Business-Ethics-and-Professional-Responsibility by aliasghar84

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									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, “The market is a place set apart where men may deceive one another.”

Unethical Behavior
The Old Testament also talks about “false balances” b t “f l b l ” ( (Amos 8:5; Hosea 12:7; ; ; Micah 6:11) despite God’s command against such (Lev (Lev. 19:36; Ezek. 45:10)

Business Ethics
• Business Ethics is about:
– Decision-Making Decision– By People in Business – According to Moral Principles or g p Standards

DecisionDecision-Making
• C fli ti d ti Conflicting duties, l loyalties or lti interests create moral dilemmas requiring decisions to be made

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

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

DecisionDecision-Making
• 8 Steps to Sound, Ethical Decision-Making Sound Decision– 1. Gather as many relevant & material facts as circumstances permit. – 2 Identify the relevant ethical issues (consider alt 2. alt. viewpoints) – 3. Identify, weigh & prioritize all the affected parties (i.e. stakeholders) (see Johnson & Johnson Credo, Taking Sides, p.25) – 4. Identify your existing commitments/obligations. – 5. Identify various courses of action ( y (dare to think creatively) y) – 6. Identify the possible/probable consequences of same (both short & long-term) long– 7. Consider the practicality of same. – 8. Consider the dictates and impacts upon your character & integrity.

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

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.

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

By People in Business y p
• Ultimately one's own motivation for ethical behavior Ultimately, one s must be internal to be effective. External motivation effective. has a limited value -- punishment and fear is only effective in the short-run. If people believe th t th ff ti i th shorth t l b li that they are above the law, they will continue to act unethically. Organizations that have a clear vision, and support individual integrity are attractive places of employment. - Teri D. Egan, Ph.d, Associate Professor, Professor The Graziadio School of Business at Pepperdine University, Corporate Ethics, Washington Post Live Online, Friday, Aug. 2, 2002; Online,

Ethics
• Values: Values: guiding constructs or ideas, representing deeply held generalized behaviors, which are considered by the holder, to be of great significance. f t i ifi Morals: Morals: a system or set of beliefs or principles, based on values, which constitute an individual or group’s perception of human duty, and therefore which act as an influence or control over their behavior. Morals are typically concerned with behaviors that have potentially serious consequences or profound i h t ti ll i f d impacts. Th t The word “morals” is derived from the Latin mores (character, custom or habit) Ethics: the study and assessment of morals. The word "ethics" is derived from the Greek word, ethos (character or custom).

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

Morality
• The historian Arnold Toynbee observed: "Out of 21 notable Out civilizations, 19 perished not by conquest from without but by moral tf ith t b t b l decay from within."

Absolutism vs. Relativism
• Ethical Absolutism: What is right or wrong is consistent in all places or circumstances. There are universally valid moral principles. (“… only by obedience to universal moral norms does man find full confirmation of his personal uniqueness and the possibility of authentic moral growth.” - Pope John Paul II, see also Rom. 12:2; Heb. 13:8) • Ethi l Relativism (also called “Situational Ethical R l ti i ( l ll d “Sit ti l Ethics”): Ethics”): What is right or wrong varies according to the individual/society/culture or set of circumstances. y There are no universally valid moral principles. (Related Biblical reference "everyone did what was right in his own eyes" (Deut 12:8 Judges 17:6; eyes (Deut. 12:8, 21:25) (see also Isa. 5:20 & 24, Jer. 2:13, Rom. 1:181:18-32, 1 Cor. 5:6-7, 2 Cor. 6:14-15, 1 John 1:8) 5:66:14-

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

Relativism
• As Cardinal Joseph Ratzinger said, Relativism is presented “presented as a position defined positively by the concepts of tolerance and knowledge through dialogue and freedom, concepts which would be limited the i t li it d if th existence of one valid t th f all were f lid truth for ll 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 Faith Guadalajara Mexico,

Absolutism v. Relativism
• “The demise of America’s legal foundations occur when society rejects laws that are based on solid, irrevocable, moral, universal, absolute values, to a society that bases it’s laws on an arbitrary system of relativism, l bit t f l ti i situational ethics, materialism, individualism, hedonism, paganism, or in any secularist ideology. This secularization of law has influenced all branches of knowledge – law, philosophy, b i hil h business, religion, medicine, li i di i 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 “What is right or wrong depends on What differences in individual values and cultural diversity.” Only 25% agreed y y g with the statement that “There 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. – B t as Cardinal Ratzinger said, “Th But, C di l R t i id “There are i j ti injustices that will never turn into just things (for example, killing an innocent person, denying an individual or g p the p y g groups 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 unjust. 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 ti l i t t d fi h ti ll right or wrong. wrong.
• • • • • • • • • • “In Germany they first came for the Communists, and I didn't speak up because I wasn't a Communist. Then they came for the Jews, and I didn't speak up because I wasn't a Jew. Then they came for the trade unionists, and I didn't speak up because I wasn't a trade unionist. Then they came for the Catholics, and I didn't speak up because I was a Protestant. Then they came for me — and by that time no one was left to speak up.”
– - German anti-Nazi activist, Pastor Martin Niemöller anti-

