Business Ethics:

Business Ethics:

A New Style of Management and Investment

Professor David M. Chen [email protected] Graduate Institute of Finance

Fu Jen Catholic University

Purposes

To appreciate the essential of Business Ethics through five main faucets

1. Recognizing socially acceptable business conduct from the global perspectives

2. Embedding good business in treating people nice and fair

3. Reengineering corporate image 4. Enhancing professional ethics

5. Investing in sustainable and socially

responsible corporations

Various global initiatives in areas related to corporate social responsibility (CSR) and their respective implementation guidance form the core of course materials.

Case: Social, Environmental and Related Reporting of Inditex Group, 2006

The course will be held in English

Students are expected to communicate and present case studies or research reports in English (19 in total).

English proficiency is emphasized as another main product of the course.

Content

1. Business Ethics as a Field of Study

 Code of Ethics (Guardsmark-ethics06)

 Code of Conduct (PwC-conduct05)

2. Caux Round Table Principles for Business

 Nissan’s Approach to CSR (Nissan’sApproachCSR)

3. Ethics Resource Center

 National Business Ethics Survey 2005 (NBES-05)

 Critical Elements of Organization Ethical Culture 2006 (ERC- OrgEthicalCuture06)

4. Environmental Management Systems

 ISO 14000

 RoHS

5. Working environment

 SA8000

 The Switcher-Prem Group Experience in India (SwitcherPremIndia-02)

 SA8000: Tool to Improve Quality of Life (ToolImporveQualityLife-02)

6. Business Principles for Countering Bribery

 Transparency International (CorruptionPerceptionsIndex-06, GlobalCorruptionBarometer-06, BribePayersIndex-06)

 (ICC-CombatBribery)

7. NYSE/NASD IPO Advisory Committee

 NYSE Hearing (StockRatingResearchConflict, GuaranteedRepurchase, PriceInfluencing)

 Enron

 SEC report (SEC-Enron-02)

 TIAA CREF testimony (TIAA-CREF-Enron-02)

8. Policy for Managing Conflicts of Interest in Relation to Investment Research

 Morgan Stanley

 Investment research report disclosure requirements (GoldmanSach- Huandian)

9. Dow Jones Sustainable Index

 (NewInvestmentStyle)

 World Resources Institute (ChangingDrivers, Oil&Gas)

10. Socially responsible investing (SRI)

 Ethical Banking

 Microcredit

11. Code of conduct for credit rating agency

 (IOSCOCRA)

Business Ethics as a Field

Case

A newly hired salesman on training

His trainer is used to making up the differences in restaurant and golf bills for procurement agents (common courtesy?).

• Being asked to add the extra expenses to cost of other items since no line on the form for this (yet the numbers don’t add up)*.

• Learned the differences between working directly with the federal government procurement agents and the companies with which his firm subcontracted (relay information).

Regulation

The Procurement Integrity Section of the Office of Federal Procurement Policy Act and the Federal Acquisition

Regulation

• Section 27(a)(2) forbidding agents to “offer, give, or promise to offer or give, directly or indirectly, any money, gratuity, or other thing of value to any procurement officials of such agency; or (3) solicit or obtain, directly or indirectly, from any officer or employee of such agency, prior to the award of a contract any proprietary or source selection information regarding such procurement.”*

Certificate of Procurement Integrity signed by procurement agents

Recognize & deal with complex issues

Public outrage about deception and fraud

Enron, WorldCom, Arthur Andersen, Tyco

• A crisis of confidence and trust: accounting fraud, insider trading, falsifying documents, deceptive advertising, defective products, bribery, & employee theft.

• Integrate business ethics and corporate responsibility into all business decisions.

Business ethics

Deals with questions about whether specific business practices are acceptable.

• Should a salesperson omit facts about a product’s poor safety record?

• Should an accountant report inaccuracy discovered in an audit?

By its nature, the field of business ethics is

controversial and there is no universally accepted approach for resolving its issues.

• The goal is to help one understand and use one’s current values and convictions when making

business decisions so that you think about the effects of those decisions on business and society.*

• Neither to moralize by telling you what is right or wrong on specific situation, nor to prescribe any one philosophy or process as best or most ethical.

• Focus on how organizational ethical decisions are made and on ways companies can improve their ethical conduct.

Definition

Ethics

Tayor

• An inquiry into nature and grounds of morality where the term morality is taken to mean moral judgments, standards and rules of conduct.*

The American Heritage Dictionary

• The study of the general nature of morals and of specific moral choices; moral philosophy; and the rules or standards governing the conduct of the members of a profession.

Distinction from ordinary decisions

• Alderson: Lies in “the point where the accepted rules no longer serve, and the decision maker is faced with the responsibility for weighing values and reaching a judgment in a situation which is not quite the same as before.”

• The amount of emphasis decision makers place on their own values relative to accepted practices within their company.

Business ethics

Comprises the principles and standards that guide behavior in the world of business.

• Profit not realized through misconduct.

• Balance the desires for profits against the needs and desires of society.

