Managing Business Ethics,Straight Talk about How to Do It Right 5th Edition Solution Manual

Managing Business Ethics,Straight Talk about How to Do It Right 5th Edition BY Trevino, Nelson

Chapter 1 Introducing Straight Talk About Business Ethics: Where We’re Going and Why

Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Discussion Questions – Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I Introduction II The Financial Disaster of 2008 A. Borrowing Was Cheap B. Real Estate Was the Investment Of Choice C. Mortgage Originators Peddled Liar Loans D. Banks Securitized the Poison and Spread It Around E. Those Who Were Supposed to Protect Us Didn’t III Moving Beyond Cynicism IV Can Business Ethics Be Taught?

A. Aren’t Bad Apples the Cause of Ethical Problems in Organizations?

B. Shouldn’t Employees Already Know the Difference between Right and Wrong?

C. Aren’t Adults’ Ethics Fully Formed and Unchangeable?

• Defining ethics • Good control or bad control?

V This Book Is About Managing Ethics in Business VI Ethics and the Law VII Why Be Ethical? Why Bother? Who Cares?

A. Individuals Are About Ethics: The Motivation to be Ethical B. Employees Care: Employee Attraction and Commitment C. Managers Care About Ethics D. Executive Leaders Care About Ethics E. Industries Care About Ethics 1

F. Society Cares: Business and Social Responsibility VIII The Importance of Trust IX The Importance of Values X How the Book Is Structured XI Conclusion XII Discussion Questions XIII Exercise: Your Cynicism Quotient

Discussion Questions – Teaching Notes

1. Before reading this chapter, did you think of ethics as "just a fad?" Why or why not? What do you think now? Why? Probes to Stimulate Discussion •

"If a roving reporter had stopped you last week on the street and asked you your opinion of the attention being given in the media to business ethics, what would you have said?"

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"Would you have said the same thing, if the street had been Wall Street?"

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"Has your opinion changed since reading this chapter? Why?"

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"What three points would you use to respond to someone who claims that business ethics is a fad?"

2. Have you been cynical about business and its leaders? Why or why not?

(See the following cynicism exercise.) How does cynicism affect you, as a business student or as a manager?

Probes to Stimulate Discussion •

"If you are cynical, name two instances that illustrate the source of your cynicism."

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"What about each of these instances makes you cynical?"

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"If you don't feel cynical, what is your opinion about the lapses in ethics represented by such practices as sexual harassment disclosures, attempted bribes, or skimming profits?”

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"What does your score on the "Cynicism Quotient" mean to you? Were you surprised by it?"

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“How does cynicism affect you, as a business student or as a manager?”

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"In what ways would the cynical attitudes of others influence your ethical behavior?"

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Can you think of something that is legal but unethical, or something that is ethical, but illegal?

Probes to Stimulate Discussion •

“If something is legal but unethical, what do you think would be the best way to ‘manage’ it in the organization?”

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“Is it appropriate for an individual to act on personal ethical beliefs (e.g., pro-life beliefs) in a work organization? For example, would it be appropriate to picket your company for offering health care benefits for abortion?”

4. Do you think business ethics/social responsibility is important? Why or why not?

Recall what was said in Chapter 1 about the cynicism of the public regarding business and industry, in light of the media coverage of their ethical lapses: a. Public holds contemptuous mistrust of many professional groups b. Prevalence of cynicism among managers and business students that employers do or will require them to compromise their ethics c. Causes of cynicism: • Businesses' preoccupation with gain • Lack of reinforcement of ethical behavior • Competition • Acceptance of unethical practices within business and industry • Perception that only results are important • Ineffective enforcement of ethics codes Although there are mixed research results regarding the claim that good ethics is good business, it behooves any intelligent organization to get and maintain an ethical image, if they want to retain and increase their client base.

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It is the social responsibility of organizations to conduct their business ethically, because they are role models for their employees and society at large.

Business ethics gives an organization the knowledge and skills necessary to: • Set ethical standards for themselves and their employees • Establish policies and practices that support ethical behavior • Provide managers the tools to manage unethical behavior Probes to Stimulate Discussion •

"Regarding the responses above, what was the basis of response #1?" (Economic concern)

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"What was the basis of response #2?" (Moral concern)

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"Have you observed situations where business ethics was important? Describe one. What would have happened differently, if the participants hadn't behaved ethically?"

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"Briefly describe two different situations, one which relates an ethical behavior that you have observed, the other which relates an unethical behavior that you have observed."

5. Identify reasons why an organization would be interested in being ethical (remove comma) and classify those reasons in terms of whether they represent moral motivation or economic motivation.

Possible Answers with Economic Motives • Ability to attract employees • Better public image • Industry pressure • Sentencing guidelines Possible Answers with Moral Motives • The fair and right thing to do • Consistent with values of the organization Probes to Stimulate Discussion •

"Let's take a poll before we answer this question. How many think there will be more reasons dealing with moral motivation and how many think there will be more reasons dealing with economic motivation?" Ask for show of hands, and then ask volunteers from each side of the question. "Why did you vote the way you did?"

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"What are three attitudes that predominate in ethical decision making in your organization?"

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To what extent is each level responsible?"

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"Is operating on the philanthropic level an option or a responsibility?"

6. Think about the television programs and films you've seen recently in which business was portrayed in some way. How were business and business people portrayed? Is there anything business could or should do to improve its media image? Some businesses try to stay out of the limelight. Why might that be? What do you think of that strategy?

Probes to Stimulate Discussion •

"Describe a situation from a television show or a film in which an unethical behavior occurred. Who was involved? What were the results to others of the unethical behavior?

Have you seen this kind of situation before in other shows or films? Does this represent "art imitating life" or "showing what sells?"

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"Do you think the media is being responsible in the way it reports the ethical behavior of individuals and organizations?"

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"Does the media teach ethics in their story lines? What kind of ethics do they teach?"

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"In addition to outright unethical behavior, what are the other ways in which business contributes to the image of "profit first"?"

7. Do you believe that employees are more attracted and committed to ethical organizations?

Are you? Why or why not? Make a list of the companies you would prefer to work for and the reasons why. Are there also companies that you would refuse to work for? Why? Are there “ethically neutral” companies that don’t belong on either list?

Possible Answers • Research suggests that individuals are attracted to ethical organizations.

• Students line up to apply for jobs at J.P. Morgan, Merck, and other highly regarded companies because of their excellent reputations for ethical management.

Probes to Stimulate Discussion •

"What can average employees do in an ethical environment that they can't do in an unethical one?"

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"If we believe that employees are more attracted to ethical organizations, does that support the contention that moral motives are every bit as powerful as economic ones in peoples' decision making?"

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"What are the flaws in thinking only about economic motives?"

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"What are the flaws in thinking only about moral motives?"

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"Imagine that you've been asked to describe five characteristics of an ideal organization.

What would they be? Take 3 to 5 minutes to think about this so you don't just write down the first things that come to your mind. Is ethics among the top five characteristics? Why or why not?"

8. Discuss the importance of trust in business. Can you cite examples? What happens when trust is lost?

Possible Answers • Trust is essential to efficient business – if there is no trust, it’s almost impossible to do business.

• Without trust, one needs complicated contracts and lots of lawyers.

• In situations where trust is high, business can be conducted with a promise and a handshake.

• Regulators and the public are forgiving when companies try to do the right thing; they’re very unforgiving with companies that lie or stonewall.

• The best insurance policy a company can have is the will to do the right thing.

Probes to Stimulate Discussion • “In the wake of Enron and the financial debacle, what will it take for the investing public to regain their trust the financial markets?”

9. What can we learn about business ethics from the recent financial crisis?

Possible Answers: • A lot of people think, “Greed is good.”

• The financial industry (Wall Street, government, regulators, rating agencies – pick your poison) is corrupt.

• Unregulated business can be a recipe for disaster.

• Ordinary people who invest are no match for professionals – it’s all “inside baseball.”

• Huge compensation packages can cause huge problems.

Probes to stimulate discussion: • Who do you think was most to blame for the financial crash of 2008?

• Has anyone been punished for his or her role in the crisis?

• Do you know of anyone who suffered harm as a result of this financial collapse?

• Will new regulations help prevent a future crisis?

• What role do you think compensation played in the crisis?

• What role will the bailouts of 2008 play in future crises?

In-Class Exercises Exercise #1: Who Has Integrity?

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As you know, it’s important to get students engaged in the subject matter of a course as soon as possible. You can begin this process of interaction in the first class by asking students to introduce themselves and describe someone they know who has high integrity. Here’s how it works: 1. Allow each student about 1 minute (give or take) to introduce himself/herself and describe a “person with high integrity” in his/her life. (Most of the time, students will talk about their parents or grandparents.) So, if you have 25 students in your class, it will take about 25 - 30 minutes to complete this exercise.

2. Ask each student for two things: a. Introduction: their name, year, and major b. Who do they know with high integrity – and describe how that person behaves that makes that obvious 3. You should start it off by describing someone YOU know who has high integrity – demonstrate what you want from your students and take a few minutes to do this. It will give them time to think about an answer. Go around the room in order.

4. As students rattle off the qualities that indicate integrity, write them on the blackboard or flip chart and try to distill the qualities they are describing. Typical responses include: consistency, honesty, high standards, kindness, focus on others (not just themselves) etc.

Exercise #2: Your Cynicism Quotient This is a great exercise because it will give students some idea of how they have been affected by media portrayals of business people. Of course, you can use this as a Power Point slide and ask for a show of hands for each question. You can also hand out a paper survey in class and have students complete it right there as an in-class exercise and use it as a springboard for discussion.

You can also use a free online web survey (like Survey Monkey) and have students complete the survey online. You can then tally their responses and use the results in the next class to spur discussion. Students will no doubt be surprised by the results.

A note: In research that is currently underway – we’ll write about the results in the next edition of the book – we’re finding that about 20% of male and 10% of female undergraduates are very cynical and about 10% of males and 5% of female undergraduates are moderately cynical.

You can copy the grid on the following page and use it in class.

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Your Cynicism Quotient Answer the following questions as honestly as you can. Circle the number between 1 and 5 that best represents your own beliefs about business.

Strongly Disagree

Strongly Agree

1. Financial gain is all that counts in business

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2. Ethical standards must be compromised in business practice

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3. The more financially successful the businessperson, the more unethical the behavior.

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4. Moral values are irrelevant in business

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5. The business world has its own rules.

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6. Business persons care only about making profit.

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7. Business is like a game - one plays to win.

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8. In business, people will do anything to further their own interest.

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9. Competition forces business managers to resort to shady practices.

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10. The profit motive pressures managers to compromise their ethical concerns.

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Scoring Procedures * Add the total number of points. The maximum is 50 points. Total _____. * The higher your score, the more cynical you are about ethical business practices. Think about the reasons for your responses. Be prepared to discuss them in class.

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Exercise #3 We feel that it’s important to encourage students to think about what they stand for and what “brand” or image they are communicating to the world. Here’s an exercise we’ve used with great success. This entire exercise takes about 20 - 30 minutes and students generally are very engaged while doing it.

1. Design a slide that looks something like this: Try to use famous people who are very different (who have different “brands”). Below, we have featured Laura Bush, Donald Trump, Tiger Woods, Oprah Winfrey, Paris Hilton, Barack Obama, and Bono. Just pull the images off of the Internet.

2. Divide the class into teams of 3 – 5 students per team. Either assign each team a famous person or ask each team to choose one they want to discuss.

3. Ask the class, if anyone present knows any of the famous people featured. (No one will!) Even though they don’t know any of these celebrities, they can probably answer these questions based on what they have read or heard about these people. Give the class 5 – 10 minutes to discuss this in their teams.

Here are some questions you might want to use or use your own: • What three adjectives describe him or her?

• What kind of car does he or she drive?

• What is his/her favorite piece of jewelry?

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• • •

What three artists/songs are at the top of their favorite playlist?

Where do they go for their news of the world?

Do they have a tattoo? If yes, of what and where?

4. Now have each of the teams report out. After each team announces its “guesses,” ask the entire class if they agree. (Almost everyone will!) “Does this sound about right?” When all teams have presented (combine presentations from teams who have the same celebrity), begin the discussion.

5. Why were they able to answer these questions? Was it easy? Was it difficult? In our experience, students find it very easy to “fill in the blanks” about these celebrities. The point: This happens to all of us! People extrapolate all the time based on what they already know about us. So, if you have given people the impression that you are casual about your standards, then they may well extrapolate and figure that you might cooperate with them in fudging the numbers or lying to a client, etc. The very best protection you can have in the workplace is to understand what it is you stand for and then very consciously communicate it. We communicate our “brand” all the time, in everything we do. This exercise is a good way to begin to encourage students to think about what they are projecting to others and be mindful of that personal brand and what others may assume based on it

Exercise #4: What Would You Do? 1. Divide the class into teams of 4 – 5 students per team and have them consider the following case: “When your colleague, Bill, is out of town, you receive a call from his wife.

She's having a crisis with one of their children and needs to reach Bill immediately. You offer to track him down for her and when you do, you inadvertently discover that he's vacationing with Marie, the chief investment officer of a prestigious college endowment fund that Bill manages. He tells you to keep his hotel location a secret and that he will call his wife immediately. Two hours later, his wife calls back and screams that his cell phone is off and she hasn't heard from you or him. What do you do?”

A)

B) C) D)

Tell her you haven't been able to reach him. Then call Bob and update him on his wife's latest call Give his wife the number of the hotel where she can reach him.

Tell your manager's manager about the situation.

Tell her that you left an urgent message for him, but she'll have to wait for his call.

2. Ask them to spend a few minutes discussing this case as a team and deciding which course of action they would take, making sure that they have justifications for their choice. Once the teams have reached their decisions, discuss the case as a group.

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Possible Probes to Promote Discussion: • What are the ethical issues involved in this case? (Most students will “miss” the conflict of interest issues (for Marie and the boss) and the risk to the firm of this relationship.

• Who are the stakeholders?

• Who has the most to lose?

• What are your obligations?

• What could happen if you do nothing?

3. Then reveal the “scores.”

Scores: A) Tell her you haven't been able to reach him. Then call your boss and update him on his wife's latest call. (-30 -- a big lie and collusion with the boss) B) Give his wife the number of the hotel where she can reach him. (10 -- deals only with the immediate crisis, not the conflict of interest) C) Tell your manager's manager about the situation. (30 -- the only option that has the potential to deal with both ethical issues) D) Tell her that you left an urgent message for him, but she'll have to wait for his call. (0 -- also a lie) NOTE: You can revisit this vignette several times during the semester to discuss ethical frameworks (See Chapter 2) and moral awareness (Chapter 3).

Homework Assignments: Assignment #1 – Movie Review Have students choose a recent Hollywood film to watch for homework. They can watch in small groups or alone. The only requirement -- that the film portrays business in some way. Have each student write a one-page thought paper on how business was portrayed in the film. In class, have a discussion about the general portrayal of business in film. What you should find is that business is generally portrayed in negative terms. For example, most business people in these films are motivated by greed. There are exceptions. For example, in Jerry Maguire the lead character is motivated by an ethical code. But, throughout the film, he fights the greed of others.

Discuss how this generally negative portrayal feeds public cynicism, and why students are choosing to study business, if this portrayal is accurate. This assignment is a great way to begin the class, especially for undergraduates who come to a business ethics class with little, if any, work experience. You can demonstrate to them how much their beliefs and attitudes may be influenced by the media.

Some suggested films: Boiler Room Class Action Michael Clayton 11

The International Up in the Air Capitalism: A Love Story Sicko The Constant Gardener The Corporation Crash Disclosure Enron: The Smartest Guys in the Room The Firm Glengarry Glenross The Insider Jerry Maguire Norma Rae North Country Philadelphia Quiz Show Roger & Me Syriana Wall Street Working Girl Assignment #2 – Interview Someone You Respect This assignment is actually a way for students to pay a huge compliment to someone they admire and it gives them plenty to think about if they interview someone who has high standards. In our experience, many students select a parent, grandparent or manager to interview.

Instructions: • Select someone who you respect and admire. Choose an adult who you believe has high personal standards. The interview should be approximately 15 – 30 minutes in length.

• Ask the following questions or questions you select for the interview: o How important do you think integrity is on a scale of 1 to 10 (1 being not important; 10 being vital)? Why? o Who had the most important influence on the formation of your ethical character? o Describe a situation that you feel really tested your integrity. What are you glad you did? Is there anything you wish you had done differently? o In your experience, what factors can make it difficult for people to make ethical decisions? o How important do you think it is for someone to be vocal or open about his or her personal standards?

• Write a two-three page paper about the interview. Make sure you include the following information about the person you interview: o Name (or an alias if you wish the person to be anonymous) o Relationship to you o Age group (e.g., 20s, or 50s, etc.)

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o How long have you known this person? o Why did you choose this person to interview?

Additional Resources 1. Frontline on PBS Frontline has produced a number of mostly one-hour programs on the financial crisis that are excellent for use in class. A real plus is that most of them are free and can be viewed in their entirety on the Frontline website – click “Watch Video Online”: http://www.pbs.org/wgbh/pages/frontline/ Among the fascinating programs are: On the Financial Crisis: • The Madoff Affair • The Warning • The Card Game • Inside the Meltdown • Breaking the Bank Other Programs on Ethics in General: • Poisoned Waters • Sick Around America • Black Money • The Medicated Child • A Dangerous Business Revisited 2. This American Life on National Public Radio No one tells a story as well as This American Life and there are many wonderful programs that can be assigned or listened to in class. Their website is located at: http://www.thisamericanlife.org/radio-archives Among the best stories are: • Inside Job (2010 Archive – about the financial crisis and how one Chicago hedge fund made hundreds of millions of dollars for itself, while making the financial crisis worse for the rest of us) • A Giant Pool of Money (2008 Archive – about the financial crisis and what caused it) • Another Frightening Show About the Economy (2008 Archive – also about the financial crisis) • NUMMI (2010 Archive – about a GM plant that could have saved GM if they had known what to do with it) 3. Video: American Dream *

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This is a 1990 documentary film about the 1986 labor dispute between Hormel Company and Hormel's union workers. Hormel lowered employee wages and simultaneously reported $29 million in annual profit. *Kopple, Barbara. American Dream. Channel 4 Films, 1990.

4. American Apparel Website, (www.americanapparel.net) This is a provocative website and organization. American Apparel manufactures clothing in Los Angeles and prides itself on making profits but also treating its workers in a very humane way – and it introduces people to workers on the website. The products clearly appeal to youth – the photo collections are sexy and suggestive. Regardless, the website can make for some interesting discussions in class.

5. Guest Speakers: Convicted White-Collar Criminals Some people feel it is controversial to invite in a guest speaker who has served time for a whitecollar crime. However, the authors’ experience in doing that has been positive. While some people feel strongly that we should not be “rewarding” ex-cons by paying them to speak to a class, we feel that it can be an excellent teaching device. In our experience, ex-cons can deliver a powerful message to students about crime, if they are contrite and accept responsibility for their behavior. We have found that they generally deliver the following messages: • Ethical decision-making is a slippery slope.

• Prisons – even the good ones – are no fun. In fact, they are just awful.

• The effect of the whole “trial, conviction, incarceration, publicity” thing takes a terrible toll on the criminal’s family and can, in many cases, destroy family relationships.

• It’s extremely difficult to get any kind of a job once you have been incarcerated.

• They have paid a debt to society and they continue to pay that debt. It does not end when they are released from prison.

The challenge is finding an ex-con who is contrite, professional, and is someone with whom students can identify. We can recommend Aaron Beamformer, co-founder and CFO at Health South, who served time in prison for his part in the accounting fraud. He is a good speaker and students react well to him. You can contact Aaron via his website (www.aaronbeam.net). He has recently teamed up with another former HealthSouth CFO, Weston Smith (www.westonsmith.biz). We have not heard Weston speak.

Another possibility is Justin Paperny (34 years old) who exited federal prison in 2009 for his actions as a stockbroker with a prestigious firm in Los Angeles. According to Walt Pavlo (who used to speak for us but has now gotten on with his life), Justin is the type of person who admits his shortcomings and has learned from them. According to Walt, Justin is well spoken, humble and tells his story in a straightforward manner. Justin has a degree from the University of Southern California and was also on the baseball team at USC, appearing in the College World Series. Walt has transferred the website and the Etika business to Justin, who will now carry on the work of teaching from mistakes that send too many of our business leaders to prison. For more information you can visit www.EtikaLLC.com or email Justin directly at JustinPaperny@EtikaLLC.com. We have not heard Justin speak, so this recommendation is based entirely on information provided by Walt.

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Supplemental Reading The following REFLECTIONS appeared in earlier editions of the textbook. We have found that our undergraduates do not connect with reflections about 9/11 as they once did – imagine – they were too young! But, we’re sure that some faculty members will want to continue to assign this reading and use it for discussion. So, we include it here. Renee Flemish is a graduate of the Smeal College, Penn State University MBA Program, a veteran of a number of jobs in telecommunications and the dot.com industry before returning to Penn State where she now teaches business ethics and serves as the Leadership Integrity Director for the college, overseeing honor code efforts.

REFLECTIONS

By Renee Flemish If the true test of character lies in our ability to gain strength from tragedy, then we passed the test.

An unprecedented humanitarian response followed the September 11 terrorist attacks. It was the single most catastrophic day in the history of any fire department in the nation, as 343 firefighters gave their lives in the rescue attempts. In the days that followed, people lined up for blocks waiting to donate blood, and thousands volunteered at Ground Zero to aid in the search, recovery, and cleanup efforts. Private contributions came in the form of goods and services, volunteerism, and cash. Trucks rolled in with pallets full of bottled water, flashlights, food, clothing, and toys. Space was donated for warehousing goods, and fleets were donated for distribution of goods.

The city’s airspace was restricted, and F16 fighter jets blared overhead at Pier 94, where makeshift memorials covered the walls and death certificates were processed. Hundreds of people trained in crisis intervention and grief counseling came to work at Pier 94. Many of them never went home at night. Nothing in their medical, clinical, or theological training could have prepared them for this; still, they came to New York hoping to make a difference. People sought help without regard for our credentials. Early on, it became clear to all of us that what people mostly needed was someone who could listen and get things done.

In the year that followed, student organizations, church congregations, and youth groups arrived from all 50 states to offer their support and feed the rescue workers on site. Citizens from the world over donated their time in New York City to try to comfort those who had lost loved ones and assist thousands more who lost their homes or jobs.

The people we saw were bond traders, electricians, investment bankers, and food service professionals. Some were near retirement and others were just getting started. They came from different neighborhoods and different countries, and they prayed in different languages and religions. As we listened to them, I realized that people are far more alike than they are different.

They were men and women with families, friends, and dreams. After the terror attacks, they shared the same despair and are still picking up pieces of their lives more than a year after the devastating losses.

History could offer no appropriate paradigm to guide the emergency response to a disaster of such unprecedented scale. There were no existing systems to provide clear, reliable information to the thousands of traumatized victims, or to equip the nonprofit and governmental organizations 15

working to manage the crisis at hand. Within a short time, it became resoundingly clear that more formalized coordination would be critical to ensure that those affected by the attacks on the World Trade Center received the help they needed—in both the short and long term—as quickly and effectively as possible. To foster this coordinated approach, we chartered the 9-11 United Services Group (USG), a not-for-profit consortium of 13 human services organizations—including the American Red Cross in Greater New York, Safe Horizon, and The Salvation Army—working together on the front lines of the September 11 recovery effort.1 This founding marked the first time New York City social service organizations joined forces to coordinate efforts on such a broad scale.

These coordinated efforts of the USG member agencies have resulted in approximately $750 million2 being distributed or committed to approximately 70,000 individuals affected by the events of September 11. The organizations continue to work one-on-one with more than 6,000 victims or family members to assist them in getting the help they need—including mental health services, employment assistance, health care services, and financial assistance. Since opening in September 2001, more than 150,000 calls have been received by the September 11 Support Hotline to pair individuals in need with one of over 160 case workers cross-trained in the full range of benefits and services available to individuals affected by the tragedy.

The Business Community’s Role in Aiding the Recovery The 9-11 USG charities faced the enormous challenge of creating a new infrastructure that would enable the efficient and compassionate distribution of September 11 assistance. As our nation’s largest disaster response got underway, dedicated talent, functional expertise, and operational know-how emerged from the business, philanthropic, and government arenas. With nearly $1.4 billion in donated monies, the 9-11 USG became the focal point for service providers who wished to aid in the recovery effort. Rather than working as 13 separate charities, the organizations combined their talents and bargaining strength to secure professional services from companies such as IBM, McKinsey, Merrill Lynch, Goldman Sachs, Morgan Stanley, and Skaaden Arps.

Our professional service needs included information technology, operations expertise, legal counsel, financial planning, Web site development, and language translation services, to name a few. The vast majority of these services were provided on a pro bono basis, while others were deeply discounted or offered at cost.

Corporate partners came forward to aid the effort in a number of ways. Managerial talent was offered through senior executives who brought key contacts and longstanding business relationships that the charities were able to build on. For example, the chief executive of the 9-11 USG was also the vice chairman of Goldman Sachs. Along with private sector experience, these managers brought client and vendor relationships that were instrumental in advancing the recovery effort.

Bear Stearns donated an entire floor of their midtown offices to house the 9–11 Family Assistance Center. This interagency facility has served thousands of families with counseling, economic assistance and support group activities. In addition, the investment banking division of Bear Sterns dedicated some of their brightest analysts to the 9–11 USG. Wall Street was especially hard hit by the attacks, with a number of firms directly and deeply affected with human and financial losses. The Financial Advisory Referral Program was formed with the participation of six such affected firms: American Express, JP Morgan Chase, Merrill Lynch, Morgan Stanley, Prudential Financial, and Salomon Smith Barney. These firms were selected on the basis of their size, investment expertise, and national presence. The program was designed to assist the families of victims in managing the money they may receive from the federal government’s September 11th Victim Compensation Fund or other sources. For many families, managing large amounts of compensation money would be complex and risky, so financial education and advice are key to their making sound investment decisions. Participating advisors from each firm were experienced financial professionals who were selected by their institutions 16

and who stepped forward to participate in the program. These advisors have been working one-onone with families to tailor investment strategies and meet individualized needs ranging from estate planning to college savings. This program is a vital part of USG’s mission to address the long-term needs of those affected by the attacks.

A shared goal of the USG and its corporate partners was to help clients navigate through myriad economic assistance and social service programs and tap into those that are most beneficial. In order for the 13 charities to offer seamless service coordination, they had to be able to operate from a common technology platform. Technology partners provided reliable and widespread access to relevant programs and funds, helping to minimize red tape and facilitate service delivery. IBM was instrumental in helping to build an e-business environment that would speed service delivery while ensuring the highest security standards. Finally, operational needs such as payroll, e-mail, staffing, and direct mail were also met through the contributions of corporate partners.

Motivating Factors: What’s in It for Businesses?

Motivated by a sense of civic duty and humanitarian obligation to the community, corporate partners came voluntarily. Targeting the center of world commerce, the terrorists took aim at a lifestyle and philosophy defined by capitalism and free markets. A good deal of our national identity is invested in the spirit of corporate enterprise. Corporate contributors helped to reaffirm some of that spirit by lending talent and business expertise to the recovery effort.

“Anything you need” was the phrase we heard most often in the weeks following the attacks, as offers poured in from the private sector. Many offers came through corporations where volunteerism is fostered. Still others were spurred on by employees who approached senior management with a call to action. Self-driven and generous, the corporate contributors created goodwill with the community, customers, and employees.

As the charities worked to define business requirements, the open-ended offers began to take shape. The list of partners narrowed and service agreements were structured. Each of the partners took on specific deliverables that would ultimately define their role in aiding the recovery.

The charities and their business partners shared a unifying sense of urgency. Getting assistance to the people in need was the sole priority and motives were never questioned. Whatever the underlying motives, everyone was drawn together to a common purpose.

Nonetheless, observations in retrospect do suggest motivating factors that are not entirely selfless. Aiding the recovery provided firms with a number of opportunities. It was a chance to build new relationships while strengthening existing ones. In a soft market, client referrals and testimonials are vital to new business development. For some partners, media exposure was a serious draw as the charities routinely shared press conferences with Mayor Rudy Giuliani, and September 11 news filled the front page of the New York Times. Some businesses welcomed an occasion to test their professional expertise in uncharted territory. These contributors were motivated by the professional challenge and determined to go well beyond their conventional approaches. Understanding and addressing the business needs of the September 11 marketplace was a monumental task and extraordinary assignment. The partnerships also posed a rare opportunity for businesses to learn from leaders in the human services arena. The charities worked closely with the Federal Emergency Management Agency, the Office of Emergency Management, the New York City Mayor’s Office and the New York State Attorney General. These linkages offered a unique learning opportunity for the businesses involved. In the most direct link to future business, corporate partners recognized that they were building a knowledge base that could be “productized” for future disaster relief opportunities. In the wake of another national crisis, future practitioners will rely on the lessons learned post–September 11. These corporate contributors are 17

now better positioned in the disaster response arena and could respond more quickly in a future crisis.

