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Lecture 11 International Management Ethics Grundfos (Denmark) 2011.

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1 Lecture 11 International Management Ethics Grundfos (Denmark) 2011

2 Website governance information Enex (Iceland) 2006

3 Enex geothermal plant El Salvador 2009

4 Grundfos (Denmark) Values 2011

5 Jotun (Norway) Identity 2011

6 2007 Fortum governance structure 2007

7 Health and safety We need suppliers to prioritise health and safety of their employees. We therefore expect appropriate working conditions, equipment and premises used to be safe, and hazardous substances and waste to be handled in a safe way. Housing facilities If the supplier provides employee housing facilities, these shall be safe and hygienic, and shall provide satisfactory privacy and space. Working conditions Clas Ohlsson expects suppliers to respect basic human rights and that employees be treated in accordance with the ILO Declaration on Fundamental Principle and Rights at work (1998). Clas Ohlsson 2006 principles

8 Sustainable development highlights 2009/10 Clas Ohlson has made progress on its sustainable development and CSR objectives in 2009/10. Examples of this progress include an increased number of factory audits than the previous year, the introduction of biomass district heating in Insjön, the phasing out of conventional light bulbs and the completion of the company’s first Group-wide employee survey. Clas Ohlson (Sweden) Sustainability 2011

9 1). As an American company, contribute to the growth of the community and the United States 2). As an independent company, contribute to the stability and well-being of team members. 3). As a Toyota group company, contribute to the overall growth of Toyota by adding value to our customers. Toyota (Japan) values 2004 (US branch)

10 Triple bottom line (Novo 2011)

11 Values Kone (Finland) 2011 KONE’s values Our values guide the behavior of our personnel towards achieving our strategy. KONE’s values are: Delighting the Customer Our customers’ success is our goal. We work for and with them to identify and deliver solutions that exceed expectations. We stay with them for the total life cycle of our products and services and ensure the safety of users and our people. Energy for Renewal We are energized by the drive for continuous improvement. We anticipate and adapt to changing requirements and constantly seek ways to work smarter. We welcome new ideas with an open mind. Passion for Performance We keep our promises. We drive new ideas to realization with speed and an obsession for customer-driven quality. We thrive on challenges and take pride in our “can do” attitude. Winning Together We can win only by working together. We encourage participation, and we share information and ideas. We trust and respect each other and recognize good performance. Our behavior is characterized by the highest ethical standards.

12 Elin Bernhardson: ”My journey within Sandvik has been great and I have learned a lot, both within my profession but a lot about me as a person.” Recruiting Sandvik (Sweden) 2011

13 Telenor 2011 Communications as an enabler

14 Oslo is the oldest of the Scandinavian capitals, and its history goes back to 1000 years ago, when the first settlements were built at the inlet of the Oslo fjord. After the Great Fire that destroyed the city in 1624, the Danish King Christian IV, decided to rebuild the city in brick and stone, and named it Christiania. Three hundred years later, in 1925, the citizens decided to rename their city Oslo. Local government Oslo 2011

15 «To advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity, and responsibility» US Chamber of Commerce Mission 2011

16 “Bechtel's contracts were part of an enormous U.S. effort to put Iraq back on its feet after decades of wars and sanctions…But Bechtel -- which charged into Iraq with American "can-do" fervor -- found it tough to keep its engineers and workers alive, much less make progress in piecing Iraq back together. “ Bechtel Problems 2007

17 International organisation ethics pitfalls Lack of openness Lack of legitimacy Nationalism, local ideology Headquarter orientation Culture not sufficiently considered Poor presentation on web

18 Summary international ethics Many good initiatives More governance issues on websites (impression only) Web used to «sell» organisation Some good government initiatives Large differences Little education

19 Lecture 12 Discussion day

20 Question 1. 1.Provide vision for a 2000 employee hightech business, international. 1.Use vision to suggest a strategy 1.Name some of the difficulties you would expect 1.What role should ethics play?

