MKTG 596 Exam 2

Ethics Issues Arise at Different Levels

Personal level - •Situations faced in our personal lives outside the context of our employment. Managerial and Organizational levels - •Workplace situations faced by managers and employees. Industry or profession level - •A manager or organization might experience business ethics issues at the industry or professional level. Societal and global levels - •Managers acting in concert through their companies and industries can bring about constructive changes.

Business Ethics & Technology

•We live in an age dominated by advancing technology. Each new generation experiences technological advances that were not seen by previous generations. •The new generation of young people is called the iGeneration.Technology is part of their DNA, and they have no "off-switch."•Technology is at the core of most businesses, but it is a two-edged sword. •Despite many positive advances, there are new problems and challenges.

Red Flags Signaling Board Problems

Ranking of Red Flags- 1. Company has to restate earnings. 2. Poor employee morale. 3. Adverse Sarbanes-Oxley 404 opinion 4. Poor customer satisfaction track record. 5. Management misses strategic performance goals. 6. Company is target of employee lawsuits. 7. Stock price declines. 8. Quarterly financial results miss analysts' expectations. 9. Low corporate governance quotient rating.

Roles of Four Major Groups

Shareholders - •Own stock in the firm, giving them ultimate control (the shareholder-primacy model). Board of Directors - •Govern and oversee management of the business. Managers - •The individuals hired by the Board to manage the business on a daily basis. Employees - •Hired to perform actual operational work.

CEO Pay-Firm Performance Relationship

Stock Options - •Allows the recipient to purchase stock in the future at the price it is today. Backdating - •Allows the recipient to purchase stock at yesterday's price, resulting in immediate wealth increase. Spring-loading - •Granting of a stock option at today's price, but with the inside knowledge that stock's value is improving. Bullet Dodging - •Delaying of a stock option grant until right after bad news.

Characteristics of Immoral Managers-

These Managers: •Intentionally do wrong •Are Self-centered and self-absorbed •Care only about self or organization's profits or success •Actively oppose what is right, fair, or just •Exhibit no concern for stakeholders •Are the "bad guys" An ethics course probably would not help them

Steps to Take for Board Repair

1.Spread risk oversight among multiple committees 2.Seek outside help in identifying potential risks 3.Deepen involvement in corporate strategy 4.Align board size and skill mix with strategy 5.Revamp executive compensation 6.Pick compensation committee members who will question the status quo 7.Use independent compensation consultants 8.Evaluate CEO on grooming potential successors 9.Know what matters to your investors

Content of Codes of Conduct

•Employment practices •Employee, client, and vendor information •Public information and communications •Conflicts of interest •Relationships with vendors •Environmental issues •Ethical management practices •Political involvement

Corporate Transparency

Corporate Transparency - •A quality, characteristic, or state in which activities, processes, practices, and decisions that take place in companies become open or visible to the outside world. •The degree to which an organization: •provides public access to information. •accepts responsibility for its actions. •makes decisions more openly. •establishes incentives for leaders to uphold standards.

Ethics and the Law

•The law and ethics can overlap in many respects. •The law is a reflection of what society thinks are minimal standards of conduct and behavior. •Research of illegal corporate behavior focuses on two questions: 1.What leads firms to behave illegally?2.What are the consequences of engaging in illegal behavior?

Insider Trading

•The practice of buying or selling a security by someone who has access to material information that is not available to the public. •"Material Information" is information that a reasonable investor might want to use, and is likely to affect the price of the firm's stock. •A "tipper" provides that information. •A "tippee" receives the information. •Executives and others who work for a firm may have inside information. •Also those in relationships that include a duty of confidentiality may have inside information, including spouses, parents, children, friends.

Business Ethics Scandals

•The public's interest in business ethics is at an all-time high, spurred by scandals. •The Enron scandal impacted business so greatly it is called "The Enron Effect." But more scandals followed: (Worldcom, Tyco, Arthur Andersen) •And then the Wall Street financial scandals: (AIG, Bear Stearns, Lehman Bros, Fannie Mae, Freddie Mac, and Bernie Madoff) •Business will never be the same.

