CHAPTER 4: Corporate Governance – Foundational Issues
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LEGITIMACY: A condition that prevails when there is congruence between the organization’s activities and society’s expectations.
LEGITIMATION: Legitimacy is a condition, legitimation is a dynamic process (where business must change if society’s norms and values change) by which business seeks
to perpetuate its acceptance
MICRO LEVEL OF LEGITIMACY: refers to individual business firms achieving and maintaining legitimacy by conforming to societal expectations through (1) adapting its
methods of operating to conform to prevailing standards (i.e. stop door-to-door selling if public view as shoddy sales technique; (2) trying to
change public’s values/norms to conform to its own practices by advertising etc.; (3) an organization may identify itself with other
organizations/people/values/symbols with powerful legitimate base in society
MACRO LEVEL OF LEGITIMACY: refers to corporate system - the totality of business enterprises
FRAGILE MANDATE: A business’ legitimacy is constantly subject to ratification, must realize it exists because society gave it a right to.
ROLES OF 4 MAJOR GROUPS (under shareholder-primacy model of corporate governance)
❏ CHARTER: Issued by the state, giving firms the right to exist, specifying corporate governance practices
❏ Shareholders: own stock in the firm, giving them ultimate control over the corporation as the firm’s owners. Generally, the no. of shares
of stock owned determines the degree of each shareholder’s right. (i.e. 100 shares = 100 votes)
❏ Board of directors: to govern and oversee the management of business. Purpose: ensure manager puts interest of shareholders first
❏ Management: group of individuals hired by the board to manage company on a daily basis
❏ Employees: hired to perform actual operational work (referring to non-managerial employees only)
SEPARATION OF OWNERSHIP FROM CONTROL: as public corporations grew and stock ownership became widely dispersed, shareholders
(owners) become more distant from managers (incl. CEO). Problem with this: true authority, power and control rest with the group with most
concentrated interest at stake - management.
NEED FOR BOARD INDEPENDENCE: (1) Inside director: has some sort of ties with the firm; are usually top executives (i.e. CEO, CFO, COO), representatives of major
shareholders/other stakeholders (i.e. labour unions). (2) Outside/Independent director: not an employee/stakeholder in the company, no ties with the company
DUTIES & LIABILITIES OF DIRECTORS: (1) Fiduciary duties, (2) Duty of skill, care and diligence, (3) Statutory duties: imposed by statute (Companies Act), relate to matters
such as disclosure of directors’ interests, keeping accounting records, etc.
CHAPTER 7: Introduction to Business Ethics Essentials
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ETHICS: Standards of conduct which originate from some external group or source. Study of what is good/evil, right/wrong, just/unjust.
MORALS: Standards of conduct that originate within the individual. Relates to principles of right and wrong in behaviour.
BUSINESS ETHICS: Concerned with good and bad or right and wrong behavior and practices that take place in business
DESCRIPTIVE ETHICS: Describing, characterising, and studying the morality of people, an organisation, a culture or a
society.
❏ NORMATIVE ETHICS: Supplying and justifying a coherent moral system of thinking and judging.
Public’s Interest In Business Ethics
❏ At an all-time high, spurred by scandals.
❏ Opinion on two levels: (1) General perception of business ethic &
(2)
Specific perceptions of what’s going on inside organisations
Ethics & The Law
❏ Ethical behavior typically thought to reside above behavior required by the law (but actually the two overlap)
❏ Law reflects society’s codified ethics, represents an ethical minimum (so ethics represent a standard that exceeds legal minimum)
Making Ethical Judgments
❏ Observe/participate in the decision, action or practice that has taken place
❏ Compare the practice with prevailing norms of availability
❏ Recognise that value judgments are being made by someone as to what really occurred & what the prevailing norms are
❏ Danger of ethical relativism: pick and choose which source of norms to apply on the basis of what will justify current actions/maximise freedom
Management Ethics: 3 Models
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IMMORAL: Approach devoid of ethical principles and active opposition to what is ethical. Goals are profitability and organisational success at virtually any price.
Doesn’t care about other stakeholders’ claims, exploits opportunities for personal/corporate gain (Enron)
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MORAL: Conforms to highest standards of ethical behavior. Aspires to succeed but only within confines
of sound ethical precepts; stresses profitability but only within confines of legal compliance and ethical
standards. Law here is viewed as minimum standard of ethical behavior. Seeks out only economic
opportunities that they can pursue within ethical boundaries. Integrity strategy – conception of ethics as
driving force of organisation
❏ Highly moral leaders: Passion to do right, morally proactive, consider all stakeholders, strong
ethical character, obsession with fairness, undertake principled decision making, integrate ethics
with management wisdom.
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AMORAL: Pursues profitability as its goal but does not consciously or cognitively attend to moral issues
that might be intertwined with that pursuit. Permit free rein within free enterprise system. (1)
Intentional. Don’t factor ethical considerations into their decisions, actions and behaviors b/c they
believe business activity is outside sphere of moral judgment. In a distinct minority today. (2)
Unintentional. Don’t think about business activity in ethical terms, simply b/c they’re casual, careless,
inattentive to the negative effects of their actions. Lack ethical perception. Compliance strategy – submission to the law as driving force.
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Population Hypothesis: Distribution of these 3 models approximates a normal curve
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Individual Hypothesis: Within individuals, these 3 models operate at various times/under various situations
Kohlberg’s Levels of Moral Development
❏ PRECONVENTIONAL: Focus mainly on self (infants/children)
❏ CONVENTIONAL: Importance of conforming to conventional norms of society
❏ POSTCONVENTIONAL/PRINCIPLED: Concept of ethics more mature than the conventionally articulated situation
External Sources of Values: Religious, Philosophical, Cultural, Legal, Professional
Elements of Moral Judgment
(1) MORAL IMAGINATION: Ability to perceive that a web of competing economic relationships is, at the same time, a
web of moral/ethical relationships. (2) MORAL IDENTIFICATION & ORDERING: Ability to discern the relevance or nonrelevance of moral factors that are introduced into a decision-making situation. (3) MORAL EVALUATION: Decision
phase of moral judgment. Challenge is to integrate concern for others into organisational goals, purposes and
legitimacy. (4) TOLERANCE OF MORAL DISAGREEMENT & AMBIGUITY: Situation is not always clear in moral judgments.
(5) INTEGRATION OF MANAGERIAL & MORAL COMPETENCE: Moral competence integral part of managerial competence. (6)
SENSE OF MORAL OBLIGATION & INTEGRITY: Foundation for everything discussed above.
CHAPTER 8: Managerial & Organisational Ethics | Principles & Tests of Ethics
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CONVENTIONAL APPROACH: Discussed in Chapter 7; <–> decision/action/policy and prevailing norms of acceptability
PRINCIPLES APPROACH: Based on the idea that employees and managers desire to anchor their decisions and actions on a
more solid foundation than that of the conventional approach
❏ ETHICS PRINCIPLE: Ethical concept/guideline/rule that if applied when faced with an ethical decision or practice, will
assist you in taking the ethical course (based on idea of principles approach)
Levels of Ethics Issues
❏ INDIVIDUAL/PERSONAL: Situations faced in personal lives outside context of employment
❏ MANAGERIAL/ORGANISATIONAL: Workplace situations faced by managers and employees
❏ INDUSTRY/PROFESSION: Manager/organisation might experience business ethics issues at the professional level
❏ SOCIETAL/GLOBAL: Managers acting in concert through their companies can bring about constructive changes
Principles Approach To Ethics
❏ (1) TELEOLOGICAL Theories: Focus on consequences or results of actions they produce. “If… then” format. Aimed at a
certain end
❏ DEONTOLOGICAL Theories: Focus on adhering to ethical duties (eg. principles of
rights/justice). How > what.
❏ ARETAIC Theories: Focus on virtues that one embodies. Individual as a member
of a social unit, moral virtue as a behavioral habit/character trait that is socially
and morally valued.
Ethics Principles
(1) UTILITARIANISM: Consequential principle. Teleological theory. Focuses on acts
that produce the greatest ratio of good to evil for everyone (greatest good for greatest number of people). If consequences are
good, action/decision considered good. (2) THE ENDS-MEANS ETHICS: When confronted with a decision involving an ethically
questionable act, ask whether there’s some overall good – such as survival of a business justifies cutting corners. (3) KANT’S CATEGORICAL IMPERATIVE: Duty-based
principle of ethics. Act such that action taken under circumstances could be universal law or rule of behaviour, aka act only on maxims that you’re willing to see
everyone follow. Second formulation: each person has dignity/moral worth, should never be used as means to another end. Third formulation: principle of autonomy
– no need external authority to determine the nature of the moral law, can discover for ourselves. (4) PRINCIPLE OF RIGHTS: Maintains that people have both moral
rights (important, justifiable claims or entitlements that can be inferred by reason from the study of human nature) and legal rights (protections and entitlements
conferred by law, governing authority has formalised it) that should be honored and respected. Focuses on examining and possibly protecting individual moral or
legal rights. A right can only be overridden by a more basic or important right. Principle of rights is morality from the POV of an individual, utilitarianism is for society.
Negative right is the right to be left alone. Positive right is the right to something. If a dilemma involves competing rights, either (1) eliminate conflict by reframing it,
or (2) decide what is “more right”. Recently, proliferation of rights claims has the potential to dilute or diminish power 9of more legitimate rights. (5) PRINCIPLE OF
JUSTICE: Consider what alternative promotes fair treatment of people. Rawls’ Principles of Justice: (1) Liberty: Each person has an equal right to the most basic
liberties comparable with similar liberties for others. (2) Difference. Social and economic inequalities are arranged so that they are both reasonably expected to be to
everyone’s advantage and attached to positions and offices open to all. (6) PRINCIPLE OF CARING: Focuses on a person as essentially relational/cooperative rather
than individualistic. Consistent with stakeholder theory in a cooperative/caring type of relationship (7) THE GOLDEN RULE: Ethic of reciprocity. Accepted by most
people, easy to understand, win-win, acts as a compass when one needs direction (8) VIRTUE ETHICS: Focuses on individuals becoming imbued with virtues.
