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Gain access to valuable instructional and training resources for ethical leadership through the Center for Ethical Organizational Cultures. Through the Center, you can find information on current research projects supported by the Harbert College of Business as well as information on the Student Center for the Public Trust (SCPT), a student organization supported by the center.
Shoplifting is “spreading faster than COVID” according to Bob Nardelli, former Chrysler and Home Depot CEO. Shoplifting is at epidemic levels with retail losses skyrocketing over the past 2 years with losses of $94.5 billion in 2021 and over $100 billion in 2022. The impact on earnings is decidedly noticed by companies such as Target which is estimated to have lost $600 million in 2022 to theft.
Although some of the theft can be tied to a belief in entitlement, there is also significant involvement from organized crime. Retailers such as Kroger, Best Buy, CVS, and Walgreens have voiced concerns over shoplifting. CVS has even closed some stores in locations where losses were too large to continue to operate. Walmart’s CEO indicates the situation is so dire that many stores may have to close if the situation does not dramatically improve.
Shoplifters are generally one of two groups comprised of individuals or organized crime. Many see the opportunity in shoplifting due to the low risk of being caught in many cities coupled with little or no punishment. In California, stealing merchandise worth $950 or less is a misdemeanor with authorities often not conducting investigations. It is estimated that only 1 in 150 shoplifters are caught. While the law imposes fines and jail time for first-time offenders, there is usually no prosecution. Organized groups have gone into CVS and Walgreens and emptied the shelves with no consequences.
There are many reasons people shoplift, and, from an ethical perspective, the level of opportunity to do so factors in with self-service stores providing an easy way to take advantage for personal gain. It is estimated that 7-10% of the population are ethical egoists. Ethical egoism is a normative philosophy that individuals act in their own self-interest. Individuals will take advantage if the perceived risk of getting caught is low and potential benefits are seen as high.
Another motivation can be tied to the drug epidemic in this country. Drug addiction and mental health challenges contribute to shoplifting. Some shoplift for the ‘high’ or excitement of taking a risk and obtaining products for status or to provide additional income.
In addition, some people may see business as profitable, and greedy and don’t see any harm in taking advantage of the opportunity to steal and don’t perceive any harm will occur.
An important question is, why has there been a dramatic increase in shoplifting? Possibly unemployment coupled with economic uncertainty in conjunction with the end of government stimulus payments has contributed to shoplifting. Are we moving in the direction of an entitlement culture? Entitlement involves the feeling that a person has the right to something. It is a feeling of deserving privileges or special treatment without personal commitment or sacrifice.
How devastating is the impact of major shoplifting? Retailers, particularly large, publicly traded companies historically have been responsible for taking a stakeholder approach to operating their business. This means that they are concerned with not only their shareholders but also with customers, employees, suppliers, communities, etc. The deluge of shoplifting has created critical waves of disruption impacting all major stakeholders. When a store closes, employees lose their jobs, customers no longer have access to the store, tax revenue that would go to the community is lost, suppliers lose business and shareholders are impacted, with a reduction in overall sales potential.
The final question is: What is the solution to our current shoplifting epidemic? To start, let’s look at a company that has not had the problems of other major retailers. Costco has some unique characteristics that have helped it stay more protected from shoplifting. For instance, to shop in a Costco, you must have a membership or be entering to apply for membership. This means that several employees are at the front of the store to screen those coming in and to check carts and receipts of those leaving.
There are some tactics that are used for shoplifting prevention: create a layout that places more vulnerable items further back in the store and place more expensive items in controlled or locked cases, have security cameras, mirrors, and signage that deters shoplifting, and train your employees to protect themselves and to be able to identify suspicious behavior.
The stakes are high if we cannot come up with an effective solution to this current epidemic. Employees and customers do not want to be at risk in these situations. It’s already difficult enough to recruit employees in today’s environment. Store responses have been to limit hours and close some locations. The solution will take a consortium of concerned individuals including law enforcement officials, to retail associations such as The National Retail Federation, along with large national retailers who are willing to step up and champion some of the best practices and new thinking on how to deal with this challenge.
