Академический Документы
Профессиональный Документы
Культура Документы
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.
Unethical Behavior
The Old Testament also talks about false balances (Amos 8:5; Hosea 12:7; Micah 6:11) despite Gods command against such (Lev. 19:36; Ezek. 45:10)
Business Ethics
Business Ethics is about:
Decision-Making By People in Business According to Moral Principles or Standards
Decision-Making
Conflicting duties, loyalties or interests create moral dilemmas requiring decisions to be made Ethical decision-making involves the ability to discern right from wrong and Good from Bad 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 (i.e. how important does the decision-maker perceive the issue to be? Can be influenced by company/management emphasis) Decision-Makers Personal Moral Philosophy Decision-Makers Stage of Moral Development Organizational Culture
Decision-Making
8 -Steps to Sound, Ethical Decision-Making
1.Gather as many relevant & material facts as circumstances permit. 2.Identify the relevant ethical issues (consider alt. viewpoints) 3.Identify, weigh & prioritize all the affected parties (i.e. stakeholders) (see Johnson & Johnson Credo, Taking Sides, p.25) 4.Identify your existing commitments/obligations. 5. Identify various courses of action (dare to think creatively) 6.Identify the possible/probable consequences of same (both short & long-term) 7.Consider the practicality of same. 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?
Decision-Making
The higher the level of a decisionmaker
the greater the impact of 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 decisionmaker matters
He doesnt 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.
Morality
The most important human endeavor is the striving for morality in our actions. Our inner balance and even our very existence depend on it. Only morality in our actions can give beauty and dignity to life. - Albert Einstein (in a letter 11/20/50) The historian Arnold Toynbee observed: "Out of 21 notable civilizations, 19 perished not by conquest from without but by moral decay from within."
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. Judges)
Relativism
As R.H. Popkin describes relativism in his article on the subject in The Encyclopedia of Religion, views are to be evaluated relative to the societies or cultures in which they appear and are not to be judged true or false, or good or bad, based on some overall criterion but are to be assessed within the context in which they occur. Thus, what is right or good or true to one person or group, may not be considered so by others there are no absolute standards Man is the measure of all things (quoting the Greek philosopher Protagoras (481-420, B.C.), and each man could be his own measure [Relativism] urges suspension of judgment about right and wrong. (Ellis Washington, Reply to Judge Richard A. Posner on the Inseparability of Law and Morality, Rutgers Journal of Law and Religion, Vol. 3)
Relativism
As Cardinal Joseph Ratzinger said, Relativism is presented as a position defined positively by the concepts of tolerance and knowledge through dialogue and freedom, concepts which would be limited if the existence of one valid truth for all were affirmed affirming that there is a binding and valid truth in history in the figure of Jesus Christ and the faith of the church is described as fundamentalism. Such fundamentalism, is presented in different ways as the fundamental threat emerging against the supreme good of modernity: i.e., tolerance and freedom. - Address to Congregation for the Doctrine of Faith, Guadalajara, Mexico, May 1996
Absolutism v. Relativism
The demise of Americas legal foundations occur when society rejects laws that are based on solid, irrevocable, moral, universal, absolute values, to a society that bases its 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).
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
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 Fosters Community Makes Communication more Efficient & Effective 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 Searsfounder of Sears Roebuck and Companystarted 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
Honesty and transparency make you vulnerable. Be honest and transparent anyway. - Mother Teresa Contra: "Speech was given to man to disguise his thoughts." - Charles-Maurice de Talleyrand
Values - Honesty
Some scriptural references regarding honesty in business:
(Exodus 22:10; 23:13; Leviticus 19:11 12, 35-36, Deuteronomy 25:1316, 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) Should respect be given or must respect be earned?
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 (17241804)
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 Christs 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
Civilizations should be measured by "the degree of diversity attained and the degree of unity retained. - W.H. Auden, English poet (1907-1973) Never look down on anybody unless you're helping him up. - Jesse Jackson, American political activist and preacher
By contrast, the New Testament uses the term love Gk. agapeo nearly 150 times in a positive sense.
So whats the difference between love and tolerance?
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
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 (18261893) "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)
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 theres 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 Dont 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 mans 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
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
Justice: demonstrating fairness, equity, impartiality, righteous action, To some, justice is about conformity to truth. To others, its about conformity to law But law and justice are 2 different concepts.
The law is something we must live with. Justice is somewhat harder to come by. - Sherlock Holmes, in The Case of the Red Circle. This is a court of law, young man, not a court of justice. ~Oliver Wendell Holmes, Jr. justice occurs on earth when power and authority between people are exercised in conformity with Gods 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
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. 5:14, 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. 2:1517, stand firm, maintain your hold; 1 Tim. 6:1112, pursue endurance; 2 Tim. 2:12, go on enduring; 2 Tim. 3:14, continue in the things you have learned; 2 Tim. 4:78, 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, 3536, 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 ones principles, in spite of possible adverse consequences to such things as reputation or emotional well-being.