Characteristics rather than rules for correct behavior. (9) SERVANT LEADERSHIP: Focuses on serving others first, eg. employees, customers, community. 10 key
characteristics of servant leaders: listening, empathy, healing, persuasion, awareness, foresight, conceptualisation, commitment to growth of people, stewardship,
building community
Ethical Tests Approach
(1) Common Sense (2) One’s Best Self (3) Making Something Public – Disclosure Rule (4) Ventilation – expose
proposed action to others and get thoughts before acting. Works best if you ask people who don’t see things your
way (5) Purified Idea – when person with authority says/implies it’s appropriate (6) Big Four – greed, speed,
laziness, haziness (7) Gag Test. Can use several in combination
Managing Organisational Ethics
❏ Compliance vs Ethics Orientation: (1) Pure compliance focus could undermine ways/habits needed in ethics
thinking (2) Compliance can squeeze out ethics (3) False consciousness – accustomed to addressing issues
mechanically, rule-based
❏ 3 Key Elements Of Improving Ethics: (1) Ethical leadership – MOST IMPORTANT (2) Core ethical values (3)
Formal ethics program (includes written standards of conduct, ethics training, mechanisms to seek ethics
advice/info, methods for reporting misconduct anonymously, disciplinary measures for violators, inclusion of
ethical conduct in evaluation of employee performance)
❏ Effective Communication of Ethics Messages: Requires candor, fidelity, confidentiality
❏ Unrealistic expectations are a primary driver
❏ Codes of conduct as a way of establishing and communicating standards of behavior. Discipline anyone who
violates (many question business’ sincerity as they are unwilling to do so)
❏ Have ethics/sustainability audits (eg. fraud risk assessments) and corporate transparency
Behavioral Ethics Phenomena
❏ BOUNDED ETHICALITY: Even when managers aspire to be ethical, it’s difficult due to organisational
pressures
❏ CONFORMITY BIAS/SELF-SERVING BIAS/OVERCONFIDENCE BIAS
❏ FRAMING: Ethical judgments affected by how a question or issue is posed
❏ INCREMENTALISM: Predisposition towards slippery slope
❏ ROLE MORALITY: Use diff ethical standards as you move throughout diff roles in life
❏ MORAL EQUILIBRIUM: Ethical scoreboard
CHAPTER 9: Business Ethics & Technology
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BIG DATA: Tons of information that are out there and how businesses are putting it to work – high
volume, velocity, variety
❏ TECHNOLOGY: Totality of the means employed to provide objects necessary for human sustenance
and comfort
❏ TECHNOLOGICAL ENVIRONMENT: Total set of technology-based advancements or progress taking
place in society.
❏ VERTICAL FARMING: Practice of producing food on vertically inclined surfaces instead of farming
on a single level (brought about by food security concerns especially after the global food crisis of
2007-08). Local production a priority
❏ URBAN FARMING: Practice of cultivating, processing and distributing food in or around urban areas
Technology & Ethics
❏ UNDESIRABLE EFFECTS: (1) Environmental pollution (2) Depletion of natural resources (3) Technological unemployment (4) Creation of unsatisfying jobs due to
technology
❏ Management’s goal should be to avoid amoral and immoral practices with respect to technology and to move forward an ethically sustainable posture
❏ TWO KEY ETHICAL ISSUES: (1) Technological determinism – imperative that what can be developed will be developed, so scientists etc are driven to push back
frontiers of technological development without consideration of ethics/side effects/social problems (2) Ethical lag – when the speed of technological change far
exceeds that of ethical development
❏ ECOMMERCE ETHICAL ISSUES: Online scams, access (diff between rich and poor), intellectual property (pirating), privacy and informed consent (identity theft, phishing,
botnet scams), protection of children, security, trust
❏ BUSINESS INITIATIVES WITH CONSUMER PRIVACY PROTECTION: Ethical leadership, privacy policies, chief privacy officers, data security, illegal downloading/theft of
intellectual property, monitoring technology
❏ TECHNOLOGY IN THE WORKPLACE: Robotics (stubbornly high unemployment rates but overall may lead to better SOL), artificial intelligence, cell phones/texting,
unethical activities by employees (using office software/equipment for personal reasons)
❏ BIOETHICS: Proceduralism – elaborate protocols established that ensure that certain classical worries such as informed consent are not violated
❏ GENETIC ENGINEERING: Development and application of scientific methods, procedures, and technologies that permit direct manipulation of genetic material in
order to alter the hereditary traits of a cell, organism, or population. Controversially, involves application of human beings. (1) Stem Cell Research (2) Cloning (3)
Cloning Animals for Food (4) Genetic Testing and Profiling (5) GMO – particularly labeling of GMO food, consumer has right to full disclosure
CHAPTER 10: Ethical Issues In The Global Arena | Global Ethics
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FOUR TRENDS TRANSFORMING GLOBAL ECONOMY: Rise of emerging markets, accelerating rate of technological change on
market competition, aging world population, greater connectedness in movement of trade, capital, people and data
MNCs & Challenges In A Global Environment
❏ ACHIEVING CORPORATE LEGITIMACY: Seeks to be recognised and accepted in an unfamiliar society
❏ Fundamentally differing philosophies that exist between firm’s home country and host country
❏ Differing cultural or philosophical perspectives from those of their host countries (eg. cultural, business/govt
differences, management and global operations control, modify or redesign products appropriate for intended
market, be sensitive to impacts and political vulnerability of products)
❏ DIFFERENT CSR VIEWS: Growing politicised concept of CSR
Ethical Issues In The Global Business Environment
❏ QUESTIONABLE MARKETING & PLANT SAFETY PRACTICES: Infant formula controversy, plant safety (Bhopal tragedy)
❏ HUMAN RIGHTS SWEATSHOPS & LABOR ABUSES: FLA, Social Accountability 8000 (SA8000) auditing initiative, individual company initiatives
❏ CORRUPTION, BRIBERY, QUESTIONABLE PAYMENTS: Bribery primary form of corruption found in global business. Necessary for profits, everybody does it,
accepted practice, forms of commissions BUT also inherently wrong, illegal, should not compromise, corrupt, once started never stop, etc.
❏ GROWING ANTICORRUPTION MOVEMENT: Transparency International (TI) – innovative special interest group. Corruption Perception Index (CPI).
Balancing & Reconciling Ethics Traditions of Home & Host Countries
❏ ETHICAL IMPERIALISM: Continue to follow its home country’s ethical standards even while operating in another country
❏ CULTURAL RELATIVISM: MNC should set aside its home country’s ethical standards and adopt the ethical standards of host country
❏ HYPERNORMS: Standards that are so basic that they are universally accepted
Strategies For Improving Global Business Ethics
❏ GLOBAL CODES OF CONDUCT: Establish universal principles or guidelines that should be followed.
❏ CORPORATE GLOBAL CODES: GBS Codex – fiduciary, property, reliability, transparency, dignity, fairness, citizenship, responsiveness
❏ GLOBAL CODES DEVELOPED BY INTERNATIONAL ORGANISATIONS: ISO26000 Social Responsibility. UN Global Compact & Caux Round Table Principles most
widely used
Others include (1) ETHICS & GLOBAL STRATEGY (2) SUSPENSION OF ACTIVITIES – if there are unbridgeable gaps between home and host countries (4) ETHICAL
IMPACT STATEMENTS & AUDITS – assess company’s impacts and underlying moral justifications
Corporate Action Against Corruption
(1) High-level commitment by top management (2) Detailed statements of policies and operating procedures (3) Training and discussion of policies and procedures
(4) Hotlines and helplines for all organisational members (5) Investigative follow-up, reporting, and disclosure
CHAPTER 11: Business, Government & Regulation
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GOVERNMENT’S ROLE: Ensure safe working environment, equal opportunities, fair pay, clean air, safe products
etc.
BUSINESS’ ROLE: Production and distribution of G&S, other roles covered by government to ensure it’s carried
out since businesses don’t automatically factor them into their decision making process.
WHITE PAPER: Authoritative report or guide that helps readers to understand an issue, solve a problem, or make
a decision
COMPETITIVENESS: Set of institutions, policies and factors that determine the level of productivity of an
economy, which in turn sets the level of prosperity that the country can earn
Pendulum of Government’s Role In Business (Areas In Which Government Regulates Change)
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Determines rules of the game
Major purchaser with buying power that can affect businesses/industries’ chances of survival
Strengthen some businesses and weaken others
Create new businesses and industries through subsidisation and privatisation
PARETO EFFICIENT: Welfare-increasing, resources allocated among various uses such that no one can be
made better off
❏ PARETO IMPROVEMENT: Resources reallocated in a way that makes at least one person better off without
making anyone else worse off
❏ EFFICIENCY: Getting the most out of a given input. EQUALITY: Eliminating disparities in the distribution of
income and wealth relative to the needs of different-sized families. Giving everyone the same thing. EQUITY:
Access to the same opportunities
❏ ALL NATIONS are blends of capitalism (means of production owned and controlled largely by private
persons. Reliance on market economy and private ownership of FOP) and socialism (means of production
owned and controlled primarily by community as a whole and administered in its collective interests. Most
important determinant of government’s role in society is citizens’ political philosophies
Clash of Ethical Belief Systems
❏ INDIVIDUALISTIC ETHIC OF BUSINESS: Maximum concession to self-interest, minimising obligations society
imposes on the individual (personal freedom), emphasises inequalities of individuals
❏ COLLECTIVISTIC ETHIC OF GOVERNMENT: Subordination of individual goals and self-interests to group and
group interests, maximising the obligations assumed by the individual and discouraging self-interest,
emphasises equality of individuals
Government’s Relationships
❏ PUBLIC-GOVERNMENT: Uses political processes like voting, electing, removing officials etc to influence
government. Also exerts influence by forming special interest groups
❏ BUSINESS-PUBLIC: Business influences public through advertising, public relations, and other forms of
communication. Public influences business through the marketplace or by forming special interest groups
and protest groups
Government’s Non-regulatory Influence on Business
❏ INDUSTRIAL POLICY: Defined as strategic effort by government to encourage development and growth of a
sector of the economy. Concerned with role that government plays in shaping the national economy. Promotes
key industries according to perceived comparative advantage. Plays active role in industrial development.
Promotes restructuring away from labor intensive and technologically simple towards technology-intensive
knowledge-based industries
❏ PRIVATISATION: Process of turning over to the private sector some function previously handled by
government, changing a public organisation to private control or ownership. ADVANTAGES: Government
involved in thousands of businesses in which it has no real comparative advantage and no basic reason for
being involved. Publicly owned enterprises less efficient and less flexible than are competitive private firms.
DISADVANTAGES: Certain activities cannot be handled safely or efficiently by the private sector.
❏ Large payroll and is a major employer itself. Largest purchaser of G&S produced in the private sector.
❏ STANDARD SETTING
❏ COMPETITION: Government is a major competitor of business
❏ FINANCIAL: Taxation, subsidies, government loans, loan guarantees, monetary policy
❏ MORAL SUASION: Persuade business to act in public interest by taking/not taking a particular course of action. Eg. public interest appeals, requests
Government’s Regulatory Influence on Business (has continued to rise)
❏ FACTORS TO CONSIDER: Protection, Scope, Cost, Burden
❏ MECHANISMS OF REGULATION: (1) Legislative – enacts laws (2) Judicial – courts (3) Executive – enforcement responsibility eg. MAS
❏ REASONS FOR REGULATION: (1) Controls natural monopolies (2) Controls negative externalities (3) Achieves social goals (4) Controls excess profits (5) Controls
excessive competition
❏ BENEFITS OF REGULATION: Fair treatment of employees, safer working conditions, safer products, cleaner air and water
❏ COSTS OF REGULATION: (1) Direct – eg. new agencies created, extra costs incurred (2) Indirect – forms, reports, etc. to complete (3) Induced. Examples of
Induced Costs: Reduced innovation (focus on defensive research), reduced investment in plant and equipment, increased pressure on small businesses since
EOS
❏ INTERNATIONALISATION: Increasing number of MNCs conducting extensive international operations so no single country can claim to be their “home”
❏ DEREGULATION: Connotes lessening of international regulation. Purpose: Intended to increase competition with the expected benefits of greater efficiency,
lower prices, and enhanced innovation. Dilemma: Must enhance competition without sacrificing applicable social regulations such as health and safety
requirements
CHAPTER 13/14: Consumer Stakeholders: Information, Product & Service Issues
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MAGNA CARTA: Right to safety, to be informed, to choose and to be heard (+ fair value for money spent)
8 BASIC CONSUMER RIGHTS: Right to basic needs, safety, information, to choose, representation, redress,
consumer education, health environment (refer to Slim 10 for full slides)
❏ CONSUMERISM: A social movement that seeks to empower the rights and powers of buyers in relation to
sellers. Involves grassroots, social media activism, rise of nonprofit organisations, etc.
