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Oswald A. J. Mascarenhas S.J., Ph.D.
We are currently witnessing high turbulence in large and small corporations, and in large and small market economies. Bigger companies, in particular, are failing more frequently and with gigantic losses. Of the 20 largest U. S. bankruptcies in the two decades, 1985-2005, ten occurred in 2001-2002. Corporate earnings are more erratic. Even perennially successful companies are finding it more difficult to deliver consistently superior returns. Companies like Disney, Ford, General Motors, Daimler-Chrysler, Hewlett-Packard, Motorola, Nordstrom, and Sony – one time “built to last” companies (Collins and Porras 1997; Collins 2001) – are performing just around the Dow Jones Industrial Average (Hamel and Välikangas 2003). High CEO turnover in large corporations is becoming commonplace (e.g., Delphi, Ford, GM, Hewlett-Packard, Gateway, and K-Mart). With imminent threats of junk bond ratings, leveraged buyouts (LBO) or hostile takeovers, the Wall Street financial analysts and investor sharks are exerting all-time high pressure on corporate executives to perform. Corporate boards and shareholders are increasingly demanding higher financial returns on investment (ROI), equity (ROE), assets (ROA), net worth (NW) and higher earnings per share (EPS) and price-earnings (P/E) ratios. Possibly yielding to such pressures, corporations have been recently indulging in unusual business practices such as creative or aggressive accounting, creative cash flow reporting, earnings management or income smoothing via overstating earnings and understating debts, and, in general, fraudulent accounting and financial reporting. Under whatever name, these unusual activities are a financial numbers game (Mulford and Comiskey 2002) or financial shenanigans (Schilit 2002) with a singular ultimate objective – creating an altered impression of the firm’s business performance. Fortune (2002) featured twenty five such large corporate accounting frauds and security scandals, a research conducted during 2001 in conjunction with the School of Business, University of Chicago. Also, early 2000 marked the beginning of some of the worst corporate security irregularities in history. Rapidly rising stock prices and the market collapse that followed led corporate executives to unusual activities and accounting manipulations that were both morally questionable and reprehensible, or were outright violations of the law. Forbes (2002) listed twenty five massive securities irregularities among top management executives, involving a haul of over $23 billion, averaging to over $923 million per company and in excess of $257 million illgotten gains per top executive. Accountants generally classify most of the corporate accounting irregularities under two heads: a) fake transactions like “round-Trip” sales, and b) manipulation of debts and assets to overstate the value of the company. The U. S. Federal Energy Regulatory Commission (FERC) defines wash trading, also known as "round trip" or "sell/buyback" trading, as the sale of a product (e.g., electricity, optical fibers) to another company with a simultaneous purchase of the
Some would even argue that this practice contributed to the bankruptcy of the two largest California electric utilities and forced subsequent government support to keep power flowing there. Marsh & McLennan. in the end. it can manipulate the power market. who will be held responsible for errors. The massive consequences of unethical executive behavior and unethical business institutions cannot be ignored. fair. JP Morgan. followed by Quest Communications (February 2002). 2 . AOL Time Warner (July 2002). McDonald’s. Most of the top executives involved in such accounting and financial irregularities were business graduates of some of the topmost business schools of the United States. to name a few. Despite this Act. wash trading is false trading because it boosts the companies' trading volume. and Shell Oil are moral wake-up calls for all corporations and their executives to renew their moral commitment to society. corporate ethics and corporate governance. CMS Energy (May 2002). KPMG. corporate scandals have not abated significantly in the USA or in the Western developed world.same product at the same price. Wal-Mart. the U. Global Crossing (March 2002). Enron (October 2001) led the gang. and authenticated by the CEO and CFO of each firm. Morgan Stanley. Home Depot. and c) compliance with applicable government rules and regulations. While this kind of trading may not be illegal as per then extant accounting procedures (e. Bristol-Myers Squibb (July 2002). Gap. The price of electricity skyrocketed and. Ernst & Young. Nike. Peregrine Systems (May 2002). especially in handling actual or apparent conflicts of interests between personal and professional relationships. but shows no gains or losses on the balance sheets. Halliburton (May 2002). b) that all public financial statements of corporations should be full. Several multinational and global companies were involved in accounting irregularities." For instance.. S. Several wholesale power traders revealed that they participated in the so called "round trip" or "wash trading. Credit Suisse First Boston. Duke Energy (July 2002). Generally Accepted Accounting Practices (GAAP) of USA).com (March 2002). Large volumes of "wash" trades raise