Chapter 4: Ethics and Social Responsibility for the Golf and Club Industry

Note: The comparison below is between this text and the current version of the text from which it was adapted.

additions / deletions

Learning Objectives



By the end of the chapter, you should be able to:

 	
Define business ethics and explain what it means to act ethically in business.
 	
Explain why we study business ethics.
 	
Identify ethical issues that you might face in business and explain rationalizations for unethical behaviour.
 	
Identify steps you can take to maintain your honesty and integrity in a business environment.
 	
Define corporate social responsibility and explain how organizations are responsible to their stakeholders, including owners, employees, customers, and the community.
 	
Discuss how you can identify an ethical organization, and how organizations can prevent behaviour like sexual harassment.
 	
Recognize how to avoid an ethical lapse, and why you should not rationalize when making decisions.



What really motivates people to be honest in business
Each year, one in seven large corporations commits fraud. Why? To find out, watch the video:  What really motivates people to be honest in business by TED [13:18] where Alexander Wagner takes us inside the economics, ethics, and psychology of doing the right thing. Join him for an introspective journey down the slippery slopes of deception as he helps us understand why people behave the way they do.
 

https://www.ted.com/talks/alexander_wagner_what_really_motivates_people_to_be_honest_in_business

 

Point to Ponder



How can we apply the principles of Alexander Wagner's talk to the golf and club industry? From the decisions on how we safely apply hazardous chemicals on the golf course to the ways we choose to handle waste from the clubhouse, managers and owners are faced with these decisions every day!




A Managers "Cautionary Tale" [footnote]Grimaldi, J. (2017, Jan 18). York Downs golf exec admits to defrauding club of $600k. Metroland Media Group. https://www.gottarent.com/news-story/7071255-york-downs-golf-exec-admits-to-defrauding-club-of-600k/[/footnote]
York Downs,  a Markham, Ontario golf course was defrauded of more than $600,000 by the club's general manager, Leonardo De La Fuente. De La Fuente apparently used the money to pay for his personal home renovations and support his lavish lifestyle. The fraud was discovered when De La Fuente paid an electrician working on his family's home with a club cheque that included incorrect information. Club administrators were notified when the information required verification. They then hired a  forensic accountant who discovered this was not the only instance of fraud.

According to the former club's president Donald Matheson,  De La Fuente "has not only shattered the trust and faith of the club and its members but has systematically unraveled the structure in which the club has always operated… Faith has been eroded… Seeds of doubt have been sewn within the greater community of the club”. De La Fuente was found guilty and served time in jail. He was also ordered to pay restitution to the club. In 2015, the club was sold.


What is Business Ethics?
It’s in the best interest of a company to operate ethically. Trustworthy companies are better at attracting and keeping customers, talented employees, and capital. Those tainted by questionable ethics suffer from dwindling customer bases, employee turnover, and investor mistrust.
Let’s begin this section by addressing this question: What can individuals, organizations, and government agencies do to foster an environment of ethical behaviour in business? First, of course, we need to define the term ethics.

What Is Ethics?
You probably already know what it means to be ethical: to know right from wrong and to know when you’re practicing one instead of the other. Business ethics is the application of ethical behaviour in a business context. Acting ethically in business means more than simply obeying applicable laws and regulations. It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your company, its owners, and its workers. If you’re in business you obviously need a strong sense of what’s right and wrong. You need the personal conviction to do what’s right, even if it means doing something that’s difficult or personally disadvantageous.

