Returning adult lecture notes

Returning Adult Lecture Notes
RAADRETURNING ADULT ACCELERATED DEGREE PROGRAM
SOCIAL RESPONSIBILTY
IN BUSINESS
RBUS 402
FACULTY LECTURES
SUMMER 2010, Term E

RBUS 402 Lectures – Summer 2010 Social Responsibility in Business
2
W E E K 1 L E C TURES

Returning Adult Lecture Notes Social Responsibility in Business
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M A XIMIZING E T HIC A L BE H A VIOR IN ORG ANI ZA TIONS
“Wealth consists not in having great possessions, but in having few wants.”
Epicurus, ancient Greek Philosopher
L E ARNING OBJE C TIV ES
Upon completion of this class session, each student should be able to:
1. Explain the competitive advantages of creating and maintaining an
ethical organization.
2. Understand that unethical behaviors can be very costly to
organizations.
3. Discuss human nature in terms of people being pleasure seekers who
can choose to be good or bad.
4. Explain the ethical foundation of capitalism.
5. Benchmark your organization to the Ethics Compliance Program best
practices outlined by the Federal Sentencing guidelines.
6. Use an Optimal Ethics Systems Model to maximize ethical behaviors
within your organization.
ASSIGNM ENTS
The following assignments are to be completed prior to this class session:
Read Collins, Essentials of Business Ethics, Forward (pp. xiii-xvi), Preface
(pp. xvii-xxii), Chapter 1: Human Nature and Unethical Behavior (pp. 1-17)
and Chapter 2: The Ethical Foundation of Capitalism and the Optimal Ethics
Systems Model (pp. 19-32).
Review the “Student Readings: Week 1 Handouts”.

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Reminder #1 from earlier in the Syllabus: Importantly: “Homework must
be typed, otherwise 3 points will be deducted”
Reminder #2 from earlier in this Syllabus: “Homework longer than
directed will also have a 3-point deduction – one paragraph means one
paragraph, it does not mean two paragraphs or just one sentence.
Learning to write things concisely is an essential managerial skill.”
1a. Homework to Submit: Read “Class Guidelines and Confidentiality
Agreement” in “Student Readings: Week 1 Handouts.” Please xerox the
page, sign the agreement, and submit it to maximize the learning potential of
this class adventure.
1b. Homework to Submit [one paragraph]: When faced with an ethical
dilemma it is good to reflect on an inspiring quote that encourages you to
make the appropriate moral decision. Pick an inspiring quote that is
meaningful to you and explain why it is.
1c. Homework to Submit [one chart]: Read “Merger Opportunity—1985,”
pp. 6-7; and “Skilling’s Innovative Gas Bank Idea—1990,” pp. 22-23. If you
were the CEO of Enron (p. 23), would you stay focused on natural gas
pipelines (option 1) or invest in a Gas Bank (option 2)? Why? Apply the
“Critical Thinking Decision Making Process” framework that appears in the
syllabus. Only submit your “Critical Thinking Table.” Only submit your
“Critical Thinking Table.”
1d. Homework to Submit [one paragraph]: Assume someone in your
current or previous place of employment commits a consumer fraud. In the
last column in Exhibit 2.1, mark each best practice the organization has and
total the amount. Discuss your organization’s best practices score. What are
its strengths and weaknesses? How would you transform a weakness into a
strength?
1e. Homework to Submit [one paragraph]: Further assume that the
corresponding fine for the consumer fraud is $1.2 million. If your
organization has not implemented any of the best practices in Exhibit 2.1,
the initial $1.2 million fine can be assessed a multiplier of 4.0, increasing the
fine to $4.8 million. If, on the other hand, your organization exhibits a good
faith effort to minimize unethical behaviors by implementing many of the

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best practices, the initial $1.2 million fine could be assessed a culpability
multiplier of 0.05, reducing the fine to $60,000. If some, but not all, of the
best practices have been implemented, the fine will be between these two
amounts. If you were the judge, what culpability multiplier [between 4.0
($1.2 million fine) and 0.05 ($60,000 fine)] would you use in this case?
Why?
1f. Homework to Submit:
1f1: Should Wisconsin allow employers to only employ nonsmokers
given employer-incurred costs related to smoking in Wisconsin
(such as the $1.4 billion productivity loss due to sickness and
premature death from smoking)?
1f2: Are Affirmative Action hirings and promotions (if “all else is
equal” preference is given to a minority/woman) ethical?
1f3: Should Dane County allow casino gambling at DeJope ?
1f4: Should Madison ban the sale of bottled water at public events?

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M A XIMIZING E T HIC A L BE H A VIOR IN ORG ANIZ A TIONS
5:30-6:45, 7:00-8:15; 8:30-9:30
5:30-6:45
Welcome to class – Last Time you faced an ethical dilemma?
What is Ethics?
Class Guidelines and Confidentiality Agreement
Why Be Ethical? – Competitive Advantages
Extent of Unethical Behaviors at Work
What Types of Organizations and Operational Areas have Ethical Problems?
Costs of Unethical Behaviors
Managing Morally Imperfect People (Lies)
Why do Good People Behave Unethically? -- Good Samaritan Story
Human Nature and Are Ethics Getting Better or Worse?
Favorite Inspiring Quote
7:00-8:15
My Bio
Student Info Sheets
Syllabus
Students choose Ethical Dilemma Narrative Presentation Date
Debates Class 2, 3, 4, 6
Star on homework next to debate issue you prefer most
X next to debate issue if you know you will not be in class
Capitalism
Debate Ethics of Capitalism
Business Issues/Ethical Dilemma – Invest in Gas Bank?
8:30-9:30
Federal Sentencing Guidelines
Optimal Ethics Systems Model
Total Quality Management of Ethics

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WELCOME TO CLASS
Activity:
Write down when (how long ago) was the last time you faced an ethical dilemma
Give name, company, job task, and how long ago was your last ethical dilemma
Tell students that human beings have many ethical dilemmas every day.
Step 1: Review my latest ethical dilemmas:
Getting out of bed when the alarm goes off can be an ethical dilemma! Is it right or
wrong to get out of bed immediately when the alarm goes off?
Being nice to people when you wake up may be an ethical dilemma. [If you were
particularly nice or mean to someone today, tell the students why.]
What type of coffee you drank this morning has ethical ramifications. [Was it fair trade
coffee?]
What type of clothes you wore today has ethical ramifications. [Were your clothes made
by employees with good working conditions and fair wages, or from a sweatshop?]
Step 2: Provide examples of the types of ethical issues you had to deal with when you were the
age of the students:
If traditional Undergraduates, mention having to deal with alcohol, drugs, sex, or a bad
roommate or teacher.
If MBA students, mention having to deal with an abusive boss, or changing careers, or
getting married.
Step 3: Now tell students that human beings have many ethical dilemmas every day. Indeed,
nearly every decision you make has ethical ramifications.
The decision to sit in the front row or back row may have been based on ethics.
The decision to sit next to one person and not sit next to someone else may have been
based on ethics.
The decision to take this class may have been based on ethics.
The decision to take the class with one particular professor may have been based on
ethics.

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C H APT ER 1: HUM AN NA TURE AND UNE T HIC A L BE H A VIOR IN
ORG ANI ZA TIONS
WHAT IS ETHICS?
Step 4: Define ethics
– Ethics is the set of principles you use to determine whether an action is right or wrong.
Introduce the “action sequence,” which is mentioned on page 3 of this chapter.
G O T O PA G E 5 AND RE VIE W INF ORM A TION,
W HIC H APPERS BE L O W
Action Sequence and Ethics
An action sequence consists of three factors:
(1) Motivation behind the Act
(2) The Act
(3) Consequence of the Act
Consequence of the Act
Good Bad
Motives
Good Ideal (#1) Deontologist
(Tell Truth on Confidential
Info)
Bad Consequentialist
(Greedy Capitalism)
Worst (#2)
What all this means is that we need to slow down, pay attention, and focus on what we are doing,
rather than unconsciously flow through life or just follow the crowd.
So let’s slow down and focus!

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CLASS GUIDELINES AND CON F IDENTIALITY
One of your most important assets is your integrity. Integrity is based on honesty.
We need to be honest in this class to maximize learning … honesty comes with
confidentiality – as an ethicist, people need to trust me to open up, so confidentiality
matters a lot
1a. Homework to Submit: Read “Class Guidelines and Confidentiality
Agreement” in “Student Readings: Week 1 Handouts.” Please xerox the
page, sign the agreement, and submit it to maximize the learning potential of
this class adventure.
RE VIE W H ANDOUT T H A T F O L L O WS:
Class Guidelines and Confidentiality Agreement

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C L ASS GUIDE LINES AND C ONFIDENTIA LIT Y A GRE E M ENT
During this class we will create a “circle of trust,” which educational philosopher Parker Palmer
defines as “a community that knows how to welcome the soul and help us hear its voice.”
[Parker J. Palmer, 2004, A Hidden Wholeness: The Journey Toward an Undivided Life, San
Francisco: Jossey-Bass.]
The most rewarding classes are those where participants feel free to express themselves without
being judged by others. Therefore, as a class participant I agree to:
1) Voluntarily express my own inner truth, whatever I think that might be (i.e., “I think
people in organizations are good/bad.”)
2) Listen respectfully to the inner truth spoken by others.
3) Ask participants honest and open questions that expand rather than restricts the
exploration of their own inner truth (i.e., “What did you mean when you said you felt
happy/angry?” instead of “Why didn’t you feel happy/angry? I would have!”).
4) Honor the identity and integrity of the other participants.
5) Not fix anyone, save anyone, advise anyone, or set anyone straight; when people listen to
others more deeply they tend to learn to listen more deeply to themselves.
6) Never repeat anything personal spoken by other participants outside of class.
Name (printed): _____________________________________
Name (signed): _______________________________________________
Date: ___________________________________________

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WHY BE ETHICAL?
So why be ethical? Convince me.
Tell students that you are a hard-nosed bottom-line boss who does not believe in the importance
of ethics. Ask the student to convince you to be ethical.
Some will say that you should be ethical because it is good for society, or that it is the “right”
thing to do, or that God wants you to be ethical.
Argue against these by noting that your competitors are unethical and the only way you can
make payroll this month is to fudge a little with your accounting numbers or ??? (provide your
favorite reason why you think managers behave unethically).
Push students more until someone claims that either:
It is in your self-interest to be ethical or
Ethical organizations financially outperform unethical organizations in the long-term
It is good for business!
G O T O PA G E 8 AND RE VIE W E XIBIT 1.1 –
“Exhibit 1.1: Competitive advantages of being ethical and
trustworthy.”
Competitive advantages of being
ethical and trustworthy.

