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Unformatted text preview: * * * Business and Ethics J. Robb Dixon
Based on materials from Based Nickels, McHugh & McHugh Nickels, and Beatty & Samuelson and * * * What is Ethics?
• Is it the law?
• • Legal but unethical Ethical but illegal • Standards of moral behavior – that which Standards is accepted by society as right versus wrong. wrong. • How people ought to act. • Doing to others as you would want done Doing to yourself. to
Sources: Nickels/McHugh/McHugh, chapter 4 and Beatty and Samuelson, chapter 2. * * Is Ethics Relevant to * • Does it increase profitability?
Does it increase profitability?
• Malden Mills • Johnson & Johnson Business? • Does society benefit?
• “The greater the measure of mutual trust and The confidence in the ethics of a society, the greater its economic strength.” Akers/IBM economic • Unethical behavior can be costly.
• Cynical, resentful, and unproductive workforce. • People/customers sometimes “punish” those People/customers (individuals/companies) they feel have behaved unethically. unethically.
Source: Beatty and Samuelson, chapter 2. * * *• Functions and Ethics
Accounting: • “Creative accounting,” earnings management • Insider trading, securities fraud • Executive compensation • Bribery, kickbacks HRM: • Discrimination • Union busting • Whistle-blowing • Occupational safety and health Marketing: • Price fixing, price discrimination • Anti-competitive practices • Advertising content • • Source: Draws from http://en.wikipedia.org/wiki/Business_ethics * * • * Functions and Ethics Operations: • Defective or dangerous products • Environmental effects • Risks of new technologies • Testing issues • R&D: • Patent infringement • Misuse of intellectual property system • Employee raiding/hoarding • Industrial espionage Source: Draws from http://en.wikipedia.org/wiki/Business_ethics * * * Ethics Question
J. Scot is the CEO of Razor, a major consumer products company. He was J. hired because Razor’s profitability and stock price had been stagnant. During his first two years Razor’s stock declined further, but during the next two years profits and the stock price rose, mostly because of increased revenue from overseas operations driven by the deteriorating dollar. Another company offers to purchase Razor. Scot knows it will lead to the firing of 5% of Razor’s employees and significant harm to the local community, but if the deal goes through he stands 1) to make $153 million in compensation immediately, 2) to be paid an $8 million annual salary as the vice-chair of the merged company, and 3) to have a pension of $1.2 million per year once he retires. If Scot pushes to have the deal approved, his actions will be: approved, a. Legal and ethical b. Legal but unethical c. Illegal but ethical d. Illegal and unethical
Source: Derived from Beatty and Samuelson, chapter 2. * * What is Ethical Behavior? The Ethics Checklist *
• • • • • What are the facts? What are the critical issues? Who are the stakeholders? What are the alternatives? What are the ethical implications of each alternative?
• • • • Is it legal? How would it look in the light of day? What are the consequences? Does the alternative violate important values? Compassion, courage, fairness, integrity, responsibility, self-control • What kind of world would this be if everyone behaved this What way? way?
Source: Beatty and Samuelson, chapter 2. * * What is Ethical Behavior? The Ethics Checklist * • Is more than one alternative right?
