Business Ethics

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Business Ethics

• Doing the Right thing, and Making the Good Life
  Better

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Welcome and Introduction

• I am Andy Gustafson
• I teach Business Ethics at Creighton
• Son of a Farmer from Aurora, NE

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Overview of Ethics

• What is Business Ethics?
• Some Ethical Quotes/Quiz
• Some moral theories
• Moral Development
• Professional Standards/Industry Paradigms
• Moral Decision Making

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• ETHICS QUOTES
• 1. When I do good, I feel good when I do bad, I
  feel bad. Thats my religion. (Abraham Lincoln)
• 2. Ethics, too, are nothing but reverence for
  life. This is what gives us the fundamental
  principle of morality, namely, that good consists
  in maintaining, promoting, and enhancing life,
  and that destroying, injuring, and limiting life
  are evil. (Albert Schweitzer)
• 3. Neither fire nor wind, birth nor death can
  erase our good deeds. (Buddha)
• 4. Gratitude is not only the greatest of virtues,
  but the parent of all the others. (Cicero)
• 5. Always do right this will gratify some and
  astonish the rest. (Mark Twain)
• 6. Good people do not need laws to tell them to
  act responsibly, while bad people will find a way
  around the laws. (Plato)
• 7. Associate with men of good quality, if you
  esteem your own reputation for it is better to
  be alone than in bad company. (George
  Washington)
• 8. To educate a person in mind and not in morals
  is to educate a menace to society. (Theodore
  Roosevelt)
• 9. A good name is more desirable than great
  riches to be esteemed is better than silver or
  gold. (Pr 221)
• 10. Leadership is a potent combination of
  strategy and character. But if you must be
  without one, be without the strategy. (General
  H. Norman Schwarzkopf)
• 11. A people that values its privileges above its
  principles soon loses both. (Dwight D.
  Eisenhower)
• 12. What does it profit a man to gain the whole
  world, yet forfeit his soul?
• 13. Relativity Applies to physics, not ethics.
  (Albert Einstein)

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ETHICS

• QUIZ

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Question 1

• 1. Which of the following has been found to be a
  true statement regarding ethics and the insurance
  industry?
• a.) On average, insurance practitioners are more
  likely to act unethically in business practices
  than in purely personal situations.
• b.) More than 50 percent of people in business
  indicate having observed one or more unethical or
  illegal acts in the past twelve months.
• c.) Insurance practitioners believe that
  managements emphasis on the bottom line is one
  of the main factors leading to unethical
  decision-making.
• d.) All of the above are true statements.

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Answer

• Answer Q1. (d) All of the above are true
  statements. (a) is based on research by Eastman,
  Eastman, and Eastman 1996 (b) is American
  Society of CLU and CFC Ethics Officer
  Association) (c) Cooper and Frank, 1991. People
  with high ethical values in their personal lives
  may act unethically in their business practices
  because of what is expected and rewarded in their
  work. (Reilly, Kjy 1990)

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Question

• 2. A strong organizational culture is one in
  which there is a high expectation of conformity
  with the organizations beliefs, values, and
  purpose. All of the following are true statements
  regarding organizational culture EXCEPT
• a.) In general, members of organizations having
  strong cultures are more likely act ethically.
• b.) In general, members in organizations with
  weak cultures are more likely to base their
  ethical decisions on the norms and values of
  small groups within the organization.
• c.) In general, members of large organizations
  feel less responsibility for their actions than
  those in small organizations.
• d.) In general, higher level employees have less
  ethical beliefs and their ethical decision-making
  is less than lower level employees.

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Answer

• Answer Q2. (a) A strong culture can lead to more
  ethical behavior if the cultures values and
  purposes are ethical but it can also lead to
  conformity of unethical behavior. (Diacon
  Ennew, 1996) (b) is true (Trevino 1986) (c) is
  true because responsibility is more diffused in
  large organizations (Ford Richardson, 1994)
  (d) (Ford Richardson 1994)

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Question

• 3. Which one of the following statements has been
  found to be true?
• a.) In general, publicly held (stock) companies
  are more ethical because of the external scrutiny
  they receive.
• b.) In general, mutual insurance companies have
  made their codes of conduct more prominent and
  ethical attitudes more positive than stock
  companies.
• c.) There is no relationship to ethics and
  organizational ownership.
• d.) Over the long run, the most successful
  companies have focused first and foremost on
  profit maximization.