Also, there needs to be more academic research to determine why individuals shoplift and how retailers can protect their stores against shoplifting while maintaining a safe environment for all key stakeholders. Maybe some stores in some of the highest-risk locations will need to rethink their business model and offer virtual stores through apps and AI with pickup at store locations. There is so much at stake, now is the time to rethink some fundamentals of brick-and-mortar retailing.
This article can be used to discuss ethics (Chapter 2: Business Ethics and Social Responsibility).
This article was developed with the support of Kelsey Reddick for and under the direction of O.C. Ferrell, Linda Ferrell, and Geoff Hirt.
Alice Hearing, "Ex–Home Depot CEO Warns of Retail Theft ‘Epidemic’ Ahead of Christmas Rush," Fortune, December 9, 2022, https://fortune.com/2022/12/09/home-depot-ceo-bob-nardelli-retail-theft-epidemic-christmas-walmart/
Andrew McMunn, "Walmart May Close Stores, Increase Prices Due to Theft, CEO Says," WSAZ, December 8, 2022, https://www.wsaz.com/2022/12/09/walmart-may-close-stores-increase-prices-due-theft-ceo-says/
National Retail Federation, "NRF Reports Retail Shrink Nearly a $100B Problem," September 14, 2022, https://nrf.com/media-center/press-releases/nrf-reports-retail-shrink-nearly-100b-problem
On Tuesday, April 4th, the Student Center for the Public Trust was eager to commence our 2023 Guest Speaker Spotlight event series by welcoming Danny Smith. As Corporate Environmental Compliance Manager at Carnival Corporation, Mr. Smith directs a diverse range of environmental compliance matters for a fleet of nearly 100 cruise ships across Carnival’s 9 international brands. As a professional lawyer and engineer, he provided vast regulatory, compliance, risk, and policy insight. Mr. Smith discussed the challenges of multi-jurisdictional compliance requirements across worldwide operations, along with essential components for success.
Dr. O.C. Ferrell and Mr. James T. Pursell
The Center was established in 2008 by Dr. Achilles Armenakis, the founding Director, with support from the late Mr. James T. Pursell, Sr. of Sylacauga, AL, to address ethical conduct in business. The Center is dedicated to producing in-demand graduates and generating knowledge that drives ethical business thought and practice. Preparing ethical leaders and supporting ethical organizational cultures provides a foundation for success in any organization.
Dr. O.C. Ferrell became Director of the Center in the summer of 2017. Dr. Ferrell continues to establish contacts with individuals and organizations and create programs that will contribute to the Center’s mission. Faculty, students, and external constituents are involved in advancing the activities of the Center.
To address ethical conduct in business, the Center for Ethical Organizational Cultures is dedicated to producing in-demand graduates and generating knowledge that drives ethical business thought and practice. Organizational cultures provide the foundation for ethical decision making. While individual integrity is important, each profession has its own set of ethical risks and standards of behavior required for success. Ethical leaders are necessary to implement and maintain shared values that create an ethical organizational culture.
To meet this need, the Center focuses on providing resources and activities that support ethical conduct in any type of organization. Faculty are provided resources to support the teaching of ethics in academic programs, as well as research and scholarship. Students are provided educational opportunities and activities to advance their ethical leadership skills. Businesses are provided access to resources that aid leaders in advancing organizational ethical cultures.
The Student Center for the Public Trust has 48 chapters in 24 states and consists of students that show dedication to ethical leadership. This organization focuses on the importance of not only ethical leadership but also the necessity for accountability, integrity, and trust across all avenues of business. Student chapters have resources, mentors, and networking opportunities available through the National Association of State Boards of Accountancy (NASBA) Center for the Public Trust.
All students in its Harbert College of Business are required to complete a course in business ethics and pass an independently administered ethical leadership certification prior to graduation. The certification is conducted by the National Association of State Board of Accountancy’s (NASBA) Center for the Public Trust.
