Corporate Social
Responsibility and
Business Ethics
UBGA 107: Week 12
Today’s Agenda
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Administrative Matters (return exams)
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Only scantron is returned to you. Blue books are available to
be viewed in Professor Gerlach’s office only.
Grade distribution adjustment?
Attendance sheet to be returned to me during class
Corporate Social Responsibility and Business Ethics
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What are CSR and Ethics?
How are ethical questions analyzed
Review
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Corporate Governance
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The Facts
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WorldCom’s meteoritic rise
The Scandal
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U.S. v. Germany (Japan)
the ways in which rights and responsibilities are shared
between the various corporate participants (In the US,
especially the management and the shareholders).
Financial Manipulations
WorldCom’s incentive to commit fraud
Arthur Andersen’s incentive to look away
Key: Misalignment of Incentives
Definitions
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What is Corporate Social Responsibility?
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Corporate-wide activities carried out to improve a company’s
image vis-à-vis various stakeholder groups
Examples
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Corporate Philanthropy, Environmental Policies, Worker Rights
Policies, etc.
What is business ethics?
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Refers to actions by individuals and/or groups within
organizations
Examples
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Embezzlement, Sexual Harassment
Discussion Question #1
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Discuss the reading in the context of the
corporate social responsibility of McWane and
Acipco, providing some specific examples
Corporate Philanthropy
 Environmental Policies
 Workers’ Rights Policies
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Corporate Philanthropy
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Examples from Reading
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$10 million donation to the science museum, the McWane
Center
Millions to Alabama’s major cultural institutions, including
the Birmingham Civil Rights Institute
McWane Scholarships
$2 million to renovate 56-foot statute of Vulcan
What is weird?
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These gifts were made by the McWane family, not McWane
corporation
Environmental Policies
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McWane’s environmental records are abysmal
Persistent defiance of laws protecting workers and surrounding
communities from toxic pollution
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Discharged arsenic, copper and thallium into the air (Alabama)
Workers exposed to exceptionally high levels of silica
Failure to provide respirator, causing severe kidney failure due to arsenic
poisoning
8.5 mil-long slick in the Delaware River
Flushing thousands of gallons of polluted water through the storm drain
(Birmingham)
Repeated failure to stop production to repair broken/ineffective
pollution control
Equipment tampered with so as not to shut down automatically
when pollution controls fail
Workers’ Rights Policies
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A dangerous business …
Workers who protest dangerous work conditions “bull-eyed” for termination
Supervisors refused to wait a few hours for federal safety inspectors to arrive
before restarting a conveyor belt that had crushed a man to death
Line workers who fail to make daily quotas get disciplinary actions
Discipline used to suppress union unrest and injury claims
Supervisors urged to discipline injured workers (to punish workers for
reporting injuries)
“Safety director’s” request for more safety equipment and assistant ignored.
Blatant refusal to adhere to federal safety rules on weight-lifting limits
Company officials lie to OSHA regarding safety issues (elevator shaft example)
OSHA: respirator program totally ineffective
404 OSHA violations 1995-2003
Contract with Acipco
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“The only time you can get a job at Acipco is if
somebody retires or dies.”
Workers take yoga glasses in a modern health club with
the latest in weight-training equipment and a springloaded floor for aerobics
Workers get cash bonuses if they keep their cholesterol
down
Spent millions of dollars to install air-conditioned
booths in the hottest parts of the plant
McWane vs. Acipco
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McWane Business Model
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Profit at the expense of worker
safety/environmental cleanliness.
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Cost savings from ignoring safety/environmental
standards much greater than fines
Acipco Business Model
If workers had a genuine stake they would work
harder and smarter and produce more
 Instituted profit-sharing for all employees
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Ethical Choices
The Three Models of Ethical
Analyses
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Utilitarian
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Rights
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Comparing benefits and costs
Action is ethical if net benefits exceed net costs
But difficult to measure some human and social costs. Majority may
disregard rights of minority
Respecting entitlements
Basic Human rights are respected
Difficult to balance conflicting rights
Justice
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Distributing fair shares
Benefits and costs are fairly distributed
Difficult to measure benefits and costs. Lack of agreement on fair shares
Discussion Question #2
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Provide Robert Restor, a former plant manager
at McWane, with advice on the ethical choices
he could have made while at McWane based on
the three ethical models discussed in class
Mr. Rester’s Ethical Dilemma
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Over 24 years, Mr. Rester became numb to the constant
body count, brushed hands and feet, disfiguring
lacerations, burns from molten iron, amputations.
His sole focus, was finding a fresh body to keep
production rolling.
For a McWane manager, taking time for safety or
environmental problem holds few attractions. It means
slowing production to fix equipment. It means more
safety training, less time to make pipe.
The McWane dictum: TIME = PIPE, PIPE =
MONEY
Advice to Mr. Rester
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Utilitarian
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Rights
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Justice
News Updates
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U.S. Brings New Set of Charges Against Pipe Manufacturer
May 26, 2004
M cWane Inc., a major pipe maker and one of the nation's most persistent
violators of workplace safety and environmental laws, faced a new round of
criminal charges last night after a federal grand jury in the company's
hometown, Birmingham, Ala., issued a 25-count indictment alleging illegal
dumping and other environmental crimes.
The indictment charges that senior McWane managers, including Charles
Robison, the corporation's vice president for environmental affairs, conspired
to dump huge quantities of polluted wastewater into a creek that runs
through McWane's oldest foundry, the McWane Cast Iron Pipe Company, on
the outskirts of downtown Birmingham.
News Update
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Plea Agreement Is Reached in Pipe Case
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May 27, 2004
A day after announcing a second indictment against McWane Inc., federal
prosecutors disclosed Wednesday that a longtime McWane manager had
agreed to cooperate with their investigation into environmental and safety
violations at McWane, one of the nation's largest manufacturers of cast iron
water and sewer pipe.
The manager, Donald Harbin, 58, has agreed to plead guilty to a single felony,
conspiracy to violate environmental laws at the McWane foundry in
Birmingham, Ala., where prosecutors charged this week that huge quantities
of polluted wastewater had been illegally and routinely dumped into a creek.
Mr. Harbin is the first McWane employee to strike a plea agreement with
prosecutors and the first to acknowledge criminal conduct. The maximum
sentence is five years in prison and a $250,000 fine , but Mr. Harbin is almost
certain to receive a much lighter sentence for agreeing to cooperate. In all, 10
McWane managers have been charged with crimes in Alabama and New Jersey.
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Key Take Away
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Sometimes, there are truly difficult ethical questions:
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From a pro-life perspective, if a pregnant mother’s life is in danger, and
you have to sacrifice the unborn child’s life, or condemn the mother to
certain death, whose life do you choose?
But many of the so-called “ethical questions” in the business
world arise from the choice between profit and socially desirable
policy considerations.
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Here, the “ethical” choice is not inherently difficult to discern, but often
financial considerations push ethically desirable concerns to the
background – Here, the cost of compliance > cost of fines
But the McWane – Acipco contrast highlights the fact that ethical
decisions do not necessarily result in financial ruin.
In Mr. Rester’s example, the opposing forces were his self-interest and his
conscience.