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Chapter 2: Ethical Decision-Making: Personal and Professional Contexts Questions, Projects, and Exercises Consider your own personal values and explain where they originated. Can you pinpoint their derivation? To what degree have you chosen your own values? To what degree are your own values products of your family, your religious or cultural background, or your age? Does it matter where values originate? The Life Goals assignment (which was passed down from other colleagues to one of the authors) works well in place of this particular question. It is included at the end of this chapter in this IM as Appendix A. Students might also be asked to distinguish from among their own values, those that are easily changed from those that would be unlikely ever to change. While much of this discussion may involve topics in psychology, it can easily be directed to questions of moral psychology, learning theory, and through that to the development of moral character and virtues. My personal values have been shaped by a combination of factors, including my family, religious upbringing, cultural background, and personal experiences. Growing up, my parents instilled in me the importance of honesty, respect, and compassion. These values were reinforced by the teachings of my religion and the cultural norms of my community. While I have consciously chosen to uphold these values in my life, I recognize that they are largely influenced by external factors. For example, my belief in the value of hard work and perseverance comes from witnessing my parents' dedication to their work and the positive outcomes that resulted from their efforts. Additionally, as I have grown older, I have developed my own values based on my experiences and reflections. For example, I have come to value open-mindedness and the importance of seeking diverse perspectives, which I believe are crucial in today's interconnected world. The origin of values is important because it helps us understand why we hold certain beliefs and behave in certain ways. It also allows us to evaluate the validity and relevance of our values in different contexts. While external influences play a significant role in shaping our values, I believe that we have the agency to reflect on and modify our values based on our own experiences and evolving understanding of the world. Identify an activity that is outside of your “zone of comfort”; in other words, do something that you might not otherwise do, experience something that you might not otherwise experience, because the activity would otherwise be something with which you would be uncomfortable. This activity does not need to be something enormous or intimidating; but instead it could be something as basic as being the first to apologize after an argument, or agreeing to dress up for a masquerade party when you might not usually feel comfortable doing so. You might offer to cook dinner for a friend, when that would normally be an uncomfortable arrangement; or you might ask a question in class, or offer to lead a presentation, if those are things something that make you uncomfortable. It is important that you consider your expectations (i.e., how do you think you will feel, what do you think it will be like?) before engaging in this activity, and write them down. Then, after the experience, complete the assignment by writing a description of the actual experience and indicating whether the reality matched your expectations, considering in particular your original perceptions and expectations and whether they were accurate. How closely can we trust our perceptions and pre-judgments about our expectations of experiences? How true is our “gut instinct?” The purpose of the Zone assignment is to encourage students to engage in a “stretch,” to do something they might not otherwise do and to explore whether their preconceptions about that stretch were correct. Sometimes, of course, they are. But more often, they are not and the students are thereby primed for the next class sessions to be a bit more open-minded about what judgments might lie ahead, as well. Reinforce to the students, however, that you do not mean to imply that they should do anything that they are not supposed to do, but simply something they might not otherwise be likely to do. Topics of etiquette and social norms can be helpful here. For this assignment, I decided to volunteer to lead a presentation at work, something that I've always found nerve-wracking and outside my comfort zone. Before the presentation, I expected to feel anxious and worried about speaking in front of my colleagues. I thought it would be a daunting task, and I was concerned about making mistakes or forgetting important points. During the presentation, I found that my anxiety was present but manageable. I focused on preparing thoroughly, which helped me feel more confident. As I began speaking, I noticed that my nervousness decreased, and I was able to engage with the audience more effectively than I had anticipated. Overall, the experience was challenging but also rewarding. After the presentation, I realized that my perceptions and expectations were somewhat exaggerated. While I had anticipated feeling extremely anxious, the reality was that my nerves were manageable, and I was able to deliver the presentation successfully. This experience taught me that our perceptions and pre-judgments about our expectations of experiences are not always accurate. Our "gut instinct" can sometimes be influenced by fear or anxiety, leading us to overestimate the challenges we might face. In conclusion, while it is important to trust our instincts to some extent, it is also essential to challenge our perceptions and be open to stepping outside our comfort zones. Doing so can lead to personal growth and the realization that we are capable of more than we might think. What issue, challenge, or idea do you care about most in the world? Share it in a brief essay, then convince your reader why it is so important that she or he should also care about that issue to the same extent. It may be effective to use the theories discussed in prior chapters to persuade your reader of the value of your argument. At the end of the chapter, as Appendix B, is an example of an argument made by an author in favor of freedom of the press with inserts (in bold/italics) by one of the text authors to reiterate how that original author is making his points using connections to the theories addressed in this chapter. Students might also be directed to take a look at NPR's "This I Believe" series to get some ideas of how to argue passionately for something in which they believe (though those authors do not necessarily use the theories discussed in the chapters as they will!). The issue that I care about most in the world is climate change. Climate change is a global crisis that threatens the well-being of our planet and future generations. The scientific consensus is clear: human activities, such as burning fossil fuels and deforestation, are the primary drivers of climate change. One of the key reasons why everyone should care about climate change is its far-reaching impacts. From extreme weather events to sea-level rise, climate change affects ecosystems, economies, and communities worldwide. It exacerbates poverty, food insecurity, and health problems, disproportionately impacting vulnerable populations. Moreover, addressing climate change requires collective action. Individuals, businesses, governments, and organizations must work together to reduce greenhouse gas emissions, transition to renewable energy sources, and adapt to a changing climate. Failure to act now will lead to irreversible damage to the planet and future generations. To convince others of the importance of addressing climate change, we can apply ethical theories discussed in prior chapters. Utilitarianism, for example, argues that actions should be judged based on their ability to maximize happiness or well-being for the greatest number of people. Addressing climate change aligns with this principle, as it seeks to prevent harm and secure a