Business ethics joseph w weiss pdf download

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BUSINESS ETHICS

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BUSINESS ETHICS A Stakeholder and Issues Management Approach

SIXTH EDITION

Joseph W. Weiss

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Business Ethics Copyright © 2014 by Joseph W. Weiss

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Sixth Edition

Paperback print edition ISBN 978-1-62656-140-3 PDF e-book ISBN 978-1-62656-141-0 IDPF e-book ISBN 978-1-62656-142-7

2014-1

Book produced by: Westchester Publishing Services

Cover design: Dan Tesser / pemastudio

Interior illustration: Westchester Publishing Services

Indexer: Robert Swanson

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Brief Contents

Chapter 1 Business Ethics, the Changing Environment, and Stakeholder Management

Chapter 2 Ethical Principles, Quick Tests, and Decision-Making Guidelines

Chapter 3 Stakeholder and Issues Management Approaches

Chapter 4 The Corporation and External Stakeholders: Corporate Governance: From the Boardroom to the Marketplace

Chapter 5 Corporate Responsibilities, Consumer Stakeholders, and the Environment

Chapter 6 The Corporation and Internal Stakeholders: Values-Based Moral Leadership, Culture, Strategy, and Self-Regulation

Chapter 7 Employee Stakeholders and the Corporation

Chapter 8 Business Ethics and Stakeholder Management in the Global Environment

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Contents

Preface

Acknowledgments

Case Authorship Chapter 1 Business Ethics, the Changing Environment, and Stakeholder Management

1.1 Business Ethics and the Changing Environment

Seeing the “Big Picture”

Point/CounterPoint

Environmental Forces and Stakeholders

Stakeholder Management Approach

1.2 What Is Business Ethics? Why Does It Matter?

What Is Ethics and What Are the Areas of Ethical Theory?

Unethical Business Practices and Employees

Ethics and Compliance Programs

Why Does Ethics Matter in Business?

Working for the Best Companies

1.3 Levels of Business Ethics

Asking Key Questions

Ethical Insight 1.1

1.4 Five Myths about Business Ethics

Myth 1: Ethics Is a Personal, Individual Affair, Not a Public or Debatable Matter

Myth 2: Business and Ethics Do Not Mix

Myth 3: Ethics in Business Is Relative

Myth 4: Good Business Means Good Ethics

Myth 5: Information and Computing Are Amoral

1.5 Why Use Ethical Reasoning in Business?

1.6 Can Business Ethics Be Taught and Trained?

1.7 Plan of the Book

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Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

1. Bernard L. Madoff Investment Securities LLC: Wall Street Trading Firm

2. Cyberbullying: Who’s to Blame and What Can Be Done?

Notes

Chapter 2 Ethical Principles, Quick Tests, and Decision-Making Guidelines

2.1 Ethical Reasoning and Moral Decision Making

Three Criteria in Ethical Reasoning

Moral Responsibility Criteria

2.2 Ethical Principles and Decision Making

Ethical Insight 2.1

Utilitarianism: A Consequentialist (Results-Based) Approach

Universalism: A Deontological (Duty-Based) Approach

Rights: A Moral and Legal Entitlement-Based Approach

Justice: Procedures, Compensation, and Retribution

Virtue Ethics: Character-Based Virtues

The Common Good

Ethical Relativism: A Self-Interest Approach

Immoral, Amoral, and Moral Management

2.3 Four Social Responsibility Roles

2.4 Levels of Ethical Reasoning and Moral Decision Making

Personal Level

Organizational Level

Industry Level

Societal, International, and Global Levels

2.5 Identifying and Addressing Ethical Dilemmas

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Ethical Insight 2.2

Moral Creativity

Ethical Dilemma Problem Solving

12 Questions to Get Started

2.6 Individual Ethical Decision-Making Styles

Communicating and Negotiating across Ethical Styles

2.7 Quick Ethical Tests

2.8 Concluding Comments

Back to Louise Simms . . .

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

3. Ford’s Pinto Fires: The Retrospective View of Ford’s Field Recall Coordinator

4. Jerome Kerviel: Rogue Trader or Misguided Employee? What Really Happened at the Société Générale?

5. Samuel Waksal at ImClone

Notes

Chapter 3 Stakeholder and Issues Management Approaches

3.1 Stakeholder Theory and the Stakeholder Management Approach Defined

Stakeholders

Stakes

3.2 Why Use a Stakeholder Management Approach for Business Ethics?

Stakeholder Theory: Criticisms and Responses

3.3 How to Execute a Stakeholder Analysis

Taking a Third-Party Objective Observer Perspective

Role of the CEO in Stakeholder Analysis

Summary of Stakeholder Analysis

3.4 Negotiation Methods: Resolving Stakeholder Disputes

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Stakeholder Dispute Resolution Methods

3.5 Stakeholder Management Approach: Using Ethical Principles and Reasoning

3.6 Moral Responsibilities of Cross-Functional Area Professionals

Marketing and Sales Professionals and Managers as Stakeholders

R&D, Engineering Professionals, and Managers as Stakeholders

Accounting and Finance Professionals and Managers as Stakeholders

Public Relations Managers as Stakeholders

Human Resource Managers as Stakeholders

Summary of Managerial Moral Responsibilities

3.7 Issues Management, Integrating a Stakeholder Framework

What Is an Issue?

