Ethics of-production


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Ethics of-production

  1. 1. BUSINESS AND ETHICS ISIGK INTRODUCTION "Whenever you do a thing, act as if all the world were watching." Thomas Jefferson Will you help create a moral code of business ethics based on honesty,integrity, and quality?This is about changing the world! About creating a climate where businessesare expected to behave ethically, and where executives who try to dragtheir companies into the unethical swamplands find that nobodys willing tocarry out their orders.I believe that if I can get 25,000 business leaders—25,000 people to makea commitment to spread the ideas in Principled Profit: Marketing That PutsPeople first, that we can change the culture of business. Following the ideasexpressed in the book The Tipping Point, and the story of the 100thMonkey, I feel, deep in my heart, that once a critical mass embraces theidea that high ethical standards are not only possible, but actually moreprofitable, society will change. Some of those key ideas (among many) include: ● Businesses are more likely to succeed when they base themselves inethics—in honesty, integrity, and quality. 1
  2. 2. BUSINESS AND ETHICS ISIGK • Amazing things can happen when all stakeholders (employees, customers, suppliers, neighbourhoods residents, even competitors) become your active champions-but that only happens if your business specifically empowers each of these groups and addresses their different needs and desires • Line employees, managers, and even CEOs need support to show that ethical principles will help their businesses succeed, and that they wont be penalized by the marketplace for taking an ethical stand.Society changes when enough people decide that something is seriouslywrong and when they feel empowered to do something about it. In my ownlifetime, weve seen critical masses arise and succeed, over and over, forexample: • Blacks and whites joined together to desegregate the southern United States • Peoples movements tore down the Berlin Wall and the entirenetwork of totalitarian Soviet governments • South Africa peacefully threw off the shackles of apartheid and freed Nelson Mandela from prison to be its first democratically elected PresidentAll of these struggles started with a few people, but spiralled outward tobecome an unstoppable movement for justice once enough people started tobelieve and to act. Ordinary people in Montgomery, in Gdansk, in Soweto, inso many other places, decided that things had to change—and they changed! 2
  3. 3. BUSINESS AND ETHICS ISIGK◙ Ethics of production:This area of business ethics deals with the duties of a company to ensurethat products and production processes do not cause harm. Some of themore acute dilemmas in this area arise out of the fact that there is usuallya degree of danger in any product or production process and it is difficultto define a degree of permissibility, or the degree of permissibility maydepend on the changing state of preventative technologies or changing socialperceptions of acceptable risk. • Defective, addictive and inherently dangerous products and services(e.g. tobacco, alcohol, weapons, motor vehicles, chemical manufacturing,bungee jumping). • Ethical relations between the company and the environment: pollution, environmental ethics, carbon emissions trading • Ethical problems arising out of new technologies: genetically modified food, mobile phone radiation and health. • Product testing ethics: animal rights and animal testing, use of economically disadvantaged groups (such as students) as test objects.◙Religious views on business ethics:The historical and global importance of religious views on business ethics issometimes underestimated in standard introductions to business ethics.Particularly in Asia and the Middle East, religious and cultural perspectiveshave a strong influence on the conduct of business and the creation ofbusiness values. 3
  4. 4. BUSINESS AND ETHICS ISIGKExamples include: • Islamic banking, associated with the avoidance of charging interest on loans. • Traditional Confucian disapproval of the profit-seeking motive. [1] • Quaker testimony on fair dealing◙Stories:The most important business ethics story of 2004 is about what did nothappen. As we end this year, with our diverse cultural celebrations ofredemption and hope, it is worthwhile to note the absence of this event.But before I tell you what didnt happen, lets look at what did.The main business ethics stories of 2004 were further chapters of thefinancial frauds that ended the 1990s. Wealth was being created atincredible rate. Even the staid Alan Greenspan thought we were entering anew phase of economics. For the first time in history, we couldcommunicate instantly and cheaply to every country in the world.However, the new business models and the technology that made ourexuberance possible created expectations that fuelled a speculative bubble.When it burst, tens of millions of stockholders, suppliers and employees feltthe pain. Dickens description of the end of the 18th century fits well: Itwas the best of times, it was the worst times. Lets look at four of thesechapters.Chapter 1. When responsibility for the Enron debacle seemed to lead toJeffrey Skilling and Ken Lay, there was a widespread belief that no matterhow culpable, they would never be indicted. Not so. Skilling was indicted inFebruary on 35 counts of fraud and insider trading. Lay was indicted in 4
  5. 5. BUSINESS AND ETHICS ISIGKJuly on 11 counts of securities and wire fraud. Why did it take three yearsto bring these indictments? Cynics cite Enrons connections to PresidentBush and the energy industry. Accountants and finance professionals arguethat the financial schemes constructed by CFO Andrew Fastow were socomplicated that it took this long for the government to build a winningcase. Whatever the reason for the delay, everyone expects Messrs.Skilling and Lay to fight these indictments with all the resources at theirdisposal, as is their right. But, should they?Chapter 2. The Sarbanes-Oxley Act, designed to prevent more Enronsand WorldComs, began to sink its teeth into corporate America in 2004.For the first time in history, management is legally responsible tothoroughly document and test financial controls. Some auditors arepredicting that 40 percent of companies will declare deficiencies in theirfinancial controls. What these reports will do to the stock price of thesecompanies and the credibility of financial markets remains to be seen. Itmay not be pretty. It would be cruelly ironic if the law passed to restoreinvestor confidence eroded it further.Chapter 3. Merck was accused of ignoring problems with Vioxx, a painreliever, that would have led to the drug being withdrawn from the market.While the full story is not in, it appears that Merck ran a study thatsuggested Vioxx increases the occurrence of heart attacks. The companydid not conduct further studies to see if this were so. In a study Merckran to see if Vioxx reduces colon cancer, the company was faced with theugly truth: Vioxx increases the risk of heart attacks. When Merckwithdrew the drug, its stock lost nearly 27 percent of its value, or morethan $26.6 billion. Merck argues that they did nothing wrong. 5
  6. 6. BUSINESS AND ETHICS ISIGKChapter 4. The CEO of Fannie Mae, Franklin Raines, resigned Dec. 21amid accusations that the company exaggerated earnings by as much $9billion. Beyond that, the company withheld funds that could have been usedto finance home loans for thousands of low-income households. Rainesstated, "By my early retirement, I have held myself accountable." Has he?So what non-event is the biggest business ethics story of 2004? Theheadline reads "Once again, no senior manager takes responsibility forcorporate frauds." The story would run something like this:For the third consecutive year, no senior business leaders involved in amajor corporate fraud have stepped forward to acknowledge theirresponsibility for their companys misdeeds. Specifically, Ken Lay (JeffreySkilling, Dennis Kozlowski ...) did not say:"It was my fault. No matter what I knew or did not know, it was my fault.No matter what the standard practice was, it was my fault. By not takingcare of the company, I hurt investors, lenders, employees, suppliers,retirees and whole communities. I contributed to the distrust of thefinancial markets. I helped bring about the Sarbanes-Oxley Act that is nowcosting American business billions of dollars. I am not asking forforgiveness; I am taking responsibility. But talk is easy. The realquestion is, what will I do?"First, my family and I will live modestly. The rest of my wealth will bedevoted to making corporate America better and relieving the plight ofthose who suffered due to my bad decisions. My mission is to reduce theprobability of corporate fraud to zero. To do this, I will work with otherbusiness leaders. We will identify and suggest solutions to the most vexingproblems facing business organizations, such as misuse of travel funds; 6
