Weekly Assignment

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 1/49

Learning Objectives

By the end of this chapter, you will be able to:

Explain how globalization has transformed the American economy through the processes of outsourcing, offshoring, and reshoring.

Describe how the First and Second Machine Ages brought greater degrees of automation to workplaces around the world.

Demonstrate how inequality within nations has increased in the 21st century.

Explain how global corporations have moved away from marketing the same products and doing business in the same way in every country and instead have developed “glocalization” strategies.

Outline the many ways businesses and business leaders have responded to the causes and/or effects of global climate change and identify strategies they employ to become climate “winners” rather than climate “losers” in an unpredictable future.

9Issues and Trends in the Global Workplace

istocksdaily/iStock/Thinkstock

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 2/49

Introduction

Your sociological imagination will be particularly useful as you read about the global workplace. As C. Wright Mills (1959/2000) described in his book The Sociological Imagination, sociologists use the sociological imagination to relate what is happening in our individual lives to larger scale social forces. Without employing a sociological imagination, we may not fully realize just how much our individual lives have been and continue to be affected by macro forces such as globalization.

Almost everything in our lives, and particularly our work lives, connects in some way to global issues and trends. We now live in a global economy with a multinational and multicultural workforce. As jobs move from nation to nation and workforces become global, the ability to work with people of different cultures has become more important than ever. Gaining skills that align with a changing job market has also become crucial for employees.

We also live on a planet threatened by global climate change, which has already begun to impact how companies do business. The repercussions of climate change have affected local, national, and global economies, as well as businesses and employees throughout the world. Many business leaders have responded to the causes and/or effects of climate change and identi�ied strategies they can employ to become climate “winners” rather than climate “losers” in an unpredictable future. We explore all these issues in this chapter.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 3/49

9.1 The Movement of Jobs

As previous chapters discussed, globalization has affected the human social experience in a multitude of ways. One of globalization’s challenges is that it causes the proverbial ground under the workforce to constantly shift. Globalization has led to:

increased cultural diversity in the workplace and the marketplace; a global workforce, with implications for local and national unions, lower wages for workers, and higher pro�its for companies able to outsource work to low-wage nations; pressure to raise standards for worker safety in some areas of the world experiencing a media and consumer spotlight (while leaving those outside the spotlight to languish); more numerous and increasingly powerful global corporations; and the loss of many middle-class positions in the United States that require some education (paralegal, secretarial, banking) to computers or outsourcing to nations with lower wages.

Depending on business trends, there may be an abundance or a paucity of jobs in a particular region. Either way, there is little job security. We now look at how globalization has transformed jobs and competition in the employment sector through the movement of jobs out of the United States.

Outsourcing and Offshoring

Outsourcing occurs when an organization or company chooses to purchase goods or services from another source such as a subcontractor. Another element of job movement is offshoring, the outsourcing of work once performed in the United States to other countries. As technology makes international communication easier, transferring jobs to areas with cheap labor has become a popular business model. During the last decades of the 20th century, in order to save money, many corporations moved their factories to nations with fewer (or no) unions, a lower (or no) minimum wage, and scant workplace regulations.

Manufacturing jobs were the �irst to move out of the United States, starting in the 1970s and 1980s when large industries began to face competition from an increasingly global marketplace. For example, U.S. car manufacturers, facing intense competition from Japanese carmakers, looked to decrease costs by moving automotive plants to low-wage antiunion nations like Mexico (Levine, 2011). The 1989 �ilm Roger and Me describes the impact on the city of Flint, Michigan, when General Motors began moving jobs from there to Mexico. Tens of thousands of people in Flint lost their jobs, and the entire city suffered a dramatic economic downturn.

In July 2014, United Airlines made headlines by simultaneously outsourcing and insourcing (creating new positions to be staffed by existing employees). The airline giant announced that 635 check-in, baggage handling, and customer service positions that paid $12 to $24 per hour and had bene�its would be outsourced to vendors expected to pay their workers as little as $9 per hour with few bene�its. The outsourcing would be limited to 12 smaller airports, including Buffalo, New York, and Salt Lake City, Utah. According to industry analysts, this would save United $1.6 million to $3.5 million per year. At the same time, United planned to add 400 similar positions at its busiest airports and staff them with their own employees (insourcing). The new positions paid higher wages and bene�its than those staffed by the outside vendors would. Advocates for airline passengers suggest that United is more concerned about baggage handling and customer service at its hubs (and willing to pay higher wages to ensure it is done well there) than at its less traveled destinations. This dual strategy indicates the complex nature of outsourcing today as businesses attempt to provide high-quality services with low-cost labor (Carey, 2014).

In recent years information technology has led to the outsourcing of work that in the past could only be performed by highly educated U.S. workers. For example, many customer service jobs related to personal computing issues have been outsourced to call centers in Bangalore and other cities in India. Many other traditionally white- collar jobs—such as radiologist, typesetter, and proofreader—have also moved out of the United States (Levine, 2011; Hughes, 2013). This has prompted concern for U.S. “college graduates facing a

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 4/49

Vivek Prakash/Bloomberg via Getty Images

It is common for companies to outsource information technology jobs. Indian-based Infosys Ltd. is one of the largest providers of technology outsourcing services.

dwindling supply of entry-level jobs that have traditionally served as stepping stones to higher skilled and higher paying positions” (Levine, 2011, p. 2).

The trend toward offshoring customer service, knowledge work, and innovation continues to expand. Successes and cost savings from offshoring such complex work have led some companies to offshore the work of product innovation, including research and development (Naghavi & Ottaviano, 2009). For example, software engineers, once considered a “safe” category of the American white-collar workforce, have watched as their own technological innovations provide the means by which engineering jobs can now be outsourced to other countries.

Today, many companies offshore complex knowledge work, such as information technology management, business operations, engineering, graphic design, architectural design, and software production. For example, platforms like oDesk, Elance, and Guru can

connect specialists with companies that seek their skills, “providing access to web designers, software programmers, salespeople, translators and administrators from across the world” (Gratton, 2012, para.19).

The jobs that remain most �irmly based in the United States tend to be those that pay well and require very high skills and on-site administration (such as systems managers and some doctors and lawyers) and low-skill jobs that do not pay well, that many people can do, and that require hands-on work (such as nurses’ aides, waiters, and clerks). Employees who can most successfully navigate this landscape tend to be those who can make connections, sell themselves effectively, and continually adjust and update their skills to match those in current demand. As columnist Thomas Friedman explains, today’s job market is “best summed up by the mantra from the Harvard education expert Tony Wagner that the world doesn’t care anymore what you know; all it cares ‘is what you can do with what you know’” (Friedman, 2013, para.1).

As technology allows job seekers to apply for multiple positions in a short amount of time, many companies are �looded with resumes and seek ways to discern quali�ied applicants from unquali�ied ones. Likewise, job applicants seek ways to gain the attention of potential employers. Some new businesses offer to connect potential employees and employers with the assistance of new technology. For example, HireArt asks job seekers to show they can effectively complete tasks they would encounter on the job they seek. The team at HireArt then “grades” the applicants and promotes the most quali�ied to businesses that use HireArt to �ind quali�ied employees.

If it is for a Web analytics job, HireArt might ask: “You are hired as the marketing manager at an e-commerce company and asked to set up a Web site analytics system. What are the key performance indicators you would measure? How would you measure them?” Or, if you want to be a social media manager . . . “you will have to demonstrate familiarity with Twitter, Facebook, Pinterest, Google+, HTML, On-Page SEO and Key Word Analysis.” Sample question: “Kanye West just released a new fashion collection. You can see it here. Imagine you had to write a tweet promoting this collection. What would your tweet be?” Someone applying for a sales job would have to record a sales pitch over video. (Friedman, 2013, paras. 6–7)

These workers are showing that they can apply the skills needed in today’s workplace even before they are hired.

In the new international workplace, not only are workers competing with people in their own country, they also face strong competition from a global talent pool that has access to both local and global means of education. For example, in 2012 alone China graduated 16.8 million college students (FlorCruz, 2012). In addition, thanks to open source education, which offers a wide variety of coursework online for free (such as MIT’s OpenCourseWare, Open Yale, iTunes U, and Khan Academy), people around the globe can gain some of the skills required to successfully compete in the global workplace (Gratton, 2012).

Highly educated, mobile workers are the new “transnationals.” Transnational used to be a term to describe corporations that conducted business in more than one nation. In the world of business, the term now describes a “global elite” of mobile workers with connections to various societies. These workers have “competencies that bridge

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 5/49

This video looks at a company called Samasource that outsources simple tasks from major companies in the United States to people in marginalized communities around the world where unemployment rates are high.

societies in terms of their management style, cultural sensitivities and social networks” (Gratton, 2012, para. 26). They have the tools and training to work for multiple companies in various nations. For example, one such transnational might be raised in the United States, go to an elite college with an international student body, get hired by a multinational company after college, and then move throughout the world while moving from one position to another within the company.

These elite transnationals have choices of where to work and thus have lives that are very different from immigrants at the other end of the socioeconomic spectrum. Low-wage workers crossing borders for jobs tend to face more push factors (oppression, lack of opportunities) than high-wage transnational workers, who tend to be pulled to different nations by exciting career opportunities. However, both are indicative of the fact that workforces are now global.

The Next Evolution of Outsourcing

The Next Evolution Of Outsourcing

Critical Thinking Question

Reshoring

As economies adjust to global forces, the demand for workers �luctuates across regions of the word. This ebb and �low of employer demand can lead to changes in rates of offshoring and in some cases its reversal. Data are hard to come by to measure the extent of offshoring in the United States. A review of published articles on the topic, however, indicates that between 2000 and 2008, U.S. companies offshored between 100,000 and 150,000 jobs annually. Today the offshoring of jobs has slowed down to about 30,000 to 50,000. In addition, about 30,000 to 40,000 jobs are now coming back to the United States every year, a phenomenon called reshoring (Branham, 2015).

Weaker unions in the United States, public pressure to bring jobs back, and government tax breaks in many U.S. states have encouraged corporations to return manufacturing to the United States (Branham, 2015). Rising wages in many developing nations (for example, 20% year-over-year increases in China, Malaysia, Vietnam, and Indonesia) have made reshoring a smart business decision for many companies. As Figure 9.1 shows, the cost of doing business has increased in most of the world’s leading goods-exporting nations over the past decade but remained steady in the United States. As the cost of manufacturing in other nations has increased, the incentive for companies to move or keep jobs out of the United States has decreased. The percentage of executives at U.S.-based manufacturing companies with sales of more than $1 billion actively considering or planning to bring back production from China rose from 37% in 2012 to 45% in 2014 (Boston Consulting Group, 2013).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 6/49

Figure 9.1: Shift in global manufacturing cost competitiveness, 2004 and 2014 compared

Among the leading goods-exporting nations, only China is more cost competitive (meaning it has a lower cost of doing business) than the United States.

Source: Adapted from Boston Consulting Group, (2014). How global manufacturing cost competitiveness has shifted over the past decade. Retrieved from https://www.bcgperspectives.com/content/articles/lean_manufacturing_globalization_how_global_manufacturin g_cost_competitiveness_has_shifted_over_past_decade/ (https://www.bcgperspectives.com/content/articles/lean_manufacturing_globalization_how_global_manufacturing_cost_competitiven ess_has_shifted_over_past_decade/)

Over the past few years, Walmart has been part of this new trend to “reshore” jobs. Walmart’s emphasis on low prices prompted many of its suppliers to use the cheapest manufacturers they could �ind overseas. As part of a new initiative, however, the giant retailer recently brought 500 of its suppliers together to encourage them to produce their goods in the United States (Blanchard, 2013). GE has also made a “180 degree shift” (Blanchard, 2013, p. 25) from moving jobs out of the United States to bringing them back. The power, lighting, and appliance producer opened new factories in 2014 in Louisville, Kentucky, to produce high-end front load washers and dryers, creating 30,000 new U.S. jobs. “A number of [other] large manufacturers, including NCR, Apple, Google, Caterpillar, Whirlpool and Ford have recently announced plans to return some of their overseas manufacturing to the United States” (Danna, 2014, 40).

The return of some jobs to the United States may be good news for American workers. However, the jobs have returned primarily because wages have stagnated or, in some cases, fallen, and it costs less for businesses to use U.S. workers than it has in the past. Many U.S. workers toil “in jobs that pay wages so low that their paychecks do not generate enough income to provide for life’s basic necessities.” Many end up on welfare programs. Today “nearly three-quarters (73%) of enrollments in America’s major public bene�its programs are from working families” (Allegretto et al., 2013, p. 1). We discuss this in further detail in Section 9.3, “The Impact of Global Inequality.”

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 7/49

Andrey Rudakov/Bloomberg via Getty Images

Automated processes can be found in many steps of candy production, minimizing the work performed by humans. Here a worker in a Nestlé factory watches chocolate- covered candy pass along a conveyor belt.

9.2 Automation and the Global Workplace

In addition to the continually shifting employment landscape and the resulting low wages for many, workers everywhere also face the threat of losing their jobs to machines. Automation relies on - computerized control systems and information technology to minimize the amount of human labor necessary to produce goods or provide services. While automation arguably began to have an impact on American manufacturing in the 1960s, the exponential advances in computing power witnessed since the 1990s have brought automation into every corner of American life and workplace.

