Ethics and Standards of Conduct “How important is ethical conduct?” Forces to Consider Company Guidelines Industry Factors Associations Personal Beliefs Traditional Ethics Negotiation Practices Supplier Relations Ethics Standards of Conduct Professionalism “A strong foundation”

Procurement Ethics “Guidelines and programs” Favoritism Gifts, free services, discounts Trips, entertainment, travel Kickbacks Lunches Dinners Confidential information Conflicts of interest Laws and Regulations Program Elements Personal obligation Perception is important Available information Top management support Institutionalized thinking

Professional Conduct Profile “Can you predict what will happen?” Honest (60-70)% Open and Fair Bidding Professional Business Merits Best Value Service/Customer Driven Communication/Accessible Feedback On Time Proposals Quality Products Partnerships Long Term/Good Investment Impressionable (30-40)% Young/Entry Level Learning Mode Developing Career Paths Educated Ambitious Gudelines/Policies Success Driven Dishonest (5-10)% Gifts, Entertainment Lunches, Tickets, Dinners Side Deals Short Term/High Risk

Corporate Ethics Headlines “Failure in the boardroom” TYCO ENRON QUEST ANDERSON WORLDWIDE ADELPHIA GLOBAL CROSSINGS MARTHA STEWART Xerox WORLDCOM TYSON FOODS PRICEWATERHOUSE COOPERS

The Washington Response “Sarbanes-Oxley Act of 2002” Establishes Public Accounting Oversight Board Audit Records and Work Papers Retention Independence of FASB Bans Providing Both audit Services and Consulting Services to Same Client New Corporate Responsibilities Criminal Provisions for Obstruction of Justice or Destruction or Records Disclosure Requirements Control of Securities-related Professionals

Ethics in the Negotiation Process “Deception, Tactics and People” Negotiation Evolution Power tactics Side-by-side problem solving Smart conversations Negotiation Realities The integrity trait Win/lose and win/win The “FTPWTWE” story Questions Where do I draw the line? Is reputation important?

Ethics in the Negotiation Process “Deception, Tactics and People” Deception Tactics (what about the truth?) Misrepresentation of one’s position to another Bluffing Falsification Deception Selective disclosure or misrepresentation People Separate the people from the problem No emotion, no revenge Business decisions on the merits

Ethical Supply Chain Management Conduct Institute for Supply Management (ISM) Principles Loyalty to your organization Justice to those with whom you deal Faith in your profession Standards of Conduct Perceived impropriety Responsibilities to the employer Conflict of interest Issues of influence Confidential and proprietary information Supplier relationship Reciprocity Applicable laws Small, disadvantaged and minority-owned business Professional competence National and international conduct Responsibilities to the profession

Ethical Supply Chain Management Conduct Institute for Supply Management (ISM) Standards 1. Avoid the intent and appearance of unethical or compromising practice in relationships, actions and communications 2. Demonstrate loyalty to the employer by diligently following the lawful instructions of the employer, using reasonable care and granted authority 3. Avoid any personal business or professional activity that would create a conflict between personal interests and the interests of the employer 4. Avoid soliciting or accepting money, loans, credits or preferential discounts and the acceptance of gifts, entertainment, favors or services from present or potential suppliers that might influence, or appear to influence, supply management decisions 5. Handle confidential or proprietary information with due care and proper consideration of ethical and legal ramifications and governmental regulations

Ethical Supply Chain Management Conduct Institute for Supply Management (ISM) Standards 6. Promote positive supplier relationships through courtesy and impartiality 7. Avoid improper reciprocal agreements 8. Know and obey the letter and spirits of laws applicable to supply management 9. Encourage support for small, disadvantaged and minority-owned businesses 10. Acquire and maintain professional competence 11. Conduct supply management activities in accordance with national and international laws, customs and practices, your organization’s policies and these ethical principles and standards of conduct 12. Enhance the stature of the supply management profession

Successful Company Programs “Company-Wide Involvement” The Brookings Institute (May 2002) Code of conduct Executive leadership and ownership On going training and communication Reporting mechanism (a safe haven) System for internal investigation and corrective action Self-evaluation, auditing and internal control Individual employee responsibility and accountability Open company disclosure

Successful Company Programs “Supply Management Responsibility” In-House Ethical Workshops Written ethical guidelines Steering committee Cross-functional brainstorming ISM published standards and guidelines Top management support On-going training Institutionalized ethical culture

The Business Ethics Challenge “Restoring Trust and Professionalism” Reflections You are involved Values are important Control your own reputation Take the high road Treat people with respect Always tell the truth What about your supplier’s ethics? Ethical conduct is professional conduct