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Economics of Ethics Jim McGraw, MCC-Longview Agenda


Economics of Ethics Jim McGraw, MCC-Longview Agenda Background of workshop 15 minute draft presentation The problem ( The Cheating Culture? ) The challenge- How ... – PowerPoint PPT presentation

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Title: Economics of Ethics Jim McGraw, MCC-Longview Agenda

Economics of Ethics Jim McGraw,
  • Background of workshop
  • 15 minute draft presentation
  • The problem (The Cheating Culture?)
  • The challenge- How to foster ethical business
  • Discussion and feedback
  • Follow-up and closure

Name that Scandal!
  • Provide a brief description of the following
    well-known scandals, noting the ethical/legal
    issues involved

  • Charles Prestwood, a 63 year old retired Enron
    employee who lost practically all of his 1.3
    million savings invested in the companys stock
    said, Something stinks here. There are people at
    Enron who made millions selling the stock while
    we, the rank and file, got burned.
  • (Vickers, M. et al The Betrayed Investor,
    Australian Financial Review, Feb 19, 2002 p. 52)

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Jayson Blair?
  • New York Times reporter for about 4 years.
  • It was estimated that almost 50 of the articles
    he wrote since 2002 contained fabricated or
    plagiarized work.

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Cultural Trends
  • In The Cheating Culture (2004), David Callahan
    asserts that a cultural shift in the 1980s
    toward a winner take all mentality has led to
    increased cheating behaviors in politics,
    business practice, sports, legal profession,
    medicine, pharmaceutical industry, journalism,
    auto repair, higher education..

Other Examples
  • Sears (auto repair)
  • Princeton (hacked into Yales computer system)
  • Taxes (it is estimated that the average taxpayer
    has to pay 3,000 per year to compensate for
    widespread tax evasion)
  • Medicine and Pharmaceuticals

Little indiscretions that add up.
  • Loss estimates per year of US businesses from
    employee theft range from 10 billion to 200
    billion annually.
  • U.S. Dept of Commerce estimates 33 of business
    failures can be traced to employee theft and
    other employee crimes.
  • Cost of a daily free deli sandwich, chips, and
    soda taken by a supermarket employee for 1 year-
    approximately 840.00
  • http//

The Problem
  • Businesses are currently struggling to stay
  • According to Callahan (2004) some
    businesses/people bend ethical standards because
    everyone is doing it, and they dont want to
    lose the competitive edge
  • Due to highly public scandals (Madoff) it is
    difficult to promote a restoration of trust
    with customers

Good News!
  • Most people that bend the rules (sacrifice
    integrity for financial stability) are basically
    good people
  • Ethical standards and decision making processes
    are available and being used by organizations.
  • Please name some companies that are recognized
    for ethical business practice.

The good news never stops
  • The 2009 National Business Ethics Survey reports
  • Misconduct at work is down (56 in 2007 to 49 in
  • Whistle blowing is up (58 in 2007 to 63 in
  • Ethical cultures are stronger (53 in 2007 to 62
    in 2009)
  • Pressure to cut corners is lower (10 in 2007 to
    8 in 2009)

Ethics Quiz 1 minute with a partner
  • What are some general principles of
    moral/ethical practice?
  • From a Rotary Perspective, we can ask ourselves.
  • Is it true?
  • Is it fair to all concerned?
  • Will it build good will and better friendships
  • Will it be beneficial to all concerned

What Can Be Done?
  • With a partner, please list 2 or 3 things
    business leaders can do to promote a culture of
    ethical business practice.
  • What are the costs of these practices?
  • What are the benefits?

A few ideas from the Lees Summit Civic Roundtable
  • Regular review of code of ethics
  • Connect with Lees Summit Community of Character
    (e.g., recognize ethical practices) and Lees
    Summit 360
  • Have clear expectations and accountability
  • Take responsibility for self and others
  • Lead by example, and admit mistakes
  • Speak up when ethical issues arise

A New Social Contract?
  • It means striking a healthier balance between
    humanistic values like shared responsibility,
    mutual respect, and compassion for the weak- and
    market values like maximum efficiency, individual
    autonomy, and admiration for the strong
  • (Callahan, 2004, p, 264)

Ethics in Business Improves the Bottom Line Lynn
Paine- Professor at Harvard Business School
asserts that ethical practice
  • 1) Helps companies manage risk
  • 2) Increases functioning of companies by
    improving employee morale
  • 3) Improves the company market position by
    maintaining or enhancing reputation
  • 4) Improves the companies civic positioning,
    allowing better relations with communities and

  • (Callahan, 2004, p. 285)

1- Risk Management
  • During a period of less than 15 years, Sears
    squandered public trust, incurred numerous
    criminal charges and multiple lawsuits, and paid
    fines and settlements that ultimately totaled
    over 2 Billion (Callahan, p. 33)

2 Employee Morale
  • Research conducted by Sears found that if
    employee satisfaction were to improve by 5
  • Customer satisfaction would increase by 1.3
  • Leading to a 0.5 increase in revenue
  • Resulting in additional sales of approximately
  • 65 million per year
  • Zadek, S, 2001 The Civil Corp. Earthscan

3 and 4- Reputation Civic Position
  • 91 of consumers are likely to buy from companies
    that can show they behave ethically.
  • 78 of consumers say they would support a company
    that does good work in the community.
  • Eye on Australia, Sweeney Research cited in
    Lloyd, Simon, Retail happy shopping, Business
    Review Weekly, Jun 8, 2001.

Examples of Local Ethical Business Practice
  • 1.
  • 2.
  • 3.

General Follow-Up
  • Read The Cheating Culture Why More Americans Are
    Doing Wrong to Get Ahead (David Callahan, 2004)
  • Visit for resources and more
    detailed information on the 2009 National
    Business Ethics Survey
  • (top companies 2008)
  • Discuss with colleagues
  • Increase awareness of workplace practices that
    have potential ethical ramifications

Immediate Follow-Up Steps
  • Post your organizational mission, vision, and
    values in a place to be viewed each day
  • Recognize and acknowledge ethical behavior in
    colleagues and customers
  • Model ethical behavior

Suggestions or Requests?
  • Jim McGraw- (816) 604-2313
  • Thanks very much for your interest and

Feedback and Next Steps
  • Please complete the short feedback form regarding
    this draft presentation.
  • Immediate suggestions?
  • Ideas for next steps?
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