Corporate Social Corporate Social Responsibility and Responsibility and

Business EthicsBusiness EthicsUBGA 107: Week 12UBGA 107: Week 12

Today’s AgendaToday’s Agenda

Administrative Matters (return exams)Administrative Matters (return exams) Only scantron is returned to you. Blue books are aOnly scantron is returned to you. Blue books are a

vailable to be viewed in Professor Gerlach’s officvailable to be viewed in Professor Gerlach’s office only.e only.

Grade distribution adjustment?Grade distribution adjustment? Attendance sheet to be returned to me during classAttendance sheet to be returned to me during class

Corporate Social Responsibility and Business Corporate Social Responsibility and Business EthicsEthics What are CSR and Ethics?What are CSR and Ethics? How are ethical questions analyzedHow are ethical questions analyzed

ReviewReview Corporate GovernanceCorporate Governance

U.S. v. Germany (Japan)U.S. v. Germany (Japan) the ways in which rights and responsibilities are the ways in which rights and responsibilities are

shared between the various corporate shared between the various corporate participants (In the US, especially the participants (In the US, especially the managementmanagement and the and the shareholdersshareholders).).

The FactsThe Facts WorldCom’s meteoritic riseWorldCom’s meteoritic rise

The ScandalThe Scandal Financial ManipulationsFinancial Manipulations WorldCom’s incentive to commit fraudWorldCom’s incentive to commit fraud Arthur Andersen’s incentive to look awayArthur Andersen’s incentive to look away

Key: Misalignment of IncentivesKey: Misalignment of Incentives

DefinitionsDefinitions What is Corporate Social Responsibility?What is Corporate Social Responsibility?

Corporate-wide activities carried out to Corporate-wide activities carried out to improve a company’s image vis-à-vis various improve a company’s image vis-à-vis various stakeholder groupsstakeholder groups

ExamplesExamples Corporate Philanthropy, Environmental Policies, Corporate Philanthropy, Environmental Policies,

Worker Rights Policies, etc.Worker Rights Policies, etc.

What is business ethics?What is business ethics? Refers to actions by individuals and/or groups Refers to actions by individuals and/or groups

within organizationswithin organizations ExamplesExamples

Embezzlement, Sexual HarassmentEmbezzlement, Sexual Harassment

Discussion Question #1Discussion Question #1

Discuss the reading in the context of thDiscuss the reading in the context of the corporate social responsibility of Mce corporate social responsibility of McWane and Acipco, providing some speWane and Acipco, providing some specific examplescific examples Corporate PhilanthropyCorporate Philanthropy Environmental PoliciesEnvironmental Policies Workers’ Rights PoliciesWorkers’ Rights Policies

Corporate PhilanthropyCorporate Philanthropy

Examples from ReadingExamples from Reading $10 million donation to the science museum, the $10 million donation to the science museum, the

McWane CenterMcWane Center Millions to Alabama’s major cultural institutionMillions to Alabama’s major cultural institution

s, including the Birmingham Civil Rights Instituts, including the Birmingham Civil Rights Institutee

McWane ScholarshipsMcWane Scholarships $2 million to renovate 56-foot statute of Vulcan$2 million to renovate 56-foot statute of Vulcan

What is weird?What is weird? These gifts were made by the McWane family, noThese gifts were made by the McWane family, no

t McWane corporationt McWane corporation

Environmental PoliciesEnvironmental Policies McWane’s environmental records are abysmalMcWane’s environmental records are abysmal Persistent defiance of laws protecting workers and sPersistent defiance of laws protecting workers and s

urrounding communities from toxic pollutionurrounding communities from toxic pollution Discharged arsenic, copper and thallium into the air (AlabaDischarged arsenic, copper and thallium into the air (Alaba

ma)ma) Workers exposed to exceptionally high levels of silicaWorkers exposed to exceptionally high levels of silica Failure to provide respirator, causing severe kidney failure Failure to provide respirator, causing severe kidney failure

due to arsenic poisoningdue to arsenic poisoning 8.5 mil-long slick in the Delaware River8.5 mil-long slick in the Delaware River Flushing thousands of gallons of polluted water through thFlushing thousands of gallons of polluted water through th

e storm drain (Birmingham)e storm drain (Birmingham) Repeated failure to stop production to repair brokeRepeated failure to stop production to repair broke

n/ineffective pollution controln/ineffective pollution control Equipment tampered with so as not to shut down auEquipment tampered with so as not to shut down au

tomatically when pollution controls failtomatically when pollution controls fail

Workers’ Rights PoliciesWorkers’ Rights Policies A dangerous business …A dangerous business … Workers who protest dangerous work conditions “bull-eyed” for Workers who protest dangerous work conditions “bull-eyed” for

terminationtermination Supervisors refused to wait a few hours for federal safety Supervisors refused to wait a few hours for federal safety

inspectors to arrive before restarting a conveyor belt that had inspectors to arrive before restarting a conveyor belt that had crushed a man to deathcrushed a man to death

