Collins
Instructor’s Guide
Chapter 1:
UNETHICAL BEHAVIORS IN ORGANIZATIONS
AND HUMAN NATURE
CHAPTER 1 CHAPTER AND ADDITIONAL QUESTIONS
In studying this chapter, students should consider the questions below.
 “CQ1” refers to “Chapter Question 1.” This question appears at the end of the textbook
chapter.
 “AQ1” refers to an “Additional Question 1.” This is an “additional” question related to
the chapter. It is not listed at the end of the textbook chapter as a “Chapter Question”.
 These items are numbered within the two categories based on the order in which the
answer appears in the chapter.
AQ1: What is ethics?
AQ2: How often do employees experience ethical dilemmas?
CQ1: What are the most common types of unethical behaviors in organizations?
CQ2: In what ways do unethical behaviors increase organizational costs?
CQ3: What are the competitive advantages of creating and sustaining an ethical organization?
AQ3: What are the different perspectives on human nature?
CQ4: Describe the six stages of moral developments.
AQ4: What is the extent of lies and cheating in society?
CQ5: Why do good people occasionally behave unethically?
CHAPTER 1 LEARNING OBJECTIVES
After completing this chapter, students should be able to:
 Explain the competitive advantages of creating and maintaining an ethical organization
 Appreciate that unethical behaviors occur in all organizational operations
 Identify common types of unethical behaviors
 Understand that unethical behaviors can be very costly to organizations
 Describe different theories of human nature and the stages of moral development
 Discuss why good people occasionally behave unethically
CHAPTER 1 OVERVIEW
Businesses significantly improve the quality of life by providing goods and services that
fulfill consumer needs. Service to others, one of the most admirable ethical standards, is at the
heart of business operations. Providing goods and services is just one ethical aspect of
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organizational operations. Doing business also involves a network of human interactions –
employees, customers, suppliers, other organizations, and government. Some of these people
may have high ethical standards, some may not. Federal, state, and local governments, along
with regulatory agencies, create new rules and regulations to ensure that stakeholders are treated
appropriately.
This chapter discusses why appropriately managing ethics is essential for every
organization. The prevalence and costs of unethical behaviors at work can be substantial. In
addition, appropriately managing ethics provides ethical organizations with many competitive
advantages. Despite these competitive advantages, however, unethical behaviors continue to
occur because every person is morally imperfect. The chapter reviews different theories of
human nature and Kohlberg’s six stages of moral development, and explores why good people
occasionally behave unethically.
CHAPTER 1 LECTURE OUTLINE
Teaching Objective: To increase awareness that all organizations experience ethical issues and
that these issues must be managed appropriately.
Suggested Time: Two to three hours of class time is recommended to present this chapter.
I.
Additional Question 1: What is Ethics?
Ethics defined
Action sequence
II.
Additional Question 2: How often do employees experience ethical dilemmas?
Daily occurrence
III.
Chapter Question 1: What are the most common types of unethical behaviors in
organizations?
Extent of unethical behaviors at work
Managers as victims
Profession and industry issues
Operation areas
IV.
Chapter Question 2: In what ways do unethical behaviors increase organizational
costs?
Legal costs
Employee theft
Monitoring costs
Reputation costs
Abusive treatment costs
Recruitment and turnover costs
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V.
Chapter Question 3: What are the competitive advantages of creating and
sustaining an ethical organization?
Attract and retain high-quality employees
Attract and retain high-quality customers
Attract and retain high-quality suppliers
Attract and retain high-quality investors
Earn good will from community and government
Performance benefits
VI.
Additional Question 3: What are the different perspectives on human nature?
Human nature
Born with prior knowledge of right and wrong
Born good
Born with inherited sin
Born morally neutral
VII.
Chapter Question 4: Describe the six stages of moral development
Cognitive development
Preconventional level
Stage 1: Obedience-and-punishment orientation
Stage 2: Instrumental orientation
Conventional Level
Stage 3: Good-boy—nice-girl orientation
Stage 4: Law-and-order orientation
Postconventional level
Stage 5: Social contract orientation
Stage 6: Universal ethical principles orientation
VIII. Additional Question 4: What is the extent of lies and cheating in society?
Lies and cheating
Altruism
IX.
Chapter Question 5: Why do good people behave unethically?
Unintended Unethical Behaviors
Choosing Between Competing Values
Intentional Unethical Behaviors
Failure to Report Unethical Behaviors
CHAPTER 1 SUPPORTING MATERIALS
Textbook Inserts
Ethical Dilemma Analysis
 What would you do?
 Let’s Build a Building
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
In the Real World: Enron
Exhibits
 Exhibit 1.1: But What If I’m a Small Business?
 Exhibit 1.2: EEOC Charges and Resolutions 1997 and 2009
 Exhibit 1.3: Competitive Advantages of Being Ethical and Trustworthy
 Exhibit 1.4: The Heinz Dilemma
 Exhibit 1.5: Stages of Moral Development for Heinz Dilemma
 Exhibit 1.6: The Day Americans Told the Truth
 Exhibit 1.7: What Would Happen if You Lost Your Wallet?
Thematic Boxes
 Tips and Techniques
 Best Practice in Use
ADDITIONAL QUESTION 1: WHAT IS ETHICS?
ETHICS DEFINED
When an organization employs someone, that individual brings to work not only unique
job skills, but also his or her ethics. Ethics is the set of principles a person uses to
determine whether an action is good or bad. Interactions involving owners, customers,
employees, lenders, suppliers, and government officials have an ethical dimension.
Human beings possess free will and can choose to behave ethically or unethically in a
particular situation. Even if the decision-maker believes he or she is being ethical,
someone harmed by the action may think otherwise.
ACTION SEQUENCE
Ethical analysis takes into consideration all aspects of an action sequence. An action
sequence consists of the motivation behind the act, the act itself, and the consequences of
the act.
Decisions are initiated by motives and result in consequences: Are the motives and
intentions behind the decision good or bad? Are the consequences and outcomes of the
decision good or bad? There is nothing inherently right or wrong with a manager
speaking to an employee. It is the motivation that led to the act, and the consequences of
an act, that carry ethical weight. In this sense, actions and behaviors are surrounded, or
sandwiched, by ethics.
 An ideal ethical situation is one in which a person has good motives and the act
results in good consequences. When this alignment occurs people often do not
realize the act has an ethical dimension.
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On the other extreme, the most unethical situation is one where a person has bad
motives and the act results in bad consequences. Those committing these acts
often realize what they are doing is wrong, but do so anyway, maybe to achieve
some personal gain at the expense of others.
Many action sequences fall within these two ethical extremes, and either motives
or consequences fall short of the ideal.
Sometimes, good motives can generate bad consequences. Trying to help a colleague
perform one task, for example, might distract the person from meeting an important
deadline. Sometimes, bad motives can generate good consequences. An employee’s
selfish refusal to assist an annoying colleague may result in the colleague obtaining
assistance from an even more qualified person.
When evaluating these less-than-ethically-ideal situations, some people place greater
ethical weight on having proper motives, while others place greater weight on achieving
favorable consequences.
DISCUSSION ACTIVITY
Have students describe a situation when someone said the student’s action was ethical. Why did
the person think the student’s action was praiseworthy?
Next, have students describe a situation when someone said the student’s action was unethical.
Why did the person think the student’s action was blameworthy?
ADDITIONAL QUESTION 2: HOW OFTEN DO EMPLOYEES EXERIENCE ETHICAL
DILEMMAS?
DISCUSSION ACTIVITY
Have students write down when (how long ago) was the last time they faced an ethical dilemma.
Tell them you don’t want to know what the situation was, just how long ago did it happen. This
can be used as an ice-breaking activity – student name, job experience, and how long ago since
experiencing an ethical dilemma.
Then describe the ethical dilemmas you (the instructor) experienced today, and the types of
ethical dilemmas you experienced when the age of the students.
