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3. ECONOMIC & AGRIBUSINESS ETHICS & CODES OF CONDUCT

3. ECONOMIC & AGRIBUSINESS ETHICS & CODES OF CONDUCT. Larry D. Sanders & Parr Rosson Spring 2002--Adjusted. Dept. of Ag Economics Oklahoma State University. INTRODUCTION. Purpose: to understand how the concept of ethics affects economics and agribusiness Learning Objectives:

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3. ECONOMIC & AGRIBUSINESS ETHICS & CODES OF CONDUCT

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  1. 3. ECONOMIC & AGRIBUSINESS ETHICS& CODES OF CONDUCT Larry D. Sanders & Parr Rosson Spring 2002--Adjusted Dept. of Ag Economics Oklahoma State University

  2. INTRODUCTION • Purpose: • to understand how the concept of ethics affects economics and agribusiness • Learning Objectives: • Understand the relationship between economic activity and agribusiness. • Consider codes of ethics and moral behavior in agribusiness. • Understand International Aspects of Business Ethics. • Review Arguments For & Against Ethical Behavior in economic and agribusiness activity. • Examine the Role of Ethics in Determining Cross-Cultural Relationships, Corporate Responsibility, and Importance to the Firm. • Become aware of the similarity in business, government & nonprofit codes of ethics.

  3. What is Business Ethics? • Code of Conduct Whereby Each Business Conforms to Socially Acceptable Norms

  4. Increased Emphasis on Ethics in Business Planning: • Important Component of Decision Making • Ethics and Impacts on Corporate Behavior Important to International Business • Greater Awareness of Social Responsibilities Key to Business Survival

  5. Several Factors Emphasize Importance of Business Ethics • Product Safety and Liability • Ethical Standards Across Countries • Increased Competition and Pressures to Be Unethical • Economic Exploitation of the Environment • Work Force Diversity • Abuse of property rights

  6. Ethics is Not New! • Remember Watergate? • Remember Ivan Boesky and Insider Trading? • Remember the Exxon Valdez? • Remember illegal dumping of hazardous waste (& not just in New Jersey)? • Remember Love Canal? • Remember Firestone tires? • Remember the Gallapagos oil spill? • Consequently, 80% of U.S. and Canadian Firms Have a Code of Conduct

  7. Code of Conduct: Generic Example • Represent each client fairly and honestly. • Establish reasonable, proper and fair prices or fees. • Advertise with honesty and truthfulness. • Be fair with employees, clients, suppliers & customers. • Be a credit to your associates & the community.

  8. Code of Conduct Examples:Halliburton Company policy requires employees to observe high standards of business and personal ethics in the conduct of their duties and responsibilities. . . . Must practice honesty and integrity in every aspect of dealing with other Company employees, the public, the business community, stockholders, customers, suppliers and government authorities. . . . Prohibits unlawful discrimination against employees,stockholders, directors, officers, customers or suppliers on account of race, color, age, sex, religion or national origin. . . . No employee should be misguided by any sense of loyalty to the Company or a desire for profitability that might cause him or her to disobey any applicable law or Company policy. Violation of Company policy will constitute grounds for disciplinary action, including, when appropriate, termination of employment.

  9. Ethical Behavior is Still an Issue • Recent Malaysian Survey Revealed That Unethical Behavior Was Approved in Four Situations: • When Obtaining Competitor Information • When Using False/Misleading Advertising • When Obtaining Confidential Information • When Superiors Were Unethical or Tolerated Unethical Behavior • What do you think?

  10. Conflict Between Corporate Goals and Ethical Behavior • Treachery Pays • Power is Abused • Dishonesty is Tolerated

  11. Influence of Different Cultures on Ethical Behavior • Difficult to Understand • Important to Understand • Clashes Between Cultures is Common • Does it have to be illegal to be unethical?

  12. Market Ethics (Adam Smith - 1776) • Foundation of Economic Freedom • Private Initiative Rather Than Mercantilism • Competition, Not Protection • Innovation, Not Economic Stagnation • Self-Interest, Not State Interest

  13. Protestant Ethic (Biblical Times) • Established “Work Ethic” • “If He Will Not Work, Let Him Not Eat,” Saint Paul • Provided Moral Legitimacy for Capitalism • Justification for Pursuit of Profit

  14. Liberty Ethic(John Locke 1632-1704) • Economic Freedom and Work Ethic Can Exist Only in Political Systems Conducive to Individual Liberty • Discourage Dictatorial Whim • Individual Participates in Government • Encourage Private Property

  15. Why Should Business Help Solve Societal Problems? • Businesses Exist as Guests of Society • Government Policies Impact Businesses • Business and Society Feast or Famine Together