sustainable future for all. Similarly, virtue ethics emphasizes the importance of cultivating virtues such as environmental stewardship and compassion. By caring for the environment and future generations, we embody these virtues and contribute to a more ethical society. In conclusion, climate change is a critical issue that requires urgent action. By understanding its impacts and embracing ethical principles, we can work together to mitigate climate change and create a more sustainable and equitable world for all. Your CEO recognizes you as having extraordinary skills in decision making and communications so she asks for guidance on how to best communicate her plans for an imminent reduction in force. What are some of the key strategies you will suggest she employ in reaching such a decision and making the announcement? Students will need to use the ethical decision making process, including sensitivity to stakeholders and careful consideration of theories. Communicating a decision about an imminent reduction in force is a sensitive and challenging task that requires careful planning and execution. Here are some key strategies I would suggest for the CEO: 1. Transparency and honesty: It is essential to be transparent about the reasons for the reduction in force. Providing honest explanations can help employees understand the rationale behind the decision, even if they do not agree with it. 2. Empathy and compassion: Acknowledge the impact of the decision on employees and express empathy for those who will be affected. Demonstrating compassion can help soften the blow and show that the decision was made with consideration for the well-being of employees. 3. Clear and concise messaging: Use clear and simple language to convey the message. Avoid using jargon or technical terms that may confuse employees. Be direct and to the point, but also empathetic in your delivery. 4. Provide support and resources: Offer support to employees who will be affected by the reduction in force. This could include assistance with resume writing, job search workshops, or access to counseling services. Providing resources can help employees navigate the transition more smoothly. 5. Timing and venue: Choose the timing and venue for the announcement carefully. Consider the best time of day to minimize disruption and choose a venue that allows for privacy and confidentiality. 6. Two-way communication: Encourage two-way communication by allowing employees to ask questions and express their concerns. This can help address any misunderstandings and provide clarity on the decision. 7. Follow-up communication: After the initial announcement, provide regular updates and information about the progress of the reduction in force. This can help maintain trust and transparency throughout the process. By employing these strategies, the CEO can communicate the decision about the reduction in force in a way that is respectful, empathetic, and clear, ultimately helping to minimize the negative impact on employees and maintain trust within the organization. Describe the qualities you believe are necessary in an “ethical leader.” Provide support for your contentions and explain why a leader should evidence these qualities in order to be considered “ethical” from your perspective. Then identify someone you believe embodies these qualities in her or his leadership and provide examples. Finally, provide an example of someone who you believe does not possess these qualities and describe that person’s leadership. With the students, walk through the qualities of an “ethical leader,” and use these as a basis for discussion of who we currently recognize as leaders in our world. Compare the ethical leaders to those listed as unethical. One might begin with the question of a “good” leader and play on the ambiguity between “good-as-effective,” and “good-as-ethical.” I will first describe the qualities I believe are necessary in an ethical leader and provide support for these qualities. Then, I will identify a person who embodies these qualities and provide examples. Finally, I will provide an example of someone who lacks these qualities in their leadership. Qualities of an Ethical Leader: 1. Integrity: An ethical leader should demonstrate honesty, fairness, and consistency in their actions. They should adhere to high moral principles and values. 2. Respect: Ethical leaders should treat all individuals with respect, regardless of their position or background. They should value diversity and inclusivity. 3. Accountability: Ethical leaders should take responsibility for their decisions and actions. They should be willing to accept consequences for their mistakes. 4. Empathy: Ethical leaders should be able to understand and empathize with the perspectives and feelings of others. They should consider the impact of their decisions on stakeholders. 5. Courage: Ethical leaders should have the courage to stand up for what is right, even in the face of adversity. They should be willing to take risks to uphold ethical principles. Support for These Qualities: These qualities are essential for ethical leadership because they create a foundation of trust and integrity. When leaders demonstrate these qualities, they inspire trust and confidence in their followers. This can lead to improved morale, motivation, and performance within an organization. Additionally, ethical leadership promotes a positive organizational culture and fosters a sense of social responsibility. Example of an Ethical Leader: One example of an ethical leader is Nelson Mandela. Mandela demonstrated integrity by standing firm in his beliefs and principles, even after spending 27 years in prison. He showed respect for all individuals, regardless of their race or background, and promoted inclusivity and diversity. Mandela was also accountable for his actions and decisions, taking responsibility for his role in the struggle against apartheid. Example of a Leader Lacking These Qualities: An example of a leader who lacks these qualities is Bernie Madoff. Madoff was a prominent businessman and investment advisor who orchestrated one of the largest Ponzi schemes in history. He lacked integrity, as he deceived investors and violated their trust for personal gain. Madoff also lacked empathy, as he showed little regard for the financial ruin he caused to thousands of people. His actions were driven by greed and a lack of moral principles. In conclusion, ethical leaders possess qualities such as integrity, respect, accountability, empathy, and courage. These qualities are essential for building trust, promoting a positive organizational culture, and demonstrating social responsibility. Leaders who embody these qualities inspire others and contribute to a more ethical and sustainable society. How can your global firm best ensure that it is taking into account the perceptual differences that may exist as a result of diverse cultures, religions, ethnicities, and other factors when creating a worldwide marketing plan? Refer students to the seminal case in this area, the Nestle infant formula case (Found at http://multinationalmonitor.org/hyper/issues/1987/04/formula.html in the Multinational Monitor, April 1987, Volume 8, Number 4). Students may also want to read: “Ethnic Consumers Require Sensitive Marketing.” July 7, 2005. Destination CRM.com: http://www.destinationcrm.com/articles/default.asp?ArticleID=5249 You may also wish to encourage students to take a look at which encourages evaluation of marketing campaigns and the messages contained in them. Exploring the impact of and responsibility for messages communicated is a critical element of judgment and accountability. To ensure that a global firm is effectively taking into account perceptual differences resulting from diverse cultures, religions, ethnicities, and other factors when creating a worldwide marketing plan, it needs to adopt a comprehensive and culturally sensitive approach. Here's how the firm can achieve this: 1. Cultural Research and Analysis: Conduct thorough research and analysis of the cultural, religious, and ethnic backgrounds of the target markets. Understand the values, beliefs, norms, and traditions that shape consumer behavior in each region. 