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KU SCM 305 - SCM 305 Notes

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Thursday August 27, 2015Ethics in Business and Business Decision MakingWhy Ethics in a Statistics Class?Mark Twain“How to Lie with Statistics”Surveys and MarketingExamplesEnron—2001 (video)Andersen Consulting—consultants for Enron (financial audits for Enron, company doesn’t exist any more)WorldCom—bankruptcyTyco—Key officers convictedRite AidCitigroupNYSEMartha Stewart (insider trading)Boycotts due to perceived unethical conduct or doing business with companies with unethical practicesNike—sweat shopsMcDonald’sWal-Mart (sweat shop collapses in 3rd world country)BP (oil spill in the Gulf)Apple (foxcom scandal, people jumping off of buildings)Ethics and Decision MakingUnethical Decisions  Scandals  Corporate RuinEveryone faces a point in time where ethical decisions are necessary!EnronStock holders lost > $1 billion in stock valueMore effects—2002 Sarbanes-Oxley“Code of ethics for Senior Financial Officers”Requires Corporate Code of EthicsReporting of:“Honest and ethical conduct, conflicts of interest”“FullPublic Law 107-204“*To protect investors* by improving the accuracy and reliability of corporate disclosures made pursuant to the securities laws, and for other purposes.”A violation by any person of this Act, any rule or regulation of the Commission issued under this Act, or any rule of the Board shall be treated for all purposes in the same manner as a violation of the Securities Exchanges Act of 1943Establishment of Board—There is established the Public Company Accounting Oversight Board to oversee the audit of public companies that are….Committee of Sponsoring OrganizationsEU version of Sarbanes-OxleyControl EnvironmentRisk AssessmentInstitute for Business, Technology, and ethics—Reasons to Run a Business EthicallyLitigation…Results of Ethical decision MakingTrustLoyaltyCommitmentEmployee InitiativeFirestone and Ethics (Ford and Firestone split)Peanut Corporation of America and Ethics (2009 salmainia scandal)Product Safety and ethicsPollution reductionFord—Pinto (gas tank problem, $175thousand trust fund)A.H. Robbins (pharmaceutical company, testing on rats uterus to compare to humans, puts IUD product on market, women get interuterun cancer)What is Ethics?Guidelines on how leaders and decision makers should properly live their livesBusiness Ethics: …..Business EthicsCan a business meet ethics requirements by simply fulfilling social responsibilities?What is social responsibility? A goal or just following the law?Is just within the law all the time really ethics? What if the laws are not ethical?Or is it unethical if you are not caught?Supreme Court and the Stolen Valor LawQuestions/ExamplesWhy is it that most corporate ethics advisors are lawyers, but most of the recent scandals involve lawyers?Major company ethics program:Decision Making Process for EthicsDetermine the facts—perceptions vs. factsAbility to recognize the situation as ethical decision; identify ethical issues; do not become engrossed in financial data and lose ability to recognize ethical issuesIdentify the ethical issuesIdentify the stakeholders and situation from their perspectiveMoral imagination—available alternativesMilitary Decision Making ModelReceipt of MissionMission Analysis—specified, implied tasksRestated MissionCourse of Action/Alternatives DevelopmentCourse of Action/Alternatives ComparisonCourse of Action/Alternatives AnalysisDecisionDecision MakingDoes the level of ignorance justify unethical decisions?WhatStatisficingSatisficingSatisfy minimum decision criteria to get an agreementSuffices and people involved can live with itIs it ethical or just the easy way out?Jermoe Kholeberg @ Retirement Kohlberg, Kravis and Roberts“All around….”Decision MakingWhat values are most important to you?What are you willing to sacrifice to maintain your values?What is important?What are your prioritiesAre there values that you would quit your job over? Example:What do you stand for professionally?Are you willing to die for your belief/values?Ethics and Child Labor ProtestsUsing Children to work is not accepted in the USSo we protestDoes that really work?If the children do not work the family does not escape povertyWithout the work, the families do not have health careSo, Does that make it ethical?The Patriot Act and 9/11Did the Patriot Act change ethics?Is personal privacy invasions ethical?Decision Making/ Ethics SummaryDecisionsEthicsExamplesIntroduction to StatisticsThe Statistics Statements Based on Numerical “Facts”The average price of a movie ticket is $_____.Last year less than 40% of mutual funds had a positive returnThe average income of American is $____.The mean cost of houses in Lawrence is $____.Use of StatisticsStatistical sampling for audits by accounting firmsFinance—use of statistics to guide investment recommendationsMarketing—use of point of sale data to make marketing decisionsProduction—statistical quality control charts to monitor output; statistics from marketing to drive outputsEconomics—statistical information for forecastsDataQualitative—does not have any numbersQuantitative—numeric values→ www.census.gov – population data; # of households; household income→ www.whitehouse.gov/omb - data on revenue; expenditures, federal debt→ Bureau of Labor Statistics – www.bls.gov – consumer spending; hourly earnings; unemploymentData Acquisition ErrorsData value obtained does not equal the “true” or actual values that accurate measures should obtainRecording errorTransposing numbersMisinterpreting the questionIntentionally answering the question wrong—Example, polls, military questionnairesStatisticsMake inference about a population—examplePercentile—how data is spread over the interval from smallest to largestExample: 50%/75%/95%; class rankingsProbability: numerical measure of the likelihood that an event will occur—must be between 0 and 1Data Collection—Where, Why, and HowTools of Business StatisticsDescriptive statisticsCollecting, presenting, and describing dataInferential statisticsDrawing conclusions and/or making decisions concerning a population based only on sample dataDescriptive StatisticsCollect DataE.g. Survey, Observation, ExperimentsPresent DataE.g. Charts and graphsCharacterize DataE.g. Sample mean =Exi/nData CollectionDescriptive StatisticsBar chartsAverageInferential Tools: estimation and hypothesis testingInferential StatisticsMaking statements about a population by


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KU SCM 305 - SCM 305 Notes

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