  16. What is Corporate Social Responsibility? • Corporate Activities that Protect and Improve the Welfare of Society • Examples: • Foundations • Charity • Low-income projects • Reclamation • Building cultural bridges • Ecosystem/animal restoration

  17. What Must Corporations Do? • More Than Obey the Law? • Laws Often Lag Society’s Values/Expectations • Moral and Ethical Duty to Help Solve Society’s Problems

  18. Levels of Corporate Social Commitment • Social Obligation • Involvement for Own Benefit and Obey Laws • Social Responsibility • Understand Societal Needs and Go Beyond Law • Social Responsiveness • Proactive, Anticipate Problems and Mitigate Social Issues

  19. Elements of Corporate Responsibility • Corporate Responsibilities Transcend Production of Goods and Services • Corporation Must Be a Productive Part of the Solution of Society’s Problems, Especially Those Which They Create

  20. Elements of Corporate Responsibility (cont.) • Corporate Constituency is Broader than Stockholders • Corporate Impacts Go Beyond the Marketplace • Corporations Serve Wide Range of Human Values

  21. Major Corporate Stakeholders • Shareholder Owners • Employees • Customers and Clients • Community • Government

  22. Fortune’s “Most Admired Global Companies”—9 Attributes (Which are ethics-related?) • Quality of management • Quality of products/services • Innovativeness • Long-term investment value • Financial soundness • Ability to attract/develop/retain talent • Community responsibility • Use of corporate assets • Global business acumen

  23. Top 10 General Electric Cisco Systems Wal-Mart Stores Southwest Airlines Microsoft Home Depot Berkshire Hathaway Charles Schwab Intel Dell Computer Bottom 10 TWA Trump Resorts Kmart Bridgestone/Firestone America West LTV US Airways Federal Mogul Warnaco Group CKE Restaurants Fortune’s “Most Admired Global Companies” (2001)

  24. U.S. Response to International Business Ethics • Foreign Corrupt Practices Act (FCPA) of 1977 • Illegal for U.S. Companies to Make Payments to Foreign Officials • Designed to Eliminate Bribes • FCPA Hampered U.S. Business in International Trade

  25. FCPA Amended in 1988 • Legalized Payments to Expedite Nondiscretionary Official Actions Facilitating Expenditure - “Grease Payment” • Illegal to Bribe Someone For Preferential Treatment • Individual May Be Prosecuted Even If Firm is Not Guilty

  26. Corruption in International Business Those who talk about the peoples of our day being given up to robbery and similar vices will find that they are all due to the fact that those who ruled them behaved in like manner. --Niccolo Machiavelli, 19th century

  27. The Scale of the International Problem with Ethics in Business "The scale of bribe-paying by international corporations in the developing countries of the world is massive. Actions by the majority of governments of the leading industrial countries to curb international corruption are modest. The results include growing poverty in poor countries, persistent undermining of the institutions of democracy, and mounting distortions in fair international commerce." --Peter Eigen, Chairman, Transparency International (January 20, 2000)

  28. 1. Sweden 8.3 2. Australia 8.1 Canada 8.1 Austria 7.8 Switzerland 7.7 Netherlands 7.4 UK 7.2 Belgium 6.8 Germany 6.2 US 6.2 Singapore 5.7 Spain 5.3 France 5.2 Japan 5.1 Malaysia 3.9 Italy 3.7 Taiwan 3.5 South Korea 3.4 China 3.1 & Hong Kong International Bribe Payers Index:Leading Exporters (1999) Transparency International, 1999. 10=negligible bribery; 0=high levels

  29. “Highly Clean” Top 10 Finland 9.9 Denmark 9.5 New Zealand 9.4 Iceland 9.2 Singapore 9.2 Sweden 9.0 Canada 8.9 Netherlands 8.8 Luxembourg 8.7 Norway 8.6 US 7.6 “Highly Corrupt” Top 10 Tanzania 2.2 Ukraine 2.1 Azerbaijan 2.0 Bolivia 2.0 Cameroon 2.0 Kenya 2.0 Indonesia 1.9 Uganda 1.9 Nigeria 1.0 Bangladesh 0.4 International Corruption Perceptions Index (2001) Transparency International, 1999. 10=highly clean; 0=highly corrupt

  30. Business Ethics in Cross-Cultural Setting • Learn the Culture • Become Involved, Responsible Corporate Citizen • Take Initiative to Exceed Minimums in Environmental Responsibility

  31. Ethical Issues • Is Honesty the “Best” Policy? • Those Who Are Fair Will Prosper • Profit Maximization is Perfectly Honest One Person’s Ethics is Another Person’s Livelihood

  32. "Who will protect the public when the police violate the law?“ --Ramsey Clark

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