Why Study Ethics?
Ideally, prison terms, heavy fines, and civil suits would discourage corporate misconduct, but, unfortunately, many experts suspect that this assumption is a bit optimistic. Whatever the condition of the ethical environment in the near future, one thing seems clear: the next generation entering the business—which includes most of you—will find a world much different than the one that waited for the previous generation. Recent history tells us in no uncertain terms that today’s business students, many of whom are tomorrow’s business leaders, need a much sharper understanding of the difference between what is and isn’t ethically acceptable. As a business student, one of your key tasks is learning how to recognize and deal with the ethical challenges that will confront you. Asked what he looked for in a new hire, Warren Buffet, the world’s most successful investor, replied: “I look for three things. The first is personal integrity, the second is intelligence, and the third is a high energy level.” He paused and then added: “But if you don’t have the first, the second two don’t matter". [footnote]Gostick, A., & Telford D. (2003). The Integrity Advantage. Salt Lake City: Gibbs Smith.[/footnote]




Identifying Ethical Issues and Dilemmas
Ethical issues are the difficult social questions that involve some level of controversy over what is the right thing to do. Environmental protection is an example of a commonly discussed ethical issue because there can be trade-offs between environmental and economic factors.


Tips to maintain honesty and integrity


 	
Follow your own code of personal conduct; act according to your own convictions rather than doing what's convenient (or profitable) at the time.
 	
While at work, focus on your job, not on non-work-related activities, such as emails and personal phone calls.
 	
Don't appropriate office supplies or products or other company resources for your own use.
 	
Be honest with customers, management, coworkers, competitors, and the public.
Remember that it's the small seemingly trivial, day-to-day activities and gestures that build your character.



 
Make no mistake about it: when you enter the business world, you’ll find yourself in situations in which you’ll have to choose the appropriate behaviour. How, for example, would you answer questions like the following?


 	
Is it OK to accept a pair of sports tickets from a supplier?
 	
Can I buy office supplies from my brother-in-law?
 	
Is it appropriate to donate company funds to a local charity?
 	
If I find out that a friend is about to be fired, can I warn her?

Obviously, the types of situations are numerous and varied. Fortunately, we can break them down into a few basic categories: issues of honesty and integrity, conflicts of interest and loyalty, bribes versus gifts, and whistle-blowing. Let’s look a little more closely at each of these categories.

Issues of Honesty and Integrity
Master investor Warren Buffet once told a group of business students the following: “I cannot tell you that honesty is the best policy. I can’t tell you that if you behave with perfect honesty and integrity somebody somewhere won’t behave the other way and make more money. But honesty is a good policy. You’ll do fine, you’ll sleep well at night and you’ll feel good about the example you are setting for your coworkers and the other people who care about you". [footnote]Gostick, A., & Telford D. (2003). The Integrity Advantage. Salt Lake City: Gibbs Smith.[/footnote]
If you work for a company that settles for its employees’ merely obeying the law and following a few internal regulations, you might think about moving on. If you’re being asked to deceive customers about the quality or value of your product, you’re in an ethically unhealthy environment.


Ethically Toxic Environments


Think about this story:
“A chef put two frogs in a pot of warm soup water. The first frog smelled the onions, recognized the danger, and immediately jumped out. The second frog hesitated: The water felt good, and he decided to stay and relax for a minute. After all, he could always jump out when things got too hot (so to speak). As the water got hotter, however, the frog adapted to it, hardly noticing the change. Before long, of course, he was the main ingredient in frog-leg soup.” [footnote]Gostick, A., & Telford D. (2003). The Integrity Advantage. Salt Lake City: Gibbs Smith.[/footnote]
So, what’s the moral of the story? Don’t sit around in an ethically toxic environment and lose your integrity a little at a time; get out before the water gets too hot and your options have evaporated. 



