Textbook- CH 1

• After studying the chapter on the relationship between business and society, students will be able to:

  • Describe the complexity of the interrelationships between business and society
  • Define the terminology relating to the integrity of business management and students
  • Differentiate between the three main approaches to ethical thinking
  • Provide a brief description of the Canadian business system
  • Explain the role of the corporation as the main economic institution in the business system
  • Recognize that business operates with the consent of society
  • Summarize factors that influence society’s attitudes toward business that lead to criticisms of the system
  • Identify the groups mainly responsible for the operation of Canadian businesses
  • Describe the integration of business and society
• Vanessa Nugent was amazed, overwhelmed, and fascinated by the article on "fast fashion," which highlighted the approach used in the apparel industry to design, create, manufacture, and market on-trend, high-fashion-style, inexpensive clothing
• In the fast-fashion industry, innovations in the supply chain allowed for low prices and constantly changing fashions, but at the expense of stakeholders due to issues like pollution, forced labor, and poor working conditions
• Retailers like Zara, H&M, The Gap, and Forever 21 relied on the fast-fashion approach, constantly introducing new products to encourage consumer purchases
• Consumers benefitted from trendy clothing at affordable prices in the fast-fashion industry, but this encouraged a throw-away attitude with built-in product obsolescence
• Some retailers are attempting to break the fast-fashion cycle, like Fashion Takes Action, a non-profit organization focusing on sustainability in the fashion industry
• The relationship between business and society is complex, with each depending on the other, and various factors influencing society’s attitudes toward business
• Business corporations are expected to meet humanity’s needs without harming future generations, and increasing numbers of stakeholders demand corporations account for more than economic responsibilities
• Corporations are evaluated on key performance indicators like energy intensity, carbon intensity, water intensity, and more to determine their social responsibility and sustainability
• Integrity in business refers to the appropriateness of a corporation’s behavior and its adherence to moral guidelines acceptable to society, such as honesty and fairness
• Integrity in business refers to the appropriateness of a corporation’s behavior and its adherence to moral guidelines acceptable to society such as honesty, fairness, and justice
• Integrity in business is the same as acting ethically, but without the negative connotation, the moralizing tone, or the sense of naiveté
• Managing with integrity means that business leaders behave in a manner consistent with their own highest values and norms of behavior, which are self-imposed but not arbitrary or self-serving
• According to De George, acting with integrity means both acting in accordance with one’s highest self-accepted norms of behavior and imposing on oneself the norms demanded by ethics and morality
• Ethics apply to business in the same manner as they do in any other institution in society, with no ethics unique to business; it is only the issues and settings that are different
• Integrity results in the responsible corporation, a business undertaking that responds to social, ethical, and environmental responsibilities in addition to its economic obligations
• Key terminologies relating to integrity in business:

  • Ethics of business: rules, standards, codes, or principles guiding morally appropriate behavior in managerial decision making
  • Stakeholder: an individual or group who can influence and/or is influenced by an organization’s purpose
  • Corporate social responsibility (CSR): achieving a balance among economic, social, and environmental responsibilities
  • Corporate sustainability (CS): demonstrating social, environmental, and economic responsibilities in business operations
  • Triple bottom line: evaluating a corporation’s performance based on economic, social or ethical, and environmental value
  • Corporate citizenship: a corporation considering its role in society and the environment in addition to its economic influence
• Ethical issues for students include plagiarism, cheating on examinations, bringing unauthorized materials into the classroom, and disrespectful behavior
• Main approaches to ethical thinking:

  • Not everyone understands or interprets ethics in the same way
• Ethical thinking in business:

  • Not everyone interprets ethics the same way, leading to disagreements on appropriate behavior by businesses
  • Many decisions involving ethics are made automatically based on individual value standards and judgments, not ethical principles
  • Different countries, cultures, and religions may define right and wrong differently, leading to ethical dilemmas where effort is required to sort out right versus wrong
• Three dominant approaches to normative theories of ethics:

  • Deontological ethics: actions are ethical if done for the sake of what is good without regard for consequences, based on duty and adherence to universal principles
  • Teleological ethics: focus on outcomes or results of actions, with utilitarianism as a well-known variation
  • Virtue ethics: emphasizes the character or identity of the individual, focusing on being rather than doing, based on the development of good character traits or virtues
• Deontological ethics:

  • Actions are ethical if done for the sake of what is good without regard for consequences
  • Decisions are based on duty and adherence to universal principles
• Teleological ethics:

  • Focus on outcomes or results of actions
  • Utilitarianism is a well-known variation, based on utility or usefulness
• Virtue ethics:

  • Emphasizes the character or identity of the individual, focusing on being rather than doing
  • Based on the development of good character traits or virtues
• Comparison of Approaches to Ethical Thinking:

  • Deontological or Rule-Based Theories
  • Focus on moral obligations, duties, and rights
  • Rules should guide decision making and behavior
  • Example: Categorical Imperative
  • Teleological or Consequential Theories
  • Focus on goals, outcomes, or results
  • Emphasizes maximum benefit and minimum harm
  • Example: Utilitarianism
  • Virtue Ethics
  • Based on character of individual
  • If individual has good traits or virtues, decisions will be good or ethical
• Adam Smith, the "Father of Capitalism":

  • Scottish philosopher and economist with major impact on capitalist economic systems worldwide
  • Believed in the "invisible hand" concept for efficient resource distribution in competitive markets without government intervention
• Economic systems:

  • Every country has an economic system using land, labor, and capital to produce, distribute, and exchange goods and services
  • Canadian business system is mainly a private-sector economic system or capitalism, allowing individual businesses to provide goods and services
• The Canadian business system includes various enterprises from sole proprietorships to partnerships and incorporated entities
• For larger undertakings or shared ownership, partnerships are formed
• Most business enterprises in Canada are small- and medium-sized enterprises
• When a business incorporates, a separate legal entity is created with limited liability for owners
• Two doctrines of incorporation exist: the "concession" doctrine and the "freedom of association" doctrine
• The "concession" doctrine views incorporation as a concession granted by the sovereign, while the "freedom of association" doctrine is based on the right to freely associate
• The modern corporation is described by the "freedom of association" doctrine, requiring greater responsibility and accountability to society
• Legitimacy and social license are concepts illustrating the relationship between the business system and society
• Trust in business is a factor in determining legitimacy and social license
• Social license is the privilege of operating in society with minimal formalized restrictions based on maintaining public trust
• A social license must be earned and maintained by doing what is acceptable to stakeholders in the business and society relationship
• Trust in large corporations declined from 28% to 20% between 2016 and 2019 in Canada
• Factors influencing attitudes toward Canadian business include trust, legitimacy, credibility, and societal approval