Management Exam 2 Study Guide

What is the 20-60-20 rule?

20% of people will always do the right thing, 20% will always engage in illegal or unethical activity, and 60% are in the middle

What is the business judgement rule?

A doctrine in corporations law that courts defer to the business judgement of corporate executives

What is negotiation?

A field of knowledge and endeavor that focuses on gaining the favor of people from whom we want things. The winners are people who are not only competent, but have the ability to negotiate to get what they want

What are the typical assets of whistleblowing?

All cases involve multiple parties, the vast majority begin by reporting internally then move externally only if internal action is insufficient, and and many whistleblowers find their experience difficult but not all suffer retaliation

How can a company include ethical values in their practices?

All decisions at every level should be based on ethical values. Meetings, additional training, and speeches should all mention it. People should also build ethical values into their stories about the company

Whether or not you should negotiate should be based on what three questions?

Am I comfortable negotiating in this particular situation? Will negotiating meet my needs? Is the expenditure of energy and time on my part worth the benefits I can receive as a result of this encounter? If the answer is yes to all three, then you should negotiate

Why don't US businesses like the FCPA?

Because it theoretically puts them at a disadvantage. They could lose major contracts or projects to European companies who still do use bribery

What is the difference between a moral person and a moral manager?

Being a moral person requires a manager to act with integrity, honesty, and trustworthiness, living a moral life at the personal level. Being a moral manager mean applying a reward system to hold people accountable and regularly communicating with employees about the importance of ethics

What are multi-level games?

Both games are often played at multiple interacting levels of government. There is interaction between national and international as well as between federal and state.

Who made the discovery of Dieselgate?

California Air Resource Board and the US Environmental Protection Agency

How should a company establish a formal ethics program?

Changing regulations have also made this a requirement in some places. The code of ethics should be easy to understand, include relevant examples, avoid a negative tone, and include expected behaviors and sanctions. Ethics training should also be conducted with managers whenever possible

What is the point of "Chicago School Economics"?

Companies are more likely to engage in rational, efficiency enhancing conduct rather than conduct whose only goal is to eliminate rivals. This means little government intervention is needed- the market usually corrects itself

What kinds of strategies fall under value net games?

Companies try to advance their goals by crafting strategies like imitation, combination, and shut-out

What is the CFPB?

Consumer Financial Protection Bureau- tries to hold top executives in the financial sector accountable for things like fraud

What is whistleblowing?

Disclosure of organization members of illegal, immoral, or illegitimate practices under the control of their employers, to persons or organizations that may be able to effect action

What is the socialization process?

Employees feel they are expected to behave accordingly

The role of government increased after what scandal?

Enron

What is ESG?

Environmental, social, and governance factors

What three things are needed to help mitigate unethical corporate culture?

Existence of a set of core ethical values throughout the organization, the establishment of a formal ethics program, and continuous presence of ethical leadership

What is the point of "Government Games"?

Few businesses do a good job of integrating government relations with business strategies. They need to focus on strategic games based on the roles that government rule-makers and referees play

What company is an example of a disruptive innovator that we talked about in class?

Flixbus

What is the FCPA?

Foreign Corrupt Practices Act- an important part of corporate governance in multinational corporations. It prohibits bribery of foreign officials

What example did the article give of a multi-level game?

In 1998, US and European Union officially recognized each other's inspection, testing, and certification requirement for a number of trading products. Interacting at the international level affected change at the federal level

What example does the article give for linked games?

In 1999, Federal Trade Commission and three states tried to block off the merger BP Amoco and Atlantic Richfield Company, which would have created the world's largest oil company. The linkage made it very difficult to pass the merger- it ended up passing only on certain conditions

Why is no one being prosecuted in Germany?

In Germany there is no criminal liability for corporations, there is also nothing against criminal conspiracy, no clean air laws, and no law against lying to regulators. It is also hard for prosecutors to sue abroad because there are no consumer class action suits and plaintiffs have limited discovery rights

Has Volkswagen been prosecuted for these crimes?

In the US they are being prosecuted but no legal action has been taken against them in Europe, even though that is where the majority of the cars were sold

In every negotiation, what are the three crucial elements?

Information, time, and power. The other side always seems to know more than you, have more time than you, and have more authority than you

What did Uber, Disruptive Innovation, and Regulated Markets talk about?

It argues that regulation will not protect from disruption in the long-run. The article uses Uber as an example of this

What are the benefits of internal whistleblowing?

It can resolve the current problem, hopefully before external stakeholders learn about it, and signals to the employees that managers are open to dissent and wish to learn about problems before they escalate

Has this affected their stocks?

It dramatically lowered their stocks but not permanently- as of now they are higher than they were when Dieselgate broke

What is the downside of the gig economy?

