Chapter 02 - the Role of Ethics in Decision Making

Chapter 02 - the Role of Ethics in Decision Making

Chapter 02 - The Role of Ethics in Decision Making

Chapter2

TheRole of Ethics in Decision Making

LearningObjectives

Theprimaryobjectiveofthischapteristoemphasizethegrowingimportanceofethicstobusinessconduct.Thesecondobjectiveistoprovideahistoricalandphilosophicalframeworkforthestudyofethics.Thethirdobjectiveistofurnishbusinessstudentswithanindividual frameworkforethicaldecisionmaking.

Toachieveitsobjectivesthechapterdiscussestherelationshipbetweenmoralsandethicsandthenofethicsandlaw.Formalismandconsequentialism,thetwoprincipalschoolsofethicalthought,aredeveloped.Sourcesofethicalvaluesareexplored.Thedifficultiesofethicaldecisionmakingwithinlargebusinessorganizationsareexamined.Thechapterconcludeswithadiscussionofthemoralityofproperty.

References

  • Barry,NormanP.,BusinessEthics.Lafayette,Ind.:PurdueUniversityPress(2000).
  • Berenbeim,Ronald,CompanyProgramsforResistingCorruptPractices:AGlobalStudy.NY:ConferenceBoard(1999).
  • Bowie,NormanandPatriciaHogue,ManagementEthics.BlackwellPub.(2004).
  • Carroll,ArchieB.andAnnK.Buchholtz,EthicsandStakeholderManagement,4thed.SouthWestern(2000).
  • Donaldson,T.,etal,EthicalIssuesinBusiness,8thed.EnglewoodCliffs,NJ:PrenticeHall(2006).
  • Maidment,FrederickandWilliamEthridge,BusinessinGovernmentSociety:Ethical,InternationalDecisionmaking.EnglewoodCliffs,NJ:PrenticeHall(2000).
  • Hartman,L.P.andDesJardins,BusinessEthics.McGrawHill(2007).
  • Pojman,LouisP.,TheMoralLife.OxfordU.Pr.(2003).
  • Shaw,WilliamH.andVincentBarry,MoralIssuesinBusiness,8thed.Belmont,CA:Wadsworth(2001).
  • Williams,O.F.andJ.W.Hauck,TheCommonGoodandU.S.Capitalism.Lanham,MD:UniversityPressofAmerica(1987).
  • Wines,WilliamA.,Ethics,Law,andBusiness.LawrenceErlbaum(2006).

TeachingOutline

I.ContemporaryBusinessEthics

A.EthicsandSociety

Emphasize:

  • That as society changes, shared values emerge that strengthen ethical foundations.

AdditionalMattersforDiscussion:

  • Thatthe2011OccupyWallStreetandother“Occupy”movementsarelargelyconcernedwiththestateofethicsinbankingandgovernmentalspending.
  • Pointoutthatover20%oftoday’slargecompanieshaveethicsofficerswhose job is todevelop ethicspolicies, listen to complaints of ethics violations, and investigate ethics abuses.Whyisthisgoodbusiness?
  • StatementofStephenFink,presidentofLexiconCommunicationsCorp.ofLosAngeles:“Thenumberonecauseofbusinessdeclineinthisnationisunethicalbehaviorofexecutives—andofyoungermanagerspushingtomoveuptheranks.”
  • FromtheChristianScienceMonitor:“AstudybytheJosephsonInstitutefortheAdvancementofEthics...talksaboutanunwillingnessorinabilityofparents,schools,andpoliticalleaderstoestablishfirmethicalstandardsofconductandholdyouthaccountabletothem.Itspeaksofaprogressiveemphasisonself-aggrandizement,personalgratification,and,ultimately,acquisitiveness.”

Changing Normative Values

Emphasize:

  • That diversity fosters concern over values, and as America becomes increasingly pluralistic, changes in traditional norms create challenges in establishing shared values.

Economic Interdependence

Emphasize:

  • That a serious ethical problem arises from economic interdependence and the modern corporation, which is the structure of most large businesses in this country.

News Media and the Internet

Emphasize:

  • That news media and the Internet make it increasingly difficult to hide the questionable behavior of large organizations.
  • Sidebar 2.1 titled ‘High School Dishonesty Predicts Dishonesty in the Workplace.’

B.EthicsandGovernment

Emphasize:

  • Thatgovernmentoftenstepsinwhenbusinessesactunethically.
  • Thatbusiness leaders have incentive to promote corporate integrity, and thereby to limit further governmental regulation.

AdditionalMatterforDiscussion:

  • TheEthicsResourceCenterreportsasurveythatfoundthat85percentofthenation’slargest2000companiesnowhaveethicalcodesorguidelines.Increasingly,corporationsalsohaveethicsofficersandboardofdirector’sethicscommittees.

