Business Ethics & Professional Responsibility

Unethical Behavior
‡ Unethical behavior in business is not just a recent phenomenon
± In the sixth century, B.C., the philosopher Anacharsis once said, ³The market is a place set apart where men may deceive one another.´

Unethical Behavior
The Old Testament also talks about ³false balances´ (Amos 8:5; Hosea 12:7; Micah 6:11) despite God¶s command against such (Lev. 19:36; Ezek. 45:10)

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

‡ Conflicting duties, loyalties or interests create moral dilemmas requiring decisions to be made

‡ Ethical decision-making involves the decisionability to discern right from wrong along with the commitment to do what is right.

‡ Some factors affecting decision-making (from Integrity decisionManagement, Management, by D. T. LeClair et al, Univ. of Tampa Press, 1998): ± Issue Intensity ‡ (i.e. how important does the decision-maker decisionperceive the issue to be? ‡ Can be influenced by company/management emphasis) ± Decision-Maker¶s Personal Moral Philosophy Decision± Decision-Maker¶s Stage of Moral Development Decision± Organizational Culture

Taking Sides. weigh & prioritize all the affected parties (i. stakeholders) (see Johnson & Johnson Credo.DecisionDecision-Making ‡ 8 Steps to Sound. p.e. ± 2. Identify various courses of action (dare to think creatively) ± 6. Identify the possible/probable consequences of same (both short & long-term) long± 7.25) ± 4. Consider the practicality of same. viewpoints) ± 3. ± 5. ± 8. Gather as many relevant & material facts as circumstances permit. . Ethical Decision-Making Decision± 1. Identify the relevant ethical issues (consider alt. Consider the dictates and impacts upon your character & integrity. Identify. Identify your existing commitments/obligations.

knew I was making this decision? .DecisionDecision-Making ‡ Disclosure Test: How comfortable Test: would I feel if others. whose opinion of me I value.

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

2003. USA Today. March 25.´ Whistleblower Sherron Watkins describing Andrew Fastow. p.By People In Business ‡ The moral foundation of the decisiondecision-maker matters ‡ ³He doesn¶t have a moral compass. (Watkins gets frank (Watkins about days at Enron. former CFO of Enron. Edward Enron. Iwata. 3B.) .

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

The word ³morals´ is derived from the Latin mores (character. ‡ Morals: a system or set of beliefs or principles. ethos (character or custom). to be of great significance. representing deeply held Values: generalized behaviors.Ethics ‡ Values: guiding constructs or ideas. which are considered by the holder. . The word "ethics" is derived from the Greek word. based on values. custom or habit) ‡ Ethics: the study and assessment of morals. 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. Morals: which constitute an individual or group¶s perception of human duty.

.Morality ‡ ³The most important human endeavor is the striving for morality in our actions. Our inner balance and even our very existence depend on it.Albert Einstein (in a letter 11/20/50) . Only morality in our actions can give beauty and dignity to life.

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

There are universally valid moral principles. Forude . manners change.´ ± James A.Absolutism vs. see also Rom. 13:8) ‡ ³History is a voice forever sounding across the centuries the laws of the right and wrong. (³« only by obedience to universal moral norms does man find full confirmation of his personal uniqueness and the possibility of authentic moral growth. creeds rise and fall. Opinions alter.Pope John Paul II. but the moral law is written on the tablets of eternity.´ . Relativism ‡ Ethical Absolutism: What is right or wrong is consistent in all places or circumstances. 12:2. Heb.

There are no universally valid moral principles. 1 John 1:8) 5:66:14- . 2:13. 1 Cor. (Related Biblical reference "everyone did what was right in his own eyes" (Deut. Relativism ‡ Ethical Relativism (also called ³Situational Ethics´): Ethics´): What is right or wrong varies according to the individual/society/culture or set of circumstances. 12:8. Jer. 5:6-7. 2 Cor.Absolutism vs. 6:14-15. Rom. Judges 17:6. 5:20 & 24. 21:25) (see also Isa. 1:181:18-32.

Popkin describes relativism in his article on the subject in The Encyclopedia of Religion.). Vol. Reply to Judge Richard A. Posner on the Inseparability of Law and Morality.H. B. and « each man could be his own measure « [Relativism] urges suspension of judgment about right and wrong. based on some overall criterion but are to be assessed within the context in which they occur. or good or bad. 3) . evaluated relative to the societies or cultures in which they appear and are not to be judged true or false. Thus. ³views are to be Religion. Rutgers Journal of Law and Religion.´ (Ellis Washington. may not be considered so by others « there are no absolute standards « ³Man is the measure of all things´ (quoting the Greek philosopher Protagoras (481(481420.Relativism ‡ As R. what is right or good or true to one person or group.C. Morality.

‡ As Cardinal Joseph Ratzinger said, Relativism is ³presented 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
‡ ³The 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).

Absolutism vs. Relativism
According to a recent poll of college seniors, 73% agreed with the statement that ³What is right or wrong depends on differences in individual values and cultural diversity.´ Only 25% agreed with the statement that ³There are clear and uniform standards of right and wrong by which everyone should be judged."

Problems with 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. ± But, as Cardinal Ratzinger said, ³There are injustices that will never turn into just things (for example, killing an innocent person, denying an individual or groups the right to their dignity or to life corresponding to that dignity) while, on the other hand, there are just things that can never be unjust.´ - Address to Congregation for the Doctrine of Faith, Guadalajara, Mexico, May 1996

Problems with 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. wrong.
‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ³In 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 ² and by that time no one was left to speak up.´
± - German anti-Nazi activist, Pastor Martin Niemöller anti-

Problems with Relativism
Relativists speak in terms that ³soften´ 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 wellwords 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 Co-

Problems with Relativism
Relativists never need bother to examine why something is moral or immoral, they merely accept/tolerate alternative determinations, so that none are held to account
³Over the years I have found that those who call themselves atheists actually have a strong sense of the absolute truth they know exists. They just don¶t want to acknowledge that it¶s true - because if they did, they would have to change the way they live. They flee on moral grounds; refusing to submit themselves, they exchange the truth for a lie.´ Chuck Colson -Being the Body, 2003. Body,

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

³If you 8:31continue in my word. .Problems with Relativism ‡ Jesus said in John 8:31-32. people cannot experience ultimate and true freedom unless and until they come to terms with the absolute truth revealed by God.´ It would seem follow then that. then are you my disciples indeed. and the truth shall make you free. And you shall know the truth.

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

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

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

Values ³Without commonly shared and widely entrenched moral values and obligations.(Vaclav Havel Politics. nor even the market economy will function properly. morality. Meditations) . nor democratic government. neither the law. and Civility. Summer Civility.´.´properly.

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

Values ‡ ‡ ‡ ‡ ‡ ‡ ‡ Honesty Respect Responsibility Fairness Compassion Perseverance Courage .

Being straightforward. Jon Entine) . ‡ Transparency . free of fraud. to provide clear.To be open.Honesty ‡ Honesty . honest and available. and understandable information (e.g.g. deception or misrepresentation. accurate.Values . sincere. 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. truthful.

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

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

. In his zeal to sell merchandise. supplying a burgeoning nation with innovative products and building a business that gave employment to hundreds of thousands of people. By Ken Shelton.´ . "Honesty is the best policy. Work. ed. he was fond of saying. Sears occasionally would get carried away with catalogue descriptions.Honesty ‡ Richard Sears²founder of Sears Sears² Roebuck and Company²started Company² the modern mail order industry. In later years.Values . I know because I've tried it both ways. praising products far beyond the literal truth.from Integrity at Work. But Sears learned his lesson. This in turn led to returned merchandise and reduced profits.

´ .Charles-Maurice de CharlesTalleyrand . Be honest and transparent anyway.Values .Honesty ‡ ³Honesty and transparency make you vulnerable.Mother Teresa ‡ Contra: "Speech was given to man to disguise his thoughts." .

Deuteronomy 25:13±16. 23:1±3. 11:1. 35-36. 6:1612:17Ephesians 4:25) . Leviticus 19:11± 23:1± 19:11± 12.Honesty ‡ Some scriptural references regarding honesty in business: ± (Exodus 22:10. 12:17-19 & 22.Values . 3525:13± Proverbs 6:16-19.

10th Edition) ‡ Should respect be given or must respect be earned? .Respect ‡ Respect: To give particular attention to.Values . show consideration for. or hold in high or special regard (Merriam-Webster's Online (MerriamDictionary.

to use him as a mere means for some external purpose.´ . Prussian geographer and philosopher (1724(17241804) .Immanuel Kant.Respect ‡ ³Every 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.Values .

In this way. persons must be conceived of. with an integrated bodily and spiritual nature. and in our ultimate destiny of union with God. In Catholic moral thought.from the Ascension Health Code of Ethics . in Christ¶s redemption Dei.´ . While providing the foundation for many normative claims.Values . 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. human dignity is the conceptual basis for human rights. the source of human dignity is rooted in the concept of Imago Dei. not in overly-individualistic terms. 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. but overlyas being inherently connected to the rest of society. because there is a social or communal dimension to human dignity itself. From the Catholic perspective (among other Christian perspectives).Respect ‡ Human Dignity is ³the intrinsic worth that inheres in every human being.

Respect ‡ Civilizations should be measured by "the degree of diversity attained and the degree of unity retained.W.Values . English poet (1907-1973) (1907‡ ³Never look down on anybody unless you're helping him up.´ .H.´ . Auden. American political activist and preacher .Jesse Jackson.

Respect .Tolerance? ‡ What about tolerance? .Values .

Christian Science Monitor. Monitor. by Jane Lampman. Kevin Phillips.Rev. August 1. director of the Business Leadership and Spirituality Network (BLSN) quoted in ³Competing Values´.Respect . 2002.´ . .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.Values .

2:20 ‡ By contrast. and that where it is used it is generally used in a negative sense? For example: ± ³Notwithstanding I have a few things against thee. because you tolerate that woman Jezebel. and to eat things sacrificed unto idols.´ Rev. agapeo nearly 150 times in a positive sense. eao) is rarely eao) used in the New Testament. who calls herself a prophetess.Values .Respect . ± So what¶s the difference between love and tolerance? . to teach and to seduce my servants to commit fornication.Tolerance? ‡ Did you know that the term ³ tolerance´ (or in some translations ³sufferance´ Gk. the New Testament uses the term ³ love´ Gk.

It is given unconditionally welland unselfishly.e. and concern for. 12:9) gives respect and demonstrates compassion. loving person. honestly (Rom. from the Gk. or making allowances for. Would you rather be loved or tolerated? . agapeo. agapeo. It involves a clear determination of will and judgment (i. one's own. Love: In the Christian context.Tolerance? Tolerance: Demonstrating sympathy for. love often requires courage. A choice). the well-being of another.. an active and beneficent interest in. The source of such love courage.Respect . Demonstrating such compassion. a responsible choice). comes ³from above´ (James 1:17). or conflicting with.Values . beliefs or practices differing from. indulging.

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

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

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. and his employees have responded in kind. He has been observed lugging baggage and greeting customers in an Easter Bunny costume.Compassion ³Southwest Airlines CEO Herb Kelleher has openly demonstrated a willingness to go the extra mile for Southwest employees.Values . Charles C. . not just a boss.from The Leadership Wisdom of Jesus.´ .000 ad in USA Today recognizing him on Bosses Day. Perhaps the most dramatic example of their commitment to their beloved leader occurred when they pooled their own money and ran a $60. In the ad they thanked Kelleher for being a friend. Manz. 1998. He has repeatedly demonstrated a truly exceptional level of caring and compassion for his employees. Jesus.