21 Question 2 ISO 26000 focuses «sphere of influence» 1.What is meant by this concept? 1.What are positive or negative implications?

22 Lecture 14 Governance

23 Purpose of lecture * Define governance * Introduce the main concepts of governance * Examine examples of governance * Present current initiatives in governance * Discuss shortcomings of current governance Aboriginal governance, Institute of Governance

24 T he way that a city, company, etc., is controlled by the people who run it Governance definition Merriam Webster Learners Dictionary 2012 Governance determines who has power, who makes decisions, how other players make their voice heard and how account is rendered... goal is to realize organsational and societal goals. Institute of Governance. 2012.

25 ISO 38500

26 ISO/IEC 38500 draws upon a number of sources, chief of which is AS 8015:2005, which defines the following six principles:  Establish responsibilities  Plan to best support the organisation  Acquire validly  Ensure performance when required  Ensure conformance with rules  Ensure respect for human factors.

27 Corporate governance «The purpose of this Code of Practice is to ensure that listed companies implement corporate governance that clarifies the respective roles of shareholders, the board of directors and executive management more comprehensive than is required by legislation. The Code of Practice is intended to strengthen confidence in companies, and help to ensure the greatest possible value creation over time in the best interest of shareholders, employees and other stakeholders.» Norwegian Code of Practice for Corporate Governance 2004

28 Implementation The board of directors must ensure that the company implements sound corporate governance. The board of directors must provide a report on the company's corporate governance in the annual report. If the company does not fully compy with this code of Practice, this must be explained in the report. The board of directors should define the company's basic corporate values and formulate ethical guidelines in accordance with these values.

29 Business The company's business should be clearly defined in its articles of association. The company should have clear objectives for its business within the scope of the definition of its business in its articles of association. The annual report should include the business activities clause from the articles of association and describe the company's objectives and principal strategies.

30 Shareholders The company should have only one class of shareholders.... Any transactions the company carries out in its own shares should be carried out either through the stock exchange or at prevailing stock exchange prices if carried out in any other way. If there is limited liquidity in the company's shares, the company should consider other ways to ensure equal treatment of all shareholders.... The company should operate guidelines to ensure that members of the board of directors and the executive management notify the board if they have any material direct or indirect interest in any transaction entered into by the company. Shares in listed companies should be freely negotiable.

31 General meetings... general meetings are an effective forum for views of shareholders and the board. * Information on resolutions and recommendations * Information sufficiently detailed to enable shareholders to form a view ' Deadline to attend close to meeting * Ensure that non-attenders can vote by proxy * Ensure that board of directors, nominating committee and the auditor are present at the general meeting. * Appoint independent chairman for the general meeting

32 Norwegian peculiarities In the absence of any agreement with employees to the contrary, companies with more than 200 employees must elect a corporate assembly with at least 12 members of which 2/3 are elected by shareholders and 1/3 are elected by the employees. The main duty of the corporate assembly is the election of the board of directors. In addition, the corporate assembly has certain duties in respect of supervision, issuing opinions and decision making. In any company with more than 30 employees, the employees have the right to be represented on the board of directors. If a company has more than 200 employees but has not elected a corporate assembly, employees must be represented on the board. The chief executive may not be the chairman of its board of directors.......representatives of the executive management are not normally elected to the board of directors.

33 Financial governance * Stock markets – investments * Banking * Insurance * National finances * Modelling

34 UK Stewardship Code 2010 * Publicly disclose their policy on how they will discharge their stewardship responsibilities. * Have a robust policy on managing conflicts of interest in relation to stewardship and this policy should be publicly discussed. * Monitor their investee companies * Establish clear guidelines on when and how they will escalate their activities as a method of protecting and enhancing shareholder value. * Be willing to act collectively with other investors when appropriate * Have a clear policy on voting and disclosure of voting activity * Report periodically on their stewardship and voting activities

