A Deep Dive into Ethics: Understanding Business Ethical Standards

This assignment delves into the multifaceted realm of business ethics, commencing with an examination of the prevalent misconception that business and ethics are mutually exclusive. It dissects the meaning of ethics, differentiating it from legal standards, and underscores the importance of normative standards, which are the generally accepted rules of conduct governing society. The assignment uses examples like line-cutting and cheating to illustrate ethical breaches, emphasizing concepts of honesty, fairness, and justice. It also explores the application of ethical principles in various business scenarios, highlighting the challenges faced by businesses in maintaining ethical standards amidst the pursuit of profit and shareholder value. The assignment also presents data on cheating in academic settings, from high school to graduate school, raising questions about the long-term consequences of unethical behavior and the importance of instilling ethical values in future business leaders.

The chapter’s opening “Consider...” teaches us that often we look at what compa- nies and
business executives say and do and the fact that the companies are doing well, and assume that
they must all have high ethical standards. The quotes are ironic because these individuals
and/or their companies then crossed the ethical lines they touted as standards.
We look at these individuals’ behaviors and wonder why they thought they could get away with
their poor ethical choices, or why they believed they were immune from the laws and our
ethical standards. We like to think of ourselves as so different from those who cross ethical
and/or legal lines. But all of them were col- lege graduates, nearly all with business degrees. All
of them were respected by their friends and were active in community projects and institutions.
These individuals were “good” people, but they lost sight of personal ethics, business ethics,
and the importance of ethics in success. Before they committed their business crimes, the
worst that could have been said about many white-collar criminals who are serving 6-month to
25-year prison sentences is that they had parking and speeding tickets. Keeping ethics with us,
in life and in business, can help us avoid the kinds of mis- takes that so many bright and capable
businesspeople have made. But, we wonder, what are ethics? How do we know when we have
them? How do we keep them when we face pressures, whether on an important exam or in
meeting the quarterly numbers or our sales quota at work? This chapter answers these
questions.
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-1 What Is Ethics?
When we learn that the Government Services Administration (GSA) held a meeting at a Las
Vegas hotel at a cost of nearly $1 million to taxpayers, we label that conduct “unethical.” When
we read that Jonah Lehrer, a young and rising star writer at the New Yorker fabricated quotes
from Bob Dylan, we use the term unethi- cal. When we learn that Beyoncé may have lip-synced
“The Star-Spangled Banner” at the 2013 presidential inauguration, we feel that we have been
duped.
2-1a “IT’SJUSTNOTRIGHT!”
We read about these types of situations in the newspaper each day. From politics to journalism
to business to our favorite sports and Hollywood icons, references to ethics run through the
stories. But we also face ethical dilemmas ourselves. Two students purchase tickets at a theater
to see Lincoln, and when they emerge from the theater they realize they are in an open area
with access to other theat- ers. If they wanted to, they could slip into Zero Dark Thirty or
another movie without paying for another ticket. “Who’s to know?” they might think. “Holly-
wood makes too much money anyway.” “It doesn’t really hurt anyone.” These thoughts are
similar to those that may have run through the minds of the GSA administrators, the young
writer, and the singer who did not analyze the risk factors in their conduct. Although we may
believe we are different from business executives and others involved in scandals, we all face
ethical dilemmas each day. Do I tell the clerk that he gave me too much change? Do I tell the
lender on my loan application that my salary was just cut 25 percent? Do I go back to pay for
the laundry detergent that slipped through on the bottom of my cart? Do I do what my boss
says when he tells me to write a fake review online for our com- pany’s services? Do I tell a
potential buyer of my car about the hairline crack in the engine block? Do I tell my clients that I
am selling off the investments I am trying to get them to buy?
The fact pattern changes slightly. The parties’ names and the subject matter vary, but the
ethical issues are the same. Some conduct is more harmful, such as those situations in which a
criminal statute is violated. Still, regardless of the law, we look at the conduct of government
employees, the writer, the students in the theater, the company employee writing reviews, and
the seller of the car, and we conclude, “It’s just not right!” We probably agree that they all
behaved unethically. We may not be able to zero in on what bothers us about their conduct,
but we know an ethics violation, or an ethical breach, when we see one.