• Right or wrong, ethical or unethical, is often determined by investors, employees, customers, interest groups, the legal system, and the community (they are not necessarily “right”, but their judgments influence society’s acceptance).

• Hence, it is important to understand business ethics and recognize ethical issues.

Reasons for studying

Business ethics is not merely an extension of an individual’s own personal ethics.

• An individual’s personal values and moral philosophies are only one factor in the ethical decision-making process.

• Normally a business does not establish rules or policies on personal ethical issues such as sex and the use of alcohol outside the workplace (may even be illegal).

• Only when a person’s preferences or values influence job performance do an individual’s ethics play a major role.

• A high level of personal moral development may not prevent an individual from violating the law in a complicated

organizational context.*

• E.g., there is considerable debate over what constitute antitrust, deceptive advertising, and violation of Foreign Corrupt Practices Act, even experienced lawyers debate the exact meaning.*

• Because organizations are culturally diverse and personal values must be respected, ensuring collective agreement on

organizational ethics is as vital as any other effort.

• Many business ethics decisions are close calls.

• Studying business ethics will help to identify ethical issues when they arise and recognize the approaches available for resolving them.

• Learn more about the ethical decision-making process and about ways to promote ethical behavior within the organization.

• Begin to understand how to cope with conflicts between personal values and those of the organization.

Development

 Before 1960

The 1920s

• The Progressive Movement attempted to provide citizens with a

“living wage,” defined as income sufficient for education, recreation, health, and retirement.*

• Businesses were asked to check unwarranted price increases and any other practices that would hurt a family’s “living wage.”

The 1930s

• Came the New Deal which specifically blamed business for the country’s economic woes.

• Business was asked to work more closely with the government to raise family income.

• Check whether you can rent the movie “The Reds” from any store or buy it.

The 1950s

• The New Deal had evolved into the Fair Deal by Harry S. Truman.

• This program defined such matters as civil rights and

environmental responsibility as ethical issues that businesses had to address.

Overall

• Ethical issues related to business were often discussed within the domain of theology or philosophy.

• Religious leaders raised questions about fair wages, labor practices, and the morality of capitalism.

• Catholic colleges and universities began to offer courses in social ethics.

• Each religion applied its moral concepts not only to business but also to government, politics, the family, personal life, and all other aspects of life.

The 1960s

American society turned to causes.

• An antibusiness attitude developed as many critics attacked the so called military-industrial complex.

• The decay of inner cities and the growth of ecological problems such as pollution and the disposal of toxic and nuclear wastes.

• The rise of consumerism (Consumers’ Bill of Rights): John F. Kennedy delivered a “Special Message on Protecting the Consumer Interest,” which outlined four basic consumer rights: safety, informed, choose, and to be heard.

• Ralph Nader’s Unsafe at Any Speed, 1965, which criticized the auto industry as a whole, and GM in particular, for

putting profit and style ahead of lives and safety.

• Consumer activist also helped secure the passage of several consumer protection laws, such as the Wholesome Meat Act of 1967, the Radiation Control for Health and Safety Act of 1968, the Clean Water Act of 1972,* and the Toxic Substance Act of 1976.

• Lyndon B. Johnson and the Great Society (national

capitalism): the U.S. government’s responsibility was to provide the citizen with some degree of economic stability, equality, and social justice. Activities that could destabilize the economy or discriminate against any class of citizens began to be viewed as unethical and unlawful.

The 1970s

Business ethics began to develop as a field of study.

• Business professors began to teach and write about

corporate social responsibility: organization’s obligation to maximize its positive impact on stakeholders and to minimize its negative impact.

• Philosophers applied ethical theory and philosophical analysis to structure the discipline of business ethics.

• Companies became more concerned with their public images.

• The Nixon administration’s Watergate scandal focused public interest on the importance of ethics in government.

• The Foreign Corrupt Practices Act was passed during Jimmy Carter’s administration: illegal for U.S. businesses to bribe government officials of other countries.*

• A number of major ethical issues had emerged, such as bribery, deceptive advertising, price collusion, product safety, and the environment.

The 1980s

Business ethics acknowledged as a field of study.

• Business ethics organizations grew to include thousands of members.

• Many of leading companies established ethics and social policy committees.

• The Defense Industry Initiative on Business Ethics and Conduct (DII)** was developed to guide corporate support for ethical conduct (18 defense contractors drafted principles in 1986).

Six principles

1. DII supports codes of conduct and their widespread distribution. Must be understandable and provide details on more substantive areas.

2. Member companies (50) are expected to provide ethics training for their employees as well as continuous

support between training periods.

3. Defense contractors must create an open atmosphere in which employees feel comfortable reporting violations without fear of retribution.

4. Companies need to perform extensive internal audits and develop effective internal reporting and voluntary disclosure plans.

5. DII insists that member companies preserve the integrity of the defense industry.

6. Member companies must adopt a philosophy of public accountability.

 Reagan/Bush eras

• Self-regulation, rather than regulation by government, was in the public’s interest.

• Many tariffs and trade barriers were lifted, and

business merged and divested within an increasingly global atmosphere.