In the days following the attacks, airwaves ran commercial free, and ad agencies were feeling the slowdown. In donating their services to build September 11 campaigns and Web sites, advertising firms were building their nonprofit portfolios, while staving the inevitable layoffs.

Business was particularly slow across the professional services sector. Budget cuts and the Arthur Andersen scandal left consulting firms in survival mode. Pressured to keep utilization rates up, consulting firms saw an opportunity to build a knowledge base by deploying a dedicated team to formulate and conduct a study of unmet needs.

Observations and Lessons Learned Nonprofits traditionally have not been able to take full advantage of cutting-edge technology solutions. Unfortunately, clients are the ones to pay the price, as service delivery is hampered, new programs are slow to develop, and cross-charity collaboration is out of the question. The coordinated case management approach that served more than 70,000 affected individuals would not have been possible without the expertise of the technology partners, many of whom worked on a pro bono basis. As a result, donor monies were more directly available to clients, as the charities were able to build large-scale programs and the necessary infrastructure with minimal cash investments.

Firms with a cultural tradition of volunteerism and pro bono service were more apt to maintain the highest standards of client service. They consistently put their best talent forward and saw their commitments through to the finish. They did not discriminate between paying and pro bono or low margin clients. But a number of Web site designs and consulting projects fell short, because the partners were unable to sustain the necessary investments or carry out their commitments. In the future, before stepping forward to provide assistance, corporations should carefully examine their motives and ability to deliver on their well-intended offers. For companies that do not have them, now is the time to establish policies on volunteerism and pro bono services. That way, if their services are needed in a future disaster (and hopefully they won’t be), they’ll be ready and able to deliver. In the meantime, managers and employees can reap the psychological and spiritual rewards derived from their organization’s commitment to meeting their financial and their moral commitments.

What’s So Different about Nonprofit Organizations?

In closing, it’s interesting to reflect on some of the contrasts between corporate and nonprofit organizations. These differences, in my experience, are not subtle—they shape the value system and the success measures and have a tangible effect on management style.

While we were working on the recovery programs, I thought it would be easy to ignore my emotions and focus instead on the business of running the operation. That is, after all, how we managed in the corporate world, and it had always worked for me. But September 11 was entirely different. Nothing was formulaic. Instinct and emotion permeated our thinking, for we were in the business of healing and rebuilding. It was the most rigorous test of my leadership abilities and a culmination of all my prior experiences. Wherever possible, decisions were made without review boards and committees. There was no time for the planning sessions, iterative revisions, and approval cycles that generally go into a corporate budgeting decision or product marketing plan.

The nonprofit business model is fundamentally different from the for-profit model. Much as businesses rely on customers for revenue growth, nonprofits rely on donors to finance their charitable missions. Rather than profitability, a key performance metric for charities is the effective utilization of funds and keeping operating costs at a minimum. Nonprofits maintain a fiduciary responsibility to donors, just as corporations do to their shareholders.

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Corporate bottom lines are sometimes at odds with what’s best for the customer, as organizational decisions are strongly guided by cost justification. Decisions can be shaped more by how Wall Street will interpret the news than by what’s in the customer’s best interest. In contrast, because the September 11 recovery programs were funded entirely through donations, we were accountable to the private citizens and organizations that made our efforts possible.

Unhindered by concerns of what the analysts might make of our latest decision, our thinking and the services were entirely client-driven. With a deep sense of urgency and compassion, we focused on serving the critical needs of our clients and maximizing the utilization of donor contributions. The clients were the only reason we were in business and their well-being was the sole motivation for our programs.

Similarly, negotiations with other agencies were carried out in the spirit of doing what’s best for the client. Parties left the negotiating table satisfied and accomplished in knowing that client needs were served to the very best of our combined abilities. As long as the resulting programs delivered the greatest possible service, there were no regrets over which agency took 51 percent and who got 49 percent.

Finally, in a welcome departure from the corporate world, I found that I could uphold the same principles at work as I did outside of work. Not only was it expected, but it was the selfguiding force that fueled the organization. Staying true to our core values gave us the energy, confidence and clarity that the recovery work demanded.

Notes: 1. The founding USG member agencies are American Red Cross in Greater New York, Asian American Federation of New York, Black Agency Executives, Catholic Charities of the Archdiocese of New York, Catholic Charities of the Diocese of Brooklyn and Queens, Federation of Protestant Welfare Agencies, Hispanic Federation, Human Services Council, Mental Health Association of New York City, Safe Horizon, The Salvation Army, UJA-Federation of New York, and United Neighborhood Houses of New York. Independent agencies actively involved in USG Service Coordination include Asociacion Tepeyac, Brooklyn Bureau of Community Service, Center for Independence of the Disabled in New York, Children’s Aid Society, Community Service Society, Legal Aid Society, and WTC Permanency Project. 2. This number reflects the reported records of USG member organizations as of December 2002.

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Chapter 2 Deciding What’s Right: A Prescriptive Approach Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I.

Introduction

II. Ethical Dilemmas A. The Layoff III. Prescriptive Approaches to Ethical Decision Making in Business A. Focus on Consequences (Consequentialist Theories) B. Focus on Duties, Obligations, and Principles (Deontological Theories) C. Focus on Integrity (Virtue Ethics) IV. Eight Steps to Sound Ethical Decision Making in Business A. Step One: Gather the Facts B. Step Two: Define the Ethical Issues C. Step Three: Identify the Affected Parties (the Stakeholders) D. Step Four: Identify the Consequences E. Step Five: Identify the Obligations F. Step Six: Consider Your Character and Integrity G. Step Seven: Think Creatively about Potential Actions H. Step Eight: Check Your Gut V. Practical Preventive Medicine A. Doing Your Homework B. When You’re Asked to Make a Snap Decision VI. Conclusion VII.

Discussion Questions

VIII.

Exercise: Clarifying Your Values

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IX. Case: Pinto Fires Teaching Notes – Discussion Questions 1. If you had to choose just one of the philosophical approaches discussed in this chapter to guide your decision making, which would you choose? Why? Or, if you had to rank them from most to least helpful, how would you rank them?

Probes to Stimulate Discussion •

"Think about your own ethical decision making. Do you already use any or all of these approaches? Separately or in combination?"

•

"Consider looking into your religious background for guidance. For example, most religions teach some form of the golden rule."

2. Some of the steps in the 8-step model might suggest very different courses of action for resolving your dilemma. How would you choose among these distinct courses of action?

Why? Instructor: This question asks the student to think about situations where different approaches lead to different decisions and to begin to consider how to make these tough choices.

Probes to Stimulate Discussion •

“Is there one principle or obligation that is most important to you personally – that would overwhelm other principles or obligations?

3. Think about a situation where your values have been in conflict. How have you resolved those conflicts? Now that you have studied the ethical decision-making frameworks in this chapter, what should you have done?

Instructor: You may have to help students to identify ethical dilemmas they've faced. An ethical dilemma is defined here as a situation where two or more values are in conflict - for example, truth and loyalty as exemplified in the layoff vignette at the beginning of the chapter.

Students can probably identify a similar truth vs. loyalty vignette from their own experience. For example, should I turn in a coworker who is stealing from our employer? How about lying to a policeman to protect a friend who was speeding?

4. Think about an ethical dilemma situation that you've faced. Apply the 8 steps recommended in this chapter. Does it change your thinking about the situation? Would it change your action?

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Instructor: You may want to select one case from those offered by students during class.

Examine the facts of the case and then ask the students to use the 8-step model to evaluate the case. What should they do? Are there any indications?

5. Some corporations and other organizations have designed ethical decision-making tests that incorporate some of the principles and systems described in this chapter.

For example, Carl Skooglund, former Vice President and Ethics Director at Texas Instruments (recently retired), outlines the Ethics Quick Test recommended for use by Texas Instrument employees: • • • • • • •

Is the action legal?

Does it comply with your best understanding of our values and principles?

If you do it, will you feel bad?

How will it look in the newspaper?

If you know it's wrong, don't do it, Period!

If you're not sure, ask.

Keep asking until you get an answer.

Think about this list in terms of the decision-making guides discussed in the chapter.

Which ones are being used here? Which are not?

What recommendations, if any, would you make to alter this list?

If you had to make up a list for your company, what would be on it? Why? • • • • • • • •

Is the action legal? (deontological - duty to obey the law) Does it comply with your best understanding of our values and principles? (virtue ethics the TI community has created values and principles it expects community members to follow) If you do it, will you feel bad? (the check your gut approach) How will it look in the newspaper? (disclosure rule - the New York Times test) (Does it matter which media outlet you choose?)

If you know it's wrong, don't do it, Period!

If you're not sure, ask. (community standards) Keep asking until you get an answer. (community standards, again)

Do the same with the Rotary International Four-Way Test.

• • • •

Is it the truth? (deontological) Is it fair to all concerned? (deontological) Will it build good will and better relationships? (consequentialist) Will it be beneficial to all concerned? (consequentialist)

The Seneca (one of the tribes of the Iroquois Nation) people's guidelines for self-discipline also include these questions: Managing Business Ethics, by L. Treviño & K. Nelson, 5th Edition

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• • • •

Am I happy in what I'm doing? (consequentialist, but limited focus only on consequences for me - consequentialism requires one to think about consequences for society) Is what I'm doing adding to the confusion? (consequentialist) What am I doing to bring about peace and contentment? (consequentialist) How will I be remembered when I am gone? (virtue ethics)

Could they serve as guides for ethical decision making in business? Why or why not?

6. The last question leads us to a useful exercise. If you had to write your own epitaph, what would it say? How would you like to be remembered? What kind of life do you hope to lead?

Instructor: Discussion of this question usually leads to comments about the importance of people, relationships, reputation, etc., rather than how much money or how many material possessions one has acquired. People who are given a short time to live often rethink how they are going to spend their time, because they want to do some good in the world before they leave it.

7. Albert Schweitzer (philosopher and mission doctor) said “Success is not the key to happiness. Happiness is the key to success. If you love what you are doing, you will be successful.” What do you think? How does this relate to the prescriptive approaches discussed in the chapter?

Instructor: This question seems most related to virtue ethics and the motivation to develop personal character as the basis for a good and happy life.

8. What do you think of the proposed Hippocratic Oath for managers?

Probes to Stimulate Discussion: • • •

Do you think managers would comply with such an oath? Is it realistic?

What would you add to this, if anything?

Compare this to the MBA Oath in Chapter 1. Are they aligned? Are students thinking about this differently than managers?

9. What limitations, if any, can you think of to the prescriptions provided in this chapter?

Can you think of reasons why they might not work?

Instructor: This question is a set-up for the next chapter. Ask students to think about the list of eight steps very carefully. Try to actually follow through on the steps. How difficult or easy is it? Students should begin to see that there are many practical obstacles (see chapter 5 for more details). Don’t get into the details here, but help students to recognize that the normative approaches do have practical limitations that they will be learning more about later.

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10. if you were to design an ethical fitness program for yourself, what would you include?

Probes to Stimulate Discussion: • • • •

How would your personal values fit into an ethical fitness program?

Who would you talk to for advice?

Would you do research when designing such a program? What kind? Where?

What elements would be important to such an effort?

In-Class Exercises Exercise #1: Pinto Fires Case by Dennis A. Gioia Note to Instructor: The Pinto Fires case should be discussed in two parts. The first discussion, associated with this chapter, will be a more or less "rational" discussion based upon the approaches and steps presented in this chapter. The next chapter provides an opportunity to question further the recall coordinator's actions, in light of what we know about human information processing.

Case-based Questions Put yourself in the role of the recall coordinator for Ford Motor Co. It's 1973 and a relatively small number of field reports have been coming in about rear-end collisions, fires, and fatalities.

The decision you must make is whether to act immediately to recall the automobile or not.

1. Identify the relevant facts.

• • • • • • • • • • •

fires and deaths occurring (in 1973, it wasn't yet clear that fires were occurring because of the fuel tank design) costs and benefits of making gas tank improvements (costs outweigh benefits by almost three times) public's attitude toward safety at the time "safety doesn't sell" price consciousness of American public at the time potential for lawsuits Pinto met required safety standards set by federal government at the time stiff competition over trunk space cost to society of one individual's death = $200,725 people implicitly accept risks when buying cars competition with foreign small auto makers (especially Japan) A decision culture that gives priority to high frequency, dangerous problems.

2. Identify the pertinent ethical issues/points of ethical conflict.

• •

obligation to people who might be harmed obligation/loyalty to the company

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• •

putting a financial value on human life using cost-benefit analysis as a basis for decision to recall

3. Identify the relevant affected parties.

• • • • • •

the company people who have been or might be hurt in crashes families of people in accidents Yourself? What will happen to you? stockholders government regulatory agencies

4. Identify the possible consequences of alternative courses of action.

Recall • huge costs, including lost business (probably short-term) • lives saved • reputation (could be positive or negative) • professional credibility of recall coordinator (e.g., if this turns out to be a minor problem) • opportunity cost for recalling other problem vehicles Don't Recall • potential lawsuits • additional lives lost • damage to corporate reputation (probably long-term) • substantial money saved 5. Identify relevant obligations.

• • • • •

to save lives, if possible (But, where does that obligation end? To some extent, all automobiles can be considered to be lethal machines). to provide families with cars at a price they can afford to obey safety regulations to produce a vehicle that conforms to standards of its class and the industry

6. Identify your relevant community standards that should guide you as a person of integrity.

This is a tough one. What would the relevant community be here? Do you look within Ford for that relevant community? Within the auto industry? Can you look to your "profession?"

It would be best to look to the broader community - the public - for guidance. You might suggest to students that they think about which community would be their toughest moral critic in a particular situation and ask them to use it. Using the broader community gets the decision maker out of the insular world of Ford and is more likely to represent customers’ concerns. This Managing Business Ethics, by L. Treviño & K. Nelson, 5th Edition

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also helps students to understand the importance of choosing the “right” moral community.

Otherwise, one could easily rationalize an unethical decision by saying (well, everyone I know does this or would say it’s okay - see Chapter 7).

7. Check your gut.

This question begins to move us into issues to be discussed in the next chapter. Think about the recall coordinator's job. Information about accidents comes in all day, every day. Unless there was something very unusual about the Pinto fire reports, the recall coordinator's gut would probably be silent.

8. What will you decide?

Instructor: Get the students to justify their decisions based upon the approaches discussed in the chapter. It may well boil down to a conflict between consequentialist and deontological approaches. The consequentialist may be more willing to accept the cost-benefit analysis that puts a value on human life. The deontologist is more likely to ask whether that's appropriate, fair, in line with placing value on all life. If not, the decision must be to recall.

But, push students to think about how much the company should be willing to spend to save a life - a life that is at risk at some level in any vehicle. As a society, we make these decisions all the time. It's better to make them consciously than unconsciously.

In-Class Exercises Exercise #1: Chapter 1 Vignette – Revisited Divide the class into teams of 4 – 5 students per team and have them consider the following case that they saw earlier in Chapter 1: “When your colleague, Bill, is out of town, you receive a call from his wife.

She's having a crisis with one of their children and needs to reach Bill immediately. You offer to track him down for her and when you do, you inadvertently discover that he's vacationing with Marie, the chief investment officer of a prestigious college endowment fund that Bill manages. He tells you to keep his hotel location a secret and that he will call his wife immediately. Two hours later, his wife calls back and screams that his cell phone is off and she hasn't heard from you or him. What do you do?”

Ask one or more team(s) to look at this case from a consequentialist perspective; another team(s) from a deontological perspective, and yet another team(s) from a virtue ethics perspective. After they have discussed this for a few minutes within their teams, conduct a group discussion: • What did they decide and why?

• What were the most important considerations given their framework?

• What has changed, if anything, from their earlier discussion of the case?

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•

What would they do, given the opportunity to add a fifth option (an “E” option) to this case?

Many (if not most) groups will change their earlier answer. In our experience, most will now choose “the manager’s manager,” because they will focus less on their personal risk (of losing their job or a good relationship with the boss) and more on concern for the child, the husband’s responsibility to his family and to the firm, etc. We have found that this exercise really helps students to understand that these frameworks do lead to different ways of thinking, and that they can be extremely useful when combined.

Exercise #2: A Values Exercise (that can be tied to the deontological framework) CLARIFYING YOUR VALUES If you wish to be better prepared to make tough ethical decisions at work or elsewhere in your life, it can be extremely helpful to clarify your personal ethical values before they’re seriously challenged. Following is a selected list of values (in alphabetical order). Feel free to add one or more, if you have a deeply held value that is not represented on this list (it is not meant to be an exhaustive list). In priority order (with 1 being the most important value), list between 3 and 6 values that are most important to you personally in making decisions.

That’s the easy part. Next, think seriously about what happens when two or more of these values conflict. For example, what happens if you value both honesty and financial success and they come into conflict? Are you willing to forego financial success in order to be completely honest with customers or suppliers? Next, if you’re working, think about the values of your organization and how those are prioritized. Are there serious conflicts between your personal values and the organization’s values? Finally, list those values that you would choose to serve as the basis for business dealings in an ideal society. Be prepared to discuss.

Action orientation

Humility

Altruism

Initiative

Authority

Innovation

Compassion

Moderation

Competence

Novelty

Conformity

Obedience

Creativity

Order

Customer Satisfaction

Power

Diversity

Promise-keeping

Equality

Respect

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Excitement

Risk-taking

Experimentation

Security

Fairness/Justice

Self-discipline

Flexibility/adaptability

Success

Freedom

Status

Harmony

Teamwork

Helpfulness

Tradition

Honesty/Integrity

Wealth (personal or shareholder?)

Honor

Winning

This exercise can be used with students at various levels. First, ask students to identify the values that are most important to them personally. Next, ask students to identify the values that are most important to the organizations where they have worked. Then have students compare the two lists.

• • • •

Are the lists different?

Does it matter that they are different?

What might happen if someone works for an organization with values that are very different from the individual’s personal values?

What might happen if the individual’s values and the organization’s values are aligned?

Exercise #3: Another Short Case for Class Discussion Whenever you see a short case in the text, you can use it as an opportunity to launch a class discussion. Divide the students into teams of 3 – 5 students per team. Give them 3 – 5 minutes to discuss this in their teams and then have them report out. Who are the stakeholders? What is the ethical issue? What would we be inclined to do if we looked at this through a consequentialist lens? A deontological lens? A virtue ethics lens?

As a counselor in an outplacement firm, you’ve been working with Irwin for six months to find him a new position. During that time, he has completed extensive assessment work, to determine if he’s in an appropriate profession or if he might benefit from a career change. The results of the assessment indicate that Irwin has low self esteem, probably could benefit from psychotherapy, and is most likely ill-suited for his current profession. Irwin has been actively interviewing for a position that’s very similar to two others he has held and lost. He desperately wants and needs this job. The company where he is interviewing happens to be one of your most important clients. You receive a call from the head of human Managing Business Ethics, by L. Treviño & K. Nelson, 5th Edition

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resources at the company, who tells you that Irwin suggested she call you for information about his abilities, interests, and personality style as measured by the assessment process. She also asks you for a reference for Irwin. Since he has, in effect asked that you share information with this woman, is it okay for you to give her an honest assessment of Irwin? What are your obligations to Irwin, who is your client in this case? Is there a way for you to be honest, yet not hurt Irwin’s changes to obtain this job? Or is that important? What will you do?

You have obligations to the firms that are your clients, as well as to the individuals who are searching for work. If you provide an assessment of Irwin, you have an obligation to be honest with your client about Irwin’s abilities, interests, and personality style. You also have an obligation to be honest with Irwin about your assessment. Irwin doesn’t seem to know that you are likely to provide a negative assessment. If he did, he wouldn’t have provided your name as a reference.

This is one of those cases where you probably know what to do (be honest with all parties), but it’s hard to actually do it. You need to have a frank discussion with Irwin about his situation and counsel him about the types of jobs for which you could provide him with a positive reference.

This would be a good case for role playing. Have students role play the roles of the counselor and Irwin. What would the counselor say? How would Irwin likely react?

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Homework Assignments: Assignment #1 – More on the Ford Pinto Fires Case 1. Research Assignment Regarding the case, students could be assigned to conduct library research on the Pinto case, in part to develop sensitivity regarding how the issue was perceived at the time. The same or different students could be assigned to conduct research on other recent product safety issues and they could compare them. (Toyota’s sudden acceleration problem would be perfect for this purpose.)

2. An Ethical Decision-Making Guide Assignment We have used an expanded written assignment based upon the first discussion question. Ask students to come up with an ethical decision-making guide for themselves - standards of conduct that they can live by; a guide that will help them recognize and eliminate unethical options and select the best ethical response. It can be based upon approaches learned in the chapter (consequentialist, deontological, virtue) or others they identify based on role models (parents, teachers, coaches, religious leaders, supervisors, etc.). Most of all, it should be personally meaningful to them and something they think they can actually use in the future. Ask them to apply the guide to one or more real decisions which they have faced.

It's a good idea to do this assignment in two stages. Let students take an initial crack at it. Then have them revise it based on your feedback.

3. A Values Exercise A useful exercise, based upon work by Michael Josephson, is to have students think about setting up an ideal society that is guided by a set of core values. Ask students to each come up with a list of these values on their own. Then, ask them to share their list with the class as you write them on the board. You should have a pretty long list. Then, ask the students to think about overlaps (honesty, truthfulness, fairness, justice) and ask them to try to trim the list to between five and ten values. Most groups, no matter the age or culture, will end up with a list that looks similar to the one below. Students will be surprised to know that. It means that there is a pretty strong basis for ethical understanding across organizations and cultures. It also means that we intuitively have an understanding of the deontological principles discussed in the chapter.

6 Pillars of Character (developed out of summit conference on character education, 1992, Aspen Colorado, by the Josephson Institute). (Josephson Institute of Ethics, “The Aspen Declaration on Character Education,” Aspen, CO: 1992.)

1. Trustworthiness 2. Respect 3. Responsibility 4. Fairness 5. Caring 6. Citizenship

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For more information on the Josephson Institute, check the website: www.josephsoninstitute.org.

Additional Resources 1. More on Philosophy: For those instructors who would like a good, basic book on ethical theory, we recommend The Elements of Moral Philosophy by James Rachels, (Rachels, J. 1986. The Elements of Moral Philosophy. Philadelphia, PA: Temple U. Press.) It could even be used as a supplementary text for those who wish to spend additional time on a more traditional approach to normative ethical theory.

2. More on the Pinto Fires Case Additional references for background on the Pinto Fires case include: • •

Schwartz, G.T. 1991. “The Myth of the Ford Pinto Case,” Rutgers Law Review, 43: 1013.

Dowie, M. 1977. “Pinto Madness,” Mother Jones, Sept-October. (*Needs page number. I suspect this was actually obtained from the Mother Jones website, in which case, the citation needs to be modified to include < http://motherjones.com/politics/1977/09/pinto-madness> with access date.

It is useful to bring the Pinto Fires issue up to date with current events, such as the story of the GM truck with side-mounted gasoline tanks. These trucks, built between 1973 and 1987, were vulnerable to rupture in a collision. Like the Pinto, GM's trucks did meet federal safety standards; the overall safety of GM trucks equaled that of other large pickups and exceeded that of most automobiles. Also, recall that in 1993, GM disputed an NBC TV investigative report on the trucks, calling into question NBC's journalistic ethics. NBC apologized publicly.

Another recent example of product safety and an auto manufacturer involves Toyota. The case is featured in Chapter 10. There are also good videos that describe the problem and the recall: do a Google search for “Toyota recall.”

Another recent product safety recall issue is Guidant’s failure to recall potentially fatal heart devices with electrical defects that have led to seven deaths. The company made a decision to not publicize problems, not to recall, and not to offer replacement devices. The company said it was concerned that replacement presented greater risk than leaving current devices implanted (cost-benefit analysis?) After Guidant learned of the problem, it even sold flawed units out of inventory! Over 100 cases have been filed since last year, when 100,000 devices were recalled and the company’s market share has plummeted. Its Current market share in the heart device market fell to 24 percent from 35 percent. Source: Meier, Barry. 2006. “Internal Turmoil at Device Maker as Inquiry Grew,” The New York Times, Feb. 28, p. C6.)

References: • Lavin, D. and D. Pearl. 1994. “GM may Face Pickup Recall of $1.2 billion,” The Wall Street Journal, October 18, p. A3, column 1.

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• • •

Samuelson, R. 1994. “The Regulatory Juggernaut,” Newsweek, November 17, p. 43.

(Samuelson criticizes the government for its finding and for the proliferation of costly regulations).

Even more recent events include the Ford/Firestone controversy, current discussions about SUV rollovers, etc.

You can also have an interesting discussion about valuing a human life and how decisions are being made to compensate Sept. 11 victims’ families. See the following Fortune magazine article: Varchaver, N. 2002. “What is a Life Worth?,” Fortune, September 16, p. 120-128.

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Chapter 3 Deciding What’s Right: A Psychological Approach Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. Ethical Awareness and Ethical Judgment III. Individual Differences, Ethical Judgment, and Ethical Behavior A. Ethical Decision-Making Style B. Cognitive Moral Development a. Level 1: Preconventional b. Level 2: Conventional c. Level 3: Postconventional d. Are Men and Women Different? e. Looking Up and Looking Around f. Autonomous Principled Thinking and Action C. Locus of Control a. Relationship to Ethical Judgment and Action D. Machiavellianism E. Moral Disengagement IV. Facilitators of and Barriers to Good Ethical Judgment A. Thinking about Fact Gathering B. Thinking about Consequences a. Reduced Number of Consequences b. Consequences for Self vs. Consequences for Others c. Consequences as Risk d. Consequences over Time: Escalation of Commitment C. Thinking about Integrity D. Thinking about Your Gut a. Your Gut – “Automatic” Ethical Decision Making E. Unconscious Biases F. Emotions in Ethical Decision Making 1

V. Toward Ethical Decision Making A. Revisiting the Pinto Fires Case: Script Processing and Cost-Benefit Analysis a. Script Processing B. Cost-Benefit Analysis VI. Conclusion VII.

Exercise: Understanding Cognitive Moral Development

VIII.

Discussion Questions

Teaching Notes – Discussion Questions 1. Steven F. Goldstone, Chairman and CEO of RJR Nabisco (one of four biggest U.S. cigarette manufacturers), said in a magazine interview, “I have no moral view of this business. . . I viewed it as a legal business. You shouldn’t be drawing a moral judgment about a business our country says is perfectly legal and is taxed like crazy by it.” (Might need to be sourced.) Think about Goldstone’s statement in terms of moral awareness.

What might happen, if he began thinking about his business in moral and not just legal terms?

Possible Answer The leaders of the tobacco companies have worked hard to keep from thinking about their companies’ product in moral terms. If they do not think about it in moral terms, they do not have to engage moral judgment processes. When forced by others to think in moral terms, they tend to talk about individual choice -- the individual adult’s right to smoke in a free country. They ran into serious problems with the public and the government, however, when it became apparent that they were aiming advertising at teenagers.

As was discussed in Chapter 1, this strict focus on the law is unacceptable. The law simply does not cover all ethical and social responsibility expectations of corporations. Companies that wish to stay out of trouble need to think beyond the law. They need to keep their fingers on the pulse of society. The disclosure rule can be helpful here. How would a particular practice play on the front page of the New York Times?

2. Evaluate yourself in terms of cognitive moral development and locus of control. What does this tell you about your own ethical decision making? Do the same for someone you know well.

It is actually difficult for people to accurately evaluate themselves or others on cognitive moral development, with the small amount of information provided in the chapter. Information about obtaining a measure of cognitive moral development is provided below. But, this question does 2

provide an opportunity for thought and self-reflection. A measure of locus of control is provided below.

Probes to Stimulate Discussion •

“What do you think about, when faced with an ethical dilemma: whether you will be caught and punished? What significant others would think and do in the same situation? Or, what kind of world it would be, if everyone took a particular action?” (Most of our MBAs generally acknowledge that they and those they have worked with are at the conventional level of cognitive moral development.)

3. Can you think of a time when you have used morally disengaged thinking?

It should be easy for students to think of times, when they have heard others use morally disengaged thinking.

Before teaching about moral disengagement, it can be revealing to give students examples of situations (see three examples below) and ask them how they are likely to act in them. Then, ask them to list the reasons why one might, or might not, do these things. Many of the reasons they generate for doing them, will match the moral disengagement mechanisms. The following examples would probably work best with undergraduates.