  7. 7. BUSINESS AND ETHICS ISIGKinfluencing hiring and promotion for personal reasons; issuing phonyconsulting contracts to channel funds to friends, family, or oneself; usingcompany resources for hotels and apartments for illicit affairs. There areways to identify these problems and rectify them. This is my mission."If the Skillings Lays and Embers of this world made this statement, theywould open themselves to jail and the loss of their fortunes. We cantexpect them to risk so much, can we? Perhaps, though, they would onlysacrifice the person they were, not the person they would become. Theycould say, as their punishments came raining down: "It is a far, far betterthing that I do, than I have ever done; it is a far, far better rest that Igo to than I have ever known."Expect here the rest would be the peace of mind we get when we have thecourage to own up to our responsibilities at great risk to ourselves. Not abad thought with Christmas just past and the new year on the way.JOHN DIENHART holds the Frank Shrontz Chair for Business Ethics at theAlbers School of Business and Economics at Seattle University.Is "business ethics" an oxymoron? Are doing business and beingethical so contradictory that it is impossible to be both aneffective business manager and an ethical individual? No doubtmany--perhaps most--would answer "yes" to both thesequestions. But if it is true that management effectiveness andindividual ethics are mutually exclusive, why would anyone wantto be a manager? Can it be that all of the people who are orwant to be managers are willing to sell their souls? 7
  8. 8. BUSINESS AND ETHICS ISIGKThe idea of this article is that business and ethics are not contradictory.Indeed, good ethics is synonymous with good management. Two principlesbased on ethical theory are presented that give ethical purpose tomanagement while at the same time making managers more effective. Theperception that business and ethics are contradictory is based on agenerally accepted view of what managers are supposed to do and, thus,how they are supposed to act. We begin by examining that view.◙The Role of the Manager:What do most people believe managers should do? To the extent that thereis a social norm concerning the managers role, people who assume that rolewill be apt to fulfill that norm. Social norms and role expectations arepowerful drivers of behavior.The traditional view of the managerial role is relatively clear. It has beenstated frequently by people writing about management. For instance, MiltonFriedman, in his essay "The Social Responsibility of Business Is to MaximizeIts Profits" (1970), says: [A] Corporate executive is an employee of the owners of the business.He has direct responsibility to his employers. That responsibility is toconduct the business in accordance with their desires, which generally willbe to make as much money as possible while conforming to the basic rulesof the society, both those embodied in law and those embodied in ethicalcustom.In a similar vein are Albert Carrs comments "Is Business Bluffing Ethical?"(1968):[A]s long as a company does not transgress the rules of the gameset by law, it has the legal right to shape its strategy without reference to 8
  9. 9. BUSINESS AND ETHICS ISIGKanything but its profits. If it takes a long-term view of its profits, it willpreserve amicable relations, so far as possible, with those with whom itdeals. A wise businessman will not seek advantage to the point where hegenerates dangerous hostility among employees, competitors, customers,government, or the public at large.These two statements define the managers role on the basis of twoprinciples: * Profit maximization is the exclusive goal of business management. * The expectations of others (as reflected in law, ethical custom andpotentially hostile reactions) serve as constraints on a managers ability toachieve the exclusive goal of profit.It is from this traditional view of the managerial role that people concludethat business ethics is an oxymoron. Business is seen to encompass thepursuit of self-interest, and ethics is recognized as involving considerationof others. Concern for self and concern for others clash; hence, businessand ethics clash.◙The Interdependent Environment ofBusiness:As long as the role of management is defined in terms of profitmaximization, the conflict with ethics remains. But suppose describing therole of manager in terms of profit maximization not only conflicts with beingethical, but also is dysfunctional as an approach to management. Then itwould follow that the traditional role of manager should be changed,perhaps in a way that does not conflict with ethics. 9
  10. 10. BUSINESS AND ETHICS ISIGKThe traditional description of the role of manager is dysfunctional becauseit draws a managers attention away from the essential part other peopleplay in the achievement of profit.Such a description doesnt just fail to point out the importance of otherpeople in fulfilling that role; it actually portrays them as a constraint onprofit maximization. However, participants in business activities areinterdependent on each other for success. They need to cooperate with oneanother to achieve their objectives. For example, a company cannot succeedwithout the help of its employers, suppliers, and customers. Managerscannot succeed without the help of superiors and subordinates.Situations of interdependence are referred to as non-zero-sum games. Azero-sum game is one in which there must be a winner and a loser. In non-zero-sum games, however, there can be a winner and a loser (win-lose),two losers (lose-lose), or two winners (win-win).Certainly, most managers recognize the existence of interdependence andcreate win-win situations daily. For instance, most managers dontconstantly insult their subordinates because they know if they do theirsubordinates will be uncooperative--and that cooperation is essential togetting most jobs done.What about situations in which interdependence is not so obvious? How aptare managers to recognize the existence of interdependence and the needfor cooperation in such situations? It seems that the second principle ofthe managerial role, which describes other people as constraints on theachievement of the exclusive goal of profit maximization, would likely causemanagers to fail to recognize less obvious situations of interdependence. If 10
  11. 11. BUSINESS AND ETHICS ISIGKothers are seen as constraints, they are apt to be seen as adversaries withwhom one should compete rather than cooperate.◙Ethics talk asks ancient and timely question:What do you do when you discover something wrong in the workplace?Do you report it or keep quiet?Can we maintain our personal integrity and remain competitive?How do we adhere to a code of ethics when so many seem to avoid playingby the rules?In a new talk, based on his book, Jim Lichtman explores these questionsand others from responses to a questionnaire sent out to more than 2,200individuals - corporate leaders, journalists, athletes, political leaders,teachers and those who would call themselves "ordinary" Americans, alongwith this follow-up:Describe a moment of principle in which your convictions were tested or astory in which you were inspired by another.""We know where we can find stories of people who do it wrong," Lichtmansays, "but where can we find stories of people who do it right?What Do You Stand For? Not only provides examples of people who do itright, but shares the core ethical values that motivate them to take action.Along the way, they inspire us all to live up to our highest values. 11
  12. 12. BUSINESS AND ETHICS ISIGK◙The Need for an Ethical Culture:In today’s highly competitive, performance-driven business climate,regulations are not enough; professional ethics codes are not enough; theold model of “business ethics” is not enough.According to a 2003 survey of corporate directors and general counselconducted by the National Association of Corporate Directors and theAmerican Corporate Counsel Association, “…the two groups overwhelminglyagree that the single measure that would most improve corporategovernance is the establishment by senior management of an ethicalbusiness culture.” And, “Another clear message of the survey is that ethicalleadership from the top is the key to reducing corporate malfeasance.”Considering the ethical failures in the last several years and the resultingcrisis in confidence, a sincere commitment to creating and sustaining anethical business culture in public and private sectors has never been moreimportant.If we are ever going to return to the level of trust and confidence that wehad in our institutions and each other, we need to take a good look in themirror and ask ourselves what we stand for.Business and Ethics From a business perspective, working under governmentcontracts can be very lucrative. In general, a steady stream of orders keepcoming in, revenue increases and the company continues to grow. There area few obvious downfalls to working with government contracts; a higherquality is to be expected as well as extensive research accompanied byaccurate and complete documentation are usually required. If one part ofthe process fails to perform correctly it can cause minor flaws as well a 12