Ethical organizations, compared to unethical organizations:

1. Attract and retain higher quality employees

2. Attract and retain higher quality customers

3. Attract and retain higher quality suppliers

4. Attract and retain higher quality investors

5. Earn goodwill with community members and government officials

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6. Achieve greater efficiency and decision making, based on more reliable information from
stakeholders

7. Achieve higher product quality

8. Need less employee supervision
Given All those Competitive Advantages … How are we doing in Real Life?
WHAT IS TH E EXTENT O F UNETHICAL BE HAVIORS AT WORK?
MIXED RESULTS
HERE’S THE NOT SO GOOD SIDE
W HIC H APPE ARS BE L O W
Extent of Unethical Behaviors at Work
67% of CFOs have been pressured to misrepresent corporate results.
25% of middle-managers have written a fraudulent internal report.
75% of employees have stolen at least once from their employer.
57% of administrative personnel have been asked to lie for their boss.
25% of public relations executives have lied on the job.
33% of employees calling in sick are not really sick (i.e., tending to personal needs).
52% of 3,000 survey respondents observed at least one type of misconduct in the
workplace during the past year.
48% of these misconducts violated the law.

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Only 55% of these survey respondents reported the misconduct to management.
Most common types of misconduct employees observed were:
o abusive or intimidating behavior towards employees
o lying
o employees placing their own interests over organizational interests
o violations of safety regulations
o misreporting of actual time worked
o illegal discrimination
o stealing
56 percent of MBAs admit to cheating on a class assignment during the previous
academic year.
WHAT TYPES O F ORGANIZATIONS AND OPERATIONAL AREAS HAVE
ETHICAL DILEMMAS?
EVERY TYPE – Public, Private, Government, Nonprofits
EVERY OPERATIONAL AREA – Board, Executives, Accounting, Marketing, Finance,
Support Staff, Janitors
WHAT ARE TH E COSTS ASSOCIATED WITH TH ESE UNETHICAL
BE HAVIORS?
How does all this impact the Bottom Line?
HIGH COSTS OF LITIGATION
Bad Media Exposure – Bad Public Relations
Turnover

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G O T O PA G E 15 AND RE VIE W E X HIBIT 1.2 –
“Exhibit 1.2: E E O C charges and resolutions, 1997 and 2007.”
So why is there unethical behavior in organizations when it is clear that being ethical is
good for business?
MANAGERS NE ED TO MANAGE MORALLY IMPERF ECT PEOPLE
Researchers have documented the following frequencies for telling lies:
1 to 2 lies half-truths a day
20% lie during a 10 minute conversation
10 million Americans cheat on Income Tax according to IRS
70% of doctors lie to insurance companies
25% of middle-level managers have submitted a fraudulent internal report
When was your first lie – Seth on poopy diaper
Activity: Have student reflect on why they have lied.
Step 1: Ask students “Have you ever lied to your boss, a work peer, or customer?” Lies include
being misleading, exaggeration, and white lies. How did you justify the lie?
Step 2: Put students in small groups (3 to 5) and have them discuss one of their lies – what was
the lie and how did the student justify it as being the right thing to do at the time?
Step 3: Have the group create a list of justifications which they then share with the entire class.
Step 4: Compare this list to the top 5 reasons why employees compromise ethical standards

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Top 5 Reasons Employees Give For Compromising Ethical Standards
1. Following the boss's directives (experienced by 49% of survey respondents)
2. Meeting overly aggressive business or financial objectives (48%)
3. Helping the organization to survive (40%)
4. Meeting schedule pressures (35%)
5. Wanting to be a team player (27%)
WHY DO GOOD PEOPLE BE HAVE UNETHICALLY?
2 Common Explanations are it’s a function of:
(1) Personality (we’re born this way)
(2) Environment (context)
To some degree, being “ethical” is similar to being a Good Samaritan. Why are some people
Good Samaritans and others are not?
What is the Good Samaritan Story?
Good Samaritan Research Study
Princeton Psychology Study -- Helping Behavior a function of (1) Personality, (2) Sensitivity to
Issue or (3) Time Concern
Princeton Theology seminarians invited to a preaching contest
Personality: tests conducted on
o (a) did you become seminarian to convert people or
o (b) to care for the poor [also Type A/B]
Sensitivity to Issue:
o (a) Half to give talk on Ministerial Careers and
o (b) half on the story of the Good Samaritan – Jesus story on who is your neighbor
– injured person on road ignored by rabbi and Levite (cares for Temple), but not
Samaritan (a New Yorker!)
Time Concern: Meeting is on other side of campus and

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o (a) half told they are already a late and
o (b) other half told they have twenty minutes to get over there
On path to building is an obviously hurt, moaning person on the ground leaning against a
wall
By far the biggest predictor of who did or didn’t help – TIME
M Y BE LIE F: 20% Go-getters, 60% Fence-sitters, 20% Adversarial
SO WHAT IS HUMAN NATURE? AND ARE ETHICS GETTING BETTER
OR WORSE?
Activity: Have students reflect on whether ethics are getting better or worse. There is no
right or wrong answer. The question can be the foundation for a lively discussion in small groups
or as an entire class.
Step 1: Ask students to write an answer to the following questions:
Do you believe that people are born good or bad?
Are people more ethical now compared to 10 years ago, 20 years ago, or 100 years ago?
Step 2: Put students in small groups (3 to 5) and have them discuss their answers.
Step 3: Challenge the group to reach a consensus and list the reasons that justify the group’s
answer. Sometimes no consensus is achieved, which they find interesting. In this case, the group
should jot down the major reasons why members cannot reach a consensus.
Step 4: Each group reports out to the entire class. Facilitate the discussion.
Philosophers – Wrong question –
(1) We are born “pleasure seekers” and then
(2) habituated by society (parents, friends, leaders), and then
(3) apply rationality as we age and make our own decisions
Me: EARTH IS ONE BIG “PURGATORY”
We need inspirations to filter into our guiding principles, to help us during periods of temptation.

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INSPIRING QUOTES
1b. Homework to Submit [one paragraph]: When faced with an ethical
dilemma it is good to reflect on an inspiring quote that encourages you to
make the appropriate moral decision. Pick an inspiring quote that is
meaningful to you and explain why it is.
BURE AUCRA TIC A C TIVITIES:
1) Go over my Bio
2) Students do Info Sheets
3) Review Syllabus
4) Students Sign Up for Narrative Day
5) Debate topic format
i. Put STAR next to your #1 Choice
ii. Put an X next to class if you will miss it

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C H APT ER 2: T H E E T HIC A L F OUNDA TION O F C APIT A LISM AND T H E
OPTIM A L E T HICS SYST E MS M ODE L
ADAM SMITH’S CAPITALISM AND BUSINESS ETHICS
Now let’s go big-picture and look at the ethics of capitalism –
The “Father of Capitalism” Adam Smith (1776, The Wealth of Nations)
Self-Interest is natural – Leads to Greatest Good GNP
Adam Smith (1723-1790), a Scottish philosophy professor, formulated capitalism as an
economic system ethically superior to mercantilism.
G O T O PA G ES 23-24 AND RE VIE W
INF ORM A TION, W HIC H APPE ARS BE L O W
Adam Smith’s Ethical Defense of Capitalism
Freedom and liberty are essential values.
A free people naturally pursue their own self-interests, they don’t have to be told to do so.
If provided freedom in the economic sector, people will choose to enter product and labor
markets where there is the greatest need and opportunity.
People morally self-regulate their actions based on their conscience, belief in God,
concern for the well-being of others, and reason.
A strong system of justice is essential to punish those who do not appropriately self-
regulate themselves.
Adam Smith maintained that, if given the opportunity to steal, most of us will not steal, even if
nobody is looking.
Activity: Have students reflect on if they have ever stolen.

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Step 1: As an employee, have you ever stolen from your employer? If yes, what was the
situation?
Step 2: As a customer, have you ever stolen from a company or organization? If yes, what was
the situation?
Step 3: Share these situations in small groups (3 to 5).
Activity: Have students reflect on resisting the temptation to steal.
Step 1: Think about a time when, as an employee, you could have stolen from your employer but
didn’t. Why didn’t you? Describe the situation.
Step 2: Think about a time when, as a customer, you could have stolen from a company or
organization but didn’t. Why didn’t you? Describe the situation.
Step 3: Share these situations in small groups (3 to 5).
Step 4: Develop a list of reasons why people do not steal even though they could have. Compare
these reasons to Adam Smith’s reasons.
Why We Can Trust People With Freedom
Adam Smith’s reasons why freedom does not result in everyone stealing from, or abusing, each
other:
(1) Conscience: Everyone has a conscience and our conscience tells us not to steal or abuse
others.
(2) Belief in God: People who believe in God – sense that God does not want them to steal, do
not want to hurt God’s feelings, or do not want to be punished by God in an after-life.
(3) Reason: Human beings can be reasoned with. We can be convinced with reason to restrain
ourselves from doing “bad” things, like stealing or abusing others.
(4) Fear of Prison: People do not want to go to jail.

