All Cases For Business Ethics Best Practices for Designing and Managing Ethical Organizations 3e Den

All Cases For Business Ethics Best Practices for Designing and Managing Ethical Organizations 3e Denis Collins; Patricia Kanashiro

CASE NOTES Case Study 1: Opioid Responsibility: Big Pharma, Doctors, Consultants, and Patients Written by Anastasia Cortez Case Summary Purdue Pharma introduced OxyContin in 1995 with an unprecedented marketing effort that aimed to create a wide market for the opioid pain reliever. Their success is convincing the medical community that OxyContin was a safe and effective drug laid the groundwork for the opioid epidemic in the United States. State and federal litigation against Purdue has revealed that the company behaved unethically by marketing OxyContin to doctors who should not have been prescribing it and claiming that it could treat conditions it was not proven to be effective for and then shifting blame for addiction onto patients for whom the drug did not work as promised.

Purdue‘s success in generating multibillion sales revenue for a new product came at the expense of hundreds of thousands of lives.

Case Analysis This case discusses Purdue Pharma‘s role in the U.S. opioid epidemic. The case is an example of unethical company behavior, primarily in the context of marketing. The case also can serve to spark discussion about corporate responsibility for product problems. In this case, the responsibility chain is complicated by the involvement of doctors mediating between the company and the patients who eventually took the product. Because the opioid epidemic has had a broad impact on so many individuals and agencies, the question of company responsibility has been magnified—is Purdue responsible for paying for the opioid epidemic?

Critical Thinking Questions and Suggested Answers 1. Identify unethical behaviors that contributed to the success of OxyContin. Some stakeholders to consider include Arthur Sackler, Richard Sackler, the Purdue marketing department, Purdue sales representatives, prescribing physicians, patients, and the FDA. Purdue‘s founding Sacklers‘ grew the company by inventing the practice of aggressively marketing products towards doctors, undermining the standard practice of respecting medical professionals‘ judgment, and letting them independently make decisions about patient care without the influence of high-pressure sales tactics. Richard Sackler was continuing a family tradition by the time he controlled the company and took it to the next level. His aggressive sales goals and tactics set the foundation for Purdue‘s sales and marketing personnel to promote OxyContin using dishonest and misleading tactics.

Richard Sackler, as a leader, modeled attitudes and behaviors that company employees used while marketing OxyContin. When Richard Sackler disregarded and dismissed evidence of OxyContin‘s problems in favor of increasing sales, he encouraged the marketing department to also ignore evidence and prioritize sales. Sales representatives were given ambitious sales goals and dishonest information to share with doctors and continued to strive for performance bonuses and ignore field observations. Purdue‘s company culture was unethical at its core.

Prescribing physicians should have seen evidence of addiction in their patients, and certain many physicians would have slowed or stopped OxyContin prescribing during growth and height of the opioid epidemic. However, some doctors aggressively pursued the revenue they could gain by prescribing OxyContin—no profession is immune to bad

members. One thing to note is that the practice of marketing to doctors with vacations, conferences, promotional items, and such has decreased—in part because doctors identified these incentives as a potential conflict of interest, perhaps as a result of patient perception/backlash.

Patient culpability will depend on students‘ opinions on the nature of addiction. Students who believe addiction is beyond a patient‘s control will say that patients are not responsible for the epidemic at all, while those who believe that people should be able to resist addiction will blame patients.

The FDA certainly acted very slowly on the opioid epidemic. It was not clear when researching the case if Purdue (or any other pharmaceutical company) was intentionally influencing the FDA to ignore the problem, or if the FDA simply dropped the ball.

2. Are pharmaceutical companies more responsible for the safety of their products than the doctors who prescribe medication to their patients?

The medical field licenses doctors as experts. Doctors are also the mediators between patients and access to medical care and prescription products. Purdue worked within this system by marketing OxyContin aggressively towards doctors. Rather than assigning responsibility (are doctors more responsible?), it would be fairer to say that Purdue exploited a system that has established doctors as responsible parties in medicine— patients sue doctors for malpractice. The opioid epidemic has spawned suits against pharmaceutical companies on behalf of patients, but in our system, this normally happens as a secondary effort, after doctors are first held responsible for negative patient outcomes.

3.

Who should be the target for pharmaceutical company product marketing, doctors or patients? Do you think it is ethical to try to ―create a market‖ for a medication like Purdue did for opioids?

An ethical marketing executive would identify a market, not create one in this case— imagine making people sick in order to sell a cure. Marketing of prescription medicine should be directed towards professionals capable of assessing appropriate use (and in this case it was marketed towards doctors, but probably disingenuously). Creating demand for painkillers by convincing people that their pain is unacceptable and must be treated does seem to cross a line.

4.

How much responsibility should a company have if their product harms more stakeholders than the actual users of their products? Is there a limit to a company’s responsibility for a harmful product?

It is likely that students will limit product liability to actual users, although people directly harmed as a consequence of use (for example, family members of addicts) could also be considered. Calculating the costs to medical facilities or the burden on law enforcement is difficult at best, and one can argue that these institutions exist specifically to deal with illness and law enforcement, and the opioid epidemic certainly comes under those umbrellas—an analogy would be to ask if gun companies should fund health care and law enforcement because their products cause injury and are involved in illegal behavior.

5.

If a pharmaceutical company genuinely believes that a medication is a safe product when they release it, should they be responsible for unexpected or unintended effects of a product they developed? (Play devil’s advocate and

assume that Purdue really didn’t know that OxyContin was harmful—would the addiction epidemic then be their fault?)

Even if Purdue did not realize that OxyContin was addictive when initially released, it appears that they had reports from the field that indicated addiction might be an issue within a year or so of the drug‘s release. After being warned or alerted, Purdue should have investigated and either relabeled the product with warnings about addiction potential or reduced its recommendations for use to patients for whom that was a lesser issue (terminal cancer patients, for example). After the initial release of any product, if it is determined that it is harmful in some way, the manufacturer is (legally) responsible to either fix or withdraw the product (think cars, child safety seats, toys).

This shows that manufacturers are responsible even if they did not know beforehand that their product was harmful.

Purdue‘s continued marketing of OxyContin in the face of evidence of misuse and addiction could broaden their responsibility beyond simple product liability.

6.

What do you think is a fair penalty for Purdue in this situation? For Richard Sackler?

The Federal Sentencing Guidelines empower the U.S. government to punish a company up by imposing fines proportional to their malfeasance. Generally, fines are imposed to punish, and although it is highly unusual to impose fines so large that the company cannot survive them, the Guidelines can accomplish that if the court feels it is appropriate. So, the first question here is do students think Purdue should continue as a company? Students may not agree with each other but may lean towards the conclusion that Purdue persisted in trying to evade responsibility, even proposing to

continue by offering anti-addiction programs (profitably) to double down on its OxyContin success. Would changing Purdue‘s executive leadership impact culture enough to steer them in a more ethical direction? Offer to compare Purdue to tobacco companies, which continue to do business. The Tobacco Settlement required companies to pay fines, relabel products, restrict sales to adults, and offer educational advertising and programs. Many of these options were proposed by Purdue—is the situation similar enough that Purdue should be treated similarly?

The Federal Sentencing Guidelines are aimed at corporations, and their punishment tool is fines. For Richard Sackler to be punished (beyond losing personal income and wealth) would require prosecutors to demonstrate that he broke laws. It seems possible that he may have done so, but the case scope does not address this since investigations are widespread and ongoing. Students may agree that Sackler does bear responsibility, but the options for punishment are limited by the legal system.

Case Study 2: Bayer and Monsanto: Acquiring a Global Giant with a Giant Image Problem Written by Asbjorn Osland, George Whaley, and Denis Collins Case Summary The case explores Bayer‘s decision to acquire Monsanto in 2018. Bayer was a large German company that enjoyed a solid reputation and was seeking to expand its business in the crop science division. Monsanto was the largest supplier of seeds in the world and was well-known for its success in innovation and promotion of genetically modified organism (GMO). However,

Monsanto had a poor public image regarding the GMO controversy and associated problems.

The case describes four key problems facing Bayer and Monsanto: GMO labeling, intellectual property rights, GMO cotton in India, and the Roundup herbicide. The case explores how Bayer should manage public relations controversies and whether Bayer should have acquired Monsanto, which some analysts called as one of the worst corporate acquisitions ever.

The main issue surrounding Monsanto is related to GMOs controversy. GMOs are legal in the U.S. and around the world, but Monsanto had pushed GMOs on consumers without disclosing which foods contain GMOs, which led to public criticism. GMOs are thought not to harm consumers in the food they ingest either directly as grains, vegetables, or fruits, or indirectly in meat from animals that ate GMO feed. However, the debate over environmental damage of industrial agriculture is pertinent. Acceptance of GMOs in Europe and other parts of the world has been controversial based on its uncertain effects on health and the environment.

Monsanto has argued that the increase in crop yields offsets the safety consequences of using GMO seeds and herbicide Roundup.

Monsanto has tried to defeat legislative bills and ballot proposals that required labeling of foods containing GMOs. Nonetheless, in 2016, the U.S. federal government passed a GMO labeling law. By the time, roughly three quarters of the food in the U.S. was estimated to contain GMO and the U.S. Food and Drug Administration believed such food was safe.

Another controversy referred to Monsanto property rights and the fact that the company patented its GMO seeds and prohibited farmers to replant seeds sold by the company. Farmers have traditionally used seeds from the prior year‘s harvest for planting. In India, Monsanto controlled 90% of the cotton seed supply and some local farmers believed that Monsanto was charging excessive prices. To help farmers, the Indian government imposed a 70% reduction in

royalties paid to Monsanto. Finally, the herbicide Roundup was suspected of killing butterflies and bees and was associated with cancer.

Case Analysis The mandates of ethical leadership are broad. Monsanto has perhaps overused the conventional ethical principle of ―doing what is legal.‖ Many GMO products have received FDA approval, and Monsanto has won most court battles over the use and reuse of GMO seeds. If Monsanto employed other ethical principles to gain wider acceptance of GMOs, perhaps its public image would improve. Similarly, we would argue that the impasse with the Indian government is a legal approach to dispute resolution, putting legality above ethics. A more segmented approach based on different ethical frameworks for different stakeholders would be more effective ethical management, leading to wider acceptance of GMOs. Critical Thinking Questions and Suggested Answers 1.

If you were the CEO of Monsanto, how would you have implemented an integrated strategy that would satisfy the needs of most stakeholders?