the revenues but have no effect on earnings. It was a massive failure in managerial ethics. Congress passed the Sarbanes-Oxley Act to address the increasing wave of corporate accounting and financial scandals. All these companies represent bad decisions and ethical failures.g. More recent accounting scandals were associated with onetime respectable companies such as Arthur Anderson. Citigroup. or even sets benchmark prices. El Paso (May 2002). Section 406 of this Act mandates that the corporations should have a code of ethics for senior officers that must include standards that promote: a) honest and ethical conduct. Salomon Smith Barney. which is illegal. accurate. World. wash-trading practices among some energy companies created false congestion and generated the perception of an energy shortage in the troubled California energy market in 2001-2002. Kmart. Recent consumer boycotts of hitherto industrial icons such as Levi-Strauss. Merrill Lynch. In 2002. Adelphia Communications (April 2002). In the wake and grip of these scandals and systematic accounting and financial irregularities. Dynergy (May 2002). timely and understandable. Essentially. a recapture of a strong sense of business and corporate ethics is urgently imperative in every business school curriculum and corporation conduct. it was the consumer who had to pay the price for corporate accounting and financial irregularities or frauds. and even the New York Stock Exchange (NYSE) itself. Some of the largest scams recently uncovered were in the utility business. An inflated balance sheet from round-trip trading misleads investors about the true nature and volume of the company's business.
and with the right people. This book targets such audiences and challenges them with ethical reasoning. social entrepreneurship. and ethical decision making of business students and business executives. and ethical assessment of business decisions and actions. marketing. and a great sense of corporate citizenship and stewardship. 2002). moral deliberation. While expanding into modern and postmodern ethics of consensual values and moral principles. distributive and corrective justice. Jim Collins and Morten Hansen (2011). as both disciplines are refining. ethics of trust. business law. critical thinking. Internet marketing. statistical methodologies and high-powered management science. moral deliberation. rights and duties. and production management involves ethical issues and challenges. a quick recovery of ethical values of corporate integrity and honesty. changing and expanding. corporate ethics should enhance critical thinking and moral reasoning. 1994.What is Corporate Ethics? Corporate or business ethics is a treatise about ethical and moral corporate deliberations. globalization. human resources management. A course in Ethics of Corporate Governance: Contemporary Challenges and Imperatives should empower business executives. business ethics and corporate ethics are interdisciplinary fields that entail the domain of at least two distinct disciplines. moral judgment. executive spiritual development. sustainability management. and corporate ethics. greening and global ecology. Business ethics is a science of moral values and principles in business exchanges. Thomas Peters and Robert Waterman (1982) and Thomas Peters and Nancy Austin (1985). corporate and social responsibility. The field of business is expanding into new areas such as revenue management. We also need a moral awakening. management students and other market practitioners readily to identify and effectively to address ethical and moral challenges of every field or discipline in the management of business. e-business. Ethics is currently shrinking from the classical philosophical ethics and absolute values of ancient Greek and Medieval philosophers and dogmatic theologians. finance. relational ethics. Corporate ethics is a science of executive moral values and principles relative to strategic exchange processes of corporate deliberations. motivation management. Current Dynamic of Corporate Ethics Ethics is a science of moral values and principles. virtue ethics. It is a dynamic interdisciplinary field. in general. Business ethics. We have excellent examples of such change as documented by David Bollier (1997). This book is all about the process of generating ethical and moral change and convictions in corporations and their executives. fortified with relevant theories. and their consequences. and contracting from traditional areas such as classic micro and macro economics. decisions. business research. Jim Collins (1998. Every field of business such as accounting. The corporations should lead this ethical and moral change. 2004). in particular. ethics of dynamic business exchanges. international trade theory and abstract quantitative methods. social electronic networking. e-advertising. Business ethics should provide tools of ethical and moral reasoning. a) business exchanges and decisions and b) the science of ethics as science of values and principles. should aid ethical reasoning. Thus. cyber surveys and marketing research. Patrick Lencioni (1998). moral worth and obligation. Stephen Covey (1989. ethical judgment. social analysis. All of us need the right change in the right direction. at the right time. to name a few. models and paradigms of ethical and moral reasoning and values. choices. decisions and actions. 3 .
