{"id":53,"date":"2020-11-02T13:35:10","date_gmt":"2020-11-02T18:35:10","guid":{"rendered":"https:\/\/pressbooks.bccampus.ca\/fundamentalsbusiness\/chapter\/ethics-and-social-responsibility\/"},"modified":"2024-12-07T00:41:23","modified_gmt":"2024-12-07T05:41:23","slug":"ethics-and-social-responsibility","status":"publish","type":"chapter","link":"https:\/\/pressbooks.bccampus.ca\/fundamentalsbusiness\/chapter\/ethics-and-social-responsibility\/","title":{"raw":"Chapter 5 - Ethics and Social Responsibility","rendered":"Chapter 5 – Ethics and Social Responsibility"},"content":{"raw":"
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Learning Objectives<\/h1>\r\n<\/header>\r\n
\r\n\r\nBy the end of the chapter, you should be able to:\r\n
    \r\n \t
  1. de\ufb01ne business ethics and explain what it means to act ethically in business;<\/li>\r\n \t
  2. explain why we study business ethics;<\/li>\r\n \t
  3. identify ethical issues that you might face in business, such as insider trading, conflicts of interest, and bribery, and explain rationalizations for unethical behaviour;<\/li>\r\n \t
  4. identify steps you can take to maintain your honesty and integrity in a business environment;<\/li>\r\n \t
  5. de\ufb01ne corporate social responsibility and explain how organizations are responsible to their stakeholders, including owners, employees, customers, and the community;<\/li>\r\n \t
  6. list the stages of corporate responsibility;<\/li>\r\n \t
  7. discuss how you can identify an ethical organization, and how organizations can prevent behaviour like sexual harassment;<\/li>\r\n \t
  8. recognize how to avoid an ethical lapse, and why you should not rationalize when making decisions; and<\/li>\r\n \t
  9. explain [pb_glossary id=\"456\"]key terms[\/pb_glossary] in the chapter.<\/li>\r\n<\/ol>\r\n<\/div>\r\n<\/div>\r\n\"\"\r\n

    Show What You Know<\/h2>\r\n

    [h5p id=\"7\"]<\/p>\r\n\r\n

    <\/div>\r\n

    Canada\u2019s Leader: Passing or Failing the \u201cSmell Test\u201d?<\/h1>\r\n

    Ethics are not always black and white; the ethical decision is not always obvious to all. Even leaders can fail to act ethically all the time. Recent decisions impacted two leaders. <\/span><\/p>\r\n[embed]https:\/\/youtu.be\/LYZsQWZMz34[\/embed]\r\n\r\nCBC News's reporter, E. Thompson, filed the following story on December 21, 2017. It provides a detailed account of the ethical issues surrounding Prime Minister Trudeau's trip to Aga Khan's private island.\r\n

    \"\"Aga Khan could face lobbying probe for Trudeau trip<\/span><\/strong><\/p>\r\n

    Democracy Watch<\/a><\/span>\u00a0files complaint, saying Bahamas vacation violated lobbying law.<\/span><\/strong><\/p>\r\n

    The Aga Khan could face an investigation into allegations he violated Canada's Lobbying Act by giving Prime Minister Justin Trudeau and his family free vacations on his private island in the Bahamas at the same time as he was discussing funding for projects.<\/span><\/p>\r\n

    Democracy Watch sent a letter to the Commissioner of Lobbying late Wednesday, urging her to investigate whether Prince Shah Karim Al Hussaini Aga Khan IV \"violated the Lobbyists Code by giving Prime Minister Trudeau and Liberal MP Seamus O'Regan the gifts of trips to his island home\".<\/span><\/p>\r\n

    In the letter, Democracy Watch co-founder Duff Conacher says the Aga Khan's actions have put Trudeau and O'Regan in a conflict of interest. It is also against the law to give a public office holder a gift that could create a sense of obligation.<\/span><\/p>\r\n

    \"Your position must be that anyone working for or associated with a company that is registered to lobby a public office holder who gives to or does anything for that office holder\u2026that is more than an average voter does\u2026puts that office holder in an apparent conflict of interest,\" he wrote.<\/span><\/p>\r\n

    The Aga Khan is the spiritual leader of millions of Ismaili Muslims and is listed as a member of the board of directors of the Aga Khan Foundation Canada. The foundation, which has received millions of dollars in federal government development aid over the years, is registered to lobby several federal government departments including the Prime Minister's Office, although the Aga Khan is not listed among those registered to lobby on its behalf.<\/span><\/p>\r\n

    A search of the lobbyist registry shows the foundation has filed 132 reports since 2011 outlining its meetings with government decision makers. However, none of those reports list any meetings with Trudeau.<\/span><\/p>\r\n