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DAILY OCCURRENCE
People experience ethical dilemmas at work every day. Just about every decision made
during a day has ethical ramifications. The decision can be based on good-bad motives
and result in good-bad consequences.
Examples of daily ethical dilemmas:
 Should you arrive at work early, on-time, or late?
 Should you submit adequate work that meets a deadline, or submit the highest
quality work possible and miss the deadline?
 Should you inform your boss about your colleague’s questionable work habits?
 Should the organization incur additional costs for environmental protection
technologies not required by law?
 Should you leave work at the designated time or cancel after-work plans and stay
late to finish a project?
Each of these decisions and actions is subject to ethical analysis that considers competing
obligations and outcomes. Even if an employee does not think the decision is an ethical
issue, the person benefitted or harmed may think so. Arriving late to work may seem
deserving after laboring hard the previous day. But other employees may be waiting for
essential information that only the late arrival possesses.
CHAPTER QUESTION 1: WHAT ARE THE MOST COMMON TYPES OF
UNETHICAL BEHAVIORS IN ORGANIZATIONS?
EXTENT OF UNETHICAL BEHAVIORS AT WORK
Every organization is confronted with ethical and unethical behaviors. The Ethics Resource
Center survey results about work-related ethical issues:
 Approximately 50% of the more than 3,010 respondents observed at least one type of
major ethical misconduct in the workplace during the past year (2009 survey)
 Nearly half of the observed major ethical misconducts violated the law (2009 survey)
 In 2003, 25% of respondents reported that their peers were not committed to ethics.
The number of respondents claiming that their peers were not committed to ethics
rose to 34% in 2005 and 39% in 2007.
In 2009, the types of ethical misconduct survey respondents observed most within the
previous 12 months include:
 Company resource abuse (23%)
 Abusive or intimidating behavior towards employees (22%)
 Lying to employees (19%)
 Email or Internet abuse (18%)
 Conflicts of interest (16%)
 Discrimination (14%)
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Lying to outside stakeholders (12%)
Employee benefit violations (11%)
Employee privacy breach (10%)
Improper hiring practices (10%)
Falsifying time or expenses (10%)
These ethical misconducts were observed in:
 Both large firms (27%) and small firms (16%)
 All sectors examined, including government agencies (29%), nonprofit organizations
(26%), publicly traded for-profit firms (25%), and privately held for-profit firms
(25%).
During a five and a half year period, 2000 to mid-2005, forty Fortune 100 companies either
pled guilty to a crime, were found guilty of a crime, or agreed to settle a case out of court for
acts such as fraud, discriminatory practices, undisclosed executive pay, antitrust violations,
and patent infringements.
In 2009 Gallup Poll, only 16% of the respondents expressed confidence in “Big Business,”
compared to 82% in the military and 67% in small businesses.
In 2008 Gallup Poll, when asked to evaluate the honesty and ethical standards of different
professions, the scores for having high or very high ethical standards for some professions
were:
 83% for nurses
 66% for pharmacists
 12% for business executives
 10% for insurance salespeople
 9% for stockbrokers
 7% for car salesmen
MANAGERS AS VICTIMS
Managers and owners are also victims of unethical behaviors:
 20–44% of all resumes contain lies about work histories, educational background, or
other credentials.
 33% of employees calling in sick are really tending to personal needs, family needs,
stress, or feel entitled to a day off.
 24% of the government’s unemployment system overpayments are due to fraud.
The percentage of employees engaged in theft is a staggering 60%. In addition to the usual
pilfering of pens and paper, the most common employee misuses of corporate assets for
personal use are:
 Email: 63%
 Web Browser: 45%
 Fax Machine: 45%
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Software: 33%
Mail/Overnight Delivery: 23%
Wireless Phone: 22%
Digital Copier: 18%
PROFESSION AND INDUSTRY ISSUES
Every profession and industry experiences ethical problems.
In the accounting/auditing profession:
 falsifying reimbursement or time reports
 working slowly without concern for budget limits
 excessively surfing the web
 using company resources for personal purpose
 ignoring manager input
Legal profession, along with accountants and auditors: Billable hours. One egregious
case involved a lawyer charging a client 3,500 billable hours for one year’s work, which
averages out to almost 10 hours a day, 7 days a week, every week of the year.
In the construction industry, 84% of survey respondents reported that they personally
experienced, encountered, or observed unethical industry-related acts or transactions
during the past year, with 34% claiming this happened many times. The top five major
issues were:
 bid shopping
 change orders
 over-billing
 unreliable contractors
 questionable claims
Public relations and sales professions: According to a survey of 1,700 public relations
executives:
 25% lied on the job
 39% exaggerated the truth.
A survey of sales and marketing representatives revealed that:
 79% heard a salesperson make an unrealistic promise on a sales call
 78% caught a competitor lying about their company’s products and services.
Government agencies: According to the 2007 Ethics Resource Center survey, on whether
the responded observed at least one form of ethical misconduct within the previous
twelve months:
 52% of federal government employees did
 57% of state government employees did
 63% of local government employees did
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OPERATION AREAS
Every employee level and operational area is confronted with ethical issues. Unethical
discriminatory practices based on race or gender can occur in dealings with suppliers,
employees, customers, the government, or the public. Unethical discrimination can occur
at any level of the organization—Board of Directors, executives, middle managers, staff,
or production employees—or in any department—accounting, finance, human resources,
or marketing:
 Among Chief Financial Officers: 67% had been pressured to misrepresent
corporate results.
 Among Middle Level Managers: 25% admit to having written a fraudulent
internal report.
 Among Secretaries:
o 57% had either been asked, or observed someone else being asked, by
their boss to lie
o 43% were asked to sign someone else’s name to a legal document
o 36% were asked to prepare a document that included false or misleading
information
o 36% report that they were verbally harassed
o 21% sexually harassed at work
o 17% shared confidential information about an employee’s salary
o 15% shared confidential information about hirings, firings, and layoffs
DISCUSSION ACTIVITY
Ask students to write down two or three sentences about an ethical dilemma they faced at work –
it could be a full-time summer job, part-time job, or a member of an organization (church,
nonprofit, sports, student group). Have students share these stories in small groups, describing
the situation that led to the ethical dilemma and how people responded to the ethical dilemma.
CHAPTER QUESTION 2: IN WHAT WAYS DO UNETHICAL BEHAVIORS
INCREASE ADDITIONAL COSTS?
Managers often underestimate the costs associated with unethical behaviors. The most direct cost
is lost business. It only takes one unethical behavior for an organization to lose a key customer or
find itself sued by an aggrieved party.
Arthur Andersen’s $9.3 billion revenue stream evaporated after the federal government indicted
the accounting firm for its involvement in the Enron scandal.
LEGAL COSTS
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Lawsuits are one of the most easily quantifiable costs associated with unethical
behaviors.
In a 2007 survey, 40% of the 250 largest U.S. corporations had at least one new lawsuit
filed against them worth $20 million within the past year, and 20% spent at least $5
million for outside counsel.
The median award for employment civil rights cases settled in U.S. District Courts
between 2006 and 2007 was $158,000.
The Equal Employment Opportunity Commission (EEOC) maintains an annual database
of charges filed and resolved under various antidiscrimination laws, such as age
discrimination or sexual harassment.
EXHIBIT 1.1 summarizes the totals for fiscal year 2009 and offers a comparison to fiscal
year 1997.
EMPLOYEE THEFT
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Theft represents a cost directly incurred by the organization for hiring untrustworthy
employees.
Employees can steal money, products, or time.
Theft-related costs that are individually minimal – doing personal emails, Internet
searchers, and phone calls on company time – become substantial when aggregated
across an entire workforce.
o For instance, the U.S. Department of Interior calculated that non-work related
Internet usage by its employees cost taxpayers $2 million and a loss of 104,221
work hours annually.
