Business Ethics

CASE STUDY (20 Marks)

General Motors, the world’s largest automobile manufacturer, accused Japan of currency
manipulation giving its automakers a huge competitive advantage in the US. market and
causing significant harm to the US auto industry. The company charged that Japan’s weak
‘yen policy’ gave its exporters an outright annual subsidy of up to 12,000 dollars per vehicle
exported to the United States, giving an expected windfall of two billion dollars to Japan’s
automakers “This subsidy has both facilitated the expansion of Japanese companies in the US
and succeeded in keeping American-built automobiles out of Japan,” GM’s chief economist
Mustafa Mohatarem told a congressional hearing. The impact of Japan’s sustained currency
manipulation is a keyreason for a plethora of problems facing US-owned automakers,
Mohatarem told a US-Japan trade hearing held by the House Representatives’ ways and
means committee “However, it is frustrating, really unbelievable, to many of us in this
business and the American manufacturing sector that the Japanese government’s
extraordinary $420 billion currency manipulation program has gone unquestioned and
unchallenged, while China has become the sole focus of attention as the threat to American
competitiveness,” he said. Lawmakers criticized the government for not being tough with
Japan on its currency policy and sought an explanation from David Loevinger, deputy
assistant secretary at the US treasury, among other government officials present at the
hearing.

Answer the following question.

Q1. Is there any ethical issue involved in this case? If so, explain the same.
Q2. What remedies do you suggest to ensure a proper approach? Discuss.

CASE STUDY (20 Marks)

Prohibition is good and women would appreciate a policy of prohibition. However some state
governments may scrap prohibition on the grounds that (i) the adjoining states do not observe
prohibition, hence people visit those states to quench their desire for the beverage (ii) the
existence of illicit distillation and the difficulty in stopping this (iii) the strain on government
resources for implementing prohibition, including the loss of revenue from excise duty.

Answer the following question.

Q1. Are the grounds shown in the above case ethically justifiable? Explain.
Q2. In your opinion what are the benefits of prohibition. Discuss.

Case (20 Marks)

Joan, an employee of Great American Market, was warned about her excessive absenteeism
several times, both verbally and in writing. The written warning included notice that "further
violations will result in disciplinary actions," including suspension or discharge. A short time
after the written warning was issued, Joan called work to say she was not going to be in
because her babysitter had called in sick and she had to stay home and care for her young
child. Joan's supervisor, Sylvia, told her that she had already exceeded the allowed number of
absences and warned that if she did not report to work, she could be suspended. When Joan
did not report for her shift, Sylvia suspended her for fifteen days. In a subsequent hearing,
Joan argued that it was not her fault that the babysitter had canceled, and protested that she
had no other choice but to stay home. Sylvia pointed out that Joan had not made a good faith
effort to find an alternate babysitter, nor had she tried to swap shifts with a co-worker.
Furthermore, Sylvia said that the lack of a babysitter was not a justifiable excuse for being
absent.

Answer the following question.

1. Was the suspension fair?

2. Did Joan act responsibly?

CASE STUDY (20 Marks)

