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Business Ethics & Social

Responsibility: How to Improve


Trust & Confidence in Business
Dr. O.C. Ferrell
Colorado State University
Dr. Linda Ferrell
University of Wyoming
Copyright O.C. and Linda Ferrell, 2002 2
Corporate Responsibility Crisis...
Opinion polls now place business people
in lower esteem than politicians.
-Jennifer Merritt (2002) For MBAs, Soul Searching 101, Business Week, Sept. 16, p. 64.
A W.S.J./NBC poll found that 57% of the
general public believed that standards &
values of corporate leaders & executives
had dropped in the last 20 years.
-Eric Hellweg (2002) www.business2.0.com, Sept. 10.
Copyright O.C. and Linda Ferrell, 2002 3
An ABC News/Washington Post survey
indicated 63% of the public felt that
regulation of corporations is necessary to
protect the public.
Seventy-five percent of those surveyed by
ABC expressed limited confidence in large
corporations.
-Gary Langer (2002) Confidence in Business: Was Low and Still Is, www.abcnews.com, Sept.
10.
Corporate Responsibility Crisis...
Copyright O.C. and Linda Ferrell, 2002 4
Suddenly, investors are obsessed with lies,
greed and dodgy accounting. It began with
the scandal that toppled Enron. Now it has
engulfed big and small companies, eroding
the markets, investor confidence and
Americas image as the economy to
emulate.
-MSNBC A Guide to Corporate Scandals: Companies Under the Microscope,
http://www.msnbc.com/news/corpscandal_front.asp?odm=C2ORB. Accessed 9/24/2002.
Corporate Responsibility Crisis...
Copyright O.C. and Linda Ferrell, 2002 5
Companies Under the
Magnifying Glass
Adelphia Comm.
Arthur Andersen
Bristol-Meyers
Computer
Associates
Dynegy
Enron
Global Crossing
Halliburton
ImClone Systems
Merrill Lynch
Qwest Comm.
Tyco Intl.
WorldCom
Xerox
-MSNBC A Guide to Corporate Scandals: Companies Under the Microscope,
http://www.msnbc.com/news/corpscandal_front.asp?odm=C2ORB. Accessed 9/24/2002.
Copyright O.C. and Linda Ferrell, 2002 6
What does fraud cost?
Cost to corporations: > $400 billion a year
Organizations lose $9/day/employee
Median loss caused by males: $185,000
Median loss caused by females: $48,000
Fraud Group Warns of Theft, Boston Sunday Globe, 2/3/2002.
Copyright O.C. and Linda Ferrell, 2002 7
Corporate Reform...
The 2002 Sarbanes-Oxley Act was the most
sweeping change in corporate governance
and the regulation of accounting practices
since the Securities and Exchange Act of
1934.
Supported by Republicans & Democrats
Provides oversight to restore stakeholder
confidence
Requires business ethics infrastructure
Copyright O.C. and Linda Ferrell, 2002 8
What are colleges of business doing?
Developing programs & courses to address
business ethics & corporate responsibility
Leaving ethics education to the liberal arts
college (philosophy departments)
Encouraging faculty to integrate ethics into
current curriculum
Maintaining the status quo
Copyright O.C. and Linda Ferrell, 2002 9
Developing Programs and
Courses
Then you had rapid succession during
the eighties, insider-trading scandals, the
defense-industry (overcharging) scandals,
savings-and-loan scandals. Each of those
ratcheted up national interest and business
school interest in teaching business ethics.
Kirk Hanson, Stanford University

