3. How to deal with economic crime- Addiopizzo

Question 1

Ethics in Business

Answer 1

• Ethics in Business consists of all of the below mentioned
• Situational and individual factors
• Psychological mechanisms affecting ethical choices
• Drivers = Economic/ Relational/ Ethical
• How to prevent and repair ethical misbehavior

Question 2

Organizational Ethical misbehavior

Answer 2

• Sources = 1. Moral Motivation = Failure of Motivation/ 2. Moral Awareness = Awareness Failure/ 3. Moral Imagination = Failure of Imagination/ 4. Stakeholder failure = Separation Biases
• Misbehavior on individual level leads to = Worse person/ Layoff/ Jail
• Misbehavior on organizational level leads to = Legitimacy threats/ Lack of support/ Bankruptcy

Question 3

How should have Guidant addressed the legitimacy threat?- Short term vs long term strategies

Answer 3

• Short-term = Symbolic
• Long-term = Substantive
• Symbolic actions = Denial/ Apologizes/ Justification/ Pro-social claim/ Symbolic alignment (Long-term)
• Substantive actions = Substantive alignment/ Stakeholder engagement

Question 4

Legitimacy management- Symbolic

Answer 4

• Short-term orientation
• Lack of external control
• Organizational complexity
• Low ethical expectations
• High information asymmetry
• Low stakeholder commitment

Question 5

Legitimacy management- Substantive

Answer 5

• Long-term orientation
• High external control
• Relational values
• High ethical expectations
• Low information asymmetry
• High stakeholder commitment

Question 6

Corruption perception index by country in comparison

Answer 6

• Portugal good score (29) but but high exports to Angola (bad score, 167)
• Italy known for its chronic corruption (51)
• Germany has a good score (9) but Russia (bad score, 137) has a strong influence on Germany
• New Zealand rank 1 in the world = High ethical standards/ Low connection to other countries/ High institutional intervention

Question 7

Corruption notes

Answer 7

• Africa and South America with the highest corruption index (geographically)
• Customer fraud, cybercrime, and asset misappropriation are the most frequent crimes

Question 8

Corruption: bribery and extortion

Answer 8

• Corruption is the abuse of entrusted power for private gain
• It hurts everyone who depends on the integrity of people in a position of authority / power
• Bribery (Bestechung)/ Extorsion (Erpressung)

Question 9

Dealing with corrupt environments: Bribery

Answer 9

• Bribery = An action in which someone gives cash, gift, benefit, emolument (Vorzüge), privilege to alter the behaviors of the recipients / Aim = Obtain an unjust advantage by someone in position of trust/ Unjust judgement, Vote, some type behaviors
• Those who receive a bribe take advantage of their position of power for personal benefit and act against the duties of their position
• Offering a bribe is always illicit (illegal) = Because it involves inducing someone to perform a disloyal and unjust act
• Accepting a bribe is always morally illicit (illegal) = Action of disloyalty/ Action of injustice as recipients are not entitled to the remuneration/ Unfair competition/ Spreading of culture of corruption

Question 10

How to recognize bribery

Answer 10

• Intention of the gift-giver = Is the intention to gain an unjust advantage?
• Impact on the receiver = Is the evaluation unfairly influenced by the gift? Is the gift causing unfair competition?
• Perception of others = How would competitors and other players interpret the gift?

Question 11

Dealing with corrupt environments: Extorsion

Answer 11

• Extorsion takes place when someone (the extortionist) demands money or some other gift to which he or she is not entitled
• Happens through intimidation or undue exercise of authority
• It comes from those with decision-making power over something that affects the victim of the extortion
• Extorsion is always illicit = Disloyalty and injustice/ Injustice to the person from whom money is extorted/ Injustice to third parties/ Give raise to a scandal/ Encourage other to do likewise/ Reducing the sense of solidarity in society
• Under certain conditions it may be licit = No functional alternatives/ One truly behaves with rectitude (Geradlinigkeit)/ Third parties are not involved/ There is a moral reason/ Moral scandal is avoided

Question 12

How to fight against corrupt environments

Answer 12

• Top down approaches
• Professional and moral competencies
• Organization policies and code of conduct
• Run away
• Regulation
• External institutional support = E.G. Policie

Question 13

Why was the mafia so powerful?

Answer 13

• Protection Legitimacy
• Replace the government (security of people) Legitimacy
• Acceptable/ deeply embedded in Sicilian culture Legitimacy
• Legitimized Relations
• Personal relations Relations
• Dangerous / violent Violence
• Market control (6% Sicilian GDP) Economic power
• Political and academic connections Economic power
• Entrepreneurial Economic power

Question 14

Addiopizzo- Lack of institutional support

Answer 14

• Distorted economic incentives (Economic power)
• Distorted relational incentives (relations)
• Fasil to see ethical issues (Legitimacy)
• Violence (mobbing)

Question 15

What are the critical stakeholders hooked by Addiopizzo?

Answer 15

• Shopkeeper = “Stakeholder involved”?!
• Addipizzo itself = Most important stakeholder because it brings all together
• Sicilian population
• Activists
• Police
• Government
• Media
• Tourists
• Schools
• Other businesses

Question 16

Stakeholder management vs stakeholder engagement

Answer 16

• Stakeholder management = Case of polluter dilemma/ Firm at the center/ Passive stakeholder influence/ Achievement of org. goals
• Stakeholder engagement = Stakeholder mobilization/ At Addiopizzo the society issue is in the center/ Proactively select and mobilize stakeholder to solve the problem

Question 17

Addiopizzo- How they mobilized the stakeholders

Answer 17

• Stickers = Symbolic Action/ Message = Lack of dignity/ Target = Sicilian Population
• Letters = Symbolic Action/ Message = Responsibility, Dignity, Duty, Freedom/ Target = Consumers
• Website = Substantive/ Message = Help/ Target = Other Businesses
• Certificate = Substantive/ Message = Reliability for customers, Dignity of business owners, Security through police, Solidarity for customers, Fight against Mafia, bravery/ Made clear the pay-off
• Mobilize multiple stakeholders = Combine symbolic & substantive actions
• 1. Values = E.G. Dignity, Fairness/ 2. Economic substantive + Cultural symbolic/ 3. Change
• Addiopizzo combined = Economic support/ Protection/ Ethical consumption/ Cultural change

Question 18

Strategic transparency

Answer 18

• 1. Very specific points of discussion
• 2. Simplicity vs. Transparency
• 3. Show the payoff
• Must identify the overlapping values of the Social Change Actor and Stakeholders

Question 19

Social movement

Answer 19

• Social movement = Group of not well-organized people or organizations/ Striving toward a common goal/ Related to human, society, or social change
• Social movements influence on corporations = 1. Influence on Regulators give Corporations Legislation/ 2. Influence on Customers increases Revenues for corporations/ 3. Influence on Media give Corporations Legitimacy
• Social movements and CSR = Circle of Cultural fit, Opportunities, Resources