The Public's Opinion of Business Ethics

•The public's view of business ethics has never been very high. •Anecdotal evidence suggests that many people see business ethics as an oxymoron, and think that there's only a fine line between a business executive and a crook. •A Gallup poll taken in December, 2015 revealed that only 17% of the public thought business executives had high or very high ethics. (Down from 21% in 2012.)

Technology and the Technological Environment

Technology - •The totality of the means employed to provide objects necessary for human sustenance and comfort. •A scientific method used to achieve a practical purpose. Technological environment - •The total set of technology-based advancements or progress taking place in society.

Ethics of Care asAlternative to Kohlberg

level 3: recognize their own needs and needs of others level 2: est connections and participate in social life level 1: self is sole object of concern

Transparency

- Exec compensation packages may include deferred pay, severance, pension benefits, and other perks over $10,000. - SEC Rules require disclosure of executive compensation. - Such disclosures may have a moderating impact prior to implementation.

Costs of Technology

Technology has some unanticipated side effects: •Environmental pollution •Depletion of natural resources •Technological unemployment •Creation of unsatisfying jobs

Types of Ethical Principles

Teleological theories - •Focuses on consequences or results of an action. Deontological theories - •Focuses on duties, without regard to consequences. Aretaic theories - •Focuses on the virtue of an action.

Ethical Tests Approach to Decision Making

Test of Common Sense Test of One's Best Self Test of Making Something Public Test of Ventilation Test of the Purified Idea Test of The Big Four (greed, speed, laziness, or haziness) Gag Test

Making Ethical Judgments

behavior or act that has been committed < compared with > prevailing norms of acceptability ^ value judgement and perception of the observer

two pillars of leadership

moral person and moral manager

Is It Society That Is Changing?

•History shows that a good number of what are now called unethical practices were at one time considered acceptable. •Or it may be that those practices never were acceptable to the public, but because they were not known, it seemed they were tolerated. •It is difficult to say whether business ethics are getting better, worse, or staying the same, but perceptions and expectations are significantly driving businesses' reputations.

Issues Surrounding Compensation

1) CEO Pay-firm performance relationship 2) Excessive CEO pay 3) Executive retirement plans/exit packages 4) Outside director compensation 5) Transparency, SEC rules

Habits of Moral Leaders

1. They have a passion to do right. 2. They are morally proactive. 3. They consider all stakeholders. 4. They have a strong ethical character. 5.They have an obsession with fairness. 6.They undertake principled decision- making. 7.They integrate ethics wisdom with management wisdom.

Ethics Check -

1.Is it legal? 2.Is it balanced? 3.How will it make me feel about myself?

Micro Level of Legitimacy

Adapt operational methods to perceived societal expectations. Attempt to change societal expectations or norms to conform to firm's practices. Seek to enhance its legitimacy by identifying itself with others that have a powerful legitimate base in society.

Why Managers and Employees Behave Ethically

Most of Us 1. To avoid some punishment 2. To receive some reward Many of Us 3. To be responsive to family, friends, or superiors 4. To be a good citizen Very Few Of Us 5. To do what is right, pursue some ideal

Business Ethics Training

Goals of training are to learn: 1. the fundamentals of business ethics 2. to solve ethical dilemmas 3. to identify causes of unethical behavior 4. about common managerial ethical issues 5. whistle-blowing criteria and risks 6. to develop a code of ethics and execute an internal ethical audit

Shareholder Activism

History of Shareholder activism Shareholder resolutions Shareholder lawsuits

Excessive CEO Pay

Ratio of CEO pay to that of average worker - •1950, 20 to 1 •2014, 216 to 1 Say on Pay •Evolved from concerns over excessive executive compensation. Clawback provisions •Compensation recovery mechanisms that enable a company to recoup CEO pay, typically in the event of a financial restatement or executive's misbehavior.

Effective Communication of Ethical Messages

Requires - •Written and verbal communication •Non-verbal communication •Candor - forthright, sincere, and honest •Fidelity - be faithful to detail, accurate, avoid deception or exaggeration•Confidentiality - exercise care in deciding what information to disclose to others. Trust can be shattered if confidences are breached.

Executive Retirement Plans and Exit Packages

Retirement packages - •have come under scrutiny. •$210 million to Robert Nardelli when he was ousted from Home Depot. •$125 million to outgoing Bank of America CEO Ken Lewis. •In contrast, many of today's workers do not have a retirement plan. •Those who do generally have a defined contribution plan, rather than a defined benefit plan.