    Representatives of the Aga Khan Foundation of Canada contacted by CBC News have yet to comment.<\/span><\/p>\r\n

    The call for a lobbying investigation comes in the wake of a scathing report by Ethics Commissioner Mary Dawson on Wednesday.<\/span><\/p>\r\n

    Dawson found that Trudeau violated four sections of the Conflict of Interest Act when he accepted a vacation on the island in the Bahamas and a ride in the Aga Khan's personal helicopter.<\/span><\/p>\r\n

    While Trudeau and his family got a tropical vacation, Canadian taxpayers got a bill for more than $215,000 in transportation and staffing costs \u2014 far more than the government initially disclosed to Parliament.<\/span><\/p>\r\n

    Dawson also revealed that Trudeau's trip during last year's Christmas holidays was one of three that Trudeau or members of his family had made to the island. Dawson disclosed that Sophie Gr\u00e9goire-Trudeau stayed on the island in March 2016 with a friend and their children.<\/span><\/p>\r\n

    Neither the Aga Khan, nor any member of his family, was on the island during their stay.<\/span><\/p>\r\n

    Dawson said the Aga Khan was on the island during the Trudeaus' Christmas-time visit last year as was a \"senior American official of a previous administration,\" who she did not name.<\/span><\/p>\r\n

    In her report, Dawson describes the relationship between Trudeau and the Aga Khan, the times they met and the questions they discussed.<\/span><\/p>\r\n

    Among them was a bilateral meeting on May 17, 2016 that was arranged by \"representatives\" of the Aga Khan. After a 15-minute chat between the two men about \"personal matters, the Ismaili community in general and geopolitics,\" they were joined by three of the Aga Khan's representatives, Heritage Minister M\u00e9lanie Joly, staff members from the Prime Minister's Office and senior officials of the Privy Council Office.<\/span><\/p>\r\n

    Dawson's report says the government had found a funding mechanism to allow it to contribute to the Global Centre for Pluralism's endowment fund and Trudeau reaffirmed the government's $15 million commitment during the meeting.<\/span><\/p>\r\n

    The Aga Khan's pitch for government funding for a $200 million riverfront renewal plan in Ottawa was also discussed.<\/span><\/p>\r\n

    Dawson ruled that Trudeau should have recused himself from two discussions in May 2016 involving the $15 million grant.<\/span><\/p>\r\n

    \"Two months prior to the May 2016 occasions, Mr. Trudeau's family accepted a gift from the Aga Khan that might reasonably be seen to have been given to influence Mr. Trudeau in the exercise of an official power, duty or function as Prime Minister,\" she wrote.<\/span><\/p>\r\n

    \"For this reason, the discussions with the Privy Council Office and later with the Aga Khan about the outstanding $15 million grant to the endowment fund provided an opportunity to improperly further the private interests of the Global Centre for Pluralism.\"<\/span><\/p>\r\n

    While the Aga Khan is not paid to lobby government (one of the criteria under the law) Conacher said he believes the Aga Khan violated the lobbying rules. Otherwise, it would create a giant loophole, he said.<\/span><\/p>\r\n

    \"Every single corporation, business, union, non-profit organization would start using board members to give gifts to politicians if this loophole were opened up by the lobbying commissioner.\"<\/span><\/p>\r\n

    Conacher is also calling for outgoing lobbying commissioner Karen Shepherd and incoming lobbying commissioner Nancy B\u00e9langer to recuse themselves from ruling on the investigation because of the way Shepherd's contract was renewed and the way B\u00e9langer was chosen in \"a secretive, PMO-controlled process.\"<\/span><\/p>\r\n

    Manon Dion, spokeswoman for the lobbying commissioner's office, said she cannot reveal whether they are already looking into the issue.[footnote]Thompson, E. (2017, December 21). Aga Khan could face lobbying probe for Trudeau trip<\/em>. http:\/\/www.cbc.ca\/news\/politics\/trudeau-aga-khan-bahamas-lobbying-1.4459561[\/footnote]<\/span><\/p>\r\n\r\n\r\n

    \r\n\r\n \r\n
    \r\n\r\nPoint to Ponder<\/strong><\/strong>\r\n

    Could the Prime Minister and family have taken an ethical version of this vacation? If yes, how? If not, why not? <\/span><\/p>\r\n

    The Prime Minister\u2019s Response<\/a><\/span>: http:\/\/www.cbc.ca\/news\/politics\/trudeau-ethics-aga-khan-1.4458220<\/span><\/p>\r\n

    The Ethics Commissioner\u2019s Report: https:\/\/www.documentcloud.org\/documents\/4334047-The-Trudeau-Report.html<\/a><\/span><\/p>\r\n\r\n<\/div>\r\n

