Ethics at Work

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Table of Contents

Part I – Thinking About Ethics in the Context of Business

Chapter I: Warm-up Questions…………………………………………5

Chapter I: Theory and Practice…………………………………………..8

Theory and Practice 8 Evaluations, Judgments, and Criteria 12Terminology 14 Reason and Argument in Ethics 17

Business Ethics 19

Chapter I: Wrap-up Questions………………………………………..26

Chapter II: Warm-up Questions……………………………………….28

Chapter II: Values & Principles…………………………………….….29

Values 30 Principles 35Values, Principles, and Ethical Disagreements 39

Taste, Manners, and Morals 41

Chapter II: Wrap-up Questions……………………………………….44

Chapter III: Warm-up Questions………………………………………47

Chapter III: Sources of Influence………………………………………48

Culture 49 The Law 52Professional and Organizational Codes 55 Religion 60

Chapter III: Wrap-up Questions……………………………………….65

Chapter IV: Warm-up Questions………………………………………66

Chapter IV: Ethical Judgments…………………………………………67

Consequences/Results 68 Intentions and Motives 71Rules and Principles 76

Chapter IV: Wrap-up Questions……………………………………….82

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Chapter V: Warm-up Questions…………………………………………85

Chapter V: Justification, Rationalization, and the Analysis of Moral Choices…………………….….87

Justification and Prima Facie Wrongdoing 88 Ends and Means 90Justice and Fairness 93 Rationalizations and Excuses 97

Chapter V: Wrap-up Questions………………………………………….101

Chapter VI: Warm-up Questions……………………………………….103

Chapter VI: Guidelines for Decision Making…………………………104

No Magic Formula 104 Identify Issues 108 Rules, codes, and law 109Identify Stakeholders and their Interests 111 The ‘Gut Check’ 112

Develop Information 114 Define Alternatives 115Compare the Consequences 117 Consider the Values at Issue 118

Apply the ‘Gut Test’ Again 119 The Golden Rule Test 120

Chapter VI: Wrap-up Questions………………………………………….123

Chapter VII: Warm-up Questions……………………………………….125

Chapter VII: Individual Traits and Character…………………………127

The Development of Character 127 Character Traits and Virtues 131Integrity 133 Honor 135 Regard for Others 138

Chapter VII: Wrap-up Questions………………………………………..140

Chapter VIII: Warm-up Questions……………………………………….142

Chapter VIII: Corporate Character and the Role of Leadership………143

The Role of Leadership 147 Articulation 149Implementation 153 Example 155

Chapter VIII: Wrap-up Questions……………………………………….160

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Part II – Case Studies

Introduction to Case Studies ………………………………………………...163

1. “Conflicting Loyalties”……………………………………………….165

2. “Good Consequences”………………………………………………..175

3. “Inside Knowledge”…………………………………………………..183

4. “The Game”……………………………………………………….….190

5. “Padding”………………………………………………………..……197

6. “Local Customs”…………………………………………………...…203

7. “Directors’ Debate”………………………………………………..…213

8. “Expenses”………………………………………………………..…..223

9. “Taking Advantage”…………………………………………………..232

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Note: These warm-up questions are not “tests” for which there are right and wrong answers. The questions are meant to engage your thinking about the chapter material and elicit your opinions.

Chapter I

Warm-up Questions

1. “Some people are better at ethics than others.”

Agree Disagree

2. It has been discovered that a product has a defect that can cause injury. Recalling the product immediately would be the right thing to do

(a) only if it would have good public relations value and would minimize company liability

(b) because it would prevent harm(c) only if the intent of the recall were to protect people from harm(d) because the law would require it sooner or later anyway(e ) all of the above(f) some of the above(g) none of the above

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3. Place each term in the single column that you think is most appropriate.

Words whose meaning is generally agreed upon

Words that are very likely to have different meanings

to different people

Words that only experts use and understand

fair profitable satisfactory moral beautiful

regressive just efficient duty price point justifiable

integrity marketable depreciable

4. Circle the words that you think are appropriate to make the sentences true and complete.

“Ethical decisions are (like/unlike) business decisions, because they usually (do/don’t) require an analysis of facts. Though sometimes neither of them may be certain, ethical decisions (like/unlike) business decisions (are/are not) almost always subjective or arbitrary.”

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5. “Companies within industry A typically seek to achieve a 1% profit on total dollar sales volume, whereas companies within industry B typically seek to make 2%.”

Based on this information, for each of the following, indicate whether you agree or disagree.

(a) Companies within industry B are typically less ethical than companies within industry A.

agree disagree

(b) Companies in both A and B are equally unethical, because you can’t try to make a profit and be ethical at the same time.

agree disagree

(c) The amount of profit a company makes has nothing to do with whether or not the company is ethical.

agree disagree

(d) The amount of profit made is one, but only one, factor in determining whether or not a given company is ethical.

agree disagree

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Chapter I

Theory and Practice

Sometimes people can perform well at one activity or another ‘without even thinking

about it.’ Often we call them naturals. There are those who can drive a golf ball, others

who can draw a picture, and still others who can prepare a succulent dish, all as it were,

effortlessly. Such people drive the rest of us crazy when we struggle to perform the same

sort of tasks at the same level.

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At the other end of the spectrum are the poor souls who study, take lessons, analyze, and

theorize yet still just can’t seem to do it very well. (Any golfers out there?) All the

lessons and all the study in the world just don’t seem to help. They may know all about

the activity in question, but they just can’t do it. For these people, learning is all in the

head; it doesn’t improve performance.

Those are the extremes. Most of us fall somewhere in between with regard to the various

activities we pursue. We have some natural abilities that afford us a modicum of success,

but we are also able to benefit from study and analysis. Learning enhances our

performance.

Probably most of us have known someone who was a natural at business: The kind of

person who seems intuitively to know how a market will react, the salesman who can sell

ice in Antarctica, the negotiator who just knows what his counterpart will accept. And

we’ve known the other type too: the MBA who wouldn’t know a deal if it were staring

him in the face, the HR expert who knows nothing about people, etc.

When it comes to business – whatever our business activity may be – most of us are

probably somewhere in between. We have some natural talents and inclinations, and we

can also benefit from some theory and instruction.

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…most of us have known someone who was a natural at business.

…in the activity of ethics most of us probably fall somewhere in between the extremes.

Inasmuch as the practice of ethical behavior is a human activity it should be no surprise

that the same kind of spectrum exists. Many of us have been privileged to know people

who were naturals at this activity. They just seem to have an intuitive sense for what is

good and right. Without benefit of formal analysis and structured training they can ferret

out the morally right course of action in a complex and conflicting situation with the

same quick ease that a talented quarterback can step up to the line of scrimmage, read a

defense and pick out just the right play to call.

Conversely, most of us have also known those at the other end of the spectrum. People

who could talk the talk, but for some reason or other did not walk the walk. Too often,

indeed, we have known such people because they were public figures. They were (are)

people who rose to public esteem sometimes precisely because of their moral fluency,

their ability to articulate a vision of personal and societal goodness; yet they themselves

could not or would not practice as they preached. Their knowledge of morality far outran

their ability to practice it.

As with so many things, in the activity of ethics

most of us probably fall somewhere in between

the extremes. Neither sinners nor saints we

engage our daily situations equipped with a moderate skill set that includes both instincts

and knowledge with respect to what is right and good. We are not utter novices at acting

ethically, nor are we incapacitated from doing so by virtue of our jobs or our ambitions.

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…in studying ethics we are likely to find out that there is actually more agreement than disagreement…

Moreover, as with so many other activities, most of us can probably benefit – i.e.

improve our ethical performance – by the study of ethics and by exposure to

considerations and points of view that might not previously have occurred to us.

In the course of such a study we are likely to encounter perspectives with which we

disagree; but that, of course, can be

beneficial as well. For in

articulating our disagreements, we

are likely to hone and amplify our own orientation. What is of greater interest, though, is

that in studying ethics we are likely to find out that there is actually more agreement than

disagreement among the various approaches that may be taken. Not only can we learn

from this, but also we can be encouraged by it; for we may see that the desire to discern

and to do that which is right is not a solitary venture. It is an activity that occurs within

community, and we have the resources and support of our various communities to draw

on as we engage in this distinctly human activity.

Evaluations, judgments, and criteria

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fft: [fft = ‘food for thought] Among people you know personally, who do you think is the most ethical? Do you think that is natural to them, or was it learned? Or both? Do you know anyone who seems to know a lot about ethics and being ethical, but who isn’t?

The study of ethics involves, among other things, the study of right and wrong, good and

bad. Such a study involves a consideration of ethical judgments and codes of behavior,

but the intent of the study is not simply to catalogue what it is that has been judged to be

right and what has been judged to be wrong. Rather, we seek to know why certain things

have been judged to be ethically right, and others have been judged to be wrong. We

want to know the criteria by which such judgments are made. We want to know what

tests or rules are applied in order to know whether an action is judged to be right or

wrong. For when we know that, then we will be in a position to evaluate new situations

and, by applying the appropriate criteria, to discern

what will constitute right action in those situations.

Sometimes the same evaluation may be supported

by quite different criteria:

Suppose that the Little Tyke Toy Company immediately and voluntarily issues a product

recall of a children’s toy, the Beta Ray Blaster, upon the discovery that the Beta Ray

Blaster is prone to breaking in such a way that it is liable to injure the child user. We

might all agree that the product recall was the right thing to do, but we might differ

considerably as to what made it the right thing to do.

Some might say it was the right thing to do because the company’s quick consumer-

oriented response would give it good will and customer loyalty that is liable to far

outweigh the negative consequences of the recall costs. Yet others might argue that this

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…we seek to know why certain things have been judged to be ethically right, and others have been judged to be wrong. We want to know the criteria by which such judgments are made

sense of “the right thing” has nothing to do with ethics, it is “right” only in the sense of a

pure business judgment.

Someone else might argue that, regardless of the business perspective, the product recall

should be judged ethically “the right thing” because, for ethical judgment, the relevant

question to ask is whether the course of action will maximize good consequences and

minimize negative ones. Inasmuch as that can be said of this action, then it was,

ethically, the right thing to do. That it was a good business decision also is just “frosting

on the cake”, and shows that ethics and good business don’t necessarily conflict.

Yet another party might argue, however, that the relevant ethical consideration has to do

with the intentions of those who made the decision. Sure, it’s nice that the action has

good results for those potentially affected, but why did the company decide to do what it

did? If the intention was merely to advance the company’s interest on the basis of a

dollars-and-cents cost-benefit analysis, then no positive ethical value attaches to the

action at all. However, if the intent behind the Little Tyke decision was to protect the

public, then the action was an ethically correct one. Moreover, says the person who

focuses on intent, this would be true regardless of what consequences were produced.

We can see, then, that investigating the criteria by which ethical judgments are made goes

to the very heart of ethical studies. When we understand the different considerations that

come into play when people make ethical judgments we are both better able to

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understand the source of our differences -- when there are differences – and also to see

how different approaches may be best-suited for different situations.

Terminology

Like any study of anything the study of ethics involves terminology, and it is worthwhile

to make a few observations about the vocabulary of ethics at the outset.

The good news is that, in large part, we are all already familiar with the terms used in

ethical discussion. Ethical judgments, characterizations, and assessments are a common

if not everyday part of human experience. The language of ethics is not a jargon spoken

only by experts. It is not something we need to be taught as we need to be taught the

terminology used in some esoteric academic field of endeavor.

The bad news, however, is a result of the good news. Precisely because the language of

ethics is a language of common human experience it is full of terms that are seldom

precise, that sometimes overlap, and that often appear to be interchangeable. We are all

familiar with terms like ‘ethics’, ‘morals’, ‘good’, ‘bad’, ‘right’, ‘wrong’, ‘duty’,

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The language of ethics is not a jargon spoken only by experts.

fft: Two people each have an opportunity to misappropriate company equipment for their own use. One doesn’t do it because the equipment doesn’t belong to him. The other doesn’t do it because he’s afraid he would be caught. Did they both do the right thing?

If we had to agree upon precise definitions before engaging in discussion, nothing would ever get said.

‘justice’, etc. We can use them in conversation and apply them as the situation warrants.

Yet each of us would quite likely define them differently; some might despair of defining

most of them at all; and all of us probably use them inconsistently from time to time.

Noting this can have an unsettling effect on the participant who wishes to embark upon a

study of ethics. If the terminology is not clear-cut and precise, how can we expect to

resolve anything? Won’t we always, or at least too often, be at cross-purposes in our

attempts to learn and better understand?

Not to worry. We don’t have to first agree on what the meaning of ‘is’ is in order to

have a conversation. If we had to agree upon precise definitions before engaging in

discussion, nothing would ever get said. Nor does that imply that we don’t, then, really

understand each other. Our understanding is generally just fine for the purposes at hand;

and if we need to clarify or, for the purposes of a particular conversation, define certain

terms, we can do that.

One example: The terms

‘ethics’ and ‘morals’ are

often used interchangeably. Sometimes they are not. On occasion people will mean to

distinguish them by suggesting that a person’s ethics have to do with his or her public or

professional behavior, whereas one’s morals refers to private conduct. At other times an

almost opposite usage is espoused. Some observers use ethics to denote private or

individual codes of conduct, whereas morals (and morality) is said to be a matter of

cultural or societal norms.

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There is no cause for intellectual anxiety over this. If, for the purposes of a particular

point or discussion, we need to make a distinction by defining a term in a certain way,

perhaps making it more precise than it really is, why then we can do so – not claiming to

have legislated a use for language as a whole. But if the discussion at hand doesn’t call

for such refinement, we should be perfectly comfortable using some of these vague and

occasionally ambiguous terms just as they stand.

The point after all, and we do well to keep this in mind, is doing the right thing, not

saying the right thing.

Reason and Argument in Ethics

There are those who are skeptical about the study of ethics because, they say, ethics is not

a science, it is not based on fact. Well, to be sure, we acknowledge that ethics is not

rocket science; ethics may be no kind of science at all. But no one should infer from that

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fft: Most all of us at one time or another have engaged in a discussion as to whether or not a particular company policy was fair. Try to recall such a discussion. Do you think the participants meant the same thing by ‘fair’ ? Was it necessary to agree on a definition?

You can’t verify an ethical judgment the same way you can verify a statement about the weather.

that ethics is, therefore, a sort of intellectual free for all, where anything goes and every

opinion is just as good as any other.

Without engaging in a lot of philosophical mumbo jumbo about what is a fact, we can

agree that there is a certain sense in which ethical judgments – assertions as to what is

right, good, just, and dutiful – may not be assertions of fact. You can’t verify an ethical

judgment the same way you can verify a statement about the weather. Nonetheless, a

serious study of ethics should disabuse the student of the notion that ethics is therefore

somehow arbitrary, that one ethical opinion is just as good as another.

Certainly we can note without much

trouble at all that questions of fact

may play an important role in the

formation of ethical judgments. Whether or not a given course of action will or will not

harm people is a question of fact; and, in a mixed case, whether the benefit will outweigh

the harm is also a question of fact. Such factual questions may not be determinative of

our ethical assessments, but they frequently, if not always, play a substantive role in the

formation of our ethical conclusions.

In short, you can’t be serious about ethics and ignore the realities of the world. Ethical

decision-making requires a serious investigation of facts and potential consequences as

much as it requires an understanding of ethical principles.

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In short, you can’t be serious about ethics and ignore the realities of the world.

“But how can it be,” an earnest critic might ask, “ that two different people might both

have ethics Ph.D.s, yet they may disagree strongly about what is or is not the right thing

to do in a given situation? Doesn’t this show that there is an arbitrariness to ethics, that it

is not like physics or chemistry or -- let us say it -- rocket science?”

First, the observation is true, but the conclusion is unwarranted. Yes, different people

well-schooled in ethics may have disagreements about particular cases. Ethics is not like

the settled sciences (let us acknowledge that there is often much disagreement at the

boundaries and/or frontiers of all the sciences); but that is not to say that it is, therefore,

somehow arbitrary or subjective.

Consider how the best run corporation might set out to do the best job of making an

important business decision. Experts should be consulted, facts should be gathered,

scenarios sketched out, and principles applied. But, as we know, there are never enough

facts, scenarios aren’t guaranteed, and principles have been known to conflict. Experts

frequently disagree. Does this mean that business decisions, then, are necessarily

arbitrary, not the products of reason? Not at all. It simply shows that business decisions,

like ethical decisions, are made in the muck and the mire of the real world and everyday

experience. They aren’t pristine controlled experiments conducted in the luxury of a

laboratory setting. They may not be ‘science’, but they aren’t shooting from the hip

either.

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fft: One business partner thinks that the majority of the marketing budget should be spent on maintaining contact and retaining past customers. The other thinks most of that money should be spent on attracting new customers. Is this a disagreement of principle or of fact?

The study of business ethics is a study of how the norms, rules, and guidelines that may be familiar to us in our personal or non-business activities also have application in our professional and corporate conduct.

Business Ethics

We come now to the topic of business ethics. Does this have to do with some special

brand of ethics that is or should be practiced by people who are in business? Are there

special ethical rules for the businessperson, companies, and corporations? In general the

answer to such questions is ‘no’, although there is a qualified sense in which an

affirmative response is called for.

Rather than being a special kind of

ethics, business ethics is simply the

application of general ethical

approaches and principles within the context of particular business concerns and

situations. The study of business ethics is a study of how the norms, rules, and guidelines

that may be familiar to us in our personal or non-business activities also have application

in our professional and corporate conduct.

The only sense in which business ethics might be said to be a special kind of ethics, or to

involve special kinds of ethical rules, is that an ethical inquiry into particular business

contexts might lead to the generation of special codes or guidelines for activities within

those contexts. Many organizations – both commercial and otherwise -- draw up their

own set of ethical guidelines for members and employees. It is common, for example, for

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In the heat of a competitive business or professional environment it is very easy simply to lose sight of – or never see at all – the fact that one’s actions and decisions may have ethical implications…

corporations and for government agencies to have ethics rules that prohibit receiving

gifts, or gifts above a certain value, from entities with whom they interact in a

professional capacity. Rules such as these do not conflict with general ethical principles;

indeed they may be derived from them. They are special or specialized in the sense that

they only have application to persons in those positions.

But if business ethics is simply the applications of general ethical principles and

considerations, “Why,” it might reasonably be asked, “is there a need for studies called

‘business ethics’ at all?” We’ll consider three responses.

(i) One of the frequently expressed reasons for engaging in the study of ethics as applied

to business is that such a study often reveals ethical dimensions to situations and

behaviors that had previously simply not been realized. In the heat of a competitive

business or professional environment it is very easy simply to lose sight of – or never see

at all – the fact that one’s actions and decisions may have ethical implications,

implications that one would not knowingly have ignored. “I never thought of it that way”

is a common response when it is pointed out that a particular business decision may, from

an ethical point of view, be unacceptable.1

In

recent decades more than one international company has been brought up short by both 1 Of course “I don’t care” might be another frequently given response to such an observation; but that goes to other issues.

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stockholders and customers alike who objected to the fact that these organizations had

outsourced tasks to others who thought nothing of engaging in the exploitation of

underage workers and others. No one intended that this would be the case. For the most

part these facts weren’t even factored in to the decision making process.

To note this, though, is in no way to single out business as a particularly ethically

insensitive field of endeavor. The same could be said of a variety of other pursuits.

Indeed, one of the phenomena that gave rise to the now fully-developed field of medical

ethics was the growing awareness that medical decisions, often only recently made

possible by new technology (think of life-prolonging support systems, egg

transplantation, in vitro fertilization, genetic therapy, etc.), were being made with little or

no consideration to the complex ethical issues they involved. Not because bad people

were making the decisions, but, more mundanely, simply because no one thought about

it.

There are all kinds of good goals – prolonging life, discovering scientific truth, becoming

more efficient, and making a profit, to name just a few – and a sharp well-intentioned

focus on them can be such as to sometimes blind practitioners to the ethical implications

of what is being done. It is hoped that a dose of ethical studies, itself focused on the

activities involved, can serve as an antidote to this myopia.

(ii) Another reason for studying ethics in the business context is to give the lie to the

often-voiced view that there is simply no place for ethics in business because ethical

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The view that ethics and business are inherently incompatible also rests on a mistaken conception of business…

considerations and business considerations are inherently in conflict.2 We might call the

proponent of such a viewpoint a business cynic.

While I suspect that this viewpoint is more often expressed as an attempt to justify a

particular instance or type of behavior than as a reasoned belief, it deserves to be dealt

with nonetheless. It rests on mistaken notions about both ethics and business.

The mistaken conception of ethics could be summed up in the view that “ethics hurts.” It

is the belief that if an action is ethical it must somehow be contrary to one’s self-interest.

This, as we shall see in subsequent chapters, is a view that lacks foundation.

The view that ethics and business are inherently incompatible also rests on a mistaken

conception of business, and that deserves to be addressed here. Usually this mistaken

notion is reflected in some extreme belief about profit and might be expressed by the

suggestion that, of necessity, to be profitable a business must act unethically.

But to say that unethical

behavior is necessary to

achieve profitability is to

make a claim about the way the world is. It wants proof, and proof, it would seem, is

going to be hard to come by. Look at all the profitable businesses there are. Are we to

say that they all behave unethically? Certainly some have, but all? Moreover, even if we

2 Note that this is not necessarily the same as saying “I don’t care” about ethical considerations. The latter expresses an attitude and a certain kind of character, whereas the view that business and ethics inherently conflict may represent an intellectual belief.

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were to stipulate that there is not even one saintly company, that all have been unethical

at one time or another, could the business cynic also show that those ethical lapses were

the key to profitability? Unlikely, to say the least.

Now if the business cynic is seeking to make the point that a business would have to act

unethically if it were to achieve maximum profitability, then, again, he would have to

make a factual argument to support that case. However we are to define the term

maximum profitability, the argument would at least have to show that, for every

company, at some point the only way to greater profit would be to engage in some kind

of unethical activity. It is hard to imagine how such an argument would go unless it were

buttressed by unreasonable and unproven assumptions about the way the world works.

Besides, it is certainly not true that maximum profitability is the goal of every business

enterprise. Of the many companies that do have mission statements that include a

reference to profit, the term is frequently modified by qualifiers like ‘decent’ and ‘fair’,

and the achievement of profit is frequently constrained by goals that relate to such things

as fair dealing, integrity, and good corporate citizenship.

Finally, we note that even if the relationship between ethical behavior and profit seeking

could be shown to be problematic, that would have to do with just one aspect of ethical

considerations in the business environment. While every business may seek to make a

profit, in large organizations very few persons are directly or functionally involved with

bottom-line decisions. Ideally it may be true that the performance of each division,

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… at work in our organizations and in the marketplace we may find ourselves on ethically unfamiliar territory…

department, section, etc. has a direct and discernible effect on a company’s earnings; but

the ethical issues encountered by many individuals – issues relating to matters like

harassment, corporate ladder climbing, favoritism, covering up, etc. – are seldom framed

in terms of profit and loss.

(iii) Finally, there is the straightforward answer that the study of business ethics is needed

because, all too often, the attempts to practice ethics in the course of conducting business

have not been very good.

This is not the same as the consideration above where it was noted that frequently the

ethical dimension of a given business situation may often be overlooked. Here we are

saying that even when ethical considerations are meant to be given their due, frequently

the resulting actions or decisions are short of being satisfactory. That this should be so is

not adequately explained simply by suggesting that the people who make the decisions

are bad, motivated only by self-interest, etc.

I refer back to the comments made at the

beginning of this chapter. Most of us are

not ethical naturals, myself included.

Whether innate or acquired we may generally have the disposition to do what is right, and

we’ve probably had enough moral training that we have little doubt as to what we ought

to do in everyday situations. But at work in our organizations and in the marketplace we

may find ourselves on ethically unfamiliar territory. We may find ourselves feeling

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opposite loyalties, sensing conflicting obligations, and wondering where our duties lie.

We’ve moved up to a new level, so to speak; the course we have to play is a little

tougher. Some more lessons and some more training could help us to negotiate it a little

better. That’s where the study of business ethics comes in.

Chapter I

Wrap-up Questions* indicates the correct answer

1. With a limited budget you are trying to make the most cost-effective decision for advertising an upscale home appliance. Your choice is between the Herald and the News. The Herald has larger circulation and reaches a higher-income demographic. Most of the Herald is bought at newsstands and other locations. On the other hand, the News is delivered to more homes, and it has a longer “table life” (i.e., it stays in the home longer). It costs 13% more to advertise in the Herald.

(a) Having more facts would likely help in the decision-making process.(b) If the facts were quite different, the decision would probably be different.(c) Even if no more facts were available, the decision won’t be arbitrary.(d) All of the above*(e) None of the above

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fft: “In sports like hockey and football you can do things to your opponent that are completely within the rules but that would be considered assault in the everyday world. It’s the same in business. The rules from home don’t apply. There aren’t any rules. It’s a jungle. Deal with it.”

What do you think?

2. You must implement serious cost savings, but you also want to do the right thing. One of the alternatives available to you is to reduce wages across the board by cutting back on hours throughout the workforce. Another alternative is to achieve the same dollar savings by laying some people off. You know that 84% of your workforce are members of two-income families. You also know that the wages you pay are 8% above the median for comparable jobs. There is a general economic downturn in the region, and unemployment is high.

(a) Having more facts would likely help in the decision-making process.(b) If the facts were quite different, the decision would probably be different.(c) Even if no more facts were available, the decision won’t be arbitrary.(d) All of the above*(e) None of the above

3. Josh thinks it is unfair that a new employee gets the same amount of vacation time as does an “old timer.” “It’s not fair,” he says, “for everyone to receive the same amount of benefits when they haven’t put in the same amount of work.” Megan, on the other hand, thinks it is fair as long as everyone is treated equally. “We all get the same vacation time; we’re all treated the same. It’s fair.”

(a) Josh and Megan have a disagreement about the facts.(b) Josh and Megan are using “fair” in different ways.*(c) Josh and Megan are both being arbitrary.(d) All of the above (e) None of the above

4. Which is correct?

(a) Through experience and training, a person can become better at business, but not at ethics.

(b) Experience and training can’t help to make a person better at business, but they can help someone become better at ethics.

(c) Experience and training can’t help to make a person better at business or ethics.(d) Through experience and training a person can become better both at business and

at ethics.*

5. Which is correct?

(a) To make a profit, somewhere along the line you must be unethical.(b) If A makes more profit than B, then A must be more unethical than B.(c) Every company wants to make as much as possible.(d) All of the above.(e) None of the above.*

6. Which is correct?

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(a) It’s ok to cheat in school, because school is competitive and the stakes are high.(b) It’s ok to cheat in sports, because sports are competitive and the stakes are high.(c) It’s ok to cheat in business, because business is competitive and the stakes are

high.(d) All of the above.(e) None of the above.*

Chapter II

Warm-up Questions

1. “When people have disagreements about ethical issues, it’s always because they have different values.”

agree disagree

2. Which, if any, on the following list are things that you value?

Sincerity Simplicity DiversityHonesty Efficiency SolitudeControl Order StatusFairness Relationships Discipline

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3. Pick one from the list above, and for each of the others try to determine if you value them more than that one, less, or about the same.

4. “When values conflict, there can be no basis for resolving the conflict.”agree disagree

5. Which of the following do you believe to be correct about the Golden Rule? (No, not the rule that “the guy with the gold makes the rules.”)

(a) If everyone lived by the Golden Rule, there would be no conflicts.(b) If no one lived by the Golden Rule, there would be conflict all the time.(c) Some people practice the Golden Rule, others don’t. Therefore, sometimes

there’s conflict and sometimes there’s not.(d) The Golden Rule has nothing to do with conflict.(e) None of the above.

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Chapter II

Values and Principles

Much if not most of the talk about ethics is couched in terms of values and principles.

We have all heard it said of people alleged to be grossly unethical that ‘they have no

values’ or ‘they have no principles.’ Commonly, when parties have a disagreement over

29

a matter that is related to ethics, it is said that they have different values or that they are

guided by different principles.

The language of values and principles presents one of those cases where the terminology

is somewhat hazy. In everyday parlance, the terms are often used interchangeably and/or

in ways that may overlap. Again we note that this does not generally present a problem.

As long as there is no impediment to communication -- and usually context makes the

matters clear -- it is of little consequence that the terms are used without precise meaning.

In the sections that follow values and principles will be used in a manner that is

consistent with their central meanings and in a way that would not allow for them to be

interchangeable. The purpose of this is so that it might be made clear what relationships

hold between certain concepts, regardless of how they are labeled. The aim of the

discussion is to gain a better understanding of how moral rules and judgments come to be

formed, not to advocate a special use of terminology.

Values

To value something is to ‘hold it dear’. Things that we value are things that we seek out

and attempt to maintain. Our values – the things that we value – may be objects,

qualities, relationships, and states of affairs. For example, our values might include,

respectively, wildlife, beauty, friendship, and justice. Not all values need be moral

values.