II.TheNatureofEthics

A.EthicsandMorality

Emphasize:

  • Thatmoralityisthecollectionofvaluesthatguideshumanbehavior.
  • Whyitisimportantforbusinessestoinculcatesharedmoralvalues.
  • Howbusinessesintheinternationalarenaoftenfacedifferentmoralvalues.
  • Thatethicsisasystemforidentifyingandapplyingmoralvalues.
  • That theendresultofethicalexaminationisthegood.
  • Thatthereisanimportantdistinctionbetweenhavingagoodtimeandleadingagoodlife.

AdditionalMatterforDiscussion:

  • AskthestudentsifGilMeche’sdecisiontoforegohis$12 million salaryforretirementwasappropriate.Whatwouldthestudentshavedone?

B.EthicsandLaw(LO2-1)

Emphasize:

  • Thatbothethicsandlawdealwithrightandwrongandfostersocialcooperation.
  • Thatthestateenforceslawbutthatpersonalethicsarevoluntarilyobserved.
  • Thatethicalvalues are ultimately superior to law in ensuring responsible business behavior.
  • Theethicssurroundingpricegouging(seeSidebar2.2.)

AdditionalMattersforDiscussion:

  • Pointoutthatonecanbeethicalyetstillbreakthelawwhileonemayalsobeunethicalwhileremaininglegal.
  • WhenMaryKayCorp.discoveredthatitsrivalAvonProductswasgoingthroughMaryKay’strashdumpster,itsuedAvon.Avonsettledthecasebyagreeingtostopthepractice.WaswhatAvondidlegal?WaswhatAvondidethical?

III.TwoSystemsofEthics

A.Formalism

Emphasize:

  • Thatformalismisan approach to ethics that affirms an absolute morality.
  • Thatitdealswithabsolutevalueswithoutreferencetotheirsituationalcontext.
  • ThattheBillofRightscontainsexamplesofformalism.

AdditionalMattersforDiscussion:

  • Notethatinformalismtheintentwithwhichoneactsdeterminesthemoralqualityoftheaction,i.e.,itiswhatone hasinhis/her heartthatcounts.Observethatintentisalsorequiredformostcriminalliability.
  • DiscusshowtheGoldenRuleaffectsindividual’sactions.
  • ExampleofformalismbymanagementscholarPeterDrucker:“Thereisonlyoneethics,onesetofrulesofmorality,onecode:thatofindividualbehaviorinwhichthesamerulesapplytoeveryonealike.”
  • Forclassdiscussion:Amalebankpresidentreceivesaninvitationtojoinamale-onlysocialclubthatwillbeaveryimportantsourceofbusinesscontacts.Isitrightforthepresidenttojointheclub?Ifthestudentsdeemitdeontologicallyproperforthepresidenttojoin,changethefactstomaketheclubawhite-onlyclub.
  • Forclassdiscussion:Everyoneshouldagreethatrobbingabankisillegalandunethical.Wouldthestudentsfeeldifferentlyifamanrobbedabankbecausehewastrulywithoutmoneyandneededthemoneytobuymedicinenecessarytolive?Wouldtheyfeeldifferentlyifthemoneywastobuymedicineforhiswifeorhisinfantdaughter?

Kant and Formalism

Emphasize:

  • Kantandhiscategoricalimperative.
  • Examples ofhowformalismraisesethicalquestionsforbusinesses.

The Social Contract

Emphasize:

  • ThesocialcontracttheoryofJohnRawls.
  • Thatalthoughformalismgenerallytakesitsrisefromconceptsofduty,socialcontractcomesfromideasabout “agreement.”
  • That the socialcontracttheoryconcernsitselfwithhowtoconstructajustsocietytakingintoconsiderationthe many inequalities of wealth, knowledge, and social status.
  • Thatindecidingonthevaluesofthesocialcontractoneplacesoneselfbehinda “veilof ignorance.” Explain.
  • That entitlementtocertainbasicrightsandequalopportunityarebasicvaluesofthesocialcontract.

B.Consequentialism(LO2-2)

Emphasize:

  • Thatconsequentialism dealswiththemoral consequencesofactionsratherthanwiththeirabsolutemorality.
  • Thatconsequentialismfocusesonthecommongood.
  • Thatthedominantformofconsequentialismisutilitarianism.
  • Whetherendsjustifythemeans.Always?Sometimes?
  • Thatconsequentialismprovidestheframeworkformuchbusinessethics.
  • Theissuesof“virtualmorality”discussedinSidebar2.3.

AdditionalMattersforDiscussion:

  • AnexampleofbusinessconsequentialismcomesfromMeganBarry,SeniorManager,BusinessEthicsatNortel,andappearsinaDePaulUniversityvirtualjournalTheOnlineJournalofBusinessEthics,Vol.2,No.1(2001).BarrysaysthatNortel’sethics“Adviceline,”whichproduces2000telephonecallsannuallyfromNortelemployeessavesthecompanymoneybyidentifyingissuesearly,minimizingthelossofworktime,andavoidingpotentiallegalissues.
  • StanleyKiaer,directoroftheLondon-basedInstituteofBusinessEthics,statedthatvariouspressuresfromthepublic,fromshareholders,fromemployeerecruits,andfromcompetitors(peerpressure)areleadingtogreatercorporateemphasisonethics.SaidKiaer,“Ifitresultsinamoreethicalstancethemotive[forchange]doesn’tmatter.”EmphasizethatKiaer’sstatementshowsconsequentialism.
  • ConsequentialiststatementbyKeithT.Darcy,presidentoftheFoundationforLeadershipQualityandEthicsPractice:“Ethicalbusinessmeansbetterbusiness.That’sbecausestraight-arrowfirmswillbeperceivedmorefavorablyinthemarketplace.”
  • ConsequentialiststatementbyRobertDenham,chairmanofSalomon,Inc.:“Inthefinalanalysis,mostofthemajorinstitutionsinourindustryprovidethesameorverysimilarservices.Ibelievethatoneimportantwaythatafirmcandistinguishitselfinthemarketplaceistoestablishasolidreputationforintegrityandadherencetohighethicalstandards.Salomonbelievesthatinthelongrun,thisisthebestwaytowincustomerloyalty.”
  • Onemajorstudyfoundthatafter30yearsaninvestmentin30companieswithastrongethicalorientationnetted4.7timesgreaterdividendsthanasimilarportfolioofstockschosenfortheirDowJonesratings.
  • Forclassdiscussion:DowCorningWright,theleadingmanufacturerofsiliconegelbreastimplants,announcedthatithadknownfor20yearsthatsomegelwouldseepoutoftheimplants.Dowmaintainedthatitdidnotbelievethattheleakagewouldcausehealthproblems.DiscusswithstudentswhetherornotitwasethicalforDowtowait20yearsbeforemakingthisannouncement.Inconsequentialistfashion,weighoutthevariousfactorsfromDow’sperspective.
  • Forclassdiscussion:Inthe1970’s,FordMotorCompanydesignedandbuilttheFordPinto.Itwascreatedasadirectresultofgasolineshortagesandresultanthighergasprices.ThePintowassoldtomeetthecompetitionsuchastheVWBeetle.Unfortunately,whenstruckfromtherear,thePintowaspronetoexplosions.ItwasshownthatFordknewofthedanger,couldhavemadealowcostrepairandcouldhavepreventedtheexplosionsandresultantdeaths.Ratherthandecreasingtheirprofitmargin,theysoldthecarsinthedangerouscondition.CanthestudentsfindanyjustificationforFord’sactions?

The Protestant Ethic

Emphasize:

  • ThattheascendancyofconsequentialisminbusinessethicsisattributabletothedeclineoftheProtestant ethic.
  • That theProtestant ethicwasabusiness-relatedethicthatviewedhardwork,achievement,self-denial,truthfulness,promisekeeping,andloyaltyasabsolutemoralvalues.Theethicisbasedonreligiousbelief.
  • Howrisingwealthandtheencouragementof mass consumptionerodedtheProtestantethic.
  • Howvestigesoftheethicremaininbusinessbeliefinhardwork,rationalplanning,andbureaucratichierarchies.

C.ComparingtheTwoEthicalSystems

Emphasize:

  • Thatalthoughformalistsandconsequentialistscanarriveatthesameconclusionregardingaproblem,theyuseadifferentevaluationprocess.
  • The“TobaccoFacts”inSidebar2.4.

AdditionalMattersforDiscussion:

  • Discusstheethicsofthetobaccoindustryintoleratingconfectioners’useoftobaccobrandtrademarksinproducingandsellingcandycigarettes.AUniversityofRochesterSchoolofMedicinestudyreleasedin2000reportedthatsixthgraderswhohadusedcandycigarettesweretwiceaslikelytosmokeasthosewhohadnot,regardlessofparentaltobaccouse.
  • Somefourmillionadolescentsagedtwelvetoseventeenweresmokersasthecenturyturned.Duringthe1990s,smokingbyeighthandtenthgradersincreasedbyathird.
  • TheU.S.CenterforDiseaseControlandPreventionreported:“Morethanfivemillionchildrenundertheageof18todayeventuallywilldiefromsmoking-relatedcauses.”
  • ABrownWilliamsonTobaccoCo.seniorofficialpubliclycalledcigarettesmoking“ahabitofaddiction”andR.J.Reynoldsinternaldocumentsrefertoitas“habitforming.”

IV.SourcesofValuesforBusinessEthics

A.LegalRegulation

Emphasize:

  • Thatethicalvaluesfrequentlybecomelawandthatlegalregulationcan reflect society’sethicalvalues.
  • That asaresult,thatlegalregulationisasignificantsourceofvaluesforbusiness ethics.
  • Atleastfivemajorethicalrulescanbedrawnfromthelaw, which are as follows:
  • Respectfor thelibertyandrightsofothers.
  • The importance of actingingoodfaith.
  • The importance of exercisingduecare.
  • The importance of honoringconfidentiality.
  • Avoidance ofconflictsofinterest.