The biggest source of retail industry theft is employees, not customers. Missing product
is five times more likely the result of an employee than a professional thief, and fifteen
times more likely the result of an employee than a shoplifter.
According to an annual survey conducted for the National Retail Federation:
 Retail stores lost more than $41 billion from theft and fraud in 2006, 1.5% of total
sales.
 Approximately $20 billion of the losses, or 50%, were attributed to employees.
Theft can occur at all levels of an organization. Dennis Kozlowski, one of the highest
paid CEOs in the world, and other Tyco executives defrauded shareholders of more than
$600 million.
MONITORING COSTS
Organizations incur monitoring costs when they employ, or do business with, unethical
individuals. According to an electronic monitoring and surveillance survey conducted by
the American Management Association:
 76% of the responding organizations monitor and review email
 51% use video surveillance
 36% monitor employee computer time
REPUTATION COSTS
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An organization’s reputation is one of its most important assets.
Reputation management is a high priority for many corporations and accounts for 63% of
their market value.
An organization’s reputation can be severely damaged when lawsuits and accusations of
unethical behavior appear in the media, or when customers register complaints with the
Better Business Bureau.
Continuous negative publicity creates substantial barriers for consumer engagement.
Goldman Sachs announced a $3.46 billion profit for the first quarter of 2010, a time when
Wall Street investors anxiously sought good news. But instead of being rewarded,
Goldman Sachs stock price declined by 2% because of negative publicity surrounding the
sale of bonds brokers expected to decline in value.
ABUSIVE TREATMENT COSTS
Researchers attribute a wide range of costs to less egregious unethical behaviors, such as a
verbally abusive manager:
 Abusive supervision affects approximately 13% of U.S. workers.
 Costs in terms of absenteeism, healthcare costs, and lost productivity have been
estimated to be $23.8 billion annually.
 Some employees “get even” with the abusive boss by stealing money or product from
the organization. Others may work less diligently when the abusive supervisor is not
closely monitoring their activities.
 Employees can also release the abuse they incur on others, such as on colleagues,
subordinates, or customers requesting help.
 The stress associated with working for an abusive boss can lead to reduced
productivity, additional health care costs, absenteeism, and turnover.
 Customers who have been mistreated by a belligerent manager or employee also have
a variety of ways to “get even.” According to medical malpractice research studies,
the most prevalent predictor of lawsuits is not the doctor’s skills or training. Instead,
it is the quality of the relationship between doctor and patient. Potential litigants tend
not to sue doctors they like.
RECRUITMENT AND TURNOVER COSTS
As will be discussed in the following section, unethical organizations incur greater costs
recruiting employees, customers, suppliers, and investors, and must provide some
premium to offset their ethical deficiencies.
The lack of loyalty between an unethical organization and its key constituents is mutual,
resulting in higher turnover among employees, customers, suppliers, and investors.
EXHIBIT 1.2, “But What If I’m a Small Business?” notes that these same ethical problems and
costs can be found in small businesses. Some businesses are more likely to employ high school
and college students on a part-time basis, a group of employees susceptible to unethical peer
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pressure and less committed to the organization. In addition, they may be more prone to bullying
from a large unethical customer or supplier.
DISCUSSION ACTIVITY
In small groups, have each student describe a situation when he or she observed an employee or
customer stealing. How did the student react to the situation? Why?
CHAPTER QUESTION 3: WHAT ARE THE COMPETITIVE ADVANTAGES OF
CREATING AND SUSTAINING AN ETHICAL ORGANIZATION?
A growing amount of research on organizational performance has shifted the theoretical debate
from choosing between ethical performance and financial performance to choosing ethical
performance because of its contributions to financial performance. EXHIBIT 1.3 lists 11
competitive advantages.
ATTRACT AND RETAIN HIGH QUALITY EMPLOYEES
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If you were a job applicant, would you rather work for an ethical or an unethical
organization?
o Ethical organizations, compared to unethical organizations, are more likely to
attract high-quality employees, have higher levels of employee satisfaction, and
greater employee commitment to both the organization and product or service
quality.
o If the pay is similar, job candidates consistently choose the ethical organization
rather than the unethical organization. Individuals only choose job offers from
unethical organizations if pay and benefits are substantially higher.
ATTRACT AND RETAIN HIGH QUALITY CUSTOMERS

If you were a customer, would you rather purchase products or services from an ethical or
unethical organization?
o A stellar ethical reputation is priceless marketing and leads to higher levels of
customer satisfaction and loyalty.
o When product price and quality are similar, potential customers consistently
choose the ethical organization over the unethical organization.
ATTRACT AND RETAIN HIGH QUALITY SUPPLIERS
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If you were a supplier, would you rather sell your products and services to an ethical or
unethical organization?
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o An ethical organization attracts high-quality suppliers and has higher levels of
supplier satisfaction and loyalty.
o Potential suppliers consistently choose to sell to the ethical organization that pays
a fair price rather than the unethical organization.
o Suppliers depend on their customers to pay their bills on time and prefer to
partner with customers they trust.
ATTRACT AND RETAIN HIGH QUALITY INVESTORS
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If you were an investor, would you rather do business with an ethical or unethical
organization?
o High-quality investors are attracted to ethical organizations, which leads to higher
levels of investor satisfaction and loyalty.
o If anticipated return-on-investments (ROIs) are similar, potential lenders and
investors consistently choose the ethical organization rather than the unethical
organization.
EARN GOOD WILL WITH COMMUNITY MEMBERS AND GOVERNMEN T OFFICIALS
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If you were a community leader or government official, would you rather interact with an
ethical or unethical organization?
o Ethical organizations honestly communicate with stakeholders and pay their fair
share of taxes.
o In return, ethical organizations earn the respect of, and gain access to, community
leaders and government officials.
o When problems arise between a company and powerful constituency groups,
politicians are more likely to provide a sympathetic perspective to the company if
it has a stellar community service reputation.
PERFORMANCE BENEFITS
A host of performance benefits that ethical organizations achieve because they attract highquality employees and are trusted by customers, suppliers, investors, and government
officials:
 Greater trustworthy information for decision making
 Higher product and service quality
 Higher levels of employee productivity
 Less employee theft
 Less need for employee supervision
TIPS AND TECHNIQUES emphasizes the importance of providing a business case (impact on
profit, revenue, and performance) for persuading employees about the importance of being
ethical.
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BEST PRACTICE IN USE: STARBUCKS 2009 GLOBAL REPSPONSIBIILTY REPORT
demonstrates how the company monitors its socially responsible behaviors in five key areas:
ethical sourcing, environment, community service, customer wellness, and diversity.
DISCUSSION ACTIVITY
Ask if any students have ever chosen a job or purchased a product based on ethical
considerations. Have students share their stories and explain why this mattered to them.
ADDITIONAL QUESTION 3: WHAT ARE THE DIFFERENT PERSPECTIVES ON
HUMAN NATURE?
HUMAN NATURE
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Given the many financial benefits associated with ethical behavior, and the many costs
associated with unethical behavior, why don’t all organizations excel in ethics? The core
of the problem can be found in the nature of human beings.
Human nature refers to the moral, psychological, and social characteristics of human
beings. It is very difficult to understand the mental and moral state of babies.
Philosophers, theologians, anthropologists, sociologists, and psychologists have explored
and debated for centuries the moral dimensions of human nature at birth. No consensus
has been achieved.
Their responses, derived through both reason and faith, can be categorized into four
areas: Infants are born with prior knowledge of right and wrong, good, with inherited sin,
and/or morally neutral.
BORN WITH PRIOR KNOWLEDGE OF RIGHT AND WRONG
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Among the ancient Greek philosophers, Socrates (469-399 BC) and Plato (427-347 BC)
theorized that individuals are born with a soul – consisting of mind, emotions, and desires
– that forms an individual’s inner essence.
The mind, filled with ideas, pre-existed in a spiritual realm and joined the body at birth.
