Ethics Final Exam- Shipp

Abusive tax shelters fraud

KPMG 'The Letter' from Tax Attorney Tax code within law letter = worth 250k

value-based thinking

A style of thinking where decisions are based on intuition, values, and ethical judgments not based on consequences for individuals rights or interests focus on avoiding certain habits (7 deadly sins) virtue is related to achieving a certain status every time we act we define ourselves I act as I aspire to be

Backdating (of stock options)

When recipient is given the option of buying stock at yesterday's price, resulting in an immediate and guaranteed wealth increase. United Health

pump and dump scheme

When someone holding a stock artificially drives its share price up by floating exaggerated or false reports of its value through Web sites, online postings, or e-mail, this is known as

Code of ethics

aka codes of conduct, business principles, mission and values statements, etc. important document for any business or non-profit written set of guidelines issued by an organization to its workers and management to help them conduct their actions in accordance with its primary values and ethical standard

why did these companies experience legal troubles?

began with ethical lapses

fraud

can be on behalf of company or against a company or individuals Knowingly Misstates Material fact other party relies other party suffers damage as a result

benefits to company for ethical behavior

clear guide for employee behavior better perception by important stakeholders increased tolerance for possible lapses favorable treatment under Federal Sentencing Guidelines, Dodd Frank, Sarbanes Oxley for companies with effective ethics programs Public companies enjoy representation in mutual funds that invest only in ethical companies longevity mixed evidence on increased profitability

how can emotions be helpful for decision making

compartmentalize the emotion from the ethical decision at hand have a higher sense of urgency to resolve the problem prioritize at the problems or issues at hand and focus specifically on resolving the most important if an individual succeeds in making a decision despite extreme emotional duress they may be admired and thought of as level-headed

virtues

conditions of people (wisdom, courage)

Dow Chemical code of ethics

create innovation for stakeholders maximize value per share invest in a market-driven portfolio

Wells Fargo ethical/legal trouble

"Every customer should have 8 accounts (checking, savings, HELOC, mortgage, investment)" Banks would put fees on some of these accounts and people wouldn't pay attention to them. Rewards systems were put in place to encourage branch EEs to hit an average of 8 accts/ individual --> leads to people opening false/ fake accounts for individuals (6,000-10,000 employees fired for creating these accounts. Class action suits by employees, stockholders, customers. Paid somewhere between $10 and $30 billion to get out of this. unnecessary insurance inappropriate home lending practices

Vice

"Tedium of God"- Acting ethically is necessary to challenge one's inner limits and live a virtuous life.

why were they incentivized to commit fraud?

-excessive rewards for success -excessive penalties for failure -multiple courses of action in accompanying the goal -lack of oversight

producing positive affect

1) increases efficiency of decision-making 2) increases use of heuristics 3) increases consideration of multiple sources of information in making decisions 4) increases use of broader categories for sorting information 5) increases flexibility in categorization 6) increases diversity in making associations

Texas Instruments

1. is the action legal? 2. Does it comply with out values? 3. If you do it, will you feel bad? 4. How will it look in the newspaper? 5. If you know its wrong, don't do it 6. if you're not sure, ask 7. Keep asking until you get an answer

5 goals codes of ethics should accomplish

1. legal- clarify appropriate legal standards or regulatory policy compliance standards 2. internal guidelines- set out the rules of the road for employees for appropriate behavior within the firm 3. inspirational- inspire employees to understand the standards of the business 4. logistical- outline the process by which the code will be communicated and updated 5. communicating to stakeholders- communicate to customers and other outside groups about the standards of the business

emotional arousal effects

1. recognize ethical dilemmas 2. have ethical intentions in line with level of moral development 3. carry out those intentions of emotional arousal

J&J corporate credo- order of responsibilities

1. to doctors, nurses, patients, mothers, fathers, others who use products 2. employees 3. communities, world community 4. stockholders- final

religious basis for business ethics

10 commandments 5 pillars 8 fold path Golden rule central to most (143) religions

Bonhoeffer

4 mandates of scripture labor, government, church, marriage Adam first labor- keep up the garden of Eden mandate of divine disciple and grace not just needed for life, required by Christian scripture

companies that operate according to owners faith

Chick fil a- not open Sundays Marriott- no adult movies in rooms, Bibles and Book of Mormon Forever 21- bible verses Interstate Batteries- open meeting with prayer Controversial cases Hobby Lobby- health care, birth control Masterpiece Cakeshop- wedding cakes for gay weddings