The Conventional Approach to Business Ethics

The conventional approach to business ethics involves a comparison of a decision or practice to prevailing societal norms.

Sources of Ethical Norms

the individual: ones self interest and conscience - fellow worker - family - friends - the law - local community - regions of county - profession - employer - society at large - religious beliefs

Elements of Moral Judgment -

•Moral imagination •Moral identification and ordering •Moral evaluation •Tolerance of moral disagreement and ambiguity •Integration of managerial and moral competence •A sense of moral obligation

National Business Ethics Survey Findings

•Observed ethical misconduct at work has decreased slightly, from 45% to 41%. •Reporting bad behavior (whistle-blowing) is down slightly, from 65% to 63%. •Retaliation against those who report misconduct has stayed about the same at 21%. •Pressure to compromise is down to 9%.

Outside Director Compensation

•Paying board members is a recent idea. •Today, outside board members are paid. •From 2003-2015, their median pay rose about a third, from $175,800 to $258,000.

Corporate Governance -

•Refers to the method by which a firm is being governed, directed, administered, or controlled, and to the goals for which it is being governed. •Is concerned with the relative roles, rights, and accountability of such stakeholder groups as owners, boards of directors, managers, employees, and other stakeholders.

Examples of Immoral Management

•Stealing petty cash •Cheating on expense reports •Taking credit for another's accomplishments •Lying on time sheets •Coming into work hungover •Telling a demeaning joke •Taking office supplies for personal use •Showing preferential treatment toward certain employees •Rewarding employees who display wrong behaviors •Harassing a fellow employee

Compliance programs

•Structure •Oversight •Due Diligence •Communication •Monitoring •Promotion & Enforcemen •Response3

Board Member Liability

•The Business Judgment Rule protects board members if: •they act in good faith •making informed decisions •that reflect the company's best interests, and not their own interests. •Good Faith is central to the defense •The argument in favor of the Business Judgment Rule is that board members need to be free to take risks without fear of liability.

Characteristics of Moral Managers

These Managers: •Conform to the highest standards of ethical behavior or professional standards of conduct. •Ethical Leadership is commonplace. •Their goal is to succeed within the confines of sound ethical precepts. •Demonstrate high integrity in thinking, speaking and doing. •Follow both the letter and the spirit of the law. •Possess an acute moral sense and moral maturity. •Moral managers are the "good guys."

Ethics Quick Test -

1.Is the action legal?2.Does it comply with our values? 3.If you do it, will you feel bad? 4.How will it look in the newspaper? 5.If you know it's wrong, don't do it. 6.If you're not sure, ask. 7.Keep asking until you get an answer.

Behavioral Ethics—Toward a Deeper Understanding

Behavioral Ethics helps us to understand many of the behavioral processes that are taking place: •Bounded ethicality - occurs when managers and employees find that behaving ethically is difficult because of various organizational pressures. •Conformity bias - the tendency people have to take their cues for ethical behavior from their peers, rather than exercising their own, independent judgment. •Overconfidence bias -people may be more confident of their moral character than they have reason to be.

Characteristics of Technology

Benefits of Technology - •Increased production of goods and services •Reduced amount of labor needed to produce goods and services •Made labor easier and safer •Results in a higher standard of living

Invasion of Consumer Privacy via E-Commerce

Cookies - •Identification tags that websites drop on our personal-computer hard drives so they can recognize repeat visitors the next time we visit their Web sites. Spam - •Unsolicited commercial e-mail. It is sent through "open-relays" to millions of persons. Identity Theft - •Tampering with one's financial accounts.

Governance Impact of the Market for Corporate Control

Mergers and acquisitions - •Expectation is that the threat of a possible takeover will motivate top managers to pursue shareholder, rather than self-interest. •But many corporate CEOs and boards go to great lengths to protect themselves from takeovers, using: •poison pills (discourages a hostile takeover by making the firm difficult to take on) •golden parachutes (firm agrees to pay key officers in the event of a change in control of the corporation)

Sources Internal to the Organization

Norms prevalent in business include - •Respect for the authority structure •Loyalty to bosses and the organization •Conformity to principles and practices •Performance counts above all else •Results count above all else

Technology and Ethics

Our perspective is to raise ethical questions that may be related to business development, and the use of technology. Two Key Issues - •Technological determinism - •The idea that what can be developed will be developed. •Ethical lag - •Occurs when the speed of technological change far exceeds that of ethical development.

