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making ethical judgments and (2) describe how the individual person develops good moral habits, virtue, and character. In the first portion of the chapter we will ask: How does one make a judgment about what is morally right and wrong? What norms, mod- els, and techniques are available for helping us to make ethical decisions? Ethics can be defined as the principles of conduct governing an individual or a group, and the methods for applying them. Ethics provides the tools to make moral judgments. Let us provide a few examples of situations that call for ethical judgments: Jason Stacy, a California graduate student, downloads copyrighted music from the Internet for his own use. He gives some of that music to friends, and also sells it to fellow students. A Canadian woman visiting San Francisco mistakenly left her purse with jewelry and cash worth about a million dollars in a park. John Suhrhoff found the purse and returned it, saying “Every person I know would have done the same thing.” But a San Francisco police sergeant said that Suhrhoff is unusual, and most people would have kept the find. Andrew S. Fastow, MBA from Northwestern and former Chief Financial Officer of Enron, pled guilty to fraud and is in jail. He admitted setting up false accounts to hide losing transactions of billions of dollars from investors and employees and enriching himself.1 In a study of managers’ ethics, 47% of top executives, 41% of con- trollers and 76% of graduate business students were willing to commit fraud by understating write-offs that cut into their company’s profits. In addition, 29% of teenagers say that one has to “bend the rules to succeed” in business.2 More than 4/5 (82%) of young people admitted that they lied to their parents about something significant at least once in the past year; 60% admitted that they cheated on an exam at least once in the past year; 28% acknowledged stealing something from a store during this same period. Yet, in contrast, 98% said that it was important for them to be a person of good character, and 74% rated their character higher than their peers.3 A Pennsylvania man advertised “Blank receipts, 100 restaurant receipts, 50 styles, $5.98. Satisfaction guaranteed.” The blank receipts are attractively designed to look like the receipts of restaurants anywhere in America: Captain’s Table, Trophy Room, Village Green, P.J.’s, and so on. The purchaser, after filling in the dates, number of diners, and total bill, can use them in reporting expenses. An IRS spokesperson says that selling blank receipts is not illegal.

Ethics provides the tools for making ethical judgments, and helps develop the habits that result in morally good behavior. Good behavior requires the ability to make moral decisions. So in this chapter we offer a model to help a person make ethically good decisions. Making ethical judgments involves three steps: (1) gathering relevant factual information, (2) selecting the moral norm(s) that most help to make the decision, and (3) making the ethical judgment on the rightness or wrongness of the act or policy (see Figure 3-1). Ethical judgments are not always easy to make. The facts of the case are often not clear, and the ethical norms to be used are not always agreed on, even by the experts. Hence, to many people, ethics seems ill-defined, subjective, and so not very useful. Just as is true with politics and religion, there is often more heat than light generated by ethical discussions. This lack of knowledge of ethics is unfortunate, because without ethical behavior, it is everyone for him or herself. In such a situa- tion, trust, which is essential to any business transaction.

Dilemmas to Decisions Let us begin our examination of ethical decision making by assessing a case that was first judged by 1,700 business executive readers of the Harvard Business Review. This case was part of an early large-scale study of business ethics by Raymond C. Baumhart, S.J.5 An executive earning $150,000 a year has been padding her expense account by about $7,500 a year. Is it ethical to pad one’s expense account? On numerous occasions over the decades, hundreds of other managers have been asked to judge this case, and the results have been substantially the same. Replying to an anonymous questionnaire, 85 percent of executives both in the United States and in Japan think that this sort of behavior is simply unacceptable. Perhaps more important, almost two-thirds of them think their business colleagues would also see such behavior as unacceptable under any circumstances. Why would padding an expense account be considered wrong by these executives? An expense account is not a simple addition to one’s salary. It is intended to pay for expenses incurred in doing one’s work. Pocketing a pencil or making a personal long-distance phone call from the office.