ethics of terrorism and ethics of war on terrorism. moral and ethical responsibilities and obligations that. human resources management. customers. worker apathy. executive moral obligations regarding their consequences. their specific skills. their strategies and actions. We first introduce the conceptual foundations for a corporate ethic of business management (Prologue. insolvency and imminent bankruptcy. and ethics of corporate trust (Chapter 06). their moral reasoning processes. is radically changing from the traditional silos of accounting. 4 . corporate cash flow crisis. suppliers and creditors. A comprehensive and integrated course in corporate or business ethics should include every part of business. ethics of global poverty. ethics of corporate critical thinking (Chapter 04). HR. finance. ethics of corporate virtue (Chapter 05). operations research and management. unstructured and “wicked” business problems of current markets. under Part II. Business ethical processes predominantly spearheaded by the corporate executive moral act. Chapter 01).g. and ethics of global ecology and sustainability. decisions sciences. and economics into modern integrated business management that views all fields of business as networked and interdependent. marketing. and business law) implies ethics. producers. ethics of cyber safety and privacy. marketing. in turn. Part One lays the general moral foundations for corporate decisions while Part Two delves into applications of moral foundations established under Part One to major critical problems and challenges of contemporary business. Specifically. interacting and synergizing business solutions to simple. the veteran concept of business management. as also every stakeholder of business. Moreover. disease and inequality. finance. we assume that all business ethical decisions in general. financial distress. as represented by the 110-year old MBA curriculum and structures. distributors and promoters. markets and trade regions floundering or disappearing. international and global businesses. business downturns and recessions. industries. Next. local and global communities) involves moral rights and duties. complex. domestic and international governments. with a significant majority of domestic. business law. and Business ethical outputs mostly represented by the moral consequences of corporate executive decisions. Every stakeholder of business (e. The Structure of the Book Specifically. ethical process and ethical outputs. and corporate ethical decisions in particular. we analyze the ethics of the corporate moral agent under five heads: ethics of corporate moral human personhood (Chapter 02). production.. there has emerged a new discipline – business turnaround and transformation management (BTTM) that researches and applies new integrated business management solutions to problems of underperformance. imply at least three constituents: Business ethical inputs primarily represented by the corporate executive moral agent. invoke ethical values and moral principles. their mental models and business models. Every part of business (e. and above all. Next. accounting. and critical thinking inputs. ethics of corporate governance (Chapter 03). we explore the ethics of corporate moral acts and actions under three heads: ethics of corporate moral reasoning (Chapter 07). this book examines ethical imperatives as applicable to the entire integrated and dynamic process of business: ethical inputs. Under Part I.. their decisions and choices. financial turbulence.cyber ethics.g. This book relates to corporate ethics that deals with major moral corporate executive leaders. personality. employees and employers.