Conflicts of Interest
Conflicts of interest occur when individuals must choose between taking actions that promote their personal interests over the interests of others or taking actions that don’t. A conflict can exist, for example, when an employee’s own interests interfere with or have the potential to interfere with, the best interests of the company’s stakeholders (management, customers, and owners). Let’s say that you work for a company with a contract to cater events at your college and that your uncle owns a local bakery. Obviously, this situation could create a conflict of interest (or at least give the appearance of one—which is a problem in itself). When you’re called on to furnish desserts for a luncheon, you might be tempted to send some business your uncle’s way even if it’s not in the best interest of your employer. What should you do? You should disclose the connection to your boss, who can then arrange things so that your personal interests don’t conflict with the company.
The same principle holds that an employee shouldn’t use private information about an employer for personal financial benefit. Say that you learn from a coworker at your pharmaceutical company that one of its most profitable drugs will be pulled off the market because of dangerous side effects. The recall will severely hurt the company’s financial performance and cause its stock price to plummet. Before the news becomes public, you sell all the stock you own in the company. What you’ve done is called insider trading – acting on information that is not available to the general public, either by trading on it or providing it to others who trade on it. Insider trading is illegal, and you could go to jail for it.

Conflicts of Loyalty
You may one day find yourself in a bind between being loyal either to your employer or to a friend or family member. Perhaps you just learned that a coworker, a friend of yours, is about to be downsized out of his job. You also happen to know that he and his wife are getting ready to make a deposit on a house near the company headquarters. From a work standpoint, you know that you shouldn’t divulge the information. From a friendship standpoint, though, you feel it’s your duty to tell your friend. Wouldn’t he tell you if the situation were reversed? So what do you do? As tempting as it is to be loyal to your friend, you shouldn’t tell. As an employee, your primary responsibility is to your employer. You might be able to soften your dilemma by convincing a manager with the appropriate authority to tell your friend the bad news before he puts down his deposit.

Bribes Versus Gifts 
It’s not uncommon in business to give and receive small gifts of appreciation, but when is a gift unacceptable? When is it really a bribe? 
There’s often a fine line between a gift and a bribe. The following information may help in drawing it, because it raises key issues in determining how a gesture should be interpreted: the cost of the item, the timing of the gift, the type of gift, and the connection between the giver and the receiver. If you’re on the receiving end, it’s a good idea to refuse any item that’s overly generous or given for the purpose of influencing a decision. Because accepting even small gifts may violate company rules, always check on company policy.  The example below is from the London Hunt and Country Club Employee Policy Manual;



Gifts, Gratuities, Favours, and Entertainment

During business interactions at the London Hunt and Country Club, sales representatives, purchasers, members, guests, and others may offer an employee, gifts, incentives, tips, promotional merchandise, or low-cost products and services. Any offering should be treated as belonging to the Club. Items valued at less than $25 should be communicated by email to the Department Manager. The Department Manager will then confirm if the employee can retain the items. All other special offerings and/or gifts must be communicated to the General Manager by email for review. All employees have an obligation to disclose any such offering. Violation of this policy could lead to immediate suspension or termination of employment with the London Hunt and Country Club.[footnote]Jon Nusink (General Manager/COO) London Hunt and Country Club in discussion with author June 2022[/footnote]


Whistleblowing
Whistleblowing was defined in 1972 by Ralph Nader as “an act of a man or a woman who, believing in the public interest overrides the interest of the organization he serves, publicly blows the whistle if the organization is involved in corrupt, illegal, fraudulent or harmful activity”. [footnote]Nader, R., Petkas, P., & Blackwell, K. (1972). Whistle Blowing: The Report on the Conference on Professional Responsibility. Viking Compass/Grossman Publishers.[/footnote] While there are increasing incentives from governments and regulators for whistleblowers to go public about corporate misconduct, protections for whistleblowers are still very limited. Few Canadian laws pertain directly to whistleblowing and therefore whistleblowers are mostly unprotected by statute.

 	
There is, however, a patchwork of protection provisions for whistleblowers under the Canadian Criminal Code, Public Servants Disclosure Protection Act (PSDPA), the Public Service of Ontario Act, 2006 as well as the Securities Act.
 	
Section 425.1 of the Criminal Code, for example, states that employers may not threaten or take disciplinary action against, demote or terminate an employee in order to deter her/him from reporting information regarding an offence s/he believes has or is being committed by her/his employer to the relevant law enforcement authorities.

