Saint Mary’s University
Department of Management
MGMT 3480
Week 3 – Ethics of Business: Management and
Leadership
Preparation
Required Reading
• Sexty (5e)
▫ Chapter 6, Ethics of Business: Management and Leadership,
pp. 95-115
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 18 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 20
Ethical Leadership Forms
• Research on leadership identifies three possible
forms applicable to the ethics of business and
corporate social responsibility:
▫ Ethical → communicate ethical standards and encourage ethical conduct
▫ Responsible → narrow orientation focused on financial performance and
extended orientation with stakeholder view
▫ Servant Leadership → emphasizes concern for others, and combines
motivation to lead with the need to serve others
Includes the design and implementation of a Corporate Ethics
Programs, i.e., a statement of values, code of conduct, etc.
Statement of Values
• A description of the beliefs, principles, and basic
assumptions about what is desirable or worth striving
for in an organization
▫ Creeds / Statements of Philosophy
• Key components to value statements:
❖Key stakeholder interests to be satisfied and balanced
❖Emphasis on quality
❖Efficiency
❖Work climate
❖Observance of codes of conduct
Codes of Conduct and Ethics
• Code of conduct → explicitly states what appropriate
behaviour is by identifying what is acceptable and
unacceptable
• Code of ethics → a statement of principles or values
that guide behaviour by describing the general value
system within which a corporation attempts to
operate in a given environment
Distinction between Codes of Conduct
and Codes of Ethics
Codes of Conduct
Codes of Ethics
Enforced by an external power and
authority; convey rules that tell people
what they must or must not do. Members
of organizations must obey or face
penalties for failing to do so.
Codes of ethics suggest guidelines to
follow and empower individuals to act
according to their consciences. Penalties
are not imposed and writers emphasize
the qualities they think members should
have.
Key characteristics:
Key characteristics:
•Imposed by others
•What must be done or what must not be
done
•Rules
•Self-imposed
•Who we are
•What we stand for
•Guidelines or guiding principles
8
Types of Codes
• Corporate or Business Enterprise - individual corporations prepare
codes for their own use
• Professional Organizations - professions such as lawyers, accountants
are influenced when employed in these types of professions, and architects
/ sets the standard for its practitioners
• Industry and Sector - formulate codes that enterprises in the industry or
sector may voluntarily follow; sometimes developed in conjunction with a
government agency / sets the standard for firms and employees within that
industry
• Single Issue - NGOs or Business develop codes applicable to a particular
issue
• Codes from National and International Bodies - the United Nations,
World Trade Organization (WTO), for instance
9
What are Codes For?
• Where people in an organization stand in relation to each
other and to the organization itself
▫ Discourage managers from making unethical; demands on subordinates
▫ Protect individuals from being placed in unethical situations
▫ Safeguard the integrity of the organization
• Where the organization and its members stand in relation to
entities outside the organization
• Declare professional or organizational standards for all to see
• Instruments of accountability and responsibility
• To be enforced → Can’t simply be motherhood statements
Codes of Conduct and Codes of Ethics,
cont.
• Codes institutionalize ethical behaviour by:
▫
▫
▫
▫
Increasing awareness
Discouraging ethical apathy
Facilitating ethical decision making
Making it easier to refuse an unethical request
Content of Codes of
Conduct and Codes of Ethics
Content of Codes of
Conduct and Codes of Ethics, cont.
• Content of codes has evolved over time and through five
generations:
▫ First generation → conflict of interest (protection of company’s assets
from employees)
▫ Second generation → commercial conduct (bribery of foreign officials)
▫ Third generation → employee rights and motivation of the workforce
(Emergence of ethical consumerism)
▫ Fourth generation → wider responsibility, with attention on
environment and respect for communities
▫ Fifth generation → international concerns, including human rights, the
rule of law and labour conditions
Criticisms
• Unenforceable standard
• Unnecessary, as most corporations operate at ethical level
above code
• Only necessary for the less scrupulous
• Penalties may be insignificant
• Convincing everyone to comply is not easy
• Often idealistic and written in meaningless generalities
• Merely to control competitive conduct among corporations,
designed to prevent government legislation
• Serve as a response to public criticism
Ethics Training
• Involves teaching employees about the values and
policies on ethics they should follow in their decision
making
• Teaching sessions can involve:
➢ Managers or outside consultants
➢ Addressed to all levels of employees, with emphasis on
management
➢ Online exercises
➢ Practical checklists and tests to evaluate actions
Checklists and Tests
• Nash → plainly worded questions should be used by managers
when examining ethics of a business decision
▫ Examples: Have you defined the problem accurately? How did this
situation occur in the first place? Etc.
• Pagano model (1987) → identifies six tests that provide
insights into the ethics of a business’ actions:
1.
Is it legal → core starting point
2.
Benefit/cost test → greatest good for the greatest number
3.
Categorical imperative → do you want this action to be the universal standard?
4.
Light of day test → What if your actions appeared on television?
5.
Do unto others → the “Golden Rule”
6.
Ventilation test → get a second opinion from a wise friend
Understanding Conflicts of Interest
• Conflict of interest → situation in which an individual has a
private or personal interest that is sufficient to appear to
influence the objective exercise of that individual’s duties
• Three types of conflict:
1.
2.
3.
Real: a manager or employee has knowledge of a private economic
interest, or any kind of private or personal gain, that is sufficient to
influence the exercise of his or her responsibilities
Apparent: can be deduced from appearances
Potential: a situation that may develop into an actual conflict; a private
interest may be sufficient to influence a duty or responsibility
17
Conflicts of Interest
Common Examples:
• Self-dealing - illegal activity that occurs when a person or entity with fiduciary duty
puts his or her own interests ahead of a client's interests in a transaction, i.e. a
lawyer or a stockbroker
• Accepting Gifts or Benefits - a politician accepts Box Seats at the Moosehead Games
• Influence Peddling - seeking a kickback or a gift
• Using Employer’s Property - taking white board markers home from SMU
• Using Confidential Information - for private purposes
• Outside Employment or Moonlighting - outside normal working hours – for
remuneration
• Post-employment - using info obtained from previous employment
• Personal Conduct - private life conduct adversely affects employer
18
Conflicts of Interest
➢When in doubt, declare your Conflict of Interest =
transparency
➢Be as transparent as Confidentiality and Prudence
allows
➢Use Good Judgement
Ethics Audits,
Managers, and Committees
• Systematic effort to discover actual or potential
unethical behaviour in an organization
▫ Designed to uncover unethical behaviour and identify
existing opportunities for unethical behaviour
▫ Useful in conjunction with a code of ethics
▫ Conducted by consultants → advise management on
how to put “integrity” into corporate culture
20
Ethics Officers and Ethics Committees
Ethics Officers:
•
•
•
•
•
•
Independent manager
Reports to the Board of Directors or CEO
Reviews complaints or information from anyone in the organization or any
stakeholder
Studies situation and recommends action
Sometimes performed by an Ombudsman
(https://nslegislature.ca/about/supporting-offices/office-ombudsman) or Advocate
Responsible for the ethics program
http://nslegislature.ca/index.php/people/offices/conflict-of- interest-commissioner/
Ethics Committees:
•
Comprising management, employees, and outside stakeholders to monitor ethical
behaviour
Ethics Reporting Systems and
Whistleblowing
• Corporations have established reporting systems so
that they can become aware of issues and concerns
relating to corporate ethical conduct
▫ Most common = hotlines
• Whistleblowing → act of voluntary disclosure of
inappropriate behaviour or decisions to persons in
positions of authority in an organization
▫ Many ethical issues related to whistleblowing have
ethical implications for whistleblowers and managers
22
Ethics Reporting Systems and
Whistleblowing
• Protection for Whistleblowers has been notoriously poor → in
government and in the private sector
▫ NS government → The Public Interest Disclosure of Wrongdoing Act
provides a framework for citizens and government and public sector
body employees to report (disclose) wrongdoing by current employees of
government and public sector bodies. The act protects employees by
making sure that employers don’t take reprisal (negative action) against
an employee who reports (discloses) wrongdoing
▫ Only New Brunswick offers protection for private sector whistleblowers
→ the New Brunswick Employment Standards Act
23
Ethics Reporting Systems and
Whistleblowing
• Internal Whistleblowing → blowing the whistle inside
the organization – reporting the concern outside the
normal channels of authority, but still not going
public (not reporting outside the organization)
• Riskier option → going outside of seeking external
intervention to overcome the problem
24
Ethics Reporting Systems and
Whistleblowing
• Whistleblowing is a matter of judgement
▫ No rules involved
▫ Some circumstances which it is mandatory to blow the
whistle, but generally it is a matter that calls for moral
judgment to be exercised
• The questions is: why should I be the one to blow the
whistle?
• If you blow the whistle, are you ready and prepared
to take / accept the consequences?
Whistleblowing: Ethical Implications
• Issues:
▫ Remain silent, quit, or disclose wrongdoing?
▫ Range of concerns from clearly illegal to maybe illegal to issue of
morality
▫ Does obligation to employer supersede obligation to self, profession, or
industry?
▫ Will the whistleblower be believed?
▫ Is the whistleblower a hero or a snitch?
▫ When and who to tell?
▫ What will the consequences be?
26
Whistleblowing: Questions to
Consider
1. Should someone really be personally & professionally
persecuted for being Honest, Trustworthy, Noble, SelfSacrificing & Upholding the Public Trust?
2. Shouldn’t Whistleblowers be considered Courageous?
3. Shouldn’t there be Adequate Reporting Systems In Place?
4. Should the Issue be Serious?
5. Should the Public have a Right To Know?
6. Should other avenues be considered first?
7. Will Blowing the Whistle remedy the Problem?
8. Do employees have a moral obligation to blow the whistle?
9. Is whistleblowing a grey area?
Ethics: Who is Responsible?
