Business	  Ethics	         Tathagat	  Varma	           Session	  6/12:	  20-­‐Aug-­‐09	  
Quiz	  •  Why	  people	  engage	  in	  unethical	  behavior?	      –  A	  belief	  that	  the	  acEvity	  is	  within	  re...
Quiz	  •  What	  are	  the	  major	  ethical	  dilemmas	  of	     today’s	  business?	  	      –  Green	  /	  eco-­‐respon...
Quiz	  •  IdenEfy	  ethical	  issues	  in	  the	  following	  situaEon,	     and	  suggest	  an	  ethical	  response	  to	...
Quiz	  •  Satyam	  works	  for	  a	  pharma	  company	  as	  a	  sales	  rep.	     He	  is	  based	  out	  of	  Bangalore	...
Quiz…	  1.  Business	  ethics	  focuses	  mostly	  on	  personal	  ethical	  issues	       –     No.	  Business	  ethics	 ...
Quiz…	  6.  Whistle-­‐blowers	  o]en	  retain	  their	  posiEons	  and	  conEnue	  to	      advance	  within	  the	  organ...
The	  Discipline	  of	  Building	  Character	  •  Joseph	  Badaracco,	  Jr	  •  We	  have	  all	  experienced,	  at	  one	...
The	  Discpline…	  •  An	  ethical	  decision	  typically	  involves	  choosing	     between	  two	  opEons:	  one	  we	  ...
The	  Discipline…	  •  We	  form	  our	  character	  in	  defining	  moments	     because	  we	  commit	  to	  irreversible...
The	  Discipline…	  •  In	  today’s	  workplace,	  three	  types	  of	  defining	     moments	  are	  parEcularly	  common....
A	  Guide	  to	  Defining	  Moments	  •  For	  Individuals:	  Who	  am	  I?	  •  For	  Managers	  of	  Work	  Groups:	  Who...
Who	  am	  I?	  •  What	  feelings	  and	  intuiEons	  are	  coming	  into	     conflict	  in	  this	  situaEon?	  •  Which...
Who	  are	  We?	  •  What	  are	  the	  other	  strong,	  persuasive	     interpretaEons	  of	  the	  ethics	  of	  this	 ...
Who	  is	  the	  Company?	  •  Have	  I	  done	  all	  I	  can	  to	  secure	  my	  posiEon	  and	     the	  strength	  of...
Why	  Be	  an	  Ethical	  Company?	  •  …Theyre	  Stronger	  and	  Last	  Longer	  •  Of	  the	  original	  Forbes	  100	 ...
Why…	  •  Beer,	  author	  of	  High	  Commitment,	  High	  Performance,	  a	     book	  on	  business	  ethics	  recently...
Why…	  •  Another	  key	  failing	  Beer	  discussed	  was	  the	  inability	  of	     actors	  inside	  the	  large,	  fa...
Why…	  •  The	  moral	  here	  is	  fairly	  simple:	  When	  a	     companys	  ethical	  compass	  is	  poinEng	  true	  ...