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Debate: How Ethical is Capitalism?
Activity: Have students discuss the following: Circle the number that represents the
extent to which you believe the United States’ version of free market capitalism is ethical.
Explain your answer.
#1: Very Ethical
#2: Ethical
#3: Slightly more ethical than unethical
#4: Slightly more unethical than ethical
#5: Unethical
#6: Very Unethical.
Manage this debate using the Exhibit 6.6 “Facilitating an Ethics Dialogue Workshop”
framework:
Write answer
Take vote
Develop position rationale in small groups
Empower the minority position to speak first and challenge the majority viewpoint
Reach a conclusion
AMENDMENTS TO UNREGULATED CAPITALISM [Supplemental
Information not in the Book]
Several ethical shortcomings of unregulated capitalism have resulted in amendments to
unregulated capitalism.
Ethical Shortcomings of Unregulated Capitalism (Amendment in Parentheses)
Working Conditions (Labor Unions)
Funding nonprofit organizations (Andrew Carnegie philanthropy)
Monopolies (Sherman Anti-Trust Act)
Low Wages (Henry Ford and New Deal)
Lack of Social Security (New Deal)
Discrimination (Equal Employment Opportunity Commission)
Environmental Problems (Environmental Protection Agency)
Unsafe Workplaces (Occupational Safety and Health Administration)

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Unsafe Products (Consumer Product Safety Commission)
LET’S LOOK AT REAL-LI F E: ENRON

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1c. Homework to Submit [one chart]: Read “Merger Opportunity—1985,”
pp. 6-7; and “Skilling’s Innovative Gas Bank Idea—1990,” pp. 22-23. If you
were the CEO of Enron (p. 23), would you stay focused on natural gas
pipelines (option 1) or invest in a Gas Bank (option 2)? Why? Apply the
“Critical Thinking Decision Making Process” framework that appears in the
syllabus. Only submit your “Critical Thinking Table.” Only submit your
“Critical Thinking Table.”
Background Summary:
“Merger Opportunity—1985,” pp. 6-7:
Irv “The Liquidator” Jacobs approaches InterNorth to buy it out
InterNorth of Omaha, Nebraska ($7.5 billion, 3 times the size of HNG) approaches Ken
Lay to be a White Knight
Will pay $70 a share for stock selling at $46, a $2.4 billion price tag to buy HNG
Combined IN/HNG Natural Gas entity would have a $4.3 billion debt
Plus a $357 million greenmail payment to Jacobs for stock he already owns
This would deplete cash
Jobs would be reduced, only need 1 CEO! And HQ to be in Omaha
But Ken Lay would earn a lot, getting $70 a share for his $46 a share HNG stock, which
he has a lot of
Review Ken Lay background.
Lay accepts offer
“Skilling’s Innovative Gas Bank Idea—1990,” pp. 22-23:
Almost bankrupt 1989 due to debt
Hires consultants for new revenue streams
Jeff Skilling personality
Andy Fastow personality
1989 communism collapsed, capitalism won, internet starting, we’re in a new economy
If you were the CEO of Enron (p. 23), would you:
stay focused on natural gas pipelines (option 1) or
invest in a Gas Bank (option 2)?
Why?
Vote and Debate – Real Life: Invest in a Gas Bank
Critical Thinking Decision Making Process

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Step 1: Apply the six “Applying Ethical Theories to Decision Making” questions to obtain
relevant ethical information for each decision option.
1) Who are all the people affected by the action?
2) Is the action beneficial to me?
3) Is the action supported by my social group?
4) Is the action supported by national laws?
5) Is the action for the greatest good of the greatest number of people affected by it?
6) Are the motives behind the action based on truthfulness and respect/integrity toward each
stakeholder?
Step 2: Use this information to complete the “Critical Thinking Table” below. Begin by
summarizing the strengths and weaknesses of each option.
Step 3: Given the strengths and weaknesses, reach a conclusion and explain how you would
manage the weaknesses associated with your choice.
Critical Thinking Table
Options Option Strengths Based on
Ethical Decision Making Answers
Option Weaknesses Based on
#1:
#2:
#3:
Option Choice
Chosen Because
How to Manage
Option Weaknesses
The Ethical Decision-Making Framework questions are:
a. CEO of Enron (you/Ken Lay)
b. Enron employees
c. Enron shareholders
d. Jeff Skilling
8) Is the action beneficial to me? – Invest in the Gas Bank.
The energy market is being deregulated. This is an optimal time to innovate
because Enron would have first-mover advantages. Otherwise, new competitors
are likely to invade the traditional gas pipeline market.

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9) Is the action supported by my social group? – Invest in the Gas Bank.
Industrial associations are looking for new methods for making the market more
efficient and effective.
10) Is the action supported by national laws? – Invest in the Gas Bank.
CEOs have a legal obligation to act in the best interests of shareholders. The Gas
Bank investment could help Enron overcome its financial problems.
11) Is the action for the greatest good of the greatest number of people affected by it? –
Invest in Gas Bank.
The Gas Bank, if successful, will establish Enron as an innovative market leader,
create new sources of revenue, and ensure employee job security.
stakeholder? – Invest in Gas Bank.
Shareholders and employees are being treated fairly and management is fulfilling
its obligations.
Therefore, invest in the Gas Bank. It is to the greatest good of both employees and customers,
and respects all stakeholders.
F EDERAL SENTENCING GUIDELINES
In 1991, President George H.W. Bush issued new Federal Sentencing Guidelines with the
intention of encouraging, though not requiring, managers to implement ethical business
practices. The Federal Sentencing Guidelines are applicable to nonprofits, unions, partnerships,
trusts, and universities, as well as businesses.
The 16 best practices for an Ethics Compliance Program suggested by the Federal Sentencing
Guidelines are divided into six categories in Exhibit 2.1.
G O T O PA G ES 25-26 AND RE VIE W E XIBIT 2.1 –
“Exhibit 2.1: Best practices for ethics compliance programs.”
1d. Homework to Submit [one paragraph]: Assume someone in your
current or previous place of employment commits a consumer fraud. In the

25
last column in Exhibit 2.1, mark each best practice the organization has and
total the amount. Discuss your organization’s best practices score. What are
its strengths and weaknesses? How would you transform a weakness into a
strength?
1e. Homework to Submit [one paragraph]: Further assume that the
corresponding fine for the consumer fraud is $1.2 million. If your
organization has not implemented any of the best practices in Exhibit 2.1,
the initial $1.2 million fine can be assessed a multiplier of 4.0, increasing the
fine to $4.8 million. If, on the other hand, your organization exhibits a good
faith effort to minimize unethical behaviors by implementing many of the
best practices, the initial $1.2 million fine could be assessed a culpability
multiplier of 0.05, reducing the fine to $60,000. If some, but not all, of the
best practices have been implemented, the fine will be between these two
amounts. If you were the judge, what culpability multiplier [between 4.0
($1.2 million fine) and 0.05 ($60,000 fine)] would you use in this case?
Why?
TH E “OPTIMAL ETHICS SYSTEMS MODEL” SOLUTION
The “Optimal Ethics Systems Model” in Exhibit 2.2 provides a more detailed guide for
developing ethical employees and ethical organizations, and achieving superior performance,
based on best practices that appear in the business ethics literature.
Implementing the Optimal Ethics Systems Model significantly reduces the likelihood of an
employee engaging in unethical or illegal behaviors.
Review the model from the perspective of a manager.
G O T O PA G E 28 AND RE VIE W E XIBIT 2.2 –
“Exhibit 2.2: Optimal Ethics Systems Model.”
Hiring
Hire Ethical People (Chapter 3)
Orientation

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Codes of Ethics and Codes of Conduct (Chapter 4)
Ethical Decision-Making Framework (Chapter 5)
Training
Ethics Training (Chapter 6)
Operations
Employee Diversity (Chapter 7)
Ethics Reporting Systems (Chapter 8)
Ethical Leadership, Work Goals, and Performance Appraisals (Chapter 9)
Empowering Ethical Employees (Chapter 10)
Environmental Management (Chapter 11)
Community Outreach (Chapter 12)
TH E TOTAL QUALITY MANAGEMENT O F ETHICS
Human beings will remain morally imperfect and ethical problems will still arise. Depending on
the egregiousness of the unethical behavior, the employee should be either disciplined or fired.
These short-term solutions, however, do not address the systematic root of the ethical problem.
Why wasn’t the employee’s unethical proclivity detected earlier? Is there a problem with the
hiring process, ethics training workshops, or performance evaluations? The Total Quality
Management of Ethics framework provides a method for determining the original source of the
ethics defect.
G O T O PA G ES 30-31 AND RE VIE W TIPS AND
T E C HNIQUES
“Tips and Techniques: The Total Quality Management of Ethics.”
Activity: Have students discuss the following: Think about a particular illegal or
unethical act committed by an employee at a current or previous place of employment. In small
groups, describe the situation. Locate the original systematic failure source in the “Tips and
Techniques: The Total Quality Management of Ethics” system (i.e., was there a hiring process
failure, Code of Ethics failure, etc.?). Then develop an action plan to correct for the system
failure.

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MAKE SURE STUDENTS DID LAST HOMEWORK ASSIGNMENT, IF NOT, DO SO NOW!
1f. Homework to Submit:
1f1: Should Wisconsin allow employers to only employ nonsmokers
given employer-incurred costs related to smoking in Wisconsin
(such as the $1.4 billion productivity loss due to sickness and
premature death from smoking)?
1f2: Are Affirmative Action hirings and promotions (if “all else is
equal” preference is given to a minority/woman) ethical?
1f3: Should Dane County allow casino gambling at DeJope ?
1f4: Should Madison ban the sale of bottled water at public events?

28

29
JOB C ANDIDA T ES AND E T HICS ORIENT A TION
“All that is necessary for evil to triumph is for good men to do nothing.” Edmund
Burke, 18th
century English political philosopher
1. Screen job candidates for their ethics.
2. Describe the content found in most Codes of Ethics and Codes of Conduct.
3. Conduct an annual employee assessment of the Code of Ethics.
4. Use a systematic ethics decision-making framework to arrive at moral
conclusions.
5. Recognize warning signs that an unethical decision is approaching.
ASSIGNM ENTS
Read Collins, Essentials of Business Ethics, Chapter 3: Hiring Ethical
People (pp. 35-56), Chapter 4: Codes of Ethics and Codes of Conduct (pp.
59-75), and Chapter 5: Ethical Decision-Making Framework (pp. 77-95).
2. Journaling Homework to Submit [one sentence explanation]: What
topic did you write about in your journal and did you earn 20 points (you
did all 3 steps), 15 points (you only did 2 of the 3 steps), 10 points (you only
did 1 of the 3 steps), or 0 points (you did not compose a journal entry during
the past week)?
2a. Homework to Submit [one chart]: Read “Mark-to-Market
Accounting—1991,” pp. 48-49; “The SPE Revenue Solution—1993,” pp.