With age and experience, individuals rediscover what they already knew about the world
at the time of birth.
BORN GOOD
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The second perspective on human nature tends to be grounded in religious faith.
Theologians in a variety of faith traditions – including branches of Christianity, Judaism,
and Islam – maintain that all individuals are born in the image of God, or with a
conscience, which is good.
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The soul is pure and sinless at birth, and seeks perfect goodness.
Conscience, in this context, is the voice of God, or pure goodness, within us.
o Individuals possess free will and can act in accordance with the goodness
embodied within their soul or conscience, or choose to do wrong.
According to the philosopher Jean-Jacques Rousseau (1712-1778), children are born
good and then learn immoral behaviors from morally corrupt adults and institutions.
University of Virginia Psychology Professor Jonathan Haidt maintains that infants are
born with a “moral sense” consisting of four groups of emotions that help individuals
differentiate right from wrong: (1) other-praising emotions: gratitude and moral awe; (2)
other-condemning emotions – contempt, anger, and disgust; (3) other-suffering emotions:
sympathy, compassion, and empathy; and (4) self-conscious emotions: guilt, shame, and
embarrassment.
o These emotions are developed over time, inform our sense of right and wrong,
and guide people along a moral path.
BORN WITH INHERITED SIN
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Others believe that individuals are born morally imperfect, or with inherited sin.
This does not mean individuals are born evil, just morally imperfect.
Due to inherited sin, a morally damaged soul joins the body at birth and needs to be
healed.
Roman Catholics and many Protestants trace inherited sin to Adam and Eve’s
disobedience to God’s will.
Hindus and Buddhists believe that a morally imperfect soul is reincarnated from one
individual to another.
The individual currently embodying the soul is challenged to purify the inherited moral
imperfections of the individual who previously embodied the soul.
BORN MORALLY NEUTRAL
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Lastly, some philosophers maintain that individuals are born morally neutral.
Aristotle (384–322 BC) disagreed with his teacher Plato’s view that infants possessed
pre-existing ideas, and argued that at birth the mind is an “unscribed tablet”.
Many centuries later, John Locke (1632-1704) referred to this as a “tabula rasa,” or
blank slate, on which people store moral rules and knowledge based on life experiences.
Infants are born with moral capacities, but are not pre-programmed with a set of moral
principles.
Their sense of morality is shaped by culture.
Moral principles are learned through parental influence, experiences, and reason.
DISCUSSION ACTIVITY
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Ask students to write answers to: (1) are people born morally good, bad, or neutral, and (2) is the
world getting morally better or worse over time? Have students discuss their answers in small
groups.
CHAPTER QUESTION 4: DESCRIBE THE SIX STAGES OF MORAL
DEVELOPMENT.
COGNITIVE DEVELOPMENT
Whether born morally perfect, imperfect, or neutral, children are born into a particular
family, neighborhood, and culture that influence their moral judgment. Parents are a
child’s most direct role model and shape the child’s environmental experiences. A child’s
brain receives and analyzes information, and formulates decisions. With the passage of
time, these decisions tend to form a pattern.
Jean Piaget (1896-1980) was among the first psychologists to outline stages of cognitive
development based on patterns he observed in children, including his own.
 During the first two years of life, the child has an egocentric understanding of the
world – the belief that what he or she sees, hears, feels, and thinks is what
everyone else sees, hears, feels, and thinks.
 Infants express a social smile by 6 weeks of age, laughter and curiosity by 3
months, anger by 8 months, and fear of social events, strangers, and separation
from caregiver by the age of one, when they are also able to speak their first
coherent words.
 At 18 months, children exhibit self-awareness, and feelings of pride, shame, and
embarrassment.
 Around age 2, through play and other activities, the child becomes more sociocentric and realizes that other people see, hear, feel and think differently.
 By 2.5 years of age the child understands what it means to be good or bad, and by
age three can empathize with another child’s situation. As the child’s conscience
forms, the child becomes more capable of self-regulating emotions and
behaviors.
STAGES OF MORAL DEVELOPMENT
Everyone has the potential to be kind or cruel to others. Harvard psychologist Lawrence
Kohlberg (1927-1987), influenced by the writings of Jean Piaget, analyzed how children
and adults from many cultures formed moral judgments in response to a series of ethical
dilemmas. The most famous of these ethical dilemmas is a situation involving Heinz, a
fictional person who stole a highly priced rare drug from a pharmacist to save his dying
wife (see EXHIBIT 1.4).
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DISCUSSION ACTIVITY
Have students independently read and answer the Heinz Dilemma in EXHIBIT 1.4. Sort students
into groups based on answering “yes” or “no” to the question “Should the husband have done
that?” Within the group, have students share the reasons why Heinz’s stealing the drug is right or
wrong. Then have representatives from the two opposing viewpoints try to persuade the opposite
side.
After discussing the issue, have students categorize their moral reasoning according to
Kohlberg’s six stages. Be aware that many people tend to evaluate themselves at a higher level
than they really are. Reform groups based on their stage of moral development. Did they all
reach the same conclusion whether it was right or wrong for Heinz to steal the medicine? If not,
why not?
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Based on extensive research, patterns emerged in terms of how people reasoned through
the ethical dilemmas.
According to Kohlberg, people sequentially progress through a continuum of six stages
of moral development, beginning with egocentric punishment avoidance and
culminating at the level of universal ethical principles.
An individual might stop progress at any point along the stages of moral development.
As shown in EXIBIT 1.5, the six stages are subdivided according to three levels:
Preconventional, Conventional, and Postconventional.
PRECONVENTIONAL LEVEL: Moral reasoning is based on what benefits the individual. Only
my interests exist and matter. Moral determination is based on my own needs and wants.
STAGE 1: OBEDIENCE-AND-PUNISHMENT ORIENTATION. Right is determined
by obeying rules from a superior authority and avoiding punishment.
STAGE 2: INSTRUMENTAL ORIENTAITON. Right is determined by a selfish desire
to obtain rewards and benefits from others. You should be nice to other people so that
they will be nice to you.
CONVENTIONAL LEVEL: Moral reasoning is based on applying a social role or group
membership analysis. The interests of other people must be considered. Moral determination is
based on performing good or right roles, pleasing others, and maintaining societal order.
STAGE 3: GOOD BOY – NICE GIRL ORIENTATION. Right is determined by winning
the approval, and avoiding the disapproval, of others. You should be concerned about the
feelings of other people and keep loyalty and trust with partners.
STAGE 4: LAW-AND-ORDER ORIENTATION. Right is being a dutiful citizen who
follows societal rules and maintains social order.
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POSTCONVENTIONAL LEVEL: Moral reasoning is based on applying abstract universal
principles. There are societal and beyond societal perspectives that matter. Moral determination
is based on abiding by abstract principles applied to society.
STAGE 5: SOCIAL CONTRACT ORIENTATION. Right is determined by preserving
mutually agreed upon human rights and changing unjust laws for the sake of community
welfare. Individual freedom should be limited only when such freedom interferes with
other people’s freedom.
STAGE 6: UNIVERSAL ETHICAL PRINCIPLES ORIENTATION. Right is determined
by following abstract universal ethical principles (such as justice, the Golden Rule,
equality, and respect for life). These principles represent a universal consciousness that
all humanity should follow.
An individual’s sequential passage through the six stages of moral development is
influenced by three factors: age, respect for people at the next higher stage, and moral
discomfort.
First, progression is somewhat dependent on age because the mind becomes more
capable of understanding abstract thoughts over time.
 Most children under the age of nine, some adolescents, and some adults
(particularly criminals) reason at the preconventional level. All pleasure seeking
pursuits are good until the pain associated with a scolding parent or authority
figure outweighs the pleasure.
 Most adolescents and adults reason at the conventional level, which is why this
level is called conventional or ordinary. They want others to perceive them as
being good, and understand the importance of laws for maintaining societal order
and peace.
