Business Ethics Andrew Wicks R Edward Freeman Solution Manuals

Business Ethics

By Andrew Wicks R. Edward Freeman

Email: Richard@qwconsultancy.com

Table of Contents Preface

..................................................................................................................... iv

Part I: Ethics and Business Chapter 1: The Language of Ethics ..................................................................................1 Chapter 2: A Look at the Sources of Ethical Problems in Business and How to Prevent Them ...........................................................................12 Chapter 3: Ethics, Stakeholders, Corporate Strategy, and Value Creation .....................20 Chapter 4: Business Ethics in the Global Marketplace ...................................................27 Part II. Ethics in the Functional Areas of Business Chapter 5: Leadership .....................................................................................................41 Chapter 6: Marketing and Operations .............................................................................49 Chapter 7: Finance and Accounting ................................................................................59 Chapter 8: Management ..................................................................................................68 Part III. Special Topics in Ethics Chapter 9: Environmental Sustainability and Its Challenges to Management ...............77 Chapter 10: Managing on the Ethical Frontier ...............................................................86

Preface This instructor manual is a supplement for faculty using Business Ethics: A Managerial Approach authored by Andrew C. Wicks, R. Edward Freeman, Patricia H. Werhane, and Kirsten E. Martin.

Each chapter in this manual includes the following items: • Sample Answers to the Discussion Questions at the end of each textbook chapter • Teaching Notes for the end-of-chapter cases that include: ▪ Case Synopsis ▪ Case Objectives ▪ Questions for Case Discussion ▪ Suggested Teaching Plan This text and instructor manual provide you with instruction suggestions and exercises.

We encourage you to adapt the documentation to the needs of your curriculum and pedagogy.

Additional Teaching Suggestions Ethics LX provides an array of great simulation products that are appropriate for this course. Consult the Ethics LX website and choose the products that best suit your needs.

Each has teaching guides for instructors that can be adapted to suit your particular needs and preferences.

Chapter 1: The Language of Ethics Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. Why are managers uncomfortable discussing ethics? Relate both the answers provided in the chapter and your own ideas based on your experiences. (Page 2) There are many reasons why managers may feel uncomfortable discussing ethics – see p.

2 for the list summary of the findings of Bird and Waters: i) managers believe they lack the technical ability to discuss ethics; ii) managers see ethics as about blaming and they don’t want to blame others; iii) managers see ethics as soft and idealistic when they need to be hard-nosed and focused on results. All these factors mitigate against discussing ethics.

Whether or not managers are uncomfortable discussing “ethics” may depend on how one defines the term. Many people may actually feel quite comfortable discussing certain ethical issues without realizing that they are talking about ethics. This brings us to our next question.

2. What is ethics, and what does it mean to “put business and ethics together”?

From your vantage point, what would it mean for a company to do this well? (Page 4) Ethics is about human welfare, both our own and that of others, Ethics in this sense includes not only an imperative to not inflict harm upon others, but also entails a prescription for excellence. Such excellence may be manifested in any number of ways (actions, goals, codes conduct, etc), and those manifestations may likewise have any number of justifications.

Whether we admit or not, we all “do” ethics; the real challenge is whether or not we can do ethics well. In this sense, business and ethics are necessarily linked – all businesses allocate harms and benefits for stakeholders, take actions that both express and shape their character, and observe certain standards of conduct. This fact is true both for our personal life and for activity in business. The key question in both cases is whether one can justify their behavior. This is a major challenge and it will involve getting into more detail about the nature of business to better understand points of tension within and across each of the decision-guides.

Students will have their own ideas about how much of a tension exists between business and ethics and where these tensions are most prominent.

.1

3. What are the three traditions of ethics, and how do they provide guidance to help inform your managerial decision making? (Page 5) There is a tremendous amount of literature from throughout history exploring issues of ethics. That literature can be broadly categorized into three large themes: 1. The actions or “means” people use to achieve their goals. This dimension of ethics is concerned with identifying the intrinsic moral value of particular actions.

For example, many philosophers will agree that the act of lying, by itself, is morally wrong while the act of halting the exploitation of small children for sweatshop labor can be considered morally virtuous.

2. The agents or “persons” who are acting in the situation. This tradition of thought sees ethical behavior and ethical people as one in the same: people who behave ethically and virtuously are people of good character. This branch of ethics explores what it means to be a good person – to not only practice ethics, but to live it.

3. The ends or “goals” that are outcomes of actions. This branch of ethics evaluates the moral value of an action in terms of the consequences of that action.

Under this analysis, for example, lying to a mass-murderer may be considered a virtuous act if lives are saved as a consequence of the lie; and banning child labor in sweatshops may be considered a deplorable act if the lack of sweatshop employment forces the children to work in mines or prostitution.

These three themes are each facets of ethics that can be considered when evaluating ethical justifications. Each tradition brings with it certain insights that can help guide managerial decision making.

The actions-based tradition is probably the tradition of thought most people immediately associate with ethics, possibly because it is a constant presence in daily life. Social norms, standards of conduct, legal systems, and religious beliefs all shape what people believe to be virtuous or immoral actions. Very likely, these institutions have already shaped your own beliefs as to what constitutes ethical actions – beliefs that guide your decisions on a daily basis. Do you apply those same precepts within the workplace as you do in life outside of work? Why or why not?

The agent-based tradition can further help one evaluate an ethical decision by considering how the decision will affect one’s character. One way to benefit from this tradition is to ask oneself what kind of manager one wants to become and what kind of actions will lead to becoming that kind of manager. (i.e. what would <insert personal hero> do in this situation?) Likewise, some could argue that, just as the actions of an individual determine that individual’s character, the actions of a company determine that company’s ethical culture. As a manager, what kind of corporate culture do you wish to foster? How is that

.

2

reflected in your decisions? Conversely, when making a decision, you can try to foresee what kind of corporate culture those actions will facilitate.

Finally, the ends-based tradition serves to remind that, good intentions aside, good ethical decisions require a consideration of the consequences of an action. One can use this dimension of analysis as a manager to evaluate how one’s decisions align with one’s goals. What are the consequences of this action? What are the consequences of those consequences?

Note that this line of reasoning can lead to conclusions that counter the prescriptions of actions-based and agent-based traditions. If lying in a certain circumstance results in a better outcome than not having lied in that situation (e.g. lying to the mass-murderer who asks for directions to the children’s hospital), then the result would justify the act. Lying, in this example, could be considered the morally justifiable (perhaps, even virtuous) thing to do. Some fear that this sort of reasoning can devolve into an excuse for any number of objectionable acts. So long as the ends are desirable, are any and all means justifiable? If different means could provide the same end, could one select from among the means one that provides the most good/least harm? If so, one would need to consider what it means to find an optimal balance of good and harm and what it means for an act to be good or harmful. This brings us full circle: in order to discern a morally good end, one needs to talk about morally good means, and vice versa.

From the issues raised above, it should be evident that no one theme can be used as a sole criterion for assessing the myriad of possible ethical judgments. Indeed, it would be fairly silly to try to follow only one of these traditions fully to its logical consequences. But when taken together, these ethical traditions can offer insights on how to approach an ethical dilemma.

4. Discuss the three guides to avoid rationalizations and provide your own examples to illustrate how they may help you make better decisions. (Page 16) Three tests that could be used to help avoid rationalizations include: 1.) The Publicity Test Could you defend your decision if it appeared on the front page of the Wall Street Journal?

2.) The Reversibility Test If the situation were “reversed” and you had to bear the burden of the negative consequences of your decision, could you still endorse the decision?

3.) The Generalizability Test Is there a consistent, general rule that underpins your decision? For example, if you decide to fire an employee, are you doing so for potentially biased personal reasons, or is there an underlying rule that supports your decision?

.

3

Personal examples will vary by the individual.

5. What is reflective equilibrium? How does one get into reflective equilibrium, and what is it that tends to take people out of it? (Page 17) Reflective equilibrium reflects a state where one’s moral intuitions are congruent with one’s moral principles: practice re-enforces theory and vice versa. An idea underlying this concept is that one should not place too much faith solely in moral theory at the expense of moral intuition, or vice versa. When one’s theories of how one should behave do not actually reflect how one actually behaves, then that person(s) is said to be out of reflective equilibrium. In such situations where one’s practices do not agree with one’s ideals, one or the other has to change. The reason why one should not “place all one’s eggs” behind either practical intuition or moral theory is that either one may need to be amended from time to time. For example, throughout much of American history the practices of slavery and segregation were blatantly incongruent with the idea that “all men are created equal.” In this case, the moral practices had to change in order to better match up with the moral theory. Throughout the 1950s, a generation of women in America had been raised to fulfill a particular set of moral ideals and expectations. A woman in the 50’s, according to the ideal, was supposed to be a subservient housewife to her husband. She was supposed to be eager to have 2.5 children, bear no intellectual curiosity or desire to enter “male” professions, and have the roast ready by suppertime.

Many women found their actual lives to be utterly miserable and incompatible with the moral ideals of the time. Here, the moral ideals have changed over time to accommodate moral intuition.

Today, one can look at any number of issues and see areas of reflective disequilibrium: the legalization of marijuana, immigrant labor laws, same-sex marriage, torture and security. These are all questions of ethics and social values that arise from a lack of reflective equilibrium.

6. Why do your decisions, particularly as they relate to ethically charged issues, matter? Please draw from both what the chapter suggests and your own ideas.

(Pages 19-20) Responses should vary by individual, but here are some points that the book mentions: Accountability to the Stakeholders Whatever decisions you make ultimately affect the stakeholders and you will be held accountable for them. Being able to make good decisions and defend those decisions will be crucial to your success as a leader.

Ethics Talk is Helpful Regardless of what some people might say, ethics does matter to people. Being able to talk about ethics and understand ethical concerns and problems will help you more effectively work with employees, the public, customers, suppliers, the media, and the .4

government. Managers must be able to understand and communicate the moral dimensions of their decisions in order to gain moral ground and win hearts and minds.

Ethical Decisions Are Part of the Job A manager must be prepared to make difficult decisions. You ability to make sound, ethical decisions depends on your familiarity with ethics. Since you will ultimately have to be responsible for difficult and complex decisions, it makes sense to be well-informed about your options.

Personal Integrity Is Important While many aspects of our lives are determined by external circumstances and dumb luck, the kind of person you are is determined by your choices. The decisions that you make are reflections of your character. If you value anything about yourself, your person, or your integrity; take care to ensure that the decisions you make are the right ones.

Legal Reasoning Is Necessary, But Not Sufficient Obviously, working within the boundaries of the law should be a give. But a good manager should go beyond merely following the letter of the law, and understand that the reason why laws are made is to encourage good behavior.

Perhaps an analogy could be useful here. Suppose an individual is trying to learn good manners. That individual could read every etiquette book ever published and commit to memory every rule concerning everything from “how to use a fish knife” to “how to properly excuse oneself to the bathroom in Swahili.” Or that individual could take to heart one simple idea: care for the well-being of those around you and you will always have good manners. Likewise, just as one can follow every rule concerning etiquette and not have good manners, one can strive to follow every code and statute governing business, and miss the point altogether.

.

5

Competitive Advantage Teaching Notes Synopsis Alex Franklin, project manager for APEX computer software company, is put into a difficult situation. He is the lead rep for his company on this project and his main contact with the potential client (First Street Bank), Sean McBride, has just provided him with information that may set him up for either a huge opportunity or a giant mistake. Franklin has to sort out which it is and make a decision that could well define his career and the reputation of his company. There is a lot at stake for him personally and for his firm. If he wins the bid with this client his star is on the rise and he will likely move into a senior management position in the near term – if he doesn’t get the contract, he will likely have trouble moving up the corporate ladder and will need to go elsewhere to be promoted.

The firm is also under financial pressure, so winning the contract could be a big positive turn of events while losing out to the competition could mean layoffs for APEX. A major factor as well is First Street Bank (FSB) and how to interpret Sean McBride’s actions.

From the case it appears that FSB plays things close to the vest and does business by the book. In this case they have asked for secret bidding among competitors – so is McBride’s offer of the folder (which appears to contain the bid of APEX’s main rival) a trick designed to test Franklin’s integrity, the act of a rogue employee intent on getting the best deal for his company, or a pressure tactic from FSB to see how badly APEX wants to do business with them? All these, and other motivations, are possible.

Objective This case provides a great starting point for your discussions and a chance for students to get their feet wet in thinking about ethics in business. It is also a great opportunity to start to explore students’ conceptions of what is acceptable in business, particularly as it relates to “fair competition”. You may want to compare this case to examples of competition from other venues, including sports, to see if what is being offered here is “cheating” or “stealing”, or a perfectly acceptable act that needs to be accepted in order to be a responsible manager (or something in between).

Questions for Discussion 1. How many of you are tempted to look at the folder? How many of you would actually look? [VOTE] Give a one sentence answer for why you would or would not look?

2. What is being offered here? Do I know this, or if not, what do I know? How does that impact what I should do?

3. What is at stake here? How much should that matter to my decision?

4. Is there anything wrong with looking? Is it stealing or cheating? If so, why would you say that?

.6

5. Isn’t business competition about doing your best to look out for your organization within the terms set by those running the competition? Given that FSB has given us access to this information, isn’t that reason enough to look?

6. Does your answer about whether it is OK to look at the folder change if you knew that your competitor would look at your folder if they were given the chance?

What about if you knew your boss supported you looking (or was strongly opposed to you doing so)? What if the context changes and now this kind of activity is a fairly common practice in bidding? How much, if at all, should that matter to your decision?

7. Is time a factor here? Particularly if I care about not looking, and being seen as having not looked, what do I need to do and how soon do I need to do it?

8. Make the best case for your decision here – why is your choice (look or don’t look) the best one?

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): This provides a chance to see how many folks really think about this as an attractive option and then to really hold their feet to the fire and ask who would look. Chances are, if they are honest, most of the students would be tempted; probably a third or more would look. If not, it is likely they are either making some strong (and negative) assumptions or they are trying to appear more “ethical” than they really would be if in the actual situation.

2. Questions 2 & 3 (20 minutes): this is a chance to step back and think about the context and what is going on – do I know what is in the folder? No. Do I have some sense about this? Probably. Again, for the purposes of having a good discussion, you may need to alter some of the features of the case to create more controversy – perhaps if most say don’t look, you may want to make it appear that McBride is acting clearly on behalf of management at FSB and that the information would help APEX make a stronger bid.

3. Questions 4-6 (25 minutes): here is a chance to dig further into why students may have discomfort with looking as well as why some may feel it is perfectly fine. You may want to push them on some parallel cases here – is this act like taking money from someone’s pocket (a case where we know the answer is that it is wrong) or is it more like having someone from another team lose control of the basketball during a game and having it bounce into your hands (a case where we know taking advantage of this opportunity is right)? Push students to get specific and try to defend their claims about what kind of action this is (e.g. unfair, theft, taking advantage of a legitimate opportunity). .7

4. Question 7 (10 minutes): time may matter a great deal in some cases. One could argue that time is critical here, particularly if you care about being see as having not looked. If McBride makes it out the door and closes it, chances are he (and others who learn of this) will assume you did look – regardless of whether you did or not. Explore this and the need to have the ability to make “snap” judgments.

Here is a place where “character” matters a great deal. If we have developed the right habits and intuition, and the right values, chances are better that we will make a good decision even if we have little time to reflect on what we should do.

5. Question 8 (20 minutes): here’s a chance to let the debate rage. Push students to think about the kind of argument they are making, and whether they are picking up on the kinds of arguments used by others. Is it about deontology and the rules or is this a debate about consequences? Or is character the driver? If one is caught up in deontology (and Standards of Conduct), chances are that arguing for a more positive set of benefits will not only have little power to persuade, but may be viewed as an insult. If stealing is wrong, then learning that I might be made wealthy in the process would seem to only compound the problem. Help the students think about where they are disagreeing, where they are agreeing, and to really explore their differences.

.

8

Yahoo! and Customer Privacy Teaching Notes Synopsis In the summer of 2004, the Chinese government requested that Yahoo! disclose to them the name and address of the Yahoo! subscriber “houyan1989@yahoo.com.cn.” The government did not divulge their reasons for wanting that information; and in the political climate of China at the time, employees at Yahoo! feared that the Chinese government was seeking the information for political purposes. There were concerns that revealing the name and address of the subscriber might put his or her welfare in danger.

At the same time, Yahoo! was beginning to gain a foothold in what could potentially become the largest and most lucrative internet market in the world. Upsetting the Chinese government could potentially result in greater restrictions on all online companies and freedom of speech in China.

Objectives The case of Yahoo‘s operations in China present us with an interesting opportunity to explore ethics and business in a context where ethical norms are not clearly defined.

More specifically, Yahoo is operating in a country with a different political and social setting than that found in the U.S, raising some direct issues for the firm about how it will conduct business globally. Questions of the privacy rights (and expectations) of its users, its’ policies in complying with government requests for information, and the relevance of Yahoo!’s values are all central to this case. This case provides a great opportunity for students to think through their decisions using some of the tools and techniques introduced in this chapter.

Questions for Discussion 1. What is your gut reaction to whether Yahoo! should comply or push back?

2. Why do you believe that action to be the right thing to do? What guides you choosing that particular decision?

3. Assuming that you follow through with this line of action, how would this decision shape Yahoo! as a company? What kind of precedent is set by pursing this act? What values are at stake for you and for Yahoo!?

4. What are the consequences of this action? Who stands the most to gain or lose by your decision? Could better outcomes have been achieved through different means?

5. Imagine that your decision were reported on the front page of the New York Times.

Would you still abide by that decision? Would your answer be different if it was The China Daily or Der Spiegel (or some other international newspaper)?

6. What does this case suggest about doing business globally?

.9

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): There are valid arguments for either position (to disclose or to not disclose). What’s more important is the justification for either position. Whether one justification should trump another will depend on what values one holds. We will explore those values in the next few questions. Keep answers fairly short here, focusing more on getting reactions and issues on the table – you can dig into themes in more depth later.

2. Question 2 (15 minutes): Is the act moral under the actions-based tradition of ethics? What sources of moral guidance do students use in making their decisions? This is a chance for students to think about what is driving their decision and to link that back to the Decision Guides from Chapter 1.

3. Question 3 (15 minutes): If Yahoo! decides to acquiesce to the Chinese government’s demands now, what kind of example would that set for future decisions of the company? What kind of company will Yahoo! become if it continues to make similar decisions? How would this decision affect future interactions with the Chinese government?

4. Question 4 (15 minutes): It is hard to know the consequences of our actions in advance, but we can try to think about possible outcomes to possible actions. For example, would it be possible that, by surrendering the name and address in question, Yahoo! could build up its internet base, become more firmly entrenched in China, and from that vantage point be a force for gradually improving human rights in China? Taking time to think through who all has a stake here, and especially who stands to be especially impacted, is important for making a good decision.

5. Question 5 (10 minutes): This is the publicity test. It brings us to an interesting point. It may be possible that an action a student may consider to be the right action may also be the unpopular one. If that is the case, we have to reevaluate why we believe that action is the right one to take. Of course, part of what is interesting here is the answer to the publicity test may vary depending on where we “take it” – in the US, China, Europe, or some other context. How should that factor into the decision.

6. Question 6 (15 minutes): This provides an opportunity to step back and think through more about what it takes to compete internationally and what broader lessons to draw from this case. Do we need a set of universal values to apply the same in all contexts, no values at all since we have to adapt to each context, or some third alternative? Take some time to think this through and anticipate where . 10

this might go the rest of the course – no need to have final answers yet, but to start thinking about it early is important.

.

11

Chapter 2: A Look at the Sources of Ethical Problems in Business and How to Prevent Them Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. Before reading the chapter, what was your sense of why organizational ethics disasters (e.g., the financial crisis, Arthur Anderson, Worldcom) happen?

