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REVIEW OF CLASS 1

INTRODUCTION

· Among topics we discussed after test was the Milgram experiment. In October 1963 – over 50 years ago -- The Journal of Abnormal Psychology published Dr. Milgram’s first report of the experiments he conducted in 1961. In that article, Dr. Milgram reported that 65% of the subjects were willing to administer the highest indicated level of shock, which was marked on their control device with “XXX.” In September , 2013, a book was published about the experiment and its aftermath entitled: “Behind the Shock Machine”, author Gina Perry reviewed archival material of the experiments as well as people connected to the experiment. The included the son of the “learner” who faked his reaction to shocks as well as several of those who took part in the experiment and thought they were administering shocks to the learner. The author writes that a subject named Bill began dating a psychology professor 20 years after he had taken part in the experiments and long after he had stopped thinking about the experiments. The professor invited Bill to talk to her class. He told the author of the book: "Well, you would have thought Adolf Hitler walked in the room. I never really thought about it that way, you know?" "Bill told the silent, judging students: 'It's very easy to sit back and say, 'I'd never do this or that' or 'Nobody could ever get me to do anything like that.' Well, guess what? Yes, they can.'”

· We discussed the design of the course and administrative matters.

· Discussed a story from today’s paper to demonstrate that issues of business ethics are very much front and center in business current events.

· Einstein, whose image appears on syllabus, once said: “Relativity applies to physics, not ethics.” Einstein meant that the right thing to do in a situation is always certain and fixed. The text addresses relativism at p. 75 and says that those, like Einstein, are low in relativism and high in idealism believe that all situations are subject to universal ethical principles. The text says that idealists are more likely to engage in ethical behavior because they are more likely to have ethical intentions and be critical of unethical actions.

· Along the same lines, consider the words of Jordan Belfort, the man whose life is portrayed in the December 2013 film, “The Wolf of Wall Street.” Mr. Belfort was accused of running an investment scheme that cheated investors out of more than $200 million. In 2004, Mr. Belfort served 22 months in federal prison and pay over $110 million to his victims. Now, Mr. Belfort makes several million dollars a year mostly giving speeches to businesses about ethical behavior. In a November 2013 article in Bloomberg Businessweek, Mr. Belfort is quoted as saying in a recent speech: “You can’t be half-pregnant when it comes to ethics. Every time you step over the line and back again, the lines moves a little bit. There’s no way to succeed in business without the highest ethical standards.”

· We also discussed Ryszard Kapucinski, a great Polish journalist whose first great story exposed mismanagement and drunkenness in a Polish steel factory, and his comment that: “Money changes all the iron rules into rubber bands,” suggesting Einstein’s ideal is often corrupted by money in the real world,

· The parable of the would-be jaywalker was presented. Discussed situational variables on ethics of crossing or not. One was crossing when a police officer waves you on; another was when there was a baby in a burning building. Compare crossing against the light to save a baby with the ethical dilemma found at p. 16 of your text concerning the use of unapproved chemicals in production.

· I crossed against the light that morning. The reason we begin with this true parable is to illustrate that, perhaps, the application of ethical values, if not the values themselves, may depend on the situation confronting the decision-maker. The lesson behind resisting the invitation of the person in the car to cross against the light in the original (and actual) facts of the story, contrary to your ethical inclination to respect the law, is to illustrate that there will be those who will give you “permission” of sorts to compromise your ethical principles. The question is whether you will have the fortitude to act according to your ethical principles after: (1) you are aware that you are facing an ethical dilemma and (2) have applied moral judgment to determine the ethically correct course of action.

PART 2: A PIERCING DILEMMA

· We focused on the ethics of hiring in a real case involving the fictionally named Anne Armoire who owns Vandelay’s high-end home furnishings showroom. She had just interviewed Susan Pry for an open sales position. One of her sales associates Tyler saw Susan as was leaving and approached Anne with a concern. Anne thought the candidate was well-credentialed and had a great personality. Tyler’s concern was that Susan’s nose and tongue piercings would turn the showroom customer’s off.] Anne wondered if that might indeed be a problem. She told Tyler to get back to work, but said she was going to give further thought to what they had discussed.