These ethics requirements are designed to better prepare young professionals to handle the ethical dilemmas they will face in their careers. According to Alfonzo Alexander, Ethics and Diversity Officer of NASBA and President of the Center for the Public Trust, Auburn is the first university in the country to require its business school graduates to complete ethical leadership training and attain independent certification. Since 1908, NASBA has served as a forum for the nation’s 55 State Boards of Accountancy, which administer the Uniform Certified Public Accountant (CPA) Examination, license more than 650,000 CPAs and regulate the practice of public accountancy in the United States.
“Ethical conduct has always been a key component of the accounting profession — in fact, it is a core competency for all business leaders,” reported Alexander. “The development of this new curriculum and certification serves the growing need to educate our young professionals to meet the critical demand for ethical conduct in today’s challenging business environment.”
The course and curriculum were developed by a panel of leading business ethics professors from across the country, including Drs. O.C. and Linda Ferrell from Auburn’s Harbert College of Business as well as NASBA’s Alexander. The online curriculum, which has been developed for all functional areas of business, is available for any university to adopt through NASBA’s Center for the Public Trust.
According to O.C. Ferrell, James T. Pursell, Sr. Eminent Scholar in Ethics and Director of the Center for Ethical Organizational Cultures at Auburn University, instilling ethical conduct is critical to shaping organizational culture in today’s highly competitive business environment.
“Students need to understand their ethical responsibilities in an organizational culture and how to develop the skills necessary to motivate and manage those who report to them later in their careers. Recruiters are asking us for more certification programs,” noted Ferrell. “Ethical conduct is an important component of an Auburn education, and this initiative is the latest in an ongoing effort to equip our business students with the tools they need to be successful throughout their careers.”
“The Ethical Leadership certification has been extremely beneficial to college students across the nation,” added Alexander. “The curriculum is continually updated and can be customized to meet specific university needs. We hope that Auburn University’s decision to require this independent certification for all its business students will serve as a role model for other colleges of business and a call to action for them to join this critical initiative.”
The certification program has six modules. Students are required to complete all six modules and pass an exam at the conclusion of each section.
The Center for Ethical Organizational Cultures provides teaching resources, including a wide variety of cases, debate issues, and classroom simulations. These resources are designed to spark discussions about different types of ethical dilemmas and decisions.
Many of our simulations offer students the opportunity to work as a team on a role-playing exercise that imitates a real-world issue in organizational ethics.
The Center for Ethical Organizational Cultures is dedicated to staying informed about the latest trends in organizational culture. Check out some of the current projects we are working on below.AMS: Code of Ethics Marketing Professors: Good Ethics Is Good Business Business Ethics Outweighs Corporate Social Responsibility Wells Fargo's Organizational Culture
The Spanish Flu infected about one-third of the world’s population and killed about 675,000 Americans. People were asked to wear masks, and similar to the COVID-19 pandemic in 2020, schools, theatres, and businesses were closed for some time. What has changed is medical knowledge, technology, advanced communication, the and global connectedness of the world. Polio vaccine tests started in 1935, and a vaccine was developed by Jonas Salk and licensed to the public in 1955.
Today, we have the capability to develop vaccines in 1–2 years. In addition, our communication systems have the ability to shift social and work environments to virtual interaction. For example, Zappos transitioned its Las Vegas, Nevada, staff to remote work across all departments and provided instructional videos to teach team members how to set up a home office.
The current pandemic has provided an opportunity for firms to contribute to helping both employees and the public by taking socially responsible actions and conducting business virtually and online. Apple Inc. donated millions of dollars in personal protective equipment (PPE) and other support to both the United States and China.
Many other businesses stepped up by making masks, hand sanitizers, and ventilators to support the health care community and patients. Budweiser produced and distributed more than 500,000 bottles of hand sanitizer. Others—such as Wendy’s, Dunkin’, and Taco John’s—provided free food to health care workers and first responders, those at higher risk due to operating on the front line, and individuals in need.
Business ethics involves and affects every employee in an organization, while social responsibility decisions about how to make a positive impact are often made by top management. The COVID-19 pandemic has created many new ethics issues. It has become more important than ever to navigate the risks associated with health, safety, and privacy.
It has become the responsibility of each employee to be accountable and comply with policies to protect one another and customers. Wearing masks and maintaining six feet of distance requires discipline and respect. Monitoring employees working from home creates privacy issues just as tracking COVID-19 contacts using smartphones can create privacy issues.
