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Chapter 7 Business Ethics Fundamentals LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Describe how the public regards business ethics. 2. Define business ethics and appreciate the complexities of making ethical judgments. 3. Explain the conventional approach to business ethics. 4. Analyze economic, legal, and ethical aspects by using a Venn model. 5. Enumerate and discuss the four important ethics questions. 6. Identify and explain three models of management ethics. 7. Describe Kohlberg’s three levels of developing moral judgment. 8. Identify and discuss the elements of moral judgment. TEACHING SUGGESTIONS INTRODUCTION – Chapter 7 introduces concepts and background that are essential to understanding business ethics. The authors explore a wide range of topics that combine to form a network within which business decisions are made, how they are made, and how managers develop their abilities to make them. KEY TALKING POINTS – Unless students previously have taken a course in moral philosophy, most will have given little thought to the whole issue of ethical decision-making. Although they certainly will have opinions regarding what constitutes moral behavior (often very strong opinions), the majority will have little insight into how they make those decisions. One effective way to introduce this element of moral decision-making is to show a video clip or read a short passage that presents a clear moral dilemma (e.g., Case 10, Phantom Expenses) and then ask the students how they would make a decision about that scenario— without allowing them to say what their decisions are. Many will get frustrated with this exercise but will soon recognize the point being made—that they go through a process to get to their decisions, but rarely do they pay any attention to that process. Note that when students describe how they would make their decision, some will describe the use of an ethical principle (i.e., the principles approach); however, many will discuss the use of societal norms in their decision-making process (i.e., the conventional approach). Consequently, this exercise also is an opportunity to introduce the three major approaches to business ethics as well as Kohlberg’s three levels of moral judgment. This chapter focuses on two primary topics—the environment within which business ethics decisions are made and how managers go about making those decisions. By maintaining a clear focus on moral judgment, the authors provide students with a strong explanation of that process. However, by doing so, they also fall into the trap to which most moral philosophers succumb: neglect of other elements of moral behavior. James Rest, a contemporary of Lawrence Kohlberg, developed what he termed a Four Component Model of Moral Behavior, which outlines the psychological steps that must occur for moral action to occur. As Rest says, “…there is more to moral development than moral judgment development…” (Moral Development in the Professions, 1994, page 22). Rest’s four components include: 1. Moral sensitivity – awareness that a moral situation exists 2. Moral judgment – judging which action is morally right/wrong 3. Moral motivation – prioritizing moral values relative to other values 4. Moral character – courage to carry out the morally right action There is no question that judgment is a critical element in moral behavior, but it is only one element. Without recognition of the other components, students will not gain a full understanding of moral behavior within organizations. Using the Venn diagram, instructors can demonstrate how economics, ethics and the law affect managerial decisions. Further, the model of ethics employed by management is reflected by the emphasis placed on each of these responsibilities: (1) immoral managers focus on the firm’s economic responsibilities to the exclusion of all else, (2) moral managers balance the firm’s economic, ethical and legal responsibilities, and (3) amoral managers pursue economic profits while failing to consider ethical, and, potentially, legal factors (although they may passively comply with the law). PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The Waiter Rule: What Makes for a Good CEO? Using Ex-Cons to Teach Business Ethics To Hire or Not to Hire The Travel Billing Expense Controversy and the False Claims Act Phantom Expenses Family Business Chiquita: An Excruciating Dilemma Between Life and Law McDonald's: The Coffee Spill Heard ‘Round the World Safety? What Safety? The Betaseron Decision (A) A Moral Dilemma: Head Versus Heart Wal-Mart and Its Associates: Efficient Operator or Neglectful Employer? The Case of the Fired Waitress After-Effects of After-Hours Activities: The Case of Peter Oiler Is Hiring on the Basis of “Looks” Discriminatory? The Case of Judy Ethics in Practice Cases: Ethics in the