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What does ethics have to do with engineering?

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Professional and Business Ethics Prof. Peter Hadreas Spring, 2014 Course Website: http://www.sjsu.edu/people/peter.hadreas/courses/ProfandBusEthics/ * – PowerPoint PPT presentation

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Title: What does ethics have to do with engineering?


1
Professional and Business Ethics Prof. Peter
Hadreas Spring, 2014 Course Website http//www.
sjsu.edu/people/peter.hadreas/courses/ProfandBusEt
hics/
1
2
Ethics as Organizational Culture(continued)  
Corresponds to chapter five of Nelson and
Treviño textbook.
2
3
Ethical Culture Multisystem Framework (Again)
FORMAL SYSTEMS INFORMAL
SYSTEMS Executive Leadership Role
Models/   Selection Systems
Heroes Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Alignment? Treviño and Nelson textbook, p. 153.
3
4
Developing and Changing the Ethical Culture  
Treviño and Nelson textbook, pp. 185-9.
4
5
The Story of Arthur Andersen, LLP   Treviño
and Nelson textbook, pp. 185-9.
5
6
Arthur Andersen (1885-1947)
6
7
Arthur E. Andersen was born in Illinois in 1885.
He was orphaned at 16. He worked as a mailboy
attending school at night. He managed to be hired
as assistant to a controller Andersen began
working as a mailboy by day and attended school
at night. He was eventually hired as the
assistant to the controller of Allis-Chalmers
Manufacturing Company in Chicago. When he was 23
he became is CPA. He was then the youngest CPA in
his home state of Illinois.  
Arthur Andersen (1885-1947)
7
8
  The firm of Arthur Andersen was founded in
1913 by Arthur Andersen and Clarence DeLaney as
Andersen, DeLaney Co. The name of the company
was changed to Andersen Co. in 1918.
Arthur Andersen (1885-1947)
8
9
Andersen saw that the new profession of
accounting should maintain impeccable standards
and was elemental in the field leading it to
become elemental to business training in
universities. He created the profession's first
centralized training program. While practicing
accounting, he was a lecturer at Northwestern
University (190912), then an assistant professor
(191215), and then a professor (1915-22). In
1922 he resigned his university affiliation to
devote full-time to his professional accounting
practice.
Arthur Andersen (1885-1947)
9
10
Andersen headed Andersen Co. until his death in
1947. Andersens behavior became the stuff of
which business heroes are made. As the textbook
authors write . . . at the age of 28, Andersen
confronted a railway executive who insisted that
the accounting firm approve his companys books.
Andersen said, Theres not enough money in the
city of Chicago to induce me to change that
report. Andersen lost the railway companies
business, but when that company later went
bankrupt, Arthur Andersen became known as an
organization people could trust to be honest, and
to stand up for what was right. textbook, p.
186.
Arthur Andersen (1885-1947)
10
11
Ethical Culture Multisystem Framework (Again)
FORMAL SYSTEMS INFORMAL
SYSTEMS Executive Leadership Role Models/
  Selection Systems
Heroes Policies/Codes
Norms Orientation/Tra
ining Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Alignment? Treviño and Nelson textbook, p. 153.
11
12
The high standard of Arthur Andersen LLP
continued longh after his death. The company
dissociated itself from a number of clients in
the 1970s. The company foresaw the effect that
stock options would have on U. S. corporations.
The leadership of Arthur Andersen LLP insisted
that stock options be treated a form of
compensation. It was the first of the major
accountancy firms to propose to the Financial
Accounting Standards Board that stock options
should be included on expense reports, just as
cash compensation was.
Offices of Arthur Andersen LLP, Chicago
12
13
The Problem of Stock Options It is hard to think
of a better example of what is wrong with
corporate America than the repricing of stock
options. When the firms stock does well, the
people in charge make out like lottery winners.
When the stock plummets, they get another set of
chances to win. The scheme, in its audacity, and
its logic is almost beautiful. Graef Crystal, who
wrote the book, In Search of Excess The
Overcompensation of American Executives, told me
John Cassidy, staff writer for The New Yorker
recently that if you combine a volatile stock
with a willingness to reprice stock options then
you have created a money machine, an antigravity
device, which guarantees that the senior
executives will get super-rich.1 1. Cassidy,
John, The New Yorker, Sept. 23, 2002.
13
14
So How Did Arthur Andersen LLP Go Bad?
14
15
From the mid 1990s Arthur Andersen LLP began to
derive its profits increasingly from management
consulting rather than auditing. In terms of the
Multisystem Framework, it was primarily a change
in performance management systems that eroded
the standards of the company. The textbook
authors write Under the new business realities,
rather than standing for principles of honesty
and integrity, consultants were encouraged to
keep clients happy and to concentrate on getting
return business because only revenues mattered.
They were even expected to pad prices or create
work to increase profits. textbook, p. 186
15
16
Ethical Culture Multisystem Framework (Again)
FORMAL SYSTEMS INFORMAL
SYSTEMS Executive Leadership Role Models/
  Selection Systems
Heroes Policies/Codes
Norms Orientation/Tra
ining Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Alignment? Treviño and Nelson textbook, p. 153.
16
17
Andersen was convicted of obstruction of justice
for shredding documents associated with its role
as Enrons auditing firm and quickly went out of
business. The Supreme Court reversed the decision
in 2005, ruling that the jury had not been
advised that conviction in a white-collar crime
case requires evidence of criminal intent.
However, the Supreme Court reversal did not clear
Andersen of wrongdoing. In fact, prosecutors
provided evidence of criminal intent. In the end,
even if someone wanted to, there was no firm to
resurrect. textbook, p. 187
17
18
18
19
Lets consider company that was in very bad shape
and analyze its culture. TAP Pharmaceuticals.
textbook, pp. 201-203
19
20
  • Tap Pharmaceuticals I
  • Some facts
  • TAP Pharmaceuticals was formed in 1970 by Takeda
    Chemical Industries of Japan and Abbott
    Laboratories.
  • In 1995, TAP offered Douglas Durand the position
    of vice-president for sales, with a 40 increase
    in pay and a 50,000 signing bonus. Durand had
    worked 20 years before for Merck Co.