In a distributive workforce, creating and maintaining an ethical organizational culture will become increasingly challenging. In an organization, there is proximal and supervisory oversight and interaction. What will this look like in our evolving and transforming teleworkforce?
There will be long-term changes in the importance of responsible and authentic care for both employees and customers. The CEO of Yum! Brands, the company behind KFC, Pizza Hut, and Taco Bell, among others, gave up his 2020 salary to fund bonuses for general managers as well as an employee medical relief fund to support franchise restaurant workers and corporate employees with a COVID-19 diagnosis or for those caring for an individual suffering from COVID-19. Companies such as Hormel, Walmart, and Kroger increased bonuses at a time when most organizations were eliminating employees. The way companies treat employees during the COVID-19 pandemic stands to define those organizations for years to come.
This is an opportunity for leading brands to make a difference in their communities by providing products that allow for the ability to live and work from home. Online retailers such as Amazon have strengthened their relationship with customers by supporting the new duality of home life. Daily downloads of the Zoom videoconferencing platform increased more than 30 times year-over-year with total users reaching more than 200 million.
The pandemic has created many ethical challenges. In the education arena, how do you balance health and safety versus educational needs versus economic viability?
Businesses have faced challenges involving when to open, whether to open, and when to go out of business. Big box stores and online retailers have fared much better during the pandemic than smaller retailers such as restaurants, dry cleaners, and other service businesses. Retailers with both a brick-and-mortar and an online presence had an advantage as online-only retailers faced inventory stockouts while brick-and-mortar retailers could tap into store inventory.
Walmart, Home Depot, Walgreens, and others were deemed essential. As such, they faced the challenges of protecting their workforce from infection and providing a safe shopping environment. To protect the safety of customers and associates, Home Depot shortened store hours to allow for more thorough sanitization, limited the number of customers allowed in the store at one time, installed plexiglass shields to separate customers from employees, supplied thermometers for team members to perform health checks before their shifts, and provided face masks and gloves to associates. The company also eliminated major sales promotions—no doubt taking a financial hit—to avoid driving unnecessary traffic to its stores.
Many employees, not involved in face-to-face service exchanges, moved to working from home. Two major issues developed that impacted the worker and the firm. Some employees were unable to carry out their responsibilities due to childcare, the need for in-home education, and other distractions from attempting to work in a non-office environment. On the other hand, some employees had a hard time separating work and their personal lives. These individuals worked long hours and some of these employees felt increasing pressure to the point of causing mental health issues.
Working from home is becoming the new normal. Before the pandemic, over the last five years, there has been a 44 percent increase in working remotely, according to Flexjobs.com. Now, Twitter will allow employees to work from home indefinitely. Morgan Stanley CEO James Gorman went as far as to say the bank would likely need less commercial real estate post-pandemic.
Working at home requires boundaries and discipline. Friends and neighbors need to know that you’re working from home and are not as accessible at non-work times. Double-dipping is an ethical issue in billing clients by the hour. Though some ethical issues, such as harassment, bullying, and personal use of organizational resources, may actually decline, the biggest risk, time theft, is one of the most challenging issues in any organization. Developing shared organizational and ethical leadership skills may be challenging. Any way you slice it, just as we have had to learn how to stay e-connected, we now will need to find other ‘e-ways’ to manage and lead through this change and beyond.
Dr. O.C. Ferrell is the Director of the Center for Ethical Organizational Cultures and the James T. Pursell Sr. Eminent Scholar in Ethics
The role of ethics in artificial intelligence (AI) is gaining news coverage in recent stories such as Pentagon to Adopt Detailed Principles for Using AI and AI Ethics Backed by Pope and Tech Giants in New Plan.
Auburn University ethics scholar Dr. O.C. Ferrell comments on concerns, policies, societal benefits, and challenges to implementation. He is the James T. Pursell Sr. Eminent Scholar in Ethics and Director of the Center for Ethical Organizational Cultures in Auburn’s Harbert College of Business.
