Chapter 1 Smartbook

Question 1

Definition of Integrity

Answer 1

The appropriateness of a corporation’s behaviour and its adherence to moral guidelines acceptable to society such as honesty, fairness, and justice.

Question 2

0

What does managing with integrity mean for business leaders?

Answer 2

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.

Question 3

Does acting with integrity demand moral perfection?

Answer 3

No, acting with integrity does not insist on moral perfection; instead, it demands taking ethical considerations seriously

Question 4

Definition of Business Ethics

Answer 4

The rules, standards, codes, or principles that provide guidelines for morally right behaviour and truthfulness in specific situations.

Question 5

Definition of Stakeholder

Answer 5

An individual or group who can influence and/or is influenced by the achievement of an organization’s purpose.

Question 6

Definition of Corporate social responsibility (CSR)

Answer 6

The way a corporation achieves a balance among its economic, social, and environmental responsibilities in its operations so as to address shareholder and other stakeholder expectations.

Question 7

Definition of Corporate sustainability (CS)

Answer 7

Corporate activities demonstrating the inclusion of social and environmental as well as economic responsibilities in business operations as they impact all stakeholders presently and in the future.

Question 8

Definition of Triple Bottom Line

Answer 8

Triple-E (economic, ethical, and environmental) bottom line:

Evaluates a corporation’s performance according to a summary of the economic, social, and environmental value the corporation adds or destroys.

Question 9

Definition of Corporate citizenship

Answer 9

Corporate citizenship
Occurs when a corporation demonstrates that it takes into account its complete impact on society and the environment as well as its economic influence.

Question 10

Definition of Responsible corporation

Answer 10

A business undertaking that responds to social, ethical, and environmental responsibilities in addition to its economic obligations.

Question 11

What are the three dominant approaches to normative theories of ethics?

Answer 11

Deontological ethics
Teleological ethics
Virtue ethics

Question 12

Definition of Deontological ethics

Answer 12

An approach to ethics that determines goodness or rightness from examining the acts rather than from the consequences of the acts.

Deontological ethics focuses on the ethical nature of actions, which are considered ethical when done for the sake of what is good without regard for the consequences.

Question 13

How are decisions made in deontological ethics, and what do they prioritize?

Answer 13

Decisions are based on duty and adherence to universal principles. Deontological ethics prioritize doing the right thing regardless of the preferable consequences of another action.

Question 14

What is the importance of the “veil of ignorance” test in one variation of deontology?

Answer 14

In this variation, the “veil of ignorance” test is used to base rules on principles of justice. A rule is considered just if everyone would agree to it when made ignorant of their position in society, eliminating personal bias and ensuring fairness.

Question 15

How is the principle of acting in a way one would like to see others act relevant to deontological ethics?

Answer 15

In deontological ethics, it is essential to act in a way one would like to see others act in similar circumstances, emphasizing the universality of ethical principles.

Question 16

Definition of Teleological ethics

Answer 16

An approach to ethics that focuses on outcomes or results of actions.

Question 17

What is utilitarianism, and on what is it based?

Answer 17

Utilitarianism is a well-known variation of teleological ethics based on utility or usefulness. It looks to the end results, and individuals make decisions based on the consequences of their actions

Question 18

What is the fundamental principle of utilitarianism?

Answer 18

The fundamental principle of utilitarianism is that a decision is considered good if the end result is good, aiming to achieve the greatest good or happiness for the greatest number, even if it allows for bad consequences or harms.

Question 19

How does moral character relate to teleological ethics and utilitarianism?

Answer 19

In teleological ethics, moral character depends on the extent to which actions benefit or harm those involved, emphasizing the practical matter of the distribution of harms and benefits.

Question 20

What is the definition of Virtue ethics

Answer 20

Virtue ethics
An approach to ethics that emphasizes the individual’s character or identity and focuses on being instead of doing.

Question 21

Definition of an Economic system

Answer 21

Economic system
An arrangement using land, labour, and capitalto produce, distribute, and exchange goods and services to meet the needs and wants of people in society.

Question 22

What is capitalism, and what does it allow for?

Answer 22

Capitalism is an economic system that allows for private ownership of the means of production (land, labor, and capital).

