code of ethics

Ethics – Part I

Week 4 Workshop

MBA402 Governance, Ethics and Sustainability

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Social Experiment

Play Video

• What does US Supreme Court Justice Potter Stewart mean when he says:

Small Group Discussion

Ethics is knowing the difference between what you have a right to do and what is

right to do.

• In groups, discuss this dilemma and decide what course of action to take.

An angry mob armed with machetes are hunting you. They need only open the door to the second bathroom to find you and seven other adults crouched together in silence in an area no larger than 12 square feet. The pastor, risking his own life by hiding you in his home, slides a large cabinet across his living room to conceal the bathroom door as the men enter his house.

Your newborn baby stirs in your arms and sneezes loudly. She is going to cry and the men with machetes will hear her. The seven others, you, and your baby, will all be murdered. Or you could save their lives and your own by suffocating your child.

Small Group Challenge Kigali, Rwanda 1994

Moral Ambiguity

• People don’t choose to do what is ‘bad’ or ‘wrong’: they choose the ‘good’ or the ‘right’ as they perceive the ‘good’ or the ‘right’.

• Even men with machetes committing acts of genocide perceive their horrific actions as a justifiable moral crusade or the ‘right’ thing to do.

Ethics

• Ethics is the set of principles a person uses to determine whether an action is ‘good’ or ‘bad’ or ‘right’ or ‘wrong’.

• Corporate ethics examines the moral and ethical problems that arise in a business environment and is relevant to the conduct of individuals and entire companies.

Principle 3

3. Instil a culture of acting lawfully, ethically and responsibly Companies should act ethically and responsibly.

Ethical and Responsible Action

• Acting ethically and responsibly is about more than meeting legal obligations and involves acting with honesty, integrity and in a manner that is consistent with the reasonable expectations of investors and the broader community.

Recommendations 3.1 & 3.2

3.1 A listed entity should articulate and disclose its values.

3.2 A listed entity should: (a) have and disclose a code of conduct for its directors, senior executives, and employees; and (b) ensure that the board or a committee of the board is informed of any material breaches of that code

Code of Conduct • A code of conduct is a set of rules

outlining the social norms and proper practices of a company.

• The code of conduct should clearly express the company’s commitment not only to comply with its legal obligations but also to act ethically and responsibly.

Brown Eyes

Play Video

• What does Russian novelist Aleksandr Solzhenitsyn mean when he says:

Small Group Discussion

The battleline between good and evil runs through the heart of every man.

• Read the biography about the successful CEO then complete the survey.

Individual Challenge

Discrimination

• Discrimination is the unjust or prejudicial treatment of different categories of people, especially based on the grounds of race, age, or sex.

• The Commonwealth Government and state and territory governments have introduced laws to help protect people from discrimination and harassment.

Ethical and Responsible Action

• Acting ethically and responsibly includes creating a safe and non- discriminatory workplace.

• This includes ensuring there is no discrimination involved in: o Recruitment o Management o Termination

Code of Conduct

• The code of conduct should clearly state the company’s expectation that all directors, senior executives and employees will comply with the laws and regulations that apply to the company and its operations, including anti-discrimination laws.

Anti-Discrimination Laws

• Age Discrimination Act 2004 • Disability Discrimination Act 1992 • Racial Discrimination Act 1975 • Sex Discrimination Act 1984 • Australian Human Rights Commission

Act 1986

International Students

Play Video

• What does German playwright Bertolt Brecht mean when he says:

Small Group Discussion

The law was made for one thing alone, for the exploitation of those who don’t

understand it, or are prevented by naked misery from obeying it.

• In groups, come up with at least two strategies the Minister could implement to address the issue of international student worker exploitation.

The issue of international student exploitation in the workplace is gaining more and more attention in the press. Fresh evidence is emerging that many large Australian corporations are systematically falsifying their payroll records to conceal their practice of forcing international students to work more than 20 hours a week for less than the minimum wage. The Minister realises the problem is underreported because the victims will not admit to breaching their visa conditions and risk deportation.

The Minister seeks your advice.

Small Group Challenge The Minister for the Department of Immigration and Border

Protection has a problem…

Exploitation

• Exploitation is the action of treating someone unfairly in order to benefit from their work.

• Some companies in Australia are placing international students in a position where they are in breach of their visa conditions and then exploiting them.

Ethical and Responsible Action

• Acting ethically and responsibly includes respecting the human rights of employees.

• This would include not employing forced or compulsory labour or young children even where that may be legally permitted.

Human Rights • Human rights recognise the inherent

value of each person, regardless of background, where we live, what we look like, what we think or what we believe.

• Human rights are based on principles of dignity, equality, and mutual respect.

• Human rights are about being treated fairly and treating others fairly.

Code of Conduct

• The code of conduct should clearly state the company’s expectation that all directors, senior executives, and employees will not enter into any arrangement or participate in any activity that would be likely to infringe upon the human rights of any other person.

Inside Job

Play Video

• Do you agree with this statement by French Emperor Napoleon Bonaparte:

Small Group Discussion

Men are moved by two levers only: fear and self-interest.

• In groups, consider the merits of the proposal and decide whether the governors should implement it.

The modern sewers introduced by the French colonial government now teem with rats. The governors are formulating a novel proposal to manage the infestation. They are considering offering a bounty for the rats; they will pay citizens a small sum of money for every rat killed. To prove a rat kill and claim the bounty a citizen need only present the dead rat’s tail to the authorities.

