C H A P T E R

Contemporary Issues in Business Ethics

" E t h i c a l decision-makinff isn't an o p t i o n -today.' It's an o b l i g a t i o n ^ i n bfusiness, \ i n education, i n government^ m o u r daily lives. " WtUiamC. " . Butcher Corporation ReUred ihuirmaii, of the Chase Manhattan

Chapter Outline History of Business Ethics The Role of Integrity \A^r\ Specific Behaviors of High Integrity The Ethical Cycle Using Ethical Decisions to Build Character Ethical Managers are Able to Make Their Own Rules Is Everyone Unethical? Knowing "Right" from "Wrong" Rationalizing Unethical Behaviors Monitoring Reputations Striving for Ethical Behavior Internal and External Current Ethical Issues

14

Chapter 2

BONO: I STDLL HAVEN'T FOUND THE TAX RATE THAT I'M LOOKING FOR^
Located in a building where slave traders and spice merca^ts made business transactions four hundred years ago, a company called Promogroup has their corporate headquarters. Promogrozip helps individuals and companies with high levels of income to

cKcuo ''shelter" the tax exposure of that income. Clients include three members ofT%e Rolling StonesMick Jagger, Keith Richards, and Charlie Wattsthe record label EMI; CKX, the company that owns the rights to American Idol; and Elvis Presley's estate. Promogroup was able to reduce the total tax paid by the three Rolling Stones members to a total of $1.2 million on income of $450 million, resulting in anaggre- \jy^ gated tax rate ofL5percent. Another client of Promogroup is the author of the foreword to the book T h e E n d ^ o f P o v e r t y , Bono and the rest of U2. Bono is well known for his stance, on many global -(optTlCC^ caiises including AIDS awareness, reducing global poverty, and helping developing countries reduce the level of their foreign debt. The tax shekel' established by Promogroup is based on the simple flow of royalties that go into and leave the Netherlands. A Dutch holding company is established for Pro- - ^ /ru^n mogi'oup's clients, and the revenue from the royalties of any other intellectual property sent to the holding company is .exempt from taxes. The clients are then allowed to xvithdraw the royalties with the tax being "paid." A tax considtant in Rotterdam, the / Netherlands, Ton Smit, stated that for the yastmajority of clients who set up these holding 1^''^ compmies, the sole motivation is to achieve either tax minimization or tax avnjdnnce. only to artists who are not U.S. citizens. The U.S. Treasury Department would charge the standard corporate income tax rate on any revenue that would be transferred into the United States from a Dutch company. estimated that U2 has accumulated a total net worth of more than $900 million and felt that it had to move its royalty revenues because Ireland was going to g-eatly reduce the tax incentives given to musicians and other artists living in Ireland. In June 2006 U2 moved their song publishing catalog to the Netherlands via Promogroup. A research group in the Netherlands, SOMO (Centre for Research on Multinational Corporations), concluded that the tax haven given to individuals and corporations through the use of holding companies was having a negative impact on the capacity of developing countries to he able to provide essential services to their citizens and on the ability of developed countries to reduce or forgive their outstanding debt agreements with developing countries. One of the authors of the SOMO report, Richard Murphy, who runs a tax research institute in England, stated that Bono's tax a^eements through the U2 Limited company in the Netherlands are completely inconsistent with Bono's stance on helping developing countries move from poverty conditioits. Murphy continued by stating that Bono cannot demand that resources be given to antipoverty campaigns while he is not giving the resources to the governments so they can implement those campaigns. In commenting on Bono's shifting his tax burden to the Netherlands, a spokesperson of the Irish Labor Party, Joan Burton, stated that Bono should be applauded for \^~ixQ\\obeing an advocate for improvements in developing countries. However, those improvements comejfomtaxes, and it would he difficult to ask other people to pay taxes to improve economic development if he is not paying taxes himself.

^ ^

{/) t^U, U i ' ' " ! ^ ^ I he Dutch tax snekers arevia^

"tich UM

Contemporary Issues in Business Ethics U2's business manager, Paul McGiiinness, stated that U2 is a global business and pays global taxes. In addition, approximately 95 percent ofU2's revenue, which includes conceit ticket sales and record sales, is earned outside Ireland. The band pays taxes all over the world on its worldwide income and abides with all Irish tax laws. However, McGuinness continued by stating that unique tax solutions are common in Ireland and that U2 runs its busi?iess in the most tax-efficient way possible.

15

}MIQMQPMJM^SMM}M

...........^^^^^^^^^^^^^^

D o e s management w o r r y about, o r even care about, business ethics, integrity, and d o i n g ^- . ^ the right thing? W h i l e m o s t w o u l d like to reply w i t h a r e s o u n d i n g "yes," w i t h o u t the CaO^\'\^tt,j^e2uisije tools to do the r i g h t t h i n g ethically, it is impossible for businesspersons to ^, f k n o w r i g h t f r o m w r o n g . S o m e t i m e s outside o f the business w o r l d , the general consent, s. T^^Cki 'tft sus is tliat businesses and u l t i m a t e l y their managers w i l l do a n y t l i i n g to make a profit. D e r i v e d f r o m the G r e e k w o r d for character, ethos, ethics has been dgbar.ed for centuries. E t h i c s needs to be given even h i g h e r consideration i n today's corporate environment. E t h i c a l climates are created b y i n d i v i d u a l judgments. B u t k n o w i n g the corporate stand o n certain aspects can contribute to management's creation o f a strong ethical culture. T h e discovery o f ethics began m a n y centuries ago w i t h discussions initiated b y Aristotle, Socrates, and P l a t o . I n fact, A r i s t o t l e stated that a person is n o t complete u n t i l that person is a c o n t r i b u t i n g m e m b e r o f socieq'. Tn adrlition, A r i s t o t l e explained that a true friend would tell another firiend w h e n he o r she is acting selfishly and.foolhardiiy." A s l o n g as there has been c o m m e r c e , there have b e e n ethical issues w i t h h o w business is c o n d u c t e d . I n the seventeenth century, the U n i t e d . K i n g d o m offered c o m panies such as the H u d s o n B a y C o m p a n y , the E a s t I n d i a C o m p a n y , and the M a s s a chusetts B a y C o m p a n y u j o n o p o l i g t i c charters so " E n g l i s h " setdements c o u l d be established i n different countries.

^ , ^ O C Cj -

T h e climate o f today's business ethics has seen a real change f r o m those i n i t i a l t - - y discussions that were m a d e c e n m r i e s ago.^ E a c h decade we have been faced w i t h 4 1 ; 3 1; X,'^^ bulent ethical times. I n the 1960s the chmate o f business ethics was m o r e o f a p e r i o d . > , j o f social ynrgst. E m p l o y e e s and employers began to have a real -adversarial^relation- wClA ship, casting aside the earlier values o f l o y a l t y w i t h m a n a g e m e n t c r e a t e d T H t h e i 9 ? 0 s : - - ^ | "ipi ij^hifv'^.cj Issues such as the e n v i r o n m e n t and d m g use a m o n g employees began to be dilemmas for employers. T h i s era s h o w e d the b i r t h o f the corporate social r e s p o n s i b i l i t y m o v e m e n t , w i t h corporations b e g i n n i n g to establish codes o f c o n d u c t to help deal w i t h these n e w f o u n d p r o b l e m s . -ti^^^itX i ^ 1 ^ ^

a^vCOj

T h e U . S . e c o n o m y o f the 1970s suffered a recessigji, a n d the u n e m p l o y m e n t rate rose dramatically d u r i n g this time. T h e r e were several scandals i n v o l v i n g defense contractors a n d c o r p o r a t i o n s that led to a sense o f value-centered ethics. H u m a n rights issues began to c o m e t o l i g h t , and e n v i r o n m e n t a l issues c o n t i n u e d to be a major t o p i c o f c o n c e r n for c o r p o r a t i o n s . T h i s was a t i m e w h e n c o m p a n i e s began to cover u p their w r o n g d o i n g s r a t h e r t h a n deal w i t h the issues h e a d - o n . qiai^ Ixvri T h e era o f the 1980s showed a time w h e n financial^^^u^surfaced through the savings and loan scandal. L o y a l t y to employers decreased dramatically. T h e E t h i c s Resource C e n t e r helped f o r m the first business ethics office at G e n e r a l D y n a m i c s i n 1985.