  13. 13. BUSINESS AND ETHICS ISIGKproblems that can carry some serious repercussions; For example the caseof the failed computer chip at Company X. When both the employee andcompany are found at fault, the question arises of how extensive should therepercussions be? Is the company as a whole liable or do you look intoindividual employees within that company? From an ethical perspective onewould have to look at the available information of both the employees andtheir superiors along with the role of others in the situation. Next youwould have to analyze the final outcome from a corporate perspective andthen examine the corporate responsibility as a whole in order to find aresolution for cases such as this. The first mitigating factor involved in theCompany X case is the uncertainty, on the part of the employees, on theirduties that they were assigned. It is possible that during the testingprocedure, an employee couldnt distinguish between the parts they were totest under government standards and commercial standards. In some casesthey might have even been misinformed on the final product that theytested. In fact, ignorance on the part of the employees would fully excusethem from any moral responsibility for any damage that may result fromtheir work. Whether it is decided that an employee is fully excused, or isgiven some moral responsibility, would have to be looked at on an individualbasis. The second mitigating factor is one of threats that an employeemight suffer if they do not follow through with their assignment. After thebogus testing was completed in the Company X labs, the documentationdepartment also had to falsify documents stating that the parts had morethan met the governments testing standards. From a legal and ethicalstandpoint, both the testers and the writers of the reports were merelyacting as agents on direct orders from upper management. The writers ofthe reports were well aware of the situation yet they acted in this manneron the instruction of a supervisor. Acting in an ethical manner becomes a 13
  14. 14. BUSINESS AND ETHICS ISIGKsecondary priority in this type of environment. As stated by Alan Reder, "ifthey [the employees] feel they will suffer retribution, if they report aproblem, they arent too likely to open their mouths." (113). The workersknew that if the reports were not falsified they would come underquestioning and perhaps their job would be in jeopardy. Although workingunder these conditions does not fully excuse an employee from moral fault,it does give a starting point to help narrow down the person or departmentthat issued the original request for the unethical acts. The third mitigatingfactor is one that perhaps encompasses the majority of the employees inthe Company X case. We have to balance the direct involvement that eachemployee had with the defective parts. Thus, it has to be made clear thatmany of the employees did not have direct involvement with the testingdepartments or with the parts that eventually failed. Even employees orsub-contractors that were directly involved with the production were notaware of the ignorance on the part of the testing department. Forexample, the electrical engineer that designed the defective computer chipcould have stated that it was tested and it did indeed meet the requiredgovernment tests. Also, for the employees that handled the part after thetesting process, they were dealing with what they believed to be a piece ofequipment that met government standards. If the part was not testedproperly, and did eventually fail, isnt the testing department more morallyresponsible than the designer or the assembly line worker that was incharge of installing the chip? In large corporations there may be severaltesting departments and in some cases one may be held more responsiblethan another depending on their involvement. A process like this can serveas a dual purpose for finding irresponsible employees as well as those thatare morally excused. The fourth mitigating factor in cases of this nature isthe measure of the seriousness of the fault or error caused by the 14
  15. 15. BUSINESS AND ETHICS ISIGKproduct. Since Company X was repeatedly being added to the list ofapproved government contractors, one can safely assume that the level ofseriousness, in the opinion of the contractor approval committees, is not ofmonumental importance. Yet a person has to wonder how this case wouldhave been different if it caused the loss of life in a military setting.Perhaps the repercussions would have taken effect much faster and beenmore stringent. The fact that Company X did not cause a death does notmake them a safe company. They are still to be held responsible for anyerrors for which their products cause, no matter the extent. As for theopposition to the delegating of moral responsibility, mitigating factors andexcusing factors, most would argue that the corporation as a whole shouldbe held responsible. The executives within a corporation should not beforced to bring out all of the employees responsible. A company should bereprimanded and be left alone to carry out its own internal investigation andrepercussions. From a business law perspective this is the ideal case since acorporation is defined as being a separate legal entity. Furthermore,opposition would argue that this resolution would benefit both the companyand the government since it would not inconvenience either party. Theoriginal resolution in the Company X case was along these lines. Thegovernment permanently removed Company X from its approved contractorslist and then Company X set out to untangle the web of wrongdoing fromwithin. This allowed for a relatively quick resolution as well as an idealscenario for Company X. In response, one could argue that the wholecorporation has no morals or even a concept of the word. A corporation isonly as moral and ethical as the employees that work for it. All employees,including top ranking executives are working towards the advancement of thecompany as a whole. All employees, including the sub-contractors andassembly line workers, are in some part morally responsible. Every employee 15
  16. 16. BUSINESS AND ETHICS ISIGKshould have been clear on their employment duties and aware of which partswere intended for government use. Uncertainty is not an excuse for moralresponsibility in the case of the workers. Also, the fact that someemployees failed to act in an ethical manner gives even more moralresponsibility to that employee. While some are definitely more morallyresponsible than others, every employee has to carry some burden of weightin this case. In fact, when the government reached a final resolution, theydecided to further impose repercussions and certain employees of CompanyX were banned from future work in any government office (Velazquez, 54).Looking at the case from the standpoint of Company X, the outcome wasfavourable considering alternate steps in which the government could havetaken. As explained before, it is ideal for a company to be able to conductits own investigation as well as its own punishment. After all, it would bebest for a company to determine what specific departments are responsiblerather than having a court of law trying to decide which employee is to beblamed. Yet, since there were ethical issues of dishonesty and secrecyinvolved, Company X should have conducted a thorough analysis of theiremployees as well as their own practices. It is through such efforts that acorporation can raise the ethical standard of everyone in the organization.This case brings into light the whole issue of corporate responsibility. Thetwo sides that must ultimately be balanced are the self interests of thecompany, with main goal of maximum profit, and the impacts that acorporation can cause on society (Sawyer, 78). To further strengthen thisneed, one could argue that there are very few business decisions that donot have an affect on society in one way or another. In fact, with the vastnumber of growing corporations, society is being affected on various fronts;everything from water contamination to air bag safety is becoming a majorconcern. Every decision that a business makes is gauged by the financial 16
  17. 17. BUSINESS AND ETHICS ISIGKresponsibility to their corporation instead of their social responsibility tothe local community. This was pointed out on various occasions as the mainreason why Company X falsified their reports. The cost of reengineering ofthe defective part did not outweigh the loss of business. In the opinion ofthe executives, they were acting in a sensible manner. After all, noexecutive wants to think of themselves as morally irresponsible. Thequestion that naturally arises, in debating corporate responsibility, is whattypes of checks and balances can be employed within a company to ensurethat a corporation and all of its agents act in an ethical manner. Taking theexample of the Company X case, one can notice many failures in moralresponsibility. Company X would have to review its employees, particularlythe supervisors, for basic ethical values such as honesty. For example,ultimately it was the widespread falsification of the testing documentationthat caused the downfall of Company X, not the integrity of its employees.In the outline of the case it is never mentioned that the employeesinitiated this idea, it would seem that it was the supervisors that gave theorder to falsify the documents. Through open communication, a company canresolve a variety of its ethical dilemmas. As for the financial aspects ofthe corporation, it has to decide whether the long term effects that areprimand can have outweighs their bottom line. In other words,corporations have to start moving away from the thought of instant profitand start realizing both the long term effects and benefits. These longterm benefits can include a stronger sense of ethics in the work force aswell as a better overall example to society. In conclusion, I agree with theuse of mitigating factors in determining moral responsibility. A company, asdefined by law, is only a name on a piece of paper. The company acts andconducts itself according to the employees that work for it. I use the wordemployee because in ethical thinking there should be no distinction of rank 17
