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Canadian Business and Society Ethics & Resposnbility Chapter1: The Relationship between Business and Society Integrity

in the Business In the business environment integrity refers to the appropriateness of a corporations behaviour and its adherence to moral guideline to society such as honesty, fairness, and justice When referring to business ethics is meant is the ethics that apply to business -Ethics apply to business in the same manner as they do in any other institution in society (example religious organization) There are no ethics unique to business it is ONLY THE ISSUES AND SETTINGS that are different Issues and decisions relating to the ethics of business and society are not judged as being ethical versus unethical or right versus wrong. Examined in terms of the ethical implications of addressing issues or decisions and the distributions of harms and benefits to the relevant stake holders -Integrity results in Responsible Corporation (business undertaking that responds to social, ethical, and environmental responsibilities in addition to its economic obligations) 1.3 The Canadian Business System The Canadian Business System produces, markets, distributes, and exchanges goods and services to satisfy societys needs and wants. Majority of goods and services demanded by Canadians are provided by a privatesector economic system Canadians feel it desirable to allow individual business persons and corporations rather than some centralized agency to provide the goods and services they require Economic System: An arrangement using land, labour, and capital to produce distribute and exchange goods and services to meet the needs and wants of people in society. Objective of an economic system is to meet the societys needs Capitalism: An economic system that allows private ownership of the means f production (land, labour, and capital) and assumes that economic decision making is in the hands of individuals or enterprises who make decisions expecting t earn profit Free Enterprise System: An economic system characterized by ownership of private property by individuals and enterprises; the profit move; a competitive market system; and a limited involvement by government (private enterprise system)

Laisszez-Faire Capitalism: industry to be free of state intervention, especially restrictions in the form of tariffs and government monopolies. The phrase is French and literally means "let do", though it broadly implies "let it be" or "leave it alone Responsible enterprise system: An economic System operating as a free enterprise system but incorporating the element of accountability. Implies that business enterprises are responsible to society for their actions and are answerable or accountable for being the cause agent or source for something Stakeholder Capitalism: An economic system in which corporations accept broader obligations beyond financial ones for shareholders Our Economic System has changed from a free system with limited government involvement to one where government involvement was more intensive during most of this time Economic System in Canada is based on fundamental of individualism and economic freedom (the right to property, the importance of competition and the profit move) Our system is not a Laissez Faire but a CAPITALIST SYSTEM. The principal advantage of this business system is that decentralizes decision making from a central authority to many individual enterprises. Also provides freedom of choice to workers, consumers, and entrepreneurs. As a result high production and has a high standard of living. ADAM SMITH: 1773- 1790 Scottish Philosopher/economist whose ideas had a major impact on capitalist economic systems. He proposed a different view of morality than was prevalent at the time One view was that moral principles could rationally identify right versus wrong while yhr other view believed that governments and the laws they created established a standard of morailiity. Smith believed that people were born with a moral sense, or conscience, that told them what was right or wrong Problems with the System: Businesses provided appalling working conditions for labour in the 19th century and has sold unsafe products to consumers Monopolistic behaviour has been evident in the operation of some business corporations as witnessed by price fixing and supplier discrimination Other Problems include: (stock manipulation, misleading advertising, misrepresentation of financial information etc) 1.4 Diversity of Business Interests Canadian business is not a monolith reacting in a uniform manner to societys demands or governments involvement

What is appropriate for lagers corporation are detrimental to the smaller ones. Corporations in some industries may seek government protection through tariffs, while corporations in other industries may be advocates of free trade.

Foreign Ownership and Influence: Nationalism resulted in restrictions on the extent and form of foreign business, however in recent years restrictions have been reduced. The objective of controlling foreign investment has been to encourage foreign business to behave as good corporate citizens Resource- based Economy: Canadian economy is substantially resource based Agriculture, energy production, mining al contribute to a large portion of business activity Canadian manufacturing sector SMALL compared to countries such as Germany The processing of natural resources dominates the manufacturing sector. As a result of the resource-based nature, CANADA has been characterized y single-industry towns. These communities rely on a single industry for their livelihood and are very vulnerable to changes in the world markets for the commodities produced, or to the fortunes and misfortunes of the business enterprises operating the local plant, Another consequence of dominance of resources is the existence of mega projects Importance of Trade Canada is a major trading nations. Trends toward freer trade among nations have created opportunities for business to increase commercial activity on a worldwide basis and have led to the operation of stateless or borderless corporations Canada operates in a global economy Outsourcing: occurs when Canadian company has goods produced in or services provided from a foreign country Influence of Small Business Small business has been a growth industry in Canada 97% are defined has being small or medium sized with fewer than 500 employees Small Business are also challenged by ethical implications of their operations Bigness in the Business System: Concentration refers to the degree to which the whole economy and instrues within it are dominated by a few large corporations. Small number of coproations controls a large portion of business activity. This concentration is evident in a few specific industries such as tobacco, gasoline retailing. Large corporations have dominated Canadian Business

