Business ethics a stakehoder and issues management approach joseph weiss

Business Ethics


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Business Ethics
A Stakeholder and Issues
Management Approach
with Cases
Fifth Edition

Joseph W. Weiss
Bentley College

Australia • Canada • Mexico • Singapore • Spain • United Kingdom • United States


Business Ethics: A Stakeholders and Issues
Management Approach,
Fifth Edition
Joseph W. Weiss
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Brief Contents
Chapter 1
Business Ethics, the Changing Environment, and
Stakeholder Management 1
Chapter 2
Stakeholder and Issues Management Approaches 39
Chapter 3
Ethical Principles, Quick Tests, and Decision-Making
Guidelines 95

Chapter 4
The Corporation and External Stakeholders:
Corporate Governance: From the Boardroom to the
Marketplace 155
Chapter 5
Corporate Responsibilities, Consumer Stakeholders,
and the Environment 223
Chapter 6
The Corporation and Internal Stakeholders:

Values-Based Moral Leadership, Culture,
Strategy, and Self-Regulation 277
Chapter 7
Employee Stakeholders and the Corporation 341
Chapter 8
Business Ethics Stakeholder Management in the
Global Environment 417

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Contents
Preface xvii
Case Authorship xxv
Chapter 1
Business Ethics, the Changing Environment, and
Stakeholder Management 1
1.1 Business Ethics and the Changing Environment 3
Seeing the “Big Picture” 5
Environmental Forces and Stakeholders 5
Stakeholder Management Approach 7
1.2 What Is Business Ethics? Why Does It Matter? 8
Unethical Business Practices and Employees 9
Ethics and Compliance Programs 10
Why Does Ethics Matter in Business? 11
Working for the Best Companies 12
1.3 Levels of Business Ethics 12

Asking Key Questions 14
Ethical Insight 1.1 15
1.4 Five Myths about Business Ethics 15
Myth 1: Ethics Is a Personal, Individual Affair, Not a
Public or Debatable Matter 16
Myth 2: Business and Ethics Do Not Mix 17
Myth 3: Ethics in Business Is Relative 17
Myth 4: Good Business Means Good Ethics 18
Myth 5: Information and Computing Are Amoral 19

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Contents

1.5 Why Use Ethical Reasoning in Business? 19
1.6 Can Business Ethics Be Taught and Trained? 20
Stages of Moral Development 21
Kohlberg’s Study and Business Ethics 22
1.7 Plan of the Book 22
Chapter Summary 24
Questions 25
Exercises 25
Real-Time Ethical Dilemma 27
Cases 28
Case 1: Enron: What Caused the Ethical Collapse? 28
Case 2: Microsoft: The Next Chapter 32

Chapter 2
Stakeholder and Issues Management Approaches 39
2.1 Why Use a Stakeholder Management Approach for
Business Ethics? 40
Stakeholder Management Approach: Criticisms and
Responses 41
2.2 Stakeholder Management Approach Defined 42
Stakeholders 43
Stakes 44
2.3 How to Execute a Stakeholder Analysis 44
Taking a Third-Party Objective Observer
Perspective 45
Role of the CEO in Stakeholder Analysis 45
Summary of Stakeholder Analysis 52
2.4 Negotiation Methods: Resolving Stakeholder
Disputes 53
Stakeholder Dispute Resolution Methods 53


Contents

2.5 Stakeholder Approach and Ethical Reasoning 56
2.6 Moral Responsibilities of Cross-Functional Area
Professionals 56
Marketing and Sales Professionals and Managers as
Stakeholders 57
R&D, Engineering Professionals, and Managers as
Stakeholders 58
Accounting and Finance Professionals and Managers
as Stakeholders 59

Public Relations Managers as Stakeholders 59
Human Resource Managers as Stakeholders 60
Summary of Managerial Moral Responsibilities 60
2.7 Issues Management, Stakeholder Approach, and Ethics:
Integrating Frameworks 60
What Is a Public “Issue”? 61
Other Public Issues 61
Stakeholder and Issues Management: “Connecting
the Dots” 62
Moral Dimensions of Stakeholder and Issues
Management 63
Introduction to Issues Management: Two
Frameworks 63
2.8 Managing Crises 68
How Executives Have Responded to Crises 70
Crisis Management Recommendations 72
Chapter Summary 73
Ethical Insight 2.1 74
Questions 75
Exercises 75
Real-Time Ethical Dilemma 77