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 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
Corporate Culture
"Moral behavior is concerned primarily with the interpersonal dimension of our behavior: how we treat one another individually and in groups and, increasingly, other species and the environment." The key here is that morality brings us into contact with others and asks us to consider the quality of that contact. Quote from The Leadership Compass, John Wilcox and Susan Ebbs, as quoted in Everyday Ethics, by Thomas Shanks, S.J., Markkula Center for Applied Ethics.
Corporate Culture
"The first step in the evolution of ethics is a sense of solidarity with other human beings." Albert
Schweitzer, early 20thcentury German Nobel Peace Prize-winning mission doctor and theologian
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)
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.
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
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 organizations 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!
Whose Values?
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 Chickfil-A, argues there is no such thing as business ethics only ethics.
Ethics
Duty-Based v. Outcome-Based Ethics
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. Kants Categorical Imperative "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)
Ethical if best outcome for the majority Involves cost-benefit analysis e.g. Bentham & Mills Utilitarianism "Of any two actions, the most ethical one is that which will produce the greatest balance of benefits over harms." De-emphasizes individual rights
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
Blackwells 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. 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 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) 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)
Integrity
Some Biblical Examples of Integrity: 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. Job (Book of Job, see in particular description of Job at 2:3, 27:5) Daniel, Shadrach, Meshach & Abednego (Daniel Chapters 3 & 6) David (Ps. 7:8) Solomon (1 Kgs. 9:4) Contrast: Ananias & Sapphira, Acts 5:1-11 and Acts 20:1636
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
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. President Clinton/Monica Lewinsky situation, where, despite the scandal, President Clinton maintained between a 60 and 70% approval rating with the American public.) Do you agree with this? Contrast: Find God in all things, St. Ignatius Loyola.
Character
Character vs. Reputation: It has been said that an individuals character can be illustrated by a barrel of apples. The apples seen on top by all represent ones reputation, and the apples that lie hidden underneath are his character.
Reputation
Eli Lily introduced a drug, fialuridine, intended to treat hepatitis B. However, 15 patients who submitted to trials of the drug suffered liver toxicity and 6 died. Rather than follow the companys long-standing no comment policy, the new Chairman and CEO, Randall Tobias openly acknowledged the failure. His view was that communication stands at the top of the list in the elements of good leadership. In addition, he believed that if a company leaves a communications void, others will fill it with misinformation. (Put the Moose on the Table:Lessons in Leadership from a CEOs Journey Through Business and Life, Randall and Todd Tobias, Indiana University Press)
Reputation
A railroad executive burst into Arthur Andersens office one day in 1914, demanding that the firms founder approve the railroads books. Accountants had discovered that the railroad was inflating its profits by failing to properly record expenses. Andersen refused, saying that there wasnt enough money in the city of Chicago to make him approve the fraudulent accounting. Andersens 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.
Virtue
Virtue:The quality of doing what is right and avoiding what is wrong.
"Virtue develops from a habitual commitment to pursue the good. - Ronald F. Thiemann, a professor of religion and society at Harvard Divinity School Wisdom is know what to do next; virtue is doing it. David Starr Jordan (1851 - 1931), American naturalist
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
Archie B. Carroll, Robert W. Scherer Chair of Management in the Terry College of Business, University of Georgia, Athens-Banner Herald, 12/16/03.
Spiritual Foundation
Spiritual Foundation:
Feuerstein recently concluded a speech quoting from Jeremiah 9:22-23, in flawless Hebrew, then giving the English translation. His message was "Let the rich man not praise himself," but rather, by demonstrating the will of God, show kindness, justice and righteousness in his actions. His response to the catastrophe was in accordance with the Torah: you do not sacrifice the lives of people who are depending on you.
Spiritual Foundation
Feuerstein also quoted the famous first century Talmudic scholar Hillel - twice: "In a situation where there is no righteous person, try to be a righteous person and "Not all who increase their wealth are wise.
Spiritual Foundation
Feuerstein's father, Samuel, was one of the early pioneers of the Jewish Day School movement and a leader with the Union of Orthodox Jewish Congregations. In fact, Feuerstein related, it was, in part, his grandfather's devotion to Judaism that led him to found Malden Mills at the turn of the century when he emigrated from Hungary. "My grandfather felt that by owning a textile mill it would not only enable him to bring his children into the business, but would provide the opportunity to observe the Sabbath." Since the family worked together, it allowed them to schedule work hours around religious observances.
