MGMT 320 Final with TOD

Ethics

is a conception of right and wrong conduct. It tells us whether our behavior is moral or immoral and deals with fundamental human relationships—how we think and interact with others and how we want them to think and behave toward us.

Ethical principles

are guides to moral behavior.

- For example, in most societies lying, stealing, deceiving, and harming others are considered to be unethical and immoral.

Ethical relativism:

is the idea that there are no fixed, static ethical rules, but that ethics rules depend upon the time, place, and other circumstances.

- "When in Rome do as the Romans

- "What happens in Vegas, stays in Vegas"

- EX: Child labor in another country might be seen differently than how it is seen int eh US, or how COVID vaccines were distributed among the people during the pandemic varied by state

Laws

are society's formal written rules about what constitutes right and wrong conduct in various spheres of life.

- For example, hydraulic fracturing in oil drilling operations is legal in many communities, but some argue it is unethical due to its potential for destroying the environment.

Business Ethics

is the application of general ethical ideas to business behavior.

Theory of amorality

is the belief that business should be conducted without reference to the full range or ethical standards, restraints and ideals in society.

The Conventionist Ethic

Business is a game, where special, lower ethics are permissible.

- Ex: Jello Shots Examples in Class

- Parent told teen that he can't drink, so instead the teen ate the jello shots

- simialr to this if businesses follow the conventionist ethic, they are free to act in their best interest, even in morally questionable ways, provided they do not violate the law.

-EX2: Backpage website (s=pimps making offers for sex trafficking)

The Theory of Moral Unity

holds that businesses should be judged by the same moral/ethical considerations that apply throughout society.

Practical reasons

refer to strategic and economic arguments that will help an organization meet its business objectives.

1) People argue that ethics enhances the firm's performance, or simply: ethics pays.

2) Doing business ethically is often a legal requirement.

3) Meet Demands of Business Stakeholders

- Organizational stakeholders expect that companies will exhibit high levels of social responsibility. If employees view their company as ethical, they likely take greater pride in working there, have higher overall work satisfaction

Two Ethical legal requirements

1) U.S. Corporate Sentencing Guidelines

2) Sarbanes-Oxley Act of 2002

What are U.S. Corporate Sentencing Guidelines

provide a strong incentive for businesses to promote ethics at work. The sentencing guidelines come into play when an employee of a firm has been found guilty of criminal wrongdoing and the firm is facing sentencing for the criminal act, since the firm is responsible for the actions taken by its employees

- it's like an insurance policy against a rogue employee..

How Judge computes culpability score based on U.S Corporate Sentencing Guidelines

1) Established standards and procedures to reduce criminal conduct.

2) Assigned high-level officer(s) responsibility for compliance.

3) Not assigned discretionary authority to "risky" individuals.

4) Effectively communicated standards and procedures through training.

5) Taken reasonable steps to ensure compliance—monitor and audit systems, maintain and publicize the reporting system.

6) Enforced standards and procedures through disciplinary mechanisms.

7) Following detection of the offense, responded appropriately and prevented reoccurrence.

Sarbanes-Oxley Act of 2002

often referred to as SOX). Created after the .COM era financial Crisis

1) Requires the lead audit partner from accounting firms to rotate every 5 years

2) Creates a 5-person Public Company Accounting Oversight Board (Audits the auditors)

3) Holds management responsible for accurate financial reports. (Requires CEO and CFO to sign and certify the accuracy of quarterly and annual financial reports

4) Strengthens the power and responsibility of Board audit committees (protecting whistleblowers)

5) Establishes heavy criminal penalties for violations of the Act.

6)Audit firms are prohibited from doing consulting work for corporations while also auditing their books.

- law seeks to ensure that firms maintain high ethical standards in how they conduct and monitor business operations.

- For example, it requires executives to vouch for the accuracy of a firm's financial reports and requires them to pay back bonuses based on earnings that are later proved fraudulent, called claw back.

Normative reasons for being ethical

refer to arguments based on philosophical theories about what is right or wrong.

1) To prevent harm to the general public and the corporation's many stakeholders.

2) Promote Personal Morality

- Most people want to act in ways that are consistent with their own sense of right and wrong.