Two Hypotheses Regarding Moral Management Models

Population hypothesis •The distribution of the three models approximate a normal curve, with the amoral group occupying the large middle part of the curve and the moral and immoral categories occupying the tails. Individual hypothesis •Within the individual manager, these three models may operate at various times and under various circumstances.

Separation of Ownership from Control

precorporate period: owners (ownership) and Managers (control) corporate period: shareholders (ownership), Board of Directors, management (control)

CEO Pay Controversy

say on pay 1. Shareholder push to link pay to performance 2. Increasing use of "clawback" provisions where executives must return pay under some conditions

Factors Affecting the Morality of Managers and Employees

society moral -> business moral -> industry moral -> organization moral : individual: superiors, policies, and peers

The Corporation's Hierarchy of Authority

state charter > shareholders > Board of directors > Management > Employees

Making Moral Management Actionable -

•The characteristics of immoral, moral and amoral management provide benchmarks for managerial self-analysis, and help managers recognize the need to move from the immoral or amoral ethic to the moral ethic. •Amoral management is a morally vacuous condition that can easily be disguised as an innocent, practical, bottom-line philosophy. But it is the bane of the management profession. •Most managers are not "bad guys," but managerial decision-making cannot be ethically neutral. Both immoral and amoral management must be discarded and the process of developing moral judgment begun.

Improving the Organization's Ethical Culture

•The emphasis is on creating an ethical organizational culture or climate, one in which ethical behavior, values and policies are displayed, promoted, and rewarded. •Compliance vs. Ethics Orientation- 1.Ethics thinking is principles based; compliance thinking is rule-bound and legalistic. A compliance orientation can undermine ethical thinking. 2.Compliance can squeeze out ethics. 3.Managers many not consider tougher issues that a more ethics-focused approach might require.

Moral Decisions, Managers, and Organizations

•The goal of managers should be to create moral decisions, moral managers, and ultimately, moral organizations, while recognizing that what we frequently observe in business is the achievement of moral standing at only one of these levels. •The ideal is to create a moral organization that is fully populated by moral managers, making moral decisions (and practices, policies, and behaviors), but this is seldom achieved.

Top Management Leadership(Moral Management)

•This premise cannot be overstated: •The moral tone of an organization is set by top management. •In a poll of communication professionals, more than half believed that top management is an organization's conscience. •Managers and employees look to their bosses at the highest levels for their cues as to what practices and policies are acceptable. •Weak Ethical Leadership - led an employee to embezzle $20,000 over a 15 year period, explaining that she thought it was OK because her boss used firm employees for personal needs, took money from the firm's petty cash box, raided the soft drink machine, and used company stamps. Her boss said it was all true, and that she should not be dealt with too harshly. •Strong Ethical Leadership - When a batch of tubes in production failed a critical safety test, leaving in question the 10,000 already manufactured, the VP, without hesitation, said "scrap them." That act set the tone for the corporation for years, because everyone present knew of situations in which faulty products had been shipped under pressure of time and budget.

Best Practices for Improving an Organization's Ethics

•Three key elements that must exist if an ethical organizational culture is to be developed and sustained: 1. The continuous presence of ethical leadership reflected by the board of directors, senior executives and managers. 2. The existence of a set of core ethical values infused throughout the organization by way of policies, processes and practices; and 3. A formal ethics program which includes a code of ethics, ethics training, and an ethics officer.

Developing Moral Judgement Kohlberg's Levels of Moral Development

look at photo

Factors Affecting the Organization's Moral Climate

1.Behavior of superiors - the number one influence on moral climate 2.Behavior of one's peers - the second influence; people do pay attention to what their peers in the firm are doing 3.Industry or professional ethical practices - ranked in the upper half; these context factors are influential 4.Personal financial need - ranked last

Legitimacy and Corporate Governance: Legitimacy

A condition that prevails when there is a congruence between an organization's activities and society's expectations.