30
67-69; and “Transferring Managerial Power—1996,” pp. 88-89. If you were
the CEO of Enron (p. 89), who would you promote to COO: CEO of the
traditional gas pipeline division (option 1), Jeff Skilling, the CEO of the
highly successful Gas Bank division (option 2), CEO of the growing
international division (option 3), or a highly qualified outsider (option 4)?
Why? Apply the “Critical Thinking Decision Making Process” framework
that appears in the syllabus. Only submit your “Critical Thinking Table.”
2b. Homework to Submit [one paragraph]: Complete the “Hiring Ethical
Job Candidates” section of the “Optimal Ethics Systems Model
Organizational Check-Up” that appears in the handouts for your current or
previous employer. What was your organization’s score for Yes answers?
Discuss why your organization’s score is so high or low. How can your
organization transform one weakness into a strength?
2c. Homework to Submit [one paragraph]: Complete the “Codes of
Ethics and Conduct” section of the “Optimal Ethics Systems Model
2d. Homework to Submit [one paragraph]: Obtain your organization’s
Code of Ethics. Choose what you consider to be the 5 most important items
in the code and then create a 5 item “Code of Ethics Survey” using a “1 to 5
Likert scale” where 5=Strongly Agree (firm lives up to the Code item),
3=Neutral, and 1=Strongly Disagree, similar to Exhibit 4.4 on pages 73-74.
Evaluate your organization using the survey you created. What item has the
lowest score? How can the organization improve this ethical shortcoming?
2e. Homework to Submit [one paragraph]: Complete the “Ethical
Decision-Making Framework” section of the “Optimal Ethics Systems
Model Organizational Check-Up” that appears in the handouts for your
current or previous employer. What was your organization’s score for Yes
answers? Discuss why your organization’s score is so high or low. How can
your organization transform one weakness into a strength?
2f. Homework to Submit [one chart]: Should Wisconsin allow employers
to only employ nonsmokers given employer-incurred costs related to
smoking in Wisconsin (such as the $1.4 billion productivity loss due to

31
sickness and premature death from smoking)? Apply the “Critical Thinking
Decision Making Process” framework that appears in the syllabus.
Job Candidates and Ethics Orientation
5:30-6:45, 7:00-8:15; 8:30-9:30
5:30-6:45
Enron Dilemma
Title VII
Behaviors: Resumes, References, Background Checks, Integrity Tests
Personality Traits: Conscientiousness, Organizational Citizenship, Bullies
Interview Questions
Drug, Alcohol & Polygraph Tests
6:45-6:50 OR 6:45-7:00: First Break
6:50-8:05 OR 7:00-8:15:
Student Narratives
Codes of Ethics
Codes of Conduct
8:15-8:30: Second Break
8:30-9:30:
Ethical Decision-Making Framework
Debate Smoking Ban By Employers
ON BO ARD: Model
A C TIVIT Y: ENRON BUSINESS ISSUE
2a. Homework to Submit [one chart]: Read “Mark-to-Market
Accounting—1991,” pp. 48-49; “The SPE Revenue Solution—1993,” pp.
67-69; and “Transferring Managerial Power—1996,” pp. 88-89. If you were
the CEO of Enron (p. 89), who would you promote to COO: CEO of the
traditional gas pipeline division (option 1), Jeff Skilling, the CEO of the
highly successful Gas Bank division (option 2), CEO of the growing
international division (option 3), or a highly qualified outsider (option 4)?

32
Why? Apply the “Critical Thinking Decision Making Process” framework
that appears in the syllabus. Only submit your “Critical Thinking Table.”
Background Summary:
“Mark-to-Market Accounting—1991,” pp. 48-49:
Ken Lay approved Jeff Skilling’s innovative proposal and created a Gas Bank Division in
1990
Hired Skilling to be its CEO
Mid-1991, 35 supplier contracts and 50 customer contracts, largest Florida Power &
Light
Revenue overwhelmed by start-up costs
New York Power authority signed 23 year contract for$1.3 billion, first 10 years is fixed
Very successful, 40% revenue increase to $13.2 billion in 1990, first year of operation
Gas Bank used traditional accounting method.
Assume fixed amount of $600 million for 10 years; traditional accounting only allows
you to claim revenue upon receipt, so claim $60 million a year
Selling to public utilities, so money seems guaranteed
Skilling says this misrepresents Gas Bank’s assets, why not claim all $600 million and
adjust annually by claiming profits and losses off of the entire deal, like traders do with
their stock portfolios, which is marked to current market price, not the original price,
even though not sold yet.
Enron proposed this new accounting method to SEC, but was rejected because stock
portfolio’s evaluated by independent third party (outside investors) whereas Gas Bank
would be evaluated internally by Enron employees with competing interests
Skilling argues Arthur Andersen would provide oversight
Arthur Andersen is public auditor, agrees to sign letter supporting this new method
“The SPE Revenue Solution—1993,” pp. 67-69:
Ken Lay appealed SEC’s initial rejection and “Mark-to-Market was approved with strong
auditor oversight (Arthur Andersen)
Created cash flow problem because reported revenue was mostly projected, not actual.
Wall Street analysts developed new projection on previous reported revenue
Andy Fastow developed SPE’s; by law, (1) at least 3% had to be funded by an external
partner, and (2) had to be managed by an independent management team
SPEs funded mainly with Enron stock, to purchase assets from Enron, which also
removed debt off Enron’s books.
Outside investors were “Tier 1” investment bankers doing business with Enron.
“Transferring Managerial Power—1996, pp. 88-89:
Enron becomes the world’s largest natural gas company, high stock price, wins awards
Three internal candidates and one external candidate
Skilling threatens to quit if not promoted, accused international division CEO of
incompetence, and traditional natural gas pipeline CEO of old school
Skilling lacks hands-on cash management experience, risk-taker, impatient, arrogant

33
If you were the CEO of Enron (p. 89), who would you promote to COO:
CEO of the traditional gas pipeline division (option 1),
Jeff Skilling, the CEO of the highly successful Gas Bank division (option 2),
CEO of the growing international division (option 3), or
a highly qualified outsider (option 4)?
Why?
Vote and Debate – Real Life: Skilling is Chosen
stakeholder?
#1:
#2:
#3:
Option Choice
Chosen Because
How to Manage
Option Weaknesses

34
a. CEO of Enron (you/Ken Lay)
b. Enron shareholders
c. Job candidates
d. The internal job candidate’s division
2) Is the action beneficial to me? – Promote Skilling.
All four candidates have strengths and weaknesses. But if Skilling is not
promoted, he could quit the company and take his creative ideas and highly
skilled loyalists with him. I would now have to replace Skilling and his loyalists,
which would be very difficult.
3) Is the action supported by my social group? – Promote Skilling or one of the other two
internal divisional CEOs.
Typically, if all else is equal, organizations prefer to promote highly qualified
internal candidates.
4) Is the action supported by national laws? – Can promote any of them.
All candidates are legally acceptable.
5) Is the action for the greatest good of the greatest number of people affected by it? –
Promote Jeff Skilling or the Outsider.
Skilling has tremendous abilities; he just needs to be coached better. If Skilling
leaves, he may take his division with him. If Skilling is uncoachable, then an
outsider is needed to minimize internal damage.
stakeholder? – Promote Skilling or the Outsider.
Skilling has earned the promotion, but he has made enemies. If promoted, he
needs to be trained how to manage people and given targets to improve his
internal relationships. On the other hand, there is political bad blood between him
and the internal candidates. An outsider would provide new direction. If an
outsider is hired, each internal candidate should be counseled so that as to not
leave or seek revenge.
Therefore, consider having a long conversation with Skilling and determine his willingness to
improve his internal management skills. If he agrees, then promote Skilling. If he refuses, then
offer the job to the highly qualified outsider.

35
C H APT ER 3: HIRING E T HIC A L PE OPL E
2b. Homework to Submit [one paragraph]: Complete the “Hiring Ethical
Job Candidates” section of the “Optimal Ethics Systems Model
Activity: Anyone score 6 “Yes”? How about 5, 4, 3, 2, 1, 0?
RE VIE W H ANDOUT, W HIC H APPE ARS BE L O W
HIRING E T HIC A L JOB C ANDIDA T ES Yes Sometimes No
1. The importance of ethics is highlighted in our job listings.
2. Reference checks are conducted with a potential
employee’s former employer or superior.
3. Background checks, integrity tests, and personality tests are
conducted with potential employees.
4. Job finalists are asked to respond orally to potential ethical
dilemmas.
5. Managers take into consideration a potential employee’s
ethics when making a final hiring decision.
6. When appropriate, alcohol, drug, and polygraph tests are
conducted.
Subtotal for Hiring Ethical Job Candidates, items 1 through 6
TH E 5-STEP ETHICS JOB SCRE EN PROCESS
G O T O PA G E 37 AND RE VIE W E X HIBIT 3.1 --
“Exhibit 3.1: Five-step ethics job screen.”
STEP 1: LEGAL GROUND RULES
Don’t violate Title VII of the Civil Rights Act!