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Business Ethics 05


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Courseware from the course on Business Ethics that I taught at St. Joseph\'s College of Business Administration in 2009

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Business Ethics 05

  1. 1. Business  Ethics   Tathagat  Varma   Session  6/12:  20-­‐Aug-­‐09  
  2. 2. Quiz  •  Why  people  engage  in  unethical  behavior?   –  A  belief  that  the  acEvity  is  within  reasonable  ethical   and  legal  limits  –  that  is,  that  is  not  “really”  illegal  or   immoral   –  A  belief  that  the  acEvity  is  in  the  individual’s  or  the   corporaEon’s  best  interests  –  that  the  individual   would  somehow  be  expected  to  undertake  the  acEvity   –  A  belief  that  the  acEvity  is  “safe”  because  it  will  never   be  found  out  or  publicized;  the  classic  crime-­‐and-­‐ punishment  issue  of  discovery   –  A  belief  that  because  the  acEvity  helps  the  company   the  company  will  condone  it  and  even  protect  the   person  who  engages  in  it    
  3. 3. Quiz  •  What  are  the  major  ethical  dilemmas  of   today’s  business?     –  Green  /  eco-­‐responsible  business,  sustainable   development   –  Data  Privacy,  IP   –  Digital  idenEty   –  Financial  control  vs.  empowerment   –  InternaEonal  business,    
  4. 4. Quiz  •  IdenEfy  ethical  issues  in  the  following  situaEon,   and  suggest  an  ethical  response  to  those  issues:     –  Satyam  works  for  a  pharma  company  as  a  sales  rep.   He  is  based  out  of  Bangalore  but  travels  frequently  for   work.  He  aZends  an  interview  with  a  compeEtor  on  a   weekday  in  Mumbai,  and  he  files  expense  report  with   his  company  claiming  the  travel  as  business  travel.   During  interview,  he  is  promised  he]y  bonus  if  he   could  bring  at  least  25%  of  his  current  business  to  the   compeEtor  in  next  3  months.  In  Mumbai,  he  also  met   an  old  friend  over  lunch,  and  included  lunch  bill  as   business  entertainment.  While  retuning  from   Mumbai,  he  picked  up  a  Barbie  doll  for  his  boss’s   daughter  whose  birthday  was  on  coming  Sunday.  
  5. 5. Quiz  •  Satyam  works  for  a  pharma  company  as  a  sales  rep.   He  is  based  out  of  Bangalore  but  travels  frequently   for  work.  He  aZends  an  interview  with  a  compeEtor   on  a  weekday  in  Mumbai,  and  he  files  expense  report   with  his  company  claiming  the  travel  as  business   travel.  During  interview,  he  is  promised  he]y  bonus  if   he  could  bring  at  least  25%  of  his  current  business  to   the  compeEtor  in  next  3  months.  In  Mumbai,  he  also   met  an  old  friend  over  lunch,  and  included  lunch  bill   as  business  entertainment.  While  retuning  from   Mumbai,  he  picked  up  a  Barbie  doll  for  his  boss’s   daughter  whose  birthday  was  on  coming  Sunday.  
  6. 6. Quiz…  1.  Business  ethics  focuses  mostly  on  personal  ethical  issues   –  No.  Business  ethics  focuses  on  organizaEonal  concerns  (legal  and   ethical  –  employees,  customers,  suppliers,  society)  2.  Business  ethics  deals  with  right  or  wrong  behavior  within  a   parEcular  organizaEon   –  Yes.  That  stems  from  the  basic  definiEon  3.  Business  ethics  contributes  to  investor  loyalty   –  Yes.  Many  studies  have  shown  that  trust  and  ethical  conduct   contribute  to  investor  loyalty  4.  If  an  acEvity  is  approved  by  most  members  of  an  organizaEon  and   it  is  also  customary  in  the  industry,  it  is  probably  ethical   –  Yes.  An  acEvity  that  is  generally  regarded  as  ethical  and  survives   open  discussion  inside  and  outside  the  organizaEon  is  usually   acceptable  5.  The  primary  method  for  resolving  business  ethics  disputes  is   through  the  criminal  court  system   –  No.  Lawsuits  and  civil  liEgaEon  are  the  primary  way  in  which   business  ethics  dispute  are  resolved  
  7. 7. Quiz…  6.  Whistle-­‐blowers  o]en  retain  their  posiEons  and  conEnue  to   advance  within  the  organizaEon   –  No.  Whistle-­‐blowers  o]en  lose  their  jobs  7.  A  person  who  behaves  unethically  and  is  rewarded  is  likely  to   conEnue  to  act  unethically   –  Yes.  If  no  punishment  occurs  for  unethical  behavior  or  the  behavior  is   rewarded,  it  is  likely  to  conEnue  8.  SocializaEon  refers  to  the  process  in  which  a  person  learns  the   values  and  behaviors  considered  appropriate  by  the  organizaEon   –  Yes.  SocializaEon  teaches  employees  how  to  behave  with  respect  to   their  roles  within  the  organizaEon  9.  The  accountability  and  responsibility  for  appropriate  business   conduct  rest  with  top  management   –  Yes.  ExecuEves  in  the  organizaEon  determine  the  culture  and   iniEaEves  that  support  ethical  behavior  10.  Management’s  total  loyalty  to  maximizaEon  of  profit  is  a  principle   obstacle  to  achieving  higher  standards  of  ethical  pracEce   –  Yes.    