2. Diverse Team Composition: Form cross-functional teams comprising members from diverse cultural backgrounds. This diversity will bring varied perspectives and insights into the marketing strategy development process. 3. Localized Marketing Strategies: Tailor marketing strategies to resonate with the cultural sensitivities and preferences of each target market. Avoid universal messaging that may inadvertently offend or alienate certain cultural groups. 4. Language and Communication: Pay careful attention to language nuances and communication styles prevalent in different regions. Translate marketing materials accurately and consider hiring local translators or consultants to ensure cultural appropriateness. 5. Respect for Religious and Ethical Values: Be mindful of religious and ethical considerations when designing marketing campaigns. Avoid promoting products or messages that may conflict with religious beliefs or ethical principles prevalent in certain cultures. 6. Adaptability and Flexibility: Remain adaptable and flexible in response to feedback and cultural nuances. Continuously monitor and evaluate the effectiveness of marketing strategies, and be willing to make adjustments as needed to accommodate diverse perceptions. 7. Sensitivity Training: Provide training and education to employees on cultural sensitivity and awareness. Equip marketing teams with the knowledge and skills necessary to navigate cross-cultural communication effectively. 8. Engagement with Local Communities: Foster genuine relationships with local communities and stakeholders. Engage in dialogue and collaboration to understand their needs, preferences, and concerns, and incorporate this feedback into marketing initiatives. 9. Ethical Considerations: Ensure that marketing practices adhere to ethical standards and respect human dignity across all cultural contexts. Avoid exploiting cultural stereotypes or engaging in practices that could be perceived as discriminatory or exploitative. By integrating these strategies into its marketing planning process, a global firm can demonstrate a commitment to inclusivity, respect for diversity, and ethical responsibility while maximizing its effectiveness in reaching diverse audiences worldwide. Many people have blamed the global financial crisis of 2008-2009 on a single value or motive, namely greed. How would you define greed? How common do you think true greed is in the general population? Do you think it is more common on, say, Wall Street, than in the general population? Review different ways people define greed. Ask students to provide real-world examples of decisions motivated by greed. How do the students think that the decision-maker justified the decision to him- or herself? Do they have a different perception of greed on Wall Street? Why or why not? Challenge students to imagine themselves in the position of a Wall Street actor who made decisions that contributed to the financial crisis, and to articulate a rationale for their decision-making. We first need to define greed. Greed can be understood as an excessive desire for material wealth or gain, often at the expense of others' well-being. It involves an insatiable craving for more, regardless of need or consequences. In terms of its prevalence, true greed, defined as an extreme and harmful form of self-interest, is likely less common in the general population compared to other, more moderate forms of self-interest. While most people seek to improve their own circumstances, true greed involves a disregard for ethical considerations and the harm it may cause to others. Regarding whether greed is more common on Wall Street than in the general population, it's important to consider the context. Wall Street, as a financial hub, may attract individuals who are more oriented toward financial success and thus more likely to exhibit behaviors associated with greed. However, it would be unfair to generalize and assume that everyone in the financial sector is driven by greed. There are many professionals on Wall Street and in similar environments who prioritize ethical conduct and social responsibility. In conclusion, while true greed may exist, it is likely less prevalent in the general population compared to other forms of self-interest. The context of industries like Wall Street may create environments where greed can manifest more prominently, but it would be inaccurate to paint these industries as inherently greedy. As a class exercise, write a brief account of any unethical or ethically questionable experience you have witnessed in a work context. Read and discuss the examples in class, keeping the authors anonymous. Consider how the organization allowed or encouraged such behavior and what might have been done to prevent it. Review different ways people perceive and behave in situations. Anonymity is important here, but it is common to discover that many students have experienced unethical behaviors at work. Once again, asking students to role-play can encourage them to understand the situation from various points of view and therefore understand complexity. In a previous workplace, I observed a situation where a senior manager manipulated financial reports to make the company's performance appear more favorable than it actually was. This manager pressured the accounting team to adjust numbers and misrepresent data, leading to inaccurate financial statements being presented to stakeholders. The organization allowed this behavior to occur by not having sufficient checks and balances in place to prevent such manipulation. The lack of oversight and accountability created an environment where unethical practices could flourish. To prevent this, the organization could have implemented stronger internal controls and ethics training. Clear policies and procedures for financial reporting should have been established and enforced. Additionally, fostering a culture of integrity and ethical behavior from top leadership down could have discouraged individuals from engaging in unethical conduct. 9. Lisa is trying to raise funds to support the creation of a free clinic in a poor neighbourhood in her hometown. She has been trying very hard; but she has not been able to raise enough money to get the clinic up and running. One day, she gets a huge check from a high profile business executive whom she met at a fundraiser. She is ecstatic and finally sees her dream take shape. However, after a few days, the person who gave Lisa the money is arrested for fraud, money laundering and tax evasion. What should Lisa do? Should she still keep the money and look the other way? Does the source of the money matter or does the end justify the means? Consider how different roles might impact judgment about an ethical dilemma. Students could refer back to the example of how judgment about the iPod might differ greatly if you knew that your friend had lost it, or if you were a teacher in the class, or if you were a member of the campus judicial board. Lisa faces a challenging ethical dilemma. On one hand, she has a sincere and noble goal of establishing a free clinic to help a disadvantaged community. On the other hand, the source of the donation, a high-profile business executive now charged with serious financial crimes, raises ethical concerns. In this situation, Lisa should consider several factors. First, she should assess the impact of returning the money on her ability to establish the clinic. If returning the funds would significantly hinder or prevent the clinic from being established, Lisa may face a difficult decision. Second, Lisa should consider the ethical implications of accepting money from someone involved in illegal activities. Accepting tainted money could be seen as condoning or supporting unethical behavior, which could damage her reputation and the credibility of the clinic. Ultimately, the source of the money does matter. Even if the end goal of establishing the clinic is noble, accepting funds from someone engaged in illegal activities could compromise the integrity of the project. Lisa should weigh the potential benefits of accepting the donation against the ethical considerations and decide whether it is appropriate to keep the money. If she decides to keep the funds, she should be transparent about the source of the donation and take steps to ensure that the clinic operates with the highest ethical standards. 