The First and Second Machine Ages

Erik Brynjolfsson and Andrew McAfee (2014) argue that we have begun the Second Machine Age. According to their theory, the First Machine Age was the Industrial Revolution (1760–1850). During this period, the steam engine and other newly invented machines enabled humans to do more. These machines, however, needed to be operated by people. They augmented what people could do but did not fully replace human beings. In the Second Machine Age, unfolding now, computer-operated machines can perform more cognitive functions. In some cases machines can make better decisions than humans. For example, driverless cars, run by computers, do not become distracted as human drivers can do. Likewise, decisions on whether to offer someone a mortgage would most likely be much more fair if based on computer algorithms rather than an individual person’s decision (which can be in�luenced by a whole host of illogical factors, including racial and ethnic prejudice) (Brynjolfsson & McAfee, 2014; Rothstein, 2012).

Jobs Already Lost to Automation

Although automation is a trend that will most certainly extend into the future, many jobs have already been lost due to this practice. The “discovery process” in litigation has already undergone automation. During discovery, lawyers gather together documents relevant to a lawsuit. Previously led by paralegals or lawyers, the initial phases of discovery can now be carried out by complex algorithms that search e-mail accounts, corporate documents, and digital databases for pertinent documents. Although it does not completely remove the need for human labor, these electronic processes cut down on the routinized cognitive tasks performed by humans, which in turn lowers the economic costs of “discovery” and the jobs that go with it (Hogan, Bauer, & Brassil, 2010).

Automation has also had a signi�icant impact on biotechnology. Cheap and effective ways to extract and code an organism’s DNA with minimal human involvement now exist. The ability to automate the process of sequencing DNA not only accelerates the rate of knowledge acquisition in the biosciences but also reduces job security for workers in the industry—a phenomenon observed wherever high-skilled labor can be automated (Brynjolfsson & McAfee, 2014). Because DNA sequencing is integral to the creation of genetically modi�ied produce, innovative new drugs, and advances in stem-cell technology, the impact of its automation on the American workforce is far reaching.

In the near future the process of scienti�ic discovery itself could be automated. Scientists and engineers in the United Kingdom have created Robot Scientist “Adam.” Adam successfully generated hypotheses about a type of yeast and then experimentally tested “his” hypotheses using laboratory automation (Aberystwyth University, 2014). “The upshot is that machines are often �illing in for our smarts, not just for our brawn—and this trend is likely to grow” (Hersey, 2014, para. 3). Moreover, the competition for the remaining jobs is now global. We explore the implications of a highly competitive global economy in the Second Machine Age throughout the next section.

What Would You Do? Managing Automation and Outsourcing

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 8/49

Imagine you are a consultant. A major hospital chain has hired you to determine how it can save money through automation and outsourcing or offshoring. What steps would you suggest it take? Why? How will your suggestions affect workers at the hospital? What type of workers will be impacted the most? Why?

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,nav… 9/49

9.3 The Impact of Global Inequality

Theoretical perspectives can help us better understand the impact of global inequality on society. Functionalists examine how inequality affects how society functions. They note that some forms of inequality can help society, whereas other types can harm it. Con�lict theorists tend to focus on who bene�its from inequality and how groups compete for power. They highlight the growing power of corporations in today’s global capitalist economy and their impact on inequality among and within nations.

The Functionalist Perspective on Inequality and Economic Institutions

Functionalists point out that inequality can serve useful purposes for society. Rewards based on how much people contribute to society can provide an impetus for people to work hard and promote the public good. Those who make the effort to complete the training necessary in order to carry out important functions in society (such as becoming doctors, scientists, and engineers) should in turn receive more rewards (such as high incomes and prestige) than other members of society.

On the other hand, as one of the founders of functionalism, E�mile Durkheim (1903/1933), pointed out, not all forms of inequality are bene�icial for society. He distinguished between internal and external inequality. Internal inequality is based on people’s innate talent and ability to contribute to society. External inequality, on the other hand, occurs when people are forced to or prevented from carrying out certain tasks because of societal (external) constraints rather than natural (internal) abilities. These external constraints could range from not having access to good schools to being born into a low caste in a society with a caste system. This type of inequality, Durkheim, believed, was harmful to society.

Therefore, Durkheim promoted access to education and social services that could help mitigate external inequality and allow members to contribute to the best of their ability to society without constraints (such as poverty, lack of education, racial discrimination, and so on) prohibiting them from doing so. He believed that if all the institutions functioned properly, external inequality and its negative rami�ications would not threaten society.

As theorists who use the functionalist perspective point out, each of the major institutions in a society (government, economic, education, family, and education) serves an important purpose, and each is interdependent with the others. For example, as described in Chapter 5, the economic institution relies on the educational system to educate and train workers to �ill jobs within the economic institution.

Economic institutions organize how a society creates, distributes, and uses its goods and services. Throughout the world, economic institutions range on a continuum from capitalist to socialist. In a purely capitalist economic system, the means of production (industries that provide goods and services) are privately owned and operated for pro�it. Jobs and wages are determined by the owners of the means of production, without government interference. On the other hand, in a socialist economic system, the means of production are owned by the state, which also determines what jobs entail and what wages workers will earn.

Today we live in a global economy in which capitalism dominates and great inequality exists both among and within nations. The nations with strong educational, banking, legal, and military systems have bene�ited most from the globalization process and have the most in�luence over the following organizations that work to shape the global economy:

The World Trade Organization, which directs the terms of global trade The International Monetary Fund, which oversees global �inancial markets The World Bank, which arranges loans for economic development

These international organizations are based on capitalist principles that promote free markets; they tend to work in the interests of global corporations. Con�lict theorists explain how the global economic system serves to promote global inequality.

Con�lict Perspective on Global Inequality

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 10/49

In this video, a senator discusses the income tax as one example of a public policy that bene�its rich americans and hurts those in poverty.

Growing Inequality of Income

As stated in Chapter 3, Immanuel Wallerstein, a con�lict theorist who developed the world-systems theory, maintains that the world consists of core, semiperipheral, and peripheral nations. Inequality among nations is a function of what each contributes to and takes from the global economy. Today Global North or core nations (most postindustrial nations, such as the United States, western European countries, and Japan) primarily contribute service work in the knowledge economy, with high-skilled workers (Odeh, 2010). In contrast, Global South or peripheral nations (most Latin American, African, Middle Eastern, and Asian nations) tend to produce raw materials or provide cheap labor to produce goods consumed in Global North nations. Although some Global South nations, such as India, China, and Brazil, have become increasingly competitive (semiperipheral), most Global South nations are far from equal competitors with nations in the Global North.

The world �irst became divided into these groupings of nations in the 1500s with technological advances like the development of tall sailing ships equipped to explore the world and the establishment of economic markets in western Europe. A world economy was established, as core nations spread their market-based desire for goods and wealth throughout the world though colonialism and empire (Wallerstein, 1995). Today, according to Wallerstein, there are no new markets to exploit and, as U.S. power declines, no dominant force holds the world system together. Wallerstein believes that as inequality grows, the world system of capitalist globalization has become threatened and will ultimately result in a period of chaos and unrest (Wallerstein, 1995, 1998, 2000).

Other con�lict theorists, such as Charles Derber (2003), also focus on the rising levels of inequality and blame the growing strength of global corporations. Derber and others note that in an increasingly globalized world, governments and unions tend to operate on a national level, whereas in the new global corpocracy, corporations are global and have the power to in�luence the decisions of governments and the power of unions. Corporations can play governments and workers against one another as they move factories and capital, seeking the lowest costs and the highest pro�its. Corporations based in Global North nations often control the resources of Global South nations, making it dif�icult for the poorer nations to build the infrastructure needed to create stronger economies.

Derber points out that global corporations can also in�luence global governmental organizations, such as the World Trade Organization (WTO) and the International Monetary Fund (IMF). The WTO was created in 1995, building off the provisional General Agreement on Tariffs and Trade organization founded in 1948. Composed of 159 member nations, its declared goal is to “help producers of goods and services, exporters, and importers conduct their business” (WTO, 2014b, para. 1).The WTO (2014a) describes its mission as providing

a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing �ield for all, thus contributing to economic growth and development. The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. (para. 1)

Founded in 1944, the IMF, with 188 member nations, “tracks global economic trends and performance . . . provides policy advice and �inancing to members in economic dif�iculties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty” (IMF, n.d., paras. 1–2). Funding for the IMF comes from quotas paid by member nations. The quotas are based on each nation’s “relative size in the world economy” (IMF, 2014, para. 1).

The World Bank, like the IMF, was founded in 1944. Its mission then was to help the world’s nations recover from World War II. Today it has 188 member nations and describes its two chief goals as ending extreme poverty and spreading prosperity by increasing the income of the poorest 40% of the population in every nation (World Bank, 2015b).

Economic Inequality Within Nations

Con�lict theorists like Derber who focus on global corporations’ increase in power also note the growing levels of economic inequality within Global North nations. In the United States, for example, inequality has steadily increased in recent decades, as the middle and lower classes have lost income and

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,na… 11/49

Grow ing Inequality of Incom e From Title: Moyers & Company: How Big Banks Are Rewriting ...

(https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=48807)

Critical Thinking Question

the very wealthy have acquired even more. After World War II and until the late 1970s, inequality levels were the lowest they had been in U.S. history. As Figure 9.2 indicates, economic growth bene�ited most Americans. Since that time, however, globalization, the decline of unions, the need for a college degree, and automation have reduced most workers’ job prospects. “At the same time, these developments were hugely bene�icial to elite earners, who now [have] access to a larger, global market and productivity-enhancing technology” (Davidson, 2014, para. 7). The result is that

people in the top 20 percent of income—roughly $100,000 in 2013—have taken nearly all the economic gains of the past 40 years. (Of course, the top 1 percent and, even more so, the top 0.01 percent, has taken a far more disproportionate share). (Davidson, 2014, para. 9)

In 2012 Americans’ median household income (meaning half of all households made more and half made less) was $51,371. Adjusted for in�lation, this was a 6.6% drop from the median income in 2000 (Noss, 2013). On the other hand, those who run major businesses tended to see increases in income. Today the average CEO of one of the 350 largest �irms in the United States makes 273 times the pay of the average U.S. worker (Mishel & Sabadish, 2013). At Walmart, a full-time minimum-wage employee would have to work 1,372 hours to earn the hourly pay of CEO Michael T. Duke (Daily Kos Staff, 2014).

Today the U.S. taxpayer is in effect subsidizing corporations like Walmart and fast-food companies. Their workers make so little that many have to rely on welfare programs in order to survive (Ber�ield, 2013; Democratic Staff of the U.S. House Committee on Education and the Workforce, 2013). At the same time, fast-food workers in Denmark, who make a minimum of $20.00 an hour (compared to the $8.90 the average fast-food worker in the United States earns), have relatively comfortable lives. Although pro�its are lower for fast-food companies in Denmark and hamburgers cost more (Danes pay $5.60 for a Big Mac, whereas U.S. residents pay $4.80), it is a price Danes are willing to pay. “We Danes accept that a burger is expensive, but we also know that working conditions and wages are decent when we eat that burger” (as cited in Alderman & Greenhouse, 2014, para. 26), said labor specialist Soren Kaj Andersen of the University of Copenhagen.

Figure 9.2: Family income levels, 1947–2013

Income gains were enjoyed by all social classes relatively equally from 1950 until the mid-1970s. They have diverged widely since then, with the top earners acquiring much more.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 12/49

Source: Stone, C., Trisi, D., Sherman, A., & Debot, B. (2015). A guide to statistics on historical trends in income inequality. Copyright © Center on Budget and Policy Priorities. Retrieved from http://www.cbpp.org/research/poverty-and-inequality/a-guide-to-statistics-on- historical-trends-in-income-inequality (http://www.cbpp.org/research/poverty-and-inequality/a- guide-to-statistics-on-historical-trends-in-income-inequality)

Although high, income inequality in the United States is dwarfed by the gap in wealth levels (how much people own after subtracting for debt). Inequality of income and the effects of the Great Recession have produced even greater inequalities of wealth, particularly when studied by race. The U.S. wealth gap was signi�icant even in times of prosperity, but the Great Recession had a disproportionate impact on the wealth of Hispanic and Black Americans. As Figure 9.3 reveals, from 2005 to 2009, median White wealth fell from $134,992 to $113,149. During the same period, median Black wealth fell from $12,124 to $5,677, and Hispanic/Latino wealth fell from $18,359 to $6,325 (Kochhar, Fry, & Taylor, 2011). As a result, by 2009 White Americans had approximately 20 times the wealth of Hispanic and Black Americans.

Figure 9.3: White, Black, and Hispanic wealth, 2005 and 2009

The wealth gap between Whites and Blacks and Whites and Hispanics, already dramatic, increased during the Great Recession.

Source: Kochhar, R., Fry, R., & Taylor, P. (2011). Wealth gaps rise to record highs between Whites, Blacks, Hispanics. Pew Research Center. Retrieved from

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 13/49

http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise-to-record-highs- between-whites-blacks-hispanics (http://www.pewsocialtrends.org/2011/07/26/wealth-gaps-rise- to-record-highs-between-whites-blacks-hispanics)

Income Inequality and Unions

In general, unions have not fared well under the new global corpocracy. Overall, both local and nationally based unions tend to have few options when employers demand employees accept lower wages and fewer bene�its. Employers can simply move to a nation with weaker or no unions and lower wages. The decline in the power of unions is one key reason U.S. workers’ wages have declined over the past decade.