Mailroom What They Don’t Know Won’t Hurt Them Flowers vs. Eyes: When Would You Have Paid? Spotlight on Sustainability: Ray Anderson’s Epiphany Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE PUBLIC’S OPINION OF BUSINESS ETHICS A. Are the Media Reporting Business Ethics More Vigorously? B. Is It That Society Is Actually Changing? II. BUSINESS ETHICS: MEANING, TYPES, APPROACHES A. Descriptive versus Normative Ethics B. Three Major Approaches to Business Ethics C. The Conventional Approach to Business Ethics D. Ethics and the Law E. Making Ethical Judgments III. ETHICS, ECONOMICS, AND LAW: A VENN MODEL IV. FOUR IMPORTANT ETHICS QUESTIONS A. What Is? - The Descriptive Question B. What Ought to Be? - The Normative Question C. How to Get from What Is to What Ought to Be - The Practical Question D. What Is Our Motivation? - A Question of Authenticity V. THREE MODELS OF MANAGEMENT ETHICS A. Immoral Management 1. Operating Strategy of Immoral Management 2. Illustrative Cases of Immoral Management a. Enron b. Bernie Madoff c. Ashleymadison.com d. Proctor & Gamble e. Survey Results B. Moral Management 1. Operating Strategy of Moral Management 2. Illustrative Cases of Moral Management a. McCullough b. Navistar c. Merck C. Amoral Management 1. Intentional Amoral Management 2. Unintentional Amoral Management 3. Operating Strategy of Amoral Management 4. Illustrative Cases of Amoral Management a. Early Examples b. Nestlé c. Sears 5. Two Hypotheses Regarding the Models of Management Morality a. Population Hypothesis b. Individual Hypothesis c. Amoral Management Is a Serious Organizational Problem VI. MAKING MORAL MANAGEMENT ACTIONABLE VII. DEVELOPING MORAL JUDGMENT A. Levels of Moral Development 1. Level 1: Preconventional Level 2. Level 2: Conventional Level 3. Level 3: Postconventional, Autonomous, or Principled Level 4. Ethics of Care Alternative to Kohlberg B. Different Sources of a Person’s Values 1. Sources External to the Organization: The Web of Values a. Religious Values b. Philosophical Values c. Cultural Values d. Legal Values e. Professional Values 2. Sources Internal to the Organization VIII. ELEMENTS OF MORAL JUDGMENT A. Moral Imagination B. Moral Identification and Ordering C. Moral Evaluation D. Tolerance of Moral Disagreement and Ambiguity E. Integration of Managerial and Moral Competence F. A Sense of Moral Obligation IX. SUMMARY Chapter 8 Personal and Organizational Ethics LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Understand the different levels at which business ethics may be addressed. 2. Differentiate between consequence-based and duty-based principles of ethics. 3. Enumerate and discuss principles of personal ethical decision making and ethical tests for screening ethical decisions. 4. Identify the factors affecting an organization’s ethical culture and provide examples of these factors at work. 5. Describe and explain actions, strategies, or “best practices” that management may take to improve an organization’s ethical climate. TEACHING SUGGESTIONS INTRODUCTION – Chapter 8 has two primary purposes, the first of which is to explore some of the various ways to make judgments about ethical dilemmas. The authors present two approaches to making moral judgments, the principles approach and the ethical tests approach. The second purpose is to discuss ways in which managers can improve the moral culture and behavior of their organizations. KEY TALKING POINTS – This chapter gets into what many philosophers consider the heart of ethics—how to make judgments about ethical dilemmas and come to justifiable decisions about them. As students will quickly note, there is a bewildering collection of ways to make moral judgments. The authors introduce and discuss eight different principles and seven different ethical tests that a manager might use to think about moral dilemmas in the business context. In addition to these fifteen concepts, the authors also provide a table with fourteen additional principles (although to be fair, there is some overlap between the table and text) and methods to reconcile conflicts among the various approaches. Most people rely on their instincts to make moral judgments, as pointed out in the text. The students in your class will be no different, and so they will likely become somewhat frustrated trying to learn all of these different approaches. One way to help overcome this frustration and simultaneously help cement the concepts in their minds is to provide a number of ethical dilemmas for them to debate in class discussions (moral philosophy textbooks typically have a plethora of such cases and a hypothetical ethical dilemma is available in the group project for this chapter). The students will be tempted to come to an immediate decision about the “right thing to do” (relying on their instincts), but the instructor will need to hold them back and guide the