Responses will vary depending upon the individual student.

2. Which factors seem to be most important in diagnosing why bad things happen?

What role does the individual, and individual conscience, play in making sure good things happen in organizations?

Responses will vary depending upon the individual student. Note that this is a chance to get at student perceptions and experiences that may generate insights different than those highlighted in the chapter – or at least provide their own take on the forces discussed in this chapter.

3. What is moral development? What are the six stages of moral development, and how are they relevant to thinking about business? (Page 38) A person’s sense of morals does not remain static, but rather develops over time. The process of acquiring a more sophisticated understanding of morality, typically which emerges developmentally over time, is known as moral development. According to Kohlberg, moral development undergoes six stages: 1. Punishment and Obedience I do __ because I will be rewarded if I do and punished if I don’t.

2. Individual Instrument Purpose and Exchange I do __ because it benefits me personally.

3. Mutual Personal Expectations I do __ because all the cool people do it and expect me to do it too.

4. Law and Order Orientation I do __ because it is my duty to society.

5. Prior Rights, Social Contract, or Utility I do __ because it upholds the fundamental values of my society.

6. Universal Ethical Principals I do __ because of my commitment to universal principals that are the right of all human beings. . 12

For the scandals that wrecked Enron, Tyco, Worldcom and others, there is a fear that the business leaders thought too much in stage 2, whether because of perverse incentives or a lack of moral development. Ethicists could argue that getting beyond such reckless behaviors and bringing more value to society and stakeholders requires that business leaders act at a higher level of moral development.

4. What are the core factors identified in the chapter that indicate why bad things happen in organizations? Which seem to be most important and most prevalent as you think about actual cases of wrongdoing? (Page 42) Authority Distancing from Responsibility Tunnel Vision Rationalization External Pressure Communication Breakdowns Depending on whom you ask, answers will vary as to which factors seem to be most important in influencing acts of wrongdoing.

5. What should managers do to take these forces into account and manage differently so that these realities do not lead to ethical lapses in your organization?

(Page 47) There is no simple solution that would eliminate the factors that tend to motivate ethical lapses in the workplace; however, these policies may help managers to combat potential ethical misconduct: 1. Introduce Ongoing Ethics Education 2. Do a Policies and Procedures Audit 3. Stick to the Fundamentals 4. Cultivate Moral Imagination 5. Use Guides to Avoid Rationalizations 6. Lead by Example 7. Make Ethics Part of the Dialogue 8. Emphasize Responsibility and Accountability Throughout the Firm 9. Foster Communication and Push Back 10. Make Sure People Know—Ethics Is Everybody’s Business

.

13

The Parable of the Sadhu Teaching Notes Synopsis Bowen McCoy is on a climbing expedition in Nepal and he faces an unexpected decision.

Part way up the mountain he encounters a stranger who is brought before him and his team from a group of climbers above him. The man is suffering from exposure to the elements, is incoherent, clearly needs help, but is unable to communicate. If he does not get help getting down the mountain he could well die. At the same time, if McCoy and his team stop to help this stranger (a “Sadhu” or holy man), they will not be able to complete their climb and miss an opportunity they flew across the globe to pursue.

McCoy struggles with what to do ever so briefly before deciding to press on. Once they reach the top of the mountain, and after they come down, McCoy and his teammates wrestle with whether they made the right decision and what happened to the Sadhu.

Objective This is case provides a rich context in which to explore why we make the decisions we do, and in particular some of the forces that lead us to make decisions we later not only regret, but may see as deeply and tragically misguided. As with the Miniscribe case, faculty should be pushing students to think about how good people and good organizations can very easily veer “off course” and end up making huge mistakes. At the same time, one can also use this case to have a genuine debate about what the right thing to do here was – stop and help or not? Though McCoy seems to clearly regret not stopping to help the Sadhu, many students may want to make the case that he did nothing wrong by not helping. You can pursue both lines of inquiry in your discussion.

Questions for Discussion 1. Did McCoy do anything wrong? If so, what and why?

2. What can we say in McCoy’s defense? How might you construct a defense of his actions and argue he either did the right thing, or at least nothing bad?

3. If the Sadhu had been a child, or a beautiful Western woman, do you think McCoy would have gone to the top or stopped and helped? Why or why not?

Should that matter?

4. How much should context matter in our analysis? a. Should our standards be different at 15-20,000 feet above sea level on a mountaintop in freezing cold temperatures? b. How about when other individuals and groups are present? Does that make us more or less responsible? c. What needs to change to shift the dynamic and create better outcomes for all stakeholders?

. 14

5. McCoy seems to regret his decision to leave the Sadhu. It is a decision he made in just a few moments with little reflection, yet it has had a profound impact on the next 20-30 years of his life. What does this tell you about the challenge of living a good life? If moral dilemmas don’t come before us and announce themselves, how can we do a better job of seeing them coming? What can be learned from moral mistakes?

6. How, if at all, does your view of other moral mistakes you read about (e.g. Enron, Bernie Madoff, the financial crisis) change in the wake of considering this case?

Suggested Lesson Plan (85 minutes) 1. Question 1 (15 minutes): this provides students a chance to dig into the evaluation of McCoy’s actions. Chances are many of the students have some strong opinions about this. Take time to catalogue these, but also to push on them – why are they compelling (or not)?

2. Question 2 (15 minutes): here it is worth taking time thinking about the other side, specifically how we might construct a defense of McCoy’s actions. It is likely there are several students who will be quite sympathetic with this view – after all, McCoy spent a lot of money to be there and helping out the Sadhu would have compromised his chance, the Sadhu may well have wanted to die, and the expectations for help on a mountainside may well be quite different.

3. Question 3 (10 minutes): this question relates to our moral framing and sensitivity. What would we need to change to get McCoy to make a different decision? If he would have made a different choice if the Sadhu were a child or a woman, does that mean his decision was wrong? What does this tell us about how to alter context to help people make better decisions?

4. Question 4 (15 minutes): explore the context in terms of how it should alter our normative judgments. Push students to think about how much we should change what we expect of people depending on the circumstances (if at all). This also provides a chance to see how they would have altered the circumstances to lead to a better result than what unfolded in the case.

5.

Question 5 (15 minutes): this is a great moment to get students to share some of their own experiences and defining moments – times that have shaped them, for good or for bad, and what they have learned. Push especially on this idea that we often don’t really understand the gravity of such moments in advance. Given their importance for the rest of our lives, what do we need to do to help make sure we don’t make huge errors, either without thinking or by having a completely wrong perspective to take to the situation? . 15

6. Question 6 (15 minutes): this question provides a strong context for bringing together the discussion and using it to think about the behavior of others that we read about in the popular press. What, at a distance, may seem unbelievable and crazy behavior by utterly evil people, may in fact be understandable (if misguided) decisions by decent people in difficult circumstances. Using the context of this case, and the material of the chapter, allows students a chance to draw their own insights about that – particularly for thinking about how they will change their own thinking and how they manage to limit the likelihood of such mistakes.

.

16

Marge Norman and MiniScribe Corporation* Teaching Notes Synopsis Marge Norman, a production manager at Miniscribe's Singapore production facility, has uncovered what appears to be a case of fraud at her company. She remains unsure of what to do in this situation.

MiniScribe Corporation, a disk-drive manufacturing company, became one of Wall Street's darlings in the mid-1980s, when it reported continual, increasing profits in a market that was frequently unstable. By 1990, however, the company filed for bankruptcy after it was revealed that those profits had been falsely reported. Sixteen MiniScribe executives and staff members were charged with fraud by the SEC. Later investigations found rampant fraud and shoddy account-keeping - inventory had been fabricated, intra-company shipments had been counted as sales, and scrap items and bricks were repackaged and counted as active inventory.

Objective Unlike many other cases, which ask students to recommend some kind of decision based on available information, the MiniScribe Corporation case presents students with the results of a series of completed decisions and then asks them to analyze how and why they were made. The “puzzle” in this case is why people did such bad things and it should make them wrestle with the question of how easy it is for this to happen in their organization as well as how to manage in ways that are likely to avoid these problems.

What drove MiniScribe to commit such blatant acts of fraud? To what degree could the company's deceptive practices be attributed to the incentives to cheat created by Wiles' management techniques? Why didn't more employees, like Marge Norman, who knew about fraudulent practices at the company speak out more aggressively against them?

The MiniScribe case can be used to get students to wrestle with the question of why decent people do ignoble things. It may be helpful to include mention of the Milgram experiments, which sheds additional light on this question.

It is critically important to set expectations if this discussion will prove useful for students. Make sure they begin with the assumption that people in the case, including Wiles, did not set out with the intent to commit fraud. They should assume that people in the case were decent people trying to turn their company around and save their jobs – good people just like them and their classmates. A common reaction, and an easy way for this to be an unproductive discussion, is to begin with the assumption that people in the case were bad and intent on doing immoral and/or illegal things; this is both factually incorrect and gets the students off the hook. Students should see this as a management challenge – getting people to behave ethically is driven not primarily by their individual conscience, but by the factors and forces operating in the organizational climate: culture, authority, peer pressures, organizational vocabulary and incentives, etc.

Discussion Questions 1. Has anyone worked for a company like this? If so, what can you tell us about this experience? If not, how did you react to reading this case – did it seem surreal to you?

. 17

2. What do you think drove managers at MiniScribe to behave in such a manner? What specific factors in Wiles’ approach were critical to helping them turn around a failing company? How were these same aspects of Wiles’ approach related to the occurrence of fraud?

3. Why did employees go along with these fraudulent acts? What allowed decent people to make such bad decisions? What would you have done differently in their situation?

4. Did Marge Norman do anything wrong? Should she have done more – if so, what?

What kind of conditions need to be present to enable people like Marge to take effective action to uncover wrongdoing in organizations?

5. What kind of actions could a company take to avoid making the same mistakes that MiniScribe made? How do we manage in order to limit the propensity for people to make unethical decisions?

Suggested Lesson Plan (85 minutes) 1. Introductory Discussion (10 minutes): In this chapter, we talked about the sources of unethical behavior and ways to prevent it. There was mention of a few notable recent scandals, such as Enron and WorldCom. Many students will probably recognize these companies as having been embroiled in unethical activity, but may not fully appreciate the nature and extent of such unethical conduct. Ask the students if they have heard about MiniScribe before and ask them if and why they think what these companies did was wrong.

2. Question 1 (15 minutes): Ask for a quick show of hands to see if anyone has been put into a similar situation before. If so, ask that person(s) if he or she would be willing to share his/her experience. This section can be expanded as necessary.

3. Question 2 (15 minutes): Any number of reasons can be cited for the ethical misconduct displayed at MiniScribe: external pressures, competition, and “good old-fashioned greed.” A more productive and relevant approach for this class may be to ask what management at MiniScribe did (or did not do) to turn the company around given its dire situation. One can make the case that Wiles’ “disciplines” (5 are mentioned in the case narrative) and hard-nosed approach were key to getting the company back on its feet. At the same time, those same initiatives became twisted and were key to fostering an environment where cheating became the norm.

4. Question 3 (15 minutes): This provides an opportunity to push students to find ways to explain and better understand how we go from a struggling company where people want to improve performance and save their jobs to a context where systematic fraud and misconduct become the norm. There is a clear line here and students should be pushed to identify specific decisions and factors in the case that pushed people to go from being aggressive to being criminals. In retrospect, students should struggle with why people made such “irrational” decisions –

. 18

would anyone in the room knowingly commit fraud? If not, then why did these people do so?

5. Question 4 (15 minutes): This question is important in its own right and sets up discussion of Question 5. Marge is in a hard position. It is easy to criticize her and say she should have done more. At the same time, one can easily argue that given the circumstances, the culture of the company, the assurance of her boss, and her limited knowledge, that she did what any reasonable person would have done.

People should be troubled by her response and wrestle with what alternatives she had (both inside the company and outside it), what responsibilities she had (and to whom), and what they might have done.

6. Question 5 (15 minutes): This question is really addressed at all levels of the company, from the lower–level workers and managers to the CEO to the shareholders and the public. It may be useful to diagram the stakeholders and ask for ways that each group can contribute to creating a culture of ethics.

* This teaching note is based on the teaching note prepared by Robert J. Sack, Professor Emeritus, Patricia Werhane, Ruffin Professor of Business Ethics, Andrew C. Wicks, Associate Professor of Business Administration, and Research Assistant Jenny Mead, Darden Graduate Scholl of Business Administration at the University of Virginia.

. 19

Chapter 3: Ethics, Stakeholders, Corporate Strategy, and Value Creation Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What, in your view, makes a company “good” or “bad”, particularly if you start with the idea that ethics is an important part of your evaluation? Why? Responses will vary depending upon the individual student. This question provides a great opportunity to explore students’ own perceptions of “business” at large and the kinds of things that matter to them in evaluating specific companies. You could take a significant chunk of class to explore both themes. If students have trouble listing more than one or two companies as “good” companies, that raises some interesting questions about their overall view of capitalism – perhaps they have an overly-cynical view of companies? Relating their answers back to the new SRI (Socially Responsible Investing) movement is also interesting – to what extent do their criteria match up with those used

by SRI funds (e.g. at Calvert)? Where do they differ?

2. What is the managerial view of business? What is the stakeholder view? How do they differ? (Page 70) The managerial view, or shareholder view, of business sees serving the interests of the shareholders as the primary objective of the firm. The stakeholder view maintains that it is vital to consider the needs of everyone who is affected by the firm’s decisions and to advance the interests of key stakeholders – including, but extending beyond shareholders (e.g. shareholders, consumers, employees, management, suppliers, local community). The key difference is that the managerial view tends to emphasize the interests of the shareholders over (sometimes, to the exclusion of) the interests of other stakeholders. For the stakeholder view, this is too narrow a view of business that stifles growth and innovation, blinds the firm to its long-term interests, and strains the relationships between the firm and its stakeholders.

3. What is the separation fallacy? What is the integration thesis (I and II)? Why are they important to business? (Page 72) The separation fallacy is the common misconception that business decisions have no ethical content and that ethical issues have no relevance to business decisions. In a broader sense, it can refer to the notion that there is a separation between ethics and daily life, where ethics is reserved for academics and Greek writers who are disconnected from the real world. Rather than seeing ethics as something “outside” of business that reformers need to bring to it, the authors see values as embedded in how we think and . 20

talk about business – ethics is already part of the fabric of day to day business activity.

The challenge is using these concepts more overtly, thoughtfully, and to develop behaviors that can be defended.

The view of business and ethics taken by stakeholder theorists could be summarized by the integration thesis.

The integration thesis (I) maintains that: Most business decisions, or statements about business, have some implicit ethical view. Most ethical decisions, or statements about ethics, have some implicit view about business.

This can be paraphrased into the integration thesis II: 1. It makes no sense to talk about business without talking about ethics.

2. It makes no sense to talk about ethics without talking about business.

3. It makes no sense to talk about either business or ethics without talking about human beings.

Many academics attempt to better understand the world by creating theories with assumptions that simplify the real world in order to tease out general truths. This technique can, however, be abused when a theorist makes a simplifying assumption that results in a model that does not reflect reality or, even worse, distorts one’s perception of it. The separation fallacy is one common simplification that, when followed by academics and business leaders, can have pernicious effects on business practices. The integration thesis (I and II) is an attempt to correct this.

4. Who are stakeholders? What important distinctions are made to differentiate them? (Page 74) A stakeholder is anyone who has a “stake” in the operations of a company: customers, suppliers, employees, financiers, and the community at large are all stakeholders. We may be more specific and call these stakeholders “value chain” or “definitional stakeholders.” Definitional stakeholders are the ones who most directly interact with the company and who are vital for making it a going concern. There is also a distinction to be made between these stakeholders and instrumental stakeholders, who affect the definitional stakeholders (e.g. the government, the media, etc). Of course, these are not strict definitions. Who the stakeholders are for a particular firm really depends on that particular firm.

5. What are the three levels of the stakeholder framework? Why are they important and how are they connected? (Page 78) The stakeholder framework involves making and upholding commitments at three levels: .

21

1. Value Proposition of the Organization: the goal(s) toward which the firm strives; the ends it seeks that enable it to be profitable.

2. Principles for Stakeholder Cooperation: how the firm does business and cooperates with key stakeholders to achieve its goal(s); the means it uses, and the kind of community it needs to create.

3. Respect for Societal Standards of Conduct: understanding, engaging, and respecting different value systems outside the firm; recognizing constraints imposed on the firm by society.

Each level represents an important set of ethical issues that deserve consideration on their own terms. For the company to have a coherent identity, and to ensure that living out its values enables the firm to thrive, companies need to think about the interactions across all three levels and see that “doing ethics well” involves success at all three levels simultaneously.

6. Based on the content of this chapter, what does it mean for managers to put business and ethics together?

Were business and ethics ever separate? Ethics is part of business; to say that business decisions have no ethical content is really to merely ignore the ethical component. By ignoring the elephant in the living room, however, business leaders end up making bad ethical decisions. The key to restoring ethics in business, therefore, lies not in trying to “put” ethics into business, but realizing that it was always a part of business and should not be kept segregated or ignored.

There is no one-size fits all answer to this question and this is a chance to see what students think about this critical issue. Their answers will likely reflect back to their answers to Question 1 (above), though they may be framed differently. This is also an opportunity to highlight how much is at stake, both in forming a coherent answer to this question and to finding ways to have them working (largely) together. Seeing them as largely opposed, or ignoring this question, leaves managers open to seeing ethics as either optional or counter-productive to being successful – both of which open the door to troublesome behavior and to embracing life without a sense of integrity.

.

22

Business Enterprise Trust: Merck & Co., Inc. (A) Teaching Notes Synopsis A scientist at Merck finds that a drug the company has developed to treat a parasite that infects animals may hold the key to treating a similar problem with human beings. The illness in humans is called “River Blindness”, it afflicts 18 million people (with 85 million at risk), and has horrible effects on its victims – worms that reproduce and spread through the body of the victim cause tremendous discomfort and itching that lead many to commit suicide, and it eventually causes blindness. The central problem is that the populations affected by this disease are all in developing countries, they are poor, and they are unlikely to be able to pay for a drug. Given Merck’s mission to make medicine that is for the people, not the profits, how should they respond?

Objective This case provides a great opportunity to think about the themes presented in Chapter 3, particularly the nature of business, the purpose of the corporation, and responsibilities to stakeholders. Merck stands as an example of a company that has a mission which extends beyond making money, but this case raises a paradox – if the profits don’t (clearly) follow, to what extent can Merck pursue medical leads and remain a viable business? Is this an act of charity or a critical opportunity to show commitment to its mission? What import or value does its mission have? On this latter question, one can make the case that it is precisely this inspirational mission that is critical to its value creation for stakeholders – inspiring scientists and drawing them to the company, gaining the goodwill and support of customers, easing pressures from governments to increase regulation, and doing what it takes to be a “good company” that make others want to be associated with it. The challenge is how to hold together its mission and its desire to be a for-profit company; how to put business and ethics together.

Questions for Discussion 1. How should Roy Vagelos think about this problem? What are some possible approaches to take to framing what is going on here?

2. Does Merck have an obligation to do something here? Does its knowledge create an obligation to act? If so, does that extend to an obligation to spend between $100-200 million of its resources to help?

3. What should be on Vagelos’ radar screen as he thinks about this decision? What specific considerations should he at least note before he gets to a decision? a. Which stakeholders should he think about? What is their interest? b. What is at stake for Vagelos? How will this decision shape him and his character?

. 23

c. Are there any specific principles that should factor into his decisionmaking?

