3.
ECONOMIC & AGRIBUSINESS
ETHICS
& CODES OF CONDUCT
Larry D. Sanders & Parr Rosson
Spring 2002--Adjusted
Dept. of Ag Economics
Oklahoma State University
1
INTRODUCTION
Purpose:

–

to understand how the concept of ethics affects economics and
agribusiness
Learning Objectives:
1. Understand the relationship between economic activity and
agribusiness.
2. Consider codes of ethics and moral behavior in agribusiness.
3. Understand International Aspects of Business Ethics.
4. Review Arguments For & Against Ethical Behavior in economic
and agribusiness activity.
5. Examine the Role of Ethics in Determining Cross-Cultural
Relationships, Corporate Responsibility, and Importance to the
Firm.
6. Become aware of the similarity in business, government &
2
nonprofit codes of ethics.
What is Business Ethics?
 Code
of Conduct Whereby Each Business
Conforms to Socially Acceptable Norms
3
Increased Emphasis on Ethics in Business
Planning:
 Important
Component of Decision Making
 Ethics and Impacts on Corporate Behavior
Important to International Business
 Greater Awareness of Social
Responsibilities Key to Business Survival
4
Several Factors Emphasize Importance of
Business Ethics
 Product
Safety and Liability
 Ethical Standards Across Countries
 Increased Competition and Pressures to Be
Unethical
 Economic Exploitation of the Environment
 Work Force Diversity
 Abuse of property rights
5
Ethics is Not New!
 Remember
Watergate?
 Remember Ivan Boesky and Insider Trading?
 Remember the Exxon Valdez?
 Remember illegal dumping of hazardous waste (&
not just in New Jersey)?
 Remember Love Canal?
 Remember Firestone tires?
 Remember the Gallapagos oil spill?
 Consequently, 80% of U.S. and Canadian Firms Have
a Code of Conduct
6
Code of Conduct: Generic Example
 Represent
each client fairly and honestly.
 Establish reasonable, proper and fair prices
or fees.
 Advertise with honesty and truthfulness.
 Be fair with employees, clients, suppliers &
customers.
 Be a credit to your associates & the
community.
7
Code of Conduct Examples:
Halliburton
Company policy requires employees to observe high standards of
business and personal ethics in the conduct of their duties and
responsibilities. . . . Must practice honesty and integrity in every
aspect of dealing with other Company employees, the public, the
business community, stockholders, customers, suppliers and
government authorities.
. . . Prohibits unlawful discrimination against employees,stockholders,
directors, officers, customers or suppliers on account of race, color,
age, sex, religion or national origin. . . .
No employee should be misguided by any sense of loyalty to the
Company or a desire for profitability that might cause him or her to
disobey any applicable law or Company policy. Violation of
Company policy will constitute grounds for disciplinary action,
including, when appropriate, termination of employment.
8
Ethical Behavior is Still an Issue

