+ Business_Ethics_&_Professional_Responsibility.ppt

Business Ethics &
Professional Responsibility

Unethical Behavior
• Unethical behavior in
business is not just a recent
phenomenon
– In the sixth century, B.C., the
philosopher Anacharsis once said,
“The market is a place set apart
where men may deceive one
another.”

Unethical Behavior
The Old Testament also talks
about “false balances”
(Amos 8:5; Hosea 12:7;
Micah 6:11) despite God’s
command against such (Lev.
19:36; Ezek. 45:10)

Business Ethics
• Business Ethics is about:
–Decision-Making
–By People in Business
–According to Moral Principles or
Standards

Decision-Making
• Conflicting duties, loyalties or
interests create moral dilemmas
requiring decisions to be made

Decision-Making
• Ethical decision-making involves the
ability to discern right from wrong along
with the commitment to do what is right.

Decision-Making
• Some factors affecting decision-making (from Integrity
Management, by D. T. LeClair et al, Univ. of Tampa
Press, 1998):
– Issue Intensity
• (i.e. how important does the decision-maker
perceive the issue to be?
• Can be influenced by company/management
emphasis)
– Decision-Maker’s Personal Moral Philosophy
– Decision-Maker’s Stage of Moral Development
– Organizational Culture

Decision-Making
• 8 Steps to Sound, Ethical Decision-Making
– 1. Gather as many relevant & material facts as
circumstances permit.
– 2. Identify the relevant ethical issues (consider alt.
viewpoints)
– 3. Identify, weigh & prioritize all the affected parties (i.e.
stakeholders) (see Johnson & Johnson Credo, Taking Sides,
p.25)
– 4. Identify your existing commitments/obligations.
– 5. Identify various courses of action (dare to think creatively)
– 6. Identify the possible/probable consequences of same
(both short & long-term)
– 7. Consider the practicality of same.
– 8. Consider the dictates and impacts upon your character &
integrity.

Decision-Making
• Disclosure Test: How comfortable
would I feel if others, whose opinion of
me I value, knew I was making this
decision?

Decision-Making
• The higher the level of a decision-maker
– the greater the impact of the decision
– and the wider the range of constituencies
that will be affected by the decision.

By People In Business
• The moral
foundation of the
decision-maker
matters
• “He doesn’t have a moral
compass.” Whistleblower
Sherron Watkins describing
Andrew Fastow, former CFO
of Enron. (Watkins gets frank
about days at Enron, Edward
Iwata, USA Today, March
25, 2003, p. 3B.)

By People in Business
• Ultimately, one's own motivation for ethical behavior
must be internal to be effective. External motivation
has a limited value -- punishment and fear is only
effective in the short-run. If people believe that they
are above the law, they will continue to act
unethically. Organizations that have a clear vision,
and support individual integrity are attractive places
of employment. - Teri D. Egan, Ph.d, Associate
Professor, The Graziadio School of Business at
Pepperdine University, Corporate Ethics, Washington
Post Live Online, Friday, Aug. 2, 2002;

Ethics
• Values: guiding constructs or ideas, representing deeply held
generalized behaviors, which are considered by the holder, to be
of great significance.
• Morals: a system or set of beliefs or principles, based on values,
which constitute an individual or group’s perception of human
duty, and therefore which act as an influence or control over their
behavior. Morals are typically concerned with behaviors that
have potentially serious consequences or profound impacts. The
word “morals” is derived from the Latin mores (character, custom
or habit)
• Ethics: the study and assessment of morals. The word "ethics"
is derived from the Greek word, ethos (character or custom).

Morality
• “The most important human endeavor is
the striving for morality in our actions.
Our inner balance and even our very
existence depend on it. Only morality in
our actions can give beauty and dignity
to life. - Albert Einstein (in a letter 11/20/50)

Morality
• The historian Arnold Toynbee
observed: "Out of 21 notable
civilizations, 19 perished not by
conquest from without but by moral
decay from within."

Absolutism vs. Relativism
• Ethical Absolutism: What is right or wrong is
consistent in all places or circumstances. There are
universally valid moral principles. (“… only by
obedience to universal moral norms does man find
full confirmation of his personal uniqueness and the
possibility of authentic moral growth.” - Pope John
Paul II, see also Rom. 12:2; Heb. 13:8)
• “History is a voice forever sounding across the
centuries the laws of the right and wrong. Opinions
alter, manners change, creeds rise and fall, but the
moral law is written on the tablets of eternity.” –
James A. Forude

• Ethical Relativism (also called “Situational
Ethics”): What is right or wrong varies according to
the individual/society/culture or set of circumstances.
There are no universally valid moral principles.
(Related Biblical reference "everyone did what was
right in his own eyes" (Deut. 12:8, Judges 17:6;
21:25) (see also Isa. 5:20 & 24, Jer. 2:13, Rom.
1:18-32, 1 Cor. 5:6-7, 2 Cor. 6:14-15, 1 John 1:8)

Relativism
• As R.H. Popkin describes relativism in his article on the
subject in The Encyclopedia of Religion, “views are to be
evaluated relative to the societies or cultures in which
they appear and are not to be judged true or false, or
good or bad, based on some overall criterion but are to
be assessed within the context in which they occur.
Thus, what is right or good or true to one person or
group, may not be considered so by others … there are
no absolute standards … “Man is the measure of all
things” (quoting the Greek philosopher Protagoras (481-
420, B.C.), and … each man could be his own measure
… [Relativism] urges suspension of judgment about right
and wrong.” (Ellis Washington, Reply to Judge Richard
A. Posner on the Inseparability of Law and Morality,
Rutgers Journal of Law and Religion, Vol. 3)

Relativism
• As Cardinal Joseph Ratzinger said, Relativism is
“presented as a position defined positively by the
concepts of tolerance and knowledge through
dialogue and freedom, concepts which would be
limited if the existence of one valid truth for all were
affirmed … affirming that there is a binding and valid
truth in history in the figure of Jesus Christ and the
faith of the church is described as fundamentalism.
Such fundamentalism, … is presented in different
ways as the fundamental threat emerging against
the supreme good of modernity: i.e., tolerance and
freedom.” - Address to Congregation for the Doctrine
of Faith, Guadalajara, Mexico, May 1996

Absolutism v. Relativism
• “The demise of America’s legal foundations
occur when society rejects laws that are
based on solid, irrevocable, moral, universal,
absolute values, to a society that bases it’s
laws on an arbitrary system of relativism,
situational ethics, materialism, individualism,
hedonism, paganism, or in any secularist
ideology. This secularization of law has
influenced all branches of knowledge – law,
philosophy, business, religion, medicine,
education, science, the arts, and mass
media.” Harold Berman, The Interaction of
Law and Religion 21 (1974).

According to a recent poll of college
seniors, 73% agreed with the statement
that “What is right or wrong depends on
differences in individual values and
cultural diversity.” Only 25% agreed
with the statement that “There are clear
and uniform standards of right and
wrong by which everyone should be
judged."

Problems with Relativism
– Relativism undermines moral criticism of practices of
particular individuals or in particular societies where
those practices conform to their own standards. For
instance, it could be used to permit slavery in a slave
society or it could be used to justify trade and
investment with basically evil regimes, e.g. Apartheid
governments.
– But, as Cardinal Ratzinger said, “There are injustices
that will never turn into just things (for example, killing
an innocent person, denying an individual or groups the
right to their dignity or to life corresponding to that
dignity) while, on the other hand, there are just things
that can never be unjust.” - Address to Congregation for
the Doctrine of Faith, Guadalajara, Mexico, May 1996

– Relativism allows for oppression of those with
minority views by allowing the majority in any
particular circumstance to define what is morally
right or wrong.
• “In Germany they first came for the Communists,
• and I didn't speak up because I wasn't a Communist.
• Then they came for the Jews,
• and I didn't speak up because I wasn't a Jew.
• Then they came for the trade unionists,
• and I didn't speak up because I wasn't a trade unionist.
• Then they came for the Catholics,
• and I didn't speak up because I was a Protestant.
• Then they came for me —
• and by that time no one was left to speak up.”
– - German anti-Nazi activist, Pastor Martin Niemöller

Relativists speak in terms that “soften” harsh realities.
"Intelligent, educated, religious people embrace illogical
absurdities that set aside not only God's truth, but also
our responsibility for the well-being of others. When
words are warped and twisted perversely, they're
eventually emptied of their true meaning. When you
shine the light of common sense on deceptive language
couched in medical, philosophical or intellectual terms,
the logic evaporates. Moral choices require that we use
language to describe reality.” - Jean Staker Garton,
Author/Lecturer, Co-Founder of Lutherans for Life

Relativists never need bother to examine
why something is moral or immoral, they
merely accept/tolerate alternative
determinations, so that none are held to
account
“Over the years I have found that those who call
themselves atheists actually have a strong sense of
the absolute truth they know exists. They just don’t
want to acknowledge that it’s true - because if they
did, they would have to change the way they live.
They flee on moral grounds; refusing to submit
themselves, they exchange the truth for a lie.” -
Chuck Colson -Being the Body, 2003.

• Commenting on the idea that legal reforms
can compel corporate morality, Michael
Prowse, in the Financial Times, stated that
"The underlying problem is that we are living
in times that might aptly be called 'post-
ethical.'" People are now "emotivists," who
relativize moral judgments and "obey the law,
help others and respect customs and mores
only if they calculate that this will benefit them
personally in some way. ... The root problem
is a loss of belief in objective ethical
standards.”

• Jesus said in John 8:31-32, “If you
continue in my word, then are you my
disciples indeed; And you shall know
the truth, and the truth shall make you
free.” It would seem follow then that,
people cannot experience ultimate and
true freedom unless and until they come
to terms with the absolute truth revealed
by God.

Most ethicists reject the theory of
ethical relativism. Some claim that
while the moral practices of
societies may differ, the
fundamental moral principles
underlying these practices do not. -
Markkula Center for Applied Ethics

Values
“To ensure that employees can and will
act with integrity … organizations need
a strong and consistent set of values
that dictate appropriate individual
actions.” - Conclusion of study conducted by
Professor Pratima Bansal, cited in”
Rebuilding trust, The integral role of
leadership in fostering values, honesty and
vision,”by Carol Stephenson in the Ivey
Business Journal, Jan/Feb. 2004, Vol. 68,
Issue 3.