Ethical Insight 3.1

Other Types of Issues

Stakeholder and Issues Management: “Connecting the Dots”

Moral Dimensions of Stakeholder and Issues Management

Types of Issues Management Frameworks

3.8 Managing Crises

How Executives Have Responded to Crises

Crisis Management Recommendations

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

6. The BP Deepwater Horizon Explosion and Oil Spill: Crisis and Aftermath

7. Mattel Toy Recalls

8. Genetic Discrimination

Notes

Chapter 4 The Corporation and External Stakeholders: Corporate Governance: From the Boardroom to the Marketplace

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4.1 Managing Corporate Social Responsibility in the Marketplace

Ethical Insight 4.1

Free-Market Theory and Corporate Social Responsibility

Problems with the Free-Market Theory

Intermediaries: Bridging the Disclosure Gap

Point/CounterPoint

4.2 Managing Corporate Responsibility with External Stakeholders

The Corporation as Social and Economic Stakeholder

The Social Contract: Dead or Desperately Needed?

Balance between Ethical Motivation and Compliance

Covenantal Ethic

The Moral Basis and Social Power of Corporations as Stakeholders

Corporate Philanthropy

Managing Stakeholders Profitably and Responsibly: Reputation Counts

Ethical Insight 4.2

4.3 Managing and Balancing Corporate Governance, Compliance, and Regulation

Ethical Insight 4.3

Best Corporate Board Governance Practices

Sarbanes-Oxley Act

Pros and Cons of Implementing the Sarbanes-Oxley Act

The Federal Sentencing Guidelines for Organizations: Compliance Incentive

4.4 The Role of Law and Regulatory Agencies and Corporate Compliance

Why Regulation?

Laws and U.S. Regulatory Agencies

Laws Protecting Consumers

Laws Protecting the Environment

4.5 Managing External Issues and Crises: Lessons from the Past (Back to the Future?)

Chapter Summary

Questions

Exercises

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Real-Time Ethical Dilemma

Cases

9. Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?

10. Goldman Sachs: Hedging a Bet and Defrauding Investors

11. Google Books

Notes

Chapter 5 Corporate Responsibilities, Consumer Stakeholders, and the Environment

5.1 Corporate Responsibility toward Consumer Stakeholders

Corporate Responsibilities and Consumer Rights

Consumer Protection Agencies and Law

5.2 Corporate Responsibility in Advertising

Ethics and Advertising

The Federal Trade Commission and Advertising

Pros and Cons of Advertising

Ethical Insight 5.1

Advertising and Free Speech

Paternalism, Manipulation, or Free Choice?

5.3 Controversial Issues in Advertising: The Internet, Children, Tobacco, and Alcohol

Advertising and the Internet

The Thin Line between Deceptive Advertising, Spyware, and Spam

Advertising to Children

Protecting Children

Tobacco Advertising

The Tobacco Controversy Continues

Alcohol Advertising

Ethical Insight 5.2

5.4 Managing Product Safety and Liability Responsibly

How Safe Is Safe? The Ethics of Product Safety

Ethical Insight 5.3

Product Liability Doctrines

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Legal and Moral Limits of Product Liability

Product Safety and the Road Ahead

5.5 Corporate Responsibility and the Environment

The Most Significant Environmental Problems

Causes of Environmental Pollution

Enforcement of Environmental Laws

The Ethics of Ecology

Green Marketing, Environmental Justice, and Industrial Ecology

Rights of Future Generations and Right to a Livable Environment

Recommendations to Managers

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

12. For-Profit Universities: Opportunities, Issues, and Promises

13. Fracking: Drilling for Disaster?

14. Neuromarketing

15. WalMart: Challenges with Gender Discrimination

16. Vioxx, Dodge Ball: Did Merck Try to Avoid the Truth?

Notes

Chapter 6 The Corporation and Internal Stakeholders: Values-Based Moral Leadership, Culture, Strategy, and Self-Regulation

6.1 Leadership and Stakeholder Management

Defining Purpose, Mission, and Values

Ethical Insight 6.1

Leadership Stakeholder Competencies

Example of Companies Using Stakeholder Relationship Management

Ethical Insight 6.2

Spiritual Values, Practices, and Moral Courage in Leading

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Failure of Ethical Leadership

Ethical Dimensions of Leadership Styles

How Should CEOs as Leaders Be Evaluated and Rewarded?