discussion toward the different principles and ethical tests that can be used to deliberate the cases. It often helps for students to analyze the dilemmas using an ethical principles and/or ethical tests matrix as this device enables students to visualize the differences in the various principles and tests. A sample matrix is included at the end of this chapter. Instructors also may want to assign students to read “Sorrow and Guilt: An Ethical Analysis of Layoffs” from SAM Advanced Management Journal, Spring 2000, pp. 4-13. This article reviews the different ethical principles utilized by managers when making decisions regarding job layoffs and shows students that the ethical principles and tests are relevant. The article also illustrates that the principles actually serve as the basis for many decisions made by management. A particular strength of this chapter is the authors’ emphasis on the ethical climates within organizations, and the profound influence they have on individuals’ moral judgments. Although the textbook cannot do full justice to this idea (due to space limitations), there is strong evidence of the overwhelming power of organizational climates on individual ways of thinking, feeling, and acting. As the chapter indicates, surveys of thousands of Harvard Business Review readers found that the behavior of superiors is the number one factor that influences unethical decisions and behaviors. Even Lawrence Kohlberg, the pioneer of the cognitive moral development field, recognized the influence of group forces over the individual’s ethical decision making, stating, “Individual moral action usually takes place in a social or group context and that . . . context usually has a profound influence on the moral decision making of individuals.” If we recognize the strong influence of organizational climate in conjunction with Kohlberg’s observation that most adults make moral judgments at his level 2, we can see why organizational members are so compliant with their bosses’ demands or even mere suggestions. Instructors will do well to emphasize the influence of organizational climate, because the prevailing assumption among Americans is that individuals make individual choices, largely unaffected by “outside” influences. Using the Ethical Decision-Making Process illustrated in Figure 8-8, instructors can demonstrate how the ethical principles and tests introduced in this chapter are utilized by organizations through the conduct of top management and corporate codes of conduct. Students should revisit the ethical dilemmas that they explored when they first began discussing ethical principles and tests; however, when students use the ethics screen in the Ethical Decision-Making Process to determine the ethical course of action to take in a given quandary, instructors should direct students to consider the principles / tests employed by top management and the corporate code of conduct. This also emphasizes the difference between addressing ethical issues at the personal level versus the organizational level. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The Waiter Rule: What Makes for a Good CEO? Using Ex-Cons to Teach Business Ethics To Hire or Not to Hire The Travel Billing Expense Controversy and the False Claims Act Phantom Expenses Family Business Should Business Hire Undocumented Workers? The High Cost of High Tech Foods The Betaseron Decision (A) Felony Franks: Home of the Misdemeanor Weiner A Moral Dilemma: Head Versus Heart The Case of the Fired Waitress After-Effects of After-Hours Activities: The Case of Peter Oiler Is Hiring on the Basis of “Looks” Discriminatory? Ethics in Practice Cases: Promise Versus Lie Higher Goals, More Pressure, Lower Ethics? The Anonymous CEO: Strong or Weak Ethical Leader? Can You Learn Business Ethics from a Convicted Crook? Spotlight on Sustainability: Sustainability Audits Becoming Popular Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. ETHICS ISSUES ARISE AT DIFFERENT LEVELS A. Personal Level B. Organizational Level C. Industry or Profession Level D. Societal and Global Levels II. PERSONAL AND MANAGERIAL ETHICS A. Principles Approach to Ethics 1. What is an Ethics Principle? 