Ethics in Business and Business Decision MakingExamplesBoycotts due to perceived unethical conduct or doing business with companies with unethical practicesEthics and Decision MakingEnronMore Effects – 2002 Sarbanes-OxleyPublic Law 107-204Slide 8Slide 9Committee of Sponsoring OrganisationsInstitute for Business, Technology, and Ethics – Reasons to Run a Business EthicallyResults of Ethical Decision MakingWhat is Ethics?Business EthicsQuestions/ExamplesDecision Making Process for EthicsEthical Decision Making ProcessMilitary Decision Making ModelDecision MakingSatisficingJerome Kohlberg @ Retirement Kohlberg, Kravis and RobertsSlide 22Ethics and Child Labor ProtestsThe Patriot Act and 9/11Decision Making/Ethics SummaryIntroduction to StatisticsThe Statistics Statements Based on Numerical “Facts”Uses of StatisticsDataData Acquisition ErrorsStatisticsDATA COLLECTION – WHERE, WHY, AND HOWTools of Business StatisticsDescriptive StatisticsData CollectionInferential StatisticsSlide 37Slide 38Types of QuestionsSlide 40Slide 41Key DefinitionsPopulations and SamplesWhy Sample?Slide 45Statistical SamplingSimple Random SamplingStratified Random SamplingTypes of DataData TypesSlide 51Slide 52Data Measurement LevelsChapter SummaryEthics in Business and Business Decision MakingSCM 305Fall 2015Examples•Enron – 2001•Andersen Consulting – consultants for Enron•WorldCom - bankruptcy•Tyco – key officers convicted •Rite Aid •Citigroup•NYSE•Martha StewartBoycotts due to perceived unethical conduct or doing business with companies with unethical practices•Nike – sweat shops •McDonald’s •Home Depot•GAP •Shell •Wal-Mart•BPEthics and Decision Making•Unethical Decisions → Scandals → Corporate Ruin•Everyone faces a point in time where ethical decisions are necessary!Enron•Stock holders lost ≥ $1 Billion in stock value•Results: ∙ rolling blackouts in CA ∙ lost jobs ∙ collapsed retirement funds ∙ lost health care ∙ trickle down effect on suppliers and their suppliers ∙ New name for Astros Stadium in Houston ∙ trickle down effect on stores, schools, real estate, property valuesMore Effects – 2002 Sarbanes-Oxley •“Code of Ethics for Senior Financial Officers”•Requires Corporate Code of Ethics•Reporting of: “∙ Honest and ethical conduct, conflicts of interest” “∙ Full Disclosure, accurate and timely periodic reports” “∙ Compliance with Government rules and regulations•Bottom Line: New Layer of Legal Compliance Issues!Public Law 107-204•The Sarbanes-Oxley Act of 2002 is mandatory. ALL organizations, large and small, MUST comply.Public 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 Exchange Act of 1934Public Law 107-204•Establishment of Board.--There is established the Public Company Accounting Oversight Board, to oversee the audit of public companies that are subject to the securities laws, and related matters, in order to protect the interests of investors and further the public interest in the preparation of informative, accurate, and independent audit reports for companies the securities of which are sold to, and held by and for, public investors.Committee of Sponsoring Organisations•EU version of Sarbanes-OxleyControl EnvironmentRisk AssessmentControl ActivitiesInformation and communicationsOngoing MonitoringInstitute for Business, Technology, and Ethics – Reasons to Run a Business Ethically•Litigation/indictment avoidance•Regulatory Freedom•Public Acceptance•Investor Confidence•Supplier/Partners Trust•Customer Loyalty•Employee Performance •Personal Pride•Bottom line: it is the right thing to do!Results of Ethical Decision Making•Trust•Loyalty•Commitment•Employee InitiativeA.H.Robins Firestone and EthicsPeanut Corporation of America and EthicsFord PintoWhat is Ethics?•Guidelines on how leaders and decision makers should properly live their lives•Business Ethics: social environment – range of options to choose from •Is “Green Movement” about corporate ethics or corporate gain?Business Ethics•Can 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/Examples•Why 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 Ethics•Determine the facts – perceptions vs. facts•Ability to recognize situation as ethical decision; identify ethical issues; do not become engrossed in financial data and lose ability to recognize ethical issues•Identify and consider all of the people affected by the decision – are there alternatives?•Compare and weigh the alternatives – what if the decision is on the front page of the Wall Street Journal? Can you explain your decision to your mother/father or significant other?Ethical Decision Making Process•Identify the ethical issues•Identify the stakeholders and situation from their perspective•Moral imagination – available alternatives•Consider how the decision affects the stakeholders: consequences; duties, rights, principles; implications for personal integrity•Make a decision•Monitor the out comesMilitary Decision Making Model•Receipt of Mission•Mission Analysis – specified, implied tasks•Restated Mission•Course of Action/Alternatives Development•Course of Action/Alternatives Comparison•Course of Action/Alternatives Analysis•DecisionDecision Making•Does the level of ignorance justify unethical decisions?•What about the failure to identify all the valid alternatives? FAS Criteria – does it result in flawed decisions?•Satisficing – what is it?Satisficing•Satisfy minimum decision criteria to get an agreement•Suffices and people involved can live with it•Is it ethical or just the easy way out?Jerome Kohlberg @ RetirementKohlberg, Kravis and