16

Chapter 2 T h e 1990s saw an o u t g r o w t h o f g l o b a l o p p o r t u n i t i e s for c o m p a n i e s , b u t they w e r e not w i t h o u t concerns. U n s a f e w o r k practices, c h i l d l a b o r issues, and e n v i r o n m e n t a l issues g a i n e d p r o m i n e n c e . T h e s i g n i f i c a n t o u t g r o w t h o f c o m p a n i e s gave rise to financial m i s m a n a g e m e n t . A t the n e w m i l l e n n i u m , u n e t h i c a l c o m p a n i e s began to surface, w r o u g h t w i t h financial m i s m a n a g e m e n t p r o b l e m s . I n t e l l e c m a l p r o p e r t y theft, c y b e r c r i m e , a n d personal p r i v a c y issues surfaced. T h e m o s t significant event i n the U n i t e d States was the passage o f the S a r b a n e s - O x l e y A c t i n 2 0 0 2 , w h i c h attempted to c o n t r o l the financial m i s m a n a g e m e n t issues e r o d i n g the i n t e g r i t y and confidence o f c o r p o r a t i o n s a n d t h e i r stakeholders.

S tOi^ troCj tne\e o ^ S C u x ,

I n 2005 m o r e than two h u n d r e d thousand people w e n t o n l i n e t o the M e r r i a m - W e b s t e r W e b site i n search o f the d e f i n i t i o n o f integrity. T h e company's president, J o h n M o r s e , said, "I t h i n k the A m e r i c a n people have isolated a v e r y i m p o r t a n t issue f o r o u r society to be dealing w i t h . T h e entire list gives us an i n t e r e s t i n g w i n d o w that opens u p i n t o w h a t people are t h i n k i n g about i n t h e i r lives."'* Perhaps this interest p r o v i d e s a ghmpse o f w h a t A m e r i c a n s and others a r o u n d the w o r l d are c o n c e r n e d about. C e r t a i n l y the r e cent corporate c o r r u p t i o n discussed daily i n various forms o f the m e d i a gives rise to a real interest i n i n t e g r i t y or, m o r e precisely, ethics. Integrity is d e r i v e d f r o m the L a t i n w o r d 2n?sg?7, w h i c h mean? 7i\^o/OT.r.f. T h e t e r m OTfe^'f)'is defined b y A l e r r i a m - W e b s t e r as "a firm adherence to a code ot especially m o r a l o r artistic values."

T h e u n d e r l y i n g a s s u m p t i o n o f the r o l e o f employees w i t h i n the o r g a n i z a t i o n is a deeplyjTootsd- level o f o r g a n i z a t i o n a l c o m m i t m e n t . T h a t c o m m i t m e n t generates an attimde i n w h i c h the employees can be passionate about t h e i r efforts a n d the o v e r a l l c o m m i t m e n t o f the firm. A f t e r they leave the firm, the employees w a n t to believe that (ik <iCWi there is a l e g a c y o f tlieir c o n t r i b u t i o n to the success o f the firm. It is this c o m m i t m e n t , passion, and d e d i c a t i o n that d r i v e employees to a h i g h level o f i n t e g r i t y w i t h i n their w o r k setting. I n t e g r i t y is based o n e m p l o y e e s ' c o n t i n u o u s efforts to balance t h e i r p e r sonal values w i t h the requirements t o p e r f o r m t h e i r jobs effectively t h r o u g h o u t their careers. Integrity c o u l d i n c l u d e n o t o n l y u n d e r s t a n d i n g and f u l f i l l i n g the duties o f t h e i r jobs, but also a d m i t t i n g w h e n errors have b e e n made a n d m a k i n g c o r r e c t i o n s 7 . , w h e n needed. O n e o f the greatest dangers to a n employee's i n t e g r i t y is to have i t be :irkO(X iMCL^ c o m p r o m i s e d over time. T h e e o s i o n o f an i n d i v i d u a l ' s i n t e g r i t y a l l o w s p o t e n t i a l n e g - ? ative consequences, i n c l u d i n g u n e t h i c a l a n d i l l e g a l b e h a v i o r as w e l l as d y s f u n c t i o n w i t h i n the professional a n d personal relationships the i n d i v i d u a l has w i t h o t h e r s . ' ^ A n i n d i v i d u a l could evaluate the integrity o f his o r her actions based o n some s i m ^ l l fn h i t k p l e rules o f t h u m b o r h e u r i s t i c a i n the f o r m o f different tests. T h e p u b l i c i t y t e s t is based o n the scenario o f w h e t h e r the i n d i v i d u a l w o u l d be comfortable i f his o r her actions were pubUcized i n a newspaper o r o n television. T h e t r u s t e d f r i e n d test is based o n the scenario that the i n d i v i d u a l w o u l d be comfortable i n tellinjf his o r h e r best friend o r a

S^lWj'fcl'^

(,

close family m e m b e r about his o r her actions. T h e r ^ g r o c i t y t e s t , also k n o w n as the r\ho^ h'ldflc*|i'^ G o l d e n R u l e , asks whether the i n d i v i d u a l treats others as he o r she w o u l d like to be ^ treated. T h e u n i v e r s a l i t y t e s t draws on d i e belief o f w h e t h e r the i n d i v i d u a l w o u l d

Contemporary Issues in Business Ethics

1/ ^

consider i t acceptable behavior i f anj'one i n the w o r l d did the same a c d o n . T h e o b i t u a r y i ^ t e s t asks the i n d i v i d u a l to l o o k back i n -hindsight o n one's previous actions over the s' ^ h & n ^llv^C rfVUiOT course o f one's career and ask i f he o r she is comfortable w i t h the evaluation.'^

A s s h o w n previously, testing is o n e m e t h o d i n w h i c h the interpretation o f b e h a v i o r o f h i g h integrity can be d e t e r m i n e d . A n alternative m e t h o d w o u l d be a l i s t i n g o f specific behaviors that w o u l d s u p p o r t a h i g h level o f i n t e g r i t y w i t h the opposite behavior c o n sidered as a l o w level o f integrity. D o n a l d Z a u d e r e r listed thirteen specific behaviors that can h e l p identify the level o f i n t e g r i t y i n i n d i v i d u a l actions. T h o s e behaviors are possess h u m i l i t y , m a i n t a i n the a b i h t y to be c o n c e r n e d about the greater g o o d , be t r u d i f i i l , fulfill c o m m i t m e n t s , strive for fairness, take responsibility, have respect for the i n d i v i d u a l , celebrate the g o o d fortune o f others, develop others, r e p r o a c h unjust acts, be f o r g i v i n g , a n d extend self for others.^
/"^

Possess Humility^WiGr>-t6<i
A n i n d i v i d u a l s h o u l d be h u m b l e i n his o r h e r actions w h e n i n t e r a c t i n g w i t h others. T h e r e is n o value added i n b e i n g arrogant or e x a g g e r a t i n g the i n d i v i d u a l c o n t r i b u t i o n to the success o f the firm. ^' /|.(5i^(^i5cbi

Maintain Concern for the Greater Good

A n i n d i v i d u a l s h o u l d always make decisions that benefit the firm overall. T h e i n j i i v i d ual s h o u l d never m a k e decisions w h e r e the individual's self-interests supersede interests o f the firm. the ^' 0"^ij-th^

Be Truthful
A n i n d i v i d u a l s h o u l d always be t r u t h f u l n o t o n l y i n his o r her statements, b u t also i n his o r her actions. A n i n d i v i d u a l s h o u l d never m a k e u n t r u e statements or take c r e d i t for the efforts o f others.