Line workers who fail to make daily quotas get disciplinary actionsLine workers who fail to make daily quotas get disciplinary actions Discipline used to suppress union unrest and injury claimsDiscipline used to suppress union unrest and injury claims Supervisors urged to discipline injured workers (to punish workers Supervisors urged to discipline injured workers (to punish workers

for reporting injuries)for reporting injuries) ““Safety director’s” request for more safety equipment and assistant Safety director’s” request for more safety equipment and assistant

ignored.ignored. Blatant refusal to adhere to federal safety rules on weight-lifting Blatant refusal to adhere to federal safety rules on weight-lifting

limitslimits Company officials lie to OSHA regarding safety issues (elevator Company officials lie to OSHA regarding safety issues (elevator

shaft example)shaft example) OSHA: respirator program totally ineffectiveOSHA: respirator program totally ineffective 404 OSHA violations 1995-2003404 OSHA violations 1995-2003

Contract with AcipcoContract with Acipco ““The only time you can get a job at Acipco iThe only time you can get a job at Acipco i

s if somebody retires or dies.”s if somebody retires or dies.” Workers take yoga glasses in a modern healtWorkers take yoga glasses in a modern healt

h club with the latest in weight-training equih club with the latest in weight-training equipment and a spring-loaded floor for aerobicspment and a spring-loaded floor for aerobics

Workers get cash bonuses if they keep their Workers get cash bonuses if they keep their cholesterol downcholesterol down

Spent millions of dollars to install air-conditiSpent millions of dollars to install air-conditioned booths in the hottest parts of the plantoned booths in the hottest parts of the plant

McWane vs. AcipcoMcWane vs. Acipco McWane Business ModelMcWane Business Model

Profit at the expense of worker safety/envirProfit at the expense of worker safety/environmental cleanliness. onmental cleanliness. Cost savings from ignoring safety/environmentaCost savings from ignoring safety/environmenta

l standards much greater than finesl standards much greater than fines Acipco Business ModelAcipco Business Model

If workers had a genuine stake they would If workers had a genuine stake they would work harder and smarter and produce morwork harder and smarter and produce more e

Instituted profit-sharing for all employeesInstituted profit-sharing for all employees

Ethical ChoicesEthical Choices

The Three Models of The Three Models of Ethical AnalysesEthical Analyses

UtilitarianUtilitarian Comparing benefits and costsComparing benefits and costs Action is ethical if net benefits exceed net costsAction is ethical if net benefits exceed net costs But difficult to measure some human and social costs. But difficult to measure some human and social costs.

Majority may disregard rights of minorityMajority may disregard rights of minority RightsRights

Respecting entitlementsRespecting entitlements Basic Human rights are respectedBasic Human rights are respected Difficult to balance conflicting rightsDifficult to balance conflicting rights

JusticeJustice Distributing fair sharesDistributing fair shares Benefits and costs are fairly distributedBenefits and costs are fairly distributed Difficult to measure benefits and costs. Lack of Difficult to measure benefits and costs. Lack of

agreement on fair sharesagreement on fair shares

Discussion Question #2Discussion Question #2

Provide Robert Restor, a former plant Provide Robert Restor, a former plant manager at McWane, with advice on tmanager at McWane, with advice on the ethical choices he could have made he ethical choices he could have made while at McWane based on the three etwhile at McWane based on the three ethical models discussed in classhical models discussed in class

Mr. Rester’s Ethical DilemMr. Rester’s Ethical Dilemmama

Over 24 years, Mr. Rester became numb to the Over 24 years, Mr. Rester became numb to the constant body count, brushed hands and feet, constant body count, brushed hands and feet, disfiguring lacerations, burns from molten irodisfiguring lacerations, burns from molten iron, amputations.n, amputations.

His sole focus, was finding a fresh body to keeHis sole focus, was finding a fresh body to keep production rolling.p production rolling.

For a McWane manager, taking time for safetFor a McWane manager, taking time for safety or environmental problem holds few attractiy or environmental problem holds few attractions. It means slowing production to fix equipons. It means slowing production to fix equipment. It means more safety training, less timment. It means more safety training, less time to make pipe. e to make pipe.

