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Lecture 6

MGM101H5 Lecture 6 - Book+Lecture notes.pdf

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Dave Swanston

Lecture 6 October-18-13 11:16 AM Article: Ontario Liberals’ gas-plant cancellations cost $1-billion: auditor Issue - cancel the two plants and build another one - This will cost a lot more - The full cost will be reaching over a billion dollars - who will pay? The tax payers Other issues related (it's not just business related)- the decision was made during election campaign - They didn't want the plants made so they're not going to vote - Liberals want to ensure their positions (candidates will definitely get voted if they cancel the plants) - If they lost their seat, there is a chance that they won't be selected anymore - We need facilities that will catch our "garbage" but nobody wants them in their neighbourhood ○ Nobody wants their area to be polluted ○ The properties in the area will drop values (financial impact) - There is a conflict - is the decision unethical (making a decision to make themselves elected)? - Who should pay for this, if not the tax payers? - What should tax payers pay for and what shouldn’t they? Liberals promise certain things, but when they get in power, they cancel and say "sorry" It is usually the society pay when authorities make decisions Second article: Walmart To Skip Discussion On Compensation For Bangladesh Factory Victims Should walmart be responsible for the companies that supply them? (ex. Check the factories and ensure quality of products, sanitary of factory, treatment of employees)- They have the resources to inspect It's not fair to say they should be responsible, but we ourselves do not really care How much responsibility should we take? In Bangladesh, women is the focus of the issue. Women are unemployed. They are given jobs to stimulate economy. Labour of women - is it bad? More important issue is that the women are being exploited Who decides what fair compensation is? How much due diligence is required? What is immoral? - How does everything affect business ethical decisions Ethics & CSR Ethics And Corporate Social Responsibility - Guide to right decisions Ethics: reflection of moral principles or beliefs about what an individuals views as being right or wrong ○ Invisible hand that guides us as we make decisions ○ Dilemma: everyone has different interpretation of what is acceptable and what isn’t The Ethical Decision-Making Process - Get manager to slow down and think through all the consequences of a decision he/she is about to make What does "business ethics" mean? - Business ethics has to do with right and wrong business behaviour. - “Ethics is the study of what we understand to be good and right behavior and how people make those judgments. When one acts in ways that are consistent with our moral values we will characterize that as acting ethically‟. - Ethics govern behaviour when no one is watching. Ethics can be thought of as an invisible hand that guides each of us as we make decisions Why is business ethics important? - One organization that is ethical will garner trust - When there is trust, transaction cost is lower, creates opportunity for business to grow stronger - When there is a distrust, the transaction is higher (there are contracts, research, due diligence, controlling, correcting) - Why do some managers not act ethical? - it costs money, there is a conflict of interest, companies mask what they are actually doing Underpins all personal, professional and business actions ○ Facilities all dealings - trust ○ Lowers costs of transactions ○ Alternative to more regulations • Signals intentions – hiring, values • Motivates personnel, prospective hires & customers • Stakeholders are very interested • Sound framework for decisions and actions • Developments: ○ Ethical decision making ○ Ethical corporate cultures ○ Corporate social performance ○ Ethical Investing ○ Scandals produce more regulation Would you attempt to steal or commit a fraudulent act if there was a good chance you would not get caught? Portion of employees who will be greatly reduced by good governance and ethics Guidelines are set by owners/ board of directors Emerging governance trends - Independence of directors… judgement, role - Clarification of responsibilities of Directors, Officers, Audit - Greater accountability and transparency - Specific criminal liability for CEO and CFO for misstatements - Greater independence of auditors - Whistleblower systems - Financial, SEC and Canada - Conflicts of interest - avoid, reduce and/or manage Measures to keep employees and executives on the right path Conflicts of interest - Examples - Why not accept a bribe? - Should a lawyer work for both husband and wife in a divorce? - If you were a purchasing agent, should you accept an invitation from a supplier to dinner and a Maple Leafs hockey game? - Firing two people to get a bonus/ incentive - this depends on the context (they have too many people- right-sizing - or they just want to save money for the organization - down-sizing) - Greatest decision is always what the greater good is There are many recent examples of poor ethics in management: • Enron (2001) • Conrad Black (2007) • Nortel (2000-2008) • Bernie Madoff (2009) • Earl Jones (2009) • Canada’s federal government (Sponsorship Scandal – 2004) • Ontario Lottery Corporation • BC Rail Sale • BC Rail Sale • Orion Foundation (2010) Ponzi Scheme: a type of investment fraud that involves payment of purported returns to existing investors from funds contributed by new investors Need to assess ethics within an organization at two levels: 1. The individuals themselves 2. The culture of the organization within which individuals work 4 Fundamental Sources of ethical interpretation with respect to business decision 1. Individual 2. Societal 3. Professional 4. Business Culture "the ends justify the means" - it doesn’t matter how you do things to get to your goals Triple-Yes Rule Yes # 1 - Does the decision that I am making fall within the accepted values or standards that typically apply to all organizational environments? Yes # 2 -Would I be willing to have this decision communicated to all of my organization’s stakeholders, reported on the front page newspaper or serve as the lead story? If your name is attached to it, there is more ethical decision to think
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