All Cases For Business & Society 11th Edition Archie B. Carroll, Jill Brown

All Cases For Business & Society 11th Edition Archie B. Carroll, Jill Brown

GUIDELINES FOR CASE ANALYSIS The following guidelines are designed to assist in the case analysis process. The guidelines are not intended to be a rigid format, however. Each question is intended to surface information that will be helpful in analyzing and resolving the case. Each case is different, and some parts of these guidelines may not apply in every case.

Following each case are discussion questions that should be answered as part of any complete case analysis. The heart of any case analysis is the recommendations made based on a solid logical foundation. The questions dealing with Problem and Issue Identification and Analysis and Evaluation should be used to define and then defend recommendations made in the final Recommendations step.

Guidelines for Analyzing Cases Problem and Issue Identification 1. What are the central facts of the case? What assumptions are you making about these facts?

2. What is the major overriding issue in the case? What major question or issues does this case address that merits study at this point in the course?

3. What sub-issues or related issues are present in the case that merit consideration now?

Analysis and Evaluation 1. Who are the stakeholders in the case, and what are their stakes? What challenges, threats, or opportunities are posed by these stakeholders?

2. What economic, legal, ethical, and philanthropic responsibilities does the company have, and what is the nature and extent of these responsibilities?

3. If the case involves company actions, evaluate what the company did or did not do in handling the issue affecting it.

Recommendations 1. What recommendations do you have for this case? If a company's strategies or actions are involved, should the company have acted as it did? What action should the company take now? Why? Be as specific as possible. List several options as well as the pros and cons of each alternative. Be prepared to discuss why you eliminated those options you discarded and defend your chosen alternative. Mention and discuss any important implementation considerations. This last step is crucial because recommendations that cannot be implemented are worthless.

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Case 1: Walmart: The Main Street Merchant of Doom 1. What are the major issues in the case? What does Walmart’s experience tell you about the business and society relationship?

The major issues in the case center on Walmart‘s expansion. The case focuses on the impact to the communities to which Walmart moves, from both environmental and economic perspectives.

Walmart has been criticized for the aggressive and even predatory tactics that it takes with respect to local merchants. Competition is what drives Walmart, and a merchant who competes directly with them will lose. Is it unethical for any company, not just Walmart, to drive out all competition? Is Walmart using its size and ability to undersell small local merchants until they are driven out in order to establish an unfair monopoly on local markets? Is this a violation of the spirit of anti-monopoly laws? The Walmart experience tells us that business and society have a symbiotic relationship, that the fabric of a community is impacted dramatically by the entry of a company like Walmart, and that this fabric is sacrificed to poor working conditions, low wages, and lower-priced goods.

2. What happened to the ―Penney Idea,‖ Sam’s ten-foot rule, and the Buy America Plan? Were these discontinued over time, or did they fade away and get lost when Sam died?

To fulfill a cost-cutting philosophy, many stores eliminated their famed greeters, and this opened the door to problems (increased crime) because one fewer deterrent existed. Walmart eventually abandoned the Buy American Plan and became one of the largest purchasers of products made overseas. In fact, the company in time became the country‘s largest purchaser of Chinese goods in any industry.

3. Assess Walmart’s corporate social responsibility using the four-part CSR model. Is Walmart socially responsible even though it has had a devastating impact on many small merchants and various stakeholder groups, and some communities do not want it?

The following is an assessment of Walmart‘s corporate social responsibility using the four-part CSR model: Economic: Walmart‘s economic performance has been outstanding. According to the text, in the 2020 Fortune 500 listing, Walmart has held on to its #1 position in terms of revenues: $524 million. On a global scale, Walmart has more than 11,500 stores, and during the pandemic, its e-commerce went up by 74 percent. The year 2020 was a big year for Walmart as it continued to provide essential products and services for millions of citizens. The company grew its revenue by $35 billion, and its e-commerce business grew by triple digits. Its goal of providing quality merchandise at a low cost to consumers meets society‘s economic expectations for the company.

Legal: Walmart‘s adherence to the laws of the country generally has been good, but an explosion of lawsuits by employees and other stakeholders is tarnishing the company‘s image in this area.

As the world‘s largest employer and the largest nongovernmental employer, Walmart gets sued 20 times a day, close to 5,000 times every year. Many of these lawsuits are filed by its employees over employment discrimination issues or wage and hour claims, often regarding overtime. The most serious employee issues Walmart has faced in the past decades have been accusations of gender discrimination against women. More often than not, these lawsuits are settled out of court. According to Walmart‘s annual report for the year ending January 31, 2010,

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the company is a defendant in ―various cases containing class-action allegations.‖ The company notes that if these cases are ―decided adversely to [the company] or settled by [the company],‖ it could result in a material liability to the company and adversely impact the company‘s ―financial condition or results of operations.‖ In April 2010, the Ninth Circuit Court of Appeals, sitting en banc, upheld the class-action status in Dukes v. Wal-Mart Stores, Inc., a class-action lawsuit ―brought on behalf of all past and present female employees in all of our retail stores and warehouse clubs in the United States.‖ The certified class includes approximately 1.6 million individuals. In 2020, a new issue arose regarding Walmart‘s policies and practices on filling opioid prescriptions at its pharmacies. The U.S. Justice Department did accuse Walmart of helping to fuel the country‘s opioid crisis by insufficiently screening questionable prescriptions.

Ethical: Walmart‘s internal policies have certainly been above the spirit of the law. Questions may be raised, however, about (1) the degree to which it has considered its impact on other small stores and merchants and on town culture, and (2) certain employment-related practices that have resulted in mammoth lawsuits for the company.

Discretionary: Walmart‘s contributions to the local community, its Buy American program, and its recycling centers all speak to the positive aspects of societal expectations. At the time of this writing, Walmart has several corporate citizenship initiatives, including, among others, scholarships to high school seniors, fundraisers for The Children‘s Miracle Network Telethon, and environmental programs. In its 2020 Environmental, Social and Governance (ESG) Report, Walmart featured and summarized some of its recent goals and achievements: Walmart states that it prioritizes ESG issues that offer the greatest potential to create shared value. The company focuses on issues that are highly relevant to their business and stakeholders. However, Walmart is often criticized for the predatory practices it uses against local merchants, its lack of sensitivity to community needs when a store is closed, and to community culture.

4. What about Walmart’s impact on communities in terms of sprawl, traffic congestion, and impact on the appearance of the environment? What responsibility, if any, does the company have to the communities it enters?

Walmart has been condemned for its impact on communities in terms of sprawl, traffic congestion, and appearance of the environment. The website Wal-Mart Watch (http://walmartwatch.com) notes that Walmart‘s entry into new communities results in abandoned retail space, increased traffic congestion, and dead and decaying areas in such communities.

As noted, questions may be raised about some of Walmart‘s practices and effects described in the case. Walmart‘s responsibility to community merchants could extend to the point that Walmart should teach them how to complete with, not against them. Predatory competition designed by department managers to increase store sales should be stopped and punished if necessary.

5. Sam Walton has been called a motivational genius. After reading this case, and with what you have observed at your local Walmart store, do you think his motivational genius is still felt by associates? What is the ―Walmart Way‖? How would you characterize the store’s culture now that Sam is no longer around?

Sam motivated the associates by giving them the responsibility and the credit for Walmart‘s success. He gave them ownership in the company through stock options. He posted the stock

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price daily and pointed to it often. He held weekly videoconferences with all the stores explaining new ideas, promotions, and products. He included the associates in the decisionmaking process.

However, now that Sam Walton has died and Walmart has morphed into a mega-industrial giant, the culture arguably has changed. While the focus on customer satisfaction and low prices was once perceived as consumer (and perhaps community) friendly, now many associate low prices with social and economic injustice (the opposite of Sam‘s original intentions). Further, management‘s emphasis on corporate numbers has led to employee lawsuits that could have a material impact on the company in the long run. When one visits a Walmart store you rarely get the sense that employees are engaged and are part of a positive culture. Apart from the famed ―Walmart greeters,‖ there seems to be little in the way of a corporate identity that indicates a culture that values its employees.

6. Walmart was an early leader in the area of corporate social responsibility. Is the company’s detrimental impact on merchants, and current opioid, labor, and bribery scandals, offset by the benefits of its recent corporate citizenship and sustainability initiatives?

Both the Buy America and Environment Awareness campaigns are examples of how Walmart continues to promote corporate sustainability initiatives. The Buy American program not only promotes the purchasing of goods made in America, but the advertising of such a program raises awareness of this issue in the minds of the hundreds of thousands of Walmart shoppers. The use of Walmart‘s vast purchasing power also creates awareness in the manufacturing and marketing sectors that there is a demand for American-made goods. The Environmental Awareness campaign works in much the same way.

These programs may have been both an example of corporate social responsibility and gimmicks to entice customers into the store. By enticing people into the stores by dealing with emotional issues such as buying American-made products, the image of corporate social responsibility comes home to the consumer. Many may view the Buy American program as a gimmick, rather than corporate social responsibility, as Walmart has abandoned this emphasis and now is one of the largest purchasers of overseas products. In addition to its retail size and power, many consider the company to be socially responsible in addition to being a provider of thousands of jobs, low prices, and high value and service. Walmart has numerous corporate citizenship and sustainability initiatives at the local and national levels. Walmart and the Walmart Foundation together provide more than $1 billion in cash and in-kind donations to support programs that align with their philanthropic priorities. In 2021, they committed $100 million over five years to fund research advocacy, innovation of practices, and stakeholder convening to address racial inequity through Walmart.org‘s Center for Racial Equity.

While corporate citizenship programs that focus on certain aspects of the community are an important part of a company‘s corporate social responsibilities, it bears noting that corporate social responsibility encompasses a company‘s economic, legal, ethical, and philanthropic responsibilities. Given the record of these programs, it is difficult to believe that Walmart‘s social responsibility initiatives go far enough to be able to alleviate the detrimental impact on merchants by the company. While success in one area should be celebrated, it should not come at the expense of another area. Companies, like Walmart, must focus on all their responsibilities to be truly successful corporate citizens.

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7. Walmart continues to find resistance to its expansion into New England and some parts of the United States. What are the true goals of the opponents of Walmart? Include a consideration of the following: (a) stopping Walmart’s expansion, (b) preserving the status quo (e.g., downtown community and social fabric), (c) developing a cause that will pay their bills, (d) fighting for an ideology, or (e) something else. What should Walmart do when it encounters resistance?

Walmart‘s primary emphasis is on the consumer stakeholder. However, it is its relationships with other stakeholders, specifically the government, local and global communities, its employees, and the environment that impact its ability to expand into new areas. Opponents of Walmart fear that while the company provides low-price alternatives to consumers, it has also the ability to drive out local competition. This eliminates the consumer‘s right to choose (i.e., the right to ensure that competition is working effectively), a right identified by the Consumer‘s Magna Carta (see Chapter 13 in the textbook). Thus, opponents are concerned that Walmart‘s continued expansion may have the effect of limiting consumer choice in the long run, as well as have a detrimental impact on small-town culture. Specifically, as downtown stores close and Walmart becomes one of the only sources for certain goods, the culture of the community changes drastically. Further, employment opportunities change, and Walmart currently faces a tremendous amount of scrutiny for certain employment practices. While it may be said that some opponents undertake the Walmart cause for monetary gain or for idealistic reasons, there are others who champion this cause based on the factors listed above. Further, as noted in the case, the media has published several articles that question Walmart‘s power and influence.

As Walmart continues to increase its public image as a socially responsible company, it must address the concerns that it faces regarding its impact on community and employee stakeholders.

As the tagline for the first Spider-Man movie noted, ―With great power comes great responsibility.‖ As one of the nation‘s leaders in sales, Walmart has the ability not only to impact our nation‘s, and perhaps even the global, economy but to shape our legal and social system as well. Accordingly, it must consider the impact of its employment practices and growth strategies on the community and the individuals who live there and the company‘s responsibilities to these stakeholders.

8. When Walmart does have to close stores due to the economy and/or competition, does it have any social responsibilities to the communities it is leaving? If so, what would those responsibilities be?

Looking again at the model of CSR, the economic and legal responsibilities would give minimal responsibility to Walmart in regard to its associates, customers, and community. The ethical responsibility would require that Walmart avoid even the appearance of a questionable response and to operate above the minimum required by the law. At the discretionary level, the community would need help in the transition period. This help could be money, a search for new small retailers, or the establishment of a fund for the start-up of new business and other commercial ventures. In regard to the lost social fabric, it cannot be recovered. Not much can be done for the loyal customers. Perhaps there could be a customer appreciation day, a parking lot fair, or other attractions paid for by Walmart. The employees could be compensated with severance pay.

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9. When you are the largest company in the world, how do you protect yourself against the kind of criticism Walmart has received? Does it seem that no matter how hard you try, it’s difficult to make things better?

It would be impossible for a company as large as Walmart to insulate itself from criticism. The decisions that Walmart makes impact the communities in which it does business—that in and of itself invites criticism. What Walmart can do to counter negative criticism is to remain true to the core philosophy of its founder, Sam Walton, to cultivate social programs, be a good neighbor, offer a fair wage and a positive culture to employees, and positively impact its environment.

When he was appointed CEO, Fortune magazine dubbed Doug McMillon the ―chosen one‖ and said that he may be the best-prepared executive to lead Walmart since Sam Walton himself. The years ahead will be interesting to watch as Walmart plays out its ―business in society‖ role.

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Case 2: Walmart’s Labor Practices 1. Identify and describe the major labor relations issues facing Walmart and the likely stakeholders to be affected.

The major labor relations issues facing Walmart include concerns over income equality as well as the company‘s policies and practices regarding overtime pay; employment of undocumented immigrants; allegations of gender discrimination against women; concerns about employee treatment overall; and the question of unionization. The likely stakeholders affected are the 2.2 million people that Walmart employs globally along with the communities in which Walmart has become an important facet of the economy.

2. Walmart has been said to have excessive power in its relationship with communities. How is its manifestation of power with employees similar to or different than with communities? Which is the most serious issue? Why? The manifestation of power is similar between communities and employees in that it is a free market system. Walmart relies on customers to shop in its stores and on employees to freely take jobs. The impact to communities may be the closure of small businesses as well as changes to the landscape in the form of urban sprawl. The impact to employees may be jobs in which they are underpaid and lack benefits. It is a serious issue, because although it is a free market, the consumers who shop at Walmart and the employees who work at Walmart often lack the freedom of choice.