Problems with Relativism
Relativists speak in terms that “soften” harsh realities. "Intelligent, educated, religious people embrace illogical absurdities that set aside not only God's truth, but also God s 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 meaning 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 immoral, merely accept/tolerate alternative determinations, so that none are held to , account
“Over the years I have found that those who call themselves atheists actually h h l h i ll have a strong sense of f the absolute truth they know exists. They just don’t want to acknowledge that it’s true - because if they g y did, they would have to change the way they live. They flee on moral grounds; refusing to submit themselves, themselves they exchange the truth for a lie ” lie. Chuck Colson -Being the Body, 2003. Body,

Problems with Relativism
• Commenting on the idea that legal reforms can compel corporate morality, Mi h l l t lit Michael Prowse, in the Financial Times, stated that Times, "The underlying problem is that we are living The in times that might aptly be called 'post'postethical.'" People are now "emotivists," who p , relativize moral judgments and "obey the law, help others and respect customs and mores only if they calculate that this will benefit them personally in some way. ... The root problem is a loss of belief in objective ethical standards.”

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

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

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

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

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

Values

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

Values
• • • • • • • Honesty Respect Responsibility R ibilit Fairness Compassion Perseverance Courage C

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

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

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

Values - Honesty
• Richard Sears—founder of Sears Sears— Roebuck and Company—started Company— the modern mail order industry, supplying a burgeoning nation with innovative products and building a business that gave employment to hundreds of thousands of people. In his zeal to sell merchandise, Sears occasionally would get carried away with catalogue descriptions, ih l d i i praising products far beyond the literal truth. This in turn led to returned merchandise and reduced profits. But Sears learned his lesson. In later years, he was fond of saying, "Honesty is the best li b t policy. I know because I've k b I' tried it both ways.” - from Integrity at
Work, Work, ed. By Ken Shelton.

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

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

Values - Respect
• R Respect: T give particular t To i ti l attention to, show consideration for, or h ld in high or special f hold i hi h i l (Merriamregard (Merriam-Webster's Online
Dictionary, 10th Edition) Di ti Editi ) • Should respect be given or must respect be earned?

Values - Respect p
• “Every man is to be respected as an absolute end in himself; and it is a ; crime against the dignity that belongs to him as a human being, to g g, use him as a mere means for some p p external purpose.” - Immanuel Kant,
Prussian geographer and philosopher (1724(17241804)

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

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

Values - Respect - Tolerance?
• What about tolerance?

Values - Respect - Tolerance? p
• "Our culture has fallen into a kind of moral vertigo – we value tolerance so l ti l t l much that we don't know how to talk to t each other about what is right and h th b t h t i i ht d good,” - Rev. Kevin Phillips, director of
the Business L d th B i Leadership and Spirituality hi d S i it lit Network (BLSN) quoted in “Competing Values Values”, by Jane Lampman Christian Lampman, Science Monitor, August 1, 2002. Monitor,

Values - Respect - Tolerance?
• Did you know that the term “ tolerance” (or in some translations “sufferance” Gk. eao) is rarely eao) used in the New Testament, and that where it is used it is generally used in a negative sense? For example:
– “Notwithstanding I have a few things against thee, because you tolerate that woman Jezebel, who calls herself a prophetess, to teach and to seduce my servants to commit fornication and to eat things fornication, sacrificed unto idols.” Rev. 2:20

• By contrast, the New Testament uses the term “ love Gk. love” Gk agapeo nearly 150 times in a positive sense.
– So what’s the difference between love and tolerance?

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

Values - Compassion p
• Compassion: "sympathetic sympathetic consciousness of another's distress together with a desire to alleviate it" g
[Webster's 7th New Collegiate Dictionary], fellow

feeling, the emotion of caring concern; the opposite of cruelty, in Hebrew rahamanut, rahamanut, from the word rehem, 'womb', based on rehem, the idea of sibling love (coming from from the same womb).

Values - Compassion p
• "The word 'care' finds its roots in the The care Gothic 'Kara' which means lament. g The basic meaning of care is: to grieve, to experience sorrow, to cry out with.. . . A friend who cares makes it clear that whatever happens in the external world, being present to t each other [now] is what really h th [ ]i h t ll Now, matters." [Henri Nouwen, Here and Now,
p. p 105]

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

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

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

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

Values - Compassion p
Some scriptural references regarding compassion: – (Matthew 18:27, Luke 10:30-37, 10:30(Parable of the Good Samaritan), (P bl f th G d S it ) 1 John 3:17, Jude 1:22)

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

Values - Responsibility p y
• “I am only one, but still, I am one. I cannot y do everything but I can do something. And, because I cannot do everything, I will not refuse to do what I can.” - Edward
Everett Hale, American clergyman and writer (1822(1822-1909)

• “The question for each man to settle is not what he would do if he had the means, time, time influence and educational advantages, but what he will do with the things he has.” - Hamilton Wright Mabee

Values - Responsibility
• “Any man’s life will be filled with constant and unexpected encouragement if he makes up his mind to do his level best each day.” - Booker T. Washington, American
educator (1856-1915) d t (1856-

• “I long to accomplish some great and I noble task, but it is my chief duty to accomplish small tasks as if they were great and noble ” - Helen Keller American noble. Keller,
social activist, public speaker and author (1880(18801968)

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

Values - Fairness
• Justice: demonstrating fairness, equity, Justice: impartiality, impartiality righteous action action, • To some, justice is about conformity to truth. To others, its about conformity to law • B l But law and justice are 2 different concepts. dj i diff
– “The law is something we must live with. Justice is g somewhat harder to come by.” - Sherlock Holmes, in The Case of the Red Circle. – “This is a court of law, young man, not a court of justice.” ~Oliver Wendell Holmes, Jr. “justice occurs “j stice occ rs on earth when po er and authority hen power a thorit between people are exercised in conformity with God’s standards of moral excellence.” - Gary Haugen, in The Good News
About Injustice, InterVarsity Press, 1999.