Values
• Navigating the complexities of a situation ... requires
a reliable compass. We can plot that "north" by
determining clearly our own core values. We have to
identify - and articulate - what we believe is important
to us and to our companies. Our core values drive
our behaviors, and our behaviors tell the world who
we are and what we stand for. ...Identifying and
adhering to a core-values compass point provides a
standard that will make decisions easier, consistent
and justified.” - Parkinson, J. Robert, Thinking clearly,
remembering values key to making the call, Milwaukee Journal
Sentinel, March 22, 2004.

Values
“Without commonly
shared and widely
entrenched moral
values and obligations,
neither the law, nor
democratic government,
nor even the market
economy will function
properly.”- (Vaclav
Havel Politics, morality,
and Civility, Summer
Meditations)

Values
What are the core values that
are fundamental to the
success of any individual or
organization?

Values
• Honesty
• Respect
• Responsibility
• Fairness
• Compassion
• Perseverance
• Courage

Values - Honesty
• Honesty - Being straightforward, sincere, truthful,
free of fraud, deception or misrepresentation.
• Transparency - To be open, honest and available,
to provide clear, accurate, and understandable
information (e.g. in the context of financial
disclosures). Some ethicists have argued that
ethical business practices are best measured by a
company's character and commitment to
transparency than by their social vision or
rhetoric (e.g. Jon Entine)

Values - Honesty
Honesty
– Builds/Maintains Trust
– Fosters Community
– Makes Communication more Efficient &
Effective
– Demonstrates Respect for the Dignity of
Others

Values - Honesty
• Moral Leaders welcome transparency
and truth as opposed to secrecy and
deception.
• Respondents to a recent Victor
James ethical leadership survey, by a
wide margin, cited honesty as the
quality most admired in a leader.

Values - Honesty
• Richard Sears—founder of Sears
Roebuck and Company—started
the modern mail order industry,
supplying a burgeoning nation
with innovative products and
building a business that gave
employment to hundreds of
thousands of people. In his zeal to
sell merchandise, Sears
occasionally would get carried
away with catalogue descriptions,
praising products far beyond the
literal truth. This in turn led to
returned merchandise and
reduced profits. But Sears learned
his lesson. In later years, he was
fond of saying, "Honesty is the
best policy. I know because I've
tried it both ways.” - from Integrity at
Work, ed. By Ken Shelton.

Values - Honesty
• “Honesty and transparency make you
vulnerable. Be honest and transparent
anyway.” - Mother Teresa
• Contra: "Speech was given to man to
disguise his thoughts." - Charles-Maurice de
Talleyrand

Values - Honesty
• Some scriptural references regarding
honesty in business:
– (Exodus 22:10; 23:1–3; Leviticus 19:11–
12, 35-36, Deuteronomy 25:13–16,
Proverbs 6:16-19, 11:1, 12:17-19 & 22,
Ephesians 4:25)

Values - Respect
• Respect: To give particular
attention to, show consideration
for, or hold in high or special
regard (Merriam-Webster's Online
Dictionary, 10th Edition)
• Should respect be given or must
respect be earned?

Values - Respect
• “Every man is to be respected as an
absolute end in himself; and it is a
crime against the dignity that
belongs to him as a human being, to
use him as a mere means for some
external purpose.” - Immanuel Kant,
Prussian geographer and philosopher (1724-
1804)

Values - Respect
• Human Dignity is “the intrinsic worth that inheres in every
human being. From the Catholic perspective (among other
Christian perspectives), the source of human dignity is
rooted in the concept of Imago Dei, in Christ’s redemption
and in our ultimate destiny of union with God. Human
dignity therefore transcends any social order as the basis
for rights and is neither granted by society nor can it be
legitimately violated by society. In this way, human dignity
is the conceptual basis for human rights. While providing
the foundation for many normative claims, one direct
normative implication of human dignity is that every human
being should be acknowledged as an inherently valuable
member of the human community and as a unique
expression of life, with an integrated bodily and spiritual
nature. In Catholic moral thought, because there is a social
or communal dimension to human dignity itself, persons
must be conceived of, not in overly-individualistic terms, but
as being inherently connected to the rest of society.” - from
the Ascension Health Code of Ethics

Values - Respect
• Civilizations should be measured by "the
degree of diversity attained and the
degree of unity retained.” - W.H. Auden,
English poet (1907-1973)
• “Never look down on anybody unless
you're helping him up.” - Jesse Jackson,
American political activist and preacher

Values - Respect - Tolerance?
• What about tolerance?

• "Our culture has fallen into a kind of
moral vertigo – we value tolerance so
much that we don't know how to talk
to each other about what is right and
good,” - Rev. Kevin Phillips, director of
the Business Leadership and Spirituality
Network (BLSN) quoted in “Competing
Values”, by Jane Lampman, Christian
Science Monitor, August 1, 2002.

• Did you know that the term “ tolerance” (or in
some translations “sufferance” Gk. eao) is rarely
used in the New Testament, and that where it is
used it is generally used in a negative sense?
For example:
– “Notwithstanding I have a few things against thee,
because you tolerate that woman Jezebel, who calls
herself a prophetess, to teach and to seduce my
servants to commit fornication, and to eat things
sacrificed unto idols.” Rev. 2:20
• By contrast, the New Testament uses the term “
love” Gk. agapeo nearly 150 times in a positive
sense.
– So what’s the difference between love and tolerance?

Tolerance: Demonstrating sympathy for, indulging,
or making allowances for, beliefs or practices
differing from, or conflicting with, one's own.
Love: In the Christian context, from the Gk., agapeo,
an active and beneficent interest in, and concern for,
the well-being of another. It is given unconditionally
and unselfishly. It involves a clear determination of
will and judgment (i.e. a responsible choice). A
loving person, honestly (Rom. 12:9) gives respect
and demonstrates compassion. Demonstrating such
love often requires courage. The source of such love
comes “from above” (James 1:17).
Would you rather be loved or tolerated?

Values - Compassion
• Compassion: "sympathetic
consciousness of another's distress
together with a desire to alleviate it"
[Webster's 7th New Collegiate Dictionary], fellow
feeling, the emotion of caring concern; the
opposite of cruelty, in Hebrew rahamanut,
from the word rehem, 'womb', based on
the idea of sibling love (coming from from
the same womb).

Values - Compassion
• "The word 'care' finds its roots in the
Gothic 'Kara' which means lament.
The basic meaning of care is: to
grieve, to experience sorrow, to cry
out with.. . . A friend who cares
makes it clear that whatever happens
in the external world, being present
to each other [now] is what really
matters." [Henri Nouwen, Here and Now,
p. 105]

Values - Compassion
“Southwest Airlines CEO Herb Kelleher has openly
demonstrated a willingness to go the extra mile for Southwest
employees. He has made it a priority to learn their names and
to chip in and work alongside them when the situation has
demanded his help. He has been observed lugging baggage
and greeting customers in an Easter Bunny costume. He has
repeatedly demonstrated a truly exceptional level of caring
and compassion for his employees, and his employees have
responded in kind. Perhaps the most dramatic example of
their commitment to their beloved leader occurred when they
pooled their own money and ran a $60,000 ad in USA Today
recognizing him on Bosses Day. In the ad they thanked
Kelleher for being a friend, not just a boss.” - from The
Leadership Wisdom of Jesus, Charles C. Manz, 1998.

Values - Compassion
• “I expect to pass through the world but once. Any
good therefore that I can do, or any kindness I
can show to any creature, let me do it now. Let
me not defer it, for I shall not pass this way
again.” - Stephen Grellet, French/American
religious leader (1773-1855)
• "Men are only great as they are kind.” - Elbert
Hubbard, American entrepreneur and philosopher
(founder of Roycroft) (1856-1915)

Values - Compassion
• "No act of kindness, no matter how small, is ever
wasted." - Aesop, 6th Century B.C. Writer of
Greek fables
• "If the world seems cold to you, kindle fires to
warm it.” - Lucy Larcom, American poet (1826-
1893)
• "The individual is capable of both great
compassion and great indifference. He has it
within his means to nourish the former and
outgrow the latter.”- Norman Cousins, American
essayist & editor (1912-1990)

Values - Compassion
• "There are two ways of spreading light: to be the
candle or the mirror that reflects it.” - Edith
Wharton, American novelist (1862-1937) -
• “Compassion is the basis of morality.'' - Arthur
Schopenhauer, German philosopher (1788-1860)
• All we need in order to be moral human beings is
compassion. - Nina Rosenstand summarizing the
view of David Taylor in Good and Evil, from The
Moral of the Story: An Introduction to Ethics,
McGraw-Hill, 2004.

Values - Compassion
Some scriptural references
regarding compassion:
–(Matthew 18:27, Luke 10:30-37,
(Parable of the Good Samaritan),
1 John 3:17, Jude 1:22)

Values - Responsibility
• Responsibility/Accountability/Reliability:
Moral Leaders take responsibility for their own
actions/failures and those of their companies and they
demand accountability from their subordinates. (e.g. at Dell
there’s no ‘‘The dog ate my homework.” Dell ruthlessly
exposes weak spots during grueling quarterly reviews and
execs know they had better fix the problem before the next
meeting. – “What You Don’t Know About Dell”, Business
Week, Nov. 30, 2003, p.79) Involves a commitment to
competent quality performance. Implies fidelity to promises
and other commitments and not making promises that
cannot be kept, such as committing to unrealistic delivery
dates. Also calls for acknowledgment of implicit
commitments, such as the protection of confidences.