2. Types of Ethical Principles or Theories 3. Principle of Utilitarianism 4. Kant’s Categorical Imperative 5. Principle of Rights 6. Principle of Justice 7. Ethics of Care 8. Virtue Ethics 9. Servant Leadership 10. The Golden Rule B. Ethical Tests Approach 1. Test of Common Sense 2. Test of One’s Best Self 3. Test of Making Something Public (Disclosure Rule) 4. Test of Ventilation 5. Test of Purified Idea 6. Test of the Big Four 7. Gag Test 8. Use Several Tests Together III. MANAGING ORGANIZATIONAL ETHICS A. Factors Affecting the Organization’s Moral Climate 1. Pressures Exerted on Employees by Superiors B. Improving the Organization’s Ethical Culture 1. Compliance versus Ethics Orientation 2. Top Management Leadership (Moral Management) a. Weak Ethical Leadership b. Strong Ethical Leadership c. Two Pillars of Leadership d. Ethical Leadership Characteristics 3. Effective Communication 4. Ethics Programs and Ethics Officers a. Ethics Officers b. Raising the Status of Ethics Officers 5. Setting Realistic Objectives 6. Ethical Decision-Making Processes a. Ethics Screen b. Ethics Check c. Ethics Quick Test d. Sears’ Guidelines 7. Codes of Conduct a. Ways of Perceiving Codes 8. Disciplining Violators of Ethics Standards 9. Ethics “Hotlines” and Whistle-Blowing Mechanisms 10. Business Ethics Training a. Business Roundtable Institute for Corporate Ethics 11. Ethics Audits and Risk Assessments 12. Corporate Transparency 13. Board of Director Leadership and Oversight IV. FROM MORAL DECISIONS TO MORAL ORGANIZATIONS V. SUMMARY Chapter 9 Business Ethics and Technology LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Identify the role that technology plays in our business lives. 2. Gain an understanding of the technological environment and the characteristics of technology that influence business ethics and stakeholders. 3. Identify the benefits and side effects of technology in business. 4. Gain an appreciation of society’s intoxication with technology and the consequences of this intoxication. 5. Learn to differentiate between information technology and biotechnology and their ethical implications for management. 6. Identify the ethical issues involved in biotechnology and present the arguments on both sides of the issues. TEACHING SUGGESTIONS INTRODUCTION – Chapter 9 explores the subject of technology and business ethics. Technology is such an integral aspect of our work lives and consumer lives that special treatment of these topics is warranted. The authors first consider what technology means and some of its benefits and challenges. Then, they discuss the subject of ethics and technology, and finish the chapter by exploring ethical issues connected with two major components of technology—information technology and biotechnology. KEY TALKING POINTS – Students are likely to be aware of the latest in technology, and so have an inherent interest in this chapter. However, like many of their fellow citizens, they will have given little thought to the ethical issues raised by the use of technology. As the authors of the textbook correctly point out, the use of technology has increased our standard of living tremendously. However, it has also raised many questions that directly affect people’s lives. The authors list four categories of undesirable side effects of technology: (1) environmental pollution, (2) depletion of natural resources, (3) technological unemployment, and (4) creation of unsatisfying jobs. Items 3 and 4, technological unemployment and creation of unsatisfying jobs, are perhaps the factors that will affect students most directly. Technology is no longer replacing just manual labor—mid-level managers are now being “downsized” due to technological improvements. Jeremy Rifkin, in his book The End of Work, provides a chilling account of the effects farming technology had on farm laborers in the early twentieth century. Because owners were able to purchase farm implements that literally did the work of dozens of humans, there was a mass exodus of unskilled laborers from the South. Not only were these workers’ livelihoods jeopardized, but their entire social structure was torn apart as well. Fortunately, as Rifkin points out, factory jobs in Northern manufacturing centers provided employment for large numbers of the dislocated farm laborers. However, as manufacturing and managerial jobs are now being lost to technological innovations, there is no sector that will clearly take up the slack. Another side effect in which technology plays a role is the amount of time spent working. In fact, technology is often cited as one of the major factors that contributes to dissatisfaction with work-life balance. At one point in time, technological improvements were predicted to provide humans with a significant degree of leisure. However, current statistics show that Americans work longer hours now than at any point in our history. We also work longer hours than any other country in the world. Thus, while technology is supposed to make our lives (including work) easier, in some cases it has had the opposite effect by virtually making us available 24-7 to family, friends, superiors, co-workers and clients. How does technology produce this counter-intuitive result? Although no firm answers yet exist, my impression is that technology is viewed as a way to “do more” rather than a method for “doing the same amount of work in less time.” Students also will be keen to examine the issues raised by the use of social media in our personal and professional lives. As social media use continues to