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Something that has intrinsic value is something that is valued for itself. It is an end in itself.

Our values are revealed in our actions. What is it that we seek? What sorts of situations

and relationships do we strive to create and maintain? In non-ethical contexts our values

may often be referred to as priorities. Thus, when it is said that an organization’s

priorities are revealed in its budget, that is another way of saying that we can discern its

values by seeing how its money is spent and where its investments are made.

Values are sometimes characterized as either intrinsic or instrumental. Something that

has intrinsic value is something that is valued for itself. It is an end in itself.

Instrumental value, on the other hand, is the value something has because it is useful in

achieving something. A thing has instrumental

value because it is a means to an end. Tools like

hammers and chisels have instrumental value.

Their value resides in the fact that they are useful.

Some have said that all human beings have intrinsic value and that, therefore, none of

them should be treated as if they were of instrumental value only. In the 1960s this

viewpoint was expressed in bumper stickers that said “Love people, use things.”

In recent years much has been made of so-called family values. Family values might

include such things as respect for parental authority, loyalty to the family unit, and doing

things together. A full list would be considerably more extensive, and, different

proponents of family values would no doubt each have slightly different lists. Many of

these values might be considered instrumental values, their value consisting in the fact

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…what may be of instrumental value in one society or person’s scale of values, may be of intrinsic value for another…

that they are a means to the end of maintaining family units. The family itself, however,

might be held to have intrinsic value, to be valuable in its own right.

Alternatively, it could be held that the family unit itself is not intrinsically valuable, but

that the value of intact families is that they contribute to overall social stability. Thus the

preservation of the family, in this view, would be seen as instrumentally valuable to the

achievement of some greater social end.

It is not the point here to conclude whether families are of intrinsic or instrumental value.

Rather it is simply to show that what may be of instrumental value in one society or

person’s scale of values, may be of intrinsic value for another.

Individuals, cultures, organizations, and businesses

will generally have many values. Sometimes these

values may conflict with each other when it comes

to the matter of implementation. This does not

necessarily mean the values are contradictory or opposite. One can love both freedom

and order. These are not inherently contradictory. A free society can freely choose to

organize itself in an orderly manner. But there can be times when the two come into

conflict.

An organization may value both efficiency of operations and the enhancement of

employee creativity. Both might be perceived as having instrumental value toward the

32

achievement of profit. Certainly there may be occasions when the attempt to implement

these values would result in a conflict. In order to resolve the conflict one value would

have to be subordinated to the other, resulting in a ranking of values. ‘Values

clarification’ exercises involve the posing of conflicting-value situations, and can yield

sometimes surprising results showing individuals or groups that – based on the choices

they make – their hierarchy of values may be different than they had initially thought.

It would be a mistake to give the impression that the set of values held by an individual or

an organization either is or ought to be somehow immutable and not subject to change.

Those things that have instrumental value may be held in higher or lower esteem in

different situations depending on their ability in that situation to help bring about a

desired end.

In the organization where efficiency and employee creativity are valued, they might both

be valued because they are perceived as helpful toward bringing about an ultimate result

of profitability. In this scheme of things, profitability is the higher value. Under one

proposal where the values come into conflict, a cost-benefit analysis might show that the

cost of the resulting loss of efficiency would stand to be out-weighed by the probable

bottom-line benefit of enhanced creativity. Yet, in the case of a different proposal, an

opposite result might be predicted. In one case one value would prevail; in another the

other one would. This would show that neither value had an inherent ranking over the

other, but that their ‘standing’ could only be judged in the context of a particular set of

circumstances.

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…for both individuals and organizations values are an important component of identity…

There is no question that one’s hierarchy of values may change over time. Typically, as

the years go by freedom may take a back seat to stability, autonomy may defer to

security. This happens in individuals and it happens in organizations. The values that

drove a young start-up enterprise are quite likely to have changed as organizational

maturity sets in. Yet for both individuals and organizations values are an important

component of identity. Unless certain core values are retained there is an important sense

in which neither the person nor the company can be said to be the same.

It is a matter of on-going debate whether values can be taught. Clearly, one can acquire a

good deal of ‘head knowledge’ about the values of a group, a company, or a culture

without adopting the values as one’s own. Knowing about values is not the same as

having them. Yet we have to account for the fact that people do come to have values that

at one time or another they did not have. Certainly training, albeit not necessarily formal,

has something to do with this. Positive and negative feedback have a role, as do the three

best forms of teaching (by example, by example, and by example…). There is truth to

the adage that values are more caught than taught.

Principles

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fft: Do you value the same things now that you did ten, twenty, thirty years ago? If not, what has changed? Consider the same question about our country.

…from the “Always be truthful” principle that implements the value of honesty, we might also derive more particular rules that would prohibit us from misleading anyone – even if no untruths are involved

Principles are the fundamental rules that implement our values. Thus if honesty is the

value in question, its implementing principle could be stated as “Always be truthful” or in

its negative equivalent, “Never be untruthful.”

Principles are fundamental in the sense that other rules are derivable from them, but they

are not themselves derived from any other rule. Other, more particular rules, for

example, could be derived from “Always be truthful.” “Do not cheat” might be said to be

derivable from the general principle to be truthful; and “Never claim the work of another

as your own” might, in turn, be derived from the “Do not cheat” rule. Similarly, from the

“Always be truthful” principle that implements the value of honesty, we might also

derive more particular rules that would prohibit us from misleading anyone – even if no

untruths are involved – as we might also generate rules regarding promise keeping. All

such derivative rules could be traced back to the general principle to tell the truth and its

grounding value honesty. But the

general principle itself may not have

been derived from some other rule.3

Principles are generally formulated as rules or imperatives (commands), ‘Do this’, ‘Don’t

do that’, and it is a feature of them that they are stated as universals. That is, they are not

addressed only to certain persons, they are meant for everyone.4 Moreover principles are

not held to be contingent upon any set of circumstances (‘Tell the truth in situations

3 Of course there may be systems of values and principles in which the principle of truth-telling is indeed derived from some other rule. See the following remarks regarding the ‘Golden Rule’.4 Needless to say, perhaps, but if one did not adhere to the value that grounded the principle, one would not likely feel bound by it.

35

where it will not cost you), nor are they viewed as strategies for bringing about certain

results (‘If you want to be well thought of, tell the truth’). They are without qualification.

Just as has been observed with values, though, it can pretty quickly be seen that

principles or the rules generated from them can also conflict in certain situations. When

there is such conflict, then it will be necessary to rank one over the other. For example:

loyalty to our friends and our organizations – including our companies – are important

values and they may result in guiding rules of behavior that admonish us to ‘fall in line’

when the organization is challenged or questioned, and to protect our friends and not to

give them up easily. Yet we may also live by rules and principles that would have us

minimize harm, obey the law, and be truth tellers. Now if we found ourselves in a

position that many people were in during the past decade – where we knew that our

company, perhaps even our friends, were engaged in deceptions that were both illegal

and that would probably cause harm to innocent persons – then we would have to make a

decision as to what, if anything, we were going to do about it. And that decision would

involve ranking our principles and values as to which we thought was more important.

It is tempting to think that there might be just one overarching ethical principle such that

conflicts might never arise. This, however, does not seem to be the case. Certainly one

of the most frequently suggested candidates for an ultimate ethical principle has been

what is commonly called the Golden Rule or one of its various formulations:

Do unto others as you would have others do unto you.

36

Treat people as you would want to be treated.

Do not do things to other people that you would not want done to yourself.

In one way or another this principle has appeared in major religions and ethical systems

over thousands of years. It is not clear, however, that the Golden Rule in any of its

formulations can provide us with a conflict-free guideline for making ethical decisions.

Frequently we find ourselves in situations where individuals or groups may have

competing interests and we have to make a decision between them. When resources are

scarce, conflicts arise. Some people have to be laid off in order to keep a company viable

so that others might benefit. There are more qualified candidates than there are job

openings. Competing suppliers both have an equally meritorious claim for your order,

but only one can be selected.

Can the Golden Rule help us in such situations? Some would say ‘yes’, as long as

everyone is treated fairly and judged or selected according to the same standards, then

your action will be ethical, because that’s the way you would want to be treated, isn’t it?

Maybe. Perhaps, though, some of us would want to be treated preferentially. If we are to

37

…one of the most frequently suggested candidates for an ultimate ethical principle has been what is commonly called the Golden Rule…

fft: What value, or values, does the Golden Rule implement?

Because we can have sincere differences as to how we would want to be treated, we can have sincere differences as to how we think others should be treated.

treat others as we would want to be treated, then should we introduce those preferences

into the process?

There are those who say that a rational person would prefer to be treated according to

principles of justice, so therefore, it would follow that others should be treated according

to principles of justice. But this is to prejudice the case. Some of us would rather be

treated with mercy than justice, especially if we are honest about what we really deserve.

Is this irrational? It doesn’t seem to be. And, if it isn’t, doesn’t it follow according to the

Golden Rule that we should treat others mercifully more than justly?

The Golden Rule is an ethical

principle that enjoins us to treat

others in the same manner that we

would prefer to be treated. Certainly it is generally a good rule to follow; but attempting

to follow it does not mean that we can always avoid conflicting opinions. Because we

can have sincere differences as to how we would want to be treated, we can have sincere

differences as to how we think others should be treated.

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fft: An older worker with considerable seniority thinks that last-hired-first-fired is an equitable principle to apply during a round of layoffs; whereas a young new-hire believes that performance and potential should be the principle for retention. Can the Golden Rule be helpful in devising an ethically sound policy?

…disagreement about the right course of action, what ought or ought not to be done, can occur among people who share the same values and principles.

Values, Principles, and Ethical Disagreement

Values, Principles, and Ethical Disagreements

It should be clear by now that disagreement about the right course of action, what ought

or ought not to be done, can occur among people who share the same values and

principles. There may be sincere differences of opinion as to how the principle(s) in

question ought to be applied; or there may be differences as to which among competing

values is the higher or more important one.

Not only can ethical differences arise from

different interpretations or applications of

the same principles, contrary ethical

conclusions can also result from different

assessments of the empirical facts.

We are used to this in the day-to-day process of making business decisions. There’s

never enough information. And seldom is there unanimity in the assessments of the

information we do have.

‘How will the market react to this?’

‘Is this ad campaign too edgy for our constituency?’

‘Does our competition have the ability to meet this pricing?’

39

‘Can this supplier continue to meet our needs?’

We may have honest disagreements about the correct answers to questions such as these,

and our disagreements may lead to contrary conclusions and recommendations. But

these differences are not traceable to differences of (business) principles. The differences

stem from our dissimilar assessments of factual situations.

Many of our ethical quandaries and disagreements have the same character. They often

don’t come about because of unclarity or disagreements about our values and/or

principles, they arise because we are unsure or have differences of opinion about the facts

of the case.

40

fft: Some people believe that the use of so-called ‘recreational drugs’ would be morally wrong even if it were legal. Others disagree, and believe that there would be nothing morally wrong about using such drugs if they were made legal. Do you think these disagreements arise from different moral values, or from different assessments of the facts, or both?

Taste, Manners, and Morals

It has been noted that not all values are moral values. Some people value solitude, others

do not. It is a matter of personal preference, more a question of taste than morality. The

same can be said of principles. ‘Buy low and sell high’ may be an excellent principle to

follow; but no one would be inclined to characterize it as a moral principle. It does not

present us with a moral duty. To willingly and intentionally violate this principle might

be foolish, but it would not be morally wrong.5

Conversely we can think of moral principles whose application could also lead to norms

of behavior that would have more to do with custom and manners than with issues of

ethics and morality. Presumably none of us wants to be treated in a demanding,

offensive, and boorish way. According to the Golden Rule, then, we ought not to treat

others in such a fashion. But if we were to do so our behavior would not, by most

accounts, be considered immoral or unethical. It would just be bad manners. Consider

the telemarketing practice of cold calling at and around the dinner hour. No one, we

think, wants to be the recipients of such calls. So what about the practice of making such

calls? It would seem to violate the Golden Rule. Is it immoral? That sounds a bit

extreme, however else we might want to characterize the activity.

5 OK, OK. One can imagine an extreme religion-like form of materialism in which the willful violation of the buy-low-sell-high maxim would have the status of a sin or a moral wrong; but this reveals more about the capacity of our imagination than it does about the moral matters of the real world.

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Is there a way to distinguish ethical principals and values from those that are merely

matters of personal preference and/or cultural norms? Some have suggested that moral

values are those that are intrinsic values, whereas non-moral ones are those that are

instrumental. But this proposal seems inadequate; for, as has been noted earlier, a value

that is only of instrumental worth for one person might be an intrinsic value for someone

else. Orderliness, some persons may believe, is valuable in and of itself, and not because

of anything it may be a means to.

Another approach along this line has been to suggest that, actually, there is only one

intrinsic value and that is pleasure. All other values, it is said, are instrumental; they are

valuable only because their realization produces pleasure. If moral values are intrinsic, it

would follow then that the ultimate moral principle is to maximize pleasure. Its corollary

would be to minimize pain.

The most common objection to this approach is that it, too, can lead to conflicting

judgments inasmuch as there may be so many varying opinions as to what constitutes or

produces pleasure. Moreover, most people would be reluctant to grant any moral status

whatsoever to the pleasure that some deviant might experience from the suffering of

others.

From a practical point of view it may suffice to acknowledge that issues of taste, cultural

acceptance, manners, and morality form a continuum. We may not have theoretical

42

agreement on where precisely to draw the lines between the various segments, but that is

of little consequence if, for the vast majority of the cases, we know where we are.

We may find that there are times when we have failed to consider the moral implications

of what we do; but it is seldom the case that we can’t recognize them when they are

pointed out. Our problems seldom have to do with whether or not we can recognize that

a moral issue confronts us; they generally have to do with how we handle it.

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fft: The ‘Boy Scout Law’ requires a Scout to be

Trustworthy ____ Loyal ____ Helpful ____ Friendly ____ Courteous ____ Kind ____ Obedient ____ Cheerful ____ Thrifty ____ Brave ____ Clean ____ Reverent ____

Are some of these moral values and some of them non-moral values reflective only of manners or taste? Try ranking them – there are 12 – with the highest numbers being assigned to the ones that most clearly have to do with moral values.

Chapter II

Wrap-up Questions

1. A clothing retailer tells its salespeople to treat customers the way that they, the salespeople, would want to be treated. The company does this because they believe that it is good for business – customers will return more often, and they will tend to spend more.

(a) This proves that business and morality don’t conflict.(b) This is an example of a non-moral application of the Golden Rule.*(c) Company decisions are always driven by profit.(d) All of the above(e) None of the above

2. Connect the values with the company principles that are meant to implement those values.

Values Principles

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Fairness Always use the best ingredients available.

Reliability Always disclose any known material defects.

Honesty Only take orders that you can fill.

Quality Leads whose source cannot be traced will be handed out on a rotating basis.

3. If employee morale is important to a company for the reason that high morale leads to greater productivity, that would show that, in this case, employee morale is of

(a) instrumental value*(b) intrinsic value(c) both of the above(d) none of the above

4. Alan thinks that the company ad campaign is morally objectionable. All the ads feature attractive, younger people who are having a great time at some wonderful setting such as the beach or a ski resort. Alan believes this misleads consumers into thinking that if they use the product, then they too are going to be “beautiful people” who enjoy similar experiences. David, on the other hand, doesn’t think the ads are morally objectionable at all. He believes that they mislead no one and that no one thinks the product use would have that kind of effect on their lives.

(a) David and Alan have a disagreement about whether or not something is morally objectionable, hence they must have different values.

(b) David and Alan disagree about whether or not the ad campaign is morally objectionable, but their disagreement is not based on different values.*

(c) A disagreement about what is or isn’t morally objectionable can only occur between people who share the same values.

(d) All of the above(e) None of the above

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5. Which is correct?

(a) A company’s values may change, but an individual’s values will remain constant.(b) A company’s values may change, and so may those of an individual.*(c) A company’s values won’t change, but those of an individual may change.(d) A company’s values won’t change, and neither will those of an individual.

6. There is a choice between awarding a bonus in one lump sum or spreading it out in payments over the year. Is it possible that different people, applying the Golden Rule, could come up with different decisions?

Yes* No

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Chapter III

Warm-up Questions

1. We all get our values and ideas of right and wrong from such different sources, there is little hope of ever having agreement on such matters.

agree disagree2.

(a) Our views about right and wrong are more strongly influenced by those who are close to us than by the larger culture. agree disagree

(b) Our views about right and wrong are more strongly influenced by the mass media than by those who are close to us. agree disagree

(c) Most people get their notions of right and wrong from the law. agree disagree

(d) Only a few people get their notions of right and wrong from religion. agree disagree

(e) In business matters, most people get their notions of right and wrong from company codes, rather than from the culture at large. agree disagree

3. Which do you think would be the correct choice to make the sentence true and complete?

“Religious people are (more likely than, less likely than, about as likely as) anyone else to see “shades of gray” when it comes to assessing moral issues.”

4. With which of the following do you agree the most?

(a) The moral values of our society have changed, and for the worse.(b) The moral values of our society have changed, and for the better.(c) The moral values of our society have change, but they are neither better nor

worse.(d) The moral values of our society haven’t changed, but behavior has.(e) None of the above

5. “Different cultures may have different values, but none is any better or worse than another.”

agree disagree

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[insert figure 2A]

Chapter III

Sources of Influence

We get our ethical and moral codes, our senses of what is right and wrong, from a variety

of disparate sources. Perhaps no two of us shares the exact same influences in the exact

same proportions. No wonder, then, that we from time to time have disagreements about

such matters, and that we have conflicts both between each other and within ourselves.

Conversely, because we share so many similar influences, it is not surprising that there is

so much agreement among us.

Before going on to examine some of the predominant influences on our ethical thinking it

is important that we keep in mind that, ultimately, our ethical decisions are our own. Of

course our thinking is influenced by sources from outside of us; none of us would be

expected to have invented our own version of morality out of whole cloth so to speak.

On the other hand, none of us is a moral automaton whose reactions and decisions are

wholly determined by the sources and amounts of influences to which we have been

exposed.

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Of course our thinking is influenced by sources from outside of us; but, ultimately, our ethical decisions are our own.

Culture

Much of what we learn of right and wrong, good and bad, we learn from those around us;

and, in the modern world, the extension of ‘who is around us’ has grown considerably. It

includes not only those in our towns and neighborhoods, but, perhaps even more so, those

who influence, and those who are seen and portrayed in the various mass media,

including, but not limited to, television, movies, popular music, and radio. Indeed, to

some, the character of popular culture and the pervasiveness of its influence through the

mass media is a matter of despair. Be that as it may, we simply acknowledge the fact of

it.

We are also influenced in enormous ways by smaller, closer sub-cultures. From street

gangs to chess clubs, our society is composed of a vast number of sub-cultures formed

around both vocations and avocations. These groups sometimes serve to reinforce the

mores and standards of the wider culture, and on other occasions they may challenge and

49

negate those standards.6 The influence of sub-cultures on the standards and attitudes of

individuals within their respective spheres may be enormous.

The normative influence – that is the influence as to what should and should not be done

– is frequently only implicit. Signs are not posted as to what is approved and what is not.

Movies and TV shows do not carry sub-titles saying ‘this behavior is ok’ and ‘this

behavior is bad’. But they are none the less powerful for that. What ‘everybody does’ is

something we are more likely to learn by observation and experience than by explicit

instruction. And what is learned in such fashion is not easily forgotten or set aside.

Of course much of what we learn from our culture(s) has little or nothing to do with

ethics; and is more a matter of taste, fashion, and manners. We learn what is cool, what

is chic, what kind of attire is acceptable at work, and what sort of landscaping our

neighbors expect us to maintain. None of these would count as moral issues. Our failure

to conform to such often-unwritten rules may cause life to be uncomfortable from time to

time, and it can cause our spouses to be displeased with us, but it doesn’t result in moral

condemnation. We can be non-conformists without being considered bad persons.

Some theorists have argued that moral standards are wholly determined by culture.

According to this view, what is fashionable, and what constitutes good and bad manners,

are determined by culture. Similarly, the theory goes, ethical right and wrong are also

determined by the culture. Moreover, adherents of this position have joined it with the

observation that cultures vary, and have then concluded that, just as may be the case with

6 In neither case is such influence necessarily either overt or intentional.

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fashion and manners, what is right or wrong, what is good or bad, what is just or unjust,

can only be determined relative to a particular cultural setting. It is said that we can’t, or

shouldn’t, ask in the abstract whether a given form of behavior is good or bad; we can

only ask whether it is considered good or bad in this or that culture.

Certainly there are appealing and persuasive aspects to this kind of relativism. It helps to

explain and point the way to resolution for the vexatious problems that face those who do

international business and have to deal with bribery and other business practices that are

considered acceptable in the home country and unacceptable in ours. It’s a lot more

comfortable to do ‘what the Romans do’ when in Rome, if you are satisfied that there is

no objective standard by which such behavior is to be judged.

The idea that moral standards are determined by and relative to particular cultures, while

tempting in certain circumstances, is not easily believed if you think about it. For

example, earlier I alluded to the fact that there are those in the United States who deplore

the immoral influence that the culture is imposing upon today’s youth (and adults for that

matter). If we really believed that moral standards were culturally relative, then that

complaint wouldn’t even make sense. How could the culture – the alleged determiner and

definer of moral standards – be accused of undermining moral standards? We don’t

have to agree with the moral views of the cultural critics, but we understand what they

are saying. They are saying that there are standards of right and wrong that are

independent of what is deemed acceptable by the culture. While we may disagree with

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We are influenced by the law generally not so much in the sense that we learn from it as in the sense that what we have learned is reinforced by it.

them as to what those standards are and where they come from, we certainly see what

point they are asserting.

The Law

Many of our notions of what is right and wrong and good and bad, are embodied in the

law. Generally, we are influenced by the law not so much in the sense that we learn right

and wrong from it, as in the sense that what we have already learned is reinforced by it.

The form of the law, insofar as it relates to behavior, is usually prohibitive. Certain kinds

of actions are prohibited; but few are encouraged.7 Doing unjustified physical harm,

7 Actually the tax laws provide some exceptions to this, where incentives are provided for undertaking various kinds of behavior. Generally this has little to do with ethically admirable behavior – buying a house or ‘banking’ acreage may have little in the way of inherent moral qualities. On the other hand giving to charity would seem a morally positive thing to do, and it is definitely encouraged by our tax system.

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fft: What do you think are the predominant cultural sources of influence on people’s values today? Rank them:

Family ____ School System ____ Friends ____ Church/Religion ____ Movies & TV ____ Government ____ Ethnic Community ____ Other ____

stealing, discriminating, and harassing are all activities that most would agree are

ethically wrong and the law also prohibits them.

Although the law comes from the culture, its standards are certainly not equivalent to

those that prevail in the culture at any given time. Sometimes the law lags behind

culturally accepted notions of right and wrong. Laws that are ‘antiquated’ in this way are

sometimes repealed and often simply not enforced. There are other times when the law

may represent what only a portion – not necessarily the majority – of the culture believes;

and occasionally this may cause serious and uncomfortable divisions. Differences of

moral beliefs on issues ranging from drugs to abortion show us that the law itself cannot

be a final arbiter of what is right and what is wrong. It can tell us what is legal and

illegal, but that will not settle the moral issue.

While the injunction to obey the law may stand as a general ethical principle, few, if any,

would hold it to be absolute. Laws, like the cultures whence they come, can embody

ethical falsehoods as well as truths. They can be off the mark in this regard, and

sometimes a higher ethical principle will require that they be disobeyed.

Conversely, though, there are also occasions when the law may have the effect of morally

informing and educating. Consider discrimination and harassment. Over the years since

laws prohibiting these behaviors have been enacted, one effect has been to enlighten and

sensitize persons to the fact that these sorts of things were wrong, that they would be

wrong even if there were no laws prohibiting them.

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Only a small portion of the law deals with behavior that, as it were, has an ethical

dimension. Much of it has to do with process, structures, and procedures. Moreover,

although there may be a general ethical rule that enjoins us to obey the law, the laws

themselves do not necessarily identify behavior that in itself is unethical.

In California, it is against the law to drive more than 25 mph in a school zone. Is it

immoral (apart from the general injunction to obey the law) to drive 26 mph in a school

zone? No. Illegal, yes; but not immoral. Suppose the limit were changed to 20 mph.

Then, with the new limit, it would be illegal to drive at 24 mph, although not with the

former (present day) one. But that wouldn’t change what was formerly a morally

acceptable act to something morally wrong.

In short, the law does not make what was morally acceptable into something that is now

morally wrong. Nor, conversely, does the fact that some behavior is permitted by the law

thereby confer upon it moral acceptability. Discrimination was morally wrong before the

law prohibited it.

Many parts of the law are related to what is ethically right and wrong; but the law does

not determine that. “Is it legal?” is a good question to ask of a policy or course of action,

and a negative answer should give one pause. There are occasions when disobedience to

a legal system may be the morally correct thing to do; but seldom do those situations

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have anything to do with business decisions or corporate policies. They are more

typically conditions that are met by a reformer or a protestor, not a CFO or a sales

manager.

Finally, a ‘yes’ answer to the “Is it legal?” question can never be taken as sufficient to

settle the ethical issue. “Yes, but is it right?” comes next.

Professional and Organizational Codes

Many companies, organizations, and professional societies have codes of ethics,

statements of values, or mission statements that include ethical directives. The ethical

exhortations and prohibitions contained within such codes and statements are not, of

course, the products of unique ethical values and principles. Rather they are derived from

general principles with which we are all probably familiar.

There are two chief values to professional and organizational codes. On the one hand,

they may call our attention to the fact that there is an ethical dimension to certain

practices or industry-specific situations that we might otherwise never have realized. For

example, the ethical code of the National Association of REALTORS ® prohibits certain

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fft: Except in certain specific contexts there is no law against lying? Why not? Should there be?

…an ethical code that specifically addresses the kinds of circumstances that are peculiar to our vocation can, quite frankly, sometimes save us the time and trouble of having to work through the issue ourselves.

kinds of advertising practices – such as not including the broker/company name in an ad

– on the grounds that they are deceptive. Yet the idea that an ad without the company

name might be deceptive probably would not even occur to the typical agent.

Secondly, an ethical code that specifically addresses the kinds of circumstances that are

peculiar to our vocation can, quite frankly, sometimes save us the time and trouble of

having to work through the issue ourselves. While I would be the last to advocate

unthinking adherence to codes and directives, it also needs to be acknowledged that there

is little value in ‘reinventing the wheel.’ At some points we do well, even in ethical

matters, to give due respect to the thoughts and conclusions of those who have gone

before us.

Frequently a company or professional

ethics code will draw lines and/or

impose requirements that may seem

unduly strict. Conflict of interest

prohibitions in the legal profession

occasionally seem to be taken to such extremes that one wonders if the ultimate logic of it

all would result in a firm being able to represent only one client. Generally, professional

codes tend to be overly cautious, and to prohibit actions that might simply give the

appearance or allow the potential of impropriety, even if no substantive wrongdoing is at

issue.

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Part of the purpose of an ethics code is to provide people with rules that are easily understood and such that, if they are followed, ethical problems will generally be avoided (not eliminated).

An organization’s ethical rules may sometimes seem arbitrary as well. A company might

have an ethics rule prohibiting receiving from a supplier any gift whose value exceeded

$50. One can understand the sense in which this might be considered arbitrary. The

number might just as well have been $55, or $45. This in turn may lead to creative

attempts to circumvent the rule (‘You could give me one $40 ticket to the same event on

two different occasions…’)

The fact that certain numbers or requirements in a code may be in some sense arbitrary is

not an indictment of the code. For the purpose of the code is not in itself to be an

ultimate arbiter of what is morally right and wrong. Part of the purpose of an ethics code

is to provide people with rules that are easily understood and such that, if they are

followed, ethical problems will generally be avoided (not eliminated). That, like laws

related to speed limits, requires picking numbers and setting limits that could just as well

have been slightly different.

Organizational and professional codes are equally likely to provide guidance and

directives on matters that have little or nothing to do with morality. Sometimes the

matters with which they deal (e.g. strictures having to do with advertising, or criticizing

other members of the group) have more to do with professional etiquette and ‘getting

along’ than they do with ethics. Indeed, some of the ‘getting along’ provisions of

professional codes have amounted to nothing more than price-fixing and anti-competitive

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agreements that have been determined to be contrary to the public interest and illegal if

not immoral.

As with the law, professional and organizational codes are a good place to look when an

action or policy is being assessed; and if the code prohibits it, or seems to prohibit it, that

is good reason to take pause. Even though, as has been noted, codes like these may

contain elements that have an arbitrariness about them, the codes themselves do not tend

to be arbitrary. They are generally the result of serious attempts to apply widely

recognized ethical principles to the particular situations that occur within the industry or

practice.