It assumes that economic decision-making is in the hands of individuals or enterprises who make decisions expecting to earn a profit.

Question 23

hat are the key characteristics of a free economic system, also known as a private enterprise system?

Answer 23

A free economic system (private enterprise system) is characterized by ownership of private property by individuals and enterprises, the profit motive, a competitive market system, and limited government involvement.

Question 24

What is meant by “laissez-faire capitalism”?

Answer 24

Laissez-faire capitalism is an economic system that operates with minimal government interference in the affairs of business. Government involvement is limited to providing essential services such as police and fire protection.

Question 25

What is a “responsible enterprise system,” and how does it differ from a free enterprise system?

Answer 25

A responsible enterprise system is an economic system that operates as a free enterprise system but incorporates the element of accountability.

In this system, business enterprises are responsible to society for their actions and are answerable or accountable for being the cause, agent, or source of something.

Question 26

What are the different types of business enterprises in the Canadian business system?

Answer 26

Business enterprises in the Canadian business system vary from sole proprietorships to partnerships and incorporated entities.

Question 27

What legal requirements are necessary for an individual to establish and operate a business in Canada?

Answer 27

To establish and operate a business in Canada, an individual must be capable of entering into a binding agreement, engage in lawful business activity, and adhere to general legal principles governing persons, property, and obligations.

Question 28

How is a partnership formed, and what is characteristic of proprietorships or partnerships in terms of responsibility?

Answer 28

Partnerships are formed when two or more persons wish to share ownership of a business.

In proprietorships or partnerships, the business is identified only with the person or persons involved. Owners take all responsibility for success or failure, receive all profits, assume all losses, and can be held directly responsible for business wrongdoing.

Question 29

What is the typical structure of most business enterprises in Canada today?

Answer 29

Most business enterprises in Canada are incorporated entities, commonly referred to as corporations. However, it is recognized that not all enterprises are incorporated, and many businesses in Canada are small- and medium-sized enterprises (SMEs).

Question 30

What happens when a business incorporates?

Answer 30

When a business incorporates, a separate legal entity is created, which is an “artificial being,” invisible, intangible, existing only in contemplation of law, and with limited liability for owners.

Question 31

How is the corporate entity described in legal terms?

Answer 31

The corporate entity is described as an “artificial being” because it exists only in contemplation of the law and is intangible.

Question 32

How was the privilege of incorporation traditionally viewed?

Answer 32

The privilege of incorporation was traditionally viewed as a concession granted by the sovereign.

Question 33

What were some of the first corporations formed under this traditional view, and what were they allowed to do?

Answer 33

The first corporations were granted by British sovereigns to nobility, allowing them to explore, colonize, or commercially exploit specific geographical areas.

For example, the Hudson’s Bay Company, with a charter granted in 1617, is often considered one of the first such corporations.

Question 34

What was the “concession” doctrine of incorporation, and what did it hold?

Answer 34

The “concession” doctrine held that incorporation was conferred by public act and could not be generated merely by private agreements among several persons to associate together for business purposes.

Question 35

What were some of the dangers associated with the “concession” approach to incorporation?

Answer 35

The “concession” approach raised concerns about individual or group freedoms because the sovereign or state had the authority to grant the privilege of existence to a corporation, potentially leading to abuses of power.

Question 36

What is the basis of the second doctrine of incorporation?

Answer 36

What is the basis of the second doctrine of incorporation?
Answer: The second doctrine of incorporation is based on the right to “freedom of association,” emphasizing the fundamental role of individuals coming together for a common purpose in forming a corporation.

Question 37

What is legitimacy in the context of the business system, and why is it important?

Answer 37

Legitimacy refers to the belief in the rightness of an institution, particularly the appropriateness of the business system to supply the goods and services wanted by society.

It is crucial because society must believe in the business system, which involves trust, confidence, and the perception that the system operates in the public interest.

Question 38

What is the concept of a social license in the context of business and society?

Answer 38

The privilege of operating in society with minimal formalized restrictions—that is, legislation, regulation, or market requirements—based on maintaining public trust by doing what is acceptable to stakeholders in the business and society relationship.

