This Document Contains Chapters 8 to 9 Chapter 8 Ethical Problems of Managers Contents: (Please note: the Instructor Guide for every chapter will follow this structure.) 1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources Chapter Outline I Introduction A. Managers and Employee Engagement II Managing the “Basics” A. Hiring and Work Assignments B. Performance Evaluation C. Discipline D. Terminations E. Why Are These Ethical Problems? F. Costs III Managing a Diverse Workforce A. Diversity B. Harassment C. Family and Personal Issues D. Why Are These Ethical Issues? E. Costs IV The Manager as Lens A. The Buck Stops with Managers B. Managers Are Role Models V Managing Up and Across A. Honesty is Rule One B. Standards Go Both Ways VI Conclusion IVII Discussion Questions VIII Short Cases Teaching Notes - Discussion Questions 1. Why is employee engagement important and what is its relationship to ethics? Employee engagement is critical to organizations because it is the primary indicator of productivity. Employee productivity is all about customer service and quality products and services and being prudent with organizational and human resources. Managers are the most critical element in encouraging employee engagement. Many of the organization cultural elements that drive engagement also drive ethics – the overlap is generally striking. If an organization designs its culture to encourage engagement, it often designs an ethical culture and vice versa. Probes to Stimulate Discussion • Is it important to companies that people inspired to do their best work? Why? • What impediments are there to people being engaged and productive? What conditions in a work place could cause employees to become disengaged or disenchanted with their work? Or with the company? 2. How does employee engagement relate to organizational culture? How do managers contribute to the ethical culture? Strong, healthy organizational cultures build engagement levels. Managers are the prime communicators of the culture to employees. They help set goals for employees, determine expectations, evaluate performance and determine rewards. They are the ones who communicate what’s important and what isn’t and what’s rewarded and what’s punished. Probes to Stimulate Discussion: • What role does a manager play in communicating corporate culture to employees? • What specific activities do managers engage in that communicates culture to employees? • Is it possible to have a manager misaligned with the general corporate culture? If it is, what effect would that have on employees who report to that manager? What would be most influential with employees: the organizational culture or the manager? 3. In addition to identifying and training good managers, what else could an organization do to increase levels of employee engagement? Smart organizations understand that employee engagement is the result of a comprehensive effort to build a healthy work place. Certainly it involves hiring and training talented managers. But it also requires myriad other factors including: family-friendly corporate policy; flexible work schedules; equitable rewards; goal setting that incorporates values and ethics; ethical leadership, etc. Probes to Stimulate Discussion • Is it possible for someone to have an awful manager and still be engaged? • If you were to design an engaged organization from scratch, what would you include and why? • What could an organization do that would absolutely kill engagement? 4. What specific action could a manager take to try to move employees up the employee engagement continuum – for example, from not engaged to actively engaged? Once an employee is disengaged, it is very difficult to move him or her up the continuum to engaged. Like building a reputation, building engagement takes a lot of sustained, consistent effort over a long time. And sometimes, it can’t be done at all. However, since engagement is rooted in trust, activities that engender trust will also promote engagement: telling the truth, kindness, openness, inspiration, fairness, building a relationship, etc. Probes to Stimulate Discussion • Are some people just naturally engaged or disengaged – regardless of what a company or a manager does? • What would you do if an actively disengaged employee was transferred into a department that you manage? Is there anything you need to look out for? • What risks might disengaged employees pose to an organization? 5. Why should performance be measured as an on-going process, and not just as a once-a-year event? Performance evaluation is probably a manager’s most important job. One key reason why it should be an ongoing process is that feedback must be timely in order to have any impact on a subordinate’s behavior. Most managers know this, but they’re uncomfortable giving negative feedback, so they put it off. By the time they find themselves doing an annual performance review, neither the manager nor the subordinate can remember the details. It isn’t fair to say, “I haven’t been satisfied with your performance this year.” You haven’t provided ongoing feedback that would give the subordinate specifics and a chance to change. Probes to Stimulate Discussion • “What are the barriers to continuous performance appraisal?" • "Should peers evaluate one another's performance? What are the advantages and disadvantages?" (Many companies are using 360-degree performance appraisals.) • "Should workers evaluate the performance of their managers? What are the advantages and disadvantages?" • "Should such evaluations be confidential (the identity of the reviewer unknown to the person being evaluated)?" 