  18. 18. BUSINESS AND ETHICS ISIGKwithin a company. There are times when executives can be held directlyresponsible and at the same time, there are cases where employees areacting unethically without the executives knowing. Neither title of executiveor employee is always morally perfect. Therefore, when a company hasacted irresponsibly, its employees must be held liable in a proportionateamount. As for the future of ethics in business I would speculate that ifemployees started to think more in long term benefits and profits, many ofthe ethical dilemmas that we face today would be greatly reduced. Asmentioned before, businesses today uses the measuring stick ofprofitability. We need to stress the importance of placing ethical weight onall major business decisions. Opponents would argue that this is a long termplan that requires too many radical changes. Also, there is no way that anindustry wide standard can be set due to the vast differences incorporations. In response, I would argue that although there are noindustry standards that are feasible, but it is possible for every companyto examine their practices as well as the attitudes of their employees.There will be a number of companies that will defend that are doing allthey can to make sure their employees are aware of their moral values. Yetother companies will find that they do have areas that need improvement.It is steps like these that spark change in an organization. Once a fewcompanies start to see the benefits, it can help to encourage othercompanies to follow suit. After all, as seen in the case of Company X,mistakes in one department can cause the deterioration of an entirecorporation. When a corporation realizes the costs involved with decisionssuch as this, the changes required to rectify are small in comparison.Works Cited Pave, Moses. "Corporate Responsibility and FinancialPerformance." Quorum Books, March 1995. Reder, Alan. "In Pursuit ofPrinciple and Profit." G.P. Putnam’s Sons Publishing, 1995. Sawyer, George. 18
  19. 19. BUSINESS AND ETHICS ISIGK"Business and Society: Managing Corporate Social Impact." Houghton MifflinPublishing, February 1993. Velazquez, Manuel. "Business Ethics: Conceptsand Cases." Prentice Hall Publishing, February 1992. "WebCrawler SearchResults." WebCrawler. With the query words ethics and business. 26January 1997.◙TOP 10 MISTAKES:Top 10 Mistakes that Organizations Make in Developing Global EthicsPrograms 1) Lacking consensus on the objectives for globalization 2) Not integrating international personnel into the development process 3) Discounting the importance of promoting the program as a competitive advantage 4) Basing company policies on legal requirements in the domestic market 5) Not establishing ethics offices or resources in international locations 6) Appointing headquarters staff or expatriates (i.e., non- international employees) to fill ethics positions 7) Offering training materials only in English 8) Using the word “ethics” extensively in program materials 9) Translating the code without translating the code 10) Focusing on the few cultural differences rather than acknowledging the many cultural similarities. 19
  20. 20. BUSINESS AND ETHICS ISIGK ◙Fe rtility Clinic Errors:This ones got everything it takes to soak up public attention: race,healthcare, and paternity. Its like a perfect storm. Add in the word"lawsuit" and youve got everything a good scandal needs.The story is about a couple suing a New York fertility clinic for a spermmix up that resulted in a baby racially unlike its supposed parents.As one faithful reader of this bloc asked, "Is this a business ethics issue,or a bioethics issue, or are the parents just being jerks?"Heres the story as reported by one NBC affiliate: Fertility Clinic Suedover Too-Dark BabyAfter they saw a baby girl they had gone to a fertility clinic to conceive,her parents became convinced something was wrong, according to courtpapers.The girls skin was darker than either parents, a judge wrote in allowingthe parents to proceed with a lawsuit that claims the clinic botched theinsemination of the wifes eggs.The title of the story obviously refers to the fact that the reason thegirls paternity came into question in the first place is that shes darkerskinned than either parent. But the point here isnt that the clinic gave theparents a black baby. The point is that the clinic did such sloppy work thatthey gave the couple a baby thats not related to her own supposed father.(The parents have actually tried to sue both for malpractice and foremotional distress, etc. The court is proceeding with the former, but not 20
  21. 21. BUSINESS AND ETHICS ISIGKthe latter)Now, certain corners of the web have been awash in commentary about theparents being jerks. And its easy enough to sympathize with thatconclusion. It might not exactly be great for this kid to know she was atthe centre of this kind of controversy. The girl (whom the parents say theylove dearly) is too young to understand now, but shell understandeventually. (Paging Dr. Phil...!)But we shouldnt let that distract us from the fact that the clinic wasseriously sloppy and completely botched the job they were paid to do. Theyshould be held accountable. It seems unlikely that we want fertility clinicsto be the only commercial entities that still get to resort to the oldstandard of "caveat emptor." Are the parents supposed to not hold theclinic accountable, out of fear for this little girls dignity?Of course, this double-bind is fodder for the folks who argue against theCOM modification of fertility services. "Tsk, tsk, parents! You wouldnthave unseemly little binds like this, if you werent out buying babies tostart with." Im not saying that would be my conclusion, but this case is apretty good example of a few of the consequences of commercializingrepro-medicine. At very least, this stuff ought to be foreseen & dealt withpreemptively.◙A Case Study In professional Ethics:This (true) story was researched by Julie McDonald O’Leary, my formerbusiness manager.She interviewed a property management company, whose client was ahospital. In dealing with government agencies regarding hazardous waste,the paperwork submitted has to be exact. In many cases, the paperwork is 21
  22. 22. BUSINESS AND ETHICS ISIGKincidental to actual importance of cleanup work being done, and it can bemore time consuming and costly than the actual work itself. However, it’smore than required – it’s mandatory.The property management firm (let’s call them Acme) realized there was amistake in the paperwork regarding a specific cleanup for the hospital.Basically, the paperwork said that waste was dumped in one particular sitewhen it actually went to another. Both sites were the same type, but aclerical error had been made. No actual harm done because both sitesaccept the same type of waste—but in these situations paperwork issupposed to be exact.This was Acme’s mistake, but it would be a costly one to rectify. Theteam involved knew that they could say nothing and no one would ever knowand there would be no actual harm done.They asked their CEO what to do, and he said: “We will meet with thehospital and take it on the chin. We’ll look like fools—it’s a silly error. Thehospital has had a lot of bad press lately and the last thing they need isany kind of environmental error going to the press.”Up until now, the relationship with the hospital had been a great one(representing a $0.5 million account) and admitting this mistake couldbecome a real thorn in Acme’s side, making them look incompetent. Theycould lose the account and the word of mouth publicity that would followwould hurt future business in health care circles.Acme’s CEO decided to meet with the client, bringing along to the meetingthe whole team who had worked on the project – form the most seniorperson to the most junior. He revealed the error and told the client that 22
  23. 23. BUSINESS AND ETHICS ISIGKaction was already in progress to fix the error. The meeting lasted 4.5hours, adjourning with no outcome.The next day, the CEO received a call from the client saying that they haddiscussed it further and that it was obvious to them that Acme could haveswept the whole thing under the carpet and the hospital would never haveknown the difference.They also said that they recognized that Acme made a lot of extra workfor them by honouring what they knew the wishes of the hospital would beand that is to fix it. They said “We totally trust you to do the rightthing.”Another firm may have elected to go honest route as well, but may havebeen reluctant to do so with their juniors as an audience. By witnessing allof this first hand —lessons in professionalism are usually learned first handthis was better than any training session. The juniors had a taste of what“owning the problem” really means.Acme’s young workers saw first hand the meaning of “ethics in action.”They saw the CEO “take it on the chin” rather than be anything less thancompletely excellent to very high standards. They also saw that because ofthis, they had probably obtained a client who will work with them (andadvocate them to others) with total trust.Now here’s another interesting question. A CEO might take the decision tohandle things this way, but would a middle manager inside a company everfeel empowered enough to make a similar decision (absorb a significantexpense to make right an error that no-one outside the company would everknow about?) 23
