CHAPTER 3

1. CHAPTER 3 Business Ethics & Social Responsibility

2. Unethical Behavior • Unethical behavior in business is not just a recent phenomenon • In the sixth century, B.C., the philosopher Anacharsis once said, “The market is a place set apart where men may deceive one another.”

3. Unethical Behavior • Two centuries later, Diogenes was spotted carrying around a lighted lamp, up and down the city streets, in the middle of the day. When asked what he was doing, he replied, that he was looking for an honest man.

4. Business Ethics • Business Ethics is about: • Decision-Making • By People in Business • According to Moral Principles or Standards

5. Decision-Making • Conflicting duties, loyalties or interests create moral dilemmas requiring decisions to be made

6. Decision-Making • Ethical decision-making involves the ability to discern right from wrong along with the commitment to do what is right.

7. Decision-Making • Some factors affecting decision-making (from Integrity Management, by D. T. LeClairet al, Univ. ofTampa Press, 1998): • Issue Intensity • (i.e. how important does the decision-maker perceive the issue to be? • Can be influenced by company/management emphasis) • Decision-Maker’s Personal Moral Philosophy • Decision-Maker’s Stage of Moral Development • Organizational Culture

8. Decision-Making • 8 Steps to Sound, Ethical Decision-Making • 1. Gather as many relevant & material facts as circumstances permit. • 2. Identify the relevant ethical issues (consider alt. viewpoints) • 3. Identify, weigh & prioritize all the affected parties (i.e. stakeholders) (see Johnson & Johnson Credo, Taking Sides, p.25) • 4. Identify your existing commitments/obligations. • 5. Identify various courses of action (dare to think creatively) • 6. Identify the possible/probable consequences of same (both short & long-term) • 7. Consider the practicality of same. • 8. Consider the dictates and impacts upon your character & integrity.

9. Decision-Making • Disclosure Test: How comfortable would I feel if others, whose opinion of me I value, knew I was making this decision?

10. Decision-Making • The higher the level of a decision-maker • the greater the impact of the decision • and the wider the range of constituencies that will be affected by the decision.

11. By People In Business • The moral foundation of the decision-maker matters • “He doesn’t have a moral compass.” Whistleblower Sherron Watkins describing Andrew Fastow, former CFO of Enron. (Watkins gets frank about days at Enron, Edward Iwata, USA Today, March 25, 2003, p. 3B.)

12. By People in Business • Ultimately, one's own motivation for ethical behavior must be internal to be effective. External motivation has a limited value -- punishment and fear is only effective in the short-run. If people believe that they are above the law, they will continue to act unethically. Organizations that have a clear vision, and support individual integrity are attractive places of employment. - Teri D. Egan, Ph.d, Associate Professor, The Graziadio School of Business at Pepperdine University, Corporate Ethics, Washington Post Live Online, Friday, Aug. 2, 2002;

13. Ethics • Values: guiding constructs or ideas, representing deeply held generalized behaviors, which are considered by the holder, to be of great significance. • Morals: a system or set of beliefs or principles, based on values, which constitute an individual or group’s perception of human duty, and therefore which act as an influence or control over their behavior. Morals are typically concerned with behaviors that have potentially serious consequences or profound impacts. The word “morals” is derived from the Latin mores (character, custom or habit) • Ethics: the study and assessment of morals. The word "ethics" is derived from the Greek word, ethos (character or custom).

14. Morality • “The most important human endeavor is the striving for morality in our actions. Our inner balance and even our very existence depend on it. Only morality in our actions can give beauty and dignity to life.--Albert Einstein (in a letter 11/20/50)

15. Morality • The historian Arnold Toynbee observed: "Out of 21 notable civilizations, 19 perished not by conquest from without but by moral decay from within."

16. Absolutism vs. Relativism • Ethical Absolutism: What is right or wrong is consistent in all places or circumstances. There are universally valid moral principles. (“… only by obedience to universal moral norms does man find full confirmation of his personal uniqueness and the possibility of authentic moral growth.” - Pope John Paul II, see also Rom. 12:2; Heb. 13:8) • Ethical Relativism (also called “Situational Ethics”): What is right or wrong varies according to the individual/society/culture or set of circumstances. There are no universally valid moral principles. (Related Biblical reference "everyone did what was right in his own eyes" (Deut. 12:8, Judges 17:6; 21:25) (see also Isa. 5:20 & 24, Jer. 2:13, Rom. 1:18-32, 1 Cor. 5:6-7, 2 Cor. 6:14-15, 1 John 1:8)

