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Business Ethics - Bishop Ireton High School -- Alexandria_ VA.ppt


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									Ethics in Business and Society
Have I committed any of the following white collar
 Fraud -- Land fraud, computer fraud, odometer
fraud, investment fraud, bank fraud, credit card fraud,
 Embezzlement
 Forgery
 Insider trading -- When a person uses inside,
confidential, or advance information to trade in shares
of publicly held corporations.
 Received a ‘Kick Back’ for a business deal
 Blackmail
 Counterfeiting
 Extortion -- Occurs when one person illegally
obtains property from another by actual or threatened
force, fear, or violence, or under cover of official right.
Have I committed any of the following white collar

 Laundered Money -- The investment or transfer of
money from racketeering, drug transactions or other
embezzlement schemes so that it appears that its
original source either cannot be traced or is
 Racketeering -- The operation of an illegal business
for personal profit.
 Committed Tax Evasion
 Weights and Measures -- The act of placing an item
for sale at one price yet charging a higher price at the
time of sale
                           Pyramid Scheme
                88% lose in this particular scheme
•   The essential idea is that Mr. X, makes only one payment. To start earning, Mr. X has to recruit
    others like him who will also make one payment each. Mr. X gets paid out of receipts from those
    new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X
    gets a cut. He is thus promised exponential benefits as the "business" expands.
•   Such "businesses" seldom involve sales of real products or services.
        From www.forbes.com
• The Ponzi scam is named after Charles Ponzi, a clerk in
  Boston who first orchestrated such a scheme in 1919.
• A Ponzi scheme is similar to a pyramid scheme in that
  both are based on using new investors' funds to pay the
  earlier backers. One difference between the two schemes is
  that the Ponzi mastermind gathers all relevant funds from
  new investors and then distributes them. Pyramid schemes,
  on the other hand, allow each investor to directly benefit
  depending on how many new investors are recruited. In
  this case, the person on the top of the pyramid does not at
  any point have access to all the money in the system.
• For both schemes, however, eventually there isn't enough
  money to go around and the schemes unravel.
                       Bernie Madoff

Chairman of the NASDAQ stock exchange, and the admitted
operator of the largest investor fraud ever committed by a
single person. In March 2009, Madoff pled guilty to 11 felonies
and admitted to defrauding thousands of investors of billions of
dollars from the early 1990s onward
Largest U.S.
 bankruptcy until
Complex off-shore
 kept liabilities off
 Enron’s books.
Ken Lay Going to Jail
Enron –
Merrill Lynch
   “Sham” energy deal with Merrill Lynch allowed
Enron to meet Wall Street expectations and book
$60 million profit (1999). Inflated profits drove up
stock price, unleashed $$millions$$ in bonuses
(Lay, Skilling, etc.) and was later cancelled as
Overstated earnings by $3.8 million
Laid off 17,000 employees
Stock dropped from $64.50 to 0.83 in a
matter of weeks
Former CEO received $366 million in low
interest loans
CEO Dennis Kozlowski charged with
evading $1 million in taxes and is
accused with destroying
Kozlowski and other executives
bought art work, and one executive
bought a home.
Tax avoidance with offshore
Martha Stewart
Martha Stewart (a director of NYSE)
allegedly sold stock on inside information
provided by Merrill Lynch. Stock in
Stewart’s Omnimedia declined 40%. (see
Chpt. 16). She made tens of millions of
dollars through these transactions.
Merrill Lynch broker, Peter Bacanovic,
allegedly warned her of illegality.
From UVA's Honor Code:
Academic Fraud: The Webster’s dictionary defines fraud as “a
deception deliberately practiced in order to secure unfair or unlawful
gain.” Such forms of cheating include, but are not limited to:
Plagiarism: quoting or using the ideas of another author or source
without acknowledging that those words or ideas were not your own.
There are different methods for properly citing sources. For the correct
method, you should speak with the faculty member or teaching
assistant in charge of the particular assignment.
Multiple Submission: The use of work turned in previously for the
fulfillment of an academic course at UVA. or another institution.
False Citation: Citing or attributing work to a source from which the
referenced material was not obtained.
False Data: The fabrication or alteration of data to mislead.
                       Educational Institutions
                       have established ethics
                       codes for their students,
                       e.g. the U.S. Air Force

"We Will Not Lie, Steal Or Cheat, Nor
Tolerate Among Us Anyone Who Does"
-- Which do you think is the harder part:
Line 1 or Line 2? Why?
said, “To
educate a
person in
mind and not
in morals is to
educate a
menace to
      In his best-seller, The Closing of the
American Mind, Allan Bloom says that the
eternal conflict between good and evil has
been replaced with “I’m okay, you’re okay.”
Students unthinkingly embrace a blind
tolerance in which they consider it “moral”
never to think they are right because that
might mean someone else is wrong.