Legitimacy and Corporate Governance: Legitimation

A dynamic process by which a business seeks to perpetuate its acceptance.

Different Sources of a Person's Values

External sources: The web of values - religious values - philosophical values - culture values - legal values - professional values

The New World of Big Data

Big Data - •the tons of information that are out there and how businesses are striving to put it to work. •More information from more sources than ever before. •Businesses can access it as quickly as it's generated. •Advantages of Big Data accompanied by new issues: data security, privacy, cybercrime. Social Media - •Cutting edge of business communication based on technology •Has a dark side where social and ethical issues arise. •Unfair reviews and how they respond to them are a constant challenge •Places more emphasis on instantaneous rather than accurate information Surveillance - •Monitor customers' and employees' actions •For good, but possible abuses

E-Commerce as a Pervasive Technology

Electronic Commerce - •Also called e-commerce, e-business, or Web-based marketing. •The Internet has reshaped the way business is conducted. Online Scams - con artists are using the Internet to scam the unwary; including fake check scams, free gifts, phishing, Nigerian money offers, credit card fraud, travel scams, pyramid schemes, and investment opportunities. Ongoing Issues in E-Commerce Ethics - •Access •Intellectual property •Privacy and informed consent •Protection of children •Security of information •Trust

Business Initiatives with Consumer Privacy Protection

Ethical leadership Privacy policies Chief privacy officers Data security

Business Ethics: Some Basic Concepts

Ethics -are standards of conduct, which originate from some external group or source such as society, in general, or business, in particular. Morals -standards of conduct that originate within the individualBusiness Ethics - •Is concerned with rightness, wrongness, fairness or justice of actions, decisions, policies, and practices that take place within a business context or in the workplace. •Is the study of practices in organizations and is a quest to determine whether these practices are acceptable or not. Descriptive Ethics - •Involves describing, characterizing, and studying morality. •Focuses on what is occurring. Normative Ethics - •Focuses on what ought or should be occurring. •Demands a more meaningful moral anchor than just "everyone is doing it." Normative Ethics is our primary concern in this text.

Ethics Audits and Risk Assessments

Ethics Audits - •Intended to carefully review such ethics initiatives as ethics programs, codes of conduct, hotlines, and ethics training programs. Sustainability Audit - •Helps to identify sustainability issues within an organization. Fraud Risk Assessment - •Review processes that identify and monitor conditions that may pertain to the company's exposure to compliance/misconduct risk and to review methods for dealing with concerns.

Ethics and Compliance Programs and Officers

Ethics programs typically include: •Written standards of conduct •Ethics training •Mechanisms to seek ethics advice or information •Methods for reporting misconduct anonymously •Inclusion of ethical conduct in the evaluation of employee performance •Disciplinary measures for employees who violate ethical standards •A set a guiding values or principles

Macro Level of Legitimacy

Focus is on the corporate system, the totality of business enterprises. Business has a fragile mandate, subject to ratification. Business exists solely because society has given it that right.

Government's Involvement in Consumer Privacy Protection

Government is involved in consumer privacy, many think it is not doing enough.In 2012 the White House issued a proposed a Consumer Privacy Bill of Rights though it has not been adopted into law. 1.Individual Control 2.Transparency 3.Respect for Context 4.Security 5.Access and Accuracy 6.Focused Collection 7.Accountability A proposed Consumer Privacy Protection Act of 2015 was still in committee.

Three Models of Management Ethics

Immoral Management - •An approach devoid of ethical principles and an active opposition to what is ethical. •The operating strategy of immoral management is focused on exploiting opportunities for corporate or personal gain. Moral Management - •Conforms to highest standards of ethical behavior or professional standards of conduct. Amoral Management -•Different in nature from the others, it has two kinds: •Intentional: Does not consider ethical factors. •Unintentional: Casual or careless about ethical factors.

Characteristics of Amoral Managers-

Intentionally Amoral Managers •Don't think ethics and business should "mix."•Business and ethics exist in separate spheres. •A vanishing breed. Unintentionally Amoral Managers •Don't consider the ethical dimension of decision- making. •Don't "think ethically." •Have no "ethics buds." •Well intentioned, but morally casual or unconscious. •Ethical gears are in neutral.