increase at astronomical rates, businesses constantly must adapt to harness the benefits of this technology while recognizing the potential legal and ethical issues inherent with its use (e.g., intellectual property protection, libel / defamation claims, employment problems, and privacy complaints, among others). Many students may not have the scientific background to adequately discuss and understand the ethical implications of modern biotechnology. As a result, instructors may consider spending one class period reviewing critical background information relevant to topics such as genetic engineering and genetically modified foods, cloning, stem cell research, genetic profiling, etc. I have found it helpful to invite instructors from chemistry and/or biology to guest lecture during this review period to provide this background information in “layman’s terms” for business students. Students should have animated discussions over these and other ethical issues raised by the use of technology. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: The High Cost of High Tech Foods Ethics in Practice Cases: Bosses Watching Employees: Are you Safe on Social Networking Sites? Spotlight on Sustainability: Technology Meets Sustainability Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. TECHNOLOGY AND THE TECHNOLOGICAL ENVIRONMENT II. CHARACTERISTICS OF TECHNOLOGY A. Benefits of Technology B. Side Effects C. Challenges of Technology III. TECHNOLOGY AND ETHICS A. Two Key Issues B. Society’s Intoxication with Technology IV. INFORMATION TECHNOLOGY A. Electronic Commerce as a Popular Technology B. Ongoing Issues in E-Commerce Ethics C. Invasion of Privacy via Electronic Commerce 1. Government’s Involvement in Internet Privacy Protection 2. Business Initiatives with Privacy Protection a. Ethical Leadership b. Privacy Policies c. Chief Privacy Officers d. Data Security 3. Questionable Businesses and Practices D. The Workplace and Computer Technology 1. Surveillance 2. Monitoring Email and Internet Usage 3. Biometrics E. Other Technology Issues in the Workplace 1. Ethical Implications of Cell-Phones and Text Messaging 2. Unethical Activities by Employees Related to Technology 3. Company Actions V. BIOTECHNOLOGY A. Bioethics B. Genetic Engineering 1. Stem Cell Research 2. Cloning 3. Cloning Animals for Food 4. Genetic Testing and Profiling C. Genetically Modified Foods 1. Labeling of GMFs VI. SUMMARY Chapter 10 Ethical Issues in the Global Arena LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Differentiate between the concepts of internationalization and globalization of business. 2. Summarize the arguments for and against globalization. 3. Explain the ethical challenges of multinational corporations (MNCs) operating in the global environment. 4. Summarize the key implications of the following ethical issues: infant formula controversy, Bhopal tragedy, sweatshops and human rights abuses, and the Alien Tort Claims Act. 5. Define corruption and differentiate between bribes and grease payments, and outline the major features of the Foreign Corrupt Practices Act. 6. Describe the growing anticorruption movement and the key players in this movement. 7. Identify and discuss strategies for improving global ethics. TEACHING SUGGESTIONS INTRODUCTION – This chapter serves dual purposes. First, it introduces the students to ethical issues in the global marketplace, including two infamous examples that demonstrate some of the difficulties encountered by operating in multiple nations. Second, it offers several takes on ways to improve ethical performance in the global economy, using four different popular strategies. KEY TALKING POINTS – Students will likely have a vague notion of multinational corporations (MNCs) and the difficulties of operating in widely divergent nations and cultures. However, they are unlikely to know any of the details about cases like Nestlé and infant formula, or the Union Carbide Bhopal incident. The textbook offers concise synopses of both cases, which should be eye-opening revelations for most students. The chapter also examines two issues that arise as a result of legal and cultural differences between countries: sweatshops and bribery / corruption. Instructors may want to cover (1) the Nike case (see Case 15) in class when exploring issues related to sweatshops and (2) the most recent SEC / DOJ investigation of corporate violations of the Foreign Corrupt Practices Act. After spending a sizeable portion of the chapter identifying and discussing the ethical problems inherent in global operations, the authors then provide four strategies of improving ethical performance in multinational markets. Some of the most intractable ethical issues arise in developing countries, due to the vast differences in the level (or stage) of economic development in the home and host countries. For example, a company