4. What do you make of Merck’s mission? What, exactly, does it mean? How important is it to your decision and why?

5. Make a decision: commit to developing the drug now, or decide not to develop it?

[Note that with this latter option you are not committed to doing nothing: you can opt to wait until you get someone to pay for it and then develop it later, or simply share your discovery with others and let them pursue a drug. You are simply saying you won’t commit Merck’s resources to developing the drug.] Make the case for your decision: what are the most compelling reasons for your decision?

6. What does this case tell us about the challenge of putting business and ethics together?

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): this provides a good entrée to the conversation. Push the students to not list individual issues in the case, but to think about larger conceptual frames to put around the issues – is this an issue about corporate charity/social responsibility? Is this a marketing problem where we need to prioritize brand and how this choice will reshape our position in the market? Is it a zero-sum game where we focus on trade-offs between poor people and shareholders?

2. Question 2 (10 minutes): with this question you can tackle the issue of whether the company really needs to take some kind of action – whether based on general principles of benevolence (e.g. the story of the good Samaritan and widely held duties that we have an obligation to help those in need), the knowledge Merck has about this possible cure, or their mission. All provide possible reasons to say they should do something. You can press them on how far does that go – to just share the information, to spend money on a drug (e.g. $100-200 million), and/or to see it gets into the hands of sick people (which has a whole separate price tag).

3. Question 3 (20 minutes): here’s a chance to get students thinking about all the issues embedded in the case regardless of what they think they should do. Push them to think through what is on their minds and to try to link it back to the Decision Guides (from Chapter 1). If they don’t raise these issues specifically, make sure they consider the interests of various stakeholders, character issues embedded in the case, and particular principles and rules at issue.

4. Question 4 (15 minutes): this is a key puzzle in the case. Merck’s mission is far from self-evident and its implications for action are also ambiguous. Students will . 24

have to do some work to figure out what it means, how it bears on this decision, and why (or why not) it has value for the organization. Students who love the mission should be pressed to consider why it matters so much and how it allows them to be a successful company over time (e.g. see the generalizability test).

Students who think the mission allows them to take no action (or to focus on acts that always lead to profits) should be pressed to see how that squares with the logic of the mission. Certainly this case puts pressure on management to consider if they should be scrapping this mission or not – why does it matter and how is it good for their business?

5. Question 5 (20 minutes): let the students dig in here and make their best case. Be sure to press both sides. Pay attention to the language and logic of both sides. It will be hard to make a strict financial case for proceeding unless you make some heroic assumptions about outside help and future goodwill (both of which turn out to be either exaggerated or wrong in the actual course of events). Push both sides on their thinking, but keep in mind this layer of the conversation to set up the next question.

6. Question 6 (10 minutes): here’s a chance to get beyond this decision to use this case to think about how business and ethics go together. If this is just an isolated case of “charity”, then it gets harder to see business and ethics as connected. At the same time, if it is just a clever way to win folks over and convince them we are a nice company so they will give us more money, that it seems that there are few connections for ethics and business as well. If it is about the mission of the firm, and seeing company purpose, value creation, and making stakeholders better off, all pointed in the same direction, the case becomes pretty interesting. Help students appreciate that ethics is not all about noble intentions and being concerned solely with the well being of others and that business is not just about greed and thinking of oneself. The reality is more complex.

Additional Information: In this case Merck develops the drug and creates an incredibly successful medicine that was initially introduced in the late 1980’s. When no one stepped forward to help cover the costs or buy the drug, Merck decided to give it away. They have given it away to all those who have requested it and pledge to do so “forever”. River Blindness is now on the verge of being eradicated as a serious health problem. There is a video, developed by the Business Enterprise Trust, that makes an excellent companion (it is about 5 minutes long) and captures what happened in the wake of the case. There are also many great stories about this on the web. It should also be noted that Merck continues to provide forms of assistance to those in need with its expertise, but within limits. In the wake of the River Blindness decision, the company went to lengths to emphasize that this case was special: i) Merck had special knowledge, they knew important information that could lead to a cure that no one else knew; ii) the suggestion . 25

that they pursue a drug came from inside the company and was related to its existing research; iii) Merck only decided to give the drug away when all other options were exhausted – they tried to find a way to earn a return on the drug. For all these reasons, they could go forward here and yet remain a “for profit” company.

.

26

Chapter 4: Business Ethics in the Global Marketplace Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What are some of the key ethical questions facing companies doing business in a global context? What is your view of how well business has done in facing and addressing them?

While this is obviously not a complete list, some potential ethical questions that could be mentioned include: global chain supply, product quality, competing cultural values, labor rights and standards, corruption, bribery, extortion, safety standards, concerns about environmental degradation, crime, lack of legal enforcement or clear property rights, preservation of culture, women’s rights, children’s rights…just to name a few. Students will have different views on how business has faired in light of these issues.

2. What is a bribe? Why (and where) is it problematic? How is bribery different from a grease payment? (p. 97) The term bribe tends to refer to a particular type of gift that perverts judgment. This gift presents a conflict of interest for an agent (bribee) who could be persuaded to stray from pursuing the best interests of those represented.

Bribery has never been looked upon particularly positively in any culture or society.

Today, it is particularly problematic among poor developing countries as it appears that corruption, poverty, and crime tend to go hand in hand. Estimates by various financial organizations and international NGOs consistently find that corruption robs many developing countries of economic growth and greatly exacerbates poverty in those countries. It often has tragic consequences that are all too vivid for many, typically less well off individuals – for example, schools that collapse during an earthquake, killing hundreds or thousands of children that should have remained intact if built to specification. However, because bribes were paid, businesses used sub-standard materials and methods and governmental officials looked the other way.

Fundamentally, bribes are a problem because they violate core moral duties, particularly for those who receive bribes. Bribes create a conflict of interest for the recipient and lead them to compromise their judgment – to advocate for their own benefit at the expense of those they were supposed to benefit (e.g. a public official should make decisions to benefit the public).

Grease payments, or facilitation payments, are small transactions (the FCPA says less than $10,000) often given to lower level government officials to smooth out transactions. . 27

The key difference between a bribe and a facilitation payment is a difference of intentions and effects. Economists tend to despise bribes because they are used to distort choices, and more specifically the market mechanism. Bribes are typically done to draw a contract to a firm that should otherwise (based on market relevant considerations like price, quality, and product features) not receive it. The less efficient firm ends up producing an inferior product for which consumers (or governments) pay a higher price than what would be economically efficient. The briber and the bribee benefit, whiles everyone else in the world is made worse off. A facilitation payment, on the other hand, describes a payment that smoothes the transaction process without distorting the outcome of the bid – in short, multiple firms could pay a facilitation payment without altering the outcome of the bid or undercutting the market mechanism (e.g. to pay to get items through customs).

3. What are relativism (all four types), ethnocentrism, and principalism? Use an example to illustrate how they are different. (p 99-100) Relativism holds that all values are relative. This chapter primarily focuses on cultural relativism, the idea that no one society’s values are superior to another’s - what is “morally right” depends on each society’s mores (“When in Rome…”). But there are three other forms of relativism also included in this chapter: naïve relativism, role relativism, and social group relativism. Naïve relativism is the view that what is right depends on each individual’s personal values and that one should not judge the values used by others. Role relativism is the idea that what is right is determined by the roles we play (i.e. following orders at work). Finally, social group relativism is the idea that what is right depends on what certain groups do (The Jones family condones slavery, therefore we should too!).

Ethnocentrism is the extreme opposite of cultural relativism. An ethnocentrist believes that there is in fact one true moral code: his/her own (or, rather, the moral values of his/her own society) and all others (to the extent they are different from their values) are wrong.

Principalism is used here to refer to the spectrum of opinions that can fall somewhere in between these two extremes. It is clear that neither relativism nor ethnocentrism gets it right, but where one falls in between is a matter of great intellectual debate. Within principalism there is plenty of room to include students who lean more in the direction of relativism (emphasizing toleration of others and not passing judgment on them) as well as students who lean more in the direction of ethnocentrism (emphasizing how clear, right and fundamental their values are). In the former case, so long as the student is willing to draw some basic lines (e.g. you can’t take my computer – that’s mine and stealing is wrong), they aren’t a true relativist. In the latter case, so long as they have some tolerance of others and their values and don’t feel the need to demand everyone embrace their values, they aren’t an ethnocentrist.

The examples that can be used to demonstrate these ideas are as boundless as the creativity of the students. But for the sake of this guide, we could use the example of, say, child labor in a Bangladeshi textile factory. A relativist might say of child labor that, . 28

though it may be deplorable by our standards, we have no right to cast judgment on the way of life of another people. An ethnocentric might argue that we do indeed not only have the right to cast judgment on child labor, but also must judge it to be wrong and inexcusable so long as we have the power to stop it. He might go so far as to require that all Bangladeshi firms that wish to engage in business with his company halt the exploitation of child laborers. It might come as a surprise to the ethnocentric; however, that despite his good intentions, because Bangladeshi textile factories are now firing all their child laborers, the children, desperate for work, either find it in prostitution and mining, or can’t find work and end up dying on the streets.

But before the cultural relativist can chide the ethnocentric, one has to first ask what the children and, more importantly, their parents would have wanted. Is it really the case that the parents ultimately want their children to work in a sweatshop? Or is it more likely the case that abject poverty means that parents need their children to help support the family and would otherwise send their children to school if they had the income? In the cases economists examined in Bangladesh, they found that it was in fact a lack of income that prompted parents to send their children to work, not any particular social norm. Indeed, in cases of child labor from India to Southeast Asia to Sub-Saharan Africa, economists conclude that it’s clear that, in general, parents actually do like their children and will send them to school rather than work if they can afford to. So, it appears that neither the relativist nor the ethnocentric was correct in this case. Child labor is not necessarily a social value particular to another culture, as the relativist might have thought. At the same time, it is a complex issue; one that the ethnocentric only exacerbated by his wellintentioned, but narrowly-construed, understanding of the situation.

4. What are universal values and how are they (and Donaldson’s ethical algorithm) helpful for sorting out how to act in a global economy? (p.102) From our understanding of the relativist vs. ethnocentric debate, it seems that there is a delicate path to tread between two undesirable extremes. There must be some way to navigate the space in between. Universal values may provide guidance here. If a set of values exist that are universally acceptable to all peoples, then companies can build upon those values without showing favoritism towards any particular culture’s values. Human rights are one such candidate – standards that apply to all people, regardless of their origins or context.

The existence of universal values is still a matter of debate. But even in situations where it is no clear common ground, Donaldson’s ethical algorithm can help by allowing one to consider 1.) if the economic development levels are different between two countries, whether or not the act would be considered moral if the two countries have equivalent economies and 2.) if the social values are different, whether or not business could proceed without the act and if the act is a violation of international rights. This algorithm, while not perfect, can offer some insights to help with the decision. They may help managers discern when it is acceptable to “adapt” to local practices that may be different from those of their home country, and when doing so may be a major problem.

. 29

5. In what ways are values and principles important for global markets as well as investment decisions by firms? (p.105) Values and principles are prerequisite for any market to function. Their role, however, is often invisible and taken for granted. Take a moment, then, to consider the markets you engage with. If you have a bank account, consider how remarkable it is that you can hand over large sums of money to a complete stranger and can, with a considerable degree of confidence, expect to get that money back. Consider anytime you use a credit or debit card, or make an online transaction where you freely give information to access your account. You don’t have to bribe the postmaster in order to ensure that your mail will arrive at its intended destination. Even small purchases at the grocery store or orders made at a restaurant are made with the assumption that no one will cheat each other. All of these market transactions are built upon trust, values, and principals.

As markets are communities, values do play a role in market interactions in the same way that they influence the way people interact with each other. Business leaders will look for partners that are trustworthy and dependable. They will want to work with people who share their values and can help the company grow and develop. They will want to work with people whose management styles will complement their own and will generate social capital.

6. What other benchmarks exist for sorting out responsible from irresponsible conduct? Which, in your view, are most helpful and which are problematic? Why? (p. 108) This is an opportunity for students to bring in their own ideas and experiences. Push them to critically evaluate what they found in the chapter (and appendices) and to introduce their own ideas for handling these issues.

.

30

Davis Press and Meccan Madness* Teaching Notes Synopsis Carol Davis, owners of a fledgling publishing company, is faced with the dilemma of publishing a book that, while promising strong sales, may indirectly cause widespread negative repercussions. The book in question, titled, Meccan Madness, comes after more than a decade of conflict between the Western world and Muslim countries. In 1988, Rushdie's novel, The Satanic Verses, had created an uproar in Muslim countries, and a fatwa was declared against Rushdie. Although the incident occurred almost 20 years ago, it was still legendary in the publishing world. Since then, there had been the 1991 Gulf War, the September 11, 2001 terrorist attacks on the World Trade Center, the subsequent invasion of Iraq - a conflict that had subsequently grown in complexity - allegations of the desecration of the Qur'an at the Guantanamo Bay prison in Cuba, and the uproar over the Danish editorial cartoons depicting the Prophet Muhammad.

As with Rushdie's novel, Meccan Madness was set in an Islamic context. It was fictional, and could be misinterpreted as offensive by some Muslim readers. Davis's company is just beginning to turn a profit; it continues to walk the balance between red and black, which is typical of new ventures. If Davis signs it on, Meccan Madness could kick in a substantial and much-needed profit. The decision of whether to publish the book is not financial (the numbers are clear); a decision can be made only after a careful risk analyses that embraces a wider-than-normal socio-political and moral realm of concern.

Objectives "Davis Press and Meccan Madness" should stimulate student awareness to social and cultural implications, both real and potential, of seemingly isolated business decisions; and it underscores the subtle balance among freedom, rights, profit, and duty. The case also seeks to facilitate an awareness and understanding of the increasingly complex and extensive interactions between Western business endeavors and the Islamic world.

Meccan Madness is written as a case within a case. It describes the actual Rushdie situation as a backdrop for Davis's decision. The case presents the need for redefining who the stakeholders of a firm are and for setting policy regarding responsibilities to them in the context of unique circumstances. The context raises significant questions about what option will be most likely to help her business financially, both in the short and long term, as well as what she sees as her responsibilities to other stakeholders and to moral ideals (e.g. like freedom of the press and not giving in to terrorist threats).

The problem is multi-faceted and involves at least some discussion of moral duty - to whom the individual owes allegiance and why? Beyond its direct shareholders and employees, does Davis Press have a responsibility to independent booksellers and purchases? How about to the overall Muslim community in terms of respect for individuals and their beliefs? Can Carol Davis anticipate adverse public reaction to this book, and if so, should her decision take that reaction into account? What, if any, obligation does she have to protect the free-speech rights of the author? Meccan Madness is written for a Western audience, most likely non-Muslim. Does Davis have any reason to take into account a population that is outsider that readership? In summary, with what, exactly, should Davis be concerned in making her final decision? . 31

Although the case focuses on Carol Davis's decision in light of the reactions to the publication of Salman Rushdie's The Satanic Verses, the issues found in this case are applicable to more recent world events. The 9/11 attacks, the war in Iraq, issues concerning the treatment of Muslim detainees in Guantanamo and other prisons, the murder of a Dutch playwright, and the controversy surrounding the publication of a Danish editorial cartoon are just a few examples. We hope, therefore, that students will find this case study relevant and useful.

Questions for Discussion 1. What is at stake in this decision for Carol and for Davis Press? Why? 2. Who are the stakeholders here? To whom (or what) does Davis owe her allegiance?

3. What factors were most important to you as you thought about the case, particularly as potential concerns or as reasons to support a particular decision? How did the threat of potential violence factor into your thinking?

4. Does and American publisher have a moral obligation to further free speech? What are the limitations on free speech? Can the author have their free speech rights regardless of whether Davis publishes the book or not?

5. What, if any, assumptions have we made about Islam? Are these assumptions sound and how does our perspective change if we take a different view of Islam?

6. Make a decision – publish or don’t publish – and offer your best arguments for your choice. Which stakeholders are you most concerned with addressing as you offer your rationale?

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): Open the floor to suggestions. At this point, it would be valuable to get as many perspectives as the students can provide. This decision has the potential to draw tremendous amounts of attention to the company and generate both large sales and a reputation that could attract lots of customers and authors to the firm. However, that same attention could well come at a huge cost and risk destroying the reputation of the firm as well as put its employees’ lives in jeopardy.

2. Question 2 (15 minutes): This question aims to broaden perspectives as to who and what would be affected by this decision. Davis Press as a company, Davis Press Employees, the author, the suppliers, the booksellers, the readers – Muslim and non-Muslim, religious leaders, free speech advocates, the government, freedom of speech, and social harmony all would potentially be affected by the publication of Meccan Madness. (Note that “allegiance” here does not have to refer to people and society; it can also apply to ideas and values.)

3. Question 3 (15 minutes): This case aims to make students weigh and consider competing factors in their thinking before arriving at a decision. It allows you to . 32

dig into their thinking and what jumped out at them from reading the case and sitting in the “hot seat”. More pointedly, it provides an opportunity to think about how to factor in the issue of the threat of violence. If I know violence is likely to result, do I need to accept blame for it when it occurs? Or, is letting that fear deter me from publishing a form of giving in to a terrorist making demands and giving them what they want? Is that letting them “win” and selling out my values?

4. Question 4 (15 minutes): What are the publisher’s obligations both towards supporting freedom of the press while also maintaining social harmony? There certainly seems to be an element towards not starting fires in crowded theatres, but Davis Press’ target audience is mainly Western non-Muslim readers. Should Davis Press be considered responsible if the book transcends international borders and offends people of a different culture? Could this book be considered hate speech? If so, do readers have a right to be protected from harm? At the same time, are readers also complicity liable – that is, since they don’t have to read the book, if the book offends them, aren’t the readers somewhat responsible since they chose to read it when they could have chosen to ignore it?

5. Question 5 (10 minutes): This case provides an opportunity to reflect on our assumptions about Islam and to challenge them. Try to help students see parallels between Islam and other religions and avoid stereotypes that are both inaccurate (e.g. Muslims are violent or condone violence) and further exacerbate tensions between East and West. Some students may, as a knee-jerk reaction, choose to side with the American company against anything foreign. It may be useful to ask if any students who have had substantial experiences with the Muslim world to share them here. Likewise, one could also ask how students would feel about the publication of work that may be construed as unflattering to their own beliefs and convictions.

6. Question 6 (20 minutes): This provides an opportunity to bring the discussion together and to crystallize student sentiment about the main two options on the table – publish or not – and to think through the rationale for both sides. Students should also have in mind those groups who are most disadvantaged or harmed by their particular choice and develop a rationale that could be used to speak to that audience. You may even ask one or two students to try to offer such a rationale assuming they were speaking to the stakeholder groups in question and then discuss how they did.

* This teaching note is based on the teaching note prepared by Rosalyn Berne, Executive Director of the Olsson Center for Applied Ethics and revised by Research Assistant Jenny Mead under the direction of R. Edward Freeman, Elis & Signe Olsson Professor of Business Administration, Patricia Werhane, Ruffin Professor of Business Ethics, and Andrew C. Wicks, Associate Professor of Business Administration, Darden Graduate Scholl of Business Administration at the University of Virginia.

. 33

Questionable Payments Teaching Notes Synopsis The questionable payments case provides a whole series of short scenarios, each of which is based on real events, that should challenge students to think about whether the payment in question is acceptable or not. Most of the scenarios come from contexts outside the US, but most of the scenarios are things that could well happen domestically. The cases cover everything from small payments to customs officials, to lavish entertainment provided to company decision-makers, to pharmaceutical companies giving gifts to physicians, to large payments to senior officials to win a contract.

