Ethics Exam 3

•What are the components of Deloitte's ethics program?

1. leader 2. policies and procedures 3. ethics and compliance training programs 4. integrity helpline

•When were mortgage bonds available to trade? How did they become riskier?

1977? institutions began running out of mortgages to put them in and started putting them with riskier mortgages (private)

•What are three ways to create shared value?

4. Increase revenues, new products, cluster development (dannon yogurt-train new farmers, help support them)

•What's a NINJA loan?

A NINJA loan is a slang term for a loan extended to a borrower with "no income, no job and no assets

•What is a CDO?

CDO: Collateralized Debt Obligation When mortgage bonds don't sell, pool them with others that don't sell Repackage as "diversified"

•What is the Prisoner's Dilemma and why is it a challenge to the view that laissez faire capitalism advances the general good through efficiency?

two people might not cooperate even if it is advantageous to do so; minimize possible maximum losses and maximize possible minimum gains

What is the difference between creating shared value and corporate social responsibility?

win win = shared value; corporate social responsibility= donate to boys and girls (give back to community)... shows up in the company as a cost (less stable)

•Describe what happened in the Wells Fargo Fake Accounts Scandal. How did this happen?

with thousands of employees engaged in secretly creating new bank and credit-card accounts for customers without their knowledge, resulting in overdraft and other fees. So far, 5,300 Wells Fargo employees have been fired over the issue. pressure, just business, separate from outside life,

•What is a stakeholder, and why does Freeman believe management has fiduciary duties to stakeholders other than shareholders?

those groups who are vital to the survival and success of the corporation "Capitalism is on this view a system of social cooperation and collaboration, rather than primarily a system of competition"

•What are the pro's and con's of banking regulations?

trust vs lots of regulations

•What is "shared value?"

policies and practices enhance the competitiveness of a company while simultaneously advancing the economic and social conditions in the communities in which it operates

•What are the only constraints on management's duty to shareholders?

-law and ethical custom (law > promises) -'rules of the games' (selfish benefits if free)

•What is a subprime mortgage?

A subprime mortgage is a type of mortgage that is normally made out to borrowers with lower credit ratings

•What conflicts of interest or funding challenges do regulatory agencies face?

Agencies: Private versus Federal? - Conflict of Interest vs - Budget Cuts (no $ for investigation) Misrepresentation of Bond Values Lending Practices - NINJA practices - Targeted populations

•What legislation emerged in the aftermath of the housing crisis? What was its intent?

Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010 Addressed issues related to financial crisis and recession Intended to make financial services industry more ethical and responsible Rules to improve accountability, transparency Protect consumers

•What was the nature and origin of IKEA's child labor scandal? Why did IKEA's business model set it up for scandals like that and the formaldehyde scandal? What was IKEA's solution?

IKEA created a model of not owning its means of production, investing, training, contracting, and developing long term relationships with suppliers. Amending contracts to say that use of child labor would result in immediate contract termination.

What are the three steps of a stakeholder analysis?

Identify Stakeholders power interest grids understand key stakeholders

•What are the three main problems with the Shareholder View of Corporate Responsibility, according to Freeman?

It is resistant to change. It is inconsistent with the law It is inconsistent with basic ethics

•How did a few industry outsiders get wind of the underlying frailty of mortgage bonds and the housing market prior to the 2008 crash?

Noticed indicators similar to 1930's housing market collapse Identified and researched every mortgage in the bonds Found late payments, poor credit, unemployed

•What are the Responsibility Principle, the Separation Fallacy, and the Open Question Argument, and how do they factor into the argument for Stakeholder Theory?

Responsibility principle: Most people, most of the time, want to, actually do, and should accept responsibility for the effects of their actions on others. Seperation Fallacy: Ethics is irrelevant to business decisions. Open Question Argument: Ask questions about the situation Factor In: Ethics is about understanding and solving our differences "so that we can all flourish without resorting to coercion and violence Responsibility and separation do not work together

•What's the difference between shareholder capitalism and stakeholder capitalism?

Shareholder value is oriented towards an average diversified shareholder who wants maximum profit from his investment in shares. The fundamental idea of the stakeholder approach is to consider interests of corporate groups other than just those of shareholders.

•What is Freeman's account of the nature and origin of managerial capitalism?

Thus, managerialism, hierarchy, stability, and predictability all evolved together... to form the most powerful economic system in the history of humanity."

•Why do millennials prefer TOMS to Nike?

Toms has a better message, helping others (1 free pair for every pair sold)

•How do stakeholder concerns affect corporate business models at IKEA, Unilever, Toms, Nike, and Patagonia?

affect their practices as well as their sales

•What is, and what is the purpose of, a power-interest grid? What is a key stakeholder?

high power/low interest (govt) - (keep satisfied) key stakeholder: Shareholders are always a key stakeholder group (manage closely) low power/low interest (monitor) low power/high interest(keep informed) plot stakeholders in regards to their position within a project based on their power and interest

•What was the point of the EpiPen (Mylan) and Daraprim (Turing Pharmaceuticals) examples?

hike up prices for something that thousands need, bought company for cheap and spiked up prices

•How do Tesla, Walmart, Unilever, and Danone create shared value?

make business decisions that help benefit others (cutting costs and staying true to values) Consumers interested in energy reduction, cold water laundry detergent (Unilever)

•What is "Return on Ethics (ROE)?"

return on ethics. This ROE is really more mindset than measure, an approach to encouraging the highest standard of business behavior. It's based on the premise that ethical decision-making can lead to strong performance and competitive advantage, while unethical decision-making leads to very different outcomes.

•What is the Tragedy of the Commons and why is it a challenge to the view that laissez faire capitalism advances the general good through efficiency?

shared-resource system where individual users acting independently according to their own self-interest behave contrary to the common good of all users by depleting or spoiling that resource through their collective action;

•What is a fiduciary duty, and why does Friedman believe business management has fiduciary duties only to shareholders?

somebody obligated to work for the benefit of their clients; corps hire management to make more $, taking the job is a promise to do so

•How does Patagonia address stakeholders' interests and needs? Nike?

sustainable message that people can get behind Nike is transparent with CSR report