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-Values, 'character,' integrity, and ethical reasoning -pervade What do we need to know or do to maintain ethical leadership and our integrity?

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Leadership is not only about: Personal style Learned, developed competencies, but also: __ Ethics issues __ (all around us) leadership & business decisions Leaders must be self-aware and know who they are to ethically resolve these challenges

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Who do you first think of when you think of someone with integrity? Who are your ethical role models? Why?

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Visualizing Core Values and Ethics

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Parents, grandparents, family - those closest to you (Same % response as your peers) Religious leaders; Historical leaders Teachers Coaches Friends

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Ethical Role Models

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-Family/close friends Lincoln/Martin Luther King Benjamin Franklin -Christ; Gandhi; Budda Noted parallels across religions and cultures of values contained in the so-called "Golden Rule" -Corporate employers and values For some of you as veterans - US Military Code Google - Do No Evil Corporate/government/NGO Ethics Codes Cardinal Health

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"Touchstones" - Core Value Legacies -Secular legacy examples: -Religious: -Work:

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What values did they hold? What traits did they exhibit?

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About your Integrity role models:

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-Core Ethical Values/Principles: -Traits:

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-Honesty, Integrity, Courage, Trust, Fairness (Justice), Excellence, Duty, Virtue, Self-Control (Temperance) -Authentic, Steadfast, Accountable, Respectful, Credible, Inspirational, Encouraging, Wise, Self-Deprecating, Fun?

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Actions:

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Lead, Stand Up, Speak Out, Take Action, Set High Standards Listen, but Say No (comment from one of your peers about her Mom)

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Relating our "Touchstones" and Our Core Values to Ethics -Morality/Integrity: - Ethics:

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Definitions vary - Our working definitions: -Our personal compass of core values/principles -Rules or system governing conduct; Shared community values/principles

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business ethics

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Our definition: (Profs' Hartman and DesJardinis, for ex.) Application of values within a business context Process of responsible decision making

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Bowen McCoy - Author of The Parable of the Sadhu (trip climbing to the Himalayas to the peak, holy man is in the way...help bring him down or continue to go up)

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Interesting/insightful perspective on business ethics: -The authenticity and integrity of the enterprise -Taking a tough line or decisional stand in a muddle of ambiguity (making ethical decision when you don't know all the facts...very murky) What... do you think that means?

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Plato

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Good people do not need laws to tell them to act justly, while bad people will find a way around the laws.

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Law is not Ethics -law

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__ is public policy, but only a baseline of societal expectation __ is a floor limiting action, not a ceiling of integrity

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-past -deter/punish -accountability -you choose to do so

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Law often addresses __events; has a hard time anticipating future misconduct or unusual circumstances Criminal law is designed to __ the worst of conduct Law does serve as a barrier to misconduct and one standard of __ for corruption Always remember though, if you disregard law, __ at your own risk, and face the consequences

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Law, Values, and Ethics (center of all of it)

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Principled Leadership/Integrity is the combination of:

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-your -kind -remembered

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What do you want __ Ethics to be? What __ of leader do you want to be? What do you want to be __ for by those you care about?

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low

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where do business leaders rank for honesty/ethics?

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marketplace

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Business/Leadership ethical challenges pervade the __

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The so-called "newspaper" or "Mom" test What wouldn't you want those who care about you to read on the front page? Might be better described now as the Facebook/Twitter test

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What ethical "test" might some say our image in challenging articles on the front page of Sports Illustrated, or the WSJ or NY Times might be considered an example of?

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Ethical Role Models

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On the other hand, society doesn't give as much attention to __ among us

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-Malala Yousafzai's -first peace prize - Ihsnaullah Ishan

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__ courageous blogging against the Taliban set her apart from other 14-year-old Pakistani girls. Growing up in a region once dominated by the Islamic extremists, she knew the fear associated with the word Taliban. One of her fears came to pass Tuesday, when gunmen sought her out and opened fire on her school van, leaving her seriously wounded along with two other classmates. 14-year-old girl wins Pakistan's __ The Pakistani Taliban claimed responsibility for the attack, Taliban spokesman __ told CNN. Ishan blamed the shooting on Malala's activist blogging.

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-Dr. Catharyn A. Baird

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-ELI and EthicsGame Creator "...all of us seem to have a desire to be ethical and/or to be perceived as ethical." Citing the work of Norma Haan, et al, University of California, Berkeley, psychologist, and the book, On Moral Grounds: The Search for Practical Reality

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When it all comes down to it, it's all about Trust

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Why do you think we all want to be ethical or seen as being ethical? Why do you think ethics might be important to leadership?

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Ties between Ethics/Integrity and Leadership Why would anyone choose to follow you?

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Prof. Rucci (author of your article) and I would ask you to consider the answer to this question:

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Prof Rucci -choose -want -contribute their energies and ideas

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According to __, A true business leader is: An individual that someone would __ to follow and support even if not required to do so Causes one to __ to be a part of what they're doing Makes one wish to __ to what the leader is doing

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Who they are The traits they possess The practices that they establish

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According to Prof Rucci, a true business leader also: Evokes support for a vision based upon 3 things:

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Passion Performance Principle

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Prof Rucci contends that Exceptional business leaders have in common: Who they are: What does Prof Rucci describe as the 3 P's of who business leaders are in his article?

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passion

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Have a personal __ for what they do. They'd continue to do it if they were independently wealthy. They'd also continue to do it if they were compensated very little.

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Performance

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As much as they enjoy winning, they hate losing even more. They keep score, they set high standards, and they hold themselves and their people accountable, and are tough-minded.

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principle

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Cheating in order to win doesn't count. When faced with a decision that puts profit ahead of __, __ will always win.

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overpromoted inability to change cultural misfits

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In contrast, Prof Rucci identifies why Some Business Executives Fail:

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overpromoted

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Don't possess the necessary skills to move to the Executive level

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inability to change

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Rely on traditional behaviors when new ones are required

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cultural misfits

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Lack of fit w/ in the culture/values of the organization

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1. business acumen 2. customer orientation 3. results orientation 4. strategic thinking 5. innovation & risk taking 6. integrity 7. interpersonal maturity

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Traits they possess: 1. Balanced judgment of business tactics and their implications 2. Service, quality and customer satisfaction at core 3. Persistent bias for action 4. Anticipate and construct successful strategy 5. Desire to achieve goal rather than fear failing 6. Uncompromising standards and fair play -Business Ethics not an oxymoron to them -Articulate and enforce core values 7. "Other"-oriented -Respect; brings out best

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1. Vision 2. Opportunity 3. Incentives 4. Communication 5. Entrepreneurship

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Key Practices of Exceptional Leaders: 1. Clear line of sight to their purpose 2. Evaluate and develop people obsessively 3. Reward results; share in $'s and success 4. Share information widely/listen (Transparent) 5. Promote innovation/risk taking; resource allocation

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Commitment 1. a vision and involve others 2. values and hold people accountable 3. Treat people with dignity and build their confidence 4. results

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Still according to Rucci, the best business leaders...create __ 1. Create __ 2. Reinforce __ 3. Treat people with __ 4. Achieve __ against a broader definition of value creation

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Prof Paine *Technology *Increased Globalization *Heightened Competition *Shifting Demographics *AND Corporate Attention to Values/Ethics -More subtle, but just as significant shift

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Values in the Business Landscape - Value Shift by __ Article summary: Businesses have shifted dramatically in recent decades in several significant ways:

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25-30 yrs ago protect build

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The "Value Shift" according to Paine: "Business Ethics" was viewed skeptically __. Companies significantly shifted, in part, because: Established co.'s - __ their reputation/brand Entrepreneurial co.'s - __ their reputation/brand

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What is our purpose? Who do we believe in? What principles (core values) should guide our behavior? What do we owe one another and the people with whom we deal (stakeholders)?

