BOH4M – Grade 12 Business Leadership – Ethical Behaviour & Social Responsibility

Chapter 3: Ethical Behaviour & Social Responsibility


Ethical Behaviour


  • Ethics: Code of moral principles that set standards of good and bad and right and wrong
  • Ethical behaviour: What is accepted as good and right in the context of the governing moral code
  • Legal behaviour is not necessarily ethical behaviour and ethical behaviour is not necessarily legal
  • Values are broad beliefs about what is appropriate behaviour
    • Terminal values: preferences about desired end states (goals one strives to achieve in life such as self-respect, security, happiness)
    • Instrumental values: preferences regarding the means for accomplishing these ends (such as ambition, honesty, hard work)
  • Both values vary from one person to the next. This the reason why different people may respond quite differently to a situation with ethical challenges


  • Four different views of what constitutes ethical behaviour:
  1. Utilitarian view of ethics: Does a decision or behaviour do the greatest good for the most people?
  2. Individualism view of ethics: Does a decision or behaviour promote one’s long-term self-interests?
  3. Moral-rights view of ethics: Does a decision or behaviour respect the fundamental rights of all human beings?
  4. Justice view of ethics: Does a decision or behaviour show fairness and impartiality?


  • Cultural influences on ethical behaviour include:
    • Cultural relativism: No one right way to behave; ethical behaviour is always determined by its cultural context
    • Universalism: Suggests ethical standards apply absolutely across all cultures
    • Ethical Imperialism: An attempt to impose one’s ethical standards on other cultures


Ethics in the Workplace


  • How companies can respect universal values:
  • Respect human dignity
  • Create culture that values employees, customers, and suppliers
  • Keep a safe workplace
  • Produce safe products and services
  • Respect basic rights
  • Protect rights of employees, customers, and communities
  • Avoid anything that threatening safety, health, education, and living standards
  • Be good citizens
  • Support social institutions, including economic and educational systems
  • Work with local government and institutions to protect environment


  • Ethical business is good business. The real test, however, is when an ethical challenge is encountered and has to be dealt with
  • An ethical dilemma occurs when choices offer potential for personal and/or organizational benefit but may be considered unethical
  • Ethical dilemmas faced by managers may include:
  • Discrimination (non-job-relevant bias)
  • Sexual harassment (inappropriate comments or actions of a sexual nature)
  • Conflicts of interest (bribes and kickbacks)
  • Customer confidence (sharing privileged information)
  • Organizational resources (office supplies and e-mail)


  • Unethical behaviour can be rationalized by convincing yourself:
  • Behaviour is not really illegal
  • Behaviour is really in everyone’s best interests
  • Nobody will ever find out
  • The organization will “protect” you






  • Factors influencing ethical managerial behaviour include:
  • The manager as a person: Family influences, religious values, personal standards and needs
  • The employing organization: Policies and codes of conduct, behaviour of supervisors and peers, organizational culture
  • The external environment: Government regulations, societal norms and values, ethical climate of industry



Checklist for dealing with ethical dilemmas 


  1. Recognize the ethical dilemma
  2. Get the facts
  3. Identify your options
  4. Test each option. Is it legal?; Is it right?; Is it beneficial?
  5. Decide which option to follow
  6. Double check decision. How would I feel if my family found out?; How would I feel if decision was printed in the local paper?
  7. Take action


Maintaining High Ethical Standards


  • Progressive organizations support a variety of methods for maintaining high ethical standards in the workplace including:


  • Ethics training:
  • Structured programs that help participants understand ethical aspects of decision making
  • Helps people incorporate high ethical standards into daily behaviours
  • Helps people deal with ethical issues while under pressure






  • Whistleblower protection:
    • Whistleblowers expose misdeeds of others in organizations
    • Laws protecting whistleblowers vary and can still be inadequate
    • Organizational barriers to whistleblowing include:
    • Strict chain of command
    • Strong work group identities encouraging loyalty
    • Ambiguous priorities making it hard to distinguish right from wrong
  • Top reasons for not reporting are:
    • No corrective action will be taken
    • Reports will not be kept confidential
  • Organizational methods for overcoming these barriers include formally-appointed ethics advocates, and use of moral quality circles