American entrepreneur and philosopher (founder of Roycroft) (1856-1915) (1856- .Stephen Grellet. Let me not defer it.Values .Compassion ‡ ³I expect to pass through the world but once. French/American religious leader (1773-1855) (1773‡ "Men are only great as they are kind.´ . let me do it now. for I shall not pass this way again.´ . or any kindness I can show to any creature.Elbert Hubbard. Any good therefore that I can do.

´ .Values .´essayist & editor (1912-1990) (1912- . no matter how small. American poet (1826(18261893) ‡ "The individual is capable of both great compassion and great indifference. is ever wasted. kindle fires to warm it.Lucy Larcom.C.´.Aesop.Norman Cousins. 6th Century B.Compassion ‡ "No act of kindness. He has it within his means to nourish the former and outgrow the latter. Writer of Greek fables ‡ "If the world seems cold to you. American latter." .

.Values .Nina Rosenstand summarizing the view of David Taylor in Good and Evil. German philosopher (1788-1860) (1788‡ All we need in order to be moral human beings is compassion.Compassion ‡ "There are two ways of spreading light: to be the candle or the mirror that reflects it.´ . . McGrawMcGraw-Hill. Ethics. American novelist (1862-1937) (1862‡ ³Compassion is the basis of morality.Arthur Schopenhauer.Edith Wharton. Moral of the Story: An Introduction to Ethics.'' . 2004. from The Evil.

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

such as the protection of confidences. (e. Business Week. 2003.g. Implies fidelity to promises and other commitments and not making promises that cannot be kept. ± ³What You Don¶t Know About Dell´. Week. such as committing to unrealistic delivery dates. 30. . at Dell there¶s no µµThe dog ate my homework. Nov.79) Involves a commitment to competent quality performance. p. Also calls for acknowledgment of implicit commitments.´ Dell ruthlessly exposes weak spots during grueling quarterly reviews and execs know they had better fix the problem before the next meeting.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.

but still. I am one.´ . American clergyman and writer (1822(1822-1909) ‡ ³The question for each man to settle is not what he would do if he had the means.Values . but what he will do with the things he has.Responsibility ‡ ³I am only one. I will not refuse to do what I can.Hamilton Wright Mabee . influence and educational advantages. I cannot do everything but I can do something. And. because I cannot do everything. time.Edward Everett Hale.´ .

´ .Booker T.´ .Responsibility ‡ ³Any man¶s life will be filled with constant and unexpected encouragement if he makes up his mind to do his level best each day. but it is my chief duty to accomplish small tasks as if they were great and noble. public speaker and author (1880(18801968) .Values . American educator (1856-1915) (1856- ‡ ³I long to accomplish some great and noble task.Helen Keller. American social activist. Washington.

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. unbiased. so as to achieve a proper balance of conflicting interests. impartial. Involves a elimination (or at least a minimalization) of one's own feelings. prejudices and desires. .Fairness ‡ Fair: just. objective. Implies an equitable distribution of burdens and benefits.Values . had they been given an opportunity to accept or reject them beforehand. equitable.

To others. righteous action. justice is about conformity to truth. InterVarsity Press.´ . in The Case of the Red Circle.Gary Haugen.Fairness ‡ Justice: demonstrating fairness. ± ³The law is something we must live with. equity.Values . 1999.´ . ³justice occurs on earth when power and authority between people are exercised in conformity with God¶s standards of moral excellence. its about conformity to law ‡ But law and justice are 2 different concepts. Jr. not a court of justice. .Sherlock Holmes. young man. Justice is somewhat harder to come by. Justice: impartiality. ± ³This is a court of law. in The Good News About Injustice. ‡ To some.´ ~Oliver Wendell Holmes.

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

Perseverance ‡ ³Nothing in the world can take the place of perseverance.Calvin Coolidge .Values .´ . unrewarded genius is almost a proverb. Education will not. nothing is more common than unsuccessful men with talent. Genius will not. Persistence and determination alone are omnipotent. the world is full of educated derelicts. Talent will not.

The Koran . 1:2do not fall from steadfastness. 2 Tim. perseverance must finish its work. 5:21. Hos. Heb. Phil. 10:23. 6:11±12. finish the course. 2 Pet. go on enduring. Heb. 13:5. 1 Tim. 2 Thes. make fast your hold to the end.Values . do not give up in doing what is fine.Perseverance ‡ Some Biblical References: Job 17:9a. Gal. John 8:318:31-32. 2:15±17. 2:12. 2 Cor. hold fast to what is fine. maintain your hold. 4:1. 2:1. 1 Thes. 6:9. Gal. 3:17. 12:6b. 2 Tim. 4:7±8. you have need of endurance. hold fast 35± to the declaration of our hope. 2 Tim. 5:1± stand fast. 5:1±4. 2:15± stand firm. fight 4:7± the fine fight. stand firm. ‡ God helps those who persevere. pay attention to what you have heard that you not drift away. the righteous one holds fast to his way. keep proving yourself. 3:14. 35±36. Phil. striving side by side. James 1:2-4. 1:27. stand firm. continue in the things you have learned. pursue 6:11± endurance. . 3:14. endure to the end. Heb.

Values ‡ Which of the core values is the most important? .

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. (³The rising tide won't lift this economy: Unless we're willing to confront the trust problem we've helped to create´. Seattle Post-Intelligencer.Values .) . Guest Columnist. June 16. Post2003. Bill Grace. Founder & Executive Director. Seattle's Center for Ethical Leadership.

Samuel Johnson ‡ ³Courage is the ladder on which all the other virtues mount. capable of conquering whatever threatens the attainment of the highest good. but the form of every virtue at the testing point. unless a man has that virtue. 1979 ‡ ³Courage is the footstool of the virtues.Clare Booth Luce (1903 .1987).Values .´ . Lewis ‡ ³Courage is strength of mind. in Reader's Digest. upon which they stand.´ St.Courage ‡ ³Courage is the greatest of all virtues.C.´ . he has no security for preserving any other. because. Thomas Aquinas .´ .Robert Louis Stevenson ‡ ³Courage is not simply one of the virtues.´ .S.

Values - Courage
‡ ³Courage 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). ‡ ³Courage is being scared to death . . . and saddling up anyway.´ - John Wayne

Values - Courage
‡ ³Whenever you see a successful business, someone once made a courageous decision.´ - Peter Drucker ‡ ³We must constantly build dykes of courage to hold back the flood of fear.´ Martin Luther King, Jr. ‡ ³One 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
‡ ³The 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, cur, which means heart. Courage literally means to ³take 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. well-

Values - Universal Rule?
‡ The ³Golden Rule´ , i.e. to ³do 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 & Levitcus 19:18, Judaism, Matthew 7:12, Christianity, Udana-Varga Udana5:18, Buddhism, Analects 15:23, Confucianism, Number 13 of Imam "Al-Nawawi's Forty Hadiths.", "AlIslam)

‡ 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 ³values´
± A corporation is said to manifest its ³values´ in its ³corporate 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 ³how 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 ² and.J. increasingly. S. as quoted in Everyday Ethics. ‡ Quote from The Leadership Compass. 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. Markkula Center for Applied Ethics. John Wilcox and Susan Compass. contact. by Thomas Shanks. Ebbs.

Corporate Culture
‡ "The first step in the evolution of ethics is a sense of solidarity with other human beings." ² Albert
Schweitzer, early 20th20thcentury German Nobel Peace Prize-winning mission Prizedoctor 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, wrong, but not wanting to stand out. - ³Opinion and Social
Pressure´, Scientific American, Nov. 1955, 31-35. American, 31-

Corporate Culture
‡ The Pressure to Conform
± ³Culture 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. ± ³Postcards from an Ethical Wasteland´, CIO, June 1, 2003 CIO,

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. - ³Institutional Ethics: An Oxymoron´, By Joe E. Trull, Editor, Christian Ethics Today, Journal of Christian Ethics, Issue 035 Volume 7 No 4 Ethics, 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 culture. Paine, Harvard Business School

Corporate Culture
‡ ³A 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 61code 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? .

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

According to Ethical or Moral. Values. Principles or Standards ‡ Learned Where? .

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

over the same time period. will have spent the television. ‡ American children will take in 63. . by the age of 65. hours. internet.) input between the iages of 5 and 17.According to Ethical or Moral. Principles or Standards ‡ The average American. Values. over the same number of years. etc. the average weekly churchchurch-going American will have spent only 8 months of their life receiving spiritual instruction. ‡ By contrast. instruction. i-pods.000 hours of ³media´ (television. ‡ By contrast. that's 600 hours. radio. if they go to church once a week for an hour. equivalent of 15 years of their life watching television.

³Would you lie for a dime?´ The young man shot back. what kind of man do you think I am?´ The interviewer responded. would you lie for $1M?´ The young man thought for a moment and said. and no one was hurt? Sure. ³If no one would ever find out. Principles or Standards ‡ In the middle of an interview for acceptance to a prestigious Ivy League school back east.According to Ethical or Moral. and no one got hurt. I am just trying to determine your price. ³No way.´ . ³I have already determined that. ³If no one found out. Values. the interviewer asked his ³sure of himself´ candidate. I think I would!´ The interviewer then asked.

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

Wilson and Richard J. they discovered that the cause of crime cannot be traced to environment. Stanton Samenow. crime is the result of individuals making. Principles or Standards ‡ In the 1950s a psychologist. Harvard professors James Q. They determined that the cause of crime is a lack of proper moral training among young people during the morally formative years. wrong moral choices. They began a 1717-year study involving thousands of hours of clinical testing of 250 inmates here in the District of Columbia. Herrnstein came to similar conclusions in their book Crime and Human Nature.According to Ethical or Moral." In 1987. To their astonishment. Values. sharing the conventional wisdom that crime is caused by environment. In their 1977 work The Criminal Personality. they concluded that the answer to crime is a "conversion of the wrongwrongdoer to a more responsible lifestyle. as they put it. Samuel Yochelson. set out to prove their point. Instead. particularly ages 1 to 6. . or oppression. poverty. and a psychiatrist.

S. 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. Values. 25% said they were ³not sure´ and only 42% said they would not. .According to Ethical or Moral. Managing Partner of Deloitte & Touche.´ said Barry Salzberg. according to a new Junior Achievement/Harris Interactive Poll of 624 teens between the ages of 13 and 18. U. ³These results confirm our belief that ethics education must begin in elementary school.

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 ³ poor. as well as knowledge and arts. nasty. . lacking in industry and commerce. brutish and short´. and that its people would live in a constant state of fear and insecurity.

´ Edmund Burke (1774) .According Moral Principles or Standards ‡ ³Men qualify for freedom in exact proportion to their disposition to put moral chains on their own appetites. the more of it there must be without. Society cannot exist unless a controlling power is put somewhere on will and appetite. and the less of it there is within.

According to Moral Principles or Standards ³The institutions of our society are founded on the belief that there is an authority higher than the authority of the State. Maryland. Douglas.´ ± Justice William O. that the individual possesses rights. 366 U. conferred by the Creator. Maryland.S. that there is a moral law which the state is powerless to alter. 420 (1961) . in McGowan v. which government must respect « And the body of the Constitution as well as the Bill of Rights enshrined those principles.

´ ² Bertrand Russell. without personal morality their survival has no value. 20th20thcentury British mathematician and philosopher .According to Moral Principles or Standards ± ³Without civic morality communities perish.

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

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

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

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

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

human dignity and moral rights of all persons." ‡ De-emphasizes individual rights De- . Outcome-Based Ethics Outcome± Duty (Deontology) ‡ Duty is an act done simply for the sake of what is right.g.Ethics DutyDuty-Based v. Bentham & Mill¶s Utilitarianism ± "Of any two actions. the most ethical one is that which will produce the greatest balance of benefits over harms.g." ‡ Places High Value on Individual Rights ± Outcome (Consequentialism) ‡ Ethical if best outcome for the majority ‡ Involves cost-benefit analysis cost‡ e. Kant¶s Categorical Imperative ± "Everyone is obligated to act only in ways that respect the intrinsic value. ‡ Duty is determined by ³revealed truths´ and involves universal principles ‡ Often religion-based religion‡ e.

