3. ECONOMIC

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3. ECONOMIC AGRIBUSINESS ETHICS CODES OF
CONDUCT

• Larry D. Sanders Parr Rosson
• Spring 2002--Adjusted

Dept. of Ag Economics Oklahoma State
University
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INTRODUCTION

• Purpose
• to understand how the concept of ethics affects
  economics and agribusiness
• Learning Objectives
• Understand the relationship between economic
  activity and agribusiness.
• Consider codes of ethics and moral behavior in
  agribusiness.
• Understand International Aspects of Business
  Ethics.
• Review Arguments For Against Ethical Behavior
  in economic and agribusiness activity.
• Examine the Role of Ethics in Determining
  Cross-Cultural Relationships, Corporate
  Responsibility, and Importance to the Firm.
• Become aware of the similarity in business,
  government nonprofit codes of ethics.

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What is Business Ethics?

• Code of Conduct Whereby Each Business Conforms to
  Socially Acceptable Norms

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Increased Emphasis on Ethics in Business Planning

• Important Component of Decision Making
• Ethics and Impacts on Corporate Behavior
  Important to International Business
• Greater Awareness of Social Responsibilities Key
  to Business Survival

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Several Factors Emphasize Importance of Business
Ethics

• Product Safety and Liability
• Ethical Standards Across Countries
• Increased Competition and Pressures to Be
  Unethical
• Economic Exploitation of the Environment
• Work Force Diversity
• Abuse of property rights

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Ethics is Not New!

• Remember Watergate?
• Remember Ivan Boesky and Insider Trading?
• Remember the Exxon Valdez?
• Remember illegal dumping of hazardous waste (
  not just in New Jersey)?
• Remember Love Canal?
• Remember Firestone tires?
• Remember the Gallapagos oil spill?
• Consequently, 80 of U.S. and Canadian Firms Have
  a Code of Conduct

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Code of Conduct Generic Example

• Represent each client fairly and honestly.
• Establish reasonable, proper and fair prices or
  fees.
• Advertise with honesty and truthfulness.
• Be fair with employees, clients, suppliers
  customers.
• Be a credit to your associates the community.

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Code of Conduct ExamplesHalliburton

• Company policy requires employees to observe high
  standards of business and personal ethics in the
  conduct of their duties and responsibilities. .
  . . Must practice honesty and integrity in every
  aspect of dealing with other Company employees,
  the public, the business community, stockholders,
  customers, suppliers and government authorities.
• . . . Prohibits unlawful discrimination against
  employees,stockholders, directors, officers,
  customers or suppliers on account of race, color,
  age, sex, religion or national origin. . . .
• No employee should be misguided by any sense of
  loyalty to the Company or a desire for
  profitability that might cause him or her to
  disobey any applicable law or Company policy.
  Violation of Company policy will constitute
  grounds for disciplinary action, including, when
  appropriate, termination of employment.

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Ethical Behavior is Still an Issue

• Recent Malaysian Survey Revealed That Unethical
  Behavior Was Approved in Four Situations
• When Obtaining Competitor Information
• When Using False/Misleading Advertising
• When Obtaining Confidential Information
• When Superiors Were Unethical or Tolerated
  Unethical Behavior
• What do you think?

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Conflict Between Corporate Goals and Ethical
Behavior

• Treachery Pays
• Power is Abused
• Dishonesty is Tolerated

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Influence of Different Cultures on Ethical
Behavior

• Difficult to Understand
• Important to Understand
• Clashes Between Cultures is Common
• Does it have to be illegal to be unethical?

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Market Ethics (Adam Smith - 1776)

• Foundation of Economic Freedom
• Private Initiative Rather Than Mercantilism
• Competition, Not Protection
• Innovation, Not Economic Stagnation
• Self-Interest, Not State Interest

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Protestant Ethic (Biblical Times)

• Established Work Ethic
• If He Will Not Work, Let Him Not Eat,
  Saint Paul
• Provided Moral Legitimacy for Capitalism
• Justification for Pursuit of Profit

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Liberty Ethic(John Locke 1632-1704)

• Economic Freedom and Work Ethic Can Exist Only in
  Political Systems Conducive to Individual Liberty
• Discourage Dictatorial Whim
• Individual Participates in Government
• Encourage Private Property

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Why Should Business Help Solve Societal Problems?

• Businesses Exist as Guests of Society
• Government Policies Impact Businesses
• Business and Society Feast or Famine Together

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What is Corporate Social Responsibility?

• Corporate Activities that Protect and Improve the
  Welfare of Society
• Examples
• Foundations
• Charity
• Low-income projects
• Reclamation
• Building cultural bridges
• Ecosystem/animal restoration

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What Must Corporations Do?