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Ethics/Values increasingly viewed as significant in business: Some want to avoid the "60 Minutes" syndrome - what's that?

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1. Risk Management 2. Organizational Functioning and stability 3. Market positioning increase 4. civic positioning w/in community 5. Just right thing to do

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What were 5 of the reasons that Paine cites for a "Shift" in Business Values? 1. Avoid negative economic results of unethical activity Avoid negative impact upon Stakeholders 2. Increases quality and commitment of Employees and Customers - "Intangible value" concepts 3. Research shows it is Good for Business on final review power point!

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Risk Management

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Estimated Financial Costs of Unethical Business Practices:

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visible 1. 11% increase 2. 7% est. loss -$1 Trillion 3. WorldCom; Enron; Madoff; mortgage derivatives/credit default swaps; JP Morgan Chase ($13 B); HSBC ($1.9 B); UBS ($1.5 B)

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Direct costs never more _ 1. __ in workplace misconduct in times of economic challenge 2. __ in annual revenues due to Fraud (= to __ of 2008 US GDP) Est. 5%+ of revenue for typical company 3. Specific ex.'s of the costs of unethical acts/investigation

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profitability performance limit exposure measurable ROI

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Compliance impacts ROI: 1. Superior governance practices generate 20% greater profit 2. strong sense of cultural integrity boosts shareholder return by 16% 3. organizations in compliance avoid up to 95% of fines & penalties 4. every $1 spent saves $5.21 in liability, brand damage, and lost productivity

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Trust, Loyalty, Commitment of Workforce 1. 94% 2. 82% 3. 1/3

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Organizational Functioning/Stability: 1. __ consider firm's Ethics as critical to employment choice 2. __ willing to trade off lower pay to work for firm with Ethical business practices 3. Est. __ of US workers have walked off the job on the basis of ethics issues (some say more)

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returns 5.8% higher companies with open & active employee communication: 7.9% other companies: 2.1%

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Employees comfort level in sharing honest feedback correlates w/ strong business __: integrity capital...shareholder returns:

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Market Positioning/Civic Posture - 1. 91% 2. 74% 3. 6 out of 10 4. 53% 5. priority 6. women

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Importance to Customers - one Survey 1. __ Behavior towards customers and communities influential when making a purchase 2. __ Want to know more about company behavior before buying 3. __ Awareness of company ethics affects their decision-making towards company 4. __ Knowing that "the company donates a percentage of profits to charity and good causes" influential when considering a purchase Age and gender split - more under-30s ranking "ethical brand values" as a 5.__ when spending, compared to older consumers. Social responsibility a higher priority for 6.__ than men

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What is our purpose? Who do we believe in? What principles (core values) should guide our behavior? What do we owe one another and the people with whom we deal (stakeholders)?

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In Paine's words, for us as leaders, the Q's are:

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1. mission 2. values 3. vision 4. strategy 5. balanced scorecard

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Let's compare these to Prof Rodek's: Hierarchy of Co. statements: 1. Why we exist 2. What we believe in and how we will behave 3. What we want to be 4. What our competitive game plan will be 5. How we will monitor and implement that plan

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Vision 1. Core Ideology a. Core Mission I. Enduring II. Inspirational b. Core Values:

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Remember Prof Rodek's - Steps to Build a Core Ideology and Vision: Employees relate to and take pride in a __ 1. __: the glue that holds an organization together a. __ (purpose): Why do we exist? I. __ (strategies may change, mission should not) II. __ b. __: What do we stand for? How do we conduct ourselves?

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1. make people happy 2. better life for less $ 3. cause no harm, use business for environmental good 4. whole foods. whole people. whole planet 5. do no harm

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Prof Rodek's Mission examples...why do we exist? 1. Disney: ooperate theme parks.....__ 2. Wal-Mart: sell merchandise.....__ 3. Patagonia: sell wilderness goods...__ 4. Whole Foods: sell groceries.....__ 5. I'd add as an example: Google search engine/everything eventually?....__

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1. imagination and wholesomeness 2. product excellence 3. service to the customer and never being satisfied -right -at all

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Prof. Rodek's Ex.'s of Corporate Core values... Disney P&G Nordstrom There is no universally __ set of core values. The key is not what core values an organization has, but that it has core values __.

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core excellence decision-making who we are

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Summary - Where we are and where we're going Ethics/Integrity exist at the __ of excellence Key fundamentals of leadership and business __ Can be routinely challenged in enterprise __ But can also reduce risk, improve enterprises, positioning and communities, and aspirationally, __

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regularly align

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Trick is learning essential steps to acting with greater ethical consistency How we do more __ decide the best ethical alternatives for ourselves and our enterprises? What do we want our leadership integrity to be? How do our core values __ with what we do?

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James Burke Scientific Historian The Day the Universe Changed

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"...the world that we live in, our view of it and the values we attach to it, is shaped by what we know. And when what we know changes, the world changes and with it, everything."

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adapt

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Our core principles and values: Often begin with our role models, our family, our culture, our roots, the society in which we live and work, our Touchstones Directly affect our leadership and entrepreneurship But as Burke suggests, we continue to develop, __ our core values as we move through life

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How do core values affect our decisions? What ethical perspective do we likely use when we approach challenges? Are there benefits to us to listen to differing ethical perspectives of others? What strategic steps can we take to avoid leadership ethics mistakes?

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we also need to answer these Q's:

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Raise ethical awareness Make better decisions Change unethical behavior Notice the positive impact

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Purpose of Ethical Appreciation

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1. personal core values 2. community core values 3. what are similarities and differences?

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Create Foundation for Self-Knowledge: 1. What are my core principles and commitments? What behaviors count as living those values? 2. What are the commitments of my community? What are the company's values and compliance duties? What actions count? 3. Which values should take priority? How do I resolve any differences?

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top: head bottom: heart left: me right: us

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ethic lens overview (compass): top: bottom: left: right:

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top: rationality (reason/head) bottom: sensibility (intuition/heart) left: autonomy (individual) right: equality (community)

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building blocks of the four lenses: top: bottom: left: right:

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mix of rationality & autonomy (top left): rights/responsibilities lens mix of rationality & equality (top right): relationship lens mix of sensibility & equality (bottom right): reputation lens mix of sensibility & autonomy (bottom left): results lens

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mix of rationality & autonomy (top left): mix of rationality & equality (top right): mix of sensibility & equality (bottom right): mix of sensibility & autonomy (bottom left):

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1. perspective 2. self-identify -other ethical perspectives 3. challenges -strategic steps

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1. The ELI is not suggesting you change your __ or that your 'lens' is unequal to others 2. The ELI allows you to __ and appreciate the way you tend to view an ethical challenge, -and, compare/ contrast your lens to __ in analyzing a complex ethical challenge. 3. The ELI gives us a better understanding of the strengths and __ in our view or 'lens' -that we can use in __ for achieving the best possible ethical decision and leadership action.