3. Are many of the allegations by employees at Walmart just reflections of the changing social contract between companies and their workers? Are many of the so-called problems just the free-enterprise system at work? Discuss.

If anything, employment laws have become stronger rather than weaker, so any changing contract between companies and workers should inure to the benefit of the worker. Many of the problems outlined in the article were not a result of the free-enterprise system but the fact that large companies have a tremendous amount of influence and power. However, discriminatory practices, underpaying employees for hours worked, and employing undocumented workers are all areas of exploitation not caused by the free-market system.

4. Is the practice of being required to work ―off-the-clock‖ an unethical practice or just ―to be expected‖ in the modern world of work? After all, many salaried employees are expected to work ―until the job is done‖ no matter how many hours it takes.

The practice of requiring employees paid by the hour to work off the clock is unethical and exploitive. There is no expectation that hourly employees should work without being compensated for all hours. Salaried employees are paid at a higher rate, often have benefits, and expect that they may need to on occasion work longer hours than hourly employees.

5. Is it wrong for Walmart to fight unionization? Sam Walton always felt the company should function as one big happy family and that unions were to be resisted. What is your evaluation of the union opposition?

Walmart‘s opposition to unionization appears to be cultural, that is, the founder Sam Walton was clearly against it. Additionally, the opposition is financial. Walmart does not want to give into union demands. From an employee‘s perspective, it is clear that there are benefits to

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unionization. It would be hard to say in a free economy that it would be wrong for a company to resist unionization, as ultimately, they must serve the needs of their shareholders. Walmart should consider the benefits of its 2.2 million employees worldwide, 1.3 million in the United States, to fully evaluate all sides of the issue.

6. If Walmart can effectively argue that women are contributors to their plight by not applying for promotions or for seeking fewer responsibilities to accommodate family priorities, should the company be held to be in violation of sex discrimination laws because the statistics reveal differences between women and men?

The statistics reveal a disparity that seems to exist because of a cultural norm within the firm.

This should be investigated. Walmart has long argued that it treats its female employees fairly.

The company has said that women do not apply for promotion as often as men, and this accounts for the underrepresentation of women. We might ask Walmart why women are not applying for promotions and why are they seeking fewer responsibilities. If it is because they work for a company that discourages women from applying or is not supportive of working families, there could be a deeper issue of discrimination.

7. Regarding the various labor practices discussed in this case, do they reflect questionable treatment of associates or just the business system at work in a large corporation?

It appears the various labor practices discussed reflect a mixture of questionable treatment of associates and the business system at work. Certainly, the practice of discriminating against women, hiring undocumented employees, and not paying hourly employees for all the hours that they work represent questionable practices. However, the fact that the company hires part-time employees, that they are not offered benefits, and that they are not paid a living wage is the business system at work.

8. Have increased competitiveness, globalization, higher wages, technology, and changing social trends affected Walmart’s relations with its associates?

Yes, it has been harder for Walmart to maintain its workforce and remain competitive.

Employees must go where they are able to work for a living wage. It is difficult in this economy for Walmart to keep employees—there is significant employee turnover. In 2015, led by new CEO Doug McMillon, Walmart decided to upgrade its investments in its employees over a twoyear period, a criticism that had been hanging over the company for several years. The company committed $2.7 billion in wage increases, scheduling improvements, and employee training.

9. Conduct Internet research on Walmart and update allegations and lawsuits against the company.

Wal-Mart: The High Cost of Low Price is a 2005 documentary film by director Robert Greenwald and Brave New Films. The film presents a negative picture of Walmart's business practices through interviews with former employees, small business owners, and footage of Walmart executives. Greenwald also uses statistics interspersed between interview footage, to provide an objective analysis of the effects Walmart has on individuals and communities. In response to the film‘s release, Walmart created an advocacy group called Working Families for Walmart in collaboration with the Edelman public relations firm on December 20, 2005. It has been used to praise Walmart in a show of opposition to union-funded groups such as Wake Up Wal-Mart and Wal-Mart Watch. The group is financially supported by Walmart and is headquartered in Edelman‘s Washington, DC, office.

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Case 3: Chipotle’s Struggle with Food Safety: Back on Top Again?

1. What are the ethical issues of this case?

Multiple patrons of Chipotle were infected with E. coli and the norovirus due to allegedly neglectful food preparation practices as well as allowing obviously sick employees to handle food. Exacerbating the issues is the fact that Chipotle allegedly attempted to cover this up by hiding evidence, moving workers, and lying to the public.

2. How would you describe Chipotle’s handling of the food safety crisis? How does this compare/contrast to its current handling of labor issues in New York City?

Chipotle appears to have handled the crisis well, by closing the stores to deep clean, changing the employee sick day policy, and appearing to be upfront and honest about the issues. Additionally, Chipotle launched a new food safety policy in 2016 and attempted to repair customer loyalty through its free burrito campaign. By combining damage control tactics, new leadership, positive press, and driving traffic to its locations, Chipotle seemed to have successfully gained back its lost customer loyalty and trust. Compared to the food safety crisis, Chipotle has responded to the labor issue in New York City with vigorous denial of the allegations, saying that it is a ―dramatic overreach.‖ The lawsuit acknowledges that Chipotle attempted to comply with the law since 2019, but that violations are ongoing. To date, the shareholders seem to think that Chipotle is correctly addressing these issues. However, much will depend on whether Chipotle can avoid allegations of poor food safety practices and labor law violations in the future.

3. In Chapter 10, we identified that Chipotle did not seem to have time to completely develop a plan to manage its crises. Looking back at Chapter 10’s‖ 5 Steps in Managing Crises,‖ what might the Chipotle management team have done differently? How might these steps be applied to current issues?

The five steps in managing crisis outlined in Chapter 10 all presuppose a risk framework that is already in place and fully articulated. The steps are (1) identifying areas of vulnerability, (2) developing a plan for dealing with threats, (3) forming crisis teams, (4) simulating crisis drills, and (5) learning from experience. If the five steps had been employed at Chipotle, the question of having the time to complete a plan would not be an issue. The plan would have been in place.

Chipotle‘s management team did not seem to be ready for any crisis. If they had employed the five steps, they would have proactively identified the issues, they would have developed a plan for dealing with those issues prior to the threat, and a crisis management team would have been available when needed; Chipotle would have benefited from performing simulations and mock assessments and drills to ensure that the plan was working; and, finally, they would have amended their plan and training based on their experiences.

4. What is the role of the Centers for Disease Control (CDC) in food safety situations? How did it help or hurt Chipotle in managing the crisis?

The CDC was the governmental regulator or investigator in the E. coli and other food-borne illness breakout. While it was important and necessary for the CDC to investigate, their failure to find the cause of the breakouts even after deeming the restaurant safe could not have helped to allay the fears of Chipotle patrons.

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5. Think about the conventional approach to business ethics that we discussed in Chapter 6. Do you think that these food safety and labor issues are common in the retail food business? What standards and norms apply here? How would a principles approach and an ethical tests approach enhance the ethical decision making of Chipotle management on labor issues?

The conventional approach entails making a comparison between a decision, action, or policy and prevailing norms of acceptability. In the retail food business this would mean looking at standards and norms established by sources such as federal law, food safety protocols, health standards, and labor practices. As this industry operates with small margins and limited price elasticity, food safety and labor issues may arise and be compromised when faced with pressures such as adhering to restaurant metrics or cost-cutting. The principles approach is based on the idea that employees and managers desire to anchor their decisions, actions, or policies on a more solid foundation than that provided with the conventional approach. Ethical tests are posed as questions that should provide useful guidance.

Both of these approaches would have enhanced the ethical decision making of Chipotle management on labor issues, especially as allegations were made that Chipotle restaurant managers circumvented food safety measures by keeping restaurants understaffed and staff overworked. In the food business, the consequences are serious and can lead to illness, hospitalization, and even death.

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Case 4: The Theranos Story and Fake Blood Testing: Culture, Crime, and Hubris 1. What are the major issues in this case?

The case centers on the rise and fall of the Theranos blood-testing company. The health technology company, founded by Elizabeth Holmes, assembled a powerful board and highprofile investors in 2004. The product, the Edison blood-testing machine, did not function. By 2018, Holmes was being investigated by the Securities and Exchange Commission and the federal government for defrauding investors out of hundreds of millions of dollars and deceiving hundreds of patients and doctors. Her partner, Balwani, was also indicted. The major issues in the case include a high-profile board of directors, the pressures to succeed, a toxic corporate culture, and outright fraud.

2. Consider the corporate culture of Theranos. How might this have influenced the decisions that Holmes and Balwani made to keep forging ahead, even as the Edison continued to fail?

The design of the ethical culture at Theranos may be analysed using the ‗Best Practices for Improving an Organization‘s Ethical Culture‘ presented in Chapter 6. Best practices for improving the firm‘s ethical climate include providing leadership from top management, and board of director oversight of ethics initiatives, among other practices.

Consider that Theranos had a corporate culture of secrecy, intimidation, and fear, allegedly led

by Balwani and Holmes. The moral tone of an organization is set by top management and refers to the ethical atmosphere that is created by the organization‘s leadership, which in this case was weak ethical leadership. The two pillars of ethical leadership – being a moral person and being a moral manager—were missing at Theranos. Being a moral person requires three major attributes: traits, behaviors, and decision making. Moral management conforms to the highest standards of ethical behavior or professional standards of conduct. Moral managers recognize the importance of proactively putting ethics at the forefront of their ethical agenda.

The board of directors lacked oversight and corporate governance. Balwani and Holmes had considerable influence over the board. The board was made up of former U.S. Secretaries of State George Shultz and Henry Kissinger, former U.S. Senator Sam Nunn, former CEO of Wells Fargo Richard Kovacevich, and former Director of the Centers for Disease Control and Prevention William H. Foege. With the exception of Foege, the directors had no health care/biotech or entrepreneurial experience.

3. What do you think of the defense strategy that puts blame on the ―Silicon Valley start-up culture‖?

Elizabeth Holmes‘s lawyers suggested that Theranos succumbed to the ―Silicon Valley start-up culture‖ that invites exaggeration in the funding process. This includes the media hype surrounding the ―darling of Silicon Valley,‖ Holmes, who was named a U.S. ambassador for global entrepreneurship by former President Barack Obama, awarded the prestigious Horatio Alger Award by the Horatio Alger Association of Distinguished Members, named one of the 100 Most Influential People in the World by Time magazine, etc. Even start-up investors are owed fiduciary duties such as a duty of loyalty and a duty of care. The investors are to blame as they should have done due diligence before investing, and questioned the absence of bottom-line profits after investing.

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4. Is there any justification for the actions of Holmes and Balwani?

Theranos had responsibilities to the stakeholders including employees, customers, investors, and society. The blood test results were used for patient‘s health decisions and threatened patient safety. Balwani and Holmes had knowledge that the Edison did not work, and proceeded with the misrepresentation and intent to defraud.

5. Consider the actions of whistleblower Tyler Shultz. Would you have gone to regulators if you were in his position? Why or why not?

Whistle-blowers face many obstacles as they seek to speak out on their concerns. A ‗Checklist to Follow before Blowing the Whistle‘ is presented in Chapter 11. At Theranos, potential whistleblowers were threatened with lawsuits, and those who were critical of leadership practices were either fired or marginalized. Despite this, several employees went to regulators complaining that the company was exaggerating its achievements and failing to report test results that raised questions about the accuracy of the Edison system.

Tyler Shultz resigned and was one of the first whistle-blowers. Tyler is the grandson of former Secretary of State George Shultz, who a member of Theranos's board of directors. Again from Chapter 11, employees who believe that they have been retaliated against for engaging in protected conduct may file a complaint with the secretary of labor to request an investigation by OSHA‘s Whistleblower Protection Program

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Case 5: Direct-to-Consumer Advertising for Pharmaceuticals: Is It Ethical?

1. What are the ethical issues related to DTCA? The ethical issues revolve around the possibility of duping the public into purchasing products that they do not need and that may be harmful to them. Drug manufacturers are in a position to know the positive and negative aspects of their product but only reveal the positive. While all manufacturers tend to do this, these products may directly influence the health of people, so a higher standard might be required.

2. Should DTCA be judged by the same criteria as other advertising? If not, how should it be judged differently?

As we experience the democratization of information, we also see the confusion and despair among those professionals who once had a monopoly on that information. Stockbrokers and investment advisers bewail the trend of individuals managing their own accounts and leaving the professional out of the loop. Certainly, this new pattern is riskier than using professional advice.

The same thing is happening in medicine. However, because the downside to a bad decision here is much more significant than that of picking the wrong stock, a full disclosure of the drug's contraindications needs to be provided. The question then becomes: Whose responsibility is it to read and heed those warnings? Can you imagine the result if warnings and contraindications as are required in drug ads were required on cigarettes or alcoholic beverages?

3. What public policy changes would you advocate regarding DTCA? Should the United States and New Zealand ban them? Should the United Kingdom and the EU allow them?

The best defense against misleading advertising is an informed, educated public. As long as drug manufacturers reveal the negative aspects of their products, as well as the positive, no change would be required. Perhaps FDA oversight would help, but that also requires the creation of a uniform standard that can be applied to all pharmaceutical ads. The United States and New Zealand should not ban such ads, but additional restrictions should be put in place so that the consumer can make an educated, informed decision. The key is to leave the choice in the hands of the consumer, so long as the consumer has all the relevant information.

4. How will changes in technology and viewing habits change the DTCA issue?

With the advent of direct television viewing services like Netflix and Hulu, viewers are no longer as exposed to television commercials. However, marketing technologies that track consumer preferences and web shopping allow marketing to be more tailored to consumers. It is possible that DTCA will be enhanced to specific groups who would be most impacted and affected by the advertisements.

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Case 6: The COVID-19 Pandemic: Herculean Challenges for Business and CSR 1. What is your assessment of how businesses approached the pandemic? Can you name some businesses that have practiced good issue and crisis management during COVID-19?

The pandemic exposed vulnerabilities across most industries. Labor supply was reduced and loss of income reduced household consumption and business investments. The case states that for businesses that have embraced CSR as part of their corporate missions and strategies, the pandemic might be viewed as just a different context for them to apply their CSR principles along economic, legal, ethical, and philanthropic dimensions.

Companies like Amazon, Costco, Zoom, and Roku grew rapidly, while many traditional retailers were going bankrupt. Others, such as Walmart and Best Buy, invested aggressively in online retailing. Some businesses and their founders and employees found opportunities to move to other businesses during that time.

2. Of the dimensions of CSR, which one do you see as most/more relevant regarding how businesses should prioritize their strategic actions during a crisis like a pandemic?