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

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

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

•

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

Values - Courage
• The first place to start is for every individual to become aware of their core values and to have the courage and discipline to live out of them in all aspects of their lives. (“The rising tide p ( g
won't lift this economy: Unless we're willing to confront the trust problem we've helped to create , create”, Bill Grace, Founder & Executive Director, Seattle's Center for Ethical Leadership, Guest Columnist, Seattle Post-Intelligencer, June 16, Post2003.)

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

•

• • •

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

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

Values - Courage g
• “The credit belongs to the man who is actually in the arena... who strives valiantly... valiantly who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, g 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 l h ll b ith th ld d timid souls who knew neither victory nor defeat. defeat ” - Theodore Roosevelt

Values - Courage
• Courage: the ability to disregard fear; bravery. bravery The Latin root of this word is cur, cur, which means heart. Courage literally means to “take heart”. Fear exists along a continuum. Courage i ti C involves recognizing l i i 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-being.

Values - Universal Rule?
• The “Golden Rule” , i.e. to “do unto others as you would have them do unto you” is an example of a value common to many cultures/religions (Mahabharata 5:1517, g ( ,
Hinduism, Talmud, Shabbat 31a & Levitcus 19:18, Judaism, Matthew 7:12, Christianity, Udana-Varga Udana5:18, Buddhism, Analects 15:23, Confucianism, Number 13 of I N b f Imam "Al-N "Al-Nawawi's Forty Hadiths.", i' F t H dith " Islam)

• Note: Several Corporations have directly incorporated some form of this rule in their i t d f f thi l i th i codes of ethics including Coachman, Mary Kay, Progressive, Merrill Lynch and USAA y g y

Corporate Culture
• Both individuals and organizations hold “values”
– A corporation is said to manifest its “values” in its “corporate culture” • Corporate culture is loosely defined as the attitudes, behaviors and personalities that make up a company and that h th t shape it b h i and reputation, or as Elizabeth Kiss its behavior d t ti Eli b th Ki of the Kenan Institute for Ethics puts it, corporate culture is “how we perceive, think, feel and do things around here.” • Most employees take their cues from the company culture and behave accordingly.

• A business derives its character from the character of the people who conduct the business. - Ricky W. Griffin, Management, Boston: Houghton Mifflin
Company (2002)

Corporate Culture

Corporate Culture
• "Moral behavior is concerned primarily with the interpersonal dimension of our behavior: how we treat one another individually and in g y groups — and, p increasingly, other species and the environment." The key here is that morality brings us into contact with others and asks us to consider the quality of that contact. contact. • Quote from The Leadership Compass, John Wilcox and Susan Compass, Ebbs, as quoted in Everyday Ethics, by Thomas Shanks, S.J., Markkula Center for Applied Ethics.

Corporate Culture
• "The first step in the evolution of ethics is a sense of solidarity with other human beings. beings " — Alb t Albert
Schweitzer, early 20th20thcentury German Nobel Peace Prize-winning mission Prizedoctor and theologian

Corporate Culture
• The Pressure to Conform
– W are all a kind of Chameleon, taking We ll ki d f Ch l t ki our hue - the hue of our moral character, character from those who are about us us. - John Locke (1632 - 1704)

Corporate Culture p
• 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 subject, 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. - “Opinion and Social
Pressure , Pressure”, Scientific American, Nov. 1955, 31-35. American, 31-

Corporate Culture
• The Pressure to Conform
– “Culture shapes behavior. There are plenty of perfectly p p y p y 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 b f th E d Gl b l C i d l destroyed the company. Her book, Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen (Random House/Broadway Books 2003) describes the Books, 2003), process of ethical erosion in grim detail. – “Postcards 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. - “Institutional Ethics: An Oxymoron”, By Joe E. Trull, Editor, Christian Ethics Today Journal of Today, 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 y lone actor fully explain corporate misconduct. More typically, unethical business practice involves the tacit, b i ti i l th t it if not explicit, cooperation of others and reflects the values attitudes values, attitudes, beliefs, language, and behavioral patterns that define an organization s organization’s operating culture. - Lynn Sharp culture. Paine, Harvard Business School ,

Corporate Culture
• “A strong corporate culture founded on ethical principles and sound values is a p p 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 shirts, paperweights, signs. firm printed a 61-page booklet with its 61code of ethics and every employee had to sign a certificate of compliance. Th t i tifi t f li That company was Enron!

According to Ethical or Moral, Values, Principles or Standards • Whose Values? Wh V l ?