 Some adults, and a few adolescents, reason at the postconventional level. They
are compelled to follow the dictates of their conscience, which is based on
universal ethical principles.
Second, people predominantly apply one stage of moral reasoning, are comfortable
applying lower stages, admire people one stage higher, and consider people two stages
higher ethically naïve.
 A manager who reasons primarily at the “Good Boy-Nice Girl” stage will
occasionally justify actions based on concern for punishment and rewards,
admires managers who apply “law and order” concerns, and thinks managers who
apply concern for universal human rights to decision-making do not understand
how businesses should operate.
Third, moral discomfort plays a key factor in explaining why some adults never progress
beyond the preconventional level (stages one and two), and most adults stop moral
reasoning progress at being a good group member (stage three) or law-abiding citizen
(stage four).
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o If an individual is always content with the conclusions a particular level of moral
reasoning generates, then there is little motivation to advance to the next higher
sequential stage.
Cognitive dissonance occurs when an individual holds inconsistent or contradictory
attitudes and beliefs, which creates an unpleasant state of mind. Individuals relieve this
moral discomfort by reasoning at the next higher stage of moral development, which they
admire.
ADDITIONAL QUESTION 4: WHAT IS THE EXTENT OF LIES AND CHEATING IN
SOCIETY?
LIES AND CHEATING
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Managers need honest information from other employees and stakeholders to achieve
optimal organizational performance. Yet, truthfulness is particularly challenging for
many people.
“Do not lie” and “do unto others as you want done to you” are two moral imperatives,
principles compelling people to action, found in all cultures and major world religions.
Despite these often repeated moral messages, children and adults conceal and falsify the
truth on a daily basis and lie when it is to their advantage.
o For instance, people commonly lie about health issues, alcohol consumption,
income level, weight, age, and sexual encounters to impress others, avoid
punishment, or protect the feelings of others.
At what age do individuals begin to lie? Children lie and deceive others as soon as they
can formulate and articulate alternative strategies, which is soon after they can speak.
o A child will deny having eaten forbidden food if the consequence of truth telling
is punishment.
o If a forbidden activity is fun, children try to experience the forbidden activity
beyond parental observation and then deny having done so if asked. This pattern
remains a challenge throughout life.
 Researchers report that 96% of children videotaped while engaged in play
on two observations lied at least once.
 As a child ages, lying to help a peer group member avoid punishment
outweighs being honest with a parent, teacher, or anyone in authority.
 Within the past year, 82% of high school students have lied to a parent
about something significant and 62% lied to a teacher.
 Among high-achieving high school students, 80% cheated at least once the
past year.
 52% of college business students surveyed cheated on a test or written
assignment
 Adults lie on average once a day and tell one lie for every five social
interactions lasting more than ten minutes.
 The IRS estimates that more than 10 million Americans purposely
underpay their income taxes.
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EXHIBIT 1.6 provides results of a nationwide adult telephone survey:
 91% lied regularly
 35% stole office supplies
 33% lied on a job application
 31% cheated on his or her spouse
 25% cheated on income taxes
 22% lied to the boss
 22% stole from a store
 20% exaggerated an insurance claim
ALTRUISM
Moral imperfection, however, is just a small aspect of human activity. If adults lie once a
day, then they are honest and truthful hundreds or thousands of times every day. At any
given moment, hundreds of millions of acts of kindness take place around the world.
According to developmental psychologist Michael Tomasello, helping behaviors are also
innate because preverbal children exhibit them prior to being taught rules of polite
behavior by their parents.
 By 18 months of age toddlers exhibit altruistic behaviors, the deliberate pursuit
of actions intended to benefit the interests or welfare of others.
 People open doors for strangers, set aside time to help friends and familymembers, and make philanthropic donations, sometimes anonymously.
 Nearly half of all Americans perform a volunteer service
 30% of Americans volunteer at least once a month.
 In 2008, Americans donated $229 billion to nonprofit organizations, which is an
average of 2.2% of personal disposal income.
DISCUSSION ACTIVITY
Have students review EXHIBIT 1.7 “WHAT WOULD HAPPEN IF YOU LOST YOUR
WALLET.” How have they responded after finding a lost wallet or money that did not belong to
them, such as when a cashier returned too much change?
CHAPTER QUESTION 5: WHY DO GOOD PEOPLE BEHAVE UNETHICALLY?
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Ethics would be easy to manage if it were simply a matter of detecting and dismissing
evil people. But that is not the nature of life in organizations.
Most employees are good people; otherwise they would be in jail rather than being
employed.
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
Good people occasionally make ethical mistakes, which at times can be very costly for an
organization.
DISCUSSION ACTIVITY
Ask students if they have ever lied to a boss, customer, or co-worker. How did they justify their
actions? Have them tell stories in small groups about these situations.
UNINTENDED UNETHICAL BEHAVIORS
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Sometimes the unethical outcome was not intended. The person may have good motives,
but insufficient knowledge or awareness.
Sometimes the ethics of a situation are ambiguous or complex.
The unintended unethical behavioral outcome could result from a misaligned
management system rather than the fault of a particular employee.
CHOOSING BETWEEN COMPETING VALUES
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Sometimes ethical dilemmas arise and the decision maker must choose between two
competing values, both of which are morally appropriate. But in choosing one set of
moral values over another, those not benefitted from the decision can claim the choice
was unethical.
Rushworth Kidder notes that “The really tough choices, then, don’t center upon right
versus wrong. They involve right versus right.”
Kidder identifies four classic ethical dilemmas based on competing values. All four of
these ethical dilemmas represent hard choices where an aggrieved party can claim the
decision maker has behaved unethically even though the decision maker thoughtfully
made what he or she considered to be a highly ethical decision:
 Truth versus Loyalty
 Individual versus Community
 Short-Term versus Long-Term
 Justice versus Mercy
INTENTIONAL UNETHICAL BEHAVIORS
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The most basic justification for behaving unethically, as suggested by Kohlberg’s theory
of moral development, is to avoid punishment and receive praise.
On a broad contextual level, some good people attribute their occasional unethical
misbehaviors on an organizational culture that either encourages or tolerates them.
Some good people behave unethically as a result of feeling pressured to do so.
A survey conducted by the Society for Human Resource Management and the Ethics
Resource Center found that 24% of the respondents were pressured to compromise
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ethical standards either periodically, fairly often, or all the time. Of those feeling
pressured, the top five organizational sources were:
1.
2.
3.
4.
5.
Following the boss’s directives (experienced by 49%)
Meeting overly aggressive business or financial objectives (48%)
Helping the organization to survive (40%)
Meeting schedule pressures (35%)
Wanting to be a team player (27%)

Stanley Milgram, a professor of social psychology, conducted a series of troubling social
experiments demonstrating how good people are capable of physically harming others if
directed to do so by someone in authority willing to take responsibility for the act.
o The results: 65% of the research subjects proceeded, at 15 volt increments of
increasing severity, to the maximum 450 volts of punishment despite the learner’s
agonizing pleas to stop.
o During the post-experiment debriefing, research subjects reported that they
continued to obey the experimenter’s commands even though their own
conscience urged them to stop physically harming the learner.

Behaving unethically to be a team player highlights the importance of an employee’s
sense of belongingness.
Lastly, a good person may behave unethically because the end goal is so essential that the
ends justify the means.
o Executives may provide false financial statements to the public because they
believe this is the only way their companies can survive a difficult financial
situation.
o An employee might provide a boss with false performance information so as to
protect his or her job status.

FAILURE TO REPORT UNETHICAL BEHAVIORS
Based on in-depth interviews with employees, researchers found that 85% had not raised
an important issue or concern to their bosses on at least one occasion. The top reasons for
not informing a manager about unethical behaviors were:
 Fear of being labeled or viewed negatively by others, such as being considered a
troublemaker, tattletale, or complainer
 Fear of damaging relationships with the person committing the unethical act
 Fear of retaliation or punishment from the person committing the unethical act
 Fear of negatively impacting the life of the person committing the unethical act
 Fear of being blamed for the problem
 Belief that management would not act on the issue if informed
The justifications provided earlier for unintended unethical behaviors and intentional
ethical behaviors also justify remaining silent.