AdditionalMattersforDiscussion:

  • Askthestudentstoexaminetheirmajorcoursesofstudyandtolookathowthefivemajorethicalvaluesabovewillcomeintoplaywhentheygraduateandbeginworkintheirchosencareer.
  • ObservethattheFederalSentencingGuidelines,promulgatedintheearly1990s,rewardbusinessorganizationsthathavemadecomprehensiveeffortstoinstituteethicscodesandprograms.Insentencingforthecriminalmisconductofitsagents,corporationswithcomprehensiveethicsprogramsreceivesignificantlyreducedpunishment.Notethatmerelypostinganethicsstatementonthewallisnotconsideredsufficientlycomprehensive.

Liberty and Rights

Emphasize:

  • That respectforthelibertyandrightsofotherssuggestsformalistvalues.Considerdueprocessguarantees,freedomofexpression,andprivacylegislation.

Good Faith

Emphasize:

  • ThatgoodfaithrequirementscanbefoundintheUniform Commercial Code.
  • Thatbadfaithleadstoacauseofactionfortortincertaincircumstances.
  • That bad faith suggestsformalism.

Due Care

Emphasize:

  • Thatduecare,suchasrequiredinnegligencelaw,derivesfrom society’sexpectationsaboutthereasonablenessofactions.Thissuggestsconsequentialism(promotingthecommongood).

Confidentiality

Emphasize:

  • Thatconfidentialityoftenariseswhenthelawcreatesorrequiresfiduciaryobligations.Variousagencyrelationshipsdemonstratethis.Thissuggestsconsequentialismbyitspurposeofenhancingthewillingnesstoenterrelationshipsthroughtheexpectationofconfidentiality.

Conflicts of Interest

Emphasize:

  • Thatconflictsofinterestcanariseinthelawbecauseof “servingtwo masters,” and no agent or employee of one principal can secretly work for another whose interest competes with that of the first principal.

B.ProfessionalCodesofEthics

Emphasize:

  • Thatrecentyearshaverevealedextensivedevelopmentofgroupstandardsforethicalconduct.
  • That theAmericanMarketingAssociation’sEthicalNormsandValuesforMarketers.ObservehowtheexcerptedmaterialinSidebar2.5providesageneralframeworkforagreatmanyspecificrules.
  • TheAmerican Institute of Certified Public AccountantsCodeofProfessionalConduct.Again,pointoutthattheexcerptedmaterialinSidebar2.6providesageneralintroductiontomanyspecificethicalrequirements.
  • HowunethicalconductcanleadtoadditionalregulationsuchasSarbanes-Oxleyandcancompletelydestroyahugethrivingcompany.
  • That the professional organizations that have adopted these codes employ specific sanctions to back them up. Becausethe state will likely regulate these professions if they do not do so themselves,it is appropriate to term their ethical codes self-regulation.

AdditionalMatterforDiscussion:

  • Askthestudentstoidentifyotherformalandinformalcodesorstandardsofconductthatapplytotheirmajorsandtobusinessingeneral.StudentsshouldbeabletonameGAAP,GAAS,theABACodeofConduct,andothers.

C. OrganizationalCodesofEthics

Emphasize:

  • Thatmostlargebusinessorganizationsnowhavecodesofethics(often calledcodesofconduct)thatprovidevaluestobeobservedbyallemployeesandmanagementpersonnel.
  • TheBusinessRoundtable’slistoftopicsthatorganizationalcodesofbusinessethicsshouldcover.

AdditionalMattersforDiscussion:

  • Studentsmustappreciatethatwhenacompanyimplementsanethicsprogramthatitdoesmorethanissueawrittenethicalcode.Acomprehensiveprogramhas:
  • Ethicspoliciesandprocedures
  • Measuresofethicaleffectiveness
  • Rewardsforethicalbehavior
  • Guidelinesforethicaldecisionmaking
  • Assessmentoftheethical climate
  • Cultivationofethicalpractices
  • Focusonethicalleadership
  • Ethicseducationandtraining
  • ConsiderthestatementofRobertDenham,chairmanofSalomon,Inc.,aboutthatfirm’sstepstoachieveanethicalorganization:“Salomonhasaddressedtheneedforindividualstotakeethicalquestionsseriouslybyaseriesofmeasures.First,wehaveissuedunambiguouspolicystatementsdeclaringthatSalomonwilladherestrictlytothehighestmoralandethicalbusinessstandards.Second,wehaveestablishedaboard-levelcompliancecommitteeanddirectedourcompliancedepartmentprofessionalsworldwidetoreportdirectlytothecommitteeanyissuesthattheyfeelarenotadequatelybeingaddressed.Third,toemphasizetheseriousnessthatIattachtotheissue,Ihavegivenmypersonalhomephonenumbertotheseniormanagers—includingthecomplianceprofessional—ofeachofouroperatingsubsidiariestogetherwithinstructionstocallmeintheeventthattheyuncoveramaterialviolationofthispolicy.Fourth,wehaveissuedwrittenmanualssettingoutpoliciesforeachofourtradingdesksandwehaverequiredour200senioremployeestocertifytheircompliancewiththosepolicies.Fifth,inourtrainingeffortsfornewrecruitsandforlong-termemployees,wehaveincreasedtheemphasisontheneedforethicalbusinessconduct.”
  • Askstudentstoconsiderwhycompaniesthathavecodesofconducthaveahigherpercentageofreportedmisconductthandocompanieswithoutacodeofconduct.
  • Severalcorporationshaveanethicsombudsmanwhoplaysavitalroleindefiningwhatisrightandwrong,acceptableandunacceptablefortheircompanies.HavinganombudsmanhasbeenidentifiedbytheFederalSentencingGuidelinesaspartofacomprehensiveethicsmanagementprogram.
  • Onethingseverallargecompanieshavedoneisgivetheiremployeesatoll-freenumbertocalltohelpresolveethicalandrelateddilemmas.WilliamGriffin,VPforEthicsandBusinessPolicyatSearsreportedthat“AssistLine”received15,000callsyearlyfromSears’300,000employees.
  • AnIndustryWeeksurveyreportsthatthreeoffoursurveyedclaimthattheircompany’scodeofethics—orethicsgenerally—meanssomethingtothemintheirdailywork.But63.9%ofthosesurveyedreportedhavingwitnessedunethicalbehavior.