The other point to keep in mind when dealing with professional and organizational codes

is that one should be wary of falling into the same ethical fallacy that has been noted

about the law. Just because something isn’t prohibited by the code doesn’t mean it is

therefore an acceptable behavior or policy. We still have to ask, ‘Is it right?’

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fft: Does your company have an ethics code?

If ‘yes’, what parts would you say are reflective of general morality, what parts are industry-specific, and what, if any, are for ‘getting along’?

If ‘no’, would it be useful to have one? If you were writing it, what would it say?

Religion

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In this day and age, one has a certain hesitancy to bring the subject of religion into a

discussion like this. Many people have no religious attachments at all. Others do, but

theirs differ from others still. Which religion? Must we consider all religions, only

some, or only one? Even some religious people would say that religion is an entirely

private matter and shouldn’t be discussed at all.

On the other hand, it would be totally naïve to ignore the role that religion plays in the

ethical thinking of many, many people. In a business setting ethical decision-making is

quite likely to be a collaborative process. To be unaware of, or to choose to ignore, the

fact that religiously influenced ethics may be a critical component of one’s colleagues’ or

one’s constituency’s thinking is to approach the task with less than a full set of tools.

Much can be made of the differences between religions as well as the differences that

exist within the many groups. Frequently though, these differences do not manifest

themselves as differences on moral issues, but rather as quarrels about theological

matters, liturgy, ceremonies, observances, and even dress. Actually, on matters related to

central moral concepts such as honesty, justice, benevolence, and respect for life and

individuals there is probably more agreement than disagreement.

But where there are differences – be they about moral, theological, or even liturgical

matters – they are liable to be expressed strongly and resistant to argument and change.

Primarily this is because, for most religions, moral values and ethical directives have a

god-given status that makes them inviolable. A person whose moral beliefs are not so

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…it would be a mistake to think that all whose morality finds its source in religion are therefore people whose thinking is intransigent…

conceived is more disposed to think that his beliefs might have flaws and/or to think that

his values might be subject to change or reordering.

Having said that, let me be quick to attempt to avoid misinterpretation. I don’t in the

least mean to suggest that a person whose ethical values are not grounded in religion is,

therefore, liable to be inconsistent, relativistic, and ready to change his standards on the

slightest whim. Not at all. As have no doubt most of us, I have been privileged to know

persons of impeccable moral wisdom and integrity, steadfast in their principles

throughout circumstances and over time, who had no religious attachments whatsoever.

By the same token, it would be a mistake to think that all whose morality finds its source

in religion are therefore people whose thinking is intransigent, who see the world of

ethical choices as a simple matter of black and white, and who are insensitive to the

needs and nuances that underlie most of our moral dilemmas.

Indeed, some religion-based ethics have been at the far end of the spectrum from rigid,

inflexible codes of behavior. Consider The Rev. Joseph Fletcher, who may have been the

most misunderstood Christian ethicist of

the twentieth century. Fletcher was the

chief proponent for a position known as

situation ethics. He was as far removed from the stereotyped rigid religious ideologue as

one can imagine. Yet neither was he the unprincipled relativist so often portrayed by

critics of his viewpoint. Fletcher argued that the single guiding value of the ethics of

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Jesus was compassion; and that the application of compassion often called for different

judgments and different actions depending on the particulars of given situations.

Certainly, this value did not call for a rigid adherence to rules.

Religions, of course, are a part of our culture; and many of us have been influenced by

religious beliefs and ethical views in ways and to an extent that we may not even

imagine. If a proposed course of action seems to be at cross-purposes with a religiously-

based ethical concept, that, too, is a good reason to subject it to further consideration. For

the religious person, it may even be a conclusive reason for rejection.

Concluding Thoughts

It is not the purpose of this discussion to attempt to settle theoretical issues as to the

ultimate source of moral standards, how it is that they can become known, etc. Here we

simply want to acknowledge that most of us acquire our values and ethical beliefs from a

variety of sources. In many cases these overlap, and in some they conflict. The diagram

labeled Figure 1 attempts to represent this phenomenon to a certain degree; but it is

certainly not sufficiently complex to give a complete picture.

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fft: Has it been your experience that religious people are generally more ethical, less ethical, or about the same as the rest of us? What explains this?

Professional/Organizational

Codes

Cultural Norms Religion

Law = moral code

Figure 1

The reader is invited to make the diagram better, and to reflect on its implications as it

now stands. Are there some common standards that would call for all the circles to

overlap at some point? Is there, as is suggested by the present diagram, a portion of

morals that cannot be attributed to any of these sources? Does all of this show that ethics

are not objective? Be careful, though, for these are the kinds of questions that lead

people into philosophy.

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Chapter III

Wrap-up Questions

1.

(a) Sometimes sub-cultures will be opposed to the values of the larger culture.(b) Sometimes sub-cultures will be supportive of the values of the larger culture.(c) Both of the above.*(d) Neither of the above

2. The belief that society’s moral standards are on the decline presupposes that

(a) cultural attitudes are the determiner of right and wrong.(b) right and wrong are purely subjective, relative to each individual.(c) religion is no longer influenced by the law.(d) there are some standards of morality independent of prevailing cultural attitudes.*(e) all of the above(f) none of the above

3. Different companies are liable to have different codes regarding accepting gifts. Some prohibit receiving gifts altogether. Some set a dollar-value limit. Others only offer guidelines. The fact that there are these differences shows that company ethical codes have no basis in general morality.

True False*

4. Which of the following is true?

(a) Some laws have nothing to do with morality.*(b) If something is immoral, then it is also prohibited by law.(c) Usually, we learn moral right and wrong from the law.(d) All of the above(e) None of the above

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5. Even if people belong to different religions, you can count on the fact that they will hold the same beliefs about what is right and what is wrong, and that they will have no flexibility on those points.

True False

Chapter IV

Warm-up questions

1.“It is virtually impossible to predict the consequences of our actions.”agree disagree

2. Which of the following do you think is correct?

(a) Sometimes, even the best business decision will have a downside, but that doesn’t happen with ethical decisions.

(b) Sometimes, even the best business decision and the best ethical decision will have a downside.

(c) If anyone truly makes the best decision possible – whether a business decision or an ethical decision – there will be no downside.

(d) None of the above

3. “Last quarter more than 150 companies gave to relief efforts for disaster victims. Now, that may be nice for the victims; but no one should give any moral medals to the companies. Anytime a company does something, there’s always something in it for them. They always act out of self-interest.”

agree disagree

4. “Any company that wants ethical behavior from its employees should have a published set of rules to follow so that employees would never have any doubt about what is the right thing to do.”

agree disagree

5. Even though the law did not require it, Johnson & Johnson recalled the product Tylenol when it was learned that there had been disastrous cases of tampering. In order to know whether Johnson & Johnson had done the ethically right thing, we would need to know

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(a) the results of their action(b) their motives(c) whether what they did was required by moral rules(d) all of the above(e) none of the above

Chapter IV

Ethical Judgments

When we talk about making ethical judgments no one should get upset that we are being

judgmental or that we are setting ourselves up as somehow superior to others. If we are

to be able to talk about what we should and should not do, what is preferable and what is

to be avoided, then we are going to have to be able to make judgments. We need to be

able to evaluate behavior, especially our own, and to do so, we need to be able to apply

criteria that result in the making of a judgment. Let us not shrink from this task.

There are generally three different types of bases for evaluating actions as right or wrong,

good or bad. One basis for such evaluations is to look at the consequences of the action;

another basis for evaluation resides in looking to the agent, the person or entity who

chooses and initiates the action, and examining the motives or intentions involved; and,

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…good in the ethical sense can never be understood as simply meaning good for this company or that.

finally, another basis for evaluation consists in an attempt to isolate the qualities of the

act itself, independent of either the agent or the results.

Consequences/Results8

Consequentialist or results-oriented ethics maintains that the only ethically relevant

question to ask when we are seeking to know which among various alternatives we might

choose is, “What will the results be?” According to this view, it is the results of what we

do that make an action good or bad. “Never mind codes, and never mind what anyone

may think, the right thing to do is to do that which will produce the best results.”

What has just been stated is incomplete, though; for the adequacy of a results-oriented

ethic depends on a fuller explication of the concepts of results and good results. Without

such further consideration a results-oriented ethic becomes a straw man, easily dismissed.

Whether it was ever true that what was good for General Motors was good for America,

good in the ethical sense can never be understood as simply meaning good for this

company or that.

Those who locate the ethical quality of an act or policy in its consequences will address

three issues: (i) results for whom? (ii) what kind of results? (iii) what of the long term?

Whether or not a course of action is

the right thing to do doesn’t depend 8 The terms consequences and results will be used interchangeably in the discussion that follows.

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only on its consequences for a special group, a favored few. We must consider the results

for all parties who will be affected. A business decision may have consequences for a

variety of constituencies as it were. Many companies have recognized that decisions to

relocate facilities don’t just affect employees and shareholders. They may affect

community members, suppliers, local businesses, and public facilities to name just a few.

All such parties can be held to be stakeholders in the decision, and its effects on them are

relevant toward determining the decision’s ethical character.

Another issue to be addressed by those who focus on results is the kind of results that are

being considered. It is too easy, and mistaken, only to compute dollars and cents

outcomes. We have to ask more generally, albeit vaguely, ‘what is the potential for this

action to produce happiness or well-being, and, conversely, what is the likelihood that it

will cause pain (of any kind) or unhappiness?’

Finally, those who would test actions by their consequences also must look to the long-

term effects of what is done. It does not suffice to know that, in the short run, results will

be good and the well-being of all who are affected will be increased; we also have to

think about long-term consequences. There is neither an ethical nor a business award for

a decision that produces short-term profits, increased employment, and community

goodwill if its long-term results are groundwater pollution, wide-spread illness, and class-

action lawsuits.

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…those who would test actions by their consequences also must look to the long-term effects of what is done.

Not surprisingly, a number of objections have been raised to the position that the ethical

evaluation of actions should be based on their consequences. The objections are both

practical and theoretical.

A simple practical objection to the results-oriented view is that it is simply too hard to

apply. The objection might go something like this: ‘It’s hard enough to determine the

overall and long-term effects of an action after it has taken place, but it’s harder still –

frankly impossible – to know these things before we act. We want to do the right thing,

but how can we know what the right thing is if it takes a very comprehensive crystal ball

in order to make the assessment?”

A more theoretical objection to a consequence-based ethic is that it simply fails to take

into proper account other basic ethical notions like justice and loyalty. By saying that we

must take everyone who is affected into account, and by not allowing for anyone to have

‘special status’ it ignores the fact that some parties have, so to speak, moral claims on us.

We can sympathize with, even admire, the employer who says that the effects a decision

has on his employees are of more concern to him than the effects on others he doesn’t

even know.

There are counters to these objections, and counters to the counters, but to engage them

would be to go beyond our purpose. Let us simply conclude this section with two

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supportive observations about the view that ethical judgments should be based on

consequences.

The first is that evaluating on the basis of consequences is something we do all the time,

in business, in ethical contexts, and in everyday life. Of course there may be some

theoretical argument that we can’t know what the results of our behavior will be; but, as a

matter of fact, we often make such assessments, and more often than not we are right, or

at least right enough for the purposes at hand.

Secondly, we acknowledge that one of the attractive features of a results-oriented ethic is

that it allows us to consider and compare a number of alternatives. We can weigh

different options by their expected consequences, and we can come up with one

alternative being ‘more right’ than another, without having to get into simplistic

categorizations of either good or bad.

Intentions and Motives

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… one of the attractive features of a results-oriented ethic is that it allows us to consider and compare a number of alternatives…

fft: We frequently evaluate business decisions on the basis of their results. Is there any reason not to judge ethical decisions on the same basis?

A second proposal regarding ethical judgments is the view that our evaluations should

focus on the intentions of the agent – the one, individual or corporate – who initiates the

action. Advocates of focusing on intentions point out that once someone does something

the results are out of that person’s control; and, for that reason, they say, it is not

appropriate to base moral judgments on consequences. We can agree with that without

saying or suggesting that the world is sort of a random place where we have no idea what

the results of our activities would be.

We have noted in the previous section that the world isn’t random. Most things that we

do turn out to have roughly the effects that we intended. We couldn’t begin to know how

to behave, at the most rudimentary level, in a world that were otherwise. Still, and

especially when we are dealing with complex issues, events occasionally have a way of

getting away from us. “The best laid plans” can go awry; and it seems inappropriate that

ethical judgments should always be made on the basis of that which so often is beyond

our control.

Added to these observations is the related concern that was raised in the preceding

section, that frequently (theoretically, always) it is even harder either to anticipate or to

discover all the long-term results of what we do. The ripples on the pond, so to speak,

extend so far that they are beyond our observation. We can’t completely know who has

been affected by our acts, nor how they have been affected.

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in order to judge an action we need to look to the agent. What was he or she trying to accomplish, and why?

Thus, it is concluded, in order to judge an action we need to look to the agent. What was

he or she trying to accomplish, and why? Did the person act out of pure self-interest with

no regard to others, or was their behavior generously motivated, or was it somewhere in

between? These, it is said, are the relevant kinds of questions to ask, regardless of how

things actually turned out.

Even if we may agree that intention and

motive are the key, if not the only,

relevant factors in making ethical

judgments, there is still room for differing opinions as to which motives are the ‘right’

ones in this regard. One suggestion has been to use an intention-oriented version of the

results test suggested in the preceding chapter. From this perspective, the key to right

action would be that one acted with the intent to achieve results that would (net)

maximize the well being of all who are affected. This still puts emphasis on the

importance of results, but takes the agent ‘off the hook’ for that which is beyond his

control.

Others, who might be considered more rule-oriented, would contend that the relevant

issue has to do with what the agent had perceived to have been his duty or what it was

that he was supposed to do. Good intent, it might be said, does not simply consist in

trying to bring about good results. Good intent attaches to trying to do what moral duty

requires, and that is not, or not just, trying to bring about good results.

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Thus, it could be argued by someone who maintained that the Golden Rule is the supreme

moral principle; a person acts rightly if his or her intent is to implement the Golden Rule.

As long as the intent of the act is to treat others as you would be treated, it would be

contended, you have done the right thing.

Similarly, a person whose ethics derive from religious belief might say the same sort of

thing, only specify that the guiding intent of the action be to implement the moral rules or

commands generated by that particular religion. If one’s intention is to conform to the

moral duties imposed by one’s religion, then, according to this view, one acts rightly.

Certainly there is much about the views that focuse on intent that has appeal.

Nevertheless there are difficulties for these orientations as well. For one thing there is the

problem that what is apparently the same action can be the right thing to do at one time,

yet not so at another, depending, not on the circumstances, but on the motive of the agent.

This, one might complain, makes ethics somewhat difficult to teach, especially when so

much is taught by example.

There are theoretical objections as well. One has to do with the general inaccessibility of

other persons’ inner states. Seldom, if ever, it might be argued, do we really know what

someone intends or what their real motives are. But this would leave us, then, never or

hardly ever being able to make moral judgments about what is done. From this

perspective, an ethical view that is so inapplicable is not worthy of consideration.

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…if every action is self-interested, then what is the concept of self-interested to be contrasted with?

Finally, there are those who would argue that, at bottom, all of our motives are the same,

i.e. the furtherance of self-interest. From that, it would follow that all actions have the

same ethical quality, perhaps none whatsoever, if that quality is to be determined by

intention.

In response to those who claim that all actions are motivated by self-interest, it can be

countered that the claim is too broad. Some would say that it is so broad that it fails to

say anything at all. That is, if every action is self-interested, then what is the concept of

self-interested to be contrasted with? We used to think we knew what it meant to act out

of a concern for others and not to be motivated by self-interest (even if we didn’t see such

behavior very often); but this claim holds that we were mistaken about that. It asserts

that we never have, and never could, encounter an action that was not self-interested. It

says that all of our examples of not acting from self-interest were and are mistaken, even

the hypothetical ones.

To assert that all actions – not just a vast majority

of them – are motivated by self-interest is to strip

the concept of content. If it applies to everything,

it just as well applies to nothing; and we are left

simply having to introduce new concepts to mark the contrasts that we had heretofore

observed.

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fft: Comment on the following:

“I don’t care what people’s intentions are; I care about what they do.”

Rules and Principles

We have considered the results of actions and we have considered the intentions that

underlie actions, perhaps there is some way to consider actions themselves, abstracted

both from their results and from the agents.

One suggestion along this line has been to advocate that an action is a right action if it

conforms to or is subsumed under a set of moral rules. Simply put, if it conforms to the

rules, it is the right thing to do; if it conflicts with them, it is wrong. The simplicity and

straightforwardness of such a view is appealing, but, obviously, the debate begins when

we ask ‘which rules?’

Almost everyone has been exposed at an early age to a simple and straightforward set of

moral rules – ‘Don’t tell a lie,’ ‘Don’t steal,’ ‘Keep your promises,’ etc. Introducing

rules is an early form of moral teaching, as it is a means of establishing acceptable

behavior, both moral and non-moral. At some early point, ‘Wash your hands before

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The Golden Rule, for example, can be seen as a general moral principle that underlies a variety of specific moral rules.

dinner,’ and ‘Put away your toys,’ are likely to loom as large as the injunction to be

truthful.

One of the problems of simply identifying right action as being equivalent to according

to the rules is that we too frequently find ourselves in situations that are not specifically

addressed by the rules. We may not know how or if the rules apply. Such situations

may lead to the generation of more rules; but the only way that can come about is through

the application of the principle(s) from which the rule is derived.

The Golden Rule, for example, can be seen as a general moral principle that underlies a

variety of specific moral rules. Prohibitions against lying, stealing, promise-breaking,

etc. can be seen as derivable from the general rule that you ought not to treat people

in ways that you do not want to be treated.

Thus we might expand the view that

focuses on the relation of acts to particular

rules to a view that holds that an act is

right if it conforms to certain principles, namely, the principles that underlie the rules. A

version of this that is related to the Golden Rule is the notion that an act can be said to be

right only if you would want to see everyone behave that way. In other words, it can’t be

right for just you, but not everybody else.

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This is abstract; it is not a question of what someone’s intention is or was. If we want to

know if it was morally acceptable for someone to lie on a particular occasion, the

question would not be, ‘what was the person’s intention?’, nor would it be ‘what were the

overall results of having lied?’. Rather, we would have to ask ourselves if we find it

acceptable for everyone to lie.

“For everyone to lie on every occasion” is the more or less traditional way of stating this

view. A more relevant one, I believe, would be to phrase it as, “Would you find it

acceptable for everyone to lie in this type of situation [where you include the relevant

features of the situation]?”

This approach, stated in a more negative formulation, is a familiar line of moral

argument, i.e. the one where we ask, “What if everyone did that?” The point there, we all

know, is that if it would not be acceptable or desirable for everyone to act in such a

fashion, then it presumably wouldn’t be acceptable for a particular individual to act in

that way either.9

It is here that we begin to get a flavor of the basic moral precept that what applies to one

applies to all, and vice versa. No one has special status.

9 Here, though, we see the apparent weakness of describing actions in their more particular forms. “Of course it is morally wrong to pad your expense account. What if everyone did that? ” “Well,” the cynic (or realist) might reply, “as a matter of fact everyone does do that. The results are tolerable enough, so maybe it’s not so bad.” In this case the moralist may want to argue it is more relevant to describe the activity generally as a form of stealing which, presumably, no one could want everyone to do in all situations.

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Many of those who are inclined to focus on consequences find, nonetheless, that there are

practical reasons for basing ethical evaluations on the principles of actions, rather than

their actual results. While it may be acknowledged that results are frequently uncertain

and difficult to calculate in particular cases, it can still be said that we know in general

what sorts of consequences are liable to follow from various classes of actions.

We have good reason to think that, generally speaking, more overall harm than benefit

comes from dishonesty, deceitfulness, and the like. Hence, it is advocated, we may adopt

rules, and judge actions according to conformity with those rules, based on what in

general would be the results of the acts in question. Thus, from this perspective, we

could say of a particular case that it would be wrong to steal, even if we didn’t know

what the actual overall long-term consequences of stealing would be in that actual

situation.

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…we begin to get a flavor of the basic moral precept that what applies to one applies to all, and vice versa…

Looking at it this way, rules are viewed as ‘rules of thumb’. “Red sky in the morning,

sailor take warning.” “Pass on third down and long yardage.” “Buy the least expensive

house in a nice neighborhood.” They don’t always work, but, if followed, these rules will

generally produce the desired results. Moreover, even if a particular application doesn’t

yield the desired ends, to have followed the rule will have been to do the right thing. Just

as it has been said, “No one was ever fired for buying IBM”, a person who took this

position would say, ‘no one will be condemned for telling the truth’.

There are a number of attractive features to this approach. While concerned with results,

it still provides for us to have a framework of rules – ethical rules of thumb, if you will –

that relieve us from having to engage in the too-often hopeless task of trying to figure out

what all the effects of our particular decisions will be. Moreover, it is also a point of

view that allows us to account for the experiences that we have all had – in everyday life

as well as in ethical situations – where we just know the right thing was done, even

though things didn’t turn out the way they were supposed to.

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fft: We’ve all heard “Rules were made to be broken”. Just what does this mean? Can you give an example? Is it true in business? In ethics?

Conclusion

Rather than debating about which of the above approaches to ethical evaluation is the

right one, we might more profitably conclude that each has its place. Sometimes

focusing on results is the most appropriate approach. Sometimes it is looking to a

person’s intentions. And, sometimes, we will want to refer to rules and duties.

Despite the theoretical objections about our inability to know all relevant results, as a

matter of fact we do, everyday in all sorts of circumstances, make decisions based on our

estimates of what will happen. We couldn’t function in the world unless we did, and our

general success in getting along shows that the task is far from impossible.

It is important to recognize our ability to estimate and calculate results, not because we

need to do so in every ethical situation that confronts us, but because we need to do so in

some of them. Having rules to follow is also both useful and desirable. This is true in

ethics no less than in the world of practical experience. We don’t need to keep

reinventing the wheel. But sometimes the rules conflict; and sometimes we are not sure

how to interpret them. Sometimes, following them will be clearly at odds with what

would be morally preferable results. In such times we may have to prioritize, or to decide,

based on what we perceive results will be.

Finally, we note that there is a time and a place for looking at intentions and motives as

well. While most of the time intent and results go hand in hand and motive is clearly

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discernible in action, we still want to be able to distinguish the two in those special cases.

There is the well-meaning falsehood that may be intended to heal, not to harm; and there

is the well-intended act that may go awry. Conversely, and oddly enough, malevolent

motives can sometimes result in beneficial consequences. The law commonly seeks to

distinguish among motives, and so should we. We neither want to condemn the good-

hearted bungler who fails to bring about the good that he intends, nor do we want to

praise the scoundrel who would appear to be a saint.

Chapter IV

Wrap-up Questions

1. Although faced with severe business problems, the directors of the ABC Company voted to pay bonuses to its key executives. In part, this was done as an incentive to keep the executives from “jumping ship.” It was felt that it would be inadvisable to make the bonus decision public at this time, even though it was bound to be learned at a later date.

Shortly thereafter, the company won a major package of wage and benefit concessions from its employees. Employees felt this was preferable to going through what appeared to be an imminent bankruptcy.

Later, at the time of the S.E.C. filing, news of the bonuses produced a tremendous backlash. The employee groups reneged on their concessions, as having been obtained under false pretenses, a significant consumer boycott was mounted, and ABC stock plummeted.

(a) Directors did not pay sufficient attention to the long-term consequences of their action.

(b) Directors did not pay sufficient attention to the interests of all the stakeholders.(c) The directors may have meant to act in the best interests of the company.(d) There is no apparent reason to think that the directors acted out of self-interest.(e) All of the above*(f) None of the above

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2. “If we lay off 10% of our people now, it will certainly cause a great deal of hardship. The economy is down, and they are not likely to find other jobs. On the other hand, if we try to hang on as we are, and we keep hemorrhaging cash, we’re may have to let 20% go in the Spring. We could try cutting back on everyone’s hours, but I don’t think that can effect enough of a savings to matter.”

This illustrates the notion that

(a) There is always a right or wrong choice.(b) Motive is what counts.(c) We can always find a rule to show us what is the right thing to do.(d) Sometimes the best choice may be the “least worst” alternative.*

3. The awards program that Jordan devised was supposed to build incentive and camaraderie in the sales team. Instead, it resulted in resentment, divisiveness, and jealousy.

This is an example of a case where we might want to distinguish intentions from

(a) results*(b) rules(c) stakeholders(d) self-interest

4. “Regardless of the good consequences for consumers, Johnson & Johnson must have figured out a benefit to the company from its Tylenol decision. We know this, because we know that all actions – be they of a corporation or an individual – are based on self-interest.”

Can this viewpoint be proven? Yes No*

5. Mary Lynne, in procurement, found an incredible way to “beat the system” and to charge all sorts of personal purchases to the company in a manner that could never be traced. Her co-worker, Erik, was very disturbed by this, and sought to convince her not to continue with this. In the course of their discussion, he appealed to her by saying, “What if everyone did this?”

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In saying this, it was Erik’s intention to

(a) call Mary Lynne’s attention to the consequences of her behavior.(b) point out to her that many others might follow her example.(c) appeal to the notion that, if it would be bad for everyone to do something, it

wouldn’t be right for one person to do it.*(d) appeal to the notion that if one person shouldn’t do something, no one else should

do it.(e) All of the above(f) None of the above

Chapter V

Warm-up Questions

1. “We always want to avoid the philosophy that the ends can justify the means.”agree disagree

2. Which do you think is most correct?

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(a) A system can’t be justified if people receive unequal rewards and benefits.(b) A just system is one that will distribute benefits equally.(c) A policy is fair only if everyone is treated according to the rules.(d) All of the above(e) None of the above

3. Which do you think is most correct?

(a) Some companies treat everyone according to the rules, but the rules really aren’t fair.

(b) Some companies treat everyone according to the rules, and the rules are fair.(c) Some companies have fair rules, but they don’t treat everyone according to the

rules.(d) Some companies have unfair rules, and they don’t treat everyone according to the

rules.(e) All of the above(f) None of the above

4. Rationalizing behavior is the same as justifying it.agree disagree

4. “I know I shouldn’t have used the company credit card. I was desperate. I’ll never do it again.”

This is an example of

(a) justification(b) rationalization(c) excuse(d) all of the above(e) none of the above

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Chapter V

Justification, Rationalization and the Analysis of Moral Choices

We can see a variety of ethical concepts at work when we look at the process of

justification.10 When we are called upon to justify an action we are called upon to explain

it, to analyze why this action was chosen rather than some other. But what is asked for is

not an explanation in the causal sense. We are not, for example, being asked for a

psychological analysis. Rather, we are being asked to show why what was done is what

ought to have been done. We need to show why the choice was ethically preferable to

some alternative. The explanation that is asked for is a moral explanation.

10 It should be clear that we are here restricting our discussion to the notion of justification as it is used in ethical discourse. Of course there are all sorts of uses of justification in non-ethical contexts. We may be asked to justify a budget request or we might be asked to justify the selection of a particular supplier. The process is similar to the process of justification in ethical contexts, but not exactly the same.

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Justification and prima facie wrongdoing

Not every action requires justification. It would be odd to ask someone how he could

justify having done something that was plainly a good thing to do. This is because the

question of justification only arises when something seems to be amiss.

When it is said that something has a prima facie characteristic what is meant is that it

apparently has such a characteristic. In a legal context, to say that a plaintiff has a prima

facie case is to say that, on initial inspection at least, there seems to be something to it;

but it does not rule out the possibility that further analysis may call for the judgment to be

revised.

The idea of justifying a course of action in ethics is that what might appear prima facie to

be the wrong thing to do may, upon appropriate examination, be shown to be a right or

acceptable thing to have done. Because lying is generally wrong, any instance of lying

would appear to be prima facie a case of wrongdoing. However, a close examination of

some particular case might show that the lie helped to prevent great harm and hence it

was justified.

Implicit in the notion of justification is the idea that some moral rules may be more

important than others, or, to put it another way, that some values may be higher than

others. A person who values life above honesty would have no difficulty justifying lying

if doing so were necessary in order to save a life.

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Implicit in the notion of justification is the idea that some moral rules may be more important than others.

If a person believed that all moral rules had equal status, then nothing could ever justify

breaking any of them. Any violation would be equally wrong, and no one could

outweigh the other. Such a view would be extreme to say the least. A more likely one is

that which holds that some, but not all, rules are inviolable, and that only some values

cannot be subjected to any others.

The idea of justification shows that doing

the right thing doesn’t always involve

clear and easy choices. Sometimes our

alternatives are all flawed in one way or another. We choose the best (the least worst)

alternative available even though it may involve doing something that is prima facie

wrong; and we justify that choice by showing that any other alternative would have

involved even greater wrong. In this respect we once again see how much making ethical

decisions can be like making business decisions. Very seldom are we presented with a

perfect alternative. All of them may have a down side. Often we must settle for

choosing that which appears to be the least worst.

