Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-46
PPT 4-22
Test Prep
TEST PREP
4-22
• What are compliance-based and integrity-based
ethics codes?
• What are the six steps to follow in establishing an
effective ethics program in a business?
1. Compliance-based ethics codes emphasize prevent-
ing unlawful behavior by increasing control and
penalizing wrongdoers. Integrity-based ethics
codes define the organization’s guiding values,
create an environment that supports ethically sound
behavior, and stress shared accountability.
2. (1) Top management must adopt and uncondition-
ally support an explicit corporate code of conduct;
(2) Employees must understand that expectations
for ethical behavior begin at the top and that senior
management expects all employees to act accord-
ingly; (3) Managers and others must be trained to
consider the ethical implications of all business de-
cisions; (4) An ethics office must be set up with
which employees can communicate anonymously;
(5) Outsiders such as suppliers, subcontractors, dis-
tributors, and customers must be told about the eth-
ics program; (6) The ethics code must be enforced
with timely action if any rules are broken.
PPT 4-23
Corporate Social Responsibility
CORPORATE SOCIAL
RESPONSIBILITY
4-23
LO 4-5
• Corporate Social Responsibility (CSR) — The
concern businesses have for the welfare of society.
• CSR is based on a commitment to integrity,
fairness, and respect.
• CSR proponents argue that businesses owe their
existence to the societies they serve and cannot
exist in societies that fail.
CSR is based on a commitment to such basic principles as
integrity, fairness and respect. Many for-profit companies
have philanthropic endeavors as a part of their mission.
Communities often depend on companies to help with so-
cial programs that make the lives of people in the commu-
nity better. It stands to reason that businesses that strength-
en their communities, as proponents of CSR argue, will
grow stronger as their communities improve.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-47
PPT 4-24
Corporate Philanthropy and Social
Initiatives
CORPORATE PHILANTHROPY
and SOCIAL INITIATIVES
4-24
LO 4-5
• Corporate
Philanthropy —
Includes charitable
donations.
• Corporate Social
Initiatives — Include
enhanced forms of
corporate philanthropy.
PPT 4-25
Corporate Responsibility and Policy
CORPORATE RESPONSIBILITY
and POLICY
4-25
LO 4-5
• Corporate Responsibility — Includes everything
from hiring minority workers to making safe products,
minimizing pollution, using energy wisely, and
providing a safe work environment.
• Corporate Policy — The position a firm takes on
social and political issues.
PPT 4-26
Positive Impacts of
Companies
POSTIVE IMPACTS
of COMPANIES
4-26
LO 4-5
• Xerox offers a Social Service Leave program.
• More and more companies are encouraging
employees to volunteer while on company time.
• The majority of MBA students surveyed reported
they would take a lower salary to work for a
socially responsible company.
An ultimate example of a company helping the community
is Xerox’s program, Social Service Leave, which allows
employees to leave for up to a year and work for a non-
profit while still earning full salary, including benefits and
job security.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-48
PPT 4-27
Helping Hands
Source:ParadeMagazine.
HELPING HANDS
Most Generous Celebrities
Who? For?
George Clooney United Way;
UN Messenger of Peace
Angelina Jolie & Brad Pitt Make it Right Foundation; UN
Ben Affleck UN
Madonna Raising Malawi
Michael J. Fox Michael J. Fox Foundation for
Parkinson’s Research
Alicia Keys Keep a Child Alive;
Frum Tha Ground Up
Sir Elton John Elton John AIDS Foundation
Matt DamonGreenDimes; H2O Africa;
Running the Sahara
Oprah WinfreyAngel Network
4-27
LO 4-5
1. Students will find it interesting to see on this slide
what some of their favorite celebrities have donat-
ed.
2. Oprah Winfrey earns well over $200 million per
year and donates nearly $50 million.
3. The talk-show host and entertainment mogul is the
founder of the Angel Network, a charity that raises
money for poverty-stricken children, and she has
raised money to open schools for girls in South Af-
rica.
PPT 4-28
Generous Guys
Source:Forbes,www.forbes.com,accessedNovember2014.
GENEROUS GUYS
World’s Biggest Givers in 2013
Who? How
Much? What For?
