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Corporate Social

Responsibility and

Business EthicsUBGA 107: Week 12

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Todays Agenda

Administrative Matters (return exams)

Only scantron is returned to you. Blue books are available to

be viewed in Professor Gerlachs office only.

Grade distribution adjustment? Attendance sheet to be returned to me during class

Corporate Social Responsibility and Business Ethics

What are CSR and Ethics?

How are ethical questions analyzed

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Review

Corporate Governance U.S. v. Germany (Japan) the ways in which rights and responsibilities are shared

between the various corporate participants (In the US,

especially the management and the shareholders). The Facts

WorldComs meteoritic rise

The Scandal

Financial Manipulations WorldComs incentive to commit fraud Arthur Andersens incentive to look away

Key: Misalignment of Incentives

http://www.investorwords.com/2931/management.htmlhttp://www.investorwords.com/4527/shareholders.htmlhttp://www.investorwords.com/4527/shareholders.htmlhttp://www.investorwords.com/2931/management.html

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Definitions

What is Corporate Social Responsibility? Corporate-wide activities carried out to improve a companys

image vis--vis various stakeholder groups

Examples Corporate Philanthropy, Environmental Policies, Worker Rights

Policies, etc.

What is business ethics? Refers to actions by individuals and/or groups within

organizations Examples

Embezzlement, Sexual Harassment

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Discussion Question #1

Discuss the reading in the context of thecorporate social responsibility of McWane andAcipco, providing some specific examples

Corporate Philanthropy

Environmental Policies

Workers Rights Policies

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Environmental Policies

McWanes environmental records are abysmal Persistent defiance of laws protecting workers and surrounding

communities from toxic pollution Discharged arsenic, copper and thallium into the air (Alabama) Workers exposed to exceptionally high levels of silica Failure to provide respirator, causing severe kidney failure due to arsenic

poisoning 8.5 mil-long slick in the Delaware River Flushing thousands of gallons of polluted water through the storm drain

(Birmingham)

Repeated failure to stop production to repair broken/ineffectivepollution control

Equipment tampered with so as not to shut down automaticallywhen pollution controls fail

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Workers Rights Policies

A dangerous business Workers who protest dangerous work conditions bull-eyed for termination Supervisors refused to wait a few hours for federal safety inspectors to arrive

before restarting a conveyor belt that had crushed a man to death Line workers who fail to make daily quotas get disciplinary actions

Discipline used to suppress union unrest and injury claims Supervisors urged to discipline injured workers (to punish workers for

reporting injuries) Safety directors request for more safety equipment and assistant ignored. Blatant refusal to adhere to federal safety rules on weight-lifting limits Company officials lie to OSHA regarding safety issues (elevator shaft example) OSHA: respirator program totally ineffective 404 OSHA violations 1995-2003

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Contract with Acipco

The only time you can get a job at Acipco is ifsomebody retires or dies.

Workers take yoga glasses in a modern health club with

the latest in weight-training equipment and a spring-loaded floor for aerobics

Workers get cash bonuses if they keep their cholesteroldown

Spent millions of dollars to install air-conditionedbooths in the hottest parts of the plant

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McWane vs. Acipco

McWane Business Model

Profit at the expense of workersafety/environmental cleanliness.

Cost savings from ignoring safety/environmentalstandards much greater than fines

Acipco Business Model

If workers had a genuine stake they would workharder and smarter and produce more

Instituted profit-sharing for all employees

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Ethical Choices

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The Three Models of Ethical

Analyses Utilitarian

Comparing benefits and costs

Action is ethical if net benefits exceed net costs

But difficult to measure some human and social costs. Majority may

disregard rights of minority Rights

Respecting entitlements

Basic Human rights are respected

Difficult to balance conflicting rights

Justice Distributing fair shares

Benefits and costs are fairly distributed

Difficult to measure benefits and costs. Lack of agreement on fair shares

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Discussion Question #2

Provide Robert Restor, a former plant managerat McWane, with advice on the ethical choiceshe could have made while at McWane based on

the three ethical models discussed in class

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Mr. Resters Ethical Dilemma

Over 24 years, Mr. Rester became numb to theconstant body count, brushed hands and feet,disfiguring lacerations, burns from molten iron,amputations.

His sole focus, was finding a fresh body to keepproduction rolling.

For a McWane manager, taking time for safety orenvironmental problem holds few attractions. It means

slowing production to fix equipment. It means moresafety training, less time to make pipe. The McWane dictum: TIME = PIPE, PIPE =

MONEY

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Advice to Mr. Rester

Utilitarian

Rights

Justice

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News Updates

U.S. Brings New Set of Charges Against Pipe Manufacturer

May 26, 2004 M cWane Inc., a major pipe maker and one of the nation's most persistent

violators of workplace safety and environmental laws, faced a new round ofcriminal charges last night after a federal grand jury in the company'shometown, Birmingham, Ala., issued a 25-count indictment alleging illegaldumping and other environmental crimes.

The indictment charges that senior McWane managers, including CharlesRobison, the corporation's vice president for environmental affairs, conspiredto dump huge quantities of polluted wastewater into a creek that runs throughMcWane's oldest foundry, the McWane Cast Iron Pipe Company, on theoutskirts of downtown Birmingham.

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News Update

Plea Agreement Is Reached in Pipe Case

May 27, 2004

A day after announcing a second indictment against McWane Inc., federalprosecutors disclosed Wednesday that a longtime McWane manager had

agreed to cooperate with their investigation into environmental and safetyviolations at McWane, one of the nation's largest manufacturers of cast ironwater and sewer pipe.

The manager, Donald Harbin, 58, has agreed to plead guilty to a single felony,conspiracy to violate environmental laws at the McWane foundry inBirmingham, Ala., where prosecutors charged this week that huge quantities ofpolluted wastewater had been illegally and routinely dumped into a creek.

Mr. Harbin is the first McWane employee to strike a plea agreement withprosecutors and the first to acknowledge criminal conduct. The maximumsentence is five years in prison and a $250,000 fine , but Mr. Harbin is almostcertain to receive a much lighter sentence for agreeing to cooperate. In all, 10McWane managers have been charged with crimes in Alabama and New Jersey.

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Key Take Away

Sometimes, there are truly difficult ethical questions: From a pro-life perspective, if a pregnant mothers life is in danger, and

you have to sacrifice the unborn childs life, or condemn the mother tocertain death, whose life do you choose?

But many of the so-calledethical questions

in the businessworld arise from the choice between profit and socially desirable

policy considerations. Here, the ethical choice is not inherently difficult to discern, but often

financial considerations push ethically desirable concerns to thebackground Here, the cost of compliance > cost of fines

But the McWane Acipco contrast highlights the fact that ethicaldecisions do not necessarily result in financial ruin.

In Mr. Resters example, the opposing forces were his self-interest and hisconscience.