Focus on Ethical Decision Making: Solutions
Chapter 2: DISCRETIONARY COSTS (pp. 47-48)
Identify ethical problems: Advertising creates an ethical problem for pharmaceutical
companies because potential conflicts exist between the interests of the managers and
shareholders of the pharmaceutical companies and the interests of others, including patients,
medical providers, insurance companies, the government, employers, advertising agencies,
media companies, and society in general.
This ethical problem is open-ended (i.e., has no single correct solution) because of uncertainties
such as the costs and benefits of advertising to patients and others. For example, we do not know
the extent to which advertising provides information that helps patients identify beneficial
treatments for known conditions or identify potentially dangerous unknown medical conditions.
Nor do we know the extent to which advertising interferes with best medical practices by causing
patients to demand inappropriate or overly expensive treatments. To further complicate matters,
advertising information may be beneficial for some patient situations, and harmful for others. In
addition, we do not know how the interests of individual patients should be weighed against the
interests of others when deciding who should receive and pay for pharmaceutical treatments.
Objectively consider others: Here are some of the viewpoints, assumptions, and ethical values
apparent in different viewpoints about this problem; you may think of others.
One extreme viewpoint is that pharmaceutical companies should be allowed to advertise
pharmaceutical products the same as any other type of product. This viewpoint assumes that
pharmaceutical products should be treated the same as other products. Or, it assumes that
advertising serves a beneficial social purpose that should be permitted for all products. This
viewpoint ignores potential ethical issues, or it assumes that the best ethical result will occur
given market freedom.
An opposite extreme viewpoint is that pharmaceutical companies should not be allowed to
advertise prescription drugs. This viewpoint assumes that advertising causes harm and that
patients or others (such as insurance companies and other payers of medical costs) should be
protected from the potentially undue influence caused by advertising. Several additional
assumptions may accompany this viewpoint. For example, one assumption is that outside parties
such as advertisers should not interfere with the doctor/patient relationship—that the doctor is
the best person to identify and recommend prescription treatments. Another assumption is that it
is socially beneficial to reduce medical costs, and that one way to achieve lower costs is to
restrict advertising.
Clarify and apply ethical values: Because this is an open-ended question, no one solution
exists that everyone would agree is best overall. Two possible solutions and their related values
were described above. It is also possible to argue that some compromise should be made
between these two extremes. For example, perhaps only certain types of advertising should be
allowed. A compromise solution assumes that there is at least some legitimacy to both extreme
viewpoints, that a combination would provide the best overall result. Another way to choose a
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best solution is to decide whose interests are most important. For example, if we believe that the
individual patient’s rights to control and choose medical treatment is most important, then we
would choose an option that provides patients with more information.
Drug companies are in a difficult position in choosing appropriate ethical values, because society
is not clear about which values are most appropriate. One way that drug companies can address
the concerns of their critics is to voluntarily avoid advertisements that would tend to mislead.
However, even the definition of “misleading” is uncertain.
Work toward ongoing improvement: The concept of ongoing improvement presumes that all
practices can be improved upon. To engage in continuous improvement of advertising practices,
drug company managers must first recognize the controversy, pros, and cons of advertising.
Then they should continually seek ways to fit the needs of society with their company mission,
values, and strategies.
Focus on Ethical Decision Making: Solutions
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Chapter 3: TEMPORARY LABOR (pp. 106-107)
Identify ethical problems: The hiring of temporary labor might create an ethical problem,
depending on the circumstances. Sometimes managers use temporary labor for a short-term
need, such as a special project. For example, temporary employees may be hired for
construction of a new facility. This type of hiring would probably not pose an ethical problem.
An ethical dilemma is more likely to occur in cases where workers are hired for long-term needs.
In such cases, potential conflicts exist among the company, regular workers, temporary workers,
and others.
This ethical problem is open-ended (i.e., has no single correct solution) because of uncertainties
about how the use of temporary labor affects companies, workers, and the economy. Are
workers better or worse off? Are pay levels higher or lower? What trade-offs occur between
different worker groups, and are those trade-offs appropriate? What are managers’
responsibilities to different groups of workers? Does the use of temporary labor improve
business competitiveness? Does it lead to greater homelessness? What is the overall societal
cost/benefit?
Objectively consider others: For this problem, you were asked only to identify assumptions,
not to evaluate them. This question should help you learn to recognize assumptions for different
viewpoints and to present them objectively. You might want to express their opinion about
whether or not you agree with a viewpoint, however, your answer to this question should be as
nonjudgmental as possible. Your goal is to explore assumptions rather than to judge them.
Here are some possible assumptions underlying the different viewpoints presented in the
textbook; you may think of others.
Assumptions of managers:
 It is desirable to reduce the risk of loss.