Fulfill Commitments
A n i n d i v i d u a l s h o u l d always make a g o o d - f a i t h effort to fulfill all the c o m m i t m e n t s the i n d i v i d u a l p r o m i s e d to complete. A n i n d i v i d u a l s h o u l d never b r e a c h a n agreement o r deliver a r e q u i r e d project late or n o t at a l l .

Strivg for Fairness

A n i n d i v i d u a l s h o u l d m a k e decisions that are fair^ to everyone w h o can be i m p a c t e d by the decision. A n i n d i \ ' i d u a l s h o u l d never b e ^ ^ ^ s e d i n decisions, i n c l u d i n g m a k i n g judgments w i t h o u t all the relevant d o c u m e n t s o r assigning employees based o n subjective criteria that discriminates against other employees. , X^Q'^^''^'^i h

18

Chapter 2

Take Responsibility
A n i n d i v i d u a l s h o u l d always take fall r e s p o n s i b i l i t y for one's o w n actions. A n i n d i v i d u a l s h o u l d n o t shift the b l a m e to others o r falsely accuse others o f actions that are not accurate.

Have Respect for the Individual

A n i n d i v i d u a l s h o u l d respect the interests and actions o f others. A n i n d i v i d u a l s h o u l d , ^ ^ n o t reduce the level o f respect o f o t h e r employees b y n o t a c k n o w l e d g i n g jcecognition'^ '^CQ^ ^' ^'^^ w h e n i t is w a r r a n t e d . A n i n d i v i d u a l s h o u l d also n o t refase the i n p u t o f other e m p l o y ees o r display rude behavior t o w a r d o t h e r employees.

Celebrate the Good Fortune of Others

A n i n d i v i d u a l s h o u l d share the j o y i n another person's a c c o m p l i s h m e n t s . A n i n d i v i d u a l s h o u l d n o t be envious o f the success o f a colleague.

Develop Others
A n i n d i v i d u a l s h o u l d be able to s u p p o r t the employee d e v e l o p m e n t o f o t h e r e m p l o y ees w i t h i n the o r g a n i z a t i o n . A n i n d i v i d u a l s h o u l d m a k e a g o o d - f a i t h effort i n h e l p i n g co3ch and train tethers and give effective, constructive p e r f o r m a n c e evaluations o f his o r n e r suQojdmat^s.

(>^Ki Ar< CV^

Re^roacb^UnjusJ Acts
A n i n d i v i d u a l s h o u l d refase to p e r f o r m any act that he o r she w o u l d consider to be u n just. I n a d d i t i o n , the i n d i v i d u a l s h o u l d stand up to defend h i s o r h e r p r i n c i p l e s .

Be Forgiving
A n i n d i v i d u a l m u s t let go o f past actions that have h a d a negative i m p a c t . A n i n d i v i d u a l m u s t let go o f the previous i l l w i l l and release any .grudges that m a y have developed between the i n d i v i d u a l a n d others w i t h i n the o r g a n i z a t i o n r \

l^tead Self for Others

A n i n d i v i d u a l m u s t h e l p and p r o v i d e assistance to others i n a t i m e o f n e e d . I n a d d i t i o n , a n i n d i v i d u a l m u s t be generous vidth' rewards to others w h e n i t is warranted.^

How People Develop Ethical Behavior

P e o p l e develop a sense o f ethics, b o t h personal and p r o f e s s i o n a l , t h r o u g h various ways. T h e y m a y learn e t l i i c a l values f r o m family, o r g a n i z e d r e l i g i o n s , friends, o r c u l tural impacts. I n m a n y cases p e o p l e believe there are different ethical guidelines for

Contemporary Issues in Business Ethics their professional lives and for their personal lives. H o w e v e r , this is not the case. W h e t h e r they are d e a l i n g w i d i w o r k o r personal issues, the same ethical t r a i n i n g and values are used. M a n y assume that they w o u l d m a k e different decisions for w o r k and personal dilemmas, but they forget that their personal ethics can't be left at the c o r p o rate door. T h e y use personal ethics each day i n their business dealings. T o understand this, ethics is n o t any o f the f o l l o w i n g :
B B Religion or religious p i e t y ' ^ U Law A game A matter of feeling good or right'' '^U.nfj'dae

19

S i n c e 1964, w h e n the U n i t e d States C i v i l R i g h t s A c t was passed, companies have been faced w i t h an increasing array o f ethical decisions. T h e s e ethical decisions have created a n e w area for m a n a g e m e n t t h a t o f m a n a g i n g the business ethically. T h i s m a y m e a n f o l l o w i n g prescribed laws and regulations o r d e a l i n g w i t h equal o p p o r t u n i t y . It m a y m e a n dealing w i t h a m y r i a d o f social r e s p o n s i b i l i t y issues, such as e n v i r o n m e n t a l issues a n d sustainability, o r d e a l i n g w i t h c o r r u p t i o n . W h a t e v e r the issue, m a n a g e m e n t m u s t take an active stance o n the issues. I n general, c o m p a n i e s must take a l o o k at the needs a n d demands o f all stakeholders w h e n m a k i n g ethical decisions. O n e m e t h o d used to understand the u n d e r l y i n g dynamics o f ethical d e c i s i o n m a k i n g is based o n the ethical c}'cle. T h e ethical cycle is presented i n F i g u r e 2 - 1 .

Moral Problem Statement

3 1T(\

T h e ethical cycle begins w i t h the i d e n t i f i c a t i o n o f the mam problem. T h e moral p r o b l e m statement must be developed based o n the reggoflse to three c o n d i t i o n s : a clear statement o f w h a t the m o r a l p r o b l e m is, an i d e n t i f i c a t i o n o f w h o is affected by the r e s o l u t i o n o f the m o r a l p r o b l e m , a n d the m o r a l issue o f the p r o b l e m .

Problem Analysis
I n o r d e r to analyze the m o r a l p r o b l e m , three factors m u s t be identified: (1) W h i c h stakeholders are i m p a c t e d b y the p r o b l e m , and h o w does i t i m p a c t their o w n interests? FIGURE 2-1 The Ethical Cycle

Moral problem statement

Problem analysis
^

Options for aaions

>

Ethical judgment

Reflection: ;

Morally , acceptable action

Source; l.vsnde Poel and L. Royakkers, "The Ethical Cyde," Journal of Business Ethics 71 (2007): 4-7.

20

Chapter 2 (2) W h a t are the m o r a l values that need to be c o n s i d e r e d to analyze the p r o b l e m ? a n d (3) W h a t are the relevant tacts r e l a t e d to the m o r a l p r o b l e m ?

Options for Action

O n c e the m o r a l p r o b l e m has b e e n i d e n t i f i e d and the infiarmation related to t h e p r o b l e m has been a n a l y z e d , the next step is t o generate p o t e n t i a l alternative o p t i o n s to resolve the p r o b l e m . B y p r e s e n t i n g these alternative s o l u t i o n s , the d e c i s i o n makers are able to u n d e r s t a n d h o w each alternative can i m p a c t the relevant stakeholders. It is d u r i n g the i d e n t i f i c a t i o n o f different v i a b l e o p t i o n s that the creativity o f the d e c i s i o n makers s h o u l d c o m e to the forefront i n the d e c i s i o n - m a k i n g process. It is d u r i n g this step that the d e c i s i o n makers s h o u l d c o n s i d e r a l l ideas as i n i t i a l l y v i a b l e u n t i l they are discussed i n further detail.