While tech firms such as Google, Facebook, Amazon, IBM, and Microsoft embrace AI in their operations, the key risks of simulating the cognitive functions associated with humans is just being addressed. AI systems that think like humans through machine learning will have to make ethical decisions.
While ethics relates to principles, values, and norms, the algorithms, or set of rules simulating human intelligence, are developed by programmers that may have limited ethical knowledge. Ethics in AI at our current stage of development cannot internalize human principles and values. The result has been discrimination, bias, and intrusive surveillance in some cases.
Most fully-enabled AI can result in unanticipated outcomes. For example, in one case two fully enabled AI systems used machine learning to develop their own language and started communicating with each other in a manner not understood by humans. As AI systems learn from experience, develop solutions to problems, make predictions, and take actions, there is the need for human oversight to disengage or deactivate systems that have unethical outcomes.
The mass media report traditional misconduct by humans every day. Machines have to be regulated by organization ethics programs related to their risk areas. At this stage of development, human control and oversight systems must be in place.
AI is transforming decision making in the private sector, public services, and the military. The Department of Defense (DOD) recognizes the importance of developing principles and policies to address AI ethics. There are not standardized values or core practices for building decision-making systems involving machine learning.
The Defense Innovation Board developed a set of principles for the ethical use of AI for the DOD. While various professions such as engineering and medical associations have developed ethical principles, AI safety, security, and robustness requires principles as a first step in opening a dialogue about how to address risks. As a starting point the DOD believes the principles should reflect the values and principles of the American people and should uphold all international laws and treaties related to the conduct of armed forces. This approach could be used by the private sector based on existing ethical values and accepted core practices that are applied to behavior not enabled by AI.
The AI principles developed by the Defense Innovation Board address responsible, equitable, traceable, reliable, and governable actions. Robert Bosch GMBH, a German engineering firm, is taking this approach with an ethics-based AI training program for 16,000 executives and developers. Part of the training includes a new code of ethics emphasizing principles including human control. The principles include: “invented for life” with social responsibility; AI as a tool for people; safe, robust, and explainable AI products; trust as a key value; and legal compliance.
There are almost 100 private-public initiatives to guide AI ethics, but most are designed for humans and not machines. While these principles may not be programmed into algorithms, they can be understood by humans. Both machines and humans need to work together.
AI is a technology system that is not inherently good or bad. It is essentially enabling technology that can allow robots and drones to carry out operations. It can take big data and, through predictive analytics, make decisions and implement operations and actions. Therefore, AI should not be viewed as a threat any more than other technologies such as computers.
The risk of using this technology relates to appropriate implementation and its power to make decisions and learn from experience, making it able to go beyond human decision makers. For example, in medicine, machine learning can find statistical significance across millions of features, examples, or data. Therefore, AI can exceed human ability in performing tasks quickly, learning about the nature of complex relationships, and make it possible for clinicians to provide reliable information to patients. But AI in some medical fields has been found to create biases based on the data. Racial biases could possibly be a part of the algorithms.
In the military, AI would have to be reviewed so control of a weapon would not cause unnecessary death and destruction. While AI can ensure safety and reliability of weapons systems, there will need to be human controls for disengagement, if necessary. At this stage of development, society should not fear AI because it has the potential to improve the quality of life and operational efficiency. On the other hand, until privacy, bias, and other ethical issues are addressed, it should supplement rather than replace humans.
AI systems are not capable of mastering some of the strongest human intelligence attributes. It is a system of algorithms or rules programmed for a specific task. In other words, AI does not have the creativity and common sense that humans use to take knowledge and apply it to a completely different context. While AI has the ability to develop predictive analytics, learn from big data, and make decisions, its capabilities are different from human decision making. AI works with algorithms in a series of rules or steps to construct a desired outcome. Humans have a better opportunity to apply principles and values to ambiguous situations. This creates a dilemma for incorporating ethics into AI decisions.
Principles are pervasive boundaries for behavior and rule-based. Unfortunately, there are no proven ways to translate principles into algorithms with legal and professional accountability. On the other hand, values are general beliefs and are used to develop norms that are socially enforced. There is always the possibility for ethical conflict even using the same set of values. Highly difficult ethical decisions may need an organizational mechanism for resolution of questionable issues.