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You work in a fast-food restaurant. It is against policy to eat food without paying for it.

You came straight from classes and are therefore hungry. Your supervisor is not around, so you make something for yourself and eat it without paying.

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Your accounting course requires you to purchase a software package that sells for $50.

Your friend, who is also in the class, has already bought the software and offers to lend it to you. You take it and load it onto your computer.

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You are preparing for the final exam in a class, where the professor uses the same exam in both sections. Some of your friends somehow get a copy of the exam after the first section. They are now trying to memorize the right answers. You do not look at the exam, but just ask them what topics you should focus your studying on.

4. Identify a situation in which you have used script processing in a work or other life situation.

Most students find it difficult to really “get” this notion of scripts. So, it is helpful to discuss examples from real work settings. Be sure to emphasize that scripts only apply in “routine” situations. Think of them as “standard operating procedures” that one learns to use in these routine situations. For example, the triage system emergency room personnel use can be thought of as a script for deciding which patients get attention first, second, and so on.

5. Do you believe that scripts can override an individual’s values system?

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Possible Answer Obviously, this question asks for an opinion. But, the truth is that they can. And, Denny's personal reflections provide a great example of this. Denny had strong values and beliefs related to business' responsibility to society. And he probably believed that he was being true to those values and beliefs. But, he needed some set of guidelines for making the tough decisions of a recall coordinator. These had evolved in the context of the corporate decision environment and the scripted guidelines excluded ethical considerations. This issue hints at something discussed in Chapter 7 - multiple ethical selves.

It may also be important to note that Denny was quite young, when he was given this responsibility. But, he also did not make recall decisions alone. He was part of a group that made “recommendations” to a higher level management group that would decide on the recall.

So, the script became an important guide for decision making for the entire group.

Probe to Stimulate Discussion •

"Can you think of an example of a situation, where a script overrode your value system?"

6. Answer the question posed in Gioia’s Reflections: Is a person behaving unethically, if the situation was not even construed in ethical terms – if there was no moral awareness?

Probes to Stimulate Discussion •

“Is it appropriate to say, ‘I hadn't thought of this in terms of right and wrong - I employed a structured way of thinking about the situation and that's why I missed the ethical overtones?’ "

Sure, it helps to understand one’s behavior, but it does not necessarily excuse it. The action was still unethical. Obviously, Denny does not think now that he did the right thing, although he seems to understand why he behaved the way he did.

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“How autonomous can we expect people in organizations (ourselves) to be? “

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“Whose responsibility is it to decide that a situation involves ethical concerns?”

Here is the relevant quote from Denny's personal reflections in the text: The recall coordinator's job was serious business. The scripts associated with it influenced me more than I influenced [it]. Before I went to Ford, I would have argued strongly that Ford had an ethical obligation to recall.

After I left Ford, I now argue and teach that Ford had an ethical obligation to recall. But, while I was there, I perceived no obligation to recall and I remember no strong ethical overtones to the case whatsoever. It was a very straightforward decision, driven by dominant scripts for the time, place, and context.

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(An overhead with this quote on it can stimulate a lengthy discussion).

7. Who should make the decision about taking risks with others' lives in designing products?

Possible Answers Engineers, marketing people, top managers, government regulators, consumers? This is an important question about responsibility in organizations and is related to topics treated later in the book - chapters 7 and 9. When responsibility is diffused among a variety of people, there is more of a tendency to ignore the potential harm that a product might cause, unless organizational decision making systems are explicitly designed with this concern in mind. So, one way to deal with this is to consider ways to get every individual, who makes decisions related to new products, to consider their potential harm; n other words, to embed risk assessment into the decision making process, similar to environmental impact statements that are becoming a regular part of corporate reports. Ultimately, someone high in the organization must make the final decision. But, if information about risk and potential harm is included in reports provided to top decision makers, they are less likely to ignore or downplay these problems. It is also important that these decision makers be aware of the biases that affect the way they are likely to think about risk. They should design risk analysis into decision-making processes and ask questions like, what is the worst-case scenario? Another consideration is to have the people making the product release decision be different from those, who are already highly invested in the product's success. They are likely to be more objective in their decision making.

This is also an appropriate time to consider again the role of government regulation. Arguably, government safety standards have evolved, because businesses did not create standards, stringent enough to satisfy the public interest. But, in the Pinto Fires case, the car met all safety regulations in effect at the time.

Students’ attitudes toward government regulation often differ, depending upon the role they take -- businessperson or consumer. It can be effective to have students take these different roles in the discussion.

8. Should a person be permitted to place a value on a human life? Should a company?

Should the government? If not, how would decisions be made about whether to market certain products (that might be risky for some, but helpful for others), how much those who have lost family members in disasters should be compensated, and so on?

Possible Answers Again, there are more questions than answers. The question is designed to get students thinking and we have had many lively discussions around the issues raised by this question. Some students are inclined to answer this question with a simple "no." But, it is not that easy. As a society, we make decisions about the risk we are willing to take with human life all the time.

Certain medical procedures and medications have the risk of serious harm or death attached to them. Traveling in automobiles, trains and airplanes does kill people. We could build cars to protect us better in car accidents and fewer people would die, but we do not, because of cost and 5

competitiveness issues. In some cases, people decide to give one life more value than another, as when a fetus is aborted to save the life of the mother, or one person is selected over another to receive an organ transplant. So, we do make these decisions. How do we do it? Is it better to use a moral reasoning approach, or some intuitive or "gut" approach than to place a dollar value on human life? Do the approaches presented in Chapter 4 help? Perhaps the most important question is -- who should be making these decisions?

9. How do you feel about the use of cost/benefit analysis, where human life is part of the cost calculation? Might the infusion of moral language have changed the decision makers’ thinking? For example, what if decision makers had talked about their responsibility for killing 180 human beings?

Possible Answers This is a question about how students "feel" and is designed to provoke thought and discussion.

An argument for using cost-benefit analysis might be that dollars and cents are simply the ways we place value on things in this society. So, why not human life? It forces us to think about what human life is really worth to us. However, an argument against it might be that the value of a human life simply cannot be captured by such a crude measure. It is like trying to measure love in dollars and cents. If adults tried to do a dollar-based, cost-benefit analysis on the decision to have children, they probably never would. Although there are many benefits, they cannot be captured by a dollar figure.

It is clearly harder to make a decision to “kill” people. For that reason, it may be very appropriate to use this kind of language. At least we would be morally aware and we would be making our decisions with our eyes wide open.

Probes to Stimulate Discussion •

"If we do not use some form of cost-benefit analysis, what do we use?"

10. Given that all automobiles are unsafe to some degree, where do you draw the line on product safety? How safe is safe enough – and who decides?

Possible Answers Students have difficulty with this one. But, again, it makes them think about the complexity of these issues, and they usually acknowledge the importance of product safety regulation to protect consumers.

Probes to Stimulate Discussion •

“How many of you drive Volvos? If not, why not?” (Volvos are thought to be among the safest cars on the road, but one does not see many.)

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In-Class Exercises Exercise #1: Another Short Case for Discussion

Mary, the director of nursing at a regional blood bank, is concerned about the declining number of blood donors. It is May, and Mary knows that the approaching summer will mean increased demand for blood and decreased supplies, especially of rare blood types. She is therefore excited, when a large corporation offers to host a series of blood drives at all of its locations, beginning at corporate headquarters. Soon after Mary and her staff arrive at the corporate site, Mary hears a disturbance. Apparently, a nurse named Peggy was drawing blood from a male donor with a very rare blood type, when the donor fondled her breast. Peggy jumped back and began to cry. Joe, a male colleague, sprang to Peggy’s defense and told the male donor to leave the premises. To Mary’s horror, the male donor was a senior manager with the corporation. What is the ethical dilemma in this case, and what values are in conflict? How should Mary deal with Peggy, Joe, the donor, and other representatives of the corporation?

The values in conflict are Peggy’s right to be treated with dignity and respect, and the rights of those, who will need blood in the coming months. If Mary blows the whistle on the male donor (senior manager), she may be concerned about jeopardizing future blood donations.

Mary should talk with Peggy about her experience. She may need counseling from the organization’s Human Resources Department or Employee Assistance Program.

Mary should also praise Joe for taking quick action in Peggy’s defense.

Peggy should discuss the incident with someone in the corporation’s ethics office or human resources department. This behavior may be part of a pattern and, if so, it would be important for them to know about the incident, so they can take action. Most large corporations would consider this kind of incident to be quite serious, especially if this executive is acting similarly with their own employees. Peggy could save the company from future legal problems by alerting them to the problem. At the very least, this individual should be barred from future blood donations.

Exercise #2 – Relativism/Idealism Scale (Forsyth, 1980) The statements below are about your general philosophies. Please circle the number that indicates how much you agree or disagree with each item, IN GENERAL. 7

Strongly Disagree

Strongly Agree

Neither

1) A person should make certain that their actions never intentionally harm another even to a small degree.

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2) Risks to another should never be tolerated, irrespective of how small the risk might be.

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3) There are no ethical principles that are so important that they should be a part of any code of ethics.

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4) What is “ethical” varies from one situation and society to another.

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5) The existence of potential harm to others is always wrong, irrespective of the benefits to be gained.

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6) Whether a lie is judged to be moral or immoral depends upon the circumstances surrounding the action.

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7) Questions of what is ethical for everyone can never be resolved since what is moral or immoral is up to the individual.

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8) If an action could harm an innocent other, then it should not be done.

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9) Deciding whether or not to perform an act by balancing the positive consequences of the act against the negative consequences of the act is immoral.

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10) Rigidly codifying an ethical position that prevents certain types of actions could stand in the way of better human relations and adjustment.

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11) One should never psychologically or physically harm another person.

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12) One should not perform an action which might threaten in any way the dignity and welfare of another individual.

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13) No rule concerning lying can be formulated; whether a lie is permissible or not permissible totally depends on the situation.

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14) Dignity and welfare of people should be the most important concern in any society.

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15) Moral standards should be seen as individualistic; what one person considers to be moral may be judged to be immoral by another person.

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16) Moral actions are those which closely match ideals of the most “perfect” action.

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17) If an action could harm an innocent other, then it should not be done.

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18) Different types of moralities cannot be compared as to “rightness.”

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19) Moral standards are simply personal rules which indicate how a person should behave, and are not to be applied in making judgments of others.

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20) Ethical considerations in interpersonal relations are so complex that individuals should be allowed to formulate their individual codes.

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To score: •

Add scores from statements 1, 2, 5, 8, 9, 11, 12, 14, 16, and 17. The sum represents the score on the idealism scale.

• Add scores from statements 3, 4, 6, 7, 10, 13, 15, 18, 19, and 20. The sum represents score on the relativism scale.

Total possible score on each scale = 70

Exercise #3 – Locus of Control Students can have a difficult time understanding why locus of control is important. An easy way to help them understand this is to focus on the characteristics at the internal and external ends of the spectrum.

Internal Locus of Control: • More likely to help someone • More likely to question you and authority in general • In charge of their own fate External Locus of Control: • Follows orders and rules • Less likely to question you and authority in general • Very much influenced by peer pressure • Less likely to see how they (their role) can effect an outcome

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Begin a discussion about why locus of control might be important, when you are hiring someone to do a specific job. The point: locus of control has implications for how people behave on the job and it is good to think about this.

For example: How might locus of control figure into: • Hiring an assembly line worker?

• Hiring a nanny?

• Choosing a doctor?

• Naming someone to head a compliance function?

• Selecting a nuclear power plant engineer?

• Promoting someone in the military?

Exercise #4: Locus of Control Questionnaire Another interesting exercise to encourage students to consider their own locus of control is to administer this questionnaire in class. Then have the students score their own – you can use a paper survey, use slides to ask each question, or even use an online survey program to collect the results and then feed them back during class.

Locus of Control Questionnaire Instructions: Please read each pair of statements, (a) and (b). Then select which statement you agree with more. Check either (a) or (b) for each pair of statements.

1. ____ a) Many of the misfortunes people experience are partly due to bad luck. ____ b) People's misfortunes usually result from the mistakes they make.

2. ____ a) In the long run people get the respect they deserve. ____ b) Unfortunately, an individual's worth is often unrecognized, no matter how hard he or she tries.

3. ____ a) Grades in school are generally a fair representation of the student's effort and ability. ____ b) Most students do not realize the extent to which their grades are influenced by accidental happenings.

4. ____ a) Without the right breaks one cannot be an effective leader. ____ b) Capable people who fail to become leaders have not taken advantage of their opportunities.

5. ____ a) No matter how hard you try, some people just do not like you. ____ b) People who cannot get others to like them, do not understand how to get along with others.

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6. ____ a) I have often found that what is going to happen will happen. ____ b) Trusting to fate has never turned out as well for me, as making a decision to take a definite course of action.

7. _ ___ a) If a student is well-prepared, there is rarely, if ever, such a thing as an unfair test ____ b) Many times exam questions tend to be so unrelated to course work that studying is really useless.

8. ____ a) Getting a good job is a matter of hard work. Luck has little or nothing to do with it. ____ b) Getting a good job depends mainly on knowing the right people.

9. ____ a) The average citizen can have an influence in government decisions. ____ b) This world is run by the few people in power, and there is not much the average person can do about it.

10. ____ a) When people succeed, it is usually because they worked hard for it. ____ b) When people succeed, it is often because they were in the right place at the right time.

Scoring Instructor: Note that this is not a validated measurement instrument. It has been adapted from a variety of other instruments and is designed for instructional use only. The purpose is to familiarize students with the locus of control concept - not to measure an individual's locus of control. We recommend asking students to identify which statements refer to an external orientation and which statements refer to an internal orientation. Then discuss how this orientation might influence ethical conduct. I = internal E = external 1. ____ a) Many of the misfortunes people experience are partly due to bad luck. (E) ____ b) People's misfortunes usually result from the mistakes they make. (I) 2. ____ a) In the long run people get the respect they deserve. (I) ____ b) Unfortunately, an individual's worth is often unrecognized, no matter how hard he or she tries. (E) 3. ____ a) Grades in school are generally a fair representation of the student’s effort and ability.

(I) ____ b) Most students do not realize the extent to which their grades are influenced by accidental happenings. (E) 4. ____ a) Without the right breaks one cannot be an effective leader. (E) ____ b) Capable people who fail to become leaders have not taken advantage of their opportunities. (I) 5. ____ a) No matter how hard you try, some people just do not like you. (E) 11

____ b) People who cannot get others to like them, do not understand how to get along with others. (I) 6. ____ a) I have often found that what is going to happen will happen. (E) ____ b) Trusting to fate has never turned out as well for me as making a decision to take a definite course of action. (I) 7. ____ a) If a student is well-prepared, there is rarely, if ever, such a thing as an unfair test. (I) ____ b) Many times exam questions tend to be so unrelated to course work that studying is really useless. (E) 8. ____ a) Getting a good job is a matter of hard work. Luck has little or nothing to do with it (I) ____ b) Getting a good job depends mainly on knowing the right people. (E) 9. ____ a) The average citizen can have an influence in government decisions. (I) ____ b) This world is run by the few people in power, and there is not much the average person can do about it. (E) 10. ____ a) When people succeed, it is usually because they worked hard for it. (I) ____ b) When people succeed, it is often because they were in the right place at the right time. (E)

Additional Resources 1. Cognitive Moral Development: Materials for measuring cognitive moral development using the Defining Issues Test can be obtained from the Center for the Study of Ethical Development, University of Alabama 305a Carmichael Hall, Tuscaloosa, AL 35487 Phone: 205-348-4571

2. Moral Disengagement A measure of moral disengagement (particularly useful with undergraduates) can be found in an article by Detert, J.R., L.K. Treviño and V. Sweitzer. 2008. “Moral Disengagement in Ethical Decision Making: A Study of Antecedents and Outcomes.” Journal of Applied Psychology. 93: 374-391.

3. Video: Pinto Fires Linda Treviño and Dennis Gioia have created an instructional DVD to accompany his “Pinto Fires” case and reflections (Chapter 3).

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For years, Denny has taught the case to MBA business ethics classes as a "living case." It has always been a big hit with the students, to be able to interact with Ford's recall coordinator himself and ask questions left hanging in the case.

The DVD includes an introduction by Linda Treviño, Denny Gioia teaching the MBA class (edited to about 45 minutes), and some closing learning points by Denny. We also created titled vignettes that an instructor can pick and choose to make specific points in a shorter time period. That seems to work best. The case is packaged with the DVD, along with a brief instructor's guide and suggested readings.

We have priced the DVD at a reasonable cost, so that it will be accessible to any instructor who would like to use it. Proceeds are being split between Penn State University's Media Sales and the Shoemaker Program in Business Ethics Endowment that supported creation of the DVD. Linda Treviño would be glad to answer any questions you have about using the DVD, which she has used successfully in several teaching settings. The link to Penn State Media Sales, where you can purchase the DVD is below: http://mediasales.psu.edu, or call: 814-865-3333 To find the “Pinto Fires” DVD, see the banner, third from the top, on the right.

4. Videos: ABC News You can purchase the following videos or DVDs at the ABC News Store: www.abcnewsstore.com • “What Would You Do?” A series of video tapes that explore what people might do in various hypothetical cases. Cases vary and include subjects such as shop lifting and domestic violence.

• “Basic Instincts” – the Milgram experiments revisited.

5. Video and Podcast: Nova’s “Mind Over Money” Nova’s “Mind Over Money” is a fascinating exploration of how emotions and the way the brain works affect out behavior. Specifically this program shows how traders get so caught up in the game of trading that their ethics and ability to assess risks is compromised. Here is a link to the website: http://www.pbs.org/wgbh/nova/money/

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Chapter 4 Addressing Individuals’ Common Ethical Problems Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources Chapter Outline I.

Introduction A. Indentifying Your Values – and Voicing Them

II. People Issues A. Discrimination B. Harassment, Sexual and Otherwise III. Conflicts of Interest A. What Is It? B. How Can We Think About This Issue?

C. Why Is It an Ethical Problem?

D. Costs IV. Customer Confidence Issues A. What Is It? B. How Can We Think About This Issue?

C. Why Is It an Ethical Problem?

D. Costs V. Use of Corporate Resources A. What Is It? B. How Can We Think About This Issue?

C. Why Is It an Ethical Problem?

D. Costs VI. When All Else Fails: Blowing the Whistle A. When to Blow the Whistle 1

B. How to Blow the Whistle VII.

Conclusion

VIII.

Discussion Questions

IX. Short Cases

Teaching Notes - Discussion Questions

1. What do you value? Can you make a list of the three or four values you would stand up for?

How will you explain to others what your values are and why?

This is the perfect place to begin linking the values exercises you (hopefully) did with your students in Chapter 2, with why it is important to identify their values. It is difficult, if not impossible, to voice values, if you have no idea what your values are! Go to the “Giving Voice to Values” website: (http://www3.babson.edu/babson2ndgen/GVV/default.cfm.

There are many exercises available there, which can help you teach the importance of identifying values and then provide tools you can use to help students begin to practice voicing their values.

2. Have you ever practiced raising an ethical issue to a professor or to your manager? What did you do? What were the results?

Again, see “Giving Voice to Values.” This would make a great homework assignment.

3. Have anti-discrimination laws helped or hurt the fair treatment of workers?

This really depends on whom you talk to. However, there is probably little argument among labor experts that the strides made by women and minorities in the workplace would probably never have taken place, (or would have occurred at a much slower pace) if not for antidiscrimination legislation. As with everything else, there has been a backlash of sorts. Also, many young women and minorities today find it impossible to believe that only 20 years ago, their prospects for employment and advancement would have been far different than they are now.

4. Is diversity management an ethical issue?

If we buy into the argument that diversity management helps us appreciate differences among various groups, then it could be viewed as an ethical issue from the standpoint of fairness and respect toward all individuals. If diversity management helps us manage people more fairly, then it certainly could be viewed as an ethical issue.

5. Is sexual harassment as important an issue for men, as it is for women?

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Yes. If research is correct and sexual harassment is about power, then anyone can wield it.

Whoever has the power -- male or female -- can make life difficult in various ways for those who have less power. According to Newsweek, 16% of sexual harassment claims filed with the U.S. Equal Employment Opportunity Commission (EEOC) are from males. (Gesaman, Krista. “Abuse of Power,” Newsweek, January 13, 2010. http://www.newsweek.com/2010/01/12/abuse-ofpower.html, access date: July 27, 2010.)

Since so much interpretation of sexual harassment in the courts is based on what is "reasonable," try to determine what students think is reasonable. For example, try to determine what the class thinks is reasonable when it comes to asking someone out. Is it sexual harassment to ask someone out once? (Almost everyone will say "no.") Is it sexual harassment to ask someone out twice? (Almost everyone will still say "no," although one or two people may disagree.) How about five times? (The majority of people in the room will now think that it is sexual harassment.) How about ten times? (Now, it would be unusual for someone to think that this is not sexual harassment.) This exercise recently produced amusing results in one group of executive education students. One man in his 50's exclaimed that he had asked his wife out 20 times before she accepted, and he had no idea that his persistence would be considered harassment by almost all of his peers. Another man in the group said, “Today you would be considered a stalker.”

6. What conditions would make accepting a gift from a vendor or a client acceptable?

Accepting a gift from a vendor could be acceptable, if it was of nominal value -- probably under $100 (or whatever figure an employer has determined to be nominal). A gift could also be acceptable, if it was a food product that could be shared by a department. For example, many companies would consider it acceptable, if an elaborate tin of assorted cookies and snacks was sent to and accepted by a department of employees. The same present sent to and accepted by an individual, may not be acceptable depending on company policy. In most cases, the conditions should not change outside of the U.S. See Chapter 11 for more information on gifts.

Probes to Stimulate Discussion • •

"Is there a difference between a gift given by an individual or one given by a company?"

"What if the gift was an invitation to a party, or a day at a company-sponsored tennis match, where all clients were invited?"

7. Describe the conditions under which you could hire a college friend.

There are probably no circumstances under which this would be acceptable. Hiring implies that an individual would report to you and be appraised by you. That is a conflict of interest, regardless of how you look at it. The only possible exception could be a part-time, temporary job, like working in a department store during the holidays, or working on a construction detail during the summer. In both cases, the work is short term and the wages are set. The operative 3

word in this question is "friend." The nature of the relationship is important. If the person is more of an acquaintance, hiring the person would probably be acceptable.

8. Why do certain professionals -- bankers, accountants, lawyers, physicians, clergy -- have fiduciary responsibilities?

Certain professions have fiduciary responsibilities, because they are known as "trust" professions. All of these professions have access to personal, confidential information about finances, health, or other highly private matters and therefore, they must exercise a higher standard of care regarding their clients' confidentiality.

9. What would you do if a former subordinate asked you to write him/her a letter of reference on corporate letterhead?

As is stated in the text, you should get your company’s permission to do so. It is almost always better (safer) to write a personal letter on your personal letterhead and attach a business card.

That way, the reference represents your “personal opinion” and is not likely to be taken as a “corporate” position.

10. Do employers have a responsibility to alert other employers to an employee's wrongdoing by supplying an unfavorable reference? Why or why not? Discuss the conflict between community responsibility and self-protection.

There has been some publicity lately about the ethical responsibility of employers to warn other companies about workers who have been dismissed for "cause" (see Chapter 8 in the "Terminations" section for a description of "cause.") For example, in an ethics training session, held recently at a leading university in the Midwest, three former bank examiners complained about how employers keep quiet, when it comes to employees' misdeeds. "The slime just go from one institution to another because no one will point a finger at them," said one former regulator.

No doubt, employers have a balancing act, between any responsibility they may have to protect other companies from unscrupulous employees, and their desire to protect themselves from lawsuits filed by those employees for bad references.

11. What conditions would have to be present for you to blow the whistle about unethical conduct you observed at work? How would you go about it?

It is good to have a plan, even though it is difficult for us to anticipate how we will react when a real situation occurs. Recommend that students think about the following: How much and what kind of harm would be “enough” to trigger action on their part?

12. If Sherron Watkins had blown the whistle to the Houston Chronicle and not to Enron’s CEO Ken Lay, do you think she would have kept her job at Enron?

That is highly unlikely. Whistleblowers who report organizational misconduct to the press are usually ostracized or worse. Despite being named a person of the year by Time magazine, some have criticized Ms. Watkins for not going outside the firm and not reporting the problems 4

sooner. But, as we said in the chapter, blowing the whistle is difficult and we believe that Ms. Watkins should be commended for her efforts to at least alert senior executives inside the firm.

13. Research a story of whistle blowing. Relate what “your” whistle-blower did with the seven steps recommended in the chapter. What have you learned from the comparison?

Students could read Sherron Watkins’ book, view the film, The Insider, or read stories written by other whistleblowers. They will probably learn that most whistleblowers are caught off guard and have not planned what they would do in such a situation. We have used clips from The Insider successfully in class, as a basis for discussion of whistle-blowing. (There is more under Homework Assignments.)

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In-Class Exercises – Cases in the Chapter Text These are great springboards for discussions in class. Divide your class into teams of 3 – 5 students and give them 5 – 10 minutes to discuss each case in their teams. Then ask the teams to report out. Who are the stakeholders in each case? What are the ethical issues? What are the possible courses of action? In fact, starting each class with one of these cases is a great way to focus students and get their “heads in the game.”

Case # 1: Discrimination You and Lisa met five years ago, when you were hired into the management training program of a large utility. Although you are now in different parts of the organization, you have managed to stay close over the years. Lisa recently had a baby and plans to take advantage of the full six months of maternity leave the company offers. She told you that she is definitely coming back to work after her leave, and that her department has promised to hold her job for her. Meanwhile, you have seen a posting for her job on the company’s website. You run into one of Lisa’s colleagues in the hall and ask about the posting. He says, “Oh yeah, they’re going to fill that job. But don’t tell Lisa. She’s got five more months to be a happy Mom. Besides, they’ll find something for her to do if she decides to come back.”

Notes: The reverse of this situation is probably what happens more frequently in industry: Many new mothers give every indication that they are returning to their jobs after a maternity leave, and then they do not. Many companies jump through hoops to try to keep positions open for workers on maternity leave, only to have the workers quit at the end of their leaves. It would be interesting in class to probe around this issue; to see if students think companies have any ethical obligation to hold jobs open for workers on maternity (or other kinds of) leave; and whether students think that workers on leave have any ethical duties, regarding their return to an organization which may be holding a job open for them.

Case # 2: Sexual Harassment One of your coworkers is Joanne, a computer whiz with an offbeat style and a great sense of humor. Two of Joanne's favorite "targets" are you and Bill, another coworker who tends to be quite standoffish in his business relationships. Joanne is the department clown and is forever goading you and Bill -- you because you are a great audience and clearly think she is hilarious; Bill, because she likes to try to get him to be more approachable. Joanne frequently alludes to sexual subjects and has called both you and Bill "little alley cats" and "studs." While Joanne's behavior does not offend you at all, you are surprised when Bill approaches you in the men's room and bitterly complains about Joanne's constant teasing.

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Notes: We purposely wrote this case with a man as the "victim," to illustrate the fact that sexual harassment is not just a women's issue. While it is not typical for men to be harassed, when such incidents occur, it is just as disturbing as when it happens to a female. (See the “Teaching Notes” under Discussion Question 5 for more information.)

With all of the publicity and sexual harassment training going on in corporations in the last few years, most workers have a pretty good idea of what behavior is inappropriate in a work setting with other employees. Similarly, most students have become sensitized to this issue, and in fact, some are almost paranoid about it. It is important that students be aware that they need to know their audience. For example, in one large, well-respected firm, a young woman filed suit, because a male senior executive had placed his hand on her knee, while they were sitting in front of a computer screen. Certainly, most women would not react that vehemently to such a gesture.

However, this woman had endured years of sexual abuse as a child and as a result the executive's gesture unhinged her. The company settled out of court, and the executive (who had an outstanding reputation) was warned and that was the end of it. That is why it is important to know who you are dealing with, before you make any comment or gesture that could be considered sexual.

Case #3 -- Conflicts of Interest Your daughter is applying to a prestigious university. Since admission to the school is difficult, your daughter has planned the process carefully. She has consistently achieved high marks, taken preparatory courses for entrance exams, and has participated in various extra-curricular activities. When you tell one of your best customers about her activities, he offers to write her a letter of recommendation. He is an alumnus of the school and is one of its most active fund-raisers. Although he is a customer, you also regularly play golf together and your families have socialized on occasion.

Notes: Although the text describes circumstances, under which accepting this favor would be acceptable, it is still not a good idea. Any action that places you under any sort of "obligation" to a customer or vendor should be avoided -- even in small towns and even when your friendship is well known in the community. Realistically, few people would turn down this offer, although it could be problematic in some cases.