An employer cannot threaten an employee with negative repercussions to deter them from contacting law enforcement with information about the employer’s offence. Punishment for employers who make such threats or reprisals can include up to five years imprisonment and/or fines.

In early 2018, a Canadian whistleblower received worldwide recognition for disclosing the amount and kinds of data harvested by Cambridge Analytica through personal Facebook accounts. However, there are other, prominent Canadian whistleblowers.



Corporate Social Responsibility
Corporate social responsibility (CSR) refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economical, ethical, and social decisions. Remember that we previously define stakeholders as those with a legitimate interest in the success or failure of the business and the policies it adopts. The term social responsibility refers to the approach that an organization takes in balancing its responsibilities toward its various stakeholders.

What motivates companies to be "socially responsible"? We hope it's because they want to do the right thing, and for many companies, "doing the right thing" is a key motivator. The fact is, it's often hard to figure out what the "right thing" is: what's "right" for one group of stakeholders isn't necessarily "right" for another. One thing, however, is certain: companies today are held to higher standards than ever before. Consumers and other groups consider not only the quality and price of a company's products but also its character. If too many groups see a company as a poor corporate citizen, it will have a harder time attracting qualified employees, finding investors, and selling its products. Good corporate citizens, by contrast, are more successful in all these areas.

Additional Reading
Included in this chapter is an optional open access article updating Carroll's Pyramid by Carroll himself and diving deeper into CSR.

Excerpted from: Carroll, A. B. (2016). Carroll’s pyramid of CSR: Taking another look. International Journal of Corporate Social Responsibility, 1(3). https://doi.org/10.1186/s40991-016-0004-6


Another Lens
Carroll's Pyramid is a well-respected resource for situating corporate social responsibility. Another view of corporate social responsibility is from the perspective of a company’s relationships with its stakeholders. In this model, the focus is on managers—not owners—as the principals involved in these relationships. Owners are the stakeholders who invest risk capital in the club in expectation of a financial return. Other stakeholders include employees, suppliers, and the communities in which the club does business. Proponents of this model hold that customers, who provide the club with revenue, have a special claim on managers’ attention. The arrows indicate the two-way nature of corporation-stakeholder relationships. All stakeholders have some claim on the club’s resources and returns, and management’s job is to make decisions that balance these claims. [footnote]Baron, D. P. (2003). Business and Its Environment (4th ed.). Upper Saddle River, NJ: Prentice Hall.[/footnote]


[caption id="attachment_567" align="alignnone" width="1024"] "The Golf Business's relationship with stakeholders" by Alyssa Giles, CC BY-NC-SA 4.0[/caption]
Let’s look at some of the ways in which companies can be “socially responsible” in considering the claims of various stakeholders.


Owners
Owners invest money in companies. In return, the people who run a company have a responsibility to increase the value of owners’ investments through profitable operations.  Managers also have a responsibility to provide owners (as well as other stakeholders having financial interests, such as creditors and suppliers) with accurate, reliable information about the performance of the business. 
Managers
Managers have what is known as a fiduciary responsibility to owners: they’re responsible for safeguarding the company’s assets and handling its funds in a trustworthy manner. Yet managers experience what is called the agency problem; a situation in which their best interests do not align with those of the owners who employ them. To enforce managers’ fiduciary responsibilities for a club's financial statements and accounting records, Ontario’s Keeping the Promise for a Strong Economy Act (Budget Measures) 2002, also known as Bill 198, (Canadian equivalent to Sarbanes-Oxley Act of 2002 in the United States) requires CEOs and CFOs to attest to their accuracy. The law also imposes penalties on corporate officers, auditors, board members, and any others who commit fraud. You’ll learn more about this law in your accounting and business law courses.
Employees
Companies are responsible for providing employees with safe, healthy places to work—as well as environments that are free from sexual harassment and all types of discrimination. They should also offer appropriate wages and benefits. In the following sections, we’ll take a closer look at these areas of corporate responsibility.
Wages and Benefits
At the very least, employers must obey laws governing minimum wage and overtime pay. A minimum wage is set by the provincial government. As of October 2022, the Ontario general minimum wage rate is $15.50.  By law, employers must also provide certain benefits—Canadian Pension Plan (CPP -retirement funds), unemployment insurance (protects against loss of income in case of job loss), and depending on the industry, workers’ compensation (covers lost wages and medical costs in case of on-the-job injury). Most large companies pay most of their workers more than minimum wage and offer broader benefits, including medical, dental, and vision care, as well as savings programs, in order to compete for talent.

