Business Ethics Fundamentals


Published on

Business Ethics Fundamentals

Published in: Business
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide
  • Business Ethics Fundamentals

    1. 1. Chapter 5 Ethics and Social Responsibility
    2. 2. Learning Objectives <ul><li>Legality is only a first step </li></ul><ul><li>Questions to ask: When faced with a potentially unethical action. </li></ul><ul><li>Management’s role </li></ul><ul><li>Compliance/Integrity based codes </li></ul><ul><li>Corporate social responsibility </li></ul><ul><ul><li>A definition and stakeholders </li></ul></ul>
    3. 3. Ethics <ul><li>More Than Legality </li></ul><ul><li>Standards are Fundamental </li></ul><ul><li>Stem From Individual </li></ul>
    4. 4. The Legal Ethical Grid Legal Ethical Unethical Illegal Ethical but Illegal Unethical And Illegal Legal And Ethical Legal But Unethical
    5. 5. Factors Influencing Managerial Ethics Individual Organizational Environmental <ul><li>Values </li></ul><ul><li>Work Background </li></ul><ul><li>Family Status </li></ul><ul><li>Personality </li></ul><ul><li>Top Level Mgmt. Philosophy </li></ul><ul><li>The Firm’s Reward System </li></ul><ul><li>Job Dimensions </li></ul><ul><li>Competition </li></ul><ul><li>Economic Conditions </li></ul><ul><li>Social/Cultural Institutions </li></ul>
    6. 6. SEC Investigations (2002 ) <ul><li>Accounting </li></ul><ul><ul><li>Arthur Andersen </li></ul></ul><ul><ul><li>Deloitte & Touche </li></ul></ul><ul><ul><li>Ernst & Young </li></ul></ul><ul><ul><li>KPMG </li></ul></ul><ul><ul><li>PriceWaterhouse Coopers </li></ul></ul><ul><li>Energy </li></ul><ul><ul><li>CMS Energy </li></ul></ul><ul><ul><li>Dynergy </li></ul></ul><ul><ul><li>Enron </li></ul></ul><ul><ul><li>Halliburton </li></ul></ul><ul><ul><li>Reliant Resources </li></ul></ul><ul><li>Software </li></ul><ul><ul><li>Computer Associates </li></ul></ul><ul><ul><li>Network Associates </li></ul></ul><ul><li>Telecom </li></ul><ul><ul><li>Global Crossing </li></ul></ul><ul><ul><li>Lucent Technologies </li></ul></ul><ul><ul><li>Qwest Communications </li></ul></ul><ul><ul><li>WorldCom </li></ul></ul><ul><li>Wall Street </li></ul><ul><ul><li>Credit Suisse First Boston </li></ul></ul><ul><ul><li>Hedge Funds </li></ul></ul><ul><ul><li>Capital Markets </li></ul></ul><ul><ul><li>Merrill Lynch </li></ul></ul>Source: Business Week , June 10, 2002
    7. 7. Canadian Examples (Not all corporate!) <ul><li>Bre-X – One time value of $4 Billion </li></ul><ul><ul><li>The gold mine that wasn’t </li></ul></ul><ul><li>The Tainted Blood Scandal </li></ul><ul><ul><li>Compensation for Victims </li></ul></ul><ul><li>Residential Schools </li></ul><ul><ul><li>Aboriginal & First Nations </li></ul></ul><ul><ul><li>Christian Brothers in NFLD </li></ul></ul><ul><li>The Sponsorship Scandal </li></ul>
    8. 8. Fines & Reasons Source: Business Week , Nov. 4, 2002 Company Fine Reason Arthur Andersen $500,000 Obstruction of Justice Shredding Enron Documents Citigroup $5,000,000 Analyst Issued Misleading Information Merrill Lynch $100,000,000 Conflict of Interest Between Investment Bank & Research Dept. Credit Suisse First Boston $100,000,000 IPO Shares Unfairly Distributed
    9. 9. Crisis of Trust <ul><li>All Corporations </li></ul><ul><li>Fair Amount 41% </li></ul><ul><li>Only A Little 35% </li></ul><ul><li>Not At All 13% </li></ul><ul><li>A Great Deal 10% </li></ul><ul><li>No Opinion 1% </li></ul><ul><li>Your Employer </li></ul><ul><li>A Lot 50% </li></ul><ul><li>Only Somewhat 39% </li></ul><ul><li>Not At All 8% </li></ul><ul><li>No Opinion 3% </li></ul>Source: USA Today /CNN/Gallup Poll, Jan. 25-27, 2002
    10. 10. Ethics Check Questions: <ul><li>Is It Legal? </li></ul><ul><li>Is It Balanced? </li></ul><ul><li>How Will It Make Me Feel About Myself? </li></ul>