Most people want to be ethical — and consider themselves to be. But incidents ranging from
stolen library books to rogue trading illustrate that many people do not act as ethically as they
want to, or as they think they do. “With all the evidence to support rational,
good choices in the workplace or the marketplace, why don’t we all behave that way?” said
Ann Skeet, director of leadership ethics at the Markkula Center for Applied Ethics at Santa
Clara University. Skeet gave an introduction to a May 11 forum called, “The Behavioral
Movement: What Business Professionals Should Know About Human Nature,” sponsored by
the Business Ethics Partnership of the Markkula Center. Two speakers addressed what we
know about why people behave unethically – and how the conditions that contribute to this
behavior may be particularly acute in high-pressure environments like Silicon Valley. “The
culture of Silicon Valley is different than in most other places,” said Hersh Shefrin, the Mario
L. Belotti Professor of Finance at Santa Clara University’s Leavey School of Business and a
pioneer in the field of behavioral finance. “This is a risk-taking culture and a culture
where goals are set very high.” This can make Silicon Valley workers especially vulnerable
to the pressures that can lead to unethical decisions. For example, the increasing use of global
teams, which can require phone calls early in the morning and late at night as well as regular
hours in the office, may contribute to fatigue – a risk factor for poor decision-making. Still,
Shefrin said, “we’re not as unique as we think we are – just more so.” Workers in Silicon
Valley are subject to the same psychological issues as workers anywhere else. For example,
all workers have blind spots, said Ann E. Tenbrunsel, professor in the College of Business
Administration at the University of Notre Dame and the Rex and Alice A. Martin Research
Director of the Institute for Ethical Business Worldwide. She addressed the psychology of
ethical decision making, or “why people behave unethically despite the best intentions.”
There have been significant efforts to improve ethics: at the regulatory level; at the
organizational level, with millions spent on training; and at the educational level, with ethics
being infused into the curriculum at many universities, Tenbrunsel said. Still, the headlines
announcing bad behavior keep coming. “We haven’t taken the psychology of the decision
maker into account,” Tenbrunsel said. She listed four ethical blind spots that contribute to
poor decision making — ethical illusions, ethical fading, dangerous reward systems and
motivated blindness — and elaborated on the first two. Ethical illusions are based on
“illusions of our own ethicality,” Tenbrunsel said. She cited studies showing that library
books on ethics – presumably checked out by people who think about ethics – are stolen more
often than non-ethics books. And when people are asked to rate how honest they are, a
majority of people rate themselves above average, which is statistically not possible. “We
really seem to engage in hyperinflation about things related to morality and ethicality,”
Tenbrunsel said. “If everyone thinks their companies are ethical, we don’t do a good job of
really trying to find the problems.” It helps to think of three stages of the decision-making
process, Tenbrunsel said: prediction, action and recollection. Before making a decision,
people generally predict that they will act in accordance with their values. When it comes to
taking action, that is not always what happens. But after the fact, “we remember that we did
better than we did,” Tenbrunsel said. Why don’t people behave as they predict they will? One
reason, said Tenbrunsel, is that prediction involves high-level ideals, whereas the action
phase is more about the details and what is feasible at that particular moment. Forces such as
hunger, fatigue and fear come into play, for example, and may overwhelm idealistic plans.
“The body and mind’s goal is to mitigate it,” Tenbrunsel said. Ethical fading, the second
blind spot Tenbrunsel discussed, happens when a person making a decision doesn’t view the
decision as one that involves ethics. People use financial criteria to make financial decisions
and legal criteria to make legal decisions, for example. So if a decision can be categorized as
something other than an ethical one, it makes it easy to not consider ethics. Language plays a
role in this area, as well: For example, a decision about “runoff” may be viewed differently
than one about “pollution.” Shefrin continued the conversation by examining rogue trading,
an example of how “finance and psychology and ethics all interconnect.” Because trading
involves taking risks, it is useful to understand the psychology behind risk-taking. For
example, most people will choose a sure gain over a smaller chance to win a larger amount.
But they will choose the risk of a large loss over a sure loss. “Three of the most important
emotions associated with what happens when you face a risk are fear, hope and aspiration,”
Shefrin said. “People who are excessively fearful tend not to take risks that are worth taking
in an actuarial sense, and people who are excessively hopeful tend to shoot for the stars when
it’s not appropriate. In a situation like the rogue trading cases, traders find themselves in a
situation where the pressures to succeed are so great that they take imprudent risks.” In
addition to the psychology of the individuals involved, the strength of corporate processes
and the way corporate culture encourages or discourages risk-taking play a role. “Strong
corporate cultures that include an ethical dimension can help deal with the vulnerabilities,”
Shefrin said. “The tone always starts at the top.”

Answer the following question.

Q1. Why imprudent risks are to be taken for great success. Explain
Q2. Debate the three stages of the decision-making process.