During a crisis, like a pandemic, the priority is the economic objective which is to survive and to provide the goods and services that consumers and employees need. However, during times of crises, unethical and illegal behaviors can also surface, so businesses must make decisions in tandem with these obligations to be legal and ethical that are required and expected. Crises planning and rapid response required strong, top-down leadership. Decentralized decision making was also emphasized as the pandemic exposed supply chain vulnerabilities. For example, anticipating hoarding and stock-outs and adapting quickly was important; employees required specific guidance and security; and online sales and social media were utilized.

3. CSR inevitably involves tensions between its different dimensions: legal versus ethical, economic versus philanthropic, etc. Where do you see these tensions with regard to businesses’ actions during the pandemic?

The economic objective was to survive and to provide the goods and services that consumers and employees need. Businesses‘ legal responsibilities changed along with regulations related to COVID-19. Mandates such as mask-wearing and vaccinations were challenging. Businesses were also required to view their stakeholders with an ethical lens. Issues brought on by the pandemic included worker health and well-being, rationing of medical care, ethical management of crises, hazards posed to essential workers, disruption to domestic lives, women being disproportionately affected, black U.S. entrepreneurs facing unequal access to capital, and Asians becoming the subject of hate crimes and discrimination. Businesses‘ commitment to their philanthropic responsibilities increased as charitable responses to COVID-19 surpassed all other recent disasters to date. The pandemic did not derail businesses‘ commitment to environmental initiatives and addressing climate change.

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4. Are there some helpful lessons for businesses to learn from the pandemic? What are these lessons? Which pertain to crisis management, and which pertain to ongoing management?

The pandemic has brought challenges for business/society relationships, as well as some opportunities. For businesses that have embraced CSR as part of their corporate missions and strategies, the pandemic might be viewed as just a different context for them to apply their CSR principles along economic, legal, ethical, and philanthropic dimensions. The lessons learned from the COVID-19 pandemic might actually spur businesses to rethink their CSR strategies.

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Case 7: Volkswagen’s Diesel Deception and Its Aftermath 1. Consider the corporate culture of Volkswagen (VW) in Germany. How did it affect this situation?

The company‘s approach and philosophy regarding competition was stated by one senior executive as ―be aggressive at all times.‖ This points to a corporate culture that aggressively chooses a position and pursues it, for example, the belief that clean diesel vehicles were the key to ―global domination.‖ Additionally, the executives seemed unapologetic and unwilling to take responsibility for their failures. The CEO in an interview with NPR would not even own that it was an ethical issue; rather, he blamed it on a misunderstanding of American law.

2. Why did Volkswagen engineers decide to cheat the emissions tests? Should the engineers have consulted with executives?

It is unclear why engineers decided to cheat the emissions tests, but for the fact that the company invested significant money in its diesel program and that senior management believed that clean diesel fuel would outsell hybrid vehicles. It is hard to believe that engineers did not consult with senior executives and that executives did not know what was going on. Former EPA official John German states that the idea that VW executives were unaware of the diesel defeat tests ―just doesn‘t pass the launch tests.‖ 3. What is your assessment of VW’s sense of business ethics and fair play as manifested in the emissions cheating scandal?

The case seems to demonstrate serious deficiencies in VW‘s sense of business ethics and fair play. The emissions cheating software was not designed and implemented by accident but was designed with the single goal to systematically pass those tests and in effect lie to their consumers. Even when faced with the allegations, the VW CEO (via the NPR interview) failed to take responsibility for the actions of his firm, blaming misunderstanding of the law. In fact, in 2006, it was found that a senior executive prepared a PowerPoint presentation on how to cheat the emissions tests.

4. VW has always been perceived to be a socially responsible corporation. In light of this, how could an emissions cheating scandal like this occur?

VW spends a tremendous amount of money on advertising, and it appears as though the corporate brand that it has cultivated does not match with the corporate ethics internally. They appear to have been false claims. That the corporate brand and the internal culture was such a mismatch makes this especially jarring. VW was a trusted name. The only way that this could have occurred is through corporate greed, arrogance, and a culture that believed that it was above the rules.

5. Assume that you are a consumer who purchased one of the affected diesel vehicles in 2014, before the EPA made its announcement. What might your reaction have been? What forms of restitution would you have sought from VWoA and Volkswagen?

Many would have felt cheated by VW. VW purchasers would have expected that they initiate a recall so that the car could be brought up to the appropriate standard. Most consumers would

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have expected that if the car could not be brought up to the proper standards the car could be returned for a refund.

6. Is it appropriate that CEO Winterkorn and top-level executives be held financially responsible for their involvement in this fraud?

The former CEO and other top-level executives were implicated and held to account for their actions and will pay the company a total of $351 million to settle lawsuits for their alleged roles in the emissions scandal. VW executives admitted that the emissions cheating had begun in Germany over a decade ago. They failed to uncover and prevent the fraudulent acts, so they share in the liability, and are financially responsible. Furthermore, former CEO Winterkorn is also facing criminal charges; including conspiring to defraud customers, commit wire fraud, and violations of the Clean Air Act. 7. Do research into what has taken place in the VW case since the end of this case. Are circumstances looking better or worse for the company?

Volkswagen has undergone an expensive transformation. The company has paid out more than 20 billion euros for buybacks, fines and compensation over the emissions tests scandal. In England and Wales, the last class action was settled out of court in 2022, avoiding a costly trial and any appeal.

After the diesel scandal, VW promised deep reforms. A new strategic plan and changes in top management helped the company stage an impressive turnaround. The ―Together 2025 + Strategy‖ focused on socially and environmentally responsible vehicles and practices. At the centre of the strategy is North America, where the group is aiming to more than double its market share to 10 percent by 2030. For now, all the electric vehicles the company plans to produce for the US and Europe have already been reserved by waiting customers.

Challenges remain, such as restrictions on diesel vehicles and supply chain disruptions. The EU has introduced complex test procedures for determining pollutant and carbon dioxide emissions as well as fuel consumption. In Germany, older vehicles powered with diesel have been banned and there are demands for auto firms to refit the most polluting diesel cars. Pandemics and geopolitical unrest has reduced availability of chips and cables, forcing intermittent stoppages.

Despite a strong performance, VW‘s challenges are the economic situation and increasing competition from Tesla.

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Case 8: Payday Loans: A Needed Product or a Financial Scam?

1. Who are the stakeholders in this case and what are their stakes?

The relevant stakeholders are consumer/borrowers, the payday loan industry, and the regulators, the states, and the CFPB. The stakes for consumers are a fair and equitable loan process, the stakes for the industry are their ability to market and sell a product, and the stakes for the regulators are ensuring that consumers are protected.

2. Have you ever taken out a payday loan or title loan? What was your experience?

I have never taken out a payday or title loan. Payday loans are not common in my state because they are highly regulated.

3. What is your evaluation of the corporate social responsibility of the payday lending industry, using the four-part definition of CSR? Is payday lending an exploitive industry that snares borrowers in a never-ending cycle of debt?

The four components of CSR are (1) economics, (2) legal, (3) ethical, and (4) philanthropic.

While the payday lending industry certainly derives economic benefits to the industry, it doesn‘t seem to do much for society at large. Although consumers may get much-needed infusions of cash, the terms are bad, the consumers have poor credit, and the likelihood of their being able to pay off the debt is low. Although there is no evidence that the practice is illegal, the industry does push for less regulation. Many would not consider the payday industry ethical, given their targeting of the poor, their usurious rates, and the almost certain knowledge that many consumers will be caught in spiraling debt. And finally, one would struggle to discern a philanthropic motive behind payday lending. Payday lending does seem to be an exploitive industry.

4. Could it be that the industry is socially responsible but some of its members are engaging in questionable practices? What questionable practices are most troublesome?

As noted earlier, one would struggle with considering this industry socially responsible.

However, it is also true that many of its members seem to be engaged in questionable practices.

The most concerning practices include the application of exorbitant finance charges and the number of fees that the firms add on, virtually ensuring that the consumer will stay in debt.

5. Given the strong demand for payday loans on the part of some citizens, should the industry be regulated so that borrowers are further protected? What are borrowers to do who do not meet new federal regulations if they are passed?

Rather than regulate the borrower, perhaps the states should more closely regulate the lenders.

Caps on fees and caps on the annual rates that lenders might charge should help to alleviate some of the burden. Additionally, perhaps states might offer debt-counseling services for those consumers who feel that their only option is payday loans.

6. Some states have regulated the payday lending industry. Should the federal government be getting involved with regulating this industry? What will be the effects of new CFPB regulations?

If the federal government gets involved, it seems likely that the payday loan industry will be drastically changed. However, the CFPB—charged with ensuring consumer protection and

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alleviated predatory lending—would at least standardize the rules helping to ensure that payday lenders are treating consumers fairly.

7. What is your assessment of the Google ban? Does Google have a conflict of interest in imposing this ban?

Although the Google ban of payday lending ads seemed at first read to be based on the belief that predatory lending was unethical, given their clear conflict of interest (their parent company‘s investment in LendUp) there was some doubt as to their motives. However, as Google also banned LendUp‘s advertisements, perhaps Google has made it a policy not to be used as a forum to target ads to poor consumers.

8. Should the CFPB back off and let the marketplace and the states handle payday lending issues?

There should be consistent standards across the country for managing these dangerous loans.

Why should consumers‘ rights in one state be more important than consumers‘ rights in another?

It is not clear that the market always does a great job in ―handling‖ inequality. Opportunistic companies will not have a willingness to follow the CSR best practices if they are not forced to and they are not doing anything illegal.

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Case 9: Big Tech’s Power Plays 1. Is Big Tech too big? Does it have too much power? What type of power does it have? Should it be controlled or regulated as a monopoly? Should any of the large companies be broken up?

Big Tech is comprised of five major firms that have come to dominate the business sector, especially information technology: Facebook, Amazon, Apple, Microsoft, and Google (Alphabet). The total value of the tech giants approximates $5 trillion. Allegations that have been made about Big Tech include their sheer size and market power, their privacy practices, and the bias built into their artificial intelligence (AI) algorithms, censorship and political bias. Big Tech is under antitrust scrutiny, and as seen in Europe, the United States may decide to invoke harsher government regulations. As the case points out, the future is uncertain in whether Big Tech will be allowed to stay big.

2. Is Big Tech socially responsible? Analyze one of the Big Tech companies using the four-part definition of CSR presented in Chapter 2: economic, legal, ethical, and philanthropic responsibilities. Check the news about them for the past year or so as your source.

The economic, social, and ethical issues that have been raised in the case may potentially lead companies to embark on new self-controls, such as higher ethical standards.

Any of the FAANG companies may be analysed using the the four-part definition of CSR presented in Chapter 2, mainly economic, legal, ethical, and philanthropic obligations. However, it may also be analyzed in the context of country level, for example, Apple‘s CSR in China.

3. Big Tech provides many benefits. Do its benefits outweigh the costs citizens are experiencing?

Big Tech gives rise to many ethical dilemmas. They are becoming intimately involved in citizen‘s lives and claim to be making a positive social contribution. However, the CEOs are overtly political, and are not able to maintain stakeholder‘s interests without bias.

4. Which of Big Tech’s issues is most problematic for society? Market power? Privacy practices? AI bias? Censorship? Political bias?

All of them are problematic, but the Algorithmic Warfare Cross-Functional Team‘s (Google, Microsoft, and Amazon) involvement in AI and Project Maven (a Pentagon defense contract for image recognition tech that could have been used for drone strikes) was perhaps the most problematic. Big Tech‘s collaboration face-recognition technology with the Pentagon, Police Departments, and Immigration and Customs Enforcement continues.

5. Have you personally experienced any of Big Tech’s powers used against you? Explain.

Use an abundance of caution when using the platforms, such as an awareness of algorithms and using different search engines that respect privacy, such as DuckDuckGo and SwissCows.

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Case 10: An Epidemic of Cheating in College 1. Do college students understand what constitutes ―cheating‖ in college? If so, why do so many engage in academic dishonesty? Is cheating seen as a norm and not really all that bad?

Definitions of academic misconduct are outlined in institutional policies. Students understand what cheating is and that it is unethical. Students give many reasons for engaging in academic dishonesty, such as: not seeing the value of their assigned work; high-stakes tests; pressures to attain perfection, claiming there is a cutthroat environment, peer pressure, unfair professors or tests, an obligation to help friends, time mismanagement, and even witnessing their parents doing it. Even if cheating is seen as a norm, ―it is clear that cheating is not a defensible practice. It is a question of simple fairness and honesty.‖ 2. Is academic dishonesty as widespread as news articles seem to be reporting?

Academic dishonesty issues have gained traction and are perceived to be reaching crises levels.

Virtual learning and technology has made cheating easier and more frequent. Research by Professor Donald McCabe found that more than 60 percent of the students he surveyed who had cheated considered digital plagiarism to be trivial. The ―cheating culture‖ is a worldwide phenomenon.

3. Is it worse for students at one of the military academies to cheat than those in a public or private college or university?

In 2021, the U.S. Military Academy at West Point concluded investigations into the largest cheating scandal in at least four decades. Cheating is not a defensible practice, regardless of whether the student is at one of the military academies or in a public or private college or university.

4. Why do students cheat? Why do students not cheat? What are the reasons and factors that come into play?

See question 1. Many reasons are given for students engaging in academic dishonesty, ―… reasons for cheating are endless.‖ As long as the ―outcome is more important than the process,‖ then cheating is the norm. Moral students do not cheat as ethics and values are intimately related.

Ethical decision making and moral judgment can be developed following the models presented in Chapter 5.

5. Do students ―mature‖ when they graduate and start behaving more honestly in their work and lives?

According to research, students who engage in unethical acts in college are more likely to engage in dishonest acts in the workplace.

6. What changes can be made in college and college courses that would diminish the temptation to cheating in classes?

This will vary by institution, and an understanding and enforcement of institutional policies is a start. Another change is by involving employers in curbing academic dishonesty by working with students, faculty, and administrators to encourage ethical student behavior.

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7. How is it possible for those who engage in questionable practices in college to critique others in business or other organizations who do the same?

Students can recognize questionable practices in other organizations, and tolerate it in themselves at the same time. It is dependent on their moral philosophy.

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Case 11: Climate Change and Corporate Activism: Is It All Just Hot Air? 1. What are the benefits related to corporate political activism and climate change? What are the costs?

