Preface

About OpenStax

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About OpenStax resources

About *Business Ethics*

*Business Ethics* is designed to meet the scope and sequence requirements of the single-semester standardized business ethics course across all majors. This title includes innovative features designed to enhance student learning, including case studies, application scenarios, and links to video interviews with executives, all of which help instill in students a sense of ethical awareness and responsibility. The book provides an important opportunity for students to learn the core concepts of business ethics and understand how to apply those concepts to their professional lives.

Additional resources

About the authors

Why Ethics Matter

Introduction

Being a Professional of Integrity

Acting with Integrity

Clients, customers, suppliers, investors, retailers, employees, the media, the government, members of the surrounding community, competitors, and even the environment are stakeholders in a business; that is, they are individuals and entities affected by the business’s decisions ([link]). Stakeholders typically value a leadership team that chooses the ethical way to accomplish the company’s legitimate for-profit goals. For example, Patagonia expresses its commitment to environmentalism via its “1% for the Planet” program, which donates 1 percent of all sales to help save the planet. In part because of this program, Patagonia has become a market leader in outdoor gear.

Ends, Means, and Character in Business

How, then, should we behave? Philosophy and science help us answer this question. From philosophy, three different perspectives help us assess whether our decisions are ethical on the basis of reason. These perspectives are called normative ethical theories and focus on how people ought to behave; we discuss them in this chapter and in later chapters. In contrast, *descriptive ethical theories* are based on scientific evidence, primarily in the field of psychology, and describe how people tend to behave within a particular context; however, they are not the subject of this book.

Ethics and Profitability

Profitability and Success: Thinking Long Term

Decades ago, some management theorists argued that a conscientious manager in a for-profit setting acts ethically by emphasizing solely the maximization of earnings. Today, most commentators contend that ethical business leadership is grounded in doing right by all stakeholders directly affected by a firm’s operations, including, but not limited to, stockholder**s**, or those who own shares of the company’s stock. That is, business leaders do right when they give thought to what is best for *all* who have a stake in their companies. Not only that, firms actually reap greater material success when they take such an approach, especially over the long run.

Stockholders, Stakeholders, and Goodwill

Earlier in this chapter, we explained that stakeholders are all the individuals and groups affected by a business’s decisions. Among these stakeholders are stockholders (or shareholder**s**), individuals and institutions that own stock (or shares) in a corporation. Understanding the impact of a business decision on the stockholder and various other stakeholders is critical to the ethical conduct of business. Indeed, prioritizing the claims of various stakeholders in the company is one of the most challenging tasks business professionals face. Considering only stockholders can often result in unethical decisions; the impact on all stakeholders must be considered and rationally assessed.

A Brief Introduction to Corporate Social Responsibility

If you truly appreciate the positions of your various stakeholders, you will be well on your way to understanding the concept of corporate social responsibility (CSR). CSR is the practice by which a business views itself within a broader context, as a member of society with certain implicit social obligations and environmental responsibilities. As previously stated, there is a distinct difference between legal compliance and ethical responsibility, and the law does not fully address all ethical dilemmas that businesses face. CSR ensures that a company is engaging in sound ethical practices and policies in accordance with the company’s culture and mission, above and beyond any mandatory legal standards. A business that practices CSR cannot have maximizing shareholder wealth as its sole purpose, because this goal would necessarily infringe on the rights of other stakeholders in the broader society. For instance, a mining company that disregards its corporate social responsibility may infringe on the right of its local community to clean air and water if it pursues only profit. In contrast, CSR places all stakeholders within a proper contextual framework.

Multiple versus Single Ethical Standards

Ethics from Antiquity to the Present

Introduction

The Concept of Ethical Business in Ancient Athens

Ancient Athens

Like a modern metropolis, the city-state (*polis*) of Athens in the fifth century BCE drew people from far afield who wanted a better life. For some, that life meant engaging in trade and commerce, thanks to the openness of the new democracy established under the lawgiver Cleisthenes in 508 BCE. Others were drawn to Athens’ incredibly rich architecture, poetry, drama, religious practices, politics, and schools of philosophy. Youth traveled there hoping to study with such brilliant teachers as the mathematicians Archimedes and Pythagoras; dramatists like Sophocles and Euripides; historians Herodotus and Thucydides; Hippocrates, the father of medicine; and, of course, the renowned but enigmatic philosopher Socrates. More than being the equivalent of rock stars of their day, these thinkers, scholars, and artists challenged youth to pursue truth, no matter the cost to themselves or their personal ambitions. These leaders were interested not in fame or even in personal development but in the creation of an ideal society. This was the Golden Age of ancient Greece, whose achievements were so profound and enduring that they have formed the pillars of Western civilization for nearly two and a half millennia.

Aristotelian Virtue Ethics

For Aristotle, everything that exists has a purpose, or end, and has been designed to meet that end. For instance, the proper end of birds is to fly, that of fish to swim. Birds and fish have been designed with the appropriate means (feathers, fins) to achieve those ends. Teleology, from the Greek *telos* meaning goal or aim, is the study of ends and the means directed toward those ends. What is the *telos* of human beings? Aristotle believed it to be *eudaimonia*, or happiness. By this, he did not mean happiness in a superficial sense, such as having fun or being content. Rather, he equated happiness with human flourishing, which he believed could be attained through the exercise of the function that distinguishes humans from the natural world: reason.

 For Aristotle, reason was supreme and best used to increase not wealth but character. “But what is happiness?” he asked. “If we consider what the function of man is, we find that happiness is a virtuous activity of the soul.”

Honorable Behavior in Business

The common belief in ancient Greece that business and money were somehow tainted reflected Plato’s concept that the physical world was an imperfect expression, or shadow, of the ideal. Everything in the physical world was somehow less than the ideal, and this included the products of human thought and labor. For example, a cow exists in the physical world as an imperfect and temporary expression of the ideal essence of a cow, what we might call “cowness.” (This imperfection accounted for the many variations found in the earthly creature.) Business, as a human invention based on self-interest, also had no appreciable ideal or end. After all, what was the purpose of making money if not having more money? Any end beyond that was not evident. In other words, money existed simply to replicate itself and was fueled by avarice (the love of money) or greed (the love of material goods). “As for the life of the businessman, it does not give him much freedom of action. Besides, wealth is obviously not the good that we are seeking, because it serves only as a means; i.e., for getting something else,” said Aristotle.

Ethical Advice for Nobles and Civil Servants in Ancient China

Social Upheaval in Ancient China

More than a century and a half before Aristotle and on the other side of the globe, Confucius, a wandering preacher from the principality of Lu in China, also struggled to answer life’s questions, although in a practical rather than a philosophical way. Confucius committed himself to healing the social divisions that were tearing China apart under the declining Zhou Dynasty. Those divisions led to what historians call the “Period of the Warring States,” which persisted for two hundred years after Confucius’s death. It was a time of constant warfare and violence.

 To counter the social disintegration he found everywhere, Confucius looked to the past, or “the wisdom of the ancients.” He called for a “return to ***li***,” which was the proper order of the universe in which everyone had a role to play and there was harmony in the world.

Confucian Virtue Ethics

Scholars believe that, like Aristotle, Confucius stressed the virtuous life in his ethical system, with the goal of creating a *junzi*, or a person who was gracious, magnanimous, and cultured: in other words, a flourishing human being. A *junzi* exhibited refinement, self-control, and balance in all things, acting neither rashly nor timidly. Such a person was the opposite of a “small” individual, who spent his or her time embroiled in petty rivalries and for whom power was the ultimate measure of success.

A Confucian Business Model

The spirituality that emerges from *quan* as righteousness is not solely about the individual; it is about the act itself, that is, the transaction, whether that takes place in a market, shop, or loading dock. When righteousness is directed outward in this way, it becomes justice, compelling all parties in a transaction to act in good faith or risk upsetting the proper order of things. Justice in this sense allows for wealth creation, investment, and strategic planning as long as all fulfill their roles and act in the manner of a *junzi*. An overarching spirituality of business may even develop, arising from the people who collectively make up the company. This is a traditionally Confucian way of looking at corporate culture, as the reflection of a larger network of relationships.

Comparing the Virtue Ethics of East and West

East Meets West

Given the vastly different cultural and historical settings of ancient Greece and China, you may be surprised to find similarities between the Aristotelian and Confucian systems of virtue ethics. Yet not only are there similarities but the two systems share the theme of control. For Aristotle, control manifested itself through the deliberative process of *phrónēsis*, resulting in virtuous living, harmony, and happiness. This application of practical wisdom was related to self-restraint, or temperance. In Confucian virtue ethics, control was a function of self-regulation; primitive instincts were held at bay and the person gained the capacity and courage to act more humanely ([link]). This achievement of control benefited not only the individual but also the family and, by extension, the nation. Self-regulation was Confucius’s way of establishing order.

Personal and Professional Roles

Another important characteristic of Eastern and Western systems of virtue ethics is the integration of personal and professional life. A person could not act one way at home and a completely different way in public, especially civic leaders, merchants, teachers, and rulers. The modern tendency to compartmentalize various aspects of ourselves to accommodate circumstances would have puzzled those living in ancient Greece or China. A retail manager who contributes generously to help protect endangered species but thinks nothing of working the sales staff to the point of burnout to achieve monthly goals has not successfully integrated the personal and the professional, for instance, and even poses obstacles to individual happiness and life in the community. Everyone desires efficiency in business, but compartmentalizing our personal and professional ideals can lead to “dispersed personal accountability” in an organization and the kind of financial meltdown that occurred, through greed and rule-breaking, in the housing and financial industries and led to the worldwide recession of 2008.

Is There a Universal Ethics?

A fundamental question in the study of ethics is whether we can identify universal, objective moral truths that cut across cultures, geographic settings, and time. At the most foundational level, the answer might be yes. As Aristotle noted, ethics is not a science but an art.

 Perhaps the best way to answer the question is to consider the methods used for moral decision-making. This strategy would be in line with Aristotelian and Confucian models if we assume that once they attain insight, most people will follow their conscience and act in reasonable, responsible ways. Methods of decision-making then could be adapted to any context or dilemma. But what constitutes a reasonable, responsible method, and who gets to choose it?

