canadian business and society

8/3/2019 Canadian Business and Society

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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 beingethical versus unethical or right versus wrong. Examined in terms of the ethical

implications of addressing issues or decisions and the distributions of harms and benefitsto 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 private-

sector economic system

Canadians feel it desirable to allow individual business persons and corporations

rather than some centralized agency to provide the goods and services theyrequire

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 privateproperty by individuals and enterprises; the profit move; a competitive market system;

and a limited involvement by government (private enterprise system)


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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 enterprisesare 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 governmentinvolvement to one where government involvement was more intensive during most of

this time

Economic System in Canada is based on fundamental of individualism and economicfreedom (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 timeOne 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 19 th century and has

sold unsafe products to consumers

Monopolistic behaviour has been evident in the operation of some business corporationsas 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 societysdemands or governments involvement


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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 theoperation 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 Canada97% 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


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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 itsown 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, toincorporated 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, andobligations

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/shareholdersresponsible

Business incorporates a separate legal entity id created

This Artificial Being is invisible, intangible, existing only in contemplation oflaw, 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/indirectDirect: 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 delivergoods and services to CONSUMERS.


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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 andaffairs 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, keepingmanagement 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 compettiveenvironment 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, andknowledge 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 relationshipsManagers 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 ofbusiness 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:


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Selft- Intrest

Inequalties in Society

Business Cycle

Unemplyment

Innovations

The Influnce of Popular Media:


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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 themmade by others

Ethical Implications

Uneven distribution of wealth

Infringement of copyright rights

Membership rights (e.g., labour unions) are sometimes preferred overindividual rights

Taxation is one method of resitrbuting wealth

Desipre taxation, business retains advantages because corporations areallowed 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 theparamount decision maker in society; assumes that the individual is inherently

decent and rational.

Invidualism linked to freedom and this has provived a connection between thebusiness 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 InvestmentMoney and Inflation

Wage and Price Controls

Corruption

Ethical Implications:

Communitariansm is more important in society as individuals in society as in invidvualsseek to join and indetify with some type of community organzation


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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 thegovernment

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 executivesalaries

2.5 Competeion

The condition in a market system in which many rival sellers seek to provide goods and

services to many buyersAdvantages 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 consumersCOMPETEION 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


Profits sometimes viewed with disdain or as immoral

Taxation of excessive profits

2.7 The Work Ethic


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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 providedby corporations.

Fundamental part of any competitive system an generally more comptetive the market the

stroner the power of the consumerConsumers evaluation and acceptance or rejection that determines the success of a

business


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


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


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United States, Britain, Canada, Australia

Producer capitalism

France, Japan, Mexico

Family capitalism

Taiwan, Malaysia, Thailand, Indonesia

Frontier capitalism beginning stages. Government pursues for profit businessactivities and an entrepnreual sprout grows

Russia, China

CHAPTER 3.


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CHAPTER 4:Basic Stakeholder Analysis1. 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 stakeholderchallenges 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 analyssProblematic 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 andare very important to the organization

Low Prority Stakeholders: support the organization;s course of ation and are relatively

unimportant to the organization


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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 takedefensive 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 stakeholderclaims.


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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


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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 thestakeholder

Stakeholder Collaboration

Collaboration: is a meta-capabilty to esbalish and maintain relationships that allows theorganization to tap into a powerful source of creative energy, a large pool of innovativeideas, 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


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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 businessenterprise.

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 oroversee the corporations affairs.

Fiduciary duties: obligations of directors to shareholders that are prescribed by

laws or regulations


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Boards written mandate must include boards satisfaction with integrity of CEO

and other executives and that they are creating a culture of integrity (CanadianStock 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 anybusiness 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 58-201):

Disclose whether board has adopted written code

Describe steps board takes to encourage and promote a culture of ethicalbusiness conduct

Disclosure of executives compensation

Boards audit committee oversees internal and external accounting auditingfunction 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


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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 Governanceand 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


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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 corporationitself.

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


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This type of regulation, the industry includes non-industry stakeholders by

its own volition in the development, application, and the enforcement ofstandards.

The Stakeholders would include representation from consumer and

government, r some independent member of society including non-

governmental 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 hedevelopment, use, and enforcement of standards,

PROBLEMS with SRO: include potential conflicts of interest betweenmembers and customers, SROs maybe slow to initiate corrective action

and in some cases unable to enforce standards, Stakeholder representationis 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 particularconsumers 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, anti-

dumping, bankruptcy, incorporation

These laws provide the rules of the game, that is the conditionsunder which business will operate

is major purchaser of goods and services produced by businesses

The expenditures of all governments- federal, provincial, andmunicipal are about 40% of GNP


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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 thegovernment 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, inventoryvaluation adjustment)

Governments influences business through tax expenditures, eitherby 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 economicactivity, 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 sectorenterprise; Governments have an equity in a substantial number of


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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 enterprisesthrough commissions, tribunals, agencies, and boards

Examples are: petroleum, insurance, pipelines, dairy & poultry,

transportation

Government in one form or another directly regulates about once-

third 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 insociety 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 theinformation 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 arequalified 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, orproviding legal and other services to politicians during election

campaigns.

Publicly expressed support for a candidate or party


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Support for candidate or party can be expressed in several ways, for

example inviting campaigning politicians to address employees oncompany 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 oroppose 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 ChiefExecutives.

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 tomake 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 departmentsusually 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


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Public affairs or government relations units to continue to play a role when the

corporation is attempting to influence government and in interpretinggovernments 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 acceptgovernment 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 ofmonopolies 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 policyPrivatization 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


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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 businessoperations

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 guidelinesfor 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 theactions 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


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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 oftheir 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?


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Ethics of Caring

Gives attention to specific individuals or stakeholders harmed or disadvantaged and theirparticular 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


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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 everyoneand 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 andprovides 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 Looking out for #1

Personal Virtues Ethic Appearing to be a good person

Ethic of Caring Reducing harm

Govnt Requirements Ethic Obeying the law

Universal Rules Ethic Set a precedent


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Individual Rights Ethic Universal Declaration of Human Rights

Economic Ethic Profit by following the rules

Ethic of Justice 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.


Authority Test

Ask yourself the question, would a person in authority approve of this (boss, president,

civic leader, religious leader, etc).


Public Scrutiny Test

Would it be acceptable to write your actions/decisions in a public forum (newspaper, website, TV report) where your family and friends would find out about it

Kohlbergs Stages of

Moral Development

Pre-Conventional Level (Self)

Consequences


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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 isacceptable 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


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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; usingemployers 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


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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 ordecisions 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


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Code of conduct

Integrity-based

Values/ethics/principles

Enable responsible conduct

Management-driven Employee discretion increased

Code of ethics


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