BUSI1800 – LECTURE 4 NOTES Business Ethics & Social Responsibility

BUSI1800 – LECTURE 4 NOTES

Business Ethics & Social Responsibility

PART 1: BUSINESS ETHICS

What Is Business Ethics?

Business ethics are the standards of conduct and moral values that guide:

  • Business actions

  • Decisions

  • Behaviour in the workplace

Ethical decision-making requires businesses to consider how decisions affect:

  • Customers

  • Employees

  • The environment

  • Society as a whole

📌 Ethics go beyond profit — they focus on how profits are earned.

Why Business Ethics Matter

Businesses operate in a society that expects:

  • Fairness

  • Transparency

  • Accountability

Unethical behaviour can lead to:

  • Loss of trust

  • Financial collapse

  • Legal penalties

  • Long-term reputational damage

Examples of Corporate Ethical Scandals

Major scandals show the consequences of unethical behaviour:

  • Enron – falsified financial reports

  • Volkswagen – cheated emissions tests

  • Theranos – misled investors and patients

  • Boeing 737 MAX – safety failures

  • Martin Shkreli – extreme drug price increases

  • Facebook–Cambridge Analytica – misuse of personal data

  • Nike – sweatshop labour allegations

  • Loblaws – bread price-fixing in Canada

📌 Common theme: short-term gains → long-term damage.

The Contemporary Ethical Environment

Although most businesses act ethically:

  • Corporate scandals receive high public attention

  • Governments increased oversight and regulation

Key Ethics Regulations

Sarbanes-Oxley Act (SOX) – U.S. (2002)

  • Tightened rules for accounting and financial reporting

  • Increased executive accountability

  • Applies to Canadian firms listed on U.S. exchanges

Bill 198 – Canada (C-SOX)

  • Canadian equivalent of Sarbanes-Oxley

  • Strengthens corporate governance and disclosure

Impact of Unethical Corporate Behaviour

1. Reputational Damage

  • Loss of customer trust

  • Brand damage

2. Financial Losses

  • Fines

  • Lawsuits

  • Falling stock prices

3. Legal & Regulatory Consequences

  • Increased regulation

  • Criminal charges

4. Employee Morale Issues

  • Lower engagement

  • Higher turnover

  • Toxic work culture

5. Loss of Business Opportunities

  • Investors and partners withdraw

📌 Long-term costs always outweigh short-term benefits.

Individual Ethics in the Workplace

Individuals strongly influence ethical behaviour.

Unethical employee actions include:

  • Lying to coworkers

  • Misreporting hours

  • Violating safety rules

  • Abusing company resources

  • Prioritizing personal gain over company interests

📌 Ethical culture starts with individual choices.

Common Workplace Ethical Dilemmas

Employees often face:

  • Conflict of interest

  • Honesty vs integrity

  • Loyalty vs truth

  • Whistle-blowing decisions

There is rarely a “perfect” answer — ethical reasoning is required.

How Organizations Promote Ethical Conduct

Ethical organizations rely on four key elements
(If any are missing, the ethical climate weakens):

1. Code of Conduct

  • Formal document outlining expected behaviour

  • Guides decision-making

2. Education & Training

  • Ethics training helps employees reason through dilemmas

  • Codes cannot cover every situation

3. Action

  • Encouraging ethical decisions in practice

  • Tools such as ethics tests or reporting systems

4. Ethical Leadership

  • Leaders must model ethical behaviour

  • Employees follow what leaders do, not just what they say

Examples:

  • Mandatory ethics training

  • Privacy and security programs

  • Internal communications and compliance systems

PART 2: SOCIAL RESPONSIBILITY

What Is Social Responsibility?

Social responsibility is management’s acceptance that:

  • Profit is important

  • BUT must be considered equal to:

    • Employee satisfaction

    • Customer satisfaction

    • Societal well-being

📌 Businesses are accountable to more than shareholders.

Acting Responsibly to Satisfy Society

Socially responsible firms contribute through:

  • Job creation

  • Economic growth

  • Charitable donations

  • Community service

Organizations measure performance using social audits.

Social Responsibility & Business Objectives

Social responsibility and profitability are interconnected, not opposites.

Benefits include:

  • Stronger brand image

  • Customer loyalty

  • Employee engagement

  • Long-term sustainability

Corporate Social Responsibility (CSR) in Practice

Examples of CSR initiatives:

  • Employee empowerment

  • Diversity and inclusion programs

  • Environmental sustainability

  • Community engagement

  • Ethical sourcing

  • Privacy and data protection

Large firms (e.g., Microsoft, Amazon) publish sustainability and CSR reports to track progress.

Balancing Profit and Purpose

Social responsibility requires balance between:

  • Profit

  • Purpose

  • Ethical decision-making

This balance improves:

  • Long-term performance

  • Stakeholder trust

Areas of Business Social Responsibility

Public Health

  • Product safety

  • Responsible marketing of alcohol, tobacco, etc.

Environmental Protection

  • Reducing pollution

  • Using resources efficiently

  • Sustainability and green marketing

Workforce Development

  • Fair wages

  • Diversity and inclusion

  • Training and education

Corporate Philanthropy

  • Donations

  • Community programs

  • Employee volunteer initiatives

Workplace Safety & Quality of Life

  • Safe working conditions (e.g., WSIB-regulated)

  • Work-life balance

  • Flexible schedules

  • Childcare support

Consumer Rights

  • Right to be informed

  • Right to be safe

  • Right to choose

  • Right to be heard

FINAL EXAM TAKEAWAYS – LECTURE 4

  • Ethics guide business decision-making

  • Unethical behaviour creates long-term damage

  • Regulations exist to prevent misconduct

  • Individuals shape ethical culture

  • Organizations must support ethics through leadership and systems

  • Social responsibility balances profit with societal impact

  • Ethical and socially responsible firms perform better long-term