Utilitarianism: The Greatest Good for the Greatest Number

Maximizing Utility

During Bentham’s lifetime, revolutions occurred in the American colonies and in France, producing the Bill of Rights and the *Déclaration des Droits de l’Homme* (Declaration of the Rights of Man), both of which were based on liberty, equality, and self-determination. Karl Marx and Friedrich Engels published *The Communist Manifesto* in 1848. Revolutionary movements broke out that year in France, Italy, Austria, Poland, and elsewhere.

 In addition, the Industrial Revolution transformed Great Britain and eventually the rest of Europe from an agrarian (farm-based) society into an industrial one, in which steam and coal increased manufacturing production dramatically, changing the nature of work, property ownership, and family. This period also included advances in chemistry, astronomy, navigation, human anatomy, and immunology, among other sciences.

Synthesizing Rights and Utility

As you might expect, utilitarianism was not without its critics. Thomas Hodgskin (1787–1869) pointed out what he said was the “absurdity” of insisting that “the rights of man are derived from the legislator” and not nature.

 In a similar vein, the poet Samuel Taylor Coleridge (1772–1834) accused Bentham of mixing up morality with law. Others objected that utilitarianism placed human beings on the same level as animals and turned people into utility functions. There were also complaints that it was mechanistic, antireligious, and too impractical for most people to follow. John Stuart Mill sought to answer these objections on behalf of his mentor but then offered a synthesis of his own that brought natural rights together with utility, creating a new kind of utilitarianism, one that would eventually serve to underpin neoclassical economic principles.

The Role of Utilitarianism in Contemporary Business

Utilitarianism is used frequently when business leaders make critical decisions about things like expansion, store closings, hiring, and layoffs. They do not necessarily refer to a “utilitarian calculus,” but whenever they take stock of what is to be gained and what might be lost in any significant decision (e.g., in a cost-benefit analysis), they make a utilitarian determination. At the same time, one might argue that a simple cost-benefits analysis is not a utilitarian calculus unless it includes consideration of all stakeholders and a full accounting of externalities, worker preferences, potentially coercive actions related to customers, or community and environmental effects.

Deontology: Ethics as Duty

Aroused From “Dogmatic Slumber”

In 1781, at the age of fifty-six years, Kant published *Critique of Pure Reason* (*Kritik der Reinen Vernunft*) in Königsberg, Prussia ([link]).

 Almost immediately, it transformed him from an obscure professor of metaphysics and logic into a preeminent figure in the world of philosophy. In the 800-page tome, Kant criticized the way rationalism (“pure reason”) had assumed the mantle of absolute truth, supplanting both religious faith and empirical science. Kant referred to the unquestioned acceptance of rationalism as *dogmatism*. Whether Christian or revolutionary, dogmatic thinking was to be avoided because it obscured the truths of science and religion through flawed logic.

Utilitarianism and Deontology

From a Kantian perspective, it is clear that adherence to duty is what builds the framework for ethical acts. This is in direct contradiction of Bentham’s view of human nature as selfish and requiring an objective calculus for ethical action to result. Kant rejected the idea of such a calculus and believed, instead, that perceptions were organized into preexisting categories or structures of the mind. Compare his notion of an ordered and purposeful universe of laws with the similar *logos*, or logic, of the ancient Greeks. One of those laws included implementation of the categorical imperative to act ethically, in accordance with our conscience. However, even though that imperative ought to be followed without exception, not everyone does so. In Kant’s moral teachings, individuals still had free will to accept or reject it.

Kantian Business Ethics

Unlike utilitarianism, which forms the philosophical foundation for most cost-benefit analysis in business, Kantian ethics is not so easily applied. On one hand, it offers a unique opportunity for the development of individual morality through the categorical imperative to act ethically, which emphasizes humanity and autonomy.

 This imperative addresses one major side of business ethics: the personal. Character and moral formation are crucial to creating an ethical culture. Indeed, business ethics is littered with cases of companies that have suffered damaging crises due to their leaders’ lack of commitment to act on the basis of a good will and with regard for what benefits others. Recent examples include Uber, where a toxic work environment was allowed to prevail, and Volkswagen, which knowingly misrepresented the emissions level of its cars. Such examples exist in government as well, as the recent Theranos and “Fat Leonard” scandals confirm. The latter consisted of graft and corruption in the U.S. Navy’s Pacific fleet and has been a continual source of embarrassment for an institution that prides itself on the honorable conduct of its officers. One person can make a difference, either positively or negatively.

A Theory of Justice

Justice Theory

Rawls developed a theory of justice based on the Enlightenment ideas of thinkers like John Locke (1632–1704) and Jean-Jacques Rousseau (1712–1778), who advocated social contract theory. Social contract theory held that the natural state of human beings was freedom, but that human beings will rationally submit to some restrictions on their freedom to secure their mutual safety and benefit, not subjugation to a monarch, no matter how benign or well intentioned. This idea parallels that of Thomas Hobbes (1588–1679), who interpreted human nature to be selfish and brutish to the degree that, absent the strong hand of a ruler, chaos would result. So people willingly consent to transfer their autonomy to the control of a sovereign so their very lives and property will be secured. Rousseau rejected that view, as did Rawls, who expanded social contract theory to include justice as fairness. In *A Theory of Justice* (1971), Rawls introduced a universal system of fairness and a set of procedures for achieving it. He advocated a practical, empirically verifiable system of governance that would be political, social, and economic in its effects.

The Problem of Redistribution

Part of Rawls’s critique of utilitarianism is that its utility calculus can lead to tyranny. If we define pleasure as that which is popular, the minority can suffer in terrible ways and the majority become mere numbers. This became clear in Mills’s attempt to humanize Bentham’s calculus. But Mills’s harm principle had just as bad an effect, for the opposite reason. It did not require anyone to give up anything if it had to be done through coercion or force. To extend Rawls’s cake example, if one person owned a bakery and another were starving, like Jean Valjean’s sister in *Les Misérables*, utilitarianism would force the baker to give up what he had to satisfy the starving person without taking into account whether the baker had greater debts, a sick spouse requiring medical treatment, or a child with educational loans; in other words, the *context* of the situation matters, as opposed to just the consequences. However, Mill’s utilitarianism, adhering to the harm principle, would leave the starving person to his or her own devices. At least he or she would have one slice of cake. This was the problem of distribution and redistribution that Rawls hoped to solve, not by calculating pleasure and pain, profit and loss, but by applying fairness as a normative value that would benefit individuals and society.

Justice in Business

Although no ethical framework is perfect or fits a particular era completely, Rawls’s justice theory has distinct advantages when applied to business in the twenty-first century. First, as businesses become interdependent and globalized, they must pay more attention to quality control, human resources, and leadership in diverse settings. What will give greater legitimacy to an organization in these areas than fairness? Fairness is a value that is cross-cultural, embraced by different social groups, and understood by nearly everyone. However, what is considered fair depends on a variety of factors, including underlying values and individual characteristics like personality. For instance, not everyone agrees on whether or how diversity ought to be achieved. Neither is there consensus about affirmative action or the redistribution of resources or income. What is fair to some may be supremely unfair to others. This presents an opportunity for engaged debate and participation among the members of Rawls’s community.

Defining and Prioritizing Stakeholders

Introduction

Adopting a Stakeholder Orientation

Stakeholder Relationships

Many individuals and groups inside and outside a business have an interest in the way it brings products or services to market to turn a profit. These stakeholders include customers, clients, employees, shareholders, communities, the environment, the government, and the media (traditional and social), among others. All stakeholders should be considered essential to a business, but not all have equal priority. Different groups of stakeholders carry different weights with decision makers in companies and assert varying levels of interest and influence. As we examine their roles, consider how an organization benefits by working with its stakeholders and how it may benefit from encouraging stakeholders to work together to promote their mutual interests.

Ethical Responsibilities Often Extend Beyond Legal Requirements

We have seen that stakeholders include the people and entities invested in and influential in the success of an organization. It is also true that stakeholders can have multiple, and simultaneous, roles. For example, an employee can also be a customer and a stockholder.

Weighing Stakeholder Claims

The Ethical Basis of Stakeholders’ Claims

Stakeholder claims vary in their significance for a firm. According to Donaldson and Preston,

 there are three theoretical approaches to considering stakeholder claims: a descriptive approach, an instrumental approach, and a normative approach. The descriptive approach sees the company as composed of various stakeholder groups, each with its own interests. These interests impinge on the company to a greater or lesser degree; thus, the main point of the descriptive approach is to develop the most accurate model and act on it in ways that weigh and balance these interests as fairly as possible. The instrumental approach connects stakeholder management and financial outcomes, proposing that appropriate management of stakeholder interests is important and useful because it contributes to a positive bottom line.

Defining Stakeholder Categories

To better understand stakeholder theory and, ultimately, manage stakeholder claims and expectations, it may be helpful to take a closer look at categories of stakeholders. One way to categorize stakeholders is by defining their impact. For example, regulatory stakeholders including stockholders, legislatures, government regulators, and boards of directors are enabling stakeholder**s** because they permit the firm to function. Normative stakeholders such as competitors and peers influence the norms or informal rules of the industry; functional stakeholder**s** are those who influence inputs, such as suppliers, employees, and unions, and those influencing outputs such as customers, distributors, and retailers. Finally, diffused stakeholder**s** include other organizations such as nongovernmental organizations (NGOs), voters, and mass media organizations with less direct relationships but potential for meaningful impacts on firms ([link]).

Ethical Decision-Making and Prioritizing Stakeholders

Stakeholder Prioritization

First, it may help to speak to the expectations that any stakeholders may have of a particular business or institution. It depends on particular stakeholders, of course, but we can safely say that all stakeholders expect a form of satisfaction from an organization. If these stakeholders are shareholders (stockowners), then they generally wish to see a high return on their purchase of company shares. If, on the other hand, they are employees, they typically hope for interesting tasks, a safe work environment, job security, and rewarding pay and benefits. If, yet again, the stakeholders are members of the community surrounding a business, they usually wish that the company not harm the physical environment or degrade the quality of life within it.

