McAdams - Law, Business, and Society - 10e, solutions manual and test bank 0073525006
Chapter 2
BUSINESS Ethics
CHAPTER GOALS
Our objective in Chapter Two is to introduce self-regulation as a technique for achieving a more desirable role for business in society. We find that students often do not recognize the relationship between the free market, ethics and the law. Therefore, the instructor might remind the students that the law is probably most accurately regarded as a last resort after the market and self-regulation (ethics) have demonstrably failed. Therefore, ethics is not to be addressed in the abstract or as an afterthought. Rather, it should be at the heart of the students’ inquiries.
CHAPTER LEARNING OBJECTIVES
At the end of this chapter, students will be able to:
1. Describe some of the ethics issues associated with America's recent banking and finance crisis.
2. Discuss America’s current moral climate.
3. Discuss the leading ethical decision-making theories.
4. Distinguish between teleological and deontological ethical systems.
5. Distinguish utilitarianism and formalism.
6. Describe Kohlberg's theory of moral development.
7. Describe some of the forces that encourage unethical behavior in the workplace.
8. Explain the general purpose of ethics codes in the workplace.
9. Explain the general requirements of the Foreign Corrupt Practices Act.
CHAPTER OUTLINE
Part One—Introduction to Ethics
Self-regulation is one way in which society might achieve more desirable outcomes and business might occupy a more responsible role within society. Here we examine the ethical climate of business and the role of ethics in business decision making.
PRACTICING ETHICS: Baseball Bats encourage Subprime Loan Approvals. Maggie Hardiman, a former appraiser, describes the pressure to approve weak loan applications. Is the pressure to produce routine in American business practice, or is Hardiman’s experience an exception to the norm?
The Financial Crisis: A Corporate Scandal? A variety of forces have led to the ongoing financial crisis facing the U.S. and nations across the globe, including dubious lending practices, corporate greed. While pervasive criminal conduct might never be proven or perhaps did not occur, Wall Street’s reputation has been damaged. Bernie Madoff’s Ponzi scheme and Tyco Chief Executive Officer Dennis Kozlowski infamous $2 million birthday bash for his wife on Sardinia and his $6,000 shower curtain which allegedly was at least partially funded with looted corporate money. Yet, business is still for many a noble enterprise.
"Underwater?" Walk Away An argument in support of Homeowners who are “underwater" on their mortgage (owe more than the house is worth) and walk away from mortgage payments even if they can afford to pay is that the imbalance of power between bankers and borrowers is inherently unfair. On the other hand, such strategic defaults on mortgages erode trust and the strength of promises, and may also lead to higher interest rates.
AMERICA’S MORAL CLIMATE
Many Americans are concerned that the U.S. is suffering a moral decline, and heading to a future in which unethical acts lead to prosperity.
Sex or Cell Phone? Some cannot stand missing a phone call, even interrupting intimate relations to answer.
College Students Studies and campus scandals reveal that cheating is prevalent among today’s college and even MBA students. Over the last century, college students’ values may have shifted. Some are concerned that the modern parental reminders that they are “special” leads to narcissism and underdeveloped empathy.
My Cheating Isn’t Really Cheating At one respected Midwestern University, another professor’s online answer key leads to mass cheating on a take-home exam, and a chance to study the reasoning behind cheating. Most of the students tried to minimize, justify, or rationalize their conduct.
A. Ethics Theories
Business ethics broadly involves measurement of business behavior based on notions of right and wrong. To the business person, what is ethical is often nothing more than “what my feelings tell me is right.” That view has much support from existentialist philosophers. Existentialist philosophers believe that there is no inherent right or wrong; each person must reach his/her own conclusion about what is right and wrong. Gandhi believed that we are collectively responsible for the wrongs of all others.
Universal Truths?
Religion Religions are ethical forces of great importance in society. Religions often have universal precepts which are supposed to guide a person’s life.
Religion at work is becoming more prominent, and some argue that business needs to embrace the soul to become its most effective.
http://www.bbc.co.uk/religion/ethics
Religion at Work
Libertarianism. The view that morality springs from the maximization of personal freedom.
Virtue Ethics. A broader view in which the ultimate goal is to achieve a principled character. The assumption is that a person with such a character will reach ethical decisions instinctively.
http://plato.stanford.edu/entries/ethics-virtue
Teleology or Deontology—An Overview
Teleological ethics focuses on the consequences of a decision. A morally correct decision is that which produces the greatest good. Deontological ethics focuses on principle rather than outcomes. A deontologist would refuse to do an act that was morally wrong, even if that act might lead to the greatest social good.
Teleology
Utilitarianism. A brand of teleology in which the greatest good for the greatest number is the goal.
http://www.hedweb.com/philsoph/utillink.htm
Deontology
Formalism. The epitome of deontology. Ethics is measured by the “rightness” of rules. The moral person is a person of goodwill and ethical decisions are based on what is right, not on the consequences of those decisions.
B. Using Utilitarianism and Formalism: Layoffs, Part I
The instructor might wish to revisit the Practicing Ethics entries at the beginning of this chapter at this point and ask the students to identify whether their responses reflected utilitarian or formalist reasoning.
Are Layoffs Unethical? Despite its policy of not laying off employees, Toyota has shut down facilities and laid off thousands of temporary workers. However, the Fremont, California plant shut down was followed by a partnership with Tesla to manufacture electric cars at the that plant which may create many jobs.
C. Layoffs—Part II
“Loyalty Pays Off?” Des Moines Register
PRACTICING ETHICS: Career and Family, Are career and family goals ethically compatible?
Part Two—Managerial Misconduct?
Corporate Ethical Climate
A Gallup poll reveals that for public attitudes toward big business are significantly unfavorable. These views are unfortunately supported by wrongdoing employees observe in American industries.
Why Do Some Managers Cheat?
Moral Development
Psychologist Lawrence Kohlberg has attempted to show empirically that moral judgment improves with both age and education. He has identified what he believes to be six universal stages in moral development. At the highest stages, individuals make independent moral judgments on moral issues.
http://www.davidsongifted.org/db/Resources_id_11335.aspx
Feminine Voice. In response to Kohlberg, Carol Gilligan argues that males and females have different approaches to morality and that females would be unlikely to reach the highest levels of ethical morality in Kohlberg’s schematic.
