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Chapter 02 - The Role of Ethics in Decision Making
2-11
Emphasize:
That ethics ultimately boils down to the individual values one applies in decision
making.
That individual values can be explored by asking five important questions in situations
o Will one’s decision cause harm to others or to the environment?
o Will one’s actions violate the law?
Additional Matters for Discussion:
Discuss John Smale’s statement that “there is an ethical dimension to most complex
business problems.”
The Dow Corning code of ethics says, “We will act with the idea that everything will
see the light of day.” This is a variation of the 11:00 o’clock news concept which asks
how you would act if what you did was to be broadcast on the 11:00 o’clock news.
(Perhaps today’s students might relate better if we substitute the Internet for the 11:00
o’clock news.)
V. Achieving an Ethical Business Corporation
A. The Obstacles (LO 2-4)
Emphasize:
That there are obstacles to ethical corporate behavior that deserve serious consideration.
Additional Matters for Discussion:
Discuss the impact of executive stock options and stock price related bonuses on the
problem of overstating earnings to raise stock prices. Bring up the issue that part of the
2008 stock market collapse and credit failure, which may have been caused initially by
Chapter 02 - The Role of Ethics in Decision Making
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and complex mortgage-backed securities.
personal interest and the fiduciary duties you bear.”
Illustrating how an overemphasis on profit can cause unethical behavior in lower
echelon employees’ one corporate executive says, “That’s when the boss tells a
subordinate to ‘move it’—just get it done, meet the deadline, don’t ask for more money,
time or people, just do it—and so it goes on down the line.” That “is the heart of
that they were following the orders of supervisors, or otherwise claim that ethical
concerns were someone else’s business.
Gift giving in business presents ethical obstacles. Many corporations limit or entirely
prohibit employees from accepting gifts from suppliers or customers. For instance,
Microsoft routinely mails a notice to its suppliers that Microsoft employees are
The Emphasis on Profit
Emphasize:
That the focus on profit, “the bottom line,” can promote unethical behavior within a
large business organization, especially when senior executives order line managers to
ensure profit.
Chapter 02 - The Role of Ethics in Decision Making
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The Control of Resources by Nonowners
Emphasize:
How ethical business practice as well as corporate governance is made more difficult
by the very nature of modern business corporations that gives managers access and
control over resources owned ultimately by the shareholders.
Sidebar 2.9 titled ‘Failure and Collapse.’
B. The Steps
Emphasize:
That despite the obstacles that sometimes stand in the way of ethical corporate behavior,
certain steps can be taken to promote business ethics in corporate life.
Additional Matters for Discussion:
Provide some examples of decisions that local, national and international companies
have made (or might make) and have the students identify the stakeholders affected.
Consider the statement of Ward Classen, general counsel of CSC Intelicom, Inc.:
“Leadership begins at the top. The company’s chief executive officer must make it clear
that he or she regards the adherence to ethical standards a top priority and that the
failure to adhere to such standards will be considered a serious offense.”
In 1995 Lockheed pleaded guilty to conspiring to violate the Foreign Corrupt Practices
Act and it paid a $24.8 million fine. Subsequently, the company instituted a
sophisticated online training program on ethical and legal compliance. Between 1995
and 2000 it discharged more than 200 employees for ethical violations.
Have the students consider the effects of statements contained in a company’s mission
statement and/or vision statement and the tone they can provide. Are the students aware
of their school’s vision and mission statements?
Involvement of Top Management
Emphasize:
That the single most important step toward achieving an ethical corporation is for top
management to act as a role model for values it wishes corporate employees to share.
That employees tend to adopt top management’s real values, as set by example and
implicit statement.
That even with a current microscope on corporate ethics, 59% of the largest British
companies and a similar amount in the U.S. offer no training to lower management
with regard to the meaning and use of their corporate code of ethics.
Chapter 02 - The Role of Ethics in Decision Making
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Sidebar 2.10 “The Demise of Arthur Andersen.”
Openness in Communication
Emphasize:
That to accomplish an ethical corporation there must be an open and continuing
dialogue on ethics.
The strategies for promoting the ethical corporation as suggested by the Business
Roundtable.
Consideration of All Stakeholders
Emphasize:
The ethical importance of business management considering the many different
parties affected by business actions, known as “stakeholder theory.” Suggest that
stakeholder theory is a reflection of the increasing recognition of social
interdependence.
C. The Rewards
Emphasize:
The enormous size of the world’s largest companies.
That profits and business ethics are not contradictory.
That unethical behavior is a business liability.