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fft: Can you recall a case of a business decision that had a definite business downside, but that was justified because of some greater business benefit that it produced?

Ends and Means

Earlier we referred to the idea of certain things being ends in themselves. Here we want

to focus on the concept of ends as results. To ask what our end is or was is to ask what

results we were trying to bring about, what it is that we are attempting to achieve.

Now all of us have heard at one time or another that ‘the ends don’t justify the means.’

Indeed, sometimes it is taken to be a kind of conclusive refutation of a point of view if it

can be shown or said that the view in question represents an ends-justify-the-means

philosophy. This position – the position that ends can never justify means – bears some

careful examination.

If the ends are the results, what are the means? The means refers to the method by which

the results are brought about. They are the activities that lead to the results. To say that

‘the ends cannot justify the means’, then, would be to assert two things:

First, that there is something wrong with the means. It is to claim that the activity

employed to bring about a certain result is at least prima facie wrong. (If the

means weren’t wrong, the question of justifying them wouldn’t even arise.)

Second, it is to claim that the end, the result in question, is not sufficiently good

enough to outweigh the wrong that attaches to the means. If the value

represented by the results is not higher than the value that is violated by the

activity, then the end will not justify the means.

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But once this is all clearly understood then we can see that there is little to recommend

the view that ends can never justify means. Think about it. In the process of justification

what we do is to show that something that appeared to be the wrong thing to do really

wasn’t. One of the ways that we do this is by showing that the results of what was done

outweighed (on the value scale) the negative aspect(s) of the action in question. For

example, as noted earlier, a particular instance of lying might be justified by showing that

in that particular circumstance the lying prevented a great harm that would have resulted

from telling the truth.

To say that, always, the ends don’t justify the means would be to make the implausible

claim that there are never situations when the ethically positive aspects of some result

will outweigh the ethically negative aspects of the activity that produced the result. That

is a much too general and unsupported claim. Ethics requires more careful thinking than

that.

The more plausible, albeit weaker, claim is still relevant, namely, ‘often, the ends do not

justify the means.’ More colloquially perhaps, ‘not every end will do.’ This is supported

by a variety of circumstances.

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To say that, always,” the ends don’t justify the means” would be to make the implausible claim that there are never situations when the ethically positive aspects of some result will outweigh the ethically negative aspects of the activity that produced the result.

Frequently people seek to justify their prima facie wrong behavior by appealing to their

own self-interest. Generally, this will explain why they did what they did, but it won’t

suffice to justify it. “I lied about my expenses in order to fatten my own wallet,” doesn’t

really pass moral muster.11

Even ends that encompass the well-being of others, i.e. that extend beyond simple self-

interest, may not be sufficient to justify the employment of a prima facie wrong means.

Cheating is not justified on the grounds that it would enable victory, even if the winning

would result in a great deal of happiness for many, many people, perhaps even more than

those who would be disappointed by losing.

Some have suggested that no end that implements a non-moral value can ever be

sufficient to justify a means that violates a moral rule. This version of the ends-means

rule would be the more restricted assertion, ‘Ends that do not implement moral values

cannot justify the employment of morally wrong means.’ On grounds such as this, one

might argue that profit could never be an end that would justify the means of deception.

This is certainly a good rule of thumb, but we need to remember that there may be no

clear line distinguishing which values are moral values and which are non-moral.

11 It should not be inferred from this that there is anything inherently ethically wrong about acting in one’s own self-interest. The point is only that in many instances the end of self-interest will not be sufficient to justify having done something that is prima facie wrong. Self-interest is further discussed at Chapter VII, p. nnn

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Justice and Fairness

Not all cases of justification involve showing a relationship between ends and means.

Sometimes the process of justifying an action consists in showing that, although the

action may have appeared wrong, actually it may have been mischaracterized or

misunderstood. Here, then, the act of justification is actually a case of clarification. This

is frequently what goes on when something is characterized as unjust or unfair, and the

response – the justification – consists in attempting to show that in reality the activity

actually was fair and/or just.

Our basic notions of justice and fairness revolve around the concepts of equal treatment

and playing by the rules. It isn’t fair to break or bend the rules, and justice isn’t done

when there is unequal treatment of affected parties.

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fft: “In recent years some very prominent U.S. corporations have been accused of engaging in elaborate deceptions in order to keep their stock prices up. But what’s so terrible about deception? In World War II the U.S. and Allies constructed an enormous deception in order to throw the Germans off as to the location of the D-Day landings.”Your thoughts?

Treating people equally doesn’t necessarily mean that everyone gets or receives the same.

Right away, of course, people will want to make some distinctions regarding equal

treatment. Treating people equally doesn’t necessarily mean that everyone gets or

receives the same. The fact that different employees receive different wages doesn’t

imply that there is unequal treatment or that there is an injustice being done. If Joe and

Josh are on the same commission scale and Joe sells twice as much product as Josh, then

he will get paid more. But this is a case of unequal results, not unequal treatment. In

fact, they are both treated equally inasmuch as the rules are both applied to them in

exactly the same manner.12

Clearly, much depends on how we

describe the situation and how we

characterize what is being done.

From one perspective, people are being treated differently; from another they are being

treated the same. Which is the relevant one? Again, we need to make distinctions. We

might say that there is more than one level at which we can ask questions about justice

and fairness. At the first level, the relevant question is ‘are we playing by the rules?’ or

‘are the rules being applied the same way to each?’ Justice requires that no participant is

‘above the rules’ and fairness requires that we play – act -- according to the rules.

At the second level, questions of justice and fairness are questions about the rules

themselves. At this level attempting to justify an activity by showing that it is done

12 Certainly it is possible to hold a view that justice and fairness require equal results as opposed to equal treatment. It would be beyond the scope of this work to tackle that issue; but, in any event, that seems more of a claim about the rules, rather than their application. See the discussion that follows.

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‘according to the rules’ will not suffice, because it is the fairness of the rules that is being

questioned.

Imagine the following scenario: Yearly bonuses are awarded on the basis of dollar sales

volume; and each sales team generates its volume from within a territory assigned by the

regional manager. One team consistently outperforms the others, and consistently

pockets larger bonuses. The territory assigned to that team has a demonstrably larger

base of prospects with significantly greater income potential. Everyone knows this,

including the regional manager.

“It’s not fair,” says a member of a less favored team as the unequal bonuses are

distributed; and it is not satisfactory to point out to her that the rules for bonuses have

been equally applied to all. What isn’t fair is not the application of the rules, it is the

rules themselves – rules that allow the assignment of grossly unequal territories.

We are certainly not going to attempt here to achieve a complete resolution of the general

question, ‘How do we determine if rules are fair?’ But it would be both relevant and

useful to point out a line of thinking suggested by the late John Rawls.

Ask yourself the question, ‘are these a set of rules that I would choose to live/work/play

by?’ But ask that question from the perspective of one who does not know what one’s

own situation would be for the purpose of the application of the rules. Would I choose

to live by such rules even if I didn’t know whether or not I would benefit from them? For

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example, would a salesperson choose to be governed by the rules in the above example, if

that person didn’t know whether or not he would be assigned to the favored territory?

Is a set of workplace rules that give preferential treatment to some characteristic (age,

sex, race, religion, whatever) a fair set of rules? Ask yourself if you would choose to be

governed by them, even if you didn’t know whether you would possess the relevant

characteristic. It’s one thing to be morally comfortable with a set of rules that favors a

certain class of persons if you are among that class. But what if you weren’t in that class,

or didn’t know if you would be? Would you choose to have to live by such a set of rules?

Sometimes our choices or actions appear to be prima facie wrong because of the way

they are characterized, and the process of justifying those actions and choices consists in

showing that they really ought not to be characterized in that way. If a system appears to

be prima facie wrong because it is unfair, we might justify it by showing that actually it is

fair. This process often requires that we make careful distinctions and that all parties are

in agreement on the way terms are being used.

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fft: Suppose a company had a compensation policy based strictly on longevity (for each position). Would that be fair?

Have you ever been subject to a compensation policy that you thought was unfair? What was unfair about it?

Rationalization, we might say, occurs when justification fails.

Rationalizations and Excuses

So far we have been examining how people may bring forth considerations that will lead

us to revise our judgments and to acknowledge that what may have appeared to be

morally wrong really was not so. A related but different line of discussion occurs when it

may be acknowledged that an action or choice is prima facie wrong, but, still, ‘it isn’t

really so bad.’ That is, there is not a denial that something is morally wrong, but it is

claimed that there is something about the circumstances that makes this fact of less

consequence than it would normally be. We have all heard this kind of talk; probably we

have all engaged in it at one time or another. Frequently it is called rationalization.13

As with so many of the contrasting terms we use, there is no clear dividing line and no

exact consistency of usage in real life. For the purposes of our discussion, though, it

might be useful to represent things as a continuum.

Justification Rationalization Excuse

We have already looked at justification. Rationalization, we might say, occurs when

justification fails. Consider a very common response to ethical criticism, namely,

“everyone does it.” Generally, this is not an attempt to justify the action in the sense of

showing that it wasn’t really wrong. Rather, it

13 I am indebted to Michael Josephson, prime mover of the Character Counts Coalition, for the idea of including rationalizations in a discussion of ethics; although my treatment of the topic departs from his.

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is usually put forward as a way of saying that the wrongness, so to speak, is not so

serious.14 The list of rationalizations is as long as the mind is creative: “It didn’t hurt

anyone” “There is no law (or written rule) against it.” “No one will ever know.” Etc.

At some point – and here again let us remember that we are not talking about sharp

distinctions – rationalizations become excuses. When we offer an excuse for some

behavior we don’t really attempt to justify it or to minimize its seriousness, rather we

seek to point out conditions that would warrant minimizing our punishment or

condemnation for it.

“I was desperate; I will never do it again.” This doesn’t say that the behavior wasn’t

really wrong; nor does it discount its seriousness. Instead, it is a way of saying “Have

empathy. Have mercy. Don’t punish me.” “I had to do it; it was necessary for our

company’s survival.” Again, this is not a denial of wrongdoing; it is a plea for sympathy.

14 Thus it borders on the view discussed earlier (Chapter III, pp. 39-41) that good and bad are determined by what is generally approved or disapproved. If that is what is meant, then it is an assertion that the action really wasn’t wrong at all.

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Rationalizations and excuses are not irrelevant in the course of our everyday moral lives.

When we are assessing the character of another, or determining how we are to deal with

their misbehavior, it is important to hear them out. Nonetheless we want to remain clear

about what we are doing and saying. There certainly may be situations where we decide

not to punish someone for what they have done; but that need not imply that we have

given approval to their behavior.

Of course we need to listen to ourselves too. Do the explanations and accounts we give

to ourselves really constitute justifications, or do we too frequently rationalize our

behavior? Do we try to convince ourselves that what we know is wrong is really ‘no big

deal’, seeking to have our cake and eat it too?

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fft: Here are some different responses given in reply to a query about – contrary to policy – using a company car for personal use. Assuming they are all true, how would you classify them in light of the terms just discussed?

“I had to get my little girl to the emergency room, and it was the only transportation available.”

“Everyone does it.”

“I only used it for an eight-mile round trip. The cost was negligible.”

“I wouldn’t usually do it, but my car broke down and it was my only transportation option to get to the ball game.”

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Chapter V

Wrap-up Questions

1. Which of the following statements is true?

(a) Ends can always justify means.(b) Ends can never justify means.(c) Ends can sometimes justify means.*(d) All of the above(e) None of the above

2. “I know that it was harsh and unfair to take the Switzer account away from Sue. But the client wanted Natasha; and if we hadn’t done that, we would have lost the business altogether, and thirty people would have been out of work.”

This is an attempt to

(a) justify*(b) rationalize(c) excuse(d) all of the above (e) none of the above

3. “Sure we fudged a bit on the fat content, but so does everyone else in the industry.”

This is an example of

(a) justification(b) rationalization*(c) excuse(d) all of the above (e) none of the above

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5. “Of course our compensation policy is fair. Everyone is treated according to the rules.”

(a) This confuses first and second level questions of fairness.*(b) This confuses ends with means.(c) This confuses rationalizations with excuses.(d) This confuses me.

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Chapter VI

Warm-up questions

1.Which do you think is most correct?

(a) In both business and ethics there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(b) In business, but not in ethics, there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(c) In ethics, but not in business, there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(d) In neither business nor ethics are there strategies and decision-making procedures that can be relied upon always to produce correct decisions.

2. Suppose you are in an ethical quandary about a situation at work. Do you think it would be a good idea to seek the counsel of a friend or colleague?

Yes No

3. Choose the word or phrase that you think best completes the sentence as true.

(A few, some, most, all, none) of the ethical issues in business can be settled by reference to codes.

4. “One respect in which ethics and business decisions are alike is that, in both arenas, we want to stay away from “gut” feelings, and stick to analysis and projections.”

agree disagree

5. “It works for business decisions, and it works for ethical decisions. Heck, it works for any kind of decision. You just use the “Ben Franklin” method. Make two columns. Set out the reasons for on one side, and the reasons against on the other. Then add them up. The answer will be obvious.”

agree disagree

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Chapter VI

Guidelines for Decision Making

Overview – No Magic Formula

It is reasonable to expect that a study of ethics will yield guidelines for making ethical

decisions; and it is to such guidelines that our discussion now proceeds. But we want to

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…it’s just as unlikely that we could construct an ethical problem-solving method that would always generate correct answers as it is unlikely that we could construct a business problem solving method that would always give us the right business decision.

be careful to avoid two pitfalls. We neither want to oversimplify the subject, nor do we

want to overcomplicate it. There are tendencies and temptations in both regards.

We shouldn’t expect to be able to construct an ethical decision-making process such that

all we would have to do is to, so to speak, feed the components of our problem into one

end of the process, and then expect the correct solution to be cranked out at the other end.

Generally our ethical problems and alternatives are too intertwined and amorphous to be

dealt with in a straightforward computational way.

Not that all ethical issues are complicated. There are ‘no-brainers’ in ethics just as there

are in business. Some business choices are pretty easy. “Yes, the less-expensive more

effective advertising medium is the one you should choose.” Moral conclusions aren’t

always hard to come by either. “No, it’s not morally ok to kill your competitor.”

(Tempting, maybe, but not ok.)

But, if we think about it, it’s just as unlikely that we could construct an ethical problem

solving method that could always generate correct answers as it is unlikely that we could

construct a business problem solving method that would always give us the right business

decision.

I am reminded of a conversation I had many years ago with a friend who was in the field

of education. He had just been to a

conference whose subject matter dealt

with the teaching of problem solving.

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The premise of the sponsors was that education should not focus on facts, figures, and

traditional methods. Rather, children should be taught general methods of problem

solving so that, armed with such methods, they would be able to solve the problems that

they would encounter in the future. My friend’s query was simply this: If we are

possessed of such general problem solving methods, why should we be content just to

teach them to those who will solve the next generation’s problems? Why don’t we use

them now to solve our own?

Of course the answer to his rhetorical question is that we don’t use the all-purpose

problem solving method(s), because there is no such method. Neither is there a sure-fire

problem solving method that we can use in ethics, or in business, or in personal

relationships, or in any other arena.

Still, in ethical matters, as in business and other activities of life, to say that we can’t

provide a 100% guaranteed method for making decisions does not mean that we have

nothing to go on at all. We have a variety of strategies, checklists, and other methods that

help us often, though not always, to come up with good solutions to complicated

situations.

Sports enthusiasts are familiar with all sorts of rules of thumb (‘pass on third down and

long yardage’, ‘with three balls and no strikes, take the next pitch’, ‘move up on second

serve’) that, if followed, will generally yield good results. They don’t always work, but

they are still very useful. They employ the percentages.

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… it cannot be overemphasized how useful and important it can be to obtain the counsel and opinions of others.

Similarly, retailers employ pricing strategies, salespeople have closing techniques,

investment advisors use time-tested formulas, etc. In every business and every activity

we can find guidelines and strategies for success. The shelves of bookstores are stuffed

to overflowing with them. While some are certainly better than others, none is perfect.

Nor, really, do we expect any to be. Neither should we expect an ethics decision-making

guide that is guaranteed to be 100% successful.

With that caveat we turn to some suggested steps – a checklist if you will – to be used

when faced with a situation when it isn’t clear what is the ethically correct thing to do. In

all of these it cannot be overemphasized how useful and important it can be to obtain the

counsel and opinions of others. It’s just a fact: our friends and our colleagues are often

capable of seeing and sensing things that we might miss. And frequently they can add a

perspective that we may lack.

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fft: “Always do the right thing. This will gratify some and astonish the rest.” …Mark Twain

Do you think it is true that we always know what is the right thing to do?

1. Identify the issues

Unfortunately many of the ethical problems that present themselves to us do not come

labeled as such. It is easy to be so focused on the financing, marketing, production,

technical – whatever – issue before us that we never even see that there is an ethical

dimension to the alternatives we are considering. This is one of the reasons that it is a

good idea to draw on the counsel of others. They may notice things that have escaped

our attention.

Recall the point that many of the ethical issues related to the medical field – concerns that

seem commonplace today – have their origins in practices that, innocently enough, were

never thought to be morally questionable. These range from issues dealing with informed

consent and the rights of patients to matters dealing with resource allocation (e.g ‘do

some deserve a donated organ more than others?’; ‘how much of limited funds should be

spent on the treatment of those whose chosen living habits have left them chronically

ill?’).

In similar fashion we can look at corporate and business practices that today are brightly

lit on the moral radar screen, whereas once they were never even a subject of question.

Pollution, discrimination, insider-trading, and price-fixing all represent practices to

which, at one time, no one gave much thought, if any. Yet now there is widespread

agreement that such behavior is unethical as well as illegal.15 An interesting question to 15 We want to be careful here to resist the temptation to say that it is only because such practices are (now) illegal that they are wrong. Rather, they have been made to be illegal because they were first perceived to be wrong. A system of rules that allows such things is/was thought to be unfair and unjust because it

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…we can look at corporate and business practices that today are brightly lit on the moral radar screen, whereas once they were never even a subject of question.

ask ourselves today is, “What do we do now that is generally thought to be acceptable

that in twenty or thirty years from now (perhaps less) may be seen as something that is

ethically objectionable and that ought to be prohibited?”

For these reasons, although it may sound

too obvious, one of the most important

guidelines for ethical decision-making is

the suggestion that at the outset of

considering a course of action we need to determine if there are ethical issues involved.

There are three useful practices in this regard.

A. Refer to rules, codes, and the law.

Again, this may seem obvious; but unfortunately it is easily overlooked. It is also

sometimes too easy or tempting to dismiss various rules and codes, even the law, as

outdated or unimportant in a particular circumstance. While I would be the last to argue

that the whole of morality is to be found in ‘following the rules’, it is important to

remember that rules and codes come to be in place for a reason, and if they are to be

broken or ignored a justification will be called for.

Corporate and professional codes can be of great value in this regard. For one thing they

may keep us from having to ‘reinvent the wheel’ when faced with a particular situation.

results in harm to innocent parties. For that reason we adopt rules to prevent the behavior in question. The creation of the laws is not arbitrary; and it often is the result of a moral perception.

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,.. it is important to remember that rules and codes come to be in place for a reason, and if they are to be broken or ignored a justification will be called for.

If you are an IBM employee you don’t

have to engage in an ethical calculation to

determine whether it is all right to accept a

gift from a supplier. The code tells you

straightforwardly not to.16 Even if

company and professional codes are somewhat vague, as they often are, they can still be

useful by pointing us in the right direction and encouraging us to ask the proper

questions.

Conversely, we do well to remember that finding that a particular course of action does

not clearly violate some rule is not in itself determinative of ethical acceptability or

desirability. “Legal has cleared it” doesn’t necessarily mean it’s a right thing to do.

Often the law and other sets of rules only provide a minimum standard. Good ethics may

require more. In the famous case of the Johnson & Johnson recall of Tylenol, the 16 I am not claiming here that it would always be wrong for anyone in any company to accept a gift from a supplier. The point rather is that a ‘zero tolerance no-gifts rule’, while possibly ruling out certain innocuous exchanges, leans to the side of caution so that, if followed, an employee will not get tripped up in a situation that does have negative features.

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An analysis of stakeholder interests calls for an imaginative and empathetic understanding of the various groups and the ways in which they may be impacted.

company was not compelled by the law to act as they did. Rather, they pulled the

product because they thought it was the right thing to do.17

B. Identify stakeholders and their interests

‘Stakeholders’ is a term that has come to refer to all those who are involved with and

affected by a decision or course of action. They are those who, as we say, have a stake in

the decision. It is a play on ‘stockholders’ to be sure; and that play helps to make the

point that in a corporate setting there are likely to be more interests than just those of the

stockholders to be considered if a corporation is to act in an ethically responsible manner.

While the lists of stakeholders will vary in different situations, often they will include

such diverse groups as employees and their families, suppliers, customers, and certain

affected communities. The net may be cast so wide as to include the environment as a

stakeholder in the decisions that some companies might make.

An analysis of stakeholder interests calls for an imaginative and empathetic

understanding of the various groups and the ways in which they may be impacted. In this

respect the thinking required to come to a good ethical decision is closely related to the

17 For an account of the Tylenol event see, for example, “Johnson & Johnson and the Tylenol Case” in De George’s Business Ethics, 5th edition, Prentice Hall, pp. 3-4. Interestingly, this was a situation where Johnson & Johnson’s laudable behavior was a result of its long-held code, The Credo, which in its leaders’ eyes required action beyond that which was demanded by the law.

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kind of thinking involved in making a good business decision. Good businesses

understand their customers and their vendors and their employees. Ignoring the interests

of any of these can be bad business as well as bad ethics.

3. The ‘Gut Check’

We’ve all had that feeling at one time or another. Something just doesn’t seem right. We

find ourselves uneasy about something we’re about to do. Yet we can’t articulate exactly

what the problem is.

I’m not referring to a distinctly or exclusively moral sixth sense here. The kind of qualm

that is experienced occurs in non-moral situations as well. You’re about to make a big

purchase, or to invest a significant amount of money. You think you’ve done all your

homework, and every indicator says ‘go’; yet still you are uneasy.

We might call this a test of our feelings, and it has many versions. In the ethical context

some would ask, ‘Having done this, would you be comfortable looking at yourself in the

mirror?’ Others suggest you should ask yourself if you would want your mother, or your

kids, to know what you are thinking of doing. Would you want your action to be

reported in the newspaper? Some would say that a negative answer to such questions,

that feeling of unease about a proposed course of action, is our conscience speaking. Be

that as it may we do well to pay heed.

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‘Having done this, would you be comfortable looking at yourself in the mirror?’

Feelings such as this are not determinative

of a decision being a wrong one (either

practically or morally) anymore than finding

that something is within the rules makes it a right one. But such feelings are worthy of

our attention. Indeed, as we strive to cultivate moral character we may discover that such

feelings and reactions turn out to be on target, even if we have not articulated the reasons

for them.

2. Develop Information and Define Alternatives

We have noted earlier that in ethics as in business our greatest impediment to good

decision-making is often lack of information. Sometimes the information that we need is

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…it is so important to know our stakeholders…

of an analytical kind, information that may help to clarify the situation or to categorize

the alternatives being considered. At other times the information needed may be of the

empirical, factual sort. We may need technical information, or market research, or cost

analysis, etc.

A. Develop Information

In sorting out the ethical dimensions of an issue we need to develop information that

will enable us to evaluate alternatives. If one method of achieving an objective involves

violating some moral, institutional, or statutory rule, is there another way of reaching the

goal without rule breaking? Are we faced with a situation where our duties conflict? Do

we have conflicting obligations to different constituencies? Can we determine what

values should guide us in resolving the conflicts?

Our analysis of stakeholder interests will require factual information in order to

determine what consequences various alternatives would have for different groups. This

is why it is so important to know our stakeholders. We need to know more than who they

are; we need to know – as best we can – how they would likely be affected by the choice

of one alternative or another.

Suppose we are considering adopting mandatory

drug testing for the employees of the company.18 18 For a much more thoroughly elaborated example of the issues that could arise in such a situation, see “Drug Testing at College International” in Beauchamp, Case Studies in Business, Society, and Ethics, 4th edition, Prentice Hall, pp. 260-64, and also, “Case 1: Drug and Polygraph Testing at Company X” in De George, Business Ethics, 5th edition, Prentice Hall, pp.387-88

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There are analytical questions to be asked. Would such a policy be within the law?

Would it violate the rights of any employee? Would it be in conflict with any union

agreements and/or employment contracts? Would the adoption of such a policy conflict

with any stated company values regarding mutual trust and respect? There are also

factual, empirical questions to be asked, although we may only be able to give ‘best

guess’ answers. Even if legal and not in violation of any previous commitments, would

the adoption of such a policy breed employee resentment that might outweigh the

business benefits of the policy? Would the adoption of such a policy result in a positive

or negative reaction from such stakeholders as our customers and our stock holders?

Might the results of drug testing lead to more harm for (certain) employees than good for

the company?

B. Define Alternatives

Asking questions such as these helps us to define our alternatives, and in so doing

sometimes to reshape our proposals. Indeed, as we ask questions about the value

implications and the potential consequences of a proposed course of action we may

even come to an improved understanding of the original problem and the goals of the

solution.

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fft: Can you think of a situation in which you were a stakeholder in a decision, but your interests and those in your situation were not taken into account? Did you think there was anything wrong with that? How should it have been handled?

… as we ask questions about the value implications and the potential consequences of a proposed course of action we may even come to an improved understanding of the original problem and the goals of the solution. The proposal imagined

above, to adopt mandatory drug testing for employees, might have had its origins in

any one of a variety of different perceptions. It might have stemmed from a belief that

drug use within the employee population was affecting production quality. Or

perhaps it was believed that drug use had become a cause of supervisory and

managerial inefficiency. The suggestion could have arisen from a genuine concern

about employee welfare. Alternatively, the policy proposal might have even been

motivated simply by a desire to reap public relations benefits in a community where

‘zero tolerance’ sentiments were both strong and widespread. The proposal might

have come from a mix of these beliefs, and, of course, there might have been other

considerations as well. Becoming clearer about the problem(s) we are trying to solve

helps us define our alternative solutions.

3. Analyze and compare the alternatives

Most of us have heard of the decision-making process (and sales closing technique)

whereby one is to write down the reasons for doing something on one side of a

vertical line and the reason against doing it on the other. This can be a useful

exercise, although anyone who has actually tried it knows that it doesn’t

straightforwardly yield a decision. That is because we intuitively know that some

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reasons outweigh other ones, but we usually have no protocol for assigning weights to

them. Hence, even if we have written them down, we can’t simply add them up.

It is similar with respect to the comparison, from an ethical perspective, of

alternative courses of action. While it is good and important to compare alternatives,

we usually can’t assign exact weights to the considerations that might favor one over

another.

A. Compare the Consequences

As much as possible we must compare the various consequences of the possibilities

we are considering. Tom Morris makes the following trenchant comment on the

realization he once had when he reviewed those times in his life when he had done

things that he later came to regard as ethically wrong:

…in every case I had failed to imagine vividly and perceptively the full consequences of my actions for other people as well as for myself. I had put blinders on my moral imagination and had seen in advance only those consequences that I wanted to see.19

Of course we can’t know for sure what the consequences of our choices will be, but

that is true in virtually any situation. We just do the best we can, in ethics, in

business, and in life.

19 Morris, Tom, If Aristotle Ran General Motors, Henry Holt and Company, Owl Books edition, 1998, p. 166

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…we intuitively know that some reasons outweigh other ones, but we usually have no protocol for assigning weights to them.

B. Consider the Values at Issue

Consequences, of course, have to be considered in a certain perspective. Namely,

we need to consider the consequences of various alternatives in light of the values

that we seek to implement. And we may need to rank those values.

If we were pretty sure that adopting (some version of) a drug testing policy would

result in a high level of employee dissatisfaction, then, assuming that good employee

morale is a value of our organization, that would be a reason not to do it. But the

consequences of not adopting the policy might serve to undermine some other value

e.g. product quality or, even, employee safety. And it might be the case that those

values are more important than employee morale.

Of course, this example is not meant to imply that an issue such as this would actually

have to come down to an either/or proposition. One can imagine a number of

nuanced alternatives that might serve to foster all the values that we seek to

implement

C. Apply the ‘Gut Test’ Again

We also want to apply the same kind of test that is relevant when a choice or situation

is first proposed to us. Whether we call it the ‘look-in-the-mirror test’, the ‘would-

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The reactions that we have are a result of the training we have received and the culture(s) in which we have developed.

you-want-your-mother-to-know-you-did-this?’ test, or the ‘how-would-you-like-this-

to-be-in-the-newspapers?’ test, it all comes down to asking ourselves how we feel

about doing what we are considering doing.