Objectives While bribery seems like a clear and simple term, it is often difficult to pin down in practice – especially in a global business environment. Each of the scenarios is designed to help students think through whether the particular payment involved constitutes a bribe or extortion. Beyond getting more skilled in identifying what constitutes a bribe, the scenarios should also push students to think more about good decision-making in international business – what is at stake in these requests? As I use my framework for decision-making, what issues emerge in this case that are important and which I have to deal with in order to make a good decision? How might context, and where I’m operating, play a role in thinking about what is right to do?

Questions for Discussion 1. What is bribery? Why is it a problem?

2. Why do we need to talk about this? What do you need to learn about this topic to become better managers?

3. Which scenarios were most interesting for you? Which ones did you want to talk about the most? Why? 4. What is at stake in this payment? a. b. c. d.

Who do I become if I make this payment?

What principles are at stake, if any, in making this payment?

Which stakeholders are impacted by this decision?

What are you certain or uncertain about in this scenario?

5. What insights or wisdom can you share with your peers about how to handle requests for bribes or questionable payments?

6. Who is harmed by bribery? What is it going to take to reduce the incidence of bribery?

. 34

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): push students to come up with a concise understanding of bribery that makes sense – that isn’t just a rehash of the discussion in the chapter. Take time to also get their ideas of why bribery is a problem – it is ugly, it is costly, it raises all kinds of reputational problems for managers and firms, it may be the reason they lose business, it hurts national productivity and foreign investment, and it reduces the efficiency of markets.

2. Question 2 (10 minutes): take some time to get them to talk about why this matters for them and what about this discussion may be of help to them.

Especially if they work for US-based companies, their decisions here have significant implications for them: if they pay bribes and are caught, they can go to jail and pay large fines that come directly out of their pocket. Help make sure they appreciate that while bribery may be “easy” in some cases, it is a big deal and how they address it could be very significant for them personally.

3. Question 3 (10 minutes): given that you likely won’t have enough time to go through all the scenarios, it is helpful to get a sense of which ones the students most want to talk about. Chances are they will want to discuss the ones that left them with the most questions or the ones they think will generate the most interesting conversations. They quick replies to this question can be used to set your agenda for talking through specific scenarios.

4. Question 4 (30 minutes): spend time letting the students talk through some of the individual scenarios, thinking through the issues, how they relate to their framework, what decision they would make, and why. Depending on your time constraints this can be shrunk or expanded to suit your needs, but this segment deserves at least 20-25 minutes and should cover at least 2-3 different scenarios.

Try to balance depth of conversation with coverage of different cases.

5. Question 5 (15 minutes): this is a chance to brainstorm about how to deal with the challenges of doing business, especially in contexts where bribery may be either an appealing or necessary part of doing business. What should you do?

What, based on your past experiences or things you have read about, are some creative and constructive ways of dealing with these scenarios? What are some things to clearly avoid?

6. Question 6 (10 minutes): push the students to think about the effects of systems of bribery on key stakeholders. Studies show that the poor tend to be differentially affected by bribery, that it tends to impede economic development and economic growth, and that there are often clear and tangible harms that result from specific bribes: for example buildings that collapse during an earthquake that otherwise should have easily survived the quake if built to the original specifications of the contract. Because a bribe was paid, the contractor cut corners, the building collapsed, and not only were there financial costs of the collapse, but often scores of people die in the process. As for changing systems of bribery it is worth . 35

discussing – getting rid of bribery is very difficult, especially where it is entrenched. Finding ways to expose it, make it costly or risky to engage in, and creating collective solutions (rather than strictly firm-specific responses) are all important approaches.

.

36

GE Healthcare in India Teaching Notes Synopsis In 2006, GE became the largest provider of medical equipment in India. GE Healthcare’s pioneering efforts in investing in a developing country and developing ultrasound machines that are more mobile and affordable made many medical treatments accessible to the poorer people of rural India. The company’s decision to invest in India by itself helped to open the door for other companies to invest in the Indian economy, lifting many of the poorest people in the world out of poverty.

GE Healthcare has been criticized, however, since its ultrasound machines have been used in conjunction with attempts to abort female babies. In many parts of India, daughters are seen as burdens. Traditionally, daughters will leave the family to serve the family of their husbands - often taking a substantial dowry with them. It is the sons who traditionally stay with the family and care for the parents in their old age. Some consider it socially frowned upon for a family to not have sons. This preference for sons has manifested itself in very terrible mortality rates for daughters. Critics of GE Healthcare argue that, by introducing ultrasound screenings at affordable prices, GE Healthcare has made it easier for people who previously could not afford a sex-selective abortion to have one. Additionally, critics argue that making the ultrasounds mobile so that they may better reach more people in rural areas has also made them harder to monitor.

Objectives We want to figure out what GE Healthcare should do in this situation and, in general, what managers can learn from this case about working in countries with different social norms. The case is complicated because there are controversies regarding what the social norms of India are regarding abortion (and favoring male children) as well as challenges that emerge from the background social environment that has resulted – making it conducive to acts that many in this society would consider unscrupulous. The concern is that GE Healthcare may have given a more clandestine option to those who would otherwise have hesitated to have a sex-selective abortion out of a concern for societal disapproval. This case helps us to explore GE Healthcare’s obligations in this controversy and the role of business in such issues. To address the main question of what GE Healthcare should do, we will approach it by considering how we evaluate what is the right thing to do and how we can think about the most effective ways to achieve that end.

Questions for Discussion 1. Should GE Healthcare have foreseen the abuses of its medical machinery?

2. What are the effects of ultrasound devices in India? Would the people of India have been better or worse off without this technology?

.

37

3. Is the treatment of women in India an example of a regional social norm that should be respected, or a violation of universal human rights? Justify your response.

4. Would restricting or eliminating the availability of ultrasound machines curtail or eliminate the practice of female infanticide? If controlling the misuse of ultrasounds did little to affect the overall incidence of limiting the survival of female children (e.g. parents would use infanticide), would that impact your view of what GE Healthcare should do?

5. What about GE Healthcare’s approach to its marketing? To what extent is that a contributing factor in this situation? If so, how does it need to change?

6. What should GE Healthcare managers do to address this issue?

Suggested Lesson Plan (85 minutes) 1. Questions 1&2 (15 minutes): If GE should have foreseen the abuse of its product, then it would have an obligation to take measures to safeguard against potential abuses. If GE could not have reasonably been expected to predict the abuse of its product, then it appears doubtful that GE intended for the ultrasound machines to be used to abort female babies and it would be unfair to compare the ultrasound machines to weapons of mass destruction. Additionally, few people would argue against the premise that increasing public access to medical instruments has been, overall, a positive thing for India. So the answer lies not with the ultrasounds themselves, but beyond the production line and how its products are used in this social context.

2. Question 3 (15 minutes): Companies working in the global marketplace often find themselves condemned for complying with local human rights abuses or condemned for imposing their values upon a local population. This question should force students to navigate between the extremes of naive relativism and ethnocentrism. Lest anyone get the impression that such treatment of women in India is entirely a cultural norm that is considered acceptable under that society's morals, it should be pointed out that many in India are against sex-selective abortions and that the Indian government is seeking to eliminate this practice. At the same time, those who call this treatment of girls a violation of human rights should be pressed to explain what rights are being violated and how those rights are derived. To dismiss a practice as immoral simply because one is unaccustomed to it brings us no closer to identifying universal ethical principals and verges on ethnocentrism.

3. Question 4 (20 minutes): Just as a good doctor should target the causes of a disease and not the symptoms, any serious attempt by GE Healthcare to tackle this problem needs to look beyond the immediately obvious manifestations of the problem. For example, some economists suspect that many of the missing girls . 38

died not from systematic abortions, but from systemic neglect as a consequence of poverty. Poor families cannot afford much healthcare, so priority goes to the sons and not daughters. Thus, through continued neglect, in poor families, girls have a higher-than-average mortality rate. If it is the case that most of the sex gap can be accounted for by such neglect rather than sex-selective abortions, then placing restrictions on the ultrasound machines that raise the price of ultrasounds may actually exacerbate the situation since it would make families who want ultrasounds and patients who need ultrasounds for medical treatments poorer off and less able to afford healthcare and other needs. Students should be encouraged to consider some of the possible sources of the problem and evaluate the best sources to target. This question also poses the possibility that even if all use of this technology to enable sex-selective abortions ceases, the overall rate of abortion and/or infanticide may remain unchanged. If we knew that to be the case, how would your answer change? For those driven by consequences, the answer may be “a lot”; for those focused on standards of conduct, the connection to overall incidence may matter very little or not at all.

4. Question 5 (15 minutes): the specific sales tactics, the financing structures, and the overall incentives that result from sales to different customers may end up playing a significant role in shaping the behavior of the doctors and health care workers in this case. It may be that taking a less aggressive approach to sales, and creating more flexible terms for some customers, may significantly reduce the incentives of these stakeholders to create markets for this use of ultrasounds or go along with requests from parents for it.

5. Question 6 (20 minutes): Let students consider GE Healthcare’s options. There are many courses of action that GE can take. For example, a few of those options may include: a. b. c. d.

Complying with the letter of the law Actively seeking to change the lot of women Programming ultrasounds to restrict access Implementing greater oversight of the ultrasound machines (e.g. background checks on doctors, monitoring, etc)

Virtually every proposed solution will have drawbacks. Complying with the codes and statutes enacted by the Indian government is the least that the company can do, and it may not actually do anything new at all. Actively seeking to change women’s rights in India might draw some attention, as well as some accusations of cultural imperialism. Restricting access to the machines or implementing stronger oversight and regulation will likely be quite expensive, potentially reduce access to healthcare, be used as an excuse for anti-competitive behavior, and will probably be easily circumvented by unscrupulous doctors. The money spent on regulating the symptoms may also potentially be more effectively spent elsewhere.

.

39

GE Healthcare may try to be more discerning in its choices of locations to operate. Some regions in India, such as Kerala, show no sex ratio gap and incredible degrees of gender equality. But what’s more interesting are cases of dramatic improvements in the public perception and treatment of women in India.

One of the most effective campaigns to improve the treatment of women in India realized that households in some of the poorest regions of India may have televisions despite lacking basic necessities such as running water. When televised soap operas portraying women in a positive light were broadcast, scholars found that people who saw the soap operas began behaving more compassionately towards women and daughters. Perhaps one way that GE Healthcare could work to reduce sex-selective abortions might be to sponsor soap operas that depict women and daughters positively in order to change the public perception of women so that parents will value their daughters.

.

40

Chapter 5: Leadership Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. In your view, what is leadership? Why is it important and why is studying it filled with pitfalls?

This is an open ended question. Leadership comes in many forms (business, political, military, social, etc), and this discussion should hopefully get students to think about the many ways in which leadership may be manifested. This is a good opportunity to discuss how this term may be over-used in the US, how international students (in particular) may view this concept differently, and how we deal with so many theories/ideas/experts who feel qualified enough on the topic to discuss leadership.

2. What is the canonical model of leadership? How does ethics fit into it? (p. 145) The canonical model of leadership tries to organize all the factors that influence leadership into four variables (the leader, the follower, leadership processes and skills, and the situation or context) and outcomes. Within the canonical model of leadership, there is no specific role for ethics.

As the chapter develops, it becomes evident we can use the canonical model to connect leaders, values and ethics in (at least) three ways: amoral leadership (no connection to ethics), values-based leadership (recognizing especially leader values yes, but no focus on the ethical implications of those values), and ethical leadership.

3. How does amoral leadership theory help? Where does it fall short? (p. 145) Amoral leadership theories give us a good starting point and ask us to consider what traits constitute a good leader. This model, however, falls short in that it doesn’t really say much to allow us to evaluate whether a leader’s decisions are ethically good or bad. Some students could perhaps make a connection with actor-based ethics and point out how this view praises individual virtues, but it doesn’t attempt much to evaluate actions or their consequences.

4. Who are values-based leaders? How do they help in thinking about putting ethics and leadership together? (p. 147) Values-based leaders strive to create congruence between the values of their followers and the values of the organization. This way of thinking helps us to see leadership as more of a partnership and elevates the goals of the followers. Many value-based theories . 41

of leadership emphasize the importance of shared vision and values in maintaining this relationship, but stop short of commenting on the ethical content of such values.

5. What is different about ethical leadership (theory)? How do you practice it? How do you know if you are an ethical leader? (p. 149; 152-4) Ethical leadership theory strives to underscore the ethical content built into every aspect of leadership. In one sense, ethical leadership starts with the understanding of the deep and necessary connections between ethics and leading – one cannot lead without ethical assumptions or implications. In terms of leading in ways that are ethically sound, there are no simple guidelines or formulas to how this could be done in practice, in part because there are many complex issues involved. But at the very minimum, ethical leaders should strive to nurture the human potential of their constituents, balance the needs of the individual and the community or organization, defend the fundamental values of the community or organization, and instill in individuals a sense of initiative and responsibility. The leader should also be able to distinguish between modal and end values, and not only achieve the former, but also aim for the latter.

The chapter also raises some core benchmarks to help leaders understand if they are meeting the challenge of ethical leadership (p. 152-4): frames actions in ethical terms; articulates and embodies the values and purpose of the organization; connects the value proposition to stakeholder support and social legitimacy; creates a conversation about ethics, values and value creation for stakeholder that is alive; creates mechanisms of dissent; finds the best people and develops them; makes tough calls while being imaginative.

6. What is “leading from the middle,” and how does that influence your view of leadership in organizations? (p. 151) “Leading from the middle” refers to the idea that much of leadership in organizations happens not at the top of the hierarchy, but at the middle and lower levels of the organization, especially with middle managers. It is a theory that starts with the premise that upper management should delegate responsibility and power to middle managers to actually implement the goals of the company. The approach moves away from earlier theories of “top-down” management in that it gives middle managers more room to innovate and exercise the motivation, values and purpose common to all individuals.

.

42

Business Cycles and Employment Practices in a Domestic Garment Industry Teaching Notes Synopsis You are on the management team of a private apparel company. The fundamental philosophy behind the company is that apparel manufacturing should be profitable without exploiting workers. This philosophy has shaped the companies policies and the reputation of the company. This summer, the company hired an additional 1,000 workers to keep pace with orders. The company knows, however, that sales will decrease in winter and that the company will not be able to afford to keep all its employees (at least not under the current wages). Your task is to decide what to do in this situation.

Objectives As actions reflect leadership styles, this case challenges students to think about what kind of leaders they wish to become. The case provides a rich context to reflect on the connections between the realities of the global marketplace in the garment industry and our ideals about what it means to be a good leader. To what extent can leaders be compassionate, make decisions that look out for the interests of their workers, communicate openly and truthfully with employees, and at the same time create strong returns for shareholders and uphold their brand within the marketplace? What kinds of leadership challenges emerge from this case and how does a leader committed to ethics frame and address these challenges?

Questions for Discussion 1. Stepping back from the particulars of this case, what does it mean to be a good leader in today’s business environment? What approaches should managers take to truly lead workers given the realities of the market and worker-manager relationships?

2. What are the main alternatives in this case? What kind of leadership would you associate with each of these options? From a leadership perspective, which of these are most desirable?

3. Are there any alternative solutions not mentioned in this case? What should a good leader’s priorities be in this case?

4. What does it mean to “exploit” workers? What does management need to do to make sure it doesn’t exploit workers? What would it mean for the company to treat them well?

5. What role does process play in this case and how important is it for leading stakeholders and making decisions that stakeholders embrace?

6. What decision should be made? Why?

.

43

Suggested Lesson Plan (85 minutes) 1. Question 1 (15 minutes): take some time to push students to think about the state of relations between workers and managers in the current environment. What are the expectations of both parties? What does it take to successfully manage them?

More importantly, given those background assumptions, what does it take to lead?

2. Question 2 (15 minutes): It is clear that, due to finances, some kind of cutting back will be necessary: wages may have to be reduced, people may have to be laid off, other company expenditures and benefits may have to be curtailed. So, you know what has to be done; the real question lies in how you do it. Take some time to explore the main alternatives and to assess what kinds of leadership you might associate with each option – which options are more formulaic and “managerial” and which demonstrate real leadership?

3. Question 3 (10 minutes): Take some time to envision some alternatives that may not be obvious from the case – are there some things we are missing? Take some time to reflect on what considerations – immediate financial return, firm reputation, relations with workers, employee morale, market share, budget constraints – management should prioritize and why.

4. Question 4 (15 minutes): What is your definition of exploitation? What practices can be deemed acceptable or unacceptable by this company? What principals underlie your definition of exploitation? For example, how does justice and equity figure into your concept of exploitation (e.g. if wages were cut and working conditions made harder, would it be exploitation if everyone, including the owners, were affected?)? Is there a matter of consent (i.e. being forced to work longer hours than you would like vs. taking overtime with pay)? Also spend time thinking about the opposite – not just avoiding exploitation, but treating workers well. If treating people well is not just about financial return, there may be a variety of options to excel on this dimension without breaking the bank.

5. Question 5 (15 minutes): Process may provide a key consideration in leading within this context. How important is it, and how can process be used as a lever to both lead and make decisions that stakeholders embrace? If you choose to cut wages, how will this be decided (e.g. unilateral decision, upper-management meeting, company town hall-style meeting, company-wide vote, etc)? To what degree would you involve employees in the decision? If you choose to dismiss workers, who would be dismissed first? Who should have preference in being retained? Should seniority receive priority, or productivity? Should you offer any promises of jobs in the next summer should any employee wish to return for seasonal work (you may save in training costs, but this could become a promise you won’t be able to keep).

6. Question 6 (15 minutes): Bring the conversation back to what should be done.

Evaluate the different options and get students to advocate for their view – both . 44

about what good leadership requires and what is a good decision for the company.

Push students to think about how these things are connected.

.

45

Jeri Caldwell at Moex, INC* Teaching Notes Synopsis Jeff Fairbanks, vice president of Strategic Human Resources at MOEX Corporation, faces a challenging leadership issue. He must decide how to raise a discriminatory issue that a subordinate and friend of the family, Jeri Caldwell, informally described to him.

Caldwell, an engineer from MIT, feels that she had been denied a due promotion at MOEX for the second time primarily because she is black and female. Upon hearing that she was denied the promotion she thought she deserved, Caldwell lost her temper at her boss and stormed out of the building. Fairbanks has been with MOEX for 18 years and is currently the highest-ranking African American in the company. In 36 hours, he will be meeting with members of the executive leadership team where the issue of Caldwell’s case and diversity at MOEX may be brought to attention.

Objectives Leaders have to deal with any number of ethical dilemmas. As the role of diversity in organizations is still a controversial issue, we felt that this could be a particularly challenging and instructive topic for students to grapple with ethical leadership.

Topics that could be explored in this case may include: - The systemic dynamics that hinder organizations from gaining competitive advantage from diversity.

-

The failure to develop and enhance opportunities for people of color

-

Neglecting to use skilled people of color and their abilities to the fullest

-

A lack of self assessment (individual and institutional) for the firm's inability to retain qualified minorities.

-

Understanding how systems and culture can exclude people from participating and thriving in an organization.

-

Understanding the experience of African American employees in U.S. corporations.

The A case explains the backgrounds of MOEX, Fairbanks, and Caldwell; it then describes the informal gathering Fairbanks attends at Caldwell's private dwelling. The array of guests flushes out individual experiences with discrimination and how each person relates to functioning within the company. Students are asked to decide how Fairbanks should deal with this critical issue. Fairbanks briefly weighs some pros and cons of raising the issue of diversity in a top management meeting. In the B case, Fairbanks is in the boardroom presenting his new Diversity Initiative, and students are asked to examine his plan and determine what is missing. It may be more effective to present this case in parts; providing the A case separately and before the B case.

