MKTG Ethics & CSR Final
Exacting Culture
little concern for people but high concern for performance (United Parcel Systems)
Social Responsibility
maximizing positive and minimizing negative impacts on stakeholders
misconduct
trust employees feel toward the organization—and the greater the turnover
Crisis
"an unpredictable event that threatens important expectancies of stakeholders and can seriously impact an organization's performance and generate negative outcomes." - A crisis interrupts the normal flow of business and requires immediate attention from the management, because it might cause major damage to the organization. - A crisis can create threats to public safety, financial loss and reputation loss, and these threats are interrelated.
U.S. Environmental Regulations
- Clean Air Act - Endangered Species Act - Toxic Substances Control Act - Clean Water Act - Pollution Prevention Act - Food Quality Protection Act - Energy Policy Act
Crisis mitigation
- Crisis Mitigation refers to the process or result of making a crisis less severe, less dangerous, less painful, less harsh, less costly, or less damaging. - Mitigation may take the form of physical changes, adjustments in processes and/or procedures, eliminating potential hazards, or creating redundancies.
Centralized organization
- Decision-making authority is concentrated in the top-level management - Codes of ethics specify the techniques used for decision making by management - Distance between managers & decision-makers may lead to unethical acts
Decentralized organization
- Decision-making authority is delegated down the chain of command - Has fewer internal controls & uses shared values for their ethical standards - Ambiguity in following a rule versus the spirit of rules creates ethical challenges
Firm's culture forms the basis of ethical decision making
- Management's sense of an organization's culture might differ from that of the firm's employees - Higher-level managers need to monitor the organization's values, traditions, & beliefs to ensure they represent the desired culture - Rewards & punishments imposed by an organization should reflect the culture the top management wishes to create
Improving Organizational Risk Management
- Review the nature & scope of the risk management function. - Develop a risk & compliance plan at the beginning of major projects.Improve performance by applying risk measures & dashboards. - Maintain a recovery plan for an ethical or compliance crisis. - Communicate risk frameworks & the effectiveness of internal & external controls.
Power Bases
- Reward power-incent - Coercive power-punish - Legitimate power position - Expert power knowledge - Referent power affiliation
Legal protection for whistle-blowers exists to encourage reporting of misconduct
- Sarbanes-Oxley Act & the Federal Sentencing Guidelines for Organizations (FSGO) - Criminal Fraud Accountability Act (CCFA) - Dodd-Frank Act
Framework for an Ethics Audit
- Secure the commitment of top managers & board of directors. - Establish a committee to oversee the ethics audit. - Define the scope of the audit process, including subject matter areas important to the ethics audit. - Review the organization's mission, policies, goals, & objectives and define its ethical priorities. - Collect and analyze relevant information in each designated subject matter area. - Have the results verified by an independent agent. - Report the findings to the audit committee &, if approved, to managers & stakeholders.
Snowflake...
- a cloud data warehousing firm that has the backing of Salesforce and Berkshire Hathaway - "Data is the coal of the digital economy," Deutsche Bank analyst Patrick Colvile - Snowflake competes with Amazon's AWS, Microsoft's Azure and the Google Cloud platforms - "With Snowflake's unique and forward-thinking data warehouse solution, Capital One and other large enterprises are equipped to deliver even better user experiences for customers." VP, Capital One
Social Audit
- assessing & reporting a business's performance in fulfilling the economic, legal, ethical, & philanthropic responsibilities expected of it by its stakeholders - employment, community economic development, volunteerism & environmental impact
Medium commitment strategic approaches to environmental issues
- attempts to comply with environmental laws - deals with issues that could cause public relations problems - views environmental issues from a tactical, not a strategic, perspective - views environment as more of a threat than an opportunity
The Need for Organizational Ethics Programs
- companies are vulnerable to ethical problems & legal violations if their employees do not know how to make the right decisions - uncertainty & pressure are a poor combination - develop a program by establishing, communicating, & monitoring the ethical value/legal requirements for corporate culture, industry, & country - remember what Barney Rosenberg said about the complexities of international business in MNCs
Output controls
- comparing standards with actual behavior - ethics audit, for example
Low commitment strategic approaches to environmental issues
- deals only with existing problems - makes only limited plans for anticipated problems - fails to consider stakeholder environmental issues - operates without concern for long term environmental impact
Ethics Programs
- designed to encourage ethical decision making in business - must be well-designed to prevent major misconduct - requires oversight by Ethics Officer, General Counsel, or VP HR - only as good as the integrity of the implementation & functioning of checks & balance to provide the proper level of oversight - keys to preventing or enabling misconduct
Benefits of Ethics Auditing
- detects misconduct (before crisis mode) - provides understanding of the ethical culture - improves organizational learning, & facilitates communication & working relationships - improves relationships w/ stakeholders - assesses the effectiveness of programs & policies, which improves operating efficiencies & reduces costs - audit information is used to ensure maximum effectiveness with available resources - identifies potential risks & liabilities
most common ethics audits scope
- examine conflicts of interest - access to company information - bidding and award practices - giving and receiving gifts - employee discrimination issues
Goldman Sachs...