    11. 11. Ethical Decision Resolved Through: <ul><li>Religious Teachings </li></ul><ul><li>Individual Rights </li></ul><ul><li>Legislation </li></ul><ul><li>Court Decisions </li></ul>
    12. 12. Codes of Ethics <ul><li>Compliance-Based </li></ul><ul><ul><li>Increasing control and penalizing wrongdoers </li></ul></ul><ul><li>Integrity-Based </li></ul><ul><ul><li>Define guiding values </li></ul></ul><ul><ul><li>Support ethical behaviour </li></ul></ul><ul><ul><li>Shared accountability </li></ul></ul>
    13. 13. Six Steps to Improve Ethics <ul><li>Top management support </li></ul><ul><li>Expectations begin at the top </li></ul><ul><li>Ethics imbedded in training </li></ul><ul><li>Ethics office set up </li></ul><ul><li>External stakeholders informed </li></ul><ul><li>There must be enforcement </li></ul>
    14. 14. Ethics of MBA Students <ul><li>Percent of MBA Students Who Would : </li></ul><ul><li>Buy Stock on Inside Information 52% </li></ul><ul><li>Reveal Corp. Secrets to Spouse/Family 50% </li></ul><ul><li>Let a Gift Sway Purchasing Decision 26% </li></ul><ul><li>Pay Off to Close a Business Deal 13% </li></ul>Source: USA Today
    15. 15. Three Levels of Social Responsibility Societal Responsibility Stakeholder Responsibility Profit Responsibility Owners/Stockholders General Public Customers Employees Suppliers/Distributors Ecological Environment Public Interest Groups Source: Marketing , 5/E by Berkowitz, Kerin, Hartley, and Rudelius.
    16. 16. Triple Bottom Line <ul><li>The triple bottom line (TBL) focuses corporations not just on the economic value they add, but also on the environmental and social value they add – and destroy. </li></ul><ul><li>Triple bottom line is used as a framework for measuring and reporting corporate performance against economic, social and environmental parameters. </li></ul>         
    17. 17. Triple Bottom Line <ul><li>At its broadest, the term is used to capture the whole set of values, issues and processes that companies must address in order to minimize any harm resulting from their activities and to create economic, social and environmental value. This involves being clear about the company’s purpose and taking into consideration the needs of all the company’s stakeholders – shareholders, customers, employees, business partners, governments, local communities and the public. </li></ul>
    18. 18. Interface Carpets A Sustainability Champion <ul><li>Vision: To be the first company that, by its deeds, shows the entire industrial world what sustainability is in all its dimensions: People, process, product, place and profits — by 2020 — and in doing so we will become restorative through the power of influence. </li></ul><ul><li>Ray Anderson - believes that if Interface, a petro-intensive company, can get it right, it will never have to take another drop of oil from the earth. </li></ul>
    19. 19. Environmental Issues <ul><li>Pesticides </li></ul><ul><li>Waste disposal </li></ul><ul><li>Clear-cut logging </li></ul><ul><li>Deforestation </li></ul><ul><li>Auto exhaust </li></ul><ul><li>Conservation </li></ul><ul><li>Recycling </li></ul><ul><li>Ozone depletion </li></ul><ul><li>Extinction of species </li></ul><ul><li>Populations explosion </li></ul><ul><li>Nuclear proliferation and testing </li></ul>
    20. 20. The Resource Recovery Fund Board of Nova Scotia <ul><li>50% waste diversion & 100% of Nova Scotians have curb-side recycling </li></ul><ul><li>Almost 79% return rate on beverage containers </li></ul><ul><li>Over 1.5 billion beverage containers recycled since April 1, 1996 & 403,000 litres of paint recycled since June 1, 2002 </li></ul><ul><li>Over 912,000 tires are reused or recycled annually through the Used Tire Management Program. 5.5 million tires since the program began. </li></ul><ul><li>Total waste diverted from landfills annually:  350,000 tonnes & Composted more than 233,000 tonnes of organic material </li></ul>