Canadians are concerned about the POWER or influence of large corporations and are applying pressure on them to become more accountable to society Large= associated with undesirable corporate behavior

Government Presence: Has been a major influence on economic activity. NO manager or business owner can ignore the impact government has on the operation of their enterprise, or the need to influence the direction of government policies. Canadian governments played an increasing role in the economy and controlling business activity Has been a decline in government involvement allowing business to regulate its own behaviour THESE FACTORS influence the morality of business today. 1.5 The Corporation and The Business System Business enterprises vary from sole/singe proprietorships, to partnerships, to incorporated entities. Any individual may operate a business provided that there capable of entering into a binding agreement. That the business activity is lawful, and that the individual respects the general legal principles governing persons, property, and obligations The owners take all responsibly for success/failure, receive all profits and assume all loses, and can be held directly responsible for business wrongdoing Most business enterprises are incorporated and holding the owners/shareholders responsible Business incorporates a separate legal entity id created This Artificial Being is invisible, intangible, existing only in contemplation of law, and with limited liability of owners. Doctrines of Incorporations:

The People Who Can Run Canadian Business Three stakeholders are primarily responsible for the operation of Canadian Busess: owners/board of directors and mangers: Owners: Categorgized as direct/indirect Direct: are shareholders or investors and entrepreneurs Direct: Can be coorpations that own shares in other corporation, venture capitalists that finance growing by purchasing shares, and governments that use corporatons to deliver goods and services to CONSUMERS.

Indirect: IS THE GROWING FORM OF OWNERSHIP Indrect: occurs when consumers invest in mutual funds, or when employees contribute to pension plans. Through both types of ownership (direct/indirect), ownership possiblitees of most Canadians participate in the ownership of Business Board of Directors: Owners are represented by a board of directors, while according to section 97(1) of the Canadian Business Corporations Act: shall manage the business and affairs of a corporation referred to corporate governance Board is elected by shareholders (direct owners) Concerned with the shareholders primary objective, return on investment There MAIN tasks are: o Select, evaluate terminate employment of top management o Provide shareholders with financial statement and an external auditors report on the financial affairs of the corporation presented in annual corporate report o Direct/evaluate strategic planning including formulating plans, keeping management accountable for implementation and assessing performance o Represent shareholders by participating in any major decisions impacting the corporations operations relating to ownership, investments.. o Fulfill the fiduciary and legal requirements outlined in the Canadian Business Corporations Act Managers Managers must know how to direct the corporations affairs in an increasingly compettive environment and hw to cope with with large-scale change in their corporations Technological developments an the globalization og business made challenges Managing relationships with stakeholders has become increasingly himportant, and knowledge of the thics of business, and social and enviormental responsiblty is nesscary The operations of a business is about managing relationships with others and the development of trust and credibility with stakeholders is necessary Managers MUST have the ability to build and sustain relationships Managers are members of society and their behavior is likely to reflect the standards of morality existing in society. ALL 3 of these stakeholders (owners ,b.o.d., and mangers are aware of the ethics of business and the resulting implications This awareness includes monitoring societys attitudes toward business 1.7 Society Attitudes Toawrd Business: Factors Influencing Attitudes toward Business: Standard of Living: a prominent argument used n justifying or supporting the enterprise system is the standard of living that it provides Descentralized Decesion Making: Business system considered desirable is the decentralized decion-making process: Millions of bussineess make deesions indepentyl of one another, ensuring that a wide variety of goods and services are available Allocation of Resources:

Selft- Intrest Inequalties in Society Business Cycle Unemplyment Innovations The Influnce of Popular Media:

CHAPTER 2 The Right of Property The legal right to own and use economic goodsfor example, land and buildings Ethical implications: Allows indivbudls to control their desinty and not have decisions affecting them made by others Ethical Implications Uneven distribution of wealth Infringement of copyright rights Membership rights (e.g., labour unions) are sometimes preferred over individual rights Taxation is one method of resitrbuting wealth Desipre taxation, business retains advantages because corporations are allowed to cossolidate financial statements to average taxable income over several years, to depreciate fixed assets, and to receive tax concessions Intellectual Property: an umbrella term for patens, copyrights, trademarks, industrial designs, integrated circuit toopopgrahies and plan breeders rights Today membership rights such as those offered by labour unions etc, for a preferred basis for security and freedom 2.1 Individualism and 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. Invidualism linked to freedom and this has provived a connection between the business system in Canada and a democratic form of governemnt Economic freedoms: Exist when the business system operates with few restrictions on its activities. List of factors that are considerd when indtyifing economic freedom Prpoerty rights Taxation Governemnt Intervention Regulation International Exchange Foreign Investment Money and Inflation Wage and Price Controls Corruption Ethical Implications: Communitariansm is more important in society as individuals in society as in invidvuals seek to join and indetify with some type of community organzation

