PHI 4301 DB

PHI 4301, Business Ethics 1

Course Learning Outcomes for Unit I Upon completion of this unit, students should be able to:

1. Analyze philosophical ethical concepts. 1.1 Describe qualities necessary in an ethical leader.

Required Unit Resources Chapter 1: Ethics and Business Chapter 2: Ethical Decision Making: Personal and Professional Contexts In order to access the following resource, click the link below. The following video is provided by Ethics Unwrapped and is a free educational resource from the University of Texas at Austin. McCombs School of Business. (2019, February 19). Moral myopia | Concepts unwrapped [Video]. cielo24.

https://c24.page/rpcwnb3nabk7zwsq3uzahxm3hk A transcript and closed captioning are available once you access the video.

Unit Lesson In this unit, we will get acquainted with the topic of business ethics. At this point in your educational and personal experience, you undoubtedly know a lot about business as well as ethics. At the intersection of the business and ethics domains, there is a wealth of scholarly thought and practical wisdom. To understand why, we need only to consider one of many ethical scandals that have made headlines in recent history—Wells Fargo and consumer fraud. The seeds of the scandal took root more than a decade earlier when Wells Fargo took up a practice called cross-selling, which incentivized branch employees to convince bank customers to buy multiple financial products (Hartman et al., 2024). Wells Fargo checking account holders, for example, were sold online banking accounts, credit card accounts, mortgages, lines of credit, overdraft protection—as many products as bank employees could push. Of course, the fees associated with these products drove huge profits for Wells Fargo. It also amounted to an important cultural shift for the bank, as employees came to identify themselves less as customer service representatives and more as salespeople. From a moral point of view, the culture at Wells Fargo was questionable. Cross-selling bank customers financial products they probably did not need was shady, but was it unethical? After all, we tend to give businesses some moral latitude when it comes to sales strategies and tactics under the principle of caveat emptor (buyer beware). Since the bank customers consented to signing up for additional products, they would appear to bear at least some of the moral responsibility. This veneer of moral credibility was discarded when, in an effort to satisfy increasingly aggressive cross- selling quotas, Wells Fargo employees started ordering financial products for customers without their consent. The fraud went so far as to involve a practice called pinning that involved setting a customer’s personal identification number (PIN) to 0000, which allowed bank employees to continue setting up fraudulent accounts their customers knew nothing about. The scale of the fraud was staggering; millions of bogus products including credit cards, online bill pay accounts, deposit accounts, lines of credit, and insurance policies were

UNIT I STUDY GUIDE

Business and Ethical Decision Making

PHI 4301, Business Ethics 2

UNIT x STUDY GUIDE

Title

billed to customers without authorization (Hartman et al., 2024). It was only a matter of time before the fraud was exposed, and Wells Fargo faced a legal, financial, and reputational reckoning. It is worth thinking about this scandal because it illustrates so clearly that no one is exempt from ethical decision-making in business. Moral culpability ran up and down the Wells Fargo organization, from front-line workers to managers and executives to board members. Each employee, at every level, made the decision to perpetrate some aspect of the fraud. When the scandal finally became known, however, only some of the perpetrators suffered legal consequences. This illustrates another important point, namely, that morality is more demanding than legality in business. Staying within the bounds of legal rules and regulations does not guarantee that business behavior is morally good—or even morally permissible. Even though the Wells Fargo case shows us what business ethics is not, it does offer some insight into what business ethics is. The concept of ethics, by itself, has something to do with promoting human flourishing (and probably nonhuman). This is something we understand intuitively without studying about it very much. What is interesting about ethics, as a field of study, is that it is both descriptive and normative. Many academic subjects are descriptive in the sense that they describe through different levels of analysis, entities, events, along with their formal and cause-and-effect relationships. Statistics, for instance, describe probabilistic models that link certain types of events (e.g., the likelihood of opening a bank account given the holding of a credit card). It does not say whether opening a bank account is a good idea or, in other words, if people ought to open a bank account if they hold a credit card. When the conversation crosses from the way the world is to the way it ought to be, then we have entered normative territory. Business ethics is inherently descriptive because it involves narratives about actual, historical business decisions and outcomes. Business ethics is also inherently normative because its purpose is to guide our future business behavior toward human flourishing. Again, it is not just about what we do but what we ought to do in business. Unfortunately, the long and less-than-illustrious history of business, which includes the Wells Fargo scandal among countless others, shows us that ethics is not something that comes naturally in business decision- making. This does not mean we are naturally unethical people. It just means that making decisions in accord with business ethics is hard. As any behavioral economist will tell you that we come into this world with a host of cognitive biases that undermine rational (and, by extension, ethical) decision-making. Take change blindness, which occurs when decision makers do not notice how small changes over time have amounted to major ethical problems. The shift at Wells Fargo from cross-selling to consenting customers to foisting new products to nonconsenting customers is a perfect example of this. Change blindness is but one of our many natural inclinations toward simple, myopic, and self-serving decisions that just confirm what we feel like doing in the first place. This is why it is so important not only to study business ethics generally but also to instill in the self-discipline to make ethical business decisions individually. In this class, we will engage in business ethical theory and practice in equal measure.

