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Chapter Four

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Demanding Ethical and Socially Responsible Behavior

McGraw-Hill/Irwin

Copyright 2010 by The McGraw-Hill Companies, Inc. All rights reserved.

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LIFE AFTER SCANDAL
Scandals have shaken the real estate, mortgage and banking industries.
How do we restore trust in the free market system?
Punish those who have broken the law. Make accounting records more transparent. Consider what is ethical, not just what is legal.
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Ethics is More Than Legality

LG1

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WHAT are ETHICS?
Ethical Standards are Fundamental

LG1

Ethics -- The standards of moral behavior.

Behaviors that are accepted by society as right versus wrong.

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PAYING the PRICE
(Legal Briefcase)

Enron: One executive is serving a 24 year sentence for accounting fraud while another will be released in October 2011. Arthur Andersen: Convicted of tampering with witnesses, the company was dissolved and about 28,000 people lost their jobs. Tyco International: Two executives stole $600 million from the company and are scheduled to be released from prison in 2030. Adelphia Communication: Two executives were convicted of conspiracy, bank and securities fraud and given sentences of 15 and 20 years. WorldCom: Former CEO was convicted of fraud, conspiracy and false filings and sentenced to 25 years.

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ETHICS and YOU
Ethics Begins with Each of Us LG2

Plagiarizing from Internet materials is the most common form of cheating in schools today.

Studies found a strong relationship between academic dishonesty and dishonesty at work.

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FACING ETHICAL DILEMMAS
Ethics Begins with Each of Us LG2

Ask yourself these questions: - Is it legal? - Is it balanced? - How will it make me feel about myself?

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ETHICS START at the TOP

Managing Businesses Ethically and Responsibly

LG3

Trust between workers and managers must be based on fairness, honesty, openness and moral integrity. Leadership can help instill corporate values in employees.

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ETHICS CODES

* Setting Corporate
Ethical Standards LG4

An increasing number of companies have adopted written codes of ethics. Compliance-Based Ethics Code -- Emphasize
preventing unlawful behavior by increasing control and by penalizing wrongdoers.

Integrity-Based Ethics Code -- Define the

organizations guiding values, create an environment that supports ethically sound behavior and stress a shared accountability among employees.
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HOW to IMPROVE AMERICAS BUSINESS ETHICS

* Setting Corporate
Ethical Standards LG4

1. Top management must adopt and unconditionally support an explicit corporate code of conduct. 2. Employees must understand that senior management expects all employees to act ethically. 3. Managers and others must be trained to consider the ethical implications of all business decisions. (continued)
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HOW to IMPROVE AMERICAS BUSINESS ETHICS

* Setting Corporate
Ethical Standards LG4

4. An ethics office must be set up with which employees can communicate anonymously. Whistleblowers -- People who report illegal or
unethical behavior.

5. Involve outsiders such as suppliers, subcontractors, distributors and customers. 6. The ethics code must be enforced.
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SOCIAL AUDITING
Social Auditing LG5

Social Audit -- A systematic evaluation of an

organizations progress toward implementing programs that are socially responsible and responsive.

Four Types of Social Audit Watchdogs

Socially conscious investors

Environmentalists
Union officials Customers
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INTERNATIONAL ETHICS
Many businesses want socially responsible behavior from their international suppliers.

International Ethics and Social Responsibility

LG6

The Joint Initiative on Corporate Accountability and Workers Rights was designed to make creating a single set of labor standards and inspecting factories easier.

In the 1970s, the Foreign Corrupt Practices Act criminalized the act of paying foreign businesses or government leaders in order to get business.
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