6.2 Organizational Culture, Compliance, and Stakeholder Management

Organizational Culture Defined

High-Ethics Companies

Weak Cultures

6.3 Leading and Managing Strategy and Structure

Organizational Structure and Ethics

Boundaryless and Networked Organizations

6.4 Leading Internal Stakeholder Values in the Organization

6.5 Corporate Self-Regulation and Ethics Programs: Challenges and Issues

Ethical Insight 6.3

Organizations and Leaders as Moral Agents

Ethics Codes

Codes of Conduct

Problems with Ethics and Conduct Codes

Ombuds and Peer-Review Programs

Is the Organization Ready to Implement a Values-Based Stakeholder Approach? A Readiness Checklist

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemmas

Cases

17. Kaiser Permanente: A Crisis of Communication, Values, and Systems Failure

18. Social Networking and Social Responsibility

Notes

Chapter 7 Employee Stakeholders and the Corporation

7.1 Employee Stakeholders in the Changing Workforce

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The Aging Workforce

Generational Differences in the Workplace

Steps for Integrating a Multigenerational Workforce

Ethical Insight 7.1

Women in the Workforce

Same-Sex Marriages, Civil Unions, Domestic Partnerships, and Workforce Rights

The Increasing Cultural Mix: Minorities Are Becoming the Majority

Educational Weaknesses and Gaps

Point/CounterPoint

Mainstreaming Disabled Workers

Balancing Work and Life in Families

7.2 The Changing Social Contract between Corporations and Employees

Good Faith Principle Exception

Public Policy Principle Exception

Implied Contract Exception

7.3 Employee and Employer Rights and Responsibilities

Moral Foundation of Employee Rights

The Principle of Balance in the Employee and Employer Social Contract and the Reality of Competitive Change

Rights from Government Legislation

Employer Responsibilities to Employees

Employee Rights and Responsibilities to Employers

Employee Rights in the Workplace

Other Employee Rights and Obligations to Employers

Ethical Insight 7.2

7.4 Discrimination, Equal Employment Opportunity, and Affirmative Action

Discrimination

Equal Employment Opportunity and the Civil Rights Act

Age and Discrimination in the Workplace

Comparable Worth and Equal Pay

Affirmative Action

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Ethics and Affirmative Action

Reverse Discrimination: Arguments against Affirmative Action

Ethical Insight 7.3

7.5 Sexual Harassment in the Workplace

What Is Sexual Harassment?

Who Is Liable?

Tangible Employment Action and Vicarious Liability

Sexual Harassment and Foreign Firms in the United States

7.6 Whistle-Blowing versus Organizational Loyalty

When Whistle-Blowers Should Not Be Protected

Factors to Consider before Blowing the Whistle

Managerial Steps to Prevent External Whistle-Blowing

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

19. Preemployment Screening and Facebook: Ethical Considerations

20. Women on Wall Street: Fighting for Equality in a Male-Dominated Industry

Notes

Chapter 8 Business Ethics and Stakeholder Management in the Global Environment

8.1 The Connected Global Economy and Globalization

Ethical Insight 8.1

Globalization and the Forces of Change

8.2 Managing and Working in a “Flat World”: Professional Competencies and Ethical Issues

Shared Leadership in Teams’ Competency

Ethical Insight 8.2

Global Ethical Values and Principles

Know Your Own Cultural and Core Values, Your Organization’s, and Those with Whom You Are Working

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Cross-Cultural Business Ethical Issues Professionals May Experience

8.3 Societal Issues and Globalization: The Dark Side

International Crime and Corruption

Economic Poverty and Child Slave Labor

The Global Digital Divide

Westernization (Americanization) of Cultures

Loss of Nation-State Sovereignty

8.4 Multinational Enterprises as Stakeholders

Power of MNEs

8.5 Triple Bottom Line, Social Entrepreneurship, and Microfinancing

The Triple Bottom Line

Social Entrepreneurs and Social Enterprises

Microfinancing

8.6 MNEs: Stakeholder Values, Guidelines, and Codes for Managing Ethically

Employment Practices and Policies

Consumer Protection

Environmental Protection

Political Payments and Involvement

Basic Human Rights and Fundamental Freedoms

8.7 Cross-Cultural Ethical Decision Making and Negotiation Methods

External Corporate Monitoring Groups

Individual Stakeholder Methods for Ethical Decision Making

Four Typical Styles of International Ethical Decision Making

Hypernorms, Local Norms, and Creative Ethical Navigation

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemmas

Cases

21. Google in China: Still “Doing No Evil”?

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22. Sweatshops: Not Only a Global Issue

23. The U.S. Industrial Food System

Notes

Index

About the Author

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Preface

The sixth edition of Business Ethics: A Stakeholder and Issues Management Approach continues the mission of providing a practical, easy-to-read, engaging and contemporary text with detailed real-time contemporary and classic cases for students. This text updates the previous edition, adding fourteen new cases in addition to other new features discussed below.

We continue our quest to assist colleagues and students in understanding the changing environment from combined stakeholder and issues management approaches, based on the theory and practice that firms depend on stakeholders as well as stockholders for their survival and success. Acting morally while doing business is no longer a joking or even questionable topic of discussion. With the near shutdowns of the U.S. government, the subprime lending crisis, global climate changes, the fading middle class in America and other countries, China’s continuing economic expansion, and India’s inroads into the global economy, the stakes for the global economy are not trivial. Ethical behaviors are required, not optional, for this and future generations. Learning to think and reason ethically is the first step.