CLICK test

Consequences- what are the consequences if I do this? Legal- is it? Image- CNN test Culture- does this support or hurt my organization's culture and values? Knot- does my stomach knot up?

duty based thinking

Governing idea is duty or responsibility not so much to other individuals as to communities of individuals. Critical thinking depends ultimately on individuals conforming to the legitimate norms of a healthy community -Playing one's role as a member of larger whole. "ask not what your country can do for you..."

non-existant inventory

Billie Sol Estes produced mortgages on nonexistent ammonia tanks by convincing local farmers to purchase them on credit and lease them from the farmers for the same amount as the mortgage payment used holdings to obtain loans from banks outside Texas who were unable to check on tanks fraud- 24 years in prison

Deontology

Approach to ethics that judges the morality of an action based on the action's adherence to rules. Described as duty or obligation, because rules 'binds you to your duty'

Machiavelli (Prince)

Argues that a Prince should cultivate the image of caring and concern while in reality being neither.

Sherman Act

First United States law to limit trusts and big business. Said that any trust that was purposefully restraining interstate trade was illegal.

rights-based thinking

Moral common sense is to be governed by equalizing rights protection. The relevant rights are of two broad kinds: -right to fair distribution of opportunities and wealth -rights to basic freedoms or liberties

alternatives

Potential solutions to the ethical issue; alternatives must be stated to be considered, should not rush this step

Clayton Act

Prohibits interlocking directorates and mergers and acquisitions when the effect is to lessen competition or create a monopoly prevents tying agreements (must purchase one item to purchase another)

Uniform Trade Secrets Act

Protects employers from having former employees take trade secrets to new employer

Chappell

Says being ethical is about developing an ethical outlook. A set of views and commitments about what is worth living for and what is worth dying for

Union Carbide Bhopal

The Bhopal disaster, also referred to as the Bhopal gas tragedy, was a gas leak incident on the night of 2-3 December 1984 at the Union Carbide India Limited (UCIL) pesticide plant in Bhopal, Madhya Pradesh, India. It was considered as of 2010 to be the world's worst industrial disaster. Over 500,000 people were exposed to methyl isocyanate (MIC) gas. The highly toxic substance made its way into and around the small towns located near the plant. The official immediate death toll was 2,259. In 1989, Union Carbide paid a $470m settlement to the Indian government. It was well short of the $3.3bn in damages requested. Union Carbide was bought by Dow Chemical 16 years after the disaster.

Tylenol case

The Chicago Tylenol murders were a series of poisoning deaths resulting from drug tampering in the Chicago metropolitan area in 1982. The victims had all taken Tylenol-branded acetaminophen capsules that had been laced with potassium cyanide. A total of seven people died in the original poisonings, with several more deaths in subsequent copycat crimes. These incidents led to reforms in the packaging of over-the-counter substances and to federal anti-tampering laws. The actions of Johnson & Johnson to reduce deaths and warn the public of poisoning risks have been widely praised as an exemplary public relations response to such a crisis.

interest based thinking

The moral assessment of actions and policies depend solely on their consequences and that the only consequences that really matter are the interests of the parties affected. -Harms and benefits to identifiable parties -Maximizing net expectable utility

Volkswagen ethical/legal trouble

Volkswagen had intentionally programmed turbocharged direct injection (TDI) diesel engines to activate their emissions controls only during laboratory emissions testing which caused the vehicles' NOx output to meet US standards during regulatory testing, but emit up to 40 times more NOx in real-world driving. Volkswagen deployed this programming software in about eleven million cars worldwide, including 500,000 in the United States, in model years 2009 through 2015 Violation of Clean Air Act Outcome- huge fines and ongoing investigation

Financial statement fraud

Xerox, Worldcom, Sunbeam- packing the channel, Enron- used SPEs to hide assets

Robinson-Patman Act

a 1936 law that makes illegal any price discrimination if it injures competition prevents unfair price discrimination by ensuring that the seller offer the same price terms to customers at a given level of trade

Ponzi Scheme

a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.

what happens when emotion gets in the way of making good and rational decisions

define problem too narrowly fail to consider all possible options weigh your options differently than you would had you not been as emotional make decisions more hastily than you would have experience high levels of emotional stress that you fail to make a decision at all

values

desired state of affairs (health, justice)

egoism

determines right and wrong based on impact to self

social psychological research

emotions play larger role in decisions re individuals rather than re institutions Basch and Fischer- actions of colleagues, management, customers- trigger positive/negative emotions more than events related to org reputation, politics, planning, etc.