As a minimum, Monsanto should conduct a thorough stakeholder analysis and develop proactive strategies for key stakeholders. One effective strategic approach is environmental scanning to understand the goals and actions of its key stakeholders or publics prior to formulation of segmented strategic plans and actions. The best integrating mechanisms for competing stakeholder interests would be Monsanto‘s vision and values. Environmental scanning might suggest the proposed merger with Bayer is an opportunity to embed Monsanto within another corporate entity and stop using the name Monsanto, which has been so inflammatory to some stakeholders. The

company must continue what it does effectively in terms of new product development and maintenance of existing products, as well as courting the networks that it depends on for bringing its products to market and supporting them. In the case of its opponents, Monsanto could be less belligerent in its opposition of things activists want; for example, though labeling of GMOs in foods will be done in the United States, Monsanto could learn from this experience that its opposition was for naught.

Other opponents include environmentalists who question the use of agrochemicals because of their impact on bees, butterflies, waterways, and so forth. Monsanto could fund legitimate research on how to minimize the negative impact of its methods, which will be discussed more in the answer to question two. Regarding India, Monsanto should try to accommodate India‘s wishes regarding cotton royalties, within reason, in the hopes of getting other products into India, as discussed further in the answer to question three.

2.

What is an effective reputation management strategy that Monsanto could have used to reverse its public image as the most evil company in the world?

Both reactive (makeover) approaches and proactive (collaborative) approaches have helped organizations to improve their reputations. For years, Monsanto had not undertaken any strategic reforms but instead had employed a public relations makeover approach. Underneath the cosmetic changes, Monsanto continued to be disliked by its critics for unpopular actions such as taking aggressive legal action against farmers that wanted to use harvested seeds for planting, lobbying against GMO labeling laws in the United States, failing to address the biodiversity criticisms of monoculture practices, and continuing to kill insects such as butterflies and bees in

areas where Roundup was employed. Its infamous history was an ongoing concern in the eyes of some critics.

Examples could come from makeover steps taken by tobacco companies or any other company trying to dig itself out of a reputational problem. For Monsanto, recognizing its image problem and hiring a PR firm were hardly enough. It should have employed proactive strategies. The general recommended PR approach involved rebuilding trust with constituent publics or stakeholders; results were not apparent in that people who did not like Monsanto continued to feel that way. The proactive longrange PR approach called for Monsanto to move away from emphasis on controlled media and one-way publicity approaches in favor of uncontrolled media and two-way, open dialogue with various stakeholders and interested parties including environmentalists, organic consumer associations, and food security and conservation organizations. But this meant that Monsanto would have to listen to and address their concerns, not simply continue with the PR makeover.

Prejudice and misconceptions about GMOs were problematic to Monsanto‘s image. Part of this was an educational problem, but there were also many scientists and agricultural experts who wanted agriculture to be more oriented to preserving biodiversity than maximizing yields through massive expanses of monocultures of corn, soybeans, cotton, or other GMO crops.

The numerous awards that the business community had given Monsanto were important to people who read Chief Executive and Forbes magazines. However, critics would probably not be aware of such awards because many did not read the business press. Thus, Monsanto should use additional media sources to expand its audience.

The case lists plenty of examples of behavior that contributed to Monsanto‘s negative public image. The expanded use of social media to find and engage with new publics and communications sources is one proactive, technology approach to deal with Monsanto‘s negative image. Again, a proactive approach would have Monsanto engage in open dialogue with its critics. The Ducks Unlimited example showed how hunters and environmentalists could find common ground in trying to preserve wetlands. In like manner, Monsanto could sit down with its opponents to seek common ground.

3.

What should Monsanto have done about India?

Monsanto had to comply with India‘s legitimate requests but did not want to accept the 70% cut in cotton royalties ordered by the government. It hoped that the courts would decide in its favor. Its joint venture partner, Mahyco, appeared unable to influence the process. In sum, it would have to await the court‘s decision.

Questions one and two suggest the legal approach to conflict resolution might not be the most productive way to address its conflict with the Indian government.

Perhaps Monsanto could benefit from understanding their true business and ethical interests and the interests of the Indian government rather than their respective legal positions. For example, Monsanto hoped to sell GM corn in India eventually, but did not propose using access to the corn market in exchange for agreeing to some reduction in cotton seed royalties owed by India. This could be one alternative to threatening to leave if India did not pay all the cotton seed royalties owed.

4.

Do you regard GMOs as safe? We are told they are, but has enough research been done? If Europe is so suspect of GMOs, why should the United States be so complacent?

Scientists and governmental officials in the United States have asserted that GMOs are safe. Product safety supported by credible research needs to be a continued part of Monsanto‘s research and PR efforts. As pointed out in the case, the public pays attention to the overall safety reputation of companies. The legal and regulatory issues surrounding the toxicity and safety of Roundup are likely to influence the public‘s perception of GMO safety. The ―overhang‖ effect of one product on another comes into play when the safety of any Monsanto products are challenged. However, because Europe‘s officials have been reluctant to embrace GMO technology, consumers were probably justified in wanting to see more research results. Those who were concerned could avoid GMOs for now and the labeling laws would help them do that.

5.

Even if GMOs are safe, the methods used by industrial agriculture have harmful side effects such as creating super weeds, hurting butterfly and bee populations, and contributing to run-off of agricultural chemicals that pollute waterways and harm downstream wetlands, to name a few concerns. Could the world produce enough food to feed the projected increase in population using ecologically sensitive methods?

African nations have been reluctant to embrace GMO technologies but will likely face a food shortage due to population increases and climate change making cultivation more difficult. Ecologically sensitive cultivation methods have the advantage of employing lots of people. Monsanto, on the other hand, believed that its GMO

methods played a key role in increasing food production. Both ecologically sensitive and GMO methods will no doubt be used; researchers can assess the productivity of both as well as the side effects.

6. If you were a Bayer executive, would you have acquired Monsanto? If yes, what strategies would you pursue to change the public’s image of GMOs and Roundup?

Some students will answer that Bayer should have not acquired Monsanto given Monsanto inherited liability and negative publicity. Several financial analysts classified the $63 billion acquisition as one of the worst corporate deals in recent memory, which also threatens the future of Bayer. Just after the acquisition, Bayer lost a lawsuit around Roundup safety1 and other filings are still pending. In fact, Bayer‘s share prices have declined over 40% since the acquisition of Monsanto2. Other students may argue that the Monsanto‘s acquisition represents an opportunity for Bayer to explore new and innovative business opportunities with a of focus on agriculture. In this case, Bayer could engage in consultation with key stakeholders (government agencies, consumers, NGOs, and employees) to hear their concerns, understand the tensions, and invite those stakeholders to be part of the strategic responses regarding the use of GMOs and Roundup. Bayer could also acknowledge past liabilities and take a less combative public relations approach compared to Monsanto. Bayer can emphasize how the company‘s products have contributed to reduce hunger by increasing crop yield and promoting responsible and efficient use of natural resources.

1

Bender, R. 2019. How Bayer-Monsanto Became One of the Worst Corporate Deals – in 12 Charts. The Wall Street Journal. https://www.wsj.com/articles/how-bayer-monsanto-became-one-of-the-worst-corporate-dealsin-12-charts11567001577 2 Meyer, D. 2019. Bayer Has Now Lost Over 44% of Its Value Since Its Monsanto Merger. Fortune. https://fortune.com/2019/05/14/bayer-stock-monsanto-verdict/

Case Study 3: Searching for the ―New Normal‖: The Business Response to the Covid-19 Pandemic of 2020 Written by Tara Radin and Dahlia Rehg Case Summary The global coronavirus pandemic of 2020 created chaos in the global economy. Entire countries shut down their economies temporarily in an effort to contain the spread of the disease. In the United States, the governors of 46 states issued stay-at-home orders. Only ―essential‖ businesses were allowed to remain open. The response by other businesses varied. Some businesses found ways to keep going through telework and/or creative pivoting. Where telework was not an option, such as in retail, a number of companies decided to furlough workers. Some employers, even in retail, continued to pay their employees, even while stores were closed. Technology became instrumental in keeping people connected while workplaces and schools were closed.

Some internet service providers offered free broadband and WiFi internet access in disadvantaged communities. Academia remained one of the hardest hit industries as schools closed and students complained about having to pay full tuition for online education. Not every consequence of the pandemic was negative, however. There is hope that post-pandemic business will integrate some of the flexibility forced upon it during the pandemic.

Case Analysis What constitutes a business ethics issue has clearly evolved generation by generation. As society begins to tackle one problem, others come to light. Combatting financial fraud was, for example, in the forefront of the 1980s and 1990s; environmental sustainability has been on center stage since about 2000. Although the global coronavirus pandemic of 2020 represents a new issue for

modern society, traditional tools—such as moral philosophy and stakeholder thinking—continue to provide valuable anchors upon which managers can rely in deciding what to do. The ongoing applicability of such tools, regardless of the specific issues being addressed, reinforces the importance and relevance of business ethics in managerial decision-making.

Critical Thinking Questions and Suggested Answers 1.

What were the initial advantages and disadvantages of shutting down the economy to combat the spread of Covid-19? Is there anything you would have done differently had you been the policy maker?

Shutting down the economy helped to keep people physically safe. It also bought time for hospitals; some were already overwhelmed; others were able to prevent becoming overwhelmed. But mental health concerns became a serious issue, particularly for children isolated as a result of the closing of schools. Students can discuss the balancing of work, schools, masks, and health.

2.

Do businesses have a ―right‖ to operate?

Although critics of the shutdowns argued the governors violated the constitutional right to engage in business, the constitution does not enumerate such a right. The constitution protects ―life, liberty and the pursuit of happiness‖; in other words, public health takes priority over business. While the goal is to balance competing concerns, it is important to keep in mind that the constitution protects fundamental rights and engaging in business is not considered a fundamental right.

3.

Many people objected to restrictions imposed by their governors. American law protects the right of people to protest when they object. Some of these objectors

elected to protest restrictions by violating them. If a salon owner opened their salon during the shutdown, were they simply exercising their constitutionally protected right to protest?

No. The constitutionally protected right to protest covers the right to ―speak out.‖ Engaging in an activity for a profit is business, not protest.

4.

Should businesses have announced they were not going to pay rent? Is there a lesson here for landlords or tenants?

Answers will vary. This issue is very complicated. The businesses were transparent, but that transparency does not excuse that they were openly violating their contractual agreements. The problem was, because of the shutdowns, the retail space was virtually unusable since all retail operations were closed. There is a lesson here for landlords and tenants – at least a reminder – to be conscious of allocating risk in lease arrangements. If parties can foresee the possibility of retail operations being significantly interrupted (such as by weather damage from floods, hurricanes and/or tornadoes), they can decide in advance who bears the risk.

