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Scenario:
Jorge Nunez and Jaqueline Kerry are members of a young account sales team for AgroLaunch
Enterprises, Inc. (ALE), a new firm of high tech agro-farmers. The business provides beverage
manufacturers with plant products designed with unique specifications (e.g., herbs, spices, corn, wheat,
yeast, etc.). Using high tech processes, ALE can produce the plant products without the use of
traditional farmland to provide the client their own cheap ingredient source. Nunez and Kerry, who are
in their late twenties, are both trained in the sciences. They are very well versed in their chosen field.
They are salaried employees of ALE who each receive a 1% bonus of the total value on every contract for
every client account they bring to the company worth over $500,000. ALE holds their talent in great
esteem.
Wanting the star team to field a big client, ALE recently sent Nunez and Kerry on a trip from Boston to
Manila to meet with a new client who could potentially bring a million-dollar contract to the firm. There
was a long delay at the Boston airport due to a snowstorm. Nunez and Kerry took a different flight than
originally planned to avoid the risk of not leaving Boston for several days. They had to take economy
seats apart from each other to get on the plane. The new flight was full and the seating uncomfortable.
Grumpy from the delay and uncomfortable seating, Nunez, still had to work with Kerry to prep for the
meeting. He decided to employ the plane’s new in-flight networking technology to carry on a video chat
with Kerry who was sitting towards the back of the plane. Nunez was simultaneously using the plane’s
Internet connectivity to engage in over a dozen “chats” with friends, a marathon chess game, and a
Tweet conversation with the Manila client on the ground – all the while sipping tequila. After 8 hours
on the plane and a stop at the Azores, Kerry signed off to get some sleep. Nunez relaxed by the drink
and in a “social” mood from conversations with friends, shared ALE proprietary information about
growing methods with the potential Manila client via Twitter before signing off to get some sleep as
well. Nunez was sure sharing information would help clinch the sale but was forgetting that the
information would go to all of the contacts on his ALE Twitter account. Nunez knew disseminating
proprietary information to persons not under contract or not members of the firm was against company
policy.
Kerry and Joshua Hellman, the team’s boss, are both contacts in Nunez’s account. They both recognized
the infraction upon receipt of the text messages.
Immediately upon landing, Kerry confronts Nunez with the problem. Nunez replied, “Well I can’t do
anything now but I am sure it will seal the deal. That is why I tweeted the information. They won’t care
at home if we come back with a signed contract.” Worried, but thinking about her bonus on a million
dollars, Kerry says, “You’re probably right. I won’t say anything for now.” Nunez never told Kerry that
Hellman probably received the texts as well.
After two days of negotiation, the team lands the contract and returns to Boston feeling great.
Meanwhile, Hellman is furious and worried about Nunez’s actions and is thinking; “How can I not report
Nunez and Kerry for their infractions? Does getting the contract make a difference? Leaking proprietary
information to non-clients to get the sale is forbidden. It can bring the company down financially if such
actions continue because eventually it is likely that the information will be utilized to our competitors.
Why didn’t Kerry stop him?”
Assignment #1: Ethical Dilemmas (15%)
Purpose:
In the first assignment, you have the opportunity to gain an understanding of how to identify different
types of ethical dilemmas that occur within business, apply ethical theories to solve dilemmas, and after
comparing the results, take a critical stance of determining a theorist who can best address all three
dilemmas.
Outcome Met by Completing This Assignment:
1. Identify ethical issues that arise in domestic and global business environments using an understanding
of ethical concepts and of legal and business principles
2. Develop and evaluate alternatives to, and recommend solutions for, ethical dilemmas, taking into
account ethical and legal requirements and the essential mission of the business enterprise
3. Effectively communicate to internal and external business stakeholders the complexities of ethical
issues, suggesting and analyzing various solutions in order to ensure appropriate business practices and
accountability
NOTE: All submitted work is to be your original work. You may not use any work from another student,
the Internet or an online clearinghouse. You are expected to understand the Academic Dishonesty and
Plagiarism Policy, and know that it is your responsibility to learn about instructor and general academic
expectations with regard to proper citation of sources as specified in the APA Publication Manual, 6th
Ed. (Students are held accountable for in-text citations and an associated reference list only).