36
Gather and use information in a way that does not discriminate against job candidates based on
their race, color, religion, gender, national origin, age, or disability.
The law does not apply to:
Religious organizations or
Organizations with less than 15 employees. A manager of a business with ten employees
can refuse to hire men (or women), Christians (or any other religion), or disabled people
and not be in violation of federal discrimination law.
There are two other major exemptions to Title VII:
If a direct relationship exists between a protected class and an inability to perform the job
task
If the discrimination relates to the “essence” or “central mission” of the employer’s
business, if it is a bona fide occupational qualification (i.e., a Chinese person applying for
a job as a waiter in a Chinese restaurant)
G O T O PA G E 39 AND RE VIE W E X HIBIT 3.2 --
“Exhibit 3.2: Job Selection Rule Checklist.”
Exhibit 3.2 provides a checklist for determining the viability of a job selection rule. A
“Yes” response to any of the three rules could result in a discrimination lawsuit.
Integrity and personality test vendors should be required to affirm in writing that, based
on use by other clients, the instrument has been proven not to violate any of the three
rules.
Does your organization’s employee profile proportionally reflect the local labor market’s
gender, racial, ethnic, and religious diversity? If not, why not? What changes should the
organization make to achieve this outcome?
o Review Disparate Impact: Testing for sports or height (excludes many women)
Tell story about recruiting a minority candidate – Chuck Taylor for Dean, School of Business

37
STEP 2: BE HAVIORAL IN F ORMATION
Four recruiting tools can provide useful behavioral information about a job candidate’s ethics:
Resumes, Reference Checks, Background Checks, and Integrity Tests.
Review chart below for strengths and concerns regarding each of these four methods.
“Behavioral Information Sources: Strengths and Concerns”
Behavioral Information Sources: Strengths and Concerns
Type Strengths Concerns
Resumes Documents pervious work experience
and accomplishments
Documents educational experience
and accomplishments
44% contain lies about work histories
41% contain lies about education
41% contain lie about licenses or other
credentials
Reference
Checks
References have personal experience
working with the job applicant
References are legally protected from
a defamation lawsuit as long as the
information being conveyed is
truthful
Many references listed have a
favorable bias toward job applicant
Some references are unwilling to share
negative information due to lawsuit
concerns
Previous supervisor or subordinate are
not often listed
Background
Checks
Wide-range of information is easily
available on Internet
Can verify that information on
resumes is accurate
Internet information can be inaccurate
Information obtained that is not related
to job performance can create a
negative bias
Integrity Tests Documents applicants previous
illegal actions and opinions about
ethics issues
Favorable self-report bias
Liars can provide false information
and score higher than conscientious
applicants

38
For reference checks …
Best person to speak to – former supervisor … but …
Many now just give name, rank, years of employment … so …
Ask supervisor “Would you hire this person again?”
Activity [IF A Y OUNG GROUP]: Have students discuss the following: Assume that
you are a job recruiter. Conduct an Internet search of your name and review your MySpace or
Facebook pages. List the positive and negative information you would now have about this job
candidate. What changes should this person make to his or her MySpace or Facebook entries that
would honestly present a more positive image to job recruiters?
STEP 3: PERSONALITY TRAITS
Obtain measures for personality traits such as
(1) conscientiousness
(2) organizational citizenship behavior
(3) social dominance and
(4) bullying
Review Handout for survey items that measure “conscientiousness,” which correlates highly
with ethical performance.
Activity: Have students discuss the following: The “conscientious” survey items are the
best predictor of a person’s ethics and job performance. Review the survey items in Handout.
What percent of the 10 “positively stated items” describe you? What percent of the 9 “negatively
stated items” describe you? Discuss these survey findings.
“SURVEY ITEMS MEASURING ‘CONSCIENTIOUSNESS’”

39
Survey Items Measuring “Conscientiousness”
Positively Stated Items Negatively Stated Items
Accomplish my work on time Often forget to put things back in their proper place
Do things according to a plan Neglect my duties
Am careful to avoid making mistakes Take tasks too lightly
Keep my checkbook balanced Leave my work undone
Like to plan ahead Do not plan ahead
Return borrowed items Put off unpleasant tasks
Am often late for work
STEP 4: INTERVIEW QUESTIONS
Interview job finalists about their responses to ethical dilemmas experienced at previous
workplaces, and how they would respond to ethical dilemmas experienced by current employees.
The ethics questions about previous work experiences must be job-related, and a standardized
format followed, to avoid protected class biases.
Sample Ethics Questions for Job Finalists
Have you ever observed an employee or customer stealing product? How did you
respond?
Have you ever observed an employee sexually harassing another employee or customer?
How did you respond?
Have you ever observed anything at work, or done anything at work, that violated
industry standards or the law? What was it? How did you respond?
Have you ever been asked by a boss, co-worker, customer, or supplier to do something
unethical? How did you respond?
Have you ever observed anything at work, or done anything at work, that bothered your
conscience? What was it? How did you respond?

40
Activity [IF WE DON’T DO ETHICAL NARRATIVES]: Have students discuss the
following: Assume you are applying for a job and the interviewer asked you the following
questions. How would you respond?
1. Have you ever observed an employee or customer stealing product? How did
you respond?
2. Have you ever observed an employee sexually harassing another employee or
customer? How did you respond?
3. Have you ever observed anything at work, or done anything at work, that
violated industry standards or the law? What was it? How did you respond?
4. Have you ever been asked by a boss, co-worker, customer, or supplier to do
something unethical? How did you respond?
5. Have you ever observed anything at work, or done anything at work, that
bothered your conscience? What was it? How did you respond?
How do you know if person is lying?
Which of the following is the best predictor that a job candidate is lying
in response to an ethics question:
a. Avoiding eye contact
b. A long pause before answering
c. Shaking a leg
d. Rubbing hands
e. None of the above* (p. 51)
STEP 5: OTH ER TESTS – ALCOHOL, DRUG, AND POLYGRAPH TESTS
Where appropriate, conduct alcohol, drug, and polygraph tests as a final test of the job finalist’s
integrity.
What test could most accurately detect that a job applicant last smoked
marijuana two months ago?
A. Urine test
B. Hair follicle test* (p. 54)
C. Blood test
D. Saliva test
E. Questionnaire

41
“Alcohol, Drug, and Polygraph Testing”
Alcohol, Drug, and Polygraph Testing
Testing For Information Detection Methods
Alcohol 6.6% of full-time employees are heavy
drinkers
15% of the workforce is impaired by
alcoholism during work at least once a year
Breathalyzer
Urine tests
Blood tests
Biomarkers
Alcohol Use Disorders
Identification Test (AUDIT)
Drugs 9.4 million working Americans use illicit
drugs
Workplace substance abuse costs employers
$120 billion a year
Urine tests
Blood tests
Hair tests
Saliva tests
Lies Can be used by pharmaceutical and security
companies
Employee Polygraph Protection Act of 1988
prohibits pre-employment polygraph tests for
most other public and private companies
Accuracy rates range from 81% to 98%
Respiration
Sweat gland activity
Blood pressure

42
C H APT ER 4: C ODES O F E T HICS AND C ODES O F C ONDUC T
2c. Homework to Submit [one paragraph]: Complete the “Codes of
Ethics and Conduct” section of the “Optimal Ethics Systems Model
C ODES O F E T HICS AND C ONDUC T Yes Sometimes No
7. We have a Code of Ethics, or Values Statement, that
articulates ethical expectations at work.
8. We have a Code of Conduct that provides specific
examples of acceptable and unacceptable behaviors.
9. The Codes of Ethics and Conduct are publicly displayed
and available.
10. Managers vocally support our Codes of Ethics and
Conduct.
11. All employees are trained to implement our Codes of
Ethics and Conduct.
12. All employees participate in an annual ethics code survey
to determine how well our organization is living up to the
code.
Subtotal for Codes of Ethics and Conduct, items 7 through 12
TH E DI F F ERENCE BETWE EN A CODE O F ETHICS AND A CODE O F
CONDUCT
A Code of Ethics and a Code of Conduct are two unique documents.
A Code of Ethics describes broad ethical aspirations, like the Ten Commandments.

43
A Code of Conduct describes acceptable behaviors for specific situations that are likely
to arise, like the Deuteronomic Code found in Chapters 12 through 26 in Deuteronomy
(Old Testament book in the Bible).
G O T O PA G ES 64-65 AND RE VIE W E X HIBIT 4.1 -
“Exhibit 4.1: Code of Ethics.”
The New York Stock Exchange recommends that a Code of Conduct address seven topics.
G O T O PA G ES 65-66 AND RE VIE W
INF ORM A TION, W HIC H APPE ARS BE L O W
Code of Conduct Content
The New York Stock Exchange recommends that a Code of Conduct address seven topics:
1. Conflicts of Interest. Avoid conflict or potential conflict between an individual’s personal
interests and those of the organization.
2. Corporate Opportunities. No use of corporate information or assets for personal gain.
3. Confidentiality. No disclosure of nonpublic information that could benefit competitors or
harm the organization.
4. Fair Dealing. Abstain from any unfair treatment of customers, suppliers, competitor, and
employees, such as manipulation, concealment, abuse of privileged information, and
misrepresentation of material facts.
5. Protection and Proper Use of Assets. Use assets efficiently and avoid theft, carelessness,
and waste.
6. Compliance with Laws, Rules, and Regulations. Proactively promote compliance.
7. Encouraging the Reporting of Any Illegal or Unethical Behavior. Proactively promote
ethical behavior and not allowing retaliation for reports made in good faith.
IMPORTANCE O F CODE EXPECTATIONS AND AWARENESS

44
The organization’s leadership team must communicate the importance of these codes to
employees and make them readily available because:
1. Managers are simply too busy with their other job duties to respond to all the ethical
issues experienced daily by nonmanagement employees.
2. Many managers are uncomfortable addressing ethical issues and unreceptive to negative
information.
3. Some managers may be bad role models.
E F F ECTIVE CODES
Activity: Does your employer have a code of ethics? Describe how your employer
educated you about it.
Creating a Code of Ethics and Conduct must be followed by effective implementation.
Effectively implementing a Code of Ethics and Code of Conduct:
a. Increases employee job satisfaction* (p. 69)
b. Increases employee turnover
c. Does not impact how employees assess organizational ethics
d. Fosters hypocrisy
e. All of the above
There are six attributes of effective implementation.
W HIC H APPE ARS BE L O W [NO T E: A L L APPE ARS AS W ORDS
IN A SENT ENC E OR PARA GRAPH]
Effective implementation of a Code of Ethics and Conduct requires:
Support from senior managers
Employee training

45
Management enforcement
Wide distribution
Employee protection from retribution for reporting a violation
Annual assessment
Employees are more likely to report a code violation if the person
committing the violation was:
A. a friend
B. a star employee
C. the employee’s manager
D. given a previous warning* (p. 70)
E. never given a previous warning
ANNUAL CODE O F ETHICS ASSESSMENT
The last phase of implementation is probably the most important – use the code as an
organizational assessment tool. Use the employee feedback as the basis for continuous
improvement changes.
That nice Code in Exhibit 4.1 belonged to … ENRON!
G O T O PA G E 71 AND RE VIE W E X HIBIT 4.2 -
“Exhibit 4.2: Code of Ethics employee assessment.”
It is relatively easy to transform a Code of Ethics into a 5-point Likert scale survey for employee
assessment purposes.
“Exhibit 4.3: Code of Ethics.”

