Management 511

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					                                               CMBA - 764
                                           BUSINESS ETHICS
                           Tulane University- Master of Business Administration
                                              Summer 2004

Brad Shrader, Ph.D., MBA                     Professor of Management, College of Business
Office Address:                              Office Phone: 515-294-3050
3185 Gerdin Business Building                Dept. Phone: 515-294-8116
Iowa State University              
Ames, Iowa 50011-1350                        Email:


Defining Moments: When Managers Must Choose Between Right and Right
Author- Joseph L. Badaracco Jr., Harvard Business School Press, 1997.


- Wisconsin Power & Light (at end of course outline)
- Rogers vs. Gormley (WSJ article, handout)
- Merck (WSJ article, handout)
- Steve Lewis - case of moral identity (in Badaracco book)
- Adario, Walters & McNeil - case of fairness and efficiency (in book)
- Sakiz and RU486 - negotiated environment case (in book)
- Judy Wicks (A) by David Bollier, L. Wattenberg and K. Meyer
- Judy Wicks (B) by David Bollier, L. Wattenberg and K. Meyer
- The Parable of the Sadhu by Bowen H. McCoy
- Hitting the Wall: Nike and International Labor Practices by Debora Spar
- Martha McCaskey by Bart J. Van Dissel, Joshua Margolis, and Ayesha Kanji
- Taking the Cake by Ben Gerson
- Ethical Conflicts at Enron by Sherron S. Watkins


Recently, there has been a great deal written and said about business ethics. Examples of illegal and
unethical behavior (e.g. the insider trading scandals, fraud by financial managers, tax fraud, product
liability suits, false advertising, price fixing and so forth) seem to occur on a daily basis. Yet modern
managers are becoming more concerned with understanding and preventing illegal behavior, and with
promoting ethical behavior in organizations. Moreover, managers are often asked to make choices among
conflicting demands of stakeholders. This course focuses on these “moral” issues in management.

Because most important decisions in organizations involve values and ethics, the first objective of the
course is to provide you with an understanding of the values of business and society, and discuss some
ethical models you can use to make decisions. We will examine ethics in a business context, focusing on
dilemmas that managers encounter when dealing with employees and other stakeholders. Decisions
affecting customers, the community, government/society, and other countries also reflect the values and
ethics of the corporation; thus we will examine some important decisions that arise in these relationships.

Students needing special classroom accommodations should make them known to instructor as soon as

1. We will learn the fundamental concepts related to business ethics and corporate social responsibility.
This includes: stakeholder theory, utilitarian ethics, virtue ethics, models of moral reasoning, and theories
of ethical climate in organizations.

2. We will develop a sense of the manager's moral responsibility in fostering respect for others, managing
diversity, developing employees, telling the truth, building trust, leading change...etc.

3. We will understand the importance of values and corporate culture in organizational effectiveness.

4. We will discuss some of the basic issues in business ethics and corporate social responsibility, including:
whistle-blowing, truth in advertising, insider trading, product safety...etc.

5. Each class member will have the opportunity to study actual ethical organizational policies, such as:
codes of ethics, codes of conduct; as well as study firms that are at the forefront of being socially

6. We will discuss and apply issues relating to business ethics by using case studies and readings. Research
indicates the best way to learn ethics is through discussion. We will facilitate discussion with cases and
examples of actual business events.

 Contribute to class discussion,
 Participate, volunteer, speak out
 Respect and support for others - Professional courtesy
 Okay to disagree or take a stand
 Follow written assignment guidelines
 Attendance - Be on time
 Other…?