2-1b NORMATIVESTANDARDS:HOWWEBEHAVETOKEEPORDER
But what do we mean when we say that someone has acted unethically? Ethical standards are
not the standards of the law. In fact, they are a higher standard. Sometimes referred to as
normative standards in philosophy, ethical standards are the generally accepted rules of
conduct that govern society. Ethical rules are both standards and expectations for behavior,
and we have developed them for nearly all aspects of life. For example, no statute in any state
makes it a crime for someone to cut in line in order to save the waiting time involved by going
to the end of the line.2 But we all view those who “take cuts in line” with disdain. We sneer at
those cars that sneak along the side of the road to get around a line
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of traffic as we sit and wait our turn. We resent those who tromp up to the cash register in
front of us, ignoring the fact that we were there first and that our time is valuable too.
2-1c LINE-CUTTINGANDETHICS
If you have ever resented a line-cutter, you understand ethics and have applied ethical
standards in life. Waiting your turn in line is a societal expectation. “Wait- ing your turn” is not
an ordinance, a statute, or even a federal regulation. “Waiting your turn” is an age-old principle
developed because it was fair to proceed with first in time, first to be served. “Waiting your
turn” exists because large groups wait for the same road, theater tickets, or fast food at noon in
a busy downtown area. We recognize that lines ensure order and that waiting your turn is the
just way to allocate the limited space and time allotted for the traffic, the tickets, or the food.
“Waiting your turn” is an expected but unwritten behavior that plays a criti- cal role in an
orderly society.
So it is with ethics. Ethics consists of those unwritten rules we have developed for our
interactions with each other. These unwritten rules govern us when we share resources or
honor contracts. “Waiting your turn” is a higher standard than the laws passed to maintain
order. Those laws apply when individuals use physi- cal force or threats to push to the front of
the line. Assault, battery, and threats are forms of criminal conduct for which the offenders can
be prosecuted. But the law does not apply to the stealthy line-cutter who simply sneaks to the
front, perhaps using a friend and a conversation as a decoy. No laws are broken, but the
notions of fairness and justice are offended by one individual putting him- or herself above
others and taking advantage of others’ time and position.
Because line-cutters violate the basic procedures and unwritten rules for line formation and
order, they commit an ethical breach. We don’t put line-cutters in jail, but we do refer to them
as unethical. Other examples of unethical behavior also carry no legal penalty. A married
person who commits adultery does not com- mit the type of crime that lands you in jail, but
does create a breach of trust with his or her spouse. We do label their conduct with adjectives
such as unfaithful, and even use a lay term to describe adultery: cheating.
Speaking of cheating, looking at someone else’s paper during an exam is not a criminal
violation. If you cheat on a test, your professor may sanction you and your college may impose
penalties, but the county attorney will not pros- ecute you for cheating. Your conduct is
unethical because you did not earn your standing and grade under the same set of rules applied
to the other students. Just like the line-cutter, your conduct is not fair to those who spent their
time studying. Your cheating is unjust because you are getting ahead using someone else’s
work.
These examples of cutting in line, committing adultery, and cheating on exams bring certain
common adjectives to our minds: “That’s not fair!” “That was dishonest!” “That was unjust!”
You have just defined ethics for yourself. Ethics is more than common, or normative, standards
of behavior. Ethics is honesty, fairness, and justice. The principles of ethics, when honored,
ensure that the playing field is level, and that we earn our achievements by using our own work
and ideas. Being ethical means being honest and fair in our interactions with each other ,
whether personally or in business
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For the
Re: A State of the Union Manager’s Desk on Academic Ethics
Ethics is not so difficult to understand, but it is difficult to practice. Data are available on the
ethics of everyone from school-age children to graduate school students. In 1992, the
Josephson Institute found that 61 percent of high school students reported that they had
cheated at least once during a school year. By 2008, that num- ber had risen slightly to 64
percent, but then fell to 49 percent in 2012.3 According to the Center for Academic Integrity,
about 75 percent of college students confess that they have cheated in some way in college.4
The rate for graduate students is 50 percent. They describe tak- ing notes and answers into
exams, copying others’ work,
Consider...
downloading and buying term papers from the Internet, and not contributing to team projects
but still receiving credit for them. Graduate students at Columbia Univer- sity extended the
time clock for an online exam. Harvard Business School candidates tapped into the school’s
admission database. Thirty-four students at Duke’s Fuqua Business School faced discipline for
collaborating on a take-home exam. Several New York high school students faced criminal
charges related to a cheating conspiracy on SAT exams. One student took the exam for 20
students, who paid him an average of $2,500 for his efforts at scholastic identity deception.
