BUSINESS ETHICS

PRACTICES OF BUSINESS ETHICS

LECTURER: PHD. DƯƠNG THỊ HOÀI NHUNG

EMAIL: nhungdth@ftu.edu.vn
Mobile: 0985867488

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 BUSINESS ETHICS

CHAPTER 2: THEORIES OF ETHICS

CASE 2.1: OPENING CASE

Scenario 1: The moral side of murder
Suppose you are driver of trolley car, your trolley car is hurtling down the track at 60
m. At the end of the track, you notice 5 workers are working on the track. You try to
stop but you can’t. Your brake doesn’t work, you feel desperate because you know.
If you crash into these 5 workers, they will all die, but to soon you know that’s for
sure, so you feel helpless.
Until you notice there is off to the right, a side track, at the end of that track, there is a
worker working on the track. Your steering wheel works, so you can turn trolley car
left.
If you want to, onto the side track, killing the one, be sparing the five.
Questions:
1. How many students would turn the trolley car onto the side track? How many
students would go straight ahead? Why?
2. What’s the right thing to do?
Scenario 2: The moral side of murder
This time you are not the driver of trolley car, you are onlooker.
You’re standing on a bridge, overlooking a trolley car track, down the track come the
trolley car.
At the end of the track are five workers, the brake doesn’t work. The trolley car is
about careen into the five and kill them, and now you aren’t driver, you really feel
helpless.
Until you notice standing next to you, leaning over the bridge is a very fat man, and
you could give him a shove, he would fall over the bridge onto the track, right into the
way of trolley car, he would die but he would spare the five.
Questions:
1. How many students would push the fat man over the bridge? How many
students wouldn’t? Why?
2. What’s the right thing to do?

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CHAPTER 2: THEORIES OF ETHICS

PART 2- THEORY OF MORALITY

CASE 2.2: MOTHERHOOD FOR SALE

 This is a case involving market and in fact a contract in a human reproductive

capacity and this is a case of commercial surrogate motherhood, it is a case that
wound up in court some years ago. It began with William and Elizabeth Stern,
a professional couple wanting a baby, but they could not have one in their own,
at least without medical risks to Mrs Stern.
 They went to an infertility clinic where they met Whitehead, a 29 year-old
mother of 2 kids, the wife of a sanitation worker. She had replied an
advertisement that the Stern had placed seeking the service of a surrogate
mother.
 They made a deal, they signed a contract in which William Stern agreed to pay
Whitehead a $10,000 fee plus all expenses in exchange for which for
Whitehead agreed to be artificially inseminated with William Stern’s sperm to
bear the child and then to give the baby to the Sterns.
 Whitehead gave birth and changed her mind; she decided she wanted to keep
the baby. The case wound up in court in New Jersey.
 So let’s take put aside any legal questions and focus on this issue as moral
questions.
Questions:
1. How many people believe that the right thing to do in the baby M case would
have been to uphold the contract, to enforce the contract? Why?
2. How many people think the right thing to do would have been not to enforce
that contract? Why?

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CHAPTER 2: THEORIES OF ETHICS

PART 2- THEORY OF MORALITY

CASE 2.3: ACTION OF SHOPKEEPER

Kant starts with example of a shopkeeper. He wants to bring out the intuition and
make plausible the idea that what confer moral worth on an action is that it be done
because it’s right.
He supposes there is a shopkeeper and an inexperienced customer comes in. The
shopkeeper knows that she could give the customer the wrong change, could
shortchange the customer and get away with it; at east that customer wouldn’t know.
But the shopkeeper nonetheless says “Well, If I shortchange this customer, word may
get out, my reputation would be damaged, and I would lose business. So I will not
shortchange this customer.”
The shopkeeper dose nothing wrong, she gives correct change.
Questions:
1. Could the action of shopkeeper be considered as an ethical action based on Kant’s
view? Why?