Managing Stakeholder Expectations

Stakeholder management does not work if the firm’s prioritizing decisions are based on flawed, inaccurate, or incomplete information. Some tools are available to help. MITRE is a nonprofit research and development consulting firm that helps governments and other large organizations with many stakeholders conduct stakeholder assessment. The MITRE *Guide to Stakeholder Assessment and Management* lays out a five-step system for stakeholder management.

Corporate Social Responsibility (CSR)

Corporate Social Responsibility Defined

In recent years, many organizations have embraced corporate social responsibility (CSR), a philosophy (introduced in Why Ethics Matter,) in which the company’s expected actions include not only producing a reliable product, charging a fair price with fair profit margins, and paying a fair wage to employees, but also caring for the environment and acting on other social concerns. Many corporations work on prosocial endeavors and share that information with their customers and the communities where they do business. CSR, when conducted in good faith, is beneficial to corporations and their stakeholders. This is especially true for stakeholders that have typically been given low priority and little voice, such as the natural environment and community members who live near corporate sites and manufacturing facilities.

CSR and the Environment

Corporations have responded to stakeholder concerns about the environment and sustainability. In 1999, Dow Jones began publishing an annual list of companies for which sustainability was important. Sustainability is the practice of preserving resources and operating in a way that is ecologically responsible in the long term.

 The Dow Jones Sustainability Indices “serve as benchmarks for investors who integrate sustainability considerations into their portfolios.” There is a growing awareness that human actions can, and do, harm the environment. Destruction of the environment can ultimately lead to reduction of resources, declining business opportunities, and lowered quality of life. Enlightened business stakeholders realize that profit is only one positive effect of business operations. In addition to safeguarding the environment, other ethical contributions that stakeholders could lobby corporate management to make include establishing schools and health clinics in impoverished neighborhoods and endowing worthwhile philanthropies in the communities where companies have a presence.

People, Planet, Profit: The Triple Bottom Line

How can corporations and their stakeholders measure some of the effects of CSR programs? The triple bottom line (TBL) offers a way. TBL is a measure described in 1994 by John Elkington, a British business consultant ([link]), and it forces us to reconsider the very concept of the “bottom line.” Most businesses, and most consumers for that matter, think of the bottom line as a shorthand expression of their financial well-being. Are they making a profit, staying solvent, or falling into debt? That is the customary bottom line, but Elkington suggests that businesses need to consider not just one but rather three measures of their *true* bottom line: the economic and also the social and environmental results of their actions. The social and environmental impacts of doing business, called people and planet in the TBL, are the *externalities* of their operations that companies must take into account.

CSR as Public Relations Tool

On the other hand, for some, CSR is nothing more than an opportunity for publicity as a firm tries to look good through various environmentally or socially friendly initiatives without making systemic changes that will have long-term positive effects. Carrying out superficial CSR efforts that merely cover up systemic ethics problems in this inauthentic way (especially as it applies to the environment), and acting simply for the sake of public relations is called greenwashing. To truly understand a company’s approach toward the environment, we need to do more than blindly accept the words on its website or its advertising.

The Ultimate Stakeholder Benefit

CSR used in good faith has the potential to reshape the orientation of multinational corporations to their stakeholders. By positioning themselves as stakeholders in a broader global community, conscientious corporations can be exemplary organizations. They can demonstrate interest and influence on a global scale and improve the way the manufacture of goods and delivery of services serve the local and global environment. They can return to communities as much as they extract and foster automatic financial reinvestment so that people willing and able to work for them can afford not only the necessities but a chance to pursue happiness.

Three Special Stakeholders: Society, the Environment, and Government

Introduction

Corporate Law and Corporate Responsibility

The Advantages of Corporate Status

The concept of limited liability means that the owners (shareholders or stockholders) of corporations, as well as directors and managers, are protected by laws stating that in most circumstances, their losses in case of business failure cannot exceed the amount they paid for their shares of ownership ([link]). The same protection applies to owners of some other business entities such as limited liability companies (LLCs). An LLC is similar to a corporation in that owners have limited liability; however, it is organized and managed more like a partnership. For purposes of granting owners the protection of limited liability, several types of entities are possible within each state, including a corporation, an LLC, a limited liability partnership, and a limited partnership.

Balancing the Many Responsibilities of a Corporation

A longstanding ethical debate about corporate social responsibility asks whether, in fact, a corporation owes a duty to society or only to its shareholders. The line of important court cases shaping this issue spans almost a century and includes a series of landmark cases involving the Ford Motor Company, the Wrigley Company, and Hobby Lobby.

The Two Sides of the Corporate Responsibility Debate

The issue of corporate social responsibility is the subject of high-level global discussion and debate among leaders in the public and private sectors, such as the World Economic Forum Annual Meeting in Davos, Switzerland. Numerous respected academic centers also hold forums on CSR, such as the Center on Democracy, Development, and the Rule of Law at Stanford University and the Harvard Law School Forum on Corporate Governance and Financial Regulation.

Sustainability: Business and the Environment

Environmental Justice

If a business activity harms the environment, what rights does the environment have to fight back? Corporations, although a form of business entity, are actually considered persons in the eyes of the law. Formally, corporate personhood, a concept we touched on in the preceding section, is the legal doctrine holding that a corporation, separate and apart from the people who are its owners and managers, has some of the same legal rights and responsibilities enjoyed by natural persons (physical humans), based on an interpretation of the word “person” in the Fourteenth Amendment.

Why Sustainability Is Good for Business

The notion that the environment should be treated as a person is relatively new. But given the prominence of the environmental movement worldwide, no well-managed business today should be conducted without an awareness of the tenuous balance between the health of the environment and corporate profits. It is quite simply good business practice for executives to be aware that their enterprise’s long-term sustainability, and indeed its profitability, depend greatly on their safeguarding the natural environment. Ignoring this interrelationship between business and the environment not only elicits public condemnation and the attention of lawmakers who listen to their constituents, but it also risks destroying the viability of the companies themselves. Virtually all businesses depend on natural resources in one way or another.

The High Cost of Inaction

According to estimates from the EPA, by the year 2050, Earth’s population will be about ten billion people. Dramatic population growth has had a very significant and often negative human impact on the planet. Not only are there more people to feed, house, and care for, but new technologies allow businesses to harness natural resources in unprecedented amounts. NGOs and government agencies alike have taken notice. For years, the Department of State and the Department of Defense have considered climate change to be a potential threat to the long-term security of the United States. If unmanaged, climate change could pose a risk to both U.S. security and Department of Defense facilities and operations.

 Other respected organizations are also alerting the public to the risks of ignoring climate change.

Environmental Economics and Policy

Some politicians and business leaders in the United States believe that the U.S. system of capitalism and free enterprise is the main reason for the nation’s prosperity over the past two hundred years and the key to its future success. Free enterprise was very effective in facilitating the economic development of the United States, and many people benefited from it. But it is equally true that this could not have happened without the country’s wealth of natural resources like oil, gas, timber, water, and many others. When we consider the environment and the role of sustainability, the question is not whether our system works well with an abundance of natural resources. Rather, we should ask how well it would work in a nation, indeed in a world, in which such resources were severely limited.

Government and the Private Sector

Sustainability and the Public Interest

For two centuries, businesses have profited from using and selling the nation’s natural resources. The tradeoff in a free but regulated economic system such as that in the United States is to allow the continued extraction of natural resources but to require a commitment to protection of the environment in return. This bargain promotes long-term sustainability by balancing the interests of the environment, state and local governments, and users of natural resources. However, this public-private collaboration is not without controversy.

The Revolving Door between Government Regulation and the Private Sector

While private companies may take the initiative in response to public demand, and intergovernmental cooperation can accomplish many good things, sometimes the solution is for a private-sector company or industry to work directly with the government, as we saw with the example of Space X. Given the pressure on federal, state, and local agencies to reduce their budgets, many have increasingly turned to public-private partnerships, or P3s, as a means to solve problems.

Government Regulation and the Constitution

Over the past decade, many politicians have run for office on a platform of reducing government regulation. There are at least two closely related positions on reducing federal government regulation. The first is essentially a states’ rights position that seeks to limit the powers of the federal government to those very specifically enumerated in the Constitution. It is based on principles embodied in the Tenth Amendment and on a narrow interpretation of the Commerce Clause. The Tenth Amendment reserves to the states any right not specifically delegated to the federal government. The Commerce Clause is the part of the Constitution that gives the federal government the right to regulate commerce between states.

The Impact of Culture and Time on Business Ethics

Introduction

The Relationship between Business Ethics and Culture

Business Encounters Culture

To understand the influence of culture on business ethics, it is essential to understand the concepts of enculturation and acculturation. In its most basic anthropological sense, enculturation refers to the process by which humans learn the rules, customs, skills, and values to participate in a society. In other words, no one is born with culture; all humans, regardless of their origin, have to learn what is considered appropriate behavior in their surrounding cultures. Whereas enculturation is the acquisition of any society’s norms and values, acculturation refers specifically to the cultural transmission and socialization process that stems from cultural exchange. The effects of this blending of cultures appear in both the native (original) culture and the host (adopted) culture. Historically, acculturation has often been the result of military or political conquest. Today, it also comes about through economic development and the worldwide reach of the media.

Balancing Beliefs

What about the ethical dimensions of a business in a developed country engaging in commerce in an environment where corruption might be more rampant than at home? How can an organization remain true to its mission and what it believes about itself while honoring local customs and ethical standards? The question is significant because it goes to the heart of the organization’s values, its operations, and its internal culture. What must a business do to engage with local culture while still fulfilling its purpose, whether managers see that purpose as profitability, social responsibility, or a balance between the two?

Consumerism and the Global Marketplace

To paraphrase the ancient Greek philosopher Heraclitus (c. 535–475 BCE), the one constant in life is change. Traditional norms and customs have changed as the world’s population has grown more diverse and urbanized, and as the Internet has made news and other resources readily available. The growing emphasis on consumerism—a lifestyle characterized by the acquisition of goods and services—has meant that people have become defined as “consumers” as opposed to citizens or human beings. Unfortunately, this emphasis eventually leads to the problem of diminishing marginal utility, with the consumer having to buy an ever-increasing amount to reach the same level of satisfaction.

