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ETHICS




           2-1
Changing Demographics in a Global Economy


United States dominance in world trade
United States dominance in Foreign Direct
 Investment
Dominance of United States multinational firms
Centrally planned economies off-limits




                                                  2-2
        Changing Demographics -cont’d
Anti-globalization debate
 Jobs
 Income
 Environment
Spread of democracy
Global terrorism
Economic transformation
 Deregulation
 Privatization
 Legal systems
                                        2-3
What are Laws ?




                    2-4
                  Slide 4-7
               Laws

Laws are society’s values and
standards that are enforceable in the
courts.




                                           2-5
                                        Slide 4-47
What are Ethics?



                     2-6
                   Slide 4-7
             Ethics

Ethics are the moral principles
and values that govern the
actions and decisions of an
individual or group. They serve
as guidelines on how to act rightly
and justly when faced with moral
dilemmas.

                                        2-7
                                      Slide 4-7
       UNDERSTANDING ETHICS


• Ethical principles vary from religion to
  religion. True or false?
 FALSE - The five fundamental ethical
  principles are:
   Do no harm
   Make things better
   Respect others
   Be fair
   Be loving
                                                2-8
                                             Slide 4-10
       UNDERSTANDING ETHICS


• What is right in one part of the world might
  not be right in another part. True or false?
 FALSE - What people believe to be right may
  differ from one country to another, but this
  does not mean that what actually IS right
  differs.

  Ethics attempts to discover what IS right
  and wrong, regardless of accepted practice.
                                                    2-9
                                                 Slide 4-10
        UNDERSTANDING ETHICS


• Ethical principles change over time. True
  or false?


 FALSE - The aforementioned five ethical
  principles have existed since the beginning of
  civilization and will remain so until its end.



                                                   2-10
                                                   Slide 4-10
       UNDERSTANDING ETHICS


• Being honest is the most important ethical
  rule of all. True or false?
 FALSE - In some situations, rare as they
  may be, other ethical considerations may
  take precedence.

  For example, during WWII, courageous
  men and women in Europe who hid Jews
  from the Nazis had to lie to the Gestapo.
                                                2-11
                                               Slide 4-10
         UNDERSTANDING ETHICS
• Sometimes, one not only has a right to keep
  private things private, but has a duty not to
  do so. True or false?
 TRUE - As with the example of lying above,
  the duty to maintain confidentiality is not an
  absolute moral obligation. When a patient
  tells his psychiatrist that he intends to
  commit murder, the psychiatrist has the
  right to not keep this information to herself,
  but has a duty not to do so.

                                                   2-12
                                                   Slide 4-10
         UNDERSTANDING ETHICS
• Avoiding harm is a moral imperative, but
  being loving is not ethically required. True
  or false?
 TRUE - Whatever a person’s relationship is
  to you, you have a duty to not harm him or
  her. Being loving, kind or compassionate
  might be better viewed as ideals to which we
  should aspire, rather than as principles of
  duty. If you fail to act charitably toward the
  driver who chops you off, you are not acting
  unethically (although you may be expressing
  the deepest aspects of your humanity).
                                                   2-13
                                                   Slide 4-10
          UNDERSTANDING ETHICS
• People often disagree about what is
  important in life. True or false?
• TRUE - This is a sociological fact and says
  nothing about what should constitute the good
  life. Even if most people that you encounter
  believe acquiring wealth is their main objective,
  it does not follow that becoming rich and
  famous is a worthwhile goal. What they
  might be saying is that “being famous will
  make me happy.”

                                                      2-14
                                                      Slide 4-10
A framework for understanding ethical behavior




                                                 2-15
                                                 Slide 4-9
                    Business Ethics

 Ethical issues in international business
      Foreign Corrupt Practices Act (FCPA)
 Moral obligations
 Ethical perceptions across cultures




                                             2-16
        Global Competition
ETHICS – IS IT GOOD BUSINESS?


    GOING GREEN
            vs.
INCREASING $TOCKHOLDER EQUITY


                             2-17
Rockefeller Rebellion Turns Up Heat on Exxon
John D.'s Heirs Seek Change -- and Respect
   WSJ - May 24, 2008; Page A1

Two decades ago, Neva Goodwin Rockefeller grew so tired of all the
  baggage that came with her fabled family name that she changed it and
  became plain Neva Goodwin. But now, Ms. Goodwin, 63 years old, is
  embracing the powerful Rockefeller name as she publicly challenges the
  management of Exxon Mobil Corp., successor to the oil company founded
  by her great-grandfather, John D. Rockefeller. As Neva Rockefeller
  Goodwin, she has marshaled four generations of Rockefellers to join her
  in a campaign to force major changes at one of the most profitable
  companies in the world. The battle will come to a head at Exxon's annual
  meeting Wednesday in Dallas. (Scheduled for 28 May.)
Some members of the family joined the fight out of a passionate belief in the
  threat of global warming; others were concerned that Exxon is
  overlooking business opportunities or risks. Many seem offended that the
  company appears impervious to the wishes of its shareholders, including
  those named Rockefeller.
                                                                          2-18
                                                                          Slide 4-7
Exxon Withstands Activist Proposals
Chairman, CEO Jobs To Remain Joined;
 Environment Still Issue
WSJ - May 29, 2008; Page B3