Corporations are expected to engage in social issues through public statements, sponsorships, partnerships, and policies. Benefits are those that can bring about positive social change while creating greater value for stakeholders. Costs include politicizing the marketplace, marginalizing social issues, and uprooting core democratic values.

2. Beyond climate change issues, what other social issues do you see corporations targeting for activism?

Other social issues are engagement with indigenous communities, immigration reform, gun regulation, racial justice, gender equality, pay equality, and religious freedom.

3. How does corporate activism compare to activism by individuals and/or nonprofit, nongovernmental agencies?

Businesses have access to digital and financial platforms that allow them to exercise significant power and influence to weigh in on social issues.

4. What can businesses do to avoid being criticized for being hypocritical or not taking action regarding climate change?

Businesses can focus on implementing important structural transformations. Researcher Kenneth Pucker states that companies confuse output with impact. According to Pucker, ―The real danger is when politicians and CEOs are making it look like real action is happening when in fact almost nothing is being done.‖ 5. Are there some businesses and industries that are not seen as sincere regarding climate change because of what they do?

Critics say that corporate activism on climate change is filled with big promises that are not backed by enough action. For example, BlackRock has been criticized for omitting crucial details behind its pledge. Other businesses have also struggled to cut emissions, including Costco, Netflix, Cargill, and Levi Strauss. And ―power-hungry data centers‖ that are used by tech companies like Google and Microsoft continue to challenge their abilities to achieve their objectives. Greenpeace recently called out Amazon and the other big cloud companies on their use of renewable energy credits (RECs) related to solar and wind projects to offset their use of fossil fuels—making them look better on paper than they are in practice.

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Case 12: Family Business 1. What are the ethical issues in this case?

One obvious ethical issue in this case is whether Eddie should be taking advantage of his position as general manager by giving the preferred work tickets to his brother, Greg. Is this fair treatment to the other technicians? Another ethical issue is Eddie‘s statement that Jane should keep quiet about the practice or else be fired. Is this an ethical practice for a leader? Is this treating Jane fairly?

2. Is a family business different from other types of businesses with respect to employee treatment?

In terms of ethical treatment, you could easily argue that all employees should be treated equally whether it is a family business or not. In practice, many small business owners give preferential treatment to friends and family. Some could argue this is an ethical practice in a family business.

Owning a company should not give one the right to treat employees unfairly. If this were so, then anyone who owned their own company could unfairly discriminate between employees on grounds that were unrelated to their respective jobs. Not only is this unfair, and therefore unethical, but it is also potentially illegal. The fact that it is a family-owned business makes no difference in this matter. Family-owned businesses do not acquire exemption from ethical and legal norms simply by nature of being family owned.

3. What was Jane’s ethical dilemma?

Jane‘s ethical dilemma was whether to ignore the questionable practice (thus ensuring her relationship with her boss, Eddie) or to report the practice to Brad, the owner (thus risking retaliatory action by Eddie). Other issues include: Does Jane have an ethical obligation to Brad to make him aware of the practice? Does Jane have an ethical obligation to the other service technicians to expose the practice? Jane has been put in a difficult position. On one hand, she knows that what she witnessed is wrong and that the other employees have a right to know that they are being treated unfairly (they have been undoubtedly told that the distribution of work orders is a random or fair one). They have been lied to and have had income taken away from them in the form of the big commissions that have been secretly given to Greg. On the other hand, Jane is new and is still under probation. She could be fired without cause if she speaks out about the incident. If Jane stays silent to protect her job, then she will be guilty of perpetuation of an unethical business practice.

4. What should Jane have done? Why? How would you have handled this situation if you were Jane? What ethical principles or concepts apply?

One reasonable course of action would have been to meet with Eddie and to tell him he ought to reconsider this practice or that she would feel obligated to inform Brad of the practice. She could have asked Brad if he was aware of the practice. He might have been aware of the practice. In the final analysis, Jane needed to ask herself how important this job is for her. Is it worth losing the job to correct this practice? If Jane was truly fearful for her job, she could wait until she passed her probationary period to tell the employees.

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Case 13: What Makes a Good CEO? The Waiter Rule, Humility, and Amazon 1. Is humility an essential ingredient in ethical leadership? Why is it especially important in managers? In leadership, especially among CEOs, is character important? Why? Obviously, character is an essential ingredient in ethical leadership. Without character, managers, including CEOs, lack the moral compass necessary to make ethical decisions in tough situations.

As we saw in the early part of the millennium, absence of character led to immoral decisions by top management at Enron, WorldCom, Tyco, Adelphia, and HealthSouth. As the authors note in Chapter 8, behavior of superiors is the number-one factor that influences an organization‘s climate.

As such, the character of top management shapes the entire culture of an organization. Further, Chapter 8 explains that ethical leadership is based on two pillars: the manager as a moral person and as a moral manager. For a person to be a moral person, they must possess certain traits and behaviors that typically are associated with someone who possesses ―character.‖ 2. Do you agree with the Waiter Rule? Does it provide useful insights into who might be an ethical or unethical leader?

Most would agree with the Waiter Rule. As noted in question 1 above, ethical leadership is based on two pillars: the manager as a moral person and as a moral manager. In addition to other factors, the Waiter Rule focuses on certain behaviors to determine whether an individual is a moral person. Specifically, the actions of an individual are more important than what they say.

To the extent that an individual says they have character but mistreats those in subordinate roles, that could be an indication that the individual may not be a moral person.

Further, the second level of Kohlberg‘s levels of moral development indicates that individuals become aware of others and certain aspects of law and order morality as they advance in their moral development. Kindness to waiters and those in subordinate positions is something that is expected by society. Failure to recognize this indicates that the individual has not progressed in their moral development.

Boards should consider character when hiring someone for top management. Boards are responsible for the selection of top management; consequently, failure to hire CEOs or top management with character is arguably a failure of the board in the oversight of its responsibilities. Some estimates project that the unethical/illegal behavior of U.S. employees costs hundreds of billions of dollars on an annual basis. To the extent that the board selects top management without character, they are setting the company up to fail.

3. Should corporate boards consider character when hiring someone for the top position? What are some of the challenges to hiring for character?

As the case notes, the Waiter Rule ―reveals insights into the executive‘s character that should be taken into consideration in hiring decisions.‖ Thus, the Waiter Rule is one guideline that should be taken into consideration. In fact, while the Waiter Rule may lead the board to conclusions as to who not to hire (those who are rude to those in subordinate positions), passing the Waiter Rule would not be sufficient to justify appointment to top management. While top management must possess the traits and behaviors of a moral person, they must also possess the savvy business skills that will make their potential firm economically successful. It is a simplistic way of judging one‘s ethics; however, often potential employees have only one opportunity to make a good impression

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and employers have a limited opportunity to see employees in action prior to making a hiring decision. The Waiter Rule seems like a good benchmark for gauging those whom Bill Swanson suggests have situational ethics, which indicates those with situational values.

4. Some might say that hiring for character at the CEO level means foregoing hiring an outsider, and instead, promoting someone from within the organization who is familiar to the rest of the employees (e.g., an insider). Do you agree? Reflecting back on Chapter 9 corporate governance concepts, what are the pros and cons of hiring a CEO from within, as done by Amazon?

There are many examples of companies hiring excellent leaders from inside the organization, such as Amazon, Apple, Disney, Procter and Gamble, and General Electric. Pros include known character; knowledge and continuity of the corporate culture; continuing with the board‘s and shareholders‘ mandates; a shorter learning period; and the skill sets and expertise to manage a complex organization.

Problems that might arise include missing out on importing a fresh, new perspective, especially for a troubled company that needs a change in direction. Other issues might include ―entrenchment issues,‖ where the board allows the CEO to continue to do things that are not in the best interest of the shareholders.

5. Is using the Waiter Rule too simplistic a guideline for hiring people in important positions such as CEO? Is it too simplistic a guideline for judging one’s ethics?

The Waiter Rule ―reveals insights into the executive‘s character that should be taken into consideration in hiring decisions‖ and represents one guideline. It is a simplistic way of judging one‘s ethics (see question 3). A suggestion given by the leadership expert is rating potential candidates on a ten-point scale for four factors: Integrity (including humility), Judgment, Drive, and Emotional Intelligence.

6. Have you found yourself in situations where you have been in a ―bubble‖—listening to the same people and not keeping yourself open to different perspectives?

A ―bubble‖ is an easy trap to fall into, and as Rich Lesser points out, one needs to have a ―learning mindset‖ that requires us to listen not just to people we are comfortable with but also to those we are not comfortable with. That mindset can be acquired through an awareness of the ―bubble‖ trap.

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Case 14: Nike, Sweatshops, and Other Issues 1. What are the ethical and social issues in this case?

Ethical issues revolve around the issue of economic fairness: what constitutes fair compensation for labor. Are there universal standards or are they determined by local economies?

2. Should Nike and other companies be held responsible for what happens in factories that they do not own? Does Nike have a responsibility to ensure that factory workers receive a ―living wage‖?

Because Nike contracts with the manufacturers, it is essentially in the position of the employer of that company. Because of the work Nike creates for them, they create a reciprocal relationship, and Nike has power and associated responsibilities for what the subcontractor does. The requirement of a ―working wage‖ would be an ethical responsibility of Nike, though not a legal requirement. The wage guidelines of the FLA seem most appropriate to me, as the payment of a ―living wage‖ as required by the WRC can be difficult to compute.

3. Is it socially responsible and fair for Nike to pay endorsers millions while its factory employees receive a few dollars a day?

Linking these two categories is tempting but not helpful. Doing this confuses a one-and-many issue. That is, if there were 5,000 Michael Jordans, the endorsement of any one of them would not be worth millions of dollars. However, there is only one and we seem to be impressed with his endorsement to the point that we will buy products with his name on them. The ethical question here is whether Mr. Jordan actually believes those products he endorses are better than others. If so, and if Nike wants to pay him millions for telling the truth, that is more telling of the foibles of the public than an ethical issue.

As to ―a few dollars a day,‖ we must be careful not to fall into the arrogance of projecting an American economic scale onto another nation. The case tells us that Nike workers average twice the local minimum wage. If we consider that the minimum wage in America is approximately $7.00 per hour, or $14,500 per year, then Nike is paying the equivalent of $14.00 per hour, or $29,000 per year, in the country where the work is being done. That is hardly a cause for moral outrage. But the fact that we feel those wages are unfair has much to do with the provincialism of many Americans.

4. Is Nike's responsibility to monitor its subcontracted factories a legal, economic, social, or philanthropic responsibility?

If we discount egoism as a valid moral philosophy (ethical egoism is ―doing the right thing‖ in order to get something good for myself), then Nike‘s responsibility here is philanthropic.

5. What was behind the turnaround at Nike? Is it "good business" for Nike to acknowledge its past errors and become more socially responsible?

Nike needs to walk the line between pandering to domestic critics and maintaining the economic leverage necessary to stay in business. Perhaps if Americans were better educated about economic conditions in less-developed countries (LDCs) and were able to appreciate the benefit that Nike confers on these countries by hiring their native companies to do manufacturing work, much of the criticism would die away.

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6. What is your assessment of Nike using controversial athletes such as Colin Kaepernick?

The student organizations believe that there should be universal standards for wages and worker safety. These groups also would like to get manufacturing jobs back to the United States, because U.S. workers have been hurt by the exodus of low-paying assembly jobs to LDCs. The campus movement helps to achieve these goals, because by attacking companies allegedly using sweatshops, they seek to diminish their market. The student groups often receive assistance from organized labor and other human rights groups. Campus activism may depend on the strength of the student body‘s relationship with these outside groups.

7. In light of Nike’s success, what do you make of its alleged ―Boys Club‖ culture and discriminatory practices?

Nike has pledged to change its toxic corporate culture. After the allegations came to light, CEO Parker apologized to staff saying he wanted ―everyone to know that I‘m personally committed to making Nike a place where everyone can thrive in an environment of respect, empathy, and equal opportunity for all.‖ However, the damage was done, and a lawsuit was filed against the company's board of directors for allegedly ―failing their fiduciary duties and sullying the company's reputation by allowing a culture of sexism and discrimination.‖ 8. Nike seems to be a much more respected company today than it was back when the antisweatshop movement began. What has changed in Nike and the world to explain this?

Nike has actively taken measures to improve its reputation. It hired a CSR manager and conducted social audits of its overseas operations. It has received awards for its ethical practices and sustainable operations. While no company is perfect, the world is more forgiving of a company that attempts to improve the ethicality of its operations.

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Case 15: The Rana Plaza Factory Collapse 1. Who are the stakeholders in this case and what are their stakes? What are the ethical issues?

The relevant stakeholders in this case are the owners, the government, and ultimately the people/workers of Bangladesh. The corporate owners‘ stakes would be monetary investment, as well as their public corporate brand, as well as investment into their employee base. The government is responsible for establishing laws and policies and enforcement of those in an effort to protect their people. The workers in Bangladesh have the highest stakes, their health and safety as well as their livelihood and the welfare of their families and dependents.

2. Based on your study of the building collapse in Bangladesh, which party or parties do you think are primarily responsible and why?

The Bangladesh government, the Bangladeshi manufacturers, and the U.S. and other clothing firms who utilized those factories are all liable. The Bangladesh government is liable because it did not enforce its own building codes. One can understand that its concern was that, as a poor country, if it did enforce its building codes, manufacturers might leave, and make them even poorer. Bangladesh manufacturers are also liable. The action of the owner who forced workers back to the job even after cracks formed in the building was reprehensible. Clearly, the owner placed maintaining production above the safety of his workers. One can understand why a manufacturer in a poor country would not want to do anything to discourage U.S. and other firms from giving them clothing manufacturing jobs, but when the cracks were visible, his insistence that workers come back to work was reckless. U.S. and other clothing firms are also liable. It has been too easy to turn a blind eye, to insist on meeting production quotas, and to feel secure in the belief that factory safety was not their problem. As we can see, it clearly was and is their problem, too.

3. What role does the government of Bangladesh assume in this building collapse and other safety violations?

The Bangladeshi government did not enforce its building codes, including obvious violations, probably for fear of chasing away business. But they now realize that unless these problems are addressed, clothing firms will leave and not return. In addition, the building codes themselves, in retrospect, have been found inadequate, and the regulatory scheme needs to be improved.

4. Do Western companies have an obligation to safeguard the safety of workers in foreign lands where the products they sell are made?

There is no question that if these garments were being produced in the United States, the firms contracting for the work would have an obligation to safeguard the safety of workers who make their product. The need for safe working conditions does not disappear when the work is done elsewhere. Even if local laws in other countries do not require Western firms to take action, events, in hindsight, show that it is in their best interest to do so. In addition, corporate social responsibility demands that they exert their influence appropriately, especially in alignment with their economic interests.

