eth-ic \'eth-ik\ n the belief building ethical leaders

$: Eth-ic \'eth-ik\ n The BeLIeF Building Ethical Leaders$
Eth-ic \’eth-ik\ n

1: the discipline dealing with what is good and bad and with moral duty and obligation

2 a: a set of moral principles or values b: a theory or system of moral values c: the principles of conduct governing an individual or a group <professional~s>

- Webster’s


Eth-ic \’eth-ik\ n 1: the discipline dealing with what is good and bad and with moral duty and obligation

The BeLIeF Program

Building Ethical Leaders


1: the discipline dealing with what is good and bad and with moral duty and obligation

2 a: a set of moral principles or values b: a theory or system of moral values c: the principles of conduct governing an individual or a group <professional~s>

- Webster’s

Ethics Handbook: Building Ethical LeadersCopyright © 2011 by Northern Illinois University

This handbook was developed as part of the College of Business Building Ethical Leaders using an Integrated Ethics Framework (BELIEF) Program.

All rights reserved. No part of this handbook shall be reproduced, stored in a retrieval system, or transmitted by any means, electronic, mechanical, photocopying, recording, or otherwise, without written permission from the Dean, College of Business, Northern Illinois University, DeKalb, IL 60115.

Printed in the United States of America: 2011, 2009, 2006

Dean, College of Business Denise Schoenbachler

BELIEF Director William McCoy

Authors Terry Bishop, Management Pam Smith, Accountancy

Ethics Handbook NIU College of Business Page 1

ContentsForeward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iI . Introduction A. WhydoIneedtobeawareofethics? . . . . . . . . . . . . . . . . . . . . . 2 B. HowdoIrecognizeethicalbreaches?. . . . . . . . . . . . . . . . . . . . . 3 1. Adangerouscombination:motivation,opportunity andrationalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

II . CommonScenariosInvolvingUnethicalConduct A. Conductineverydaylife. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 B. Conductasastudent................................... 7 Plagiarism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 C. Fraudandmisrepresentation. . . . . . . . . . . . . . . . . . . . . . . . . . . .10 D. Harassment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 E. Earningspressureandfinancialreporting. . . . . . . . . . . . . . . . .12 F. Customerrelations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 G. Employeerelations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

III .SummariesofConceptualFoundations A. Conceptualfoundations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 1. Ethics/personalvalues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 2. Principlesofcapitalismandfreeenterprise. . . . . . . . . . . . . .17 3. Principal-agenttheory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 4. Businessandsociety. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

IV . Decision-Making A. Decision-makingguide. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 B. Whistle-blowing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24

V . StudentCodes,ProfessionalCodes,andCompanyCodes A. NorthernIllinoisUniversityStudentCodesofEthics. . . . . . . .27 B. ProfessionalCodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 C. CompanyCodes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .29References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30

Appendices A. CollegeofBusinessStudentCodeofEthics. . . . . . . . . . . . . . . .31 B. AccountancyStudentHonorPledgeand CodeofConduct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

Foreward

TheBuildingEthicalLeadersusinganIntegratedEthicsFramework—

BELIEF—ProgramwascreatedbytheNIUCollegeofBusiness(COB)EthicsTaskForce(ETF).TheETFwascomposedofacross-functionalteamoffacultyandstaff.Thecross-functionalnatureoftheEFThelpedcreatetheBELIEFProgramasasystematicintegrationofethicsthroughoutthecollegecurriculum.AftercreationofBELIEF,theFacultyForEthics(FFE)teamwasformedtofurthertheProgram’smission.

TheBELIEFProgramencompassesvariouscomponents,whichinclude:theEthicsHandbook,facultydevelopmentandothersupportactivities,aDirectoroftheBELIEFProgram,corporatesponsors,astudentorganizationLEAD(LeadersinEthicsandAcademicDiscipline),andanassessmentmechanismofstudentsethicalawarenessanddecision-making.

TheEthicsHandbookisapragmatictooltoprovideacommonframeworktoallCOBstudentsandfaculty.Itisusedasaresourceinclassessothatasethicsisdiscussedtherewillbeacommonfoundation.Allstudentsarerequiredtocompleteanonlinequizonthehandbookinordertoregisterforsubsequentclasses.

Facultydevelopmentandothersupportactivitiesincludefacultyseminars,guestspeakers,andcoursedevelopmentsupport.Thesupportactivitieshelpfacultyutilizethehandbookintheirclasses.Consistentreinforcementisnecessaryforathoroughintegrationandapplicationofthedecision-makingguide.

TheBELIEFDirectoroverseestheFFE,LEAD,corporatesponsors,curricularissues,anddevelopmentactivities.TheDirectorisalsotheliaisonwithcorporatesponsors,andoverseesanyotheractivitiesofBELIEF.

Externalcorporatesponsorsprovidefunding,credibility,andendorsementtotheBELIEFProgram.

Thestudentorganization,LEAD,isthestudentinfluenceonBELIEF.ThisorganizationmakessurethatBELIEFmeetstheneedsofthestudentsandstaysintunewithstudentissuesandconcerns.SelectmembersofLEADannuallyrepresentNIUatanationalethicscasecompetition.

AnonlineassessmentsystemevaluatesthegoalsofBELIEF–increasedawarenessandimproveddecision-makingskills.AssessmentiscompletedperiodicallytodeterminetheimpactofBELIEFonthestudentsandtorecalibratethecomponentsoftheprogram.

Collectively,thesecomponentscomprisetheNIUCollegeofBusinessBELIEFProgramandrepresenttheCollege’sresponsetoitsexternalandinternalstakeholdersforintegratingethicsacrossthecurriculum.i Ethics Handbook NIU College of Business

BELIEF Initiative

EthicsHandbook:BuildingEthicalLeaders

I . Introduction ThishandbookisacomponentofNorthernIllinoisUniversity’s

CollegeofBusinessBELIEFProgram.BELIEFisacomprehensiveprogramtoBuildEthicalLeadersusinganIntegratedEthicsFramework.WebelievethatNIUCOBgraduateswillbeethicalleaders.However,goodpeoplemakebaddecisions.Therefore,thepurposeofthishandbookistoincreaseyourawarenessofethicalissuesandsituationsandtoprovideyouwithadecision-makingguidetohelpevaluatealternativecoursesofaction.Youhavealreadydevelopedandformulatedmostofyourvaluesandmoralsthroughyourpriorexperiences.Thishandbookandyourcourseworkwillhelpyoudeveloptheskillsofanethicalleader.

Thishandbookwill:1. Increaseyourawarenessofethicaldilemmas,2. Provideyouwithguidanceonhowtorecognizecommonethical

dilemmas,3. Provideabasicunderstandingoftheconceptualfoundationsfrom

whichactioncanbetaken,and4. Provideadecision-makingguidethatcanbeutilizedinpersonal

andprofessionaldecision-making.

Ultimately,youractionsarecriticaltoyourethicalbehavior.Weareevaluatedonhowweactinthesituationsinwhichwefindourselves,nothowwethinkorwhatweintendtodo.

Asyoupickupthishandbookforthefirsttime,youmayhaveafewquestions,suchas:

• “WhydoIneedtobeawareofethics?” • “Whatareethics?” • “HowcanIinfluenceethicalbehaviorsinmyclassesandinthe

businessworld?”

Theanswerstothesequestions,andothers,canbefoundinthefollowingpages.Thishandbookhasbeencreatedtoprovideinformationonethicsandethicalbehaviorinthebusinessworldandgiveyoutoolstomaketheoftendifficultdecisionsthatneedtobemade.

Not only does one have to know the right thing to do —one must have the moral fortitude to do it.


A .WhydoIneedtobeawareofethics?Beforeyoudismissthecontentofthishandbookassomethingthatdoesn’tconcernyou,thereareafewthingstothinkabout.First,therehavebeenmanyhigh-profilecasesofunethicalbusinesspracticesinrecentyears,andtherewilllikelybemoreinthefuture.Thesescandalsaffectanumberofpeople .Themostobviousculpritslosetheirjobs,receivefines,andmaybeevengotojail.Theseresultsarenotparticularlytroubling,sincetheseindividualsareoftengettingwhattheydeserve.However,inthewakeofthesescandals,manyotherssuffer.Co-workers,employees,customers,stockholdersandotherswhohavenotdoneanythingwrongoftensufferasmuchormorethanthosewhoclearlyactedunethically.Therearealsothosewhowatchedanddidnothingastheywitnessedtheunethicalbehaviors.Action(ratherthaninaction)bytheseindividualscouldhavehadamajorimpactontheultimateoutcome.Inmanyofthesecases,conspicuousdemonstrationofethicalconductmayhavepreventedmuchofthedamage.Thecouragetotakeactioninthesesituationsisreferredtoasmoralcourageandiskeytobeinganethicalleader.