Ethical Judgment
It is d u r i n g the e t h i c a l j u d g m e n t stage that the e v a l u a t i o n o f the different o p t i o n s takes place. F o r each o f the o p t i o n s that w e r e presented i n the previous step, an evalu a t i o n w o u l d take place to see w h i c h o f the o p t i o n s w o u l d be acceptable based o n the m o r a l values and beliefs o f the d e c i s i o n m a k e r s a n d the o r g a n i z a t i o n as a w h o l e .

Reflection
A r e f l e c t i o n o f t h e o p t i o n s that were c o n s i d e r e d v i a b l e i n the p r e v i o u s step is needed to estabhsh the final course o f a c t i o n . I t is d u r i n g t h e r e f l e c t i o n stage that the outcomes f r o m the e t h i c a l j u d g m e n t stage are further evaluated so a definitive course o f action can be d e t e r m i n e d . T h e different e t h i c a l j u d g m e n t o p t i o n s that were the outcomes o f the p r e v i o u s step w o u l d be w e i g h e d against each other to identify w h a t the d e c i s i o n makers w o u l d c o n s i d e r the o p t i m a l s o l u t i o n to the m o r a l p r o b l e m . I t is f r o m the r e f l e c t i o n stage that the m o r a l l y acceptable a c t i o n is d e t e r m i n e d b y the d e c i s i o n makers and is i m p l e m e n t e d to resolve the m o r a l p r o b l e m .

T h e e t h i c a l c y c l e helps employees u n d e r s t a n d w h o t h e y are f r o m an ethical perspective. It is the decisions based o n r e s o l v i n g e t h i c a l d i l e m m a s that c o u l d be c o n s i d e r e d ethical d e f i n i n g m o m e n t s . T h e s e d e f i n i n g m o m e n t s shape a n d m o l d the p e r s o n a l v a l ues a n d beliefs t h a t p e r t a i n to each d e c i s i o n m a k e r i n the r e s o l u t i o n o f a n e t h i c a l issue. E t h i c a l decisions i n v o l v e c h o o s i n g b e t w e e n r i g h t a n d w r o n g . T h e classic e x a m p l e o f a ^ ^ d e f i n i n g m o m e n t is w h e n a d e c i s i o n m a k e r has a c h o i c e between t w o ^ l a u s i b k a n d ^ " l O p U o 1 acceptable o p t i o n s B a s e d o n the d e c i s i o n maker's j j l r i m a t e d e c i s i o n , the i n d m 3 u a l has %(Jix, CCOog K^(k>'^^Q cO-Cv established a t h r e ^ d j l o f a d e f i n i n g p o i n t i n w h a t is c o n s i d e r e d acceptable a n d not. A 1 d e f i n i n g m o m e n t c o u l d generate p o t e n t i a l l y c o n f l i c t i n g feelings. T h i s conflict is based <i,v!. tAH^AhaAjOn the t g n s i ^ n t h a t can arise w h e n t w o v a l i d perspectives are c o n s i d e r e d i n t h e d e c i s i o n - m a k i n g process. A s a result, d e f i n i n g m o m e n t s d o n o t have a " c o r r e c t " response.

Contemporary Issues in Business Ethics but they h e l p " f o r m , reveal, and test" the character o f the d e c i s i o n maker. A s a result, defining m o m e n t s h e l p d e c i s i o n makers f o r m and define their personal character. Who A m I? T h r o u g h these d e f i n i n g m o m e n t s , i n d i v i d u a l s are able to identify themselves by a n s w e r i n g three relevant questions: (1) W h a t feehngs and personal i n t u i t i o n are b e i n g c o n f l i c t e d as the i n d i v i d u a l decides o n the course o f action? (2) W h a t are the i n d i v i d u a l values that are so deeply r o o t e d i n the core o f the individual's b e i n g that they w i l l n o t be c o m p r o m i s e d u n d e r any circumstances? a n d (3) W h a t type o f creative ideas and shrewdnsss can be developed b y the i n d i v i d u a l to guide the i n d i vidual to make the r i g h t decision? W h o A r e W e ? D e f i n i n g m o m e n t s can also occur for managers o f various w o r k groups. W h a t is learned f r o m the d e f i n i n g m o m e n t s w i l l be based o n the answers to the f o l l o w i n g three questions: (1) W h a t are different interpretations o r points o f v i e w to the ethical d i l e m m a that can make a c i j n y i n c i g g argument? (2) W h a t focus o r p o i n t A n t u ^ t o f v i e w w o u l d be c o n s i d e r e d the m o s t supportive o r gejsi^gsiv^ to the general beliefs o f other employees w i t h i n the o r g a n i z a t i o n ? and (3) H o w can the m a n a g e r o f the Ka^p? f) ^ w o r k g r o u p create a process that w i l l manijgst the e t h i c a l values a n d beliefs that are S S t t P t i m p o r t a n t to the manager w i t h i n the o r g a n i z a t i o n ? I n o t h e r words, w h a t can the m a n ager do to make his o r her i n t e r p r e t a t i o n o f the ethical issue be s u p p o r t e d b y the w o r k group? W h o Is t h e C o m p a n y ? D e f i n i n g m o m e n t s can also be used to clarify the ethical [lath c o m p a n y executives take w i t h i n the o r g a n i z a t i o n . T h e questions that w o u l d help identify d e f i n i n g m o m e n t s for c o m p a n y executives are as follows: (1) A s a c o m p a n y executive, have I d o n e e v e r y t h i n g i n m y p o w e r to secure m y o w n strength as w e l l as the strength and stability o f the o r g a n i z a t i o n to be able to make ethical decisions? (2) A s a c o m p a n y executive, have I c o n s i d e r e d all the innovative ways i n w h i c h m y o r g a n i z a t i o n can help society, stockholders, and other stakeholders? (3) W h a t creative ideas can I develop as a c o m p a n y executive to help convert m y ethical v i s i o n i n t o a personal and o r g a n i z a t i o n a l reafity?

21

, ^ S.

AxS ,

ETHICAL MANAGERS ARE ABLE laj^E^TOERiimM^

M a n a g e r s have the a b i l i t y to estabfish their o w n rules p e r t a i n i n g to acceptable and unacceptable behaviors w i t h i n the o r g a n i z a t i o n . I n any business setting, there is a l ways the o p p o r t u n i t y for e t h i c a l and c o m m e r c i a l considerations to conflict w i t h each other. T h e ethical considerations do n o t always support the c o m m e r c i a l c o n s i d e r a tions. F o r example, the o w n e r o f C a d b u r y L i m i t e d i n the U n i t e d K i n g d o m was o r dered b y the r e i g n i n g m o n a r c h , Q u e e n V i c t o r i a , to make chocolate tins for the B r i t i s h soldiers i n the Anglo-BoeJFTVar. T h e o w n e r d i d n o t agree w i t h the w a r but w a n t e d to h e l p the soldiers. A s a result, he p r o d u c e d the tins for the soldiers but sold t h e m to the B r i t i s h g o v e r n m e n t at cost so he w o u l d n o t p r o f i t f r o m the war. It is argued that " r e a l " e t h i c a l decisions take place w h e n managers have to make decisions that i m p a c t the actual o r p o t e n t i a l interests o f o t h e r people. A s a result, ethical decisions have to c o n s i d e r and balance the interests o f a l l vested stakeholders

^ ^ Ml00-^5

22

Chapter 2 i n the company. Business o r g a n i z a t i o n s / c a n be considered to be a c o m p o n e n t o f the o v e r a l l social system a n d m u s t c o n t e m p l a t e h o w their actions i m p a c t o v e r a l l society. T h e r e f o r e , a realistic e v a l u a t i o n o f the ethical c o n d u c t o f a firm is n o t w h a t is said i n its c o d e o f ethics statement, b u t w h a t is d o n e i n its everj'day actions. It is expected that w h e n e t h i c a l decisions are m a d e , the manager's p e r s o n a l rules o f c o n d u c t are c o n s i d e r e d as w e l l as w h o w i l l be i m p a c t e d b y the d e c i s i o n . I f a c o m p a n y is t r u l y e t h i c a l , t h e n the c o m p a n y w o u l d have n o objections to b e i n g c o m p l e t e l y transparent w h e n releasing to the p u b l i c i n f o r m a t i o n that describes its actions i n every area o f the business.