The McWane dictum: TIME = PIPE, PIPE = MThe McWane dictum: TIME = PIPE, PIPE = MONEYONEY

Advice to Mr. ResterAdvice to Mr. Rester UtilitarianUtilitarian

RightsRights

JusticeJustice

News UpdatesNews Updates U.S. Brings New Set of Charges Against Pipe ManufacturerU.S. Brings New Set of Charges Against Pipe Manufacturer May 26, 2004 May 26, 2004 M cWane Inc., a major pipe maker and one of the nation's moM cWane Inc., a major pipe maker and one of the nation's mo

st persistent violators of workplace safety and environmental lst persistent violators of workplace safety and environmental laws, faced a new round of criminal charges last night after a faws, faced a new round of criminal charges last night after a federal grand jury in the company's hometown, Birmingham, ederal grand jury in the company's hometown, Birmingham, Ala., issued a 25-count indictment alleging illegal dumping anAla., issued a 25-count indictment alleging illegal dumping and other environmental crimes.d other environmental crimes.

The indictment charges that senior McWane managers, includThe indictment charges that senior McWane managers, including Charles Robison, the corporation's vice president for enviring Charles Robison, the corporation's vice president for environmental affairs, conspired to dump huge quantities of pollutonmental affairs, conspired to dump huge quantities of polluted wastewater into a creek that runs through McWane's oldest ed wastewater into a creek that runs through McWane's oldest foundry, the McWane Cast Iron Pipe Company, on the outskirtfoundry, the McWane Cast Iron Pipe Company, on the outskirts of downtown Birmingham.s of downtown Birmingham.

News UpdateNews Update Plea Agreement Is Reached in Pipe CasePlea Agreement Is Reached in Pipe Case

May 27, 2004May 27, 2004 A day after announcing a second indictment against McWane Inc., fA day after announcing a second indictment against McWane Inc., f

ederal prosecutors disclosed Wednesday that a longtime McWane ederal prosecutors disclosed Wednesday that a longtime McWane manager had agreed to cooperate with their investigation into envirmanager had agreed to cooperate with their investigation into environmental and safety violations at McWane, one of the nation's largeonmental and safety violations at McWane, one of the nation's largest manufacturers of cast iron water and sewer pipe.st manufacturers of cast iron water and sewer pipe.

The manager, Donald Harbin, 58, has agreed to plead guilty to a sinThe manager, Donald Harbin, 58, has agreed to plead guilty to a single felony, conspiracy to violate environmental laws at the McWane gle felony, conspiracy to violate environmental laws at the McWane foundry in Birmingham, Ala., where prosecutors charged this week foundry in Birmingham, Ala., where prosecutors charged this week that huge quantities of polluted wastewater had been illegally and rthat huge quantities of polluted wastewater had been illegally and routinely dumped into a creek.outinely dumped into a creek.

Mr. Harbin is the first McWane employee to strike a plea agreemenMr. Harbin is the first McWane employee to strike a plea agreement with prosecutors and the first to acknowledge criminal conduct. Tt with prosecutors and the first to acknowledge criminal conduct. The maximum sentence is five years in prison and a $250,000 fine , bhe maximum sentence is five years in prison and a $250,000 fine , but Mr. Harbin is almost certain to receive a much lighter sentence fut Mr. Harbin is almost certain to receive a much lighter sentence for agreeing to cooperate. In all, 10 McWane managers have been chor agreeing to cooperate. In all, 10 McWane managers have been charged with crimes in Alabama and New Jersey.arged with crimes in Alabama and New Jersey.

Key Take AwayKey Take Away Sometimes, there are truly difficult ethical questions:Sometimes, there are truly difficult ethical questions:

From a pro-life perspective, if a pregnant mother’s life is in dFrom a pro-life perspective, if a pregnant mother’s life is in danger, and you have to sacrifice the unborn child’s life, or coanger, and you have to sacrifice the unborn child’s life, or condemn the mother to certain death, whose life do you choose?ndemn the mother to certain death, whose life do you choose?

But many of the so-called “ethical questions” in the bBut many of the so-called “ethical questions” in the business world arise from the choice between profit and usiness world arise from the choice between profit and socially desirable policy considerations.socially desirable policy considerations. Here, the “ethical” choice is not inherently difficult to disceHere, the “ethical” choice is not inherently difficult to disce

rn, but often financial considerations push ethically desirable rn, but often financial considerations push ethically desirable concerns to the background – Here, the cost of compliance > cconcerns to the background – Here, the cost of compliance > cost of finesost of fines

But the McWane – Acipco contrast highlights the fact that ethiBut the McWane – Acipco contrast highlights the fact that ethical decisions do not necessarily result in financial ruin.cal decisions do not necessarily result in financial ruin.

In Mr. Rester’s example, the opposing forces were his self-inIn Mr. Rester’s example, the opposing forces were his self-interest and his conscience.terest and his conscience.