35 Ownership options ● Shareholding long term (insurance, ● sovereign funds...) ● Shareholding short term («day trading») ● Shareholding ultrashort- High Frequently Trading ● Shareholding private ● Finance house ownership (various) ● Ownership by industry ● Ownership by state

36 “The assumptions about investors include that they are rational, risk averse, do not influence market prices, hold diversified portfolios, pay no tax, have access to unlimited low-cost leverage and instant equal access to information.” “Irrational regard for economic models”. James Mackintosh. Financial Times 17/10-2011. Investor view

37 Dark pools Dark pools” is the romantic – or sinister, depending on your viewpoint – name given to networks that allow traders to buy or sell large orders without running the risk other traders will work out what is going on and put the price up, or down, to take advantage of the order. They have been criticised for their lack of transparency and because the inevitable fragmentation of trading could lead to less efficient pricing in traditional open stock exchanges. A type of trading platform that allows large blocks of shares to be traded without the prices being revealed publicly until after trades are completed. Pre-trade prices - the price at which shares are offered for sale - are not visible to anyone, even the participants in them, and the price at which shares change hands is only revealed after the trade is done. Financial Times Lexicon 2012.

38 EU Green Paper 2011 questions: * How can the status of the chief risk officer be enhanced? Should the status of the chief risk officer be at least equivalent to that of the chief financial officer? * Should IT tools be upgraded in order to improve the quality and speed at which information concerning significant risks is transmitted to the board of directors? * Should external auditors’ control be extended to risk-related financial information? * Should supervisory authorities be given the power and duty to check the correct functioning of the board of directors and the risk management function? How can this be put into practice? * Should institutional investors be obliged to adhere to a code of best practice? * Is it necessary to increase the accountability of the board of directors? * What is your opinion of severance packages, (so-called “Golden Parachutes”)? * Do you think the variable component of remuneration in financial institutions which have received public funding should be reduced or suspended?

39 Climate governance Extreme weather Sea level rise Pollution in general Energy Biodiversity Earth future

40 Denmark sea level rise

41 Denmark's two problems 1. Extreme weather 2. Sea level rise, perhaps 1.5 meters

42 Ecological governance The concept of ecological governance is exciting because it offers alternatives to linear, extractive, and unsustainable systems that continue to level ancient forests, displace indigenous and local communities, clog and choke our global cities. Instead, ecological governance asks how we might foster circular systems where we reduce our demands on distant (and local) ecological systems. 2012 University of Victoria,

43 UN Environment Programme Global investment in renewable energy jumped 32% in 2010, to a record $211 billion. In addition to this eye-catching record, the investment activity in developing countries increased strongly. It is the first time the developing world has overtaken the richer countries in terms of financial new investment. The Global Trends Report 2011 offers an elaborate analysis of Trends and Issues in the financing of renewable energy. 2012

44 Intergovernmental Panel on Climate Change The IPCC released its Special Report on Managing the Risks of Extreme Events and Disasters to Advance Climate Change Adaptation (SREX) on 28 March. The report assesses the evidence that climate change has led to changes in climate extremes and the extent to which policies to avoid prepare for, respond to and recover from the risks of disaster can reduce the impact of such events.

45 EU as a climate actor EU has reduced its greenhouse gas emissions by 16% over the past two decades, whereas the economy has grown by 40% over the same period. If current policies are fully implemented, the EU is on track to achieve the targets for 2020 of reducing the emissions to 20% below 1990 levels and raising the share of renewables in its energy mix. “If Europe makes the transition to a low-carbon society by 2050 we will live and work in low-emission buildings, with intelligent heating and cooling systems. We will drive electric and hybrid cars and live in cleaner cities with less air pollution and better public transport. The transition would give Europe’s economy a boost thanks to increased investment in clean technologies and clean energy.” Roadmap for moving to a low-carbon economy in 2050. Last updated 8/3-2011. European Commission Climate Action.

