PERSONAL AND CORPORATE Ethics

A set of moral principles or values that govern behavior.  What is right and wrong?  What are your personal ethics?

Ethics All individuals develop their own set of ethical rules  Which helps them decide how to behave in different situations Like individuals, businesses develop ethics to help them determine what actions are appropriate and fair among employees.

The Golden Rule One should treat others as one would like others to treat oneself (positive form) One should not treat others in ways that one would not like to be treated (negative/prohibitive form, also called the Silver Rule)Silver Rule

Hippocratic Oath The Hippocratic Oath is an oath historically taken by doctors swearing to practice medicine ethically

Code of Ethics A document that outlines the principles of conduct to be used in making decisions within the organization.  Given to all employees  Most all companies in the U.S. have a code of ethics.

Code of Ethics Common Content 1. Honesty 2. Adherence to the Law 3. Product Safety and Quality 4. Health and Safety in the workplace 5. Conflicts of Interest 6. Employment practices 7. Selling and Marketing Practices 8. Financial Reporting 9. Pricing, Billing, and Contracting 10. Using Confidential Information 11. Acquiring and using information about competitiors 12. Security 13. Payments to obtain business 14. Protection of the Environment

Code of Ethics Establishing a code of ethics does not prevent unethical behavior The Code MUST BE ENFORCED!!!!!  Companies must discipline employees that violate the Code of Ethics

Ethics PRO’s and CON’s PRO’s  Helps employees gain the trust of the people with whom they work  Helps businesses gain the trust of customers, suppliers, etc… with which they deal with CON’s  Cause a company to lose money due to lawsuits or lost business  Can result in a personal demotion or termination from the organization

Classroom Code of Ethics What are the Code of Ethics to be followed in the classroom?  Students should create a 14 item Code of Ethics that will apply to all students who take this Course. The 14 items should follow the common contents of the previous slides. The best Code of Ethics will be printed and placed on the wall.

Enron Corporation In 2001, the Enron Corporation, one of the world’s largest traders in gas, electricity, and related commodities, collapsed in scandal and declared bankruptcy. Enron was accused of crimes including deceiving investors, inflating profits, and hiding debts. Arthur Anderson, the companies accounting firm was later convicted of obstructing justice by shredding documents related to its work on Enron’s accounting.

Enron Corporation WorldCom, then the world’s second largest long- distance provider, suffered the largest bankruptcy in American history after it revealed that it had improperly booked over $7 million in earnings. As a result of these high-profile scandals and to shore up faith in the American Economy, President Bush signed the Sarbanes-Oxley Act of 2002.

Sarbanes-Oxley Act of 2002 Act containing important rules affecting the reporting and corporate governance of public companies and their directors and officers. Major provisions:  Require CEO and CFO to certify periodical reports filed with the SEC  Prohibits most loans to directors and executive officers.  Forces company insiders to report changes in ownership within two days after a transaction has been executed.

Ethics Some ethical violations are clear cut in the workplace  Stealing money or supplies  Lying about hours worked (stealing hours)  Falsifying records

Employee Theft Employers trust their employees not to steal from them.  Ethical employees do not violate that trust Unethical employees steal in many different ways  Embezzle money  Steal supplies or inventory  Accept bribes  Submit false expense reports

Lying About Hours Worked Ethical employees are honest about hours worked.  Working from home or sales from the road require ethical reporting since managers cannot check to see them working. Ethical employees show up to work unless they are ill or forced to miss for a legitimate reason.  They do not pretend to be sick or just lay out of work for no reason.  This results in no accountability in the workplace

Falsifying Records One of the most ethical collapses an employee can commit!!! This may cause massive damage to a companies reputation Years of excellent performance can be wiped out due to unethical actions.

Laws Relating To Ethics in Business Laws relating to:  Competitive behavior  Consumer protection  Product safety  Environmental protection

Competitive Behavior The federal gov. makes sure companies don’t engage in anticompetitive behavior All companies must abide by these laws Laws enforced by the:  FTC (Federal Trade Commission)  Antitrust Division of the Department of Justice

Competitive Behavior 3 laws:  The Sherman Act  The Clayton Act  The Wheeler-Lea Act

Competitive Behavior The Sherman Antitrust Act of 1890 Made it illegal for companies to monopolize trade Company mergers may be prohibited if the result of the merger gives too large of a share of the market Purpose of law is to ensure companies can compete fairly

Competitive Behavior The Clayton Act of 1914 Made it illegal to charge different prices to different wholesale customers. Also banned the practice of requiring a customer to buy a second product.