Studies have shown that as union power declines, CEOs’ power and pay tend to rise. “From 1978 to 2012, CEO compensation . . . increased about 875 percent . . . substantially greater than the painfully slow 5.4 percent growth in a typical worker’s compensation over the same period” (Mishel & Sabadish, 2013, para. 6). The discrepancy in compensation of fast-food company CEOs and typical workers is even more astounding. In 2013 fast-food CEOs earned an average of $23.8 million, 1,200 times the pay of the typical fast-food worker (Pathe, 2014).

As noted above, most fast-food workers in the United States cannot live on the incomes they make. In fact, more than half of all full-time fast-food workers receive public assistance (Allegretto et al., 2013). The cost to the U.S. public to fund welfare programs for fast-food workers is nearly $7 billion a year (Allegretto et al., 2013). Fast-food companies have stubbornly resisted proposed legislation to increase the minimum wage. On the other hand, some have made efforts to help their low-wage workers, though these have not been positively received. In 2013 McDonald’s infamously developed a sample budget for its employees who earn a $7.72-per-hour cashier wage. The budget was roundly mocked in the media for its $0 heating allowance and $20-a-month health insurance budget, but the strongest reactions were reserved for the assumption that a McDonald’s cashier must also hold a second full-time job to make the budget work (Weissman, 2013a). McDonald’s has since pulled the budgeting guide from its website.

Similarly, in 2013 Walmart held a food drive for its employees in an Ohio store. The effort captured the attention of the media and focused attention on the corporation’s low wages and its employees’ need to rely on public assistance (Nicks, 2013; Fox, 2013b). A 2014 report estimated that Walmart’s low wages caused its workers to collect $13.5 billion in food stamps in 2013 (O’Connor, 2014).

However, some unions have begun to recognize the common interests of low-wage workers around the world. Many workers have, as Marx would put it, gained a class consciousness, an awareness that low-wage workers in the United States have more in common with low-wage workers in Bangladesh than they do with CEOs who reside in their own nation. They have begun to mobilize across borders as globalization has encouraged more companies—particularly fast-food businesses—to engage in global commerce.

According to David Callahan, former fellow at the policy group Demos, the global spread of fast-food businesses is both �inancially pro�itable and potentially detrimental to companies’ bottom line. He notes that “as workers press for higher wages in the fast-food industry . . . labor can bring pressure on these companies in nations where unions are a lot stronger” (para. 5).

Although labor unions in the United States have lost members and are less effective than in decades past, some “overseas [unions] have more power and can leverage it against multinational corporations that are drawing a greater source of revenue from abroad amidst weakening U.S. sales” (Shin, 2014, para. 6). Thanks to their unions, McDonald’s workers make about $21.00 an hour in Denmark; in New Zealand they enjoy guaranteed weekly hours and a higher minimum wage, which amounts to about $12.35 an hour (Short, 2014).

On May 15, 2014, a group of 396 unions at McDonald’s, Burger King, KFC, and other fast-food restaurants across the globe carried out a 1-day strike in support of a proposed minimum wage increase (Callahan, 2014). Some highlights from the multinational strike included the following:

In the Philippines capitol of Manila, workers created a �lash mob inside a McDonald’s, singing and dancing to “Let It Go,” from the movie Frozen. They urged McDonald’s to “let go” of low wages. A lunchtime protest in Brussels shut down a McDonald’s. In Mumbai, local police threatened to arrest protestors but the union supporters remained steadfast.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 14/49

Protesters across Japan asked McDonald’s to pay Japanese workers 1,500 yen (approximately $12.34) (Shin, 2014).

As millions of workers worldwide now do “the same job functions for the same giant companies: �lipping burgers for McDonald’s, selling iPhones for Apple, making caffe lattes for Starbucks . . . [a] new era of solidarity and joint labor actions should now be possible” (Callahan, 2014, para. 7).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 15/49

© Raminder Pal Singh/epa/Corbis

McDonald’s practices glocalization in India, where it

9.4 Navigating Cultural Diversity in a Global Corporation

As we have noted throughout this book, organizations in the United States and throughout the world cannot exist apart from the global economy and workplace. In order to thrive in these contexts, organizations and the people within them must constantly adapt to changing environments and different cultures. They must adjust business practices and sometimes even the products they create as they work in new areas and market products in different parts of the world.

Adjusting to Different Cultures

As symbolic interactionist theorists note, norms—or rules for behavior—are socially constructed and vary over time and among different societies. According to social psychologist Geert Hofstede (2014), national cultures differ based on the values held by a majority of the population. To what extent we accept inequality, tolerate difference and uncertainty, value collectivism or individualism, are more competitive than caring, focus on planning for the future, and suppress or seek grati�ication varies depending on our culture. These cultural differences impact every aspect of our societies, including our organizations and work experiences. Therefore, expectations and interactions at business meetings can differ substantially from culture to culture.

Many companies have developed businesses that advise other companies and organizations on how to successfully operate in different cultural settings. For example, World Business Culture offers a variety of resources, including general background on how to conduct business in different nations and information on management and communications style, conducting meetings, working in teams, the role of women in business, professional dress code, and successful entertaining. Being familiar with a culture’s particular customs can prevent behavior that is unintentionally insulting or embarrassing and can help business transactions go smoothly.

Glocalization and Grobalization

Businesses that deal with customers and colleagues from diverse cultures have also embraced the concept of glocalization, a term �irst used in sociology in the mid-1990s by Roland Robertson (1995), who points out that global in�luences and local cultures interact and in�luence one another. In earlier stages of globalization, products distributed by multinational corporations tended to be uniform across regions. A common critique of such global uniformity is that it fails to respect diverse cultures and forces local cultures to conform to the preferences of core countries. Most importantly for businesses, if a product appears too strange or even offensive to people, they will not buy it.

Global businesses have responded accordingly and adapted their globally available products to local cultures. Some examples of glocalization include the following:

MTV tailors its programming to the various nations in which it airs, featuring regional musicians as well as international performers. Recognizing that most Hindus do not eat beef or pork, McDonald’s sells mostly lamb, chicken, and vegetarian offerings in India. Likewise, it serves kosher Big Macs in Israel. Whirlpool makes refrigerators in bright colors for its many Asian markets, based on the fact that many Asians place them in their living room as a sign of status. (Casestudyinc.com, 2010)

In addition to adapting products, global corporations have also begun to change how they market their products. Fresh Intelligence, a Toronto-based market research company, has conducted research that shows companies that tailor their messaging to a population’s values perform better than those that do not (Shaw, 2011).

A decade or two ago, most global brands were marketed in the same way throughout the world. The ads and executions may have been different and certain markets offered a different lineup of products, but the brand’s main personality and value pro�ile was the same.… That began to change when

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 16/49

opened its �irst vegetarian-only restaurant in 2014.

marketers realized targeting messaging to local markets resonated more deeply with consumers. (Shaw, 2011, para. 6)

For example, Nescafé coffee sells well in both Australia and China because Nescafé has learned to market its product effectively—and differently—in both nations. In Australia its ads connect the product with “being successful and well respected,” whereas its messages in China relate it to “enjoying life to the fullest” (Shaw, 2011, para. 16).

Sociologist George Ritzer (2004) argues that grobalization accompanies glocalization. He de�ines grobalization as “the imperialistic ambitions of nations, corporations, organizations, and the like and their desire, indeed, need, to impose themselves on various geographic areas” (Ritzer, 2004, p. 73). Instead of emphasizing and supporting local cultures, grobalization contributes to the dominance of U.S. culture across the globe. It spreads “the production of super- abundance, material wealth, ef�icient order, speed and the fantasies of the world’s number one cultural empire, America (capitalism, McDonaldization, Americanization)” (Beilharz, 2004, p. 106). The result is more homogeneity (the spread of U.S. culture) than true respect for local culture.

What Would You Do? Adapting Services and Products to Cultures

Suppose you are the owner of a global clothing corporation who realizes that uniformity of goods and services is not really what your consumers want or need. What types of changes would you make to your clothing items so that women in both Mexico and Japan are satis�ied with and purchase the clothing you sell? How might these changes affect your production and bottom line?

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 17/49

9.5 Global Climate Change and Business

In addition to the cultural challenges in a global workforce, employees and employers around the world must also respond to the physical challenges of climate change. As the number and severity of droughts, �loods, coastal erosion, tornadoes, and storm systems increase, the dangers of unchecked global warming have become increasingly obvious. According to the National Climate Assessment, residents of the United States have already begun to experience the impact of climate change, and the effects will only become more severe as temperatures continue to rise (U.S. Global Change Research Program, 2014). The �ifth assessment report by the Intergovernmental Panel on Climate Change (2014) made it clear that climate change is real and is caused, in part, by human activity:

Anthropogenic greenhouse gas emissions have increased since the pre-industrial era, driven largely by economic and population growth, and are now higher than ever. This has led to atmospheric concentrations of carbon dioxide, methane and nitrous oxide that are unprecedented in at least the last 800,000 years. Their effects, together with those of other anthropogenic drivers, have been detected throughout the climate system and are extremely likely to have been the dominant cause of the observed warming since the mid-20th century.

Changes in many extreme weather and climate events have been observed since about 1950. Some of these changes have been linked to human in�luences, including a decrease in cold temperature extremes, an increase in warm temperature extremes, an increase in extreme high sea levels and an increase in the number of heavy precipitation events in a number of regions.

Continued emission of greenhouse gases will cause further warming and long-lasting changes in all components of the climate system, increasing the likelihood of severe, pervasive and irreversible impacts for people and ecosystems. Limiting climate change would require substantial and sustained reductions in greenhouse gas emissions which, together with adaptation, can limit climate change risks. (pp. 4, 7, 8)

As Henry Paulson Jr. (2014), a former top manager at Goldman Sachs and U.S. Secretary of the Treasury during the 2008 �inancial crisis, describes it, “We’re staring down a climate bubble that poses enormous risks to both our environment and economy. The warning signs are clear and growing more urgent as the risks go unchecked” (para. 3).

Among global �inance organizations, the World Bank has put climate change “at the center of the bank’s mission” (Davenport, 2014, para. 10). In 2013 the president of the World Bank declared:

No country—rich or poor—is immune from the impacts of climate-related disasters.… Damages and losses from natural disasters have more than tripled over the past 30 years. Years of development efforts are often wiped out in days or even minutes. (Kim, 2013, paras. 4–5)

With this in mind, the World Bank has increased its “mitigation, adaptation and disaster risk management work” (Kim, 2013, para. 6).

Businesses’ Contributions to and Repercussions From Global Climate Change

Beginning with early manufacturing processes at the start of the Industrial Revolution, businesses have been largely responsible for introducing the environmental pollutants that have caused climate change (U.S. Environmental Protection Agency, 2014a). Greenhouse gases trap heat in the atmosphere, leading to global climate changes that include rising temperatures and more extreme weather. These gases consist of:

Carbon dioxide (CO2), which enters the atmosphere through the burning of fossil fuels (coal, natural gas, and oil), solid waste, trees, and wood products, and also results from certain chemical reactions such as the manufacture of cement. Methane (CH4), which is emitted during the production and transport of coal, natural gas, and oil. Other major sources of methane are factory farms (livestock waste) and organic waste decaying in land�ills. Nitrous oxide (N2O), which results from agricultural and industrial activities and the combustion of fossil fuels and solid waste. Fluorinated gases, which include hydro�luorocarbons, per�luorocarbons, and sulfur hexa�luoride, synthetic gases that stem from a variety of industrial processes (U.S. Environmental Protection Agency, 2014b).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 18/49

Business leaders have responded in several ways to the mounting evidence regarding the reality and severity of climate change. Some, particularly fossil fuel companies (though not all of them), have attempted to minimize the claims by questioning the science behind them. Others have accepted the scienti�ic consensus and are preparing for a changed world, hoping to be a climate change “winner” rather than a “loser.” Indeed, some people and regions will bene�it from climate change. For example, thanks to a warmer world, farming opportunities in South Dakota will likely increase, and shipping to China will be possible via the thawed Northwest Passage. Some companies have become “winners” by developing alternative energy solutions. Many others, though, will likely suffer from the rami�ications of climate change. Corn growers in a parched and drought-ridden Iowa are one example, and coastal property developers are another.

A growing number of business leaders now recognize that they must take steps to reduce greenhouse gases in order both to promote world stability and to freely engage in commerce. It has become increasingly clear that unchecked global climate change threatens economic and social stability and is therefore a threat to the bottom line.

The 2011 �loods in Thailand provide a powerful example of the negative impact of global climate change on business. That year, a particularly robust monsoon season wreaked havoc on millions of people and caused billions in damages. Hundreds of people were killed, half a million �led their �looded homes, a large percentage of agricultural land was �looded, and thousands of businesses closed, putting hundreds of thousands of people out of work. The Thai economy suffered a steep decline, and the effects of the �looding reverberated across the globe to disrupt numerous corporations’ supply chains, including those of Toyota, Honda, Mitsubishi, Isuzu, Nissan, General Motors, Ford, and Mazda. These companies had assembly and parts-making plants in areas of Thailand that �looded, and the �loods prevented the plants from operating. Those affected included global companies with factories in the country of Thailand, the various national economies those companies support, and their workers (Vaidya & Rao, 2011).