Why Ethical Problems Occur in Business

1) Personal Gain and selfish Interest

2) Competitive Pressures on profits

3) Conflicts of interest

4) Cross-cultural contradictions

Ethical Egoist/Self-Interest

a manager or employee who puts his or her own self-interest above all other considerations

- self-interest is the engine of our success, individually and collectively - but left unchecked, it may lead us to ruin.

Competitive Pressure

When companies are squeezed for profits (or simply want more), they sometimes engage in unethical behavior.

Ex; Well Fargo Case

conflict of interest

occurs when an individual's self-interest conflicts with acting in the best interest of another, when the individual has an obligation to do so

Cross-Cultural Contradictions

Some of the knottiest ethical problems occur as corporations do business in other societies where ethical standards differ from those at home

Ex: Nike child labor case in class is a good example of this

ex2: During the 1994 World Cup, bottles of Heineken beer displayed the flags of all the participants in soccer's biggest tourn ament, including Saudi Arabia.

The Quran forbids the use of alcohol, so Muslims registered complaints.

Managers' Values

Managers are key to whether a company and its employees will act ethically or unethically.

- The values held by managers, especially the top-level managers, serve as models for others who work at the company.

Spirituality

a personal belief in a supreme being, religious organization, or the power of nature or some other external, life-guiding force

- scholars have found a positive relationship between an organization's economic performance and attention to spiritual values.

Managers' Moral Development

managers in a company are likely to be at various stages of moral development. Some will reason at a high level, others at a lower level.

CASE: The former head of Make-A-Wish Foundation's Iowa chapter

Jennifer Woodley, was arrested on multiple felony charges for allegedly embezzling tens of thousands of dollars from the charity that helps fulfill the wishes of critically ill children. Woodley started secretly paying herself a bonus in October 2019. She then continued to abuse her authority by making 84 unauthorized purchases for personal items on the organization's credit card.20 This story illustrates that even charitable foundations are not immune from unethical behavior by ethical egoists in their management ranks.

CASE: The Securities and Exchange Commission

charged former Goldman Sachs executive, Tim Leissner, in 2019 for his involvement in a corruption scheme. Leissner had bribed government officials to obtain lucrative contracts for the company, in direct violation of the Foreign Corrupt Practices Act (discussed in Chapter 6). In his role as a managing director, Mr. Leissner used a third party to bribe Malaysian and Emirate of Abu Dhabi government officials to secure business from Malaysia Development Berhad, an economic development company controlled by Malaysia's finance minister. The bribery scheme included $43 million in personal payments to Leissner. He consented to the SEC's order and was permanently barred from the securities industry.

Kohlberg's 6 Stages of Moral Development and Ethical Reasoning

Stage 1: To avoid punishment.

- Childhood

Stage 2. To satisfy self-centered needs and elicit a positive external response.

- Adolescence youth

Stage 3. To conform to the group interest to please others in the group.

- Early adulthood adolescence

Stage 4. To accept legal restrictions as being in the best interest of society.

- Adulthood

Stage 5. To accept legal restrictions balanced with individual rights as being in the best interests of society and the individual.

- Mature Adulthood

Stage 6: To find satisfaction in being ethical and moral for personal reasons.

- Mature Adulthood

- (Stages 4, 5, and 6 are Ideal)

Four Methods of Ethical Reasoning

1) Virtues

2) Utilitarian

3) Rights

4) Justice

Application of Utilitarianism includes

1) Knowing who will be affected

2) As assessment of the positive/negative impact on these people, by cost-benefit analysis

3) A choice to pursue the greatest good, for the greatest number.

Virtue Ethics

first ethical theory bases on values and personal character

- focuses on character traits that a good person should possess, theorizing that moral values will direct the person toward good behavior.

- it aligns with good character

- Subjective or incomplete set of good virtues

Utilitarian Ethics

overall amount of good that can be produced by an action or a decision. This ethical approach is called utilitarian reasoning. It is often referred to as cost–benefit analysis because it compares the costs and benefits of a decision, a policy, or an action,

- produces the greatest good for the greatest number of people in society.

- Net benefits exceed net costs

- Difficult to measure some human and social costs; majority may disregard rights of the minority

- could justify violation of basic human rights in the service of the greater good

CASE: Ford Pinto

The Ford Pinto - CASE (ex: of Cost-Benefit Analysis).

