Ethics and Social Responsibility

Slides by Professor Tim Richardsonof the School of Marketing and eBusiness, Seneca College

and the Dept. of Management, University of Toronto (UTSC)© 2010 McGraw-Hill Ryerson Limited

Chapter 5 Slide 2

Learning Objectives1. Explain why legality is only one step in behaving ethically.2. Describe management’s role in setting ethical standards

and distinguish between compliance-based and integrity-based ethics codes.

3. List the six steps that can be considered when setting up a corporate ethics code.

4. Define corporate social responsibility and examine corporate responsibility to various stakeholders.

5. Discuss the responsibility that business has to customers, investors, employees, society, and the environment.

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Ethics

• Ethics is more than legality.

• It is not just obeying the law; it

is “doing the right thing.”

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Ethics

Canadian ethical breaches• WestJet Airlines Ltd. spying on Air Canada

• the Atlantic Lottery Corporation had concerns of retailers stealing winning tickets from customers

• Research In Motion (RIM) Stock Option Scandal

• Federal Government Sponsorship Scandal

• Hollinger International Inc./Conrad Black

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Ethical Checklist

Is It Legal?

Is It Balanced?

How Will It Make Me Feel About Myself?

There are no easy solutions to ethical dilemmas.

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Managing Businesses Ethically and Responsibly

Organizational ethics begin at the top.• The leadership and example of strong top

managers can help instill corporate values in employees.

• Some managers think that ethics is a personal matter—that individuals either have ethical principles or they don’t.

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Setting Corporate Ethical Standards

• Compliance-based ethics codes emphasize preventing unlawful behaviour by increasing control and by penalizing wrongdoers.

• Integrity-based ethics codes are ethical standards that define the organization’s guiding values, create an environment that supports ethically sound behaviour, and stress a shared accountability among employees.

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Setting Corporate Ethical Standards

• Whistleblowers: people who report illegal or unethical behaviour among employees.

• Whistleblowing Legislation in Canada– Bill C-11: The Public Servants Protection Disclosure

Act– there is no provision to protect private-sector

whistleblowers

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Six Steps to Improve Ethics

1. Top management support2. Expectations begin at the top3. Ethics imbedded in training4. Ethics office set up5. External stakeholders informed6. There must be enforcement

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Responsibility Defined

• Corporate Social Responsibility (also known as corporate responsibility): the concern businesses have for the welfare of society.

• includes everything from hiring minority workers to making safe products, minimizing pollution, using energy wisely, and providing a safe work environment—that is, everything that has to do with acting responsibly within society and toward employees.

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Responsibility Defined

• Corporate Philanthropy: charitable donations• Strategic philanthropy involves companies

making long-term commitments to one cause, such as the Canadian Tire Foundation for Families.

Tim Horton Children’s Foundation is a private organization that is supported by Tim Horton’s. Every year, thousands of children from economically challenged homesparticipate in camps that are run by the Foundation.

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Responsibility Defined

• Corporate social initiatives include enhanced forms of corporate philanthropy that are more directly related to the company’s competencies.

• For example, as part of the 2004 Asian tsunami disaster relief, UPS and FedEx shipped emergency relief supplies for free from all over the world and Johnson & Johnson sent medical supplies.

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Responsibility Defined

• Corporate Policy: position on social and political issues

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Responsibility to CustomersOne responsibility of business is to satisfy

customers by offering them goods and services of real value.

• This responsibility is not as easy to meet as it seems.

• more than half of new businesses fail—perhaps because their owners failed to please their customers.

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Responsibility to InvestorsEthical behaviour is good for shareholder

wealth. It doesn’t subtract from the bottom line, but rather adds to it.

On the other hand, unethical behaviour does cause financial damage.

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Responsibility to InvestorsInsider Trading• involves insiders using private company

information to further their own fortunes or those of their family and friends.

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Responsibility to EmployeesBusinesses have several responsibilities to

employees. • First, they have a responsibility to create jobs

if they want to grow. • It’s been said that the best social program in the world

is a job.

• Once a company creates jobs, it has an obligation to ensure that hard work and talent are fairly rewarded.

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Responsibility to EmployeesEmployees need realistic hope of a better future,

which comes only through a chance for upward mobility.

• the factor that most influences a company’s effectiveness and financial performance is human resource management.

• If a company treats employees with respect, they usually will respect the company as well.

• That respect can make a huge difference in a company’s bottom line.

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Responsibility to SocietyOne of business’s responsibilities to society is to

create new wealth, which is disbursed to employees, suppliers, shareholders, and other stakeholders.

• if businesses don’t create wealth, who will?• Non-profit organizations (NPOs)

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Responsibility to Society NPOsNon-profit organizations (NPOs)• play an important role in distributing the funds

they receive from donors, governments, and even their own investments in billions of shares in publicly held companies.

• As those stock prices increase, more funds are available to benefit society.

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Responsibility to the EnvironmentBusinesses are often criticized for their role in

damaging the environment.

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Ethical Decision Resolved Through:

• Religious Teachings

• Individual Rights

• Legislation

• Court Decisions

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Triple Bottom Line• The triple bottom line (TBL) focuses

not just on the economic value corporations add, but also on the environmental and social value they add – and destroy.

• Triple bottom line is used as a framework for measuring and reporting corporate performance against economic, social, and environmental parameters.

                 

http://www.sustainability.com/

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Interface CarpetsA Sustainability Champion

• Vision: To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: people, process, product, place, and profits — by 2020 — and in doing so we will become restorative through the power of influence.

• Ray Anderson: believes that if Interface, a petro-intensive company, can get it right, it will never have to take another drop of oil from the earth.

http://www.interfaceinc.com/

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Reaction to the New Social Responsibility

• Many companies have undertaken a social audit, a systematic evaluation of the company’s position and progress on social issues

• Shareholders and other stakeholders have actively encouraged companies to become proactive on social issues.

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New PhilanthropyNew Philanthropy

Source: Source: Business WeekBusiness Week, Dec. 2, 2002, Dec. 2, 2002

DonorEstimated Total

Given (in millions)

Causes

Bill Gates $25.6 Health &Education

Gordon Moore $6.6 Conservation & Education

James Stowers $1.5 Biomedical Research

Eli Broad $1.045 Education & Arts

Walton Family $.75 Education

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International Ethics & Responsibility

Ethics Not Unique To U.S. - Leaders Accountable

Demand for Socially Responsible Behaviour

Inter-American Convention Against Corruption

The Legal/Ethical Grid

ethical but

illegal

unethicaland

illegal

legal and

ethical

legal but

unethicalLegal

Ethical Unethical

Illegal