Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 2 2 The Ethical Basis of Law and Business Management.

2-2 SEC Investigations (2002) Accounting Arthur Andersen Deloitte & Touche Ernst & Young KPMG Price Waterhouse Coopers Energy CMS Energy DynergyEnronHalliburton Reliant Resources Software Computer Associates Network Associates Telecom Global Crossing Lucent Technologies Qwest Communications WorldCom Wall Street Credit Suisse First Boston Hedge Funds Capital Markets Merrill Lynch Source: Business Week, June 10, 2002

2-3 Corporate Scandal Fines CompanyFineReason Arthur Andersen $500,000 Obstruction of Justice Shredding Enron Documents Citigroup$5,000,000 Analyst Issued Misleading Information Merrill Lynch $100,000,000 Conflict of Interest Between Investment Bank & Research Dept. Credit Suisse First Boston $100,000,000 IPO Shares Unfairly Distributed Source: Business Week, Nov. 4, 2002

Unethical Behavior  Unethical behavior in business is not just a recent phenomenon In the sixth century, B.C., the philosopher Anacharsis once said, “The market is a place set apart where men may deceive one another.” In the sixth century, B.C., the philosopher Anacharsis once said, “The market is a place set apart where men may deceive one another.”

Unethical Behavior Two centuries later, Diogenes was spotted carrying around a lighted lamp, up and down the city streets, in the middle of the day. When asked what he was doing, he replied, that he was looking for an honest man. Two centuries later, Diogenes was spotted carrying around a lighted lamp, up and down the city streets, in the middle of the day. When asked what he was doing, he replied, that he was looking for an honest man.

Business Ethics  Business  Business Ethics is about: Decision-Making Decision-Making By By People in Business According According to Moral Principles or Standards

Decision-Making  Conflicting duties, loyalties or interests create moral dilemmas requiring decisions to be made

Decision-Making  Ethical decision-making involves the ability to discern right from wrong along with the commitment to do what is right.

Decision-Making  Some factors affecting decision-making (from Integrity Management, by D. T. LeClair et al, Univ. of Tampa Press, 1998): Issue Intensity Issue Intensity  (i.e. how important does the decision-maker perceive the issue to be?  Can be influenced by company/management emphasis) Decision-Maker’s Personal Moral Philosophy Decision-Maker’s Personal Moral Philosophy Decision-Maker’s Stage of Moral Development Decision-Maker’s Stage of Moral Development Organizational Culture Organizational Culture

Decision-Making  8 Steps to Sound, Ethical Decision-Making 1. Gather as many relevant & material facts as circumstances permit. 1. Gather as many relevant & material facts as circumstances permit. 2. Identify the relevant ethical issues (consider alt. viewpoints) 2. Identify the relevant ethical issues (consider alt. viewpoints) 3. Identify, weigh & prioritize all the affected parties (i.e. stakeholders) (see Johnson & Johnson Credo) 3. Identify, weigh & prioritize all the affected parties (i.e. stakeholders) (see Johnson & Johnson Credo) 4. Identify your existing commitments/obligations. 4. Identify your existing commitments/obligations. 5. Identify various courses of action (dare to think creatively) 5. Identify various courses of action (dare to think creatively) 6. Identify the possible/probable consequences of same (both short & long-term) 6. Identify the possible/probable consequences of same (both short & long-term) 7. Consider the practicality of same. 7. Consider the practicality of same. 8. Consider the dictates and impacts upon your character & integrity. 8. Consider the dictates and impacts upon your character & integrity.

Decision-Making  Disclosure Test How comfortable would I feel if others, whose opinion of me I value, knew I was making this decision? How comfortable would I feel if others, whose opinion of me I value, knew I was making this decision?

Decision-Making  The higher the level of a decision-maker the greater the impact of the decision the greater the impact of the decision and the wider the range of constituencies that will be affected by the decision. and the wider the range of constituencies that will be affected by the decision.

By People In Business  The moral foundation of the decision-maker matters  “He doesn’t have a moral compass.” Whistleblower Sherron Watkins describing Andrew Fastow, former CFO of Enron. (Watkins gets frank about days at Enron, Edward Iwata, USA Today, March 25, 2003, p. 3B.)

By People in Business  Ultimately, one's own motivation for ethical behavior must be internal to be effective. External motivation has a limited value -- punishment and fear is only effective in the short-run. If people believe that they are above the law, they will continue to act unethically. Organizations that have a clear vision, and support individual integrity are attractive places of employment. - Teri D. Egan, Ph.d, Associate Professor, The Graziadio School of Business at Pepperdine University, Corporate Ethics, Washington Post Live Online, Friday, Aug. 2, 2002;

Ethics  Values: guiding constructs or ideas, representing deeply held generalized behaviors, which are considered by the holder, to be of great significance.  Morals: a system or set of beliefs or principles, based on values, which constitute an individual or group’s perception of human duty, and therefore which act as an influence or control over their behavior. Morals are typically concerned with behaviors that have potentially serious consequences or profound impacts. The word “morals” is derived from the Latin mores (character, custom or habit)  Ethics: the study and assessment of morals. The word "ethics" is derived from the Greek word, ethos (character or custom).

Morality  The historian Arnold Toynbee observed: "Out of 21 notable civilizations, 19 perished not by conquest from without but by moral decay from within."

2-17 Absolutism vs. Relativism  Ethical Absolutism What is right or wrong is consistent in all places or circumstances. There are universally valid moral principles. (“… only by obedience to universal moral norms does man find full confirmation of his personal uniqueness and the possibility of authentic moral growth.” - Pope John Paul II, see also Rom. 12:2; Heb. 13:8) Ethical Relativism (also called “Situational Ethics”) What is right or wrong varies according to the individual/society/culture or set of circumstances. There are no universally valid moral principles. (Related Biblical reference "everyone did what was right in his own eyes" (Deut. 12:8, Judges 17:6; 21:25) (see also Isa. 5:20 & 24, Jer. 2:13, Rom. 1:18-32, 1 Cor. 5:6-7, 2 Cor. 6:14-15, 1 John 1:8) What is right or wrong varies according to the individual/society/culture or set of circumstances. There are no universally valid moral principles. (Related Biblical reference "everyone did what was right in his own eyes" (Deut. 12:8, Judges 17:6; 21:25) (see also Isa. 5:20 & 24, Jer. 2:13, Rom. 1:18-32, 1 Cor. 5:6-7, 2 Cor. 6:14-15, 1 John 1:8)

2-18 Absolutism vs. Relativism  “The demise of America’s legal foundations occur when society rejects laws that are based on solid, irrevocable, moral, universal, absolute values, to a society that bases it’s laws on an arbitrary system of relativism, situational ethics, materialism, individualism, hedonism, paganism, or in any secularist ideology. This secularization of law has influenced all branches of knowledge – law, philosophy, business, religion, medicine, education, science, the arts, and mass media.” Harold Berman, The Interaction of Law and Religion 21 (1974).

2-19 Absolutism vs. Relativism  According to a recent poll of college seniors, 73% agreed with the statement that “What is right or wrong depends on differences in individual values and cultural diversity.” Only 25% agreed with the statement that “There are clear and uniform standards of right and wrong by which everyone should be judged."

Absolutism vs. Relativism Relativism undermines moral criticism of practices of particular individuals or in particular societies where those practices conform to their own standards. For instance, it could be used to permit slavery in a slave society or it could be used to justify trade and investment with basically evil regimes, e.g. Apartheid governments. Relativism undermines moral criticism of practices of particular individuals or in particular societies where those practices conform to their own standards. For instance, it could be used to permit slavery in a slave society or it could be used to justify trade and investment with basically evil regimes, e.g. Apartheid governments.

