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3. ECONOMIC & AGRIBUSINESS

ETHICS& CODES OF CONDUCT

Larry D. Sanders & Parr Rosson

Spring 2002--Adjusted

Dept. of Ag Economics Oklahoma State University

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INTRODUCTION Purpose:

– to understand how the concept of ethics affects economics and agribusiness

Learning Objectives:1. Understand the relationship between economic activity and

agribusiness.2. Consider codes of ethics and moral behavior in agribusiness.3. Understand International Aspects of Business Ethics.4. Review Arguments For & Against Ethical Behavior in economic and

agribusiness activity.5. Examine the Role of Ethics in Determining Cross-Cultural

Relationships, Corporate Responsibility, and Importance to the Firm.6. Become aware of the similarity in business, government & nonprofit

codes of ethics.

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What is Business Ethics?

Code of Conduct Whereby Each Business Conforms to Socially Acceptable Norms

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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

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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

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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

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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.

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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.

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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?

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Conflict Between Corporate Goals and Ethical Behavior

Treachery Pays Power is Abused Dishonesty is Tolerated

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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?

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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

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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

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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

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Why Should Business Help Solve Societal Problems?

Businesses Exist as Guests of Society Government Policies Impact Businesses Business and Society Feast or Famine

Together

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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

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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

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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

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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

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Elements of Corporate Responsibility (cont.)

Corporate Constituency is Broader than Stockholders

Corporate Impacts Go Beyond the Marketplace

Corporations Serve Wide Range of Human Values

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Major Corporate Stakeholders

Shareholder Owners Employees Customers and Clients Community Government

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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

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Fortune’s “Most Admired Global Companies” (2001)

Top 101. General Electric2. Cisco Systems3. Wal-Mart Stores4. Southwest Airlines5. Microsoft6. Home Depot7. Berkshire Hathaway8. Charles Schwab9. Intel10. Dell Computer

Bottom 10495. TWA496. Trump Resorts497. Kmart498. Bridgestone/Firestone499. America West 500. LTV501. US Airways502. Federal Mogul503. Warnaco Group504. CKE Restaurants

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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

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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

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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

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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)

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International Bribe Payers Index:Leading Exporters (1999)

1. Sweden 8.32. Australia 8.1

Canada 8.14. Austria 7.85. Switzerland 7.76. Netherlands 7.47. UK 7.28. Belgium 6.89. Germany 6.2

US 6.2

11. Singapore 5.712. Spain 5.313. France 5.214. Japan 5.115. Malaysia 3.916. Italy 3.717. Taiwan 3.518. South Korea3.419. China 3.1

& Hong Kong

Transparency International, 1999. 10=negligible bribery; 0=high levels

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International Corruption Perceptions Index (2001)

“Highly Clean” Top 101. Finland 9.92. Denmark 9.53. New Zealand 9.44. Iceland 9.2

Singapore 9.26. Sweden 9.07. Canada 8.98. Netherlands 8.89. Luxembourg 8.710. Norway 8.616. US 7.6

“Highly Corrupt” Top 10

82. Tanzania 2.2

83. Ukraine 2.1

84. Azerbaijan 2.0

Bolivia 2.0

Cameroon 2.0

Kenya 2.0

88. Indonesia 1.9

Uganda 1.9

90. Nigeria 1.0

91. Bangladesh 0.4

Transparency International, 1999. 10=highly clean; 0=highly corrupt

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Business Ethics in Cross-Cultural Setting

Learn the Culture Become Involved, Responsible Corporate

Citizen Take Initiative to Exceed Minimums in

Environmental Responsibility

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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

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"Who will protect the public when the police violate the law?“

--Ramsey Clark