Anotherreasontobecomemoreinformedaboutethicalissuesisbecausestudieshaveshownthatyouwillbeconfrontedwithethicaldilemmasmuchearlierinyourcareerthanyoumaythink .KeepinmindyouareresponsibleforyourethicalbehaviorandyouaredevelopingyourleadershipskillsNOW.Peopleoftenthinkthattheywon’tseeethicalissuesofsubstanceuntilmuchlaterintheircareersorthattheyarenotresponsibleforactionsiftheydowhattheyaretold.Therealityisthatmostbusinesspeopleareforcedtomakedecisionswithethicalramificationsveryearlyintheircareers.Itisimportanttonotshirkresponsibilitybydoingwhatyouaretoldwhentheactivityisagainstyourvaluesorjudgment.Itisagoodideatoprepareforthisrealityandhaveareadymeansbywhichtoconsidertheethicalimplicationsofyourdecisions.Theprimarypurposeofthishandbookistoprovideyouwithboththefoundationforunderstandingethicsandethicsapplicationindecision-making.

“Always tell the truth. That way you don’t haveto remember what you said.” — MarkTwain

Page 2 Ethics Handbook NIU College of Business

B .HowdoIrecognizeethicalbreaches?Inmostcases,noonedecidestobeunethical;rather,peoplearecaughtupinsituationswherelackofawarenessandlackofdecision-makingtoolsleadtoinactionorparticipationininappropriateactions.Keepinminditisnottheclearblackandwhitesituationsthataremostproblematic.Ethicalissuesareoftenunrecognizedbecausetheissueisnotclearlyblackandwhite.Thesesituationsinthe“gray”areaofethicalissuesarethemostproblematicbecauseoftentheyarenotrecognizedortheconsequencesarenotthoroughlyevaluated.Itisthecombinationofmotivation,opportunity,andrationalizationthatisthemakingofabaddecisionbyagoodperson.

1 . Adangerouscombination:motivation,opportunity,andrationalization

Onewaytohelpidentifysituationswhereethicsarebeingchallengedisthefraudtriangle,whichcomesfromtheworldofforensicauditing(Cressey1958).Itdisplayshowotherwisegoodpeopleareinasituationinwhichtheyrationalizeaninappropriatebehaviorasappropriate.Thefraudtrianglehasthreecomponents:motivation,opportunity,andrationalization .Whenallthreeoftheseattributesarepresent,thereisahighriskofunethicalbehavior.

Motivationisaneedorpressure.Motivationmaybethedesireformoremoney,thepressuretogetagoodgrade,ortheneedtomeetearningsexpectations.Motivationaloneisnotproblematic;itishowtheneedortheexpectationisfulfilledwhichmaycauseaproblem.

Opportunityistheopendoorthatwillmeettheneedorresolvethepressure.Ifthereismoneylyingonadeskandyouareinneedofcash,themoneylyingaroundprovidesanopportunitytosatisfyyourneed.IfyouneedanAonyourtermpaperandyoucomeacrossapaperfromaprevioussemesterthatreceivedanA,thepaperprovidestheopportunitytofulfilltheneedforagoodgrade.Opportunitiesalonearenotproblematic;itishowopportunitiesareusedtofulfillamotivationthatcanleadtounethicalbehavior.

Rationalizationisthefinalpartofthetriangle.Coupledwithmotivationandopportunity,rationalizationprovidesthejustificationthatexplainsawayabehavioryouknowiswrong.Rationalizationisthejustificationforalackofintegrity.Sincemostofushaveaconscience,rationalizationisusedtomakeus


feelbetteraboutthebehavior.Herearesomerationalizations,whichareredflagsandwhichindicatethatabehaviormaywarrantfurtherthoughtorinvestigation:

1. “Everybodyelsedoesit .”Thisistheclassicrationalization.IfIdon’t“cheat,”Iwillnotbeabletocompete,orwhyshouldIdotheworkwhenothersarenot?

2. “Iwasjustfollowingorders .”Projectingresponsibilitytosomeoneelse,ratherthantakingresponsibilityforyouractions.Remember,everyonehastherighttosay“no.”

3. “Itreallydoesn’thurtanyone .”Thoughtslike“Ineedthemoneymorethantheydo”or“Theyhaveplentyofmoney,thiswon’tbemissed,”areusedtojustifyactivitiesfrompettythefttoembezzlements.

4. “Ideservethis,orthesystemisunfair .”Youfeelyourhardworkhasnotbeenrecognizedandyouhavetakenituponyourselftorewardyourself.Also,“Ireallydoknowthematerial,so‘borrowing’someoneelse’spaperisokay.”Becarefulifyouareconsideringyourself“deserving”ofsomethingtowhichyouarenotentitled.

(DiagramadaptedfromHillison,Sinason,Pacini,1998)

Wheneveryoufindyourselfstatingtheserationalizations,stopandthinkaboutthesituationandapplythedecisionguideprovidedinthishandbook.Rationalizationisoftenour

consciencerecognizinganunethicalsituationbuttryingtomakeusfeelbetteraboutit.

Hereareafewcommoncategoriesofunethicalbehaviorstothinkaboutandsomeexamplesofeach.

“Rationalization attempts to excuse our lack ofintegrity.” — FredSmithSr .

Rationalization

Motivation Opportunity


1. Takingthingsthatdon’tbelongtoyou .Examplesincludetakingofficesupplies,paddingexpenseaccountsandusingofficeequipmentforpersonaluse.Usingthewords,thoughtsandideasofanother(plagiarism)isalsoaformofstealing;seethedescriptionofplagiarismbelow

2. Sayingthingsyouknowarenottrue .Don’tmakefalsestatementsonyourresume,orembellishaccomplishments,orexaggeratefacts.

3. Givingorallowingfalseimpressions .Notvolunteeringrelevantinformationornotcorrectingaknownmisrepresentation.Justbecausetherewasnotaliedoesnoteliminatetheethicalneedfordisclosure.Ethicscanbeunderminedwithincreasedtoleranceofunacceptablebehavior.Standupforwhatyoubelieveinanddon’tbeafraidtospeakupandtakeaction.Ofcourse,onemustexercisediplomacyandbeawarethattakingastandmighthavepersonalconsequences.

4. Buyinginfluenceorengaginginconflictofinterest .Usingyourpositiontoobtainacompetitiveadvantageorawardingspecialtreatmenttofamilyorfriends.

5. Hidingordivulginginformation .Destroyingevidenceorsharingconfidentialinformation.

6. Committingpersonalover-spending .Behavioroutsidetheworkplacecaninfluencejudgmentandethicsonthejob.Personalexcesscancausefearoflosingyourjobandthatfearcanoverpowerethicaljudgmentsmadeintheworkplaceforfearofjeopardizingyourjob.

7. Violatingtherules .Itisnotjustifiabletoviolatetherulesbecauseyoubelievetherulesareunfair,therulesdonotworkasintended,oryoujustdon’tlikethem.Insomeinstancesyoucan(andshould)makeanefforttochangetherules,butdon’tviolatethem.

Nowthatyouhaveabetterunderstandingofwhyitisimportantforyoutobemoreawareofethicsandhowyoucanrecognizesituationswhereethicsarebeingcompromised,thenextsectionisanoverviewofexamplesthatcontainethicalissuesthatareoftenconfrontedinthe“realworld.”

Thethirdsectionprovidessomeconceptualbackgroundonpersonalvalues,businessprinciplesandtheroleofcorporationsinsociety.Thefourthsectionincludesadecision-makingguidethatcanbeusedtoevaluatesituationswiththeintenttoformulateanactionplan.Thefifthsectionpresentsvarious“codesofconduct”includingstudentcodesofconduct,codesofconductfromprofessionalorganizationsrelevanttothebusinessworldandcompanycodes.


Asyouutilizethishandbook,trytoimagineyourselfintheroleofdecisionmakerwhereyouwillneedtochooseacourseofactionthathassignificantethicalimplications .

II . CommonScenariosInvolvingUnethicalConduct Itishelpfultounderstandareasthatarecommonlysubjectto

ethicaldilemmas.Thissectionstartswithhowyoucandevelopcertaincharactertraitsinyoureverydaylife.Dailyconductcanhelpbuildthestrengthandfortitudetodotherightthinginamorallychargedsituation.Moralcourageisputtingyourbeliefsintoaction.Developingyourmoralcouragetakesplaceinyourconductineverydaylifeandisthefoundationofbeinganethicalleader.

A .ConductineverydaylifeEverydayyourconductweavesthethreadofyourmoralfiber.Thatis,itisthesmallthingsthatyoudoeverydaythatbuildwhoyouare,andthesedailyhabitshavealargeimpactonyourdecisions.Strengthenyourcharacterbyweavingthesetraitsintoyoureverydaylife:

• Behonest—tellthetruth,besincere,don’tmislead.Whatwouldyoudoifyousawsomeonedropa$10billorifyoufoundalostwallet?

• Honorcommitments—keepyourword,returnwhatyouborrow.Beresponsibleandfollowthroughwithyourobligations.Doyoudowhatyousaidyourweregoingtodo?

• Demonstrateintegrity—standupforwhatyoubelieve,beyourbestself.Doyoustandupforsomeonebeingwronged,orjustwalkaway?

• Beloyal—standbyyourfamilyandfriends,employers,communityandcountry.Don’ttalkaboutpeoplebehindtheirbacks.Avoidgossipandcertainlydon’tspreadit.

• Pursueexcellence—doyourbestateventhemostmenialtasks.Everyjobisaself-portrait.

• Becourteous—showkindnessandrespecttofamily,friendsandstrangers.Doyouholdopendoorsforothers?Doyousayexcusemeifyoubumpintoastranger?

Ethics can be undermined with increasedtolerance of unacceptable behavior.