According to Ethical or Moral, Values, Principles or Standards
– Personal – Family – Peers – Religious – Company – Community, Regional, National, International te at o a

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

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

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

•

•

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

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

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

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

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

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

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

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

According to Moral Principles or Standards
– “Without civic morality communities perish; without personal morality their survival has no value.” —
Bertrand Russell 20thRussell, 20thcentury British mathematician and p philosopher p

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

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

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

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

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

Ethics
DutyDuty-Based v. Outcome-Based Ethics Outcome– Duty (Deontology)
• Duty is an act done simply for the sake of what is right. • Duty is determined by “revealed truths” and involves universal principles g • Often religion-based religion• e.g. Kant’s Categorical Imperative – "Everyone is obligated to act only in ways that respect the intrinsic value, human dignity and moral rights of all persons." • Places High Value on Individual Rights

– Outcome (Consequentialism)
• Ethical if best outcome for the majority • Involves cost-benefit analysis cost• e.g. Bentham & Mill’s Utilitarianism – "Of any two actions, the most ethical one is that which will produce the greatest balance of benefits over harms." • De-emphasizes individual rights De-

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

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

Integrity
• “Psychologists have found integrity to be Psychologists essential to an individual's sense of identity and self-worth, self-worth, enabling the successful navigation of change and challenge. Links between integrity and the ability to gain and maintain the trust of others have often been noted. Many purveyors of practical advice, including Cicero and Benjamin Franklin, have counseled that integrity is the F kli h l d th t i t it i th cornerstone of worldly success. According to Franklin, "no Qualities [are] so likely to make a poor M ' Fortune as those of Probity & Man's F t th f P bit Integrity" (quoted in Beebe, 1992, p. 8)” - from
Blackwell’s Encyclopedic Dictionary of Business Ethics. Ethics.

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

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

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

•

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

Character
• Character: Th notable/conspicuous/ Character: The t bl / Ch t i / distinguishing moral/ethical traits or characteristics of a person that give h t i ti f th t i evidence of their essential nature and which ultimately shape their d hi h lti t l h th i reputation.

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

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

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

Character
• Compartmentalization: Many people believe that what individuals do in their private lives is their own business as long as it does not adversely impact the performance of their duties to the organization and they are able to “deliver the goods” professionally. Under this way of thinking even serious moral failures may be excused. Some refer to this kind of thinking as “compartmentalization.” (e.g. President Clinton/Monica Lewinsky situation, where, despite the scandal, President Clinton maintained between a 60 and 70% approval rating with the American public.) • Do you agree with this? • Contrast: “Find God in all things”, St Ignatius Find things St. Loyola.

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

Reputation
• Eli Lily introduced a drug, fialuridine, intended to treat hepatitis B. However, 15 patients who submitted to trials of the drug suffered liver toxicity and 6 died. Rather than follow the company’s long-standing “no comment” policy, the new Chairman and CEO, Randall Tobias openly acknowledged the failure. His view was that communication stands at the top of the list in the elements of good leadership. In addition, he believed that if a company leaves a communications void, others will fill it with misinformation. (Put the Moose on the

Table:Lessons in Leadership from a CEO’s Journey Through B i T bl L i L d hi f CEO’ J Th h Business and Life, Randall and Todd Tobias, Indiana University Press)

Reputation
• A railroad executive burst into Arthur Andersen’s office one day in 1914, demanding that the firm’s founder approve the railroad’s books. firm s railroad s 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 A d di i h h l d h fi b f h 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 Enron.

Reputation R i
• 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 p p a reputation that took 37 years to build in 37 seconds. seconds And it might take more than 37 years to build it back.”

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

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

The Role of Leadership in Developing a Culture of Integrity
• “ A company's commitment to integrity company s flows from the commitment, action, and credibility of its leaders ” - Responsibility Lies In leaders.

Leadership , By: Ruettgers, Mike, Chairman of the Board of EMC Corporation, Vital Speeches of the Day, 0042742X, 12/15/2003, Vol. 70, Issue 5 Delivered to The Fall 2003 Raytheon Lectureship in Business 5, Ethics, Bentley College, Center for Business Ethics, Waltham, Massachusetts, October 8, 2003

Role of Leadership in Developing a Culture of Integrity
• A leader’s integrity is probably the single leader s 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, measure, reward and dislike. dislike
– e.g. At Enron and Worldcom, executives and Board members elevated growth and short-term profits short term above all other considerations and nurtured a culture of cut-throat competition within the company.

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

The Role of Leadership in Developing a Culture of Integrity
• A report by former U.S. 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.S. history. Ebbers resisted efforts to establish a company code of conduct calling it a “colossal waste of time”. He colossal time also made numerous, often highly emotional demands for “results”. (Reports:Ebbers knew of “gimmickry”, Matthew Barakat, Raleigh
News & O Observer, June 10, 2003 p.1) 0 2003,

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

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

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

Role of Leadership in Developing a Culture of Integrity
• “Business ethics is integral to effective Business leadership. It is not something that can be delegated to others or to specialists like ethics officers, though the latter help. Top managers have the responsibility to "set the moral tone." -

Archie B Carroll Robert W. Scherer Chair of Management B. Carroll, W in the Terry College of Business, University of Georgia, Athens-Banner Herald, 12/16/03.

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

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. Demonstrating an all-too-uncommon loyalty to his 2,400 workers, he continued paying them for 90 days at a cost of $1.5 million per week while the factories were being rebuilt. He also gave generously to support charities that helped the families of nine critically injured workers who have since recovered.

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, “The fundamental difference is that I consider our workers an asset, asset not an expense. I have a expense responsibility to the worker, both blue-collar and white-collar”, Feuerstein added, his voice taking an edge of steely conviction. ‘I d f t l i ti have an equal responsibility to the community. It would have been u co sc o ab e o pu unconscionable to put 3,000 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
• 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 p y summer heat drove temperatures to more than 90 degrees on the manufacturing lines.