10. What values do you think motivated Bernard Madoff in carrying out his Ponzi scheme? How do you think his motivation may have evolved over the years that the scheme was in play? What do you think he would have said if asked, five years prior to being caught, to reflect on the values that inspired him in his work? Ask students to consider Bernie Madoff’s initial motivations in carrying out his Ponzi scheme. Students should consider if Madoff’s initial financial success at the beginning of the Ponzi scheme may have contributed to the development of normative myopia that enabled the scheme’s continuation. Challenge students to place themselves in Madoff’s shoes at various points in the timeline of his growing criminal activities, and to reflect on whether the same motivations and values could explain his behavior in the earlier and later stages of the many years that he maintained his scheme. This discussion might stress the “slippery slope” character of unethical decision-making. Bernard Madoff's Ponzi scheme was motivated by several values, including greed, ambition, and a desire for status and power. Initially, Madoff may have been driven by a desire to achieve financial success and build a reputable investment firm. However, as the scheme continued over the years, his motivations likely evolved. He may have become more focused on maintaining the facade of success and avoiding detection, leading to increasingly unethical behavior. If asked five years prior to being caught, Madoff may have reflected on values such as ambition, innovation, and a desire to provide for his family. He may have presented himself as a savvy and successful businessman driven by a passion for the financial markets. However, these values were overshadowed by his unethical actions, which ultimately led to the collapse of his firm and significant harm to investors. Madoff's case highlights the dangers of unchecked ambition and the importance of ethical decision-making in business. It serves as a stark reminder of the consequences of prioritizing personal gain over ethical principles. Chapter 2 Readings Summaries and Main Points Reading 2-1 “The Parable of the Sadhu” by Bowen (“Buzz”) H. McCoy Main Points McCoy uses a life-changing experience hiking in the Himalayas to question the limits of responsibility. How far is one expected to go out of her or his way to help a needy stranger? McCoy compares the situation on the mountain to a business situation in which a company must act quickly under stress. Organizations that do not have a heritage of mutually accepted, shared values tend to become unhinged during stress, with each individual bailing out for her or himself. This group of strangers on the mountain did not have a process for developing consensus, nor did they have a plan or sense of purpose. The lesson of the situation with the sadhu, McCoy believes, is that when people do not find such support in their organizations, they do not know how to act. They need the support of a culture and values that guide them to do the right thing. Summary McCoy’s article details his experience hiking in the Himalayas while on sabbatical from his job at Morgan Stanley. While he and his friend were hiking, they, along with a group of other hikers, encountered a nearly dead sadhu who was barely clothed and barefoot, trying to make a dangerous journey across a pass. They helped the man get clothed, but then McCoy took off for the summit, leaving the sadhu, his friend Stephen, and several others behind. After reaching the summit, McCoy waited for his friend and upon his arrival, Stephen asked him, “How do you feel about contributing to the death of a fellow man?” McCoy did not see things the same way. He felt that he had done his part since he and the others had given the sadhu clothing, fed him, and carried him down the mountain to within 500 feet of a hut. They each felt that they had done enough to help the man, who was an unexpected interruption to their goal of reaching the summit of the mountain. Stephen responded, “I feel that what happened with the sadhu is a good example of a breakdown between the individual ethic and the corporate ethic. No one person was willing to accept ultimate responsibility for the sadhu. Each was willing to do his bit just so long as it was not too inconvenient. When it got to be a bother, everyone just passed the buck to someone else and took off.” McCoy considered this response, but asked about the limit of responsibility in this type of situation. He wondered, was his friend was actually saying that he should have given up his own goal and lost out on the experience of a lifetime, simply to help a stranger? McCoy compares the situation on the mountain to a business situation in which a company must act quickly under stress. Organizations that do not have a heritage of mutually accepted, shared values tend to become unhinged during stress, with each individual bailing out for her or himself. The situation on the mountain parallels that unhinging process. The group of strangers did not have a process for developing consensus, nor did they have a plan or sense of purpose, so they each fended for themselves and left the sadhu to do the same. McCoy poses several questions about this scenario, such as: How much must we give of ourselves? Must we take care of every needy person we come across? What is our duty to others? Should we do everything in our power to help them? Or should we do what provides the greatest good for the greatest number? He asks a similar question about corporations, wondering how we prepare organizations so they will deal with crises appropriately. He sees the current interest in corporate culture and corporate value systems as a positive response to Stephen’s pessimism about the declining role of the individual in large corporations. He believes that in a complex corporate situation, the individual requires and deserves the support of the group, which is operating from a strong foundation of corporate values. The lesson of the situation with the sadhu, McCoy believes, is that when people do not find such support in their organizations, they do not know how to act. They need the support of a culture and values that guide them to do the right thing. Reading 2-2 “Managing for Stakeholders” by R. Edward Freeman Main Points The purpose of this essay is to outline an emerging view of business, “managing for stakeholders.” Businesses, and the executives who manage them, actually do and should create value for customers, suppliers, employees, communities, and financiers (or shareholders). The authors contend that it is vital to pay careful attention to how these relationships are managed and how value gets created for these stakeholders. The dominant story or model of business that is deeply embedded in our culture is resistant to change, not consistent with the law, and for the most part, simply ignores matters of ethics. Using ‘stakeholder’ as a basic unit of analysis makes it more difficult to ignore matters of ethics. Managing for stakeholders is a new narrative about business that lets us improve the way we currently create value for each other. Capitalism is a system of social cooperation and collaboration, rather than primarily a system of competition. Summary The modern business corporation has emerged during the 20th Century as one of the most important innovations in human history; yet, the changes that we are now experiencing call for its reinvention. Organizations in the past were quite simple and “doing business” consisted of buying raw materials from suppliers, converting it to products, and selling it to customers. Many owner-entrepreneurs founded simple businesses and worked at the business along with family members. The development of new production processes, such as the assembly line, meant that jobs