Why do we worry about ethics in school? What is the point of teaching young people to be
honest? Why do we impose penalties for cheating? How does cheating affect those who do not
cheat? What are some of the long-term consequences if those who cheat are permitted to pass
courses, graduate with honors, and pursue careers in their fields? What happens when the 75
percent of those who admit cheating in college reaches 100 percent?
2-2 What Is Business Ethics?
Many have referred to “business ethics” as an oxymoron. The little jibe suggests that it is
impossible to be in business and be ethical. Some see the pursuit of profit as being at odds with
ethics. However, the term business ethics is actually a complex one with many layers of
meaning. The first layer consists of basic values (covered in the following section) such as being
honest, keeping promises, and not taking things that do not belong to you. Another layer
consists of notions of fairness (also covered in the next section) such as how we treat others,
including customers and employees who report to us. Still a third layer consists of issues related
to how a business interacts with the community, the environment, and its neighbors.
The three layers of business ethics bring back into the purely quantitative mod- els of business
the elements of a fair playing field. Business ethics involve the study of fairness and ethical
standards amidst the pressure of earning a profit and providing returns to shareholders and
others who have invested in the business.
A business faces the special problem of having to develop ethical standards for a group of
people who work together toward the common goal of profit for the firm. Individuals in the
group have personal ethical standards, but too often employees find that the ethical standards
imposed by managers at the top of a company result in possible harm to those at the bottom or
to others outside the
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Ethical Issues
Gerry Roscoe was the “Outstanding Graduating Senior” for the class of 2013 at State University.
By tradition, the graduate chosen for this honor speaks at the commence- ment ceremonies for
the university. Gerry was scheduled to give the student commencement address and had a job
awaiting him on Wall Street at one of the nation’s largest investment banking firms.
Jill Swain and Eric Bourdeaux were also graduating seniors who knew Gerry. Jill and Eric knew
that, at least twice, Gerry had taken exams for others. One was a final exam during their
sophomore year. The class was an economics course with 500 students. The exam was held in a
large lecture hall and proctored by graduate students. ID was not required, and Gerry took the
exam twice, once for his section and at another time for a friend who was having trouble with
the course. Without a B on the mid-term, Gerry’s friend would have failed the course and lost
his scholarship. The second instance involved a final exam in finance. Finance 300 had been
taught in sections of 50 students, but a common final
was given with, again, 500 students in the room. The exam was proctored by one finance
professor and graduate students. Gerry had taken Finance 300 one year before his girlfriend,
Anissa Foulger, had, and she struggled through the course. She needed a B on the final exam in
order to pass the course. If she did not pass, she jeopardized her transfer to a college in New
York upon Gerry’s graduation and employment there. Jill and Eric saw Gerry enter the common
final for Finance 300, and he explained that he was taking the final for Anissa: “You understand.
Everything is off if she doesn’t make it through. She doesn’t need this stuff. She is going into
advertising. I can take it for her and she’ll get her B.”
If you were Jill or Eric, what would you have done at the time of the exams? What would you do
now that Gerry has been given this “Outstanding Graduating Senior” honor? Does his
dishonesty really hurt anyone? Wasn’t Gerry just being noble by taking the exam for his friend?
For his girlfriend? Is it any of your business? How is anyone harmed by what Gerry did?
firm. An employee may feel compelled to resolve the conflict between loyalty to an employer
and the performance of an illegal or unethical act ordered by that employer by simply following
the employer’s direction. In other words, in devel- oping standards of business ethics, an
employee has personal economic interests in continuing employment that may compromise
personal ethical standards. Busi- nesses face the additional challenges of developing business
standards that are consistent with individual standards and helping employees understand that
their personal standards of honesty and fairness need not be different at work. To accomplish
this meshing, business managers should understand the various sources of ethical standards.