• “I am only one, but still, I am one. I cannot
do everything but I can do something.
And, because I cannot do everything, I will
not refuse to do what I can.” - Edward
Everett Hale, American clergyman and writer
(1822-1909)
• “The question for each man to settle is not
what he would do if he had the means,
time, influence and educational
advantages, but what he will do with the
things he has.” - Hamilton Wright Mabee

• “Any man’s life will be filled with constant
and unexpected encouragement if he
makes up his mind to do his level best
each day.” - Booker T. Washington, American
educator (1856-1915)
• “I long to accomplish some great and
noble task, but it is my chief duty to
accomplish small tasks as if they were
great and noble.” - Helen Keller, American
social activist, public speaker and author (1880-
1968)

Values - Fairness
• Fair: just, equitable, impartial, unbiased,
objective. Involves a elimination (or at least a
minimalization) of one's own feelings, prejudices
and desires, so as to achieve a proper balance of
conflicting interests. Implies an equitable
distribution of burdens and benefits. John Rawls
argues in A Theory of Justice that rules are fair if
they are rules that the people operating under
them would have agreed to, had they been given
an opportunity to accept or reject them
beforehand.

Values - Fairness
• Justice: demonstrating fairness, equity,
impartiality, righteous action,
• To some, justice is about conformity to truth. To
others, its about conformity to law
• But law and justice are 2 different concepts.
– “The law is something we must live with. Justice is
somewhat harder to come by.” - Sherlock Holmes, in The
Case of the Red Circle.
– “This is a court of law, young man, not a court of
justice.” ~Oliver Wendell Holmes, Jr.
“justice occurs on earth when power and authority
between people are exercised in conformity with God’s
standards of moral excellence.” - Gary Haugen, in The Good News
About Injustice, InterVarsity Press, 1999.

Values - Perseverance
• Perseverance/Fortitude -
steadfast determination to
continue on despite adversity
usually over a long period of
time.

• “Nothing in the world can take the place
of perseverance. Talent will not; nothing
is more common than unsuccessful men
with talent. Education will not; the world
is full of educated derelicts. Genius will
not; unrewarded genius is almost a
proverb. Persistence and determination
alone are omnipotent.” - Calvin Coolidge

• Some Biblical References: Job 17:9a, the righteous one
holds fast to his way; Hos. 12:6b, endure to the end, John
8:31-32, 2 Cor. 13:5, keep proving yourself; Gal. 5:1–4,
stand fast; Gal. 6:9, do not give up in doing what is fine;
Phil. 1:27, stand firm, striving side by side; Phil. 4:1, stand
firm; 1 Thes. 5:21, hold fast to what is fine; 2 Thes. 2:15–17,
stand firm, maintain your hold; 1 Tim. 6:11–12, pursue
endurance; 2 Tim. 2:12, go on enduring; 2 Tim. 3:14,
continue in the things you have learned; 2 Tim. 4:7–8, fight
the fine fight, finish the course; Heb. 2:1, pay attention to
what you have heard that you not drift away; Heb. 3:14,
make fast your hold to the end; Heb. 10:23, 35–36, hold fast
to the declaration of our hope, you have need of endurance;
James 1:2-4, perseverance must finish its work, 2 Pet. 3:17,
do not fall from steadfastness.
• God helps those who persevere. - The Koran

Values
• Which of the core values is
the most important?

Values - Courage
• The first place to start is for every
individual to become aware of their
core values and to have the courage
and discipline to live out of them in
all aspects of their lives. (“The rising tide
won't lift this economy: Unless we're willing to
confront the trust problem we've helped to
create”, Bill Grace, Founder & Executive Director,
Seattle's Center for Ethical Leadership, Guest
Columnist, Seattle Post-Intelligencer, June 16,
2003.)

Values - Courage
• “Courage is the greatest of all virtues; because, unless a
man has that virtue, he has no security for preserving any
other.” - Samuel Johnson
• “Courage is the ladder on which all the other virtues
mount.” - Clare Booth Luce (1903 - 1987), in Reader's
Digest, 1979
• “Courage is the footstool of the virtues, upon which they
stand.” - Robert Louis Stevenson
• “Courage is not simply one of the virtues, but the form of
every virtue at the testing point.” - C.S. Lewis
• “Courage is strength of mind, capable of conquering
whatever threatens the attainment of the highest good.” -
St. Thomas Aquinas

Values - Courage
• “Courage is a perfect sensibility
of the measure of danger and a
mental willingness to endure it.”
- General William T. Sherman (for
whom the Sherman tank was
named).
• “Courage is being scared to
death . . . and saddling up
anyway.” - John Wayne

Values - Courage
• “Whenever you see a successful
business, someone once made a
courageous decision.” - Peter Drucker
• “We must constantly build dykes of
courage to hold back the flood of fear.” -
Martin Luther King, Jr.
• “One isn't necessarily born with courage,
but one is born with potential. Without
courage, we cannot practice any other
virtue with consistency. We can't be kind,
true, merciful, generous, or honest.” -
Maya Angelou (1928 - )

Values - Courage
• “The credit belongs to the man who is
actually in the arena... who strives
valiantly... who spends himself for a
worthy cause; who, at the best, knows, in
the end, the triumph of high achievement,
and who, at the worst, if he fails, at least
he fails while daring greatly, so that his
place shall never be with those cold and
timid souls who knew neither victory nor
defeat.” - Theodore Roosevelt

Values - Courage
• Courage: the ability to disregard fear;
bravery. The Latin root of this word is cur,
which means heart. Courage literally
means to “take heart”. Fear exists along a
continuum. Courage involves recognizing
a reasonable amount of fear or
nervousness, facing it and then taking an
intelligent risk.
• Moral courage involves standing up for
one’s principles, in spite of possible
adverse consequences to such things as
reputation or emotional well-being.

Values - Universal Rule?
• The “Golden Rule” , i.e. to “do unto others
as you would have them do unto you” is an
example of a value common to many
cultures/religions (Mahabharata 5:1517,
Hinduism, Talmud, Shabbat 31a & Levitcus 19:18,
Judaism, Matthew 7:12, Christianity, Udana-Varga
5:18, Buddhism, Analects 15:23, Confucianism,
Number 13 of Imam "Al-Nawawi's Forty Hadiths.",
Islam)
• Note: Several Corporations have directly
incorporated some form of this rule in their
codes of ethics including Coachman, Mary
Kay, Progressive, Merrill Lynch and USAA

Corporate Culture
• Both individuals and organizations hold “values”
– A corporation is said to manifest its “values” in its “corporate
culture”
• Corporate culture is loosely defined as the attitudes,
behaviors and personalities that make up a company and
that shape its behavior and reputation, or as Elizabeth Kiss
of the Kenan Institute for Ethics puts it, corporate culture
is “how we perceive, think, feel and do things around
here.”
• Most employees take their cues from the company culture
and behave accordingly.
• A business derives its character from the
character of the people who conduct the
business. - Ricky W. Griffin, Management, Boston: Houghton Mifflin
Company (2002)

Corporate Culture
• "Moral behavior is concerned primarily
with the interpersonal dimension of our
behavior: how we treat one another
individually and in groups — and,
increasingly, other species and the
environment." The key here is that
morality brings us into contact with others
and asks us to consider the quality of that
contact. -
• Quote from The Leadership Compass, John Wilcox and Susan
Ebbs, as quoted in Everyday Ethics, by Thomas Shanks, S.J.,
Markkula Center for Applied Ethics.

Corporate Culture
• "The first step in the
evolution of ethics is
a sense of solidarity
with other human
beings." — Albert
Schweitzer, early 20th-
century German Nobel
Peace Prize-winning mission
doctor and theologian

Corporate Culture
• The Pressure to Conform
– We are all a kind of Chameleon, taking
our hue - the hue of our moral
character, from those who are about us.
- John Locke (1632 - 1704)

Corporate Culture
– Some years ago, a social scientist named Solomon Asch
wanted to see how people dealt with social pressure so
he designed an experiment to measure the results. He
came up with a simple test that showed a series of lines
on a board in front of the room, with one of the lines
matching another in being the same length. The others
were either much shorter or much longer. A person was
brought into the room, along with others in a group,
which unbeknown to the subject, were helpers to the
professor. The whole group was asked to match the two
lines that were the same length together. The helpers
intentionally gave the wrong answer and it was found that
in almost 75% of the time, the subjects would go along
with the wrong answer, knowing full well it was wrong,
but not wanting to stand out. - “Opinion and Social
Pressure”, Scientific American, Nov. 1955, 31-35.

Corporate Culture
– “Culture shapes behavior. There are plenty of perfectly
decent people who go astray because they're in a
culture that creates an environment in which they can't
get their jobs done unless they engage in unethical
activities.” - Harvard Business School professor and
business ethicist Barbara Toffler, former partner at
Arthur Andersen. Toffler left Andersen in 1999, well
before the Enron and Global Crossing scandals
destroyed the company. Her book, Final Accounting:
Ambition, Greed, and the Fall of Arthur Andersen
(Random House/Broadway Books, 2003), describes the
process of ethical erosion in grim detail. – “Postcards
from an Ethical Wasteland”, CIO, June 1, 2003

Corporate Culture
• In Moral Man and Immoral Society,
Reinhold Niebuhr proposed that
individual persons are always more moral
functioning alone than when they function
in a social group. - “Institutional Ethics:
An Oxymoron”, By Joe E. Trull, Editor,
Christian Ethics Today, Journal of
Christian Ethics, Issue 035 Volume 7 No 4
August 2001 .
• Do you agree with this?

Corporate Culture
• Rarely do the character flaws of a
lone actor fully explain corporate
misconduct. More typically, unethical
business practice involves the tacit,
if not explicit, cooperation of others
and reflects the values, attitudes,
beliefs, language, and behavioral
patterns that define an organization’s
operating culture. - Lynn Sharp
Paine, Harvard Business School

Corporate Culture
• “A strong corporate culture founded on
ethical principles and sound values is a
vital driving force behind strategic
success.” - Thompson & Strickland
• One company stressed its commitment to
RICE : respect, integrity, communication,
and excellence. The words have been on
T-shirts, paperweights, and on signs. The
firm printed a 61-page booklet with its
code of ethics and every employee had to
sign a certificate of compliance. That
company was Enron!

According to Ethical or
Moral, Values, Principles
or Standards
• Whose Values?

