The _____ of 2002 incorporates the "comply or else" approach to corporate governance.

iv • Business Ethics Now

BRIEF TABLE OF CONTENTS

PART 1 Defi ning Business Ethics

1 Understanding Ethics 2 Defi ning Business

Ethics

PART 2 The Practice of Business Ethics

3 Organizational Ethics 4 Corporate Social

Responsibility

5 Corporate Governance

6 The Role of Government

7 Blowing the Whistle 8 Ethics and

Technology

PART 3 The Future of Business Ethics

9 Ethics and Globalization

10 Making It Stick: Doing What’s Right in a Competitive Market

Ch. 9 THE FUTURE OF

BUSINESS ETHICS

BusinessEthicsNow

Ch. 3 THE PRACTICE OF

BUSINESS ETHICS

Ch. 1 DEFINING BUSINESS ETHICS

Ch. 4 CORPORATE SOCIAL RESPONSIBILITY

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Ta bl

e of

C on

te nt

s PART 1 Defi ning Business Ethics

1 > Understanding Ethics FRONTLINE FOCUS Doing the Right Thing 3

WHAT IS ETHICS? 4

UNDERSTANDING RIGHT AND WRONG 4

How Should I Live? 4 The Value of a Value 4 Value Confl icts 5 Doing the Right Thing 5 The Golden Rule 6

ETHICAL THEORIES 6

Virtue Ethics 6 Ethics for the Greater Good 6 Universal Ethics 6 LIFE SKILLS What do you stand for, or what will you stand against? 7

ETHICAL RELATIVISM 7

ETHICAL DILEMMAS 8

ETHICAL DILEMMA Peer Pressure 8

Resolving Ethical Dilemmas 9 Ethical Reasoning 10 ETHICAL DILEMMA The Overcrowded Lifeboat 11

REAL WORLD APPLICATIONS Living with a Tough Decision 12

CONCLUSION 13

FRONTLINE FOCUS Doing the Right Thing—Megan Makes a Decision 13

For Review 14

Key Terms 14

Review Questions 15

Review Exercises 15

Internet Exercises 15

Team Exercises 16

Thinking Critically 1.1: ALL THE NEWS THAT’S FIT TO PRINT 17

Thinking Critically 1.2: THE MAN WHO SHOCKED THE WORLD 18

Thinking Critically 1.3: LIFE AND DEATH 19

2 > Defi ning Business Ethics FRONTLINE FOCUS The Customer Is Always Right 21

DEFINING BUSINESS ETHICS 22

WHO ARE THE STAKEHOLDERS? 22

AN ETHICAL CRISIS: IS BUSINESS ETHICS AN OXYMORON? 23

ETHICAL DILEMMA The Ford Pinto 25

THE HISTORY OF BUSINESS ETHICS 26

RESOLVING ETHICAL DILEMMAS 26

Resolution 28 LIFE SKILLS Making tough choices 29

JUSTIFYING UNETHICAL BEHAVIOR 30

ETHICAL DILEMMA Too Big to Fail? 30

REAL WORLD APPLICATIONS Everybody’s Doing It 31

CONCLUSION 31

FRONTLINE FOCUS The Customer Is Always Right— Nancy Makes a Decision 32

For Review 32

Key Terms 33

Review Questions 33

Review Exercises 33

Internet Exercises 34

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vi • Business Ethics Now

Team Exercises 34

Thinking Critically 2.1: PHOENIX OR VULTURE? 36

Thinking Critically 2.2: AN UNEQUIVOCAL DEDICATION TO BUSINESS ETHICS? 37

Thinking Critically 2.3: TEACHING OR SELLING? 39

PART 2 The Practice of Business Ethics

3 > Organizational Ethics FRONTLINE FOCUS Just Sign the Forms 43

DEFINING ORGANIZATIONAL ETHICS 44

ETHICAL CHALLENGES BY ORGANIZATIONAL FUNCTION 45

The Ethics of Research and Development 45 ETHICAL DILEMMA A Firm Production Date 45

Ethics in Manufacturing 46 Ethics in Marketing 46 REAL WORLD APPLICATIONS “Talking At” or “Talking To”? 48

ETHICS IN HUMAN RESOURCES 49

ETHICS IN FINANCE 50

All in a Day’s Work: Internal Auditors’ Roles 51 ETHICAL DILEMMA A Different Perspective 51

ETHICAL CHALLENGES 52

GAAP 52 Creative Bookkeeping Techniques 52 LIFE SKILLS Being ethically responsible 53

