships to: o The general public  Include:  Dealing with public health issues o Central to the public health debate is what businesses should do about dangerous products such as tobacco and alcohol (cardiovascular hospital admissions dropped by 39% after smoking was banned in public places). o Rates of heart disease, diabetes, and obesity are three conditions that are now major public health issues (1.6 million (26%) Canadian children are overweight or obese). o Substance abuse is another serious public health problem worldwide (i.e. doping in sports).  Protecting the environment o The use of coal and oil for energy production introduces CO 2nd sulphur into the earth’s atmosphere (sulphur + water vapour = acid rain). o Other production and manufacturing methods leave behind large quantities of waste materials (fill of landfills). o Some products are difficult to recycle (i.e. electronics with lead and mercury). o For many managers minimizing pollution and other environmental damage is an important economic, legal, and social issue. o Recycling: reprocessing of used materials for reuse (can sometimes pro
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