Chapter 10 Making It Stick: Doing What’s Right in a Competitive Market Chapter Summary This chapter begins by explaining how a tough market environment can be difficult for a company to hold on to the promise of running an ethical business. Next, the chapter states how a company can sustain such promises by establishing a code of ethics and by hiring a code officer who is willing to monitor the employees in an organization. The chapter also argues that employees need to have extensive training and the company’s code of ethics needs to be updated, due to the ever changing environment. After the code of ethics has been set, it is time to reward employees who have demonstrated exceptional ethical behavior. Employees who are not up to par with the ethics program must go through additional training. Finally, the chapter presents reactive and proactive policies and suggests that organizations become transparent in all their communications with their stakeholders. Learning Outcomes After studying this chapter, the student should be able to: 1. Develop the key components of an ethics policy. 2. Analyze the ramifications of becoming a transparent organization. 3. Understand the difference between reactive and proactive ethical policies. 4. Discuss the challenges of commitment to organizational integrity. Extended Chapter Outline Frontline Focus You Scratch My Back Questions 1. The four key points of a code of ethics are outlined on page 200. If we assume that Adam’s company has such a code, what guidance could Adam find in those four key points? Assuming that Adam’s company has such a code, it should identify the company’s values statement, provide a detailed guide to acceptable behavior, state policies for behavior in this situation, and document punishment for violating the policies. 2. Do you think Zachary is willing to provide those “marketing funds” in order to win the business away from Adam, or is Dr. Green just bluffing? If Zachary’s company does not abide by such codes of ethics, he may be willing to provide such funds. It is also possible that Dr. Green is simply bluffing to get such funds or to see how far he can push Adam. 3. What should Adam do now? Adam certainly needs to follow his company’s code of ethics and not get involved with individuals like Dr. Green. Learning Outcome 1: Develop the Key Components on an Ethics Policy. • Ask any CEO to describe the market she is working in, and she will probably describe the same set of characteristics: o Demanding customers who want new and better products and services at lower prices. o Impatient stockholders who want the stock price to rise each and every quarter. o Aggressive vendors who want to sell more of everything. o Demanding federal, state, and local officials who want to burden the business with more rules and regulations while encouraging it to hire more people and pay more taxes. o Demanding creditors who want their loan payments on time. o Aggressive competitors who want to steal the business’s customers from it. • When people operate a business in such a tough environment, holding on to the promise to run an ethical business and to do “the right thing” for all the stakeholders can be very challenging. o It’s easy to see why so many executives, after the unethical behavior of their companies has been exposed, point to the ruthless competition of the business world as their excuse for not doing the right thing. • Sustainable ethics is ethical behavior that persists long after the latest public scandal or the latest management buzzword. • Making ethical behavior sustainable requires the involvement of every member of the organization in committing to a formal structure to support an ongoing process of monitoring and enforcement. This can be summarized in the following six stages: o Establish a code of ethics. o Support the code of ethics with an extensive training for every member of the organization. o Hire an ethics officer. o Celebrate and reward the ethical behavior demonstrated by your employees. o Promote your organization’s commitment to ethical behavior. o Continue to monitor the behavior as you grow. • In order for everyone to begin from the same starting point, the organization’s commitment to ethical behavior must be documented in a code of ethics. A well-written code of ethics can do several things: o It can capture what the organization understands ethical behavior to mean—the values statement. o It can establish a detailed guide to acceptable behavior. o It can state policies for behavior in specific situations. o It can document punishments for violations of those policies. • If an organization is involved in creating a code of ethics from scratch, it could consider the following advice from the Institute of Business Ethics: o Find a champion. o Get endorsement from the chairman and the board. o Find out what bothers people. o Pick a well-tested model. o Produce a company code of conduct. o Try it out first. o Issue the code and make it known. o Make it work. • Writing the code is the easy part. Getting the commitment to ethical performance down on paper and specifying the standards of behavior the organization will accept and the punishments it will enforce is a good starting point. o However, the code can only be a guide—it cannot cover every possible event. • An extensive training program to support the published code of ethics is important. o Since the code can’t capture every possible example, each department of the organization should take the code and apply it to examples that could arise in its area. o In the department or in team meetings, employees can work on: ➢ Recognizing the ethical issue ➢ Discussing options for an appropriate response ➢ Selecting the best option for the organization • An ethics officer is a senior executive responsible for monitoring the ethical performance of the organization both internally and externally. o The role is usually developed as a separate department with the responsibility of enforcing the code of ethics and