• Boards of Directors have two tasks in relation to ethics:
▫ To collectively identify values that determine acceptable behaviour in
the firm
▫ Put in place a process that ensures values are reflected in action
• Success of any ethics programs depends on commitment of
top management:
▫ Announce the program
▫ Champion its development and implementation
▫ Aspire to lead in an ethical manner
Management and Leadership Models – 3
Models of Moral Management & Leadership
Immoral
Amoral
Moral
•
•
•
•
•
•
•
•
•
A posture or approach that is devoid of
ethical principles and actively opposed
to what is moral
Management’s motives are selfish, and
it cares only about the individual’s or
the organization’s gains
Management to some degree knows
right from wrong and chooses to do
wrong
May be motivated by greed and
profitability, and organizational (or
personal) success is the goal to be
achieved at any price
Do not care about claims or
expectations of others
The law is regarded as a barrier to be
overcome and will circumvent if it will
achieve their ends
Do not make good corporate citizens
•
•
•
•
•
•
•
•
A posture or approach that is without
ethics, but not actively immoral
Two types: intentionally or unintentionally
amoral
Intentionally amoral leaders do not
consider ethics, as they believe business
activity lies outside of moral judgments;
neither moral nor immoral, as different
rules apply to business
Unintentionally amoral leaders are
morally careless, unaware of or
inattentive to impact of their decisions on
others
They lack ethical perception, sensitivity, or
awareness
May be well-intentioned but unaware of
harms from their actions
“Ethical gears in neutral”
Use letter of the law instead of spirit
Cannot make good corporate citizens
•
•
•
•
•
Conform to high standards
of ethical behaviour or
professional standards
Aspire to succeed only
within confines of ethical
principles; for example
fairness, justice, and due
process
Concerned with letter and
spirit of the law
Prefer standards that are
higher than the minimum
set by the law
Assume leadership when
ethical dilemmas arise
Make ethics a driving force
of the organization
29
Ethics Programs: Approaches
Formal approach (most commonly used)
•
•
•
Based on organizational norms that are written as a code of conduct
Focuses on unacceptable behaviour; top-down; clear guidance for decision-making
Employees may resist & rebel
Monological approach
•
•
•
Allows organizational members (e.g., managers, employees) to determine for
themselves what is right or wrong
Focuses on argument and reflection; but leaves room to act upon specific
circumstances
Justice Ethic Principle most likely to be used
Dialogical approach (least commonly used)
•
•
Emphasizes communication before decisions are made and implemented
Seeks inclusive solutions; based on the Ethic of Caring
Compliance versus
Values-based Programs
Compliance-based
Values-based
Rules, laws, policies
Values, ethics, guiding principles
Conformity with externally imposed standards
Self-governance to chosen standards; self-imposed
Prevent criminal misconduct
Enable responsible conduct
Lawyer-driven
Management-driven
Educational approach: policies and rules, legalistic
Educational approach: policies and rules, but also
guidelines/awareness through leadership
Employee discretion: limited
Employee discretion: increased
Control: auditing, penalties
Control: accountability, systems, decision processes
Code of Conduct:
Code of Ethics:
•Specific
•Prescriptions/directives
•Uniformity
•Enforceable statements of specific behaviour
•General
•Values/principles
•Judgment
•“Empowering” and “aspirational”
Ethics Programs: Evaluation
• Implicit ethics programs are implemented through:
▫ Organization’s culture, reward systems, valued behaviour, promotion
policies, management example, general practice and performance
measures
• Criteria for an effective ethics program:
▫ Visibility
▫ Ownership
▫ Fit
▫ Balance
Ethics Programs: Evaluation
and Benefits, cont.
• Benefits of programs to manage ethics:
▫ Business practices more beneficial to society
▫ Increased awareness of ethics
▫ Alignment of corporate behaviour with values
▫ Heightened ethical sensitivity of employees and managers
▫ Sensitizes managers and employees to legal requirements
▫ Avoidance of criminal acts
▫ Integration of values with quality and strategic management
▫ Implications of management decisions on stakeholders
▫ More favourable public image
Ethics Programs: Evaluation
and Benefits, cont.
• Four types of executive ethical leadership:
▫ Hypocritical leader = strong moral manager and weak
moral person
▫ Unethical leader = weak moral manager and weak
moral person
▫ Ethical leader = strong moral manager and strong moral
person
▫ Ethically silent leader = weak moral manager and either
a weak or strong moral person
Ethics Programs: Evaluation
and Benefits, cont.
• Guidelines for effective ethics management:
FIRST: Understand the Existing Ethical Culture
SECOND: Communicate the Importance of Ethical Standards
THIRD: Focus on the Reward System
FOURTH: Promote Ethical Leadership Throughout the Firm
• Corporate culture → complex set of values, beliefs,
assumptions and symbols that define the way in
which an organization conducts its business
▫ Ethical corporate culture → “subset” of the
organizations broader culture
Why Ethical Leadership and Programs
Fail
• Managers are morally imperfect
• Self-interest
• Rationalization and self-delusion
• Threat of formal sanctions
• Threat of informal sanctions
• Tolerance to risk-taking behaviour
• Pressure in particular situations
Summary
• Corporations must take deliberate actions to reinforce the
importance by considering ethical implications in decision
making. Key to this is the appropriate form of ethical
leadership.
• The components of a corporation’s ethics program to
accomplish are described. The initial stage should be a
statement of values or the equivalent that states in general
terms the behaviours expected. These values become the
foundation for the corporation’s ethics program.
Summary, cont.
• A code of ethics reflects the values of an organization.
A distinction should be made from a code of conduct,
which focuses on compliance to rules or regulations
instead of values.
• Today, corporations are not leaving an understanding
of morality to chance and are engaged in a variety of
training for everyone in the organization.
Summary, cont.
• Ethics audits are becoming more common as an
approach to assessing the ethical implications of a
corporation’s practices. Usually, such audits are
conducted by outside consultants, who can also
provide a range of advice about ethics programs.
• In larger corporations, there is a trend toward an
ethics officer of some type being responsible for all
aspects of compliance and morality in the
organization. Ethics committees in many corporations
facilitate the implementation of ethics programs.
Summary, cont.
• Ethics reporting systems are being established. Several
complicated issues are associated with whistleblowing and
whistleblowers. Managers must carefully monitor the practice
to make sure its benefits outweigh the drawbacks.
• Someone must take responsibility for the development and
implementation of ethics programs. The board of directors and
top management must signal their commitment to any
program if it is to be successful. A “moral” leadership model is
necessary to achieve this.
Summary, cont.
• Approaches to ethics programs are described. The formal
approach is most common; the dialogical the least. Most
corporations have programs that are a combination of these
approaches. Also, the components of programs can be
identified as being compliance-based versus values-based.
• The components of an ethics program are either compliancebased, following rules and requiring conformance, or valuesbased, emphasizing values as a way to influence behaviour. In
most corporations today, a combination of these approaches is
used and referred to as integrity management.
Summary, cont.
• There are several explanations for why ethical
leadership and programs fail despite the best efforts
and intentions of the corporation and its managers.
An ethical corporate culture is necessary for ethics
programs to be successful.
Discussion Questions
• Located under Discussions on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 3 – Ethics of Business: Management and
Leadership
Preparation
Required Reading
• Sexty (5e)
▫ Chapter 6, Ethics of Business: Management and Leadership,
pp. 95-115
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 18 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 20
Ethical Leadership Forms
• Research on leadership identifies three possible
forms applicable to the ethics of business and
corporate social responsibility:
▫ Ethical → communicate ethical standards and encourage ethical conduct
▫ Responsible → narrow orientation focused on financial performance and
extended orientation with stakeholder view
▫ Servant Leadership → emphasizes concern for others, and combines
motivation to lead with the need to serve others
Includes the design and implementation of a Corporate Ethics
Programs, i.e., a statement of values, code of conduct, etc.
Statement of Values
• A description of the beliefs, principles, and basic
assumptions about what is desirable or worth striving
for in an organization
▫ Creeds / Statements of Philosophy
• Key components to value statements:
❖Key stakeholder interests to be satisfied and balanced
❖Emphasis on quality
❖Efficiency
❖Work climate
❖Observance of codes of conduct
Codes of Conduct and Ethics
• Code of conduct → explicitly states what appropriate
behaviour is by identifying what is acceptable and
unacceptable
• Code of ethics → a statement of principles or values
that guide behaviour by describing the general value
system within which a corporation attempts to
operate in a given environment
Distinction between Codes of Conduct
and Codes of Ethics
Codes of Conduct
Codes of Ethics
Enforced by an external power and
authority; convey rules that tell people
what they must or must not do. Members
of organizations must obey or face
penalties for failing to do so.
Codes of ethics suggest guidelines to
follow and empower individuals to act
according to their consciences. Penalties
are not imposed and writers emphasize
the qualities they think members should
have.
Key characteristics:
Key characteristics:
•Imposed by others
•What must be done or what must not be
done
•Rules
•Self-imposed
•Who we are
•What we stand for
•Guidelines or guiding principles
8
Types of Codes
• Corporate or Business Enterprise - individual corporations prepare
codes for their own use
• Professional Organizations - professions such as lawyers, accountants
are influenced when employed in these types of professions, and architects
/ sets the standard for its practitioners
• Industry and Sector - formulate codes that enterprises in the industry or
sector may voluntarily follow; sometimes developed in conjunction with a
government agency / sets the standard for firms and employees within that
industry
• Single Issue - NGOs or Business develop codes applicable to a particular
issue
• Codes from National and International Bodies - the United Nations,
World Trade Organization (WTO), for instance
9
What are Codes For?
• Where people in an organization stand in relation to each
other and to the organization itself
▫ Discourage managers from making unethical; demands on subordinates
▫ Protect individuals from being placed in unethical situations
▫ Safeguard the integrity of the organization
• Where the organization and its members stand in relation to
entities outside the organization
• Declare professional or organizational standards for all to see
• Instruments of accountability and responsibility
• To be enforced → Can’t simply be motherhood statements
Codes of Conduct and Codes of Ethics,
cont.
• Codes institutionalize ethical behaviour by:
▫
▫
▫
▫
Increasing awareness
Discouraging ethical apathy
Facilitating ethical decision making
Making it easier to refuse an unethical request
Content of Codes of
Conduct and Codes of Ethics
Content of Codes of
Conduct and Codes of Ethics, cont.