714
O n e o f the u n d e r l y i n g assumptions that is m a d e p e r t a i n i n g to e t h i c a l b e h a v i o r is that p e o p l e are always aware o f t h e i r o w n behavior. It c o u l d be a r g u e d that u n d e r certain circumstances, p e o p l e can act i n an u n e t h i c a l m a n n e r and n o t e v e n realize it. U n i n t e n t i o n a l u n e t h i c a l b e h a v i o r c a n take place, i n part, due to the i l l u s i o n o f objectivity. ^ T h e i l l u s i o n o f objectivity o c c u r s w h e n a d e c i s i o n m a k e r believes that his o r h e r deg / , ., c i s i o n s are free o f biases, but biases are actually part o f the d e c i s i o n - m a k i n g propessT" ^-.^ C ^KcxiVvvO^ A(x q-j^g biases m a y be u n d e t e c t e d because t h e y are not c o n g r u e n t w i t h the e x p l i c i t l y l e l d d ^ n ^ Q.OJ^ beliefs o f the d e c i s i o n maker. I t c o u l d be c o n c l u d e d that B o n o m a y be d e a l i n g w i t h an ^< i l l u s i o n o f objectivity i n the e x a m p l e that was g i v e n at the b e g i n n i n g o f the chapter. It , 6,u, -tKwxn appears that he does n o t see a n y c o n t r a d i c t i o n i n asking others to p a y to i m p r o v e the standard o f l i v i n g o f citizens i n d e v e l o p i n g countries v / h i l c he is try"ing to pa^' as l i t t l e i n c o m e tax as possible. T h e r e are f o u r avenues a l o n g w h i c h u n i n t e n t i o n a l u n e t h i c a l beha%'ior m a y be developed; (1) i m p l i c i t forms o f ^ r e j u d i c e , (2) a bias that is favorable to the d e c i s i o n maker's o w n " g r o u p , " (3) actual and p o t e n t i a l c o n f l i c t s o f interest, a n d (4) the tendency o f the d e c i s i o n m a k e r t o c l a i m the credit for o t h e r people's actions.

Implicit Prejudice

1 - xf ^' 1 - 1 ^ ' ^

T h i s is a bias that occurs based o n unconscious_behefs. A c o m m o n bias occurs w h e n a d e c i s i o n maker supports the d e c i s i o n p e r t a i n i n g to a p e r s o n b y r e l y i n g o n u n c o n s c i o u s - ^ W o ^ ' ^ ^ " ^ stereotypes o r the u n c o n s c i o u s c o m p a r i s o n o f past behavior to a p e r s o n i n the past w h o had s i m i l a r characteristics w i t h a p e r s o n c u r r e n t l y w o r k i n g f o r the o r g a n i z a t i o n . G e n d e r and e t h n i c biases can be c o m m o n i m p l i c i t prejudices.

I n - G r o u p Favoritism
I n - g r o u p f a v o r i t i s m occurs w h e n the d e c i s i o n maker forms a bias t o w a r d i n d i v i d u a l s i n the same " g r o u p " as the d e c i s i o n maker. F o r example, a m a n a g e r m a y be m o r e h e l p f i i l to subordinates w h o have a g o o d p e r s o n a l relationship w i t h the boss. A p r i n c i p a l reason a close, personal r e l a t i o n s h i p h a d developed between the boss a n d the s u b ordinate c o u l d be that they share the same interests o r ethnic b a c k g r o u n d . A s a result, managers m a y give m o r e " h e l p " to subordinates i n t h e i r o w n g r o u p s t h a n o t h e r s u b ordinates and n o t realize that a bias has o c c u r r e d .

Contemporary Issues in Business Ethics

C l a i m i n g C r e d i t for O t h e r s ' A c t i o n s

C l a i m i n g credit for others' actions occurs w h e n the d e c i s i o n makers believe that they are above average i n t h e i r j o b duties, responsibilities, and general intellect, w h i c h results i n above average performance. I n a s m d y at H a r v a r d , i V I B A students were asked to determine what percentage their i n d i v i d u a l c o n t r i b u t i o n s were to a g r o u p project. T h e overall average percentage for each g r o u p was 139 percent, clearly i n d i cating some individuals were c l a i m i n g m o r e than t h e i r fair share.

Conflicts o f Interest
A bias occurs w h e n there is a conflict o f interest a n d the decision maker favors a s o l u t i o n i n w h i c h there w o u l d be personal benefits. A conflict o f interest can u n i n t e n t i o n a l l y shift \ the focus as to what course o f action s h o u l d be considered. A n example o f h o w conflictS'<'^^ o f interest caUv^kejv the d e c i s i o n - m a k i n g process relates to the ability o f physiciarfsto '(ajO accept compensation w h e n they refer patients to be viable participants i n a clinical trial. A simple j a t i o n a l i z a d o n t h a t i t is i n the best interest o f tlie patient and that n o h a r m is !0U done b y receiving m o n e y for it c o u l d become entrenched i n the physician's mindset. D e c i s i o n makers m u s t be aware that p o t e n t i a l u n r e a l i z e d biases can b e c o m e part o f their d e c i s i o n - m a k i n g pattern. A s a result, d e c i s i o n makers must make t h e m selves aware o f the p o t e n t i a l u n c o n s c i o u s biases that c o u l d im.pact their "objective" d e c i s i o n m a k i n g . T h e r e f o r e , d e c i s i o n makers need to c o l l e c t e n o u g h data, even i f it is ccajnterintuitive, to m.?ke t h e i r decisions i n c o n f i d e n c e . F-arthermore, d e c i s i o n m a k ers m u s t shape t h e i r o w n e n v i r o n m e n t b y u n d e r s t a n d i n g the external signals that are presented i n the e n v i r o n m e n t . F i n a l l y , d e c i s i o n m a k e r s must lift u p the " v e i l o f i g n o rance" b y b r o a d e n i n g t h e i r perspective as i t pertains to the d e c i s i o n - m a k i n g process. T h e results o f c o m p a n y decisions h e l p shape the company's image. M a n a g e m e n t o f the ethical issues gives rise to several m j t h s about business ethics. Table 2-1 presents ten m ) ^ s o f business ethics. T h e s e myths represent a general m i s u n d e r s t a n d i n g about business ethics. TABLE 2-1
12. 3. 4. 5. 6. 7. 8. 9. 10.

Ten Myths about Business Ethics

Business ethics is more of a focus on religion than on effective management. Companies assume that they select and train ethical employees who will always do the right thing. Business.ethics is a theoretical and abstract philosophical concept Business ethics is based solely on the belief that you will always do the right thing. Business ethics is used by ethical people to correct what unethical people do. Business ethics is based on legal Qompliance^ (?

Business ethics cannot beraariagedby company supervisors and executives. Business ethics equals corporate social responsibility. Because the company does not have any criminal investigations pending, the company is ethical. There is little practical relevance in supervisors' managing subordinates on business ethics in the workplace.

Source: Adapted from

mm.managementhelp.or^ethics/ethxgde.h.tm.