17. Absolutism vs. Relativism • As Cardinal Joseph Ratzinger said, Relativism is “presented as a position defined positively by the concepts of tolerance and knowledge through dialogue and freedom, concepts which would be limited if the existence of one valid truth for all were affirmed … affirming that there is a binding and valid truth in history in the figure of Jesus Christ and the faith of the church is described as fundamentalism. Such fundamentalism, … is presented in different ways as the fundamental threat emerging against the supreme good of modernity: i.e., tolerance and freedom.” - Address to Congregation for the Doctrine of Faith, Guadalajara, Mexico, May 1996

18. Absolutism vs. Relativism • “The demise of America’s legal foundations occur when society rejects laws that are based on solid, irrevocable, moral, universal, absolute values, to a society that bases it’s laws on an arbitrary system of relativism, situational ethics, materialism, individualism, hedonism, paganism, or in any secularist ideology. This secularization of law has influenced all branches of knowledge – law, philosophy, business, religion, medicine, education, science, the arts, and mass media.” Harold Berman, The Interaction of Law and Religion 21 (1974).

19. Absolutism vs. Relativism • According to a recent poll of college seniors, 73% agreed with the statement that “What is right or wrong depends on differences in individual values and cultural diversity.” Only 25% agreed with the statement that “There are clear and uniform standards of right and wrong by which everyone should be judged."

20. Problems with Relativism • Relativism undermines moral criticism of practices of particular individuals or in particular societies where those practices conform to their own standards. For instance, it could be used to permit slavery in a slave society or it could be used to justify trade and investment with basically evil regimes, e.g. Apartheid governments. • But, as Cardinal Ratzinger said, “There are injustices that will never turn into just things (such as, for example, killing an innocent person, denying an individual or groups the right to their dignity or to life corresponding to that dignity) while, on the other hand, there are just things that can never be unjust.” - Address to Congregation for the Doctrine of Faith, Guadalajara, Mexico, May 1996

21. Problems with Relativism • Relativism allows for oppression of those with minority views by allowing the majority in any particular circumstance to define what is morally right or wrong. • “In Germany they first came for the Communists, • and I didn't speak up because I wasn't a Communist. • Then they came for the Jews, • and I didn't speak up because I wasn't a Jew. • Then they came for the trade unionists, • and I didn't speak up because I wasn't a trade unionist. • Then they came for the Catholics, • and I didn't speak up because I was a Protestant. • Then they came for me — • and by that time no one was left to speak up.” • - German anti-Nazi activist, Pastor Martin Niemöller

22. Problems with Relativism • Relativists speak in terms that “soften” harsh realities. • "Intelligent, educated, religious people embrace illogical absurdities that set aside not only God's truth, but also our responsibility for the well-being of others. When words are warped and twisted perversely, they're eventually emptied of their true meaning. When you shine the light of common sense on deceptive language couched in medical, philosophical or intellectual terms, the logic evaporates. Moral choices require that we use language to describe reality.” - Jean Staker Garton, Author/Lecturer, Co-Founder of Lutherans for Life

23. Problems with Relativism • Relativists never need bother to examine why something is moral or immoral, they merely accept/tolerate alternative determinations, so that none are held to account • “Over the years I have found that those who call themselves atheists actually have a strong sense of the absolute truth they know exists. They just don’t want to acknowledge that it’s true - because if they did, they would have to change the way they live. They flee on moral grounds; refusing to submit themselves, they exchange the truth for a lie.” - Chuck Colson -Being the Body, 2003.

24. Problems with Relativism • Commenting on the idea that legal reforms can compel corporate morality, Michael Prowse, in the Financial Times, stated that "The underlying problem is that we are living in times that might aptly be called 'post-ethical.'" People are now "emotivists," who relativize moral judgments and "obey the law, help others and respect customs and mores only if they calculate that this will benefit them personally in some way. ... The root problem is a loss of belief in objective ethical standards.”

25. Problems with Relativism • Jesus said in John 8:31-32, “If you continue in my word, then are you my disciples indeed; And you shall know the truth, and the truth shall make you free.” It would seem follow then that, people cannot experience ultimate and true freedom unless and until they come to terms with ultimate, absolute truth inherent in and revealed by God.