based in the United States is more likely to encounter difficult ethical issues by operating in Sudan than if it opened a branch in Germany. Part of this difference in ethical standards is due to culture (northern European countries are more culturally similar to the United States than is Sudan), but a significant portion can also be traced to historic and continuing discrepancies in the position of countries in the world economy. Immanuel Wallerstein proposed a world-system theory, in which he identified core regions that benefited most from the capitalist world economy, and peripheral zones, such as Africa and Latin America. His book, The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century (New York: Academic Press, 1976) provides a compelling case for how theses differences developed and how the core regions continue to profit from exploitation of the peripheral regions. While Wallerstein offers a historical account of how the world economic system developed, David Korten writes about the current effects of the world system. His books When Corporations Rule the World (San Francisco: Berrett-Koehler Publishers, 1995) and The Post-Corporate World: Life after Capitalism (San Francisco: Berrett-Koehler Publishers, 1999) both explore and denounce the effects that corporations from developed countries have on the economies and social lives of underdeveloped nations. Touching on these ideas may help the students see the problems of operating a global business in a larger context than simply trying to match ethical systems. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Should Business Hire Undocumented Workers? Something’s Rotten in Hondo Nike, Inc. and Sweatshops Coke and Pepsi in India: Issues, Ethics, and Crisis Management Chiquita: An Excruciating Dilemma Between Life and Law Goldman Sachs and Greece Big Pharma’s Marketing Tactics Ethics in Practice Cases: An Innocent Revelation? I Love My Job – Just Don’t Ask How I Got It! Spotlight on Sustainability: Earth Hour: A Global Ethical Sustainability Movement Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE NEW, NEW WORLD OF GLOBAL BUSINESS A. Expanding Concepts of Global Business B. Ongoing Backlash against Globalization 1. Globalists and Antiglobalists II. MNCS AND THE GLOBAL BUSINESS ENVIRONMENT A. Changed Scope and Nature of MNCs B. Underlying Challenges in a Multinational Environment 1. Achieving Corporate Legitimacy 2. Differing Philosophies between MNCs and Host Countries C. Other MNC-Host Country Challenges 1. Facing Cultural Differences 2. Business and Government Differences 3. Management and Control of Global Operations 4. Exploration of Global Markets III. ETHICAL ISSUES IN THE GLOBAL BUSINESS ENVIRONMENT A. Questionable Marketing and Plant Safety Practices 1. Questionable Marketing and Plant Safety Practices a. Questionable Marketing: The Infant Formula Controversy b. Plant Safety and the Bhopal Tragedy B. Sweatshops, Human Rights, and Labor Abuses 1. Fair Labor Association (FLA) 2. Social Accountability 8000 (SA 8000) 3. Individual Company Initiatives 4. Alien Tort Claims Act and Human Rights Violations C. Corruption, Bribery, and Questionable Payments 1. Arguments For and Against Bribery 2. The Foreign Corrupt Practices Act (FCPA) 3. The Growing Anticorruption Movement a. Transparency International b. OECD Antibribery Initiatives c. UN Convention Against Corruption (UNCAC) d. Individual Country Initiatives IV. IMPROVING GLOBAL BUSINESS ETHICS A. Balancing and Reconciling the Ethics Traditions of Home and Host Countries 1. Ethical Imperialism 2. Cultural Relativism B. Strategies for Improving Global Business Ethics 1. Global Codes of Conduct a. Corporate Global Codes b. The GBS Codex c. Global Codes/Standards Set by International Organizations 2. Ethics and Global Strategy 3. Suspension of Activities 4. Ethical Impact Statements and Audits C. Companies Take Action Against Corruption V. SUMMARY Chapter 11 Business, Government, and Regulation LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Articulate a brief history of government’s role in its relationship with business. 2. Appreciate the complex interactions among business, government, and the public. 3. Identify and describe government’s nonregulatory influences, especially the concepts of industrial policy and privatization. 4. Explain government regulation and identify the major reasons for regulation, the types of regulation, and issues arising out of deregulation. 