Role of Leadership in Developing a Culture of Integrity
• While many other American mill owners moved their operations to foreign countries, where employees earn as little as $1 or $2 an hour, Feuerstein said he was committed to keeping his business in Lawrence, MA where he paid his workers $12.50 an hour. In fact, Malden Mills' new $70 Mills million plant was situated in the heart of a ghetto in Lawrence, one of the state's poorest cities. "I think it's the duty of government and industry to [remain committed to urban America]," he said. "Because if we don't, we won't have our cities in another 20 to 30 years. And if we don't have our major don t cities, we won't be the leader the financial world."

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 d i i f k 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 was as moved by his workers' gratitude as they were by his generosity He told of generosity. one employee who thanked him for his support after the fire and said, "We're going to pay you back g g p yy tenfold." Feuerstein said he didn't completely comprehend the meaning of the worker's comments until after two months until, months' time, production in one undamaged portion of the mill was boosted to 200,000 yards of fabric a week - 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. li d i diffi l i These customers returned the favor by remaining loyal customers even when Malden Mills was nearly destroyed.

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. Actions Speak Louder Than Words

Spiritual F S i i l Foundation d i
•
recently concluded a speech quoting from Jeremiah 9:22-23, in flawless Hebrew, then giving the fl l H b h i i h English translation. His message was "Let the rich man not praise himself, himself," but rather, by demonstrating the will of God, show kindness, justice and righteousness in his actions. His response to the catastrophe was in accordance with the Torah: you do not sacrifice the lives of people g who are depending on you.”

Spiritual Foundation: Feuerstein

Spiritual F S i i l Foundation d i
• Feuerstein also quoted the famous first century Talmudic scholar Hillel - twice: "In a situation where In there is no righteous person, try to be a righteous person” and "Not all who increase their wealth are wise.”

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

Spiritual F S i i l Foundation d i
• Feuerstein grew up in a family where Talmudic discussions around the dinner table helped formulate his beliefs about how to act in the world. "Judaism gives you a complete and thorough p g ethical framework within which you and your family can live " he explained live, explained.

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

Spiritual F S i i l Foundation d i
• Spiritual study remains an important part of Aaron Feuerstein's life, and he refers to it as "exercise for my mind." Also, each day he alternates between doing an hour of running and an h i d hour of f calisthenics. During that time, he goes over memorized passages from either Jewish literature (his favorites are the Prophets, the Psalms and Pirke Avot) and English literature (specializing in Shakespeare's tragedies).

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

Spiritual Foundation
• In a recent poll 58% of Americans said yes This is not the view in poll, yes. most developed countries. For example, in France, only 13% said yes. (Nicholas D. Kristof, N.Y. Times} However, However only 4 % of U S adults have a biblical worldview as the basis U.S. of their decision-making, according to a new study by Barna Research Group. "Although most people own a Bible and know some of its content, our research found that most Americans have little idea how to integrate core biblical principles to form a unified and meaningful response to the challenges and opportunities of life," said researcher George Barna. Among the most prevalent alternative worldviews was postmodernism, dominant in the two youngest generations.

•

Spiritual F S i i l Foundation d i
• “the happiness of a people, and the good g order and preservation of civil government, essentially depend upon piety, religion, and morality." - The Massachusetts Constitution of
1780, Ch. V, Sec. 2

Spiritual F S i i l Foundation d i
• "Religion, morality, and knowledge, being g y g g necessary to good government and the happiness of mankind, schools and the means of education shall forever be f d i h ll f b encouraged.” - Northwest Ordinance, enacted
by the Continental Congress in 1787, Art. 3, 1 1787 Art 3 Stat. 51, 53 n. a (July 13, 1787, re-enacted Aug. 7, 1789)

Spiritual F S i i l Foundation d i
• "Where there is no religion, there will be no morals.” -

Benjamin Rush,, Speech in j p Pennsylvania Ratifying Convention (Dec. 12, 1787)

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

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

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

Of all the dispositions ll h di ii and habits which lead to p political p p y, prosperity, religion and morality are indispensable supports… supports Reason and experience both forbid us to expect that national morality can ti l lit prevail in the exclusion of religious principle.

George Washington s Washington’s Farewell Address, September 17, 1796

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

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

Spiritual F S i i l Foundation d i
• “Business and religion are not separate worlds. Business is people … they take their religion to work with them … True religion is is the life we lead, not the creed we profess … A character standard is more important to a stable world than an international gold standard.” - The

Spiritual Responsibility of American Business and Industry. By: Johnson, Clement D.. Vital Speeches of the Day, 12/15/55, Vol. 22 Issue 5, p151, 3p; (AN 9867986)

Spiritual F S i i l Foundation d i
• “[T]he loss of God leaves man at [T]he the naked mercy of his fellows, where might makes right.” – J h right ” John Montgomery, The Law Above the Law,
55 (1975)

Spiritual F S i i l Foundation d i
• “What if, under your particular understanding of the universe, other human beings were not created in God's image, had no inherent dignity, and were yours to do with as you pleased? And what if your particular response to the mystery of life happened to be the same as that of Eric Harris, one of the two young killers in Littleton, Colorado, who said, "My belief is that if I say something it goes. I am something, goes the law"? or, as Fyodor Dostoevsky wrote, "Without God, everything is permitted"?” - The Necessity of Truth by Senator Rick Santorum Heritage Santorum, Lecture #643, August 6, 1999

•

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

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

Spiritual F S i i l Foundation d i
• In Business and Religion: Odd Couple or Bosom Buddies? Evan Gahr reports that that:

– Allou Health and Beauty Care, Inc., which boasts one of the highest profit margins in the industry, bases its business operations principles enunciated in the Jewish Talmud.