References Freepik. (n.d.). Business ethics good relationships or profit [Graphic]. https://www.freepik.com/free-

vector/business-ethics-good-relationships- profit_10980278.htm#query=ethics%20business&position=3&from_view=search&track=ais

Hartman, L. P., DesJardins, J., & MacDonald, C. (2024). Business ethics: Decision making for personal

integrity and social responsibility (6th ed.). McGraw-Hill Education. https://online.vitalsource.com/#/books/9781265810153

PHI 4301, Business Ethics 1

Course Learning Outcomes for Unit I Upon completion of this unit, students should be able to:

1. Analyze philosophical ethical concepts. 1.1 Describe qualities necessary in an ethical leader.

Required Unit Resources Chapter 1: Ethics and Business Chapter 2: Ethical Decision Making: Personal and Professional Contexts In order to access the following resource, click the link below. The following video is provided by Ethics Unwrapped and is a free educational resource from the University of Texas at Austin. McCombs School of Business. (2019, February 19). Moral myopia | Concepts unwrapped [Video]. cielo24.

https://c24.page/rpcwnb3nabk7zwsq3uzahxm3hk A transcript and closed captioning are available once you access the video.

Unit Lesson In this unit, we will get acquainted with the topic of business ethics. At this point in your educational and personal experience, you undoubtedly know a lot about business as well as ethics. At the intersection of the business and ethics domains, there is a wealth of scholarly thought and practical wisdom. To understand why, we need only to consider one of many ethical scandals that have made headlines in recent history—Wells Fargo and consumer fraud. The seeds of the scandal took root more than a decade earlier when Wells Fargo took up a practice called cross-selling, which incentivized branch employees to convince bank customers to buy multiple financial products (Hartman et al., 2024). Wells Fargo checking account holders, for example, were sold online banking accounts, credit card accounts, mortgages, lines of credit, overdraft protection—as many products as bank employees could push. Of course, the fees associated with these products drove huge profits for Wells Fargo. It also amounted to an important cultural shift for the bank, as employees came to identify themselves less as customer service representatives and more as salespeople. From a moral point of view, the culture at Wells Fargo was questionable. Cross-selling bank customers financial products they probably did not need was shady, but was it unethical? After all, we tend to give businesses some moral latitude when it comes to sales strategies and tactics under the principle of caveat emptor (buyer beware). Since the bank customers consented to signing up for additional products, they would appear to bear at least some of the moral responsibility. This veneer of moral credibility was discarded when, in an effort to satisfy increasingly aggressive cross- selling quotas, Wells Fargo employees started ordering financial products for customers without their consent. The fraud went so far as to involve a practice called pinning that involved setting a customer’s personal identification number (PIN) to 0000, which allowed bank employees to continue setting up fraudulent accounts their customers knew nothing about. The scale of the fraud was staggering; millions of bogus products including credit cards, online bill pay accounts, deposit accounts, lines of credit, and insurance policies were

UNIT I STUDY GUIDE

Business and Ethical Decision Making

PHI 4301, Business Ethics 2

UNIT x STUDY GUIDE

Title

billed to customers without authorization (Hartman et al., 2024). It was only a matter of time before the fraud was exposed, and Wells Fargo faced a legal, financial, and reputational reckoning. It is worth thinking about this scandal because it illustrates so clearly that no one is exempt from ethical decision-making in business. Moral culpability ran up and down the Wells Fargo organization, from front-line workers to managers and executives to board members. Each employee, at every level, made the decision to perpetrate some aspect of the fraud. When the scandal finally became known, however, only some of the perpetrators suffered legal consequences. This illustrates another important point, namely, that morality is more demanding than legality in business. Staying within the bounds of legal rules and regulations does not guarantee that business behavior is morally good—or even morally permissible. Even though the Wells Fargo case shows us what business ethics is not, it does offer some insight into what business ethics is. The concept of ethics, by itself, has something to do with promoting human flourishing (and probably nonhuman). This is something we understand intuitively without studying about it very much. What is interesting about ethics, as a field of study, is that it is both descriptive and normative. Many academic subjects are descriptive in the sense that they describe through different levels of analysis, entities, events, along with their formal and cause-and-effect relationships. Statistics, for instance, describe probabilistic models that link certain types of events (e.g., the likelihood of opening a bank account given the holding of a credit card). It does not say whether opening a bank account is a good idea or, in other words, if people ought to open a bank account if they hold a credit card. When the conversation crosses from the way the world is to the way it ought to be, then we have entered normative territory. Business ethics is inherently descriptive because it involves narratives about actual, historical business decisions and outcomes. Business ethics is also inherently normative because its purpose is to guide our future business behavior toward human flourishing. Again, it is not just about what we do but what we ought to do in business. Unfortunately, the long and less-than-illustrious history of business, which includes the Wells Fargo scandal among countless others, shows us that ethics is not something that comes naturally in business decision- making. This does not mean we are naturally unethical people. It just means that making decisions in accord with business ethics is hard. As any behavioral economist will tell you that we come into this world with a host of cognitive biases that undermine rational (and, by extension, ethical) decision-making. Take change blindness, which occurs when decision makers do not notice how small changes over time have amounted to major ethical problems. The shift at Wells Fargo from cross-selling to consenting customers to foisting new products to nonconsenting customers is a perfect example of this. Change blindness is but one of our many natural inclinations toward simple, myopic, and self-serving decisions that just confirm what we feel like doing in the first place. This is why it is so important not only to study business ethics generally but also to instill in the self-discipline to make ethical business decisions individually. In this class, we will engage in business ethical theory and practice in equal measure.

References Freepik. (n.d.). Business ethics good relationships or profit [Graphic]. https://www.freepik.com/free-

vector/business-ethics-good-relationships- profit_10980278.htm#query=ethics%20business&position=3&from_view=search&track=ais

Hartman, L. P., DesJardins, J., & MacDonald, C. (2024). Business ethics: Decision making for personal

integrity and social responsibility (6th ed.). McGraw-Hill Education. https://online.vitalsource.com/#/books/9781265810153