26. Absolutism vs. Relativism • Most ethicists reject the theory of ethical relativism. Some claim that while the moral practices of societies may differ, the fundamental moral principles underlying these practices do not. -Markkula Center for Applied Ethics

27. Values • “To ensure that employees can and will act with integrity … organizations need a strong and consistent set of values that dictate appropriate individual actions.” - Conclusion of study conducted by Professor Pratima Bansal, cited in” Rebuilding trust, The integral role of leadership in fostering values, honesty and vision,”by Carol Stephenson in the Ivey Business Journal, Jan/Feb. 2004, Vol. 68, Issue 3.

28. Values • Navigating the complexities of a situation ... requires areliable compass. We can plot that "north" by determining clearly our own core values. We have to identify - and articulate - what we believe is important to us and to our companies. Our core values drive our behaviors, and our behaviors tell the world who we are and what we stand for. ...Identifying and adhering to a core-values compass point provides a standard that will make decisions easier, consistent and justified.” - Parkinson, J. Robert, Thinking clearly, remembering values key to making the call, Milwaukee Journal Sentinel, March 22, 2004.

29. Values • “Without commonly shared and widely entrenched moral values and obligations, neither the law, nor democratic government, nor even the market economy will function properly.”-- Vaclav Havel ("Politics, morality, and Civility" Summer Meditations)

30. Values • What are the core values that are fundamental to the success of any individual or organization?

31. Values • Honesty, respect, responsibility, fairness, compassion, perseverance and courage.

32. Values - Universal Rule? • The “Golden Rule” , i.e. to “do unto others as you would have them do unto you” is an example of a value common to many cultures/religions (Mahabharata 5:1517, Hinduism, Talmud, Shabbat 31a & Leviticus 19:18, Judaism, Matthew 7:12, Christianity, Udana-Varga 5:18, Buddhism, Analects 15:23, Confucianism, Number 13 of Imam "Al-Nawawi's Forty Hadiths.", Islam) • Note: Several Corporations have directly incorporated some form of this rule in their codes of ethics including Coachman, Mary Kay, Progressive, Merrill Lynch and USAA

33. Corporate Culture • Both individuals and organizations hold “values” • A corporation is said to manifest its “values” in its “corporate culture” • Corporate culture is loosely defined as the attitudes, behaviors and personalities that make up a company and that shape its behavior and reputation, or as Elizabeth Kiss of the Kenan Institute for Ethics puts it, corporate culture is “how we perceive, think, feel and do things around here.” • Most employees take their cues from the company culture and behave accordingly. • A business derives its character from the character of the people who conduct the business. - Ricky W. Griffin, Management. Boston: Houghton Mifflin Company (2002)

34. Corporate Culture • "Moral behavior is concerned primarily with the interpersonal dimension of our behavior: how we treat one another individually and in groups — and, increasingly, other species and the environment." The key here is that morality brings us into contact with others and asks us to consider the quality of that contact. - • Quote from The Leadership Compass, John Wilcox and Susan Ebbs, as quoted in Everyday Ethics, by Thomas Shanks, S.J., Markkula Center for Applied Ethics.

35. Corporate Culture • "The first step in the evolution of ethics is a sense of solidarity with other human beings." — Albert Schweitzer, early 20th-century German Nobel Peace Prize-winning mission doctor and theologian

36. Corporate Culture • The Pressure to Conform • We are all a kind of Chameleon, taking our hue - the hue of our moral character, from those who are about us. - John Locke (1632 - 1704)

37. Corporate Culture • The Pressure to Conform • Some years ago, a social scientist named Solomon Asch wanted to see how people dealt with social pressure so he designed an experiment to measure the results. He came up with a simple test that showed a series of lines on a board in front of the room, with one of the lines matching another in being the same length. The others were either much shorter or much longer. A person was brought into the room, along with others in a group, which unbeknown to the subject, were helpers to the professor. The whole group was asked to match the two lines that were the same length together. The helpers intentionally gave the wrong answer and it was found that in almost 75% of the time, the subjects would go along with the wrong answer, knowing full well it was wrong, but not wanting to stand out. - “Opinion and Social Pressure”, Scientific American, Nov. 1955, 31-35.