• • • Which values are in conflict? Which of the values are most important? Can you find an alternative that is consistent Can with your values? with The Checklist is a method to use in The thinking through ethical problems – it does not lead to one particular solution. solution. Source: Beatty and Samuelson, chapter 2. * * * Ethics Question
• Your boss has asked you to travel to Qwerty, a developing nation, Your to explore the possibility of opening a new manufacturing facility. You are traveling with Esperanto, a Qwerty native, with whom you have worked on several projects. As you approach the Customs & Immigration line after landing, Esperanto suggests that your first meeting of the day is scheduled in just over an hour, and the odds are much better that you will make the meeting if you slip $50 into your passport. If you do so, your action will be: $50 a. b. c. d. Legal and ethical Legal but unethical Illegal but ethical Illegal and unethical * * * Ethics Question
You resist the suggestion because it does not feel right. Esperanto You explains that it is accepted practice in Qwerty, and he has routinely done so for years. Customs agents are not paid a living wage, and if those who could afford it did not provide them with gratuities, the entire system would break down. Upon further reflection you decide placing the money in the passport is a. a. b. c. d. Legal and ethical Legal but unethical Illegal but ethical Illegal and unethical * * * Top U.S. Ethical Issues
Improper Accounting Practices Deceptive Sales/Marketing Practices Conflicts of Interest Lying on Reports/Falsifying Records Dishonesty with Customers Lack of Public Trust in Corporate America Bribes and Kickbacks Unfair Treatment of Employees/Customers Securities and/or Bank Fraud Discrimination Producing Low-quality or Unsafe Products 0% 10% 20% 30% 40% 50% 60% Source: CMO Magazine, October 2004 * * * Ways to Prevent Unethical Behavior Unethical
Increasing Penalties for Offenders Employee Education Programs Publicity About Those Being Punished A Code of Conduct Adding Ethics Classes to College Programs New Laws 0% 10% 20% 30% 40% 50% 60% 70% 80% Source: CMO Magazine, Oct. 2004 * * * Ethics of MBA Students
Percent of MBA Students Who Would: • Buy Stock on Inside Information • Reveal Corp. Secrets to Spouse/Family • Let a Gift Sway Purchasing Decision • Pay Someone Off to Close a Pay Business Deal
Source: USA Today 52% 50% 26% 13% 13% * * * Why Don’t We Why Trust Corporations? Trust Source: USA Today * * * Factors Influencing Managerial Ethics Managerial
• Values Values • Work Background Background • Family Status Family • Personality Personality Organizational
• Top Level Mgmt. Philosophy Philosophy • The Firm’s Reward System Reward • Job Dimensions Job Environmental
• Competition Competition • Economic Conditions Conditions • Social/Cultural Institutions Institutions Source: Nickels/McHugh/McHugh, chapter 4 * * * Codes of Ethics
• Compliance-Based • Integrity-Based Source: Nickels/McHugh/McHugh, chapter 4 * * * Steps to Improve U.S. Business Ethics U.S.
1. Top management support 2. Employees’ understanding 3. Managers’ training 4. Ethics Office 5. Outsiders must be informed 6. Enforcement of ethics code
Source: Nickels/McHugh/McHugh, chapter 4 * * * Levels of Corporate Social Responsibility
Societal Responsibility Stakeholder Responsibility
Ecological General Public Customers Profit Profit Responsibility
Owners/Stockholders Employees Suppliers/Distributors Environment Public Interest Groups Source: Marketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius. Source: Marketing * * * Corporate Responsibility
(Percent of country’s top 100 companies that publish separate CR reports)
Japan UK France Germany US Italy Spain 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Source: Financial Times, June 15, 2005 Source: Financial * * * Social Audit
• Company • Outside Groups that serve Outside as watchdogs: as
• Socially-Conscious Socially-Conscious Investors Investors • Environmentalists • Union Officials • Customers
Sources: Nickels/McHugh/McHugh, chapter 4 * * * International Ethics and Social Responsibility and
• Ethical problems are Not Unique to Ethical Not the U.S. managers the • Demand for Socially Responsible Demand Behavior from Global Suppliers Behavior • Joint Initiative on Corporate Joint Accountability and Workers’ Rights Accountability • Inter-American Convention Against Inter-American Corruption Corruption
Source: Nickels/McHugh/McHugh, chapter 4 * * * Best Company Reputation
• Johnson & Johnson (80.6) • Coca-Cola (79.7) • Google (79.5) • UPS (79.4) • 3M (78.8) Source: USA Today * * *
1. Apple 1. Most Admired Most Global Companies Global
1. Starbucks 1. FedEx 1. Procter & Gamble 1. Johnson & Johnson 1. Goldman Sachs 1. Berkshire Hathaway 1. General Electric 1. Google 1. Toyota
Source: Fortune, 2008 * * * Sources
• Beatty and Samuelson, The Legal Beatty Environment, Chapter 2. Environment • Nickels, McHugh & McHugh, Understanding Nickels, Business, Chapter 4. Business ...
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- Spring '08