Business Ethics over Time

Shifts in Cultural and Ethical Standards

We find an example of changing cultural mores in the fashion industry, where drastic evolution can occur even over ten years, let alone a century. The changes can be more than simply stylistic ones. Clothing reflects people’s view of themselves, their world, and their values. A woman in the first half of the twentieth century might be very proud to wear a fox stole with its head and feet intact ([link]). Today, many would consider that an ethical faux pas, even as the use of fur remains common in the industry despite active campaigns against it by organizations such as People for the Ethical Treatment of Animals. At the same time, cosmetics manufacturers increasingly pledge not to test their products on animals, reflecting changing awareness of animals’ rights.

A Matter of Time

What effect does time have on business ethics, and how is this effect achieved? If we accept that business today has two purposes—profitability and responsibility—we might assume that business ethics is in a much better position now than in the past to affect conduct across industries. However, much of the transformation of business over time has been the result of direct government intervention; one recent example is the Dodd–Frank Wall Street Reform and Consumer Protection Act that followed the financial crisis of 2008. Yet, despite such regulation and increased management vigilance in the form of ethics training, compliance reporting, whistleblower programs, and audits, it is tempting to conclude that business ethics is in worse shape than ever. The Information Age and the Internet may even have facilitated unethical behavior by making it easier to move large sums of money around undetected, by enabling the spread of misinformation on a global scale, and by exposing the public to the theft and misuse of vast stores of personal data gathered by companies as diverse as Equifax and Facebook.

The Influence of Geography and Religion

Business as Global Relationships

Global relationships teach us to be sensitive not just to other languages and customs but also to other people’s worldviews. A company looking to move its production to another country may be interested in setting up supply, distribution, and value chains that support human rights, worker safety, and equity for women, while the local culture is excited about the economic benefits it will gain from the company’s investment in employment and the local tax base and infrastructure. These goals need not be in conflict, but they must be integrated if the company is to reach an ethically sound agreement with the host country. Dialogue and openness are crucial to this process, just as they are in every other kind of relationship.

Religion and Ethics

A major factor in the difference that geography and culture make in our ethical standards is the influence of religious practice. For example, just as the current debate over the redistribution of goods and services has Christian roots, so the Industrial Revolution in England and northern Europe looked to Protestant Christianity in particular for the values of frugality, hard work, industriousness, and simplicity. Until the seventeenth century, religion and ethics were nearly inseparable. Many believed that people could not be persuaded to do the right thing without the threat of eternal damnation. The Enlightenment’s attempt to peel religion away from ethics was short-lived, with even Kant acknowledging the need to base morality on something beyond the rationalism of his time.

Are the Values Central to Business Ethics Universal?

Absolute Values versus Relative Values

To put this question another way, is there a set of universal values that all can endorse? Are there “human values” that apply everywhere despite differences in time, place, and culture ([link])? If not, and if ethical standards are relative, are they worth having? Again, the UN Universal Declaration of Human Rights is a useful starting point for the way business can conduct itself. Let us look at how it is possible to align business with human rights in such a way that both profitability and responsibility are honored across the globe.

Business Ethics and Compliance

A hallmark of any profession is the existence of ethical guidelines, often based on values like honesty, integrity, and objectivity. Organizational responsibility is fairly straightforward: Comply with applicable local, state, national, and international regulations. Compliance can be an immense task for industries like aerospace, pharmaceuticals, banking, and food production, due to the large number of employees involved, the certification of them that sometimes is necessary, and the requisite record keeping. Still, legal requirements are usually clear, as are the ways an organization can exceed them (as do, for example, companies such as Whole Foods, Zappos, and Starbucks). Personal responsibility is a different matter. It is either less clear what to do or harder to do it because of constant pressure to increase the organization’s profitability and the perception that “everybody else is doing it.”

Normative Business Ethics

Normative business ethics should address systemic issues such as oversight and transparency as well as the character of individuals who make up the organization. Human flourishing may not be the immediate concern of business, but managers and employees have a significant impact on business performance. Giving employees common-sense advice and training in practical ways to counter unethical behavior, as well as ethical role models at the top of the organization, can be more effective than prevention. There are programs that do this, such as “Giving Voice to Values” at the Darden School of Business at the University of Virginia.

 These programs are effective for their ability to help individuals act on their principles. As effective as they may be, however, they beg the larger question not of how someone can act on what their conscience tells them but how to determine what their conscience is telling them in the first place.

What Employers Owe Employees

Introduction

The Workplace Environment and Working Conditions

Ethical Decision-Making and Leadership in the Workplace

A contemporary corporation always owes an ethical, and in some cases legal, duty to employees to be a responsible employer. In a business context, the definition of this responsibility includes providing a safe workplace, compensating workers fairly, and treating them with a sense of dignity and equality while respecting at least a minimum of their privacy. Managers should be ethical leaders who serve as role models and mentors for all employees. A manager’s job, perhaps the most important one, is to give people a reason to come back to work tomorrow.

Workplace Safety under the Occupational Safety and Health Act

The primary federal law ensuring physical safety on the job is the Occupational Safety and Health Act (OSHA), which was passed in 1970.

 The goal of the law is to ensure that employers provide a workplace environment free of risk to employees’ safety and health, such as mechanical or electrical dangers, toxic chemicals, severe heat or cold, unsanitary conditions, and dangerous equipment. OSHA also refers to the Occupational Safety and Health Administration, which operates as a division of the Department of Labor and oversees enforcement of the law. This act created the National Institute for Occupational Safety and Health (NIOSH), which serves as the research institute for OSHA and enunciates appropriate standards for safety and health on the job.

A Workplace Free of Harassment

Employers have an ethical and a legal duty to provide a workplace free of harassment of all types. This includes harassment based on sex, race, religion, national origin, and any other protected status, including disability. Employees should not be expected to work in an atmosphere where they feel harassed, prejudiced against, or disadvantaged. The two complaints most frequently filed with the Equal Employment Opportunity Commission (EEOC), which strives to eliminate racial, gender, and religious discrimination in the workplace, are sexual harassment and racial harassment. Together, these categories made up two-thirds of all cases filed during 2017. More than thirty thousand complaints of sexual, gender, racial, or creedal harassment are filed each year, illustrating the frequency of the problem.

A Satisfied Workforce

Although the workplace should be free of harassment and intimidation of every sort, and management should provide a setting where all employees are treated with dignity and respect, ideally, employers should go much further.

What Constitutes a Fair Wage?

Economic Data as an Indicator of Fair Wages

The Pew Research Center indicates that over the thirty-five years between 1980 and 2014, the inflation-adjusted hourly wages of most middle-income American workers were nearly stagnant, rising just 6 percent, or an average of less than 0.2 percent, per year.

 (The Pew Research Center defines middle-class adults as those living in households with disposable incomes ranging from 65 percent to 200 percent of the national median, which is approximately \$60,000.) The data collected by the Economic Policy Institute, a nonprofit, nonpartisan think tank, show the same stagnant trend. Contrast this picture with the wages of high-income workers, which rose 41 percent over the same years. Many economists, political leaders, and even business leaders admit that increasing wage and wealth disparities are not a sustainable pattern if the U.S. economy is to succeed in the long term. Wage growth for all workers must be fair, which, in most cases, means higher wages for low- and middle-income workers. [link] presents evidence of the growth of the income gap in the United Sates since the start of the great recession in 2007.

Unfair Wages: The Gender Pay Gap

Even after all possible qualifiers have been added, it remains true that women earn less than men. Managers sometimes offer multiple excuses to justify pay inequities between women and men, such as, “Women take time off for having babies” or “Women have less experience,” but these usually do not explain away the differences. The data show that a woman with the same education, experience, and skills, doing the same job as a man, is still likely to earn less, at all levels from bottom to top. According to a study by the Institute for Women’s Policy Research, even women in top positions such as CEO, vice president, and general counsel often earn only about 80 percent of what men with the same job titles earn.

 Data from the EEOC over the five years from 2011 through 2015 for salaries of senior-level officials and managers (defined by the EEOC as those who set broad policy and are responsible for overseeing execution of those policies) show women in these roles earned an average of about \$600,000 per year, compared with their male counterparts, who earned more than \$800,000 per year. That \$200,000 difference amounts to a wage gap of about 35 percent each year.

Experiments in Compensation

Whether we are discussing fair wages, minimum wages, or equal wages, the essence of the debate often boils down to ethics. What should people get paid, who should determine that, and should managers and upper management do only what is required by law or go above and beyond if that means doing what they think is right? Organizational pay structures are set by a variety of methods, including internal policies, the advice of outside compensation consultants, and external data, such as market salaries.

An Organized Workforce

Organized Labor

Americans’ longstanding belief in individualism makes some managers wonder why employees would want or need to be represented by a labor union. The answer is, for the same reasons a CEO wants to be represented by an attorney when negotiating an employment contract, or that an entertainer wants to be represented by an agent. Unions act as the agent/lawyer/negotiator for employees during collective bargaining, a negotiation process aimed at getting management’s agreement to a fair employment contract for members of the union. Everyone wants to be successful in any important negotiation, and people often turn to professionals to help them in such a situation.

Pay and Productivity in the United States

Some managers, politicians, and even members of the general public believe unions are a big part of the reason that U.S. companies have difficulty competing in the global economy. The conservative think tank Heritage Foundation conducted a study that concluded unions may be responsible, in part, for a slower work process and reduced productivity.

 However, multiple other studies indicate that U.S. productivity is up.

Is Management Compensation Fair?

We gain yet another perspective on labor by looking at management compensation relative to that of employees. Between 1978 and 2014, inflation-adjusted CEO pay increased by almost 1,000 percent in the United States, while worker pay rose 11 percent.

 A popular way to compare the fairness of a company’s compensation system with that in other countries is the widely reported pay ratio, which measures how many times greater CEO pay is than the wages for the average employee.

Privacy in the Workplace

Legal and Ethical Aspects of Electronic Monitoring

Monitored workstations, cameras, microphones, and other electronic monitoring devices permit employers to oversee virtually every aspect of employees’ at-work behavior ([link]). Technology also allows employers to monitor every aspect of computer use by employees, such as downloads of software and documents, Internet use, images displayed, time a computer has been idle, number of keystrokes per hour, words typed, and the content of e-mails. According to a survey by the American Management Association, 48 percent of employers used a form of video monitoring in the workplace, and 67 percent monitored employee Internet use. In 30 percent of the organizations responding to the survey, this electronic monitoring had ultimately led to an employee’s termination.