46
Exhibit 4.3 is a Code of Ethics that describes an organization’s five core values.
G O T O PA G ES 73-74 AND RE VIE W E X HIBIT 4.4 -
“Exhibit 4.4: Code of Ethics survey.”
Exhibit 4.4 transforms the Code of Ethics into a survey instrument. The survey differentiates the
evaluation of managers from nonmanagement employees because of their different
responsibilities and activities.
2d. Homework to Submit [one paragraph]: Obtain your organization’s
Code of Ethics. Choose what you consider to be the 5 most important items
in the code and then create a 5 item “Code of Ethics Survey” using a “1 to 5
Likert scale” where 5=Strongly Agree (firm lives up to the Code item),
3=Neutral, and 1=Strongly Disagree, similar to Exhibit 4.4 on pages 73-74.
Evaluate your organization using the survey you created. What item has the
lowest score? How can the organization improve this ethical shortcoming?
Activity: Using Survey Handout Below of 5 Dominican Values for Edgewood College,
Evaluate how well our organization lives up to this Code of Ethics using a “1 to 5 Likert scale”
where 5=Strong Agree (firm lives up to the Code), 3=Neutral, and 1=Strongly Disagree. How
can the organization improve an ethical shortcoming?
The 5 Dominican Values: Truth, Justice, Compassion, Partnership, Community
G O T O NE X T PA G E AND RE VIE W H ANDOUT,
Living Up To The Values Statement
Instructions: Please use the 1-5 scale below to assess how well each of the following statements
exemplifies students and faculty. The more honest you are the more helpful the information you
will receive. First assess the behavior of students, and then faculty.
1=Strongly Disagree; 2=Disagree; 3=Neither Agree nor Disagree; 4=Agree; 5=Strongly Agree
SD D N A SA

47
Students
Are honest and tell the truth [truth] 1 2 3 4 5
Are fair when dealing with others [justice] 1 2 3 4 5
Demonstrate concern others [compassion] 1 2 3 4 5
Provide help to others when needed [partnership] 1 2 3 4 5
Exhibit “school spirit,” a sense of belonging to the school [community] 1 2 3 4 5
Students Subtotal -- Add the five scores and divide by five:
Faculty
Are honest and tell the truth [truth] 1 2 3 4 5
Are fair when dealing with others [justice] 1 2 3 4 5
Demonstrate concern others [compassion] 1 2 3 4 5
Provide help to others when needed [partnership] 1 2 3 4 5
Exhibit “school spirit,” a sense of belonging to the school [community] 1 2 3 4 5
Faculty Subtotal – Add the five scores and divide by five:
Assessment of Students
1) How do students live up to the company’s Values Statement? (choose just one area)
2) How do students fall short of living up to the company’s Values Statement? (choose just one
area)
3) How can the college improve the shortcoming noted in #2? (provide one or two strategies)
Assessment of Faculty
4) How does faculty live up to the company’s Values Statement? (choose just one area)
5) How does faculty fall short of living up to the company’s Values Statement? (choose just
one area)
6) How can the college improve the shortcoming noted in #5? (provide one or two strategies)

48
C H APT ER 5: E T HIC A L DE CISION-M A K ING FRA M E W OR K
2e. Homework to Submit [one paragraph]: Complete the “Ethical
Decision-Making Framework” section of the “Optimal Ethics Systems
Model Organizational Check-Up” that appears in the handouts for your
current or previous employer. What was your organization’s score for Yes
answers? Discuss why your organization’s score is so high or low. How can
your organization transform one weakness into a strength?
Activity: Anyone score 3 “Yes”? How about 2, 1, 0?
E T HIC A L DE CISION-M A K ING Yes Sometimes No
13. Ethics is an important consideration in our decision-
making process.
14. Employees are trained to use an ethical decision-making
framework to help them derive moral answers when issues
arise.
15. Employees are comfortable engaging each other in an
ethics discussion when contentious issues arise.
Subtotal for Ethical Decision-Making, items 13 through 15
TH E ETHICS DECISION-MAKING FRAMEWORK
The Rotary’s Four-Way Test, Raytheon’s Ethics Quick Test, and the Josephson Institute’s Ethics
Questions are very helpful lists of questions, but not philosophically systematic.
Rotary [p. 78]:
1. Is it the TRUTH?
2. Is it FAIR to all concerned?
3. Will it build GOODWILL and BETTER FRIENDSHIPS?
4. Will it be BENEFICIAL to all concerned?
Philosophers have been debating the ranking of ethical theories for more than two thousand
years.

49
Review Exhibit 5.1, which provides an ethics decision-making framework that parallels
Lawrence Kohlberg’s stages of moral reasoning. This ranking of ethical principles can be found
in all cultures. The six question framework can help managers reach a moral conclusion
regarding the rightness or wrongness of any decision.
“Exhibit 5.1: An ethics decision-making framework.”
The five ethical theories are ordered in Exhibit 5.2 from the most basic to the most important.
“Exhibit 5.2: Five ethical theories.”
Egoism (Question #2) is the most basic ethical theory and
Deontology (Question #6) is considered the most important and demanding ethical
theory.
Utilitarianism: Consequences, Outcomes, General Welfare
Deontology: Do No Harm! Sainthood!
Which way do you lean?
Activity: Have students discuss the following: Assume an out of control trolley car is
hurtling down a street. Five people working on the track are in its path and about to be killed.
You can save five lives by pulling a lever that will divert the trolley to an alternative track.
Unfortunately, one worker is on the alternative track, so pulling the lever would kill him. Is it
ethical to pull the lever? Explain why.
A deontologist would not pull the lever. All lives are of equal value and pulling the lever
would be participating in a moral wrong – killing an innocent person.
A utilitarian, on the other hand, would pull the lever because, although one innocent
person would be killed, five other lives would be saved.

50
Researchers report that most people agree with the utilitarian moral assessment of this
situation.
For the Utilitarians:
Activity: Have students discuss the following: Now assume that you are standing on a
bridge when the runaway trolley takes aim at the five people working on the track.
Unfortunately, the only nearby heavy object that could stop the trolley is a very obese person
standing next to you. You are thin, yet strong, and throwing the obese person over the bridge will
stop the trolley. Is it ethical to throw the obese person in the path of the trolley? Explain why.
Researchers report that utilitarians now hesitate, not wanting to physically move an
innocent person in harm’s way.
PERSUADING OTH ERS
After applying the ethical decision-making framework, two employees may still sincerely
disagree about what is the ethically correct action to take.
When this happens in organizations, the person with higher status or power tends to get his or her
way.
A healthier approach is for people to listen carefully to each other and then try to persuade each
other. After listening carefully, categorize the other person’s response in terms of one of the five
ethical theories. Then reframe the analysis using the other person’s ethical theory.
TEN “ETHICAL HAZARD APPROACHING” SIGNS
Michael Josephson describes ten common rationalizations for unethical acts.
“Exhibit 5.3: Ten “ethical hazard approaching” signs.”
Activity: Have students do the following: Think of the last time you heard someone in
your organization state one of the ten “Ethical Hazard Approaching” comments in Exhibit 5.3.
Which of the ten justifications was it? Describe the situation. What alternative action could the
person have taken to generate a more ethical outcome?

51
2f. Homework to Submit [one chart]: Should Wisconsin allow employers
to employ only nonsmokers given employer-incurred costs related to
smoking in Wisconsin (such as the $1.4 billion productivity loss due to
sickness and premature death from smoking)? Apply the “Critical Thinking
Decision Making Process” framework that appears in the syllabus.
Debates: Current and future leaders must be well-informed about both sides of contentious
public issues. We will debate four topics during the semester. Twenty-five percent of the
students will be assigned each topic, with half defending the issue and the other half opposing
the issue. Only students debating the issue have to read the associated readings. Everyone else
should simply rely on their intuitive reactions to the issue. These debates are not graded to
minimize anxieties. The format of each debate is as follows:
2 minute – “Yes” and “No” teams organize remarks
5 minutes – “Yes” Team argues in favor of the proposition
5 minutes – “No” Team argues in opposition to the proposition
2 minutes – “Yes” Team responds to points raised by “No” Team
2 minutes – “No” Team responds to points raised by “Yes” Team
14 minutes – Both teams respond to questions raised by other students

52

53
E T HICS AND DIV ERSIT Y TRAINING
“What is it that needs to be done, that you can do something about, and won’t get
done unless you do it? Then do it!” Buckminster Fuller
1. Conduct seven types of ethics training workshops.
2. Assess the ethics training workshop.
3. Describe five competitive advantages of diversity.
4. Conduct a variety of diversity workshops.
5. Manage different communication styles.
ASSIGNM ENTS
Read Collins, Essentials of Business Ethics, Chapter 6: Ethics Training (pp.
97-124) and Chapter 7 (pp. 127-151).
3. Journaling Homework to Submit [one sentence explanation]: What
topic did you write about in your journal and did you earn 20 points (you
did all 3 steps), 15 points (you only did 2 of the 3 steps), 10 points (you only
did 1 of the 3 steps), or 0 points (you did not compose a journal entry during
the past week)?
3a. Homework to Submit [one chart]: Read “SPE Investments—1997,”
pp. 114-115 and “Checks and Balances—1997,” pp. 131-133. If you were
the lead external auditor engagement partner on the Enron account (p. 132),
would you: risk losing the Enron account by requiring that Fastow and
Causey follow more rigorous accounting methods (option 1) or risk your
professional license by allowing Fastow and Causey to use aggressive

54
accounting methods (option 2)? Why? Apply the “Critical Thinking
Decision Making Process” framework that appears in the syllabus. Only
submit your “Critical Thinking Table.”
3b. Homework to Submit [one paragraph]: Complete the “Ethics
Training” section of the “Optimal Ethics Systems Model Organizational
Check-Up” that appears in the handouts for your current or previous
employer. What was your organization’s score for Yes answers? Discuss
why your organization’s score is so high or low. How can your organization
transform one weakness into a strength?
3c. Homework to Submit [one paragraph]: Who receives ethics training
in your organization (everyone or just certain departments or job
classifications)? How often is ethics training offered? What is the content of
the ethics training workshops? What are the strengths and weaknesses of the
current ethics training? How can your organization transform one weakness
into a strength?
3d. Homework to Submit [one paragraph]: Complete the
“Machiavellianism” survey in the handouts. What was your score? Do the
results adequately describe you? What are the strengths and weaknesses of
your Machiavellian personality?
3e. Homework to Submit [one paragraph]: Complete the “Employee
Diversity” section of the “Optimal Ethics Systems Model Organizational
3f. Homework to Submit [one chart]: Are Affirmative Action hirings and
promotions (if “all else is equal” preference is given to a minority/woman)
ethical? Apply the “Critical Thinking Decision Making Process” framework
that appears in the syllabus.

