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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.