    21. 21. Responsibility Defined <ul><li>Corporate Social Responsibility -the concern businesses have for the welfare of society </li></ul><ul><li>Corporate Philanthropy – charitable donations </li></ul><ul><li>Corporate Responsibility – acting responsibly within society </li></ul><ul><li>Corporate Policy – position on social and political issues </li></ul>
    22. 22. What is the Answer? <ul><li>Japan has developed “green technologies” and is exporting this technology - using “green” as a competitive advantage </li></ul><ul><li>Some Canadian companies are exporting environmental technology </li></ul><ul><li>We have established IISD - the International Institute of Sustainable Development </li></ul><ul><li>Business continues to worry about the cost to institute “green” operating procedures </li></ul>
    23. 23. A Very Different Answer <ul><li>American author, Paul Hawken, says that sustainable development is not enough </li></ul><ul><li>His proposals would make “green” products cheaper </li></ul><ul><ul><li>Prices should reflect all costs including disposal and harm to the environment </li></ul></ul><ul><ul><li>redesign products to make them biodegradable </li></ul></ul><ul><ul><li>taxes on pollution and depletion instead of taxes on payroll </li></ul></ul><ul><ul><li>redesign products to make them recyclable </li></ul></ul><ul><li>Are we ready for these kinds of changes? Do we have any choice ? </li></ul>
    24. 24. Reaction to the New Social Responsibility <ul><li>Many companies have undertaken a Social Audit - a systematic evaluation of the company’s position and progress on social issues </li></ul><ul><li>Shareholders and other stakeholders have actively encouraged companies to become proactive on social issues </li></ul>
    25. 25. Why People Volunteer <ul><li>Total is more than 100%- respondents could give more than one reason. </li></ul>Percent of Respondents
    26. 26. Contributions to Charity (In Billions of Dollars)
    27. 27. New Philanthropy Source: Business Week , Dec. 2, 2002 Donor Estimated Total Given (in Millions Causes Bill Gates $25.6 Health & Education Gordon Moore $6.6 Conservation & Education James Stowers $1.5 Biomedical Research Eli Broad $1.045 Education & Arts Walton Family $.75 Education
    28. 28. <ul><li>Merck </li></ul><ul><li>Johnson & Johnson </li></ul><ul><li>Pfizer </li></ul><ul><li>Eli Lilly </li></ul><ul><li>IBM </li></ul><ul><li>Microsoft </li></ul><ul><li>Intel </li></ul><ul><li>Bank of America </li></ul><ul><li>$221.0* </li></ul><ul><li> 176.2 </li></ul><ul><li> 123.9 </li></ul><ul><li> 121.4 </li></ul><ul><li> 116.1 </li></ul><ul><li> 104.7 </li></ul><ul><li> 101.0 </li></ul><ul><li> 91.5 </li></ul>Corporate Annual Giving Source: The Taft Group * In Millions
    29. 29. Where US Charitable Contributions Go (2001) In Billion $ Source: BusinessWeek . Dec. 2, 2002
    30. 30. International Ethics & Responsibility <ul><li>Ethics Not Unique To U.S.- Leaders Accountable </li></ul><ul><li>Demand for Socially Responsible Behavior </li></ul><ul><li>Inter-American Convention Against Corruption </li></ul>
    31. 31. Conundrums of Doing Business Globally <ul><li>What do you do when: </li></ul><ul><ul><li>You are forbidden to trade – Cuba </li></ul></ul><ul><ul><li>Ethical norms of the host country violate the laws of the home country </li></ul></ul><ul><ul><li>Social responsibility has whole new meaning </li></ul></ul><ul><ul><li>Environmental practices differ from the home company </li></ul></ul>
    32. 32. Most Admired Global Companies (Outside of U.S.) <ul><li>Nokia Finland </li></ul><ul><li>Toyota Motor Japan </li></ul><ul><li>Sony Japan </li></ul><ul><li>Nestle’ Switzerland </li></ul><ul><li>Honda Motor Japan </li></ul><ul><li>BP Britain </li></ul><ul><li>Singapore Airlines Singapore </li></ul><ul><li>L’Oreal France </li></ul><ul><li>Royal Dutch/Shell Britain & Netherlands </li></ul><ul><li>Canon Japan </li></ul>Source: Fortune , March 4, 2002