Spiritual Foundation
Feuerstein grew up in a family where Talmudic discussions around the dinner table helped formulate his beliefs about how to act in the world. "Judaism gives you a complete and thorough ethical framework within which you and your family can live," he explained.
Spiritual Foundation
Feuerstein and his wife, Louise, are ardent supporters of their temple, Young Israel of Brookline, Mass. Coincidentally, their synagogue suffered a fire a year before the mill burned down and they played a role in helping to rebuild it. For Louise, who converted to Judaism nine years ago, her religion is a way "to focus on the here and now." She adds, "It's a positive impetus to make life meaningful every day, not just concentrate on what's down the road.
Spiritual Foundation
Spiritual study remains an important part of Aaron Feuerstein's life, and he refers to it as "exercise for my mind." Also, each day he alternates between doing an hour of running and an hour of calisthenics. During that time, he goes over memorized passages from either Jewish literature (his favorites are the Prophets, the Psalms and Pirke Avot) and English literature (specializing in Shakespeare's tragedies).
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} However, only 4 % of U.S. adults have a biblical worldview as the basis of their decision-making, according to a new study by Barna Research Group. "Although most people own a Bible and know some of its content, our research found that most Americans have little idea how to integrate core biblical principles to form a unified and meaningful response to the challenges and opportunities of life," said researcher George Barna. Among the most prevalent alternative worldviews was postmodernism, dominant in the two youngest generations.
Spiritual Foundation
the happiness of a people, and the good order and preservation of civil government, essentially depend upon piety, religion, and morality." - The Massachusetts
Constitution of 1780, Ch. V, Sec. 2
Spiritual Foundation
"Religion, morality, and knowledge, being necessary to good government and the happiness of mankind, schools and the means of education shall forever be encouraged. - Northwest Ordinance, enacted
by the Continental Congress in 1787, Art. 3, 1 Stat. 51, 53 n. a (July 13, 1787, re-enacted Aug. 7, 1789)
Spiritual Foundation
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 Franklins 1790 reply to Thomas Paine regarding Paines 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.
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.
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 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 [T]he loss of God leaves man at the naked mercy of his fellows, where might makes right. John
Spiritual Foundation
What if, under your particular understanding of the universe, other human beings were not created in God's image, had no inherent dignity, and were yours to do with as you pleased? And what if your particular response to the mystery of life happened to be the same as that of Eric Harris, one of the two young killers in Littleton, Colorado, who said, "My belief is that if I say something, it goes. I am the law"? or, as Fyodor Dostoevsky wrote, "Without God, everything is permitted"? - The Necessity of Truth by Senator Rick Santorum, Heritage Lecture #643, August 6, 1999
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. IBM chairman Louis Gerstner, Jr., a graduate of an all-boys Catholic high school, attends mass daily. Dallas-based Interstate Battery company, the top replacementbattery 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." 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
In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that:
Allou Health and Beauty Care, Inc., which boasts one of the highest profit margins in the industry, bases its business operations principles enunciated in the Jewish Talmud.
Spiritual Foundation
According to a recent national survey by the American Research Group:
70 % of respondents believe that corporate scandals would be avoided if CEOs followed biblical principles. 94.4% of respondents believe companies run by individuals who follow the Bible will grow at least as fast or faster than those that do not. 54% percent of respondents said they would be more likely to invest in a company run by a CEO who uses the Bible to guide his or her business decisions.
Spiritual Foundation
And according to one study, a majority of Americans see religion as central to recovering the country's moral compass.
Spiritual Foundation
Christian philanthropist Sir John Templeton, regarded by Wall Street as one of the world's wisest investors, contends in his book, The Templeton Plan21 Steps to Personal Success and Real Happiness, that "the most successful people are often the most religiously motivated. They are likely to have the keenest understanding of the importance of ethics in business. They can be trusted to give full measure and not cheat their customers. In his extensive research, Templeton found that "the common denominator connecting successful people and successful enterprises is a devotion to ethical and spiritual principles." Templeton believes that "the person who lives by God's principles is the same person who will succeed in life, making lasting friendships and, most likely, reaping significant financial rewards.- Christian Ethics in Business - Asset or Liability, Ian
Buchanan, www.christianity.ca.
Spiritual Foundation
Does a leaders 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."
2) Genuinely Empathetic 3) Healer 4) Persuader 5) Aware 6) Possessing/Demonstrating Foresight 7)Conceptualizer 8)Committed to the Growth of others 9)Good Steward 10)Community Builder
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,
Classical Theory
Put another way, by Harvard Professor Theodore Levitt, In the end business has only two responsibilities - to obey the elementary canons of face-to-face civility (honesty, good faith, and so on) and to seek material gain. - The Dangers of Social Responsibility, Harvard Business Review 36 (Sept.-Oct., 1958)
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 Smiths 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.