Safety and Health
Though it seems obvious that companies should guard workers’ safety and health, some simply don’t. Currently, responsibility for workers' compensation and occupational health and safety issues falls largely to provinces or territories – and each jurisdiction has different approaches.
The Occupational Health and Safety Act sets out the rights and duties of all parties in Ontario workplaces, as well as the procedures for dealing with workplace hazards and for enforcement as needed. Industries share the goal of making Ontario's workplaces safe and healthy. The Occupational Health and Safety Act provides the legal framework and the tools to achieve this goal. It sets out the rights and duties of all parties in the workplace. It establishes procedures for dealing with workplace hazards and it provides for enforcement of the law where compliance has not been achieved voluntarily by workplace parties. [footnote]Ontario Ministry of Labour, Immigration, Training and Skills Development. (2002, May 21). Guide to the Occupational Health and Safety Act https://www.ontario.ca/document/guide-occupational-health-and-safety-act#:~:text=The%20Occupational%20Health%20and%20Safety%20Act%20sets%20out%20the%20rights,and%20for%20enforcement%20as%20needed [/footnote]

Some associations such as the PGA of Canada, provide guidelines to its members in order to decrease health and safety concerns. In response to the COVID-19 pandemic, PGA Canada released golf club best practices.
Members & Customers
The purpose of any business is to satisfy customers, who reward businesses by buying their products. Sellers are also responsible—both ethically and legally—for treating customers fairly. This means customers have:



 	
The right to safe products. A company should sell no product that it suspects of being unsafe for buyers. Thus, producers have an obligation to safety-test products before releasing them for public consumption. The automobile industry, for example, conducts extensive safety testing before introducing new models (though recalls remain common).
 	
The right to be informed about a product. Sellers should furnish consumers with the product information that they need to make an informed purchase decision. That’s why pillows have labels identifying the materials used to make them, for instance.
 	
The right to choose what to buy. Consumers have a right to decide which products to purchase, and sellers should let them know what their options are. Pharmacists, for example, should tell patients when a prescription can be filled with a cheaper brand-name or generic drug. Telephone companies should explain alternative calling plans.
 	
The right to be heard. Companies must tell customers how to contact them with complaints or concerns. They should also listen and respond.

Companies share the responsibility for the legal and ethical treatment of consumers with several government agencies.
From the federal Office of Consumer Affairs (https://www.ic.gc.ca): 
In Canada, consumer complaints are regulated by different levels of government, as well as non-government organizations. Finding the right place to direct your complaint is not always easy, but understanding your rights as a consumer is an important part of the complaint filing process.




Provincial & Territorial Consumer Protection Legislation
Federal Consumer Protection Legislation


Many consumer complaints fall under provincial and territorial jurisdiction, including issues related to:

 	
buying goods and services;
 	
contracts;
 	
the purchase, maintenance, or repair of motor vehicles;
 	
credit reporting agencies and the practices of collection agencies.



Federal agencies and departments are responsible for enforcing legislation related to various issues, including:


 	
consumer product safety;
 	
food-safety;
 	
consumer product packaging and labeling;
 	
anti-competitive practices, such as price-fixing and misleading advertising;
 	
privacy complaints.





 

Additional Readings
Follow or bookmark this link for some of the more relevant areas where federal agencies and departments regulate consumer issues: https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02965.html
In Ontario, customers have the added protection of the Consumer Protection Act. 