  24. 24. BUSINESS AND ETHICS ISIGKOr is this kind decision, which requires guts, courage and ethics, alwayskicked upstairs? Are any companies so “ethical” that a middle managerwouldn’t need to ask permission to “do the right thing?”Within the role of issues in business ethics, image is everything. Imageissues in business ethics means a lot. Its like youre on the cover of abusiness ethics magazine. Your business ethics problems reflect a great dealon the importance of business ethics you have in your workplace. Yourphysical appearance is just as important as your sales pitch. This is why youpay homage to the mirror each morning, picking out the right outfit,grooming, to show the world by your outward appearance that you are aserious professional. There is no questioning the fact that physicalappearance is a critical component in how you are perceived, but what aboutyour ethical appearance? This is where the role of ethics in business comesinto play. The importance of business requires you to pay close attention toit.Make no mistake; the ethical impression you leave with others communicatesvolumes about your character and the importance of business ethics youhave. People will judge you more quickly and more deeply based on youractions rather than your clothes. No matter how clean your suit, leaving asoiled perception of your ethics can negate whatever outward impression youattempt to make. All it takes is one simple act or oversight to start theball rolling. It can cause an unfortunate chain of events that may tarnishyour reputation forever. Improving business ethics may be impossibleafterward. Perhaps you found yourself in the wrong place at the wrongtime? Maybe youre caught with your hand in the cookie jar? Or possiblyyou did something truly foolish and wish you could start over. Whatever thetransgression, an indelible impression has been made and now youre trying 24
  25. 25. BUSINESS AND ETHICS ISIGKto row upstream. Unfortunately, there is a part of our human nature thatgets satisfaction in anothers misfortune and rushes to pass judgmentinstantaneously. What happens after that fateful perception is made, youcant control. Business ethics issues are like this. Its like it was publishedin some kind of business ethics magazine or focus of some kind of businessethics research. Luckily, this kind of ethics magazine doesnt exist toilluminate your mistakes. Even without such business ethics research, gossip,hearsay, even outright lies are sure to have plenty of willing listeners andbelievers. Forget whatever youve heard about being judged fairly in acourt of law, this is the real word. Having your character and businessethics judged by your fellow employees based on mere circumstance is aboutas final as it gets. The tragedy here is that once an ethical impression ismade, theres little you can do to stop or repair it. The role of ethics inbusiness is to help prevent this. Damage control may set the record straightto some extent, but a wounded reputation may be impossible to heal.A crisis of ethical perception is not only a problem for liars, cheaters, andbad guys; its a problem for everyone. The first line of defence withregard to ethics issues in workplace and business is to understand thatyoure not above the fray. Just because youre an honest person doesntmean that you wont wake up tomorrow and find yourself in full-fledgedethical dilemma. We all have bouts of mistakes, sloppiness, miscalculation,panic, or bad judgment. Understanding our fallibility and being ethicallycognitive of our day-to-day behaviour helps enormously. If youre lucky,your conscience will do most of the watchful work for you. But beware thatyou dont close your eyes and let your guard down.Another line of defence is to truly care about how others perceive your 25
  26. 26. BUSINESS AND ETHICS ISIGKbusiness ethical behaviour. At any given time, even in the most mundane andinsignificant actions of your workday, you are being judged. Think of yourco-workers as judges at an Olympic-style event holding up numbers toevaluate your ethical performance. Its like youre in that ethics magazineagain. Your business ethics problems are there for the entire world to see.When all is said and done, you hope to perform so that they will hold uptens and not ones. You should care what people think and want others tosee you do the right thing because ethics important in business. You want tobe defined on the basis of your good character. Finally, you should avoid the appearance of impropriety all costs. Justas an attorney looks at every possible angle or potential problem, you too,must judge your business ethics actions in the same way. Leave no stoneunturned. Cover your bases. Be transparent and open to scrutiny. Take timewith careful consideration to make sure that your ethical position appearssound from every angle.Dont leave others to second guess you. Perception is everything, not only inyour looks but in your character. Understand the role of ethics in business.Treasure and protect your ethical reputation like a priceless commodity.Tomorrow, as you prepare and primp in the mirror for your best physicalappearance at work, dont forget your ethical appearance. It costs younothing to put on, but costs you dearly to lose.Ethics issues in workplace and business arenas are Global Ethics Universitysspecialty. Business ethics issues are such a large part of the image thatyour company portrays. Business ethics problems cost you dearly if youdont understand the importance of business ethics for sake of your imageand health of your company. Improving business ethics and raising the 26
  27. 27. BUSINESS AND ETHICS ISIGK ethical bar is what a Global Ethics University course can do. You might wonder, is ethics important to business? Yes, it is. Issues in business ethics are vital. You cant just read about it in a business ethics magazine or read about the most important business research of our day in some academic journal, it is about the real issues in business ethics that your employees face every day. Let Global Ethics University is your partner in improving business ethics for your company today. ◙Workplace Ethics: The Importance of Workplace Ethics TrainingAs far as workplace ethics goes, employers must do their part to make ethicalexpectations clear and trust the employee to deliver. Sometimes ethics training worksand sometimes ethics training doesnt. Work place ethics shouldnt be a guessing gameif the employer has truly done all he or she can do to set employees up for ethicalsuccess. There should not be a disconnect between the work ethics that employer hasand the work ethic of the employee. Understand that ones ethic is his or her systemof moral standards or principles that may or may not agree with the companysprofessional work ethics standards. Despite the differences, promoting professionalwork ethics requires the employer to do everything in his or power to set up employeesfor success.In the context of ethics in the work place employers lead the employees to ethicalsuccess by requiring them to read the ethics manual, attend a training session, andsign a document swearing to uphold the rules. With that done, employers sit back andrely on the integrity, understanding, and self-discipline of each employee. This is 27
  28. 28. BUSINESS AND ETHICS ISIGKwhere many ethics in workplace programs fall short. They demand the higheststandards of self-discipline possible yet do little to promote them in the long run.The following four questions can be asked by both employees and employers who wantto seriously assess how well their company promotes self-discipline:1. Are the work place ethics expectations in my organization clearly communicated?People need to know what is expected of them. Its human nature. Some employerscloud expectations in vague concepts to accommodate Gray areas, while otherspromote distrust by controlling every aspect of the employees existence. Clarity inethics training is the key. If the ethical issue is black and white, the employer mustleave no room for interpretation. If the issue relies on human judgment, theexpectation must be logical and be grounded in principle. Most people want to knowwhats expected so they can get on with their job good work ethics.2. Are the ethical expectations in the ethics training of my organization based in common sense and reality?Expectations shouldnt be burdensome, attainable only by saints. Having unattainableexpectations with regard to ethics in the work of people makes criminals out ofperfectly good people. It sets them up for failure. The key to this is to not be solocked into rules that you fail to see how they affect real people in the real world.There must be balance in ethics training. The irony is that oftentimes the fewer rulesthe better. People will be more compliant in a work place ethics atmosphere offreedom governed by principle rather than oppressive restrictions. In other words,its not the number of rules in the employee manual but what those rules mean andhow relevant they are to real people. For example, rather than having numerous ruleson caring for company property, a statement on "respect" written with clarity,conviction, and principle may cover it all. 28
