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Economics of Ethics Jim McGraw, MCC-Longview Agenda Economics of Ethics Jim McGraw, MCC-Longview Agenda Background of workshop Background of workshop 15.

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Presentation on theme: "Economics of Ethics Jim McGraw, MCC-Longview Agenda Economics of Ethics Jim McGraw, MCC-Longview Agenda Background of workshop Background of workshop 15."— Presentation transcript:

1 Economics of Ethics Jim McGraw, MCC-Longview Agenda Economics of Ethics Jim McGraw, MCC-Longview Agenda Background of workshop Background of workshop 15 minute draft presentation 15 minute draft presentation –The problem (“The Cheating Culture?”) –The challenge- How to foster ethical business practices Discussion and feedback Discussion and feedback Follow-up and closure Follow-up and closure

2 Name that Scandal! Provide a brief description of the following well-known scandals, noting the ethical/legal issues involved: Provide a brief description of the following well-known scandals, noting the ethical/legal issues involved:

3 Enron

4 Charles Prestwood, a 63 year old retired Enron employee who lost practically all of his $1.3 million savings invested in the company’s stock said, “Something stinks here. There are people at Enron who made millions selling the stock while we, the rank and file, got burned.” (Vickers, M. et al ‘The Betrayed Investor, Australian Financial Review, Feb 19, 2002 p. 52)

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6 Jayson Blair? Jayson Blair? New York Times reporter for about 4 years. It was estimated that almost 50% of the articles he wrote since 2002 contained fabricated or plagiarized work.

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8 Napster!

9 Politics?

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11 Cultural Trends In The Cheating Culture (2004), David Callahan asserts that a cultural shift in the 1980’s toward a “winner take all” mentality has led to increased cheating behaviors in: politics, business practice, sports, legal profession, medicine, pharmaceutical industry, journalism, auto repair, higher education….. In The Cheating Culture (2004), David Callahan asserts that a cultural shift in the 1980’s toward a “winner take all” mentality has led to increased cheating behaviors in: politics, business practice, sports, legal profession, medicine, pharmaceutical industry, journalism, auto repair, higher education…..

12 Other Examples Sears (auto repair) Sears (auto repair) Princeton (hacked into Yale’s computer system) Princeton (hacked into Yale’s computer system) Taxes (it is estimated that the average taxpayer has to pay $3,000 per year to compensate for widespread tax evasion) Taxes (it is estimated that the average taxpayer has to pay $3,000 per year to compensate for widespread tax evasion) Medicine and Pharmaceuticals Medicine and Pharmaceuticals

13 Little indiscretions that add up…. Loss estimates per year of US businesses from employee theft range from 10 billion to 200 billion annually. Loss estimates per year of US businesses from employee theft range from 10 billion to 200 billion annually. U.S. Dept of Commerce estimates 33% of business failures can be traced to employee theft and other employee crimes. U.S. Dept of Commerce estimates 33% of business failures can be traced to employee theft and other employee crimes. Cost of a daily “free” deli sandwich, chips, and soda taken by a supermarket employee for 1 year- approximately $840.00 Cost of a daily “free” deli sandwich, chips, and soda taken by a supermarket employee for 1 year- approximately $840.00 –http://law.jrank.org/pages/1084/Employee-Theft-Legal-Aspects-Estimates-cost.html http://law.jrank.org/pages/1084/Employee-Theft-Legal

14 The Problem Businesses are currently struggling to stay solvent Businesses are currently struggling to stay solvent According to Callahan (2004) some businesses/people bend ethical standards because “everyone is doing it”, and they don’t want to lose the competitive edge According to Callahan (2004) some businesses/people bend ethical standards because “everyone is doing it”, and they don’t want to lose the competitive edge Due to highly public scandals (Madoff) it is difficult to promote a “restoration of trust” with customers Due to highly public scandals (Madoff) it is difficult to promote a “restoration of trust” with customers

15 Good News! Most people that bend the rules (sacrifice integrity for financial stability) are basically “good people” Most people that bend the rules (sacrifice integrity for financial stability) are basically “good people” Ethical standards and decision making processes are available and being used by organizations. Ethical standards and decision making processes are available and being used by organizations. Please name some companies that are recognized for ethical business practice. Please name some companies that are recognized for ethical business practice.

16 The good news never stops The 2009 National Business Ethics Survey reports (www.ethics.org): The 2009 National Business Ethics Survey reports (www.ethics.org):www.ethics.org Misconduct at work is down (56% in 2007 to 49% in 2009) Misconduct at work is down (56% in 2007 to 49% in 2009) Whistle blowing is up (58% in 2007 to 63% in 2009) Whistle blowing is up (58% in 2007 to 63% in 2009) Ethical cultures are stronger (53% in 2007 to 62% in 2009) Ethical cultures are stronger (53% in 2007 to 62% in 2009) Pressure to cut corners is lower (10% in 2007 to 8% in 2009) Pressure to cut corners is lower (10% in 2007 to 8% in 2009)

17 Ethics Quiz: 1 minute with a partner What are some general principles of moral/ethical practice? What are some general principles of moral/ethical practice? From a Rotary Perspective, we can ask ourselves…. From a Rotary Perspective, we can ask ourselves…. Is it true? Is it true? Is it fair to all concerned? Is it fair to all concerned? Will it build good will and better friendships Will it build good will and better friendships Will it be beneficial to all concerned Will it be beneficial to all concerned

18 What Can Be Done? With a partner, please list 2 or 3 things business leaders can do to promote a culture of ethical business practice. With a partner, please list 2 or 3 things business leaders can do to promote a culture of ethical business practice. What are the costs of these practices? What are the costs of these practices? What are the benefits? What are the benefits?