The governors like the proposal because they believe it will serve two interests. Firstly, it will benefit the whole city by eradicating the rats and, secondly, it will benefit those individual citizens who participate by providing them a source of income.

Small Group Challenge Hanoi, Vietnam 1902

Corruption

• Corruption is a form of dishonest or fraudulent conduct.

• It is a perversion of proper business practice and standards.

• An example of corporate corruption is a company offering a potential client a bribe or a kickback to secure an advantage over competitors.

Bribery

• In 2006, German prosecutors conducted an investigation to determine if Siemens AG employees paid bribes in exchange for business.

• The company was found to have bribed public officials in Libya, Russia, and Nigeria in return for the awarding of contracts.

Recommendation 3.4

3.4 A listed entity should: (a) have and disclose an anti- bribery and corruption policy; and (b) ensure that the board or a committee of the board is informed of any material breaches of that policy.

Ethical and Responsible Action

• Acting ethically and responsibly includes refraining from activities that would conflict with the company’s best interests.

• This would include not using company property or information for personal gain and not offering or accepting bribes.

Code of Conduct

• The code of conduct should clearly state the company’s expectation that all directors, senior executives and employees will not take advantage of their position or the opportunities arising therefrom for personal gain.

Unethical Payments • The code of conduct should also

describe the company’s processes for preventing the offering or acceptance of bribes and other unlawful or unethical payments or inducements.

• This might include how the company regulates the giving and accepting of business courtesies and facilitation payments.

Playtime

Week 4 Workshop

MBA402 Governance, Ethics and Sustainability

Ms Sandra Allen, Chair of the Parliamentary Joint Committee on Corporations and Financial Services, invites you to make your statement.

“Thank you Madam Chair. Meridian Group has implemented a number of significant reforms in the wake of ASIC’s prosecution of former directors of our board. We have adopted a board charter, a screening process for new directors, a diversity policy and a process for evaluating board and senior executive performance. We have also established a nomination committee, a board skills matrix, a professional development program for directors, and we have restructured the board to have a majority of independent directors with an independent chair.”

“That sounds like a promising start,” Madam Chair Allen says, “Our investigation into Meridian Group is as concerned with the affairs of the new board as it is with the old.”

Committee Deputy Chair Senator Michael Stone adjusts his microphone, “There seems to me to be a broader problem at Meridian that goes beyond board and senior management structure. What is being done to facilitate a corporate culture that promotes ethical and responsible behaviour?”

Senator Stone’s question takes you by surprise. “What is it about Meridian’s corporate culture that is causing you concern, Deputy Chair?”

He places his hand on a small pile of documents. “A number of submissions made to this Committee paint a very bleak

picture of Meridian’s corporate culture. It appears unethical behaviour occurs at every level of the organisation. One particularly disturbing submission comes from an unsuccessful job applicant who was told by her interviewer she would not be a good fit because she wears a hijab.”

You swallow hard as Senator Stone riffles through his pile. “There was another one… yes, here it is, the submission from the former

employee. He was an international student forced by his manager to work twice the hours he was actually paid for.”

“But this one’s my personal favourite,” he declares, “a submission alleging Meridian employees secure new business from clients by offering them kickbacks.”

As Senator Stone continues to talk you realise you should not have come to the hearing without having first prepared a company code of conduct…

Group One In your group, draft a statement announcing the introduction of Meridian’s new code of conduct Focus on the following:

• Explain the concept of ethical and responsible action

• Discuss Recommendations 3.1 & 3.2 of the ASX Corporate Governance Principles and Recommendations

• Propose three things Meridian could do to implement the Recommendations

Group Two In your group, draft a statement announcing the introduction of Meridian’s new code of conduct Focus on the following:

• Explain the concept of discrimination • Discuss how Meridian employees have engaged in

discriminatory conduct • Propose a statement for inclusion in Meridian’s

code of conduct that addresses discriminatory practices

Group Three In your group, draft a statement announcing the introduction of Meridian’s new code of conduct Focus on the following:

• Explain the concept of exploitation • Discuss how Meridian employees have engaged in

exploitative conduct • Propose a statement for inclusion in Meridian’s

code of conduct that addresses exploitative practices

Group Four In your group, draft a statement announcing the introduction of Meridian’s new code of conduct Focus on the following:

• Explain the concept of corruption • Discuss how Meridian employees have engaged in

corrupt conduct • Propose a statement for inclusion in Meridian’s

code of conduct that addresses corrupt practices

Group One Group Two

Group Three Group Four

• Deliver your announcement of Meridian’s code of conduct to the Parliamentary Joint Committee on Corporations and Financial Services

Deputy Chair Stone finishes his speech about Meridian’s corporate culture.

Madam Chair Allen invites you to respond. You drink an entire glass of water and clear your throat…

Deputy Chair Stone appears unmoved by your announcement of Meridian’s new code of conduct.

He removes his reading glasses and rubs his eyes. “Your proposed code of conduct seems half-baked and incomplete. A

company’s code of conduct should include its expectations regarding honesty and personal integrity of the board, senior executives, and employees. It should also include a statement about environmental responsibility and a program for protecting whistleblowers. And most importantly, a code of conduct must contain clear provisions on how it is to be enforced. Your code does not include these essential ingredients.”

Your chest tightens and your heart thumps in your ears. “I recommend you appear before the Committee again when we next

convene to explain how your revised code of conduct addresses these omissions.”