LEBANESE AMERICAN UNIVERSITY

Corporate Governance acrossEthics, Culture and Citizenship.

Said M. Ladki, Ph.D.Interim Dean

Outline

• Ethical Behavior

• Ethics in the workplace

• Pillars of Professionalism

• CSR, maintaining high Ethical Standards

WHAT IS ETHICAL BEHAVIOR?

Ethics: The code of moral principles of

Good Bad

Right Wrong

which guides the behavior of a person or group.

Ethics guide behavior to make moral choices among alternative courses of action.

EXAMPLES

A rental car company admits overcharging consumers more than US$ 13 million for damaged

rental cars.

Executives get prison terms for selling adulterated apple juice labeled “100% Fruit Juice”, which was

actually a blend of synthetic ingredients.

Laws, Values, and Ethical Behavior

Are all legal behavior considered ethical?

• Slavery was legal• Laws permitted only men to vote• Gambling• Manufacturing and distribution of firearms• Minimum wage• Working conditions• Equal pay for equal work• A person will give more money to his son vs. his

daughter

What are Values?

Values: broad beliefs about what is or is not appropriate behavior.

• Euthanasia

• Child labor

Laws, Values, and Ethical Behavior

How about an action which is strictly not illegal, does it make it ethical?

• Employee take longer than necessary to do a job• Call in sick to take a day off for leisure• Fail to report rule violation by coworker• Employee falsify travel charges• Employees act busy when the boss is around• Employee brown nose• Employee bad mouth fellow workers• Employee sells trade secrets to competitors

How ethical problems arise?

• Most ethical problems arise when people are asked to do or find themselves about to do something that violates their personal conscience.

Laws, Values, and Ethical Behavior

• If the act is legal proceed with confidence

• If the act is not legal ethical question arise

Business Ethics

• General Motors:

- The world’s largest automobile company

- Revenues of $189 billion

- Employed more than 388,000 workers

• Wal Mart:

- The world’s largest retailer

- Sales of $165 billion

- 1,140,000 employees

• General Electric:

- World’s largest maker of electrical equipment

- Sales of $111 billion

- 340,000 employees

• IBM:

- The world’s largest company

- Revenues of $87.5 billion

- 307,000 employees

Business Ethics

Of the world’s 190 nations only a handful:• Canada• France• Germany• Italy• Japan• United States• Russia• United Kingdom

had government budgets larger than any one of these company's sales revenues

Do Moral Standards Apply to Corporations or only to Individuals?

• The Justice Department charged E.F. Hutton Corporation for check kiting (200 banks) where employees wrote overdrafts on bank accounts.

• This allowed E.F. Hutton to derive interest earnings ($8 M in 20 months with daily usage of $250 M of interest-free funds) that rightly belonged to the banks.

Check Kiting

Do Moral Standards Apply to Corporations or only to Individuals?

• Critics : Justice Department should have charged the individual managers of E.F. Hutton, not the corporation.

‘Corporations don’t commit crimes,

people do.’

Do Moral Standards Apply to Corporations or only to Individuals?

• Two views have emerged in response to this problem:

1) Organizations act as individuals and have ‘intended objectives’ for what they do, they are ‘morally responsible’ for their actions which are ‘moral’ or ‘immoral’ in exactly the same sense that as individuals’.

2) It makes no sense to hold organizations ‘morally responsible’ for failing to follow moral standards than it makes to criticize a machine for failing to act morally.

ETHICS IN THE WORKPLACE

Codes of Ethics

1. Principles: guidelines, references, or bases for some document

2. Public policies: norms, practices of a society or group

3. Codes of conduct: may include ethical principles

4. Legal instruments: enforces good conduct through courts

Moral Imperatives

• Avoid harm to others• Be honest and trustworthy• Be fair and take action not to discriminate• Honor property rights including copyrights and patents• Give proper credit for intellectual property• Respect the privacy of others• Honor confidentiality

Professional Responsibilities

• Strive to achieve the highest quality and effectiveness• Acquire and maintain professional competence• Know and respect existing laws pertaining to professional

work• Accept and provide appropriate professional review• Honor contracts, agreements, and assigned responsibilities• Uphold and promote the principles of this code

Objectives of Codes of Ethics

• Disciplinary: ensures professional integrity of members

• Advisory: offers advice on fuzzy moral issues

• Educational: do’s and don'ts of the profession

• Inspirational: carry messages to inspire users to be good

• Publicity: shows strong code of ethics

Four Types of Codes

• A working professional usually observes the following:

Professional Code

Personal Code

Institutional Code

Community Code

Pillars of Professionalism

• Commitment: Openly and publically stated

• Integrity: Vision and Love

• Responsibility: Professional, Service, Product and consequential .