· We discussed ethical question Anne faced.

· In a recent article Survey: Tattoos Hurt Your Chances of Getting a Job, Salary.Com surveyed 2700 people and 76% of respondents felt tattoos and piercings hurt a job applicant's chances of being hired during a job interview. More than one third - 39% of those surveyed, believe that having employees with visible tattoos and piercings, reflect poorly on the employer/business. Of those surveyed, 42% felt visible tattoos are always inappropriate at work, with 55% reporting the same about body piercings.

· As employment law expert Mark Fijman noted in his 2011 article, “employers could face potential Title VII liability for workplace restrictions on tattoos that are part of a religious practice. Employers should generally avoid any overly broad dress code or similar policy that does not acknowledge the potential need to offer accommodation. While religious tattoos or piercings may be subject to accommodation, those worn for secular or purely decorative reasons do not need to be accommodated under Title VII. As such, it is legally within an employer’s right to require that tattoos, piercings or other body art be covered up in the workplace. Likewise, an employer can require workers to cover up any secular tattoos that could be considered offensive or a source of harassment toward other employees or customers, including, but not limited to tattoos of a sexual nature or racist symbols or images.”

· Discussed why discrimination, even discrimination based on looks, is an ethical issue in connection with Hiring Case on p. 291 of the text.

· A book published in April, 2012 entitled “the Art of the Sale: Learning from the Masters about the Business of Life” makes the following observation: “Pharmaceutical companies regularly hire ex-cheerleaders to sell their drugs. The logic is simple and crude. Most doctors are men. To get in to see them, it helps to be a peppy, attractive young woman. The overprescription of drugs often correlates with this sexual dynamic. Doctors buy more and prescribe more to please ex-cheerleaders than they do for salesmen who look like themselves. Hence the saying goes that you’ll never meet an ugly drug rep. . . .” (Broughton, Art of the Sale, pp. 94-95.)

· On May 31, 2013, the Wall Street Journal ran an article headline “In Real Estate, Looks Can Sell.” The focus of the article was on a study published by university researchers in May 2012 in Applied Financial Economics. The researchers asked 402 people to rate the attractiveness of a several male and female real estate agents based on their online headshots from 1 – 10, with 10 being the highest. The researchers then examined the seven-year sales record of the agents. The result: the average list price of the homes handled by attractive real estate agents was $20,275 more than the list price of the average looking agent. The average actual sale price of the homes handled by attractive agents was $15,622 more than the sale price obtained by average-looking agents. The bottom line, said one of the researchers: “All else being equal, we give attractive people a little bump.” If you own a real estate agent, do you favor an attractive candidate over a plain-looking one? Before you answer, consider this from the same study. The researchers found that attractive agents made more money per transaction. But they also carried 17 fewer listings of home for sale and made 11 fewer actual home sales than their plain-looking counterparts. What that means according to one researcher is that beautiful people were using their looks to supplement or compensate for other productive characteristics.

· The following comes from an August 27, 2011 column by Prof. Daniel Hammersmesh from the University of Texas at Austin: “In addition to whatever personal pleasure it gives you, being attractive also helps you earn more money, find a higher-earning spouse (and one who looks better, too!) and get better deals on mortgages. Each of these facts has been demonstrated over the past 20 years by many economists and other researchers. The effects are not small: one study showed that an American worker who was among the bottom one-seventh in looks, as assessed by randomly chosen observers, earned 10 to 15 percent less per year than a similar worker whose looks were assessed in the top one-third — a lifetime difference, in a typical case, of about $230,000. [¶] “Beauty is as much an issue for men as for women. While extensive research shows that women’s looks have bigger impacts in the market for mates, another large group of studies demonstrates that men’s looks have bigger impacts on the job. [¶] “Why this disparate treatment of looks in so many areas of life? It’s a matter of simple prejudice. Most of us, regardless of our professed attitudes, prefer as customers to buy from better-looking salespeople . . . . This is not a matter of evil employers’ refusing to hire the ugly: in our roles as workers, customers and potential lovers we are all responsible for these effects.