  29. 29. BUSINESS AND ETHICS ISIGK3. Does the system of dealing with ethical problems show respect and due process to people involved?In a nutshell, how are people treated once they are caught or accused of unethicalconduct? Our legal system operates under the assumption of innocence, in contrast tothe workplace, which operates on the assumption of guilt. Although the administrationof justice is the prerogative of the company, it must always be done with fairness andrespect for everyone involved. Using disciplinary action to punish or intimidate peopleis in itself unethical and hypocritical. Employers must listen to all the facts. Disciplineis something that no one likes, but the process can work toward the good of theorganization if justice is genuinely sought and lessons are learned.4. Is ethics a positive or negative issue in my organization?Its no surprise that ethics is predominantly viewed in a negative light. Turning thisperception around requires a different way of thinking about what makes anorganization successful. Theres more to ethics in workplace situations than justpreventing loss of assets. Its about making the company a better place to work andconduct business. A positive ethics approach looks out for the best interests of boththe employees and the company with positive workplace ethics training. People want togo to work every day knowing that they wont be harassed, that co-workers play bythe rules, supervisors treats them with respect, and the company will honour theethical principles they hold dear. A serious ethics program will attract and keep goodemployees not scare them away. Try to see ethics as a vital component in buildingsomething great. It can be framed as something that makes life better for everyonenot worse. 29
  30. 30. BUSINESS AND ETHICS ISIGK ◙Ethical Concerns in Business and TheirSolutions: Undergraduate business majors but also everyday consumers and investors.Sarah MeisingerDr. Fife Eng 30004-18-05It was one of the biggest bankruptcy cases in U.S. history, and many employees wereleft without retirement savings while executives and higher management made a profit(Cuplan 59). I think after reading about Enron and scandals like it we all havewondered “how could this happen?” What was it that led them to believe that it wasokay to misrepresent their financial records? In the ethics community many people aretalking about these very questions and attributing unethical behaviour to personalbackground, the business environment and the undergraduate business programs.All three have their own arguments and solutions, whether it is better ethical trainingor different business environments. Although it is a complex undertaking, somethingmust be done to improve conditions to prevent such scandals in the future. Thisprevention is important as business ethics affect not only employees and undergraduatebusiness majors but also everyday consumers and investors. If certain steps are taken in both the business world and the education of business students, corporate scandals are likely to decrease noticeably. With many different debates going on about ethical behaviour, one argument stands out as the definitive contributor to ethical behaviour-- a person’s convictions. These personal convictions can be due to a person’s upbringing, culture and other life experiences, but the general consensus in 30
  31. 31. BUSINESS AND ETHICS ISIGKthe ethics community seems that this will override any sort of ethicstraining or business structure. The logic to this argument is that in real lifesituations with multiple pressures and responsibilities, a person is going toperform based on the type of person they are and their personal valuesystem. In a study of business students in Taiwan and American, the cultureof the student seemed to have an impact on how well they performed onethics reasoning tests (Venezia 204). Obviously moral values and attitudesare going to differ between cultures. Because Taiwanese students aretaught to “save face” as part of their culture they are much less like likelyto behave dishonestly because of the values placed on doing your best forthe group (Venezia 200). In contrast to American culture, Taiwan has anoverriding need to blend in with a group and participate within that groupwhereas in American culture the focus is on individualism and independence(Venezia 200). The focus on the individual gain by American students oftenresulted in them picking an alternative during the study that would bebeneficial to them rather than beneficial to the group (Venezia 200). Insome cases this focus led to them marking unethical behaviour as acceptableas long as the benefits were high enough. This study supports the theorythat culture has an impact on how students respond to ethical situations. Other studies have looked at how gender affects ethical reasoningabilities. Female students tended to be more conservative and harsh in howthey scored each situation causing them to be less tolerant of dishonesty(Fischer). The male students in the study tended to be more tolerant ofwhere the line was between ethical and unethical behaviour (Fischer). Thestudy offered no explanation other than females are traditionally moreempathetic than males and would look at how other people would beeffected more so than how it would advance their careers (Fischer). This 31
  32. 32. BUSINESS AND ETHICS ISIGKsame study also looked at how age affected each person’s score, which wasalso shown to be a factor: students under 21 scored the lowest and thescores went up consistently as age increased (Fischer). In the article“Schools for Scandal” the author says “becoming a successful leader of menand women in a turbulent business world requires maturity and wisdom.”These results certainly show that the experience and maturity that comewith age affect how students scored in this study. Maturity and wisdom aresomething an individual has to acquire outside of their college education andworkplace instruction, so this is something every person must come to termswith on a personal level of what they believe is acceptable. There haven’tbeen any long term studies to see if ethics training was presented tostudents of a younger age, perhaps in junior high or high school, it wouldhelp override personal experience and age. Children are often more open toideas and instruction, so it is my belief that earlier introduction might makestudents receive their ethical training at the college level as more of a corevalue than merely as a theory or practice. Although most people in the business and ethics community believepersonal conviction to be the overriding determining factor in ethicalbehaviour, there are several credible people who believe that businessstructures are almost entirely responsible for corporate scandals. In Dr.Joseph Castillo’s article “How Corporate Culture Impacts UnethicalDistortion of Financial Numbers,” he looks at how the managing byobjectives and results or MBO/MBR affects how employees perform. TheMBO/MBR form of management is a very common style for managers to useand it involves giving targets to employees and then ranking them againsttheir colleagues based on how well they met the goals set for them (Castillo37). Dr. Castillo says that the flaw in this type of management is “Goalsand targets are set without statistically determining whether they are 32
  33. 33. BUSINESS AND ETHICS ISIGKbeyond the capability of the existing process. Hence, employees are oftenheld accountable for results that cannot be achieved without distortion offigures or they system” (38). Giving employees unrealistic goals andpenalizing them for not reaching these goals is “laying the groundwork foran unhealthy climate through the use of MBO/MBR” (Castillo 38). Anexample of how unrealistic goals led to scandal can be seen in the 1992Sears Roebuck & Company auto service settlement of about $60 million inrefunds to its customers (Paine). Lynn Paine discusses this particularinstance in her article “Managing for Organizational Integrity” saying thatthe main reason for the unethical business practices was “a new set oforganizational pressures and incentives with few options for meeting theirsales legitimately, some employees judgment understandably suffered.”Even the CEO at the time, Edward Brennan, stated that the fault lay withthe managers because they “created an environment in which mistakes didoccur.” (Paine). Of course the danger I see in blaming business structuresand managers is that it diminishes a person’s accountability for theiractions, which have already been argued to be the biggest factor inwhether a person is ethical or unethical in their behaviour. In the coverage of the Enron scandal, MBAs and higher managementwere blamed for most of the scandal (Cuplan 59). This caused the media tostart looking at the MBA certification and teachings in undergraduateprograms to try and place blame on the lack of ethics training. In SumantraGhoshal’s article “Bad Management Theories Are Destroying GoodManagement Practices,” he says that “Many of the worst excesses ofrecent management practices have their roots in a set of ideas that haveemerged from business school academics over the last thirty years”(75). Hegoes on to say that specifically business schools are not adequatelypreparing students for dealing with management pressures in the working 33