❏ CONSUMER MOVEMENT: Expects (1) Fair value for money spent (2) Product meets reasonable expectations
(3) Full disclosure of specifications (4) Truthful advertising (5) Safe products (6) Removal of dangerous
products
Product/Service Issues
❏ Misinformation/deception regarding product’s attributes. CLEAR, ACCURATE, ADEQUATE information
❏ ADVERTISING ISSUES: (1) Ambiguous Advertising – weasel words avoid making direct promise (2) Concealed
Facts – deliberately not communicating information the consumer should have in making informed decisions.
Product placement – embedding products in movies/TV. Plot placement – products integrated into the
plotline of a TV show (3) Exaggerated Claims – cannot be substantiated. Eg puffery, refers to hyperbole. Loss of advertising efficiency. (4) Psychological Appeals
– persuade on emotions rather than features.
❏ SPECIFIC CONTROVERSIAL ADVERTISING ISSUES: Comparative Advertising, Use of Sex & Women, Marketing to the Poor (vulnerable, less educated), Advertising
to Children, Advertising Alcoholic Beverages, Cigarette Advertising, Health & Environmental Claims, Ad Creep (ads can be found everywhere one looks) →
ambient advertising = ads that are located in nontraditional places.
❏ WARRANTY: Written contractual promise that attests to quality or durability of a product purchased for a period of time. Vs GUARANTEE: Promise regarding
product quality but less likely to be written. SELF-REGULATION: Control of business conduct/performance by the business itself. Means the responsibility of
ensuring truthful advertising lies with both advertisers and consumers. Balance of trust. Companies’ standards go beyond legal obligations
❏ TWO CENTRAL ISSUES: Quality. Ethical Underpinnings – (1) contractual theory focuses on contractual agreement between firm and customer (2) due care
theory focuses on relative vulnerability of customer thus ethical responsibility (3) social costs view extends beyond 1 and 2 to suggest that if a product causes
harm, firm should pay costs of any injury. Safety. Caveat emptor (buyer beware) vs caveat venditor (seller beware).
❏ LIABILITY: (1) Doctrine of Strict Liability – everyone involved in value chain is liable for harm. Utilitarian. (2) Absolute liability (3) Market share liability
❏ RISK MANAGEMENT: Product tampering/extortion (damage/contaminate products to get money), product liability reform
Moral Management Models & Consumer Stakeholders
(1) IMMORAL: Consumers viewed as opportunities to be exploited for personal/organisational gain. (2) AMORAL: Makes profitable decisions within letter of the law.
No consideration given to ethical implications of interaction with consumers. (3) MORAL: Consumers viewed as equal partners in transactions.
❏ BUSINESS RESPONSE TO CONSUMER STAKEHOLDERS: Casual/ineffective → Formal interactions with them becoming institutionalised → Now customer service
programs, toll free hotlines, customer service programs. CRM is ability of an organisation to identify, acquire, and retain loyal profitable customers.
❏ LEMON LAW: Able to make a claim for a defective product within 6 months of purchase. Covers all general consumer products in SG
❏ 7 PRINCIPLES OF CUSTOMER SERVICE: (1) Keep your word (2) Be Honest (3) Think Proactively (4) Never pass the buck – aka try to deal with problems yourself
(5) Don’t argue with customers (6) Accept mistakes, don’t repeat them (7) Consistency for lasting success
Moral Management Models & Consumer Stakeholders
(1) IMMORAL: Consumers viewed as opportunities to be exploited for personal/organisational gain. (2) AMORAL: Makes profitable decisions within letter of the law.
No consideration given to ethical implications of interaction with consumers. (3) MORAL: Consumers viewed as equal partners in transactions.
All Required Videos: Review
How Nike Became The Most Powerful Brand In Sports
Industry Run By Immoral Managers
Companies acquired over the years: Cole Haan (1988), Hurley (2002), Converse
(2003), Analytics companies (to help with online business - Zodiac (2018),
Invertex (2018). ‘80s-’90s: Nike dropped exclusive sneakers (e.g. Jordan). 1980:
Nike went public, it was the first year it took over Adidas in terms of market
shares. 1986: Surpassed US$1 Billion revenue for the first time. 1988: Nike
releases its first “Just do it” campaign. 2018: Scandal - Sexual harassment and
gender bias within the company. Athletes also came out to claim Nike wanted to
pay them less after their pregnancy.
1953 - late 1990s: Duration of the nicotine conspiracy (ard 50 years)
1994: All 7 CEOs of 7 major domestic cigarette companies came before Congress and
lied under oath that nicotine was not addictive.
Key Business Strategies:
(1) Controversial/ Risky advertising: Nike always aired ads that took a stand on
issues and have always almost resulted in a rise in sales. Charles Barkley (1993) “I am not a role model”. Colin Kaepernick (2018) - Nike got a huge backlash at
first for supporting an athlete that did not stand up for the national anthem
during a football game (Kaepernick was fighting for US race injustices). Nike’s
shares dropped and had their brand boycotted online but they stood by
Kaepernick’s convictions and eventually had a whole lot of free marketing online
(US$165 million) when people began to see the light on the issue. However, ads
featuring Maria Sharapova (Tennis) and Lance Armstrong (Cyclist) took a backlash
as these stars used drugs. Nike dropped their endorsements. (2) Air Jordans:
‘80s-’90s: Nike dropped exclusive sneakers (e.g. Jordan). Nike worked with
rappers and artistes to brand its shoes as one that’s not only to be worn on court.
Air Jordans franchise raked in US$100 million. Nike made sure it supplied lower
than market demand to keep it ‘exclusive’. (3) Exclusive Contracts: Nike is the
uniform supplier for the 3 biggest sports leagues in US - MLB, NBA, NFL. Adidas
still the main uniform supplier for soccer (MLS).
Vertical Farming
Pros of VF: (1) conditions can be controlled: lighting, ambient temperature, soil
conditions and nutrients → hence, does not rely on seasonal patterns + increased
yields; (2) uses vertical racking to optimise space (can be located near/in cities) →
overcomes transportation challenges; (3) remove need for pesticides since a
controlled environment eliminates birds/insects → improve quality; (4) optimise
level of nutrients crops receive, remove the need to find suitable farming land in
close proximity to cities; (5) Closed-cycle approach (reusing resources) →
prevents nutrients/ fertilizers from damaging land/washed into rivers.
Singaporean Garden of the Future
Constraints to food production in SG: Current domestic farming lands produces up to
7% of vegetable supply only
A-Go Grow System (commercially viable)
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High tech, highly compact VF tower (9metres, 38storeys, produces 10x more
than traditional means)
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Produces 1000 tonnes of veg vs 200 tonnes (traditional)
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Rotation system (using water-pulley): brings plants to water instead of pumping
water up (more resource intensive)
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No pesticides → Greenhouse shelters plants from insects. Plus, used sticky
insect trap to trap insects, identify how to deal with each specifically without
pesticides
Gardens by the Bay
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Gene banks: self-contained conservatories that can artificially sustain entire
ecosystems of endangered species
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2 domes recreate habitats with plants at high risk from climate change →
valuable time capsules of conservation importance.
●
Had to be energy efficient → dehumidifiers; fitted with special glass that filters
out heat but maximises sunlight
●
Consumes 30% less energy than conventional cooling + carbon neutral
Drakoo
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Harvest wave energies (even with small waves)
●
Conversion rate: 55%, double that of any other wave converters
●
Key feature: one-way valves → streamlines irregular waves to a single
directional flow of water to smoothly generate power. Also overcomes bounceback.
●
One Drakoo unit can power one household; with larger waves, this quadruples.
25 units
Growth of SG’s VF Sector
Limitations: (A) Amount of energy required to maintain the farms; (B) Cost & land
availability in urban areas
Mitigation: (A) Many farms are powered by renewable technologies + recycle
their resources; optimised process reduces amt of water used, many farms use
rainwater harvesting system; (B) Farms are using re-purposed shipping
containers/ former factories/ disused warehouses
●
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Agriculture is the biggest industry in the world, but global food production must
double by 2050 to feed all the people on the planet
Investments in agrifood tech grew $10B in 2017, up 29%
AVA also trying to bolster food security, advises companies on scalability and
how they can build their facilities in a closed environment, giving funds to farms
who can scale-up
Eric Ng built first vertical fish farm in SG. From 6 ponds, planning to scale to 96
by building $52M mega farm
In SG land is expensive, so sustainable farming is the only way to go
Vertical farming increasing in SG, from 12 in 2016 to 34 in 2018. Biggest
challenge is finding ways to rewrite policies so farms can use buildings
AVA also encouraging farms to expand overseas. They hope to build this model
into urban cities, closer to consumers
Vertical farms supplements farm systems, decentralises the food value b/c
impossible crops can be grown locally, so communities can have temporary
products all year round. Can work with outdoor farmers to help them integrate
smart technology and optimise their farming of Drakoo can power 75
households
Why we need VF: (1) More than 11% of world’s total land area used for crop
production: leading to habitat clearing, soil degradation and putting pressure on
scarce resources; (2) As cities expand, we have lesser suitable farming lands
(those that remain are far away from cities) → increases transportation cost; (3)
Changing climate → disrupting seasonal weather patterns; (4) Lack of suitable
soils in close proximity to rapidly expanding areas
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The Insider
Enron
Jeffrey Wigand: Former tobacco scientist; Head of R&D for Brown & Williamson
Tobacco Company; corporate vice president,came from companies (J&J, Pfizer)
where research was core value but tobacco companies were all about the sales
culture: market and sell enormous volume. Got fired by Thomas Sandefur (B&W
CEO); Lowell Bergman: Producer for 60 minutes; received scientific papers from
Phillip Morris (a tobacco company), initially engaged Wigand to explain the
papers but he refused - fax Bergman to-and-fro saying he can’t talk about it. Met
Bergman at Seelbach Hotel: Wigand says he can talk to him about what’s in
Philiip Morris’ papers but ‘that’s as far as he can go’, he can’t talk about ‘anything
else’ (tobacco-related) since he signed a confidentiality agreement. Bergman
asked Debbie to “get Legal on corporate confidentiality agreement, boundaries of
their constraint, Kentucky state law etc.”. Shortly after Wigand met Bergman,
Wigand was called back to talk to Sandefur who wanted to expand his
confidentiality agreement to broadly and clearly define what ‘confidential’ means
- so nobody can say “I didn’t know that was also confidential”. Wigand was mad,
he states he has no intentions to violate his confidentiality agreement at all so
he’s angry that the company doesn’t trust him and seems to be threatening even
his family’s welfare. Ultimately, he said he will sign it. Proceeds to angrily call
Bergman saying Bergman “sold him out”. That night, Wigand played golf and
found someone suspiciously following him. The next day, Bergman went all the
way down to Wigand’s house to make things clear that he did not utter a single
word out about Wigand. This is when he begins convincing Wigand to tell his
story. Both had a conversation in the car: Wigand akin the 7 CEOs of 7 tobacco
companies to 7 dwarfs; explained he was incentivised to work for B&W because
[HISTORY & BACKGROUND OF SCANDAL] Enron nation’s 7th largest corporation,
new business model, took 16 years to grow assets from $16B to $65B but just 24 days
to go bankrupt on Dec 2, 2001 due to huge financial and accounting fraud scandal.