✱ Huge gas price changes

↳ Wanted the car to weigh less than 2000 lbs (very light) to make it more fuel efficient

↳ Pushed car into production & took shortcuts, placed gas tanks above the axle

for cars exploding on people (bc car design was flawed).

✱ Ford had a choice: (1) Do we recall the cars & fix them, or (2) do we keep swallowing all the lawsuits from people getting hurt from the car

- ultimatly they found out that the cost of settling for the laws suits was cheaper and they kept doing that

Human Rights Ethics

Respecting entitlements

- means that a person or group is entitled to something or is entitled to be treated in a certain way,

- basic human rights are respected

- difficult to balance conflicting rights

CASE: on Diplomats and Immunity in New York

New Yorkers hated this: Diplomats' Immunity Leaves Bitter Taste in Mouths of Ticket Payers. Rules applied to all the cars in New York... except those with diplomatic plates.

So, some social scientists wondered:

Was there a correlation between the countries whose diplomats got a lot of parking tickets (but didn't have to pay) and the level of corruption in those countries (often measured, using several criteria)?

- the answer is YES

Justice

Distributing fair shares

- Benefits and cost are fairly distributed

- Difficult to measure benefits and costs; lack of agreement on fair shares

Basic Human Rights

1) rights to life,

2) safety,

3) free speech, 4)freedom,

5) being informed,

6) due process, 7) and property,

Moral intensity Analysis

refers to a person's perception of how morally severe an ethical issue is.

1) Magnitude of consequences

2) Proximity

3) Social Consensus

4) Probability something bad happening

5) Temporal Immediacy

CASE: Upper Big Branch Mine

Wanted to produce as much coal as they possibly could↳ Explosion happened due to auditing problem

Cause of the Explosion:

Investigations later showed that:

There was a

- build-up of methane gas and coal dust

- Ventilation systems were faulty

- Safety systems were bypassed,

- chronic safety violations (over 500 citations

Root Cause Analysis (RCA)

when a business has ethics problems it employs "root cause analysis"

- Five whys (or 5 whys) is an iterative interrogative technique used to explore the cause-and-effect relationships underlying a particular problem.

- The 5 Why's

- stripping things away until you get to the root cause of the problem

CASE: NFL and Root Cause analysis

The NFL faced a serious problem:

Many retired football players were dying young.

These players had significant brain damage, specifically CTE (Chronic Traumatic Encephalopathy).

CTE can cause erratic behavior, poor decision-making, and alcohol abuse.

It is linked to repeated concussions, especially those occurring in close proximity.

Many individuals diagnosed with CTE had played football.

- Aaron Hernandez a former football player was charged with murder.

His case highlighted the long-term effects of concussions in the NFL.

He was sentenced to life in prison and died by suicide in 2017.

It’s believed he killed multiple people during this time.

CTE is only diagnosable through an autopsy.

Doctors said Hernandez’s brain was severely damaged and had holes due to concussions.

He was just 27, and his case was one of the worst seen at that age.

Experts believe CTE may have contributed to both the murder and suicide.

📉 Impact and Response

In 2016, the NFL acknowledged the link between football-related concussions and CTE.

As a result, the number of kids playing tackle football dropped significantly across the U.S.

🛠️ Using Root Cause Analysis

To address and solve the problem of CTE in football, the NFL began applying Root Cause Analysis, such as the "5 Whys"

The NFL changed the rules for kickoffs, where players were more likely to suffer concussions.

This led to a 35% decline in concussion rates.

Proximity

refers to the social, physical, and psychological distance decision makers perceive themselves to have from those affected by the decision.

Social consensus

refers to the degree of social agreement that a proposed act is either acceptable or unacceptable.

Moral intensity

is also influenced by the probability that a decision maker's action will lead to the consequences predicted.

Temporal immediacy

refers to the length of time that the predicted consequences will occur from the present moment of the decision.

CASE: In early April 2020 the Trump administration and N95 masks for COVID

issued a presidential order directing the Federal Emergency Management Agency (FEMA) to use its authority under the Defense Production Act to acquire from 3M and its subsidiaries as many N95 respirators as it determined appropriate.