· What about CEOs? The bottom line conclusion of the authors of a November 2013 study is that good-looking CEO’s have a positive effect on a publicly traded company’s stock price. Good-looking CEO’s create shareholder value by being better negotiators for their companies and by creating higher stock returns on days they appear on television. In a January 3, 2014 online article on msnbc.com, the study authors were quoted as saying: "Our results do not suggest that, when searching for CEOs, firms should only look at appearance without considering other abilities," they wrote in an email to CNBC. "On the other hand, for firms that rely more on the negotiation and visibility aspects, maybe they should place more weight on appearance when searching for CEOs."

· We learned about stakeholders, defining what they are and examples of stakeholders and the difference between primary and secondary stakeholders. Book defines a “stake” as “an interest or share in some effort or undertaking.” A stakeholder in business, then, is anyone who holds an interest in the business in some way. We identified stakeholders that a business has and those that may be affected by Stan’s decision about whether to disclose the information he has about Mike. The text addresses the difference between primary and secondary stakeholders. According to the text at p. 356, the primary stakeholders in a business are those with whom the business has a formal relationship: customers, employees, shareholders, or owners, suppliers or, perhaps, government. The secondary stakeholders comprise those to whom the business may have obligations but not formal ones. The community may be secondary stakeholder.

· To say that a company has a stakeholder orientation is to say that the interests of others with an interest in the company’s business are as important or more important than the interest of the shareholders who own stock in company. In a January 15, 2010 essay in the WSJ entitled “Bank Bonuses and the Communitarian Spirit,” Klaus Schwab, founder of the World Economic Forum in Switzerland and the man who developed stakeholder theory, put it this way. The stakeholder approach, he said, “considers the enterprise as a community with a number of stakeholders – in other words, social groups that are directly and indirectly connected to the enterprise and that are dependent on its success and prosperity. These groups include employees, customers, suppliers, the state and especially the society in which enterprise is active. [¶] According to the stakeholder approach, the top management of the enterprise acts as a trustee for all stakeholders—and not just the trustee of the shareholders. It is based on the principle that each individual is embedded in societal communities in which the common good can only be promoted through the interaction of all participants.” (WSJ 1/15/10, p. A19.) Mr. Schwab attributes the banking crisis to the rise of more profit-centered behavior at odds with the stakeholder approach that he advocates. “In the last few years, the business enterprise has been transformed from a purposeful unit to a purely functional unit. The purpose of an enterprise—to create goods and services for the common good—has been replaced by a purely functional enterprise philosophy aimed at maximizing profits in the shortest time possible. But if management decision-making processes are decoupled from the responsibility of managers for their own risk-taking, then the entrepreneurial system is being perverted.”

· To say that a company has a shareholder orientation is to say that the interest of the shareholders or stockholders clearly come first in running the company, which means the focus is on making money or maximizing shareholder value. . As one scholar put it, those with a shareholder orientation believe that “the objective if the firm is shareholder wealth maximization. This objective is reflected in corporate law, according to which officers and directors of corporations are agents of the corporation and have the duty to operate the corporation in the interests of the shareholders.” (Boatright, J. Finance Ethics in “Companion to Business Ethics” p. 159.) “[T]he responsibility for upholding ethical standards . . . belong[s] ultimately to the government, not to corporate managers. The main argument for this position is that corporate managers have neither the right nor the ability to pursue multiple, nonfinancial goals.”