Fatal flaws pride, arrogance, intolerance, greed, everyone blinded by money. Shows
how the top management, especially Ken Lay (founder and chairman), Jeffrey Skilling
(CEO), Andrew Fastow (CFO), through their blind power of greed and faulty
organisational culture led to unfortunate downfall of Enron. During Congress hearing,
Skilling testified that “In all the time that I worked for Enron Corporation, it was in the
interest of the shareholders of the company.” Enron’s collapse played a significant
role for enactment of revolutionary legislation, Sarbanes-Oxley Act of 2002, especially
designed to prevent corporate failures and accounting scandals. Some suspected
political conspiracy. Enron had been one of the largest contributors to George Bush’s
presidential campaign. Bush calls Ken Lay “Kenny boy”. [KEN LAY] An early apostle for
deregulation, thought about energy markets that would be deregulated, in particular
the natural gas industry. Became part of a new crusade to liberate businessmen from
the rules and regulations of government. He founded Enron to take advantage of the
government’s decision to let gas prices float. Wrapped himself in a cloak of moral
rectitude at first, but there was one incident that raised questions and suggested
otherwise… [VALHALLA SCANDAL (Oil Trading)] Involved misappropriation of monies
by two traders, Louis Borget and Thomas Mastroeni. In 1987 they made bets for
Enron on whether price of oil would rise or fall. Enron Oil always seemed to win,
bringing steadily high profits. Mike Muckleroy (ex-Enron executive) was suspicious
and tried to explain to Ken Lay that there was a tremendous risk where you can lose
10x your original investment. Mr Borget took over $3M in company funds and put it
●
●
he got paid a lot and his wife was happy (throughout this movie, can tell he is a
family man); Bergman tried convincing, said “If you got vital insider stuff, the
American people need to know, for their welfare; and on the other hand, you
have a confidentiality agreement to honour, there’s only one person to decide
this - and that’s you”// Bergman, Debbie, Mike Wallace (CBS Journalist,
interviewer for Wigand’s interview, works closely with Bergman) and other staff
producers are discussing abt Wigand’s case at the table: “Tobacco’s standard
defense - “we don’t know” litany - Addiction? We believe not. Disease? We don’t
know” We just roll up a bunch of leaves, you smoke them, you’re on your own.”,
The big checkbook is how Big Tobacco always wins even with thousands dying
each year due to their products, they have never lost a personal injury lawsuit.
Bergman suggests that they could cut through confidentiality agreement if the
law states that he had to reveal it, but that means he had to get ‘killer’ attorneys
who aren’t afraid of risking years of litigation and millions of dollars in legal costs
(going up against Big Tobacco)// Wigand applies and gets a job at a high school as
a Japanese and Chemistry teacher even though he was overqualified// Nighttime,
Wigand discovered someone trespassed his property and called Bergman//
Bergman and Wigand met again: Bergman wants Wigand to tell him all about his
past wrongdoings because once the case is out, Big Tobacco will do anything to
dig out his dirty past and Bergman had to know first. Their conversation ended
unhappily because Wigand claimed he was just a commodity to Bergman, to be
used for tv shows without a heck as to what his family could potentially face, the
latter was unhappy because his honesty and to a certain extent ‘ethics’ as a
journalist was being questioned and he was not such unreasonable person at
all.// Richard Scruggs: A lawyer at Mississippi; Worked on Wigand’s case together
with Michael Moore (Attorney general). Richard once filed a lawsuit against
tobacco on behalf of the state of Mississippi to get the state reimbursed
Medicaid costs for treating people with smoking-related illness. Bergman
contacted Richard to ask him to be Wigand’s legal representation (to be that
‘killer’ attorney previously mentioned)// Diane (Wigand’s wife) discovered a
death threat sent through email to Wigand’s personal computer, Wigand
discovered a bullet in his mailbox. Wigand was dead mad, he decided he wanted
to be interviewed. Wigand called FBI because of the threats but the cops seems
to suspect he himself put the bullet in his mailbox and even asked if he had a
history of emotional problems, one cop drove away with Wigand’s personal
computer that contains all important documents, Bergman suspects cops sent
are under B&W// Wigand and Diane flew to New York; Diane did not know about
the interview, was upset because it could jeopardise her childrens’ safety and
their future; Wigand did the interview with Mike Wallace: Impact Boosting: B&W
manipulates and adjusts the nicotine fix not by artificially adding nicotine, but by
enhancing the effect of nicotine through the use of chemical elements such as
ammonia. Ammonia Chemistry Technology: allows for nicotine to be more rapidly
absorbed in the, affecting the brain and central nervous system. The last straw
for Wigand was coumarin (compound) - a lung-specific carcinogen. Wigand sent a
memo to Sandefur saying he could not in conscience continue with this product
but was told to continue work on it, they were not removing it because it would
impact sales. When asked if Wigand regrets whistleblowing: he said sometimes
yes, sometimes no but ultimately, he would do it again and he thinks it’s worth
it.// Diane initiated a divorce with Wigand saying even though she wishes to
support her husband, everything that’s happening is taking a toil on her// Wigand
flew to Mississipi to meet Richard Scruggs, Michael Moore, Ronald Motley
(Wigand’s trial attorney) : Scruggs explained B&W got Kentucky court to issue a
gag order to stop Wigand’s deposition happening that day. Kentucky court tried
to get Mississippi court to acknowledge it but the latter did not. Still, this means
when Wigand “step foot back in Kentucky, they can find him in contempt and
incarcerate (jail) him”. Wigand was concerned this will affect his family etc. and
he thought twice about his decision to make the deposition again, ultimately he
still decided to do it.// In the court (during the deposition), B&W’s lawyer
reminded that Wigand had contractual obligations and instructed him not to
answer Motley’s question but Motley firmly shuts the lawyer down by saying he
got no rights in the sovereign state of Mississippi’s proceedings/court. Wigand
proceeds to answer Motley’s question if nicotine acted as a drug.// Wigand
returns to an empty home as Diane left a letter (contents not revealed)// Helen
Caperelli (general counsel of CBS News) and Eric Kluster (President of CBS News)
sat down with Wallace and Bergman to explain Tortious Interference - if 2 people
have an agreement (i.e. confidentiality agreement), and one of them breaks it
because they are induced to do so by a third party, the third party can be sued for
damages for interfering. “The greater the truth (from Wigand), the greater the
damage (to B&W)”. CBS was worried their company would be sold to Big Tobacco
and face a multibillion lawsuit should they air the segment with the interview,
they wanted to air it WITHOUT the interview. Bergman was dead angry after all
that he and Wigand had to go through, he did some research and brought up the
fact that both Helen and Eric was just afraid that the B&W lawsuit would
jeopardize the sale of CBS to Westinghouse to which both of them stand to gain
millions with the sales. Bergman thought Mike Wallace was with him on this
(supports airing the interview) but Mike thought otherwise. Bergman left the
room speechless// At this point, B&W already got their legal department to work
on a 500-page dossier scrutinizing every single flaw that Wigand has made in his
life (how he married before Diane came along, estrangement of his daughter,
shoplifting etc.), according to Bergman, they will exaggerate it and air it on TV so
that nobody will believe what Wigand has to say when CBS airs the interview
(The Wall Street Journal is doing a major story on this). Wallace hands Bergman
into personal offshore accounts which were phony and no one could find and a trail
that led from the company treasurer, Tom Mastroeni, to a mysterious Lebanese
speculator named M. Yass (aka they were not being serious). They presented falsified
records to Enron, diverted company’s profits to personal accounts, manipulated
earnings, destroyed trading records, gambled way beyond their limits. But Ken Lay
didn’t listen to external auditors because “this was the only part of the company that
was making money”, and so these traders were neither disciplined nor fired, but were
told to “please keep making us millions”. However ultimately lost $90M in 5 days and
gambled all Enron’s reserves away. Muckleroy bluffed market and managed to save
the company. Lay claimed he was shocked at their reckless gambling but knew about
risks involved all along. [FINDING JEFFREY SKILLING] Ken liked Jeffrey; found new
ways to deliver energy and not be bound by the physical pipeline, so Enron became a
kind of stock market for natural gas. But had a specific condition to be met before
joining Enron, which was that he be allowed to use mark-to-market accounting
(beginning of a major cog in Enron’s downfall). Allowed Enron to book future profits
on the very day a deal was signed, no matter how much they actually ended up
making. Very subjective and open to manipulation. Moved to Hypothetical Future
Value (HFV) accounting, to add money into the economic bottom line. Rank and Yank:
Started b/c Skilling believed “money was the only thing that motivated people” –
survival of the fittest. Set up a system known as Performance Review Committee.
Graded people from 1-5 based on their earnings for the company, and around 1015% got 5s and were fired every year. “I am Enron.” Skilling was a huge risk-taker,
flirted with death. [GUYS WITH SPIKES] Insane trips every year to do daredevil acts,
fed the whole toxic macho Enron culture. Lou Pai was a key Skilling lieutenant, his
ICBM, helped build trading business, went on to run EES. Motivated by money and
strippers. Used company funds to go to strip clubs, brought traders with him. Lost
interest in running EES as soon as numbers got high enough, left Enron with the most
money after sold all stocks. But his division incurred $1B loss. [LOVE ME, LOVE ME]
Meanwhile, stock market had its greatest bull run, everybody was investing. And top
executives pushed stock prices up and put in their money, and then sold the stocks
(pump and dump). People at Enron got paid through stock, so everyone had a huge
stake in the stock price, making them very conscious of it. Massive PR campaign to
convince investors to buy their stock but actually profits were dropping. Enron built
power plant in India but Indians couldn’t pay for power that Enron plants produced.
Paid out multibillion dollar bonuses to executives based on imaginary profits that
never arrived. To mitigate this problem, merged with Portland General. Put Enron in
the electricity business and gave it access to the newly deregulated California market.
[LOVE FOR SALE] All Wall Street analysts gave Enron strong buy ratings, didn’t make
any real analysis as afraid of going against Enron (if didn’t have buy rating, became an
enemy). John Olson didn’t recommend and got fired. So stock price kept increasing
but business was actually spiraling downwards. [ENRON BROADBAND SERVICES]
Created market to buy and sell bandwidth like a commodity, claimed to have made
lots of profits and technology was loved by customers. But actually they were
struggling with video on demand, deals with blockbusters soon collapsed. But they
used future projections to book $53M in earnings when nothing was really made
(MTM accounting). And then in 2000 they couldn’t create this illusion of a successful
business anymore… so the executives sold their stocks. [EMPEROR HAS NO CLOTHES]
Shares plummeted 31%, yet Enron increased its stock price by 90% during dot-com
bubble. Poster child for economy, but one investor saw something in Enron’s numbers
that everyone had missed – it’s a financial black box which is there to fool you.
