Bagley 5th

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CHAPTER 1 Ethics, Value Creation, and Risk
Management
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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.

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Law and Strategy

• Noncompliance is not an option.
• Drexel Burnham.
• Arthur Anderson.
• Negative Monetary Return
• TAP Pharmaceuticals.
• Texaco.
• Cendant.

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Ethical Tone Set at the Top

• CEO sets ethical tone.
• Executives On Trial.
• Dennis Kozlowski.
• Rigas Family.
• Phil Condit.
• Dick Grasso.

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Ethical Leaders Decision Tree

• Is the action legal?
• Does it maximize shareholder value?
• Is the action ethical?

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Ethical Decision Making
Legal
Ethical
Profitable
Case 1.1 Bammert v. Dons Supervalu
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The Law and the Unethical

• 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).

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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 Stakeholders rights
to Reject any alternative (Deontological) be
respected do unto that violates
a others stakeholders rights or obey
the rules. Eternal Truths or Rules Guide
Behavior.
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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.

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Positive LawContinued

• Assumptions
• Contemporary U.S. Societys 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.

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Aquinas on Law and Ethics
Historical Perspective

• Saint Thomas Aquinas (1225?-1274), a theologian
  and philosopher, believed that an unjust law was
  contrary to Gods 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)

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Resolving the Tensions

• Tensions between Long-Term and Short-Term values.
• Long-Term ethics are simply good business.
• Tensions Costco, Stride Rite, and IBM.

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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.

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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

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To Insure Effective Applied Ethics Program

• Articulate Clearly the Ethical Anchors of Your
  Business
• Conduct an Ongoing Education Effort
• Accept Legal Environment as Framework

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Social Responsibility

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

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Advertising

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

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Positive Action

• Customers and Product Safety Johnson Johnson
  (Tylenol).
• Employees Auditing of Work Conditions.
• Levis Layoffs.
• Environment Honda/Ford.