Absolutism vs. Relativism Relativism allows for oppression of those with minority views by allowing the majority in any particular circumstance to define what is morally right or wrong. Relativism allows for oppression of those with minority views by allowing the majority in any particular circumstance to define what is morally right or wrong.  “In Germany they first came for the Communists,  and I didn't speak up because I wasn't a Communist.  Then they came for the Jews,  and I didn't speak up because I wasn't a Jew.  Then they came for the trade unionists,  and I didn't speak up because I wasn't a trade unionist.  Then they came for the Catholics,  and I didn't speak up because I was a Protestant.  Then they came for me —  and by that time no one was left to speak up.” - German anti-Nazi activist, Pastor Martin Niemöller - German anti-Nazi activist, Pastor Martin Niemöller

Absolutism vs. Relativism Relativists speak in terms that “soften” harsh realities. Relativists speak in terms that “soften” harsh realities. "Intelligent, educated, religious people embrace illogical absurdities that set aside not only God's truth, but also our responsibility for the well-being of others. When words are warped and twisted perversely, they're eventually emptied of their true meaning. When you shine the light of common sense on deceptive language couched in medical, philosophical or intellectual terms, the logic evaporates. Moral choices require that we use language to describe reality.” - Jean Staker Garton, Author/Lecturer, Co-Founder of Lutherans for Life "Intelligent, educated, religious people embrace illogical absurdities that set aside not only God's truth, but also our responsibility for the well-being of others. When words are warped and twisted perversely, they're eventually emptied of their true meaning. When you shine the light of common sense on deceptive language couched in medical, philosophical or intellectual terms, the logic evaporates. Moral choices require that we use language to describe reality.” - Jean Staker Garton, Author/Lecturer, Co-Founder of Lutherans for Life

Absolutism vs. Relativism Relativists never need bother to examine why something is moral or immoral, they merely accept/tolerate alternative determinations. Relativists never need bother to examine why something is moral or immoral, they merely accept/tolerate alternative determinations.

Absolutism vs. Relativism  Most ethicists reject the theory of ethical relativism. Some claim that while the moral practices of societies may differ, the fundamental moral principles underlying these practices do not. - Markkula Center for Applied Ethics

Absolutism vs. Relativism  Commenting on the idea that legal reforms can compel corporate morality, Michael Prowse, in the Financial Times, stated that "The underlying problem is that we are living in times that might aptly be called 'post-ethical.'" People are now "emotivists," who relativize moral judgments and "obey the law, help others and respect customs and mores only if they calculate that this will benefit them personally in some way.... The root problem is a loss of belief in objective ethical standards.”

Values  “To ensure that employees can and will act with integrity … organizations need a strong and consistent set of values that dictate appropriate individual actions.” - Conclusion of study conducted by Professor Pratima Bansal, cited in” Rebuilding trust, The integral role of leadership in fostering values, honesty and vision,”by Carol Stephenson in the Ivey Business Journal, Jan/Feb. 2004, Vol. 68, Issue 3.

Values  Navigating the complexities of a situation... requires a reliable compass. We can plot that "north" by determining clearly our own core values. We have to identify - and articulate - what we believe is important to us and to our companies. Our core values drive our behaviors, and our behaviors tell the world who we are and what we stand for....Identifying and adhering to a core-values compass point provides a standard that will make decisions easier, consistent and justified.” - Parkinson, J. Robert, Thinking clearly, remembering values key to making the call, Milwaukee Journal Sentinel, March 22, 2004.

Values  “Without commonly shared and widely entrenched moral values and obligations, neither the law, nor democratic government, nor even the market economy will function properly.”-- Vaclav Havel ("Politics, morality, and Civility" Summer Meditations)

Values  What are the core values that are fundamental to the success of any individual or organization?

Values  Honesty, respect, responsibility, fairness, compassion, perseverance and courage.

Values - Honesty  Honesty - Being straightforward, sincere, truthful, free of fraud, deception or misrepresentation.  Transparency - To be open, honest and available, to provide clear, accurate, and understandable information (e.g. in the context of financial disclosures). Some ethicists have argued that ethical business practices are best measured by a company's character and commitment to transparency than by their social vision or rhetoric (e.g. Jon Entine)

Values - Honesty  Honesty Builds/Maintains Trust Builds/Maintains Trust Fosters Community Fosters Community Makes Communication more Efficient & Effective Makes Communication more Efficient & Effective Demonstrates Respect for the Dignity of Others Demonstrates Respect for the Dignity of Others

Values - Honesty  Moral Leaders welcome transparency and truth as opposed to secrecy and deception.  Respondents to a recent Victor James ethical leadership survey, by a wide margin, cited honesty as the quality most admired in a leader.

Values - Honesty  Richard Sears—founder of Sears Roebuck and Company—started the modern mail order industry, supplying a burgeoning nation with innovative products and building a business that gave employment to hundreds of thousands of people. In his zeal to sell merchandise, Sears occasionally would get carried away with catalogue descriptions, praising products far beyond the literal truth. This in turn led to returned merchandise and reduced profits. But Sears learned his lesson. In later years, he was fond of saying, "Honesty is the best policy. I know because I've tried it both ways.” - from Integrity at Work, ed. By Ken Shelton.

Values - Honesty  At the age of 24, Abraham Lincoln served as the postmaster of New Salem, Illinois, for which he was paid an annual salary of $55.70. Even then, twenty-four years before he entered the White House, the rail splitter was showing the character that earned him the title of "Honest Abe." The New Salem post office was closed in 1836, but it was several years before an agent arrived from Shington to settle accounts with ex-postmaster Lincoln, who was a struggling lawyer not doing very well. The agent informed him that $17 was due the government. Lincoln crossed the room, opened an old trunk and took out a yellow cotton rag, bound with a string. Untying it, he spread out the cloth and there was the $17. He had been holding it untouched for all these years. "I never use any man’s money but my own," he said.

Values - Honesty  Honesty and transparency make you vulnerable. Be honest and transparent anyway. - Mother Teresa

Values - Honesty  Some scriptural references regarding honesty in business: (Exodus 22:10; 23:1–3; Leviticus 19:11–12, 35-36, Deuteronomy 25:13–16, Proverbs 6:16-19, 11:1, 12:17-19 & 22, Ephesians 4:25) (Exodus 22:10; 23:1–3; Leviticus 19:11–12, 35-36, Deuteronomy 25:13–16, Proverbs 6:16-19, 11:1, 12:17-19 & 22, Ephesians 4:25)

Values - Respect  Respect: To give particular attention to, show consideration for, or hold in high or special regard (Merriam-Webster's Online Dictionary, 10th Edition)

Values - Respect  “Every man is to be respected as an absolute end in himself; and it is a crime against the dignity that belongs to him as a human being, to use him as a mere means for some external purpose.” - Immanuel Kant, Prussian geographer and philosopher (1724-1804)

Values - Respect  Human Dignity is “the intrinsic worth that inheres in every human being. From the Catholic perspective (among other Christian perspectives), the source of human dignity is rooted in the concept of Imago Dei, in Christ’s redemption and in our ultimate destiny of union with God. Human dignity therefore transcends any social order as the basis for rights and is neither granted by society nor can it be legitimately violated by society. In this way, human dignity is the conceptual basis for human rights. While providing the foundation for many normative claims, one direct normative implication of human dignity is that every human being should be acknowledged as an inherently valuable member of the human community and as a unique expression of life, with an integrated bodily and spiritual nature. In Catholic moral thought, because there is a social or communal dimension to human dignity itself, persons must be conceived of, not in overly-individualistic terms, but as being inherently connected to the rest of society.” - from the Ascension Health Code of Ethics

Values - Respect  “Never look down on anybody unless you're helping him up.” - Jesse Jackson, American political activist and preacher

Values - Respect - Tolerance?  What about tolerance?

Values - Respect - Tolerance?  "Our culture has fallen into a kind of moral vertigo – we value tolerance so much that we don't know how to talk to each other about what is right and good,” - Rev. Kevin Phillips, director of the Business Leadership and Spirituality Network (BLSN) quoted in “Competing Values”, by Jane Lampman, Christian Science Monitor, August 1, 2002.

Values - Respect - Tolerance?  Did you know that the term “ tolerance” (or in some translations “sufferance” Gk. eao) is rarely used in the New Testament, and that where it is used it is generally used in a negative sense? For example: “Notwithstanding I have a few things against thee, because you tolerate that woman Jezebel, who calls herself a prophetess, to teach and to seduce my servants to commit fornication, and to eat things sacrificed unto idols.” Rev. 2:20 “Notwithstanding I have a few things against thee, because you tolerate that woman Jezebel, who calls herself a prophetess, to teach and to seduce my servants to commit fornication, and to eat things sacrificed unto idols.” Rev. 2:20  By contrast, the New Testament uses the term “ love” Gk. agapeo nearly 150 times in a positive sense. So what’s the difference between love and tolerance? So what’s the difference between love and tolerance?