could be specialized and more work could be accomplished. Ownership of the business became more dispersed, as capital was raised from banks, stockholders, and other institutions. During the last 50 years the "Managerial Model" has put "shareholders" at the center of the firm as the most important group for managers to worry about. Indeed, all of the recent scandals at Enron, Worldcom, Tyco, Arthur Anderson and others are in part due to executives trying to increase shareholder value, sometimes in opposition to accounting rules and law. The Managerial View of business with shareholders at the center is inherently resistant to change. It puts shareholders’ interests over and above the interests of customers, suppliers, employees, and others, as if these interests must conflict with each other. According to this view the only change that counts is change oriented toward shareholder value. If customers are unhappy, if accounting rules have been compromised, if product quality is bad, if environmental disaster looms, even if competitive forces threaten, the only interesting questions are whether and how these forces for change affect shareholder value, measured by the price of the stock every day. However, the law has evolved to put constraints on the kinds of tradeoffs that can be made. The doctrine of “privity of contract,” the National Labor Relations Act, the Clean Air Act, and the Clean Water Act are all examples of such constraints mandated by law. The Responsibility Principle states that most people, most of the time, want to, actually do, and should accept responsibility for the effects of their actions on others. Business can be understood as a set of relationships among groups that have a stake in the activities that make up the business. Furthermore, business is about how customers, suppliers, employees, financiers (stockholders, bondholders, banks, etc.), communities and managers interact and create value. While any business must consist of financiers, customers, suppliers, employees, and communities, it is possible to think about other stakeholder, too. If a group or individual can affect a business, then the executives must take that group into consideration in thinking about how to create value. Additionally, no stakeholder stands alone in the process of value creation. The stakes of each stakeholder group are multi-faceted, and inherently connected to each other. First and foremost, we need to see stakeholder interests as joint, as inherently tied together. Serving all your stakeholders is the best way to produce long-term results and create a growing, prosperous company. There is no conflict between serving all your stakeholders and providing excellent returns for shareholders. Most human beings are complicated. Most of us do what we do because we are self-interested and interested in others. Business works in part because of our urge to create things with others and for others. Once you say stakeholders are persons then the ideas of ethics are automatically applicable. However you interpret the idea of “stakeholders”, you must pay attention to the effects of your actions on others. Finally, the main reason that the dominant model of managing for shareholders is a good idea is that it leads to the best consequences for all. Reading 2-3 “What Stakeholder Theory is Not” by Robert Phillips, Ed Freeman, and Andrew Wicks Main Points Not all corporate misdeeds are committed by bad people… a significant number of unethical acts in business are the likely result of foibles and failings rather than selfishness and greed; good people inadvertently do bad things. Scripts are the procedures that experience tells us to use in specific situations…cognitive shortcuts that take the place of careful thinking. When we brush our teeth or congratulate a friend on the arrival of a new grandchild, we probably use scripts. Repetitive jobs requiring vigilance to prevent ethical lapses can be found in quality control, customer service, and manufacturing…whenever there is repetition, there are likely to be scripts. Scripts allow people to avoid responsibility for the suffering of others in situations when providing help appears costly. When concentrating on completing an involving task, most of us don’t deal well with distractions. Inattention to what is happening on the periphery can result in ethical lapses. A problem that brings out the worst in good people is the very human tendency to morally exclude certain persons or groups perceived as outside the boundary in which moral values and considerations of fairness apply, such as citizens of an enemy country during a war. We owe it to ourselves to resist these pernicious influences (repetition, distractions, and our natural tendency to exclude) and we owe it to those in our work communities to help them to do the same. Summary The news is full of the exploits of corporate villains; yet, not all corporate misdeeds are committed by bad people. A significant number of unethical acts in business are the likely result of foibles and failings rather than selfishness and greed. Put in certain kinds of situations, good people inadvertently do bad things. Consequently, we must identify the situational factors that keep people from doing their best and eliminate them whenever we can. One factor for why good people sometimes do unethical things is something psychologists call scripts. This term refers to the procedures that experience tells us to use in specific situations. When we brush our teeth or congratulate a friend on the arrival of a new grandchild, we probably use scripts. Unlike other forms of experience, scripts are stored in memory in a mechanical or rote fashion. When we encounter a very familiar situation, rather than actively think about it, we reserve our mental energy for other purposes and behave as though we are cruising on automatic pilot. According to research at the University of Kansas, scripts allow people to avoid responsibility for the suffering of others in situations when providing help appears costly. Ford Motor Co.’s failure to recall the Pinto in the 1970s is an example of this. Whenever there is repetition, there are likely to be scripts. Accordingly, the best way to eliminate the potential of scripts to result in unethical behavior is to keep people out of highly repetitive situations. Technology can help with this. A similar human tendency is our mindless treatment of distractions. In one experiment, divinity students were told that they had to deliver a lecture from prepared notes in a classroom across campus. Half the students were told they had to hurry to be on time, and the other half were told they had more than ample time. On the way, the students came across a person in distress (actually an actor), who sat slumped motionless in a doorway, coughing and groaning. Shockingly, only 16 of the 40 divinity students stopped to help, most of them from the group that had ample time. To those in a hurry, the man was a distraction, a threat to their focus on giving a lecture. Ironically enough, half of them had been asked to discuss the parable of “The Good Samaritan.” A final problem that brings out the worst in good people is the very human tendency to morally exclude certain persons. This occurs when individuals or groups are perceived as outside the boundary in which moral values and considerations of fairness apply. Greater awareness and extensive training have reduced some of the exclusion women and people of color have historically experienced. One way such exclusion shows up is in our use of pronouns. If we are in marketing and they are in production, the chances are that the distance may be great enough for us to be morally indifferent to what happens to them. Repetition, distractions, and our natural tendency to exclude those unfamiliar to us cloud our best thinking and forestall the expression of our virtues. We owe it to ourselves to resist these pernicious influences, and we owe it to those in our work communities to help them to do the same. Reading 2-4 “What’s Wrong—and What’s Right—with Stakeholder Management” by John R. Boatright Main Points The stakeholder concept