Chapter 3 Applying Moral Philosophies to Business Ethics 53 climb the corporate ladder is the ‘lass celling issue for minorities and women. In her current position, she must decide ‘which of three managers to promote. Her superior has informed her that making the wrong decision ‘would not be good, either internally or externally. ‘These are the candidates Liz (Aican-American, 34, divorced, one child) graduated in the lower half of her college class (Northveest State). She has been with the eompany fo four years and in the industry fr eight years, with medioere performance ratings but high en ergy level. She has had some difculties in manag lng her staff. Her child has had medical problems, 1d so higher pay would be helpful. If promoted, Liz would be the first African-American female manager at this level. Lael has known Liz only a short time, but they seem to have hit tof. n fac, Lael once baby-sat Liz daughter, Janeen, in an ‘emergency. The downside to promoting Li, though, ‘might be a perception Lae is playing favorites. Roy (white 57, married, dhee children) grad ated from a private university in the top half of his class. Roy has been with the company for twenty years and inthe industry for thirty. He has always been a steady performer, with mostly average rat Ings. The reason Ray has been passed aver before vas his refusal to relocate, but that is no longer a problem, Roy's energy evel is average to low how. fever, he has produced many of the company’s top sales performers in the past. This promotion would be ls last before retirement, and many in the com: any fee he has earned it Infact, one senior man- ager stopped Lael in the hall and said, "You know, Lael, Roy has been wit us for @ long Gime. He has done many good things for the company, sacrific ing not only himself but also his far 1 really hhope that you can see your way to promoting bits Tewould bea favor tome that I woulda forget Quang Yeh (male, Asian, 27, single) graduated from State University in the top 3 percent of her class and has been with the conpany’ for three years. She is known for puting sixty-hour weeks and for her very meticulous management style, which has generated some criticism from her sales staff. The last area she had minaged showed recor increases, despite the loss of some older ac counts that for some reason did not lke dealing ‘with Quang, One fact about Quang is that at her previous place of work she sued the company for discrimination and won. A comment that Lael had hheard from that company was that Quang was in tense and that nothing would stop her ftom reach- ing her goals As Lael was going over some of her noes, another upper-management individual eame toher office and said, "You know Lael, Quang is en {gaged to my son. I've looked over her personnel files and she looks very good. She looks like a ris Ing star, which would indicate that she should be promoted as quickly as possible. I realize that you're notin my division, but the way people get transferred you never know. [would telly like to see Quang get this promotion, Finally; Laels immediate supervisor came to her to tak about Liz "You know, Lael, Lizs one of avery few people at the compiny who is an AMrican-American female who is qualified for this position. I've been going over the eompany’shir ing and promotion figures, and it would be very advantageous for me personally and for the com pany to promote her. I've also spoken o public re- Jations, and they believe that tis would be a tremendous boost for the company ‘As Lael pondered her decision, she mentally went through each candidates record and found tat cach had advantages and disadvantages, ‘While she was considering her problem, the phone rang, "Lael, Tm sory to disturb you at this late hour but I need you to come to the hospital heen {Li's daughter) has been in an aceident, and T donit know who to turn to Can you came?” was Li's frantc question. "es, mon ry way" Lael re- sponded, When Lael got tthe hospital, she found54 Part 1 Understanding Ethic Decision Making that Janeen's injuries were fily serious and that Liz would have to miss some work to help with the recuperation process, Lae ao realized that this 1, Discuss the advantages and disadvantages of Questions accident would create a financial problem for Liz, each eandidate Which a promotion could help solv, 2. What ate the ethical and legal considerations The next day seemed very long and was pune- for Lael? tuted by the announcement that Roy's son was 3, Identify the pressures that have caused this to getting martied to the vice president's daughter. be anethieal and legal issue, The wedding would be in June, and it sounded as 4, Discuss the implications of each decision Lael though i¢ would be a company affal. By 4:30 that could mate afternoon Lael had gone through four asplrins and ‘wo antacids Her decision was due in two days, “his cue sity hypothetical any resemblance ore What should she do? persons companies 0 situations i coincidental ‘oral philosophies have to do with Ideas of right ard wrong. They help ‘explain why a person believes that one action fright whereas another wrong: they are often cited to justify decisions or explain actions, There fore, to understand how people make ethical decisions, iis useful to have a grasp ofthe major types of maral philosophies. In this chapter we explore several aspects of moral philosophy, First we define moral philosophy and discuss how it applies to business. Next we describe two broad classifications of moral philosophy: teleology and deontology. Then we consider the relativst perspective from which many ethical orunethieal decisions are made in everyday hfe We