• More Than Obey the Law?
• Laws Often Lag Societys Values/Expectations
• Moral and Ethical Duty to Help Solve Societys
  Problems

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Levels of Corporate Social Commitment

• Social Obligation
• Involvement for Own Benefit and Obey Laws
• Social Responsibility
• Understand Societal Needs and Go Beyond Law
• Social Responsiveness
• Proactive, Anticipate Problems and Mitigate
  Social Issues

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Elements of Corporate Responsibility

• Corporate Responsibilities Transcend Production
  of Goods and Services
• Corporation Must Be a Productive Part of the
  Solution of Societys Problems, Especially Those
  Which They Create

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Elements of Corporate Responsibility (cont.)

• Corporate Constituency is Broader than
  Stockholders
• Corporate Impacts Go Beyond the Marketplace
• Corporations Serve Wide Range of Human Values

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Major Corporate Stakeholders

• Shareholder Owners
• Employees
• Customers and Clients
• Community
• Government

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Fortunes Most Admired Global Companies9
Attributes (Which are ethics-related?)

• Quality of management
• Quality of products/services
• Innovativeness
• Long-term investment value
• Financial soundness
• Ability to attract/develop/retain talent
• Community responsibility
• Use of corporate assets
• Global business acumen

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Fortunes Most Admired Global Companies (2001)

• Top 10
• General Electric
• Cisco Systems
• Wal-Mart Stores
• Southwest Airlines
• Microsoft
• Home Depot
• Berkshire Hathaway
• Charles Schwab
• Intel
• Dell Computer

• Bottom 10
• TWA
• Trump Resorts
• Kmart
• Bridgestone/Firestone
• America West
• LTV
• US Airways
• Federal Mogul
• Warnaco Group
• CKE Restaurants

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U.S. Response to International Business Ethics

• Foreign Corrupt Practices Act (FCPA) of 1977
• Illegal for U.S. Companies to Make Payments to
  Foreign Officials
• Designed to Eliminate Bribes
• FCPA Hampered U.S. Business in International Trade

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FCPA Amended in 1988

• Legalized Payments to Expedite Nondiscretionary
  Official Actions Facilitating Expenditure -
  Grease Payment
• Illegal to Bribe Someone For Preferential
  Treatment
• Individual May Be Prosecuted Even If Firm is Not
  Guilty

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Corruption in International Business

• Those who talk about the peoples of our day
  being given up to robbery and similar vices will
  find that they are all due to the fact that those
  who ruled them behaved in like manner.
• --Niccolo Machiavelli, 19th century

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The Scale of the International Problem with
Ethics in Business

• "The scale of bribe-paying by international
  corporations in the developing countries of the
  world is massive. Actions by the majority of
  governments of the leading industrial countries
  to curb international corruption are modest. The
  results include growing poverty in poor
  countries, persistent undermining of the
  institutions of democracy, and mounting
  distortions in fair international commerce."
• --Peter Eigen, Chairman, Transparency
  International
• (January 20, 2000)

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International Bribe Payers IndexLeading
Exporters (1999)

• Singapore 5.7
• Spain 5.3
• France 5.2
• Japan 5.1
• Malaysia 3.9
• Italy 3.7
• Taiwan 3.5
• South Korea 3.4
• China 3.1
• Hong Kong

• 1. Sweden 8.3
• 2. Australia 8.1
• Canada 8.1
• Austria 7.8
• Switzerland 7.7
• Netherlands 7.4
• UK 7.2
• Belgium 6.8
• Germany 6.2
• US 6.2

Transparency International, 1999. 10negligible
bribery 0high levels
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International Corruption Perceptions Index (2001)

• Highly Clean Top 10
• Finland 9.9
• Denmark 9.5
• New Zealand 9.4
• Iceland 9.2
• Singapore 9.2
• Sweden 9.0
• Canada 8.9
• Netherlands 8.8
• Luxembourg 8.7
• Norway 8.6
• US 7.6

• Highly Corrupt Top 10
• Tanzania 2.2
• Ukraine 2.1
• Azerbaijan 2.0
• Bolivia 2.0
• Cameroon 2.0
• Kenya 2.0
• Indonesia 1.9
• Uganda 1.9
• Nigeria 1.0
• Bangladesh 0.4

Transparency International, 1999. 10highly
clean 0highly corrupt
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Business Ethics in Cross-Cultural Setting

• Learn the Culture
• Become Involved, Responsible Corporate Citizen
• Take Initiative to Exceed Minimums in
  Environmental Responsibility

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Ethical Issues

• Is Honesty the Best Policy?
• Those Who Are Fair Will Prosper
• Profit Maximization is Perfectly Honest
• One Persons Ethics is Another Persons
  Livelihood

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• "Who will protect the public when the police
  violate the law?
• --Ramsey Clark