Ethics: Why They Are Important, Why We Hate to Talk About Them, and What To Do About Them

1. Ethics: Why They Are Important, Why We Hate to Talk About Them, and What To Do About Them NASACT November 3, 2004 Professor Marianne M. Jennings

2. Why the Focus on Ethics? Why Does Ethics Have Such a Bad Reputation? How Do I Resolve Ethical Dilemmas?

3. Why the focus on ethics? Part I

4. 1. It hurts and it costs when ethics fall short

5. Examples of Fall-Out When Ethics Fall Short • Clark County, Nevada • N.J. and the stock deals • Darlene Druyun and Boeing • Illinois, Ryan and contracts • Bruce Babbitt • Robert Citron and Orange County • The Assessor and the Property Owner List • Stadium Site and the FAA • NASA and O-rings and Space Shuttles

6. 2. The State of Ethics Is Not So Great • 74% of high school students cheated on an exam in the last year (61% in 1992); 45% said they did it at least twice in the last year • 93% lied to their parents in the past year; 79% say they lied twice • 78% have lied to their teachers • 37% said they would lie to get a job • 38% took something from a store in the last year Josephson Institute 2002

7. Thoughts on cheating per high school students • “Students who cheat do so on their own terms. Of course there has been no penalty, but they know there is a risk, and apparently it seems like it’s worth taking.” • “Just about everyone is cheating in some way or another. It is a common thing among society that is seemingly accepted.”

8. Thoughts on cheating from a high school teacher • “Cheating is done on a daily basis and there is little effort to curb it. Kids will ditch class by having their parents excuse them during the period they are to take a test, and then the kids find out from their friends what is on the test. Kids can then take the test the next day. . . . The new camera cell phones are now being used to take pictures of tests and also they are using instant messaging to cheat.”

9. 3. The State of Ethics in College • 70% have cheated at least once on a test • 87% have cheated on written work • 52% have copied work from others • 56% have plagiarized Rutgers University survey • 75% have cheated in college in some way Center for Academic Integrity, Duke

10. Thoughts on cheating from college students • “If people can lie and get away with it, good for them.” • “Honestly, I would probably do nothing.” [response of students to hypothetical asking what action they would take if they learned an executive of their company had lied under oath]

11. Ethics at Work • 76% of employees in business have observed a high level of illegal or unethical conduct at work in the past 12 months • 49% of employees in business have observed misconduct that, if revealed, would cause their firms to “significantly lose public trust” - KPMG 2000 Organizational Integrity Survey

12. Most Ethically Vulnerable Area at Work - IT • 100% of IT employees say they have lied at work in the past year • Some IT Tidbits • 60% of all online purchases are done during the hours from 9 AM to 5 PM • 70% of all pornographic site visits are made during those same hours • Only 10% say they use work computer to visit porn sites

13. State of Ethics • MOST (65%) DON’T REPORT • 96% feared being accused of not being a team player • 81% feared corrective action would not be taken • 68% feared retribution from their supervisors • (Society of Human Resource Managers, 1999)

14. State of Ethics • None thought their ethical standards were lower than those of their peers in their organization (1%)

15. 3. Fear – You Will Be Caught The Fish Bowl Existence of Government Congressman J.D. Hayworth and the forged signature on the re-election petition FTC, Time Warner and the memo Good intentions are not a substitute for good actions. M.M. Jennings

16. The Newspapers and Revelations • The Laws of Probability Do Not Apply When it Comes to the Surfacing of Unethical or Illegal Conduct • If one person knows . . . Three people can keep a secret if two are dead. Hell’s Angels’ motto (borrowing from B. Franklin)

17. Truth and Its Percolating Quality Lying is good. It’s the only way we ever get at the truth. Dostoevsky Circumstances beyond your control will cause bad acts to be discovered. Anonymous

18. Truth Percolates Like a Natural Force • Despite the odds, ethical risk-takers • abound. . . • The city truck and the beer stop • The council man and the threats • The assistant fire chief and the contracts • The art museum director and employees • The museum and the audit