Business ethics is concerned with doing what is right over what is wrong, while acting in helpful over harmful ways, and with seeking the common good as well as our own welfare. This text addresses this foundational way of thinking by asking why does the modern corporation exist in the first place? What is its raison d’être? How does it treat its stakeholders? Business ethics engages these essential questions, and it is also about the purpose, values, and transactions of and between individuals, groups, and companies and their global alliances. Stakeholder theory and management, in particular, are what concern nonfinancial as well as the financial aspects of business behavior, policies, and actions. A stakeholder view of the firm complements the stockholder view and includes all parties and participants who have an interest—a stake—in the environment and society in which business operates.

Students and professionals need straightforward frameworks to thoughtfully and objectively analyze and then sort through complex issues in order to make decisions that matter—ethically, economically, socially, legally, and spiritually. The United States and indeed the whole world are different after the 9/11 attacks. Terrorism is a threat to everyone, everywhere, as the Boston bombings showed. Also threatening are the ongoing corporate scandals, the consequences of the Arab Spring, security issues worldwide, immigration problems, the inequalities in income distribution and wealth, the decay of the middle classes—all of these affect graduating students and those who wish to attend a university or college but cannot afford to. Business ethics affects our professional and personal relationships, careers, and lives, and this text attempts to identify and help analyze many of these issues and opportunities for change, using relevant ethical frameworks and reasoning.

The New Revised Sixth Edition: Why and How This Text Is Different

This edition builds on previous success factors to provide:

1. A competent, contemporary text grounded in factual and detailed research, while being easy to read and

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applying concepts and methods to real-time business-related situations.

2. Interesting and contemporary news stories, exercises, and examples.

3. In-depth, real-time customized cases (twenty-three in this edition) specifically designed for this book.

4. Ethical dilemmas experienced by real individuals, not hypothetical stories.

5. A detailed chapter on both stakeholder and issues management methods, with step-by-step explanations, not summarized or theoretical abstractions.

6. A straightforward business and managerial perspective supported by the latest research—not only a philosophical approach.

7. One of the most comprehensive texts on the topics of workforce and workplace demographics, generational trends, and issues relating to ethical issues.

8. Comprehensive coverage of the Sarbanes-Oxley Act, federal sentencing guidelines, and codes of conduct.

9. Personal, professional, organizational, and global perspectives, and information and strategies for addressing ethical dilemmas.

10. A decision-maker role for students in exercises and examples.

This edition adds features that enhance your ethical understanding and interest in contemporary issues in the business world. It also aligns even more closely with international Association to Advance Collegiate Schools of Business (AACSB) requirements to help students, managers, and leaders achieve in their respective fields. Additions and changes include:

• A Point/CounterPoint exercise has been added to several chapters to challenge students’ thinking and arguments on contemporary issues. Topics include “too big to fail” (TBTF) institutions; advertising on the Boston bomber; student loan debt; and file sharing and other forms of online sharing.

• Twenty-three cases, of which fourteen are new and three updated, dealing with national and international issues.

• Updated national ethics survey data is included throughout the text.

• New perspectives on generational differences and ethical workplace issues have been added.

• Each chapter has new and updated lead-off cases and scenarios to attract students’ attention.

• Updated data on global and international issues.

• Updated research and business press findings and stories have been added to each chapter to explain concepts and perspectives.

• Chapter 1 includes a section on personal ethics with Covey’s maturity continuum and cases on cyberbullying and Madoff’s Ponzi scheme.

• Chapter 2 now covers more material on personal ethics and has a section explaining the foundations of ethics with cases on Jerome Kerviel, rogue trader, Sam Waksal (ImClone), and the Ford Pinto.

• Chapter 3 is now the stakeholder and issues management chapter with a section explaining stakeholder theory in more depth with a lead-in case on the BP oil spill and aftermath in the Gulf of Mexico. Cases include genetic discrimination and the Mattel toy recalls.

• Chapter 4 has updated research throughout with new Ethical Insight inserts and cases on conscious

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capitalism, Goldman Sachs, and Google Books.

• Chapter 5 includes cases on fracking, for-profit education, neuromarketing, and gender discrimination.

• Chapter 6 includes new cases on Kaiser Permanente, and social networking and social responsibility.

• Chapter 7 remains a leader in the field on depth and coverage of current trends on generational differences, gender, and population changes. Cases include Facebook and Preemployment, and women on Wall Street.

• Chapter 8 features new research on skills and ethical capacities in international/global management and leadership. The “dark side” of globalization is updated with research on ethical issues in developing and underdeveloped countries. Cases include sweatshops and the U.S. industrial food system.