Bethany Mclean (Fortune magazine reporter) questioned where Enron made all their
money. Skilling didn’t know how to answer giving the reason that he wasn’t an
accountant. [THE SORCERER’S APPRENTICE] Fastow’s job to cover up the fact that
Enron was losing lots of money. Wanted to please Skilling by finding out how to push
stock prices up by hiding the $30M debt they had. Created hundreds of companies
that made their debt disappear, stashed Enron’s debts there where investors couldn’t
see. Created LJM, only buys assets from Enron to motivate other bankers to invest in
it. With prospect of 2000% returns, 96 banks invested. Andy doesn’t have strong
moral compass! Conflict of interest: General Partner of LJM and CFO of Enron.
[USEFUL IDIOTS – INVESTMENT BANKERS] Story of synergistic corruption, no one
who was supposed to say no said no. Enron paid its advisers well eg. lawyers, banks.
Merrill Lynch even helped Enron cook books by pretending to purchase assets when it
was actually giving a loan (bought some boat really far away from the US) [ASK WHY,
ASSHOLE] Skilling losing it, called an analyst an “asshole” in a conference call when he
asked where’s the balance sheet. Max Eberts: “Weeks before quarterly reports we
find out that we can’t make the numbers but we always miraculously can” [KAY-LEEFOR-NYAH (Rolling Blackouts)] California deregulated electricity so Enron controlled
their market. Exported power out of the state and when prices rose they exported it
back in. Shut down power plants to create artificial shortages so that prices
skyrocketed 300-400%. West Coast traders made $2B for Enron by betting on the
prices of electricity. Unethical transaction, didn’t consider Californians. Sought out
every loophole they could to profit off California’s misery [MILGRAM EXPERIMENT]
Once accept that behaving inhumanly is OK, can do anything → lose sense of
morality. 50% of subjects willing to shock to the death as long as commands came
from a seemingly legitimate source. Growing public anger → deregulation might
disappear, Enron will collapse. BUT THEN Bush became president and the FERC
refused to intervene. [THE SHIP WAS SINKING] Enron’s stock began to fall and in the
end traders ran Enron. Summer 2001, Enron’s stock continued to decline, as they
were unable to produce balance sheets and income statements. Skilling resigned
suddenly on Aug 14, everyone was surprised and employees felt betrayed as if he left
Enron right before it crashed. Ken Lay took over. [JEFFREY HAS LEFT THE BUILDING]
Sherron Watkins, former Enron VP, worked directly under Fastow and discovered
the documents and tells him about this, Bergman made an angry call to Wigand
saying he did not tell him about all his dirty past but eventually said he will refute
every single allegations made against Wigand// Wigand got help from a guy
named Jack and his assistant to gather evidence to clear the allegations, also met
with Charlie (from The Wall Street Journal) and gave him the leads and sources
he gathered, which shows that it is different from the ones in the dossier, wants
Charlie to work with reporters to clear Wigand’s name// Mike told Bergman to
take a vacation (aka. Forced vacation, leave of absence), which he did/ had to.//
CBS eventually aired the segment without the interview. Bergman contacted
Wigand to which they fought a little because Wigand was upset his interview
wasn’t aired after all the trouble and litigations, and his divorce that he had to go
through, Bergman reminded him that “he was important to a lot of people” and
that “heroes like him are in short supply” to which Wigand said Bergman was also
a hero in short supply// Bergman contacted Jim (New York Times) and explained
how “CBS Corporate leaned on CBS News, which yanked an interview 60 minutes
did, trying to close down the story”. Jim checked with the Editorial who
confirmed they were interested in writing this article.// Mike met with Bergman
with NYT article in his hands. Mike explained why he took his stance (of not
supporting the interview): “In the real world, when you get to where I am, there
are other considerations… I’m talking about when you’re nearer the end of your
life than your beginning, you’ll think about How will I be regarded in the end after
I’m gone?.. History only remembers most what you did last.” This leads to him
saying “Should that be fronting a segment that allowed a tobacco giant to crash
this network… yeah”. Ultimately, Wallace admits that he was wrong to have
‘caved in’ and the segment with the interview was aired// The last scene ends
with Bergman approaching Wallace to say he quit CBS, he said “What do I tell a
source on the next tough story? Hang in with us. You’ll be fine. Maybe….What got
broken here, doesn’t go back together again“.
Killing Us Softly 3: Advertising Image of Women ESSAY
Advertising increased from a $20B/yr to a $180B/yr industry; the average
American is exposed to >3000 ads every day and will spend 3 years of their lives
watching TV. Ads everywhere. YET Americans still feel personally exempt from
the influence of advertising. Advertising is the foundation of mass media whose
key purpose is to sell products. Advertising sells more than just products: it sells
values, images, concepts of love & sexuality of romance, of success, and most
importantly, of normalcy → Telling us who we are, who we should be.
What advertising tells us about women - the most important thing is how we
look. Advertisers surround us with image of ideal female beauty → hence women
from a young age learn we must spend enormous amounts of time, energy and
money, striving to achieve this ideal; and feeling ashamed and guilty when we
fail. But, failure is inevitable, for the ideal is based on absolute flawlessness (face
models have ‘no wrinkles, scars, blemishes and even pores’). Women’s bodies
continue to be dismembered in advertising only one part is reused over and over
again (video shows butt in jeans/lingerie ads) - Jean says, “Not only is she a thing,
but just one part of that thing is focused on”. Mostly, ads are focused on breasts,
“used to sell absolutely everything” (referring to fishing lines, husband’s opinion
on your breast ads). Women are constantly told they must change their lives by
increasing their breast sizes and the stakes are high. “Women are acceptable only
if we’re young, thin, white, beautiful, carefully groomed and polished; and any
deviation from that ideal is met with a lot of contempt and hostility”. These days,
the ‘latest contempt’ is for women seen as “overweight” - (an ad says “The more
you subtract, the more you add”). At least 1 in 5 young American women today
has an eating disorder, most commonly anorexia and bulimia; Jean attributes this
to the ads surrounding us that tell us “we need to be painfully, unnaturally thin”.
Highest rate of teen pregnancy in the developed world. Teenagers are hypersexualised. Ads continue to normalize and trivialize battering which is the single
greatest cause of injury to women in America. “Advertising is one powerful force
that keeps us trapped in very rigid roles, and in very crippling definitions of
femininity and masculinity”. Jean urges us to get involved in changing not just
these ads but also the attitudes that run so deep in our culture that affects
everyone so deeply, conscious or not because “What’s at stake for all of us is our
ability to have authentic and freely chosen lives, nothing less.”
Required Readings: Review
shocking documents – many assets couldn’t balance out on the sheets, much more
than accounting irregularitie, massive fraud. Contacted and warned Ken Lay but no
use. Meanwhile Arthur Andersen shredded dozens of Enron’s documents. Fastow
fired when Enron discovered he made more than $45M from LJM partnerships, he
was set up as the “fall guy” the one who stole from them. Ken claimed he didn’t know
what was going on with Andy. [IT WAS A WONDERFUL LIFE] 2001 less than 4 months
after Skilling left, Enron declared bankruptcy. Small employees’ retirement accounts
frozen so couldn’t sell stock but top people were moving their money away. Arthur
Andersen fell along with Enron (29k people lost jobs). [SOME ISSUES TO TALK ABOUT
IN EXAM] Skilling unloaded stock while encouraging people to buy. Diffusion of
responsibility where everyone is on the bandwagon. Focus on law (basic dishonesty
of trying to keep Enron’s stock afloat) over ethics led to downfall. Law firm Vincent &
Elkins, accounting firm Arthur Andersen, FERC all complicit. Employees at Enron who
knew about wrongdoing but kept quiet. Wall Street analysts and investment banks
who kept quiet as well.
Advertising and the Obsession With Thinness ESSAY
“The current emphasis on excessive thinness for women is one of the clearest
examples of advertising’s power to influence us, both culturally and individually.”.
Advertising makes these stereotypes more pervasive and persuasive. Research shows
self-esteem plummets for girls who reach adolescence but not boys. Eating disorders
(e.g. bulimia and anorexia) are starting earlier for girls (80% of 10 yr-old girls are on
diets). “Yesterday’s sex symbols by today’s standards would be considered fat” compared Marilyn Monroe (who had a tummy and hips) to Kate Moss (who lacked
curves) - both had different body types. Today’s average fashion model weighs 23%
less than the average female (vs. 3% in the past). “Women’s bodies haven't changed,
what’s changed is the ideal”. The ‘skinny’ body type is one that statistically excludes
95% of American women but it’s the only one we ever see in the media as
acceptable/desirable. Ladies’ Home Journal advertised themselves as a terrific place
to put Coke’s Diet Coke ads - “What’s being sold here isn’t Diet Coke. What’s being
sold are the readers of The Ladies Home Journal who are made to feel anxious about
their weight and they are being sold to the diet industry. Obsession with thinness
used to sell not only diet products but also cigarettes, repeatedly. The Tobacco
industry has to get 3000 children to start smoking everyday to replace smokers who
die or quit; they’re in the business of getting children addicted to nicotine. 90% of
smokers start before they are 18, 60% of smokers start before 14. “They are targeting
girls with ads (that combine idea of slim with cigarettes) suggesting that they smoke,
since they are not allowed to eat (to stay slim)”. Jean calls for us to “challenge these
images”. “Advertisers will never voluntarily change because it is profitable for them,
for women to feel terrible about themselves”.
VICE reports: Playing off gender stereotypes to sell stuff is now explicitly against the
law for advertisers in the UK. Britain’s Advertising Standards Authority announced the
ban in December.And that announcement came shortly after the ASA published a 64page report on how gender stereotypes in ads “can lead to unequal gender outcomes
in public and private aspects of people’s lives,” citing public opinion and various
experts. The report was prompted by a series of widely reviled ads in the UK,
including those for a Protein World weight loss drink marketed with the tagline “Are
you beach body ready?” and a baby formula commercial that showed a girl growing
up to be a ballerina and a boy growing up to be a mathematician. It also comes after
the ASA stepped in to penalize Gucci for “unhealthily thin” models in a 2016 ad
campaign.
A study conducted by R3 and AWARE on Gender in SIngapore AdvertisingBody image and Beauty Standards segment: Surveyors asked themselves: Does this
ad foster a progressive and diverse idea of beauty by recognising the attractiveness of
people who fall outside of society’s narrow physical ideals? Or does it instead shame
these people for their looks. High scorers in this category included: Dove’s “Rachel’s
Story”: in which a woman with eczema talks openly about learning to be proud of her
skin, after years of disparagement from others: “I look at every mark on my body as…
a point where I’ve gotten through the pain and I’ve come out stronger.” Apple’s
“Behind the Mac”: a simple, powerful montage of well-known female artists and
leaders, from Lady Gaga to Malala Yousafzai, who all look distinctively radiant in their
own skin. Singtel’s “GOMO feat. Preetipls”: With Preetipls, a body-positive local
entertainer, doing sultry beach yoga à la Instagram influencers and comically sporting
a fake unibrow, the ad challenges ideas of who is allowed wit and glamour in media.
