Business Ethics Classes 7-9 (Ch. 4, 8, 9)

strategic philanthropy

the synergistic and mutually beneficial use of an organization's core competencies and resources to deal with key stakeholders so as to bring about organizational and societal benefits ex: Home Depot's program involves partnering with organizations to build affordable housing and provide aid for disaster recovery

cause-related marketing

ties an organization's products directly to a social concern through a marketing program ex: the Shamrock Shake

informal group

two or more individuals with a common interest but without an explicit organizational structure -help develop informal channels of communication, sometimes called the grapevine

Wells Fargo: Resolution

-former employees have filed lawsuits against the firm -former CEO Stumpf was forced to pay back millions in compensation -their business practices have been compromised in the eyes of consumers -ranked #95 out of 100 on their reputation (poor)

History of McDonalds

-founded in 1955 -went public in 1965 -launched Egg McMuffin in 1970s -introduced Chicken McNuggets in 1980s -added to Dow Jones Industrial Average in 1985 -added All-day breakfast in 2015

Wells Fargo: The Decision Makers

-front-line managers and other employees at Wells Fargo claim tactics that encouraged employees to open unauthorized accounts have been around much longer than bank executives have acknowledged

Wells Fargo: Introduction

-in 2015, became the world's largest bank -large-scale cross-selling scandal: employees had faked 2 million customer accounts to meet short-term sales goals -5,300 employees were fired -$185 million fine by the CFPB -scandal was fueled by a corporate culture that seemed to know of and encourage (or at least tolerate) these illicit activities

voluntary practices

-includes beliefs, values, and voluntary contractual obligations of a business -all businesses engage in some level of commitment to voluntary activities to benefit both internal and external stakeholders ex: Google works hard to give its employees a positive work environment through its benefits package and office amenities as swimming pools, gyms, volleyball courts, ping-pong tables

Mohammed ethical dilemma: make your decision

Have to do something -contact senior management, legal, the board either confidentially or anonymously -if changes are made, quit

Occupational Safety and Health Administration (OSHA)

enforces safe and healthy working conditions and makes regular surprise inspections to ensure businesses maintain safe working environments

caring culture

exhibits high concern for people but minimal concern for performance issues (ex: Ben & Jerry's)

whistle-blowing

exposing an employer's wrongdoing to outsiders such as the media or government regulatory agencies

mandated boundaries

externally imposed boundaries of conduct, such as laws, rules, regulations, and other requirements ex: antitrust and consumer protection laws create boundaries of propriety that must be respected by companies, failure to do so results in civil and criminal penalties

McDonald's Workers are striking for a $15 minimum wage

fast food law in California could pay workers a minimum of $22 an hour

social entrepreneurship

When an entrepreneur founds an organization with the purpose of creating social value ex: Toms provide one pair of shoes to children in need for each pair of shoes sold

civil law

defines the rights and duties of individuals and organizations (including businesses) -preponderance of the evidence (more likely than not) -damages -private (parties hire their own attorneys)

Associating with others who are unethical and who have the opportunity to act unethically can lead to a learning process known as

differential association

According to our authors, the primary objective of U.S. antitrust laws is to

e. distinguish competitive strategies that enhance consumer welfare from those that reduce it

The Sarbanes-Oxley Act is known for?

e. requiring greater transparency in financial reporting

voluntary responsibilities

improve quality of life and make communities the places where people want to do business, raise families, and enjoy life -makes it easier to attract and retain employees and customers

voluntary boundaries

include the beliefs, values, and voluntary contractual obligations of a business

Wells Fargo: Situation - The Aftermath

investigations continued by the FBI, SEC, US Department of Justice and more -following Senate Banking testimony, Wells Fargo's CEO and chairman John Stumpf "retires"

values-based ethics culture

relies upon an explicit mission statement that defines the core values of the firm and how customers and employees should be treated