Moral, Values, Principles or
Standards
– Personal
– Family
– Peers
– Religious
– Company
– Community, Regional, National,
International

Standards
• Learned Where?

Standards
– Home
– School
– Church (or other place of worship)
– Life Experience
– Work Experience
– Books
– News Media
– Entertainment Media

According to Ethical or Moral,
Values, Principles or
Standards
• The average American, by the age of 65, will have spent the
equivalent of 15 years of their life watching television.
• By contrast, over the same time period, the average weekly
church-going American will have spent only 8 months of
their life receiving spiritual instruction.
• American children will take in 63,000 hours of “media”
(television, radio, internet, i-pods, etc.) input between the
ages of 5 and 17.
• By contrast, if they go to church once a week for an hour,
over the same number of years, that's 600 hours.

Standards
• In the middle of an interview for acceptance to a prestigious
Ivy League school back east, the interviewer asked his
“sure of himself” candidate, “If no one would ever find out,
and no one got hurt, would you lie for $1M?” The young
man thought for a moment and said, “If no one found out,
and no one was hurt? Sure, I think I would!” The interviewer
then asked, “Would you lie for a dime?” The young man
shot back, “No way, what kind of man do you think I am?”
The interviewer responded, “I have already determined that,
I am just trying to determine your price.”

Standards
• So fearful were the ancient Chinese of their enemies on the north
that they built the Great Wall of China, one of the 7 wonders of the
ancient world. It was so high they knew no one could climb over it,
& so thick that nothing could break it down. Then they settled
back to enjoy their security. But during the first 100 years of the
wall’s existence, China was invaded 3 times. Not once did the
enemy break down the wall or climb over its top. Each time they
bribed a gatekeeper & marched right through the gates. According
to the historians, the Chinese were so busy relying upon the walls
of stone that they forgot to teach integrity to their children.

Standards
• In the 1950s a psychologist, Stanton Samenow, and a psychiatrist,
Samuel Yochelson, sharing the conventional wisdom that crime is
caused by environment, set out to prove their point. They began a
17-year study involving thousands of hours of clinical testing of
250 inmates here in the District of Columbia. To their
astonishment, they discovered that the cause of crime cannot be
traced to environment, poverty, or oppression. Instead, crime is
the result of individuals making, as they put it, wrong moral
choices. In their 1977 work The Criminal Personality, they
concluded that the answer to crime is a "conversion of the wrong-
doer to a more responsible lifestyle." In 1987, Harvard professors
James Q. Wilson and Richard J. Herrnstein came to similar
conclusions in their book Crime and Human Nature. They
determined that the cause of crime is a lack of proper moral
training among young people during the morally formative years,
particularly ages 1 to 6.

Moral, Values, Principles
or Standards
• 33% of teens would act unethically to get ahead
or to make more money if there was no chance of
getting caught, according to a new Junior
Achievement/Harris Interactive Poll of 624 teens
between the ages of 13 and 18. 25% said they
were “not sure” and only 42% said they would
not. “These results confirm our belief that ethics
education must begin in elementary school.” said
Barry Salzberg, U.S. Managing Partner of Deloitte
& Touche.

According to Moral
Principles or Standards
• Does society require a moral
code to survive and prosper?

According to Moral
– 17th Century Philosopher
Thomas Hobbes postulated that
life in an amoral society would
be “ poor, nasty, brutish and
short”, lacking in industry and
commerce, as well as
knowledge and arts, and that its
people would live in a constant
state of fear and insecurity.

According Moral Principles
or Standards
• “Men qualify for freedom
in exact proportion to their
disposition to put moral
chains on their own
appetites. Society cannot
exist unless a controlling
power is put somewhere
on will and appetite, and
the less of it there is
within, the more of it there
must be without.” -
Edmund Burke (1774)

According to Moral
“The institutions of our
society are founded on the
belief that there is an authority
higher than the authority of
the State; that there is a moral
law which the state is
powerless to alter; that the
individual possesses rights,
conferred by the Creator,
which government must
respect … And the body of the
Constitution as well as the Bill
of Rights enshrined those
principles.” – Justice William
O. Douglas, in McGowan v.
Maryland, 366 U.S, 420 (1961)

According to Moral
– “Without civic
morality
communities
perish; without
personal morality
their survival has
no value.” —
Bertrand Russell, 20th-
century British
mathematician and
philosopher

According to Moral
– Martin Luther King, Jr.
once noted, " The
most dangerous
criminal may be the
man gifted with reason
but with no morals."

According to Moral
• We have grasped the
mystery of the atom and
rejected the Sermon on the
Mount. The world has
achieved brilliance without
wisdom, power without
conscience. Ours is a
world of nuclear giants
and ethical infants. --
General of the Army, Omar
Bradley

According to Moral
• There are seven sins in the
world: Wealth without
work, Pleasure without
conscience, Knowledge
without character,
Commerce without
morality, Science without
humanity, Worship without
sacrifice and politics
without principle. -
Mahatma Gandhi (1869 -
1948)

Ethics
• R. H. Tawney, the British
historian, once wrote: ''To
argue, in the manner of
Machiavelli, that there is
one rule for business and
another for private life, is
to open the door to an
orgy of unscrupulousness
before which the mind
recoils.''

Ethics
• Truett Cathy,
founder of
Chick-fil-A,
argues there is
no such thing as
business ethics
- only ethics.

Ethics
Duty-Based v. Outcome-Based Ethics
– Duty (Deontology)
• Duty is an act done simply for the sake of what is right.
• Duty is determined by “revealed truths” and involves
universal principles
• Often religion-based
• e.g. Kant’s Categorical Imperative
– "Everyone is obligated to act only in ways that respect the
intrinsic value, human dignity and moral rights of all
persons."
• Places High Value on Individual Rights
– Outcome (Consequentialism)
• Ethical if best outcome for the majority
• Involves cost-benefit analysis
• e.g. Bentham & Mill’s Utilitarianism
– "Of any two actions, the most ethical one is that which will
produce the greatest balance of benefits over harms."
• De-emphasizes individual rights

Ethics
Strategic v. Real Ethics
–What is the motivation/purpose
for acting ethically?

Integrity
• Integrity: from the Latin integritas, meaning
wholeness, completeness, or purity. To
courageously hold to what one believes is right
and true, without compromise. To stand
undivided, immovable, consistent in both heart
and action, word and deed. Involves the
maintenance of virtue and the pursuit of moral
excellence. Integrity is demonstrated by not only
espousing your values, but by living according to
them. Integrity describes both who you are and
what you do. People of integrity are
conscientious, trustworthy, accountable,
committed and consistent. A key to maintaining
integrity is “counting the cost” before committing
yourself.

Integrity
• “Psychologists have found integrity to be
essential to an individual's sense of identity and
self-worth, enabling the successful navigation of
change and challenge. Links between integrity
and the ability to gain and maintain the trust of
others have often been noted. Many purveyors of
practical advice, including Cicero and Benjamin
Franklin, have counseled that integrity is the
cornerstone of worldly success. According to
Franklin, "no Qualities [are] so likely to make a
poor Man's Fortune as those of Probity &
Integrity" (quoted in Beebe, 1992, p. 8)” - from
Blackwell’s Encyclopedic Dictionary of Business Ethics.

Integrity
• In Living a Life That
Matters Rabbi Harold
Kushner describes the
kind of people who are
able to overcome the
negativity in their lives as
shalem, people who are
“whole, united within
themselves, their internal
conflicts ended.” Because
of this, he says, they are
“persons of integrity.”
Integrity, says Kushner, is
a quality just as essential
to human well-being as is
the pursuit of peace and
justice.

Integrity
• The Bible/Talmud says that:
– The man of integrity walks securely, but he
who takes crooked paths will be found out.
(Prov. 10:9)
– The integrity of the upright guides them, but
the unfaithful are destroyed by their duplicity.
(Prov. 11:3)
– Integrity brings peace (i.e. a clear conscience)
and marks the perfect man (Hebrew Word: Tam
= Man of Integrity) (Ps. 37:37, 1 Kings 9:4)
– The just [man] walketh in his integrity: his
children [are] blessed after him. (Prov. 20:7)
– A good name is better than precious ointment.
(Ecc. 7:1)

Integrity
• Some Biblical Examples of Integrity:
– Joseph, Gen. 39:1-12
– Jacob/Israel (Gen 32:29) known as a “simple man” (tam,
Gen 25:27) that is to say, that “his mouth was like his
heart.”
– Job (Book of Job, see in particular description of Job at
2:3, 27:5)
– Daniel, Shadrach, Meshach & Abednego (Daniel
Chapters 3 & 6)
– David (Ps. 7:8)
– Solomon (1 Kgs. 9:4)
• Contrast: Ananias & Sapphira, Acts 5:1-11 and Acts 20:16-
36

Integrity
• According to Michael Useem,
Director of the Center for
Leadership and Change
Management, Warren
Buffett's “influence derives
from his moral stature and
integrity. In the aftermath of
scandals that have rocked
U.S. companies in the past
few years, it is difficult to
overemphasize the
importance of ethics as a
factor in leadership.” -
Leadership and Change:
Becoming the Best: What You
Can Learn from the 25 Most
Influential Leaders of Our Times ,
Knowledge @ Wharton
Newsletter, Jan.28-Feb.4, 2004

Character
• Character: The notable/conspicuous/
distinguishing moral/ethical traits or
characteristics of a person that give
evidence of their essential nature
and which ultimately shape their
reputation.

Character
• President Harry
Truman used to
say: "Fame is a
vapor, popularity
an accident, riches
take wings, those
who cheer today
may curse
tomorrow, only
one thing endures
-- character.”

Character
• "What you are stands over
you... and thunders so that
I cannot hear what you
say to the contrary.” -
Ralph Waldo Emerson

Character
• In his book The Death of Character, James Hunter, a noted
sociologist from the University of Virginia, concludes that
while Americans are innately as capable of developing
character as they ever were in the past, there are now few
cultural or institutional guidelines in our society that call
for its cultivation or maintenance. The reason, he
suggests, is because there is no consensus of moral
authority.