• Befair—beopen-mindedandlistentoothers.Betolerantandacceptingofdifferences.Doyoureallylisten,orclosesomeoneoffwhenyoudon’tagree?

• Beagoodcitizen—obeythelaw,respectauthority,voteandvolunteer.Doyoucontributeinyourcommunity?Youcanmakeadifference!

Moralcouragehasbeendefinedinmanydifferentways.Thepurposehereisnottoprovideatheoreticalanalysisofmoralcourage.Insteadthepurposeistoprovidesomefoodforthoughtonhowbeliefsbecomebehaviorsandhowthebehaviorsofanethicalleadercanhaveanimpactonothers.Doingwhatyoubelieveisrightwhenfacedwithadifficultsituationmightnotalwaysbepopular;however,oftenthatiswhenethicalleadershipemerges.Readthroughthefollowingsectionsandthinkabouthowyouwouldreactinagivensituation.Wouldyouhavethemoralcouragetostandupanddotherightthinginthesesituations?

B .ConductasastudentHowyouconductyourselfasastudentsetsthetoneforhowyouwillconductyourselfinbusiness.Moreimportantly,howyouconductyourselfnowleavesanimpressionwithfellowstudents(whowillonedaybeyourbusinesscolleagues)andteachers.Youareestablishingyourreputationrightnow–notafteryougraduate.

Studentsrarelysetouttocheat.However,theydosetthemselvesupforcheatingopportunitiesbynottakingthetimetocompleteanassignedtaskandthenjustifycheatingbyrationalizingthat“Ireallydidknowthematerial;Ijustdidn’thavethetime,”or“I

“Circumstances do not make a person, theyreveal him.” — JamesAllen

“I do not seek unpopularity as a badge of honor; but sometimes it is the price of leadership and the cost of

conviction” — TonyBlair



didn’tthinkthattheassignmentwasveryimportantoruseful.”Takeresponsibilityforyourlearninganddon’tbetemptedbytheshortcutstocompleteanassignedtask.

Imagineyouaregoingintoaclasswheretherewillbeaquiz,andyourfriendiscomingoutofthesameclassandhadjusttakenthequiz.Isitcheatingifyouaskwhatisonthequiz?Deepdownwhatdoesyourguttellyou?Yes,itischeating.Anytimeyoutrytoobtaininformationthatisnotpubliclyavailabletoeveryoneelse,itischeating .MarthaStewartservedjailtimeasaconsequenceofactingoninsideinformation.Therefore,youshouldthinkabouttheawkwardpositionyouputyourfriendin;heisforcedintoparticipatingincheatingorriskingmakingyoumad.Don’tdothistoyourfriendship.

Ifyouaren’tsurethatdiscussingaprojectwithfellowstudentsisokay—ask!Whenindoubt,askyourteacher.Thereisnothingwrongwithaskingforadviceorguidance.Itismuchbettertoaskandknowwhatisorisnotacceptablethantofindoutlaterthatyourconductwascheating.

Unfortunately,therearestudentswhointentionallycheat.Thesestudentsdevalueeducation.Theydevaluetheeducationofeveryoneattheirinstitutionbybecominganinadequatelypreparedgraduateoftheuniversity.Educationismorethanjusttheaccumulationoffactsandknowledge .Educationalsoinvolvesthedevelopmentoftheabilitytocommittoagoalandadheretotherequirementsofachievingthatgoal.Byshortcuttingtheprocess,studentsonlyshortcuttheirowneducationanddevaluetheeducationofthosewhodofulfilltherequirements.

PlagiarismPlagiarismispresentingthethoughts,ideas,writings,etc,ofothersasyourown.Intoday’sworlditisveryeasytofindessays,termpapersandotheracademicassignmentsalreadycompletedandavailableforuse(orinexchangeforpayment.)However,thisisintellectualtheftandisnotacceptableinacademicsorinbusiness.Supposeyoucompletedanimportantreportforyourcompanythatincludedabrilliantmarketingcampaign.Duringthepresentationtothe

“Ninety-nine percent of the failurescome from people who have the habit of making

excuses.” — GeorgeWashingtonCarver


corporatemanagementteamyoursupervisortooksubstantialportionsofyourreport(andyourmarketingconcepts)andpresentedthemashisorherown?Youwouldbeangrythatyoursupervisor“stole”yourwritingsandideasandgotcreditforyourwork.Thesameconceptapplieseverywhere-itisunethicaltotakesomeoneelse’sintellectualwork(writings,ideas,informationfromafilmordocumentary,theinternet)andpresentitasyourown.

Thebasicruleistoalwayscitethesourceofinformationyouhaveusedinyourwork.Thismeansthatasyouarecompletingtheresearchyoumustkeepcopiousnotesonwhereyouhaveobtainedinformation.Oftenplagiarismoccursbecauseofsloppynotetaking.Ifyoucutandpasteinformationfromtheinternettouseinyourproject,youmustkeeptrackofwherethatinformationwasobtained.Inthebodyoftheessayorassignment,youmustputquotationmarksaroundanysentencesorpartialsentencesthatyoudidnotoriginateyourself.Youmustalsocitethesourceofideasandotherinformationthatwasobtainedfromanexternalsource.Ifyouparaphrasesomeone’ssentencesandideas,youmustalsoacknowledgethesourceoftheinformation.Thesourcesshouldbelistedinabibliographyinthefootnotesorattheendofthepaper.Therearemanyresourcesavailabletoshowyouhowtocompletepropercitation,suchasChicago Manual of StyleorMLA Handbookfor Writers of Research Papers.

Whentheinformationyoupresentinyourassignmentisgeneralorcommonknowledge,citationsarenotneeded.Forexample,thefactthatBarackObamawassworninasthePresidentoftheUnitedStatesin2009iscommonknowledgeanddoesnotneedtobecited.Ifyouhavequestionsorareuncertainwhethersomethingshouldbecited,askyourinstructororprofessorforguidance.

Whatcanyoudowhenyouseeotherstudentscheating?Sometimesthecheatersneedremindersthatthebehaviorisunacceptablebytheirpeers.Youcanapproachthemandencouragethemnottotake“short-cuts.”Youdonothavetobeconfrontational,butsupportiveandpointoutthatanycheatingdevalueseveryone’seducation.YoucangotothestudentorganizationthatsupportstheBELIEFProgram.TheLEAD(LeadersinEthicsandAcademicDiscipline)organizationcanhelpyoudetermineacourseofactionforthesituationoryoucanletafacultymemberknow.Sometimesthefacultymembermaycreateanenvironmentwherethecheatingismuchmoredifficulttoaccomplish.

C .FraudandmisrepresentationUsingdeceptivepracticesinbusinessandcommerceisreferredtoasfraudormisrepresentation.Undercontractandtortlaw,fraudisaspecificactionforwhichacompanyand/oritsmanagersmaybesued.

Fraudoccurswhenthereisanintentiontodeceive—whenpromisesaremadewithnointentionofkeepingthem.AninfamouscaseoffraudoccurredwhenBeech-Nutsoldapplejuicelabeledas“pure”from1978to1982.Atthetime,Beech-NutwasthesecondlargestbabyfoodmanufacturerintheUnitedStates.Theapplejuice,however,wasnotpurebut,rather,wasreconstitutedfromconcentratewithsugarsadded.A“whistle-blowing”employeebroughttheissuetolight,eventuallyleadingtoBeech-Nutpleadingguiltytomorethan200federalcountsofproducinganddistributingmislabeledproductswiththeintenttodeceiveanddefraudconsumers.

Anotherexampleoffraudisknownas“baitandswitch”—anunscrupuloussalestactic.Baitandswitchoccurswhenaproductisadvertisedataspeciallowprice,but,whencustomersattempttomakeapurchase,theproductiseitherunavailableorthecustomermustwaitforalongtimetoreceivetheofferedproduct.Thesalespersonthenattemptstoconvincetheprospectivecustomertopurchaseadifferentproduct,oftenatahigherpriceandhigherprofitmarginforthecompany.Thefraudinthissituationoccurswhenthecompanyadvertisestheavailabilityofaproductwithnointentiontoactuallysellit.Lawhasspecificallyprohibitedthistactic.

Misrepresentationoccurswhenoneattemptstoclaimtorepresentsomeoneelseortriestopasshimselfoffassomeoneheisnot.Whenapersonliesonhisresumeabouthiscredentialsoracademicbackground,itismisrepresentation.Unfortunately,theuseofdeceptiononresumesisafairlycommonpractice—someestimatethatthenumberofresumescontainingsomedeceptioncouldbeashighas10%.Inrecentyears,therehavebeennotablescandalsinvolvingpeoplewhomadeclaimsontheirresumesthatwerefabrications.In2001,GeorgeO’LearywashiredastheheadfootballcoachatNotreDameUniversity,onlytoresignsixdayslaterwhentwosignificantinaccuracieswerediscoveredonhisresume.Thefirstwastheclaimthathehadcompletedamaster’sdegree,whichhehadnotreceived.ThesecondwasaclaimthathehadletteredinfootballattheUniversityofNewHampshire—whenhehadneveractuallyplayedevenasinglegameatthatschool.Similarly,in2002SandraBaldwinresignedfromherpost


asthepresidentoftheUnitedStatesOlympicCommitteewhenitwasrevealedthatshehadnotcompletedherundergraduatedegreeattheUniversityofColoradoassheclaimedonherresume,norhadshecompletedherdoctoraldegree—anotherclaimmadeonherresume.