corporate executive leaders. Corporate moral virtue of respecting rights and duties of all stakeholders (Chapter 08). 12. 5 . The Target Audience Organized thus. 5. application and exercise of the following concepts. Thirdly. Defining. Moral responsibility for corporate decisions and their consequences (Chapter 11). we could divide the content of ethical analysis into 1) The Ethics of the Means – what do leaders use to motivate followers to obtain their goals. 7. Understanding corporate human personhood as the cornerstone of corporate ethics (Chapter 02). As its title suggests. 3. business scholars and business practitioners alike. Defining. General concepts and foundations of ethical imperatives as applicable to contemporary challenges and imperatives of business management (Prologue and Chapter 01). and especially. Objectives of this Book The book drills and challenges corporate executives and business students in the understanding. this Book is uniquely designed for high potential business students. Moral virtue in relation to deliberating. exercising and implementing business decisions (Chapter 05). and ethics of moral corporate social responsibility (Chapter 12). 9. tools and skills: 1. In the typical MBA program. Discerning and exercising corporate moral social responsibility for corporate decisions and outcomes (Chapter 12). this Book emphasizes corporate 1 There are other approaches to ethical and moral analysis that are quite laudable. 4. In this book we follow the suggested framework of Table A. and moral obligation (Chapter 07). 2. this book could be useful for courses in business ethics and strategy. From the viewpoint of ethical and moral leadership. 6. Moral Justice in addressing the social externalities of one’s corporate executive decisions and strategies represented by some major ethical theories of teleology. Fostering Moral trusting relations for enhancing and empowering corporate decisions (Chapter 06). intuitive and innovative business management. under Part III. deontology. 2) The Ethics of Person: What are the virtues and personal ethics of the leaders? Are they motivated by self-interest or altruism? 3) The Ethics of the Ends: What is the ethical value of the leader’s accomplishments? Did they serve the greater good of the greatest number? [See Ciulla (2004: xvi)]. moral judgment. Analyzing and explaining corporate governance in its contemporary role and context (Chapter 03). understanding and applying corporate executive critical thinking skills for moral decisions (Chapter 04). distributive justice. Moral reasoning for ethical decision-making skills in business management based on the theories of moral worth. distributive and corrective justice (Chapter 10). and corrective justice (Chapter 10) 11.1 Table A captures the structure of the book succinctly. and ethics of corporate moral leadership (Chapter 09). particularly at the graduate level. 8. as it better fits the moral analysis of the current business paradigm.ethics of stakeholder rights and duties (Chapter 08). ethics of moral responsibility (Chapter 11). imaginative. Moral and ethical leaderships skills and decisions for corporate executives (Chapter 09) 10. moral justification. we examine the ethics of corporate outputs or consequences under three themes: ethics of consequences represented by the major ethical theories of teleology. to corporate executives and business entrepreneurs who are engaged in corporate-wide decisions and strategies that demand creative. deontology.
Such corporate-wide decisions need to be preceded by proper moral reasoning and rationalization. The content of each chapter is best learnt and internalized against real-time “live” cases of current market problems. such that the corporate decision makers can foresee the consequences. There is no closure to this book. finance. but hardly any on corporate ethics. peoples. and operations management. and the like. Thus. 2011). upgrades. philosophers and theologians. Hence. This is best done by challenging students with take-home. and institutional leaders that are engaged in transforming their organizations from being not-so-good to good to great. medieval and modern scholars. products. personnel (HRD).governance and is primarily meant for all corporate executives. moral deliberation and choices. on business ethics. linear and circular. Each chapter integrates into one interactive unit the traditionally compartmentalized silos of management education such as economics. brands and services. The content and structure of this Book (see Table A) is geared to realize this corporate objective. day-to-day corporate world of ethical and moral business management. 2000. Corporate ethics empowers corporate executives to execute this choice-decision-strategy process with assurance and clarity. and from recent journal articles from top tier journals such as Theological Studies. It feeds and expands on the real. Harvard Business Review. The Uniqueness of This Book There are several books on ethics. Collins 1999) and “market busting” strategies (Gunther and MacMillan 2005) as they unfold during the academic semester of learning. a book that captures the real-time ethical and moral process of forming strategic leaders of corporate transformation experience and accomplishment must be a “work in progress” that needs constant updates. on managerial ethics. and assume responsibility for the consequences. The real world of corporate strategy problems is rarely simple. from questionable to impeccable. structured 6 . problem-centered exams that invite team learning of three to four weeks in ethical or moral problem identification. moral and spiritual organizations. 2002. formulation. As in our other recent books (Mascarenhas 2008. paradigms. accounting. paradigms. structured and unstructured. Sloan Management Review. “disruptive changes” (Christensen et al. marketing. alternatives exploration and the final choice assessment in the actual real-time field of contemporary business and market reactions. on executive ethics. ethical understanding and explanation. its divisions. A significant percentage of current MBA or PGDBM students from prestigious schools will one day be corporate executives who will make decisions that will impact the whole company and its stakeholders. we safeguard some critical features of modern integrated business management such as: Each chapter provides critical thinking and ethical principles that can enable and empower readers to address current ethical and moral challenges of a given corporate strategy. even those that were unintended. models and strategies of Ethics of Corporate Governance are translated to ready critical review. applications and implementation. California Management Review. specification. the material covered represents the mind and works of the best scholars in the field. Business Ethics Quarterly. this book is not about immutable and frozen conceptualizations and theories. business law. models and strategies. The content of each chapter is continuously evolving and emerging. production. Each chapter is appended with Business Executive Exercises (BEE) where the more challenging concepts. ethical. boards of directors. theories. episodes. revisions and restatements. Each chapter is built on solid moral and ethical foundations laid by eminent ancient. In other words.