Status is achieved by working with others rather than by struggling alone. Unions and Cooperatives are examples Individualism and Economic freedom become less important than social well being, distribution of income, health and educations All business enterprises now require some form of licensing prior to commencing business and if an enterprise whishes to incorporate, it must be registered with the government 2.1 EQUALITY OF OPPURNITY The assumption that all individuals or groups have an even chance at responding to some condition in society. This type of environemtn was appropriate for business Ethical implications Difficult to achieve in capitalistic system Wealth created not distributed equally Inequities such as layoffs, drops in living standards, excessively high executive salaries 2.5 Competeion The condition in a market system in which many rival sellers seek to provide goods and services to many buyers Advantages are: ensures goods and services are provided at lowest costs, reduces waste and inefficieny and holds profit to a minum, widens the choice of goods and services avaible to consumers COMPETEION IS THE INVISBILE HAND that is responsible for the orderly operation of the market Ethical implications: Oligopolies (few sellers in industry) or even monopolies (one seller) can be created More difficult for some firms to enter certain industries Firms might engage in anti-competitive activity 2.6 Profit: The excess of revenues over expenses; closely associated with competition Corporations compete for profit Profits not onlt a regulator of efficenty but a measure of effectiveness Ethical Implications: Profits sometimes viewed with disdain or as immoral Taxation of excessive profits 2.7 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. Ethical Implcations: Government programs and societys expectations have influenced individuals attitudes toward work Individuals now expect more from government and business enterprises in terms of working conditions, benefits, and salaries 2.8 Consumer Soverignty The assumption existing in an economy that consumers have and exercise power over producers through the decisions they make in purchasing the goods and services provided by corporations. Fundamental part of any competitive system an generally more comptetive the market the stroner the power of the consumer Consumers evaluation and acceptance or rejection that determines the success of a business Ethical Implications: Consumers not always aware of alternative products available Consumers preferences are shaped by advertising Producers have power to ignore consumer wishes 2.9 The Government Laissez-faire approach (i.e., leave us alone) suggests minimal involvement of government other than national security, internal law and order, and a system of currency and measures. Provides mechanism for indivudals to assosciate with others for common, lawful purpose by evolving a body of law relating to contracts between individuals Ethical Implications: Government now an influential stakeholder (e.g., subsidies, taxation, tariffs, regulations, legislation, loans, grants, ownership) Government can restrict capital movement, impose product standards, prevent businesses from shutting down plants 2.10 The Fundamentals and Candian Capitalism An economic system that allows for private ownership of the means of production (land, labour, and capital) and assumes that economic decision making is in the hands of individuals or enterprises that make decisions expecting to earn a profit. Several pros and cons exist regarding capitalism 2.11 Various Forms of Capitalism Consumer capitalism

United States, Britain, Canada, Australia Producer capitalism France, Japan, Mexico Family capitalism Taiwan, Malaysia, Thailand, Indonesia Frontier capitalism beginning stages. Government pursues for profit business activities and an entrepnreual sprout grows Russia, China CHAPTER 3.

CHAPTER 4: Basic Stakeholder Analysis 1. Who are our stakeholders? 2. What are their stakes? 3. What opportunities and challenges are presented to our firm? 4. What responsibilities (economic, legal, ethical, and philanthropic) does our firm have to all its stakeholders? 5. What strategies or actions should our firm take to best deal with stakeholder challenges and opportunities? Stakeholder Management Cpab lity The ability of managers to: (1) identify stakeholders and their influence; (2) develop the organizational practices to understand stakeholders; and (3) undertake direct contact with stakeholders. Stakeholder Matrix Mapping A technique of categorizing an organizations stakeholders by their influence according to two variables; usually involves plotting them on a two-by-two matrix: Y Axis: Oppose or support corporation X Axis: Importance of stakeholders Four Categories of Stakeholders result from this analyss Problematic Stakeholders: oppose the organizations course of action and are relatively unimportant to the organization Anatagonistic Stakholder: oppose or be hostile to the organizations course of action and are very important to the organization Low Prority Stakeholders: support the organization;s course of ation and are relatively unimportant to the organization