Recent Malaysian Survey Revealed That
Unethical Behavior Was Approved in Four
Situations:
–
–
–
–
When Obtaining Competitor Information
When Using False/Misleading Advertising
When Obtaining Confidential Information
When Superiors Were Unethical or Tolerated Unethical
Behavior
 What
do you think?
9
Conflict Between Corporate Goals and
Ethical Behavior
 Treachery
Pays
 Power is Abused
 Dishonesty is Tolerated
10
Influence of Different Cultures on Ethical
Behavior
 Difficult
to Understand
 Important to Understand
 Clashes Between Cultures is Common
 Does it have to be illegal to be
unethical?
11
Market Ethics
(Adam Smith - 1776)
 Foundation
of Economic Freedom
 Private Initiative Rather Than
Mercantilism
 Competition, Not Protection
 Innovation, Not Economic Stagnation
 Self-Interest, Not State Interest
12
Protestant Ethic (Biblical Times)
 Established
“Work Ethic”
– “If He Will Not Work, Let Him Not Eat,”
Saint Paul
 Provided
Moral Legitimacy for
Capitalism
 Justification for Pursuit of Profit
13
Liberty Ethic
(John Locke 1632-1704)
 Economic
Freedom and Work Ethic Can
Exist Only in Political Systems Conducive
to Individual Liberty
 Discourage Dictatorial Whim
 Individual Participates in Government
 Encourage Private Property
14
Why Should Business Help Solve
Societal Problems?
 Businesses
Exist as Guests of Society
 Government Policies Impact Businesses
 Business and Society Feast or Famine
Together
15
What is Corporate Social
Responsibility?
 Corporate Activities
that Protect and
Improve the Welfare of Society
 Examples:
–
–
–
–
–
–
Foundations
Charity
Low-income projects
Reclamation
Building cultural bridges
Ecosystem/animal restoration
16
What Must Corporations Do?
 More
Than Obey the Law?
 Laws Often Lag Society’s
Values/Expectations
 Moral and Ethical Duty to Help Solve
Society’s Problems
17
Levels of Corporate Social
Commitment
 Social
Obligation
– Involvement for Own Benefit and Obey Laws
 Social
Responsibility
– Understand Societal Needs and Go Beyond
Law
 Social
Responsiveness
– Proactive, Anticipate Problems and Mitigate
Social Issues
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Elements of Corporate
Responsibility
 Corporate
Responsibilities Transcend
Production of Goods and Services
 Corporation Must Be a Productive Part of the
Solution of Society’s Problems, Especially
Those Which They Create
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Elements of Corporate
Responsibility (cont.)
 Corporate
Constituency is Broader than
Stockholders
 Corporate Impacts Go Beyond the
Marketplace
 Corporations Serve Wide Range of Human
Values
20
Major Corporate Stakeholders
 Shareholder
Owners
 Employees
 Customers
and Clients
 Community
 Government
21
Fortune’s “Most Admired Global Companies”
—9 Attributes (Which are ethics-related?)
 Quality
of management
 Quality of products/services
 Innovativeness
 Long-term investment value
 Financial soundness
 Ability to attract/develop/retain talent
 Community responsibility
 Use of corporate assets
 Global business acumen
22
Fortune’s “Most Admired Global
Companies” (2001)
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Top 10
General Electric
Cisco Systems
Wal-Mart Stores
Southwest Airlines
Microsoft
Home Depot
Berkshire Hathaway
Charles Schwab
Intel
Dell Computer
Bottom 10
495. TWA
496. Trump Resorts
497. Kmart
498. Bridgestone/Firestone
499. America West
500. LTV
501. US Airways
502. Federal Mogul
503. Warnaco Group
504. CKE Restaurants
23
U.S. Response to International Business
Ethics
 Foreign
Corrupt Practices Act (FCPA) of 1977
– Illegal for U.S. Companies to Make Payments
to Foreign Officials
– Designed to Eliminate Bribes
– FCPA Hampered U.S. Business in
International Trade
24
FCPA Amended in 1988
 Legalized
Payments to Expedite
Nondiscretionary Official Actions
Facilitating Expenditure - “Grease
Payment”
 Illegal to Bribe Someone For Preferential
Treatment
 Individual May Be Prosecuted Even If
Firm is Not Guilty
25
Corruption in International Business
Those who talk about the peoples of
our day being given up to robbery and
similar vices will find that they are all due
to the fact that those who ruled them
behaved in like manner.
--Niccolo Machiavelli, 19th century
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The Scale of the International Problem
with Ethics in Business
"The scale of bribe-paying by international corporations
in the developing countries of the world is massive.
Actions by the majority of governments of the leading
industrial countries to curb international corruption are
modest. The results include growing poverty in poor
countries, persistent undermining of the institutions of
democracy, and mounting distortions in fair
international commerce."
--Peter Eigen, Chairman, Transparency International
(January 20, 2000)
27
International Bribe Payers Index:
Leading Exporters (1999)
1. Sweden
2. Australia
Canada
4. Austria
5. Switzerland
6. Netherlands
7. UK
8. Belgium
9. Germany
US
8.3
8.1
8.1
7.8
7.7
7.4
7.2
6.8
6.2
6.2
11.
12.
13.
14.
15.
16.
17.
18.
19.
Singapore
Spain
France
Japan
Malaysia
Italy
Taiwan
South Korea
China
& Hong Kong
Transparency International, 1999. 10=negligible bribery; 0=high levels
5.7
5.3
5.2
5.1
3.9
3.7
3.5
3.4
3.1
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International Corruption Perceptions
Index (2001)
“Highly Clean” Top 10
1.
Finland
9.9
2.
Denmark
9.5
3.
New Zealand
9.4
4.
Iceland
9.2
Singapore
9.2
6.
Sweden
9.0
7.
Canada
8.9
8.
Netherlands
8.8
9.
Luxembourg
8.7
10. Norway
8.6
16. US
7.6
“Highly Corrupt” Top 10
82. Tanzania
2.2
83. Ukraine
2.1
84. Azerbaijan
2.0
Bolivia
2.0
Cameroon
2.0
Kenya
2.0
88. Indonesia
1.9
Uganda
1.9
90. Nigeria
1.0
91. Bangladesh
0.4
Transparency International, 1999. 10=highly clean; 0=highly corrupt
29
Business Ethics in Cross-Cultural
Setting
 Learn
the Culture
 Become Involved, Responsible Corporate
Citizen
 Take Initiative to Exceed Minimums in
Environmental Responsibility
30
Ethical Issues
 Is
Honesty the “Best” Policy?
 Those Who Are Fair Will Prosper
 Profit Maximization is Perfectly Honest
One Person’s Ethics is Another Person’s
Livelihood
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"Who will protect the
public when the police
violate the law?“
--Ramsey Clark
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