providing support to any employees who witness unethical behavior. o This person can be: ➢ Promoted from within the organization (selecting a familiar face who can be trusted) ➢ Hired from outside (selecting an independent face who is new to company history and office politics) • The Ethics and Compliance Officers Association documented the chief responsibilities of their members in a survey, which may be summarized as: o Oversight of hotline/guideline/internal reporting o Preparation and delivery of internal presentations o Organizationwide communications o Senior management and/or board briefings/communications o Training design o Assessing/reviewing vulnerabilities o Assessing/reviewing success/failure of initiatives o Overseeing investigations of wrongdoing o Management of program documentation o Direct handling of hotline/guideline/internal reporting o Preparation and delivery of external presentations o Establishing company policy and procedures o International program development o Training delivery o International program implementation o Conducting investigations of wrongdoing • With standards of behavior specified in the code of ethics, along with the punishment served for failing to follow those standards, the ethics program can become harsh. o So the threats of punishment must be balanced with promised rewards for successful behavior: ➢ Celebrate examples of good ethical behavior in the company newsletter. ➢ Award prizes for ethical behavior—and let the employee choose the reward. ➢ Award prizes for new and creative ideas—and let the employee choose the reward. ➢ Recognize employees who represent the standard of behavior to which the company is committing. ➢ Declare an Ethics Day, and allow every department to share success stories. • An ethics policy commits the company to do the right thing for all its stakeholders, so that message must be shared with all the stakeholders—both inside and outside the company. o The organization should offer concrete examples that the organization is committed to winning the trust (and the business) of the customers by building a reputation they can count on. For example: ➢ Offer a no-questions-asked refund policy like Lands’ End. ➢ Offer a 110-percent price match guarantee like Home Depot. ➢ If the organization overcharges clients by mistake, it should give them a refund plus interest before their accounting department figures out the error and asks for the money. ➢ Get the clients involved in the development of the ethics policies. Ask them to tell you what forms of behavior or guarantees will make them feel reassured that they are dealing with an ethical company. ➢ Let the employees visit client sites to talk about the code of ethics in person. ➢ Share the success stories with all of the stakeholders, not just the employees. ➢ Invite the stakeholders to the Ethics Day celebration. Learning Outcome 2: Analyze the Ramifications of Becoming a Transparent Organization. • Reactive ethical policies are policies that result when organizations are driven by events and/or fear of future events. • Proactive ethical policies are policies that result when the company develops a clear sense of what it stands for as an ethical organization. o One characteristic that is common to such organizations is a commitment to organizational transparency. • Transparency is a characteristic of an organization that maintains open and honest communications with all stakeholders. • Microsoft’s 2006 white paper, “The New World of Work: Transparent Organizations,” summarized transparency as follows: o Transparency in business means that stakeholders have visibility deep into the processes and information of an organization. Important qualities of transparency include the following: ➢ A requirement that is being enforced on markets and companies through regulation. ➢ An enabler of better relationships with partners and customers. ➢ A great opportunity to rework business processes to increase efficiency. ➢ A risk to confidential intellectual property. • It is the risk factor of becoming too transparent that still remains as the biggest obstacle to change in this area. Learning Outcome 3: Understand the Difference between Reactive and Proactive Ethical Policies. • Reactive ethical policies are policies that result when organizations are driven by events and/or fear of future events. • Proactive ethical policies are policies that result when the company develops a clear sense of what it stands for as an ethical organization. Learning Outcome 4: Discuss the Challenges of a Commitment to Organizational Integrity. • Recognizing the concept of business ethics allows people to categorize behavior as unethical, but when one is looking to manage the reputation and policies of an organization, the commitment to doing the right thing becomes more about organizational integrity than any sense of a written ethics policy. o Organizational integrity is a characteristic of publicly committing to the highest professional standards and sticking to that commitment. Life Skills A Lone Voice For an organization to operate ethically, senior executives must commit to developing a culture that supports ethical principles beyond minimal compliance to federal legislation. Ultimately, however, ethical conduct comes down to the actions of individual employees each and every day. “Doing the right thing” becomes an individual interpretation based on personal ethics and a series of guidelines from a company code of ethics. Can you make that work? What if you work with colleagues who don’t share that perspective? If they operate from the perspective that it’s a “dog-eat-dog world” with “‘victory at all costs,” you may find yourself as the lone voice in trying to do the right thing. How will you handle that? Progress Check Questions 1. List six characteristics of a tough market. The following are the six characteristics of a tough market: • Demanding customers who want new and better products and services at lower prices. • Impatient stockholders who want the stock price to rise each and every quarter. • Aggressive vendors who want to sell you more of everything. • Demanding federal, state, and local officials who want to burden you with more rules and regulations while encouraging you to hire more people and pay more taxes. • Demanding creditors who want their loan payments on time. • Aggressive competitors who want to steal your customers from you. 2. List four key items in a code of ethics. The following are the four key items in a code of ethics: • It can capture what the organization understands ethical behavior to mean—the values statement. • It can establish a detailed guide to acceptable behavior. • It can state policies for behavior in specific situations. • It documents punishment for violations of those policies. 