Reason or Emotion? Controlled or Automatic? moral decision making may be the product of a dual process system employing both automatic emotions and controlled reasoning in different parts of the brain.
Moral Identity? Moral identity has gained some recognition as an important aspect of moral development, including the will to act.
Organizational Forces
Studies show that organizational forces are also influential on workplace ethics. A 2004 survey found a large majority of CEOs believe that corporate ethics standards have risen since the recent outbreak of corporate scandals. Surveys of employees likewise suggest that some improvement has occurred. ) A 2009 Ethics Resource Center survey of nearly 3,000 employees nationwide clearly affirmed the importance of a strong ethical climate. The rate of misconduct is significantly greater in organizations with strong ethical cultures compared to those with weaker cultures.
http://www.corporate-ethics.org/
The Boss
The image of bosses has been marred in the ongoing financial crisis, who are seen as culprits who still are rewarded with big bonuses. Substantial research supports the view that bosses are crucial in setting the ethical climate in an organization.
The trailer “Wall Street: Money Never Sleeps.”
Bill Hawkins: A Tough Decision The Medtronic chief executive’s decision to recall Sprint Fidelis was made with focus on doing the right thing and upholding the company’s mission rather than its probable effect on stock price or market share.
Bank Robber to Boardroom Source: “How Troubled Past Finally Caught Up with James Minder,” by Vanessa O’Connell
Ethics Teachers? One academic holds that “managers are the ethics teachers of their organizations.” While recent events suggest that many of the examples have not been positive ones, good role models exist, such as Bill Neukom, lead owner of the major league baseball team, the San Francisco Giants.
http://www.darden.virginia.edu/corporate-ethics
Pitcher Passes Up $12 Million 32-year-old pitcher Gil Meche gave up a lucrative last year on his contract when he retired from the Kansas City Royals because his shoulder injury would prevent him from earning his salary. Source: Tyler Kepner, "Pitcher Spurns $12 Million, to Keep Self-Respect," The New York Times, January 26, 2011 [http://www.nytimes.com].
Part Three—Business Ethics in Practice
A. Introduction: Ethics Codes
Corporate codes of conduct have long been a tool for organizations committed to ethical behavior. In the wake of the scandals at Enron and WorldCom, Congress passed the Sarbanes-Oxley Act (SOX), which now requires publicly-held corporations to adopt a code of ethics for senior financial management or explain why they have not done so. Whether the new attention to corporate ethics codes will prove beneficial remains to be seen, beyond the sympathetic judicial treatment a corporation’s compliance with its own corporate ethics code may have in the event of criminal charges.
http://www.conference-board.org
Building an Ethical Culture at General Electric General Electric requires each business unit to provide a quarterly report regarding employees’ completion of required ethics training and agreement to GE’s ethics guide. The training is contextual and attempts to immerse employees in discussions regarding actual ethical dilemmas they might face on the job.
B. Bribery Abroad
Multinational firms face an especially difficult situation because bribery is an accepted way of doing things in many cultures. Failing to pay bribes would place these firms at a disadvantage economically.
The Foreign Corrupt Practices Act (FCPA) makes it illegal for American companies (and managers) to offer bribes to foreign officials in an attempt to secure business. “Grease” payments to expedite what should be routine governmental action and payments legal in the host country are not prohibited. Civil and criminal penalties are provided for violations.
http://www.fcpaenforcement.com/explained/explained.asp
Controversy.
Controversy exists over the FCPA because it preserves the ethics of American businesses but harms their competitiveness internationally. Now, however, other nations are recognizing that corruption is a great risk to the global economy. International initiatives also exist, such as the OECD Anti-Bribery Convention, the United Nations Convention against Corruption, and the Inter-American Convention.
http://www.oecd.org/topic/0,2686,en_2649_34859_1_1_1_1_37447,00.html [N.B.: This is a revised address since the printing of the text.]
United States Corruption. The U.S. ranked 19th in the 2006 Gallup Worldwide Corruption Index which asked residents in 101 nations whether they believed corruption was widespread in business and/or government in their nation.
Bribery in Practice. Bribery appears to be a routine costs of daily life in some countries. China executed the former head of its food and drug agency in 2007 for accepting $850,000 in bribes from Chinese pharmaceutical companies. In the U.S. there seems to be a remarkable new zeal in attacking bribery.
Practicing Ethics: Bribe the Terrorists? Banadex, a division of Chiquita Brands International, paid bribes to Colombian rebels over a period of years, thought necessary to protect employees and company property at its Colombian operations. One group receiving these bribery payments was the AUC, designated in 2001 that continued for a year after the 2003 alleged discovery by Chiquita of AUC’s designation – making such payments
unlawful. During the time of Chiquita’s payments to AUC, approximately 4,000 Colombians were killed in the banana-growing region of Colombia. According to an OAS investigation, rifles and ammunition reached the terrorists with Banadex’s assistance.
C. Corporate/White-Collar Crime
As clearly evidenced in recent years, corporate crime is widespread: Martha Stewart, the Enron Bosses,, Tyco’s Dennis Kozlowski, WorldCom’s Bernard Ebbers, and Adelphia’s John Rigas are all among those convicted. The 2009 Pricewaterhouse Coopers Global Economic Crime Survey found that over 30 percent of the 5,400 companies surveyed in more than 40 nations reported having been victims of at least one substantial economic crime during the two previous years. The 2007 Pricewatehouse Coopers survey had shown that internal fraud controls alone do not stop misconduct.
Is Theft Sometimes OK? Source: Greg Wilcox, “It’s All Relative,” The Des Moines Register, December 12, 2005, p. 6A.
Punishment. In response to the recent spate of big business crime, Congress strengthened certain federal criminal laws by passing the 2002 Sarbanes-Oxley Act (SOX). Congress had previously enacted federal sentencing guidelines in an effort to discourage both white-collar and street crime and to address a general belief that many of the criminals are not punished even if caught.
SOX compliance costs can be quite high, but A 2009 Securities and Exchange Commission study showed that the benefits of SOX outweigh these costs.