Aftter Categorization is Completeed, managers can devlop tactics or stategies: Strategies for problematic stakeholders: A target moderate stakeholders with educational problems , adjust corporate plans to accommodate stakeholders Strategies for antagonistic stakeholders: identify potential coalitions and take defensive action, prepare for undermine of supporters, Strategies for low priority stakeholders: Provide educational programs and promote involvement with supporters Strategies for support stakeholders: Provide information to reinforce position, and ask supporters to influence indifferent stakeholders 4.4 Diagnostic typoelogu of Organzational Stakeholders: Type 1: Supportive stakeholder and strategy (i.e., involve) Type 2: The marginal stakeholder and strategy (i.e., monitor) Type 3: The non-supportive stakeholder and strategy (i.e., defend) Type 4: The mixed-blessing stakeholder and strategy (i.e., collaborate)

4.5 Stakeholder Identification and Salience Salience: is the degree to which managers give priority to competing stakeholder claims.

Mitchell, Agle, Wood, developed a theory of stakeholder indedication based on stakeholder possession of one or more of the follwing attributes: POWER, LEGITMACY, AND URGENCY. Power ability to get firm to do something that it would not otherwise do based on force, threat, incentives, etc. Legitimacy Perception or assumption that actions of firm are desirable, proper, or appropriate within a socially constructed set of norms, values, beliefs, and definitions Urgency degree to which stakeholders claim or relationship calls for immediate attention (time sensitive and important

Examples of Stakeholder Types Latent stakeholders Managers may not recognize their existence Expectant stakeholders Require more attention from managers Definitive stakeholders Management must address the claims of these stakeholders immediately Stakeholder Influence Strategies

Withholding strategies stakeholder discontinues providing a resource Usage strategies stakeholder continues to supply resource but specifies how it is to be used Influence pathway when withholding and usage strategies are used by an ally of the stakeholder

Stakeholder Collaboration Collaboration: is a meta-capabilty to esbalish and maintain relationships that allows the organization to tap into a powerful source of creative energy, a large pool of innovative ideas, and a wider network The goal is to increase the organizations environmental stability and to enhance control over changing circumstances FOSTERing Stakeholder relationships involves : Creating a foundation Organizational alignment Strategy development Trust building Evaluation Repeat the process 4.8 Stakeholders and Social Capital Any aspect of a corporations organizational arrangement that creates value and facilitates the actions of stakeholders within and external to the corporation. Building TRUST or GOODWILL

3 dimensions of Social Capital From Svendsen, Boutilier and Wheeler 1. Structural - networks that represent relationships 2. Relational - trust and reciprocity 3. Cognitive - mutual understanding Leads to 3 benefits Willingness to share information Willingness to exert ones influence or power to benefit the other Group cohesiveness CHAPTER 12: Corporate Governance: Definition The processes, structures, and relationships through which the shareholders, as represented by a board of directors, oversee the activities of the business enterprise. Rights of Shareholders Secure ownership registration Capability to transfer ownership Access to relevant corporate information Participation and voting at shareholder meetings Election and removal of board members Share in profits of the corporation Knowledge of extraordinary transactions or decisions Disclosure of dual-class shares Capability to exercise ownership rights Responsibilities of Board Board of Directors: group of individuals elected by shareholders to govern or oversee the corporations affairs. Fiduciary duties: obligations of directors to shareholders that are prescribed by laws or regulations

Boards written mandate must include boards satisfaction with integrity of CEO and other executives and that they are creating a culture of integrity (Canadian Stock Exchanges) Board must apply high ethical standards and take into account the interests of stakeholders (OECD, 2004) Board Membership Independent director: A director who is free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the directors ability to act in the best interests of the corporation. Boards are being held more accountable and the liability of individual directors is a concern Board Structure Board committee examples: audit; finance; human resources; pension; compensation; nominating; governance; and strategic planning. Audit committee is required to have independent members. Most experts recommend separation between the role of the board chair and the CEO. Disclosure and Transparency Disclosure requirements for Canadian public companies (National Instrument 58201): Disclose whether board has adopted written code Describe steps board takes to encourage and promote a culture of ethical business conduct Disclosure of executives compensation Boards audit committee oversees internal and external accounting auditing function to ensure accurate financial statements U.S. Sarbanes-Oxley Act (2002) Public Company Accounting Oversight Board Auditor independence Corporate responsibility Enhanced financial disclosures Corporate and criminal fraud accountability White-collar crime penalty enhancements Evaluating Board and Director Performance Criteria for evaluating board performance: Legal - all responsibilities upheld