3. Provide three examples of unethical behavior by a customer. Students’ answers may vary. The following are some examples of unethical behavior by a customer: • Swapping a used piece of good with a brand new item • Telling the cashier you gave him a $20 when you really gave him a $10 and you want the rest of your change back • Wearing a new piece of clothing keeping the tags on it knowing you will return it after you have worn it 4. Provide three examples of unethical behavior by a supplier. Students’ answers may vary. The following are some examples of unethical behavior by a supplier: • Having sweat shops in international countries to create profit maximization • Selling an item that is a defective product • False advertising 5. When hiring an ethics officer, is it better to promote someone from within the company or hire someone from outside? Explain your answer. Students’ answers may vary. Some of the students may say that an ethics officer should be promoted from within the organization. The ethics officer should be a familiar face who can be trusted. He or she should have a history with the company and know the office politics. However, other students may say that the ethics officer should be hired from outside. Such an ethics officer will not know the employees or the company history and office politics, and can therefore, serve as an unbiased person. 6. List six key responsibilities of an ethics officer. Students’ answers will vary. Their answers could include some of the following points: • Oversight of hotline/guideline/internal reporting • Preparation and delivery of internal presentations • Organizationwide communications • Senior management and/or board briefings/ communications • Training design • Assessing/reviewing vulnerabilities • Assessing/reviewing success/failure of initiatives • Overseeing investigations of wrongdoing • Management of program documentation • Direct handling of hotline/guideline/internal reporting • Preparation and delivery of external presentations • Establishing company policy and procedures • International program development • Training delivery • International program implementation • Conducting investigations of wrong doing 7. Give three examples of celebrating ethical behavior. Students’ answers will vary. Their answers could include some of the following points: • Celebrate examples of good ethical behavior in the company newsletter. • Award prizes for ethical behavior—and let the employee choose the reward. • Award prizes for new and creative ideas—and let the employee choose the reward. • Recognize employees who represent the standard of behavior to which the company is committing. • Declare an Ethics Day and allow every department to share success stories. 8. If you publicly celebrate ethical behavior, should you also publish punishment for unethical behavior? Why or why not? Students’ answers may vary. Some of them may say that if a company is dedicated enough to put in a code of ethics and enforces it to the extent of giving rewards, then it should definitely publish punishment for unethical behavior. The company should be dedicated enough to punish employees who demonstrate unethical behavior. 9. List six examples of commitments that companies can make to win the trust of their shareholders. Students’ answers will vary. Their answers could include some of the following points: • Offer a no-questions-asked refund policy like Lands’ End. • Offer a 110-percent price match guarantee like Home Depot. • If the company overcharges clients by mistake, it should give them a refund plus interest before their accounting department figures out the error and asks for the money. • Get the clients involved in the development of the ethics policies. Ask them to tell you what forms of behavior or guarantees will make them feel reassured that they are dealing with an ethical company. • Let the employees visit client sites to talk about the code of ethics in a person. • Share the success stories with all the stakeholders, not just your employees. • Invite the stakeholders to the Ethics Day celebration. 10. Provide four of your own examples. Students’ answers may vary. Some examples include the following: • Create a survey so employees and stakeholders can share ethical problems they have dealt with the company. • Design a website that lists the code of ethics on it. The stakeholders and the employees should be able to access the document at any time. • Have an ethical standards ratio to determine employees’ successful ethics stories compared to ethical complaints. • Have a greeter at the exit ask customers if there was a way to better serve their needs while they were at the company. 11. Why would a code of ethics need to be updated? Students’ answers may vary. Some of them may say that the continued growth of technology will present new situations for ethical dilemmas as well as globalization and therefore, a code of ethics would need to be updated. 12. Find out when your company’s code of ethics was last updated. Students’ answers will vary. 13. What is a reactive ethical policy? Reactive ethical policies are policies that result when organizations are driven by events and/or fear of future events. 