· It is important to understand that no company focuses exclusively on the interests of shareholders without regard to other stakeholders or, on the other hand, focuses exclusively on the interests of stakeholders other than shareholders. The differences are found in the emphasis companies place on the interests of stakeholders in making ethically significant decisions. Still, there are those who firmly reject the idea that all stakeholders have some kind of right to influence corporate decisions. Consider a letter to the editor of the Wall Street Journal published on January 21, 2010 in response to Mr. Schwab’s essay on stakeholder theory, one writer wrote: “The more that the management of a corporation acts at the expense of the shareholders, the more likely the corporation will not survive. In that case the interests of neither the shareholders nor any other ‘stakeholders’ will continue to be served at all. [¶] It seems hardly coincidental that those who seek to undermine the primacy of the shareholder utilize the term ‘stakeholder,’ as though to suggest by its similarity to ‘shareholder,’ that the two terms are roughly the same substantively. They are not.”

· Who do you think has the better argument, Mr. Schwab or the letter writer?

· “Benefit corporations” are for-profit corporations where, in running the business, the directors and officers are required to place social and environmental objectives at least at the same level with the interests of investors.

· On January 19, 2012, the Wall Street Journal ran an article entitled “With New Law, Profits Take a Back Seat” about what are called “benefit corporations” where the interests of the shareholders need not be the primary focus of how the corporation is run. In fact, under California’s benefit corporation law, which took effect on January 1, 2012, the corporation must be run to produce “a material positive impact on society and the environment. . .” Directors and officers of such corporations must consider, in addition to the shareholders of the corporation, community and societal considerations and the local and global environment.” “The legal structure is intended to shield the board from investor lawsuits. That anything other than maximizing shareholder value should be considered in a company’s decision-making normally can open the door to investor suits.” (B1.) Seven states now allow such benefit corporations, with New York’s law becoming effective just yesterday, February 10, 2012. California’s law allowing such corporations went into effect on January 1, 2012. (You don’t need to know this, but FYI the other states are Maryland (first to allow them in October 2010), Vermont, New Jersey, Virginia, and Hawaii. States currently considering such a law are Colorado, North Carolina, Pennsylvania, and Michigan.)

· Outdoor apparel company Patagonia incorporated under the new structure in California this month. Patagonia, according to the article, “places high priority on sustainable and renewable production methods. . . .” “We’re trying to preserve for the long-term the way our company is run,” said Casey Sheahan, CEO of the company with $500 million in annual revenue. “In Mr. Sheahan’s view, traditional corporate structures don’t encourage boards of for profit companies to sacrifice shareholder value for a public good.” Would you invest in a benefit corporation? Consider the following from a corporate governance professor at the University of Delaware quoted in the WSJ article. He called the benefit corporation “a terrible idea” for investors since “id management makes a bad decision, there’s very little you can do about it as a shareholder” since your interests do not have to come first in how the corporation is managed.

· I illustrated the difference between the stakeholder and shareholder approaches by reading from the play “Other People’s Money,” in which New England Wire and Cable Company Chairman Andrew Jorgenson and Larry “the Liquidator” Garfinkle both addressed the 73rd annual meeting of the company’s shareholders. The shareholders were voting on whether to keep the existing members of the Board, who wanted to keep the firm in business, or instead replace them with a competing slate of directors offered by Garfinkle who vowed to dismantle the company and sell off its assets.

· The stakeholder approach is represented in the following excerpt from Jorgensen’s speech: “[O]ne day this industry will turn. . . And [then] we will be stronger for having survived. And the price of our stock will make his offer pale by comparison. God save us if you vote to take [Garfinkle’s] paltry few dollars and run. . . . [I]f we have come to the point in this country where we kill something because at the moment it’s worth more dead than alive, then turn around and take a good look at your neighbor. You won’t kill him because it’s called ‘murder’ and it’s illegal. This, too, is murder, on a mass scale, only on Wall Street they call it ‘maximizing shareholder values’ and they call it legal and they substitute dollar bills where their conscience should be. Damn it. A business is more than the price of its stock. It is the place where we make our living, meet our friends and dream our dreams. It is, in every sense, the very fabric that binds our society together. So let us, right now, at this meeting, say to every Garfinkle in this land, that here we build things – we don’t destroy them. Here, we care for more than the price of our stock. Here we care about people!”