Thebottomlinewithrespecttofraudandmisrepresentationisthatasanethicalleaderyoushouldonlymakepromisesyouintendtokeepanddonotdeceivecustomersorotherswithwhomyouengageinbusiness .Asanethicalleaderyoucansetthetonesothatothersarealsoconductingthemselvesinanethicalmanner.

D .HarassmentHarassmentoccurswhenapersonintimidates,ridiculesorcoercesanother.Harassmentisusuallytheresultoftheabuseofpowerortheunreasonableattempttocontrolsomeone.Harassmentleadstofeelingsofdiscomfortorstressandcanevenleadtophysiologicalconsequencessuchasanxietydisorders.Thebottomlineisthatharassmentisnottolerableinanyform .Unfortunately,harassmentoccursoften,withsexualharassmentbeingthemostcommonformofharassment.Harassmenthasmanynegativeconsequences,includingreducedworksatisfactiononthepartofthosebeingharassed,decreasedproductivity,increasedlikelihoodofturnoverofpersonnelandpotentialmonetaryliabilitiesarisingoutoflawsuitsorstatutoryviolations.

TheUnitedStatesSupremeCourtusesatestforwhatconstitutesunreasonableworkplaceharassment(Harris vs. Forklift Systems).Thetestlooksatfourfundamentalquestions.

1. Isthebehaviorpersistent?Peopleengageintheharassingconductoftenenoughthatitbecomesclearthatthereisapatternofbehavior,whichisintentionalandcannotbedismissedasa“badday”oraperceptualerror.

2. Howsevereistheconduct?Themoreseveretheperceivedharassment,themorelikelyitwillbethattherewillbeapotentialliability.

3. Istheconductofaphysicalnature?Whileharassmentofaverbalformisundesirable,anyharassmentthattakesaphysicalformisviewedastotallyunacceptable.


“The bad news is that painless lessons tendnot to stick.” —JesseEisinger

4. Doestheharassingconductinterferewiththeemployee’sabilitytosuccessfullyandsatisfyinglyengageinwork?Ifapersonisdistractedfromeffectivelyperformingworkorifmotivationtoperformisreduced,theharassmentwillbeseenasmoreserious.

Howandwhydoesharassmentoccur?Itstartswithsomeonewhooftenfailstoconsiderhowhisorheractionsandwordsmayimpactothers.Insomecases,harassmentisunintentional,butthatdoesn’tmakeitacceptable.Harassmentisdeterminedbasedontheimpactithasonanother;nottheintentoftheharasser .Inothercases,theharassmentispersistentduetoacompletelackofcareonthepartoftheharasserandistoooftendonewithanintentiontoharm.

Strongleadershipincludesthemanagementofpersonnel,knowinghowtoprovideconstructivecriticismandlearninghowtoworkwithdifficultpeople.Itiscounter-productiveduringconflictresolutiontoengageinharassmentandpersonalattacks.Self-controlandself-awarenessarecharactertraitsthatwillhelpyoubecomeawareofyourimpactonothersandtraitsyoucanhelpothersdevelopinordertominimizethreateningorintimidatingbehaviors.

E .Earningspressure,financialreportingandgreedUnfortunately,thereareplentyofexamplesofunethicalbehaviorwithrespecttofinancialreporting.Inmostinstances,themotivationistomeetearningsexpectationsortomanagecorporateperformancetomeetsomeotherfinancialgoal.ManagementatcompaniessuchasEnron,WorldcomandAdelphiafacedextremepressuretomeettheexpectationsofthemarketandachievesteadyearningsgrowth .Inotherinstancesthemotivationisgreed .Greedisdisplayedinthemisuseofcertainfinancialdealingsinthesub-primemarketorinthePonzischemeorchestratedbyBernardMadoff .

Thecycleissomethinglikethis:Corporateanalystsandbrokersreviewcorporateperformanceandmakepredictionsastohowthecompanywillperforminthecomingquarter.Basedonthepredictions,anearnings“target”isimplied.Ifthecompanydoes

“Above all . . . learn to disagree without beingdisagreeable.” — TedGalenCarpenter


notmeetthattarget,itistakenasasignalthatthecompanyisunabletomaintainitscompetitiveedge,whichthemarketviewsasbadnews.Thebadnewscausesthetraderstosellthestockandthestockpricegoesdown.Inaddition,uppermanagementisoftencompensatedbasedonthecompany’smarketperformance(ortheyownstockinthecompany),hence,thepressureonmanagementtomeetearningsexpectations.

Therearevariouswaysthatmanagementcouldtrytomanipulateearningstomeetexpectations.Themostcommonistoacceleratetherecognitionofrevenue.Companiescandothisbypre-bookingsales.Thesecondmostcommonmanipulationistodefertherecognitionofexpensesuntilthenextperiodbydelayingpayments,extendingpaymentdeadlinesandpost-datingchecks.Bothofthesetacticsarefutilebecausetherevenuerobbedfromthefollowingquarterwillbeneededinthenextquarterandtheexpensesdeferredintothefollowingquarterwillreducethenextquarter’snetincome.Thecyclewillperpetuateitselfbecausethesametacticswillneedtobedoneinthesubsequentquartersaswell.

Inyourcareeryoumaybefacedwiththepressureto“fudge”thenumberstomakethesituationlookbetter.Oftenthisrequestisrationalizedbythestatement“itwillonlybethisonce!”However,onceyouhave“fudged”thenumbersyoucannever“takeitback”andwillmostlikelybeaskedtodoitagain.Youwillhavesetprecedenceforyourbehavioranditwillbemuchhardertorefusetherequestthenexttime.UndertheSarbanes-OxleyAct,financialmisrepresentationisacriminalviolationsubjecttosentencingandappliestoeveryoneinvolvedinthemisrepresentation.

F . CustomerrelationsCustomerrelationshipsarecriticaltothesuccessofabusiness,particularlyoverthelongterm.Unfortunately,somecompanieshavetakenactionsthatarecontrarytotheinterestsofcustomers.TheFordPintocaseinthelate1960sandearly1970sillustratesthisissuealltoowell.InFord’srushtoputacaronthemarketthatcouldcompetewiththefloodofsmallcarsfromJapanandGermany,thecompanydesignedthePinto .

Duringthedevelopmentprocess,designengineersdiscoveredthattheplacementofthegastankandotherdesigncharacteristicscreatedahighprobabilityoftankruptureinrearendcrashes,evenatslowspeeds.Engineersestimatedthatitwouldcost$11percartoreducethisrisk,acostofonlyone-half


ofonepercentofthetotalcostofthecar.Theengineersalsoestimatedthatthisactioncouldsavehundredsoflivesperyearandhundredsmorefrominjury.However,basedonfinancialanalysisthatprojectedthecostofpotentialliabilityfromtheseaccidents(estimatingalostlifewouldbeworth$200,000),Forddecidedtonotmakethedesignchange.Afterapatternofaccidents,whichledtofiresanddeaths,itwasdiscoveredthatFordhadmadetheanalysisthatledtothedecisiontonotimprovethedesign.WhenjuriesheardtheinformationabouttherelativelylowvalueFordputonhumanlife,thecourtshandeddownsignificantliabilityawardstopeopleinjuredincrashesandthefamiliesofthosekilled.

Thegreatestironyofthecaseisthat,priortothePintocaseFordhadagoodreputationforproductsafety .ThefalloutfromthePintocaseledtoskepticismfromconsumersregardingFord’sdiligenceindesigningcarsforsafety.

IncontrasttothePintocase,Johnson&Johnsondemonstratedthevalueinmakingdecisionswiththeinterestsofconsumersasahighpriority.In1982,someonetamperedwithanumberofbottlesofTylenol–oneofJohnson&Johnson’smostprominentproductlines.Cyanidewasputintothecapsules,whichthenwereboughtbyconsumersintheChicagoarea.Sevenpeoplediedafteringestingthecapsules,leadingtoacrisisforJohnson&Johnson.Theprominenceofconsumerwelfareinthecompany’sdecision-makingisevidentinitsactions:Theuseofwide-spreadmediainformingpeople(notjustinChicago)ofthethreatofproducttampering,theacceptanceofproductreturns,theremovalofALLTylenolproductsfromshelvesandwarehouses,andtheestablishmentofavarietyofsafetystandardstomakeitmoredifficultforsomeonetotamperwithproductsinthefuture.Thepackagingapproachesbecametheindustrystandardforpreventativepackaging.AtthecoreofJohnson&Johnson’sactionswasthecompanycredo,whichbeginswiththestatementthat“…ourfirstresponsibilityistodoctors,nursesandpatients,tomothersandfathersandallotherswhouseourproductsandservices.”

Insummary,ethicalleadersshouldconsiderthewellbeingoftheircustomersorconstituentsandalsomustbalancetheseneedswithotherprioritiesindecision-making.

“Character is revealed by how you behave when no one is looking.” — AsdefinedbytheJosephsonInstituteofEthics


G .EmployeerelationsEmployeesobviouslyplaycriticalrolesinthesuccessofacompany.Concernsforthehealth,welfareandotherneedsofemployeesshouldbetakenintoconsiderationinbusinessdecision-making .Unfortunately,therearemanyillustrationsthroughouthistorywherecompanieshaveneglectedorevenforsakenemployeeinterest.

