CHAPTER 2 - Defining Business Ethics: Lesson Overview

Instructor Supplement
Understanding Ethics – Ghillyer
CHAPTER 2 – Defining Business Ethics

LESSON OVERVIEW
The purpose of this lesson is to introduce the student to business ethics.
You will give students an understanding of business ethics including its history and identify ways to
resolve an ethical dilemma in your work place.
CHAPTER OUTLINE
The textbook outlines the chapter with the following six headings. As an instructor, you can use the
headings to focus and direct your major lecture topics.
o Defining Business Ethics

o Who Are the Stakeholders?
o An Ethical Crisis: Is Business Ethics an Oxymoron?
o The History of Business Ethics
o Justifying Unethical Behavior
o Building and Operating an Ethical Business
CHAPTER OBJECTIVES
You will find notations throughout the support material indicating the appearance of the objectives. The
notations will appear, for example, as OBJ 2.1 for Chapter 2, objective 1.
Upon completion of this chapter, the students will be able to:

1. Explain the term business ethics.
 Assessment Method –
 Progress check questions
 Assignments/activities
2. Identify an organization’s stakeholders.
 Progress check questions
3. Understand the purpose of a Code of Ethics.
 Progress check quiz
4. Identify an ethical dilemma in your work environment.
Assignments/activities
5. Understand how to go about seeking advice when facing an ethical dilemma.
6. Be prepared to resolve an ethical dilemma in your work environment.
Progress check quiz
Chapter 2 – Page 1
ASSESSMENT TOOLS
This chapter supplement includes quizzes, homework assignments, a test bank, projects, and group
exercises.
KEY TERMS AND CONCEPTS

Key terms and concepts are posted in the student textbook margins. They are compiled here alphabetically
for your quick reference. You can use this table to check off terms as they are covered in class.
Write the terms you will be covering in your lesson on the board prior to class. Refer to the board during
the lecture time. Also do a quick review of the terms after the breaks by asking students to provide an
extemporaneous definition. It will help students refocus prior to resuming the lecture.
For online faculty, post “terms of the day” for students to review.
Include a definition quiz as part of your daily lesson. Select the key terms from the board, give the
definition, and have the students write the correct term.
Term Definition Page

Business
ethics The application of ethical standards to business behavior. 21
A company's written standards of ethical behavior that are designed to
guide managers and employees in making the decisions and choices they
Code of ethics face every day. 24
Corporate
governance The system by which business corporations are directed and controlled. 23
Ethical A situation in which there is no obvious "right" or "wrong" decision, but
dilemma rather a "right" or "right" answer. 27
The combination of two contradictory terms, such as "defeating silence" or
Oxymoron "jumbo shrimp." 24
Stakeholder Someone with a share or interest in a business enterprise. 21
LESSON OUTLINE
Estimated Topic Description Asset
time
5 minutes Administrative  Take attendance. Roster
10 to 25 Chapter 2  Defining Business Ethics Textbook

minutes Introduction 1. Business ethics involves that application of p. 20 – 22
OBJ 2.1, 2.2 ethical standards to business behavior
Teaching tip: Ask students if ethical

behavior should be the same both inside and PowerPoint
outside a business situation. Student answers slide 3
may vary.
2. A descriptive summation of the customs,

attitudes, and rules that are observed within a
business. As such, we are simply
documenting what is happening.
3. A normative (or prescriptive) evaluation of

the degree to which the observed customs,
attitudes, and rules can be said to be ethical.
Here we are more interested in recommending
what should be happening.
 Who are the Stakeholders?
1. A stakeholder is someone with a share or

interest in a business enterprise.
Teaching tip: Ask students to give an

example of a stakeholder. Student answers
may vary.
Objectives
Discuss each of the objectives to be completed during
the lesson with the class.
Upon completion of this chapter, the student will be

able to:
1. Explain the term business ethics.
2. Identify an organization’s stakeholders.
3. Understand the purpose of a Code of Ethics.
4. Identify an ethical dilemma in your work

environment.
5. Understand how to go about seeking advice

when facing an ethical dilemma.
6. Be prepared to resolve an ethical dilemma in

your work environment.
LESSON OUTLINE
time
25 to 55 Chapter 2  An Ethical Crisis: Is Business Ethics an Oxymoron? Textbook
minutes Lecture 1 1. Corporate governance is the system by which p. 23 – 28
OBJ 2.3 & business corporations are directed and controlled.
2.4 PowerPoint
2. Over the last two decades, the ethical track record of slide 4
many organizations would lead us to believe that
there have been no ethical policies or procedures in
place.
3. A code of ethics is a company’s written standards of

ethical behavior that are designed to guide managers
and employees in making the decisions and choices
they face every day.
Teaching tip: Ask students what function a code of

ethics serves. A code of ethics can be seen to serve a
dual function. It can be seen as a message to the
organization’s stakeholders and as an internal
document.
 The History of Business Ethics