• Corporations that once were nationally based began operating internationally and found themselves mired in value structures where accepted rules of business behavior no longer applied.

The 1990s

Bill Clinton continued to support self-regulation and free trade.

• Unprecedented government action to deal with health- related social issues such as teenage smoking (restricting cigarette advertising, banning vending machine sales, and ending the use of cigarette logos in connection with sports events).

• SEC Chairman Arthur Levitt unsuccessfully pushed for many reforms that could have prevented the accounting ethics scandals.

Federal Sentencing Guidelines for Organizations*

• FSGO approved by Congress in Nov. 91.

• Based on the six principles of the DII.

• Codifying into law incentives to reward organizations for taking action to prevent misconduct, such as developing effective internal legal and ethical compliance programs.

• Mitigate penalties for businesses that strive to root out misconduct and establish high ethical and legal standards.

• If a company lacks an effective ethical compliance program and its employees violate the law, it can incur severe

penalties (carrot-and-stick).

• Focus on firms taking action to prevent and detect business misconduct in cooperation with government regulation.*

• A mechanical approach using legislative logic will not suffice to avert serious penalties. Must develop corporate value, enforces its code of ethics, and strive to prevent misconduct.

The twenty-first century

Falsifying financial reports and reaping questionable benefits had become part of the culture of many

companies.

• Dennis Kozlowski, former CEO of Tyco, was indicted on 38 counts of misappropriating $170m of Tyco funds and netting

$430m from improper sales of stock.

– Allegedly used the funds to purchase many personal luxuries, including a $15m vintage yacht and a $3.9m Renoir painting and to throw a $2m party for his wife’s birthday.

• Arthur Andersen was convicted of obstructing justice after shredding documents related to its role as Enron’s auditor.

– Also faced questions surrounding its audits of other companies that were charged with employing

questionable accounting practices, including Halliburton, WorldCom, Global Crossing, Dynegy, Qwest, and

Sunbeam.

Congress passed the Sarbanes-Oxley Act

• in 2002, the most far-reaching change in organizational control and accounting regulations since the Securities and Exchange Act of 1934.

• Made securities fraud a criminal offense and stiffened penalties for corporate fraud.

• Created an accounting oversight board that requires corporations to establish codes of ethics for financial

reporting and to develop greater transparency in financial reports to investors and other interested parties.

• Requires top executives to sign off on financial reports (risk fines and long jail sentences if misrepresented).

• Requires executives to disclose stock sales immediately and prohibits companies from giving loans to top managers.

Current trend

• From legally based ethical initiatives to cultural or

integrity-based initiatives that make ethics a part of core organizational values.*

• NYSE requires all member companies to have code of ethics.

• Many firms now have ethics officers, and some firms, including UPS, Raytheon, and Baxter International, take ethics seriously enough to have their ethic officers report directly to senior management or boards of directors.

• The growth of the Ethic Officer Association (EOA) to 850 members, representing 420 companies, highlights the increasing importance of this position (considering launching an ethics certification program).

Global development

• Businesses are working more closely together to establish standards of acceptable behavior.

• Some companies will not do business with

organizations that do not support and abide by these standards.

• The Caux Round Table is a group of businesses, political leaders, and concerned interest groups that desire responsible behavior in the global community.

Benefits

Building an ethical reputation among employees, customers, and the general public pays off.

Increased efficiency in daily operation, greater employee commitment, increased investor

willingness to entrust funds, improved customer trust and satisfaction, and better financial performance.*

• Many believe a particular course of action is simply the right thing to do as a responsible member of society (feeling good is also a good business).

Employee commitment

• Comes from employees who believe their future is tied to that of the organization and their willingness to make personal

sacrifices for it.

• Safe work environment, competitive salaries, and the fulfillment of all contractual obligations toward employees.

• Work-family programs and stock ownership plans to community service.*

• Productivity and teamwork: share a common vision of trust

within and between departments; make individuals more willing to rely and act on the decisions and actions of their coworkers.

• Trusting relationships (honesty and respect) contribute to greater decision-making efficiencies.

Investor loyalty

• Social responsible mutual funds and asset management firms.

• Investors recognize that an ethical climate provides a

foundation for efficiency, productivity, and profits. Negative publicity, lawsuits, and fines can lower stock prices, diminish customer loyalty, and threaten a company’s long-term

viability.*

Customer satisfaction

• Almost 60% of people focus on social responsibility ahead of brand reputation or financial factors when forming

impressions of companies (boycott the company).

• May avoid the products of companies that are perceived as treating their employees unfairly (sweatshop and abuses in subcontracting, SA 8000 industry code of conduct).

• When an organization has a strong ethical

environment, it usually focuses on the core value of placing customers’ interest first.

• Companies convicted of misconduct (failure to

act responsibly toward various stakeholders) 　

experience a significantly lower return on assets

and on sales.

Ethics Resource Center, ERC (reading)

www.ethics.org

National Business Ethics Survey, NBES

• "Ethics and compliance programs can and do make a difference.