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CHAPTER 2: THEORIES OF ETHICS

ETHICAL LEADERSHIP STYLES TEST

Situations

1. You are the leader of a manufacturing team and learn that your employees are
falsifying product quality results to sell more products. If you report the matter, most of
them will lose their jobs, you may lose yours, and your company will take a significant
hit to its reputation. What would you do in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

2. You have an employee who has been having performance problems, which is making
it hard for your group to meet its work quota. This person was recommended to you as
a solid performer. You now believe the person’s former manager had problems with the
employee and just wanted to get rid of the person. If you give the underperforming
employee a good recommendation, leaving out the performance problems, you will have
an opportunity to pass the employee off to another group. What would you do in this
situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

3. Your team is hard-pressed to complete a critical project. You hear about a job
opening that would be much better for one of your key employees’ career. If this
individual leaves the team, it would put the project in danger. What would you do in
this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

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4. An employee of yours has a child with a serious illness and is having trouble fulfilling
obligations at work. You learn from your administrative assistant that this employee
claimed 40 hours on a time sheet for a week when the employee actually only worked 30
hours. What would you do in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

5. You are a manager, and some of your employees can finish their quotas in much less
than the allotted time to do so. If upper management becomes aware of this, they will
want you to increase the quotas. Some of your employees are unable to meet their
current quotas. What would you do in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

6. You are an organization’s chief financial officer, and you are aware that the chief
executive officer and other members of the senior leadership team want to provide
exaggerated financial information to keep the company’s stock price high. The entire
senior management team holds significant stock positions. What would you do in this
situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

7. Two new employees have joined your accounting team right out of school. They are
regularly found surfing the Internet or texting on their phones. Your accounting work
regularly requires overtime at the end of the month to get the financial reports
completed. These employees refuse to do any overtime, which shifts work to other team
members. The other team members are getting resentful and upset. What would you do
in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

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□ E. I would do what benefits me the most.

□ F. I would do what is fair.

8. You are the director of a neighborhood food cooperative. A member—a single parent
with four children—is caught shoplifting $30 in groceries from the co-op. You suspect
this person has been stealing for years. You consider pressing charges. What would you
do in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

9. You have been accused of discriminating against a particular gender in your hiring
practices. A new position opens up, and you could hire a candidate of the gender you’ve
been accused of discriminating against over a candidate of another gender, even though
the latter candidate has slightly better qualifications. Hiring the former candidate
would let you address this accusation and improve your reputation in the company.
What would you do in this situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

10. You are a professor. One of your best students buys an essay online and turns it in
for a grade. Later in the term, the student begins to feel guilty and confesses to you that
the paper was purchased. It is the norm at the university to fail a student guilty of
plagiarism. You must decide if you will flunk the student. What would you do in this
situation?

□ A. I would do what is right.

□ B. I would do what benefits the most people.

□ E. I would do what benefits me the most.

□ F. I would do what is fair.

Scoring

To score the questionnaire, sum the number of times you selected item A, B, E, or F. The
sum of A responses represents your preference for Duty Ethics, the sum of B responses

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represents your preference for Utilitarian Ethics, the sum of E responses represents your
preference for Egoism Ethics, and the sum of F responses represents your preference for
Justice Ethics. Place these sums in the Total Scores section that follows.

A. Duty Ethics: __________

B. Utilitarian Ethics: __________

E. Egoism Ethics: __________

F. Justice Ethics: __________

No. A. Duty Ethics B. Utilitarian Ethics E. Egoism Ethics F. Justice Ethics

1
2
3
4
5
6
7
8
9
10
SUM:

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CHAPTER 2: THEORIES OF ETHICS