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.
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
Stakeholder Theory
Stakeholder Theory
Some Additional Possible Stakeholders:
Local Community National Citizens Global Inhabitants Non-Human Life 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 Interest Group Politics - Leads to waste and inefficiency
Environment
Areas of Concern?
Waste & Pollution Use of Natural Resources Preservation of Environmentally Sensitive Areas Preservation of Biodiversity
Consider Endangered Species Act, Noah/Ark, Note: Under Jewish Law: The medieval Jewish commentator Nahmanides explained the biblical injunction against slaughtering a cow and her calf on the same day (Leviticus 22:28) and the taking of a bird with her young (Deuteronomy 22:6). "Scripture will not permit a destructive act that will cause the extinction of a species, even though it has permitted the ritual slaughtering of that species (for food). And he who kills mother and sons in one day, or takes them while they are free to fly away, is considered as if he destroyed that species." The Sefer Ha-hinukh offers a similar explanation, stating that there is divine providence for each species and that God desires them to be perpetuated.
Environment
Sustainability - the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs. (see Phil. 2:4) The responsibility for ensuring a sustainable world falls largely on the shoulders of the worlds enterprises. Stuart Hart (1997) See Interface Corporation Case, Desjardins, p.174-176. Polluters Dilemma (Supplement)
Environment
Environment
Environment
Caretaker
See Gen. 2:15 (Dress & Keep) Dress(abad, Heb.) = Work, Serve, Labor for Keep (shamar, Heb.) = Keep, Guard, Treasure, Preserve, Protect, Retain, Save, Watch Over, Celebrate Jewish prohibition known as bal tashhit, 'do not destroy' is based by the Rabbis on the biblical injunction not to destroy fruit-bearing trees (Deut. 20: 19), but it is extended by them to include wasting anything that can be used for the benefit of mankind. See also Ezek. 34:18, Anti-pollution scripture? Takes into account the moral principle of stewardship/trusteeship (see Lev. 25:23-24).
Sweatshops
Sweatshops: Huge mass production facilities in which large numbers of people work under barbaric conditions for subsistence wages.
Sweatshops
Sweatshops often involve such things as:
Dangerous working conditions (e.g. firetraps, exposure to dangerous chemicals and/or machines without proper safeguards) Denial of bathroom breaks Physical abuse Demands for sexual favors Seven day work weeks Long hours (12 to 16 hours a day) Forced double shifts Dismissal of anyone who tries to organize a union
Sweatshops
Some Examples (from a recent Fair Labor Association Report):
Adidas - Vietnam: Workers forced to do overtime, arbitrary firings, widespread sexual harassment, toilet visits limited Liz Claiborne-China: Workers fined for talking, blocked exits, no toilet paper or towels, no sick leave, no pay stubs, excessive overtime.. Levi Strauss-Thailand: Child labor, dirty toilets, improperly stored chemical tanks, no drinking water in the dining facility, excessive overtime. Levis now monitors producers (no-sweat goods) Negative: Monitoring leads to use of fewer sources = less opportunity
Sweatshops
Illegal immigrants especially vulnerable. Often involve organized crime. 90% of sweatshop workers are female. Sometimes involve child labor.
Note: According to International Labor Organization (ILO) reports, some 1/5 of all children in the world ages 5-14, or about 250 million children, are engaged in child labor.
Sweatshops
Are Sweatshops Necessarily Evil? (Taking Sides, p. 282)
Globalization
Yes - Black et al
Violate Intl Human Rights & Labor Laws Right to a living wage? Companies can afford to treat better/pay more
A mens dress shirt, made in Mexico, and selling for $32.00 in the United States, costs only $4.74 to produce
Customers will not tolerate sweatshops and are willing to pay more to prevent them. (Is this true?)
Ad by Behind the Label and organization dedicated to exposing sweatshops shows a young American girl shopping and saying, I helped push African women into slums, I was just shopping.
Globalization
No- Myerson - Merely Growing Pains
May be only option in developing countries to accumulate capital
First-step towards modern prosperity (e.g. Hong Kong, Singapore, South Korea, Taiwan, Indonesia) Over the past 50 years, countries like India resisted sweatshops, while countries that started at a similar economic level - like Taiwan and South Korea - accepted sweatshops as the price of development. Today, Taiwan and South Korea are modern countries with low rates of infant mortality and high levels of education; in contrast, every year 3.1 million Indian children die before the age of 5, mostly from diseases of poverty like diarrhea. Per capita income in Indonesia has more than tripled in the last 20 years. The simplest way to help the poorest Asians would be to buy more from sweatshops, not less. - Nicholas D. Kristof, N.Y. Times, 9/4/2000.