Spiritual F S i i l Foundation d i
• According to a recent national survey by the American Research Group:
– 70 % of respondents believe that corporate scandals would be avoided if CEOs followed biblical principles. – 94 4% of respondents believe companies run by 94.4% individuals who follow the Bible will grow at least as fast or faster than those that do not. – 54% percent of respondents said they would be more likely to invest in a company run by a CEO who uses the Bible to guide his or her business decisions decisions.

Spiritual F S i i l Foundation d i
• And according to one study, a majority of Americans see religion as central to g recovering the country's moral compass.

Spiritual F S i i l Foundation d i
• Christian philanthropist Sir John Templeton, regarded by Wall Street as one of the world's wisest investors, contends in his book, The Templeton Plan—21 Steps to Personal Success and Real Happiness, that "the most successful people are often the most religiously motivated. They are likely to have the keenest understanding of the importance of ethics in business. They can be trusted to give full measure and not cheat their customers.” I hi extensive research, d h h i ” In his i h 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 principles. the lives by God's principles is the same person who will succeed in life, making lasting friendships and, most likely, reaping significant financial rewards ”- Christian Ethics in Business - Asset or Liability, Ian rewards. Liability
Buchanan, www.christianity.ca.

Spiritual F S i i l Foundation d i
• Does a leader’s strong spiritual foundation g guarantee that he will lead his company in developing a culture of integrity?

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

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

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, when asked by The New York Times last November about Mr. Feuerstein's actions in the wake of the Malden Mills fire, and about the company's newly precarious economic prospects, suggested that "it may have been it that the desire to take principled action somehow blinded him to thinking long term.” Perhaps SHE was the one not thinking LONG TERM? (Mark 8:36)

Role of Leadership in Developing a Culture of Integrity
• It seems appropriate that Feuerstein, Feuerstein translated from the Yiddish, means “firestone”, or “a stone which can endure intense heat”, because it is clear that his integrity survived a literal “trial by fire”.

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

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

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

Role of Leadership in Developing a Culture of Integrity
• 10 Characteristics of a Servant Leader (from Spears, Reflections on Leadership)
– 1) Active Listener A i Li
• Leaders must be good listeners and invite discussion, debate and feedback. - Carol Stephenson

– – – – – – – – –

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

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. Among these are the Toro Company (Minneapolis, Minnesota), (Minneapolis Minnesota) Synovus Financial Corporation (Columbus, Georgia), ServiceMaster Company (Downers Grove, Illinois), the Men's Wearhouse (Fremont, California), Southwest (Fremont California) Airlines (Dallas, Texas), and TDIndustries (Dallas, Texas).

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

3 Theories of Social Responsibility
• Classical Theory • Stakeholder Theory • C Corporate Social Responsibility Theory t S i lR ibilit Th (CSR)

Classical Theory Cl i l Th
• Definition: The role of business is to maximize profits within the law (see Milton Friedman "The Friedman, The Social Responsibility of Business Is to Increase Its Profits.",

New York Times Magazine, 1970)

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

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

Classical Theory - C Cl i l Th Contra
• Problems with: Market Failures (e.g. pollution & resource depletion, see Pacific Lumber Case, Desjardins, Case Desjardins Introduction to Business Ethics, p.39, a successful, balanced enterprise ruined)

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

Classical Theory -Contra Cl i l Th C
• “In fact, the purpose of a business firm is not simply to make a profit, 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,, and who form a particular p group at the service of the whole of society. Profit is a regulator of the life of a business, but it is not the only one; other human and moral factors must also be considered which, in the long term, are at least equally important for the life of a business.” - Pope John Paul, Centesimus annus, May 1, 1991

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

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

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

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

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

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

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

Corporate Social Responsibility Theory
• • Possible Examples Merck: moved to develop Mectizan, a drug that would treat river blindness, a disease that primarily affected the poor. Merck knew that it would cost millions to develop and that they would most likely not realize a direct profit from the effort. But this resulted i a ff B hi l d in 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.

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

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

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

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

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

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

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

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

Environment
• A Areas of C f Concern? ?
– – – – Waste & Pollution Use of Natural Resources Preservation of Environmentally Sensitive Areas Preservation of Biodiversity
• Consider Endangered Species Act, Noah/Ark, Note: Under Jewish Law: The medieval Jewish commentator Nahmanides explained the biblical injunction against slaughtering a cow and her calf on the same day (Leviticus 22:28) and the taking of a bird with her young (Deuteronomy 22 6) "Scripture will not 22:6). permit a destructive act that will cause the extinction of a species, even though it has permitted the ritual slaughtering of that species (for food). And he who kills mother and sons in one day, or takes them while they are free to fly away, is considered as if he destroyed that species " The Sefer Ha hinukh away species." Ha-hinukh offers a similar explanation, stating that there is divine providence for each species and that God desires them to be perpetuated.

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

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

Environment
– What is the world’s oldest profession?