5. Provide a perspective on privatization versus federalization, along with accompanying trends. TEACHING SUGGESTIONS INTRODUCTION – In this chapter the authors examine the relationship between business and government, along with the general public, which also plays an important role. The central focus here is the government’s role in influencing business, although, as discussed in the next chapter, business also influences government. KEY TALKING POINTS – Many schools provide an entire course titled Business, Government, and Society, which indicates the centrality of the subject matter in this chapter. Many students will be quite familiar with the concept that government regulates and influences business (the focus of this chapter) but will be less cognizant of the reciprocal relationship (Chapter 12). Because the business/government relationship does flow in both directions, the instructor should consider covering Chapters 11 and 12 as a single unit, so that students realize the full extent of the influence each has over the other. Several books have delved into this subject in some depth. The instructor may want to incorporate some of their content into the classroom discussion or assign students to read sections of different books. One of the earlier writings was Taking Care of Business, a 32- page pamphlet written by Richard Grossman and Frank Adams. This item is currently available through the Program on Corporations, Law & Democracy (POCLAD) at http://www.poclad.org/. Other relevant books include: Bakan, J. 2004. The Corporation. New York: Free Press. (A movie of the same name has been produced and is currently available on DVD.) Kelly, M. 2003. The Divine Right of Capital. San Francisco: Berrett-Koehler Publishers, Inc. Nace, T. 2003. Gangs of America. San Francisco: Berrett-Koehler Publishers, Inc. While many students understand the concept of regulation, they don’t understand the process. At a basic level, students should understand that Congress creates laws, various regulatory agencies create rules/regulations within the parameters of those laws and that the public has an opportunity to comment on the proposed regulations. The first group project in this chapter is designed to help students understand this concept. Certain chapter concepts can be illustrated by encouraging students to explore current political issues: Should the U.S. social security system be privatized? On the other hand, should the U.S. federalize healthcare? Should the government provide bailout funds to struggling industries? Should the government further regulate the financial services industry? Students also may want to explore the concept of deregulation by looking at the impact that this process has had on certain industries. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Astroturf Lobbying DTC: The Pill Pushing Debate Big Pharma’s Marketing Tactics Firestone and Ford: The Tire Tread Separation Tragedy The Hudson River Cleanup and GE Ethics in Practice Cases: Incompatible Goals for the FDA To Comply or Not to Comply with the Government Regulation Spotlight on Sustainability: Walking Their Talk at the EPA Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. THE PENDULUM OF GOVERNMENT’S ROLE IN BUSINESS II. THE ROLES OF GOVERNMENT AND BUSINESS A. A Clash of Ethical Belief Systems III. INTERACTION OF BUSINESS, GOVERNMENT, AND THE PUBLIC A. Government-Business Relationship B. Public-Government Relationship C. Business-Public Relationship IV. GOVERNMENT’S NONREGULATORY INFLUENCE ON BUSINESS A. Industrial Policy B. Arguments for Industrial Policy C. Arguments Against Industrial Policy D. Privatization 1. Producing Versus Providing a Service 2. The Privatization Debate E. Other Nonregulatory Governmental Influences on Business V. GOVERNMENT’S REGULATORY INFLUENCES ON BUSINESS A. Regulation: What Does It Mean? B. Reasons for Regulation 1. Controlling Natural Monopolies 2. Controlling Negative Externalities 3. Achieving Social Goals 4. Other Reasons C. Types of Regulation 1. Economic Regulation 2. Social Regulation D. Issues Related to Regulation VI. DEREGULATION A. Purpose of Deregulation B. The Changing World of Deregulation C. Dilemma with Deregulation 1. Trucking Industry 2. Financial Services VII. SUMMARY Chapter 12 Business Influence on Government and Public Policy LEARNING OUTCOMES After studying this chapter, you should be able to: 1. Describe the evolution of corporate political participation. 2. Differentiate among the different levels at which business lobbying occurs. 3. Explain the phenomenon of political action committees (PACs) in terms of their historical growth, the magnitude of their activity, and the arguments for and against them. 4. Define coalitions and describe the critical role they now assume in corporate political involvement. 5. Discuss the Bipartisan Campaign Reform Act and other issues surrounding campaign financing. 