Inonecase,employeesinashipbuildingyardcomplainedaboutthelackofenclosedscaffoldingduringcoldandwindyweather.Thelackofenclosuresledtoveryuncomfortableandhazardousconditions.ThisbecameoneoftheearliestlegalcasesinwhichemployeesclaimedthattheyhadarighttoengageincollectivebehaviorundertheWagnerAct—eveniftheywerenotformallyunionized.Thecourtsagreedwiththeworkersandimposedtherequirementthatemployersaddresssuchconcerns.

AnothercaseinvolvingacompanycalledFilmRecoverySystemsillustratesthatcompaniesoftenseriouslyneglectemployeewelfare.Thecompanywascreatedtocapitalizeontheunusuallyhighsilverpricesinthelate1970sandearly1980s.Thecompanyemployedatechnologythatrecoveredthetraceamountsofsilverthatwereusedinphotographicfilmbyusingcyanidesolutiontocausethesilvertobereleasedfromthefilmsurfaces.Openvatsofcyanidesolutionandthelackofbasicemployeeprotections,suchasaprons,respiratoryprotection,factoryventilationandgloves,ledtoillnessandfinallythedeathofanemployee.

Ethicalleadersneedtoconsidertheimpactoftheirdecisionsonemployees .Employeescannotbetreatedascommodities—indistinguishablefromoneanotherandeasilyreplaceable.Managementneedstoconsidertheconsequencesoftheiractionsonemployees.

III .SummariesofConceptualFoundations

A .ConceptualfoundationsWeareexposedtocomplexandsometimesconflictingsourcesofvaluesoverthecourseofourlives.Eachoftheseinfluencesusinuniqueways—withsomeofusbelievingratherstronglyincertainvaluesystemsandotherstakingamoreambivalentattitudetowardthesourceofethicalvalues.Tounderstandthenatureofthesevaluesystemsandtheroleinourdecisions,itisimportanttounderstandtheoriginsandrelationshiptobusinesspractice.Thissectionexploresbothpersonalvaluesandthevaluesupon


whichcapitalismandfreeenterprisearebased.Thissectionalsoexplorestherelationshipofmanagerstotheownersofcorporationsandtherelationshipofbusinessestobroadersociety.Byunderstandingtheseperspectives,youwillhaveamuchbetterappreciationofthenatureofbusinessdecision-makingwithinthecontextofethics.

1 . Ethics/personalvalues

Despiteallofthediscussionofethicsandthefailuresofbusinessleaders(andothers)whohaveengagedinunethicalbehavior,thetermitself—ethics—oftengoesundefined.Ethicsarethevaluesthatwehavedevelopedfromourfamilyinteractions,religiousbeliefsandpersonalexperiences .Thissetofvaluesdrivesourbehaviorandinfluencesourexpectationsofhowothersshouldact.Manypeoplemaintainthattheyknowthedifferencebetweenrightandwrong,yettheyoccasionallyengageinbehaviorsthattheywoulddescribeaswrong.Tohelpunderstandthisparadox,theremainderofthissectionwilldescribefourmajorethicalframeworksthatarecommonlyfoundinsociety.Thesefourframeworksare:utilitarianism,universalism,theoriesofrightsandsocialprecepts.

a. Utilitarianismsuggeststhatethicaldecisionsbeapproachedbyconsideringtheoverallimpactofdifferentactionsonsociety .Actionsthatgenerallydomoregoodthanbadwouldbeacceptableunderthisconcept.Extendingthisconcept,actionsthatbenefitmorepeoplethanthosewhoareharmedwouldbedeemedmoreethicalthanactionsthatonlybenefitafew.Thisperspectiveisoftenappliedineconomicdecision-makingmodelsusedinbusinesssettings.

b.Universalismsuggeststhatasimplerulebeappliedtodeterminetheappropriatenessofone’sownactions.Thisruleis“WhatbehaviorwouldIexpectfromothers?”Thisperspectivesuggeststhatitisinappropriatetobehaveonewaywhenwewouldexpectotherstobehaveinadifferentway.Asanexample,stealingmoneyfromsomeoneelsewhileexpectingthatothersrespectourpropertyrightswouldbeillogical.Ifweexpectotherstorespectourrightstoproperty(oranythingelse),thenweshouldrespectthatothersalsohavethosesamerights.Thisconcepthasoftenbeenlabeledasthe“goldenrule”—thatweshouldtreatothersaswewouldexpecttobetreated.


c. TheoryofRightssuggeststhateachpersonhasrights—rightsthatareinalienableorshouldnotbetakenaway,exceptindrasticsituations.Theserightsincludetherighttoholdproperty,toliveasweseefittolive,tomakefreechoices,tolivewherewewanttolive,tobefreefromintrusionsintoourprivacy,topracticethereligion(ornoreligion)thatwewantandtopursuelifesatisfactionthroughwhatevermeanswechoose.ManyoftheserightshavebeenincorporatedintotheU.S.ConstitutionandtheBillofRights.Itisimportanttonotethattheserightsmustbebalancedagainstothersrights.Themostcommonexampleofthisisthatonedoesnothavetherighttoyell“fire”inacrowdedtheater,becausethismightcauseastampedeofpatronstotheexits,threateningthesecurityofsomeofthosepersons.Intoday’ssociety,thedebateoverwhatconstituteshatespeechorwhatispoliticallycorrectrelatestothisexample.Individualrightsdosometimesconflict—leavingthequestionofwhoserightsshouldprevail.

d.Socialpreceptsarespecificguidelinesthatcallforparticularbehaviorsthatweareexpectedtofollowduetoourbelonginginasocialgroup.Religionisperhapsthemostcommonsetofsocialpreceptsfoundinsociety.TheTenCommandmentsandotherspecificguidesforbehaviorfoundinreligioussourcesendorsecertainactionsandforbidothers.Whilereligionislikelythemostcommonlyconsideredofthesesocialprecepts,therearemanyothersocialsources.TheBoyandGirlScoutoaths,professionalcodesofethics,organizationalcodesofconductandevenlawsgenerallyfallintothiscategory.

2 . Principlesofcapitalismandfreeenterprise

Inadditiontothevarioussourcesofethicalvaluesdiscussedabove,therearesomeconceptsthatareuniquelyembeddedintothebusinessworldthroughthebasicstructureofoureconomicsystem.Therearemanybasicvaluesthatareusedtojustifycapitalisticorfree-marketsystems.


“Being truthful when you know it will cost you is the truetest of honesty.” — DaveWeinbaum

Capitalismisbelievedbymany(especiallyinthewesternhemisphere)tobethesuperioreconomicsystemintheworldduetoitsabilitytoefficientlydistributelimitedresourcestodifferentactivities.Supplyanddemandforces,andtheresultantprices,dictatethebestusesofcapitalgoods,materialsandlabor.Capitalismisoftendescribedasfreemarketeconomics.Itisimportanttounderstandexactlywhatismeantbythistermandwhyitisbelievedthatthiseconomicsystemhassuchhighpotential.Itisalsoimportanttorealizethelimitationsorpotentialshortcomingsofthiseconomicsystemandthatalackofethicsisacatalystforthoselimitations.

Freemarketsserveasthemeanstodistributescarceresourcesasefficientlyaspossible.Itservesbothsellersandbuyersbyprovidingacompetitiveframeworkthroughwhichvalueisassignedtoallthingsthatcanbesold,includinglabor,materials,informationandcapital.Someofthebasictenetsoffreemarketsystemsareasufficientnumberofparticipants(nomonopoliesandlimitedoligopolies),reasonableaccesstoinformationaboutthegoodsandservicesbeingsoldandalternativesourcesavailable,nocollusionamongsellersorbuyers,andnodeceptionorfraudinbusinesspractice.Throughfreemarkets,purchasingandsellingdecisionsaremade.Efficientpricinganddistributionoftheproductsorservicesareachievedthroughaccesstoinformationandcompetition.

Unfortunately,therearesomelimitations.Deceptionandfraudunderminetheeffectivenessofthefreemarketsystem.Furthermore,competitionislimitedwhenanindustryisdominatedbyonlyafeworganizations,oriftherearelogistical,geographicorinternationalboundariesthatrestrictfreeexchange.Wheninformationisunavailableorisrestricted,decision-makershaveagreatdealofuncertaintyinmakingchoices,resultinginaninefficientdistributionofresources.

Anotherlimitationofthefreemarketconceptistheconflictofinterestthatisinherentbecausemanagersareneededtomakedecisionsonbehalfofabsenteeowners.Therelationshipbetweentheownersofabusinessandthemanagershiredtorunthebusinessisreferredtoastheprincipal-agenttheory.

Greedcanlimitfreemarketeffectiveness,yetitisthepursuitofself-interestthatisanessentialqualityoffreemarkets.InthepopularmovieWallStreet,theleadingcharacter,GordonGecco,famouslyclaimsthat“greed,forlackofabetterword,isgood.”Greedhasbeenarguedtobethecauseofmanyofour


recentscandalsandcorporatemisconduct.Whileself-interestisrecognizedbyeconomistsasessentialtotheefficiencyandeffectivenessofaneconomicsystem,blindorunbridledgreedmaydriveinappropriatebehavior.Greedoftenisthedrivingforcebehindfraudorrationalizationsofimproperconduct.Thefamouseconomist,AdamSmith-oftenviewedasthe“father”ofmicroeconomictheory-believedthatenlightenedself-interestistheideal.Theconceptofenlightenedself-interestsuggeststhateconomicactorscanadvancetheirinterestswithoutengagingininappropriateactions.Indoingso,theyseektoactinwaysthatwillcontributetosocietalgoodaswellasachieveself-benefit.