I repeat that this is not to make appeal to some mystical faculty with which we are

endowed. The reactions that we have are a result of the training we have received

and the culture(s) in which we have developed. If we seem to be appealing to moral

intuition let us acknowledge that such intuition

is informed. More particularly it is formed in us

as a result of experiences as diverse as the

lessons we received in childhood, the

experiences we have had in ‘the real world’ of business, and the discussions that

might go on in a corporate training session.

D. The Golden Rule Test

Finally, there is the Golden Rule test. Is this the sort of thing I would want done to me?

Would I want to be treated in such a fashion? But here we have to be careful how we

frame the issue. We can illustrate this point by considering an example without moral

overtones.

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The principle of the Golden Rule is also at the heart of good manners and just what is

generally thought of as the considerate treatment of others. If you have people over

for dinner you don’t just serve what you like, you give some consideration to what

they like. Personally, I like liver and onions; but I can’t seem to find many others

who do. Now if I served liver and onions to a group of dinner guests, could I say I

was following the Golden Rule because I was treating them as I would have them

treat me? Hardly. The problem is that I have framed the issue incorrectly by

focusing on the outcome, rather than the principle. The principle would be ‘serve

people what they like’. That is a principle that I would want to be treated by, even if

in this case it results in a different outcome for others.

If, to return to a more serious sphere, we were forced to devise a principle for layoffs,

the Golden Rule test should be applied to the principle we adopt, not to the outcomes

it yields. Presumably none of us wants to be laid off, and if we focused on outcome

we would always be saying, ‘no, I wouldn’t want that done to me’. But if we focus

on the principle, and the principle is a fair one, we could answer, ‘yes, that is a way I

would want to be treated’ – even if it might result in a personally undesirable

outcome.

Conclusion

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…the Golden Rule test should be applied to the principle we adopt, not to the outcomes it yields.

By way of conclusion I would reiterate two points. One, there is no one simple (or

even complex) formula for arriving at ethical decisions. Not all ethical problems are

the same; and many of them are complex. They require us to think of ethical

dimensions to situations while we are also thinking of nitty-gritty issues such as

profitability, production schedules, performance reviews, and the like. But while we

can’t simply compute ethical answers, we can approach matters asking questions and

applying perspectives such as we have discussed here.

The second point to be reiterated is that we cannot overemphasize the value of

sharing our thoughts with others and of seeking the counsel of those we know and

respect. While our decisions must be our own, we remember that our values are

played out, so to speak, in a community. The perspectives of others can frequently

provide us with greater insight into that community.

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fft: Suppose your company has found it necessary to lay off one-fifth of its personnel in each division. There are no constraints as to the manner in which this is to occur. Devise a policy that in your mind will meet both ethical concerns and the company’s economic requirements.

Chapter VI

Wrap-up Questions

1.Which is most correct?

(a) In both business and ethics there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(b) In business, but not in ethics, there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(c) In ethics, but not in business, there are strategies and decision-making procedures that can be relied upon always to produce correct decisions.

(d) In both business and ethics there are strategies and decision-making procedures that can be relied upon to increase the likelihood of making correct decisions.*

2. In ethics, as in business, there are no easy decisions.True False*

3. When faced with complex and/or difficult ethical decisions,

(a) you should always consult with the stakeholders.(b) don’t let yourself be influenced by your friends.(c) try to overcome your instinctive reactions.(d) all of the above(e) none of the above*

4. The BDL Company archives all email that goes out of and into company computers, and it maintains a record of all Internet use. At any time the IT department can access the screen of any user. It was a deliberate management decision that the employees of BDL not be made aware of these company practices and capabilities.

(a) This is another example of the means being used to justify the ends.(b) Employees were stakeholders in this decision.*(c) A decision such as this one is best made without consultation.(d) All of the above(e) None of the above

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5. When confronted with a decision that has ethical implications, the Golden Rule test applies to

(a) customers(b) employees(c) stockholders(d) all of the above*(e) none of the above

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Chapter VII

Warm-up Questions

1. “Doing the right thing” generally requires rising above one’s day-to-day character.agree disagree

2. Which word or phrase do you think best completes the sentence as true?

(Anyone, No one, Only a few, Most people) can change their habits of behavior.

3. “Virtue is an outmoded concept, suitable only to a bygone era.”agree disagree

4. Place the name of a character trait in the column you think most appropriate

Desirable in all contexts

Desirable in only some contexts

Undesirable in all contexts

Undesirable in only some contexts

innovative aggressive humble fair efficient cautious

careful friendly competitive hot-headed empathetic generous

selfish trustworthy self-centered outgoing sentimental jealous

uncaring loyal objective sensitive considerate focused

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5. If there’s one essential trait needed for living an ethical life, it would be

(a) caring for others as much as for yourself(b) caring for others more than for yourself(c) always taking others into consideration(d) looking out for yourself first, and then taking others into consideration(e) all of the above(f) none of the above

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Ethics is a matter of how we live, not simply what we know.

[insert figure 10]

Chapter VII

Individual Traits and Character

In discussing such things as ethical

principles, judgments, justification, and

decision-making our focus has been, so to speak, on the intellectual or analytical aspects

of ethics. But by that I do not mean to draw a contrast with feelings. Rather I mean to

draw the contrast with what might be called the behavioral aspect of ethics – the manner

of living and doing that results both in and from the kinds of persons that we are.

Ethics is a matter of how we live, not simply what we know. Our discussion of ethics

would be seriously incomplete if it only treated the topics covered thus far. (It would

also be a failure were it to result only in ‘head knowledge’.) To complete our task we

need to talk about behavior and character.

The Development of Character

A Marine fighter pilot once told me, “People don’t ‘rise to the occasion’; they default to

the level of their training.” He was talking about aerial combat, but what he said applies

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“People don’t ‘rise to the occasion’; they default to the level of their training.”

to ethical behavior as well. (It applies to sports and sales too. Indeed, what does it not

apply to?)

To be sure, each of us will scratch our heads thinking up some exception to this ‘rule’,

but the point in general remains a valid one. Our responses to events and situations, be

they ‘gut reactions’ or reflectively considered, do not come out of nowhere. They arise

from our character, our professional persona, our role as a parent, husband, wife, etc.;

and who we are in those respects is a result of what we have been taught and what we

have been trained and have trained ourselves to be.

Trained ourselves to be? Now that is an odd expression to say the least. But it is vitally

important. It points to the paradoxical but central fact of character development that,

although it is true that what we do is a result of who and what we are, so too do we

become what we do.

Many of us have been exposed to this principle

in one kind of professional setting or other. It is

the grist of the trainer’s mill. Do you want to be

an organized person? Act like organized people do. Do organized things. Categorize

tasks, write things down in a systematic way (not on sticky notes all over your desk, wall,

and computer), schedule tasks, etc.

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Our character, in both the moral dimensions and otherwise, is a summary of our habits of behavior.

Is confidence a trait that you seek? Act the way confident people do! Shake hands

firmly, maybe even using the type A over-the-top method. Practice looking people in the

eye. Visualize your successful outcomes. Speak of your achievements, both those

accomplished and those to come. Follow this advice – and the rest of the tips to be found

in the books and tapes – and you will find that you have made yourself a confident

person!

I don’t mean to sound too satirical; for the truth is – as many of us no doubt know – there

is validity in these approaches. People who take the advice and put the habit-building

behaviors into action actually do change themselves, sometimes in significant ways. The

rub, of course, is that you really do have to take the advice and do something, not just

hear it.

Our character, in both the moral dimensions and otherwise, is a summary of our habits of

behavior. When you attribute a character trait to someone – cheerfulness, kindness,

trustworthiness – you are saying that this is the way in which that person habitually acts.

You can expect that kind of behavior from them.

There is both bad news and good news in

this. The bad news is that, as we must all

know, habits (mostly bad ones, it seems) are

easily formed, often unconsciously, and can

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be difficult to break. The good news is that we can break old habits and we can instill

new ones, and we can cause ourselves to become the sort of person we aspire to be.

Anyone who has experienced parenthood knows that parents are all the time training their

children to be certain kinds of persons, whether the training is intentional or not.

Curiously, the same is true of each of us individually. That is, we are, constantly,

training ourselves to be certain types of people. Mostly this is not done consciously. We

just keep doing the same kinds of things we have been doing, and we reinforce the

habitual behavior instilled in us long ago. Occasionally, though, we will consciously

seek to effect change, whether by breaking an old habit or adopting a new one; and when

we do that we literally change our character.

Once again, Tom Morris speaks eloquently:

Too many people in high places talk big abut ethics, and morality, and virtue, and goodness, but do not practice these qualities when they interact day-to-day with the people who work for them. There are far too many people who want to increase the general weal of the world without doing the unglamorous and sometimes inconvenient work of, for example, responding in kindness to a coworker during a time of stress. The little kindnesses, the small decencies, form the foundation for truly magnificent things.20

UCLA basketball coach John Wooden was famous for his emphasis on the fundamentals.

His players achieved great victories and turned in outstanding performances because they

had been trained to do the little things, the basic things, habitually in the right way. An

20 If Aristotle Ran General Motors, p. 164

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…we are, constantly, training ourselves to be certain types of people.

application of the same principles to moral character development can lead to similar

results. If we train ourselves to do the ‘little things’ correctly – to take others into

account, to speak the truth, to play by the rules (even if no one is watching), etc. – we

prepare ourselves and develop the kind of character that will take the big things in stride.

Without developing such habits, without training ourselves, we are not likely to rise to

the occasion.

Character Traits and Virtues

William Bennett notwithstanding, we don’t talk about virtues much anymore.21 The term

has a quaint Victorian sound to it. When it is used, it is more likely than not to occur in a

non-moral context, e.g. “The virtue of his presentations is that they are clear and brief.”

But we need not be put off by, or wary of, talk about virtues in the moral sense. It is not

to invoke some inscrutable ethical aura, nor does it commit us to the adoption of some

particular code, perhaps now outmoded.

21 Well, most of us don’t. Actually there are a number of philosophers – people like Tom Morris and Robert Solomon – who speak of virtue, and they speak of it quite well. The focus of Morris and Solomon on the role of virtue in business will probably do little to reintroduce virtue terminology into the popular vocabulary, but they have probably had a considerable influences in making some business environments a better place to be.

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fft: Give an example, either personal or someone you know of, of a person changing, adopting, and/or breaking a habit of behavior. What did it take to make this happen?

… the components of good character are habits of behavior. As such, they are within the grasp of any of us…

Virtues, as we use the term here, simply refers to character traits (good ones, that is; vices

is reserved for the other end of the spectrum). And, as we have noted, such traits need

not always be thought of as uniquely associated with ethics or morality. Friendliness is

among the classic virtues, and though it may not fit into our conception of that which

constitutes good moral character, few would argue against its desirability as a character

trait.

Many virtues are role related. Aggressiveness might be a desirable trait in a professional

athlete, but not such a wonderful thing for a family counselor. Other traits, such as

trustworthiness, seem to cut across all categories. Moreover, not only does a trait such as

trustworthiness have a moral dimension to it; it also has business value. (We’ve all had

the experiences. Whom do you prefer to deal with?)

Our aim here is certainly not to try to create a list of

all the behavioral habits that might be considered

virtues. Nor is it to attempt a cataloging of various

traits as to which ones seem to have distinctly moral

value, which are desirable only for situation-

specific reasons, which seem desirable in any setting, etc. Rather we want simply to

emphasize that the components of good character are habits of behavior. As such, they

are within the grasp of any of us; for it is within our power to form our habits. The Nike

slogan applies to ethics too: Just do it.

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Honor and Integrity

We use words like ‘honor’, ‘code’, and ‘loyalty’. We use these words as the backbone of a life spent defending something. You use them as a punch line.

Jack Nicholson, as Col. Nathan Jessup, in A Few Good Men

Although a dictionary won’t show that honor and integrity are synonyms, they are often

treated as if they denote the same qualities. To say that someone is a person of ‘honor

and integrity’ seems to say the same thing twice. Certainly they are closely related, and it

is appropriate to discuss them together.

Integrity

Integrity does not seem a virtue in itself; rather, having this characteristic is more the

result of virtues, i.e. of having acquired them. If someone displays the character traits of

honesty, trustworthiness, fairness, etc. – if he habitually behaves in these ways -- then, as

a result of that, we will say that this is a person of integrity. The person can be counted

on to behave in those ways. He or she is not likely to be buffeted by the winds of

circumstance nor swayed by the lure of a conflicting self-interest.

The word integrity derives from a root that means ‘whole’ (think of integer), and it has

uses in non-moral contexts as well as moral ones. Indeed, there is something to be

learned by looking at the non-moral uses. We speak of the integrity of a building or a

material and by that we mean that the subject in question is strong or solid, that it can be

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A person of integrity is not likely to be buffeted by the winds of circumstance nor swayed by the lure of a conflicting self-interest.

… people of integrity are liable to perceive and feel the weight of moral dilemmas more than most.

counted on to do what it is supposed to do. Certainly the moral ascription of integrity to

someone carries a similar meaning.

The wholeness of integrity comes

about from the unification of

principles and action. There is a

consistency of belief and behavior

that characterizes a person of integrity. This is why one dictionary says that hypocrisy is

a “failure of integrity”.

None of this, though, should be taken to imply that persons of integrity are some sort of

other-worldly saintly creatures, or that they ‘have all the answers’ when it comes to

questions of ethics and morality. To the contrary people of integrity are liable to perceive

and feel the weight of moral dilemmas more than most. Not all ethical dilemmas, after

all, are simply matters of weighing principle against self-interest. (Frankly, in most cases

that is not even a dilemma at all. An issue of temptation and a test of character perhaps,

but not a dilemma.) The nature of many moral dilemmas consists in a conflict of rules.

Sometimes, as we have noted, general moral principles may conflict. Moreover, because

our jobs and positions often carry with them particular obligations (e.g. company loyalty,

fiduciary duty, non-disclosure, etc.), moral

quandaries may occur when our positional

duties and obligations conflict with more

general ones. People of integrity are persons who can be counted on to fulfill their duties

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and follow the rules that apply to them; but even they – especially they – may find

themselves in the situation of needing to sort out which rules and which duties are the

overriding ones.

Honor

Boy Scouts and Girl Scouts each say a pledge that begins, “On my honor…”. The

signers of the Declaration pledged “…our lives, our fortunes, and our sacred honor.”

When I was in college each exam, each paper or project that we submitted contained a

cover pledge “On my honor as a gentleman…” that we had neither given nor received

assistance – that the work was our own. What is the common thread that runs through

these uses of honor? What does the term refer to?

From the dictionary we learn that honor is esteem or respect that is due or paid to worth.

To honor someone is to hold them in esteem or respect. When we honor a person we

ascribe worth of some sort to them. We may honor someone, or give them honors, for

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At their initial meeting, a lawyer tells his prospective client that he will need a $1,000 retainer if he is going to take on the situation. That is fine with the client, and at their next meeting he hands the lawyer an envelope. “Here is the retainer. It’s in cash. I hope that is ok.” The lawyer says ‘yes’, and they proceed onto business.

When the client leaves the lawyer opens the envelope and counts the money. The envelope contains eleven one hundred dollar bills. Now the lawyer has a moral dilemma: Should he tell his partner? [Relax: It’s a joke.]

…the person who has honor ascribes worth to himself.

their athletic prowess, achievements, bravery, or any manner of other doings. But how

does this relate to one’s personal honor, the honor on which one pledges?

As the act of honoring another is to ascribe worth to them, the person who has honor

ascribes worth to himself. (Conversely, I believe, the person who lacks a sense of honor

is a person who lacks self-worth.) It is a worth based on character, not skills. Thus honor

is not equivalent to integrity, but it derives from it. A person who has honor, or a sense

of honor, is a person who lives by a code and/or a set of principles, and who finds such

value in so doing that he or she counts it as a basis of self-worth.

Just as the principles involved in a given

individual’s integrity may be ones that are derived

from his or her role or position, similarly one’s

sense of honor may be intimately tied up with one’s station. It is common – to the extent

that language about honor is common – that the term is often followed by a

characterizing expression: “On my honor as…” a knight…, a gentleman…, a doctor…,

an officer…, etc. Thus stated one puts one’s integrity on the line as a follower of a

certain kind of code or set of principles.

One of Tom Clancy’s characters relays the thought that honor is “…a man’s gift to

himself.” Although this gender-insensitive formulation may not be politically correct, the

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Whether we live with honor or not is up to us. No one can give us honor but ourselves; and no one else can take it away.

notion is a sound one. Whether we live with honor or not is up to us. No one can give us

honor but ourselves; and no one else can take it away.

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Regard for Others

If there is one character trait that might be deemed essential for ethical living it would

have to be the habitual taking into consideration the thoughts, feelings, and welfare of

others when one is contemplating a decision or course of action. No single word appears

to quite capture it. It is, for want of a better expression, the quality of being ‘other-

regarding’.

This is a characteristic that goes beyond being considerate. Considerate seems to extend

only to fairly close, personal interactions. The characteristic of being other-regarding

may cast the net quite farther than that. It takes into account, when appropriate, whole

classes of persons, perhaps ones not even personally known to the agent. It denotes the

habit of thinking that pays heed to the potential effect of actions on employees,

customers, suppliers, and vendors – in short, stakeholders. A person need not be in the

business arena for this kind of thinking to be relevant. Anyone who lives and acts in a

community – a coach, a family member, a neighbor – will be a better person to the extent

that his or her behavior is influenced by a regard for others.

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fft: “Honor is an outmoded concept that depends on antiquated moral codes. It is irrelevant to life in the 21st century.”What do you think?

Ethics does not require self-denial; and ethical behavior is not measured by the degree to which one makes oneself a doormat.

A person who is other-regarding is not by virtue of that necessarily insensitive to rules,

duties, and obligations. Not at all. But such a person will always want to know more

than simply, “Is this what the rules say?”, or “Is this something the rules will allow?”

“Who will be affected, and how?” will always be a relevant consideration too.

Nor should we think that to be other-regarding is necessarily to sublimate one’s own self-

interest to that of others. The characteristic of taking others into account goes to the

bedrock of ethical conduct, namely the notion that everyone counts. But to say that is

also to say that you, I, we count too.

Ethics does not require self-denial; and ethical behavior is not measured by the degree to

which one makes oneself a doormat. There is nothing inherently unethical about living

and conducting one’s business in a way that enhances one’s own self interest. But neither

does the advancement of self-interest require that one break rules, ignore duties, or act in

disregard for the well-being of others.

The characteristic of being other-regarding is the behavioral embodiment of the Golden

Rule. It is the habit of ‘putting ourselves into the other person’s shoes’. It is asking,

‘would I want this done to me?’ It acknowledges our basic equality. It is central to

ethical living.

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Chapter VII

Wrap-up Questions

1. Marcia is known as the type of boss who is not only demanding, but also abusive. She is known for her yelling tirades, and there are countless stories of her publicly demeaning subordinates who she believed were not performing up to her standards.

Which of the following is most correct?

(a) From this we know enough to make inferences about the productivity of Marcia’s department.

(b) We can infer that it is not likely that Marcia takes all stakeholders into account when making a policy decision.*

(c) It is likely that Marcia is dishonest.(d) All of the above(e) None of the above

2. If she chose to, Marcia could probably learn not to be so abusive to subordinates.True* False

3. Which of the following statements is correct?

(a) Certain character traits may be considered virtues in some contexts, but not in all.(b) Not all virtues are ethical virtues.(c) Some ethical virtues are also valuable character traits in business.(d) All of the above*(e) None of the above

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fft: “The idea of living ethically is basically contrary to human nature; for ethics requires that we must deny our own self-interest, and no one does that.”Again, what do you think?

4. If a company has a reputation for integrity,

(a) it can be expected to stand behind its products and/or services.*(b) its products and/or services will always be the best priced in the marketplace.(c) its products and/or services will always outperform the competition.(d) all of the above(e) none of the above

5. Living ethically requires that you always put the interests of others before that of your own.

True False*

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Chapter VIII

Warm-up Questions

1. An organization can have the effect of making people who belong to it better.agree disagree

2. Which seems the most correct to you?

(a) Just as an organization may have many levels of management, it may have many levels of leadership.

(b) Large organizations may have many managers, but they can only have one leader.(c) Businesses don’t have leaders; they have bosses and/or managers.(d) All of the above (e) None of the above

3. The job of communicating a company’s values to its employees

(a) is best accomplished by professional experts(b) can’t be done by management(c) has to start at the top(d) is best done implicitly, rather than explicitly(e) all of the above(f) none of the above

4. “A company that is really serious about ethics and values would require the same training for all of its employees, including management.”

agree disagree

5. “Leadership can’t be accomplished by example, because those who are leaders will have very different jobs from those who are to be lead.”

agree disagree

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Corporate Character and the Role of Leadership

Most of what I know about honor I learned from two distinctly different institutions:

Princeton University and the United States Marine Corps.22 The point of this observation

22 The manner in which these institutions are similar is worthy of a commentary in its own right.

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is not to convey biographical information; rather it is to emphasize the role of institutions

in the inculcation of values and the development of character.

To be more precise, I should say that I learned about honor at these institutions more than

from them. There were no lectures on honor, no explicit lessons, no designated classes.

And yet, what was expected of you, what behaviors you were to conform to, what

standards were to be upheld, were an ever-present part of the cultural milieu.

The previous chapter emphasized the capacities of individuals to shape and form their

own characters. Yet it would be both misleading and disingenuous not also to

acknowledge that character development, even more character change, is not likely to

happen unless it receives cultural and institutional support in the environment where it is

attempted. It would be pretty hard to diet if you spent most of your time hanging out

with members of the gourmet club. Conversely, as many well-known diet programs have

proven, it is easier to change your eating behavior when you have the support and

encouragement of others who share the same goals.

“You play better golf with better golfers.” The adage applies to much more than golf,

and to much more than sports. Do you want to improve your sales performance?

Associate with top producers. Do you want to develop a more positive attitude? Hang

out with positive people. Robert Solomon offers a modern version of the ancient Greek

saying, “to live the good life one must live in a great city”, when he advises his business

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“You play better golf with better golfers.” The adage applies to much more than golf, and to much more than sports.

students who seek to live morally decent professional lives, “choose the right

company.”23 And of course there is an institutional corollary to that advice, “If you want

to have a company characterized by integrity and high ethical standards, hire good

people.”

Recall the paradoxical but central fact

regarding character: our behavior arises

out of our character; while at the same

time our character is formed by our

behavior. So it is with respect to the relationship between individuals and the

organizations to which they belong. Ultimately the character of an organization is

determined by the people who are a part of it; yet it is the institution that enhances and

enables the development of the persons who are associated with it.

23 Solomon, “Corporate Roles and Personal Virtues”, in Donaldson, Wherhane, and Cording, Ethical Issues in Business, 7th edition, Prentice Hall, p. 75

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Fans knew of the fantastic won/lost record of John Wooden’s UCLA teams, but the

basketball players knew more. They knew that they would become better players if they

became a part of his program. The ‘wizard of Westwood’ recruited great players, to be

sure, but they improved as they benefited from participating in an organization under his

leadership. Players who had been all-American quality in high school were willing to sit

on the bench during their first college years because they knew they stood a better chance

of becoming pros under Wooden’s program than if they had started as a star somewhere

else.

Playing with good players will increase your own performance level. Working with

sharp, productive people will improve your own professional skills. And associating in

an environment where integrity is valued and principles are upheld will develop and

enhance your own sense of honor and morality.

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fft: Have you ever been associated with an institution that in some way made you a better person than you would have been if you had not been a part of it? Or, have you been a part of an institution (these need not be ‘formal’) that made you worse? In either case, or both, how did that happen?

The Role of Leadership

While there is some inevitable performance-enhancing effect from associating with better

performers, it is the role of leadership that greatly magnifies that effect. Sure, you play

better golf with better golfers; and you will become a better person if you spend your

time with good people. But these results will more likely be significantly enhanced if

your association occurs in an environment that is designed and maintained to encourage

such improvement. John Wooden’s players probably would have improved just by virtue

of the fact of playing with each other, but not nearly so much as they did when that

association-effect was magnified because of his coaching.

An organization that wants to maintain a high degree of integrity and a positive ethical

atmosphere should do its best to hire people of good character, of course; but the

contributions of leadership are critical to obtaining maximum results.

There is no magic formula for leadership in this regard, just as there is no all-purpose

procedure for making good ethical decisions. Nor, for that matter, is there any sure-fire

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The demands and needed characteristics of leadership are too varied and context-specific to be summarized and fit into one simple set of do’s and don’ts.

…it is important to note that when we talk about the role of leadership in an organization we need not think that our discussion is confined simply to those at the top of the organizational chart.

formula for leadership in general. Which is not to say that there aren’t plenty of books,

tapes, and seminars available; and many of them are indeed valuable.

The demands and needed characteristics of leadership are too varied and context-specific

to be summarized and fit into one simple set of do’s and don’ts. The behaviors and traits

it takes to excel as a leader of a Navy SEAL team are significantly different – even if

some similarities can be found – from those that it takes to exercise political leadership in

a democratic society, and those in turn will differ from what it takes to be an effective

leader of a multi-national corporation. The person who would be a leader does well to

read the books and attend the seminars, and then to sort out the suggestions and strategies

that fit his or her context from the ones that don’t.

Thus our discussion proceeds with this caveat:

the role that leaders can play, the actions they

can take and the policies they can put in place

to encourage and enhance the ethical character

of their organization will vary from context to

context. What will be relevant to some will not likely be relevant to all.

Additionally, it is important to note that when we talk about the role of leadership in an

organization we need not think that our discussion is confined simply to those at the top

of the organizational chart. Although it is common to speak of different levels of

management it seems a bit awkward to speak of different levels of leadership.

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…a critical element of leadership consists in the ability to articulate to its members what it is that an organization is about.

Nonetheless, certainly such a phenomenon exits. (And we don’t want to get into a sterile

debate about the differences between management and leadership. If it seems more

appropriate, substitute ‘management’ where ‘leadership’ is used in this discussion.)

Depending on the size of the organization there may be hundreds, perhaps even

thousands, of persons whose job it is in some sense or other to lead.

Articulation

In many contexts a critical element of leadership consists in the ability to articulate to its

members what it is that an organization is about. The business leader concerned about

ethics will not be limited to defining the organization in terms of its product or the

marketplace (as in, ‘…to be the number one widget-maker in North America!’). His or

her job will be also to articulate the values of the organization.

What it takes to do this will vary widely

depending on particular situations. In many

cases the values of an organization will

already have been spelled out, but here, too, situations may differ greatly. They can

range from a simple set of value words (“Integrity”, “Dependability” , “Honesty”, etc.)

that may have been penned by the company’s founder decades ago, or they might be

represented in a thorough and complex code of ethics and behavior that undergoes

frequent revision and updating. Whatever the particular situation, it is one of the tasks of

organizational leadership to keep those thoughts alive by stating them or restating them,

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by referring to them and, if needs be, explaining them in ways that are fresh and relevant

to the context of the times.

This is common in the political arena. Leaders as far apart in their programs as John F.

Kennedy and Ronald Reagan may be best remembered for the influence they wielded

through the articulation of values and their ability to invoke the application of long-held

principles to the situations and context of their times.

Of course there are also situations where a set of values is implicit in an organization, but

they have not been spelled out. This happens in business organizations and it happens in

social groups. Certain kinds of behaviors are just ‘not done’; whereas others receive

approval and commendation, sometimes subtly. Most of us have had experiences with

unspoken group values in this way, though perhaps not in a business setting.

Unspoken values can be learned, no doubt about it; but it is an inefficient and sometimes

ineffective way of transmitting the priorities of a group to new members. A corporate

leader who is concerned about the perpetuation of the values of the organization will do

well to give voice to those traits and behaviors that are deemed to be important. Not only

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fft: Can you think of an example of a business whose structures implies certain values, even though those values may not be overtly stated? If so, what are the values, and how do the structural elements convey them?

these remarks are not meant to be confined to those ‘at the top.’

does it make the learning easier, but also it helps in attracting the kind of people you

want.

It is worth mentioning again that these remarks are not meant to be confined to those ‘at

the top.’ In a large organization with multiple functions spread over multiple locations

the words and exhortations of the C.E.O. may simply be too distant to have much effect

on, or even get the attention of, employees who are many layers below. This is not to say

that the C.E.O. ought, therefore, to remain silent about matters of values and principles.

Rather it is to point out that

value-emphasizing roles may

also be needed at a variety of

other levels within the company. Touchstone words like integrity and commitment may

refer to principles that are widely understood to be at the basis of the company’s

character; nonetheless it may fall to subordinate leadership to spell out how those

concepts are to be translated into reality for the sales division, engineering, human

resources, etc.

In concluding these remarks about the need for leadership to articulate organizational

values it is only fair to acknowledge that many people are understandably reluctant to

speak out about values, and even more reluctant to ‘take the lead’ in discussing them.

