Chapter 10: Government's Role in Business

Scope of Government in Society

• Architect of economic growth: government buys goods and services, such as building roads and schools
• Major purchaser of goods and services
• Promoter and subsidizer of business
• Provides financial capital through loans and grants
• Saves businesses in trouble
• Owner of business enterprises (e.g. Canada Post, Via Rail)

Government Influence on Business Ethics

• Prescribes legal rules of conduct
• Protects interests of business
• Protects interests of stakeholders
• Uses regulation to manage large areas of business activity

Deregulation

• Reduction of government influence over the economy
• Allows for a freer and more efficient marketplace
• Pros: more competitive business environment, higher productivity, lower prices
• Cons: reduced environmental quality standards, market control by monopolies

Privatization

• Strengthening of the market at the expense of the state
• Examples: Canada Post
• Self-regulation: regulation imposed by the company, not the government or market forces
• Pros: faster, cheaper, efficient
• Cons: impairs business competition and innovation

Third Party Certification

• Independent organization that sets standards for responsible business practices
• Examples: quality inspector

Laissez-Faire Approach

• Government does not interfere with business

Corporate Self-Discipline

• Form of regulation where norms are developed and used by the corporation itself

Remediation Agreements

• Voluntary agreement between government prosecutor and corporation accused of committing an offence
• Examples: corporation acknowledging wrongdoing, paying penalties, undertaking anti-corruption policies

Tax Havens

• No tax or very low rates

Involvement of Business in Politics

• Moral responsibility to take part in the political system
• Issues: lack of transparency, favouritism
• Ways business is involved in politics: financing of political parties, publicly expressing support for a candidate, publicly expressing views on political issues

Lobbying

• All attempts to influence directly or indirectly any government activity
• Pros: substitute the influence of other groups
• Cons: unethical, too powerful and one-sided, over-represented

Corporate Governance

• Rules that guide how a company is managed and overseen to ensure it operates ethically, responsibly, and in the best interests of shareholders and stakeholders
• Board of Directors: group of individuals elected by shareholders to govern or oversee the corporation's affairs
• Fiduciary duties: obligations owed by directors to shareholders that are prescribed by laws or regulations
• Independent director: unbiased advice and oversight

Shareholder Democracy

• Exercise of power of owners to ensure they are treated fairly and enjoy equally the privileges and duties of ownership
• Basic shareholder rights: voting power, transfer of ownership, entitlement to dividends
• Several stakeholders attempt to ensure shareholder rights: governments, self-regulatory agencies, shareholder activists

Business Ethics

• Rules, standards, codes, or principles that provide guidelines for morally right behaviour
• Value judgements: subjective evaluations of what is considered important
• Moral standards: the means by which individuals judge their actions and the actions of others

Influences on Business Ethics

• Five categories: individual, corporate, economic, government, and social
• Seven most cited principles of ethical analysis: self-interest, personal values, caring, utilitarian benefits, universal rules, individual rights, and justice

Ethical Dilemmas

• Situation where a person has to make a difficult decision
• Moral reasoning: process of making decisions about what is right or wrong based on ethical principles or values
• Steps: define moral issue, gather information, identify stakeholders, develop alternative solutions, identify harms/benefits, decide on action

Kohlberg's Stages of Moral Development

• Six stages: pre-conventional, conventional, and post-conventional
• Level 1: Pre-conventional (self); Level 2: Conventional (others); Level 3: Post-conventional (humankind)

Challenges to Ethical Behaviour

• Too simplistic approaches
• Myths
• Lack of awareness (four biases: prejudice, favouritism, overclaiming credit, and conflict of interest)

Leadership and Ethics

• Three forms of leadership: ethical, responsible, and servant leadership
• Code of conduct: tells employees what behaviours are okay and not okay
• Code of ethics: a statement of principles and values

Corporate Social Responsibility

• Wider responsibility, attention to the environment, and respect for communities
• Five generations of codes: conflict of interest, proper business practices, employee rights, wider responsibility, and international concerns

Ethics Officer and Compliance Officer

• Ethics officer: independent manager who reports to the board of directors or CEO
• Compliance officer: ensures all employees are familiar with company's policies and codes

Whistleblowing

• Reporting wrongdoings like fraud or safety violations
• Issues: who is responsible, and is it heroic or snitching?

Classification of Programs

• Four approaches: formal, monological, dialogical, and classification of programs

Benefits of Ethics Programs

• Business practices more beneficial to society
• Increased awareness

Types of Executive Ethical Leadership

• Four types: hypocritical, unethical, ethical, and ethically silent

Work Ethic and Employee Loyalty

• Set of values that holds what work is important to a member of society
• How to improve employee loyalty: communicate, reward, corporate priority, involvement, and time

Workplace Privacy

• Protection of employee's personal information
• Discrimination: preferential treatment on bases not directly related to qualification or job performance
• Employment equity: fair and equal treatment of employees

Managing Employment Diversity

• Diversity management: voluntary initiative beyond what's required by law to eliminate discrimination
• Connection between CSR and employee engagement