5.

Should businesses have furloughed employees?

Answers will vary. Students should discuss the reality that businesses have a range of stakeholders, not just customers; if the business cannot sustain itself while continuing to pay non-working employees, that business might have an obligation to furlough those employees. It is important not to focus only on short term challenges, however.

Employees represent the highest cost almost any company bears. This cost involves not just salaries, but also hiring, training and so on. It might be less costly in the long

term to keep paying employees, perhaps at a reduced salary, than to risk losing them entirely and having to hire and train new employees.

6.

What is the business rationale for companies like Comcast and U-Haul giving away free services?

There are many possible responses. First, it creates good will and can engender loyalty such that the customers receiving the free service might be more likely to pay for the service from that vendor when they are in the market and able to pay in the future. Second, it strengthens a company‘s reputation and might attract other customers. Third, the incremental cost to the companies was minimal (in exchange for the positive PR). Fourth, it can be argued that companies have a moral responsibility to give back to the communities from which they earn their profits.

7.

Should students have been charged full tuition once campuses closed?

This remains a contentious issue for which there is not a ―right‖ answer. The schools‘ expenses, upon which tuition prices were based, did not decrease significantly.

Students were still receiving the same education from the same instructors. While it is true there are online courses that cost less than full-time tuition, those courses are taught by different instructors often at different schools. But college is more than the 10 – 15 hours a week a student spends in the classroom; it is the entire experience, inside and outside the classroom. There is no denying that students were deprived of at least some portion of that experience when school campuses closed.

8.

In what sort of ways can post-pandemic businesses integrate what they have learned through the pandemic?

This question is intentionally open-ended. Students will hopefully discuss how companies can consider increased flexibility. Will restaurants that only started offering takeout during the pandemic continue to offer takeout after the pandemic is over? Will retailers continue curbside service? Will companies go back to requiring in person meetings, or will zoom attendance remain an option? Will companies reduce their office space more permanently such as by encouraging telework?

Case Study 4: The Happiness Minimum Wage: The Story of Dan Price and Gravity Payments Written by Kelly Nyhoff Case Summary In 2015, 31-year-old executive Dan Price increased the salaries of all employees at his credit card processing company in Seattle to $70,000 per year and decreased his own annual salary from $1.1 million to $70,000. Price says that it was conversations with employees led him to a new sense of identification with them and the acute financial hardships they were facing, one of whom suggested that about $70,000 per year is what she would need to earn in order to be able to support her family in the Seattle area. Price reports that he also read a 2010 article by psychologist Daniel Kahnemann and economist Angus Deaton, both Nobel Prize awardees, about how increases in U.S. employee happiness correlate to increases in employee wages, but not beyond $75,000 per year. After five years, Price‘s company has experienced increases in revenue, employees, customers, employee quality of life, employee productivity, and employee engagement.

Case Analysis Some have questioned Dan Price‘s motivations. However, Price‘s decision to increase all employee wages at his company and the positive results from these changes actually has a number of parallels with the studies of happiness and minimum wage by Kahneman and Deaton, with centuries of Catholic social teachings regarding such concepts as just wages and living wages, with Adam Smith‘s concept of the natural wage, with present-day considerations of what constitutes a living wage,‖ with U.S. policy deliberations over a ―minimum wage,‖ and with economic theories regarding the efficiency of wages.

Critical Thinking Questions and Suggested Answers 1. When interviewed in 2018 by the Center for Values-Driven Leadership at Benedictine University, Price is quoted as saying, ―The purpose of an organization is to make the humans’ lives better. It’s not the purpose of the humans to make the organization better. That is 100% backwards with how most of us look at companies and organizations. It’s always company first, and I am going to sacrifice myself, sacrifice my colleagues, sacrifice my integrity, sacrifice my loyalties, in the name of supporting the almighty organization, and that’s really wrong. People should come first.‖i As you reflect on your own experience in organizations, can you remember a time where you felt that your life and the lives of those around you were genuinely treated as a priority to the organization? What occurred in that setting to convince you that you were valued? Please reflect on this and explain.

This question is designed to simply permit each student to reflect critically on their own experiences in organizations and to discern the reasons why they might have felt that the well-being of employees was an organizational priority. Discussion on this theme may enable students to cultivate deeper awareness of what they themselves can do in the future to ensure that employees are handled with care.

2. If you have not had this type of experience in an organizational setting, what did you experience that communicated a low priority and/or a devaluing of employees as persons? Please reflect on this and explain.

See response above. Again, the reflection in this question is designed to help the student begin to discern how a lack of value regarding employees might have been conveyed. Student responses will vary, and this could make for meaningful classroom dialogue.

3. As you think about your own leadership values, how might you strive to convey your values to your organization? Please reflect on this and explain.

This question is designed to provide a space for students to reflect on their leadership values and to explore the tools available to communicate the values they have. Student responses will vary.

4. In 1968, Frederick Herzberg published a paper in the Harvard Business Review titled, ―One More Time: How Do You Motivate Employees?‖ This paper would go on to become a top-selling article for HBR, selling more than 1.2 million reprints since its initial publication.ii In this paper, Herzberg presents his ―twofactor theory of motivation,‖ based on extensive employee motivation research he

conducted in the 1950s and 1960s. Herzberg discovered that the things that make people satisfied and motivated on the job are different from the things that make them dissatisfied, and he asserted that wages alone do not tend to motivate employees toward higher job-related performance. What do you think about Herzberg’s assertion regarding the motivational impact of wages? Please reflect and explain.

Students may argue that if a salary is insufficient, a person will be focused on improved earnings to enhance employment satisfaction. Herzberg argued that improved salary will eliminate dissatisfaction, but that it does not bring satisfaction.

The things that bring satisfaction relate to opportunities for growth and learning, and workplace acknowledgement. So, this idea that something can remove dissatisfaction but fail to ensure satisfaction or stimulate motivation in a professional role is a point worth emphasizing in this discussion.

5. Is it possible that people today have different workplace motivations than the people Herzberg studied in the 1950s and 1960s did? Please reflect and explain why you either agree or disagree with this statement.

Students might suggest that, for their generation, worker satisfaction today also includes broader societal factors such as a desire for their work to make a difference in the community or world at large. Also, in the 1950s and 1960s, it was more common for a worker to stay at a single company for long periods of time, perhaps even an entire lifetime of work. Students might also note the increases in technology requirements, with quality of technology and/or quality of technology integration might be a motivating factor. Students might also note the increased need for

continuing education for employees. Students might also note the changes in family roles and situations since 1959, such that factors like flexibility in work schedules might be highly motivating.

Students might note that the factors that are the most motivating are ones that do not change over time. Indeed, research has continued to show that good wages, appreciation for work done well, job security, and opportunities to grow and advance in a position have continued to be the most motivating factors during the more than 60 years since Herzberg‘s study, right up to the present time.

6. In your opinion, what are some things that might earnestly generate employee motivation? Reflect and explain.

There are wide range of possible student responses, here.

Appreciation is a good topic to explore with students. One possible way to begin the discussion could be the following: one study has noted that ―Praise for a job well done is the most powerful, yet least costly and most underused, motivation tool.‖ Another angle for such discussion could be the following. It is often the case that, for teachers with students and for parents with children, those with highly positive and highly negative performance garner the most attention, whereas the majority of those who simply meet reasonable expectations, consistently, day after day, may not receive as much attention, may feel less appreciated, and might not be as motivated. What about for employers and employees? What if employers were make a concerted effort to give more attention and appreciation to the majority of employees that consistently just do their job satisfactorily, day after day?

7. If Herzberg was correct, what else might have been occurring at Gravity Payments that could have generated the type of enormous increase in productivity and reduction in employee turnover that the firm has experienced since instituting the $70,000 minimum wage?

Students might have a variety of ideas, here. For example, given the increase in employee salaries and the reduction in the salary of CEO Dan Price, there was a positive effect upon coworker relations, a hygiene factor that, as Herzberg suggests, resulted in a decrease in job dissatisfaction. Also, employees may have experienced the increase in pay as recognition of their value to the company, a motivator factor that, as Herzberg suggests, resulted in an increase in job satisfaction.

8. Since January 2017, the Securities and Exchange Commission has required American publicly traded companies to disclose the relationship between their chief executive’s compensation and that of their median employee. iii In 2018, the median chief executive pay ratio was 254:1, an increase of 8.1% over the 2017 ratio of 235:1.iv Dan Price of Gravity Payments was quoted in the New York Times as saying, ―The market rate for me as a CEO compared to a regular person is ridiculous, it’s absurd.‖v At the time Price instituted the $70,000-peryear minimum wage, the ratio of CEO salary to the average employee salary at his firm was 23:1, assuming his salary was $1.1 million per year and the average salary of his staff was $48,000 per year. From your perspective, would it be beneficial for the United States to consider legalizing maximum salaries for CEOs? Please reflect and explain.

Students might have a variety of ideas, here. Wage inequality has grown rapidly, with the share of company wages for executives continuing to rise rapidly, resulting in significantly slower growth or declines in the share of company wages available for non-executive employees. Studies have shown that slower growth in executive salaries would have resulted in much faster increases in non-executive wages. Also, contrary to what is sometimes contended, studies have also shown that such rapid rises in executive wages were not necessary to fuel economic growth. Some relevant ideas here could include higher tax rates for companies that exceed a certain ratio of executive wages to worker wages or other incentives for companies to boost worker wages and lower these ratios. Some argue that even more foundational changes are necessary in regard to the way that company wages are determined: for example, better representation of workers on a company‘s board of directors.

Case Study 5: Volkswagen’s Diesel Scandal: Failure of the Code of Conduct Written by Mark Barnard Case Summary In the mid-2000s, Volkswagen‘s leaders decided that focusing on developing automobiles with ‗clean diesel‘ engines would be the best path to follow in building its competitive advantage and allow it to become the world‘s number one automobile manufacturer by 2018. Problems arose however as the existing ‗clean diesel‘ technology that was available from other companies did not meet VW‘s cost or performance criteria. Thus, VW engineers were tasked with creating a new technology that could be used for ‗clean diesel‘ engines for VW automobiles. When the technology that was created by VW for is ‗clean diesel‘ engines failed to meet U.S. emission

standards, the decision was made to install a defeat device (software code) that allowed VW vehicles to pass emissions tests in the U.S. while in reality emitting pollutants at levels far above U.S. EPA allowable standards. The case identifies external and internal pressures that pushed VW to ignore its Code of Ethics and Code of Standards and develop a defeat device that allowed its ‗clean diesel‘ engines to pass emission tests in the U.S. The case then traces the unraveling of the deception and the financial, reputational, and human impact.