However, their impact is related to the culture in which they are situated." 2005 NBES Summary

Misconduct: any behavior that violates the law or organizational ethics standards.

• 21% observed abusive or intimidating behavior towards employees.

• 19% observed lying to employees, customers, vendors, or the public.

• 18% observed a situation that places employee interests over organizational interests.

• 16% observed violations of safety regulations.

• 16% observed misreporting of actual time worked.

• 12% observed discrimination on the basis of race, color, gender, age or similar categories.

• 11% observed stealing or theft.

• 9% observed sexual harassment.

The six elements of a formal ethics and compliance program are based upon suggestion by the FSGO

1.Written standards of conduct 2.Training on ethics

3.Mechanisms to seek ethics advice or information 4.Means to report misconduct anonymously

5.Discipline of employees who violate ethical standards

6.Evaluation of employees performance based on ethical conduct

 The NBES defines risk factors as:

1. Employee's exposure to circumstances that invite misconduct.

2. Employee's recognition of those situations as misconduct.

3. Pressure to compromise the standards of the organization.

4. Preparedness of employees to respond to these situations.

 www.workingvalues.com

 www.complianceweek.com

 www.ama-assn.org

 www.aacsb.edu

Every Guardsmark crest (reading)

is emblazoned with our company core values: Truth, Courage, & Judgment.

Our business success and ethical commitment are indivisible.

• Guardsmark was founded on the pillars of quality, excellence, diversity, opportunity, and doing the right thing; from day one, we wanted to work with individuals who had intellect, work ethic, and honesty.

• Every single member of our organization—from the security officer to the corporate executive—is committed to demonstrating our values and principles at all times.

• Through our Code of Ethics, the people of Guardsmark pledge to work always “to strengthen our weaknesses and build on our strengths” and to “lead by example.”

The Guardsmark Code of Ethics

• All Guardsmark employees subscribe to our comprehensive Code of Ethics, which is a product of top-down commitment and bottom-up involvement. First developed in 1980, this living document is

revised annually by the entire workforce.

• The Code sets impeccable standards of behavior for employee conduct across:

» Employee relations

» Our commitment to excellence

» Professionalism in the industry

» Employee wellness

» Vendor relations

» Community and government relations

» Industry commitment

» Information technology

Ensuring understanding by employees, visitors and vendors

• Our code appears in our employment application, where it must be signed by every applicant. It is always available to our

employees as a stand-alone document and promoted in:

» Our orientation handbook

» Periodic educational publications

» Employee manuals

» Placards in all offices

• To make the principles of this important document accessible to each Guardsmark team member, Guardsmark maintains an

ethics committee and a dedicated ethics officer who can be reached through a toll-free number. We take every ethics

concern or issue seriously and provide assistance about applying principles to any given situation.

Understand our ethical foundation

• A true understanding of Guardsmark's commitment can only come from reviewing our Code of Ethics in its entirety.

• Guardsmark exceeds the requirements of the Sarbanes-Oxley Act of 2002 that mandates the disclosure by public

companies of whether they have adopted written codes of ethics to deter wrongdoing and to promote honest and ethical conduct.

• Although a private company such as Guardsmark is not subject to the requirements of this bill, the organization

publicly releases its Code of Ethics, which was established in 1980 and is rewritten annually with input from its employees and applies to all team members, without exception.

• www.guardsmark.com

PricewaterhouseCoopers (reading)

is one of the world’s pre-eminent professional services organisations.

As professional advisers we help our clients solve complex business problems and aim to enhance their ability to build value, manage risk and improve

performance.

• As business advisors we play a significant role in the operation of the world’s capital markets.

• We take pride in the fact that our services add value by helping to improve transparency, trust and consistency of business

processes.

• In order to succeed, we must grow and develop, both as individuals and as a business.

• Our core values of Excellence, Teamwork and Leadership help us to achieve this growth.

• As a result, we also have a Code of Conduct for all PwC people and firms.

• This Code is based on our values and it takes them to the next level - demonstrating our values in

action.

• The Code also provides a frame of reference for

PwC firms to establish more specific supplements to address territorial issues.

• www.pwc.com

Ethics Statements

One of BellSouth's greatest assets is our reputation.

One of the key factors that contribute to our reputation and good name is our long-standing tradition of ethics -- a tradition which has built solid trust between us and our customers, our employees, our shareholders, and our

communities.

As we work to maximize shareholder value, we

will not waver in maintaining our tradition of

ethics.

• BellSouth's ethical culture is rooted in our values. It is these values that guide our actions and relationships with each other, with our customers, and with our investors.

• While our values describe who we are and what we are about, it is our actions that make these values

meaningful. Every action we take shapes the ethical character of BellSouth. That character is at the heart of our reputation and ultimately sets us apart in the

marketplace.

• We understand each individual employee's actions contribute to the trust we have earned. We offer our employees a variety of resources to help them make ethical decisions and maintain the highest level of integrity.

• BellSouth's Office of Ethics & Compliance is

available to answer questions concerning ethics, or take reports of possible ethical violations.