While there might be many reasons for such a reluctance, certainly two primary ones are

these: (i) a desire not to appear ‘preachy’, and (ii) an uneasy feeling that values are, after

all, subjective or relative and that therefore one’s own ought not to be imposed on others.

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If these are the values of the organization, if they define its character, then that’s what they are. Whether they can be ‘proved’ to be ultimately defensible is beside the point.

As a theoretical point of view the latter position has been considered in chapters II and

III; but the practical issue, even if we grant the premise, is whether or not it is appropriate

to impose one’s values on others. From the

organization’s point of view the answer is

clearly ‘yes’. If these are the values of the

organization, if they define its character, then

that’s what they are. Whether they can be

‘proved’ to be ultimately defensible is beside the point. The point is simply: “This is

what we are. Those who would be a part of this organization need to know this, and to

know that they are expected to conduct themselves in these ways. A person may have

every right to live and conduct themselves in other ways. But not here.”

As to the first concern, that taking the lead in the organizational value conversation seems

uncomfortably ‘preachy’: Well, there’s one of the burdens – if it is a burden – of

leadership. And surely it would not be one of the greater ones. Even more to the point

though would be to recall that which has been noted earlier in Chapter III. As a simple

matter of fact we are overwhelmingly more likely to encounter agreement rather than

disagreement about values and principles. So if spelling out company values seems like

preaching, at least most of it will be ‘preaching to the choir.’ And know that the choir

will appreciate the fact that the message is being delivered to those who need to hear it.

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fft: At whatever level, how can a leader (or manager, if you prefer) talk about values without sounding ‘preachy’?

Implementation

The leader who is concerned about and responsible for the promulgation of values

throughout an organization needs to give attention not only to the enunciation of those

values but also to the implementation of programs or practices that will help to instill or

reinforce that which has been said. And, again, it is obvious that the specifics of such

activities will vary widely from circumstance to circumstance. In some situations

holding periodic discussions or classes dealing with industry-specific ethical concerns

might be appropriate. In others, less formal procedures might be called for. The point is:

while it is important to spell out the values of a company, it is not sufficient simply to do

that. Attention must be given to providing ways for those values to be brought home to

the specific situations of different segments of the work force.

Just as it makes sense to provide task-related training for the sales force, or fabric cutters,

or middle managers, it makes sense to provide value training for employees. And it is to

be expected that the training modes and contents will vary just as different jobs vary.

The specifics of what it means to act with integrity will be quite different for an employee

in the accounting department than for one in human resources.

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Just as it makes sense to provide task-related training for the sales force, or fabric cutters, or middle managers, it makes sense to provide value training for employees.

It is the job of leadership at various levels to

devise the forms of value training and

reinforcement that are appropriate to their

areas of oversight and responsibility. Safety,

quality control, and customer service may all be important priorities of a company; but

one doesn’t expect specific training and systems to enhance these to be devised ‘at the

top’. That is a job for those who are closer to the situation. So, too, with implementing

the ethical concerns of the organization.

The discussion and development of codes can be extremely useful in this regard. And the

fact that a company may already have a code doesn’t preclude the development of so-to-

speak ‘subordinate codes’. Indeed, one of the common complaints about codes is that

they are so general and vague as to be unhelpful. It may sound nice that a company

enjoins all its employees to ‘do the right thing’, but that may not give much guidance to a

sales manager who has to settle a dispute between reps over claims to a new customer;

nor does it provide direction to the buyer who has been invited to enjoy sumptuous

transportation and lodging facilities offered by a vendor in connection with a trade show.

Codes have been discussed more thoroughly in Chapter III. Suffice it here to repeat both

that codes ought never be a substitute for thought, nor can they possibly cover every

situation. Nonetheless they may be extremely useful as guidelines tailored more closely

to job or industry-specific situations, and they can often give us answers in situations

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…policies and procedures – be they ethics guidelines or strictly functional – will have a much greater chance of acceptance and implementation if they have arisen out of the knowledge, concerns, and experience of those who will be affected by them.

where we have neither the time nor the inclination to engage in an actual or internal

moral debate over a preferred course of action.

Finally, it is relevant to note that while it may be the responsibility of leadership to

develop and/or train on codes that help employees understand how the values of a

company are practically implemented in the context of specific job roles, that is a task

that is best done collaboratively. Leaders must lead and managers must manage, to be

sure. Nonetheless policies and procedures – be they ethics guidelines or strictly

functional ones – will have a much greater chance of acceptance and implementation if

they have arisen

out of the

knowledge,

concerns, and

experience of those who will be affected by them. Moreover, if codes are to be useful

they need to be updated to take account of changing circumstances and new situations.

Nowhere are these better learned than from those who are on the front lines.

Example

It is said that there are three ways to lead just as there are three ways to teach: By

example, by example, and by example. That’s not all there is to it, for either role, of

course; but the point is well taken. How does this apply to the development of values and

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… there are three ways to lead just as there are three ways to teach: By example, by example, and by example.

ethical behavior in a corporate setting? What examples can leadership give that will have

the effect of enhancing the moral climate of the organization?

We certainly know what sorts of examples are bad in this regard. At the time this is

being written corporate America

is reeling from a seemingly

endless wave of revelations of

unethical and unlawful behavior by top executives in major corporations. The stock

market fall out from this news is well known; but a worse and longer-lasting effect is the

poisonous cynicism and contempt it breeds among employees. Those are attitudes that

they are liable to take with them as they move on to other jobs in other corporations; and

if they ever harbored sentiments such as loyalty, respect, and commitment before, it

cannot be expected that those will be forthcoming again soon.

For the most part, though, the character and behavior of board members, top executives,

and company owners are not – unless exposed in a negative way – likely to be observed

or noted by employees. This is where the role of lower-level leadership is crucially

important. All the codes and value statements in the world become meaningless if up and

down the organizational chart there is not a continuous chain of individual professional

behavior that lives out the values that the company would espouse. The sales manager

who treats his own staff as merely means to achieve his personal advancement is not

going to be successful at instilling a customer-first ethos in his department. The finance

officer who makes it a policy constantly to put the squeeze on suppliers and to string out

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All the codes and value statements in the world become meaningless if up and down the organizational chart there is not a continuous chain of individual professional behavior that lives out the values that the company would espouse.

payments is not going to breed in those around and under him the kind of character trait

that would result in employees who go the extra mile for the company. Whatever

exactly, “what goes around, comes around” is supposed to mean, it is true.

When we talk of leadership by example we

don’t mean that leaders engage in the same

sort of tasks as those that they influence. If

you want to influence those who report to

you to be passionate about their work, then

you be passionate about your work. It need

not be the same kind of work. Nor are the skills presupposed to be the same. It takes

different skills to be a sales manager than it does to be in sales. (Not that there isn’t some

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overlap.) A leader needs to exercise the skills and virtues required of him or her, in order

to affect others so that they will do what is required of them.

Conclusion

In concluding the discussion of the role of leadership in the development of corporate

character it is worth recalling that the root meaning of integrity is wholeness. The

wholeness of a person of integrity consists not only in the unity of principle and action,

but also in the integration of values, not a compartmentalization of them. A person of

integrity doesn’t have one set of ethical values for home and another for the office.

Just as we noted earlier that moral values occupy one space on a continuum that includes

tastes and preferences, so too do those values that seem ‘only’ job-related occupy space

on the same continuum as those that are ‘ethical’. There is no divorcing honesty as an

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If you want to influence those who report to you to be passionate about their work, then you be passionate about your work.

fft: “Whatever goes around, comes around.” What does that mean to you in the context of an organization and the development of an organizational culture?

ethical concept from the workplace value of doing a job well. It would be naïve to think

an emphasis on work quality could be unrelated to a commitment to trustworthiness.

It bears repeating that the essential ethical trait consists in a respect and regard for others.

But this is not a virtue confined exclusively to ‘ethical’ issues; it is at the heart of

responsible and professional behavior. It is returning phone calls, consulting with

subordinates, being prepared, and doing one’s best to meet expectations. The leader who

takes on the responsibility of instilling a good work ethic will at the same time be

teaching ethical work.

###

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Chapter VIII

Wrap-up Questions

1. Good leadership will ________ the beneficial effects and influences that the members of an organization may have on one another.

Which word best fills the blank to complete the sentence?

(a) enhance*(b) neutralize(c) overcome(d) minimize(e) all of the above(f) none of the above

2. “Suppose that honesty and dependability are among a company’s core values. It would be the job of leadership to develop a single company-wide training program showing how those values are realized in the same ways in every division, be it R&D, advertising, sales, or production.”

True False*

3. Those who lead must have the same jobs and responsibilities as the ones whom they lead.

True False*

4. If a company wants to foster certain values throughout its organization, then it is the job of company leadership to

(a) articulate those values.(b) develop programs to train on those values.(c) be examples of those values at work.(d) all of the above*(e) none of the above

5. One reason that it is difficult for companies to teach or encourage ethical behavior is that the character traits that constitute ethical virtues have little value in the world of business.

True False*

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158

Case Studies

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Introduction to Case Studies

The Case Studies that follow are all fictional, although some of them are based on actual

events. All of them are based on things that happen out there in the real world. In all

likelihood readers will wish they contained more information in order that better

judgments could be reached. Part of the reason that they don’t is that they are meant to

be reflective of the experiences we all have – which is to say, there is never enough

information!

Each Case Study is accompanied by both ‘Pre-reading’ and ‘Post-reading’ assignments.

Whether the sections can be dealt with in that way will, of course, depend upon the

format of the class or seminar in which they are being read. If they can’t be done in that

order, not to worry. The main point is that they are provided in order to elicit from you,

the reader, thoughts that will help to make the studies resonate.

As you read the Case Studies section, it is recommended that you keep a journal of each

study. Some important elements to include in such a journal are the following:

What is suggested by the title of each case study?

What ethical issues are raised by the case study?

How, in any way, are the events or conflicts from the case study similar to ones you have experienced yourself, or heard of second hand?

What is your general position on the ethical issue raised in the case study?

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Please note that there are no correct or incorrect answers to these questions. They are

simply for your reflective benefit.

After you have completed the case studies section and your Case Studies Journal, try to

synthesize your position. See if you can make any general statements about your

opinions regarding ethics at work.

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Case Study 1: Conflicting Loyalties

Pre-Reading: “Conflicting Loyalties”

Free Writing

For 10-15 minutes, write about the questions below. Do not worry about spelling or grammar; just try to get as many ideas as you can down on paper.

What does it mean to “look the other way”? What are some examples of looking the other way? Are there times when you should never look the other way? Are there times when you should always look the other way? What are the differences?

BrainstormingIf you discovered that one of your co-workers was doing the following, would you tell a supervisor? Circle “I” for Ignore it or “R” for Report it.

I—R (a) using the copier for personal use to invite some colleagues to a weekend barbeque

I—R (b) taking under-the-table cash kickbacks from a supplier

I—R (c) spending company time daily to send personal e-mail

I—R (d) entertaining friends with a company expense account

I—R (e) leaving an hour early each day without docking it

I—R (f) making personal long-distance calls on the company phone

I—R (g) using the company car contrary to policy—about 10 miles per weekend

I—R (h) looking at pornography on a company computer during break time

I—R (i) accepting Super Bowl tickets from a supplier that exceeded company limits by $60.

I—R (j) dating a subordinate employee contrary to company policy, even though the relationship is voluntary.

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Group discussion

1) In small groups, discuss your answers to the questions above. Make a list of additional examples where the choice is to look the other way or to snitch. As a group, come up with any guidelines which inform you whether looking the other way is acceptable or not.

2) What do the members of your group feel about “snitching” or “whistle-blowing”? Is whistle-blowing an honorable act? Why or why not?

3) What are alternative ways to react to a co-worker’s violations (i.e., rather than blowing the whistle or ignoring them)?

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Conflicting Loyalties

Dave Novak owes a lot to Ann Bartlett, and he knows it.

Ann and Dave are both employees of Aegis Instrumentation, a producer of measurement

and timing devices. Headquartered in the mid-West, Aegis has production facilities in

five southern states and Mexico. Aegis employs approximately eighteen thousand

people.

Ann is an Assistant Director of Procurement in the Optics Division, also located in the

mid-west. Dave is head of the Accounting Department in the same Division. Ann has

worked for Aegis for seven years, Dave for five.

Ann and Dave first became acquainted when he was Comptroller for R&S Components, a

small but vital subcontractor to Pathway Communications, for which Ann was Vice

President for Production. During the operating relationship of the two companies Dave

initiated two programs which resulted in significant cost savings, cost savings which

were passed on to Pathway and which were notably career-enhancing for Ann. She told

Dave she would always be grateful to him, and that he should feel free to call upon her if

there were ever any way in which she could be helpful to him.

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It was through Ann’s doing that Dave came to Aegis. She had left Pathway a couple of

years before an industry shakeout took its toll on Pathway, many of its similar-sized

competitors, and, of course, a host of their subcontractors and suppliers. Dave hadn’t

even yet begun to send out résumés when he heard from Ann. ‘She had read about what

was happening. There was a possibility of something at Aegis. Would he be interested?’

Dave’s career at Aegis is on a solid track. Company insiders expect that he will be

C.F.O. some day. And while there is no question that Dave’s success within the

company is entirely merited, there is also no question that he wouldn’t have had the

opportunities he has had without Ann’s sponsorship.

There is absolutely no romantic, or even very personal, relationship between Ann and

Dave. He is a devoted family man. She is single. They mix in very different social

circles. While they both have considerable professional respect for each other, only in

the most superficial sense would they be considered ‘friends’.

Aegis has undergone significant changes in the past three years. The period of change

coincides with the tenure of E.J. (for Everett Jones) ‘Stand Up’ Davenport as C.E.O. of

the company. (The ‘stand up’ nickname has been attached to Davenport ever since the

widely publicized ‘stand-up-and-be-counted’ speech he gave to the graduating class of

the Redstone University School of Business.)

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The Board of Directors of Aegis Instrumentation brought Davenport in as C.E.O. in the

wake of a kick-back scandal that had primarily involved the Sonics Division but that

reached all the way up to the highest corporate offices. The scandal had severe

repercussions for Aegis and resulted both in lost business and depressed stock prices.

The Board’s charge to Davenport had been to bring unity to Aegis’ heretofore disparate

and independent divisions, and to establish a corporate culture of integrity that would

engender both customer and investor confidence.

Though no easy task, it was a charge that ‘Stand Up’ relished. In his first six months on

the job, Davenport traveled to every facility and office that Aegis maintained. He spoke

at over two hundred employee meetings ranging in size from groups of ten to two

hundred. His message was simple: “Working together we can make Aegis a company

that we can all be proud of. No one person can do that. No one department can do that.

We can only do it together.”

Davenport had attended military school, and he was fond of quoting an honor code

learned there. “Cadets neither lie, cheat, or steal. Nor will we tolerate among us those

who do.”

The new C.E.O. initiated a variety of programs that were intended not just to improve the

image of Aegis but seriously to begin the work of establishing a corporate culture of

ethics and integrity. Divisions and departments were encouraged to develop codes that

were relevant to the specific situations that their employees encountered. Guidelines for

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dealing with customers, vendors, and each other were published and discussed. In each

division an Office of Ethics was established. Not only did the office develop programs

and seminars, but also it maintained a confidential “dialogue line” whose function was

both to provide private consultation and advice and also to receive complaints or reports

of inappropriate behavior.

More than a few employees derisively referred to the dialogue line as the snitch line and

adamantly opposed it. On the other hand a considerably larger number not only accepted

it but also acknowledged that it seemed to be performing a useful function. Some of the

company’s more notorious ‘bad apples’ had been removed as a result of this new

program.

“What a coincidence; and what a pleasant surprise,” thought Dave when he spotted Ann

Bartlett across the dining room at the Shadow Mountain Country Club. Dave certainly

didn’t expect to see anyone he knew at a place like this. Located right on the California

coast, Shadow Mountain was as famous for its exclusivity as it was for its thirty-six holes

of impeccably manicured fairways and greens, the annual site of one of the most

prestigious Pro-Celebrity charity tournaments in the United States. As Dave would put it,

Shadow Mountain was ‘way out of his league’; but he was happy to be there, the guest of

one of his brother’s colleagues at the nearby university hospital. It was a perfect final

event as Dave wound up his west coast vacation.

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Dave knew that Shadow Mountain would have been out of Ann’s league too, and he

wondered what connection might have brought her there as he headed across the room to

greet her. Both his curiosity and his sense of pleasant surprise came to an abrupt end, for

he saw that Ann was in the company of Frank Schilling and his wife Dorothy. The

Schillings are well-known to Dave, not personally but professionally. They are the

owners of Silica Products, a major supplier to the optics division of Aegis.

Eye contact had already been made, and Dave was much too close to change course,

though he wished he could have disappeared. He knew there was no industry event or

conference going on anywhere remotely near Shadow Mountain, and he also knew that

Silica had no business facilities anywhere nearby. Finally, Dave knew that under E.L.

Davenport, Aegis had adopted some very restrictive guidelines regarding accepting gifts

and/or entertainment from customers and suppliers – guidelines that most assuredly

would have ruled out an outing at Shadow Mountain.

Cordial greetings and introductions were exchanged, and then Ann quickly took Dave

aside. “Don’t even ask,” she said quietly but firmly. “You never saw me, and this

encounter never took place.” With that she turned, called out “So good to see you”, and

departed for the private dining room.

The next week Dave came to see Ann in her office. “I really need to talk to you about…”

he began, but she cut him off quickly. With the same demeanor exhibited at Shadow

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Mountain she delivered essentially the same message. “David, I’m not going to discuss

this, and I don’t want to hear about it again. You never saw me there, and that’s that.”

###

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Post-Reading: “Conflicting Loyalties”

Questions for discussion or writing

1. How should Dave proceed? Should he just drop it, pass it on to the company’s confidential ethics office, or should he continue to dig? If he should drop it, explain why. If Dave continues to dig, how should he go about it?

2. How does Dave’s behavior so far reflect on his person? What would you expect him to do next? What would you do? How would that reflect on his career?

3. Does Ann’s position with Aegis have any bearing on how Dave should proceed? Why or how?

4. Aegis is experiencing a change in their corporate culture and mission. Perhaps not too long ago, what Ann was apparently doing was the norm, and not against any company policy. Would this have any effect on how Dave should react? How so or why not?

5. Does Ann’s history with Dave have a bearing on how Dave should continue?

6. Is it unethical of Ann to put Dave in this position, to cut him off with no explanation?

7. What should Dave do if Ann ‘confessed’ that she broke company policy, but swore that there was no improper behavior on her part?

8. What should Dave do if Ann ‘confessed’ that she broke company policy, acknowledged that she had given Silica Products preferential treatment, but promised that she would never do so again?

Writing

By yourself or with collaboration, do the following.

Imagine that you are Dave, and that Ann continues to be unwilling to discuss your concerns with you. Write her a letter about this.

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Proposition for debate by the entire class

“Obligations to friends always outweigh obligations to impersonal institutions.”

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Case Study 2: Good Consequences

Pre-Reading: “Good Consequences”

Free-Writing

Spend 10-20 minutes writing about the following questions. Do not worry about making grammatical errors or spelling mistakes. Be prepared to share your ideas with the class.

1. Do ENDS ever justify MEANS, even if it involves rule breaking?

2. If your boss or supervisor tells you to break the rules, does that relieve you of your ethical responsibilities?

3. There are situations in which following the rules makes the system work poorly. For example, if everyone drove the speed limit in a large city, traffic would be worse. Can you think of any rules in your workplace which, if followed, would hinder the efficiency or goals of the system?

Personal Narratives

Think of a personal story in which you had a hard decision to make, a dilemma in which either choice would hurt or offend someone else. Consider how it was resolved and what the alternatives were.

In small groups, relate your stories to one another. Feel free as a group to ask questions of the story-teller (for clarification and for opinions). When all of the narratives have been told and the questions have been answered, choose, as a group, the story with the most challenging ethical problem.

Report to the entire class your group’s most difficult ethical dilemma.

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Good Consequences

Frank Briton was delighted, for several reasons, to have landed the job as a loan officer

for Community Action Bank. For one thing the past three years working as an

independent contractor sales rep for Keystone Jewelry had just been too stressful for his

young marriage. The income had been ok, but too inconsistent. It was always ‘feast or

famine’. He had had to spend way too much time on the road; and the benefits package

available to him bordered on the non-existent. Community Action, on the other hand,

was at the other end of the spectrum in all these regards. He would have a modest but

steady base salary; and the commission-plus-bonus compensation package could be quite

lucrative for a producer. He wouldn’t have to travel. The ‘Community’ in ‘Community

Action Bank’ was quite literal in this regard. The bulk of the bank’s customer base, and

Frank’s prospect territory, consisted of an area only about thirty square miles. Finally,

the benefits package was outstanding, which was especially meaningful to Frank’s

pregnant wife.

As an additional plus, Community Action Bank’s image and business philosophy had a

strong appeal to the idealistic streak that ran deep within Frank. Community Action

Bank was founded in the middle 1990s on the eastern edge of metropolitan Los Angeles.

California was just emerging from a recession that had been both long and far-reaching.

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Unemployment in some areas – such as the one where Community Action first opened –

was still in double digits. Opening a local bank in such circumstances was bold enough,

but when one added to that the wave of mega-bank mergers that was going on, then

opening a ‘mom-and-pop’ seemed practically audacious.

Of course Community Action was not exactly a mom-and-pop operation. Its founders

believed, and were soon proved correct, that they could employ new technologies –

particularly the internet – in ways that would allow them to be both more flexible and

more cost-efficient than their ever-more impersonal competitors. This was particularly

true because, as the Community Action people knew, their long-established competitors

were still wedded to outmoded main-frame systems, ones that were making mergers more

and more difficult to accomplish smoothly.

The business plan – not fully described here – was evidently a good one. Five years after

opening its first branch Community Action Bank now has four locations in the greater

Los Angeles area, and, in a generally declining market, its stock has risen thirty-two

percent above the initial offering price.

The ideological appeal of Community Action Bank consisted in its strong commitment to

bring business and banking opportunities to what are euphemistically referred to as

underserved communities. Make no mistake, Community Action did not cast itself as a

charitable institution. It was in business to make money, and its annual reports bore that

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out. But it specifically chose to conduct its profitable business in locations and among

people who banking institutions had traditionally ignored.

Community Action Bank had been particularly aggressive in working with various

government and semi-government agencies (such as SBA, FNMA, and FHA), tapping

into programs that had been designed to bring about the same sort of results that the bank

sought to achieve. In its first four years of operation Community Action Bank was twice

recognized for its role in implementing first-time buyer programs in the communities it

served.

Frank had been impressed with the two-week training program the bank had put him

through; and even though the branch manager, John Novak, had kidded about the

difference between training and the real world, it seemed to him so far that the program

had prepared him well. In his first three days on the job he had followed up on a half-

dozen loans in various stages of progress that were left over from his predecessor, taken

two auto loans through the approval process, had begun the paperwork on one home

mortgage application, and had an appointment to take another.

It was the second home mortgage application that had him stumped, and he went to John

Novak for help. “I don’t know, John,” sighed Frank, “I’ve tried to work this every way I

can think of, and I just don’t see how we can make Mr. and Mrs. Ramos this loan. I’m

trying to run them through on that Opportunity Loan program; it’s by far the most lenient

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qualifier program we have, but I still just can’t make the numbers work. They’re about

$200 a month short on income.”

“What really bothers me,” Frank went on, “is that Joe Ramos says we made a similar-size

loan to his brother Pete when Pete purchased his home last fall. Interest rates were even

higher then, though not by much, and Joe says that he makes more money than Pete.

What am I missing?” John Novak asked Frank to leave the Ramos loan application for

him to look at, and promised to get back to him later in the afternoon.

That afternoon, John called Frank back over to his office. “Close the door, please, and

let’s take a look at this Ramos situation. I’ve looked at the package, Frank, and I can see

why you were having a problem. I told you that training program didn’t cover

everything. What we need to do here is to give Mrs. Ramos a part-time job.”

“I beg your pardon?” was about all Frank could muster.

“Frank, you were right. The Ramos’ need to show about $200 per month more income in

order to qualify under the program guidelines. So we will give them $200 more per

month.” John Novak reached into his file cabinet and pulled out some papers. “When

you put the final version of that loan application into the computer, you put down that

Mrs. Ramos earns approximately $200 per month – don’t make it exact – working from

home at a telemarketing job. Here is a blank pay stub and a verification of employment

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form, both with the telemarketing firm name on them. You fill in the right amounts, and

include them in the file. We’ll make the loan.”

Remembering the serious admonitions against misrepresenting data on loan documents

that Frank learned in the company training, he continued to stumble for words.

John Novak cut Frank off in mid-stammer. “I think I know what you’re thinking, Frank,

and we don’t even want to go there. Maybe you’re one of those idealists who wants to do

good and also wants to do right. Well, in this world you can’t always do that; it’s kind of

like having your cake and eating it too.

“You want to see people like the Ramos’ be able to buy a house. So do I. So do the

founders of this bank. So even do the people back east who came up with this

Opportunity Loan program. But the fact of the matter is, even though the program has

extremely lenient guidelines, people like Joe and Martha Ramos still can’t meet those

guidelines. So what should we do? Deny them the loan? I don’t think so.

“No, what we will do is approve the loan, fund it, and then ship the file off to

Philadelphia where some file-checker will look at it to see that everything meets the

guidelines, and then it will never see the light of day again. And who will be the worse

for it? Will some investor be hurt because the Ramos’ default on the loan? Hardly. For

one thing, we know they can afford it because they are paying that much in rent now –

without any tax benefits!

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Besides, I don’t care if Joe Ramos loses the job he has now; he’ll work two others, and

his kids will work, and his cousins will work to help them keep that house. They’ll get a

piece of the American Dream when they close on that house, and they are not going to let

it go! And giving the Ramos’ that kind of opportunity is what we all are trying to

accomplish here, isn’t it?”

###

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Post-Reading: “Good Consequences”

DebateGroups

Divide into AGREE teams and DISAGREE teams; informally debate the following:

Frank should create fictitious income for Mr. Ramos to get his family a home loan, even if it is illegal.

Writing

(1) Knowing that his supervisor wants him to do something illegal, what are some steps that Frank should/could take?

Small-group Discussion

1. Would it make a difference if the situation had to do with falsifying documentation on behalf of a reasonably well-to-do investor?

2. Does it matter that the goals of the loan program are to create homebuying opportunities for people like the Ramos family?

3. Suppose this scheme had been proposed to Frank by a co-worker, and that the supervisor knew nothing of it. Should that make a difference to Frank?

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Case Study 3: Inside Knowledge

Pre-Reading: “Inside Knowledge”

Free-writing and/or Discussion

Imagine the following situation:

You are fairly confident that your long-time partner has been embezzling from

your jointly owned business. Many of your partner’s recent personal purchases

and explanations of business expenses just haven’t added up, especially

considering the belt-tightening of the last eight months. Your partner is out of

town for the week on a Caribbean cruise. Stan, your administrative assistant, has

just delivered the company mail and phone messages to your desk. In the

delivery is the current statement from your partner’s personal bank account. Also,

there is a message from your partner’s real estate broker—who happens to be a

friend of your family’s—claiming that she had found “the perfect investment

property.” In the adjacent office are the accounting records—your partner’s side

of the business.

1. How would you proceed? For example, would you look at his bank account?

Would you call his broker?

2. Would it normally be unethical to look at his personal bank account or to check up on his personal business? Does this situation make it different? Why or why not?

3. Do suspicions provide an ethical ‘pass’ to do what otherwise might be considered illegitimate snooping? Are the ‘rules’ here any different for companies than for individuals?

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Inside Knowledge

There was a certain irony to the fact that Dennis Westin was the person who accessed the

‘Confidential – Sensitive’ email message that C.F.O. Ron Stuart had sent to C.E.O. Carla

Manning. After all, it was Dennis the MIS Director who had designed the firewalls and

security system for OnGoing.com’s intranet email system. On the other hand, what

better-equipped person to breach the system could there be?

Dennis was one of the originals with OnGoing.com. They used to kid him about being

‘the tech company’s tech guy’. ‘Supertech’ was such a common nickname for him that

someone made him a tee shirt with the familiar big red S logo imposed on blue and a

golden T. Those were exhilarating times, with the twenty-hour days and the cold-pizza-

and-coke breakfasts. Actually, from a work satisfaction point of view, those were the

best days in Dennis’ mind. Laying down the electronic infrastructure was a lot more

interesting to him than all the artsy, marketing-oriented website creation stuff. Most of

that was consumer psychobabble to him. He preferred the purely technical side.

Ongoing.com was one of those early 90s Internet start-ups that had actually kept its legs,

not that it hadn’t had a stumble or two. Originally conceived as an aggregator of ‘best-

priced’ airline fares it soon became a player in the field itself, buying from the airlines

and reselling. Moreover it grew and grew as a one-stop web site for all sorts of

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discounted services as Carla made deal after deal, and then went on the mammoth

acquisition binge.