Bill Gates $2.5B Malaria, public health, education
Warren Buffett $2.63B Gates Foundation
Leonard Lauder $1.1B Art museums
Mark Zuckerberg $991M Education, healthcare
George Soros $734M Human rights, democracy
Michael Bloomberg $1.8B Antismoking, education
Walton Family $325M Education, conservation
Gordon & Betty Moore $321M Science education
Chuck Feeny $297M Human rights
Pierre & Pamela Omidyar $294M Education
4-28
LO 4-5
1. Students may be surprised how much billionaires
donate and the causes they support. You could
prompt discussion by asking students why they be-
lieve billionaires give so much to education while
celebrities choose more social causes.
PPT 4-29
President Kennedy’s Basic Rights of
Consumers
PRESIDENT KENNEDY’S BASIC
RIGHTS of CONSUMERS
4-29
LO 4-5
• The Right to Safety
• The Right to be Informed
• The Right to Choose
• The Right to be Heard
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-49
PPT 4-30
How Do Customers Know?
HOW DO CUSTOMERS KNOW?
4-30
LO 4-5
• The primary use of social media
is to communicate CSR efforts.
• Social media allows companies to
reach a broad, diverse group and
connect directly to them.
• Now more than ever, it’s
important for companies to live up
to their expectations.
PPT 4-31
Social Customer Contact
Source:Entrepreneur,www.entrepreneur.com,accessedSeptember2014.
SOCIAL CUSTOMER CONTACT
Do’s and Don’ts of Using Twitter for Business
Do Don’t
Engage followers in discussion
relevant to your industry.Start political rants.
Think about your message
before tweeting. Deleted tweets
can still be found!
Tweet impulsively.
Frequently offer new content. Let your account lie dormant.
Create separate accounts for
business and personal use.
Make personal announcements
via your company’s Twitter
account.
4-31
LO 4-5
PPT 4-32
Insider Trading
INSIDER TRADING
4-32
LO 4-5
• Insider Trading — Insiders
using private company
information to further their own
fortunes or those of their family
and friends.
• Unethical behavior does
financial damage to a
company and investors are
cheated.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-50
PPT 4-33
Responsibility to Employees
• Create jobs and provide a chance for upward
mobility.
RESPONSIBILITY to
EMPLOYEES
4-33
LO 4-5
• Treat employees
with respect.
• Offer salaries and
benefits that help
employees reach
their personal
goals.
PPT 4-34
America’s Most Admired Companies
Source:Fortune,www.fortune.com,accessedNovember2014.
AMERICA’S MOST ADMIRED
COMPANIES of 2014
4-34
LO 4-5
1. Apple
2. Amazon
3. Google
4. Berkshire Hathaway
5. Starbucks
6. Coca-Cola
7. Disney
8. FedEx
9. Southwest Airlines
10. General Electric
1. Before you put this slide up, you may want to ask
the students: Are the ideals of maximization of
profit and social responsibility in conflict?
2. Corporate social responsibility is the concern busi-
nesses have for the welfare of society, not just for
their owners.
3. The vast majority of the companies listed in this
slide are not only admired, but also financially suc-
cessful.
PPT 4-35
When Employees Are Upset . . .
WHEN EMPLOYEES
are UPSET…
4-35
LO 4-5
• Employee fraud costs U.S. businesses about
5% of annual revenue and causes 30% of all
business failures.
• Disgruntled workers relieve frustration by:
– Blaming mistakes on others.
– Manipulating budgets and expenses.
– Making commitments they intend to ignore.
– Hoarding resources.
– Doing the minimum.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
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PPT 4-36
Society and the Environment
SOCIETY and
the ENVIRONMENT
4-36
LO 4-5
• Over one-third of working Americans receive their
salaries from nonprofits – who are dependent on
funding from others.
• The green movement emerged as concern about
global warming increased.
• Many companies are trying to minimize their
carbon footprints – the amount of carbon released
during an item’s production, distribution,
consumption and disposal.
PPT 4-37
Responsibility to the
Environment
RESPONSIBILITY to the
ENVIRONMENT
• By 2030, as many as
40 million “Green”
jobs will be created.
4-37
LO 4-5
• Environmental efforts may increase costs, but
can offer good opportunities.
• The emerging renewable-energy and energy-
efficiency industries account for 9 million U.S.
jobs.
PPT 4-38
Sustainability’s in the Bag
SUSTAINABILITY’S in the BAG
4-38
• Rickshaw Bagworks makes
sustainable accessories built to
last.
• The “three Fs” are followed
company-wide.
