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Ethics & Social Responsibility

Dr. Tracy A. Suter Professional Development Seminar 22 January 2010

Why Are We Here?

Source: Gallup, Inc., Moral Issues Survey

Why Are We Here?

Source: Gallup, Inc., Moral Issues Survey

Why Are We Here?

Implications (May 14, 2009)
Americans are not rating the current state of moral values in the country any more positively this year than last, but there is the sense by a small but growing proportion of the American public (mostly on the left side of the political spectrum) that things are getting better in this area.

Source: Gallup, Inc., Moral Issues Survey

Why Are We Here?

Implications (May 14, 2009)
But this sense of improving conditions may merely reflect increased enthusiasm for a new presidential administration -- chiefly among Democrats, who largely share Obama's political outlook -- as opposed to real, observed improvement in Americans' moral values.

Source: Gallup, Inc., Moral Issues Survey

Why Are We Here?

Results of the 2009 National Business Ethics Survey
Ethical misconduct is down
2007: 56%; 2009: 49%

Whistle-blowing is up
2007: 58%; 2009: 63%

Organizational cultures are ethically stronger

2007: 53%; 2009: 62%

Pressure to cut corners is down

2007: 10%; 2009: 8%
Source: Ethics Resource Center, National Business Ethics Survey

Why Are We Here?

NBES conclusion: when times are tough, ethics improve. This pattern has repeated itself in the last decade in terms of observed misconduct
55% in 2000, Enron & Bursting of the Dot Com Bubble, 46% in 2003 56% in 2007, Recession, 49% in 2009

NBES researchers believe that when business is booming again, ethics will erode
Source: Ethics Resource Center, National Business Ethics Survey

Why Are We Here?

A possible explanation is that during hard times, when a company s well-being or even existence may be on the line and regulators are watching, management talks more about the importance of high standards to see the organization through the crisis. It may also be that some are less inclined to commit misconduct when management is on high alert.

Source: Ethics Resource Center, National Business Ethics Survey

Common Sense?

You Are
You are the distribution manager for a large consumer products firm. Your company is about to release a very large shipment of products. As manager, you must decide between several competing transportation companies that are seeking your business. Sales representatives from railroad and trucking companies often make calls to your office. Your decision will mean the loss or gain of millions of dollars of revenue for these companies.

You Are
Pen and pencil set (with the company s logo) Five-year supply of scratch pads (with logo) Fruits and nuts delivered to you each Christmas Dinner for four at an exclusive restaurant Season tickets to a professional football team Three-day, all-expensepaid golfing vacation $500 in cash Bag of groceries delivered to your home each week Lavish trip to the Cayman Islands Use of the transportation company CEO s summer house

Myths About Business Ethics

It s common sense It s about employee character Very few companies engage in misconduct Small companies have their founder s ethics Following the law is enough Business ethics is too costly to implement in a globally competitive environment
Others don t, why should we? You have to go along to get along.

Cintas: Gifts and Entertainment

We do not accept gifts or business favors. Normal business lunches are permitted; dinners, entertainment, and trips may be accepted only when they have a definite business purpose and are approved by your supervisor. We do not want to do anything that would place us in a compromising position or cause us to lose our objectivity. We encourage healthy relationships with our suppliers, and expect our suppliers to understand, respect, and cooperate with this policy.

Ethics is a Concern in Business Organizations Today!

Ethical Behavior Influences

Individual Values

Ethical Behavior

Corporate Culture

Significant Others

Opportunity

10/40/40/10 Principle
10% will take advantage of a situation if the risk is low 40% will go along with the work group 40% will try to determine what the organization wants them to do and comply 10% feel the organization has not gone far enough and push for their own personal beliefs

Factors Influencing Organization s Commitment to Ethics

Initiated by the CEO To ensure commitment to corporate values To reduce the risks to the company of employee misconduct To establish a better corporate culture

Obstacles to an Organization s Commitment to Ethics

Employee anxiety Financial & other pressures Compensation/performance appraisal system not consistent with company values Declining trust & cynicism of employees Lack of financial or staff support Lack of training support General apathy

Advantages of Ethical Guidelines

Identify acceptable practices Foster internal control Avoid confusion Facilitate Discussion

Best Practices
Ethical culture Oversight & administration Standards & procedures Communication strategy Monitoring, auditing & reporting systems Enforcement, investigation & resolution procedures Risk assessment & evaluation

Source: Language & Culture Worldwide, Global Benchmarking Study of 20+ global industries

Worst Practices
Abusive/intimidating behavior Lying to employees, customers, vendors, the public Conflicts of interest Violations of safety regulations E-mail/Internet abuse
Source: Ethics Resource Center

Misreporting of actual time worked Discrimination Stealing/theft Sexual harassment Misuse of confidential information Alteration of documents

Accountability of Top Executives

Dennis Kozlowski

Ken Lay & Jeff Skilling

Bernie Ebbers

Accountability of Top Executives

We believe it is important to set a tone, to send a message and to lead by example. -- Eliot Spitzer, January 2007 Governor of New York

Accountability of Top Executives

It is true that when Mr. Spitzer was attorney general, we were among his harshest critics. And it is true that these columns, alone among the dailies in this city, endorsed Mr. Spitzer s Republican opponent, John Faso, for governor. We saw Mr. Faso as the man of principle in the election. -- Tom Bevan, March 2008 Yahoo! News

Accountability of Top Executives

When I came here in 1990, Enron was a company with a $3.5 billion market capitalization. Today, we re around $35 billion, and that s without issuing a whole lot of equity. -- Andrew S. Fastow, CFO Enron Corp.