• Employees and other concerned individuals can contact Ethics by completing this online form or by calling the Ethicsline at 1-800-664-4231.

• Both these methods are available 24 hours a day, 7 days a week You may remain anonymous if you prefer, but this sometimes limits the investigation due to insufficient information.

• www.ethics.bellsouth.com

Texas Instruments

Employees placed their personal imprint on the ethics of the company, more than 60 years ago.

They chose to conduct themselves to the highest standards of personal integrity, and they demanded the same of others.

• Today, those principles and values still permeate all of TI's actions and decisions.

• As TI grew, management recognized a need to formalize and communicate company standards.

• In 1961, TI published its first written code of ethics, a booklet titled "Ethics in the Business of TI."

• Though it has been revised several times to reflect

changes in the business environment, the basic message contained in that first booklet has never changed, nor has TI's emphasis on maintaining a track record of ethics and integrity.

• About 20 years ago, an increasing number of difficult

issues, challenges and close calls in modern business were recognized, but clear choices of action did not always

exist.

• Employees and their business associates needed to better understand TI's expectations and where they could go for help if they had a question or a concern.

• TI believes maintaining the highest ethical standards

requires a partnership between employees and employers.

• The employer proactively supports employees by

communicating values and giving individual guidance, while empowered employees participate actively in problem-solving.

• In 1987, TI decided to actively support employees by

establishing a TI Ethics Office and appointing a TI Ethics Director.

• The TI Ethics Office has three primary functions:

» Ensure that business policies and practices continue to be aligned with ethical principles;

» Clearly communicate ethical expectations; &

» Provide multiple channels for feedback through which people can ask questions, voice concerns and seek

resolution to ethical issues.

• A reputation and track record for ethics and integrity is vital for establishing the trust that is the basis for all successful business relationships. All people associated with TI—

employees, customers, suppliers, governments and communities—need to understand and appreciate the importance of these principles.

• TI has strong documented requirements for ethical business practices:

» TI Standard Policies and Procedures

» The TI Commitment

» "The Values and Ethics of TI" booklet

• The direction is clear, and the message is firmly and credibly supported by our highest levels of management and by our Board of Directors.

• www.ti.com

HCA announced the development

of the Ethics, Compliance and Corporate Responsibility Department in Oct. 1997.

Alan Yuspeh was named Senior Vice President for Ethics, Compliance and Corporate Responsibility.

• The department oversees the development and implementation of a comprehensive corporate Ethics and Compliance Program.

1.Articulating standards of compliance and ethical conduct through a Code of Conduct and a series of company Policies and Procedures.

2.Creating awareness of these standards among everyone in the company through high quality ethics training, compliance training, and other ongoing communication efforts.

3. Providing a means to report exceptions (i.e., possible

misconduct). We maintain an Ethics Line (1-800-455-1996) to receive reports from anyone who is aware of a violation of our Code of Conduct or Policies and Procedures. This line is

answered at all times.

4. Monitoring and auditing performance in areas of compliance risk to ensure that established policies and procedures are being

followed and are effective.

5. Establishing organizational supports, including necessary committees, responsible executives and facility ethics and compliance officers, for this entire effort.

6. Overseeing implementation of and adherence to a Corporate Integrity Agreement.*

7. And undertaking other efforts, such as clinical ethics and pastoral care services.

hcahealthcare.com

Starbucks: It’s the way we do business

Contributing positively to our communities and environment is so important

that it’s a guiding principle of our mission statement.

• We jointly fulfill this commitment with partners (employees), at all levels of the company, by getting involved together to help build stronger communities and conserve natural

resources.

In our communities Starbucks has many community building programs

• that help us be good neighbors and contribute positively to the communities where our partners (employees) and

customers live, work and play.

• We encourage and reward volunteerism and participation in organizations that are important to our partners, including local schools, literacy programs, walk-a-thons and Earth Day activities.

Environmental Affairs

• Starbucks integrates policies and programs throughout all aspects of operations to minimize our environmental impact.

• From promoting conservation in coffee growing countries to

recycling, Starbucks is committed to contributing positively to the environment.

Supplier Diversity

• By working with qualified diverse suppliers, Starbucks has regularly met and exceeded its goals for purchases with women and minority- owned suppliers. Embracing diversity is our foundation for providing a world-class supplier program that supports our Mission Statement.

Mission Statement

Establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our

uncompromising principles while we grow. Six guiding principles:

1.Provide a great work environment and treat each other with respect and dignity.

2.Embrace diversity as an essential component in the way we do business.

3.Apply the highest standards of excellence to the purchasing, roasting and fresh delivery of our coffee.

4.Develop enthusiastically satisfied customers all of the time.

5.Contribute positively to our communities and our environment.

6.Recognize that profitability is essential to our future success.

Committed to a role of environmental leadership in all facets of our business.

1.Understanding of environmental issues and sharing information with our partners.

2.Developing innovative and flexible solutions to bring about change.

3.Striving to buy, sell and use environmentally friendly products.

4.Recognizing that fiscal responsibility is essential to our environmental future.

5.Instilling environmental responsibility as a corporate value.