Sentencing Federal sentencing guidelines, issues by the United States Sentencing Commission, provide ranges within which judges are advised to impose sentences. The guidelines are designed to provide greater predictability and consistency in punishment. However, recent Supreme Court decisions have reduced the power of the guidelines by restoring federal judges’ authority to deviate from them.
White Collar Crackdown? While in the past white collar convicts have received relatively lighter sentences than street criminals, recent examples of white collar sentencing have been harsh. Source: Andrew Ross Sorkin, "White-Collar Jail Terms: Who Got What," New York Times, June 29, 2009 [http://dealbook.blogs.nytimes.com/].
D. Whistle-Blowing
Former GlaxoSmithKline quality control manager, Cheryl D. Eckard, will receive at least $96 million of the British drug maker's settlement of federal criminal charges involving a contaminated manufacturing plant and the sale of allegedly adulterated drugs because of her role as a whistle blower (or “whistleblower”). Whistle blowing(or “whistleblowing”) seems likely to increase with the passage of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (See Chapter 8.) which extends rewards to those revealing financial fraud in private sector contracts.
http://www.phillipsandcohen.com
Retribution. Despite these actions, whistle-blowers often pay a high price for their decisions to go public.
INTERNET EXERCISE AND SUPPLEMENT
Answers to Internet Exercise
1. a. Their answer: Like Socrates, most psychologists would agree that ethics can be taught. Research has found that “dramatic changes occur in young adults
in their 20s and 30s” with regard to the problem-solving strategies they use to deal with ethical issues; that the extent of the change correlates with the number of years of formal education; and that deliberate educational curricula can influence the awareness of moral issues and the judgment process. See http://www.scu.edu/ethics/practicing/decision/canethicsbetaught.html.
b. Discussion
Student Project:
Locate a website that in some fashion discusses business ethics or raises an ethical issue in a business context. For example, you could find a news article about a particular business or industry that is facing some ethical challenge; or you could find some article that discusses business ethics or some aspect of business or corporate ethics or responsibilities; or you might find the home page of some business that you think illustrates some ethical value (either positively or negatively). Explain the ethical issue raised. Provide ethical arguments for resolving it in at least two different ways.
Supplemental Web Addresses:
http://www.scu.edu/Ethics (Markkula Center for Applied Ethics, Santa Clara University)
http://www.singerpubs.com/ethikos (ethikos and Corporate Conduct Quarterly)
http://onlineethics.org (Ethics Center for Engineering and Science)
ANSWERS
Answer to Baseball Bats Question
Discussion, but see ethics data later in chapter, particularly “Organizational Forces” data relating to pressure to cheat and workplace misconduct.
Answers to Big Bankers Question
New York Attorney General Andrew Cuomo, in releasing a study of the compensation controversy, said:
“When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well. And when the banks did very poorly, they were bailed out by taxpayers, and their employees were still paid well.”
The study concluded that pay had become “unmoored” from performance.
Source: Barrie McKenna, “In Wall Street’s Meltdown, 5,000 Made a Million,” The Globe and Mail (Canada), July 31, 2009, p. B1.
On the other hand, the banks have been extremely successful in the years since the bailout, arguably suggesting that their personnel compensation decisions were wise for the longer term.
Answers to “Underwater” Questions.
- Opinion. The mortgage contract constitutes a promise to pay if able, thus voluntarily defaulting seems to be unethical from a formalist perspective. The argument is more complicated from a consequentialist cost/benefit perspective since it involves making some very complex calculations about not only the well being of the borrower but the borrower’s neighbors and the whole of society. One of the big risks would be a long-term loss of trust that is vital to efficiency and to minimizing transaction costs.
- Those who make their payments are burdened with a higher price to compensate for those free riders who enjoy the benefits of the system without paying for those benefits.
- Many banks did lend to those who clearly could not pay, but federal “easy money” and rules encouraging minority and low income home ownership also stimulated the mortgage bubble.
Sources: Kenneth Harney, "Professor Advises Underwater Homeowners to Walk Away from Mortgages," Los Angeles Times, November 29, 2009 [http://articles.latimes.com/], Gail Marksjarvis, "Personal Finance: Vacancies Leading to Ethical Crisis?" Arizona Daily Sun, October 10, 2010 [http://azdailysun.com/], and David Streitfeld, "Owners Stop Paying Mortgages, and Stop Fretting," The New York Times, May 31, 2010 [http://www.nytimes.com/].
Answers to College Students Questions
- Opinion.
- A study built upon a small sample of 230 upper division undergraduate business students found that those going to church more frequently were less likely to cheat while those going to church less frequently were more likely to do so. Taking a course in business ethics had no influence on cheating behavior for the total sample of students. Students who were not highly religious were less likely to cheat if they had taken a business ethics course. And among highly intelligent students, cheating was significantly reduced if the students had taken a business ethics course. Likewise, highly intelligent students who were also highly religious were less likely to cheat.
- Prentice cited research by Jonathan Haidt finding that people who strive primarily for wealth and achievement are less happy, on average, than those who focus on relationships, intimacy, spirituality, and leaving a legacy to society. Prentice cited other studies demonstrating that those who act ethically tend to be happier than those who do not. Prentice also cites work by Richard Layard indicating that those with a strong moral sense tend to be more prosperous than others.
Answers to Narcissism Questions
- Opinion.
- Sara Konrath and Edward O’Brien, primary authors of the empathy study, speculated that the reasons for declining college student empathy might include: a. increased exposure to media and violent video games, which numb us to the pain of others. b. social media may allow students to connect easily with friends and tune out when they don’t feel like responding to others’ needs. c. the hypercompetitive atmosphere and celebrity reality shows may increase attention to the self and decrease attention to the needs of others.