DALLAS -- Exxon Mobil Corp. shareholders rejected a proposal to create an
  independent chairman in a heated proxy fight over the future of the giant oil
  company . . . The proposal to create an independent chairman, which would have
  stripped Chairman and Chief Executive Rex Tillerson of one of his titles, drew
  39.5% of the votes cast at Wednesday's annual shareholder meeting. Support for
  the measure edged down from last year, when it received 40% of the votes cast.

The shareholder unrest also reflected some concerns that Exxon isn't doing enough
   to prepare for climate change or develop a more robust renewable-fuels strategy.
   (The chairman) acknowledged activists' environmental concerns without offering
   any concrete promises. He said Exxon must continue to generate needed energy
   while taking steps to "lower our environmental footprint." But he also said he didn't
   think non-fossil fuels would make a significant dent in global energy demand until
   2050 or so.

                                                                                     2-19
                                                                                     Slide 4-7
                Global Competition
Ethics – is it good business?
The Question:

Companies spend billions of dollars doing good works -- such
  as developing eco-friendly technology -- and then trumpeting
  them to the public. But does it pay off?




                                                           2-20
                 Global Competition
Ethics – is it good business?
The Test:

In a series of experiments, consumers were shown the same
   products -- coffee and T-shirts -- but one group was told the
   items had been made using high ethical standards and
   another group that low standards had been used.




                                                              2-21
                     Global Competition
REWARD AND PUNISHMENT


What consumers were willing to pay for a pound of
 coffee based on what they were told about the
 company's production standards:

  Ethical standards . . . . . . . . . $9.71
  Unethical standards . . . . . . . . 5.89
  Control (no information) . . . . 8.31
  Source: Remi Trudel and June Cotte




                                                    2-22
                 Global Competition
A MATTER OF DEGREE
How much consumers were willing to pay for all-
 cotton T-shirts based on what they were told about
 the proportion of ethical production:

  100% organic cotton . . . . . . $21.21
  50% organic cotton . . . . . . . . 20.44
  25% organic cotton . . . . . . . . 20.72
  Unethical behavior* . . . . . . . .17.33
  Control (no information) . . . . 20.04
                                              *Production harms environment


                                                                      2-23
                 Global Competition
ATTITUDE ADJUSTMENT
Consumers with high ethical expectations of companies
 doled out bigger rewards and punishments than
 consumers with low expectations. What each group was
 willing to pay for a pound of coffee based on production
 standards:
  Consumers with high expectations:
     Ethical standards . . . . . . . $11.59
     Unethical standards . . . . . . . 6.92
  Consumers with low expectations:
     Ethical standards . . . . . . . $9.90
     Unethical standards . . . . . . 8.44
                                                      2-24
                 Global Competition

The Results:
Consumers are willing to pay a small premium for ethically
  produced goods. But they'll punish an unethically made
  product even more harshly, by buying it only at a steep
  discount.




                                                             2-25
                        Global Competition
Six Products, Six Carbon Footprints
Everybody's talking about it. But what exactly is a carbon footprint? And how
  is it calculated?
By JEFFREY BALL                                                     WSJ – 06 Oct 2008

A new concept is entering the consumer lexicon: the carbon footprint.

First came organic. Then came fair trade. Now makers of everything from milk to
    jackets to cars are starting to tally up the carbon footprints of their products.
    That's the amount of carbon dioxide and other greenhouse gases that get
    coughed into the air when the goods are made, shipped and stored, and then
    used by consumers.

So far, these efforts raise as many questions as they answer. Different companies
   are counting their products' carbon footprints differently, making it all but
   impossible for shoppers to compare goods. And even if consumers come to
   understand the numbers, they might not like what they find out.
For instance, many products' global-warming impact depends less on how they're
   made than on how they're used. That means the easiest way to cut carbon
   emissions may be to buy less of a product or use it in a way that's less
   convenient.                                                                   2-26
Global Competition




                     2-27
                               Carbon Footprints
 CARS -The simplest statistic in the carbon-footprinting game may be
  this: For every mile it travels, the average car in the U.S. emits about
  one pound of carbon dioxide. Given typical driving distances and fuel-
  economy numbers, that translates into about five tons of carbon dioxide
  per car per year.
     The vast majority of those emissions -- 86% -- came from the car's fuel use, the study
      found. Just 4% of emissions came from making and assembling the car. That means
      consumers can lower their footprint by buying a car with better fuel economy.
     The Prius, the hybrid gasoline-and-electric car that averages 42 miles per gallon, has
      a lifetime carbon footprint of 44 metric The Corolla, a small sedan with 29 MPG, has a
      footprint of 64 tons. The Camry (23 MPG) has a footprint of 95 tons. And the 4Runner,
      an SUV rated at 16 MPG, has a footprint of 118 tons.