Case #4 -- Customer Confidence Issue You work for a consulting company in Atlanta. Your team has recently completed an analysis of Big Co., including sales projections for the next five years. You are working late one night, when you receive a call from an executive vice president of Big Co. in Los Angeles, who asks you to immediately fax to her a summary of your team's report. When you locate the report, you discover that your team leader has stamped "For internal use only" on the report cover. Your team leader 7

is on a hiking vacation, and you know it would be impossible to locate him. Big Co. has a long-standing relationship with your company and has paid substantial fees for your company's services.

Notes: At many companies, releasing information like this would be enough to get a young worker fired. Senior managers at a number of firms tell stories of how various phone callers tried to bully them into releasing information like this. When you are a new employee, it is difficult to say "no" to a big client. The most prudent move in a situation like this is to stall the customer, until you have time to check policy with a senior manager. First, confirm the identity of the caller -- usually by taking their number and calling them back or calling their company's central switchboard. Then try to reach your manager. If that is impossible, try to reach your manager's manager or another senior member of your team. If you cannot reach anyone on your team, explain the problem to any other senior manager in your company, being careful not to release any customer information. All you need to know is your company's process for authorizing the release of internal customer information.

Case #5 -- Product Safety You are the head of marketing for a small pharmaceutical company that has just discovered a very promising drug for the treatment of Alzheimer’s disease. You have spent months designing a marketing campaign that contains printed materials and medication sample kits for distribution to almost every family physician and gerontologist in the country. As the materials are being loaded into cartons for delivery to your company’s representatives, your assistant tells you that she has noticed a typographical error in the literature that could mislead physicians and their patients. In the section that discusses side effects, diarrhea and gastrointestinal problems are listed as having a probability of 2 percent. It should have read 20 percent. This error appears on virtually every piece of the literature and kits, and ads containing the mistake are already on press in several consumer magazines.

Notes: This case was recently used in a training program that was delivered to 2,000 medical company employees. The workers were unanimous in their assessment of the case. Once they identified the stakeholders, they decided that patients were the primary stakeholders. Since their profession has as its underpinning -- “first, do no harm” -- the employees had no problem fixing this error before the kits were distributed to physicians. It will be interesting to see how students playing the role of marketing professionals address this issue.

Case #6 -- Truth in Advertising Imagine that your financial firm is offering a new issue -- a corporate bond with an expected yield of 7–7.5 percent. In the past, offerings like this one have generally been good investments for clients, and you have sold the issue to dozens of large and small clients. You are leaving on a two-week vacation and only have a few hours left in the office, when your firm announces that the yield for the bond 8

has been reduced; the high end will now be no more than 7 percent. The last day of the issue will be next week, while you are away on vacation. What should you do?

Notes: Most financial professionals have no problem with notifying their customers of the change. They may leave it for their assistants to deal with, but they somehow deal with it.

Case #7 -- Special Fiduciary Responsibilities For 12 years, you have been the financial advisor for an elderly man in his late 70s who is an active investor of his own portfolio, and for a trust that will benefit his two children. In the last few months, you have noticed a subtle, yet marked change in his behavior. He has become increasingly forgetful, has become uncharacteristically argumentative, and seems to have difficulty understanding some very basic aspects of his transactions. He has asked you to invest a sizable portion of his portfolio and the trust, in what you consider to be a very risky bond offering. You are frank about your misgivings. He blasts you and says that if you do not buy the bonds, he will take his business elsewhere.

Notes: Undergraduate students frequently do not see the ethical issue here -- they simply say that they would buy the bonds. Graduate students frequently see the issue, but would go ahead and buy the bonds anyway. However, ethical financial professionals almost always find a way to protect this client. They may warn him in another way, or contact his family, or a trusted professional who is close to him. One graduate student who saw this case exclaimed that it described exactly what he had been through with his father. In that case, his father’s broker called him, explained that he felt there was something wrong with his father, and that he was concerned about the father’s behavior and investments. The student investigated, encouraged his father to see a doctor, and shortly after, discovered that his father had a brain tumor. The broker not only saved his father’s assets -- he saved the father’s life. That said, the financial representative must proceed very carefully and try to protect the client’s confidentiality at all costs. One financial executive from a well-known investment bank told the story of how he did this once – contacted the daughter of an investor who was clearly impaired – and the daughter later sued the financial firm and the executive for breach of confidentiality. This is why it is so crucial to discuss these issues up front with a client. “What are your specific investment objectives? Who can I contact in case you become ill?” Obviously, these kinds of questions become even more imperative with elderly clients, where the risk of impairment is greater. It is also interesting to note that a client’s cognitive ability can be affected by any number of issues, not just age. Clients can be affected by any of the following: drugs (including prescription medications), alcohol abuse, gambling, divorce, depression and other mental issues, and any number of physical conditions and diseases.

Case #8 -- Use of Corporate Reputation A young woman who works for you is moving with her husband to another city, where she will be looking for a new job. She is an excellent worker and when she 9

asks you for a reference, you are glad to do it for her. She specifically asks for a written recommendation on your corporate letterhead.

Notes: Some managers would no doubt deny this young woman a reference and cite company policy as the reason. In the real world, it is probably not fair to penalize a good employee because of the constraints of corporate policy. If you feel that you want to recommend her for another job, it would probably be all right to recommend her personally, on personal letterhead. Then attach your business card to the letter. The only reason companies refuse to give recommendations is because of the risk of lawsuits. The risk to you as an individual is probably negligible.

Case #9 – Use of Social Media You joined one of the country’s largest retail chains, and already you have been promoted to department manager in one of your employer’s largest stores in an upscale shopping mall. Imagine your surprise, when you log on to Facebook and see that one of your ‘‘friends’’— a young woman who heads one of the other departments in your store — has posted confidential store sales on her wall and has also posted sexual comments about a young man who reports to her.

Use of social media is very popular, especially among college students and other young people.

A well-known and trendy retailer, who was shocked to find confidential store information posted on Facebook by a young store manager, suggested this case to us. Needless to say, this young manager was fired for disclosing (and posting!) confidential company information. The retailer described a number of other problems it had uncovered on social media websites. One involved provocative verbiage and photos appearing on an employee’s page – used to describe a coworker. Another involved a worker who was on an extended medical leave, who posted photos of herself horseback riding, playing golf, gardening – all of which are activities that are highly unlikely, if her medical condition (and the leave) were legitimate. Companies are struggling with this new media and many are establishing guidelines for use among employees. Others are establishing their own social media sites for internal use by employees. Bottom line: if an individual misbehaves – whether in person or on social media sites – their job is in jeopardy.

That includes activities such as disclosing company or personal information (about other employees), sexual or other harassment of coworkers or subordinates, etc. An offense does not have to be “in person,” to get an employee disciplined or fired.

Case #10 -- Dealing With the Press You are an employment counselor at a large outplacement firm. Your company is currently negotiating with Black Company, to provide outplacement services to 500 employees who are about to lose their jobs as the result of a layoff. Your neighbor and good friend is a reporter for the local newspaper, who mentions to you over coffee one Saturday that she is writing a story about Black Company.

According to her sources, 1,500 employees are about to lose their jobs. You know her numbers are incorrect. Should you tell her?

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Notes: If there was ever a trap, this is it! Under no circumstances should this employee talk to a newspaper reporter -- especially one who is a good friend and neighbor. If she is a good friend, she should refer her to the company’s public relations department. And she should go to PR herself, and explain what the problem is and what her good friend is about to write. In that way, she protects the company, the community, and perhaps gets a good and accurate story for her friend.

Case #11 -- Use of Corporate Resources You have been working very long hours on a special project for the chairman of your company. Your company policy states that employees who work more than 12 hours in one day may be driven home by a company car at company expense.

Policy also states that employees who work longer than two hours past the regular end of their day can have a meal delivered to the office at company expense. You and your colleagues, who are also working on the project, arrive at the office at 8:00 a.m. and order dinner at 7:00 p.m.; then you enjoy dinner and conversation for an hour and are driven home by company cars. Is this OK? Notes: Most workers who see this case think that these folks have found a way to have a free meal on the company. Their behavior is slimy, and it would be interesting to hear them justify this to their management.

Case #12 -- Corporate Financial Resources Your manager is being transferred to another division of the company in early January. He calls a meeting in early November and asks that every department head delay processing all invoices until after January 1. He wants to keep expenses low and revenues high, so that his last quarter in your area shows maximum revenue.

Notes: This is unethical on a myriad of levels -- regarding the new manager, the vendors, the company, and the employees, etc. There is no way to justify behavior like this and any company would fire this person.

Case #13 -- Blowing the Whistle A long-time customer approaches you for financing for a new business venture.

The customer offers as collateral a piece of property he has purchased in a rural location for the purpose of building a housing development. You send an appraiser to the property and he accidentally discovers that this property holds toxic waste. You are sure this customer is unaware of the waste; in fact, the waste is migrating and in a few years will invade the water table under a nearby 11

farmer’s fields. You explain the situation to your manager, who naturally instructs you to refuse to accept the property as collateral, but he also forbids you to mention the toxic waste to the customer. “Let them find out about it themselves,” he says. Do you alert the customer to the toxic waste? Do you alert government regulators?

Notes: This case is a real one that occurred at a huge multinational corporation. The company’s lawyers were uncertain how to handle this, because they felt that telling the customer would be “poor customer service.” (We have not figured that one out yet.) Even if customer service was a concern, the company could approach the owner, explain what had been found, and offer to go to the regulators with them. There is no alternative but to report this.

Case #14 – Voicing Your Values You are a trader who joined a large investment bank two years ago. Pat, one of your fellow traders, is well known on the Street for being a big risk taker and a big money maker for the firm. Consequently, he is popular among your firm’s senior management.

You see him at a party one night and notice him surreptitiously using cocaine several times. Several weeks later in the office, you notice that he seems exceptionally highspirited and that his pupils are extremely dilated — you know that both are signs of drug use. You are thinking of mentioning something about it to his managing director, Bob, when Pat makes a particularly impressive killing in the market for your firm’s own account. Bob jokes that he does not know how Pat does it, but he does not care. ‘‘However he is pulling this off, it’s great for the firm,’’ Bob laughs. You feel strongly that this is a problem and that it places your firm at risk. You have already raised the issue with Pat’s manager, Bob, who ignored it. Do you raise it further? How can you voice your values in this case?

Notes: This case is more realistic than many people know. Traders at senior levels in investment banks are under tremendous pressure to perform and the stress can be daunting. They also have almost unlimited resources and can afford to pay for a drug habit. This can be a toxic combination. The issue here is not whether or not this is wrong – there is little doubt of that. The issue is: how do you raise this issue about a star employee, without getting cut off at the knees yourself? It helps to practice what you are going to say and to whom you will say it. Approaching the managing director is probably pointless and dangerous. This is why HR was created – to worry about the risks that some employees can pose to the organization. Consequently, the best answer in this case is to practice what you are going to say, document your observations, and approach HR with the issue. If they do nothing, then no one else will either, and you may have to consider whether you want to stay with this company.

Case #15 -- Human Resources Issue Your division has formed a committee of employees to examine suggestions and create a strategy for how to reward good employee ideas. The committee has five 12

members, but you are the only one who is a member of a minority group. You are pleased to be part of this effort, since appointments to committees such as this one are viewed generally as a positive reflection on job performance. At the first meeting, tasks are assigned and all the other committee members think you should survey minority members for their input. During the weeks that follow, you discover that several committee meetings have been held without your knowledge.

When you ask why you were not notified, two committee members tell you that survey information was not needed at the meetings and you would be notified when a general meeting is scheduled. When you visit one committee member in his office, you spot a report on the suggestion program that you have never seen before. When you ask about it, he says it is just a draft he and two others have produced.

Notes: The challenge in this case is to make sure you are included in all committee matters, but not alienate anyone you are going to have to work with. Probably the best way to handle it, is to approach each member of the team individually and frankly explain that you feel excluded from the process and if they can think of any ways to make you feel more a part of the team. Before you do this, explain your strategy to you manager.

Case #16 -- Conflict of Interest Issue You have just cemented a deal between a $100 million pension fund and Green Company, a large regional money manager. You and your staff put in long hours and a lot of effort to close the deal and are feeling very good about it. You and three of your direct subordinates are having lunch in a fancy restaurant to celebrate a promotion, when the waiter brings you a phone. A senior account executive from Green is on the phone and wants to buy you lunch in gratitude for all your efforts. "I'll leave my credit card number with the restaurant owner, he says, “You and your team have a great time on me."

Notes: The pros are: you and your staff get a free lunch and the account executive feels as if he has thanked you for your efforts. The cons are: it could appear that you have been “bought” to the account executive, your employees, and restaurant personnel. This is a far cry from being entertained by a client or account executive in person. The point of business entertainment is to discuss business, and no business will be discussed at a luncheon like this one. If a client wants to thank you and your staff, he should have sent popcorn, or candy, or a fruit basket to the office for everyone to share. Or your client could arrange for a luncheon for you and your staff, and attend it to thank you in person.

Case #17 -- Customer Confidence Issue You are working the breakfast shift at a fast food restaurant, when a delivery of 13

milk, eggs, and other dairy products arrives. There is a story in the local newspaper about contaminated milk distributed by the dairy that delivers to your restaurant. When you read the article more closely, you discover that there is a problem with only a small portion of the dairy's milk, and the newspaper lists the serial numbers of the containers that are affected. When you point out the article to your manager, he tells you to forget it. "If you think we've got time to go through every carton of milk to check serial numbers, you're crazy," he says. "The article says right here that the chances are minuscule that anyone has a contaminated carton." He also explains that, not only does he not have the workers to check the milk, but also destroying the milk would require him to buy emergency milk supplies at the retail price. So, he tells you to get back to work and forget about the milk. He says, "I don't have the time or the money to worry about such minor details."

Notes: This is one of those cases, where a local manager is behaving in a way that probably would appall a company’s senior management. Food safety is such an important issue to companies -and mistakes in this area are so expensive -- that senior managers would surely advise local supervisors to take the time to check the dates, or throw the milk out and get new supplies. The restaurant chain for which this case was designed absolutely believed in the highest quality standards for food and food safety.

Case #18 -- Corporate Resources Issue You work for Red Co. You and a colleague, Pat Brown, are asked by your manager to attend a weeklong conference in Los Angeles. At least 25 other employees from Red Co. are attending, as well as many customers and competitors from other institutions. At the conference, you attend every session and see many of the Red Co. people, but you never run into Pat. Although you have left several phone messages for her, her schedule does not appear to allow room for a meeting. However, when you get back to the office, the department secretary, who is coordinating expense reports, mentions to you that your dinner in L.A. must have been quite the affair. When you ask, "What dinner?," she describes a dinner with 20 customers and Red Co. employees that Pat paid for at a posh L.A. restaurant. When you explain that you did not attend, she shows you the expense report with your name listed as one of the attendees.

Notes: Your colleague's mistake could be just that -- a mistake -- or she could be involved in some kind of fraud. Probably the best move is to ask her for an explanation. Did she know that you were not at the dinner? Depending on her answer, you can determine what your next move should be. If it appears that she did make an honest mistake, you could ask her to make sure that your name is off the report and you might want to just mention it to your manager as insurance. If you think the whole thing is a fraud, you might want to report it to your manager, or even to your 14

company's audit department. The auditors can frequently check the veracity of expense reports, without anyone ever knowing it is being done and without any damage to reputations.

Homework Assignments: Assignment #1 – Interview Have students interview their parents or other individuals they may know, who are over the age of fifty and would remember what looking for their first job was like before anti-discrimination legislation was in place. How have the workplace and hiring practices changed as a result?

Assignment #2 – Case Analysis Any of the cases used in this chapter can be used as homework assignments. Students can be asked to submit a 2 – 3 page paper, where they address some or all of the following: identify the stakeholders and the ethical issue; describe possible actions and the consequences of each action; describe how actions would be influenced by looking through various theoretical lenses (consequentialist, deontological, virtue ethics); and decide how they personally would handle the situation and explain why.

Additional Resources 1. Giving Voice to Values Dr. Mary Gentile, formerly with the Aspen Institute, now with Babson College, designed a groundbreaking program on ethics called “Giving Voice to Values.” The entire curriculum is available free on the Babson College website. All you need to do is register as a user. Here is a link to the program website: http://www3.babson.edu/babson2ndgen/GVV/default.cfm You will find cases, teaching tools, assignments, etc. We urge you to explore this website and incorporate this approach into your teaching.

2. Aspen Institute The Aspen Institute has publications and cases that you might find useful: http://www.aspeninstitute.org/ 3. Case Place Case Place also contains teaching materials, cases, and teaching tools: http://www.caseplace.org/ 4. Institute for Global Ethics 15

The Institute for Global Ethics has interesting tools and perspectives posted on its website. In addition, it has also posted a series of interesting cases that can be used as in-class exercises or as homework assignments. Click on ”Dilemmas” on the organization’s website: http://www.globalethics.org/ 5. Videos: “Crash” and “The Insider”

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Crash, starring Don Cheadle, Matt Dillon, and Sandra Bullock. This is an excellent vehicle for a discussion on bias. It is very fast-paced and nothing is what it seems.

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The Insider, starring Russell Crowe and Al Pacino. This is an excellent film. You can use selected clips as a springboard for discussing whistle blowing and its risks. There are many subtexts to the movie, including CBS’ social responsibility (not just Brown & Williamson). Jeffrey Wigand’s website also provides lots of great information and instructional materials, including videos you can use in class, such as his 60 Minutes interview, and other information about his situation and his current activities. It is helpful for students to see that there is life after whistle blowing. See www.JeffreyWigand.com.

Chapter 5 Ethics as Organizational Culture Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. Organizational Ethics as Culture A. What is Culture?

B. Strong vs. Weak Cultures C. How Culture Influences Behavior: Socialization and Internalization III. Ethical Culture: A Multisystem Framework A. Alignment of Ethical Culture Systems IV. Ethical Leadership A. Executive Leaders Create Culture B. Leaders Maintain or Change Organizational Culture V. Other Formal Cultural Systems A. Selection Systems B. Values and Mission Statements C. Policies and Codes D. Orientation and Training Programs E. Performance Management Systems F. Organizational Authority Structure G. Decision-Making Processes VI. Informal Cultural Systems A. Role Models and Heroes B. Norms: “The Way We Do Things Around Here” C. Rituals 1

D. Myths and Stories E. Language VII.

Organizational Climates: Fairness, Benevolence, Self-Interest, Principles

VIII.

Developing and Changing the Ethical Culture

A. How an Ethical Culture Can Become an Unethical Culture B. Becoming a More Ethical Culture IX. A Cultural Approach to Changing Organizational Ethics A. Audit of the Ethical Culture B. A Cultural Systems View C. A Long-Term View D. Assumptions about People E. Diagnosis: The Ethical Culture Audit F. Ethical Culture Change Intervention X. The Ethics of Managing Organizational Ethics XI. Conclusion XII.

Discussion Questions

XIII.

Cases (Texaco, TAP Pharmaceuticals)

Teaching Notes - Discussion Questions Note to Instructor: The discussion questions in this chapter all assume that students have had significant work experience to draw upon in conducting their own “ethical culture audit.” .

If this is not the case, you have several options. One approach that has worked well for us is to divide students into groups, in which at least some of the members have significant work experience. The students talk about their experiences and choose an organization to focus on.

The individual student who worked for that organization becomes the information source and "teacher" for the other students who ask questions. The groups can then be asked to present their findings to the rest of the class.

If you are teaching a group with little or no work experience (e.g., undergraduates), you can assign them to interview someone they know (parents, neighbors, relatives, coaches). This works especially well if the assignment is due after a holiday (Thanksgiving, Spring Break), when students are likely to take a trip home and have the opportunity to interview a family member.

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Remind students that it is okay to focus on an organization that they perceive to be highly ethical or unethical. It makes for an exciting class when these are contrasted. Assuming that you will get examples of both, it is also helpful to build here on discussions from Chapter 1. Ask which type of organization individuals preferred to work for and why. It soon becomes clear that students have been inspired by companies with ethical cultures and repelled by those with unethical cultures.

1. Does your organization address ethical issues in a formal, systematic way? If so, is it a cookie cutter, one-size-fits-all approach, or has the organization customized an ethical culture to match its unique needs?

Probes to Stimulate Discussion •

“What does your organization do, if anything, to support ethical conduct?"

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“How do you know if the approach is cookie cutter or customized?"

2. To the best of your ability, use the questions in Tables 5.1 and 5.2 to conduct an ethics audit of the formal and informal systems in your organization.

Instructors: Our students have had no difficulty answering these questions, assuming that they have work experience (as discussed above).

3. Having conducted the ethics audit, identify the formal and informal systems that are in need of attention. Where is the culture out of alignment? Design a change program to address weaknesses and to align formal and informal systems into a strong ethical culture Instructors: Remind students that they need to look beyond individual systems to ensure consistency and "alignment" among systems. Culture change programs take years to implement.

An evaluation plan should be incorporated in the program.

4. How would you change the culture audit questions, if you were planning to use them to conduct an ethics culture audit of a firm you were considering joining?

Similar questions can be used, but they can also be altered to fit the person to whom such questions are to be directed. Applicants can probably learn the most by asking their future peers questions about how things are really done in the organization and about the informal cultural systems. One way to get at these questions is to ask the individual to tell stories about their organizational experiences. Can they tell a story about how integrity has been emphasized by executives and supervisors? About a time when business was turned down because of concerns about ethics? About a time when someone was dismissed for unethical conduct? About who gets ahead and how?

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Applicants can also ask questions about the formal systems and they can direct these to a future supervisor, someone in human resources, or both. For example, ask to see the ethics code and ask about the systems that surround it. How does one report an ethical concern and to whom does one report it? How well does the organization respond and follow up? Ask to see the performance management materials and see if issues such as integrity are incorporated. Are employees held accountable for behaving in ways that are consistent with ethical values, or is only bottom line performance rewarded?

Consider nonverbal reactions as well as verbal responses to such questions. If the respondent seems comfortable answering questions about the ethical culture in the organization, and has concrete stories to share, that is a very good sign. If not, beware.

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In-Class Exercises Case: Culture Change at Texaco Case-based Questions and Answers 1. Identify the ethical culture problem at Texaco in the mid-1990s.

Possible Answer Multiple systems supported racism and discrimination against minorities, including lower pay and racist language.

2. Based on the facts in the case and what you have learned in Chapter 5, evaluate the culture change effort that is underway. What cultural systems have been targeted in the cultural change effort? What systems are missing, if any? Does the culture appear to be in alignment? Misalignment? What else might management do that they have not already done to make the culture change successful?

Possible Answer Perhaps most important is CEO commitment to change. The CEO made a commitment to diversity throughout the organization and showed he meant it, by hiring a number of minority executives. He targeted multiple systems including selection, rules/policies, reward systems, and decision processes. New recruiting systems were set up to employ minorities at every level. Women and minorities were included on human resources committees to make sure that their perspectives were heard. The company even established scholarships to help ensure a pool of minority hires for the future, and set up leadership development programs to help minorities advance within the firm. Systems were put in place for reporting problems and filing grievances. Perhaps most important, Texaco Chairman Peter Bijur tied managers’ performance appraisal and compensation to their commitment to implementing the new initiatives. From what we know, at least the formal systems seem to be aligned to support the change. We know less about the informal systems and those will be key to long-term success. We also have no information about the new CEO and his commitment to sustaining these changes.

3. How long might such a culture change take?

Possible Answer Such culture change efforts generally take years – as many as 6-15 years!

Case: An Unethical Culture in Need of Change - TAP Pharmaceuticals 5

Case-based Questions and Answers 1. Analyze the ethical culture at TAP. Does the culture appear to be in alignment?

Misalignment?

Possible Answer Based on what we are told in the case, this appears to be a culture perfectly aligned to support unethical conduct. The reward system focused only on the bottom line. Leadership did not support attempts to change the reward system. Informal norms supported illegal conduct, such as bribing physicians. There is no language and there are no systems in place to encourage ethical conduct (selection systems, rules/policies or codes, etc.). The legal counsel is thought of as the “sales prevention” department, rather than as a source to help everyone keep their conduct within the law.

2. Based on the facts in the case and what you have learned in Chapter 5, evaluate the culture change effort that Douglas Durand undertook. What cultural systems did he target in the cultural change effort? What systems were missing, if any?

Possible Answer After attempts at simple persuasion failed, he focused his change attempt on the reward system, arguably the most important one. So, he did the right thing. And for a short time, the change had the intended effect, because people do respond to rewards. But, (and this is key) senior management overturned his efforts. So, senior leadership support, essential to any culture change effort, was clearly missing. All other systems that we know about were aligned to support unethical conduct. So, his attempts were probably doomed from the start.

He also attempted to change the informal norms, by appealing to concerns about physicians’ trust, but was met with “rolled eyes.”

3. Why did his cultural change effort fail? What would it take for it to succeed?

Possible Answer His culture change effort failed, because he did not have the authority, or the support from those who did, for the change effort. As a result, he was able to target change in isolated cultural systems, but not throughout the culture as a whole.

An important message from this case is that culture change is very difficult. Even someone at a relatively high VP level, will not be able to change culture without substantial support from senior management for a company-wide change effort.

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Homework Assignment Assignment #1: Interview an Ethical Leader If you did not use this assignment in Chapter 1 (Interview someone you respect), you can use it now. This assignment involves students identifying and interviewing an ethical leader they know. It can be anyone they feel demonstrates integrity: a parent or another relative, a teacher, a manager, a neighbor, a scout leader, a religious leader – it has to be someone they personally know. The interview should be 20 – 30 minutes and students should ask a series of questions that they are then prepared to discuss in class: 1. How important do you think ethical leadership is on a scale of 1 to 10 (1 being not important; 10 being vital)? Why? 2. In your experience, where do most people learn about ethics?

3. Who had the most important influence on the formation of your ethical character?

4. Describe a situation that you feel really tested your ethics. Is there anything you wish you had done differently?

5. In your experience, what factors can make it difficult for people to make ethical decisions?

6. How important do you think it is for someone to be vocal or open about their ethical standards?

7. Should people be rewarded for being ethical?

Students should also provide information about the interviewee, including their occupation, their relationship to the student, how long the student has known the interviewee, and what made the student select the interviewee.

Assignment #2: Goldman Sachs and Ethical Culture Another interesting assignment could involve students researching Goldman Sachs and the ethical culture of that firm, which has been under such a microscope as a result of the 2008 financial debacle and the recession that followed. You could refer students to this blog entry on the New York Times website: “Goldman Sachs and the Trader Culture” http://opinionator.blogs.nytimes.com/2010/04/29/goldman-still-greedy-no-longer-patient/?hp

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Students can do additional research on Goldman and the debacle, and write a paper or be ready to discuss in class, how Goldman’s culture evolved and what effect this has had on the company, their clients, and the public.

Additional Resources: 1. Video: The Danish Solution One of the most remarkable stories of ethical conduct involves the entire country of Denmark.

During World War II, when European Jews were being rounded up and murdered by the millions, the Danish people saved almost all of the Jews in Denmark by defying Nazi orders to turn over Jews. Danes took their Jewish neighbors into their homes and through an elaborate system of Dane helping Dane, managed to smuggle almost every Jew out of Denmark to neutral Sweden. Then Danes tended Jewish property until the Jews returned at the end of the War. There are two movies that tell this unbelievable story: 1. Act of Faith, available through Nostalgia Family Video – 30 minutes, inexpensive, old and grainy – but authentic and tells the story effectively (www.nostalgiafamilyvideo.com) 2. The Danish Solution – 58 minutes, color, narrated by Garrison Keillor, expensive, but beautifully made film. Available through: www.filmakers.com Probes to Stimulate Discussion: • Why did the Danish people behave almost as one in this effort?

• How were the Danes able do this and not people in other European countries?

• Could an effort like this ever happen today? Why? Why not?

• What can this effort tell us about ethical leadership?

• What can organizations learn from this situation?

More information about the Danish rescue of Jews from A Conspiracy of Decency, by Emmy E. Werner, 2002, Westview Press.

What factors contributed to the success of the effort?

• Lack of anti-Semitism • Feelings/attitudes of civic equality for all citizens in Danish culture • Assimilations of Jews into Danish society • Participation in rescue efforts was endorsed by a wide range of organizations: professional, business, social • Relative leniency on the part of the German commanders in Denmark • Decent people in positions of authority (Danish royalty, police, doctors, teachers, etc.)

Rescuers tended to be one of four types: • Type #1 – Had strong and cohesive family bonds; reported being closely attached to their parents and valued caring for others; dependability, self-reliance, and independent judgment. These people tended to have a strong religious commitment, be “good” neighbors, and have many close friends.