Character
• Compartmentalization: Many people believe that
what individuals do in their private lives is their own
business as long as it does not adversely impact the
performance of their duties to the organization and
they are able to “deliver the goods” professionally.
Under this way of thinking even serious moral
failures may be excused. Some refer to this kind of
thinking as “compartmentalization.” (e.g. President
Clinton/Monica Lewinsky situation, where, despite
the scandal, President Clinton maintained between
a 60 and 70% approval rating with the American
public.)
• Contrast: “Find God in all things”, St. Ignatius
Loyola.

Character
• Character vs. Reputation: It has been said
that an individual’s character can be
illustrated by a barrel of apples. The apples
seen on top by all represent one’s
reputation, and the apples that lie hidden
underneath are his character.

Reputation
• Eli Lily introduced a drug, fialuridine, intended to treat hepatitis B.
However, 15 patients who submitted to trials of the drug suffered liver
toxicity and 6 died. Rather than follow the company’s long-standing
“no comment” policy, the new Chairman and CEO, Randall Tobias
openly acknowledged the failure. His view was that communication
stands at the top of the list in the elements of good leadership. In
addition, he believed that if a company leaves a communications
void, others will fill it with misinformation. (Put the Moose on the
Table:Lessons in Leadership from a CEO’s Journey Through Business
and Life, Randall and Todd Tobias, Indiana University Press)

Reputation
• A railroad executive burst into Arthur Andersen’s office one day in
1914, demanding that the firm’s founder approve the railroad’s books.
Accountants had discovered that the railroad was inflating its profits
by failing to properly record expenses. Andersen refused, saying that
there wasn’t enough money in the city of Chicago to make him
approve the fraudulent accounting. Andersen’s independence cost
him the client, but it gained him something far more valuable, a
reputation for integrity that gave investors confidence in Arthur
Andersen audits, a reputation that helped the firm become one of the
top 5 accounting firms in the U.S. After nearly 90 years in business,
Andersen imploded in 2002 after acknowledging that its auditors had
shredded documents relating to its audits of Enron.

Reputation
• Warren Buffett, CEO of
Berkshire Hathaway,
warns his executives
once a year not to do
anything that year they
would be ashamed to read
about in their local
newspaper. “You can lose
a reputation that took 37
years to build in 37
seconds. And it might take
more than 37 years to
build it back.”

Virtue
• Virtue:The quality of doing what is right and
avoiding what is wrong.
– "Virtue develops from a habitual commitment to
pursue the good.” - Ronald F. Thiemann, a professor of
religion and society at Harvard Divinity School
– Wisdom is know what to do next; virtue is doing it. -
David Starr Jordan (1851 - 1931), American naturalist

The Role of Leadership in
Developing a Culture of Integrity
• According to Marshall Schminke, who teaches business ethics at the
University of Central Florida, “A person’s individual moral framework
is only the third-most important factor in deciding what they’ll do. The
most important is what does their boss do. Workers look to their boss
first for cues on what constitutes moral behavior. Second, they look at
their peers, and finally at their own moral code.” -Experts: Ethics not Just
Codes, Marshall Schminke, Raleigh News & Observer, June 8, 2003, p.12E,
based on an article by Harry Wessel in the Orlando Sentinel.)

• “ A company's commitment to integrity
flows from the commitment, action, and
credibility of its leaders.” - Responsibility Lies In
Leadership , By: Ruettgers, Mike, Chairman of the Board of EMC
Corporation, Vital Speeches of the Day, 0042742X, 12/15/2003, Vol. 70,
Issue 5, Delivered to The Fall 2003 Raytheon Lectureship in Business
Ethics, Bentley College, Center for Business Ethics, Waltham,
Massachusetts, October 8, 2003

Role of Leadership in Developing
a Culture of Integrity
• A leader’s integrity is probably the single
most important factor in an organization’s
ability to develop a culture of integrity
• Numerous business leaders have
described the development and
maintenance of a culture of integrity as the
very purpose of leadership?

• Edgar Schein argues that leaders shape culture
through what they notice, measure, reward and
dislike.
– e.g. At Enron and Worldcom, executives and Board
members elevated growth and short-term profits
above all other considerations and nurtured a culture
of cut-throat competition within the company.

• President George W.
Bush observed
recently, "Ultimately
the ethics of American
business depend on
the conscience of
America's business
leaders."

• A report by former U.S. Attorney General Richard
Thornburg explained how the corporate culture created
by CEO Bernie Ebbers and CFO Scott Sullivan fostered an
environment that led to the largest ever bankruptcy in U.S.
history. Ebbers resisted efforts to establish a company
code of conduct calling it a “colossal waste of time”. He
also made numerous, often highly emotional demands for
“results”. (Reports:Ebbers knew of “gimmickry”, Matthew Barakat, Raleigh
News & Observer, June 10, 2003, p.1)

• The “closer” the enterprise the greater the
correlation between the corporate culture
and the personal ethics of its leaders (e.g.
small, family business (note: Malden Mills
was a family business), contrast: a
multinational corporation)

• In a recent study by the Southern Institute for Business
and Professional Ethics, 97% of respondents said that the
leader of an enterprise must also be the moral leader, but
many executives don’t see or appreciate their power as
role models in this regard. Employees take their cue from
superiors on how to conduct themselves, and written
codes of conduct rarely carry as much weight as the
actual actions of those in command.

• Perhaps Skilling and Lay couldn't know all the
goings-on at Enron, as they claim. However,
"people at the top tend to set the target, the
climate, the ethos, the expectations that fuel
behavior," says Thomas Donaldson, a business
ethics professor at the Wharton School at the
University of Pennsylvania. (Corporate Ethics:
Right Makes Might, Business Week, 4/11/02)

• “Business ethics is integral to effective
leadership. It is not something that can be
delegated to others or to specialists like ethics
officers, though the latter help. Top managers
have the responsibility to "set the moral tone." -
Archie B. Carroll, Robert W. Scherer Chair of Management
in the Terry College of Business, University of Georgia,
Athens-Banner Herald, 12/16/03.

• In his new book, "Authentic Leadership" (2003),
Bill George, CEO of Medtronic, discusses how to
develop 5 essential dimensions of the authentic
leader:
– 1) Purpose
– 2) Values
– 3) Heart
– 4) Relationships
– 5) Self-discipline.

• Malden Mills/Aaron Feuerstein
• A Profile in Ethical Business
Leadership
• Feuerstein was thrust into the national
spotlight in December 1995 when fire
nearly completely destroyed his 130-
year-old textile company.
Demonstrating an all-too-uncommon
loyalty to his 2,400 workers, he
continued paying them for 90 days at a
cost of $1.5 million per week while the
factories were being rebuilt. He also
gave generously to support charities
that helped the families of nine
critically injured workers who have
since recovered.

• Sense of Responsibility to a Broad
Range of Stakeholders
• Feuerstein spurned the recent
rush to downsizing stating that,
“The fundamental difference is
that I consider our workers an
asset, not an expense. I have a
responsibility to the worker, both
blue-collar and white-collar”,
Feuerstein added, his voice taking
an edge of steely conviction. ‘I
have an equal responsibility to the
community. It would have been
unconscionable to put 3,000
people on the streets and deliver a
death blow to the cities of
Lawrence and Methuen.

• Compassion: Feuerstein
arranged Heart-bypass
operations for several
workers that could not
afford them and he
provided free soft drinks
and extra breaks for
employees when the
summer heat drove
temperatures to more
than 90 degrees on the
manufacturing lines.

• While many other American mill
owners moved their operations to
foreign countries, where employees
earn as little as $1 or $2 an hour,
Feuerstein said he was committed to
keeping his business in Lawrence, MA
where he paid his workers $12.50 an
hour. In fact, Malden Mills' new $70
million plant was situated in the heart
of a ghetto in Lawrence, one of the
state's poorest cities. "I think it's the
duty of government and industry to
[remain committed to urban America],"
he said. "Because if we don't, we won't
have our cities in another 20 to 30
years. And if we don't have our major
cities, we won't be the leader the
financial world."

• Respect: Employer/Employee
Loyalty That Goes Both Ways
How many corporate CEOs in
the downsize-crazed
companies today could ask
their employees to double
production in a few weeks
given no changes in the
current plant, much less given
temporary plants set up in old
warehouses? How many of your
employees would work 25
hours a day because the
company needed it to fill
outstanding orders?

• More than a year after the fire,
Feuerstein said he was as moved
by his workers' gratitude as they
were by his generosity. He told of
one employee who thanked him for
his support after the fire and said,
"We're going to pay you back
tenfold." Feuerstein said he didn't
completely comprehend the
meaning of the worker's
comments until, after two months'
time, production in one
undamaged portion of the mill was
boosted to 200,000 yards of fabric
a week - far beyond its capacity
before the fire.

• Customer Loyalty also goes
both ways: Feuerstein gave
some young companies credit
early on to help them grow and
Feuerstein made sure the
company kept its customers
supplied even in difficult times.
These customers returned the
favor by remaining loyal
customers even when Malden
Mills was nearly destroyed.

• Integrity: The real test of
leadership is maintaining
convictions during hard
times. The most important
communication is not
what you say but what you
do. Actions Speak Louder
Than Words

Spiritual Foundation
• Spiritual Foundation: Feuerstein
recently concluded a speech
quoting from Jeremiah 9:22-23, in
flawless Hebrew, then giving the
English translation. His message
was "Let the rich man not praise
himself," but rather, by
demonstrating the will of God,
show kindness, justice and
righteousness in his actions. His
response to the catastrophe was
in accordance with the Torah: you
do not sacrifice the lives of people
who are depending on you.”

• Feuerstein also
quoted the famous
first century Talmudic
scholar Hillel - twice:
"In a situation where
there is no righteous
person, try to be a
righteous person” and
"Not all who increase
their wealth are wise.”