1. Form
2. Function
3. Footprint
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-52
PPT 4-39
Social Auditing
SOCIAL AUDITING
4-39
LO 4-5
• Social Audit — A systematic evaluation of an
organization
’
s progress toward implementing socially
responsible and responsive programs.
• Five Types of Watchdogs
1) Socially conscious investors
2) Socially conscious research
organizations
3) Environmentalists
4) Union officials
5) Customers
PPT 4-40
Test Prep
1. Corporate social responsibility (CSR) is the con-
cern businesses have for the welfare of society, not
just for their owners. CSR defenders believe that
businesses owe their existence to the societies they
serve and cannot succeed in societies that fail.
CSR must be responsible to all stakeholders, not
just investors in the company.
2. A social audit is a systematic evaluation of an or-
ganization’s progress toward implementing social-
ly responsible and responsive programs. Many feel
a social audit should measure workplace issues,
the environment, product safety, community rela-
tions, military weapons contracting, international
operations and human rights, and respect for the
rights of local people.
PPT 4-41
International Ethics
INTERNATIONAL ETHICS
4-41
LO 4-6
• Many businesses want socially responsible
behavior from their international suppliers.
• In the 1970s, the Foreign Corrupt Practices Act
criminalized the act of paying foreign businesses
or government leaders in order to get business.
• Partners in the Organization of American States
signed the Inter-American Convention Against
Corruption.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-53
PPT 4-42
Going by a Different Standard
GOING by a
DIFFERENT STANDARD
4-42
• A telecommunications employee returns to his
home country to work and the company
reimburses living expenses so he can live in a
safe area. The employee is trying to do the
honorable thing for his family and the company is
trying to keep the employee safe.
If the employee uses the money to help his family
instead, is it right for the company to stop payment?
PPT 4-43
Test Prep
TEST PREP
4-43
• How are U.S. businesses demanding socially
responsible behavior from their international
suppliers?
• Why is it unlikely that there will be a single set of
international rules governing multinational
companies soon?
1. Many U.S. businesses now demand that interna-
tional suppliers do not violate U.S. human rights
and environmental standards.
2. It’s unlikely there will be a single set of interna-
tional rules governing multinational companies be-
cause of the widespread disparity among global na-
tions as to what constitutes ethical behavior. For
example, a gift in one culture can be a bribe in an-
other. In some nations child labor is expected and
an important part of a family’s standard of living.
The fairness of adhering to U.S. standards of ethi-
cal behavior is not as easy as you may think.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-54
lecture
enhancers
“A business that makes nothing but money is a poor kind of business.”
Henry Ford
“Commitment in and of itself, irrespective or whether you win or not, is something
that truly makes your life worthwhile.”
Pete Seeger
“We make a living by what we get, but we make a life by what we give.”
Winston Churchill
“Life is all one piece. Men err when they think they can be inhuman exploiters in
their business life, and loving husbands and fathers at home. For achievement with-
out love is a cold and tight-lipped murderer of human happiness everywhere.”
Smiley Blanton
lecture enhancer 4-1
IMPRISONED ENRON CEO GETS SENTENCE SHORTENED
Recently the economy was brought to its knees when the stock market buckled under the weight
of years of unprecedented corruption and greed. Incredibly, no high level arrests have been made against
those corporate leaders who directly contributed to the largest financial crisis since the Great Depression.
Then again, it would appear the justice system has a hard enough time holding on to white-collar crimi-
nals who actually manage to get convicted. According to a new agreement with federal prosecutors, for-
mer Enron CEO Jeffery Skilling will be released from prison as early as 2017, knocking a decade off his
24-year sentence.
Skilling’s crimes were vast and well documented. He played a key role in transforming Enron
from a faltering energy trading firm into a multi-billion dollar fraud machine. As he publicly touted his
company’s robust health, behind the scenes Skilling unloaded massive amounts of his own shares at a
huge profit. After the scam came to light in late 2001, prosecutors indicted and arrested Skilling for secu-
rities fraud. His protracted legal battle seemed finally to come to an end in 2006 when he received a 24–
year jail sentence along with an order to pay more than $41 million in restitution.
