,Instructor Solution Manual For
Business Ethics Decision Making for Personal Integrity & Social Responsibility,
5th Edition By Laura Hartman, Joseph DesJardins and Chris MacDonald
Chapter 1-10
IM Chapter 1:
Ethics and Business
Chapter Objectives
After reading this chapter, you will be able to:
1. Explain three levels at which ethical decisions get made in business.
2. Explain the nature of business ethics as an academic discipline.
3. Explain why ethics is important in the business environment.
4. Explain why ethical responsibilities go beyond legal compliance.
5. Distinguish the ethics of personal integrity from the ethics of social responsibility.
6. Distinguish ethical norms and values from other business-related norms and values.
7. Describe ethical decision making as a form of practical reasoning.
Opening Decision Point - Wells Fargo
The Wells Fargo case can be used to introduce a range of topics that will emerge throughout this book.
The case involves decision making at a number of levels, from individual entry-level employees (like
many of our students), to branch managers, to mid-level management, senior executives, and the board of
directors. A good discussion can be generated by asking students to assign responsibility, both in terms
of who is at fault (who is accountable?) and what could be one to prevent it from re-occurring (what
caused it?).
These discussions can easily lead into the decision-making model that will be introduced late in the
chapter. What facts would be helpful to make these judgments of responsibility? What facts would
change your decision? Who are the stakeholders involved, ranging from entry-level employees, to
customers, to stockholders, to competitors. What stake, exactly, do these groups have in this case? How
were they harmed? How, if at all, were their interests represented in the process?
This is also a good case with which to introduce the topics of corporate culture and leadership. How were
the decisions made by individuals influenced by the surrounding culture, and how did that culture emerge
at Wells Fargo? How free were employees at every level, including senior executives, to diverge from
the prevalent culture? How might that institutional culture be changed? Who is responsible for
institutional decisions? Which institutional policies and practices enabled this scandal? How might they
be changed to avoid a re-occurrence?
Another topic that can be introduced involves professional responsibilities of bankers and financial
professionals. This discussion can be helpful in setting the stage for Chapter 5 and the general topic of
corporate social responsibility. A discussion of fiduciary duties can introduce several important questions.
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,What responsibilities do managers, perhaps especially senior executives, have to stockholders? How
might these responsibilities conflict with their responsibilities as financial professionals?
This case can also introduce the question of government regulation within a market economy. What is the
proper role for government agencies, both in terms offsetting standards to prevent misconduct, and in
enforcing sanctions after the fact? How does this influence the ―free market‖ system?
I. Introduction: Getting Comfortable with the Topic
It is not uncommon for students to enter a business ethics class with some degree of doubt, confusion, and
apprehension about the topic. This opening chapter aims to relieve those concerns by introducing
business ethics as an unavoidable and non-threatening part of business (and life).
The topic is introduced by reviewing some of the past and recent well-known scandals, but also pointing
out some well-known examples of commendable corporate ethics. It can be worthwhile to remind
students of best case examples as a means to reminding them that business ethics does not assume that
only the bad cases deserve attention.
We also remind students that business ethics is not limited to the type of major corporate decisions with
dramatic social consequences. At some point every worker, and certainly everyone in a management role,
will be faced with an issue that will require ethical decision-making.
This opening section identifies 5 general goals for a business ethics class:
1. Develop the knowledge base and skills needed to identify ethical issues.
2. Understand how and why people behave unethically.
3. Decide how we should act, what we should do, and the type of person we should be as individuals.
4. Create ethical organizations.
5. Think through the social, economic, and political policies that we should support as citizens.
* Reality Check: Psychological Egoism‖ provides a brief philosophical refutation of a common
assumption that underlies much of the skepticism about business ethics, including the separation thesis.
That assumption is the view that all human behavior is motivated by selfish interest, otherwise known as
―psychological egoism.‖
II. Making the Case for Business Ethics
a. The ―Separation thesis‖ described a common which holds that ethical standards are separate
from the standards that apply in business activities. This view holds that business has its own
rules that govern how the game is played and, therefore, business is exempt from ordinary
ethical judgments.
b. This separation thesis is represented prominently in Milton Freidman‘s famous essay,
―The Social Responsibility of Business is to Increase its profits.‖ This very common
perspective can be seen in many cases discussed throughout this text, and should be
contrasted with the ―stakeholder theory‖ described in Chapter 5.
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, c. Relationship between economic and moral values: How should we conceive of the
relationship between business and market activity, on the one hand, and ethical concerns, on
the other? This is not a new question, but one that can be found since the very dawn of
modern capitalism.
i. The relationship between Adam Smith‘s two books, The Wealth of Nations and The
Theory of Moral Sentiments, can be seen as representing this question.
ii. The issue of the relationship of economic and moral values is addressed in the study
of business ethics.
d. As recently as the mid-1990s, articles in such major publications as The Wall Street Journal,
the Harvard Business Review, and U.S. News and World Report questioned the legitimacy
and value of teaching classes in business ethics.
e. Leaders realize that they can no longer afford this approach in contemporary business.
The direct costs of unethical business practice are more visible today than perhaps they have
ever been before.
f. The first decade of the new millennium was riddled with highly-publicized corporate
scandals, the effects of which did not escape people of any social or income class. Moreover,
we saw the economy begin a downward spiral into one of the largest financial crises of the
last 80 years.
g. These lending and trading efforts encouraged bad debt to appreciate beyond levels that
the market could bear. The inevitable correction caused real estate values in most markets to
decline sharply, domestic credit markets to freeze, and the federal government to intervene
with a rescue package.
h. Economic turmoil incites misconduct; there is a significant bump in observed workplace
misconduct during times of economic challenges. Some money-saving strategies deployed by
struggling companies, such as compensation/benefit reductions and hiring freezes, have been
found to increase misconduct by more than 35 percent.
*Chapter Objective 1 Addressed Below*
i. To understand the origins of the shift from whether ethics or values should play a role in
business decisions to the almost frantic search for how most effectively (and quickly!) to do
it, consider the range of people who were harmed by the Wells Fargo scheme: Customers,
employees, investors, competitors, and the communities in which these people live.
j. Expansion of ethically responsible business decision-making: Ethically responsible
business decision-making must move beyond a narrow concern with stockholders, and
consider the impact that decisions will have on a wide range of stakeholders. In a general
sense, a business stakeholder will be anyone affected, for better or worse, by decisions made
within the firm.
*Reference: ―Reality Check - Why Be Ethical? Because the Law Requires It‖* (describes some legal
requirements that have been created since the Enron fiasco)
k. Reasons to be concerned with ethical issues: Beyond specific legal obligations,
contemporary business managers have many other reasons to be concerned with ethical
issues.
i. Unethical behavior not only creates legal risks for a business, it creates financial and
marketing risks as well.
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