Instructions:
Step 1: Preparation for the Assignment
◦Before you begin writing the assignment, you will read the following requirements that will help you
meet the writing and APA requirements. Not reading this information will lead to a lower grade:
◦Read the grading rubric for the assignment. Use the grading rubric while writing the report to ensure
all requirements are met that will lead to the highest possible grade.
◦Third person writing is required. Third person means that there are no words such as “I, me, my, we, or
us” (first person writing), nor is there use of “you or your” (second person writing). If uncertain how to
write in the third person, view this link: http://www.quickanddirtytips.com/education/grammar/firstsecond-and-third-person.
◦Contractions are not used in business writing, so you are expected NOT to use contractions in writing
this assignment.
◦You are expected to paraphrase and are NOT to use direct quotes. You are expected to paraphrase,
which can be learned by reviewing this link: https://writing.wisc.edu/Handbook/QPA_paraphrase2.html
◦You are responsible for APA only for in-text citations and a reference list.
◦You are expected to use the facts from the case scenario paired with the weekly course readings to
develop the analysis and support the reasoning. No more than three (3) external resources can be used
in completing the assignment. Books cannot be used as resources for this assignment. The expectation
is that you provide a robust use of the course readings. No other books besides the course eBook can
be used. When using a source document, the expectation is that the information is cited and
referenced with a page or paragraph number.
Step 2: How to Set Up the Paper
Task 1: Create a Word or Rich Text Format (RTF) document that is double-spaced, 12-point font. The
final product will be between 4-6 pages in length excluding the title page and reference page. Write
clearly and concisely.
Task 2: Use the following format with headings:
•Create a title page with title, your name, the course, the instructor’s name and date;
•Introduction (one paragraph)
•Ethical Dilemmas;
•Ethical Categories;
•Applying Theorists
•Reflection
Step 3: Create the introductory paragraph.
Within this paragraph, provide a brief overview of the scenario. Then, provide a thesis statement and
tell the reader the main topics covered in the paper. The introductory paragraph is the first paragraph
of the paper. View this website to learn how to write an introductory paragraph:
http://www.writing.ucsb.edu/faculty/donelan/intro.html
Step 4: Read critically and analyze the case scenario under Week 3 Content area.
Step 5: Identify and discuss the three dilemmas presented in the case scenario. Explain the facts that
you have relied upon to make the selection. Use the course material to support your reasoning and
conclusions.
Step 6: Identify and discuss the common ethical issues categories to which each of the three dilemmas
belong. Use the course material to support your reasoning and conclusions.
Step 7: State each dilemma in question form and then apply the ethical theories of Kant, Rand, and
Bentham to answer the question: How would each of these theorists solve the dilemma? You need only
chose one theorist per dilemma but all three theorists must be used in discussing the three dilemmas.
Explain in detail how the conclusions were conceived using the class material, the facts from the case
scenario, and any additional resources necessary to define the answer.
Step 8: In a final paragraph, compare the results and select one theorist who would best solve all three
dilemmas. Since this last part is reflective of your personal opinion, be sure to support the conclusion
with the class material, facts from the case scenario, and a definition of any personal ethical values that
influenced the decision process.
Step 9: Proofread the paper for spelling and grammatical issues and third person writing as this
assignment requires college-level writing.
•Use the spell and grammar check in Word as a first measure;
•Have someone who has excellent English skills to proof the paper;
•Consider submitting the paper to the Effective Writing Center (EWC). The EWC will provide 4-6 areas
that may need improvement.
Step 10: Submit the paper in the Assignment Folder (The assignment submitted to the Assignment
Folder will be considered a student’s final product and therefore ready for grading by the instructor. It is
incumbent upon the student to verify the assignment is the correct submission. No exceptions will be
considered by the instructor.)
This text was adapted by The Saylor Foundation under a Creative
Commons Attribution-NonCommercial-ShareAlike 3.0 License without
attribution as requested by the work’s original creator or licensee.
1
Chapter 2
Business Ethics and Social
Responsibility
“Mommy, Why Do You Have to Go to Jail?”
The one question Betty Vinson would prefer to avoid is ―Mommy, why do you have to go
to jail?‖ [1] Vinson graduated with an accounting degree from Mississippi State and
married her college sweetheart. After a series of jobs at small banks, she landed a
midlevel accounting job at WorldCom, at the time still a small long-distance provider.
Sparked by the telecom boom, however, WorldCom soon became a darling of Wall
Street, and its stock price soared. Now working for a wildly successful company, Vinson
rounded out her life by reading legal thrillers and watching her twelve-year-old daughter
play soccer.