24

Chapter 2 I n o v e r c o m i n g these myths, managers m u s t reaUze that there are benefits t o p a y i n g attention to ethical issues. E m p l o y e e s need guidance about the ethical issues they w i l l face, especially i n the gray areas. T h e r e are several benefits for-paying attent i o n t o ethical issues i n the w o r k p l a c e . T h e s e i n c l u d e t h e f o l l o w i n g : ' ^ ^ Attention to business ethics has substantially improved society. Ethics programs help maintain a moral course in turbulent times. Ethics programs gultivatq strong teamwork and productivity. Ethics programs support employee growth and meaning. Ethics programs are an insurance policy; they help ensure that policies are legal. ^

B Ediics programs help avoid criminal acts "ofjjmissipn" and can lowerfines.S b(3 ci,ot Ethics programs help manage values associated with quality management, strategic planning, and diversity management. Ethics programs promote a strong public image.

B Overall benefits of etliics programs include legitimizing managerial actions, strengthening the coherence and balance of the company's culture, improving trust in relationships, supporting consistency, and cultivating sensitivity to the impact of the company's messages. n Formal attention to ediics in the workplace is the right thing to do. I n addition, changes i n the e c o n o m y have altered attitudes about ethical issues. F o r example, adjustments i n C h i n a ' s e c o n o m y have brought m a n y issues to l i g h t such as CGrrjpt;aii, iiitellectual property right:;, e i i . i r j i i m c n t d concerns, l a b o r disputes, iiiid equahty issues.*^ A s C h i n a prepares to take an active role i n international c o m m e r c e and tries t o become a n international leader, these ethical issues must be actively addressed. Different coimtries have different cultural norms, so ethical dilemmas w i l l always exist ^ firom. a cultoral perspective. W h i l e the U n i t e d States has tried to .address the problems o f ?Clc c o r r u p t i o n and m i s l e a d i n g financial statements t h r o u g h recent legislation, other c o u n tries have n o t been as proactive i n dealing w i t h these problems. A n o t h e r example o f i n ternational differences is t h r o u g h e n v i r o n m e n t a l regulations. A l t h o u g h the U n i t e d States appears t o have strict e n v i r o n m e n t a l laws, m a n y E u r o p e a n coimtries have even m o r e r i g i d e n v i r o n m e n t a l regulations that pose differing levels o f compHance for U . S . companies.

It is essential for employees a n d managers to understand the i m p a c t o f t h e i r decisions. M a n y argue that ethics can't be taught a n d that people just k n o w " r i g h t " f r o m " w r o n g . " Because o f t h e focus o n m a x i m i z i n g shareholder w e a l t h , s o m e decisions made w i t h i n c o r p o r a t i o n s b y top m a n a g e m e n t are unethical. E t h i c s t r a i n i n g helps e m ployees m a k e decisions i n difficult situations, c o n s i d e r i n g there m a y be m u l t i p l e o p tions that m a y n o t be s i m p l e to choose firom i n any given situation. H o w e v e r , these decisions, ethical o r n o t , m a y seem, at the time, necessary because o f the pressure o n individuals a n d c o r p o r a t i o n s a r o u n d the globe to succeed.

Contemporary Issues in Business Ethics T h e ethics o f business r e a l l y affects a g r o u p o f faceless s t a k e h o l d e r s . T h e s e stakeholders are faceless i n the sense that the persons r e s p o n s i b l e for m a k i n g the e t h i c a l d e c i s i o n s i n these g l o b a l c o r p o r a t i o n s m a y n o t be u n a w a r e o f the m a n y s t a k e h o l d e r g r o u p s that w i l l be affected b y t h e i r actions, w h e t h e r e t h i c a l o r u n e t h i c a l . T h e s e stakeholder g r o u p s i n c l u d e , b u t are n o t l i m i t e d to, e m p l o y e e s ( i n c l u d i n g m a n a g e m e n t ) , s u p p l i e r s , c u s t o m e r s , persons i n the c o m m u n i t y a n d c o m m u n i t y g r o u p s , the g o v e r n m e n t , c o m p e t i t o r s , and s t o c k h o l d e r s . T h u s , the idea o f operat~ v i n g a business e t h i c a l l y is ^nescapablg. Business professionals have a n o b l i g a t i o n to 9 jXi [d ^ s t a k e h o l d e r s to act w i t h i n t e g r i t y a n d w i t h the s t a k e h o l d e r s ' best interests i n m i n d . I f the business professionals d o n o t act e t h i c a l l y , t h e i r b e h a v i o r s c a n affect m a n y different s t a k e h o l d e r g r o u p s i n m a n y ways, m o s t often n e g a t i v e . A n d s o m e t i m e s the interests o f these s t a k e h o l d e r g r o u p s m a y be i n c o n f l i c t w i t h the desires o f the f i r m , c r e a t i n g an even m o r e d e m a n d i n g p r o f e s s i o n a l o b l i g a t i o n f o r the business professional.

E t h i c s is about b e i n g and d o i n g the r i g h t t h i n g , n o t just p r e s e n t i n g the lught idea. C o r p o r a t i o n s are n o t responsible for m a k i n g e t h i c a l decisions; the people at those c o r p o r a t i o n s have the ultimate r e s p o n s i b i l i t y for decisions made, ethical o r u n e t h i c a l . M a n a g e r s will begin to cut corners a n d glay a c c o u n t i n g _ g i r i c s . w h e n tr}"in,g to raise share prices, u l t i m a t e l y t r y m g to satisfy the shareholders a n d increase their o w n bonuses. T h e Institute o f Business E t h i c s has identified three s i m p l e ethical tests to use for a business decision: transparency, effect, a n d fairness.

Transparency
T r a n s p a r e n c y refers to d e c i d i n g i f o n e accepts h a v i n g others k n o w w h a t one has d e c i d e d . T h e m o r e o p e n a n d transparent a p e r s o n is i n d i s c u s s i n g his o r h e r actions w i t h others, the m o r e c o m f o r t a b l e the p e r s o n is that he o r she has m a d e the r i g h t decision.

Effect
Effect refers to d e t e r m i n i n g w h o the d e c i s i o n affects or impacts. D e c i s i o n makers m u s t always be aware o f w h o w i l l be d i r e c t l y o r i n d i r e c t l y i n f l u e n c e d b y t h e i r actions. T h e d e c i s i o n m a k e r m u s t n o t assume that the effect w i U be o n l y m i n i m a l to others.

Fairness
Fairness refers to d e t e r m i n i n g i f the d e c i s i o n w o u l d be c o n s i d e r e d fair by those affected by it. A decision m a k e r must understand the perspective o f each person w h o is affected by the decision to ensure that the d e c i s i o n is just to a l l .

TABLE 2-2
1. 2. 3. 4. 5. 6. 7. 8.

Eight Rationalizations for Ethical Compromise

I have to do questionable actions to achieve my objectives. I don't have the time and/or the resources to follow an ethical course of action. M y fellow colleagues expect me to behave in an unethical manner. M y boss wants me to produce results, not excuses as to why it can't be done. I beUeve that my actions are neither wrong nor illegal. Other people would agree wdth my decision. N o one will be able to identify the difference between my action and a more ediical course of action. I am hesitant to take the right course of action.

Source; Adapted from Ethics fiesouTO Centef.