An Action Approach

The sixth edition puts the students in the decision-maker role when identifying and addressing ethical dilemmas with thought-provoking cases and discussion questions that ask, “What would you do if you had to decide a course of action?” Readers are encouraged to articulate and share their decision-making rationales and strategies. Readers will also learn how to examine changing ethical issues and business problems with a critical eye. We take a close look at the business reporting of the online editions of the Wall Street Journal, 60 Minutes, the New York Times, Businessweek, the Economist, and other sources.

Stakeholder and Issues Management Analysis

Stakeholder analysis is one of the most comprehensive approaches for identifying issues, groups, strategies, and outcomes. In the sixth edition, these methods are presented in an updated and more integrative Chapter 3. This chapter offers a useful starting point for mapping the who, what, when, where, why, and how of ethical problems relating to organizations and their stakeholders. Issues and crisis management frameworks are explained and integrated into approaches that complement the stakeholder analysis. Quick tests and negotiation techniques are presented in Chapters 2 and 8.

• A new instructor’s manual and PowerPoints.

• Streamlined case teaching notes.

• Suggested videos and web sites for each chapter.

Objectives and Advantages of This Textbook

• To use an action-oriented stakeholder and issues management approach for understanding the ethical dimensions of business, organizational, and professional complex issues, crises, and events that are happening now.

• To introduce and motivate students about the relevance of ethical concepts, principles, and examples through actual moral dilemmas that are occurring in their own lives, as well as with known national and international people, companies, and groups.

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• To present a simple, straightforward way of using stakeholder and issues management methods with ethical reasoning in the marketplace and in workplace relationships.

• To engage and expand readers’ awareness of ethical and unethical practices in business at the individual, group, organizational, and multinational levels through real-time—not hypothetical— ethical dilemmas, stories, and cases.

• To instill self-confidence and competence in the readers’ ability to think and act according to moral principles. The classroom becomes a lab for real-life decisions.

Structure of the Book

• Chapter 1 defines business ethics and familiarizes the reader with examples of ethics in business practices, levels of ethical analysis, and what can be expected from a course in business ethics. A Point/CounterPoint exercise engages students immediately.

• Chapter 2 has exchanged positions in the text with the former Chapter 3. This chapter engages students in a discussion of ethics at the personal, professional, organizational, and international levels. The foundations of ethical principles are presented in context with contemporary ethical decision- making approaches. Individual styles of moral decision making are also discussed in this section. Although the approach here is a micro-level one, these principles can be used to examine and explain corporate strategies and actions as well. (Executives, managers, employees, coalitions, government officials, and other external stakeholder groups are treated as individuals.)

• Chapter 3 introduces action-oriented methods for studying social responsibility relationships at the individual employee, group, and organizational levels. These methods provide and encourage the incorporation of ethical principles and concepts from the entire book.

• Chapter 4 presents ethical issues and problems that firms face with external consumers, government, and environmental groups. How moral can and should corporations be and act in commercial dealings? Do corporations have a conscience? Classic and recent crises resulting from corporate and environmental problems are covered.

• Chapter 5 explains ethical problems that consumers face in the marketplace: product safety and liability, advertising, privacy, and the Internet. The following questions are addressed: How free is “free speech”? How much are you willing to pay for safety? Who owns the environment? Who regulates the regulators in an open society?

• Chapter 6 presents the corporation as internal stakeholder and discusses ethical leadership, strategy, structure, alliances, culture, and systems as dominant themes regarding how to lead, manage, and be a responsible follower in organizations today.

• Chapter 7 focuses on the individual employee stakeholder and examines the most recent, new and changing workforce/workplace trends, moral issues, and dilemmas employees and managers face and must respond to in order to survive and compete in national and global economies. This chapter has been described as a “must-read” for every human resource professional.

• Chapter 8 begins by asking students if they are ready for professional international assignments. Ethical and leadership competencies of new entrants into the global workforce are introduced, before

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moving the discussion to global and multinational enterprises (MNEs) and ethical issues between MNEs, host countries, and other groups. Issues resulting from globalization are presented along with stakeholders who monitor corporate responsibility internationally. Negotiation techniques for professionals responsibly doing business abroad are presented.

Cases

Twenty-three cases are included in this edition, fourteen of which are new and three thoroughly updated.

Chapter 1

1. Bernard L. Madoff Investment Securities LLC: Wall Street Trading Firm

2. Cyberbullying: Who’s to Blame and What Can Be Done?

Chapter 2

3. Ford’s Pinto Fires: The Retrospective View of Ford’s Field Recall Coordinator

4. Jerome Kerviel: Rogue Trader or Misguided Employee? What Really Happened at the Société Générale?

5. Samuel Waksal at ImClone

Chapter 3

6. The BP Deepwater Horizon Explosion and Oil Spill: Crisis and Aftermath

7. Mattel Toy Recalls

8. Genetic Discrimination

Chapter 4

9. Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?