○ The Secretary of Health and Human Services, through the Administrator of the Federal Emergency Management Agency (Administrator), shall use any and all authority available under the [Defense Production] Act to acquire, from any appropriate subsidiary or affiliate of 3M Company, the number of N-95

○ Administration to ask 3M to direct its N95 respirators first to U.S. customers

CASE: Strategic Defaults

homeowners walking away from their homes, when they have lost value over time & owe more than what it is currently worth.

Well Fargo Case

September 20, 2016, hearing, the Senate Banking Committee relentlessly grilled John Stumpf, chairman and CEO of Wells Fargo, about charges that the bank had fraudulently opened unauthorized accounts for millions of customers.

CASE: Microsoft, senior manager Brian Jorgenson and Stocks

Brian Jorgenson, a former senior manager at Microsoft, was charged with insider trading after sharing confidential financial information with a friend, Sean Stokke, to profit from stock trades. Over 18 months, Jorgenson provided nonpublic Microsoft data three times, enabling his friend to make around $400,000, while Jorgenson received about $40,000. They intended to use the earnings to start a hedge fund

CASE: Ethics and KPMG

KPMG, one of the largest U.S. accounting firms, agreed to pay $50 million in 2019 to settle Securities and Exchange Commission allegations that former employees obtained an unlawful sneak peek at regulators' plans to inspect its work and that its auditors had cheated on internal training exams.

CASE: UBS, Financial Ethics

Following a crackdown on tax evasion in France, French judges ordered UBS, a Swiss multinational investment bank and financial services company, to pay a record €3.7 billion fine ($4.2 billion) for conducting a long-running scheme to help French clients hide huge sums of money from government tax authorities. A decade earlier, UBS paid a $780 million fine in the United States for similar charges

CASE JP MORGAN AND CHACE

JPMorgan Chase agreed to pay $920 million and admitted misconduct tied to manipulation of precious metals and Treasury markets in 2020

Regulation Best Interest rule

aimed at giving investors more information about brokers' complex pay incentives and other potential conflicts of interest that can influence their clients.

CASE Federal Trade Commission and Google

Federal Trade Commission and the New York Attorney General announced that Google, and its subsidiary YouTube, would pay $170 million to settle allegations that the YouTube video-sharing service illegally collected personal information from children without their parents' consent, violating the 1998 Children's Online Privacy Protection Act (COPPA).

CASE: Dish Network

Dish Network agreed to pay $210 million in penalties related to telemarketing violations, according to the Justice Department. In California, Illinois, North Carolina, and Ohio, Dish made millions of unlawful telemarketing calls to consumers and supported millions of more calls by retailers that marketed Dish products and services.

IS Ethics

Ethical challenges in this field involve invasions of privacy

white collar crime

crime committed by respectable business and professional people is "not ordinarily called crime, and calling it by this name does not make it worse, just as refraining from calling it crime does not make it better than it otherwise would be.

Student Expert: Congressman Gorge Santos

Thrown out of Congress- Lied about his whole background & his resume- Serial liar and one of few people who got kicked out of Congress since Civil War

Volkswagen

In 2015, Volkswagen admitted to equipping certain VW, Audi, and Porsche diesel vehicles with "defeat devices"—software designed to cheat on government emissions tests. These cars, marketed as "clean diesel," were actually emitting dangerous pollutants. As a result, the U.S. Justice Department and Federal Trade Commission sued Volkswagen. The company agreed to buy back or repair affected vehicles, offer lease termination without penalties, and provide restitution payments of $5,000 to $10,000 to customers. By 2020, the emissions scandal had cost Volkswagen nearly $35 billion globally.

- VW did this because of competitive pressure

fraud triangle

To explain the behavior of white-collar criminals. The triangle consists of

1) pressure,

2) opportunity and 3) rationalization.

MBA Oath

- was created by Harvard students in an attempt to reduce the problem Personal Gain and selfish interest in business

Why Businesses should act ethically

1) To enhance performance(positive link to being perceived as ethical)

2) To comply with legal requirements

3) to prevent or minimize harm

4) to Meet demands of business stakholders

5) to promote personal morality

Culture

"how we do things around here"

- Whether it is the culture of a country, a business, or a community of people, culture plays a significant role in whether people act ethically/morally.

- Ex: Kyoto: No one will cross the road if the cross walk is not one even if there are no cars passing

- Deli India: People don't care about cars they will cross and expect cars to stop for them

Twofold:

(1) The first group of people are crossing lines.