I n d e f i n i n g the boundaries o f business ethics, o n e c o u l d v i e w the b i n a r y c o n s i d erations: d i s c r e t i o n a r y actions and n o n d i s c r e t i o n a r y actions. Discretiona?y actions are those actions that y o u can c o m p r o m i s e w i t h i n established boundaries. Nondiscretionary aaions are those that y o u cannot change; that is, there is o n l y o n e acceptable w a y o f acting. N o n d i s c r e t i o n a r y actions i n c l u d e laws and regulations, p u b l i c and e m p l o y e e safety, and truthfulness o f records a n d statements.'^ F r e q u e n t l y , people w i l l t r y to r a t i o n a l i z e t h e i r u n e t h i c a l behaviors. T a b l e 2-2 consists o f eight rationahzations for ethical c o m p r o m i s e s as identified b y the E t h i c s R e s o u r c e C e n t e r . M a n y people w i l l use these excuses to c o n v i n c e them.selves rhst the behavior they have chosen is appropriate. W i t h o u t appropriate support f r o m u p p e r m a n a g e m e n t o r f r o m an enforceable code o f ethics, m a n y employees m a y be s t r u g g l i n g w i t h t h o u g h t s such as these. E m ployees m u s t understand what is expected o f t h e m w h e n f a c i n g ethical d i l e m m a s . F o r example, Texas Instruments first addressed the issue o f ethics m o r e t h a n sixty years ago w h e n it d e v e l o p e d ethical p r i n c i p l e s for the c o m p a n y , b u t the first w r i t t e n code o f ethics appeared for the c o m p a n y i n 1961. T h e n , i n 1987, the c o m p a n y opened the Texas I n s t r u m e n t s E t h i c s Office a n d a p p o i n t e d an ethics director. A l l Texas I n s t r u ments e m p l o y e e s have been issued a s m a l l b o o k l e t w i t h a short test that encourages the company's employees to make the r i g h t e t h i c a l decisions. T h e test consists o f seven steps, w h i c h follow: 1. Is the action legal? 2. Does it comply with our values? 3. 4. If you do it, w i l l you feel bad? H o w w i l l it look i n the newspaper?

5. I f you Icnow it's wrong, don't do it! 6. 7. If you're not sure, ask. Keep asking imtil you get an answer.'^

N o m a t t e r w h a t the decision, e a c h p e r s o n w i l l u l t i m a t e l y be responsible for h i s or h e r e t h i c a l choices. B u t k n o w i n g w h a t an e t h i c a l d i l e m m a is m a y be difficult f o r some p e o p l e . T a b l e 2-3 provides a fist o f r e d flags to consider.

Contemporary Issues in Business Etliics TABLE 2-3 Red Flags to Spot Ethical Dilemmas
'

27

It is too insignificant a matter for anyone to notice. It is too insignificant a matter for anyone to be hurt by my actions.

I am not comfortable with this course of action, but I need to do it to advance my career. Everybody else is doing it, so why should I be the exception? I hope that the relevant party to this decision doesn't find out what I did. Since I was told what to do, I did it. I am doing this because I don't want to disappoint a specific person. If I make this decision, I will not have to deal with this specific person again.

Source: Adapted from www.refresher.com/lcrbethics.html.

W h i l e these r e d flags d o n o t m e a n that a n e t h i c a l v i o l a t i o n is o c c u r r i n g , it c o u l d m e a n that o n e c o u l d p o t e n t i a l l y occur. B e i n g alert t o these red flags means that better ethical choices w i l l m o s t l i k e l y be made.

O n e o f the m o s t difficult concepts to grasp o r embrace is that o f s e l f - m o n i t o r i n g . ' ' ' A n ethical v i o l a t i o n can b e v e r y s m a l l . B u t w i t h o u t appropriate s e l f - m o n i t o r i n g , e m p l o y i n g techniques to keep oneself i n line, a n d f o l l o w i n g the c o r p o r a t e code o f ethics, p r o fessionals w i l l feel the s m a l l ethical v i o l a t i o n is a l l r i g h t a n d w i l l b e g i n to jjistify all h)(XO c K u ^ ^ ?,l\)^itc\l U g s e j , n o matter the size. J u s t i f i c a t i o n w i l l p r o v i d e o n l y a means for t h i n k i n g that these e t h i c a l lapses are acceptable. A company's r e p u t a t i o n i n the marketplace can be t h o u g h t o f as a competirive a d vantage i f it is a positive reputation. M a n y companies, i n l i g h t o f recent corporate scan- . r. dais, are creating n o - t o l e r a n c e policies for t a r n i s h i n g corporate images. L i k e tcp 0 individuals, a company's reputation is a precious c Q m m o d i ^ . M a n y companies w o r k - ^ c u ^ g Aaca,/ .-tit'; h a r d to m a i n t a i n the images they have created. M a n y realize that once this image is tarnished, i t is difficult to restore. A n i n d i v i d u a l m u s t decide i f he o r she w i l l act e d i i c a l l y and, i n a sense, serves as an agent o f the c o m p a n y w h e n m a k i n g this choice. W h i l e i t cannot be guaranteed, i t is necessary for individuals to make the right ethical choice all the time to h e l p m a i n t a i n the positive images that m a n y companies have created f o r themselves.

-X0j,'O

Businesses operate o n the u n d e r l y i n g value o f trust. It takes o n l y o n e w r o n g choice to change the image o f a company. H o w e v e r , the e t h i c a l c l i m a t e i n a c o m p a n y m u s t be set at the t o p , a "tone f r o m the t o p " a p p r o a c h . C o m p a n i e s can't have a scandal tarnish the positive images that they have w o r k e d h a r d to create. As an applied d i s c i p l i n e , business ethics c a n be v i e w e d as the w a y a person deals w i t h c o n d u c t i n g business i n a responsible manner. It requires a s k i n g questions a n d , a t t e m p t i n g to decide o n the m o r a l l y correct t h i n g to do. E m p l o y e e s s h o u l d c o n d u c t a H L * ^ personal evaluation o f themselves b y reflecting o n several questions that deal w i t h ethical scenarios. T a b l e 2 - 4 addresses these questions.

TARI P 7-4

Oiipstions for an Fthir<; Splf-Asspssment

In the past, have you . . . B used company time to do personal activities? taken company properly for your own personal use? lied when you called in sick to your employer? used an offensive word in reference to someone else? told your colleagues a joke that could be considered offensive? spread rumors and gossip with negative repercussions about someone else in the workplace? talked negatively about the company and/or company executives to other employees? eavesdropped on the conversations of other employees? relayed confidential information to others who should not have access to that information? violated a company rule or requirement? not completed a task you promised to fulfill? not given valuable information to others who needed it to make a decision? supplied inaccurate numbers on a time sheet, billing sheet, orfinancialreport? sold a product that was poor quality and/or defective? been less than truthful to others to complete a sale? accepted a gift that was inappropriate and/or above the cost guidelines established by the company? sought out credit and recognition for actions that you did not do? not taken responsibility for a mistake you made and/or not corrected the mistake when you realized that a mistake did ocriir? knowmgly let a colleague make mistakes that could have been avoided,''

Source: Adapted from http://ethics.georgemay.com/10.html.

M a n a g e r s i n o r g a n i z a t i o n s sfiould always strive f o r e t h i c a l b e h a v i o r . I t m a y n o t be easy to always act i n a n e t h i c a l way, b u t as a leader, i t is necessary to f o l l o w t h e c o r p o r a t e codes a n d to s u p p o r t t h e c o r p o r a t e code o f ethics. G e o r g e S. M a y I n t e r n a t i o n a l C o m p a n y provides t e n reasons leaders s h o u l d m o d e l e t h i c a l b e h a v i o r : 1. 2. Redtices pressure on employees to compromise ethical standards Increases employee willingness to report misconduct

3.. Improves trust and respect at all levels 4. at ^ c6 Protects the positive reputation of the organization

' X 5 Encourages early detection of problem areas and ethics violations V _ 6. Fosters a positive work culture and improved customer service 7. 8. 9. 10. Provides an incentive and framework for ethical decision making Increases pride, professionalism, and productivity Enhances the firm's abihty to attract and retain high-quality and diverse employees Helps ensture the long-term viabiHty of the enterprise'*'

Contemporary Issues in Business Ethics L o m p a n i e s have a chance tor i m m e n s e ethical o p p o r t u n i t i e s m the future. C i o m ; ^pliance w i t h ethical codes and a n overall attitude that ethics matter w i l l enhance t h e i r culture and v i s i o n . T h e r e m a y n o t always b e a single c o r r e c t answer to a n y m o r a l o r ethical d i l e m m a . T h i s causes us t o have t o evaluate each ethical d i l e m m a separately, a n d i t m a y m e a n that we won't always k n o w a l l o f the facts about the s i t u a t i o n . P e o p l e m a y state m a n y reasons for w a n t i n g to be ethical a n d behave i n an ethical manner. T h e s e include a n i n n e r benefit, personal advantage, pegj; approval, r e l i g i o n , and habit. H o w ever, there are obstacles that p e o p l e face w h e n t r y i n g to be ethical. T h e s e i n c l u d e selfinterest and the pursuit o f happiness.^' E v e r y o n e makes mistakes, b u t h o w we deal w i t h these mistakes is what matters. W h a t makes people make b a d decisions? M i c h a e l D a i g n a u l t , a f o r m e r e m p l o y e e o f the E t h i c s R e s o u r c e C e n t e r , p r o v i d e d several reasons. B They do not feel loyal to the organization. They feel pressure to "succeed," as defined by the organization. They feel entided. They believe that the rules do not apply to them. They do not view the act as illegal. They feel pressured by their peers.