6. Should high performers be allowed to work by rules that are different from those that apply to other workers? Why or why not? Managing stars is one of the most challenging tasks for any manager. Too often, stars feel that they are producing so much that the rules do not apply to them. Of course, other employees notice this and it can evolve into an ugly situation. As parents must treat children equally for the most part, so must managers treat employees equally for the most part. Probes to Stimulate Discussion • "If star employees are exempt from the rules that govern other employees, how can you explain that to other employees?" • "Are there certain employees who deserve to have different rules?" • "What happens when workers violate the rules?" • "What happens when "stars" violate the rules? If there's a difference, is it fair?" 7. Imagine that you're the manager of a facility where 200 layoffs are scheduled. Design an action plan for how the layoffs would occur. How would you handle those who are being laid off and the survivors? Probes to Stimulate Discussion • "Should any employees get early notification?" • "Who can help you plan the layoff?" • "Will everyone hear at the same time?" • "When will the press be notified?" • "Who will give affected employees the news? How? Where? When?" • "How will you motivate workers who are remaining with the company?" • "If you need to lay off workers six months from now, how can you notify them now and yet encourage them to stay for a six-month period?" • “Put yourself in employees’ shoes. What will make the layoff seem fair?” 8. Are there ways in which managers can avoid harassment issues among employees who report to them? What would your strategy be? Probes to Stimulate Discussion • "If you work in a male-dominated industry, do you need to be especially vigilant about this issue?" • "How can you get senior management support regarding this issue?" • "Should you talk to employees individually about this topic or in a group?" • "If you believe an employee is harassing a coworker, how would you discipline the employee?" 9. Imagine that someone who reports to you is on a prescription medication that makes his breath smell like alcohol. How would you handle this situation? Probes to Stimulate Discussion • "How can you protect his or her rights (especially to privacy) and yet prevent your customers from thinking a worker is an alcoholic?" • "How would you counsel this employee? What would you say?" • "Could you ask someone else to counsel this employee?" • "Could you insist that this employee have no customer contact?" 10. Imagine that one of your employees complained that a coworker was harassing him or her. Also, imagine that you suspect the motives of the person who is complaining to you. How would you handle the situation? Is there a way you could discern motivation, or does it matter? When would you involve your company’s human resources department? Probes to Stimulate Discussion • “Is it up to you to analyze motivation in this case?” • “What questions might you ask the person who has brought the issue to you?” 11. As a manager, how would you respond when a worker’s performance has declined and you suspect a problem at home is the cause? How might you respond if you think an alcohol or drug problem is the cause? What language could you use to confront the employee? Are there others you might want to bring into the discussion? Probes to Stimulate Discussion • “Is an employee’s home life your business? Should privacy be a concern? • “What questions might you ask the person?” • “Would you involve human resources? When?” 12. List ways you can communicate your standards to your employees and to your peers. As an employee, how can you communicate your ethical standards to your manager? Probes to Stimulate Discussion • "Are there any situations you can think of where it's natural to communicate standards?" • "Can you help employees establish their own standards?" • "Can peers get together and agree to standards? What are the advantages and disadvantages?" • How could you communicate your standards to your manager? • Is it advisable to tell your manager that you want to uphold high ethical standards? How would you say that In-Class Exercises General Note to Instructors: For many of the ethical issues in this chapter, it may be difficult to do what one thinks is right because of the sensitive communications that must take place. It is difficult for most people, especially inexperienced students, to give negative feedback for example, or talk with an employee about a personal problem that seems to be interfering with work. We suggest that this chapter and its cases are perfect for role playing exercises. Involve students in role playing so that they can practice their communication skills and get feedback from you and their classmates. After you get some consensus on what is the right thing to do, ask students if they would have difficulty actually doing it. If so, ask people to role play the characters in the case. Case # 1 -- Hiring and Work Assignments: You're planning to hire a new sales manager and one of the leading candidates is really homely. You are concerned about how your customers – and even his colleagues -- would react to him. The specific job he's applying for requires extensive customer contact and his appearance is frankly disconcerting. On the other hand, his credentials are excellent and he's certainly qualified for the job. Notes: In the classes where this scenario has been used, students invariably laugh over the "homely" aspect. However, when asked how things would change if the candidate were deaf, or overweight, or longhaired, or scarred, students begin taking the issue more seriously. Case #2 -- Performance Evaluation You were recently promoted to manager of a department with five professionals and two clerical staff. One of the professionals, Joe, is a nice guy, but he simply hasn't been able to match the performance of the others in the department. When he tells you he has been interviewing for another job in a different part of your company, you pull his personnel file and see that your predecessor had rated Joe's performance as "good to excellent." You frankly disagree. Joe has asked you for a recommendation. Based on the written