 These justifications for inaction are apparent in “Good Samaritan” research
studies that examine whether a person’s willingness to assist a stranger is based
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on personality characteristics, issue sensitivity, or a contextual factor, such as
time.
Researchers examined what attributes best predicted which seminarians ignored
the person’s pleas for help.
Seminarians in a hurry were the least likely to help, even if they had scored highly
for serving others or had just practiced giving a sermon on the Good Samaritan.
Time pressures, and other situational factors, can blind good people to the ethical
ramifications of their decisions or influence them to behave unethically.
DISCUSSION ACTIVITY
Ask students if they have ever observed someone behaving unethically at work (or in school).
Then have them reflect on a situation where someone behaved unethically at work and they: (a)
took some positive action to correct the wrong behavior, and (b) did not take any action to
correct the wrong-doing. Why did they take action in one situation but not the other? List the
reasons for further discussion.
CHAPTER 1 CHAPTER AND ADDITIONAL QUESTIONS SUMMARY
Additional Question 1: What is ethics?
 Ethics is the set of principles a person uses to determine whether an action is good or bad.
 Interactions involving owners, customers, employees, lenders, suppliers, and government
officials have an ethical dimension.
 An action sequence consists of the motivation behind the act, the act itself, and the
consequences of the act.
 An ideal ethical situation is one in which a person has good motives and the act results in
good consequences
 The most unethical situation is one where a person has bad motives and the act results in bad
consequences;
 Many action sequences fall within these two ethical extremes, and either motives or
consequences fall short of the ideal.
 When evaluating these less-than-ethically-ideal situations, some people place greater ethical
weight on having proper motives, while others place greater weight on achieving favorable
consequences.
FOR DICUSSION: Describe a situation when someone said your action was ethical and one
situation when someone said your action was unethical. What reasons were given (or potentially
could be given) for these evaluations? Are these reasons appropriate reasons?
Additional Question 2: How often do employees experience ethical dilemmas?
 People experience ethical dilemmas at work every day.
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Just about every decision made during a day has ethical ramifications. The decision can be
based on good-bad motives and result in good-bad consequences.
Even if an employee does not think the decision is an ethical issue, the person benefitted or
harmed may think so.
FOR DISCUSSION: How long ago was the last time you faced an ethical dilemma?
Chapter Question 1: What are the most common types of unethical behaviors in
organizations?
 Every organization is confronted with ethical and unethical behaviors.
 The types of ethical misconduct observed most within the previous 12 months include:
company resource abuse, abusive or intimidating behavior towards employees, lying to
employees, and email or Internet abuse (18%)
 These ethical misconducts were observed in all sizes of organizations (large and small), and
all sectors (public, private, government, non-profits)
 60% employees have stolen from an employer
 Each industry and profession has its own unique set of ethical misconduct
 Every employee level and operational area is confronted with ethical issues.
FOR DISCUSSION: Describe an ethical dilemma you faced at work (full- or part-time job) or as
a member of an organization (church, nonprofit, sports, student group).
Chapter Question 2: In what ways do unethical behaviors increase organizational costs?
 Managers often underestimate the costs associated with unethical behaviors. The most direct
cost is lost business.
 Lawsuits are one of the most easily quantifiable costs associated with unethical behaviors.
 Employee theft represents a cost directly incurred by the organization for hiring
untrustworthy employees. The biggest source of retail industry theft is employees, not
customers.
 Organizations incur monitoring costs when they employ, or do business with, unethical
individuals.
 An organization incurs reputation costs when lawsuits and accusations of unethical behavior
appear in the media, or when customers register complaints with the Better Business Bureau.
 Costs associated with abusive supervision include absenteeism, healthcare costs, and lost
productivity. Some employees “get even” with the abusive boss by stealing money or product
from the organization, or by taking their anger out on customers or other employees.
 Unethical organizations incur greater costs recruiting employees, customers, suppliers, and
investors, and must provide some premium to offset their ethical deficiencies.
FOR DISCUSSION: Describe a situation when you observed an employee or customer stealing.
Did you do anything about it? Why?
Chapter Question 3: What are the competitive advantages of creating and sustaining an
ethical organization?
 Attract and retain high quality employees.
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Attract and retain high quality customers.
Attract and retain high quality suppliers.
Attract and retain high quality investors.
Earn good will with community members and government officials.
Performance benefits in terms of greater trustworthy information for decision making, higher
product and service quality, higher levels of employee productivity, less employee theft, and
less need for employee supervision.
FOR DISCUSSION: Describe a situation when you have chosen a job or purchased a product for
ethical considerations.
Additional Question 3: What are the different perspectives on human nature?
 Human nature refers to the moral, psychological, and social characteristics of human beings.
 Philosophers, theologians, anthropologists, sociologists, and psychologists have explored and
debated for centuries the moral dimensions of human nature at birth. No consensus has been
achieved.
 Some believe individuals are born with prior knowledge of right and wrong.
 Some believe individuals are born good.
 Some believe individuals are born with inherited sin.
 Some believe individual are born morally neutral.
FOR DISCUSSION: Do you believe people are born morally good, bad, or neutral? Why?
Chapter Question 4: Describe the six stages of moral developments.
 Harvard psychologist Lawrence Kohlberg (1927-1987), influenced by the writings of Jean
Piaget, analyzed how children and adults from many cultures formed moral judgments in
response to a series of ethical dilemmas and conceptualized six stages of moral development.
 Stage 1: Obedience-and-punishment orientation. Right is determined by obeying rules from a
superior authority and avoiding punishment.
 Stage 2: Instrumental orientation. Right is determined by a selfish desire to obtain rewards
and benefits from others. You should be nice to other people so that they will be nice to you.
 Stage 3: Good boy—nice girl orientation. Right is determined by winning the approval, and
avoiding the disapproval, of others. You should be concerned about the feelings of other
people and keep loyalty and trust with partners.
 Stage 4: Law-and-order orientation. Right is being a dutiful citizen who follows societal rules
and maintains social order.
 State 5: Social contract orientation. Right is determined by preserving mutually agreed upon
human rights and changing unjust laws for the sake of community welfare. Individual
freedom should be limited only when such freedom interferes with other people’s freedom.
 Stage 6: Universal ethical principles orientation. Right is determined by following abstract
universal ethical principles (such as justice, the Golden Rule, equality, and respect for life).
These principles represent a universal consciousness that all humanity should follow.
 An individual’s sequential passage through the six stages of moral development is influenced
by three factors: age, respect for people at the next higher stage, and moral discomfort.
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FOR DISCUSSION: Was it right or wrong for Heinz to steal the drug for his dying wife? Why?
Additional Question 4: What is the extent of lies and cheating in society?
 Children and adults conceal and falsify the truth on a daily basis and lie when it is to their
advantage. For instance, people commonly lie about health issues, alcohol consumption,
income level, weight, age, and sexual encounters to impress others, avoid punishment, or
protect the feelings of others.
 Children lie and deceive others as soon as they can formulate and articulate alternative
strategies, which is soon after they can speak.
 Within the past year, 82% of high school students have lied to a parent about something
significant and 62% lied to a teacher.
 52% of college business students surveyed cheated on a test or written assignment
 Adults lie on average once a day and tell one lie for every five social interactions lasting
more than ten minutes.
 The IRS estimates that more than 10 million Americans purposely underpay their income
taxes.
 Moral imperfection, however, is just a small aspect of human activity. If adults lie once a
day, then they are honest and truthful hundreds or thousands of times every day.