Among other companies and organizations, Coca-Cola now recognizes “increased droughts, more unpredictable variability, [and] 100-year �loods every two years” (as cited in Davenport, 2014, para. 3) as economic threats to their global business model. This perspective “re�lects a growing view among American business leaders and mainstream economists who see global warming as a force that contributes to lower gross domestic products, higher food and commodity costs, broken supply chains and increased �inancial risk” (Davenport, 2014, para.4).

Business Leaders’ Responses to Global Climate Change

To better ascertain the risks of global climate change and to raise support for efforts to mitigate it, three prominent U.S. business leaders—Michael Bloomberg, the founder of Bloomberg Finance and former mayor of New York City; Henry Paulson Jr., a former top Goldman Sachs manager and former U.S. Secretary of the Treasury; and Tom Steyer, the founder of Farallon Capital Management, LLC—have created the Risky Business Project. The project “focuses on quantifying and publicizing the economic risks from the impacts of a changing climate” (Risky Business, n.d.). Part of that effort involves creating and disseminating reports on climate change.

Key �indings from the Risky Business Project 2014 report The Economic Risks of Climate Change in the United States include the following scenarios, many of which are inevitable because of the level of greenhouse gas already in the atmosphere:

Large-scale losses of coastal property and infrastructure Extreme heat across the nation—especially in the Southwest, Southeast, and Upper Midwest—threatening labor productivity, human health, and energy systems Shifting agricultural patterns and crop yields, with likely gains for northern farmers offset by losses in the Midwest and South (Risky Business, n.d.).

Using the report as a call to action, these leaders encourage “the American business community to rise to the challenge and lead the way in helping reduce climate risks” (Risky Business, 2014, p. 5).

Some corporations have already taken steps to respond to global climate change by modifying processes to incorporate more green approaches. Coca-Cola, for example, has embraced water-saving technologies and encouraged nations where it does business to take steps to curb climate change (Davenport, 2014). Meanwhile, the New

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 19/49

AP Photo/The Denver Post/Jerry Cleveland

Colorado’s New Belgium Brewing Company employs several green approaches. Here an engineer inspects a unit that uses methane created in the brewing process to generate electricity.

Belgium Brewing Company (2014), based in Colorado, designed its state-of-the-art brewery to use sun tubes to augment lighting, steam condensers to reuse hot water, and wind power to provide the energy for its technology data center.

Nike is another corporation that is beginning to take action. With more than 700 factories in 49 countries, including many in Southeast Asia, Nike has experienced business disruptions due to both �looding and worsening droughts, both of which impact the cost and availability of the cotton it uses in its athletic clothing.

“That puts less cotton on the market, the price goes up, and you have market volatility,” said Hannah Jones, the company’s vice president for sustainability and innovation. Nike has already reported the impact of climate change on water supplies on its �inancial risk disclosure forms to the Securities and Exchange Commission. (Davenport, 2014, paras. 12–13)

In response Nike is using more synthetic material in its clothing and is lobbying governments to pass legislation that will address climate change. (Davenport, 2014)

Some other notable environmental achievements by global corporations include the following:

Nineteen percent of the power Walmart uses in its buildings comes from renewable resources (Walmart, 2014). Starbucks is aiming to have all its new company-owned stores LEED (Leadership in Energy and Ef�iciency Design) certi�ied (University Alliance, 2014). Wilmar International, a giant agribusiness and supplier of 45% of the market’s palm oil, made a commitment in 2013 to “monitor activities among its subsidies and third-party suppliers, to ensure it can halt deforestation across the supply chain” (Shankleman, 2013, para. 6) by the end of 2014. Google is carbon neutral and has been since 2007 (Google, n.d.).

Incentivizing green initiatives is a powerful way to motivate climate change mitigation efforts. Federal, state, and local governments have provided individuals and organizations with various incentives to cut energy consumption and reduce pollution (see Energy.gov, the Database of State Incentives for Renewables & Ef�iciency at http://www.dsireusa.org (http://www.dsireusa.org) , and http://www.epa.gov/greenpower/pubs/incentives.htm (http://www.epa.gov/greenpower/pubs/incentives.htm) ). The private sector has also employed strategies to encourage such efforts. Almost a quarter of the 500 largest companies in the United States and 39% of the world’s 500 largest companies now link executive bonuses to environmental targets. “Pay is one of the most powerful motivators: when a CEO’s bonus is a function of delivering on an environmental target, the targets tend to get hit” (Heaps, 2014, para. 5).

Tables 9.1 and 9.2 show how Newsweek ranks the 10 most environmentally friendly companies among the 500 largest publicly traded companies in, respectively, the United States and throughout the globe (some of the 500 companies in the United States are also among the largest in the world, so 809 rather than 1,000 companies were covered in all).

Table 9.1: Newsweek’s 2014 list of top 10 green companies in the United States

Ranking Company Sector

1 Allergan Health care

2 Adobe Systems Information technology

3 Ball Corporation Materials

4 Ecolab Materials

5 Sigma-Aldrich Materials

6 McCormick Consumer staples

7 Biogen Idec Health care

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 20/49

Ranking Company Sector

8 Rockwell Automation Industrials

9 Cardinal Health Health care

10 Agilent Technologies Health care

Source: Newsweek, 2014a.

Table 9.2: Newsweek’s 2014 list of top 10 green companies in the world

Ranking Company Sector

1 Vivendi Telecommunication services

2 Allergan Health care

3 Adobe Systems Information technology

4 Kering Consumer discretionary

5 NTT Docomo Telecommunication services

6 Ecolab Materials

7 Atlas Copco Industrials

8 Biogen Idec Health care

9 Compass Group Consumer discretionary

10 Schneider Electric Industrials

Source: Newsweek, 2014b.

What Would You Do? Greening Your Company

Imagine you are the CEO of a building supply company. You want to encourage your employees to take steps to limit carbon emissions. How would you motivate them to do so? How would your answer change depending on the type of business you run?

Pro�itability is just one of the bene�its of operating an ethical and environmentally friendly business. In addition to making improvements that bene�it the environment and mitigate immediate and long-term costs of global warming, “green” businesses experience higher worker morale. Employees at companies perceived as being environmentally responsible report higher job satisfaction levels (Walsh & Sulkowski, 2010). As the �inal chapter discusses, employers who run their companies and organizations in environmentally friendly and ethical ways tend to have more successful companies, more effective organizations, and more engaged workers.

Spotlight on Workplace Research: David Pellow’s Work on Mining Justice Campaigns

David Pellow, a professor of sociology at the University of Minnesota, focuses his research on environmental inequality, or how the quality of the environment differs among demographic communities. He has conducted a wide variety of research on local, national, and transnational environmental justice movements. In his work, he points out

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 21/49

Courtesy of David Pellow, Ph.D.

that marginalized people—particularly poor communities of color—bear the brunt of environmental pollution and climate change.

The environmental justice movement, of which Pellow is a leader, challenges environmental injustices and helps mobilize communities to resist them. He worked as part of a team of scholars and activists to create A Guide for Community Organizers Facing Mining Companies. The guide “offers clear and accessible information” on how mining companies often “impose their will on communities, and how ordinary people can �ight back” (Pellow, 2009, para. 3).

The guide draws on Pellow’s sociological knowledge of social movements, environmental justice issues, and the activists’ experience carrying out campaigns for environmental justice. The activists have responded to the ecological destruction carried out by major mining operations by industries in Global South nations. Since its publication in 2009, activists around the world have used it to educate, mobilize, and help people effectively respond to companies that carry out environmental injustices. For example, Pellow’s guide has been used by antimining activists in Sierra Leone and in Mexico, as well as by those combating the oppression of workers on oil palm plantations in Indonesia (Pellow, 2011).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 22/49

Summary and Resources

Chapter Summary Globalization has transformed the American economy in many ways, often separating production and service processes through outsourcing, offshoring, and most recently, reshoring. The First and Second Machine Ages brought greater degrees of automation to workplaces around the world, beginning with replacing some manual labor and, in contemporary times, providing data-gathering and analytic functions. Economic inequality exists across nations and has increased within nations over the past several decades as a result of outsourcing, offshoring, automation, and the decline in the power of unions. Global corporations have moved away from universally offering the same products and doing business in the same way in every country. Instead, they are choosing to develop glocalization strategies that adjust products and marketing to different cultures. Although some businesses and business leaders, particularly in the fossil fuel industry, deny the causes and/or effects of global climate change, many more are trying to mitigate climate change and determine how to become climate “winners” rather than “losers” in an unpredictable future.

Case Study: Tobacco Companies and Pro�it Over Health

As global corporations gain power, some have taken steps to in�luence nation’s laws. Some are suing governments that pass laws that try to block or otherwise control a company’s ability to do business. These corporations maintain that international trade agreements take priority over national legislation.

Each year, more than 5 million people succumb to smoking-related deaths. Over the past several decades, smoking rates in the Global South have more than doubled, with particularly high increases in China and, more recently, Africa. Three out of 4 smokers now live in the Global South.

As tobacco companies began to receive more negative press coverage in the Global North in the last decades of the 20th century, the U.S. government’s practice of pressuring developing nations to open their markets to U.S.- based tobacco garnered increased public criticism. In 2001, President Bill Clinton signed an executive order ending that practice.

Since the 1990s, however, new international trade agreements have strengthened the hand of tobacco companies and helped them expand their market share in Global South nations. These treaties allow companies to sue governments that attempt to curb or otherwise in�luence the sale of their product. For example, tobacco companies have warned at least four nations in Africa—including Gabon, Namibia, Uganda, and Togo—that their laws regulating the sale of tobacco violate international treaties. The following excerpt describes how global tobacco companies have used international trade agreements to limit the ability of many nations to curb smoking in their countries.

“They’re trying to intimidate everybody,” said Jonathan Liberman, director of the McCabe Center for Law and Cancer in Australia.… In Namibia, the tobacco industry has said that requiring large warning labels on cigarette packages violates its intellectual property rights and could fuel counterfeiting.…

Uruguay has acknowledged that it would have had to drop its tobacco control law and settle with Philip Morris International if the foundation of the departing mayor of New York, Michael R. Bloomberg, had not paid to defend the law. (The company’s net revenue last year was $77 billion, substantially more than Uruguay’s gross domestic product.) Even developed countries like Canada and New Zealand have backed away from planned tobacco laws in the face of investment treaty claims.…

Bashupi Maloboka, a Health Ministry of�icial . . . in Namibia, said . . . “The fear is that they have the money and they have the resources, so they can pay for anything.”

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 23/49

Think About It:

1. Do you support tobacco companies’ ability to in�luence international trade agreements in order to promote their business interests, even if they harm the health of consumers and citizens? Why or why not?

2. Do you think any institution or organization (a) should and (b) can effectively control global corporations? Why or why not?

Source: Tavernise, S. (2013, December 13). Tobacco �irms’ strategy limits poorer nations’ smoking laws. The New York Times. Retrieved from http://www.nytimes.com/2013/12/13/health/tobacco-industry-tactics-limit-poorer-nations-smoking-laws.html?pagewanted=all&_r=0 (http://www.nytimes.com/2013/12/13/health/tobacco-industry-tactics-limit-poorer-nations-smoking-laws.html?pagewanted=all&_r=0)

Discussion Questions 1. After reading this chapter, how would you explain “reshoring?” Do reshored jobs bene�it the American worker?

Why or why not? Be sure to include in your explanation the key reasons why some jobs have begun to return to the United States.

2. How do you think you will fare during the ongoing Second Machine Age? How might the new technological developments of this age affect your career choices and social class?

3. Do you think steps should be taken to stem the growing power of global corporations? Why or why not? If yes, what steps would you suggest?

4. Suppose your company is sending you to another country to conduct business. What steps would you take to prepare?

5. How do global corporations bene�it from investing in efforts to mitigate global climate change? How can ethical decisions in this area also make for good business?

Additional Resources Roger and Me �ilm trailer http://www.imdb.com/title/tt0098213 (http://www.imdb.com/title/tt0098213)

The impact of automation on employment http://www.economist.com/news/brie�ing/21594264-previous-technological-innovation-has-always-delivered- more-long-run-employment-not-less (http://www.economist.com/news/brie�ing/21594264-previous-technological- innovation-has-always-delivered-more-long-run-employment-not-less)

Global inequality http://inequality.org/global-inequality (http://inequality.org/global-inequality)

“Business Etiquette Tips for International Travel” http://www.forbes.com/sites/susanadams/2012/06/15/business-etiquette-tips-for-international-travel (http://www.forbes.com/sites/susanadams/2012/06/15/business-etiquette-tips-for-international-travel)

The Intergovernmental Panel on Climate Change http://www.ipcc.ch (http://www.ipcc.ch)

Key Terms

automation

First Machine Age

global corpocracy

Global North

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 24/49

Global South

glocalization

greenhouse gases

grobalization

International Monetary Fund (IMF)

outsourcing

reshoring

Risky Business Project

Second Machine Age

transnationals

World Bank

World Trade Organization (WTO)

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 25/49

Learning Objectives

By the end of this chapter, you will be able to:

Describe the rise and development of business and organizational ethics.

Understand the processes of formulating workplace ethics and who bears responsibility for enforcing them.