appraisals, you could give him a good one -- but your personal observation is at odds with the written evaluations. Joe's prospective manager -- your peer in another department -- asks for your opinion. What do you say? Notes: Many managers don't see this as an ethical issue, which, of course, it is. They say that getting Joe out of their department doesn't hurt anyone, and in fact may help Joe in the long run. After giving the issue some thought, however, most managers agree that Joe needs to be properly evaluated before a transfer can take place, even if it's more difficult for the manager. Honesty with Joe about the kind of evaluation you can give him is the most ethical route and best for all concerned in the long run. Joe will have an opportunity to improve and another department won’t be stuck with a mediocre employee when they thought they were getting a good one. Case #3 – Discipline Steven is a salesman who reports to you, the regional director of sales for an office supply company. He has a great track record and has consistently surpassed his sales targets, but he has one terrible flaw: he's not on time for anything. He's late for both for meetings with you and for lunches with clients, and the problem extends to his paperwork. His expense reports, sales reports -- everything is handed in a week late. As his manager, you've counseled him about his tardiness and he has improved. Now instead of being 15 minutes late for a meeting, he's only five minutes late. And instead of submitting his expenses a week late, they're only two days late. His lateness seems minor in view of his achievements, but it's driving you and his co-workers crazy. Notes: While this issue is common just about everywhere, it's a real issue in industries like investment banking. "Star" employees can bring in or make millions of dollars for their companies, and they are generally very well compensated for their efforts. They can also think they are more valuable than other employees (and they may be) and that they don't have to follow the same rules as everyone else. It takes a very strong leader to keep these characters in tow. Without senior management discipline, these "stars" can become real "monsters." Case #4 – Terminations You're a manager in a large commercial bank. You discover that Patricia, a loan officer who reports to you, has forged an approval signature on a customer loan, which requires signatures from two loan officers. When you confront Pat with the forgery, she apologizes profusely and says that her husband has been very ill. The day she forged the signature, he was going into surgery and she just didn't have time to find another loan officer to sign the authorization for the loan. Pat has been with your bank for 15 years and has a spotless record. Notes: This real case resulted in termination and caused a lot of angst for the manager who had to do the firing. But, this kind of behavior simply cannot be tolerated in a financial institution. Forgery is one of the biggest "sins" an employee can commit in a company, especially a financial firm. Appeals would get an employee nowhere in a situation like this one. Patricia could have avoided the debacle by asking for help. If she had admitted to her manager that she couldn't get the other signature, he or she could have helped her. It's a sad case, but there's really no excuse for her behavior. Case #6 – Diversity One of your best customers is a very conservative organization -- a real "white-shirt" company. Reporting to you is David, a very talented African-American who could benefit greatly from working with this customer account -- and the customer account would benefit greatly from David's expertise and creativity. The issue is that David dresses in vibrant colors and wears a kufi, an African skullcap. Your company long ago recognized David's brilliance, and his dress within the company isn't an issue. But you know your customer would react to David's attire with raised eyebrows. Notes: Most students and employees are savvy enough to understand this particular issue and see the need to support this employee in his choice of dress. Change the situation slightly and substitute a different sort of variation from the norm and you may get a very different reaction. Suppose all of the following employees are extremely competent and well groomed. Which might you hesitate bringing into a client meeting? A 65-year old female; a deaf male who reads lips; a man or woman who weighs 300 pounds; a dwarf or someone extremely tall; a man with a beard; a woman with a discernible mustache; someone in a wheelchair? Is there any justification for judging a coworker by appearance or disability and not bringing them to a client meeting if they are otherwise qualified? In the case of David, one can simply alert the client to his brilliance and his dress in advance so there aren’t any surprises. Case # 7 – Harassment Your profession has been traditionally a male-dominated one and Marcia is the only woman in your department. Whenever Sam -- your senior engineer-- holds staff meetings, he and the other males in the department compliment Marcia profusely. They say things like, "It's hard for us to concentrate with a gorgeous woman like you in the room," or "you've got to stop batting your eyelashes at us or the temperature in this room will trigger the air conditioning." They complement her apparel, her figure, her legs, and her manner of speaking. Although flattering, their remarks make her feel uncomfortable. She has mentioned her discomfort to you on several occasions, and you've told Sam and the others to cut it out. They just laughed and told you that Marcia was too sensitive. You think that while Marcia was being sensitive, she did have justification for being upset about her co-workers' remarks. Notes: This is probably the most common form of sexual harassment, although many people are simply complimented and don't feel harassed. Since it's