Communities
For obvious reasons, most communities see getting a new business as an asset and view losing one—especially a large employer—as a detriment. After all, the economic impact of business activities on local communities is substantial: they provide jobs, pay taxes, and support local education, health, and recreation programs. Both big and small businesses donate funds to community projects, encourage employees to volunteer their time, and donate equipment and products for a variety of activities. Larger companies can make greater financial contributions. Let’s start by taking a quick look at the philanthropic activities of Canadian Golf Courses and Clubs.

Philanthropy
Many golf courses and clubs support various charities, an activity called philanthropy. As per the "We Are Golf" 2019 Economic Impact of Golf on Canada, there is a considerable charitable component. "The golf industry generated an estimated $330M in charitable impact through more than 51,000 tournaments and events" [footnote]National Allied Golf Associations (NAGA). (2020, November 2). We Are Golf’ releases Economic Impact of Golf in Canada (2019).https://www.golfcanada.ca/articles/golf-releases-economic-impact-golf-canada-2019/ [/footnote]
Not to mention the various donations golf clubs provide to local events within the communities they operate.
Ethical Organizations
One goal of anyone engaged in business should be to foster ethical behaviour in the organizational environment. How do we know when an organization is behaving ethically? Most lists of ethical organizational activities include the following criteria:


 	
Treating employees, customers, investors, and the public fairly
 	
Holding every member personally accountable for his or her action
 	
Communicating core values and principles to all members
 	
Demanding and rewarding integrity from all members in all situations [footnote]Axelrod, A. (2007). My First Book of Business Ethics. Philadelphia: Quirk Books.[/footnote]

Employees at companies that consistently make Business Ethics magazine’s list of the “100 Best Corporate Citizens” regarding the items on the previous list as business as usual in the workplace. Companies at the top of the 2016 list include Microsoft, Hasbro, Ecolab, Bristol-Myers-Squibb, and Lockheed Martin. [footnote]Corporate Responsibility Magazine. (2016). 100 Best Corporate Citizens for 2016.[/footnote]
By contrast, employees with the following attitudes tend to suspect that their employers aren’t as ethical as they should be:


 	
They consistently feel uneasy about the work they do.
 	
They object to the way they’re treated.
 	
They’re uncomfortable about the way coworkers are treated.
 	
They question the appropriateness of management directives and policies. [footnote]Axelrod, A. (2007). My First Book of Business Ethics. Philadelphia: Quirk Books.[/footnote]

Sexual Harassment
Sexual harassment occurs when an employee makes “unwelcome sexual advances, requests for sexual favours, and other verbal or physical conduct of a sexual nature” to another employee. It’s also considered sexual harassment when “submission to or rejection of this conduct explicitly or implicitly affects an individual’s employment, unreasonably interferes with an individual’s work performance or creates an intimidating, hostile or offensive work environment.” [footnote] the U.S. Equal Employment Opportunity Commission. (2016). Facts about Sexual Harassment. Retrieved from: https://www.eeoc.gov/facts/fs-sex.html[/footnote]
To prevent sexual harassment—or at least minimize its likelihood—a company should adopt a formal anti-harassment policy describing prohibited conduct, asserting its objections to the behaviour, and detailing penalties for violating the policy. Employers also have an obligation to investigate harassment complaints. Failure to enforce anti-harassment policies can be very costly. At the end of 2017, 353 women had submitted and finalized sexual harassment, discrimination, or intimidation claims against the RCMP with as many as another 650 expected to file. To settle these claims, the government of Canada has set aside $100 million.

Workforce Diversity & Inclusive Workplaces

In addition to complying with equal employment opportunity laws, many companies make special efforts to recruit employees who are underrepresented in the workforce according to sex, race, or some other characteristic. In helping to build more inclusive workforces, such initiatives contribute to competitive advantage for two reasons: 


 	
People from diverse backgrounds bring new talents and fresh perspectives to an organization, typically enhancing creativity in the development of new products. 
 	