Answer to My Cheating Isn’t Really Cheating Question
The authors identified four broad forms of rationalization: 1. Separation of self from action. (Distance themselves from the act.) The student committed the action but is not responsible
for doing so because of: a. confusion over whether the act was wrong or b. cheating was out of character for the individual. 2. Third party interference (Blame someone else.) Many students placed the blame on the professor either for not being clearer or for giving a take-home examination when the answer was available on the web. The test was an “attractive nuisance” of sorts. Some students also referred to the propensity of other students to cheat as a justification for their own cheating. 3. Redefined Action (Redefine the behavior as a good thing.) Collaborating to receive help is wrong, but helping others is not wrong and cheating in this collaborative manner is considered socially acceptable. 4. Alternative Outcome (the outcome made cheating worthwhile). This was the most common form of rationalization. In it students either minimized the seriousness of their behavior by comparing it to other, more serious forms of cheating of they said that collaboration in this instance could not be a serious wrong if it enhanced learning.
Answer to Religion at Work Questions
1. The Wall Street Journal reports that an increasing number of schools are offering courses addressing spirituality and self-fulfillment in the workplace. Scholars claim people are yearning to lead more “integrated” lives, and that we want to pursue jobs that express our personal values and make contributions to society. Columbia and Stanford are among the schools giving attention to workplace spirituality. See Ronald Alsop, “M.B.A. Track/Focus on Academics, Careers and other B-School Trends, “ The Wall Street Journal, January 11, 2005, p. B6.
2. As seen in a 2007 Pew survey, throughout much of Africa, Asia, and the Middle East, large majorities feel that faith in God is a necessary foundation for morality and good values, while in the relatively wealthy and secular nations of Western Europe, the majority belief is that morality is possible without religious faith. Source: The Pew Global Attitudes Project (Thursday, October 4, 2007) Sources: The Gallup Poll, May 2–4, 2004 and Rob Moll, “Outer Office, Inner Life,” The Wall Street Journal, January 19, 2010 [http://online.wsj.com/].
Answers to Deontology Questions
1. Autry did what he “felt was right” suggesting that he was moved by principle; a deontological position.
2. Jones asked that the theft be directed to large, national businesses in the knowledge that the costs would be passed on to all other shoppers in the form of higher prices.
Rushworth Kidder decried what he described as the outcome-based, consequentialist nature of Jones’ advice. Clearly, poor families’ lives would be immensely improved if they did as Jones suggested. Kidder says Jones’ advice “skates perilously close to the moral bankruptcy of ‘the end justifies the means.’” Thus, if outcomes alone determine ethical propriety, “any bad policy is acceptable if only it can be seen to benefit the poor.”
Kidder went on to say that most people, however, approach cases like this one from a Kantian/deontological perspective; trying to obey a principle “we’d like
everyone in the world to obey.”
Beyond the consequentialist and deontological perspectives, Kidder went on to raise a third ethic – the care-based principle of the Golden Rule. Kidder asked about the harm of shoplifting to the thieves themselves: “How does it degrade their self-respect, harden their sentiments, and increase their distrust of others?”
Source: Rushworth Kidder, “Go Forth and. . .Shoplift? Ethics Newsline, January 4, 2010 [http://www.globalethics.org/newsline].
3. Poole’s reasoning seems to be consequentialist in tone in that he implicitly rejects the right or wrong, principled, formalist standard that cheating is always wrong in favor of embracing the total good produced by Armstrong as a cancer research/treatment advocate.
Answers to Toyota Question
Opinion.
Answers to Aaron Feuerstein and Malden Mills, Part I Questions
1. a. Formalist reasoning—he was acting without regard to consequences, but based on a value (rule) that he felt was imperative.
b. Discussion
2. a. Clearly, utilitarian reasoning based on ultimate consequences of the decision.
b. Discussion. This statement of the bishops could be viewed both as a fast rule (support the dignity of each human person) and, therefore, a formalistic statement or as focused on the results of an action (in fact supporting the dignity of each human person) and, therefore, a utilitarian statement. Then the issue is whether Useem’s rationale violates both of these concepts.
3. Discussion. Owners of closely-held companies have the power to be capricious and unkind, as history amply reveals.
Answers to Aaron Feuerstein and Malden Mills, Part II Questions
1. a. Certainly some layoffs may be defended on free market grounds. That is, greater efficiency means, among other things, that some jobs will be saved that might otherwise be lost and more jobs might be added. Over the long term, greater efficiency will mean benefits for all in the form of better products/services and lower prices. So it is hard to see how a universal, formalistic rule could be applied, without considerable government oversight and regulation. On the other hand, perhaps the decision should not always be left to business decision makers.
b. Discussion
2. The reading points out that poor business decisions may have also played a role, e.g., the arguable overbuilding after the fire. Certainly, protecting his employees had a financial cost and, as such, contributed to later financial difficulties. Moreover, framing the question in an either-or fashion “limits our ability to effectively address deeper issues. … How do we best serve our customers? How, long term, do we maintain a viable business that contributes to the community?” Barbara Ley Toffler, “Malden Mills’ Owner Lacked the Vision Thing,” Newsday, December 17, 2001, p. A24.
3. It is perhaps worth pointing out to students that Feuerstein did not in fact protect his workers “at all costs.” Even in the original story, about 400 workers had not been returned to work. Prior to the bankruptcy, the business was down to 1,200 employees. Thus, it might be questioned whether Feuerstein was really applying a deontological approach at all.
4. Discussion. They may have more quickly retooled or moved for other opportunities, instead of remaining with the mill. The economy was more robust in December,1995 at the time of the fire than in November, 2001 when the bankruptcy was filed.
5. Discussion. One might profitably turn the question around for students’ consideration: Do you have an obligation to boycott a business for decisions they make that you find ethically unsupportable?
Answer to Career and Family Questions Students might be asked to reflect on these questions individually, and then discuss their written answers in pairs before a larger class discussion. Students might also be asked to consider the factors that might have contributed to the disturbing number of children’s deaths due to heat exhaustion while trapped in automobiles, and what social policies, employers’ practices, etc. might ease the burden the working families.
a. Discussion.
Answer to Corporate Ethical Climate Questions
1. Both legally and morally, we would generally be disinclined to attach blame unless we could show the local owners somehow helped to cause the spill or were somehow so negligent in their behavior that they should have realized the consequences. No such facts have appeared.