discuss whats called virtue ethics and how itcan be applied to today's multinational business environment. And the final section re lates to evaluations of justice. MORAL PiiLosopry Derive ‘When people talk about philosophy, they usually mean the system of values by hich they live. Moral philosophy rofers in particular to the principles or rules that people use to decide what is right or wrong. For example, production man ‘ager may be guided by a general philosophy of management that emphasizes en couraging workers to know as much as possible about th: product they are ‘manufacturing. Moral philosophy comes into play when the nanager must make decisions such as whether to notify employees in advance of upcoming lyofl Although workers would prefer advance warning, ts side effects migit adversely affect production quality and quantity. Such deeisions require a person to eval. ate the “rightness,” or morality, of choiees in terms of his or het own principles and values,Chapter 2 Real-Life Situation* ‘Twenty-eight year-old Elaine Hunt, who is married and has one child hhas been with United Bane Corp. (UBC for several years, During that time she has seen it grow from a relatively stall eo ‘medium-size company with domestic and inten hational customers. Elaine’ husband, Dennis, hes ‘been involved inthe import-export business The situation that precipitated the eurrent prob- fem began six months ago. Elaine had just been promoted to senior finanetal manager, which rae her in charge of ten branch-ofice loan managers ‘each of whom had five loan officers who reper tea tohim or her. For he most part, the branch ean of, ficets would go through the numbers of thelr loan people as well assign off on loans under $250,000, But recently this limit had been increased to $900,000. Any oan over this amount and up to $10, nllon had to be signed off by Elaine. For lager Toans, a viee president would have to be involved Recently, Graphco, Inc. had requested a $10 ‘milion loan, which Elaine had been hesitant to approve. Graphco was a subsidiary of a tobaces firm embroiled in ligation concerning the pro motion ofits products to children, When reviewing the numbers, Eine could not find any glaring Droblems, yet she had decided against the lost ven when Graphco had offered to pay an add onal interest point. Some at UBC applauded hey ‘moral stance while others didnot, arguing th it was not a good “inanclal business decision” The ‘ext prospective loan was for a Canadian com any that was doing business in Cube, exporting cigars. Elaine ited the U.S. policy against Cuba ne the reason for not approving that oan, "The Helos Burton Amendment gives us clear guidance as to what we shouldn'tbe doing with Cuba" she said to bothers in the company, even though the loan was ‘oa Canadian frm. The third loan application she was unwiling to approve had come from flee trode Intemational, which sought $50 milion The ‘Bumbers had been marginal, but the sticking point Applying Moral Philosophies to Bosines Ethics 6 for Elaine was Blectode's unusually high profits during the last two years. During dinner with Deas nis, she had learned about a meeting in Zurich during which Hletrode and others hal allegedly fixed the prices on ther products. Because only handful of companies manufactured these part ular products, the rice increases were very sus cessful, When Elaine suggested denying the nae ‘on the basis of this irformation, she was ove ruled. At the same time, a company in Brazil wos asking for an agricultual loan to harvest parte ot {he rainforest The Brazilian company was wiling to pay almost two points aver the going rate fon $40 milion loan. Because of her stand on environ ‘mental issues, Elaine rejected this application oo well The company obtained the loan from one of UBC’ competitors Recently, Eaines husband's decision making had fallen short ofhis superior’ expectations Pie thete was the problem ofan American firm wane ingto export nicotine andcafeine patches o South, fast Asia, With new research showing both ther rugs to be moze problematic than previously thought, the manufactuing frm had decided wy {attempt a rapid-penetraton marketing strategy tha is, to price the products very low or at cost in frder to gain market share and then over time slightly increase the margin, With 2bilion poten tial customers. a 1 cent markup could result a tions of dollars in profits. Dennis had rejected the eal, and the frm had gone to another compare ‘One person in Dennis’ dision had said, "De you realize that you had the perfect product — one tat \as lw cos and both physically and paycholog ¢ally addictive? You could have serviced that ooo account for years and would have had enough Ine ‘arly retirement. Are you nuts for tuning it doen Soon afterwaed an area financial hank manager wanted Elaine to sign off on a revolving loan for NBC. ABCO's debe equity aio had ineeased sig: icantly and ddl not conferm to company rege tions: however, laine was the one wha had written the standards for UBC. Sore in the company felt that laine was not quit up withthe times For example, several very good bank staf had let in70 the past year because they found her regulations two provincial forthe global marketplace that was emerging for URC. As Elaine reviewed ABOO' credit. report, she found many danger signals; however, the loan was relatively large, $30 milion, and the ‘company had been in a credit sales slump. AS she {questioned ABCO, Elaine learned thatthe loan was to develop a new business venture within the Peo- ples Republic of China, which rumor had it was tlso working with the Democratic Peoples Repub- Tieof Korea, The biotech venture was for