FOR DISCUSSION: How have you responded after finding a lost wallet or money that did not
belong to you, such as when a cashier returns too much change?
Chapter Question 5: Why do good people occasionally behave unethically?
 Sometimes the unethical behavior is unintended. The person may have good motives, but
insufficient knowledge or awareness.
 Sometimes ethical dilemmas arise and the decision maker must choose between two
competing values, both of which are morally appropriate, such as truth versus loyalty.
 Sometimes people behave unethically to avoid punishment or receive praise.
 Sometimes people do not report unethical behaviors because they fear being considered a
troublemaker, tattletale, or complainer, damaging relationships, or retaliation.
FOR DISCUSSION: Have you ever lied to a boss, customer or co-worker? Have you ever not
reported someone at work or school who behaved unethically? How did you justify these
decisions?
CHAPTER 1 KEY WORDS
Action sequence (p. 5): consists of the motivation behind the act, the act itself, and the
consequences of the act.
Altruistic behaviors (p. 22): the deliberate pursuit of actions intended to benefit the interests or
welfare of others.
Cognitive dissonance (p 20.): when an individual holds inconsistent or contradictory attitudes
and beliefs, which creates an unpleasant state of mind.
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Conscience (p 16.): the inner sense of pure goodness that guides people when deciding that
something is right or wrong; many religions attribute it to the voice of God within us.
Ethics (p 5.): set of principles a person uses to determine whether an action is good or bad.
Good Samaritan (p. 25): someone willing to assist a stranger.
Human nature (p. 16): the moral, psychological, and social characteristics of human beings.
Inherited sin (p. 16): religious belief that a morally damaged soul joins the body at birth, the
damage attributed to Adam and Eve or previous ancestors.
Kohlberg, Lawrence (p. 18): Harvard psychologist (lived 1927–1987), influenced by the
writings of Jean Piaget, who sought to answer how children and adults from many cultures
formed moral judgments in response to a series of ethical dilemmas.
Moral imperatives (p 20.): principles originating in a person’s mind that compel people to
action.
Piaget, Jean (p. 17): among the first psychologists (lived 1896-1980) to outline stages of
cognitive development based on patterns he observed in children, including his own.
Stages of moral development (p. 18): an individual’s moral reasoning can sequentially progress
through six distinct stages – obedience-and punishment orientation (stage 1), instrumental
orientation (stage 2), good boy—nice girl orientation (stage 3), law-and-order orientation (stage
4), social contract orientation (stage 5), and universal ethical principles orientation (stage 6).
Stakeholder (p. 4): any person or organization that is affected by, or could affect, an
organization’s goal accomplishment.
Tabula rasa (p. 17): the mind as a blank slate on which people store moral rules and knowledge
based on life experiences.
CHAPTER 1 ANCILLARY MATERIALS
Websites to Explore
 Business Ethics surveys
o Ethics Resource Center, available at: http://www.ethics.org/topic/nationalsurveys.
o Josephson Institute, available at: http://josephsoninstitute.org/.
o Gallup Poll business ethics surveys, available at:
http://www.gallup.com/search/default.aspx?q=business+ethics&s=&p=1.
 Government statistics
o Bureau of Justice, available at: http://bjs.ojp.usdoj.gov/.
o U.S. Equal Employment Opportunity Commission, “Discrimination by Type,”
available at: http://www.eeoc.gov/laws/types/index.cfm.
 100 Wallets Dropped in Front of Hidden Cameras to Test Honesty, available at:
www.wallettest.com.
Best Place to Work Video
 Best Place to Work – SAS, available at:
http://money.cnn.com/video/fortune/2010/01/20/f_bctwf_sas.fortune/.
Business Ethics Issue Video
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
“The Spill,” Frontline, about the BP Oil Spill, October 26, 2010, 54 minutes, available at:
http://www.pbs.org/wgbh/pages/frontline/thespill/?utm_campaign=viewpage&utm_medium=grid&utm_source=grid.
TEDTalks Videos
 Born with Blank Slate Mind and Innate Traits: Steven Pinker talks about his book The
Blank Slate which argues that all humans are born with some innate traits; February,
2003, 22 minutes, available at
http://www.ted.com/talks/steven_pinker_chalks_it_up_to_the_blank_slate.html.
 Human Beings Compared to Animals: Jane Goodall, the primatologist, says the only real
difference between humans and chimps is our sophisticated language; March 2002, 28
minutes, available at:
http://www.ted.com/talks/lang/eng/jane_goodall_on_what_separates_us_from_the_apes.
html.
Conversations with Charlie Rose
 A conversation about how the brain controls social behavior; January 19, 2010, 53
minutes, available at: http://www.charlierose.com/view/interview/10820.
 A conversation with former Secretary of Education William Bennett about his book "Our
Sacred Honor", which offers pieces of moral wisdom from the country's founding fathers;
October 1, 1997, 31 minutes, available at:
http://www.charlierose.com/view/interview/5333.
CHAPTER 1 ETHICAL DILEMMA ANALYSIS
Each chapter contains three real-life ethical dilemmas: (a) What would you do? (all scenarios
provided by my students), (b) Let’s Build a Building (all scenarios provided by a construction
consultant), and (c) In the Real Word: Enron (more in-depth explanations available in Denis
Collins (2006) Behaving Badly: Ethical Lessons from Enron.
Have students apply Exhibit 5.11 “Critical Thinking Decision-Making Process Table” to analyze
these ethical dilemmas (instructions below). By doing so, students develop a habit for analyzing
decisions that take into consideration ethical concerns.
Step 1: Write the decision options in the appropriate column below.
Step 2: Apply the seven “Applying Ethical Theories to Decision Making” questions to the
decision to obtain relevant ethical information.
Step 3: Insert the ethical strength and weakness revealed by each of the seven ethical questions in
the appropriate column below.
Step 4: Review the option strengths and insert in the options column what “value” supports the
option (i.e., honesty, loyalty, efficiency, respect, job security, profits, etc.)
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Step 5: Given the strengths and weaknesses, choose a decision option, explain why that option
and value were chosen rather than the alternative options, and determine how to manage the
weaknesses associated with the option chosen.
NOTE ON ETHICAL DILEMMA ANALYSES AND AUTHOR RECOMMENDATION – The
“author” (me) is stating his best judgment. All the ethical dilemmas are difficult and involve
tradeoffs, some more so than others. As noted throughout the textbook, everyone has a different
moral intuition and those reasoning at the same level of moral development can disagree about
the right thing to do. In addition, everyone has a different level of risk comfort (my risk comfort
is rather high). The teacher can use my recommendation as grounds for student agreement or
disagreement.
CHAPTER 1 ANALYSIS FOR WHAT WOULD YOU DO?
1) Who are all the people affected by the action?
You (marketing manager), owner, customers, supplier, businesses and homeowners robbed,
upset community members, police, thief
2) What option benefits me the most?
Mixed: If you purchase the design you can make a lot money, but you will also make
enemies of businesses and homeowners recently robbed
3) What option does my social group support?
Don’t purchase the design (Option #2): The victims, police, and upset community members
would oppose glorifying the thief.
4) What option is legal?
Both.
5) What option is the greatest good for the greatest number of people affected?
Don’t purchase the design (#2): Glorifying a thief may encourage others to break the law,
and will upset victims, community members, and the police.
6) What option is based on truthfulness and respect/integrity toward each stakeholder?
Don’t purchase the design (#2): This demonstrates respect for victims, police, and
community members. You also protect the owner’s integrity by not selling the questionable
product. You are not respecting the customer’s right to choose, but this is over-ridden by
preventing customers from making a bad choice.
7) What option would a virtuous person do?
Don’t purchase the design (#2): Moral character is strengthened by standing up for your
personal moral beliefs and refusing to glorify a criminal.
