The third edition of Business Ethics: Decision Making for Personal Integrity and Social Responsibility, by Hartman, DesJardins, and MacDonald, offers a comprehensive, accessible, and practical introduction to the ethical issues arising in business. The text focuses on real-world ethical decision making at both the personal and policy levels and provides students with a decision-making process that can be used in any situation. In addition, practical applications throughout the text show how theories relate to the real world. The third edition features thoroughly updated statistics and coverage of timely issues and dilemmas throughout the text. Key Features of the Third Edition: • New co-author Chris MacDonald brings an enriched sense of hands-on reality. • More than 20 new end-of-chapter readings, including new readings with global perspectives and on stakeholder theory. • New and updated cases in the form of Opening Decision Points in every chapter. • Expanded coverage of current topics such as the Enbridge oil spill in Canada’s Northwest Territories, the MBA Oath, whistleblowers, Goldman Sachs and corporate culture, social media in the employment context, bullying in the workplace, and the growing LIBOR scandal. • Completely updated to make the text more readable, to clarify concepts, to better integrate theory and practice, and to improve end-of-chapter questions to better support assessment of student learning, group projects, and classroom discussion. To learn more about this book and for additional student and instructor resources, please visit www.mhhe.com/busethics3e. Business Ethics Decision Making for Personal Integrity & Social Responsibility Laura P. Hartman | Joseph DesJardins | Chris MacDonald TH I R D ED I T IO N Business Ethics Decision Making for Personal Integrity & Social Responsibility Hartman DesJardins MacDonald THIRD EDITION MD DALIM 1223255 1/21/13 CYAN MAG YELO BLACK Confi rming Pages Confi rming Pages Business Ethics Decision Making for Personal Integrity and Social Responsibility har29457_fm_i-xvi.indd i har29457_fm_i-xvi.indd i 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages har29457_fm_i-xvi.indd ii har29457_fm_i-xvi.indd ii 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages Business Ethics Decision Making for Personal Integrity and Social Responsibility Third Edition Laura P. Hartman DePaul University Joe DesJardins College of St. Benedict/ St. John’s University Chris MacDonald Ryerson University har29457_fm_i-xvi.indd iii har29457_fm_i-xvi.indd iii 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages BUSINESS ETHICS: DECISION MAKING FOR PERSONAL INTEGRITY & SOCIAL RESPONSIBILITY, THIRD EDITION Published by McGraw-Hill, a business unit of The McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY, 10020. Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved. Printed in the United States of America. Previous editions © 2011 and 2008. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of The McGraw-Hill Companies, Inc., including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning. Some ancillaries, including electronic and print components, may not be available to customers outside the United States. This book is printed on acid-free paper. 1 2 3 4 5 6 7 8 9 0 DOC/DOC 1 0 9 8 7 6 5 4 3 ISBN 978-0-07-802945-5 MHID 0-07-802945-7 Senior Vice President, Products & Markets: Kurt L. Strand Vice President, Content Production & Technology Services: Kimberly Meriwether David Publisher: Paul Ducham Managing Development Editor: Laura Hurst Spell Editorial Coordinator: Claire Wood Marketing Manager: Elizabeth Trepkowski Director, Content Production: Terri Schiesl Project Manager: Erin Melloy Buyer: Susan K. Culbertson Media Project Manager: Prashanthi Nadipalli Cover Designer: Studio Montage, St. Louis, MO. Cover Image: (From left to right) Design Pics/Don Hammond/RF; Pixtal/AGE Fotostock/RF; Last Resort/ Getty Images/RF; Photodisc/Punchstock/RF; Design Pics/Don Hammond/RF; Roc Canals Photography/ Getty Images/RF Typeface: 10/12 Times New Roman PS Compositor: Laserwords Private Limited Printer: R. R. Donnelley All credits appearing on page or at the end of the book are considered to be an extension of the copyright page. Library of Congress Cataloging-in-Publication Data Hartman, Laura Pincus. Business ethics: decision making for personal integrity and social responsibility/ Laura P. Hartman, DePaul University, Joe DesJardins, College of St. Benedict/St. John’s University, Chris MacDonald, Ryerson University.