Different Approaches to Ethical Codes

Emphasize:

  • Boeing’sCodeofConductinSidebar2.7.
  • Discusswhetheritismoreappropriatetohaveashortoralongbusinesscodeofconduct.
  • Thatbecausecodesofbusinessethicsareoftenbackedupbysanctions,itisappropriatetotermthem “self-regulation.”

D. IndividualValues (LO2-3)

Emphasize:

  • Thatethicsultimatelyboilsdowntotheindividualvaluesoneappliesindecisionmaking.
  • Thatindividualvaluescanbeexploredbyaskingfiveimportantquestionsinsituationsofdecisionmaking:
  • Has onethoughtaboutwhethertheactiononemaytakeisrightorwrong?
  • Willonebeproudtotalk about one’s actions to his or her family,to his or heremployer, orto the news media?
  • Will one bewillingto actasone isthinkingofacting?
  • Willone’sdecisioncauseharmtoothersortotheenvironment?
  • Willone’sactionsviolatethelaw?

AdditionalMattersforDiscussion:

  • DiscussJohnSmale’sstatementthat“thereisanethicaldimensiontomostcomplexbusinessproblems.”
  • ExamineHannahArendt’sstatementthateviloften comesfromakindofthoughtlessness.
  • ConsiderPlato’sstatementthatimmoralbehavioroftenflowsfromignorance.
  • DiscusswhyMortimerAdlerobservedthatAmericanslack“muchthatisneededforthegoodlife.”
  • TheDowCorningcodeofethicssays,“Wewillactwiththeideathateverythingwillseethelightofday.”Thisisavariationofthe11:00o’clocknewsconceptwhichaskshowyouwouldactifwhatyoudidwastobebroadcastonthe11:00o’clocknews.(Perhapstoday’sstudentsmightrelatebetterifwesubstitutetheInternetforthe11:00o’clocknews.)

V. AchievinganEthicalBusinessCorporation

A. TheObstacles (LO2-4)

Emphasize:

  • Thatthereareobstaclestoethicalcorporatebehaviorthatdeserveseriousconsideration.

AdditionalMattersforDiscussion:

  • Discusstheimpactofexecutivestockoptionsandstockpricerelatedbonusesontheproblemofoverstatingearningstoraisestockprices.Bringuptheissuethatpartofthe2008stockmarketcollapseandcreditfailure,whichmayhavebeencausedinitiallybyfinancialexecutivestakingriskswiththeircorporations’assetsthattheywouldnothavetakenwiththeirown,principallyinthecreation,sale,andpurchaseofincrediblyriskyandcomplexmortgage-backedsecurities.
  • AskthestudentstoconsiderSweden’sconceptof“lagom.”Woulditaffectresearchanddevelopmentbycorporations?Wouldithinderotherformsofinnovation?CoulditworkintheUnitedStates? Refer to sidebar 2.8.
  • MaxClarksonofTorontoUniversity’sInstituteofBusinessEthicsstated:“Oneofthefundamentalsofbusinessisthatyouareinvariablyinaconflictofinterestbetweenyourpersonalinterestandthefiduciarydutiesyoubear.”
  • Illustratinghowanoveremphasisonprofitcancauseunethicalbehaviorinlowerechelonemployees’onecorporateexecutivesays,“That’swhenthebosstellsasubordinateto‘moveit’—justgetitdone,meetthedeadline,don’taskformoremoney,timeorpeople,justdoit—andsoitgoesondowntheline.”That“istheheartofunethicalpracticeinbusiness.”
  • ConsiderthestatementofRobertDenham,chairmanofSalomon,Inc.:Thesinglegreatestethicalconcernfacinganylargefinancialinstitutionistoinstillineachemployeeasenseofpersonalresponsibilitytoactivelyseekoutethicalquestionsandtoconfrontthemcandidly.Toooftenindividualstrytoshirktheirobligationsbyclaimingthattheywerefollowingtheordersofsupervisors,orotherwiseclaimthatethicalconcernsweresomeoneelse’sbusiness.
  • Giftgivinginbusinesspresentsethicalobstacles.Manycorporationslimitorentirelyprohibitemployeesfromacceptinggiftsfromsuppliersorcustomers.Forinstance,MicrosoftroutinelymailsanoticetoitssuppliersthatMicrosoftemployeesareforbiddentoacceptgifts.ComparethepracticeofsomeInternetandotherfirmsingivingtheemployeesoftheircustomerssharesoroptionsofstockintheirinitialpublicofferings.
  • NotethatU.S.companiesloseoverabilliondollarsannuallybecauseemployeesusecompanyassets—suchaslong-distancephonecallsandsupplies—forpersonalpurposes.