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• •

•

Type #2 – Had consistently close contacts with Jews, and tended to have close Jewish ties – friends, living arrangements, relatives, etc., and were extremely disturbed by antiSemitic propaganda.

Type #3 – Had a strong sense of responsibility for the welfare and improvement of society as a whole. While not necessarily close to family, they credited a “parent” figure (could well have been a parent) with encouraging them to be independent, self-reliant, and to practice helpfulness and caring toward people who came from different classes and religions.

Type #4 – Were concerned more abstractly with egalitarianism. They derived their sense of responsibility from their identification with humanity as a whole and their empathy for people who were suffering. They were moved by other people’s pain and felt a strong responsibility to help them.

Motives of rescuers: • Helping Jews was an affirmation of the value system they were brought up with: “to love your neighbor as yourself” (52%) • Great empathy and distress for those who were persecuted and suffering (37%) • Principles alone (11%) Principles identified by rescuers, as having been learned when they were children from a parent, parent surrogate, or teacher: 1. Human beings are basically the same and differences between them are to be respected.

2. The world is not divided into “them” and “us,” but we all have a common bond of humanity.

3. We should have a clear sense of right and wrong and we should stand up for our beliefs.

4. We should practice kindness and compassion toward others.

5. We should be independent and self-sufficient and never blindly follow the crowd.

This story has the potential to be used successfully in multiple chapters. Here, one could discuss how an entire national culture supported such courageous action.

2. Video: Enron: The Smartest Guys in the Room The first 30 minutes of this video provide an excellent description and analysis of how organizational culture can drive ethical behavior – or, in the case of Enron, unethical behavior.

We strongly urge you to show the entire film in class. It is a classic and an excellent overview of why ethics in organizations is critical.

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Chapter 6 Managing Ethics and Legal Compliance Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. Structuring Ethics Management A. Making Ethics Comprehensive and Holistic B. Managing Ethics: The Corporate Ethics Office C. Ethics and Compliance Officers D. The Ethics Infrastructure E. The Corporate Ethics Committee III. Communicating Ethics A. Basic Communication Principles B. Evaluating the Current State of Ethics Communication C. Multiple Communication Channels for Formal Communication D. Interactive Approaches to Communication at USAA E. Mission or Values Statements F. Organizational Policy G. Codes of Conduct H. Communicating Senior Management Commitment to Ethics I. Formal and Informal Systems to Resolve Questions and Report Ethical Concerns IV. Using the Reward System to Reinforce the Ethics Message V. Evaluating the Ethics Program A. Surveys VI. Values or Compliance Approaches VII.

Globalizing an Ethics Program

VIII.

Conclusion

IX. Discussion Questions X. Short Case XI. Case: Improving Ethical Culture at Georgia-Pacific

Teaching Notes - Discussion Questions 1. Think about the impact of the U.S. Sentencing Guidelines. Would organizations have tried to drive ethical behavior among employees without government encouragement?

The Sentencing Guidelines clearly motivated organizations to develop the formal systems prescribed in the guidelines. There were almost no formal “ethics offices” prior to the early 1990s, except perhaps in the Defense Industry as a result of the Defense Industry Initiative, which inspired the Sentencing Guidelines.

Probes to Stimulate Discussion: •

Do you think that encouraging ethical behavior among employees is at all related to government regulations in general?

•

What might the attitude be toward ethics of a company that is being basically “forced” to adapt these measures by the government?

2. After reading about how a number of large companies try to encourage ethical behavior, what stands out? What approach is most unique? Which one do you think is most effective?

Which one would make the biggest impression on you, if you were an employee?

3. Imagine that it is your responsibility to select an ethics officer for your organization. What qualities, background, and experience would you look for? Would you ever be interested in such a position? Why or why not?

Generally, insiders who have held line management positions, who are thought to be fair, trustworthy, and credible, and who have a good relationship with the top management team, are thought to make the best ethics officers. The General Counsel may not be the best choice, because a lawyer is trained to, first and foremost, protect the company. Employees may not feel that they can go to this person with a problem, especially if it involves misconduct at higher levels. An ethics officer needs to have an internal as well as an external focus. She or he must be concerned about fairness to employees and customers, as well as protecting the organization from outside attack.

Probes to Stimulate Discussion

•

"What sorts of ethical issues will an ethics officer in your organization have to decide or resolve?"

•

"Is there technical knowledge required? How could a non-technical person acquire the knowledge necessary to resolve issues?"

•

"Is a background in the law essential?"

•

"Could a young person -- under age 35 -- do the job, or would employees be more comfortable with an older person?"

•

"What kind of experience within your company would make the most well-rounded ethics officer?"

•

"How could outsider gain credibility within your organization?"

•

"Is there anything which could bar an insider from the job of ethics officer?"

4. What are the advantages of having an ethics office or officer report to a company's chief executive officer, the legal department, human resources or audit? What are the disadvantages?

The ethics officer should report to the CEO or to the Board. Reporting to a single department suggests that the ethics office is strictly about obeying the law, or auditing for compliance. In fact, ethics management should involve all of those departments and should be part of the overall organizational culture. That is best accomplished, if the top management team is directly involved and takes ethics as their responsibility.

Probes to Stimulate Discussion •

"Think about the mission of all of the departments listed -- legal, audit, human resources, the CEO -- what are the risks associated with raising an issue with each of the departments?"

•

"What advice could each provide?"

•

"What protection could each provide?"

5. Think about an organization where you have worked. What kinds of ethical dilemmas are unique to that organization? To that industry? What might be the best way to prepare employees to deal with those issues?

Probes to Stimulate Discussion • •

"Is your industry regulated? By whom?"

"What do the regulators think are the biggest problems in your industry?"

• •

"Is there something in your corporate culture that could put your company at increased risk for an ethical problem?"

"Is there any aspect of your company or industry that has been criticized by the media or the public?"

6. Think about all of the communication opportunities provided by social media. How could an organization use social media like Facebook, Twitter and the like, to promote ethical behavior and communicate the organization’s values? What are the advantages and dangers of those media?

7. Which of the following exist in the organization? Mission or values statement, policy manual, code of conduct, ethics training (who conducts it), hotline? Are they consistent and credible?

Probes to Stimulate Discussion •

"Do all employees receive copies of the policy manual, values or mission statement, conduct code?"

•

"Does everyone receive ethics training?"

•

"Have you ever read the policy manual or conduct code, or other materials relating to ethics?"

•

"Is your company saying one thing in its printed materials and doing another?"

•

"Who conducts ethics training in your organization? Are they -- to the best of your knowledge -- ethical?"

•

"Who answers the company hotline? Who resolves the issues raised on the hotline? Is the hotline confidential?"

8. Is senior management committed to ethics? How do you know? What could they do differently or better?

Probes to Stimulate Discussion •

"Do senior managers ever write articles on ethics for company communications (newsletters or magazines)?"

•

"Do they ever reference ethical behavior in speeches or orientations?"

•

"Is any senior executive "known" for his or her integrity?"

•

"Is there a senior executive who is especially trusted by employees?"

9. Are leaders at all levels held accountable for their ethical conduct? If so, how? If not, why not? What would you recommend?

Probes to Stimulate Discussion •

"Can you think of any employees within your organization who have been fired or disciplined for their behavior or for unethical conduct? How did you find out about it?"

•

"How long after the problem occurred did it take for them to be disciplined? Who actually did the firing?”

•

"How did other employees interpret the discipline -- what messages did it send?"

•

"Has anyone been commended for his or her high ethical conduct? What form did the praise or commendation take? How did other employees interpret it -- what messages did it send?"

10. What recommendations would you make for handling frivolous calls to the hotline?

There may be some frivolous calls. But, our experience suggests that these are rare. The best thing to do is to handle each call as if it were serious, because most of them are serious requests for information or serious reports of violations. Generally, if an employee calls, the issue is not frivolous to him or her, even if it seems so to you. The focus should be on fairness to all concerned, when an accusation is being made.

The best ethics programs consider any call to be relevant. In other words, if the issue seems to be a human resource issue, the person called the ethics office for a reason. To that person, the human resource issue (usually a fairness concern) is an ethical issue. The ethics office needs to take responsibility for handling the call, even if it is in conjunction with HR professionals.

Probes to Stimulate Discussion •

"How would you define a frivolous call?"

•

"Are problems relating to human resource issues -- arguments with supervisors, for example -- frivolous?"

•

"Could employees calling with frivolous complaints be penalized? Should they be? Should their managers be notified?"

11. Does the organization evaluate its ethics initiatives? How? If not, why not?

Probes to Stimulate Discussion

•

"Have you ever received an employee survey that has tried to assess your attitudes toward ethical issues?"

•

"Have you ever participated in employee focus groups that have involved ethics?"

•

"Have you ever read about any ethics evaluation efforts in your company newsletter or magazine?"

•

"Have your company's senior executives ever distributed reports on how the organization's ethics program is doing?"

12. Would you characterize the ethics efforts in this organization as taking a values, compliance, or combination approach? Is it effective? Recommend improvements.

Probes to Stimulate Discussion •

"Has senior management spoken publicly about ethics initiatives?"

•

"Have they issued any printed material on ethics?"

•

"Is the program receiving senior attention?"

•

"Do senior executives and middle managers participate in ethics training programs?"

•

"Are only the company's lawyers involved in the ethics program?"

13. How would you raise an ethical concern in this organization? List all of the resources available to you. Which ones would you be likely to use? Why or why not?

Probes to Stimulate Discussion •

"How would the following people/departments react, if you were to raise an ethics issue: your manager, your manager's manager, the legal department, the human resources department, the audit department, the ethics officer/department, the chief financial officer, the head of public relations/communications, the head of your division/department, the president of your organization, the CEO, the board of directors?"

•

"If you had to go outside of your chain of command, who would you approach and why?"

•

"Under what circumstances would you approach any of the above?"

14. Imagine that you are the CEO of a small manufacturing company. An employee has dumped toxic waste in a nearby stream. Who would you call into your office and what would

you want to know? Develop a short-term and long-term action plan for dealing with the crisis.

Who would you communicate with and why?

Obviously, you would need to talk with the employee and decide how to handle the issue as a personnel issue. Was it an accident or was it intentional? Your response in terms of dealing with the employee will depend on what you learn. But, first you would need quick help from anyone in the organization with expertise in environmental issues, especially the nature of the toxic waste, and how dangerous it is. You should immediately call your local and/or state environmental protection agency for help. Your goal should be to try to prevent health problems in the community and work with environmental experts to do so. You may also want to speak with the press openly to avoid speculation and unnecessary fear.

Probes to Stimulate Discussion •

"Who are the stakeholders in this situation?"

•

"Who on your staff (which kind of job) could you count on to handle each stakeholder group?”

•

"Does your strategy for coping with the disaster address the needs of all stakeholders?”

•

"Does your plan include being forthright, accepting responsibility, and making some sort of restitution to effected stakeholders?"

15. Evaluate the ethics program at your organization from the perspective of “fit.” Has the ethics program been designed to “fit” the organization’s overall culture? If so, how? If not, what could be done to make the program a better fit?

•

“What are the three most key values in your organization?”

•

“Are workers rewarded for exhibiting those values?”

•

“Is your organization’s ethics program consistent with what your company rewards?”

16. Think about your own positive, memorable, “peak experiences,” when it comes to ethics.

Be prepared to discuss those with others in your class and to think about the conditions that would make it possible for such experiences to happen more regularly at work. Or, if you do not have much work experience yourself, interview someone who has and ask these questions.

Be prepared to report back what you learned from the interview.

In-Class Exercises Case #1 – What is Wrong with This Picture?

You are a management consultant, who has been asked by Green Company to help design an ethics communication and training program for all Green Company employees. Your meetings to date have been with the head of human resources, and your contract with the company has been negotiated with him.

Once the papers have been signed, you begin your research and are quickly stymied by Green's corporate counsel. He says that you will not be allowed to ask employees about ethical dilemmas that have occurred at Green. He specifically asks that you get your information from other sources, such as press accounts of problems in the industry, or from other organizations with which you have worked. In addition, the head of human resources has told you that you will be unable to meet the three most senior executives, because they are busy negotiating a large acquisition. You will have access to other high-level managers, who can tell you what they think the seniors want. You are instructed to write a code of conduct for the company and a mission statement, and prepare presentations on corporate expectations and values for the seniors to give to employees sometime next month. .

Case-Based Questions and Possible Answers: 1. Based on what you know about developing ethical cultures and programs, identify the problems presented by this case.

There are three big problems. First, you are being denied access to employees and, therefore, the real ethical dilemmas in the company. As a result, it will be next to impossible for you to develop a program that addresses real issues. While you will be able to develop some materials, based on press accounts and publicly available documents about the industry, nothing you develop will be specific to the organization. The second problem is the unavailability of senior management. If this issue is not important enough for senior managers to focus on, then there will be little commitment from the executive ranks for whatever you develop. A third problem involves you, as an outsider, developing a corporate mission statement and code of conduct. It would be difficult enough for an insider to accomplish that; it will be almost impossible for an outsider to write something that reflects an intimate knowledge of the organization. And that kind of intimate knowledge of organizations is the only way a statement or code can ring true with employees.

2. Why do you think the corporate counsel has responded in this way? What will be your response to him, if any?

The corporate counsel is being paranoid about disclosure of company information ("dirty linen") to an outsider. Of course, that issue could be circumvented by having you sign a nondisclosure agreement. However, some company lawyers feel that it is still risky to have an outsider privy to company "secrets." What you could do, is inform the corporate counsel that you are not interested in what has happened. You are only interested in what could happen. That kind of response can allay the fears of some lawyers.

3. As a consultant, what are your ethical obligations, if any?

Your obligations are to help an organization and do no harm. Fiddling around with a company's ethics communications and training can do major damage, if you cannot develop a realistic program and if you do not have senior management commitment. The situation described in the case is a very dangerous one, and the consultant should proceed with great caution.

4. How will you proceed?

Many consultants would find a way to develop something in a situation like the one described in this case. However, if the corporate counsel remains adamant that you receive no information from employees, and if you are unable to meet with senior management, and if you are to receive no help from the inside with a mission statement and code of conduct, you should probably resign the account. The task is impossible. And while you may be doing management a shortterm favor by sticking your finger in the ethics dike, you will be doing them (and all employees) a long-term disservice by developing something without their help. It is one almost sure way to destroy a company's credibility.

Case #2 – Georgia-Pacific 1. What behavior do you think a system such as Market-Based Management might drive?

Koch Industries, the parent of Georgia-Pacific, created Market-Based Management (MBM), as a holistic approach to management that enables organizations to succeed long term, by applying the same principles inside the company that allow free societies to prosper. MBM, in turn, requires a culture centered on specific attributes. These attributes set the standards for evaluating policies, practices, and conduct; establishing norms of behavior; and building the shared values that guide individual actions. In short, this approach drives long-term thinking and ethical behavior throughout the organization.

2. The case describes how a number of senior managers were dismissed after the acquisition. How could employees interpret this? Does this help drive ethical culture?

There is perhaps nothing more dramatic than seeing employees leave, to drive home the idea that the company is taking ethics and integrity (or other values) very seriously. This is really where the rubber meets the road.

3. What is more challenging to fix: a knowledge gap or a values gap?

Traditionally, a values gap is much more difficult to address. You can always teach someone knowledge – it is a rational, cognitive exercise. But values are deeply held beliefs that drive behavior. That is much more difficult to tackle and the reason why so many companies try to hire people, whose values align with the company values.

4. What could a hiring manager ask a candidate, to determine if there is good values fit between the organization and the candidate?

A hiring manager could use what is known as “behavioral event” interview questions, to determine values fit. Behavioral event questions are generally framed like this: “Tell me about a time…when you encountered a difficult dilemma. What happened and what did you do?” The theory behind this type of interrogation is that the best predictor of future performance is past

behavior. So, if an interviewer asks questions that encourage a candidate to describe a situation and how he/she reacted to it, the interviewer should be able to determine the candidate’s values and make the judgment, as to whether or not the candidate’s values and the organization’s values are aligned. (Georgia-Pacific (and many other organizations) calls these SBOs – Situations, Behaviors, and Outcomes) 5. What do you think are the strongest benefits of this approach?

It is an excellent way to hire people who have values that align with the organization’s – and creates a strong culture as a result.

Additional Resources: 1. Ask a Local Company for Materials or a Guest Speaker Many companies are willing to share the materials they have developed to increase their employees' awareness of ethical issues. You or your students can contact various corporations and request copies of their mission/values statements, policy manuals, and codes of conduct. It is an interesting exercise to compare statements, codes, and manuals from various companies and look for clues about what is important to each organization, what ethical problems they may be anticipating, etc.

Another idea is to ask corporate representatives to talk about their own highly ethical organization. Students will believe them more than they will believe you. They can demonstrate how their organizations train employees in ethics and compliance, and how they do all of the other things necessary to create a strongly aligned ethical culture. A corporate representative discussing or demonstrating the program is very valuable for students.

2. DVD – Ethics: The Fabric of Business The Society for Human Resources Management has produced a DVD entitled "Ethics, The Fabric of Business: A Case Study of Lockheed Martin Corporation," that focuses on Lockheed Martin, one of our profiled organizations. Follow this link for more information: http://www.shrm.org/about/foundation/products/Pages/EthicsDVD.aspx

3. Online Video: The Surprising Truth about What Motivates Us This online video is ingenious and entertaining – an artist illustrates the 10-minute video, as the narrator is talking. And it describes research that shows that higher rewards only incentivize certain kinds of work. When cognitive creativity or productivity is required, high rewards actually deter high performance. People who are doing cognitive work respond best to autonomy, mastery, and purpose. Great video that could be used in a number of chapters! http://www.ritholtz.com/blog/2010/05/the-surprising-truth-about-what-motivates-us/

Chapter 7 Managing for Ethical Conduct Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. In Business, Ethics Is about Behavior A. Practical Advice for Managers: Ethical Behavior III. Our Multiple Ethical Selves A. The Kenneth Lay Example B. The Dennis Levine Example C. Practical Advice for Managers’ Multiple Ethical Selves IV. Rewards and Discipline A. People Do What is Rewarded and Avoid Doing What is Punished B. People Will Go the Extra Mile to Achieve Goals Set by Managers C. How Goals Combined with Rewards Can Encourage Unethical Behavior D. Practical Advice for Managers: Goals, Rewards, and Discipline E. Recognize the Power of Indirect Rewards and Punishments F. Can Managers Really Reward Ethical Behavior?

G. What about the Role of Discipline?

H. Practical Advice for Managers: Discipline V. “Everyone’s Doing It” A. People Follow Group Norms B. Rationalizing Unethical Behavior C. Practical Advice for Managers: Group Norms VI. People Fulfill Assigned Roles A. The Zimbardo Prison Experiment 1

B. Roles at Work C. Conflicting Roles can Lead to Unethical Behavior D. Roles Can Also Support Ethical Behavior E. Practical Advice for Managers: Roles VII.

People Do What They are Told

A. The Milgram Experiments B. Obedience to Authority at Work C. Practical Advice for Managers: Obedience to Authority VIII.

Responsibility Is Diffused in Organizations

A. “Don’t Worry – We’re Taking Care of Everything” B. Diffusing Responsibility in Groups C. Diffusing Responsibility by Dividing Responsibility D. Diffusing Responsibility by Creating Psychological Distance E. Practical Advice for Managers: Personal Responsibility IX. Conclusion A. Am I Walking My Ethical Talk?

X. Discussion Questions XI. Case: Sears, Roebuck and Co.: The Auto Center Scandal XII.

Short Case

Teaching Notes - Discussion Questions 1. Have you ever been in a situation, especially a work situation, where the norms supported a particular behavior, ethical or unethical, where you felt pressured to go along? Explain.

Undergraduate students have limited work experience. But, they will often cite examples from summer jobs, such as working in a fast food restaurant, where the rules said you could not eat the food, but everyone did. Or, they may have had a job where they worked hard at first, but after being charged with "rate-busting," slowed down to match the work levels of regular workers.

Graduate students with work experience will have lots of examples - some good and some bad.

It is good to solicit both. That way the message is clear that organizations and managers vary and perhaps one should attempt to learn about the ethical values of an organization or manager before accepting a job.

Probes to Stimulate Discussion 2

With examples of pressure toward unethical behavior, ask: • "What was the nature of the pressure? Why did you feel you should go along? What options did you think you had, if you did not go along?"

With examples of pressure toward ethical behavior, ask: • "How did you feel about the pressure?" Often the reaction is quite positive. Rather than pressure, they may experience it as "support" for doing the right thing. Discuss the difference.

•

"Do you think it is okay to pressure people to do 'the right thing,' such as supporting a blood drive or the United Way?"

2. Have you ever been in a situation where the rewards explicitly or implicitly supported unethical conduct? Explain.

Again, the discussion will depend upon examples generated by the students. The most frequent examples will probably be the sales job that rewards on commission and provides no guidance regarding how the goal is reached.

3. Can you think of situations in which unethical behavior was dealt with appropriately (punished justly) or inappropriately? What were the reactions of others in the organization?

Generally, students will speak positively about situations where "bad guys" were punished, and negatively about situations where people "got away with" misconduct. This reaction supports the idea that people want to work in “just” environments, where reasonable rules are enforced.

Probes to Stimulate Discussion •

"How would you feel if someone cheated on a test and was not disciplined?"

•

“Would you feel differently if the test was curved?”

This is the time to discuss the important social effects of rewards and punishments. As a manager, you need to think about not only the person you are rewarding or punishing, but also the reactions of others who are aware of the situation. They will judge your behavior primarily in terms of its fairness to everyone. The situation with cheating is similar to a work situation, where there is a fixed pie of benefits (e.g., bonus money) and one salesperson who is using unethical sales tactics is likely to get the money, while the honest salespeople will be left with nothing (but their integrity).

4. What do you think would be appropriate punishment for those found guilty of assault or indecent exposure in the Tailhook situation? Why? This question will probably generate a lively discussion. You may want to see, if the answers differ for females versus males and those with military experience versus those without military 3

experience. One point that is important to make, however, is that management of the Navy needs to take responsibility for whatever role it played in allowing this behavior to continue year after year. It was obviously considered a "rewarding" experience for many of the men involved, and we know that people do what is rewarded. So, it might be most appropriate to discipline individuals at the highest levels, who were responsible for tacitly condoning the behavior.

On Nov. 14, 1994, Newsweek ran an article entitled "The Military Fights the Gender Wars," p. 35. [Source (either embedded in text, or footnoted): Morganthau, Tom. “The Military Fights the Gender Wars,” Newsweek, Nov. 14, 1994, p. 35.] It discussed sex-related scandals in the Navy and at West Point.

At West Point, women cadets complained that they were fondled by army football players during an October pep rally. Citing that they had learned the lesson of Tailhook, Lt. Gen. Howard Graves (superintendent of the academy) notified the Pentagon, launched an immediate investigation, and talked to the New York Times openly.

Paula Coughlin, the Tailhook Navy lieutenant, won a $6.7 million jury award from the Las Vegas hotel where the convention occurred.

In 1996, Newsweek reported that, in the four years since Tailhook, the Navy had received more than 1,000 sexual harassment complaints and more than 3,500 charges of indecent assault.

[Source (either embedded in text, or footnoted): “Anchors Aweigh,” Newsweek, Feb. 5, 1996, http://www.newsweek.com/1996/02/04/anchors-aweigh.html, Access date.]

There have been other sex-related scandals in the military more recently, including students at the Air Force Academy, who claimed that they were raped by fellow students and that school officials either ignored their complaints, or punished the accusers for complaining. Students can be asked to do research to bring the Tailhook discussion up to date. You can also discuss how the military’s experience relates to the experiences of other work organizations with sexual harassment.

Probes to Stimulate Discussion •

"What do the women/men in the class think?"

•

"What do those with military experience think?"

•

"How should punishment be distributed to participants and high ranking officers who did not participate, but tacitly 'allowed' such behavior to occur?"

5. Have you ever felt obligated to do something you felt was wrong, because a person in a position of authority told you to do it?

Discussion related to this question will rely upon students' experience. Expect to hear stories about experience in sales positions, where students are told to be dishonest with customers in order to sell their wares -- telling someone the shoes fit when they do not, or that buying a coat in July is really a good idea!

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6. Think about how you might design work to maximize workers' taking responsibility for the consequences of their actions.

Possible Answers Make employees responsible for a whole, identifiable piece of work. The more it is chopped up into pieces, the less likely they are to be aware of the consequences.

Create opportunities for employees to interact with the people who might be affected by their behavior or decisions.

Both of these answers relate to the job design literature, which suggests that jobs designed along these lines would also be more motivating.

7. Evaluate yourself or a manager you know using the "do you walk your talk" questions above.

Probes to Stimulate Discussion •

“Are these the right questions to ask?”

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“Are there others we should be asking?”

In-Class Exercises Case #1: Sears, Roebuck, and Company: The Auto Center Scandal Case-based Questions and Answers 1. Identify the ethical issues involved in the case from a consequentialist and deontological perspective (refer to Chapter 2).

Deontological approaches seem most useful here. For example, fairness, honesty, and the obligation to provide customers with only needed service, are the most obvious ethical issues in the case.

Consequentialist approaches would point one toward the costs to society of thousands of people paying for unnecessary service. The primary harm seems to be monetary and the loss of trust.

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A virtue ethics approach begs the question, what is the relevant community here?

Mechanics and service advisors are not professionals with established codes to guide their conduct. However, they would probably agree that people of integrity do not lie. And, doing so certainly would not look very good on the front page of the local newspaper.

2. Identify the management issues involved in the case. For example, think about the case in terms of multiple ethical selves, norms, reward systems, diffusion of responsibility, and obedience to authority. What factors contributed the most to the alleged unethical conduct on the part of service advisors and mechanics?

Multiple ethical selves: Most of the people who were dishonest to customers are probably upstanding members of the community, who think of themselves as good, honest people. It is likely that their self-perception did not change because of their behavior at work.

Norms: It seems that dishonesty became the norm in this environment. It became the way things were done.

Roles: Consider making quality an important part of the mechanic and service advisor roles.

Another possibility is to create a new role - quality control person. But, this is not an ideal solution. Why check up after the fact, if you can avoid problems from the start? This case also suggests that there are role conflicts for those who diagnose problems and sell service to customers. These roles should be separate.

Reward System: Clearly the reward system is the biggest problem in this case.

Management has designed a reward system that focuses on ends (quantity, not quality), but not means (honesty with customers). It also rewards people not only for selling more service, but implicitly rewards them for being dishonest. It also punishes those who are honest, if by being honest you will do less repair work. For a company that has prided itself on customer service over the years, this new reward system created problems with consumer trust that take years to rectify. The reward system contributed the most to the unethical conduct. The reward system can be changed to focus goals on quality, customer satisfaction, and/or repeat customers, rather than amount of service sold. A great exercise - have students design this new reward system.

Diffusion of responsibility: Diffusion of responsibility is a factor in this case, especially with the new reward system that maintains commission for mechanics. For example, if a mechanic is the one diagnosing the problem, he/she may list more problems (or bigger problems) than really exist, because of the reward system. But, this is even more possible because he/she might think, "I'm not the one really advising the customer.""I'm just making a list of problems and handing it to the service advisor." So, the responsibility for the bad advice is diffused between the mechanic and the service advisor. And, it is possible for either or both to point to the other as "really responsible." Psychological distance comes into play here as well. If the mechanic never sees the customer, it is probably easier to be dishonest than if he/she has to lie to the customer face-to-face.

Obedience to authority: Nobody was openly telling these people to be dishonest.

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But, in the absence of clear statements, employees will try to figure out what authority figures want them to do. In this case, employees figured out that management wanted them to sell more service at any cost - and they did.

3. How would you evaluate Sears' response to the allegations and the changes they made?

Has Sears resolved its problem? Why or why not?

Brennan's response was weak. He should have apologized and fully accepted management's responsibility for creating a faulty reward system. He should also send a strong message to employees about future expectations.

Some of the ideas that were implemented are okay. For example, commissions based upon customer satisfaction should turn attention to satisfying the customer, rather than selling a certain number of brake jobs. And, shopping audits can provide management with useful information about the kind of service customers are really getting. However, Sears has definitely not resolved the problem. The fact they the company maintained the compensation system for mechanics is a huge problem. As the letter from Chuck Fabbri stated so well, mechanics are frequently the ones who provide the diagnosis. This system encourages them to oversell or recommend more repair work than is needed.

4. What do you think is the impact of the scandal on Sears' reputation for quality and service?

There is no good way to know, but thousands of business school students are studying this case every year through versions published in this book and elsewhere. It might be interesting to conduct a brief survey of students in the class, to find out whether they would take their car to Sears, or what they would advise their parents to do.