What Constitutes a Reasonable Monitoring Policy?

Many employees generally are not be familiar with the specific details of the law. They may feel offended by monitoring, especially of their own equipment. Companies must also consider the effect on workplace morale if everyone feels spied upon, and the risk that some high-performing employees may decide to look elsewhere for career opportunities. Employers should develop a clear, specific, and reasonable monitoring policy. The policy should limit monitoring to that which is directly work related. For example, if a company is concerned about productivity and the goal of monitoring is to keep tabs on employee performance, then neither keystroke logging nor screenshot recording is necessary; software designed to show idle time or personal Internet use would be more helpful in identifying wasted time, which is the ultimate goal.

Drug Testing in the Workplace

Key issues that arise about a drug testing or monitoring program begin with whether an employer wants or needs to do it. Is it required by law for a particular job, under state or local regulations? Is it for pre-employment clearance? Does the employer need employees’ permission? Does a failed test require mandatory termination? With the exception of employers in industries regulated by the federal government, such as airlines, trucking companies, rail lines, and national security-related firms, federal law is not controlling on the issue of drug testing in the workplace; it is largely a state issue. At the federal level, the Department of Transportation does mandate drug testing for workers such as airline crews and railway conductors and has a specific procedure that must be followed. However, for the most part, drug testing is not mandatory and depends on whether the employer wants to do it. Multiple states do regulate drug testing, but to varying degrees, and there is no common standard to be followed.

What Employees Owe Employers

Introduction

Loyalty to the Company

A Duty of Loyalty

Hard work and our best effort likely make sense as obligations we owe an employer. However, loyalty is more abstract and less easily defined. Most workers do not have employment contracts, so there may not be a specific agreement between the two parties detailing their mutual responsibilities. Instead, the common law (case law) of agency in each state is often the source of the rules governing an employment relationship. The usual depiction of duty in common law is the duty of loyalty, which, in all fifty states, requires that an employee refrain from acting in a manner contrary to the employer’s interest. This duty creates some basic rules employees must follow on the job and provides employers with enforceable rights against employees who violate them.

Differing Concepts of Loyalty

There is no generally agreed-upon definition of an employee’s duty of loyalty to his or her employer. One indicator that our understanding of the term is changing is that millennials are three times more likely than older generations to change jobs, according to a *Forbes* Human Resources Council survey ([link]).

 About nine in ten millennials (91 percent) say they do not expect to stay with their current job longer than three years, compared with older workers who often anticipated spending ten years or even an entire career with one employer, relying on an implicit social contract between employer and employee that rewarded lifetime employment.

Confidentiality

In the competitive world of business, many employees encounter information in their day-to-day work that their employers reasonably expect they will keep confidential. Proprietary (private) information, the details of patents and copyrights, employee records and salary histories, and customer-related data are valued company assets that must remain in-house, not in the hands of competitors, trade publications, or the news media. Employers are well within their rights to expect employees to honor their duty of confidentiality and maintain the secrecy of such proprietary material. Sometimes the duty of confidentiality originates specifically from an employment contract, if there is one, and if not, the duty still exists in most situations under the common law of agency.

Loyalty to the Brand and to Customers

Respecting the Brand

Every company puts time, effort, and money into developing a brand, that is, a product or service marketed by a particular company under a particular name. As Apple, Coca-Cola, Amazon, BMW, McDonald’s, and creators of other coveted brands know, branding—creating, differentiating, and maintaining a brand’s image or reputation—is an important way to build company value, sell products and services, and expand corporate goodwill. In the sense discussed here, the term “brand” encompasses an image, reputation, logo, tagline, or specific color scheme that is trademarked, meaning the company owns it and must give permission to others who would legally use it (such as Tiffany’s unique shade of blue).

Obligations to Customers

As the public’s first point of contact with a company, employees are obliged to assist the firm in forming a positive relationship with customers. How well or poorly they do so contributes a great deal to customers’ impression of the company. And customers’ perceptions affect not only the company but all the employees who depend on its success for their livelihood. Thus, the ethical obligations of an employee also extend to interactions with customers, whom they should treat with respect. Employers can encourage positive behavior toward customers by empowering employees to use their best judgment when working with them.

Contributing to a Positive Work Atmosphere

Getting Along with Coworkers

An employee who gets along with coworkers can help the company perform better. What can employees do to help create a more harmonious workplace with a positive atmosphere?

Understanding Personalities

Understanding the various personalities at work can be a complex task, but it is a vital one for developing a sense of collegiality. One technique that may be helpful is to develop your own emotional intelligence, which is the capacity to recognize other people’s emotions and also to know and manage your own. One aspect of using emotional intelligence is showing empathy, the willingness to step into someone else’s shoes.

Reducing Workplace Violence

As recent incidents have shown—for example, the April 2018 shooting at YouTube headquarters in San Bruno, California

—workplace violence is a reality, and all employees play a role in helping make work a safe, as well as harmonious place. Employees, in fact, have a legal and ethical duty not to be violent at work, and managers have a duty to prevent or stop violence. The National Institute for Occupational Safety and Health reports that violence at work usually fits into one of four categories: traditional criminal intent, violence by one worker against another, violence stemming from a personal relationship, and violence by a customer.

Codes of Conduct

Companies have a right to insist that their employees, including managers, engage in ethical decision-making. To help achieve this goal, most businesses provide a written code of ethics or code of conduct for all employees to follow. These cover a wide variety of topics, from workplace romance and sexual harassment to hiring and termination policies, client and customer entertainment, bribery and gifts, personal trading of company shares in any way that hints of acting on insider knowledge of the company’s fortunes, outside employment, and dozens of others. A typical code of conduct, regardless of the company or the industry, will also contain a variety of standard clauses, often blending legal compliance and ethical considerations ([link]).

Financial Integrity

Insider Trading

The buying or selling of stocks, bonds, or other investments based on nonpublic information that is likely to affect the price of the security being traded is called insider trading. For example, someone who is privy to information that a company is about to be taken over, which will cause its stock price to rise when the information becomes public, may buy the stock before it goes up in order to sell it later for an enhanced profit. Likewise, someone with inside information about a coming drop in share price may sell all his or her holdings at the current price before the information is announced, avoiding the loss other shareholders will suffer when the price falls. Although insider trading can be difficult to prove, it is essentially cheating. It is illegal, unethical, and unfair, and it often injures other investors, as well as undermining public confidence in the stock market.

Bribery and the Foreign Corrupt Practices Act

Another temptation that may present itself to employees is the offer of a bribe. A bribe is a payment in some material form (cash or noncash) for an act that runs counter to the legal or ethical culture of the work environment. Bribery constitutes a violation of the law in all fifty U.S. states, as well as of a federal law that prohibits bribery in international transactions, the Foreign Corrupt Practices Act. Bribery generally injures not only individuals but also competitors, the government, and the free-market system as a whole. Of course, often the bribe is somewhat less obvious than an envelope full of money. It is important, therefore, to understand what constitutes a bribe.

Ethical Leadership

Of course, bribery is just one of many ethical dilemmas an employee might face in the workplace. Not all such dilemmas are governed by the clear-cut rules generally laid out for illegal acts such as bribery. Employees may find themselves being asked to do something that is legal but not considered ethical. For example, an employee might receive confidential proprietary knowledge about another firm that would give his or her firm an unfair competitive advantage. Should the employee act on this information?

Criticism of the Company and Whistleblowing

Limiting Pay Secrecy

For decades, most U.S. companies enforced pay secrecy, a policy that prohibits employees from disclosing or discussing salaries among themselves. The reason was obvious: Companies did not want to be scrutinized for their salary decisions. They knew that if workers were aware of what each was paid, they would question the inequities that pay secrecy kept hidden from them.

Speaking Out on Social Media

Does the First Amendment protect employees at work who criticize their boss or their company? Generally, no. That answer may surprise those who believe that the First Amendment protects all speech. It does not. The Bill of Rights was created to protect citizens from an overreaching government, not from their employer. The First Amendment reads as follows:

Whistleblowing: Risks and Rewards

The act of whistleblowing—going to an official government agency and disclosing an employer’s violation of the law—is different from everyday criticism. In fact, whistleblowing is largely viewed as a public service because it helps society reduce bad workplace behavior. Being a whistleblower is not easy, however, and someone inclined to act as one should expect many hurdles. If a whistleblower’s identity becomes known, his or her revelations may amount to career suicide. Even if they keep their job, whistleblowers often are not promoted, and they may face resentment not only from management but also from rank-and-file workers who fear the loss of their own jobs. Whistleblowers may also be blacklisted, making it difficult for them to get a job at a different firm, and all as a result of doing what is ethical.

Recognizing and Respecting the Rights of All

Introduction

Diversity and Inclusion in the Workforce

Workplace Diversity

The twenty-first century workplace features much greater diversity than was common even a couple of generations ago. Individuals who might once have faced employment challenges because of religious beliefs, ability differences, or sexual orientation now regularly join their peers in interview pools and on the job. Each may bring a new outlook and different information to the table; employees can no longer take for granted that their coworkers think the same way they do. This pushes them to question their own assumptions, expand their understanding, and appreciate alternate viewpoints. The result is more creative ideas, approaches, and solutions. Thus, diversity may also enhance corporate decision-making.

Adding Value through Diversity

Diversity need not be a financial drag on a company, measured as a cost of compliance with no return on the investment. A recent McKinsey & Company study concluded that companies that adopt diversity policies do well financially, realizing what is sometimes called a diversity dividend. The study results demonstrated a statistically significant relationship of better financial performance from companies with a more diverse leadership team, as indicated in [link]. Companies in the top 25 percent in terms of gender diversity were 15 percent more likely to post financial returns above their industry median in the United States. Likewise, companies in the top 25 percent of racial and/or ethnic diversity were 35 percent more likely to show returns exceeding their respective industry median.