The Emphasis on Profit

Emphasize:

  • That the focus onprofit, “thebottom line,” canpromoteunethicalbehaviorwithinalargebusinessorganization,especiallywhenseniorexecutivesorderlinemanagersto ensure profit.

The Effect of the Group

Emphasize:

  • That anotherobstacleisthewillingnessofindividualstoactunethicallyinalargegroupwhentheywouldneverdosoalone.Illustratewiththefamiliarstatements “Ididitbecauseeveryoneelsedid it” and “Justfollowing orders.”

The Control of Resources by Nonowners

Emphasize:

  • Howethicalbusinesspracticeaswellascorporategovernanceismademoredifficultbytheverynatureofmodernbusinesscorporationsthatgivesmanagersaccessandcontroloverresourcesownedultimatelybytheshareholders.
  • Sidebar 2.9 titled ‘Failure and Collapse.’

B. TheSteps

Emphasize:

  • That despite the obstacles that sometimes stand in the way of ethical corporate behavior, certain steps can be taken to promote business ethics in corporate life.

AdditionalMattersforDiscussion:

  • Providesomeexamplesofdecisionsthatlocal,nationalandinternationalcompanieshavemade(ormightmake)andhavethestudentsidentifythestakeholdersaffected.
  • ConsiderthestatementofWardClassen,generalcounselofCSCIntelicom,Inc.:“Leadershipbeginsatthetop.Thecompany’schiefexecutiveofficermustmakeitclearthatheorsheregardstheadherencetoethicalstandardsatoppriorityandthatthefailuretoadheretosuchstandardswillbeconsideredaseriousoffense.”
  • In1995LockheedpleadedguiltytoconspiringtoviolatetheForeignCorruptPracticesActanditpaida$24.8millionfine.Subsequently,thecompanyinstitutedasophisticatedonlinetrainingprogramonethicalandlegalcompliance.Between1995and2000itdischargedmorethan200employeesforethicalviolations.
  • Havethestudentsconsidertheeffectsofstatementscontainedinacompany’smissionstatementand/orvisionstatementandthetonetheycanprovide.Arethestudentsawareoftheir school’svisionandmissionstatements?

Involvement of Top Management

Emphasize:

  • Thatthesinglemostimportantsteptowardachievinganethicalcorporationisfortopmanagementtoactasarolemodelforvaluesitwishescorporateemployeestoshare.
  • That employeestendtoadopttop management’srealvalues,assetbyexampleandimplicitstatement.
  • Thatevenwithacurrentmicroscopeoncorporateethics,59%of the largest BritishcompaniesandasimilaramountintheU.S.offernotrainingtolowermanagementwithregardtothemeaninganduseoftheir corporate codeofethics.
  • Sidebar2.10“TheDemiseofArthurAndersen.”

Openness in Communication

Emphasize:

  • That toaccomplishanethicalcorporationtheremustbeanopenandcontinuingdialogueonethics.
  • ThestrategiesforpromotingtheethicalcorporationassuggestedbytheBusinessRoundtable.

Consideration of All Stakeholders

Emphasize:

  • Theethicalimportanceofbusinessmanagementconsideringthemanydifferentpartiesaffectedbybusinessactions,knownas“stakeholdertheory.”Suggestthatstakeholdertheoryisareflectionoftheincreasingrecognitionofsocialinterdependence.

C. TheRewards

Emphasize:

  • Theenormoussizeoftheworld’slargestcompanies.
  • Thatprofitsandbusinessethicsarenotcontradictory.
  • Thatunethicalbehaviorisabusinessliability.
  • Thatbusinessesmustalwaysbeethicallysensitivechanges in society.
  • Thatbusinessethicsreflectbusinessleadership.
  • That inreadingsubsequentchaptersonbusinessregulation,studentsshouldconsidertheethicallapsesthatcontributedtoimpositionofregulation.If ethical self-regulation does not guide business behavior sufficiently, legal regulation often follows quickly.

AdditionalMattersforDiscussion:

  • AneditorialinIndustryWeek,concludes:“Industrialmanagementisneitherasciencenoranart.It’smoreofaprocess.Anongoingconcernforethicsthroughoutanorganizationwillimprovethatprocess.Evenwhentimesaretough.”
  • Foraninternationalperspectiveonethics,seeT.Donaldson,“ValuesinTension:EthicsAwayFromHome,”HarvardBusinessReview,Sept.-Oct.1996.