has been expressed most often in the moral prescription that managers, in making decisions, ought to consider the interests of all stakeholders, as opposed to shareholders alone. The dispute between stockholder and stakeholder management revolves around the question of how best to enable each stakeholder group or corporate constituency to benefit from the wealth-creating activity of business. Stakeholder management fails to appreciate the extent by which the prevailing system of corporate governance serves the interests of all stakeholders. Stakeholder management can be regarded as incompatible with and an alternative to the prevailing form of corporate governance, or as a managerial guide that can be followed within corporations as they are currently legally structured. Stakeholder management goes wrong when it is developed as an alternative system of corporate governance. Stakeholder management as a guide for managers, on the other hand, constitutes a valuable corrective to common misunderstandings of the argument for stockholder management. The most suitable protection for the capital provided and risk borne by shareholders is control of the firm, and control by equity capital providers is in the best interests of the other stakeholders Viewed in terms of an economic approach to the firm, stakeholder management offers managerial decision making as a means for protecting and advancing stakeholder interests. The firm’s management must ensure that the firm conducts its business in ways that benefit everyone. The fundamental mistake of stakeholder management is a failure to see that the needs of each stakeholder group are different and that different means best meet these needs. Management decision making is a relatively ineffective means for protecting the interests of non-shareholder stakeholders. Corporate governance rules tell us very little about how managers should actually go about their task of managing a firm to the benefit of shareholders or anyone else. Stakeholder management addresses this matter of what managers and others need to do to create wealth. Stakeholder management, then, as a guide for managers rather than a form of corporate governance, provides a valuable corrective to managers who fail to appreciate how shareholder primacy benefits all stakeholders and use it a reason for disregarding other stakeholders. Summary This article addresses the benefits and shortcomings of the stakeholder management style, as opposed the prevailing system of management, also referred to as “stockholder management”. The stakeholder concept has been expressed most often in the moral prescription that managers, in making decisions, ought to consider the interests of all stakeholders. This is contrasted with stockholder management, in which shareholder interests are primary. To advocates of stakeholder management, focusing attention on only one stakeholder, the shareholders, is morally unjustified. These advocates get one point right: the modern for-profit corporation should serve the interests of all stakeholder groups. On this point, there is no conflict with the argument for the current system of corporate governance. Stakeholder management goes wrong by failing to appreciate the extent by which the prevailing system of corporate governance serves the interests of all stakeholders, and by assuming that all stakeholders are best served by making this the task of management. Boatright distinguishes two forms of stakeholder management. The main point of difference is whether stakeholder management is incompatible with and an alternative to the prevailing form of corporate governance, or whether it is a managerial guide that can be followed within corporations as they are currently legally structured. Instrumental stakeholder theory acknowledges that any successful corporation must manage its relations with all stakeholder groups, if for no other reason than to benefit the shareholders, and that managers also have obligations to treat each stakeholder group in accord with accepted ethical standards. Normative stakeholder theory modifies the prevailing system of corporate governance to these propositions: 1) all stakeholders have a right to participate in corporate decisions that affect them, 2) managers have a fiduciary duty to all stakeholders, and 3) the objective of the firm ought to be the promotion of all interests and not those of the shareholders alone. Stakeholder management goes wrong when it is developed as an alternative system of corporate governance. When used as a guide for managers, stakeholder management contains much that is helpful to managers and constitutes a valuable corrective to some common misunderstandings of the argument for stockholder management. A firm requires many inputs, e.g. land, labor, and capital. Governance can be understood as the contractual agreements and legal rules that secure each input provider’s claim for the return due on that input provider’s contribution to the productive activity of a firm. The most prominent input providers are shareholders, who not only provide capital, but also assume much of the risk of a firm. The shareholders’ willingness to bear this residual risk benefits all other input providers. The most suitable protection for this capital and risk is control of the firm, and is in the best interests of the other stakeholder groups as well. Usually non-shareholder groups are better served by safeguards other than control. Viewed in terms of an economic approach to the firm, stakeholder management offers managerial decision making as a means for protecting and advancing stakeholder interests. Stakeholder management proposes that the firm’s management treat all stakeholders like shareholders. The fundamental mistake of stakeholder management is a failure to see that the needs of each stakeholder group are different and that different means best meet these needs- management decision making is a relatively ineffective means for protecting the interests of non-shareholder stakeholders. Managers lack both the ability and legitimacy required to ensure that the wealth created by a firm is distributed in a fair way. The prevailing system of corporate governance may obscure the benefits to all stakeholders by failing to emphasize that the objective of shareholder wealth maximization are merely means to an end. The stakeholder view makes it a task of management to ensure that the firm conducts economic activity in ways that benefit everyone. On the economic approach, mutual benefit is a result of the opportunity each group has to make mutually advantageous agreements. In practice, some stakeholders fail to benefit as they should from a firm’s activity. In general, it is the responsibility of government to prevent or correct for unfair practices, externalities, or third party effects, but managers might also be held to have some responsibility. Traditional corporate governance is concerned with how business organizations should be legally structured and controlled. The prevailing provisions tell us very little about how managers should actually go about their task of managing a firm so as to create wealth for shareholders or anyone else. Stakeholder management addresses this matter of how managers and others should act to create wealth for shareholders or any other stakeholder. Stakeholder management, then, as a guide for managers rather than a form of corporate governance, provides a valuable corrective to managers who fail to appreciate how shareholder primacy benefits all stakeholders and use it a reason for disregarding other stakeholders. Indeed, a manager who fails to benefit every stakeholder group is not achieving the full potential of a firm. Reading 2-5 “When Good People Do Bad Things at Work: Rote Behavior, Distractions, and Moral Exclusion Stymie Ethical Behavior on the Job,” by Dennis J. Moberg Main Points The news is full of the exploits of corporate villains, but not all corporate misdeeds are committed by bad people. Three main problems that might cause unethical behavior are: 1) following mental scripts, 2) mindless treatment of distractions, 3) morally excluding people