LIFE AFTER SCANDAL
Ethics is More
• Scandals have shaken the real
estate, mortgage and banking
• How do we restore trust in the
free market system?
Punish those who have broken the
Make accounting records more
Consider what is ethical, not just
what is legal.
• More Than Legality
• Standards are
•Ethics begins with each
WHAT are ETHICS?
• Ethics -- The standards of moral behavior.
Behaviors that are accepted by society as right
Reasons to maintain ethics in Business
To maintain good reputation
To keep existing customers
To attract new customers
To avoid lawsuits
To reduce employee turnover
To avoid government intervention
To please customers, employees, society
PAYING the PRICE
• Enron: One executive is serving a 24 year sentence for
accounting fraud while another was released in October
• Arthur Andersen: Convicted of tampering with witnesses,
the company was dissolved and about 28,000 people lost
• Tyco International: Two executives stole $600 million
from the company and are scheduled to be released from
prison in 2030.
• Adelphia Communication: Two executives were
convicted of conspiracy, bank and securities fraud and
given sentences of 15 and 20 years.
• WorldCom: Former CEO was convicted of fraud,
conspiracy and false filings and sentenced to 25 years.
ETHICS and YOU
with Each of Us
• Plagiarizing from Internet materials is the most
common form of cheating in schools today.
• Studies found a strong
and dishonesty at work.
FACING ETHICAL DILEMMAS
with Each of Us
• Ask yourself these questions:
- Is it legal?
- Is it balanced?
- How will it make me feel about myself?
ETHICS START at the TOP
• Trust between workers and
managers must be based on
fairness, honesty, openness
and moral integrity.
• Leadership can help instill
corporate values in
• An increasing number of companies have
adopted written codes of ethics.
• Compliance-Based Ethics Code -Emphasize preventing unlawful behavior by
increasing control and by penalizing wrongdoers.
• Integrity-Based Ethics Code -- Define the
organization’s guiding values, create an environment
that supports ethically sound behavior and stress a
shared accountability among employees.
Steps to Improve
1. Top management support
2. Employees’ understanding
3. Managers’ training
4. Ethics Office- whistle blower
5. Outsiders must be informed
6. Enforcement of ethics code with
• Corporate Social Responsibility:
A business's concern for the
welfare of society.
• Corporate philanthropy:The
dimension of soclal
responsibility that includes
charitable donations. ex: The Bill
& Melinda Gates Foundation
• Corporate social initiatives: Enhanced forms of
corporate philanthropy directly related to the
• Corporate responsibility: includes everything
from hiring minority, make safe products,
minimizing pollution, using energy wisely, and
providing a safe work environment
• Corporate policy: refers to the position a firm
takes on social and political issues.
Stakeholders to whom
businesses are responsible
• Responsibility to Customers
– Right to safety
– Right to be informed
– Right to choose
– Right to be heard
• Responsibility to Investors – insider trading
• Responsibility to Employees
• Responsibility to society and the environment
• Social Audit -- A systematic evaluation of an
organization’s progress toward implementing
programs that are socially responsible and
• Four Types of Social Audit Watchdogs
Socially conscious investors