Explain the responsibilities corporations have toward their local, state, national, and global communities.

Give examples of ethical violations in the workplace and protections workers have when reporting them.

Discuss the impact an ethical workplace can have on workers, consumers, the organization, and the overall economy.

10Workplace Ethics

Scott Olson/Getty Images

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 26/49

Introduction When you think of an ethical workplace, what do you envision? Chances are you picture engaged workers who feel energized and positive about the work they do. You also likely imagine a thriving organization. In this chapter, we explore the development of business and organizational ethics; the conditions that make for an ethical workplace; efforts to enforce ethics in the workplace; and the impact an ethical workplace can have on workers, consumers, the organization, and the overall economy.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 27/49

10.1 The Rise of Ethics in the Workplace

Ethical companies and organizations conduct business and treat employees, customers, and the community in a fair and just way, according to the norms of the culture in which they work. In turn, organizations receive bene�its for being ethical. Creating and maintaining an ethical workplace has extrinsic (instrumental) value, as a means for employers to achieve an end. For example, an ethical organizational culture tends to be good for business and can mitigate the organization’s criminal responsibility if individual workers behave badly.

Ethical workplace behavior also has intrinsic value, meaning it is simply a good thing to do for its own sake. No matter the motivation behind it, most workers and employers feel better knowing they do honest work for an ethical organization. They are also more likely to feel a sense of loyalty to their company (LRN, 2006). It was not until relatively recently, however, that ethical behavior in organizations became a widely recognized focus of concern and a �ield of study.

Codes of Ethics

Johnson & Johnson was the �irst company to establish a code of ethics. It created its Credo in 1943 shortly before the company went public. Robert Wood Johnson, the CEO at the time, had worked at Johnson & Johnson since his teenage years and was introduced to the company as a child by his father, one of three brothers who founded the company. He wanted to make sure the company’s guiding principles remained in place after it became publicly held (no longer owned by only a few people). In the Credo, Johnson & Johnson spells out the company’s responsibilities toward its consumers, employers, community, and stockholders.

It was not until the 1980s, however, that most businesses established codes of ethics and business ethics became a widely recognized �ield of study. The �irst centers for business ethics on university campuses were established in the 1970s, and it did not become an established �ield until around 1990 (De George, 2014).

Widespread recognition of the importance of business ethics stemmed from the political, economic, and environmental activities of the 1960s, including the civil rights movement. Title II of the Civil Rights Act of 1964 prohibited “discrimination because of race, color, religion, or national origin in certain places of public accommodation, such as hotels, restaurants, and places of entertainment” (U.S. Department of Justice, n.d., para. 1). Title VII of the act forbids “employment discrimination based on race, color, religion, sex and national origin” (EEOC, n.d.e, para. 1). In response many large businesses created equal opportunity of�ices as they came to understand that they would be held accountable for issues of equity in the workplace (De George, 2014).

The 1960s also saw growing recognition of the close ties among the military, industry, and the government, coined the military–industrial complex by former president Dwight D. Eisenhower and the “power elite” by sociologist C. Wright Mills (1956). This, along with the global economic and political dominance of the United States; the development of huge global businesses; and the rapid expansion of the chemical industry, which created great environmental damage, served to generate critiques of capitalism and consumerism and spawned the environmental movement. In addition, the public began to view large corporations as having a more negative than positive impact on society (De George, 2014).

Finding themselves under attack, corporations created the concept of corporate social responsibility, the idea that they have an obligation to carry out activities that bene�it society. This term (without the word corporate) �irst came into widespread use with Howard Bowen’s 1953 book, Social Responsibilities of the Businessman (as cited in Carroll, 1999). In it, Bowen de�ined such responsibilities as “the obligations of businessmen to pursue those policies, to make those decisions, or to follow those lines of action which are desirable in terms of the objectives and values of our society” (as cited in Carroll, 1999, p. 270). As noted by Richard T. De George, codirector of the International Center for Ethics in Business at the University of Kansas, the concept of corporate social responsibility continued to develop in the decades following the release of Bowen’s book.

Exactly what “social responsibility” meant varied according to the industry and company. But whether it was reforestation or cutting down on pollution or increasing diversity in the workforce, social responsibility was the term used to capture those activities of a corporation that were bene�icial to society and usually, by implication, that made up for some unethical or anti-social activity with which the company had been charged. (De George, 2014, para. 14)

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 28/49

Businesses also began to establish codes of ethics to allay public concerns and forestall more government regulations. Nonetheless, government oversight grew. In 1970, the federal government established both the Occupational Safety and Health Administration and the U.S. Environmental Protection Agency, which made businesses responsible for the pollution they produce. Recognizing that the U.S. government was willing to take new steps to curb the harms corporations could do to workers and the environment, businesses tried to show that they could police themselves (De George, 2014; LRN, 2006).

The development of the Sullivan principles is one of the most well-known efforts of businesses to self-regulate their behavior. In the mid-1970s, General Motors (GM) and many other corporations doing business in South Africa faced public pressure to move their companies out of the then apartheid nation. Unwilling to lose their business connections there, they instead agreed to abide by the Sullivan principles, a code of conduct through which they promised to treat workers in South Africa as they treated workers in the United States and to lobby the South African government to abolish its system of racial segregation.

Rev. Leon Sullivan was a Black Baptist clergyman, civil rights activist, and member of the GM Board of Directors. After visiting South Africa and being discriminated against himself because of his race (he was even made to strip down to his underwear before boarding his plane home), he became committed to making sure that GM did not follow the discriminatory rules of apartheid in its South Africa operations (Lewis, 2001). As public sentiment against apartheid and calls to stop doing business in that nation increased, adhering to the Sullivan principles allowed GM to continue to do business in South Africa yet be able to say they were behaving in a socially responsible, nondiscriminatory way (Seidman, 2003; De George, 2014).

Another ethical code of conduct emerged in the 1980s, after the 1984 Union Carbide plant accident in Bhopal, India killed thousands of people and injured hundreds of thousands more. In response to public outrage over the industry, the American Chemistry Council—the trade association for American chemical companies—created a code called Responsible Care, which has since been adopted by chemical corporations around the world. Results of adoption include improved safety records and community relations and lower levels of liability (American Chemical Council, 2014). Shortly after the creation of Responsible Care, another code—the Defense Industry Initiative on Business Ethics and Conduct—was established in response to a number of publicized problems with defense contracts. Many major defense contractors, including General Electric, General Dynamics, and Martin Marietta (now Lockheed Martin), “saw business ethics programs as a way to self-regulate rather than submitting themselves to government regulation” (LRN, 2006, p. 2).

Government Efforts to Promote Ethical Workplaces

Despite corporate and industry efforts to self-regulate, the federal government created more regulations for companies to promote ethical behavior. The Defense Industry Initiative became the blueprint for “the most signi�icant governmental impetus to the business ethics movement, namely, the 1991 Federal Sentencing Guidelines for Corporations” (De George, 2014, para. 38). Created by the U.S. Sentencing Commission, these guidelines were designed to encourage corporations to set up systems to ensure ethical behavior by reducing the possible sentences of those that did so.

If a company could show that it had taken appropriate measures to prevent and detect illegal and unethical behavior, its sentence, if found guilty of illegal behavior, would be reduced considerably. Appropriate measures included having a code of ethics or of conduct, a high-placed of�icer in charge of oversight, an ethics training program, a monitoring and reporting system (such as a “hotline”), and an enforcement and response system. Fines that could reach up to $290 million could be reduced by up to 95 percent if a company could show bona �ide institutional structures that were in place to help prevent unethical and illegal conduct. (De George, 2014, para. 38)

The 1991 guidelines declared that in order to bene�it from the reduced sentences, organizations deemed guilty of misconduct must be able to show (a) that they have an effective compliance program (not just an ethics code); (b) that they promptly reported the misconduct; and (c) no high-ranking of�icers were involved in the misconduct (Desio, n.d.). The guidelines note that simply establishing a code is not enough; organizations must take effective steps to enforce it. According to Stuart C. Gilman, president of the Ethics Resource Center, a 3ps approach—when “you print a code of conduct, post it on the wall and pray people actually read it”—does not suf�ice (Myers, 2003, “Putting Together a Code,”

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 29/49

para. 3). There must be formal mechanisms to communicate and support the organization’s declared ethics (LRN, 2006, p. 2). Satisfactory mechanisms for enforcing ethical standards of conduct consist of:

Oversight by high-level personnel… Effective communication to all levels of employees Reasonable steps to achieve compliance, which include systems for monitoring, auditing, and reporting suspected wrongdoing without fear of reprisal Consistent enforcement of compliance standards including disciplinary mechanisms Reasonable steps to respond to and prevent further similar offenses upon detection of a violation (Desio, n.d.)

The U.S. Sentencing Commission encouraged organizations to adapt these principles (Desio, n.d.).

Further legislation pertaining to ethical conduct came in the early 21st century. In response to �inancial scandals involving such corporations as Enron, Arthur Andersen, and WorldCom, the Sarbanes–Oxley Act was passed in 2002. This act made the CEO and CFO legally responsible for the accuracy and transparency of a corporation’s �inancial statements and for establishing a code of ethics for high-level �inancial of�icers (De George, 2014). Public disapproval of unethical behavior and suspicion of big corporations prompted this legislation and further private sector efforts to promote ethical behavior. In 2003, both the Nasdaq and the New York Stock Exchange required listed companies to have, and make public, a business code of ethics (LRN, 2006).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 30/49

AP Photo/A.M.Ahad

When different sectors within an organization fail to communicate with one another, silos develop. The 2013 Rana Plaza building collapse, in which thousands of workers were injured and killed, is one example of the potential dangers silos can create.

10.2 Dif�iculties Enforcing Ethics

As noted in the 1991 Federal Sentencing Guidelines, organizations’ codes of ethics are only useful when effectively communicated and reinforced. If structured and managed properly, an organization can ensure that information is shared effectively and that workers feel compelled to make sure that they and the entire organization behave ethically. However, “big, complex companies are typically structured so that decision making is separated according to function, geography, and product. That naturally creates silos” (Foroohar, 2014, p. 24). These silos, or separate spheres within an organization, impede communication and can have drastic consequences. For example, at one time Sony had two divisions of its company manufacturing the same electrical plug. No one knew of the overlap (Foroohar, 2014). This kind of siloed thinking impedes a company’s ability to work effectively.

Former U.S. attorney Anton Valukas’s 2014 report on GM’s ignition-switching problems provides a disturbing example of how silos can negatively impact an organization. The report indicates that the problems—which led to more than a dozen deaths—were caused by mismanagement and a lack of communication at GM. The engineers investigating “reports of cars stalling while moving didn’t know that engineers elsewhere in the company had designed air bags that would not deploy when cars were technically off” (Foroohar, 2014, p. 24). The result was that air bags did not deploy in situations where drivers needed their protection, which resulted in many needless deaths.

The 2013 Rana Plaza building collapse in Bangladesh that killed more than 1,000 workers provides another powerful example of the negative impact of silos. The disaster was partly due to the fact that many Western clothes makers “didn’t know who their suppliers were or what they were doing” (Foroohar, 2014, p. 24). The lack of oversight over who was making the clothes for the Western companies, and how, allowed labor abuses to be carried out without the companies’ knowledge. Some were even surprised to learn that their products were in the Rana Plaza building (Mosk, 2013).

Not knowing how their suppliers treat workers allows companies to say they are unaware of harsh working conditions, even as they bene�it from the results in the form of reduced costs. Even the U.S. government takes advantage of sweatshop labor. A 2013 investigative report by the New York Times revealed that:

American government suppliers in countries including Bangladesh, the Dominican Republic, Haiti, Mexico, Pakistan and Vietnam show a pattern of legal violations and harsh working conditions, according to audits and interviews at factories. Among them: padlocked �ire exits, buildings at risk of collapse, falsi�ied wage records and repeated hand punctures from sewing needles when workers were pushed to hurry up. (Urbina, 2013, para. 3)

The U.S. government has not passed legislation that requires it to ensure that the goods it purchases overseas are created under safe and fair working conditions. According to Daniel Gordon, a former top federal procurement of�icial who now works at George Washington University Law School, the reason is simple: “The government cares most about getting the best price” (as cited in Urbina, 2013, para. 9).

Addressing Ethical Lapses

It usually takes widespread public outrage before steps are taken to protect workers and consumers. The GM-related deaths and the Rana Plaza disaster generated widespread outrage and repeated calls for action. In turn, the government encouraged corporations to change how they do business and monitor their behavior. GM—under threat of possible criminal penalties—has pledged to take steps to demolish its silos, and Mary Barra, the new CEO of GM, has “set a communal goal for GM—‘to set a new industry standard in safety’” (Foroohar, 2014, p. 24).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 31/49

Under intense public pressure, corporations that use factories in Bangladesh have also taken steps to better monitor and enforce safety standards. Many European and a few U.S.-based businesses have signed the Bangladesh Accord on Fire and Building Safety, which calls for independent inspections of factories in Bangladesh. Many U.S. retailers refused to sign the Accord but did join the Bangladesh Worker Safety Alliance, which calls for inspections completed by inspectors hired by the companies (Banjo & Passariello, 2013; Fox, 2013).