5. What are the pros and cons of companies working together in an accord to address safety violations versus taking independent action to address the issues in the plants they use? Do both approaches represent sound global corporate citizenship?

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The benefits of companies working together in an accord is the systemization of policies and procedures as well as the development of best practices regarding inspections and remediation.

Companies who join will need to agree and comply to continue participation. I can see there being both positive and negatives regarding the participation of a company in an accord. On the one hand, best practices should emerge, and on the other hand the accords together could be powerful in terms of neglecting employee concerns that they do not agree with. Additionally, companies have indicated that a major drawback of signing an accord is that the agreements are legally binding and it is unclear exactly what they are agreeing to. The benefit to working independently, from a company‘s point of view, is the lack of a legally binding requirement and the clarity that comes with a company making its own decisions. The drawback to working independently is a lack of transparent best practices and shared information between corporations. Additionally, companies who have participated in the accords have a noticeable increase in employee safety conditions.

6. Which plan seemed best for addressing the factory safety problem in Bangladesh: the European-led accord or the U.S.-led alliance? What are the pros and cons of each?

Key differences between the European-led and the U.S.-led proposals are as follows: Government‘s participation The European plan did not require participation of the Bangladesh government; the U.S. plan required the government‘s participation. The $50 million U.S.-led plan was contingent on the Bangladesh government meeting certain criteria ensuring accountability and compliance for safety improvements. This was included because many safety codes were often ignored by governmental officials responsible for enforcing them.

Legal liability The European plan required signatories to accept broad legal liability; the U.S. plan called for limited legal liability. In the U.S. proposal, firms could be held legally liable if they agreed to commit resources and then reneged, or if they continued to use the unsafe factories Resources required for improvements Under the European plan, companies were required to pay for all upgrades to factories at an estimated cost of $600,000 per factory; in the U.S. plan, companies set up a $50 million fund to help cover the upgrade costs.

It should be noted that neither plan is satisfactory, but in having to choose, it seems that the U.S.led plan appears more effective. It shares responsibility by involving various stakeholders, including government. Firms could be held legally liable, and according to Christie Miedema, companies are responsible for their complete supply chain need to carry out due diligence.

Finally, a $50 million fund is more practical than a fixed amount per factory.

7. What is your appraisal of companies that decide Bangladesh is too risky a country for them to do business in?

Whether to do business in a country like Bangladesh is entirely at the discretion of the company making the decision. It is better that a firm decline to do business there than to do business there without regard for its obligations.

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8. What is the responsibility of consumers to the employees in other countries where their products are made? Is it true that ―we quickly forget‖? What can consumers do to address this mindset?

Jayne O‘Donnell is right that consumers are troubled by such tragedies but soon forget them.

Ideally, consumers would not buy from companies who ignored safety, but it‘s often difficult to establish exactly where the blame lies or how much to apportion to each actor. Perhaps one clothing firm will decide on a socially responsible policy and advertise that in its labels, so that consumers could make the conscious choice of buying clothing made in a socially responsible way.

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Case 16: Big Food, Big Problem: Nestlé in Brazil 1. What are the key ethical issues revealed in this case?

The ethical issues revolve around Nestlé‘s role in changing the Brazilian diet and contributing to Brazil‘s problem of having a population that is both overweight and undernourished.

In 2020, Brazil was Nestlé‘s fifth leading market after the United States, China, France, and the United Kingdom. Critics claim that Nestlé‘s promotion of its processed food is not driven by nutritional science and wellness but, instead, by a focus on profit and growth at the expense of some of the world‘s most vulnerable populations. According to the company, its products have helped eradicate hunger and are providing important nutrients to a needy population. Sean Westcott, head of Nestlé food research and development, said that rising obesity was an unintended side effect of making the company‘s processed foods more commonplace.

2. Conduct a stakeholder analysis to identify Nestlé’s key stakeholders and the risks that Nestlé’s actions (or inaction) create for them. In the wake of recent news stories about the obesity epidemic, how should the company prioritize its stakeholders’ needs?

On their website, Nestlé identifies the following groups as stakeholders: 

Academia

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Communities

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Consumers and the general public

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Civil society organizations (CSO)

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Customers

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Employees and their representatives

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Governments

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Industry and trade associations

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Intergovernmental organizations

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Non-governmental organizations (NGOs)

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Reporting agencies

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Shareholders and the financial community

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Suppliers (including farmers and smallholders)

Relevant stakeholders in this case are the Brazilian government and Brazilian consumers.

Government. The Brazilian government, which is under pressure to address the public health issue, is already prioritized by Nestlé. According to the organization Transparencia Brasil, the Big Food industry donates to members of Brazil‘s National Congress and more than half of Brazil‘s federal legislators received donations from the food industry. Nestlé‘s executives sit on the board of the Brazilian Association of Food Industries, a lobbyist group. It is believed that 32

these lobbyists and some Big Food corporate lawyers waged an effective multipronged campaign to derail legislative proposals to fight the obesity crisis. The current president of Brazil, Jair Bolsonaro, is a business-friendly politician, whose allies in Congress are currently seeking to chip away at the handful of regulations and laws intended to encourage healthy eating.

Consumers. From the Nestlé website, ―We believe collective action is key to improving consumer awareness of nutrition and to make healthier products more accessible to all.‖ Nestlé has initiated R&D projects, product reformulations, and education programs. For instance: 

The company opened a new quality assurance lab and launched its first organic food line in Brazil.



It has removed 350 tons of sodium, 5,000 tons of saturated fats, and 6,900 tons of sugar from the products it sells in Brazil since 2014.



It is trying to educate the Brazilian consumer about healthy eating. For example, Nestlé has created a website called ―Nutrir,‖ where school-age kids can play games about nutrition and health. Nestlé claims that they have reached 3 million children since 1999, but it should be noted that many of the poorest children in developing countries do not have access to computers.

3. What strategic actions should Nestlé’s board of directors take moving forward, specifically in relation to its product offerings in Brazil?

Nestlé is familiar with being the target of public uproar over its strategic decisions, having experienced negative publicity and an international boycott when promoting the use of its baby formula. It has a reputational risk that is dependent on brand value. As Nestlé‘s actions are judged by consumers, society, government and NGOs, the risks of not taking action are significant. Addressing emerging health crises, such as obesity, will benefit the company in the long term. The board of directors should look on increasing consumer demand for nutritious food as a growth opportunity.

According to the research, the Brazilian population consumes serving sizes that are up to 9.2 times larger than the suggested serving size on the product label. In Western economies, the new marketing message is to treat these highly processed foods as an indulgence or as treats to be enjoyed on special occasions and in small quantities. In contrast, in Brazil and other developing countries, cookies, chocolates, pudding, and other unhealthy products are often seen as part of a daily diet. Strategic actions that would have meaningful impact would be to move consumers toward healthier consumption through product reformulations, education programs, and redefining a normal portion.

4. What are the ethical obligations of companies who sell perfectly legal, but unhealthy, products? Do these companies’ ethical obligations change when they are dealing with vulnerable populations or when entering markets in less-developed countries? Explain.

Companies who sell unhealthy products should take responsibility to support the health of families especially dealing with vulnerable populations or when entering markets in lessdeveloped countries. Obesity has other social costs such as well-being. If companies do a poor job, then accountability agents such as governments and health activists will force the change.

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The companies have an obligation to provide food that is actually healthy, remove junk food from its portfolio and change their marketing practices.

5. Even if Nestlé continues to sell its full array of products in Brazil, are there specific types of marketing actions from which it should voluntarily refrain? Are there specific actions the company should pursue? Explain.

Nestlé claims it is committed to nutrition and science but continues to invest in unhealthy food products (such confectionaries and chocolate) and is aggressively expanding its product penetration in emerging markets. It is looked at as a trusted leader by the customers they serve and the pressure on food marketers grows. The company should align its marketing strategy with its motto of ―Good Food, Good Life.‖

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Case 17: The Dark Side of Going Green: Tesla’s Ethical Dilemma 1. What is the ethical dilemma faced by Tesla’s customer base?

Cobalt is used in the rechargeable lithium-ion batteries powering electric vehicles. Tesla produces more lithium-ion batteries than all other carmakers combined. Tesla‘s ethical dilemma is that it may be profiting from the clean energy revolution while turning a blind eye to the problems of working conditions, child labor, and environmental contamination that are prevalent in the cobalt mining industry.

2. When conducting a stakeholder analysis, what obligations does Tesla have to each of its key stakeholders? What influence, if any, do these stakeholders have over Tesla, and how likely are they to exert this influence?

Tesla‘s stakeholders are: shareholders, employees, governments, customers, communities, and social activist groups. See Chapter 3 for obligations Tesla has to each of its key stakeholders.

From the case, the following are identified: Shareholders: Shareholders expect good to excellent returns on their investment. Tesla‘s investors and shareholders have benefited from the company‘s growth strategy. In 2020, Tesla reported its first full-year profit, a feat 18 years in the making. Tesla earned $721 million in 2020, in contrast to a loss of $862 million in 2019, nearly $1 billion in 2018, and close to $2 billion in 2017. Tesla announced that they sold 499,550 cars in 2020, with China being the largest market for EVs. Tesla believes it could sell more than 800,000 cars in 2021 as it expands output at its Chinese factory and opens another plant in Berlin and in Austin, Texas.

Customers: Consumers want to curb carbon emissions and want to see companies use clean and renewable energy. Tesla‘s stated mission is to ―accelerate the world‘s transition to sustainable energy.‖ Its strategic intent is to be the world‘s biggest and most highly regarded producer of electric-powered motor vehicles.

Governments and Activist Groups: Tesla has Gigafactories in the United States, China, and Germany and has to comply with regulations in those countries. In 2010, the United States Conflict-Minerals Law was passed; however, cobalt was excluded from this law. In 2012, the OECD issued a guideline that ―manufacturers should be able to say who their smelters or refiners are and should make public their own assessment of whether the smelter‘s due diligence practices are adequate in identifying and addressing human rights risks and abuses.‖ In 2016, the Responsible Cobalt Initiative was formed to ―help the industry conduct due diligence in line with the OECD standards, and tackle the issue of child labor‖ in the DRC. No car manufacturer has joined this initiative. The DRC government announced that it would take action to eliminate child labor in its mines by 2025 and appealed for international help. Activists are concerned with social issues such as extreme poverty, human right violations, and child labor.

3. Is there any way that Tesla can ensure the cobalt it needs to manufacture its electric cars is sourced ethically and in a socially responsible manner? If so, how can this be accomplished?

In response to questions about the source of its cobalt, Tesla provided two arguments to support the ethicality of its sourcing practices: (a) Tesla says it uses less cobalt in its EV batteries than its competitors, and (b) Tesla claims that it will only source its cobalt from North America. Tesla has also stated that it performs audits but has not shared the results of these audits.

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To ensure the cobalt it needs to manufacture its electric cars is sourced ethically and in a socially responsible manner, Tesla will need to be much more transparent about identifying where its cobalt is sourced, and reduce the cobalt content of its next generation battery, with the ultimate goal of introducing a cobalt-free battery.

4. Virtually everyone agrees that child labor and dangerous working conditions for adults represent work practices that should be avoided. However, shutting down the artisanal mines would devastate already impoverished communities and families. How should these conflicting concerns be addressed and balanced?

Tesla should ensure that responsible sourcing standards are created and met. A solution to address and balance conflicting concerns might be to ―think locally‖ and co-exist with the cobalt suppliers.

In its 2021 Impact Report, Tesla announced that it visited the Democratic Republic of Congo (DRC) and Argentina in order to assess both environmental and societal risks. Tesla said, ―We will continue supporting sourcing from the DRC provided our responsible sourcing standards are met.

While Tesla does not source cobalt from Artisanal and Small-Scale Mining (ASM), we recognize the importance of ASM for local livelihoods. This is why Tesla provides funding to, and sits on, the Steering Committee of the Fair Cobalt Alliance (FCA), a multi-stakeholder initiative to support the improvement of conditions in communities impacted by artisanal mining.‖

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Case 18: Coke and Pepsi in India: Water, Issues and Crisis Management 1. Identify the ongoing issues in this case with respect to global business ethics, crisis management, and stakeholder management. Rank these in terms of their priorities for Coca-Cola and for PepsiCo. Initially, both companies faced allegations that their products contained unsafe amounts of pesticide and that the companies were polluting India‘s drinking water. This was an issue to be managed by both companies that developed into a crisis when many Indian states started banning the use of the products. Furthermore, state-mandated warning labels contributed to the crisis.

Had the companies anticipated the response by special-interest groups and adequately addressed stakeholder management issues, including an emphasis on managing the consumer and the government as stakeholders, they might have been able to prevent the issue from developing into a crisis. The global issues center on whether the companies had less stringent standards for their products in India than other European countries. The crisis that developed had to be the companies‘ priority, as failure to manage this crisis could have resulted in the total ban of the companies‘ products. Adequately managing the consumer and government stakeholders allowed the companies to address the issues raised by the special-interest groups, including the allegations that the companies weren‘t meeting certain global safety standards.

2. Assess the corporate social responsibility (CSR) of Coke and Pepsi in India.

Both companies have recognized their economic, legal, and ethical responsibilities in India. By accessing the Indian market, both Coke and Pepsi have tapped new consumers to enhance corporate profitability. To our knowledge, both companies have created a product within the constraints of Indian law. The criticisms faced by the companies fall within the ethical realm.

Both companies faced allegations that their products contained unsuitable amounts of pesticide and that the companies were polluting water sources in the country. However, both companies have attempted to show that these allegations are false and have created philanthropic endeavors to pursue clean water projects.

3. Are these companies ignoring their responsibilities in India, or is something else at work?

The companies arguably have been attacked due to their foreign roots. One might note that all the pesticide allegations were the result of testing by special-interest groups, not governmentsanctioned testing. As noted in the case, some Indian-produced milk products and teas contain more pesticides than do Coke and Pepsi products. Further, we have seen both companies take steps to address the allegations and to improve the Indian community in various ways.

4. Did these companies mistakenly view their issues as just public relations rather than legitimate crises?

Coke‘s and Pepsi‘s initial responses indicate that they viewed the crises as a public relations issue. Coke started an aggressive marketing campaign, while Pepsi went to the Indian media to try to build relationships. Perhaps that view has changed as Coca-Cola announced in March 2021 its 2030 water security strategy, while Pepsi announced that water would be one of its primary focus areas in its 2020 Sustainability Report.

