IPPTChap001.ppt

Editor's Notes

• #3: This chapter will introduce business ethics as a process of responsible decision-making. Simply put, the scandals and ruin experienced by all these institutions and every one of these individuals were brought about by ethical failures. This text provides a decision-making model that, we hope, can help individuals to understand such failures and avoid future business and personal tragedies. As an introduction to that decision-making model, this chapter reflects on the nature of ethics and business. Ethical decision-making in business is not limited to the type of major corporate decisions with dramatic social consequences listed above. At some point every worker, and certainly everyone in a managerial role, will be faced with an issue that will require ethical decision-making. Not every decision can be covered by economic, legal, or company rules and regulations. More often than not, responsible decision-making must rely on the personal values and principles of the individuals involved. Individuals will have to decide for themselves what type of person they want to be. At other times, of course, decisions will involve significant general policy issues which affect entire organizations, as happened in all the well-known corporate scandals and in the Malden Mills case described at the start of this chapter. The managerial role especially, involves decision-making that establishes organizational precedents and has organizational and social consequences. Hence, both of these types of situations—the personal and the organizational—are reflected in the title of this book: “Business Ethics: Decision-Making for Personal Integrity and Social Responsibility.” As recently as the mid-1990s, articles in such major publications as the Wall Street Journal, the Harvard Business Review, and U.S. News and World Report questioned the legitimacy and value of teaching classes in business ethics. Few disciplines face the type of skepticism that commonly confronted courses in business ethics. Many students believed that, like “jumbo-shrimp,” business ethics was an oxymoron. Many also viewed ethics as a mixture of sentimentality and personal opinion that would interfere with the efficient functioning of business. After all, who is to say what’s right or wrong? Throughout the 1980s and 1990s, this skeptical attitude was as common among business practitioners as it was among students. But this simply is no longer the case in contemporary business. The questions today are less about why or should ethics be a part of business, than they are about which values and principles should guide business decisions and how ethics should be integrated within business.] Students unfamiliar with the basic concepts and categories of ethics will find themselves as unprepared for careers in business as students who are unfamiliar with accounting and finance. Indeed, it is fair to say that students will not be fully prepared even within fields such as accounting, finance, human resource management, marketing, and management unless they are familiar with the ethical issues which arise specifically within those fields. You simply will not be prepared for a career in accounting, finance, or any area of business if you are unfamiliar with the ethical issues that arise within these fields. Refer to: Reality Check Why be ethical? Because the law requires it. Today, business executives have many reasons to be concerned with the ethical standards of their organizations. Perhaps the most straightforward reason is that the law requires it. In 2002, the U.S. Congress passed the Sarbanes-Oxley Act to address the wave of corporate and accounting scandals. Section 406 of that law, "Code of Ethics for Senior Financial Officers," requires that corporations have a Code of Ethics "applicable to its principal financial officer and comptroller or principal accounting officer, or persons performing similar functions." The Code must include standards that promote: 1. honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; 2. full, fair, accurate, timely, and understandable disclosure in the periodic reports required to be filed by the issuer; and 3. compliance with applicable governmental rules and regulations. [i] A persuasive case for why this shift has occurred can be found in Value Shift by Lynn Sharp Paine (New York: McGraw Hill, 2003).
• #16: There is an appropriate caution about influencing behavior within a classroom. Part of this hesitation involves the potential for abuse; expecting teachers to influence behavior may be viewed as permission for teachers to impose their own views on students. Many believe that teachers should remain value-neutral in the classroom and respect a student’s own views. Another part of this concern is that there can be a narrow line between motivating students and manipulating students. There are many ways to influence someone’s behavior, including threats, guilt, pressure, bullying, intimidation. Some of the executives involved in the worst of the recent corporate scandals were very good at using some of these means to motivate the people who worked for them. Presumably, none of these approaches belong in a college classroom, and especially not in an ethical classroom. But not all forms of influencing behavior raise such concerns. There is a major difference between manipulating someone and persuading someone, between threats and reasons. This textbook resolves the tension between knowledge and behavior by emphasizing ethical judgment, ethical deliberation, ethical decision-making. We agree with those who believe that an ethics class should strive to produce more ethical behavior among the students who enroll. But we believe that the only academically and ethically legitimate way to do this is through careful, and reasoned decision-making. Our fundamental assumption is that a process of rational decision-making, a process that involves careful thought and deliberation, can and will result in behavior that is both more reasonable and more ethical.
• #17: Example: Perhaps this view is not surprising after all. Consider any course within a business school curriculum. Doesn’t a management course aim to create better managers? Wouldn’t we judge as a failure any finance or accounting course that denied a connection between the course material and financial or accounting practice? Every course in a business school assumes a connection between what is taught in the classroom and appropriate business behavior. Classes in management, accounting, finance, marketing all aim to influence students’ behavior. All assume that the knowledge and reasoning skills learned in the classroom will lead to better decisions-making and therefore better behavior within a business context. A business ethics class is no different. While few teachers think that it is our role to tell students the right answers and proclaim what they ought to think and how they ought to live, fewer still think that there should be no connection between knowledge and behavior. Our role should not be to preach ethical dogma to a passive audience, but to treat students as active learners and engage them in an active process of thinking, questioning, and deliberating. Taking Socrates as our model, philosophical ethics rejects the view that passive obedience to authority or the simple acceptance of customary norms is an adequate ethical perspective. Teaching ethics must, on this view, involve students thinking for themselves. The decision-making model that will be presented in the next chapter offers one process of such ethical analysis, deliberation, and reasoning.