Values - Respect - Tolerance?  Tolerance: Demonstrating sympathy for, indulging, or making allowances for, beliefs or practices differing from, or conflicting with, one's own.  Love: In the Christian context, from the Greek, agapeo, an active and beneficent interest in, and concern for, the well-being of another. It is given unconditionally and unselfishly. It involves a clear determination of will and judgment (i.e. a responsible choice). A loving person, honestly (Rom. 12:9) gives respect and demonstrates compassion. Demonstrating such love often requires courage. The source of such love comes “from above” (James 1:17).  Would you rather be loved or tolerated?

Values - Compassion  Compassion: "sympathetic consciousness of another's distress together with a desire to alleviate it" [Webster's 7th New Collegiate Dictionary], fellow feeling, the emotion of caring concern; the opposite of cruelty, in Hebrew rahamanut, from the word rehem, 'womb', based on the idea of sibling love (coming from from the same womb).

Values - Compassion  "The word 'care' finds its roots in the Gothic 'Kara' which means lament. The basic meaning of care is: to grieve, to experience sorrow, to cry out with.... A friend who cares makes it clear that whatever happens in the external world, being present to each other [now] is what really matters." [Henri Nouwen, Here and Now, p. 105]

Values - Compassion  “Southwest Airlines CEO Herb Kelleher has openly demonstrated a willingness to go the extra mile for Southwest employees. He has made it a priority to learn their names and to chip in and work alongside them when the situation has demanded his help. He has been observed lugging baggage and greeting customers in an Easter Bunny costume. He has repeatedly demonstrated a truly exceptional level of caring and compassion for his employees, and his employees have responded in kind. Perhaps the most dramatic example of their commitment to their beloved leader occurred when they pooled their own money and ran a $60,000 ad in USA Today recognizing him on Bosses Day. In the ad they thanked Kelleher for being a friend, not just a boss.” - from The Leadership Wisdom of Jesus, Charles C. Manz, 1998.

Values - Compassion  Too often we underestimate the power of a touch, a smile, a kind word, a listening ear, an honest compliment, or the smallest act of caring, all of which have the potential to turn a life around.-- Leo Buscaglia

Values - Compassion  Leo Buscaglia discovered that the capacity for compassion is not limited to wise elders. He was once asked to judge a contest to find the most caring child. The winner was a four year old whose next door neighbor was an elderly gentleman who had recently lost his wife. Upon seeing the man cry, the little boy went into the old gentleman's yard, climbed onto his lap, and just sat there. When his mother asked him what he had said to the neighbor, the little boy said, "Nothing, I just helped him cry."

Values - Compassion  “I expect to pass through the world but once. Any good therefore that I can do, or any kindness I can show to any creature, let me do it now. Let me not defer it, for I shall not pass this way again.” - Stephen Grellet, French/American religious leader (1773-1855)  "Men are only great as they are kind.” - Elbert Hubbard, American entrepreneur and philosopher (founder of Roycroft) (1856-1915)

Values - Compassion  "No act of kindness, no matter how small, is ever wasted." - Aesop, 6th Century B.C. Writer of Greek fables  "If the world seems cold to you, kindle fires to warm it.” - Lucy Larcom, American poet (1826-1893)  "The individual is capable of both great compassion and great indifference. He has it within his means to nourish the former and outgrow the latter.”- Norman Cousins, American essayist & editor (1912-1990)

Values - Compassion  "There are two ways of spreading light: to be the candle or the mirror that reflects it.” - Edith Wharton, American novelist (1862-1937) -  “Compassion is the basis of morality.'' - Arthur Schopenhauer, German philosopher (1788-1860)  All we need in order to be moral human beings is compassion. - Nina Rosenstand summarizing the view of David Taylor in Good and Evil, from The Moral of the Story: An Introduction to Ethics, McGraw-Hill, 2004.

Values - Compassion  Some scriptural references regarding compassion: (Matthew 18:27, Luke 10:30-37 (Parable of the Good Samaritan), 1 John 3:17, Jude 1:22) (Matthew 18:27, Luke 10:30-37 (Parable of the Good Samaritan), 1 John 3:17, Jude 1:22)

Values - Responsibility  Responsibility/Accountability/Reliability: Moral Leaders take responsibility for their own actions/failures and those of their companies and they demand accountability from their subordinates. (e.g. at Dell there’s no ‘‘The dog ate my homework.” Dell ruthlessly exposes weak spots during grueling quarterly reviews and execs know they had better fix the problem before the next meeting. - What You Don’t Know About Dell, Business Week, Nov. 30, 2003, p.79) Involves a commitment to competent quality performance. Implies fidelity to promises and other commitments and not making promises that cannot be kept, such as committing to unrealistic delivery dates. Also calls for acknowledgment of implicit commitments, such as the protection of confidences.

Values - Responsibility  “I am only one, but still, I am one. I cannot do everything but I can do something. And, because I cannot do everything, I will not refuse to do what I can.” - Edward Everett Hale, American clergyman and writer (1822-1909)  “The question for each man to settle is not what he would do if he had the means, time, influence and educational advantages, but what he will do with the things he has.” - Hamilton Wright Mabee

Values - Responsibility  “Any man’s life will be filled with constant and unexpected encouragement if he makes up his mind to do his level best each day.” - Booker T. Washington, American educator (1856-1915)  “I long to accomplish some great and noble task, but it is my chief duty to accomplish small tasks as if they were great and noble.” - Helen Keller, American social activist, public speaker and author (1880-1968)

Values - Fairness  Fair: just, equitable, impartial, unbiased, objective. Involves a elimination (or at least a minimalization) of one's own feelings, prejudices and desires, so as to achieve a proper balance of conflicting interests. Implies an equitable distribution of burdens and benefits. John Rawls argues in A Theory of Justice that rules are fair if they are rules that the people operating under them would have agreed to, had they been given an opportunity to accept or reject them beforehand.

Values - Fairness  "The precepts of the law are these: to live honestly, to injure no one, and to give every man his due.” - Justinian I, Byzantine emperor (483-565)  “This country will not be a good place for any of us to live in unless we make it a good place for all of us to live in.” - Theodore Roosevelt, American adventurer and 26th president (1858- 1919)

Values - Fairness  Justice: demonstrating fairness, equity, impartiality, righteous action, conformity to truth, conformity to law  “justice occurs on earth when power and authority between people are exercised in conformity with God’s standards of moral excellence.” - Gary Haugen, in The Good News About Injustice, Intervarsity Press, 1999.

Values - Perseverance  Perseverance/Fortitude - steadfast determination to continue on despite adversity usually over a long period of time.

Values - Perseverance "When the morning’s freshness has been replaced by the weariness of midday, when the leg muscles quiver under the strain, the climb seems endless, and suddenly nothing will go quite as you wish--it is then that you must not hesitate.” - Dag Hammarskjöld, former U.N. Secretary General

Values - Perseverance  “Nothing in the world can take the place of perseverance. Talent will not; nothing is more common than unsuccessful men with talent. Education will not; the world is full of educated derelicts. Genius will not; unrewarded genius is almost a proverb. Persistence and determination alone are omnipotent.” - Calvin Coolidge

Values - Perseverance  Some Biblical References: Job 17:9a, the righteous one holds fast to his way; Hos. 12:6b, endure to the end, John 8:31-32, 2 Cor. 13:5, keep proving yourself; Gal. 5:1–4, stand fast; Gal. 6:9, do not give up in doing what is fine; Phil. 1:27, stand firm, striving side by side; Phil. 4:1, stand firm; 1 Thes. 5:21, hold fast to what is fine; 2 Thes. 2:15–17, stand firm, maintain your hold; 1 Tim. 6:11–12, pursue endurance; 2 Tim. 2:12, go on enduring; 2 Tim. 3:14, continue in the things you have learned; 2 Tim. 4:7–8, fight the fine fight, finish the course; Heb. 2:1, pay attention to what you have heard that you not drift away; Heb. 3:14, make fast your hold to the end; Heb. 10:23, 35–36, hold fast to the declaration of our hope, you have need of endurance; James 1:2-4, perseverance must finish its work, 2 Pet. 3:17, do not fall from steadfastness.  God helps those who persevere. - The Koran

Values  Which of the core values is the most important?

Values - Courage  The first place to start is for every individual to become aware of their core values and to have the courage and discipline to live out of them in all aspects of their lives. (The rising tide won't lift this economy: Unless we're willing to confront the trust problem we've helped to create, Bill Grace, Founder & Executive Director, Seattle's Center for Ethical Leadership, Guest Columnist, Seattle Post-Intelligencer, June 16, 2003.)