2-2a ETHICALSTANDARDS:POSITIVELAWANDETHICS
Ethical standards can be derived from different sources, and ethicists often debate the origins
of these standards. One theory is that our ethical standards are the same as actual or positive
law, and that our ethical decisions are made simply upon the basis of whether an activity is
legal. Positive law, or codified law, estab- lishes the standard for ethical behavior. But
compliance with positive law is not always ethical. For example, one of the most frequently
asked questions about the 2008 financial crisis is, “How come no one has been convicted of any
crimes?” The federal government has brought three cases against fund managers and analysts
in an attempt to attain convictions. However, in all three cases, the juries returned acquittals in
the cases. In the third case, the jury sent the judge a note along with
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its acquittal that read, “This verdict should not deter the S.E.C. from continuing to investigate
the financial industry, review current regulations and modify exist- ing regulations as
necessary.” The jury found that there was not criminal conduct because violation of the law,
but they called the conduct “appalling.” The three acquittals illustrate that ethical and legal
standards are not the same. Conduct may be legal, but not ethical.
2-2b ETHICALSTANDARDS:NATURALLAWANDETHICS
Others believe that our ethical standards are derived from a higher source and that they are
universal. Often labeled natural law, this school of ethical thought supports the notion that
some standards do not exist because of law (and, indeed, may exist despite laws). For example,
as discussed in Chapter 1, at one time the United States permitted slavery. Even though the
positive law allowed the activity and the standard of positive law considered slave ownership
ethical, natural law dictated that the deprivation of others’ rights was unethical
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ETHICALSTANDARDS:MORALRELATIVISMANDETHICS
Moral relativism (also called situational ethics) establishes ethical standards accord- ing to the
situation in which the dilemma is faced. Violation of the law, for example, is permitted if you
are stealing to provide food for your starving family. Under moral relativism, adultery is justified
when you are caught in an unhappy marriage, as is the business situation in which you engage
in lying to avoid offending a coworker or a customer. Bribery is illegal in the United States, and
most companies even have firm policies against accepting gifts, because doing so may create
conflicts of interest; but some companies still use a relativist approach and argue that being
competitive in international markets is different. They adhere to a philosophy of “When in
Rome, do as the Romans do,” following the standards and customs in a given country even
though those same behaviors in the United States would be unacceptable and even illegal.
2-2d ETHICALSTANDARDS:RELIGIONANDETHICS
A final source of moral standards is religious beliefs or divine revelation. The source of
standards can be the Bible, the Koran, or any inspired book or writing that is the cornerstone of
a religion or faith and believed to have resulted from divine revelation.
2-3 What Are the Categories of Ethical Dilemmas?
Regardless of the root or source of a company’s or individual’s ethical standards, certain
categories of conduct involve ethical issues. The following 12 categories were developed and
listed in Exchange, the magazine of the Brigham Young University School of Business.
2-3a TAKINGTHINGSTHATDON’TBELONGTOYOU
Everything from the unauthorized use of the Pitney-Bowes postage meter at your office for
mailing personal letters to exaggerations on travel expenses to the down- loading of music from
the Internet without authorization to not working your required hours at your job but accepting
full pay as if you had belongs in this category of ethical violations. A CFO (chief financial officer)
of a large electric util- ity reported that, after taking a cab from LaGuardia International Airport
to his midtown Manhattan hotel, he asked for a receipt. The cab driver handed him a full book
of blank receipts and drove away. Apparently, the problem of accurately reporting travel
expenses involves more than just employees.
2-3b SAYINGTHINGSYOUKNOWARENOTTRUE
A salesperson who tells a potential customer that a product carries a “money-back guarantee”
when the salesperson knows that only an exchange is possible has said something that is not
true, committed an ethical breach and possibly a violation of the law, and misled the customer.
If a car dealer assures a customer that a car has not been in an accident and it has, an ethical
breach has occurred. If a homeowner tells a buyer that a home has not had any water damage
when, in fact, the base- ment had been flooded, this false statement is an ethical breach too.
2-3c GIVINGORALLOWINGFALSEIMPRESSIONS
An urban legend that has circulated among marketing departments around the country is the
story of an infomercial that offered two CDs with the hits of the 1980s on them. The infomercial
emphasized over and over again, “All songs by
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original artists.” Even the CDs carried the line, “All songs by original artists.” When purchasers
read the label with a closer eye and listened to the CDs, they discovered that all the songs were
performed by one group, a group called “The Original Artists.” While technically true, the
advertising left a false impression with customers who assumed they would be buying songs as
performed by the recording artists who made the songs popular.
2-3d BUYINGINFLUENCEORENGAGINGINCONFLICTOFINTEREST
A company awards a construction contract to a firm owned by the father of the state attorney
general while the state attorney general’s office is investigating that company. A county official
who has the responsibility for selecting the contractor who will build the county’s new baseball
stadium travels around the country at the contractor’s expense to view existing stadium sites.