Case Analysis Details included in the case provide an opportunity for students to identify external and internal pressures faced by VW that caused company executives and managers to ignore the company‘s Code of Conduct and instead pursue unethical and illegal actions related to the creation and installation of a defeat device in its engines. While a Code of Conduct provides employees with guidance in making ethical decisions, it should only be one practice of many that a company implements to build a strong ethical culture. Students will analyze and discuss how to strengthen VW‘s Code of Conduct and identify other ethical best practices that should be adopted as part of a company‘s overall ethical ecosystem. Lessons learned from the case can be applied across industries and companies.

Critical Thinking Questions and Suggested Answers 1. As explained in the case, VW faced many external and internal pressures that could derail its financial and growth goals. How can a company’s code of conduct help safeguard against illegal and unethical actions being taken by employees, supervisors, and/or executives when facing such pressures?

The instructor can start with asking students to identify the external and internal pressures facing VW related to its strategy and goals to increase sales and become the world‘s largest car manufacturer.

External pressures include: 

Rising diesel fuel prices which made driving a car with a diesel engine more expensive compared to a car with a gasoline powered engine.



Shift in consumer demand from cars to light trucks, an area in which VW did not compete.



Stricter emission standards which led some car manufacturers to begin developing and manufacture hybrid and electric vehicles.

Internal pressures included: 

Goal of becoming the world‘s largest automobile manufacturer by 2018.



The U.S. being identified as the key market for achieving VW‘s sales goal.



An autocratic, command and control leadership culture.



Maintaining VW‘s reputation an environmental leader among automobile manufacturers.

After identifying external and internal pressures, the instructor can lead students in a discussion of the reasons for creating a Code of Conduct, the benefits of a Code of Conduct, explore examples of the Code of Conduct of different companies (including VW‘s), and how a Code of Conduct can be used to ensure employees understand and meet the company‘s ethical expectations.

2. Why would a company continue to pursue illegal and/or unethical actions even after the deception has been uncovered? What policies, practices or structures could a company include in its code of conduct to ensure that such deception was revealed sooner?

Students can explore the actions taken by VW to coverup its unethical and illegal actions related to the defeat device even after testing revealed that VW‘s ‗clean diesel‘ engines did not meet U.S. emission standards. Rather than admitting to ethical and legal failures, we see in the case that VW continued to try and convince regulators in the U.S. to certify VW brand vehicles with the ‗clean diesel‘ engine for sale in the U.S. until mid-August 2015, just a month before the EPA issued a ―Notice of Violation of the Clean Air Act‖ to VW. Admitting that a defeat device had been installed would virtually guarantee that VW would no longer be able to sell its vehicles in the U.S. until the problem was fixed. With sales of VW vehicles increasing from 213,454 units in 2009 to 407,704 in 2012, admitting wrongdoing would severely harm its sales in the U.S. and end the strong growth the company was experiencing in the U.S. market. Further, admitting misconduct would have immediately made VW vulnerable to lawsuits, government investigations, fines, loss of sales, and damage to its reputation.

To encourage exposing wrongdoings as early as possible, policies regarding expected behaviors and actions should be included in the company‘s Code of Conduct and clearly explained. Examples of common ethical dilemmas and situations faced by employees should be included along with examples of acceptable and unacceptable responses to the dilemmas.

Having a clear understanding of the company‘s policies and examples of appropriate behavior can remove doubt from employees‘ minds about whether a particular action is unethical and make it more likely that an employee will report the action earlier based on have a clearer understanding that an action may be unethical. Structures for reporting

unethical behaviors should also be included and clearly explained in the Code of Conduct.

Information should include the steps to take in reporting misconduct, who to report misconduct to, what actions to take if misconduct is not addressed. Understanding the steps and process for reporting misconduct will allow employees to take faster action to report the misconduct.

3. Based on the failure of VW’s Code of Conduct to prevent illegal and unethical decisions and actions, it is evident that VW’s code needs to be rewritten. What recommendations would you make regarding the content of the code?

The Code of Conduct should include the following information: 

Why the company has a Code of Conduct



Ethics and values of the company



General principles and guidelines about how the Code should be used



Expectations of ethical actions and behaviors



Guidance about how employees can evaluate actions to determine if they are ethical or unethical



Detailed processes and steps for reporting wrongdoing



Policies and practices regarding more general areas of employee behavior (harassment, discrimination, internet usage, social media)



Policies and practices related to employee behavior in areas specific to the company‘s operations (entertainment, gifts, safety, confidentiality, government regulations)



Specific examples of acceptable and unacceptable behaviors related to each policy.

(Examples should be common issues that employees face.)



Assurance that an employee who reports a violation will not face any retaliation

4. It appears that Volkswagen’s Code of Conduct failed to prevent even flagrant illegal and unethical decisions and actions from being taken at all levels of the corporation.

Beyond revising and strengthening its code of conduct, what other actions can a company take to protect against such failures in the future?

The instructor can lead a discussion about focusing on ethics as a system rather than concentrating on only individual practices or policies. Individual, or a few best ethical practices, can be adopted but to be effective an ethics ecosystem needs to be created so that policies and practices reinforce one another. Each ethical practice implemented can reinforce and strengthen the overall ethical culture of the company. The instructor can also ask students to identify and explain best practices discussed in the textbook that could be implemented to build a stronger ethical culture and better guard against ethical and legal failures of a company. Specific practices related to hiring ethical employees, providing ethics training, implementing a holistic ethics reporting system, developing ethical leaders, adopting ethical policies concerning incentives, work goals, appraisals, diversity, would provide rich areas for student exploration and discussion.

In addition, students can consider how a company‘s singular concentration on achieving a particular strategy or goal can create an environment of ‗winning‘ at all costs and lead to unethical actions being taken and wrongdoings being overlooked or covered up. Similarly, students can examine whether a company‘s competitive advantages might encourage a company to pursue unethical actions in order to support and reinforce its competitive

advantages. Although technology existed that VW could have installed to create a ‗clean diesel‘ engine, the technology reduced VW‘s competitiveness in the very areas in which it had built its competitive advantage, i.e., fuel efficiency, performance, and power.

5. In 2006, VW sold more than 2.5 times as many cars in China as in the U.S. By 2009, the China market had grown to be more than 5 times as large. In addition, China’s emissions standards at the time were far less strict than those in the U.S. Why was VW so fixated on growing sales in the U.S. when sales were growing much more rapidly in China, and how did this fixation contribute to VW’s ethical and legal failures?

As noted in the case, VW executives identified the U.S. as a key market for achieving its goal of becoming the world‘s largest automobile manufacturer by 2018. While details are lacking about why VW gave such strong preference to the U.S. market, students can conjecture about reasons for this. The U.S. market was a very competitive market and perhaps considered a more prestigious market in which VW could demonstrate and reinforce its engineering expertise and reputation which in turn would enhance VW‘s brand in other markets. Since the U.S. emission standards were stricter than in other markets, creating a ‗clean diesel‘ engine that met U.S. standards could secure VW‘s stature as an environmental leader and easily meet emission standards and provide a competitive advantage over other automobile manufacturers in other countries in which VW competed.

Case Study 6: Troubles in Higher Education: The Growing Dilemma of Student Debt Written by Kelly Nyhoff

Case Summary Beginning in the 1940s, a broad variety of student loan programs have been introduced in the U.S. In recent decades, as a result of multiple contributing factors, student loan debt has grown rapidly in the U.S., rising to become the second-largest source of consumer debt after mortgages.

The unpaid balances of student loans are now even greater than those of credit cards in the U.S., and approximately 43% of these student loan accounts with unpaid balances are currently considered to be ―in distress.‖ Moreover, the wide variety of student loan repayment plans offered to students adds even greater complexity to what is already a highly complicated situation. Truly, there is now a student loan crisis in the U.S. Case Analysis The U.S. student loan industry originated in the 1940s to assist veterans returning from WWII. Additional programs introduced in the 1960s were designed to promote social equality through broader access to college education. However, over the next half-century, a wide variety of student loan programs emerged that include direct student loans from the U.S. federal government and indirect student loans guaranteed by the federal government but lent by private financial institutions, some of which are still in existence and some of which have now been eliminated. The rise of loans to for-profit colleges and universities further complicated this lending arena. Today, U.S. student loan debt consists of more than $1.6 trillion owed by more than 44 million borrowers, is second only to mortgage loan debt, exceeds credit card debt, and comprises approximately 8% of the U.S. GDP. At present, the U.S. student loan situation seems to have become a convoluted morass of loan terms and loan program terminologies, with an equally confusing array of complicated loan repayment programs offered to student borrowers.

This case study examines key programs in the history of U.S. student loans, identifies the main

types of loan programs still active today and some of the complicating and controversial factors associated with them, and clarifies the kinds of repayment options offered to students and parents who have student loan debt.

Critical Thinking Questions and Suggested Answers 1) Some scholars argue that the student loan industry should incorporate risk-based pricing models, similar to those used in conventional banking. They argue that the failure to implement these tools contributes to many of the problems and inefficiencies the industry is currently experiencing. Were risk-based pricing of student loans to be used, certain courses of study may be flagged as ―financially risky,‖ and loans for these students may be more expensive. Critics argue that this pricing would send a warning signal to students that may assist them in making better-informed decisions about the course of study they choose and the types of postgraduation opportunities they may later encounter. Advocates of risk-based pricing for student loans also contend that these price signals would assist postsecondary educational institutions in adjusting their programs to improve the employment prospects of their students after college.vi a. What are your thoughts regarding the use of conventional pricing models for student loans? Do you think it would make sense for students majoring in certain disciplines to receive substantially higher or lower interest rates on their student loans because their future industry looks promising?

This question will likely stimulate a variety of responses from students. That said, it could be good to remind students that if one of the primary goals of the U.S. Federal Student

Loan program is to broaden access to college education and to promote social mobility, then limiting access to loans or pricing them in ways that favor certain students in certain courses of study would go against the original goals of the program. b. What are some of the pros of an approach like this?

It may result in students considering very carefully where they study, the associated costs, and whether they might be able to find most cost-effective approaches when seeking out education (i.e., stay closer to home rather than study out of state, attend community college for a portion of their education, etc.) c. What are some of the cons of the argument for risk-based pricing?

It could result in a surplus of students selecting courses of study that appear to be financially favorable while other, equally necessary degree programs – from a social perspective – diminish.

