Download CHAPTER 1 - ETHICAL ISSUES IN BUSINESS

CHAPTER 5
ETHICAL DILEMMAS IN BUSINESS
INTRODUCTION
People who work in business - managers and employees alike - frequently encounter
and must deal with on-the-job ethical issues. Learning how to recognize ethical dilemmas
and knowing why they occur are important business skills. Ethical issues also arise when
businesses operate in other countries, where social customs and business practices may
clash. The costs to business and to society of unethical and illegal behavior are very large.
A firm is more likely to gain public approval and social legitimacy if it adheres to basic
ethical principles and society’s laws.
PREVIEW CASE
U.S. Foodservice
What caused U.S. Foodservice to engage in questionable accounting practices?
Were sales targets set too high by parent company, Ahold? Were the incentives
offered to managers too enticing to resist? Was the firm’s board of directors lax in
its oversight, and could this have contributed to the ethical lapse? Why did
ConAgra and Sara Lee react differently to this situation?
All of the above conditions may have contributed to the unethical actions taken at U.S.
Foodservice. ConAgra and Sara Lee may have different ethical climates or formal
policies that were effective in influencing managers’ behavior. Each of these firms
should be further investigated to determine why ethical or unethical actions were taken.
Teaching Tips: Preview Case
The general objective of presenting the Preview Cases is to
expose students to an ethical dilemma that invokes a valueladen response. Students often need to hear their own
recommendations for actions in order to identify their
personal values. Moreover, exposing students to the values
and recommendations for actions suggested by their peers
is an excellent educational opportunity. The instructor may
wish to re-visit this ethical dilemma after discussing the
ethical decision framework presented in Chapter 6.
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CHAPTER OUTLINE
I. THE MEANING OF ETHICS
Teaching Tip: Defining Ethics
Establishing a clear definition of ethics is a critical task in
understanding this and the following chapters. Ethics is not
identical to law (as discussed at the end of this chapter), nor
is it simply personal or cultural values. Defining ethics
should promote a lively discussion, although at the
conclusion of the class session all students should have a
clear definition.
A. What Is Business Ethics?
B. Why Should Business Be Ethical?
*Meet demands of business stakeholders
*Enhance business performance
*Comply with legal requirements
*Prevent or minimize harm
*Promote personal morality
McKendall, Marie, Beverly DeMarr & Catherine Jones-Rikkers (2002) “Ethical Compliance Programs and
Corporate Illegality: Testing the Assumptions of the Corporate Sentencing Guidelines,” Journal of
Business Ethics 37: 367-383.
Palmer, Daniel E. & Abe Zakhem (2001) “Bridging the Gap Between Theory and Practice: Using the 1991
Federal Sentencing Guidelines as a Paradigm for Ethics Training,” Journal of Business Ethics 29:
77-84.
Teaching Tip: Corporate Sentencing Guidelines
The U.S. Corporate Sentencing Guidelines have emerged on
the ethics scene. There are numerous current articles discussing
these guidelines. Students may be challenged by the question: Will
the U.S. Corporate Sentencing Guidelines promote ethical behavior
by employees, or are firms only interested in reducing the length of
criminal jail time for their executives?
See Daniel E. Palmer and Abe Zakhem, “Bridging the Gap
Between Theory and Practice …” Journal of Business Ethics 29:
77-84, 2001 and Marie McKendall, Beverly DeMarr and Catherine
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Jones-Rikkers, “Ethical Compliance Programs and Corporate
Illegality …” Journal of Business Ethics 37: 367-383, 2002.
Isn’t it a bit ironic that executives found guilty of criminal
activity could serve less time in prison if their firm has developed a
comprehensive ethics program? How effective was the program if
criminal activity was discovered?
II. BUSINESS ETHICS ACROSS ORGANIZATIONAL FUNCTIONS
A. Accounting Ethics
B. Financial Ethics
C. Marketing Ethics
D. Information Technology Ethics
E. Other Functional Areas
Teaching Tip: Types of Business Ethics Issues
Have your students prepare a class report that identifies an
example of a business ethics issue for each functional area.
If the students have work experience, have them draw upon
their own experiences. If not, a review of recent newspapers
or business periodicals will provide a rich research source.
Challenge students – possibly matching students majoring
in a discipline to the corresponding professional code of
conduct (e.g. Accounting majors matched to the AICPA
code, etc.), to identify ethical issues in the current press.
Then, locate passages in the professional code as a guide
for those professionals encountering these ethical issues,
answering the question: What should these professionals do
when faced with the ethical issue?
III. WHY ETHICAL PROBLEMS OCCUR IN BUSINESS
Teaching Tips: Ethical Issues
Update each major category described in this section of the
chapter with new examples of ethical challenges.
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A. Personal Gain and Selfish Interest
B. Competitive Pressures on Profits
C. Business Goals versus Personal Values
D. Cross-Cultural Contradictions
IV. ETHICS IN A GLOBAL ECONOMY
Teaching Tips: Global Ethics
Can there ever be an international code of ethics? Most
students believe not.
Have them locate the Caux
Roundtable
Principles
via
the
Internet
(www.cauxroundtable.org) or find other international codes
such as the Global Sullivan Principles for discussion.
Global ethics codes also are discussed in Chapter 7.