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Contents

Cases 79

Case 3: Mattel Toy Recalls 79
Case 4: JetBlue: Bringing Humanity Back to
Air Travel? 84
Case 5: Arthur Andersen: Shredding the Reputation
and Viability of a Once Venerable Accounting Firm 88

Chapter 3
Ethical Principles, Quick Tests, and Decision-Making
Guidelines 95
3.1 Ethical Dilemmas, Decision Criteria, Moral Creativity, and
Ethical Reasoning 96
Ethical Insight 3.1 97
3.2 Levels and Types of Ethical Issues and Dilemmas 98
Moral Creativity 100
12 Questions to Get Started 101
Three Criteria in Ethical Reasoning 102
Moral Responsibility 103
3.3 Utilitarianism: A Consequentialist (Results-Based)
Approach 104
Utilitarianism and Stakeholder Analysis 107
3.4 Universalism: A Deontological (Duty-Based) Approach 107
Universalism and Stakeholder Analysis 108
3.5 Rights: A Moral and Legal Entitlement-Based Approach 109
Rights and Stakeholder Analysis 110
3.6 Justice: Procedures, Compensation, and Retribution 110
Rights, Power, and “Transforming Justice” 112
Justice and Stakeholder Analysis 112
3.7 Virtue Ethics: Character-Based Virtues 113
Virtue Ethics and Stakeholder Analysis 114

Contents

3.8 The Common Good 114
3.9 Ethical Relativism: A Self-Interest Approach 115
Ethical Relativism and Stakeholder Analysis 117
3.10 Immoral, Amoral, and Moral Management 118
3.11 Four Social Responsibility Roles 119
3.12 Individual Ethical Decision-Making Styles 121
Communicating and Negotiating across Ethical
Styles 122
3.13 Quick Ethical Tests 123
3.14 Concluding Comments 124
Back to Louise Simms… 124
Chapter Summary 124
Questions 125
Exercises 126
Real-Time Ethical Dilemma 128
Cases 129
Case 6: Samuel Waksal and ImClone 129
Case 7: Aaron Feuerstein and Malden Mills: How
Values Guided Actions in a Post-Crisis Situation 132
Case 8: Jerome Kerviel: Rogue Trader or Misguided
Employee 136
Case 9: Seeking Two Kinds of Green: Richard
Branson’s Venture into Biofuels 143
Case 10: Ford’s Pinto Fires: The Retrospective View
of Ford’s Field Recall Coordinator 146

Chapter 4

The Corporation and External Stakeholders:
Corporate Governance: From the Boardroom
to the Marketplace 155
4.1 Managing Corporate Social Responsibility in the
Marketplace 157

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Contents

Ethical Insight 4.1 158
Free-Market Theory and Corporate Social
Responsibility 158
Problems with the Free-Market Theory 159
4.2 Managing Corporate Responsibility with External
Stakeholders 160
The Corporation as Social and Economic
Stakeholder 160
The Social Contract: Dead or Desperately
Needed? 160
Balance between Ethical Motivation and
Compliance 162
Covenantal Ethic 162
The Moral Basis and Social Power of Corporations as
Stakeholders 163
Corporate Philanthropy 164
Managing Stakeholders Profitably and Responsibly:

Reputation Counts 164
Ethical Insight 4.2 165
4.3 Managing and Balancing Corporate Governance, Compliance, and Regulation 166
Ethical Insight 4.3 167
Top Ten Companies: Best Corporate Board Governance Practices 169
Sarbanes-Oxley Act 171
Pros and Cons of Implementing the Sarbanes-Oxley
Act 172
Revised 1991 Federal Sentencing Guidelines: Compliance Incentive 174
4.4 The Role of Law and Regulatory Agencies and Corporate
Compliance 176