• Content of codes has evolved over time and through five
generations:
▫ First generation → conflict of interest (protection of company’s assets
from employees)
▫ Second generation → commercial conduct (bribery of foreign officials)
▫ Third generation → employee rights and motivation of the workforce
(Emergence of ethical consumerism)
▫ Fourth generation → wider responsibility, with attention on
environment and respect for communities
▫ Fifth generation → international concerns, including human rights, the
rule of law and labour conditions
Criticisms
• Unenforceable standard
• Unnecessary, as most corporations operate at ethical level
above code
• Only necessary for the less scrupulous
• Penalties may be insignificant
• Convincing everyone to comply is not easy
• Often idealistic and written in meaningless generalities
• Merely to control competitive conduct among corporations,
designed to prevent government legislation
• Serve as a response to public criticism
Ethics Training
• Involves teaching employees about the values and
policies on ethics they should follow in their decision
making
• Teaching sessions can involve:
➢ Managers or outside consultants
➢ Addressed to all levels of employees, with emphasis on
management
➢ Online exercises
➢ Practical checklists and tests to evaluate actions
Checklists and Tests
• Nash → plainly worded questions should be used by managers
when examining ethics of a business decision
▫ Examples: Have you defined the problem accurately? How did this
situation occur in the first place? Etc.
• Pagano model (1987) → identifies six tests that provide
insights into the ethics of a business’ actions:
1.
Is it legal → core starting point
2.
Benefit/cost test → greatest good for the greatest number
3.
Categorical imperative → do you want this action to be the universal standard?
4.
Light of day test → What if your actions appeared on television?
5.
Do unto others → the “Golden Rule”
6.
Ventilation test → get a second opinion from a wise friend
Understanding Conflicts of Interest
• Conflict of interest → situation in which an individual has a
private or personal interest that is sufficient to appear to
influence the objective exercise of that individual’s duties
• Three types of conflict:
1.
2.
3.
Real: a manager or employee has knowledge of a private economic
interest, or any kind of private or personal gain, that is sufficient to
influence the exercise of his or her responsibilities
Apparent: can be deduced from appearances
Potential: a situation that may develop into an actual conflict; a private
interest may be sufficient to influence a duty or responsibility
17
Conflicts of Interest
Common Examples:
• Self-dealing - illegal activity that occurs when a person or entity with fiduciary duty
puts his or her own interests ahead of a client's interests in a transaction, i.e. a
lawyer or a stockbroker
• Accepting Gifts or Benefits - a politician accepts Box Seats at the Moosehead Games
• Influence Peddling - seeking a kickback or a gift
• Using Employer’s Property - taking white board markers home from SMU
• Using Confidential Information - for private purposes
• Outside Employment or Moonlighting - outside normal working hours – for
remuneration
• Post-employment - using info obtained from previous employment
• Personal Conduct - private life conduct adversely affects employer
18
Conflicts of Interest
➢When in doubt, declare your Conflict of Interest =
transparency
➢Be as transparent as Confidentiality and Prudence
allows
➢Use Good Judgement
Ethics Audits,
Managers, and Committees
• Systematic effort to discover actual or potential
unethical behaviour in an organization
▫ Designed to uncover unethical behaviour and identify
existing opportunities for unethical behaviour
▫ Useful in conjunction with a code of ethics
▫ Conducted by consultants → advise management on
how to put “integrity” into corporate culture
20
Ethics Officers and Ethics Committees
Ethics Officers:
•
•
•
•
•
•
Independent manager
Reports to the Board of Directors or CEO
Reviews complaints or information from anyone in the organization or any
stakeholder
Studies situation and recommends action
Sometimes performed by an Ombudsman
(https://nslegislature.ca/about/supporting-offices/office-ombudsman) or Advocate
Responsible for the ethics program
http://nslegislature.ca/index.php/people/offices/conflict-of- interest-commissioner/
Ethics Committees:
•
Comprising management, employees, and outside stakeholders to monitor ethical
behaviour
Ethics Reporting Systems and
Whistleblowing
• Corporations have established reporting systems so
that they can become aware of issues and concerns
relating to corporate ethical conduct
▫ Most common = hotlines
• Whistleblowing → act of voluntary disclosure of
inappropriate behaviour or decisions to persons in
positions of authority in an organization
▫ Many ethical issues related to whistleblowing have
ethical implications for whistleblowers and managers
22
Ethics Reporting Systems and
Whistleblowing
• Protection for Whistleblowers has been notoriously poor → in
government and in the private sector
▫ NS government → The Public Interest Disclosure of Wrongdoing Act
provides a framework for citizens and government and public sector
body employees to report (disclose) wrongdoing by current employees of
government and public sector bodies. The act protects employees by
making sure that employers don’t take reprisal (negative action) against
an employee who reports (discloses) wrongdoing
▫ Only New Brunswick offers protection for private sector whistleblowers
→ the New Brunswick Employment Standards Act
23
Ethics Reporting Systems and
Whistleblowing
• Internal Whistleblowing → blowing the whistle inside
the organization – reporting the concern outside the
normal channels of authority, but still not going
public (not reporting outside the organization)
• Riskier option → going outside of seeking external
intervention to overcome the problem
24
Ethics Reporting Systems and
Whistleblowing
• Whistleblowing is a matter of judgement
▫ No rules involved
▫ Some circumstances which it is mandatory to blow the
whistle, but generally it is a matter that calls for moral
judgment to be exercised
• The questions is: why should I be the one to blow the
whistle?
• If you blow the whistle, are you ready and prepared
to take / accept the consequences?
Whistleblowing: Ethical Implications
• Issues:
▫ Remain silent, quit, or disclose wrongdoing?
▫ Range of concerns from clearly illegal to maybe illegal to issue of
morality
▫ Does obligation to employer supersede obligation to self, profession, or
industry?
▫ Will the whistleblower be believed?
▫ Is the whistleblower a hero or a snitch?
▫ When and who to tell?
▫ What will the consequences be?
26
Whistleblowing: Questions to
Consider
1. Should someone really be personally & professionally
persecuted for being Honest, Trustworthy, Noble, SelfSacrificing & Upholding the Public Trust?
2. Shouldn’t Whistleblowers be considered Courageous?
3. Shouldn’t there be Adequate Reporting Systems In Place?
4. Should the Issue be Serious?
5. Should the Public have a Right To Know?
6. Should other avenues be considered first?
7. Will Blowing the Whistle remedy the Problem?
8. Do employees have a moral obligation to blow the whistle?
9. Is whistleblowing a grey area?
Ethics: Who is Responsible?
• Boards of Directors have two tasks in relation to ethics:
▫ To collectively identify values that determine acceptable behaviour in
the firm
▫ Put in place a process that ensures values are reflected in action
• Success of any ethics programs depends on commitment of
top management:
▫ Announce the program
▫ Champion its development and implementation
▫ Aspire to lead in an ethical manner
Management and Leadership Models – 3
Models of Moral Management & Leadership
Immoral
Amoral
Moral
•
•
•
•
•
•
•
•
•
A posture or approach that is devoid of
ethical principles and actively opposed
to what is moral
Management’s motives are selfish, and
it cares only about the individual’s or
the organization’s gains
Management to some degree knows
right from wrong and chooses to do
wrong
May be motivated by greed and
profitability, and organizational (or
personal) success is the goal to be
achieved at any price
Do not care about claims or
expectations of others
The law is regarded as a barrier to be
overcome and will circumvent if it will
achieve their ends
Do not make good corporate citizens
•
•
•
•
•
•
•
•
A posture or approach that is without
ethics, but not actively immoral
Two types: intentionally or unintentionally
amoral
Intentionally amoral leaders do not
consider ethics, as they believe business
activity lies outside of moral judgments;
neither moral nor immoral, as different
rules apply to business
Unintentionally amoral leaders are
morally careless, unaware of or
inattentive to impact of their decisions on
others
They lack ethical perception, sensitivity, or
awareness
May be well-intentioned but unaware of
harms from their actions
“Ethical gears in neutral”
Use letter of the law instead of spirit
Cannot make good corporate citizens
•
•
•
•
•
Conform to high standards
of ethical behaviour or
professional standards
Aspire to succeed only
within confines of ethical
principles; for example
fairness, justice, and due
process
Concerned with letter and
spirit of the law
Prefer standards that are
higher than the minimum
set by the law
Assume leadership when
ethical dilemmas arise
Make ethics a driving force
of the organization
29
Ethics Programs: Approaches
Formal approach (most commonly used)
•
•
•
Based on organizational norms that are written as a code of conduct
Focuses on unacceptable behaviour; top-down; clear guidance for decision-making
Employees may resist & rebel
Monological approach
•
•
•
Allows organizational members (e.g., managers, employees) to determine for
themselves what is right or wrong
Focuses on argument and reflection; but leaves room to act upon specific
circumstances
Justice Ethic Principle most likely to be used
Dialogical approach (least commonly used)
•
•
Emphasizes communication before decisions are made and implemented
Seeks inclusive solutions; based on the Ethic of Caring
Compliance versus
Values-based Programs
Compliance-based
Values-based
Rules, laws, policies
Values, ethics, guiding principles
Conformity with externally imposed standards
Self-governance to chosen standards; self-imposed
Prevent criminal misconduct
Enable responsible conduct
Lawyer-driven
Management-driven
Educational approach: policies and rules, legalistic
Educational approach: policies and rules, but also
guidelines/awareness through leadership
Employee discretion: limited
Employee discretion: increased
Control: auditing, penalties
Control: accountability, systems, decision processes
Code of Conduct:
Code of Ethics:
•Specific
•Prescriptions/directives
•Uniformity
•Enforceable statements of specific behaviour
•General
•Values/principles
•Judgment
•“Empowering” and “aspirational”
Ethics Programs: Evaluation
• Implicit ethics programs are implemented through:
▫ Organization’s culture, reward systems, valued behaviour, promotion
policies, management example, general practice and performance
measures
• Criteria for an effective ethics program:
▫ Visibility
▫ Ownership
▫ Fit
▫ Balance
Ethics Programs: Evaluation
and Benefits, cont.
• Benefits of programs to manage ethics:
▫ Business practices more beneficial to society
▫ Increased awareness of ethics
▫ Alignment of corporate behaviour with values
▫ Heightened ethical sensitivity of employees and managers
▫ Sensitizes managers and employees to legal requirements
▫ Avoidance of criminal acts
▫ Integration of values with quality and strategic management
▫ Implications of management decisions on stakeholders
▫ More favourable public image
Ethics Programs: Evaluation
and Benefits, cont.
• Four types of executive ethical leadership:
▫ Hypocritical leader = strong moral manager and weak
moral person
▫ Unethical leader = weak moral manager and weak
moral person
▫ Ethical leader = strong moral manager and strong moral
person
▫ Ethically silent leader = weak moral manager and either
a weak or strong moral person
Ethics Programs: Evaluation
and Benefits, cont.