fetal tissue research and harvesting, Recenty, attention had focused on the economic benefits of such tissue in helping ahostof ailments Anticipated global market sales for such products were being estimated at $10 billion forthe next decade. ABCO was also will ing to go almost two points above the standard in- terest equation for such a revolving loan. Elaine realized that if she signed off on ths sal, it would signal an end to her standards. Ifshe did not and ABCO went to another company for the loan and paid off the debt, she would have made a gross er forand everyone in the company would know it ‘As she was wrestling with this problem, Den- hiss commissions began to slp, putting crimp in Understanding Ethical Decision Making their cash-flow projections. If hings did not tum around quickly for Dennis, they could lose thelr ‘new home, get behind in other payments, and re duce the numberof educational options for teit child, Elaine had also had a frank discussion with Senior management about ber loan standards as wel as her stand on tobacco, which had lost UBC precious income. The response was, "Elaine, we Applaud your moral outrage bout such products, Dut your morals are negatively impacting the bot tom line, We can'thave that al the time.” Questions = Exercises Discuss the advantages and disadvantages of ‘each decision Elaine has made. What are the ethical and legal considerations facing Elaine, Dennis, and UBCt Discuss possible moral philosophies used in this situation, 4 Discuss the implications of each decision laine could make “This case srt hypothaiatany resemblance to reat persons companies or ituaton iscoincidemtal 5 ane 1. Teleology refers to right or acceptable behavior in terms Yes No [EE * ircoeuens rena PYOUR 2 scetatvist ots at an ethical situation and considers Yes No [PR assent gos nas } |, 3. Autiltarian is mast concerned with the bottom-line benefits. Yes No SS aoe ; | gence * S'mratry inmates dion ol th oor {loan Asses |S Vires supporting business transactions include trast, Yes No © your performance faimess, truthfulness, competitiveness, and focus. Noosa YOU a ‘overall understand tng of the caper mater [nou jue suman od = URI pur I BUS onic apap sistem a] ON a ve AED 30 SBI adele pit Sopp se Mut ane a 34 owes sen a od 30 Canons te 3.9 poo ea 3 0} 0 uePEAN 9A e_SUUS a IDEn art hical Dilemma* “Myron had just graduated from West Coast University with both chemistry! pharmacy and business degrees and was excited to work for Producto In ternational (PD). Myron loved the opportunity to discover medicinal products around the word. His wife, Quan, was also enthusiastic about her job as an import-export agent fora subsidiary of Pt Producto International was the industry with headquarters in Pais. Worldwide, of small firms were competing with PI; however, only six were ofits magnitude. These six had cor ered 75 percent of world sales. So many interrela tionships had developed that competition had ‘become managed” This did not constitute any ile gal form of monopolistic behavior as defined by the European Union. ‘Myron’ firs assignment was in India and con cemed exporting betel nuts to South and perhaps North America. Itis estimated that more than 20, ‘milion people chew betel nuts in India alone. The betel nut sone ofthe world’s most popular plants, with the leaf used as a paper for rolling tobacco. ‘Myron quickly found that regula use ofthe betel ‘nut will in time, stan the mouth, gums, and teeth deep ted, which in Asia isa postive quality, The betel nt is mashed or powdered with other ingre dents and rolled up ina leaf and sold as eandy. As ‘Myron was learning more about the betel nut, he came actoss the following report from the People’s Republic of China: "Studies show that the cheving ‘of the spiced eel nut can lead to oral eancer. Ac= cording to research, 88 percent of Taiwan's oral cancer patients ate betelnut chewers, Als, people who chew betel nuts and smoke are 99 times more likely to develop oral eancer than nonusers.” My- ron found that the betel nut primarily afeets the tenral nervous system, It Increases respiration while decreasing the work load on the hear a mild high). Myron also found hat demand for it was starting to emerge in the United States as well asin other developed counties. ‘Understanding Ethie Deion Making While Myron was working on the betel nut, David, Myron’ boss, alsa wanted him to work on the introduction of khat (pronounced “cot’) into Asa. Kha is a natural stimiantfiom a plant grown In ast Africa and southern Arabia. Freshkhat eaves, ‘which are typically chewed lke tobacco, produce 8 mild cocaine- or amphetarrine-like euphoria, ‘hich, however, is much less intense than that produced by either of these substances, with no ‘eports ofa rush sensation or paranoia. Chewing hat produces a strong aroma and generates in tense thist, Casual users clara that Khat lis spi its, sharpens thinking, and, when its effects weat off, generates mild lapses into depression similar to those observed among cocaine users. Reports ‘suggest that since there appeas to be a physical Intolerance due in pat o limitations in how much, ‘canbe ingested by chewing, there are no reports of physical_symproms accompanying withdrawal, Advocates of Khat use claim that it eases symp: toms of diabetes, asthma, and disorders of the ‘stomach and the intestinal tact, Opponents elaim that Khat damages health, suppresses appetite, land prevents sleep In the United States, Khat has ‘been classified asa schedule 1V substance by the Drug Enforcement Agency (DEA, with freshly picked leaves (within forty-eight hours of harvest) being classitied as a schedule Inarcoti, the most