Laws that encourage ethical conduct

-Federal Sentencing Guidelines for Organizations (FSGO) -SOX -Dodd-Frank Act

Yang ethical dilemma: Determine the facts

-Yang has interned with Jennings Department Store for 2 summers and he now is the section manager. -Yang is respected by his coworkers. -He starts to hear rumors about Zara, one of his highest performing managers. She has been rated higher than the other managers for the past two years and Yang is curious why she has not been promoted. -He talks to people and hears more positive comments about Zara. -When he speaks to Zara's retail clients, they again speak highly of her. -However, he discovered that some customers gave Zara cash for small items and told her to keep the change. Yang learned that these were not rung up. -There was not any excessive store shrinkage. -He next suspects that Zara used the cash as unrecorded payments to her retail staff. She used it in performance bonuses, overtime incentives, and off-hours work. -This is against company policy, but Yang does not have definite proof. He couldn't say she was stealing, but there were issues with recording the cash purchases. -No payroll taxes are being withheld, which means the IRS could get Jennings in trouble with a tax liability. -The ethics code guidelines are super vague, so Yang is not sure what to do.

key elements of an effective corporate Ethics help line

-confidential -anonymous -non-retaliatory -independent -user-friendly

Yang ethical dilemma: specify the alternatives/consequences

-do nothing (conditions persist) -confront Zara, tell her to stop (conditions cease, but tax liability persists?) -talk with management or audit committee (investigate/audit to determine if there was theft..) -go public or quit (kinda premature)

Implementation: Training

-must be effective -- must modify behavior -need top level commitment: set "Tone at the Top" -content: flow from risk assessment -trigger audience self-interest -entertaining -media -amount/duration/repetition

Yang ethical dilemma: identify major principles, rules, values

-payroll/tax law -Jenning's Code

compliance orientation

-requires employees to commit to specific required conduct -uses legal terms, statutes, and the like to teach employees the rules and penalties for noncompliance

values orientation

-strives to develop shared values -the foundation of an organizational ethical culture -gives employees a clearly defined basis on which to make decisions -employee diversity: requires explicit communication and training -increase employees' work ethics awareness, integrity, willingness to deliver information to supervisors, use of reporting mechanisms, and perception that ethical decisions are being made

Developing and Implementing a Code of Ethics

1. Consider areas of risk and state the values as well as conduct necessary to comply with laws and regulations. Values are an Important buffer In preventing serious misconduct. 2. Identify values that specifically address current ethical Issues. 3. Consider values that link the organization to a stakeholder orientation. Attempt to find overlaps In organizational and stakeholder values. 4. Make the code understandable by providing examples that reflect values. 5. Communicate the code frequently and In language that employees can understand. 6. Revise the code every year with Input from organizational members and stakeholders.

2 basic dimensions in an organization's culture:

1. concern for people - the organization's efforts to care for its employees' well-being 2. concern for performance - the organization's efforts to focus on output and employee productivity

reasons codes fail

Not promoted so employees don't read it. Not easily accessible. Written too legalistically. Written vaguely, providing no accurate direction. Top management never refers to the code in body or spirit.

Yang ethical dilemma: define the ethical issue

What should Yang do about: -Zara's improper recording of cash purchases -And the related payroll tax issues

ethics audit

a systematic evaluation of an organization's ethics program and performance to determine whether it is effective

Which of the following statements about corporate culture is/are true?

all of the above a. Corporate culture includes the behavioral patterns, concepts, values, ceremonies, and rituals that take place in an organization b. the culture of an organization may be explicitly stated or unspoken c. failure to monitor or manage an organization's culture may foster unethical behavior

What are some of the steps WorldCom took after its accounting scandal in order to implement an effective ethics & compliance program?

all of the above a. appointed new leadership, including new board members and a new CEO b. established an ethics office c. Published a code of conduct d. implemented an ethics helpline, with a no-retaliation policy e. investigated allegations of wrongdoing f. punished wrongdoers g. launched communication and training initiatives

You've just been named Chief Ethics Officer of Wayne Enterprises. Your duties probably include working with others to:

all of the above a. assess needs/risks an organization-wide ethics program must address b. develop/distribute the code of conduct c. conduct training programs d. establish/maintain an ethics helpline e. investigate allegations of wrongdoing

FSGO: A "carrot-and-stick" philosophy (an effective ethics program)

carrot= avoid penalties should a violation occur stick= possibility of being fined or put on probation if convicted of a crime

Value Statement

conceived by management, fully developed with input from all stakeholders

code of ethics

consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rules of conduct 6 desirable value for codes of ethics: -trustworthiness -respect -responsibility -fairness -caring -citizenship

You are the new Chief Ethics & Compliance Officer of Wayne Enterprises, a publicly traded U.S. company that does business in over forty countries around the world. Which of the following should concern you the most:

d. Senior management's commitment to the company's compliance and ethics program.

decentralized organization

decision making authority is delegated as far down the chain of command as possible

codes of conduct

formal statements that describe what an organization expects of its employees

Yang ethical dilemma: Make your decision

have to do something! -talk to your boss -they will probably suggest you talk with legal or HR -then an internal investigation will probably happen

WorldCom: Who is to blame?