- first said it was 'rogue employees' - repeated failure of Goldman's compliance & internal control function - did not conduct proper investigations when bond offerings were being underwritten by Goldman - in 2009, the bank vetted Mr. Low & refused to onboard him as a client - Mr. Low was engaging in money laundering & FCPA violations - compliance officers & other institutional checks had little power to over ride high profile bankers on $lucrative deals - has agreed to overhaul its ethics & compliance program, as well as oversight
High commitment strategic approaches to environmental issues
- has strategic programs to address environmental issues - views environment as an opportunity to advance the business strategy - consults with stakeholders about their environmental concerns - conducts an environmental audit to assess performance and adopts international standards
Systems to Monitor & Enforce Ethical Standards
- how employees handle ethically charged situations - role-playing exercises - discussion regarding ethical issues & dilemmas - questionnaires - internal systems that allow employees to report misconduct - consultants - case-management services & software
The Need for Organizational Ethics Programs
- impossible to know and understand all laws - sensitizes employees to potential legal/ethical issues in work environments - increases employees' ethical awareness, participation in ethical decision making, & ethical behavior - fosters ethical decision making requires terminating unethical employees & improving the firm's ethical standards
process controls
- management's commitment to the ethics program & the methods or system for ethics evaluation - daily coaching of managers & employee reminders
Best Buy's Code of Ethics
- new in the Fall 2019 - foundational doc for all employees, vendors, customers, & shareholders - what's new...real life examples, interactive & engaging...go directly to areas of interest - benchmarked against other 'best in class' codes - all types of organizations & subject matter experts - "Purpose & Guiding Behaviors"
FSGO
- reduces or eliminates fines for firms with extensive compliance programs that make due diligence attempts to abide by legal & ethical standards - programs developed in the absence of misconduct will be more effective than one imposed as a reaction to scandal or prosecution
Reasons Social Responsibility is a Corporate Ethics Issue
- socially responsible activities can create competitive advantages - both positive & negative information about products and organizations is more available - organizations can use their products & brand identity to create social value, quality, & consumer loyalty - companies use their sustainable & socially responsible decisions to differentiate their firms & promote their products
Ethics Audit
- systematic evaluation of an organization's ethics program & performance to determine effectiveness - opportunity to measure conformity to the firm's desired ethical standards
Ethics audits are time-consuming & based on checklists
- team that typically consists of a HR professional, an internal auditor, legal managers & an ethics & compliance manager - team visits an area of the organization to conduct research in response to a specific incident or as part of an ongoing auditing cycle
VW Tries to Change its Culture
- vehicle emissions scandal involved about 11 million diesel vehicles (cost $37.56 billion)• - VW had a culture of "rule-breaking & deception" - just completed its 3 year corporate compliance monitoring (independent & required by U.S.) - added whistleblowing program & network of compliance officers in each business sector - >transparency, more open discussion, > accountability & > tolerance of errors
Alternative Energy Sources
-Wind Power - Geothermal Power - Solar Power - Nuclear Power - Biofuels - Hydropower
Types of Organizational Cultures
1. Apathetic 2. Caring 3. Exacting 4. Integrative
Measurement Tools
> Balanced Scorecard - uses elements that contribute to organizational performance &success (financial, customer, market, &internal processes) > Triple Bottom Line - takes into account:(social, environmental, financial impacts, ...of decisions made within an organization) > Environmental, Social & Governance (ESG)
Goals of the Environmental Protection Agency
1. Reduce air pollution 2. Improve access to clean and safe water 3. Promote materials management, waste management, and clean sites 4. Enhance joint preparedness for environmental response 5. Enhance compliance assurance and environmental stewardship
Code of Conduct Types
1. code of ethics 2. code of conduct 3. statement of values
Chandler's Crisis Lifecycle Model
1. warning 2. risk assessment 3. response 4. management 5. resolution 6. recovery
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.