19 A few ideas from the Lee’s Summit Civic Roundtable Regular review of code of ethics Regular review of code of ethics Connect with Lee’s Summit Community of Character (e.g., recognize ethical practices) and Lee’s Summit 360 Connect with Lee’s Summit Community of Character (e.g., recognize ethical practices) and Lee’s Summit 360 Have clear expectations and accountability Have clear expectations and accountability Take responsibility for self and others Take responsibility for self and others Lead by example, and admit mistakes Lead by example, and admit mistakes Speak up when ethical issues arise Speak up when ethical issues arise

20 A New Social Contract? “It means striking a healthier balance between humanistic values like shared responsibility, mutual respect, and compassion for the weak- and market values like maximum efficiency, individual autonomy, and admiration for the strong” “It means striking a healthier balance between humanistic values like shared responsibility, mutual respect, and compassion for the weak- and market values like maximum efficiency, individual autonomy, and admiration for the strong” –(Callahan, 2004, p, 264)

21 Ethics in Business Improves the Bottom Line Lynn Paine- Professor at Harvard Business School asserts that ethical practice: 1) Helps companies manage risk 1) Helps companies manage risk 2) Increases functioning of companies by improving employee morale 2) Increases functioning of companies by improving employee morale 3) Improves the company market position by maintaining or enhancing reputation 3) Improves the company market position by maintaining or enhancing reputation 4) Improves the companies’ “civic positioning”, allowing better relations with communities and government 4) Improves the companies’ “civic positioning”, allowing better relations with communities and government (Callahan, 2004, p. 285) (Callahan, 2004, p. 285)

22 #1- Risk Management During a period of less than 15 years, Sears squandered public trust, incurred numerous criminal charges and multiple lawsuits, and paid fines and settlements that ultimately totaled over $2 Billion (Callahan, p. 33) During a period of less than 15 years, Sears squandered public trust, incurred numerous criminal charges and multiple lawsuits, and paid fines and settlements that ultimately totaled over $2 Billion (Callahan, p. 33)

23 #2 Employee Morale Research conducted by Sears found that if employee satisfaction were to improve by 5 points- Research conducted by Sears found that if employee satisfaction were to improve by 5 points- –Customer satisfaction would increase by 1.3 points… –Leading to a 0.5% increase in revenue… –Resulting in additional sales of approximately $65 million per year Zadek, S, 2001 The Civil Corp. Earthscan

24 #3 and #4- Reputation & Civic Position 91% of consumers are likely to buy from companies that can show they behave ethically. 91% of consumers are likely to buy from companies that can show they behave ethically. 78% of consumers say they would support a company that does good work in the community. 78% of consumers say they would support a company that does good work in the community. –Eye on Australia, Sweeney Research cited in Lloyd, Simon, “Retail: happy shopping’, Business Review Weekly, Jun 8, 2001.

25 Examples of Local Ethical Business Practice 1. 1. 2. 2. 3. 3.

26 General Follow-Up Read The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead ( David Callahan, 2004) www.thecheatingculture.com Read The Cheating Culture: Why More Americans Are Doing Wrong to Get Ahead ( David Callahan, 2004) www.thecheatingculture.com www.thecheatingculture.com Visit www.ethics.org for resources and more detailed information on the 2009 National Business Ethics Survey Visit www.ethics.org for resources and more detailed information on the 2009 National Business Ethics Surveywww.ethics.org Ethisphere..com (top companies 2008) Ethisphere..com (top companies 2008) Discuss with colleagues Discuss with colleagues Increase awareness of workplace practices that have potential ethical ramifications Increase awareness of workplace practices that have potential ethical ramifications

27 Immediate Follow-Up Steps Post your organizational mission, vision, and values in a place to be viewed each day Post your organizational mission, vision, and values in a place to be viewed each day Recognize and acknowledge ethical behavior in colleagues and customers Recognize and acknowledge ethical behavior in colleagues and customers Model ethical behavior Model ethical behavior

28 Suggestions or Requests? Jim McGraw- (816) 604-2313 Jim McGraw- (816) 604-2313 Jim.McGraw@mcckc.edu Thanks very much for your interest and assistance!

29 Feedback and Next Steps Please complete the short feedback form regarding this draft presentation. Please complete the short feedback form regarding this draft presentation. Immediate suggestions? Immediate suggestions? Ideas for next steps? Ideas for next steps?


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