2
WorldCom Inc.’s former director of management, Betty Vinson, leaves Federal Court
after pleading guilty to securities fraud October 10, 2002, in New York City.
Photo by Adam Rountree/Getty Images
Her moment of truth came in mid-2000, when company executives learned that profits
had plummeted. They asked Vinson to make some accounting adjustments to boost
income by $828 million. She knew that the scheme was unethical (at the very least) but
gave in and made the adjustments. Almost immediately, she felt guilty and told her boss
that she was quitting. When news of her decision came to the attention of CEO Bernard
Ebbers and CFO Scott Sullivan, they hastened to assure Vinson that she‘d never be
asked to cook any more books. Sullivan explained it this way: ―We have planes in the
air. Let‘s get the planes landed. Once they‘ve landed, if you still want to leave, then
leave. But not while the planes are in the air.‖
[2]
Besides, she‘d done nothing illegal, and
if anyone asked, he‘d take full responsibility. So Vinson decided to stay. After all,
Sullivan was one of the top CFOs in the country; at age thirty-seven, he was already
making $19 million a year. [3] Who was she to question his judgment? [4]
Six months later, Ebbers and Sullivan needed another adjustment—this time for $771
million. This scheme was even more unethical than the first: It entailed forging dates to
hide the adjustment. Pretty soon, Vinson was making adjustments on a quarterly
basis—first for $560 million, then for $743 million, and yet again for $941 million.
Eventually, Vinson had juggled almost $4 billion, and before long, the stress started to
get to her: She had trouble sleeping, lost weight, looked terrible, and withdrew from
people at work. But when she got a promotion and a $30,000 raise, she decided to
hang in.
By spring 2002, however, it was obvious that adjusting the books was business as usual
at WorldCom. Vinson finally decided that it was time to move on, but, unfortunately, an
internal auditor had already put two and two together and blown the whistle. The
3
Securities and Exchange Commission charged WorldCom with fraud amounting to $11
billion—the largest in U.S. history. Seeing herself as a valuable witness, Vinson was
eager to tell what she knew. The government, however, regarded her as more than a
mere witness. When she was named a co-conspirator, she agreed to cooperate fully
and pleaded guilty to criminal conspiracy and securities fraud. And that‘s why Betty
Vinson will spend five months in jail. But she won‘t be the only one doing time: Scott
Sullivan—who claims he‘s innocent—will be in jail for five years, and Bernie Ebbers—
who swears he‘s innocent also—will be locked up for twenty-five years. [5]
So where did Betty Vinson, mild-mannered midlevel executive and mother, go wrong?
How did she manage to get involved in a scheme that not only bilked investors out of
billions but also cost seventeen thousand people their jobs?
[6]
Ultimately, of course, we
can only guess. Maybe she couldn‘t say no to her bosses; maybe she believed that
they‘d take full responsibility for her accounting ―adjustments.‖ Possibly she was afraid
of losing her job. Perhaps she didn‘t fully understand the ramifications of what she was
doing. What we do know is that she disgraced herself and headed for jail.
[7]
[1] This case is based on Susan Pullman, ―How Following Orders Can Harm Your Career,‖Wall Street
Journal, June 23,
2003, CareerJournal.com,http://www.cfo.com/article.cfm/3010537/c_3036075 (accessed January 22,
2012).
[2] Susan Pullman, ―How Following Orders Can Harm Your Career,‖ Wall Street Journal, June 23,
2003, CareerJournal.com, http://www.cfo.com/article.cfm/3010537/c_3036075(accessed January 22,
2012).
[3] Amanda Ripley, ―The Night Detective,‖ Time, December 22,
2002,http://www.time.com/time/personoftheyear/2002 (accessed April 24, 2006).
[4] Jeff Clabaugh, ―WorldCom‘s Betty Vinson Gets 5 Months in Jail,‖ Washington Business Journal,
August 5, 2005, Albuquerque
Bizjournals.com,http://www.bizjournals.com/washington/stories/2005/08/01/daily51.html (accessed
January 22, 2012).
[5] Scott Reeves, ―Lies, Damned Lies and Scott Sullivan,‖ Forbes.com, February 17,
2005,http://www.forbes.com/2005/02/17/cx_sr_0217ebbers.html (accessed January 22, 2012); David A.