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

trustworthy. word and deed. but by living according to them. immovable. wholeness. Integrity is demonstrated by not only espousing your values. accountable. completeness. A key to maintaining integrity is ³counting the cost´ before committing yourself. . Integrity describes both who you are and what you do. meaning integritas. consistent in both heart and action. To stand undivided. committed and consistent. without compromise. To courageously hold to what one believes is right and true.Integrity ‡ Integrity: from the Latin integritas. Involves the maintenance of virtue and the pursuit of moral excellence. or purity. People of integrity are conscientious.

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

he says.´ Integrity. is a quality just as essential to human well-being as is wellthe pursuit of peace and justice. justice .´ Because of this.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. says Kushner. united within themselves. they are ³persons of integrity. their internal conflicts ended. people who are ³whole.

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

9:4) ‡ Contrast: Ananias & Sapphira. 27:5) ± Daniel. Meshach & Abednego (Daniel Chapters 3 & 6) ± David (Ps. Gen. 7:8) ± Solomon (1 Kgs. 39:1-12 39:1± Jacob/Israel (Gen 32:29) known as a ³simple man´ (tam. Gen 25:27) that is to say. Shadrach. Acts 5:1-11 and Acts 20:165:120:1636 . see in particular description of Job at 2:3. that ³his mouth was like his heart.Integrity ‡ Some Biblical Examples of Integrity: ± Joseph.´ ± Job (Book of Job.

integrity.4.´ Leadership and Change: Becoming the Best: What You Can Learn from the 25 Most Influential Leaders of Our Times . In the aftermath of scandals that have rocked U. 2004 Jan. it is difficult to overemphasize the importance of ethics as a factor in leadership.28- .28-Feb.Integrity ‡ According to Michael Useem. Warren Buffett's ³influence derives ³influence from his moral stature and integrity. Director of the Center for Leadership and Change Management. Jan.S. companies in the past few years. Knowledge @ Wharton Newsletter.

.Character ‡ Character: The notable/conspicuous/ Character: 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. those who cheer today may curse tomorrow.character. riches take wings. only one thing endures -. popularity an accident.´ .

‡ "What you are stands over you... and thunders so that I cannot hear what you say to the contrary.µ Ralph Waldo Emerson

‡ 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?

‡ 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 ³deliver the goods´ professionally. Under this way of thinking even serious moral failures may be excused. Some refer to this kind of thinking as ³compartmentalization.´ (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: ³Find God in all things´, St. Ignatius Loyola.

‡ 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.

‡ 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 company·s long-standing ´no commentµ 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 CEO·s Journey Through Business and Life, Randall and Todd Tobias, Indiana University Press)

‡ 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.

‡ 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.µ

Ronald F. a professor of religion and society at Harvard Divinity School ² Wisdom is know what to do next.1931). David Starr Jordan (1851 . virtue is doing it.Virtue ‡ Virtue:The quality of doing what is right and avoiding what is wrong. American naturalist . Thiemann.µ . ² "Virtue develops from a habitual commitment to pursue the good.

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

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

Role of Leadership in Developing a Culture of Integrity ‡ A leader·s integrity is probably the single most important factor in an organization·s ability to develop a culture of integrity ‡ Numerous business leaders have described the development and maintenance of a culture of integrity as the very purpose of leadership? .

The Role of Leadership in Developing a Culture of Integrity ‡ Edgar Schein argues that leaders shape culture through what they notice.g. 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. At Enron and Worldcom. measure. reward and dislike. ² e. .

" . 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 ‡ President George W.

(Reports:Ebbers knew of ´gimmickryµ.S.1) .S. He also made numerous. history. p.The Role of Leadership in Developing a Culture of Integrity ‡ A report by former U. June 10. Ebbers resisted efforts to establish a company code of conduct calling it a ´colossal waste of timeµ. often highly emotional demands for ´resultsµ. Attorney General Richard Thornburg explained how the corporate culture created by CEO Bernie Ebbers and CFO Scott Sullivan fostered an environment that led to the largest ever bankruptcy in U. Matthew Barakat. Raleigh News & Observer. 2003.

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

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.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. .

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

Robert W. University of Georgia. . Scherer Chair of Management in the Terry College of Business. Top managers have the responsibility to "set the moral tone. Athens-Banner Herald.Role of Leadership in Developing a Culture of Integrity ‡ ´Business ethics is integral to effective leadership. It is not something that can be delegated to others or to specialists like ethics officers." Archie B. Carroll. 12/16/03. though the latter help.

discusses how to develop 5 essential dimensions of the authentic leader: ² ² ² ² ² 1) Purpose 2) Values 3) Heart 4) Relationships 5) Self-discipline. CEO of Medtronic.Role of Leadership in Developing a Culture of Integrity ‡ In his new book. . Bill George. "Authentic Leadership" (2003).

400 workers.5 million per week while the factories were being rebuilt. he continued paying them for 90 days at a cost of $1. Demonstrating an all-too-uncommon loyalty to his 2.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 130year-old textile company. . He also gave generously to support charities that helped the families of nine critically injured workers who have since recovered.

It would have been unconscionable to put 3. both blue-collar and white-collarµ. I have a responsibility to the worker. Feuerstein added. not an expense. his voice taking an edge of steely conviction.000 people on the streets and deliver a death blow to the cities of Lawrence and Methuen. .Role of Leadership in Developing a Culture of Integrity ‡ ‡ Sense of Responsibility to a Broad Range of Stakeholders Feuerstein spurned the recent rush to downsizing stating that. ¶I have an equal responsibility to the community. ´The fundamental difference is that I consider our workers an asset.

.Role of Leadership in Developing a Culture of Integrity ‡ Compassion: Feuerstein arranged Heart-bypass operations for several workers that could not afford them and he provided free soft drinks and extra breaks for employees when the summer heat drove temperatures to more than 90 degrees on the manufacturing lines.

we won't have our cities in another 20 to 30 years. In fact." . "Because if we don't.50 an hour. Malden Mills' new $70 million plant was situated in the heart of a ghetto in Lawrence.Role of Leadership in Developing a Culture of Integrity ‡ While many other American mill owners moved their operations to foreign countries. MA where he paid his workers $12." he said. where employees earn as little as $1 or $2 an hour. we won't be the leader the financial world. And if we don't have our major cities. Feuerstein said he was committed to keeping his business in Lawrence. "I think it's the duty of government and industry to [remain committed to urban America]. one of the state's poorest cities.

Role of Leadership in Developing a Culture of Integrity ‡ Respect: Employer/Employee Loyalty That Goes Both Ways How many corporate CEOs in the downsize-crazed companies today could ask their employees to double production in a few weeks given no changes in the current plant. much less given temporary plants set up in old warehouses? How many of your employees would work 25 hours a day because the company needed it to fill outstanding orders? .

Role of Leadership in Developing a Culture of Integrity ‡ More than a year after the fire." Feuerstein said he didn't completely comprehend the meaning of the worker's comments until. . after two months' time.000 yards of fabric a week . He told of one employee who thanked him for his support after the fire and said. production in one undamaged portion of the mill was boosted to 200. Feuerstein said he was as moved by his workers' gratitude as they were by his generosity. "We're going to pay you back tenfold.far beyond its capacity before the fire.

Role of Leadership in Developing a Culture of Integrity ‡ Customer Loyalty also goes both ways: Feuerstein gave some young companies credit early on to help them grow and Feuerstein made sure the company kept its customers supplied even in difficult times. These customers returned the favor by remaining loyal customers even when Malden Mills was nearly destroyed. .

Actions Speak Louder Than Words .Role of Leadership in Developing a Culture of Integrity ‡ Integrity: The real test of leadership is maintaining convictions during hard times. The most important communication is not what you say but what you do.

His message was "Let the rich man not praise himself.µ . 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 ‡ Spiritual Foundation: Feuerstein recently concluded a speech quoting from Jeremiah 9:22-23. in flawless Hebrew. by demonstrating the will of God. justice and righteousness in his actions." but rather. then giving the English translation. show kindness.

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 personµ and "Not all who increase their wealth are wise.µ .

it was. it allowed them to schedule work hours around religious observances. in part. Feuerstein related. "My grandfather felt that by owning a textile mill it would not only enable him to bring his children into the business." Since the family worked together. was one of the early pioneers of the Jewish Day School movement and a leader with the Union of Orthodox Jewish Congregations. his grandfather's devotion to Judaism that led him to found Malden Mills at the turn of the century when he emigrated from Hungary. In fact.Spiritual Foundation ‡ Feuerstein's father. Samuel.µ . but would provide the opportunity to observe the Sabbath.

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." he explained. "Judaism gives you a complete and thorough ethical framework within which you and your family can live. .

Mass. are ardent supporters of their temple. "It's a positive impetus to make life meaningful every day. who converted to Judaism nine years ago.Spiritual Foundation ‡ Feuerstein and his wife. her religion is a way "to focus on the here and now. Young Israel of Brookline. Louise.µ . their synagogue suffered a fire a year before the mill burned down and they played a role in helping to rebuild it. For Louise. Coincidentally." She adds. not just concentrate on what's down the road.

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). and he refers to it as "exercise for my mind. each day he alternates between doing an hour of running and an hour of calisthenics." Also.Spiritual Foundation ‡ Spiritual study remains an important part of Aaron Feuerstein's life. . During that time.

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

adults have a biblical worldview as the basis of their decision-making.Y. only 4 % of U. N. Among the most prevalent alternative worldviews was postmodernism. "Although most people own a Bible and know some of its content. This is not the view in most developed countries. Kristof. 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. in France. For example.S. (Nicholas D. according to a new study by Barna Research Group. 58% of Americans said yes. . only 13% said yes. dominant in the two youngest generations.Spiritual Foundation ‡ In a recent poll. Times} ‡ However." said researcher George Barna.

" . essentially depend upon piety. and the good order and preservation of civil government. V. religion.The Massachusetts Constitution of 1780. Sec. 2 . and morality.Spiritual Foundation ‡ ´the happiness of a people. Ch.

morality. 1789) . 1 Stat. and knowledge. schools and the means of education shall forever be encouraged. 3. 51. 1787. enacted by the Continental Congress in 1787.Northwest Ordinance. Art. a (July 13. re-enacted Aug. being necessary to good government and the happiness of mankind. 53 n. 7.Spiritual Foundation ‡ "Religion.´ .

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

. . 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 ‡ ³[T]he most important of all lessons [from the Scriptures] is the denunciation of ruin to every State that rejects the precepts of religion. .

. . . If men are so wicked with religion. but to burn this piece before it is seen by any other person. But were you to succeed. . to fear his displeasure.Spiritual Foundation ‡ ³I have read your manuscript with some attention. do you imagine any good would be done by it? . He that spits into the wind. therefore. . I would advise you. the consequence of printing this piece will be a great deal of odium [hate] drawn upon yourself. mischief to you.Benjamin Franklin¶s 1790 reply to Thomas Paine regarding Paine¶s request of Franklin to review his new book. to support their virtue. The Age of Reason: .´ . [T]hink how great a portion of mankind consists of weak and ignorant men and women and of inexperienced. . and may favor particular persons. For without the belief of a Providence that takes cognizance of. guards. . . and no benefit to others. . and guides. inconsiderate youth of both sexes who have need of the motives of religion to restrain them from vice. there is no motive to worship a Deity. though you seem to desire it. what would they be if without it. spits in his own face. though you allow a general Providence. not to attempt unchaining the tiger. or to pray for his protection. I will not enter into any discussion of your principles. By the argument it contains against a particular Providence [Christianity]. you strike at the foundation of all religion. At present I shall only give you my opinion that . .

