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Business Ethics

What Role Should Ethics Play in Today's Organizations? BOH Summative Presentation

Jimmy Zhuang

on 14 April 2016

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Transcript of Business Ethics

BOH Final Summative
Jimmy Zhuang
Damage to the Environment

water pollution through unethical waste and oil disposal
production of green house gases by irresponsible factories
Pesticides, Insecticides creating mutations in local environment

What does that have to do with me?
Ruined Reputation and Lost of Trust

customers no longer trust the organization's products or services
downsize of clientele
years of reputation ruined by one misconduct
associated with "no social responsibility"
lost of faith from stakeholders and investors
news spread FAST
Loss of Everything

investors and stockholders of the company goes bankrupt
employees loose their jobs and source of income
loss of pension plans and retirement funds
Punishment by Law

rights taken away by the government
fines for misbehavior
criminal charges
what is it?

Stock Market Simulation

America's number one energy company declared its bankruptcy.
Enron Corporation
Famous world-wide Financial Institution declared its bankruptcy.
Lehman Brothers
Ethics are the code of morals* that sets standards as to what's
and what's
What are Corporate

A form of applied ethics or that examines ethical principles and
ethical dilemmas
that arise in a business environment.
core values and beliefs that guide your decisions

dependent on your culture, experiences, and the environment you grew up in
a situation with a potential course of action that is unethical but can offer potential benefits
What Role Should
Play in Today's Organization?

Fundamental Misconduct Issues
Unfair Working Conditions
Disregard for Health & Safety
Unethical Decision Making
unable to conduct business affairs with honesty and a commitment to treating every customer fairly
child labour & "sweat shops" operations
ignoring health, safety and environmental standards
decision-making is not centered on protecting employee and customer rights
reduce costs, and generate huge profits in a short time
but there are Severe Consequences...
It is a serious matter.
World's largest telecommunication company collapsed.
The Organization
The Ethics
The Effect
-Worldcom began as Long Distance Discount Services, Inc. (LDDS) in 1983, based in Hattiesburg, Mississippi

-1997, WorldCom and MCI Communications announced their 37 billion merger to form MCI WorldCom, making it the largest merger in US history
-used fraudulent accounting methods to hide its decline in earnings by falsely showing profitability to prop up the price of WorldCom’s stock.

-employees were evaluated based on achieving the "goal" with no emphasize on achieving it the "right away"

-employee work ethics were passive and pessimistic, pay cheque was the sole purpose
-Worldcom fell in 2005

-thousands of employees lost jobs, insurance and 401k accounts invested heavily in company stock

-countless investors and stockholders went bankrupt

-competitions were forced to lay off employees in order to maintain their competitiveness with WorldCom, and matching their ridiculously low costs
The Organization
The Ethics
The Effect
-Enron Corporation was an American energy and services company based in Houston, Texas in 1985

-by 2001 Enron employed approximately 20,000 staff and was the 7th largest company in the United States, with claimed revenues of nearly $101 billion in 2000

-Fortune named Enron "America's Most Innovative Company" for six consecutive years
-many of Enron's recorded assets and profits were inflated or even wholly fraudulent and nonexistent, through fraudulent accounting practices known as the Enron scandal

-Enron executives, who possessed the inside information on the hidden losses, began to sell their stock, while at the same time, encouraging the general public and Enron's investors to buy the stock

-Arthur Andersen disregarded the fraud manipulation because they were hired as both the consultant and the auditor receiving huge bucks
-Enron declared bankruptcy in 2001

-Arthur Andersen (once a Big Five accounting firm) dissolved

-countless investors and stockholders went bankrupt

-20,000 employees lost their jobs, insurance, and 1.2 billion in retirement funds

-retirees lost 2 billion in pension

-criminal charges: 15 guilty pleas, 6 convictions, 11 pending cases
The Organization
The Ethics
The Effect
-founded in 1850, Lehman Brothers was the oldest and the 4th largest investment bank in the United States

-26,200 employees in 2008

-executives and employees received over $16 billion in bonuses between 2004 to 2007
-indulged in high risk realestate investments because interest was low and housing market was supposedly "stable" and very profitable

-stakeholders were put at risk as well

-loans and mortgages were given to anyone regardless of credibility

-mortgages were sold to other financial institutions
-Lehman Brothers declared bankruptcy in 2008

-26,000 employees lost their jobs

-stock market crashed, and millions of investors lost all or almost all of their money, triggering a chain reaction that produced the worst financial crisis and economic downturn in 70 years

-many related financial insitutions fell along with Lehman Brothers

- the global economy has suffered from the fall of Lehman Brothers
How am I affected?
7. You must have less than $10,000 cash on hand after year 5.
1. Every group starts off with $1,000,000.

2. Each year you may invest in any number of stocks your cash on hand permits.
3. Record the price of each stock every year as they change.
4. Calculate the Return on investment from each Stock.
5. Record the cash on hand you have left during each year.

6. Record the TOTAL amount you have each year by adding the cash on hand with the return on investment from the stocks you have.
Cash on Hand
Return from Investment A
Return from Investment B
< $10,000
< $10,000
< $10,000
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Stock A
Stock B
Stock A
Stock B
Stock A
Stock B
Stock A
Stock B
Stock A
Stock B
Stock A
Stock B
Stock A
Stock B
Ending Capital?
This isn't just a simulation...
... this is reality.
Stock A
Stock B
Enron Corporation Stock Price 1994 - 2001
Lehman Brothers Stock Price 1994 - 2008
Who are real victims of poor ethics in organizations?
You are.
What can we do?
Promote Good Ethics
Provide Early Education
incentives and recognitions for outstanding ethical behaviors
raise awareness through:
Advertising campaigns
"motto" or tag line that emphasizes your ethical stance
lead good ethics
incorporating ethics into school curriculum
educating about ethics at youth
examine the consequences and impacts of poor ethics
Organizations Can...
Society Can...
Implement Heavier Actions
increase fines for unethical behavior
conduct investigation for suspicious operations
extend jail time
Government Can...
You can...
be an ethical individual and a role models for others
How do you feel?
Ethics should and
play an
important role
in today's organizations.
It is
in determining the
long term success
for any organization.
Business is
Business "
Choose for Yourself Today.
Full transcript