• Guidelines for effective ethics management:
FIRST: Understand the Existing Ethical Culture
SECOND: Communicate the Importance of Ethical Standards
THIRD: Focus on the Reward System
FOURTH: Promote Ethical Leadership Throughout the Firm
• Corporate culture → complex set of values, beliefs,
assumptions and symbols that define the way in
which an organization conducts its business
▫ Ethical corporate culture → “subset” of the
organizations broader culture
Why Ethical Leadership and Programs
Fail
• Managers are morally imperfect
• Self-interest
• Rationalization and self-delusion
• Threat of formal sanctions
• Threat of informal sanctions
• Tolerance to risk-taking behaviour
• Pressure in particular situations
Summary
• Corporations must take deliberate actions to reinforce the
importance by considering ethical implications in decision
making. Key to this is the appropriate form of ethical
leadership.
• The components of a corporation’s ethics program to
accomplish are described. The initial stage should be a
statement of values or the equivalent that states in general
terms the behaviours expected. These values become the
foundation for the corporation’s ethics program.
Summary, cont.
• A code of ethics reflects the values of an organization.
A distinction should be made from a code of conduct,
which focuses on compliance to rules or regulations
instead of values.
• Today, corporations are not leaving an understanding
of morality to chance and are engaged in a variety of
training for everyone in the organization.
Summary, cont.
• Ethics audits are becoming more common as an
approach to assessing the ethical implications of a
corporation’s practices. Usually, such audits are
conducted by outside consultants, who can also
provide a range of advice about ethics programs.
• In larger corporations, there is a trend toward an
ethics officer of some type being responsible for all
aspects of compliance and morality in the
organization. Ethics committees in many corporations
facilitate the implementation of ethics programs.
Summary, cont.
• Ethics reporting systems are being established. Several
complicated issues are associated with whistleblowing and
whistleblowers. Managers must carefully monitor the practice
to make sure its benefits outweigh the drawbacks.
• Someone must take responsibility for the development and
implementation of ethics programs. The board of directors and
top management must signal their commitment to any
program if it is to be successful. A “moral” leadership model is
necessary to achieve this.
Summary, cont.
• Approaches to ethics programs are described. The formal
approach is most common; the dialogical the least. Most
corporations have programs that are a combination of these
approaches. Also, the components of programs can be
identified as being compliance-based versus values-based.
• The components of an ethics program are either compliancebased, following rules and requiring conformance, or valuesbased, emphasizing values as a way to influence behaviour. In
most corporations today, a combination of these approaches is
used and referred to as integrity management.
Summary, cont.
• There are several explanations for why ethical
leadership and programs fail despite the best efforts
and intentions of the corporation and its managers.
An ethical corporate culture is necessary for ethics
programs to be successful.
Discussion Questions
• Located under Discussions on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 3 – Ethics of Business: The Theoretical Basis
Preparation
Required Reading
• Sexty (5e)
▫ Chapter 5, Ethics of Business: The Theoretical Basis , pp. 7694
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 18 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 20
Introducing the Ethics of Business
• Business ethics → rules, standards, codes, or
principles that provide guidelines for morally right
behaviour and truthfulness in specific situations
▫ Means different things to different managers
Levels of Ethical Assessment
Assessment of Ethical
Implications in Business Decisions
• Value judgments → subjective evaluations of what is
considered important
▫ Based on how managers intuitively feel about the
goodness or rightness of various goals
• Moral standards → the means by which individuals
judge their actions and the actions of others
▫ Based upon accepted behaviour in society
Influences on Ethical Behaviour
• Influences become bases for an individual’s value
judgments and moral standards that determine
behaviour
▫ Five categories:
1.
2.
3.
4.
5.
Influences of Individuals
Corporate or Organizational Influences
Economic Efficiency Influences
Government and Legal System Influences
Social Influences
8
Influences on Ethical Behaviour
Influences become the bases for an individual’s value
judgments and moral standards that determine
behaviour
1. Influences on Individuals - Family, home, religion, education
2. Corporate or Organizational Influences - Superiors, colleagues,
corporate mission statements, codes of conduct, business /
industry organizations like the Better Business Bureau (BBB),
professional organizations for professions like lawyers, dentists,
engineers, doctors have ethical codes that govern their
behaviour
9
Influences on Ethical Behaviour, cont.
3. Economic Efficiency Influences - Corporation’s success = social
betterment; enhanced public good; not cutting corners and
producing sub-standard products
4. Government and Legal System Influences - Enacts legislation
and regulations, i.e., a code of laws, i.e., Competition Act, i.e.,
sharing of information to the public; government regulation
5. Societal Influences - Dominant culture, political views,
economic status, role of NGOs (non-governmental
organizations) and their advocacy efforts
10
Influences on Ethical Behaviour, cont.
Ethical Relativism
• Belief that ethical answers depend on the situation and there are no
universal standards or rules to guide or evaluate morality
• Ethics are relative and people set their own standards for judging their
behaviour
• It’s lazy; lacks rigour; contradicts everyday behaviour where individuals seek
differing views and opinions
Cultural relativism
• Where various societies have different customs and belief systems
• What is considered morally appropriate in one society may not be so in
another
• Outsiders should be careful about condemning behaviours within a society
Distinguishing among Values, Morals, and Ethics
The Theoretical Basis for Ethical
Conduct
• Moral problems should be defined as resulting in
harms to some and benefits to others
▫ Introduces more realism in the business context
• Seven most cited principles of ethical analysis: selfinterest, personal virtues, caring, utilitarian benefits,
universal rules, individual rights, and justice
▫ Ethical principles are applied the same way in any
context → not subjective measures rather objective
statements
Self-Interest Ethic (Ethical Egoism)
• Individuals or corporations set their own standards for judging
the ethical implications of their actions
▫ Individual’s values and standards are the basis for actions
• Problems with self-interest ethic:
▫ Considered easy way out because person relies on own beliefs without
more complicated analysis
▫ Viewed as selfish behaviour
▫ Leads to absolutism; failing to take into consideration interest of others
Self-Interest Ethic (Ethical Egoism),
cont.
• It is acceptable for an individual to be appropriately selfconcerned as long as interests of others are considered
▫ Enlightened egoist – attentive to needs of others, and selfinterest provides an incentive to restrain one’s self-interest
• Maximization of profits is acceptable as long as interests of
relevant stakeholders are considered
▫ Corporation must stay within rules of operation provided in society
through government
Personal Virtues Ethic
• An individual’s or corporation’s behaviour is based upon being
a good person or corporate citizen
▫ Emphasizes traits (virtues) such as courage, honesty, wisdom,
temperance, and generosity
▫ People should act in ways to convey honour, pride and self-worth
▫ Virtues are acquired through learning and practice, and will become
habits
• “Does this action represent the kind of person I am or want to
be, or present the desired corporate image or reputation?”
Ethics of Caring
• Gives attention to specific individuals or stakeholders harmed
or disadvantaged and their particular circumstances
▫ Responsibility for reducing harm or suffering of others
▫ Solutions designed to respond to needs of particular individuals or
stakeholders
• Managers and corporations should act toward others in a way
they would expect others to act toward them
▫ Golden rule: “Do unto others as you would have them do unto you”
Ethics of Caring, cont.
• Advantages:
▫ Responsive to immediate suffering or harm
▫ It allows for flexibility, enabling the manager to respond quickly to
changing circumstances
▫ Precedents are not a concern
• Problems:
▫ Lose sight of the bigger picture thus unintentionally harming some other
stakeholder
▫ Caring actions rely on subjective criteria that limit understanding of all
the factors involved
Utilitarian Ethic
• Focuses on the distribution of benefits and harms to all
stakeholders with the view to maximizing benefits
▫ “The greatest good for the greatest number.”
• Problems:
▫ Does not account for what is just
▫ What should be maximized to result in community’s happiness?
▫ Cannot accurately measure some costs and benefits (and/or risk of
miscalculating them)
▫ No method for distributing costs or benefits
Universal Rules Ethic
• Ensures that managers or corporations have the
same moral obligations in morally similar situations
▫ “What individuals believe is right for themselves, they
should believe is right for all others”
▫ Persons should be treated as end in themselves, worthy of
dignity and respect and never as a means to one’s own ends
▫ Categorical imperative ethics → rules and morals in society
should be fair to everyone, they should universally apply and
apply over time
Universal Rules Ethic, cont.
• Problems:
▫ Difficult to determine if someone is being used merely
as a means to an end
▫ Not possible to always work to universal rules i.e.,
exceptions exist
▫ No scale between actions that are considered morally
right or wrong
Individual Rights Ethic
• Relies on a list of agreed-upon rights for everyone that will be
upheld by everyone and that becomes the basis for deciding
what is right, just, or fair
▫ Examples: Rights to safety, information, privacy, property
▫ Governments identify rights in constitutions
• Problems:
▫ Determining and agreeing upon the list of rights
▫ Rights and/or holders of those rights can be in conflict
▫ Rights are not absolute and overemphasis on one might result in
injustice
Ethic of Justice
• Considers that moral decisions are based on the primacy of a single value: justice
which will result in fair outcome - Ethical dilemmas are a conflict among rights that
can be resolved by the impartial application of some general principle
• Different types of justice:
• Procedural
• Impartial application of rules or procedures
• Free from Bias
• Based on accurate Information
• Compensatory
• Stakeholders are compensated appropriately for wrongs that are suffered
• Retributive justice
• Punishment should fit the crime; controlled by the criminal justice system
• Distributive justice
Concern for how all stakeholders are treated; outcomes
Ethic of Justice, cont.