 As business conditions change, temporary workers are likely to be hired and terminated
more quickly than regular workers (i.e., temporary labor costs are more likely to be truly
variable).
 The quality of work is unaffected by the use of low-paid or less-skilled temporary
workers, or a decline in quality is more than offset by a lower wage cost.
 Regular workers will not demand pay increases if they learn that skilled temporary
workers receive higher rates of pay.
 Low-skilled workers will accept lower pay when hired on a temporary rather than a
regular basis.
 It is okay to avoid making hiring commitments to low-skilled employees.
 Even during labor shortages, it is possible to hire temporary workers to fill positions.
Assumptions of economists and business analysts:
 Companies are less reluctant to hire temporary than regular workers.
 New workforce entrants, workers who have been laid off, and workers wanting flexible
work schedules are more likely to be hired as temporary workers than as regular workers.
 Regular employees are less likely to be laid off when companies use temporary labor.
 Regular employee morale is higher when the risk of layoff is lower.
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Based upon the issues listed in the text, assumptions of labor groups, homeless advocacy groups,
and others opposed to the use of temporary labor might include the following:
 The use of temporary labor allows companies to pay lower rates, and lower rates are
unfair to both skilled and unskilled workers.
 The least-skilled and lowest-paid workers are more likely to be laid off when they are
hired as temporary workers.
 The least-skilled and lowest-paid workers who are laid off are more likely to live in
poverty and/or become homeless.
 Temporary workers are less well represented than regular workers.
 Temporary workers are less likely to receive health care and retirement benefits than
regular workers.
Clarify and apply ethical values: Based on the arguments presented in the textbook, the hiring
of temporary labor is both a business issue and a social issue. It is a business issue because it
affects company profitability and risk, which in turn affects the overall economy. It is a social
issue because it potentially affects the well-being of workers, particularly those who are lessskilled and lowest-paid.
Different people are likely to have different opinions about whether it is fair for employers to pay
different wage rates and provide different benefits to temporary and permanent workers who
perform the same jobs and also about whether it is fair for businesses to pass their business risks
directly on to the employees. However, the textbook asks you to identify the values you use
when addressing these questions. Thus, you need to consider what it means to be fair and how
values relate to the concept of fairness. Below are several possible values that could be used by
managers when making temporary labor decisions; you may think of others.
 Value: Managers should take actions that maximize company profits. Under this value, it
is not relevant to address questions of fairness when deciding whether to use temporary
labor, unless employee, customer, or others’ perceptions of fairness affect the costs and
benefits to the company from using temporary labor.
 Value: Managers should take actions that are legal. This value is similar to the preceding
one; it would not be necessary for managers to consider questions of fairness beyond
compliance with labor or other laws.
 Value: Managers should take actions that maximize the social benefit and/or take actions
that do no harm to others. Under these values, managers would need to assess the effects
of their employment choices on others and society as a whole. This type of assessment
could be difficult to perform, given uncertainties about the effects of temporary labor
arrangements on unemployment, poverty, homelessness, access to health care, etc. Thus,
it is not immediately clear whether it would be fair to give different pay and benefits to
temporary versus permanent employees who perform the same jobs, or whether it would
be fair for businesses to pass their business risks directly on to the employees. These
practices would be considered fair if they improve overall societal benefits, as argued by
economists and business analysts. However, these practices would be unfair if they harm
society, as argued by labor groups, homeless advocacy groups, and others.
 Value: Managers should take actions that are most fair to permanent employees. Under
this value, the interests of regular employees should take priority over the interests of
temporary employees, shareholders, society as a whole, or others. Assuming that regular
Focus on Ethical Decision Making: Solutions
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employees are self-interested, they would consider a company’s temporary labor
practices as fair as long as they receive pay and benefits that are no less than those
offered to temporary workers who perform the same work. Also, they would probably
consider the risk assumed by temporary workers to be fair because it would reduce the
unemployment risk for permanent workers.
Value: Managers should be honest with their employees. Under this value, the managers
could choose any form of labor practices, as long as they are honest with employees. In
turn, this honesty would allow permanent and temporary employees to make informed
decisions about whether they wish to work under the conditions offered.
Value: Managers should base employment practices upon the merit of individual
employees. Under this value, it would be unfair to pay different wage rates and provide
different benefits to temporary and permanent workers who perform the same jobs or to
pass risk directly onto employees unless based upon some aspect of merit other than job
performance. For example, higher merit could be given to employees who have worked
for the company for a longer period of time, in which case those employees (most likely
permanent employees) could receive higher pay and/or benefits or lower layoff risk.
