16. The above analysis rests on the assumption that there is no implied promise to continue
servicing clients past the legal period of the contract (unless such a promise is made orally).
However, our analysis of Jennifer’s job decision claims that there is an implied promise to work
longer than the two-week notice period. Why are the two situations different? Hint. Under
what conditions would the agreements involved lose their point?
Service contracts most definitely have a point if the parties observe exactly the written terms and
17. Filching printer paper. When I take business school classes, I prefer to have a hard copy of
the notes that are distributed electronically by the professors. Because there is typically a long
line of students at the school printer, I print my notes at home. This not only makes better use of
my time but reduces ink consumption and wear and tear on the school printer. However, class
notes require a great deal of printer paper, and I would like to take home a pack of the paper that
is stockpiled near the school printer. I would use it only for printing class notes. Given that I
would consume the same paper if I printed the material at school, is there an ethical problem
with this?
Taking the printer paper without permission is theft, and theft is ungeneralizable. Printing the
same material at school is not theft because you have permission to use the paper. The
18. Vacation allowance. My previous employer allowed 10 vacation days a year, which could be
used at any time without management approval. In addition there were five personal days, for
which there were very specific restrictions. They could be used only to take care of a sick child,
attend a funeral, or complete the sale of real estate. My boss, however, told me to use personal
days as though they were vacation days. In fact, he said I should use personal days first,
because they could not be rolled over from year to year as vacation days could. Was it OK to
follow his advice?
19. Unqualified intern. While a systems engineer at a bank, at one point I shared a cubicle with
Michael, a summer intern. I got to know him quite well, and we became friends. Near the end of
the summer, I learned from my supervisor that he was going to recommend Michael for a
permanent position. I was naturally happy for Michael, but disconcerted at the same time. Over
the summer I had learned that Michael didn’t have the ability for the job. In fact, I had to assist
him with his internship duties several times over the summer. Should I have informed my
supervisor that Michael was unqualified?
The utilitarian test is pivotal. If Michael takes the job, both the company and Michael are likely
There is no reason to believe that advising one’s superior on the qualifications of coworkers is
ungeneralizable. Virtue ethics plays a role here because of your friendship with Michael, but it is
20. Playing someone else’s shell game. I was working as a contractor for a company that had
several concurrent projects with the same client. Each project had a budget, and some had more
money left in the budget than others. The company would face a penalty for each budget it
exceeded, and it would collect a bonus whenever it came in under budget. While I was working
on project A, the company asked me to charge some of my expenses to project B.
Presumably the penalty is greater than the bonus, or else there would be no incentive for the
21. Too much sophistication. I was a relatively new associate in the sales and trading division
of a major investment bank. One of our tasks was to value and manage risk for structured
securities, which can be a very complicated affair. My particular job was to help prepare
materials used by a sales force that sells less-risky securities to such traditional investors as
insurance companies, pension funds, and fixed-income mutual funds. Riskier securities were
sold to hedge funds. At one point I realized that a relatively obscure valuation approach
commonly used for another product could help traditional investors understand specific types of
risk associated with their investments. I wrote some materials to describe the approach, but my
director told me not to share them with the sales force. He said that he didn’t want traditional
investors to start viewing their securities in this way. It would complicate the sales process and
make it harder to create demand for new deals. However, I thought we owed it to our clients to
provide a more sophisticated risk valuation method. Hint. Note that this case concerns a
company decision, rather than the decision of this individual.
The basic question is whether the bank has an ethical obligation to provide the client the best
possible valuation method. Generally speaking, there is no obligation to provide customers with
We can ask if there is a professional obligation for financial advisors to provide the best possible
investment advice. There have been efforts to put the industry on a professional footing. In the
The issue therefore boils down to a utilitarian choice. A more sophisticated valuation method
may result in wiser investment and increase overall net utility. Yet if it alienates customers, they
22.* Fraud in Armenia. I was a Peace Corps volunteer in a small Armenian mining town. I
spent a year trying to learn the language and local customs, and in the process I got to know the
owner of a local poultry farm. Aside from the mine, this farm was the largest employer in town,
with roughly 300 employees, although many of them worked only part time due to bad
management. I estimated that if the farm were managed properly, it could employ another 300.
I began meeting with the farm’s accountant and discovered that he owned a computer, at which
point I began to teach him to use Excel. After a time he began to realize the value of what I was
teaching, and he stopped his heavy drinking before and during our sessions. Although there was
plausible deniability, I got the strong impression that he wanted to prepare multiple sets of
books: one for under-the-table investors in the United States, one for the relatively corrupt
Armenian government, and a true version for resource management. I concluded that if I taught
him enough to upgrade the poultry operation, he would use the same knowledge to commit
fraud. Should I discontinue my efforts?