—Third Edition. pages cm Includes bibliographical references and index. ISBN 978-0-07-802945-5 (alk. paper)—ISBN 0-07-802945-7 (alk. paper) 1. Business ethics. I. DesJardins, Joseph R.. II. Title. HF5387.H3743 2014 174’.4—dc23 2012045579 The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill, and McGraw-Hill does not guarantee the accuracy of the information presented at these sites. www.mhhe.com har29457_fm_i-xvi.indd iv har29457_fm_i-xvi.indd iv 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages To Rachel and Emma. — Laura Hartman To Michael and Matthew. — Joe DesJardins To Georgia. — Chris MacDonald har29457_fm_i-xvi.indd v har29457_fm_i-xvi.indd v 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages vi Laura P. Hartman DePaul University Laura P. Hartman is Vincent de Paul Professor of Business Ethics and Legal Studies in DePaul University’s Driehaus College of Business, serves as Special Assistant to the President with a focus on Haiti, and is also Research Director of DePaul’s Institute for Business and Professional Ethics. Hartman also chairs the board of a trilingual elementary school in Haiti: the School of Choice/l’Ecole de Choix. Previously, Hartman was Director of External Partnerships for Zynga .org , through which Zynga players have contributed more than $14 million toward both domestic and international social causes. From 2009 to 2011, Hartman represented DePaul University on the steering committee for Zafen.org , a micro- fi nance organization seeking to enhance economic development in Haiti to ben- efi t Haitians living in poverty. She has been an invited professor at INSEAD (France), HEC (France), and the Université Paul Cezanne Aix Marseille III, among other European universities, and she previously held the Grainger Chair in Business Ethics at the University of Wisconsin–Madison. Her other books include Rising above Sweatshops: Innovative Management Approaches to Global Labor Challenges, Employment Law for Business, Perspectives in Business Ethics, and The Legal Environment of Business: Ethical and Public Policy Contexts. Hartman graduated from Tufts University and received her law degree from the University of Chicago Law School. Joe DesJardins College of St. Benedict/St. John’s University Joe DesJardins is Vice Provost, as well as Professor in the Department of Philosophy, at the College of St. Benedict and St. John’s University in Minnesota. His other books include: An Introduction to Business Ethics, Environmental Ethics: An Introduction to Environmental Philosophy, Environmental Ethics: Concepts, Policy & Theory, Contemporary Issues in Business Ethics (co-editor with John McCall), and Business, Ethics, and the Environment: Imagining a Sustainable Future. He is the former Executive Director of the Society for Business Ethics, and has published and lectured extensively in the areas of business ethics, environ- mental ethics, and sustainability. He received his B.A. from Southern Connecticut State University, and his M.A. and Ph.D. from the University of Notre Dame. He previously taught at Villanova University. About the Authors har29457_fm_i-xvi.indd vi har29457_fm_i-xvi.indd vi 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages About the Authors vii Chris MacDonald Ryerson University Chris MacDonald is an Associate Professor in the Ted Rogers School of Management at Ryerson University in Toronto, Canada, and a Senior Fellow at Duke University’s Kenan Institute for Ethics. His peer-reviewed publications range across business ethics, professional ethics, bioethics, the ethics of technol- ogy, and moral philosophy, and he is co-author of a best-selling textbook called The Power of Critical Thinking (3rd Canadian Edition, 2013). He has several times been declared one of the “100 Most Infl uential People in Business Ethics” by Ethisphere magazine. He is perhaps best known for his highly respected blog, The Business Ethics Blog, which is carried by Canadian Business. har29457_fm_i-xvi.indd vii har29457_fm_i-xvi.indd vii 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages viii Preface We began writing the fi rst edition of this textbook in 2006, soon after a wave of major corporate scandals had shaken the fi nancial world. Headlines made the com- panies involved in these ethical scandals household names: Enron, WorldCom, Tyco, Adelphia, HealthSouth, Global Crossing, Arthur Andersen, ImClone, KPMG, J.P. Morgan, Merrill Lynch, Morgan Stanley, Citigroup, Salomon Smith Barney, and even the New York Stock Exchange itself. At the time, we suggested that, in light of such signifi cant cases of fi nancial fraud, mismanagement, criminality and deceit, the relevance of business ethics could no longer be questioned. Sadly, though we are now several editions into the publication, these very same issues are as much alive today as they were a decade ago—and decades prior to our original publication. While our second edition was preceded by the fi nancial meltdown in 2008–2009 