who are unfamiliar to us. People in repetitive jobs are likely to follow scripts because over time they have learned to always do the same thing in similar situations. The Ford Pinto case in the 1970’s provides an example of an error in judgment based on a script. Mindlessness about distractions can cause ethical lapses because employees are not paying close attention to what is going on around them. This typically happens in workplaces where employees do not have a work-life balance. Moral exclusion is a problem when employees treat others as if they are outside the boundary in which moral values and considerations of fairness apply. This can be seen when employees have a “we” versus “them” mentality or when they operate based on stereotypical views of others. Moberg concludes that we owe it to ourselves and to our work communities to resist these three influences so that we can make the most ethical decisions possible in the workplace. Summary: The news is full of the exploits of corporate villains and the acts of such people are hard to forgive. However, all corporate misdeeds are committed by bad people. In fact, a significant number of unethical acts in business are the result of situational factors keeping people from doing their best. The three main problems that Moberg suggests might cause unethical behavior are 1) following mental scripts, 2) mindless treatment of distractions, and 3) morally excluding people who are unfamiliar to us. People in repetitive jobs are likely to follow certain scripts because over time they have learned to always do the same thing in similar situations. One example was the Ford Pinto case in the 1970’s, where the recall coordinator at the time admits that he had gotten used to dealing with (and dismissing) very similar reports of technical problems with other cars and he was making the same decisions automatically every day. He had trained himself to respond to prototypical cues and did not catch that the Pinto case did not fit that prototype. Mindlessness about distractions at work is another problem that can result in ethical lapses because employees are not paying close attention to what is going on around them. This type of behavior is most pronounced in situations where employees are encouraged to be focused and driven. Allowing for more work-life balance for employees can combat this. Moral exclusion occurs when people are perceived as outside the boundary in which moral values and considerations of fairness apply. This type of exclusion is often apparent in a “we” versus “they” mentality, or when stereotypes are used and enforced. One way to combat this problem is to activate human relationships between individuals and break down the stereotypes of boundaries so that no one is excluded. Moberg concludes that we owe it to ourselves and to our work communities to resist these three influences so that we can make the most ethical decisions possible in the workplace. APPENDIX A MISSION & LIFE GOALS ASSIGNMENT The purpose of this assignment is to encourage you to manage your life and to become aware of the foundations of that management. Mission Statement: Your assignment is to draft a mission statement for your personal interactions. This mission statement should articulate how you plan to treat others in any situation where you are in contact with another individual. The statement should identify who is your primary stakeholder, what values will dictate your actions and responses, and what are your primary objectives in your life. In drafting the statement, you may choose to look at some corporate mission statements. An example of a personal mission statement: My personal objective is to enjoy each of my days to their fullest. In order to achieve this objective, I will place the needs of my family above those of my work. However, I will place my personal needs above those of my family since I must be happy in order to make others happy. The values that I will use in negotiating personal interactions are honesty and integrity, courage, trust and consideration. You do not have to answer all of the following questions but, in drafting your mission statement, it might help to consider your responses to the following questions: Self-image: If you could be exactly the kind of person you wanted what would your qualities be? Tangibles: What material things would you like to own? Home: What is your ideal living environment? Health: What is your desire for health, fitness, athletics, and anything to do with your body? Relationships: What types of relationships would you like to have with friends, family, and others? Work: What is your ideal professional or vocational situation? What impact would you like your efforts to have? Personal pursuits: What would you like to create in the arena of individual learning, travel, reading, or other activities? Community: What is your vision for the community or society you live in? Other: What else, in any other arena of your life, would you like to create? Life purpose: Imagine that your life has a unique purpose--fulfilled through what you do, your interrelationships, and the way you live. Describe that purpose, as another reflection of your aspirations. Goals. List five goals that you would like to achieve before you retire. It is helpful to think of where you would like to be at that time. Think both about material and near-material possessions (the amount of money that you would like to have, the level of position you would like to hold, the sort of vacations you would like to take) as well as non-material aims (your family life, community service, political actions). Next, list three personal traits that should be helpful in reaching your goal along with three personal traits that may tend to hinder your reaching that goal Norms. List five actions that you believe to be "right". Think about actions that you would ALWAYS approve if others did them, and that you would certainly be willing to do yourself. Yes, this is difficult but the effort is towards finding those particular things that you would always judge as acceptable. Then, list five actions that you believe to be "wrong." Here, think about actions that you would ALWAYS condemn in others, and that you would not be willing to do yourself. Yes, difficult, as well. Beliefs. Think about why the actions listed above are "right" or "wrong" in your opinion; what is the basis for your conclusion that it is right or wrong? Values. The following is a list of twelve statements, each of which implies given goals (ends desired by the person), norms (acts approved by a person), and beliefs (ideas accepted by a person). Rank the statements in your order of preference or agreement (1 is the highest in your preference or agreement among them, 12 is the least preferred). ___ 1. Increases in my wealth and the power, possessions and life style that go with money, are important to me. ___ 2. Advancement in my company, and the authority and privileges that go with promotion, are important to me. ___ 3. Performance in my job, and the security and respect that go with achievement, are important to me. ___ 4. Reputation within my community, and the political offices and social activities that go with reputation, are important to me. ___ 5. Attention to my family, and the affection and companionship that go with family life, are important to me. ___ 6. Devotion to my faith or spiritual community, and the sense of community and sharing that are a part of a spiritual life, are important to me. ___ 7. Independence in my personal life, and the ability to achieve my own goals and follow my own rules (as long as I do not directly harm others) are important to me. ___ 8. Interdependence with my fellow citizens, and the opportunity to set social goals and adopt mutual rules (through representative government) are important to me. ___ 9. Protection of the poor, and the need to help others within our society who are less fortunate than I have been, are important to me. ___ 10. Equality among races, sexes, and ethnic groups, and the need to achieve courtesy/respect between peoples, are important to me. ___ 11. Preservation of the environment, and lack of exploitation of the earth's resources, are important to me. ___ 12. Peace between nations, and a lack of oppression of the earth's peoples, are both important to me. APPENDIX B The following article ["WHY YOU SHOULD CARE ABOUT PRESS FREEDOM," by Mark Feldstein, published in the Chicago Tribune, April 23, 2006] has been modified by the authors to reflect the ways in which the original author of the article uses (intentionally or not) ethical theory to strengthen his arguments. WHY YOU SHOULD CARE ABOUT PRESS FREEDOM Nation needs an unfettered press