• Advantages:
▫ Looks at dilemmas logically and impartially
▫ All are perceived to have an equal right to equitable treatment
• Problems:
▫ Difficult to decide, outside of the law, who has the moral authority to
reward or punish whom
▫ Ensuring benefits distributed fairly is challenging
▫ Interests of particular stakeholders may be overlooked
▫ Perceived as being impersonal, inflexible, cold and uncaring
Ethical Dilemmas
• Situation or problem where a person has to make a difficult
choice between two alternatives, neither of which resolves an
issue or problem in an ethically acceptable fashion
• Approach to handling:
▫ Identify the ethical principles involved
▫ Review or analyze the problem using one of the ethical principles
outlined above
▫ Examine the problem from an ethical perspective different from the
one(s) used initially
Moral Reasoning
• Systematic approach to thinking or reasoning through the
implications of a moral problem or issue
• Steps to moral reasoning:
▫
▫
▫
▫
▫
▫
▫
▫
Define moral issue or decision
Gather all relevant information
Identify the stakeholders involved
Develop possible alternative solutions
Consider applicable value judgments, moral standards, principles
Identify harms/benefits to stakeholders
Determine practical constraints
Decide on action
26
The Case of the iPhone 11
• Applying the Moral Reasoning Process for ethics, what
would you do with an iPhone 11?
27
The Case of the iPhone 11
• Imagine that you are the first person to arrive to
MGMT 3480. As you sit down at your desk you notice
an iPhone 11 on the floor underneath your seat. You
pick it up. It works. It has some of your favourite
music listed. You look around. No one else has arrived.
No one will know if you decide to keep it. You push
the phone under your backpack and realize you have
some time to think about what to do.
28
iPhone 11 Case Analysis
1. Define moral issue or decision / determine the facts
▫
▫
▫
You are alone in the room
The iPhone is working
iPhones are expensive
2. Gather all relevant information / Identify the Ethical Issues
Involved
▫
Cost and understanding of private property make it clear there are
issues of rights, utility, fairness, honesty, breaking of rules, and personal
integrity, others?? Privacy?
3. Identify the stakeholders involved and their viewpoints
▫
True owner, yourself, SMU stakeholders (instructor, classmates,
administration, students, alumni), family, friends
29
iPhone 11 Case Analysis
4.
Develop / consider possible alternative solutions
▫
▫
▫
5.
#1 – Keep iPhone and not say anything
#2 – Turn iPhone over to security
#3 – Keep iPhone but make sincere efforts to locate the owner; other ideas
with moral imagination??
Consider applicable value judgments, moral standards, ethical principles
▫
6.
You tell me
Impact of Alternatives on Stakeholders
▫
▫
▫
#1 – Unfair to true owner; damage to your personal integrity (internal conflict; potential
to become public)
Potentially better outcome for true owner; no negative impact on your personal integrity
#3 – depends (e.g., what if student was visiting for the day and would only check through
security)
30
iPhone 11 Case Analysis
7. Determine practical constraints
▫
You tell me
8. Decide on action
▫
Could look elsewhere for help - Talk to friends, parents, teachers, boss,
etc.
Look at codes of conduct - What values does SMU promote?
▫
▫
Integrity, Respect, Intellectual Curiosity, Responsibility & Accountability and
Excellence Through Continuous Improvement
Ultimately, need to choose one alternative
9. Monitor Outcomes
Kohlberg’s Stages of Moral
Development
• Individuals have identifiable cognitive skill levels that
they use in resolving moral dilemmas
▫ Developed over time as result of educational experience
and the socialization process in maturing from childhood
to adulthood
▫ Six stages of moral development divided into three
levels:
LEVEL I: Pre-Conventional Level (Self)
LEVEL II: Conventional Level (Others)
LEVEL III: Post-conventional Level (Humankind)
Kohlberg’s Stages of Moral
Development, cont.
• LEVEL I: Pre-conventional (Self)
▫ Stage 1 – Punishment and obedience orientation
Authority is exercised & fear used as an influencer
▫ Stage 2 – Individual instrumental purpose/ exchange
“what is in it for me”
Kohlberg’s Stages of Moral
Development, cont.
• LEVEL II: Conventional Level (Others)
▫ Stage 3 – Mutual interpersonal expectations
Individuals are concerned with being a good person
▫ Stage 4 – Law and order orientation
What is right is determined by a sense of duty to society
• LEVEL III: Post-Conventional Level (Humankind)
▫ Stage 5 – Social contract orientation
Societal standards apply that are established through consensus
▫ Stage 6 – Universal ethical principles orientation
Decisions are based upon one’s conscience
Ethics in Business: Some Challenges
• Too simplistic approaches:
▫ Indicating “just do the right thing” is not satisfactory
• Myths:
▫ It’s easy to be ethical
▫ Unethical behaviour in business is simply result of “bad apples”
▫ People are less ethical than they used to be
• Lack of awareness:
▫ Most people believe that they behave ethically towards others, but selfperception often falls short
▫ Four biases: prejudice, favouritism, overclaiming credit and conflict of
interest
Summary
• An extensive examination of ethical behaviour has occurred
not only as it relates to business and the corporation but also
as it impacts the various interrelationships among business,
society, and stakeholders
• The preferred phrase ethics of business is defined as the rules,
standards, codes, or principles that provide guidance for
morally appropriate behaviour in managerial decision making
relating to the operation of the corporation and business’s
relationship with society
Summary, cont.
• The three levels of assessing ethical assessment are:
1. Awareness of moral or ethical implications
2. Ethical implications assessed upon individual,
organizational, economic efficiency, governmental,
and societal influences, described as value judgments
and moral standards
3. Implications assessed upon use of ethical principles
Summary, cont.
• The multitude of influences on ethical behaviour range from
educational and religious backgrounds to professional
organizations and governments. These influences lead to
ethical relativism, the belief that ethical answers depend on
the situation and that no universal standards or rules guide or
evaluate morality
• Seven theoretical bases, or ethics, for understanding ethical
conduct are described: self-interest, personal virtues, caring,
utilitarian benefits, universal rules, individual rights, and justice
Summary, cont.
• Kohlberg’s theory of the stages of moral development is outlined in regard
to its application to the ethics of business. The pre-conventional,
conventional, and post-conventional levels and the six stages illustrate the
attitude that managers may have toward assessing the implications of
ethics in the business environment
• The consideration of the ethical implications of the responsibilities of
business is prevalent in what corporations do. The theoretical basis for
ethics has been outlined and sets the stage for further examination. But,
there are several challenges to ethical behaviour in corporations
Discussion Questions
• Located under Discussions on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 2 – Civil Society Stakeholders
Preparation
Required Reading
▫ Sexty (5e):
Chapter 13, Civil Society Stakeholders, pp. 240-258
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 11 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 13
4
Civil Society: Definition
• Civil society comprises the voluntary, community, and
social organizations or institutions that contribute to
the functioning of society but are not related to or
supported by government
• E.g.; non-governmental organizations (NGOs), the media,
community-based organizations, civic clubs, trade unions,
charities, social and sports clubs, cooperatives,
environmental groups, professional associations, etc.
5
Non-Governmental Organizations
(NGOs)
• Any group that holds shared values or attitudes
about an issue confronting society and advocates
for changes relating to the issue
▫
Well-known example: Mothers Against Drunk Driving
(MADD) – fighting against impaired driving / raising
awareness / providing support services
• Part of the private sector, not part of government
• Not new to society
• Usually, but not always, non-profit
6
NGO Societal Issues Most Relevant to
Business
➢
➢
➢
➢
➢
➢
Animal welfare versus rights
Technology
Economic: Often opposed to capitalism
Social Development: Gap between rich and poor
Workers’ / human rights: Working conditions
Environment: One of the most common causes of
NGO activity
➢ Religious activism: Very prevalent in the U.S.
NGO Tactics
• Pressure on governments to
change policies
• Damaging publicity
• Disrupt annual meetings
• Develop shareholder social
policy resolutions
• Damaging physical property
• Picket managers’ homes
• Sponsor demonstrations or
picket corporate locations
• Organize boycotts
• Launch letter-writing campaigns
• Initiate legal proceedings
• Non-violent use of the Internet
(i.e., ‘hacktivism’)
• Develop anti-business websites
• Support anti-business
documentaries
• Provide support for alternative
sources of goods and services
The Case for and Against NGOs
• Corporations should not dismiss NGOs:
▫
▫
▫
▫
▫
▫
▫
Members very dedicated to cause
Allows wider cross-section of society to influence
Generate ideas, knowledge and solutions
Disseminate information on issues
Pressure for results
Agents for change
Confer legitimacy when governments cannot act alone
9
The Case for NGOs: Benefits from
Partnership
✓ Identifying opportunities and risks
✓ Influence on public opinion
✓ Innovation possibilities
✓ Reputation and trust by the public
✓ Expertise on specific issues
✓ Employee engagement
10
Strategies for Relationships with NGOs
• Proactively engage NGO & expect to interact with
them
• Do not underestimate NGO’s influence
• Reversing a decision from a project shouldn’t be
viewed as a defeat
• Sometimes selective concessions are sufficient to
address opposition
• Sometimes better to deal with “realist” NGO, not
radical ones
• A pre-emptive strategy may be feasible
11
Partnership Relationships with NGOs
• Four key ingredients to a successful
partnership:
1.
2.
3.
4.
Corporate and NGO leaders must show leadership
The corporation must be open to change
Must be a commitment to being committed
Partners must have a shared goal
The Media Stakeholder
• Can influence the views held by the public about
business
• Most media operations are owned by private-sector
enterprises
▫ Advertising is a main source of revenue
• Divided into two categories:
▫ Traditional media – mainly print and broadcast
▫ Social media
The Influence of Traditional Media
• Composed of written and broadcast approaches including
newspapers, periodicals, books, television, film
documentaries, movies, and Internet websites
▫ Portray business operations and its relationship to society
• Coverage of business increasingly dominated by live TV
▫ Example: CBC-TV’s Marketplace
• Nature of regulation important:
▫ Print media content is self-regulated by editors and reviewers
▫ Canadian Radio-television and Telecommunications commission (CRTC)
regulates broadcasting and telecommunications
14
The Media Stakeholder
• Dealing with the media is part of a managers’
responsibilities
• Media is important in earning and keeping public
trust and acceptance
• Legitimacy of business is dependent upon public’s
knowledge of events and issues
• Information spread through newspapers, periodicals,
radio, television, and social media (i.e., online
technologies; instant analysis and commentary)
15
The Influence of Popular Media
• Operations of business and its relationship to society
• Documentaries:
▫
Super Size Me, Roger & Me, Wal-mart: the High Cost of Low Price, Capitalism: A Love Story
• Movies:
▫
▫
▫
▫
▫
▫
▫
Wall Street
Erin Brockovich
A Civil Action
The Constant Gardener
Blood Diamond
In Good Company
Up in the Air
• Focus is on the ethics of business and CSR
The Interaction Between Business and
the Media
Business complaints:
• Reporters not sufficiently
knowledgeable
• Only interested in “bad” news
• Inherent bias
• Do not respect “off-therecord” comments
Media complaints:
• Businesspeople dishonest
• Use excuse that they are
only accountable to
shareholders
• Overreact to reporting
process
Issues in the Business and Media
Relationship
• Managers sometimes attempt to manage relationship with
media to suite their purposes
▫ Example: press releases
▫ Libel chill → a business threatens legal action if a particular article or
book is published
▫ Media spin → corporations have access to services of public relations
experts who are able to put a particular “spin,” or interpretation, on
corporate events or information
• Does fairness and bias in media make a difference?