Whatever makes men good Christians. . 1820 at Plymouth. . Mass. . Moral habits. they believed. inspires respect for law and order.Spiritual Foundation ‡ " « our ancestors established their system of government on morality and religious sentiment. . and gives strength to the whole social fabric. . nor any government be secure which is not supported by moral habits. December 22.Daniel Webster. makes them good citizens " . ³[T]he cultivation of the religious sentiment represses licentiousness . . cannot safely be trusted on any other foundation than religious principle.

September 17. George Washington·s Farewell Address.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. 1796 .

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

Spiritual Foundation ‡ ´If we are to go forward.µ Martin Luther King. Jr.that all reality hinges on the moral foundations and that all reality has spiritual control. we must go back and rediscover those precious values . .

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

Spiritual Foundation ‡ ´[T]he loss of God leaves man at the naked mercy of his fellows.µ ² John Montgomery. 55 (1975) . The Law Above the Law. where might makes right.

one of the two young killers in Littleton. had no inherent dignity. other human beings were not created in God's image. "Without God. it goes. I am the law"? or. as Fyodor Dostoevsky wrote.The Necessity of Truth by Senator Rick Santorum. who said. August 6. Heritage Lecture #643. 1999 ‡ . Colorado. under your particular understanding of the universe. "My belief is that if I say something. everything is permitted"?µ . 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.Spiritual Foundation ‡ ´What if.

boasts a full-time corporate chaplain who leads voluntary prayer sessions and Bible study groups. . the top replacementbattery manufacturer in North America. ² IBM chairman Louis Gerstner.. 65 % attend church or synagogue regularly--compared to 40 % of the general population. attends mass daily. ² Dallas-based Interstate Battery company. Jr. a graduate of an all-boys Catholic high school.Spiritual Foundation ‡ In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that: ² Among leaders of the nation's top 100 businesses.

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

.Spiritual Foundation ‡ In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that: ² Allou Health and Beauty Care. bases its business operations principles enunciated in the Jewish Talmud. . which boasts one of the highest profit margins in the industry. Inc.

² 94. ² 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 ‡ According to a recent national survey by the American Research Group: ² 70 % of respondents believe that corporate scandals would be avoided if CEOs followed biblical principles. .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.

.Spiritual Foundation ‡ And according to one study. a majority of Americans see religion as central to recovering the country's moral compass.

Ian Buchanan.Spiritual Foundation ‡ Christian philanthropist Sir John Templeton. The Templeton Plan³21 Steps to Personal Success and Real Happiness.Christian Ethics in Business .ca. making lasting friendships and. that "the most successful people are often the most religiously motivated. most likely. 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. contends in his book. reaping significant financial rewards. www. regarded by Wall Street as one of the world's wisest investors. They can be trusted to give full measure and not cheat their customers. .µ. They are likely to have the keenest understanding of the importance of ethics in business.µ In his extensive research.Asset or Liability.christianity.

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

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. 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.." . From this background.Spiritual Foundation ‡ Note that in Business as a Calling Michael Novak reports that: ² Kenneth Lay. Chairman and CEO of Enron Corp. I was. confided that "I grew up the son of a Baptist minister. and am. There are few things more satisfying than to see individuals reach levels of performance that they would have thought was virtually impossible for themselves.

To Feuerstein. knowing how things played out. he would do the same thing he had done. Questions inevitably arose about whether Feuerstein's benevolence may have helped bring his company to bankruptcy. ´Maybe on paper my company is now worth less to Wall Street. In March.µ . though. subsequent years of mounting debt forced Malden Mills into bankruptcy. it was the right thing to do.Role of Leadership in Developing a Culture of Integrity ‡ Courage to do the right thing: Unfortunately. the point is moot. But I can tell you it is worth more. he was asked by the CBS program "60 Minutes" if. he responded "Yes.

when asked by The New York Times last November about Mr.Role of Leadership in Developing a Culture of Integrity ‡ Barbara Lee Toffler an adjunct professor at Columbia University's Graduate School of Business and an expert on corporate responsibility. Feuerstein's actions in the wake of the Malden Mills fire. suggested that "it may have been that the desire to take principled action somehow blinded him to thinking long term. and about the company's newly precarious economic prospects.µ Perhaps SHE was the one not thinking LONG TERM? (Mark 8:36) .

. because it is clear that his integrity survived a literal ´trial by fireµ. or ´a stone which can endure intense heatµ. means ´firestoneµ. translated from the Yiddish.Role of Leadership in Developing a Culture of Integrity ‡ It seems appropriate that Feuerstein.

whereas Feuerstein "believes that it is not only feasible. though they haven't kicked him out of his office. to maintain manufacturing operations in the United States. a policy he felt would protect local jobs. Malden Mills Board now includes Feuerstein. Feuerstein's connections won Malden Mills valuable military contracts to supply troops in Afghanistan with Polartec garments and won some leverage with creditors. The company has laid off about 70 people and has set aside Feuerstein's pledge that fabric made in Asia with cheaper labor wouldn't be sold to US consumers. Feuerstein has to raise $125 million to pay off creditors and retain control of Malden Mills.Role of Leadership in Developing a Culture of Integrity ‡ Postscript: Aaron Feuerstein filed a reorganization plan to emerge from Chapter11 bankruptcy on March 7. ."The board is also looking into developing housing or commercial assets on parts of the mill's 25-acre site. Feuerstein retains the titles of president and chairman but owns just a minority stake. two independents and four members appointed by creditors. Creditors have already arranged to strip Feuerstein of his chief executive's title. A mill in China recently began producing the company's signature Polartec for garments sold in the United States. but desirable. Some members of the board would like to move "substantial" parts of the mill overseas. 2003. His ´social capitalµ (with the support of Senator John Kerry) also helped him gain $35 million in financial guarantees from the US Export-Import Bank.

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

(see Matt. the latent potentialities of others.Role of Leadership in Developing a Culture of Integrity ‡ Servant Leadership . 20:25-27) ‡ The key concept behind servant leadership is the belief that true leadership emerges from those whose primary motivation is a deep desire to help others. and then helping actuate.Moral leaders benefit their organizations by empowering as opposed to controlling others. They do this by first recognizing. .

Role of Leadership in Developing a Culture of Integrity ‡ 10 Characteristics of a Servant Leader (from Spears.Carol Stephenson ² ² ² ² ² ² ² ² ² 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 . Reflections on Leadership) ² 1) Active Listener ‡ Leaders must be good listeners and invite discussion. debate and feedback. .

Texas). the Men's Wearhouse (Fremont. Minnesota). Southwest Airlines (Dallas. California). . Illinois). and TDIndustries (Dallas. ServiceMaster Company (Downers Grove. Texas). Georgia). Among these are the Toro Company (Minneapolis.Role of Leadership in Developing a Culture of Integrity ‡ An increasing number of companies have adopted servant-leadership as part of their corporate philosophy or as a foundation for their mission statement. Synovus Financial Corporation (Columbus.

both by word and deed. . They become consciously and actively involved in the promotion of ethical behavior in their organizations.Role of Leadership in Developing a Culture of Integrity ‡ Front-line Actors .Moral leaders really lead.

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. 1970) .". New York Times Magazine.

. and so on) and to seek material gain.µ .Classical Theory ‡ Put another way. by Harvard Professor Theodore Levitt.-Oct. 1958) . ´In the end business has only two responsibilities .´The Dangers of Social Responsibilityµ. good faith. Harvard Business Review 36 ( obey the elementary canons of face-to-face civility (honesty.

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

g. see Pacific Lumber Case. a successful.Contra ‡ Problems with: Market Failures (e. Desjardins.39. p. Introduction to Business Ethics. pollution & resource depletion.Classical Theory . balanced enterprise ruined) .

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

but is to be found in its very existence as a community of persons who in various ways are endeavouring to satisfy their basic needs. the purpose of a business firm is not simply to make a profit. are at least equally important for the life of a business. Centesimus annus.Pope John Paul. Profit is a regulator of the life of a business. but it is not the only one. in the long term.µ . 1991 . May 1. other human and moral factors must also be considered which. and who form a particular group at the service of the whole of society.Classical Theory -Contra ‡ ´In fact.

.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. ‡ Who are the stakeholders of a business? ‡ Narrow view vs. Wide View . inside or outside the organization. who has a meaningful stake in its performance.

Stakeholder Theory ‡ Some Possible Stakeholders of a Business: ² Customers ² Department/Employees ² Owners/Shareholders ² Creditors ² Suppliers ² Distributors ² Competitors .

Stakeholder Theory ‡ Some Additional Possible Stakeholders: ² Local Community ² National Citizens ² Global Inhabitants ² Non-Human Life ² the Environment .

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

Undermines/Dilutes shareholder property rights ² Interest Group Politics .Stakeholder Theory ‡ Problems with wider view? ² Discourages Investment .Leads to waste and inefficiency .

beyond the legal and economic. .Corporate Social Responsibility Theory ‡ Definition: A voluntary assumption of responsibilities. 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 1960µs.

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

.Corporate Social Responsibility Theory ‡ Intel: provides education in science & math in countries where it has plants.

.Corporate Social Responsibility Theory ‡ Citigroup: has provided significant funds to microcredit ventures.

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

sells or buys. it is acting for the people as well as for itself. builds. In a business society. if it even really was.Corporate Social Responsibility Theory ‡ In the words of General Robert Wood Johnson. every act of business has social consequences and may arouse public interest. founder of Johnson and Johnson: ´The day has passed when business was a private matter. Every time business hires. and it must be prepared to accept full responsibilityµ .

Corporate Social Responsibility Theory ‡ Problems with CSR in general? ² Dilutes the Business Purpose ² Viewed as fundamentally antagonistic to the Capitalist Enterprise ² Often influenced by simplistic political and social agendas .

to environmental causes. ‡ Patagonia. it has given 10% of pre-tax profits or 1% of sales.Corporate Social Responsibility Theory ‡ The search for guilt-free affluence has helped to transform "green" business into a mass-market phenomenon. has long prided itself on being green. For nearly two decades. a designer and distributor of outdoor clothing and gear. whichever is larger. .

Socially responsible image as a marketing tool.g. both customers and franchisees attracted by progressive reputation) .Corporate Social Responsibility Theory ‡ ´Rain Forest Chicµ . source of free. positive publicity (e. The Body Shop.

Corporate Social Responsibility Theory ‡ Anita Roddick/Body Shop ² Supports various social causes (e.g.Save the Whales) ² But may have stolen store concept and unfairly deals with franchisees? .

Corporate Social Responsibility Theory ‡ Ben & Jerry·s ² Fight global warming with Ice Cream ² Annual one world one heart festival ² Pint for a pint with International Red Cross ² Rainforest Crunch Fiasco/Mistreatment of Employees/Sale to Unilever (4/12/2000) .

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

even though it has permitted the ritual slaughtering of that species (for food). is considered as if he destroyed that species. 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). . stating that there is divine providence for each species and that God desires them to be perpetuated." The Sefer Ha-hinukh offers a similar explanation.Environment ‡ Areas of Concern? ² ² ² ² Waste & Pollution Use of Natural Resources Preservation of Environmentally Sensitive Areas Preservation of Biodiversity ‡ Consider Endangered Species Act. And he who kills mother and sons in one day. or takes them while they are free to fly away. "Scripture will not permit a destructive act that will cause the extinction of a species.