The safety alliance, however, has not appeased many consumers in the United States. For example, in July 2014 Rutgers University, one of more than 20 colleges and universities that require companies that use their logos to sign the Bangladesh Accord, severed its relations with OC Sports/Outdoor Cap and VF Corporation (of which JanSport is a subsidiary).VF signed the Bangladesh Worker Safety Alliance, but this did not satisfy Rutgers or other members of the group, who regard the alliance as much weaker than the accord (Banjo & Passariello, 2013; Heyboer, 2014).

Global Efforts to Enforce Ethics in the Workplace

Recognizing the power of global corporations and the often limited power of many governments (and the corruption in others), the United Nations (UN) has moved from encouraging nations to control corporations within their borders to working directly with corporations to promote ethical business behavior and help bring about UN goals. In 2000, it established the UN Global Compact, which asks corporations “to embrace, support and enact, within their sphere of in�luence” (United Nations, 2013b) the following 10 core values related to human rights, labor rights, care of the environment, and anticorruption efforts:

Human Rights

Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and Principle 2: make sure that they are not complicit in human rights abuses.

Labour

Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining; Principle 4: the elimination of all forms of forced and compulsory labour; Principle 5: the effective abolition of child labour; and Principle 6: the elimination of discrimination in respect of employment and occupation.

Environment

Principle 7: Businesses should support a precautionary approach to environmental challenges; Principle 8: undertake initiatives to promote greater environmental responsibility; and Principle 9: encourage the development and diffusion of environmentally friendly technologies.

Anti-Corruption

Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery. (United Nations, 2013b)

A voluntary initiative, the Global Compact relies on the corporate members of the compact to self-report. The UN leadership reasons that the pressure from other signatories and the shared tools and assistance that come with being a member of the compact will encourage members to follow the principles (Rasche, Waddock, & McIntosh, 2013). As of 2014, the Global Compact has “over 12,000 corporate participants and other stakeholders from over 145 countries” and is “the largest voluntary corporate responsibility initiative in the world” (United Nations, 2013a, para. 3). According to UN Secretary-General Ban Ki-Moon, “The Global Compact . . . has grown to become a critical platform for the UN to engage effectively with enlightened global business” (as cited in United Nations, n.d., para 1).

Other global organizations not af�iliated with the UN, such as the Institute for Global Labour and Human Rights, also work to end unethical corporate behaviors. In the late 1990s, the institute was an early contributor to the antisweatshop movement. It spearheaded a particularly well-known campaign against the mistreatment of workers

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 32/49

(many as young as 12 years old) who made Kathie Lee clothes for Walmart (Resnikoff, 2013; Institute for Global Labour and Human Rights, 2014). These types of organizations focus primarily on workers’ welfare, but various stakeholders closely scrutinize companies to ensure that they also treat the broader communities in which they do business fairly. We now explore the impact companies’ decisions can have on local and national communities.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 33/49

10.3 Corporations’ Local and National Responsibilities

Most codes of ethics, such as Johnson & Johnson’s Credo, acknowledge an organization’s obligations to the community in which it resides. Organizations can contribute to their communities by assisting local charities, partnering in urban development programs, and supporting local schools. One of the most in�luential ways businesses contribute to their surrounding communities is by paying taxes. Taxes pay for police and �ire�ighters, teachers, street paving, garbage collection, and many other services that keep a community running. In the United States 8% of federal, 9% of state, and 19% of local government revenues come from taxes on businesses (Chantrill, 2014). However, many companies employ a variety of methods to reduce their tax liability.

Corporations’ Efforts to Avoid Federal Taxes

Increasing numbers of U.S. companies have used the practice of inversion to merge with a company in another nation to avoid paying taxes in the United States, even as they still do much of their business there. For example, in 2014 Medtronic, a U.S.-based company, announced that it would merge with Covidien. Covidien is based in Ireland, a nation well known for its low corporate tax rate (Sorkin, 2014).

That same year, Walgreens announced it was considering merging with a European company and moving its headquarters to Switzerland. This drew the ire of many people on both national and state levels. Just 2 years earlier, Walgreens’ CEO had asked for and received several tax breaks from the state of Illinois. At the time, he said:

We are proud of our Illinois heritage. Just as our stores and pharmacies are health and daily living anchors for the communities we serve, we as a company are now recommitted to serving as an economic anchor for northeastern Illinois. (as cited in Sorkin, 2014, para. 3)

At the federal level, Walgreens’ move to Switzerland would have cost the government an estimated $4 billion over 5 years in lost tax revenues. Critics of the proposed move also pointed out that almost a quarter of Walgreens’ revenue is tied to the government, in that it comes directly from people who receive Medicare and Medicaid payments and buy their prescription drugs at Walgreens (Sorkin, 2014). Illinois senator Richard J. Durbin re�lected the attitudes of many Americans when he said, “I am troubled by American corporations that are willing to give up on this country and move their headquarters for a tax break. It really speaks to your commitment” (as cited in Sorkin, 2014, para. 17).

The negative publicity played a role in Walgreens’ decision not to pursue inversion (Frost, 2014). A consumer-driven businesses, it feared it would lose customers if it came to be viewed as an unpatriotic company trying to avoid its tax obligations. Other businesses, however, particularly pharmaceutical companies that are not as publicly visible, continue to pursue inversion and other methods to lower the amount they pay in taxes (Ziobor & Calia, 2014).

Corporations’ Efforts to Avoid State Taxes

While increasing numbers of corporations consider moving out of the United States for lower tax rates, many other corporations seek out states that will offer them the best in-country tax deals. Most mass relocations of jobs are from state to state, rather than nation to nation. Many states in the United States use relatively low tax rates (some as low as zero) to lure businesses to relocate there. For example, South Dakota, Wyoming, and Nevada have neither corporate nor individual income taxes (Drenkard & Henchman, 2013). Figure 10.1 indicates the states with the best and worst tax climates for businesses.

Figure 10.1: Business tax climates in United States, 2014

Businesses make strategic decisions about where to base their operations depending on a state’s business tax climate.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 34/49

Source: U.S. Department of Labor.

Although many may view businesses that move from state to state in pursuit of lower taxes or weaker union in�luence (as discussed in Chapter 3) as unethical, there is nothing illegal about these acts. We now turn to ethical violations in the workplace that are both unethical and against the law. These include safety violations, discrimination, and bribery.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 35/49

10.4 Ethical Violations in the Workplace

To understand the extent of ethical violations in the workplace, organizations like the EEOC, which handles incidents reports and complaints, and OSHA, which monitors workplaces, collect extensive data on the matter. However, the information from these sources may not provide a complete picture. This is because few people who witness ethical misconduct risk reporting it. In addition, OSHA and other monitoring agencies—such as the Wage and Hour Division of the U.S. Department of Labor, which enforces the regulations of the Fair Labor Standards Act, the Family and Medical Leave Act, the Consumer Credit Protection Act, the Migrant and Seasonal Agricultural Worker Protection Act, and other regulations that protect workers—have limited funding from the federal government and do not have enough inspectors to monitor most employers (Schrank, 2012).

Employee surveys are another source of data, though these may also result in undercounts, since some employees may fear retribution for reporting ethical lapses in their workplace, even when assured con�identiality. Despite these data limitations, it is clear that ethical violations in the workplace occur in many organizations. Some, such as safety violations, can result in workers’ injury or even death. It is important that all employees feel empowered to stand up against such work conditions and that they receive support to do so.

Safety Violations

Despite the safety guidelines laid out in federal law under the Occupational Safety and Health Regulations, these rules are violated every day. During the 2014 �iscal year, OSHA issued the most citations to companies in violation of the following 10 safety standards:

1. Fall protection, or standards intended to protect workers from on-the-job falls 2. Hazard communication, or standards requiring communication of hazardous chemicals and necessary

protective measures to employees 3. Scaffolding, or standards outlining safety requirements for scaffolding, suspension, and elevated platforms 4. Respiratory protection, or standards intended to protect workers from respiratory injuries 5. Powered industrial trucks, or standards outlining safety requirements for industrial trucks using internal

combustion engines or electric motors 6. Lockout/tagout, or standards intended to protect workers from injuries sustained by the unexpected activation

of machinery 7. Ladders, or standards outlining safety requirements for ladders 8. Electrical: wiring methods, or standards outlining safety requirements for electrical wiring methods 9. Machine guarding, or standards requiring installation of guards on or near machines to protect workers from

injuries 10. Electrical: general requirements, or standards outlining safety requirements for electrical systems in general

(OSHA, 2014c).

Even very serious violations often result in relatively low �inancial penalties for employers. One example comes from Tyson Foods, one of the largest meat processing companies in the world, with about 115,000 employees. In June 2013 in the company’s Hutchinson, Kansas, plant, a worker’s arm was severed as four workers cleaned a machine at the end of their shift. The workers had not been trained to lock out equipment when cleaning it, and when the machine went on unintentionally, the employee’s uniform apron and arm were pulled into it.

For this incident, OSHA placed Tyson in its Severe Violator Enforcement Program, which is reserved for “recalcitrant employers that endanger workers by committing willful, repeat or failure-to-abate violations” (OSHA, 2013, para. 7). Under this program, OSHA may inspect any of the employer’s facilities if it has “reasonable grounds to believe there are similar violations” (OSHA, 2013, para. 7). The Hutchinson plant had been inspected by OSHA �ive times in the previous 10 years, resulting in seven recorded violations. However, OSHA has proposed �ines of just $147,000 against Tyson for these violations, including the severed arm (OSHA, 2013).

Similarly, in June 2014 the R. E. Arnold Construction company in Jacksonville, Florida, was also cited by OSHA but paid a relatively low �ine for the violation. One of the company’s employees became trapped when an excavation wall on which

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 36/49

he was working collapsed around him. He had to be rescued by a �ire and rescue team and was hospitalized in critical condition. The OSHA area director said:

These employers deliberately chose not to follow established OSHA standards for protecting workers in excavations and repeatedly ignored warnings—including one on the day of the incident—that the trench was unsafe.… This shortcut led to a worker seriously injured and nearly killed. (as cited in OSHA, 2014d, para. 2)

OSHA has proposed that R. E. Arnold pay penalties of just $70,000 for that safety violation.

These cases are a small sample of those handled by OSHA and recorded by the Bureau of Labor Statistics, which in 2013 recorded more than 3 million cases of nonfatal injuries and illnesses in private industry (BLS, 2014h).

What Would You Do? Pressure to Increase Productivity

Imagine that you are a supervisor at a meat processing plant. You are under enormous pressure to increase production. Your boss tells you your job is on the line. You know that if you make the employees under your supervision process meat throughout their shift and wait longer than usual to clean their machinery, you can meet your production goals. You also know that doing this will increase the chances that machines will not work properly and may injure workers. What would you do? Why? Who is responsible when a lower level manager mistreats workers because of pressure from senior management?

Discrimination

As Chapters 4 and 5 discussed, racism continues to exist in the workplace despite the victories of the civil rights movement and the establishment of laws that prohibit discrimination. Although Title VII of the Civil Rights Act of 1964 forbids employers with at least 15 employees from acting in a racially discriminatory manner, many violate this law.

Consistently, the largest number of workplace complaints the EEOC receives are race based (EEOC, n.d.a). The EEOC continually �inds supporting evidence for many racial discrimination cases that lead either to guilty court verdicts or out-of-court settlements. For example, in 2012 Alliant Techsystems agreed to pay $100,000 to settle an EEOC suit that alleged the company violated Title VII by refusing to hire a woman because she was Black.

According to the lawsuit, the alleged victim applied and was interviewed several times for the job in May 2007. After the �irst interview, the recruiter allegedly advised her to take out her braids to appear more professional. She did so and purportedly was later told by the recruiter that Alliant wanted to hire her and that she would be contacted by the company’s Human Resources Department. However, by the time she met with the company’s information technology director, she had put her braids back in. The next day she was informed that she would not be hired. In June 2007 the company hired a White male for the information technology job (EEOC, n.d.c, para. 1).

Unequal treatment of workers based on race also continues to exist. For example, in 2011 a Chicago hospital agreed to pay $80,000 to settle another EEOC racial discrimination suit. This suit alleged that the hospital

subjected a class of Black female employees to different terms and conditions of employment and segregation in job assignments because of their race. The suit also alleged that at least one of the women was demoted in retaliation for opposing and complaining about unlawful employment practices. Further, the agency’s administrative investigation revealed that numerous Black female medical technicians at the hospital appear to have been required to perform assignments that their male Asian-Indian counterparts were allegedly not required to perform. (EEOC, n.d.d, para. 1)

According to a 2014 Pew Research survey, 54% of Black respondents said that Blacks in their community are treated less fairly than Whites while at work. A 2013 Gallup Poll revealed similar results, with 61% of Blacks maintaining that

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 37/49

quali�ied Whites have a better chance of obtaining a job than a quali�ied Black. This was a decrease compared to the 74% who believed this in 1963, right before passage of the Civil Rights Act (Jones, 2013). These �indings, together with other social scienti�ic studies that reveal that Black and Hispanic workers face discrimination in hiring (such as Syal, 2009; Pager, Western, & Sugie, 2009), indicate that civil rights legislation has yet to be universally applied in the workplace.

Discrimination in the workplace is both unethical and bad for business. It can impact an employer’s ability to recruit and retain staff, can slow worker productivity, and can damage the organization’s reputation (Benjamin, 2014)—as can bribery.