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Option
#1: Purchase design
(customer freedom
to choose, sales and
profit maximization)
#2: Don’t purchase
(paternalism,
community wellbeing)
Option Strengths Based on
Application of Ethical Theories
Generates revenue
Option Weaknesses Based on
Application of Ethical Theories
Glorifies a criminal
Serves customer desires
Will upset victims and some
community members
Demonstrates respect for the
honorable behavior, victims, and
upset community members
Potential high revenue stream is lost
Customers will shop at a competitor
who sells the design
If someone else sells it, the criminal
will be glorified anyway, although
you are not the person supporting
the glorification
Option and Value
Chosen
Chosen Because
How Will You
Manage Chosen
Option Weaknesses
#1: Purchase the design: customers’ freedom to choose, profit
maximization
#2: Don’t purchase the design: paternalism, community well-being
#1: Purchase the design: you maximize profits, customers shop at your
store, you allow freedom of choice, and the product will be on the market
anyway
#2: Don’t purchase the design: You shouldn’t glorify criminals, it
demonstrates respect for community well-being
#1: Maybe donate a small percentage of the profits to the victims or as a
reward for capturing the thief
#2: Continue to find innovative designs that appeal to college customers
without glorifying a criminal
AUTHOR RECOMMENDATION: Option #2: Don’t purchase the design – This is based on
social group relativism, cultural relativism, utilitarianism, deontology, and virtue ethics. You
may lose some revenue, but you are respecting nearby businesses, victims, and community
members. Continue to find innovative designs that appeal to college customers without
glorifying a criminal.
CHAPTER 1 ANALYSIS FOR LET’S BUILD A BUILDING
1) Who are all the people affected by the action?
You (land purchaser), real estate broker, owner of business park, business park tenants, other
customers wanting more education, city planners
2) What option benefits me the most?
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Agree to make the $275,000 modification (Option #3): It is the only option that allows you to
meet your deadline. Try to negotiate a lower price for the modification.
3) What option does my social group support?
Sue the broker (#1): Other land purchases will want to ensure that brokers are held
accountable for the land they sell.
4) What option is legal?
All.
5) What option is the greatest good for the greatest number of people affected?
Difficult to determine: Holding brokers accountable for land use impacts many people. But
the greatest direct impact pertains to potential customers. How will extra building costs
impact tuition? It is unlikely to matter to most customers if college opens immediately or in
one year.
6) What option is based on truthfulness and respect/integrity toward each stakeholder?
Sue the broker (#1): Suing the broker holds the broker accountable for knowing the contract
violates the original purpose of business park use. You should have found this out at the time
as well, but you trusted the broker.
7) What option would a virtuous person do?
All can be: Moral character is strengthened by suing the broker who should be accountable.
Moral character can also be strengthened by making the business park owner accountable for
how real estate agents sell his/her property. Don’t choose option #3 if paying the extra
$275,000 makes you feel like the business park owner is manipulating you; however, if it
doesn’t feel manipulative, then building an eco-friendly building is virtuous. Others can
argue that keeping the $3 million plan, rezone, open fall 2005, is the most virtuous act
because you should have done more research on Planned Use Development document.
Option
#1: Sue broker,
recover costs, sell
#2: Sue business
park owner, sell
#3: Make $275,000
modification,
rezone, open fall
2014
#4: Keep $3 million
plan, rezone, open
fall 2015
Option and Value
Chosen
Option Strengths Based on
Application of Ethical Theories
You recover your costs
Option Weaknesses Based on
Application of Ethical Theories
Need to start over
You recover your costs
Need to start over
Open on time
Costs extra $275,000
Makes building greener
Falls within budget
Opening delayed one year
#1: Sue broker, recover costs: Holds broker accountable
#2: Sue business park owner: Business Park owner should not allow
broker to mislead customers
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Chosen Because
How Will You
Manage Chosen
Option Weaknesses
#3: Make $275,00 modification: Green building, makes deadline
#4: Keep $3 million plan: Honors budget limits
#1: Sue broker, recover costs: Need to hold people accountable for actions
#2: Sue business park owner: Business Park owner is responsible to make
sure that property sales meet appropriate criteria
#3: Make $275,000 modification: Opens on time and benefits students and
staff
#4: Keep $3 million plan: It’s what you can afford
#1: Change plans to incorporate an additional year to get land
#2: Change plans to incorporate an additional year to get land
#3: Where will the $275,000 come from?
#4:Change plans to incorporate an additional year to get rezoned
AUTHOR RECOMMENDATION: Option 1: Sue the broker and Option 4: Keep $3 million
plan, rezone, and open fall 2015 – Option 1 is based on social group relativism, cultural
relativism, deontology, and virtue ethics. The broker needs to be held accountable for not
knowing the land stipulation when making the deal. This also prevents the broker from maker
similar mistakes with other clients. This is a good location, so obtain rezoning and open one year
later. Making the building more eco-friendly is for the long-term interests of students, but you
are being manipulated by the business park owner. Maybe have the broker pay the additional
expense.
CHAPTER 1 ANALYSIS FOR IN THE REAL WORLD: ENRON
1) Who are all the people affected by the action?
You (CEO of Enron/Ken Lay), Irwin Jacobs, InterNorth and HNG shareholders, InterNorth
and HNG employees, InterNorth CEO, Omaha, HNG executives, Houston
2) What option benefits me the most?
Mixed: If you merge you get $70 on stock worth $46. But you can lose your job because only
one CEO needed.
3) What option does my social group support?
Merge (Option #2): CEO’s have duty to act in the best interests of shareholders. Shareholders
can then decide to sell stock or remain a shareholder.
4) What option is legal?
Both.
5) What option is the greatest good for the greatest number of people affected?
Merge (#2): Shareholders immediately maximize wealth and HNG would now be part of the
largest natural gas pipeline system in North America. This is a strategic advantage at a time
of deregulation. Tremendous debt will be incurred and must be managed appropriately.
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6) What option is based on truthfulness and respect/integrity toward each stakeholder?
Mixed: Merging respects shareholders and they can sell stock immediately, but this can result
in executive team members and other HNG employees losing jobs and harm Houston if
company relocates to Omaha.
7) What option would a virtuous person do?
Mixed: Moral character can be strengthened by taking on the challenges and responsibilities
of being part of the largest natural gas pipeline in North America. Other the other hand, if
indeed the $4.3 billion debt is too large a burden, then moral character is strengthened by not
being greedy.
Option
#1: Reject
InterNorth Proposal
Option Strengths Based on
Application of Ethical Theories
Saves your job and that of other
executives
Option Weaknesses Based on
Application of Ethical Theories
Missed financial windfall for you,
and HNG executives and
shareholders
HNG remains in Houston
#2: Merge with
InterNorth
Financial windfall for you and
HNG executives and shareholders
Provides access to largest natural
gas system in the U.S.
Remain regional; a missed
opportunity to be part of largest
natural gas pipeline in U.S.
You and other executives may lose
jobs
Houston community loses HNG
Huge debt
Option and Value
Chosen
Chosen Because
How Will You
Manage Chosen
Option Weaknesses
#1: Reject Proposal: Stability
#2: Merge: Shareholder wealth
#1: HNG is doing well as regional player, this opportunity is too risky
#2: Maximizes shareholder wealth and provides access to largest system
#1: Look for other opportunities that do not entail so much debt incurred.
#2: Hone political skills to come out on top in the merged organization
and remain prominent in Houston; find new revenue streams to manage
additional debt
AUTHOR RECOMMENDATION: Option #2: Merge – This is based on social group relativism,
cultural relativism, and utilitarianism. Merging creates many benefits for HNG operations. A lot
hinges on being able to manage the $4.3 billion debt (deontology and virtue ethics). Assuming
that it can be managed, accept the merger opportunity and build into the agreement safeguards to
limit the harms likely to be incurred by HNG employees losing their jobs and the city of
Houston. Hone political skills to come out on top in the merged organization and remain
prominent in Houston. Find new revenue streams to manage the additional debt.
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