2. Considering the mounting student loan debt burden U.S. students are incurring, how can a student decide when ―enough is enough‖ when it comes to borrowing for college?

A student could conduct their own risk-based assessment of their educational outcomes and critically evaluate the time it will take them to pay back the loan, the size of loan payment, etc…Student responses will vary.

3. Many students are reluctant to work during college for fear that it will prolong their studies. Considering the mounting troubles student borrowers are facing in managing their loan repayments after college, what is your perspective on working during school?

For many students who rely on student loans in order to attend college, working during school necessary. How work and studies are structured to enable the student to focus sufficiently on studies while working is the question that is worth teasing out in a discussion. Many students have taken a year or two to work full-time and then, armed with savings, they attend college and work part-time or full-time. Virtually every combination of study and work could be found on most college campuses, but students who are able to do both effectively tend to control how many hours a week they work, take a reasonable full-time class load, and do their best to minimize overhead expenses. Students who work during college may find themselves inadvertently better prepared to compete for jobs after college due to the work experience, they have gained. Alternatively, a student attending college full-time, who is supported financially by a family and who may have no need to work, may find themselves surprised at the end of college to discover that many employers desire to hire people with work experience.

4. In several European countries, public universities are tuition-free, even for international students, yet few American students take advantage of this.vii Why do you suppose that is? What are the primary risks, in your opinion, of seeking a degree program abroad?

A few risks that are easy to identify might be (1) lack of knowledge of these programs and of the potential benefits of spending time in another country; (2) desire to study in an academic area that has specific credentialing requirements that are easiest to obtain through the U.S. higher education system; (3) lack of clarity on whether U.S. employers will understand and honor their foreign diplomas.

Case Study 7: Deutsche Bank’s Path Back to Profitability: From Corruption to Compliance Written by Asbjorn Osland and Denis Collins Case Summary The case deals with a major international bank that has been mired in corruption. Although not central to DB‘s viability as a going concern, it was interesting that it had accepted the risk of loans to the Trump family. With its five-year plan, DB was trying to reform and become a good citizen in terms of compliance. It also had to struggle to remain a going concern.

Case Analysis The application to ethics is direct in terms of corruption. But the case goes beyond ethics in that it focuses on how to bring about compliance.

Critical Thinking Questions and Suggested Answers 1.

DB appeared to have a culture of corruption. How should executives change it?

In operational terms, what could DB do to change the culture to enhance its viability as a going concern?

It had done the appropriate things in terms of training, focusing on corruption, and so forth. However, the resignation of the leader of the effort over DB‘s culture change was not a good signal. He wanted to hire more people to work in compliance than management allowed.

Legal compliance is a start, but one must translate rules into management actions accepted by the corporate culture. Compliance must include active risk management,

hands-on training, monitoring of unusual fluctuations in business transactions, systems and tools to measure risk, integration of all relevant differentiated functions and the culture as a whole has to change, which can take years. Executives must help employees see the integration of strategy and culture. Change should focus on several critical areas, but not too many, and build on existing strengths.

2.

How could DB use its business relationship with the Trump brand to its advantage without violating the emoluments clause of the Constitution and raising the ire of politicians opposed to Trump?

Trump could run afoul of the U.S. Constitution‘s emoluments clause, so DB should quietly enjoy the business success of the Trump brand and collect its repayments on schedule. It should not broadcast its relationship with Trump since scandals could arise.

3.

Should the German government bailout DB in the event it fails? Is it too big to fail (i.e., too important to the German economy)?

A systemic failure involving DB and other European banks could be problematic. As long as large investors are interested in investing in the bank, there should not be a need for a government bailout by Germany. However, the situation is fluid and time will tell.

4.

Check on DB's current share price. Has it gone up or down of late? How do the analysts explain its performance?

The standard practice for case analyses is for students to limit themselves to information in the case. However, given the proclivity of students to access the

Internet and the fluid situation of DB, it would be useful to bring the case up to date with active analyses of the current stock price and the views of analysts. This could help answer the questions regarding DB‘s ability to change its corrupt culture as well as determine the extent to which it is a going concern.

5.

Has DB been fined or found guilty of corruption since early 2017 when it paid the $7.2 billion fine? What accounts for its actions, according to the reputable business press (e.g., Wall Street Journal, Financial Times, New York Times)?

What accounts for DB‘s ability to stay clean in the short term after this case was published? If it had been fined again, what accounted for its failure to change?

Case Study 8: Starbucks: A Socially Responsible Firm and a Diversity Crisis Written by Denis Collins Case Summary This case provides an overview of Starbucks corporate social responsibility and how Howard Schultz, founder of Starbucks, prioritized the company‘s involvement with the community, as affirmed in its mission (―To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time‖). Schultz wanted the stores to serve as a ―Third Place‖ in customers‘ lives – a place that is neither work nor home, a place that‘s safe, uplifting, and welcoming for everyone.

Despite the company‘s emphasis on the importance of creating a welcoming coffee shop environment, Starbucks recognized that much had to be done to eliminate potential bias and discrimination in the stores. The case focuses on the racial discrimination incident that occurred in 2018 in a store in Philadelphia. Two Black men sat down but did not order anything. One of

them requested to use the restroom and the manager refused the request and asked the men to order something. When they refused, the manager called the police, and the Black men were handcuffed and arrested for alleged trespassing. Starbucks publicly apologized for the incident, agreed on a settlement to be invested in the city, and the two Black men received full tuition to attend Arizona State University. Schultz also closed all stores for half day to conduct anti-bias training. In addition, the case describes Starbucks response to the COVID-19 pandemic and how the company‘s actions reflect ongoing commitment to all stakeholders.

Case Analysis The case focuses on the analysis of Starbucks‘ socially responsibility initiatives with a focus on an incident of workplace racial discrimination (L.O. 8.3.) and how the company responded to address the issue (L.O. 8.4). Students can critically assess Starbucks‘ socially responsible activities and evaluate whether the company‘s anti-bias training is sufficient to address racial discrimination.

Critical Thinking Questions and Suggested Answers 1. What do you think is driving Howard Schultz’ socially responsible initiatives?

Why? Howard Schultz wanted Starbucks to differentiate itself from other coffee shops as a place where customers feel welcomed, can connect with one another, and part of the neighborhood. He also wanted to make a difference in the specialty coffee industry by adopting fair trade sourcing of beans and by offering great working conditions to the employees.

2. What socially responsible policies do you find most impressive? Why?

Answers will vary significantly. Some of the most impressive socially responsible policies adopted by Starbucks are: 1) Engagement with the company‘s supply chain by training farmers in sustainable agriculture and achieving 99% of coffee and tea ethically sources under C.A.F.E. practices. Starbucks demonstrates commitment to the wellbeing of farmers around the world while ensuring production of the best quality beans.

2) Engagement with the local community: Starbucks creates job opportunity for the local youth, provides scholarships, and full employment benefits. As Starbucks positions itself as a ―Third Place‖, the company needs to demonstrate its support to the local community members.

3) Diversity, equity, and inclusion: Starbucks hired a Chief Inclusion and Diversity Officer, achieved 100% gender pay equity, and provided greater transparency and accountability of antidiscrimination and antiharassment policies. Aligned with the commitment of being a ―Third Place‖, it is critical that every customer feels welcomed at the store and has a genuine sense of belonging.

3. What do you think of Starbucks decision to close its stores for a half day and give employees anti-bias training? Does it seem like a publicity stunt or a genuine effort to make its stores more inclusive spaces? Why do you think so?

Starbucks needed to immediately address the racial incident and closed 8,000 stores for a half day for emergency training. Starbucks reaction was likely well received by the public as the company apologized, took accountability, and addressed the problem quickly.

However, some critics may say that a half day training on racial bias is not enough to address systemic racism. Nonetheless, Starbucks‘ response represented a major statement

about the company‘s values and encourage difficult conversations about race and discrimination.

4. What do you think of the training curriculum — the activities, reflection exercises and videos that employees watched to learn about unconscious bias and the history of racism in the United States? How does it compare with what you have learned in school?

Starbucks made its training curriculum Team Guidebook available on the webpage, which sets a higher standard for public accountability. The training was tailored to Starbucks employees including real cases of workers describing situations in which they discriminated a customer based on their appearance (gender, race, economic status) and perceived intention (―will she steal? will they create disorder?‖). Employees were asked to reconsider how they could have handled the situation better to eliminate bias and to treat each customer with respect. Compared to other trainings, Starbucks‘ approach appears to be beyond ―checking the box‖ and is intended to serve as a starting point for continuous training.

5. Do you think all Americans should receive some sort of anti-bias training like this?

Why? If so, where and when should people learn about prejudice, unconscious bias, and racism: In school, at their jobs, from their families or elsewhere? What should they learn and why?

Systemic racism is a reality in the United States and anti-bias training is necessary to promote a truly diverse, equitable, and inclusive society. Effective anti-bias trainings help individuals exercise self-awareness and identify biases, address differences among people (e.g., sex, race, age, economic status, religion), and commonalities. Such trainings

should be offered in an on-going basis at school, jobs, churches, community centers, families, TV, social media, and others.

6. Should Starbucks continue to operate based on a Stakeholder Statement on the Purpose of a Corporation? Do you think more companies should follow their lead? Why? Starbucks should continue to operate based on a Stakeholder Statement on the Purpose of a Corporation, joined by other 200 global companies which also made the public commitment to shift the focus away from shareholder supremacy to benefitting all stakeholders: customers, employees, suppliers, communities, and shareholders. Starbucks and the other signatory companies believe that businesses have a vital role in creating value for customers, investing in employees, fostering strong relationships with suppliers, embracing sustainability practices in the communities where companies operate in, and sustain long-term value generation and transparency for shareholders. Companies should follow Starbucks lead as stakeholders management is essential for businesses‘ successes.

Case Study 9: Boeing 737 Max and the Challenger: The Tale of Flying Objects Falling from the Sky Written by Laura Gow-Hogge Case Summary The legacy of the magnitude and longevity of the Boeing 737‘s success, contributed to lapses in ethical decision by Boeing leading up to the Max 737 crisis. The 737 had become a victim of its own success. With over 10,000 737‘s sold, Boeing chose not to research and develop new energy and cost saving technologies. As the airline commercial industry began to demand more fuel efficient and lower cost aircrafts to meet their customer demands in a deregulated industry,

Boeing needed to find a solution and solution fast. Instead of designing a brand-new aircraft which would take over ten years to accomplish, Boeing decided to update the existing 737 design to a new model. This resulted in management being overly optimistic in the timeline for design modifications; overconfident in the need for safety review and certifications of the MCAS system; misjudging the safety issues of the design flaws; shifting focus to delivery timelines and not production quality; and focusing on maximizing shareholder value and minimizing costs.