(2) The second group of people see the first group crossing lines, and think they have to cross the lines, too, to keep up. The second group of people are rationalizing their unethical conduct by using the first group as their benchmark, or norm, rather than looking to the standard.

positive feedback loop at work; the culture is making the problem worse.

People take their cues from those around them. If a person sees a lot of other people around him/her are cheating, that will make it more likely for the first person to cheat.

CCA (Corrections Corporation of America)

specializes in the design, building and management of prisons jails and detention facilities and providing inmate residential and prisoner transportation services in partnership with government

Student Experts: Heart doctors in Ohio

Three main ways to treat heart problems

Drugs/Pills/Meds

Angio-plasty (catheter that goes through artery)

Bypass Surgery

✱ Ohio doctors can prescribe drugs & do angio-plasty, but cannot do bypass surgery (they have to transfer patient to an actual surgeon)↳ Rate of angio-plasty in this hospital was 4× the national avg.

✱ They did this instead of transferring to bypass, or prescribing pills because they got an $800 bonus for recommending this form of treatment.

✱ They were not acting in patients’ best interest

✱ 2013 a private citizen whistleblows (and he used to work @ the heart lab at that hospital)↳ Hospital & doctors got fined millions of $

Cross-cultural contradictions.

Frequently, businesspeople, companies and corporations are unaware of cultural norms - and laws - in foreign countries, and this can lead to unethical conduct.

Student Expert: Fiduciary Rule

Comes from the Department of Labor↳ Has to give the best plan that’s in the best interest of the client

Suitability Standard↳ Give recommendations that are suitable for the client butmight not be in the best interest of the client

Ill-suited Investment: an investment for a client that’s not suitable for the client↳ Ask investment advisors what standard they’re using (One that’s okay for you & makes them a lot of moneyora great one for you & will make them decent money?)

Rationalization

Ethical failures can also be "justified" via this...

- Ex: If I cheat in a class where there is no curve, nobody will be hurt, and my high grade will insure my future.

"the ends justify the means"

The most famous way to rationalize conduct is to conclude that

- (which is a distortion of utilitarianism)

Example: The ends justify the means.

If you needed a heart transplant ($250,000) but cannot afford it because you only have $5,000.

What are your choices? (maybe find way to get the money you need even if it's not legal)

Companies place the relative importance of things

1) Egoism (self-centered) =

- Company interest

- Economic efficiency.

2) Benevolence (concern for others) =

- Team interest

- Social Responsibility

3) Principle (Integrity approach) =

- Rules and Procedures

- Laws and Codes

Two Models for Ethics enforcement

1) Compliance- based programs

2) Integrity- Based programs

Compliance-based programs

Seek to avoid legal sanctions through detection and punishment. You live with these programs every day.

Integrity based programs

combines concern for the law with an emphasis on personal integrity

Consequentialism

Essentially look to the end results to determine whether conduct is ethical.

DUTY BASED MODELS

Use pre-existing rules to determine the ethically correct course of action.

- From IMMANUEL KANT and includes elements of consequentialism

Strengths: Strong foundation in which to guide people.

Weaknesses: Occasionally, difficult to consistently apply.

Categorical Imperative:

if you act one way, you need to be OK with the results if everyone else, faced with the same issue, did what you did.

Three types of Justice

1) Procedural Justice

2) Distributive Justice

3) Compensatory Justice

Procedural Justice

is duty-based; it's not really concerned about the result. If we follow the pre-existing rules and procedures, which are agreed to ahead of time, then the result is just.

Distributive Justice

is a form of consequentialism because the results matter; it focuses on the result, and whether it is "fair".

- Example: How did we (or should we) "fairly" distribute the covid vaccines, when they first came out?

CASE: Walmart and low-income assistance

For years, Walmart employees (partly because it’s the largest employer in the country) led the nation in employees who qualified for government assistance...– Walmart had more people working for them that qualified for gov. help than any other company (because Walmart’s wages were so low, people still needed gov. assistance even after working full-time).

Rawls' Theory

You can only make a fair decision concerning "distributive justice" if you are blind to your own personal stake in the outcome (or are blind to your own circumstances).

- If you have are thinking about your stake, your bias will prevent you from being objectively fair.

