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Slide 1: 

CHAPTER 1 Ethics, Value Creation, and Risk Management

Law and Public Policy : 

2 Law and Public Policy Law provides the ‘rules of the game.’ Managers can create their own private law with, e.g., contracts. Today, law: Promotes Economic Growth, Protects Workers, Promotes Consumer Welfare, and Promotes Public Welfare.

Law and Strategy : 

3 Law and Strategy Noncompliance is not an option. Drexel Burnham. Arthur Anderson. “Negative Monetary Return”: TAP Pharmaceuticals. Texaco. Cendant.

Ethical Tone Set at the Top : 

4 Ethical Tone Set at the Top CEO sets ethical tone. Executives On Trial. Dennis Kozlowski. Rigas Family. Phil Condit. Dick Grasso.

Ethical Leader’s Decision Tree : 

5 Ethical Leader’s Decision Tree Is the action legal? Does it maximize shareholder value? Is the action ethical?

Slide 6: 

6 Ethical Decision Making Legal Profitable Ethical Case 1.1 Bammert v. Don’s Supervalu

The Law and the “Unethical” : 

7 Role of the Law. The law -civil as well as criminal- plays an important part in promoting ethical conduct. Ethical behavior often requires a higher standard than that prescribed by the law; an action that is unethical may nonetheless be legal. Case 1.2 Meinhard v. Salmon (1928). The Law and the “Unethical”

Ethical Models for Business Decisions : 

8 Ethical Models for Business Decisions Model Description How Applied Cost/Benefit “The greatest good Estimate impact of (Utilitarian) for the greatest Alternative actions on number” all stakeholders and select one that optimizes their benefits. Duty Based Stakeholder’s rights to Reject any alternative (Deontological) be respected: “do unto that violates a others” stakeholder’s rights or obey the rules. Eternal Truths or Rules Guide Behavior.

Positive Law: A Valid Moral Compass : 

9 Positive Law: A Valid Moral Compass Defined: - Rules imposed on Society by Government. - Penalties are imposed if not followed. Thesis: - Positive law provides a ceiling that is caving in. - I.e. Many persons/Businesses are choosing not to follow law as a conscious strategy (Their activity is Below the “Ethical Waterline”.) - Positive law generally contains moral underpinnings of fairness, justice, or both.

Positive Law…Continued : 

10 Positive Law…Continued Assumptions: Contemporary U.S. Society’s values include: - Tendency to legalize all aspects of endeavor. - Greed is an acceptable norm. - High stakes for winning encourages cheating. - Team players do not criticize organizational behavior. - Decline in institutions of Family, Community & Religion.

Aquinas on Law and Ethics : 

11 Saint Thomas Aquinas (1225?-1274), a theologian and philosopher, believed that an unjust law was contrary to God’s eternal law and could not properly be considered a law at all. Aquinas believed human law must be just to be considered law. A just law must be: Consistent with universal good. Within the power of individuals to fulfill. Clearly expressed by legitimate authority. Approved by custom. Widely promulgated. (Compare with Positive Law Model) Historical Perspective Aquinas on Law and Ethics

Resolving the Tensions : 

12 Tensions between Long-Term and Short-Term values. Long-Term: ethics are simply good business. Tensions: Costco, Stride Rite, and IBM. Resolving the Tensions

Resolving the Tensions : 

13 Resolving the Tensions Approaches to resolving the tension… Softening the Edges. OECD Code of Business Conduct. Adopt an Ethics Program. Google. Coca-Cola. Individual Action.

Corporate Codes of Conduct : 

14 Corporate Codes of Conduct REASONS TO HAVE A CODE - Clarify what is ethically acceptable - Provide an impersonal reason for refusing to engage in questionable practices. THE IDEAL CORPORATE CODE WILL - Be consistent in terms and tone - Provide positive and Negative Guidance - Create a sense of Responsibility

To Insure Effective Applied Ethics Program : 

15 To Insure Effective Applied Ethics Program Articulate Clearly the Ethical Anchors of Your Business Conduct an Ongoing Education Effort Accept Legal Environment as Framework

Social Responsibility : 

16 Issues of social responsibility arise in the areas of the environment, sweatshops and underpaid foreign workers, and advertising campaigns. Social Responsibility

Advertising : 

17 Advertising Marketing Tobacco and Beer to Children. NBC and Liquor Advertising. Pfizer and Off-Label Drug Promotion.

Positive Action : 

18 Positive Action Customers and Product Safety: Johnson & Johnson (Tylenol). Employees: Auditing of Work Conditions. Levi’s Layoffs. Environment: Honda/Ford.

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