  8. 8. The  Discipline  of  Building  Character  •  Joseph  Badaracco,  Jr  •  We  have  all  experienced,  at  one  Eme  or  another,   situaEons  in  which  our  professional   responsibiliEes  unexpectedly  come  into  conflict   with  our  deepest  values…At  these  Emes,  we  are   caught  in  a  conflict  between  right  and  right.  And   no  maZer  which  opEon  we  choose,  we  feel  like   we’ve  come  up  short.  •  In  every  case,  regardless  of  what  path  is  chosen,   these  decisions  taken  cumulaEvely  over  many   years  form  the  very  basis  of  an  individual’s   character.  For  that  reason,  I  call  them  defining   moments.  
  9. 9. The  Discpline…  •  An  ethical  decision  typically  involves  choosing   between  two  opEons:  one  we  know  to  be   right  and  another  we  now  to  be  wrong.    •  A  defining  moment,  however,  challenges  us  in   a  deeper  way  by  asking  us  to  choose  between   two  or  more  ideals  in  which  we  deeply   believe.  Such  challenges  rarely  have  a   “correct”  response.  Rather,  they  are  situaEons   created  by  circumstance  that  ask  us  to  step   forward  and  “form,  reveal  and  test”  ourselves.  
  10. 10. The  Discipline…  •  We  form  our  character  in  defining  moments   because  we  commit  to  irreversible  courses  of   acEon  that  shape  our  personal  and  professional   idenEEes.    •  We  reveal  something  new  about  is  to  ourselves   and  others  because  defining  moments  uncover   something  that  has  been  hidden  or  crystallize   something  that  had  been  parEally  known.    •  And  we  test  ourselves  because  we  discover   whether  we  will  live  up  to  our  personal  ideals  or   only  pay  them  lip  service.  
  11. 11. The  Discipline…  •  In  today’s  workplace,  three  types  of  defining   moments  are  parEcularly  common.   –  The  first  type  is  largely  an  issue  of  personal  idenEty.  It   raises  the  quesEon,  Who  am  I?   –  The  second  type  is  organizaEonal  as  well  as  personal:   both  the  character  of  groups  within  an  organizaEon   and  the  character  of  an  individual  manager  are  at   stake.  It  raises  the  quesEon,  Who  are  We?   –  The  third  type  of  defining  moment  is  the  most   complex  and  involves  defining  a  company’s  role  in  the   society.  It  raises  the  quesEon,  Who  is  the  Company?  •  By  learning  to  idenEfy  each  of  these  three   defining  moments,  managers  will  learn  to   navigate  right-­‐vs-­‐right  decisions  with  grace  and   strength.  
  12. 12. A  Guide  to  Defining  Moments  •  For  Individuals:  Who  am  I?  •  For  Managers  of  Work  Groups:  Who  are  We?  •  For  Company  ExecuEves:  Who  is  the   Company?  
  13. 13. Who  am  I?  •  What  feelings  and  intuiEons  are  coming  into   conflict  in  this  situaEon?  •  Which  of  the  values  that  are  in  conflict  are   most  deeply  rooted  in  my  life?  •  What  combinaEon  of  expediency  and   shrewdness,  couple  with  imaginaEon  and   boldness,  will  help  me  implement  my  personal   understanding  of  what  is  right?  