6.Measuring and monitoring our progress for each project.

7.Encouraging all partners to share in our mission.

www.starbucks.com

The Caux Round Table Business Principles of Ethics

Introduction

CRT principles are rooted in two basic ethical ideals: kyosei and human dignity.

The Japanese concept of kyosei means

• living & working together for the common good enabling cooperation and mutual prosperity to coexist with healthy and fair competition.

• “Human dignity” refers to the sacredness or value of each person as an end, not simply as a mean to the fulfillment of others' purposes or even majority prescription.

• The document owes a substantial debt to The

Minnesota Principles, a statement of business behavior developed by the Minnesota Center for Corporate

Responsibility. The Center hosted and chaired the drafting committee, which included Japanese,

European, and United States representatives.

• CRT principles offer a foundation for dialogue and action for business leaders worldwide and affirm the necessity for moral values in business decision-making.

Without moral values, stable business relationships and a sustainable world community are impossible.

CRT Business Principles of Ethics

Responsibilities Economic &

social impact

Business behavior Respect for rules

Support for multilateral trade Respect for the

environment Avoidance of

illicit operations Customers Employees Owner/investors

Suppliers Competitors

Communities

Principle 1. The responsibilities

Beyond shareholders toward stakeholders

• The value of a business to society is the wealth and employment it creates and the marketable products and services it provides to consumers at a reasonable price commensurate with quality.

• To create such value, a business must maintain its own economic health and viability, but survival is not a

sufficient goal.

• Businesses have a role to play in improving the lives of all their customers, employees, and shareholders by sharing with them the wealth they have created.

• Suppliers and competitors as well should expect businesses to honor their obligations in a spirit of honesty and fairness.

• As responsible citizens of local, national, regional, and

global communities in which they operate, businesses share a part in shaping the future of those communities.

Principle 2. The economic and social impact

Toward innovation, justice, and world community

• Businesses established in foreign countries to develop, produce, or sell should also contribute to the social advancement of those countries by creating productive employment and helping to raise the purchasing power of their citizen.

• Businesses also should contribute to human rights, education, welfare, and vitalization of the countries in which they operate.

• Businesses should contribute to economic and social development not only in the countries in which they operate, but also in the world community at large, through effective and prudent use of resources, free and fair competition, and emphasis upon innovation in technology, production methods, marketing, and

communications.

Principle 3. Business behavior

Beyond the letter of law toward a spirit of trust

• Accepting the legitimacy of trade secrets, businesses should recognize that sincerity, candor, truthfulness, the keeping of promises, and transparency contribute not only to their own

credibility and stability but also to the smoothness and efficiency of business transactions, particularly on the international level.

Principle 4. Respect for rules

To avoid trade friction

• and to promote free trade, equal conditions for competition, and fair and equitable treatment for all participants, business should respect

international and domestic rules.

• In addition, they should recognize that some behavior, although legal, may still have adverse consequences.

Principle 5. Support for multilateral trade

Should support the multilateral trade systems

• of the GATT/World Trade Organization and similar international agreements.

• They should cooperate in efforts to promote the progressive and

judicious liberalization of trade, and to relax those domestic measures that unreasonably hinder global commerce, while giving due respect to national policy objectives.

Principle 6. Respect for the environment

Should protect and, where possible,

• improve the environment, promote sustainable development, and prevent the wasteful use of natural resources.

Principle 7. Avoidance of illicit operations

Should not participate in or condone bribery,

• money laundering, or other corrupt practices; indeed, should seek cooperation with others to eliminate them.

• Should not trade in arms or other materials used for terrorist activities, drug traffic, or other organized crime.

Principle 8. Customers

We believe in treating all customers with dignity

• irrespective of whether they purchase our products and services directly from us or otherwise acquire them in the market.

We therefore have a responsibility to

• provide our customers with the highest quality products and services consistent with their requirements;

• treat our customers fairly in all aspects of our business transactions, including a high level of service and remedies for their dissatisfaction;

• make every effort to ensure that the health and safety of our customers, as well as the quality of their environment, will be sustained or enhanced by our products and services;

• assure respect for human dignity in products offered, marketing, and advertising; and

• respect the dignity of the culture of our customers.

Principle 9. Employees

We believe in the dignity of every employee

• and in taking employee interest seriously.

We therefore have a responsibility to

• provide jobs and compensation that improve workers’ living conditions;

• provide working conditions that respect each employee’s health and dignity;

• be honest in communications with employees and open in sharing information, limited only by legal and competitive restrains;

• listen to and, where possible, act on employee suggestions, ideas, requests, and complains;

• engage in good faith negotiations when conflict arises;

• avoid discriminatory practices and guarantee equal treatment and opportunity in areas such as gender, age, race, and religion;

• promote in the business itself the employment of differently abled people in places of work where they can be genuinely useful;

• protect employees from avoidable injury and illness in the workplace;

• encourage and assist employees in developing relevant and transferable skills and knowledge; and

• be sensitive to serious unemployment problems frequently associated with business decisions, and work with governments, employee

groups, other agencies and each other in addressing these dislocations.