Many believe the rush to certify the 737-Max lead to lapses in ethical decision making, dangerous group ethics behaviors, and the emergence of whistleblowers.

Case Analysis Boeing leaders began to exhibit behaviors indicative of the slippery slope of ethical decision making. The pressures to perform were high, group think existed, mismanaged agreement and escalation of commitment were significant. All of this resulted in moving away from a focus on safety to a focus on profits and not doing the right thing with MCAS based on economic factors rather than human factors. Boeing leaders clearly failed to comply with their own Company‘s ethics and relied upon their own personal values and ethics to make decisions based on costs and profitability. They had become model citizens for the new company culture they had so proudly created. They exhibited overconfidence and self-serving biases in their decision making along with characteristics of omnipotence, cultural numbness, and justified neglect. As of January 2020, the estimated losses to Boeing from the 737 Max has reached $10 Billion US dollars. The impact of the on-going grounding of the 737 Max will continue to mount not only for Boeing but for the rest of the economy. The cancellation of future orders is expected to have billions of dollars of effects on the US. Economy. The grounding of flights will continue to result in fewer seats available for business and recreational travelers which impacts tourism and spending.

Critical Thinking Questions and Suggested Answers 1. What is the difference between an ethical choice and an ethical dilemma?

An ethical choice exists when there is a clear moral choice between ―right‖ and ―wrong‖ (a simple ―Yes‖ or ―No‖ answer) and you‘re choosing to violate a set of established ethics or not (i.e., personal, group, organizational, etc). Ethical dilemmas exist when there is no clear choice and either decision violates an ethical principle. Ethical dilemmas do not necessarily lead to lapses in ethical judgements and decision making but requires ethical reasoning in making a decision.

2. Was Boeing leaders faced with an ethical decision or an ethical choice?

Given Boeing new focus on shareholders and commitments to profits, Boeing leadership was faced with an ethical dilemma of taking the time to re-imagine and re-engineer a plan that would be competitive and cost effective in the long-run or take the path with quicker results and maintaining the competitive position of the company in the short term.

3. What role does organizational culture play in ethical decision making by leadership?

As is seen in both the NASA and Boeing incidences, organizational culture played a large role in the decision making of leadership. A shift in the company culture of Thiocol occurred and created an environment which changed their decision -making framework. This led to the breakdown of communications between Thiocol

engineers and top-level NASA management and resulted in decisions being made of which both organizations had historically viewed as excessive and unacceptable levels of risk. Boeing‘s new leadership prided itself in hanging the company‘s culture but was blind to the impacts of it. Their decisions became highly influence by reacting to the competitive pressures from Airbus. This resulted in management being overly optimistic in the timeline for design modifications; overconfident in the need for safety review and certifications of the MCAS system; misjudging the safety issues of the design flaws; shifting focus to delivery timelines and not production quality; and focusing on maximizing shareholder value and minimizing costs.

4. Are individuals to be held accountable for the lapse in ethical judgement and decision making of their organization?

New technologies, evolving forms or organizations, and new social systems are changing so rapidly, the traditional parameters of ethical decision -making are being challenged. At the heart of this is whether or not the individual is responsible for unethical decisions or the organization. It appears there is shift in decision making rooted in individual morals and character to the policy, structure, and culture of the organizations for which individuals work. Individuals have an ethical duty to dissent within our group or organization. More complicated is the ethical dilemma of whether or not to whistle blow. Whistleblowing is a special form of dissent in which a member of an organization goes outside the normal channels to reveal

organizational lapses in ethics. Often the acts of a whistleblower are seen as a betrayal to the group or organization and has substantially negative consequences for the reporting individual. Whistleblowing is considered to be an ethical form of dissent when the individual has met the following conditions: they have the legal right to the information; unknowing harm to others exists; there is no benefit to the whistleblower, and it is believed negative consequences exist in reporting; all formal and informal reporting avenues have been exhausted; information must be fair and accurate; and is not anonymous.

5. What role did overconfidence and self-serving biases of Boeing management play in the 737 Max crashes?

Boeing leaders exhibited overconfidence and self-serving biases in their decision making along with characteristics of omnipotence, cultural numbness, and justified neglect. This resulted in moving away from a focus on safety to a focus on profits and not doing the right thing with MCAS based on economic factors rather than human factors. Boeing leaders clearly failed to comply with their own Company‘s ethics and relied upon their own personal values and ethics to make decisions based on costs and profitability

6. Margaret Thatcher, former prime minister of England, is known for saying, ―Consensus is the death of leadership.‖ What do you think is meant by this statement? What are the ethical considerations and implications?

An ethical warning sign in groups and organizations is the idea of group think. Group think occurs when the focus of decision making and reasoning is on unanimous agreement of the group rather than non-biased, ethical decision making. In other words, the group is focused on how to make everyone happy and how to have everyone come to the same uniform consensus. We must keep in mind as individuals we have an ethical duty to dissent within our group or organization and doing so is considered an ethical choice. Minority opinions can significantly improve group performance as well as the ethical aspects of decision making.

Case Study 10: The Wells Fargo Scandal: A Tale of a Toxic Corporate Culture Written by Tara Radin and Dahlia Rehg Case Summary Wells Fargo, admired for how it emerged from the financial crisis of 2007-2008, has more recently been exposed for illegal conduct by employees dating back to 2002. In September 2016, it was announced that Wells Fargo was being fined $185 million for fraud. An investigation revealed improper actions including but not limited to employees having applied for and/or opened bank and credit card accounts without the knowledge or consent of the customers in whose names the accounts were opened. A closer look revealed a toxic corporate culture at Wells Fargo that motivated the fraud. Once the fraud was uncovered, immediate leadership changes took place. The CEO stepped down, and the former president and chief operating officer took over as CEO. The company failed to turn around significantly, though; employees remained unempowered and disconnected. The new CEO stepped down in March

2019, and Charles W. Scharf, an outsider, took over. Scharf‘s arrival signals that real change is coming to Wells Fargo.

Case Analysis Although corporations are considered legal ―persons,‖ their true personhood is inextricably tied to the human persons that populate them, i.e., the talented employees who breathe life into their operations. Engaging and empowering employees in a responsible, ethical fashion is critical because it is the behavior of those employees that ensures that corporate actions are consistent with stated values. No case demonstrates this reality better than the Wells Fargo case, where the absence of employee engagement and empowerment caused corporate actions to diverge from stated values. The company essentially stole from the very stakeholders about whom the company claimed to care. In this case, a toxic corporate culture led to corporate fraud that has cost the company more than $3 billion. The Wells Fargo Case underscores the importance of corporate culture and signals the vital importance of engaging employees and empowering them to maintain high-performing ethical organizations.

Critical Thinking Questions and Suggested Answers 1.

How did fraud continue for more than 10 years at Wells Fargo?

It is easy to be critical in hindsight; it is important to recognize that the behavior likely began and increased gradually over a period of years. It‘s like what supposedly happens with a frog and boiling water. If you drop a frog in boiling water, it jumps out. If, however, you put a frog in cold water and slowly heat the water, the frog will be boiled alive. In reality, even a frog in water that is gradually heated will often jump

out, but an employee blinded by a toxic corporate culture is less likely to notice the change.

2.

Why did it take so long for Wells Fargo to get caught?

There is no single reason, but many that combine to create a sort of perfect storm.

First, employees felt powerless. There were afraid of losing their jobs, either for reporting improper behavior or for not meeting their sales targets. Second, customers were unaware and/or isolated from one another. Even if a customer noticed an anomaly on his/her account, he/she could not have imagined it was intentional. Each customer was likely given some story about how it was a mistake; victimized customers had no reason to look for one another. Third, there was no clear regulator in charge. Although this is exactly the sort of situation to be addressed by regulators, agency changes, resource shortages and plain and simple bureaucracy prevented the fraud from being exposed sooner.

3.

Did Wells Fargo respond properly in 2016 when the investigation exposed the fraud? Is there anything else that the company could or should have done?

While answers will vary, there is significant evidence that suggests the initial response

by Wells Fargo was superficial and inadequate. At the very least, the fact that an outsider was named to take over as CEO less than 3 years later strongly suggests the company‘s initial reaction was inadequate. In addition, the company‘s financial performance continued to suffer. It is likely Wells Fargo would have fared better if it had taken a bolder action, such as by naming an outsider to take over as CEO from the start. In addition, the company could have considered a public apology (J&J‘s response following the Tylenol scare has taught us that stakeholders respond

positively to accountability) and/or strong steps toward culture change. Following its alleged racism in Philadelphia when an employee challenged two customers as not belonging in the store because of their race, Starbucks closed more than 8,000 stores for racial bias training.

4.

What would you have done if you were a Wells Fargo employee feeling pressured to participate in fraudulent acts?

Answers will vary. The goal of this question is for students to acknowledge the pressures on employees: peer pressure to participate, managerial pressure, personal pressure to meet performance expectations. How do you reconcile such pressures with personal values?

5.

What would you have done if you found out that a co-worker was participating in fraudulent acts?

Answers will vary. Some students will likely say they will report their co-workers.

But to whom? And what if the manager punishes you and not your co-worker? What do you do then? There is never an easy answer to the whistleblowing dilemma, particularly at Wells Fargo.

6.

What should Wells Fargo do now under Scharf’s leadership?

Again, answers will vary. It is hoped that students will explore more significant measures, such as culture change and morale boosting initiatives. Students should also inquire into incentive structures and performance metrics as well as training processes.

Case Study 11: Uber’s #MeToo Reckoning: Sexual Harassment and Gender Discrimination Written by Wendy Carroll and Margaret McKee Case Summary The #MeToo movement drew significant attention to the issue of sexual harassment in the U.S. and other developed countries. A series of high-profile cases that emerged during the #MeToo movement‘s most active timeframe – October 2017 to September 2019 – revealed patterns about the challenges and consequences for women who attempted to report sexual harassment within their organizations. Drawing on public accounts of Susan Fowler‘s experience of reporting sexual harassment at Uber, this case provides students with an opportunity to more closely examine some of the reasons why women may or may not speak up about experiences of workplace sexual harassment and, if they do speak up, what some of the reporting challenges and consequences of doing so have been.