Compensatory justice

refers to the pre-set rules concerning how we compensate those who have been wronged in the past.

- EX: affirmative action

- combines duty based model and consequentialist model

Comparative Negligence

In Washington State, the rule is that each person, including the plaintiff, is responsible for their % of fault. So, for instance, if the jay-walking plaintiff thought he had time to cross the street outside of a crosswalk was hit be a car - driven at 100 mph - sued, the jury might say that plaintiff was 10% liable and the defendant car driver was 90% liable. If the plaintiff had $100,000 damages, he'd be responsible for 10%, or $10,000.

The Disclosure Rule

What would I do if my actions were in the New York Times? Would I do it? Would I not? The idea here is quite simple and is consistent with the idea of transparency.

CASE: Pharmaceutical Companies and Disclosure

Pharmaceutical companies have to have sales reps that connect the pharmacy to the doctor that will be prescribing the medication. They had a big scandal with a monopoly on a new patented drug, & they want [to] convince the doctor to write prescriptions for the drug.

— They told doctors to give a speech to other doctors about how amazing the new drug was, they had to show up to dinner & give a 20 min presentation on the amazing effects of the drug, and in return they would pay the doctors $25,000.

↳ To avoid this, doctors must publicly disclose $ that they get from companies.

Examples of self interest

- athletes cheat because they have greater... than ethics

- Teacher in Atlanta were cheating on states exams on behalf of students to get a bonuses (people went to prison)

- Harvard Students got expelled for cheating

Rumors

unofficial stories, spreading through informal channels that contain uncertain and/ or contested information

- Rumors often arise during times of crisis, as people attempt to cope with uncertain information under anxiety

Facts

Data and evidence

Frames

mental structures that help us interpret that data

- Both individual and collective

Conspiracy Theory:

a theory or type of rumor that explains an event or situation as the result of a secret plot or conspiracy perpetrated by sinister forces

- Can result from a form of " corrupt sensemaking"

- Can be seeded or amplified by disinformation

- were often cited to a multitude of strange websites

Disinformation

False or misleading information that is purposely seeded and or spread for a specific objective e.g. financial or political

- Often built around a true or plausible core

- Functions as a campaign

- Often spread by unwitting agents

- ( a lot of misinformation is spread by people who don't know it's not true these are called onleading agents)

Examples of Disinformation

the 2016 elections were a clear example of disinformation when the Russian government got involved and started making multiple false accounts and claims to skew the election

○ Jan 6 Riot of the capital was due to... about having a rigged election

○ Sharpie Gate Conspiracy about how Sharpies smudged the ballot and would affect the vote ( this ofc was false)

Participatory disinformation

Elites ( in media and politics) collaborating with social media influences and everyday people to produce and spread content for political goals

- takes shape as improvised collaboration between wittings agents and unwitting (through willing) crowds of sincere believers

Right-wing media

is Improv in which the audience is an active member of

Sense making rumors

that came up during the Boston Marathon Bombings on Twitter

People were trying to make sense of the event, and were falsely accusing the wrong person

Alternative media ecosystem

Gaining prominence, rumors, conspiracy theories and disinformation

The content within the... ecosystem was resonating with the rise of the right wing populism around the glob

Bullshit

information that could be true, could be false, but people don't care if it's true of false

Technology and It's Characteristics

1) Nomadic

2) Agrarian

3) Industrial

4) Service

5) Information

6) Semantic/ Metadata

7) Biotechnology

Outsourcing

Technology Facilitates... (both for good and bad)

- companies like TaskGrab, allow you to hire someone else to do tasks for you so you can focus on what you truly care about

- training your replacement was related to this

Regulating Online content

this is an issue in the US and around the world

- in the US the internet has very little regulation

- In the EU there is a lot of government regulation

- in much of the rets of the world there is a lot of regulation on the internet but this is to protect the government not the citizens

The right to be forgotten

- in the E.U there is a lot of internet regulation

- this rule, legal concept that gives individuals the right to have certain personal information removed from public access, especially on the internet, under specific circumstances. like o the information is inaccurate, irrelevant, outdated, or excessive

- It no longer serves a public interest

- It is damaging to their privacy or reputation

- however the right is not absolute, companies can refuse to remove information if there is compelling public interest in keeping it available