Controller David Meyers CFO Scott Sullivan CEO Bernie Ebbers The accountants just followed along with Ebber's orders Ebbers (25 years in prison) Sullivan (5 years) Meyers (1 year) -lots of civil suits and settlements

According to our authors, most of the laws that govern business activities fall into 1 of 5 groups including:

(ALL OF THE ABOVE) a. Laws regulating competition b. laws protecting consumers c. laws promoting equity and safety d. protection of the natural environment e. incentives to encourage compliance programs

According to our authors, there are multiple dimensions of institutionalization of business ethics:

(ALL OF THE ABOVE) a. Voluntary practices that include the beliefs, values, and voluntary contractual obligations of a business b. Core practices that are documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations c. Mandated boundaries that are externally imposed levels of appropriate conduct, such as laws, rules, and regulations

McDonald's Obesity Suit

It was tossed because a U.S. judge said the complaint fails to prove chain is responsible for kids' weight gain

centralized organization

decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels

Mohammed ethical dilemma: Identify major principles, rules, values

-Common law fraud -company policies- integrity, confidentiality

1. How did Wells Fargo's focus on short-term gains violate the duties they owed to consumers, regulators, and employees?

-Controversial sales goals most likely encouraged employees to open accounts without customers' permission and knowledge -employees had continually engaged in fraudulent activities in order to satisfy sales goals and earn financial rewards under the bank's incentive-compensation program (they opened up fake bank accounts and falsified signatures) -had unrealistic sales goals and did not have systems in place to ensure employees were actually engaging in selling

WorldCom Scandal

-Dick Thornburgh was assigned to investigate WorldCom Phase 1: The Emergence of LDDS (Long Distance Discount Services) (1983) -1984: revenues total $1 million -1985: Mr. Ebbers is elected CEO -1989: merges and becomes public (revenues: $116 million) 2001: WorldCom -over 60 acquisitions since 1983 -full service, global provider -annual revenues of $35 billion Phase 5: "The Perfect Storm" (2000) -NASDAQ peaks at 5,049 in March, then steadily falls -WorldCom stock has fallen to $46 per share from $96.76 -board approves loans to Mr. Ebbers totaling over $75 million in order to prevent Ebbers from selling stock to pay outstanding debts 2002: Ebbers resigns as President, CEO, Director -(May)WorldCom terminates Arthur Andersen and retains KPMG as its independent auditor -(June) WorldCom says its books are off by $3.8 billion Report observations: -Bernie Ebbers dominated the course of the company's growth, as well as the decisions of the Board of Directors -put extraordinary pressure on itself to meet the expectations of securities analysts

Steven ethical dilemma: Specify the alternatives/consequences

-Do nothing (unsanitary conditions persist?) -Try to persuade coworkers to change (unlikely to work) -Search for allies, build a coalition (unlikely to work) -ethics helpline, boss, employer's code of conduct (conduct an internal investigation and fix, manager fixes problems? Culture changes?) -go public (social media) -quit (right away or after finding new job) (company doesn't fix problem) -try to get bonus policy changed?

2. Describe how the Wells Fargo scandal demonstrates that organizational leaders must not only establish goals but ensure that those goals are being acted upon appropriately.

-Organizational leaders established too aggressive quotas and didn't check in with their employees -didn't listen to employee complaints about the hard quotas -SOX Section 404 -Cultural Audit (assessment of an organization's values)

core practices

-Documented best practices, often encouraged by legal and regulatory forces as well as industry trade associations. -helps ensure compliance with legal requirements, industry self-regulation, and societal expectations -although these practices are not enforced, there are consequences for ignoring them that lead to misconduct ex: FSGO incentivize an organization to adopt a compliance and ethics program, starting with the governing authority (board of directors) being responsible for and assessing an organization's ethical and compliance activities

Laws Promoting Equity and Safety

-Equal Employment Opportunity Commission (EEOC) enforces Title VII of the Civil Rights Act of 1964 -Equal Pay Act. of 1963 mandates that women and men who do equal work must receive equal pay, wage differences are allowed only if they can be attributed to seniority, performance, or qualifications -Americans with Disabilities Act of 1990 prohibits discrimination against people with disabilities -Occupational Safety and Health Act of 1970- created the Occupational Safety and Health Administration (OSHA), which ensures businesses maintain safe working environments