Contents

Why Regulation? 178
Laws and U.S. Regulatory Agencies 179
Laws Protecting Consumers 179
Laws Protecting the Environment 180
4.5 Managing External Issues and Crises: Lessons from the
Past (Back to the Future?) 181
Chapter Summary 188
Questions 188
Exercises 189
Real-Time Ethical Dilemma 191
Cases 192
Case 11: Reinventing Napster: How Many Lives for
the Cat with Headphones? 192
Case 12: VIOXX, Dodge Ball: Did Merck Try to Avoid
the Truth? 196

Case 13: “Who Killed the Electric Car?” 203
Case 14: Skype and Peer-to-Peer VoIP Technology:
Too Good to Be True? 211

Chapter 5
Corporate Responsibilities, Consumer Stakeholders,
and the Environment 223
5.1 Corporate Responsibility toward Consumer
Stakeholders 224
Corporate Responsibilities and Consumer Rights 225
Consumer Protection Agencies and Law 227
5.2 Corporate Responsibility in Advertising 228
Ethics and Advertising 229
The FTC and Advertising 230
Pros and Cons of Advertising 230

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Contents

Ethical Insight 5.1 231
Advertising and Free Speech 232
Ethical Insight 5.2 234
Paternalism, Manipulation, or Free Choice? 235
5.3 Controversial Issues in Advertising: The Internet,
Children, Tobacco, and Alcohol 235
Advertising and the Internet 235

Ethical Insight 5.3 237
Advertising to Children 239
Tobacco Advertising 241
The Tobacco Controversy Continues 241
Alcohol Advertising 242
Ethical Insight 5.4 243
5.4 Managing Product Safety and Liability Responsibly 244
How Safe Is Safe? The Ethics of Product Safety 244
Ethical Insight 5.5 245
Product Liability Doctrines 247
Legal and Moral Limits of Product Liability 248
Product Safety and the Road Ahead 249
5.5 Corporate Responsibility and the Environment 250
Most Significant Environmental Problems 250
Causes of Environmental Pollution 253
Enforcement of Environmental Laws 253
The Ethics of Ecology 254
Green Marketing, Environmental Justice, and Industrial Ecology 255
Rights of Future Generations and Right to a Livable
Environment 256
Recommendations to Managers 256


Contents

Chapter Summary 258
Questions 259
Exercises 259
Real-Time Ethical Dilemma (or Not?) 260
Cases 261

Case 15: Facebook’s Beacon: Marketer’s Treasure
or User’s Nightmare? 261
Case 16: Genetic Discrimination 265

Chapter 6
The Corporation and Internal Stakeholders:
Values-Based Moral Leadership, Culture, Strategy,
and Self-Regulation 277
6.1 Leadership and Stakeholder Management 278
Defining Purpose, Mission, and Values 279
Ethical Insight 6.1 286
Leadership Stakeholder Competencies 287
Example of Companies Using Stakeholder
Relationship Management 291
Spiritual Values, Practices, and Moral Courage in
Leading 292
Failure of Ethical Leadership 294
Ethical Dimensions of Leadership Styles 295
How Should CEOs as Leaders Be Evaluated and
Rewarded? 297
6.2 Organizational Culture, compliance, and Stakeholder
Management 299
Organizational Culture Defined 300
High-Ethics Companies 302
Weak Cultures 302

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Contents

6.3 Leading and Managing Strategy and Structure 304
Organizational Structure 305
Boundaryless and Networked Organizations 307
6.4 Leading and Balancing Internal Stakeholder Values in the
Organization 307
6.5 Corporate Self-Regulation and Ethics Programs:
Challenges and Issues 310
Organizations and Leaders as Moral Agents 312
Ethics Codes 312
Codes of Conduct 312
Problems with Ethics and Conduct Codes 314
Ombuds and Peer Review Programs 314
Is the Organization Ready to Implement a ValuesBased Stakeholder Approach? A Readiness
Checklist 316
Chapter Summary 317
Questions 319
Exercises 320
Real-Time Ethical Dilemma 321
Real-Time Ethical Dilemma 324
Cases 325
Case 17: Commitments to Sustainability in the
Oil and Gas Industry: Do the Actions Match the
Words? 325
Case 18: What’s Written versus Reality: Ethical
Dilemmas in a Hi-tech Public Relations Firm 328

Chapter 7

Employee Stakeholders and the Corporation 341
7.1 Employee Stakeholders in the changing Workforce 343
The Aging Workforce 343