19. Examples of the Risk-Takers • Zoe Baird and Kimba Wood • Henry Cisneros • Fife Symington • Scottsdale School District and the bids • The government witness in the Martha Stewart trial “It’s not the first mistake the gets you. It’s the second, the cover-up, that will.” M. M. Jennings

20. 4. The Role of Ethics in Maximizing the Potential of Individuals and Organizations: Reputation • The Baggage-Free Existence • The Marathon vs. The Sprint • The Meteorites with Success: Judge Stephen Miretti and the Vegas Connection Always tell the truth. That way you don’t have to remember anything. Mark Twain

21. 4. Ethics and Reputation A reputation, good or bad, is tough to shake. Richard Teerlink Former CEO, Harley-Davidson A bad reputation is like a hangover. It takes a while to get rid of, and it makes everything else hurt. James Preston Former CEO, Avon

22. Ethics and Reputation • The reputation of a thousand years is determined by the conduct of one hour. • Japanese Proverb • What goes around comes around. • M.M. Jennings’ Grandmother

23. 5. Ethics and Leadership • Leadership is the ability to see around corners • Leadership is the ability to see the problem before others • Leadership is the ability to fix the problem before it becomes a headline

24. Social/Regulatory/Litigation Cycle Public Moves the Cycle Options Latency Awareness Activism Regulation/Litigation Time

25. 6. Ethics as a Management Tool- Morale Motto 1: “Let’s get out there and not break the law today.” (Compliance and code adherence) Motto 2: “Let’s aim for no ill-will among employees, suppliers, citizens and observers.”

26. 7. Ethics and Liability You don’t make legally incorrect turns if you make ethically correct choices. The Could vs. Should Issue Jurassic Park ethics There is a big difference between what we have a right to do and what is right to do. Justice Potter Stewart

27. Avoid Jurassic Park Ethics Could I do this? -- The Codified Society Legalisms, litigiousness and its costs Should I do this? -- The Ethical Society

28. --Ethics and Conscience It’s the Right Thing to Do Trust as the basis for all organizations, systems and relationships

29. 8. Ethics and Trust • The Interdependence of Government, Business, Citizens and Ethics

30. The Interdependence of Trust, Business, and Government Relationships Payment Business Quality Dependency ROI Regulation Fairness Capital Investors Customers Reliance Reliance Government Protection Protection

31. Least Corrupt Finland Denmark New Zealand Iceland Singapore Sweden Canada Luxembourg Netherlands United Kingdom Australia Norway Switzerland Hong Kong Austria USA Most Corrupt Bangladesh Nigeria Paraguay Madagascar Angola Kenya Indonesia Azerbaijan Uganda Moldova Haiti Ecuador Cameroon Bolivia Kazakhstan Vietnam Corruption Perception Index(Transparency, Int’l 2002)

32. Martha Stewart, ImClone and Omnimedia and Ethics • Dec. 27, 2001 – Martha’s sale of ImClone shares ($229,002) • If she had sold the shares after FDA problems with ImClone announced: $189,495 • Overall savings for Martha: $39,507

33. Martha’s Omnimedia shares • Martha Stewart Omnimedia: Every $1 drop in share price cost Martha $30 million • Dec. 27, 2001: $70 per share • June 25, 2002: $13.60 • November 25, 2002 : $5.26 • October 10, 2003 : $9.86 • December 19, 2003: $9.11 • March 5, 2004 (pre-verdict) -- $12.52 • March 5, 2004 (trading halted after verdict) $10.18 • March 16, 2004 - $9.97 • May 16, 2004 -- $9.29 • July 15, 2004 (new trial denied) -- $8.64 • July 16, 2004 (sentencing) -- $11.81 • Sept. 2004 -- $12.03