It might be interesting to note that, since the scandal, Sears has invested heavily in a corporate ethics program. They even won an award for it. So, they seem to be aware of the importance of ethics and their reputation.

5. Respond to Brennan's comment, "We have to have some way to measure performance."

What can management do to prevent "overselling?" Propose a management plan (including a compensation system) that allows management to measure performance and encourages auto center employees to behave ethically. Be specific.

Certainly, management needs some way to measure performance, but they selected inappropriate ways to do it. Again, any goals or incentives based on sales run the risk of promoting the sale of unnecessary service, or overselling. At the very least, if they insist on sales quotas, they must counterbalance these with strong ethics training, and harsh and enforced penalties for dishonesty.

They certainly should not punish people for being honest.

The company might think about implementing a straight salary system, with bonuses for quality, customer satisfaction (based on surveys), and referrals. Some of these could be team-based, which would encourage mechanics to work together, consult each other for ideas on how to solve problems, etc.

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It would probably also help to have the mechanic meet the customer and talk with him or her about the problem (reducing psychological distance). Midas muffler mechanics work in glassedin shops, so that customers can watch them work. They also bring customers into the shop to show them what is wrong - the hole in the muffler, for example. Obviously, that is easier with mufflers, but it could probably be done with other problems, and would do a lot to inspire trust.

An important part of any new reward system will be to make it clear that any future dishonesty will be harshly disciplined, and then following through.

The current system focuses only on selling more service to current customers. How about looking beyond these customers, to think about ways to bring more customers in? They might consider getting service employees involved in coming up with creative ideas to attract new customers. If they are successful, they should share in the profits. Goals or incentives based on quality, new customers, referrals, or customer satisfaction, focus on satisfying customers.

Service managers and mechanics would then be motivated to satisfy customers over the long term, rather than to make short-term sales.

Sears might also consider implementing some kind of simple code to guide mechanics, like, "Would I recommend this service if this were my mother's car?"

You can have students work in teams to design a reward system. They can present their ideas to the other teams who can play the role of devil’s advocate. Given the reward system, what is the behavior that is rewarded, punished? Hopefully, students will learn what an important management role designing reward systems is.

6. Should anyone be disciplined? If so, who and when? What should the discipline be?

Take care when discussing this question. Students (especially undergraduates) will often want to harshly discipline the "unethical" workers - to make an example of them. But, discipline must be perceived to be fair (by observers and by those punished), if it is going to be effective. So, first, management must take responsibility for its role in tacitly encouraging the unethical behavior through the poorly designed reward system. The best answer here is for management to acknowledge its role, to make clear that things are changing, to change the reward system to one that does not encourage unethical behavior, to state clearly that unethical behavior will be harshly punished in the future, and then to follow through at the first opportunity. Under these circumstances, discipline will be very appropriate and necessary.

7. Think more generally about Sears’s management’s response to the firm’s financial problems.

How else could they have increased auto center sales without providing incentives to employees to sell specific products?

There are many possible responses to this question. They could offer discounts in an attempt to increase volume, improve customer service, so that people are more likely to come back for service when they need it, etc.

An additional resource for the Sears case: 8

Rucci, A.J., S.P. Kirn, andR.T. Quinn. 1998. “The Employee-Customer-Profit Chain at Sears,” Harvard Business Review, 76(1): 82-97. A good teaching note to accompany the case. (Thanks to Stu Youngblood at Texas Christian University for bringing this to our attention).

Case #2: Another Short Case for Discussion 1. What are the ethical issues in this case?

Fairness is a prominent issue in this case. What is the fairest allocation of resources, given the three regions’ size and needs? The fairest approach is to support all three regions, not just Bill’s. The golden rule would certainly support that position, as would Kant’s categorical imperative. Fairness comes up again, when Bill says he will recommend you and your people for every award, AND give you a monetary bonus out of his own pocket. That begins to feel like bribery and undue influence and should be avoided at all costs.

2. What are some reasons why the decision maker in this case might be inclined to go along?

Not go along?

Obedience to authority may come into play here. Bill does represent the largest region and the biggest money maker. Depending upon the company’s values, Bill may have more power than the other regional directors, and that puts pressure on the decision maker in this case. But, the decision maker’s gut should be screaming about the fairness and bribery issues as well, which would make him or her think more than twice about the situation.

3. If you were the decision maker, how would you handle the situation?

This probably depends a lot on the organization’s culture. In some organizations, Bill would be allowed to get away with these shenanigans, because of his region’s financial success. The best approach is to first have a frank conversation with Bill about the situation and your fairness concerns. You can explain that your approach will be to work with each regional director with equal enthusiasm and provide the best service possible to all of them. You also need to be clear that you cannot accept the monetary bonus. If he continues to insist on preferential treatment, you might suggest that you and all of the regional directors have a problem-solving meeting with their manager to discuss the situation. If you take a problem-solving approach, you may be able to come up with a creative solution. For example, if Bill’s area is clearly the most important to the company, maybe you can designate a particular person or persons to work closely with Bill.

The organization might even pay for additional staff. But, whatever you do, it needs to be out in the open and not some side deal.

Would you report the conversation to your manager? Why or why not?

You could certainly solicit advice and support from your manager on this sticky situation. That is what managers are there for. Your manager may have information about Bill and the others that could be helpful in working the situation out. You may also gain insight into what the organization’s stance is likely to be, by talking with your manager.

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Homework Assignment Please note that either of the in-class discussion cases would make excellent homework assignments.

Additional Resources: 1. Video: “Obedience” A 45-minute, classic film about Milgram's experiments is entitled "Obedience." Although the film is old, it makes an extremely powerful statement about the notion that "people do what they're told." We recommend that you preview the film and then prepare students for what is to come. Students typically react to the "worst" obedience scenes with nervous laughter. If you explain to them that they are likely to react that way, they will understand their own discomfort better. Advise them to feel free to laugh, but to think about why they are laughing and be prepared to discuss that. Be sure that you leave enough time for discussion. Students will often argue that "people are different now" and that they would never comply as those in the film did.

The major point to be made here is that the research overwhelmingly supports the idea that people do what they are told. This was not just one study, but many studies that are documented in Milgram’s book. Therefore, managers/leaders have a great deal of influence on most people's conduct and that responsibility must be taken seriously.

Another important point to be made is that experiments such as Milgram's could not be done today because of the Human Subjects Committees at universities that protect the rights of research subjects.

2. Video: “Quiet Rage” A newer, 50-minute video entitled, “Quiet Rage; the Stanford Prison Study,” is similarly powerful. It is narrated by Zimbardo and includes scenes from the actual experiment. It is highly recommended for discussion on the power of roles to mold behavior. Reading about the experiment just does not convey all of its complexity.

3. Video: “Invitation to Social Psychology” A shorter film/video, entitled "Invitation to Social Psychology," has very brief vignettes from both Milgram's and Zimbardo's studies.

Both the full-length Milgram film and the Zimbardo film are highly recommended for students at any level. Students report that they are thought-provoking and memorable. The important lessons about the power of obedience and roles will not be forgotten soon.

Some websites devoted to Stanley Milgram and his work can be found by putting “Stanley Milgram” into the Google search engine.

4. Primetime Live – a recent “Obedience” experiment

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In November, 2005, Primetime Live ran a powerful segment about a situation that occurred in a number of McDonald’s restaurants. Much of the segment was from video, recorded on a McDonald’s surveillance camera. A man, saying he was a policeman, called. He claimed to have a McDonald’s manager with him. He requested to talk to the restaurant manager and told this manager that a young female employee who he described had stolen something and should be called into the private office. The caller proceeded to make requests that involved requiring the 18-year old woman to take off her clothes, so that she can be searched, and worse. The young woman in the segment ended up being physically abused by a man (the restaurant manager’s boyfriend, who was called in to watch the young woman, while the manager went back to work). The restaurant manager, a middle-aged woman, came across as not evil, but simply following orders from an authority figure (a policeman). She never questioned him about his requests. The segment was not available to purchase when we last checked, but it has been rerun. So, you may want to look for it. We tell you about it, because sometimes students say, “Oh, this couldn’t happen today.” This story clearly counters that belief.

P.S. The perpetrator was caught (by tracking down his calling card).

For more information and the script of the segment, see http://abcnews.go.com/Primetime/story?id=1297922&page=1 You can also purchase a DVD that ABC created. It is available on Amazon.com as part of a series ABC News Primetime called “Basic Instincts” – it is number 5 in the series and is entitled “The Milgram Experiment Re-Visited.” It demonstrates how a University of Santa Clara psychologist replicated the Milgram experiment (with some serious tweaks to reflect today’s ethical standards). It shows variations on the Milgram experiment, as well as a very short segment on the McDonald’s story. If you use it (especially the part about what happened at McDonald’s), you may want to warn the class. We have had students get upset (one young man who had daughters found it very difficult to watch; a young woman who had been sexually abused also had a negative reaction). But, the large majority of students find this to be an extraordinarily educational video.

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Chapter 8 Ethical Problems of Managers Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction A. Managers and Employee Engagement II. Managing the “Basics” A. Hiring and Work Assignments B. Performance Evaluation C. Discipline D. Terminations E. Why Are These Ethical Problems?

F. Costs III. Managing a Diverse Workforce A. Diversity B. Harassment C. Family and Personal Issues D. Why Are These Ethical Issues?

E. Costs IV. The Manager as Lens A. The Buck Stops with Managers B. Managers Are Role Models V. Managing Up and Across A. Honesty is Rule One B. Standards Go Both Ways VI. Conclusion 1

VII.

Discussion Questions

VIII.

Short Cases

Teaching Notes - Discussion Questions 1. Why is employee engagement important?

Employee engagement is critical to organizations, because it is the primary indicator of productivity. Employee productivity is all about customer service, quality products and services, and being prudent with organizational and human resources. Managers are the most critical element in encouraging employee engagement.

Probes to Stimulate Discussion • Is it important to companies that people are inspired to do their best work? Why? • What impediments are there to people being engaged and productive? What conditions in a work place could cause employees to become disengaged or disenchanted with their work? Or with the company?

2. How does employee engagement relate to organizational culture? How do managers contribute to the ethical culture?

Strong, healthy organizational cultures build engagement levels. Managers are the prime communicators of the culture to employees. They help set goals for employees, determine expectations, evaluate performance and determine rewards. They are the ones who communicate what is important and what is not, and what is rewarded and what is punished.

Probes to Stimulate Discussion: • What role does a manager play in communicating corporate culture to employees?

• What specific activities do managers engage in that communicate culture to employees?

• Is it possible to have a manager misaligned with the general corporate culture? If it is, what effect would that have on employees who report to that manager? What would be more influential with employees: the organizational culture or the manager?

3. In addition to identifying and training good managers, what else could an organization do to increase levels of employee engagement?

Smart organizations understand that employee engagement is the result of a comprehensive effort to build a healthy work place. Certainly it involves hiring and training talented managers.

But it also requires a myriad of other factors including: family-friendly corporate policy; flexible work schedules; equitable rewards; goal setting that incorporates values and ethics; ethical leadership, etc.

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Probes to Stimulate Discussion • Is it possible for someone to have an awful manager and still be engaged?

• If you were to design an engaged organization from scratch, what would you include and why?

• What could an organization do that would absolutely kill engagement?

4. What specific action could a manager take to try to move employees up the employee engagement continuum – for example, from not engaged to actively engaged?

Once an employee is disengaged, it is very difficult to move him or her up the continuum to engaged. Like building a reputation, building engagement takes a lot of sustained, consistent effort over a long period of time. And sometimes, it cannot be done at all. However, since engagement is rooted in trust, activities that engender trust will also promote engagement: telling the truth, kindness, openness, inspiration, fairness, building a relationship, etc.

Probes to Stimulate Discussion • Are some people just naturally engaged or disengaged – regardless of what a company or a manager does?

• What would you do, if an actively disengaged employee was transferred into a department that you manage? Is there anything you need to look out for?

• What risks might disengaged employees pose to an organization?

5. Why should performance be measured as an on-going process, and not just as a once-ayear event?

Performance evaluation is probably a manager’s most important job. One key reason why it should be an ongoing process is that feedback must be timely, in order to have any impact on a subordinate’s behavior. Most managers know this, but they are uncomfortable giving negative feedback, so they put it off. By the time they find themselves doing an annual performance review, neither the manager nor the subordinate can remember the details. It is not fair to say, “I haven’t been satisfied with your performance this year.” You have not provided ongoing feedback that would give the subordinate specifics and a chance to change.

Probes to Stimulate Discussion • • • •

“What are the barriers to continuous performance appraisal?"

"Should peers evaluate one another's performance? What are the advantages and disadvantages?" (Many companies are using 360-degree performance appraisals.)

"Should workers evaluate the performance of their managers? What are the advantages and disadvantages?"

"Should such evaluations be confidential (the identity of the reviewer unknown to the person being evaluated)?"

6. Should high performers be allowed to work by rules that are different from those that apply to other workers? Why or why not?

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Probes to Stimulate Discussion • • • •

"If star employees are exempt from the rules that govern other employees, how can you explain it to other employees?"

"Are there certain employees who deserve to have different rules?"

"What happens when workers violate the rules?"

"What happens when "stars" violate the rules? If there is a difference, is it fair?"

7. Imagine that you are the manager of a facility where 200 layoffs are scheduled. Design an action plan for how the layoffs would occur. How would you handle those who are being laid off and the survivors?

Probes to Stimulate Discussion • • • • • • • •

"Should any employees get early notification?"

"Who can help you plan the layoff?"

"Will everyone hear at the same time?"

"When will the press be notified?"

"Who will give effected employees the news? How? Where? When?"

"How will you motivate workers who are remaining with the company?"

"If you need to lay off workers six months from now, how can you notify them now and yet encourage them to stay for a six-month period?"

“Put yourself in employees’ shoes. What will make the layoff seem fair?”

8. Are there ways in which managers can avoid harassment issues among employees who report to them? What would your strategy be?

Probes to Stimulate Discussion • • • •

"If you work in a male-dominated industry, do you need to be especially vigilant about this issue?"

"How can you get senior management support regarding this issue?"

"Should you talk to employees individually about this topic or in a group?"

"If you believe an employee is harassing a coworker, how would you discipline the employee?"

9. Imagine that someone who reports to you is on a prescription medication that makes his breath smell like alcohol. How would you handle this situation?

Probes to Stimulate Discussion • • • 4

"How can you protect his or her rights (especially to privacy) and yet prevent your customers from thinking a worker is an alcoholic?"

"How would you counsel this employee? What would you say?"

"Could you ask someone else to counsel this employee?"

•

"Could you insist that this employee have no customer contact?"

10. Imagine that one of your employees complained that a coworker was harassing him or her.

Also, imagine that you suspect the motives of the person who is complaining to you. How would you handle the situation? Is there a way you could discern motivation, or does it matter? When would you involve your company’s human resources department?

Probes to Stimulate Discussion • “Is it up to you to analyze motivation in this case?”

• “What questions might you ask the person who has brought the issue to you?”

11. As a manager, how would you respond when a worker’s performance has declined and you suspect a problem at home is the cause?

Probes to Stimulate Discussion • “Is an employee’s home life your business? Should privacy be a concern?

• “What questions might you ask the person?”

• “Would you involve human resources? When?”

12. List ways you can communicate your standards to your employees and to your peers.

Probes to Stimulate Discussion • "Are there any situations you can think of where it is natural to communicate standards?"

• "Can you help employees establish their own standards?"

• "Can peers get together and agree to standards? What are the advantages and disadvantages?"

In-Class Exercises General Note to Instructors: For many of the ethical issues in this chapter, it may be difficult to do what one thinks is right, because of the sensitive communications that must take place. It is difficult for most people, especially inexperienced students, to give negative feedback for example, or talk with an employee about a personal problem that seems to be interfering with work. We suggest that this chapter and its cases are perfect for role playing exercises. Involve students in role playing, so that they can practice their communication skills and get feedback from you and their classmates.

After you get some consensus on what is the right thing to do, ask students if they would have difficulty actually doing it. If so, ask people to role play the characters in the case.

Case # 1 -- Hiring and Work Assignments:

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You are planning to hire a new sales manager and one of the leading candidates is really homely. You are concerned about how your customers – and even his colleagues -- would react to him. The specific job he is applying for requires extensive customer contact and his appearance is frankly disconcerting. On the other hand, his credentials are excellent and he is certainly qualified for the job.

Notes: In the classes where this scenario has been used, students invariably laugh over the "homely" aspect. However, when asked how things would change, if the candidate were deaf, or overweight, or longhaired, or scarred, students begin taking the issue more seriously.

Case #2 -- Performance Evaluation You were recently promoted to manager of a department with five professionals and two clerical staff. One of the professionals, Joe, is a nice guy, but he simply has not been able to match the performance of the others in the department. When he tells you he has been interviewing for another job in a different part of your company, you pull his personnel file and see that your predecessor had rated Joe's performance as "good to excellent." You frankly disagree. Joe has asked you for a recommendation. Based on the written appraisals, you could give him a good one -- but your personal observation is at odds with the written evaluations.

Joe's prospective manager -- your peer in another department -- asks for your opinion. What do you say?

Notes: Many managers do not see this as an ethical issue, which, of course, it is. They say that getting Joe out of their department does not hurt anyone, and in fact may help Joe in the long run. After giving the issue some thought, however, most managers agree that Joe needs to be properly evaluated before a transfer can take place, even if it is more difficult for the manager. Honesty with Joe about the kind of evaluation you can give him is the most ethical route and best for all concerned in the long run. Joe will have an opportunity to improve and another department will not be stuck with a mediocre employee, when they thought they were getting a good one.

Case #3 – Discipline Steven is a salesman who reports to you -- the regional director of sales for an office supply company. He has a great track record and has consistently surpassed his sales targets, but he has one terrible flaw: he is not on time for anything. He is late both for meetings with you and for lunches with clients, and the problem extends to his paperwork. His expense reports, sales reports -everything is handed in a week late. As his manager, you have counseled him about his tardiness and he has improved. Now instead of being 15 minutes late for a meeting, he is only five minutes late. And instead of submitting his expenses a week late, they are only two days late. His lateness seems minor in view of his achievements, but it is driving you and his co-workers crazy.

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Notes: While this issue is common just about everywhere, it is a real issue in industries like investment banking. "Star" employees can bring in or make millions of dollars for their companies, and they are generally very well compensated for their efforts. They can also think they are more valuable than other employees (and they may be) and that they do not have to follow the same rules as everyone else. It takes a very strong leader to keep these characters in tow. Without senior management discipline, these "stars" can become real "monsters."

Case #4 – Terminations You are a manager in a large commercial bank. You discover that Patricia, a loan officer who reports to you, has forged an approval signature on a customer loan, which requires signatures from two loan officers. When you confront Pat with the forgery, she apologizes profusely and says that her husband has been very ill. The day she forged the signature, he was going into surgery and she just did not have time to find another loan officer to sign the authorization for the loan. Pat has been with your bank for 15 years and has a spotless record.

Notes: This real case resulted in termination and caused a lot of angst for the manager who had to do the firing. But, this kind of behavior simply cannot be tolerated in a financial institution. Forgery is one of the biggest "sins" an employee can commit in a company, especially a financial firm.

Appeals would get an employee nowhere in a situation like this one. Patricia could have avoided the debacle by asking for help. If she had admitted to her manager that she could not get the other signature, he or she could have helped her. It is a sad case, but there is really no excuse for her behavior.

Case #6 – Diversity One of your best customers is a very conservative organization -- a real "whiteshirt" company. Reporting to you is David, a very talented African-American, who could benefit greatly from working with this customer account -- and the customer account would benefit greatly from David's expertise and creativity. The issue is that David dresses in vibrant colors and wears a kufi, an African skullcap. Your company long ago recognized David's brilliance, and his dress within the company is not an issue. But you know your customer would react to David's attire with raised eyebrows.

Notes: Most students and employees are savvy enough to understand this particular issue and see the need to support this employee in his choice of dress. Change the situation slightly and substitute a different sort of variation from the norm and you may get a very different reaction. Suppose all of the following employees are extremely competent and well groomed. Which might you hesitate to bring into a client meeting? A 65-year old female; a deaf male who reads lips; a man or woman who weighs 300 pounds; a dwarf or someone extremely tall; a man with a beard; a 7

woman with a discernible mustache; someone in a wheelchair? Is there any justification for judging a coworker by appearance or disability and not bringing them to a client meeting, if they are otherwise qualified? In the case of David, one can simply alert the client to his brilliance and his dress in advance, so there are no surprises.

Case # 7 – Harassment Your profession has been traditionally a male-dominated one and Marcia is the only woman in your department. Whenever Sam -- your senior engineer-- holds staff meetings, he and the other males in the department compliment Marcia profusely. They say things like, "It's hard for us to concentrate with a gorgeous woman like you in the room," or "You've got to stop batting your eyelashes at us, or the temperature in this room will trigger the air conditioning." They compliment her apparel, her figure, her legs and her manner of speaking.

Although flattering, their remarks make her feel uncomfortable. She has mentioned her discomfort to you on several occasions, and you have told Sam and the others to cut it out. They just laughed and told you that Marcia was too sensitive. You think that while Marcia was being sensitive, she did have justification for being upset about her co-workers' remarks.

Notes: This is probably the most common form of sexual harassment, although many people are simply complimented and do not feel harassed. Since it is difficult (if not impossible) to know how people are going to react to this sort of banter, managers should nip this kind of thing in the bud.

Case # 8 – Harassment One of your direct subordinates, Robert, belongs to an activist church. Although you have no problems with anyone's religious beliefs, Robert is so vocal about his religion that it is becoming a problem with other employees in your department.

He not only preaches to his fellow employees, but he also has criticized the attire of some of his female co-workers, and continually quotes religious verse in staff meetings. You have received complaints about his behavior from several employees. A few weeks ago, you suggested to Robert that he tone down his preaching, and he reacted as if you were a heathen about to persecute him for his beliefs. His behavior has since escalated.

Notes: This is no doubt a sensitive issue. However, it does not matter if the issue is peddling religion or Girl Scout cookies, employees should not have to endure feeling pressured by other employees.

Robert is selling religion, as surely as someone else may be selling candy bars for their civic organization. That kind of behavior is fine, if people do not mind it. As soon as people start to complain and feel uncomfortable, the behavior must cease. Robert has gone way too far and should be disciplined.

Case #9 -- Family and Personal Issues 8

One of your direct subordinates is Ellen, who just returned from maternity leave.

She now has two children -- her infant is four-months-old and her older child is three-years-old. Ellen is not only a talented worker, but she is also a wonderful person. Before the birth of her second child, she had no problem handling the workload and the demands on her time - she had a live-in nanny, who could care for her child regardless of when she returned home. Recently, however, her livein left and Ellen is now sending her children to a day care facility with strict opening and closing times. Although Ellen is very productive when she is in the office, her schedule no longer has any flexibility -- she must leave the office no later than 5:00 p.m. This has caused a hardship for all of her peers, who must complete team assignments whether or not she is present. Although you do not want to cause problems for her, the situation does not seem fair to her coworkers.

Notes: Frequently, this situation is more common in reverse. In some companies, managers bend over backwards to help employees in Ellen's situation -- sometimes to the detriment of other employees. There are offices, where single people always have to work the weekend or overtime shifts. There are other organizations, where Jewish employees are forced to work over the Christmas holidays. Fair is, after all, fair. If you try too hard to accommodate employees with special needs, you may be unfair to employees without special needs. The situation should be discussed honestly with Ellen. Can she still meet the expectations of her job?

Case #10 -- Honesty Is Rule One Michael is a lawyer who reports to Paula -- the corporate counsel for a chemical company. During one particularly busy period, Paula asks Michael to prepare a summary of all pending lawsuits and other legal activity for the company's senior management. Since Michael has several court appearances and depositions cluttering his schedule, he assigns the report to one of his paralegals, who completes the report in several days. Since he is so busy, Michael simply submits the report to Paula, without reviewing it. When Paula asks him what he thinks of the report, he assures her that he is fine with it. The next day, Paula asks Michael into her office and says that she has found a major omission in the report.

Michael has no choice but to admit that he did not have time to review it.

Notes: This is a perfect illustration of how important it is to be forthright with your manager. If we fake it, we invariably get caught. And the effects of our behavior can last for the duration of our relationship with our manager. Trust is very difficult to reclaim.

Case #11 -- Standards Go Both Ways

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It began when Bruce asked Andy to lie to his wife about his whereabouts. "If Marcia calls, tell her I'm in Phoenix on a business trip," he told Andy. Of course, he had also confided to Andy that in case of an office emergency, he could be reached at a local golf tournament or at a nearby hotel, where he was staying with another woman. Since Bruce was senior to Andy and was a powerful contributor in the department, Andy went along with his request. When Marcia called, Andy told the lie about Bruce being in Phoenix. Bruce asked several more "favors" of Andy, and Andy complied. Then Bruce asked for a big favor: he instructed Andy to inflate monthly sales figures for a report going to senior management. When Andy objected, Bruce said, "Oh, come on Andy, we all know how high your standards are."

Notes: In the real case, "Andy" was subpoenaed by Bruce's wife to be a witness in their divorce. It was a real mess! It is foolhardy to ever lie for a co-worker or manager.

Case #12 -- Employment Basics You have recently been promoted to a supervisory position and are now responsible for coordinating the work of four other employees. Two of these workers are more than 20 years older than you are, and both have been with the company much longer than you . Although you have tried to be supportive of them and have gone out of your way to praise their work, whenever there is some kind of disagreement, they go to your boss with the problem. You have asked them repeatedly to come to you with whatever issues they have; they just ignore you and complain to other workers about reporting to someone your age. Design a strategy for dealing with these workers and your manager.

Notes: This problem is as much with your boss, as with the two workers who report to you. You should ask your manager to stop undermining you with these two workers. If he or she refuses to listen to their complaints, they will be forced to deal with you.

Case #13 – Diversity After two years of sales calls and persuasion, a large, multinational petroleum company -- Big Oil Ltd. -- decides to sign with your employer, Secure Bank. Since Big Oil is headquartered in Saudi Arabia and most of the meetings with the client have been in the Middle East, Secure Bank's senior executive in charge of oil and oil product companies -- Julie -- has not attended. Although the Secure Bank employees who have met with the company have told the Big Oil executives that the lead on their account will be a woman, the news must not have registered, perhaps because of language difficulties. Today the Big Oil reps are in Chicago to sign on the dotted line and meet with Secure Bank's senior managers, and of course, they have met with Julie. A member of the original Secure Bank sales team calls you, to say that Big Oil's senior team member has told him, he does not 10

want Julie to work on their account, period. Because of cultural issues, Big Oil execs are uncomfortable dealing with women from any country. As Julie's manager, what do you do?

Notes: This case has been discussed in various business and educational settings and almost everyone who has seen it thinks that the “right” thing is to defend Julie, but that most companies would comply with customer wishes and replace her. However, that sends quite a message to customers and to every other employee in the company. Julie needs to be included in this deal or the result is unfair, period. An interesting question raised by one student is: Why do American companies always try to accept other cultures? Why can’t other cultures accept our standards?

Case #14 --Managing Up and Across As an operations professional, you need to be able to interact effectively with many internal customers – from corporate managers to field representatives. One of your peers is Jessica, who is a talented operations professional, but who is downright rude to her internal customers. Her attitude is so bad that people around your company ask specifically to deal with you instead of Jessica. You have heard many tales about her sarcasm and her unwillingness to deliver anything other than the absolute minimum to other employees. You have thought about talking to Bruce, the manager to whom both you and Jessica report, but you and everyone else knows that they are dating. In the meantime, your workload is increasing, because of Jessica’s reputation. How do you handle Jessica and Bruce?

Notes: Most professionals agree that it is unfair to everyone to let a situation like this one continue.

You could, of course, approach Bruce with this. A better choice might be to go to your human resources representative or to Bruce’s manager.

Homework Assignment Please note that any of the in-class discussion cases would make excellent homework assignments.

Additional Resources: 1. Institute for Global Ethics This is a wonderful website and the founder of the IGE, Rushworth Kidder, is a well-known expert on organizational ethics. Look for the section called “Dilemmas” for additional cases that can be used as homework assignments or as in-class cases for discussion. http://www.globalethics.org/

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2. CasePlace Another good resource for cases and teaching materials is CasePlace: http://www.caseplace.org/

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Chapter 9 Corporate Social Responsibility Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. Why Corporate Social Responsibility?

A. Pragmatic Reason B. Ethical Reason C. Strategic Reason III. Types of Corporate Responsibility A. Economic Responsibilities B. Legal Responsibilities C. Ethical Responsibilities D. Philanthropic Responsibilities IV. Triple Bottom Line and Environmental Sustainability V. Is Socially Responsible Business Good Business?