5. Why does it seem that Coke has become a larger and more frequent target than Pepsi in India? Did having an Indian-born CEO help Pepsi’s case?

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Having an Indian-born CEO helped remove Pepsi from the focal point of criticism. Consumers are more likely to relate to ―one of their own,‖ and Indra Nooyi‘s visit to India solidified the validity of the product in her fellow compatriots‘ eyes.

6. By their sales, it appears both companies are popular with the people. If so, what is driving the activist groups? Are they just going after ―deep pockets‖?

The commentary in BusinessWeek argues that the companies may have been singled out because they are foreign-owned. It is also speculated this is a form of backlash against huge MNCs that come into countries and consume natural resources.

7. How do companies defend themselves against the nonstop allegations of activist groups that have made them a target? Is any form of stakeholder management workable?

The steps taken by both companies seem to have met with some success. The response in the media and the hiring of popular, visible Indian-born spokespeople to support the products seem to alleviate some consumer concerns. Using grassroots efforts to determine consumer concerns and developing a targeted marketing campaign based on the information obtained in those efforts proved to be instrumental in the turnaround for Coke and Pepsi. Stakeholder management, specifically management of consumers and government, is key to addressing these issues. In fact, successful attempts to resolve the allegations faced by Coke and Pepsi involved both companies identifying ways to manage the expectations of both these stakeholders.

8. IRC seems to have made it its life’s work to defeat Coca-Cola. Is IRC an interest group that has just gone too far? How should Coke deal with IRC? While IRC‘s tactics appear to be severe, they have gotten Coca-Cola‘s attention. In fact, CocaCola is making water stewardship a strategic priority, potentially gathering needed resources and attention to address the clean water issues in India.

9.What lessons do Coke’s and Pepsi’s experiences in India present for multinationals in their global business and society relationships? Enumerate three to five lessons and give examples from the case to document them.

Multi-national corporations (MNCs) must be prepared for the resistance they will meet in the global marketplace from special-interest groups. Proper research and issues/crisis management should alert companies of the groups that are the most likely to create problems for an MNC. Companies should be prepared to respond to these groups prior to entering a new country. CocaCola would have been better served to engage IRC prior to beginning its operations in India.

Companies should form alliances, much like the Indian Beverage Association (IBA). Companies should be transparent in their plans for working together with communities; this is illustrated by Coca-Cola‘s ―5 Pillar Growth Strategy‖ as well as its announcement that water stewardship is a strategic priority.

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Case 19: An Ethical Dilemma for Chiquita in Colombia 1. Go to the ethical dilemma at the beginning of the case. Which position did you take and why?

Did your position change after you read the case?

Most would not pay extortion money to a known terrorist group. When you negotiate with terrorists, you not only fund future activities by that group, but you also encourage ongoing kidnappings and extortionist activities. By the end of the case, however, readers might be sympathetic to the company and the dilemma the company faced with economic values in conflict with issues of the safety and health of their employees.

2. Was Chiquita justified in making the extortion payments to protect its employees? Was the company really between a rock and a hard place? What should it have done differently?

Arguably, Chiquita felt that it should do all that it could to protect the safety and welfare of its employees, including making extortion payments to terrorist groups to prevent attacks on its workers. It also may have felt like it placed some of these employees in harm‘s way. However, extortion payments were against U.S. law. Thus, the company may have felt like it was between a rock and a hard place. I think the company should have notified the U.S. government of any illegal payments and the motivations behind such payments and divested its property in Colombia. This is the course of action that the company eventually had to pursue.

3. Using your knowledge of business ethics and global practices, what concepts, principles, or ideas from your study have a bearing on this case? Explain how some of them might have guided Chiquita toward better decisions.

As noted in question 1, you cannot negotiate with terrorist groups. This only encourages additional terrorist activity, which is undesirable from an economic, legal, and ethical perspective. Chiquita should have considered that while it may have been protecting a certain group of employees, it was enabling terrorist groups to harm others and setting the company up for ongoing attack.

4. What is your assessment of then-CEO Aguirre’s statements? Did he come across as sincere or just making excuses?

It comes down to a question of motivation—was the company breaking U.S. law to fund terrorist organizations, or was the company breaking U.S. law to protect the safety and welfare of its employees? Many readers will be persuaded by the company‘s statements that it was trying to determine whether it should break U.S. law to potentially save the lives of its employees. The company felt that it should protect its employees even if its actions were illegal, and then it voluntarily reported what it had done.

5. What is your analysis of the Chiquita Board of Director’s handling of this case? Do you think selling the farms at a loss in Colombia was the right thing to do? Why? Many will feel the board did the right thing when it sold the farms for a loss. While a board members‘ fiduciary duty requires them to maximize shareholder wealth, keeping the farms in Colombia would subject the company to ongoing extortion attempts, legal battles, and scrutiny.

By selling the farms, the company can focus its resources on areas where they are less likely to face these problems.

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6. If you were the judge in the consolidated case, what would you decide?

It is a bit odd that the judge felt that the court did not have jurisdiction over the case, given that Chiquita turned itself in to the United States and was found to have violated U.S. law by making the improper payments.

7. How does this case exemplify what global businesses face in different parts of the world? How does this case inform the current trend of businesses hiring private security?

Colombia is not unique in its corruption and security challenges for global businesses. In fact, the global market for private security services continues to grow, with many security firms advertising security for ―crisis zones‖ around the world, with employees providing ―highly trained armed personnel and logistical support.‖ 8. In the ―tale of two companies,‖ which do you think is the real Chiquita and why?

Many will say that the real Chiquita is the company that is trying to make a difference through socially responsible initiatives and community partnerships. The company did have to make a difficult choice, and many may argue that they made the wrong choice. The motivation of the company seemed to be to protect its workers; however, the methods that they took to accomplish this pushed ethical boundaries.

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Case 20: Dark Money and Corporate Political Spending on Campaigns 1. What is your reaction to the issue of political spending? What would you do if you were the CEO of a pharmaceutical company? Would you still belong to PhRMA? Would your membership in PhRMA have any conditions attached?

Most CEOs would be angry that this action was taken without their knowledge or permission.

CEOs of pharma companies might terminate their membership in PhRMA unless they made a full and complete disclosure, and refunded monies from their firms that were paid to them but used for their private political purposes.

2. What is your reaction to the Target situation? How would you handle it if you were the CEO? Target‘s reputation as an LGBT-friendly organization was damaged by the fact that its membership payments to PhRMA were used in a way directly contrary to its company policies and directly contrary to its interests—all without its permission or knowledge. Target‘s membership dues were co-opted for PhRMA‘s personal use. The Target CEO might demand complete disclosure, and an appropriate refund, and if those were not forthcoming, drop membership in PhRMA. 3. It seems like corporate political campaign spending is becoming more transparent. Do you agree?

Yes, corporate political campaign spending is becoming more transparent. Shareholders and other stakeholders are asking firms to be transparent in their political spending. They want to judge those expenditures for themselves to avoid agency problems and other conflicts of interest.

Also, The Center for Political Accountability, and the Zicklin Center for Business Ethics Research at The Wharton School found that recent elections have seen much better and stronger policies of disclosure and accountability by businesses regarding their election-related spending.

4. Should dark money spending be more regulated? If so, how?

Ira M. Millstein proposes that boards of directors need to step up and institute more measures for accountability regarding corporate political spending. He suggests the following: (1) Companies should require trade associations of which they are members to report to them on their political spending. (2) Companies should require trade associations of which they are members to disclose the donors who provide the money for their political spending. (3) Companies should then disclose the information they receive from their trade associations when they disclose their other spending to shareholders and other stakeholders.

5. Do you agree with Ira Millstein? Should companies require trade associations to disclose this information before they join? Should companies then disclose the information they receive? If a trade association refuses to provide that information, should the company refuse to join?

Most would agree with Ira Millstein, but perhaps take the requirement further-- by requiring the permission of its members before engaging in political spending. It is likely member companies will disagree. Each one should have the right to opt out of such contributions if it disagrees.

Further, if PhRMA or any other trade association does not make such information available, get permission before using trade association funds for political purposes, and provide an opt-out provision, member companies should withdraw from membership. Each firm has the right to make political contributions on its own, as it sees fit. But no firm or group has the right to decide such matters for others.

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Case 21: Big Pharma’s Marketing Tactics 1. What are the ethical issues in this case?

One might be tempted to say that the primary ethical issue is unfair business practices (e.g., paying doctors to prescribe certain drugs or providing free items to medical students), but that would be short-sighted. Concern over unfair business practices implies that the harm being done affects other businesses. Although that aspect of the problem is certainly evident, the more important concern is about potential harm being done to patients. Medicine is a unique industry in that its main function is the physical health of individuals. If unfair business practices occur in this industry, they directly affect individuals‘ well-being.

2. Who are the primary stakeholders in these incidents and what are their stakes?

As noted above, the primary stakeholders of concern are the patients who are affected by Big Pharma‘s practices. The conflicts of interest evident in the relationships between doctor and pharmaceutical company can endanger patients. Doctors may tout certain medications due to their relationship with the pharmaceutical company rather than the specific needs of their patients.

3. Is there any justification for the marketing and pricing tactics described in the case? Which tactics are acceptable and which are questionable?

The primary justification is greed—the ―need‖ for increased profits. Other reasons given generally fall into two categories: (1) Big Pharma‘s need for high profits to fund research and development efforts and (2) informing patients of new developments in medicines. While the pharmaceutical industry does need profits to fund additional R&D, this does not justify the tactics employed in this case.

4. What ethical principles may be violated by the marketing tactics described? Do any of these ethical principles support the companies’ actions?

These marketing tactics could be interfering with physicians‘ duties to the patient by providing incentives to prescribe medicines that could do nothing for the patient, or even do harm. An argument in favor of the practices might be that patients‘ rights to be informed about health issues have been enhanced.

5. Big Pharma needs enormous sums of money to conduct R&D and to advance its innovations.

Do the ends justify the means because the citizenry’s health is at stake?

Most would not think that these ends justify the means. Prescription drugs cost far more in the United States than in other countries, indicating that something is odd. One could also point to the billions spent on marketing efforts and suggest that those monies be used in R&D. Finally, with a 19.1 percent profit margin (among the highest of any industry), it would seem that the industry already makes plenty of money with which to fund research.

6. What response do you think physicians should take when approached regarding some of the schemes presented in this case? Are doctors in a conflict-of-interest situation when taking Big Pharma’s money?

The easy answer would be to ―just say no.‖ Unfortunately, it is unreasonable to expect that physicians, any more than any other profession, are immune to the lure of money. Doctors face 42

huge costs for their initial schooling, the operations of their practices, and malpractice insurance.

They need sources of income just as much as other people. But at the least, we should expect that physicians would carefully consider the ethical implications of these marketing tactics and should place their patients‘ interests and well-being above their own financial health. Doctors who take the money that Big Pharma offers will appear to be under a conflict of interest when they prescribe the company‘s medicine. Even if the medicine is the best for the patient, there will be the appearance of a conflict, which is tantamount to an actual conflict and should be avoided.

7. What strategy should a socially conscious Big Pharma company adopt if it wanted to address the questionable tactics discussed? Is it likely that a more responsible company will initiate such action? Why? Why not?

Big Pharma has been called into question for its marketing, advertising, pricing, and sales techniques. Increased transparency, such as the requirement instituted by the Affordable Care Act, is a strategy a socially conscious Big Pharma company could adopt. It is unlikely that companies will initiate such action willingly, and change will only come about if the divide between regulators and manufacturers is sharpened, and monopolies over drugs are broken.

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Case 22: Purdue Pharma, OxyContin, and the Opioid Crisis 1. Identify the ethical issues in this case and the stakeholders affected.

Purdue Pharma aggressively marketed and sold its dangerous opioid products to health-care providers even though it knew those providers were diverting them to abusers. Consumers of OxyContin carried the risk of addiction and overdose. OxyContin fueled the opioid crisis in the United Sates. Ethical issues include: aggressive marketing of a harmful drug, misleading regulators and physicians, fraud, and kickbacks. The stakeholders are as follows: doctors, patients, salespeople, regulatory agencies, and the government. The owners (the Sackler family) are also a stakeholder, but it should be noted that the company was very successful financially.

2. What is wrong with aggressive marketing of drugs such as OxyContin? Shouldn’t a company be free to market its products as it sees fit?

Purdue Pharma misrepresented the addictive properties of OxyContin. It faced a lawsuit over its aggressive marketing of OxyContin in 2007. A State of Massachusetts‘s legal complaint in 2019 contended that the Sacklers were pushing Oxycodone into more hands through their marketing, at higher doses and for longer periods of time, while reaping billions of dollars even as the company blurred the risks of addiction and overdose that came with the drugs.

3. What marketing tactics they engaged in do you think are questionable?

Purdue incentivized its sales force to maximize sales. Sales representatives were told that their bonuses would be calculated so that OxyContin sales counted for considerably more bonus money than other drugs. The memo said, ―Your priority is to sell, sell, sell OxyContin.‖ They unethically encouraged doctors to prescribe the drug. Dr. Richard Sackler announced at the launch party that its release would be ―followed by a blizzard of prescriptions that will bury the competition.‖ Other sources state that the company also paid patient advocacy groups, medical societies, and academic experts in the marketing blitz.

4. The Sackler family owned and controlled Purdue Pharma. What is your assessment of their claim they did nothing wrong legally or ethically? It’s the ―company’s‖ liability, they seem to be saying.

Members of the Sackler family testified at a hearing claiming that they had done nothing wrong.

David Sackler, who served on Purdue‘s board for six years, testified, ―The family and the board acted legally and ethically.‖ Money and governance trail: The Sackler family are founders and owners of Purdue Pharma.

The three main brothers of the family are deceased but their adult children are the primary executives in charge of the company. Seven members of the Sackler family were on the board.

Disclosures of wealth released to the government indicate that the family members are collectively worth $11 billion. Most of their wealth came from the prescription painkiller OxyContin. Some of the prosecutors claim that the Sacklers have been moving billions of dollars offshore to different banks including some in Switzerland.

Diverting blame: As questions were being asked about the risk of addiction and overdose five years later, Sackler laid out a strategy that critics say the company has used often by diverting the blame to others, especially those who had become addicted to the opioids. Sackler wrote in an

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email, ―We have to hammer on the abusers in every way possible.‖ He continued, ―They are the culprits and the problem. They are the reckless criminals.‖ 5. What is your assessment of the proposed settlement with the Sackler family? Should this end it all?

