Video Transcript: Lecture 11

Hello. So here we are in module number 11. It's moving right along. We are  talking about ethics today, which is corporate governance, corporate ethics,  social responsibility, and this is such a big topic right now, especially, you know,  certainly there has been some problems with corporate accounting and and  businesses taking advantage, which has led to legislation which is trying to  protect things so ethics and businesses is huge, but let's not forget about the  importance of social responsibility. And before we even really get into the  lecture, I want to bring something up, and I want to show you that apple. I know  I'm using Apple a lot. I know I am, but they're a good example that Apple actually has some really good corporate social responsibility desires, and you can see  that they want to be carbon neutral for every product by 2030 heres their 21  progress report. So I'm not going to do a lot here. I'm just going to show you a  couple of these things and and show them to you. I think I showed them to you  before, but I'm going to show them to you again, because I think it's a good  remember. Good memory, reminder that that Apple is working very hard on their  corporate social responsibility initiatives, as are many companies. Google is is  completely carbon neutral as well, and has been since 2004 so as we get into  material, let's talk about whether we think that a business, businesses should be doing good for the environment and and what their role is as a business in this  World. So what are their responsibilities? So some organizations that that the  book talks about, that also does really, really good work in this area, is Tom's  Shoes. Tom's gives away a lot of shoes. A bomba sock. I don't know if you've  seen those commercials, but they talk about the greatest sock never sold. So for every bombas socket you buy, they give one away. So that's pretty amazing, the work that they're doing. So I talked about these corporate scandals recently.  Bernie Madoff passed away. Bernie Madoff is known for one of his scandals. It  was a whoops, sorry about that. It was a Ponzi scheme. Enron is one Boeing  their supermax liner. Was a corporate scandal. Because they didn't pay attention to all their FAA rules. Bernie Madoff, who I just talked about, who was spending  150 years in prison. He passed away recently, and then Adelphi had some  securities violations and theft as well. And they're not the only ones. Martha  Stewart was involved in a corporate scandal as well. She spent some time in  jail, and she has recently kind of remade herself. So these corporate scandals  have really led to stronger accounting practices, stronger laws and stronger  board diligence and making sure that this stuff does not happen again. There  was the source SoV Oakley act that that had a bunch of reforms, and that was  signed by President Bush, and you can see some of those right there an  oversight board which I talked about standards that exist for for auditors, senior  executives must take Personal responsibility for financial statements being  accurate, enhanced reporting securities analysts, CEOs must sign a firm's tax  return. The SEC has expanded authority. There are criminal penalties that exist,  and SEC can freeze Large transactions if fraud is expected. So those are some 

of the changes that have been put in place. And certainly, there's other laws as  well that have been put in place as a result of some of these unfair and wrong  accounting practices. So when we think about ethics and corporate social  responsibility, there is a lot of a lot of things that go into it. There's a code of  conduct. Certainly, code of conduct is around how you operate the book shows  Facebook. So because the book shows Facebook instead of using another  company, I think that that's a good one to show this kind of gives you an  example right here, what it looks like, conflicts of interest, harassment, financial  integrity and responsibility. Obviously you can't retaliate, training, protection, etc. There's rules around confidential information and those kind of things as well.  So you will see that businesses, businesses are really responding to having  rules in place to make sure that their employees and themselves are operating  ethically. Part of this is corporate social responsibility, which is the social  contract that exists between businesses and society. Sometimes you're going to  hear this referred to as the triple bottom line, and we, I will show you a graphic  on that. Sorry. So this is a this is an example. Let me see if I can make it big. I'm sorry. This is an example of the triple bottom line in practice, where you talk  about people as a resource, obviously profit, and then obviously the planet. If  you look at this term in the middle, sustainability, what being sustainable means  is basically just keeping something going and setting it up for the future. So  there are finite resources out there. So if you're a paper company and you take  a tree out of the ground, or cut down a tree, then planting another tree would be  an example of sustainable practice. So here is a one, one picture, one graphic,  and I want to bring up another that kind of talks about how everything works  together again. Remember that these things are. Well, I didn't do what I wanted  to do. These things are tied together. So just give me second to find that  graphic, and you can see this graphic again. It illustrates that profitability the  planet and people aspect. So in the United States, certainly there has been a  push for social equality, diversity initiatives, so that that would be an example of  the people side. Obviously, you have to make a profit for your company. So  that's an example of the profit side, and then from the planet side, I already  showed you Apple sustainable practices. I've probably done that a couple times  in this class, but that's an example of carbon neutrality and how it's important to  take care of the planet as well. So as we, as we think about this concept of the  triple bottom line, we, we companies, can't just be concerned with one and the  exclusion the others, because now consumers are demanding movement in the  other areas. Obviously there have been protests and boycotts against  companies who do not, do not partake in the social aspect or the environmental  aspect aspect in the name of profits. So that's a little graphic for the triple bottom line. What? Remember that it's you can also hear it called the three P's, which is profit, planet and people. And we will talk about it a little more, but let's talk  about some corporate governance first. So there is board of directors, and the 