Values - Courage  “Courage is the greatest of all virtues; because, unless a man has that virtue, he has no security for preserving any other.” - Samuel Johnson  “Courage is the ladder on which all the other virtues mount.” - Clare Booth Luce (1903 - 1987), in Reader's Digest, 1979  “Courage is the footstool of the virtues, upon which they stand.” - Robert Louis Stevenson  “Courage is not simply one of the virtues, but the form of every virtue at the testing point.” - C.S. Lewis  “Courage is strength of mind, capable of conquering whatever threatens the attainment of the highest good.” - St. Thomas Aquinas

Values - Courage  “Courage is a perfect sensibility of the measure of danger and a mental willingness to endure it.” - General William T. Sherman (for whom the Sherman tank was named).  “Courage is being scared to death... and saddling up anyway.” - John Wayne

Values - Courage  “Whenever you see a successful business, someone once made a courageous decision.” - Peter Drucker  “We must constantly build dykes of courage to hold back the flood of fear.” - Martin Luther King, Jr.  “One isn't necessarily born with courage, but one is born with potential. Without courage, we cannot practice any other virtue with consistency. We can't be kind, true, merciful, generous, or honest.” - Maya Angelou (1928 - )

Values - Courage  “The credit belongs to the man who is actually in the arena... who strives valiantly... who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.” - Theodore Roosevelt

Values - Courage  Courage: the ability to disregard fear; bravery. The Latin root of this word is cur, which means heart. Courage literally means to “take heart”. Fear exists along a continuum. Courage involves recognizing a reasonable amount of fear or nervousness, facing it and then taking an intelligent risk.  Moral courage: involves standing up for one’s principles, in spite of possible adverse consequences to such things as reputation or emotional well-being.

Values - Universal Rule?  The “Golden Rule”, i.e. to “do unto others as you would have them do unto you” is an example of a value common to many cultures/religions (Mahabharata 5:1517, Hinduism, Talmud, Shabbat 31a & Leviticus 19:18, Judaism, Matthew 7:12, Christianity, Udana- Varga 5:18, Buddhism, Analects 15:23, Confucianism, Number 13 of Imam "Al-Nawawi's Forty Hadiths.", Islam)  Note: Several Corporations have directly incorporated some form of this rule in their codes of ethics including Coachman, Mary Kay, Progressive, Merrill Lynch and USAA

Corporate Culture  Both individuals and organizations hold “values” A corporation is said to manifest its “values” in its “corporate culture” A corporation is said to manifest its “values” in its “corporate culture”  Corporate culture is loosely defined as the attitudes, behaviors and personalities that make up a company and that shape its behavior and reputation, or as Elizabeth Kiss of the Kenan Institute for Ethics puts it, corporate culture is “how we perceive, think, feel and do things around here.”  Most employees take their cues from the company culture and behave accordingly.  A business derives its character from the character of the people who conduct the business. - Ricky W. Griffin, Management. Boston: Houghton Mifflin Company (2002)

Corporate Culture  The Pressure to Conform We are all a kind of Chameleon, taking our hue - the hue of our moral character, from those who are about us. - John Locke (1632 - 1704) We are all a kind of Chameleon, taking our hue - the hue of our moral character, from those who are about us. - John Locke (1632 - 1704)

Corporate Culture  The Pressure to Conform Some years ago, a social scientist named Solomon Asch wanted to see how people dealt with social pressure so he designed an experiment to measure the results. He came up with a simple test that showed a series of lines on a board in front of the room, with one of the lines matching another in being the same length. The others were either much shorter or much longer. A person was brought into the room, along with others in a group, which unbeknown to the subject, were helpers to the professor. The whole group was asked to match the two lines that were the same length together. The helpers intentionally gave the wrong answer and it was found that in almost 75% of the time, the subjects would go along with the wrong answer, knowing full well it was wrong, but not wanting to stand out. - “Opinion and Social Pressure”, Scientific American, Nov. 1955, 31-35. Some years ago, a social scientist named Solomon Asch wanted to see how people dealt with social pressure so he designed an experiment to measure the results. He came up with a simple test that showed a series of lines on a board in front of the room, with one of the lines matching another in being the same length. The others were either much shorter or much longer. A person was brought into the room, along with others in a group, which unbeknown to the subject, were helpers to the professor. The whole group was asked to match the two lines that were the same length together. The helpers intentionally gave the wrong answer and it was found that in almost 75% of the time, the subjects would go along with the wrong answer, knowing full well it was wrong, but not wanting to stand out. - “Opinion and Social Pressure”, Scientific American, Nov. 1955, 31-35.

Corporate Culture  The Pressure to Conform “Culture shapes behavior. There are plenty of perfectly decent people who go astray because they're in a culture that creates an environment in which they can't get their jobs done unless they engage in unethical activities.” - Harvard Business School professor and business ethicist Barbara Toffler, former partner at Arthur Andersen. Toffler left Andersen in 1999, well before the Enron and Global Crossing scandals destroyed the company. Her book, Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen (Random House/Broadway Books, 2003), describes the process of ethical erosion in grim detail. – Postcards from an Ethical Wasteland, CIO, June 1, 2003 “Culture shapes behavior. There are plenty of perfectly decent people who go astray because they're in a culture that creates an environment in which they can't get their jobs done unless they engage in unethical activities.” - Harvard Business School professor and business ethicist Barbara Toffler, former partner at Arthur Andersen. Toffler left Andersen in 1999, well before the Enron and Global Crossing scandals destroyed the company. Her book, Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen (Random House/Broadway Books, 2003), describes the process of ethical erosion in grim detail. – Postcards from an Ethical Wasteland, CIO, June 1, 2003

Corporate Culture  In Moral Man and Immoral Society, Reinhold Niebuhr proposed that individual persons are always more moral functioning alone than when they function in a social group. - Institutional Ethics: An Oxymoron, By Joe E. Trull, Editor, Christian Ethics Today, Journal of Christian Ethics, Issue 035 Volume 7 No 4 August 2001.  Do you agree with this?

Corporate Culture  Rarely do the character flaws of a lone actor fully explain corporate misconduct. More typically, unethical business practice involves the tacit, if not explicit, cooperation of others and reflects the values, attitudes, beliefs, language, and behavioral patterns that define an organization’s operating culture. - Lynn Sharp Paine, Harvard Business School

Corporate Culture  “A strong corporate culture founded on ethical principles and sound values is a vital driving force behind strategic success.” - Thompson & Strickland  One company stressed its commitment to RICE : respect, integrity, communication, and excellence. The words have been on T-shirts, paperweights, and on signs. The firm printed a 61-page booklet with its code of ethics and every employee had to sign a certificate of compliance. That company was Enron!

According to Ethical or Moral, Values, Principles or Standards  Whose Values?

According to Ethical or Moral, Values, Principles or Standards Personal Personal Family Family Peers Peers Religious Religious Company Company Community, Regional, National, International Community, Regional, National, International

According to Ethical or Moral, Values, Principles or Standards  Learned Where?

According to Ethical or Moral, Values, Principles or Standards Home Home School School Church (or other place of worship) Church (or other place of worship) Life Experience Life Experience Work Experience Work Experience Books Books News Media News Media Entertainment Media Entertainment Media

According to Ethical or Moral, Values, Principles or Standards  The average American, by the age of 65, will have spent the equivalent of 15 years of their life watching television.  By contrast, over the same time period, the average weekly church-going American will have spent only 8 months of their life receiving spiritual instruction.

According to Ethical or Moral, Values, Principles or Standards  So fearful were the ancient Chinese of their enemies on the north that they built the Great Wall of China, one of the 7 wonders of the ancient world. It was so high they knew no one could climb over it, & so thick that nothing could break it down. Then they settled back to enjoy their security. But during the first 100 years of the wall’s existence, China was invaded 3 times. Not once did the enemy break down the wall or climb over its top. Each time they bribed a gatekeeper & marched right through the gates. According to the historians, the Chinese were so busy relying upon the walls of stone that they forgot to teach integrity to their children.

According to Ethical or Moral, Values, Principles or Standards  In the 1950s a psychologist, Stanton Samenow, and a psychiatrist, Samuel Yochelson, sharing the conventional wisdom that crime is caused by environment, set out to prove their point. They began a 17-year study involving thousands of hours of clinical testing of 250 inmates here in the District of Columbia. To their astonishment, they discovered that the cause of crime cannot be traced to environment, poverty, or oppression. Instead, crime is the result of individuals making, as they put it, wrong moral choices. In their 1977 work The Criminal Personality, they concluded that the answer to crime is a "conversion of the wrong-doer to a more responsible lifestyle." In 1987, Harvard professors James Q. Wilson and Richard J. Herrnstein came to similar conclusions in their book Crime and Human Nature. They determined that the cause of crime is a lack of proper moral training among young people during the morally formative years, particularly ages 1 to 6.