· The shareholder approach is represented by the following except from Garfinkle’s speech: “You invested in a business. And that business is dead. Let’s have the intelligence, let’s have the decency, to sign the death certificate, collect the insurance and invest the money in something with a future. Aha—But we can’t, goes the prayer—we can’t because we have a responsibility—a responsibility to our employees, our community…What will happen to them? I got two words for that—“Who cares?” Care about them? They didn’t care about you. They sucked you dry. You have no responsibility to them. For the last ten years this company has bled your money. Did this Community care? Did they ever say, “I know things are tough. We’ll lower your taxes, reduce water and sewer?” Check it out. We’re paying twice what we paid ten years ago. And the mayor is making twice what he made ten years ago. And our devoted employees, after taking no increases for three years, are still making twice what they made ten years ago. And our stock is one-sixth what it was ten years ago. Who cares? I’ll tell you—me! I’m not your best friend—I’m your only friend. I care about you in the only way that matters in business. I don’t make anything? I’m making you money. And, lest we forget, that’s the only reason any of you became stockholders in the first place. To make money. You don’t care if they manufacture wire and cable, fry chicken, or grow tangerines. You want to make money. I’m making you money. I’m the only friend you got. Take the money. Invest it somewhere else. Maybe—maybe you’ll get lucky and it will be used productively—and if it is—you’ll create more jobs and provide a service for the economy and—God forbid—even make a few bucks for yourself. Let the Government and the Mayor and the unions worry about what you paid them to worry about. And if anyone asks, tell them you gave at the plant.”

· As you review the ethical decision-making rules in Video Block number 3 (Objectivism, the Ethic of Care, and Integrative Social Contracts Theory), consider which theory must closely matches Mr. Jorgensen’s view and which most closely matches Mr. Garfinkle’s view.

· Individual members of the class discussed how they would have voted their shares and their ethical reasoning for their vote. Who do you see yourself most like, Jorgensen or Garfinkle and why?

· We voted on whether the hiring decision was ethically black and white or whether it was gray.

PART 3: HANG TEN

· We discussed theoretical methods of ethical decision-making in business. The skit for this segment was “Hang Ten,” involving Vandelay’s Surfing Gear subsidiary. Marcie Stevens, Division President of Vandelay’s Surfing Gear Division, visits Chief Product Development Manager Luke Woods in his office for a closed-door meeting. She praises Luke on his attitude and his department’s innovative design work, but tells him the production crew has not been up to the challenge. Marcie says the company is considering outsourcing production abroad to address the problem. The decision, though, has not yet been made. Don Phillips, head of the production crew, knocks on the door to confirm the poker game with Luke later that week. He uses the game to get his mind off his ailing child. Marcie tells Luke that she had forgotten that he and Don were friends. She tells him she doesn’t want to say anything to the guys in production because it would make the problems worse. Luke says nothing in response. Marcie gets a message on her palm device and leaves. Luke gets a call from Don, who apologizes for interrupting the meeting. He says it seemed the two of them were discussing something serious. Don then asks Luke whether he and Marcie were discussing anything about which he should be informed.

· We discussed two ethical theories. Consequentialist theories that focus on the consequences of the action. The consequentialist theory on which we focused was utilitarianism and what that meant. Applied the theory to Luke’s dilemma, including identifying the stakeholders with interests in the decision.

· Discussed deontological, or duty-based theories. One such theory comes from Rawls. (Another comes from Kant, but you are not responsible for understanding Kant’s categorical imperative.) Rawls’ theory focuses on whose interests and places what ethical value above others? How does Dr. Ryan explain that the text gets Rawls wrong? (Veil of ignorance not used in each decision; used to justify principle. Why does it make sense to focus on the least advantaged as a governing principle if you develop that governing principle behind the veil of ignorance, not knowing where you would come out?) Book still gets it wrong at p. 45, even though Dr. Ryan consulted with the author in revising the text, by saying: “So, following Rawls, if a business needs to downsize, what kind of process would the group of imaginary people behind the veil of ignorance devise for deciding whom to lay off and when to tell employees.” This still incorrectly brings the veil of ignorance into the decision-making process, which is not how Rawls used it. Anyway, how does Rawls’ theory properly understood, apply to Luke’s decision? (Dr. Ryan is working with the author to get this corrected in future printings of this edition.)

