Ethics and ProfessionalResponsibilityManufacture 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 ResponsibilityDisclosure Helps

Corporations are perceived to hold duties to the following groups, duties that often come into conflict:

Shareholders

Employees

Consumers

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 ControlsNot in Book

• Battery Division• Lead Exposure

• No Women of Child Bearing Age

Start here tues

Attendance – Most of you have not “registered” your account to me.

1. Click here to register – 2. Add email address and certify your cell # (if using texting)3. Add Your First Name and Last Name as identifiers (otherwise, I will

not give you credit)

Moving Profits Overseas – End-of-Chapter Q: 4-2

• £200 Million Profit - £6 million tax (3%) Tax rate is 20-24%.• CEO of Zoidle: He stated he was proud of his company for

taking advantage of tax loopholes. “Capitalism at its finest”• “It would be unethical not to take advantage of loopholes

and borderline illegal to tell shareholders it that the company paid more in taxes than it had to pay because it felt it should”

• Obama Quote: “Corporate deserters” “A small but growing group of big corporations are fleeing the country to get out of paying taxes. They’re…basically renouncing their citizenship and declaring that they're based somewhere else, just to avoid paying their fair share.”

What do you think? - poll

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).

Is profit maximization an ethical goal?

Google IPO example

• What is corporate social responsibility? • Corporate philanthropy?

Milton Friedman – On “greed”

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

Approach to Making Ethical Decisions:Open and full disclosure reduces ethical breaches

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 versus law

Immoral Act

Illegal Act

“Unethical” Act

Okay Act

Good ActNot visit the sick

Visit the sick

Tease the sick

Poison the sick

Watch the sick collapse in

agony, do not call for help, but

laugh the evil laugh (muhaha)

There are legal ‘consequences’ to some decisions which are different than ‘illegal’ acts.

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.

Sources of Ethical Standards

Duty-based ethics:– Religious Based (Ten

Commandments)– Rights Based– Kantian

- people are not means to an end (Ends never justify means_

– Categorical imperative.

Outcome-based ethics:Ethics based on philosophical reasoning. Example: utilitarianism Cost/BenefitRights Based ethics:Ethics based on human/individual rights.

Ethics In The Global Context

Despite the cultural and religious differences among nations, the most important ethical precepts are common to virtually all countries.

Hypothetical – US Developed DrugU.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.

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

JailJail

Azerbaijani Oil Company End-of-Chapter Q: 4-6

Set up a series of companies to allow for Azerbaijani leaders to receive 2/3 of profits from new business.

Outside of U.S. Ethical? Foreign Corrupt Practices Act?

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.

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.

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….

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

Hypothetical – Women in BusinessAssume 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

Ethics In The Global Context

Do you send Amanda?