By Mark Feldstein, director of the journalism program at George Washington University Last month, as part of an ongoing criminal investigation, two FBI agents showed up at my home in suburban Washington, D.C., and waved their government-issued badges to demand access to decades-old historical archives that I have been reading. Why? Because they say these documents may--or may not--shed light on alleged leaks to a dead investigative reporter that may--or may not--have occurred more than 20 years ago. This inept fishing expedition would be laughable if it were not part of a larger and more serious government assault on freedom of the press, the most systematic attack on free expression and the public's right to know waged by any presidential administration since the infamous days of Richard Nixon. Establishes free expression as a universal principle based on historical violations and the public’s reaction to those violations. In my case, the FBI claims it is entitled to rummage through the notes of columnist Jack Anderson, who donated his papers to my university before he died in December. The FBI agents who interviewed me said they want to confiscate any classified government documents that might be in the Anderson collection and prosecute whoever leaked them more than two decades ago. The agents even demanded the names of graduate students who might have looked at these records while helping with my research. My university and the Anderson family are resisting this government intrusion into our files. Ultimately, the courts may have to decide the outcome. Regardless, this heavy-handed action is troubling because the FBI has already violated the Justice Department's own guidelines that for the past three decades have set limits on such fishing expeditions into reporters' notes. Addresses the violation as a violation of other, widely-accepted rules, such as the Justice Department’s own guidelines. A violation of guidelines articulated by the one engaged in the violation is hypocritical, which would be against Universalism, though perhaps hypocrisy is justified when one looks only at ends, such as Utilitarianism. The media as a target. Worse still, it is just one of many efforts hatched by the Bush administration to target journalists who have criticized the government, and it would have the effect of criminalizing the kind of press leaks that have been a regular part of politics since the presidency of George Washington. Looks to perhaps undesirable end results (criminalizing leaks) to persuade those who might not otherwise follow a Universalistic approach. Media censorship always increases in wartime, in the U.S. and everywhere else. Abraham Lincoln shut down newspapers that sympathized with the Confederacy during the Civil War, and Woodrow Wilson did the same to leftist and German-American periodicals during World War I. In wartime, truth is notoriously the first casualty. While we are now at war just as surely as we were then, our current enemy makes censorship more dubious and dangerous than it was in the past. America's battle against terrorism could well last decades and has no obvious end in sight. Are we to live under a kind of undeclared and unofficial martial law until all potential threats can be stamped out? Strives toward a Universalist argument of whether this would be all right if it became a universal, consistent and prevailing occurrence. In addition, asks how we would feel if this restriction increased, supporting a Distributive Justice perspective. That may sound like hyperbole, but the Bush administration is now dusting off the antiquated Espionage Law of 1917, designed to jail dissidents during World War I, as a way to prosecute journalists who disclose information that the government deems a threat to America's war on terror. The president's congressional allies are considering even more disturbing legislation that would further criminalize leaks of classified information to reporters, action that even Bush's conservative former attorney general, John Ashcroft, opposed. In addition, the CIA director has testified that he hopes reporters will soon be forced to reveal under oath to criminal grand juries the identities of their confidential sources. Judith Miller is only the most prominent of several journalists jailed in the past few years because of government efforts to uncover anonymous sources. Considering the end results of allowing these intrusions, arguing that we would not desire these end results so we should not accept the beginning of the erosion of this principle. President Bush himself contributed to this climate of intimidation in December when he said whoever leaked the information to the press about the domestic spying operation was "helping the enemy" in "a shameful act." In response to all of this, the international watchdog group Reporters Without Borders has rated the United States behind 43 countries when it comes to press freedom--just ahead of Bolivia and just behind Macedonia. Explains that external parties believe this is not acceptable (works toward supporting a Universalist concept). Thomas Jefferson and the other constitutional framers who enshrined press freedom in our 1st Amendment would not be proud. A violation of press freedom would not be what a virtuous country would do. Choking off information. Unfortunately, the administration has not targeted only reporters. Equally important, federal officials are now trying to choke off the flow of information to the public right from the source. As part of ongoing leak investigations, numerous government employees have had to undergo lie-detector tests. Although the polygraphs have not turned up any known cases of law-breaking, such harassment has undoubtedly discouraged politically embarrassing whistle-blowing. Stakeholder perspective, Distributive Justice (trying to see how the various stakeholders in various roles might be impacted). Other government investigators have been poring through university archives around the country as part of a larger effort to reclassify historical documents previously made public. The Pentagon now is enforcing long-established restrictions that limit how close journalists can get to the funerals for American personnel killed in Iraq who are being buried at Arlington National Cemetery. Press photographs of coffins arriving at military bases are also prohibited for fear of undermining public support for the war. All of this has led media outlets to censor themselves lest they run afoul of the administration. According to correspondent Christiane Amanpour, even the mighty CNN was intimidated by the administration's "climate of fear," leading to "self-censorship" in its coverage of the war in Iraq in 2003. Asks whether we really want this end result. Consider the result and determine whether the good outweighs the bad – Utilitarianism. Why does any of this matter? Because a free society depends on democratic decision-making by an informed public. And an informed public depends on a free and independent press. Justifies the Universal principle by explaining the consequences – Utilitarian, as well. Ironically, dictatorships around the world are now using America's crackdown on journalists to justify their own repression. As I learned all too clearly when the FBI came calling at my door, we cannot stifle freedom at home and have any hope of spreading it abroad. Solution Manual for Business Ethics: Decision Making for Personal Integrity and Social Responsibility Laura P. Hartman, Joseph R. Desjardins, Chris MacDonald 9780078029455, 9781259060588, 9781259417856