1. The increased presence of an “employee voice” to the
extent that individual employees now feel more
comfortable speaking out against actions of their
employer that they feel to be irresponsible or
unethical.
2. The issue of corporate responsibility has become a

core performance assessment issue with clearly
established legal liabilities.
3. Corporate ethics has moved into the organizational

mainstream with the appointment of clearly mandated
corporate ethics officers
Teaching tip: Ask students if codes of ethics are

being used as a performance measurement document.
Many organizations are using this as a performance
measurement document and sharing it with all of their
stakeholders.
4. The 2002 Sarbanes-Oxley Act has introduced greater

accountability for chief executive officers and boards
of directors in signing off on the financial
performance records of the organizations they
represent.
5. In many cases, the scenario you are facing is not a

clear-cut case of right and wrong, but a case of “right
versus right.” This is known as an ethical dilemma.
FRONTLINE FOCUS:
‘The Customer is Always Right’
Carol is the shift leader at a local fast food restaurant. She first started working there as a summer job for
gas money for that old Honda Civic she used to drive. That was more years ago than she cared to remember
and she had managed to upgrade her car to something far more reliable these days. She enjoyed working
for this company. The job was hard on your feet, but when you hit the breakfast, lunch or dinner rush, you
were usually too busy to notice.
Today was an important day. Dave, the Store Manager had called an ‘all staff’ meeting to discuss the new
‘healthy’ menu that the company had launched in response to public pressure for healthier lunch choices –
lots of salads and new options for their side items. It was going to take a lot of work to get her staff up to
speed, and Carol expected that a lot of the customers would need extra time to work through all the new
options, but overall she liked the new menu and she thought that the new lower-priced items would bring in
a lot of new customers who were looking for something more than burgers and fries.
The company had sent a detailed information kit on the new menu and Dave covered the material very
thoroughly. As he finished the last PowerPoint slide, he asked if anyone had any questions. Since they had
been in the meeting for over an hour, her team was very conscious of all the work that wasn’t getting done
for the lunch rush, so no one asked any questions. As a last comment Dave said:
“This new menu should hopefully bring in some new customers, but let’s not forget what we’re doing here.
We’re here to make money for our shareholders and to do that, we have to make a profit. So, we’re only
going to make a limited number of these new items – if they run out, offer customers something from the
regular menu and don’t forget to push the ‘upsize’ menu options and ice creams for dessert – those are still
our most profitable items. And if someone wants one of these new healthy salads, make sure you offer
them an ice cream or shake to go with it”.
Carol was amazed. The company was making a big push for this new menu and spending a ton of money
on advertising and here was Dave planning to sabotage it just because he was afraid that these lower-priced
items would hurt his sales (and his bonus!).
1. Look at Tables 2.1 and 2.2 and identify which stakeholders would be directly impacted by Dave’s plan
to sabotage the new healthy menu?
Stakeholders Impact from Dave’s plan

Stockholders  Loss of potential revenue
 Loss of Stock Value if revenue falls
 Cancellation of Dividends
Employees  Loss of Employment if revenue falls
Customers  Not receiving items on the menu
 Poor Service Quality
Suppliers/  Loss of sales of new menu items
Vendor Partners
Federal  Loss of Tax Revenue if sales fall
Government
Creditors  Company may get into financial difficulties if revenue falls and be unable to
pay their creditors
Community  Denied potential new menu items and possibility of new jobs.
 Unemployment of Local Residents
2. Describe the Ethical Dilemma that Carol is facing here.
Carol has an ethical responsibility to be a productive employee and to follow the directions of her
supervisor (Dave). However, she also recognizes that it is wrong to deliberately mislead customers by
not delivering what the restaurant menu says is available. Running out of items on a busy shift is one
thing, but to deliberately not make items (and then deny customers who would have preferred to
purchase that item) is wrong.
3. What should Carol do now?
Carol must make a choice between following Dave’s instructions or finding a way to
do what she thinks is right.
LESSON OUTLINE
Time
55 to 80 Chapter 2  Justifying Unethical Behavior Textbook
minutes Lecture 2 p. 28 – 31
OBJ 2.5 & 1. Saul Gellerman identified “four commonly held
2.6 rationalizations that can lead to misconduct. PowerPoint
slides 5 – 8
2. A belief that the activity is within reasonable ethical
and legal limits – that is, that it is not “really” illegal
or immortal.
3. A belief that the activity is in the individual’s or the

corporation’s best interests – that the individual
would somehow be expected to undertake the
activity.
4. A belief that the activity is “safe” because it will

never be found out or publicized; the classic crime-
and-punishment issue of discovery.
5. A belief that because the activity helps the company,

the company will condone it and even protect the
person who engages in it.
 Resolving Ethical Dilemmas
1. Resolution of an ethical dilemma can be achieved by

first recognizing the type of conflict you are dealing
with: truth versus loyalty, short-term versus long-
term, justice versus mercy, individual versus
community.
2. The three resolution principles for ethical dilemmas