Minimum Requirements for Ethics and Compliance Programs
1.Establish standards and procedures to prevent and detect criminal conduct. 2.Ensure the firm's board, top management, and high-level personnel exercise reasonable oversight of those standards and procedures. 3.Make reasonable efforts to keep individuals whom organizations knew or should have known to have engaged in illegal activities out of key positions. 4.Communicate standards and procedures by training directors, employees, and appropriate agents. 5.Monitor and audit the program to detect criminal conduct, evaluate the program periodically, and have a system for reporting suspected violations. 6.Promote and consistently enforce the program through appropriate incentives and appropriate discipline. 7.After criminal conduct is detected, take reasonable steps to respond appropriately and prevent further similar criminal conduct, including necessary modifications to the ethics and compliance program.
Benefits of Having an Ethics Code
1.Guide employees in situations where the ethical course of action is not immediately obvious. 2.Help the company reinforce—and acquaint new employees with—its culture and values. A code can help create a climate of integrity and excellence. 3.Help the company communicate its expectations for its staff to suppliers, vendors, and customers. 4.Minimize subjective and inconsistent management standards. 5.Help a company remain in compliance with complex government regulations. 6.Build public trust and enhance business reputations. 7.Offer protection in preempting or defending against lawsuits. 8.Enhance morale, employee pride, loyalty, and the recruitment of outstanding employees. 9.Promote constructive social change by raising awareness of the community's needs and encouraging employees and other stakeholders to help. 10.Promote market efficiency, especially in areas where laws are weak or inefficient, by rewarding the best and most ethical producers of goods and services.
Key Goals of Successful Ethics Training
1.Identify key risk areas employees will face. 2.Provide experience in dealing with hypothetical or disguised ethical issues within the industry through mini-cases, online challenges, DVDs, or other experiential learning opportunities. 3.Let employees know wrongdoing will never be supported in the organization and employee evaluations will take their conduct in this area into consideration 4.Let employees know they are individually accountable for their behavior. 5.Align employee conduct with organizational reputation & branding. 6.Provide ongoing feedback to employees about how they are handling ethical issues. 7.Allow a mechanism for employees to voice their concern that is anonymous, but provides answers to key questions (24-hour hotlines). 8.Provide a hierarchy of leadership for employees to contact when they are faced with an ethical dilemma they do not know how to resolve.
Top Challenges for CEOs
1.Political uncertainty 2.Increased regulation 3.Technological change 4.Cybersecurity 5.Management diversity 6.Shareholder activism 7.Competition 8.Conflict management 9.Reputation management 10.Finding capital
Ethics Officers Responsibilities
1.assess needs/risks an organization-wide ethics program must address 2.develop/distribute the code of conduct or ethics 3.conduct training programs 4.establish/maintain confidential services to answer employees' ethical questions 5.monitor effectiveness & make improvements as necessary 6.make sure company is in compliance 7.monitor/audit ethical conduct 8.take action on code violations 9.review/update code
Implementing an Ethics Program: Shared Values is the Glue of Successful Management
1.check the content of the company's code of ethics 2.what is the frequency of communication on the ethics code & program 3.quality/impact of communication 4.senior management's ability to successfully incorporate ethics into the organization 5.local management's ability to do the same
Common Mistakes in Designing and Implementing an Ethics Program
1.failure to understand & appreciate goals 2.setting unrealistic & unmeasurable program objectives 3.senior management's failure to take ownership of the ethics program 4.developing program materials that do not address the needs of the average employee 5.transferring an "American" program to a firm's international operations 6.designing an ethics program that is little more than a series of lectures.