    Moving Ethics To the Business World<\/h1>\r\n[caption id=\"attachment_48\" align=\"alignright\" width=\"201\"]\"a Figure 5.1 Bernie Madoff by Thierry Ehrmann licensed CC BY | flickr[\/caption]\r\n

    Perhaps you have heard of Bernie Madoff, founder of Bernard L. Madoff Investment Securities and former chairman of the NASDAQ stock exchange.[footnote]Time Magazine. (2009). Top 10 Crooked CEOs<\/em>. http:\/\/content.time.com\/time\/specials\/packages\/article\/0,28804,1903155_1903156_1903160,00.html[\/footnote] Madoff is alleged to have run a giant Ponzi scheme[footnote]Langan, F. (2008, December 15). The $50-billion BMIS Debacle: How a Ponzi Scheme Works<\/em>. CBC News. http:\/\/www.cbc.ca\/news\/business\/the-50-billion-bmis-debacle-how-a-ponzi-scheme-works-1.709409[\/footnote] that cheated investors of up to $65 billion. His wrongdoings won him a spot at the top of Time Magazine\u2019s Top 10 Crooked CEOs. According to the SEC charges, Madoff convinced investors to give him large sums of money. In return, he gave them an impressive 8 percent to 12 percent return a year. But Madoff never really invested their money. Instead, he kept it for himself. He got funds to pay the first investors their return (or their money back if they asked for it) by bringing in new investors. Everything was going smoothly until the fall of 2008, when the stock market plummeted and many of his investors asked for their money. As he no longer had it, the game was over and he had to admit that the whole thing was just one big lie. Thousands of investors, including many of his wealthy friends, not-so-rich retirees who trusted him with their life savings, and charitable foundations, were financially ruined. Those harmed by Madoff either directly or indirectly were likely pleased when he was sentenced to jail for one hundred and fifty years.<\/span><\/p>\r\n\r\n

    The Idea of Business Ethics<\/span><\/h2>\r\n

    It is in the best interest of a company to operate ethically. Trustworthy companies are better at attracting and keeping customers, talented employees, and capital. Those tainted by questionable ethics suffer from dwindling customer bases, employee turnover, and investor mistrust.<\/span><\/p>\r\n

    Let us begin this section by addressing this question: What can individuals, organizations, and government agencies do to foster an environment of ethical behaviour in business? First, of course, we need to define the term [pb_glossary id=\"758\"]\"ethics\"[\/pb_glossary].<\/span><\/p>\r\n\r\n

    What Is \"Ethics\"?<\/span><\/h2>\r\n

    You probably already know what it means to be ethical<\/span>: to know right from wrong and to know when you are practicing one instead of the other. [pb_glossary id=\"760\"]Business ethics<\/span>[\/pb_glossary] is the application of ethical behaviour in a business context. Acting ethically in business means more than simply obeying applicable laws and regulations. It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers. If you are in business you obviously need a strong sense of what is right and wrong. You need the personal conviction to do what\u2019s right, even if it means doing something that\u2019s difficult or personally disadvantageous.<\/span><\/p>\r\n\r\n

    Why Study Ethics?<\/span><\/h2>\r\n

    Ideally, prison terms, heavy fines, and civil suits would discourage corporate misconduct, but, unfortunately, many experts suspect that this assumption is a bit optimistic. Whatever the condition of the ethical environment in the near future, one thing seems clear: the next generation entering business \u2014 which includes most of you \u2014 will find a world much different than the one that waited for the previous generation. Recent history tells us in no uncertain terms that today\u2019s business students, many of whom are tomorrow\u2019s business leaders, need a much sharper understanding of the difference between what is and is not ethically acceptable. As a business student, one of your key tasks is learning how to recognize and deal with the ethical challenges that will confront you. Asked what he looked for in a new hire, Warren Buffet, the world\u2019s most successful investor, replied: \u201cI look for three things. The first is personal integrity, the second is intelligence, and the third is a high energy level.\u201d He paused and then added: \u201cBut if you do not have the first, the second two do not matter\".[footnote]Gostick, A., & Telford D. (2003). The Integrity Advantage<\/em>. Salt Lake City: Gibbs Smith.[\/footnote]<\/p>\r\n\r\n

    Identifying Ethical Issues and Dilemmas<\/span><\/h1>\r\n

    Ethical issues<\/span>\u00a0are the difficult social questions that involve some level of controversy over what is the right thing to do. Environmental protection is an example of a commonly discussed ethical issue, because there can be trade-offs between environmental and economic factors. <\/span><\/p>\r\n\r\n

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    Tips to maintain honesty and integrity<\/h3>\r\n