3. Why are ethical values useless unless they are continually reinforced within the company?

-Management and the board demonstrate their commitment to integrity, core values, and ethics codes through their communications and actions -ethical leadership should start with tone at the top, followed by 'walking the talk' -importance of ethical leadership- "Leadership from the top is the single most important factor in creating and maintaining an ethical climate in any business -illicit activities directly conflicted with Wells Fargo's publicly expressed Vision and Values -bank's reputation is now in tatters

Mohammed Ethical Dilemma: Determine the facts

-Mohammed starts working in the HR department at KR Electronics. -His training is two days worth of learning about the company's ethical policies and values, so they are fresh in his mind. -His first task is to monitor the ethics helpline reports. -At the company, employees are evaluated for performance every six months and the lowest 15% are always fired within a year. -Supervisors are very verbally abusive to employees who are not performing well. -Mohammed's boss, Emma, shrugs this off and says that supervisors have to be tough in order to maintain the company's competitive advantage. -Sarah, a woman in the sales department, reports that salespeople are making exaggerated claims about their products and making guarantees that are not true. -The salespeople get large bonuses if they exceed their quotas, so they make promises that are not necessarily true. -Sarah asks Mohammed to make sure Rick, her manager, does not find out about her complaint. He passes the report to Emma, his supervisor. -Later, Sarah is fired for poor performance. Sarah's sales manager, Rick, was told about the report. -Emma sides with Rick, saying he would not fire someone to get back at them for reporting something. -Emma and Rick are good friends who go to lunch together often.

Ethical issues associated with McDonalds

-Ray Kroc's treatment of the McDonald brothers (he bought out the McDonald's brothers and didn't follow through on their handshake agreement) -Product safety (In 1992, a 79-year-old woman suffered third-degree burns when she accidentally spilled hot McDonalds coffee in her lap, had skin grafts and 2 years of medical treatment) -Nutrition (lack of nutrition when Super Size Me came out) -Wages (raising minimum wage to $15 an hour) -Ex-CEO sexting, lying, fraud (fired CEO Steve Easterbrook for sexting with a subordinate)

Sarbanes-Oxley 404

-Requires firms to adopt a set of values that forms a portion of the company's culture requires management to: -assess the effectiveness of the organization's internal controls -commission audits of internal controls by an external auditor in conjunction with the audit of its financial statements

Wells Fargo: Situation- scandal

-September 2016 -bank had opened up more than 2 million customer bank or credit card accounts without permission from the customers -$185 million fine -fraud is especially bad if you are in an industry that has trust at its core (ex: banking, audit) -introduced an incentive called "eight is great" (perverse incentives) -employees were encouraged to sell 8 accounts per customer -employees began breaking the rules to meet their targets

procompetitive legislation (goal: enhance competition)

-Sherman Antitrust Act, 1890: prohibits monopolies -Clayton Act, 1914: prohibits price discrimination, exclusive dealing, and other efforts to restrict competition -Federal Trade Commission Act, 1914: created the Federal Trade Commission (FTC) to help enforce antitrust laws -Robinson-Patman Act, 1936: bans price discrimination between retailers and wholesalers -Wheeler-Lea Act, 1938: prohibits unfair and deceptive acts regardless of whether competition is injured -Lanham Act, 1946: protects and regulates brand names, brand marks, trade names, and trademarks -Celler-Kefauver Act, 1950: prohibits one corporation from controlling another where the effect is to lessen competition -Consumer Goods Pricing Act, 1975: prohibits price maintenance agreements among manufacturers and resellers in interstate commerce -FTC Improvement Act, 1975: gives the FTC more power to prohibit unfair industry practices -Antitrust Improvements Act, 1976: strengthens earlier antitrust laws; gives Justice Department more investigative authority -Foreign Corrupt Practices Act, 1977: makes it illegal to pay foreign government officials to facilitate business or to use third parties such as agents and consultants to provide beiges to such officials -Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010: overhaul of the U.S. financial regulatory system

Steven Ethical Dilemma: Determine the facts

-Steven starts working part-time at a fast food restaurant chain. -He likes his coworkers, but quickly realizes that they do not respect the company or management. -They play loud music and do not clean up their work areas, which are against company policy. -His coworker Julie accidentally drops a meat patty on the floor and then puts it right back on the burger and wraps it up. Then, it is served to a customer. -Steven continues to see other employees dropping burgers on the floor, not washing their hands between handling meat and veggies, and not washing utensils between uses. -This is against company policy and there would be investigations by the health department if reported. -Julie says they use patties that fall on the floor because it is faster than cooking another patty. Also, she mentions that restaurants with the fastest service get a bonus from corporate headquarters, so the employees got extra money last year for working quickly. -The same unsanitary conditions continue. Steven notices the walk-in freezer was left open and he has to throw away all of the rotten meat.