Competitive Behavior The Wheeler-Lea Act of 1938 Banned all unfair or deceptive acts or practices like false advertising Required businesses to notify customers of any possible negative consequences of using their product

Consumer Protection Laws protect consumers in the United States against unethical and unsafe business practices These laws cover:  Food and Drug  Consumer Products  Loans

Food and Drug The Federal Food, Drug, and Cosmetic Act of 1938 bans the sale of impure, improperly labeled, falsely guaranteed, and unhealthy foods, drugs, and cosmetics. This law is enforced by the FDA (Food and Drug Administration)  FDA has the power to force manufacturers to stop selling products it considers unsafe

Consumer Products The CPSC was established in 1972  The Consumer Product Safety Commission It established minimum product safety standards on consumer products The CPSC has the authority to force manufacturers to recall any product found to be defective

Loans Laws that protect consumers from unfair lending practices are:  The Truth-In-Lending Act of 1968  The Equal Credit Opportunity Act of 1975

Loans Truth-In-Lending Act of 1968  Requires the lender to disclose in writing the APR (Annual Percentage Rate), and all finance and interest charges over the course of the loan. The Equal Credit Opportunity Act of 1975  Creates equal chances for all consumers to receive a line of credit.  Makes it illegal to make credit approval decisions based on any discriminatory practice.

Environmental Protection Environmental Protection has been an important social and economic issue in the U.S. since the 1960’s This issue led to these laws designed to protect the environment.  The National Environmental Policy Act of 1969  The Clean Air Act of 1970  The Toxic Substance Control Act of 1976  The Clean Water Act of 1977

The National Environmental Policy Act of 1969 Was the key piece to the environmental protection movement of the 1960’s Created the EPA  Environmental Protection Agency  Mission is to protect humans health and safeguard the air, water, and land. The EPA enforces all of the following laws

The Clean Air Act of 1970 The federal law that regulates air emissions Set maximum air pollution standards in for each of the 50 states. In 1990, the act was amended to deal with new problems:  Acid Rain  Ground-Level Ozone  Stratospheric Ozone Depletion  Toxic substances in the air

The Toxic Substances Control Act of 1976 Act gave the EPA the authority to track all industrial chemicals produced in, or imported into the U.S. EPA screens all industrial chemicals and can require periodical reporting or testing of those that may be dangerous to humans or the environment.

The Clean Water Act of 1977 Act gives the EPA authority to prevent industries from discharging pollutants into bodies of water without a permit Law makes it illegal to dump chemicals or pollutants into bodies of water unless a permit is granted

Environmental Protection Which laws govern the environment? What was the key piece of legislation in the environmental protection movement? Which decade did the Environmental protection movement begin?

Ethical Standards Standards of Business Ethics are different around the world Business Managers must be aware of these different ethical standards when working in foreign countries

Ethical Standards Gift Giving  Some cultures expect a gift. Failure to give is considered an insult.  In Japan, gifts are important part of doing business, usually exchanged at the first meeting In the U.S. Government officials are not allowed to accept gifts from businesses.

Intellectual Property Ownership of ideas, such as inventions, books, movies, and computer programs In the U.S. creators of intellectual property have the exclusive right to market and sell their work.

Intellectual Property These rights are protected by:  Patents  Trademarks  Copyright laws These laws guarantee only the creator profits from the idea In 1999, the Justice Department, FBI, and Customs Services began cracking down on piracy and counterfeiting

Intellectual Property China and India do not enforce these rights  Chinese copy and sell foreign computer programs and pirate newly released movies  Publishers in India reprint foreign textbooks In the U.S. these people would be guilty of PLAGARISM and will be sued in a court of law

Intellectual Property A manager must know the culture of the countries they do business in. Intellectual property laws must be respected and followed in the U.S.