Masters Class in Business Ethics 2nd Annual Conference on Teaching Ethics in Universities May 24, 2011 Bill O’Rourke, Alcoa Background and Introduction My approach: Introduce myself. • message: this guy has some broad corporate experiences. Describe my corporation – Alcoa. • Message: Alcoa is a large, global organization. Give a few additional details on my Russian experience and the Alcoa Operation in Russia. • Message: There are cultural differences around the World. Touch on the concepts of Corporate Values and Leadership. • Message: Values have to be more than just words, they must be supported by behaviors, especially the behaviors of the leaders. Give specific ethical situation examples and have the class wrestle with them. • Messages: - There are structured approaches to dealing with these issues. - Learn about your own moral compass. Summary. Agenda Brief Overview of Alcoa Leadership Leadership Challenges: Alcoa’s Investment in Russia Business Ethics Situations Ethical Challenges Questions/Comments 2010 Revenue: $21.0 Billion An Overview: Alcoa Inc. 31 Countries 59,000 Employees Alcoa Russia Alcoa is 1 of 61 “survivors” on the Fortune 500 List since its inception. Alcoa – Global Leader in the Aluminum Industry Founded in 1888 in Pittsburgh A leading producer of primary aluminum, fabricated aluminum and alumina. 2010 Revenues: $21 Billion 60,000 employees in 31 countries. Strong Values. Environment, Health & Safety (EHS) In 2010 it was 10 times safer to work for Alcoa than it was in 1991. GHG Emission Reduction – 44% on a 1990 base and 22% on a 2005 base. Results: Alcoa Lives Its Values Every Day Safety Incident Rate History and Significant Accreditations. Best Ever Safety Performance 4.0 3.86 3.57 COVALENCE ETHICAL RATINGS – No. 1 in Industry Incident Rate 3.5 Total Recordable Incident Rate 3.0 2.5 2.26 1.85 2.0 1.48 1.4 1.5 1.42 1.32 1.30 1.5 0.5 0.0 Continued Sustainable Growth 9h Consecutive Year 2.03 1.0 Strengthened Reputation Lost Workday Incident Rate 0.29 0.32 0.19 0.19 0.13 0.13 0.11 0.15 0.14 0.15 0.11 Established Carbon Leadership Founding Member 6 Products Packaging/Can Sheet Aerospace Sheet, Plate & Hard Alloy Lithographic Sheet Marine Plate Automotive Brazing Hard Alloy, Oil & Gas VISION Alcoa aspires to be the best company in the world. ALCOA VALUES Integrity. Alcoa’s foundation is our integrity. We are open, honest and trustworthy in dealing with customers, suppliers, coworkers, shareholders and the communities where we have an impact. Environment, Health & Safety. We work safely in a manner that protects and promotes the health and well-being of the individual and the environment. Customer. We support our customers success by creating exceptional value through innovative product and service solutions. Excellence. We relentlessly pursue excellence in everything we do, every day. People. We work in an inclusive environment that embraces change, new ideas, respect for the individual and equal opportunity to succeed. Profitability. We earn sustainable financial results that enable profitable growth and superior shareholder value. Accountability. We are accountable - individually and in teams - for our behaviors, actions and results. Our Values Respect - We treat others as we would like to be treated ourselves. We do not tolerate abusive or disrespectful treatment. Ruthlessness, callousness and arrogance don’t belong here. Integrity - We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it; when we say we cannot or will not do something, then we won’t do it. Communication - We have an obligation to communicate. Here, we take the time to talk with one another. . .and to listen. We believe that information is intended to move and information moves people. Excellence - We are satisfied with nothing less than the very best in everything we do. We will continue to raise the bar for everyone. The great fun here will be for all of us to discover just how good we can really be. Some Leadership Concepts I recommend that you have a “vision.” I urge you to define “Personal Success.” Consider seeking “True North” – the ultimate goal. Health & Safety Inventory Procurement Audit Function Payroll Some Leadership Concepts Leaders venture out of their comfort zones. Leaders question the rules. “If you don’t ask ‘why?’ at least five times, you don’t know why.” Leaders challenge the status quo. “When the situation is better than ever, that might be the ideal time to make change.” Leaders “drive” for change. “Do you have a license to drive?” Is it better to ask for permission or seek forgiveness? Go; until someone tells you to stop. Challenge Yourself. A most important challenge. Leadership What are the most important qualities of a Leader? The Foundation of Leadership is Values A leader has a strong foundation: Integrity Honesty Fairness Treating others with Dignity & Respect A leader provides inspiration. A leader possesses intelligence, skills & experience A leader