and the problems faced by such companies as AIG, Countrywide, Lehman Brothers, Merrill Lynch, and Bear Stearns, and of the fi nancier Bernard Madoff , this current edition continues to witness fi nancial and ethical malfeasance of historic proportions and the inability of market mecha- nisms, internal governance structures, or government regulation to prevent it. As we refl ect upon the ethical corruption and fi nancial failures of the past decade, the importance of ethics is all too apparent. The questions today are less about whether ethics should be a part of business strategy and, by necessity, the business school curriculum, than about which values and principles should guide business decisions and how ethics should be integrated within business and business education. This textbook provides a comprehensive yet accessible introduction to the ethi- cal issues arising in business. Students who are unfamiliar with ethics will fi nd that they are as unprepared for careers in business as students who are unfamiliar with accounting and fi nance. It is fair to say that students will not be fully prepared, even within traditional disciplines such as accounting, fi nance, human resource management, marketing, and management, unless they are suffi ciently knowledge- able about the ethical issues that arise specifi cally within and across those fi elds. While other solid introductory textbooks are available, several signifi cant fea- tures make this book distinctive. We emphasize a decision-making approach to ethics, and we provide strong pedagogical support for both teachers and students throughout the entire book. In addition, we bring both of these strengths to the students through a pragmatic discussion of issues with which they are already often familiar, thus approaching them through subjects that have already gener- ated their interest. New to the Third Edition While our goal for the third edition remains the same as for the fi rst—to pro- vide “a comprehensive yet accessible introduction to the ethical issues arising in business”—you will notice a few changes. To begin, we are enthusiastic to har29457_fm_i-xvi.indd viii har29457_fm_i-xvi.indd viii 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages Preface ix introduce a third author to our mix, Dr. Chris MacDonald. You will fi nd his complete biography elsewhere in the text. Inviting Dr. MacDonald to join our author team enriches the book’s sense of hands-on reality. We believe that you will fi nd that Dr. MacDonald, an infl uential thought leader in our fi eld, has a remarkable ability to take today’s complicated business transactions and help us to distill their complexities into completely understandable terms. Because we found ourselves often relying on his work to keep abreast of the latest hap- penings in business ethics, we thought it would be a good idea just to bring him aboard as a co-author! Gratefully, he was willing to join us. While you might notice Dr. MacDonald’s contributions throughout the text in terms of the Reality Checks and Decision Points, in particular, we have worked to enhance our focus on decision making as well as the emphasis on all elements on both personal and policy-level perspectives on ethics. We continue to provide pedagogical support throughout the text and, with Dr. MacDonald’s contributions, we have provided many new versions of distinct items such as the Reality Checks, Decision Points, and a number of new readings to refl ect new cases, examples, and up-to-the-minute data. Among these changes are the following: • More than 20 new end-of-chapter readings, averaging more than two new read- ings for each chapter. • New readings off ering international and global perspectives. • New or updated cases to serve as Opening Decision Points in every chapter. • New readings on stakeholder theory. • Extremely timely and expanded textual coverage of such topics as the Enbridge oil spill in Canada’s Northwest Territories, the MBA Oath, whistle-blowers, Goldman Sachs and corporate culture, social media and the employment con- text, bullying in the workplace, and the growing LIBOR scandal. Finally, we have made numerous small editorial changes in each chapter to make the text more readable, to clarify concepts, to better integrate theory and practice, and to improve end-of-chapter questions to better support assessment of student learning, group projects, and classroom discussion. har29457_fm_i-xvi.indd ix har29457_fm_i-xvi.indd ix 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages x Acknowledgments A textbook should introduce students to the cutting edge of the scholarly research that is occurring within a fi eld. As in any text that is based in part on the work of others, we are deeply