Strategic and social - set, approve and monitor Financial - evaluates, minimizes risk Business - following the plan? Human resources - select, monitor and evaluate CED Governance - integrity and adherence to rules

Corporate Governance and Performance Some research suggests that good corporate governance affects firm performance Annual rankings of governance practices: Criteria: board composition, compensation, shareholder rights, disclosure, returns (Report on Business, The Globe and Mail) Criteria: returns, independence, accountability, disclosure (Canadian Business Magazine)

Criticism of Corporate Governance Reform Audit fees have increased Management attention diverted away from operation of business Additional costs have made North American business less competitive in global market Changes may not make a difference to firm performance or in protection of shareholders Approach should be principles-based, not rule-based Rebalancing Power in the Corporation CEOs have been too powerful New balance of power emerging among management, board, professional services (e.g., lawyers, auditors) Directors now playing bigger role in strategic decision making and ethical responsibilities Auditors more cautious Legal counsel representing everyone Some shareholders more active in pressuring boards Corporate Governance and Stakeholders Rights of stakeholders are to be respected Effective redress for stakeholders when rights violated

Stakeholders should have access to information Stakeholders should be allowed to blow whistle on illegal or unethical practices to board

CHAPTER 10: REGULATING BUSINESS: Spectrum of Regulation Laissez-faire regulation Corporate self-discipline Industry self-regulation Self-regulation involving stakeholders Negotiated self-regulation Mandated self-regulation Quasi-government regulation Government regulation Forms Market Regulation, Self Regulation and Governement Regulation No need for government-imposed laws or regulations Corporation influenced by market forces Laissez-faire approach Government does not interfere with business Consumers can force companies to behave in particular ways by refusing to purchase goods or services or through boycotts Self-Regulation (corporate/industry/self regulation involving stakeholders) Corporate self-discipline regulation Norms or standards are developed, used and enforced by the corporation itself. Accomplished through mission, values statement, codes of conduct or ethics The acceptance of and practice of corporate social responsibility (CSR) is the most general form of regulation. Industry self-regulation voluntary codes Industry or trade associations often facilitate this type of regulation, and initiatives are undertaken to address industry issues that if not addressed mat lead to government regulation. Self-regulation involving stakeholders

This type of regulation, the industry includes non-industry stakeholders by its own volition in the development, application, and the enforcement of standards. The Stakeholders would include representation from consumer and government, r some independent member of society including nongovernmental organizations Negotiated self-regulation Outside body voluntarily negotiates regulatory standards (Example a non governmental agency or a separate entity established by industry) This type of self-regulation is not common as it it difficult to establish and can be expensive to operate Mandatory self-regulation Government prefers to have industry regulate itself, and grants this under legislation. An is self regulatory organizations (SRO), industry groups that are delegated or designated a regulatory function including he development, use, and enforcement of standards, PROBLEMS with SRO: include potential conflicts of interest between members and customers, SROs maybe slow to initiate corrective action and in some cases unable to enforce standards, Stakeholder representation is often token, as with professional associations, and their influence is limited. It is considered a variation on corporatism where government and industry influence dominates that of other stakeholders, in particular consumers or investors. Scope of Government Regulation Government: regulates an industry or some aspect of business operations Standards are developed, applied, and enforced by the government or its agents, and the standards apply to everyone. is architect of economic growth Government actions affect the economic growth of the economy. Economic growth is impacted by trade, fiscal, monetary, taxation, ;and use, wage, and price controls, and employment policies Businesspersons play a role in influencing government to follow policies favourable to them. prescribes rules businesses must follow Government provides the framework legislation enabling business to operate This legislation includes laws relating to competition policy, antidumping, bankruptcy, incorporation These laws provide the rules of the game, that is the conditions under which business will operate is major purchaser of goods and services produced by businesses The expenditures of all governments- federal, provincial, and municipal are about 40% of GNP