14. What is a proactive ethical policy? Proactive ethical policies are policies that result when the company develops a clear sense of what it stands for as an ethical organization. 15. Why would a company want to be transparent? Students’ answers may vary. Some of them may say that companies want to show to stakeholders that they are committed to ethical policies and that they have nothing to hide and therefore, they would want to be transparent. 16. Would you say the company you work for is transparent? Explain your answer. Students’ answers will vary. Ethical Dilemma 10.1 – The Price of Past Transgressions 1. If the investigation over the allegations of sexual harassment found no evidence, what did the HP Board gain by forcing Hurd to step down? Students’ responses will vary. Some of them may say that HP saved itself from public humiliation and embarrassment by asking Hurd to step down. Another possible scenario is that the board wanted Hurd out and this was the opportunity to get him out of the picture. Students can recall that sustainable ethics is the ethical culture that persists long after the latest public scandal or latest management buzzword. 2. Hurd left HP with a severance package estimated to be up to $40 million in cash and stock options. Does that dilute HP’s apparent commitment to strong corporate governance? Why or why not? Students’ responses will vary based on their perception of the case. If Hurd had a contract with a golden parachute effect then the company could have been liable to pay him, and thus the strong corporate governance is apparent. If, on the other hand, an ethics officer has stepped in, it might have resulted in less cash and stock options than what the company had to pay. Students should weigh the pros and cons. 3. At what point did the HP board lose sight of its corporate governance issues and focus instead on apparently beating Oracle at all costs? Students’ responses may vary. Some of them may say that the HP board lost sight of its corporate governance issues and focus when Larry Ellison hired Mark Hurd to run Oracle as its “co-president.” HP sued immediately, allegedly to protect the intellectual property it believed that Hurd would be taking to Oracle. The lawsuit was settled quickly, in the interests of convincing investors that everyone was getting back to business. However, there were some specific agreements in that settlement that only served to drag out the fiasco even further. Oracle agreed to a “standstill” proviso in which it would not make an attempt to launch a takeover bid for HP (based, presumably on Hurd’s insider information) for a specific time period. 4. How could the HP board have handled this situation differently? Students’ responses will vary. They should be encouraged to think in terms of creating an organization that is transparent and a role model to others in the industry. Students can recall that reactive ethical policies are those policies that result when organizations are driven by evens or the fear of future events. HP really needs an accountable ethics officer to guide the organization to ensure that the 10.2 – Yahoo!: Return to the office 1. Why is Marissa Mayer requiring all telecommuters at Yahoo! to return to the office? Marissa Mayer’s justification for the requirement of all telecommuters at Yahoo! to return to the office was as follows: “Speed and quality are often sacrificed when we work from home…we need to be one Yahoo!, and that starts with physically being together.” 2. With a clear expectation of “compliance or quit,” could Yahoo! have another agenda here? Why or why not? Students’ answers will vary. Yahoo! could have an additional agenda. Individuals who cannot work from Yahoo! offices due to valid reasons, can work from home on all working days and visit the office a day every week. This will allow employees to update their supervisors regarding their projects, attend important meetings, interact with coworkers, and work as a team. 3. Many of the Yahoo! employees impacted by the memo have taken to social media to express their frustrations and displeasure at this decision? Do they have a case? Explain your answer. Students’ responses may vary. Some of them may say that most employees must have been accustomed to the flexible working arrangements. They must have most likely been outraged with the company’s decision as it did not give them any alternative. That’s why, these employees may have felt that they have a case. 4. How could Marissa Mayer have approached this situation differently? Students’ answers may vary. Many of them may say that Marissa Mayer should have provided choices to employees. If employees cannot work from the Yahoo! office, they could be allowed to work from home on all working days and work from office a day every week. Some employees could also be given the choice of half day work from office and half day work from home. The company could also introduce part-time work, where employees’ working arrangements will be determined based on the type of the project. For example, if a project absolutely requires them to work from the workplace, they should be asked to compulsorily come to office. Frontline Focus You Scratch My Back—Adam Makes a Decision Questions 1. What do you think the reaction of Adam’s regional manager was to the initial news of the loss of Dr. Green’s business? Students’ answers will vary. Any supervisor would first react with shock and a disappointment after hearing about loss of business. He or she may even get upset. However, a good manager is one who understands and follows ethical business practices. Such a manager would understand and applaud Adam’s decision to give up the account and stick to the principles that guide the company. 2. Do you think Zach’s company supported his willingness to provide Dr. Green’s “marketing funds”? Students’ answers will vary. It is possible that some managers go to any stretch to obtain business. It is very difficult to believe that the company as a whole and the top management team would bless such funds. However, with two-way deals being cooked up between both the parties, it is entirely possible. 