According to Ethical or Moral, Values, Principles or Standards  33% of teens would act unethically to get ahead or to make more money if there was no chance of getting caught, according to a new Junior Achievement/Harris Interactive Poll of 624 teens between the ages of 13 and 18. 25% said they were “not sure” and only 42% said they would not. “These results confirm our belief that ethics education must begin in elementary school.” said Barry Salzberg, U.S. Managing Partner of Deloitte & Touche.

According to Ethical or Moral, Values, Principles or Standards  Daniel R. Levine notes that "honesty and integrity have been replaced in many classrooms by a win-at-any-cost attitude that puts grades, expediency and personal gain above all else.  "Moral standards have become so eroded that many children can no longer tell right from wrong," says Kevin Ryan, founding director of the Center for the Advancement of Ethics and Character at Boston University.  According to Stephen F. Davis, a professor of psychology, "There's no remorse. For students, cheating is a way of lire.”  Ryan further comments that "kids have no moral compass other than enlightened self-interest"; Ryan blames the nation's schools for abandoning their traditional role of providing students with moral guidance.- "Cheating in Out Schools: A National Scandal," Daniel R. Devine, Reader's Digest, October 1995, p. 66.), quoted in PERSONAL ETHICS VERSUS PROFESSIONAL ETHICS, Jerry E. White,, Airpower Journal, 08970823, Summer96, Vol. 10, Issue 2

According to Moral Principles or Standards  Does society require a moral code to survive and prosper?

According to Moral Principles or Standards  17th Century Philosopher Thomas Hobbes postulated that life in an amoral society would be “ poor, nasty, brutish and short”, lacking in industry and commerce, as well as knowledge and arts, and that its people would live in a constant state of fear and insecurity.

According Moral Principles or Standards  “Men qualify for freedom in exact proportion to their disposition to put moral chains on their own appetites. Society cannot exist unless a controlling power is put somewhere on will and appetite, and the less of it there is within, the more of it there must be without.” - Edmund Burke(1774)

According to Moral Principles or Standards  “Without civic morality communities perish; without personal morality their survival has no value.” — Bertrand Russell, 20th- century British mathematician and philosopher

According to Moral Principles or Standards Martin Luther King, Jr. once noted, " The most dangerous criminal may be the man gifted with reason but with no morals." Martin Luther King, Jr. once noted, " The most dangerous criminal may be the man gifted with reason but with no morals."

According to Moral Principles or Standards  We have grasped the mystery of the atom and rejected the Sermon on the Mount. The world has achieved brilliance without wisdom, power without conscience. Ours is a world of nuclear giants and ethical infants. --General of the Army, Omar Bradley

According to Moral Principles or Standards  There are seven sins in the world: Wealth without work, Pleasure without conscience, Knowledge without character, Commerce without morality, Science without humanity, Worship without sacrifice and politics without principle. - Mahatma Gandhi (1869 - 1948)

Ethics  R. H. Tawney, the British historian, once wrote: ''To argue, in the manner of Machiavelli, that there is one rule for business and another for private life, is to open the door to an orgy of unscrupulousness before which the mind recoils.''

Ethics  Truett Cathy, founder of Chick-fil- A, argues there is no such thing as business ethics - only ethics.

Ethics  Duty-Based v. Outcome-Based Ethics Duty (Deontology) Duty (Deontology)  Duty is an act done simply for the sake of what is right.  Duty is determined by “revealed truths” and involves universal principles  Often religion-based  e.g. Kant’s Categorical Imperative "Everyone is obligated to act only in ways that respect the intrinsic value, human dignity and moral rights of all persons." "Everyone is obligated to act only in ways that respect the intrinsic value, human dignity and moral rights of all persons."  Places High Value on Individual Rights Outcome (Consequentialism) Outcome (Consequentialism)  Ethical if best outcome for the majority  Involves cost-benefit analysis  e.g. Bentham & Mill’s Utilitarianism "Of any two actions, the most ethical one is that which will produce the greatest balance of benefits over harms." "Of any two actions, the most ethical one is that which will produce the greatest balance of benefits over harms."  De-emphasizes individual rights

Ethics  Strategic v. Real Ethics What is the motivation/purpose for acting ethically? What is the motivation/purpose for acting ethically?

Integrity  Integrity: from the Latin integritas, meaning wholeness, completeness, or purity. To courageously hold to what one believes is right and true, without compromise. To stand undivided, immovable, consistent in both heart and action, word and deed. Involves the maintenance of virtue and the pursuit of moral excellence. Integrity is demonstrated by not only espousing your values, but by living according to them. Integrity describes both who you are and what you do. People of integrity are conscientious, trustworthy, accountable, committed and consistent. A key to maintaining integrity is “counting the cost” before committing yourself.

Integrity  “Psychologists have found integrity to be essential to an individual's sense of identity and self-worth, enabling the successful navigation of change and challenge. Links between integrity and the ability to gain and maintain the trust of others have often been noted. Many purveyors of practical advice, including Cicero and Benjamin Franklin, have counseled that integrity is the cornerstone of worldly success. According to Franklin, "no Qualities [are] so likely to make a poor Man's Fortune as those of Probity & Integrity" (quoted in Beebe, 1992, p. 8)” - from Blackwell’s Encyclopedic Dictionary of Business Ethics.

Integrity  In Living a Life That Matters Rabbi Harold Kushner describes the kind of people who are able to overcome the negativity in their lives as shalem, people who are “whole, united within themselves, their internal conflicts ended.” Because of this, he says, they are “persons of integrity.” Integrity, says Kushner, is a quality just as essential to human well-being as is the pursuit of peace and justice.

Integrity  The Bible/Talmud says that: The man of integrity walks securely, but he who takes crooked paths will be found out. (Prov. 10:9) The man of integrity walks securely, but he who takes crooked paths will be found out. (Prov. 10:9) The integrity of the upright guides them, but the unfaithful are destroyed by their duplicity. (Prov. 11:3) The integrity of the upright guides them, but the unfaithful are destroyed by their duplicity. (Prov. 11:3) Integrity brings peace (i.e. a clear conscience) and marks the perfect man (Hebrew Word: Tam = Man of Integrity) (Ps. 37:37, 1 Kings 9:4) Integrity brings peace (i.e. a clear conscience) and marks the perfect man (Hebrew Word: Tam = Man of Integrity) (Ps. 37:37, 1 Kings 9:4) The just [man] walketh in his integrity: his children [are] blessed after him. (Prov. 20:7) The just [man] walketh in his integrity: his children [are] blessed after him. (Prov. 20:7) A good name is better than precious ointment. (Ecc. 7:1) A good name is better than precious ointment. (Ecc. 7:1)

Integrity  Some Biblical Examples of Integrity: Joseph, Gen. 39:1-12 Joseph, Gen. 39:1-12 Jacob/Israel (Gen 32:29) known as a “simple man” (tam, Gen 25:27) that is to say, that “his mouth was like his heart.” Jacob/Israel (Gen 32:29) known as a “simple man” (tam, Gen 25:27) that is to say, that “his mouth was like his heart.” Job (Book of Job, see in particular description of Job at 2:3, 27:5) Job (Book of Job, see in particular description of Job at 2:3, 27:5) Daniel, Shadrach, Meshach & Abednego (Daniel Chapters 3 & 6) Daniel, Shadrach, Meshach & Abednego (Daniel Chapters 3 & 6) David (Ps. 7:8) David (Ps. 7:8) Solomon (1 Kgs. 9:4) Solomon (1 Kgs. 9:4)  Contrast: Ananias & Sapphira, Acts 5:1-11 and Acts 20:16-36

Integrity  According to Michael Useem, Director of the Center for Leadership and Change Management, Warren Buffett's “influence derives from his moral stature and integrity. In the aftermath of scandals that have rocked U.S. companies in the past few years, it is difficult to overemphasize the importance of ethics as a factor in leadership.” -Leadership and Change: Becoming the Best: What You Can Learn from the 25 Most Influential Leaders of Our Times, Knowledge @ Wharton Newsletter, Jan.28-Feb.4, 2004

Character  Character: The notable/conspicuous/ distinguishing moral/ethical traits or characteristics of a person that give evidence of their essential nature and which ultimately shape their reputation.

