W1-C1 Business & Society Relationship PDF

1 ADM1101/1301 Week 1 – Chapter 1  General Copyright Notice 2  Some content is copyright the textbook author  Some content is copyright the professor  Posting any content on external website or other sources is considered to be an academic offence by the Un...

1 ADM1101/1301 Week 1 – Chapter 1  General Copyright Notice 2  Some content is copyright the textbook author  Some content is copyright the professor  Posting any content on external website or other sources is considered to be an academic offence by the University  Learning Outcomes 1-3 1. Describe the complexity of the interrelationships between business and society. 2. Define the terminology relating to the integrity of business management and students. 3. Differentiate between the three main approaches to ethical thinking. 4. Provide a brief description of the Canadian business system. 5. Explain the role of the corporation as the main economic institution in the business system. 6. Recognize that business operates with the consent of society. 7. Summarize factors that influence society’s attitudes toward business that lead to criticisms of the system. 8. Identify the groups that are mainly responsible for the operation of Canadian businesses. 9. Describe the integration of business and society.  What would you do if? 4  “I pledge that during my years in higher education I will explore and take into account the social, economic, and environmental consequences of my behaviours and that of my institution. I will learn about issues of environmentalism, social justice, and economic strength, and will try to promote a sustainable and just society both at my institution and in the wider world”  Have you experienced anything like this?  Have you read/heard/seen any recent news about education/business schools  Does a university have a social responsibility?  Would such a pledge make a difference?  Would you be viewed differently?  Who’s going to hold you to it?  Issues 5  Society’s expectations of business driven by a more informed, affluent and litigious society  Technological advances facilitate misinformation and disinformation but also puts business in society’s spotlight  Who in “society” has the greatest influence?  Who has the right to dictate how business should operate?  What exactly is “ethical” behaviour?  What exactly is “social responsibility”? 5  The Business and Society Relationship 1-6  Textbook emphasizes four things about Canadian business system: 1. Increase awareness of system by describing Canadian capitalism, stakeholders involved and society’s attitudes 2. Identify business’ response to its role in society 3. Learn how business corporations have responded to many challenges in their environment 4. Address each of the above from perspective of manager or owner to emphasize the dynamic nature of the environment  The Business and Society Relationship Cont’d… 1-7  Shift occurring in what society believes business responsibilities should be  Corporations must consider the following:  Meeting humanity’s needs without harming future generations  Social responsibility and corporate sustainability reports should move beyond being a public relations exercise  Demanding accountability beyond economics  Responses to social, ethical and environmental responsibilities constitute a valuable intangible asset  Executives must have the skills and competencies to manage these additional responsibilities successful  Responses to these responsibilities will determine corporations that survive  Integrity in Business 2-8  Integrity → meaning “whole” or “complete  Person: “is grounded in solid ethical principles, and he or she acts in keeping with those principles” (Daft, p.42)  Company: “the appropriateness of a corporation’s behaviour and its adherence to moral guidelines acceptable to society such as honesty, fairness, and justice”  Related to “ethics”, but different  Managing with integrity:  Business leaders behave in a manner consistent with their own highest values and norms of behavior  Values are self-imposed but not arbitrary or self-serving  Responsible corporation → business undertaking that responds to social, ethical and environmental responsibilities in addition to economic obligations  Key Terminology Relating 1-9 to Integrity in Business  Ethics of business Corporate sustainability (CS)  Stakeholder Triple bottom line  Corporate social 3E or 3P responsibility (CSR) Corporate citizenship  Integrity of Business 2 - 10 Students  Post-secondary institutions facing increased demand to prepare graduates to identify and address ethical implications in business  Graduates need a moral compass and sensitivity to integrity issues  Business schools must become aware of and address moral dilemmas both from a staff and student perspective  A comparison 11 US Canada Convictions obtained by the Convictions obtained by the President’s Corporate Fraud Integrated Market Enforcement Task Force, 2002–2007: Teams, 2003–2007: - 214 Presidents and CEOs, - 2 (A serial fraud artist including Conrad Black pleaded guilty to two charges.) - 53 Chief Financial Officers - 23 Corporate counsels - 129 Vice Presidents Total: 1,236 Total: 2 August 13/27, 2007 issue of Canadian Business (page 80) a comparison of corporate criminality convictions  Main Approaches to 1 - 12 Ethical Thinking LO 1.3  Three dominant approaches to normative theories of ethics:  Deontological (rule-based) ethics  Teleological or consequential theories  Virtue ethics  Deontological Ethics 2 - 13  Actions are ethical if done for sake of what is good without regard for consequences of the act  Decisions based upon duty and adherence to universal principles  Individuals have duty to do the right thing even if the consequences of another action are preferable  “Veil of ignorance” 2 - 14 Teleological Ethics  Focuses on outcomes or results of actions  Utilitarianism → individuals make decisions based on consequences of an action  Decision believed to be good if end result is good  Decisions should result in the greatest good for the greatest number 2 - 15 Virtue Ethics  Emphasizes individual’s character or identity  Focuses on being instead of doing  Morality based on development of good character traits (virtues)  Assumes “good” person will act ethically  Absolute rules unlikey to apply in all situations  Business as an Economic System 2 - 16  Economic system→ arrangement using land, labour, and capital to produce, distribute, and exchange goods and services to meet the needs and wants of people in society  Key terminology:  Capitalism  Free enterprise / private enterprise system  Laissez-faire capitalism  Responsible enterprise system  Capitalism provides most goods and services but public and non-profit sectors also involved  The Corporation and 1 - 17 the Business System  Canadian business system is comprised of:  Sole proprietorships  Partnerships  Incorporated entities  Any individual may operate business if:  They are capable of entering into binding agreement  Business activity is lawful  Individual respects legal principles governing persons, property and obligations  The Corporation and the Business System Cont’d… 1 - 18  Two doctrines of incorporation:  Concession doctrine → incorporation was conferred by public act and could not be made by private agreements among several persons to associate together for business purposes  Freedom of association → association of individuals coming together for some purpose is fundamental to forming a corporation  When a business incorporates, a separate legal entity is created  Society’s Permission for Business 1 - 19  Legitimacy → belief in the rightness of an institution, in this case the appropriateness of our business system to supply the goods and services wanted by Canadian society  To be legitimate, the business enterprise system must respond to the changing values and expectations in society  Attitudes (criticisms) must be monitored  Management should take actions to counter negative views  Society’s Permission for Business Cont’d 1 - 20  Social licence → privilege of operating in society with minimal formalized restrictions  Based on maintaining public trust by doing what is acceptable to stakeholders in the business and society relationship  Must be earned and maintained—it is non-permanent because society’s beliefs, perceptions, and opinions change  To assess society’s permission, measure trust Canadians have in business enterprise system  Factors Influencing Attitudes Toward Business 21 90% of Canadians stated that they were more likely to purchase from a responsible company  Standard of living  The higher the SOL, the more belief in business  Decentralized decision making  Ensuring lack of collusion  Allocation of resources  Are businesses “creating” scarcities?  Self-interest  “Greed” vs “positive self-interest”  Factors Influencing Attitudes Toward Business 22  Inequities in society  Some are inevitable  Business that help to solve them are thought of more positively  Business cycle  Fraud seems to happen more during recessionary times  Unemployment  An indicator of overall business performance  Innovation  Good or bad?  The media  Government  The People Who 1 - 23 Run Canadian Business  Owners  Direct ownership (e.g., shareholders); or  Indirect ownership (e.g., mutual fund holders)  Boards of Directors  Elected by shareholders  Concerned with shareholder’s primary objective, return on investment  Increasing focus on corporate social responsibility (CSR)  Managers  Hired by boards of directors & oversee operations  Integration of 1 - 24 Business and Society  Business and society need each other  Must be a shared value in which both business and society benefit  Goal is to reduce friction between society and business and to increase the benefits for both  Social contract → set of two-way understandings that characterizes the relationship between two major institutions  Integration is the focus of textbook  Summary 1 - 25  The relationship between business and society is complex. To understand the relationship it is necessary to be knowledgeable of the business system and of capitalism in particular. (LO 1.1)  Business integrity is the appropriateness of a corporation’s behaviour and its adherence to moral guidelines acceptable to society such as honesty, fairness, and justice. (LO 1.2)  The three main approaches to ethical thinking are deontological, teleological, and virtue ethics. (LO 1.3)  Summary 1 - 26  The Canadian business system is usually referred to as a form of capitalism. The business system does have some defects, but is constantly changing to reflect society’s demands. (LO 1.4)  Several forms of business enterprise exist; the most common is the incorporated enterprise (the corporation). The modern corporation is accountable not only to the government, but also to society in general. (LO 1.5)  Society allows business to function as a system to provide goods and services. Two concepts that help to understand this consent are legitimacy and social licence. (LO 1.6)  Summary 1 - 27  Society’s attitudes toward business vary over time, and its views are influenced by several factors. Corporate wrongdoing receives a lot of attention and creates negative views of business. (LO 1.7)  Owners, boards of directors, and managers are the three most important stakeholders in the actual operation of the corporation. (LO 1.8)  Business and society are integrated. Business needs society and society needs business. (LO 1.10) Questions, concerns, comments  For next week 29  Ensure you have the textbook  Read Chapter 1 if you haven’t already  Read Chapter 2