38. Corporate Culture • The Pressure to Conform • “Culture shapes behavior. There are plenty of perfectly decent people who go astray because they're in a culture that creates an environment in which they can't get their jobs done unless they engage in unethical activities.” - Harvard Business School professor and business ethicist Barbara Toffler, former partner at Arthur Andersen. Toffler left Andersen in 1999, well before the Enron and Global Crossing scandals destroyed the company. Her book, Final Accounting: Ambition, Greed, and the Fall of Arthur Andersen (Random House/Broadway Books, 2003), describes the process of ethical erosion in grim detail. – Postcards from an Ethical Wasteland, CIO, June 1, 2003

39. Corporate Culture • In Moral Man and Immoral Society, Reinhold Niebuhr proposed that individual persons are always more moral functioning alone than when they function in a social group. - Institutional Ethics: An Oxymoron, By Joe E. Trull, Editor, Christian Ethics Today, Journal of Christian Ethics, Issue 035 Volume 7 No 4 August 2001 . • Do you agree with this?

40. Corporate Culture • Rarely do the character flaws of a lone actor fully explain corporate misconduct. More typically, unethical business practice involves the tacit, if not explicit, cooperation of others and reflects the values, attitudes, beliefs, language, and behavioral patterns that define an organization’s operating culture. - Lynn Sharp Paine, Harvard Business School

41. Corporate Culture • “A strong corporate culture founded on ethical principles and sound values is a vital driving force behind strategic success.” - Thompson & Strickland • One company stressed its commitment to RICE : respect, integrity, communication, and excellence. The words have been on T-shirts, paperweights, and on signs. The firm printed a 61-page booklet with its code of ethics and every employee had to sign a certificate of compliance. That company was Enron!

42. According to Ethical or Moral, Values, Principles or Standards • Whose Values?

43. According to Ethical or Moral, Values, Principles or Standards • Personal • Family • Peers • Religious • Company • Community, Regional, National, International

44. According to Ethical or Moral, Values, Principles or Standards • Learned Where?

45. According to Ethical or Moral, Values, Principles or Standards • Home • School • Church (or other place of worship) • Life Experience • Work Experience • Books • News Media • Entertainment Media

46. According to Ethical or Moral, Values, Principles or Standards • The average American, by the age of 65, will have spent the equivalent of 15 years of their life watching television. • By contrast, over the same time period, the average weekly church-going American will have spent only 8 months of their life receivingspiritual instruction.

47. According to Ethical or Moral, Values, Principles or Standards • In the middle of an interview for acceptance to a prestigious Ivy League school back east, the interviewer asked his “sure of himself” candidate, “If no one would ever find out, and no one got hurt, would you lie for $1M?” The young man thought for a moment and said, “If no one found out, and no one was hurt? Sure, I think I would!” The interviewer then asked, “Would you lie for a dime?” The young man shot back, “No way, what kind of man do you think I am?” The interviewer responded, “I have already determined that, I am just trying to determine your price.”

48. According to Ethical or Moral, Values, Principles or Standards • So fearful were the ancient Chinese of their enemies on the north that they built the Great Wall of China, one of the 7 wonders of the ancient world. It was so high they knew no one could climb over it, & so thick that nothing could break it down. Then they settled back to enjoy their security. But during the first 100 years of the wall’s existence, China was invaded 3 times. Not once did the enemy break down the wall or climb over its top. Each time they bribed a gatekeeper & marched right through the gates. According to the historians, the Chinese were so busy relying upon the walls of stone that they forgot to teach integrity to their children.

49. According to Ethical or Moral, Values, Principles or Standards • In the 1950s a psychologist, Stanton Samenow, and a psychiatrist, Samuel Yochelson, sharing the conventional wisdom that crime is caused by environment, set out to prove their point. They began a 17-year study involving thousands of hours of clinical testing of 250 inmates here in the District of Columbia. To their astonishment, they discovered that the cause of crime cannot be traced to environment, poverty, or oppression. Instead, crime is the result of individuals making, as they put it, wrong moral choices. In their 1977 work The Criminal Personality, they concluded that the answer to crime is a "conversion of the wrong-doer to a more responsible lifestyle." In 1987, Harvard professors James Q. Wilson and Richard J. Herrnstein came to similar conclusions in their book Crime and Human Nature. They determined that the cause of crime is a lack of proper moral training among young people during the morally formative years, particularly ages 1 to 6.

50. According to Ethical or Moral, Values, Principles or Standards • 33% of teens would act unethically to get ahead or to make more money if there was no chance of getting caught, according to a new Junior Achievement/Harris Interactive Poll of 624 teens between the ages of 13 and 18. 25% said they were “not sure” and only 42% said they would not. “These results confirm our belief that ethics education must begin in elementary school.” said Barry Salzberg, U.S. Managing Partner of Deloitte & Touche.