Questions for Discussion 1. What are the problems presented in this case? . 46

2. Where do these problems come from?

3. What kinds of changes could address problems related to diversity at MOEX? 4. What should Fairbanks do?

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): A Broad range of discussion points will arise. Many students may initially see the case as revolving around Caldwell's desire to be promoted and respected, Fairbank's own position of attracting and retaining talented engineers from all demographics, and senior management's need to be effective in global markets. To help students think about the interests of the various stakeholders in this case, it may be useful to write down several categories on the board: Jeri Caldwell, Jeff Fairbanks, Senior Management, Prospective Engineers, other minority employees, and MOEX INC are all good candidates to include as students consider where each stakeholder is coming from and how they would be affected by Fairbanks' decision.

2. Question 2 (15 minutes): It is helpful to be expansive in this discussion and to encourage students to look at a variety of causes for these problems. Since many students may hesitate to discuss problems in terms of being individually generated, the discussion may need prompting. Would a white person who exploded at a boss for not being promoted be viewed in the same way as Caldwell? Would Fairbanks have acted in a similar fashion? Even with a nudge, students are apt to underestimate the cultural differences between people of color and whites and - even more - underestimate the cultural differences between Latino or Asian backgrounds and whites. Often Minority students will step forward and vocalize different problems that the rest of the students do not relate to. It is useful to flesh out that MOEX culture has a reputation for being congenial, cordial, and collegial; and it has encouraged teamwork and mutually respectful learning, as manifest in the team bonus. Persuade students to explore MOEX culture through the lens of its reputation as "conservative and even hostile to people of color." What do these different reputations mean? Are they incompatible? If not, ask the students to provide examples of institutions that exhibit both reputations.

3.

Question 3 (15 minutes): Students often feel more comfortable discussing systemic problems. You may wish to suggest broad themes such as recruitment policy, selection expansion, and training programs. How can one design systems that will effectively manage cultural differences? Press the students. A brief background on current EEOC judgments, labor law, and recent court rulings on discrimination and reverse discrimination could be useful.

4. Question 4 (15 minutes): Although he is several steps removed from the incident, Fairbanks does take the issue to heart as he himself had struggled to climb the company ladder. At the same time, while he may sympathize with Caldwell, he must be able to frame the issue in a way that would not undermine his own . 47

credibility. Note that we are only given partial information – we do not know the intentions of Caldwell’s supervisor (and in real life may never truly know). It may be useful to check with Caldwell’s supervisor to ascertain the reason for Caldwell’s non-promotion (was it a universalizable reason?). Could Caldwell’s non-promotion have been influenced by race, even subconsciously? If so, would that suggest a systemic problem? How can one reasonably approach and correct this problem? Here we have to consider Fairbanks’ role as a leader. While he may not be able to take direct leadership action, he may find himself most effective in influencing the way his colleagues think about an issue. He could press the executive committee to examine the firm's seemingly contradictory reputations.

He could encourage his fellow decision makers to consider Caldwell's accusations to their logical end. He could even threaten to leave the company. There is any number of solutions that he could propose as well as a broad range of actions that he can take. Let the students wrestle with which ones he should take.

5. Hand out the B case (5 minutes): Have the students read it.

6. Ask the students what they think of Fairbanks’ proposal. (20 minutes): Have the students debate the merits of Fairbanks’ proposal in the B case. What parts have merit? What parts are weak? What could be improved? What could have undesirable consequences?

7. Closing comments (5 minutes): Diversity in the workplace can be a sensitive issue. You may wish to provide some perspective to the class based on your own knowledge and experiences with the matter.

* This teaching note is based on the teaching note prepared by Gerry Yemen under the supervision of Martin Davidson, Associate Professor of Business Administration, Darden Graduate Scholl of Business Administration at the University of Virginia. The original teaching note was also made possible by Jim Clawson, Joe Harder, and Celia Harquail thanks to their helpful comments.

. 48

Chapter 6: Marketing and Operations Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What is marketing with and without ethics? Why do many people see ethics and marketing as in tension? (p. 166) Marketing without ethics is associated with the kind of thinking that emerges when one considers only short-term profits for shareholders and follows marketing trends without considering their consequences on other stakeholders. It tends to coincide with a belief that marketing is amoral and exempt from any standards of ethics.

For those who imagine marketing with ethics, it seems silly to separate the two. Business serves to fulfill stakeholder wants and needs, particularly (in this chapter) to create value for consumers. As we have argued throughout the text, business has ethical content through and through, and marketing is no exception. The question is only what understanding of marketing do we want to develop and defend? Taking on that project puts us squarely in the realm of ethics.

Ethical marketers consider the value proposition – the value consumers receive from purchasing the company’s goods and/or services – and build their reputation (brand) from delivering that value. They know that the kind of marketing they engage in says something about the kind of firm they represent and what values they are committed to.

Ethical marketers place the interested of their core stakeholders above short-term profits and take steps to not only follow they law, but operate within basic moral standards.

Marketing is as much about building a relationship as it is about advertising a product.

Therefore, it requires marketers to think about maintaining and building the company’s reputation so that it remains successful in the long term.

The likely perceived tension between ethics and marketing is that people often see sales pitches as desperate efforts by (used car) sales people to grossly overstate the qualities of their product in order to woo customers and generate revenue for the firm.

2. As you think about STP, what are some of the central ethical questions that emerge for you? (p. 167) Individual students reading through this section each may find themselves asking different questions. Some of the central questions they might touch on may concern questions of content, moral questions concerning the method of segmentation, and questions concerning the social consequences of STP.

. 49

Often the questions boil down to a matter of respect. Is the content the material the company is collecting respectful of the consumers? Is the company collecting the information in a manner that is respectful to their customers and other stakeholders? A good way to check is for the manager to ask him/herself if he/she would be willing to submit to the STP methods used by his/her company.

3. How should ethics play a role in shaping marketing strategy? Why? (p. 171) Many transactions that seem like they should be straightforward procedures in marketing do invariably encounter ethical issues. A company's ability to act ethically in the long term interests of its stakeholders is vital to its own success, because marketing advertises more than just a product. It tells a story about a company. It is that company's face to consumers and to other companies. A company's brand is its reputation, and that reputation sets the tone for that company's relationship with other stakeholders – so marketing strategy should be designed with the firm’s value proposition, its stakeholder cooperation principles, and its respect for societal standards (see Chapter 3) in mind.

4. What are operations with and without ethics? How different are they? (p. 173) It should be fairly easy to imagine operations without ethics: grinding employees like cogs in a machine until all vestiges of job satisfaction and love for the company are worn away, treating suppliers like potential rivals to be beaten down should they threaten the company, grasping at every means - regardless of the ethical consequences - to secure the production targets.

If we take ethics seriously, we can imagine operations differently: not as a task that must be completed using employees and suppliers solely as tools to achieve a desired outcome, but as a goal that should be completed with employees and suppliers as collaborators.

Operations with ethics treat employees as critical assets to be invested with skills and trust, which could in turn lead to better customer services and products. Suppliers are considered stakeholders and partners in producing greater value to the consumer. Shared goals and values, trust, and shared responsibility underlie operations on this view.

5. How does ethics relate to the core elements of operations? (p. 174) The way a manager runs operational tasks carries with it implicit assumptions about business ethics. Throughout the book, we have seen the reoccurring theme of a shareholder-derived view of business and the stakeholder view of business. The last question provided a brief comparison of the two as they apply to operations. The older view of operations as an assembly line and little more is gradually being supplanted by the model of operations as a complex coordination of workers, suppliers, vendors, wholesalers, transportation, and logistics support. Workers are not merely hired hands; they are whole persons who are part of the team. How a company handles its core operations - and therefore its ability to innovate, develop, and perform over the long run depends on the kind of philosophy the manager brings to the company.

. 50

For example, when the company seeks to measurement consumer tastes, will it conduct its tests in a manner that respects the consumer? Will the company view its employees as lazy and untrustworthy and seek to squeeze out every ounce of work from them, or see them as potentially the company's greatest advocates and empower them and trust them?

How well will the manager be able to get different departments of the company to work in concert, rather than fight as competitors? What kind of culture will management foster and will it be beneficial to the health of the company? Finally, the kind of organizational structure the manager employs reflects his/her commitments and will either facilitate or prohibit the ideas mentioned above. As a manager, would you be willing to surrender power to empower your stakeholders or remain reluctant to decentralize the structure of your company?

6. How does ethics relate to the supply chain and many of the challenges posed there for companies? What kind of practical guidance would you offer managers of operations? (p. 179) This question is intended to elicit student responses about operations and their own take on the material of the chapter.

In terms of the chapter material, there is an emphasis on seeing the human dimension to supply chain issues, particularly the role for stakeholder relationships and the value proposition of the firm. Maintaining good relations with workers and supply chain partners and working cooperatively with them is a good strategy, but there may be times when managers may have to make hard choices – make cuts, change suppliers, lay off workers, etc. The key is to make these choices with their larger perspective about what it means to be a good business in mind, and to see such choices as part of being accountable to other stakeholders – both in terms of process (i.e. how such choices are made) and outcomes (i.e. what decisions are made and whose interests are upheld). Sustainable strategy depends on firms finding ways to keep stakeholder interests pointing in the same direction over time, and this is critical when we focus on the supply chain.

Ethics is also a helpful frame of mind for proactively addressing special challenges in the supply chain, such as taking responsibility for international labor issues (e.g. the Nike example from the Chapter) and for when other unexpected problems arise.

.

51

Fingerhut's Pricing Strategy Teaching Notes Synopsis Jane Johnson is director of Communications at Fingerhut Company. The firm, based in Minnetonka, Minnesota, is a direct marketing company that sells consumer goods clothing, housewares, furniture, electronics, appliances, and more - through an array of specially targeted catalogs. In November of 1996, an unfavorable article appeared in the Star Tribune, a major Minneapolis newspaper. The story drew attention to a class action lawsuit pending against Fingerhut that suggests the firm made its profits by exploiting the poor. Several civil rights groups rallied around the suit and submitted amicus curiae in favor of the litigation.

Johnson believes that Fingerhut's pricing strategy offers customers and affordable method of obtaining valued consumer goods on credit. She recognizes that the lawsuit and its related publicity could damage Fingerhut's image as an ethical, socially conscious company. The firm's CEO was renowned for his philanthropy and environmental awareness. Yet the lawsuit portrays Fingerhut as a predatory company that used unfair and deceptive marketing techniques. Although the company's advertizing and credit policies might be legal, are they moral?

Objectives Was Fingerhut Company engaging in unethical marketing? Or were they providing a key service to economically disadvantaged citizens that they highly valued and no one else would offer? The discussion of this case will require the class to investigate a variety of issues including those related to: • • • • •

Truth in Advertising Accuracy of Consumer Information Corporate Responsibility and Corporations as Moral Agents What constitutes an ethical issue Corporate response to negative media coverage

Questions for Discussion 1. Was Fingerhut’s marketing strategy unethical? Why or why not?

2. Build a stakeholder framework and apply it to the issues facing Fingerhut. Make a recommendation for what Jane Johnson should do.

3. What are the arguments for and against, or the strengths and weaknesses of the framework you used to answer the last question?

4. Fingerhut’s practices have been condemned. Yet the Grameen Bank (which extends microloans in developing countries), despite also having high interest rates, has been praised. What accounts for this discrepancy?

. 52

Suggested Lesson Plan (85 minutes) 1. Question 1 (5 minutes): With a show of hands, ask the students to indicate whether or not they think that Fingerhut’s marketing strategy is unethical. It may be useful to take note of who supports which position, or even to divide up the class based on the students’ stances.

2. Question 1 continued (20 minutes): Discuss with the students why they think Fingerhut’s policy was unethical or not unethical.

3. Question 2 (20 minutes): It may be useful to try to draw this out as a diagram. For example, we could start off with something like this: Management Owners

Community The Corporation

Suppliers

Customers Employees

4. Question 3 (20 minutes): Answers will depend on the frameworks developed by the students. Do look for common fallacies such as: forgetting stakeholders and assuming that all stakeholders must be weighted equally.

5. Question 4 (20 minutes) For those who believe that Fingerhut behaved unethically, this question should help the students to articulate what aspects of Fingerhut’s marketing strategy were unethical. For those who believe that Fingerhut did not behave unethically, the challenge may be to see how well this analogy holds.

.

53

Wal-Mart in 2005 Teaching Notes Synopsis By 2005, Wal-Mart had become the largest employer in the U.S. and the largest corporation in the world. Its achievements in efficiency and cutting prices were legendary. Overall, the company was hailed as an innovator and widely admired for its success. At the same time, the end of the 20th century also saw a rise in Anti-Wal-Mart sentiment. The company, fairly and unfairly, became associated with all that Americans despised about large corporations. It was accused of paying employees wages that were too low, of suppressing unions, of outsourcing jobs, employing sweatshop and child labor, destroying mom and pop shops and local economies, giving insufficient benefits, not compensating employees for overtime, and participating in sexual and racial discrimination. How did Wal-Mart gain such a reputation and what can it do to combat the negative publicity?

Objectives Wal-Mart's publicity woes present us with an opportunity to evaluate several kinds of company policies from an ethical perspective. In related fashion, this case provides a chance to think about Wal-Mart as an example of what is best, and what is worst, in modern global capitalism. In these notes, we will consider first whether or not Wal-Mart did anything wrong and then consider what they did (or could have done) right. We will try to do this by evaluating each policy in terms of how it affects Wal-Mart's stakeholders. Finally, it would be useful to address what Wal-Mart could do to combat its negative publicity and become a better company.

Questions for Discussion 1. How has Wal-Mart been so successful? What has it done well?

2. What problems face Wal-Mart? Are the criticisms of Wal-Mart fair? Would Wal-Mart have received this kind of attention if it were a much smaller company?

3. Do you feel that Wal-Mart changed after the death of Sam Walton? If so, in what ways has it changed?

4. If you were made CEO of Wal-Mart, what changes would you make? Where would you start in trying to “fix” Wal-Mart? Why? 5. How would you handle the company's negative public relations? What does it need to do differently on this front?

.

54

Suggested Lesson Plan (85 minutes) 1. Class Poll (5 minutes): Ask for a show of hands to see how many students love or hate Wal-Mart. Also ask how many shop there and see if any of the “haters” are also shoppers – if so, ask how they reconcile the two.

2. Question 1 (15 minutes): There must be reasons behind Wal-Mart's success despite its bad P.R. Have students consider what aspects of Wal-Mart's marketing and operations made it so successful (e.g. its distribution networks, its computerized inventory, its relationship with suppliers, its laser-like focus on delivering products customers want at the lowest prices, etc).

3. Question 2 (25 minutes): This can potentially be a long discussion. The issues mentioned in this chapter include: Low Wages Wal-Mart pays low wages and employs almost 2 million people. It could certainly increase wages, but after some point, that would likely result in Wal-Mart having to fire workers. So the choice that is presented to workers is one of having lowpaying jobs or having no jobs at all. We now have to ask which stakeholders are being presented with that choice and what they would chose to do in this situation. A useful example for a country that has chosen the second option is France. France's labor laws place strict restrictions on wages and the ability for employers to fire their employees. The laws were originally implemented to boost employment. French policymakers reasoned that making it harder to fire employees would slow down the unemployment rate. What they seem to have failed to consider was that making it harder to fire employees would also make employers more hesitant to hire employees. (Imagine how eager you would be to purchase from a store that did not offer refunds, and also charged you more for the good than other stores.) The unemployment rate in France increased.

Particularly hurt were the Turkish residents of France. When the labor market tightened, they were the ones last hired (or not) and first fired. This resulted in a large class of young Turks who were relatively poor, unemployed, poorly treated, and angry. Scholars who followed this trend were not surprised by the riots that broke out throughout France in recent years.

At the same time, it should be noted that American employers during the golden age of American productivity growth (1950-1973) paid their workers a premium wage (and their managers a more modest wage) that was largely credited with helping to create a strong middle class. So, there is something to be said about the social ramifications of the payment systems that companies devise. But we should bear in mind who will be affected by whatever policy is chosen. If Wal-Mart raises wages and managers are forced to fire workers, then the workers who keep their jobs have had their incomes improved, but those who lost their jobs are made worse off.

Effect on Economy and Social Programs . 55

Some argue that Wal-Mart, because it does not pay its employees enough, drives them to drain welfare, Medicare, and other public services. This argument assumes that Wal-Mart made its employees poor. We can consider two explanations for this: 1) because Wal-Mart pays low wages, it makes its employees poor, and 2) because Wal-Mart causes its competitors to go out of business, those who have lost employment become poor and in need of social services. We will examine the first explanation here and the second one in the next paragraph. First, is it that case that Wal-Mart makes its employees poor, or do poor people tend to seek employment at Wal-Mart? If the former is true, then one should be concerned for those almost 2 million employees. However, if the latter is true, then Wal-Mart is actually helping to take people out of poverty, rather than causing it. The real question is whether or not those people would be better of if there were no Wal-Mart in their community. Would the absence of Wal-Mart mean that there would be more higher paying jobs and less unemployment, or would it mean higher unemployment and reduced real discretionary incomes (from higher prices)?

Mom and Pop Shops Wal-Mart has been accused of causing smaller mom and pop shops to go out of business. While it does appear to be the case that some small shops went out of business upon the arrival of Wal-Mart, some shops have actually benefited from the presence of a Wal-Mart nearby. As for the mom and pop shops that go out of business, one has to ask if it was Wal-Mart or the consumers who no longer patronized the smaller shops. If consumers would rather purchase goods from Wal-Mart than from mom and pop shops, that is their right to choose. If mom and pop shops go out of business, that is a consequence of the consumer's right to choose. It is likewise also the consumer's right to choose what kind of community he or she would like to build. Perhaps a community will decide that they would rather preserve a main street of small shops and promote local culture rather than strip malls and box stores. That would be entirely their right to choose.

Outsourcing Some contend that Wal-Mart, in its attempts to lower costs, has forced suppliers to move operations overseas. It is not certain how much of a role Wal-Mart in particular played in the decision of companies to relocate overseas. Regardless, outsourcing has definitely become a controversial topic and one that has become associated with Wal-Mart. Despite how much attention has been given to outsourcing, however, it is remarkable how few jobs were lost to it relative to the economy as a whole. Most everyone gains a little from outsourcing, some people lose a lot. On the whole, it is a net positive. But for those who lose, each job lost can mean a lot of human suffering. There is an interesting debate over whether or not those who have lost from outsourcing should be compensated, and, if so, how that should best be done. This may be an issue where Wal-Mart could potentially find opportunities for community outreach.

.

56

Sweatshop Labor and Child Labor Perhaps one of the most evocative criticisms of Wal-Mart has been its association with factories in developing countries, especially ones that utilize child labor. The issue of child labor in overseas sweatshops drew national attention. If people are committed to ending child labor, then they should commit to the development and education of developing countries.

Poor Health Benefits It is interesting to see this criticism because it seems to be a uniquely American problem. The U.S. is the only developed country where the vast majority of people receive healthcare from their employers. Any activity on this front will necessarily be tied to political decisions about the larger US healthcare system.

Contributing to sprawl There are many factors that contribute to urban sprawl in the U.S.; and it appears that Wal-Mart is a product of those factors, not a cause of them. Still, as with mom and pop shops, communities can choose whether or not to enact zoning limits.

Poor Treatment of Employees Overtime without compensation, employee lock-ins, sexual and racial discrimination; these are all clearly problems that should not be tolerated in any company.

Fighting against Unionization Whereas accusations that Wal-Mart's low wages are tearing down the middle class are probably fallacious, there may be some merit to the accusation that WalMart's policies have contributed to shrinking middle class America - just not in the way that most critics anticipated. Economists suspect that the shrinking middle class can be attributed to three major forces: political policy changes (reduced unionization, tax policy, public programs, etc), technology (improved mechanization, economies of scale), and immigration (barely noticeable compared to the previous two factors). Some studies now point to political forces as the primary cause of America's shrinking middle class. A large part of that may have been due to the decline of unions. Wal-Mart's staunch stance against unions, therefore, may have indirectly hurt the American middle class.