21
Tap Pharmaceuticals
formed in 1970
with
Takeda Chemical Industries, largest
pharmaceutical industry in Japan
Abbot Laboratories has 762,000 employees and
operates in over 130 countries.
22
Douglas Durand, left Merck for TAP an 40
increase in pay and 50,000 signing bonus.
23
Tap Pharmaceuticals II 2. Durand found out
that TAP had a very different culture from Merck
Co. Durand discovered a. Tap had no in-house
legal counsel. Legal counsel was considered a
sales prevention department. b. Durand
overheard, on a conference call, sales
representatives openly bribing urologists with an
up-front administration fee to doctors who
prescribed TAPs new drug for prostate cancer,
Lupron. c. TAP sales representatives gave
doctors samples of drugs, encouraged doctors to
charge the full Medicare price and keep the
difference. d. TAP offered a big screen TVs
(10,000) to every urologist in the country,
office equipment, golf vacations.
24
Tap Pharmaceuticals II
Lupron, TAPs new drug for prostate cancer
25
TAP Pharmaceuticals III Some more facts 3.
Durand tried to change the culture at TAP by
offering a bonus to sales reps who kept accurate
records of their samples. The program worked, but
then senior management discontinued the bonus and
the reps stopped keeping track. 4. Durand
wondered if he left the job in less than a year
whether hed get hired elsewhere. Perhaps, hed
become the companys scapegoat?
26
5. Durand finally gave up on changing TAPs
corporate culture and became a double agent for
the US government.
27
Ethical Culture Multisystem Framework-- The
Chart Again FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Alignment? Treviño and Nelson textbook, p. 153.
27
28
?Cultural systems Durand targeted 1.
performance management reward system, 2.
authority structure. 3. Systems missing
policies/codes, orientation training.??
29
QUESTION ?Why did Durands culture change
effort fail? What would it take for it to
succeed?
30
QUESTIONS Suppose you succeeding in replacing
the TAP leadership, how would you reorder the
performance management reward system? Change
the selection system? Install a sense of a TAP
company hero? Construct a myth or story that
would accommodate the improvements you want to
make at TAP?
31
What happened to TAP? TAP pleaded guilty to
conspiracy to cheat the federal government and
agreed to pay a record 875 million fine, TAP
has been dissolved as of 2008. What happened to
Douglas Durand? In October 2001, Durand
collected 77 million (28 million went to
taxes), his 14 percent of the share of the fine
paid under the federal whistle blower statute.
see textbook, p. 202.
32
Using the Multisystem Framework to Understand the
Culture at San José State
32
33
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
What is the
Alignment? Treviño and Nelson textbook, p. 153.
33
34
Ethical Culture Multisystem applied to San José
State FORMAL SYSTEMS INFORMAL
SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
What are the
Alignment? Treviño and Nelson textbook, p. 153.
34
35
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Are there any
Alignment? Treviño and Nelson textbook, p. 153.
35
36
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
What about
Alignment? Treviño and Nelson textbook, p. 153.
36
37
Ethical Culture Multisystem Framework-- The
Chart Again FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
What are the carrots/sticks?
Alignment? Treviño and Nelson textbook, p. 153.
37
38
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