Mohammed ethical dilemma: Define the ethical issue

-Whether it is ethical for supervisors to berate employees who do not perform highly? -Whether Emma breached confidentiality by telling Rick about Sarah's call to the ethics hotline? -Whether Rick retaliated against Sarah by firing her?

Steven ethical dilemma: Make your decision

-You have to act, raise your hand: Contact the Ethics Helpline to investigate and resolve Seek "employment" elsewhere if situation is not resolved Contact the local health inspector Why? -Can't let safety issues persist -serious consequences: health, life, and death

Notre Dame's Core Values

-accountability -teamwork -integrity -leadership in excellence -leadership in mission ethics: list of do's, behaviors we aspire to compliance: list of don'ts, rules we should not break

What are some of the things WorldCom executives could have done to prevent the accounting scandal?

-created an Ethics and Compliance Program following SOX -changed their tone at the top (new board members and senior management) -ethics office, code of conduct

Mohammed ethical dilemma: alternatives/consequences

-do nothing (conditions persist) -search for allies/build a coalition (effective here?) -ethics helpline, employer's code of conduct (launch investigation, management fixes problems) -go public, social media (culture changes, company fixes problem -quit (company doesn't fix problem?)

Federal False Claims Act

-employee provides information to the government - U.S. Department of Justice - about a company's wrongdoing -employee whistleblower is known as a qui tam relator -whistleblower can receive 10-30% of the recovered funds

More fun facts

-employs more than 210,000 people worldwide -has increased shareholder dividends for 25 consecutive years

WorldCom: Result

-exit bankruptcy and change name to MCI -Verizon acquires MCI for $6.6 billion

Laws Regulating Competition

-issues surrounding the impact of competition on businesses' social responsibility arise from the rivalry among businesses for customers and profits -primary objective of U.S. antitrust laws is to distinguish competitive strategies that enhance consumer welfare from those that reduce it -difficulty of this task lies in determining whether the intent of a company's pricing policy is to weaken or even destroy a competitor -size frequently gives some companies an advantage over others -large firms can often generate economies of scale (for example, by forcing their suppliers to lower their prices) that allow them to put smaller firms out of business

Wells Fargo: Background (proud history)

-over 150 years, first offices in San Francisco and Sacramento -emblematic of the American West -continued to grow, early mover in adopting many banking innovations: (credit cards, bundled checking) -successfully weathered the 2008-2009 Great Recession -in 2016, listed 25th among Fortune's Most Admired Companies, early emphasis on diversity

Sarbanes-Oxley Act (SOX)

-passed in 2002 in response to widespread accounting scandals (ex: Enron, Arthur Andersen, WorldCom) -creates greater federal oversight of corporate accounting practices -strengthens fraud penalties -requires corporations to establish codes of ethics for financial reporting -attempts to eliminate conflicts of interest by: prohibiting accounting firms from providing both auditing and consulting services to the same client limiting the length of time lead auditors can serve a particular client -Public Company Accounting Oversight Board (PCAOB): monitors/establishes standards and rules for auditors -Auditor and Analyst Independence: Section 201 prohibits registered public accounting firms from providing both non-audit and audit services to a public company -Whistleblower Protection: prohibits the employer from taking certain actions against employees, prompted a provision for stronger whistle-blower protection in the Dodd-Frank Act -Cost of compliance: with SOX can be extensive and includes internal costs, external costs, and auditor fees

McDonald's stats

-serve 70+ million customers daily -4000+ independent entrepreneurs -100+ countries -36,000+ restaurants

Key elements of an effective corporate Ethics Helpline

-user-friendly -confidential -anonymous -non-retaliatory -independent

How could corporate ethics have played a role in this failure?