Included in such expenditures are salaries, the procurement of goods and services and grants is major promoter and subsidizer of businesses There are several ways of that government promote and subsidize business including through grants, loans, loan guarantees, and tax credits. is a supplier of debt capital to many businesses The Federal and provincial governments operate financial institutions or development agencies that lend to businesses. Loan guarantees are also available, and they are a substantial assistance to corporations as they reduce the debt burden Tax expenditures or tax credits: are potential revenues the government chooses not to collect and are any form of incentive or relief granted through the tax system rather than government expenditures (Examples are accelerated depreciation, inventory valuation adjustment) Governments influences business through tax expenditures, either by granting or withdrawing them A Chosen instrument: is a corporation within a particular industry that receives some form of special attention from government through grants, loans, purchasing policy. is a rescuer of failed businesses Canadian governments have a long history of coming to the assistance of failing corporations or industries Bailouts occur to varying degrees and can take different forms May involve a one-time capital infusion to overcome a crisis, or the complete takeover of the corporation is the protector of business and producer interests Examples of protection are tariff and non-tariff barriers that exist to shield Canadian industry from foreign competition. Is the owner of business enterprises Governments at all levels own and operate a business that provide goods and services that could also be supplied by private sector corporations. Government-owned enterprises, often referred to as Crown Corporations were formed or acquire for a variety of reasons, including to maintain employment, to fill a gap in the private sectors provision of good and services, to promote economic activity, to provide services the public is compelled to purchase, to enhance incomes. Government is a partner with a business some endeavors Two examples of business and government partnerships are mixed enterprises and public-private partnerships. Mixed Enterprises are those in which a government owns equity in a private sector enterprise; Governments have an equity in a substantial number of

corporations that ranges from small numbers of voting shares, to effective control through a substantial but minority interest. A Public Private Partnership: is a cooperative venture between the public and private sectors, built on the expertise of each partner that best meets clearly defined public needs through the appropriate allocation of resources, risks, and rewards. Government directly manages through regulation, large areas of private business activity Various governments regulate the operation of business enterprises through commissions, tribunals, agencies, and boards Examples are: petroleum, insurance, pipelines, dairy & poultry, transportation Government in one form or another directly regulates about oncethird of the economy through more than 600 organizations (CRTC)

Business Involvement in Politics: Its a pluralistic right for business to involved, as corporations are a an institution in society and thus have a moral responsibility to take part in the political system Business influences society and in additions, corporations pay taxes. Businesspersons are knowledgeable in economics, and finances, and have the information and skills to make a contribution to the political processes. Participation by business is necessary to counterbalance the anti-business activity of other groups, such as Unions, Argument Against: It is argued that politics should be left to politicians, and business should be publicly neutral Politicians have to address issues across a wide spectrum, and business persons are qualified to deal with many of the social issues the government must address. Business accused of exerting too much power in society, and the involvement of businessperson in politics could upset the pluralistic balance in society Business involvement might also be considered biased, thus having an adverse affect on customers or shareholders, or conflicts of interest might exist. Examples Financing of political parties Corporations are a source of funds, but recent elections laws limit the amounts Also contribute in kind providing a party with free office space, or providing legal and other services to politicians during election campaigns. Publicly expressed support for a candidate or party

Support for candidate or party can be expressed in several ways, for example inviting campaigning politicians to address employees on company property. Publicly expressed views on political issues Business expresses views on political issues by purchasing advertisements usually contributions to industry or trade associations that support or oppose some political issues. Executives running for public office Managements position on employee participation Business Lobbying Business lobbying attempts to influence: Making or amending of legislation and regulations Making or changing of government policies or programs Government decisions in the awarding of grants, contracts, contributions, or any similar benefits Government appointments to boards, commissions, and any other public office Types of Business Lobbyists: 1.) Business enterprises that attempt to influence government through lobbying performed by business interest groups of associations (Examples of business interest groups that acts as lobbies include the Canadian Council of Chief Executives. 2.) Second type is the consultant who specializes in government- business relations and is paid by a corporation, a group of corporations, or a business association to make a contact with government or to tell business how to influence government. 3.) Third Type is exist when corporations develop lobbying capability in-house, often referred to as government relations or public affairs staff. Such departments usually report to top management and constantly monitor the political environment for developments that will impact the corporation and industry. Business Lobbying: Criticisms Practices unethical (e.g., bribes, gifts, improper political contributions, blackmail) Business lobby too powerful Business has unequal access to government Cost of business lobbying passed on to consumers Corporate Public Affairs Departments The management function responsible for monitoring and interpreting the governmental environment of the corporation or industry and for managing the responses necessary to protect the interests of the corporation or industry. Role expanded to include community relations, media relations, environmental monitoring, issues management, lobbying, and public relations