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

Sweatshops S h
• Sweatshops: Huge mass production facilities in which large numbers of people work under barbaric conditions for subsistence wages.

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

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

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

• Major offender: apparel industry.

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

Globalization
• Yes - Black et al
– Violate Int l Human Rights & Labor Laws Int’l – Right to a “living wage”? – Companies can afford to treat better/pay more
• A men’s dress shirt, made in Mexico, and selling for $32.00 in the United States, costs only $4.74 to produce

– Customers will not tolerate sweatshops and are willing to pay more to prevent them. (Is this true?)
• Ad by “Behind the Label” and organization dedicated to exposing sweatshops shows a young American girl shopping and saying, “I helped push African women into slums, I was just shopping.”

Globalization
• No- Myerson - Merely “Growing Pains”
– May be only option in developing countries to accumulate capital
• First-step towards modern prosperity (e.g. Hong Kong, Singapore, South Korea, Taiwan, Indonesia) Over the past 50 years, countries like India resisted sweatshops, while countries that started at a similar economic level - like Taiwan and South Korea - accepted sweatshops as the price of development. Today, Taiwan and South Korea are modern countries with low rates of infant mortality and high levels of education; in contrast every year 3.1 million Indian contrast, 31 children die before the age of 5, mostly from diseases of poverty like diarrhea. Per capita income in Indonesia has more than tripled in the last 20 years. • “The simplest way to help the poorest Asians would be to buy more from sweatshops, not less.” - Nicholas D. Kristof, N.Y. Times, 9/4/2000.

Globalization
• No- Merely “Growing Pains”
– When Nike and Gap pulled out of Cambodia after a BBC report on sweatshops there it cost the country $10 million in contracts and hundreds or workers lost their only source of i l f income f themselves and their for h l d h i families. – China Vietnam and various Eastern European China, Countries are now Sweatshop “hot spots” – The United States has had its own history of sweatshops, employing African & Asian slaves, various waves of immigrants, etc,

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

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

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

Is Ethical Behavior Good for Business?
• Some Costs of Ethical Misconduct
– Public/Interest Group/NGO disgrace/scandal/ostracism/repudiation/protests – Litigation/Prosecution – Decreased Employee Morale/Loyalty/Commitment/Performance/Productivity M l /L lt /C it t/P f /P d ti it – Loss of Business/Profits – Loss of Customer/Supplier/Partner Customer/Supplier/Partner, Trust/Goodwill/Loyalty

Is Ethical Behavior Good for Business?
• S Some Addi i Additional C l Costs of Ethical Misconduct f E hi l Mi d
– Loss of Social/Reputation Capital/Goodwill (i.e. the willingness of stakeholders to overlook failings) – Shaken public confidence in company and in capital markets – Layoffs – Loss of Investments/Pensions – Increased Government Scrutiny/Regulation – Environmental/Health Damage

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

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. And it gets better: According to Management Review, published by the American Management Association "For the 47 Association, companies expressing a more extensive or more explicit commitment to ethics, the market value added difference was larger--an average of $10.6 billion, or almost three times the MVA of companies" without similar commitments. commitments

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

Is Ethical Behavior Good for Business?
• An investment of $1,000 ten years ago in each of ten companies highly regarded for ethical behavior (G.E., Coca-Cola, Hewlett-Packard, Microsoft, I t l S th Mi ft Intel, Southwest Ai li t Airlines, Berkshire B k hi Hathaway, Disney, Johnson & Johnson, and Merck) would have resulted in a return nearly three times as much as an investment of $10,000 in the Standard & Poor’s 500 stock index. (Fortune) Poor s

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

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

Is Ethical Behavior Good for Business?
• Social Capital – Experts say most people forgive mistakes made by leaders who have both conviction and a good heart. - Del Jones, Leadership lessons from the Reagan years, USA Today, June 11, 2004, p.6B. 2004 p 6B

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

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

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.g. Lying to the IRS, cancer causing pajamas and other defective products dumped on 3rd world markets, etc.) Narrow View of Stakeholders Failing to “Count of Cost” before committing to a particular course (see Luke 14:28-30) Lack of “Owner” Accountability/Spin Actual or Perceived Pressures Fixation on “Results” Speed/Carelessness Ethical Illiteracy Rote Behavior Distractions

• • • • • • • • •

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

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

Causes of Failures in Business Ethics
• Self-Deception/Choosing Not to Know
– Types
• Tribalism, or the belief that the company is always right • Legalism, 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. Under Jewish law, it is entirely possible for a person to be 100% observant or all the law and yet be a Naval B'rshut HaTorah , that is, a repulsive, disgusting individual. One must go beyond the law, called Lifnim Mishurat HaDin, and embrace the ethical imperatives that are within it.

• Moral Gamesmanship, the excusing of unethical practices by viewing business as "a game" and oneself as "a player” • Scientism, the elevation of science-including management science-to a position of unquestioned authority.
• (see Corporate “moral blindness not solved by typical ethics, by John Knapp, Emory Report April 26 1999 Volume 51 moral blindness” ethics Knapp Report, 26, 1999, 51, No. 29, http://www.emory.edu/EMORY_REPORT/erarchive/1999/April/erapril.26/4_26_99morals.html)

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

Causes of Failures in Business Ethics
• Emotions
– – – – – “Blind” Ambition Desperation espe a o 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?