Question 39

How is a social license earned and maintained, and why is it non-permanent?

Answer 39

A social license must be earned and maintained, as it is non-permanent due to changing beliefs, perceptions, and opinions in society, along with evolving influential stakeholders. It is accomplished by gaining acceptance and approval from stakeholders through the establishment of legitimacy, credibility, and trust.

Importantly, a social license is not granted by the government but is instead based on acceptance received from the stakeholders involved.

Question 40

What is a prominent argument used to justify or support the business enterprise system?

Answer 40

A prominent argument is the standard of living that the system provides. As living standards increase, it is more likely that society will view business in a positive manner.

Question 41

How does the decentralized decision-making process in the business system influence attitudes?

Answer 41

The decentralized decision-making process is considered desirable in the business system because millions of businesses make independent decisions, ensuring a wide variety of goods and services are available. This choice is viewed favorably by consumers.

Question 42

What argument supports the efficient allocation of resources in a business system?

Answer 42

Some argue that the efficient allocation of resources is more likely to occur with a business system because allocation is based on the price and availability of resources.

Question 43

How do critics of the business system challenge the efficiency claim related to resource allocation?

Answer 43

Critics challenge the efficiency claim by arguing that enterprises can control prices, particularly in oligopolistic industries, or that business enterprises can control the availability of resources, potentially creating artificial scarcities.

Question 44

How does self-interest play a role in the business enterprise system?

Answer 44

In the business enterprise system, individuals can behave in their own self-interest, which serves as a motivator and provides the drive for profit, encouraging individuals to get things done.

Question 45

What is the role of self-interest in a competitive business enterprise system?

Answer 45

In a competitive business enterprise system, where consumers choose among businesses offering similar goods and services, everyone working in their own self-interest provides a stimulus to the economy’s operation, even though it may be referred to as greed.

Question 46

What is the intended outcome of positive self-interest in the pursuit of wealth?

Answer 46

Positive self-interest is intended to produce an intelligent and informed pursuit of wealth.

Question 47

How do some people view self-interest, and why might it lead to negative attitudes toward the business system?

Answer 47

While self-interest appeals to many as a motivating force, some view it as a source of negative attitudes toward the business system, particularly when it is perceived as cruel, malicious, dumb, or hysterical, which is sometimes referred to as greed.

Question 48

What are business cycles, and how do they relate to the business enterprise system?

Answer 48

Business cycles are natural fluctuations in economic activity in a market system.

They are more accentuated in a business enterprise system than in a centralized economy.

These cycles involve periods of prosperity followed by recessions, making the business enterprise system vulnerable to criticisms due to the hardships imposed upon particular individuals and types of businesses at various times.

Question 49

What are some common examples of corporate wrongdoing in the financial area?

Answer 49

Common examples of corporate wrongdoing in the financial area include:

- Misleading financial statements
- Insider trading
- Stock manipulation
- Bid rigging
- Embezzlement
- Bankruptcy fraud

Question 50

Besides financial misdeeds, what are some other areas where corporations have faced criticism for wrongdoing?

Answer 50

Corporations have faced criticism for wrongdoing in areas such as:

• Workplace health and safety violations,
• Bribery in international markets,
• Weak or absent food safety practices,
• Environmental pollution,
• The depletion of natural resources,
• Excessively high profits and executive compensation.

Question 50

What event in 2008-09 led to societal annoyance and criticism of corporate behavior?

Answer 50

Bank and corporate bailouts in 2008-09, where governments loaned or gave corporations billions of dollars and executives still received high salaries, led to significant societal annoyance and criticism.

Question 51

How are corporations sometimes punished for wrongdoing, and is it always the case?

Answer 51

Corporations can be punished for wrongdoing through declining stock prices, decreased sales, and criminal charges. However, it is not always the case that corporations face significant consequences for their actions.

Question 52

What are some of the challenges that globalization presents to businesses, both large and small?

Answer 52

Globalization brings challenges such as increased competition from foreign producers, job loss due to outsourcing, and the need to respond to the demands of customers in other nations.

Corporations operating globally also face ethical, social, and environmental issues relevant to local areas where they operate.