• Feuerstein's father, Samuel, was one of
the early pioneers of the Jewish Day
School movement and a leader with the
Union of Orthodox Jewish
Congregations. In fact, Feuerstein
related, it was, in part, his grandfather's
devotion to Judaism that led him to
found Malden Mills at the turn of the
century when he emigrated from
Hungary. "My grandfather felt that by
owning a textile mill it would not only
enable him to bring his children into
the business, but would provide the
opportunity to observe the Sabbath."
Since the family worked together, it
allowed them to schedule work hours
around religious observances.”

• Feuerstein grew up in a
family where Talmudic
discussions around the
dinner table helped
formulate his beliefs
about how to act in the
world. "Judaism gives you
a complete and thorough
ethical framework within
which you and your family
can live," he explained.

• Feuerstein and his wife, Louise, are
ardent supporters of their temple,
Young Israel of Brookline, Mass.
Coincidentally, their synagogue
suffered a fire a year before the
mill burned down and they played
a role in helping to rebuild it. For
Louise, who converted to Judaism
nine years ago, her religion is a
way "to focus on the here and
now." She adds, "It's a positive
impetus to make life meaningful
every day, not just concentrate on
what's down the road.”

• Spiritual study remains an
important part of Aaron
Feuerstein's life, and he refers
to it as "exercise for my mind."
Also, each day he alternates
between doing an hour of
running and an hour of
calisthenics. During that time,
he goes over memorized
passages from either Jewish
literature (his favorites are the
Prophets, the Psalms and Pirke
Avot) and English literature
(specializing in Shakespeare's
tragedies).

• Is it necessary to believe in God to be
moral?

• In a recent poll, 58% of Americans said yes. This is not the view in
most developed countries. For example, in France, only 13% said yes.
(Nicholas D. Kristof, N.Y. Times}
• However, only 4 % of U.S. adults have a biblical worldview as the basis
of their decision-making, according to a new study by Barna Research
Group. "Although most people own a Bible and know some of its
content, our research found that most Americans have little idea how
to integrate core biblical principles to form a unified and meaningful
response to the challenges and opportunities of life," said researcher
George Barna. Among the most prevalent alternative worldviews was
postmodernism, dominant in the two youngest generations.

• “the happiness of a people, and the good
order and preservation of civil government,
essentially depend upon piety, religion, and
morality." - The Massachusetts Constitution of
1780, Ch. V, Sec. 2

• "Religion, morality, and knowledge, being
necessary to good government and the
happiness of mankind, schools and the
means of education shall forever be
encouraged.” - Northwest Ordinance, enacted
by the Continental Congress in 1787, Art. 3, 1
Stat. 51, 53 n. a (July 13, 1787, re-enacted Aug. 7,
1789)

• "Where there is no religion,
there will be no morals.” -
Benjamin Rush, Speech in
Pennsylvania Ratifying Convention
(Dec. 12, 1787)

• “[T]he most important of all lessons
[from the Scriptures] is the denunciation
of ruin to every State that rejects the
precepts of religion. . . . I believe that
religion is the only solid base of morals
and that morals are the only possible
support of free governments”. -
Gouverneur Morris, who spoke on floor
of the Constitutional Convention 173
times, more than any other delegate.

• “I have read your manuscript with some attention. By
the argument it contains against a particular
Providence [Christianity], though you allow a general
Providence, you strike at the foundation of all religion.
For without the belief of a Providence that takes
cognizance of, guards, and guides, and may favor
particular persons, there is no motive to worship a
Deity, to fear his displeasure, or to pray for his
protection. I will not enter into any discussion of your
principles, though you seem to desire it. At present I
shall only give you my opinion that . . . the consequence
of printing this piece will be a great deal of odium [hate]
drawn upon yourself, mischief to you, and no benefit to
others. He that spits into the wind, spits in his own face.
But were you to succeed, do you imagine any good
would be done by it? . . . [T]hink how great a portion of
mankind consists of weak and ignorant men and women
and of inexperienced, inconsiderate youth of both sexes
who have need of the motives of religion to restrain
them from vice, to support their virtue. . . . I would
advise you, therefore, not to attempt unchaining the
tiger, but to burn this piece before it is seen by any
other person. . . . If men are so wicked with religion,
what would they be if without it.” - Benjamin Franklin’s
1790 reply to Thomas Paine regarding Paine’s request of
Franklin to review his new book, The Age of Reason:

• " … our ancestors established their
system of government on morality and
religious sentiment. “[T]he cultivation of
the religious sentiment represses
licentiousness . . . inspires respect for law
and order, and gives strength to the
whole social fabric. Moral habits, they
believed, cannot safely be trusted on any
other foundation than religious principle,
nor any government be secure which is
not supported by moral habits. . . .
Whatever makes men good Christians,
makes them good citizens " - Daniel
Webster, December 22, 1820 at
Plymouth, Mass.

Of all the dispositions
and habits which lead to
political prosperity,
religion and morality
are indispensable
supports… Reason and
experience both forbid
us to expect that
national morality can
prevail in the exclusion
of religious principle.
George Washington’s
Farewell Address, September
17, 1796

• "We have no government
capable of contending with
human passions unbridled by
morality and religion. Our
constitution was made only for
a moral and religious people. It
is wholly inadequate to the
governing of any other.” - John
Adams

• “If we are to go forward, we must go back
and rediscover those precious values - that
all reality hinges on the moral foundations
and that all reality has spiritual control.” -
Martin Luther King, Jr.

• “Business and religion are not separate worlds. Business
is people … they take their religion to work with them …
True religion is is the life we lead, not the creed we
profess … A character standard is more important to a
stable world than an international gold standard.” - The
Spiritual Responsibility of American Business and Industry. By:
Johnson, Clement D.. Vital Speeches of the Day, 12/15/55, Vol. 22 Issue
5, p151, 3p; (AN 9867986)

• “[T]he loss of God leaves man at
the naked mercy of his fellows,
where might makes right.” – John
Montgomery, The Law Above the Law,
55 (1975)

• “What if, under your particular
understanding of the universe, other
human beings were not created in
God's image, had no inherent dignity,
and were yours to do with as you
pleased? And what if your particular
response to the mystery of life
happened to be the same as that of Eric
Harris, one of the two young killers in
Littleton, Colorado, who said, "My belief
is that if I say something, it goes. I am
the law"? or, as Fyodor Dostoevsky
wrote, "Without God, everything is
permitted"?” - The Necessity of Truth
• by Senator Rick Santorum, Heritage
Lecture #643, August 6, 1999

• In Business and Religion: Odd Couple or Bosom Buddies?
Evan Gahr reports that:
– Among leaders of the nation's top 100 businesses, 65 % attend
church or synagogue regularly--compared to 40 % of the general
population.
– IBM chairman Louis Gerstner, Jr., a graduate of an all-boys
Catholic high school, attends mass daily.
– Dallas-based Interstate Battery company, the top replacement-
battery manufacturer in North America, boasts a full-time
corporate chaplain who leads voluntary prayer sessions and
Bible study groups.

– Illinois-based ServiceMaster was founded by 2 evangelicals.
Originally just a rug-cleaning operation, it has since blossomed
into the nation's top provider of cleaning workers. The company's
motto is, "To honor God in all we do."
– Thomas Monaghan, the founder of Domino's Pizza, also founded
Legatus, an international organization for Catholic business
leaders that holds seminars on business ethics and sponsors
conferences featuring prominent Catholics from the pope on
down. Monaghan calls Legatus his "number-one priority.

– Allou Health and Beauty Care, Inc., which
boasts one of the highest profit margins in the
industry, bases its business operations
principles enunciated in the Jewish Talmud.

• According to a recent national survey by the
American Research Group:
– 70 % of respondents believe that corporate scandals
would be avoided if CEOs followed biblical principles.
– 94.4% of respondents believe companies run by
individuals who follow the Bible will grow at least as
fast or faster than those that do not.
– 54% percent of respondents said they would be more
likely to invest in a company run by a CEO who uses the
Bible to guide his or her business decisions.

• And according to one study, a majority of
Americans see religion as central to
recovering the country's moral compass.

• Christian philanthropist Sir John Templeton, regarded by Wall Street
as one of the world's wisest investors, contends in his book, The
Templeton Plan—21 Steps to Personal Success and Real Happiness,
that "the most successful people are often the most religiously
motivated. They are likely to have the keenest understanding of the
importance of ethics in business. They can be trusted to give full
measure and not cheat their customers.” In his extensive research,
Templeton found that "the common denominator connecting
successful people and successful enterprises is a devotion to ethical
and spiritual principles." Templeton believes that "the person who
lives by God's principles is the same person who will succeed in life,
making lasting friendships and, most likely, reaping significant
financial rewards.”- Christian Ethics in Business - Asset or Liability, Ian
Buchanan, www.christianity.ca.

• Does a leader’s strong spiritual foundation
guarantee that he will lead his company in
developing a culture of integrity?

• Note that in Business as a Calling Michael Novak reports
that:
– Kenneth Lay, Chairman and CEO of Enron Corp., confided that "I
grew up the son of a Baptist minister. From this background, I was
fully exposed to not only legal behavior but moral and ethical
behavior and what that means from the standpoint of leading
organizations and people. I was, and am, a strong believer that
one of the most satisfying things in life is to create a highly moral
and ethical environment in which every individual is allowed and
encouraged to realize their God-given potential. There are few
things more satisfying than to see individuals reach levels of
performance that they would have thought was virtually
impossible for themselves."

• Courage to do the right thing:
Unfortunately, subsequent years of
mounting debt forced Malden Mills into
bankruptcy. Questions inevitably arose
about whether Feuerstein's
benevolence may have helped bring
his company to bankruptcy. To
Feuerstein, though, the point is moot. In
March, he was asked by the CBS
program "60 Minutes" if, knowing how
things played out, he would do the
same thing he had done, he responded
"Yes, it was the right thing to do.
“Maybe on paper my company is now
worth less to Wall Street. But I can tell
you it is worth more.”