Globalization
No- Merely Growing Pains
When Nike and Gap pulled out of Cambodia after a BBC report on sweatshops there it cost the country $10 million in contracts and hundreds or workers lost their only source of income for themselves and their families. China, Vietnam and various Eastern European Countries are now Sweatshop hot spots The United States has had its own history of sweatshops, employing African & Asian slaves, various waves of immigrants, etc,
Globalization
No- Growing Pains
In the late 1930s Life Magazine declared that sweatshops no longer existed in America However, there has been a definite resurgence of sweatshops in America, especially since the late 1960s, mainly employing illegal immigrants
(e.g. A 1995 police raid of a fenced-in compound in El Monte, California found a clandestine garment sweatshop that employed some 72 Thai immigrants as virtual slaves) The U.S. Labor Dept. estimates that 50% of current U.S. owned/operated garment factories are sweatshops.
Globalization
No- Developing nations not complaining
Honduran union leaders universally resent the moralizing of U.S. labor activists who, like the National Labor Committee, are funded by organized labor committed to preserving American jobs. According to Honduran labor leaders, maquiladoras are increasingly unionized and offer wages two-to-three times the minimum wage. These are prime jobs in an economy in which almost half of the population can find no work at all. Labor shortages at these jobs have helped bump up wages throughout the economy. (Jon Entine) A policy of good jobs in principle, but no jobs in practice, might assuage our consciences but is no favor to its alleged beneficiaries.
letter of the law but to obey the spirit of the law as well. Under Jewish law, it is entirely possible for a person to be 100% observant or all the law and yet be a Naval B'rshut HaTorah , that is, a repulsive, disgusting individual. One must go beyond the law, called Lifnim Mishurat HaDin, and embrace the ethical imperatives that are within it.
Moral Gamesmanship, the excusing of unethical practices by viewing business as "a game" and oneself as "a player Scientism, the elevation of science-including management science-to a position of unquestioned authority.
(see Corporate moral blindness not solved by typical ethics, by John Knapp, Emory Report, April 26, 1999, Volume 51, No. 29, http://www.emory.edu/EMORY_REPORT/erarchive/1999/April/erapril.26/4_26_99morals.html)
Capitalism
Capitalism: An economic system in which the major part of production and distribution lies in private hands, operating under a primarily free market system, for the primary purpose of earning a profit on capital invested.
Capitalism
Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of the things for the greatest good of everyone. John Maynard Keyes
Capitalism
Values that are central to a capitalism
Freedom of voluntary exchange Sanctity of contracts Removal of impediments to trade
(Source: Ethics and Economic Affairs,by Lewis, Alan; Wrneryd, Karl Erik, Publication: London ; New York Routledge, 2002)
Capitalism
As it presently functions, capitalism encourages human pathologies -embodying irresponsibility as a central requirement in its operating routines. -William Greider is national affairs correspondent
for The Nation
Corporations
Today more than 25% of the worlds economic activity comes from the 200 largest corporations. - Top 200 The Rise of
Corporate Global Power, by Anderson & Cavanaugh, Institute for Policy Studies, 2000)
The largest 500 U.S. companies constitute at least 75% of the U.S. economy.
Corporations
Many now believe that it is not the church or state, but the corporation that is:
the most important organization in the world The Company: A Short History of a Revolutionary Idea, by Micklethwait & Woolridge, 2003 or the central institution of contemporary society - Corporate Society: Class, Property, and Contemporary Capitalism, by McDermott, 1991.
Corporations
These beliefs echo the prediction made by -French Sociologist Emile Durkheim (1858-1917), in his work Suicide, that following the collapse of the family and the church, the corporation would be the association in the future that would supply the social support that every individual needs to maintain a moral life . - Cited in An Essay on the Background
of Business Ethics: Ethics, Economics, Law and the Corporation, by Lisa N. Newton & Maureen M. Ford, in Taking Sides.
Corporations
Legally speaking, Corporations are:
fictional persons
lacking body and soul, corporations cannot be punished - Pope Innocent IV (13th Century) lacking a soul, corporations cannot commit treason, be outlawed, or excommunicated - Sir Edward Coke, Chief Justice, Kings Bench (17th Century)
Corporations
King George III's Lord Chancellor Baron Thurlow remarked at the end of the 18th Century: "How can you expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?"
Corporations
As artificial persons corporations cannot have real responsibilities. - Nobel Prize Winning Economist Milton Friedman Philosophy Professor Manuel Velasquez argues that only corporate members and not corporations themselves, can be held morally responsible.