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mix of rationality & autonomy (top left):

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Fulfill responsibilities andrights of ethical actor Act is done with care and concern for others I am responsible

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mix of rationality & equality (top right): relationship lens

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Create a fair system Include all members andcommunity institutions I am fair

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mix of sensibility & equality (bottom right): reputation lens

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Act is consistent with a good character I make virtuous choices

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mix of sensibility & autonomy (bottom left): results lens

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Create greatest good forgreatest number I make choices that aregood for everyone

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essential

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The vast majority of human beings believe that they are ethical as they make choices within their own belief systems. As we make decisions about what actions count as ethical, each ethical lens has a slightly different take on what is __ for ethical behavior.

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I am responsible

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Those whose preferred lens is the Rights Lens define being ethical by doing their duty and following the rules. Thus, being responsible is important.

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I am fair.

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Those whose preferred lens is the Relationship Lens define being ethical by making sure that people are treated the same and have equal opportunities. Thus, being fair is important.

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I make choices that are good for everyone.

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Those whose preferred lens is the Results Lens define being ethical by making people happy and finding "win-win" solutions that respect everyone. Thus, making choices that are good for everyone is important.

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I make virtuous choices.

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Those whose preferred lens is the Reputation Lens define being ethical as making hard choices with courage and wisdom. Thus, making choices that demonstrate the key virtues of their role is important.

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justify

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You can tell what lens is someone's preferred lens by listening to how they describe themselves and __ the choices that were made in difficult situations. You can also learn about yourself by listening to how you explain why a particular course of action is the best.

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mix of rationality & autonomy (top left): rights/responsibilities lens mix of rationality & equality (top right): relationship lens mix of sensibility & equality (bottom right): reputation lens mix of sensibility & autonomy (bottom left): results lens

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Some blind spots & risks: 1. Believe that the motivejustifies method Being autocratic (bossy) 2. Overconfident in process Being authoritarian 3. Have unrealistic role expectation Self-righteous 4. Satisfied with too little good Reducing decisions to cost-benefit analysis

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violate

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Each lens also has a blind spot. Just like our cars have a very predictable blind spot, when we know which lens is our preferred lens, we know where we need to check with someone from another lens to make sure that we aren't going to unwittingly __ our own ethical values.

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Rights/Responsibility Lens -

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Excused: People who favor this lens will find ways that they are excused from following the rules. They know that the rule, the duty, is there but some very good reason exists that gives them permission to not follow the rules. Sometimes the excuse involves shifting responsibility: if you don't follow the rules, I don't have to. These rules are violated on a one time basis.

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Relationship Lens -

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Exempt: People who favor this lens will find that the rules don't apply to them - only others. People in leadership fall into the trap of limiting internet access, demanding drug testing, or not providing health care - for everyone else except them. Those who exempt themselves don't think of themselves being excused from the rule - the rule never applied to them at all.

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Results Lens -

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Expedience: People who favor this will have a tendency to cut corners to make people happy. As people focus on short-term results rather than long-term goals, they will do what is needed to get ahead and say that they had no choice.

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Reputation Lens -

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Entitled: People who favor this lens believe that they are entitled to certain perks - often at the expense of others. Whether padding an expense report or taking advantage of a corporate jet or car, organizational executives tend to forget that they are employees, just like everyone else.

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dilemmas

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Do you know your blind spots? What strategies do you have in place to make sure you have a colleague with a different perspective who can look at the road for you. The value of a trusted friend or community is to provide perspective for difficult (or sometimes just everyday) __.

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...

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Where do you think Coach Tressel would fit in the 'lens' analysis when he initially learned of OSU players behavior in "Tatoo-gate?" What do you think is the best ethical 'lens' (perspective) of his actions/ inactions?

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...

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Where do you think Edward Snowden fits within the lenses when he decided to take highly confidential, top secret data, against a sworn oath he gave, from the NSA, and disclose it to the world?

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...

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What about GM CEO Mary Barra when she announced a new culture of 'safety first' for GM and a fund to pay potential victims of past GM car ignition switch failures?

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Rights/Responsibilities Lens

answer

(Deontological Theories) Immanuel Kant

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Relationship Lens

answer

(Justice Theories) John Rawls

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Reputation Lens

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(Virtue Theories) Aristotle and Alasdair Macintyre

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Results Lens

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(Consequentialist Theories) John Stuart Mill

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mix of rationality & autonomy (top left): rights/responsibilities lens mix of rationality & equality (top right): relationship lens mix of sensibility & equality (bottom right): reputation lens mix of sensibility & autonomy (bottom left): results lens

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Guardians of the lenses 1. Legal Department/Lawyers Finance team/CPAs Board of Directors 2. Human resources Quality assurance teams Training and Development Leadership team 3. CEO Marketing and consultative sales Investor relations Public relations 4. Sales Manufacturing/R & D Project Management Investors/Owners

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others

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The final layer is noticing that different sets of folks have the responsibility to be the guardians of the lenses. Their job is to assure that the values of the lenses as well as the results of their job descriptions are accomplished. Many ethical conflicts arise because the guardians vigorously advocate for their position without considering the positions of __.

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Rights/Responsibility Lens -

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lawyers and accountants: Their job is to assure that we both know the rules as well as the consequences for not following them. Arthur-Anderson got into trouble because they did not fulfill their guardian function and became complicit in breaking the accounting rules.

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Relationship Lens -

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human resources/quality assurance: The HR team assures that everyone in the company is treated fairly and the rules are applied to everyone equally. These two groups also care about systems, which embody the values of this lens. Results Lens - sales/R&D: These two groups may seem like odd suite-mates, but each of them is responsible for forwarding the goals of the organization. Without good products, the company cannot flourish. Unless someone sells the good products, the company cannot thrive. .

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Reputation Lens -

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marketing/leadership: These two groups are responsible for assuring that the external community has a favorable but accurate view of the company. In times of difficulty, often senior leadership is asked to make the statements to the press to contextualize the situation.

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bad

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Unless all four lenses are represented and present in the conversation, __ decisions are made. Respecting those whose role includes articulating the values of the lenses is important. Also important is making sure that all positions are articulated in the conversation

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1. own 2. gut -detoured 3. consideration 4. often

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How do we practically apply the 'lens' analysis? 1. Understand and appreciate our __ perspective 2. Our "__" (instinct, 'sensibility') may alert us: -Our visceral instincts and past experiences - often 'sound' ethical issues; highly reliable in instant circumstances -But alone, may be insufficient and we may be __ by rationalizations/self-interest in routinely making best ethical decisions in difficult/ complex decision-making 3. Appreciate the importance the ethical 'lenses' others may bring to our __ 4. What steps can we take or 'framework' can we use to discover and make the best decision most __?