55
E T HICS AND DIV ERSIT Y TRAINING
5:30-6:45; 7:00-8:15; 8:30-9:30
5:30-6:45
Enron
Ethics Training
Facilitation
Workshop Options
6:45-7:00: First Break
7:00-8:15:
Narratives
Diversity Training
Layers of Diversity
Problems and Solutions
Workshop Options
8:15-8:30: Second Break
8:30-9:30:
Communication Style
Debate Affirmative Action

56
A C TIVIT Y: ENRON BUSINESS ISSUE
3a. Homework to Submit [one chart]: Read “SPE Investments—1997,”
pp. 114-115 and “Checks and Balances—1997,” pp. 131-133. If you were
the lead external auditor engagement partner on the Enron account (p. 132),
would you: risk losing the Enron account by requiring that Fastow and
Causey follow more rigorous accounting methods (option 1) or risk your
professional license by allowing Fastow and Causey to use aggressive
accounting methods (option 2)? Why? Apply the “Critical Thinking
Decision Making Process” framework that appears in the syllabus. Only
submit your “Critical Thinking Table.”
Background Summary:
“SPE Investments—1997,” pp. 114-115:
Ken Lay promoted Jeff Skilling to be CEO of Enron
Skilling promoted Andy Fastow to Vice President of Treasury and Business Funding,”
with goal of raising $20 billion a year in capital.
Fastow creates new SPE called RADR to buy Enron’s wind farms
Fastow’s wife (Leah) loans Michael Kopper, Fastow’s protégé, $419,000 to give to his
domestic partner to create “Friends of Enron” to invest in RADR
Fastow would receive RADR profits through multiple gift checks and donations to the
Fastow Foundation
“Checks and Balances—1997,” pp. 131-133:
David Duncan, 38 year old Arthur Andersen partner, becomes lead auditor on the Enron
account in 1997
Rick Causey, now Enron CAO, was Duncan’s former boss at Andersen; still friends
Duncan known for being a strong client advocate
Duncan’s annual bonus based on 20% increase in client fees
Carl Bass, a senior Andersen accountant on Duncan’s audit team, concludes Enron’s
aggressive accounting methods results in inappropriately booking income
Bass tells Duncan not to sign off on 1997 fourth quarter audited statements until Enron
applies more rigorous accounting methods, which Wall Street would interpret negatively
Fastow threatens to change accounting firms if Duncan does not sign the statements
If you were the lead external auditor engagement partner on the Enron account (p.
132), would you:
risk losing the Enron account by requiring that Fastow and Causey follow
more rigorous accounting methods (option 1) or

57
risk your professional license by allowing Fastow and Causey to use
aggressive accounting methods (option 2)?
Why?
Vote and Debate – Real Life: Duncan ignores Bass and signs
stakeholder?
#1:
#2:
#3:
Option Choice
Chosen Because
How to Manage
Option Weaknesses
a. Lead external auditor engagement partner (you/David Duncan)
b. Carl Bass
c. Arthur Andersen partners

58
d. Andy Fastow
e. Rick Causey
f. Enron shareholders
2) Is the action beneficial to me? – Can go either way.
a. Be More Rigorous. If Enron’s methods violate the law I can lose my license.
b. Accept Aggressive Methods. Enron is my only client and if I lose this account I
will not earn a bonus nor get promoted.
3) Is the action supported by my social group? – Be More Rigorous.
Bass has objected to Enron’s aggressive methods, and many other accountants
would most likely object too.
4) Is the action supported by national laws? – Be More Rigorous.
External auditors have a legal obligation to convey truthful financial information
to shareholders. Enron’s aggressive methods of accounting are deceptive.
5) Is the action for the greatest good of the greatest number of people affected by it? – Be
More Rigorous.
Enron’s aggressive accounting methods can deceive shareholders. If Enron
continues along this path costly litigation might be filed.
stakeholder? – Be More Rigorous.
External auditors have an obligation to shareholders and the accounting
profession to certify truthful financial statements. An oversight partner has
questioned Enron’s accounting and his opinion needs to be respected.
Therefore, demand that Fastow and Causey follow more rigorous accounting methods. Explain
to Fastow and Causey that other external auditing companies are likely to reach a similar
conclusion in hopes that they will not change accounting firms. Carefully explain your concerns
to Enron’s Board of Directors if Fastow and Causey decide to change accounting firms.
Document all of your concerns and gain Carl Bass’s support to help explain to other Andersen
partners why you may lose your only client, Enron.

59
REMINDER: GOAL IS CREATING A HIGH PERMORMING ETHICAL ORGANIZATION
Already looked at how to determine the ethics of job candidates
and ethics orientation with ethics codes and an ethical decision making process
C H APT ER 6: E T HICS TRAINING
3b. Homework to Submit [one paragraph]: Complete the “Ethics
Training” section of the “Optimal Ethics Systems Model Organizational
E T HICS TRAINING Yes Sometimes No
16. All employees receive ethics training annually.
17. The ethics workshops are facilitated by someone our
employees trust.
18. The workshops examine real-life work-related situations
that are linked back to the Code of Ethics or Code of Conduct.
19. Employees share their real feelings with each other during
our ethics workshop.
20. Employees are comfortable engaging each other in an
ethics discussion when contentious issues arise during our
workshops.
21. Employees understand the competitive advantages of
being ethical and how being ethical impacts organizational
performance.
Subtotal for Ethics Training, items 16 through 21
Benefits of Training
Researchers report that people employed in organizations with formalized ethics training have
more:
Positive perceptions about their organization’s ethics and

60
Greater job satisfaction* (p. 98)
EXTENT O F ETHICS TRAINING
Researchers report that people employed in organizations with formalized ethics training have
more positive perceptions about their organization’s ethics and greater job satisfaction.
How extensive?
In a 2004 survey of publicly traded companies, 68 percent provided ethics training.
In a 2005 survey of Human Resource professions, those most likely responsible for
managing the training, only 32 percent reported that their organizations offered ethics
training.
More than 80 percent of city governments provide ethics training for employees.
A law passed in 2004 by the Illinois legislature requires that all state employees receive
annual, computer-based, ethics training.
Many states mandate that continuing education courses for accountants and lawyers
include an ethics component.
All members of the National Association of Realtors must complete ethics training
courses.
Professional organizations, such as the AICPA, provide ethics resources on their
websites, including a list of disciplinary actions.
WHO TO TRAIN
Ethics training should be conducted throughout the organization, ranging from the CEO and
Board of Directors to the janitor.
Both new and long-term employees need ethics training.
Long-term employees require unique attention because they significantly shape the
organization’s ethical tone.
WEB-BASED ETHICS TRAINING
According to one survey, companies conduct more than 90% of their ethics training through e-
learning programs.

61
Internet ethics training programs should supplement, not replace, the most effective ethics
training method – facilitator guided face-to-face interactions and group activities.
F ACILITATING AN ETHICS DISCUSSION
Create a safe learning environment by choosing someone the participants trust to facilitate the
ethics training workshop.
Some employees don’t trust:
Boss
HR Vice President
Therefore:
Have unit elect a facilitator they trust
Consultant
ETHICS TRAINING OPTIONS
“Exhibit 6.1: Ethics training workshop options.”
3c. Homework to Submit [one paragraph]: Who receives ethics training
in your organization (everyone or just certain departments or job
classifications)? How often is ethics training offered? What is the content of
the ethics training workshops? What are the strengths and weaknesses of the
current ethics training? How can your organization transform one weakness
into a strength?
Activity:
How many do ethics training?
What do you do?
Does it work?
Review Exhibit 6.1 which lists ten ethics training options.
G O T O PA G ES 101-102 AND RE VIE W E X HIBIT
6.1 -

62
CODE O F ETHICS ASSESSMENT TRAINING
Employees should annually assess the organization’s ethical performance based on its Code of
Ethics. A 9-step process for conducting this workshop was previously discussed in Chapter 4
(Exhibit 4.2).
CODE O F CONDUCT CONTENT TRAINING
Use a game format to engage the minds of employees when educating them about the Code of
Conduct’s content:
Jeopardy
Who Wants to Be a Millionaire
Who is the organization’s Ethics Officer?
The next round could be about the law:
Which one of the following is an appropriate reason for rejecting a job applicant: A) age,
B) religion, C) gender, D) physical disability, or E) inability to perform the required task?
CODE O F CONDUCT VIOLATIONS AND OUTCOMES TRAINING
Design a workshop educating employees about the types of unethical activities that have
previously occurred within the organization or industry, and how the guilty person was
ultimately punished.
The United States Department of Defense maintains an ongoing list of ethical violations and
corresponding punishments for use in ethics training programs. The crimes, and corresponding
punishments, include:
Authorized purchase of non-work related clothing: Reassigned
Showed police government ID to avoid ticket: Demoted
Romantic relationship with government contractor: Reassigned
Obtained free auto repairs from supplier: Fired

63
“Exhibit 6.2: ‘Match the bribe to the penalty’ exercise.”
APPLYING TH E CODE O F CONDUCT TO SPECI F IC SITUATIONS
TRAINING
Coca-Cola’s ethics training includes reviewing the company’s Code of Business Conduct and
determining whether several real-life scenarios are in accordance with, or violate, the code.
Coca-Cola’s Code of Business Conduct exercise appears in Exhibit 6.3.
6.3 -
“Exhibit 6.3: Coca-Cola’s Code of Business Conduct exercise.”
CREATING BUSINESS ETHICS SCENARIOS F OR DISCUSSION
TRAINING
The most meaningful ethical issues to explore are those employees observe, experience, or hear
about while employed either at their current organization or a previous employer.
This workshop can also serve as a team building exercise.
6.4 -
“Exhibit 6.4: Ethical dilemma narrative exercise.”