▫ Media is pervasive element in society and appears to be an important
influence on performance of modern companies
Media Ownership & Centralization
• Business enterprises now own and operate major media
outlets
• Related issues:
1.
2.
3.
4.
Newspaper monopolies held in cities by large corporations
Interlocking ownership between print and broadcasting media
Licensing process in broadcasting where some corporations are
allegedly favoured over others
Operation of newspaper chains that are concerned more with
financial performance than professional journalism
• Issue of centralization of media → concern that there may be
too few voices in media
19
The Media and CSR
• Ethical, social, and environmental responsibilities of
business of increasing interest to public
• This has led to increased coverage of ethics in
business and CSR in the media
• Corporations owning media have also recognized
importance of CSR or sustainability
The Challenges of Social Media
• Social media → online technologies and practices that people
use to share opinions, insights, experiences, and perspectives
▫ Allow business and society stakeholders to share opinions, insights,
experiences, and perspectives through networking platforms
▫ Exchanges of information are instant, often interactive and cover all
topics, and require minimum knowledge of technology
▫ Costs to participants are low or even non-existent, allowing large
numbers to publish and receive information
▫ Can build, or destroy, a corporation’s reputation
The Challenges of Social Media, cont.
• Issues exist in HR:
▫ Time employees should spend on social media during work hours
▫ Action to take when employees make negative comments about
corporation
▫ Scanning social media for information when evaluating potential
employees for positions
• Issues in marketing and advertising practices:
▫ Corporations may distort endorsements by misrepresenting
credentials, affiliations, and expertise or by placing fake stories
▫ Marketers may inappropriately collect data on consumers
Social Media Issues and Ethics
• Involvement in social media should be guided by virtues such
as honesty, trust, openness, respect, and fairness
• Challenges:
▫ Rights of privacy for consumers and employees
▫ Ascertaining which information should be banned (freedom of speech
vs. censorship)
▫ Collection of data without paying, and its manipulation for profit
• Need to regulate social media has arisen
▫ Mostly regulated by industry
▫ Increased demands for government intervention
23
Policy Development Institutions (Think
Tanks)
• An organization that researches and analyzes various important social,
economic, and political issues confronting business and society
• Intended to be a neutral and independent, however, ideological views are
claimed
• Funded by government, corporations, trade unions, wealthy individuals,
universities
• Examples
➢ C.D. Howe Institute
➢ Conference Board of Canada (supports an agenda that improves Canada’s economic
performance)
➢ Fraser Institute
➢ Canadian Centre for Policy Alternatives (Social Policy)
➢ The David Suzuki Foundation (the Environment)
➢ The Pembina Institute (Social Policy)
➢ Canada West Foundation (western Canadian & regional interests)
24
Religious Institutions
Influence of religion on business:
1. The impact on managerial decision making, e.g., Impact on
what is ethical and what is unethical
2. The existence of businesses supplying religious goods and
services
3. Spirituality in the workplace, e.g., Individual’s sense of peace
and purpose
4. Corporate response to religious activism, e.g., When should
companies take positions on social issues?
25
Educational Institutions
• Business now involved in the educational system from
kindergarten to university
• Is this involvement controversial?
• Two distinct approaches:
1. Mutually beneficial partnership → As government financial supports
drops, businesses step in Sponsoring a sports team
2. Educational institutions should be unencumbered from corporate
influence → “Market-Driven” Learning; losing control of what is taught
• Educational institutions are addressing environmental issues
through a variety of initiatives including supply management
sustainability.
Discussion Questions
• Located under Week 2 on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 2 - Identifying Stakeholders and Issues
Preparation
Required Reading
▫ Sexty (5e):
Chapter 3, Identifying Stakeholders and Issues, pp. 39-57
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 11 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 13
4
The Stakeholder Concept and Business
• Business in Canada operates in a pluralistic social system where a variety
of groups and institutions use power or influence to represent the interests
of particular groups of citizens
▫ A Pluralistic Social System is one influence or power is decentralized by
dispersing it among a variety of institutions
▫ No one institution is completely independent of others; but, each institution
does possess some autonomy to pursue its own interests
• This protects society from the dominance of one group or one institution
• Business is subject to the influence of other institutions and must respond
to the various participants in society
• These participants are referred to as stakeholders
5
The Stakeholder Concept and Business
Stakeholders:
•
An individual, or group, who can influence and/or is influenced by the
achievement of an organization’s purpose
Stakeholder connotes Legitimacy!
“…to manage effectively, then you must take your stakeholders into
account in a systematic fashion.”
All stakeholders have expectations
•
•
•
▫
•
You’re all stakeholders of SMU; what are your expectations?
Relationship with business is a two-way street
▫ Corporations must understand how activities influence stakeholders
▫ Stakeholders must consider their responsibilities to the corporation
6
Identifying Stakeholders
✓ Owners
✓ Directors
✓ Elected by shareholders to represent their interests; comprise a board that meets to
decide on issues confronting the corporation
✓ Determine the strategic direction of a firm / business; hire or fire top executives
✓ Employees
✓
✓
✓
✓
✓
✓
Blue-collar vs. white collar
Professional groups (engineers, lawyers, and accountants)
Part-time vs. full-time
Unions
Retired employees (pension plans; Sears)
Obvious, and most important stakeholder
✓ Customers or Consumers
✓ You and I
✓ How are important are we? Are we taken for granted? How can we influence corporations to offer
‘ethical’ goods and services?
7
Identifying Stakeholders
✓ Lenders and Creditors
✓ Banks
✓ Suppliers
✓ Provide the raw materials, component parts, or finished materials used in the manufacture
of the corporation’s goods and services
✓ Service Professionals
✓ Lawyers / accountants / engineers; fee for service basis
✓ Dealers (autos), Distributors, and Franchisees
✓ Can include wholesalers as well
✓ Business Organizations
✓ Council of Chief Executives, Chambers of Commerce, Canadian Federation of Independent
Business (CFIB), Canadian Manufacturers & Exporters (CM&E)
✓ Competitors
✓ Domestic and foreign
✓ See current trade spats initiated by the Trump Administration
8
Identifying Stakeholders
✓ Joint-Venture Participants
✓ Alliances, consortia, networks and partnerships
✓ Non-Governmental Organizations (NGOs)
✓ Any group outside of the public and private sectors that holds shared values or attitudes
about an issue confronting society
✓ Not-for-profit; volunteers and networks
✓ E.g., environmental, community-based
✓ Society at Large
✓ The general public, e.g., communities where businesses are located
✓ Educational Institutions
✓ Saint Mary’s Dalhousie, etc.
✓ How does business rely on this stakeholder? How are you a stakeholder?
✓ Employees, research, educate society
✓ Religious Groups
✓ Church leaders tend to voice their opinions about business issues, e.g., Sunday shopping
9
Identifying Stakeholders
✓ Charities
✓ The United Way
✓ Service, Fraternal, Cultural, and Ethnic Associations
✓ Rotary Clubs, The Knights of Columbus, etc.
✓ Provide a source of business contacts
✓ The Media
✓ Print, radio and television
✓ Can have a significant impact on a corporation's sales
✓ Government
✓ Businesses must consider the impact of politicians, public servants, regulatory agencies
(Canadian Radio-television and Telecommunications Commission (CRTC)), Utility Boards
(Nova Scotia Utility and Review Board (UARB)), political parties (rely on business financial
support), judiciary, Crown Corporations (compete in the marketplace against businesses
in Canada)
10
The Dynamics of Stakeholders’ Influence
1. Why are stakeholders important to a firm?
2. What can happen to the firm if managers do not properly
identify and satisfy the interests of their firm’s stakeholders?
3. Why is it important to categorize stakeholders?
4. Do stakeholders have differing goals and power / influence
over time?
Categorizing Stakeholders
• Frederick, Davis and Post:
▫ Primary interactions → with employees (unions),
shareholders, creditors, suppliers, customers,
competitors, wholesalers or retailers
▫ Secondary interactions → with local communities,
governments, social activist groups, media, business
support groups and the general public
• Difficult to ascertain who should be on each list
Categorizing Stakeholders
• Mintzberg:
▫ Stakeholders are categorized as being external vs. internal to the
organization
▫ Helps conceptualize power in and around organizations
• Phillips:
▫ Normative stakeholders → those to whom organization has an
obligation and from whom corporation accepts benefits
▫ Derivative stakeholders → those from whom corporation has not
accepted benefits, but they hold power over corporation
13
Managers’ Responsibilities
1. Identify stakeholders and their influence
2. Understand how a corporation currently views
stakeholders
3. Examine how each stakeholder will or might
influence firm
4. Assess opportunities and threats
5. Rank stakeholders by influence
6. Prepare programs or policies detailing how to cope
with stakeholders
The Manager:
A Special Stakeholder Cont’d…
• High CEO compensation raises ethical implications
• Changing executive compensation:
▫ “Pay for performance” result in executives receiving
large cash salaries + stock and equity-linked incentives
▫ Executives focus on shareholders (vs. other
stakeholders)
▫ Contributes to income inequity
• Sustainable pay → tying executive compensation to
environmental, social, and governance performance targets
15
Arguments Against the Stakeholder
Concept
1. Problems of categorization, e.g., how to identify and
prioritize stakeholders
2. Challenges in meeting expectations of all stakeholders, e.g.,
tradeoffs among the stakeholders / can everyone benefit?
3. Dilution of top management focus, e.g., away from financial
/ measurable performance
4. Impracticality of shared governance / does not
accommodate shared governance e.g., focus still on one set
of stakeholders, the shareholders!
