Ethics

oMore Than Legality

oStandards are Fundamental

oStem From Individual

The Legal Ethical Grid

Ethical but

Illegal

UnethicalAnd

Illegal

Legal And

Ethical

Legal But

UnethicalLegal

Ethical Unethical

Illegal

Factors Influencing Managerial Ethics

IndividualIndividual OrganizationalOrganizational EnvironmentalEnvironmental

oValuesValues

oWork Work BackgroundBackground

oFamily StatusFamily Status

oPersonalityPersonality

oTop Level Mgmt. Top Level Mgmt. PhilosophyPhilosophy

oThe Firm’s Reward The Firm’s Reward SystemSystem

oJob DimensionsJob Dimensions

oCompetitionCompetition

oEconomic Economic

ConditionsConditions

oSocial/Cultural Social/Cultural

InstitutionsInstitutions

Fines & Reasons

Company Fine Reason

Arthur Andersen $500,000Obstruction of Justice

Shredding Enron Documents

Citigroup $5,000,000Analyst Issued

Misleading Information

Merrill Lynch $100,000,000

Conflict of Interest Between Investment

Bank & Research Dept.

Credit SuisseFirst Boston $100,000,000

IPO Shares Unfairly Distributed

Source: Business Week, Nov. 4, 2002

Crisis of Trust

All Corporations

Fair Amount 41%

Only A Little 35%

Not At All13%

A Great Deal 10%

No Opinion 1%

Your Employer

A Lot 50%

Only Somewhat 39%

Not At All 8%

No Opinion 3%

Source: USA Today/CNN/Gallup Poll, Jan. 25-27, 2002

Ethical Decision Resolved Through:

Religious Teachings

Individual Rights

Legislation

Court Decisions

Codes of Ethics

Compliance-Based Increasing control and

penalizing wrongdoers

Integrity-Based Define guiding values Support ethical

behaviour Shared accountability

Six Steps to Improve Ethics

1. Top management support2. Expectations begin at the top3. Ethics imbedded in training4. Ethics office set up5. External stakeholders informed6. There must be enforcement

Responsibility Defined

Corporate Social Responsibility -the concern businesses have for the welfare of society

Corporate Philanthropy – charitable donations

Corporate Responsibility – acting responsibly within society

Corporate Policy –position on social and political issues

Reaction to the New Social Responsibility

Many companies have undertaken a Social Audit - a systematic evaluation of the company’s position and progress on social issues

Shareholders and other stakeholders have actively encouraged companies to become proactive on social issues

Conundrums of Doing Business Globally

What do you do when: You are forbidden to trade – Cuba Ethical norms of the host country

violate the laws of the home country Social responsibility has whole new

meaning Environmental practices differ from the

home company