6. Outline the principal strategic approaches to political activism that firms are employing. TEACHING SUGGESTIONS INTRODUCTION – In this chapter, the authors focus on business’s attempts to influence government. They take a descriptive approach to the topic, seeking primarily to understand the various approaches business uses, and to evaluate strengths and weaknesses, successes and failures. However, as the students read the chapter, they will undoubtedly be impressed with the tremendous power that business wields in the political realm, primarily through its application of money to the process. The question is whether they will be pleased with the situation or scared for our republic, especially in light of the Supreme Court’s recent decision in Citizens United v. Federal Election Commission. As discussed in the previous chapter, government also influences business, and students should be reminded of this fact. KEY TALKING POINTS – The authors did not go into depth about the process by which corporations gained political power in the United States, but the subject is worth exploring with students. From the relatively low status corporations held in the early years of the United States, they have risen to be the most powerful social institution we have. The books mentioned in Chapter 11 of the Instructor’s Manual (and repeated below) do an excellent job of tracing their trajectory, especially Gangs of America. Contributing factors include the separation of management and ownership, the rise of a consumer culture, receding religious influence, business’s concerted efforts to gain power, and legal decisions that granted certain rights to corporations that they had not previously held. Ted Nace, in Gangs of America, argues that corporations now have more rights than do individual humans. One of the most important rights won was the right to be conceived of as a “person,” and therefore protected by the Fourteenth Amendment to the Constitution (Santa Clara County v. Southern Pacific Railroad, 1886). This amendment was originally passed to protect freed slaves but has been used much more often for the benefit of corporations. In 2010, the Supreme Court again increased the rights of corporations when it ruled that the First Amendment protects a corporation’s right to fund independent political broadcasts. One of the interesting questions for students to explore is if corporations have garnered too much power in our society. Several books have delved into this subject in some depth. The instructor may want to incorporate some of their content into the classroom discussion or assign students to read sections of different books. One of the earlier writings was Taking Care of Business, a 32- page pamphlet written by Richard Grossman and Frank Adams. This item is currently available through the Program on Corporations, Law & Democracy (POCLAD) at http://www.poclad.org/. Other relevant books include: Bakan, J. 2004. The Corporation. New York: Free Press. (A movie of the same name has been produced and is currently available on DVD.) Kelly, M. 2003. The Divine Right of Capital. San Francisco: Berrett-Koehler Publishers, Inc. Nace, T. 2003. Gangs of America. San Francisco: Berrett-Koehler Publishers, Inc. While many students are familiar with the concept of lobbying, few understand how the process actually works and the different levels at which lobbying occurs. A review of the lobbying process should prove beneficial. Furthermore, few students will know how PACs work and how businesses use PACs in the political process. Instructors may want to explore how PACs truly function in our society. Finally, instructors should lead students into a discussion on the impact of the Bipartisan Campaign Reform Act on the use of hard and soft money and the dollar limits regulated by the Federal Election Commission, as well as a discussion of the Supreme Court’s recent ruling in Citizens United v. Federal Election Commission. PEDAGOGICAL DEVICES – In this chapter, instructors may utilize a combination of: Cases: Should Business Hire Undocumented Workers? Astroturf Lobbying The Hudson River Cleanup and GE Ethics in Practice Cases: Influencing Local Government Patriotism versus Profits: What Should a Firm Do? Spotlight on Sustainability: Green Lobbying Power Point slides: Visit http://academic.cengage.com/management/carroll for slides related to this and other chapters. LECTURE OUTLINE I. CORPORATE POLITICAL PARTICIPATION A. A Lesson Learned B. Business Lobbying C. Organizational Levels of Lobbying 1. Professional Lobbyists 2. Grassroots Lobbying 3. Trade Association Lobbying 4. Umbrella Organizations a. Chamber of Commerce of the United States b. Business Roundtable c. National Association of Manufacturers (NAM) d. National Federation of Independent Businesses (NFIB) II. COALITION BUILDING III. POLITICAL ACTION COMMITTEES A. Evolution of PACs B. Arguments for PACs C. Arguments Against PACs 1. PACs and the Vote-Buying Controversy 2. PAC Effectiveness D. PACs and Campaign Financing 1. The Hard Facts about Soft Money 2. Strategies for Political Activism IV. SUMMARY Instructor Manual for Business and Society: Ethics, Sustainability, and Stakeholder Management Archie B. Carroll, Ann K. Buchholtz 9780538453165