CONFLICTS OF INTEREST 54

CONCLUSION 55

FRONTLINE FOCUS Just Sign the Forms—Matt Makes a Decision 56

For Review 56

Key Terms 57

Review Questions 57

Review Exercises 57

Internet Exercises 58

Team Exercises 59

Thinking Critically 3.1: BOOSTING YOUR RÉSUMÉ 60

Thinking Critically 3.2: BANK OF AMERICA’S MOST TOXIC ASSET 61

Thinking Critically 3.3: JOHNSON & JOHNSON AND THE TYLENOL POISONINGS 62

4 > Corporate Social Responsibility

FRONTLINE FOCUS A Stocking Error 65

CORPORATE SOCIAL RESPONSIBILITY 66

MANAGEMENT WITHOUT CONSCIENCE 67

MANAGEMENT BY INCLUSION 68

REAL WORLD APPLICATIONS Unless They Ask 69

THE DRIVING FORCES BEHIND CORPORATE SOCIAL RESPONSIBILITY 69

ETHICAL DILEMMA Global Oil 70

THE TRIPLE BOTTOM LINE 71

ETHICAL DILEMMA Banning the Real Thing 72

Jumping on the CSR Bandwagon 74 LIFE SKILLS Being socially responsible 76

BUYING YOUR WAY TO CSR 76

CONCLUSION 77

FRONTLINE FOCUS A Stocking Error—Jennifer Makes a Decision 78

For Review 78

Key Terms 79

Review Questions 80

Review Exercises 80

Internet Exercises 80

Team Exercises 81

Thinking Critically 4.1: WALMART 82

Thinking Critically 4.2: CORPORATE SOCIAL IRRESPONSIBILITY 83

Thinking Critically 4.3: THE PESTICIDE DDT 85

5 > Corporate Governance FRONTLINE FOCUS “Incriminating Evidence” 87

CORPORATE GOVERNANCE 88

WHAT DOES CORPORATE GOVERNANCE LOOK LIKE? 88

IN PURSUIT OF CORPORATE GOVERNANCE 90

TWO GOVERNANCE METHODOLOGIES: “COMPLY OR EXPLAIN” OR “COMPLY OR ELSE”? 91

“In the Know” or “In the Dark”? 91 The Chairman and the CEO 91

ETHICAL DILEMMA 20/20 Hindsight 92

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Table of Contents • vii

A Bark Worse Than Its Bite 110 FCPA in Action 111 REAL WORLD APPLICATIONS Additional Compensation 111

Making Sense of FCPA 111

THE U.S. FEDERAL SENTENCING GUIDELINES FOR ORGANIZATIONS (1991) 112

Monetary Fines under the FGSO 113

Organizational Probation 113

Compliance Program 113

ETHICAL DILEMMA The Bribery Gap 114

Revised Federal Sentencing Guidelines for Organizations (2004) 115

THE SARBANES-OXLEY ACT (2002) 115

Title I: Public Company Accounting Oversight Board 116 Title II: Auditor Independence 116 Titles III through XI 116

WALL STREET REFORM 117

ETHICAL DILEMMA An Unethical Way to Fix Corporate Ethics? 118

The Dodd-Frank Wall Street Reform and Consumer Protection Act 119 LIFE SKILLS Governing your own ethical behavior 120

CONCLUSION 121

EFFECTIVE CORPORATE GOVERNANCE 93

REAL WORLD APPLICATIONS One and the Same 94

22 Questions for Diagnosing Your Board 94 ETHICAL DILEMMA A Spectacular Downfall 95

The Dangers of a Corporate Governance Checklist 96 LIFE SKILLS Governing your career 97

A Fiduciary Responsibility 97 CONCLUSION 98

FRONTLINE FOCUS “Incriminating Evidence”—Adam Makes a Decision 98

For Review 99

Key Terms 100

Review Questions 100

Review Exercises 100

Internet Exercises 100

Team Exercises 101

Thinking Critically 5.1: HEWLETT-PACKARD: PRETEXTING 102

Thinking Critically 5.2: SocGen 103

Thinking Critically 5.3: HealthSouth 105

6 > The Role of Government FRONTLINE FOCUS Too Much Trouble 109

KEY LEGISLATION 110

THE FOREIGN CORRUPT PRACTICES ACT 110

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viii • Business Ethics Now

Review Questions 144

Review Exercises 144

Internet Exercises 144

Team Exercises 144

Thinking Critically 7.1: QUESTIONABLE MOTIVES 146

Thinking Critically 7.2: WIKILEAKS: PRINCIPLED LEAKING? 147

Thinking Critically 7.3: THE OLIVIERI CASE 149

8 > Ethics and Technology FRONTLINE FOCUS Problems at ComputerWorld 153

INTRODUCTION: ETHICS AND TECHNOLOGY 154

DO YOU KNOW WHERE YOUR PERSONAL INFORMATION IS? 154

THE PROMISE OF INCREASED WORKER PRODUCTIVITY 155

The Employer Position 155 The Employee Position 155 ETHICAL DILEMMA A Failure to Disclose 156