resistive category used by the DEA. ‘ter doing his research, Myron delivered his re- port to David and sald, “T really think that, given the right marketing to some of te big pharmaceu- tical companies, we should have ewo huge revenue makers. "That’ great, Myron, but the pharmaceutical market is only secondary to ourprimary market — ‘the 2 billion consumers to whom we can introduce these products” "what do you mean, David?” Myron asked, “I mean these products are grown legally around the world, and the eotntties dat we a targeting have no restrictions on these sub stances," David explained, “Wh not tailor the de livery of the product by country? For example, we find out which flavors people nant the betel nutChapter 4 Sock Responsibty in, in North and South America or the Middle East The packaging will have to change by country as well as branding, Pricing strategies will nee (o be developed relative t0 our branding decisions, and of course quantity usages wall have co be ea. culated. For example, single, multiple, supervalue sizes, et, need to be explored. The same can be done for Khat.” David added, “Because of your re your salaries! You dont have to thank me, Myron, ‘You've worked hard on theseprojects and now you deserve to have some ofthe benefits ‘Myron went back this ofice to think about his and Quan’ future, He had heard of someone re Jecting such an offer, and tht persons career had languished at PL Eventually, that individual left the Industry, never tobe heard fram again, search and your business background, Im putting you on the marketing team for both. Of course, Questions w Exercises” ‘his means that you're going to have co be pro. Questions w Exerc ‘moted and at least for awhile live in Hong Kong. 11. know Quan will be excited. Infact, told her the 2. news this morning that she would be working on the same project in Hong Kong. Producto Interna- 3, | tonal ies tobe sensitive to the dual-career family problems that can occur. Ps you'll be closer 0 Felatives 1 told Quan that with living allowances and all ofthe other things that go with interna ional placement, you to should almost triple Identity the social responsbilty issues Discuss the advantages nd disadvantages of ‘each decision Myron could make. Discuss the issue of marketing products that are legal but have addictive properties associ- ated with them, “This case is sity hypothetical any resemblance tral persons, companies, oF situations coincidental terchangeably, but as we pointed out in Chapter 1, each of these two terms hhas a distinct meaning. Busines els, as defined inthis text, comprises principles and standards that gude behavior in the world of susiness, Specific be- havior is usually evaluated in terms of individual and group decisions. A specific action is judged right or wrong, ethical or unethical, bythe individual and by oth- ‘ers inside and outside the organization. Although evaluations of et date not necessarily accurate, these judgments influence sosietys acceptance or rejection of individual and group activities within the business environment, So- ‘iat responsiblity in business refers to an organization’ obligation to maximize its } positive impact on stakeholders (customers, owners, employers, community, sup pliers, and the government) and to minimize its negative impact, There are four kinds of social responsiblity: legal, ethical, economic, and philanthropic. Ethie, then, is one dimension of social responsibility Ethics inthe context of social e sponsibility focuses on issues that influence a fits positive impact on society and minimize its negative impact, Business ethics and social esponsibility are thus closely linked, Many of the ‘cases, exercises, and vignettes used in this text have both soda responsibilty and ethical implications. The more you know about socal responsibility and its rela tion to business ethics, the better informed you will bein dscussing ethical and social responsibilty issues (see Figure 4-1), Corporate citizenship isthe extent to which businesses meet the legal, ethical, economic, and philanthropic responsibilities placed on them by their various he ‘concepts of business ethics and social responsibility are often used inChapter 4 Socal Responsitity al-Life Situation’ Albert Chen was sweating profusely i his Jaguar on the expressway as he thought about his options and the fact that Christmas and the nese New Year were at hand. He and his wife, Mary ‘who were on their way to meet Alberts parent at New Yorks Johin E Kennedy Airport, seemed to bbelooking up ftom an abyss, wth no daylight to be seen, Several visits and phone cals from various people had engulfed both him and Mary. He had graduated with honors in finance and hhad married Mary in his senior year. They had both obtained prestigious brokerage jobs in the New York area, and both had been working killer hours to develop their accounts. Listening to other brokers, both had learned that thete were some added expenses. For example, they were told that brokers need to “look” and “ace” siccesful $0 Ale bert and Mary boughe the appropriate clothes and as, joined the right clubs, and ate atthe right Festaurants with the right people. They also took the advice of others, which was to identity the layers" of large corporations at parties and take ‘mental notes. "You'd be surprised at what informa tion you heat with a lite alcohol in these people,” said one broker. Both started using this strategy, nd five months late their clients began to see sig nificant profits In their portolios, Their good luck even came fom strange places. Forexample, Albert hed an uncle whose work asa janitor gave him access to many law