46 Australia as climate actor Australia decided 2011 to follow the Kyoto protocol. Of special interest in Australia is very hot days: “By the end of the century the number of days over 35˚C is expected to increase by: 3 times in Melbourne; 4 times in Sydney; 2.5 times in Adelaide; 20 times in Brisbane; 3 times in Hobart and 6 times in Canberra. By the end of the century, the estimated temperature in Perth during one fifth of the year—or two and a half months—will be over 35˚C, while in Darwin 10 months of the year will be over 35˚C” 2011

47 Climate Vulnerable Forum ecology. “A near doubling in warming is unavoidable in the next 20 years or so as the lag in the planet’s greenhouse effect catches up with us. We must meet this growing challenge. If not, the Monitor estimates that by 2030, over 130 countries will be highly vulnerable to climate change; while over 50 countries will suffer the kinds of acute impacts that just a handful of particularly fragile states are experiencing today. According to the scientific consensus, we must also begin reversing our patterns of emissions within the next five years to avoid even greater temperature change and greater harm.” Climate Vulnerability Monitor 2010. The Climate Vulnerable Forum did not make a major impression during the Climate Conference in Durban 2011, but may have achieved a minor breakthrough. On “overtime”, the Forum teamed up with other small countries and may continue work. One vulnerable big country is India, so perhaps there is hope?

48 Government governance Modern government perhaps moving towards hybrid model: * Government + private * Extensive stakeholder involvement Reasons: ● Impossible for government to be expert in everything ● Democratic legitimacy ● Help to business Bell, Stephen & Hindmoor, Andrew Rethinking Governance. Cambridge University Press 2009

49 UK advanced level auditing ● compliance with the Code of Conduct ● arrangements for local determinations and investigations ● the roles and responsibilities of standards committees ● monitoring officer roles and responsibilities ● chief executive roles and responsibilities ● protocols and constitution ● arrangements for promoting confidence in local democracy ● understanding of ethical issues and behaviours

50 Vacancy ad The Inter-American Development Bank (IDB) is seeking… Ethics Officer… supervises and directs the work of the Ethics Office, which provides consistent advice to management and employees on the application of workplace rules related to integrity, including the Banks’s Code of Ethics and Professional Conduct, and leads training programs aimed at increasing awareness on ethics issues...must have a proven track record of resolving conflicts and grievances.” IDB appointments ad, The Economist 1/10-2011.

51 Reporting Sustainability reporting is the practice of measuring, disclosing, and being accountable to internal and external stakeholders for organizational performance towards the goal of sustainable development. ‘Sustainability reporting’ is a broad term considered synonymous with others used to describe reporting on economic, environmental, and social impacts (e.g., triple bottom line, corporate responsibility reporting, etc.). A sustainability report should provide a balanced and reasonable representation of the sustainability performance of a reporting organization – including both positive and negative contributions.” Global Reporting Initiative December 2012

52 Ethics governance in organisations * Determine the organisation’s view of ethics. Research ethics in books, courses and public discussions (or use a consultant). * Decide and formulate a first attempt at ethical guidelines, perhaps testing out with employees (and later, customers) * Develop a (first) ethical policy. Test on stakeholders, especially employees and customers. * Attempt a sustainable vision, and perhaps the beginning of a strategy. Perhaps submitting to review by a professional (in management or ethics or both) * Publish vision and perhaps strategy on website. Allow for feedbacks. * Develop guidelines and teaching material. Especially important is a glossary that employees (and perhaps customers) can agree on. (This teaching may be prioritized up, then part of the groundwork is missing, but a half-finished message early may be better than an excellent one three years later.) * Teach, including updating the above based on class feedbacks. Like Novo, target at least 99% of the employees. Perhaps even partners and customers need an update? * Implement measurements, especially for self-improvement. * Implement reporting, perhaps allowing comparisons with peer group * Institutionalise ethical reviews, even targeting Board and top management. * Use the above to review current practices. Perhaps the practices need to be changed, or the ethical guidelines?

53 Governance and ethics * Governance important for ethics * Perhaps an important part of ethics * Several challenges * May contribute in very high level projects

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