34. The Irony of Martha and ImClone • Value of ImClone shares March 5, 2004 (verdict day): $164,976 • One day after Martha’s announcement that she would serve her sentence without continuing appeal (Sept. 2004) • Martha Stewart -- $12.03 • ImClone shares – $54.10 • Martha’s ImClone shares were sold for $58 each on Dec. 27, 2001

35. 9. Ethics and Survival For exactly at the time when the fatal knowledge of how to destroy the entire human race has fallen forever into our hands, the knowledge of morality has fallen out. Exactly when the vehicle of our history has gotten a souped-up engine, we have lost the road map. Exactly when our toys have grown up with us from bows and arrows to thermonuclear bombs, we have become moral infants. Peter Kreeft

36. Why does ethics have such a bad reputation? PartII

37. Why Does Ethics Have Such a Bad Reputation? 1. Urban Legend • “You have to play the game.” • “You can’t get ahead without cutting a few corners.” • “You’ll be eaten alive.” • “Ethics is for wimps.” • “It’s a poker game. We’re all bluffing.”

38. Ethics and Its Bad Reputation 2. Lack of Enforcement What you are thunders so loudly that I cannot hear what you say to the contrary. Ralph Waldo Emerson

39. Ethics and Its Bad Reputation 3. The Myth of the Lonely, Dysfunctional Whistle-Blower • Hesitancy to pass judgment • Hesitancy to raise issues 4. Theoretical

40. Ethics and Its Bad Reputation 5. Difficult I would never suggest that ethics is simple. Not only does one have to know the right thing to do -- one must also have the moral fortitude to do it. Norman R. Augustine Former Chairman Lockheed Martin

41. Ethics and Its Bad Reputation Let us have faith that right makes might, and in that faith let us to the end dare to do our duty as we understand it. Abraham Lincoln

42. The Hesitancy to Speak Up – The Assistant Principal and Glowing Recommendations: The Ethics of Confrontation

43. 6. We prefer rationalizing “Everybody else does it.” What is right is right even if no one is doing it. What is wrong is wrong even if everyone is doing it. Source unknown

44. Rationalizing “That’s the way they do it at Stanford.” Benchmarking as an ethical standard The Tragedy of Donald Kennedy and Government Grants Funds Use at Stanford

45. Stanford and Benchmarking Overhead funds from federal grants used for • $3,000 cedar-lined closet for Kennedy’s home • $2,000 flowers • $2,500 grand piano refurbishing • $7,000 sheets • $4,000 wedding reception • $184,000 yacht depreciation

46. The Language of An EthicalBreach December 18, 1990 “What was intended as government policy to build the capacity of universities through reimbursement of indirect costs leads to payments that are all too easily misunderstood. Therefore, we will be reexamining our policies in an effort to avoid any confusion that might result. At the same time, it is important to understand that the items currently questioned, taken together, have an insignificant impact on Stanford’s indirect-cost rate.”

47. The Language of An Ethical Breach December 18, 1990 (cont’d) “Moreover, Stanford routinely charges the government less than our full indirect costs precisely to allow for errors and allowances.” From a university statement

48. The Language of an Ethical Breach January 14, 1991 “I don’t care whether it’s flowers, or dinners and receptions, or whether it’s washing the table linen after it’s been used, or buying an antique here or there, or refinishing a piano when its finish gets crappy, or repairing a closet and refinishing it -- all those are investments in a university facility that serves a whole array of functions.” From an interview with the Stanford Daily

49. The Language of An Ethical Breach January 23, 1991 “Because acute public attention on these items threatens to overshadow the more important and fundamental issue of the support of federally sponsored research, Stanford is voluntarily withdrawing all general administration costs for operation of Hoover House claimed for the fiscal years since 1981.” University statement

50. Evolutionary Progress February 19, 1991 “I am troubled by costs that are perfectly appropriate as university expenditures and lawful under government rules but I believe ought not be charged to the taxpayer. I should have been more alert to this policy issue, and I should have insisted on more intensive review of these transactions.” Remarks to alumni