Circumstances are cited that might mitigate the injustice. Some may say, “Many others are also doing it” or “My superior knows about it and says nothing.” In the cited study, only about a quarter of the executives thought that their peers would justify such actions for these reasons. Few (about 10%) said that they themselves thought that it would be acceptable in such circumstances. Let us further examine these circumstances. Others Are Doing It; My Superior Knows About It and Says Nothing The fact that many people are performing certain actions never in itself makes those actions ethically acceptable. For example, the fact that superiors ordered actions was not accepted as a defense for the unethical managers at Enron. It is not a defense for. the military guards who tortured Iraqi prisoners at Abu Ghraib prison outside Baghdad. Nor was it a defense for concentration camp officers at the post–World War II Nuremberg war crime trials. Although ethics is influenced by conditions, a moral principle is not established by majority vote. Let us go back to the case of the expense account. It would benefit the executive if she could increase her salary by $7,500; it would be in her self-interest. Focusing primarily on her own benefit could lead her to be less objective in her search for the right action and would make her more prone to look for excuses to take the money. Justice calls for a fair distribution of the benefits and burdens of society. In this case, we are concerned with benefits. Is it ever ethical to claim funds from an expense account that were not true expenses? The executive’s family is not starving because she has an abnormally low salary, so justice tells us that the expense account should not be used as a salary supplement. Ignorance and coercion can lessen responsibility. However, in this case, the executive can hardly claim that she did not know what an expense account was or that she was forced into taking the money.

AL PRINCIPLES FOR BUSINESS ACTIONS How to make better ethical decisions has been deliberated for centuries. The norm of rights and duties is based on the human dignity of each individual person and results in personal entitlements. Immanuel Kant7 (personal rights) and John Locke8 (property rights) developed the theory of rights and duties. The norm of justice is also based on the dignity of each person and has a longer tradition, going back to Plato and Aristotle in the fourth century.

Norm of Caring Over the centuries ethicists, who were almost all male, developed the norms of rights and duties, justice, and utilitarianism. These norms highlight impartiality and abstract principles. A norm of caring has been recognized in the last few decades.20 Caring is built upon relations between people and is an extension of family life. Rather than autonomous individuals making objective, impartial ethical judgments, we instead experience numerous relationships, and these relationships influence our ethical obligations. We care for each other, and we have responsibilities to each other. Ethicists who advocate caring as a norm demonstrate how women’s moral experience has been neglected. When facing moral dilemmas, women tend to focus on the relationships of people rather than on impartial, theoretical principles. As we saw in Chapter 2, Gilligan amended the levels of moral development in light of the experience of women. The male matures by developing autonomy and sees himself in opposition to the other. Thus he insists on personal rights. However, if a businessperson is unduly influenced by rights and competition, it can result in paranoid tendencies that can cause difficulty relating to others or relating to others only by contract.

Ethical Norms for Global Business Some claim that the varying business customs and practices in countries around the world demand new norms for international business ethics. They propose a variety of different models, based upon rights, social contract, and negative and modified utilitarianism.22 Other scholars, however, have found common basic ethical values in business in different cultures. While global business norms do not yet exist, the various attempts to achieve norms and the codes of ethics that we will examine in Chapter 9 are developing an international policy regime.23 This is gradually providing a consensus of moral expectations for the global firm. Manuel Velasquez applied the new proposed models to several cases in global business ethics.24 He demonstrates the limitations of each of those new proposals. On the other hand, he found that the comprehensive model containing the norms of rights and duties, justice, utilitarianism, and caring as presented in this chapter is more flexible and effective for the global business manager. Let us now use these norms to solve some ethical problems.

Overriding Factors Overriding factors are factors that may, in a given case, justify overriding one or perhaps two of the four ethical norms: rights and duties, justice, utility, or caring (see Figure 3-3). Overriding factors can be examined when there is a conflict in the conclu- sions drawn from the ethical norms. For example, there might be incapacitating fac- tors, such as a lack of information or coercion. If there are any elements that coerce an individual into doing a certain action, then that individual is not fully responsible. Let us take the example of Bausch and Lomb. CEO Daniel Gill expected division managers to show double-digit earnings each quarter. Under this unrelenting pressure, the managers faked sales of sunglasses and forced distributors to accept unneeded products. This even- tually resulted in a collapse of revenues and an SEC investigation. What the managers did was unethical, but to the extent that they were coerced their guilt is less because they were pressured by their CEO.27 Also, a lack of information may be an incapacitating factor that might prevent someone might from utilizing a norm. A manager might suspect that another manager is embezzling from the firm. However, to report him to superiors could ruin his reputation. Therefore, even though stealing is a violation of justice, in this instance there is not yet sufficient information to act. In addition, a man- ager may be sincerely uncertain of the norm or its applicability in a particular case.28