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Nickels Nickels

McHughMcHugh

McHughMcHugh

Nickels Cover

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ChapterChapter

4444Demonstrating Demonstrating

Ethical Ethical Behavior and Behavior and

Social Social ResponsibilityResponsibility

Demonstrating Demonstrating Ethical Ethical

Behavior and Behavior and Social Social

ResponsibilityResponsibility

4-2

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EthicsEthicsMore Than LegalityMore Than Legality

Standards are Standards are

Fundamental Fundamental

Stem From IndividualStem From Individual

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SEC Investigations (2002)SEC Investigations (2002)AccountingAccounting

Arthur AndersenArthur AndersenDeloitte & ToucheDeloitte & ToucheErnst & YoungErnst & YoungKPMGKPMGPriceWaterhouse PriceWaterhouse CoopersCoopers

EnergyEnergyCMS EnergyCMS EnergyDynergyDynergyEnronEnronHalliburtonHalliburtonReliant ResourcesReliant Resources

SoftwareSoftwareComputer AssociatesComputer AssociatesNetwork AssociatesNetwork Associates

TelecomTelecomGlobal CrossingGlobal CrossingLucent TechnologiesLucent TechnologiesQwest CommunicationsQwest CommunicationsWorldComWorldCom

Wall StreetWall StreetCredit Suisse First BostonCredit Suisse First BostonHedge FundsHedge FundsCapital MarketsCapital MarketsMerrill LynchMerrill Lynch

Source: Business Week, June 10, 2002

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Corporate Scandal FinesCorporate Scandal FinesCompanyCompany FineFine ReasonReason

Arthur AndersenArthur Andersen $500,000$500,000Obstruction of Justice Obstruction of Justice

Shredding Enron Shredding Enron DocumentsDocuments

CitigroupCitigroup $5,000,000$5,000,000Analyst Issued Analyst Issued

Misleading InformationMisleading Information

Merrill LynchMerrill Lynch $100,000,000$100,000,000

Conflict of Interest Conflict of Interest Between Investment Between Investment

Bank & Research Dept.Bank & Research Dept.

Credit SuisseCredit Suisse

First BostonFirst Boston $100,000,000$100,000,000IPO Shares Unfairly IPO Shares Unfairly

DistributedDistributed

Source: Business Week, Nov. 4, 2002

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How Much DoHow Much Do Americans Trust Corporations?Americans Trust Corporations?

All CorporationsAll Corporations

Fair AmountFair Amount 41%41%

Only A LittleOnly A Little 35%35%

Not At AllNot At All 13%13%

A Great DealA Great Deal 10%10%

No OpinionNo Opinion 1% 1%

Your EmployerYour Employer

A LotA Lot 50%50%

Only Somewhat 39%Only Somewhat 39%

Not At AllNot At All 8% 8%

No OpinionNo Opinion 3% 3%

Source: USA Today/CNN/Gallup Poll, Jan. 25-27, 2002

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Why People VolunteerWhy People Volunteer

Percent of RespondentsPercent of Respondents

Total is more than 100%- respondents could give more than one reason.Total is more than 100%- respondents could give more than one reason.

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Ethics of MBA StudentsEthics of MBA StudentsPercent of MBA Students Who Would:Percent of MBA Students Who Would:

Buy Stock on Inside InformationBuy Stock on Inside Information 52%52%

Reveal Corp. Secrets to Spouse/FamilyReveal Corp. Secrets to Spouse/Family 50%50%

Let a Gift Sway Purchasing DecisionLet a Gift Sway Purchasing Decision 26%26%

Pay Someone Off to Close aPay Someone Off to Close a Business DealBusiness Deal 13%13%

Source: USA Today

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Ethics Check Questions:Ethics Check Questions:

Is It Legal?Is It Legal?

Is It Balanced?Is It Balanced?

How Will It Make Me Feel About How Will It Make Me Feel About Myself?Myself?

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Ethical Decision Ethical Decision Resolved Through:Resolved Through:

• Religious TeachingsReligious Teachings

• Individual RightsIndividual Rights

• LegislationLegislation

• Court DecisionsCourt Decisions

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Factors InfluencingFactors Influencing Managerial EthicsManagerial Ethics

IndividualIndividual OrganizationalOrganizational EnvironmentalEnvironmental

ValuesValuesWork Work BackgroundBackground

Family StatusFamily Status

PersonalityPersonality

Top Level Mgmt. Top Level Mgmt. PhilosophyPhilosophy

The Firm’s The Firm’s Reward SystemReward System

Job DimensionsJob Dimensions

CompetitionCompetition

Economic Economic

ConditionsConditions

Social/Cultural Social/Cultural

InstitutionsInstitutions

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Codes of EthicsCodes of Ethics