include ‘Ends-based,’ ‘Rules-based,’ and ‘The
Golden Rule.’
 Building and Operating an Ethical Business
1. It is unfortunate that the media has been given so

much material on unethical corporate behavior over
the last decade. In such a negative environment, it is
easy to forget that businesses can and do operate in an
ethical manner, and that the majority of employees
really are committed to “doing the right thing” in
their time at work.
Teaching tip: Ask students if building and operating

an ethical business only requires that a company
simply do the right thing. Students should be able to
identify that building and operating an ethical
business requires a great deal more than simply
doing the right thing.
Progress Check Questions:
1. Explain the term ‘Business Ethics’.
The application of ethical standards to business behavior
2. Explain the difference between a Descriptive and Prescriptive approach to Business Ethics.
A descriptive approach describes what is happening. A prescriptive approach recommends what

should be happening.
3. Identify six stakeholders of an organization.
Stockholders, employees, customers, suppliers/vendor partners, retailers/wholesalers, Federal

Government, Creditors, Community.
4. Give 4 examples of how stakeholders could be negatively impacted by unethical corporate behavior.
 Stockholders could base investment decisions on false and misleading financial information.
 Stockholders could see a cancellation of dividends and/or a loss of stock value.
 Employees could lose their employment and not receive severance packages or pension benefits.
 Customers could receive poor service and/or product quality.
 Suppliers/Vendors could receive delayed payment for goods or have their invoices go unpaid.
 Federal Government could lose tax revenue and face the cost of litigation if there has been a
failure to comply with all relevant legislation.
 Creditors could lose principal and interest payments.
 Community could lose employment of local residents and see economic decline in the area.
5. Define the term ‘Oxymoron’ and provide 3 examples.
The combination of two contradictory terms, such as ‘deafening silence’ or ‘jumbo shrimp’. Three
additional examples are offered in the text: ‘government efficiency’, Central Intelligence Agency, or
‘authentic reproduction’.
6. Is the term ‘Business Ethics’ an oxymoron? Explain your answer.
Answers will vary. The author takes the position that: “It would be unfair to brand every organization
as fundamentally unethical in its business dealings”. Given the high degree of attention paid to
unethical corporate behavior by the general media, students could well view the term as oxymoronic.
7. Define the term ‘Corporate Governance’.
The system by which business corporations are directed and controlled.
8. Explain the term ‘Code of Ethics’.
A company’s written standards of ethical behavior that are designed to guide managers and
employees in making the decisions and choices they face every day.
9. Identify a Major Ethical Dilemma for each of the last four decades.
Answers will vary – refer to table 2.3
10. Identify a key development in business ethics for each of the last four decades.
11. Which decade saw the most development in business ethics? Why?
12. Which decade saw the most ethics dilemmas? Why?
13. Give 4 examples of the cliché’s employees often hear when faced with an ethical dilemma.
 Consult the Company Code of Ethics

 Do what’s right for the Organizations Stakeholders
 Do what’s legal
 Do what you think is best (‘use your best judgment’)
 Do the right thing.
14. List the 4 types of ethical conflict.
 Truth versus Loyalty

