Business Ethics 2 Discussion
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Chapter2and3VideoCaseandreading.docxChapter 02: Video Case - Banking on Nature
Video Transcript:
> In 2008, Mark Tercek gave up a powerful position at Goldman Sachs to become president of the Nature Conservancy. It is the world's largest environmental group. And now he's trying to change the way that we think about business and the environment. Mark Tercek, welcome.
>> Thank you
>> So when you talk about changing the way people think about business and the environment, what you have brought to the table here is a partnership between businessu and an environmental group. And you've received some criticism for that.
>> Yeah, we think about nature. It's got tremendous value for people. You should think about nature as infrastructure, something to invest in, to improve economies, to improve jobs, to improve life. And so of course we want out allies to include the government, working joes, but business as well. And big business increasingly has a huge environmental footprint. So if we can work with business, help them understand that taking better care of the environment is good for their business, we think they can really be powerful allies to the environmental movement.
>> How does somebody go from one of the biggest of businesses, Goldman Sachs, at the height of the boom to a nature non-profit?
>> Yeah, I think I've really been fortunate. I worked at Goldman Sachs for 25 years. I had a very positive experience there. Near the end of my career I wanted to shift gears. My boss at the time, Hank Paulson, said, I was thinking about leaving the firm in 2005 to become an environmentalist. He said no, stay at the firm and build an environmental effort at the firm. So Hank and I did that together. We looked for business opportunities that made business sense and that were good for the environment. It went really well. I'm really proud of what we accomplished there. And I became so convinced of this opportunity I went all the way and joined the Conservancy. I was very fortunate. The Conservancy was a great organization before I got there. That's for sure. I have the good privilege of leading it today, and we're excited about what we can do.
>> How many of those opportunities are out there today, by the way? Investments that are good for business and for the environment at the same time?
>> You know, we think it's almost unlimited, to be honest. We're just beginning to scratch the surface. But in case after care we work closely with companies who have a big environmental footprint. We help them understand how their business depends on nature, and the better they understand that the more incentivized they are by good old profit motives, chairholder value maximization motives to do a better job of being environmental stewards. That's a great weapon in our work.
>> Hank Paulson went on to lead the Treasury when you went on to lead the Nature Conservancy. I wonder, how do you convince, because sometimes it's not in a business's best interests as far as their bottom line is concerned, to be environmentally conscious. So in those circumstances, how do you convince them? And coming from a company like Goldman Sachs you know better than anyone being a public company means you're first and foremost having to maximize shareholder value.
>> Right. It's a great question. So you're right. There's a whole mix of businesses, and we don't pretend everybody is ready to be our ally right now. But some leading business people are. A good example would be Andrew Liveris, CEO of Dow Chemical. Dow is one of our partners. Lots of folks say why on earth would you partner with Dow Chemical? I say why wouldn't we? If we can help them understand how being better stewards of the environment will help their business, imagine what we can do. And Andrew is a far-sighted leader and he heard me argue that nature, business depends on nature. So he said Mark, let's test that. Let's take some Dow engineers and some Nature Conservancy scientists, put them to work side by side. Let's figure out how Dow depends on nature, and if the natural capital that Dow depends on is vulnerable, then what might we do about it? And so that's an exciting project for us. And in the business world, people pay attention to one another. So all of Dow's competitors and other companies are watching our project. And if we can make it work, we think we can replicate that in many places.
>> You're spending a lot of time focusing on population growth. How big a problem is that moving forward?
>> Population growth is a big deal. But this is one of the good stories that's occurred recently without a lot of profile. The developing world, as they grow their economies and invest in education, invest in girls, invest in family planning, population growth is coming down. So it's not our core area of expertise, but boy, we really support it. And the U.S. government has been a good supporter of this through international aid, and we sure hope that continues as well.