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Answer

• Answer Q3. (b) (Diacon Ennew, 1996). (d) this
  is one of the myths exposed in the book by Jim
  Collins entitled Built To Last. In as study of
  the most successful and enduring companies in
  America, 17 out of 18 companies were more
  ideologically driven, and less purely profit
  driven then their peers. Contrary to business
  school doctrine, what drives a company is its
  belief that it provides a value and makes some
  contribution to society. Maximizing shareholder
  wealth, or profit maximization, has not been the
  dominant force for visionary companies. Instead
  they pursued a cluster of objectives. Making
  money was only one, and not necessarily the
  primary one. They are equally guided by a purpose
  and core values beyond just making money. Profits
  are what sustain the life of an organization, but
  they are not what drive the organization to
  succeed in the long run.

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Question

• 4. All of the following are true statements
  EXCEPT
• a.) Individuals see themselves as more ethical
  than their coworkers or supervisors.
• b.) The ethical behavior of supervisors strongly
  influences the ethical behavior of their
  subordinates.
• c.) In general, supervisors and managements
  actions have little influence over individuals
  ethical behavior because individuals form their
  ethical values outside of the work environment.
• d.) Supervisors who are successful performers
  have greater influence over their subordinates
  ethical behavior.

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Answer

• Answer Q4. (c ) is the only one that is not true.
  Countless studies show that although some core
  values may not change, most values and ethical
  standards of conduct are influenced by
  supervisors and management actions (a) is true
  (Tyson 1992), people judge themselves by their
  intentions and they judge others by their
  actions. (Cooper, 1996) (b) Nel Watson, 1989,
  Cooper Frank, 1992)) (d) True, (Javidan,
  Memmels, Devine Dastmalchian).

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Question

• 5. Which one of the following is a true
  statement?
• a.) Most employees report that a companys
  ethical position is stated in their training
  courses.
• b.) The existence of a formal code of ethics is
  a strong deterrent to unethical behavior.
• c.) The awareness of a formal code of ethics is
  a strong deterrent to unethical conduct rather
  than just the mere existence of one.
• d.) The most successful ethical training
  programs are ones that emphasize how to make
  ethical decisions rather than setting clear,
  uncompromising rules.

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Answer

• Answer Q5. (d) As in other training in other
  aspects, training on how to make decisions is
  more effective in changing behaviors than
  training that sets out lists of rules to abide
  by. (Mahoney, 1997) (a) less than half of
  employees state that their companys ethical
  position is stated in training (b) The existence
  of a formal code has no relationship on ethical
  behavior. (Weaver, Trevino, Cochran, 1999) Enron,
  for example, had an award-winning 79 page Code of
  Conduct. (c) Unfortunately, awareness by
  employees does not affect their behavior either.
  (Kohut Corriher, 1994, Vitell, 1997). However,
  clearly communicated and strongly enforced
  guidelines do make a difference. (Laczniak
  Inderrieden, 1987).

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Vocabulary Business Ethics

• What is Business ?
• What is Ethics ?

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Business is inherently social

• Business has its own culture
• Enron, Paypal, your office
• Business Transforms Culture
• Mutual of Omaha, FNB, community outreach
• Business is about relationships
• Insurance business is about relationships

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Business Its purpose/goal

• Lone Ranger/I am an Island View
• The purpose of business is to make me money, and
  increase stockholder value
• (Milton Friedman)

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Alternate Stakeholder View

• Business should make money, but it has many
  stakeholders groups/individuals who have a stake
  in what the business does. Owners are not the
  only ones with a stake (Freeman)
• Examples of Stakeholders

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Your business makes the world Better or Worse for
people by

• Your products/Services
• The way you treat your customers
• The way you treat your employees or coworkers
• The way you treat your boss/company
• The way you contribute to the local community

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Responsibilities in Business

• To your employer
• To Customers
• To employees
• To boss/es
• To your community
• To your family
• To your God

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The challenge Balancing Responsibilities
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What is ethics?
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Ethics isnt legal Difference between the
Law and Ethics

