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Chapter 3

RSM100Y1 Chapter Notes - Chapter 3: Triple Bottom Line, Niche Market, People Skills

Rotman Commerce
Course Code
John Oesch

of 10
RSM100Y Midterm 2 NotesYefan Chen
RSM Review (Chp. 3 & 6)
Chapter Three: Business Ethics
Ethical Behaviour conforms to individual beliefs and social norms about what are right.
Business Ethics refers to the behaviour of employees of an organization.
Problem: Individual ethics differ, thus laws must be made. It is the ambiguity of certain cases that
motivate people to take advantage of ethics.
Jeitinho Get the job done”, by whatever means necessary.
Deontology ethics depends on the duty, rights, and justice involved. The duty involves
vows and responsibilities, while right involves the freedom of association.
Virtue ethical if an act parallels the virtues expected by stakeholders (Societal norms,
owners, employees, members, community, institutions)
Consequentialism ethical decisions must have good consequences
The 3 Categories of Managerial Ethics
1.Behaviour towards employees
a.Hiring and Firing
b.Wages and Conditions
c.Privacy and Respect
2.Behaviour towards the organization
a.Conflict of interest (When an activity benefits the employee at the expense of the
employer, e.g. gifts/bribes from more expensive suppliers)
b.Confidentiality and Honesty (Stealing office items, Selling secrets to competitors)
3.Behaviour towards other economic agents
a.Advertising, Financial Disclosure, Ordering, Negotiation
b.Relationship with customers, competitors, suppliers, etc.
c.International practices (in some countries, its customary to receive bribes)
The 3-Step Model to Distinguish Unethical Behaviour
1)Gather the relevant factual information
2)Determine most appropriate moral values
3)Make an ethical judgment based on the rightness/wrongness of the activity
[Ethical Norms to Consider]:
Utility does the act optimize what is best for those who are affected?
Rights does it respect the rights of the people involved?
Justice is it fair?
Caring is it consistent with our responsibilities toward each other?
If the answer is no to all four, its unethical.
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RSM100Y Midterm 2 NotesYefan Chen
-If some is no, then ask: Is one ethical norm more important, and is there a reason why a
person might have been forced into doing this?
If the answer is yes to all, its ethical.
Remember the NEWSPAPER TEST: If you did this action and would feel ashamed if it was
reported on the front page of tomorrows paper, then its unethical.
If a company TRULY wishes to promote ethical behaviour on the part of its employees, the
most effective step is to demonstrate top management commitment to high ethical
Two of the most common approaches to formalizing commitment are adopting written codes
and instituting ethics programs.
Code of Ethics formal, written acknowledgement of a company’s intent to do business in an
ethical manner. They are used to:
a.Increase public confidence
b.Help stem government regulation (aid in self-regulation)
c.Improve internal operations by providing standards
d.Help managers respond to problems from unethical/illegal behaviour
This code can be comprised of: Purpose, Vision, Mission, and Values. The company’s core
principles and organizational values should never be changed. 2/3 of Canadian companies
have these core goals, and 90% of U.S. firms do.
Corporate Social Responsibility
This term refers to the way in which a business tries to balance its commitments to
organizational stakeholders (customers, employees, investors, local communities, AS WELL as
Not based on the concept of managerial capitalism anymore, a practice to make as much money as
possible for the shareholders.
Late 19th century entrepreneurial spirit, laissez-faire economy, which led to more laws
Great Depression- new laws stating businesses should protect the welfare of society
1960s-70s business was seen as greedy, thus more bans/laws were placed (cigarettes, environment)
2008 will lead to laws regarding business conduct
The Four Main Areas of Concern:
(see slides 21-26 on Nov10 class)
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RSM100Y Midterm 2 NotesYefan Chen
1.Air pollution Kyoto Summit was an attempt to reach an agreement on ways to reduce
the threat of pollution. Austrailia is the largest greenhouse gas emitter per capita. Richer
countries can buy carbon credits (the right to pollute), and the money goes towards clean-
air projects in China and etc.
a.Water Pollution
b.Land Pollution like toxic waste (dangerous chemical or radioactive by-products
of manufacturing processes)
c.Recycling (of plastics and biomass)
2.Rights of Customers Consumerism: Social activism dedicated to protect the rights
of consumers in their business dealings. They have the following rights:
a.Right to safe products (Chinese toys, Maple Leaf listeria)
b.Right to be informed about relevant aspects of a product (ingredients must be
listed in food, interest on a loan, etc.)
c.Right to be heard (Complaints offices/hotlines)
d.Right to choose what they buy (Free and open competition)
e.Right to be educated about purchases (prescription drugs & side effects)
f. Right to courteous Service
Unfair Pricing: Collusion, the agreement among companies to fix prices is illegal!
Advertising: Truth, counterfeit brands (knockoffs)
Stealth Advertising (Undercover or Guerilla): involves companies paying people to extol
the virtues of their products to other people
Morally Objectionable Advertising- Victorias Secret and Tobacco Companies
3.Employees- Legal and Social Commitments, for example Bell hires over 1000 people
with disabilities. In Canada, over 50% of those with disabilities are unemployed.
Workplaces must be safe, both physically and emotional (sexual harassment).
Whistle-Blowers an employee who discovers and tries to stop a company’s unethical,
illegal, or socially irresponsible actions by publicizing them. Half of them get fired, and
are viewed in a negative way by their co-workers and employers.
Legislation Federal Accountability Act (only for the government), Public Sector
Integrity Commissioner (who must listen to your complaints)
4.Investors can be affected by a firms unethical behaviour as well. For example, AIG had
improper financial management and large amounts of money were spent on executives.
Cheque Kiting: writing a cheque from one account to a second account, and then
immediately spending money from the second account while the money is still in transit.
Insider Trading: the use of confidential information to gain from the purchase or sale of
stock. E.g. Martha Stewart
Misinterpretation of Finances like Enron, some companies dont follow
GAAP/accounting rules
Supporters of CSR think that corporations are citizens just like people and therefore need to help
improve our lives. They should help solve world issues, and there is a payoff for the firm.
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