Corporate Social

Responsibility and
Business Ethics
UBGA 107: Week 12

Todays Agenda

Administrative Matters (return exams)

Only scantron is returned to you. Blue books are

available to be viewed in Professor Gerlachs
office only.
Grade distribution adjustment?
Attendance sheet to be returned to me during
class

Corporate Social Responsibility and Business

Ethics

What are CSR and Ethics?

How are ethical questions analyzed

Review

Corporate Governance

The Facts

WorldComs meteoritic rise

The Scandal

U.S. v. Germany (Japan)

the ways in which rights and responsibilities are
shared between the various corporate participants
(In the US, especially the management and the
shareholders).

Financial Manipulations
WorldComs incentive to commit fraud
Arthur Andersens incentive to look away

Key: Misalignment of Incentives

Definitions

What is Corporate Social Responsibility?

Corporate-wide activities carried out to

improve a companys image vis--vis various
stakeholder groups
Examples

Corporate Philanthropy, Environmental Policies,

Worker Rights Policies, etc.

What is business ethics?

Refers to actions by individuals and/or groups

within organizations
Examples

Embezzlement, Sexual Harassment

Discussion Question #1

Discuss the reading in the context of

the corporate social responsibility of
McWane and Acipco, providing some
specific examples
Corporate Philanthropy
Environmental Policies
Workers Rights Policies

Corporate Philanthropy

Examples from Reading

$10 million donation to the science museum, the

McWane Center
Millions to Alabamas major cultural institutions,
including the Birmingham Civil Rights Institute
McWane Scholarships
$2 million to renovate 56-foot statute of Vulcan

What is weird?

These gifts were made by the McWane family,

not McWane corporation

Environmental Policies

McWanes environmental records are abysmal

Persistent defiance of laws protecting workers and
surrounding communities from toxic pollution

Discharged arsenic, copper and thallium into the air

(Alabama)
Workers exposed to exceptionally high levels of silica
Failure to provide respirator, causing severe kidney failure
due to arsenic poisoning
8.5 mil-long slick in the Delaware River
Flushing thousands of gallons of polluted water through
the storm drain (Birmingham)

Repeated failure to stop production to repair

broken/ineffective pollution control
Equipment tampered with so as not to shut down
automatically when pollution controls fail

Workers Rights Policies

A dangerous business
Workers who protest dangerous work conditions bull-eyed for
termination
Supervisors refused to wait a few hours for federal safety inspectors
to arrive before restarting a conveyor belt that had crushed a man to
death
Line workers who fail to make daily quotas get disciplinary actions
Discipline used to suppress union unrest and injury claims
Supervisors urged to discipline injured workers (to punish workers
for reporting injuries)
Safety directors request for more safety equipment and assistant
ignored.
Blatant refusal to adhere to federal safety rules on weight-lifting
limits
Company officials lie to OSHA regarding safety issues (elevator shaft
example)
OSHA: respirator program totally ineffective
404 OSHA violations 1995-2003

Contract with Acipco

The only time you can get a job at Acipco is if

somebody retires or dies.
Workers take yoga glasses in a modern health
club with the latest in weight-training
equipment and a spring-loaded floor for
aerobics
Workers get cash bonuses if they keep their
cholesterol down
Spent millions of dollars to install airconditioned booths in the hottest parts of the
plant

McWane vs. Acipco

McWane Business Model

Profit at the expense of worker

safety/environmental cleanliness.

Cost savings from ignoring safety/environmental

standards much greater than fines

Acipco Business Model

If workers had a genuine stake they would
work harder and smarter and produce more
Instituted profit-sharing for all employees

Ethical Choices

The Three Models of

Ethical Analyses

Utilitarian

Rights

Comparing benefits and costs

Action is ethical if net benefits exceed net costs
But difficult to measure some human and social costs.
Majority may disregard rights of minority
Respecting entitlements
Basic Human rights are respected
Difficult to balance conflicting rights

Justice

Distributing fair shares

Benefits and costs are fairly distributed
Difficult to measure benefits and costs. Lack of agreement
on fair shares

Discussion Question #2

Provide Robert Restor, a former

plant manager at McWane, with
advice on the ethical choices he
could have made while at McWane
based on the three ethical models
discussed in class

Mr. Resters Ethical

Dilemma

Over 24 years, Mr. Rester became numb to

the constant body count, brushed hands and
feet, disfiguring lacerations, burns from
molten iron, amputations.
His sole focus, was finding a fresh body to
keep production rolling.
For a McWane manager, taking time for safety
or environmental problem holds few
attractions. It means slowing production to
fix equipment. It means more safety training,
less time to make pipe.
The McWane dictum: TIME = PIPE, PIPE =
MONEY

Advice to Mr. Rester

Utilitarian

Rights

Justice

News Updates

U.S. Brings New Set of Charges Against Pipe

Manufacturer
May 26, 2004
M cWane Inc., a major pipe maker and one of the nation's
most persistent violators of workplace safety and
environmental laws, faced a new round of criminal charges
last night after a federal grand jury in the company's
hometown, Birmingham, Ala., issued a 25-count indictment
alleging illegal dumping and other environmental crimes.
The indictment charges that senior McWane managers,
including Charles Robison, the corporation's vice president
for environmental affairs, conspired to dump huge
quantities of polluted wastewater into a creek that runs
through McWane's oldest foundry, the McWane Cast Iron
Pipe Company, on the outskirts of downtown Birmingham.

News Update

Plea Agreement Is Reached in Pipe Case

May 27, 2004

A day after announcing a second indictment against McWane Inc.,
federal prosecutors disclosed Wednesday that a longtime McWane
manager had agreed to cooperate with their investigation into
environmental and safety violations at McWane, one of the nation's
largest manufacturers of cast iron water and sewer pipe.
The manager, Donald Harbin, 58, has agreed to plead guilty to a
single felony, conspiracy to violate environmental laws at the
McWane foundry in Birmingham, Ala., where prosecutors charged
this week that huge quantities of polluted wastewater had been
illegally and routinely dumped into a creek.
Mr. Harbin is the first McWane employee to strike a plea
agreement with prosecutors and the first to acknowledge criminal
conduct. The maximum sentence is five years in prison and a
$250,000 fine , but Mr. Harbin is almost certain to receive a much
lighter sentence for agreeing to cooperate. In all, 10 McWane
managers have been charged with crimes in Alabama and New
Jersey.

Key Take Away

Sometimes, there are truly difficult ethical questions:

From a pro-life perspective, if a pregnant mothers life is in

danger, and you have to sacrifice the unborn childs life, or
condemn the mother to certain death, whose life do you choose?

But many of the so-called ethical questions in the

business world arise from the choice between profit and
socially desirable policy considerations.

Here, the ethical choice is not inherently difficult to discern,

but often financial considerations push ethically desirable
concerns to the background Here, the cost of compliance >
cost of fines
But the McWane Acipco contrast highlights the fact that
ethical decisions do not necessarily result in financial ruin.
In Mr. Resters example, the opposing forces were his selfinterest and his conscience.