• Some legal issues are neither ethical or
  unethical.
• Some ethical issues have no laws to support them.
• Law often tries to encourage ethical behavior
• Better to have self-regulation than more govt
  regulations

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Ethics and Regulation

• Government regulation often is designed to
  promote ethical behavior
• SOX
• OSHA Regulations
• EPA Regulations
• Federal Sentencing Guidelines

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Federal Sentencing Guidelines

• 1. Having Standards
• 2. Assigned Responsibility - Adequate Resources
• 3. Due diligence in Hiring
• 4. Communications and Training
• 5. Monitoring, Auditing, Reporting
• 6. Promotion and Enforcement of Ethical Conduct
• 7. Reasonable Steps to Prevent Misconduct

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Company Ethics

• Company Policy often has some basis in the
  compliance regulations and legal statutes and
  fine schedules set up by government.
• But Personal ethics requires personal
  decisionmaking, rooted in values.

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Many think Ethics is just about what to NOT do
Dont do __!!
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But ethics is more than just what not to do

• Minimal What we shouldnt do
• Dont steal, dont kill, dont lie
• Better What we should do (justice)
• Be fair, Be honest, Fulfill duties, work hard
• Best What we could do to make things excellent
  for all of us
• Mutual of Omaha Project, Real Estate

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Business can help create an excellent life

• Example of this mindset Midland National Life
  insurance mission
• "To make life better for individuals and
  families to afford security, trust, superior
  value, and peace of mind to those we serve to
  offer the best in financial resources and
  services.

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How does Business make life better? Table
discussion (5 min)

• How do you make life better for your community
  through your business?
• What are positive things you do for the benefit
  of the many through your work?
• Do you see these things you do for others as
  being ethical?

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The Point is Realize the good you do in society!

• Businesses do have an effect on society and
  culture. Business is not just about making money.

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Moral Psychology

• WHY DO PEOPLE DO WRONG THINGS?
• Milgram Experiment

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Question Why do Soccer moms sometimes drive
like jerks?
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Question Why do people forge signatures and
documents?
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Why do people stretch or edit the truth, or
exaggerate?
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Moral Development Why do people do unethical
things?

• Why did the soccer mom drive like a jerk?
• Why did my student cheat on the exam?
• Why did people at Enron do unethical things?
• Why do insurance professionals cut corners?

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Some reasons people do wrong

• Ignorant
• In a hurry
• Thoughtless
• Didnt plan ahead
• Financial difficulties
• Pressure from organization
• Not clear communication from management
• Lazy
• Want a quick buck
• They are a Bad evil wicked person

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More Moral Psychology

• WHY DO PEOPLE DO THE RIGHT THINGS?

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Kohlbergs theory of moral development

• Stage 1 Obedience and Punishment
• Stage 2 For self-benefit
• Stage 3 For sake of reputation (good boy)
• Stage 4 Maintain Social order
• Stage 5 Contractual-Legalistic orientation
• Stage 6 Conscience/Principle Orientation

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moral dilemma

• In Europe, a woman was near death from a special
  kind of cancer. There was one drug that the
  doctors thought might save her. It was a form of
  radium that a druggist in the same town had
  recently discovered. the drug was expensive to
  make, but the druggist was charging ten times
  what the drug cost him to make. He paid 400 for
  the radium and charged 4,000 for a small dose of
  the drug. The sick woman's husband, Heinz, went
  to everyone he knew to borrow the money and tried
  every legal means, but he could only get together
  about 2,000, which is half of what it cost. He
  told the druggist that his wife was dying, and
  asked him to sell it cheaper or let him pay
  later. But the druggist said, "No, I discovered
  the drug and I'm going to make money from if."
  So, having tried every legal means, Heinz gets
  desperate and considers breaking into the man's
  store to steal the drug for his wife.