Case Analysis The critical thinking questions for this case ask students to apply concepts and frameworks from the chapter: first, considering managers as ethical leaders; second, examining factors leading to employee silence and engagement; and third, relating to whether concerns are a] ethical breaches and/or b] should be reported. Responding to these questions using a real case provides students with an opportunity to apply the concepts and frameworks in a way that encourages discussion and debate and, hopefully, provides a guide to assist them in assessing managers as ethical leaders and reporting system strengths and weaknesses for their own future work experiences.

Critical Thinking Questions Suggested Answers 1. Considering the managers described in this case – both in operational roles and HR positions: 

How would you characterize them using Carroll’s three types of managers? See chapter introduction.



How might their response to concerns raised by employees, including Fowler, have contributed to a culture of tolerance for such behavior?

In response to these questions, students are to identify the key managers described in the case and their responses to Fowler‘s reporting of sexual harassment. Using Carroll‘s three types of managers, students are to discuss the actions managers took by the three types - moral, amoral, and immoral.

In addition, they can overlay the skills outlined in the chapter on ethically approachable managers to assess whether these skills were demonstrated by each of the managers identified. Responses to this question may vary by student or student group; and these differences provide an opportunity to discuss the challenging nature of declaring an individual manager‘s actions as moral, amoral, or immoral.

For the second part of the question, students can rely on Chapter 2 about high-integrity work cultures to examine some of the evidence about cultures of tolerance. They can apply the sections in this chapter about employee silence, engagement, and empowerment to guide their discussion. Student responses to this question should surface some of the challenges for employees in various roles to speak up about ethical concerns and aspects of the culture that

appear to signal acceptance of certain types of behavior (tolerance). Again, student responses may vary, providing an opportunity to generate discussion and debate.

2. Using the ―Ethical Systems Framework‖ and the information shared in the case, complete an assessment of Uber’s internal reporting system. See Table 11.5 titled ―Effective Internal Ethics Reporting System‖ in the summary section.

What do you see as strengths and/or weaknesses of Uber’s process?

With this question, students can use the steps and activities as outlined in Table 8.5. For each of the steps, students should identify what Uber had in place and how it worked. Students may create an analysis guide using this table and add columns for strengths and weaknesses to discuss and assess it and record their analysis.

3. When referring to the reasons for employee silence, what organizational, and/or observer, factors or anticipated negative outcomes might have contributed to this problem not being addressed until Fowler ―blew the whistle‖?

See Table 11.4 titled ―Reasons for

Employee Silence‖.

Using Table 11.4, students consider each of the factors to assess employee silence. This question provides students with the opportunity to differentiate between speaking up (formally reporting within and organization – such as union grievance, human resource complaint) versus speaking out (informally making concerns known because employees feel they are not heard within their organization – such as talking to co-workers, friends, family members, doctors).

4. Considering the four recommendations from legal advisors on when to blow the whistle externally, do you think Susan Fowler acted within this guidance by going public and

writing her blog post about her experiences of sexual harassment at Uber? See section titled ―When to Blow the Whistle‖.

Students rely on the 4 recommendations by legal advisors to assess whether Fowler‘s decision to report publicly fell within this guidance. Student responses may vary within each of the steps, but, overall, they should reach a conclusion that her decision to ―blow the whistle‖ fits within this guidance.

5. Thinking about the research highlights shared on preventative approaches and the ―Effective Internal Ethics Reporting Systems‖, what are 3-4 recommendations that you would make to senior executives and members of a board of director to reduce – and ideally eliminate – future concerns about sexual harassment? See table ―Effective Internal Ethics Reporting System.‖ This question encourages students to move beyond the case and revelations about #MeToo to offer preventative approaches for future change in workplaces. In conjunction with the Table – Effective Internal Ethics Reporting Systems, students should be encouraged to draw on evaluated academic research evidence to help shape and guide their responses. They can refer to the section on the evaluated research evidence to find references about preventative approaches.

Case Study 12: The Paris Climate Change Agreement: Walmart and Amazon as Sustainability Leaders Written by Gordon Rands, Patricia Kanashiro, and Pamela Rands

Case Summary Climate change is the greatest environmental challenge facing the world today. It has been referred to as the existential crisis of the 21st century. Nations have been attempting since the early 1990s to develop responses to climate change that solve the problem without disrupting economic activity—without much success. This case examines the major elements of the Paris Agreement reached in 2015, climate change policies of the U.S. government, and the different responses to the climate crisis of two leading retail companies. In particular, this case highlights Walmart‘s efforts to leverage its influence over suppliers and customers to lower emissions and Amazon‘s engagement with multisectoral partners to fund and develop new decarbonizing technologies and scale up climate solutions.

Case Analysis This case addresses the Paris Climate Agreement designed to tackle the problem of climate change, which is the preeminent global environmental problem and is a major focus of chapter 12. The case provides additional background on greenhouse gases to supplement the scientific information on climate change presented in the text. The Paris Agreement is addressed in LO 12.2, and the case provides additional details of the agreement and its relationship to U.S. environmental policy, under both the Obama and Trump administrations, and poses questions related to the climate policies of the incoming Biden administration. The case discusses the concern of employees regarding Amazon‘s climate actions, thus pointing out that along with customers and the general public, positive relations with employees is a competitive advantage of being eco-friendly (LO 12.3). The main focus of the case is the climate goals and actions of Walmart and Amazon, which examines how some companies have attempted to improve their environmental performance. While the case does not directly address the processes that

companies use to manage environmental change efforts (LO 12.4, 12.5 and 12.6), it speaks to the pressures that provide much of the motivation for this process, especially Vision and Strategy, Employee Involvement, Feedback and Measurement, and Influence, and questions posed also relate somewhat to Integrate into All Business Functions. Information presented in the case relates to different green organization features (LO 12.6), including Green Mission Statement, Green Energy, Green Suppliers. Regarding LO.12.6 (Green Operations, Design, and Assessments), while not directly addressing EMS elements, the case substantially relates to the discussions of environmental risk factors, environmental performance indicators including issues of how to report GHG emissions, and to carbon offsets and green philanthropy as elements of the two companies‘ climate strategies.

Critical Thinking Questions and Suggested Answers 1. What are the main similarities and differences between Amazon and Walmart’s approaches to address climate change? How do these reflect their differing business models?

Walmart and Amazon are global and leading retail companies with significant different business models and therefore distinct approaches to address climate change. Walmart is a typical brickand-mortar retailer store with over 11,500 stores around the world. Walmart‘s success relies heavily on successful supply chain management to ensure timely deliveries, minimize inventory, and the lowest costs. Due to Walmart‘s close and tight relationship with suppliers, Walmart‘s climate change strategy focuses on reducing emissions along the supply chain (upstream scope 3 emissions). Moreover, every week, Walmart receives 265 million customers in their stores.

Walmart leverages its influence on consumers to push sustainable products (e.g., energy efficient light bulbs).

Amazon is one of the four biggest tech companies (together with Apple, Google, and Facebook) with businesses in computing cloud service Amazon Web Services (AWS), online stores, physical stores (Whole Foods, Amazon Go), and subscriptions (e.g., Prime membership, audiobook, music). As a giant tech, Amazon has a strong emphasis on innovation and technology. Amazon‘s climate change approach focuses on engaging multi-sectoral partners to fund and develop new decarbonizing technologies that can help reduce Amazon‘s direct emissions (scope 1 and scope 2) and scale up those solutions. Rivian, a start-up electric van, is one of the first recipients of Amazon‘s investments, and has committed to deliver 100,000 electric vehicles that will be part of Amazon‘s transportation fleet.

2. Did the U.S. leaving the Paris Agreement represent an opportunity for big businesses to step up to the challenge of tackling climate change? How well do you think Amazon and Walmart have met this? What impacts do you think President Joe Biden’s reentry of the U.S. to the Paris Agreement will have on Walmart, Amazon, and other companies?

Companies, especially large ones such as Amazon and Walmart, were going to have to make dramatic changes to meet the goals of the Paris Agreement. But the withdrawal of the U.S. from the Paris Agreement simultaneously increased the need for companies to take action, the visibility of such efforts, and the public relations benefits from doing so.

Amazon and Walmart have each made significant strides, but their actions and goals still fall short of the actions that are needed. The Intergovernmental Panel on Climate Change, the international group of scientists that produces periodic reports on climate change, has said that in

order to meet the 1.5° Celsius maximum temperature increase by 2050 envisioned by the Paris Agreement, nations and companies globally must take action to cut CO2 emissions by about 45 percent by 2030 in order for the world to achieve net zero CO2 emissions by 20503. Given that small businesses and average citizens are unlikely to cut their emissions as quickly as big business can, society would appear to require large companies such as Amazon and Walmart to become carbon neutral or even carbon negative sooner than their carbon neutral goals of 2040.

President Biden‘s reentry of the U.S. into the Paris Agreement, along with other planned climate initiatives such as a green infrastructure plan, will likely further draw attention to the need of action by big businesses. This is particularly likely if the Biden administration is unable to secure bipartisan cooperation to implement major elements of its climate agenda, and if severe climate change related weather events continue to increase. Opposition to climate proposals by Republicans in the U.S. Congress is also likely to cause environmental activists to put additional pressure on the leaders of big business to make changes in their public statements and corporate political strategies, in order to encourage Republicans (who traditionally receive substantial political donations from big business) to change their position on climate policies. Finally, Amazon and Walmart are likely to come under increased pressure to educate and influence both suppliers and consumers about the need to adopt climate-friendly actions.

3. Should Amazon disclose more information regarding the company’s carbon emissions, following Amazon’s employees’ requests? If so, in what way?

One of the main criticisms against Amazon is its lack of transparency of the methodology used to calculate GHG emissions and lack of disclosure regarding GHG scope 3 emissions, both upstream (supply chain) and downstream (consumers). Amazon utilizes its own method to 3

https://insideclimatenews.org/news/27082019/12-years-climate-change-explained-ipcc-science-solutions/

estimate emissions, called carbon intensity, which is calculated as total emissions divided by sales. There are several problems with Amazon‘s data. First, companies need to focus on reduction of absolute emissions as established by the Paris Agreement. Second, Amazon does not count emissions from manufacturing of products by third-party sellers, even though the carbon intensity metric includes sales of those products in calculating its emissions per dollar.

Finally, Amazon appears to be selective in calculating Scope 3 emissions. Amazon does not include all supply chain emissions or emissions generated by consumers using its products.

Amazon only includes emissions from products sold under its private label, which constitutes only a fraction of its online sales. Amazon also does not include emissions of its fossil fuel clients even though AWS provides technology that facilitates those companies to explore, drill, and extract oil and gas.