Accountability of Top Executives

You didn t tell on your brother when you were a kid. Loyalty was more important than scoring points with your parents. If you got a bad grade, you stood in front of your father with the report card and took your punishment. Instead of asking for spending money, you earned it. In college, you stood up for what you believed in. You didn t lie to get the job and you never compromised your ideals to keep it.

Accountability of Top Executives

You were the kind of person who might take the blame to help out a friend, but you did not take credit for an accomplishment that was not yours. Integrity isn t something you get overnight. It takes a lifetime to earn. -- Bill Daniels Founder, Cablevision

Accountability of Top Executives

The elders of any society frequently view the younger generation as possessing fewer values than they have, but the fact is we all start out the same. Each generation has unique challenges; no generation has a monopoly on values. -- Jon M. Huntsman Chairman & Founder, Huntsman Corp. Author, Winners Never Cheat

Accountability of Top Executives

It s not location, location, location. While that is important, for us it is more about people, people, people and making a good selection. We typically select based on what we call the three C s. Competence, that s their business acumen and the skills that they have.

Accountability of Top Executives

Character, which is their whole values set, and also their Chemistry, their likability is this someone we would want our own sons or daughters to work for? -- Dan T. Cathy President & COO, Chick-fil-A Son of Founder Truett Cathy

Principle-Centered Companies
Southwest Airlines Procter & Gamble Applied Materials A study of these principled companies over 15 years showed that they delivered a total shareholder return of 43% while the S&P average was 19%
Source: David Batstone (2003), Saving the Corporate Soul

Exercise
Create a fictitious company Identify the key values that would define your company How would these values assist in differentiating your company in the marketplace?

Cintas: Ethics Checklist

Is it legal? Will I be violating either a law or a company policy? How will it make me feel about myself? Will it make me proud? Will I feel good if my family knows about it? How would I feel if this was disclosed in the media?

Texas Instruments: Ethics Quick Test

Is the action legal? Does it comply with our values? If you do it, will you feel bad? How will it look in the newspaper? If you know it s wrong, don t do it! If you re not sure, ask. Keep asking until you get an answer.

Lockheed Martin: Warning Signs

Well, maybe just this once. Everyone does it. Shred that document. We can hide it. No one will get hurt.

Lockheed Martin: Warning Signs

What s in it for me? This will destroy the competition. We didn t have this conversation. It doesn t matter how it gets done, as long as it gets done.

1. You miss a day at work because you partied too hard the night before. The following day, during a meeting, your supervisor asks why you were absent.

You A. B. C. D. explain to your supervisor that you were ill. explain to your supervisor that an emergency came up in your home and it entirely consumed you. tell your supervisor you were absent for personal reasons. tell your supervisor that you were ill because of overpartying.

2. You are responsible for making travel arrangements for people in your office. An airline agent whom you know offers you bonus points for every booking you make with his airline and you can cash in the bonus points for free travel.

What do you do? A. B. C. D. As long as the company incurs no additional costs, accept the offer. Reject the offer summarily. Accept the offer for company and use the free travel for productivity awards. Tell the airline agent that you have to think about it.

3. After 3 months you discover that a recently hired employee who appears to be very competent falsified her employment application in that she claimed she had a college degree when she did not.

As her manager, what do you do? A. B. C. D. You re happy with the new employee so you do nothing. Discuss the matter with human resources to determine company policy. Recommend she be fired for lying. Weigh her performance, length of service, and potential benefit to the organization before making any recommendation to anyone.

1. You miss a day at work because you partied too hard the night before. The following day, during a meeting, your supervisor asks why you were absent.

You A. B. explain to your supervisor that you were ill. (Add 5 points) explain to your supervisor that an emergency came up in your home and it entirely consumed you. (Subtract 10 points) tell your supervisor you were absent for personal reasons. (Add 5 points) tell your supervisor that you were ill because of overpartying. (Add 10 points)

C. D.

2. You are responsible for making travel arrangements for people in your office. An airline agent whom you know offers you bonus points for every booking you make with his airline and you can cash in the bonus points for free travel.

What do you do? A. B. C. D. As long as the company incurs no additional costs, accept the offer. (Subtract 10 points) Reject the offer summarily. (Add 10 points) Accept the offer for company and use the free travel for productivity awards. (Add 5 points) Tell the airline agent that you have to think about it. (No points)

3. After 3 months you discover that a recently hired employee who appears to be very competent falsified her employment application in that she claimed she had a college degree when she did not.

As her manager, what do you do? A. B. C. D. You re happy with the new employee so you do nothing. (Subtract 10 points) Discuss the matter with human resources to determine company policy. (Add 10 points) Recommend she be fired for lying. (Add 5 points) Weigh her performance, length of service, and potential benefit to the organization before making any recommendation to anyone. (No points)

How Did You Do?

20 to 30 Points: You are ready to be a Corporate Ethics Officer 10 to 15 Points: Consider an Ethics Training lecture, workshop, or seminar -30 to 5 Points: Have a heart-to-heart talk with your CEO (or significant other)

What Does Gray Matter Accomplish?

Employees perceive ethics training as more important Employees feel greater self-confidence in making the correct decision Employees place less reliance on their peers in making ethical decisions and more reliance on company rules and procedures

Ethics & Social Responsibility

Business ethics
A decision about what is acceptable or right in an organization context to benefit
Organizational performance, individual achievement in the workplace, social acceptance and approval of peers and coworkers, relevant stakeholders

Corporate social responsibility

Doing what society views as the best for the welfare of the public in general or for relevant stakeholders
Consumers, employees, suppliers, communities

Pyramid of Social Responsibility

Philanthropic Be a good corporate citizen

Ethical Be Ethical

Legal Obey the Law

Economic Be Profitable

Fast Cars Need Good Brakes!

Stress Ethics & Social Responsibility

Ethics & Social Responsibility

Dr. Tracy A. Suter Professional Development Seminar 22 January 2010