Corporations
However, Although a corporation is not something that can be seen or touched, it does have prescribed rights and legal obligations within the community. - William
H. Shaw, Business Ethics.
Corporations
The exclusively economic definition of the corporation is a deadly oversimplification , allowing overemphasis on self-interest at the expense of the consideration of others. - Kenneth Andrews, Professor, Harvard Business School
Corporations
Limited liability is the key feature of the corporate form, encouraging investment.
Doesnt that run directly counter to the value of Responsibility/Accountability?
Types of Codes
Forbes 500 Companies (237 respondents):
Date Introduced Revised in 90s < 5 yrs. >20 yrs. Code of Ethics Values Statement Corporate Credo All Three Documents 91% 53% 34% 49 cos. 18.5% 51.0% 41.0% 15.5% 8.0% 22.0% 82% 83% 81%
Source: Patrick E. Murphy, Corporate Ethics Statements: Current Status and Future Prospects, Journal of Business Ethics 14: 727-740 (1995).
Companies must disclose whether or not they have a code of ethics, and if not why not. They must also disclose any change in or waiver of ethics codes. Whistleblowing employees are protected for providing information to federal officials, congressional members, and company supervisors.
Created a public company accounting oversight board to register public accounting firms, to establish or adopt auditing, quality control, ethics and independence and accounting standards, to conduct inspections of registered CPA firms and to enforce compliance with the Act.
Attorneys must report material evidence of a securities law violation, or breach of fiduciary duty, to the chief legal counsel or CEO. If those parties fail to respond, attorneys must report to the board. Some attorneys believe this duty may conflict with their fields existing ethical codes of conduct. (Though the ABA has recently sanctioned this)
CEOs and CFOs must certify their financial reports are accurate, or suffer penalties of $1 million and up to 10 years in prison for "knowing" violations, and up to $5 million and 20 years for "willful" violations. All personal loans to executives and directors by public companies are banned.
Executives are required to pay back bonuses or equity-based compensation, if companies later restate their financials. The penalty for certifying bad financials: fines up to $5 million, and up to 20 years in prison.
There are no objective standards for exactly what CEO's or CFO's are actually certifying. Under Section 906, they must certify "that information contained in the periodic report fairly represents, in all material respects, the financial condition and results of operations of the issuer." But what does "fairly" mean? What is "material"?
Of the 208 sentenced organizations, only four asked for mitigation based on the presence of an effective ethics compliance program.
Corruption/Bribery
Corruption/Bribery
Corruption exists in every country and is endemic to some, especially developing countries.
Africa: Corruption is perceived to be rampant in Cameroon, Kenya, Angola, Uganda, Madagascar and Nigeria. In Kenya, bribery costs the average citizen 20% of their income. In 2004, Kenyan President Kibaki launched a zero corruption initiative. (Unfortunately, his government was recently forced to resign due to, you guessed it, corruption). No African country was listed among the 25 least corrupt countries in the most recent Transparency International Survey (Botswana, which was rated as Africas least corrupt nation, tied for 29th overall).
Corruption/Bribery
Asia: Corruption is perceived to be rampant in Bangladesh and Indonesia. In Indonesia, it is estimated that 20% of business costs are bribes to bureaucrats. The Financial Times recently reported that deep corruption [in China] is corroding the exercise of state power. Falsified accounts used to cover up this corruption have the effect of rendering Chinas official statistics virtually meaningless.
Corruption/Bribery
Latin America: Corruption is perceived to be rampant in Paraguay. In Ecuador, it is estimated the government could pay off its foreign debt in five years if corruption was brought under control. In Argentina, corruption in the customs department defrauded the government out of $3 billion in revenues. Officials estimated that 30% of all imports were being under-billed and approximately $ 2.5 billion of goods were brought into the country labeled in transit to another country, thus illegally avoiding import taxes altogether.
Corruption/Bribery
In Albania, approximately one-third of potential profits are lost to bribe payments that amount to 8% of inventory turnover. German companies are estimated to pay an aggregate of over $ 3 billion a year in bribes to obtain business contracts abroad. In industrial countries 15 % of businesses were found to pay bribes, but in the former Soviet Union this figure jumped to over 60 %. In Kazakhstan typical bribe to win approval of a large construction contract is 15 to 20% of contract price.
Political Corruption/Bribery
In Mexico, suspicions surround the ability of Raul Salinas, the brother of former President Carlos Salinas, to amass a fortune of over $ 120 million while a public official. Two former presidents of South Korea were convicted of developing a fund of over $900 million while they were in office in the 1980s and 1990s. According to Transparency International, in 6 out of 10 countries, political parties were determined to be their nations most corrupt institutions.
1997 estimate by the World Bank placed the total about of bribery involved in international trade at $ 80 billion per year. A recent World Bank survey of 3,600 firms in 69 countries found that 40 % of businesses pay bribes.