[Allan Bloom, The Closing of the American
Mind, New York, Simon and Schuster, Inc.
       “Until about 50 years ago, it was commonly accepted
that universities were to provide students not only with
knowledge and skills, but also moral guidance based on the
essentials of the Western tradition.”
Business Prof Geoffrey Lantos
This, though, is changing, as more and more business schools
are realizing that to properly train someone as a
businessman/woman, you need to train them to be ethical.
“The truth of the matter
is that you always
know the right thing to
do. The hard part is
doing it.”
-- General H. Norman
"If the company is unethical, that company is going to be
cheated by its own employees."
-- Bunge's Walter Klein

“If you believe in unlimited quality and act in all your
business dealings with total integrity, the rest will take
care of itself.”
-- Frank Perdue

Andrew Sigler, Chairman and CEO of Champion
International states, "I don't believe that ethical behavior
is an impairment to profitability. I cannot remember
situations where if I do the bad thing we'll make a lot of
money, but if I do the right thing we'll suffer." "Lots of
responsible decisions," he explains, "aren't just ethically
sound. They're damn smart and very smart business."
“In looking for people to
hire, you look for three
qualities: integrity,
intelligence, and energy.
And if they don't have the
first, the other two will kill
-- Warren Buffet
"If I do something unethical
for some short term gain
somebody else is going to get
hurt, and they're not going to
forget it. You're clearly trading
a short term gain for
something that's inevitably
going to be worse down the
road--you'll eventually lose

-- Jerry R. Junkins,
President and CEO of Texas
Truett Cathy, the Founder
of Chick-Fil-A stated
(quoting Proverbs 22:1):
"A good name is more
desirable than great riches;
to be esteemed is better
than silver or gold."

At the Congressional Hearing on
Accounting and Business Ethics in
July 2002
     Business Ethics -- 8 Reasons to be
     Ethical in Business
1) Litigation/Indictment
   Without strong ethical
    values, companies easily
    drift to the legal edges--
    dangerous territory where
    bending and breaking the
    law leads to lawsuits and
    indictments – or spending
    LOTS of money on
    lawyers/legal fees.
8 Reasons to be ethical in
2. Public Acceptance
 Companies that tolerate unethical
  practices in today's transparent era will
  almost certainly be exposed and then
  boycotted and punished in the
  marketplace. There is strong research
  supporting the premise that companies
  with good reputations have better
  financial performance than those with
  poorer reputations.
8 Reasons to be ethical in
3. Investor Confidence
   Today's investors will avoid a company that isn't
    responsible and ethical.
8 Reasons to be ethical in
4. Supplier/Partner Trust
   No company is self-
    sufficient/an island unto
    itself. Successful partnerships
    are built on trust and
    trustworthiness. The
    technological revolution
    demands very high levels of
    trust--externally as well as
8 Reasons to be ethical in
      5. Customer Loyalty
         Customers look at the reputation of the
          company. Customer surveys have
          consistently shown that a company's ethical
          reputation is a factor that affects purchase
      6. Employee Performance
         People produce best in an open, creative,
          ethical environment. Companies that have a
          poor reputation have difficulty attracting and
          retaining top talent.
         Lower employee turnover and reduced
          training costs, together with higher
          productivity resulting from greater
          experience, has been shown to be an
          important factor in increasing revenue,
          reducing costs, and assuring corporate
    8 Reasons to be ethical in
7. Personal Pride
   Company leaders and employees can take
    genuine pride in their accomplishments knowing
    they didn't bend rules, cut corners, or hurt people
    to accomplish their goals.
8. It's the Right thing to do
   Most of the great moral teachers and leaders in
    human history argue that, no matter what the
    consequences, it is intrinsically good to do the
    right thing and be ethical.
   The “Loyalty Effect”
       Surplus       SUPERIOR
         Cash        CUSTOMER                     “The “Right
    Reinvested         VALUE                      New Customers”
                   Operations & Process

            SHAREHOLDER               CUSTOMER
            LOYALTY                     LOYALTY

                     EMPLOYEE                     “The “Right”
  The “Right”                                     New Employees
New Investors         LOYALTY
         The Good Guys for 2001
    Business Ethics Magazine ranks the
      “100 Best Corporate Citizens”

   IBM                     General Mills
   Hewlett-Packard         Avon Products
   Fannie Mae              Intel
   St. Paul Companies      State Street Corporation
   Procter & Gamble        H.B. Fuller
   Motorola                Timberland
   Cummins Engine          Bank of America
   Herman Miller           Amgen
           Business Ethics Program