Character  Our character...is an omen of our destiny, and the more integrity we have and keep, the simpler and nobler that destiny is likely to be. - George Santayana (1863 - 1952), "The German Mind: A Philosophical Diagnosis"

Character  President Harry Truman used to say: "Fame is a vapor, popularity an accident, riches take wings, those who cheer today may curse tomorrow, only one thing endures -- character.”

Character  "What you are stands over you... and thunders so that I cannot hear what you say to the contrary.” - Ralph Waldo Emerson

Character  In his book The Death of Character, James Hunter, a noted sociologist from the University of Virginia, concludes that while Americans are innately as capable of developing character as they ever were in the past, there are now few cultural or institutional guidelines in our society that call for its cultivation or maintenance. The reason, he suggests, is because there is no consensus of moral authority.  Do you agree with this?

Character  Compartmentalization: Many people believe that what individuals do in their private lives is their own business as long as it does not adversely impact the performance of their duties to the organization and they are able to “deliver the goods” professionally. Under this way of thinking even serious moral failures may be excused. Some refer to this kind of thinking as “compartmentalization.” (e.g. Bill Clinton/Monica Lewinsky situation)  Do you agree with this?

Character  Character vs. Reputation: It has been said that an individual’s character can be illustrated by a barrel of apples. The apples seen on top by all represent one’s reputation, and the apples that lie hidden underneath are his character.

Reputation  A railroad executive burst into Arthur Andersen’s office one day in 1914, demanding that the firm’s founder approve the railroad’s books. Accountants had discovered that the railroad was inflating its profits by failing to properly record expenses. Andersen refused, saying that there wasn’t enough money in the city of Chicago to make him approve the fraudulent accounting. Andersen’s independence cost him the client, but it gained him something far more valuable, a reputation for integrity that gave investors confidence in Arthur Andersen audits, a reputation that helped the firm become one of the top 5 accounting firms in the U.S. After nearly 90 years in business, Andersen imploded in 2002 after acknowledging that its auditors had shredded documents relating to its audits of Enron.

Reputation  Warren Buffett, CEO of Berkshire Hathaway, warns his executives once a year not to do anything that year they would be ashamed to read about in their local newspaper. “You can lose a reputation that took 37 years to build in 37 seconds. And it might take more than 37 years to build it back.”

The Role of Leadership in Developing a Culture of Integrity  According to Marshall Schminke, who teaches business ethics at the University of Central Florida, “A person’s individual moral framework is only the third-most important factor in deciding what they’ll do. The most important is what does their boss do. Workers look to their boss first for cues on what constitutes moral behavior. Second, they look at their peers, and finally at their own moral code.” - Experts: Ethics not Just Codes, Marshall Schminke, Raleigh News & Observer, June 8, 2003, p.12E, based on an article by Harry Wessel in the Orlando Sentinel.)

The Role of Leadership in Developing a Culture of Integrity  “ A company's commitment to integrity flows from the commitment, action, and credibility of its leaders.” - Responsibility Lies In Leadership, By: Ruettgers, Mike, Chairman of the Board of EMC Corporation, Vital Speeches of the Day, 0042742X, 12/15/2003, Vol. 70, Issue 5, Delivered to The Fall 2003 Raytheon Lectureship in Business Ethics, Bentley College, Center for Business Ethics, Waltham, Massachusetts, October 8, 2003

The Role of Leadership in Developing a Culture of Integrity  Edgar Schein argues that leaders shape culture through what they notice, measure, reward and dislike. e.g. At Enron and Worldcom, executives and Board members elevated growth and short-term profits above all other considerations and nurtured a culture of cut-throat competition within the company. e.g. At Enron and Worldcom, executives and Board members elevated growth and short-term profits above all other considerations and nurtured a culture of cut-throat competition within the company.

The Role of Leadership in Developing a Culture of Integrity  President George W. Bush observed recently, "Ultimately the ethics of American business depend on the conscience of America's business leaders."

The Role of Leadership in Developing a Culture of Integrity  The “closer” the enterprise the greater the correlation between the corporate culture and the personal ethics of its leaders (e.g. small, family business (note: Malden Mills was a family business), contrast: a multinational corporation)

The Role of Leadership in Developing a Culture of Integrity  In a recent study by the Southern Institute for Business and Professional Ethics, 97% of respondents said that the leader of an enterprise must also be the moral leader, but many executives don’t see or appreciate their power as role models in this regard. Employees take their cue from superiors on how to conduct themselves, and written codes of conduct rarely carry as much weight as the actual actions of those in command.

Role of Leadership in Developing a Culture of Integrity  Perhaps Skilling and Lay couldn't know all the goings-on at Enron, as they claim. However, "people at the top tend to set the target, the climate, the ethos, the expectations that fuel behavior," says Thomas Donaldson, a business ethics professor at the Wharton School at the University of Pennsylvania. (Corporate Ethics: Right Makes Might, Business Week, 4/11/02)

Role of Leadership in Developing a Culture of Integrity  Malden Mills/Aaron Feuerstein  A Profile in Ethical Business Leadership  Feuerstein was thrust into the national spotlight in December 1995 when fire nearly completely destroyed his 130-year-old textile company. Demonstrating an all- too-uncommon loyalty to his 2,400 workers, he continued paying them for 90 days at a cost of $1.5 million per week while the factories were being rebuilt. He also gave generously to support charities that helped the families of nine critically injured workers who have since recovered.

Spiritual Foundation  Is it necessary to believe in God to be moral?

Spiritual Foundation  In a recent poll, 58% of Americans said yes. This is not the view in most developed countries. For example, in France, only 13% said yes. (Nicholas D. Kristof, N.Y. Times}

Spiritual Foundation  "Where there is no religion, there will be no morals.” - Benjamin Rush, Speech in Pennsylvania Ratifying Convention (Dec. 12, 1787)

Spiritual Foundation  “[T]he most important of all lessons [from the Scriptures] is the denunciation of ruin to every State that rejects the precepts of religion.... I believe that religion is the only solid base of morals and that morals are the only possible support of free governments”. - Gouverneur Morris, who spoke on floor of the Constitutional Convention 173 times, more than any other delegate.

Spiritual Foundation  “I have read your manuscript with some attention. By the argument it contains against a particular Providence [Christianity], though you allow a general Providence, you strike at the foundation of all religion. For without the belief of a Providence that takes cognizance of, guards, and guides, and may favor particular persons, there is no motive to worship a Deity, to fear his displeasure, or to pray for his protection. I will not enter into any discussion of your principles, though you seem to desire it. At present I shall only give you my opinion that... the consequence of printing this piece will be a great deal of odium [hate] drawn upon yourself, mischief to you, and no benefit to others. He that spits into the wind, spits in his own face. But were you to succeed, do you imagine any good would be done by it?... [T]hink how great a portion of mankind consists of weak and ignorant men and women and of inexperienced, inconsiderate youth of both sexes who have need of the motives of religion to restrain them from vice, to support their virtue.... I would advise you, therefore, not to attempt unchaining the tiger, but to burn this piece before it is seen by any other person.... If men are so wicked with religion, what would they be if without it.” - Benjamin Franklin’s 1790 reply to Thomas Paine regarding Paine’s request of Franklin to review his new book, The Age of Reason:

Spiritual Foundation  " … our ancestors established their system of government on morality and religious sentiment. “[T]he cultivation of the religious sentiment represses licentiousness... inspires respect for law and order, and gives strength to the whole social fabric. Moral habits, they believed, cannot safely be trusted on any other foundation than religious principle, nor any government be secure which is not supported by moral habits.... Whatever makes men good Christians, makes them good citizens " - Daniel Webster, December 22, 1820 at Plymouth, Mass.

2-129 Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports… Reason and experience both forbid us to expect that national morality can prevail in the exclusion of religious principle. George Washington’s Farewell Address, September 17, 1796

Spiritual Foundation  "We have no government capable of contending with human passions unbridled by morality and religion. Our constitution was made only for a moral and religious people. It is wholly inadequate to the governing of any other.” - John Adams

Spiritual Foundation  “If we are to go forward, we must go back and rediscover those precious values - that all reality hinges on the moral foundations and that all reality has spiritual control.” - Martin Luther King, Jr.