Chapter 03: Video Case - Employee Microchip
>> By now you've probably heard about New Square Market. The company that wants to install microchips in their employee's bodies. Which caused a lot of controversy. Generated a lot of headlines. It remained me a lot of this Black Mirror episode. Which showed a future in which people have devices inserted inside of them in their necks. It allowed everything they saw and every conversation they had be recorded. And then you could watch that and play it back to themselves. And it caused this complete nightmare. And it caused a generational divide too. Which I can speak to myself. But in this case two of the employees are a mother and daughter. And a mother had some concerns about it. Wasn't necessarily against it. Was definitely a little creeped out about it. And the daughter worked for the same company. She had no problem with it. She saw it as a matter of convenience. I mean if my employer asked me to insert a microchip, I definitely would say no. I would object that idea. There are obviously a lot of people who were okay with that. There is a generation that's much more open to sharing their lives whether it's on Facebook or Snap. This raises issues of privacy and the role of technology in our lives. Obviously, there's some data that's being collected. The second issue is in terms of technology actually being in our bodies. It's not clear what the implications of that are health wise. They're not actually data. And yet for me person it presents sort first sign of this dystopian future. It could be a slippery slope. It very easily happens where those who voluntary to in voluntary and then it's out of your hands. I think people should be concerned and think about even legislation that could potentially limit this type of activity. Also, just to be on the lookout for that and have employees be much more concerned and keeping an eye on the agreements they have with employers. It's still a lot of questions raised about what happens to that data. And how future companies would use it. Especially bigger companies. I think in the end it compels all of this to take a lot more ownership of what we sign up for when we go to work for a company.
Chapter 02: Stakeholder Relationships, Social Responsibility, and Corporate Governance - Reading
Chapter Review
2-8aSummary
Business ethics, issues, and conflicts revolve around relationships. Customers, investors and shareholders, employees, suppliers, government agencies, communities, and many others who have a stake or claim in an aspect of a company’s products, operations, markets, industry, and outcomes are known as stakeholders. Stakeholders are influenced by and have the ability to affect businesses. Stakeholders provide both tangible and intangible resources that are critical to a firm’s long-term success, and their relative ability to withdraw these resources gives them power. Stakeholders define significant ethical issues in business.
Primary stakeholders are those whose continued association is absolutely necessary for a firm’s survival. Secondary stakeholders do not typically engage in transactions with a company and are not essential to its survival. The stakeholder interaction model suggests there are reciprocal relationships between a firm and a host of stakeholders. The degree to which a firm understands and addresses stakeholder demands is expressed as a stakeholder orientation and includes three sets of activities:
1. the generation of data about its stakeholder groups and the assessment of the firm’s effects on these groups,
2. the distribution of this information throughout the company, and
3. the responsiveness of every level of the business to this intelligence.
A stakeholder orientation can be viewed as a continuum in that firms are likely to adopt the concept to varying degrees.
Although the terms ethics and social responsibility are often used interchangeably, they have distinct meanings. Social responsibility in business refers to an organization’s obligation to maximize its positive impact and minimize its negative impact on society. There are four levels of social responsibility—economic, legal, ethical, and philanthropic—and they can be viewed as a pyramid. The term corporate citizenship is used to communicate the extent businesses strategically meet the economic, legal, ethical, and philanthropic responsibilities placed on them by their stakeholders.
Issues in social responsibility include social issues, consumer protection issues, sustainability, and corporate governance. Social issues are associated with the common good and include such issues as childhood obesity and Internet privacy. Consumer protection often occurs in the form of laws passed to protect consumers from unfair and deceptive business practices. Sustainability is the potential for the long-term well-being of the natural environment, including all biological entities, as well as the mutually beneficial interactions among nature and individuals, organizations, and business strategies. Corporate governance involves the development of formal systems of accountability, oversight, and control.
Most businesses operate under the assumption that the main purpose of business is to maximize profits for shareholders. The stakeholder model places the board of directors in the position of balancing the interests and conflicts of various constituencies. Both directors and officers of corporations are fiduciaries for the shareholders. Directors have a duty to avoid ethical misconduct and provide leadership in decisions to prevent ethical misconduct in their organizations. To remove the opportunity for employees to make unethical decisions, most companies develop formal systems of accountability, oversight, and control known as corporate governance. Accountability refers to how closely workplace decisions are aligned with a firm’s stated strategic direction and its compliance with ethical and legal considerations. Oversight provides a system of checks and balances that limit employees’ and managers’ opportunities to deviate from policies and strategies intended to prevent unethical and illegal activities. Control is the process of auditing and improving organizational decisions and actions.
