~Ch.3 - Business Ethically~

~3.1 Ethics in the workplace~

• Ethics: beliefs about what is right/wrong or good/bad
• taking notes is very important especially if the notes are aesthetic :}
• to individuals’ beliefs and social norms about what is right + good
• unethical behaviour: individual beliefs and social norms define as wrong or bad
• Business ethics: ethical/unethical behaviours by a business’s managers/employees

~Individual Ethics~

• Important to make the distinction between unethical and illegal behaviour

  • Given behaviour may be ethical and legal
  • providing high-quality products to consumers
  • ethical and illegal
  • breaking the law in a totalitarian regime to carry out humanitarian efforts
  • unethical and legal
  • paying low wages to workers at a company facility in a foreign country
  • unethical and illegal
  • “cooking the books” to make the company’s financial situation look better than it is

  ~Behaviour Toward Employees~

• Important ethical questions: hiring-firing, wages-working conditions, and privacy

• hiring-firing can be based only on a person’s ability to perform a job

  • hiring a friend and relative may not be illegal but can be seen as unethical

• wages/working conditions are an area of debate

  • manager paying a worker less b/c the employee can’t afford to quit
  • unethical or smart business?

• Protection and Electronic Documents Act (PIPEDA): requires organizations to obtain consent before they collect, use, or disclose information about individuals

~Behaviour toward the Organization~

• Conflict of interest: when an activity benefits an employee at the expense of the employer

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~Assessing Ethical Behaviour~

• can determine whether an action or decision is ethical or unethical by using a three-step model

  1. Gather the relevant factual information
  2. determine the most appropriate moral values
  3. make an ethical judgment based on the rightness or wrongness of the proposed activity or policy

• Example: Manager adding a leisure dinner to expense account claims … need to determine most appropriate moral values

  • Utility: does act optimize what’s best for those affected by it?
  • Rights: does it respect the rights of the individuals involved?
  • Justice: is it consistent with what we regard as fair?
  • Caring: is it consistent with people’s responsibility to each other?

~Encouraging Ethical Behaviour in Organizations~

• Three important general factors for managers to understand why unethical behaviours may occur:
  • Pressure: the employee has some problems that cannot be solved through legitimate means
  • Opportunity: employee uses their position in the organization to secretly solve the problem
  • Rationalization: employee sees themselves as basically ethical person caught up in an unfortunate situation
• To reduce unethical behaviour: organizations should demonstrate top management @@commitment to ethical standards@@, adopt @@written codes of ethics@@, and @@provide ethics training@@ for employees

~Demonstrate top management commitment to values and high ethical standards~

crucial for top management to demonstrate a serious public commitment to high ethical standards

• EXAMPLE: Mountain Equipment inc. committed to ethical sourcing (to make sure that employees had good working conditions)

~Adopt written codes of ethics~

• Acknowledges that a company intends to do business in an ethical manner
• Increases public confidence
• improves internal operations
• help managers respond on those occasions when there are problems with illegal or unethical employee behaviour

~Provide Ethics Training~

• Managers are reminded of the importance of ethical decision-making and are updated on most current laws and regulations that are relevant for their firm

~3.2 Corporate Social Responsibility~

• Corporate Social Responsibility: idea where businesses try to balance commitments to important individuals/groups in external environment
• Businesses that want to meet rigorous standards for inclusion, sustainability, equity, and diversity can be certified as B Corp.
  • must provide certain information about operations
• Ongoing debate about the extent to which businesses should be concerned about social responsibility
  • Managerial Capitalism: company’s only responsibility is to make as much money as possible for shareholders
  • some fear that if businesses become too active in social concerns, they will take control of how these concerns are addressed
  • one main example is how these businesses have been able to influence gov't that are supposed to regulate them
• Arguments have been challenged by opposing view that says that companies must be responsible to a variety of stakeholders → customers, employees, investors, supplier, and local communities where they do business
• businesses often create many of the problems social programs are designed to alleviate (another opposing view)
• Fair-trade movement is an example of social responsibility.

~3.3 Stakeholder Model of Responsibility~

• how the concept of social responsibility applies to a firm’s relationship with its customers, employees, and investors, along with environmental issues.
• Organizational Stakeholders: individuals and groups that are directly affected by practices of an organization and therefore have a stake in its performance.
• to ensure that companies understand the emphasis of social responsibility, they have gone beyond traditional financial measures like return on investment
  • SOCIAL RETURN ON INVESTMENT (SROI)
  • Has been created so companies understand, manage, and communicate social value of their activities for stakeholders

~Responsibility toward customers~

• Three key areas of social responsibility in business → consumer rights, unfair pricing, and ethics in advertising

~Consumer rights~

• Consumerism: protect the rights of consumers
  • The right to safe products
  • to be informed of all relevant aspects of a product (ingredients)
  • to be heard (money-back offers)
  • right to choose what they buy
  • to be educated about purchases (side effects in medicine)
  • courteous service (consumer hotlines)