64
“Exhibit 6.5: ‘Sick leave?’ ethical dilemma narrative.”
APPLYING TH E ETHICS DECISION-MAKING FRAMEWORK TRAINING
“Exhibit 6.6: Facilitating an ethics dialogue workshop.”
Activity: Use format in Exhibit 6.6 to facilitate the “Sick Leave” dilemma on page 110.
ETHICAL HAZARD APPROACHING TRAINING
If you did not do this activity for Chapter 5, Michael Josephson describes ten common
rationalizations for unethical acts.
Activity: Have students do the following: Think of the last time you heard someone in
your organization stated one of the ten “Ethical Hazard Approaching” comments in Exhibit 5.3.
What was it? Describe the situation. What alternative action could the person have taken to
generate a more ethical outcome?
PERSONALITY ANALYSIS TRAINING
A host of personality surveys provide useful information, including:
Conscientiousness
Organizational Citizenship Behavior
Social Dominance Orientation
Locus of Control
Machiavellianism
Conscientiousness, Organizational Citizenship Behavior, and Social Dominance Orientation
If you did not do this activity for Chapter 3, obtain measures for personality traits such as
conscientiousness, organizational citizenship behavior, and social dominance and bullying.
Review survey items in Week 2 handouts that measure “conscientiousness,” which correlates
highly with ethical performance.

65
Activity: Have students discuss the following: The “conscientious” survey items are the
best predictor of a person’s ethics and job performance. Review the survey items in Week 2
Handout. What percent of the 10 “positively stated items” describe you? What percent of the 9
“negatively stated items” describe you? Discuss these survey findings.
Locus of Control
Locus of control refers to whether individuals believe:
(1) they are in control, or responsible for, the events in their lives (internal locus of
control), or
(2) the events in their lives are the result of things in their environment that are beyond
their control (external locus of control).
Note: Complete the “Locus of Control” survey available at
www.ballarat.edu.au/ard/bssh/psych/rot.htm (see Footnote #16). Do the results adequately
describe you? What are the strengths and weaknesses of your locus of control personality?
L O CUS O F C ONTRO L SURV E Y*
Evaluate the following statements about your beliefs by circling “Yes” or “No.” If you want to answer
both “Yes” and “No,” think about whether your answer is just a little more one way than the other. If you
would assign a weighting of 51 percent to “Yes” and 49 percent to “No,” then circle “Yes.” There are no
“right” or “wrong” answers. The more honest you are the more helpful the information you will receive.
Then complete the scoring key on the next page.
Yes No 1. Most problems will solve themselves if you just don’t fool with them.
Yes No 2. You can stop yourself from catching a cold.
Yes No 3. Some people are just born lucky.
Yes No 4. Success on work projects or school means a great deal to me.
Yes No 5. I am often blamed for things that just aren’t my fault.
Yes No 6. If somebody works hard he or she will be successful.
Yes No 7. Most of the time it doesn’t pay to try hard because things rarely turn out right anyway.
Yes No 8. If things start out well in the morning it’s going to be a good day no matter what I do.
Yes No 9. Wishing can make good things happen.
Yes No 10. It’s hard to change a friend’s opinion.
Yes No 11. When I do something wrong there is very little I can do afterwards to make it right.
Yes No 12. Most people who are good in sports are born that way.
Yes No 13. One of the best ways to handle most problems is not to think about them.

66
Yes No 14. I have a lot of choice in deciding who my friends will be.
Yes No 15. A four-leaf clover will bring me good luck.
Yes No 16. When people are angry with me there is very little I can do to stop their anger.
Yes No 17. I have a good luck charm.
Yes No 18. People like me according to how I behave when situations arise.
Yes No 19. People are often angry with me for no reason at all.
Yes No 20. I can change what might happen tomorrow by what I do today.
Yes No 21. When bad things happen, there’s nothing I could have done to stop them from happening.
Yes No 22. People can get what they want if they just keep trying.
Yes No 23. It is useless for me to try to get my own way at home.
Yes No 24. Good things happen to people who work hard.
Yes No 25. There is little I can do to stop someone from being my enemy.
Yes No 26. It’s easy for me to get friends to do what I want them to do.
Yes No 27. When someone doesn’t like me there is little I can do about it.
Yes No 28. It is almost useless for me to try in school because most people are smarter than I am.
Yes No 29. Planning ahead makes things turn out better.
Yes No 30. It is better to be smart than lucky.
* Adapted from Dorothy Marcic, Joe Seltzer & Peter Vaill, Organization Behavior: Experiences and
Cases, 6th
Edition, South-Western: Cincinnati, 2001, pp. 17-20.
L O CUS O F C ONTRO L SC ORING K E Y
Using the key below, score your answer from the Locus of Control Survey. Give yourself one point each
time your answer agrees with the answer key. Your total score is the total number of agreements between
your answers and the answer key answers.
Item
Answer
Key
Your
Answer
Agree-
ment
Point Item
Answer
Key
Your
Answer
Agree-
ment
Point Item
Answer
Key
Your
Answer
Agree-
ment
Point
1 No 11. No 21. No
2 Yes 12. No 22. Yes
3 No 13. No 23. No
4 Yes 14. Yes 24. Yes
5 No 15. No 25. No
6 Yes 16. No 26. Yes
7 No 17. No 27. No
8 No 18. Yes 28. No
9 No 19. No 29. Yes
10. No 20. Yes 30. Yes
Total Agreement Points:
Interpreting Your Score
Does luck or chance or the actions of others that determines what happens to you or is the direction of
your life determined by your own actions? These two views represent the extremes of a personality
concept labeled “locus of control.” People with a high internal locus of control believe they control what
happens to them. People with a high external locus of control believe what happens to them is caused by
other people or events.

67
0-17 Points indicate External Locus of Control: As a low scorer you indicate that life is generally more
a game of chance than where your skills make a difference. Things happen to you. About 25 percent of
the people taking the survey score in this range.
18-23 Points indicate Mixed Locus of Control: Since you answered some of the questions in each
direction, you indicate that your internal and external locus of control beliefs may be situation-specific. In
some situations you believe there is nothing you can do to change a situation. In other situations you
believe that your fate rests entirely in your own hands. About 50 percent of the people taking the survey
score in this range.
24-30 Points indicate Internal Locus of Control: As a high scorer you indicate that you have a lot of
control over what happens to you, both good and bad. You tend to take the initiative and are willing to
spend energy working for specific goals. About 25 percent of the people taking the survey score in this
range.
Machiavellianism
Machiavellianism is “the ends justify the means” moral thinking. Many Machiavellians have a
“do whatever it takes” attitude toward goal accomplishment.
Although the term Machiavellian is often used in an ethically derogatory manner, there is a good
side to Machiavellianism. Machiavellians are very determined goal-oriented people.
Managers should allow Machiavellians the liberty to pursue their interests as long as they do not
violate the organization’s Code of Ethics or Conduct of Conduct.
3d. Homework to Submit [one paragraph]: Complete the
“Machiavellianism” survey in the handouts. What was your score? Do the
results adequately describe you? What are the strengths and weaknesses of
your Machiavellian personality?
RE VIE W H ANDOUTS, W HIC H APPE ARS BE L O W
M A C HIA V E L LI ON PO W ER
ASSUMPTIONS ABOUT HUMAN NATURE
1) Wicked
2) Desire for Power
3) Paradox between not wanting to be oppressed, and
oppressing others

68
HOW TO OBTAIN POWER [STAGE 1]
1) Heredity
2) Virtue
3) Military Force
4) Fortune (Luck, $)
5) Crime
6) Support of the Citizens of the Great
HOW TO MAINTAIN TEMPORARY POWER AND SECURITY [STAGE 2]
1) Live Amongst the People
2) Establish Colonies of Loyal Citizens
3) Strong & Supportive Standing Army
4) Be Protector of Lesser Powers
5) Weaken the Existing Powerful
6) Attack Foreign Threats First
7) Alliances with Friends
8) Bring Disorder and Resolve It
9) Put in Cruel Person for Dirty Work, then Replace
10) Special Case for Democracies
HOW TO MAINTAIN PERMANENT POWER AND SECURITY [STAGE 3]
1) Keeping People Inspired
2) Strong Army and Don't Be Hated
3) Managing the Paradox Between The Great and The People
4) Mean Between Art of War and Amenities
5) Mean Between Liberality and Parsimony
6) Mean Between Cruelty and Mercy
7) Be Held in High Esteem
8) Surround yourself with capable and faithful ministers
9) Listen to the wise men, not the flatters
10) Take counsel when you want to, not when others want it
11) Be a very broad questioner
12) Be a good listener
13) Become angry at people who are hesitant to talk with you
14) Be wise, don't just rely on the wisdom of others
M A C HIA V E L LIAN SURV E Y
Richard Christie and Florence I. Geis, 1970, Studies in Machiavellianism.
Circle the answer that most closely resembles your attitude for each of the following 10
statements using the following 1-5 Scale. The more honest you are the more helpful the
information you will receive.

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