offices that had information on a numberof companies, espe cially those about to file for bankruptey. Mary and Albert were able to use information provided by this uncle to beneft their clients pottfolios. The lunele even had some of his friends use albert To Alberts surprise, his uncle's friends often had nest ‘ea in excess of $200,000, Hecause some of these friends were quite elderly, Albert was given per mission to buy and sell nontisky stocks at wil As hoth of them were earning good salaries, the ‘Chens soon managed to invest in the market 99 themselves, and their investments included stock in the company for which Mary's father worked, Aer eighteen months, Alsere decided to Jump ship and start working for larvs, Sunni, Lamar Morten (JSL&M). JSLEM's reputation was ofa fast ‘mover inthe business, “We go up to the line and then measure how wie theline isso that we know hhow far we ean go int it," was a common remark at the brokerage firm, About six months ago, Mary’ father, who was ‘with a major health eare company, commented thatthe management team was running the cot any into the ground, “If ony someone could by the company and put in 4 good management team," he mused. Air the conversation, Mary in vestigated the company and discovered that the Stock was grossly undervalued. She made a few Phone cals and found a company that was inter ested in doing a hostile takeover. Mary ako learned ftom her father that if new management were acceptable to the union, the union would do everything in its power to aust the old manage ‘ment —by striking, if necesiary — andl welcome the new one. As things started to materialize, Mary told several ofher best clients, who in tr did very Well on the stock. This inereased her satus in the firm, which kept dravsing bigger clients, Albert soon became a plyer in initial public stock offerings (IPOs) of new companies. Occa sionally, when Albert sawa very hot IPO, he would talk to some of his best ventute-capital types who then bought the IPOs and gained some very good. returns. This strategy helped attact some larger Players in the market. By ths point in his young career, Albert had made great many friends, One of those frends was Bury, who worked on the stock floor. As they were talking, Barry men tioned that if lbert wanted toe, as favor, when, Placing orders to buy shares, would occasionally Put Albert or Mary’ trade betsre the eient onder ‘The fist sign of rouble came when Maty told Albert about what was happening at her office ‘Tm getting e-mail from someof the brokers with off-color jokes and even some nude photos of women and men, 1just dont ite for it *So what100 Part are you doing about it" Albert asked. “Well, ve just started not even opening my messages if they come ftom these people," Mary replied. “What about messages that request that you send them ‘on? What do you do with those?" queried Albert. "1 just e-mail them along without looking at them,” was her response. "Ths isnt good, Mary. A couple of analysts were just fired for doing that ata big firm last week,” said Albert. Several Weeks later the people who were sending Mary the obnoxious messages were fired, Mary was also asked to see the head of her division. When she came to his of- fice, he said, "Please shut the door, Mary. I have some bad news, [know that you weren't involved with what was happening withthe e-mail scandal; however, you did forward messages that contained. such material As a result, [have ne alternative but to give you your two weeks’ notice. [know this unfair, hut Thave my orders. Because ofthis mess, the SEC [Securities and Exchange Commission wants (0 check all your trades for the last eight ‘months, It seems tobe a formality, but it wil take time, and as you well know, the chances of going to another firm with that hanging over your head are slim. Tm sorry tha it’s only wo months until the holidays” That night Macy fel into a depression, ‘To exacerbate the situation, Alberts parents were flying in from the People's Republi of China, They were not happy with Alberts marriage to a casian, but they had consoled themselves that Mary had @ good job. They had also said that if things should go badly for them in New York, they could always come to the parents’ retirement hhome in Taiwan. However, the idea of leaving the United States, attempting to leaen Mandarin, and raising children in an unfamiliar culture did not peal co Mary. “Albert was aso having some problems. As their Income was cut in half, Albert ted to make up for the loss by trading in some high-risk markets, sue ‘Understanding Ethical Decision Making 45 commodities and metals. However, many of these investments turned sour, and he foxnd him self buying and selling more and more to pl his ‘own portfolio, as well as thote of his cients, into the black. He was geting worsed because some of his uncle’ frends’ portfolios were losing signif cant value. Other matters, hawever, were causing him even more anxiety. The previous week Barry had called him, asking for some inside information ‘on several companies that hewas working with for ‘an IPO. Albert knew that this could be construed as insider information and had said no. Today Barry called again and sald, "Look, Al, I've been doing you favors for awhile. T need 0 sore big because of the holidays. You probably don't know, but ‘what I've been doing for you cold be construed as spinning, which is not looked upon favorably. Im not asking fr the IPO information — I'm demand. ing it, Is that elear enough for you, AF? E-mail it over by tomorrove morning." Then Barry bung up. ‘An hour later Albert's supervisor eame in and said, |, 1 need a favor from you 1 want you to buy some stock for me and afew fiends, When it goes to $112, Twant you to sell it. Wel pay the taxes and give you a litle bonus fot Crista as well. ‘want you to buy tomorrow as soon as the market ‘opens. Here are the account numbers for the ‘ransaction. must un See yeu tomorrows" Questions = Exercises 1. Identify the ethical and legal issues of which Al bertneeds o be aware. 