Unlike the other areas of MBA study, ethics is a new area. The purpose of ethics in an MBA curriculum is not create model citizens, but to make students aware of the ethical implications of business decisions. It's notable that the discussion of ethics in the course text occupies just eleven pages -- less than a third of what has been devoted to the other eight primary areas focus. Furthermore, three pages are dedicated to Sarbanes-Oxley (more of a Business Law topic it seems to me). Nevertheless, ethical discussions make for lively classroom discussions and are fertile academic ground for articles and dissertations and a source of hope for the the future of our civilization.
Some hot ethical topics include:
- Environmental issues - pollution, toxic waste disposal, animal rights
- Corporate restructuring - layoffs
- Employee privacy issues - HIPPA, drug screening
- Diversity issues - race, ethnicity, gender, sexual orientation, religion
- Respectful workplace - sexual harassment, retribution
- Conduct of multinational corporations - bribery
- Others - antitrust actions, predatory pricing, insider trading
- Corporations have societal obligations that go beyond maximizing profits and should be managed for the benefit their stakeholders: customers, suppliers, employees, local communities and owners.
- Corporate leaders bear a fiduciary responsibility to all stakeholders.
- "Businesses are in the business of maximizing shareholders' value by a prudent use of scarce organizational resources, as long as the activities of business are within the letter of the law."
- It is up to government to determine what the laws should be.
- A profitable business benefits society by creating jobs, increasing the standard of living of its owners and employees.
- Corporations pay taxes that support government's social action.
- In my opinion, Friedman's position makes a great deal of sense to me assuming that there is a balance and separation of power between corporate and governing interests. However, in our current state, where money buys the ability to present your ideas through lobbying, advertising and campaign donations, corporate entities and government are inextricably intertwined. This, and the broken governmental systems we have in place mean that it is no longer reasonable to assume that government can effectively direct and enforce corporate behavior through pro-social legislation. Corporations, as society's dominant institutions should bear and increased responsibility to preserve and foster the society allowed them to rise to power.
- Relativism
- Examines why we often ignore ethics in our decision making
- Proponents hold that we cannot decide on matters of right and wrong, or good and evil. Ethics are relative to personal, social, and cultural circumstances.
- Relativists are not torn by ethical dilemmas since they do not believe that truth can be discovered through soul searching.
- Relativism takes four forms:
- Naive relativism
- Holds the every person has his or her own standard that enables him or her to make choices. No one can make a moral judgment about another person's behavior.
- Role relativism
- Distinguishes between our private selves and public roles. Public roles call for "special" morality that we can separate from the individual making the choices.
- Social group relativism
- Akin to naive relativism, people refer to social norms to make ethical judgments.
- These include professional codes of conduct and accepted practices.
- Cultural relativism
- Holds that these is no universal moral code by which to judge another society's moral and ethical standards. If a whole cultural holds certain beliefs, how can an outsider sit in judgment?
- This is more important as companies compete globally. Multinational corporations often follow local laws and customs that may violate ethical standards in their home countries.
- Apartheid
- Bribery
- Labor laws
- In some instances, US corporations and citizens are barred from adopting host countries' practices
- Foreign Corrupt Practices Act of 1977 (outlaws bribery)
- Other ethical frameworks:
- Natural law
- Serves as a guide to those who believe the right thing to do is revealed in nature or the religious texts
- Utilitarianism
- Action is justified if it produces the greatest benefit for the greatest number of people
- Universalism
- Any action is condonable if the motive behind the action is good since the results of an individual's action are so often out of their control.
- Stakeholder analysis
- Provides a structure with which to confront ethical decisions. This process is:
- List all potentially affected parties
- Evaluate all the harms and benefits that a particular action will have on those involved
- Determine the affected parties' rights and responsibilities
- Consider the relative power of each
- Consider short and long term consequences of your decision alternatives
- Formulate contingency plans for alternative scenarios
- Make a judgment
- To create a stakeholder analysis:
- With a piece of paper, write the main characters along the top
- Along the side, place the words "Harms and Benefits" and below that "Rights and Responsibilities"
- Sarbanes-Oxley Act of 2002
- Congress forced to legislate ethics in corporate America
- New provisions of SOX and related agency regulations that became effective in 2005 include four categories of new rules:
- Financial accounting
- Internal Control Rules
- Executive Ethical Conduct Rules
- Ethical Conduct Rules for Related Parties
- Scott Green's Manager's Guide to the Sarbanes-Oxley Act summarizes the COSO (Committee of Sponsoring Organizations of the Treadway Commission) "Internal Control -Integrated Framework" which the SEC accepts as the approved framework for corporate officials, auditors, and compliance professionals to use to comply with SOX.
- Identify the possible threats from within and outside
- Identify all the processes within
- Identify the vulnerable process gaps with control assessment tools
- Implement internal controls to fill gaps with strong control processes
- Monitor and test the controls with an early warning system
- Hall of Shame for corporate grift includes:
- Pre-Sarbanes-Oxley Act
- Tyco
- Xerox
- Qwest
- Sunbeam
- WorldCom
- Adelphia
- Enron
- Global Crossing
- Health-South
- ImClone
- Credit Suisse First Boston
- Arthur Andersen
- Nick Leeson at Barings
- Yasuo Hamanaka at Sumitomo
- John Rusnak at Allfirst
- Post-Sarbanes-Oxley Act
- Putnam, Invesco, Janus
- Rapid mutual fund trading in 2003
- Marsh & McLennan
- Bid rigging in the insurance industry in 2004
- Fannie Mae
- Egregious accounting in 2004
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