29

^ cfw v( C^i";^

B They lack resources.^" So h o w s h o u l d one a p p r o a c h b e i n g ethical? W h i l e there is n o ser list o f items to follow, some suggestions are p r o v i d e d i n T a b l e 2 - 5 . ^/ W h o are the real v i c t i m s o f c o r p o r a t e m i s d e e d s ? T h e p u b l i c , the s t a k e h o l d e r s / \' w h o have invested i n the c o m p a n i e s w i t h a n attitude o f p r o f e s s i o n a l trust, b e h e v i n g that t h e i r i n v e s t m e n t s w i l l b e p r o t e c t e d , are t h e r e a l v i c t i m s . I n reality, t h e y s h o u l d ' ' -i'- Jk be a c t i n g w i t h a n attitude o f p r o f e s s i o n a l s k e t i e i r n . E m p l o y e e s m u s t r e m e m b e r - t ^ c t ' CfO that t h e r e is always s o m e o n e w a t c h i n g t h e m a n d t h e i r b e h a v i o r . M a n y t i m e s these individuals, whether a supervisor, an employee's colleagues, o r the employee's c h i l d r e n , are t a k i n g cues f r o m the e m p l o y e e a b o u t h o w t o behave i n a c e r t a i n situation.

qj^ nol'^i
'

Based o n the survey b y the A m e r i c a n M a n a g e m e n t A s s o c i a t i o n and H u m a n R e s o u r c e Institute ( A M A / H R I ) i n 2005, the t o p five reasons managers t r y to make sure t h e i r firms operate i n a n ethical m a n n e r are as follows: 1. They are protecting the brand and reputation.

2. It is the right thing to do. 3. 4. 5. It is used to establish customer trast and loyalty. It increases the level of investor confidence. It helps in developing public acceptance and recognition.^'

30

Chapter 2 TABLE 2-5 Ways to Be More Ethical

Cutting corners does not equal efEciency. Have a good understanding of your job responsibilities. Acknowledge the effoi ts of others within the company. Make sure your knowledge is shown. Put in additional effort to complete a task. Patienee, understanding, and empathy are good characteristics to include in your decision-making process. Have discussions with others at the same level, and never talk about others behind their backs. Make people aware when you are not satisfied. Treat others as you would like to be treated yourself Identify customer needs before focusing on completing the sale. Make sure customers and supphers can depend on you. Use feedback to measure your success. Provide long-standing and durable products and services. Think about how your decisions impact others. Make decisions that will satisfy all your stakeholders. Make sure you understand what is considered acceptable industry practice. Make sure you take risks when they are warranted. Establish and maintain the core values and beliefs of die company. Use K.I.S.S. (knowledge, information, skills, support to ensure the competencies of the company> employees). Make sure your ideas are heard! Eliminate obstacles that can. get in the way of success. Make sure you consider "what i f scenarios. Make sure that the ethical course of action is also a safe course of action. Make sure your goals and objectives match the company's values. Make sure to integrate ethics in the performance feedback process for each employee. Recognize and reward integrity. Make sure that ethics is integrated into the company's selection processes for new employees. Be careful who you select as a business partner. Make sure you have a bias toward immediate action when it is necessary. Learn and understand what factors are involved for the company and employees to be ethical leaders. ^

Source: Adapted from http://ethics.georgiemay.com/14.htmt.

It is also i n t e r e s t i n g t o n o t e w h a t role ethics plays i n the o p e r a t i o n s o f b u s i nesses. T h o s e i n the survey stated that the top five r a n k e d reasons as o f 2005 that drive business ethics are the f o l l o w i n g : 1. Corporate scandals 2. Marketplace competition 3. 4. Demands by investors Pressure from customers

5. Globalization

Contemporary Issues in Business Ethics T h e participants i n the survey were also asked what they w o u l d predict to be the drivers for business ethics i n 2010. T h e y p r e d i c t e d that globaUzation w o u l d the n u m ber one reason, f o l l o w e d b y marketplace c o m p e t i t i o n , pressure from customers, c o r porate scandals, a n d demands by investors.''* W h e n asked what the t o p t e n external factors that impact corporate ethics w e r e , the results s h o w e d that legal requirements and g o v e r n m e n t regulations were the t o p factors, f o l l o w e d b y e c o n o m i c e n v i r o n m e n t , p o l i t i c a l e n v i r o n m e n t , social values, privacy, level o f g l o b a l security, technology, c o r porate social responsibility, e n v i r o n m e n t a l issues, and societal pressures.^^ 'W'Tren asked w h y people w o u l d decide to do u n e t h i c a l actions, the survey showed that the n u m b e r one reason was due to the pressure to m e e t unrealistic business goals o r dead^ ( lines. A d d i t i o n a l top five reasons, i n order, w e r e the desire to ^ i r t h e j one's career, the f^'^ desire to protect one's l i v e l i h o o d , w o r k i n g i n an e n v i r o n m e n t w i t h l o w m o r a l e , and 1"^^ kZ' i m p r o p e r or nonexistent t r a i n i n g r e g a r d i n g acceptable and unacceptable actions.'^ T h e respondents were also asked to identify the t o p factors that have to be i n c o r p o rated w i t h i n a firm to estabfish and m a i n t a i n an e t h i c a l culture. T h e top five factors were corporate leaders p r o v i d i n g support a n d leadership by m o d e l i n g ethical behavior, h a v i n g consistent c o m m u n i c a f i o n s p e r t a i n i n g to ethics f r o m all areas w i t h i n the ^ company, m a k i n g sure that ethics was i n c o r p o r a t e d w i t h i n the goals a n d strategies of4>lt the company, m a k i n g sure that ethics was i n c l u d e d w i t h i n the performance evaluation system w i t h m the company, and m a k i n g sure that ethics was i n c l u d e d w i t h i n d i e sel e c t i o n a n d r e c r u i t m e n t f u n c t i o n o f the company.

App

A s can been seen by the A i \ i A / H R I survey, stakeholders have a significant r o l e i n m o l d m g and s h a p m g the e t h i c a l . c o n u a i t r n e n t o f the firm. It is t h r o u g h the external CCX/O contact w i t h those groups that have a vested interest i n the c o m p a n y that the firm is able t o establish and m a i n t a i n strong, p o s i t i v e e d i i c a l relationships w i t h its s t a k e h o l d ers. A m o r e i n - d e p t h review o f the roles o f stakeholders and corporate social r e s p o n sibility is presented i n the next chapter.

Q u e s t i o n s for T h o u g h t
1. D o y o u personally t h i n k ethics is an i m p o r t a n t t o p i c to discuss i n business schools? E x p l a i n . 2. E x a m i n e the myths given i n T a b l e 2 - 1 . D o y o u agree that these are a l l v a l i d myths? W h y o r w h y not? 3. A s s u m i n g everyone makes mistakes i n life, are ethical mistakes considered the w o r s t mistakes to make? E x p l a i n .