174-176. Desjardins.µ Stuart Hart (1997) ‡ See Interface Corporation Case. 2:4) ‡ ´The responsibility for ensuring a sustainable world falls largely on the shoulders of the world·s enterprises. ‡ Polluter·s Dilemma (Supplement) .Environment ‡ Sustainability . (see Phil. p.the ability to meet the needs of the present without compromising the ability of future generations to meet their own needs.

Environment ‡ Do Christians/Jews/Muslims have a moral duty to care for the environment? .

Environment ² What is the world·s oldest profession? .

Save. Treasure. Anti-pollution scripture? ‡ Takes into account the moral principle of stewardship/trusteeship (see Lev. 2:15 (´Dress & Keepµ) ² Dress(abad. Retain. Heb. ² See also Ezek. but it is extended by them to include wasting anything that can be used for the benefit of mankind. 20: 19). Preserve. Labor for ² Keep (shamar.) = Keep. Protect. Serve. Guard. 'do not destroy' is based by the Rabbis on the biblical injunction not to destroy fruit-bearing trees (Deut. 34:18. Heb.Environment ² Caretaker ‡ See Gen. Celebrate ² Jewish prohibition known as bal tashhit. Watch Over. . 25:23-24).) = Work.

.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: ² Dangerous working conditions (e. exposure to dangerous chemicals and/or machines without proper safeguards) ² Denial of bathroom breaks ² Physical abuse ² Demands for sexual favors ² Seven day work weeks ² Long hours (12 to 16 hours a day) ² Forced double shifts ² Dismissal of anyone who tries to organize a union .g. firetraps.

no drinking water in the dining facility. improperly stored chemical tanks. no pay stubs. no toilet paper or towels. excessive overtime. arbitrary firings. no sick leave.. ² Levi·s now monitors producers (´no-sweatµ goods) » Negative: Monitoring leads to use of fewer sources = less opportunity . ² Levi Strauss-Thailand: Child labor. widespread sexual harassment. toilet visits limited ² Liz Claiborne-China: Workers fined for talking.Vietnam: Workers forced to do overtime. blocked exits. dirty toilets. excessive overtime.Sweatshops ‡ Some Examples (from a recent Fair Labor Association Report): ² Adidas .

some 1/5 of all children in the world ages 5-14. ² Note: According to International Labor Organization (ILO) reports. Often involve organized crime. or about 250 million children. 90% of sweatshop workers are female. Sometimes involve child labor. ‡ Major offender: apparel industry. are engaged in child labor.Sweatshops ‡ ‡ ‡ ‡ Illegal immigrants especially vulnerable. .

282) . p.Sweatshops ‡ Are Sweatshops Necessarily Evil? (Taking Sides.

Black et al ² Violate Int·l Human Rights & Labor Laws ² Right to a ´living wageµ? ² Companies can afford to treat better/pay more ‡ A men·s dress shirt.00 in the United States.µ . I was just shopping. (Is this true?) ‡ Ad by ´Behind the Labelµ and organization dedicated to exposing sweatshops shows a young American girl shopping and saying.74 to produce ² Customers will not tolerate sweatshops and are willing to pay more to prevent them. ´I helped push African women into slums. and selling for $32.Globalization ‡ Yes . costs only $4. made in Mexico.

N.g. Taiwan and South Korea . not less.Globalization ‡ No. 9/4/2000.Merely ´Growing Painsµ ² May be only option in developing countries to accumulate capital ‡ First-step towards modern prosperity (e. every year 3. mostly from diseases of poverty like diarrhea. . Kristof.µ . ‡ ´The simplest way to help the poorest Asians would be to buy more from sweatshops. Indonesia) Over the past 50 years. Taiwan and South Korea are modern countries with low rates of infant mortality and high levels of education. Times. Hong Kong.accepted sweatshops as the price of development. Today. South Korea.1 million Indian children die before the age of 5.Y. while countries that started at a similar economic level .Nicholas D. in contrast.Myerson . Singapore. countries like India resisted sweatshops. Per capita income in Indonesia has more than tripled in the last 20 years.

various waves of immigrants. etc.Merely ´Growing Painsµ ² 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.Globalization ‡ No. ² China. . employing African & Asian slaves. Vietnam and various Eastern European Countries are now Sweatshop ´hot spotsµ ² The United States has had its own history of sweatshops.

S.S. estimates that 50% of current U. . especially since the late 1960·s. owned/operated garment factories are sweatshops. there has been a definite resurgence of sweatshops in America.Globalization ‡ No.´Growing Painsµ ‡ In the late 1930·s Life Magazine declared that sweatshops no longer existed in America ‡ However. California found a clandestine garment sweatshop that employed some 72 Thai immigrants as virtual slaves) ² The U. A 1995 police raid of a fenced-in compound in El Monte. mainly employing illegal immigrants ² (e.g. Labor Dept.

S. but no jobs in practice. like the National Labor Committee. are funded by organized labor committed to preserving American jobs.µ . According to Honduran labor leaders. maquiladoras are increasingly unionized and offer wages two-to-three times the minimum wage. Labor shortages at these jobs have helped bump up wages throughout the economy. might assuage our consciences but is no favor to its alleged beneficiaries. These are prime jobs in an economy in which almost half of the population can find no work at all.Globalization ‡ No. (Jon Entine) ² ´A policy of good jobs in principle. labor activists who.Developing nations not complaining ² Honduran union leaders universally resent the moralizing of U.

.. besides other positive qualities. Rockefeller.Is Ethical Behavior Good for Business? ‡ "The successful entrepreneur must know how to glide over every moral restraint with almost childlike regard.µ . .John D. and [be] ready to kill off thousands of victims -without a murmur. no scruples whatsoever.[and have].

Trust/Goodwill/Loyalty .Is Ethical Behavior Good for Business? ‡ Some Costs of Ethical Misconduct ² Public/Interest Group/NGO disgrace/scandal/ostracism/repudiation/protests ² Litigation/Prosecution ² Decreased Employee Morale/Loyalty/Commitment/Performance/Productivity ² Loss of Business/Profits ² Loss of Customer/Supplier/Partner.

Is Ethical Behavior Good for Business? ‡ Some Additional Costs of Ethical Misconduct ² Loss of Social/Reputation Capital/Goodwill (i. the willingness of stakeholders to overlook failings) ² Shaken public confidence in company and in capital markets ² Layoffs ² Loss of Investments/Pensions ² Increased Government Scrutiny/Regulation ² Environmental/Health Damage .e.

Most academic studies support the conclusion that ethical behavior and profitability go hand in hand .Is Ethical Behavior Good for Business? ‡ Impact on the Bottom Line ² Ethical Behavior Enhances profitability .

or almost three times the MVA of companies" without similar commitments. the market value added difference was larger--an average of $10. And it gets better: According to Management Review. published by the American Management Association. . "For the 47 companies expressing a more extensive or more explicit commitment to ethics.Is Ethical Behavior Good for Business? ‡ A 1999 DePaul University study of 300 large firms found that companies that make an explicit commitment to follow an ethics code provided more than twice the value to shareholders than companies that didn't.6 billion.

By: Thompson. the bottom line.µ . and came up with an analysis of the top 20 companies vs. The top 20% enjoyed an increase in stock prices of 363% in the same period. Issue 1. how well managers listen to their employees. They then put these companies up against the hard side.Is Ethical Behavior Good for Business? ‡ ´Two professors at the Harvard Business School did a study of 207 major companies over an 11-year period. took a second look at those numbers. 0042742X. and so on. 10/15/2002.Restoring Integrity To Business . William David. the bottom 20. The top 20% averaged a 417% higher return on investment. and 3] increase in stock prices. Terry Deal. They used all sorts of measuring devices and came up with a ranking by corporate cultures. The top 20--the companies with integrity-the spirited workplaces--averaged 571% higher earnings than the dispirited workplaces. 69. What they measured were things that are sometimes called the soft side of business-morale. We could also call them companies with a high or low level of integrity. Vital Speeches of the Day. . ran the same numbers again. "the soft side is the hard side. rewards for creativity. One of American's most successful CEO's was right when he said. 2] return on investment. who coined the term corporate culture. Vol. Here's what he found. emphasis on ethics. In my business we call them more or less spirited workplaces. on three measures: 1] gains in operating earnings.

000 ten years ago in each of ten companies highly regarded for ethical behavior (G. Johnson & Johnson. Southwest Airlines. and Merck) would have resulted in a return nearly three times as much as an investment of $10. Disney.Is Ethical Behavior Good for Business? ‡ An investment of $1. Hewlett-Packard. (Fortune) . Coca-Cola. Microsoft. Intel..E.000 in the Standard & Poor·s 500 stock index. Berkshire Hathaway.

employees were laid off.Is Ethical Behavior Good for Business? ‡ An exception: In response to numerous lawsuits. lives may have been saved by the change in product design. Smith & Wesson's former CEO Ed Shultz decided to start including locks on its handguns in March 2000. despite jobs lost. customers especially the NRA) were unhappy with the change. Although the decision was clearly ethical. the ethical decision did not have a positive financial impact on the firm. gun manufacturer. Nonetheless. and Shultz resigned. . Sales declined. In this case.

g. damage to a company's reputation can mean a sharp and often irreversible loss of market share. . Johnson & Johnson Tylenol Case) ‡ Conversely.Is Ethical Behavior Good for Business? ‡ Reputation Management ‡ A reputation for integrity enhances customer loyalty (e.

. USA Today. Leadership lessons from the Reagan years. p. .Is Ethical Behavior Good for Business? ‡ Social Capital ² Experts say most people forgive mistakes made by leaders who have both conviction and a good heart.Del Jones. 2004.6B. June 11.

it generally helps to avoid other larger costs later.Is Ethical Behavior Good for Business? ‡ Decreases Costs .Though initiating and ethics program sometimes involves significant upfront costs. .

A Conference Board of Canada poll revealed that 77% of Canadians are most likely to invest in.Is Ethical Behavior Good for Business? ‡ Encourages Investment . and 79% to work for companies they view as socially responsible. 81% to purchase from. .

cancer causing pajamas and other defective products dumped on 3rd world markets.g. Lying to the IRS. etc.) Narrow View of Stakeholders Failing to ´Count of Costµ before committing to a particular course (see Luke 14:28-30) Lack of ´Ownerµ Accountability/Spin Actual or Perceived Pressures Fixation on ´Resultsµ Speed/Carelessness Ethical Illiteracy Rote Behavior Distractions ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ ‡ .Causes of Failures in Business Ethics ‡ ‡ ‡ ‡ ‡ ‡ Decreased Authority of Moral Standards Empty Gestures/Insincerity Situational Ethics/Moral Relativism/Expansion of Cultural Diversity Rapid Expansion and Decentralization of Control Company/Personal Immaturity Parties Perceived as Enemies or Not Worthy of Ethical Treatment/Moral Exclusion (e.

² ´The mind of the superior man is conversant with righteousness.µ -Confucius . . and we shower them with inordinate rewards." the author asks. Former CEO Medtronic Corp." Jossey-Bass/ "Authentic Leadership: Rediscovering the Secrets to Creating Lasting Value. 2003. the mind of the mean man is conversant with gain. "why should we be surprised when they turn out to lack integrity?µ Bill George.Causes of Failures in Business Ethics ‡ Focus on Short Term Profits & Wrong Standards for Hiring ² "If we select people principally for their charisma and their ability to drive up stock prices in the short term instead of their character.

thinking. Kennedy. and acting where autonomy and related rights take priority has seriously jeopardized the meaning and values of all institutions in our society. Maida.µ . This way of living.Detroit Archbishop Adam J.Causes of Failures in Business Ethics ‡ Emphasis on the Individual rights ² ´Instead of conceiving of society as something established for the defense of individual rights. and O'Connor . fair contracts. and due process of law. we are invited to see it in terms of the biblical vision. in a speech to Catholic judges including Rehnquist. Scalia.