3. What do you think will happen to Zach and Dr. Green now? Students’ answers will vary. Some of them may say that the legal ramifications for bribery of such marketing funds and massaging patient data will result in loss of medical privileges for Dr. Green. Key Terms Ethics Officer: A senior executive responsible for monitoring the ethical performance of the organization both internally and externally. Organizational Integrity: A characteristic of publicly committing to the highest professional standards and sticking to that commitment. Proactive Ethical Policies: Policies that result when the company develops a clear sense of what it stands for as an ethical organization. Reactive Ethical Policies: Policies that result when organizations are driven by events and/or fear of future events. Sustainable Ethics: Ethical behavior that persists long after the latest public scandal or the latest management buzzword. Transparency: A characteristic of an organization that maintains open and honest communications with all stakeholders. Review Questions NOTE: Some questions allow for a number of different answers. Below are some suggestions. 1. You have been asked to join a team as a representative of your department. The team has been tasked with the development of an ethics training program to support the company’s new code of ethics. What would your recommendations be? Students’ responses will vary. Since the code can’t capture every possible example, each department rep should take the code and apply it to examples that could arise in their area. In the team meetings, everyone can work on: • Recognizing the ethical issue • Discussing options for an appropriate response • Selecting the best option for the organization Additional training for supervisors and managers in ethical conflict resolution can also be recommended. If the organization is large, hiring of an ethics officer could also be recommended. 2. Your company wrote its code of ethics in 1986. You have been assigned to a team that has been tasked with updating the code to make it more representative of current business ethics issues like the Internet and modern business technology. What are your recommendations? Students’ responses will vary. Continued growth of technology will present situations where the code needs updating such as e-mail monitoring and Web surfing. Large organizations can make this a responsibility of an ethics officer/team. Smaller companies need to include this as part of their strategic planning exercise to make sure it is as up-to-date as possible. Originally, written and if never updated since 1986, it is apparent that this has not been a part of the strategy. It needs to be included as part of the strategic planning with regular updates. 3. Does the role of an ethics officer bring real value to an organization, or is it just “window dressing” to make the company look good? Students’ responses will vary. The role of an ethics officer should not be ridiculed or taken lightly. The company implements an ethics policy and they establish a code of ethics to ensure the organizational commitment to ethical behavior. The ethics officer is the individual that managers or employees can turn when they need guidance and support. In addition, the ethics officer is responsible for monitoring both the internal and external ethical performance of employees. The ethics officer should not be considered just a “window dressing” to make the company look good. 4. Do you think you could be an ethics officer? Why or why not? Students’ responses will vary. An individual with a strong moral code and a commitment to strong and sound ethical policies and procedures could make a great ethics officer. 5. When you go shopping, do you pay attention to how transparent the company is in its business practices? Why or why not? Students’ responses will vary. Students should discuss whether they researched the company (before buying its brand) in order to find out how transparent the company was in its business practices. 6. Would organizational integrity make a difference in your loyalty to a company? Why or why not? Students’ responses will vary. Most students would agree that organizational integrity makes a difference in the consumers’ loyalty to a company. Consumers demand strong ethical and legal practices in the organizations that conduct their business. The students should note that when an individual or group has a sense of commitment and they have a hand to manage the reputation of the company, the commitment to loyalty to a company improves. Review Exercises 1. Which ethical theories could be applied here? Students’ responses will vary. Organizational integrity, which is a characteristic of publicly committing to the highest professional standards and sticking to that commitment, can be applied here. This helps in explaining that the city office finance is committed to the five-year budget plan that included predetermined tax increases and is sticking to that commitment though Brad’s house was now worth less, not more. Proactive policies can also be applied here. They are policies which occur when the company develops a clear sense of what it stands for as an ethical organization—not only what ethics means to that company and its stakeholders but also the extent of the actions it will take (and the necessary punishments it will enforce) to get there. This can be applied in the above case as it explains that the city finance office exemplifies what ethics is to it. The office executed predetermined tax increases irrespective of Hurricane Sandy’s occurrence. Also, it shows the extent of the actions it will take, as the council advised Brad that property taxes would increase though his house was in such a hopeless condition. 