Even though the Sackler family has agreed to pay $4.28 billion to resolve lawsuits, it appears that they will win immunity from future opioid lawsuits. According to legal documents filed, the immunity from further liability would extend to dozens of families. Attorney General Maura Healy said that giving the Sackler‘s immunity would ―set a terrible precedent.‖ This will not end as there is a proposed bill being considered in Congress titled the Opioid Crisis Accountability Act, but it has not yet passed. The purpose of the bill is to hold the pharmaceutical industry accountable for dubious marketing and distribution of opioid products and for their role in creating and exacerbating the opioid epidemic in the United States.

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Case 23: McDonald’s: The Coffee Spill Heard ’Round the World 1. What are the major issues in the Liebeck case and in the following incidents? Was the lawsuit ―frivolous‖ as some people thought, or was it serious business regarding safety and treatment of consumers?

These cases are about product safety and responsiveness to consumers. In its desire to please consumers with hot coffee, McDonald‘s has created a product that must be handled carefully. The important question is, regarding the spilled coffee, who is ultimately responsible, McDonald‘s, Ms. Liebeck, or both? Regardless of whether one views the lawsuit as frivolous or not, it clearly was serious business; these types of claims have had (and continue to have) an economic impact on McDonald‘s. Further, McDonald‘s has changed certain practices related to its coffee (e.g., employees offer to add cream/sugar for customers in the hopes of preventing a spill).

2. What are the social (economic, legal, and ethical) responsibilities toward consumers for McDonald’s in the Liebeck case and the other cases? What are consumers’ responsibilities when they buy a product such as hot coffee or hot hamburgers? How does a company give consumers what they want and yet protect them at the same time?

Before learning of the jury‘s award in this case, one might have argued that McDonald‘s had a responsibility to sell coffee at a temperature at which consumers wanted, but that the product had to be perceived as reasonably safe. After the award, it seems that McDonald‘s has gotten the message that it, as well as the consumer, must also be responsible for consumer carelessness with the product. Thus, the warning on the cup was not seen as adequate protection for the consumer.

Consumers have a responsibility to carefully use a product as it is intended. It appears from this case that a company must walk a fine line in meeting consumers‘ needs for a product that is both desirable and safe. McDonald‘s found out the hard way that it could be held legally responsible for customers injuring themselves with their products. Ethically speaking, given the number of burns reported, McDonald‘s should at least take the minimal step of enlarging the warning label on their coffee cups to better warn customers of the risk of burns.

3. What are the arguments supporting McDonald’s position in the Liebeck case? What are the arguments supporting Liebeck’s position? Should McDonald’s have settled this case when it had a chance?

The major argument on McDonalds‘s part was that it was Liebeck‘s carelessness that caused the burn. McDonald‘s argues that its ―Caution: Contents Hot!‖ warning is adequate. Liebeck‘s major argument was that the coffee was so hot that it caused third-degree burns, even if she contributed to the accident. Thus, the product was dangerous. McDonald‘s might have avoided all of the negative publicity and reputational costs if it had settled the case when it had the chance.

4. If you had been a juror in the Liebeck case, which position would you most likely have supported? Why? What if you had been a juror in the pickle burn case?

This should be an interesting question for students to discuss. It is likely that most students will side with McDonald‘s as was demonstrated in the public opinion polls. The pickle burn case, on the other hand, may receive a different reaction. While many students expect coffee to be hot and believe that consumers should be aware that spilling coffee could cause burns, they often feel

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differently about pickle burns. Consumers do not expect pickles or onions on a sandwich to be so hot that they could cause burns or permanent scarring.

5. What are the similarities and differences between the coffee burn cases and the pickle burn case? Does one represent a more serious threat to consumer harm? What should McDonald's, and other fast-food restaurants, do about hot food, such as hamburgers, when consumers are injured?

One might argue that wrestling with the coffee cup between one‘s thighs is not the way the container or its contents were intended to be used and/or consumed. The pickle, on the other hand, was in the sandwich that was being eaten. In both cases, excessive heat caused physical injury to the customer. There is no need for foods to be hot to the point of causing burns to the customer. Given the way a hamburger sandwich is created, there is no logic to explain how a pickle can be heated to such a high temperature as to cause burning to the skin. Hence, we would consider this case to be more serious and more representative of employee negligence.

6. Why did Stella Liebeck win this case, and what implications does it pose for businesses’ responsibility toward consumers?

The jury found Stella Liebeck 20 percent liable for her injury and McDonald‘s 80 percent liable, finding that the company had engaged in willful, reckless, malicious, or wanton conduct.

McDonald‘s knew that the coffee was hot enough to cause significant burns and yet failed to take the proper care. The case sets a precedent that companies will be responsible for neglecting to take proper care to avoid injuring customers.

7. What is your assessment of the ―Stella Awards‖? Is this making light of a problem that is too serious?

Many will believe that the Stella Awards simply reflect the public‘s general opinion regarding these issues—that consumers are at least partially responsible for injuries that arise in these types of cases. However, the Stella Awards usually address lawsuits that are more outrageous than the Liebeck case, where an elderly lady was injured. Consequently, the awards may be making fun of America‘s litigious nature rather than the injuries themselves.

8. Do we now live in a society where businesses are responsible for customers’ accidents or carelessness in using products? We live in a society that is growing older. Does this fact place a special responsibility on merchants who sell products to senior citizens?

Companies now have to have a broader view of their social responsibilities. Companies will now have to assume that they may be held accountable for customers‘ carelessness. Considering this fact, merchants who sell products that are geared toward senior citizens will need to be cognizant of the potential accidents/misuses of such products by this target group. One result of this is that product costs will rise.

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Case 24: Boeing’s Two Flight Crashes 1. Identify the legal, ethical, and management issues involved with the two Boeing 737 MAX crashes.

In 2018, a Boeing 737 MAX plane crashed into the Java Sea, killing 189 people. In 2019, a Boeing 747 MAX crashed in Ethiopia, killing 157 people. Investigators found that design flaws with the MCAS led to the two major airline crashes. Boeing has since faced investigations and lawsuits by the families of victims, shareholders, pilots, stakeholders such as the SEC, and a grand jury criminal investigation.

Legal issues: Safety deficiencies, not training pilots about 737 MAX systems, defrauding shareholders through lack of disclosures, conspiring to defraud the FAA during its review of the 737 MAX, and other concerns (plane‘s flight control computer, wiring, and engines).

Ethical issues: Focus on profitability and growth, board of directors lack of oversight and corporate governance, leadership failure, erosion of integrity in corporate culture (culture of concealment), overly close relationship between Boeing and the FAA. Management issues: Insufficient documentation and testing of the MCAS system, lack of adequate training for pilots and government inspectors (FAA), lack of communications, costreduction focus, and not listening to the concerns of Boeing engineers.

2. Who is most accountable for the Boeing crashes? Boeing executives? The pilots? The Boeing maintenance crews? The FAA? The Boeing Board?

There is responsibility and accountability among all the parties.

Boeing executives: The congressional investigation in the United States concluded that the two fatal crashes were partly due to Boeing‘s unwillingness to share technical details with those needing to know (pilots, FAA). The investigation blamed a ―culture of concealment‖ at Boeing.

Boeing knew of the test pilot‘s concerns expressed in 2019 and had failed in its design and development of the MAX. Pilots: One pilot reported that he had run into unexpected troubles during tests and said further that he had basically lied to the regulators unknowingly.

Boeing maintenance crews: Why were there no whistle-blowers when issues where detected?

FAA: FAA failed in its oversight and certification of the aircraft. The congressional report alleged ―regulatory capture,‖ wherein an overly close relationship had developed between Boeing and the FAA that compromised the process of gaining safety certification. The report said that the FAA was, in effect, in Boeing‘s pocket and that FAA‘s management had actually overruled its own technical and safety experts ―at the behest of Boeing.‖ Boeing Board: Lack of oversight and corporate governance and breach of duties - not monitoring the safety issue, not providing oversight both before and after the two deadly crashes, misleading the public through various media, moving in tandem with the company‘s management rather than challenging decisions based on safety considerations, failing to fulfill its proper role, missing red flags, and failing to question CEO Muilenburg about how he handled the crisis.

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3. Do you think the ―culture of concealment‖ and ―regulatory capture‖ issues were instrumental to the crashes? Could these have been avoided through sound ethics management? What ethical principles should Boeing have followed?

Yes, the ―culture of concealment‖ and ―regulatory capture‖ issues were instrumental to the crashes.

First, Boeing was unwilling to share technical details with those needing to know (pilots, FAA).

Second, the close relationship between Boeing and the FAA compromised the process of gaining safety certification. From Chapter 17 on self-regulation: Arguments have been made to let industries police themselves, particularly in complicated technologies and industries where regulators or policymakers default to the expertise of others. The Federal Aviation Administration routinely permits airline manufacturers like Boeing to certify that their products are safe.

4. What is your assessment of how Boeing handled the crashes from a human relations, business ethics, and crisis management perspective?

The news media tends to focus on the major ethical scandals involving well-known corporate names, and Boeing considerable attention. Initially, Boeing had to balance between empathy and legal liability. The company and its CEO mishandled their response. See answer to question 5.

5. What could Boeing’s leadership have done differently or better in terms of dealing with the crises?

Crises can topple organizations if top management does not respond ―quickly, decisively, and effectively.‖ The company should have grounded the planes pending an investigation. Instead, they assigned blame to pilot error and allowed the second crash to happen. Muilenburg should have been visible and expressed regret immediately after the crises. He should have been honest and transparent, and communicated with all of the key stakeholders. The Boeing board could have chosen a different spokesperson if they were not comfortable with the CEO. The question arises, would Boeing have reacted differently if the crashes were not in Indonesia or Ethiopia, but in England or in Germany?

On December 23, 2019, Boeing announced that Muilenburg resigned from his position effective immediately. The company‘s board of directors named David Calhoun, its current chair, as successor. David Calhoun disparaged his predecessor, which should not have been done.

6. Based on your reading, do you think the Boeing 747 MAX is now safe to fly? Will customers back off now when they realize they are scheduled to fly on a 747 MAX? Or, will things quickly return to ―business as usual‖?

In 2020, Boeing fixed a date to discontinue the 737-8 model of aircraft. By June 2021, the 737 MAX was finally cleared to fly again in most of the world. Airlines continue to fly the old 737-8 line and plan to retire them as quickly as possible. Even so, Boeing still has much to do to restore the public‘s trust in their aircraft.

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Case 25: Should States Woo Big Business with Tax Incentives? Amazon Thinks So! 1. Who is helped and who gets hurt in the use of tax incentives? Draw a stakeholder map for Amazon and the governments involved. Who was excluded or who could have been included?

Amazon (or the beneficiary of the tax incentives) is helped as well as the consumer who does not have to pay the tax. Potentially, the state losing the income tax benefit as well as local businesses who are not operating on a level playing field are hurt the most by tax incentives that favor one company over all others. Ultimately it seems as though the citizens of South Carolina will suffer as services funded by government could conceivably be impacted as fewer taxes are collected.

The stakeholders are as follows: Amazon; the State of South Carolina government (including South Carolina State Legislature); the county of Lexington, South Carolina; consumers; and businesses.

2. Did Amazon, the South Carolina State Legislature, and the county of Lexington arrive at creating shared value for the greatest number of stakeholders?

A central issue within the cases is the comparative value of the 1,500 jobs created via the Amazon tax incentives vs. the lost sales tax revenue to the state and the adverse impact to brickand-mortar businesses within South Carolina. It seems as though the greatest value was created for Amazon, as the amount of lost revenue for the state is staggering.

3. What is the nature of the various stakeholder stakes? Are they owners or community members? Analyze their legitimacy, power, and urgency characteristics.

The stakeholders are the government of South Carolina, the individual taxpayers of South Carolina, business owners in South Carolina, and Amazon.

The South Carolina government‘s (South Carolina Legislature, Governor Haley, and the county of Lexington) legitimacy would be difficult to question. The urgency centers on the evaluation of the relative value of needed jobs and needed state income tax as well as the perception that they are favoring big business (Amazon) over smaller brick-and-mortar businesses.

The South Carolina taxpayers‘ legitimacy cannot be questioned; their power lies in public opinion, voting power, and their power as a consumer base. The urgency centers on the balance of competing interests, increased jobs, lower tax-free purchases, and lower state tax income, which might impact the state‘s ability to fund public resources.

The business owners in South Carolina have legitimacy; the power lies in their influence on local politics and their part of the fabric of the community. The urgency is the inability to compete with large corporations like Amazon, exacerbated by tax incentives that are not open to them.

The urgency is the threatened disappearance of many brick-and-mortar stores and many small businesses in South Carolina.

4. Was Amazon abusing its power when it canceled procurement contracts and job postings if it did not get its way?

It‘s difficult to say whether Amazon‘s actions are an abuse of power or just part of doing business. Amazon owes it to its shareholders to get the best deal possible. However, that Amazon used South Carolina‘s low employment rate as leverage against them raises ethical and moral

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issues. Consumers in South Carolina have the power to vote against Amazon by spending their retail dollars elsewhere.

5. Could the State of South Carolina, or Lexington County, have asked for more, or were they fortunate to get what they got?

South Carolina and Lexington County gave up quite a bit—to incentivize Amazon to move to Lexington, they granted them 90 acres of land, a five-year exemption from charging state sales tax to South Carolina residents, property tax cuts, and state job tax credits. Additionally, South Carolina removed Sunday morning sales restrictions, allowing Amazon to fill orders at any hour.

Given all that South Carolina gave up, it seems as though they could have asked for more from Amazon.

6. Do ―corporate welfare‖ deals like this give Amazon an unfair advantage over other businesses that do not receive tax breaks? What are the ethical issues involved in this decision?

Corporate welfare deals do give unfair advantages to large businesses like Amazon over other businesses. The ethical issue regards weighing the positive impact for all stakeholders. In this case, South Carolina needed the jobs that Amazon brought to the community. However, the jobs were at the expense of small, local brick-and-mortar businesses that could not compete on a level playing field with Amazon.

7. What updates can you find about this tax break issue in South Carolina or in other states?

Amazon‘s tax break in South Carolina expired on January 1, 2016. The state tax issue continues to be debated in Illinois and Florida. Recently, it was uncovered that the State of Washington failed to collect state taxes from Amazon under an expired agreement.

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Case 26: Everlane: Ethical Chic and Radical Transparency in Global Supply Chains 1. What are the ethical and social issues in this case?