Principle 10. Owners/investors

We believe in honoring the trust

• our investors place in us.

We therefore have a responsibility to

• apply professional and diligent management in order to secure a fair and competitive return on our owners’ investment;

• conserve, protect, and increase the owners/investors’ assets;

• disclose relevant information to owners/investors subject only to legal requirements and competitive constrains; and

• respect owners/investors’ requests, suggestions, complains, and formal resolutions.

Principle 11. Suppliers

Our relationship with suppliers

• and subcontractors must be based on mutual respect.

We therefore have a responsibility to

• seek fairness and truthfulness in all of our activities, including pricing, licensing, and rights to sell;

• ensure that our business activities are free from coercion and unnecessary litigation;

• foster long-term stability in the supplier relationship in return for value, quality, competitiveness, and reliability;

• share information with suppliers and integrate them into our planning processes;

• pay suppliers on time and in accordance with agreed terms of trade; and

• seek, encourage, and prefer suppliers and subcontractors whose employment practices respect human dignity.

Principle 12. Competitors

We believe that fair economic competition

• is one of the basic requirement for increasing the wealth of nations and, ultimately, for making possible the just distribution of goods and

services.

We therefore have a responsibility to

• foster open markets for trade and investments;

• promote competitive behavior and demonstrates mutual respect among competitors;

• refrain from either seeking or participating in questionable payments of favors to secure competitive advantages;

• respect both tangible and intellectual property rights; and

• refuse to acquire commercial information by dishonest or unethical means, such as industrial espionage.

Principle 13. Communities

We believe that as global corporate citizens,

• we can contribute to such forces of reform and human rights as are at work in the communities in which we operate.

We therefore have a responsibility to

• respect human rights and democratic institutions, and promote them wherever practicable;

• recognize government’s legitimate obligation to the society at large and support public policies and practices that promote human development through harmonious relations between business and other segments of society;

• collaborate with those forces in the community dedicated to raising standards of health, education, workplace safety, and economic well-being;

• promote and stimulate sustainable development and play a leading role in preserving and enhancing the physical

environment and conserving the earth’s resources;

• support peace, security, diversity, and social integration;

• respect the integrity of local culture; and

• be a good corporate citizen through charitable donations,

educational and cultural contributions, and employee participation in community and civic affairs.

ISO 14000

What is it?

International Organization for Standardization (ISO)

ISO 9000 series

• International standards dealing with quality management systems.

ISO 14000 series

• Environmental management systems.

• Finalized in September 1996.

• The key to a successful ISO 14001 EMS is having documented procedures that are implemented, maintained, monitored,

reviewed, and corrected.

• Specifies requirements for establishing an environmental policy, determining environmental aspects & impacts of

products/activities/services, planning environmental objectives &

measurable targets, implementation & operation of programs to meet objectives & targets, checking & corrective action, and management review.

Why is the concern?

May become a contractual requirement of customers in both the U.S. and the EC.

• It is a continuation of the ISO-9000, may eventually become a requirement for obtaining ISO-9001 recertification.

• It is a logical next step because it is very similar to ISO-9001 and the principles of TQM.

• The U.S. EPA may provide incentives under its Common Sense Initiative (CSI) programs to benefit companies certified.

What is the benefit?

Help remain competitive

• Competitors, customers and suppliers are seeking registration.

• Identify areas for reduction in energy and other resource consumption, reduce environmental liability & risk, help to maintain consistent compliance with legislative &

regulatory requirements, benefit from regulatory

incentives, prevent pollution & reduce waste, response to pressure from customers & shareholders, improve

community goodwill, profit in the market for green products, response to insurance company pressure, and demonstrate commitment to high quality.

EPA Guidance

In Enforcement Settlements

EMS as injunctive relief

to return violators to compliance

• and minimize or eliminate the potential for repeat

violations by addressing the root causes of noncompliance.

• Where EPA determines that the root cause of a defendant’s or respondent’s violations is the absence of a systematic approach to identifying, understanding, and managing the regulated entity’s compliance with applicable

environmental requirements.

• Where specific elements or requirements common to EMSs are independently required by law or regulation, such elements/

requirements should be sought as injunctive relief whether or not a compliance-focused EMS, per se, is sought.

 Regulatory requirements

• Clean Water Act, Clean Air Act, Resource Conservation and Recovery Act.

• 12 Elements of Compliance-Focused Environmental Management System (CFEMS):

1. An environmental policy with an express statement of

management’s intent to provide adequate EMS personnel and resources.

2. Processes and monitoring to ensure sustained compliance.

3. Written targets, objectives, and action plans, for each

organizational subunit, to achieve and maintain compliance with all environmental requirements.

4. A mandatory pollution prevention program.

5. A program for ongoing community education and involvement in the environmental aspects of the defendants’ operations.

6. Procedures for investigating and promptly correcting violations and their root causes.

7. Ongoing evaluation of facility compliance, including periodic compliance audits by independent 3rd party auditors.

 EMSs as Supplemental Environmental Projects (SEPs)

 for small businesses and state and local governments

• EMSs that meet the SEP Policy criteria are eligible for penalty mitigation credit as “Other Types of Projects” without advance approval.