  14. 14. Who  are  We?  •  What  are  the  other  strong,  persuasive   interpretaEons  of  the  ethics  of  this  situaEon?  •  What  point  of  view  is  most  likely  to  win  a   contest  of  interpretaEons  inside  my   organizaEon  and  influence  the  thinking  of   other  people?  •  Have  I  orchestrated  a  process  that  can   manifest  the  values  I  care  about  in  my   organizaEon?  
  15. 15. Who  is  the  Company?  •  Have  I  done  all  I  can  to  secure  my  posiEon  and   the  strength  of  my  organizaEon?  •  Have  I  thought  creaEvely  and  boldly  about  my   organizaEon’s  role  in  society  and  its   relaEonship  to  stockholders?  •  What  combinaEon  of  shrewdness,  creaEvity,   and  tenacity  will  help  me  transform  my  vision   into  a  reality?  
  16. 16. Why  Be  an  Ethical  Company?  •  …Theyre  Stronger  and  Last  Longer  •  Of  the  original  Forbes  100  in  1917,  61  ceased  to   exist  by  1987.    •  Of  the  remaining  39,  only  18  stayed  in  the  top   100,  and  their  return  was  20%  less  than  the   overall  market  during  the  period  from  1917   through  1987.    •  Of  companies  in  the  original  Standard  &  Poors   500-­‐stock  index  in  1957,  only  74  remained  in   1997;  of  these,  only  12  outperformed  the  S&P   500  in  the  period  from  1957  through  1998.    •  The  average  CEO  tenure  in  the  U.S.  is  4.2  years,   less  than  half  the  10.5-­‐year  average  in  1990.    
  17. 17. Why…  •  Beer,  author  of  High  Commitment,  High  Performance,  a   book  on  business  ethics  recently  published  by  Josey-­‐ Bass,  posited  three  core  reasons  why  Wall  Street  failed   so  badly  in  the  fall  of  2008:  The  firms  lacked  a  higher   purpose,  lacked  a  clear  strategy,  and  mismanaged  their   risk.    •  Charles  Schwab  &  Co.  (SCHW)  has  largely  avoided  the   huge  fallout.  So  has  US  Bancorp  (USB).  A  quality  both   of  these  companies  share  is  a  laser-­‐like  focus  on   customer  service  and  on  honesty  and  transparency.   This  comes  from  their  cultures.    •  Neither  company  touched  the  subprime  mortgage   securiEzaEon  market,  because  they  saw  it  as  risky  and   simply  not  the  kind  of  business  that  served  the   companys  long-­‐term  interests  
  18. 18. Why…  •  Another  key  failing  Beer  discussed  was  the  inability  of   actors  inside  the  large,  failing  banks  to  speak  truth  to   power.  Key  players  inside  the  banks  felt  inEmidated  by   superiors;  the  internal  voice  of  conscience  and  purpose   of  these  insEtuEons  was  silenced  by  a  maniacal  focus   on  short-­‐term  profits  and  whatever  scheme  would   bring  them  in.    •  The  silencing  of  employees  who  sought  to  challenge   strategy  and  risk-­‐management  pracEces  likely  also   undermined  the  banks  moral  authority  and   emboldened  those  who  already  felt  inclined  to  do  the   wrong  thing.  With  a  muted  internal  voice,  these   organizaEons  lacked  a  moral  compass.  As  a  result,  they   drove  off  a  cliff  with  astonishing  speed.  
  19. 19. Why…  •  The  moral  here  is  fairly  simple:  When  a   companys  ethical  compass  is  poinEng  true   north,  everything  else  falls  into  line.  This  isnt   to  say  that  companies  with  great  ethics  dont   fail.  But  it  does  seem  to  indicate  that   companies  without  good  ethics  are  far  more   likely  to  fail  due  to  their  inability  to  sustain  or   hear  an  inner  voice  to  guide  them  through  the   dark  Emes  to  the  light.    
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