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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