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Explicit and routine process Subject to analyses Often critical discussion

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Paine's Differences in Common Approaches When It Comes to Ethical Decision Making: Issue: Financial, legal, competiveness, market issues and challenges View: __

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Often left to instinct "Gut" response Ad hoc to the challenge

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issue: ethics quandary view: __

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emotion

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Difficulty is that the research shows we often use __, rather than reason, to resolve ethical issues. If we use reason, often it is to attempt to justify our action after the fact.

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1. Identifying Facts and Ethical Issues -Stakeholders 2. Applying Ethical Standards -Stakeholders 'Lenses' (Duty, Rights, Best Practice, Commitments) -Law; Organizational Mission, Values, Ethics Codes; Our Core Values 3. Objectivity (Impartiality) 4. Transparency

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Begin discussion of Prof. Payne's - Basic Ethics "Framework" to address complex ethical dilemmas:

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rationalizations/self-interest

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Others may or may not share our exact lens But, other 'lenses' may help us because of our own 'Blind Spots', 'Risks', or __ The trick is figuring out strategic steps to make ethical choices more consistently

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Expressing two alternative ethical stories raise the Q: Why do we not always voice our values as we are deciding ethical challenges? Strong, very personal experiences in voicing values Can be very difficult or discomforting to do Results or serious consequences might be unexpected

answer

Tale of 2 stories: Babson Prof Gentile

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Lao Tzu Chinese Philosopher and Founder of Taoism

answer

At the center of your being you have the answer; you know who you are and you know what you want.

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I want to do this (Act ethically) Remember the studies - most people want to be ethical I have done this before I can do this more often, and better It is easier in some contexts than others I am more likely to do this if I have thought about how I may respond Mastering and delivering responses to rationalizations can empower others who share my views to act But I cannot assume I know who those folks are

answer

Some Giving V to V's "Starting Assumptions":

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shareholders

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All shareholders are stakeholders But not all stakeholders are __ Stakeholder: includes public

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Don Knauss - CEO of CloroxNY Times interview 3-23-14 "On Putting Your Followers First"

answer

Leadership qualities sought: 1. Passion - "fire in the belly" 2. Intellect - "think analytically, creatively and strategically" "If you don't have the intellectual horsepower, it's going to be hard for people to follow you." 3. Mentor - "pattern of" developing other people in the co. 4. Communicate - inspire others; in an "easy, informal" manner 5. Integrity - "values"; "tell the truth" & "stand up for what is right" "It starts with Integrity, which is really the grease of commerce." Sound familiar to Prof Rucci's 3P's? By the way, latest stock value of his 8200 employee, 12.65 $B co., 98.21 yesterday - reached all time 31 yr. high

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Sensibility -visceral -accurate difficult

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Our "gut"; "instinct" -Research supports that our __ response may accurately measure our sense in what is "wrong" in the potential ethical problem we face Instinct may well be based in part upon prior experience To extent we face instantaneous/ non-complex responses, following our sensibilities, appears generally __ Larger challenge is when we face __ or complex issue that requires us to consider a course of action: Ex.'s of start-up; technology breakthrough; new business model; complex financial restructuring; employee action Might again use Google as an ex.

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What would you want to know before deciding? Would you want to work through alternatives? How do you remain impartial and protect vs. biases? Would you feel differently about what steps should be taken if you are the one directly impacted by the outcome of someone else's ethics decision?

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If you were facing a critical ethical issue what steps would you take?

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Markets are amoral, but market participants frequently make ethical judgments...Trust Repeats links between ethics and performance Despite those links, Paine argues we haven't done a good job of integrating Ethics strategies into management decision-making Paine suggests a Framework for doing so

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What was Prof Paine's Ethics Framework article about?

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Is the action consistent with the actor's basic duties? Does it respect the rights and other legitimate claims of the affected parties? Does it reflect best practice? Is it compatible with the actor's own deeply held commitments ("core values")?

answer

What four Q's does the author propose one consider in facing an ethical challenge?

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Duty

answer

Requirement to act or not to act toward others Basic moral __ in law or codes What would be an example of a __ in the context of Edward Snowden's actions?

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Right

answer

Requirement in others to behave in a certain fashion toward you - also often in law or codes Converse of duty What might be considered a Right for some stakeholders in the context of GM's ignition switch recall on their cars?

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Does the action attempt to deceive anyone or allow anyone to be deceived? Does the action gain or allow the gain of privilege or advantage to which I or someone else would not otherwise be entitled? Would I be dissatisfied by the outcome if I were on the receiving end of the action?

answer

Secular Example West Point - Three Rules of Thumb

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Best Practices

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Principles or standards of excellence (ethics codes, voluntary standards) Ideals, values, aspirations Can you think of any enterprise __? Anyone interned/worked in Health Care?

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Commitments

answer

Self-chosen or subjective moral convictions (principles, core values, standards of integrity) "You can make money without doing evil" -- one of Google's "What We Believe" statements Another one...

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The J.M Smucker Company Why We Are, Who We Are

answer

A culture of dotting the i's and crossing the t's...Of doing the right things and doing things right...A culture of growth — individual and as a company.It's who we are. It's because of who we are.It's a result of living our Basic Beliefs...Our Commitment to Each Other. To our consumers and to our customers... Market cap 10.5 $B; 4775 employees; 115 yr. old co.; 103.03 /share, just off recent high Does it echo touchstones or the lenses?

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Facts Stakeholders Ethical Standards Objectivity and Transparency

answer

What are some basic steps Prof Paine suggests to work through in serious ethical challenges?

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stakeholder

answer

Anyone who can affect, or Anyone who is affected by a decision

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1. Facts 2. Stakeholders assessment Ethical Issues and their consequences 3. Identifying Standards Duties, Rights, Best Practice, Commitments 4. Objectivity Transparency, Fairness

answer

Paine "frames" ethics challenges into a decision- making process consisting of four steps:

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1. Fiduciary 2. Property 3. Reliability 4. Transparency 5. Dignity 6. Fairness 7. Citizenship 8. Responsiveness

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Prof. Paine's CODEX: Paine also supports her discussion of standards by the compilation of 8 principles found through leading ethical codes: 1. Act in company's best interest 2. Respect property & others property rights 3. Keep your commitments 4. Conduct business openly and truthfully 5. Respect dignity of all people 6. Treat everyone fairly 7. Act as responsible community members 8. Be responsive to legitimate claims/concerns

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Facts stop and think

answer

-Emotion can derail objectivity -Trust "gut" to alert you to issue, but critically examine facts and issues -Appreciate the difficulty and potential bias in fact gathering, in data - facts can be fluid -Be careful to exercise critical thinking and ask Q's to assure the accuracy of data -Often not the answer to a given Q that's going to provide the ethical response , but the failure to ask needed questions to identify the ethical answer

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Ethical Issues -Identify stakeholders -stakeholders impact and consequences of actions

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-Those affected or can affect decisions Who's making the decision? Ethical issues may not be self-evident

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Standards -Explore Duties, Rights, Best Practice, & Commitments to Stakeholders -Creative, yet ethical, alternatives

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Lenses may suggest ethical alternatives Law and Code of Ethics, Mission CODEX principles May be more than one ethical answer

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objectivity and transparency (Gentile's Assumptions; protecting vs. biases)

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Rationalizations can create hurdles to objectivity Conflicts of Interest can threaten our impartiality "Inappropriate" self-interest Some suggested solutions/strategies Voicing our Core Values Transparency

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Slippery slope Victim mentality Everybody does it Cultural context - organizational and demographic "practice" or "the way things are done" Don't challenge 'authority', obedience mentality Conflicting Interests - self-interest "Inappropriate self-interest" - evolutionary influence "Moral disengagement" "Moral muteness" - Threats we see if we speak up

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Some Rationalizations and Hurdles:

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Moral self-regulation system to cognitive disengagement processes to behavior? Cognitive Disengagement Processes

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Bandura's Moral Disengagement: Moral justification Euphemistic language Advantageous comparison Displacement of responsibility Diffusion of responsibility Distortion of consequences Attribution of blame Dehumanization

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Moral Self-Regulation System

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Underlying values and standards that potential actions are judged against

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Can be very difficult or discomforting to do Can have results or serious consequences we didn't expect

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Why do we not always voice our values?