Question 53

What factors are associated with unemployment in a country?

Answer 53

Unemployment is associated with a country’s economic performance, business cycles, and productivity.

It is influenced by how well major industries are performing and the levels of consumer spending.

Question 54

When does unemployment typically occur, and what can cause it?

Answer 54

Unemployment occurs when businesses lay off or fail to hire employees during periods of declining business activity.

Declining productivity in Canadian businesses may also lead to the provision of goods and services from other countries.

Question 55

How is technological innovation related to the business enterprise system, and what has been a significant contributor to technological development?

Answer 55

The business enterprise system is designed to constantly seek innovation, and a large portion of technological development has been the result of the efforts of business enterprises.

Question 56

What is one of the challenges associated with rapid technological change, especially in the workplace?

Answer 56

A challenge associated with rapid technological change is alienation, particularly in the workplace, where employees may feel disconnected or estranged from their work.

Question 57

Who are the three primary groups of individuals responsible for the operation of Canadian businesses, and what role do they play in overseeing ethical behavior and responsibilities to society?

Answer 57

The three primary groups responsible for the operation of Canadian businesses are **owners, boards of directors, and managers. **

Each of these groups has some influence on the morality of the business system and oversees the corporation’s ethical behavior and responsibilities to society.

Question 58

What are some categories of direct owners in Canadian business, and who falls under these categories?

Answer 58

Direct individual owners include:

• Shareholders, investors, entrepreneurs, and sometimes employees who participate in ownership through stock-purchase and grant programs.
• Customers and producers may also participate in ownership through cooperatives.
• Other direct owners include corporations that own shares in other corporations, venture capitalists who finance growing businesses by purchasing shares, and governments that use corporations to deliver goods and services to citizens.

Question 59

What is the indirect category of ownership in Canadian business, and how does it manifest?

Answer 59

Indirect ownership occurs when consumers invest in mutual funds or when employees contribute to pension plans. The managers of these funds have become more active and frequently influence corporate decisions.

Question 60

What is the primary responsibility of a board of directors in Canadian business, and what is this process referred to as?

Answer 60

According to section 97(1) of the Canada Business Corporations Act, the primary responsibility of a board of directors is to “manage the business and affairs of a corporation,” a process referred to as corporate governance.

Question 61

What are some of the main tasks of a board of directors in Canadian business?

Answer 61

The main tasks of a board of directors include:

• Selecting, evaluating, and terminating top management,
• Providing shareholders with financial statements and an external auditor’s report,
• Directing and evaluating strategic planning,
• Representing shareholders in major decisions impacting the corporation’s operations,
• Fulfilling fiduciary and legal requirements as outlined in the Canada Business Corporations Act.

Question 62

How has the role of many boards of directors evolved in recent years regarding ethics, social responsibility, and environmental responsibility?

Answer 62

In recent years, many boards of directors have become more active in overseeing the ethics of the corporation and its social and environmental responsibility.

Question 63

What skills are required by managers to oversee the operations of corporations in today’s dynamic business environment?

Answer 63

Managers require skills in directing corporate affairs in a competitive environment, coping with large-scale change, addressing technological developments, and dealing with the challenges of globalization.

They also need to manage relationships with stakeholders and have knowledge of business ethics, social responsibility, and environmental responsibility.

Question 64

What quality has been argued to be at the top of the list of essential qualities for a good CEO?

Answer 64

Integrity is now considered one of the top essential qualities for a good CEO.

Question 65

What qualities are considered essential for a good CEO in today’s business environment?

Answer 65

In today’s business environment, integrity is at the top of the list of essential qualities for a good CEO.

developing trust and credibility with stakeholders,

practicing transparency,

fostering teamwork and partnerships,

and aligning behavior with societal standards of morality

Question 66

According to Porter and Kramer, why do business and society need each other?

Answer 66

Porter and Kramer argue that business needs a healthy society for education, healthcare, equal opportunity in the workforce, and consumer safety.

Society, in turn, needs successful companies to create jobs, wealth, and innovations that improve the standard of living.

They emphasize the importance of shared value, where both business and society benefit, and advocate reducing frictions and increasing benefits in the relationship between the two.