Consumer Sovereignty

• Characteristics: consumers decide what products businesses should make, voting through purchase decisions, consumers free to make their own choices, and businesses make what consumers want
• Consumerism: social movement seeking to protect and augment the rights and powers of buyers in relation to sellers

Ethical Consumerism

• Form of activism where consumers buy products, goods, and services that are ethically produced and not harmful to the environment or society

Factors Motivating Ethical Purchases

• CSR information must be available
• Consumers are more likely to buy from companies whose actions and values match their own beliefs
• Products must be considered affordable

Competition

• Necessary for an effective market economy
• Benefits the consumer
• Encourages innovation, productivity, entrepreneurship, and efficiency

Competition Act

• Establishes basic principles for the conduct of business in Canada
• Prevents companies from forming monopolies### Sustainability and Ethics in Purchasing
• Extended producer responsibility: a producer's responsibility for a product extends to the post-consumer stage, ensuring environmental protection (e.g., collecting and recycling old batteries)
• Fair trade: a designation for products involved in sustainability purchasing, focusing on the beginning of the product chain to ensure fair working conditions and environmental practices (e.g., fair trade chocolate)

Criticisms of Fair Trade

• Little of the extra paid to farmers actually reaches them
• Certification issues can lead to farmers' impoverishment
• Labour exploitation still exists

Environmental Issues and Government Involvement

• Environmental issues affect all aspects of a corporation, from input of resources to workplace conditions
• Commons: resources used as though they belong to all (e.g., public parks)
• Government departments regulate corporate activities to protect the environment (e.g., Environment Canada)

Environmental NGOs and Corporate Targeting

• ENGOs hold shared values about environmental changes and target corporations based on:
  • Environmental impact
  • Consequences of environmental harm
  • Size and influence
  • Consumer connection
  • Brand visibility

Approaches to Environmental Concerns

• Standard environmentalism: government rules are necessary to protect the environment
• Market environmentalism: businesses can earn money by being eco-friendly, making laws unnecessary
• Carbon pricing: a way to reduce carbon emissions by putting a price on them (e.g., cap-and-trade, carbon tax)
• Carbon capture and storage (CCS): capturing and injecting carbon emissions into underground formations

Environmental Management Systems

• EMS helps corporations reduce costs, respond to investor demands, and improve reputation
• EMS ensures environmental practices become an important component of corporate strategy

Green Marketing and Human Resources Practices

• Green marketing: selling environmentally friendly goods and services to consumers
• Human resources practices for a greener workplace:
  • Offering recycling programs
  • Saving energy and reducing consumption
  • Encouraging eco-friendly transportation
  • Reducing emissions
  • Purchasing renewable energy credits

Evaluating Environmental Performance

• Indicators used to evaluate environmental performance:
  • Type and amount of materials used
  • Energy source and efficiency
  • Biodiversity
  • Emissions and waste reduction
  • Transportation mode efficiency

Sustainability and Criticisms

• Criticisms of sustainability:
  • Difficulty in defining and understanding the concept
  • Constraining economic development
  • Lack of market understanding
  • Executives being misled
• Opportunities and challenges of sustainable development:
  • Enhanced reputation and customer attraction
  • Increased costs and potential revenue loss

Economy and Environmental Impact

• Linear economy: raw materials used, products produced, and waste generated
• Reuse economy: some goods recycled and reused, but still generating waste
• Circular economy: restorative and regenerative, with materials constantly flowing in a closed-loop system

Globalization and its Impact

• Globalization: the process of decreasing constraints on international interactions
• Economic globalization: integrating markets into a global economy
• Political, social, and cultural globalization: changes in world power relationships, loss of sovereignty, and emergence of a worldwide cultural system
• Globalization increases business economic, social, and environmental responsibilities

Globalization Arguments and Criticisms

• Globalists' arguments:
  • Everyone gains
  • Employment and income opportunities in developing countries
  • Increased standard of living in developing countries
  • Open markets provide better goods and services
• Anti-globalists' arguments:
  • Unemployment in developed countries
  • Poverty and inequality in developing countries
  • Human rights violations
  • Questionable government payments
  • Profit-driven motives

Supranational Institutions and International Trade

• World Trade Organization (WTO): the only global international organization dealing with trade rules between nations
• International Non-governmental Organizations (INGOs): groups working to improve conditions in developing countries
• Supranational institutions: international organizations where countries work together on specific issues (e.g., World Bank, IMF)

Canadian Business and Globalization

• Canadian business influenced by globalization:
  • Pressure to forge international links
  • Meeting global market challenges
  • Attracting investment
  • Competitiveness
• Challenges faced by Canadian business in the global economy:
  • Corruption
  • Human rights respect
  • Sweatshop production
  • Reducing poverty

Socialization of Capitalism and Social Responsibility

• Socialization of capitalism: the process of conforming to societal expectations, resulting in desired, socially responsible outcomes
• Social purpose: corporations are responsible to society, aware of and concerned about ethical, social, and environmental issues
• Fourth sector: a sector combining elements of the private, social, and public sectors, aiming to make a profit while having a positive social or environmental impact