difficult (if not impossible) to know how people are going to react to this sort of banter, managers should nip this kind of thing in the bud. Case # 8 – Harassment One of your direct reports, Robert, belongs to an activist church. Although you have no problems with anyone's religious beliefs, Robert is so vocal about his religion that it's becoming a problem with other employees in your department. He not only preaches to his fellow employees, but he also has criticized the attire of some of his female co-workers, and continually quotes religious verse in staff meetings. You've received complaints about his behavior from several employees. A few weeks ago, you suggested to Robert that he tone down his preaching, and he reacted as if you were a heathen about to persecute him for his beliefs. His behavior has since escalated. Notes: This is no doubt a sensitive issue. However, it doesn't matter if the issue is peddling religion or Girl Scout cookies, employees should not have to endure feeling pressured by other employees. Robert is selling religion as surely as someone else may be selling candy bars for their civic organization. That kind of behavior is fine if people don't mind it. As soon as people start to complain and feel uncomfortable, the behavior must cease. Robert has gone way too far and should be disciplined. Case #9 -- Family and Personal Issues One of your direct reports is Ellen, who just returned from maternity leave. She now has two children -- her infant is four-months-old and her older child is three-years-old. Ellen is not only a talented worker, but she's also a wonderful person. Before the birth of her second child, she had no problem handling the workload and the demands on her time - she had a live-in nanny who could care for her child regardless of when she returned home. Recently, however, her live-in left and Ellen is now sending her children to a day care facility with strict opening and closing times. Although Ellen is very productive when she's in the office, her schedule no longer has any flexibility -- she must leave the office no later than 5:00 p.m. This has caused a hardship for all of her peers who must complete team assignments whether or not she's present. Although you don't want to cause problems for her, the situation doesn’t seem fair to her co-workers. Notes: Frequently, this situation is more common in reverse. In some companies, managers bend over backwards to help employees in Ellen's situation -- sometimes to the detriment of other employees. There are offices where single people always have to work the weekend or overtime shifts. There are other organizations where Jewish employees are forced to work over the Christmas holidays. Fair is, after all, fair. If you try too hard to accommodate employees with special needs, you may be unfair to employees without special needs. The situation should be discussed honestly with Ellen. Can she still meet the expectations of her job? Case #10 -- Honesty Is Rule One Michael is a lawyer who reports to Paula, the corporate counsel for a chemical company. During one particularly busy period, Paula asks Michael to prepare a summary of all pending lawsuits and other legal activity for the company's senior management. Since Michael has several court appearances and depositions cluttering his schedule, he assigns the report to one of his paralegals, who completes the report in several days. Since he's so busy, Michael simply submits the report to Paula, without reviewing it. When Paula asks him what he thinks of the report, he assures her that he's fine with it. The next day, Paula asks Michael into her office and says that she has found a major omission in the report. Michael has no choice but to admit that he didn't have time to review it. Notes: This is a perfect illustration of how important it is to be forthright with your manager. If we fake it, we invariably get caught. And the effects of our behavior can last for the duration of our relationship with our manager. Trust is very difficult to reclaim. Case #11 -- Standards Go Both Ways It began when Bruce asked Andy to lie to his wife about his whereabouts. "If Marcia calls, tell her I'm in Phoenix on a business trip," he told Andy. Of course, he had also confided to Andy that in case of an office emergency, he could be reached at a local golf tournament or at a nearby hotel where he was staying with another woman. Since Bruce was senior to Andy and was a powerful contributor in the department, Andy went along with his request. When Marcia called, Andy told the lie about Bruce being in Phoenix. Bruce asked several more "favors" of Andy, and Andy complied. Then Bruce asked for a big favor: he instructed Andy to inflate monthly sales figures for a report going to senior management. When Andy objected, Bruce said, "Oh, come on Andy, we all know how high your standards are." Notes: In the real case, "Andy" was subpoenaed by Bruce's wife to be a witness in their divorce. It was a real mess! It's foolhardy to ever lie for a co-worker or manager. Case #12 -- Employment Basics You've recently been promoted to a supervisory position and are now responsible for coordinating the work of four other employees. Two of these workers are more than 20 years older than you are, and both have been with the company much longer than you have. Although you've tried to be supportive of them and have gone out of your way to praise their work, whenever there is some kind of disagreement, they go to your boss with the problem. You've asked them repeatedly to come to you with whatever issues they have; they just ignore you and complain to other workers about reporting to someone your age. Design a strategy for dealing with these workers and your manager. Notes: This problem is as much with your boss as with the two workers who report to you. You should ask your manager to stop undermining you with these two workers. If he or she refuses to listen to their complaints, they'll