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Chapter 02 - Defining Business Ethics
2-13
as 35 percent, which contributes significantly to Microsoft’s overall tax rate of only 4
4. Is there a potential solution that would represent a more ethical business approach to the
payment of corporate taxes? Explain your answer.
Frontline Focus
“The Customer Is Always Right—Carol Makes a Decision” Questions
1. Did Carol make the right choice here?
Students’ answers will vary. Carol did a good job of keeping track of the sales and
2. What do you think Dave’s reaction will be?
3. What would the risk have been for the restaurant if it had implemented Dave’s plan and
deliberately run out of the new items?
Chapter 02 - Defining Business Ethics
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Key Terms
Business Ethics: The application of ethical standards to business behavior.
Code of Ethics: A company’s written standards of ethical behavior that are designed to guide
managers and employees in making the decisions and choices they face every day.
Corporate Governance: The system by which business corporations are directed and controlled.
Ethical Dilemma: A situation in which there is no obvious right or wrong decision, but rather a
right or right answer.
Oxymoron: The combination of two contradictory terms, such as “deafening silence” or “jumbo
shrimp.”
Stakeholder: Someone with a share or interest in a business enterprise.
Review Questions
NOTE: Some questions allow for a number of different answers. Below are some suggestions.
1. Based on the history of business ethics reviewed in this chapter, do you think the business
world is becoming more or less ethical? Explain your answer.
Students’ responses will vary. Some students may say that the business world is becoming
2. How would you propose the resolution of an ethical dilemma using The Golden Rule?
3. Why should a short-term or long-term consequence make a difference in resolving an ethical
dilemma?
Chapter 02 - Defining Business Ethics
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
consequences that result in unethical behavior. Short-term consequences may require a
different resolution principle. For example, for a long-term consequence, the manager could
consider an ends-based resolution principle; and for a short-term consequence, the manager
may consider the Golden Rule resolution principle or the rules-based resolution principle.
4. Of the four commonly held rationalizations for unethical behavior proposed by Saul
Gellerman, which one do you think gets used most often? Why?
5. Is it ever acceptable to justify unethical behavior? Why or why not?
6. Explain what “doing the right thing” in a business environment means to you.
Review Exercises
1. Since you are traveling on company time, does the free ticket belong to you or your
company? Defend your choice.
2. If the later flight was actually the next day (and the airline offered you an accommodation
voucher along with the meal vouchers) and you would be late getting into work, would you
make the same choice? Explain your answer.
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3. What if the offer only reached a $100 discount coupon on another ticket—would you still
take it? If so, would you hold the same opinion about whether the coupon belonged to you or
your company?
4. Should your company offer a clearly stated policy on this issue, or should it trust its
employees to “do the right thing?” Explain your answer.
Internet Exercises
1. Locate the website for the Ethics Compliance Initiative (ECI) and review the ‘Ethics
Compliance Toolkit’. The ’PLUS Ethical Decision Making Model’ lists seven steps to
ethical decision making. What are they?
2. The Ethics Resource Center (www.ethics.org) is also part of the ECI.
a. What is the stated goal of the ECI’s research arm?
b. List the three categories of ECI research.
Chapter 02 - Defining Business Ethics
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
3. Compliance processes and practices.
c. Identify the topic of the most recent Global Business Ethics Survey
When accessed on November 7, 2016, the following information was available on the
Team Exercises
1. Thanks for the training!
Divide into two groups and prepare arguments for and against the following behavior:
You work in the IT department of a large international company. At your annual
performance review, you were asked about your goals and objectives for the coming year
and you stated that you would like to become a Microsoft Certified Systems Engineer
(MCSE). You didn’t get much of a pay raise (yet another cost-cutting initiative!), but your
boss told you there was money in the training budget for the MCSE course—you’re
attending the training next week. However, after receiving the poor pay raise, you had
polished your resume and applied for some other positions. You received an attractive
job offer from another company for more money, and, in the last interview, your potential
new boss commented that it was a shame you didn’t have your MCSE certification
because that would qualify you for a higher pay grade. The new company doesn’t have
the training budget to put you through the MCSE training for at least two years. You tell
the interviewer that you will complete the MCSE training prior to starting the new
position in order to qualify for the higher pay grade. You choose not to qualify that
statement with any additional information on who will be paying for the training. You
successfully gain the MCSE certification and then give your two weeks’ notice. You start
with your new company at the higher pay grade. Is that ethical?
from one company. If there is no stipulation in the company policy stating the employee
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2. What you do in your free time…
Divide into two groups and prepare arguments for and against the following behavior:
You are attending an employee team-building retreat at a local resort. During one of the
free periods in the busy agenda, you observe one of your colleagues in a passionate
embrace with a young woman from another department. Since you work in HR and
processed the hiring paperwork on both of them, you know that neither one of them is
married, but your benefit plan provides coverage for “life partners,” and both of them
purchased health coverage for life partners. As you consider this revelation further, you
are reminded that even if they have both ended their relationships with their respective
partners, the company has a policy that expressly forbids employees from dating other
employees in the company. Both you and the colleague you observed have applied for the
same promotion—a promotion that carries a significant salary increase. What is your
obligation here? Should you report him to your boss?