The county official should see as many sites and samples of work as there are bidders on the
new stadium, but when the contractors pay, there is an ethical issue. A physician researcher
whose work concludes that a company’s product is meritorious needs to disclose the consulting
fees he receives from that company.
All of these examples illustrate conflicts of interest. Those involved in situa- tions such as these
often protest, “But I would never allow that to influence me.” That they have to insist they are
not or would not be influenced is evidence of the conflict. Whether the conflict can or will
influence those it touches is not the issue, for neither party can prove conclusively that a quid
pro quo was not intended. The possibility exists, and it creates suspicion.
Ethical Issues
The temptation is remarkable. The run is long. The body screams, “No more!” So, it happened
again in the New York City Marathon for 2008. Cheating on this form of a physical final
examination became international news when, in 1979, Boston Marathon runner and winner
Rosie Ruiz combined her running with a hitch on the train to earn first place. She repeated the
ploy in the 1980 Boston Marathon, when her creative approach was discovered.
The New York Road Runners Club, the sponsors and managers of the New York City Marathon,
disclosed multiple subway riders in their 2008 race on the eve of the 2009 Marathon with the
hope of encouraging the 42,000 runners to go the distance, the real distance. For 2008, there
were 71 runners disqualified from the race, 46 of them for taking the subway in order to go the
distance. The club discovers these free-riders when it investigates what it believes to be
extraordinary times for runners who have not been able or should not have
been able to achieve their recorded times. In at least two situations, the runners who took the
subway also took first place in their age categories and deprived the real winners of their
Tiffany trophies as well as the thrill of quaffing the elixir of victory on the day of the marathon.
The real winners in these age categories from 2008 were not notified of their victories until July
2009 because of the time the investigations take.
A spokesperson from the Road Runners Club said that the greatest temptation in the race
comes when the runners enter Manhattan via the Queensboro Bridge. That entry to the city is
close to Central Park and the finish line, but the race first takes a turn there for another 10
miles into Harlem and the Bronx. Most cheaters sim- ply skip those boroughs and head right
into Central Park and the finish line.
Are there any laws that govern this situation with the runners? Discuss the ethical issues of the
runners. Is anyone really hurt if runners cheat?
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Dr. Drew Pinsky, the host of a cable health show, recommended GlaxoSmithKline’s antidepres- sant
Wellbutrin to physicians and patients but did not disclose that he received $275,000 from Glaxo-
SmithKline for “services related to Wellbutrin.” Dr. Drew, as he is known on television, participated in
town hall meetings, published writings, and hosted multimedia activities that touted the benefits of
Wellbutrin. When asked about his failure to disclose the payments, Dr. Drew said that all of his
commentary and writing were consistent with his clinical experience and that, “how does a doctor
choose one specific antidepressant medication for a certain patient from the many excellent medica-
tions available? The vast majority of doctors attending my lectures stated that they felt I answered this
question and did so in an unbiased and scientifically sound manner.” Is there a conflict of interest? Did
Dr. Drew manage the conflict correctly? Is there any significance to Dr. Drew’s statement that doctors
felt that he answered their questions in a scientific and unbiased manner?
(Jeanne Whalen, “ ‘Dr. Drew’ Was Paid by Glaxo,” Wall Street Journal, July 5 2012, B3.) Steps for
Analyzing Ethical Dilemmas and Case Studies in Business
1. Make sure you have a grasp of all the available facts. 2. List any information you would like to
have but don’t and what assumptions you would have to
make, if any, in resolving the dilemma.
3. Take each person involved in the dilemma and list the concerns they face or might have. Be sure
to consider the impact on those not specifically mentioned in the case. For example, product safety
issues don’t involve just engineers’ careers and company profits; shareholders, customers, custom- ers’
families, and even communities supported by the business are affected by a business decision on what
to do about a product and its safety issue.
4. Develop a list of resolutions for the problem. Apply the various models for reaching this
resolution. As you apply the various models to the dilemma, you may find additional insights for
questions 1, 2, and 3. If the breach has already occurred, consider the possible remedies and develop
systemic changes so that such breaches do not occur in the future.
5. Evaluate the resolutions for costs, legalities, and impact.Try to determine how each of the
parties will react to and be affected by each of the resolutions you have proposed.