What Would You Do? Race and Hiring

Suppose that as a manager of a sales department for a department store, you have been charged with hiring a sales associate. You will have to work with this associate closely. You have interviewed several quali�ied candidates. One shares your racial and social class background, and you seem to have much in common. The others come from different racial and social class backgrounds and seem to have little in common with you. Who do you hire? Why? What might be the repercussions of your choice for you personally and for your company? Why?

Bribery

Until just a few decades ago, bribery was not illegal; in fact, it was considered a routine aspect of conducting business in foreign markets. In 1977, after a series of bribery scandals involving U.S. �irms, the United States passed the Foreign Corrupt Practices Act, which made it illegal for U.S. companies to pay of�icials from other governments for special treatment. In 1997, the OECD member nations adopted similar laws (De George, 2014).

As demonstrated by the OSHA and EEOC cases, laws may diminish the instances of unethical behavior but are unlikely to fully eliminate it. For example, in 2012 the Walmart executive management team was accused of high-level and widespread corruption in its dealings with its stores in Mexico (as of 2012, 1 out of 5 Walmart stores were in Mexico) (Barstow, 2012). The charges came to light after the New York Times “found credible evidence that bribery played a persistent and signi�icant role in Wal-Mart’s rapid growth in Mexico, where Wal-Mart now employs 209,000 people, making it the country’s largest private employer” (Barstow, 2012, para. 15).

According to the New York Times, Walmart paid $24 million in bribes to Mexican government of�icials as it established stores there. The Mexican government has also opened investigations into the matter, and the company faces lawsuits from shareholders. Walmart is also conducting an internal investigation of its programs (Voreacos & Dudley, 2014). The costs of the investigations into the corruption—both for the federal government’s and Walmart’s internal investigation —have been high and continue to grow. From 2012 to 2014, Walmart says it spent $439 million on the investigations and expects to spend $200 to $240 million in 2015 (Ber�ield, 2014; Voreacos & Dudley, 2014). This cost is signi�icant even considering Walmart’s enormous annual net income, which in 2014 was $15.88 billion (MarketWatch, 2014).

Bribery among businesses can be just as prevalent as bribery between business and government of�icials. Transparency International, an international nongovernmental organization, monitors corruption across the world and ranks nations accordingly. The rankings are based on the responses of business executives who “were asked, for each of the 28 countries with which they have a business relationship (for example, as supplier, client, partner or competitor), ‘How often do �irms headquartered in that country engage in bribery in this country?’” (Transparency International, 2011, p. 5). Table 10.1 lists Transparency International’s ranking of executives’ responses, based on a scale of 0 (always paying a bribe in that country) to 10 (never paying a bribe).

Table 10.1: Ranking of nations on scale of 0–10

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 38/49

Country Score

Netherlands 8.8

Switzerland 8.8

Belgium 8.7

Germany 8.6

Japan 8.6

Australia 8.5

Canada 8.5

Singapore 8.3

United Kingdom 8.3

United States 8.1

France 8.0

Spain 8.0

South Korea 7.9

Brazil 7.7

Hong Kong 7.6

Italy 7.6

Malaysia 7.6

South Africa 7.6

Taiwan 7.5

India 7.5

Turkey 7.5

Saudi Arabia 7.4

Argentina 7.3

United Arab Emirates 7.3

Indonesia 7.1

Mexico 7.0

China 6.5

Russia 6.1

Source: Transparency International, 2011.

In the nations at the bottom of the list, bribes are still a normal part of doing business (Transparency International, 2011). As shown in Figure 10.2, bribery also varies based on business sector. Many business leaders see bribery as part of the price to enter these markets. However, as Elisse Walter (2013), the chair of the U.S. Securities and Exchange Commission, states:

Failure to enforce laws can put honest companies at a disadvantage, harming those that play by the rules. It can [also] mean higher costs and economic inef�iciencies for countries that lack the will or the expertise to crack down on corruption—bene�iting a few individuals or groups while harming the larger populace and a nation’s development goals. (para. 10)

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 39/49

Figure 10.2: Bribery by business sector, ranked from most to least transparent/ethical

Research by Transparency International found that the type and frequency of bribery differs by business sector. The �ive least transparent/ethical sectors are: 1. public works contracts and construction; 2. utilities; 3. real estate, property, legal and business services; 4. oil and gas; and 5. mining.

Source: Bribe Payers Index 2011 ©Transparency International (2011). Retrieved from http://www.transparency.org/bpi2011/ (http://www.transparency.org/bpi2011/) . All Rights Reserved. For more information, visit http://www.transparency.org (http://www.transparency.org) .

Standing Up to Unethical Behavior

Just as bribery is a cultural norm in some societies, brushing off responsibility for ethical behavior can be the norm at some companies. For example, the U.S. Attorney’s report on GM’s faulty ignition problem noted several negative behavioral norms at GM that re�lect an unethical environment. An example of such a norm is the “GM nod,” when

everyone nods with respect to a certain course of action before leaving a meeting and then does nothing at all. And there was the “GM salute,” �irmly crossed arms pointing outward toward others, signaling a steadfast

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 40/49

Alex Wong/Getty Images

GM CEO Mary Barra testi�ies during a hearing before the Consumer Protection, Product Safety, and Insurance Subcommittee to examine accountability and corporate culture in the wake of GM recalls of cars with a faulty ignition switch. Barra has attempted to change GM’s culture of unaccountability.

refusal to take personal responsibility. (Foroohar, 2014, p. 24)

These norms re�lect the fact that no one was willing to buck the unethical culture at GM. To counter this culture, in 2014 Mary Barra, the new CEO, publicly requested that GM employees speak up if they see anything that might endanger customers and even e-mail her directly about it (Foroohar, 2014). In doing so, Barra is asking employees to serve as internal whistleblowers, or employees who step up and report unethical behavior to persons of authority within an organization. Internal whistleblowers are different from external whistleblowers, who report ethical violations to persons or agencies outside the organization, such as the media, the government, and nongovernmental organizations.

Protections for federal employees who engage in whistleblowing come, in part, from the Whistleblower Protection Enhancement Act of 2012. This act enhanced the provisions of the Whistleblower Protection Act of 1989 and protects federal employees who report abuse, fraud, or waste in the workplace (U.S. Securities and Exchange Commission, 2014). Not all employees are protected, however. The Whistleblower Protection Enhancement Act only applies to federal government workers. Whistleblower laws vary by state and federal laws and the jurisdiction under which they fall. Also, protection has an expiration date; many laws require workers to report retaliation within a very short amount of time. For example, employees �ired for complaining about a safety violation have just 30 days from the day of the retaliatory act to register a complaint with OSHA (U.S. Department of Labor, n.d.b).

It is now common practice, however, for large employers and public institutions (such as universities) to include whistleblower guidelines in their policies. In many circumstances, such as with sexual harassment, employers are held accountable for the work culture that exists under their supervision. Therefore, encouraging a collective sense of obligation to report misconduct protects their liability as well as promotes social responsibility.

A few whistleblower cases end as those of Cynthia Cooper and Sherron Watkins did when they exposed the �inancial fraud conducted by their respective corporations, WorldCom and Enron. Their cases are highly unusual, in that they earned a cover photo and Time magazine’s Persons of the Year accolade (Time, 2002). Such positive recognition was far from guaranteed. As these whistleblowers were in the process of holding their employers accountable, they knew they were in dangerous waters. Despite some legal protections for whistleblowers, reporting an employer’s misdeeds can carry great risks and takes bravery. As Cooper described it:

I wish I could tell you that I was a pillar of strength throughout this process. But I wasn’t. There were times when I was scared—when my hands were shaking and my heart was pounding. I certainly knew there was a very real possibility I would lose my job, and I also worried at times that I was overreacting. I had no interest in making accusations that might be wrong and cause unnecessary damage to others’ reputations, so we had to be sure our conclusions were accurate. (as cited in Carozza, 2008, para. 57)

When successfully prosecuted, most whistleblower cases result in the employer being forced to pay workers lost wages and modest �ines for damages. For example, in 2014 OSHA forced the railroad company Burlington Northern Santa Fe LLC to pay $225,000 to an employee it �ired for reporting a workplace injury (U.S. Department of Labor, 2014c). Also in 2014, a biohazard waste disposal company, Stericycle Inc., was forced to reinstate a transportation supervisor it had �ired for raising “safety concerns after a driver was instructed to pull a trailer without a valid license plate” (U.S. Department of Labor, 2014d, para. 1).

Many workers do not speak up because they fear being �ired, labeled as a “snitch,” or simply because they do not want to go against the workplace’s culture. Many whistleblowers risk and even lose their careers as a result of reporting misconduct. In a 2013 survey, 21% of workers who reported misconduct said they faced negative consequences for doing so (Ethics Resource Center, 2014).

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 41/49

One such person was James Holzrichter. In 1989, Holzrichter was �ired after he �iled a complaint against his former employer, Northrop Grumman, under the False Claims Act, which encourages employees to report fraud against the government. His complaint took years to go through the legal system. In the meantime, he could not �ind a job.

He received more than 400 rejection letters from employers who weren’t interested, he believes, in hiring a snitch. Desperate to support his wife and four children, he took menial jobs such as scrubbing toilets and delivering the Chicago Tribune. At one point, he moved his family into a homeless shelter. (Hallman, 2012, para. 4)

Then, shortly before the case was slated to go to trial, Northrop Grumman agreed to pay $62 million to the federal government as part of a settlement deal. Holzrichter received an award as part of the compensation allotted to whistleblowers whose claims result in successful cases. However, lawyer’s fees and taxes left him with only about a third of it—far less than what he would have made if he could have stayed and worked in his original job.

Although publicizing unethical practices might hamper an organization’s reputation and pro�itability in the short term, whistleblowing could actually bene�it a company in the long run. Appropriately handling whistleblowing can strengthen an organization and create a better workplace environment. As we will see in the next section, ethical workplaces foster engaged workers and successful businesses.

What Would You Do? Whistleblowing

Suppose a friend has just told you that his boss has asked him to punch out before he �inishes the work involved in closing his store for the night. This gets you thinking about what you would do in a similar situation. Under what circumstances would you “blow the whistle” if you saw your supervisor behaving unethically? What circumstances might compel you to keep silent instead?

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 42/49

Figure 10.3: Making ethics a priority

Research conducted by the Ethics Resource Center indicates that the ethical climate within companies is improving.

10.5 Bene�its of an Ethical Workplace

An ethical workplace bene�its employees, employers, and the overall economy. In this section, we discuss the connection between an ethical workplace and worker engagement, as well as the in�luence both have on workplaces and the larger society. We begin with an examination of the impact an ethical work environment has on employees.

Bene�its for Employees

As we saw at the beginning of this chapter, there is intrinsic value in working at an ethical organization. It simply feels good to do honest work for an ethical company. Ethical workplaces also tend to be more �inancially successful than other organizations (Meinert, 2014). Working for an organization that underscores ethical behavior can also have tangible bene�its for workers, in terms of job security and opportunities for advancement.

Although in the short term it may be more pro�itable for companies to exploit employees and underpay them, this approach does not work for an organization interested in its long-term �inancial health. In an ethical workplace, employers give “priority to employee rights, fair procedures, and equity in pay and promotion, and . . . promote tolerance, compassion, loyalty and honesty in the treatment of customers and employees” (Meinert, 2014, para. 19). In turn, this workplace environment promotes worker loyalty and engagement (Ethics Resource Center, 2010). It also promotes an atmosphere in which whistleblowers feel safe to report ethical violations. Engaged employees are more likely to report ethical lapses (Ethics Resource Center, 2014).

Bene�its for Employers

Growing numbers of employers have realized the bene�its of ethically operating their organizations. They know that “companies that work to build and maintain ethical workplace cultures are more �inancially successful and have more motivated, productive employees” (Meinert, 2014, para. 7). Awareness among employers that “in order to maintain high levels of employee engagement, leaders need not only to set an example but to carefully monitor and manage compliance with corporate ethics standards” (Ethics Resource Center, 2014, p. 10), has also grown. Many executives have made efforts to incorporate this knowledge into the way they run their organizations. The 2013 National Business Ethics Survey indicates that more and more companies are making ethics a priority, as shown in Figure 10.3.

Evidence exists that ethical companies can be more pro�itable companies. Research by the Economic Intelligence Unit shows that “while the intangible bene�its are often greater,” corporate responsibility and ethical means of conducting business “can help to improve the bottom line.” Almost 3 out of 4 business leaders surveyed by the unit said corporate responsibility and ethical behavior serve to “increase pro�its” and offer companies a “competitive advantage” (Economist Intelligence Unit, 2008, p. 5). A meta-analysis of articles on the relationship between ethics and pro�its revealed that “corporate virtue in the form of social responsibility and, to a lesser extent, environmental responsibility is likely to pay off” (Orlitzky, Schmidt, & Rynes, 2003, p. 403). A study of the performance of �irms on the S&P 500 Index revealed that those with records of socially responsible practices in all “three categories —environment, product safety and employee treatment” (Landier & Nair, 2008, p. 4) were actually more pro�itable than the other companies on the Index.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 43/49

In this video, Robert Lane, the CEO of John Deere, discusses ethics and transparency.

Source: Based on data from Ethics Resource Center, 2014.