gets results. Leadership Challenges Alcoa purchases assets in Russia. What are the initial Leadership Challenges? Why Invest in Russia? The Future Potential Aluminum Consumption Per Capita, 2007 Eastern Europe & CIS Sheet & Plate Market (kg/capita) Japan CAGR 7% US Italy CAGR 11% Canada Sweden 1100 800 KMT 530 Germany Switzerland Spain Russia Other France UK Mexico 2002 2006 2011 China Venezuela Aerospace – The fast-growing industry Russia Packaging – Major can manufacturers are Brazil now building new plants in Russia Argentina India Automotive/Transportation – Expected 0 5 10 15 Significant Long-Term Growth Potential Source: McKinsey analysis, CRU 20 25 30 35 increase in usage of aluminum rolled and extruded products, forged wheels, etc. Alcoa-Russia: Two Major Plants Acquired in 2005 Samara (Population 1.5 million) Age of facility: 1950’s Initial Headcount: 7,200 Capabilities & capacities Cast house Flat Rolled Products: HT & NHT sheet Extrusions 31 small to medium presses; 2 large presses (12,000 MT and 20,000 MT) Forgings: 4 presses including 30KMT & 75KMT Belaya Kalitva (Population 60,000) Samara Belaya Kalitva Age of facility: Early 1960’s Initial Headcount: 5,300 Capabilities & capacities Cast house Flat Rolled Products: HT & NHT Plate Extrusions: 1-15,000 MT & 14 small - medium presses Tubes: 15,000 MT Forgings: 6 presses Production Capacity 75,000 Ton Forging Press Production Capacity 25,000 Ton Extrusion Press A Top Priority - Invest in Russia - $1 Billion Investment: $750 million through 2008; $1 B now. Acquisition price: $257.5 million 2005 Capital: >$20 million * Plus Working Capital 2006 Capital: >$100 million Why was the 2005 Investment only $20 million? 2007 Capital: > $167 million 2008 Capital: > $186 million Cumulative Investment: Alcoa Russia 800 Millions of Dollars 600 400 200 0 Initial 2005 2006 2007 2008 New Slitting Operation Before After Belaya Kalitva - Forging - Pump House Business Ethics Can a Leader be successful in Russia: While being honest? By playing by the rules? While respecting the environment? By making worker safety a top priority? By being a good neighbor in the community? Ethical Challenges How would you handle the various ethical issues that arise in business every day? Some Examples. You just started to work for a large, multinational company. You’re ready to take your first business trip. Your boss tells you that while you are away you should buy a few personal things for yourself and submit the cost on your expense account as a little extra compensation for all the personal inconveniences of travel and being away from the family. Do you? You’re the Plant Manager during a downturn in the business and your HR Manager is accused of taking $1,000 from laid-off employees after she approves very attractive severance packages. What do you do? You get a call at 5:00 PM on a Wednesday reporting that TCE was discovered in a ground water sample taken at the border of our plant in El Campo, Texas. What do you do? Your HR Manager comes to you and says the black employees (in the North Carolina Plant) are complaining about an employee who drove his pick-up truck into the company parking lot, displaying a 4’ X 8’ Confederate flag. You get a call from the Company “Compliance Line” Director alleging that the Plant Manager, who reports to you and is performing well, is instructing employees to “spin” the safety results. The Procurement Group needs to save $1 billion. Everything is being “bid” for better pricing. You are the electrical buyer and have placed all the electrical supplies ($26 million) for competitive bid. The field is narrowed to 3 finalists who passed the quality and delivery requirements. Price bids are due next week. The President of one of the finalists calls and invites you and a friend to the Super Bowl where your favorite team is playing. In the waiting area of an Airport in St. Louis, you overhear four Buyers from one of your biggest customers openly discussing an upcoming sales negotiation with your company. Proactive Behaviors Periodic Discussions with Employees. A Compliance Program – Policy, Procedures, Phone Line, etc. Annual Business Conduct Surveys. Publicized Punishment – sometimes. Rotation of Assignments – where conflict is possible, avoid it. Education & Training. Climate – where reporting is acceptable. Values Management. Reward Employees based on proper Ethical behavior. A Suggested Approach Gather the Facts Define the Ethical Issues Identify the Affected Parties Identify the Consequences Identify the Obligations Consider Character & Integrity Think Creatively about Potential Actions Check your Gut Act Summary If it looks wrong or feels wrong; don’t do it. Let others know the rules; upfront. Be outspoken and quick when you spot potential ethical violations. Tell the truth. Be Fair - to all concerned. Walk the Talk. Leaders establish Culture. If in doubt - seek advice. Questions? THANK YOU! Nobody is LOL Now.