~Unfair pricing~

• interfering with competition can also mean illegal pricing practices
  • Collision: getting together to fix prices
• max sentence for price fixing have been tripled to 14 years → max fine has increased from $10M to $25M

~Ethics in Advertising~

• Several ethical issues in advertising
  • Truth-in-advertising: claims made in advertising must be demonstrably true
  • Sony had a critic who would give rave reviews, only for us to find out that Sony had made up a critic as he didn’t exist
  • Stealth advertising: companies pay individuals to extol the virtues of their products to other individuals
  • models were hired as tourists to approach real tourists to take pictures while promoting the product unsuspectedly
  • Morally objectable advertising: portrayals of individuals/products that offend customers’ sense of decency
  • targeting young teenagers with tobacco/smoking ads, women in skimpy clothes
  • Advertising of counterfeit brands

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~Responsibility Toward Employees~

• Human resource management activities that are essential to a smoothly-running business
• Socially responsible behaviour:
  • hire and promote without regard to gender, race, other irrelevant factors
  • provides non-bullying workplace
  • do not tolerate harrassment
  • promote work-life balance
  • emphasize employee mental health
  • pay living wage

~Whistle-blowers~

• an employee that discovers and tries to put an end to a company’s illegal/unethical/socially irresponsible actions by publicizing them.

~Responsibility toward investors~

• if manager’s do not use the firm’s financial resources in a responsible way, the losers are the owner’s because they don’t receive the earnings, dividends, or capital appreciation

~Improper financial management~

• executives make bad financial decisions by paying themselves outlandish salaries and bonuses, or use investor money to buy expensive personal items

~Misrepresentation of Finances~

• money-laundering like opening fake accounts and crediting yourself with currency and then trading it with amounts that don’t exist with clients who ae unaware

~Cheque Kiting~

• writing a cheque from one account, depositing it in a second account, and then immediately spending money from the second account while the money from the first account is still in transit
  • cheque from the 2nd account can also be used to replenish money in the 1st acc and the process starts again
• process is irresponsible because it involves using other’s money without paying for it

~Insider trading~

• definition: using confidential information to gain from purchase or sale of stock
• trader uses info not available to general investor by either buying stock just before its price goes up or selling stock just before price goes down

~Responsibility toward suppliers~

• How are businesses socially responsible when it comes to managing their relationship with their supplier?
  • keep suppliers informed about company’s plans
  • negotiate delivery schedules and prices that are acceptable to both firms
  • may also allow suppliers access to firm’s internal records so the supplier can better serve firm
• The flip side: large retailers may put intense pressure on suppliers to lower prices
  • if supplier cannot lower prices per retailer demand
  • retailer drops supplier and finds one that can meet price
  • is done so retailer can charge low prices to consumers and improve market share

~Responsibility toward local and international communities~

• social responsibility can be shown by contributing to local programs or charities

~Corporate charitable donations~

• acknowledge their commitments to their stakeholders one each country where they do business
• international business must also address their social responsibilities in areas like wages, working conditions, and environmental protection across different countries

~Responsibility toward the environment~

• Pollution is the main challenge for business firms
  • air, water, and land pollution are the focus of most anti-pollution efforts by business and gov’t

~Air pollution~

• results when a combination of factors lowers air quality
• concerns have led to an increasing emphasis on development of clean, renewable energy sources like wind solar, and hydroelectric power to reduce pollution
• Carbon tax could help reduce greenhouse gas emissions
  • is controversial as critics say it will slow economic growth, increase business costs, reduce our standard of living, and undermine Canadian international competitiveness
  • major concern: Canadian business will simply move to a lower-cost place that does not have a carbon tax, leading to job losses
  • one way to avoid these issues: exempt Canadian exports from the carbon tax and put tariffs on imports into Canada from countries without carbon tax

~Water Pollution~

• caused by businesses dumping waste into rivers, streams, and lakes
• ocean pollution is caused by cargo and passenger ships
• ships cause more air pollution than all cars combined

~Land Pollution~

• toxic wastes: dangerous chemicals and radioactive by-products of various manufacturing processes that are harmful to humans and animals
• Attempts to address issue: changes in forestry practices, limits on certain types of mining, and new forms of solid waste disposal
• Recycling has become a part of increased consciousness
  • plant and animal waste can be recycled to produce energy → biomass
• Fracking: injection of water/chemical compounds into underground rock formations to break them apart
  • has led to an increase in supply of oil and has resulted in lower energy prices
  • has been argued that this could be causing earthquakes and polluting underground water sources

~Consumers and Pollution~

• combating pollution/environmental issues is a consistent effort
• many companies take part in %%greenwashing%%
  • has made consumers hesitant in going green (big-time) but are willing to do small acts towards it

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