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CHAPTER 5
BUSINESS ETHICS
ANSWER TO CRITICAL THINKING QUESTION
IN THE FEATURE
DIGITAL UPDATE—CRITICAL THINKING
From an ethical point of view, is there any difference between managers calling
subordinates during off hours for work-related questions and sending e-mails or text
messages? The basic ethical issue is whether employees should be compensated for time
ANSWERS TO QUESTIONS
AT THE ENDS OF THE CASES
CASE 5.1—CRITICAL THINKING
ETHICAL
Are Salvatore’s actions likely to affect his business’s ability to profit in the long run?
Discuss. Any successful business has a plan to attain certain goals in the short run and in the
2 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
LEGAL ENVIRONMENT
Did Carmela Carpanzano meet the minimum acceptable standard for ethical business
behavior? Explain. The minimum acceptable standard for ethical business behavior is
CASE 5.2—CRITICAL THINKING
WHAT IF THE FACTS WERE DIFFERENT?
Suppose that Case Western had tolerated Al-Dabagh’s conduct and awarded him a
diploma. What impact might this result have had on other students at the school? Why?
Al-Dabagh’s expulsion for unprofessional, unethical behavior stood as an example for other
CASE 5.3—LEGAL REASONING QUESTIONS
1A. Using duty-based ethical principles, what facts or circumstances in this case
would lead Moseley to disclose Herzog’s behavior? Using the duty-based principles,
Moseley would have been led to report the behavior because it was not fair. Fairness would be
CHAPTER 5: BUSINESS ETHICS 3
2A. Using outcome-based ethical principles, what issues would Moseley have to
analyze in making the decision to report Herzog’s behavior? What would be the risks to
Moseley? The benefits? The things which Moseley would have to consider would be culture
of the company. He would have to evaluate whether the policies at issue (nepotism, posting of
3A. Under the Business Pragmatism™ steps, what alternatives might Moseley have
had in this situation? In the second step of the Business Process PragmatismTM process,
Moseley should list his alternatives. One alternative is to ignore the behavior. Another is to
ANSWERS TO QUESTIONS IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
1A. Principle of rights
If one of the fundamental rights is the right to be treated fairly and to be able to invest one’s
2A. Categorical imperative
The categorical imperative asks the decision maker to assess the results of the action as if
everyone in a similar situation made the same decision. If all insurance companies participated
4 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
3A. Utilitarianism
Utilitarianism asks the decision maker to perform a cost/benefit analysis of the alternatives.
Smithson should evaluate the risks or chances of an investor buying a void policy compared to
4A. Decision process
First, Smithson must recognize that there is a problem. He should identify the stakeholders as
the investors, the sellers, his employees and the insurance companies that are at risk of being
ANSWER TO DEBATE THIS QUESTION IN THE REVIEWING FEATURE
AT THE END OF THE CHAPTER
Executives in large corporations are ultimately rewarded if their companies do
well, particularly as evidenced by rising stock prices. Consequently, should we let those
who run corporations decide what level of negative side effects of their goods or
services is “acceptable”? The first problem with this attitude is that executives and managers
(and even directors) may be looking at only short-run profits. They therefore might ignore the
long-run profitability to their company. If a drug that works well against a potential pandemic
CHAPTER 5: BUSINESS ETHICS 5
ANSWERS TO ISSUE SPOTTERS
AT THE END OF THE CHAPTER
1A. Acme Corporation decides to respond to what it sees as a moral obligation to cor-
rect for past discrimination by adjusting pay differences among its employees. Does this
raise an ethical conflict between Acme’s employees? Between Acme and its employees?
Between Acme and its shareholders? Explain your answers. When a corporation decides to
respond to what it sees as a moral obligation to correct for past discrimination by adjusting pay
2A. Delta Tools, Inc., markets a product that under some circumstances is capable of
seriously injuring consumers. Does Delta have an ethical duty to remove this product
from the market, even if the injuries result only from misuse? Why or why not? Maybe. On
the one hand, it is not the company’s “fault” when a product is misused. Also, keeping the
ANSWER TO BUSINESS SCENARIO
AT THE END OF THE CHAPTER
5–1A. Business ethics
Of course, it was unethical to sell goods that their maker knew were defective and could cause
harm. This is the most reasonable and likely conclusion under any set of standards, even if it
were possible to eventually obtain a negative result with respect to a defect from testing that
repeatedly yielded a positive result. Under the six basic guidelines outlined in the text for making
6 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWERS TO BUSINESS CASE PROBLEMS
AT THE END OF THE CHAPTER
5–2A. SPOTLIGHT ON PFIZER—Corporate social responsibility
It could be argued that the defendants have an ethical responsibility to society to voluntarily take
steps to reduce the availability of their products to meth makers. This might have become a
more certain obligation once the defendants were aware that their products were used in the
manufacture of meth. Retailers might have been asked to place the products behind the counter
5–3A. BUSINESS CASE PROBLEM WITH SAMPLE ANSWER—Online privacy
Facebook created a program that makes decisions for users. Using duty-based ethics, many
believe that privacy is an extremely important right that should be fiercely protected.