indebted to the work of our colleagues who are doing this research. We are especially grateful to those scholars who graciously granted us personal permission to reprint their materials in this text: Christine Bader Norm Bowie Michael Cranford Marc Gunther Carl Hausman Joseph Heath Avner Levin Gael O’Brien Dennis Moberg Richard Moberly Tara Radin Bob Tricker Theo Vermaelen Lindsey Wylie Our book is a more eff ective tool for both students and faculty because of their generosity. In addition, we wish to express our deepest gratitude to the reviewers and others whose eff orts served to make this manuscript infi nitely more eff ective: Crina Archer, Northwestern University Matthew Brophy, High Point University Robin T. Byerly, Appalachian State University Joseph Leo Lynch, Indiana Wesleyan University Joseph A. Petrick, Wright State University Cheri Ann Sherman, Ramapo College of New Jersey Gary Wilson, Columbia College of Missouri Our thanks also go out to the team at McGraw-Hill/Irwin who helped this book come into existence: Brent Gordon, Vice President, General Manager Paul Ducham, Publisher Laura Hurst Spell, Managing Development Editor Claire Wood, Editorial Coordinator Erin Melloy, Project Manager Elizabeth Trepkowski, Marketing Manager har29457_fm_i-xvi.indd x har29457_fm_i-xvi.indd x 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages xi Brief Contents Preface viii 1 Ethics and Business 1 2 Ethical Decision Making: Personal and Professional Contexts 45 3 Philosophical Ethics and Business 101 4 The Corporate Culture—Impact and Implications 147 5 Corporate Social Responsibility 211 6 Ethical Decision Making: Employer Responsibilities and Employee Rights 261 7 Ethical Decision Making: Technology and Privacy in the Workplace 335 8 Ethics and Marketing 401 9 Business and Environmental Sustainability 475 10 Ethical Decision Making: Corporate Governance, Accounting, and Finance 523 Glossary 571 Index 580 har29457_fm_i-xvi.indd xi har29457_fm_i-xvi.indd xi 24/01/13 3:56 PM 24/01/13 3:56 PM Confi rming Pages Confi rming Pages xii Table of Contents About the Authors vi Preface viii Chapter 1 Ethics and Business 1 Opening Decision Point: Selling Less Meat 2 Introduction: Making the Case for Business Ethics 3 Business Ethics as Ethical Decision Making 10 Business Ethics as Personal Integrity and Social Responsibility 12 Ethics and the Law 19 Ethics as Practical Reason 24 Readings 29 1-1 Value Shift 29 1-2 Review of Debra Satz’s Why Some Things Should Not Be for Sale 35 1-3 The MBA Oath 40 1-4 The Oath Demands a Commitment to Bad Corporate Governance 40 1-5 The MBA Oath Helps Remind Graduates of Their Ethical Obligations 42 Chapter 2 Ethical Decision Making: Personal and Professional Contexts 45 Opening Decision Point: What Would You Do? 46 Introduction 46 A Decision-Making Process for Ethics 47 When Ethical Decision Making Goes Wrong: Why Do “Good” People Engage in “Bad” Acts? 59 Ethical Decision Making in Managerial Roles 63 Readings 67 2-1 The Parable of the Sadhu 67 2-2 Managing for Stakeholders 74 2-3 What Stakeholder Theory Is Not 86 2-4 What’s Wrong—and What’s Right—with Stakeholder Management 91 2-5 When Good People Do Bad Things at Work: Rote Behavior, Distractions, and Moral Exclusion Stymie Ethical Behavior on the Job 97 Chapter 3 Philosophical Ethics and Business 101 Opening Decision Point: Executive Compensation: Needed Incentives, Justly Deserved, or Just Distasteful? 102 Introduction: Ethical Frameworks: Consequences, Principles, Character 104 Utilitarianism: Making Decisions Based on Ethical Consequences 106 Utilitarianism and Business 108 Challenges to Utilitarian Ethics 111 An Ethics of Principles and Rights 113 Human Rights and Duties 116 Human Rights and Social Justice 118 Human Rights and Legal Rights 121 Challenges to an Ethics of Rights and Duties 122 Virtue Ethics: Making Decisions Based on Integrity and Character 123 A Decision-Making Model for Business Ethics Revisited 128 Readings 131 3-1 The U.N. Guiding Principles on Business and Human Rights: Analysis and Implementation 132 3-2 The Caux Principles for Responsible Business 138 3-3 It Seems Right in Theory but Does It Work in Practice? 140 har29457_fm_i-xvi.indd xii har29457_fm_i-xvi.indd xii 2/1/13 4:10 PM 2/1/13 4:10 PM Confi rming Pages Confi rming Pages Table of Contents xiii Chapter 4 The Corporate Culture—Impact and Implications 147 Opening Decision Point: Creating an Ethics Program 148 What Is Corporate Culture? 