Ongoing.com’s IPO went out at $20, and in less than eighteen months rose to $127. But

like so many others of that era, all the debt incurred to finance the acquisitions began to

take its toll. Currently, Ongoing.com has been trading around 65, not too bad

considering what had happened to many of its contemporaries. A retrenchment was

under way, some of the more dubious acquisitions had been sold off, and the books of the

past two quarters actually showed a modest profit. It seemed that the period of investor

punishment might have passed.

Being in a settling-down mode was just fine with Dennis. He had never cared that much

for Carla’s go-go attitude anyway. It wasn’t the work and drive that he minded, it was

this ‘rule the world’ thing she seemed to have. That was one of the reasons he had

decided to monitor her private emails. You never could tell exactly what she was up to,

and he had so much at stake with the company he thought it prudent to keep an eye on

what she was doing.

The other reason, of course, was his immense dislike and distrust for Ron Stuart, one of

the officers who had been brought into the company later in the game. Finance guys

were not exactly Dennis’ cup of tea anyway, and Stuart, in his eyes, was the worst of the

worst – one of those guys who could talk about the same numbers in six different ways,

and spend other people’s money all day long.

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Laura Setting and Dennis had been meeting for an after-work beer off and on for more

than five years now. She was one of the originals too, and despite the fact that she was in

marketing she was a person who Dennis both liked and respected. The feeling was

mutual, even though he was a tekkie. They were good friends. The only thing unusual

about their meeting today was that Dennis had chosen a little pub some blocks away,

rather than the usual watering hole for Ongoing.com employees that was on the ground

floor of the building where the offices were located.

Dennis even looked around before he started in. It seemed like some class B spy movie.

“Laura, there’s something big going on. It’s big, and it’s bad, and it’s going to effect you

and me.” He went on to tell her about his monitoring of the top executives’ internal

emails – he had never told her this before – and he explained that of course he didn’t read

all the stuff – that would take forever – just the ones that carried the top security

designations. He figured he only wanted to know about things that they didn’t want

anyone to know about. It was his own little ‘cover-your-assets’ program.

Reading other people’s mail really wasn’t exactly Laura’s style, but for some reason she

didn’t react in a critical vein at all. “So what did you learn?”

“Well, Stuart sent Carla a long email last night – I just picked it up this morning – telling

her that ‘the game is up’. I don’t know all the details, and probably wouldn’t understand

them anyway, but it has something to do with the way they’ve been doing the accounting.

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I guess the company’s really been losing money, and they’ve been manipulating the

books so that it’s looked like we were making a profit. Stuart say’s the accounting firm is

about to bail out on us – and he’s really mad about that because he says they’re the ones

that gave him the ideas in the first place – and that the S.E.C. is going to be on our case

by next week. He really sounded panicked.

“Laura, it sounded like the company’s stock isn’t going to be worth a nickel, and you

know what that will do to us. We’re not like that bunch on the top floor. They’ve already

sucked so much money out of this company, they could lose all their stock and they’d

still be rich. But me, almost everything I have – my retirement for sure – is all tied up in

the company’s stock. And I know you’re in the same boat I’m in. That’s why I’m telling

you this. I think we should both sell all the stock we can.”

“Wow, Dennis, that’s heavy. Are you sure of all this? I mean, what if you’re

misinterpreting something? Selling everything would be enormous. Even at today’s

values, that would be one hell of a tax bite. And besides, wouldn’t it make someone

suspicious? I know we’re not the biggest shareholders on the block; but we have been

with the company for all this time. If someone noticed, what about insider trading

charges?”

“Well I don’t know how all those rules work, but this isn’t like we’re board members

who are plotting a takeover or we just learned that R&D has discovered a cure for cancer

pill; I mean, we’re just taking care of ourselves. And besides, what are we supposed to

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do? Should we just sit here waiting for the company to crash, and watch all our hard

work go down the toilet? I don’t think so.”

Laura nodded, “Don’t you think we should tell some of the others? Think of Jack, and

Candy, and Lynne. My gosh, I could go on and on and on. They’re in the same boat we

are.”

“Laura, I think that would be a big mistake. You get a steamroller effect going on and we

probably could be accused of something. Besides, I’d just as soon nobody know that I

ever had this information, much less how I got it.”

“But, Dennis, how can we not tell them. I’m not going to get too worked up about a lot

of the new guys, but Candy? Lynne? I could never look them in the eye again if I got

out and they got stuck. There are 15 or 20 people we’ve been with since Day 1. I

couldn’t do that to them.”

“I disagree, Laura, I think we’d better just confine this to you and me. And we’d better

do something quickly and quietly.”

###

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Post-Reading: “Inside Knowledge”

Writing/Discussion

(1) What, if anything, should Laura do with the information Dennis has passed on to her?

(2) Were any of Dennis’ behaviors or attitudes unethical? Was any of it acceptable?

(3) What are Laura’s ethical burdens in this situation?

Debate

In AGREE teams and DISAGREE teams, debate the following topics:

1. Eavesdropping is acceptable if you think someone is going to harm you or your company.

2. It is ok to use your inside knowledge to increase your profits.3. It is ok to use your inside knowledge to protect yourself from losses.4. It is your duty to pass on company news to colleagues it may affect,

regardless of whether or not it has been labeled “confidential”.

Debate Format

(1) AGREE presents its case (3 minutes)(2) DISAGREE rebuts the Agree Case (2 minutes)(3) AGREE cross-examines* DISAGREE (4 minutes)

(4) DISAGREE presents its case (3 minutes)(5) AGREE rebuts the Disagree Case (2 minutes)(6) DISAGREE cross-examines* AGREE (4 minutes)

* In these rounds, the cross-examining team (any or all members) ask questions of the opposing team. The opposing team should try to answer without asking questions.

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Case Study 4: The Game

Pre-Reading: “The Game”

Free-Writing and Discussion

For the next 10-20 minutes, write about any of the questions below. Do not worry about spelling or grammar because nobody is going to read what you write. Just try to get as many ideas as you can on paper.

1. Are some lies worse than others or are all lies the same? If they are different, then which ones are the worst? Which ones are not so bad?

2. White Lies are lies that (supposedly) don’t hurt anyone. What are some good examples of white lies? If there are no white lies, then why not?

3. What is a bluff? (Give some examples of bluffs.) Is a bluff different from a lie?

Discussion Questions

Answer the questions in small groups.

(1) Under what circumstances is it common for people to lie to any of the following: a salesman; a buyer; a doctor; a patient; a lawyer; a priest or pastor; a policeman; a government authority; a classmate; a teacher; a friend; a best friend; a spouse; a sibling; parents; children; a stranger…

(2) Are any of the lies your group mentioned above culturally acceptable? Which are the least acceptable in your group’s opinion? Rank the lies from worst to not so bad or even good.

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The Game

Ted Lansing and Jerry Burns have known each other for years. In fact they had worked

together, back in the Silicon Valley days, along with Daryl Newsome who now owns the

company where Jerry works.

Ted is the Director of Purchasing for the Hand-Held Devices division of Levco, a

manufacturer of electronic games designed for children in the six to ten year old age

groups. Levco is headquartered in Southern California and has three assembly plants in

Mexico, just across the border. Levco produces children’s electronic games with

packaging, instructions, and displays in eighteen different languages.

Jerry is the western regional sales representative for Vizscan, a manufacturer of LCD

display modules such as those used in Levco’s products. Vizscan has been one of

Levco’s suppliers for almost ten years, and Jerry and Ted have interacted frequently

during that period of time.

They’re not exactly friends, but they know each other and get along well enough that they

occasionally play golf together when Jerry is in town. Sometimes they will dine together

when they happen to be at the same trade show. Actually, Ted and Jerry are somewhat

related in that a cousin of Ted’s married a distant cousin of Jerry’s, but neither of them

could actually draw the family tree line that connects them.

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Ted wasn’t somber, but his tone of voice conveyed that he was serious. “Jerry, you know

I like to do business with you and Daryl, and I’d love to be able to just hand you this

order. But the competition’s getting tougher and tougher, my friend, and you know that I

have people to answer to also.”

The product order Ted was referring to was a display module for Levco’s newest hand-

held product, due out in time for the Christmas season. Levco design engineers expected

the displays to be bid at about $2.50 per unit. Ted’s boss had told him that if he could get

the units for $2.35 there would be a $10,000 bonus in it for him, as well as another ‘gold

star’ in his file. Of course Jerry knew nothing of this. He only knew that Ted had said

the price needed to be “in the $2.30 range.”

This was a deal Ted really wanted to make. The bonus would be great, sure, but deep

down it was the challenge that drove him.

“Well, Ted, you know we want the business. I wouldn’t pretend it’s no big deal to us one

way or the other. You know that 500,000 units would mean a lot to the company, and to

me. But since I talked to you last week and went back to the production guys I still can’t

get a figure out of them lower than $2.40.”

“Man, I’m sorry to hear that, Jerry.” “Look, you know that I normally wouldn’t do this;

but let me show you what I’m up against.” He reached into his drawer and pulled out a

file. “Gloteck has come in at $2.36. Here’s their response to our bid request, and their

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firm commitment.” Ted pulled some papers from the file and placed them in front of

Jerry. There, on Gloteck letterhead, was the $2.36 bid along with all the specs for the

units.

“Jerry, they want this order, and they are going all out to get it. They’ve invited me up to

Vancouver to tour their facility, meet with the president, and sign the deal. First class

too.” Ted dropped the airline ticket on top of the Gloteck letter for Jerry to see.

“Man, I see what you mean. But, damn it, I’m not going to let those newcomers squeeze

us out. I need to talk to those guys back home, Ted. Maybe I need to sharpen their

pencils for them. Give me a couple of hours, I’ll get back to you.”

Jerry called a little bit after 4:00. Vizscan would do the deal for $2.34; 500,000 units;

same terms as always.

Ted was as bubbly as the champagne he had ordered. What more wonderful way to

celebrate his victory than dinner with Janice at The Right Side, the current reigning

trendy restaurant in town. He and Janice had been dating about two months now, and it

was so nice that she liked to hear about what he did at work. Just the opposite of his ex-

wife’s ‘leave it at the office’ attitude.

Ted told the story with relish. How he set Jerry up initially with that ‘$2.30 range’

comment. And then the ‘letter’ from Gloteck. Oh the miracle of modern computers and

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a good graphics department. The letterhead looked better than Gloteck’s own stationery.

But Ted thought the airline ticket was really the crowning touch. It was worth putting out

the thousand dollars or so to be able to lay down that first class ticket. Of course he still

had plenty of time to cancel for a refund anyway.

“But, Ted, you lied to him. And you guys are friends. Even his boss is your friend. Isn’t

that a problem?” Janice was so sweet and naïve. Maybe that’s what was so attractive

about her.

“No, Janice, that’s not lying, that’s business. Besides he’s not really a great friend, not

that it would matter. Look, if he were in my shoes he’d do the same thing to me, though I

don’t know if Jerry’s quite that clever. Anyway, he’s probably done the same thing to me

in one version or another.”

“I don’t understand, Ted, how can you live like that?”

“Don’t you see, Janice, it’s just like a game. I bluff, he bluffs. Heck, everybody bluffs;

and I’ll bet your teachers’ union bluffs when you are in contract negotiations too.”

“There’s nothing personal going on here, we’re just playing by the rules of business.

Why I even read a journal article about that when I was in business school.

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Remember, he told me they couldn’t get under $2.40; but of course they could, and they

did. Now I don’t hold it against him that he was bluffing me. That’s just the way the

game is played.”

###

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Post-Reading: “The Game”

Questions for Discussion or Writing:

1. Did Ted lie to Jerry? Why would you call it lying, or why not?

2. Do you think Jerry was deceitful to Ted? If you think so, then how was he deceitful? If you don’t think so, then why not?

3. What things do both Ted and Jerry need to consider when playing their negotiation game? (For example, do they need to consider things like their history as friends? their family relationship? their future business? how much money they will make on this deal? Etc.) Which considerations are most important?

4. Is some deceit acceptable in business? Explain your answer.

Role Play:

One of you will pretend to be Ted while another student will be Jerry. Replay the interaction between Ted and Jerry as you would if you were those characters. Begin with: “Jerry, you know I like to do business with you and your company…”

Dialogue Writing/Practice:

Imagine that during the next morning, Jerry calls Ted with some bad news: His company actually cannot deliver the modules at the new price of $2.34 per unit, but can only produce them for the original $2.40 to make the deal profitable, and therefore, worthwhile.

Write the dialogue between Ted and Jerry for this new situation.

Do the characters continue to play the business game, or do they change the way that they interact?

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Case Study 5: Padding

Pre-Reading: “Padding”

Interview

Interview two or three different people in the classroom. Ask them the questions below, but feel free to ask different follow-up questions; ask for any stories that the questions bring to mind.

Is someone’s personal background relevant when considering him/her:… for a job?…for a promotion?…for membership on a team unit?…for a publicly visible position?…for a partnership?

Do you believe everything someone puts on a resume?

How are resumes and advertisements different?

Discussion

Note down any strong similarities and large differences in answers of the interviewees. Note down the elements of any striking stories told by the interviewees. Discuss your findings with the other students.

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Padding

Susan Riggs possesses an impressive resume´ – B.A. from Wrightman University, track

team and debating society; two years in the Peace Corps, an Edgemont M.B.A. earned

while she was working for The Edge – and she has a history of job performance to match.

As a buyer, then store manager, and ultimately regional director for The Edge, a trendy

so-called ‘action oriented’ clothing store chain, she compiled an admirable record of sales

growth, expansion, and lowered operating costs. It was no wonder that Bolt, a major

supplier to The Edge, hired her away.

Few people know that Bolt actually had its origins in the Huntington Leather Company.

As the sports division it was probably best known for its baseball gloves. After the break

up of Huntington, though, the sports division quickly expanded beyond leather products,

and soon became better known for sports apparel than for sports equipment. Today Bolt

is an internationally-known company with both production and sales markets around the

globe.

In her three years at Bolt, Susan’s performance has exceeded the hopes and expectations

of those who hired her. Under her direction not only is more product getting into stores

in the western region, but also it is getting there at less cost with better timing. Both

those in positions above her and those who work for her have been amazed at how

quickly she grasped the nuts and bolts of the company’s operations. The inventory

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control system she put into effect has become a model for the other regions. Company

insiders say she is on track for a vice-presidency.

Although she had plenty of guesses Susan didn’t really have the faintest idea what it was

that Tom Walling, Vice-President for Human Resources, wanted to talk to her about. All

she knew was that he had flown in from company headquarters and he wanted to meet

with her in the executive conference room at 3:00 PM.

After the initial exchange of pleasantries Tom started right in. “Susan, I think you know

Frank Banning in Marketing.” She did. “Well, a couple of weeks ago he happened to be

playing golf with Hank Jenkins, the Athletic Director at Wrightman University. Hank’s

been there at Wrightman quite a few years, as you might know. Anyway, Frank was

bragging on the company a bit, and on your region in particular, when he remembered he

had seen that you were a Wrightman grad and that you had run track there. He said

something to Hank, but Hank couldn’t remember ever hearing of you. And until only a

few years ago Hank was the head women’s track coach at Wrightman.”

“Tom,” Susan began, but he cut her off.

“No, let me finish. Hank was bothered that he couldn’t remember your name, so he did

some checking. Then he called Frank, who called me. Susan, not only did you not run

track at Wrightman, you never even graduated from Wrightman. You dropped out half

way through your sophomore year.”

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Susan didn’t hesitate a second. “All right, Tom, you found me out. I padded my resume

´. Big deal. Who doesn’t pad their resume´ ? And…you want to know something more?

I never finished that M.B.A. at Edgemont either. Because I couldn’t give them a

transcript showing I had a bachelor’s degree they took me in on one of those ‘credit for

work experience’ programs; but I had to do so much extra course work – which they just

require so they can get more money out of you – it finally became too much. I wasn’t

learning anything I didn’t already know anyway.”

“So what’s the point, Tom? Do you want me to say I’m sorry? I’m not really, but I’ll

say it if it will make you feel better.

“I mean, seriously, I do excellent work. I’m doing the kind of work you brought me here

to do. So why don’t I just get back to it, ok?”

“Susan, it’s a little more serious than that. I’ve discussed this matter at the highest levels.

Everyone has appreciated what you’ve done here, and I’m sure you know that you were

being looked at to move up the ladder. But that’s all changed now. Our directors have

been very clear that our creed words, ‘Quality’, ‘Ethics’, ‘Integrity’, are not going to be

mere slogans. They are supposed to stand for something. Susan, we’re going to have to

let you go.”

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“I can’t believe what I’m hearing!” Susan exclaimed. “Ethics and integrity indeed. Tom,

this company thrives on hypocrisy and deception and you know it. Remember that

sanctimonious ‘power of green’ campaign we did two years ago? And all the time this

company knew full well that our Southeast Asian suppliers are some of the worst

polluters on the planet! Or what about our oh-such-good-citizens program of outfitting

inner city school basketball teams with our top-of-the-line sneakers? You know as well

as I do that that was driven by market research showing how much sales increase we

could get from that exposure. And just to double the irony, the payoff was that you had

all these poor kids buying the most expensive shoes we make. And the commercials we

run – with those sweaty kids in their uniforms. You know they’re all models from the

agency who probably never played on a team in their lives. I wouldn’t be surprised if the

sweat were fake. Ethics and integrity? Oh, please!”

“Susan I’m surprised, and disappointed, at your reaction. All those things you mentioned

are just business. You know that as well as I do. But this is different. Now we’re talking

about what is right and what is wrong. Were you to stay on with us and it later to be

revealed that we had known about your misrepresentations, it would look very, very bad.

It would look bad to our customers, and it would look bad to our other employees.”

“The decision has already been made, Susan. It includes a generous severance and gives

you ample time to come up with a cover story. Let’s make this as painless as possible for

all of us.”

###

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Post-Reading: “Padding”

Writing/Discussion Questions

1. This case study is called “Padding.” How is padding that is used in other arenas similar or different than padding in a resume?

2. Is what Susan did “just business”?

3. Summarize Susan’s counter-argument to Tom. Is it a valid counter-argument? Does it have any bearing on the way Bolt should treat her?

4. Would you call Frank Banning a “snitch”? Why or why not?

5. What would you have done with the information that Frank learned while visiting Hank Jenkins, the Wrightman University Athletic Director?

6. How else could Bolt have dealt with Susan’s padded past?

7. Susan is given the opportunity to come up with a ‘cover story’ Would it be unethical of Bolt to go along with her cover story?

8. Bolt clearly cares about looking bad. Do you think the company cares about the truth? Does it matter?

9. Is Susan being wrongfully terminated?

Role Play

In pairs, play the parts of Tom and Susan. Assume that the facts of the case study are true. Rather than following the script of the case study, speak as though you were that character. Begin with Tom’s line, “No, let me finish.” When you are finished discussing the issue, switch roles.

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Case Study 6: Local Customs

Pre-Reading: “Local Customs

Discussion Questions

As a class, discuss the following:

1. In some countries the payment of money that we might call ‘bribes’ or ‘kickbacks’ is both commonplace and accepted. Even though accepted in those cultures, are those practices morally wrong?

2. Suppose you were traveling in a foreign country, and a customs official demanded $100 from you or you and your family would be delayed for several hours. Would you pay him? Would it be morally wrong of you to do so?

Pair Work

Below are a number of situations that could occur while doing international business. Although they may be culturally appropriate in the country with which you are dealing, they may be inappropriate to you personally, or uncustomary in your culture, or against your company’s policies or even federal law. Categorize the actions as Acceptable (A) or Unacceptable (U). In pairs, compare and contrast your results. For unacceptable acts, discuss why they are so.

A—U (a) You are asked to accept a figurine carved from the tusk of an endangered White Rhinoceros.

A—U (b) The latest batch of product from your international supplier was produced by

child laborers.

A—U (c) The latest batch of product from your international supplier was produced by prison laborers.

A—U (d) You are told to leave out the list of potential adverse side-effects of a drug your company is selling overseas.

A—U (e) You are asked to over-estimate your production cost by the importing representative.

A—U (f) You are asked to eat a plate of whale fillet at an important meeting with the President of the partnering company.

A—U (g) You are told to pay a “bonus” to the inspecting agency in the foreign country you are exporting to.

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A—U (h) You are told by a partnering company not to pay a supplier which has met all its obligations to you, but not to the partnering company.

A—U (i) The international business you are negotiating with refuses to work with any female managers in your company.

A—U (j) The international organization you are visiting requests that you attend a social event, at which participants smoke a locally grown hallucinogenic.

A—U (k) You are asked to leave out specific ingredients in the product you are shipping.

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Local Customs

ComAcCo (for Communications Accessories Corp.) is a wholly owned subsidiary of J.T.

Vaughn & Co., one of the world’s largest clothing companies. The ComAcCo group like

to refer to themselves as low-tech suppliers for a high-tech industry. ComAcCo produces

both leather and fabric covers and carrying cases for cell phones, PDAs, and hand-held

GPS devices. ComAcCo is not the major player in the field, but with more than 100

million cell phones in use in the U.S., and more than that in Europe, there is plenty of

room for people with even 11% market share to turn a tidy profit.

Not that ComAcCo is a sleepy little company. Roughly paralleling the growth in the

industries it supplements, ComAcCo has doubled its sales volume every three years for

the past nine. Revenues and net profit have been even better.

It is not surprising, then, that ComAcCo is a company facing the variety of problems

associated with rapid growth. Unlike many growing companies, though, achieving

financing has not been the main problem. Rather, it has been the constant struggle to

keep production capacity up to demand. That is why the Directors of ComAcCo

unanimously approved management’s proposal to construct the Twin Rivers Production

Facility, ComAcCo’s first offshore plant.

Although building the Twin Rivers plant was ComAcCo’s first foreign production

construction project, it certainly wasn’t the company’s first venture into business outside

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the U.S.A., from either the production end or the sales end. After all, until 1997

ComAcCo received greater revenue from European sales than it did from the U.S.

Moreover, for years the company – and especially its parent – has engaged subcontractors

and suppliers from sources in Latin America, Southeast Asia, and China.

It was barely two years ago that the Twin Rivers facility was authorized. A variety of

factors went into the decision, but not the least of them was the concern that it was

becoming almost impossible to monitor the business practices of subcontractors (and sub-

subcontractors etc.). This was a matter of great concern to the parent organization, J.T.

Vaughn & Co.

J.T. Vaughn & Co. has had an ethic of social responsibility that far out-dated any of its

most activist shareholders. It was providing benefits and workplace amenities for

employees in the early 1900s that weren’t even generally thought of until the 1970s.

Hence when J.T. Vaughn & Co. began doing business in foreign markets – both as a

producer and as a seller – it developed elaborate protocols that were intended to help its

employees to live by ‘home-grown’ ethical standards, regardless of where they might

find themselves engaged in business. They wouldn’t do business with contractors who

exploited child labor; they wouldn’t buy from producers who ignored workplace safety

factors; they wouldn’t pay bribes and kickbacks; they wouldn’t knowingly pollute the

environment; etc.

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Grant Ballinger could not have been more excited about his new job. The thought of

being Director of Operations at the Twin Rivers facility was almost more than he could

bear. Grant had been with ComAcCo for more than twelve years now, the past five years

as a plant manager. Because of his experience with that job he had had a hand in the

design of the Twin Rivers facility. It didn’t matter at all to him that he had not been

involved either in the land acquisition or in the construction of the plant.

Being Director of Operations was a big step up for Grant. A plant manager is responsible

for production. At Twin Rivers he would be responsible from everything from hiring and

employee practices (HR at home) to shipping of product and scheduling of material. He

was exhilarated. But first he had to get the damn plant running.

Technically everything was ready. The structural contractors had been signed off. The

machines were installed and operational. HR had even conducted employee orientation

tours – consistent with the company policy of ensuring that each employee had at least

some idea of what the overall mission of the facility was, and what other employees had

to do. The only obstacle remaining to clear was purely bureaucratic – obtaining the

‘O&O’ (Occupancy & Operations) permit.

“Mr. Secretary” (it was so important to address them by their title) “I am Grant

Ballinger”, he said as he extended his hand.

“Welcome,” the Secretary responded, “ and this is Mr. Low.”

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“Mr. Low, I am pleased to meet you. Are you a government official also?”

The Secretary interrupted, “No, Mr. Low is a private business man. He is a consultant.

He also happens to be the brother of my wife.”

“I know that you have been here before Mr. Ballinger, but now your stay will be

somewhat permanent. We trust that you will enjoy our country, and we look forward to

being your friend and your host.”

“I thank you, Mr. Secretary; but, please, let me get right to the matter at hand. What is

our problem?”

“Oh, no, Mr. Ballinger, there is no problem. We have only a formality remaining. You

know that, just as you, I had no part in the acquisition of this land, or in the construction

of the facility. Like you, my job is confined solely to the operation of the plant.” (His

English was flawless.)

“Now, in order for you to obtain – what do the Americans call it? – an ‘O&O’ permit, it

will be necessary for you to engage the services of Mr. Low. You will pay him a

Consulting and Facilitation fee of $50,000. The money is to be paid to Mr. Low

personally. It will be wired to a Swiss account. He will provide you the wiring

instructions. For this he will see to it that all of your inspections have been properly

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completed and that your paperwork is all in order, and then you will have your permit

within seventy-two hours.”

“But Mr. Secretary, we have completed all of our inspections and filled out all the

necessary paperwork...”

“Please, that is from your perspective, Mr. Ballinger. But Mr. Low is needed in order to

see that everything has been done properly.”

Grant Ballinger was not exactly famous for keeping his cool. “Mr. Secretary,” he

exploded, “ I don’t care what you call this. It sounds like I am being told that I have to

pay a bribe, pure and simple.”

“Oh, no, Mr. Ballinger. That is quite incorrect. A bribe is when you pay someone money

to do something that is wrong. There is nothing wrong being done here. This is to make

sure that everything is being done right. It is a common practice in our country. I am

sure that it took place during your company’s purchase and construction phases. To pay

a facilitator is, as you Americans might say, simply to provide an extra layer of security.”

Grant put off the Secretary, saying that he would have to confer with his superiors. But

later, when he finally established contact with Connie Dearling, his boss, he was agitated

to the extreme. “Connie, I can’t believe this. For one thing, I can’t imagine that the other

guys have paid these kinds of fees to get the project this far. You know the Vaughn

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companies’ positions on bribes and kickbacks. Besides, how would I ever show this on

the books? It’s outrageous.”

“Listen, Grant,” Connie said with a tone of urgency in her voice, “getting this plant open

is a top priority in the company. You know that as well as I do. We have 300,000 units

to crank out by November! Now I’m not going to get into the niceties of this policy or

that. I just know that we need this facility on line ASAP. And it’s your job to get it done.

So whatever has to happen, you make it happen. And don’t worry about your budget and

your bookkeeping. We have accountants who can bury these things so deep the sun will

never shine on them! You just do what you are being paid to do.”

###

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Post-Reading: “Local Customs”

Small-Group Discussion

A) Imagine that Grant decides to talk to his old friend and mentor, Karen Hollingsworth, one of his closest associates from ComAcCo. Karen gives Grant this opinion:

“From a dollars-and-cents perspective the company will be better off to pay the

bribe. Besides, the longer it takes the plant to open, the longer it is until all those

locals are able to start work at a decent-paying job. Getting the plant under way

will be good for you, it will be good for Connie, and it will be good for the

company. There are good consequences all around, and no one gets hurt. The

bottom line is that paying the bribe is the right thing to do.”

In small groups, discuss Karen’s advice. Are there any additional benefits of paying Mr. Low that Karen doesn’t mention? What are counter-arguments to her points?

B) Later, Grant turns to one of his long-time friends from graduate school, Rev. Michael Jones, who offers the following:

“Look Grant, I don’t feel I can comment on the details of your operation. I don’t

know the local customs, and I don’t know the intricacies of your business. But,

there is one thing clear to me: It is absolutely unethical of a supervisor to pressure

a subordinate employee to break the company rules.”

In your groups, discuss Michael’s viewpoint. Do you agree with Michael? What should Grant do with this advice? Questions for Writing or Discussion

(1) Suppose you were given a gift that would be against company policy for you to accept, but that was in accordance with local custom and ill-mannered of you to reject. What should you do?

(2) Connie says Grant should do what he is being paid to do. Just what is Grant being paid to do? What bearing does this have on his dilemma?

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Memo Writing

Pretend that you are Grant Ballinger and that you have received a message from Connie Dearling’s boss. Connie’s superior, Dr. Ralph Green, an executive from J.T. Vaughn & Co., has requested a written report on the status of the Twin Rivers Production Facility as well as a projection for when it will begin operation. Write Grant’s report to Dr. Green.

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Case Study 7: Directors’ Debate

Pre-Reading: “Directors’ Debate”

Prioritization and Small-Group Discussion

Organize the following. Put the statements that you agree with most, first; put the ones you agree with least, last.