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Aaron Feuerstein Ethics isn't easy Ethical decisions often come in the midst of stress Reacting emotionally or instinctually, without stopping to think through options, "framing" the issues, may not provide the best ethical choice Ethical choices sometimes present more than one "right" thing to do Considering stakeholders, their perspectives (lenses), and "creative" alternatives may provide a better solution

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Malden Mills What was your reaction to reading this case? Why do you think we have MM in your ethics leadership and decision making course?

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Critically disabling factory fire Out of work, skilled labor force; employees hospitalized Devastated economic conditions in community Christmas season; trauma of devastation; age of F? Legacy family leadership for F Deep moral and religious convictions for F Immense offshore textile competition Sophisticated product in Polartec New, larger factory rebuild lower than expected insurance recovery

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What were the critical Facts in Ethical Hero or Failed Businessman (MM)?

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Rebuild factory in a economically devastated community Pay workers while the factory is rebuilt Insurance payout and how it's used

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What are the Ethical Issues?

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Challenge of deciding between 2 competing ethical "rights"

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Would it have been ethical for F to take the insurance payout and not rebuild? Did he have a duty to pay the workers even while the factory was rebuilt? Did workers have an ethical need to continue to get paid?

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Feuerstein His family Workers Community Customers His Board Creditors Insurer?

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Who are the Stakeholders?

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F's mind (reason) and heart (intuition) F's individuality (autonomy) and notions of community (equality)

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What are the Ethical values in tension here for the decision maker - F?

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Religious Secular (3rd generation family owner)

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What were Feurerstein's Touchstones?

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What may have been the lens of his family board member? What about that of his workers? What about the community?

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What do you believe F's lens (perspective) as the decision making stakeholder to be?

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What laws or rules or standards apply to the decision here, if any? What was the mission and vision of Malden Mills? Was there a religious ethical standard influencing F?

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What Ethical Standards apply here?

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Why might insight into F's lens or ethical view be helpful reaching the best ethics outcome?

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If F had responded to Paine's 4 Q's, which do you think would have the highest ethical priority for him? Duties? Rights of others? Best practice? Actor's own deeply held Commitments ("core values")?

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Impartiality / Objectivity Transparency and Fairness Voicing our Values - Courage - (Tale of Two Stories ex.)

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What were some of the hurdles / challenges F faced in his Impartiality / Objectivity in making the best ethical decision for MM?

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Slippery slope Victim mentality Everybody does it Cultural context - organizational and demographic "practice" or "the way things are done" Don't challenge 'authority', obedience mentality "Moral muteness" - Threats we see for not speaking up "Moral disengagement" (not at issue for F) Conflicting Interests - self-interest "Inappropriate self-interest" - evolutionary influence

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Some Rationalizations and Hurdles:

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1. Can affect us all Has very positive impact; but also negative ones Even the most thoughtful and upstanding of us 2. Can influence us even when we are trying to prevent it from doing so 3. Difficult to compensate for a bias for which we are unaware 4. HBR (Harvard Business Review) article on "Inappropriate" self-interest Inappropriate Self-Interest: A Beguiling and Unconscious Influence on Decision Making by Sydney Finkelstein, Jo Whitehead, Andrew Campbell

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Why is Self-Interest critical to a discussion of business ethics?

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1. Easier to argue our position if we genuinely believe our own argument - Unaware of the influence of our own self-interest 2. Truly believe we are right when we are wrong 3. Convince ourselves that we are being fair or even altruistic 4. Mischaracterize the opposing view as self-interested or irrational

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Evolutionary notions of self-interest:

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Are any options likely to be especially attractive or unattractive, particularly given the short-term interests of the decision makers? Are these interests likely to conflict with the interests of the main stakeholders? Are any conflicting interests likely to be strong enough to significantly distort the decision?

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Recognizing "Inappropriate" Self-Interest: 3 questions

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What about F's Board member son's view? What about F's decision on rebuilding costs? What about F's examination of potential insurance recovery?

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Diversity of Stakeholders' Lenses What alternatives or options do the stakeholders present to the diversity of F's lens?

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Quiet leaders: Don't break the rules But don't want to be mechanical and cause harm either Look to imaginative and creative means, and if necessary, bend the rules Use that means as an opportunity to uphold their values and commitments

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Another Potential Solution - Bend the Rules What was the story he told to illustrate his concept? What was Prof Badaracco trying to suggest about 'quiet leaders'?

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1. Creative, ethical problem solving 2. Not breaking, but when necessary, bending the rigidity of rules for rules sake, or the existing processes 3. If we start with notions of the best ethical solutions, or best mission, or best design for products or services, we may avoid many of the ethical challenges we otherwise would face, and can incur significant accountability costs Entry of Corporate Social Responsibility (CSR), Creating Social Value (CSV), Sustainability Prof Wells upcoming discussions

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Creative Ethical Alternatives and "Entrepreneurial Ethics"

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Patrick Cescau Group Chief Executive Unilever 2007

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Today social responsibility and environmental sustainability are core business competencies, not fringe activities...how well and how quickly businesses respond to this [sustainability and corporate responsibility] agenda will determine which companies succeed and which will fail in the next few decades.

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1. Facts and Ethical Issues 2. Stakeholders ID and assessment 3. Identifying and applying Standards Duties, Rights, Best Practice, Commitments Mission and Vision, Law and Ethics Codes, our Lenses Creative Ethical Solutions; Core Values; Assistance CSR, CSV, and Philanthropy 4. Impartiality / Objectivity Awareness to Self-Interest and Rationalizations Stopping to Critically Think and Anticipating Response Maintaining Transparency, Fairness

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Paine's - Basic Ethics Framework (Adapted):

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1. Self-knowledge, self-image, and alignment 2. purpose 3. values 4. normality 5. reasons and rationalizations 6. voice 7. choice

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Prof Gentile's "To-Do" List (7 Pillars): 1. Develop your own 'story'; 'align' it with who you are 2. Define (own/share) your __ 3. Recognize and appeal to "shared" __ of others Ex.'s of Duty, fairness, stakeholder consequences, reputational risk 4. Expect conflicts and don't overreact 5. Anticipate and practice your response 6. Learn and practice __ing your own values 7. Choose to act and enable others to do so Know what has and not worked in the past; no choice is a decision Courage may be required, and outcomes are not guaranteed

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interpersonal skills project management conducting meetings time management written communication verbal communication presentation skills team player self-awareness personal influence skills personal values

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Knowledge & Skills: Being Successful: What you know: vs. How you do things

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Leadership development is a critical role for business schools Leadership is not only about: Personal style Learned, developed competencies, but also: Values, 'character,' integrity, and ethical reasoning Ethics issues pervade leadership & business decisions Leaders must be self-aware and know who they are What are their core values; how they align with what they do

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Our Starting Assumptions

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Trust your "gut," particularly in immediate circumstances But "Stop and Think" in difficult circumstances, and use your brain to explore ethical options (lenses, 4 Q's) What don't you want your Mom (or loved one, or future employer) to read on Facebook about you? Can you explain your actions to someone whom you trust to tell you when you are wrong? Seek the experience or wisdom of others with a different or more objective view; a mentor or trusted adviser Will you be able to sleep at night, or look yourself in the mirror taking the action? Don't forget the "2 Rules" What do you want your leadership integrity to be?

