Conducting Business Ethically and Responsibly Prof. Bauer-Ramazani Actuary Analysis Actuary Analysis, from the movie Class Action (1:40 min.) Jan. 29, 2008, CNN.com

Ethical Dilemma -- definition n A predicament in which a (business) person must resolve whether an action may be considered unethical even if it benefits the organization, the individual, or both. n An ethical dilemma may arise when two norms or values are in conflict  Identify the 2 norms or values.  Tradeoffs (pros & cons)

What Is Ethical Behavior? n Ethics  Right or wrong, good or bad, in actions that affect others n Ethical Behavior  Conforming to individual beliefs AND social norms about what’s right and good n Business ethics  Ethical or unethical behavior by employees of organizations

Formalizing the Commitment to Ethics Adopting Written Codes Instituting Ethics Programs

Code of Ethics n formal statement = a guide for how people within a particular organization should act and make decisions in an ethical fashion. n ‘s Code of Business Conduct (in 15 languages): –Our Code of Business Conduct serves to guide the actions of our employees, officers and directors in ways that are consistent with our core values: honesty; integrity; diversity; quality; respect; responsibility; and, accountability. The Code helps our people play by the rules wherever we operate around the world. ( colacompany.com/ourcompany/business_conduct.html) colacompany.com/ourcompany/business_conduct.htmlhttp:// colacompany.com/ourcompany/business_conduct.html

Ethical Decision Model by the Josephson Institute of Ethics Josephson Institute of Ethics Josephson Institute of Ethics 1. All decisions must take into account and reflect a concern for the interests and well-being of ALL stakeholders. 2. Core ethical values and principles ALWAYS take precedence over non- ethical ones, e.g. self-interest.

Major Corporate Stakeholders Major Corporate Stakeholders Groups, individuals, and organizations that are directly affected by the practices of an organization Businesses have a social responsibility toward them.

6 Pillars of Character (Ethical Norms)

Steps in Making Ethical Decisions

Responsibility Toward Customers Consumer Rights Fair Pricing Ethics in Advertising

Responsibility Toward Employees Legal and Social Commitments  Safe work environment  Equal pay Ethical Commitments  Whistle-blowers

David Batstone on whistleblowing: Unethical behavior at work? (2:46 min) Unethical behavior at work?

Responsibility Toward Investors 1. NO improper financial management 2. NO insider trading 3. NO misrepresentation of finances on financial statements

Responsibility Toward Local Communities n Environment  Air pollution  Water pollution  Land pollution Clean up toxic waste Clean up toxic waste Use recycling Growth / infrastructure Growth / infrastructure Social well-being of all members of the community Social well-being of all members of the community

Company Practices and Business Ethics Best Approach: Open, Honest, Responsive! The Tylenol Scare Case Lawsuits as a result of pharmaceutical company Merck’s announcement about the potential side effects of its drug Vioxx and subsequent withdrawal

7 possible Guidelines for Making Ethical Decisions in the Work Place 7 possible Guidelines for Making Ethical Decisions in the Work Place (Please refer to your handout.) 1. The Golden Rule 2. The Utilitarian Principle 3. Kant’s Categorical Imperative 4. The Professional Ethic 5. The TV Test 6. The Legal Test 7. The Four-Way Test Business Ethics: My Life in Headlines Business Ethics: My Life in Headlines (1 min.)

Social Audits n Many companies attempt to regulate themselves on the topic of social responsibility and ethics. They do this through social audits. n A social audit is a form of self-regulation in which the company attempts to monitor managers’ and employees’ ethical behavior.

Managing Social Responsibility & Ethics Programs Key steps: p Social responsibility and ethics must start at the top. p A committee of top managers must develop a plan detailing the level of top management support. p One executive must be put in charge of the firm’s agenda. p The organization must conduct periodic social audits àEvaluate progress in achieving social responsibility goals