3 . Principal-agenttheory

Inabusinessorganization,particularlyonethatispubliclytraded,managersarehiredtomakedecisionsandmanagethebusinessonbehalfofthestockholders.Thestockholders,orowners,aredescribedas“principals”andthemanagersas“agents .”Theowners—foravarietyofreasons—cannot(orhavechosennotto)beactivelyengagedintheday-to-daymanagementoftheorganization.Theownershirebusinessmanagerstoconducttheaffairsofthebusinesswiththeexpectationthatthosemanagerswillprimarily(orprincipally)considertheowners’interestsinalldecision-making.

Allpersons(notjustmanagers)inanorganizationareagentsfortheownersandhaveafiduciaryresponsibilitytoholdtheowners’interestabovetheirowninallactionsanddecisions.Ownersareexpectedtosetguidelinesandcreategovernancesystemstoguideagents.Policies,plans,goals,andrulessetboundariesandparametersforagents,butoftentheagentsmustinterprettheguidelinesinday-to-dayactivitiestoachievethebestresultsfortheprincipals.

Anumberofresponsibilitiesoftheagentemergefromthisrelationship.Someoftheseresponsibilitiesincludeloyalty,thedutytoactingoodfaith,thedutytoreportfairlytheactivitiesandresultsofbusinesspractice,thedutytoavoidtakingany

“To feel much for others and little for ourselves; to restrain our selfishness and exercise our benevolent affections, constitute

the perfection of human nature.” AdamSmith


adverseinterestsortoengageinbehaviorthatcompeteswiththeprincipals’interests,andthedutytorepresenttheprincipalswithdignityandapositiveimage.Manyofthescandalsintoday’sbusinessworldinvolvedirectviolationoftheseprincipal-agentresponsibilities.

Whiletheagenthasspecificresponsibilities,sodotheprincipals.Principalsaretoreasonablycompensateagentsfortheirwork,theyshouldnotexposeagentstounnecessaryrisks,andtheymustprovidereasonabledirectionandexercisesomeoversight(monitoringandcontrol)overagents’actions.

4 . Businessandsociety

Theroleoforganizationsinbroadersocietyhasbeendebatedformanyyears.Areorganizationseconomicentitieswithnoresponsibilitytodeterminewhatactionsare“right”or“wrong”–withonlyalimitedroleinchoosingwhatisbestforsociety?Doorganizationshaveadutytotakecoursesofactionthatbenefitsociety?Thissectiondescribesthethreemostprevalentviewsofhoworganizationsrelatetobroadersociety.

a . Economicentitiesonly

Oneviewoforganizationspurportsthatcorporationsandotherbusinessesprovidegreatbenefittosocietybyengagingintheeconomicexchangeprocessesdescribedpreviouslyinthesectiononcapitalism.Advocatesofthisviewclaimthat,throughthemicroeconomicsystems,businessesachievetheoptimaldistributionofresourcesforthemaximumbenefittosociety.Thisconcept,referredtoasPareto Optimality, isachievedwhentheparticipantsworktooptimizeprofitandindoingsoachievethemostbeneficialdistributionofresourcesthatcanbeachieved .Theseeconomicentitiesarestillexpectedtofollowthenormativestandardsofnotcheating,lying,orstealing,aswellasthespecificlawsofsociety.Businessesandtheiragentsmustnotcolludeorconspirewithoneanotherinbusinesspractice.

AdvocatesofParetoOptimalitypointoutthatbusinessesprovidejobs,andproducegoodsandservices,whichotherwisewouldnotbeprovided.Businessescontributetoahealthyeconomicsystemthatbenefitsallormostofthemembersofsociety.IfthepurestateofParetoOptimalitywereattained,itwouldbeimpossibletoprovideadditionalbenefittoonepartywithoutharminganother.Thisisautilitarianperspective—thatthegreatestconditionthatcanbeachievedistheefficientdistributionofresourcesandwealth.


Theoretically,theconsumersinafreemarketsysteminfluencetheactionsoftheparticipantsbychoosingwhattobuy,fromwhomtobuy,andforwhatprice.Boycottsandsupplierpreferencearethetoolsusedbyconsumerstoinfluencebusinesses.Ifasupplierofproductsengagesinactivitiesdeemedimproper,buyerscanchoosenottobuyfromthatsupplier.Freemarketadvocatesclaimthatthesemechanismscreateresponsibilityonthepartofboththesellerandthebuyertoassurethatactionsaretaken,whichcontributetothegreatergoodofsociety.

b .Compliance-reactiveapproaches

Mosteconomistsandsociologistsrecognizethatgovernmentplaysanimportantroleinregulatingbusinessactivity .Lawsprovidespecificstandardsofconduct,whichbusinessagentsareexpectedtofollow.

Oneoftheargumentsfortheneedofgovernmentsandlawsisthatalleconomicsystemsproduceexternalities,oroutcomes,thataffectpeopleoutsidetheexchangeprocess.Forexample,individualsharmedbythepollutioncausedbyamanufacturingsystemareanexternalitytothatsystem.Theseindividualsarewithouttheeconomicinfluencetocompelthesebusinessestoactinalternativeways.Hence,thereistheneedforgovernmentstostepinandregulateconductthathasanexternalityeffect.

Governmentswritelawsandcreateenforcementsystemstoassurecompliance.Enforcementagenciesatthefederal,stateandlocallevelsinterpretlawsandinvestigateandprosecuteactionsthataredeterminedtobeviolations.

Underthecompliancemodel,businessesmustbeawareofthelawsandassurethatactionsarenotinviolation,orelseriskbeingfinedand/orrestrainedfromengaginginfurthersimilaractivity.Lawsthatregulatebusinesspracticeincludesecuritiesexchangeandfinancialreporting,discrimination,environmentalstandards,productsafetyandworkersafety.

Lawsoriginatefrompublicpressureforlawstoprohibitcertainactionsbybusinessesorperhapstorequirebusinesstoactinotherways.Unlesspublicinterestgroupsareabletoinfluencelawmakers,businessesarelefttoengageinthoseparticularbehaviors.Whenlawsarepassed,however,thecompliancesystemcompelsbusinessestoactdifferently.


Thereisaparadoxtothecompliance-reactivesystem .Businesspeopleoftencomplainthatthereistoomuchregulationbygovernment.Thisshouldnotbeasurprise.However,ifthesolesourcesofmoralguidancearethelawsandcompliancesystems,thelawsandguidancewillbecomeoverwhelming.Putanotherway,ifbusinessmanagersexpectthatlawswillprovidesufficientguidanceforwhatisrightandwrong,thentheyalsoshouldexpectthattherewillbeamultitudeoflawsregulatingbusinesspractices.

c . Socialresponsibilityandcorporatecitizenship

Criticsofpurefreemarketsandthecompliance-reactivesystemsarguethatlawscanneversufficientlyprotectthebroaderinterestsofsocietyandthat,evenifgovernmentscouldcompletelyregulatebusinesspractice,thecostsofcreatingenforcementagenciesandcompletelyregulatingbusinesswouldbeenormousandinefficient.Undertheconceptofsocialresponsibilityandcorporatecitizenship,businessmanagersareexpectedtobecognizantofthebroadersocietalimplicationsoftheiractionsandtakeactionsthat,whilebenefitingthemselves,alsoservethebroaderneedsofgreatersociety.Inthisview,businessesareseenascitizenswithmorethanjustanarrowly-viewedeconomicresponsibility,butasocialresponsibilityaswell.

Withthisviewofbusinesses,thebroadercontextofsocietyneedstobeconsideredinallbusinesspractices.Thismeansthatbusinessdecision-makersmustconsidersocialvariablesindecision-makingandtakeactionswhichprovidebenefitstogreatersocietyinamuchmoreproactivewaythanthepurefreemarketorcompliancemodels.Someorganizationscarryoutthisresponsibilitybychoosingtosupportsocialcausessuchashealthandmedicalcare,socialcharitiesandenvironmentalprotection.

IV .Decision-Making Whydogoodpeoplesometimesmakebaddecisions?Oftenitiswhen

theyarethrustintoasituationwheretheyarecompelledtoactinawaythathasn’tbeenfullythoughtthroughandtheconsequencesofthatactionarenotconsidered.Consequencesarenotconsideredduetotheneedtoactwithhasteorwhenthereisasignificantpersonalstake,whichmakesthemeitherunableorunwillingtoevaluatetheramificationsoftheiractions.Theseactionsmaybeclearviolationsoflaws,ornotinbestinterestsoftheirprincipalsorthebroadersociety.


Nowthatyouhaveanunderstandingofhowtorecognizeethicaldilemmasandtheconceptualfoundationsfromwhichethicalchoicesaremade,thissectionpresentsadecision-makingguidetohelpyouthinkthroughtheconsequenceofanactionordecision.