16
Arguments For the Stakeholder
Concept
1. Simply good business as you don’t want a miffed
stakeholder adversely impacting the bottom line
2. Ignoring stakeholder interests can have substantial
economic consequences, e.g., employees,
customers, lenders, etc.
3. Provides more systematic approach to recognizing
stakeholder expectations and deciding how to
respond
Issues Relating to Ethics,
Responsibilities, and Sustainability
• Issue → point in question where different views are held of
what is or what ought to be corporate performance-based
management or stakeholder expectations
• Wartrick and Mahon expand:
a.
b.
c.
d.
Controversial inconsistency based on expectation gaps
Involving management perceptions of changing legitimacy
Occur with or between views of what is and/or what ought to be
corporate performance
Imply an actual or anticipated resolution that creates significant
impact on organization
Purpose of Issues Management
• Issues management → systemic process by which the
corporation can identify, evaluate, and respond to economic,
social, and environmental issues that may impact significantly
upon it
• Purpose:
▫ Minimize surprises relating to events or trends in society by serving as
an early warning system
▫ Prompts managers to be more systematic in coping with issues and
stakeholder concerns
▫ Mechanism for coordinating and integrating management of issues
Benefits of Issues Management
• Corporations more likely to maintain competitive
advantage
• Behaviour more consistent with societal
expectations
• Less likely to make a serious social or ethical mistake
• Detect issues earlier and develop appropriate
responses
• Reduces vulnerability and enhances credibility
Crises Management
• Crisis → turning point, a crucial time, and a situation
that has reached a critical point
• Fink’s “anatomy of a crisis”:
▫ Crisis is an unstable time but outcome may not be bad
▫ Crisis management → approach involving planning
and removing much of the risk and uncertainty,
allowing the corporation to achieve more control over
events
Crises Management, cont.
• Corporations will experience crises
▫ Important to be prepared
▫ Proactively invest in approaches to deal
• Includes a discussion on communications
▫
▫
▫
▫
▫
All key stakeholders must be identified and contacted
Transparency is stressed
Key ingredient is honesty
Disclose facts and show empathy for any stakeholders harmed
Apologize when necessary
Discussion Questions
• Located under Week 2 on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 1 – Ethics and Capitalism
Preparation
Required Reading
• Sexty (5e)
▫ Chapter 2, Ethics and Capitalism, pp. 20-38
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 4 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 6
4
Introduction to the Fundamentals of
Capitalism
• Canadian economic system largely composed of
business enterprises operating in a market system
• Theory of capitalism examines eight elements:
1.
2.
3.
4.
5.
6.
7.
8.
Right of Private Property
Equality of Opportunity
Competition
Individualism and Economic Freedom
Profits
Work Ethic
Consumer Sovereignty
Role of Government
5
1. Right of Private Property
• The legal right to own and use economic goods—for example, land and
buildings
▫
Provides a sense of security; sense of destiny; pride; develop a respect for the
property of others; sense of satisfaction
• Ethical Implications:
▫
▫
▫
Uneven distribution of wealth → demands for more equitable distribution by
government action, i.e., taxation
Infringement of copyright rights; intellectual property; patents; trademarks
HAVE ANY OF YOU VIOLATED INTELLECTUAL PROPERTY RIGHTS IN THE PAST
WEEK?
• Membership rights (e.g., labour unions) are sometimes preferred over
individual rights; having property in private hands vs. by gov’t or some form
of collective (gov’ts and aboriginal peoples)
6
2. Individualism & Economic Freedom
• Individualism: The view that the individual, and not society or a collective, is
the paramount decision maker in society; assumes that the individual is
inherently decent and rational; behaves in their own self-interest with little
authority being exercised over them
• Linked to freedom
▫
Economic freedoms: Exist when the business system operates with few
restrictions on its activities; the list here is endless
• Ethical Implications:
▫
▫
Desirability of individual versus collective (Unions / cooperatives) action
Desirability of individual vs. collective action, and the extent to which economic
freedoms should exist
7
3. Equality of Opportunity
• The assumption that all individuals or groups have an even
chance at responding to some condition in society
▫ An ‘Equal’ chance to succeed
• Ethical Implications:
▫ Difficult to achieve in a capitalistic system
▫ Why?
• Wealth created not distributed equally
• Move towards social, educational and culturally leveling →
Equality of Results
• Inequities such as layoffs, drops in living standards, excessively
high executive salaries
8
4. Competition
• The condition in a market system in which many rival sellers seek to provide
goods and services to many buyers
• It’s natural /desirable; Invisible hand that is responsible for the orderly
operation of the market
• Goods and services are provided at lower costs, reduces waste /
inefficiency, holds profit to a minimum, widens the choice of goods and
services available to consumers and regulates prices
• Ethical Implications:
▫ Oligopolies (few sellers in industry) or even monopolies (one seller) can
be created
▫ More difficult for some firms to enter certain industries (plant size to
achieve economies of scale)
▫ Firms might engage in anti-competitive activity
9
5. Profits
• The excess of revenues over expenses; closely associated with
competition; measure of effectiveness; they can be used as
businesses wish
• Ethical Implications:
▫
▫
▫
Profits sometimes viewed with disdain or as immoral
WHY?
How do you feel?
Are these profits reasonable at a time when consumers are paying high
service fees, etc.?
Should excessive profits be taxed by governments?
10
6. The Work Ethic
• A code of values, or a body of moral principles, claiming that
work is desirable, a natural activity, and good in and of itself
▫
‘Worthy’, ‘Admirable’, & “Personally & Socially Valuable”
• Ethical implications:
▫ Government programs and society’s expectations have influenced
individuals’ attitudes toward work
▫ Individuals now expect more from government and business enterprises
in terms of working conditions, benefits, and salaries
• Do all of you have a good work ethic?
▫ How so?
11
7. Consumer Sovereignty
• Consumers have and exercise power over producers through the
decisions they make in purchasing the goods and services
provided by corporations
• Consumers dictate the types, styles, and quality of goods and
services provided by business
• Ethical Implications:
▫
▫
▫
▫
▫
▫
Consumers not always aware of alternative products available
Consumers don’t always understand the technical complexities of many goods
and services
Issue of choice, or lack thereof
Consumers’ preferences are shaped by persuasive advertising
Too many products / brands, with too little difference
Producers have power to ignore consumer wishes
12
8. The Role of Government
• Laissez-faire approach (“leave us alone”) → minimal
involvement of government
• Ethical implications:
• Government now an influential stakeholder in business
• Governments restrict capital movements and natural
resource sales, impose product standards, prevent
businesses from shutting down plants
• Legislation governs treatment of employees
13
8. The Role of Government, cont.
• Ethical Implications, cont.:
▫ Influential stakeholder; greater involvement in the economy in Canada,
than the U.S.
▫ Government now extensively involved in the economy through:
Subsidies (see financial aid to U.S. farmers)
Taxation (Federal, provincial, property, HST, etc.)
Tariffs (see current trade spats the U.S. is having with Canada, China and the
EU)
Regulations (environmental, etc.)
Legislation (laws and bills)
Loans (government steps in to helps firms and businesses)
Grants (to cultural organizations)
Ownership (CBC, pipelines)
▫ Government can restrict capital movement, impose product standards,
prevent businesses from shutting down plants
Canadian and Other Forms of
Capitalism
• Capitalism → economic system that allows for
private ownership of the means of production (land,
labour, and capital)
• Assumes economic decision making is in hands of
individuals or enterprises that make decisions expecting
to earn a profit
• Canada does not have pure free-enterprise system
• Different forms of capitalism exist throughout world
Common Forms of Capitalism
•
Consumer capitalism → government involvement is limited,
open borders and profit mentality exists (e.g. Canada, U.S.,
Britain and Australia)
Producer capitalism → emphasizes production, employment
and statist policies (e.g. France, Japan)
Social market economy → regulated capitalist market with generous
social welfare (e.g. Germany); input from labour
Family capitalism → extended clans dominate business
activities and control capital flows (e.g. Thailand, Indonesia &
Taiwan)
Common Forms of Capitalism, cont.
•
Frontier capitalism → fundamentals of business being
introduced; capitalism in its beginning stages (e.g. Russia,
China)
•
State capitalism → economic system in which
governments manipulate market outcomes for political
and social purposes
•
Does not result in most efficient use of resources
17
The Ethics of Capitalism
The Challenges
•
•
•
•
•
•
•
•
Greed – excessive and selfish form of self-interest where individuals desire
more of something than what is needed or fair
Economic downturns – economic cycles are a feature of capitalism, see
2008 collapse of financial institutions
Business failures – implications for government, employees and investors
Income and wealth inequality
Corporate crime and wrongdoing – harms the reputation of businesses
Stagnant incomes vs. increasing CEO salaries
Damage to the environment
Reliance on market system that seldom works perfectly
Capitalism as an Ethical System
• Pros for capitalism:
➢ System that produces wealth, promotes prosperity, and provides
greater human well-being than other economic systems
➢ Allows creative and productive forces to operate
➢ Cooperation is encouraged despite competitive market
➢ Respects freedoms, including right for individuals to pursue
happiness
• Assumption exists that moral individuals operate the
business system and that they are in the majority
• Strong system of moral behaviour and integrity is
necessary
Summary
•
•
•
Eight elements of Canadian capitalism: the right of private
property; equality of opportunity; competition; individualism
& economic freedom; profits; the work ethic; consumer
sovereignty; and the role of government
The right of private property facilitates the operation of
business, but some in society resent a few acquiring large
amounts
For capitalism to be acceptable to most, it must allow for
equality of opportunity to share in economic well-being even
though the results are not the same for everyone
Summary, cont.
•
To ensure that capitalism is regulated in the best interests of
stakeholders, competitive rivalry must exist. The difficulty is that even
in Canada’s form of capitalism competitive markets do not exist
•
Individualism encourages people to participate in a capitalistic system.
Some resent the focus on individuals and believe the economy should
be directed more by governments
•
In theory, when profits become too high in an industry, more
businesses are attracted. Due to market imperfections such as barriers
of entry, this sometimes does not occur
Summary, cont.
•
To ensure that capitalism is regulated in the best interests of
stakeholders, competitive rivalry must exist. The difficulty is that even
in Canada’s form of capitalism competitive markets do not exist
•
Individualism encourages people to participate in a capitalistic system.