WHEN ARE YOU “AT WORK”? 156

Thin Consent 157 Thick Consent 157

THE DANGERS OF LEAVING A PAPER TRAIL 159

LIFE SKILLS The mixed blessing of technology 160

Vicarious Liability 160 ETHICAL DILEMMA Top 20 Blonde Jokes 161

REAL WORLD APPLICATIONS Telecommuting 24/7 161

The Right to Privacy—Big Brother Is in the House 162 CONCLUSION 163

FRONTLINE FOCUS Too Much Trouble—Lara Makes a Decision 122

For Review 122

Key Terms 123

Review Questions 123

Review Exercises 124

Internet Exercises 124

Team Exercises 125

Thinking Critically 6.1: PONZI SCHEMES 126

Thinking Critically 6.2: INDIA’S ENRON 128

Thinking Critically 6.3: MARTHA STEWART AND IMCLONE SYSTEMS 130

7 > Blowing the Whistle FRONTLINE FOCUS Good Money 133

WHAT IS WHISTLE-BLOWING? 134

THE ETHICS OF WHISTLE-BLOWING 134

When Is Whistle-Blowing Ethical? 134 When Is Whistle-Blowing Unethical? 135 The Year of the Whistle-Blower 136

THE DUTY TO RESPOND 136

ETHICAL DILEMMA The Insider 137

ETHICAL DILEMMA The Cold, Hard Reality 138

ADDRESSING THE NEEDS OF WHISTLE-BLOWERS 140

REAL WORLD APPLICATIONS A Hotline Call 141

WHISTLE-BLOWING AS A LAST RESORT 141

LIFE SKILLS Making diffi cult decisions 142

FRONTLINE FOCUS Good Money—Ben Makes a Decision 142

For Review 143

Key Terms 143

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Table of Contents • ix

ETHICAL DILEMMA For Services Rendered 178

THE PURSUIT OF GLOBAL ETHICS 178

ETHICAL DILEMMA What Is a Global Business? 180

ENFORCING GLOBAL ETHICS 181

The UN Global Compact 181 REAL WORLD APPLICATIONS Globally Ethical 182

THE OECD GUIDELINES FOR MULTINATIONAL ENTERPRISES 182

LIFE SKILLS A subtle infl uence 183

CONCLUSION 184

FRONTLINE FOCUS A Matter of Defi nition—Tom Makes a Decision 185

For Review 185

Key Terms 186

Review Questions 186

Review Exercise 186

Internet Exercises 187

Team Exercises 187

Thinking Critically 9.1: TOMS SHOES: ETHICALLY GLOBAL? 189

Thinking Critically 9.2: SUICIDES AT FOXCONN 190

Thinking Critically 9.3: THE ETHICS OF OFFSHORING CLINICAL TRIALS 191

FRONTLINE FOCUS Problems at ComputerWorld—Steve Makes a Decision 164

For Review 165

Key Terms 165

Review Questions 166

Review Exercise 166

Internet Exercises 166

Team Exercises 167

Thinking Critically 8.1: STUMBLING OVER GMAIL 168

Thinking Critically 8.2: REVERB COMMUNICATIONS 169

Thinking Critically 8.3: THE HIPAA PRIVACY RULE 171

PART 3 The Future of Business Ethics

9 > Ethics and Globalization FRONTLINE FOCUS A Matter of Defi nition 175

ETHICS AND GLOBALIZATION 176

Ethics in Less-Developed Nations 176

ETHICAL RELATIVISM 177

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x • Business Ethics Now

For Review 204

Key Terms 205

Review Questions 205

Review Exercise 205

Internet Exercises 206

Team Exercises 206

Thinking Critically 10.1: MOTT’S: SOUR APPLES 207

Thinking Critically 10.2: THE FAILED TRANSFORMATION OF BP 208

Thinking Critically 10.3: UNPROFESSIONAL CONDUCT 209

Appendix A: The Social Responsibility of Business Is to Increase Its Profi ts, by Milton Friedman 211

Appendix B: Getting to the Bottom of “Triple Bottom Line,” by Wayne Norman and Chris MacDonald 215

