Business Ethics and Corporate Responsibility

Posted on May 19, 2025 in Economy

Cardinal Duties

These are rules of right behaviour that help protect the company, its people, and its reputation.

Obedience: Follow the law and company rules. If your boss tells you to break the law, you must follow the law first; they can be personally responsible. Laws always come first (if illegal, don’t do it).
Loyalty: Always act in the company’s best interest, not your own. Avoid conflicts of interest, don’t use company secrets or resources for personal gain. Don’t take business opportunities that belong to the company.
Good Faith: Be honest, fair, and act with integrity. Avoid intentionally harming the business. Don’t lie, cheat, or act recklessly in business decisions.
Care: Be careful and responsible in your actions. If you act carelessly and someone gets harmed, you can be held liable. Negligence is carelessness that causes harm.

Confidentiality

Don’t share private company information without permission. This builds trust and protects the business.

Avoiding Deception

Especially in important relationships (like doctor-patient or financial advisor-client), lying or leaving out important facts is fraud.

Disclosure Requirements

In some cases, you must share important information—especially if hiding it would mislead others.

Dimensions of Corporate Responsibility

Everything a business does affects workers, communities, cities, countries, and the world. Companies must be aware of their responsibilities and impact.

Economic Dimension: Companies create jobs, produce goods, stimulate growth, and boost innovation. But they can also cause unfair markets, income gaps, and monopolies if not careful.
Social Dimension: Companies influence people’s quality of life — like access to human rights and labour, children, healthcare, education, gender equality, and food & housing. Good companies support equality and protect human rights.
Environmental Dimension: This dimension helps the economy grow without harming people, the environment, or culture. Companies can pollute or waste resources, but they can also protect the environment by using sustainable practices. They are key to fighting climate change and preserving nature for the future.

New Business Models

Social Enterprise: A business that focuses more on helping people and solving problems than on maximizing profit. It also addresses social problems (like education or healthcare). Money earned is used to further its social mission.
Social Business: A company created primarily to solve a social issue, not to make a large profit. Profits are reinvested into helping more people, not distributed to owners. Investors can only recoup their initial investment.
Circular Economy: A system where businesses reuse, recycle, and design out waste instead of just producing and disposing of things. The goal is to protect the environment and save resources.
Bottom of the Pyramid (BoP): This involves making affordable products and services available to the poorest people in the world. It helps poor communities and creates new markets for companies.

Code of Ethics (COE)

Objectives of the Code of Ethics

Values: Integrate ethics into the company’s goals and actions.
Ethical Behaviour: Help staff make good, fair decisions at work.
Corporate Culture: Build a strong culture of honesty and openness for a sustainable business.
Risks: Reduce risks and avoid unethical behaviour.
Reputation: Build trust with customers, workers, and partners to support business success.
Sustainability: Reduce harm and increase positive impact on society and the planet (the 3 P’s: People, Planet, Profit).

Policies Supporting the Code of Ethics

For Employees: Employees must use IT and company resources properly, avoid fraud and bribery, respect privacy, support diversity, maintain health and safety, and report any wrongdoing.
For Shareholders: The company must communicate clearly with investors, plan for business continuity, follow laws, and prevent insider trading.
For Suppliers: Suppliers must be treated fairly, follow rules about gifts, imports/exports, and ensure safe working conditions without child labour.
For Competitors: Companies must compete fairly and follow competition laws without stealing information.
For Customers: Companies must offer safe products, provide honest information, market fairly, and treat animals ethically if used in research.
For the Community: Companies should support charities, protect the environment, respect human rights, and be responsible when dealing with governments.

Ethical Decision-Making Process

Identify the Company’s Ethics Framework: Understand the company’s values, rules, and principles (like honesty, fairness). Consider the need to avoid harm and support the less privileged.
Look at the Normative Dimensions: Think about what “should” be done based on universal values (justice, honesty). This represents the ideal way to act.
Consider Influencing Factors: Assess the seriousness of the situation. Notice pressures like company rules, peer influence, or unclear policies. Consider individual factors such as gender, education, age, and locus of control.
Identify the Ethical Issue and Its Intensity: Clearly understand how serious the ethical problem is.
Get the Facts: Gather reliable information (facts) — do not rely on opinions or rumours.
Generate and Evaluate Alternatives: Think of all possible solutions, look at the pros and cons, and see which one does the most good and the least harm. An alternative can succeed in both, fail in one, or fail in both.
Make a Decision: Choose the best option that respects values and is fair to everyone. Select the option that does the most good and the least harm.
Implement and Monitor: Put the decision into action, observe the results, and adjust if needed.

Piercing the Corporate Veil

Normally, a company protects its owners from personal responsibility for its debts and actions. However, if the company is used dishonestly (like for fraud or to avoid debts), a court can ‘pierce the corporate veil’, ignoring the company’s separate legal status and making the owner personally liable.