That said, the vast majority of ads did feature slim, fair-skinned and pretty women.
These conventionally “beautiful” women were sometimes coupled with schlubby
men, in a display of gendered double standards. Indeed, women across the ads were
much more likely than men to adhere to traditional beauty standards.
Slim 10 ESSAY Andrea de Cruz awarded 900k in damages against distributors of diet pill Slim 10. Judge said he found Slim 10 distributor Health Biz and its founder, Semon
Liu, negligent, and that as importers and distributors they “owed a duty of care to consumers”. Health Biz “failed to keep proper records of consignment of pills that were
being imported and do proper batch tests”. TV Media also negligent and liable, accepted Slim 10 packs for sale without verification, and promoted it to the public as “100%
herbal and safe for consumption”. Slim 10 found to contain fenfluramine, a substance that is prohibited in many countries including SG. Pills on sale in SG also did not list
nicotinamide in ingredients. At least 16 Singaporeans who took it developed hyperthyroidism and liver failure (1 victim died from this). Authorities criticised for not being fast
or firm enough once it realised the extent of the threat – HSA gave importer 4 days to comply instead of immediate ban. Also, one woman said she was able to buy them on
April 20 (even though they had until 19/4 to stop selling). Another issue was raised regarding living organ donation – MOH doesn’t allow living organ donation from someone
not related or emotionally attached to the patient, to prevent organ trading.
DBS High Notes 5 ESSAY Structured financial instruments called first-to-default credit-linked notes. Product structured on first-to-default basis which means if any of the
eight reference entities goes bankrupt, a credit event will be triggered and clients might not get their entire principal. Lehman Brothers’ collapse triggered a “credit event”
that had a significant impact on High Notes 5. Investors thought their risk exposure was diversified since the product had a basket of eight reference entities. Felt swindled as
they were told it was a low-risk investment, and some trusted relationship managers who explained that the product was “very safe”. Many went to protest.
Structured Financial Products Findings & Bans SG’s central bank banned 10 financial institutions from selling structured products b/c they’d sold notes linked to
Lehman Brothers without ensuring staff were properly trained. Hong Leong Finance heaviest penalty (2 years). Thousands of investors lost money after buying risky
derivatives linked to Lehman that had been marketed as relatively safe alternatives to fixed deposits. Several of the firms didn’t provide their salespeople with accurate and
complete information about the notes/took insufficient steps to ensure staff were properly trained in its marketing and sales.
Sherron Watkins Had Whistle, But Blew It Sherron Watkins, vice-president of Enron, wrote a memo to Ken Lay raising “suspicions of accounting improprieties”. Lay met
with her for about an hour to discuss her concerns, she gave him additional information detailing her allegations, he said he’d investigate – he didn’t. Watkins kept her silence
publicly, and her job. Her actions provided cover for the Enron board – the fact she “warned” Lay presumes he knew nothing and needed to be warned. She blamed Skilling
and Fastow in front of Congress.
South Korea’s Whistleblowers (WBs) Sound Off At Their Own Risk South Koreans were calling a British number to sway an international phone poll to name Jeju
Island 1 of the new “7 wonders of nature”. On Jeju Island alone, government officials voted up to 2 million times a day on their office phones, generating $20.3 million in
phone bills. Mr Lee, union leader at SK’s main telephone company, heard from fellow workers that employers were handling the calls locally even though they charged South
Koreans millions for calling Britain. He blew the whistle, and KT (largest telecom company) suspended him for 2 months, transferred him out of Seoul, ultimately fired him
citing factors like sick leave without permission. Won his job back after 3 years, but then got punished with a pay cut. Shows broader issue of corruption in SK. Economic
growth is slowing as people demand higher standards from leaders and companies. Opposition calling for establishment of an independent agency to investigate graft among
senior public servants. New law bans public servants, schoolteachers, journalists from getting free meals worth more than $27 to prevent conflicts of interest. Prosecutors
increasingly examining conduct of corporate executives. In the past, military dictatorship spawned a rigid hierarchical office culture that made WB difficult as it was an act of
betrayal. Loyalty to organisations was prized. Now, empowering WBs crucial: govt encouraging tattling by camera-toting bounty hunters, collecting evidence of petty crimes
as well as serious infractions like bribery. Civic groups like the Horuragi Foundation are lobbying Parliament to extend coverage from current WB protection laws. Slow
progress due to broad political gridlock as well as entrenched attitudes towards WBs, esp. among govt and corporate executives who do whatever it takes to find an excuse to
expel them. In a survey of 42 WBs, 60% were fired after exposing corruption in their organisations. Suffered financial ruin, divorce, suicidal impulses, ostracisation,
harassment with defamation and other lawsuits. CASE STUDIES – 1992: lieutenant revealed vote-rigging in barracks during election, demoted to private and dishonourably
discharged. 2003: Red Cross revealed that tainted blood was shipped, reprimanded for “disorderly behaviour”. 2008: Samsung legal counsel KYC WBed. Found that chairman,
LKH, kept 4.5T won hidden under aides’ names, convicted of tax evasion. Samsung called KYC an “untrustworthy former employee”.
Encouraging Internal Whistleblowing in Organizations by Lilanthi Ravishank Time named WorldCom’s Cynthia Cooper and Enron’s Sherron Watkins as People of
the Year in 2002 (both internal whistleblowers). Terance Miethe, Peter Drucker: Whistleblowers are seen as a ‘snitch’ or ‘betrayer’ who are not loyal to the company; Frank
Serpico, Karen Silkwood: whistleblowers who are seen as ‘saviors’ who brought about important organizational change. Ralph Nader: Consumer advocate who views
whistleblowers as guardians of public accountability. Back then, whistleblowing was not common, loyalty to company was, problems were often concealed than solved (i.e.
tobacco case). [Unsuccessful case] Even where there was whistleblowing, it was not always heeded - In 1972, Thomas A. Robertson, Director of Development at Firestone
Tire, sent top mgmt a memo warning 500 tire inferior and subjected to belt-edge separation at high speeds. His warnings were ignored despite complaints from major
customers like General Motors → resulting in >41 deaths and hundreds of serious injuries; companies had to replace 3 million tires and spent millions in personal injury
lawsuits. A similar story occured at Firestone again in 2000. [Successful case] In 1968, A. Ernest Fitzgerald found a cost overrun of $2B for C-5A air transport program. The Air
Force dismissed him but he was reinstated through legal action but demoted because he was given ‘very low marks on loyalty’. Congress passed the Civil Service Reform Act
in 1978 to protect the rights of govt. Employees who reported wrongdoing; 1989, False Claims Act: govt. extended this protection to non-governmental employees.
Currently, all but 15 states provide whistleblower protection. With the enactment of the Sarbanes-Oxley Corporate Reform Act of 2002, internal and external whistleblower
protection has been extended to all employees in publicly traded companies for the first time. The provisions of Sarbanes-Oxley: (1) Make it illegal to "discharge, demote,
suspend, threaten, harass or in any manner discriminate against" whistleblowers; (2) Establish criminal penalties of up to 10 years for executives who retaliate against
whistleblowers; (3) Require board audit committees to establish procedures for hearing whistleblower complaints; (4) Allow the secretary of labor to order a company to
rehire a terminated employee with no court hearing; and (5) Give a whistleblower the right to a jury trial, bypassing months or years of administrative hearings. Barriers to a
successful internal whistleblowing program: (1) A lack of trust in the internal system; (2) Unwillingness of employees to be "snitches"; (3)Misguided union solidarity; (4)
Belief that management is not held to the same standard; (5) Fear of retaliation; (6) Fear of alienation from peers. Creating a whistleblowing culture: (1) Create a Policy: that
includes formal mechanisms for reporting violations and clear communications about the process of voicing concerns etc. ; (2) Clear communications about bans on
retaliation; (3) Get endorsement from top management: starting with CEO, top mgmt should demonstrate a strong commitment to encouraging whistleblowing, line
managers must continuously be trained to create an open-door policy regarding employee complaints; (4) Publicize the Organization’s commitment: in memos, newsletters,
speeches to company personnel → this shows mgmt is serious about whistleblowing; (5) Investigate and follow up: managers should investigate all allegations prompt and
thoroughly, and report origins and the investigation results to a higher authority; (6) Assess the Organization’s internal whistleblowing system: E.g. Sears conducts an annual
employee survey related to ethics. Some questions: Do you believe unethical issues are tolerated here? Do you know how to report an ethical issue?
Population White Paper (Executive Summary)
[Background] Over 900,000 baby boomers will enter their silver years; From 2020, no. of working-age citizens will decline, older Singaporeans retiring outnumber younger
ones starting work. If we do not take in any new immigrants, our citizen population will age rapidly from 2025. 3 pillars for a sustainable population for a dynamic Singapore:
(1) Maintain a strong Singaporean core: Strong families are bedrock of our society: pass on our values and sense of belonging through generations. Enhancing Marriage &
Parenthood Package (2001) to help couples get housing faster/easily, provide support for conception and delivery costs, defray child-raising costs, enhance work-life
measure, increased paternity and shared parental leave. We will accept 15,000-25,000 new citizens each year, reviewing this rate from time to time.
(2) Creating good opportunities for Singaporeans: to meet Singaporeans’ hopes and aspirations. By 2030, no. of Singaporeans in PMET jobs expected to rise by 50% to about
1.25 million vs 850k today. Overall, 2/3 of Singaporeans will hold PMET jobs in 2030 (vs. 1/2 today). To create good opportunities, need dynamic economy and businesses to
produce G&S for the region and world. Need complementary workforce of Singaporeans and foreigners so new products can penetrate new international markets. Foreign
workers: (1) provide skills and expertise, market knowledge and access; (2) create right balance of skilled and less-skilled workers in the overall workforce; (3) provide
healthcare, eldercare and domestic services to support our ageing population and working families; (4) enable biz to expand quickly and flexibly during economic booms,
buffer Singaporean workers from job losses during downturns. (3) High quality living environment: Create high quality urbance spaces, offer convenient access to amenities,
transport nodes and services. Rail network will expand by 100km to reach 280km by 2021. Continue to explore new tech and innovative solutions to optimise land use:
$135M allocated for research and development into land and liveability.
Up to 2020, if we can achieve 2-3% productivity growth per year (which is an ambitious stretch target), and maintain overall workforce growth at 1-2%,then we can get 3-5%
GDP growth on average. Singapore’s total population of residents and non- residents in 2020 is projected to be between 5.8-6M, depending on our fertility trends, life
expectancy, as well as our social and economic needs. The resident population (citizens+PRs) is projected to be 4-4.1M, of which citizens alone will make up 3.5-3.6M. By
2030, Singapore’s total population could range b/w 6.5- 6.9M.