Improving Corporate Governance

Legislative Efforts: •Sarbanes-Oxley Act of 2002 (SOX) - •Amends securities laws to protect investors in public companies •Enhances public disclosure to require reporting of off-balance sheet transactions, and personal loans to executives •Limits the nonauditing services an auditor can provide to a firm it audits •Makes it unlawful for accounting firms to provide services where conflicts of interest exist •CEOs and CFOs must certify financials, and are held responsible for financial representations Changes in boards of directors - •More Board diversity •A greater ratio of outside board members to inside board members •Use of board committees to: •Ensure that financials are not misleading •Ensure that internal controls are adequate •Follow-up allegations of irregularities •Ratify the selection of an external auditor

Questionable Businesses and Practices

Made possible by electronic commerce and the use of the Internet. Three business categories viewed as questionable: •Web-based pornography •Internet gambling •Web-based downloading of music, movies, books, and other copyrighted digital materia lIllegal Downloading - represents theft of intellectual property Monitoring Technology - raises questions when companies use technology to monitor consumers as they use a company's products.

Principles Approach to Ethics

Major principles of ethics - •Principle of Utilitarianism •Kant's Categorical Imperative •Principle of Rights •Principle of Justice •Ethical Due Process •Rawl's Principle of Justice •Ethics of care •Virtue ethics •Servant leadership •The Golden Rule

Personal and Organizational Ethics

Managers encounter day-to-day ethical challenges in such areas as: •conflicts of interest •sexual harassment •customer dealings •pressure to compromise on personal standards, and more Many managers have no training in ethics or ethical decision making. Ethics is vital to business success.

Problems in Corporate Governance

The Need for Board Independence: Outside directors - •are independent from the firm Inside directors - •have some tie to the firm Board independence from management is crucial to good governance.

The Role of Shareholders

The Shareholder Democracy Movement arises from the fact that although they are owners, shareholders may find that their votes are not counted. They seek: A Majority Vote •The requirement that board members be elected by a majority of votes cast, rather than by a plurality. Banning Classified or Staggered Boards •Electing members in staggered terms means that it might take 3 or more years to replace a board. Proxy Access •Would provide shareholders with the opportunity to propose nominees for the board of directors.

Setting Realistic Objectives -

•Managers must be keenly sensitive to the possibility of unintentionally creating situations in which others may perceive a need or incentive to cut corners or do the wrong thing. •Unrealistic expectations are the primary driver of employees perceiving excessive pressure to achieve goals. •Example: A marketing manager set a sales goal of a 20% increase for the next year when a 10% increase was all that could be realistically and honestly expected, even with outstanding performance. A subordinate might believe he or she should go to any lengths to achieve the 20% goal.

Investor Relations and Shareholder Engagement

•A majority of corporate boards now communicate with their major investors •Public corporations have obligations to current and potential shareholders, including Full disclosure (Transparency), and the duty to provide information that might affect investment decisions. •Management is also responsible for communicating with shareholders. •CEO Warren Buffett calls his annual shareholder meeting a "Woodstock weekend for capitalists."

The Danger of Ethical Relativism

•A serious danger of using the conventional approach to business ethics is: Ethical Relativism - •One picks and chooses which source of norms one wishes to use based on what will justify current actions or maximize freedom.

Codes of Ethics or Conduct

•A way of establishing standards of behavior and communicating them to managers and employees. •The single most important element of an ethics and compliance program. •Virtually all major corporations have codes of conduct today. •Many have worldwide codes or standards. •Some codes of conduct are designed around stakeholders, others on conduct.

Ethics "Hotlines" and Whistle-Blowing Mechanisms

•An effective ethical culture is contingent on employees having (with support of top management) a mechanism for reporting violations. •Hotlines are the most common way to report corporate fraud. •Can be telephone, web, or email-based.

The Board's Relationship with CEO

•Boards are responsible for monitoring CEO performance and dismissing poorly performing CEO •Formerly, CEOs were protected; no more; firings of CEOs are up significantly •If CEO also serves as Chairman of the Board, this duality can offer some protection •Activists have moved to separate CEO and Board functions

Challenges of Technology

•Data amnesia - forgetfulness from outsourcing from brains to digital devices. •Google Effect - knowing that information is easily accessible on the Internet, we are less likely to remember it. •Communications technology affects our brains, nervous systems, social abilities, relationships, mental health, physical health, and family structures.