Small Group Exercise:
  Create a code of Business ethics for a company (you
   come up with the company name and purpose).
  Start at the top of the corporate ladder and go down
   from there.
  Identify and/or renew your company values,
   principles and norms of behavior.
  Come up with a corporate mission and vision
             Ask Your Parents!
   Talk to your parents about what they do
    for a living. Talk to them about 5 different
    ways of how people can be ‘unethical’ in
    their particular business.
     What Should an Ethics Program
      And, where should you start?
       Information obtained from Business for Social Responsibility White Paper, “Business Ethics,” 2001-2002, and
    The Ethics Resource Center, Ethics Toolkit: “Code Construction and Content”, and „Common Ethics Code Provisions”

   Typical Code Provisions include:
              Employment Practices like harassment, diversity, fair
               treatment of staff, illegal drugs and alcohol, use of corporate
               property, volunteer activities, proper exercise of authority.
              Employee, Client and Vendor Information and
               Relationships like privacy and confidentiality, disclosure and
               records maintenance, procurement, negotiations, and contracts.
              Conflicts of Interest like gifts, gratuities, political activities,
               outside employment, family members, disclosure of financial
              Communications and Information like advertising and
               marketing; clarity, access, transparency, accuracy and
               confidentiality of public and proprietary information.
              Environmental Practices, like commitment to the environment,
               employee health and safety.
      What Should an Ethics Program
       And, where should you start?
          Information obtained from Business for Social Responsibility White Paper, “Business Ethics,” 2001-2002, and
      The Ethics Resource Center, Ethics Toolkit: “Code Construction and Content”, and „Common Ethics Code Provisions”

   Provide adequate funding and resources for sustained
    ethics program.
   Distribute the Code widely.
   Develop and deliver comprehensive ethics training.
   Create an ethics help/hot line for employees’ anonymous
    questions and reports.
   Reward and publicize ethical behavior.
   Develop routine audit and evaluation systems for
   Require compatible, coordinated departmental programs
    to complement the corporate program (similar to
    Corporate Strategic Plan).
Example: Thomas More Society
   (legal society of Catholic
          Mission Statement of the St. Thomas More Society

  The St. Thomas More Society of Orange County Is an
  independent organization sponsored by lawyers and judges
  who are practicing members of the Roman Catholic
          Ideals of St. Thomas More

  The legal profession is a high calling with corresponding
  responsibilities to society.

  The principal objective of every lawyer is to promote and
  seek justice.
            Thomas More Society

Catholic Lawyers pursue the truth in both
their spiritual and professional lives.

“The duty of a Catholic lawyer is to remain
faithful to Jesus Christ, His Church and its
teachings at all times despite the personal
-- Thomas More Society
 “What will it
profit a man if
 he gain the
 whole world
 but lose his
 own soul?”
 (Mark 8:36)

Jesus Christ
          Business Ethics

• Evil corporation -- How? What do you do? What is your
  purpose? How do you treat your workers? The environment?
  Etc. What are the consequences of your actions? Come up
  with a company logo.
• A corporation informed by Christian principles -- same as
• Good workers -- what are your rights and responsibilities as
  workers? What are the fruits of you being good workers?
  Come up with a slogan for your work.
• Evil workers? How do you abuse the system? How do you
  not perform your duties as a worker? What are the
  consequences of your actions? Come up with a slogan as well.
Creating an Ethical Corporate
•How would you run a business in an
ethical manner?
•What principles would guide you?
•How would concretely do this?
•1 page
     Homework -- Due Friday
1. Talk to your parents about what they do for
   a living. Have them list to you 5 different
   ways that people are unethical in their
   particular profession.
2. Ask them if they know of someone who
   got in trouble for something unethical that
   they did in business.
Business Exercise

1. Come up with a company (and company name).
2. What would it mean to be unethical/ethical in your
   particular profession?
3. What is your purpose? How do you treat your workers?
   The environment? Etc. What are the consequences of
   your actions? Come up with a company logo.
4. What are the benefits of being ethical in your profession?
   How do you run your business/do what you do in an
   ethical/Christian way?
5. What potential temptations are there in your profession?
   What shortcuts might tempt you?
6. Come up with a company logo and company slogan.
Profession Exercise:

•   Lawyer
•   Politician
•   Doctor
•   Engineer
•   Athletic Director and/or coach
•   Restaurant owner
•   Mechanic
•   Plumber
•   Military officer
•   Architect

How could you be ethical in the professions listed above? How
   could you be unethical?
What are the benefits of being ethical in your profession?

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