Sarbanes-Oxley Act of 2002

established PCAOB (oversight from SEC) Auditor independence Corporate responsibility- strengthen audit committees, CEO and CFO certify reports, ban on trading by directors and officers during pension fund blackout periods Established financial disclosure- prevents loans to execs, requires management to disclose changes in securities ownerships within 2 business days after close of month, strengthen analyst conflict of interest regulations Inspect Public accounting firms Restrict auditors to audit activities only Rotate partners assigned to client Auditors report to committee (board not client) Removes power from company personnel Gives auditor a voice outside of audit to attest to policies Felony to impede federal investigation

criteria on which companies are judged for ethics

ethics and compliance programs corporate citizenship and responsibility culture of ethics governance leadership innovation and reputation e.g. Aflac, GE, UPS, Starbucks

Geva's issues with traditional model

fails to recognize pluralism fails to outline how we combine prescriptions fails to outline how we are to resolve conflict among different theories model confused moral judgment and moral choice only rational and thinking based, no emotions

purpose of code of ethics

help a company reinforce and acquaint new employees with culture and values- create climate of integrity and excellence help company communicate expectations to staff regarding appropriate behavior towards suppliers, vendors, customers, community; encourage frequent, open, honest communication among employees minimize subjective and inconsistent management standards; explicitly outline rights and responsibilities of staff members and helps guard against capricious and preferential treatment of employees help company remain in compliance with regulatory requirements (SOX requires code of ethics for senior financial officers) build public trust and enhance business reputations; demonstrate company's values to socially responsible investors enhance morale, employee pride, loyalty and recruiting of outstanding employees help promote constructive social change by raising awareness of the community's needs and encouraging employees and other stakeholders to help promote market efficiency- especially in areas where laws are weak or inefficient- by rewarding the best and most ethical producers of goods and services guide employees in situations where the ethical course of action is not immediately obvious help develop an ethical culture

Josephson universal ethical standards

honesty- truthful, not deceive, no partial truths, etc. integrity- do what think is right even when pressure to do otherwise promise-keeping and trustworthiness- candid and supply important and relevant info, fulfill letter and spirit of promises loyalty- faithful, don't use private information to their advantage fairness- just, do not exercise power arbitrarily concern for others- caring, compassionate respect for others- human dignity, autonomy, rights law abiding- laws, rules, regulations commitment to excellence- well-informed, prepared, strive for success leadership- as ethical leader reputation and morale- seek to protect and build company reputation accountability- personal responsibility for actions

Phillipa Foot

if act unethically, will be surrounded by other unethical people who will try to deceive or harm him can't find true happiness

traditional model

intended to be used in every situation, regardless of expertise or circumstance awareness- recognize situations with ethical implications understanding- identify stakeholders and stakes involved and identify alternatives; obtain info & perspectives application/decision- make a decision using judgment/intuition, decision aids/shortcuts, decision analysis post-decision consequences- learn from decision and use feedback in future decisions

Geva's Phase-Change Model

introductory phase- framing the ethical issue principle-based evaluation virtue based solution contract based decision

why should we act ethically?

its the norm most people abide by laws (paying taxes) and even act altruistically trade depends on trust, truth-telling, keeping promises, etc. business ethics=ethics Skinner- why shouldn't you act morally when others are watching to gain good reputation and act immorally to your advantage when no one's watching? There are three main arguments that have been put forward to justify morality 1. God commands it 2. Happiness requires it 3. Acting immorally is irrational

how do emotions affect ethical decision making

largest impact- how we view the ethical decision-making process itself classical view- emotion=hindrance contemporary view- integral part emotions=primary mechanism by which we make ethical decisions and logic may cloud the process positive and negative emotions affect EDM differently leaders' emotions- trickle down if think of EDM as objective, unbiased, unemotional is missing richness of how humans make decision