A. The Benefit of a Good Reputation B. Socially Responsible Investors Reward Social Responsibility C. The Cost of Illegal Conduct D. The Cost of Government Regulations E. What the Research Says about Social Responsibility and Firm Performance F. Being Socially Responsible Because It is the Right Thing to Do VI. Conclusion VII.

Discussion Questions

VIII.

Case: Merck and River Blindness

IX. Short Case 1

Teaching Notes - Discussion Questions 1. Do you think corporate social responsibility (CSR) is important? Why or why not?

Depending upon the audience, many students will see the importance of social responsibility. Generally, they are conscious of some kinds of environmental concerns and have some understanding of the relationship between business and the community. But with some business school audiences, you may find resistance to the idea that corporations owe anything to society, beyond making a profit and obeying the law. So, be prepared for a debate on this one. The chapter is designed to provide students with lots of reasons to think that CSR is important. If nothing else, they should recognize the importance of corporate reputation.

Probes to Stimulate Discussion: 2. Choose a company and analyze its CSR report. In doing so, think about what seem to be its reasons for being socially responsible. Is it pragmatic, ethical, strategic, or some combination? Can you identify its key stakeholders?

3. Using the same company as an example, think about the four types of corporate social responsibility. What is your assessment of how the company is doing?

4. With reference to the CSR pyramid, what are the implications of stopping at a particular pyramid level? For example, would it be all right, if a company took its sole responsibility to be the financial responsibility to its shareholders? Financial responsibility and legal responsibility? Do you agree that CSR is best represented by a pyramid? Why or why not? Can you think of a better way to graphically represent a company’s social responsibility?

Obviously, the course is oriented toward the importance of ethical responsibility beyond financial and legal responsibility. Hopefully, students will see that, once they have read the chapter. Philanthropy is more discretionary, but even that tends to be expected in the US if a company is successful.

Students sometimes come up with interesting alternatives to the pyramid.

5. Think about the television programs and films you have seen recently, in which business’ social responsibility (or lack thereof) was portrayed in some way. How were business and business people portrayed? Is there anything business could or should do to improve its media image? Some businesses try to stay out of the limelight. Why might that be? What do you think of that strategy?

This can lead to a great discussion, because it is usually difficult for students to think of positive media portrayals of business. Those just do not make the news very often. Staying out of the limelight is certainly an option. But, if something goes terribly wrong, the company has no reputation to fall back on, no trust account to draw upon.

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6. Do you believe that employees are more attracted and committed to socially responsible companies? Why or why not? Are you? Why or why not?

There is certainly evidence for this. But, with students, ask them for their own thoughts about the companies they would hope to work for. Often, they are influenced by the company’s positive reputation for its treatment of employees, customers, etc.

7. If you were running your own company, how would you communicate your CSR strategy to employees, to external stakeholders, and why? (This is an opportunity to discuss, whether it is a good idea to “promote” a company’s CSR)

In-Class Exercises Case # 1 – Merck and River Blindness: Although the decision by Merck to develop this drug for what amounted to no profits is an old one, it is still a great example of corporate social responsibility and ethical leadership. It is particularly useful, because most students have never heard of it, meaning that Merck has not “promoted” it to external audiences. On the other hand, it is clearly an important part of the company’s culture. Ask any employee about it and be prepared for a long conversation. Also, Merck did this long before corporate social responsibility was fashionable.

We encourage you to search YouTube for videos on river blindness. It is harder to discuss this just in terms of the financial bottom line, once you have seen pictures of exactly what the disease is and what it does. Go to YouTube and put in the search terms “river blindness” or “Merck river blindness.” Choose a video and then decide where in the discussion it would be best to insert it.

Case Questions: 1.

Think about the definition of stakeholders — any parties with a stake in the organization’s actions or performance. Who are the stakeholders in this situation?

How many can you list? On what basis would you rank them in importance?

There are many, including employees, stockholders, people with river blindness, the communities where those people live, those with other diseases, governments, the media, perhaps competitors, etc.

2. What are the potential costs and benefits of such an investment?

This is difficult, as always, because once again we have no crystal ball. The potential to discover a drug for this terrible disease certainly exists and the company’s research scientists think it is possible. The outcomes for those with the disease would be very positive and there could also be very positive media attention and reputational effects. But, there is also the potential to invest years and millions of dollars, and come up empty handed. Employee 3

morale is a potential cost or benefit. Scientists are extremely important to pharmaceutical companies and Merck’s research scientists wanted to pursue this. Allowing them to do so, might make them feel good about themselves and their work. Finally, there are opportunity costs. What drugs might “not” get discovered, because scientists were working on this one.

3. If a safe and effective drug could be developed, the prospect of Merck recouping its investment was almost zero. Could Merck justify such an investment to shareholders and the financial community? What criteria would be needed to help them make such a decision?

We wrote this question, but we actually do not like it very much. Merck is clear on its website about its commitment to corporate social responsibility and to philanthropy. So, investors have the opportunity to freely decide, whether they wish to invest in a company with these values or not. Companies do not justify every investment to shareholders, so we are not convinced that they would need to justify this one. But, they certainly would not be able to justify it in terms of the financial bottom line. They would have to justify it in terms of goodwill, or some other more difficult to measure criterion.

Another important discussion point here might be “which shareholders?” As the chapter discusses, some shareholders are very interested in CSR. Are we talking about those, or about day traders who have little interest in the company, other than whether they can make a short term gain? One of us heard a representative of the Business Roundtable refer to the fact that we no longer have shareholders. We have share “renters.” These are people with only short-term financial interest in the company. So, we think companies will need to look beyond these shareholders, if they wish to think about the long-term greater good of the firm and society.

4. If Merck decided not to conduct further research, how would it justify such a decision to its scientists? How might the decision to develop the drug, or not to develop the drug, affect employee loyalty?

As noted earlier, a pharmaceutical company’s scientists are one of its most important resources, a point that students often miss. Of course, they know that they are working for a for-profit company. But, they are also highly trained scientists with advanced degrees, who probably have humanistic values about helping people and curing disease. So, this is an important consideration.

5. How would the media treat a decision to develop the drug? Not to develop the drug?

How might either decision affect Merck’s reputation?

This is tough to predict. The media may or may not even be aware of this. As noted earlier, Merck has not “promoted” itself in this way. It is possible that a media outlet would pick up the story and run with it. But, in our view, this is not a good reason to do it or not do it. A decision like this must be based upon deeply held values.

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6. Think about the decision in terms of the CSR pyramid. Did Merck have an ethical obligation to proceed with development of the drug? Would it matter if the drug had only a small chance to cure river blindness? Does it depend on how close the company was to achieving a cure, or how sure they were that they could achieve it?

Or does this decision become a question of philanthropy only?

This is mostly a question of philanthropy. The other questions raised here are difficult to answer, because, when the decision must be made, we know very little about the chances of success.

But, the case does raise an important ethical question that seems to affect some companies more than others. For example, if a company has information that no other person or company has and it could help people with that information, does the company have an ethical duty or obligation to act? Some students have suggested that the company share the information with someone else, who might be interested in pursuing the research. But, remember that this drug was based upon an existing Merck veterinary drug. So, we feel quite sure that Merck would not be interested in sharing its proprietary information. That leaves it with an ethical dilemma. Does it have an obligation to pursue this, because it alone has the information to do so?

7. How does Merck’s value system fit into this decision?

Merck’s value system is very important here. If a company says that it values people over profits, it should act that way. Otherwise, it is just going to create a lot of cynical employees. If you do not mean it (your values, that is), do not say it! That goes for individuals too!

8. If you were the senior executive of Merck, what would you do?

It is important for students to know that Merck decided to pursue the research. After about a decade and many millions of dollars, the company succeeded. They came up with a wonder drug (Mectizan) that could kill the worms on the inside and the insects biting on the outside, with seemingly few side effects. The next challenge was finding someone to buy the drug. The company had all sorts of ideas for who might help. But, there were no takers -- not the US, the UN, the World Health Organization – they all had their own priorities – and the countries and people where river blindness was rampant had no resources. So, Merck had another ethical dilemma – what to do now that they had the drug available but no one to buy it. The company made an extraordinary decision – to distribute the drug for free (to give it away) to all who needed it forever or until river blindness was eradicated! That was not the end of it though. The company had to decide how to get the drug to the distant villages where river blindness was a problem, addressing issues of poor or no transportation over terrible roads to places with no health professionals. So, the company partnered with others, to arrange for the logistics of transporting the drug to the people who needed it. Rather than provide all the details here, we direct you to read more about this story and other Merck social responsibility efforts on the Merck Company’s website. Their philanthropy program is over twenty years old, has been very successful and a model that other companies have followed. Merck remains one of the most philanthropic companies in the US. There is another notable outcome – when AIDS became a worldwide health problem, the company’s experience with the distribution of Mectizan in Africa helped. Although AIDS drugs were more complicated, the company could call on its experience to inform these new efforts.

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One last note – at least some students will remember the Vioxx story. If you remember, Merck voluntarily recalled Vioxx a few years ago, after learning that it caused cardiovascular problems in patients who took it for 18 months or more. The recall created uproar and lots of lawsuits.

Merck fought them, because of its claim that it had done nothing wrong. But after winning more cases than it lost, it finally settled the remaining cases, so that it could move on. We have found it interesting to discuss this case and contrast it with the River Blindness story. The Vioxx case is a complex one. So, if you want to do it, you will have to do some research. Maybe we will write that case to accompany the Merck case for the next edition!

Case #2 – Short Case You have a long-standing consulting relationship with a large consumer products company. This company represents 50 percent of your consulting revenues and is clearly your most important client. The CEO has called, to ask you to commit a significant amount of time over the next couple of months to assist with a large merger project. The company is merging with a large conglomerate, whose primary business is the sale and distribution of tobacco products. The CEO is relying on you to assist in facilitating the smooth integration of the two companies. You promised yourself that because your father died of lung cancer, you would never work for a tobacco company. Is there a way that you can accept the consulting assignment and still keep your promise to yourself? How will you handle this dilemma, if you decide that you cannot work for the tobacco company?

Probes to Stimulate Discussion: •

How would you feel, if this client represented a smaller portion of your company revenue – 10%? Or 30%?

•

Exactly how would you explain your decision to your client, if you decided you could not work on this merger?

• •

Could you propose working on the part of the merger not involved with the tobacco company?

If you brought in another consultant to work with you as a team – the other person working directly with the tobacco company – would that make it possible for you to continue this client relationship?

•

Does this merger signal the end of your relationship with all parts of this organization?

•

Can you continue to work for the non-tobacco businesses within this corporation?

Homework Assignments 1. Merck River Blindness Case 6

Have students analyze the Merck River Blindness Case and answer the discussion questions.

Have them write a 3 – 4 page paper, outlining their answers, or prepare a presentation for class discussion.

2. Write a Sustainability Report This is a good opportunity to have students interview a parent, friend, or find another businessperson to interview about what his/her company is doing with regards to sustainability.

You could instruct them to either focus only on local companies – and interview local businesses – or focus on large and/or global companies. They could focus on companies in one country, or investigate whether there are trends in certain regions of the world. If they could give a “Sustainability” or “Green” award, what companies would they nominate and why?

3. Global 100 Analysis Students could select two companies from the Global 100 index (see Additional Resources, which follows) and compare how various companies approach the subject of social responsibility. Alone or in teams, students could investigate a company (or companies), prepare a presentation, and present their findings in class.

Additional Resources: 1. Global 100 The Global 100 is a group based in Canada that rates companies globally on a sustainability index: http://www.global100.org/ 2. Newsweek’s Top 500 Sustainable Companies http://www.sustainablelifemedia.com/content/story/brands/newsweeks_500_sustainable_compan ies 3. SB20 – The World’s Top Sustainable Business Stocks http://www.sustainablebusiness.com/index.cfm/go/progressiveinvestor.sb20p1 4. Green Biz: How to Produce a Top-Notch Sustainability Report http://www.greenbiz.com/blog/2010/05/10/how-produce-topnotch-sustainability-report 5. Robust Company Sustainability Sites: A number of organizations have robust sustainability sections on their internet sites. See:

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General Electric: http://ge.ecomagination.com/

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Siemens: http://www.siemens.com/sustainability/en/index.php

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Dell: http://content.dell.com/us/en/corp/dell-earth.aspx

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Unilever: http://www.unilever.com/sustainability/?WT.GNAV=Sustainability

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Nokia: http://www.nokia.com/environment

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Wal-Mart: http://walmartstores.com/Sustainability/

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SC Johnson: http://www.scjohnson.com/en/commitment/focus-on.aspx

Chapter 10 Ethical Problems of Organizations Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I.

Introduction

II. Managing Stakeholders III. Ethics and Consumers A. Conflicts of Interest a. Enron b. Marsh & McLennan B. Product Safety a. Johnson & Johnson b. Toyota C. Advertising a. Pharmaceutical Companies IV. Ethics and Employees A. Employee Safety a. Johns Manville b. McWane, Inc. B. Employee Downsizings a. Scott Paper b. Lincoln Electric V. Ethics and Shareholders A. Salomon Brothers B. AIG VI. Ethics and the Community A. EXXON 1

VII.

Why Are These Ethical Issues?

VIII.

Costs

IX. Conclusion X. Discussion Questions XI. Short Cases A. Conflict of Interest B. Product Safety C. Advertising D. Product Safety and Advertising E. Shareholders F. Community

Teaching Notes - Discussion Questions 1. What factors contributed to Johns Manville's long silence on the dangers of asbestos?

Chapter 3 may hold some clues, as to why successive top managers at Manville kept quiet. They may have felt an "illusion of optimism" and believed that the problems would not turn out to be as bad as they appeared to be. That illusion may have led to "escalation of commitment," where top managers kept getting more involved in stonewalling, in an attempt to justify the original decisions made about nondisclosure. Hindsight being 20/20, it is still difficult to understand how this could have happened.

2. What role do you think the personality of a CEO plays in the handling of an ethical problem?

The CEO's personality can play a tremendous role in how ethical dilemmas are handled.

Executives with a background in marketing and communications (like James Burke, the former CEO of Johnson & Johnson) are more comfortable with the media and are knowledgeable about what it takes to sell a message. Technical or engineering types, with little or no background in communications or media relations, can have an extremely difficult time dealing with the public relations aspect of a crisis and can therefore appear to be stonewalling, or unsympathetic to the press and the public.

3. When other firms in your industry are behaving unethically, how can you buck the trend and position your company to value ethical behavior? Why is that important? Will it damage your company’s competitiveness?

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It is extremely difficult to buck a trend, if an entire industry is engaged in unethical behavior.

We are reminded of a money management firm in New York that described the lavish entertaining of clients that was (and perhaps still is) typical in their industry. “We’ll have some state treasurer call and tell us when he’s landing, so that we can have a limo there to pick him up.

Then he tells us where he wants to go to dinner and what shows he expects tickets to, etc.” The firm went on to say that they feel extremely uncomfortable complying with the demands of this customer. However, they believed that if they did not provide these little perks, other companies would be happy to do so. Apparently, a prior executive had refused such favors and had quickly lost a lot of business to other firms. After that, the company just went along with client demands.

That said, we believe that there is a business advantage to bucking this kind of trend. One of the best ways to buck a trend is to start a new one. One of the reasons industry groups exist is to create standards that all companies can agree are important. If other industries can come together and agree to live by certain standards – the pharmaceutical, defense, and chemical industries are three we know of who have done this – then companies in the financial industry can do it, too.

4. Imagine that you are the CEO of a large firm like any of the ones described in this chapter.

What concrete steps would you take to restore your company's reputation?

When disaster strikes, company lawyers generally urge caution and try to put a lid on communication. That may be a good approach from a legal standpoint, but it is disastrous from a public relations standpoint. Obviously, a company needs to find out exactly what happened as soon as possible. So, fact gathering is paramount after a disaster. Simultaneously, executives need to mobilize their public relations and communications professionals, to begin the process of notifying and/or keeping the media and other stakeholder groups informed, in order to maintain or regain credibility. The CEO needs to be accessible to the press, honest (if he or she does not know the answer to a question, admit it), provide plentiful and accurate information, admit mistakes, if they have occurred, and promise restitution to any affected stakeholders.

Probes to Stimulate Discussion •

"What specific steps can a top manager take to restore credibility?"

•

"Can you develop a road map that could be used in any corporate disaster?"

•

"Are there three or four key steps that could be taken in any ethical debacle?"

5. How much testing is enough when launching a new product?

It probably depends on the product. But, the decision-making guidelines that are adopted are extremely important. And, they should be adopted in advance, not during a financial (final?) crunch. For example, you might want to develop the “family member rule.” Ask yourself, “How much testing is enough, if a member of my family were going to use this product, fly on this airplane, etc.?”

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However, it also can be extremely difficult for a company to know when “user error” morphs into “product defect.” Apparently, this was one of the issues behind Toyota’s slow response in addressing problems with sudden vehicle acceleration. They heard reports about a problem, but assumed that it was a driver issue, because they were confident of their quality controls. Every product has some issues and it is generally more art than science to determine whether there really is a problem with a product.

Probes to Stimulate Discussion •

"What safeguards could a company implement, to ensure that new products are properly evaluated before they are released?"

•

"Should research and development professionals be allowed to participate in decisions to release a new product?"

•

"Does just one negative evaluation forever taint a product's reputation?"

•

“How can a company overcome a negative evaluation?"

6. How can the interests of multiple stakeholders be balanced?

This is a key question that has not yet been adequately addressed in the stakeholder literature .

Recently, Mitchell, Agle, and Wood (Academy of Management Review, 1997, pp. 853-886), proposed that managers pay attention to stakeholders, based upon something they termed “stakeholder salience.” Stakeholder salience is based upon stakeholder power, legitimacy, and the urgency of the stakeholder claim. These combine to make stakeholders’ claims more or less salient to managers. The approach is meant to be descriptive; it describes what managers actually do. But, we also need to think about what managers should do. What if a stakeholder has a morally legitimate claim, but is not powerful? For example, a poor community has a stake in not living next to a toxic waste dump, but little power to fight it. Should not managers still pay attention to this stakeholder’s needs? Somehow, managers need to combine the moral legitimacy of stakeholders’ claims, with the realities of balancing multiple claims in a complex, competitive global business context.

7. Do long prison sentences really help deter corporate criminals?

This is a tough question. Certainly a lot of senior executives, like most other people, have a hard time believing that they will ever get caught and go to jail. As a result, it may be naïve to think that an executive will be deterred from wrongdoing, by thinking about Bernie Ebbers and his 25year prison sentence. However, it is not unreasonable to believe that the investing public needs the huge jail terms. In 2001 and 2002 – right after September 11 and when companies were being indicted right and left – U.S. investors (and indeed, investors around the world) suffered a huge loss of confidence in the integrity of the financial markets. Convictions and hefty jail sentences surely have played a role in the small increases of investor confidence over the last few years.

That loss of confidence pales in comparison to what has happened to investors, since the financial crisis of 2008. A significant portion of small investors have not reinvested, since losing 4

so much money in 2007 and 2008. They sit on the sidelines, not trusting the markets and the large investors who influence those markets. Perhaps one reason small investors are so gun-shy, is that no one to date has been jailed because of the activities that brought the markets down in 2008.

Probes to Stimulate Discussion • What message would be sent by the courts, if executives convicted of fraud (or another corporate crime) were given probation or suspended sentences?

• Aside from lengthy jail sentences, what other measures could be taken to deter corporate crime?

• What other measures could be taken to increase investor confidence in the integrity of markets and large corporations?

• Why has no one been charged with fraud as a result of the financial crisis of 2008?

• Some experts claim that more than half of the small investors who were invested in the markets when they tanked in 2008 have yet to reenter the stock market. Do you think they would, if some of the folks involved in the crisis were tried and convicted?

8. How does a company’s reputation play a role in your purchasing decisions?

Who wants to buy something from a crook? If Enron still existed, who would want to buy their power? Who would go to Drexel Burnham Lambert or E.F. Hutton (once vibrant financial firms that were driven out of business by ethical debacles in the 1980s) for financial services or to Arthur Andersen for accounting services? Put simply: the marketplace has shown repeatedly that few companies can survive catastrophic ethical disasters. Consumers simply do not trust them or their products.

Probes to Stimulate Discussion • • • •

What kind of products and services would you continue to purchase from a company that has been involved in an ethical disaster?

What products and services would you NOT purchase from a company that had been involved in an ethical disaster?

What could a company do to get back in your good graces?

Is there a particular type of ethical misbehavior that is unforgivable? That would prevent you from ever being a company’s customer again?

In-Class Exercises Case #1 -- Conflict of Interest: Big Company is a large manufacturer of health care products that is under fire from the government to lower costs. Big Company has an excellent reputation and is widely acknowledged as one of the best-managed companies in the country. In spite of its reputation, however, Wall Street has reacted negatively to government efforts to reform the health care industry as a whole, and Big Company's stock price has lost 30% of its value in the last year. To counter the effect of possible 5

government intervention, Big Company has just purchased Little Company, a discount health care supplier. Wall Street has greeted the acquisition with enthusiasm and Big Company's stock price has rebounded by more than 10%, since news of the acquisition was made public.

While this acquisition could provide Big Company with a foothold in a growing part of the health care industry, a real problem lies in the mission of Little Company. Little has made its reputation by providing objective health care advice to its customers. Now that it is owned by Big Company, customers have expressed doubts, about how objective Little can be in recommending health care products, if it is owned by a health care giant.

Will Little Company be pressured to recommend the products offered by Big Company, its parent? Or will Little Company’s advice remain objective?

As the senior executive charged with bringing Little Company into the corporate fold, how do you proceed? What are your obligations to Big Company, Little Company, and the customers of both? What do you owe to shareholders and the financial community? Are there other stakeholders and what do you owe to them?

What provisions would you include in an ethics code for Little Company?

Notes: As a senior executive, you should make every effort to ensure that the objectivity of Little is not compromised by the merger. You need to orient the Little employees into the Big Company fold, while making sure that Little employees know they are a separate entity. Your obligations to all stakeholders, including the ones mentioned, involve helping the companies and employees avoid conflicts of interest. You should be very specific in Little's ethics code that conflicts of interest are prohibited. You should also include wording reinforcing Little's independence.

Case #2 -- Product Safety: As a brand manager at a large food manufacturer, you are positioning a new product for entry into the highly competitive snack food market. This product is low-fat and low-calorie, and should prove to be unusually successful, especially against the rapidly-growing pretzel market. You know that one of your leading competitors is preparing to launch a similar product at about the same time.

Since market research suggests that the two products will be perceived as identical, the first product to be released should gain significant market share.

A research report from a small, independent lab - Green Lab - indicates that your product causes dizziness in a small group of individuals. Green has an impressive reputation and their research has always been reliable in the past.

However, the research reports from two other independent labs do not support Green's conclusion. Your director of research assures you that any claims of adverse effects are unfounded and the indication of dizziness is either extremely rare, or the result of faulty research by Green Lab. Since your division has been 6

losing revenue, because of its emphasis on potato chips and other high-fat snack food, it desperately needs a low-fat money maker. Since you were brought into the division to turn it around, your career at the company could depend on the success of this product.

What are your alternatives? What is your obligation to consumers? Who are your other stakeholders and what do you owe them? What is your obligation to your employer and to other employees at your company? What should your course of action be? How can you apply the due care theory to this case?

Notes: There are a number of alternatives. You could hold the product until further testing is completed, release the product as planned, or perhaps even issue a consumer warning (such as the one on packs of cigarettes) on the product. (Obviously, that might place a real damper on sales.) Your obligation to your company and coworkers is to honestly evaluate the merits of a product and withhold it from the market, if you think that is appropriate. In one large manufacturing company, management has taken steps to ensure the objectivity of such decision making.

Management has established teams of employees from a range of disciplines, to judge whether or not a product is ready for release. The key to the process is that no employee involved in the product's development is allowed to be part of the decision-making process (because of their likely bias).

Interestingly, when this scenario is used with students and business people, the students are more likely to release the product than the business people are. The business people seem to favor some kind of "final" test, in an effort to resolve the safety issue. Usually about half of any given student group wants to go ahead and release the product now with no further testing.

Case # 3 -- Advertising: As a bottler of natural spring water, your advertising department has recently launched a campaign that emphasizes the purity of your product. The industry is highly competitive, and your organization has been badly hurt by a lengthy strike of unionized employees. The strike seriously disrupted production and distribution, and it caused your company to lose significant revenues and market share. Now that the strike is over, your company will have to struggle to recoup lost customers, and will have to pay for the increased wages and benefits called for in the new union contract. The company's financial situation is precarious to say the least.

You and the entire senior management team have high hopes for the new ad campaign, and initial consumer response has been positive. You are shocked when your head of operations reports to you that an angry worker has sabotaged one of your bottling plants. The worker introduced a chemical into one of the machines, which in turn contaminated 120,000 bottles of the spring water.

Fortunately, the chemical is present in extremely minute amounts - no consumer 7

could possibly suffer harm, unless he or she drank in excess of 10 gallons of the water per day over a long period of time. Since the machine has already been sterilized, any risk of long-term exposure has been virtually eliminated. But, of course, the claims made by your new ad campaign could not be more false.

List all of the stakeholders involved in this situation. Do any stakeholder groups have more to gain or lose than others? Develop a strategy for dealing with the contamination. How much does a company's financial situation determine how ethical dilemmas are handled?

Notes: The stakeholders in this scenario include not only consumers of the spring water, but also employees, the company shareholders, the community where the company is located, other bottlers of spring water, the press, and regulatory agencies. Since the chances of harm are so slim, the stakeholders with the most to lose are probably the employees, the shareholders, and other bottlers of spring water, who might see the image of their industry sullied. The company's financial situation would probably have a significant bearing on this situation, just as BeechNut's had a profound effect on its actions with the bogus apple juice concentrate. If a company is very profitable, it can afford to lose money on a noble gesture. If it is on the ropes because of a huge debt burden (like Beech-Nut), or struggling to survive after a strike as in this case, it is much harder to do the right thing.

However, there is little choice in this case. The CEO has to recall the contaminated water, not only because it is the right thing to do (it would be dishonest to do otherwise), but also because the company's reputation would be dealt a crippling blow, if the public ever discovered the problem. While the company might suffer in the short term by addressing the problem, a recall is certainly the most sound management approach for the long term. The company might even come out ahead of the competition by announcing a recall -- "because this water isn't pure enough by our standards. It's almost impossible for any of our customers to be harmed by our water, but we won't risk hurting our customers for any reason." So, a good strategy might include, asking the ad agency that developed the new ad campaign to design a strategy for the recall that would tie into the new ads.

Case #4 – Product Safety and Advertising For years, arthritis sufferers have risked intestinal bleeding from consistently taking non-steroidal, anti-inflammatory drugs (NSAIDs) like Advil, which are used to ease chronic joint pain. Your company, Big Pharma, introduced a new type of painkiller, a COX-2 inhibitor that addressed the pain without these gastrointestinal effects. To get the word out , Big Pharma decided to market the new painkiller directly to consumers, so that they could ask their doctors about it. The marketing was extraordinarily successful, ultimately creating a multibillion dollar market. Over 100 million prescriptions were written in just five years and the drug was a big contributor to your company’s bottom line.

Patients and doctors seemed grateful for the alternative and doctors began using it to treat all kinds of pain. Then, complaints began coming in about 8

cardiovascular events (heart attacks), associated with taking the new drug.

Early scientific studies suggested that there might be a problem, but the science remained inconclusive. It appeared that many of these patients had other health problems that may have caused their heart attacks. So, your company undertook a more definitive double-blind placebo controlled study (the only kind that can truly demonstrate cause and effect), which eventually showed a link between your drug and increased risk of cardiovascular events, if the drug was taken consistently for more than 18 months. The Food and Drug Administration suggested a stronger black box warning on the drug packaging, to warn of the potential for cardiovascular side effects from prolonged use. Your senior management team met to discuss what to do. Should you follow the FDA’s advice or do something else? The discussion included reference to your company’s values and strong commitment to integrity and human welfare. You also referred to the famous Johnson & Johnson Tylenol incident, and the success of their recall effort. After much discussion, you decided to recall the drug and cease manufacturing it. The negative reactions were instantaneous. In stinging press reports and Congressional hearings, at which your CEO had to appear, your company was criticized for not recalling sooner, based upon the earlier evidence. And, the lawsuits began. It seemed that anyone who had ever taken your company’s drug and then had a heart attack was bringing suit. Ironically, on the other side, patients and doctors who had been using the drug successfully also complained. They thought you should return the drug to the market with a stronger warning, so that they could do their own risk assessment. Nothing else worked for some patients and they were suffering. But, after careful deliberation, you decided to stick to the recall decision and fight (rather than settle) the lawsuits. Early in the fight, your company won some lawsuits and lost some, but vowed to continue fighting them all, because you were convinced that you had done nothing wrong. The fight was costly in dollars and reputation.