But Skilling and his lawyers kept the bitter fight going. With his substantial resources, Skilling
could afford to appeal his case over and over again. This arduous process prevented prosecutors from re-
ceiving the restitution money owed to the victims’ families. “He continues to have the wherewithal to ap-
peal and appeal and appeal,” says Sherron Watkins, a former Enron VP who was the first to call attention
to the company’s accounting issues. “That’s why he is getting his day in court today. No lawyer wants to
keep fighting someone else’s case.” Rather than continue to tie up the courts with incessant appeals, a
Texas judge knocked 10 years off Skilling’s sentence. In exchange he must pay the restitution in full and
may never challenge his conviction again.i
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-55
lecture enhancer 4-2
CHINA CONFRONTS ITS ETHICAL DEMONS
China recently surpassed Japan to become the world’s second largest economy, behind only the
United States. As China grows in economic clout, the famously insular nation is expanding its role in
global business in ways beyond manufacturing and exporting. But with new international ventures comes
the need to adhere to new customs, business practices, and ethical standards.
In order for the still developing nation to modernize itself within the 21st-century business envi-
ronment, China must improve its dismal record on corruption and environmental issues. For example,
China recently came under fire regarding the recent floods caused by landslides. Though described as
natural disasters by the state, geologists found that the catastrophic landslides are a direct result of forest
destruction, farmland expansion, and overdevelopment of hydroelectric power. The general public isn’t
fooled, either, with 82.4% of respondents in a recent poll believing that the floods and landslides were
human-made. As a result of the outcry, China shut down 2,087 factories with low energy efficiency, tak-
ing its first steps toward finding sustainable ways to do business.
According to cases filed under the Foreign Corruption Practices Act (FCPA), China ranks only
behind Iran and Nigeria for most criminal corruption prosecutions. Over the years the Chinese business
practice of gift giving often devolved into outright bribery. But as the United States and other countries
gain footholds within China (and vice versa), the FCPA is used to target major bribery offenders. Under
the FCPA, any company, foreign or otherwise, that lists securities on U.S. exchanges is susceptible to
prosecution. This allows the FCPA to target major violators like Siemens, which was ordered to pay $450
million in fines for bribery in China and other nations. Chinese bribery laws have also been strengthened
in recent years, sometimes resulting in prosecution under both the FCPA and Chinese law. So although
Chinese efforts to curb corruption and environmental hazards still linger in their beginning stages, the
country is now taking a more active role in targeting some of its most outright offenders.ii
lecture enhancer 4-3
SELECTED CODES OF ETHICS
Codes of ethics are as unique as the companies that write them. There is no firmly established
format for these codes. Below are samples of ethics codes for several major U.S. companies.
Ethics Code for Dell Computers
Just as The Soul of Dell articulates our values and beliefs, the following Code of Conduct pro-
vides guidance to ensure we meet our higher standard and conduct business the Dell Way—the right way;
which is “Winning with Integrity.” Simply put, we want all members of our team, our shareholders, cus-
tomers, suppliers and other stakeholders to understand that they can believe what we say and trust what
we do. Our higher standard includes several key components and characteristics that both underpin The
Soul of Dell and provide the foundation for our Code of Conduct.
• Trust. Our word is good. We keep our commitments to each other and to our stakeholders.
• Integrity. We do the right thing without compromise. We avoid even the appearance of
impropriety.
• Honesty. What we say is true and forthcoming—not just technically correct. We are open
and transparent in our communications with each other and about business performance.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-56
• Judgment. We think before we act and consider the consequences of our actions.
• Respect. We treat people with dignity and value their contributions. We maintain fairness
in all relationships.
• Courage. We speak up for what is right. We report wrongdoing when we see it.
• Responsibility. We accept the consequences of our actions. We admit our mistakes and
quickly correct them. We do not retaliate against those who report violations of law or poli-
cy.
All of us—regardless of grade level, position, or geographic location—should base our daily ac-
tions and conduct on these standards, which support The Soul of Dell and our ultimate success.
Code of Ethics for Merck & Company
1. Our business is preserving and improving human life. All of our actions must be meas-
ured by our success in achieving this goal. We value, above all, our ability to serve every-
one who can benefit from the appropriate use of our products and services, thereby provid-
ing lasting consumer satisfaction.
2. We are committed to the highest standards of ethics and integrity. We are responsible
to our customers, to Merck employees and their families, to the environments we inhabit,
and to the societies we serve worldwide. In discharging our responsibilities, we do not take
professional or ethical shortcuts. Our interactions with all segments of society must reflect
the high standards we profess.
3. We are dedicated to the highest level of scientific excellence and commit our re-
search to improving human and animal health and the quality of life. We strive to
identify the most critical needs of consumers and customers, and we devote our resources
to meeting those needs.