2, Discuss the advantages and disadvantages of ‘each decision Albert could-nake and has made, 8. Identify the pressures that have brought about these issues “This casei strc hyphal ny eeemblance to eal Persons companies, o stations revncenta ——— eeChapter 5A Framework for Understanding Ethical Dedson Makirg in Business Bill Church was ina bind. A recent graduate of a prestigious business shoo] he had taken a job in the au iting division of Greenspan & Co, a fast-growing leader in the accounting industry. Greenspan relocated Bil, his wife, and their 1- year-old daughter from the Midwest to the East Coast. On arriving, they bought their frst home and a second car. Bll was tld thatthe company had big plans for him, Thus he did not worry about being financially overextended, ‘Several months into the job, Bil found that he ‘was working late into the night to complete his au ‘iting assignments, He realized that the company ‘id not want its clients billed for excessive hours And that he needed to become more efficient he ‘wanted to move up in the company. He asked one ofhis friends, Ann how she managed to beso eft cient in auditing client records ‘Ann quietly explained: “Bill, there are times ‘when being efficient isnt enough. You need to do ‘what Is equited to get ahead. The partners just ‘want results — they dont care how you get dem.” | dont understand,” said Bi 103 “Look.” Ann explained, “I had the same prob: Jem you have a few years ago, but Mr. Reed [the manager of the auditing deoartment) explained ‘that everyone eats time so thatthe group shows top results and looks good. and when the group ooks good, everyone in it ooks good. No one ‘ares ifaitletime ges lost ir the shuile” Bill realized that “eating time" meant not re: porting all the hours required to complete a pro: Ject. He also remembered one of Reed's classic phrases, “results, results, results” He thanked Ann for her input and went back to work. Bill thought of going over Reed's head and asking for advice from the division managet, but he had met her only once and did not now anything about her. Questions w Exercises 1, What should Bill do? Describe the process through which Bill might ttempt to resolve his dilerama 2. Consider the impact of thiscompany’s approach ‘on young accountants. Why cauld working long hours be an ethical problem? ‘This casei strictly hypthaialany neemblance ora persons, companies, oF uations is colncldemta ‘must frst understand how individuals make ethical decisions. Some T: improve ethical decision making within a business organization, one philosophers, socal scientists, and other academics tave attempted to ex plain the ethical decision-making process in business by examining ethical issue Intensity, individual moral philosophy, or corporate culture, including the infu tence of coworkers, This chapter summarizes or current nowledge of ethical {decision-making frameworks for business. While itis impossible to describe exactly hhow an individual ora work group might make ethical decisions, we ean provide generalizations about average or typical bohavior patterns within organizations These generalizations are based on many studies and at least sx ethical decision models? mn this chapter we describe a framework for understanding ethical decision ‘making in a business organization context. This framework shown in Figure 5 integrates concepts from moral philosophy, psychology, sociology, and businessus Part Understanding Ethical Decision Making Important ethical sve intensity Significant others Terms for Kehlbera’s mace of coontve moral ‘obedience to authority ‘evelopment role stress eae corporate culture opportunity ‘thleal climate component Kent was getting pressure from his boss, parents, and wife about the marketing campaign for Broadway Corporation’ new video game called Lucky” He had been working for Broadway for about two years, and the Lucky game was his first big project. Kent and his wife, Amy, had graduated from the same college and hal decided to go hack to thelr home town of Las Cruces, New Mexico, near the Mexican border. Kent’ father knew the president of Broadway, which enabled Kent to get 8 job in its marketing department. Broadway is a medium-size company with about five hundred ‘employees, making it one ofthe largest employers in Las Cruces. Broadway develops, manufactures, and markets video arcade games, ‘Within the video arcade industry, competition Is fletce. Games typically have a lifecycle of only eighteen to cwentyfour months. One of the key strategies in the industry Is providing unique, visu ally stimulating games by using color graphics technology, fast action, and participant interac tion. The target markets for Broadways video products are children aged 5 to 12 and teenagers from 13 t0 19. Males constite 75 percent of the market ‘When Kent first started with Broadway, his task immediate job context was to conduct market research on the types of games desired, His research showed that the ma. et wanted more action vilence), quicker graph ‘cs, multiple level of difcuty, and sound. Further research showed that certain tones and types of sound were more pleasing than others. As part of his research, Kent also abserved people in video arcades, where he found that many became hyp- notized by a game and