Ethics and Professional Responsibility Manufacture shoes in Indonesia You are a high level shoe manager. You know you could increase profit margin by having shoes produced in Indonesia where you could pay women $40 a month to assemble the shoes. You also know that human rights activists have recently accused a competing shoe manufacturer of engaging in exploitative labor practices for doing that. You do not personally believe that paying the women $40 a month is unethical because that is a better than average wage in Indonesia. What do you do? What do you think about? Corporate Social Responsibility Disclosure Helps Corporations are perceived to hold duties to the following groups, duties that often come into conflict: Shareholders Consumers Employees Community Society Duty to Employees Employers have numerous legal duties to employees, including providing employees with a safe workplace and refraining from discriminating against employees on the basis of race, color, national origin, gender, religion, age, or disability. These duties often come into conflict. Many believe that employers hold ethical duties to their employees that go beyond those prescribed by law. UAS v. Johnson Controls Not in Book •Battery Division •Lead Exposure •No Women of Child Bearing Age Duty to Shareholders Because the shareholders are the owners of the corporation, directors and officers have a duty to act in the shareholders’ interest (maximize profits). Google IPO example Is profit maximization an ethical goal? Milton Friedman – On “greed” •What is corporate social responsibility? •Corporate philanthropy? Approach to Making Ethical Decisions: Open and full disclosure reduces ethical breaches Duty to Consumers Corporate directors and officers have a legal duty to the users of their products. Most feel that corporations also have an ethical duty that goes beyond what the law requires. Controversy exists over the point at which corporate responsibility for consumer safety ends and consumer responsibility begins. Died from Inhaling Butane. Twenty-year-old Stephen Pavlik died from intentionally inhaling the contents of Zeus brand butane lighter. His father filed suit, claiming there was not an adequate warning on the can Pavlik v. Lane Ltd./Tobacco Exporters International Duty to the Community/Society Most people believe a corporation has a duty to the community in which it operates. The corporation should consider the needs of the community when making decisions that substantially affect the welfare of the community. •Remsburg v. Docusearch, Inc. (2003) (Sold employer name address to stalker). •Wal-Mart – Impact on small communities Ethical Responsibilities of Firms Do firms have a duty to prevent criminal misuses of their products? In a Colorado case, a man bought a cupful of gasoline at a gas station, threw it on a woman, and set her on fire. The woman argued that the gas station was negligent for selling him the gasoline. The Colorado Appellate Court stated that knowing a customer buying gasoline was going to intentionally throw it on a victim and set the victim on fire was not reasonably foreseeable. Ethics In The Global Context Hypothetical – US Developed Drug U.S. drug laws are among the toughest in the world. Therefore, companies with products banned from sale in the U.S. will naturally look elsewhere for potential customers—particularly in developing countries that do not have such extensive restrictions on consumer products. Despite the cultural and religious differences among nations, the most important ethical precepts are common to virtually all countries. Ethics in the Global Context Two notable differences relate to: – The role of women in society. – The practice of giving side payments to foreign officials to secure favorable contracts. The Foreign Corrupt Practices Act of 1977 (FCPA), prohibits the bribery of foreign officials through such side payments. • • • US Jail for Thailand Bribery $1.8 Million Bribe. Two Hollywood producers paid $1.8 million in bribes to secure a $13.5 million contract for the Bangkok International Film Festival. Festival Financial Success. The government made a lot of money on the festival and overall it was a success. 6 Months Prison. They got 6 months in prison and 6 months home suspension (prosecution wanted 10 years – even though one defendant was 78 years old with health problems). Plus $250,000 in restitution. Aug 16, 2010 National Law Journal Michael Douglas, Actor Jail Jail The Nature Of Business Ethics Law does not codify all ethical responsibility Business ethics are created from moral values The law reflects society’s convictions on what constitutes right or wrong behavior. Ethics versus law Illegal Act Poison the sick Immoral Act There are legal ‘consequences’ to some decisions which are different than ‘illegal’ acts. “Unethical ” Act Okay Act Watch the sick collapse in agony, do not call for help, but laugh the evil laugh (muhaha) Tease the sick Good Act Not visit the sick Visit the sick Sources of Ethical Standards Duty-based ethics: Ends never justify means Ethics based on religious beliefs and philosophical reasoning. What if everyone acted that way Example: Ten Commandments Outcome-based ethics: Ethics based on philosophical reasoning. Example: utilitarianism Cost/Benefit Rights Based ethics: Ethics based on human/individual rights. Obstacles To Ethical Business Behavior The corporate structure: Collective decision making tends to deter individual ethical assertiveness. The corporate structure tends to shield corporate actors from personal responsibility and accountability. SCSU Employee Code of Ethics • Cell Phone Use. • Gifts • Nepotism • Influence staff/students • Frequent Flyer Miles • Use of SCSU name Discussion of values, policy, law…. Management: Uncertainty on the part of employees as to what kind of behavior is expected of them makes it difficult for them to behave ethically. Unethical conduct by management shows employees that ethical behavior is not a priority. Enron Enron asked Merrill Lynch to participate in a bogus sale of three barges. Sale/buy back deal. Ethical for Enron to do this? Is it unethical for Merrill Lynch to play along? Review Difference between illegal and unethical Origins of ethics – – – Duty Based - Religion Rights Based-- Individuals Outcome Based – Utilitarianism Corporate Responsibility – – – – – Shareholders Employees Society Community Consumers Group 1 v. Group 2 Debate Extra Slides Ethics In The Global Context Hypothetical – Women in Business Assume you are the executive of an international company, Widgets International. After a lot of work, you finally received approval to give a sales presentation before a buying committee of a Saudi Arabian based company, Arabia, Inc. If successful this opportunity will increase your overall sales by 20% (a very much needed 20% given that your other sales are slipping in an overall poor economy). You explain to your contact at Arabia that Amanda Smith, your Vice President of Marketing, will give the presentation. The contact immediately tells you that the key members of the committee do not welcome women in business leadership roles and bringing Amanda will reflect badly on your company. Although you do have others you could send, you know that Amanda is the best person you have for the presentation, she is the person with the job title to give it and that she will question the ethics of sending a man to do her job. WORK IN GROUPS Do you send Amanda?