The Challenges of a Diverse Workforce

Diversity is not always an instant success; it can sometimes introduce workplace tensions and lead to significant challenges for a business to address. Some employees simply are slow to come around to a greater appreciation of the value of diversity because they may never have considered this perspective before. Others may be prejudiced and consequently attempt to undermine the success of diversity initiatives in general. In 2017, for example, a senior software engineer’s memo criticizing Google’s diversity initiatives was leaked, creating significant protests on social media and adverse publicity in national news outlets.

 The memo asserted “biological causes” and “men’s higher drive for status” to account for women’s unequal representation in Google’s technology departments and leadership.

Accommodating Different Abilities and Faiths

Protections for People with Disabilities

In the United States, the Americans with Disabilities Act (ADA), passed in 1990, stipulates that a person has a disability if he or she has a physical or mental impairment that reduces participation in “a major life activity,” such as work. An employer may not discriminate in offering employment to an individual who is diagnosed as having such a disability. Furthermore, if employment is offered, the employer is obliged to make reasonable accommodations to enable him or her to carry out normal job tasks. Making reasonable accommodations may include altering the physical workplace so it is readily accessible, restructuring a job, providing or modifying equipment or devices, or offering part-time or modified work schedules. Other accommodations could include providing readers, interpreters, or other necessary forms of assistance such as an assistive animal ([link]). The ADA also prohibits discriminating against individuals with disabilities in providing access to government services, public accommodations, transportation, telecommunications, and other essential services.

Managing Religious Diversity in the Workplace

Title VII of the CRA, which governs nondiscrimination, applies the same rules to the religious beliefs (or nonbeliefs) of employees and job applicants as it does to race, gender, and other categories. The essence of the law mandates four tenets that all employers should follow: nondiscrimination, nonharassment, nonretaliation, and reasonable accommodation.

Sexual Identification and Orientation

Legal Protections

Workplace discrimination in this area means treating someone differently solely because of his or her sexual identification or sexual orientation, which can include, but is not limited to, identification as gay or lesbian (homosexual), bisexual, transsexual, or straight (heterosexual). Discrimination may also be based on an individual’s association with someone of a different sexual orientation. Forms that such discrimination may take in the workplace include denial of opportunities, termination, and sexual assault, as well as the use of offensive terms, stereotyping, and other harassment.

Ethical Considerations

In the absence of a specific law, LGBTQ issues present a unique opportunity for ethical leadership. Many companies choose to do the ethically and socially responsible thing and treat all workers equally, for example, by extending the same benefits to same-sex partners that they extend to opposite-sex spouses. Ethical leaders are also willing to listen and be considerate when dealing with employees who may still be coming to an understanding of their sexual identification.

Income Inequalities

The Middle Class in the United States

Data collected by economic researchers at the University of California show that income disparities have become more pronounced over the past thirty-five years, with the top 10 percent of income earners averaging ten times as much income as the bottom 90 percent, and the top 1 percent making more than forty times what the bottom 90 percent does.

 The percentage of total U.S. income earned by the top 1 percent increased from 8 percent to 22 percent during this period. [link] indicates the disparity as of 2015.

Addressing Income Inequality

Robert Reich was U.S. Secretary of Labor from 1993 to 1997 and served in the administrations of three presidents (Gerald Ford, Jimmy Carter, and Bill Clinton). He is one of the nation’s leading experts on the labor market and the economy and is currently the chancellor’s professor of Public Policy at University of California, Berkeley, and a senior fellow at the Blum Center for Developing Economies. Reich recently told this story: “I was visited in my office by the chairman of one of the country’s biggest high-tech firms. He wanted to talk about the causes and consequences of widening inequality and the shrinking middle class, and what to do about it.” Reich asked the chairman why he was concerned. “Because the American middle class is the core of our customer base. If they can’t afford our products in the years ahead, we’re in deep trouble.”

Pay Equity as a Corollary of Income Equality

The issue of income inequality is of particular significance as it relates to women. According to the World Economic Forum (WEF), gender inequality is strongly associated with income inequality.

 The WEF studied the association between the two phenomena in 140 countries over the past twenty years and discovered they are linked virtually everywhere, not only in developing nations. The issue of pay discrimination is addressed elsewhere in this textbook; however, the issue merits mention here as a part of the bigger picture of equality in the workplace. Adding to the disparity in income between men and women is the reality that many women are single mothers with dependent children and sometimes grandchildren. Hence, any reduction in their earning power has direct implications for their dependents, too, constituting injustice to multiple generations.

Animal Rights and the Implications for Business

A Brief History of the Animal Rights Movement

Rhode Island, along with Boulder, Colorado, and Berkeley, California, led the way in enacting legislation recognizing individuals as guardians, not owners, of their animals, thus giving animals legal status beyond being just items of property. Many U.S. colleges now teach courses on animal rights law, there is strong support for granting fundamental legal rights to animals, and some attorneys, scientists, and ethicists dedicate their careers to animal rights.

The Ethics of What We Eat

Concern for the welfare of animals beyond pets brings us to the agribusiness industry. This is where groups such as the ASPCA and HSUS have been particularly active. Agribusiness is a huge industry that provides us with the food we eat, including plant-based and animal-based foodstuffs. The industry has changed significantly over the past century, evolving from one consisting primarily of family and/or small businesses to a much larger one dominated mostly by large corporations. Aspects of this business with relevant and interrelated ethical questions range from ecology, animal rights, and economics to food safety and long-term sustainability ([link]). To achieve a high level of sustainability in the world’s food supply chain, all stakeholders—the political sector, the business sector, the finance sector, the academic sector, and the consumer—must work in concert to achieve an optimal result, and a cost-benefit analysis of ethics in the food industry should include a recognition of all their concerns.

The Use of Animals in Medical and Cosmetic Research

Viewpoints about animals used in medical research are changing in very significant ways and have resulted in a variety of initiatives seeking alternatives to animal testing. As an example, in conjunction with professionals from human and veterinary medicine and the law, the Yale University Hastings Program in Ethics and Health Policy, a bioethics research institute, is seeking alternatives to animal testing that focus on animal welfare.

Regulating the Use of Animals in Research and Testing

Like virtually every other industrialized nation, the United States permits medical experimentation on animals, with few limitations (assuming sufficient scientific justification). The goal of any laws that exist is not to ban such tests but rather to limit unnecessary animal suffering by establishing standards for the humane treatment and housing of animals in laboratories.

Professions under the Microscope

Introduction

Entrepreneurship and Start-Up Culture

The Risks of Entrepreneurship

Although the risk of failure associated with starting a business is real and even high, we hear much in the media about success stories and little about those entrepreneurs who crash and burn. Perhaps the allure of entrepreneurship inevitably outshines any mention of the downside. Still, start-ups impose a higher than normal degree of risk, and we turn to the evidence for this now.

Why Successful Start-Ups Change as They Grow

A legendary example of a start-up that still inspires many today is the Hewlett-Packard Corporation (HP). Its origins lie in the efforts of Bill Hewlett and David Packard, two Stanford University classmates in the 1930s. Much like members of a garage band, they started their company in a real garage, and the firm has outgrown its humble beginnings many times over ([link]).

Entrepreneurial Culture

A fairly common characteristic of successful start-ups is charismatic, driven founders with take-no-prisoner competitive mentalities, as was illustrated earlier in this chapter in the example of Kalanick and the leadership values at Uber. After all, it takes a thick skin and powerful ego to get through the inevitable disappointments that confront a start-up leader. Often, however, even when these self-assured personalities evade the most egregious behavior of a Kalanick, they still remain very difficult for others to abide. Many companies discover that a different leadership ethos is necessary as they grow. Could entrepreneurs still succeed if they also embraced a humanistic leadership style at the outset, or would this invariably undermine the already low initial odds of success? It is a difficult problem with which many firms wrestle. Dedicated employees may be put off by demanding leaders who are harsh, giving little back to loyal workers even after achieving success. New employees may decide the working climate is less congenial than they anticipated and simply leave. This turnstile effect of workers voting on management with their feet constitutes an ethical judgment of repugnant leadership at the top.

The Influence of Advertising

The Rise of Social Media

Relevant to any discussion of the influence and ethics of advertising is the emergence and dominance of social media, which now serve as the format within which many people most often encounter ads. Kelly Jensen, a digital-marketing consultant, observed that we inhabit a “Digital Era” in which “the internet is arguably the single most influential factor of our culture—transforming the way we view communication, relationships, and even ourselves. Social media platforms have evolved to symbolize the status of both individuals and businesses alike. . . Today, using social media to create brand awareness, drive revenue, engage current customers, and attract new ones isn’t optional anymore. Now it is an absolute ‘must.’”

Does Advertising Drive Us to Unnecessary Purchases?

By definition, advertising aims to persuade consumers to buy goods and services, many of which are nonessential. Although consumers have long been encouraged to heed the warning caveat emptor (let the buyer beware), it is a valid question whether advertisers have any ethical obligation to rein in the oft-exaggerated claims of their marketing pitches. Most consumers emphatically would agree that they do.

Is Subliminal Advertising Real?

It may be possible for marketing to be unfairly persuasive in ways that overwhelm the better judgment of consumers. Whether it is the consumers’ responsibility to resist or marketers’ to tone down their appeals, or both, will continue to be debated. Yet the question of where responsibility lies when consumers are steered to make choices certainly has ethical ramifications.

The Insurance Industry

How Insurance Works

The irony of insurance coverage of any sort is that we buy it hoping never to use it. Still, business and consumers alike appreciate that a catastrophic loss can be financially devastating and so they seek to protect against it. Insurance coverage does not prevent illness, accidents, or other unforeseen events from occurring, but it does offer a means to recover, at least partially, from the monetary costs associated with them.

The Ethical Dilemma of Insuring against Natural Disasters

We do not know with certainty what effect climate change will have on the incidence or severity of natural disasters (i.e., accidents that do not appear to have any direct human cause). We do know, however, that these events can be ruinously expensive, for the carriers that insure against them and for those who suffer them and must put their lives back together afterward.

Redlining: Discrimination in Insurance

A specific ethical challenge within the insurance profession is the tendency to engage in redlining. Redlining is the practice of assigning or denying coverage for certain policies, such as auto, homeowners, or business insurance, on the basis of the geographic neighborhoods where applicants for such coverage live, particularly inner-city neighborhoods. A variation on the practice is to charge considerably higher prices for the same coverage in different neighborhoods. Redlining assumes that the propensity for accidents, burglaries, fires, and other catastrophes is higher in some areas than others, so claims and costs will be higher for the insurance carrier.