4. We expect profits, but only from work that satisfies customer needs and benefits hu-
manity. Our ability to meet our responsibilities depends on maintaining a financial position
that invites investment in leading-edge research and that makes possible effective delivery
of research results.
5. We recognize that the ability to excel—to most competitively meet society’s and cus-
tomers’ needs—depends on the integrity, knowledge, imagination, skill, diversity and
teamwork of our employees, and we value these qualities most highly. To this end, we
strive to create an environment of mutual respect, encouragement and teamwork—an envi-
ronment that rewards commitment and performance and is responsive to the needs of our
employees and their families.
Code of Ethics for JCPenney
J. C. Penney founded the retailing company in 1903. In 1913, with 34 stores and 325 employees,
he presented his first written code of ethics—“The Penney Idea.”
The Penney Idea
• To serve the public, as nearly as we can, to its complete satisfaction
• To expect for the service we render a fair remuneration and not all the profit the traffic will
bear
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
4-57
• To do all in our power to pack the customer’s dollar full of value, quality and satisfaction
• To continue to train ourselves and our associates so that the service we give will be more
and more intelligently performed
• To improve constantly the human factor in our business
• To reward men and women in our organization through participation in what the business
produces
• To test our every policy, method and act in this wise: “Does it square with what is right and
just?”
lecture enhancer 4-4
APPROACHES TO SOCIAL RESPONSIBILITY
Corporations can take several approaches toward social responsibility:
1. Reaction. In this approach, an organization basically has no strategy for social responsibility. It
merely reacts to outside influences that might occur.
2. Defense. A corporation responds to challenges to its effect on the community only to defend
whatever it has been doing.
3. Accommodation. Here corporations adapt their policies and behaviors to comply with public
policy and regulations. They are attempting to be responsive to what their customers and the pub-
lic expect.
4. Proaction. Organizations with this approach take a leadership role in anticipating what they
might do to improve the welfare of their community. They take the initiative in forming their own
policy of social responsibility.
lecture enhancer 4-5
HELPING VETERANS ADJUST THROUGH PUBLIC SERVICE
The stagnant economy has been tough on many Americans, but none more so than our nation’s
veterans. Far too many military men and women come back home from overseas only to find a place al-
most as inhospitable and unwelcoming as the one they left. On top of a dire job market, many have prob-
lems receiving benefits from Veterans Affairs. Thousands of others struggle to come to grips with their
post-traumatic stress, sometimes leading to tragedy.
Iraq vet Ian Smith nearly succumbed to his own trauma before a friend intervened and got him
involved with Mission Continues, a veteran service centered in St. Louis. There Smith found new mean-
ing in life by volunteering on local projects, such as cleaning up community centers or helping with disas-
ter relief. After a six–month fellowship he joined the staff as a service project coordinator. Now complet-
ing a degree in international studies from Washington University, Smith credits Mission Continues with
renewing his sense of purpose. “I was blown away by how much better I felt,” Smith says. “And I
thought, man, if I could just capture a little bit of that and hold it close to my heart, I think I could do all
right. Things could get better.”
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
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According to a recent study of Mission Continues, 86 percent of Smith’s fellow vets reported a
positive life-changing experience following their service. Seventy-one percent went on to receive further
education while 86 percent said the program helped them translate their military skills into the civilian
world. This data is especially incredible given that 64 percent had been diagnosed with post-traumatic
stress. Mission Continues and other organizations like it are growing in cities across the country. Their
goal seems like a win-win for society: improving lives for veterans and communities through service. Vis-
it www.missioncontinues.org for more information.iii
lecture enhancer 4-6
CORPORATE RESPONSIBILITY IN THE CLASSROOM
Businesspeople have long debated the role companies should play in the betterment of society.
After all, renowned economist Milton Friedman once asserted that a business’s only responsibility was to
make money for its stockholders. But in these days of mounting environmental concerns and unscrupu-
lous corporate behavior, social responsibility is quickly becoming a hallmark of many companies. In re-
sponse, some of the nation’s top graduate-level business schools added programs on corporate social re-
sponsibility to their overall curriculum.
For many companies, getting involved in social concerns can be more than just a reputation
booster. Fair business practices like environmental sustainability can increase a company’s bottom line as
well. And that’s exactly what high-level MBA programs across the country are teaching the future execu-
tives of America. Schools teach students about corporate social responsibility through case studies with
actual companies that have seen overall growth or brand awareness stem from their social initiatives.
