Busn 100 Chapter 04

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Busn 100 Chapter 04

• Ethics

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Goals

• Ethics
• Legality is only the first step in behaving
  ethically
• 3 questions one should answer when faced with a
  potentially unethical action
• Managements role in setting ethical standards
• Compliance-based and integrity-based ethics code
• 6 steps in setting up a corporate ethics code
• Corporate Social Responsibility
• Americans role in influencing ethical behavior
  and social responsibility in global markets

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Ethics

• Standards of moral behavior
• Behavior that is accepted by society as right
  versus wrong

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Ethics - Textbook

• Similarities on basic moral values in the Bible,
  Aristotles Ethics, William Shakespeares King
  Lear, the Koran, and the Analects of Confucius
• Golden rule
• Do not do unto others as you would not have them
  do unto you

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Similarities On Basic Moral Values In The Bible,
Aristotles Ethics, William Shakespeares King
Lear, The Koran, And The Analects Of Confucius

• Right
• Integrity
• Respect for human life
• Self-control
• Honesty
• Courage
• Self-sacrifice

• Wrong
• Cheating
• Cowardice
• Cruelty

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Ethics - Textbook

• Many Americans today have few moral absolutes.
• Many decide situationally whether its OK to
  steal, lie or drink and drive.
• They seem to think that what is right is
  whatever works best for the individual

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Have USA Companies Acted Unethically?

• Enron Accounting fraud to invent income and
  hide debts
• Anderson Accounting firm that helped Enron
• WorldCom - 11 B. in accounting irregularities
• AIG Acted within law but acted unethically when
  they insured people without setting aside money
  to pay off policy if they (Credit Default Swaps)
• Credit Agencies - acted unethically when they
  failed to see that companies like AIG had insured
  trillions of dollars without setting aside money
  to pay off insurance policies
• Homebuyers in USA
• Mortgage brokers

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People

• Steeling supplies at work
• Goofing off at work
• Cheating in school
• Plagiarism
• Lying in interview

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Ethics of MBA Students

• Percent of MBA Students Who Would
• Buy Stock on Inside Information 52
• Reveal Corp. Secrets to Spouse/Family 50
• Let a Gift Sway Purchasing Decision 26
• Pay Someone Off to Close a 13
• Business Deal

Source USA Today
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What Are The Three Questions One Should Answer
When Faced With A Potentially Unethical Action

• Textbook
• Is it legal?
• Is it balanced?
• How will it make me feel about myself?
• I would say
• Would I want this done to me?
• Will I feel bad in the long run even though there
  may be a short-term gain?
• Does the action go against the idea that we
  should be good citizens and be kind and caring
  toward others?
• Is it legal

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Ethical Orientation

• Ethical Orientation Questionnaire
• Excel workbook
• Ethical Dilemmas
• Choose between equally unsatisfactory alternatives

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Why Should Businesses Act Ethically?

• If the humans that run and work for the business
  act ethically, all stakeholders are better off
• Other reasons
• Avoid lawsuits
• Avoid new laws
• Avoid employee turnover
• To attain a good reputation (everything follows
  from this)
• Keep customers, employees

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How Does Business Become More Ethical?

• If the people at the top
• Set a good example
• Define guiding values
• Set clear rules with clear and enforceable
  penalties
• Ethics is caught more than it is taught
• Example Anderson International

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Compliance And Integrity

• Compliance-based ethics codes
• Preventing unlawful behavior by
• Increasing control and
• Penalizing wrongdoers
• Integrity-based ethics codes
• Define the organizations guiding values
• Create ethically sound environment
• Stress shared accountability among employees

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Code Of Ethics

• Johnson Johnson http//www.jnj.com/wps/wcm/conn
  ect/c7933f004f5563df9e22be1bb31559c7/our-credo.pdf
  ?MODAJPERES
• Wholefoods
• http//www.wholefoodsmarket.com/values/index.php

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Steps To Improve Business Ethics

1. Top management support
2. Employees understanding
3. Managers Employees training
4. Ethics Office
5. Outsiders must be informed
6. Enforcement of ethics code

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Corporate Social Responsibility

• A businesss concern for the welfare of society
• Some people argue that the pursuit of an increase
  in shareholder wealth provides the best possible
  benefit to society
• Some argue that, like ordinary citizens,
  corporations must be good citizens with acts like
  donations and volunteering and other such acts
• Debate Between Milton Friedman and John Mackey
• http//reason.com/archives/2005/10/01/rethinking-t
  he-social-responsi

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Corporate Social Responsibility

• Corporate Philanthropy
• Dimensions of social responsibility that includes
  charitable donations
• Corporate Social Initiatives
• Enhanced forms of corporate philanthropy that are
  more directly related to the companys
  competencies
• Corporate Responsibility
• Dimensions of social responsibility that includes
  everything from hiring minority workers to making
  safe products
• Corporate Policy
• Dimensions of social responsibility that refers
  to the position a firm takes on social and
  political issues

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Businesses Area Responsible To