  34. 34. BUSINESS AND ETHICS ISIGKworld and only teach those theories that are not useful in ethics training(Ghoshal 76). Dr. John Elliot, the dean at Oxford University, says that“Business schools sometimes inadvertently enable and encourage greedrather than moderating and controlling it” (569). The word that stands outto me in this quote is “inadvertently” because universities are taking actionsto educate their students and the ethics community as a whole tends toblame individual moral values and poor business management and structurefor larger unethical problems. In fact, ethics has become a bigger part of business education inrecent years. In the 1960s and 1970s, ethics training was very limited andonly took place in upper level auditing classes (Elliot 537). In 1979 TheAssociation for the Advancement of Collegiate Schools of Business (AACSB)made ethics as a high priority for business schools and accreditation ofbusiness schools (Elliot 573). Because of the AACSB increased emphasis onethics textbooks now have regular mentions of ethical issues and casestudies to encourage professors and students to think about ethics (Elliot573) In Ronald Madison’s survey of universities he found that more thanhalf of the universities require an ethics course before graduation (24).Ethical training in undergraduate education in accounting and other areas ofbusiness is especially important because firms often don’t give extra trainingto help their employees. Dr. Christin Earley found that “a study ofaccounting firms attitudes toward ethical training found that the vastmajority of firms ‘rely primarily on colleges to cover the ethics and ethicalbehaviour expected in the profession” (Earley 54). Earley’s findings aloneare enough to warrant improvements and encourage ethical training anddiscussion in undergraduate education and business schools because firmsare obviously putting the burden of responsibility onto the schools. If firmsare expecting their employees to come into the business world prepared to 34
  35. 35. BUSINESS AND ETHICS ISIGKdeal with the pressures involved in being honest in the business environmentdiscussed above, then undergraduate programs need to step up and work onthe best methods for teaching their students. Right now at Western there is a three-hour corporate governance andethics class specifically for business majors, but it is a primarily a web-based class. This class is not required by accounting majors, but from thediscussion above should most certainly be to make sure students areequipped with moral reasoning tools that their employers expect. There aremore ethics classes offered at Western under the philosophy andpsychology genres but they are not required for accounting majors. To befair many of the upper management courses have sections dealing withethical issues. However Dr. Stape observed in his research onundergraduate business education that ”many professors are hard pressedto find the time to teach the technical content let alone incorporate ethicsinto their courses.” This could mean requiring an entire class devoted toethics before graduation to ensure that the proper amount of time is spenton ethics education. A study done by Dr. Lawrence Poneman comparingmoral reasoning in business graduates from liberal arts and publicuniversities found that students from liberal arts universities scoresignificantly higher than graduates from public universities (204). Hesuggested many reasons for this discrepancy but the one he found to bemost significant is that liberal arts schools typically have smaller classroomsmore based on discussion (Poneman 204). Clearly smaller classrooms are notonly helpful in all areas of learning but in ethical training as well. In factmany studies have found discussion and personalizing situations to be themost effective methods for improving ethical reasoning in undergraduatestudents. In Dr. Daryl Koehn’s study of undergraduates over severalsemesters, he found the most effective method was not case studies or 35
  36. 36. BUSINESS AND ETHICS ISIGKcontext-specific instruction but rather that personal, real life discussionsand debates got students thinking and engaged in the material (143). Forexample, instead of talking about Enron and analyzing where the executiveswent wrong, the instructors would put students into groups and give them asituation more applicable such as having trouble paying for their educationwith ethical dilemmas along the way (Kohen 143). The students would thendebate among themselves the pros and cons of certain questionable actionsthat they could take. The students who participated in this exerciseimproved their scores significantly over a semester more than students whoreceived traditional case study instruction (Koehn 143). Dr. Earley did asimilar study with discussion-based approaches and found that “resultsindicate that educational interventions are capable of increasing studentsmoral reasoning, regardless of the specific case context or other currentevent” (Earley 61). It seems that whatever part undergraduate education isfailing to reach students with their ethical training is not from a lack ofeffort but merely a bad approach. No long-term studies have been done tosee if the discussion based approaches carry over better to graduates inthe business world, but it seems that the personal and engaging methodseems to have a better chance of overriding past and cultural experiences.Some universities have come up with other creative approaches such ashaving an ex-con come in and talk to students about white collar crimes(“Schools for Scandal”). This is an excellent approach to reach students asI think it would bring home the gravity of the consequences they face ifthey choose to behave unethically in business. As Elliot says, “Businessschools arrive late in the development of our students. We cannot undoformative influences of family, religion, pop culture, environment andheredity on the future behaviour of our students” (573). However fromlooking at the different approaches, the undergraduate education can have 36
  37. 37. BUSINESS AND ETHICS ISIGKsome impact on an employee’s ethical behaviour. As Dr. Early says in hisconclusion, “Educational interventions regarding ethical issues can beeffective in improving student’s moral reasoning” (61). Although corporations depend on undergraduate education for ethicaltraining, they are by no means exempt from preventing corporate scandals.In a survey of 100 ethics officers, a mere 1% thought that ethics trainingwould have prevented a big scandal such as Enron (Verschor 24). Asdiscussed above, many business structures contribute to pressures thatmake it difficult for employees to act in an ethical way, no matter theirundergraduate training. In Verschor’s study he found that only 40% of thecompanies he surveyed punished employees for violating the company’s ethicscode. Even more disturbing is that 8% of the people who were foundviolating the code were promoted (Vershor 22). By overlooking violations ofthe ethics code, employees are being given the message that so long as theresults look good, managers don’t care how they were obtained. Dr.Verschor observes that “in many organizations concern for the bottom lineor making the numbers seems to override any concern for ethical values(22). This shows that businesses need to take a stricter stance when itcomes to minor ethics violations so that they don’t end up with a full blownscandal. As with any job, but especially in business, it is about money.Koehn’s survey’s found that “the number one ethical issue within Americancorporations is perceived injustice of salary differentials”(148). Whenlooking at the higher level executive paycheck one sees that they are notonly given an annual salary but they are also rewarded based on how wellthey manage and produce a profit. These rewards are often stock optionswithin the company (Cuplan 70). Senator Carl Levin said after the Enronscandal, “Most executive pay packages rely heavily on options, encouragingcorporation managers to push accounting rules to the limit in order to make 37
  38. 38. BUSINESS AND ETHICS ISIGKtheir financial statements look better so their stock prices will go up andthen executives can cash in their options” (Cuplan 70). If executives’compensations were not so heavily based in stock options, this might letsome of the pressure up on misrepresenting financial data and in doing somake it easier on employees to act in an ethical way. It seems that overallthe pressure and unattainable goals in the workplace are the factors thatresearchers believe to be contributors in unethical behavior, so solutions tothese should be focused on creating what Dr. Castellano says is an“atmosphere of harmonious relationships” (41). Employees should be givenbudget goals that can be met with reasonable effort and dedication. Theircompensation and bonuses should not be based on how well they didaccording to unrealistic standards but on how hard they worked and whatthey did with what they had to work with. Obviously the biggest motivatorin the business world is keeping ones job, so companies need to be stricterwhen unethical behaviour is discovered and definitely stop promoting theoffenders. Yet another problem is that there is really no good way foremployees to report unethical business practices. Many companies haveanonymous hotlines for things such as safety violations or harassment but nosuch system for other unethical behaviour like financial dishonesty. I seethis as an added addition to any business because it allows employees tobypass their managers, who from above are very interested in making theirfinances look good, and do what they think is right without fear of beingfired or hurting their careers. Ethics is an important issue within the business community. All thebusiness and educational factors are ones that can be improved andhopefully reduce scandal in the future. I think that even though personalexperience and conviction is the overall contributor to ethical behaviour,this does not mean we should give-up and accept another Enron. There are 38