be forced to deal with you. Case #13 – Diversity After two years of sales calls and persuasion, a large, multinational petroleum company -- Big Oil Ltd. -- decides to sign with your employer, Secure Bank. Since Big Oil is headquartered in Saudi Arabia and most of the meetings with the client have been in the Middle East, Secure Bank's senior executive in charge of oil and oil products companies -- Julie -- has not attended. Although the Secure Bank employees who have met with the company have told the Big Oil executives that the lead on their account will be a woman, the news must not have registered, perhaps because of language difficulties. Today the Big Oil reps are in Chicago to sign on the dotted line and meet with Secure Bank's senior managers, and of course, they've met with Julie. A member of the original Secure Bank sales team calls you to say that Big Oil's senior team member has told him he does not want Julie to work on their account, period. Because of cultural issues, Big Oil execs are uncomfortable dealing with women from any country. As Julie's manager, what do you do? Notes: This case has been discussed is various business and educational settings and almost everyone who has seen the case thinks that the “right” thing is to defend Julie, but that most companies would comply with customer wishes and replace her. However, that sends quite a message to customers and to every other employee in the company. Julie needs to be included in this deal or the result is unfair, period. An interesting question raised by one student is: Why do American companies always try to accept other cultures? Why can't other cultures accept our standards? Case #14 --Managing Up and Across As an operations professional, you need to be able to interact effectively with many internal customers – from corporate managers to field representatives. One of your peers is Jessica, who is a talented operations professional, but who is downright rude to her internal customers. Her attitude is so bad that people around your company ask specifically to deal with you instead of Jessica. You’ve heard many tales about her sarcasm and her unwillingness to deliver anything other than the absolute minimum to other employees. You’ve thought about talking to Bruce, the manager to whom both you and Jessica report – but you and everyone else knows that they’re dating. In the meantime, your workload is increasing because of Jessica’s reputation. How do you handle Jessica and Bruce? Notes: Most professionals agree that it’s unfair to everyone to let a situation like this one continue. You could, of course, approach Bruce with this. A better choice might be to go to your human resources representative or to Bruce’s manager. Homework Assignment Please note that any of the in-class discussion cases would make excellent homework assignments. Additional Resources: 1. Institute for Global Ethics This is a wonderful website and the founder of the IGE, the late Rushworth Kidder, was a well-known expert on organizational ethics. Look for the section called “Dilemmas” for additional cases that can be used as homework assignments or as in-class cases for discussion. http://www.globalethics.org/ 2. Case Place Another good resource for cases and teaching materials is Case Place: http://www.caseplace.org/ Chapter 9 Corporate Social Responsibility Contents: (Please note: the Instructor Guide for every chapter will follow this structure.) 1. Chapter Outline 2. Teaching Notes 3. In-Class Exercises 4. Homework Assignments 5. Additional Resources Chapter Outline I Introduction II Why Corporate Social Responsibility? A. Pragmatic Reason B. Ethical Reason C. Strategic Reason III Types of Corporate Responsibility A. Economic Responsibilities B. Legal Responsibilities C. Ethical Responsibilities D. Philanthropic Responsibilities IV Triple Bottom Line and Environmental Sustainability V Is Socially Responsible Business Good Business? A. The Benefit of a Good Reputation B. Socially Responsible Investors Reward Social Responsibility C. The Cost of Illegal Conduct D. The Cost of Government Regulations E. What the Research Says about Social Responsibility and Firm Performance F. Being Socially Responsible Because It’s the Right Thing to Do VI Conclusion IVII Discussion Questions VIII Case: Merck and River Blindness IX Short Case Teaching Notes - Discussion Questions 1. Do you think corporate social responsibility is important? Why or why not? Depending upon the audience, many students will see the importance of social responsibility. Generally, they are conscious of some kinds of environmental concerns and have some understanding of the relationship between business and the community. But with some business school audiences, you may find resistance to the idea that corporations owe anything to society beyond making a profit and obeying the law. So, be prepared for a debate on this one. The chapter is designed to provide students with lots of reasons to think that CSR is important. If nothing else, they should recognize the importance of corporate reputation. Probe to Stimulate Discussion: • Put yourself in the role of consumer. What are your expectations of companies that you deal with from the consumer’s perspective? • Put yourself in the role of a socially responsible investor. What are your expectations of companies that you are considering investing in? • Put yourself in the role of local community. What are your CSR expectations of local companies? 2. Choose a company and analyze its CSR report. In doing so, think about what seem to be its reasons for being socially responsible. Is it pragmatic, ethical, strategic, or some combination? Can you identify its key stakeholders? 3. Using the same company as an example, think about the four types of corporate social responsibility. What is your assessment of how the company is doing? 