Pai Management Institute (TAPMI). The plan and contents of this book have been presented and discussed at several graduate courses in Corporate Ethics at various Colleges of Business Administration such as University of Detroit Mercy. St. and currently. theology. where I obtained MBA and Ph.D. analogical (Garvin and Rivkin 2005). Aloysius (Autonomous) College. 2013. non-linear (i. India. Beeri. and currently.e. I am especially indebted to Russell Ackoff. We hope this book will challenge students and readers. Mangalore. Several professors have molded me during my management studies. This Book is dedicated to my oldest sister Agnes who still continues to be the ethical and moral force that guides and empowers my life. often circular and spiral) and “wicked” (Rittel and Webber 1973) problems that need creative. 7 . Xavier School of Management. Michigan. at XLRI. D. School of Business. innovative. T. Ozzie Mascarenhas S. Beeri. Pennsylvania. Philadelphia. Aloysius (Autonomous) College. They are complex. I am grateful for the incisive comments of these students. This book represents my latest research and thinking in the critical domain of corporate governance and business ethics and morals for business transformation management.. experimental and entrepreneurial resolutions. South Kanara. Ph. Len Lodish and Howard Perlmutter of the Wharton School of Business. Mangalore. resilient (Hamel and Välikangas 2003). USA. business turnaround and transformation management with over 35 years of teaching and research experience.. June 10. AIMIT: MBA Programs. e-business and Internet marketing. Chairman: St. marketing. imaginative. unstructured. Manipal. Jamshedpur. This work has taken several years from conception to execution.and linear in their content and solutions. Jharkhand. A. teachers and executives to this great world of strategic ethical and moral leadership and organization learning (Senge 1990. India. Paul Green. Acknowledgements and Dedication My academic background is philosophy. J. 2006) of business transformation management (Hammer 2004). Detroit.
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Teleology.Corporate Ethics: Contemporary Challenges and Imperatives Part Corporate Chapter Focus: # Prologue Table A: The Structure of the Book Chapter Title In General 1 PART ONE: Ethics of Corporate Business Inputs 2 The Corporate Moral Agent 3 4 5 6 PART TWO: Ethics of Corporate Business Process PART THREE: Ethics of Corporate Business Outputs Corporate Decisions Dilemmas. Distributive Justice. Corrective Justice and their Sub-Theories Ethical Theories of Moral Executive Responsibility and Moral Executive Obligation Ethics of Corporate Moral Social Responsibility for Executive Decisions and Outcomes 10 . and Moral Obligation Ethical Theories of Moral Rights and Duties of all Stakeholders Ethical and Moral Leadership for Corporate Strategies Ethical Theories of Deontology. Acts and Actions Executive DecisionOutcomes & Social Externalities 7 8 9 10 11 12 Preface: Ethical Imperatives for Business Executives Executive Ethics for Business Management Decisions: Conceptual Foundations The Foundation of Corporate Ethics: The Human Person The Context of Corporate Ethics: Concepts. Moral Worth. Moral Judgment. Theories and Models of Corporate Governance The Cornerstone of Corporate Ethics: Executive Critical Thinking The Bastian of Corporate Ethics: Executive Virtue Ethics The Moral Fiber of Corporate Ethics: Executive Ethics of Trust Ethical Theories of Moral Reasoning.