would quickly put in quar ters when told to do so. Research suggested that ‘many target consumers extibited the same symp. ‘om as compulsive gamblers, Kent’ research re sults were very well received by the company, Which developed several new games using the in formation. The new games were instant hits with the market, Inhis continuing esearch, Kent had found that the consumer’ level of intensity increased as the fame’ intensity level increased, Several reports later, Kent suggested that target consumers might bbe willing, a strategic percds ina video game, to insert multiple coins. For example, a player who wanted to move to a higier level of dificlty would have to inseet two enins; to play the final level, three coins would hav® to he inserted. When the idea was tested, Kent found it did inevease game produetiviy Kent had also notced that video games that gave Positive reinforcements to the consumer, such a5, audio cues, were played muuch more frequentlyF Chapter 5A Framework for Understanding Ethical Decision Making in Business than others. He reported his findings to Bra, Broadivay’s president, who asked Kent to apply the {nvormation to the development of new games. Kent suggested having the machines give eandy to the gime players when they attained specific goals forthe teen market, the company modified the idea: the machines would give backeoins at certain levels during the game. Players could then use the tins a strategic eves to play aslottype” chance ‘pening of the next eve. By inserting an clement of ehance, these games generated more coin input than output, and game productivity increased dra matically. These Innovations were quite success- ful, ving Broadway a larger share of the market ‘and Kenta promotion to product manager Kent's newest assigament vas the Lucky game —a fastaction stenario in which the got ‘was to destroy the enemy before being destroyed Kent expanded on the slot-ype game forthe older market, with two additions. Fitst, the game er ployed virtual reality technology, which gives the player the sensation of actually being i the game Second, keeping in mind that most of the teenage ‘onsumers were male, Kent incorporated a female character who, at each level, removed a plece of her elothing and taunted the player. A win at the highest level et her nude Tet market results sug ested that the two additions increased proftabil- ity per game dramatically. Several weeks later, Brad asked about the Lucky project. "I think we've got a real problem, Brad, Kent told him. “Maybe the nudity is a bad idea, Some people wil be rally upset about it” Brad was very displeased with Kent’ response. ‘Word got around fast thatthe Lucky project had stalled, During dinner with his parents, Kent men: tioned the Lucky project, and his dad said some thing that affected Kent. "You know, son, the Lucky project will bring in @ great deal of revenue for Broadway, and jobs are at stake. Some of your no coworkers are upset with your stand on this pro ject. I'm not telling you what to do, but theres ‘more at stake here than just video game.” ‘The next day Kent hada meeting with Brad about lately. "Well” Brad asked, “whathave you decided? Kentanswered, “dont think we shoul go with the nudity idea ‘Brad answered, "You know, Kent, you'e right “The U.S. marke just sn ready to see full nudity as ‘well as graphic violence in arcades in their local malls. That's why Tye conticted an Intetnet provider who will ake our game and put it on the Net as an adult product. Ive also checked out the foreign markets and found thatwe ean sell the ma. ‘chines to the Mexican market we tone down the violence. The Taiwanese joint venture group has ‘okayed the version we have now, but they would like you to develop something that is more grape in both areas. You see, they already have similar versions of ths ype of game now and their market Js ready to go tothe next level I see the Internet market as secondary because we cant got the vie tual realty equipment and software into an inte net mode, Maybe when PCs get faster well be able to tap into it at that level, but not now: So, Kent, do you understand what you need t0 be doing on Lucky? Questions 1. What a 2, What are Kents options? 8 Discuss the acceptability and commercial use of sex, violence, and gambling in the United States, 4 Is this acceptable in other counties if i fits their culture? *Thiccae erly hypothetical: any resemblance to eal persons, compan, situaons sinceraHealth Care Hospitals for three years, ‘and had been promoted to market- ing director in the Miami area. She had a staff of ten and a farly healthy budget Dawnis job was to attract more patients into the HMO while helping 1o keep costs down. Ata meet: ing with Dawn, Nancy Belle, the vice president, had explained the ramifications of the Balanced Budget Act and how itwasaffetingall HMOs. "Be Jing herein Miami does not help our division she told Dawn, "Because ofthis Balanced Budget Act, ‘we have been losing money on many of our elderly patients. For example, we used to receive $600 or ‘more @ month, per patient, from Medicare, but ‘now our minimaim reimbursement is jst $367 a ‘month! T need solutions, and that’s where you ‘come in, By the end of the month [want a ist of things that wil help us show a prof. Anything less than a positive balance sheet will be unaceept able” Te was obvious that Nancy was serious about cetting costs and increasing revenues within the elderly market. Thats why Dawn had been pro moted to marketing director. The firs thing Dawn did after the meeting with Nancy was to fre four key people. She then gave their duties to six who ‘were at lower salaries and put the