Work toward ongoing improvement: When addressing this question, it is first necessary to
consider why a company’s managers would need to work toward ongoing improvement. In
other words, why can’t managers simply adopt ethical hiring practices? Why would ongoing
improvement be needed? Keep in mind that uncertainties exist about the costs and benefits of
different hiring practices to companies, employees, society, and others. Also, it is unclear which
values or trade-offs are most appropriate. Given these uncertainties, managers cannot determine
absolutely whether their hiring practices are ethical. However, managers who wish to make
ethical decisions must seek and consider new information about the effects of their hiring
practices. New information might include studies conducted by the company or data made
available by others. Managers must also reevaluate their values and reconsider the trade-offs
they make in their hiring decisions. Over time, new insights might lead managers to adopt new,
more ethical practices.
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Chapter 4: STEWARDSHIP OF PUBLIC FUNDS (pp. 149)
Identify ethical problems: People might disagree about whether the passing of legislation to
provide incentives for drivers to use clean air vehicles represents an ethical dilemma. However,
this decision involves trade-offs among the well-being of potential program participants, society
(because of the potential environmental effects), stakeholders of alternative expenditure
programs, etc. Therefore, it can be argued that it is an ethical dilemma.
This ethical dilemma was open-ended (i.e., has no single correct solution) because of
uncertainties about how well the program might achieve its goals, whether this program was the
best use of taxpayer money, effects on the environment, total expected cost, and so on.
Objectively consider others: Below are some of the social costs and benefits of providing
financial support to individuals for programs such as this one; you may think of others.
Social costs:
 Assuming that governmental resources are limited, an opportunity cost exists when
money is spent on this type of program instead of some other program(s). The benefits of
alternative programs are foregone.
 The existence of subsidies can lead to greater demand for future subsidies—and further
opportunity costs—because (1) individuals who receive the subsidies might expect
similar future subsidies, or (2) individuals who did not receive this subsidy might insist
upon another subsidy plan in which they can participate.
 This type of program might be perceived as unfair to those who do not participate. In
turn, such perceptions can adversely affect government/citizen relationships.
Social benefits:
 This type of program is designed to encourage a particular behavior to achieve a social
benefit. In this case, the program encouraged the purchase or conversion of vehicles that
run on propane and was intended to improve air quality and reduce the risk of EPA
sanctions.
 By spending money on a particular program, the legislature might encourage additional
non-governmental investments in desirable projects. For example, the State of Arizona
project increased the demand for propane-fuel vehicles, potentially encouraging
automobile companies to further develop alternative-fuel vehicles.
Misuse of taxpayer money is likely to be all three—a political issue, a business issue, and a
social issue. It is a political issue because it can affect elections and alter the position/influence
of politicians who were for/against the related program. It is a business issue in cases where
businesses are directly or indirectly involved. In the State of Arizona case, businesses benefited
directly from increased sales of propane-fuel vehicles and propane conversion services. It is also
a social issue because misuse of taxpayer money diverts resources from better alternatives and
adversely affects government/citizen relationships.
Clarify and apply ethical values
Should taxpayer funds ever be used to purchase or modify private vehicles? There are many
possible ways to address this question. The analysis depends on beliefs about the role of
Focus on Ethical Decision Making: Solutions
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government and the appropriateness of different forms of subsidy. In the U.S., governments use
a variety of incentives to encourage social benefits. For example, tax laws allowing rapid
depreciation are used to encourage business investment. Home ownership is encouraged through
tax deduction of mortgage interest. Thus, one way to address this question is to evaluate whether
the social benefits exceeded the costs of this subsidy.
Should the legislators have anticipated that many of the program vehicles would be SUVs with
propane tanks as small as three gallons? It is often impossible for legislators to foresee all
potential misuses of a governmental program. However, legislators have an ethical
responsibility to adequately explore alternatives and to consider whether the programs they adopt
are likely to be effective. In addressing this question, consider how the legislators might have
gathered better information before adopting the program.
Should the legislation have been restricted to vehicles that burn only propane? This question
depends on your answer to the preceding two questions. Assuming that the program was
desirable to begin with, the specific provisions would depend on the expected costs/benefits.
Restricting the program to all-propane vehicles would probably reduce participation in the
program. And because propane might not be readily available in all locations, it might be
unrealistic to require 100% propane. Thus, it is not simple to develop an answer to this question.
Work toward ongoing improvement: Although governments have a responsibility to
anticipate responses to their programs, they cannot always foresee the results. New types of
programs, such as the one in Arizona, are most difficult. Nevertheless, monitoring systems can
be used to evaluate programs. For example, Arizona could have monitored its vehicle program
by studying/auditing sample transactions for compliance with the intent of the program. Vehicle
advertisements could also have been analyzed. But monitoring alone is insufficient; a
mechanism would be needed for possible changes to programs based on the monitoring results.
Some governments use “sunset” laws to periodically reexamine long-standing programs.