Volume 51.26/4_26_99morals. a repulsive. the inability to imagine moral obligations beyond the law (Note: Kedoshim Tiyu is a requirement of a Jew not to just obey the letter of the law but to obey the spirit of the law as well. and embrace the ethical imperatives that are within it. http://www. Under Jewish law. disgusting individual. 29. One must go beyond the law. No. Emory Report. or the belief that the company is always right ‡ Legalism. ‡ (see Corporate ´moral blindnessµ not solved by typical ethics.Causes of Failures in Business Ethics ‡ Self-Deception/Choosing Not to Know ² Types ‡ Tribalism. 1999.emory. by John Knapp.html) . ‡ Moral Gamesmanship. called Lifnim Mishurat HaDin. it is entirely possible for a person to be 100% observant or all the law and yet be a Naval B'rshut HaTorah .edu/EMORY_REPORT/erarchive/1999/April/erapril. the elevation of science-including management science-to a position of unquestioned authority. April 26. that is. the excusing of unethical practices by viewing business as "a game" and oneself as "a playerµ ‡ Scientism.

historian.Causes of Failures in Business Ethics ‡ Emotions ² Arrogance ‡ "When men are most sure and arrogant they are commonly most mistaken. 1711-1776) . economist and essayist. giving views to passion without that proper deliberation which alone can secure them from the grossest absurdities" ² .David Hume quotes (Scottish philosopher.

Causes of Failures in Business Ethics ‡ Emotions ² ² ² ² ² ´Blindµ Ambition Desperation Feeling of Invulnerability Flirting with the Edge Greed .

Causes of Failures in Business Ethics ‡ Is the Capitalist System or the Corporate Structure inherently Immoral or Amoral? .

. for the primary purpose of earning a profit on capital invested. operating under a primarily free market system.Capitalism ‡ Capitalism: An economic system in which the major part of production and distribution lies in private hands.

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.µ John Maynard Keyes .

Wärneryd. New York Routledge. Publication: London . Karl Erik. 2002) .by Lewis.Capitalism ‡ Values that are central to a capitalism ² Freedom of voluntary exchange ² Sanctity of contracts ² Removal of impediments to trade ‡ (Source: Ethics and Economic Affairs. Alan.

µ William Greider is national affairs correspondent for The Nation .Capitalism ‡ ´As it presently functions. capitalism encourages human pathologies -embodying irresponsibility as a central requirement in its operating routines.

S.S.´Top 200 The Rise of Corporate Global Powerµ. . Institute for Policy Studies. economy. 2000) ‡ The largest 500 U.Corporations ‡ Today more than 25% of the world·s economic activity comes from the 200 largest corporations. . by Anderson & Cavanaugh. companies constitute at least 75% of the U.

Value Shift: Why Companies Must Merge Social and Financial Imperatives. 1991. by McDermott. and Contemporary Capitalism. . by Micklethwait & Woolridge. by Paine. Property.Corporations ‡ Many now believe that it is not the church or state. but the corporation that is: ² ´the most important organization in the worldµ The Company: A Short History of a Revolutionary Idea.´Corporate Society: Class. 2003. ² or ´society's dominant non-governmental institution. 2003 ² or ´the central institution of contemporary societyµ ." .

Economics. that ´following the collapse of the family and the church. Ford. .Cited in ´An Essay on the Background of Business Ethics: Ethics.Corporations ‡ These beliefs echo the prediction made by -French Sociologist Emile Durkheim (1858-1917). . by Lisa N. in his work Suicide. Newton & Maureen M. the corporation would be the association in the future that would supply the social support that every individual needs to maintain a moral lifeµ . Law and the Corporation. in Taking Sides.

be outlawed.Pope Innocent IV (13th Century) ‡ ´lacking a soul. Corporations are: ² ´fictional personsµ ‡ ´lacking body and soulµ. Chief Justice. King·s Bench (17th Century) . corporations cannot commit treason.Sir Edward Coke. or excommunicated .Corporations ‡ Legally speaking. corporations cannot be punished .

when it has no soul to be damned and no body to be kicked?" .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.

. . can be held morally responsible.Nobel Prize Winning Economist Milton Friedman ‡ Philosophy Professor Manuel Velasquez argues that only corporate members and not corporations themselves.Corporations ‡ As ´artificial personsµ corporations cannot have ´realµ responsibilities.

. it does have prescribed rights and legal obligations within the community. Business Ethics. Shaw.Corporations ‡ However. ´Although a corporation is not something that can be seen or touched.William H.µ .

allowing overemphasis on self-interest at the expense of the consideration of others. Professor.Kenneth Andrews. Harvard Business School .Corporations ‡ ´The exclusively economic definition of the corporation is a deadly oversimplification .µ .

² Doesn·t that run directly counter to the value of Responsibility/Accountability? . encouraging investment.Corporations ‡ Limited liability is the key feature of the corporate form.

Self-Regulation of Business Ethics ‡ Types of Codes of Ethics/Conduct ² Compliance Oriented: Statement of business standards or practices ² Visionary: Statement of beliefs. the ´HP Wayµ) ² Combination: (e. . Johnson and Johnson Credo) or corporate philosophy (e. principles (e. G.·s Integrity Program called ´The Spirit and the Lawµ. mission.g.g. core values.g.E.

Code of Ethics Values Statement Corporate Credo All Three Documents 91% 53% 34% 49 cos. Journal of Business Ethics 14: 727-740 (1995). .Types of Codes Forbes 500 Companies (237 respondents): Revised in 90s Date Introduced < 5 yrs.0% 15. Corporate Ethics Statements: Current Status and Future Prospects.0% 82% 83% 81% Source: Patrick E.5% 8.0% 22. Murphy. 18.5% 51.0% 41. >20 yrs.

² to provide a benchmark for members to use for self evaluation.Self-Regulation of Business Ethics ‡ Why have a Code of Ethics? ² to define accepted/acceptable behaviors. ² to promote high standards of practice. ² to establish a framework for professional behavior and responsibilities. .

Self-Regulation of Business Ethics ‡ Why have a Code of Ethics? ² as a vehicle for occupational identity & maturity. . ² to increase ethical sensitivity & judgement. of belonging to a group with common values and a common mission. ² to enhance the sense of community among members.

as a group & as individuals.Self-Regulation of Business Ethics ‡ Why have a Code of Ethics? ² to compel people to think through their mission and obligations. . ² to act as a vehicle to address public concerns. ² because a written document reinforces an intention. ² to strengthen support for individuals· moral courage.

fraud and other malfeasance ² to enhance credibility with stakeholders ² to provide a guidepost for addressing potential problems such as potential conflicts of interest .Self-Regulation of Business Ethics ‡ Why have a Code of Ethics? ² to discourage corruption.

² An Articulation of Core Values .Self-Regulation of Business Ethics ‡ Some Typical Components ² Preamble (Aspirations) ² Rules and principles.

Self-Regulation of Business Ethics ‡ Some Elements of ´Best Codesµ ² Clear. . Understandable Language ² Involves sanctions and rewards ² Is more about values than compliance ² Involves ´Ownershipµ (i. Coherent. People from every level of the company should be involved in its development.e.

valuable individuals ² Supports each individual employee's freedom.Self-Regulation of Business Ethics ‡ Some Elements of ´Best Codesµ ² Provides a set framework for making ethical decisions ² Demonstrates respect for all employees as unique. and development ² Promotes a ´balanced lifeµ & respect for employee family concerns . growth.

Self-Regulation of Business Ethics ‡ Some Elements of ´Best Codesµ ² Promotes employee health & safety ² Promotes tolerance & an atmosphere free of harassment ² Promotes honesty ² Promotes fairness? ² Cultivates a positive attitude/outlook .

Self-Regulation of Business Ethics ‡ Some Elements of ´Best Codesµ ² Promotes openness/transparency (no coverups) ² Promotes accountability/personal responsibility ² Promotes risk-taking. within limits ² Promotes excellence .

Self-Regulation of Business Ethics ‡ Some Elements of ´Best Codesµ ² Promotes tolerance of errors & learning from same ² Promotes unquestioned integrity ² Promotes consistency ² Promotes cooperation/collaboration ² Promotes courage & persistence .

Self-Regulation of Business Ethics .

Organizations must communicate what·s in the code. corporate ethics codes alone have little effect on employee behavior. research manager at the Ethics Resource Center in Washington.Self-Regulation of Business Ethics ‡ But as Joshua Joseph. says.C. . 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. D.

Self-Regulation of Business Ethics ‡ Some Implementation Methods ² Integration ² Endorsement ² Breach Response Plan (Gaps between values and practices must be addressed) ² Personal Feedback ² Affirmation ² Regular Review ² Contracts .

g. Baker Hughes signed a 3-year contract renewal and extension with LRN® . legal and compliance issues to its global workforce through the LRN Legal Compliance and Ethics Center) . e. training and testing in ethics.Self-Regulation of Business Ethics ‡ Some Implementation Methods ² Training (Role-Playing) (including outside specialty firms. The Legal Knowledge CompanyŒ to provide online education.

On-Line. etc.Self-Regulation of Business Ethics ‡ Some Implementation Methods ² Translation (e.g. Merck & Co.) ² Annual Report ² Ethics Officer/Department .·s code has been translated into 22 languages) ² Distribution (Pamphlets.

Self-Regulation of Business Ethics ‡ Some Monitoring/Compliance Methods ² Required annual acknowledgement/review ² Periodic surveys ² Anonymous 24-hour contact point with real and immediate investigation/follow-up .

Self-Regulation of Business Ethics ‡ Are Codes of Ethics/Conduct just for show? (Taking Sides.22) ‡ Yes? ² Created in response to coercion ² Often Ambiguous language ² Enron had a Code of Ethics! . p.

g. Boy Scouts) ² Hiring Ethical People: hire people who can uphold the company's high ethical standards .Self-Regulation of Business Ethics ‡ Other Forms of Self-Regulation: ² Industry Codes ² Support character based education in your community (e.

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

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

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

Government Regulation of Business Ethics ‡ Is It desirable or necessary for government to protect/promote good business ethics? ² Not everyone agrees that tough. new regulations is the best way to stop corporate fraud .

Plato . .Government Regulation of Business Ethics ‡ Good people do not need laws to tell them to act responsibly. while bad people will find a way around the laws.

´You cannot legislate honesty.5 million salary) . Former Chairman and CEO of the New York Stock Exchange.Government Regulation of Business Ethics ‡ Dick Grasso.µ (Who was forced to resign due to outrage over his $39.

CEOs and Boards of Directors have that responsibility.Government Regulation of Business Ethics ‡ Leon Panetta. "Restoring trust in corporate America is crucial to our economy. Passing laws alone will not guarantee honesty. . Former White House Chief of Staff in the Clinton Administration." he said.

Government Regulation of Business Ethics ‡ µRules cannot substitute for character. Federal Reserve Board . Chairman of the U.S." ³ Alan Greenspan.

µ . Government will never be able to legislate or regulate morals into every part of our markets. ´We cannot put the business ethics police on every corner that might be cut³nor would we want to. Business people and businesses must do that themselves.Government Regulation of Business Ethics ‡ Senator Joe Lieberman.

´Those who idealize the government's role and suggest heaping so many new regulations on businesses may stifle the American spirit of enterprise. Those who idealize the market's self-corrective powers don't see the size of the scar or the powerful temptation to return to business as it was before.Government Regulation of Business Ethics ‡ Senator Joe Lieberman. .

but we must acknowledge before we act that there are twin dangers³of doing too little and doing too much.Government Regulation of Business Ethics ‡ Senator Joe Lieberman. ´The Enron scandal cries out for governmental action.µ .