By more accurately reflecting the demographics of the marketplace, a diverse workforce improves a company’s ability to serve an ethnically diverse population.



Each year The Globe and Mail, reports on Canada's Top 100 Employers. Peruse the list of industry winners and follow through to highlights detailing why the company topped the list.

Please note the selection process:

To determine this year's winners of Canada's Best Diversity Employers competition, Mediacorp editors reviewed diversity and inclusiveness initiatives at employers that applied for Canada's Top 100 Employers project. From this applicant pool, a smaller short-list of employers with noteworthy and unique diversity initiatives was developed. The short-listed candidates' programs were compared to those of other employers in the same field. The finalists chosen represent the diverse leaders in their industry and region of Canada.





The Individual Approach to Ethics
How can you make sure that you do the right thing in the business world? How should you respond to the kinds of challenges that you’ll be facing? Because your actions in the business world will be strongly influenced by your moral character, let’s begin by assessing your current moral condition. Which of the following best applies to you (select one)?


 	
I’m always ethical.
 	
I’m mostly ethical.
 	
I’m somewhat ethical.
 	
I’m seldom ethical.
 	
I’m never ethical.

Now that you’ve placed yourself in one of these categories, here are some general observations. Few people put themselves below the second category. Most of us are ethical most of the time, and most people assign themselves to category number two— “I’m mostly ethical.” Why don’t more people claim that they’re always ethical?
Apparently, most people realize that being ethical all the time takes a great deal of moral energy. If you placed yourself in category number two, ask yourself this question: How can I change my behaviour so that I can move up a notch? The answer to this question may be simple. Just ask yourself an easier question: How would I like to be treated in a given situation? [footnote]Maxwell, J. C. (2003). There’s No Such Thing as “Business Ethics”: There’s Only One Rule for Making Decisions. New York: Warner Books.[/footnote]
Unfortunately, practicing this philosophy might be easier in your personal life than in the business world. Ethical challenges arise in business because companies, especially large ones, have multiple stakeholders who sometimes make competing demands. Making decisions that affect multiple stakeholders isn’t easy even for seasoned managers; and for new entrants to the business world, the task can be extremely daunting. You can, however, get a head start in learning how to make ethical decisions by looking at two types of challenges that you’ll encounter in the business world: ethical dilemmas and ethical decisions.


Making Ethical Decisions


In contrast to the “right-versus-right” problem posed by an ethical dilemma, an ethical decision entails a “right-versus-wrong” decision—one in which there is clearly a right (ethical) choice and a wrong (unethical or illegal) choice. When you make a decision that’s unmistakably unethical or illegal, you’ve committed an ethical lapse. If you’re presented with this type of choice, ask yourself the following questions and increase your odds of making an ethical decision.



 	
Is the action illegal?
 	
Is it unfair to some stakeholders?
 	
If I do it, will I feel bad about it?
 	
Will I be ashamed to tell my family friends, coworkers, or boss?
 	
Will I be embarrassed if my action is written up in the newspaper?



Refusing to Rationalize
Despite all the good arguments in favour of doing the right thing, why do many reasonable people act unethically (at least at times)? Why do good people make bad choices? According to one study, there are four common rationalizations (excuses) for justifying misconduct: [footnote]Gellerman, S. W. (1986, July). Why “Good” Managers Make Bad Ethical Choices. Harvard Business Review on Corporate Ethics. Retrieved from: https://hbr.org/1986/07/why-good-managers-make-bad-ethical-choices[/footnote]


 	
My behaviour isn’t really illegal or immoral. Rationalizers try to convince themselves that action is OK if it isn’t downright illegal or blatantly immoral. They tend to operate in a gray area where there’s no clear evidence that the action is wrong.
 	