 SHOES -You may think you're at one with nature going for a walk in the
  woods in your sturdy hiking boots. But those boots pack a lot of carbon.
  The big reason: the leather.
     Timberland Co., a shoe company with an outdoorsy image, has assessed the carbon
      footprint of about 40 of the shoe models it currently sells. The results range from
      about 22 pounds to 220 pounds per pair. Each of the shoes that has been carbon-
      footprinted comes with a label assessing its greenhouse-gas score on a scale of zero,
      which is best, to 10, which is worst.                                               2-28
                                  Carbon Footprints
 LAUNDRY DETERGENT - The recipe for a low-carbon load of laundry:
  Use liquid detergent instead of powder, wash your clothes in cool water
  and hang them out to dry.
     But consumers who care about their carbon emissions should do more than switch
      detergent forms, the labels advise. Doing the wash in cooler water -- 86 degrees
      Fahrenheit instead of 104 degrees -- will shave the carbon footprint of each load by 0.3
      pounds. That's as much of a reduction as you get from switching to liquid from powder.
     The biggest way to cut the environmental impact of cleaning clothes, however, is to
      stop using a clothes dryer. Drying laundry outside on a line, Tesco says, will cut the
      carbon footprint of every load by a whopping 4.4 pounds.
 JACKETS – Patagonia Inc.'s Talus jacket looks like a naturalist's dream.
  In fact, its carbon footprint is 66 pounds. That is 48 times the weight of
  the jacket itself.
     Over the past year the outdoor-equipment maker has computed and posted on its Web
      site the carbon footprints of 15 of its products. Because most of Patagonia's products
      are made overseas and sold in the U.S., the company that a big chunk of the carbon
      footprints came from –
     The fabric for the Talus is made in China, the zippers come from Japan, and the jacket
      is sewn in Vietnam. Yet all that transportation adds up to less than 1% of the product's
      total carbon footprint, Patagonia says. The majority of the footprint -- 71%, or about 47
      pounds -- comes in producing the polyester, which originates with oil.                    2-29
                                 Carbon Footprints
 MILK - Several studies of milk's carbon footprint are under way in the U.S.
  Each has come up with a different number, largely because each is counting
  things differently.
     A recent study by National Dairy Holdings, a Dallas-based dairy, found that the carbon
      footprint of a gallon of its milk in a plastic jug is either 6.19 pounds or 7.59 pounds. The
      difference rests in what kind of cases the jugs are placed in during transport from the milk-
      processing plant to the distribution center. Plastic cases, because they take more energy to
      produce, yield more carbon-dioxide emissions than do cardboard ones.
 BEER - When New Belgium Brewing Co. set out last year to compute the
  carbon footprint of a six-pack of its Fat Tire Amber Ale, it figured it would find
  transportation was the biggest problem. That's the emission source New
  Belgium thinks about most often. The microbrewer has been expanding into
  more states, necessitating more trucking of its beer.
     When the numbers came in this summer, they showed that a six-pack's carbon footprint
      was about seven pounds. The real surprise was where the bulk of that number came from:
      the refrigeration of the beer at stores. Transportation came in fourth, behind manufacturing
      the glass bottles and producing the barley and malt. Refrigeration poses a tougher
      problem. Stores selling Fat Tire aren't owned by New Belgium, so even if the brewer
      wanted them to stop refrigerating the beer, they might not do so. Many stores could switch
      from less-efficient, open-front beer chillers to more-efficient models enclosed by clear
      doors. But that presents its own hurdle, Ms. Orgolini notes: "People don't want to have to
                                                                                               2-30
      open the door."
FORD AND FIRESTONE:

 WHO’S TO BLAME?




                      2-31
                      Slide 4-42
Now, let’s compare and contrast
 this PR debacle with . . .




                                  2-32
                                  Slide 4-10
Johnson & Johnson

   TYLENOL



                    2-33
                    Slide 4-42
            Implications for Managers

The most common ethical issues that one may
 encounter in a business setting – and especially
 global businesses - are:
  employment practices,
  human rights,
  environmental regulations,
  corruption and
  the moral obligation of multinational
    corporations.
Ethics & Trust – do the hard right thing
                                                    2-34

				
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