A.Decision-makingguideThefollowingdecision-makingguideisaculminationfromvarioussources(seereferences)andcommonsense.Itisintendedtobeamechanismtothoroughlythinkthroughanissueandevaluatetheconsequencesofanaction.Thisguideisnotconsideredtobeall-inclusive.

1. Determinethefactsandstatetheproblem .Whatdoweknowthatwillhelpdefinetheproblem?Whatdon’tweknow?Sometimesthe“problem”isclearlyidentifiable,othertimesitisasituationthatmakesyouuncomfortable.Listentoyourintuitioninthesesituations–ifsomethingmakesyouuneasy,itisoftenforgoodreason.

2. Whoarethestakeholders?Whowillbeaffectedbythedecision?Makesuretoconsiderallstakeholders,includingemployees,shareholders,customers,vendorsandunintendedbystanders.

3. Identifyrelevantfactors .Listthelaws,professionalcodesandotherpracticalconstraintspertinenttothisproblem.Thiswillalsoincludeanyrelevantfactorsrelatedtotheissuebeingevaluatedsuchaswhataretheconstraints,parametersorotherlimitations.

4. Developalistofthreetofiveoptions .Listoptionsthatwouldsolvethestatedproblem.Becreativeandpresentoptionsthatmaynotseemplausible.Oftenthroughthisbrainstormingactivity,amoreviableandsatisfactoryoptionwillmaterialize.Trytoavoid“yes”or“no”optionsbutthinkabouttowhomtogoorwhattosay.

5. Testoptions .Applythefollowingteststotheoptions.

a. Harmtest .Doesthisoptiondolessharmthanthealternatives?

b.Legalitytest .Isthisoptionlegal?Iftheansweris“no,”stophere!

“Think before you act, consider consequences, and beaccountable for your actions.” — JosephsonInstituteofEthics


c. Precedencetest .Doesthisoptionsetprecedence,which,whiletheoutcomeinthisfactpatternisnotproblematic,thisoptionunderanotherfactpatterncouldcauseadramaticallydifferentoutcome?

d.Publicitytest .WouldIwantmychoiceofthisoptionpublishedinthenewspaper?

e. Defensibilitytest .CouldIdefendmychoiceofthisoptionbeforeaCongressionalcommitteeorajuryof mypeers?

f. Momtest .WhatwouldmyMomsayifshelearnedof thisoption?

g. Reversibilityor“GoldenRule”test .WouldIstillthinkthechoiceofthisoptiongoodifIwereoneofthoseadverselyaffectedbyit?HowwouldIwanttobetreated?

h.Virtuestest .WhatwouldIbecomeifIchoosethisoption?

i. Professionaltest .Whatmightmyprofession’sethicscommitteesayaboutthisoption?

j. Peerorcolleaguetest .WhatdomypeersorcolleaguessaywhenIdescribemyproblemandsuggestthisoptionasmysolution?

k. Howdoesitmakemefeel?Thisisyourconscience.Howdoesthisoptionmakeyoufeelphysicallyoremotionally?Areyouabletosleep?

l. Organizationtest .Whatdoestheorganization’sethicsofficerorlegalcounselsayaboutthis?

6. Selectanoption .Testtheoptionslistedinstep4toevaluateeachoptionfromdifferentpointsofview.Assessingeachoptionwithtesta.throughl.willhelpyouthoroughlythinkthroughtheimpactofyourdecisionandmakebetterchoices.

7.Evaluateoutcomesandreviewsteps1-6 .Whatcouldmakeitlesslikelythatyouwouldhavetomakesuchadecisionagain?Youmayneedtocreateadditionaloptionsbecausethetestingcompletedin5revealedundesirableoutcomes.

B .Whistle-blowingOneoftheoptionsthatyouhaveevaluatedmaybeto“blowthewhistle”onthoseengagedinanunethicalactivity.Youhaveidentifiedtheethicaldilemmaandevaluatedthesituationusingthedecision-makingguide.However,yoursupervisorpresses


youtotakeanactionthatmakesyouuncomfortable .Youhaveexaminedthesituation,identifiedthestakeholders,determinedandtestedtheoptions.Youarefirmlyconvincedthatifyoutaketheactionyoursupervisorhasasked,theactwouldbeunethical.Whatdoyoudonow?Youneedthisjobtopayyourbillsandsimplywalkingawayfromyourjobisnotacourseofactionyouwanttotake.Goingagainstwhatasupervisorhasaskedororderedisnevereasy,butyouneedtodecidewhattodo.

Followingthedirectionsorordersofsomeoneelseisnotanethicalorlegaldefenseforwrongdoing.Youmustbepreparedtothinkandactinawaythatisbeneficialtoyouandthatoftheorganizationforwhichyouwork.Aretherealternativesforyoutofollowshortofquitting?Fortunately,inmostorganizationstheansweris“yes.”Herearesomepossiblecoursesofactionifyoufindyourselfinthistypeofethicaldilemma:

1. Discussyourconcernswithyourimmediatesupervisor,evenifyoursupervisoristheonepresentingtheethicalproblem.Sometimeswhenpresentedwithasubordinatewhoquestionstheethicalnatureofasituation,thesupervisorwillrethinkthesituationandstepbackfromtheunethicalaction.If,however,thisdoesnotprovideasatisfactorysolution,youwillneedtofindanalternativecourseofaction.ItisNOTokaytojustdowhatyouaretoldtodowhenyoubelievetheactionisinappropriateorunethical!

2. Yourorganizationmayhaveanethics/fraudhotlineand/oranethicsofficerwithwhomyoumayconsult.Inaddition,ifyoubelongtoaprofessionalorganizationthathasanethicsadvisor,youmaybeabletoconsultthatpersontogetanobjectiveopinionaboutyoursituation.Generally,areporttoahotlineorethicsofficerwillbekeptconfidential(atleastinitially).However,iftheproblemisveryseriousandinvolveshigherlevelsofmanagement,maintainingconfidentialitymaybedifficult.Ifyoudecidetopursuethematterhigherintheorganization,forexampletotheauditcommittee,youwillhavetodecideifyouarewillingtobecomea“whistle-blower .”

“I would prefer even to fail with honor than winby cheating.” — Sophocles


3. Atthispoint,youmaywanttoassessyourownsituation—bothfromanethicalandlegalstandpoint.Ifyoubelieveyoumaybeinlegaljeopardyfromactionsyoualreadyhavetakenoryoubelieveyouwillhavetoblowthewhistle,youmaywanttoconsultaprivateattorney.Anattorneycanadviseyouaboutyourlegalrightsandresponsibilitiesinthesituation.

4. Awhistle-blowerissomeonewho,duetoasituationinvolvingwrongdoing,“blowsthewhistle”orinformshigherlevelsofauthority.Somewhistle-blowersstaywithintheorganizationbyinforminghighermanagement,theinternalauditors,theauditcommittee,ortheboardofdirectorsaboutthewrongdoing.Otherwhistle-blowersgooutsideoftheorganizationbyinforminglawenforcement,theauditors,orthenewsmediaaboutthewrongdoing.Therearelegalprotectionsfromretributionforwhistle-blowerscontainedintheSarbanes-OxleyActandotherstateandfederallaws.Despitesuchprotections,whistleblowersareoftensubjectedtointensepressureandmayfinditnecessarytoleavethecompany.Beingawhistle-blowercanbeaverydifficultandlonelyroadtofollow.Ifyouareaccusinghigh-rankingindividualsintheorganizationofwrongdoing,expecttomeetwithveryfierceoppositionfromthosebeingaccused.Somewhistle-blowerscomeoutverywellfromtheirsituationandbecomenationalcelebrities,suchasSherronWatkinsofEnronandCynthiaCooperofWorldCom .Butmostwhistle-blowersdonotbecomefamousorrich.Manyhavetoleavetheirjobs,andsomeevenhavegonetojailduetoactionstheytookbeforetheyblewthewhistle.Despitethesehazards,becomingawhistle-blowermaybethebestthingtodo;otherwise,youmaybecomeaperpetratorintheunethicalactivity.

5. Ifyoudecidethatyoumustproceedupthechainofcommandintheorganization,youshouldkeepyoursuperiorapprisedandfullydocumentyouractionsinwriting .Ultimately,yourcasemayreachtheauditcommittee,theboardofdirectors,ortheownersofthecompany.Atthisstage,anonymityisprobablynolongerpossible.

6. Hopefully,yoursituationwillberesolvedwithoutbecomingawhistle-blowerorgoingallthewayuptotheboardofdirectors.But,ifyoursituationstillexistsafterexhaustingalllevelsofinternalreview,youmaynothaveanyothercourseofactionbuttoresignfromtheorganizationandsubmitamemorandumtotheappropriatepartyinthe


companydetailingexactlywhyitisnecessaryforyoutoresign.Resignationprobablywillnotresolvethesituation,butatleastyouwillbeablesleepatnightandknowthatyouhavedonetherightthingbynotparticipatinginwrongfulconduct.Reportingillegalconducttolawenforcementauthorities,oranyoutsideparty,shouldbedoneonlyafterconsultinganattorneywhocanadviseyouproperly.

Fortunately,manyethicalsituationscanberesolvedshortofresignation.Thisiswhymanyorganizationsnowhavecodesofconduct,hotlines,andethicsofficers.Still,knowledgeofyourrightsandresponsibilitiesisalwaysthebestwaytoprepareifpresentedwithanethicaldilemma.