P1+2: UTILITARIANISM AND THEORY OF MORALITY

CASE 2.4: CONFIDENTIALITY

You are employed as a technical communicator by Caduceus Company, a major
provider of software systems for the health care industry. Currently, you are working
on help-desk instructions for a new software system that operates from a database
accumulated from all the records of all the hospitals, clinics, HMOs, laboratories, and
physicians in your state. These records carry a good deal of highly personal
information on patients and are, of course, private and confidential. The revelation of
some of this information to the wrong people could be seriously damaging for those
patients. Improper release of this information could, for example, limit their
employability, damage their reputations, or restrict their access to health insurance at
affordable rates. Part of your job, in fact is to ensure that confidentiality is maintained
by all who use the system while preventing access to those who might misuse it.
Just yesterday, you learned of some shocking information. While observing the typical
daily operation of the help-desk staff in resolving users' questions, you recognized the
name of one of the clients called up on a screen. It is the name of your cousin's fiancé,
and the entry indicates that he has tested positive for HIV and has received counseling
about HIV and AIDS from a local clinic. You and your cousin are very close, and you
are certain that she is unaware that her intended spouse has tested positive for HIV.
The marriage is only a few weeks away. She would be highly endangered after
marriage but also in their current relations without this knowledge.
Questions:
1. Do you reveal this information to your cousin but violate the privacy and
confidentiality that you have sworn yourself to and are legally obliged to
maintain?
2. Or do you keep the information to yourself but jeopardize the health and life of
your cousin by preserving the deception by her fiancé.
• Identifying how many choices to deal with situation do you consider?
• Justifying each your choice based on theory of Utilitarianism and Kant’s ethics

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CHAPTER 3: ETHICS AND STAKEHOLDERS

CASE 3.1: MILK PRODUCT CONTAMINATION INVOLVING THE SANLU

GROUP
In 2008, a great number of babies in China, having consumed the milk powder
produced by Sanlu Group, were discovered to have suffered from kidney stones.
Later, its milk was found to contain melamine, an industrial chemical, which can
result in a heightened protein content value in tests and yield greater profit for milk
farmers. Adding melamine to the milk may boost its market value, yet long-term
ingestion of melamine would create problems for the urinary system, resulting in
kidney stones and even cancer. According to statistics, up until 21 January 2009
nearly 50,000 infants sought medical consultation and was treated and recovered as a
result of having ingested the problematic milk powder; 6 died as a result. There were
also confirmed cases in Hong Kong and Macau. After the General Administration of
Quality Supervision announced the examination report regarding the presence of
melamine in the baby powder produced by numerous major manufacturers, the scope
of incident was revealed – the presence of melamine was discovered in the milk
powder of many major manufacturers in China. The event also had a disastrous
impact on the reputation of China-made goods, with many countries banning the
import of China-made milk products.
Later, it was revealed that in as early as 2007 there have been customer complaints
about the quality of Sanlu’s milk powder. The company only covered up the incidents
and it was not until August 2008 when cases began to mushroom all over the country
that Sanlu reported to the Shijiazhuang Municipal Government and the Xinhua
District Government and announced the public about the presence of melamine in the
milk powder. A recall was subsequently conducted but there was already a surge in
occurrence of kidney-stones in infants. Many infants suffered kidney problems and
some did not survive; later the government announced that they would treat infants
freely.

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The Shijizhuang Municipal Government later arrested near 20 individuals working

separately at the ranches, milk cows rearing communities, operators of milk halls, and
illegal sellers of the chemical. The Provincial Government ordered Sanlu to cease
production. The company was declared bankrupt and the persons responsible were
punished.
Questions
1. Who are stakeholders of the Sanlu Group?
2. How did the stakeholders impact on the Sanlu Group?
3. What lessons do you learn from the case?

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CHAPTER 4: MARKETING ETHICS

PRACTICE 4.1: ETHICS IN MARKETING AND ADVERTISING

PRACTICES (CONSUMER-RELATED ISSUES)
What is ethical issue in the following cases?
Cases Ethical issues
1.The Society of Hospital Pharmacists of Hong
Kong conducted a study of the safety and
effectiveness of 10 major injection and external use
medical beauty treatments. They discovered that 5
of these treatments were not supported by sufficient
clinical evidence and poses possible safety hazards.
There is a chance that the consumer may suffer
possible bacterial infection and even die.
2. A bank sold complex financial products to
poorly-educated elderly citizens, attempting to
convince them to make high risk investments.
3. A certain advertisement was promoting a “fitness
shoe” that claimed reduction of weight upon
wearing but did not provide any evidence.