4. Question 3 (10 minutes): Is there a difference between the old Wal-Mart and the Wal-Mart post Walton? Students could point to policies, such as profit-sharing, as examples of a change or to the effects of its overall size. It may be the case that much of the difference in public opinion occurred because Sam Walton's personality generated a positive image for the company that was lost after his death. Push them to think through what has changed and why it matters.

5. Question 4 (15 minutes): Responses to this question are limited only by the creativity of the students. The previous questions should have helped students to . 57

think about the issues and policy questions involved. Develop an extensive list of what needs to change, but also spend time on what should anchor or drive that change – where should they start and how far-reaching does this change need to be?

6. Question 5 (15 minutes): It may be useful to remind students that there is no guarantee that public opinion will improve even if one resolves all of the problems cited in complaints against Wal-Mart. It is also clear that Wal-Mart has had problems with its approach to PR and that its operations would improve from a more effective approach. Other than that, responses to this question are limited only by the creativity of the students.

.

58

Chapter 7: Finance and Accounting Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What is finance with and without ethics? What are some of the core reasons why many look at finance with ethical skepticism? Are these reasons sound or misconstrued? (p. 233) Finance without ethics simply assumes that finance, whether treated as a method, operation, or industry, holds no intrinsic moral content. Here, finance is strictly about numbers and generating financial returns - ethics is a separate topic. Explicitly, this is not necessarily to say that ethics is unimportant, but that it occupies a separate sphere of activity. Some, however, interpret this to allow management decisions to ignore the ethical component in their evaluation of financial reports.

Infusing ethics into finance is really a matter of incorporating more information into one's financial models to allow for better decisions to be made. Finance with ethics strives to make financial reports more complete and improve transparency both in the comprehensiveness of the data and the inclusion of key stakeholders. This philosophy recognizes that financial models and forecasts are one of many considerations that go into operational decisions. In short, finance with ethics is all about stepping back to take in the bigger picture, a more nuanced view, and a longer-term perspective.

2. How does ethics factor into thinking about finance as a method? What key questions do managers need to ask as they perform a financial analysis of a project? (p. 234) A key aspect to finance as a method is valuation - assigning values or priority among competing goals and deciding how to view certain information. Thus finance, as a method, is inherently driven by values and a particular point of view. What those values are and how one sets those values are central questions within the purview of ethics.

Ethics can help one to recognize what one values, check for assumptions, and identify the goals and the stakeholders of the company in order to have a clearer understanding of what kind of strategy needs to be pursued.

Questions managers need to ask as they perform a financial analysis of a project include: 1. What alternatives are not being considered? Are there alternatives that meet the needs of multiple stakeholders or multiple standards of conduct?

. 59

2. Have I examined the assumptions to ensure they are in keeping with the values of the organization? Can I stand by these assumptions? Am I making these assumptions as transparent as possible to key stakeholders?

3. Does the model take into consideration alternative priorities and goals?

4. Who is impacted by this model? Have I included these stakeholders in the process?

5. Am I positioning this model as one possible answer? Am I giving the audience enough information to make an informed decision in keeping with their values and the values of the organization?

3. How should stakeholder theory (and key themes from Chapters 1 through 3) influence core elements of finance? (p. 237) Companies, such as Enron, have fallen for failing to view their financial partners as stakeholders. By thinking of sources of financing as partners rather than as cash-cows, companies can look beyond the short term to build long-term value. Understanding better the causes of organizational failure and ethical breakdowns (Chapter 2), managers can better anticipate and avoid these factors as they impact how management approaches the challenges of finance.

This becomes more important as finance becomes more democratized. With more stakeholders and more interactions, more people are likely to be impacted by the decisions of managers.

4. What is accounting with and without ethics? (p. 245) The common perception of accounting without ethics is one that is neither moral nor immoral, but amoral. Accounts, according to this view, are merely "bean counters" whose jobs are strictly to tally the numbers.

On the other hand, a view of accounting with ethics might recognized that, because there exist temptations to finesse the numbers, accountants do hold a vital positions as moral guardians for their stakeholders.

In accordance with this view, an accountant needs to uphold his/her standards of accounting, consider how transparent he/she is making the company's processes, and the consequences of publishing his/her documents on the stakeholders. By having accountability to others, and by acting as individual moral agents, accountants have moral responsibilities to live up to in their activities.

.

60

5. How do the elements of Chapter 1 help us ask some core questions about financial accounting and the creation of financial statements? (p. 250) Take a look at the questions listed on page 250. They may be worth discussion, as they are all applications of concepts introduced in chapter 1.

1. Are the actions of the firm violating any regulations or laws? Are the financial statements abiding by the letter and spirit of the rules and regulations?

Once again, we are asking ourselves what the morally right actions are. We are not merely concerned with what we should do to avoid legal repercussions. In order to work in stride with the spirit of the law, we need to think about the moral values of our actions in themselves, what committing those acts will do for the character of the company, and the consequences of such actions.

2. Are the actions of the firm likely to jeopardize the reputation of the firm or its key personnel? Are the financial statements hiding any such actions of the firm?

Personal integrity matters. Your character is judged by your actions. Reputation is currency in a system dependent on trust.

3. Have I taken into account all of the relevant stakeholders and taken steps to ensure not only the success of my operations but that I have not unduly burdened or harmed others? Who is using this information and for what purpose? Have I taken into account both short-term and long-term stakeholders such as individual and corporate investors and creditors, government regulatory bodies, taxing authorities, and the accounting governance structure (as outlined earlier)?

Stakeholder theory provides a variety of reasons to consider the interests of various relevant stakeholders – whether because they have the power to impact managements’ plans or because management is genuinely interested in their wellbeing.

4. Could I defend my decision if all the information became public?

Recognize the Publicity Test? It's a useful tool to remember should you fear that you are rationalizing your decision.

5. Would I agree with the statements if I were relying upon them as an outside investor? Are we withholding information in the name of clarity or in order to deceive the recipient?

. 61

This is an example of the Reversibility Test. What decision would you arrive at if the situation were reversed? If we can’t support these statements from different points of view, chances are they may need to be revised.

6. What practical guidance would you offer to accounting managers as they go about their work?

Responses to this question will be limited only by the creativity of the students. This is a chance to push your students to think more critically about the material of the chapter and their own experiences.

.

62

NoTel* Teaching Notes Synopsis Strategic Investment (SI) associate research analyst Todd Thompson is using his Friday train ride home to work on his earnings model. He checks in with his client, Charles Buron, an investor relations manager at NoTel, to run his estimate and get some feedback. Buron interrupts to warn Thompson that one of his firm’s institutional sales people leaked the numbers to his clients—that SI was going to put out an earnings model at a much lower figure than the company expected. Buron cut the call short, leaving Thompson confused. A note from Thompson that contradicted NoTel’s model would create a stir in the investment community. Thompson’s good working relationship with Buron had been compromised by the information Thompson’s institutional colleague (Robert Day) had leaked to Vanguard and TRI-CREF. On top of that, at the request of NoTel’s top brass, Thompson was to present his model the following Wednesday. He needs feedback and guidance from Burton beforehand. Without it, his presentation and Strategic Investment’s relationship with NoTel will be compromised.

Objectives The NoTel case offers to provide a more concrete example of ethics in finance and show that Finance, far from being a neutral profession of bean counters, is laden with ethically charged issues. A healthy ethical culture is critical to maintaining good business relationships and a company’s reputation. The way that Thompson handles this problem will reflect on his personal integrity and the reputation of his company.

Day's decision to release sensitive information is also worthy of discussion and may be useful in distinguishing good and bad consequences from the intentions that were behind the respective actions. Students should be encouraged to imagine themselves in his position, or consider if they have been in a similar situation and did not realize it at the time.

Questions for Discussion 1. Describe the situation facing Todd Thompson. What are his options? What is at stake for him in this decision?

2. Who are the stakeholders here? Who is affected by this decision? Is there any priority among stakeholder interests here? Who stands to gain or lose the most?

3. Would you consider Robert Day's decision to release sensitive information to be moral, amoral, or immoral? How does that factor into your view of Thompson’s predicament and what he should do?

4. Thompson’s next phone call is to you, his boss. What would you say and why? What wouldn’t you say?

. 63

5. Regardless of which decision you make, what follow-ups does Thompson need to make? What should his priorities be?

Suggested Class Plan (85 Minutes) 1. Question 1 (15 minutes): Ask students to identify the problems facing Thompson and propose ways for him to resolve them? What could happen at the presentation? How can Thompson regain good standing with Burton? What allowed this breakdown to happen and could it happen again? It may help the students to try to put themselves in Thompson's shoes and imagine what they would do if they were in his situation – or, if they have been in a similar situation and what insights they gained from that experience.

2. Question 2 (20 minutes): It seems that in this case, a lot of Todd Thompson's suffering is the result of Robert Day's rather myopic view of people who would be affected by his decision. Just as Thompson and the company’s relationship with NoTel were adversely affected by Day’s decision, we want to consider if anyone else could be adversely affected by Thompson’s decision. There are a lot of groups that may be viewed as relevant – be sure to help sort out what is at stake for each of these groups and what standing these groups (and interests) should have for Thompson.

3. Question 3 (20 minutes): Some may find it easy to cast Robert Day as the villain.

But we have to consider 1) what motivated his decision and 2) whether or not we would have done the same thing in his situation. If Day acted out of a genuine conviction that it is morally right to release accurate information, for the benefit of the public and the company in question, then would his action be considered morally acceptable, even righteous? If anyone can say that he or she would have acted differently in Day’s position, what reasons can that person cite for behaving differently? More importantly, how does that situation (and precedent) inform what Thompson does? Some may argue it is irrelevant (or a distraction); others may claim that it matters a lot and that it sets a new standard that Thompson should follow. Both views have merit and may be worth pursuing in a conversation.

4. Question 4 (15 minutes): Answers to this question are restricted only by the creativity of the students. This question provides the instructor a great opportunity to do a role play – to have one student play Thompson and another to play Thompson’s boss. You may even throw in a few other characters for Thompson to call and contact. This not only makes the situation more real for students, it allows them to explore the tensions in the case and see how their thinking and their strategies play out in a “real” setting.

5. Question 5 (20 minutes): regardless of what Thompson does here there will be a mess to clean up, or at least ongoing tensions that can become a problem for him

. 64

and his firm. What is most important to address and what can be let go of? What is his problem and what should he be responsible for addressing?

* This teaching note is based on the teaching note prepared by Gerry Yemen under the supervision of June West, Associate Professor of Business Administration, Darden Graduate Scholl of Business Administration at the University of Virginia.

. 65

Ben & Jerry’s Teaching Notes Synopsis By early 2000, Ben & Jerry’s Homemade Ice Cream, Inc had publicly announced that it had received generous offers from Chartwell Investments, Dryer’s Grand, Unilever, and Meadowbrook Lane Capital to buy out the company. The news created a tremendous degree of backlash from Ben & Jerry’s customers, suppliers, some shareholders, and state and congressional leaders of Vermont. Many Ben & Jerry’s aficionados saw the takeover as a case of the “little guy” being swallowed by a giant multinational corporate conglomerate. Vermont farmers were concerned that their special relationship with the company would be undermined by new management. Vermont government officials saw this acquisition as a potential threat to Vermont tourism and cultural identity. Many worried about the freedom of the company to continue its unique management style and promotion of social causes.

Objectives This case examines issues of asset control for Ben & Jerry's Homemade, Inc., in light of the outstanding takeover offers by Chartwell Investments, Dreyer's Grand, Unilever, and Meadowbrook Lane Capital in January 2000. The case provides a unique opportunity to discuss fundamental firm objectives and the implications of poor financial performance as it reviews the development of Ben & Jerry's strong social consciousness and the takeover defense mechanisms that maintain management's control of company assets.

Taking the role of an outside board member, students may review management's performance, estimate the economics cost of current management practice, and evaluate the implications of takeover defense strategies. Ultimately, students must take a position on whether the board should defend the agenda of the current management team or accept one of the takeover offers and support a shift toward a more traditional orientation.

Questions for Discussion 1. Why is Ben & Jerry’s considered an ethical company? Can you cite practices that merit this reputation? Do you agree that they are a good company or not?

2. Who are the key stakeholders and what do they hope to gain or fear losing in this transaction? Which stakeholders deserve special consideration here (or not)?

3. What are Ben & Jerry’s responsibilities to the shareholders? Do non-shareholder customers have the right to a say in the direction of the company?

4. What do you think Ben & Jerry’s should do? Would it be best for the company to try to remain independent or to accept a buyer’s offer?

5. Assuming the company does accept the buyer’s offer, what should the management do once it is sold? How does your advice change (or does it) if you assume that the new management genuinely wants to maintain the image of Ben & Jerry’s as an ethical and socially responsible company? . 66

Suggested Lesson Plan (85 minutes) 1. Class Vote (5 minutes): With a show of hands, ask the class to vote on whether or not they think that Ben & Jerry’s management should sell the company. Elicit reasons for and against the proposition.

2. Question 1 (20 minutes): This question should get students to think about what makes a company “ethical” and evaluate why they hold certain companies in high esteem. This does not have to remain restricted to just Ben & Jerry’s. Students can consider, for example, if they hold Apple in high esteem because they believe that the company promotes philanthropy or because the company simply invests a lot in its image?

3. Question 2 (15 minutes): Who will stand to benefit from this transaction? Who may be hurt by it? If the transaction proceeds, is there any way to compensate those made worse off? Are there alternative solutions or stipulations that could be made as part of the transaction?

4. Question 3 (15 minutes): The duty of management to the shareholders should not be ignored. The trick here is finding that golden balance of obligations to the shareholders and to the other stakeholders and to learn more from students how they see that playing out in this case. This example provides another opportunity to explore their view of business and the responsibilities of management.

5. Question 4 (20 minutes): Answers to this question are limited only by the creativity of the students. This provides an opportunity for a debate and a chance to dig deeper into the initial comments that emerged from the class vote.

6. Question 5 (10 minutes): Here’s another opportunity for students to explore the issues and let their own views of who B&J’s is, and how they should run the company, going forward. This chance to look beyond the decision puts them back into the details of the case and seeing how they will operate to realize the benefits that the buy-out was meant to achieve. Simply making the decision isn’t enough – management has to think through how to make it real and avoid the dangers of going forward.

* This teaching note is based on the teaching note prepared by Professor Michael J. Schill, with assistance from Research Assistant Ruslana Deykun, Darden Graduate Scholl of Business Administration at the University of Virginia.

.

67

Chapter 8: Management Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What is management and what are some of the core reasons why managing people is important? (p. 284-285) This question is intended to generate student responses independent of the text as well as to get their reactions to what is conveyed in this chapter.

Management is coordinating people, things, and ideas to attain certain ends. In this chapter, we focus primarily on a view of management with ethics in which managing people is important for several reasons: 1. The increasingly global economy has meant that firms need to be able to engage and increasingly diverse spectrum of people.

2. Management is one of the few remaining areas where companies can distinguish themselves to maintain sustainable competitive advantage.

3. Companies are becoming more decentralized, which places a greater premium on good management.

4. Knowledge and the ability to share information quickly and effectively are critical and that is often the product of good management.

2. How different is a human being from a human resource? How much does that matter? (p. 284) In this context, we are trying to make a distinction between treating humans as resources (management without ethics) and respecting individuals as human beings (management with ethics). Management without ethics sees people as tools to achieve an end (e.g. profit, sales targets, etc). Management with ethics places more of an emphasis on seeing the company as a community that inspires its members to excel and contributed towards shared ends, rather than compelling them to “work” and be treated as objects used for the benefit of others.

3. What are some of the key ideas from the history of management and how are they relevant to our understanding of management today?

Some key ideas that students might want to touch on include:

.

68

•

Adam Smith – his many observations in The Wealth of Nations include passages that recognized the incredible levels of productivity that could be achieved with specialization.

•

Henry Ford – introduced the assembly line to the U.S. (It was already in use in Great Britain and continental Europe, but its introduction in the U.S. had tremendous repercussions later on.)

•

Frederick Winslow Taylor – his attempts to establish scientific management still influences modern perspectives on management.

•

Hawthorne Effect – a term given to the finding that kindness on the part of the manager was often reciprocated with good productivity among the employees.

•

Abraham Maslow – his name is still associated with his hierarchy of needs.

Although the idea sounds rather intuitive, it is remarkable how many leaders failed to recognize its significance and how much suffering resulted from such failures.

•

Douglas MacGregor – we have taken particular note in this chapter of his Theory X and Theory Y, which describe assumptions about worker behavior that can manifest themselves in very different management styles.

•

Total Quality Management – W Edwards Deming’s idea that productivity and product quality could best be improved by empowering workers may have had more influence in Japan than in the U.S., but it is now slowly gaining influence in the states.

4. What are the factors discussed in terms of individuals and relationships at the corporation? How do they shape your view of the individual and how to manage people? (p. 288) 1. Motivation – Are the employees’ needs being met and do they feel as if they are working in an equitable company?

2. Relationships with Authority – What is the relationship between employee and manager at this company?

3. Role of Gender in Relationships – How are differences in gender treated at the workplace?

4. The Psychological Contract in the Workplace – What are the assumptions about social norms adhered to in this company?

5. Groups and Teams – how do groups form, cooperate, and function at this organization? . 69

5. What are some of the most important factors for managing at the level of the organization? How do we put all this together to create value for stakeholders? (p.

295) •

Managing Change – change is inevitable in every facet of business. Here, managers can contribute both by responding to that change and directing it to constructive ends.

•

Human Resource Management Systems – managers have always been relied upon to train and educate the workforce. Different companies will have different policies and different competencies to fulfill, but the aim remains the same: helping the employee to develop and grow.

•

Entry and Exit – in the modern American workplace, entering and exiting a firm has become a more frequent affair than in previous decades. Managers often have to be the ones to facilitate such changes in employment.

•

Diversity – a diversity of backgrounds and perspectives enriches the company. At the same time, it is a controversial issue, so managers must handle it with care.

•

Growth and Development – as the market creates, it destroys. How the company can be saved from the destructive forces of the market and steered towards its creative fronts is a question of growth and development.

Managing the Climate of the Organization – managers are well-situated to look for the big picture and have a sense of the overall mood (climate) of the organization to better guide the many tasks that take place in the organization. Their job is to understand these various forces and create processes and structures that align with the value proposition, stakeholder cooperation principles, and larger societal values (see Chapter 3) to drive value creation for their stakeholders.

6. Examine the principles for action. How helpful are these and how good a job do they do of putting ethics and business together? How could they be improved? (p.

302) This provides an opportunity for the students to reflect on the relevance and usefulness of this material from the chapter.

1. Communicate Regularly (and Effectively) with Employees as an Integral Part of Managing Well 2. Make the Organization a Means to Help create Buy-In and Empowerment 3. Foster a Culture That Celebrates Need Fulfillment and Fairness as well as Openly Addresses Inequities 4. Be Conscious of the Influence of Authority and Create an Internal Culture Where Subordinates Also Have a Healthy Skepticism of Authority . 70

5. Engage Diversity, Be Willing to Have Conversations about It, and Actively Work to Create an Environment Where All Employees and Managers Can Realize Their Full Potential 6. Create a Culture of Performance through Teamwork 7. Embrace the Role of Change Leadership 8. Commit to Continuous Learning, Building Your Own Intellectual Capital and That of Your Subordinates

.