2. When Brad took his complaint to the local media, a spokesperson for the city finance office pointed out that the city’s property taxes were paying for the emergency services that were currently working overtime to help everyone impacted by the storm. Is that an ethical argument? Why or why not? Students’ responses will vary. Some of them may say that it is an ethical argument as the city property’s taxes are being used for a good cause. Others may say that the council should not implement predetermined increase on property which was destroyed due to the hurricane. 3. If you were in Brad’s situation, how would you react? Students’ responses will vary based on their personalities. 4. How would you resolve the situation? Students’ responses will vary based on their perception of the case. The ethical policies and code of ethics is going to be different for different individuals. Internet Exercises 1. Review the commitment of the Charity Commission (the regulator for charities in England and Wales) to increased transparency at www.charitycommission.gov.uk/About_us/About_the_Commission/Transparency_index.aspx. a. What steps has the commission taken to “be open and accountable”? The commission publishes the following reports on its website in an effort to “be open and accountable”: • The Board Members’ and Executive team’s registration and declaration of interests • Details of expenses incurred by the Board Members and senior Executive team • Staff structure and salary ranges • Details of Charity Commission’s expenditure over £25,000 • Application of the Charity Commission’s risk framework • Information about how visitors can access the Commission’s records • Information about the Commission’s standards of customer service • Providing the opportunity for feedback on a wide range of policy issues • Sickness absence rates for Charity Commission staff • Details of the Commission’s procurement process and how it selects suppliers • The Commission’s environmental and sustainability plan • Civil Service People Surveys results • Information Charter • Complaining about a freedom of information or subject access request decision • The Commission’s commitment to the promotion and support of equality and diversity • The commission’s policy on the provision of electronic copies of publicly available information • Publication scheme • Public meetings b. How do the commission’s range of operational guidance (OG) standards support the commitment to transparency? The operational guidance (OG) standards are produced for the Commission’s staff and covers policy and practice based on charity law. The guidance enables the Commission’s staff to carry out their work in a fair and consistent way. (http://www.charitycommission.gov.uk/about-the-commission/operational-guidance/) c. What else could the commission do to make itself more transparent to its’ customers? Students’ responses will vary. The students should discuss other ways that the Commission could make itself more transparent to the stockholders. Students should recall that a transparent organization is an organization that maintains open and honest communications with all of its stakeholders. Any other suggestions that reveal how the Commission could implement open and honest methodologies in its communications with stakeholders are acceptable. 2. Visit the website of Transparency International (TI) at www.transparency.org/. a. What does TI do? TI’s mission is to stop corruption and promote transparency, accountability, and integrity at all levels and across all sectors of society. Its vision is a world in which government, business, civil society, and the daily lives of people are free of corruption. b. How is corruption connected to a vision of organizational transparency? TI’s mission is to stop corruption and promote transparency, accountability, and integrity at all levels and across all sectors of society. Its vision is a world in which government, business, civil society, and the daily lives of people are free of corruption. TI is a global network of more than 100 chapters—locally established, independent organizations—that fight corruption in their respective countries. c. What were the main topic and focus areas for the current Global Corruption Report? The Global Corruption Report (GCR) is one of Transparency International’s flagship publications. The Report brings the expertise of the anti-corruption movement to bear on a specific corruption issue or sector. In the next report in the series, the education sector will be the focus, providing essential analysis for understanding corruption in the sector and highlighting the significant work that has already been done to improve governance and educational outcomes. The GCR on education will be published on October 1, 2013. The GCR on education will present more than 50 articles from experts in the fields of corruption and education, from universities, think-tanks, business, civil society and international organizations. It will draw on both qualitative and quantitative research to advance our understanding of the dynamics of corruption in the sector and focus on providing examples of practical solutions. The GCR focuses on forms of corruption in education and innovative solutions in four key areas: • Corruption in school education • Corruption in higher education and research • Innovative tools to tackle corruption in education • Education for integrity (http://www.transparency.org/files/content/activity/Brochure_GlobalCorruptionReportEducation _EN.pdf) The GCR: Climate Change is the last already published report. It is the first publication to comprehensively explore major climate-related corruption risks. The report provides essential analysis to help policy-makers, practitioners and other stakeholders understand risks and develop effective responses at a critical moment when the main architecture for climate governance is being developed. More than 50 leading experts and practitioners contribute, covering four key areas: • Governance—investigating major governance challenges towards tackling climate change. • Mitigation—reducing greenhouse gas emissions with transparency