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Some simplistic ethical tests:

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top: ethics and integrity: your core values middle: corporate/enterprise values and codes: ethics and compliance codes bottom: law as foundation: baseline

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Ethics and integrity pyramid

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Michael Josephson

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We judge ourselves by our intention, but we are judged by our last worst act.

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Groucho Marx

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Those are my principles, and if you don't like them...I have others.

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The progression is: 1. forming Difficulties, problems, issues occur.... 2. storming Reality... have to get things done...still don't like the team (maybe).... 3. norming OK.. I get it... now lets understand everyone's role and be the best.... 4. performing

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Be able to identify the four stages of team and group dynamics and have a perspective for your team. Bruce Tuckman's (1965) forming storming norming performing model.

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forming: stage 1

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High dependence on the leader for guidance and direction. • Little agreement on team goals other than received from leader. • Individual roles and responsibilities are very unclear. • Leader and other members of the team must prepare to answer questions about the team's purpose, objectives and external relationships. • Processes are often ignored. Members of the team act independently.

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storming: stage 2

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Decisions don't come easily within group. • Team members vie for position as they attempt to establish themselves in relation to other team members and possibly the leader, who might receive challenges from team members. • The clarity of purpose for the team increases, but uncertainties persist. Cliques and factions form and there may be power struggles. • The team needs to be focused on its goals to avoid becoming distracted by relationships and emotional issues. The team may even have to compromise to enable progress.

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norming: stage 3

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Agreement and consensus begins to happen within the team. • Roles and responsibilities are clear and accepted. Big decisions are made by group agreement. We begin to work together. • Smaller decisions may be delegated to individuals or small teams within group. Commitment and unity is strong. • The team may engage in fun and social activities. The team discusses and develops its processes and working style. There is general respect for the leader and some of leadership is more shared by other team members.

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performing: stage 4

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The team is more aware of performance, they know clearly why it is doing what it is doing. • The team has a shared vision and is able to stand on its own feet with no interference. There is minimal participation from the leader. • There is a focus on over-achieving goals, and the team makes most of the decisions against criteria agreed with the leader. • The team has a high degree of autonomy. Disagreements occur but now they are resolved within the team positively with changes to processes and structure made by the team.

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performing: stage 4 continued

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The team works towards achieving the goal, and attends to relationships, style and process issues along the way. • The team requires delegated tasks and projects from the leader. • The team does not need to be instructed or assisted. • Team members might ask for assistance from the leader with personal and interpersonal development.

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planning

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Analyzing the problem, defining your purposes, and analyzing the audience Gathering the information you need

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writing

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Putting words on paper or on a screen. Writing can be lists, fragmentary notes or a formal draft.

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revising

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Evaluating your work and measuring it against your goals Getting feedback from someone else Editing the draft to see that it satisfies the requirements of standard English Proofreading the final copy to see that it's free from typographical errors

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order start

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The activities do not have to come in this __. You do not have to finish one activity to __ another.

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several all

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You may do an activity __ times, not just once. Most writers do not use __ activities for all the documents they write.

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Realize that the first draft can be revised. Write regularly. Break big jobs into smaller chunks. Have clear goals for purpose and audience.

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Does it matter what process I use?

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complete

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Have several different strategies to choose from. Use rules flexibly. Edit after the draft is __.

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To get the best results from the time you have, spend only a third of your time actually "writing." Spend at least one-third of your time analyzing the situation and your audience, gathering information, and organizing what you have to say.

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I don't have much time. How should I use it?

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evaluating

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Spend another third __ what you've said, revising the draft(s) to meet your purposes and the needs of the audience and the organization, editing a late draft to remove any errors in grammar and mechanics, and proofreading the final typed copy.

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brainstorm, freewrite, cluster, talk to your audiences, storyboard

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what planning should I do before I begin writing or speaking

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ideas

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clustering helps generate __

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Revision consists of: revising: editing proofreading

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making changes that will better satisfy your purposes and your audience. making surface-level changes that make the document grammatically correct. checking to be sure the document is free from typographical errors.

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are the first and last paragraphs effective? does the design of the document make it easy for readers to find the info they need? have you told the reader what to do?

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Light Revision checklist

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You need to know the rules of grammar and punctuation to edit. Editing should always follow revision. There's no point in taking time to fix a grammatical error in a sentence that may be cut when you clarify your meaning or tighten your style.

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Can a grammar checker do my editing for me?

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Read once quickly for meaning to see that nothing has been left out. Read a second time, slowly. To proofread a document you know well, read the lines backward or the pages out of order

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I spell-check. Do I still need to proofread?

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cycling

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How can I get better feedback? process of drafting, getting feedback, revising, and getting more feedback

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can I use form letters? form letter boilerplate

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a prewritten fill-in-the-blank letter designed for routine situations language—sentences, paragraphs, even pages—from a previous document that a writer includes in a new document.

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When you get feedback that you understand and agree with, make the change If you get feedback you don't understand, ask for clarification Paraphrase. Ask for more information. Test your inference.

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Revising After Feedback

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If it's an issue of grammatical correctness, check this book. If it's a matter of content, recognize that something about the draft isn't as good as it could be. If the reader thinks a fact is wrong (and you know it's right), show where the fact came from. 4-33

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When you get feedback that you don't agree with

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Participate actively in the organization and the community. Practice writing regularly and in moderation. Learn as many strategies as you can. Talk positively to yourself. Talk about writing to other people.

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How can I overcome writer's block and procrastination?

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Identify the problem

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Set a regular time to write. Develop a ritual for writing. Try freewriting. Write down the thoughts and fears you have as you write. __ that keeps you from writing. Set modest goals and reward yourself for reaching them.

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Shareholder Theory

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Milton Friedman believed overriding purpose of a corporation is to "maximize shareholder wealth". •Sharing internal profits is a waste of shareholders' money and potentially immoral because of stealing from owners. •Business operates in a "free market" and has no obligation to support socialism.

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Need Investment of $1,000,000 •250 shareholders in the room each purchase share for $4,000 •First year, we make $500,000 and return $2,000 to each shareholder •Second year, CEO request $250,000 for better employee benefits and $250,000 for charity donations

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Fisher NewCo

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Theory of organizational management and business ethics that addresses morals and values in managing an organization and how they interact with internal and external parties.

