“Business Ethics & Social
Responsibility: How to Improve
Trust & Confidence in Business”
Dr. O.C. Ferrell
Colorado State University
Dr. Linda Ferrell
University of Wyoming
Corporate Responsibility Crisis...
 “Opinion polls now place business people
in lower esteem than politicians.”
-Jennifer Merritt (2002) “For MBAs, Soul Searching 101,” Business Week, Sept. 16, p. 64.
 “A W.S.J./NBC poll found that 57% of the
general public believed that standards &
values of corporate leaders & executives
had dropped in the last 20 years.”
-Eric Hellweg (2002) www.business2.0.com, Sept. 10.
Copyright O.C. and Linda Ferrell, 2002
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Corporate Responsibility Crisis...
 “An ABC News/Washington Post survey
indicated 63% of the public felt that
regulation of corporations is necessary to
protect the public.”
 “Seventy-five percent of those surveyed by
ABC expressed limited confidence in large
corporations.”
-Gary Langer (2002) “Confidence in Business: Was Low and Still Is,” www.abcnews.com, Sept.
10.
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Corporate Responsibility Crisis...
 “Suddenly, investors are obsessed with lies,
greed and dodgy accounting. It began with
the scandal that toppled Enron. Now it has
engulfed big and small companies, eroding
the markets, investor confidence and
America’s image as the economy to
emulate.”
-MSNBC “A Guide to Corporate Scandals: Companies Under the Microscope,”
http://www.msnbc.com/news/corpscandal_front.asp?odm=C2ORB. Accessed 9/24/2002.
Copyright O.C. and Linda Ferrell, 2002
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Companies Under the
Magnifying Glass…
 Adelphia Comm.
 Arthur Andersen
 Bristol-Meyers
 Computer
Associates
 Dynegy
 Enron
 Global Crossing
 Halliburton
 ImClone Systems
 Merrill Lynch
 Qwest Comm.
 Tyco Intl.
 WorldCom
 Xerox
-MSNBC “A Guide to Corporate Scandals: Companies Under the Microscope,”
http://www.msnbc.com/news/corpscandal_front.asp?odm=C2ORB. Accessed 9/24/2002.
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What does fraud cost?
 Cost to corporations: > $400 billion a year
 Organizations lose $9/day/employee
 Median loss caused by males: $185,000
 Median loss caused by females: $48,000
“Fraud Group Warns of Theft,” Boston Sunday Globe, 2/3/2002.
Copyright O.C. and Linda Ferrell, 2002
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Corporate Reform...
 The 2002 Sarbanes-Oxley Act was the most
sweeping change in corporate governance
and the regulation of accounting practices
since the Securities and Exchange Act of
1934.
– Supported by Republicans & Democrats
– Provides oversight to restore stakeholder
confidence
– Requires business ethics infrastructure
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What are colleges of business doing?
 Developing programs & courses to address
business ethics & corporate responsibility
 Leaving ethics education to the liberal arts
college (philosophy departments)
 Encouraging faculty to integrate ethics into
current curriculum
 Maintaining the status quo
Copyright O.C. and Linda Ferrell, 2002
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Developing Programs and
Courses…
 “…Then you had rapid succession during
the eighties, insider-trading scandals, the
defense-industry (overcharging) scandals,
savings-and-loan scandals. Each of those
ratcheted up national interest and business
school interest in teaching business ethics.”
– Kirk Hanson, Stanford University
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Philosophy Departments Teach
Business Ethics...
 “The University of Akron Business College
is urging students to enroll in a new ethics
course in the philosophy department.”
– “Certain words are sort of owned by certain
departments…one of the words that is sort of
owned by the philosophy department in lots of
universities is the word ‘ethics’.”
– Stephen Hallam, Dean—Akron’s College of Business
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The Philosophy Department’s
Philosophy on Business Ethics...
 “The attitude of a lot of liberal-arts faculty
toward business & toward businessprofessional education was a certain level of
disdain, somewhat born in a liberal mindset. Anti-business sentiment is strong in
philosophy departments.”
– Kenneth Goodpaster, University of St. Thomas College
of Business
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Where did the Enron ‘infamous’
get their degrees?
 Ken Lay—bachelors and masters degree in
economics from University of Missouri
 Jeffrey Skilling—applied science from SMU
and MBA from Harvard
 Andrew Fastow—economics from Tufts and
MBA from Northwestern
 Robert K. Jaedicke (board member)—former
Dean of the Graduate School of Business,
Stanford University & Stanford graduate
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Integrating Ethics...
 “The curriculum is under so many
pressures—to do technology, the Internet,
globalization, the environment…ethics is
competing with so many other things. The
curriculum is finite. You can’t put
everything in it.”
– David Vogel, University of California—
Berkeley
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Eliminating the Business Ethics
Course…
 “Eliminating business ethics as a separate
class is the approach at the Katz School of
Management [University of Pittsburgh]. It
may be better to integrate ethics into other
classes, so students see it as an integral part
of other subjects…such as finance,
accounting or marketing.”
– Frederick Winter, Dean
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Maintain the Status Quo...
 “By the time they’re taking auditing, they’re
21-33 years old. The question comes up,
can you teach a person of that age ethics? I
don’t think we can.”
– Ken Lambert, Director, School of Accountancy,
University of Memphis
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Eliminating Business Ethics...
 “A business can’t have ethics any more than
a building can have ethics. I don’t believe
the university is a place for that—family &
elementary & secondary schools are.”
– Milton Friedman, Nobel Laureate
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Teaching Idealism or
Management Issues...
 “A business ethics course is not serving its
mission in the curriculum if it just deals
with ideological stuff; it’s got to deal with
the stuff of leadership & management.”
– Kenneth Goodpaster, University of St. Thomas
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Developing Trust & Confidence
in Business...
 Individuals alone did not cause our current
crisis
 Many stakeholders were involved in
supporting deception, fraud & destruction
–
–
–
–
–
Board members
Top management
Attorneys
Accounting firms
Securities analysts
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–
–
–
–
Regulators
Politicians
Mass media
Investors
Colleges of business
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How does ethical decision
making occur in organizations?
 The #1 influencer of ethical/unethical
behavior is the influence of significant others
& the corporate culture
 Business ethics in an organization relates to a
corporate culture of values, programs,
enforcement & leadership
 Stakeholders must support organizational
ethics initiatives—it’s good business
– Stop focusing on the short term!!!
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Our Recommendation for
Colleges of Business...
 Take responsibility for educating your
students about corporate responsibility,
business ethics & social responsibility
 Both colleges of business & business
top management need to make sure
there are visible & supported programs
– Do not rely on individual faculty to
integrate ethics into their courses
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The Solution...
 Teach courses such as Business & Society,
Business Ethics, Social & Regulatory Issues
 Integrate business ethics into core coursework
 College of Business faculty need education &
support to achieve the above objectives
 AACSB will put greater pressure on COB’s to
prove they are using due diligence in
addressing the business ethics needs of our
students
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Caution...
 Teaching moral philosophies, character
education, & ethical idealism is not the
solution for business students
 Organizational ethics takes students into the
world of business & addresses relevant
current ethical dilemmas & solutions
 Students need to understand that most
businesses are responsible & ethical!!
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The Main Point...
 “You can’t necessarily teach morality…but,
it’s possible to point out behavior that’s over
the line. Your mother did not teach you
about off-balance-sheet entities and how to
grapple with them.”
– Thomas Donelson, Wharton College of Business
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