Managing Organizational Ethics

•Ethical decision making is at the heart of business ethics. •One must sharpen one's decision-making skills to avoid amoral thinking, and achieve moral management. •A manager must see the organization's ethical climate as part of its corporate culture. •An ethical climate is shaped through actions taken, policies established, and examples set.

Positive Ethical Behaviorsof Moral Leaders -

•Giving proper credit where it is due •Being straightforward and honest with other employees •Treating all employees equally •Being a responsible steward of company assets •Resisting pressure to act unethically •Recognizing and rewarding ethical behavior of others •Talking about the importance of ethics and compliance on a regular basis

Compliance Officers

•Head up compliance programs •Implement the array of ethics and compliance initiatives •Many hired after Sarbanes-Oxley •Started with compliance issues, ethics became focal point later on

Behavioral Ethics—Striving Towards a Deeper Understanding

•Ill-conceived goals - poorly set goals that encourage negative behaviors. •Motivated blindness - overlooking the questionable actions of others when it is in one's own best interest. •Indirect blindness - one holds others less accountable for unethical behaviors when they are carried out through third parties. •The slippery slope - causes people not to notice others' unethical behavior when it gradually occurs in small increments. •Overcoming values - the act of letting questionable behaviors pass if the outcome is good. This can occur when managers put more emphasis on results rather than on HOW the results are achieved.

Are the Media Reporting Business Ethics More Vigorously?

•It is sometimes difficult to tell whether business ethics have really deteriorated or whether the media is doing a more thorough job of reporting ethics violations. •There is no doubt that news media outlets are reporting ethical problems more frequently and fervently. •The media had a field day with the Bernie Madoff Ponzi scheme, which defrauded thousands of investors of $50 billion. •Investigate reporting on ethics has been shown on 60 Minutes, 20/20, Dateline NBC, Rock Centerand Frontline.

Board of Director Leadership and Oversight

•Leadership and oversight of ethical initiatives by boards has not been a given.The Sarbanes-Oxley Act •Companies are required to protect whistle-blowers without fear of retaliation. •It is a crime to alter, destroy, conceal, cover up, or falsify documents to prevent their use in a federal government lawsuit.

Disciplining Violators of Ethics Standards

•Management must discipline violators of accepted ethical norms and standards. •One reason many question the sincerity of business with regard to codes of conduct is that many business are unwilling to discipline violators, implicitly approving their behavior. •Before disciplining anyone, the firm needs to have communicated its ethics standards clearly and convincingly.

Behavioral Ethics—Striving Towards a Deeper Understanding

•Self-serving bias - people may process information in a way that supports their preexisting beliefs & self-interest. •Framing - ethical judgments are affected by how an issue is posed; if posed as an "ethical" issue, they make more ethical decisions. •Incrementalism - a predisposition toward the "slippery slope." •Role morality - a tendency to use different ethical standards for different roles in life. •Moral equilibrium - a tendency for people to keep an ethical scoreboard in their heads, and use this information when making future decisions, balancing decisions, and avoiding a moral "surplus."

An Alternative Model ofCorporate Governance

•The Anglo-American model of corporate governance is one of shareholder primacy •A emerging perspective is a director-primacymodel of corporate governance •A director-primacy model is based on the concept of a corporation that is not owned, but is an independent legal entity that owns itself. •Boards are mediating hierarchs, responsible for balancing competing interests of stakeholders •Boards have a duty to shareholders, but boards are the ultimate decision-makers, whose duty is to the corporation

The Role of the SEC

•The SEC is responsible for protecting investor interests. •Critics argue that the SEC is more focused on the needs of businesses than on that of investors. •The SEC failed to stop the Bernard Madoff Ponzi scheme before investors lost billions, although they had been warned of the scheme a decade earlier.

Managerial Ethics and Ethical Principles

•Three major approaches to ethical decision making - 1.Conventional Approach - •Discussed in chapter 7. Principles Approach - •Managers desire to make decisions based on a more solid foundation than is provided by the conventional approach to ethics. •A principle of business ethics is an ethical concept, guideline, or rule that assists you in taking the ethical course. 3.Ethical Tests Approach - •Discussed later in this chapter.