“partners” or if someone else were to see them together. Plus, if the company has a clearly
3. Treatment or prevention?
Divide into two groups and prepare arguments for treatment (Group A) and prevention
(Group B) in the following situation:
You work in your city for a local nonprofit organization that is struggling to raise funds
for its programs in a very competitive grant market. Many nonprofits in your city are
chasing grant funds, donations, and volunteer hours for their respective missions—
homelessness, cancer awareness and treatment, orphaned children, and many more. Your
organization’s mission is to work with HIV/AIDS patients in your community to provide
increased awareness of the condition for those at risk and also to provide treatment
options for those who have already been diagnosed. Unfortunately, with such a tough
financial situation, the board of directors of the nonprofit organization has determined
that a more focused mission is needed. Rather than serving both the prevention and
treatment goals, the organization can only do one. The debate at the last board meeting,
which was open to all employees and volunteers, was very heated. Many felt that the
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treatment programs offered immediate relief to those in need, and therefore represented
the best use of funds. Others felt that the prevention programs needed much more time to
be effective and that the funds were spread over a much bigger population who might be
at risk. A decision has to be reached. What do you think?
patients; therefore, these patients would be grateful for the options and help provided.
4. Time to raise prices…
Divide into two groups and prepare arguments for and against the following behavior:
You are a senior manager at a pharmaceutical company that is facing financial
difficulties after failing to receive FDA approval for a new experimental drug for the
treatment of Alzheimer’s disease. After reviewing your test data, the FDA examiners
decided that further testing was needed. Your company is now in dire financial straits.
The drug has the potential to revolutionize the treatment of Alzheimer’s, but the testing
delay could put you out of business. The leadership team meets behind closed doors and
decides the only way to keep the company afloat long enough to bring the new drug to
market is to raise the prices of its existing range of drug products. However, given the
financial difficulties your company is facing, some of those price increases will exceed
1,000 percent. When questions are raised about the size of the proposed increases, the
chief executive officer defends the move with the following response: “Look, our drugs
are still a cheaper option than surgery, even at these higher prices; the insurance
companies can afford to pick up the tab; and, worst case scenario, they’ll raise a few
premiums to cover the increase. What choice do we have? We have to bring this new
drug to market if we are going to be a player in this industry.”
deciding to increase prices. The company should try to minimize the increase in price if this
is the only option and then increase the drugs with the smallest profit margin. The ethical
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Education.
Thinking Critically
2.1 – Marriott: Wi-Fi As a Service or Revenue Stream??
1. What is the FCC’s position on Wi-Fi jamming?
2. What is the position of hotels and convention centers?
3. Is there room for negotiation? Would less exorbitant fees draw less anger?
4. How should these companies balance their obligation to shareholders to make money against
the obligation to provide good customer service?
5. Is the FCC being too extreme in its position? Why or why not?
6. Is there potential for an equitable resolution of this issue? Why or why not?
Chapter 02 - Defining Business Ethics
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Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill
Education.
Students’ responses will vary. Since the optimum solution appears to be giving up revenue
and investing capital in higher grade network systems in the name of increased customer
satisfaction, an equitable solution seems unlikely.
2.2 – Unequivocal Dedication to Business Ethics?
1. Visit the website for BELA at www.ethisphere.com/bela. Define the three areas of
performance for the World’s Most Ethical Companies in detail, and explain which one you
think will be the hardest for members to achieve and why.
Students’ responses will vary. When the website was accessed on November 6, 2016, the
2. Do you think it was a good idea to welcome founding members with such widely publicized
ethical transgressions in their past? Why or why not?
3. BELA is a U.S.-driven initiative at the moment. Do you think it will achieve a wider global
acceptance over time? Why or why not?
4. Are the three key products enough to establish a credible reputation as an ethical company?
What other values would you consider adding and why?
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5. Cynics could argue that this is simply a public relations exercise for companies that have
performed unethical business practices in the past. Optimists could argue that this is, at the
very least, a step in the right direction of restoring the ethical reputation of business as a
whole. What do you think?
6. According to the rules of BELA, members will be audited every two years to make sure they
are in compliance with BELA standards, and can face removal from the alliance should that
audit provide evidence of failure to comply. Do you think the threat of removal from the
alliance will keep members in line? Why or why not?
2.3 – Teaching or Selling?
1. Where is the conflict of interest in this CME relationship?
2. Do you think doctors are likely to be influenced by such promotional tactics? Why or why
not?
3. If the pharmaceutical company is paying for the event, shouldn’t it have the right to promote
its products at the event? Why or why not?
Chapter 02 - Defining Business Ethics
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Education.
should have the right to promote its products at the event because all pharmaceutical
companies have the opportunity to be a sponsor or pay for the event. However, the sole
purpose of paying for the event should not be promotion.
4. Pfizer stated in 2008 that it would only support medical education put on by hospitals and
professional medical associations. How can it then justify the Stanford grant?
5. Has Pfizer simply replaced one conflict of interest with another? Why or why not?
6. Propose an alternative approach to ensure CME is provided without a conflict of interest.
Students’ responses will vary. CME courses must be taken by doctors in order to maintain