2. The boycott may be defensible as one means of encouraging changes in BP behavior. The boycott has the disadvantage of most directly harming the innocent people at the local stations. But the boycott is perhaps more justifiable in this case given BP’s lengthy history of tragedies and apparent misconduct. Perhaps we would be interested in knowing the extent to which local owners have pressured BP to mend its ways.
Answers to Bill Hawkins Questions
1. Of course, many issues would have been considered. Hawkins mentioned: the company culture, the balancing of the various costs and benefits including the risk of removing already implanted devices, the fact that all medical devices carry risks, the ambiguous data, the product was extending people’s lives, the FDA had never told Medtronic to remove the product (not included in the textbook account of the story), the company’s assessment of its own responsibilities, the fact that some of his own family members had benefited from Medtronic products (not included in the textbook account of the Sprint Fidelis decision), and – presumably - his own career considerations (not mentioned in Hawkins’ account).
2. Ethicist Chris MacDonald said the decision clearly was not easy. MacDonald pointed to the ambiguous failure data that made the Sprint Fidelis situation one of uncertainty; that is, not a clear case of a product killing people. The uncertain statistical findings meant that the Sprint Fidelis might have been just as safe as the older leads. Taking the leads off the market prematurely might have encouraged physicians to remove defibrillators, a very risky procedure. And in any case, MacDonald noted that no health product is 100 percent safe and effective. See Chris MacDonald, “Can Life-Saving Decisions Really Be ‘Tough Calls’?” The Business Ethics Blog,” October 15, 2009 [http://www.businessethics.ca/blog/].
Answer to Gil Meche Questions
1. Opinion
2. His reasoning appears to be largely formalist. “I wasn’t earning my money.” “[I]t just wasn’t the right thing to do.” He seems to be relying on principled reasoning rather than assessing the greatest good for the greatest number. At the same time, Meche has said that he wants to spend more time in his boyhood home and with his friends and family. And he has mentioned the struggle of playing hurt, of trying to summon enthusiasm, and of struggling through his throwing program.
Answers to Questions—Part Two (p. 65)
1. a. According to one survey, 46% of those polled said it was very important to have heroes in our lives, while 40% said it was somewhat important. Karlyn Bowman, “Vanishing Heroes?,” The American Enterprise, September 2000, p. 60.
b. In the same survey, 64% said there are fewer heroes today than in the past. Id.
c. Discussion
2. Dan Gainor, director of the Business & Media Institute and the cited study’s author, says he finds the shows very entertaining, but that the plots have a pernicious effect on how businesspersons are perceived. Source: Editorial, “TV’s Killer Capitalists,” The Wall Street Journal, July 14, 2006, p. W9.
3. Discussion
4. 89% of respondents said they would not flirt with their boss or someone else who could help them get a promotion; 10%s said they might; and only 1% responded that they would do it. Money Magazine ethicists said that flirting is neither criminal nor unethical. Neither is trying to appear as attractive as possible to the person making the big decision. However, encouraging the person to believe that your interest is more than playful and that you might be sexually available to them, and “then you’ve crossed over to the dark side.” Source: “Money and Ethics: How you stack up,” (January 23, 2008), [http://money.cnn.com/galleries/2007/moneymag/0705/quiz.money_ethics.moneymag/ ]
Answer to Ethical Culture at General Electric Questions
1. It isn’t clear that ethics training, even with a contextual approach, is having much impact. About half the respondents to an Ethics Resource Center survey reported observing at least one type of questionable conduct in the past year, about the same proportion as in 2000. Moreover, the surveys found that employees are less willing to report misconduct. Of the respondents who observed misconduct in 2005, 55% said they reported it to management, down from 65% in 2003. Ethics experts say employers might not be tailoring programs enough to different types of workers at different organizational levels. Source: Erin White, “What Would You Do? Ethics Courses Get Context, “Wall Street Journal, June 12, 2006, p. B3.
2. The Kelly Global Workforce Index survey of about 100,000 people in 34 nations found 90 percent of the respondents saying they would lean toward a company perceived to be ethically and socially responsible. Fifty-three percent of baby boomers said they would forgo higher pay or a promotion to work for a company with a good reputation. Source: Carl Hausman, “Companies that Act Ethically Have Edge in Recruiting Talent: Survey,” Ethics Newsline, November 2, 2009.
Answers to Bribe the Terrorists? Questions
1. Chiquita’s general counsel claimed that the bribes were morally proper to save lives. Originally, the payments had been lawful, and Chiquita argued they were not voluntary and were a response to extortion. Prosecutors said that Chiquita could have promptly left Colombia, but made a business decision to stay. Colombian officials point to Chiquita’s alleged role in arms smuggling and say that the company was not facing extortion at all. Rather, they say the company knew that AUC was directing its violence at its various rivals, including union workers. Business wanted low-wage labor in Colombia, and AUC regarded union organizers as left-wing guerillas hoping to overthrow the government.
2. Law.com asked experts about how the episode should have been handled:
As for handling the payments to the AUC: Robert Litt, says his client [former Chiquita general counsel Robert Olson] acted appropriately. “If you child is kidnapped by terrorists who demand money to return your child, will you pay it. I think yes, you would. I would…there was no other way to protect [Chiquita’s] people.”
Professor Deobrah Rhode, head of Stanford Law School’s Keck Center on Legal Ethics and the Legal Profession and founding director of Stanford’s Center on Ethics, doesn’t condone what Chiquita di, but she acknowledges that Olson was faced with a difficult decision. “This is a really hard place for a general counsel who wants to do the right thing,” Rhode says. Yet Rhode believes Chiquita’s actions, however well-intentioned, were wrong because the AUC used the money to buy weapons that killed innocent people.
She sees the Chiquita tale offering an important lesson for other companies struggling with moral dilemmas. People of integrity often feel entitled to respond in kind when they think someone else is doing wrong to their company or their employees, Rhode observes. But in the end, Rhode says,
there is only one answer: Follow the law. You simply cannot establish a rule of law if multinational companies feel free to violate it when their own employees and interests are at stake, she concludes…
Source: Sue Reisinger, “Blood Money Paid by Chiquita Shows Company’s Hard Choices,” Corporate Counsel, Nocember 26, 2007.