Ebbers just believed in growth through acquisition, codes of conduct are a waste of time new regime has guiding principles

Pro-competitive Legislation

Laws have been passed to prevent the establishment of monopolies, inequitable pricing practices, and other practices that reduce or restrict competition among businesses

consumer protection law

Laws that protect consumers require businesses to provide accurate information about their goods and services and follow safety standards

McDonald's Mission

Our mission is to make delicious feel-good moments easy for everyone.

Steven Ethical Dilemma: Identify major principles, rules, values

Rules: Laws: local health code ethical policies telling employees how to act -professionalism? -cleanliness? -report wrongdoing? Company core values? -integrity -safety -respect for customers -duty to employer -loyalty to coworkers -golden rule -self-preservation

Which of the following includes a requirement that management assess the effectiveness of an organization's internal controls and commission audits of these controls by an external auditor in conjunction with the audit of its financial statements?

Sarbanes-Oxley Section 404

According to the Federal Sentencing Guidelines for Organizations, in order to have an effective compliance and ethics program an organization shall: (1) exercise due diligence to prevent and detect criminal conduct; and (2) otherwise promote an organizational culture that encourages ethical conduct and a commitment to compliance with the law.

True

Steven Ethical Dilemma: Define the ethical issue

What should Steven do about: 1. The unsanitary conditions at the restaurant? -Say something? -What? -To whom? 2. The culture at the restaurant?

Food and Drug Administration (FDA)

a federal agency of the United States Department of Health and Human Services that has stringent standards for approving drugs

Better Business Bureau (BBB)

a leading self-regulatory body that provides directions for managing customer disputes and reviews advertising cases

compliance culture

a legalistic approach to ethics, good in the short term, revolves around risk management

Which of the following is/are true statements about group norms?

a, b, c, and d only a. Group norms are standards of behavior groups expect of their members. b. Group norms have the power to force a strong degree of conformity among group members. c. Management must carefully monitor the norms of all the various groups within the organization, as well as the organization's corporate culture. d. Sanctions may be necessary to bring in line a group whose norms deviate sharply from the overall culture.

According to our authors, laws that govern equity and safety in the workplace include:

a-d only a. Title VII of the Civil Rights Act of 1964 b. Occupational Safety and Health Act c. Pregnancy Discrimination Act d. Americans with Disabilities Act

Several legislative or regulatory regimes provide or call for mechanisms for employees to raise unethical conduct, including violations of law

all of the above a. Federal Sentencing Guidelines for Organizations b. Sarbanes-Oxley c. Dodd-Frank

According to our authors, which of the following is/are true with respect to centralized and decentralized organizational structures?

all of the above a. In a centralized organization, decision-making authority is concentrated in the hands of top-level managers, and little authority is delegated to lower levels. b. In contrast, in a decentralized organization, decision-making authority is delegated as far down the chain of command as possible. c. Because of the strict formalization and implementation of ethics policies and procedures in centralized organizations, they tend to be more ethical in their practices than decentralized organizations, very generally speaking.

According to our authors, research indicates that:

all of the above a. The bottom 10% of employees take advantage of situations to further their own personal interests b. Another 40% of employees go along with the group on most matters, easily influenced by what the people around them are doing c. Yet another 40% always try to follow company policies and rules d. The top 10% maintain formal ethical standards that focus on rights, duties, and rules, and embrace values that assert certain inalienable rights

If the authors of our textbook were to answer Lucius Fox's question, they would suggest that as CEO of Wayne Enterprises he should want a corporate compliance and ethics program in order to, among other things:

all of the above a. To sensitize employees to potential legal/ethical issues in work environments b. Increase employees' ethical awareness, participation in ethical decision making and ethical behavior c. Foster ethical decision making, which requires terminating unethical employees and improving the firm's ethical standards d. Eliminate 'Bad Apples' (employees) e. Prevent an entire organization from becoming a 'Bad Barrel' (the more misconduct, the less trust employees feel toward the organization - and the greater the turnover

According to our authors, organizational cultures can be classified as:

all of the above a. apathetic b. caring c. exacting d. integrative

The Dodd-Frank Wall Street Reform and Consumer Protection Act is a federal statute that

all of the above a. was signed into law by President Obama on July 21, 2010 in order to further regulate our financial system b. among other things, was designed to increase accountability and transparency in the financial industry and protect consumers from deceptive financial practices c. established the Consumer Financial Protection Bureau (CFPB) to protect consumers from unsafe financial products d. gave federal regulators more power over large companies and financial institutions to prevent them from engaging in risky practices or becoming "too big to fail"

formal group

an assembly of individuals with an organized structure that is explicitly accepted by the group -weaknesses: lack of individual responsibility and Groupthink mentality

qui tam relator

an employee who provides information to the government about a company's wrongdoing under the Federal False Claims Act

consumer financial protection bureau (CFPB)

an independent agency within the Federal Reserve System that "regulates the offering and provision of consumer financial products or services under the Federal consumer financial laws"