  39. 39. BUSINESS AND ETHICS ISIGKspecific fairly simple solutions: start ethics teaching before college, changethe ethics instruction to a more interactive and personal format, requireethics courses as a graduation requirement, stop managing for the bottomline, and have harsher punishments for violators of ethics in the workplace.If these changes are made, I am confident that corporate scandals willdecrease and we will not have to see another Enron.◙Ethics — The Incomplete Solution :Executives and legislators are once again going after the right problem withthe wrong solutions. Instead of curing the investor “confidence gap” incorporate reporting, the current focus on ethics and legislation is likeputting a band-aid on your arm when your leg is haemorrhaging. It’s time toclear up some misconceptions.(1) Its not about ethics. “Business ethics” training has been around sincethe beginning of commerce. In fact, BCS founder Bob Stuckey is one ofthousands of graduates of a popular executive ethics program who arereluctant to even list it on a resume’. Why? It was conducted by ArthurAndersen.Executives don’t need to be taught not to lie about what they’re doing.They learned that in kindergarten. Thinking you can turn shady employeesinto upright moralists with some ethics course is lunacy.(2) It’s not about regulation. The Sarbanes-Oxley Act of 2002 (CorporateReform Act) doesn’t prevent anything. It simply establishes potential after-the-fact punishment along with a couple of governance restrictions. Thereis nothing in the Act that indicates how organizations should make certaintheir reporting is accurate. It’s like a coach teaching athletes how to win 39
  40. 40. BUSINESS AND ETHICS ISIGKthe Olympics by admonishing them to run faster. “Report well!” insists theAct, leaving the how up to the company.(3) It’s not about reporting accurately. While there may have been 50 or somajor scandals, the remaining top 1,000 companies are generally honest intheir statements. You can totally mismanage your company, but as long asyou report your terrible results accurately, you are in ethical and legalcompliance.(4) It’s not about financial control. The classic financial control techniqueswere founded in the era of Scrooge & Marley, but are now inadequate inthe age of empowerment, restructuring, outsourcing, and the Internet.So what’s the real issue? Our research found that the most importantconcern for investors should be corporate waste and inefficiency. You canpick up any edition of the Journal and find a number of articles wherecompanies needlessly lost revenue and incurred unnecessary costs.For example, Ford Motor took a $1 billion raw materials write-off (and lostnearly a quarter of its market capitalization) because R&D wasn’t talking topurchasing. The U.S. government wasted millions due to governmentemployees purchasing— among other things—lap dances! Having to honorincorrect online air fares, paying more than retail for statewide PCdatabase software, fines for incorrect utility charges … the list of blundersis endless. These are affecting investors far more than the lurid reportingscandals. What organizations need today are effective business controls!This is a level above traditional financial or process controls, and covers theorganization from boardroom to front-line. 40
  41. 41. BUSINESS AND ETHICS ISIGKThere are standard early warning signs of control problems. We haveidentified six “out-of-control incubators” that provide the businessequivalent of warmth, moisture, and nutrients for small control issues togrow into big problems. Two are ever-present: silo organizational structuresand new IT systems. Four are event-driven: downsizing, outsourcing,restructuring/reorganization, and merger/acquisition/divestiture. Whenthese are occurring, control problems are sure to be present.So what can companies and institutions do about it? The initial step is torecognize that “business control” is a new organization-wide corecompetency. It is now legally mandated, right up there with sexualharassment and safety, and is going to take a comprehensive change inprocesses to accomplish. Then there are required “best practice” activitiesat several levels:Public positioning … New legislation ensures that business control is not thefad du jour. Commitment starts at the top. Companies must take a publicstand on their approach to business control. This means publicizing anyinitiatives and including business control content in all positioning statementsand communications.Board-level … The Corporate Reform Act recommends a few board-levelchanges, but doesn’t go far enough. Boards now require different levels oforganization, expertise, and information to do their job correctly. Thisincludes having greater skills, taking a more active role, and getting moreinformation directly from company sources. 41
  42. 42. BUSINESS AND ETHICS ISIGKPerformance management … “Business control” must make its way into theorganization’s policy manual, competency models, job descriptions,performance plans, appraisals, and compensation systems.Skills development … Business control is now a mandatory competency forsupervisors on up. A certification process is required to ensure thateveryone in the organization understands control and has the skills toachieve it. And many front-line professionals, such as IT systemsdevelopers, will need specialized training on designing controls in.Operations … Some companies are already setting up a dedicated, cross-functional business controls team. This is a high-impact group that shouldbe populated with rising stars. The team becomes a central point forcommunicating successes and learning from mistakes. Business controlsconcepts also have to be integrated into project management and decisiontemplates, and process design tools.Don’t think that you can knock these off one-by-one. An effective businesscontrol system cannot be piecemealed. Just as a chain is only as strong asits weakest link, the same holds true for an effective business controlsystem. In addition, business control is a forever endeavour. Controlscannot remain static in the ever-changing business environment.Implementing this entire program has two crucial advantages: • Our research indicates that implementing effective business controls is the fastest way to improve the bottom line by eliminating unnecessary expenses and waste and preventing future mistakes. 42
  43. 43. BUSINESS AND ETHICS ISIGK • It is also the only way to keep executives from being punished as a result of honest error by providing the basis for an active defense, i.e., “We did everything in our power to prevent this.”While these activities may currently provide a competitive edge, they willultimately be a standard requirement. It’s only a matter of time beforesome analyst during a briefing or some stockholder with microphone in handasks about the company’s status in these areas. Why invest in a companythat isn’t properly under control?Idealistically, we wish that controls of any sort were not needed and thatwe could rely on human integrity, i.e., ethics. Realistically, lettingemployees get into situations where they have to make ethical decisionssimply means that the controls are inadequate. The only way to stop thehaemorrhaging is to treat the true cause of the bleeding … poor businesscontrols.◙Business by example:Imagine the employee who works loyally for the firm but sees a seniormanager engaged in fraud or some other unlawful action. If employee blowsthe whistle and exposes the senior manager they may - even as the angel -may lose their job. Crier opportunities may be severely dented. Turning ablind eye is easier. It may be difficult to see anyway that anyone inparticular has been substantially hurt from the fraudulent activity.The argument to confront however that individual is exercising free willmake moral choices. Indeed without free will can the notion of morality 43
  44. 44. BUSINESS AND ETHICS ISIGKexist? Whilst a killer whale attacking and even mauling a seal is notbehaving unethically, we generally see due punishment for a serial killer orrapist as necessary.We may differ about the type of punishment and argue over contributoryand mitigating factors - tortured family up-bringing perhaps. If someonewas to steal a sheep today or paint a rude slogan about a politician or thepolice chief or rival deity on the wall - we would regard it (Western liberalreaction) as unethical if such misdemeanour was punished by a lobotomy oramputation of the offending limb?Yet a good resident of ancient Rome woundergraduate businessmajors but also everyday consumers and investors. Oldchoose to enjoy a good day out at the circus with captives on the lionsmenu. Friends and family label our Roman as a "party-pooper" if he hadstayed at home muttering «such unethical".Today - Monty Python visiting a Spanish bull-fight or bull-baiting in a localtown festival - might be disgusted. Few holiday-makers seeking the sun,sangria and the good life would be prepared to boycott Spanish holidays.Furthermore most Spanish people would not agree with the argument thatthe obsession with frightening, mutilating and killing bulls in a publicspectacle - a centuries old local tradition which outsiders do not appreciate- is unethical. 44