Is being legal the only requirement for being ethical?

law always lags laws/regulations don't always take into account extreme acts law= floor for ethical behavior bare minimum

leadership research

leaders who are highly aroused create high level of arousals in followers 1. angry leader -> angry followers 2. angry leaders, more polarizing 3. negative traits in leaders, ineffective and low transformational leadership 4. happy leaders, higher follower ratings

Gordian knot

legend of Phrygian Gordium associated with Alexander the Great. It is often used as a metaphor for an intractable problem (disentangling an "impossible" knot) solved easily by finding a loophole or thinking creatively ("cutting the Gordian knot"

moral emotions

linked to interests and welfare of society or others 1. other condemning (contempt, anger, disgust) 2. self-conscious (share, embarrassment, guilt) 3. other-suffering (compassion) 4. other-praising (gratitude)

ethical decision making (EDM)

making business decisions while considering the moral context, antecedents, actions and consequences of the action in a business context process and content

why should be study ethics?

making the right choice can be trained requires consideration of principles and outcomes requires moral courage bright line between should/should not moral coarsening- bright line becomes blurred over time

bad codes of ethics

many codes are old and tired- written many years ago and never updated lack of training lack of consistent reinforcement failure to use to justify employment and customer-related action failure to update to reflect changes to industry and business environment confusion of employees and others- required vs. optional

Oliver Williamson

markets are normal state of competition, market failure framework allow people to take advantage of one another

sources of alternatives

may arise from the nature of the ethical issue itself choose either alternative can lead to negative consequences

heuristic models

models of decision making are quick reference decision aids, attempt to distill the process of EDM into a series of easily identifiable and sequential steps

anger

most frequent response to violations of rights and fairness felt toward those who have violated rights of 3rd parties righteous anger can motivate passion which directs action to repair social order

1st philosophical basis for acting ethically

necessary for human happiness Aristotle- not just searching for money, for something else Eudaimonia- represents flourishing, achieved in a community; rational activity of the soul in accordance with virtue being a good friend, having a great soul, being fair and demonstrating justice, etc.

Dodd Frank

new agency for Fed to oversee credit providing institutions ends "too big to fail" bailouts early warning signals before big companies threaten economy transparency and accountability for derivatives shareholders have say on pay for execs new rules for credit rating agencies encourages regulators to go after fraud

issues with using religious bases

not everyone believes in Supreme Being not everyone believes in moral rules created by Supreme Being not everyone depends on religion for morality not everyone holds same religious principles can be discriminatory against other religion

moral laxity

one acknowledges a general moral duty but given that there is an indefinite range of ways to fulfill this duty is unsure as to what exactly ought to be done and fails to take serious steps toward pursuit of the general duty

genuine dilemma

one is unsure as to what one ought to do, but has the will and the ability to do what is right dilemma= important questions tradeoff between two or more alternatives must not be addressed by law or regulation one or more winners and losers any option will result in consequences must be clearly understood before it can be communicated and resolved

no-problem problem

one knows what the moral obligations are and has the will and the ability to fulfill them

compliance problem

one knows what the moral obligations are but experiences difficulty in fulfilling them

2nd philosophical basis for acting ethically

only rational choice Kant- how we legislate ourselves as rational beings if my interests matter, and others are similar to me, then others interests matter as much as mine would be irrational to want to live in a world with lying and cheating

individuals with positive affect- negatives

overestimate their contributions to a task when the outcomes are positive underestimate their contributions to a task when the outcome are negative

federal sentencing guidelines

point system severity of offense and extenuating circumstances increase value of fine or length of imprisonment can also be circumstances to reduce offset

3rd philosophical basis for acting ethically

pragmatic choice Velasquez- Argues that the main reasons to act ethically are practical. Ethical actors attract other ethical actors Martin- commitment to living in harmony with other people Friedman- market-based pragmatic approach, He asserts that businesses should act ethically only if legally required to do so. - "there is one and only one social responsibility of business- to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud" - Argues against charitable donations being an ethical act - as long as businesses and individuals receive tax benefits for donations the act is pragmatic rather than ethical