Public affairs or government relations units to continue to play a role when the corporation is attempting to influence government and in interpreting governments influence upon the corporation Three approaches of involvement politics, lobbying, and public affairs department, business does influence government policy making and regulation. Corporate Agenda The real or imagined alleged domination of public policy or government programs by corporations or business organizations in their own best interests. The corporate agenda might include: Reduction of government involvement Deregulation of business and industry Reduced corporate taxation Enactment of free trade agreements and support for globalization Weakening of unions and workers right to organize Increasing lobbying and involvement in the political process by business including the formation of partnerships between business and government Corporations and industries appear increasingly willing to advocate for and accept government assistance referred to as corporate welfare any action by municipal, provincial, or federal governments that gives a specific corporation or an entire industry a benefit not offered to others. Impact of Decreasing Government Involvement: Possibilities Problems: Direct benefits such as (grants, tax, incentives) maybe lost, as will protection of monopolies by regulating or tariffs. Some consequences of the trend toward less government might transfer of jobs from the public to private sector, the possible widening of share ownership in Canada Opportunities: Decreasing government involvement provides many opportunities for business including, reducing costs as a result, of increased competition among suppliers of telecommunications and transportation, and increasing demand for some products Privatization: is one manifestation of lessened government involvement, means strengthening of the market at the expense of the state. Often considered as a sale of the government-owned business enterprise to the private sector. Privatization of the financing of services that continue to be produced by the public sector Contracting out of the provision of services to the private sector Transfer of state functions to private sector Sale of government-owned enterprises Liberalization of public policy Privatization trend provides numerous opportunities for business. They are several ways that private- sector business can provide services formerly delivered by the government, namely participation in conventional markets where buyers and sellers compete for

projects; contract to perform work; monopoly franchise where the private company provides services at specified standards. Ethical Implications in BusinessGovernment Relationship Appropriateness of government involvement and interference in business operations Matter of accessibility to government Favouritism to some corporations regarding loans, grants, or protection Endorsement of political candidates or parties can be perceived as expecting favours in future Lack of transparency in relationship between government and business Ethics in Government Office of Values and Ethics, Treasury Board of Canada Principles of the Public Service of Canada Public Service and Integrity Office Office of the Ethics Commissioner Federal Accountability Act CHAPTER 5- Ethics of Business: The Theoretical Basis: Introducing the Ethics of Business Ethics of business: rules, standards, codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations. Value judgments: subjective evaluations of what is considered important. Moral standards: the means by which individuals judge their actions and the actions of others. Types of Ethical Assesment Amoral Awareness of Implications Individual and Societal Influences Value judgments Moral standards Systematic Analysis Influences on Ethical Behaviour Individual morals National and ethnic cultures Government legislation and regulation The legal system Religion

Colleagues or peers Education Media Corporate mission, vision and values statements Union Contracts Competitive behavour Activist or advocacy groups Business or industry organizations Professional associations

Self-Interest (Ethical Egoism) Individuals or corporations set their own standards for judging the ethical implications of their actions; only the individuals values and standards are the basis for actions Egoism (Self-interest) Self-interest not necessarily the same as: selfishness, greed, disregard for the rights and interests of others, hedonism, or materialism. Not eat, drink and be merry Thats not in your best interest Egoism (Self-interest) Look out for # 1 No moral obligation to help others Moral obligation is to do the best you can do for yourself Can involve helping others as long as it furthers your own interests Egoism (Self-interest) Self-interest to some degree is always present Short-term vs. Long-term Negative light Enlightened egoist Scale Personal Virtues Ethic An individuals or corporations behaviour is based upon being a good person or corporate citizen with traits such as courage, honesty, wisdom, temperance, and generosity. Personal Virtues Ethic Honor, pride, and self-worth Not about kindness or compassion Not about rights or benefits All about the character of actions Ask, how would I feel if my actions were explained on television?

Ethics of Caring Gives attention to specific individuals or stakeholders harmed or disadvantaged and their particular circumstances Ethics of Caring Responsibility to reduce harm or suffering of others Golden rule: Do unto others as you would want done to you Ethics of Caring Upside for business: Flexible Quick response Downside for business: Miss the big picture Subjective criteria Government Requirements Ethic The acceptance of a code of laws as the governing rules of society or as a contract with society that determines what is considered right or appropriate behaviour. The law represents the minimal moral standard Government Requirements Ethic Legal system and a code of laws Government enforces obedience to provide fair competition and peace Its legal so its okay Do laws cover everything? 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 Cost-Benefit analysis Good means happiness or pleasure Anything has the potential of being morally right Take the long-term into account Can we predict the future? Universal Rules Ethic Ensures that managers or corporations have the same moral obligations in morally similar situations. Treat people as means in themselves (i.e., with respect) and never as a means to ones own ends. Goal: eliminate self-interest