• Customers
• Investors
• Employees
• Society and Environment

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Responsibility To Customers

• Offer quality goods and service at a reasonable
  price
• Customers
• Prefer to do business with companies they trust
• Do not want to do business with companies they do
  not trust

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Responsibility To Investors

• Ethical behavior tends to increases shareholder
  wealth
• Unethical behavior tends to decreases shareholder
  wealth
• No Insider Trading (Managers know details of
  future business activity)

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Responsibility To Employees

• Create jobs that reward hard work and talent
  fairly
• Treat employees with respect and they treat the
  company with respect
• Costco
• Starbucks
• Dicks
• Give benefits that help employees to reach
  personal goals
• Highline

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Responsibility To Society Environment

• Make profit and grow
• Take care of their communities (including the
  environment)

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Social Auditing

• A systematic evaluation of an organizations
  progress toward implementing programs that are
  socially responsible and responsive
• How do you measure whether a business is socially
  responsible?
• Some ways might be to determine if the business
• Donating executive time to community based or
  nonprofit organizations
• Offering day care to workers or paying employees
  while they do community work
• Support of museums or education
• Producing truthful ads or ensuring product safety
  (Daimler-Benz)
• Negative effects such as layoffs or pollution

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Watchdogs That Monitor How Well Companies Enforce
Their Ethical And Social Responsibility Policies

• Socially Conscious Investors (SCI)
• Environmentalists
• Union Officials
• Customers (1)

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International Ethics And Social Responsibility

• Multinationals and companies that use contract
  manufacturing must act ethically in all counties
• Customers in the USA still seem to prefer brand,
  price and quality over their perception of a
  companys humane treatment of workers and social
  responsibility (but that is changing a bit)
• Low wages
• Not fair when compared to wages in USA?
• But what if the company did not move to that
  country to provide jobs?

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Explain Why Legality Is Only The First Step In
Behaving Ethically

• Laws are more limited than the set of morals and
  ethics that a society holds
• Deceptive ads are often legal
• http//www.excessvoice.com/article101.htm
• Because laws have grey area, a person can act
  unethically while breaking no laws

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Example

• Enron and many banks in the current 2007-2008
  banking crisis (Credit Crunch) hid liabilities
  and risks off their balance sheets while breaking
  no laws.
• Although they acted within the laws they mislead
  many people

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Example

• No Income No Asset loans made by banks in 2006
  and 2007 were legal but unethical.
• These were called Liar Loans because people
  could lie about income, but still get 500,000
  loans.
• Unethical Mortgage Brokers during the 2007-2008
  Banking Crisis that acted within the law
• http//cosmos.bcst.yahoo.com/up/player/popup/?rn3
  906861cl9944104ch4226713srcnews
• http//www.propublica.org/article/insiders-detail-
  how-greed-drove-credit-ratings-926/

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What Are The Three Questions One Should Answer
When Faced With A Potentially Unethical Action

• Textbook
• Is it legal?
• Is it balanced?
• How will it make me feel about myself?
• I would say
• Would I want this done to me?
• Will I feel bad in the long run even though there
  may be a short-term gain?
• Does the action go against the idea that we
  should be good citizens and be kind and caring
  toward others?
• Is it legal

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Describe Managements Role In Setting Ethical
Standards

• Because people tend to do as you do, not as you
  say, when managers act unethically, others may
  tend to do the same
• As a manager, set clear rules (what to do and
  consequences)

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Distinguish Between Compliance-based And
Integrity-based Ethics Code

• Compliance-based
• Follow the law, and punish
• Integrity-based
• Set clear rules, lead by example, train all
  stakeholders, stress the team, follow the law,
  enforce consequences

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Define Corporate Social Responsibility And
Examine Corporate Responsibility To Various
Stakeholders

• It is in the businesss best interest to act
  socially responsible toward
• Customers
• Community
• Employees
• Stockholders

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Analyze The Role Of American Businesses And
Government In Influencing Ethical Behavior And
Social Responsibility In Global Markets

• America has had some positive influenced and
  negative influence on global markets
• Positive Examples
• Spread of Free Markets
• This helps economies to grow
• Increases the middle class
• Spread of Technology
• Spread of the internet and information
• Increases in competition
• Increase in Education

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America Has Had Some Positive Influenced And
Negative Influence On Global Markets

• Negative Examples
• Going to war on flimsy evidence
• Stating that the Genève Conventions do not apply
  to the War on Terror
• Guantanamo Bay
• Abu grade prison
• Deregulating the Banking Industry
• Keeping Interest Rates low while Europeans kept
  rates high
• Inventing No Income No Asset Loans and
  Collateralized Debt Obligations that were based
  on No Income No Asset Loans
• American companies follow environmental rules at
  home, but not abroad
• Pollution
• Culture

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Have USA Companies Acted Unethically?

• Dicks Starbucks Costco
• Ethics good business practice
• Happy Employees productive Employees
• Pfizer (build hospitals) Wal-Mart (gave out
  free food, diapers, etc.) helped after Katrina
• Digicel Group (5 M) Lowe's (1 M) FedEx Corp
  (donated airplanes to fly goods to Haiti) helped
  after the 7.0 earthquake in Haiti