3. Prosecutors’ particular concern was whether Chiquita executives had ignored the law in continuing to make payments for nearly a year after they had first reported the bribes. Prosecutors apparently were lenient, in part, because Chiquita volunteered critical information subsequent to the company’s guilty plea. Apparently, national security considerations played a role in the deliberations in that concerns were expressed about instability in the region if Chiquita withdrew. Further, the Bush Administration may have been conflicted since it had condemned all terrorist activities, but did not want to undermine a newly-elected, friendly Colombian government. All of the facts about government deliberations over the Chiquita case are not publicly available at this writing.
Answer to Is Theft Sometimes OK? Perhaps he meant that the thief was taking a small measure of retribution against the corporate giants that, according to the letter writer, abuse Americans.
2. Discussion. Justice seems to require going after the big wrongdoers in American lift, but the hurdles are quite substantial. Corporate fraud is difficult to discover and to prove. Investigations and prosecutions are extremely expensive. Very aggressive pursuit of white collar crime may cause major economic bumps, including job losses. Answers to White Collar Crackdown Question
Opinion. Law professor and former U.S. Justice Department prosecutor commented on the increasingly stiff white-collar crime sentences:
“It is hard to justify sentences like the 50 years imposed on white-collar defendants on the need to protect society from future harm. It is unlikely that someone like Mr. Petters (convicted of 20 counts of fraud and other crimes in schemes that cost investors an estimated $3.7 billion – ed.) would ever be in a position to defraud investors again, and he presented no physical threat. Whether other potential offenders will be deterred because of the sentence is also open to question, because many white-collar defendants often do not start out planning to defraud investors or customers, but pursue the fraud to avoid disclosing losses from poor business decisions. . . .
1. Source: Peter Henning, “Sentences Get Harsher in White-Collar Cases,” DealBook, The New York Times, April 12, 2010 [http://dealbook.nytimes.com/].
Answers to Whistle Blowing Questions
1. Discussion
2. Discussion
Answers to Chapter Questions
1. Mary could find other ways to help the high school find the necessary funds. Are there other corporate sponsors or community funds available? Could she plan a school fund-raiser, or help the school apply for a government grant? Alternatively, Mary could seek out other sales prospects or ask other customers to increase their orders. The donation scheme is difficult as tye cash gft would likely be used for basic necessities like textbooks. The school likely has an internal purchase approval system to detect kickbacks as well. What would Mary’s colleagues think? What if everyone did this? Will Lincoln and other similarly treated customers come to expect this – and what will the impact of that expectation be? Further, Mary is under amoral obligation to act in the interests of those who depend on her. The “real Mary” decided not to offer Lincoln High School a donation. She knew that her manager and other supervisors would object. She didn’t get her bonus. However, her reputation as a hard worker with integrity under pressure led to a promotion and higher pay. Source: Shel Horowitz, “Should Mary Buy Her Own Bonus?” Business Ethics, January 23, 2008.
2. The following response is that of Carl Kaufmann:
The issue of private medical files involved DuPont’s Belle, W. Va. plant and I note, in passing, that the ethical argument came up only because DuPont does scrupulously maintain employee health records. The company decided not to comply with the government demands and the issue was decided by an outside refereea federal judgewho ruled that DuPont must turn over the records, but that the government must observe strict limits to protect confidentiality. This is how this type of tough case should be decided, I think, by a third party in a legitimate process where all sides can be fairly considered.
3. Some studies examining differences in ethics by gender:
a. A survey of nearly 3,000 undergraduate business students from 58 universities and colleges in 32 states regarding certain general ethics-related attitudes and the degree of “ethicality” these students possess reached similar conclusions generally reported in the literature: female survey participants are slightly but significantly more ethically inclined than male survey participants, and survey participants who report being very religious are slightly but significantly more ethically inclined than survey participants who are less religious. Source: “Ethical Attitudes of Future Business Leaders: Do They Vary by Gender and Religiosity?” Business & Society, Vol. 45, No. 3 Septemer 2006 (Sage Publications) pp. 300-321.
4. a. Discussion
b. Discussion. Bok argues that unmarked patrol cars fall into the only category of moral lies, that is, those approved in advance by the general public.
c. Discussion
5. Discussion
6. The results drawn form a sampling of 435 adult Americans:
a.-b. Yes. Other factors most often mentioned were productivity, achievement, and life expectancy. But there was general agreement that ability to pay afforded the only workable standard, as well as a rough measure of productivity and achievement.
c. A consensus approved testing without informed consent on persons judged to be “unproductive” or “undesirable.”
d. $28,000.
7. Discussion
8. Discussion as to ethical responsibility:
a. To protect customers.
b. To allow customers freedom of choice.
c. To enhance the return on owners’ investments.
9. The executive response:
Yes—17 (33%)
No—34 (67%)
10. a. In one survey, about 60% of employees and executives said they believe taking office supplies home for personal use is unethical; less than half considered sending personal e-mails from
their desk to be unethical. Walker Information, Inc., “Ethical Issues in the Employer-Employee Relationship,” March 2000, a summary of which is available through .
b. In the same survey, 40% of employees believed their employers are committing a serious ethics breach when they monitor their e-mails; only 33% of their employers agreed. Id.
11. a. According to one commentator, what it means is that “we are a nation of lascivious hypocrites. … [T]he TV ratings show that we are choosing the equivalent of fast-food entertainment over quality programming. Sex and violence sell well everywhere; high culture does not. So the entertainment titans keep dishing up more of the same.” Robert Scheer, “The Invisible Hand Holds the Remote,” Los Angeles Times, November 30, 2004, p. B13.
b. “The real engine at work here, for better or worse, is the profit motive. If this patently obvious point is absent from the complaints of social conservatives, it is because the truth of the matter is inconvenient to their agenda. It’s much easier for them to politicize the moral decay of our culture than to admit that its wellspring is the domination of media corporations, along with the rampant consumerism that has led us deep into personal debt. Let’s face it: There’s not much money to be made off children’s piano recitals, songs sung around the campfire or performances by your local orchestra, but the choice to consume such fare is always there. So if
you’re upset with what’s on the boob tube tonight, just ask yourself: What would Jesus watch? My guess is PBS.” Id.