Bene�its for Local, National, and Global Communities

Organizations that create ethical workplace environments have more engaged employees who work in safer environments; they are also more concerned with doing what is best for their organization, customers, and communities. This fosters a more effective organization, which has much to offer its local, national, and global economies. Local communities pro�it from relationships with businesses and other organizations that work as community partners. In turn, nations and the global community bene�it from higher tax revenues, a more satis�ied citizenry, and a healthier environment.

By contrast, the latest Gallup �indings indicate that disengaged workers cost the U.S. economy $450 billion to $550 billion every year; likewise, they appear to be hurting the bottom lines of the organizations for which they work. As discussed in Chapter 7, organizations with relatively high numbers of disengaged workers have lower pro�its, more safety problems, more product defects, and higher employee turnover (Gallup, 2013).

On the other hand, positive work environments correlate with higher pro�its (Meinert, 2014). As Jim Clifton, the CEO of Gallup Inc. explains, leaders of organizations with such workplaces create economic growth that bene�its all of society. With more engaged employees, we can “create far more customers, companies will grow . . . and desperately needed GDP will boom like never before” (Gallup, 2013, p. 5). In short, it pays to create an ethical workplace.

Integrity and Ethics in the Workplace

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 44/49

Courtesy Jan Stets

Integrity and Ethics in the Workplace From Title: Feeding and Fueling the World: Healthier Alter...

(https://fod.infobase.com/PortalPlaylists.aspx?wID=100753&xtid=44112)

Critical Thinking Question

Spotlight on Workplace Research: Jan Stets’s Theory on Moral Behavior and How It Relates to the Banking Crisis and the Great Recession

Jan Stets, a professor at the University of California– Riverside, has developed a theory of morality that may help explain the �inancial crisis that led to the Great Recession. Using identity theory, she and a colleague examined how people’s self-identity (the extent to which they think they are moral) and their surroundings (that is, their culture’s expectations for moral behavior) in�luence their moral behavior. They conducted surveys of college students that revealed that people act in ways to re�lect the views they think others hold of them—including their morality.

Stets and her colleague collected their data through two sets of surveys. In the �irst one, they asked students how they responded to

speci�ic situations where they had a choice to do the right or wrong thing; for example, copy another student’s answers, drive home drunk, take an item, give to charity, allow another student to copy their answers, let a friend drive home drunk, return a lost item, or return money to a cashier. (Miller, 2012, para. 5)

Respondents were then asked to rate how they thought others viewed them in moral terms. Those who behaved morally and thought others viewed them as moral were deemed to have high moral identity scores. After 3 months, Stets and her colleague gave the same students a second survey and asked them to rate each scenario in moral terms, and how they thought individuals ought to feel after doing the right or wrong thing in each situation.

Students’ answers on the �irst survey related to how they responded on the second. Not surprisingly, those with high moral identity scores were more likely to behave and advocate behaving in moral ways. However, the results also indicated that those who behave immorally, and think others view them immorally, are less likely to think that immoral behavior should make one feel badly than those who behave immorally but thought others viewed them as moral.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 45/49

Stets maintains that many of the actors who caused the recession—such as bankers, mortgage lenders, and stockbrokers—did so perhaps because they were acting in ways consistent with their own moral identity and operating in an environment with cultural norms that supported immoral behavior. According to Stets, our sense of moral identity plus the reactions others have to our actions guide our behavior. If we think those around us see us as immoral but they do not challenge our immorality, than we will continue our immoral behavior. And “this is how immoral practices can emerge” (as cited in Miller, 2012, para. 4).

Stets says steps can be taken to counter low levels of moral identity:

Exposure to particular social contexts and individuals may encourage a higher moral identity. For example, when parents are involved in their children’s lives, their children are more likely to recognize moral values. Schools can also sensitize individuals to moral meanings by providing an atmosphere that fosters justice, virtue and volunteering. Religious traditions that promote re�lection on moral issues and foster charitable work also help individuals recognize moral meanings. (as cited in Miller, 2012, para. 9)

Given that the immoral acts of a few can damage the whole economy and impact the lives of millions, it is important to understand how the moral identity can be shaped to encourage more people to act ethically.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 46/49

Summary and Resources

Chapter Summary It was not until the 1980s that most businesses established codes of ethics and business ethics became a widely recognized �ield of study. Organizations’ codes of ethics are only useful when effectively communicated and reinforced. If structured and managed properly, an organization can ensure that information is shared effectively and that workers feel compelled to make sure that they and the entire organization behave ethically. Most codes of ethics, such as Johnson & Johnson’s Credo, acknowledge an organization’s obligations to the community in which it resides. One of the major ways businesses contribute to their surrounding communities is by paying taxes. However, many companies employ a variety of methods, such as inversion, to reduce their tax liability. OSHA, and other regulatory agencies that protect workers, do not have enough inspectors to closely monitor most employers. Organizations with ethical workplace environments employ more engaged employees who work in safer environments and are motivated to do what is best for their organizations, customers, and communities. This leads to more effective organizations that bene�it their local, national, and global economies.

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 47/49

Case Study: Running a Successful Business Through Open Book Management

Why do some business owners make a concerted effort to run an ethical business? The following case study examines why and how one team of employers in Ann Arbor, Michigan, has done so. As you read the information, keep in mind both the intrinsic and extrinsic rewards of an ethical workplace for employers and employees.

The book The Great Game of Business tells the tale of what happened when International Harvester made the decision to close its manufacturing plant in Spring�ield, Missouri. Jack Stack, a coauthor of The Great Game of Business, and some fellow managers decided to buy the plant when they heard it was going under. They then turned the to-be-shuttered plant into a now successful collection of businesses called SRC. To do so, they used a management system The Great Game of Business describes as open-book management, whereby managers share with employees both how their colleagues and the business are performing. Stack and his fellow managers believed that this sharing of information and establishing of rewards for improved performance would create a shared sense of investment in the company’s success among employees and encourage everyone to work harder and volunteer ideas on how the company might perform better. They were right.

When Ari Weinzweig read The Great Game of Business, he described the experience as “like turning on the light in a dark room where we had been bumping into the furniture” (as cited in Conlin, 2014, para. 31). He and Paul Saginaw, the other cofounder of Ann Arbor, Michigan, based Zingerman’s Community of Businesses (ZCoB), “wanted to build an extraordinary organization—not the biggest, not the most pro�itable—but an organization where decisions would not be based on who had the most authority but on whoever had the most relevant information” (Conlin, 2014, para. 12).

Together, Weinzweig and Saginaw decided to create local businesses that would each be run by a managing partner who embraced their ideas of an ideal business culture. After they read The Great Game of Business, that culture included an open-book management style.

Weinzweig and Saginaw’s most famous business is Zingerman’s Deli, “now known internationally for its many huge and creative sandwiches” (Conlin, 2014, para. 7). President Obama has noted that “The Reuben is killer” (as cited in Conlin, 2014, para. 7). “But [Weinzweig and Saginaw’s] most important creation may turn out to be a highly unusual business model—one that has produced impressive growth while engaging employees who enjoy the opportunity to help run the businesses and even to start new ones” (Conlin, 2014, para. 7).

Today, each of their now nine businesses offer employees more than 50 classes on topics ranging from safety issues in the workplace, to when to smile and greet a customer, to how to buy a home. Class time is paid, and workers receive credit toward raises or promotions for the classes they take. Through these classes, employees gain a variety of skills—including business skills that help them contribute effectively to efforts to improve their own workplace. Heather Kendrick, a Zingerman’s Deli employee and music major at the University of Michigan, said, “I feel like I have received a business degree working here” (as cited in Conlin, para. 24).

Saginaw and Weinzweig are �ine with a relatively low pro�it margin (about 5% yearly), knowing that the lower margin is due to making sure that employees are treated well, receive above average salaries, and have good health care. “Employees who are stressed out �inancially, wondering how to pay for their kid’s allergy meds, or their rent or auto insurance, are not going to be able to do their job well,” said Saginaw, who has been lobbying in Washington, D.C., for the past year for an increase in the minimum wage. “We’re comfortable with the notion that there’s such a thing as enough. Others may be wealthier than we’ll ever be, but I wonder if they’ve lost a certain amount of joy in their work” (Conlin, 2014, para. 43).

Think About It:

1. How have the intrinsic motivations of the founding partners at Zingerman’s Deli helped their company succeed and grow? How did their use of open-book management enable them to ful�ill their original goals for the company?

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 48/49

2. Not all workers at Zingerman’s Deli stay on the job for long periods. As one former worker said, it can be “exhausting to work somewhere where you feel like you have to improve what you do constantly.” Do you think you would be happy working for a company like Zingerman’s Deli? Why?

3. If you owned a business, would you be OK with making less pro�it in order to provide higher wages and good bene�its for your workers? Why or why not?

Discussion Questions 1. Why do you think organizational codes of ethics were not a priority before the 1980s? How does this fact relate

to what you learned in earlier chapters about government actions during the Progressive era? 2. What do you think are the greatest challenges to the success of efforts such as the UN Global Compact that

encourage but do not legally require corporations to practice ethical behavior? What steps could be taken to encourage more corporations to embrace ethical business practices?

3. What obligations does an organization have to the community in which it is located? Before you answer, think of the bene�its organizations receive from their communities (even those that do not receive special tax breaks). For example, almost all organizations depend on their communities for skilled employees, customers, and infrastructure—roads, sewage systems, access to sources of energy, and police and �ire protection.

4. Why do you think OSHA levies relatively low �ines for the harm done to workers when their employers violate OSHA guidelines? What do you think is the impact of this on large corporations’ efforts to follow the guidelines OSHA established to protect workers?

5. Given the intrinsic and extrinsic bene�its that come with establishing an ethical workplace, why do you think there are not more ethical workplaces? If you were an employer, would you spend much effort to create an ethical workplace? Why? How might you go about doing so?

Additional Resources Learn how to create a code of ethics for a business http://smallbusiness.chron.com/create-code-ethics-business-793.html (http://smallbusiness.chron.com/create-code- ethics-business-793.html)

Learn more about the Bangladesh Accord on Fire and Building Safety and see the list of signatories http://bangladeshaccord.org (http://bangladeshaccord.org)

Learn more about the Bangladesh Worker Safety Alliance and view a list of its members http://www.bangladeshworkersafety.org (http://www.bangladeshworkersafety.org)

How Henry Ford and the Ford Motor Company pro�ited from paying workers well http://pueblopulp.com/op-ed-do-businesses-have-social-responsibility-to-their- communities (http://pueblopulp.com/op-ed-do-businesses-have-social-responsibility-to-their-communities/)

A list of the world’s most ethical companies (and how the list was compiled) http://www.forbes.com/sites/susanadams/2014/03/20/the-worlds-most-ethical-companies (http://www.forbes.com/sites/susanadams/2014/03/20/the-worlds-most-ethical-companies/)

Sweatshops and forced labor http://www.carnegiecouncil.org/studio/multimedia/20090526b/index.html#section-18511 (http://www.carnegiecouncil.org/studio/multimedia/20090526b/index.html#section-18511)

Ethical Systems—How Ethics Pays http://ethicalsystems.org/content/ethics-pays (http://ethicalsystems.org/content/ethics-pays)

Zingerman’s approach to business http://www.zingtrain.com (http://www.zingtrain.com/) http://vimeo.com/43003986 (http://vimeo.com/43003986) (video)

8/14/2017 Print

https://content.ashford.edu/print/AUSOC402.15.1?sections=navpoint-63,navpoint-64,navpoint-65,navpoint-66,navpoint-67,navpoint-68,navpoint-69,navpoint-70,n… 49/49

Key Terms

corporate social responsibility The idea that corporations carry out activities that can bene�it society.

external whistleblowers Individuals who report ethical violations to persons or agencies outside the organization (for example, the media, the government, and nongovernmental organizations).

extrinsic (instrumental) value The value of something based on it being a means to achieve something else.

internal whistleblowers Individuals who report unethical behavior to persons of authority within an organization.

intrinsic value Something that has value in and of itself, for its own sake.

inversion A method of avoiding taxes that occurs when businesses merge with a foreign company.

military–industrial complex A term coined by former president Dwight D. Eisenhower that is used to describe close ties among the military, industry, and the government.

1991 Federal Sentencing Guidelines for Corporations Recommendations created by the U.S. Sentencing Commission that encourage corporations to set up systems to ensure ethical behavior by reducing the possible sentences of those that did so.

Sarbanes–Oxley Act Passed in 2002, this act made the CEO and CFO legally responsible for the accuracy and transparency of a corporation’s �inancial statements and for establishing a code of ethics for high-level �inancial of�icers.

silos Separate spheres within an organization that lead to a lack of communication and mismanagement.

Sullivan principles One of the most well-known corporate codes of conduct, established in the mid-1970s when GM and other corporations doing business in South Africa promised to treat workers in South Africa as they treat U.S. workers and to lobby the South African government to abolish apartheid.

3ps approach An approach to ethics that involves the establishment of a code of conduct without taking effective steps to enforce it.

UN Global Compact An agreement that asks corporations to enact 10 core values related to human rights, labor rights, care of the environment, and anticorruption efforts.

Wage and Hour Division of the U.S. Department of Labor A branch of the U.S. government that enforces the regulations of the Fair Labor Standards Act, the Family and Medical Leave Act, the Consumer Credit Protection Act, the Migrant and Seasonal Agricultural Worker Protection Act, and other regulations that protect workers.