         PARTICIPATION IN CLASS DISCUSSION                                          25% of grade (individual)

         JOURNAL                                                                    20% of grade (individual)

         PRESENTATION                                                               20% of grade (team)

         WRITTEN CASE ANALYSES (FINAL EXAM)                                         25% of grade (individual)

         CODE OF ETHICS ASSIGNMENT                                                  10% of grade (individual)

Class participation/discussion - Participation means adding value to the class experience. There will be
assigned cases and readings every session; and on occasion, questions will be given students to for general
discussion or to address from a particular stakeholder point of view. Participation will be assessed on the
basis of quality as well as quantity. Students will be called upon by the instructor to summarize and
critique the assigned readings and “in-class” cases; and will be graded on how well issues are analyzed,
integrated into course material, and how well questions are linked to the assignments. I will keep a log of
the day-to-day contributions of class members. Substantive comments that guide or summarize discussion
are required in order for a student to receive participation credit for a session! Additionally, students are to
be prepared for each class session in terms of responding to those of the instructor. The instructor will keep
a journal of daily class proceedings and attendance; and will be the sole judge of both the quality and
quantity of student participation. The objective of this assignment is to get individuals involved in
assessing and examining the course subject matter.
Journal- Each class member is required to record and submit a class journal. The journal should reflect the
class member‟s evaluation of class content material on a day-to-day basis. In other words, class members
should keep a journal chronicling the concepts they have learned as they progress through the course. The
journal should include sections evaluating the text, cases, lecture material, videos, and current events. For
example, things that might be included are the following: a short summary and evaluation of the required
chapter, responses to assigned cases and readings, executive summaries of lecture main ideas, short
summaries of current events, and ideas on how to take class ideas into your work setting.

The journal can take a number of forms but should be set up so that the class member can use it for future
reference. It should take the form of a taxonomy of concepts in business ethics and corporate social
responsibility. The goal of this assignment is to have each student reflect on what they are learning in the
course. Class members are encouraged to keep original copies of their journals and to submit “final”
journals via email. Journals should not exceed seven typed pages. The journal is due July 17.

Presentation of Business Ethics Issue - In two (or three) person teams, each student will participate in
making a short presentation dealing with an important current issue in the field of business ethics. The
topics for presentation are provided at the end of this outline. In making the presentations, students should
define and articulate the issue, present current findings (pros and cons) relative to the issue, and engage the
class in discussion on the issue. Each presentation should last 15-20 minutes and will be given in class on
July 10, our fifth meeting session. No paper is associated with this assignment. The goal of this exercise is
to apply concepts from the course to current topics and events.

Written Case Analyses - Each class member is asked to analyze the Nike case in terms of how the case
issues/problems help reveal, define, shape and test moral behavior. This project will be explained in detail
the first day of class and the relevant questions are listed at the end of this course outline. The key is to use
course material in examining the case. The purpose of this assignment is to have students integrate what
they have learned in context of this well-known case. This assignment is due July 17, 2004, at 5:30pm.

Code of Ethics Assignment - Each class member is to find an example of any (one) of the following: code
of ethics, code of conduct, corporate credo, statement of corporate values, etc. and bring it to class to
discuss. The goal of bringing codes to class is to have concrete examples to compare and evaluate in terms
of good code structure. This is due the third class meeting (June 25).

Assignment and Class/Case Discussion Schedule

Meeting #1 – June 12

First Day - Class Organization – Course Outline

        Find a code of ethics (by the third meeting)
        Read Chapter 1 in Defining Moments
        Start reading Cases
        Definitions of Business Ethics
        Ethics Models - Utilitarian Ethics, Absolute Principles, Virtue Ethics, Stakeholders
        Moral Reasoning
        How do you define “business ethics?”
        Is good ethics good business?
        How do thoughtful people make difficult choices?
        When is it okay to lie? Cheat?
        Is it possible to categorize moral reasoning styles?
        Wisconsin Power & Light (in outline below)
                  What do you think of WP&L‟s actions? Are they justifiable?
Meeting #2 – June 13