4. With reference to the CSR pyramid, what are the implications of stopping at a particular pyramid level? For example, would it be all right if a company took its sole responsibility to be financial responsibility to its shareholders? financial responsibility and legal responsibility? Do you agree that CSR is best represented by a pyramid? Why or why not? Can you think of a better way to graphically represent a company’s social responsibility? Obviously, the course is oriented toward the importance of ethical responsibility beyond financial and legal responsibility. Hopefully, students will see that once they have read the chapter. Philanthropy is more discretionary, but even that tends to be expected in the US if a company is successful. Students sometimes come up with interesting alternatives to the pyramid. 5. Think about the television programs and films you’ve seen recently in which business’ social responsibility (or lack thereof) was portrayed in some way. How were business and business people portrayed? Is there anything business could or should do to improve its media image? Some businesses try to stay out of the limelight. Why might that be? What do you think of that strategy? This can lead to a great discussion because it’s usually difficult for students to think of positive media portrayals of business. Those just don’t make the news very often. Staying out of the limelight is certainly an option. But, if something goes terribly wrong, the company has no reputation to fall back on, no trust account to draw upon. 6. Do you believe that employees are more attracted and committed to socially responsible companies? Why or why not? Are you? Why or why not? There is certainly empirical evidence for this. But, with students, ask them for their own thoughts about the companies they would hope to work for. Often, they are influenced by the company’s positive reputation for its treatment of employees, customers, etc. If they are, they can expect other employees to feel the same. Probe to stimulate discussion: • How much salary would you be willing to forego if you knew that your company would treat employees well, and conduct business in a totally ethical manner? 7. If you were running your own company, how would you communicate your CSR strategy with employees, with external stakeholders, and why? It probably depends on the stakeholders. Communicating about CSR with employees can boost morale as long as employees believe that the company is sincere. They’ll think that a company that cares about others also likely will care about them. With external stakeholders, these decisions are a bit more nuanced. You may have to assess the stance of the external stakeholder. Is it a supplier who is resistant to demands you are making? If so, you may need an “education” orientation to bring that supplier on board. If it’s a customer, you can gauge that customer’s interest in CSR and use it as a selling point. If it’s an NGO, you’ll need to assess whether it’s friend or foe. Is this an organization you can work with or not? Bottom line – this is a complex question and you’ll probably need a multi-pronged communication strategy. You could ask students to create one. See probe below. Probe to Stimulate Discussion: Can you think of companies that strongly promote their CSR? Can you think of others that don’t? What are some reasons for and against doing so? What are your reactions to companies that promote their CSR? If you are cynical, what can a company do to avoid such a cynical reaction? In-Class Exercises Case # 1 – Merck and River Blindness: Although the decision by Merck to develop this drug for what amounted to no profits is an old one, it is still a great example of corporate social responsibility and ethical leadership. It is particularly useful because most students have never heard of it, meaning that Merck has not “promoted” it to external audiences. On the other hand, it is clearly an important part of the company’s culture. Ask any employee about it and be prepared for a long conversation. Also, Merck did this long before corporate social responsibility was fashionable. We encourage you to search YouTube for videos on river blindness. It’s harder to discuss this just in terms of the financial bottom line once you’ve seen pictures of exactly what the disease is and what it does. Go to YouTube and put in the search terms river blindness or merck river blindness. Choose a video and then decide where in the discussion it would work best to insert it. Case Questions: 1. Think about the definition of stakeholders —any parties with a stake in the organization’s actions or performance. Who are the stakeholders in this situation? How many can you list? On what basis would you rank them in importance? There are many including employees, stockholders, people with river blindness, the communities where those people live, those with other diseases, governments, the media, perhaps competitors, etc. 2. What are the potential costs and benefits of such an investment? This is difficult, as always because once again we have no crystal ball. The potential to discover a drug for this terrible disease certainly exists and the company’s research scientists think it is possible. The outcomes for those with the disease would be very positive and there could also be very positive media attention and reputational effects. But, there is also the potential to invest years and millions of dollars and come up empty handed. Employee morale is a potential cost or benefit. Scientists are extremely important to pharma companies and Merck’s research scientists wanted to pursue this. Allowing them to do so might make them feel good about themselves and their work. Finally, there are opportunity costs. What drugs might “not” get discovered because scientists were working on this one. 3. If a safe and effective drug could be developed, the prospect of Merck’s recouping its investment was almost zero. Could Merck justify such an investment to shareholders and the financial community? What criteria would