Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Chapter 1 The Foundation of Ethical Thought The purpose of this chapter is to give the students a broad overview of the theoretical foundation that supports ethical decision making. It is from this theoretical grounding that the students can understand how their decisions related to ethical issues can impact not only themselves but others as well. In addition, this chapter introduces the structure of the textbook which allows the instructor to also explain his or her structure for the class. Key Learning Points There are a number of key learning points which can be accomplished when this chapter is presented to your students. These learning points include: 1. The chapter introduces the student to the concepts of ethics and business ethics. 2. Ethics is a complex concept to describe. Different philosophies have used different theories in order to help explain and guide ethical behavior. 3. Although some of the theories presented in this chapter were developed over two thousand years ago, they are appropriate and applicable to today’s business environment. 4. This chapter demonstrates that the eight underlying principles presented in the Global Business Standards Codex are interrelated with each other as well as with the major philosophical theories related to ethics. 5. The “Utilitarian Ethics: One Playground at a Time” shows that one person can have an impact on many others by doing “the right thing”. 1 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Utilitarian Ethics: One Playground at a Time An 8:10 minute video highlighting the PlayPumps program can be found on the Frontline World web site.(http://www.pbs.org/frontlineworld/rough/2005/10/flwrc11.html?&c=3wm). There are a number of other videos and other valuable information about this program at playpumps.org. This is a good case to foster discussion during the first class period. Here are a number of potential questions that could be asked to help extend the discussion. There is also additional background information available on the Frontline web site (http://www.pbs.org/frontlineworld/rough/2005/10/south_africa_th.html#) 1. Ask the class how many of them have volunteered for a non profit organization. Follow up with those who respond positively by asking them why they volunteered. An additional follow up question would be to ask if those same students would consider volunteering in the future. 2. Why did Trevor Field volunteer his services to develop the playground pump? Mr. Field probably felt that since there were no other solutions being developed, he put it upon his own shoulders to help the villages. There would certainly be self satisfaction in achieving a goal of providing clean cool water to these villages. In addition, as a former executive he probably viewed the issues of providing clean water similar to the business challenges he faced when he was working. 3. Explain the title of the case “Utilitarian Ethics: One Playground At a Time”. The title highlights the link between the actions of Mr. Field and the utilitarian approach to ethical behavior. Mr. Field viewed resolving the issue of poor drinking water not for his own self interest such as Ethical Egoism, but for the benefit of many - Utilitarianism. In fact, Mr. Field received no physical benefit from the develop of the playground pump. Therefore Mr. Field was intrinsically motivated to resolve the issue. Intrinsic motivation takes place when the person performs an act for internal satisfaction and not for extrinsic or material rewards. Definition of Ethics and Business Ethics To introduce the concepts of Ethics and Business Ethics to the students in the classroom, a good starting discussion point would be to ask the students what kind of ethical dilemmas have they faced in the past. A follow up discussion point would be to ask them what type of ethical dilemmas do they think they will face in their jobs after they have graduated. 2 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Types of Ethical Examinations Descriptive-the presentation of facts that relate to a specific set of circumstances related to an ethical issue. Analytical-Using the facts of the ethical situation to try and understand or analyze the actions of the decision makers as related to the ethical issue. Normative-A prescribed course of action that is recommended to avoid unethical behavior is in future. Example Using Enron Descriptive-Ken Lay and Jeff Skilling were found guilty of fraud based on their actions as top executives at Enron Analytical-Ken Lay and Jeff Skilling, through their cognitive lens, believed that they were doing nothing wrong. In addition, if they were doing something wrong doing, they were not aware of it and/or did not bother to ask about it. Alternatively, Ken Lay and Jeff Skilling knew exactly what they were doing in a calculated attempt to defraud Enron’s stockholders. Furthermore, they actively tried to conceal their behavior in order to try to avoid prosecution by the federal government. Normative-Need to have a code of ethics that creates real consequences if unethical behavior is detected. Try to ensure that power is not concentrated at the CEO level by having a separation of the CEO and the Chairman of the Board. Have the appointment of a Chief Ethics Officer who reports to the Board of Directors and is accountable to ensure the ethical conduct of all the employees within the firm. Revise