Contents

Generational Differences in the Workplace 344
Steps for Integrating a Multigenerational
Workforce 346
Ethical Insight 7.1 347
Women in the Workforce 348
Same-Sex Marriages, Civil Unions, Domestic Partnerships, and Workforce Rights 350
The Increasing Cultural Mix: Minorities Are Becoming
the Majority 351
Educational Weaknesses and Gaps 351
Mainstreaming Disabled Workers 352
Balancing Work/Life in Families 352
7.2 The Changing Social Contract between Corporations and
Employees 353
Good Faith Principle Exception 354
Public Policy Principle Exception 354
Implied Contract Exception 354
7.3 Employee and Employer Rights and Responsibilities 356
Moral Foundation of Employee Rights 357
The Principle of Balance in the Employee and
Employer Social Contract and the Reality of
Competitive Change 358
Rights from Government Legislation 359
Employer Responsibilities to Employees 359

Employee Rights and Responsibilities to
Employers 361
Employee Rights in the Workplace 361
Other Employee Rights and Obligations to
Employers 365
Ethical Insight 7.2 366

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Contents

7.4 Discrimination, Equal Employment Opportunity, and
Affirmative Action 372
Discrimination 372
Equal Employment Opportunity and the Civil Rights
Act 373
Age and Discrimination in the Workplace 374
Comparable Worth and Equal Pay 375
Affirmative Action 375
Ethics and Affirmative Action 376
Reverse Discrimination: Arguments against
Affirmative Action 377
Ethical Insight 7.3 378
7.5 Sexual Harassment in the Workplace 379
What Is Sexual Harassment? 379
Who Is Liable? 380
Tangible Employment Action and Vicarious

Liability 380
Sexual Harassment and Foreign Firms in the
United States 382
7.6 Whistle-Blowing versus Organizational Loyalty 385
When Whistle-Blowers Should
Not Be Protected 387
Factors to Consider before Blowing
the Whistle 388
Managerial Steps to Prevent External
Whistle-Blowing 388
Chapter Summary 389
Questions 390
Exercises 391
Real-Time Ethical Dilemma 392


Contents

Cases 393
Case 19: Wal-Mart: Ongoing Challenges with Gender
Discrimination 393
Case 20:“Don’t Ask, Don’t Tell”: A Policy on Gays in
the Military 398
Case 21: Women on Wall Street: Fighting for Equality
in a Male-Dominated Industry 403

Chapter 8
Business Ethics Stakeholder Management in the
Global Environment 417
8.1 The Connected Global Economy and Globalization 418

Ethical Insight 8.1 419
8.2 Managing and Working in a “Flat World”: Professional
Competencies and Ethical Issues 423
Shared Leadership in Teams’ Competency 427
Ethical Insight 8.2 428
Global Ethical Values and Principles 429
Know Your Own Cultural and Core Values, Your
Organization’s, and Those with Whom You Are
Working 431
Cross-Cultural Business Ethical Issues Professionals
May Experience 433
8.3 Societal Issues and Globalization:
The Dark Side 440
Crime and Corruption 440
Economic Poverty and Child Slave Labor 442
The Global Digital Divide 443
Westernization (Americanization) of Cultures 443
Loss of Nation-State Sovereignty 444

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Contents

8.4 Multinational Enterprises as Stakeholders 445
Power of Multinational Enterprises 446
8.5 Triple Bottom Line, Social Entrepreneurship, and
Microfinancing 452

Social Enterpreneurs and Social Enterprises 453
8.6 MNEs: Stakeholder Values, Guidelines, and Codes for
Managing Ethically 453
Employment Practices and Policies 454
Consumer Protection 455
Environmental Protection 455
Political Payments and Involvement 455
Basic Human Rights and Fundamental Freedoms 456
8.7 Cross-Cultural Ethical Decision-Making and Negotiation
Methods 456
External Corporate Monitoring Groups 457
Individual Stakeholder Methods for Ethical
Decision Making 458
Four Typical Styles of International Ethical
Decision Making 461
Hypernorms, Local Norms, and Creative Ethical
Navigation 462
Chapter Summary 464
Questions 466
Exercises 467
Real-Time Ethical Dilemma 469
Real-Time Ethical Dilemma 470