Andelman, ―Scott Sullivan Gets Slap on the Wrist—WorldCom Rate Race,‖Forbes.com, August 12,
2005, http://www.mindfully.org/Industry/2005/Sullivan-WorldCom-Rat12aug05.htm (accessed January 22,
2012).
[6] Susan Pullman, ―How Following Orders Can Harm Your Career,‖ Wall Street Journal, June 23,
2003, CareerJournal.com, http://www.cfo.com/article.cfm/3010537/c_3036075(accessed January 22,
2012).
4
[7] ―World-Class Scandal at WorldCom,‖ CBSNews.com, June 26,
2002,http://www.cbsnews.com/stories/2002/06/26/national/main513473.shtml (accessed January 22,
2012).
2.1 Misgoverning Corporations: An
Overview
LEARNING OBJECTIVES
1. Define business ethics and explain what it means to act ethically in business.
2. Explain how you can recognize an ethical organization.
The WorldCom situation is not an isolated incident. The boom years of the 1990s were
followed by revelations of massive corporate corruption, including criminal schemes at
companies such as Enron, Adelphia, and Tyco. In fall 2001, executives at Enron, an
energy supplier, admitted to accounting practices concocted to overstate the company‘s
income over a period of four years. In the wake of the company‘s collapse, stock prices
plummeted from $90 to $1 a share, inflicting massive financial losses on the investment
community. Thousands of employees lost not only their jobs but their retirement funds,
as well. [1] Before the Enron story was off the front pages, officials at Adelphia, the
nation‘s sixth-largest cable company, disclosed that founder and CEO John Rigas had
treated the publicly owned firm as a personal piggy bank, siphoning off billions of dollars
to support his family‘s extravagant lifestyle and bankrupting the company in the
process. [2] Likewise, CEO Dennis Koslowzki of conglomerate Tyco International was
apparently confused about what was his and what belonged to the company. Besides
treating himself to a $30 million estate in Florida and a $7 million Park Avenue
apartment, Koslowzki indulged in a taste for expensive office accessories—such as a
5
$15,000 umbrella stand, a $17,000 traveling toilette box, and a $2,200 wastebasket—
that eventually drained $600 million from company coffers.
[3]
As crooked as these CEOs were, Bernie Madoff, founder of Bernard L. Madoff
Investment Securities and former chairman of the NASDAQ stock exchange, makes
them seem like dime-store shoplifters. [4] Madoff is alleged to have run a giant Ponzi
scheme [5] that cheated investors of up to $65 billion. His wrongdoings won him a spot
at the top of Time Magazine‘s Top 10 Crooked CEOs. According to the SEC charges,
Madoff convinced investors to give him large sums of money. In return, he gave them
an impressive 8 percent to 12 percent return a year. But Madoff never really invested
their money. Instead, he kept it for himself. He got funds to pay the first investors their
return (or their money back if they asked for it) by bringing in new investors. Everything
was going smoothly until the fall of 2008, when the stock market plummeted and many
of his investors asked for their money back. As he no longer had their money, the game
was over and he had to admit that the whole thing was just one big lie. Thousands of
investors, including many of his wealthy friends, not-so-rich retirees who trusted him
with their life savings, and charitable foundations, were financially ruined. All those
harmed by Madoff either directly or indirectly were pleased when he was sentenced to
jail for one-hundred and fifty years.
Are these cases merely aberrations? A Time/CNN poll conducted in the midst of all
these revelations found that 72 percent of those surveyed don‘t think so. They believe
that breach of investor and employee trust represents an ongoing, long-standing pattern
of deceptive behavior by officials at a large number of companies. [6] If they‘re right, then
a lot of questions need to be answered. Why do such incidents happen (and with such
apparent regularity)? Who are the usual suspects? How long until the next corporate
bankruptcy record is set? What action can be taken—by individuals, organizations, and
the government—to discourage such behavior?
6
The Idea of Business Ethics
It‘s in the best interest of a company to operate ethically. Trustworthy companies are
better at attracting and keeping customers, talented employees, and capital. Those
tainted by questionable ethics suffer from dwindling customer bases, employee
turnover, and investor mistrust.
Let‘s begin this section by addressing one of the questions that we posed previously:
What can individuals, organizations, and government agencies do to foster an
environment of ethical and socially responsible behavior in business? First, of course,
we need to define two terms: business ethics and social responsibility. They‘re often
used interchangeably, but they don‘t me …
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