Campbell Soup Company, for example, is conducting a study on sustainable agriculture and packaging
with students at the University of Pennsylvania’s Wharton School. Additionally, the nonprofit Net Im-
pact, a global network of business leaders, expanded onto 157 MBA campuses in an effort to get students
to work with companies on social issues.
For students, working with these companies can act as brief internships as they move past classroom theo-
ry into the reality of today’s business environment. Still, most recruiters admit that skills in corporate so-
cial responsibility aren’t required for new hires. Even aspiring MBAs participating in these programs
won’t likely seek out jobs in the green sector or other socially responsible industries. Instead, schools
hope that students will impart these skills to whatever company they end up working for. Some compa-
nies, such as Campbell, are going so far as to train new hires in social concerns with the goal that such
knowledge will someday be required in recruiting.iv
lecture enhancer 4-7
PHARMACEUTICAL OR FOOD?
As organic and local food movements gain steam, some food companies are responding by
providing the consumer public with “healthier” options, even in snack foods. Traditional prepackaged
snacks have never been a favorite with nutritionists. Most are high in sugar and fat and provide little nu-
tritional value to the average human. But instead of just cutting down on the fatty stuff that make snack
foods so unhealthy, some companies are injecting snacks with supposedly beneficial substances. The re-
sult is a line of snacks marketed more as medicine than food. For example, a yogurt-like beverage called
ProBugs touts itself as a healthy snack packed with stomach-healing probiotics that help fight antibiotic-
associated diarrhea in children.
Chapter 04 – Demanding Ethical and Socially Responsible Behavior
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Besides its less than appetizing marketing campaign, ProBugs simply does not work as adver-
tised. A study commissioned by Lifeway, owners of ProBugs, and published by Georgetown University
found that the yogurt does little to curb stomach problems or missed days in school. Other foods like Flax
Plus cereal and Sara Lee’s Soft & Smooth Plus white bread claim to be rich in heart-protecting omega-3
fatty acids, only they’re not the same beneficial fats found primarily in fish. Another product, Dream-
Water, advertises three additives that can lead to more satisfying sleep. In reality, the data on those addi-
tives are mixed at best, with one ingredient not even entering into the brain.
Food companies can make such broad claims thanks to a 1994 law allowing companies to pro-
mote the ways their products affect the normal “structure and function” of the body. However, the law
prohibits companies from making outright claims that a product can treat disease. Regardless, medicines
masquerading as snacks have become big business for food companies, pulling in more than $160 billion
worldwide annually. For now the FDA can’t do anything to stop these dubious claims due to another law
that exempts foods from pharmaceutical-style regulation. In the meantime, consumers are once again
warned not to believe everything they read on a product’s packaging. Many businesses fail because they
fail to please customers. If these products don’t live up to promises, do you think they will thrive or dis-
appear?v
lecture enhancer 4-8
APP-GATE AT UNIVERSITY OF MISSOURI
By their nature, colleges are meant to foster thought and instill in students applicable knowledge
that will serve them well outside the university halls. Also hard at work within academic institutions are
scholars and researchers who, similar to their pupils, push past the current limits of human understanding
in order to better serve the world at large. Some would say that the only distinction between scholar and
student is that one is paid to gather information while the other pays for the privilege.
What happens, though, when the two intersect and the student begins making money off the fruits
of his or her knowledge and skills? A proud professor may mark the achievement as the sign of a job well
done, but the university’s bursar office may view it a bit differently. After all, many colleges claim a per-
centage of the profits from all ventures undertaken by faculty members who use school resources. Why
shouldn’t the same principles apply to students?
Administrators at the University of Missouri asked this same question when they demanded a 25% own-
ership stake and two-thirds of any profits from a student-made iPhone app. Undergraduate Tony Brown
devised the idea for a smartphone search engine of apartment listings in class and created the app on his
own time with three fellow students. Since its launch in March 2009, the app has had hundreds of thou-
sands of downloads and has led to a wealth of job offers for its creators. But the demands of the university
had Brown and company shaking as they squared off with an institution far older and better funded than
the lot of them. Luckily for the young entrepreneurs, resulting public outcry caused college officials even-
tually to relent. Mizzou subsequently implemented a policy that keeps the college’s hands off any student
project spawned from a school contest, extracurricular activity, or individual initiative. This issue is far
from resolved nationwide, however, as hundreds of other schools lack similarly explicit policies on their
books.vi