Business Ethics and Corporate Social Responsibility

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A presentation on business ethics developed by myself and Boise State Professor Tony Roark in 2010. Tony and I served on the Boise City Ethics Commission from its formation in 2005 until 2010.

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Business Ethics and Corporate Social Responsibility

  1. 1. Tony Roark, PhDGeoffrey M. Baker, JD
  2. 2. Presented by:Tony RoarkAssociate Professor of PhilosophyAssociate Dean of Arts and Sciences, Boise State University
  3. 3. ‘Business ethics’ =df the standards of behavior(whether strictly codified or merely implicit)applicable to the members of a business entity, wherethe propriety of the behavior in question is notmeasured in terms of productivity, profit generation,or procedural convention.
  4. 4.  The intellectual answer: Because (obviously!) one ought to conduct himself in an ethically proper way. The practical answer: Because improper conduct can have profoundly negative consequences on the success of a business, whereas a proactive, intentional commitment to business ethics can have profoundly positive consequences.
  5. 5.  Exposure to external harm Legal liability Fractured relationships with other businesses Sullied public/consumer image Deterioration of internal workplace environment Decreased employee morale Distraction from legitimate business activity Loss of prized employees
  6. 6.  AIG Massey mine disaster in West Virginia Toyota BP
  7. 7. Presented by:Geoffrey M. BakerVice President, General Counsel, and Chief Compliance OfficerUnited Heritage Financial Group
  8. 8.  News reporting generally focuses on “poor” or lacking corporate ethics and resulting downward economic effect No reporting (generally) on businesses having a strong ethical culture “No news is good news!” A strong ethical culture has a proven positive economic effect! How?
  9. 9.  What is it? “Optimizing operations to minimize environmental impact and improve social outcomes while maximizing performance.” © IBM, 2009 Self-regulation that is built into a business model, designed to produce long-term positive social and environmental impacts, and which improves the business’ long term economic value.
  10. 10.  Ethics is a proactive concept: doing the right thing because you should, not because you have to. CSR is the proactive acceptance of responsibility for the impact of business activities on the environment, consumers, communities and all other members of the “public sphere” – aka “stakeholders.” Promoting the public interest by encouraging community growth and development, while also eliminating practices that harm stakeholders regardless of the legality of those practices.
  11. 11.  Building CSR into the corporate strategy and culture is the key. CSV – “Creating Shared Value” Corporate success and social welfare are interdependent:  To be profitable, a business must have a healthy and educated workforce, as well as sustainable resources.  For society to thrive, profitable businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy.
  12. 12.  Who actively engages in CSR?  Shell  IBM  McDonalds  Patagonia  Timberland  Nike  CLIF Bar Generally, these companies do not isolate their CSR departments from their operating units, but rather integrate them to assist in critical strategic decisions.
  13. 13.  Human Resources – recruitment and retention Risk Management – reputation protection Brand Differentiation – unique value independent from price; “ethical consumerism” Governmental Oversight – reduce by taking substantive voluntary steps
  14. 14.  IBM survey (2009):  224 business leaders surveyed worldwide  60% believed that CSR became more important in past 12 months Denmark: 2008 law mandating that 1100 largest Danish companies include information on CSR and SRI in annual financial reports: CSR policies, implementation, results
  15. 15. The City of Boise’s Ethics Commission
  16. 16.  Commission was born from City’s desire to provide ethical leadership, insight and direction for its employees and officials. “Where government is based on the consent of the governed…the proper operation of democratic government requires that public officials and employees be independent, impartial, and responsible to the people, the community and the government; that public office not be used for personal gain, and that the public have confidence in the integrity of its government.” Boise City Code § 1-21-01
  17. 17.  December 2004:  In reaction to an ethics scandal resulting in criminal charges and jail time for three City officials, the Boise City Council and Mayor adopted a policy creating the state’s first municipal “Ethics Commission.” Recruitment process begins. February 2005:  Five commissioners are selected from over 50 applicants. Rules of procedure and forms created. Commission releases 7 Advisory Opinions in 2005.
  18. 18.  The Commission allows employees and officials of the City to present “real world” ethical questions to an impartial and informed board. The Commission brings ethics and ethical conduct into the “everyday consciousness” of City officials and employees. It does so through a process in which employees may ask for an Advisory Opinion about their own past, present or future conduct. All members of the public may file an “Inquiry” as to whether the conduct of any city official or employee violates the code of ethics.
  19. 19.  As of February 2010, Commission has issued over 30 “Advisory Opinions” and addressed one “Inquiry” All City employees actively participate in ethics training and advised regularly on new opinions rendered. 68 training sessions attended by over 1400 employees. Ethics Handbook provided to all employees, which includes the City’s Code of Ethics
  20. 20.  Outside business interests Conflicts of Interest Acceptance of Gifts and Discounts City Purchases and Contracts
  21. 21.  A police officer meets with a person who is the target of harassment by an ex-spouse. The person does not want to press charges, but needs the assistance in monitoring the ex-spouse’s behavior. The officer prepares a possible action plan, noting that there are private firms that offer threat assessment services. The police officer has a private business that provides threat assessment and monitoring services in cases of domestic violence. He does not mention this to the person at the time, despite knowing that she would benefit from the service. He wishes to contact this person and provide his services for a fee. Is this an ethical conflict?
  22. 22.  The Boise City Code § 1-21-03(A) prevents a city employee from using his official position to obtain financial gain for himself, any member of his family, or any business with which he or a member of his household is associated. If the officer were to contact the victim and offer the services of his consulting firm for a fee, it would be an ethical violation. The officer was on an official call when he learned of this situation. He is privy to this information only because of his official position with the City. While employees can use knowledge and experience gained from their positions to start outside businesses, employees cannot use knowledge obtained from employment to pursue clients.
  23. 23.  If, however, the victim were to initiate contact with the officer’s consulting firm on her own, the statute would allow the officer to conduct the work for a fee, because in such a situation the employee would not have used knowledge obtained on the job to pursue clients. Further, if the officer were to contact the victim and offer his consulting firm’s services for free, this section would not come into play, because there would be no financial gain for the employee.
  24. 24. You are a recruiter for an executive recruitment firmthat has recently been retained by one of the largestcorporations in the United States to find appropriatecandidates for the position of President of thecorporation. If the corporation hires one of thecandidates you find then your firm will receive onethird of the President’s cash compensation —— salaryand bonus, an amount in excess of $750,000. Severalweeks into the recruitment process it becomes clear toyou that the company has gone about the search in aseverely flawed way, making it highly unlikely that itwill find the kind of candidates it needs.
  25. 25. The Board of Directors, in your judgment, has allowedthe CEO to control the search. It is clear to you that hewants someone who will be deferential towards him,which, in your judgment, will make it extremelydifficult to attract the most highly qualifiedcandidates. You discuss the issue with your superior.She says that given the intensely competitiveenvironment for executive search firms, it wouldseriously disadvantage your firm to offend the Board ofDirectors of one of America’s largest corporations. Shereminds you that the Board of Directors is responsiblefor hiring the President of the Corporation.
  26. 26. A recruitment firm, she says, bears no legal liability ifa candidate it presents to a company is hired andproves unsuccessful in his position.What should you do in this situation, and why? Robert Ladenson © 1998

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