_____ A company should consider its history when making decisions.

_____ Caring for the environment should be one of the most important factors that a company considers in its decision making.

_____ A company’s primary goal should be to follow its mission statement.

_____ A company’s primary goal should be to maximize returns for its shareholders.

_____ Companies should make investment decisions based on the will of the stockholders rather than the vote of the board or the spirit of the mission statement.

_____ A company must always consider what is best for its employees.

In small groups, discuss the values inherent in each of your prioritization lists.

Class Discussion

If you look at the stockholder population of most corporations you don’t find one unified group, but rather a variety of constituencies with a variety of interests, some of which may occasionally conflict. At any given moment a corporation’s stockholders might be made up of the following identifiable groups as well as countless individuals.

Pension funds of the company’s employees Day traders The company’s founders, or their families Company executives Retirees Mutual funds Non-employee pension funds

How might the interests of these groups differ? Explain. Does the Board of Directors have the same obligations to all of them? Discuss.

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Directors’ Debate

The Rolling Hills Land & Cattle Company was founded by Henry Barris in 1872. The

first ranch was on the eastern slope of the Sierras, almost into Nevada. Henry Barris and

sons expanded and kept expanding, first to the north and to the southeast. These were not

contiguous additions to the first ranch, but rather separate acquisitions that after awhile

looked like a patchwork arrangement on a map of the western United States. The Barris

family continued on to the other side of the Sierras acquiring land in the foothills along

California’s Central Valley and then north into eastern Oregon and Washington.

That was then. Today even people who are acquainted with Rolling Hills Land & Cattle

don’t think of it as a ranching operation, though it is still among the largest cattle

companies west of the Rockies. Most who know about it know it as one of the largest

land developers in the United States. Not that that many people know about the company

at all. Rolling Hills Land & Cattle (RHLC on the New York Stock Exchange) is way

down among the low-profile publicly traded companies.

The Barris family took Rolling Hills public in 1983. It was a tough decision to do so, and

the family debate was heated and emotional. In the end, though, most of the members

agreed it was the only way to raise the capital needed to keep the operations running and

to preserve and accomplish the goals the family had set forth back in the 1950s.

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While it is a publicly traded company Rolling Hills Land & Cattle is nonetheless not

widely held. The cumulative total of family holdings, including the non-profit Barris

Foundation, represents 18% of the stock, with no single family member owning more

than 3%. Most of the other major stockholders are pension funds and staid institutional

investors, with one notable exception. J. Dalton Squires, through his holding company,

Conway-Hastings, recently amassed 22% of Rolling Hills’ outstanding stock.

J. Dalton Squires is one of those individuals about whom much is written and said, and

little is actually known. What is known is that under his direction over the last twenty-

five years Conway-Hastings has put together one of the most impressive – read valuable

– collections of holdings in the country, if not the world. Squires is known as a value

buyer, certainly not as a raider. He doesn’t invest with a company with the idea of selling

off assets, nor is he generally inclined to become involved in its operations. As he was

once quoted, “I wouldn’t buy into these companies unless they were already doing

something right.”

Occasionally Squires will seek a position on the Board of a company in which he is

significantly invested, and Rolling Hills was one of those occasions. Not that there was

resistance to him being seated. Both family members and other major investors were

generally pleased to add a person of Squires’ stature and acumen to the Board of

Directors, even if a few had some reservations about his public comment concerning

Rolling Hills’ ‘unrealized potential’.

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Even if J. Dalton Squires had not yet been seated, this Board meeting would have been a

tough one. Finally, the development plans for Rancho Cerrito Cielo were being brought

to the Board by company management. By all accounts Cerrito Cielo was the crown

jewel of the Rolling Hills holdings. Fourteen thousand acres of gentle hills and sloping

plains extending from the western edge of southern California’s foothill mountain range

to white sandy beaches on the Pacific Ocean. Rancho Cerrito Cielo spreads across two

large counties and lies within a population area of more than three million people.

For more than thirty years Rolling Hills Land & Cattle has operated under a rule that any

development plan involving more than three thousand acres was first to be brought to the

Board for approval. Moreover, not unlike the E.P.A., a proposal also had to include an

alternative – one that might be less favorable to Rolling Hills financially, but more

palatable to those with strong environmental concerns.

Finally, no proposal was to be brought to the Board unless the potentially most profitable

alternative had already been floated to, and approved by, the relevant governmental

planning staffs. This last requirement – not easily complied with, by the way – was

designed to keep the Board from getting excited about some great profit-generating plan

that never was going to fly (by the authorities) anyway.

So it was predictable that the development proposals for Rancho Cerrito Cielo would

cause a stir on the Board. But no one was quite prepared for the opposing dynamic

created by the presence of J. Dalton Squires and ‘Sissy’ Barris.

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Cecilia ‘Sissy’ Barris, like five generations of Barris’ before her, grew up on one of the

ranches. She not only grew up there, she worked there – like the five generations before

her. Sissy knew the difference – Sissy had made the difference – between a yearling and

a gelding. So Sissy’s summers were spent differently than those of her classmates at

Westcliff. Nonetheless, she owed them no deference academically. Sissy graduated

summa cum laude with a combined degree in Environmental Sciences and Business

Administration.

Sissy took a backseat to no one as far as environmental concerns were counted. Not only

was Sissy as ‘green’ as anyone might want; but also she knew what she was talking

about. Sissy, like her father and her father’s father, and those before him, loved the land.

She knew that it underlay all, and that its integrity must be upheld if we who lived upon it

were to survive.

So there was Sissy: as ‘green’ as Rachel Carson, and tough as nails.

It was no surprise that Sissy and J. Dalton Squires were at odds regarding the plans for

Cerrito Cielo. He favored Plan A, the maximally profitable – yet acceptable to the

agencies – alternative with linked golf course developments running through the

watershed area that drained to the ocean. Sissy, on the other hand, opted for the

alternative Plan B, the one that nixed the golf courses and retained most of the natural

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character of the drainage land, with custom homes allowed to peek out over its edges.

Either, of course, would have been handsomely profitable; but Plan A much more so.

It was Squires’ idea that they meet for lunch. He had done this routine before; but that

didn’t mean that he was calloused or insincere. Occasionally it was just his job to

educate fellow directors.

“Sissy,” Squires began, “I think that you and I have much more in common than some

might expect. You are what they call these days ‘an environmentalist’. You want to

protect and maintain the surroundings in which we find ourselves; and I respect that.

You are also a businessperson; and of course I respect that too. You and I both know that

the two are compatible. We just have to find out where on the spectrum of possibilities

we can agree.

Now on these two plans we have before us, it seems to me that the choice is clear. Plan

A is environmentally acceptable. We’ve already had the sign-offs from all the agencies.

And it makes more money. So, really, what is left to debate? We don’t even have a

choice. Our obligation as directors is clear. We must opt for Plan A.”

“Mr. Squires,” Sissy began,

“Please, just call me ‘Dalton’”

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“ I like you. And I appreciate your taking the initiative to get us together. But you just

don’t get it. Not yet, anyway.

“ This company is about more than making money. Making money is part of it, sure.

But it’s also about preserving our heritage in the land, and making sure that future

generations have an opportunity to experience some of what we have experienced.

That’s what we mean when we say that ‘we want to provide tomorrow’s communities

with the means to understand and appreciate what has gone before them’.”

“Sissy,” Dalton started again, “I really do empathize with what you are saying, but you

have to understand that this isn’t just a family business anymore. You have stockholders

who have bought into this company because they want a return on their investments. The

mission statement, and all that stuff about the land and the heritage is wonderful prose,

but it just doesn’t have any bearing on these decisions…”

“Dalton, you can take that crap and stuff it!” Sissy was in her cowboy mode now. “And

don’t you lecture me about stockholder expectations and director responsibilities. I’ve

read Friedman and the others. But that stuff is theory, and only that. Look, we are a

public company, sure; but we have a mission statement that we say we are going to live

by, and people who buy stock in this company ought to pay attention to that.

“We have said that one of the things that we are going to do as a business enterprise is to

manage our assets in such a way as to protect the land and to provide future generations

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with an environment that will allow them to experience its beauty and vitality and

diversity. If investors in our company don’t like that, then they shouldn’t have bought a

ticket on our train.”

“But, Sissy, people have bought stock in this company – I have bought stock in this

company – as an investment, with the purpose of making money. As directors, it is our

fiduciary duty to honor that intention.”

“Dalton, you’re an intelligent guy; what part of this don’t you understand? Let me say it

again – watch my lips – we are a company with a mission statement. Our mission

statement promises that we will seek an excellent return on investment, but we also say

that we are going to be guided by an intention to develop the land in a manner that is

sensitive to the preservation of beauty and ecological health and diversity. Profit is one

measure of success for us; but it is not the only measure, and it is no more important than

the others.”

“Sissy,” Dalton interrupted, “you are the one who doesn’t seem to understand. We, as

directors, have a duty – a duty to people who bought into this company with the intention

of making money. All this ‘save the earth’ falderal is fine for a family business; but

when you go public you have to think about those people who are investing in this

enterprise.

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“Oh, Dalton, don’t give me that old fiduciary-duty-to-maximize-returns stuff. Look,

when people buy into a mutual fund they receive a prospectus that tells them what the

fund’s goals are and how they intend to achieve it. If they don’t like it, they don’t buy

into it. In the same way, when people buy stock in a company, they should look at its

mission statement –if there is one– and its history, and ask themselves if that is where

they want to put their money.

“They shouldn’t just assume that profit is the number one goal, or the only goal. If stock

purchasers don’t do their due diligence in that respect, it’s not my problem. Don’t tell me

I have a duty to maximize shareholder profits; I have a duty to carry out the mission of

this corporation. Profits, yes; but at the expense of our other values, no way!”

###

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Post-Reading: “Directors’ Debate”

Panel presentations or PowerPoint presentations – groups of three or four

Construct a presentation to be given to the full Board of Directors (here, the entire class) for either option “A” (the one favored by Squires) or “B” (the one favored by Sissy), whichever you feel is the better/right plan for RHLC. Feel free to use your imagination to add facts that strengthen your case, but keep those facts consistent with the features of the plans as described in the Case Study.

Small-Group Discussion Questions

1. What does it mean for a company to be a ‘good corporate citizen’?

2. Does a corporation have ethical obligations beyond that which the law requires?

3. Does an ordinary citizen?

4. Suppose that the Rolling Hills Land & Cattle Co. did not have a mission statement. Would it have any obligations to care for the environment beyond those imposed on it by law? Does having a mission statement make any difference in this regard?

5. Would the stockholders of Rolling Hills Land & Cattle have any right to complain if the Board opted for the less-profitable plan favored by Sissy?

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Case Study 8: Expenses

Pre-Reading: “Expenses”

Pairs

With each statement below, do you Agree (A) or Disagree (D)? Discuss your answers with a partner.

A—D (a) All inefficient systems in a business should be changed.

A—D (b) You should do what’s best for your co-workers, even if you disagree.

A—D (c) Exaggerating actual expenses is the norm.

A—D (d) Having a large expense account is an important perk for a good sales force.

A—D (e) If a company is financially strong, inefficiencies can be overlooked.

A—D (f) If nobody padded their expense accounts the actual effect on the company’s bottom line would be insignificant.

A—D (g) Changes in a business culture are best made from the top-down.

A—D (h) Competition within a sales team is healthy.

A—D (i) It’s more important to fit in with your coworkers than to insist on your personal moral principles

In order of importance – with 1 being most important – rank the attributes of a salesperson.

__ Ethics __Professionalism

__Cooperativeness __Loyalty to company

__ Production __Loyalty to colleagues

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Expenses

Chad Hollingsworth was nearing the end of his first quarter as a ‘field sales

representative’ for AFW Chemical, and he was pleased.

He was pleased to be working for AFW, one of the premier chemical products companies

in the entire world. More precisely, though, he was working for the Agricultural Division

of AFW Chemical, that portion of the company that developed both herbicides and

pesticides. Still, that was something to be pleased about.

The AFW line of agricultural products would never be sufficiently benign to satisfy the

‘organic only’ crowd. After all, the products did kill things. But, nonetheless, AFW was

internationally recognized as the leader in the development of environmentally sensitive

products that did (selectively) kill things, while leaving other things free of residue and

effects that were liable to be harmful to the rest of the environment.

AFW’s ability to create such products and bring them to market at competitive prices was

primarily the result of work by a superb research staff. It was a group that schools like

the University of California at Davis (Chad’s graduate school alma mater) would love to

have on their faculty – if they could afford them.

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Chad was also pleased for the reason that he was in the process of racking up a quarterly

sales volume that was literally ‘off the charts’ by the standards of AFW’s Agricultural

Division.

It was no wonder that Chad’s sales performance was so outstanding. If anyone was a

‘natural’ to be selling agricultural products in California’s Central Valley, a.k.a. ‘The

Nation’s Breadbasket’, it was Chad Hollingsworth. Born and raised in Modesto, Chad

had gone on from all-around star athlete status at Downey High to become the first Cal

State University at Fresno Bulldog to attain Division I first-string All American honors.

Add to that his highly decorated tour of duty in the Gulf War, and if Chad weren’t going

to be a salesman in the Central Valley, he surely could capture one of its Congressional

seats. (In fact, doing just that was one of his longer-term goals.) Even his strong

conservative Christian background – to which he remained true – would help him far

more than it would hurt him in that country.

But Chad was much more than just a pretty resume´. His undergraduate degree in

Agronomics and the subsequent M.S. from Davis gave him more than credentials, they

gave him knowledge and understanding. He could talk with intelligence and insight to

the whole range of farmers and ranchers – from those wonderful and stubborn individuals

who still held on to a dream of their forefathers, to the managers of corporate mega-farm

operations – about the issues that concerned them all: weather, government water policy,

crop yields, market prices, and operational costs.

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All of these things had served Chad well in his previous job as a sales rep for a large farm

machinery company, and now he was putting the same knowledge, experiences, and

attractive personal characteristics to use in his new position.

Chad certainly wasn’t surprised at the hearty congratulations he received from Regional

Sales Manager, Todd Bowen. Indeed, he was pretty much expecting it. But he was not

prepared when the conversation underwent a shift in tone.

“Chad, you are doing a terrific job, and you have a great future here. You’ll probably

have my job sooner than I want to let it go. But before that happens, and before you do

much more, we need to have a talk about your expense account.”

“Is there a problem?” Chad began, but Bowen cut him off.

“There isn’t a problem, Chad. At least not a problem in the usual sense.”

“Well, what …”, he started again.

“Chad, this company values its sales force. It recognizes that no matter how good the

product that goes out the door, nothing happens without a strong sales team. That’s why

our compensation packages, benefits, and expense allowances are without equal in the

industry.”

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“ I know that, sir, and I appreciate it. We all do.”

“Well, here’s the problem, Chad. We are nearly at the end of the quarter, and you have

barely touched either your regular expense account or your special projects account.”

“Well, yes, Mr. Bowen, that’s true, but I thought…”

Todd cut him short again. “Look at your travel expenses, Chad. I think my wife spends

more going out to get her hair done. Why you could be flying up and down this valley,

and using top-of-the-line rental cars at all your stops, yet from what I can see, all you

have done is drive, and in your own little economy car at that.”

“That’s right, sir. But don’t get me wrong. I appreciate the allowance I’ve been given –

it’s down right generous; but I have given this a lot of thought, and I think it’s more

efficient and more productive if I drive. If I’m driving then I’ll go to a lot of little out-of-

the-way places that I never would have visited if I just went to the areas outlying from

airports. I can pick up a lot of the smaller customers that way, and it’s better if I’m not

committed to some airline schedule. It gives me time to get to know the folks, and even

stay and visit a while if they invite me.

“And I think the results speak for themselves,” he said pointing to a map on Todd

Bowen’s wall. Why I have picked up five new accounts – each one over a thousand acres

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– in this sector alone. I’ve made some friends too. I even have an invitation to hunt

Dove at the Baxter spread.”

Todd cut him off again, as if he hadn’t heard a word that Chad had spoken. “And, Chad,

your special projects budget is zero, zilch, nada. You haven’t even touched it. You

should be using that to take people over to the coast to go fishing, or into the cities for a

ball game, or to Las Vegas …”

This time Chad cut in. “Mr. Bowen, when I was with my former company I found out

two things. One, a lot of the people I dealt with didn’t really care about those kinds of

things. And, two, even with the ones who did enjoy trips and outings and such, I didn’t

need to do that to win their business. Good products, good service, and good prices

pretty much did it for them.

“So I’ve got to think, why should I spend the company’s money like that if I don’t need

to? I remember my granddaddy – he was our pastor too – used to say ‘Don’t spend a

dime when a nickel will do.’”

This time Todd Bowen spoke slower and softer, almost in a soothing tone. “Chad, I

appreciate all you are saying; but I don’t think you have a clue about where I’m coming

from here. Look, normally, when a salesman’s expenses are down that’s a sign that

something is wrong, and that he is not working at his usual level. He’s not keeping up a

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presence with his customers. Sometimes that’s an early warning sign to me, because I

can spot it before the actual ordering season begins.

“But I know that’s not the case with you, because we are in the ordering season, and your

volume is terrific.”

“Thank you, Mr. Bowen. And isn’t it good that I’ve been able to do this while keeping

costs down?”

“Now hear me carefully, Chad.

“You are probably doing more harm than good by keeping your costs so low.

“For one thing, the amount of money saved on your individual expense account just

doesn’t matter. That number is a very small drop in the very big bucket of AFW

Chemical. Chad, it’s a tiny little fraction of those bonuses the top executives pay

themselves every year.

“But it does mean a lot at this level – not to the company, but to me and your fellow

salesmen. Son, you acknowledged that AFW is generous in its expense allowances; but I

want you to know that those numbers didn’t just come from a benevolent expense fairy

sitting on the board of directors. I’ve worked hard, and so have the other managers, to

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get those numbers up to where they are. And we’ve been working even harder to keep

them there in this current budget-cutting atmosphere.

The expense money that’s available means a lot to my team – to your fellow reps – who

use those allowances to the hilt. Many of them feel as if the expense money is as

important a fringe benefit to them as are vacations, or dental coverage, etc.”

“But I still don’t see…”, Chad started.

“Chad, if you keep going the way you’ve started, some bean counter at the regional office

is going to take notice. And then he and his fellows are going to start asking questions,

and they’re going to say to themselves, ‘That Hollingsworth fellow is on to something

there. If he can do that kind of production and keep expenses that low, the others should

be able to as well.’

“Chad, I don’t want that. Your fellow reps don’t want that.

“Look, you had a great athletic career and you know what it is to play on a team. I need

you to be a team player on my team. I need you to get your expense numbers up. I don’t

care how you spend it or who you spend it on – as long as you can give us some receipts

and an explanation that looks good on the books. I need you to spend more money,

Chad; we all need you to. So let’s play ball, ok?”

###

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Post-Reading: “Expenses”

Writing

Put yourself in Chad’s shoes. Write a memo to Mr. Bowen in response to what he has said.

Small-Group Discussion

“Don’t spend a dime when a nickel will do.” Is this an attitude every good employee should have with regard to his company’s money? Is this an ethical or moral issue?

Suppose that you are Mr. Bowen, Chad’s boss, and that Chad has convinced you that it really would be possible for your division to maintain, perhaps even increase, productivity while decreasing expenditures significantly. In the current belt-tightening environment this would not only be good for the company, it would also be good for your career. What steps would you take to implement change? What difficulties do you think you would face?

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Case Study 9: Taking Advantage

Pre-Reading: “Taking Advantage”

Small-Group Discussion

Is not telling something that you know the same as (or similar to) a lie? Consider the examples below and discuss which examples are bad actions and which are good actions (or somewhere in between). Give new examples if you can think of any.

1. …not telling someone his/her pants are unzipped.

2. …not telling someone who is about to use a vending machine that it just ate your dollar and didn’t give you your food or your money back

3. …not telling a customer that you know that your competitor is about to come out with a superior and less-expensive product than the one he is about to purchase

4. …not telling a customer that you know that your own company is about to come out with a superior and less-expensive product than the one he is about to purchase

5. …not telling a colleague who is about to interview for the same position that you are competing for that she/he has poppy seeds stuck between her/his teeth.

6. …not telling the robber that you know where your boss keeps his cash box

7. …not telling employees that the company is in trouble

8. …not telling the angry, drunk father that you know where his son is hiding

9. …not telling your boss that – based on good knowledge that you have – his new plan is not going to work

10. …not telling your friend that his girlfriend/her boyfriend is secretly seeing other people.

11. …not telling your friend that his girlfriend/her boyfriend is secretly seeing you!

Class Discussion

We are all familiar with the detailed disclosures that are provided when one is about to undergo a medical or surgical procedure. What purpose do they serve? Could that purpose be served better? Discuss.

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Taking Advantage

Harold ‘Buck’ Weatherly had been the Treasurer of Clear Lakes County, Montana for

thirty years. He first ran for the position in 1964, six years after he came to work as a

bookkeeper in the office of then- County Treasurer William Hart. When Hart retired,

Buck was a natural to run for the job. A veteran of the Korean war, local high school

football hero, and a graduate of the nearby state university, he was a shoo-in. Ever since

his victory in that first election, no one has ever contested the position again.

Not that Buck was all that bright. His understanding of finance and monetary matters

was limited to say the least. He had graduated as a business major with an emphasis on

marketing, and he never did finish the course work to gain a C.P.A. Indeed, the

bookkeeper position had been a fall-back job during the recession of the early 60s.

On the other hand, the job did not exactly demand a fiscal Einstein. Clear Lakes County

was rock-solid conservative country. Taxes were kept low, as they ought to be, and the

county Treasurer was neither expected to be managing a large excess of funds, nor was it

likely that he would have to juggle his way through a deficit budget. The county, like

most local businesses, was a pay-as-you-go enterprise,

At least that’s the way it was at the start. But country as beautiful as Clear Lakes County,

with its natural appeal as both a summer and winter vacation spot, was bound to see

growth. And indeed it did. The growth was neither excessive nor harmful. A few ski

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resorts were developed, and lakeside summer homes were built as well. While local

industry remained confined largely to ranching, logging, and mining, all of those sectors

grew at a healthy pace.

The county’s growth required new attitudes from county government. Public facilities

had to be built to accommodate the various developments, and Clear Lake County joined

the ranks of local governments all over the country who had to learn more about public

financing, government grants, environmental impact reports, and the like.

Like others in county government, Buck learned on the job and grew into his expanded

responsibilities quite adequately. Though still not the sharpest tool in the shed, he carried

out his job honestly and effectively. He did all that was required of him.

Thus it was that by the early 1990s, Buck Westminster found himself responsible for

some sizeable amounts of money. Like most counties, Clear Lakes did not have an even

flow of either income or expenses. Large amounts of money came in twice a year when

property taxes were due, and sales and hotel tax revenues were decidedly higher during

the winter ski season. Expenses, on the other hand, tended to be highest during the late

spring and summer months, when weather permitted repair and construction of needed

infrastructure facilities.

Not only did Buck have the responsibility of investing the county’s excess cash on hand,

he also found himself managing the funds of a variety of special districts – from schools

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to mosquito-abasement districts – who were allowed to pool their funds with the county’s

in order to achieve greater purchasing and investment power. By 1990, Buck was

managing a portfolio in excess of $75 million, not enormous on a national scale, but a

sum that few in Clear Lakes County might ever have imagined even ten years earlier.

As County Treasurer, Buck Weatherly had virtually complete control over the county’s

investment pool. The portfolio was subject to audit, of course, but, with the exception of

a vague charge of ‘sound fiscal management’ in the county charter, there was no structure

or oversight mechanism to which Buck was answerable. Nor had this ever presented a

problem. Buck’s investment strategy, if you could call it that, had always been plain

vanilla – Treasury bonds, insured certificates of deposit, and the like – with returns to

match, and everyone was quite satisfied with that.

Even an unimaginative portfolio takes management, though, and by the early 1980s it had

become clear that Treasurer Weatherly needed the help and direction of a professional

investment advisor. Inasmuch as Clear Lakes County lacked an individual or a firm

qualified for such a task, Buck Weatherly turned to the firm of Lennox and Burns in the

city of Billings.

Ed Hastings felt that he had the perfect life. A stockbroker with the national firm of

Lennox and Burns, he ran the twelve-person office in Billings, Montana. A Montana

native, Ed had ‘done his time’ in the New York City office, and had established himself

both professionally and financially there. Now in his mid-forties he had been able to

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return to the place he loved. He could hike, hunt, and fish to his heart’s content. He

lived in the midst of spectacular beauty. Yet he still had every opportunity to exercise his

considerable professional skills at a job he really did enjoy.

Aggressive both by nature and training Ed preferred his individual investor accounts to

some of the institutional ones such as Clear Lake County. The latter, in a word, tended to

be boring; and not all that lucrative either, but they came with the territory. As manager

of the Billings office, Ed inherited these accounts from his predecessor.

Then came the recession that began in 1990. While national news stories tended to focus

on the effects on large manufacturing states and cities, places like Clear Lake County felt

it too. As a matter of fact Clear Lakes took a double hit. When building and

manufacturing lagged, the logging and mining operations almost came to a standstill. At

the same time the ski resorts and tourist businesses dried up too. No one was more

acutely aware of this than the Clear Lakes County Treasurer.

“Buck”, said Ed Hastings over the phone, “ I think I can help you out. As it stands right

now the portfolio’s performance is anemic, and with interest rates continuing down it’s

not going to get any better unless some changes are made. I can take the $5 million that’s

due to roll over next week and put it into some derivative instruments issued by our

company that I guarantee you will outperform the short-term treasuries by 4%. You

know what that could mean to the county.”

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“Boy that would help, Ed; but what about these – what did you call them, determinives? –

are they pretty safe?”

“Derivatives, Buck, and here’s how they work…”

“No, no,” Buck interjected, “I don’t care how they work, I just want to know if they’re

ok.”

“Well, sure they’re ok, Buck, we wouldn’t be issuing them if they weren’t. Now, they

are going to cost a little more in fees on the front end, but believe me, you’ll think the

returns are well worth it.”

The rest, as they say, is history. Encouraged by the initial results, Buck Weatherly sought

similar direction from Ed Hastings, and Ed happily complied. Buck never did understand

the nature of the investments he was making, but never mind that, he was achieving

almost hero status among financially strapped government agencies in Clear Lakes

County. They didn’t know how Buck was doing it either, but they did know that his

county investment pool was clearly out-performing comparable funds in and around the

state. Two of the school districts even issued short-term notes – that is, borrowed funds –

for the sole purpose of taking the money and putting it into the county investment pool.

Ed steered Buck into a variety of increasingly exotic financial instruments, all perfectly

legal and all on the speculative side of the investment spectrum. Occasionally within his

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office an eyebrow would be raised or a question asked about the propriety of these

investments of public funds, but Ed’s response was always the same. “Look, it’s Buck’s

job, not mine, to determine where the money goes. I’m just presenting him with

opportunities. And it’s not like he’s some helpless old widow lady, he’s a county

treasurer for crying out loud!”

In short, the speculative nature of the county’s investments was that they were predicated

on the assumption that interest rates would continue to decline, or at least stay at present

low levels. Of course that couldn’t go on forever, and it didn’t. Interest rates begin to

rise in 1994, and by the time it was becoming clear that they weren’t headed down again

it was too late for the Clear Lakes County investment portfolio.

The 1995 bankruptcy filing of Clear Lakes County was the first such default by a

government entity in the history of the state. Twenty percent of the county workforce had

to be laid off; and they have not yet been recalled or replaced. Two of the seven district

schools that were forced to close remain closed today. Buck Weatherly resigned in

disgrace, and was subsequently indicted for malfeasance in office. Ed Hastings retired

and is now living at Lake Tahoe in northern California.

###

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Post-Reading: “Taking Advantage”

Writing

As a citizen of Clear Lake County write a letter to the editor expressing your feelings about the bankruptcy and its outcomes and about the role of the brokerage firm Lennox and Burns.

Small Group Discussion

1. Was it unethical of Ed not to explain the risky nature of the investments?

2. Does it matter that Buck said he didn’t care about the details?

3. In terms of Ed’s obligations, does it make any difference that this account involved public money?

4. Would his obligations have been different if the customer had been a wealthy individual?

5. Would Ed’s obligations have been different if the account represented the bulk of the assets of an elderly widow?

6. Was justice served in these events? If not, what would the appropriate outcomes have been?

Class Debate – Divide into two groups, one argue in favor of the following and one argue against

“Caveat Emptor – ‘Buyer Beware’ is an ancient maxim that is still appropriate

today. The sellers of products and services certainly have no right to lie to or

deceive their customers, but that limits it. They have no obligation to explain the

possible downsides of doing business with them. That would kill a deal before it

ever got started. It’s the buyer’s job to do his own homework, and if he doesn’t

do his diligence then that’s just too bad.”

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