The Difference Between Ethics and Laws Ethics Socially accepted norms and behaviors We don’t make fun of other people We don’t swindle people out of money by tricking them. Example of unethical : puppy mills? Conflicts of interest? CAN get you sued! Laws Ethics that have agreed-upon penalties attached to them if violated. Example of illegal: Enron debacle, HealthSouth affair

Types of Ethical Tests for Daily Decisions Legal Is there a law against the decision you are making? Justice Is your decision or action fair and equitable? Is it balanced? The Mama Test How would I feel if my Mama found out about this? How about if it were communicated in the news? Does this just feel wrong??

Ethics in the Corporate World P. 94: “People learn their standards and values from observing what others do, not hearing what they say. This is as true in business as it is at home.” Employees watch others to determine what is socially acceptable. Strong leaders know that their actions are being mimicked.

* * Enron: One executive is serving a 24 year sentence for accounting fraud while another will be released in October Arthur Andersen: Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs. Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in Adelphia Communication: Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years. WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years. 4-5

Ethics in the Corporate World Relationships at work should be based on trust, openness, integrity, honesty, and fairness. Businesses should act ethically because: Good reputation Keep customers Keep employees Avoid lawsuits Sleep at night! “Overly ambitious goals can create an environment in which unethical actions… can occur.”

Ethics in the Corporate World Compliance Codes of Ethics Reinforced by penalties for violations Negative reinforcement Integrity-Based Codes of Ethics Reinforced by cultural change and policies, appealing to everyone’s greater good Positive reinforcement Whistleblowing Roger Boisjoly, formerly of Morton Thiokol

How to Make Ethics Work at Your Company 1. There must be a code of ethics for the company. 2. Policies have to be communicated through training. 3. Policies have to be upheld. 4. Ethics have to be brought up in decision-making. 5. Employees need to be reminded that they are the ones protecting the company’s ethics.

Social Responsibility Corporate Philanthropy Giving money and company time to other causes Social initiatives The company decides to set up a program to help some cause (usually the program relates to what the company does) Socially Responsible Practices and Policies What types of things do you think companies can do to be more socially responsible other than the above?

Areas of Social Responsibility Responsibility to Consumers Keep them safe, give them information, hear their feedback Responsibility to Investors Keep them informed, be honest with them, try to build their wealth Responsibility to Employees Create jobs for them; make them contented Responsibility to Community Environmental impact, community welfare

Freidman or Smith? Milton Freidman: Social responsibility is too close to socialism. A business’s role is to enhance shareholder wealth. Giving that to society is not a business’s right. Adam Smith: Benevolence is the utmost responsibility. Self-interested pursuit of profit is wrong The invisible hand must churn the wealth around.

* * Source: Wall Street Journal, June 23, Corporate Social Responsibility LG ¾ of U.S. adults give no time in their community

Social Audit A systematic process of evaluating the business’s effect on society, good and bad Designed to meet the needs of each unique business What types of things could be measured?

Ethics Legislation Sarbanes-Oxley Act All public corporations must have a way for employees to report unethical behavior anonymously AND to protect those people from retaliatory behavior from the company. Regulation FD (SEC) Corporations must tell everyone when substantive news happens, not just a chosen few. Foreign Corrupt Practices Act American businesspersons may not bribe foreign officials.

International Issues Labor Hours worked, fumes, health, child labor Living wage as a new concept Bribery Socially accepted gift-giving or illegal? Environmental Impact Pollution, deforestation, mining Global Imperialism As U.S. companies expand, they take U.S. culture with them.

* * Source: Forbes, March 24, International Ethics and Social Responsibility LG6 4-16