New regulations will only hinder the growth of American's economy. and the "bad eggs" have already have been punished by the market.Government Regulation of Business Ethics ‡ Milton Friedman. suggests that the market and not new regulations is a more effective deterrent and punisher. .

Government Regulation of Business Ethics ‡ The argument for regulation ² The existence of a code of ethics alone is not sufficient to prevent unethical behavior (e. ² Competition does not enable the manager to pay attention to social goals and thus must be forced.g. General Dynamics code of ethics did not prevent some highly unethical practices in the pursuit of government contracts and Enron had an elaborate code of ethics) ² Change in the behavior of the corporation is initiated to make it give more attention to social goals. .

Government Regulation of Business Ethics ‡ Has regulation been good for business in any way? ² Statutes like the Sherman & Clayton Antitrust Acts helped to dissolve giant trusts (Though recent trends seem to be reversing this) ² Statutes like the Wagner Act enabled labor unions to emerge as responsible entities ² OSHA regulations have improved workplace safety ² Recent acts have forced disclosure of financial information leading to a more honest and effective stock market. .

Government Regulation of Business Ethics ‡ But have recent new regulations actually helped improve business ethics? ‡ Only 17% of respondents to a recent SHRM online poll report seeing a decrease in ethics violations at their companies. 35% report an increase! .

Government Regulation of Business Ethics ‡ Levels ² Local ² State ² National ² International .

Government Regulation of Business Ethics ‡ Branches ² Executive ² Legislative ² Judicial .

. ‡ provides a series of new civil and criminal penalties for violations of securities laws. and enhances penalties for such violations under existing statutes.The Sarbanes-Oxley Act ‡ creates higher standards for corporate governance ‡ includes rigorous standards for audit committees ‡ requires more frequent & transparent financial disclosures ‡ requires securities analysts to maintain greater independence from investment banks.

and if not why not. ‡ Whistleblowing employees are protected for providing information to federal officials. They must also disclose any change in or waiver of ethics codes. and company supervisors.The Sarbanes-Oxley Act ‡ Companies must disclose whether or not they have a code of ethics. . congressional members.

to establish or adopt auditing. to conduct inspections of registered CPA firms and to enforce compliance with the Act. ethics and independence and accounting standards. quality control.The Sarbanes-Oxley Act ‡ Created a public company accounting oversight board to register public accounting firms. .

attorneys must report to the board. (Though the ABA has recently sanctioned this) . Some attorneys believe this duty may conflict with their field·s existing ethical codes of conduct.The Sarbanes-Oxley Act ‡ Attorneys must report material evidence of a securities law violation. or breach of fiduciary duty. If those parties fail to respond. to the chief legal counsel or CEO.

and up to $5 million and 20 years for "willful" violations.The Sarbanes-Oxley Act ‡ CEOs and CFOs must certify their financial reports are accurate. ‡ All personal loans to executives and directors by public companies are banned. or suffer penalties of $1 million and up to 10 years in prison for "knowing" violations. .

The Sarbanes-Oxley Act ‡ Executives are required to pay back bonuses or equity-based compensation. ‡ The penalty for certifying bad financials: fines up to $5 million. . if companies later restate their financials. and up to 20 years in prison.

Under Section 906. the financial condition and results of operations of the issuer. they must certify "that information contained in the periodic report fairly represents.The Sarbanes-Oxley Act ‡ There are no objective standards for exactly what CEO's or CFO's are actually certifying." But what does "fairly" mean? What is "material"? . in all material respects.

‡ Intent to wipe out illegal gains and compensate victims. Federal Sentencing Guidelines ‡ Created in 1984 in order to give greater uniformity and effectiveness in sentencing for federal crimes. .g. factors e.5 K + or culpability score.U. ‡ Took effect in 1991. level of personnel involved & existence of an effective ethics program.S. ‡ Emphasis is on prevention and detection. ‡ Base fine from a table of ranked crimes. $5K to 72.

Federal Sentencing Guidelines ‡ Codes of conduct must be developed that are capable of reducing misconduct. . compliance officers) and support the ethics/compliance program (i.U.S. ‡ Specific high level personnel must be responsible for the compliance program (i.. ‡ Substantial discretionary authority in the organization must not be given to persons with a propensity to engage in illegal conduct. top management).e..e.

and independent contractors (or consultants) through training programs and formal communication systems. . (All relevant stakeholders should be exposed to the company code of conduct). other agents (such as advertising agencies). Federal Sentencing Guidelines ‡ Standards and procedures must be communicated to employees.S.U.

e. Federal Sentencing Guidelines ‡ The organization must take reasonable steps to achieve compliance with its standards.U. A reporting system must allow employees and agents to report misconduct without fear (i. ..S. by using monitoring and internal auditing systems to detect misconduct. anonymous ethics hotlines).

S.U. Federal Sentencing Guidelines ‡ Standards and punishment must be enforced consistently and the organization must create a process to prevent further offenses. . ‡ A plan to review and modify the compliance program is necessary to demonstrate a continuous improvement process in selfmonitoring.

Federal Sentencing Guidelines ‡ The Corporate Ethics movement has been spurred by the Federal Sentencing Guidelines which offer leniency where an effective ethics program is in place.S. .U.

only four asked for mitigation based on the presence of an effective ethics compliance program.S. .U. Federal Sentencing Guidelines ‡ Limitations: ² Motive for violation usually financial opportunity ‡ Many large companies can afford the risk of penalties ² Of the 208 sentenced organizations.

but it's regulated.Limitations of Government Action ‡ ‡ ‡ ‡ Punitive Nature: Laws & regulations are usually punitive rather than motivational Difficult to Enforce: Regulations sometimes difficult to enforce as the costs of conducting litigation are high Incompetence: ´Political appointeesµ are sometimes not competent Failure to act in the Public Interest: Regulatory agency made earlier decisions allowing Enron to engage in certain accounting practices and exempting the energy-trading company from some federal requirements Non-compliance: Passing laws alone will not guarantee compliance. Ambiguity: Difficulty in reaching consensus.g. Often Based on Inaccurate Assumptions: For example.) Creates a False Sense of Security: Regulation creates a moral hazard. leading to ambiguity in legislation: leaving it subject to various interpretations (e. good faith) Unethical does not always = illegal: (Enron·s worst sins seem to have been lawful. ‡ ‡ ‡ ‡ ‡ . so we're safe. We don't understand finance. the threat of longer sentence assumes rational risk/reward analysis but ignores emotional factors.

each requiring a volume of explication.Limitations of Government Action ‡ ‡ ‡ ‡ ‡ ‡ Jurisdictional limitations: Globalization has weakened the ability of government agencies to regulate business.g. Conflicts of Laws: e. public campaigns. Regulatory process allows ´commentµ period and thus lobbying. is 2. misinformation. Slow Process in Creating: The legal process is slow. There are plenty of places to hide! ‡ ‡ .330 pages long. with an additional 12. legal challenges.880 pages of regulations.778 pages. Title 17 of the CFR. Federal tax is 3. Ineffective Enforcement: Regulatory agencies understaffed and underfunded (by design?) Complexity: ´Generally accepted accounting principlesµ consist of 144 standards. covering commodity and securities exchanges. Government Regulation = free trade barrier under WTO Reactive: Law is usually reactive and rarely proactive Tech Lag: Regulation lags behind knowledge/Technology in an industry (e.g. asbestos cancer causing effects). Inefficiency Defense: Compliance with government regulations makes production slower and more expensive.

Limitations of Government Action ‡ Agency Capture: Regulated industries set out to "capture" their regulatory bodies. etc. J. John Graham. a former mining and oil industry lobbyist is now Deputy Secretary of the Interior. . ² e. the director of a White House office overseeing environmental regulation founded a Harvard think tank that produced studies questioning the need for many regulations.g. Steven Griles.

² Over $5 billion a year spent by lobbyists in U.g.Limitations of Government Action ‡ Effects of Lobbying/Propaganda: (e.g. Pinto Case)Auto industry powerful lobbyists still today (e. fuel efficiency standards) Enron helped by deregulation of energy industry a position they heavily lobbied for. ² Lobbying budget in US greater than GDP of 57 nations ² Over 100 lobbyists per Member of Congress .S.

Government Regulation of Business Ethics ‡ Best Option: Combined Self & Government Regulation? .

Government Regulation of Business Ethics ‡ Other regulators: The market. Pressure usually irregular & ad hoc in nature . Public Interest Groups /class action suits) ‡ Weakness: Approach based on confrontation. industry associations (peer pressure). the media/public opinion (boycotts).

Corruption/Bribery .

Kenya. Angola. In 2004. (Unfortunately. ² Africa: Corruption is perceived to be rampant in Cameroon. In Kenya. Uganda. you guessed it. tied for 29th overall). Kenyan President Kibaki launched a ´zero corruptionµ initiative.Corruption/Bribery ‡ Corruption exists in every country and is endemic to some. which was rated as Africa·s least corrupt nation. corruption). bribery costs the average citizen 20% of their income. Madagascar and Nigeria. especially developing countries. No African country was listed among the 25 least corrupt countries in the most recent Transparency International Survey (Botswana. . his government was recently forced to resign due to.

The Financial Times recently reported that ´deep corruption [in China] is corroding the exercise of state power.µ Falsified accounts used to cover up this corruption have the effect of rendering China·s official statistics ´virtually meaningless. In Indonesia. it is estimated that 20% of business costs are bribes to bureaucrats.Corruption/Bribery ² Asia: Corruption is perceived to be rampant in Bangladesh and Indonesia.µ .

corruption in the customs department defrauded the government out of $3 billion in revenues.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. thus illegally avoiding import taxes altogether.5 billion of goods were brought into the country labeled ´in transitµ to another country. In Argentina. Officials estimated that 30% of all imports were being under-billed and approximately $ 2.

‡ In industrial countries 15 % of businesses were found to pay bribes. ‡ German companies are estimated to pay an aggregate of over $ 3 billion a year in bribes to obtain business contracts abroad. approximately one-third of potential profits are lost to bribe payments that amount to 8% of inventory turnover. . ‡ In Kazakhstan typical bribe to win approval of a large construction contract is 15 to 20% of contract price.Corruption/Bribery ‡ In Albania. but in the former Soviet Union this figure jumped to over 60 %.

to amass a fortune of over $ 120 million while a public official. ‡ According to Transparency International. in 6 out of 10 countries. ‡ 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. . suspicions surround the ability of Raul Salinas. political parties were determined to be their nation·s most corrupt institutions. the brother of former President Carlos Salinas.Political Corruption/Bribery ‡ In Mexico.

600 firms in 69 countries found that 40 % of businesses pay bribes. . ‡ A recent World Bank survey of 3.Corruption/Bribery ‡ 1997 estimate by the World Bank placed the total about of bribery involved in international trade at $ 80 billion per year.

Least Corrupt ‡ According to a recent Transparency International Report.Corruption/Bribery . Iceland. followed by New Zealand. Denmark. Finland was rated the world's cleanest business environment. (Note Norway is somewhat farther back on the list) . Sweden and Switzerland. Singapore.

Least Corrupt ‡ What national characteristics might explain this? ² Racial homogeneity? (But what about Japan & Korea?) ² Geographic Isolation? (Iceland. New Zealand.Corruption/Bribery . Singapore) ² Strict Rule of Law? (Singapore) .

.Corruption/Bribery ‡ What sets Norway apart? ² Oil ‡ 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.