Eventually, after several years and winning more lawsuits than you lost, you decided to settle all remaining lawsuits and move on, a decision that was considered to be wise in the business community. Your company’s financial performance took a big hit, but it is now rebounding and the future looks more hopeful with some promising new treatments on the horizon.

Who are the stakeholders in this situation? Experts claim that there is always a risk, when people take prescription drugs. How much risk is too much? How widely do drug companies need to publicize the risks of prescription medications? Or, is that the doctor’s responsibility? Do consumers really understand these risks? Do drug companies have an obligation to ensure that doctors do not overprescribe their drugs? Is that a reasonable expectation? Was direct-to-consumer marketing appropriate for this type of drug? When is it, or is it not, appropriate? Do drug companies have a bigger obligation to explain the risks of the drugs that they heavily market directly to consumers, because such consumers are more likely to ask their doctors for these drugs? Why do you think the reaction to the decision to recall in this case was so different, compared to the Tylenol situation? Should senior management have expected the reactions they got? Is there anything they could have done to change them?

Notes: 9

This is actually the Vioxx case that Merck dealt with for a number of years. In spite of its best efforts, there were still issues with this drug and its adverse effects on some patients.

Case #5 -- Shareholders: You work for an investment bank that provides advice to corporate clients. The deal team you work on also includes Pat, a marketing manager, and Joe, who serves as the credit manager for the team, as well as several other professionals.

Just before your team is scheduled to present details of a new deal to senior management, Pat suggests to Joe that the deal would have a better chance of being approved, if he withheld certain financials. "If you can't leave out this information," Pat says, "at least put a positive spin on it so they don't trash the whole deal."

The other team members agree that the deal has tremendous potential, not only for the two clients, but also for your company. The financial information Pat objects to – though disturbing at first glance -- would most likely not seriously jeopardize the interest of any party involved. Joe objects and says that full disclosure is the right way to proceed, but that if all team members agree to the "positive spin," he will go along with the decision. Team members vote and all agree to go along with Pat's suggestion -- you have the last vote. What do you do?

In this hypothetical case, what is your obligation to the shareholders of your organization and to the shareholders of the two organizations that are considering a deal? Are shareholders a consideration in this case? Are customers? Are employees? Could the survival of any of the three companies be at stake in this case? In a situation like this one, how could you best protect the interests of key stakeholder groups?

Notes: You and Joe should insist that full disclosure is the only alternative. Senior management needs all of the information, in order to make the best decision. If the others do not agree, politely but firmly insist that a senior manager make the decision.

Case #6 -- Community: You have just been named CEO of a small chemical refinery in the Northeast.

Shortly after you assume your new position, you discover that your three predecessors have kept a horrifying secret. Your headquarters location sits atop 30 5,000-gallon tanks that have held a variety of chemicals - from simple oil to highly toxic chemicals. Although the tanks were drained over 20 years ago, there is ample evidence that the tanks themselves have begun to rust and leak sludge from the various chemicals into the ground. Because your company is located in an area that supplies water to a large city over 100 miles away, the leaking sludge could already be causing major problems. The costs involved in a clean-up are estimated to be astronomical. Because the tanks are under the four-story 10

headquarters building, the structure will have to be demolished, before clean-up can begin. Then, all 30 tanks will have to be dug up, disposed of, and all of the soil around the area cleaned.

You are frankly appalled that the last three CEOs did not try to correct this situation, when they were in charge. If the problem had been corrected 15 years ago, before the building had been erected, the costs would be substantially less than they will be now. However, as frustrated as you are, you are also committed to rectifying the situation. After lengthy discussions with your technical and financial people, you decide that a clean-up can begin in two years. Obviously, the longer you wait to begin a clean-up, the riskier it becomes to the water supply.

Before you begin the clean-up, it is imperative that you raise capital, and a stock offering seems to be the best way to do it. However, if you disclose news of the dump problem now, the offering will likely be jeopardized. But the prospect of holding a news conference and explaining your role in keeping the dump a secret, keeps you up at night.

Who are the stakeholders in this situation? What strategy would you develop for dealing with the dump and its disclosure? Are you morally obligated to disclose the dump right away? How will Wall Street react to this news? Does your desire to correct the situation justify keeping it a secret for another two years?

Think about the due care theory presented earlier in this chapter. Can we draw parallels between due care for the consumer and due care for the environment?

What if the oil tank dump mentioned in the hypothetical case, was located in a foreign subsidiary of a U.S. company and the country in which it was located had no laws against such a dump? Would the CEO be under any obligation to clean it up? Should American companies uphold U.S. laws concerning the environment in non-U.S. locations? How much protection is enough?

Notes: Just as in the earlier case concerning contaminated spring water, this CEO does not have much of a choice. By the time his/her firm has enough capital to make the cleanup financially more "comfortable," the contaminated water might seriously harm countless people in the large city.

The CEO needs to contact the proper authorities (the Environmental Protection Agency and local officials) and explain the problem. He or she needs to hire the best experts to assess the problem as best they can, to determine the extent of the damage and perhaps put a figure on the cost of the clean-up. With all of that information gathered, he or she can begin a relocation and clean-up strategy. If a CEO self-reports to the EPA, perhaps the EPA will make the news public with the company executives. The reputation of the company may not be damaged in such a scenario and a successful stock offering might be a real possibility. Investors in the past have been willing to take a chance on a company that has a sound plan for recovery from a difficult situation. For example, investors, who bought Chrysler bonds when the company was on the ropes, made out very well.

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Homework Assignments 1. Case Analysis One effective homework assignment is to have students analyze any of the short cases at the end of the chapter, which are also described under In-Class Exercises in this Instructor’s Manual.

2. Real Case Analysis or Classic Case Update Another homework assignment involves asking students to either choose a company that is currently going through an ethics crisis (Toyota, BP, Goldman Sachs, AIG, etc.), or to update one of the classic cases outlined in the chapter.

Additional Resources: There are a number of videos available through YouTube on these various ethics disasters. Since some of these may not be available when you look for them, we are not providing links. To find available videos, go to YouTube and search for any of the disasters in this chapter.

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Chapter 11 Managing for Ethics and Social Responsibility in a Global Environment Contents: (Please note: the Instructor Guide for every chapter will follow this structure.)

1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources

Chapter Outline I. Introduction II. Focus on the Individual Expatriate Manager A. The Difficulties of Foreign Business Assignments B. The Need for Structure, Training, and Guidance C. Foreign Language Proficiency D. Learning about the Culture E. Recognizing the Power of Selective Perception F. Assumption of Behavioral Consistency G. Assumption of Cultural Homogeneity H. Assumption of Similarity I. Ethics-Related Training and Guidance J. How Different Are Ethical Standards in Different Cultures – Really?

K. Development of Corporate Guidelines and Policies for Global Business Ethics III. The Organization in a Global Business Environment A. Deciding to Do Business in a Foreign Country B. Development of a Transcultural Corporate Ethic IV. Conclusion V. Discussion Questions VI. Short Cases A. The Gift B. Selling Medical Ultrasound Technology in Asia C. Google Goes to China VII. 1

Appendix – Caux Roundtable Principles for Business

Teaching Notes - Discussion Questions 1. If you were going on your first overseas business assignment, what would you do to ensure that you were prepared to deal with ethical dilemmas you would face?

Possible Responses •

Study the culture - Social, political and economic - Similarities and differences in relation to the U.S. - Cultural perspectives on business

•

Learn the language and cultural idioms

•

Talk to employees who have been there before - Their perceptions of differences in business practices - Pitfalls to avoid

•

Talk to foreign nationals - Their perceptions of differences in business practices - Pitfalls to avoid

•

Learn business practices - Ethical issues typical of the culture - Negotiation tactics

What questions would you ask your superiors in preparation for the trip?

Possible Responses •

What training is available to prepare me?

•

What are the guidelines for doing business ethically?

•

Specific job expectations

•

How job expectations and ethical guidelines align. (Will you be rewarded for making ethical decisions, even if company profit is not as great?)

2. Your firm is expanding globally and is sending executives overseas for the first time. What will you do, to be sure these individuals are prepared to deal with the ethical dilemmas they will face?

Possible Responses

2

•

Provide training - Nature of culture - Language - Business customs

•

Establish corporate guidelines for doing business

•

Adjust the reward system to reward ethical decision making

3. Imagine that someone from another culture asked you to provide information about business ethics, when dealing with American managers. What would you say?

Possible Responses •

Describe the Foreign Corrupt Practices Act that U.S. corporations and their members must obey

•

Share that American managers prefer to follow U.S. and local laws

•

Emphasize the similarities in practices and point out the differences

•

Americans are eager to learn about the culture and business practices of partner nations

•

Suggest they explain the differences in business practices to the American managers -

•

Americans expect you to look them in the eye Americans are task, not process, oriented Bluffing in negotiation is generally accepted Americans sometimes withhold information, because they think information is power

American law has become policy in other countries

4. Talk with someone from another culture. Ask for information that would be helpful to you, if you had to do business in their culture. What did you learn that you did not know before?

How might you behave differently, because of what you know?

Examples of Cultural Differences •

3

On a business trip to Japan, one of the authors established a business relationship with a Japanese man who was educated in America. During her tenure in Japan, their interaction included business meals, joint travel and extended meetings. A year later, when the Japanese man came to New York for business, the author greeted him with a kiss on the cheek, much to his embarrassment. It was a totally inappropriate greeting.

•

The other author encountered a Korean student, who was not comfortable making eye contact during conversation. In Korea, who you establish eye contact with and for how long is determined by gender, age and status. This can make negotiations difficult.

5. If you were planning to do business in a culture that was opposite from your own on the cultural dimensions of “power distance” and “individualism/collectivism,” what challenges would you expect to face? How would you prepare?

With power distance, you would need to be sensitive to any hierarchical differences between you and your business partner and consider how those might impact your interactions. In doing business with someone from a high power distance culture, you may also need to understand that your partner will defer to those in higher positions.

With individualism/collectivism, again you would need to be sensitive to the potential differences. Collectivists value harmony and the group, while individualists value individual achievement and tend to be more aggressive. Collectivists also tend to engage in gift-giving and nepotism. So, you would need to be prepared for that and ready to respond in a sensitive manner.

6. Imagine yourself in a situation, where you had to bribe someone or lose the deal. How would you think about it? What do you think you would do? Why? What position would you hope your employer takes?

Possible Answers •

Apply the "Eight Steps to Sound Ethical Decision Making in Business" that were introduced in Chapter 2 1. Gather the facts 2. Define the ethical issues 3. Identify the affected parties 4. Identify the consequences 5. Identify obligations 6. Consider your character and integrity 7. Think creatively about potential actions 8. Check your gut

•

4

Refer to the culture of your organization. What guidelines does it provide for decision making? (See Chapter 5 for a discussion of organizational culture.)

•

Recall the code of conduct or policy manual of your organization. What guidelines does it provide for decision making? (See Chapter 6 for a discussion of codes of conduct.)

Probes to Stimulate Discussion •

"What factors would you consider in weighing your options?"

•

"What are the options?"

•

"What criteria would influence your final decision?"

•

"What would be the short and long term ramifications of each option?"

•

“What do you think you would do? Why?”

Probe to Stimulate Discussion •

“Explain your decision in terms of the factors you considered and the ramifications of your choice versus other options.”

7. Assume the role of corporate decision maker in a decision about whether to do business in a particular foreign country in the developing world. What criteria will you establish for making the decision from an ethics and social responsibility perspective? Why are these the most important criteria? What information will you use to help you make the decision?

This question is designed to get students to think deeply about values and how those should drive decisions about whether to do business in a particular country. (See suggested assignment below, as well as “Google Goes to China” case at the end of this Instructor’s Manual).

Probes to Stimulate Discussion •

“What core values will you establish for your firm?”

•

“What will you do, if these core values cannot be satisfied in the country?”

•

“What information will you need in order to make the decision?”

8. What are the costs and benefits of developing a transcultural corporate ethic? Whose responsibility should it be to develop such an ethic - governments, corporations, and intergovernmental organizations, all of these?

Probes to Stimulate Discussion • 5

“Could such an effort be seen as just a form of U.S. interference in other cultures?”

•

“How do you think American business people in general would react to it?”

•

“What countries would be most (least) amenable to such a development?

9. Choose a multinational company. Study its website and compare its emphasis on business ethics and social responsibility with the Shell Group. What did you find – more or less emphasis? Do you have any ideas about why that might be?

10. If you had to create a global code of conduct for your company, what would you include? What core values would you state? How would you treat behaviors such as gift giving and nepotism?

The code will depend somewhat on the countries you are in and the particular ethical issues that are of concern in those places. But, you would certainly deal with typical issues of bribery, working conditions (if that is an issue), protection of the natural environment, gift giving, nepotism, non-discrimination in hiring, etc. For how to treat gift giving and nepotism, see the section of the chapter on Tom Donaldson’s approach, which we think is best.

In-Class Exercises: 1. Case #1: The Gift You are an account executive with a multinational financial firm, and one of your biggest accounts is that of a shipping magnate in Greece. Several months after you have arranged very complex financing to build a new fleet of oil tankers for this customer, he asks if you and your wife would attend the christening of the first tanker. You, of course agree to attend - it would be an insult to him if you did not. When you arrive, he asks your wife to break the traditional champagne bottle over the bow of the tanker. Two weeks after the christening, your wife receives a package from your customer. In it is a gold bracelet with her initials and the date of the christening set in diamonds. To return the gift would insult your customer, but accepting it, would clearly violate your company's policy.

What should you do?

Possible Answers •

Go to the corporate counsel before you go to a foreign country and ask what to do in such an event.

•

Return it and nicely explain the corporate policy.

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•

Accept on behalf of the organization. Then sell it and give the proceeds to charity - but tell the magnate what you are doing and why.

•

Accept on behalf of the organization and buy it back from them.

Case-based Questions 1. What kind of ethical issue is this?

Possible Responses •

Conflict of Interest - Subtle "bribes" - Influence

2. Why would it be against corporate policy to accept such a gift? Do you agree with the policy? Why or why not?

• • •

Could encourage blatant bribes in the future Could be interpreted as a bribe Very expensive gift

Do you agree with the policy? Why or why not?

3. Put yourself in the "shoes" of each of the parties. How might they think about the issue?

Shipping Magnate • Money to burn • Common practice to lavish gifts • Insulted if gift returned • Might understand if policy was explained Executive • Caught in the middle between following policy and not insulting the customer • Does not want to lose business, on the other hand, the magnate needs our money to do business, so he should follow our business practices Spouse • No harm done or insulted, depending on perspective 4. Imagine that you are the corporate vice-president in charge of business ethics and conduct for your firm. Would you be willing to change this policy? Why or why not?

• 7

Policy is consistent with spirit of the Foreign Corrupt Practices Act, so would not change it

•

Practice is turning away from "In Rome do what the Roman's do," to following customs of American business

•

If situation is unique, if you have been careful to disclose and document all facts; policies can sometimes be flexible. However, it should be a rare occasion.

2. Case #2: Selling Medical Ultrasound Technology in Asia Notes: Frontline created a powerful video that you may want to show before discussing this case. It is called “India: The Missing Girls” http://www.pbs.org/frontlineworld/rough/2007/04/the_missing_gir.html.

Case Questions: 1. Should Pat raise this issue with management? If so, what should he say?

This is a good example of an opportunity to voice one’s values (see Chapter 4). Pat will have to decide if this is a “spear in the sand” issue and, if so, how to raise it in a way that is likely to garner a positive response. Pat may want to educate management about the problem and talk in terms of potential risk to the company’s reputation, if nothing is done. He may also want to bring in allies to raise the issue with him. You may want to role play this one.

2. What if he does raise the issue and the company does nothing? What should he do then?

This becomes an ethical dilemma for Pat and can be analyzed using the ethical decision making frameworks provided in Chapter 2. For example, how much harm is being done to these societies in the long term (versus the medical benefit provided by the machines)?

How do Pat’s personal values come into play? Does the disclosure rule help?

3. Does this use of the technology breach a core value? Or is this a case, where the company should respect local cultural practice? Is there some compromise position in between?

It seems to us that this does breach a core value of human rights, particularly for women.

Think of all the girls who will never be born, if this practice is allowed to continue. On the other hand, there is evidence that women feel pressured to engage in this practice, so that they will have a son who will take care of them.

If we think long-term, the human rights of boys may also be at stake, if we think of the opportunity to have a life partner as a human right. If so, this right is seriously in jeopardy. Finally, the human right to the best health care may also be at stake, making this a really tough ethical issue.

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4. Should the company be anticipating additional government regulation?

The practice is already against the law in most countries, but the law is not well enforced.

Will increased enforcement be likely and, if so, does the company risk fines and other punishments? It is hard to say. But, it is generally good management practice to be out in front of government regulation.

5. What is the risk to the company’s reputation of doing nothing? Of doing something?

Again, this is tough to anticipate. But, given the transparency in our interconnected world, one never knows who will pick up an issue and run with it. Management certainly needs to be concerned, about getting a reputation for contributing to sex-selection abortions. On the other hand, taking strong action could have negative effects, if they are seen as cultural imperialists. So, action will have to be taken with sensitivity to the local culture.

6. How might the company think about their responsibility from a supply-chain perspective? Might they learn anything from companies in other industries that have had to deal with this issue? For example, would it be appropriate to initiate a policy to engage with customers, who certify that they will sell exclusively to authorized users? Even if the company did that, how could they be sure customers were complying?

As other industries have done before, this company is going to have to get more involved in relationships in the supply chain from an ethics perspective. They might want to obtain some legal document from customers, certifying that they are complying, but as the question asks, it would be difficult to ensure compliance, without putting an expensive monitoring system in place. And, given that many of these clinics are located in remote areas, doing so would not be a simple matter.

7. Should the company also be educating and training employees and clients on the ethical uses of the products? Or, would that be seen as ethical imperialism?

The company has an obligation to do this, but it will be difficult to do it in a way that is not seen as ethical imperialism. They may explain why they are doing it in terms of core values. Or, they may hire locals from the culture, who agree with the company’s stance to conduct the training, if they are willing to do so (remember – gender selection abortion is against the law in most of these countries – therefore one can likely find locals who agree with the company’s stance.

8. What should a sales representative do, if he or she suspects that a client will be using the ultrasound equipment for sex-selective purposes?

Hopefully, the sales representative has been trained and prepared to offer a carefully designed response that is consistent with company policy. The rep may actually stop the 9

sales call and leave, if it is clear that the machine is going to be used for that purpose. If there has been no direction from the company, the least the sales rep should do is to report this back to the company.

9. The company provides service for these machines. Might that be a way to monitor use?

This may be the very best hope for getting a handle on this issue. The company might add labels to all machines, making it clear that they should not be used to identify the sex of fetuses. They can also refuse to service machines that are being used for sex selection purposes. But, this will work only if no local competitors exist, who can just move in and take over the service.

10. Can the company do anything to better understand the root cause of the problem and tackle that?

Certainly, company representatives should do their best to understand the drivers of this problem, so that they can attempt to arrive at creative solutions. They may work with governments and activists to attempt to do so. But, with this problem, there do not seem to be apparent solutions (such as building schools for children who are removed from factories with the child labor issue). Entire cultures would need to change in order to resolve this one, perhaps through educating the public and making social investments that promote equality for girls. In fact, this is what GE has done.

See below for a website that offers information about how GE is handling a similar problem: •

http://www.ge.com/citizenship/news_features/features_ethical_product_use.jsp

3. Case #3: Google Goes to China

Case Questions 1. Why do you think so many American citizens and lawmakers reacted negatively to Google’s decision in 2006?

First, Americans value free speech and freedom of the press, because these are constitutionally protected values in the U.S. Thus, many saw China’s censorship as a breach of human rights. They also saw Google as hypocritical, given their stated values and principles.

2. Does the fact that Google is an Internet company change societal expectations of it with regard to information openness?

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We think it does. The Internet is associated with freedom of expression and the free movement of information around the globe. China’s censorship seems totally counter to the ethos of the Internet.

3. Was Google facing an ethical dilemma (values in conflict) in 2006?

Absolutely! This is a company that says it values freedom of information. But, it also values financial success and China is the fastest growing market in the world. At the time, the company seemed to compromise by saying that being in China (and continually bugging the government about its stance), would be more helpful than not. But, it does not seem to have worked out that way.

4. Analyze the dilemma from consequentialist, deontological and virtue ethics perspectives. Based upon your analysis, what do you think is the right thing to do?

Do you agree with Google’s CEO that the company made “a principled decision?”

Why or why not?

Consequentialist analysis would identify all the stakeholders and the harms and benefits to each, caused by either staying in this market or not (or some creative alternative).

Without a crystal ball, Google would not have been able to assess these harms and benefits very effectively and it does seem that they were wrong in their estimation of how powerful Chinese censorship would continue to be.

Deontological analysis would focus us right back on values. What are the company’s values and what are its duties and obligations as a responsible company in this situation?

What about virtue ethics? What does it take to be viewed as a virtuous company in this situation? Obviously, many critics in the US Congress, the media, NGOs etc. did not view the company as very virtuous at the time. The “disclosure rule” suggested many critics were not very kind to the company, with criticisms that are outlined in the case.

5. Google’s motto is “Don’t Be Evil.” What does that mean? And, how does it apply in this situation? Is the company living up to its motto? Is it a good motto?

This is a great topic for discussion. We think the motto means, do not do unethical things (if you can be clear about what those are). But, it clearly does not say anything about doing good things, or attempting to be an ethical leader in any way. Over time, it does seem that the company was attempting to live up to its motto. It continually reassessed the situation and eventually decided that it could no longer do business in China, as it previously had. One interesting statement is that “withdrawing the service would be a ‘greater evil.’” But, the company motto did not say “do less evil.” It says do “NO” evil.

The question is, did Google live up to that motto? We do not think so, but others may disagree.

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6. Consider Google’s other values related to democracy, not doing evil, focusing on the user, providing information, etc. Can Google do business in China and maintain these ideals? If so, how? If not, why not?

It seems pretty hard to us. China is clearly not democratic, and it is impossible to say that the company is providing accurate information on certain topics, when China engages in such powerful censorship. Also, the company clearly says things in its stated goals and values that seem impossible to live up to in the Chinese environment. For example, “Google has refused to make any change that does not offer a benefit to the users who come to the site.”

7. In defense of its 2006 decision, Google said that it complies with the law in countries where it does business. But, the author of a book on IBM and the holocaust says that IBM used the same defense in the 1930s, when it provided Adolf Hitler with the tools to keep “the wheels of the Holocaust running on time.” The author says “[they] want to be good Americans in the U.S. and good collaborators in China.

They want it both ways but there are certain things we must not do” (Page, 2006).

(This needs an appropriate citation. I’m assuming that it’s a reference to an Edwin Black book, called IBM and the Holocaust, but the authors need to confirm.) Do you agree with the company’s stance? If so, what changed in 2010?

Complying with the law in countries where the company does business, creates a “floor” or minimum standard for ethical and socially responsible behavior. Remember the corporate social responsibility pyramid. Ethical behavior goes beyond just legal behavior and this is particularly important in foreign countries, where the laws may be quite different in terms of human rights or care for the natural environment. Recall that we said that companies must start with their own core values and base decisions upon those.

What if the law says, it is okay to kill workers who do not work hard enough? Or, what if the law says that workers do not need to wear protective gear despite the harmful health effects of their work? Will the company comply with those laws and feel okay about what it is doing???

8. Google and other companies routinely comply with government rules to censor other types of material, especially pornography, but also hate speech and other moral matters, such as sexual images in Islamic countries. Are some forms of censorship acceptable? If so, where/how would you draw the line?

This question will require much ethical deliberation and companies may want to bring in ethics experts, to help when matters such as these come before them. Core values can help, to the extent that one can decide whether any proposed action breaches a core company value. For example, if human dignity is a core value, it might seem permissible to censor pornography. If harm to people is an issue, the decision is even clearer. For example, most of us can agree that child pornography is harmful to the children involved and can have other harmful effects. We can ask questions, such as -- is hate speech likely to cause harm to the targets of the hate?

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9. Tom Donaldson rejects ethical relativism (“when in Rome”) and ethical absolutism (insisting on the same exact standards everywhere for every situation). Instead, he recommends that companies operating overseas adopt an ethical threshold, based upon core values, such as the golden rule and respect for human rights. Those must then be translated into specific guidelines. Do you think Google’s 2006 operating standards were consistent or inconsistent with Donaldson’s recommendations? If you were going to recommend a set of standards for Google, what would they say and why?

We think that Google went against its core values in this case. But, we also think, Google has more work to do to develop a set of core values that can truly guide company behavior in situations like this. Do not be evil does not seem to do it.

10. Every transcultural set of ethics standards for global business practice includes the principle of human rights. For example, the UN global compact says that companies should protect internationally proclaimed human rights and not be complicit in human rights abuses. The Caux Roundtable Principles state that businesses should contribute to human rights in the countries in which they operate.

Is Google’s behavior consistent with these expectations? Do you agree that the company “negotiated away users’ human rights” in 2006?

We are critical of Google’s 2006 stance. The company seemed to naively conclude that the company could come in and change the culture of a country like China. There have been examples of that, such as when companies entered South Africa, abiding by the Sullivan Principles. Some argue that they helped to change the country for the better.

Although this is still debated, this was a country already in transition and very different from China. We think Google learned a powerful lesson from this experience. But management is still trying to navigate these difficult waters.

11. What about the company’s threat to pull out of China in 2010, if its users could not conduct censorship free searches? Do you agree with it? If so, why was it the right decision at that moment? How might it affect other companies doing business in China? Does it change how you think about the company’s original decision?

We agree with the decision. The company’s action was precipitated by concerns for human rights activists in China, whose email accounts were apparently hacked by the government. This is a government that takes its censorship and repression of dissent very seriously and the company felt that it could no longer protect user security. At press time, the company was sending Google.cn users to its Hong Kong website.

It is unclear how this might affect other companies, but it would not be surprising to see other US firms follow Google’s lead.

It does not change our perspective on the original decision. The company miscalculated.

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Homework Assignments 1. Assignment: Research a Country Assign students (as individuals or in teams) to research specific countries. What information will they look for, in trying to decide whether to do business there or not? What criteria will they use?

The following are excellent on-line resources for completing such an assignment. It would be interesting to discuss what students or teams learned.

Country Information Resources: The Library of Congress country studies: http://lcweb2.loc.gov/frd/cs.cshome.html Political Risk Yearbook, a subscription database: http://www.libraries.psu.edu/business/online.htm (Despite its title, this is an excellent resource!)

Additional Resources: 1. Exercise: Bafa Bafa Bafa Bafa is a tried and true cross-cultural simulation exercise. It requires two facilitators, takes two hours and works best with about 35 students. Students are divided into two groups. Each group learns its "culture" (alpha or beta) from audio taped instructions and practice. The cultures are designed to be quite different. In fact, the "betas" even learn a different language. (It is easy to learn, but hard to figure out.) Then, the groups exchange visitors who do not try to interact, but do try to understand the other culture. They return with information for their respective group. Then, the cultures trade visitors who actually try to understand the other culture they are visiting. They inevitably make cultural mistakes, and some are even asked to leave. After all students have had an opportunity to visit and interact, the entire group is brought together for debriefing.

The experience teaches: • The power of culture • The discomfort associated with being in a culture where you do not know the rules • The comfort of being at "home" • What one needs to do to have a successful cross-cultural experience?

“Bafa Bafa” is available from Simile II, P.O. Box 910, Delmar, CA 92014, 619-755-0272.

2. Discussion: Parable of the Sadhu

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This is another good place to use the Harvard Business Review case, “The Parable of the Sadhu.”

Discussing it at this point in the course, allows you to revisit many of the major themes in the course: values, values in conflict, ethical decision making frameworks, moral awareness, goals, leadership, rewards, cross-cultural issues, etc. Note: It is difficult, if not impossible, to obtain the video version of “The Parable of the Sadhu.” However, the print version is readily available through Harvard.

3. Suggested Final Exam An idea for a final exam that has worked very well is to have students analyze a film using the various concepts from the course. Select a film such as Wall Street or Dead Poets’ Society or The Insider. Instruct students that they can watch the film as often as they would like and they can discuss the film with others. However, they must analyze the film on their own, using concepts they have learned from the course. In most of these films, we have identified well over 20 concepts.

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