Some resent the focus on individuals and believe the economy should
be directed more by governments
•
In theory, when profits become too high in an industry, more
businesses are attracted. Due to market imperfections such as barriers
of entry, this sometimes does not occur
Summary, cont.
•
The work ethic influences the ethics and responsibilities
of a corporation
•
The output of capitalism should be determined
consumer choice, however, this is restricted by various
business practices and some government regulations
•
Government role in a capitalistic system, should be only
to protect stakeholders unable to defend themselves and
to provide the infrastructure for the market system to
operate effectively
Summary, cont.
•
Capitalism exists in several forms and the way it functions
changes; however, is does operate most of the time with
moral standards
•
The ethics of capitalism involve several challenges, but an
argument can be made that it is a moral system
Discussion Questions
• Located under Discussions on Brightspace
Saint Mary’s University
Department of Management
MGMT 3480
Week 1 - The Relationship between Business and Society
Preparation
Required Reading
• Sexty (5e), chapter 1,The Relationship between
Business and Society, pp.1-19
Task
➢ Upload your Initial Posting (200-250 words) to the
Discussion Board on or before May 4 and your Response
Postings (at least three Response Postings; 100-150 words
each) on or before May 6
The Business and Society Relationship
• Emphasis on four elements about the Canadian
business system:
1. Increase awareness of system by describing Canadian
capitalism, stakeholders involved and society’s attitudes
2. Identify business’ response to its role in society
3. Learn how business corporations have responded to
many challenges in their environment
4. Address each of the above from perspective of manager
or owner to emphasize the dynamic nature of the
environment
The Business and Society
Relationship, cont.
• Shift occurring in what society believes business
responsibilities should be
• Corporations must consider the following:
▫ Meeting humanity’s needs without harming future generations
▫ Social responsibility and corporate sustainability reports should move
beyond being a PR exercise
▫ Demanding accountability beyond economics
▫ Responses to social, ethical and environmental responsibilities
constitute a valuable intangible asset
▫ Executives must have the skills and competencies to manage these
additional responsibilities successful
▫ Responses to these responsibilities will determine corporations that
survive
Integrity in Business
• Integrity → appropriateness of a corporation’s behavior and its
adherence to moral guidelines acceptable to society
▫ E.g. Honesty, fairness & justice
• Managing with integrity:
▫ Business leaders behave in a manner consistent with their own highest
values and norms of behavior
▫ Values are self-imposed but not arbitrary or self-serving
• Responsible corporation → business undertaking that
responds to social, ethical and environmental responsibilities
in addition to economic obligations
7
Key Terminology Relating to Integrity
in Business
Ethics of Business
• Rules, standards, codes, or principles that provide guidance for morally
appropriate behaviour in managerial decision-making relating to the
operation of the business enterprise’s and business’ relationship with
society
Stakeholder
• An individual or group who can influence and/or is influenced by the
achievement of an organization’s purpose
Corporate Social Responsibility (CSR)
• The way a corporation achieves a balance among its economic, social, and
environmental responsibilities in its operations so as to address stakeholder
expectations
8
Key Terminology Relating to Integrity
in Business, cont.
Corporate Sustainability (CS)
• Corporate activities demonstrating the inclusion of social and
environmental as well as economic responsibilities in business operations
as they impact all stakeholders to ensure the long-term survival of the
corporation
Triple Bottom Line
• The evaluation of a corporation's performance according to a summary of
the economic, social or ethical, and environmental value the corporation
adds or destroys
Corporate Citizenship
• A corporation demonstrating that it takes into account its role in and
complete impact on society and the environment as well as its economic
influence
Integrity of Business Students
• Post-secondary institutions, like Saint Mary’s, facing
increased demand to prepare graduates to identify
and address ethical implications in business
▫ Graduates need a moral compass and sensitivity to
integrity issues
▫ Business schools must become aware of and address
moral dilemmas both from a staff and student
perspective
Main Approaches to
Ethical Thinking
• Three dominant approaches to normative
theories of ethics:
1. Deontological (rule-based) ethics
2. Teleological or consequential theories
3. Virtue ethics
Deontological Ethics
• Actions are ethical if done for sake of what is good
without regard for consequences of the act
• Decisions based upon duty and adherence to
universal principles
▫ Rules Based Ethics
▫ Individuals have duty to do the right thing even if the
consequences of another action are preferable
• “Veil of ignorance” Test
Teleological Ethics
• Focuses on outcomes or results of actions
• Utilitarianism → individuals make decisions based on
consequences of an action
• If the consequences are good, then the action is right (either
morally permissible or obligatory); If the consequences are
bad, then the action is wrong (impermissible)
▫ Decisions should result in the greatest good for the
greatest number
Virtue Ethics
• An approach to ethics that emphasizes the
individual’s moral character (i.e., traits or virtues) and
focuses on being a good person
• Morality based on development of good character
traits (virtues)
▫ Assumes “good” person will act ethically
• Absolute rules unlikey to apply in all situations
• What virtues make a good businessperson or leader?
14
Business as an Economic System
• Economic system→ arrangement using land, labour, and
capital to produce, distribute, and exchange goods and
services to meet the needs and wants of people in society
• Key terminology:
▫
▫
▫
▫
Capitalism
Free enterprise / private enterprise system
Laissez-faire capitalism
Responsible enterprise system
• Capitalism provides most goods and services but public
(governments provides many services) and non-profit
(charities, cooperatives, & non-profit social enterprises)
sectors also involved
16
Business as an Economic System,
cont.
Capitalism
• An economic system based on private ownership of the means of
production; see Adam Smith
Free Enterprise System
• An economic system where few restrictions are placed on business
activities and ownership; a competitive market system / limited
government
Laissez-faire (“allow to do”) Capitalism
• An economic system in which transactions between private parties are free
from intrusive government (only provide essential services) restrictions,
tariffs, and subsidies; absolute minimum interference by government
The Corporation and the Business
System
• Canadian business system comprises:
▫ Sole proprietorships
▫ Partnerships
▫ Incorporated entities
• Any individual may operate business if:
▫ They are capable of entering into binding agreement
▫ Business activity is lawful
▫ Individual respects legal principles governing persons,
property and obligations
The Corporation and
the Business System, cont.
• Two doctrines of incorporation:
▫ Concession doctrine → incorporation was conferred by
public act and could not be made by private
agreements among several persons to associate
together for business purposes
▫ Freedom of association → association of individuals
coming together for some purpose is fundamental to
forming a corporation
• When a business incorporates, a separate legal entity
is created
Society’s Permission for Business
• Legitimacy → belief in the rightness of an institution,
in this case the appropriateness of our business
system to supply the goods and services wanted by
Canadian society
▫ To be legitimate, the business enterprise system must
respond to the changing values and expectations in
society
▫ Attitudes (criticisms) must be monitored
▫ Management should take actions to counter negative
views
Society’s Permission for Business,
cont.
• Social licence → privilege of operating in society with minimal
formalized restrictions, e.g., legislation, regulation, or market
requirements
▫ Based on maintaining public trust by doing what is acceptable to
stakeholders in the business and society relationship
▫ Must be earned and maintained—it is non-permanent because society’s
beliefs, perceptions, and opinions change
• To assess society’s permission, measure trust Canadians have
in business enterprise system
Attitudes Toward Business
• Factors influencing attitudes toward business:
▫
▫
▫
▫
▫
▫
▫
▫
▫
▫
▫
Standard of living
Decentralized decision making
Allocation of resources
Self-interest
Business cycle
Business wrongdoing
Globalization
Unemployment
Technological innovation
Media coverage
Government
22
Attitudes Toward Business, cont.
Standard of Living
• As living standards increase, it is more likely society will view business in a
positive manner
Decentralized Decision Making
• Independent decision-making amongst business ensures a wide variety of
goods and services are available; viewed favourably by consumers
Allocation of Resources
• Based on price and availability of resources
Self-interest
•
•
•
•
Key stimulus to the operation of the business system
Acts as a motivator; provides the drive for profit
Consumers have choice, and routinely exercise it
Can be hazardous as well and equal greed
23
Attitudes Toward Business, cont.
Business Cycle
•
Natural in a market system; see GDP // prosperity followed by recessions
can bring hardship
Business Wrongdoing
• Corporate misdeeds, e.g., bribery, insider trading, etc., workplace health
and safety issues
• Societal annoyance at 2008-09 corporate bailouts
▫
Watch Wizard of Lies on Crave
Globalization
• Business increasingly conducted on a global scale
• Comes with opportunities and challenges, e.g. job losses, working in other
countries
24
Attitudes Toward Business, cont.
Unemployment
•
•
Clearly associated with a country’s economic performance
Canada’s current unemployment rate 7.5% (directly the result of COVID19)
Technological Innovation
•
Constant change, and adapting to it
Media Coverage
•
•
Influence society’s views of business // some positive and some negative
Social Media is a dynamic influence on the relationship between business
& society
Government
• Mutually dependent relationship // this relationship is described
throughout MGMT 3480
The People Who Run Canadian
Business
• Owners
▫ Direct ownership (e.g., shareholders); or
▫ Indirect ownership (e.g., mutual fund holders)
• Boards of Directors
▫ Elected by shareholders
▫ Concerned with shareholder’s primary objective, return on investment
▫ Increasing focus on corporate social responsibility (CSR)
• Managers
▫ Hired by boards of directors & oversee operations
Integration of Business and Society
• Business and society need each other
▫ Must be a shared value in which both business and
society benefit
▫ Goal is to reduce friction between society and business
and to increase the benefits for both
• Social contract → set of two-way understandings that
characterizes the relationship between two major
institutions
• Integration is the focus of textbook
Summary
✓The relationship between business and society is complex. To
understand the relationship it is necessary to be
knowledgeable of the business system and of capitalism in
particular
✓Business integrity is the appropriateness of a corporation’s
behaviour and its adherence to moral guidelines acceptable to
society such as honesty, fairness, and justice
✓The three main approaches to ethical thinking are
deontological, teleological, and virtue ethics
Summary, cont.
✓ The Canadian business system is usually referred to as a form of capitalism.
The business system does have some defects, but is constantly changing to
reflect society’s demands
✓ Several forms of business enterprise exist; the most common is the
incorporated enterprise (the corporation). The modern corporation is
accountable not only to the government, but also to society in general
✓ Society allows business to function as a system to provide goods and
services. Two co...
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