Amazon could consider following existing standardized protocols for reporting emissions (e.g., CDP), which would enhance transparency, credibility, and consistency of the reported data. In particular, the CDP emphasizes the importance of reporting and addressing scope 3 emissions as indirect upstream and downstream emissions represent a significant portion of the company‘s overall emissions. In 2019, Amazon reported that scope 3 emissions represent 78% of total emissions.

4. Is it legitimate for Walmart to require the company’s suppliers adopt sustainability practices? How can Walmart leverage its buying power and give suppliers the incentive to innovate?

While it may seem to be an infringement on suppliers‘ freedom to require sustainability practices of them, businesses frequently require suppliers to make changes to their products. This has been a major push of business in the area of quality since the 1980s, and many companies require their suppliers to have been certified as practicing excellent quality management practices under ISO 9000, or other custom developed standards.

Walmart can partner with suppliers to set emissions goals, develop a reduction emission plan, and encourage continuous reports and third-party accountability. Walmart can work with suppliers to improve energy efficiency and use of renewable energy, reduce waste, particularly food waste in the supplier‘s operations, and encourage sustainable packaging that is fully recyclable and sourced from sustainable materials.

5. Could Amazon require its suppliers (and/or third-party sellers) to adopt a similar model? Should it?

It would be more difficult, but still possible for Amazon to require similar actions by those whose products are sold on its site. Doing so would run the risk that these companies would decide to sell through their own online channels rather than on Amazon. But due to Amazon‘s huge leadership in online sales, it has the potential to exercise the same kind of influence as Walmart does.

While it may not make good business sense for Amazon to require this, if the company is serious about helping contribute to a sustainable planet such an action would have an enormous impact.

In fact, Walmart and Amazon together may have the greatest potential of any global companies

to put the world on a path to a sustainable future through imposing such requirements on the value chain participants of all products sold by and through their stores and online sites.

6. Should Amazon and Walmart be focusing on other environmental issues in addition to climate change? Which ones, and why?

While climate is the most critical environmental issue due to its impacts on human social and economic well-being, as well as on all other species, there are many other environmental problems that Walmart and Amazon could be focused on. There is general agreement among business ethicists and business and society scholars that companies should focus on those social issues that most directly relate to their business models and practices. In the case of Walmart and Amazon, this would seem to pertain to the environmental impacts of the production, use, and disposal of the products the companies sell.

In addition to energy use and climate impacts, key environmental issues in production include use of pesticides and other harmful chemicals, destruction of natural habitats to produce foods and ingredients such as beef and palm oil, overharvesting of scarce resources, and water pollution from livestock production. Focusing on these issues would suggest increasing attention to the sale of organic foods, sustainably grown and harvested food and fiber, and fair-trade products.

Harmful environmental impacts during the use of products largely relate to energy consumption and chemical pollution. Working with suppliers to increase the energy efficiency of their products and decreasing the release of harmful chemicals both directly (e.g., in insecticides and

weed killers) and indirectly (e.g., through off gassing) would appear to be the major areas of emphasis here.

Many environmental problems occur because of the disposal of products after their useful life.

Most notable among these are the release of plastics into aquatic, marine and terrestrial ecosystems, and the release of toxic chemicals and/or methane when products are disposed of in landfills or incinerated. Society has attempted to address these problems through residential and commercial recycling programs, and to a lesser extent through municipal composting programs for food and other organic wastes. But collection of recyclables is only part of the solution, as markets must exist for the use of recycled materials to prevent collected materials from being landfilled or incinerated. Walmart and Amazon could help address these problems by giving preference to materials with high recycled content, by encouraging suppliers to modify plastic products and packaging to utilize more easily recycled types of plastics, by educating consumers, and by helping make return of obsolete products and packaging for refurbishment or recycling easier. Walmart and Amazon could also work with other grocery chains to help fund local and regional municipal organic waste collection and composting systems in communities where they have stores.

Case Study 13: Corporate Citizen or Public Parasite? Amazon’s Complicated Relationship with the Tax Man Written by Anastasia Cortez

Case Summary Amazon.com has transformed the way people shop worldwide. Their success has made founder Jeff Bezos the richest person in the world. Amazon‘s impact on society is profound, in both positive and negative ways. On the one hand, shoppers have greater access to goods than ever before, and entrepreneurs can use Amazon‘s market reach to sell their products globally. On the other hand, the success of online retail has hurt local businesses and cost communities jobs and tax revenue from local sales. Amazon‘s aggressive stance towards paying taxes might improve their bottom line, but it deprives governments at all levels of much needed revenue to support public services and community development.

Case Analysis Amazon has grown from its 1995 founding to become one of the world‘s largest companies, generating hundreds of billions of dollars in revenue annually. Amazon‘s tax payments, however, have not grown proportionally. The facts are that Amazon, like many other global corporations, aggressively pursues opportunities to minimize their tax obligations. This case uses Amazon as the focal company to examine the corporate practice of tax avoidance. The moral arguments for and against both corporate tax payments and tax avoidance are presented, and the impacts of both on stakeholders are discussed. The case concludes that avoiding corporate taxes, while legal, is an example of doing the legal minimum and avoiding corporate social responsibility.

Critical Thinking Questions and Suggested Answers 1. Do you believe that Amazon is taking unfair advantage of the tax system?

Amazon, strictly speaking, is not taking unfair advantage when pursuing legal opportunities to avoid taxes. What they are doing is, by all reports, completely legal. That being said, it seems clear that Amazon is not treating the locations it does business in fairly by contributing their fair share of tax dollars to the economy. Students may argue that since they, personally, would never pay more taxes than legally required, it isn‘t ―fair‖ to expect Amazon to do so either.

You might respond to this by referring to corporate social responsibility, asking if corporations owe society more than the legal minimum behavior. An analogy might be made to pollution. Ask students if they recycle. If they say yes, ask why—it is not legally required behavior and goes above and beyond the minimum. Are they happy knowing that some companies pollute all the way up to the legally allowed maximum, and only mitigate pollution to the extent required to avoid penalties, or do they expect companies to try to exceed legal minimums for the sake of the planet?

Another tack to take is to suggest swapping the word ―fair‖ with the word ―just‖—is it just for Amazon to avoid taxes and shift the burden of supporting social infrastructure onto private citizens? Remind students that the argument has never been to force Amazon to support society, only that they should contribute their share, which seems to align with notions of justice.

2. If tax laws are changed so that companies are no longer allowed to reduce their tax debt by deducting expenses for investment into research and development, do you think that companies will reduce spending on innovation? Why or why not?

Perhaps it will reduce this type of investment in some companies. However, eliminating a tax break will not eliminate the need for companies to continually invest in improving

their competitiveness. Apple would not keep releasing new iPhones if the market didn‘t require new technology—they don‘t do it for tax breaks.

An example where this R&D is more important to society—pharmaceutical companies— might spark more discussion. The recent scramble for pharmaceutical companies to develop COVID vaccinations has not been undertaken because of tax breaks. Certainly, the U.S. government and other national governments have provided support for this research with direct payments to the pharmaceutical companies. This is the duty of governments in a crisis—to try to find a solution and support their citizens‘ welfare.

However, pharmaceutical companies have been working on these vaccines for two main reasons—first, it‘s what they do. Secondly, the revenue to these companies from selling vaccines (patients aren‘t paying, but the government most certainly is—these shots are not free) to most people on the planet is worth working for.

3. How can communities attract business investment without giving away their tax revenue?

This is a tough question, because the practice is so baked into American politics that it would be very difficult to transition away from. Any locality that decided to take the high road and stop giving away tax breaks would immediately be at a disadvantage when competing with other localities for new business. It would not exactly be unprecedented to try to wean an industry off subsidies, however. The medical industry has reduced its enthusiasm for free perks from the pharmaceutical industry, with hospitals and clinics and doctors‘ offices all making statements about declining free samples and other incentives in an effort to be (or at least to appear to be) more ethical. It would be very difficult to encourage localities from cooperating to eliminate tax incentive packages

from bids for new business, as any place that did not cooperate would have an advantage over the rest.

4. Globalization has made it more difficult for national governments to tax corporate income effectively because it is difficult to establish where the income was earned.

Companies like Amazon exploit this in order to shift their tax burdens to countries with lower rates, effectively depriving some countries of revenue they deserve and need and sending money to countries that do not bear the cost of supporting the company’s operations. Should countries compete for corporate tax revenue by offering lower rates than their neighbors?

Competing for corporate taxes by offering the lowest rates is just like competing for development by offering tax incentives (previous question) and would be difficult to prevent for the exact same reasons.

The question of getting tax revenue to the correct communities/states/countries is slightly different. It is possible that taxes will have to be conceived a little differently to accomplish this. Rather than taxing final net income, perhaps states and localities (anywhere in the world) can increase the use of payroll taxes (taxes on the number/salaries of employees in a particular location) or sales taxes (on the sales made to community members) to target companies operating in their areas more effectively.

Neither of these answers the issue of federal (national level) taxes, but that question may have to be addressed by closing loopholes in the tax code. We do have a corporate tax rate of over 20%, but loopholes permit many companies to pay well below that rate on their income.

i

J. Ludema and A. Johnson, ―Gravity Payment‘s Dan Price on How He Measures Success after His $70k Experiment,‖ Center for Values Driven Leadership, Benedictine University, August 28, 2018.

ii

F. Herzberg, ―One More Time: How Do You Motivate Employees?,‖ Harvard Business Review 46, no. 1 (1968; reprint 2003): 53–62.

iii

U.S. Securities and Exchange Commission, ―SEC Adopts Rule for Pay Ratio Disclosure,‖ August 5, 2015, https://www.sec.gov/news/pressrelease/2015-160.html, retrieved April 14, 2020.

iv

A. Edgecliffe-Johnson, ―US Companies Reveal Pay Gap between Bosses and Workers,‖ Financial Times, April 16, 2019, https://www.ft.com/content/1ee790f0-5da8-11e9-b285-3acd5d43599e, retrieved April 13, 2020.

v

P. Cohen, ―One Company‘s Minimum Wage: $70,000 a Year,‖ New York Times, April 13, 2015, https://nyti.ms/1FHRX1K, retrieved March 4, 2020. vi Michael Simkovic, ―Risk-Based Student Loans,‖ Washington and Lee Law Review 70, no. 1 (2013): 527, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1941070, accessed April 26, 2020. vii Katie Lobosco, ―Americans Are Moving to Europe for Free College Degrees,‖ CNN Money, February 23, 2016, https://money.cnn.com/2016/02/23/pf/college/free-college-europe/index.html, accessed May 5, 2020.