Spiritual Foundation  “Business and religion are not separate worlds. Business is people … they take their religion to work with them … True religion is the life we lead, not the creed we profess … A character standard is more important to a stable world than an international gold standard.” - The Spiritual Responsibility of American Business and Industry. By: Johnson, Clement D.. Vital Speeches of the Day, 12/15/55, Vol. 22 Issue 5, p151, 3p; (AN 9867986)

Spiritual Foundation  In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that: Among leaders of the nation's top 100 businesses, 65 % attend church or synagogue regularly-- compared to 40 % of the general population. Among leaders of the nation's top 100 businesses, 65 % attend church or synagogue regularly-- compared to 40 % of the general population. IBM chairman Louis Gerstner, Jr., a graduate of an all-boys Catholic high school, attends mass daily. IBM chairman Louis Gerstner, Jr., a graduate of an all-boys Catholic high school, attends mass daily. Dallas-based Interstate Battery company, the top replacement-battery manufacturer in North America, boasts a full-time corporate chaplain who leads voluntary prayer sessions and Bible study groups. Dallas-based Interstate Battery company, the top replacement-battery manufacturer in North America, boasts a full-time corporate chaplain who leads voluntary prayer sessions and Bible study groups.

Spiritual Foundation  In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that: Illinois-based ServiceMaster was founded by 2 evangelicals. Originally just a rug-cleaning operation, it has since blossomed into the nation's top provider of cleaning workers. The company's motto is, "To honor God in all we do." Illinois-based ServiceMaster was founded by 2 evangelicals. Originally just a rug-cleaning operation, it has since blossomed into the nation's top provider of cleaning workers. The company's motto is, "To honor God in all we do." Thomas Monaghan, the founder of Domino's Pizza, also founded Legatus, an international organization for Catholic business leaders that holds seminars on business ethics and sponsors conferences featuring prominent Catholics from the pope on down. Monaghan calls Legatus his "number-one priority. Thomas Monaghan, the founder of Domino's Pizza, also founded Legatus, an international organization for Catholic business leaders that holds seminars on business ethics and sponsors conferences featuring prominent Catholics from the pope on down. Monaghan calls Legatus his "number-one priority.

Spiritual Foundation  Does a leader’s strong spiritual foundation guarantee that he will lead his company in developing a culture of integrity?

Spiritual Foundation  Note that in Business as a Calling Michael Novak reports that: Kenneth Lay, Chairman and CEO of Enron Corp., confided that "I grew up the son of a Baptist minister. From this background, I was fully exposed to not only legal behavior but moral and ethical behavior and what that means from the standpoint of leading organizations and people. I was, and am, a strong believer that one of the most satisfying things in life is to create a highly moral and ethical environment in which every individual is allowed and encouraged to realize their God-given potential. There are few things more satisfying than to see individuals reach levels of performance that they would have thought was virtually impossible for themselves." Kenneth Lay, Chairman and CEO of Enron Corp., confided that "I grew up the son of a Baptist minister. From this background, I was fully exposed to not only legal behavior but moral and ethical behavior and what that means from the standpoint of leading organizations and people. I was, and am, a strong believer that one of the most satisfying things in life is to create a highly moral and ethical environment in which every individual is allowed and encouraged to realize their God-given potential. There are few things more satisfying than to see individuals reach levels of performance that they would have thought was virtually impossible for themselves."

Role of Leadership in Developing a Culture of Integrity  Vision - Moral leaders tend to maintain a clear, strong and positive vision and purpose for themselves and their organizations that takes into account their organization’s impact on society, and they must inspire others to become invested in the pursuit of that vision. (Related Scriptures, Prov. 29:18, Hab. 2:2- 3)  According to Wess Roberts, author of Leadership Secrets of Attila the Hun, vision is the “North star” for any organization.

3 Theories of Social Responsibility  Classical Theory  Stakeholder Theory  Corporate Social Responsibility Theory (CSR)

Classical Theory  Definition: The role of business is to maximize profits within the law (see Milton Friedman, "The Social Responsibility of Business Is to Increase Its Profits.", New York Times Magazine, 1970)

Classical Theory  Serve the interests of the shareholders  Social obligations limited to “ordinary moral expectations”.  Views obligations to non-shareholders as a constraint  Trusts in Adam Smith’s “Invisible Hand” (The Wealth of Nations) - The assumption that society benefits most when individuals are allowed to define and pursue their own self- interests, with minimal interference from governments or other authorities.

Classical Theory - Contra  Problems with: Market Failures (e.g. pollution & resource depletion, see Pacific Lumber Case, successful, balanced enterprise ruined)

Classical Theory - Contra  When the 1990’s Tech Stock Bubble “burst” it sent layoffs soaring, 401(k) assets tanking. According to the Center on Budget and Policy Priorities, between 1997 and 1999 the bottom 20% of earners saw their income decline, while the richest 1% saw their income more than double. The invisible hand is a bit partial in the way it dispenses favors. (Marjorie Kelly, The Divine Right of Capital)

Stakeholder Theory  Definition: The primary consideration in business decision-making is preserving/promoting the rights of stakeholders  Takes into consideration the moral principle of mutual respect.

Stakeholder Theory  Goal: to maintain the benefits of the free market while minimizing the potential ethical problems created by capitalism (Phillips, Wharton School)  Primary difference from Classical Theory: elevation of nonshareholding interests to the level of shareholder interests in formulating business strategy and policy.

Stakeholder Theory  Stakeholder: an individual or group, inside or outside the organization, who has a meaningful stake in its performance.  Who are the stakeholders of a business?  Narrow view vs. Wide View

Stakeholder Theory  Some Possible Stakeholders of a Business: Customers Customers Department/Employees Department/Employees Owners/Shareholders Owners/Shareholders Creditors Creditors Suppliers Suppliers Distributors Distributors Competitors Competitors

Stakeholder Theory  Some Additional Possible Stakeholders: Local Community Local Community National Citizens National Citizens Global Inhabitants Global Inhabitants Non-Human Life Non-Human Life the Environment the Environment

Stakeholder Theory  Corporate citizenship: the extent to which a business meets its responsibilities, to its various stakeholders, or to society at large.

Stakeholder Theory  Problems with wider view? Discourages Investment - Undermines/Dilutes shareholder property rights Discourages Investment - Undermines/Dilutes shareholder property rights Interest Group Politics - Leads to waste and inefficiency Interest Group Politics - Leads to waste and inefficiency

Corporate Social Responsibility Theory  Definition: A voluntary assumption of responsibilities, beyond the legal and economic, that take into account moral/ethical/socially desirable goals and outcomes.  Concept originated in the 1950’s and began to gain a significant following in the 1960”s.

Corporate Social Responsibility Theory Example Example  Merck: moved to develop Mectizan, a drug that would treat river blindness, a disease that primarily affected the poor. Merck knew that it would cost millions to develop and that they would most likely not realize a direct profit from the effort. But this resulted in a public relations windfall!

Corporate Social Responsibility Theory  “Man … ought to regard himself, not as something separated and detached, but as a citizen of the world, a member of the vast commonwealth of nature … to the interest of this great community, he ought at all times to be willing that his own little interest should be sacrificed.” - Adam Smith

2-153 Corporate Social Responsibility  Social Contract Theory: Business does not exist in a vacuum. It involves a series of interdependent, intertwined, symbiotic relationships and coexists with many other institutions in society, including the family, the church, and the political, criminal justice, and educational systems. Each of these institutions contributes toward making capitalism possible: The court system enforces contracts; the political system provides monetary stability; and the educational system trains future employees and prepares them for the workforce. Therefore, the firm is obligated to "give something back" to those that make its success possible. Business exists only because society allows it and therefore it must satisfy the demands of society. This creates an implicit social contract (see “Changing the Social Contract: A Role for Business”, by Melvin Anshen, Columbia Journal of World Business 5 (Nov.-Dec. 1070)

Corporate Social Responsibility Theory  Problems with CSR in general? Viewed as fundamentally antagonistic to the Capitalist Enterprise Viewed as fundamentally antagonistic to the Capitalist Enterprise Often influenced by simplistic political and social agendas Often influenced by simplistic political and social agendas

Corporate Social Responsibility Theory  “Rain Forest Chic” - Socially responsible image as a marketing tool, source of free, positive publicity (e.g. The Body Shop, both customers and franchisees attracted by progressive reputation)

Corporate Social Responsibility Theory  Anita Roddick/Body Shop Supports various social causes (e.g.-Save the Whales) Supports various social causes (e.g.-Save the Whales) But may of stolen store concept and unfairly deals with franchisees? But may of stolen store concept and unfairly deals with franchisees?