How was WorldCom's fraud discovered?

b. It was uncovered by WorldCom's Internal Audit Department (began investigating in May 2002) -KPMG says they do not comply with GAAP -hired KPMG to reaudit their financial statements

integrative culture

combines a high concern for people and performance -when superiors recognize employees are more than interchangeable parts -employees have an ineffable quality that helps the firm meet its performance criteria (ex: Starbucks- always looks for ways to expand and improve performance, high concern for people through community causes, sustainability)

Because every organization has employees that will try to take advantage if there is an opportunity for misconduct, when developing a values-based ethical culture it must include a(n) (blank) element.

compliance

Public Company Accounting Oversight Board (PCAOB)

monitors accounting firms auditing public corporations and establishes standards and rules for auditors in accounting firms

Giving Voice to Values

most people want to do the right thing, they just don't know how, skill that requires work and practice -most of us have chosen to voice and act own our values on some occasions and our example is powerful to others

Most ethical issues relate to:

non financial such as marketing, human resource management, and customer relations

criminal law

not only prohibits specific actions - such as fraud, theft, or securities trading violations - but also imposes fines or imprisonment as punishment for breaking the law -beyond reasonable doubt (higher standard, burden) -jail or prison; fines -public (prosecutor represents community)

Consumer advocate Ralph Nader demonstrated the lack of credibility of corporations, initially by exposing their:

poor car safety

Title VII of the Civil Rights Act of 1964

prohibits discrimination in employment on the basis of race, sex, religion, color, or national origin

bureau of consumer protection

protects consumers against unfair, deceptive, or fraudulent practices

Laws Protecting Consumers

require businesses provide accurate information about products and services and follow safety standards Federal Trade Commission's (FTC) Bureau of Consumer Protection: -protects consumers against unfair, deceptive, or fraudulent practices -divided into 5 divisions, which monitors compliance with and investigates violations of laws Food & Drug Administration (FDA): -regulates food safety, human drugs, tobacco, dietary supplements, vaccines, vet drugs, medical devices, cosmetics, products that give off radiation, and biological products -has the power to authorize the marketing of these products as well as to ban those deemed unsafe for the public

Dodd-Frank Act

seeks to: -improve financial regulation -increase oversight of the industry -prevent the types of risk-taking, deceptive practices, and lack of oversight that led to the 2008-2009 financial crisis New Regulatory Bodies Created: Financial Stability Oversight Council (FSOC) Consumer Financial Protection Bureau (CFPB) Whistle-Blower Bounty Program: - whistle-blower provisions implemented in SOX were not enough to prevent the massive misconduct occurring at business institutions before the financial crisis -To encourage more employees to come forward when they witness misconduct, the Dodd-Frank law instituted a whistle-blower bounty program -Whistle-blowers who report financial fraud to the Securities and Exchange Commission and Commodities Exchange Commission are eligible to receive 10 to 30 percent of fines and settlements if their reports result in convictions of more than $1 million in penalties

McDonald's Values

serve, inclusion, integrity, community, family

corporate culture

shared values, norms, and artifacts that influence employees and determine behavior, including ways of solving problems that members of an organization share

exacting culture

shows little concern for people but a high concern for performance -focuses on the interests of the organization (ex: United Parcel Systems- employees are held to high standards to ensure maximum performance, consistency of delivery, and efficiency)

apathetic culture

shows minimal concern for either people or performance -individuals focus on their own self-interest (ex: Countrywide Financial- encourages unethical conduct in exchange for profits)

group norms

standards of behavior groups expect of their members -sometimes they conflict with the values and rules prescribed by the organization's culture

Foundation to McDonald's success

suppliers, franchises, company

differential association

the idea that people learn ethical or unethical behavior while interacting with others who are part of their role-sets or belong to other intimate personal groups -superiors in particular have a strong influence on the ethics of their subordinates -employees tend to go along with their superiors' moral judgments to demonstrate loyalty