• Accountability: Objective and reliable performance evaluation

What is an Ethical Dilemma?

Ethical dilemma:

A situation in which action must be taken but for which there is no clear consensus on what is “right” and “wrong”.

Example: Firing someone due to budget constraint.

Ethical Problems Faced by Managers

• Discrimination:

race, religion, gender, age, or other non-job-relevant criterion.

• Sexual Harassment:

Requesting sexual favors in return for favorable job treatment.

• Conflicts of Interest:

Accepting a bribe or kickback or extraordinary gift.

• Customer Confidence:

Sharing of privileged information about customer activities.

• Organizational Resources:

Usage of corporate stationary or e-mails for personal purposes.

Rationalizations for Unethical Behavior

Four ways of thinking about ethical behavior:

Convince yourself that:

• The behavior is not illegal.• The behavior is in everyone’s best interests.• Nobody will ever find out what you’ve done.• The organization will “protect” you.

CSR, MAINTAINING HIGH ETHICAL

STANDARDS

Justice and Fairness

• Distributive Justice

Concerned with the fair distribution of society's benefits and responsibilities

• Retributive Justice

The belief that agents should be punished or blamed for wrongdoing

• Compensatory Justice

To restore items or benefits lost due to wrong actions of others

Ethics Training

Ethics training:

Designed to help people deal with ethical issues while under pressure.

“We aren’t teaching people right from wrong – we assume they know that. We aren’t giving people moral courage to do what is right – they should be able to do that anyhow. We focus on dilemmas.”

Executive of Chemical Bank

Whistleblower Protection

Ethics

advisors

Moral

quality

circles

Whistleblower

Complication to Whistle-blowing

• Fear of reprisals

• Suspicion surrounding whistle-blowing

• Membership in organizational channels

Ethical Role Models

• 64% of 238 executives reported feeling under pressure to compromise personal standards to achieve company goals.

• Fortune survey reported that 34% of respondents felt a company president can create an ethical climate by setting reasonable goals “so that subordinates are not pressured into unethical actions.”

Corporate Social Responsibility

Obligation of an organization to act in ways that serve the interests of its stakeholders.

Social Responsibility

• Ben & Jerry’s Homemade, Inc.

Gives 7.5% of pretax earnings to charities

• Hewlett-Packard

Started a program to help villagers around the world gain access to technology

• Ebay, Inc.

Gave 100,000 of pre-IPO shares to charity

• Timberland Company

40 hours of paid time/year to community volunteer work

Perspectives on Social Responsibility

• Milton Friedman, a respected freemarket economist and Nobel Laureate

• The argument against corporate social responsibility include fears that will:

- reduce business profits

- raise business costs

- dilute business purpose

Perspectives on Social Responsibility

• Paul Samueson, distinguished economist and Nobel Laurette.

• Among the arguments in favor of corporate social responsibility are that it will add:

- long run profits

- Improve the public image

- Help them to avoid more government regulation

How Government Influences Organizations

• FAA (Federal Aviation Administration)

• FDA (Food and Drug Administration)

• NTSB (National Transportation Safety Board)

• Fair labor practice

• Occupational safety and health

• OSHA (Occupational Safety and Health Administration)

• Consumer protection• Environmental protection

How Organizations Influence Government

• Personal contacts and networks

• Public relations campaigns

• Lobbying

• Political action committees

What is Ethics?

An act or decision is ETHICAL if:

1. It can be accepted

2. For good reasons

3. By all concerned parties.

Conclusion

Ethics is not about:

1. The one and only solution

2. The rational solution

3. Consensus

4. The elimination of every risk

Thank you