Goldman Sachs
> $2.9 billion settlement w/ U.S. authorities - $3.9 billion w/ Malaysian government > Goldman execs bribed to get the business ($1.6 billion)•overlooked 'red flags' > oversight of Malaysian Fund for economic development - fund overseers embezzelled $4 billion - jet, yachts, Beverly Hills & NY real estate, Van Goghs, Monets, and a acrylic clear grand piano given to a super model > largest penalty in foreign bribery case
Global Environmental Issues
> Atmospheric - air pollution - acid rain -global warming > Land - land pollution -waste management - deforestation - urban sprawl - biodiversity - genetically modified organisms
Implementing Ethics Programs
> Success of an ethics program depends on: - content of the company's code of ethics - frequency &quality of communication regarding the ethics code & program - quality of communication - senior & local management's ability to successfully incorporate ethics into the organization - creating a culture of ethics & compliance
> controls 90% of all search traffic globally > has effectively developed 'tying agreements' that allow for the search engine to be embedded in electronics -phones, iPads, computers, etc > relationships & financial support of companies like Apple have effective squeezed out others > stifled competition, limiting innovation & allowing for higher ad costs due to no competition
Responsibility of the Corporation to Stakeholders
> corporations are viewed as moral agents that are accountable to stakeholders > coverage of specific issues in the media about a firm adds to its reputation as a moral agent -or detracts as in the case of Goldman Sachs > corporation is created in society to perform specific social functions -accountable to the society for its actions
Strategic Importance of Ethics Auditing
> ethics audit is not a control process to be used during a crisis - should be conducted regularly > may be comprehensive or targeted to key risks >provides an assessment of a company's overall ethical performance. -audit reports identify &define a company's impact &facilitate important improvements > helps companies boost profits &reduce risks > its existence & transparency assures investors
Ethical Disasters
> follow recognizable phases of escalation - ethics issue recognition (?)•decision to act unethically - organization's discovery of & response to the act > process of ethics disaster-recovery planning - assess an organization's values &develop an ethics program - perform an ethics audit &develop contingency plans - have crisis management plan 'on the shelf' (anticipate vulnerabilities: climate, health, economic, natural disaster, etc.)
What can/should employers do?
> make flexible work the norm (cultural) - give all a manageable work/life balance > lead w/ empathy & trust - open dialogue, more 'check-ins' - 44% of women want more regular leader check-ins > promote networking & mentorship - 46% of women-more likely to stay w/ their company > more learning & development opportunities > ensure that rewards, succession & promotion processes address 'unconscious bias' - look at the current processes & strip issues associated w/ remote work & caregiver responsibilities, etc. > make diversity, respect & inclusion non- negotiables - women leave because of a lack of diversity, poor or no role models & a poor organizational culture - non-inclusive behaviors such as microaggressions and exclusion
VW Tries to Change its Culture
> original whistleblower program was only in German & English > new program in 19 languages enabling over 90% of VW employees to report int heir native language > attempting to build trust: - > transparency, > training & access to program info - demystify the process...share results of internal probes - 80%attached their names to hotline concerns (in 2017, it was only15%) > dealing w/ new risks AI & autonomous vehicles
compliance orientation
> requires employees to identify with and commit to specific required conduct u - uses legal terms, statutes, and contracts to teach employees the rules & penalties for noncompliance > helps employees understand rules of conduct when there are identified risks > linked to employees' awareness of ethical risks at work & a clear understanding of rules & expectations that facilitates decision making
Pilgrim's Pride...
> second largest chicken processor paid $110.5 million fine for price-fixing > plea agreement does not require outside compliance monitoring > suppressing competition working w/ competitors from 2012-2019 - Tyson, Claxton, Perdue and Koch all under investigation > Tyson has been cooperating in the investigation hoping for 'corporate leniency > supermarket & restaurant chains potentially harmed by alleged price-fixing
values orientation
> strive to develop shared values - penalties are attached but the focus is on an abstract core of ideals (accountability & commitment) - the foundation of an organizational ethical culture. > employees have a clearly defined basis on which to make decisions - fairness, compassion, respect, & transparency are paramount
Employers need to be proactive to mitigate the COVID-19 impact on women's careers
> women have been disproportionately impacted: - 80% negative - additional responsibilities (caregiving, household, heavier workloads) - taking a toll on physical & mental health > 70% have experienced career disruptions & are concerned about their ability to 'move up' > 60% question that they want to progress - given the requirements to do so
FSGO
A "carrot-and-stick" philosophy. - carrot = Avoid penalties should a violation occur - stick = Possibility of being fined or put on probation if convicted of a crime - encourages federal judges to increase fines for organizations that continually tolerate misconduct
An individual's hierarchy of needs may influence his or her motivation & ethical behavior
After basic needs & survival needs are satisfied, relatedness needs & growth needs become important
Formal groups
Assembly of individuals with an organized structure that is explicitly accepted by the group - Committees, work groups, and teams
Informal group
Composed of individuals who have similar interests & band together for purposes that may or may not be relevant to the goals of the organization
Crisis as an existential threat
Crisis Paracrisis Incident Event Problem Challenge
Integrative Culture
High concern for people and performance (Starbucks)
Caring Culture
High concern for people; minimal concern for performance (Ben & Jerry's)
Differential Association
Idea that people learn ethical or unethical behavior while interacting with people who are part of their intimate personal groups
Power
Influence leaders & managers have over the behavior & decisions of their subordinates
Leader's ability in motivating his or her subordinates plays a role in maintaining an ethical organization
Job performance is the product of motivation & ability
Apathetic Culture
Minimal concern for either people or performance (Countrywide Financial)
Values-based ethics culture
Relies on a mission statement that defines the core values of the firm and how customers and employees should be treated
Sarbanes-Oxley 404
Requires firms to adopt a set of values that forms a portion of the company's culture
Group norms
Standards of behavior that groups expect of their members
Elements of a crisis
Three elements are common to a crisis: (a) a serious or existential threat to the organization, (b) the element of surprise or suddenness, and (c) a short decision time.