        Remember; find a code of ethics for next time
        Read Chapters 2-4 in Defining Moments         Read Judy Wicks (A)
        Read Gormley vs. Rogers handout               Read: Merck Article
        Corporate Social Responsibility
        For whom does the corporation toil? Are the economic performance and social performance of the
        firm at odds?
        Is Merck a socially responsible firm? What do you think of their decision to donate Mectizan?
        Is legal equal to ethical? Understandable?
        What rights do employees have? Managers? Unions?
        What is stakeholder management? Who are the stakeholders?
        What is the role of the market in influencing managerial decisions? Values? Rules/Laws?
        What do you think of T. J. Rogers‟ views? Doris Gormley?
                  What was Sister Gormley‟s request of Cypress?
                  What was Rogers‟s response?
                  Who makes the strongest argument?
        What do you think of Judy Wicks?
                  Would you consider the White Dog café to be a successful business venture?
        What does it mean to be socially responsible?

Meeting #3 – June 25

         Read Chapters 5-7 in Defining Moments
         Read Judy Wicks (B)
         Read Taking the Cake
         Bring your code of ethics to class
         Formal ethics – ethics applied in organizations
         Codes of Ethics, How to build a workable code of ethics! Examples of Codes.
         Ethics Policies
         Judy Wicks/Southland/values/ and company responsibilities
         Sharing codes of ethics
         What constitutes a great, interesting, relevant, and workable code? (See pages 27-30 of text)
         Is Judy Wicks an effective leader? What do you think of her business?
         Should Peter tell CEO Ed Malanga that Southland needs to recast its product lines?
                    To whom is Southland responsible? What are its legal responsibilities? Societal?
                    Are lawsuits like the one filed against Southland far-fetched?
                    Is growing obesity in society Southland‟s problem?
                    What alternative growth strategies should Southland consider?
Participation hint:
         Share your code of ethics! Present your code in class!
Meeting #4 – June 26

        Read Chapters 8-9 in Defining Moments
        Read Martha McCaskey
        Get ready for presentations next time
        Practical ethical choices and reflection/How difficult choices can be interpreted?
        How ethical dilemmas are resolved
        Lessons learned from text cases- Steve Lewis, Peter Adario and Ed Sakiz
        To what values are you committed?
        What is right? For what kind of company do you want to work?
        Steve Lewis case (in book)
                 Should Lewis take the assignment? What do you think of his decision?
        Adario, Walters & McNeil case (in book)
                 How was the problem solved between Walters and McNeil?
                 What should Adario do now?
        Case discussion, Sakiz and RU486 (in book)
                 Is Sakiz a fox or a lion?
                 What do you think of the RU486 outcome?
        How is the Silicon 6 project a defining moment for Martha McCaskey?
                 What is the dilemma she faces?
                 What should she do?

Meeting #5 – July 10


Meeting #6 – July 11
        Read the Parable of the Sadhu
        Read Ethical Conflicts at Enron
        Finish Nike case
        Lessons learned from Enron
        Lessons learned from the Nike case
        What are the issues in the Nike case?
        Is Nike a socially responsible firm?
        Are Nike managers acting ethically? Are they solving dilemmas well?
        What went wrong at Enron?
        Why did Watkins blow the whistle?
        What leadership reforms does Watkins propose to avoid another Enron?
        What is the meaning of the Parable of the Sadhu?

July 17 – Final exam and Journals due
Final Case Analysis – Ten Pages (Maximum) – Due July 17

Analyze the Nike case using course material/principles, and by addressing the following questions:

    1.    What level of moral reasoning is present in this case? What model or models of ethics do you see
          operating in this case study? Explain and give examples.
    2.    What actors are reasoning most morally? Least morally? Explain and offer descriptions.
    3.    Is Nike acting in a socially responsible manner? How are the actions of Nike managers similar or
          different than those of other class case companies (e.g. Merck, Judy Wicks, and WP&L)?
    4.    Identify the defining moments in the case.
    5.    If you were a consultant, what recommendations would you offer to improve Nike‟s international
          labor practices?