· This is how Harvard Prof. Michael Sandel describes the difference principle in Rawls’ theory: “[O]nly those social and economic inequalities are permitted that work to the benefit of the least advantaged.” How does that work in practice? Anybody ever heard of microfinance? Giving small sums to borrowers too poor to borrow from traditional banks so that they may start businesses of their own. Very popular in underdeveloped countries like Bangladesh. Given that their customers are poor, is it acceptable for microfinance lenders to seek to earn a profit?

· Marcie CEO pay may be justified by Rawls, even if multiple of production worker. But there may be a limit. May 27, 2014 AP Story. NEW YORK (AP) — They're the $10 million men and women. Propelled by a soaring stock market, the median pay package for a CEO rose above eight figures for the first time last year. The head of a typical large public company earned a record $10.5 million, an increase of 8.8 percent from $9.6 million in 2012, according to an Associated Press/Equilar pay study.

· Last year was the fourth straight that CEO compensation rose following a decline during the Great Recession. The median CEO pay package climbed more than 50 percent over that stretch. A chief executive now makes about 257 times the average worker's salary, up sharply from 181 times in 2009.

Over the last several years, companies' boards of directors have tweaked executive compensation to answer critics' calls for CEO pay to be more attuned to performance. They've cut back on stock options and cash bonuses, which were criticized for rewarding executives even when a company did poorly. Boards of directors have placed more emphasis on paying CEOs in stock instead of cash and stock options.

The change became a boon for CEOs last year because of a surge in stocks that drove the Standard & Poor's 500 index up 30 percent. The stock component of pay packages rose 17 percent to $4.5 million.

· CEO pay remains a divisive issue in the U.S. Large investors and boards of directors argue that they need to offer big pay packages to attract talented men and women who can run multibillion-dollar businesses. "If you have a good CEO at a company, the wealth he might generate for shareholders could be in the billions," says Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank. "It might be worth paying these guys millions for doing this type of work."

· How would Rawls apply to Luke’s dilemma? Remember the difference in advantage between Luke and Don is not money, but information in this instance.

· We voted on whether Luke’s decision was ethically clear or unclear and discussed why.

PART 4: TO MAKE A DEAL

· Addressed the ethics of making your numbers, a context full of ethical challenges and one you will all face, if you haven’t already.

· The U.S. Bureau of Labor Statistics says that one in nine Americans works in sales. But a book published in December 2012 called “To Sell is Human: The Surprising Truth about Moving Others” says that actually, if you’ve ever had a job of any kind, you’ve probably done sales in one form whether you realize it or not. The author commissioner a survey of 7,000 adult full-time workers and asked a particularly pointed question: "What percentage of your work involves convincing or persuading people to give up something they value for something you can offer?" The offering might be money or goods, but it could also be intangibles such as attention or time. Pink found that the mean for all workers -- no matter what their jobs -- was that 41% of their time was spent in a "sales-like" mode. "That is a lot of time. That is 24 minutes of every hour," Pink noted. "That is the punchline: Like it or not, we are all in sales now. We spend a huge part of our jobs persuading and selling."

· The author of “The Art of the Sale” argued that sales should be the very starting point of a business education. Why? This is what the author says toward the end of the book: “It is from sales that everything follows: how you make money, how you treat people, how you wish to grow. Every ethical question a businessperson could face comes down to a question you confront on your very first sale: What are you willing to do for a buck?” (Broughton, Art of the Sale, p. 265.) To that I would add the implied negative of that question which sets your ethical boundaries: What are you not willing to do for a buck? Remember the observation of Mr. Kapucinski, the Polish journalist I quoted at the beginning of the class: “Money changes all the iron rules into rubber bands.”

