September 30, 2012 Morris W. Beverage Jr., EDM President, Lakeland Community College Kirtland, Ohio

A (Owns boat) B (In love with D) C (1 st other person) D (In love with B) E (2 nd other person)

Most liked person1. _________________ 2. _________________ 3. _________________ 4. _________________ Least liked person5. _________________

Ethics The Study of right and wrong, usually including the determining and encouraging of what is right. Ethical Issue A situation in which there is one answer or choice involving the rule of law.

Well, certainly people no different than you!

Largest corporate fraud in history Inflated profits by $3.9 billion 17,000 people were laid-off within a week Stock dropped from $64.50 to 20 cents CEO Bernie Ebbers was found guilty of fraud, conspiracy and filing false documents and faces 85 years in prison Bernie Ebbers was a great guy

At one time Bernie Ebbers was no different than us. At one time the CFO was no different than us. At one time the accountants that made the erroneous entries were no different than us – and, they even wrote out their resignation letters and held them all the way through the fraud.

Accountants knew what they were doing was wrong (Prepaid Capacity) The belief was that it would all turn around They thought they were doing the right thing in the long run by: Protecting shareholders Protecting workers Protecting the economy

So, how do we get from today’s session to perpetrating the greatest fraud in U.S. corporate history?

Most liked person1. _________________ 2. _________________ 3. _________________ 4. _________________ Least liked person5. _________________

Values A tightly held belief upon which a person acts by choice, an enduring belief that one way of behaving is personally or socially preferable to the opposing way of behaving. Ethical Dilemma A situation in which there is a conflict in the minds of people between values, or a conflict between what is right and what is wrong. You have to make a choice.

* Robert Axelrod – The evolution of cooperation PastPresentFuture

19 hitters 13 pitchers Inserted questions about cheating as part of a wide-range anonymous survey *Dennis Manoloff, The Plain Dealer, June 11, 2003

To the 19 hitters……. Would you use a corked bat if you were told you could hit a home run in a world series game and never be exposed? NO: 12 “Couldn’t live with myself.” YES: 5 “If you ain’t cheatin’, you ain’t tryin’.” Abstention: 2

To the 13 pitchers… Would you use a blatantly doctored ball to record a game-ending strikeout in the world series if you were guaranteed never to be exposed? NO: 8 “If I can’t strike the guy out playing fair, I shouldn’t be playing.” YES: 2 “Whatever it takes to win a ring.” Abstention: 3

To the 19 hitters…. If you knew a grounder ruled a hit should have been ruled an error, would you urge the official scorer to change the call if it meant ending your hitting streak at 55 games? NO: 15 “Why should I?” YES: 3 “To tie DiMaggio? I’ve absolutely got to get it changed.” Abstention: 1

To the 13 pitchers…. If you knew a grounder ruled an error in the ninth inning should have been ruled a hit, would you urge the official scorer to change the call if it meant ruining what could have been a no-hitter? NO: 8 “If one of those jokers wants to call it an error, fine. He’s got to live with that, not me.” YES: 4 “The last thing you want is a tainted no-hitter.” Abstention: 1

Social Contract Maximize the capacity to do what I want while also letting OTHERS do what they want. Each individual will forego certain selfish, personal opportunities in exchange for profiting from the cooperation of others. Balancing “self-interest” with “community interest”

In 2000, Stephen King offered to provide an electronic book, one chapter at a time, if at least 75% of the downloads were paid for ($1 per download) 120,000 downloads of the first chapter 40,000 downloads of the second chapter, but only 46% were paid for He said on his website – “If you pay, the story rolls. If you don’t, the story folds.” He folded it.

Defecting results in gaining at others’ expense Cheating: I cheat + You don’t = I win You cheat + I don’t = You win Our “social contract” is only in balance if either we both cheat or we both don’t cheat. AKA “social reciprocity”: I will commit to NOT defect when I can, and expect others to NOT defect when they can.

Manville Corporation Continental Illinois Bank E.F. Hutton *Saul W. Gellerman, Harvard Business Review, July-August 1986

I. A belief that the activity is within the reasonable ethical and legal limits – that is, that it is not “really” illegal or immoral. *Saul W. Gellerman, “Why ‘good’ managers make bad ethical choices,” Harvard Business Review, July-August 1986

II. A belief that the activity is in the individual’s or the organization’s best interests - that the individual would somehow be expected to undertake the activity.

III. A belief that the activity is “safe” because it will never be found out or publicized; the classic crime and punishment issue of discovery.

IV. A belief that because the activity helps the company, the company will condone it and even protect the person who engages in it.

So how does it happen? How do we wake up one day and choose to do wrong things instead of right things?

Right vs. Right  Responsibility to yourself and others  Responsibility for others  Responsibility shared

Thank you!