• Barbara Lee Toffler an adjunct
professor at Columbia University's
Graduate School of Business and
an expert on corporate
responsibility, when asked by The
New York Times last November
about Mr. Feuerstein's actions in
the wake of the Malden Mills fire,
and about the company's newly
precarious economic prospects,
suggested that "it may have been
that the desire to take principled
action somehow blinded him to
thinking long term.” Perhaps SHE
was the one not thinking LONG
TERM? (Mark 8:36)

• It seems appropriate that
Feuerstein, translated
from the Yiddish, means
“firestone”, or “a stone
which can endure intense
heat”, because it is clear
that his integrity survived
a literal “trial by fire”.

• Postscript:Aaron Feuerstein filed a reorganization plan to emerge
from Chapter11bankruptcy on March 7, 2003. Creditors have already
arrangedto strip Feuerstein of his chief executive's title, though they
haven't kicked him out of his office. Feuerstein retains the titles of
president and chairman but owns just a minority stake. Malden Mills
Board now includes Feuerstein, two independents and four members
appointedby creditors. The companyhas laid off about 70 people and
has set aside Feuerstein's pledge that fabric made in Asia with
cheaper labor wouldn't be sold to US consumers, a policy he felt would
protect local jobs. A mill in China recently began producing the
company's signature Polartecfor garments sold in the United States.
Some members of the board would like to move "substantial" parts of
the mill overseas, whereas Feuerstein "believes that it is not only
feasible, but desirable, to maintain manufacturing operations in the
United States."The board is also looking into developing housing or
commercial assets on parts of the mill's 25-acre site. Feuerstein has
to raise $125 million to pay off creditors and retain control of Malden
Mills. Feuerstein's connections won Malden Mills valuable military
contracts to supply troops in Afghanistan with Polartecgarments and
won some leverage with creditors.His “social capital” (with the
support of Senator John Kerry) also helped him gain $35 million in
financial guarantees from the US Export-ImportBank.

• Vision - Moral leaders tend to maintain a clear, strong and
positive vision and purpose for themselves and their
organizations that takes into account their organization’s
impact on society, and they must inspire others to
become invested in the pursuit of that vision. (Related
Scriptures, Prov. 29:18, Hab. 2:2-3)
• According to Wess Roberts, author of Leadership Secrets
of Attila the Hun, vision is the “Northstar” for any
organization.

• Servant Leadership - Moral leaders benefit their
organizations by empowering as opposed to
controlling others. They do this by first
recognizing, and then helping actuate, the latent
potentialities of others. (see Matt. 20:25-27)
• The key concept behind servant leadership is the
belief that true leadership emerges from those
whose primary motivation is a deep desire to help
others.

• 10 Characteristics of a Servant Leader (from Spears, Reflections on Leadership)
– 1) Active Listener
• Leaders must be good listeners and invite discussion, debateand feedback. - Carol
Stephenson
– 2) Genuinely Empathetic
– 3) Healer
– 4) Persuader
– 5) Aware
– 6) Possessing/Demonstrating Foresight
– 7)Conceptualizer
– 8)Committed to the Growth of others
– 9)Good Steward
– 10)Community Builder

• An increasing number of companies have adopted
servant-leadership as part of their corporate philosophy
or as a foundation for their mission statement. Among
these are the Toro Company (Minneapolis, Minnesota),
Synovus Financial Corporation (Columbus, Georgia),
ServiceMaster Company (Downers Grove, Illinois), the
Men's Wearhouse (Fremont, California), Southwest
Airlines (Dallas, Texas), and TDIndustries (Dallas, Texas).

Role of Leadership in
• Front-line Actors - Moral leaders really
lead. They become consciously and
actively involved in the promotion of
ethical behavior in their organizations,
both by word and deed.

3 Theories of Social
Responsibility
• Classical Theory
• Stakeholder Theory
• Corporate Social Responsibility Theory
(CSR)

Classical Theory
• Definition: The role of
business is to
maximize profits
within the law (see
Milton Friedman, "The
Social Responsibility
of Business Is to
Increase Its Profits.",
New York Times
Magazine, 1970)

Classical Theory
• Put another way, by Harvard Professor Theodore Levitt, “In
the end business has only two responsibilities - to obey
the elementary canons of face-to-face civility (honesty,
good faith, and so on) and to seek material gain.” - “The
Dangers of Social Responsibility”, Harvard Business
Review 36 (Sept.-Oct., 1958)

Classical Theory
• Serve the interests of the shareholders
• Social obligations limited to “ordinary moral
expectations”.
• Views obligations to non-shareholders as a constraint
• Trusts in Adam Smith’s “Invisible Hand” (The Wealth of
Nations) - The assumption that society benefits most
when individuals are allowed to define and pursue their
own self-interests, with minimal interference from
governments or other authorities.

Classical Theory - Contra
• Problems with: Market
Failures (e.g. pollution
& resource depletion,
see Pacific Lumber
Case, Desjardins,
Introduction to
Business Ethics, p.39,
a successful,
balanced enterprise
ruined)

Classical Theory - Contra
• When the 1990’s Tech Stock
Bubble “burst” it sent layoffs
soaring, 401(k) assets tanking.
According to the Center on
Budget and Policy Priorities,
between 1997 and 1999 the
bottom 20% of earners saw
their income decline, while the
richest 1% saw their income
more than double. The invisible
hand is a bit partial in the way it
dispenses favors. (Marjorie
Kelly, The Divine Right of
Capital)

Classical Theory -Contra
• “In fact, the purpose of a business
firm is not simply to make a profit,
but is to be found in its very
existence as a community of
persons who in various ways are
endeavouring to satisfy their basic
needs, and who form a particular
group at the service of the whole of
society. Profit is a regulator of the
life of a business, but it is not the
only one; other human and moral
factors must also be considered
which, in the long term, are at least
equally important for the life of a
business.” - Pope John Paul,
Centesimus annus, May 1, 1991

Stakeholder Theory
• Definition: The primary consideration in
business decision-making is
preserving/promoting the rights of
stakeholders
• Takes into consideration the moral
principle of mutual respect.

Stakeholder Theory
• Goal: to maintain the benefits of the free
market while minimizing the potential
ethical problems created by capitalism
(Phillips, Wharton School)
• Primary difference from Classical Theory:
elevation of nonshareholding interests to
the level of shareholder interests in
formulating business strategy and policy.

Stakeholder Theory
• Stakeholder: an individual or group, inside
or outside the organization, who has a
meaningful stake in its performance.
• Who are the stakeholders of a business?
• Narrow view vs. Wide View

Stakeholder Theory
• Some Possible Stakeholders of a Business:
– Customers
– Department/Employees
– Owners/Shareholders
– Creditors
– Suppliers
– Distributors
– Competitors

Stakeholder Theory
• Some Additional Possible Stakeholders:
– Local Community
– National Citizens
– Global Inhabitants
– Non-Human Life
– the Environment

Stakeholder Theory
• Corporate citizenship: the extent to which a
business meets its responsibilities, to its
various stakeholders, or to society at large.

Stakeholder Theory
• Problems with wider view?
– Discourages Investment - Undermines/Dilutes
shareholder property rights
– Interest Group Politics - Leads to waste and
inefficiency

Corporate Social
Responsibility Theory
• Definition: A voluntary assumption of
responsibilities, beyond the legal and
economic, that take into account
moral/ethical/socially desirable goals and
outcomes.
• Concept originated in the 1950’s and began
to gain a significant following in the 1960”s.

Corporate Social Responsibility
Theory
• Possible Examples
• Merck: moved to develop
Mectizan, a drug that would
treat river blindness, a disease
that primarily affected the
poor. Merck knew that it would
cost millions to develop and
that they would most likely not
realize a direct profit from the
effort. But this resulted in a
public relations windfall!

Theory
• Intel: provides
education in
science & math in
countries where it
has plants.

Theory
• Citigroup: has
provided
significant funds to
microcredit
ventures.

Theory
• “Man … ought to regard himself,
not as something separated
and detached, but as a citizen
of the world, a member of the
vast commonwealth of nature …
to the interest of this great
community, he ought at all
times to be willing that his own
little interest should be
sacrificed.” - Adam Smith

Corporate Social
• In the words of General Robert Wood Johnson,
founder of Johnson and Johnson: “The day has
passed when business was a private matter, if it
even really was. In a business society, every act of
business has social consequences and may
arouse public interest. Every time business hires,
builds, sells or buys, it is acting for the people as
well as for itself, and it must be prepared to
accept full responsibility”

Corporate Social
• Problems with CSR in general?
– Dilutes the Business Purpose
– Viewed as fundamentally antagonistic to the
Capitalist Enterprise
– Often influenced by simplistic political and
social agendas

Corporate Social
• The search for guilt-free affluence has helped to
transform "green" business into a mass-market
phenomenon.
• Patagonia, a designer and distributor of outdoor
clothing and gear, has long prided itself on being
green. For nearly two decades, it has given 10% of
pre-tax profits or 1% of sales, whichever is larger,
to environmental causes.

Corporate Social
• “Rain Forest Chic” - Socially responsible image as
a marketing tool, source of free, positive publicity
(e.g. The Body Shop, both customers and
franchisees attracted by progressive reputation)

Theory
• Anita Roddick/Body
Shop
– Supports various
social causes (e.g.-
Save the Whales)
– But may have stolen
store concept and
unfairly deals with
franchisees?

Theory
• Ben & Jerry’s -
– Fight global warming with
Ice Cream
– Annual one world one heart
festival
– Pint for a pint with
International Red Cross
– Rainforest Crunch
Fiasco/Mistreatment of
Employees/Sale to Unilever
(4/12/2000)

3 Theories of Social
Responsibility
• If you were trying to decide which type of
company to invest in, which would you
choose and why? (Classical, Stakeholder,
CSR)

Environment
• Areas of Concern?
– Waste & Pollution
– Use of Natural Resources
– Preservation of Environmentally Sensitive Areas
– Preservation of Biodiversity
• Consider Endangered Species Act, Noah/Ark, Note: Under Jewish Law: The
medieval Jewish commentator Nahmanides explained the biblical injunction
against slaughtering a cow and her calf on the same day (Leviticus 22:28) and
the taking of a bird with her young (Deuteronomy 22:6). "Scripture will not
permit a destructive act that will cause the extinction of a species, even
though it has permitted the ritual slaughtering of that species (for food). And
he who kills mother and sons in one day, or takes them while they are free to
fly away, is considered as if he destroyed that species." The Sefer Ha-hinukh
offers a similar explanation, stating that there is divine providence for each
species and that God desires them to be perpetuated.