10. Goldman Sachs: Hedging a Bet and Defrauding Investors

11. Google Books

Chapter 5

12. For-Profit Universities: Opportunities, Issues, and Promises

13. Fracking: Drilling for Disaster?

14. Neuromarketing

15. WalMart: Challenges with Gender Discrimination

16. Vioxx, Dodge Ball: Did Merck Try to Avoid the Truth?

Chapter 6

17. Kaiser Permanente: A Crisis of Communication, Values, and Systems Failure

18. Social Networking and Social Responsibility

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Chapter 7

19. Preemployment Screening and Facebook: Ethical Considerations

20. Women on Wall Street: Fighting for Equality in a Male-Dominated Industry

Chapter 8

21. Google in China: Still “Doing No Evil”?

22. Sweatshops: Not Only a Global Issue

23. The U.S. Industrial Food System

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Acknowledgments

This book continues the practice that has endured over the last several years that I have been teaching business ethics to MBA students and executives. My consulting work also informs this edition in numerous ways. I would like to thank all my students for their questions, challenges, and class contributions, which have stimulated the research and presentations in this text. I also thank all the professional staff at Berrett-Koehler who helped make this edition possible and the faculty and staff at Bentley University who contributed resources and motivation for this edition. I am grateful to Michael Hoffman and his staff at Bentley University’s Center for Business Ethics, whose shared resources and friendship also helped with this edition.

I also recognize and extend thanks to those whose reviews of previous editions were very helpful, and whose comments on this edition were instructive as well: Anna Pakman, Ohio Dominican University; Buck Buchanan, Defiance College; Francine Guice, Indiana University-Purdue University Fort Wayne; Lois Smith, University of Wisconsin; Ross Mecham, Virginia Polytechnic Institute and State University; Christina Stamper, Western Michigan University.

Special thanks go to Laura Gray, Lu Bai, and Matt Zamorski, former and current graduate students at Bentley University, without whose help this edition would not have been possible.

Joseph W. Weiss Bentley University

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Case Authorship

Editing help was provided by Laura Gray, Lu Bai, and Matt Zamorski.

Case 1 Bernard L. Madoff Investment Securities LLC: Wall Street Trading Firm

Alba Skurti, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 2 Cyberbullying: Who’s to Blame and What Can Be Done?

Roseleen Dello Russo and Lauren Westling, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 3 Ford’s Pinto Fires: The Retrospective View of Ford’s Field Recall Coordinator

Dennis A. Gioia, Professor of Organizational Behavior, Smeal College of Business, Pennsylvania State University, provided the personal reflections in this case. Michael K. McCuddy, Valparaiso University, provided background information and discussion questions.

Case 4 Jerome Kerviel: Rogue Trader or Misguided Employee? What Really Happened at the Société Générale?

Steve D’Aquila, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 5 Samuel Waksal at ImClone

Amy Vensku, MBA Bentley student under the direction of Professor Joseph W. Weiss, and edited and adapted for this text by Michael K. McCuddy, Valparaiso University and Matt Zamorski, Bentley University.

Case 6 The BP Deepwater Horizon Explosion and Oil Spill: Crisis and Aftermath

Jill Stonehouse and Bianlbahen Patel, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 7 Mattel Toy Recalls

Mike Ladd, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 8 Genetic Discrimination

Jaclyn Publicover, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 9 Conscious Capitalism: What Is It? Why Do We Need It? Does It Work?

John Warden, Bentley University, edited by Professor Joseph W. Weiss.

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Case 10 Goldman Sachs: Hedging a Bet and Defrauding Investors

Dean Koutris and Jess Sheynman, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 11 Google Books

Steve D’Aquila, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 12 For-Profit Universities: Opportunities, Issues, and Promises

Alicia Cabrera and Nate Pullen, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 13 Fracking: Drilling for Disaster?

Lauren Casas and Ned Coffee, MBA Bentley students, under the direction of Professor Joseph W. Weiss, Bentley University, with editorial revisions made by Laura Gray, Matt Zamorski, and Lu Bai.

Case 14 Neuromarketing

Eddy Fitzgerald and Jennifer Johnson, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 15 WalMart: Challenges with Gender Discrimination

Michael K. McCuddy, the Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University.

Case 16 Vioxx, Dodge Ball: Did Merck Try to Avoid the Truth?

Sean Downey, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 17 Kaiser Permanente: A Crisis of Communication, Values, and Systems Failure

Sarah O’Neill, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 18 Social Networking and Social Responsibility

Adam Schilke, Kimberly Benevides, and Eden Kyne, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 19 Preemployment Screening and Facebook: Ethical Considerations

Carl Forziati, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

Case 20 Women on Wall Street: Fighting for Equality in a Male-Dominated Industry

Monica Meunier, under the direction of Professor Joseph W. Weiss, and adapted and edited for this text by

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Michael K. McCuddy, Valparaiso University.

Case 21 Google in China: Still “Doing No Evil”?

Professor Joseph W. Weiss, Bentley University, edited by Lu Bai.

Case 22 Sweatshops: Not Only a Global Issue

Michael K. McCuddy, the Louis S. and Mary L. Morgal Chair of Christian Business Ethics and Professor of Management, College of Business Administration, Valparaiso University.

Case 23 The U.S. Industrial Food System

Brenda Pasquarello, Bentley University, under the direction of Professor Joseph W. Weiss, Bentley University.