Spain. the U. Canada. Germany and Honk Kong. . Japan. the Netherlands. ² It was perceived as more corrupt than Norway. but less corrupt than nations such as France.. Italy.Corruption/Bribery ‡ Where do we stand? ² In the same study . Israel. the U. Australia. & Mexico.S. Austria. Luxembourg. tied for 17th with Belgium and Ireland.K.

or something of value. or in exchange for special consideration. with the intent to influence. position or role (´Coarse Briberyµ that which affects a significant community interest) .a payment of money.Corruption/Bribery ‡ Bribe . to a party. that is incompatible with the party·s duties of office.

hotels. in order to include certain airlines. restaurants. ² Tour operators may receive special unpublicized commissions or payment in kind or services. .Corruption/Bribery ‡ Some examples of bribery ² Corporate purchasing agents are often given "kickbacks" in order to make their purchases from a specific supplier. and stores in their itinerary.

to suit special groups or firms. usually badly paid relative to the economic power they possess.Corruption/Bribery ‡ Civil servants in regulatory agencies. may find it hard to refuse payment in exchange for waiving the regulations or to tailor specifications and contracts.) . (Note: In India most government officials & their families could probably not survive on their salaries alone.

Corruption/Bribery .

. pressure groups and citizens try to maximize their gains by paying bribes.Corruption/Bribery ‡ Motivations: Firms. while public officials try to maximize their illegal earnings and politicians their power and wealth.

Corruption/Bribery ‡ Facilitating Payment . Usually made to low-level public officials to ´speed things alongµ.customary. schimengeld. douceur. local. In South Africa. la mordida. incentive/µgreaseµ payments or ´sweetenersµ intended to expedite performance. In Mexico. clearing goods through customs. etc. (In Italy. baaksheesh. ´dashµ. In the Middle/Near East. In Germany. Typically involves issuing licenses or permits. (Ukraine adoption example) . In France. called bustarella. ´the biteµ.

and bans the use of payments for unfair advantage although trusted local managers have leeway to interpret the rules according to local habits. But they are only used where local custom and practice dictate in the 90+ countries in which Unilever operates. the food and hygiene giant." he said. He insisted that an overall code of conduct governs these matters. . "There are customary local things. insists Unilever does not pay bribes but it does pay "facilitating payments".Corruption/Bribery ‡ The CEO of Unilever. The idea is akin to tipping a waiter to get a better table. he said.

Corruption/Bribery ‡ How do you distinguish between a bribe and a mere gift? ² Its not always clear ² Secrecy is a defining characteristic of bribery/corruption. ² Gifts are generally made openly and often declared ² Bribes are often made using a middleman ² Gifts are usually given directly ² Bribes are usually of significant value ² Gifts are typically of minimal value .

Corruption/Bribery ‡ How do you distinguish between a bribe and a mere gift? ² Consider the social situation and context ² Consider perceptions of donor and recipient important ² Consider whether or not a quid pro quo is understood to be expected .

were both Masons and Parkin had sponsored White for membership to an exclusive country club a couple of years earlier. worth $22 million per yr.& an old college buddy of John Joyce. a former employee of Ashbourn Corp. & Edgar White. the CEO of Perfect Cleaning Co. is. . the CEO of Ashbourn Corp. the Sales Manager of Perfect Cleaning Co. Pete was confident he could win this contract. Pete Stevens.·s Purchasing Director. is soliciting bids for a 5 year contract for the cleaning of their U..S. after all his company already had a good relationship with Ashbourn Corp. James Parkin. by coincidence.Gift or Bribe? ‡ Ashbourn Corp. Ashbourn Corp. facilities.

"How about booking a long weekend? I've got plenty of spare Air Miles that you can use?µ ‡ John Joyce was cautious about this suggestion. 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. They book to go on holiday with Peter and his wife in February.Gift or Bribe? ‡ Pete phoned John Joyce to find out more about the bidding process. After all. "We will have a rule. no mention of work" She says. 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. .

.000 at the casino after taking some tips from John on winning at Black Jack. It is an elegant mantel clock. John Joyce. John·s wife receives a package by courier on the 23rd of December from Pete and his wife addressed to the Joyce family. His company has a policy of not sending gifts. Pete buys John a champagne dinner to celebrate. ‡ In February. Not a word is spoken about business.Gift or Bribe? ‡ Christmas is fast approaching. Pete even wins $10. sends Pete Stephens a Christmas card. the two couples enjoy a relaxing skiing holiday together.

is awarded the contract. ‡ John tells his CEO that he hesitates to recommend Perfect Cleaning Co. John Joyce opens it and a check for $5. with John Joyce as Chairman of the Selection tell me who you think is best for the job". However. etc.Gift of Bribe? ‡ In March the bids are considered. None of the companies really stand out on price. A simple note is attached "Thanks for your tip at the Casino you deserve a share of my winnings! Pete. A week later a letter arrives marked "Private & Confidential". quality of service. his CEO tells him.µ . The bids are almost identical.000 falls out. because of his rejuvenated friendship with Pete. ‡ Perfect Cleaning Co. µDon·t worry about that. I trust you to look after our shareholders' interests .

Corruption/Bribery ‡ Bribery commonly occurs in: ² Large investment projects ² Government Purchasing ² Extra-Budgetary Activities (´Special Projectsµ) .

Corruption/Bribery ‡ Reasons/Excuses for Participation in Bribery ² Competitive necessity ² Respect for local cultural norms ² Extortion ² Inability or unwillingness to control rogue employees/delegation of power .

² Inhibits fair and efficient markets. and into projects where public officials can more easily extract bribes. lower return) ² Bribery adds to the cost of goods. . bribes are sometimes paid in order to keep a competitor out of the market. ´Pork Barrel Spendingµ. services and technologies. reasoned judgment ² Creates partiality ² Often shifts government spending away from vital functions such as education and public health. (e. ´The Big Digµ. they are less concerned about increasing operating efficiency. fueling inflation.g. by preventing it from receiving a license or winning a bid.g.Problems with Corruption/Bribery ² Distorts otherwise sound. or developing new products. etc. e.) ² Disincentive to invest (Less security. ´White Elephant Projectsµ. When companies choose to rely on bribe payments to secure market position.

g.Problems with Corruption/Bribery ² Can lower the quality of public goods and services and even threaten safety (e. Nicaragua. Turkish apartments that collapse. Bolivia. Venezuela.g. Guatemala. Panama. ² Opting to pay bribes damages company reputations and makes it difficult to say no later (the reverse of this is also true!) . Ecuador and Haiti.e. in places like Argentina. African bridges without connecting roads) ² Undermines public confidence in democracy . Honduras.

duties.) . etc. ‡ Governments are starting recognize and respond to the damage caused by bribery/corruption ‡ Why? ² Lost revenues (taxes.Corruption/Bribery .

involved major companies as well as political figures and staggering sums of money. Paid $12. Lockheed/Japan.g. ‡ Globalization: The ´borderlessµ global marketplace is bringing national economies and corporations throughout the world into increasingly greater interdependence. ‡ High profile cases (e.5 million in bribes for $430 million sales contract.Corruption/Bribery .) .

64) .´Special Report: Bribery and Business. March 2. p. Foreign Corrupt Practices Act of 1997 ² 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 ² Implies intent ² Only liable for actions of 3rd party agents when have reason to know of ² Does not prohibit facilitating payments ² (Note that the Justice Dept. Economist. ‡ U. 2002.5 cases per year. only brings on average 1.Corruption/Bribery .S.

Corruption/Bribery .S. ‡ At first. the rest of the world looked at it as a sad case of an American moralism or moralistic imperialism ² If other nations not follow suit does this = a competitive disadvantage for U.? .

in effect beginning in 1999. ‡ 1996 Interamerican Treaty Against Corruption ‡ 1997 OECD treaty committing 34 countries to similar restrictions.Corruption/Bribery . .

. the European Union. the Global Coalition for Africa and the United Nations.Corruption/Bribery . ‡ Other important anti-bribery initiatives have recently been launched by the World Bank. the International Monetary Fund. the Organization of American States. the Council of Europe. the Pacific Basin Economic Council.

. . Mozambique. Zambia & South Africa have also launched anti-corruption drives.Corruption/Bribery . ‡ Ghana.

. ‡ In addition. Japan. Taiwan and South Korea. China. 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.Corruption/Bribery . Italy. USA and France. Hong Kong. Malaysia.

‡ Not much being done to address the ´demandµ side of bribery (i.S. . extortion) ‡ RICO (Anti-Racketeering) Statutes in U.Corruption/Bribery .e.

The company is thoughtful and painstaking about how it enters new markets. . and how it conducts itself in foreign countries. how it selects local business partners.Corruption/Bribery . ‡ Reputation Management (Coca-Cola) ² Coca-Cola is operational in many developing countries. is beating competitors. and is not paying bribes. is doing well.

and to develop the kind of strength -from its consumers and the public at large -that make top officials uneasy about seeking bribes from the beverage giant. ‡ Integrity is key to its approaches. ² Coca-Cola makes maximum effort to be transparent in its dealings. to win public support.Corruption/Bribery . .

committed guests. ‡ The reality is that to maximize opportunities in the growing markets of developing countries. long-term. open. corporations must strive to be seen as honest. . Corporations must impress upon host governments. long-term relationships. and the general public that they seek fair. suppliers. customers.Corruption/Bribery .

‡ Coca-Cola trains its staff to learn about the traditions. .Corruption/Bribery . 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.

‡ Coca-Cola plays an active role in most of the countries in which it works. ‡ GE & Texaco also have developed a reputation of refusing to pay bribes. . supporting education and the arts and social services in a long-term and genuine way.Corruption/Bribery .

to assist employees to act in compliance with the firm·s policy. ‡ 4. Establish a clearly articulated written policy prohibiting any of the firm·s employees from paying or receiving bribes and ´kickbacks.µ ‡ 3. and provide continuing support. Implement the policy with due care and take appropriate disciplinary action against any employee discovered to have made payments in violation of the policy. Disclose publicly and make widely known its endorsement of the Anti-Corruption Measures. ‡ 2. . such as help lines. Provide training for employees to carry out the policy.Corruption/Bribery Caux Roundtable Anti-Corruption Principles ‡ 1.

. and conduct internal audits to assure that all payments made are proper. 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. Have the annual report in step six above audited either by an independent financial auditor or an independent social auditor.Corruption/Bribery Caux Roundtable Anti-Corruption Principles ‡ 5. Report annually on the firm·s bribery and corruption policy. ‡ 6. ‡ 7. Record all transactions fully and fairly. ‡ 8. in accordance with clearly stated record-keeping procedures and accounting controls. or both. along with a description of the firm·s experiences implementing and enforcing the policy.

‡ 10. Establish a monitoring and auditing system to detect any improper payments made by the firm·s employees and agents. 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. ‡ 12. .Corruption/Bribery Caux Roundtable Anti-Corruption Principles ‡ 9. ‡ 11. such as Transparency International or a social auditor). 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. Establish a system to allow any employee or agent of the firm to report any improper payment without fear of retribution for their disclosures.

.Accounting Principles Accountant¶s Duty of Care An accountant must possess the skills that an ordinarily prudent accountant would have and exercise the degree of care that an ordinarily prudent accountant would exercise.

.Accounting Principles The skills and care of an ordinarily prudent accountant are reflected in the: Generally accepted accounting principles (³GAAP´) promulgated by the Financial Accounting Standards Board (FASB). and the Generally accepted auditing standards (³GAAS´). promulgated by the American Institute of Certified Public Accountants (AICPA).

Accounting Principles An accountant conforming to GAAP or GAAS. subject to the accountant clearly qualifying her opinion or disclaiming liability for particular errors. will normally not be held liable for incorrect judgments or for relying on incorrect information. . a violation of GAAP or GAAS will be prima facie evidence of the accountant¶s negligence. On the other hand. and acting in good faith.

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