149 Culture and Ethics 153 Compliance and Value-Based Cultures 156 Ethical Leadership and Corporate Culture 158 Eff ective Leadership and Ethical, Eff ective Leadership 162 Building a Values-Based Corporate Culture 163 Mission Statements, Credos, Codes of Conduct, and Statements of Values 164 Developing the Mission and Code 164 Culture Integration: Ethics Hotlines, Ombudspersons, and Reporting 168 Assessing and Monitoring the Corporate Culture: Audits 171 Mandating and Enforcing Culture: The Federal Sentencing Guidelines for Organizations 173 Readings 186 4-1 Leadership in a Values-Based Organization: The Sears Lectureship in Business Ethics at Bentley College—Thursday, February 7, 2002 187 4-2 Assessment and Plan for Organizational Culture Change at NASA 191 4-3 Does the Company Get It?—20 Questions to Ask Regarding Compliance, Ethics, and Risk Management 193 4-4 Whistleblower Policies in United States Corporate Codes of Ethics 201 4-5 Greg Smith, Goldman Sachs, and the Importance of Corporate Culture 206 Chapter 5 Corporate Social Responsibility 211 Opening Decision Point: Walmart’s Ethics 212 Introduction 216 Ethics and Social Responsibility 217 Philanthropic Model of CSR 222 Social Web Model of CSR 223 Example of a Social Web Model: Stakeholder Theory 224 Integrative Model of CSR 226 The Implications of Sustainability in the Integrative Model of CSR 227 Exploring Enlightened Self-Interest: Does “Good Ethics” Mean “Good Business”? 229 Readings 239 5-1 Rethinking the Social Responsibility of Business: A Reason Debate Featuring Milton Friedman, Whole Foods’ John Mackey, and Cypress Semiconductor’s T. J. Rodgers 239 5-2 BP and Corporate Social Responsibility 248 5-3 The Link Between Competitive Advantage and Corporate Social Responsibility 250 5-4 The Case Against Corporate Social Responsibility 256 Chapter 6 Ethical Decision Making: Employer Responsibilities and Employee Rights 261 Opening Decision Point: American Apparel: Image Consciousness? 262 Introduction 264 Ethical Issues in the Workplace: The Current Environment 264 Defi ning the Parameters of the Employment Relationship 266 Due Process and Just Cause 267 Downsizing 272 Health and Safety 276 Health and Safety as Acceptable Risk 276 Health and Safety as Market Controlled 279 Health and Safety—Government-Regulated Ethics 282 Global Applications: The Global Workforce and Global Challenges 283 The Case of Child Labor 288 har29457_fm_i-xvi.indd xiii har29457_fm_i-xvi.indd xiii 2/1/13 4:10 PM 2/1/13 4:10 PM Confi rming Pages Confi rming Pages xiv Table of Contents Rights and Responsibilities in Confl ict: Discrimination, Diversity, and Affi rmative Action 290 Discrimination 290 Diversity 294 Affi rmative Action 297 Readings 310 6-1 Confessions of a Sweatshop Inspector 310 6-2 Sweatshops, Choice, and Exploitation 315 6-3 Apple’s Factories in China Are Breaking Employment Laws 328 6-4 What’s So Bad about Apple’s Factories? 330 6-5 American Apparel and the Ethics of a Sexually Charged Workplace 331 Chapter 7 Ethical Decision Making: Technology and Privacy in the Workplace 335 Opening Decision Point: Being Smart about Smartphones 336 Introduction 337 The Right to Privacy 339 Defi ning Privacy 339 Ethical Sources of a Right to Privacy 340 Legal Sources of a Right to Privacy 341 Global Applications 344 Linking the Value of Privacy to the Ethical Implications of Technology 347 Information and Privacy 348 Managing Employees through Monitoring 350 Monitoring Employees through Drug Testing 354 Other Forms of Monitoring 357 Business Reasons to Limit Monitoring 359 Balancing Interests 360 Regulation of Off -Work Acts 362 Privacy Rights since September 11, 2001 366 Readings 378 7-1 Drug Testing and the Right to Privacy: Arguing the Ethics of Workplace Drug Testing 379 7-2 The Ethical Use of Technology in Business 384 7-3 Hiring in a Social Media Age 390 7-4 Genetic Testing in the Workplace 392 Chapter 8 Ethics and Marketing 401 Opening Decision Point: Marketing Pharmaceuticals 402 Introduction 404 Marketing: An Ethical Framework 406 Responsibility for Products: Safety and Liability 410 Contractual Standards for Product Safety 411 Tort Standards for Product Safety 413 Strict Product Liability 418 Ethical Debates on Product Liability 418 Responsibility for Products: Advertising and Sales 420 Ethical Issues in Advertising 422 Marketing Ethics and Consumer Autonomy 423 Marketing to Vulnerable Populations 426 Supply Chain Responsibility 432 Sustainable Marketing 435 Product 435 Price 436 Promotion 438 Placement 441 Readings 445 8-1 The Friendship of Buzz, Blog and Swag 445 8-2 Privacy, Profi t, & the Delicate Balance 453 8-3 First Analysis of Online Food Advertising Targeting Children 455 8-4 Fortune at the Bottom of the Pyramid 458 8-5 POM Wonderful 472 Chapter 9 Business and Environmental Sustainability 475 Opening Decision Point: When Is Building Design and Construction an Ethical Issue? 476 Introduction 477 Business Ethics and Environmental Values 480 har29457_fm_i-xvi.indd xiv har29457_fm_i-xvi.indd xiv 2/1/13 4:10 PM 2/1/13 4:10 PM