4. A supplier sold goods to large corporations at

very low or sub-product cost prices; meanwhile it
sold the goods to small merchants at prices that
exceed the production cost. The aim was to help
large corporations expand their market share.
5. A certain mobile phone manufacturer launched a
new phone. At sales launch a great number of grey
goods traders queued outside the store making it
impossible for real consumers to buy the phone.

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CHAPTER 5: HRM AND ETHICS

PRACTICE 5.1: WHAT IS ETHICAL ISSUE IN THE BELOW CASES?

Cases Ethical issues in HRM

a. A certain music school asks its new employees to sign
a 3-year contract, which stated that if the employee
resigns before the contract ended, he or she must pay the
company 3-years’ worth of salaries. There are also
unreasonable clauses including the deduction of one
dollar from the salary upon every minute of being late,
and $300 from the salary for every day’s absence from
work – every if one takes a sick leave.

b.A certain book store asks its staff to clock in 7 hours of

overtime per day during the book fair – making a total of
15 hours of work per day. They were also only allowed
30 minutes of meal time.

c. A company’s employee becomes pregnant, she would

be given a difficult time by the company under various
pretences, until she resigns voluntarily.
d. A certain restaurant in Hong Kong is used to paying
its staff later than usual –salary is paid usually10 days
after the month end.
e. The staff at a famous Japanese home electronics brand
complains about the company violating their personal
privacy. The company would closely monitor their
activities in the office.

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f. A certain Korean enterprise has established a factory in

Shenzhen. During a theft incident, its management
forcibly searched the bodies of 56 female workers making
them feel humiliated. Also there was once when a
production line failed to meet its production quota, the
staff of the entire production line was punished by having
to kneel at the entrance of the company. The incident has
drawn media’s attention.

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CHAPTER 6: BUSINESS, THE ENVIRONMENT AND SUSTAINABILITY

CASE 6.1: SHOULD TOXIC WASTE BE EXPORTED?

Tons of toxic wastes are created every day in the production and disposal of countless
goods and services. Business and government must decide what to do with such
leftovers as the radioactive wastes created in nuclear power plants, the fly ash from
industrial and municipal incinerators, chemical residues from industrial processes and
consumer goods, and heavy metals in computers and other consumer electronics.
Consumers are challenged to find ways to dispose of toxic chemicals in household
cleaners, lawn and garden pesticides, home appliances, and consumer electronics.
Ordinary waste disposal is a serious enough public policy challenge for every level of
government. Newer landfills soon reach their capacity; many older and closed
landfills contaminate groundwater; and incinerators spew noxious pollutants. But the
challenge is compounded when the wastes entering into the disposal system are
themselves highly toxic and dangerous.
Historically, industry has disposed of wastes into the easiest and least desirable sites.
For decades, industry simply dumped waste into the air and water or buried it
underground. Landfills, trash dumps, incinerators, and other socially undesirable
activities were located either in out-of-the-way and unattractive locations, or in the
most convenient location to ease disposal. Such decisions seemed to make economic
sense; if land values would be degraded because of proximity to a toxic waste dump, it
makes most sense to choose a location that already has the lowest valued property.
One result of this dumping is that domestic waste disposal often creates a cycle of
decreasing land values that seem clearly to harm the poorest and most disenfranchised
citizens. Areas with the lowest land values, and therefore areas targeted as the location
for socially undesirable activities, tend to be the areas in which a society’s poorest
citizens live. As those areas accept more of the undesirable wastes and industries, they
became even less attractive locations in which to live, thereby making them poorer
and poorer, as those who are able to move away leave behind those who are less able
to do so. This practice raises fundamental questions of social justice when society’s

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least advantaged citizens pay the highest costs for the social benefits of industrial
society.
In recent decades, this same economic logic has created a market for toxic wastes
among the world’s poorest countries. The incentive to send toxic wastes offshore
increases as waste disposal has become more expensive domestically.
The world’s less developed countries need the income and, because they are less
developed, often do not have the industrial pollution problems that plague developed
countries.
Questions:
Should waste disposal be treated simply as an economic issue, to be resolved through
private market exchanges, or should government regulations place greater
responsibility on producers for the entire life cycle of products?
CHAPTER 6: BUSINESS, THE ENVIRONMENT AND SUSTAINABILITY

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CASE 6.2: ETHICAL ISSUES IN PROTECTING ENVIRONMENT IN X

CHEMICAL CORP.