Ethical Issues in the Provision of Health Care

Multipayer Health Care in the United States

Typically in the United States, medical services have been dispensed through a multipayer health care system, in which the patient and others, such as an employer and a private health insurance company, all contribute to pay for the patient’s care. Germany, France, and Japan also have multipayer systems. In a single-payer health care system such as those in the United Kingdom and Canada, national tax revenues pay the largest portion of citizens’ medical care, and the government is the sole payer compensating those who provide that care. Contributions provided by employers and employees provide the rest. Both single- and multipayer systems help reduce costs for patients, employers, and insurers; both, especially single-payer, are also heavily dependent on taxes apportioned across employers and the country’s population. In a single-payer system, however, because payment for health care is coordinated and dispensed by the government, almost no one lacks access to medical services, including visitors and nonpermanent residents.

The High Cost of Prescription Drugs

Discussions of health care accessibility have become politically charged, so for now it is enough to observe that not only is medical care enormously expensive in the United States but so are prescription drugs. According to William B. Schultz, an attorney writing in the *Washington Post* in 2017, “in the past 35 years, the only significant victory in the battle to control drug prices has been the enactment of legislation that established the generic drug program at the FDA [Federal Drug Administration].” Otherwise, he stated, “prescription drug prices account for 17 percent of the nation’s health-care costs, up from 7 percent in the 1990s,” and “prescription drug spending accounts for nearly 20 percent of total program spending for Medicare, the largest of the governmental health-care programs.”

 (Schultz is not entirely impartial; he is a partner in a law firm that represents generic drug providers, among other clients.)

Paying for Health Care and Wellness

Within the multipayer system, many U.S. workers have traditionally looked to their employers or their unions to subsidize the cost of care and thereby make it available for them and their families. Many reasons explain why this is so. In contrast to the European and Canadian perspective, for example, in which both the state and employers are presumed to have an interest in and responsibility for underwriting the cost of health care, the traditional U.S. approach is that workers and their employers should be responsible for securing this coverage. This belief reflects an unease on the part of some about assigning services to the government, because this implies the need for a larger governing entity as well as additional taxes to sustain it. The sentiment also reflects a conviction on the part of some that self-reliance is always to be preferred when securing the necessities of life.

The Affordable Care Act

Health care reform on a major scale emerged in the United States with the passage of the Patient Protection and Affordable Care Act, more commonly known as the Affordable Care Act (ACA), in March 2010, during the Obama Administration. The ACA (so-called Obamacare) represents a controversial plan that strikes its opponents as socialist. For its supporters, however, it is the first effective and comprehensive plan to extend affordable health care to the widest segment of the U.S. population. Furthermore, like most new federal policies, it has undergone tweaks and revision each year since becoming law. The ACA is funded by a combination of payments by enrollees and supplemental federal monies earmarked for this task.

State-Level Experiments with Single-Payer Health Care Plans

Against the backdrop of federal attempts to institute national health care over the past several decades, some individual states in the United States have used their own resources to advance this issue by proposing mandated health care coverage for their citizens. For example, in April 2006, Massachusetts passed An Act Providing Access to Affordable, Quality, Accountable Heath Care, the first significant effort at the state level to ensure near-universal health care coverage.

Changing Work Environments and Future Trends

Introduction

More Telecommuting or Less?

Telecommuting and Its Advantages

The term telecommuting emerged in the 1970s to describe the practice of working at a specific location, whether the employee’s home or an alternate office, to reduce commuting time to a centrally located office space or store. “Telework” was greatly facilitated by new telecommunications technology, including the Internet, e-mail, and mobile phones. Today, telecommuting means any mode of working at a remote location (home or other space) by virtue of an electronic connection and/or telephone and encompasses a variety of employment types, from gig assignments to part-time contract work to traditional full-time employment.

The Drawbacks of Telecommuting

In 2013, Yahoo’s then–chief executive officer (CEO), Marissa Mayer, ended the company’s work-at-home policy, contending that the change would boost communication and collaboration by bringing people back to the office to work with their colleagues face to face.

 IBM, Aetna, and Bank of America followed her lead, citing a greater need for collaborative communication to compete with smaller firms. A backlash in the media followed this announcement, because working at home is popular among Yahoo employees. Yahoo has since shown greater flexibility in allowing some employees to once again work at home. But recent research does reveal that employees collaborate more creatively when they meet to discuss projects face to face. This finding has important implications for firms dependent on research and development for their future growth. In fact, Steve Jobs designed the Pixar facility to increase the likelihood of conversations that would promote idea generation.

The Ethical Challenges of Telecommuting

Ethical employers must juggle the potential ethical challenges of managing remote employees, including developing trust in remote workers, encouraging trust among project team members when some are working remotely, keeping equity in mind when reviewing the performance of remote and in-office staff, and deciding which employees get to work remotely. Supervisors also must guard against abuse of the remote-work opportunity, maintain the security of the remote employee’s work-related data, foster a level of collaboration that is vital to product development, and protect the remote worker’s safety.

 How can managers meet these challenges?

Workplace Campuses

Workplace Campuses and Historical Precedents

Traditional workspaces are designed to allow each person to get the maximum amount of work completed each day, spending most of the time alone in a fairly utilitarian environment with minimal distractions. The size and location of the offices indicate status (corner offices are prized), and lunchrooms or cafeterias and water coolers provide the only place for brief social encounters.

The Pursuit of Work-Life Balance

Twenty-five percent of U.S. employees in multiple industries were recently surveyed and reported feeling “super stressed” as they juggled work and home responsibilities.

 Daily stress from trying to maintain work-life balance can produce health effects like reduced immunity and inadequate sleep. Stressed workers are also less productive in the workplace.

The Ethical Challenges of Workplace Campuses

It is hard to imagine that anyone could find fault with a job that came with all the amenities of a campus-like environment. However, the all-encompassing aspect of these workplaces means a manager’s job description greatly expands to include small-city management functions. As the April 2018 shooting of employees at YouTube’s headquarters suggests, corporate campuses may have a greater need for security, with duties that dovetail those of the city police. Growth of the compound will challenge managers to comply with city planning and zoning regulations. How should these villages within a city contribute to the municipal services they need for the population they draw? Should the city be able to require a greater tax contribution from mega-corporate campus developers that equals the load they add to the city’s fiscal responsibilities?

Alternatives to Traditional Patterns of Work

Job Sharing and Flextime

In job sharing, two or more employees perform the work of a full-time position, each taking part of the total workload for the job. For example, one job-sharing employee might work three eight-hour shifts a week and the other would take two such shifts at the same job. In some ways, job sharing is simply another name for part-time work. The two people need not work equal numbers of hours, but they perform a single job, doing the same tasks and shouldering the same responsibilities. Unlike nurses, who work shifts but each has their own job, job sharers work one job between them.

The Access Economy and Online Platforms

The access economy is essentially a resource circulation system in which consumers participate on both sides of a transaction, as both providers and obtainers of resources (the transaction is usually facilitated by a third party acting as a go-between). The model, sometimes called peer-to-peer (or P2P), is particularly popular when the asset is expensive to obtain and is not fully consumed by the user (such as a house or condo). In the traditional capitalist economic model, goods are bought and sold by businesses and individuals, but in the access or sharing economy, goods and services are traded on the basis of access rather than ownership.

The Gig Economy

Opportunities for limited-term employment, sometimes referred to as “gigs,” have existed for decades in the music and entertainment industry; they have even been likened to the widespread small-scale self-employment typical of the pre-union and pre-Industrial eras.

 What is new about gig work today is that it is often made possible by technology, which frees workers from the need to travel to the employer’s workplace and allows them to work multiple jobs at once. This offers workers, and perhaps even managers, a new set of advantages and disadvantages in the employment equation.

Robotics, Artificial Intelligence, and the Workplace of the Future

Robotics and Automation in the Workplace

Advances in the field of robotics—a combination of computer science, mechanical and electronics engineering, and science—have meant that machines or related forms of automation now do the work of humans in a wide variety of settings, such as medicine, where robots perform surgeries previously done by the surgeon’s hand. Robots have made it easier and cheaper for employers to get work done. The downside, however, is that some reasonably well-paying jobs that provided middle-class employment for humans have become the province of machines.

Artificial Intelligence

Although some robots are remotely controlled by a human operator or a computer program written by a human, robots can also learn to work without human intervention, and often faster, more efficiently, and more cheaply than humans can. The branch of science that uses computer algorithms to replicate human intelligent behavior by machines with minimal human intervention is called artificial intelligence (AI). Related professions in which the implementation of AI might have particular impact are banking, financial advising, and the sales of securities and managing of stock portfolios.

Epilogue: Why Ethics Still Matter

Introduction

Business Ethics in an Evolving Environment

Committing to an Ethical View

Relationships Matter

Workplace research indicates that employees are more likely to be unethical when they are dissatisfied with their jobs or see their superiors acting unethically.

 How do relationships influence this equation? A good example set at the top and the freedom to determine a comfortable work-life balance for oneself—all influenced by the organization’s positive relationship with its employees—lead to a more ethical workplace. Consider Walmart’s relationships with its many employees.

Using Values to Make Hard Choices

According to the logic of the market, each of us is a commodity with specific assets, such as education, training, and job experience. But we are more than commodities, and what moves us are values. Can you identify your core values and imagine how you might live them in the workplace ([link])? We’ll return to this question at the end of the chapter.

The Role of Loyalty

Customers often remain loyal to a brand because of its appearance, functionality, or price. Companies want loyal customers like these and will go to great lengths to keep them. These relationships are external relationships between the company as an organization and its customers as a group.

Becoming an Ethical Professional

Finding the “Right Fit”

Ethics has become a major consideration for young people in their selection of work and career. The following observation about young British workers applies to their counterparts in the United States, as well: “There’s a quiet revolution happening. . . but it’s not about pay, hours or contracts. It’s a coup d’état led by the nation’s young, politically engaged jobseekers who demand employers enshrine values and ethics in their business model, not just profit.”