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stakeholder theory

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internal stakeholders external stakeholders

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-employees, manager, owners -suppliers, society, govt., creditors, shareholders, customers

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The World Business Council for Sustainable Development defines Corporate Social Responsibility (CSR) as:

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Business take responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment.

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Howard Bowen (name on exam!!) nike soccer balls...child sweat shops leaders of CSR today, but hated at first FedEx & Orbis

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History of Corporate Social Responsibility Reporting •In 1953, __ published his book, Social Responsibilities of the Businessman, and is largely credited with coining the phrase 'corporate social responsibility' and is perhaps the Father of CSR. •In the 1960s and 1970s, the civil rights movement, consumerism, and environmentalism affected society's expectations of business. •In the 1990s, CSR as an accepted part of the business world with new models including business ethics and corporate citizenship. •In the 2000's, two popular methodologies developed for cause marketing and venture philanthropy.

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1. Power of the Brand: 2. flow of info 3. Globalization 4. Environment:

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Influencers of Corporate Social Responsibility 1. Public perception of the corporation impacts revenue, attracting employees, overall reputation and consumer's purchasing attitudes. 2. Accessible and affordable communication technologies have increased transparency of corporation's actions. 3. Increased wealth and expansion of multinational corporations has led to questions on cultural differences and acceptable behaviors and ethics. 4. Concerns over pollution, waste, natural resource depletion, and climate change

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philanthropic ethical legal economic fedex at top and GM in middle know whole period for exam!!

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Carroll's pyramid of corporate social responsibility: top: be a good corporate citizen; contribute resources to the community; improve quality of life 2nd highest: be __; obligation to do what is right, just and fair; avoid harm 2nd lowest: obey the law; law is society's codification of right & wrong; play by the rules of the game lowest: be profitable; the foundation upon which all others rest

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1. by reconceiving products & markets 2. by redefining productivity in the value chain 3. by enabling local cluster development

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There are 3 key ways that co. can create shared value opportunities: every firm should look at decisions and opportunities through the lens of shared value. this will lead to new approaches that generate greater innovation and growth for co. and also greater benefits for society

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Solution: •The Vscanis a portable ultrasound device that is roughly the size of a large cell phone with a handheld remote and costs $7,900 retail. •The Vscancan be easily carried by physicians but has the added use of being ideal for disaster relief situations as well as in rural regions of the world. •The Vscanallows GE to enter previously unreachable markets while simultaneously creating social value.

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Creating Shared Value -General Electric Value Problem: •Women in developing countries lack accessible equipment to monitor the child during pregnancy. •Ultrasound devices can weigh hundreds of pounds and cost over $200,000.

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Corporate Social Responsibility....know for exam!

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Value: doing good Citizenship, philanthropy, sustainability Discretionary or in response to external pressure Separate from profit maximization Agenda is determined by external reporting and personal preferences Impact limited by corporate footprint and CSR budget ex. Fair Trade Purchasing

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Corporate Shared Value...know for exam! in both cases, compliance with laws and ethical standards and reducing harm from corporate activities are assumed

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Value: economicand societal benefits relative to cost Joint company and community value creation Integral to competing Integral to profit maximization Agenda is company specific and internally generated Realigns the entire company budget Ex: transforming procurement to increase quality and yield...on final review

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Shareholders/Stockholders Board Directors

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C-Corporation Structure Investors who provide capital (money, property, or services) in exchange for a share of ownership. •Ownership/control via per share voting rights Oversee the corporation's affairs and vision; establish rules of governance •Hire and coach the CEO and approve compensation for executive officers •Have final say over major proposals by executive officers •Have a fiduciary responsibility to shareholders via duties of care & loyalty

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Dodge vs. Ford (1919): A corporation's purpose is to create financial gain for its shareholders. Ben & Jerry's on exam? C-corp maximize shareholder?

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History of C-Corps with Social Concerns "A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes."

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Benefit Corporations

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legally obligated to pursue a public benefit and return profits to shareholders. offer: •Clear market differentiation •Broad legal protection to directors and officers •Expanded shareholder rights •Greater access to capital than traditional legal forms •Legislation has since been passed in 27 states, pending in 14 states. In 2010, Maryland became the 1st state to allow organizations to incorporate as __

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Cause Marketing... 1.8 billion dollars target market: younger people (under age of 30) choose product that is helping society b/c we don't have enough money to donate big on our own plus next 2 flash cards

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Charities raised more than $358-million last year from businesses that offered shoppers a chance to give at the checkout counter, according to a study ....Chronicles of Philanthropy (didn't gain or lose anything from business)

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Toys "R" Us

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__ created a campaign with Alex's Lemonade Stand. The eight-week fundraising campaign raised $1.9 million, and public relations generated nearly 1 million viewers across print and social media.

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Subaru

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__ donates $250 for every new vehicle sold or leased. Customers selected one of five charities to receive the donation. The program has donated $25 million in the past five years.

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increased awareness or $ donated or Coleman? pink ribbon generates donations for letting other people use it bad case: lance armstrong

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From Reading: "The Hidden Cost of Cause Marketing" by Angela Eikenberry Explain the benefits to Nonprofits in Cause Marketing •Explain the benefits to Business in Cause Marketing •What are the arguments against Cause Marketingby the author?

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Help charities raise money and public awareness Makes consumers feel good Helps corporations increase sales Increase brand reputation of both the company and charity Business responding to consumers demands for better CSR ...know for exam!

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The Hidden cost of cause marketing: pros:

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Distracts attention from charities providing a greater service to society May cannibalize other forms of cash and volunteer donations Fulfills self interest but discourages thoughtful consideration of real problems and personal decisions Increased competition creating blur between promotions Mask the real ethical, legal and environment problems. Risk for NGO of companies behaving badly Manipulation of core human emotions

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Cons of cause marketing: know for exam!

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Nike's child sweatshop scandal 12-year-old Tariq spends most of a day stitching together balls for the grand sum of 60 cents

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In 1996, Life magazine carried an article about Nike's child labor in Pakistan •BBC documentary on a Cambodian factory where girls worked seven days a week, often 16 hours a day •It costs $5.00 to make the shoes which is sold for $125.00 in the United States •Students nationwide demand universities drop partnership with Nike

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General public benefit:

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A "material, positive impact on society and the environment, taken as a whole, as assessed against a third-party standard, from the business and operations of a Benefit Corporation." 20

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Providing low-income or underserved individuals or communities with beneficial products or services 2.Promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business 3.Preserving the environment 4.Improving human health 5.Promoting the arts, sciences, or advancement of knowledge 6.Increasing the flow of capital to entities with a public benefit purpose 7.The accomplishment of any other particular benefit for society or the environment

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A Benefit Corporation may also adopt a specific public benefit for ''any other particular benefit on society or the environment' such as:

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Directors

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__ are not required to give priority to the interests of any particular person or group (including shareholders) referred to in the statute over any other person or group. Rather, it only requires thoughtful consideration of all stakeholder interests.

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Caution:

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are not required to give priority to the interests of any particular person or group (including shareholders) referred to in the statute over any other person or group. Rather, it only requires thoughtful consideration of all stakeholder interests.

