Transcript Document 7114865

 Two
Important
Concepts
Social
Responsibility
Ethical
Behavior




The new millennium has ushered in a wave of fraud, investment scams, and ethical
lapses unprecedented in scope. Worse yet, such corruption has cost thousands of
employees their jobs, clipped investor stock portfolios by billions, and destroyed
the faith of many in Corporate America and its underlying securities markets.
Adelphia. For 50 years, John Rigas, the founder of the sixth largest U.S. cable
company, lived the American Dream. But he and his two sons—Timothy and
Michael—were accused of committing one of the largest frauds ever perpetrated
on investors and creditors.
WorldCom. This long-distance telecom giant shocked investors when it revealed in
2002 that it had engaged in one of the biggest frauds in corporate history. The
company admitted to overstating cash flow by $3.9 billion by reporting ordinary
expenses as capital expenditures. The accounting fraud allowed WorldCom to post
a 2001 profit of $1.4 billion instead of reporting a loss for that year.
Ford and Firestone. Faulty Firestone tires on Ford Explorers are blamed for 271
deaths and more than 800 injuries worldwide—numbers that investigators said
could've been much lower if both companies had reacted sooner to evidence of
product failure. Firestone blamed the problem on Ford (and on Explorer drivers);
Ford blamed the problem on Firestone. Firestone refused to recall the tires, then
Ford stepped in and replaced the tires on nearly 50,000 vehicles in 16 counties
outside the United States—but neither company bothered to inform U.S.
authorities or customers until similar failures started to show up in this country.
Enron
Tyco
Arthur Andersen
Fair and Honest
Competition
Truthful
Communication
Not Harming Others
Cheating on
Expense Accounts
Misuse of
Company Resources
Creative Accounting
Padding Invoices
Insider Trading
Conflicts of Interest
•Even legitimate companies can mislead investors by withholding vital information.
For example Enron and WorldCom both showed that with a little “creative
accounting,” a business that is in financial trouble can be made to look attractive,
even to government regulators and astute investors.
•Some business executives take advantage of the investor by using the company’s
earnings or resources for personal gain. Perhaps the most common approach is to
cheat on expense accounts.
•Padding invoices and then splitting the overcharge with the supplier is another
common ploy.
•Other tactics include selling company secrets to competitors and
using confidential, nonpublic information gained from one’s
position in a company to benefit from the purchase and sale of
stocks. Such insider trading is illegal and is closely checked by
the Securities and Exchange Commission (SEC).
•Another way that businesspeople can harm others is by getting
involved in a conflict of interest situation. A conflict of interest
exists when choosing a course of action will benefit one person’s
interests at the expense of another or when an individual chooses
a course of action that advances his or her personal interests
over those of the employer.
Organizational
Behavior
Influential Factors
Knowledge
Cultural
Differences

Top executives

Written code

Ethics training

Ethics officer

Reporting system
Stakeholder
Issues
Is It Ethical?
Philosophical
Approaches
Outsiders
Legality
and Balance
Utilitarianism
Supervisors
Acceptability
Legal and
Human Rights
Employees
Feasibility
Principles
of Justice
Ethical Dilemma
Ethical Lapse
Early
20th Century
Maximize
Profits
Middle
20th Century
Provide Jobs
and Pay Taxes
Early
21st Century
Balance Profits
and Social Issues
Percentage of Executives Who “Strongly Agree”
or “Agree” That Companies Should:
Percentage
•Be environmentally responsible
100
•Be ethical in operations
100
•Earn profits
96
•Employ local residents
94
•Pay taxes
94
•Encourage and support employee volunteering
89
•Contribute money and leadership to charities
85
•Be involved in economic development
75
•Be involved in public education
73
•Involve community representatives in business decisions
62
•Target a portion of purchasing toward local vendors
61
•Help improve quality of life for low-income populations
54
Business
Investors
Consumers
Employees
Society
Profits
Fair Disclosure
Informed
Purchase
Equity
Health & Safety
Clean
Environment
Safe
Products
Product
Choice
Efforts to Increase
Social Responsibility
Social
Audit
Cause-Related
Philanthropy
Marketing
Industrial Discharges
Vehicle Emissions
Chemical Spills
Government
Efforts to
Reduce Pollution
Regulate
Air and Water
Reduce
Automobile Emissions
License Pesticides
Control
Toxic Substances
The Environmental
Protection Agency
Safeguard
Drinking Water
Environmental Issues
Long-Term Cost
Environmental Staff
Product Development
Performance Expectations
Supplier Expectations
Performance Rewards
Training and Awareness
The Right to Safe Products
The Right to Be Informed
The Right to Choose
The Right to Be Heard
Responsibility
Toward Investors
Fair Profit
Distribution
Social
Responsibility
Ethical
Behavior
Responsibility Toward
Employees
Equal Employment
Opportunity
Affirmative
Action
Americans with
Disabilities Act
Occupational
Health and Safety
Bribery
Environmental Abuse
Unscrupulous
Business Practices