Corruption/Bribery
Corruption/Bribery
Recent Statoil bribery allegations, planned to funnel a $15 million bribe to an Iranian official in exchange for help with contracts Oil is considered a significant factor in Nigerian & Angolan corruption as well.
Corruption/Bribery
Where do we stand?
In the same study , the U.S. tied for 17th with Belgium and Ireland. It was perceived as more corrupt than Norway, Australia, the Netherlands, the U.K., Canada, Austria, Luxembourg, Germany and Honk Kong, but less corrupt than nations such as France, Spain, Japan, Israel, Italy, & Mexico.
Bribe - a payment of money, or something of value, to a party, with the intent to influence, or in exchange for special consideration, that is incompatible with the partys duties of office, position or role (Coarse Bribery that which affects a significant community interest)
Corruption/Bribery
Corruption/Bribery
Corporate purchasing agents are often given "kickbacks" in order to make their purchases from a specific supplier. Tour operators may receive special unpublicized commissions or payment in kind or services, in order to include certain airlines, hotels, restaurants, and stores in their itinerary.
Civil servants in regulatory agencies, usually badly paid relative to the economic power they possess, may find it hard to refuse payment in exchange for waiving the regulations or to tailor specifications and contracts, to suit special groups or firms. (Note: In India most government officials & their families could probably not survive on their salaries alone.)
Corruption/Bribery
Corruption/Bribery
Motivations: Firms, pressure groups and citizens try to maximize their gains by paying bribes, while public officials try to maximize their illegal earnings and politicians their power and wealth.
Corruption/Bribery
Facilitating Payment - customary, local, incentive/grease payments or sweeteners intended to expedite performance. Usually made to low-level public officials to speed things along. Typically involves issuing licenses or permits, clearing goods through customs, etc. (In Italy, called bustarella. In Mexico, la mordida, the bite. In South Africa, dash. In the Middle/Near East, baaksheesh. In Germany, schimengeld. In France, douceur. (Ukraine adoption example)
Corruption/Bribery
Corruption/Bribery
The CEO of Unilever, the food and hygiene giant, insists Unilever does not pay bribes but it does pay "facilitating payments". "There are customary local things," he said. But they are only used where local custom and practice dictate in the 90+ countries in which Unilever operates. The idea is akin to tipping a waiter to get a better table, he said. He insisted that an overall code of conduct governs these matters, and bans the use of payments for unfair advantage although trusted local managers have leeway to interpret the rules according to local habits.
Corruption/Bribery
Corruption/Bribery
How do you distinguish between a bribe and a mere gift? Consider the social situation and context Consider perceptions of donor and recipient important Consider whether or not a quid pro quo is understood to be expected
Ashbourn Corp., is soliciting bids for a 5 year contract for the cleaning of their U.S. facilities, worth $22 million per yr. Pete Stevens, the Sales Manager of Perfect Cleaning Co. is, by coincidence, a former employee of Ashbourn Corp.& an old college buddy of John Joyce, Ashbourn Corp.s Purchasing Director. Pete was confident he could win this contract, after all his company already had a good relationship with Ashbourn Corp. James Parkin, the CEO of Perfect Cleaning Co. & Edgar White, the CEO of Ashbourn Corp. were both Masons and Parkin had sponsored White for membership to an exclusive country club a couple of years earlier.
Gift or Bribe?
Pete phoned John Joyce to find out more about the bidding process. They also talked about old times and how they used to enjoy skiing holidays together "Isn't it about time we went back to Reno" asked Pete, "How about booking a long weekend? I've got plenty of spare Air Miles that you can use? John Joyce was cautious about this suggestion. After all, they are in the middle of a bidding process. But he mentions it to his wife who is really keen about the idea of getting back onto the slopes. "We will have a rule, no mention of work" She says. They book to go on holiday with Peter and his wife in February.
Gift or Bribe?
Christmas is fast approaching. John Joyce, sends Pete Stephens a Christmas card. His company has a policy of not sending gifts. Johns wife receives a package by courier on the 23rd of December from Pete and his wife addressed to the Joyce family. It is an elegant mantel clock. In February, the two couples enjoy a relaxing skiing holiday together. Not a word is spoken about business. Pete even wins $10,000 at the casino after taking some tips from John on winning at Black Jack. Pete buys John a champagne dinner to celebrate.
Gift or Bribe?
Gift of Bribe?
In March the bids are considered, with John Joyce as Chairman of the Selection Committee. The bids are almost identical. None of the companies really stand out on price, quality of service, etc. John tells his CEO that he hesitates to recommend Perfect Cleaning Co. because of his rejuvenated friendship with Pete. However, his CEO tells him, Dont worry about that. I trust you to look after our shareholders' interests - you tell me who you think is best for the job". Perfect Cleaning Co. is awarded the contract. A week later a letter arrives marked "Private & Confidential". John Joyce opens it and a check for $5,000 falls out. A simple note is attached "Thanks for your tip at the Casino you deserve a share of my winnings! Pete.