My action is in everyone’s best interests. Some rationalizers tell themselves: “I know I lied to make the deal, but it’ll bring in a lot of business and pay a lot of bills.” They convince themselves that they’re expected to act in a certain way. [footnote]Gostick, A., & Telford, D. (2003). The Integrity Advantage. Salt Lake City: Gibbs Smith.[/footnote]
 	
No one will find out what I’ve done. Here, the self-questioning comes down to “If I didn’t get caught, did I really do it?” The answer is yes. There’s a simple way to avoid succumbing to this rationalization: always act as if you’re being watched.
 	
The company will condone my action and protect me. This justification rests on a fallacy.


If you find yourself having to rationalize a decision, it’s probably a bad one.


What to Do When the Light Turns Yellow



Like our five questions, some ethical problems are fairly straightforward. Others, unfortunately, are more complicated, but it will help to think of our five-question test as a set of signals that will warn you that you’re facing a particularly tough decision— that you should think carefully about it and perhaps consult someone else. The situation is like approaching a traffic light. Red and green lights are easy; you know what they mean and exactly what to do. Yellow lights are trickier. Before you decide which pedal to hit, try posing our five questions. If you get a single yes, you’ll almost surely be better off hitting the brake. [footnote]Online Ethics Center for Engineering and Science. (2004). Advice from the Texas Instruments Ethics Office: Article Number 280: What do you do when the light turns yellow? Onlineethics.org. Retrieved from: https://web.archive.org/web/20060517161459/http://onlineethics.org/corp/help.html[/footnote]



 

Key  Terms
Ethics is used to describe moral principles that govern a person's behavior or conduct during an activity.

Business ethics is the study of how a business should act when faced with ethical dilemmas and controversial situations in a business context. Business ethics is important because it enables a business to work within the boundaries of the law, and ensures that the business is not committing crimes against its employees, customers, consumers, and other stakeholders and interested parties.

Conflicts of interest occur when individuals must choose between taking actions that promote their personal interests over the interests of others or taking actions that don’t.

Whistleblowing was defined as an act of a man or a woman who, believing in the public interest overrides the interest of the organization he serves, publicly blows the whistle if the organization is involved in corrupt, illegal, fraudulent or harmful activity.

Corporate social responsibility (CSR) refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders when making legal, economical, ethical, and social decisions.

Sexual harassment occurs when an employee makes “unwelcome sexual advances, requests for sexual favours, and other verbal or physical conduct of a sexual nature” to another employee.




 



Key Takeaways



 	
Business ethics is the application of ethical behaviour in a business context. Ethical (trustworthy) companies are better able to attract and keep customers, talented employees, and capital.
 	
Acting ethically in business means more than just obeying laws and regulations. It also means being honest, doing no harm to others, competing fairly, and declining to put your own interests above those of your employer and coworkers.
 	
In the business world, you’ll encounter conflicts of interest: situations in which you’ll have to choose between taking action that promotes your personal interest and action that favors the interest of others.
 	
Corporate social responsibility refers to the approach that an organization takes in balancing its responsibilities toward different stakeholders (owners, employees, customers, and the communities in which they conduct business) when making legal, economic, ethical, and social decisions.
 	
Managers have several responsibilities: to increase the value of owners’ investments through profitable operations, to provide owners and other stakeholders with accurate, reliable financial information, to safeguard the company’s assets, and to handle its funds in a trustworthy manner.
 	
Companies have a responsibility to pay appropriate wages and benefits, treat all workers fairly, and provide equal opportunities for all employees. In addition, they must guard workers’ safety and health and provide them with a work environment that’s free from sexual harassment.
 	
Consumers have certain legal rights: to use safe products, to be informed about products, to choose what to buy, and to be heard. Sellers must comply with these requirements.
 	
Business people face two types of ethical challenges: ethical dilemmas and ethical decisions.
 	
An ethical dilemma is a morally problematic situation in which you must choose competing and often conflicting options which do not satisfy all stakeholders.
 	
An ethical decision is one in which there’s a right (ethical) choice and a wrong (unethical or downright illegal) choice.