  • Ethical role models:
  • Top managers serve as ethical role models, setting ethical tone
  • Every manager can influence the ethical behaviour of people who work for and with them
  • Excessive pressure to accomplish goals that are too difficult can foster unethical behaviour. Managers should be realistic in setting performance goals for others


  • Codes of ethics:
  • Official written guidelines on how to behave in situations susceptible to the creation of ethical dilemmas
  • Areas often covered by codes of ethics:
  • Workforce diversity
  • Bribes and kickbacks
  • Political contributions
  • Honesty of books or records
  • Customer/supplier relationships
  • Confidentiality of corporate information
  • Although codes of ethical conduct are now common, codes alone cannot guarantee ethical conduct




Corporate Social Responsibility


  • Corporate social responsibility: an obligation of the organization to act in ways that serve both its own interests and the interests of society at large
  • Organizations have a social responsibility to serve the interests of its many stakeholders: persons, groups or other organizations directly affected by the behaviour of the organization and hold a stake in its performance (including employees, customers, suppliers, owners, competitors, regulators, interest groups)


  • Leadership beliefs that guide socially responsible practices:
    • People do their best in work environments with a balance of work and family life
  • Organizations perform best in healthy communities
  • Organizations gain by respecting the natural environment
  • Organizations must be managed and led for long-term success
  • Organizations must protect their reputation to ensure customer and stakeholder support


  • Perspectives on social responsibility:
  • The classical view holds that management’s only responsibility is to maximize profits. Arguments against social responsibility include:
  • Reduced business profits
  • Higher business costs
  • Dilution of business purpose
  • Gives businesses too much social power
  • Lack of public accountability


  • By contrast, the socioeconomic view holds that management must be concerned for the broader social welfare, not just profits. Arguments in favour of social responsibility include:
  • Adds long-run profits
  • Better public image
  • Avoids more government regulation
  • Businesses have resources and ethical obligation to act responsibly
  • Public at large wants businesses to act in this manner


  • A social responsibility audit can be used periodically to report on and systematically assess an organization’s accomplishments in areas of social responsibility
  • The social performance of organizations is driven by compliance (acting to avoid adverse consequences), or by conviction (acting to create a positive impact)


  • Criteria for evaluating corporate social performance:
  • Economic responsibility met? (is the organization profitable?)
  • Legal responsibility met (does it obey the law?)
  • Ethical responsibility met (is it doing the “right” things?)
  • Discretionary responsibility met (is it contributing to the broader community?)


  • Four strategies of corporate social responsibility:
  1. Obstructionist – fight social demands; meet economic responsibilities
  2. Defensive – do minimum legally required; meet economic and legal responsibilities
  3. Accommodative – do minimum ethically required; meet economic, legal, and ethical responsibilities
  4. Proactive – take leadership in social initiatives; meet all criteria of social performance; take preventative action


  • Social entrepreneurship involves undertaking tasks for the benefit of society rather than for personal profit
  • The desire to “give something back” to the communities in which the businesses operate










Organizations and Society


  • Not all managers and organizations accept the challenge of acting with conviction and proactive commitment to social responsibility


  • Government is often called upon to step in and act on the public’s behalf. Often pass laws and establish regulating agencies to control and direct organizational behaviour in areas such as:
  • Occupational safety and health
  • Fair labour practices
  • Consumer protection
  • Environmental protection


  • Just as governments take action to influence organizations, organizational leaders take action to influence governments through:
  • Personal contacts and networks (get to know important people)
  • Public relations campaigns (communicate positive images of their organization)
  • Lobbying (express opinions and preferences to government officials)
  • Political action committees (collect money and donate it to support favoured political candidates)


  • Corporate governance is the oversight of top management (particularly the CEO) by a board of directors
  • Ensures accountability for achieving performance objectives, while always doing so in an ethical and socially responsible manner
  • All managers must accept personal responsibility for doing the “right” things
  • Being a manager is a very socially responsible job