 Short-term versus Long-term
 Justice versus Mercy
 Individual versus Community
15. List the 3 principles available to you in resolving an ethical dilemma.
 ‘Ends-Based’- which decision would provide the greatest good for the greatest number of
people?
 ‘Rules-Based’- what would happen if everyone made the same decision as you?
 ‘The Golden Rule’ – ‘do unto others as you would have them do unto you’.
16. Give an example of an ethical business dilemma you have faced in your career, and explain how you
resolved it, indicating the type of conflict you experienced and the resolution principle you adopted.
Answers will vary.
Case 2.1: “Ethics, Schmethics” – Enron’s Code of Ethics
1. What is the purpose of a Code of Ethics?
A company’s code of ethics is: “A company’s written standards of ethical behavior that are designed
to guide managers and employees in making the decisions and choices they face every day”.
2. Do you think the employees of Enron Corp. were told about the vote to put aside key elements of the
Code of Ethics? If not, why not? If they had been told about the decision, what do you think their
reaction would have been?
No, the employees weren’t told, for several reasons. First, the more people who were notified, the
greater the risk of a leak to the media. Second, the senior management of Enron obviously saw
themselves as beyond reproach and therefore under no obligation to explain their actions. Third, the
subsequent legal depositions revealed that the senior management looked after themselves first, with
no thought or concern for the wellbeing of their rank-and-file employees.
If the employees had been told, many may not have understood the consequences of the action. In
addition, the attraction of such rapid increases in shareholder value may have been enough to
rationalize the questionable ethics of the decision.
3. Do you think that the employees of Enron Corp. were planning to defraud investors all along? If not,
why not?
Answers will vary. The author agrees with the assessment by Norman Augustine at the beginning of
Chapter 3 – the senior team set very high expectations and managed to achieve them for a short while.
However, when the expectations of Wall Street began to exceed their capacity to deliver, they were
faced with the challenge of being honest (and taking the hit on their stock price) or “working the
numbers”. Once they chose the latter and got away with it, there was no going back.
4. Explain the conflict of interest in Enron’s relationship with Arthur Andersen.
Answers will vary. Auditors are supposed to provide an objective 3rd party assessment of an
organizations financial viability. It is impossible to maintain that objectivity if you are also pursuing
millions of dollars in consulting fees from the same client.
Case 2.2: What to say to the man let go? 6
1. What kind of ethical dilemma is Mary Facing?
‘Truth versus Loyalty’ – should she tell Jim the truth or remain loyal to the organization and let Jim be
formally notified by the branch director.
2. Should Mary rely on the Human Resources staff to tell Jim? Why?
Answers will vary. The argument for telling Jim is that he might prefer to hear the truth from Mary
and would be grateful for the additional adjustment time. The argument against telling Jim is that
Mary would be stepping outside of her bounds as an employee, plus she doesn’t know all the details
behind Jim’s departure – it may be performance related.
3. Could the organization have handled Jim’s termination differently? How?
Definitely. It is inappropriate to place other employees in the middle of a termination in this manner. If
the decision had been made to terminate Jim, then the branch director should have made Jim aware of
it immediately and handled all the logistics (voicemail, email, etc.) at the same time, rather than
dragging the process out.
4. What would you do in this position? Explain your answer
Answers will vary. Some students will argue in favor of avoiding the situation altogether and no longer
taking Jims’ calls. Others will be willing to risk their own job security by getting involved and telling
Jim the truth – though they may not think the decision through and wonder if Jim will ultimately reveal
his source. Others will remain within the bounds of the job description and leave it up to the branch
director or HR to make the formal notification to Jim.
FRONTLINE FOCUS:
‘The Customer is Always Right’ – Carol makes a decision
Rachel, one of Carol’s brightest team members, identified the problem that Dave had created for them right
away: “So we have a new menu that’s supposed to bring in new customers, but we’re only going to make a
few items to make sure that we sell lots of our unhealthy but more profitable items – is that it?”
“Looks like it,” said Carol

“Well I hope I’m not working the drive thru window when we start to run out of the new items,” said
Rachel, “Can you say ‘bait and switch’?”
Fortunately, the new menu items wouldn’t start until next week, so Carol had some time to work on this
potential disaster. She couldn’t believe that Dave was being so shortsighted here. She understood his
concern about sales, but healthier menu items would bring in new customers not reduce his sales to existing
ones. Sure, some might switch from their Jumbo Burger to a salad once in a while, but the new sales would
more than make up for that. Plus advertising items and then deliberately running out just wasn’t right.
She’d run out of things before – if there had been a run on a particular item or Dave had messed up the
supply order, but they had never deliberately not made items just to push customers towards more
profitable items before – and Carol didn’t plan to start now.
For the first week of the new menu items, Carol worked harder than she had done in a long time. She
covered the drive thru window through the breakfast, lunch and dinner rushes, and when Dave made his
trips to the bank for change or to their suppliers when he forgot something in the supply order, she ran in
the back and made extra items to make sure they never ran out. It was a close call once or twice when she
was making things to order but the customers were never kept waiting.
At the end of the week, she had all the information she needed. Sales were up – way up – the new items
were a big hit. She had been able to sell everything she had made without impacting the sales of their
traditional items. Now all she had to do was confess to Dave…
1. Did Carol make the right choice here?
Answers will vary. Some will argue that her first responsibility as an employee was to follow the
instructions of her supervisor (Dave). As such, she was being insubordinate by deliberately disobeying
those instructions. Others will argue that she did the right thing by taking care of her customers and
modifying her work system to make sure that every customer got what they wanted.
2. What do you think Dave’s reaction will be?
Dave will probably be angry at first that Carol disobeyed his instructions. However, the increased
sales figures should help him calm down. It will take some tact on Carol’s part to show Dave what she
has done without making him look foolish.
3. What would the risk have been for the restaurant if they had implemented Dave’s plan and deliberately
run out of the new items?
Unhappy customers may have complained about the lack of availability of the new
items. In addition, those unhappy customers (or a disgruntled employee) may have
gone to the media with the story and generated a lot of negative press coverage for the
company. In those situations, when the company is required to demonstrate decisive
action as a sign that they are listening to their customers, the first act is to replace the
management of the restaurant. So, for all Dave’s concern about sales figures, he was
running the risk of losing his job.
END OF CHAPTER QUESTIONS