It is creating a group of people that don't have enough money to live and the company is enabling it because it is cheaper to customers. These types of jobs are good to do as a side-job but not full-time- you're missing out on things like health insurance

How can a company include ethical values in their policies?

It should be included in the annual report, public accountability statement, or social report, and should also be present on the firm's website

How was ESG started and how has it grown?

It started in 2004 when the UN Secretary General, Kofi Annan, wrote to 50 CEOs and invited them to participate in a joint initiative to find ways to incorporate ESG into capital markets. The growth accelerated most around 2013-2014 as the idea that ESG can improve returns is quickly spreading.

What is the Merit Service Protection Board?

It was created in 1978 to protect whistleblowers from retaliation. The long-term goal was to encourage federal employees to report waste, fraud, and abuse in an effort to save money.

What is the baseline of a code of ethics?

Law

What is the starting point of creating hybrid strategies?

List the most important of both types of games the company is currently engaged in as well as figure out if you are playing offense or defense. You also need to know if you are trying to block, shape, or delay change. If the primary goal cannot be accomplished, the next best should be considered. Sticking just to one goal may shadow opportunities to minimize damage or gain an advantage

Why is there some speculation about the White House?

Makan Delrahim is the Justice Department's chief antitrust enforcer. The president has had public fights with CNN, raising suspicion of White House pressure on Delrahim to somehow cobble the network. If this is true, the government's case will be even harder to make because it could raise issues of freedom of the press and potentially illegal interference.

Why is it important for a company to establish a set of core ethical values?

Many employees perceive their firm to be lacking in ethical values. A proposed set of core values would include things like trustworthiness, respect, responsibility, fairness, caring, and citizenship. Core ethical values can sometimes constrain the firm's self interest but they can also help ensure the long-term prosperity of the company. Infusion of these values should take place within the firm's policies, practices, and processes.

Do people have a positive view of Uber and its executives?

No- riders and drivers viewed the company as made up of greedy and self-centered people

What kinds of strategies fall under public interest games?

Non-business organizations try to persuade government to impose costs on business in what they consider to be the best interest of society. recently, issues like privacy and intellectual property have become focal points for these kinds of games

Why are police having trouble finding the records of the bribery?

Odebrecht had their own department that handled bribery (Division of Structure Operations). All their financial activity was conducted using two computer systems. The first one allowed internal communication, and the second was used to make and process payment requests. The second service is the one the federal police still can't crack.

What was the largest foreign bribery case in history?

Odebrecht: Brazilian company that admitted to a cash-for-contracts corruption scandal in 12 countries. Bribery totaled $788 million and they had to pay record-breaking fines of $3.8B

Why does whistleblowing matter to managers and organizations?

Organizations incur many potential costs when organized wrongdoing occurs whether they are financial or reputational costs. Even if the company doesn't go bankrupt from a scandal, it usually at least leads to higher turnover and lower productivity.

What is the power of precedent and how does he describe it in the article?

People believe they can't negotiate at a one-price store. If they think they can't negotiate, they won't, which proves the inability to negotiate

What is the power of legitimacy?

Power derived from perceived or imaginary authority. Often represented by something inanimate like a sign, form, or other document

What are the top universal identifiers in order?

Social Security number, D.O.B, driver's license number, phone number

What is disruptive innovation?

Something new that drastically changes the game and forces incumbent industries to either change or become obsolete. Disruptors create new markets and it is easy for them to avoid regulation.

How did Kalanick finally leave Uber?

Stories continued to emerge of his poor handling of things like sexual assault allegations. He started regularly cancelling meetings and going missing from the office. Six members of Ubers Executive Leadership Team sent a letter to the board asking him to take a leave of absence. He finally agreed to take a three-month leave. A few days after he went on leave he was asked to resign. They threatened to make allegations against him public if he didn't so he agreed.

What is Uber disruptive to?

Taxi industry- some argue whether or not it really was disruptive but the article and our class argued that it was.

Who is Travis Kalanick?

The CEO of Uber

What does ESG build on?

The Socially Responsible Investment movement- this focuses on ethical criteria more while ESG is focused on how ESG factors have financial relevance.

Who is Oliver Schmidt?

The Volkswagen engineer sentenced to 7 years in prison for his role in Dieselgate

What is the point of the article on the AT&T merger?

The author claims that if the government tries sue to stop the merger from going through, they will lose

What are the difficulties with establishing an ethical corporate culture?

The ideas of what defines ethical corporate culture varies. It is also hard to tell whether this will actually make a difference, because illegal activity will always go on. It is also impossible to know whether employees know how to recognize morally ambiguous situations

What is the context of the AT&T merger?

The merger between AT&T and Time Warner was an $85B deal announced a year ago. Recent info claimed the Department of Justice's anti-trust division was demanding that AT&T sell Turner Broadcasting including CNN and AT&T was refusing, setting up a possible court challenge

How should a company establish ethical leadership?