12. Discussion
13. According to one survey, honesty and integrity ranked as the most critical quality in a job candidate. Stephanie Armour, “Companies rate honesty as best worker policy,” The Register, May 4, 1997, p. 1G.
14.
a. Cakic rejects the idea that drugs would give users an unfair advantage. He makes the point that unfair advantages come in many ways, including superior financial resources for some students.
b. Cakic says that the drugs are very attractive to students and virtually impossible to ban. He recommends studies to enhance the safety of drug use.
15.-17. Discussion
18. Several studies conclude that lying is commonplace in sales practice.
A 1997 survey of sales managers found 49 percent of those managers reporting that their salespeople had lied on a sales call, 34 percent said their salespeople made unrealistic promises and 22 percent sold products the customers did not need. Approximately 50 percent of the sales and marketing executives surveyed in a 2002 study believed their salespeople had lied on sales calls. Source: John D. Hansen and Robert J. Riggle, “Ethical Salesperson Behavior in Sales Relationships,” Journal of Personal Selling & Sales Management 24, no. 2 (Spring 2009), p. 151.
An SMM/Equation Research survey of 316 sales and marketing executives found 47 percent of managers suspecting their salespeople lie on sales calls and only 16.5 percent have never heard one of their sales representatives make an unrealistic promise to a customer. Source: Erin Strout, “To Tell the Truth,” Sales & Marketing Management 154, no. 7 (2002), p. 1.
19. Discussion.
20. Philosopher James S. Fishkin, The Limits of Obligation (New Haven: Yale University Press, 1982) discusses the famine relief problem and explains the need for a “cutoff for heroism” such that we do not, for example, starve ourselves into the same condition as those we are trying to save. However, Fishkin notes philosopher Peter Singer’s denial of that conclusion:
[Singer] argues that we are obligated to give until we reach the “level of marginal utility,” i.e., the level at which a dollar sacrificed does as much harm to us as it does good for a starving Bengali refugee. On Singer’s view, such sacrifices would not only be admirable, they are also morally required of us all. (p. 70)
SUPPLEMENTARY MATERIALS
I. PRACTICING ETHICS: Deans’ Quiz
The Wall Street Journal reported the results of a scholarly survey of 291 business-school deans:
Here’s a pop quiz for business-school deans: Would you admit a clearly unqualified student to your school just because the candidate’s family donated $1 million? Forty-eight percent of the 291 deans … answered yes.
How would you respond to some of the other questions asked of the deans: (1) What if the potential student’s father was just a friend and not a donor? (2) Would it be ethical for a dean to remove an honor code violation from a student’s record in exchange for a $1 million donation to the school? (3) Would it be ethical for a dean to personally accept a $500,000 bequest that was meant for the school but was mistakenly willed to the dean?
Answer: 25.6% of the deans said they would admit the student if the father was just a friend and not a donor. 90% said they would refuse to remove an honor code violation from the student’s record. 20% of the deans said it would be ethical for them to accept the $500,000 bequest. Gordon Fairclough, “For Business-School Deans, Ethics Appear to Come in Shades of Green,” The Wall Street Journal, August 10, 1998, p. A8.
II. PRACTICING ETHICS: Clean Up Accounting
A CRUSADE TO CLEAN UP ACCOUNTING
According to The Chronicle of Higher Education: “Lawrence A. Ponemon quit his first accounting job after just one year. A manager asked him to underreport his hours, he says, and when he wavered, his time sheet was fudged anyway.”
Ponemon, now an accounting professor at the State University of New York at Binghamton, says that in his first auditing job with Deloitte Haskins & Sells (now Deloitte & Touche), he put in 88 hours, but reported only 41. “I was pressured to do that, “ he says “to the point where my senior auditor erased my time sheet hours. Ponemon says that underreporting is rampant because it makes accounting managers look efficient and it keeps clients happy by avoiding overtime charges. A spokesman for Deloitte & Touche said that underreporting “wasn’t the norm then, and it isn’t the norm now.”
Assume you are in Ponemon’s position as a beginning auditor and your boss instructs you to underreport your hours and says, “This makes us all look better. Nobody gets hurt.” What would you do?
Answer: This episode is drawn from Ben Gose, “A Crusade to Clean Up Accounting,” The Chronicle of Higher Education, Nov. 30, 1994, p. A8. Clearly, an employee should not violate company policy. However, Professor Lynn Paine Sharpe of the Harvard Business School reminds us: "Students aren't prepared for the difficulties with what appear to be simple ethics issues. It seems an easy matter to tell the truth, but sometimes actually doing it requires great capabilities. The stakes are so much higher than they've ever had to deal with." (Lori Tansey, "Right vs. Wrong,” National Business Employment Weekly, Spring/Summer 1994, p. 11, 12.)
Presumably, it would be useful to discuss those stakes with students and help them identify the competing considerations. Remind them that pressure to cheat is not unusual. Tansey refers to a recent Ethics Resource Center survey of 4,000 employees, 30% of whom reported feeling "pressure to cheat" on the job and 30% of whom say they had personally observed conduct on the job in the past year that violated the law or company policy.
The reported incident occurred in one of the remaining Big Four accounting firms, all of which have been sued in recent years for professional malfeasance. In retrospect, it might seem that falsifying hours was just the tip of the iceberg that is now threatening the whole accounting profession. This incident may also be useful to bring to students’ attention in conjunction with “The Boss” (text at p. 52).
III. PRACTICING ETHICS: Destroy All Girls
Galyan’s Trading Co. is a Plainfield, Indiana subsidiary of The Limited, Inc. A Galyan’s customer in Minnesota complained when she saw a slogan on a Galyan’s shirt saying, “Destroy all girls.” How would you respond if you were the Galyan’s CEO? The Associated Press details the company’s decision:
A maker of in-line skating equipment thought it could attract aggressive young male buyers with a simple slogan: “Destroy all girls.”
An offended retailer came up with an equally forceful response—ending all sales.
Galyan’s Trading Co. announced Monday it sent back the fall line of T-shirts, sweatshirts, pants, and boxer shorts made by Senate, a private company based in Huntington Beach, Calif. The slogan was carried on the apparel’s laundry-instruction tags.