Glossary 228

References 231

Photo Credits 233

Index 234

10 > Making It Stick: Doing What’s Right in a Competitive Market

FRONTLINE FOCUS You Scratch My Back 195

MAKING IT STICK—KEY COMPONENTS OF AN ETHICS POLICY 196

Establish a Code of Ethics 196 Support the Code of Ethics with Extensive Training for Every Member of the Organization 197 LIFE SKILLS A lone voice 198

Hire an Ethics Offi cer 198 Celebrate and Reward the Ethical Behavior Demonstrated by Your Employees 199 Promote Your Organization’s Commitment to Ethical Behavior 199 ETHICAL DILEMMA The Price of Past Transgressions 199

Continue to Monitor the Behavior As You Grow 200 ETHICAL DILEMMA Just a Small Favor 201

BECOMING A TRANSPARENT ORGANIZATION 202

REAL WORLD APPLICATIONS A Sacrifi cial Lamb 202

ORGANIZATIONAL INTEGRITY 203

FRONTLINE FOCUS You Scratch My Back—Adam Makes a Decision 204

ghi24697_fm_i-xii.indd x 1/31/11 9:51 PM

Welcome to

WHAT’S NEW

Throughout the book: Modifi ed Learning Outcomes meet student and instructor needs.

For Review section at the end of each chapter revisits and discusses the Learning Outcomes.

Real World Applications element in each chapter highlights situations students may face in their own life.

New, up-to-the-moment ethical examples include the BP oil spill and WikiLeaks.

1 Understanding Ethics NEW ETHICAL DILEMMA TOPIC Sexting

NEW INTERNET EXERCISE TOPIC Taking ethics pledges

2 Defi ning Business Ethics NEW ETHICAL DILEMMA TOPIC The AIG collapse

NEW THINKING CRITICALLY The Phoenix Consortium

3 Organizational Ethics NEW ETHICAL DILEMMA TOPIC Mortgage modifi cation programs

NEW INTERNET EXERCISES TOPIC Codes of ethics and product recalls

NEW THINKING CRITICALLY Bank of America

4 Corporate Social Responsibility NEW ETHICAL DILEMMA Global Oil

NEW REVIEW EXERCISE Pangea Green Energy Philippines, Inc.

BusinessEthicsNow

ghi24697_fm_i-xii.indd xi 1/31/11 9:51 PM

xii • What’s New

5 Corporate Governance NEW ETHICAL DILEMMA The Stanford Financial Group

NEW ETHICAL DILEMMA John Thain and Merrill Lynch

NEW INTERNET EXERCISE TOPIC Outside directors

6 The Role of Government NEW INFORMATION REGARDING RECENT WALL STREET REFORM

NEW INTERNET EXERCISE Elizabeth Warren and the Consumer Financial Protection Bureau

UPDATED THINKING CRITICALLY Satyam Computer Services

7 Blowing the Whistle NEW INTERNET EXERCISE The National Whistleblower Center

NEW THINKING CRITICALLY Bradley Birkenfeld and UBS

NEW THINKING CRITICALLY WikiLeaks

8 Ethics and Technology NEW EXAMPLES IN THE SECTION “THE DANGERS OF LEAVING A PAPER TRAIL”

NEW INTERNET EXERCISE The Electronic Frontier Foundation

NEW THINKING CRITICALLY An FTC settlement case

9 Ethics and Globalization NEW INTERNET EXERCISE The Institute for Global Ethics (IGE)

NEW INTERNET EXERCISE Walmart’s Global Ethics Offi ce

NEW THINKING CRITICALLY TOMS Shoes

NEW THINKING CRITICALLY Foxconn suicides

UPDATED THINKING CRITICALLY Offshore clinical trials

10 Making It Stick: Doing What’s Right in a Competitive Market NEW ETHICAL DILEMMA Hewlett-Packard

NEW INTERNET EXERCISE Transparency International

NEW THINKING CRITICALLY Mott’s salary decrease

NEW THINKING CRITICALLY BP Oil

NEW THINKING CRITICALLY Andrew Wakefi eld and the MMR vaccine

ghi24697_fm_i-xii.indd xii 1/31/11 9:51 PM

>> 1

DEFINING BUSINESS ETHICS 1 Understanding Ethics

2 Defi ning Business Ethics

We begin by exploring how people live their lives according to a standard of “right” or “wrong” behavior. Where

do people look for guidance in deciding what is right or wrong or good or bad? Once they have developed a

personal set of moral standards or ethical principles, how do people then interact with other members of their

community or society as a whole who may or may not share the same ethical principles?