board of directors is one of the key stakeholders of the corporation. And what,  what they do is they, they basically are the board that checks the CEO. So you  might have different board roles related to that, where they might act as an  advisor, they might be an activist, they might be human resource manager. They have to monitor CEO, the accountant lawyer. Now there's a lot of questions and  whether this is ethical or not, I'm leaving that up to you to decide, but there's  often a lot of questions around employee around CEO behavior and CEO  compensation. So a lot of people are saying, well, CEOs are making, you know,  you have somebody that's working at the lower end. A lower end of a job is  making $10 an hour. You have a CEO making 200 million a year. How is that  fair? How is that right? One of the things I want to point out is that generally,  board of directors are made up of other CEOs and board of directors. So when it comes to CEO compensation, there's a vested interest in that board of directors  to make sure they're paying their CEOs well, because obviously it drives up their con their their competition as well, in their company. So a lot of people look at  these board of directors and they're like, man, well, you know, I mean, they have a job to do, but are they doing it ethically? And that's a legitimate question, and  that's a legitimate concern. So I just want to, I just want to, I'm not going to pick  Apple, because I always pick apple. So I'm just going to randomly pick another  company, and we're going to look at the board of directors for it. What do you  what do you think let's go with? Let's go with Coca Cola. Hopefully it's easy to  find there. Hopefully it's easy to find their board of directors. So let's, let's, let's  see if we can find him. Oh, as we talk about sustainability and that triple bottom  line, remember a you? I mean, you can see right here that they're talking about  sustainable business. So certainly they are firmly committed toward it, so let's  but that's not what we're here to do. We are here to look at the leadership, and  specifically the board of directors, and oh, look, there they all are. So let's see  what they do. So he is the CEO of Coca Cola. He is on the board. You can see  here, Chief and Chief Executive Officer and director of Allen and company, head of the European portfolio operations for Blackstone, chairman of this group,  chairman of that group, Chairman and CEO of new ventures, President and  CEO of the Chicago committee. Anyway, you see CEO of, managing partner of  we, we family offices, Chief Executive Officer of compute Software Inc,  Chairman and Chief, Chief Executive Officer of Gen enterprises. I think you're  seeing a theme. So if you have a bunch of CEOs on a board and they're trying  to set the compensation, which is one of their role of one of their roles, set the  compensation of the CEO, if the CEO they put in place is making more money  than what does that mean for them if they move to a different company as well?  Something to think about. So let's see some there are some perks also. So  there are some CEOs that do not take a salary, but they have perks. So they'll  get stock. Certain CEOs will get certain perks, like like Ben and Jerry's CEO will  receive a free ice cream for life. I'm sure the CEO of Delta Airlines, been Ed 