Create rules and morals that are fair to everyone Only act if you are willing for it to become a universal law Drawback: no exceptions 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. Universal Declaration of Human Rights Economic Efficiency Ethic Judges the moral implications of a decision by its economic consequences and provides the moral justification for a market system. Adam Smith: By focusing on efficient operations, profits are maximized, and society ultimately benefits Ethics of Justice Different types of justice: Procedural justice Corrective justice Retributive justice Distributive justice Benefits: Logical and impartial process Equal rights Drawbacks: Who has moral authority? Stakeholder may be overlooked Impersonal, inflexible, cold and uncaring Markets are unjust Type Egoism Personal Virtues Ethic Ethic of Caring Govnt Requirements Ethic Universal Rules Ethic Looking out for #1 Appearing to be a good person Reducing harm Obeying the law Set a precedent

Individual Rights Ethic Economic Ethic Ethic of Justice

Universal Declaration of Human Rights Profit by following the rules 4 kinds (procedural, corrective, retributive, distributive)

Moral Reasoning Process Define moral issue or decision Gather all relevant information Identify the stakeholders involved Develop possible alternative solutions Consider applicable value judgments, moral standards, ethical principles Identify harms/benefits to stakeholders Determine practical constraints Decide on action Range of perspectives Ethics verses morals and values Testing Ethical Congruence The Butterfly Test Your own personal conscience, typified by a feeling of anxiety (butterflies in your stomach) when you know something is inherently wrong. Testing Ethical Congruence Authority Test Ask yourself the question, would a person in authority approve of this (boss, president, civic leader, religious leader, etc). Testing Ethical Congruence Public Scrutiny Test Would it be acceptable to write your actions/decisions in a public forum (newspaper, web site, TV report) where your family and friends would find out about it Kohlbergs Stages of Moral Development Pre-Conventional Level (Self) Consequences

Stage 1 Punishment and obedience orientation Stage 2 Individual instrumental purpose/exchange Whats in it for me? Conventional Level (Others) Stage 3 Mutual interpersonal expectations Stage 4 Law and order orientation Post-Conventional Level (Humankind) Stage 5 Social contract orientation Stage 6 Universal ethical principle orientation

CHAPTER 6 Managing the Ethics of Business Statement of Values A description of the beliefs, principles, and basic assumptions about what is desirable or worth striving for in an organization. Key components: Key stakeholder interests to be satisfied and balanced Emphasis on quality and/or excellence Efficiency Work climate Observance of codes Codes of Conduct Code of conduct: explicitly states what appropriate behaviour is by identifying what is acceptable and unacceptable Distinction between the Codes of Conduct Imposed by others What must be done or what must not be done Rules Codes of Ethics Self-imposed Who we are What we stand for Guidelines or guiding principles

Types of Codes Corporate or business enterprise Professional organizations Industry and sector Single issue Codes from national and international bodies Criticisms of Codes Unenforceable If enforced, penalties are insignificant Unnecessary, as most corporations already operate ethically Often idealistic Written in meaningless generalities Merely to prevent government legislation Mere response to public criticism Ethics Training Managers or outside consultants Online exercises Practical checklists and tests Is it legal Benefit/cost test Categorical imperative Light of day test Do unto others Ventilation test Conflicts of Interest Three types of conflict: (1) real; (2) apparent; (3) potential Examples: self-dealing; accepting gifts or benefits; influence peddling; using employers property; using confidential information; outside employment or moonlighting; post-employment; personal conduct Ethics Audits and Consultants Systematic effort to discover actual or potential unethical behaviour in an organization. Preventive and remedial purpose Useful in conjunction with a code of ethics Conducted by consultants 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 Responsible for the ethics program Ethics committees: Comprising management, employees, and outside stakeholders

Ethics Reporting Systems and Whistleblowing Whistleblowing: an act of voluntary disclosure of inappropriate behaviour or decisions to persons in positions of authority in an organization. Reporting systems (e.g., hotlines) Whistleblowing: Issues Remain silent, quit, or disclose wrongdoing? Does obligation to employer supersede obligation to self, profession, or industry? Will whistleblower be believed? Is whistleblower hero or snitch? Who should the whistleblower contact? What will the consequences be Ethics: Who is Responsible? Boards of directors? Management? Three models of moral management: Immoral (devoid of ethical principles) Amoral (without ethics, but not actively immoral) Moral (conform to high standards of ethical behaviour) Ethics Programs: Approaches Formal approach based on organizational norms that are written as a code of conduct Monological approach allows organizational members (e.g., managers, employees) to determine for themselves what is right or wrong Dialogical approach Emphasizes communication before decisions are made and implemented Ethics Programs: Evaluation and Benefits Compliance-based Rules, laws Prevent criminal conduct Lawyer-driven Employee discretion limited

Code of conduct

Integrity-based Values/ethics/principles Enable responsible conduct Management-driven Employee discretion increased Code of ethics