With a basic understanding of ethics, we can then examine the concept of business ethics, where employees

face the dilemma of balancing their own moral standards with those of the company they work for and the

supervisor or manager to whom they report on a daily basis. We examine the question of whether the business

world should be viewed as an artifi cial environment where the rules by which you choose to live your own life

don’t necessarily apply.

P A

R T

ghi24697_ch01_001-019.indd 1 1/27/11 11:14 PM

2 • Business Ethics Now

UNDERSTANDING ETHICS

C H

A P

T E

R

ghi24697_ch01_001-019.indd 2 1/27/11 11:14 PM

>> Chapter 1 / Understanding Ethics • 3

M egan is a rental agent for the Oxford Lake apartment complex. The work is fairly boring, but she’s going to school in the evening, so the quiet periods give her time to catch up on her studies, plus the discounted rent is a great help to her budget. Business has been slow since two other apartment complexes opened up, and their vacancies are starting to run a little high.

The company recently appointed a new regional director to “inject some energy and creativity” into their local cam- paigns and generate some new rental leases. Her name is Kate Jones, and based on fi rst impressions, Megan thinks Kate would rent her grandmother an apartment as long as she could raise the rent fi rst.

Kate’s fi rst event is an open house, complete with free hot dogs and cokes and a clown making balloon animals for the kids. They run ads in the paper and on the radio and manage to attract a good crowd of people.

Their fi rst applicants are Michael and Tania Wilson, an African-American couple with one young son, Tyler. Megan takes their application. They’re a nice couple with a stable work history, more than enough income to cover the rent, and good references from their previous landlord. Megan advises them that they will do a background check as a standard procedure and that things “look very good” for their application.

After they leave, Kate stops by the rental offi ce. “How did that couple look? Any issues with their application?” “None at all,” answers Megan. “I think they’ll be a perfect addition to our community.” “Don’t rush their application through too quickly,” replies Kate. “We have time to fi nd some more applicants, and, in

my experience, those people usually end up breaking their lease or skipping town with unpaid rent.”

QUESTIONS

1. What would be “the right thing” to do here? How would the “Golden Rule” on page 6 relate to Megan’s decision? 2. How would you resolve this ethical dilemma? Review the three-step process on page 9 for more details. 3. What should Megan do now?

After studying this chapter, you should be able to:

1 Defi ne ethics.

2 Explain the role of values in ethical decision making.

3 Understand opposing ethical theories and their limitations.

4 Discuss ethical relativism.

5 Explain an ethical dilemma and apply a process to resolve it.

FRONTLINE FOCUS LE

A R

N IN

G O

U TC

O M

ES

Doing the Right Thing

Ethics is about how we meet the challenge of doing the right thing when that will

cost more than we want to pay.

The Josephson Institute of Ethics

ghi24697_ch01_001-019.indd 3 1/27/11 11:15 PM

4 • Business Ethics Now

collection of all these infl uences as they are built up over your lifetime. A strict family upbringing or reli- gious education would obviously have a direct impact on your personal moral standards. Th ese standards would then provide a moral compass (a sense of per- sonal direction) to guide you in the choices you make in your life.

HOW SHOULD I LIVE? You do not acquire your personal moral standards in the same way that you learn the alphabet. Standards of ethical behavior are absorbed by osmosis as you observe the examples (both positive and negative) set by everyone around you—parents, family members, friends, peers, and neighbors. Your adoption of those standards is ultimately unique to you as an individual. For example, you may be infl uenced by the teachings of your family’s religious beliefs and grow to believe that behaving ethically toward others represents a demonstration of religious devotion. However, that devotion may just as easily be motivated by either fear of a divine punishment in the aft erlife or anticipation of a reward for living a virtuous life.

Alternatively, you may choose to reject religious morality and instead base your ethical behavior on your experience of human existence rather than any abstract concepts of right and wrong as determined by a religious doctrine.

When individuals share similar standards in a community, we can use the terms values and value system. Th e terms morals and values are oft en used to mean the same thing—a set of personal principles

by which you aim to live your life. When you try to formalize those principles into a code of behavior,

>> What Is Ethics? Th e fi eld of ethics is the study of how we try to live our lives according to a standard of “right” or

“wrong” behavior—in both how we think and behave toward others and how we would like them to think and behave toward us. For some, it is a con- scious choice to follow a set of moral standards or ethical principles that pro- vide guidance on how they should conduct themselves in their daily lives. For oth- ers, where the choice is not so clear, they look to the behavior of others to determine what is an ac- ceptable standard of right and wrong or good and bad behavior. How they arrive at the defi nition of what’s right or wrong is a result of many factors, including how they were raised, their religion, and the traditions and beliefs of their society.