Accordingly, any program that has a default of giving out information is unethical. Facebook
CHAPTER 5: BUSINESS ETHICS 7
5–4A. Business ethics on a global scale
The Foreign Corrupt Practices Act relates to the payments of foreign officials to make
discretionary decisions in favor of the payer. In this circumstance, Kozeny was paying members
5–5A. Business ethics
Business ethics might have been violated in these circumstances by Mark Ramun, John
Ramun, and the employees and managers of Genesis.
The “tense relationship” between John and Mark at Allied may have been caused or
exacerbated by either or both of them. And instead of confronting whatever it was that made
their relationship “tense,” they may have exacted revenge—John by forcing Mark out of the firm,
or Mark by leaving it, after ten years. Of course, this is speculation.
What is not speculation, however, is that Mark took 15,000 pages of Allied’s documents
8 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
5–6A. Business ethics
Ethics is the study of what constitutes right and wrong behavior. It is a branch of philosophy
focusing on morality and the way moral principles are derived and implemented. Ethics has to
do with the fairness, justness, rightness, or wrongness of an action. Those who study ethics
evaluate what duties and responsibilities exist or should exist for its practitioners. The
circumstances set out in this problem underscore the importance of ethics by illustrating the
consequences of engaging in ethical misconduct. Those consequences can extend beyond the
short run.
Does Glass deserve a “second chance”? Based on the facts in this problem, it can be
argued that no, he does not—he had more than one “second chance” and blew them all. This is
indicated by the California Supreme Court’s citation of “numerous instances of dishonesty and
5–7A. Business ethics
It seems obvious from the facts stated in this problem that Hratch Ilanjian behaved unethically in
the circumstances. Ethics, of course, involves questions relating to the fairness, justness,
rightness, or wrongness of an action. Business ethics focuses on the decisions that businesses
and businesspersons apply moral and ethical principles to make their decisions and whether
those decisions are right or wrong.
CHAPTER 5: BUSINESS ETHICS 9
5–8A. Business ethics
Ethical behavior on the part of employees is an important issue—as important as the ethics of
their employers. In any set of employment circumstances, an unethical employee may engage
in wrongful conduct.
In this problem, Priscilla Dickman worked for the University of Connecticut Health Center.
Her employer received complaints that she was getting non-business-related phone calls and
that she was absent from her work area when she should have been present. Based on
materials found on her work computer, the state investigated her for violations of state law. She
5-9A. A QUESTION OF ETHICS—Consumer rights
(a) In this case, the court found that the company did not violate any laws and that the
disclosures were adequate. From an ethical perspective, the question becomes whether the
word “may” on the website gave adequate notice to the potential user or borrower that a charge
would occur. It is settled legally that it up to a contract signer to read all the components of a
contract keeps a copy of the written contract.
(b) The law often is considered the minimum ethical standard that society will allow. If
a company follows the law, there will be no formal, societally-imposed consequences. There
10 UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS
ANSWERS TO LEGAL REASONING GROUP ACTIVITY QUESTIONS
AT THE END OF THE CHAPTER
5–10A. Global business ethics
(a) In Pfizer’s case, it would appear that the potential for short-run profit maximization,
(b) The principal pro-Pfizer argument might be that the firm did not violate the law.
Whether the test was legal is the question at the heart of the problem. In the actual case on
(c) As a corporation, Pfizer might have applied the five-step procedure set out in the
text to review the ethical conflicts in a test of Trovan. The first step is to specify the facts, the
problem, and the ethical principles at issue. The second step is to discuss potential actions and
their effects. The third step is to come to a consensus as to what to do. This consensus should