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Kohlbergs theory of moral development

• Stage 1 Obedience and Punishment
• Stage 2 For self-benefit
• Stage 3 For sake of reputation (good boy)
• Stage 4 Maintain Social order
• Stage 5 Contractual-Legalistic orientation
• Stage 6 Conscience/Principle Orientation

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Part 2 Ethical Principles, and how to use them

• Brief explanation of the 5 classic ethical
  theories
• Egoism
• Social Contract Theory
• Utilitarianism
• Duty-Based
• Virtue Ethics

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Egoism

• People should always do what is in their own
  self-interest.
• (ex do what it takes to get repeat business)

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Social Contract Theory

• Compromise-Egoism Make concessions to others,
  but try to get what you can
• Obey the law, respect others because you want to
  be respected, etc
• When driving, slow down near other schools, not
  just your own kids school

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UtilitarianOutcome-Based

• Do what benefits the greatest number the most
• Jump on the grenade if it benefits the most.
• Do what is right if it will make for a better
  society in the long run, even if you could have
  short term maximization right now
• I can save my client on this insurance premium by
  under-reporting risks, but in the long run this
  will cause the insurance company and other
  clients to be at considerable risk.

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We can lose our moral conscience and concern!

• Capacity for the nobler feeling is in most
  natures a very tender plant, easily killed, not
  only by hostile influences, but by mere want of
  sustenance and in the majority of young persons
  it speedily dies away if the occupations to which
  their position in life has devoted them, and the
  society into which it has thrown them, are not
  favourable to keeping that higher capacity in
  exercise.

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John Stuart Mill

• Men lose their high aspirations as they lose
  their intellectual tastes, because they have not
  time or opportunity for indulging them and they
  addict themselves to inferior pleasures, not
  because they deliberately prefer them, but
  because they are either the only ones to which
  they have access, or the only ones which they are
  any longer capable of enjoying.

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Principle/Duty-Based

• Only act in a way that you could make your act a
  universal law
• Should I lie? Would I make lying a universal
  law? No. Then dont lie!
• Should I cheat on my taxes? Would I want
  everyone to do that? No. Then dont!

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Principle 2

• Treat others always as an end, not as a means to
  an end.
• Dont treat checkout person as humanoid ATM
• Dont treat other drivers as obstacles in your
  path
• Dont treat customer as a just a means to money

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Virtue Ethics/Nebraska Ethics

• What is the GOOD life,
• and how do we achieve that?
• Aim for excellence
• Moderation/Balance
• -- Vice Virtue Vice
• (Too little) (just right) (too much)
• Coward Courage Foolhardy

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Being Virtuous

• Does depend on the situation
• When to be witty
• Does depend on the individual
• Child Maestro
• Is something we must constantly strive to upkeep,
  work at
• We can lose our touch!
• It helps to have roll models WWJD?

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Virtues

• Honesty
• Integrity
• Responsibility
• Respect/Caring
• Truthfulness

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Moral Principles for Living and Working

• Banker Friend look in the mirror rule
• Showgirl from Las Vegas Grandma rule
• Golden Rule do unto others
• Silver Rule do no harm
• What rules do you use?....

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Guiding Questions

• Questions to help decide if the situation or
  decision has ethical dimensions
• Is it legal but unethical?
• Is it necessary?
• Does it involve a core ethical principle such as
  honesty, integrity, truthfulness, etc.?

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Guiding Questions Info

• Information gathering questions
• Who are the stakeholders and what are their
  rights?
• Consider the source, reliability, and accuracy of
  all relevant information.
• Who should be involved in this decision?
• Do I have enough information to make a sound
  ethical decision? If not, how do I get it?

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Guiding Questions Options

• Questions to help identify and evaluate
  alternatives
• Am I rationalizing to justify what I want to do?
• Am I using anyone for my own personal gain? (Who
  will be injured and how)
• Are there conflicting loyalties to stakeholders?
• What would result in the long run if everyone did
  this?

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Guiding Questions Conclusion

• Questions that help in reaching a decision
• Could I defend my position before the Board of
  Directors, the CEO, or the media?
• What would ______________________ do? (Fill in
  the name of the best role model you know.)
• Will this seem to be the right decision a year
  from now? Five years from mow?
• Do I have the moral courage to take the more
  ethical course of action? (Am I willing to pay
  the price for my convictions?)

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Final Thoughts

• Usually, doing the right thing is clear, even if
  its not easy
• We tend to cut corners for short-term apparently
  inconsequential issues, but this can come back to
  haunt us
• Having Ethical Habits takes practice, and some
  thoughtfulness.

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Summary What have we covered?

• What is Business Ethics?
• Some moral theories
• Moral Development
• Moral Decision Making

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The End