Theranos

privately held health technology corporation known for its false claims to have devised blood tests that only needed very small amounts of blood Founded in 2003 by then-19-year-old Elizabeth Holmes, Theranos raised more than US$700 million from venture capitalists and private investors A turning point came in October 2015, when investigative reporter John Carreyrou of The Wall Street Journal questioned the validity of Theranos' technology. Since then, the company has faced a string of legal and commercial challenges from medical authorities, investors, the U.S. Securities and Exchange Commission (SEC), Centers for Medicare and Medicaid Services (CMS), state attorneys general, former business partners, patients, and others

Pros and cons of Heuristic decision models

pros: they can be extremely useful in training individuals who are learning the EDM process helpful for those who are operating in a fairly predictable environment in which the ethical challenges are known and occur over and over cons: not as useful for highly experienced managers not as useful in highly chaotic environments with multiple ethical challenges from multiple sources

Burden of rebutting prima-facie case of discrimination

provide evidence of price discrimination burden lies on defendant to rebut

evolution of role of emotion in EDM

reason- highest order of decision making emotion- distraction/destructive Stoic philosophers- must control emotions and avoid traditional view of EDM- objective, unbiased, unemotional, Now- up for debate emotion allows for fast decision making e.g. not wanting to eat ice cream with worms 1st- process from emotional perspective 2nd- apply principles of moral reasoning to justify emotional response

how to make sure code is fully utilized

refer to it frequently set the tone at the top make sure it applies across the levels of hierarchy update it make sure it's relevant make sure everyone is familiar and knows how to use it balance between legals compliance, internal compliance, ethical aspirations

ethical decision vs dilemma

right or wrong? right vs wrong?

morals

rules that guide behavior

differences in managerial decision making based on emotional state

significant differences between decision making under conditions of state happiness vs state unhappiness happy managers are less likely to access relevant information in a thorough and meticulous way- as a result decision is faster but less accurate unhappy managers are more deliberate (slower) but consider more information and make a more thorough analysis of the alternatives

affective research

starting in 1980s assume more importance in the role of emotions in managerial decision making multidisciplinary- includes bio, anthro, psych overall affect- general levels of emotional arousal valence- direction of emotional state (+/-) whether the emotional state is a trait (permanent) or a state

ethics

study of morals, values, virtues yields well-established rules of right and wrong that prescribe what humans ought to do

business ethics

subset of ethics does not justify a separate moral standard constantly changing environment requires conversation, impossible to cover all topics in code of ethics

examples of effects of religion on US business operations

tax-free treatment for churches prohibitions of drugs/alcohol/abortion/etc. blue laws- prohibit sales on Sundays

Clawson's 4 elements of ethical leadership

telling the truth keeping one's promises treating others fairly respecting the rights of others

Hagia Sophia

the Cathedral of Holy Wisdom in Constantinople, built by order of the Byzantine emperor Justinian Converted to Ottoman mosque when ottomans conquered Turkey Atatruk led successful revolt against Ottoman empire Some wanted him to keep mosque, other wanted it back into a church 3rd option- turned it into a museum

utilitarianism

the doctrine that actions are right if they are useful or for the benefit of a majority

relativism

the doctrine that knowledge, truth, and morality exist in relation to culture, society, or historical context, and are not absolute.

usury

the practice of lending money at exorbitant rates, especially because rich taking advantage of poor Hinduism, Islam, Judaism, Christianity have rules that prohibit usury St. Thomas Aquinas- lender is compensated from suffering harm of not having the money he loaned Merchant of Venice- Jewish character was money lender because Christians disallowed loaning money Texas- above 6%, large fines, with exceptions (business loans, when lender has appropriate license)

common types of dilemmas

truth vs. loyalty individual vs. community short-term vs. long-term justice vs. mercy primacy of interests of one party over the other (client or group) distribution in one way or other (merit or equal share) obligation of one to another (duty, custom, legal obligation) responsibility to client, colleague, profession, employer, society, etc.

cognitive research

until 1980s individual decision making is result of how individuals store, categorize, retrieve, evaluate, synthesize info

anti-trust violations

vertical and horizontal arrangements to restrain trade predatory pricing tying agreements consequences of violations of anti-trust- civil, criminal, state, federal

content

what decisions do we make

process

what steps do we follow

Winston Churchill

when you do the right thing even though no one is watching

Elegido

work bears witness to dignity of man develop personality bond with others support family progress of humanity sanctified by Christ