• #19: Definitions: Ethics is not something one abides by when convenient and then discards if too much trouble. All too often, firms in distress say they can’t “afford” to be ethical when their very existence is on the line. The bottom line is that they can’t afford not to be ethical at that point. [Process: Later you’ll ask participants if there’s anything they would quit their job over. At this slide, you want to point out that firms, too, should have limits. There should be things they shouldn’t do and, if standing by their ethics means failing to survive, maybe they weren’t meant to survive.]
• #21: Social sciences such as psychology and sociology also examine human decision-making and actions, but these sciences are descriptive rather than normative. They provide an account of how and why people do act the way they do; as a normative discipline, ethics seeks an account of how and why people should act, rather than how they do act.
• #23: Ethical business leadership is exactly this skill: to create the circumstances in which good people are able to do good, and bad people are prevented from doing bad. Example: The Enron case provides an example. Sherron Watkins, an Enron vice president, seemed to understand fully the corruption and deception that was occurring within the company and she took some small steps to address the problems. But when it became clear that her concerns might be used against her by her boss, she backed off. So, too, with some of the Arthur Andersen auditors involved. When some individuals raised concerns about Enron’s accounting practices, their supervisors pointed out that the $100 million annual revenues generated by the Enron account provided good reasons to back off. The Decision Point, below, exemplifies the culture present at Enron during the heat of its downfall. Refer to: DECISION POINT Sherron Watkins
• #24: In essence, managerial decision-making will always involve both aspects of ethics. Each decision made by a business manager not only involves a personal decision, but also involves making a decision on behalf of, and in the name of, an organization that exists within a particular social, legal, and political environment. Within a business setting, individuals will constantly be asked to make decisions affecting both their own personal integrity and their social responsibilities. Refer to: Decision Point Management and Ethics
• #26: Company’s core values could refer to financial, religious, legal, historical, nutritional, political, scientific, and aesthetic values.
• #27: Example: One approach to the Enbridge oil spill, from the perspective of ethics, steps back from the facts of the situation to raise such questions as: What should the company do? What are the rights and responsibilities involved? What advice ought Enbridge’s engineers offer? What good will come from this situation? Is Enbridge being fair, just, virtuous, kind, loyal, trustworthy? This normative approach to business is at the center of business ethics. Ethical decision-making involves the basic categories, concepts, and language of ethics: shoulds, oughts, rights and responsibilities, goodness, fairness, justice, virtue, kindness, loyalty, trustworthiness, honesty, and the like.
• #29: Can’t the law answer our ethical dilemmas? [Process: ask the participants to answer the slide’s questions.]
• #30: Consider one law that has significant impact of business decision-making: the Americans with Disability Act. This law requires employers to make reasonable accommodations for employees with disabilities. But what counts as a disability and what counts as a reasonable accommodation? Over the years, claims have been made that relevant disabilities include obesity, depression, dyslexia, arthritis, hearing loss, high blood pressure, facial scars, and the fear of heights. Whether or not such conditions are covered under the law will depend on a number of factors, including how severe the illness is and how it affects the employee’s ability to work. Imagine that you are a corporate human resource manager and an employee asks that you make reasonable accommodations for her allergy? How would you decide if allergies and hay-fever are disabilities under the Americans with Disabilities Act? The legal answer is ambiguous. The law offers general rules that get specified in case law. Most of the laws that concern business are based on past cases that establish legal precedents. Each precedent applies general rules to the specific circumstances of an individual case. In most business situations, asking “Is this legal?” is really to ask “Are these circumstances similar enough to past cases that the conclusions reached in those cases will also apply here?” Since there will always be some differences between cases, this will always remain an open question. Thus, there is not unambiguous answer to the conscientious business manager who wishes simply to obey the law. One simply cannot find the applicable rule, apply it to the situation, and deduce a decision from it.
• #31: Decision makers might include in their assessment before taking action: The likelihood of being challenged in court. The likelihood of losing the case. The likelihood of settling for financial damages. A comparison of those costs. The financial benefits of taking the action. The ethical implication of the options available. The Conference Board suggests that the ongoing assessment and review process might have a greater focus on the final element—the ethical implications—because it could involve: Independent monitoring of whistle blowing or help-line information systems. Issuing risk assessment reports. Benchmarking for future activities. Modifying programs based on experience.
• #33: According to this tradition, science is the great arbiter of truth. Science provides the methods and procedures for determining what is true. Thus, the scientific method can be thought of as the answer to the fundamental questions of theoretical reason: What should we believe?
• #34: These traditions, or what are often referred to as ethical theories, explain and defend various norms, standards, values, and principles that contribute to responsible ethical decision-making.