Contents

Cases 471
Case 22: China, India, and Wal-Mart: Issues of Price,
Quality, and Sourcing 471
Case 23: Google Goes to China 474

Case 24: Sweatshops: Are Companies Willing to Solve
the Problem? 479

Index 489

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Preface
Visit a major news Web site, read any major newspaper or business journal, turn on any major broadcast network like CNN, or tune into satellite
radio news, and you will find an event, a crisis, or an issue that relates a
corporation’s activities to ethical issues and implications. Whether it is the
subprime lending crisis, a global climate change, the fading middle class in
America, a major political figure who has violated public trust, or events in
China and India that affect the U.S. economy, questions quickly arise: Who
is right? Who is wrong? Does someone stand to gain or lose? Was someone
hurt? Who is liable? Should someone pay damages? Who acted responsibly?
Who did not? Will justice be served? And, perhaps, how does this affect me,
my work, and my life?
Business ethics is about relationships, values, justice, and identity (personal,
professional, corporate, national, and global). It also concerns the intersection between business and ethics and is fundamental to the relationships between business and society at large. Why does the modern corporation exist
in the first place? What is its raison d’être? How does it treat its stakeholders? Business ethics engage these essential questions, and it is also about the
purpose, values, and transactions of and between individuals, groups, and
companies and their global alliances.
With this in mind, students and professionals need straightforward frameworks to thoughtfully and objectively analyze and then sort through complex issues in order to make decisions that matter—ethically, economically,
socially, legally, and spiritually. The post–9/11 world is different. Potential
terrorist threats, ongoing corporate scandals, security issues, globalization,

off-shoring and outsourcing, and what types of work and jobs will be available for graduating students and those returning for advanced degrees all
present business and ethical issues that can and do affect our professional
and personal relationships, careers, and lives.

BUSINESS ETHICS, FIFTH EDITION:
WHY AND HOW THIS TEXT IS DIFFERENT
This text remains a leader in the field, and this edition builds on previous
success factors:
1. Easy to read and apply concepts and methods
2. Interesting news stories, exercises, and examples throughout the text
3. One of the most comprehensive sections on the market: in-depth, realtime customized cases (twenty-four in this edition) designed for this
book
4. Ethical dilemmas that have happened to real people, not hypothetical
stories
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Preface

5. Best section on the market on stakeholder and issues methods with
step-by-step explanations, not summarized abstractions
6. A business, managerial perspective with the latest research, not only a
philosophical approach
7. One of the most comprehensive chapters on the market: Chapter 7 is
devoted to updated information and data on specific workforce/workplace trends and issues
8. Comprehensive coverage of Sarbanes-Oxley, federal sentencing guidelines, and codes of conduct
9. Personal, professional, organizational, and global information and
strategies offered with the latest research

THE NEW REVISED FIFTH EDITION
This fifth edition of Business Ethics: A Stakeholder and Issues Management
Approach adds features that enhance your ethical understanding and interest in contemporary issues in the business world. This edition also aligns
even more closely to help students, managers, and leaders achieve international AACSB requirements in their respective fields. Here are the new and
revised changes:
• Eight chapters instead of seven; the eighth chapter expands global and international business topics, including a case on China, India, and Google
in China
• Twenty-four cases, almost all of which are newly created for this text
• New national ethics survey data is included throughout the text, starting
with Chapter 1
• New perspectives on generational differences and ethical workplace issues
have been added to Chapter 6
• Each chapter has new and updated lead-off cases and scenarios to attract
students’ attention
• Expanded coverage of corporate governance laws and values-based
methods
• Updated research and business press findings and stories have been added
to each chapter to explain concepts and perspectives
In addition to providing concrete frameworks for analyzing and discussing a
wide range of ethical issues, the fifth edition of Business Ethics also includes
a full complement of tools for leading discussions and encouraging student
participation:
• Highlighted ethical dilemmas (several are new to this edition) underscore
the fact that difficult business decisions are grounded in ethical dilemmas.
Each dilemma asks students not only to make a choice, but to defend their
decisions and to consider the consequences that inattention to the ethical
implications depicted might bring. Plant closings, audit disclosures, and
the strategic misrepresentation of facts are among the dilemmas examined
in these end-of-chapter dilemmas.