Business Ethics: A New Style of Management and Investment

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Business EthicsA New Style of Managementand
Investment

• Professor David M. Chen
• 003924_at_mail.fju.edu.tw
• Graduate Institute of Finance
• Fu Jen Catholic University
• Spring 2009

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Purposes

• To appreciate the essential of Business Ethics
  through five main faucets
• Recognizing socially acceptable business conduct
  from the global perspectives
• Embedding good business in treating people nice
  and fair
• Reengineering corporate image
• Enhancing professional ethics
• Investing in sustainable and socially responsible
  corporations

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• 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.

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Content

• Business Ethics as a Field of Study
• Code of Ethics (Guardsmark-ethics06)
• Code of Conduct (PwC-conduct05)
• Caux Round Table Principles for Business
• Nissans Approach to CSR (NissansApproachCSR)
• Ethics Resource Center
• National Business Ethics Survey 2005 (NBES-05)
• Critical Elements of Organization Ethical Culture
  2006 (ERC-OrgEthicalCuture06)
• Environmental Management Systems
• ISO 14000
• RoHS

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• Working environment
• SA8000
• The Switcher-Prem Group Experience in India
  (SwitcherPremIndia-02)
• SA8000 Tool to Improve Quality of Life
  (ToolImporveQualityLife-02)
• Business Principles for Countering Bribery
• Transparency International (CorruptionPerceptionsI
  ndex-06, GlobalCorruptionBarometer-06,
  BribePayersIndex-06)
• (ICC-CombatBribery)
• NYSE/NASD IPO Advisory Committee
• NYSE Hearing (StockRatingResearchConflict,
  GuaranteedRepurchase, PriceInfluencing)
• Enron
• SEC report (SEC-Enron-02)
• TIAA CREF testimony (TIAA-CREF-Enron-02)

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• Policy for Managing Conflicts of Interest in
  Relation to Investment Research
• Morgan Stanley
• Investment research report disclosure
  requirements (GoldmanSach-Huandian)
• Dow Jones Sustainable Index
• (NewInvestmentStyle)
• World Resources Institute (ChangingDrivers,
  OilGas)
• Socially responsible investing (SRI)
• Ethical Banking
• Microcredit
• Code of conduct for credit rating agency
• (IOSCOCRA)

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

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• 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

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• 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 products
  poor safety record?
• Should an accountant report inaccuracy discovered
  in an audit?

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• 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 ones
  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.

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• 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.

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

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• Reasons for studying
• Business ethics is not merely an extension of an
  individuals own personal ethics.
• An individuals 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 persons preferences or values
  influence job performance do an individuals
  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.

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• 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.

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• 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 familys living wage.
• The 1930s
• Came the New Deal which specifically blamed
  business for the countrys 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.

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• 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.
  

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• 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.

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• Ralph Naders 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. governments 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.

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• The 1970s
• Business ethics began to develop as a field of
  study.
• Business professors began to teach and write
  about corporate social responsibility
  organizations 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 administrations Watergate scandal
  focused public interest on the importance of
  ethics in government.

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• The Foreign Corrupt Practices Act was passed
  during Jimmy Carters 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).

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• Six principles
• DII supports codes of conduct and their
  widespread distribution. Must be understandable
  and provide details on more substantive areas.
• Member companies (50) are expected to provide
  ethics training for their employees as well as
  continuous support between training periods.
• Defense contractors must create an open
  atmosphere in which employees feel comfortable
  reporting violations without fear of retribution.
• Companies need to perform extensive internal
  audits and develop effective internal reporting
  and voluntary disclosure plans.

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• DII insists that member companies preserve the
  integrity of the defense industry.
• Member companies must adopt a philosophy of
  public accountability.
• Reagan/Bush eras
• Self-regulation, rather than regulation by
  government, was in the publics 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.

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• 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.

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• 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.

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• 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 wifes birthday.
• Arthur Andersen was convicted of obstructing
  justice after shredding documents related to its
  role as Enrons auditor.

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• 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.

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• 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.

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• 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.

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• 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).

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• 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.

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• 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
  companys 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).

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• 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.

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• 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.

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• 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
• Written standards of conduct
• Training on ethics
• Mechanisms to seek ethics advice or information
• Means to report misconduct anonymously
• Discipline of employees who violate ethical
  standards
• Evaluation of employees performance based on
  ethical conduct 

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• The NBES defines risk factors as
• Employee's exposure to circumstances that invite
  misconduct.
• Employee's recognition of those situations as
  misconduct.
• Pressure to compromise the standards of the
  organization.
• Preparedness of employees to respond to these
  situations.
• www.workingvalues.com
• www.complianceweek.com
• www.ama-assn.org
• www.aacsb.edu

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• 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 organizationfrom the
  security officer to the corporate executiveis
  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.

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• 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

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• 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.

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• 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

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• PricewaterhouseCoopers (reading)
• is one of the worlds 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 worlds capital markets.
• We take pride in the fact that our services add
  value by helping to improve transparency, trust
  and consistency of business processes.

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• 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

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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.

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• 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. 

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• 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

45

• 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."

46

• 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.

47

• 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.

48

• 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
  TIemployees, customers, suppliers, governments
  and communitiesneed 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

49

• 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.
• Articulating standards of compliance and ethical
  conduct through a Code of Conduct and a series of
  company Policies and Procedures.
• Creating awareness of these standards among
  everyone in the company through high quality
  ethics training, compliance training, and other
  ongoing communication efforts.

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• 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.
• Monitoring and auditing performance in areas of
  compliance risk to ensure that established
  policies and procedures are being followed and
  are effective.
• Establishing organizational supports, including
  necessary committees, responsible executives and
  facility ethics and compliance officers, for this
  entire effort.
• Overseeing implementation of and adherence to a
  Corporate Integrity Agreement.
• And undertaking other efforts, such as clinical
  ethics and pastoral care services.
• hcahealthcare.com

51

• Starbucks Its the way we do business
• Contributing positively to our communities and
  environment is so important
• that its 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.

52

• 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.

53

• 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
• Provide a great work environment and treat each
  other with respect and dignity.
• Embrace diversity as an essential component in
  the way we do business.
• Apply the highest standards of excellence to the
  purchasing, roasting and fresh delivery of our
  coffee.
• Develop enthusiastically satisfied customers all
  of the time.
• Contribute positively to our communities and our
  environment.
• Recognize that profitability is essential to our
  future success.

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• Committed to a role of environmental leadership
  in all facets of our business.
• Understanding of environmental issues and sharing
  information with our partners.
• Developing innovative and flexible solutions to
  bring about change.
• Striving to buy, sell and use environmentally
  friendly products.
• Recognizing that fiscal responsibility is
  essential to our environmental future.
• Instilling environmental responsibility as a
  corporate value.
• Measuring and monitoring our progress for each
  project.
• Encouraging all partners to share in our mission.
• www.starbucks.com

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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.

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• 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. 

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Competitors
Responsibilities
Suppliers
Communities
Economic social impact
Owner/investors
CRT Business Principles of Ethics
Business behavior
Employees
Respect for rules
Customers
Respect for the environment
Support for multilateral trade
Avoidance of illicit operations
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• 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.

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• 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.

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• 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.

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• 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.

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• 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.

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• 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