the selection and reward system for employees to try and ensure that ethical people are selected and rewarded for their positive ethical behavior. Teleological Frameworks Ethical Egoism-Each individual’s own self interests drive them. On balance, there are more positive than negative results Utilitarianism-Each individual’s actions will be based on providing the greatest good to the greatest number of people Sidgwick’s Dualism-The middle ground between Ethical Egoism and Utilitarianism. Sidgwick argues that self interest can be included in determining the greatest good for the greatest number and that the other two theories are not mutually exclusive. After these three theories have been presented, a good leading discussion point would be to discuss what drives a free market system. If it is individual self interest, is it an 3 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Ethical Egoism based system? If this is true, then why are there so many non profit organizations? Could Sidgwick’s Dualism be the answer - that a free market system is driven both by the extrinsic rewards by the accumulation of material goods as well as the intrinsic rewards of helping others? This would support Sidgwick’s argument that individual actions need to be explained from the rational benevolence aspect of Utilitarianism and the prudence aspect of Ethical Egoism. At this point you can refer back to the opening Case on the playground pumps in South Africa. Deontological Frameworks Existentialism-The only person who can determine right and wrong is based on the free will of the person making the decisions. As a result, duty is connected with actions each individual determines the value of his/her actions. Contractarianism (Social Contract Theory)-All individuals agree to social contracts to be members within society. As a member of society, each individual agrees to certain social norms. As a result, the values and norms developed by society must be fair to everyone who is a member of society. Kant’s Ethics-Individual free will to make decisions needed to be converted into universal free will. It attempts to bridge the gap between existentialism and contractarianism by proposing that each individual would act in the same manner as anyone else in society if they also had to address the same set of circumstances. Using WorldCom as an Example Existentialism Bernie Ebbers claimed that he did nothing wrong. Even upon his conviction he stated that he did not know what type of fraudulent activities were occurring at WorldCom. From an existentialism perspective, Mr. Ebbers is justifying his actions based on his individual interpretation of the value of his actions. His interpretation is that he did not do anything wrong; therefore, he will continue to believe he did nothing wrong. Contractarianism By being a publicly traded company, WorldCom agreed to certain social norms. Those norms included being truthful when disclosing the financial performance of their firm and identifying any actual of potential problems to the owners and employees of WorldCom. This norm of transparency assures society that the information that was presented by WorldCom is accurate and timely. Of course, WorldCom broke that trust by violating this norm by not being transparent. Kant’s Ethics Cynthia Cooper would be a good example of Kant’s Ethics. By ignoring the requests by her superiors, Ms. Cooper began an investigation into financial transactions occurring at WorldCom. She uncovered the massive fraud that was occurring at WorldCom. This 4 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall would be considered a Kant’s Ethics approach since she believed that her actions would be done by others as part of a universal will under the same set of circumstances in order to discover the fraud. Mixed Frameworks Intuitionism and Love Seven Guiding Principles 1. Fidelity-an individual needs to keep explicit and implicit promises 2. Reparation-an individual must act on repairing the consequences of previous wrongful acts 3. Gratitude- an individual must be able to show gratitude for the kindness that others have given him or her. 4. Justice-an individual should try to see that any goods are fairly distributed 5. Beneficence-an individual should focus on trying to improve the lives of others 6. Self-improvement-an individual should improve oneself by focusing on virtue and intelligence. 7. Noninjury-any individual should not cause harm to others. Links with previous ethical philosophies include: Ethical Egoism-self-improvement Utilitarianism-beneficence and noninjury Existentialism-fidelity and self-improvement Contractarianism-fidelity and justice Global Business Standards Codex Fiduciary Principle- Similar to agency theory, the fiduciary principle states that managers have a legal responsibility to protect the interests of the stakeholders. Property Principle-Each employee needs to respect the property of the firm and the property of others. Reliability Principle-Each employee must honor his/her commitments to the firm. Transparency Principle-Each employee should conduct business in a truthful and open manner. Dignity Principle-Similar to the Golden Rule, the dignity principle states that employees should treat others with dignity. Fairness Principle-Stakeholders who have a vested interest in the business decisions made by management should be treated fairly. 