and accountability. • Adapting to climate change—identifying corruption risk in climate-proofing development, financing, and implementation of adaption. • Forestry governance—responding to the corruption challenges plaguing the forestry sector, and integrating integrity into international strategies to halt deforestation and promote reforestation. (http://www.transparency.org/research/gcr/gcr_climate_change) Team Exercises 1. A different HP. Divide into two teams. One team must defend the actions of the board of directors at Hewlett- Packard in demanding the resignation of Chairman and CEO Mark Hurd. The other team must critique the decision and come up with an alternative resolution to the sexual harassment scandal. Student responses will vary. The team critiquing the decision can come up with different alternative resolutions to the sexual harassment scandal. For instance, instead of Mark Hurd stepping down as chairman and CEO in response to allegations of sexual harassment, the board of directors could have conducted a proper investigation by questioning the victim as well as Mark Hurd. 2. An ethics charter. Divide into groups of three or four. Each group develops a charter that documents its company’s commitment to ethical behavior. What industry is your company in? What does ethical behavior look like in that industry? What will your company’s commitment consist of? A code of ethics? Performance guarantees? Corporate governance policies? Students’ responses will vary. Thinking Critically 10.1 – Mott’s: Sour Apples 1. When you consider Milton Friedman’s position on corporate responsibility in Chapter 4, is it possible to defend DPS’s demand for lower hourly wages? Students’ responses will vary. Milton Friedman’s position on corporate responsibility states that the only social obligation of a business is to make profits for its shareholders. DPS’s demand for lower hourly wages may be defended with Milton Friedman’s position by stating that if it was not done: • DPS would have made large layoffs like Xerox and Kodak • DPS would have become bankrupt due to low profits and high costs • DPS would not have been able to meet the needs of its customers and would have charged high prices due to high costs of labor 2. Was DPS considering the interests of all stakeholders in this battle? Explain why or why not? Students’ responses will vary. Some may answer that DPS was considering the interests of all stakeholders. They lowered hourly wages keeping in mind the high costs of labor. This decision of the company aimed to reduce the prices of the products which will benefit the consumers. It will also increase the profits of the company due to high demand and reduced costs of the company. The parent company had also confirmed that its finances were very healthy and that there were no plans to close the plant or move production operations overseas. This implies that the employees’ jobs were safe. 3. How could senior executives have approached this situation differently? Students’ responses will vary. Some may give suggestions that the company could have continued pension benefits for new hires. Others may answer that the company should have reduced other costs (other than labor costs) like raw material costs, land rent, and so on by buying raw materials in bulk at a discount, choosing pieces of land which cost less, etc. 4. Both sides claimed in media interviews that they had won their case. Was there victory here? Explain why or why not. Students’ responses will vary. The union agreed to a wage freeze, but not the cuts in hourly rates that the company had demanded. Pensions for current workers were preserved (the company had wanted to freeze them), in return for a concession from the union that new workers would be offered 401(k) plans instead of pensions. Students may answer that nobody won the case as neither side will be happy with what they got. They may answer that there was compromise in this case. 10.2 – The Failed Transformation of BP 1. What evidence is there in this case that BP simply addresses fines “as a cost of doing business”? Students’ responses will vary. Both seem to have played a role in company’s motivation. One way to approach this question is to form two groups, with each taking one side and presenting a debate in class. 2. BP chief executive Tony Hayward argued that “changing the culture of a 100,000 person company couldn’t happen overnight.” He had been in charge for three years before the Deepwater Horizon spill. Were critics right to expect more change than they saw? Students’ responses will vary. Some of them may say that the critics were right in expecting more changes than they saw. If the company’s efforts would have been real, the changes would have had positive impact on all stakeholders. Greater good could have come from such efforts and could have served as a model for other organizations. 3. Has BP been successful in its move “Beyond Petroleum”? Students’ responses will vary. The students should recall that “Beyond Petroleum” was developed to illustrate a company that was environmentally conscious and committed to the development of alternative energy sources such as wind and solar power. 4. How can BP begin to restore its reputation going forward? Students’ responses will vary. The students should note the importance of an ongoing ethics policy and that organizations today need to have both reactive and proactive ethical policies. Finally, students should suggest that BP needs to become a transparent organization and maintain honest and open communications with its stakeholders. They need a sound commitment to organizational transparency. 