Review Questions:
1. Locate the published Code of Ethics for the company you work for (or have worked for in the past).
How well does that code reflect business practices you have observed in that company? Provide
examples.
Answers will vary.
2. You have worked at the same company with your best friend for the last 10 years – in fact, he told you
about the job and got you the interview. He works in the Marketing Department and is up for a
promotion to Marketing Director – a position that he has been wanting for a long time. You work in
Sales, and on your weekly conference call the new Marketing Director – someone recruited from
outside the company, joins you. Your boss explains that although the formal announcement hasn’t
been made yet, the company felt it was important to get the new Director up to speed as quickly as
possible. He will be joining the company in two weeks, after completing his two-weeks notice with his
current employer. Should you tell your friend what happened?
This is an example of the ‘truth versus loyalty’ conflict. Some students will argue in favor of avoiding
the situation altogether and not discussing the issue with the best friend. Others will be willing to risk
their own job security by getting involved and telling the best friend the news – though they may not
think the decision through and wonder if the best friend will ultimately reveal the source of the news.
Others will remain within the bounds of the job description and leave it up to the boss to make the
formal announcement of the new hire.
3. You work in a small custom metal fabrication company that is a wholly owned subsidiary of a larger
conglomerate. Your parent company has announced cost-cutting initiatives that include a freeze on pay
increases, citing ‘current market difficulties’. At the same time, the CEO traded-in the old Company
plane for a brand-new Gulfstream jet. Your colleagues are planning to strike over the unfair treatment
– a strike that will cause considerable hardship for many of your customers who have come to rely on
your company as a quality supplier. Do you go on strike with them?
While we are examining an individual choice here, this scenario can be seen to involve both the
‘short-term versus long-term’ and ‘individual versus community’ conflicts. The former is relevant
because the strike may damage the employer-employee relationship and lead to further problems down
the road. The choice made may also ostracize that employee from his or her colleagues and prompt
the eventual departure of that employee from the company. The latter is relevant because the choice
made may endorse the strike and win the support of your colleagues but it could also impact the
community in which the company operates if there are serious ramifications to the strike taking place.
4. At a picnic given by your employer for all of the company's employees, you observe that your
supervisor -- who is also a friend -- has had a bit too much to drink. As you're walking home after the
party, he stops his car and asks if you'd like a ride home. Do you refuse his offer, perhaps jeopardizing
the friendship, or take a chance on not getting home safely
Answers will vary here depending on the degree of intoxication that is assumed to be prevalent. The
supervisor may have no recollection of the refusal to accept the ride home. The students’ own
willingness to drive after a few drinks may also influence the decision.
Review Exercise:
You are returning from a business trip. As you wait in the departure lounge for your flight to depart, the
gate personnel announce that the flight has been significantly overbooked and that they are offering
incentives for passengers to take later flights. After several minutes, the offer is raised to a free round-trip
ticket anywhere in the continental United States plus meal vouchers for you to have dinner while you wait
for your later flight. You give the offer serious consideration and realize that even though you’ll get home
several hours later than planned, the inconvenience will be minimal, so you give up your seat and take the
free ticket and meal vouchers.
1. Since you are traveling on company time, does the free ticket belong to you or your company? Defend
your choice.
If we assume that there is no clear company policy on this issue, most students would argue that since
the delay doesn’t impact the company (i.e. they wouldn’t miss work as a result), the ticket belongs to
the employee rather than the company. They may also argue that the company would rather reap the
benefit of an unintended ‘perk’ than handle the headache of keeping track of such free tickets.
2. If the later flight was actually the next day (and the airline offered you an accommodation voucher
along with the meal vouchers) and you would be late getting into work, would you make the same
choice? Explain your answer.
In the absence of a clear company policy, the student could take the ticket but would be obligated to
make up the lost time or have it deducted from his or her personal vacation time. To take the ticket and
then ‘blame’ the airline for the delay would be wholly unethical.
3. What if the offer only reached a $100 discount coupon on another ticket – would you still take it? If so,
would you hold the same opinion about whether the coupon belonged to you or your company?
If the employee was planning a vacation, the $100 coupon might be attractive, but beyond that, the
offer would most likely not be seen as attractive as a free ticket.
4. Should your company offer a clearly stated policy on this issue or should they trust their employees to
‘do the right thing’? Explain your answer.
Answers will vary. The value of a clearly stated policy would be that there would be no
misunderstanding on either side. Since the free ticket doesn’t cost the company anything, it is an
attractive way to offer a ‘perk’ to their road warriors, with the clarification that taking such tickets
cannot impact their ability to show-up for work the next day. The alternative choice – to require
employees to turn in such tickets as company property – would be self-defeating since there would be
nothing in it for the employee and as a result of a potentially full and long flight home, that employee
may not be too productive the next day.
Internet Exercise:
1. Locate the Website for the Ethics Resource Center. Does the Center offer any training programs in
Ethics? If so, what types of programs are available? Does the site offer links to other Ethical
organizations? If so, list two companies who have their Code of Ethics linked from the ERC Site.
Answers will vary. Refer to: www.ethics.org
2. Locate the Website for the Ethics and Compliance Officers Association. The ECOA makes a public
commitment to 4 key values. What are they? How does the mission of the ECOA differ from that of
the ERC?
Refer to: www.theecoa.org
4 key values: Integrity, Confidentiality, Collegiality, and Cooperation.
The ECOA’s mission: “Being the leading provider of ethics, compliance, and corporate governance
resources to ethics and compliance professionals worldwide.” Focuses on the profession of being an
Ethics and Compliance Officer. The ERC mission focuses on a much broader perspective: “to
strengthen ethical leadership worldwide by providing leading-edge expertise and services through
research, education and partnerships.”