71

Joe Willis: Feeling the Heat in Thailand Teaching Notes Synopsis Part A Jim Doyle, the president of Fasco Motors, has discovered that leadership of the Thailand branch of the company under Allen Moot has stolen money from the company through shady deals with Sanga Devakula, an influential Thai businessman with strong connections in the government and police force. Doyle has Moot dismissed and sends a team that includes Ivan Ramsey, Edward Fyvie, and Joe Willis to rebuild the company.

Before the team can begin the rebuilding efforts in earnest, Thai police - probably under the influence of Devakula - arrest Fyvie and Willis and confiscate their passports under the charge that they were working without proper work permits. It takes 4 weeks for a local lawyer to regain the passports and process their work permits.

Part B Finally having settled the legal mess, the team faces a demoralized work force. Many at the company fear that they are being audited and will lose their jobs. Joe Willis and the team try everything they can to boost morale and build trust and confidence. However, nothing seems to work and company productivity declines.

Part C Six months after their arrival, the managers decide to try something different. As a gesture to demonstrate the sincerity of their efforts to build good relations with the Thai workforce, they invite monks to bless the factory.

Objectives There are several issues concerning management and ethics that may be explored in this case study. These issues include: - managing across cultures - creating team unity amid a diverse team - restoring trust in worker-manager relations - improving the climate of the organization in the wake of ethical misconduct This case may be presented all at once so that students may evaluate and reflect upon the decisions made, or it may be presented in segments to elicit student responses to the issues in the case as they develop. (The suggested lesson plan will be based upon the second approach.) Ultimately, this case is about how to work with people and act as an effective manager under difficult situations – in this case, scandal, corruption, incarceration, distrust, and possible threats to life and limb.

.

72

Questions for Discussion 1. Ramsey, Fyvie, and Willis had to make judgments as to what degree of involvement with the scandal warranted dismissal and who deserved to be retained. What principals would guide you in making similar decisions if you had to decide what kind of ethical violations would merit dismissal?

2. Workers at the factory could tell that Ramsey, Fyvie, and Willis were not being entirely honest when they described Moot’s dismissal as the result of poor performance.

This may have been received as a sign of a lack of trust among the new managers and might have given employees reason not to entirely trust the new managers in return.

Should the managers have been more transparent about their efforts?

3. What do you see as the main barriers in this factory impeding the work of the managers? What should they be focused on? How might addressing those issues make for a better environment and an improved management approach?

4. What are ways that one can communicate across cultures? Can Ramsey, Fyvie, and Willis find common ground with Buddhist Thais? What shared values might provide a platform for improved relations?

5. What do you think of the plan to bring in monks to bless the factory? How would you compare it to, say, company-led prayer, which is not uncommon in the American South?

Are there other good options to blend local culture with their business to improve the situation?

6. What are some steps that Ramsey, Fyvie, and Willis can do next to foster trust, enhance communication, and improve their approach to managing the company?

Suggested Lesson Plan (85 minutes) 1. Question 1 (15 minutes): Some factors for consideration may include: the level of awareness about the incident, the intent, severity, and degree of freedom in choosing to be part of the transaction. Utilize your moral framework (introduced in Chapter 1) to evaluate unethical acts and think about how managers should draw lines about what is acceptable or not (and what constitutes dismissal).

2. Question 2 (10 minutes): The way that managers choose to disclose (or not disclose) information reflects the kind of relationship they are setting with their employees. Hiding information, even for the protection of the workers, can be seen as treating the workers like children, which undercuts trust and exacerbates other tensions in the work environment.

3. Question 3 (15 minutes): Give the students time to break the case apart. What are the key tensions and problems in the case from the standpoint of the managers?

You may push them to think in terms of categories listed in the chapter (e.g.

. 73

diversity, team norms, authority) as well as their own ideas about what is going on.

4. Question 4 (10 minutes): This provides an opportunity to think more about what background conditions are needed to communicate well with others, particularly when they are from a different culture. Spend time not only identifying these barriers, but considering ways – both specific techniques and specific shared values – that may be critical to creating a better relationship.

5. Distribute Part C: Or have the students read part C from the books.

6. Question 5 (15 minutes): Certain rituals may be sources of comfort and fodder for building trust among a group of people. It may be the case that these rituals may play a larger role in business in the future. With an increasingly global market, this may reflect a greater inclusively of cultures and become an enriching aspect of business. At the same time, with a more diverse workforce, it may also potentially alienate some members of the workforce. You may also want to push students on this, as the blessing may be controversial for them. Think crossculturally and ask if they would be comfortable with Thai managers coming to the US and having a Christian minister come in and bless their factory? Is there a problem here, and what are the boundaries around this kind of activity?

7. Question 6 (15 minutes): Perhaps the managers would do well to learn a bit more about Thai culture. To avoid making public gaffes, they could hire professionals, but the best resource may simply be their workers. A sincere effort to better understand and respect the workers may be reciprocated by greater camaraderie and a sincere willingness among the Thai workers to also learn about the ways of their Western colleagues. Push the students to think more about what needs to happen to improve things and create a platform for a richer work experience for workers, better manager-employee relations and stronger performance.

.

74

Diversity Vignettes (Including Emma Pover and Fred Smith) Teaching Notes Synopsis This collection of case materials raises a series of issues around the topic of diversity. All of the items are based on real events that happened to actual managers in the workplace.

Objectives These materials provide a rich array of situations for instructors to explore what diversity in the workplace means, what background conditions are necessary for it to thrive, what factors undercut and stifle diversity, and what managers need to do to create diversity – especially in cases where there are significant impediments to it. You may have sufficient class time to talk through all of these different cases, but if your time is more limited, take time to work through them and decide which ones hit at issues you find most relevant for your students.

Questions for Discussion 1. What is diversity? How important is a definition of diversity for managers and companies? How much does it need to change, if at all, as we move from company to company, go across borders, or operate as a multi-national organization?

2. As you read through the issues in the assigned cases and reflect on your own experiences, what are the biggest challenges in creating diversity in the workplace?

3. What are the costs of not having diversity in an organization? a. What about for the company? b. What about for individual stakeholders? Particularly for those who have experienced it, what is it like to feel like you aren’t valued or welcomed by your company solely because of some core aspect of your identity? c. What value is created by having diversity and how might it be a morally preferable alternative?

4. What are the main problems you see going on in this case? Try to specify which of those problems relate to diversity (and how) and to highlight the moral dimensions of these issues (using the moral framework discussed in Chapter 1)?

5. What should be done, if anything, to address the issues raised in the case? Why? 6. What capabilities and skills do managers need to cultivate to do a better job of managing diversity? What fears and limitations do they need to face and get beyond?

. 75

Suggested Lesson Plan (85 minutes) 1. Questions 1-3 (25 minutes): Take time to get students to think about diversity from their reading of the chapter, the case material, and their own experience.

How do they see these issues, and how are they relevant for them?

2. Questions 4&5 (40 minutes): Either on your own, or with student input, select a series of diversity cases to discuss in detail. Try to balance covering a range of different issues and scenarios along with depth of discussion. Ideally you want both depth and range here. Push them to get specific about what the specific problems are and when something goes from being an innocent comment or trivial decision to being a significant issue that needs to be addressed. You should also push them to think about how their responses may, in many cases, actually make things worse – for themselves, for the main characters they are trying to protect, and for other key stakeholders. Also take time to push the importance of stakeholder relationships and stakeholder perspective. By looking at the issues from multiple vantage points we may glean new insights about the issues as well as what to do. At the same time, but understanding what resources given relationships provide (or are lacking, like trust), we may be able to better appreciate what needs to be done and how it can be accomplished. Since diversity is embedded in the culture of a company, managers have to think about diversity in these terms – not just noble intentions of treating people and being inclusive.

This may also be used to do some role plays with the scenarios to make the issues more real and to test out students’ ability to deal with these issues. Note that this section can easily be expanded if you have more time.

3. Question 6 (15 minutes): After talking through a series of these cases, take some time to step back from the discussion and look for some common threads. Many students are going to be uncomfortable talking about this. Get them to think and talk about why as well as what they would really appreciate to help them do a better job with this.

.

76

Chapter 9: Environmental Sustainability and Its Challenges to Management Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. What is your view of how things stand with the environment? How big an issue is this for us, how much (if any) is business responsible for it? How much change (if any) is needed to get us on the right track?

Student responses will likely vary dramatically on this issue. Some disagreements will probably come from common misconceptions, in which case it may be useful to have additional credible resources available. Many issues of disagreement may however arise from some very subtle and legitimate sources of concern.

2. What are the four mind-sets about the environment? Why are they important for our thinking? (p. 322) The four mind-sets introduced in this chapter include: Doomsayer mind-set We're all doomed! The world is doomed! The only way to mitigate the inevitable is to retreat from economic growth and technology, curtail population growth, and restrict the unfettered growth of developing countries.

Cornucopian mind-set We will innovate, we always have. At least in terms of resources, humans have always been faced with scarcity and responded with substitutions. Whenever the discovery or loss of resources, changes in extraction technology, changes in the availability of close substitutes, or changes in technology change the relative prices of goods, we adjust our consumption to whatever is most cost efficient.

“Haves versus have-nots” mind-set Largely agrees with the Doomsayers mindset, but focuses on the fact that in 50 years, if current trends continue, the pollution emitted by the developing world will vastly overwhelm that produced by the developed world (imagine the other roughly 90% of the world producing as much pollution per person as the current average developed nation). Cutbacks will have to be made, even if it means restricting third world growth and keeping the poor of the world poor.

.

77

Aesthetic mind-set Largely agrees with Cornucopians that the future in all likelihood will not be as bleak as the doomsayers predict. Nonetheless, this mindset notes that people in developed countries consume too much anyway and that this culture of consumption is unhealthy. Perhaps we should reevaluate our morals concerning consumption and nature and seek a simpler, more moderate existence?

3. What is Pascal’s Wager? How does it influence how you look at the uncertainty surrounding the environment?

Pascal's Wager refers to a thought problem formulated by the French philosopher and mathematician Blaise Pascal. Pascal argues that it is rational to believe in a Christian God (as opposed to being atheist) because 1.) if Christianity is true, the believer will be saved and 2.) if Christianity is false, the believer still has nothing to lose by living according to Christian principals. (Note that Pascal implies that non-Christians will suffer eternal damnation if Christianity is true. Also note that this wager would not work so well if other religions offered similar damnation policies [the kind with the after-lifetime warranty].)

Pascal’s Wager (or some derivative of it) is invoked in this chapter to suggest that action should be taken to forestall global warming even if we are uncertain about its effects. If global warming is imminent, then we ignore it at our peril and acting to mitigate it would be wise. Even if global warming were not imminent, becoming green is not costly.

This argument offers a useful perspective on the issue. But one should take a moment to note that it is not entirely accurate. It is not the case that acting as if global warming will have catastrophic consequences is without costs. Indeed, some of those costs will very certainly be quite big. There are clear and obvious benefits to be gained from pollution abatement. Scientists and climatologists overwhelmingly agree that, although there is much uncertainty concerning the range of how much damage global warming will cause, even the most optimistic predictions entail extreme irrevocable terrible damage on a global scale. At the same time, abating emissions entails some degree of costs and human suffering. Furthermore, abating too much today may actually diminish the amount of resources we have tomorrow to combat pollution.

The real question, then, is one of degree. One of the fastest growing areas of collaboration between scientists and economists concerns calculating the damage expected from global warming, calculating how much could be saved through pollution abatement policies, and calculating the costs of pollution abatement. Environmental policy will have to find a balance between these legitimate concerns.

Overall, the spirit in which this idea is employed has validity. In matters of uncertainty, particularly when the potential costs of inaction are catastrophic, it would be wise to err on the side of caution.

.

78

4. What are the four Shades of Green? Where do most businesses operate? (p. 328) 1. Light Green Principle: Create and sustain competitive advantage by ensuring that your company is in compliance with the law.

2. Market Green Principle: Create and sustain competitive advantage by paying attention to the environmental preferences of customers.

3. Stakeholder Green Principle: Create and sustain competitive advantage by responding to the environmental preferences of stakeholders.

4. Dark Green Principle: Create and sustain value in a way that sustains and cares for the earth.

It is hard to know where most businesses operate. Intuition and anecdotal evidence would suggest that most operate in the lighter green range, but there are notable exceptions.

5. What do we need to do to help businesses do a better job regarding the environment?

Responses to this question are limited only by the creativity of the students.

6. What is the end goal here? How does this discussion relate back to the goal of putting ethics and business together?

Environmental challenges are one important aspect of the project of putting ethics and business together. Particularly given the dire predictions connection to our current environmental challenges, this chapter highlights in bold relief what is at stake in this project and the costs of failing to connect them in how we live.

.

79

ExxonMobil in Chad and Cameroon* Teaching Notes Synopsis In November 1999, ExxonMobil and its CEO Lee Raymond had to determine what course of action to take after two major partners, Royal Dutch/Shell and France’s TotalFinaElf, withdrew from the Chad-Cameroon Oil and Pipeline Project. The project was enormously complex, involving billions of dollars in potential revenue, with a wide variety of stakeholders, an array of critics, and a potentially volatile political and social environment. The situation was further complicated by the history of oil extraction in developing countries and the unbridled corruption that had inevitable ensued. Shell’s and Elf’s pullout threatened to sideline the whole operation and seemed to give credence to those critics who thought that the environmental and human costs of oil exploration and extraction in the extremely poor countries of Chad and Cameroon were too great.

Raymond and ExxonMobil had to decide whether to proceed with the project.

Objectives While a greater conscientiousness of the interactions between business and the environment has grown in recent years, it is important to note that business and the environment have always impacted each other. How can ExxonMobil balance the interests of the Chadian and Cameroonian citizens, the two countries' indigenous people, the environment, and development? What are the ethical issues and sources of ethical guidance involved in ExxonMobil's decision-making process?

Students should be encouraged to consider the interests and roles of the various stakeholders involved. Stakeholders here can refer to: 1. Direct Parties: ExxonMobil, the governments of Chad and Cameroon 2. Indirect Parties: the indigenous peoples, the citizens of Chad and Cameroon, rebellious groups, The World Bank, environmental organizations 3. Abstract Concepts and Ideals: the environment, freedom, prosperity For the stakeholders, this project can potentially result in much progress and in much pain. Although on the surface the case may seem to be asking students whether or not they think ExxonMobil should continue with the pipeline project or not, the more important question is how the company should proceed with either decision.

Questions for Discussion 1. How should managers think about the environment as part of their decisionmaking? How much should it matter and how should it be incorporated?

2. If ExxonMobil is truly committed to the environment, is this the last place they should be drilling or exactly where they belong? For those who say they should leave, where else is it OK to drill for oil? For those who say stay, is there anywhere that ExxonMobil should not drill for oil?

. 80

3. What about this case and its appeal for ExxonMobil? What are the biggest opportunities and risks for the company?

4. Strategically, what is at stake for the firm and its future operations? How important is it for them to earn recognition for being environmentally responsible?

5. How much does it matter that someone else is likely to partner with the Chad government and develop this oil to your decision here? Especially if they are likely to do a worse job on the environmental issues, does that impact your thinking – and if so, how much?

6. What about the Chad government? Do you “own the ethics” of your business partners? Will ExxonMobil end up suffering for being associated with this government and be seen as supporting its activities? Are they the kind of business partner ExxonMobil wants to do business with?

7. Make the case: vote to stay and invest or leave and make the best arguments for your side.

Suggested Lesson Plan (85 minutes) 1. Question 1 (5 minutes): Ask students to think about how they think about the environment as part of being a manager and how they think companies like ExxonMobil should incorporate the environment into their thinking. You can tie this back into the chapter and the discussions about mindsets and different “shades of green”.

2. Question 2 (10 minutes): Press students to consider the broader case, especially in terms of the generalizability problem – if the environmental issues are too great to drill here, does this mean we have to get out of the oil business? If so, chances are we may need to re-think our decision here. If it is OK to drill here, or any other part of the planet, no matter how pristine, then are we really committed to the environment?

3. Question 3 (20 minutes): There is a lot of material to fit in here, from the size of the oil reserves, its strategic location, the impacts on various stakeholders, the risk of opposition from various activist groups, to the many sizable questions about how strong a business partner the Chad government will be. Try to get a wide array of issues up here to reflect the various considerations that deserve the attention of managers and try to use the language of the Decision Guides to frame this.

4. Question 4 (10 minutes): One can argue that this is a very significant case for ExxonMobil. Precisely because it is environmentally sensitive, this context may be key in convincing other governments and interest groups that this company can . 81

do oil extraction responsibly – and as a result, gain preferred access to other key sites. Given the information in the case that most of the untapped oil reserves in the world are in environmentally sensitive regions, this issue becomes key for the firm.

5. Question 5 (10 minutes): This is a key question in the case. If I care so much about the environment, does that obligate me to step in if I can do a better job? Or is that a horrible justification (bordering on relativism) to do something I know to be wrong? What work should this issue do in helping me sort out a good decision?

6. Question 6 (10 minutes): The Chad government is a huge factor in this case. Take some time to get them to think through the challenges of going into business with them, how reliable they may be, and being associated with their conduct. You can make the case that this is an opportunity to turn the corner for them and their people – introduce prosperity and stability for all; you can also see it as a recipe for disaster for both ExxonMobil and Chad.

7. Question 7 (20 minutes): Bring it all back together, see where people stand, and have them make their best case for their decision. Really press on their thinking on both sides. You may even close by bringing them back to the environment and what they learned in the process of discussing this case.

Additional Material: ExxonMobil proceeded with the project. The pipeline created 11,000 new jobs for Chadians (55 in supervisory positions). ExxonMobil spent $3.7 million to train those employees and $100 million when into local businesses. In 2004, $84 million was transferred from the London escrow account to Chad, allowing for many microlending projects. $67 million was spent on poverty reduction, building roads and schools and $13 million had been placed in a "Fund for Future Generations."

The influx of transient workers, however, also resulted in an increase in prostitution and HIV infections. There were inter-tribal disputes over the allocation of benefits. In the meanwhile, the Chadian government began restricting political freedoms. In late 2005 and early 2006, the Chadian government described its accord with the World Bank and ExxonMobil as a "fool's agreement." It pressured ExxonMobil to hand over the royalties, citing national security reasons. It then began to draw money from the Fund for Future Generations and tried to take more from the oil proceeds that were supposed to go to the escrow account. In response, the World Bank suspended all loans to Chad and froze the London account. *This teaching note is based on a teaching note prepared by Senior Ethics Research Assistant Jenny Mead under the supervision of Andrew C. Wicks, Associate Professor of Business Administration, Patricia H. Werhane, Ruffin Professor of Business Administration, and R. Edward Freeman, Elis and Signe Olsson Professor of Business Ethics, Darden Graduate School of Business Administration at the University of Virginia.

. 82

Walden Paddlers* Teaching Notes Synopsis This case chronicles the formation and development of Walden Paddlers, a company that produces affordable, high performance recreational kayaks from recycled plastic. While on vacation after being laid off, Paul Farrow came across the idea of producing inexpensive, quality kayaks from recycled materials. He partnered with Dale Vetter, who brought an engineering and business background with him, and forged a critical relationship with Hardigg Industries to manufacture the new kayaks. Since it sold its first kayak, made from recycled milk bottles, in 1993, Walden Paddlers has sold over 5,000 and made over $1 million in sales.

Objectives This case should help students to think about green business by providing an example of an entrepreneur who managed to successfully pursue what he enjoys in a manner that fits his personal values. It can be used not only as an example of innovation that can be applied in other areas, but how individuals can use their creative impulses to try to live their values while also creating value in the marketplace. Finally this is also an opportunity to think more about what kinds of environmental innovations can and should be applied to other businesses as well as what kinds of changes need to take place to create a sustainable economy for future generations.