10.3 – Unprofessional Conduct 1. What were the perceived conflicts of interest in Wakefield’s research activities? The perceived conflicts of interest occurred in Wakefield’s research because the paper proposed a new syndrome with two conditions—chronic intestinal disease and the loss of behavioral skills that had already been acquired as part of normal child development. Eight out of twelve cases in the paper had parents that associated the vaccine to behavioral problems. Although the paper clearly stated that no association between the MMR and the condition had been proven, the implication was perceived that it had. 2. If Wakefield had disclosed the source of the funding of his study and his interest in the experimental vaccine, would that have added credibility to his campaign against MMR? Why or why not? Students’ responses will vary. Wakefield was conducting research out of his normal scope of work. Even if he had disclosed the source of funding and his interest in the experimental vaccine, his actions would have been considered as unethical. 3. Why did Wakefield lose his license to practice medicine? Wakefield lost his license to practice medicine as a result of conflicts of interest. It was discovered that he was employed at Royal Free Hospital as a gastroenterologist at the time of the study and he did not have ethical approval or medical permission to conduct the tests outside of his approved area. It was also discovered that at the time of his follow-up study at Wakefield, he took blood samples from the children of fellow medical professionals at his son’s birthday party in return for payments of £5. 4. The GMC found that Wakefield brought his profession into disrepute with his conduct. What could he have done differently to share his concerns about MMR? Students’ responses will vary based on their perception of the case. However, students should note that Wakefield should have been open about the study and used legitimate funding to finance his research. In addition, Wakefield could have consulted with other professionals in the field to discuss the outcome of his research. Chapter 10 Making it Stick: Doing What’s Right in a Competitive Market 10-2 Key Components of an Ethics Policy • Characteristics of a market • Demanding customers • Impatient stockholders • Aggressive vendors • Demanding federal, state, and local officials demanding creditors • Aggressive competitors 10-3 Sustainable Ethics • Ethical behavior that persists long after the latest public scandal or the latest management buzzword • Stages in making ethical behavior sustainable • Establish a code of ethics • Support the code of ethics with extensive training for every member of the organization 10-4 Sustainable Ethics • Hire an ethics officer • Celebrate and reward the ethical behavior demonstrated by your employees • Promote your organization’s commitment to ethical behavior • Continue to monitor the behavior as you grow 10-5 Establish a Code of Ethics • Well-written code of ethics can: • Capture what the organization understands ethical behavior to mean • Establish a detailed guide to acceptable behavior • State policies for behavior in specific situations • Document punishments for violations of those policies 10-6 Establish a Code of Ethics • Recommendations of the Institute of Business Ethics to create an ethics code • Find a champion • Get endorsement from the chairman and the board • Find out what bothers people • Pick a well-tested model 10-7 Establish a Code of Ethics • Produce a company code of conduct • Try it out first • Issue the code and make it known • Make it work 10-8 Support the Code With Extensive Training • Each department of the organization should apply the code to examples that could arise in their area where employees can work on: • Recognizing the ethical issue • Discussing options for an appropriate response • Selecting the best option for the organization 10-9 Hiring an Ethics Officer • Ethics officer: Senior executive responsible for monitoring the ethical performance of the organization both internally and externally • Enforce the code of ethics and provide support to any employees who witness unethical behavior • Sends a clear message to your stakeholders • Provides an appropriate person for employees and their managers to turn to when they need additional guidance and support 10-10 Encouraging Ethical Behavior • Celebrate examples of good ethical behavior in the company newsletter • Award prizes for ethical behavior • Award prizes for new and creative ideas • Recognize employees who represent the standard of behavior to which you are committing • Declare an Ethics Day and allow every department to share their successes stories 10-11 Promote the Organizations’ Commitment to Ethical Behavior • Offer a no-questions-asked refund • Offer a 110% price-match guarantee • If the client is overcharged accidently, give them a refund plus interest before their accounting department figures out the error and asks for the money 10-12 Promote the Organizations’ Commitment to Ethical Behavior • Get clients involved in the development of the ethics policies • Let employees visit client sites to talk about the code of ethics in person • Share success stories with all stakeholders • Invite stakeholders to the Ethics Day celebration 10-13 Continuous Monitoring • Any organization’s commitment to ethical performance must be watched constantly • Continued growth of technology will present new situations for ethical dilemmas so the code may need to be re-written on a regular basis 10-14 Becoming a Transparent Organization • Result when organizations are driven by events and/or a fear of future events Reactive ethical policies • Result when the company develops a clear sense of what they stand for as an ethical organization Proactive ethical policies • Organization maintains open and honest communications with all stakeholders • Leads to the conclusion of the loss of market advantage through corporate surveillance Transparency 10-15 Organizational Integrity • Characteristic of publicly committing to the highest professional standards and sticking to that commitment • It is vital to earn the trust and confidence of the stakeholders for the long-term survival of the organization Solution Manual for Business Ethics Now Andrew Ghillyer 9780073524696, 9781260262513
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