6. Make a recommendation for the actions that should be taken. Some Help for You on the Dr.
Drew Case
THINK: To help in your analysis, consider the following list of the parties affected by this dilemma.
␣␣ GlaxoSmithKline—the company’s credibility is affected by Dr. Drew’s conduct, recommendations,
and disclosures.
␣␣ The doctors who listened to Dr. Drew’s recommendations without knowing about his compensation.
␣␣ The patients who asked for or used the drug Wellbutrin without knowing about Dr. Drew’s conflict.
␣␣ Other drug manufacturers whose drugs may have been more appropriate or worthy of
recommendation but were not mentioned because of Dr. Drew’s loyalty to Wellbutrin and
GlaxoSmithKline.
APPLY: To further assist you in your analysis, consider the following categories:
␣␣ Conflict of interest: Dr. Drew had an obligation to disclose his financial interest in promoting the
drug.Those who listened to his analysis, read his recommendations, or used the drug deserved to know
before they made their decision that he did have a financial interest
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␣␣ Giving or allowing false impressions: Dr. Drew gave the impression of being a detached clinician who
had prescribed the drug and had patients who benefited, but he did not disclose that he was paid by
GlaxoSmithKline for his work in recommending the drug.
ANSWER: Because the conduct has already occurred, your role becomes one of recommen- dation. You
need to provide a recommendation that affords protection to all the parties listed as affected by the
conduct. For example, to protect the credibility of the pharmaceuticals, the companies and their experts
need to develop a policy on accepting compensation, as well as one for disclosures of these programs of
compensation. These policies may require not only disclosure but also prohibitions on certain types of
conduct (such as doctors receiving stock ownership in the pharmaceutical companies) if the conflict
seems too difficult to overcome. Two approaches can be taken in regard to a conflict of interest: (1)
don’t do it, or (2) disclose the conflict to those affected. Sometimes disclosure is insufficient and one
party must not engage in the conduct. Regulators may force these new standards on physicians and
pharma- ceutical firms.
2-3e HIDINGORDIVULGINGINFORMATION
Taking your firm’s product development or trade secrets to a new place of employ- ment constitutes an
ethical violation: divulging proprietary information. Failing to disclose the results of medical studies that
indicate that your firm’s new drug has significant side effects is an ethical violation: hiding information
that the product could be harmful to purchasers.
2-3f TAKINGUNFAIRADVANTAGE
New credit card regulations went into effect in 2010 and 2012 because so many businesses took unfair
advantage of customers on payment due dates, late fees, and increases in interest rates. Not all of the
charges were spelled out clearly in the credit card terms prior to the regulatory changes. These new
credit disclosure requirements and other truth-in-lending provisions all resulted because businesses
took unfair advantage of consumers who could not easily follow the jargon of long and complex
agreements.
Consider...
Eagle Gate College hired an admission consultant from Stevens-Henager College named Janna Miller.
Ms. Miller hired others from Stevens-Henager to join her at Eagle Gate. Those who came along to join
Ms. Miller also brought along lists of potential students for recruiting purposes. Those lists of potential
students are very valuable to for-profit colleges because of the need for new students. In addition, the
information left behind at Steven-Henager was altered so that the data base of potential recruits could
not be reached due to incorrect phone numbers and/ or e-mails. Stevens-Henager could not contact the
potential students from their own data base.
Are there ethical issues in this situation? Or is this just competition? [Stevens-Henager College v Eagle
Gate College, 248 P.3d 1025 (Utah 2011)
OMMITTINGACTSOFPERSONALDECADENCE
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While many argue about the ethical notion of an employee’s right to privacy, it has become increasingly
clear that personal conduct outside the job can influ- ence performance and company reputation.
During 2012, a number of CEOs and the former head of the CIA, General David Petraeus, had to resign
their positions because of affairs with employees or extramarital affairs. The CEOs’ personal conduct
created tension within their companies and resulted in loss of respect from the employees. For General
Petraeus, his role as the chief executive for the organization protecting national security was in jeopardy
because the affair with a younger woman left him vulnerable to threat and also meant he was not
complying with the agency standards that applied to all employees. Personal conduct by those who are
in leadership positions affects organizational reputa- tion, morale, and credibility.
2-3h PERPETRATINGINTERPERSONALABUSE
A manager sexually harasses an employee. Another manager is verbally abusive to an employee. Still
another manager subjects employees to humiliating correc- tion in the presence of customers. In some
cases, laws protect employees. But at the heart of this category is unfair treatment.