· Skit: Julie, a seasoned salesperson at Vandelay’s electronics division, was telling a junior colleague how she consistently made her numbers selling televisions, particularly high-end televisions. She said that she sizes the customer up and sells him or her a television somewhat more expensive than the customer can probably afford. It’s the American dream and it’s none of her business whether the customer ultimately is able to make payments. The conversation was overheard by Tan Nguyen, a regional finance official from the company. The skit ends with Tan introducing herself to Julie. The ethical question was whether Tan should praise or criticize Julie for her sales tactics.

· We focused on Robert Nozick’s rights theory. That theory defines a decision as ethical if it is not accompanied by fraud or force. A libertarian theory, the government’s regulatory role is limited to that of a “night watchman.” How did that theory apply to the scenario? How does those who follow that theory generally feel about the federal organizational sentencing guidelines and why?

· Thomas Carson, identified four minimal moral duties that govern the ethics of sales: (1) sales people should warn customers of the dangers of the goods and services sold of which the average, reasonable customer is unaware; (2) sales people should refrain from lying and deception; (3) within reasonable time constraints, sales people should answer customer’s questions about what they are selling, even if makes it less likely a deal will close, though they have no obligation to answer questions about competing goods or services; (4) sales people should not try to persuade customers to buy goods and services that may be harm them physically or financially or that customers will come to regret. We discussed how these principles apply to Julie’s sales methods. Do you believe that Carson’s principles put too many limits on legitimate sales practices? What about comments by class members that customers are responsible for knowing their own budget and for declining a purchase that is beyond their means?

· [The following is another illustration of Nozick which we did not address in class, but that should give you a deeper understanding of the theory in action.] Consider the case of Kansas City, Missouri woman Linda Robertson who was $23,000 in debt and sought help from a company named Financial Freedom of America, according to a June 19, 2010 NY Times article. The company’s pitch was “We negotiate the past while you navigate the future. The company required her to put $427.93 into a new account. The company told her it would take $100/month as a fee, but that in three years she would be debt free. Ms. Robertson made 9 payments, but a sheriff arrived on behalf one of her creditors. When she called the company, Robertson was told she didn’t have enough to pay that creditor. She filed bankruptcy when a credit company sued her. She was angry and demanded her money back from Financial Freedom and claimed the company ripped her off. The company chief executive Corey Butcher rejected that. Listen to what he told the NY Times reporter: “We talked to her multiple times and verified the full details,” he said, adding that his company puts every client through a verification process to validate that they understand the risks — from lawsuits to garnished wages. Intense and brooding, Mr. Butcher speaks of a personal mission to extricate consumers from credit card debt. But roughly half his customers fail to complete the program, he complained, with most of the cancellations coming within the first six months. He pinned the low completion rate on the same lack of discipline that has fostered many American ailments, from obesity to the foreclosure crisis. “It comes from a lack of commitment,” Mr. Butcher said. “It’s like going and hiring a personal trainer at a health club. Some people act like they have lost the weight already, when actually they have to go to the gym three days a week, use the treadmill, cut back on their eating. They have to stick with it. At some point, the client has to take responsibility for their circumstance.”

· Do you agree? How does Mr. Butcher’s view reflect Nozick? Is it consistent with Carson?

· The text puts the same idea in the context of goals. Setting goals and giving rewards when they are attained is both good and bad. People will do what they are rewarded to do. Goals focus attention on the task at hand? But what is the bad in a task goal? “[I]ntense focus on attainment of a task goal can distract people from other goals, such as ethical goals.” (Text, p. 261).

