Conducting Business Conducting Business Ethically and ResponsiblyEthically and Responsibly

Prof. Bauer-RamazaniProf. Bauer-Ramazani

Actuary Analysis, from the movie Class Action

(1:40 min.)

Jan. 29, 2008, CNN.com

Ethical Dilemma -- definitionEthical Dilemma -- definition

A predicament in which a (business) person A predicament in which a (business) person must resolve whether an action may be must resolve whether an action may be considered considered unethical even if itunethical even if it benefitsbenefits the organization, the individual, or the organization, the individual, or bothboth..

An ethical dilemma may arise when An ethical dilemma may arise when two two norms or values are in conflict norms or values are in conflict

Identify the 2 norms or values.Identify the 2 norms or values. Tradeoffs (pros & cons)Tradeoffs (pros & cons)

What Is Ethical Behavior?What Is Ethical Behavior?EthicsEthics

Right or wrong, good or bad, Right or wrong, good or bad, in actions that affect othersin actions that affect others

Ethical BehaviorEthical BehaviorConforming to Conforming to individual individual

beliefsbeliefs AND AND social normssocial norms about what’s right and goodabout what’s right and good

Business ethicsBusiness ethics Ethical or unethical behavior Ethical or unethical behavior

by employees of by employees of organizationsorganizations

Formalizing the Commitment to Formalizing the Commitment to EthicsEthics

Adopting Written CodesAdopting Written CodesAdopting Written CodesAdopting Written Codes

Instituting Ethics ProgramsInstituting Ethics ProgramsInstituting Ethics ProgramsInstituting Ethics Programs

Code of EthicsCode of Ethics formal statement = a formal statement = a guide forguide for how people within how people within

a particular organization should act and make a particular organization should act and make decisions in an ethical fashiondecisions in an ethical fashion. .

‘ ‘s Code of Business Conduct s Code of Business Conduct

(in 15 languages):(in 15 languages):– Our Code of Business Conduct serves to guide the Our Code of Business Conduct serves to guide the

actions of our employees, officers and directors in ways actions of our employees, officers and directors in ways that are consistent with our core values: honesty; that are consistent with our core values: honesty; integrity; diversity; quality; respect; responsibility; and, integrity; diversity; quality; respect; responsibility; and, accountability. The Code helps our people play by the accountability. The Code helps our people play by the rules wherever we operate around the world. rules wherever we operate around the world. ((http://www.thecoca-colacompany.com/ourcompany/business_conduct.hthttp://www.thecoca-colacompany.com/ourcompany/business_conduct.htmlml) )

Ethical Decision Model by the Ethical Decision Model by the Josephson Institute of EthicsJosephson Institute of Ethics

1.1. All decisions must take into account and All decisions must take into account and reflect a reflect a concern for the interests and concern for the interests and well-being of ALL stakeholderswell-being of ALL stakeholders..

2.2. Core ethical values and principles Core ethical values and principles ALWAYSALWAYS take precedence over non- take precedence over non-ethical ones, e.g. self-interest.ethical ones, e.g. self-interest.

Major Major Corporate Corporate

StakeholdersStakeholders

Groups, individuals, and organizations that are directly affected by

the practices of an organization

Businesses have a social responsibility

toward them.

6 Pillars of Character 6 Pillars of Character (Ethical Norms)(Ethical Norms)

Steps in Steps in Making Making Ethical Ethical

DecisionsDecisions

Responsibility Toward CustomersResponsibility Toward Customers

Consumer RightsConsumer RightsConsumer RightsConsumer Rights

Fair PricingFair PricingFair PricingFair Pricing

Ethics in AdvertisingEthics in AdvertisingEthics in AdvertisingEthics in Advertising

Responsibility Toward Responsibility Toward EmployeesEmployees

Legal and Social Commitments Safe work environmentSafe work environment Equal payEqual pay

Ethical Commitments Whistle-blowersWhistle-blowers

David Batstone on whistleblowing: Unethical behavior at work? (2:46 min)

Responsibility Toward InvestorsResponsibility Toward Investors

1.1. NO improper financial NO improper financial managementmanagement

2.2. NO insider tradingNO insider trading

3.3. NO misrepresentation NO misrepresentation of finances on financial of finances on financial statements statements

Responsibility Toward Local Responsibility Toward Local CommunitiesCommunities

EnvironmentEnvironmentAir pollutionAir pollutionWater pollutionWater pollutionLand pollutionLand pollution

Clean up toxic wasteClean up toxic wasteUse recycling

Growth / infrastructureGrowth / infrastructure Social well-being of all members of Social well-being of all members of

the community the community

Company Practices and Business Company Practices and Business EthicsEthics

Best Approach: Open, Honest, Responsive!

The Tylenol Scare Case

Lawsuits as a result of pharmaceutical company Merck’s announcement about the potential side effects of its drug Vioxx and subsequent withdrawal

7 possible Guidelines for Making Ethical 7 possible Guidelines for Making Ethical Decisions in the Work Place Decisions in the Work Place

(Please refer to your handout.)

1.1. The Golden RuleThe Golden Rule

2.2. The Utilitarian PrincipleThe Utilitarian Principle

3.3. Kant’s Categorical ImperativeKant’s Categorical Imperative

4.4. The Professional EthicThe Professional Ethic

5.5. The TV TestThe TV Test

6.6. The Legal TestThe Legal Test

7.7. The Four-Way TestThe Four-Way Test

Business Ethics: My Life in Headlines (1 min.)

Social AuditsSocial Audits

Many companies attempt to regulate Many companies attempt to regulate themselves on the topic of social themselves on the topic of social responsibility and ethics. They do this responsibility and ethics. They do this through through social audits.social audits.

A A social auditsocial audit is a form of self-regulation is a form of self-regulation in which the company attempts to in which the company attempts to monitor monitor managers’ and employees’ ethical behavior.managers’ and employees’ ethical behavior.

Managing Social Responsibility Managing Social Responsibility & Ethics Programs& Ethics Programs

Key steps:Key steps: Social responsibility and ethics must start at the top.Social responsibility and ethics must start at the top.

A committee of top managers must develop a plan A committee of top managers must develop a plan

detailing the level of top management support. detailing the level of top management support.

One executive must be put in charge of the firm’s agenda.One executive must be put in charge of the firm’s agenda.

The organization must conduct periodic The organization must conduct periodic social auditssocial audits

Evaluate progress in achieving social responsibility goals Evaluate progress in achieving social responsibility goals