Ethics and Corporate Responsibility

1. Ethics and Corporate Responsibility

2. Ethics • What are ethics? • What are laws? • Definition: principles established in a community by some authority that is applicable to its people • What are morals? • Definition:pertaining to the rules of conduct or behavior; distinguishing right from wrong • Is there a difference between these?

3. Ethics • Definition: rules of conduct recognized by a particular group • Structural guide for behavior • Dependent on organization you are in • Examples • Academia • Business • Athletics • Video: http://www.youtube.com/watch?v=voQjgngODU0

4. How Do You Know? • How do you know you are ethical? • How can you demonstrate it to others? • Scenario: You have planned to do a kayaking and camping trip with a few others, including your best friend, who also happens to be in your class. Your best friend got an extension on his/her paper that is due in class, a paper which you already turned in, on time. If you don't help your best friend, he/she will have to stay home over the weekend to complete the paper. If you help him/her, he/she will be able to come on the long-awaited and already-planned trip. What do you do?

5. Corporate Ethics • Code of Ethics • Social responsibility and philanthropy • Bill and Melinda Gates Foundation • Largest foundation ever • Contributed ~$14B to Global Health since 1994 • Environmental responsibility • Conserving the world around us • “Green” efforts

6. Why have a Code of Ethics? • To define accepted/acceptable behaviors; • To promote high standards of practice; • To provide a benchmark for members to use for self evaluation; • To establish a framework for professional behavior and responsibilities; • As a vehicle for occupational identity; • As a mark of occupational maturity; (from the website of Life Skills Coaches Association of BC)

7. Codes Come in Many Varieties • The company has established a code of conduct, a set of ethical principles, supported by detailed standards of business conduct. The ethical principles of the company (integrity, respect, teamwork, quality, innovation and citizenship) are the foundation for ethical conduct. The company’s Standards of Business Ethics and Conduct booklet provides a clear road map for employees to follow in their daily work. Each employee is a critical link in the chain of excellence and acknowledges his or her responsibility under the code. • Raytheon

8. Dell Computer • Key elements of their code of ethics: • Trust – keep commitments • Integrity – do the right thing without compromise • Honesty – what we say is true and forthcoming • Judgment – think before we act and consider consequences • Respect – treat people with dignity and value their contributions • Courage – speak up for what is right • Responsibility – accept the consequences

9. Chevron/Texaco Who Is This? Values Our company's foundation is built on our values, which distinguish us and guide our actions. We conduct our business in a socially responsible and ethical manner. We respect the law, support universal human rights, protect the environment, and benefit the communities where we work. Integrity We are honest with others and ourselves. We meet the highest ethical standards in all business dealings. We do what we say we will do. We accept responsibility and hold ourselves accountable for our work and our actions. Trust We trust, respect and support each other, and we strive to earn the trust of our colleagues and partners. Partnership We have an unwavering commitment to being a good partner focused on building productive, collaborative, trusting and beneficial relationships with governments, other companies, our customers, our communities and each other. Diversity We learn from and respect the cultures in which we work. We value and demonstrate respect for the uniqueness of individuals and the varied perspectives and talents they provide. We have an inclusive work environment and actively embrace a diversity of people, ideas, talents and experiences. Ingenuity We seek new opportunities and out-of-the-ordinary solutions. We use our creativity to find unexpected and practical ways to solve problems. Our experience, technology, and perseverance enable us to overcome challenges and deliver value. Protecting People and the Environment We place the highest priority on the health and safety of our workforce and protection of our assets and the environment. We aim to be admired for world-class performance through disciplined application of our Operational Excellence Management System. High Performance We are committed to excellence in everything we do, and we strive to continually improve. We are passionate about achieving results that exceed expectations — our own and those of others. We drive for results with energy and a sense of urgency.

10. Microsoft Who Is This? • As a company, and as individuals, we value integrity, honesty, openness, personal excellence, constructive self-criticism, continual self-improvement, and mutual respect. We are committed to our customers and partners and have a passion for technology. We take on big challenges, and pride ourselves on seeing them through. We hold ourselves accountable to our customers, shareholders, partners, and employees by honoring our commitments, providing results, and striving for the highest quality.

12. INVESTOR RELATIONS

13. Investor Relations (IR) • What is investor relations? • Investor relations is a strategic management responsibility that integrates finance, communication, marketing and securities law compliance to enable the most effective two-way communication between a company, the financial community, and other constituencies, which ultimately contributes to a company's securities achieving fair valuation (Adopted by the NIRI Board of Directors, March 2003).

14. Job Duties • Intermediary between Financial Analysts & Investors, & Executives • Report quarterly and annual operating results • Ensure company is meeting SEC rules, esp. Fair Disclosure • Prepare reports for CEO, CFO and Board of Directors • Work with legal department on issues that may effect shareholders • Ensure company & industry information in accurately reported by Financial Analysts and Media

15. Ethics Implications • Have company’s results before they’re reported • Know of major company events before they occur • Examples – layoffs, acquisitions, etc.

16. Enron’s Story

17. On-the-JobEthical Conflicts • Four ethical conflicts confront leaders in business: • Conflict of Interest - A leader achieves personal gain from a decision he/she makes • Loyalty versus truth - A leader must decide between loyalty to the company and truthfulness in business relationships • Honesty and integrity – A leader must decide if he/she will be honest or lie; if he/she will take responsibility for decisions and actions or blame someone else? • Whistleblowing – Does the leader tell others (media or government authorities) about the unethical behavior of the company or institution?

18. Enron • Energy company based in Houston, Texas • Before its bankruptcy in late 2001, Enron employed ~ 22,000 people • Was one of the world's leading electricity, natural gas, communications and pulp and paper companies, with claimed revenues of nearly $101 billion in 2000.

19. Enron • At the end of 2001, it was revealed that its reported financial condition was sustained primarily by institutionalized, systematic and creatively planned accounting fraud • Enron created offshore entities, units which may be used for planning and avoidance of taxes, raising the profitability of a business. • This provided ownership and management with full freedom of currency movement and the anonymity that allowed the company to hide losses. • These entities made Enron look more profitable than it actually was, and created a dangerous spiral, in which each quarter, corporate officers had to perform more and more contorted financial deception to create the illusion of billions in profits while the company was actually losing money.

20. Broken Trust – The Story of Enron72 Pairs of Relationships Senior Management Professional Associations Credit Raters Board of Directors Consultants Accountants Lawyers Analysts Investment Bankers

21. Your Personal Code of Ethics • Worth 5 extra credit points • Due next Monday • Must be present today (Nov. 8) and next Monday (Nov. 15) to play • Typed, double spaced, one page max • Your own elements that resound strongly with you • Personally signed by you • Challenge: hang/place in your work space