Corruption/Bribery
Corruption/Bribery
Governments are starting recognize and respond to the damage caused by bribery/corruption Why?
Lost revenues (taxes, duties, etc.)
Corruption/Bribery .
Corruption/Bribery .
Globalization: The borderless global marketplace is bringing national economies and corporations throughout the world into increasingly greater interdependence. High profile cases (e.g. Lockheed/Japan, involved major companies as well as political figures and staggering sums of money. Paid $12.5 million in bribes for $430 million sales contract.)
Corruption/Bribery .
U.S. Foreign Corrupt Practices Act of 1997
Prohibits payments to a foreign official for the purpose of influencing
any act or decision or the omission of an act in violation of the law of that country to obtain or retain business
Implies intent Only liable for actions of 3rd party agents when have reason to know of Does not prohibit facilitating payments (Note that the Justice Dept. only brings on average 1.5 cases per year- Special Report: Bribery and Business, Economist, March 2, 2002, p.64)
At first, the rest of the world looked at it as a sad case of an American moralism or moralistic imperialism
If other nations not follow suit does this = a competitive disadvantage for U.S.?
Corruption/Bribery .
1996 Interamerican Treaty Against Corruption 1997 OECD treaty committing 34 countries to similar restrictions, in effect beginning in 1999.
Corruption/Bribery .
Other important anti-bribery initiatives have recently been launched by the World Bank, the International Monetary Fund, the European Union, the Council of Europe, the Organization of American States, the Pacific Basin Economic Council, the Global Coalition for Africa and the United Nations.
Corruption/Bribery .
Corruption/Bribery .
Ghana, Mozambique, Zambia & South Africa have also launched anti-corruption drives..
In addition, recent steps by President Vladimir Putin to introduce tax reforms and new laws fighting money-laundering in Russia But still high levels of bribery by firms from Russia, China, Taiwan and South Korea, Italy, Hong Kong, Malaysia, Japan, USA and France.
Corruption/Bribery .
Not much being done to address the demand side of bribery (i.e. extortion) RICO (Anti-Racketeering) Statutes in U.S.
Corruption/Bribery .
Corruption/Bribery .
Corruption/Bribery .
The reality is that to maximize opportunities in the growing markets of developing countries, corporations must strive to be seen as honest, long-term, committed guests. Corporations must impress upon host governments, customers, suppliers, and the general public that they seek fair, open, long-term relationships.
Corruption/Bribery .
Coca-Cola trains its staff to learn about the traditions, politics, and values of the people in all of the countries in which it operates. It gives key responsibilities to nationals of these countries and ensures that its image is never that of a ruthless multinational colonialist corporation.
Corruption/Bribery .
Coca-Cola plays an active role in most of the countries in which it works, supporting education and the arts and social services in a long-term and genuine way. GE & Texaco also have developed a reputation of refusing to pay bribes.
Corruption/Bribery .
Corruption/Bribery
Caux Roundtable Anti-Corruption Principles
1. Disclose publicly and make widely known its endorsement of the Anti-Corruption Measures. 2. Establish a clearly articulated written policy prohibiting any of the firms employees from paying or receiving bribes and kickbacks. 3. Implement the policy with due care and take appropriate disciplinary action against any employee discovered to have made payments in violation of the policy. 4. Provide training for employees to carry out the policy, and provide continuing support, such as help lines, to assist employees to act in compliance with the firms policy.
Corruption/Bribery
Caux Roundtable Anti-Corruption Principles
5. Record all transactions fully and fairly, in accordance with clearly stated record-keeping procedures and accounting controls, and conduct internal audits to assure that all payments made are proper. 6. Report annually on the firms bribery and corruption policy, along with a description of the firms experiences implementing and enforcing the policy. 7. Have the annual report in step six above audited either by an independent financial auditor or an independent social auditor, or both. 8. Require all agents of the firm to affirm that they have neither made nor will make any improper payments in any business venture or contract to which the firm is a party.
Corruption/Bribery
Caux Roundtable Anti-Corruption Principles
9. Require all suppliers of the firm to affirm that they have neither made nor will make any improper payments in any business venture or contract to which the firm is a party. 10. Establish a monitoring and auditing system to detect any improper payments made by the firms employees and agents. 11. Report publicly any solicitations for payments whenever such reporting will not lead to harsh reprisals of material consequences to the company or its employees (or report privately to a monitoring organization, such as Transparency International or a social auditor). 12. Establish a system to allow any employee or agent of the firm to report any improper payment without fear of retribution for their disclosures.