• The SEP Policy, and federal law, require SEPs to be

“supplemental” projects that the violators are “not otherwise legally required to perform.”

• The SEP Policy’s “environmentally beneficial projects” and

“public benefits” SEP criteria can generally be satisfied when the terms of settlement require the violators to implement

their EMSs for at least one full EMS cycle, identify and report performance results on two or more EMS targets and

objectives promoting beyond-compliance results with public benefits, ensure that issues and priorities of concern to the communities in which the facilities are located are identified and considered, and submit to EPA SEP Completion Reports describing what the violators have done to develop,

implement, and act on their EMSs.

• SEP credit should be extended only to EMS expenditures that produce significant benefits accruing primarily to the public.

• EPA personnel have the discretion to calculate a settlement penalty that reflects relevant actions by violators. With

respect to EMSs, the range of possible scenarios where a violator’s actions may be considered in adjusting a penalty downward from the preliminary penalty amount include where a company discovers a violation through an existing EMS and corrects the violation prior to EPA’s discovery or the company lacks a preexisting EMS but puts one into

place before concluding settlement negotiations.

• It may also be appropriate to consider whether and to what extent a violator has implemented an EMS in assessing the degree of willfulness and/or negligence.

RoHS

European Directive

The Restrictions of the use of certain Hazardous Substances in electrical and electronic equipment

ban the putting on the EU market

• of new Electrical and Electronic Equipment (EEE) containing more than the permitted levels (maximum concentration values) of lead, cadmium, mercury,

hexavalent chromium and both polybrominated biphenyl (PBB, 多溴化聯苯 ) and polybrominated diphenyl ether (PBDE, 多溴聯苯醚 ) flame retardants from 1 July 2006.

• There are a number of exempted applications for these

substances (and an exemption for spare parts for the repair of equipment put on the market before 1 July 2006; the regulations do not apply to the re-use (capacity expansion or update) of

equipment that was put on the market before the same date).

• Producers must be able to demonstrate compliance by submitting technical documentation or other information to the enforcement authority on request and retain such documentation for a period of four years after the EEE is placed on the market.

• Responsibility for the enforcement will lay with the Secretary of State for Trade & Industry, who has appointed the National

Weights and Measures Laboratory (NWML), an executive agency of the Department of Trade and Industry, to act on his behalf.

Definition

Maximum concentration value

• A maximum concentration value of up to 0.1% by weight in homogeneous materials for lead, mercury, hexavalent chromium, PBB and PBDE and of up to 0.01% by weight in homogenous materials for cadmium will be permitted in the manufacture of new EEE. These values were

established through the adoption of a Commission Decision on 18 August 2005.

Homogeneous material

• A material that cannot be mechanically disjointed into different materials.

Scope

Categories of EEE covered

1. Large household appliances 2. Small household appliances

3. IT and telecommunication equipment 4. Consumer equipment

5. Lighting equipment

6. Electric and electronic tools

7. Toys, leisure and sports equipment 8. Automatic dispensers ( 自動 ??)

• Reflect eight of the ten categories in Annex 1 of the Waste Electrical and Electronic Equipment (WEEE) Directive.

• Apply both to electric light bulbs and to household luminaries.

• The two categories of the WEEE Directive not included are Medical Devices and Monitoring & Control Instruments.

Article 6 of the RoHS Directive places an obligation on the European Commission to present proposals for including EEE falling within those two categories within the scope of the RoHS Directive, once scientific and technical evidence has demonstrated that such proposals are feasible.

• The criteria for assessing “grey area” products (those whose inclusion is in doubt) have been discussed in the Technical Adaptation Committee (TAC) of Member States and is reflected in the Commission’s non-legally binding

Frequently Asked Questions document on the WEEE and RoHS Directives

Outside the scope

• Intended for a specific national security and/or military

purpose. This exemption would not apply to any equipment that is not designed exclusively for these purposes.

• Products where electricity is not the main power source:

Many products contain electrical and electronic components, either for additional functionality or as peripheral parts, e.g., a combustion engine with an electronic ignition.

• Products where the electrical or electronic components are not needed to fulfil the primary function: particularly toys and novelty items contain an electrical or electronic element that gives added value to the product. Often there are similar products on the market fulfilling the same function, but without these components.

• Electrical and electronic equipment that is part of another type of equipment: Examples of such equipment would be lighting or entertainment equipment for use in vehicles, trains or aircraft.

The elements of a system that are not discernible EEE products in their own right or that do not have a direct function away from the installation are excluded from the scope of the Regulations.

• Batteries: includes batteries that are permanently fixed into the product, as well as disposable batteries. The text of the draft Directive on Batteries and Accumulators & Waste Batteries and Accumulators is currently being finalised, with an expectation that it will be adopted shortly and come into effect in 2008.

Exemptions

• Large scale stationary industrial tools

1.Mercury in compact fluorescent lamps not exceeding 5 mg per lamp.