Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
11) The business communicates performance with its shareholders and allows shareholders to
exercise their rights and communicate their views.
CHAPTER QUESTION 5: WHAT ARE SEVERAL COMMON GOVERNANCE
PROBLEMS AND ISSUES?
NEGLIGENCE
• The result of multiple demand may make it difficult for board members to have time to
adequately address corporate problems and understand the best interest of the company
UNDUE INFLUENCE BY CEO AND OTHER MANAGERS
• Boards are often constructed with trusted friends and colleagues – this can sometimes
result in bias
BOARD MEMBER INTERESTS AND INSIDER TRADING
• Conflicts of interest can occur when the board member’s own company is impacted by
BOARD DIVERSITY
• Society has increased the pressure on companies to include more women and minorities
on their boards
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
– Increases sensitivity to customer preferences
– Enhance credibility
SEXUAL HARASSMENT
• Has become a more visible problem in recent years
SHAREHOLDER ACTIVISM
• a person who attempts to use his or her rights as a shareholder of a publicly-traded
corporation to bring about change within or for the corporation
• Types:
EXECUTIVE PAY
• Median CEO salary in 2019: $802,506
• Average pay top 200 CEO: $18.6 million
• Highest paid in 2018: Elon Musk of Tesla: $2.3 billion
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
o Board members, who are also highly paid executives and often hand-picked by the
CEO, choose a compensation package toward the high end of the scale so as not to
lose the CEO to a competitor.
• In the 1980s, Ben & Jerry’s addressed the compensation fairness issue by establishing a
five-to-one salary ratio between the highest and lowest paid employees. However, the
compensation plan was abandoned in the 1990s due to difficulties Ben & Jerry’s
experienced trying to recruit skilled senior-level managers willing to accept this pay
limitation.
DISCUSSION ACTIVITY
Small group or whole class discussion: The ratio of CEO pay to that of an average employee
Chapter 3 QUESTIONS ANSWERED
Chapter Question 1: What are the roles of ethical values for the six traditional shareholder-
oriented governance systems?
Type
Description
Instructor Resource
Collins, Business Ethics 3e
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S-Corporation
100 or fewer shareholders who elect a board of directors; business
profits are distributed to shareholders and taxed on the shareholder’s
individual federal income tax form.
C-Corporation
Unlimited shareholders who elect a board of directors; business
income is taxed at the corporate level and shareholders only pay
personal income tax on dividend distributions.
stocks are sold on public exchanges or over-the-counter markets;
pay personal income tax on dividend distributions.
Chapter Question 2: What are the two primary ways board of directors determine the
shareholders’ best interests?
Narrow conception of social responsibility
federal income tax form.
Partnership
individual federal income tax form.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
Chapter Question 3: How can companies implement three innovative stakeholder-oriented
governance systems?
Type
Description
Benefit Corporation
Any for-profit company whose governing documents state that it
operates for a public benefit; the board of directors has legal
Chapter Question 4: What are some of the best practices for good corporate governance?
Company executives and board members are to be transparent, accountable, responsible, and fair
Chapter Question 5: What are several common governance problems and issues?
• Negligence
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
CHAPTER 3 ANALYSIS FOR “WHAT WOULD YOU DO?” OPENING DILEMMA
Chapter 3: Work Hard, Play Hard
Summary
You obtain a management position with a rapidly growing start-up preparing for an
IPO.
Just before the IPO, you see a board member sitting by herself in a restaurant. Board
members have a legal obligation to make decisions based on the best interest of the
company. You wonder if the board knows about the reckless culture that the CEO
has developed in the workplace.
What would you do?
Instructor Resource
Collins, Business Ethics 3e
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Table 6.3 Systematic Rational Ethical Decision-Making Process
1. Who are all the people affected by the action?
2. What option benefits me the most (egoism)? Why?
complicated, and protects your job.
3. What option does my social group support (social group relativism)? Why?
Mixed: Many incidents of workplace harassment and drug use are not reported, and your
4. What option is legal (cultural relativism)? Why?
Both: By reporting the reckless work culture to the board directly (Option A) or by writing
5. What option is the greatest good for the greatest number of people affected
(utilitarianism)? Why?
Write an anonymous letter to report the reckless work culture (Option B): Reporting
illegal behaviors to the board member allows her to investigate take measures to protect
6. What option is based on truthfulness and respect/integrity toward each stakeholder
(deontology)? Why?
Instructor Resource
Collins, Business Ethics 3e
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Write an anonymous letter to report the reckless work culture (Option B): Reporting
7. What option would a virtuous person do (virtue ethics)? Why?
Approach the board member directly and report reckless work culture (Option A).
Note
• If answers to Questions 2 through 7 are all the same option, then do that option.
• If answers to Questions 2 through 7 are mixed, then:
Option
Option Weaknesses Based on
Application of Ethical Theories
A: Approach the
board member
directly and report
You may suffer retaliation. You
are at risk of losing your job and
career.
Instructor Resource
Collins, Business Ethics 3e
SAGE Publishing, 2022
B: Write an
anonymous
If your identity is revealed, you are
at risk of losing your career and
C: Do nothing.
CEO and harassers are not held
accountable.
D: Other?
Option Chosen
Option B: Write an anonymous note documenting the reckless
work culture to the board member.
Chosen Because
Option
This option is based on cultural relativism, utilitarianism, deontology,
and, in part, social group relativism. Reporting wrongdoing fulfills legal
Instructor Resource
Collins, Business Ethics 3e
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Weaknesses?
seek another employment before your identity can be potentially
revealed.
CHAPTER 3 ANALYSIS FOR UP FOR DEBATE
Up for Debate: The Social Responsibilities of Business
Some people believe that the only social responsibilities businesses have are to increase profits
for the owners and obey the law. Others believe that businesses have additional social
1. Should businesses take on social responsibilities beyond increasing profits for owners and
obeying the law?
Up for Debate: The Social Responsibilities of Business—Should businesses take on social
responsibilities beyond increasing profits for owners and obeying the law?
Yes
• Consumers are demanding corporate
responsibility (social group relativism).
No
• Enhanced social responsibility should
be voluntary, not mandatory