Questions for Discussion 1. How serious are the global environmental problems we face? What kinds of changes are going to have to happen to create a sustainable future, and a sustainable economy, for our grandchildren (and their grandchildren)?

2. How does this make you think about environmentally conscientious business? In what ways was Walden Paddlers environmentally conscious? In what ways could it be doing a better job?

3. What decisions do you think were most important to Walden Paddlers’ success?

4. What are the advantages and disadvantages of the informal relationships developed in this company (e.g. the partnership with Vetter, the agreement with Hardigg Industries)?

How significant were they in enabling this kind of environmental innovation?

5. Walden Paddlers provides an example of a company that reduced the cost of making a product by utilizing more environmentally friendly methods. In light of this strategy, why don't more companies do a better job of improving their environmental performance, especially when it pays? What are the major barriers to firms doing a better job here?

6. What are Walden Paddlers’ options for future growth? Do you believe that its current structure will assist or hinder future growth?

. 83

7. In what ways is Walden Paddlers’ model useful for thinking about what business can do and what business needs to do? What insights can other businesses, especially larger and more traditional businesses, learn from Walden Paddlers?

Suggested Lesson Plan (85 minutes) 1. Question 1 (10 minutes): This question provides a way to connect these issues back to the students and get their sense of how big the problems are and what kinds of change need to happen. You may even want to give them some specific categories (very small; minor; significant, major; proper innovations will occur naturally within markets; some external pressures and changes will be needed; major external changes are urgently required) and take a vote.

2. Question 2 (15 minutes): Before diving into the details of this case, take some time to push them to reflect on what business can and should do about the environment. Then take some of those ideas and apply them to the case. To what extent is Walden Paddlers a company to emulate and applaud? What have they done that is remarkable? As good as they are, chances some students will feel they haven’t done enough and that they could or should have done more.

3. Question 3 (10 minutes): Take time to go back through the case and encourage students to look for choices that seemed particularly significant in shaping this story. What made this a success? At what point did we gain confidence that this was going to work? What did it take and how did the alignment of values among key stakeholders play a role?

4. Question 4 (10 minutes): The informality with which the people in this case were able to conduct business was perhaps one of the greatest assets that contributed to the success of this venture. Such informality was made possible because of a high degree of trust among the businessmen involved. One wonders, then, if such informality could continue if the company grew beyond a size where everybody could know everybody. Also, although the informality of the arrangements is considered an asset now that Walden Paddlers is successful, what would have happened if the venture did not succeed?

5. Question 5 (15 minutes): This question should give students pause. It offers an opportunity to go back to the case to think about the barriers to Walden Paddlers as well as other businesses and to ask why environmental performance isn’t better across the board. What stands in the way? Especially with respect to innovations that are actually cost-saving, why don’t more businesses use them?

6. Question 6 (10 minutes): There is no limit to the number of options for Walden that students can think of. As for the second argument, there can be good reasons to believe either possibility. It is conceivable that Walden Paddlers’ structure will help it as it grows and, eventually, changes into a different kind of business. On the other hand, Walden's current management style may not be well-suited for a large business and it may become a hindrance to further expansion after a point. . 84

7. Question 7 (15 minutes): Take time to push students beyond this case to think about how it may speak to other companies – particularly traditional businesses.

What about this story, and this environmental entrepreneur, can be used to help other managers improve their companies? How much of this is about shared values and a passion for the environment and how much is about a desire to serve stakeholders, specifically customers, in shaping innovation?

* This teaching note has benefited from the teaching note prepared by Andrea Larson, Assistant Professor of Business Administration, Darden Graduate School of Business Administration at the University of Virginia.

.

85

Chapter 10: Managing on the Ethical Frontier Sample Discussion Answers These answers should be treated as supplemental to your own thoughts and analysis and are by no means comprehensive. Feel encouraged to include your own experiences and points of disagreement with the chapter should you find any.

1. From your own experience, when do you feel like you are operating on the ethical frontier? What makes you think so?

Answers will vary depending upon the student.

2. How does the text characterize the ethical frontier? Is it tied solely to technology?

Why is studying it important?

The ethical frontier isn’t entirely tied to technology, but that is our focus here. The ethical frontier refers to areas of uncertainty - particularly when people operate in untested waters where there is little in the way of moral and legal precedent to determine ethically sound behavior. The uncertainty can be created from technology, in that it raises new problems and issues not faced previously, but political and social changes may also shift what is considered ethically permissible. Having an awareness of both the enduring and changing aspects of ethics can give one perspective in approaching the unexpected ethical issues of our times.

3. What are risk and uncertainty and how do they play a role in managing at the frontier? What approaches are helpful in facing this?

Uncertainty describes a situation with unpredictable outcomes. Risk is what is entailed in taking an action with uncertain outcomes. In that sense, we all take risks in every task we undertake, though some tasks are considerable more risky than others. Everyday experience already gives us some sense of risk and taking risks can further help people to better distinguish a worthwhile risk from an unnecessary one. Otherwise, one can strive to mitigate risk simply by staying involved, continually thinking things through, and trying to anticipate unintended consequences that may raise problems for the firm or its stakeholders.

4. What is privacy and why is it associated with managing at the frontier? What are some key examples of privacy issues at the frontier?

For practical purposes, privacy does not need a formal definition here. Functionally, it is essential to the autonomy of the individual and focuses on the right of the individual to control certain information about themselves, including limiting the ability of others to access that information (e.g. medical records). The advent of the internet and digital technologies has brought privacy concerns to the fore. Plenty of examples of privacy . 86

issues can be found anywhere from Facebook and other online services to medical records to civil rights.

5. What is responsibility at the frontier? How do managers need to think about responsibility in contexts where society and key stakeholders often have little idea of what is going on or who they might blame if something goes wrong?

The future is ultimately the responsibility of all of us. That is especially apparent at the ethical frontier. Precisely because there are no established guidelines, the assignment of blame and responsibility will have to be “made up” to some extent. Doing this well, through stakeholder networks proactively shaping solutions that work for all is critical.

We all have a stake in avoiding the “race to the bottom” where all stakeholders try to avoid or shirk responsibility and no-one addresses the problems before they are forced to do so. Not only could this entail substantially higher costs for firms that end up “holding the bag” when government does step in, it also leaves society paying to clean up large messes that, depending on the technology involved (e.g. genetic engineering), may have huge costs involved. Firms need to foster dynamic cooperation and specific processes with their stakeholders to enable them to handle the kinds of issues faced on the frontier.

.

87

Monsanto* Teaching Notes Synopsis This case chronicles Monsanto’s formation and its forays into bioengineering technologies. Of particular note is Monsanto’s development of genetically modified organisms. It is one of the largest companies in the industry and has subsequently been involved in a number of controversies surrounding the use of genetically modified organisms. The public uproar over the presence of Bt-modified corn (a genetically modified strain of corn that produces its own pesticide, and therefore reduces the amount of chemical pesticides needed) in taco shells for human consumption (the corn had been approved for livestock but had yet to be approved for human consumption) is one example of negative public opinion against genetically modified organisms. There have been many other complaints, from accusations that Monsanto is suppressing biological diversity to dismay at Monsanto’s attempts to copyright protect their seeds.

Objectives In this chapter, we seek to explore how managers can think through some of the challenges they face on the frontiers of business, including how to better prepare themselves either avoid or better address them. While it is true that the future is riddled with uncertainty and that we can never predict what problems will face business in the future, it does seem to be the case that new problems are often extensions or reincarnations of older problems. Therefore, studying Monsanto’s development of genetically modified organisms can help us to evaluate ethical problems that may arise in other industries at the forefront of science (be it bio-, nano-, or whatever-technology).

Questions for Discussion 1. Take any example of a controversy involving Monsanto. What did Monsanto do wrong and how could it have handled the situation better? Were there any circumstances that were simply out of the company’s control?

2. Much of the concern over genetically modified organisms seems to stem from an uncertainty about the potential repercussions of the technology. What are ways that managers can cope with uncertainty?

3. Are there health hazards associated with continuing development of this technology?

Do we know (or not) how big they are and whom they will affect and does that matter?

4. Will the development of this technology potentially harm the environment or lead to other costs not borne by the company?

5. As an overall assessment, would you say that Monsanto act responsibly here? Why or why not? Who else has responsibility? What needs to change in order to reach an optimal outcome for the core stakeholders involved?

. 88

6. What does this case tell us about managing at the frontier? What are some best or worst practices that emerge from this example that you would want to use to think about future cases?

Suggested Lesson Plan (85 minutes) 1. Gauge Opinions (5 minutes): Ask the class if they have heard of genetically modified organisms before and if they have already formed an opinion about the subject.

2. Question 1 (15 minutes): There is plenty of room for discussion here. The question is not whether or not Monsanto could or should be held responsible for certain incidents that have sparked controversy, but rather what the company should have done to either prevent the controversy or how the company should have responded to controversy.

3. Question 2 (15 minutes): Uncertainty is present, in varying degrees, in every aspect of a person’s life and certainly in every business decision. After a certain level, uncertainty tends to beget fear. Some of that fear is legitimate. For example, it is unknown how quickly insects can develop resistance to the genetically modified crops, or if cross-pollination between genetically engineered plants and unintended cross pollinators may result in undesirable invasive species. On the other hand, some of that fear may simply be a product of ignorance and a fear of the unknown.

4. Question 3 (15 minutes): This question is really meant to be a consideration that applies to a broad range of industries (“frontier” or not). Obviously, if the company is aware of any potential risks to human health that may arise from the industry, then it should act to forestall, mitigate, or compensate for the risks. The trick is that frontier industries often don’t know the risks or potential harms that may be inflicted. So, can companies be held responsible for events they could not have foreseen? What obligations do companies have to take actions against the unforeseeable?

5. Question 4 (15 minutes): This question is similar to question 3. What are the obligations a company has in regard to external harms before the event? What obligations does a company have after the event? Where should one draw the line of liability? Should a line be drawn at all, or should the company take a more proactive approach to weeding out potential problems? If so, who should bear the costs of such a more proactive approach?

.

89

6. Question 5 (10 minutes): This provides an opportunity to step back and assess Monsanto’s performance, particularly in terms of its overall level of responsibility through the case. You can also explore to what extent other parties have responsibility here and how the dynamics of the situation can be redrawn to create better outcomes for all.

7. Question 6 (10 minutes): Here is an opportunity to reflect on the conversation and push for lessons learned – both good and bad – that may come in handy as you consider other possible cases.

* This teaching note benefited from the teaching note prepared by Mark E. Parry, Professor of Business Administration, Darden Graduate Scholl of Business Administration at the University of Virginia.

.

90

Danville Airlines Teaching Notes Synopsis A pilot for Danville, David Reiger, has just been given a genetic test (without his consent) and found to have tested positive for Huntington’s Disease. Management is concerned that his having this gene, even though he does not yet have the disease, may put passengers and crew at risk. Previous research shows that in a very small percentage of cases the initial onset of the disease may inhibit his ability to fly. Is the risk large enough to justify taking him out of a flying role, or are his claims that he is fine and should be allowed to continue to fly more compelling? Reiger claims he doesn’t want to die or put others at risk and that he will be the first to ground himself if symptoms start to appear, but in the meantime he wants to be allowed to fly – and he will sue you if you try to either fire or ground him.

Objectives This case pushes us to consider the growing influence of genetics and genetic technology into our lives – in this case genetic screening and what we do with this information. Our society (and our institutions) has a growing interest in technology and the power it can generate to make our lives better. At the same time individuals have great fear of how this new technology will be used, particularly if people view certain uses as harmful to the individual and individual rights. Management in this case faces some hard questions about what to do – airline safety is crucial to their success and survival, yet the main regulatory body governing this industry does not use genetic screening. Should management ground Reiger or should they allow him to keep flying? This case also provides a rich opportunity to consider the relevance of other business disciplines to making a good decision. For example, in all likelihood you will get people arguing that the risk in this case is large and unacceptable and others who will claim it is small and acceptable. Did they actually calculate the number using their Decision Analysis skills?

Most likely very few have done so, yet you can make the case that this is actually quite essential to figuring out what to make of this risk. Like any other risk, you have to put it in context and compare it to other risks in order to begin discussing what to do with it.

Decisions about what is morally (and managerially) right should be informed by such factors – and chances are if you made the number big enough (or small enough) you could get everyone to agree that he should be grounded (or allowed to fly). Similar connections to marketing (e.g. brand image) and other disciplines of business can be made.

Questions for Discussion 1. As you read the case, what did your gut tell you about what to do with Reiger?

2. When you fly, how many of you think about dying? What about when you get in a car or riding a bus? How does that square with the actual risks involved? What do we do with that information here?

. 91

3. How much should we be worried about lawsuits here? How big a deal are they, and if we are, how should they inform our choice?

4. Given that the FAA doesn’t do genetic testing and would allow Reiger to fly, how should we look at this genetic information? Does this mean we have to consider this a mistake and forget this information, or are we obliged to act given the spirit of what the FAA requires and our customers expect?

5. Is this a chance for us to demonstrate our commitment to safety and if so how? Or are we more likely to be viewed as “bigot airlines”?

6. Who and what else was important in your thinking about this case? Any other key Standards of Conduct or core stakeholders we should be considering?

7. Make a decision and defend it: allow him to fly or ground him? Make sure you address the issue of risk and support why you think it is either acceptable or not.

8. What about genetic screening? What policy should Danville adopt going forward – to genetically test or not? If so, when should it be used? How do you feel about being genetically screened in your workplace?

Suggested Lesson Plan (85 minutes) 1. Question 1 (5 minutes): this case usually generates strong reactions from students. Take some time to get quick responses on what was top of mind for them.

2. Question 2 (10 minutes): the psychology involved in this case needs to be addressed. People are not rational about risk and flying, for most people, is a disproportionately frightening activity when one considers the level of perceived risk to the actual risk. Explore some of those inconsistencies and what we do, as managers, to think about how to manage both real risk and perceived risk.

3. Question 3 (10 minutes): you face lawsuits here regardless of what you do – from Reiger if you ground him (which is highly likely to be successful, but may not cost you a huge sum), and from the families of passengers if he flies and a crash occurs and people discover you knew he had the HD gene (very small chance of occurring, but potentially catastrophic financial loss). At the same time you have the ADA to think through – how does the law balance individual rights and community interests? The Tay-Sachs case provides some insight that may be helpful. Of course, the law is still playing “catch up” here and you don’t know what the law will say/allow/require in the future.

4. Question 4 (15 minutes): this is a key question for a firm on the frontier. Given these uncharted waters, do we simply go with what is required by the government or do we believe it is our obligation to use this new technology to increase flight safety on our airline? There is a great deal to discuss here and some strong . 92

reasons to think about using the testing and not using it.

5. Question 5 (10 minutes): there are some key character questions here – what will the actions the company takes say about who they are and what they value? Spend some time digging into this aspect and how it plays into the final decision.

6. Question 6 (10 minutes): here’s a chance to let in whatever else was on the minds of students – either key issues like fairness and privacy or the perspective of key stakeholders who may not have come up in the conversation so far.

7. Question 7 (15 minutes): have the students vote and then take time to unpack the thinking behind their decision. Why was their decision the right one? Push them especially on the issue of risk and how we figure out if it is large or small, acceptable or unacceptable. Getting into the details of what the true risk are likely to be critical here – is the size and nature of this risk like other things that pilots are grounded for (e.g. poor vision) or more like things that all pilots have as risks (e.g. chance of a stroke or heart attack)?

8. Question 8 (10 minutes): this provides a chance to come full circle and think about genetic screening as a broader policy. You can think about this from the standpoint of Danville and the issue of generalizability – if they tested Reiger and thought doing so was a good idea (or generated relevant information), then aren’t they obliged to use it as a general rule for other pilots and staff? If so, who should be tested and for what? What about the costs? You can also make it personal and get students to think about how they would feel to have an employer do a genetic test on them, especially given all that we can already infer from such a test and may be able to learn in the future (e.g. likelihood of certain major illnesses, tendencies towards aggressive or anti-social behavior, sexual preference, level of intelligence). You may want to include references here to other work that explores where genetic technology may take us – like Huxley’s novel Brave New World or the film Gattica.

.

93

Make Mine a Russian Shorthair, and Hold the Allergies, Please Teaching Notes Synopsis Chris is trying to impress his stepson and is thinking about using new genetic technology to do the trick. The case raises the possibility that Chris could purchase a cat that was cloned, allowing pet owners to have new pets that are genetic replicas of pets they love (or loved and who are now deceased). In addition to being genetically identical, they can also offer specific genetic changes to “improve” a pet – for example, to make cats that don’t cause allergies in humans. Chris is reflecting on whether this kind of technology is a good thing and whether he should buy one of its products to give his stepson, Charles, a cat that was an exact replica of his old pet Gatticus, minus the allergies.

Objectives This case is relatively short but raises a whole slew of “frontier” issues to consider, but within the case context and in extensions of the core issues to other situations. Genetic technology is evolving rapidly and our ability to use genetic information as well as genetic manipulation holds great promise and huge risks. The Shorthair case provides a chance to think about cloning and genetic manipulation in a less controversial context – a cat. However, even here there are a whole series of questions that arise that may give Chris, and the managers at companies that offer these products, reasons to pause before jumping into this market. Students should also consider extensions of this product line – if it is OK to clone cats and dogs, what about moneys? Or embryos? Or adult human beings? All of these questions push us to think about appropriate ways to develop technology and the challenges of managing at the “frontier” where the answers to such questions are highly uncertain.

Questions for Discussion 1. How many of you have had a beloved pet die? How many of you would like to be able to have another one, just like them? Does this technology offer that opportunity or not?

2. What should Chris think about before deciding whether to buy a clone of Gatticus?

3. Should Chris buy the clone of Gatticus or not? Why or why not?

4. Where is the line for you here? If Chris wanted to make inroads with Charles by helping him battle against his cancer, should he consider trying to support cloning Charles to create the perfect tissue donor? a. Why or why not? b. How does your reaction to this scenario relate back to your assessment about Gatticus the cat? Are they the same, or similar enough to lead to the same conclusion?

. 94

5. What key safeguards need to be in place to make sure we harness this technology properly? What are the biggest risks and what are your biggest fears?

6. How do managers need to handle the risks and uncertainties to make sure that these initiatives turn out well for all stakeholders?

Suggested Lesson Plan (85 minutes) 1. Question 1 (15 minutes): this question (and the follow ups) provides a chance to make this case personal. Chances are many in the class have had beloved pets die in their lifetime. The chance to “bring them back” is probably very strong. Here’s a chance to think about that and consider whether they think what is being offered is really a chance to bring their pet back or is something quite different – and possibly very disturbing.

2. Question 2 (20 minutes): here you can push students to develop a wide range of considerations that should at least end up on the radar screens of managers. Try to link this back to their framework and get at issues around Standards of Conduct, Character, and Consequences for stakeholders.

3.

Question 3 (15 minutes): push the students to make a decision here and justify it.

Get at the arguments for both sides and allow them to challenge each other.

4. Question 4 (15 minutes): after the argument about Gatticus, take time to explore this extension of the technology. It is very likely that students will find this application of cloning a problem. Spend time pushing them on why and to sort out how these cases may either be very similar or quite different. Consider if this discussion leads any students to go back and rethink their views about Gatticus.

5. Question 5 (10 minutes): there are lots of stories out there exploring the world when genetics and cloning are common. Spend time with your students thinking about the risks and potential problems that go along with this technology, and what needs to be done to ensure it doesn’t all go terribly wrong.

6. Question 6 (10 minutes): connect the conversation back to managing on the frontier. What insights does this conversation provide about managing here, especially if our goal is not just to make a quick buck, but to truly create value for an array of stakeholders?

.

95