D. Can a Business Have a Conscience?

Emphasize:

  • The “personhood” rights of a corporation have long been recognized in the law.
  • The Affordable Care Act includes a provision that businesses’ health care insurance plans offered to employees must include coverage for a wide range of contraceptives.

AdditionalMattersforDiscussion:

  • Sidebar 2.11 for an example of a business representing its business owners’ religious beliefs.
  • Discuss the legal issues in Citizens United and the Hobby Lobby case.

Answers to Review Questions and Problems

ContemporaryBusinessEthics

1.EthicsandSociety

Theanswershouldmentiontheincreasinglycomplex,diversesociety.Theproblemsinthe AmericaneconomyhavebecomeaconcernforallAmericansandmanyoftheseproblemsarehighlightedbycorporatecollapsesandgovernmentalbailouts.Mostpeopleseeadirectconnectionbetweenalackofethicalconductinbusinessandthesecurrenttroubles.

2.EthicsandGovernment

Certainly,criminalpenaltiesbroughtagainstunethicalexecutivesandtheirincarcerationhasincreasedethicalscrutinyonbusiness.LawssuchastheFederalSentencingGuidelinesandSarbanes-Oxleyhavecreatedspecificlegalguidelinesanddefinedpenalties.

TheNatureofEthics

3.EthicsandMorality

Moralityconsistsofthevaluesthatguideone’sbehavior,whileethicsisthesystematicstatementofrightandwrongtogetherwithaphilosophicalsystemthatbothjustifiesandnecessitatesrulesofconduct.Theendofethicalexaminationis“thegood.”

4.EthicsandLaw

Lawisafloorforethicalbehavior.Itishardlyaceiling.Asaprocess,thelawdoesnotservewelltoprovidethenecessarysensitivitytoachieveanethicalbusinesslife.Whatthemarketingconsultantisarguablysayingisthatethicsareirrelevanttobusinesslife.Abusinesscanactlegallyyetstillbeactingunethically.Eventually,theunethicalbehaviorcancomebacktoharmthecompany.

TwoSystemsofEthics

5.Formalism

Thelanguageof“inherentwrong”showsabsolutemoralvalues,whichisformalism.Inconsequentialistanalysis,overseasbriberymaybemorallywrongbecauseitcouldleadtobriberyattemptsinthiscountry,eitherbyforeignordomesticcompanies.ItcouldalsohaveadverserepercussionsonU.S.businessorpolicyinforeigncountries.

6.Consequentialism

Inmostbusinesscontexts,thisissuewillbetreatedstrictlythroughconsequentialistanalysis.Aformalistapproachtothisissueshouldquestionwhetherapolicyofdocumentshreddingleadstounacceptabledeceit,akintolying.Also,doesshreddingmakeiteasierforexecutiveslatertolieaboutcompanyactions?Rememberthatlyingisdeontologicallyunacceptable.

SourcesofValuesforBusinessEthics

7.ComparingtheTwoEthicalSystems

a.Eitherintermsofpromotingthecommongoodoroflimitingharmtoothers,itwouldseemthattheseadvertisingappealsareunethical.Leadingtothisconclusionisthemedicallyarguableaddictivenatureoftobaccoconsumptionanditsknownharm.

b.Whiletobaccoadvertisersarguethatadvertisingdoesnotcatalyzeconsumption;itmerelyinitiatesbrandswitching.Theuseofcartooncharactersenhancesrecognitioninyoungchildrenandcanmaskthedangersinherentinsmoking.Asthechildrengrow,theingrainedappealoftheproductcanleadtoinitialuse.

8.LegalRegulation

Lawisfrequentlyreactiveratherthanproactive.Asthe societychanges,societalviewsregardingacceptablebehaviorchanges.Whenregulationisdeemednecessary,lawsareenactedtoeitherdefineorlimitacceptableconduct.Ethicalvaluesreflectedinthelawinclude,respectforthelibertyandrightsofothers,actingingoodfaith,exercisingduecare,honoringconfidentiality,andavoidingconflictsofinterests.

9.ProfessionalCodesofEthics

Thisisanopen-endedquestiondesignedtogetstudentsviewsonlawyersoutintheopen.SharewiththestudentsthatlawyersarecriticizedbothintheBibleandinShakespeare.Sincelawyersaretaskedwithactingzealouslyonbehalfoftheirclients,someonewhohasbrokenthelaworactedunethicallymustbeprovidedlegalassistance.Manypeopledon’tunderstandthis.Thelawyer’sjobisoftentomakesurethatthesystemdoesitsjob.Hencethecases like theO.J.SimpsoncaseandtheCaseyAnthonycase give defense lawyers a bad name.

10.OrganizationalCodesofEthics

a.Thiscynicismalmostcertainlyarisesbecauseofthecontradictionthatlowerlevelemployeesfeelbetweentheethicalvaluesexpressedbycompanycodesandthevalueof“profitfirst”thattheseemployeesperceiveisthetruevalueoftopmanagement.

b.Topmanagementmustleadthroughexampleandbe clearandconsistentin the communicationofethicalvalues.