Bryan Montoya is a production supervisor. He was recently hired by X Chemical

Corp. to oversee production of a new industrial lubricant. The factory that produces
the lubricant was built on land next to a river. X Chemical has a permit from the
government to dump factory waste into the river.
X Chemical has always said publicly that it would do all that it could to protect the
environment. When the factory was first proposed, there was a lot of opposition from
various citizen’s groups, who feared it would pollute the river. X Chemical persuaded
them to support construction of the factory by promising to make the production
process as clean as possible. Their support made the permit easier to get.
The factory was originally meant to include a final stage in the production process that
would minimize the amount of waste produced. However, after X Chemical had
made promises to the citizen’s group, it received the government permit, and to its
surprise, learned that the permit allows X Chemical to release more waste in the river
than they planned to release. Evidently the river can tolerate that level of pollution
without any noticeable effects, so the public will not be bothered by the relatively
small amounts of pollution emitted. Because the government will let them pollute
more than they intended to, the final stage in the production process became
unnecessary. X Chemical took advantage of this by not building the final stage in the
production process, thereby saving capital and production costs.
The company has had mediocre performance for several quarters. However, this is
now changing, thanks to the new lubricant. The lubricant is top-quality, and it is
produced at a cost significantly below those of their competitors. Orders have been
flowing in, and the plant is selling everything it can produce. Because the new
product is so successful, all employees are looking forward to sizable bonuses.
Bryan is upset that the company failed to build the final stage, and fears that the
excess waste released today will cause problems for the company tomorrow. Bryan
approaches Bill Garrison, the Plant Supervisor, with his concerns. Bill replies, "It's up
to the government agency to protect the river from excess waste, and the company

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only had to meet the agency's standards. The amount of waste being released poses
no threat to the environment, according to the agency. Besides, the final stage waste
reduction equipment can be added later when it becomes necessary. At this point,
building the final stage would cost even more money and interrupt production, and
interrupting production would hurt sales. Don't go trying to cause trouble without any
proof. You're new here, and you wouldn't want to have to find a new job."
Bryan is frustrated and upset. He can see all the benefits of the new product, but inside
he is sure the company is making a short-sighted decision which will hurt them in the
long run. He considers whether to report this situation to the news media.

Questions to discuss:
1. Whether X Chemical should go ahead and install the final stage equipment?
2. Whether Bryan should blow the whistle if they do not?

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CHAPTER 7: ETHICS, ACCOUNTING AND AUDITING

CASE 7.1: IGNORE THE ERROR?

Kelsey, a senior accountant at a multi-office CPA firm, is assigned to the audit of
Compo Corporation. Compo is a closely held corporation and a major client of the
firm. During the audit, Kelsey finds a material cutoff error which causes Compo’s
income to be significantly misstated. Kelsey is aware that the CPA firm’s policy
clearly states the audit senior must document any potential material adjustment in the
work papers. The final determination of materiality is then made by the partner in
charge of the audit. Kelsey also knows Compo does not want to make the adjustment.
Before wrapping up the field work, the audit manager, Bruce, tells Kelsey, :Let’s not
mention this adjustment in the work papers. Since Compo is closely held and there are
not tax implications, the partner has decided not to force an adjustment. Compo is our
largest client. We need to get the Compo work up to the partner as soon as possible.”
Kelsey is concerned and upset after the conversation with Bruce. Failure to document
such a material amount just does not seem right.
(Author: Sandra K. Fleak, Associate Professor of Accounting, Northeast Missouri
State University)

Questions:
1. What Are the Ethical Issues?
2. What action would you take if you were Kelsey? Why?

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