At this stage of AI development one of the biggest challenges will be to incorporate values into AI decisions. Some are turning to philosophical theories to resolve ethical decision making, but machines cannot take philosophical theories such as social justice and consequentialism and apply them to outcomes. There are many judgments to making ethical decisions that will be very difficult to program in a series of algorithms. Developing AI for the common good of society will require integrating machine learning with the innate ability of humans to use their cognitive ability and values to achieve desired outcomes.
Below are publications created by Raymond J. Harbert College of Business faculty that are related to organizational ethical cultures. The topics include ethical decision making, ethical cultures, social responsibility, sustainability, and stakeholder relationships.
Dr. O.C. Ferrell is the James T. Pursell, Sr. Eminent Scholar in Ethics and Director of the Center for Ethical Organizational Cultures at Auburn University. He was formerly Distinguished Professor of Leadership and Business Ethics at Belmont University and University Distinguished Professor at the University of New Mexico. He has also been on the faculties of the University of Wyoming, Colorado State University, University of Memphis, Texas A&M University, Illinois State University, and Southern Illinois University.
Dr. Ferrell holds a Ph.D. from Louisiana State University in Marketing, an M.B.A. in Marketing as well as a B.A. in Sociology from Florida State University. Dr. Ferrell is past president of the Academy of Marketing Science. He is past president of the Academic Council of the American Marketing Association and chaired the American Marketing Association Ethics Committee. Under his leadership, the committee developed the AMA Code of Ethics and the AMA Code of Ethics for Marketing on the Internet. In addition, he is a former member of the Academy of Marketing Science Board of Governors and is a Society of Marketing Advances and Southwestern Marketing Association Fellow and an Academy of Marketing Science Distinguished Fellow. He served for nine years as the vice president of publications for the Academy of Marketing Science. He received a Lifetime Achievement Award from the Macromarketing Society and a special award for service to doctoral students from the Southeast Doctoral Consortium. He received the Harold Berkman Lifetime Service Award from the Academy of Marketing Science and the Cutco Vector Distinguished Marketing Educator Award from the Academy of Marketing Science.
Dr. Ferrell has been involved in entrepreneurial engagements, co-founding Print Avenue in 1981, providing a solution-based printing company. He has been a consultant and served as an expert witness in legal cases related to marketing and business ethics litigation. He has conducted training for a number of global firms, including General Motors. His involvement with direct selling companies includes serving on the Academic Advisory Committee and as a fellow for the Direct Selling Education Foundation.
Dr. Ferrell is the co-author of 20 books and more than 100 published articles and papers. His articles have been published in the Journal of Marketing Research, Journal of Marketing, Journal of Business Ethics, Journal of Business Research, Journal of the Academy of Marketing Science, AMS Review, and the Journal of Public Policy & Marketing, as well as other journals.
Linda Ferrell is the Roth Family Professor of Marketing and Business Ethics in the Raymond J. Harbert College of Business, Auburn University. She was formerly Distinguished Professor of Leadership and Business Ethics at Belmont University. She completed her PhD in business administration, with a concentration in management, at the University of Memphis. She has taught at the University of Tampa, Colorado State University, University of Northern Colorado, University of Memphis, University of Wyoming, and the University of New Mexico. She has also team-taught classes at Thammasat University in Bangkok, Thailand.
Her work experience as an account executive for McDonald’s and Pizza Hut’s advertising agencies supports her teaching of advertising, marketing strategy, marketing ethics, and marketing principles. She has published in the Journal of Public Policy & Marketing, Journal of Business Research, Journal of the Academy of Marketing Science, Journal of Business Ethics, AMS Review, Journal of Academic Ethics, Journal of Marketing Education, Marketing Education Review, Journal of Teaching Business Ethics, Marketing Management Journal, and Case Research Journal, and she is co-author of Business Ethics: Ethical Decision Making and Cases (thirteenth edition), Management (fourth edition), and Business and Society (seventh edition).
Director of Center for Ethical Organizational Cultures