Bastian. I'm sure he has some perks related to his position. Maybe it's free  travel for life. Maybe it's free club access, whatever it may be. Certainly, different CEOs have different compensation packages and perks that the board sets. So  there are some things that happen in corporate governance related takeovers.  This chart talks about it. Maybe you've heard the term a golden parachute,  which is financial package if somebody loses their job, there is a friendly  takeovers. That's called a when White Knight, and then there's a corporate  raider who just takes over a firm by purchasing a stock. And if it's hostile, then  that's something that happens that the board doesn't want that happen. There's  a term called poison pill. And then there's something called Green mail, where  an unfriendly firm forces a target company to repurchase a large block of stock  at a premium to thwart a takeover attempt. So there are all these strategies that  are in place all these things that happen, and I want to leave it up to you to  determine if you think those are ethical practices or not, and what those  practices mean and what the implications of them are. So going back to CSR,  remember we talked about social accountability. We showed that people profits  and planet, so the three P's, think about, you know, the kind of impact that a  company is going and there used to be a model where people would say that a  corporation only has one purpose, and that's the share to serve their  shareholders. Make as much money as possible for their shareholders or the  company owners. And now that that thought is shifting, and it's more about  stakeholders, and what good are they doing for society? So a lot of people are  taking their purchasing power, and they're only purchasing from companies that  are doing good for society and then eschewing those that are not. So an  example in my life is if you look at what is happening in Niger Delta region, I  don't want to name the company, but certainly Niger Delta, if you look that up,  you will see there are certain there's a certain company that had some unethical  practice in that region that they have since tried to clean up, and they're very  transparent about it on their website. But that is a company that I generally do  not purchase from, if given a choice in different options. So corporate  responsibility, you know, you got to think about the responsibilities. And we  talked about, there's the ever increasing responsibilities, but there's economic  responsibilities. Obviously they have some philanthropic responsibilities, which  Apple is a good example of this, because Apple did not really, under Steve Jobs, did not really have a lot of philanthropic effort, a little bit, but not a lot, and that's  certainly increased since Steve Jobs. There's legal responsibilities, and then  there's ethical responsibilities, which is the COVID governance indexes, ethics  and all these kind of work together to provide to provide a framework for a  company to operate ethically, to give back to the stakeholders, not Just the  shareholders, but the stakeholders of that company. So there are ways that  these are measured, and that's for corporate social performance. So there's a  lot of metrics out there. The UN certainly has some indexes and things like that, 

which measure how much good somebody's doing, whether they are doing good for the planet and those kind of things. So there are corporate measures out  there to measure what brands are doing good and what brands are not. So just  be aware of that. I want to, I want to end there. I just want to ask one question.  You know, as we, as we think about company and ethics and things like that,  think about COVID 19 and the impact and the nature of work, and we can talk  about COVID 19 from a strategy perspective of all the different things that we've  learned over the previous 10 chapters, certainly, how businesses had to adapt,  how they had to change, how you can't put your strategy in place and stick to it  no matter what. Sometimes you're going to have to modify it. You have to be  adaptable. Those kind of things we've talked about all that. But one of the things that I want you to think about is, what is the responsibility of a business, what is  ethical to maintaining its business rhythm, but then also taking care of their  employees. So if, if somebody gets COVID and comes to work, then does  should the business, in the interest of the welfare of the employees, shut down  the entire business and do a deep cleaning? Or should? Should it keep  operating as normal? These are some of that gray area, some of those ethical  dilemmas that companies have to wrestle with, and they have to wrestle with  quite often. So with that, we we have completed our Pen Ultimate, Pen Ultimate  lecture here, and we will be going into strategic leadership, which is slightly  different from strategic management, and we'll just be talking a little bit about  some of the concepts related to that next. So with that, I just want to thank you  for your time and attention. Thus far, you have gone through a lot of material.  You've certainly read a lot out of this textbook and out of other books. In fact, I  think, Oh, it doesn't give you number. Oh, yeah. So I am looking at page and  looking at page 331 right now. So you've certainly read a lot and done a done a  lot of work, and I just want to applaud you for doing that. So as we move into  this last lecture, I just want to close us in prayer, Heavenly Father, we almost  have done it, and we're here at the end and one more lecture to go. And I just  want to thank you for this class, and I want to thank you for their attention and all the work that they are put in, and may it bear fruit, Lord, so as we go about our  day, as we go about our evening, as we go about our morning, I pray that we will stay focused on you, Lord. Thank you so much, and thank you for your salvation in Jesus name Amen. Thank you so much, and I will see you back here for our  final lecture