3. Locate the Website for the Center for Business Ethics. Find the Research Publications page and
identify the most recent research report released by the CBE. Briefly summarize the ethical issue
discussed in the report. Do you agree or disagree with the conclusions reached in the report? Explain
your answer.
Answers will vary. Refer to: www.bentley.edu/cbe
Team Exercises:
1. Thanks for the training!
Divide into two groups and prepare arguments for and against the following behavior:
You work in the IT department of a large international company. At your annual performance review you
were asked about your goals and objectives for the coming year and you stated that you would like to get
MCSE (Microsoft Certified Systems Engineer) certification. You didn’t get much of a pay raise (yet
another cost-cutting initiative!) but your boss told you that there was money in the training budget for the
MCSE course – you’re attending the training next week. However, after receiving the poor pay raise, you
had polished your resume and applied for some other positions. You have received an attractive job offer
from another company for more money, and in the last interview your potential new boss commented that it
was a shame you didn’t have your MCSE certification because that would qualify you for a higher pay
grade. They don’t have the training budget to put you through the MCSE training for at least 2 years. You
tell the interviewer that you will complete the MCSE training prior to starting the new position in order to
qualify for the higher pay grade. You choose not to qualify that statement with any additional information
on who will be paying for the training. You successfully gain the MCSE certification and then give your
two weeks notice. You start with your new company at the higher pay grade. Is that ethical?
FOR:
 Assuming that there was no contractual commitment attached to the training (i.e. the employee
had to agree to stay for a certain period of time after completing the training), the employee had
no obligation to stay once the training was completed. If the company had needed to make job
cuts, the training wouldn’t have made a difference, so why should it make a difference on the
employee side?
 The company didn’t give you a decent pay raise, and so the MCSE training can be counted as
‘alternative compensation.
 They could have put a clause in your contract requiring you to stay or pay for the training, but
they apparently didn’t – whose fault is that?
 If the MCSE certification makes an employee more marketable, why shouldn’t he or she take
advantage of that?
 If the company paid a decent salary to begin with, maybe you wouldn’t have polished your resume
and found a better position.
AGAINST:
 It was wrong to take the training when you had already decided to leave the company for the new
position.
 The company made a ‘good faith’ investment in your continued employment with them but you are
taking the money and running.
 Your supervisor was conscious of the low pay raise and put you forward for the training to
compensate for that – he found a way to keep you happy in recognition of your value to the
company.
 You withheld information from your new employer by not disclosing that your former employer
was paying for the training. Had your new boss been made aware of that, he might not have been
so willing to employ you – after all, if you would do that to your ex-boss, what would you do to
your new one?
2. What you do in your ‘free time’….
Divide into two groups and prepare arguments for and against the following behavior:
You are attending an Employee Team-Building Retreat at a local resort. During one of the ‘free-time’
periods in the busy agenda you observe one of your colleagues in a passionate embrace with a young
woman from another department. Since you work in HR and processed the hiring paperwork on both of
them, you know that neither one of them is married, but your benefit plan provides coverage for ‘life
partners’ and both of them purchase health coverage for life partners. As you consider this revelation
further you are reminded that even if they have both ended their relationships with their respective partners,
the company has a policy that expressly forbids employees from dating other employees in the company.
Both you and the colleague you observed have applied for the same promotion – a promotion that carries a
significant salary increase. What is your obligation here? Should you report him to your boss?
FOR:
 You are observing behavior that is in violation of company policy.
 Such behavior shows a lack of judgment on the part of both employees involved in the ‘embrace’.
 If the colleague is making a bad choice on this issue, what other bad choices is he making and,
more importantly, what bad choices could he make if he was promoted to a new role with greater
authority and responsibility?
AGAINST:
Consider the questions for resolving an ethical dilemma:
 Analyze the consequences. Who will be helped by what you do? Who will be harmed? You don’t
know all the details about what’s going on here. They may be violating a company policy, but you
have no evidence from one ‘passionate embrace’ that they are dating. You would also run the risk
of ruining your own reputation since your report to your boss on what you saw could be perceived
as a deliberate attempt to discredit someone who is under consideration for the same promotion
as you. HR may be the corporate conscience, but that doesn’t mean they should be the corporate
CIA or KGB.
 Analyze the actions. Consider all of the options from a different perspective, without thinking
about the consequences. Would taking the moral high ground really benefit anyone in this
situation?
 Make a decision. Then be prepared to live with that decision. The demonstration of such poor
judgment should lead you to believe that the same behavior will be demonstrated again and the
situation will be resolved permanently.
Discussion Exercise 2.1
$2500
1. Would you cash the check or return it to Global Investment Banking? What is ‘the right thing’ to do
here? Explain the reasoning behind your decision.
Answers will vary. Some will empathize with his anger and frustration at the way he has been treated
by his company and argue that he is ‘entitled’ to keep the money. Others will recognize that the ticket
was returned unused, he never made the business trip as an employee of the company, and the money
is not his to keep. When the emotion is put aside, logic would also tell you that the bookkeeping system
would probably catch-up with him at some point anyway.
2. The employee feels that he was misled by his employer – is that sufficient justification for keeping the
check?
No. He is right to feel misled by his employer, but there is nothing in the employment contract that
guarantees permanent employment – plus he received a severance check. To use the behavior of his
company to justify keeping the check is simply rationalization for behavior that he knows is unethical.
3. The employee took some company notepads and pens when Security wasn’t looking – does that
behavior suggest that he/she will most likely keep the check?
The behavior is certainly indicative of questionable ethics, but it would be a stretch to leap from
notepads and pens to a check for $2500. The key factor here is the emotional state of mind – the anger