Textbook Case Studies: Review
Nike Inc and Sweatshops ESSAY [Use of Contract Labour] When it first started,
Coke & Pepsi (C&P) in India ESSAY [Initial Allegations] In 2003, India’s Center
manufacture of Nike’s shoes were in Japan, Taiwan and Korea ▪︎ Nike does not
own a single shoe/apparel factory. Subcontracted factories are in Indonesia,
Vietnam, China and Thailand. Labour cost is <4% of consumer’s price for shoes.
After some bad press in 1990s Nike sought to improve its plants’ working conditions
by establishing code of conduct for its suppliers. This was not seen as enough by
outside critics. [Gifford Story] Kathie Lee Gifford (cohost) owns a line of clothing.
Tearfully informed the public that she was unaware that her clothes were being
made in sweatshops, and vowed to do whatever she could to promote the antisweatshop cause. [Nike Accused] Cases of worker abuse; paying underage
Indonesian workers 14c/hr to make Air Jordans. Total payroll of 6 Indonesian
subcontracted factories is < US$20 million Jordan makes from his endorsements.
Made in the USA Foundation is one of the orgs that ignited Gifford controversy.
Nike pointed out AJ shoes were made in Taiwan not Indonesia, said wages were fair
& higher than govt-mandated min. wage in all subcontracted factories, total wages
in Indonesia = US$50M/year. Knight pledged to make transition from 14-16 year old
min age labor force. [Nike Responds] Hired Andrew Young (vocal opponent of
sweatshops) to review firm’s overseas labor practices. He was constantly
accompanied by Nike representatives during factory tours + relied on Nike
translators when communicating with factory workers. Public felt Young’s report
was biased and incomplete. Hired Maria Eitel (former PR executive for Microsoft) to
be VP for CSR - to oversee Nike’s labor practices, environmental affairs and global
community involvement. Public (some) were skeptical and claimed it was a publicity
stunt. Nike to (1) raise min. hiring age from 16-18, (2) Expand worker education
program - all workers can take middle and high school equivalency tests [Students
& Organized Labor] (Organized Labor) UNITE launched “Stop Sweatshops”. UNITE
recruited students who founded The United Students against Sweatshops (USAS)
organization. USAS staged large no. of campus demonstrations. Students denied
they were being manipulated by UNITE, claims they discovered sweatshop issues on
their own. Regardless, the students helped raise the issue of sweatshops. [Fair
Labour Association, FLA] Made up of consumer and human rights groups + footwear
and apparel manufacturers. Code of Conduct: prohibits discrimination, use of
child/forced labour, harassment or abuse + requirements for health & safety, wages
& benefits, hours of work and OT compensation. Nike first few to join FLA. [The
Worker Rights Consortium, WRC] An alternative to FLA created by USAS. USAS
proposes factories to pay higher ‘living wage’ that takes into account wage required
for sufficient housing, clothing, nutrition etc. WRC supports public disclosure of all
factory locations + right to monitor any factory any time. >183 colleges joined
WRC. Nike opposed, states ‘living wage’ as impractical with no agreed-upon
definition, monitoring of factories by WRC are unrealistic and biased toward
organized labour. Nike’s CSR manager acknowledged their inadequate handling of
sweatshop issues. Released CSR report (2001) on CSR practices. In 2005, Nike was
first company in its industry to adopt a policy of transparency to publish a complete
list of its contract companies. Published detailed reports revealing conditions and
pay in factories, acknowledging widespread issues. In 2016, ranked 28th in Best
Corporate Citizens awards
for Science and Environment, CSE (independent public interest group) alleged tests
revealed dangerously high levels of pesticide in soft drinks in India, said Coke and
Pepsi’s were much higher. India Resource Center, IRC (special interest group)
accused C&P of over-consuming scarce water & polluting water sources with their
operations in India – also accused of water exploitation, controlling natural
resources. In 2004, “Campaign to Hold Coke Accountable” - IRC alleged
communities experience severe water shortages around Coke’s bottling plants,
significant depletion of water table, strange water tastes and smells, and pollution
of groundwater and soil. According to IRC, Parliament of India banned sale of Coke
in its cafeteria. In December 2004, India’s Supreme Court ordered Coke and Pepsi
to put warning labels on their products, causing serious slide in sales for several
years. [Sunita Narain] CSE’s director, well-known activist in New Delhi. Claims she
does not intend to hurt companies but only to spur India to pass stricter
regulations. [C&P Early Responses] Initially C&P denied allegations of IRC and CSE
primarily through the media. Coke conducted its own tests, concluding that their
drinks met demanding European standards. Over the next years, they tried to
deflect the issue by claiming other Indian beverages also had traces of pesticide
levels. IRC said Coke hired new PR firm to build a new image in India rather than
addressing real issues. Then-new CEO of Coke Neville Isdell immediately visited
India ‘stealthily’ to avoid heavy protests. IRC pointed out that Coke had just
increased its marketing budget by a sizable amount in India. [Pesticide Residue &
Partial Bans] In 2006, CSE’s new tests results showed 57 C&P drink samples had 24
times higher than maximum allowed pesticide levels. 7 out of 28 India states
banned the drinks completely. Later, India’s Union Health Ministry rejected CSE
study as “inconclusive”. [C&P Increases Responses] COKE started more aggressive
marketing campaign, claiming their products were safe. Created TV ad ft. Aamir
Khan (popular movie star) who toured Coke’s plant - told people the product was
safe and they could personally visit the plant, showing the company had nothing to
hide, this proved persuasive. After 2003 episode, Coke changed management to
tackle future PR crises. PEPSI went straight to Indian media to try build
relationships there. Pepsi representatives met with editorial boards, presented its
own data in press conferences and ran TV commercials. They cut down on water
usage in its plants and employed lobbying of local govt. In 2006, Indra Nooyi
became Pepsi’s CEO. She shared Pepsi’s programs to improve water and
environment, and her memories of growing up in India. Indian media loved her.
[Why C&P Were Targeted] A news commentary highlighted C&P were singled out
as they were foreigned-owned. It mentioned pesticides’ levels were present in
most of India’s groundwater but govt. was slow to resolve. Revealed that C&P
invested $2b in India over the years, generated 12,500 jobs, supported over
200,000 indirectly. [Continuing Protests] In 2007, IRC accused Coke of
‘greenwashing’ its image in India, staged a major protest at the new Coke Museum
in Atlanta, questioning the company's human rights and environmental abuses.
Had banner stating “Coca-Cola Destroys Lives, Livelihoods, Communities”. These
protests motivated other groups to fight against Coke. [Coke’s Renewed Priorities]
Coke had 70 clean-water projects in 40 countries to boost local economies (+ build
their image). In 2007, Coca-Cola India unveiled “5-Pillar” growth strategy - People,
Planet, Portfolio, Partners and Performance. Pepsi sponsors other community
water projects. [Indian Beverage Associate (IBA)] Formed by C&P to address
issues/attacks from regulators and activist groups. IBA brought together other
bottlers and packaging firms with similar interests and issues in India. [Water issue
Continues] IRC accused Pepsico - (1) severely underestimates the amount of water
it is using in India, (2) has flawed water balance accounting techniques, (3) just
doesn’t get it that water issues are local issues in India, (4) has one in four of its
plants operating in a water stressed area, and (5) lacks commitment to local water
stewardship in India. From 2012-2013, IRC continued to campaign against Coke. In
2016, Coke closed a bottling plant, PepsiCo put on notice that it was contributing to
water shortage in parts of India + asked to stop operations for a few months.
Walmart [Sam Walton] Applied JCPenney idea (serve the public; not to demand all
the profit the traffic will bear; to pack customer’s dollar full of value, quality and
satisfaction; to continue to be trained, to reward men and women in the
organization through participation in what the business produces; to test every
policy, method and ask “does it square with what is right and just?”) to Middle
America. [The Walmart Way] “Ten-Foot Rule” meant if a customer came within 10ft
of an associate, he/she would look the customer in the eye, greet them and ask if
they needed help. Sam bought an expensive network corporate satellite system to
track total sales [“Buy American” Plan – Early Efforts At CSR] After 12 months since
the plan started, he estimated Walmart to have restored 4,538 jobs. The plan
morphed into “Made in the USA” campaign where Walmart labelled domestic
products specially but they eventually abandoned this program and became one of
the largest purchasers of products made overseas, forcing many US manufacturers
out of business. [“Environmental Awareness” Campaign] In stores, shelf tags made
from 100% recycled paper informed customers of a product’s ‘green-ness’.
Together with advertising, this increased customers’ awareness and sales increased.
[Sam and The Early Merchants of Main Street] (1) Steamboat Springs, Colorado (a
city) denied permission for Walmart to build a store there. Owners of upscale shops
and condos were concerned with their image as a resort and ski community,
Walmart’s low-cost reputation just did not fit in. (2) Iowa City. Citizens gathered
enough signatures during a petition drive to block Walmart and the city council
from building a new store. Efforts were, however, unsuccessful. [Pawhuska,
Oklahoma] With Walmart’s entry in 1983, other merchants like JCPenny, Western
Auto closed their stores. It was revealed that Walmart sponsored local rodeo, was
involved in local cerebral palsy and multiple sclerosis fund-raisers etc. [Walmart’s
Organized Opposition] By 1990s, there were dozens of organized groups actively
opposing Walmart’s expansion. Paul Glover defined Walmart as the epitome of
capitalism. New England - Opposition came from high-profilers (e.g. Jerry
Greenfielder, cofounder of Ben & Jerry’s). Other areas, like resorts, also opposed as
they consider Walmart’s presence to be offensive consumerism. [Clandestine
Opposition] Rival grocery chains secretly funded opposition to Walmart’s entrance
into communities. Hired Saint Consulting Group to operate anti-Walmart
campaigns. [Heavy Criticisms] Walmart’s sheer size equated to great power,
becoming highly visible and hence a natural target of critics. [Millions of Supporters]
Many consider Walmart to be socially responsible, a provider of thousands of jobs,
The Body Shop (TBS) ESSAY [Part A: Pursuing Social And Environmental Change]
[Anita Roddick: Founder] Created and maintained TBS’ marketing strategy and
product development. She became one of the richest women in the UK by
challenging well-established firms and rewriting rules of the cosmetics industry.
Opened 1st TBS store in England. Early on, Roddick didn’t believe in advertising.
TBS’ mission: “To dedicate our business to the pursuit of social and environmental
changes”. [Employees & Hiring] Employees paid half-day’s wage per week to
perform community service, in addition to their regular wages. Roddick refused to
hire a retail director when she learned he likes hunting. [Social Activism] Suppliers
had to sign statements guaranteeing no animal testing done in previous 5 years.
TBS used human volunteers to test new/current products. [TBS in U.S.] TBS’ market
shares were limited by (1) higher prices it charged, (2) limited no. of stores opened.
TBS was taken public in 1984. TBS annually contributed up to several millions of
dollars to outside organizations. Exotic nature of its products + strong emotional
appeal of social issues led to one of the most successful marketing and promotional
concepts in the industry. [Competition] Competitors like Estee Lauder, Revlon and
Bath & Body Works were experienced and well-financed but none dominated the
new product segment TBS helped create. [Advertising Campaign] In 1993, Roddick
first appeared in U.S. TV commercial - an American Express ad. TBS had a policy of
not advertising directly to consumers. [Part B: TBS’ Reputation Tarnished] [Jon
Entine’s Expose] Wrote a cover story on TBS in Business Ethics (BE) magazine.