A. Efforts to Curtail Unethical Practices
V. ETHICS, LAW, AND ILLEGAL CORPORATE BEHAVIOR
Teaching Tips: Preview Case
Excellent cases featuring ethical issues and the need for
ethical leadership can be found in the Hartwick Classic
Leadership
Cases
series.
For
details
see
www.hartwick.edu/hhmi or call 800 - 942 – 2737 for a
catalog.
A. Corporate Law Breaking and Its Costs
GETTING STARTED
KEY QUESTIONS AND CHAPTER OBJECTIVES
1. What is ethics? What is business ethics?
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Ethics is a conception of right and wrong behavior. Ethics deals with fundamental
human relationships - how we think and behave toward others and how we want them to
think and behave toward us. Ethical principles are guides to moral behavior; for example,
do not lie, steal, or harm others. Honesty, helping others, and respecting the rights of
others are considered to be ethically and morally desirable behavior. Business ethics is the
application of general ethical ideas to business activities.
2. Why should business be ethical?
Business is a participant in society. The general public expects business to be ethical
in its conduct. Ethical conduct by business prevents harm to the public and a firm’s
stakeholders. Business can improve business relations, increase employee productivity,
and reduce penalties for criminal offenses by encouraging ethical behavior from its
employees. Being ethical avoids abuse by unethical employees and unethical
competitors. Also, most people on the job want to act in ways consistent with their own
values of right and wrong.
3. Why do ethics problems occur in business?
Businesses are composed of people who, themselves, may or may not wish to adhere
to society’s codes of behavior and may seek personal gain at the expense of the company.
Beyond outright wrongdoing there are often job-related factors, such as competitive
pressures on profitability and cross-cultural interpretations of ethical conduct, which give
rise to ethical problems in business.
4. What efforts are being made to curtail unethical practices around the world?
Similar ethical issues, such as bribery, are evident throughout the world and many
international agencies and national governments are actively attempting to minimize such
actions through economic sanctions and international codes. The most common control
is through government intervention and regulation. Many governments are attempting to
establish a moral minimum as a guide for proper behavior or to draw the line to control
unethical actions.
5. Are ethical behavior and legal behavior the same?
No, law and ethics are not quite the same. Laws are society’s attempt to formalize
minimum standards of conduct for business. Ethical concepts are more complex than
written rules of law, often going beyond the formal language of law and meanings given
to the legal ruler. Legal standards and ethical norms do work together toward achieving
the same goal of compliance with current societal demands, but ethics is broader and
subtler than law.
KEY TERMS AND CONCEPTS USED IN THE CHAPTER
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bribery, 94
business ethics, 82
conflicts of interest, 87
ethics, 82
ethical egoist, 92
ethical principles, 82
ethical relativism, 82
functional-area ethics
laws, 97


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Organization for Economic
Cooperation and Development
treaty, 95
Sarbanes-Oxley Act, 85
U.S. Corporate Sentencing
Guidelines, 85
U.S. Foreign Corrupt Practices
Act, 95
INTERNET RESOURCES
www.dii.org
Defense Industry Initiative on Business Ethics and Conduct
www.usoge.gov
United States Office of Government Ethics
www.ethicscan.on.ca
EthicScan, Toronto-based ethics clearinghouse
www.ibe.org.uk
Institute for Business Ethics
www.globalethics.org
Institute for Global Ethics
DISCUSSION CASE
VIAGRA – WONDER DRUG OR ETHICAL IRRESPONSIBILITY?
Discussion Questions
1.
What are the ethical responsibilities for drug manufacturers? Is any drug”
completely safe,” or is the ethical principle “Do no harm” a relative guide?
Response: Various ethical principles, particularly in the section on virtue ethics, are
presented in the chapter to guide students in the discussion of the ethical responsibility for
drug manufacturers. Clearly there are examples of other products where society has
determined that the product does significant enough harm to ban the product (e.g., heroin)
or place strict controls or warnings on the product (e.g., cigarettes). Since no drug is
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completely safe, warnings are often attached. Since “do no harm” is an ethical guide,
students might argue that more testing should be done or warning labels attached to
bottles of Viagra.
2.
Did Pfizer do enough by pre-testing its drug and warning patients of the drug’s side
effects through product labeling and instructions to physicians? If not, what more
could Pfizer have done?
Response: This is a debatable point that might be a matter of opinion – how much testing
is enough testing? Since Viagra promises positive performance for males taking the drug,
the manufacturers may need to be more careful in their testing process. The consumer
might focus more on the positive effects and less on the possible negative effects, which
might increase the manufacturer’s responsibility in testing and labeling the drug and
instructing physicians in the distribution of the drug.
3. Should the FDA require the pharmaceutical industry to conduct more elaborate premarket drug testing or increase their monitoring of customer’s use of the drug?
Response: This is amore broad question that the specific focus on Pfizer and Viagra, the
focus of question #2. Similar issues are at stake here but on a larger scale.
4. Although legal, is it ethical for drug manufacturers to develop and market a drug
that promises enhanced sexual performance but could also cause life threatening side
effects?
Response: The balance between positive effects and negative affects must be challenged
and debated here. People might argue that the satisfaction of taking drugs, such as
heroin, is great but the harmful effects outweigh the benefits according to society and
heroin is illegal. The basic question is: How much risk is the consumer willing to take, or
can society step in and legislate how risk is acceptable?
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