and resentment he feels towards his company may cloud his better judgment and lead him to keep the
money.
4. Is the employee’s willingness to consider keeping the check really about the money or is it about the
way he was treated by his employer?
It’s about the way he was treated by his employer. The interest in the check is not the amount or what
he could do with it. It’s more about the act of defiance in not returning it as a payback for the way he
feels he was treated.
5. Global Investment Banking gave the laid-off employees a four-month severance package – if they had
given a 6-month package, would that make a difference in this dilemma? What about a 12-month
package?
Assumptions have to be made here since there is very little information on this in the case. His
resentment is at the way he was treated, not the amount of severance he received, so it’s unlikely that
more money would make a difference. Again, his decision to keep the check would be an act of
defiance in retaliation for the way he feels he was treated. It’s not about the $2500 making-up for a
perceived shortfall in the severance he feels he deserved.
6. Could Global Investment Banking have treated this employee any differently in this situation? Would
that different treatment have prompted the employee to return the check without even considering the
possibility of cashing it?
Answers will vary. His termination was certainly cold, clinical and as efficient as their company policy
probably demanded. However, the company could have made an effort to offer him an alternative
position somewhere else in the organization or offered help in finding a new position (outplacement
services), or sufficient severance to fund his period of (hopefully) temporary unemployment. It is
possible that better treatment such as this might help to reduce his anger and resentment and thus
minimize the likelihood of his keeping the check as an act of defiance.
Discussion Exercise 2.2
Nick Zane
1. Should Carol have discussed her brother’s relationship with his COO, Sue Ralston, with Nick Zane?
She obviously thought he already knew, which made the discussion more about ‘gossip’ than about
deciding what the consequences of the relationship should be for the people involved and for the
company.
2. Now that Nick has been given this information, what are his choices of action?
Nick has an obligation as a Board Member of this company. For the Chief Executive Officer and Chief
Operating Officer of an organization to be having a relationship – and an extra-marital relationship at
that – demonstrates poor judgment that could impact the efficient operation of the company. As a
Board Member, Nick can bring this information to the attention of the Board and even go as far as
requesting a ‘vote of no confidence’ which could result in Greg’s replacement. His alternative action
would be to assume that the relationship wouldn’t impact the performance of the company and say
nothing.
3. Does Nick have an obligation to notify the CEO whose name he gave to Greg as a lead for a potential
investor? Why?
Yes. He recommended Greg based on his current assessment of his abilities. This new knowledge of
Greg’s judgment would definitely change that assessment and probably prompt him to withdraw that
recommendation.
4. Do you think Nick will be able to continue as a Board Member for this company? Should he continue?
Given the deception and poor judgment involved here, it is unlikely that Nick would want to continue.
However, if the Board were to replace Greg and Sue on the basis of their relationship, Nick may
decide to continue as a Board Member with the new management team in place.
5. Does Greg have an obligation to disclose his relationship with Sue Ralston? If they had ‘gone public’
about the relationship instead of letting people find out through dinner conversations, would that have
made a difference?
If the relationship is likely to impact the efficient operation of the company, then yes he had an
obligation to disclose it. For the CEO and COO to have a relationship brings the effective governance
of the corporation into question, which can, in turn, prompt questions among stakeholders who would
see the relationship as a major ‘distraction’. Going public in announcing their relationship would
have shown more maturity than letting it leak out through gossip, but a public announcement would
have to include a plan as to who would be stepping down to maintain the effective governance of the
corporation.
6. How do you think the Board and the company’s investors will react to the news?
It’s unlikely that the reaction will be a positive one. Both parties have shown poor judgment in keeping
the relationship a secret from colleagues who had a vested interest in the continued effective
management of the company and an ethical obligation toward their stakeholders. The Board should
vote to replace both of them. However, given the involvement of family members as primary investors,
it’s likely that the situation will get very messy.
DVD NOTES:
Title 1: Money & Ethics
Summary:
University of Maryland MBA students witness presentations from incarcerated white-collar criminals as
part of a ‘scared straight’ program. One of the prominent business leaders in Tom Peters’ ‘In Search of
Excellence’, Stew Leonard, is featured as an example of how the mighty may fall. Leonard was sentenced
to 52 months in prison in the largest tax fraud case in Connecticut after pleading guilty to skimming $17
million in profits to offshore accounts.
Ethics consultant and Columbia University professor, Barbara Toffler recounts how she was hired by
Arthur Andersen to build a consulting practice on ethics and responsible business practices at the same time
that Andersen’s lack of ethical controls over their internal practices were leading to the eventual collapse of
the company after the Enron scandal.
This video is a good introduction to the general discussion of whether or not business ethics is an
oxymoron. The questions in the ethics debate between business students at the end of the piece could be
repeated in class as an activity.
Discussion Questions
1. Barbara Toffler argues that business ethics are worse than ever. Do the unethical acts of Enron,
Global Crossing, Tyco and WorldCom seem worse than the ‘junk bond’ activities of Ivan Boesky
and Michael Milken?
2. Do you agree with the statement: “Money is the hugest intoxicant there is”? Why or why not?
3. Do you think the 25-year sentence against Bernie Ebbers from WorldCom and the 24-year
sentence for Jeff Skilling from Enron will be sufficiently harsh to impact ethical business
behavior? Why or why not?
Discussion Answers:
1. Students may agree with Toffler’s argument in the video that individual investors and consumers
were shielded from the true effects of the unethical behavior by the B2B relationship of the bond
traders. It may be argued that those over-leveraged businesses ultimately resorted to layoffs to
reduce costs so the B2B relationship really did nothing more than delay the inevitable.
2. Students are likely to agree with this characterization.
3. There is some question as to the extent to which Ebbers and Skilling have been used as examples
of the new ‘tough regime’ on corporate fraud. However, whether this approach proves to be an
effective deterrent remains to be seen.