Entine (1) Alleged Roddick stole the concept of TBS, including store name, design
and products, bottle recycling from a store she visited in Berkeley, CA. (2) Also
low prices and high value and service. Walmart had numerous corporate citizenship
initiatives at local and national levels (e.g. funded scholarships, raised funds for
childrens’ hospitals etc.) Walmart had many global responsibility and sustainability
achievements contributing to different initiatives. [Issues Continued] (1) Labor
Practices - accused of paying low wages, not paying OT pay including a class-action
lawsuit on gender discrimination against women. (2) Bribery Scandal in Mexico, (3)
Fire in Bangladesh, (4) Buy American More Often - pledged to spend $50b overtime
on American products but many doubt its plans. [Doug McMillon - New CEO] Rise of
Amazon.com declared the biggest disrupter of retail since Walmart. McMillon sped
up new investments in e-commerce, experimented with a new retail model Walmart Pickup Grocery. He set forth 4 steps - (1) Create a “Walmart sized”
ecommerce business, (2) Think “Omnichannel” so it’s easier for customers to buy
anywhere, anytime, get their purchases anywhere, anyhow, (3) Increase
innovations experimentation, (4) Bring back Sam’s spirit. [Higher Min. Wages But
Stores Closing] Increased min. wage from $9 to $10/hr. However, due to
competition and sluggish economy, Walmart had to close 154 U.S. stores.
McDonald’s Coffee Spill [The Incident] Stella Lieback put the cup between her
knees and tried to get the lid off, ended up scalding herself with the coffee suffered 3rd degree burns over 6% of her body. She lost 20 pounds and was
immobilized at times, gone through tremendous pain. In 1994, Lieback wrote to
McDonalds’ asking them to reduce coffee temperatures. Asked McDonalds’ about
$2000 for compensation but offered $800 instead. [Lawsuit] Reed Morgan filed a
lawsuit on behalf of Lieback for “gross negligence” and selling coffee that was
“unreasonably dangerous” and “defectively manufactured.”, asked for $100,000
compensation including for pain and suffering. McD blamed Lieback for spilling it.
Morgan was willing to settle for $150,000 but McD refused. [The Trial] Lasted for 7
days. Photos of Lieback’s charred skin were shown. A supervisor testified McD did
not lower coffee heat despite 700 burn complaints over 10 years but McD argued
700 complaints were trivial → implied McD cared more about statistics > people.
McD claimed such burns to be trivial when compared to more serious dangers in
the restaurants, did not intend to change procedures or go beyond the “Caution”
printed on cups. Jury decided $160,000 in compensatory damages (decided 20% of
fault lies in Lieback), $2.7 million in punitive damages as they concluded McD
engaged in malicious or wanton conduct. This was reduced to $640,000 after the
judge reduced the award. McD eventually reached an undisclosed out-of-court
settlement with Lieback. [The Stella Awards] Recognizes each year’s most
outrageous lawsuit. Many other coffee lawsuits continue till this day (not
necessarily just those against McD)
claimed its products were full of petrochemicals, artificial colours and fragrances,
synthetic preservative and contained only a small amount of naturally sourced
ingredients (3) Quality control was a problem with instances of mold, e.coli
contamination, requiring large amount of preservatives to ensure stable shelf lives.
(4) Wrote U.S. FTC was investigating TBS’s franchising practises which included
using deceptive financial data, unfair competition and misleading representations.
(5) Claimed TBS’s “Trade Not Aid” program was a sham, providing only small
portion of TBS’ raw materials while failing to fulfill company’s promises to
suppliers. (6) TBS contributed far less than average annual charitable donations for
U.S. companies. [Reactions to Entine’s Article] Reactions were swift and furious.
Rumours about the articles caused stocks to fall. Ben Cohen, (Ben & Jerry's cofounder, BE advisory board member) severed ties with the magazine. Gordon
Roddick came to defense. TBS hired PR firm to counterattack Entine’s credibility
and motives. Gordon sent a 10-page letter to all BE’s subscribers (dishonestly
obtained through a 3rd party). [Part C: Unimpressive Growth] Advertising did not
help improve sales. In 1994, TBS began annual social audits (Values Report 1997) established policies in 3 areas: human & civil rights, environmental sustainability,
animal protection. [Franchisee Allegations] A no. of U.S. franchisees were angry
with unfair buyback terms if they wanted to leave TBS’ business. Franchisee owners
saw the chronic out-of-stock problem as a ploy to force them to sell their franchises
back at their loss. [Anita & Gordon Step Aside] However, both (tgt with early
investor Ian McGlinn) continue to hold >50% of company’s voting rights. In 2002,
Peter Saunders became CEO of TBS. [Sale to L’Oreal] In 2006, TBS was sold to
France’s L’Oreal. Saunders remained as CEO, Anita remained on company’s board.
TBS hoped to operate independently, led by its own management team. It
continues to face stiff competition against its top 3 competitors: Bath & Body
Works, Estee Lauder, Alliance Boots and dozens more. An article argued the sale
dented the company’s reputation, said Roddick abandoned her principles by
accepting the deal. Roddick published 4 books - Take It Personally and Business as
Unusual: Triumph of Anita Roddick (2001); A Revolution in Kindness (2003);
Business as Unusual: My Entrepreneurial Journey (2005). She said the hardest thing
for her are marketing people, because they focus on TBS as a brand and customers
as consumers. She died in 2007 at 64 of brain hemorrhage. When Roddick sold TBS
to L’Oreal, she said TBS would be a ‘Trojan Horse’ - the ethical stance of the smaller
group she founded would infiltrate the multinational.
Everlane Direct-to-consumer: A business model pioneered by Everlane who sold products online and cut out middleman retailers. Founded by Michael Preysman in 2010.
Objective: Offer high-quality clothes at lower prices sold online and provide ‘radical transparency’ (RT). RT means partnering with best, ethical factories globally, sourcing
only finest materials, sharing down to the true cost of every product, factory’s information etc. Preysman publicized costs of making Everlane shirts on Facebook, breaking
tradition from the unspoken protocol of keeping this information a trade secret. He notes that in “traditional retail”, designer shirts are marked up 8 times by the time it
reaches the customer and promised to be fairer by passing on cost savings of being an online-only store to the customer. In response to the Rana Plaza collapse in
Bangladesh in 2013, when more than 1,100 workers died in factories that supplied clothes to European and American retailers, Everlane posted videos and photos of the
workers and factories that they use for their production. Factories must allow videos and pictures taken at their facilities to do business with Everlane, must supply
information about workers’ dorm, including availability of hot water, heating, and air conditioning. All of this information reinforces Everlane’s commit- ment to radical
transparency, noted on their Web site byline as, “Know your factories. Know your costs. Always ask why.”. Rise in conscious consumerism driving many companies to
make serious changes to their global supply chains and increase their reputation as good corporate citizens. Some companies have chosen to be Fair Trade Certified.
Others choose to pursue a “slow fashion” trend that involves taking the time to source for organic materials and articles made by artisans and craftspeople worldwide,
viewing apparel as a more long-term investment. This trend sparked the annual “Fashion Revolution Day” to generate awareness of “slow fashion” and a call for
accountability through all steps in the clothes-making process. Everlane has not pursued certification or slow fashion but is committed to ethical production - Its focus is
on the ethical production process. It searches for factories certified by independent outside organizations (Preysman spends time with each factory’s owner to see if
he/she is a “decent human being”. In one instance, Everlane was trying to work with the supplier (who twice failed an independent audit) to raise its audit scores, rather
than simply cut ties with the organization, firstly because of a sense of ‘loyalty’ to the relationship and secondly, Everlane struggled to find good suppliers in China who
were willing to take on smaller companies - They rely on large, global buyers to recommend them to good suppliers. Everlane likes the ability to control costs and quality
in their current model so it is difficult to get suppliers who wants to be transparent. On the upside, since Everlane is relatively small, it has the opportunity to visit, vet and
negotiate with suppliers (i.e. will visit Chinese suppliers after Lunar New Year to get a sense of how many workers return to work after the holiday)
ESSAYS
Who do you think was most responsible for Enron’s demise? How did he/she cause the demise?
I believe that Kenneth Lay, Enron’s chairman, was the one most responsible for Enron’s demise. Even though there were other crooked leaders like Skilling,
Lou Pai, and Andrew Fastow, who all played a huge part in the enormous fraud, it was ultimately Ken Lay who allowed all of this to happen. Skilling
introduced mark-to-market accounting and hypothetical future value accounting allowing Enron to book profits it never made. He also introduced toxic
culture through the use of rank and yank performance reviews. Fastow created special purpose entities such as LJM to hide Enron’s massive debt from
investors, failing in his fiduciary duties as CFO. So although these individuals caused Enron’s demise as the imaginary profits and concealed debt caused
Enron to crash and burn, Ken Lay was the person responsible as he had the power to stop this playing out as chairman. He could fire these executives if he
wanted. In line with the board’s relationship with the CEO, whereby board’s main role is to monitor CEO performance and dismiss underperformers. But
Lay failed in fiduciary duties, b/c he ignored warning signs. Clear demonstration of his immoral management. Witnessed in several events, such as Valhalla
Scandal, hiring Jeffrey Skilling (unethical since Skilling huge risk-taker), willingness to create accounting irregularities. Lay also caused the demise through
his excessive focus on stock price. Had the power to set enterprise level moral focus for the company but focused on stock price instead of realistic
objectives. If we look at the ethics, economics and law venn diagram, Lay’s actions were neither profitable, legal or ethical. Many times where things
could have turned around for Enron if he did things differently.
In our case discussions some MNCs have been the targets of special interest groups. Briefly describe two such examples. What advice would you give in
dealing with the nonstop allegations of these groups?
Firstly, Nike. (Elaborate from Nike case). And also Coke. (Elaborate from Coke case). For Nike, I would recommend that they defend against such special
interest groups as they had already taken the necessary steps to meet society’s demands (Andrew Young, Knight’s initiatives). Shows they had engaged in
moral management by going above and beyond legal requirements of the host countries they operate in. Move toward ethical imperialism, (define). Yet
despite all this, the USAS continued to oppose Nike. So Nike should defend against them as they are a high threat low cooperation stakeholder (can state
stakeholder type here). Coke should also defend against CSE. Proven through research that their standards met EU, and India’s health ministry also
declared that beverages contained no pesticide. Coke also engaged in a PR campaign. Undertook steps to improve corporate legitimacy and became a
good corporate citizen, assuming social and political responsibilities such as clean water efforts that extend beyond legal requirements. But CSE refused to
budge (elaborate), and hence Coke should defend against them. It should continue to work with the media, remain a good corporate citizen, adapt to
cultural norms and continue to bridge the gap such as understanding that water is sacred to Indians. So even if CSE not appeased, other stakeholders will
eventually disregard them, causing them to lose legitimacy and Coke will win its battle against their allegations.