Each question is worth approximately 5 points.

Ethics Issues and Topics for Presentation

    1.    Chairman and CEO duality – should the chairperson of the board and the CEO be the same
          person? Why or why not? What are the ethical issues?
    2.    What is the Sarbanes-Oxley Act? How do you think it will impact future corporate governance?
          In November 2003, Richard Scrushy (Health South) became the first CEO to be indicted for
          violating the Sarbanes-Oxley Act. What did he do? What does this mean?
    3.    How can firms enhance CEO and Board power and accountability? What reforms make the most
          sense? How can managers/boards better ensure financial reporting accuracy?
    4.    What is the relationship of CEO pay with firm performance? How should CEOs be rewarded for
          good performance? What motives performance at this level? Are current levels of CEO pay fair?
    5.    What went wrong at Enron? What are the lessons learned?
    6.    What went wrong at Tyco? What are the lessons learned?
    7.    Sherron Watkins blew the whistle on Enron. How was she treated after blowing the whistle?
          How are whistleblowers normally treated? Identify some famous whistle blowers. What do we
          learn from their experiences?
    8.    Wal-Mart is Fortune Magazine‟s most admired firm for 2004. Why is this firm so admired? What
          strategies and policies account for the firm‟s success? Are there any areas where Wal-Mart might
          be considered less admirable?
    9.    Find a firm that is leading the way in terms of business ethics and corporate social responsibility –
          a firm that is performing well and „aiming higher‟ (we‟ve used examples such as Merck and White
          Dog Café). What factors define success for the firm? What can we learn from this example?
    10.   The Balanced Scorecard is a management planning technique that considers innovation, employee
          development, and customer satisfaction as equivalent with firm financial performance in
          understanding company effectiveness. Do you agree with this approach to management? How
          can the BSC help firms be more ethical and responsible?
    11.    When is it okay to cheat? What situations require or permit someone to take unfair advantage?
          Does everybody cheat?
    12.   What is ethical leadership? Identify someone that most would agree is a moral leader. What
          qualities does this person possess? How does this person lead? How does this person manage?
    13.   Downsizing seems to be a fact of organizational life? Downsizing allows firms to realize the
          efficiency of restructuring, but it also can adversely affect the lives of individuals. How can
          downsizing be made into both an economically viable and humane experience? Give examples of
          good and bad downsizing efforts.
    14.   Competitive intelligence is a growing managerial function in many firms. What issues are
          associated with gathering business intelligence about firms? Is it possible to be an aggressive
          intelligence gatherer and be ethical at the same time?
    15.   Create your own topic.
CMBA - 764 Case - Wisconsin Power & Light

Madison Wisconsin, February, 1994- Wisconsin Power & Light has, for the most part, a wonderful
corporate reputation in the Madison Wisconsin community and nationwide as well. They are in the process
of downsizing. Two weeks ago they invited thirty management information systems (MIS) employees to
an afternoon meeting at a hotel/restaurant. The thirty employees were broken down into groups of fours
and sent to separate rooms. There they were told that they were being laid-off. They would receive a nice
severance. However, because they are MIS employees, they would not be allowed on company property
again. They were to go home and stay home. You won‟t be permitted back in the building. We‟ll give
you your belongings.

(Source: Dennis Collins, IABS network posting, 2/2/94)

Note: Rumor had it that WP&L invited the thirty employees to lunch at the hotel and then lowered the
boom. WP&L officials defended their actions in the local newspapers on the grounds that MIS employees
could do crippling damage to the company through sabotaging their work. WP&L also claimed that a
consulting firm recommended this course of action to protect the company and to protect customers who
would bear some of the brunt of sabotage.

1. What do you think of WP&L‟s actions? Can they be justified? Could there possibly be damage to the
company? To customers?

2. Who are the stakeholders in this case? Who was harmed by WP&L‟s actions? Who was benefited?

3. How could this “downsizing” exercise been improved?