Corporate Social Responsibility Theory  Ben & Jerry’s - Fight global warming with Ice Cream Fight global warming with Ice Cream Annual one world one heart festival Annual one world one heart festival Pint for a pint with International Red Cross Pint for a pint with International Red Cross Rainforest Crunch Fiasco/Mistreatment of Employees/Sale to Unilever (4/12/2000) Rainforest Crunch Fiasco/Mistreatment of Employees/Sale to Unilever (4/12/2000)

3 Theories of Social Responsibility  If you were trying to decide which type of company to invest in, which would you choose and why? (Classical, Stakeholder, CSR)

Self-Regulation of Business Ethics  Types of Codes of Ethics/Conduct Compliance Oriented: Statement of business standards or practices Compliance Oriented: Statement of business standards or practices Visionary: Statement of beliefs, core values, mission, principles (e.g. Johnson and Johnson Credo) or corporate philosophy (e.g. the “HP Way”) Visionary: Statement of beliefs, core values, mission, principles (e.g. Johnson and Johnson Credo) or corporate philosophy (e.g. the “HP Way”) Combination: (e.g. G.E.’s Integrity Program called “The Spirit and the Law”. Combination: (e.g. G.E.’s Integrity Program called “The Spirit and the Law”.

2-160 Types of Codes Forbes 500 Companies (237 respondents): Source: Patrick E. Murphy, “Corporate Ethics Statements: Current Status and Future Prospects,” Journal of Business Ethics 14: 727-740 (1995). Code of Ethics Values Statement Corporate Credo All Three Documents 82% 83% 81% 91% 53% 34% 49 cos. Revised in ‘90s 15.5% 8.0% 22.0% 18.5% 51.0% 41.0% Date Introduced >20 yrs.< 5 yrs.

Self-Regulation of Business Ethics  Why have a Code of Ethics? to define accepted/acceptable behaviors; to define accepted/acceptable behaviors; to promote high standards of practice; to promote high standards of practice; to provide a benchmark for members to use for self evaluation; to provide a benchmark for members to use for self evaluation; to establish a framework for professional behavior and responsibilities; to establish a framework for professional behavior and responsibilities;

Self-Regulation of Business Ethics  Why have a Code of Ethics? as a vehicle for occupational identity & maturity; as a vehicle for occupational identity & maturity; to increase ethical sensitivity & judgement; to increase ethical sensitivity & judgement; to enhance the sense of community among members, of belonging to a group with common values and a common mission; to enhance the sense of community among members, of belonging to a group with common values and a common mission;

Self-Regulation of Business Ethics  Why have a Code of Ethics? to compel people to think through their mission and obligations, as a group & as individuals; to compel people to think through their mission and obligations, as a group & as individuals; to strengthen support for individuals’ moral courage; to strengthen support for individuals’ moral courage; because a written document reinforces an intention. because a written document reinforces an intention. to act as a vehicle to address public concerns. to act as a vehicle to address public concerns.

Self-Regulation of Business Ethics  Why have a Code of Ethics? to discourage corruption, fraud and other malfeasance to discourage corruption, fraud and other malfeasance to enhance credibility with stakeholders to enhance credibility with stakeholders to provide a guidepost for addressing potential problems such as potential conflicts of interest to provide a guidepost for addressing potential problems such as potential conflicts of interest

Self-Regulation of Business Ethics  Some Typical Components Preamble (Aspirations) Preamble (Aspirations) Rules and principles. Rules and principles. An Articulation of Core Values An Articulation of Core Values

Self-Regulation of Business Ethics  Some Elements of “Best Codes” Clear, Coherent, Understandable Language Clear, Coherent, Understandable Language Involves sanctions and rewards Involves sanctions and rewards Is more about values than compliance Is more about values than compliance Involves “Ownership” (i.e. People from every level of the company should be involved in its development. Involves “Ownership” (i.e. People from every level of the company should be involved in its development.

Self-Regulation of Business Ethics  Some Elements of “Best Codes” Provides a set framework for making ethical decisions Provides a set framework for making ethical decisions Demonstrates respect for all employees as unique, valuable individuals Demonstrates respect for all employees as unique, valuable individuals Supports each individual employee's freedom, growth, and development Supports each individual employee's freedom, growth, and development Promotes a “balanced life” & respect for employee family concerns Promotes a “balanced life” & respect for employee family concerns

Self-Regulation of Business Ethics  Some Elements of “Best Codes” Promotes employee health & safety Promotes employee health & safety Promotes tolerance & an atmosphere free of harassment Promotes tolerance & an atmosphere free of harassment Promotes honesty Promotes honesty Promotes fairness? Promotes fairness? Cultivates a positive attitude/outlook Cultivates a positive attitude/outlook

Self-Regulation of Business Ethics  Some Elements of “Best Codes” Promotes openness/transparency (no cover-ups) Promotes openness/transparency (no cover-ups) Promotes accountability/personal responsibility Promotes accountability/personal responsibility Promotes risk-taking, within limits Promotes risk-taking, within limits Promotes excellence Promotes excellence

Self-Regulation of Business Ethics  Some Elements of “Best Codes” Promotes tolerance of errors & learning from same Promotes tolerance of errors & learning from same Promotes unquestioned integrity Promotes unquestioned integrity Promotes consistency Promotes consistency Promotes cooperation/collaboration Promotes cooperation/collaboration Promotes courage & persistence Promotes courage & persistence

Self-Regulation of Business Ethics

 But as Joshua Joseph, research manager at the Ethics Resource Center in Washington, D.C. says, corporate ethics codes alone have little effect on employee behavior. Organizations must communicate what’s in the code, provide training on what it means and put systems into place that allow workers to ask questions and report possible misconduct without fear of reprisals.

Self-Regulation of Business Ethics  Some Implementation Methods Integration Integration Endorsement Endorsement Breach Response Plan (Gaps between values and practices must be addressed) Breach Response Plan (Gaps between values and practices must be addressed) Personal Feedback Personal Feedback Affirmation Affirmation Regular Review Regular Review Contracts Contracts

Self-Regulation of Business Ethics  Some Implementation Methods Training (Role-Playing) (including outside specialty firms, e.g. Baker Hughes signed a 3-year contract renewal and extension with LRN®, The Legal Knowledge Company™ to provide online education, training and testing in ethics, legal and compliance issues to its global workforce through the LRN Legal Compliance and Ethics Center) Training (Role-Playing) (including outside specialty firms, e.g. Baker Hughes signed a 3-year contract renewal and extension with LRN®, The Legal Knowledge Company™ to provide online education, training and testing in ethics, legal and compliance issues to its global workforce through the LRN Legal Compliance and Ethics Center)

Self-Regulation of Business Ethics  Some Implementation Methods Translation (e.g. Merck & Co.’s code has been translated into 22 languages) Translation (e.g. Merck & Co.’s code has been translated into 22 languages) Distribution (Pamphlets, On-Line, etc.) Distribution (Pamphlets, On-Line, etc.) Annual Report Annual Report Ethics Officer/Department Ethics Officer/Department

Self-Regulation of Business Ethics  Some Monitoring/Compliance Methods Required annual acknowledgement/review Required annual acknowledgement/review Periodic surveys Periodic surveys Anonymous 24-hour contact point with real and immediate investigation/follow-up Anonymous 24-hour contact point with real and immediate investigation/follow-up

Self-Regulation of Business Ethics  Other Forms of Self-Regulation: Industry Codes Industry Codes Support character based education in your community (e.g. Boy Scouts) Support character based education in your community (e.g. Boy Scouts) Hiring Ethical People: hire people who can uphold the company's high ethical standards Hiring Ethical People: hire people who can uphold the company's high ethical standards

Self-Regulation of Business Ethics  Set your expectations high; find men and women whose integrity and values you respect; get their agreement on a course of action; and give them your ultimate trust. - John Fellows Akers, Chairman of IBM

Self-Regulation of Business Ethics  I am sure that in estimating every man’s value either in private or public life, a pure integrity is the quality we take first into calculation, and that learning and talents are only the second.- Thomas Jefferson

Self-Regulation of Business Ethics  In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you.-- Warren Buffet

Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 2 2 The Ethical Basis of Law and Business Management.

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Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 2 2 The Ethical Basis of Law and Business Management.

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Presentation on theme: "Chapter McGraw-Hill/Irwin Copyright © 2005 by The McGraw-Hill Companies, Inc. All rights reserved. 2 2 The Ethical Basis of Law and Business Management."— Presentation transcript:

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