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

Capitalism C i li
• “Capitalism is the astounding belief that Capitalism the most wickedest of men will do the most wickedest of the things for the greatest good of everyone.” John Maynard Keyes

Capitalism C i li
• Values that are central to a capitalism
– Freedom of voluntary exchange – Sanctity of contracts – Removal of impediments to trade
• (Source: Ethics and Economic Affairs,by Lewis, Alan; Wärneryd, Karl Erik, Publication: London ; New York Routledge, 2002) g

Capitalism C i li
• “As it presently functions, capitalism As encourages human pathologies -embodying irresponsibility as a central requirement in its operating routines.” -

William Greider is national affairs correspondent p for The Nation

Corporations
• Today more than 25% of the world’s economic activity comes from the 200 largest corporations. - “Top 200 The Rise of
Corporate Global Power”,, by Anderson & p y Cavanaugh, Institute for Policy Studies, 2000)

• The largest 500 U.S. companies constitute at least 75% of the U.S. economy.

Corporations
• Many now believe that it is not the church or state, but the corporation that is:
– “the most important organization in the world” p g
The Company: A Short History of a Revolutionary Idea, by Micklethwait & Woolridge, 2003 – or “the central institution of contemporar instit tion contemporary society” - “Corporate Society: Class, Property, and Contemporary Capitalism, by McDermott, 1991. Capitalism McDermott 1991

– or “society's dominant non-governmental institution. institution." - Value Shift: Why Companies Must

Merge Social and Financial Imperatives, by Paine, 2003.

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

Corporations
• Legally speaking, Corporations are: speaking
– “fictional persons”
• “lacking body and soul”, corporations cannot be lacking soul punished - Pope Innocent IV (13th Century) • “lacking a soul, corporations cannot commit treason, be outlawed, or excommunicated - Sir Edward Coke, Chief Justice, King’s Bench (17th Century)

Corporations C i
• King George III's Lord Chancellor Baron Thurlow remarked at the end of the 18th Century: "How can How you expect a corporation to have a conscience, when it has no soul to be damned and no body to be kicked?"

Corporations
• As “artificial persons” corporations cannot have “real” responsibilities - Nobel Prize real responsibilities. Winning Economist Milton Friedman • Philosophy Professor Manuel Velasquez argues th t only corporate members and that l t b d not corporations themselves, can be held morally responsible. ll ibl

Corporations
• However, “Although a corporation is not something that can be seen or touched, it touched does have prescribed rights and legal obligations within the community ” - William community.
H. Shaw, Business Ethics.

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

Corporations
• Limited liability is the key feature of the corporate form encouraging investment form, investment.
– Doesn’t that run directly counter to the value of Responsibility/Accountability?

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

Types of Codes
Forbes 500 Companies (237 respondents):
Date Introduced < 5 yrs. yrs >20 yrs. yrs Code of Ethics Values Statement Corporate Credo All Three Documents 91% 53% 34% 49 cos. 18.5% 51.0% 51 0% 41.0% 15.5% 8.0% 8 0% 22.0% Revised in ‘90s 82% 83% 81%

Source: Patrick E. Murphy, “Corporate Ethics Statements: Current Status and Future Prospects,” Journal of Business Ethics 14: 727-740 (1995).

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

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

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

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

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

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

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

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

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

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

Self-Regulation of Business Ethics

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

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

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

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

Self-Regulation of Business Ethics
• Some Monitoring/Compliance Methods
– Required annual acknowledgement/review – Periodic surveys – 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, p.22) • Yes?
– Created in response to coercion – Often Ambiguous language – Enron had a Code of Ethics!

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

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

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

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

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

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. laws - Plato

Government Regulation of Business Ethics
• Dick Grasso, Former Chairman and CEO of the New York Stock Exchange, You “You cannot legislate honesty.” (Who was forced to resign due to outrage over his $39 5 $39.5 million salary)

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

Government Regulation of Business Ethics
• ”Rules cannot substitute for character." — Alan

Greenspan, Greenspan Chairman of the U.S. Federal Reserve Board

Government Regulation of Business Ethics
• Senator Joe Lieberman, “We cannot put the business ethics police on every corner that might be cut—nor would we want to. G Government will never be able to legislate or regulate morals into g every part of our markets. 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 Th h id li h 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, “The Enron scandal cries out for governmental action, but we must acknowledge before we act that there are twin dangers—of doing too little and doing too much.”

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

Government Regulation of Business Ethics
• The argument for regulation
– The existence of a code of ethics alone is not sufficient to prevent unethical behavior (e.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) – Change in the behavior of the corporation is initiated to make it give more attention to social goals. – Competition does not enable the manager to pay attention to social goals and thus must be forced.

Government Regulation of Business Ethics
• Has regulation been good for business in any way?
– Statutes like the Sherman & Clayton Antitrust Acts helped to dissolve giant trusts (Though recent trends seem to be reversing this) – Statutes like the Wagner Act enabled labor unions to emerge as responsible entities – OSHA regulations have improved workplace safety – 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% companies report an increase!

Government Regulation of Business Ethics
• Levels
– – – – Local State National International

Government Regulation of Business Ethics
• Branches
– Executive – Legislative – Judicial

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. • provides a series of new civil and criminal penalties for violations of securities laws, and enhances penalties for such violations under existing statutes statutes.

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

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

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

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

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

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


								
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