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1 BUSINESS ETHICS, THE CHANGING ENVIRONMENT,

AND STAKEHOLDER MANAGEMENT

1.1 Business Ethics and the Changing Environment

Point/CounterPoint

1.2 What Is Business Ethics? Why Does It Matter?

1.3 Levels of Business Ethics

Ethical Insight 1.1

1.4 Five Myths about Business Ethics

1.5 Why Use Ethical Reasoning in Business?

1.6 Can Business Ethics Be Taught and Trained?

1.7 Plan of the Book

Chapter Summary

Questions

Exercises

Real-Time Ethical Dilemma

Cases

1. Bernard L. Madoff Investment Securities LLC: Wall Street Trading Firm

2. Cyberbullying: Who’s to Blame and What Can Be Done?

Notes

OPENING CASE

Blogger: “Hi. i download music and movies, limewire and torrent. is it illegal for me to download or is it just illegal for the person uploading it. does anyone know someone who was caught and got into trouble for it, what happened them. Personally I dont see a difference between

downloading a song or taping it on a cassette from a radio!!”1

The Recording Industry Association of America (RIAA), on behalf of its member companies and copyright owners, has sued more than 30,000 people for unlawful downloading. RIAA detectives log on to peer-to-peer networks where they easily identify illegal activity since users’ shared folders are visible to all. The majority of these cases have been settled out of court for $1,000—$3,000, but fines per music track can go up to $150,000 under the Copyright Act.

The nation’s first file-sharing defendant to challenge an RIAA lawsuit, Jammie Thomas-Rasset, reached the end of the appeals process to overturn a jury-determined $222,000 fine in 2013. She was ordered to pay

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this amount, which she argued was unconstitutionally excessive, for downloading and sharing 24 copyrighted songs using the now-defunct file-sharing service Kazaa. The Supreme Court has not yet heard a file-sharing case, having also declined without comment to review the only other appeal following Thomas-Rasset’s. (In that case, the Court let stand a federal jury-imposed fine of $675,000 against Joel Tenenbaum for downloading and sharing 30 songs.) “As I’ve said from the beginning, I do not have now, nor do I anticipate in the future, having $220,000 to pay this,” Thomas-Rasset said. “If they do decide to try and collect, I will

file for bankruptcy as I have no other option.”2

Students often use university networks to illegally distribute copyrighted sound recordings on unauthorized peer-to-peer services. The RIAA has issued subpoenas to universities nationwide, including networks in Connecticut, Georgia, Kansas, Michigan, Minnesota, New Jersey, Pennsylvania, Rhode Island, Texas, Virginia, and Washington. Most universities give up students’ identities only after offering an opportunity to stop the subpoena with their own funds. As in earlier rounds of lawsuits, the RIAA is utilizing the “John Doe” litigation process, which is used to sue defendants whose names are not known.

RIAA president Cary Sherman has discussed the ongoing effort to reach out to the university community with proactive solutions to the problem of illegal file-sharing on college campuses: “It remains as important as ever that we continue to work with the university community in a way that is respectful of the law as well as university values. That is one of our top priorities, and we believe our constructive outreach has been enormously productive so far. Along with offering students legitimate music services, campus-wide educational and technological initiatives are playing a critical role. But there is also a complementary need for enforcement by copyright owners against the serious offenders—to remind people that this activity is illegal.”

He added: “Illegally downloading music from the Internet costs everyone—the musicians not getting compensated for their craft, the owners and employees of the thousands of record stores that have been forced to close, legitimate online music services building their businesses, and consumers who play by the rules and purchase their music legally.”

On the other hand, once the well-funded RIAA initiates a lawsuit, many defendants are pressured to settle out of court in order to avoid oppressive legal expenses. Others simply can’t take the risk of large fines that juries have shown themselves willing to impose.

New technologies and the trend toward digital consumption have made intellectual property both more critical to businesses’ bottom lines and more difficult to protect. No company, big or small, is immune to the intellectual property protection challenge. Illegal downloads of music are not the only concern. A new wave of lawsuits is being filed against individuals who illegally download movies through sites like Napster and BitTorrent. In 2011, the U.S. Copyright Group initiated “the largest illegal downloading case in US history” at the time, suing over 23,000 file sharers who illegally downloaded Sylvester Stallone’s movie The Expendables. This case was expanded to include the 25,000 users who also downloaded Voltage Pictures’ The Hurt Locker, which increased the total number of defendants to approximately 50,000, all of whom used peer- to-peer downloading through BitTorrent. The lawsuits were filed based on the illegal downloads made from an Internet Protocol (IP) address. The use of an IP address as identifier presents ethical issues—for example, should a parent be responsible for a child downloading a movie through the family’s IP address? What about a landlord who supplied Internet to a tenant?

