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Ethics in Business and Society

Ethics in Business and Society. Have I committed any of the following white collar crimes? Fraud -- Land fraud, computer fraud, odometer fraud, investment fraud, bank fraud, credit card fraud, etc. Embezzlement Forgery

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Ethics in Business and Society

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  1. Ethics in Business and Society

  2. Have I committed any of the following white collar crimes? • Fraud -- Land fraud, computer fraud, odometer fraud, investment fraud, bank fraud, credit card fraud, etc. • Embezzlement • Forgery • Insider trading -- When a person uses inside, confidential, or advance information to trade in shares of publicly held corporations. • Received a ‘Kick Back’ for a business deal • Blackmail • Counterfeiting • Extortion -- Occurs when one person illegally obtains property from another by actual or threatened force, fear, or violence, or under cover of official right.

  3. Have I committed any of the following white collar crimes? • Laundered Money -- The investment or transfer of money from racketeering, drug transactions or other embezzlement schemes so that it appears that its original source either cannot be traced or is legitimate. • Racketeering -- The operation of an illegal business for personal profit. • Committed Tax Evasion • Weights and Measures -- The act of placing an item for sale at one price yet charging a higher price at the time of sale

  4. Pyramid Scheme88% lose in this particular scheme • The essential idea is that Mr. X, makes only one payment. To start earning, Mr. X has to recruit others like him who will also make one payment each. Mr. X gets paid out of receipts from those new recruits. They then go on to recruit others. As each new recruit makes a payment, Mr. X gets a cut. He is thus promised exponential benefits as the "business" expands. • Such "businesses" seldom involve sales of real products or services.

  5. From www.forbes.com • The Ponzi scam is named after Charles Ponzi, a clerk in Boston who first orchestrated such a scheme in 1919. • A Ponzi scheme is similar to a pyramid scheme in that both are based on using new investors' funds to pay the earlier backers. One difference between the two schemes is that the Ponzi mastermind gathers all relevant funds from new investors and then distributes them. Pyramid schemes, on the other hand, allow each investor to directly benefit depending on how many new investors are recruited. In this case, the person on the top of the pyramid does not at any point have access to all the money in the system. • For both schemes, however, eventually there isn't enough money to go around and the schemes unravel.

  6. Bernie Madoff Chairman of the NASDAQ stock exchange, and the admitted operator of the largest investor fraud ever committed by a single person. In March 2009, Madoff pled guilty to 11 felonies and admitted to defrauding thousands of investors of billions of dollars from the early 1990s onward

  7. ENRON Largest U.S. bankruptcy until WorldCom. Complex off-shore partnerships kept liabilities off Enron’s books.

  8. Ken Lay Going to Jail

  9. Enron – Merrill Lynch • “Sham” energy deal with Merrill Lynch allowed Enron to meet Wall Street expectations and book $60 million profit (1999). Inflated profits drove up stock price, unleashed $$millions$$ in bonuses (Lay, Skilling, etc.) and was later cancelled as planned.

  10. WorldCom • Overstated earnings by $3.8 million • Laid off 17,000 employees • Stock dropped from $64.50 to 0.83 in a matter of weeks • Former CEO received $366 million in low interest loans

  11. TYCO • CEO Dennis Kozlowski charged with evading $1 million in taxes and is accused with destroying documents. • Kozlowski and other executives bought art work, and one executive bought a home. • Tax avoidance with offshore incorporation.

  12. Martha Stewart • Martha Stewart (a director of NYSE) allegedly sold stock on inside information provided by Merrill Lynch. Stock in Stewart’s Omnimedia declined 40%. (see Chpt. 16). She made tens of millions of dollars through these transactions. • Merrill Lynch broker, Peter Bacanovic, allegedly warned her of illegality.

  13. From UVA's Honor Code: Academic Fraud: The Webster’s dictionary defines fraud as “a deception deliberately practiced in order to secure unfair or unlawful gain.” Such forms of cheating include, but are not limited to: Plagiarism: quoting or using the ideas of another author or source without acknowledging that those words or ideas were not your own. There are different methods for properly citing sources. For the correct method, you should speak with the faculty member or teaching assistant in charge of the particular assignment. Multiple Submission: The use of work turned in previously for the fulfillment of an academic course at UVA. or another institution. False Citation: Citing or attributing work to a source from which the referenced material was not obtained. False Data: The fabrication or alteration of data to mislead.

  14. Educational Institutions have established ethics codes for their students, e.g. the U.S. Air Force Academy: "We Will Not Lie, Steal Or Cheat, Nor Tolerate Among Us Anyone Who Does" -- Which do you think is the harder part: Line 1 or Line 2? Why?

  15. Teddy Roosevelt said, “To educate a person in mind and not in morals is to educate a menace to society.”

  16. In his best-seller, The Closing of the American Mind, Allan Bloom says that the eternal conflict between good and evil has been replaced with “I’m okay, you’re okay.” Students unthinkingly embrace a blind tolerance in which they consider it “moral” never to think they are right because that might mean someone else is wrong. [Allan Bloom, The Closing of the American Mind, New York, Simon and Schuster, Inc. 1987]

  17. “Until about 50 years ago, it was commonly accepted that universities were to provide students not only with knowledge and skills, but also moral guidance based on the essentials of the Western tradition.” Business Prof Geoffrey Lantos This, though, is changing, as more and more business schools are realizing that to properly train someone as a businessman/woman, you need to train them to be ethical.

  18. “The truth of the matter is that you always know the right thing to do. The hard part is doing it.”-- General H. Norman Schwarzkopf

  19. What CEO's Have to Say "If the company is unethical, that company is going to be cheated by its own employees." -- Bunge's Walter Klein “If you believe in unlimited quality and act in all your business dealings with total integrity, the rest will take care of itself.”-- Frank Perdue Andrew Sigler, Chairman and CEO of Champion International states, "I don't believe that ethical behavior is an impairment to profitability. I cannot remember situations where if I do the bad thing we'll make a lot of money, but if I do the right thing we'll suffer." "Lots of responsible decisions," he explains, "aren't just ethically sound. They're damn smart and very smart business."

  20. “In looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you.”-- Warren Buffet

  21. "If I do something unethical for some short term gain somebody else is going to get hurt, and they're not going to forget it. You're clearly trading a short term gain for something that's inevitably going to be worse down the road--you'll eventually lose business." -- Jerry R. Junkins, President and CEO of Texas Instruments,

  22. Truett Cathy, the Founder of Chick-Fil-A stated (quoting Proverbs 22:1): "A good name is more desirable than great riches; to be esteemed is better than silver or gold." At the Congressional Hearing on Accounting and Business Ethics in July 2002

  23. Business Ethics -- 8 Reasons to be Ethical in Business 1) Litigation/Indictment Avoidance • Without strong ethical values, companies easily drift to the legal edges--dangerous territory where bending and breaking the law leads to lawsuits and indictments – or spending LOTS of money on lawyers/legal fees.

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