It’s Not About the Money—Is It?

You may follow a professional vocation that offers low pay or low status but yields nontangible rewards, such as nonprofit work, nursing, or teaching. Or you may find a position that pays a great deal and offers job security but leaves you feeling unhappy or unfulfilled. For some professionals, these might include law, accounting, dentistry, or anything else. The point is that occupations with high compensation and a certain stature do not always infuse their holders with the greatest psychological and emotional rewards, and it is different for each of us. In the best of all worlds, you might embark on a well-paying career that helps others or contributes a much-needed good or service to society. Finding such work is easier said than done, of course, because the aim of most jobs is not to help people find meaning or happiness. Where these do occur, they are often ancillary effects of work, whose real purpose is the profitability without which there would not be any jobs at all.

The Role of Ethical Top Leadership

As you consider your future path, perhaps leading toward a leadership role, keep in mind that perhaps the most effective way ethical behavior is learned in a company is through the modeling of that behavior by senior executives and others in leadership positions. This modeling sets what is known as “tone at the top.” Employees may already have a personal moral code when they join an organization, but when they see key figures in the workplace actually living out the ethical values of the company, they are more likely to follow suit and take ethics seriously. Leaders’ ethical behavior is especially important in emerging fields like artificial intelligence, where questions of safety, bias, misuse of technology, and privacy are raised daily.

 It is not enough to offer codes of conduct, training, reporting, and review programs, no matter how thorough or sophisticated, if management does not adhere to or promote them. These are tools rather than solutions. The solutions come from leaders using the tools and showing others how to do the same. This takes practice, reinforcement, and collaboration at all levels of an organization. The result will be a culture of ethics that permeates the company from top to bottom.

Making a Difference in the Business World

Identifying Your Values and Mission

The values we choose to honor are the essence of ourselves, and we carry them with us wherever we live, work, and play. As we noted, the career you choose should reflect your values, whether you work at a for-profit or nonprofit organization, at Wells Fargo Bank or Doctors Without Borders (a medical rescue organization). It also is possible that you might work for a for-profit company and volunteer extensively on your own or on behalf of your firm in the nonprofit sector. Whatever path your career takes, it remains important not to let your well-considered values be diminished by others who do not prize loyalty or industriousness, for instance. Your career is not a contest in which the person who finishes with the biggest portfolio or fastest jet skis wins anything other than an empty prize. It is far better to treat others with integrity and respect and be surrounded by the true emblems of a successful career—family, friends, and colleagues who will attest to the dignity with which you have worked. In the final analysis, if you achieve a life of honor, then you have won.

Putting Your Values and Mission Statement to the Test

There may be no better place to put personal values and mission to the test than in an entrepreneurial role. Startups cannot be run on concepts alone. More than almost any other kind of venture, they demand practical solutions and efficient methods. Entrepreneurs usually begin by identifying a product or service that is hard to come by in a particular market or that might be abundantly available but is overpriced or unreliable. The overall guiding force that inspires the startup then is the execution of the company’s mission, which dictates much of the primary direction for the firm, including the identification of underserved customers, the geographic site for a headquarters, and the partners, suppliers, employees, and financing that help the company get off the ground and then expand. In a brand-new organization, though, where does that mission come from?

The Lives of Ethical Philosophers

The Ethics of Aristotle: Virtue Theory

**Aristotle, 384 BCE–322 BCE**

The Ethics of Bentham and Mill: Utilitarianism

**Jeremy Bentham, 1748–1832**

The Ethics of Kant: Deontology

**Immanuel Kant, 1724–1804**

The Ethics of John Rawls: Justice Theory

**John Rawls, 1921–2002**

Profiles in Business Ethics: Contemporary Thought Leaders

Dan Bane, chairman and chief executive officer of Trader Joe’s

With roots in Pasadena, California, the Trader Joe’s brand is no stranger to ethical and sustainable business practices. At its origin, when it was a mere convenience store and still called Pronto Markets, founder Joe Coulombe opted to pay his employees at the median California family income rate. He did not want to exploit his employees the way he felt other large convenience chains did at the time.[footnote] After reading about the looming threats to the environment in 1970, Joe transformed his stores to become more health and environmentally conscious. Indeed, as far back as 1977, the growing chain of grocery stores began selling reusable “Save-A-Tree” canvas bags to its customers to encourage more environmentally friendly shopping practices.[footnote]

Beth Kowitt, “Meet the Original Joe,” *Fortune*, August 23, 2010, http://fortune.com/2010/08/23/meet-the-original-joe/.“Our Story: Timeline,” Trader Joe’s, https://www.traderjoes.com/our-story/timeline (accessed July 6, 2018).

Mary T. Barra, chairman and CEO of General Motors

Mary T. Barra was born into a General Motors (GM) family in Michigan. Her father worked for the GM brand Pontiac for nearly four decades and one of her first jobs was working at a GM plant herself checking the fender panels and hoods of cars rolling off the line when she was only eighteen years old.

Marc Benioff, chairman, CEO, and founder of Salesforce

Marc Benioff took to computer entrepreneurism at an early age. At only 15 years old, he had already started his own software company. The profits from that company were enough to put him through college. When he graduated, he jumped right into a position at the software company Oracle, quickly climbing the corporate ladder and becoming the youngest vice president in the company’s history within a few years.[footnote]

Matt Weinberger, “The Rise of Marc Benioff, the Flashy Billionaire Founder of Salesforce,” *Business Insider*, March 17, 2016. http://www.businessinsider.com/the-rise-of-salesforce-ceo-marc-benioff-2016-3.

John C. (Jack) Bogle, founder of The Vanguard Group

Born months before the infamous Black Thursday stock market crash of 1929, Jack Bogle knows from experience the social and economic cost of unethical and unregulated stock market speculation. In the depression that followed the crash, his family lost much of its wealth, and his father sunk into a destructive alcoholism that tore the family apart. He and his twin brother were compelled to enter the workforce at early ages, holding menial jobs like delivering papers and waiting on tables.[footnote] The experience was formative for Bogle, who admits he feels sorry for those who do not grow up in circumstances where they have to work for what they need. Despite earning a comfortable fortune in managing mutual funds, Bogle remains reluctant to spend money on himself, believing that extravagance is a weakness that exposes him to unnecessary risk.[footnote]

Jonathan Berr, “Vanguard Founder John Bogle Sees No Good Alternatives to Indexing,” Aol.com, February 13, 2010, https://www.aol.com/2010/02/13/vanguard-founder-john-bogle-sees-no-good-alternatives-to-indexin/ (accessed July 5, 2018).Chris Taylor, “Me and My Money: Jack Bogle,” Reuters, September 11, 2012, https://www.reuters.com/article/us-column-taylor-bogle/me-and-my-money-jack-bogle-idUSBRE88A0LI20120911.

Yvon Chouinard, founder, and Rose Marcario, CEO and president of Patagonia Works

Yvon Chouinard was introduced to rock climbing almost by accident. After taking an interest in falconry, an adult decided to teach the young Chouinard to rappel down a cliff to reach the cliff-side falcon nests. But it was not long before Chouinard was teaching himself how to climb up in the same way. Thus began a life-long love affair with climbing around the world. To support his climbing lifestyle, he learned to make and sell steel climbing pitons, the small metal spikes with an eyelet that climbers drive into the rock to guide their rope.

Tony Hsieh, CEO of Zappos

Born to Taiwanese immigrants in Illinois and raised largely in San Francisco’s Bay Area, Tony Hsieh excelled at school as a child. He developed an interest in computers, which helped get him accepted to Harvard University, from which he graduated in 1995 with a degree in computer science. Upon graduation, he jumped right into the corporate world by taking a position at Oracle, a large database and software company.

Kim Jordan, CEO of New Belgium Brewing Company

In 1988, while working in Europe as an electrical engineer, Jeff Lebesch took a beer-tasting trip through Belgium riding atop a fat-tire bicycle. A couple years later he met Kim Jordan and they soon married. Both being beer aficionados, they could smell a great business opportunity bubbling up from Jeff’s experience. Sensing that the famously bold flavors of Belgian beer were exactly what the American beer market lacked and needed, Jeff and Kim got to work testing methods and recipes in their Fort Collins, Colorado, basement. By 1991, New Belgium Brewing was born.[footnote]

Tanza Loudenback, “Why the Maker of Fat Tire Bucked the Trend and Became 100% Owned by Its Workers,” *Business Insider*, June 13, 2016, http://www.businessinsider.com/new-belgium-brewing-kim-jordan-2016-6.

Indra Nooyi, chairman and CEO of PepsiCo

What might a company like PepsiCo, known for selling sugar-filled sodas and junk food, teach us about ethical business practices? It might actually teach us quite a lot if CEO Indra Nooyi has anything to say about it.

Jostein Solheim, CEO of Ben & Jerry’s

Cherry Garcia, Wavy Gravy, and Chubby Hubby are just a few of the wacky flavors churned out by the four-decades-old ice cream company, Ben & Jerry’s. These quirky names are a reflection of the company’s unique business style, something Jostein Solheim signed on to when he agreed to become CEO of the company in 2010.

A Succinct Theory of Business Ethics

The Nature of Business Ethics

Business ethics should be grounded in *deontology* more than in *utilitarianism*. That is, the ends should not typically be considered sufficient justification for the means when it comes to framing a business strategy. Rather, it is the means that ennoble the ends. Utilitarianism, as a consequentialist theory and when applied to business, emphasizes the greatest good (or profit) for the greatest number of shareholders. However, this may be inappropriate criterion for determining what is truly ethical in the conduct of business because business morality should not to be centered only on calculations of profit or loss. Deontology, on the other hand, focuses on the motives and reasons why entrepreneurs engage in business and the methods that they implement in doing so. Ultimately, both theories have a place in business practice, but a preference should be shown to deontology.

The Nature of the Ethical Business Leader

An ethical business leader appreciates the existence of multiple stakeholders and accepts responsibility for all of them. These include employees, shareholders, customers/clients, vendors, suppliers, wholesalers, retailers, and the community as a whole within which a corporation resides. While not all stakeholders are *equal* in significance, they nonetheless *all are significant*.