V . StudentCodes,ProfessionalCodes,andCompanyCodes

Codesofethicsareusedtocommunicateto,andformalizesetsofvaluesfor,groupsofpeople.Thesegroupsmaybebusinessorganizations,membersofprofessionalorganizations,participantsinacademicprograms,oranyothercollectionofpeople.Often,acodeofethicsiswrittenbyarepresentativeassemblyofgroupmembersandthendistributedtotheentiregroup.Thissectioncontainsexamplesofcodesofethics-orconductcodes,astheyaresometimescalled.Fortheprofessionalcodes,usetheURLlinktogototheorganization’swebsitetolocatethetextofthecodes.Theexamplespresentedhereofferaviewofthebreadthandcoverageofdifferentprofessionalandsubject-specificcodes.Thesecodescanbeusedasreferencematerialandfordiscussionpurposes.

A .NorthernIllinoisUniversityStudentCodesofEthics1. NIU’sStudentCodeofConduct—www .stuaff .niu .edu/judicial

2. CollegeofBusinessStudentCodeofEthics—seeAppendixA

3. AccountancyMajorsStudentHonorPledgeandCodeofConduct—seeAppendixB

“Always bear in mind that your own resolution to succeed is more important than any one thing.” — AbeLincoln


B .ProfessionalCodes

1 . Accountancyi. Publicaccounting—AmericanInstituteofCertifiedPublic

Accountants.www.aicpa.orgii. Taxpreparation—NationalAssociationofTaxConsultants.

www.natctax.orgiii. Internalaudit—InstituteofInternalAuditors.

www.theiia.orgiv. Fraudexaminers—AssociationofCertifiedFraud

Examiners.www.cfenet.comv. ManagementAccountants—InstituteofManagement

Accountants.www.imanet.org

2 . Financei. CertifiedFinancialPlanner.www.cfp.netii. CharteredFinancialAnalyst.www.cfainstitute.orgiii. SecuritiesandExchangeCommission—“finalrules”.

www.sec.gov

3 . Managementi. Humanresourceprofessionals—SocietyforHuman

ResourceManagement.www.shrm.orgii. Managementgeneralists—SocietyfortheAdvancementof

Management.www.cob.tamucc.edu/sam/

4 . Marketingi. Marketingandsales—AmericanMarketingAssociation. www.marketingpower.comii. Marketingresearch—InteractiveMarketingResearch

Association.www.imro.org

5 . OperationsManagementandInformationSystemsi. OperationsManagementandLogistics. www.apics.org/default.htmii. InformationSystems—www.aitp.org


C .CompanyCodes

1 . Caterpillarwww.caterpillar.com/company/strategy/code-of-conduct

2 . Experian .www.experian.com/newsletters/experian_news/5408/

heartofexperian.html?INTCMP=EXTISNL0710CLCORN3_nwltr

3 . KPMGwww.kpmg.com/US/en/IssuesAndInsights/

ArticlesPublications/Pages/Ethics-and-compliance-Report-2010.aspx

4 . TheNationalBand&TrustCompanyofSycamorewww.nabatco.com

5 . NICOR,Incwww.nicor.com/en_us/nicor_inc/careers/what_we_believe.htm

6 . Microsoftwww.microsoft.com/About/Legal/EN/US/Compliance/

Buscond/Default.aspx

6 . AT&Twww.att.com/gen/investor-relations?pid=5595


ReferencesCressey,D.R.1953.Other People’s Money: A Study in the Social Psychology of

Embezzlement.

Davis.Michael.2003.A Format for Ethical Decision Making.CenterforStudyofEthicsintheProfessionsattheIllinoisInstituteofTechnology:Chicago.

Hillison,Bill,DavidSinason,andCarlPacini.1998.The Role of the Internal Auditor in Implementing SAS 82,CorporateController(July/August).

Jennings,Marianne.1998.Ethics: Why it Matters & How You Do It. GovernmentAccountantsJournal.pp.12-22.

Johannesen,Richard.2002.Ethics in Human Communications, 5thed.ProspectHeights,IL:WavelandPress.

Nash,Laura.1993.Good Intentions Aside: A Manager’s Guide to Resolving Ethical Problems.Boston:HarvardBusinessSchoolPress.

Paton,H.J.1947.The Categorical Imperative: A Study of Kant’s Philosophy.London:Hutchinson’sUniversityLibrary.

Peale,NormanandKenBlanchard.1988.The Power of Ethical Management.NewYork,NY:WilliamMorrow&Co.

Plagiarismresource:http://www.indiana.edu/~wts/pamphlets/plagiarism.pdf


AppendixANIUCollegeofBusinessStudentCodeofEthics

AsastudentatNorthernIllinoisUniversity’sCollegeofBusiness,Iunderstandthatitismydutytobehaveinacourteousandethicalmanneratalltimes.TheattitudesandhabitsIdevelopasastudentformthecoreofmyprofessionalbehavior.Assuch,Iwillsetanexampleofthehighestcaliberforthosethatworkwithme.

Topromotethesebehaviorswithinthestudentbody,Iwillusetheprinciplesofhonesty,respect,integrity,andprofessionalismasmyacademicandprofessionalguide.

HONESTY:

• UnderstandtheCollege’spoliciesonacademicconduct,andpracticethemasapartofmylife

• Honormypersonalobligationtobesincereandforthrightbydealingfairlyandtruthfullywithothers

RESPECT:

• Embracethediverseperspectivesandaccomplishmentsofothers,knowingthatitisthepersonalandculturalvariationsamongpeoplethatenrichusindividuallyandasasociety

• TakeprideinmyCollegeandUniversitybyprotectingourfacilitiesandtheirsurroundings

INTEGRITY:

• Maintainmybeliefsandvaluesdespitechangingcircumstancesandchallengingenvironments

• Respectmyreputationandthatofmyuniversitybyavoidingunethicalbehaviorsandthecircumstancesthatencouragethem

PROFESSIONALISM:

• Maintainthehigheststandardsofperformance,conduct,andcooperationwithmyfellowstudents,faculty,andco-workers

• Performmydutieswithduediligenceandmakeacontinuousefforttowardsimprovement

Written by and for NIU College of Business StudentsNIU College of Business Student Advisory Board

Unanimously Approved December 6, 2004


AppendixBAccountancyStudentHonorPledgeandCodeofConduct

ThePledge:As students in the Accountancy Department at

Northern Illinois University, we will uphold and promote the highest levels of integrity and professionalism

while pursuing academic excellence.

TheCode: Toabidebythispledge,weestablishthisCodeofConducttocreatea

foundationforourvaluesandculture.

ThisCodeofConductexemplifiesthevirtuesnecessarytocontinueourdepartment’slongstandingandwell-respectedreputationamongtheaccountingprofession.

Asfutureaccountants,wemusttakeresponsibilityforourlearning,beaccountableforourdecisions,andconsidertheconsequencesofouractions.

WehavetheresponsibilitytorememberthateachstudentisarepresentativeofNIU’sAccountancyprogramoncampus,inthecommunity,andintheworkplace.

Weneedtoactwithintegrity,throughdemonstratingacademichonesty,“doingtherightthing”,andstandingupforourbeliefs.

Wedemonstrateprofessionalismbyconductingourselvesinanappropriatemannerandmaintaininggoodcomposureatalltimes.

Weachieveacademicexcellencebychallengingourselves,takingprideinourwork,andstrivingforourbest.

Wewillrespecttheuniversity,includingthefaculty,facilities,fellowstudents,theprofession,andourselves.

Wecommittothelife-longlearningprocess.

Written by and for NIU Accountancy MajorsUnanimously endorsed and approved Spring 2003

By the Accountancy Faculty and Advisory Board



Notes


NorthernIllinoisUniversityisanequalopportunity/affirmativeactioninstitutionanddoesnotdiscriminateonthebasisofrace,color,religion,sex,age,maritalstatus,nationalorigin,disability,statusbasedontheVictims’EconomicSecurityandSafetyAct(VESSA)orstatusasadisabledorVietnam-eraveteran.Further,theConstitutionandBylawsofNorthernIllinoisUniversityprovidesforequaltreatmentregardlessofpoliticalviewsoraffiliation,andsexualorientation.InquiriesconcerningapplicationofTitleIX,Section504,andotherstatutesandregulationsmaybereferredtotheAffirmativeActionandDiversityResourcesCenter,1515W.LincolnHighway,DeKalb,IL60115,telephone815-753-1118.

PrintedbyauthorityoftheStateofIllinois.

www.niu.edu8/1152828

Decision-Making Guide

Step 1Determine the facts and state the problem.

Step 2Identify the stakeholders.

Step 3Identify relevant factors.

Step 4Develop a list of 3–5 options.

Step 5Assess options using various “tests.”

a. Harm test b. Legality test c. Precedence test d. Publicity test e. Defensibility test f. Mom test g. Reversibility or “Golden Rule” test h. Virtues test i. Professional test j. Peer or colleague test k. “How does it make me feel?” test l. Organization test

Step 6Select an option

Step 7Evaluate outcome and review steps 1-6.

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Northern Illinois University

eth-ic \'eth-ik\ n the belief building ethical leaders

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