The moral tone of an organization is best set at the top, not just by CEOs but my other executives, managers, and even entry level employees. Many executives see a conflict with fiduciary responsibilities and ethics. Companies need to be moral people and moral managers

What is unethical corporate activity?

The range is extensive from bribery, to extortion, to sexual harassment. Major scandals are often the things in the spotlight but government prosecution and lawsuits are the more challenging ethical dilemmas.

How can a company include ethical values in their processes?

The right people need to be hired initially. Ethics training should also be a part of orientation. Performance appraisals and promotions should also take ethics into account. Discipline and dismissals should be based on whether people live up to the values

What is hipster antitrust?

The rise of dominant networks like Google, Facebook, and Amazon has led to some Democrats calling for broad but unspecified limits on the reach of modern enterprise. This would represent a huge change in anti-trust law, but there is little to suggest this change is actually happening

What are linked games?

The two games often become linked, for example mergers and acquisitions usually require the approval of government regulators but they may call for efforts to win approval of non-business groups.

What did the VW scandal expose as a bigger problem?

There is a bigger problem with cheating emissions across Europe. This is a long-simmering public health issue that is not caused by VW alone, but by the diesel car industry in general and the political culture that protects it

What are public interest games?

These pit coalitions of businesses and industry associations against non-business organizations like unions, consumer groups, and environmental organizations

What are value net games?

These relate to cooperation and competition among businesses

How is this merger known as a vertical merger?

These two companies are in different places in the industry supply chain. AT&T focuses on distribution and Time Warner focuses on content. Vertical mergers present far less risk of consumer harm than competing firms

What is the internalization process?

They adopt the ethical norms as their own

Why were companies at first reluctant to use ESG factors?

They argued that their fiduciary responsibility was limited to maximizing shareholder values. Another challenge was the lack of data on the subjectq

Why can disruptors topple incumbents?

They can innovate out of reach of the regulators

What was the company's defense?

They claimed the defeat device was lawful outside of the US due to lax diesel policies. They also claimed non-American customers suffered no injuries. This is made easier by lenient Nox limits abroad.

What is one reason Flixbus is able to be so disruptive to other bus companies?

They focus on online marketing, specifically to millenials- this is an age category often overlooked by bus companies such as Greyhound

Why were Google and Uber competing?

They were both racing to build a self-driving car. Google ended up accusing Uber or stealing their secrets

How was the Odebrecht scandal discovered?

They weren't originally a target of prosecutors. They were originally investigating a money-laundering scheme through a car wash (Lava Jato) but their focus shifted to a Brazilian oil company, which led them to Odebrecht.

What does ESG cover?

Things like how corporations respond to climate change, how they manage water, how effective their health and safety policies are, how they treat workers, etc.

What was the point of "Developing and Sustaining an Ethical Corporate Culture"?

This article talks about unethical corporate activity and how to solve it. However, it makes it clear that this is only the first step. Sustaining it is a constant challenge. Due to human nature, these issues will never fully be eliminated, but firms have an ethical obligation to make attempts to minimize them

Why did Schmidt get punished for his actions but not the people higher up than him?

This was meant to send a message to other corporate employees that following illegal orders is not a defense

What is the biggest challenge now for companies?

To adapt to a new environment that favors smarter, cleaner, and healthier products. This means they have to prioritize the common good over short-term profits

How do value net games and public interest games differ?

Value net games tend to be played by individual businesses and ad hoc coalitions while public interest games tend to be played between industries, represented by their industry association and non-business organizations. In net value games, the government acts more like referees. In public interest games, the government acts more like rule-makers

What are the two types of business games?

Value-net games and public interest games

What was the Dieselgate scandal?

Volkswagen was promoting a new clean diesel vehicle. Over half a million of these cars were sold in the United States. However, the exhaust controls were programed to shut off as soon as the cars moved off the regulator's test beds (defeat device), and the cars actually released 35 times the legal level of emissions. This causes smog, respiratory disease, and premature death.

What is the point of "You Can Negotiate Anything"?

We negotiate all the time, even when we don't realize we are doing it and goes over when you should decide to negotiate and when you shouldn't

Why did Kalanick receive backlash after Trump's Muslim ban?

When Trump imposed the Muslim ban, taxi drivers protested in New York. This increased the demand for Uber, so, trying to avoid backlash, they suspended surge pricing. They received backlash anyway and were accused of trying to break up the taxi driver's protest. This was made worse by Kalanick's decision to join Trump's advisory council, a decision he later reversed.

Has VW paid compensation anywhere besides the US?

Yes- Canada and South Korea

What are the two options for trying to develop and ethical corporate culture?

You can adopt this culture through a socialization process or an internalization process.