Galyan’s said it also is returning Senate’s wheels, bearings, and other skating gear carried at its nine sporting goods stores in Indiana, Ohio, Minnesota, and Kansas.
Senate said the slogan was not meant to be taken literally.
“The tag was supposed to say, ‘Kill your parents,’ but some people thought that was too extreme. Go figure,” said Arlo Eisenberg, one of the five partners who founded Senate three years ago.
In your opinion, was Galyan’s making a principled decision, a practical decision or both? If the product were a video, book or compact disc with the same “destroy all girls” message, should the retailer remove it from the shelves?
Answer: The argument that it was a principled decision is that individuals and businesses should not sell items likely to be offensive or incite violence against segments of the population. The argument that it was a practical decision is that Galyan’s did not take any action until a customer complained. Also significant may be the fact that Galyan’s received considerable positive and free publicity for its actions. Does the product bearing the message
matter? Associated Press, “Clothing Line wit ‘Destroy All Girls,’ Slogan on Tags Is Pulled by Retailer,” Waterloo-Cedar Falls Courier, May 20, 1997, p. B6.
IV. PRACTICING ETHICS: Public Policy Issues
BANKER’S FETAL POSITION
Tim Williams is using his skills and connections as a businessman to fight what he regards as a sin against God: abortion. The assistant vice president and trust investment officer at First National Bank of Dayton (Ohio) belongs to Financial Professionals for Life. The group of about fifty bankers, stockbrokers and insurance agents shares information about abortion and supports boycotts against companies that give to Planned Parenthood.
“Basically, we want to carry the life ethic into our professional lives,” said Williams. “The object of corporate charity is to create good will. Why make such a controversial gift? It’s not doing the company or the shareholders any good.”
Financial Professionals for Life has joined a long list of groups that oppose abortion, including Life Decisions International, which has spearheaded boycotts against corporate donors to Planned Parenthood. A number of corporations, including AT&T, have cut off support to Planned Parenthood when the issue was raised or boycotts threatened.
“My wife is reminding me all the time which products we shouldn’t buy or restaurants we shouldn’t go to,” said Williams, a father of four children with a fifth on the way.
Financial Professionals is now looking to target insurance companies that pay for abortions. “Do you want to make a premium payment to an insurance carrier that pays for—and thereby encourages—abortion?” Williams asked. He added that insurance companies my have an economic reason to cover abortions because the medical costs are less expensive than carrying a baby to term. “They lose in the long run. The baby that gets aborted doesn’t get to buy insurance.”
Williams said that the Dayton bank where he works does not contribute to Planned Parenthood, though some of his coworkers are pro-choice. “We agree to disagree,” he says.
Jeffrey Zack, “Ethics in the News,” Business and Society Review, No. 83 (Fall1992), p. 4. Reprinted with permission of the copyright holder, Business and Society Review.
Questions that can be explored with students include: In dealing with ethics-public policy questions such as abortion, should managers strictly divide their private and professional lives? Do you have an ethics-public policy cause to which you are so committed that you will practice it as an active part of your professional life? Should Williams be dismissed from his job if his anti-abortion activism hurts his employer? Should First National Bank of Dayton deal differently with Williams if he were, for example, a white supremacist or the leader of an anti-gay organization? Should Williams decline to do work for his employer where that work assists a company that he knows to be a contributor to Planned Parenthood?
SELECTED BIBLIOGRAPHY
Daniel Akst and Lee Berton, “Accountants Who Specialize in Detecting Fraud Find Themselves in Great Demand,”
The Wall Street Journal, February 26, 1988, p. 17.
Ronald E. Berenbeim, “The Corporate Ethics Test,” Business and Society Review, Fall, 1987, p. 22.
Lee Berton, “Audit Firms are Hit by More Investor Suits for not Finding Fraud,” The Wall Street Journal, January 24,
1989, p. A1.
Michael Brody, “Listen to Your Whistleblower,” Fortune, November 24, 1986, p. 77.
Jose De Cordoba, “White-Collar Inmates Find that Tennis and Good Food do not a Prison Unmake,” The Wall Street
Journal, June 9, 1987, p. 35.
Editorial, “Handcuffs for Corporations,” The Wall Street Journal, February 11, 1991, p. A10.
Daniel Hausman, “Are Markets Morally Free Zones?,” Philosophy and Public Affairs, Fall 1989, p. 317.
Arthur Levitt, Take On The Street: What Wall Street and Corporate America Don’t Want You to Know (Pantheon
Books 2002).
Los Angeles Times, “Study: Campus Cheaters Prosper,” Des Moines Register, October 23, 1990, p. 2A.
Denise K. Magner, “Students Urge Graduate Business Schools to Emphasize Ethical Behavior and Require Courses
in Standards,” The Chronicle of Higher Education, March 29, 1989, p. A31.
R.H. Morrison, “Nothing Succeeds Like an S.O.B.,” Business and Society Review 28, Winter 1978-79, p. 69.
Sonia L. Nazario, “Schoolteachers Say It’s Wrongheaded to try to Teach Students What’s Right,” The Wall Street Journal, April 6, 1990, p. B1.
George Pamental, “The Course in Business Ethics: Can It Work?,” Journal of Business Ethics 8, 1989, p. 547.
Rhonda L. Rundle, “Ex‑Lockheed Workers Win $45.4 Million for Firings They Linked to Safety Report,” The Wall Street Journal, November 16, 1990, p. B10.
M. Schwartz, “The Nature of the Relationship between Corporate Codes of Ethics and Behaviour,” Journal of Business Ethics 32, 2001, p. 247.
Symposium, “Do Good Ethics Ensure Good Profits?,” Business and Society Review 70, Summer 1989, p. 4.
Thor Valdmanis, “Kozlowski, Others Accused of Using Tyco as “Piggy Bank,” USA Today, September 13, 2002, p. 18.
William R. Wynd and John Mager, “The Business and Society Course: Does it Change Student Attitudes?,” Journal of Business Ethics 8, 1989, p. 487.
Pete Yost, “Enron Head Pushed Stock after Officer Gave Warning,” Des Moines Register, January 19, 2002, p. 1A.
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