That businesses must always be ethically sensitive changes in society.
That business ethics reflect business leadership.
That in reading subsequent chapters on business regulation, students should consider the
organization will improve that process. Even when times are tough.”
For an international perspective on ethics, see T. Donaldson, “Values in Tension: Ethics
Away From Home,” Harvard Business Review, Sept.-Oct. 1996.
D. Can a Business Have a Conscience?
Emphasize:
Chapter 02 - The Role of Ethics in Decision Making
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The “personhood” rights of a corporation have long been recognized in the law.
The Affordable Care Act includes a provision that businesses’ health care insurance
plans offered to employees must include coverage for a wide range of contraceptives.
Additional Matters for Discussion:
Sidebar 2.11 for an example of a business representing its business owners’ religious
beliefs.
Discuss the legal issues in Citizens United and the Hobby Lobby case.
Answers to Review Questions and Problems
Contemporary Business Ethics
1. Ethics and Society
The answer should mention the increasingly complex, diverse society. The problems in the
American economy have become a concern for all Americans and many of these problems
2. Ethics and Government
Certainly, criminal penalties brought against unethical executives and their incarceration has
The Nature of Ethics
3. Ethics and Morality
Morality consists of the values that guide one’s behavior, while ethics is the systematic
4. Ethics and Law
Law is a floor for ethical behavior. It is hardly a ceiling. As a process, the law does not serve
Chapter 02 - The Role of Ethics in Decision Making
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come back to harm the company.
Two Systems of Ethics
5. Formalism
The language of “inherent wrong” shows absolute moral values, which is formalism. In
6. Consequentialism
In most business contexts, this issue will be treated strictly through consequentialist analysis.
Sources of Values for Business Ethics
7. Comparing the Two Ethical Systems
a. Either in terms of promoting the common good or of limiting harm to others, it would
8. Legal Regulation
Law is frequently reactive rather than proactive. As the society changes, societal views
9. Professional Codes of Ethics
Chapter 02 - The Role of Ethics in Decision Making
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This is an open-ended question designed to get students views on lawyers out in the open.
Share with the students that lawyers are criticized both in the Bible and in Shakespeare.
name.
10. Organizational Codes of Ethics
a. This cynicism almost certainly arises because of the contradiction that lower level
11. Individual Values
Students’ answers will vary.
Achieving an Ethical Business Corporation
12. The Obstacles
a. The answer should address how an overemphasis on profit and the effects of group
pressure make it hard to do what is morally correct in corporate decision making.
b. The need to retain proven successful leaders has largely led to this increased
discrepancy. Emphasis on profits has made it imperative for businesses to increase pay
implausible levels.
13. The Steps
Chapter 02 - The Role of Ethics in Decision Making
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© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
in a corporate top-down hierarchy, strict loyalty is required of subordinates in exchange for
mentoring and advancement. Whistle blowing violates the expectations of this system. To
make whistle blowing acceptable, or at least more acceptable, will require clear approval
and modeling from corporate top ranks. To this end whistle blowing is an appropriate
subject for corporate ethics codes.
14. The Rewards
Legal regulation lacks flexibility and is inadequately informed to be the only social guide for
business decision making.
Business Discussion #1
1. Is it ethical for you to hire away from your competitor a secretary who may have overheard
something that will be useful to you? Is it ethical for you to send an attractive employee to a
bar where your competitor’s programmers hang out in the hope of getting the information
you want?
Discuss the section on individual values. In these first two instances, one should think how
one would feel if the rival company did what one was contemplating. Certainly one would
violated.
2. Is it ethical for you to have someone hunt up and read everything published by your
competitor’s programmers in case they may have let slip something that will help you?
Business Discussion #2
1. If follow-up animal studies of the new drug do not show significant side effects, would it be
ethical for the company to tell the two researchers to keep quiet about their concerns?
Chapter 02 - The Role of Ethics in Decision Making
2-19
© 2016 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
their concerns and possibly threaten the marketing of the product. However, this conclusion
is certainly debatable.
2. Is it ethical to put animals at risk in order to test the drug’s safety?
Use this discussion to illustrate the difference between formalist approaches, such as
“harming living creatures is always wrong” or “God gave humans dominion over the
3. Is it morally right for PharmCo to maximize its profit even if it means many men will have to
remain bald? Does your answer change if the drug cures rheumatoid arthritis? AIDS?
The latter questions address very real issues. From a personal perspective, is comparing a
drug that helps users cosmetically to a drug that potentially saves lives a truly valid