• Compliance-Compliance-BasedBased

• Integrity-Integrity-BasedBased

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Steps to ImproveSteps to Improve U.S. Business EthicsU.S. Business Ethics

1.1.Top Top ManagementManagement

2.2.EmployeesEmployees

3.3.ManagersManagers

4.4.Ethics OfficeEthics Office

5.5.OutsidersOutsiders

6.6.EnforcementEnforcement

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Levels of CorporateLevels of CorporateSocial ResponsibilitySocial Responsibility

Societal ResponsibilitySocietal Responsibility

Stakeholder ResponsibilityStakeholder Responsibility

Profit ResponsibilityProfit Responsibility

Owners/StockholdersOwners/StockholdersGeneralGeneral

PublicPublic

CustomersCustomers

EmployeesEmployees

Suppliers/DistributorsSuppliers/Distributors

EcologicalEcological

EnvironmentEnvironment

Public Interest GroupsPublic Interest GroupsSource: Source: MarketingMarketing, 5/E by Berkowitz, Kerin, Hartley, and Rudelius., 5/E by Berkowitz, Kerin, Hartley, and Rudelius.

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$9$10

$120

$12

Individuals

Foundations

Bequests

Corporations

Contributions to CharityContributions to Charity(In Billions of Dollars)(In Billions of Dollars)

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New PhilanthropyNew Philanthropy

Source: Source: Business WeekBusiness Week, Dec. 2, 2002, Dec. 2, 2002

DonorDonorEstimated Total Estimated Total

Given (in Given (in MillionsMillions

CausesCauses

Bill GatesBill Gates $25.6$25.6 Health &Health &

EducationEducation

Gordon MooreGordon Moore $6.6$6.6 Conservation & Conservation & EducationEducation

James StowersJames Stowers $1.5$1.5 Biomedical ResearchBiomedical Research

Eli BroadEli Broad $1.045$1.045 Education & ArtsEducation & Arts

Walton FamilyWalton Family $.75$.75 EducationEducation

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Most AdmiredMost Admired Companies by IndustryCompanies by Industry

ApparelApparel Levi-StraussLevi-StraussAirlinesAirlines SouthwestSouthwestFood ServicesFood Services McDonald’sMcDonald’sFood ProductsFood Products Campbell’sCampbell’sBeveragesBeverages Coca-ColaCoca-ColaElectronicsElectronics IntelIntel

Industry Company

Source: Fortune Magazine

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• MerckMerck

• Johnson & JohnsonJohnson & Johnson

• PfizerPfizer

• Eli LillyEli Lilly

• IBMIBM

• MicrosoftMicrosoft

• IntelIntel

• Bank of AmericaBank of America

$221.0* $221.0*

176.2176.2

123.9123.9

121.4121.4

116.1116.1

104.7104.7

101.0101.0

91.591.5Source: The Taft Group

* In Millions* In Millions

Corporate Annual GivingCorporate Annual Giving

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Where CharitableWhere Charitable Contributions Go (2001)Contributions Go (2001)

$20.7

$18.4

$31.8

$12.1

$11.8

$6.4

$4.1

$81.0Religious Charity

Education

Human Serv.

Health

Art/Culture

Umbrella Charities

Environ./Animals

Int'L Affairs

In Billion $In Billion $

Source: BusinessWeek. Dec. 2, 2002

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Social AuditSocial Audit

• By CompanyBy Company

• Outside CompanyOutside Company• Socially-Conscious Socially-Conscious

InvestorsInvestors

• EnvironmentalistsEnvironmentalists

• Union OfficialsUnion Officials

• CustomersCustomers

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International EthicsInternational Ethics & Responsibility& Responsibility

Ethics Ethics NotNot Unique To U.S.- Unique To U.S.- Leaders AccountableLeaders Accountable

Demand for Socially Demand for Socially Responsible BehaviorResponsible Behavior

Inter-American Convention Inter-American Convention Against CorruptionAgainst Corruption

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Most Admired GlobalMost Admired Global Companies (Outside of U.S.)Companies (Outside of U.S.)1)1) NokiaNokia FinlandFinland2)2) Toyota MotorToyota Motor JapanJapan3)3) SonySony JapanJapan4)4) Nestle’Nestle’ SwitzerlandSwitzerland5)5) Honda MotorHonda Motor JapanJapan6)6) BPBP BritainBritain7)7) Singapore AirlinesSingapore Airlines SingaporeSingapore8)8) L’OrealL’Oreal FranceFrance9)9) Royal Dutch/ShellRoyal Dutch/Shell Britain & NetherlandsBritain & Netherlands10)10)CanonCanon JapanJapan

Source: Fortune, March 4, 2002