Compliance Culture
Uses laws and regulatory rules to create compliance codes and requirements
Corporate Culture
Values, beliefs, rules, & ceremonies that are accepted, shared, & circulated throughout an organization -Founder's Day @ McDonalds
Corporate Social Responsibility (CSR)
a sustainability agenda that can create long-term favorable stakeholder responses. - sustainability, social responsibility & business ethics should not be used interchangeably
Corporate Culture
associated with a company's success or failure
research (compliance programs)
both approaches can interact or work toward the same end
Effective Ethics Programs
cannot be assumed people know how to behave appropriately in a job/firm/business context
statement of values
conceived by management, fully developed with input from all stakeholders - the terms "code of ethics" & "statement of values" are often used interchangeably
Crisis Management
covers the processes and decisions by which an organization deals with a disruptive, non-routine, and often unexpected event or situation that threatens to harm the organization, its personnel, its operations, and/or its stakeholders.
bad apples
employees
Controls in Business Ethics
formal, process, output
Misconduct Declines as Ethics Culture...
improves
Sustainability
includes the assessment and improvement of business strategies, economic sectors, work practices, technologies, and lifestyles in the maintaining of the natural environment
Formal Controls
input controls such as proper selection of employees, effective ethics training, & strong structural systems (ethics program)
code of conduct
more like a regulatory set of rules - tends to elicit less debate about specific actions
code of ethics
most comprehensive; consists of general statements, sometimes altruistic or inspirational, that serve as principles and as the basis for rules of conduct - generally specifies methods for reporting violations, disciplinary action for violations, & a structure of due process - six values that are desirable for codes of ethics: (1) trustworthiness, (2) respect, (3) responsibility, (4) fairness, (5) caring, & (6) citizenship
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 (window-dressing)
bad barrel
organization
updated Foreign Corrupt Practices Act guidelines
recommend incorporating incentives into the firm's corporate culture to encourage ethical behavior
employee diversity
requires explicit communication & training - reporting & use of company resources increase employees' work ethics awareness, integrity, willingness to deliver information to supervisors, use of reporting mechanisms, & perception that ethical decisions are being made
Ethical Consideration In Crisis Management -Three Core Obligations
responsibility, accountability, humanistic care
Crisis Management Process Loop
review > assess > plan > train > test > manage
Examples of social responsibility concerns
social issues, employee well being, legal responsibilities, legal responsibilities, sustainability, philanthropy, consumer protection, corporate governance
Organizational probation
use of on-site consultants to observe and monitor legal compliance efforts as well as to report the firm's progress toward avoiding misconduct to the U.S. Sentencing Commission
research (values program)
when personal & organizational values are compatible with one another, it tends to positively influence workplace ethics - employees want to work for companies that have similar values to their own - feel that they can collaboratively advance social goals in an era when gov't & business, in general are not as proactive
Environmental Legislation & The EPA
• - protecting Americans from significant health & environmental risks - managing environmental risks based on empirical information - ensuring the fairness and effectiveness of laws protecting human health & the environment. - ensuring environmental protection is an integral consideration in U.S. policies - making available access to accurate information that allows participation in managing health & environmental risks - making sure environmental legislation contributes to diverse, sustainable, & economically productive communities & ecosystems.