CHAPTER 2 - Defining Business Ethics: Lesson Overview

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CHAPTER 2 - Defining Business Ethics: Lesson Overview

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Understanding Ethics – Ghillyer

CHAPTER 2 – Defining Business Ethics

o Defining Business Ethics

Upon completion of this chapter, the students will be able to:

KEY TERMS AND CONCEPTS

Term Definition Page

10 to 25 Chapter 2  Defining Business Ethics Textbook

Teaching tip: Ask students if ethical

2. A descriptive summation of the customs,

3. A normative (or prescriptive) evaluation of

 Who are the Stakeholders?

1. A stakeholder is someone with a share or

Teaching tip: Ask students to give an

Upon completion of this chapter, the student will be

2. Identify an organization’s stakeholders.

3. Understand the purpose of a Code of Ethics.

4. Identify an ethical dilemma in your work

5. Understand how to go about seeking advice

6. Be prepared to resolve an ethical dilemma in

3. A code of ethics is a company’s written standards of

Teaching tip: Ask students what function a code of

 The History of Business Ethics

2. The issue of corporate responsibility has become a

3. Corporate ethics has moved into the organizational

Teaching tip: Ask students if codes of ethics are

4. The 2002 Sarbanes-Oxley Act has introduced greater

5. In many cases, the scenario you are facing is not a

‘The Customer is Always Right’

Stakeholders Impact from Dave’s plan

2. Describe the Ethical Dilemma that Carol is facing here.

3. What should Carol do now?

3. A belief that the activity is in the individual’s or the

4. A belief that the activity is “safe” because it will

5. A belief that because the activity helps the company,

 Resolving Ethical Dilemmas

1. Resolution of an ethical dilemma can be achieved by

2. The three resolution principles for ethical dilemmas

 Building and Operating an Ethical Business

1. It is unfortunate that the media has been given so

Teaching tip: Ask students if building and operating

Progress Check Questions:

1. Explain the term ‘Business Ethics’.

The application of ethical standards to business behavior

A descriptive approach describes what is happening. A prescriptive approach recommends what

3. Identify six stakeholders of an organization.

Stockholders, employees, customers, suppliers/vendor partners, retailers/wholesalers, Federal

5. Define the term ‘Oxymoron’ and provide 3 examples.

6. Is the term ‘Business Ethics’ an oxymoron? Explain your answer.

7. Define the term ‘Corporate Governance’.

The system by which business corporations are directed and controlled.

8. Explain the term ‘Code of Ethics’.

Answers will vary – refer to table 2.3

Answers will vary – refer to table 2.3

Answers will vary – refer to table 2.3

12. Which decade saw the most ethics dilemmas? Why?

Answers will vary – refer to table 2.3

 Consult the Company Code of Ethics

14. List the 4 types of ethical conflict.

 Truth versus Loyalty

15. List the 3 principles available to you in resolving an ethical dilemma.

Answers will vary.

Case 2.1: “Ethics, Schmethics” – Enron’s Code of Ethics