2-3i PERMITTINGORGANIZATIONALABUSE
Many multinational firms, such as Walmart, Ikea, Apple, and Nike, have faced issues of organizational
abuse. The unfair treatment of workers in international operations appears in the form of child labor,
demeaning wages, excessive work- ing hours, and factory safety standards. Even though a business
cannot change the culture of another country, it can perpetuate—or alleviate—abuse through its
operations there.
2-3j VIOLATINGRULES
Many rules, particularly those in large organizations that tend toward bureau- cracy from a need to
maintain internal controls or follow lines of authority, seem burdensome to employees trying to serve
customers and other employees. How- ever, those rules do serve a purpose and should be followed so
that harms are avoided. For example, Yale University senior Michele Dufault was killed in a lab accident
when her hair was caught in a lathe in the machinery lab. The phys- ics and astronomy major did not
follow the simple safety rule of tying your hair back before beginning work with the heavy equipment.
She was also working in the lab at 2:30 a.m., a time when there were no people near the lab and she
violated a basic safety standard of not working alone around the large machines. Sometimes these rules
seem superfluous and we feel that we have more expertise and experience and need not follow them.
However, there is an ethical issue here in that as a student she had agreed to follow the safety rules of
the lab and the university. Not following those rules was a breach of that promise. As a result of Ms.
Default’s accident, Yale and other colleges and universities have revamped their rules, enforcement, and
training to encourage compliance.
2-3k CONDONINGUNETHICALACTIONS
In this breach of ethics, the wrong results from the failure to report the wrong. What if you witnessed a
fellow employee embezzling company funds by forging
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his signature on a check that was supposed to be voided? Would you report that violation? A winking
tolerance of others’ unethical behavior is in itself unethical. Suppose that as a product designer, you
were aware of a fundamental flaw in your company’s new product—a product predicted to catapult
your firm to record earnings. Would you pursue the problem to the point of halting the distribution of
the product? Would you disclose what you know to the public if you could not get your company to act?
Toyota experienced the cost of employees not passing along information about customer accidents and
complaints when it recalled 8.5 million vehicles, answered class-action suits, and repaired relationships
with government regulators over its alleged failure to disclose important data and issues about its cars’
safety. One former employee of Lehman Brothers, whose sales efforts and structuring of securities
investments “helped lead to the demise of the bank he loved and to an economic unraveling worldwide
confessed, ‘I have blood on my hands.’”5 His remorse comes from his failure to speak up and raise his
concerns about the ethical issues he saw even as he was rewarded for his work.
2-3l BALANCINGETHICALDILEMMAS
In some situations, the answers are neither right nor wrong; rather, the situ- ations present dilemmas to
be resolved. For example, Google has struggled for years with its decision to do business in the People’s
Republic of China because of known human rights violations and censorship by the government there.
Its eventual decision was to remain in China despite the government’s censorship of its search engine
there. Other companies debated whether to do business in South Africa when that country’s
government followed a policy of apartheid. In some respects, the presence of these companies would
help by advancing human rights and, certainly, by improving the standard of living or communications
for at least some international operations workers. On the other hand, their presence could help such
governments sustain themselves by enabling them to point to economic successes despite human rights
violations.
2-4 Resolution of Business Ethical Dilemmas
So far, you know what business ethics is and you have a list of the areas that cover most ethical
dilemmas. But if you were faced with an ethical dilemma, how would you resolve it? The resolution of
ethical dilemmas in business is often difficult, even in firms with codes of ethics and cultures committed
to com- pliance with ethical models for decision making. Managers need guidelines for making ethical
choices. Several prominent scholars in the field of business ethics have developed models for use as
guides in difficult situations. This section cov- ers those models.
2-4a BLANCHARDANDPEALE
The late Dr. Norman Vincent Peale and management expert Kenneth Blanchard offer three questions
that managers should ponder in resolving ethical dilemmas: “Is it legal?” “Is it balanced?” “How does it
make me feel?” If the answer to the first question, “Is it legal?” is no, for business ethics purposes, your
ethical analysis is done. While there is room for conscientious objection to many laws on an ethi- cal
basis, a manager is not given the authority to break the law, and agencies such as the Internal Revenue
Service (IRS) and the Securities Exchange Commission
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