· Zimbardo prison experiment, discussed at 273-274, is a fascinating example of deindividuation, i.e., the importance of role in shaping ethical behavior. In this experiment, people played roles of prisoners and guards. As I discussed in reviewing the test, here is how dramatically that experiment worked. Prior to the start of the experiment, a Guard designated “Guard A” wrote in his diary: “As I am a pacifist and nonaggressive individual I cannot see a time when I might . . . maltreat other living things.” At the end of the fifth day of the experiment, Guard A wrote in his diary: “I harass [a prisoner nicknamed] ‘Sarge’ who continues to stubbornly overrespond to all commands. I have singled him out for special abuse both because he begs for it and because I simply don’t like him. The real trouble starts at dinner. The new prisoner (416) refuses to eat his sausage. That is a violation of Rule Two: ‘Prisoners must eat at mealtimes,’ and we are not going to have any of that kind of shit. . . . Obviously we have a troublemaker on our hands. If that’s the way he wants it, that’s the way he gets it. We throw him into the Hole ordering him to hold greasy sausages in each hand. After an hour, he still refuses. . . . I decide to force-feed him, but he won’t eat. I let the food slide down his face. I didn’t believe it was me doing it. I hated myself for making him eat but I hated him more for not eating.” The 6th day, the organizers pulled the plug on the experiment; it had been planned to last two weeks.

· Professor Zimbardo closed a lengthy essay about the experiment published in the New York Times Sunday magazine on April 8, 1973 with the following question: “To what extent do we allow ourselves to become imprisoned by docilely accepting the roles others assign us or, indeed, choose to remain prisoners [of our roles] because being passive and dependent frees us from the need to act and be responsible for our actions?”]

· Under Nozick’s theory, the government serves a minimal role of night watchman. Are the federal organizational sentencing guidelines consistent with that idea of a minimal role or inconsistent with them?

· What is culpability? (Guilt or blameworthiness.)

· While we did not discuss the guidelines in class in any great depth, the text addresses the federal sentencing guidelines for organizations and the effect they have on corporate behavior even before the government makes an accusation of any crime. We discussed the concept of “culpability.” The guidelines use a carrot and stick approach to influencing organizational behavior. What kind of actions do the guidelines encourage? What kind of actions do the guidelines discourage? (You are not responsible for knowing the point system, but you are responsible for knowing the general principles of the guidelines.)

· We voted and discussed whether Tan should praise or criticize Julie for her sales methods. The overwhelming majority of the class believed that Julie should be praised, or at least not criticized.

PART 5: WRAP UP

· Closed this first part of the class, which was focused on business ethics, the individual, and the company. Briefly previewed second half of the course focused on business ethics, the individual, and the broader community.

· CONSIDER THE FOLLOWING QUOTE from from Oliver Wendell Holmes, Sr., the father of the great Supreme Court Justice: “A mind once stretched to a new idea never regains its original dimensions.”

CONCEPTS YOU SHOULD BE ABLE TO EXPLAIN AND APPLY AFTER CLASS 1

· Albert Einstein, Ryszard Kapucinski, and ethics

· Ethical relativism versus ethical idealism

· Parable of the jaywalker

· Discrimination as an ethical issue

· Primary stakeholder

· Secondary stakeholder

· Stakeholder orientation versus shareholder orientation.

· Definition of an ethical issue

· Three stages of ethical decision-making

· Euphemistic language

· Consequentialism

· Utilitarianism

· Deontology

· Rawls’ theory of justice

· Nozick’s rights theory

· Benefit corporations

· To whom most people look for guidance in ethical decision-making

· Ethics and organizational culture

· Overlap between ethics and law

· Importance of identifying issues as ethical

· Triggers to recognition of need to apply moral judgment to a decision

· Kohlberg theory of ethical decision-making levels and stages [though focus on generally understanding what is reflected at each level rather than the details of each stage]

· Locus of control

· Ego strength

· Desire of Moral Approbation Scale

· Milgram experiment

· Relation of Milgram experiment to locus of control and ego strength

· Cognitive barriers to good ethical judgment

· Confirmation trap

· Illusion of control

· Illusion of optimism

· Escalation of commitment

· Illusion of superiority.

· Thomas Carson’s four minimal moral duties that govern the ethics of sales.

· The diffusion of responsibility

· Deindividuation

· The Zimbardo prison experiment

· The Pygmalion effect

· The limits of rewarding ethical behavior in an organizational setting

· The federal organizational sentencing guidelines

· What a culpability score is and what it is designed to capture. (Note: You are not responsible for knowing how much certain items raise or reduce the culpability score.)