The Armenian’s fraud is clearly unethical because it is deceptive. The question here, however, is
We teachers face this issue. Some of our students will use what we teach for unethical purposes.
Some may even use knowledge of ethics to defend unethical practices with clever arguments.
This seems to be a case where a utilitarian test is more useful than a generalization test. Nearly
However, teaching bomb science to terrorists is likely to reduce utility, while teaching ethics to
23. Blaming the subcontractor. I worked for EPI, a contractor that specialized in the
construction of manufacturing plants. EPI does most of its own work but subcontracts for
electrical and instrumentation systems. Engineers at EPI prepare the drawings, estimate the
required hardware, and issue subcontracts to the most competitive bidder. The subcontractor,
generally a small company, orders the hardware three or four months in advance, because of
long lead times. It then completes the construction under the supervision of EPI engineers.
Upon reaching the construction site, I found that the installation drawings were wrong, and as a
result the subcontractor had not procured some of the hardware. I reported this to George, top
boss at the site, who instructed me to correct the drawings and hand over a list of additional
hardware items to the subcontractor’s foreman. I was to tell the foreman that these items should
have been ordered by the subcontractor. George explained that I must make it appear that the
items were included in the initial hardware list, so that EPI could avoid paying the hefty cost
(about $70,000) of expedited delivery of these items. In other words, George wanted me to cover
up EPI’s mistake and get the subcontractor to pay the additional cost. Hint. First evaluate
George’s action and then address the decision his subordinate must make.
Here, again, the boss asks a subordinate to lie. It is the most common theme in ethical dilemmas
24.* Inside information? Mr. Martin was, until recently, head of investor relations at Verband, a
Fortune 500 company. He had risen steadily through company ranks, due to his infallible
judgment and ability to tell the company story in a most marvelous way. This was not an easy
task, as Verband had a habit of covering up its blunders. The company had major discrepancies
in its accounts and, in particular, lied to stockholders over the years about the lack of progress in
its overseas operations. However, Martin was adept at putting the company in the best light
while diverting attention from any discrepancies. The private banking division at EuroBank,
however, had been scrutinizing Verband carefully on behalf of its clients. The research team
contacted Martin numerous times with penetrating questions, which he always skillfully
deflected. The research team was so impressed that they recommended that EuroBank try to hire
Martin. Due to a very generous offer and rumors that Verband was looking for a buyer, Martin
transferred to EuroBank. He quickly became as successful as he had been at Verband. On one
occasion, the head of private banking offered a wealthy client with large holdings in Verband a
presentation by a former Verband insider, who of course was Martin. Martin prepared the
presentation carefully so as to use only data in the public domain to reveal the serious
discrepancies in Verband’s statements. Revelation of anything more would have violated his
contractual confidentiality obligations to Verband. The difference between Martin and any other
analyst is that, as a former insider, he knew exactly where to look for the discrepancies.
Following the presentation and a series of follow-up meetings with Verband management, the
client sold his large holdings, causing the share price to plummet. Verband was subsequently
taken over at a much reduced price. Martin and his colleagues at EuroBank are convinced that
his presentation to the client was entirely proper. After all, Martin’s judgment is infallible.
It is hard to say, without knowing more about the circumstances of the case, whether Mr.
Martin’s revelations maximize utility. We therefore grant that the pass the utilitarian test.
Verband’s conduct is ungeneralizable, but this alone doesn’t show that Martin’s exposure of their
For present purposes we can view confidentiality as an agreement: you give me information, and
Clearly he did. He knows about the pattern in the public documents because of information he
received in confidence from Verband. How to connect the dots is information over and above the
However, one might argue that the confidentiality obligation doesn’t apply here because the
information is about Verband’s unethical behavior. The issue is what kind of information is
On the other hand, suppose a friend says to me, “I will tell you who my extramarital lover is if
you won’t reveal it to anyone.” If I agree to hear the information, I am clearly promising not to
In some cases, however, I shouldn’t promise confidentiality in the first palace. If so, my “act” of
promising confidentiality is not an act because it has no coherent rationale. There is no need to
As for Martin, he continued to work for Verband and cover up its practices long after he was
aware of their questionable nature. So perhaps it is like the extramarital affair. He is implicitly
However, I think we can make a case that that Martin should not have implicitly promised
confidentiality for unethical actions in the first place. Given this, he has no obligation to keep
This means that Martin can ethically reveal some additional dots as well as connect the dots that
are already public. He chose not to do so, perhaps to stay on the safe side of the law. There may