Environment
• Sustainability - the ability to meet the needs of
the present without compromising the ability of
future generations to meet their own needs. (see
Phil. 2:4)
• “The responsibility for ensuring a sustainable
world falls largely on the shoulders of the world’s
enterprises.” Stuart Hart (1997)
• See Interface Corporation Case, Desjardins,
p.174-176.
• Polluter’s Dilemma (Supplement)

Environment
• Do Christians/Jews/Muslims have a moral duty to
care for the environment?

Environment
– What is the world’s oldest profession?

Environment
– Caretaker
• See Gen. 2:15 (“Dress & Keep”)
– Dress(abad, Heb.) = Work, Serve, Labor for
– Keep (shamar, Heb.) = Keep, Guard, Treasure, Preserve, Protect,
Retain, Save, Watch Over, Celebrate
– Jewish prohibition known as bal tashhit, 'do not destroy' is
based by the Rabbis on the biblical injunction not to destroy
fruit-bearing trees (Deut. 20: 19), but it is extended by them to
include wasting anything that can be used for the benefit of
mankind.
– See also Ezek. 34:18, Anti-pollution scripture?
• Takes into account the moral principle of stewardship/trusteeship
(see Lev. 25:23-24).

Sweatshops
• Sweatshops: Huge mass
production facilities in
which large numbers of
people work under
barbaric conditions for
subsistence wages.

Sweatshops
• Sweatshops often involve such things as:
– Dangerous working conditions (e.g. firetraps, exposure to
dangerous chemicals and/or machines without proper
safeguards)
– Denial of bathroom breaks
– Physical abuse
– Demands for sexual favors
– Seven day work weeks
– Long hours (12 to 16 hours a day)
– Forced double shifts
– Dismissal of anyone who tries to organize a union

Sweatshops
• Some Examples (from a recent Fair Labor
Association Report):
– Adidas - Vietnam: Workers forced to do overtime, arbitrary firings,
widespread sexual harassment, toilet visits limited
– Liz Claiborne-China: Workers fined for talking, blocked exits, no
toilet paper or towels, no sick leave, no pay stubs, excessive
overtime..
– Levi Strauss-Thailand: Child labor, dirty toilets, improperly stored
chemical tanks, no drinking water in the dining facility, excessive
overtime.
– Levi’s now monitors producers (“no-sweat” goods)
» Negative: Monitoring leads to use of fewer sources =
less opportunity

Sweatshops
• Illegal immigrants especially vulnerable.
• Often involve organized crime.
• 90% of sweatshop workers are female.
• Sometimes involve child labor.
– Note: According to International Labor Organization
(ILO) reports, some 1/5 of all children in the world ages
5-14, or about 250 million children, are engaged in
child labor.
• Major offender: apparel industry.

Sweatshops
• Are Sweatshops Necessarily Evil? (Taking
Sides, p. 282)

Globalization
• Yes - Black et al
– Violate Int’l Human Rights & Labor Laws
– Right to a “living wage”?
– Companies can afford to treat better/pay more
• A men’s dress shirt, made in Mexico, and selling for $32.00 in
the United States, costs only $4.74 to produce
– Customers will not tolerate sweatshops and are
willing to pay more to prevent them. (Is this true?)
• Ad by “Behind the Label” and organization dedicated to
exposing sweatshops shows a young American girl shopping
and saying, “I helped push African women into slums, I was
just shopping.”

Globalization
• No- Myerson - Merely “Growing Pains”
– May be only option in developing countries to accumulate capital
• First-step towards modern prosperity (e.g. Hong Kong, Singapore,
South Korea, Taiwan, Indonesia) Over the past 50 years, countries
like India resisted sweatshops, while countries that started at a
similar economic level - like Taiwan and South Korea - accepted
sweatshops as the price of development. Today, Taiwan and South
Korea are modern countries with low rates of infant mortality and
high levels of education; in contrast, every year 3.1 million Indian
children die before the age of 5, mostly from diseases of poverty like
diarrhea. Per capita income in Indonesia has more than tripled in the
last 20 years.
• “The simplest way to help the poorest Asians would be to buy more
from sweatshops, not less.” - Nicholas D. Kristof, N.Y. Times, 9/4/2000.

Globalization
• No- Merely “Growing Pains”
– When Nike and Gap pulled out of Cambodia after a BBC
report on sweatshops there it cost the country $10
million in contracts and hundreds or workers lost their
only source of income for themselves and their
families.
– China, Vietnam and various Eastern European
Countries are now Sweatshop “hot spots”
– The United States has had its own history of
sweatshops, employing African & Asian slaves, various
waves of immigrants, etc,

Globalization
• No- “Growing Pains”
• In the late 1930’s Life Magazine declared that
sweatshops no longer existed in America
• However, there has been a definite resurgence of
sweatshops in America, especially since the late
1960’s, mainly employing illegal immigrants
– (e.g. A 1995 police raid of a fenced-in compound in El
Monte, California found a clandestine garment
sweatshop that employed some 72 Thai immigrants as
virtual slaves)
– The U.S. Labor Dept. estimates that 50% of current U.S.
owned/operated garment factories are sweatshops.

Globalization
• No- Developing nations not complaining
– Honduran union leaders universally resent the moralizing of U.S.
labor activists who, like the National Labor Committee, are funded
by organized labor committed to preserving American jobs.
According to Honduran labor leaders, maquiladoras are
increasingly unionized and offer wages two-to-three times the
minimum wage. These are prime jobs in an economy in which
almost half of the population can find no work at all. Labor
shortages at these jobs have helped bump up wages throughout
the economy. (Jon Entine)
– “A policy of good jobs in principle, but no jobs in practice, might
assuage our consciences but is no favor to its alleged
beneficiaries.”

Is Ethical Behavior Good for
Business?
• "The successful entrepreneur
must know how to glide over
every moral restraint with
almost childlike regard...[and
have], besides other positive
qualities, no scruples
whatsoever, and [be] ready to
kill off thousands of victims --
without a murmur.” - John D.
Rockefeller.

Is Ethical Behavior Good for Business?
• Some Costs of Ethical Misconduct
– Public/Interest Group/NGO
disgrace/scandal/ostracism/repudiation/protests
– Litigation/Prosecution
– Decreased Employee
Morale/Loyalty/Commitment/Performance/Productivity
– Loss of Business/Profits
– Loss of Customer/Supplier/Partner,
Trust/Goodwill/Loyalty

• Some Additional Costs of Ethical Misconduct
– Loss of Social/Reputation Capital/Goodwill (i.e. the
willingness of stakeholders to overlook failings)
– Shaken public confidence in company and in capital
markets
– Layoffs
– Loss of Investments/Pensions
– Increased Government Scrutiny/Regulation
– Environmental/Health Damage

• Impact on the Bottom Line
– Ethical Behavior Enhances profitability - Most
academic studies support the conclusion that
ethical behavior and profitability go hand in
hand

• A 1999 DePaul University study of 300 large firms found
that companies that make an explicit commitment to
follow an ethics code provided more than twice the value
to shareholders than companies that didn't. And it gets
better: According to Management Review, published by
the American Management Association, "For the 47
companies expressing a more extensive or more explicit
commitment to ethics, the market value added difference
was larger--an average of $10.6 billion, or almost three
times the MVA of companies" without similar
commitments.

• “Two professors at the Harvard Business School did a study of 207 major
companies over an 11-year period. They used all sorts of measuring devices
and came up with a ranking by corporate cultures. What they measured were
things that are sometimes called the soft side of business-morale, rewards
for creativity, emphasis on ethics, how well managers listen to their
employees, and so on. In my business we call them more or less spirited
workplaces. We could also call them companies with a high or low level of
integrity. They then put these companies up against the hard side, the bottom
line, on three measures: 1] gains in operating earnings, 2] return on
investment, and 3] increase in stock prices. Terry Deal, who coined the term
corporate culture, took a second look at those numbers, ran the same
numbers again, and came up with an analysis of the top 20 companies vs. the
bottom 20. Here's what he found. The top 20--the companies with integrity--
the spirited workplaces--averaged 571% higher earnings than the dispirited
workplaces. The top 20% averaged a 417% higher return on investment. The
top 20% enjoyed an increase in stock prices of 363% in the same period. One
of American's most successful CEO's was right when he said, "the soft side is
the hard side.” - Restoring Integrity To Business , By: Thompson, William David, Vital Speeches
of the Day, 0042742X, 10/15/2002, Vol. 69, Issue 1.

Is Ethical Behavior Good
for Business?
• An investment of $1,000 ten years ago in each of
ten companies highly regarded for ethical
behavior (G.E., Coca-Cola, Hewlett-Packard,
Microsoft, Intel, Southwest Airlines, Berkshire
Hathaway, Disney, Johnson & Johnson, and Merck)
would have resulted in a return nearly three times
as much as an investment of $10,000 in the
Standard & Poor’s 500 stock index. (Fortune)

Business?
• An exception: In response to
numerous lawsuits, gun
manufacturer, Smith & Wesson's
former CEO Ed Shultz decided to
start including locks on its
handguns in March 2000. Although
the decision was clearly ethical,
customers especially the NRA)
were unhappy with the change.
Sales declined, employees were
laid off, and Shultz resigned. In this
case, the ethical decision did not
have a positive financial impact on
the firm. Nonetheless, despite jobs
lost, lives may have been saved by
the change in product design.

Business?
• Reputation Management
• A reputation for integrity
enhances customer
loyalty (e.g. Johnson &
Johnson Tylenol Case)
• Conversely, damage to a
company's reputation can
mean a sharp and often
irreversible loss of
market share.

Business?
• Social Capital
– Experts say most
people forgive
mistakes made by
leaders who have both
conviction and a good
heart. - Del Jones,
Leadership lessons
from the Reagan years,
USA Today, June 11,
2004, p.6B.

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