be needed to help them make such a decision? We wrote this question, but we actually don’t like it very much. Merck is clear on its website about its commitment to corporate social responsibility and to philanthropy. So, investors have the opportunity to freely decide whether they wish to invest in a company with these values or not. Companies don’t justify every investment to shareholders so we’re not convinced that they would need to justify this one. But, they certainly would not be able to justify it in terms of the financial bottom line. They would have to justify it in terms of goodwill or some other more difficult to measure criterion. Another important discussion point here might be “which shareholders?” As the chapter discusses, some shareholders are very interested in CSR. Are we talking about those or about day traders who have little interest in the company other than whether they can make a short term gain? One of us heard a representative of the Business Roundtable refer to the fact that we no longer have shareholders. We have share “renters.” These are people with only short-term financial interest in the company. So, we think companies will need to look beyond these shareholders if they wish to think about the long-term greater good of the firm and society. 4. If Merck decided not to conduct further research, how would it justify such a decision to its scientists? How might the decision to develop the drug, or not to develop the drug, affect employee loyalty? As noted earlier, a pharmaceutical company’s scientists are one of its most important resources, a point that students often miss. Of course, they know that they are working for a for-profit company. But, they are also highly trained scientists with advanced degrees who probably have humanistic values about helping people and curing disease. So, this is an important consideration. 5. How would the media treat a decision to develop the drug? Not to develop the drug? How might either decision affect Merck’s reputation? This is tough to predict. The media may or may not even be aware of this. As noted earlier, Merck has not “promoted” itself in this way. It’s possible that a media outlet would pick up the story and run with it. But, in our view, this is not a good reason to do it or not do it. A decision like this must be based upon deeply held values. 6. Think about the decision in terms of the CSR pyramid. Did Merck have an ethical obligation to proceed with development of the drug? Would it matter if the drug had only a small chance to cure river blindness? Does it depend on how close the company was to achieving a cure, or how sure they were that they could achieve it? Or does this decision become a question of philanthropy only? This is mostly a question of philanthropy. The other questions raised here are difficult to answer because, when the decision must be made, we know very little about the chances of success. But, the case does raise an important ethical question that seems to affect some companies more than others. For example, if a company has information that no other person or company has and it could help people with that information, does the company have an ethical duty or obligation to act? Some students have suggested that the company share the information with someone else who might be interested in pursuing the research. But, remember that this drug was based upon an existing Merck veterinary drug. So, we feel quite sure that Merck would not be interested in sharing its proprietary information. That leaves it with an ethical dilemma. Does it have an obligation to pursue this because it alone has the information to do so? 7. How does Merck’s value system fit into this decision? Merck’s value system is very important here. If a company says that it values people over profits, it should act that way. Otherwise, it is just going to create a lot of cynical employees. If you don’t mean it (your values, that is), don’t say it! That goes for individuals too! 8. If you were the senior executive of Merck, what would you do? It is important for students to know that Merck decided to pursue the research. After about a decade and many millions of dollars, the company succeeded. They came up with a wonder drug (Mectizan) that could kill the worms on the inside and the insects biting on the outside and the drug seemed to have few side effects. The next challenge was finding someone to buy the drug. The company had all sorts of ideas for who might help. But, there were no takers- not the US, the UN, the World Health Organization – they all had their own priorities – and the countries and people where river blindness was rampant had no resources. So, Merck had another ethical dilemma – what to do now that they had the drug available but no one to buy it. The company made an extraordinary decision – to distribute the drug for free (to give it away) to all who needed it forever or until river blindness was eradicated! That wasn’t the end of it though. The company had to decide how to get the drug to the distant villages where river blindness was a problem, addressing problems of poor or no transportation over terrible roads to places with no health professionals. So, the company partnered with others to arrange for the logistics to transport the drug to the people who needed it. Rather than provide all the details here, we direct you to read more about this story and other Merck social responsibility efforts on the Merck company’s website. The philanthropy is over twenty years old now and has been very successful and a model that other companies have followed. Merck remains one of the most philanthropic companies in the US. Another notable outcome is this – when AIDS became a worldwide health problem the company’s experience with distribution of Mectizan in Africa helped. Although AIDS drugs were more complicated, the company could call on its experience to inform these new efforts. One last note – at least some students will remember the Vioxx story – If you remember, Merck voluntarily recalled Vioxx a few years ago after learning that it caused cardiovascular problems in patients who took it for 18 months or more. The recall created an uproar and lots of lawsuits. Merck fought them because of its claim that it had done nothing wrong. But after winning more cases then it lost, it finally settled the remaining cases so that it could move on. We have found it interesting to discuss this case and contrast it with the River Blindness story. The Vioxx case is a complex one. So, if you want to do this, you’ll have to do some research. Case Teaching Resources: We use an old video (that we believe is no longer available) to introduce the case. It shows what river blindness is and brings the issue very much into focus, creating an emotional response. It also shows Merck’s response and the complexity of making a decision to give the drug away. You can Google river blindness and find stories and pictures. You can also put river blindness into youtube and find multiple videos. Here is a 5 minute video about river blindness in Tanzania http://www.youtube.com/watch?v=PIJ8UYDAF3M Here’s a good 10 minute documentary about the Mectizan donation program and its effects. http://www.youtube.com/watch?v=0BdMOj-9gBo Case #2 – Short Case You have a long-standing consulting relationship with a large consumer products company. This company represents 50 percent of your consulting revenues and is clearly your most important client. The CEO has called to ask you to commit a significant amount of time over the next couple of months to assist with a large merger project. The company is merging with a large conglomerate whose primary business is the sale and distribution of tobacco products. The CEO is relying on you to assist in facilitating a smooth integration of the two companies. You promised yourself that because your father died of lung cancer, you would never work for a tobacco company. Is there a way that you can accept the consulting assignment and still keep your promise to yourself? How will you handle this dilemma if you decide that you cannot work for the tobacco company? Probes to Stimulate Discussion: • How would you feel if this client represented a smaller portion of your company revenue – 10%? Or 30%? • Exactly how would you explain your decision to your client if you decided you couldn’t work on this merger? • Is there a way you could propose working on part of the merger, yet not be involved with the tobacco company? • If you brought in another consultant to work with you as a team – the other person working directly with the tobacco company – would that make it possible for you to continue this client relationship? • Does this merger signal the end of your relationship with all parts of this organization? • Can you continue to work for the non-tobacco businesses within this corporation? Homework Assignments 1. Merck River Blindness Case Have students analyze the Merck River Blindness Case and answer the discussion questions. Write a 3 – 4 page papers outlining their answers or they could prepare a presentation for class discussion. 2. Write a Sustainability Report This is a good opportunity to have students interview a parent, friend, or find another businessperson to interview about what his/her company is doing with regards to sustainability. You could instruct them to focus only on local companies – and interview local businesses – or the students could focus on large and/or global companies. They could focus on companies in one country, or investigate whether there are trends in certain regions of the world. If they could give a “Sustainability” or “Green” award, what companies would they nominate and why? 3. Global 100 Analysis Students could select two companies from the Global 100 index (see Additional Resources, which follows) and compare how various companies approach the subject. Alone or in teams, students could investigate a company (or companies), prepare a presentation, and present their findings in class. Additional Resources: 1. Global 100 The Global 100 is a group based in Canada that rates companies globally on a sustainability index: http://www.global100.org/ 2. Newsweek’s Top 500 Sustainable Companies http://www.sustainablelifemedia.com/content/story/brands/newsweeks_500_sustainable_companies 3. SB20 – The World’s Top Sustainable Business Stocks http://www.sustainablebusiness.com/index.cfm/go/progressiveinvestor.sb20p1 4. Green Biz: How to Produce a Top-Notch Sustainability Report http://www.greenbiz.com/blog/2010/05/10/how-produce-topnotch-sustainability-report 5. Robust Company Sustainability Sites: A number of organizations have robust sustainability sections on their internet sites. See: • General Electric: http://ge.ecomagination.com/ • Siemens: http://www.siemens.com/sustainability/en/index.php • Dell: http://content.dell.com/us/en/corp/dell-earth.aspx • Unilever: http://www.unilever.com/sustainability/?WT.GNAV=Sustainability • Nokia: http://www.nokia.com/environment • Wal-Mart: http://walmartstores.com/Sustainability/ • SC Johnson: http://www.scjohnson.com/en/commitment/focus-on.aspx 6. Supplementary Case We have used Harvard’s Herman Miller case quite successfully with this chapter. It is a sustainability case and a nice demonstration of a company living its values. But it also shows the complexity of a sustainability decision with regard to employees (some of whom prefer the status quo), suppliers (some of whom resist sharing proprietary information), and the company itself (that must change its manufacturing processes and other practices). But the decision pays off and the case demonstrates how a commitment to sustainability can also spark innovation. Instructor Manual for Managing Business Ethics: Straight Talk about How to Do It Right Linda K. Trevino, Katherine A. Nelson 9781118582671
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