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OSU Scores!! "Another $1,000 for A Kid Again by Barbasol Shaving Cream"

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Other Macro Trends Affecting Nonprofits -Cause Marketing

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Creating shared value ex. co. can by developing clusters... Nestle

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Nespresso coffee is usually sourced from rural farmers in Africa and Latin America who struggle with low productivity, poor quality and environmental degradation. •Nestle built out agricultural, technical, financial, and logistical firms and capabilities in each coffee region, strengthening a cluster of organizations that impact its own ability to thrive. •This included giving farmers access to plant stock, fertilizers and irrigation equipment; helping local farmer co-ops by financing shared wet-milling facilities, supporting an extension program to advise all farmers on growing techniques, and worked with Rainforest Alliance to teach farmers sustainable growing practices.

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Nonprofit Charity universities, hospitals, etc.

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In the United States, a charitable organization is an organization that is organized and operated for purposes that are beneficial to the public interest.

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1. third sector 2. CSOs 3. NGOs 4. NPOs 5. Charities everywhere besides U.S. the govt. pays for charities through corporation tax (55%) so U.S. is called NPOs & charities but where else is NGO

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Nonprofit Charitable Organization by many names...know for exam 1. third" after business and government. •2. Civil Society Organizations, i.e., the formally organized part of civil society. •3. Non-Governmental Organizations (often referring to international aid and development groups that are supported in one country and operate —non-governmentally —in another). •4. An abbreviation for nonprofit organizations. •5. Some people use this term to refer to all nonprofits, though legally and importantly there are lots of nonprofits that are not in any sense charitable (business leagues, social clubs, cooperatives, etc....).

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9.2% 5.5% $1.51 trillion 10%

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Nonprofits accounted for __ of all wages and salaries paid in the United States •Nonprofit Share of GDP was __ •Public charities reported over __ in total revenues and$1.45 trillion in total expenses •The Nonprofit sector employs __ of the US workforce

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•Governed by the Board of Directors •Allowed to make a profit •Required to file annual IRS tax returns

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A for-profit organization exists primarily to generate a profit and a nonprofit organization exist to create "greater good" Similarities to For-Profit Organizations on exam!

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Uniqueness of Non-Profit Organizations...on exam!

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•No equity or shareholders to the corporation -owned by the community •Profits can not be distributed to any person •Can provide a tax deduction to anyone who donates money •Tax exempt on income and corporate property

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economies Individuals give the most percentage 72% ...corporations only give 5%

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billions donated in U.S. ... becoming wealthier so we give more philanthropy follows __

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dollar

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International giving has grown b/c more transparent due to internet & how far you can spread the __

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Social Enterprise

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The blend of Philanthropy, Entrepreneurship and Nonprofit Services

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1.A social enterprise directly addresses an intractable social need. Either through its products and services or through the number of disadvantaged people it employs. 2.A social enterprise is a profitable commercial activity. Whether a significant earned income stream within a nonprofit's mixed revenue portfolio, or a for profit enterprise. Social enterprises deploy innovative business skills, pursue unique sources of capital and leverage a variety of professional talents to alleviate some of society's most pressing poverty-related issues.

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Social Enterprise -Combining Business with Charity Two characteristics distinguish a social enterprise from other types of businesses, nonprofits and government agencies: know for exam!

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Most entrepreneurs Social entrepreneurs

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__ would say that they create social value because they make people's lives better or easier in some way. They would like to achieve financial success AND make social impact. __ are different in that they achieve financial success BY making a social impact. It isn't so much of a choice between the two because they are interlinked and one is not achieved without the other.

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makes brownies for the ice cream (bakery) business can create social good

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Ben & Jerry's & Greyston (who hires anyone who walks in)

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There is huge gap in the capital market for social purpose enterprise. •Finance needs have outgrown grants •Conventional investors are largely disinterested •Business plans or strategic plans are not always easy to convey due to investor unfamiliarity with the concept

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The following are key financing challenges that face social entrepreneurs:

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Impact Investing

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is a developing and dynamic field that is forming to address and overcome these challenges, so that nonprofits and social enterprises can gain access to the financing they need to strengthen and grow their organizations and, consequently, their impact.

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1. grant-giving foundations govt. grants/reimbursements individual donations 1 & 2. wells foundation= social impact investment foundations 2 & 3. corporate partnerships 3. commercial banks/ traditional investors

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social enterprise: mission vs. profit 1. 100% mission motivation...nonprofit 2. social enterprise 3. 100% profit motivation...traditional for-profit

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social impact investments -social first, financial second for social enterprises know for exam!

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investments made into nonprofits, for profit social ventures with the intention to generate measurable social and environmental impact alongside a financial return.

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Challenge: Heavy reliance on ability to grow the endowment ("corpus") to replace 5% payout Goal: Invest endowment at market to replace the 5% that was given away

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Traditional foundation operations: beginning of year 1...5% payout as grant but then poof by end of year for endowment growth beginning of year 1 95% endowment that is invested so end of year same percent

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Support 10 nonprofits/ social enterprises who help 1,000 kids Overall Financial Return: 6% growth

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the 5% and 95% impact: overall financial return:

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Support 100 nonprofits/ social enterprises who help 10,000 kids Overall Financial Return: 5% growth

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vs. 50% social payout returned 50% endowment impact: overall financial return:

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10X the impact by accepting a 1% reduction in overall foundation growth.

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this example achieves...

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marginal

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A foundation who uses its endowment to fund social investments are able to dramatically increase its mission fulfillment and its impact on the community with only a __ compromise on the its growth in investments.

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Foundation Assets $692 Billion Foundation Giving $49 Billion Impact Investing $10.6 Billion

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The Role of Foundations in Social Impact Investments

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20%

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Mission Investing is expected to increase by 19% to $12.7 billion in 2014 and the number of deals in 2014 is expected to increase by 31% from 4,914 to 6,419. From 2012 to 2013 the capital committed grew by 10% and the number of investments grew by __

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•Low interest loans •Equity investments •Quasi-equity investments

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"A New Approach to Funding Social Enterprise" -Harvard Business Review Funding Social Enterprise

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Challenge #1 Legal Structures Challenge #2 Financing Challenge #3 Customer and Beneficiaries Challenge #4 Organizational Culture and Talent Development

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"In Search of the Hybrid Ideal" -Stanford Social Innovation Review 2 questions on exam about reading so read it!

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Goal: Help the Down Syndrome community to raise an additional $30 million annually by 2019

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dsconnex ▪Investment:$500,000 Equity ▪Structure :Joint Venture L3C between the Wells Foundation, Down Syndrome Association of Central Ohio and Ground Work group

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What are the facts? What are the ethical issues? Who are the stakeholders, and what are the potential consequences for the stakeholders? What are the relevant standards? Laws? Principles? Company's Code of Conduct? What are Duties, Rights, Best Practice, Commitments? Maintain your objectivity Visibility - Would I be comfortable if this was on the front page of the newspaper? Standard - Would I be ok if this decision set the standard for all future situations in the future? Legacy - Would I like to be remembered for this decision?

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Framework for Analyzing Malden Mills and Ethical Dilemmas

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what are the rules and laws? take the rules very seriously look for wiggle room use innovation and creativity to find a better solution

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bend the rules

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shareholder theory vs stakeholder theory

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