11.IndividualValues

Students’answerswillvary.

AchievinganEthicalBusinessCorporation

12.TheObstacles

a.Theanswershouldaddresshowanoveremphasisonprofitandtheeffectsofgrouppressuremakeithardtodowhatismorallycorrectincorporatedecisionmaking.

b.Theneedtoretainprovensuccessfulleadershaslargelyledtothisincreaseddiscrepancy.Emphasisonprofitshasmadeitimperativeforbusinessestoincreasepaytothosewhocreatethoseprofits.ThenegativeeffectsofaCEOleavingacompanyforanother,takingnotonlyhisorhermanagementskills,butalsotheirintimateknowledgeofthecompanyoftencompelsoverpayment.Toalargeextent,ifonecompanyiswillingtooverpay,othercompaniesmustdosotoremaincompetitive.Onemightlikenthistofreeagencyinsportswhichexponentiallyraisedsalariestoimplausiblelevels.

13.TheSteps

Corporatecultureisbasedonloyaltyandteamwork.“Tellingon”one’ssuperiorsorco-workersisperceivedasbeingdisloyalandactingatoddsagainsttheteam.Jackallsaysthatinacorporatetop-downhierarchy,strictloyaltyisrequiredofsubordinatesinexchangeformentoringandadvancement.Whistleblowingviolatestheexpectationsofthissystem.Tomakewhistleblowingacceptable,oratleastmoreacceptable,willrequireclearapprovalandmodelingfromcorporatetopranks.Tothisendwhistleblowingisanappropriatesubjectforcorporateethicscodes.

14.The Rewards

Legal regulation lacks flexibility and is inadequately informed to be the only social guide for business decision making.

Business Discussion #1

1.Isitethicalforyoutohireawayfromyourcompetitorasecretarywhomayhaveoverheardsomethingthatwillbeusefultoyou?Isitethicalforyoutosendanattractiveemployeetoabarwhereyourcompetitor’sprogrammershangoutinthehopeofgettingtheinformationyouwant?

Discussthe sectiononindividualvalues.Inthesefirsttwoinstances,one should thinkhowonewouldfeeliftherivalcompanydidwhatone wascontemplating.Certainlyonewouldfeelthatunethicalbehaviorwasbeingused.One should think whether one wouldbehappytoseeone’scontemplatedactionspublicized?Certainlynot.Notethatthestealingormisappropriationoftradesecretsisillegalsobothethicalandlegalconcernsarebeingviolated.

2.Isitethicalforyoutohavesomeonehuntupandreadeverythingpublishedbyyourcompetitor’sprogrammersincasetheymayhaveletslipsomethingthatwillhelpyou?

Thisthirdinstancepresentsnoproblemsfromalegalorethicalperspective.Informationreadilyavailableinpublicsourcesis“fairgame”andsimplydoinghonestresearchisagoodbusinesspractice.

Business Discussion#2

1.Iffollow-upanimalstudiesofthenewdrugdonotshowsignificantsideeffects,woulditbeethicalforthecompanytotellthetworesearcherstokeepquietabouttheirconcerns?

Discussthemoraldifferencebetweentellingalieandmerelynotspeaking.AslongastheFDAisproperlyinformedofallconcernsandthepublicappropriatelywarnedaccordingtoFDAstandards,itmaybeethicalforthecompanytoasktheresearchersnottobroadcasttheirconcernsandpossiblythreatenthemarketingoftheproduct.However,thisconclusioniscertainlydebatable.

2.Isitethicaltoputanimalsatriskinordertotestthedrug’ssafety?

Usethisdiscussiontoillustratethedifferencebetweenformalistapproaches,suchas“harminglivingcreaturesisalwayswrong”or“Godgavehumansdominionovertheanimals,”andconsequentialistapproachessuchas“thebenefittohumansoutweighstheinjurytoafewanimals”or“insensitivitytoanimalwelfareleadstoinsensitivitytohumanwelfare.”

3.IsitmorallyrightforPharmCotomaximizeitsprofitevenifitmeansmanymenwillhavetoremainbald?Doesyouranswerchangeifthedrugcuresrheumatoidarthritis?AIDS?

Thelatterquestionsaddressveryrealissues.Fromapersonalperspective,iscomparingadrugthathelpsuserscosmeticallytoadrugthatpotentiallysaveslivesatrulyvalidcomparison?Fromabusinessperspective,askstudentsifitismoraltorequirepharmaceuticalcompaniestosurrenderresourceswhenothersinthepropertysystemarenotsurrenderingtheirs?Thepointisthatthemoralimperativeofhelpingthoseinneedwhensocietycaneasilydosoleadsasmuchtogovernmenttaxationofalltopurchasethedrugsfordistributiontothepoorasitdoestomakingthecompaniesthatmadethedrugbeartheburden.And,ofcourse,thereisthelossofincentivetoproducenewdrugsforotherdiseases.Ifitismoraltohelpthoseinneed,isitmoraltorequirepeopletohelpthoseinneed?

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