Copyright O.C. and Linda Ferrell, 2002 10
Philosophy Departments Teach
Business Ethics...
The University of Akron Business College
is urging students to enroll in a new ethics
course in the philosophy department.
Certain words are sort of owned by certain
departmentsone of the words that is sort of
owned by the philosophy department in lots of
universities is the word ethics.
Stephen Hallam, DeanAkrons College of Business
Copyright O.C. and Linda Ferrell, 2002 11
The Philosophy Departments
Philosophy on Business Ethics...
The attitude of a lot of liberal-arts faculty
toward business & toward business-
professional education was a certain level of
disdain, somewhat born in a liberal mind-
set. Anti-business sentiment is strong in
philosophy departments.
Kenneth Goodpaster, University of St. Thomas College
of Business
Copyright O.C. and Linda Ferrell, 2002 12
Where did the Enron infamous
get their degrees?
Ken Laybachelors and masters degree in
economics from University of Missouri
Jeffrey Skillingapplied science from SMU
and MBA from Harvard
Andrew Fastoweconomics from Tufts and
MBA from Northwestern
Robert K. Jaedicke (board member)former
Dean of the Graduate School of Business,
Stanford University & Stanford graduate
Copyright O.C. and Linda Ferrell, 2002 13
Integrating Ethics...
The curriculum is under so many
pressuresto do technology, the Internet,
globalization, the environmentethics is
competing with so many other things. The
curriculum is finite. You cant put
everything in it.
David Vogel, University of California
Berkeley
Copyright O.C. and Linda Ferrell, 2002 14
Eliminating the Business Ethics
Course
Eliminating business ethics as a separate
class is the approach at the Katz School of
Management [University of Pittsburgh]. It
may be better to integrate ethics into other
classes, so students see it as an integral part
of other subjectssuch as finance,
accounting or marketing.
Frederick Winter, Dean
Copyright O.C. and Linda Ferrell, 2002 15
Maintain the Status Quo...
By the time theyre taking auditing, theyre
21-33 years old. The question comes up,
can you teach a person of that age ethics? I
dont think we can.
Ken Lambert, Director, School of
Accountancy, University of Memphis
Copyright O.C. and Linda Ferrell, 2002 16
Eliminating Business Ethics...
A business cant have ethics any more than
a building can have ethics. I dont believe
the university is a place for thatfamily &
elementary & secondary schools are.
Milton Friedman, Nobel Laureate
Copyright O.C. and Linda Ferrell, 2002 17
Teaching Idealism or
Management Issues...
A business ethics course is not serving its
mission in the curriculum if it just deals
with ideological stuff; its got to deal with
the stuff of leadership & management.
Kenneth Goodpaster, University of St. Thomas
Copyright O.C. and Linda Ferrell, 2002 18
Developing Trust & Confidence
in Business...
Board members
Top management
Attorneys
Accounting firms
Securities analysts
Regulators
Politicians
Mass media
Investors
Colleges of business
Individuals alone did not cause our current
crisis
Many stakeholders were involved in
supporting deception, fraud & destruction
Copyright O.C. and Linda Ferrell, 2002 19
How does ethical decision
making occur in organizations?
The #1 influencer of ethical/unethical
behavior is the influence of significant others
& the corporate culture
Business ethics in an organization relates to
a corporate culture of values, programs,
enforcement & leadership
Stakeholders must support organizational
ethics initiativesits good business
Stop focusing on the short term!!!
Copyright O.C. and Linda Ferrell, 2002 20
Our Recommendation for
Colleges of Business...
Take responsibility for educating your
students about corporate responsibility,
business ethics & social responsibility
Both colleges of business & business
top management need to make sure
there are visible & supported programs
Do not rely on individual faculty to
integrate ethics into their courses
Copyright O.C. and Linda Ferrell, 2002 21
The Solution...
Teach courses such as Business & Society,
Business Ethics, Social & Regulatory Issues
Integrate business ethics into core coursework
College of Business faculty need education &
support to achieve the above objectives
AACSB will put greater pressure on COBs to
prove they are using due diligence in
addressing the business ethics needs of our
students
Copyright O.C. and Linda Ferrell, 2002 22
Caution...
Teaching moral philosophies, character
education, & ethical idealism is not the
solution for business students
Organizational ethics takes students into the
world of business & addresses relevant
current ethical dilemmas & solutions
Students need to understand that most
businesses are responsible & ethical!!
Copyright O.C. and Linda Ferrell, 2002 23
The Main Point...
You cant necessarily teach moralitybut,
its possible to point out behavior thats over
the line. Your mother did not teach you
about off-balance-sheet entities and how to
grapple with them.
Thomas Donelson, Wharton College of Business