There are two perceptions of corporate governance that can be viewed as a continuum. The shareholder model is founded in classic economic precepts, including the maximization of wealth for investors and owners. The stakeholder model adopts a broader view of the purpose of business that includes satisfying the concerns of other stakeholders, from employees, suppliers, and government regulators to communities and special interest groups.
Two major elements of corporate governance that relate to ethical decision making are the role of the board of directors and executive compensation. The members of a public corporation’s board of directors assume legal responsibility for the firm’s resources and decisions. Important issues related to boards of directors include accountability, transparency, and independence. Boards of directors are also responsible for appointing top executive officers and determining their compensation. Concerns about executive pay center on the often-disproportionate relationship between executive pay and median employee wages in the company.
An organization that develops effective corporate governance and understands the importance of business ethics and social responsibility in achieving success should develop a process for managing these important concerns. Although there are different approaches, steps have been identified that have been found effective in utilizing the stakeholder framework to manage responsibility and business ethics. These steps are
1. assessing the corporate culture,
2. identifying stakeholder groups,
3. identifying stakeholder issues,
4. assessing organizational commitment to social responsibility,
5. identifying resources and determining urgency, and
6. gaining stakeholder feedback.
Chapter 03: Emerging Business Ethics Issues - Reading
Chapter Review
3-5aSummary
Stakeholders’ concerns largely determine whether business actions and decisions are perceived as ethical or unethical. When government, communities, and society become involved, what was merely an ethical issue can quickly become a legal one. Shareholders can unwittingly complicate the ethical conduct of business by demanding managers make decisions to boost short-term earnings, thus maintaining or increasing the value of their stock.
A first step toward understanding business ethics is to develop ethical issue awareness, that is, to learn to identify which stakeholder issues contain an ethical component. Characteristics of the job, the corporate or local culture, and the society in which one does business can all create ethical issues. Recognizing an ethical issue is essential to understanding business ethics and therefore to create an effective ethics and compliance program that minimizes unethical behavior. Businesspeople must understand the universal moral constants of honesty, fairness, and integrity. Without embracing these concepts, running a business becomes difficult.
Fairness is the quality of being just, equitable, and impartial and overlaps with concepts of justice, equity, and equality. The three fundamental elements that motivate people to be fair are equality, reciprocity, and optimization. Equality relates to how wealth is distributed between employees within a company, country, or globally; reciprocity relates to the return of favors approximately equal in value; and integrity refers to a person’s character and is made up of two basic parts, a formal relation one has to oneself and a person’s set of terminal, or enduring, values from which he or she does not deviate.
An ethical issue is a problem, situation, or opportunity that requires an individual, group, or organization to choose among several actions that must be evaluated as right or wrong, ethical or unethical. By contrast, an ethical dilemma has no right or ethical solution.
The misuse of company time and resources—especially computer resources—has become a major ethical issue. Abusive or intimidating behavior includes physical threats, false accusations, being annoying, profanity, insults, yelling, harshness, ignoring someone, and unreasonableness. Bribery is the practice of offering something (usually money) in order to gain an illicit advantage. A conflict of interest occurs when individuals must choose whether to advance their own interests, those of the organization, or some other group. Corporate intelligence is the collection and analysis of information on markets, technologies, customers, and competitors, as well as on socioeconomic and external political trends. The tools of corporate intelligence are many. Corporate intelligence can be a legitimate business activity but becomes unethical if deception is used to steal another firm’s trade secrets.
Another ethical/legal issue is discrimination, which is illegal in the United States when it occurs on the basis of race, color, religion, sex, marital status, sexual orientation, public-assistance status, disability, age, national origin, or veteran status. Additionally, discrimination on the basis of political opinions or affiliation with a union is defined as harassment. Sexual harassment is a form of sex discrimination. To build workforces that reflect their customer base, many companies initiated affirmative action programs. In general, fraud is any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. There are several types of fraud: accounting, marketing, and consumer.
An insider is any officer, director, or owner of 10 percent or more of a class of a company’s securities. There are two types of insider trading: legal and illegal. Intellectual property rights involve the legal protection of intellectual property such as music, books, and movies. Consumer advocates continue to warn consumers about new threats to their privacy.