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Digital books are also now in play. In 2012, a lawsuit was filed in China against technology giant Apple for sales of illegal book downloads through its App Store. Nine Chinese authors are demanding payment of $1.88 million for unauthorized versions of their books that were submitted to the App Store and sold to consumers for a profit. Again, the individual IP addresses are the primary way of determining who performed the illegal download. Telecom providers and their customers face privacy concerns, as companies are being asked for the names of customers associated with IP addresses identified with certain downloads.

Privacy activists argue that an IP address (which identifies the subscriber but not the person operating the computer) is private, protected information that can be shown during criminal but not civil investigations. Fred von Lohmann, senior staff attorney with the Electronic Frontier Foundation, has suggested on his organization’s blog that “courts are not prepared to simply award default judgments worth tens of thousands

of dollars against individuals based on a piece of paper backed by no evidence.”3

1.1 Business Ethics and the Changing Environment

The Internet is changing everything: the way we communicate, relate, read, shop, bank, study, listen to music, get news and “TV,” and participate in politics. Of course the last “third billion” of people in undeveloped

countries are not participating on broadband as is the rest of the world,4 but they predictably will, first through mobile phones. Businesses and governments operate in and are disrupted by changing technological, legal, economic, social, and political environments with competing stakeholders and power claims, as many Middle Eastern countries in particular are experiencing. Also, as this chapter’s opening case shows, there is more than one side to every complex issue and debate involving businesses, consumers, families, other institutions, and professionals. When stakeholders and companies cannot agree or negotiate competing claims among themselves, the issues generally go to the courts.

The RIAA, in the opening case, does not wish to alienate too many college students because they are also the music industry’s best customers. At the same time, the association believes it must protect those groups it represents. Not all stakeholders in this controversy agree on goals and strategies. For example, not all music artists oppose students downloading or even sharing some of their copyrighted songs. Offering free access to some songs is a good advertising tactic. On the other hand, shouldn’t those songwriters and recording companies who spend their time and money creating, marketing, distributing, and selling their intellectual property protect that property? Is file sharing, without limits or boundaries, stealing other people’s property? If not, what is this practice to be called? If file sharing continues in some form, and ends up helping sales for many artists, will it become legitimate? Should it? Is this just the new way business models are being changed by 15–26 year olds? While the debate continues, individuals (15 year olds and younger in many cases) who still illegally share files have rights as private citizens under the law, and recording companies have rights of property protection. Who is right and who is wrong, especially when two rights collide? Who stands to lose and who to gain? Who gets hurt by these transactions? Which group’s ethical positions are most defensible?

Stakeholders are individuals, companies, groups, and even governments and their subsystems that cause and respond to external issues, opportunities, and threats. Corporate scandals, globalization, deregulation, mergers, technology, and global terrorism have accelerated the rate of change and brought about a climate of uncertainty in which stakeholders must make business and moral decisions. Issues concerning questionable

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ethical and illegal business practices confront everyone, as the following examples illustrate:

• The subprime lending crisis in 2008 involved stakeholders as varied as consumers, banks, mortgage companies, real estate firms, and homeowners. Many companies that sold mortgages to unqualified buyers lied about low-risk, high-return products. Wall Street companies, while thriving, are also settling lawsuits stemming from the 2008 crisis. In 2013, “Hundreds of thousands of subprime borrowers are still struggling. Subprime securities still pose a significant legal risk to the firms that packaged them, and they use up capital

that could be deployed elsewhere in the economy.”5 In 2011, Bank of America announced that it would “take a whopping $20 billion hit to put the fallout from the subprime bust behind it and satisfy claims from

angry investors.”6 The ethics and decisions precipitating the crisis contributed to tilting the U.S. economy toward recession, with long-lasting effects.

• The corporate scandals in the 1990s through 2001 at Enron, Adelphia, Halliburton, MCI WorldCom, Tyco, Arthur Andersen, Global Crossing, Dynegy, Qwest, Merrill Lynch, and other firms that once jarred shareholder and public confidence in Wall Street and corporate governance may now seem like ancient history to those with short-term memories. Enron’s bankruptcy with assets of $63.4 billion defies imagination, but WorldCom’s bankruptcy set the record for the largest corporate bankruptcy in U.S. history (Benston, 2003). Only 22% of Americans express a great deal or quite a lot of confidence in big business,

compared to 65% who express confidence in small business.7 Confidence in big business reached its highest point in 1974 at 34%, and even during the dot-com boom in the late 1990s it hovered at 30%. The lowest rating of 16% was polled in 2009 after the subprime lending crisis, and although public confidence has slightly increased, the significant differential in American confidence between big and small business belies a

public mistrust of big business that may not be easily repaired.8

• The debate continues over excessive pay to those chief executive officers (CEOs) who posted poor corporate performance. Large bonuses paid out during the financial crisis made executive pay a controversial topic, yet investors did little to solve the issue. “Investors had the opportunity to provide advisory votes on executive pay at financial firms that received TARP funds in 2009, and they gave thumbs up to pay packages at every single one of those institutions. This proxy season, with advisory votes now widely available (thanks to the Dodd-Frank Act), only five companies’ executive compensation packages have received a thumbs down from