hospital staff on notice that changes would be occurring a the hos- pltal ver the next several months. In about three ‘weeks Davin presented Nancy with an extensive Tstof ideas. It neluded those suggestions 1, Tritnming some prescription drug benents 2, Reducing redundant tess for terminal patients 3, Hiring physician assistants to see patients but bling 4, Allowing physilans o buy shares in PCA, thus providing an incentive for bringing in more patient Understanding Ethel Deesion Making 5, Stelizing and reusing cardiac catheters 6, Instituting a one-vendor policy on hospital produets to gain quanity discounts 7. Prescreening“insuran:e patients fr proba bility of payment Daves assistants fel that some of the hospital Staff could be more aggresive in the marketing area. They urged using morepromotional material, offering incentives for physicians who suggested PCA or roquired their patients to be hospitalized, and prescreening potential sient ino categories "You see” said Ron, one of Dawn’ staf, “we fel ‘hat there ae four types of elderly patients. There are the healthy elderly, whose life expectancies are ten or more years. There ae the fragile elder, with lf expectancies of ow> to seven years. Then there are the demented and dying eldery, who usually have one to thre years. Finally, we have the high-cost uninsured elderly. Patients who are designated healthy would get the most care, in- ‘cluding mammograms, prostate-cancer screening, ‘and cholesterol ehecks. Patents in the other cate: {ories would getless As she implemented some of the recommenda tions from Davi list, Nancy also launched an ag ‘gressive plan to destabilize ‘he nurses! union. Asa many nurses began a work slowdown and ‘were fling intemal petitions to upper manage- ‘ment, Headquarters told Nancy to give the nurses and other hospital staff as much overtime as they wanted but not to hire anyone new. One floor ‘manager suggested spliting up the staff into work teams, with built-in incentives fo those who worked smarter and/or faster. Nancy approved the plan, and in three months productivity jumped $0 per cent, with many of the hospital workers making ‘more money. The downside for Nancy was an in crease in worker related accidents, ‘When Dawn toured the hospital around this time, she foun that some of the must productive workers were using substardard procedures and poorly made products. One nurse said, “Yes, the ‘Surgical gloves are somewhat ofa problem, but we(Chapter 6 Organizational Culture and Ethical Decision Making were told that the quality met the minimum re (gitements and so we have to use them.” Dawn Srought this to Nancy's attention, whereupon ‘Nancy drafted the following memo: ATTENTION HOSPITAL STAFF [thas come to management’ attention that mi not injuries to staff and patient are on the rise. Please review the Occupational Safery and eat Administration guidelines, as wells the standard procedures handbook, © make sure you ae in compliance. also want to thank all, those teams that have been Keeping, cos dove. We have finally gone into the plus seas faras profitably Hang on and well be able to stabilize the hospital to make ta better place to axe fo patients and to work. ‘At Naney’s latest meeting with Dawn, she told Dawn: "We've decided on your staff's segmenta- tion strategy forthe elderly market We want you to develop a questionnaire to presereen incoming. HMO patients, as well as existing clients, into one ofthe four categories so we can tag their charts 123 land alert the HMO physicians tothe new proto: ‘ols. Als, since the recommendations we've put into practice have worked so well we've decided to Use the rest of your suggestions. The implementa tion phase wil start next month. T want you, Dawn, tobe the lead person in devoloping along, term strategy to break the unions in the hospital Do whatever it takes. We just eee to do more with Jess. 'm firm on this—so you're elther on board ‘or you're not. Which ist going tobe?" Questions w Exercises 1. Discuss the corporate culture and its ethical implications ‘What factors are affecting Dave's options? 43. Discuss the issue of for-profit versus nonprofit health care facts, 4. Ifyou were Davin, what information would you like to have inorder to make your decisions? ‘This case isi hypotheia: any weemblance to rsa persons companies sitions leo ncldnta they are not alive, we attribute human characteristics to them. When Ox: fare much more than structures in which we work. Although tes are good, we say the company “well; when times are not so good, ‘we may ty to “save" the company. Understandably, people have feelings toward the place that prov is them with income and benefits, challenge and satisfac tion, self-esteem, and often lifelong friendships. Infact, excluding the time spent sleeping, we spend almost 50 percent of our lives in this second home with our second “family.” It important, then, to examine how the organizational str: ture and culture inluence the ethical decisions made within the organization, In the decision-making framework described in Chapter 5, we discuss how or tanizational factors such as corporate culture and interpersonal relationships in- fluence the ethical decision-making process. In tis chapter ve describe two organizational structures and examine how they may influence ethical decisions, [Next we discuss organizational, or corporat, culture and how the values and tra empl ethical behavior Welsu cscuss the cole of leadership in influencing ethical behavior within the organization. Then se con. sider the impact of groups within organization Pinay, we examine the implica ‘ions of organizational relationships for ethical decisions.