It is a hierarchical authority structure, but
what are the levels?
Alignment? Treviño and Nelson textbook, p. 153.
38
39
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
What is the burden of proof on safety issues?
Alignment? Treviño and Nelson textbook, p. 153.
39
40
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
San José State has woven heroes into its culture
Alignment? Treviño and Nelson textbook, p. 153.
40
41
Tommie Smith and John Carlos who won Gold and
Bronze at the Olympics on October 16, 1968 in
Mexico City. Both were San José State students.
41
42
César Chavez Memorial Arch Left is Delores
Huerta who helped César Chavez in founding the
United Farm Workers and furthering the civil
rights of farm workers.  On the right is Mohandas
Gandhi.
42
43
Mosaic panel in César Chavez Memorial Arch
43
44
Bronze bust of Dr. Martin Luther King, Jr. by
artist Sascha Schnittmann at King Library
(Christina Olivas photo).
44
45
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Is there a difference in equity, discrimination,
grading, or even commute to campus, norms
different from the official (formal) policies?)
Alignment? Treviño and Nelson textbook, p. 153.
45
46
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Commencement is a formal ritual, but are there
any informal rites of passage, or introduction to
student groups that affect student identities?
Alignment? Treviño and Nelson textbook, p. 153.
46
47
Finis Conner  founder, Conner Peripherals and
co-founder of Seagate Technology, Ron Conway 
angel investor, co-founder and former CEO of
Altos Computer Systems, Robert Frankenberg 
former CEO, Novell, Carl Guardino  President and
CEO, Silicon Valley Leadership Group, Omid
Kordestani  Senior Vice President, Google, Brian
Krzanich  CEO, Intel Corporation, Gordon Moore 
co-founder, Intel Corporation (studied two years
at SJSU graduated from U.C. Berkeley), Ed
Oates  co-founder, Oracle Corporation , Daniel
R. Scoggin  founder and CEO, TGI Fridays, Mike
Sinyard  founder and CEO, Specialized Bicycle
Components, James E. Thompson  founder and
chairman, Crown Worldwide Group. These contribute
to business success stories. What are stories
might be relevant?
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Alignment? Treviño and Nelson textbook, p. 153.
47
48
Ethical Culture Multisystem Framework applied to
San José State FORMAL SYSTEMS
INFORMAL SYSTEMS Executive Leadership Role
Models/Heroes   Selection Systems
Policies/Codes

Norms Orientation/Training Ethical and
Rituals Performance Mgmt.
Unethical Myths/Stories Authority Structure
Behavior Language Decision Processes
Any language typical of San Jose State?
articulation, Core G. E., San Jose State
Studies, concentrations, How about ways of
talking about fees? Any local slang?
Alignment? Treviño and Nelson textbook, p. 153.
48
49
slide 6 picture of Arthur Andersen
http//www.google.ca/search?qArthurAndersenpict
uretbm Slide 12 Aurthur Andersen Placque
http//www.google.ca/search?qarthurandersencomp
anypicturetbm Slide 12 picture of Arthur
Andersen Offices, Chicago http//www.google.ca/se
arch?qarthurandersencompanypicturetbmischtb
ousource Slide 18, cartoon of man applying for
job with shredded resume http//www.google.ca/sea
rch?qpicturesofArthurAndersentbm slide 21
logo of TAP Pharmaceuticals http//www.vector-log
o.net/logo/TAP_PHARMACEUTICAL_1-81374.html durand
tbmischtbousourceunivsaXei5UZQU-h0pKzIAd
uwgKAGsqi slide 22 picture of Douglas Durand
http//www.google.ca/search?qdouglas
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