5 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall Citizenship Principle-Every employee should act as a responsible citizen in the community. An example which could be used in class is the European Training and Coaching firm Energizers which lists how they use the 8 principles to help guide their decisions in an ethical manner. (http://www.energizers.eu/gbs_codex.html) Questions for Thought 1. Choose an event in your life where you believe you acted ethically. Discuss the event in terms of the teleological frameworks discussed in the text. After the student has described the event, have the student determine whether the act was based on Ethical Egoism, Utilitarianism or Sidgwick’s Dualism. Ask other members of the class if they agree with the student’s conclusion. An additional discussion point would be to ask the students how the PlayPump story could be changed so that is would be considered Ethical Egoism or Sidgwick’s Dualism instead of Utilitarianism. Ethical Egoism example would be that Mr. Field would make a personal financial profit from the operation. The play pump still benefits others but instead of viewing from an utilitarianism perspective it would be used as just “satisfying the news of his customers”. As a result, his own personal self interests would be satisfied with financial compensation and the fresh drinking water would still come to the villages. Sidgwick’s Dualism example would be that Mr. Field would not receive any financial profit from the playpumps but he would be allowed to advertise for free his company’s products on the water towers if he had his own businesses not related to the water pump. This could be an example of the middle point between the self interests of Ethical Egoism and the greatest good for the greatest number of Utilitarianism. Mr. Field would not receive any direct financial benefits from the pumps but would receive the indirect benefit of being able to make potential customers aware of his other products. However, the net result would be that the pumps would be installed at no charge to the communities around South Africa. 2. Using the same event you chose in question 1 above, discuss the event in terms of the deontological frameworks discussed in the text. Existentialism-From this perspective, ask the student how he/she judged his/her behavior during the event. Is the judgment of the behavior now the same as it was when the event was occurring. If the answer is no, this could highlight one of the limitations of existentialism. Upon reflection the validation of the activity may not be so clear cut. As a result, existentialism relies on determining right and wrong based on free will at that point in time but the decision maker may change their perspective over time. The follow 6 Copyright © 2009 Pearson Education, Inc. publishing as Prentice Hall up question to enforce the point is to ask the student whether he/she would behave in the same manner if the event occurred again in the future. Contractarianism- From this perspective, ask the student whether his or her actions were based, in part, on the actions of others. Did he or she believe it was okay to act that way because his or her friends were also acting that way? This discussion would eventually lead to the “If your friends jumped off a cliff, would you do it also?” question. Ask the class how important is it to have acceptance from their peers when they are doing any activity. Kant’s Ethics-From this perspective, ask the student whether the student’s free will or the peer pressure from others lead to the final determination of the ethical event. The student may reply that both individual free will as well as fitting into social norms were considered when the activity took place. At this point ask the student whether certain friends would be more influential in the decision making process. 3. Choose any Fortune 500 Company. Locate the company’s code of ethics published on the company’s web site. Evaluate the code of ethics in terms of the Global Business Standards Codex. This would be a good first written assignment for your students. You may want everyone in the class to select a different company and have them present their analysis in a following class period. In addition, you also may want to have the students select both a US based and Non US based company from the same industry possibly ranked in the Global Fortune 500 listing. This would be a good exercise to show the students that firms in different companies may take a different approach to addressing ethical policies and procedures. 4. Using the principles set forth in the Global Business Standards Codex, find an example of a company that does or did not follow one of the principles. Discuss the implications of the company’s action. You could use the previous example given of the firm Energizers which lists how they use each of the 8 principles (http://www.energizers.eu/gbs_codex.html). You also may start discussion by asking whether the students would rank each of the 8 principles as having the same level of importance. If they do not feel they should be ranked equally, have the students rank them for you and have them justify their rankings. If a student brings in an example of a company which doesn’t address all 8 of the principles in their ethical policy, ask them why wouldn’t they. Also ask them whether the omission of the principle(s) would impact whether you would: invest in the company, buy products from the company or work for the company. 7