Everlane sought to promote radical transparency. It wanted to provide fashion that was ethically produced but trendy as well as cost-conscious for the consumer. To do business with Everlane, manufacturers must submit to having videos and pictures taken of their facilities as well as supply information about their workplace. Through its transparency, Everlane seeks to have a positive impact on the workers in the textile industry. However, as it has grown it has faced growing pains and more scrutiny, particularly as it resisted filing a corporate social responsibility report and third party certification. Additionally, as sales grew, the demands for accountability and transparency grew when allegations of retributive layoffs and workplace harassment surfaced.

2. How difficult is it for a company like Everlane to follow through on its mission? What are the challenges to its commitment to radical transparency in global supply chains?

It is difficult to maintain this level of transparency, given that Everlane must find good, but cheap and efficient, suppliers willing to submit to the level of scrutiny that Everlane requires.

Given Everlane‘s size, keeping costs down to remain competitive is a challenge because it typically means using partners in China.

3. What are the different ways that a fashion company can be ethical?

Fashion companies can be ethical by doing due diligence on the companies in their supply chain and making sure that they only partner with companies that promote ethical and safe work environments for their employees. Additionally, fashion companies have an ethical duty to their consumers to provide quality.

4. What interest groups might support an ethical fashion group like Everlane? How could they do this?

Consumer groups interested in promoting ethical workplaces and supply chains could endorse fashion groups like Everlane by giving them public endorsement. Nonprofit groups like Fair Trade USA could continue to support them by endorsement; the annual Fashion Revolution Day is another way to help ensure that ethical fashion groups get the marketing and exposure that they might need to survive. Additionally, retail stores might decide only to carry brands that provide ethical transparency.

5. What are the other stakeholder groups that are involved with Everlane? How would each stakeholder view Everlane’s quest for transparency and ethical production?

Stakeholder groups involved with Everlane include manufacturers, employees, shareholders, investors, and consumers. Manufacturers may find the increased scrutiny by Everlane to be intrusive and impactful to their business. Employees at Everlane may appreciate the missiondriven approach to fashion. Shareholders and investors must understand the mission before the investment so that they are not disappointed that growth may be hindered by the business practices and additional scrutiny and potentially higher costs required. Consumers may view the transparency positively by not having to choose fashion over personal ethics.

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6. How does Everlane’s approach to their supply chain differ from a large global buyer like Nike?

Everlane does not have the same buying power as a large company like Nike; therefore, it may be difficult for Everlane to influence manufacturers. Additionally, access can be an issue for small suppliers. In particular, it can be difficult for the small supplier to access manufacturers in China.

7. How hard is it to create and sustain a positive corporate culture when working with remote workers and unions?

Remote workers and unions have to grapple with different work conditions. They may feel that management is not responsive, they might not be as engaged as non-remote workers, and might even feel ―expendable.‖ 8. Is the Everlane business model sustainable? Or is it just temporarily popular because it is unique? Are competitors likely to follow?

The business model that Everlane follows does appear to be sustainable with mission-driven firms that have an interest in social issues and ethical business practices. It will be a popular model if Everlane is able to make it profitable and it continues to appeal to consumers.

Competitors will follow if consumers demonstrate their interest by putting their consumer spending behind companies like Everlane.

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Case 27: Slow and Sustainable Fashion 1. What are the arguments for slow fashion? What are the arguments against slow fashion?

Arguments for slow fashion include responsible sourcing, the use of materials that reduces environmental impact, producing clothing in-house or locally to allow for full control of the supply chain, forsaking traditional fast retail schedules, creating staples made to last, and not exploiting workers. Arguments against slow fashion may include loss of revenue, higher costs, an inability to attract and retain talent, and increasing competition.

2. What incentivizes consumers to make socially conscious purchasing decisions, especially with clothing?

Consumers are making significant changes to their lifestyles to lessen their environmental impact. Slow fashion represents sustainable brands and eco-friendly shopping and merges with those lifestyle choices.

3. Do you think slow fashion is just a trend that will go away, particularly as the world recovers from the COVID-19 pandemic?

Fashion is said to ―both reflect and lead culture.‖ If consumers truly want to lessen their environmental impact, then this is an authentic shift and not a trend.

4. Are the companies that produce slow fashion clothing really ―true believers‖ or are they just targeting a market niche?

It does not matter if the company is a true believer or just targeting a market niche when considered within a larger framework of sustainable fashion. Consumers and buyers are demanding more sustainable textiles and companies. Global brands like Zara and H&M have to report on their social, environmental, and economic impact. Companies that do not produce clothing in a sustainable manner might be legislated into doing so in the future.

5. Would you be willing to pay more and wait longer for slow fashion products?

Many consumers would be willing to pay more and wait longer for slow fashion pieces that will last for a lifetime. It is a shift from quantity to quality. ―Hand-made pieces,‖ ―made-to-last materials,‖ and ―ethically sourced‖ hold considerable appeal.

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Case 28: The Perils of Student Loan Debt 1. What are the ethical issues involved with student loans? How do these parallel issues that were involved with the mortgage lending crisis of 2008–2009?

Lending large amounts of money to young students with little to no credit experience and no income seems to parallel the issues involved in the mortgage lending crisis of 2008/2009 when large amounts of money were lent to those with poor credit ratings who would have a difficult time repaying. In the student loan situation, lenders prey on those with the American dream of higher education; in the mortgage lending crisis, they preyed on those with the American dream of home ownership.

2. As a matter of public policy, should the federal government be getting involved in providing these funds for education?

While it may be difficult for the government to provide funds for education, lower-cost lending options would be appropriate. Additionally, the government should be involved in regulating the industry.

3. Who are the stakeholders involved in student lending?

The stakeholders involved in student lending include the lenders, the institutions, the government, the student and parent borrowers, and American taxpayers.

4. Should large sums of money (tens of thousands of dollars) be loaned to students and parents without any sort of credit check? Should qualifying for a student loan be any different than qualifying for a home mortgage? Why or why not?

No. Student and parent borrowers should have to undergo a credit check to borrow funds, much like any other loan processing system.

5. How can responsible lending take place in this sort of environment? Is it ethical and responsible for private lenders to make such loans just because they are backed by taxpayers’ money?

It does not seem possible that responsible lending can take place in an environment that lacks accountability. Private lenders should not get the full backing of the U.S. taxpayer in the absence of heightened scrutiny and accountability processes in place.

6. Should the federal government be involved in guaranteeing loans provided by private lending groups? Why or why not?

Federal student loans are available to students, and as noted in the case, the risks are limited because it can garnish wages, Social Security benefits, and tax refunds to collect the money.

There is no incentive for the federal government to be involved in guaranteeing private lender loans, particularly as they would not have any control over the prequalifications of borrowers.

7. Should student loan forgiveness be limited to situations where a college has engaged in deceptive practices? If so, why should taxpayers be responsible for bad judgments being made?

Yes argument: Yes, student loan forgiveness should be limited to where fraud is concerned. The government has done little to regulate this industry. The borrowers were making bad judgments, but these bad judgments were made based on bad information.

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No argument: No, student loan forgiveness should not be limited to situations where a college has been deceptive, but could be designed to target those who need help most –helping those in greater need and reducing social inequities through income-driven repayment plans.

8. If the federal government engages in a broad student loan relief program, how might they determine the amount of per person forgiveness? What issues of procedural and distributive justice are at play here?

If such a program is implemented, there has to be impartiality and transparency, as to whose loans are forgiven. As proposals range from $10,000 to $50,000 per person in student debt forgiveness, a ceiling or limit will have to be placed. Procedural justice demands that the process to resolve disputes and allocate resources be fair and consistent. Distributive justice concentrates on outcomes and the socially just allocation of resources, which is more difficult to determine in this scenario.

9. What do you think about the IDRP and PSLF programs for student loan relief?

The IDRP and PSLF programs represent important incentives that allow students with significant debt the ability to afford to take nonprofit or government work. Assuming that students would be able to garner a larger salary outside of public service, programs for student loan relief not only give the students more choice in their careers but also benefit the agencies by attracting highly educated and qualified employees.

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Case 29: “Dead Peasant” Life Insurance Policies 1. What are the major ethical issues involved in this case? Is it ethical for an employer to benefit from the death of an employee if they took out and paid for the policy?

The major ethical issue regards an employer having the ability to take out a corporate-owned life insurance (COLI) policy on an employee sometimes without the employee‘s consent. While not illegal, it does not seem ethical for employers to receive a nontaxable payment upon the death of an employee. There seems little incentive for employers to keep their employees safe if they are benefiting from employees‘ deaths.

2. How does the idea that these policies help to fund executive compensation and/or retiree benefits affect your answer to question 1?

Perhaps the use of the funds might make the idea of a COLI more palatable. It‘s difficult to conceive of a scenario in which workers would be comfortable with having their death benefit directly tied to management compensation—the logical extension is that managers get a bonus when their employees die. However, the funding of retiree benefits is an easier proposition to accept. That the employer is using the monies to fund other employee benefits seems much less egregious than the funding of management bonuses.

3. Should Congress create more stringent guidelines, beyond ―best practices,‖ for the administration and use of these types of COLI policies?

Congress might create more stringent guidelines beyond the codification of best practices as the requirement that notice and consent be merely ―notified in writing‖ is subject to interpretation.

As insurance companies are regulated by individual states, states should conform to stricter and better-defined consent policies. States should protect their constituents and help to ensure that employees know what they are agreeing to.

4. Should states be pressured to conform to stricter ―consent‖ policies for those current policies that are grandfathered under the old ―no consent‖ rules?

Yes, however, the ―business of insurance‖ and its regulation has been delegated to states since the McCarren-Ferguson Act of 1945. States under the old rules might be pressured to use ―opt in‖ or ―opt out‖ declarations for employees.

5. What are other ways that federal and state governments could encourage businesses to avoid these COLI policies?

The federal and state government can encourage businesses to avoid COLI policies by eliminating the tax incentives that precipitated businesses‘ interest in the policies.

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Case 30: The Case of the Fired Waitress 1. What are the ethical issues in this case from an employee’s point of view? From management’s point of view? From a consumer’s point of view?

Management must consider whether or not they are justified in terminating a 19-year employee for one infraction. Consumers have an interest in having the confidentiality of their comments respected. It is unethical to give the appearance of confidentiality (a locked comments box) yet allow customers‘ comments to be viewed by any employee who asks for the key.

2. Who are the stakeholders in this case, and what are their stakes? What are their legitimacy, power, and urgency characteristics?

Ms. Hatton, the Red Lobster management, and the disgruntled customer are all stakeholders. Ms. Hatton has a stake in keeping the job she has held for 19 years (starting a new career at age 53 surely is not a welcome prospect).

The management has a stake in satisfying its customers (in this case a disgruntled one who probably demands some kind of action be taken) and in enforcing company policies (the reason everyone looks in the comments box is that nothing is done to keep them from looking).

However, management also has a stake in retaining a long-time employee with valuable experience whom they have invested time and training in.

3. As a peer review panel member, how would you judge this case? Do you think that Hatton ―stole‖ company property or inadvertently threw it away? Was the discharge too harsh a penalty for a 19-year, veteran employee? Do you think the discharge should be upheld?

Ms. Hatton, whether intentionally or not, stole company property. She also was in clear violation of company policy by opening the comments box. It will not be easy to decide the proper course of action in this case. Termination after 19 years of service seems extreme in this situation.

However, Ms. Hatton did break company policy by opening the comments box, and while the management has a right to punish her, it might be unwarranted to punish her excessively without also punishing the other employees who opened the box to look at the comments about themselves. Ms. Hatton should probably receive a less severe punishment than termination.

4. Is the peer review method of resolving work complaints a desirable substitute for lawsuits?

What are its strengths and weaknesses?

Yes, if both parties are willing to utilize a peer review process it would save money and time, and it is a less combative environment than a courtroom. The weakness of the peer review system is that, unlike arbitration or court trials, the decision of the peer group is not binding. If employees are not satisfied with the decision, they may still file a lawsuit. However, the peer review process has the benefit of handling cases of unfair dismissals without the cost or time involved in court cases.

5. If you had been Hatton, would you be willing to turn your case over to a peer review panel such as this and then be willing to live with the results?

Most employers and employees would be willing to try peer review before a trial because it would be quicker and less costly. However, if the job was not reinstated by the peer panel, Hatton would likely consider legal recourse.

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Case 31: Two Vets, Two Dogs, and a Deadlock 1. Before doing any more research on service dogs and the ADA, think about what happened.

Was this a violation of the ADA, or does the store owner have rights too that confound matters in terms of providing a clear answer?

Yes, this was a violation of the ADA. Clyde owns a private business that is open to the public, and the ADA applies to all establishments open to the public. Clyde cannot claim that the law does not apply to him and his store. Clyde‘s concerns do not make the law inapplicable to him.

2. When Clyde said the service dog, Ellie, was disturbing his security dog, Kit, could this have been construed that he thought the service dog was out of control? If he did think the service dog was out of control, does this influence his decision about removing her from his store?

No, Clyde was clear that Kit does not interact well with other dogs. His request to remove the service dog, Ellie, was more about Kit‘s potential behavior than it was about Ellie‘s behavior.

3. Should Clyde have accommodated Murray in any way? If so, how? Should Murray have complied and left his service dog, Ellie, outside as requested?

Yes, Clyde could have removed Kit for the time that Murray was in the store with the service dog.

4. Now check out the ADA policy on service animals. Taking this into consideration, whose rights should have prevailed in the above scenario? Is it clear? Does your answer change from the one you gave in question 1? Explain.

No, it does not change. Clyde‘s actions were a violation of ADA. Murray has the federally protected right to have the same access to the store as other members of the public.

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Case 32: Are Criminal Background Checks Discriminatory?

1. Do you agree with the EEOC or the WSJ regarding criminal background checks? Explain why based on legal or ethical principles.

With its criminal background check policy, the EEOC is trying to make the type of conviction relevant to the job at issue. The WSJ believes all convictions of whatever kind disqualify an employee or applicant. There are many reasons why someone may have a conviction: failure to pay child support, protesting, property damage from a youthful indiscretion, and so on. Also, there is a great difference between a conviction for a misdemeanor (a minor crime) and a felony (a serious crime with serious consequences). Even for more serious convictions, we want people who have been convicted to reform and become useful citizens. If we ban them from employment, that will not be possible.

2. Are blanket exclusions of people with criminal backgrounds discriminatory or should businesses be given the discretion to make the employment decision when a potential or current employee is found to have a criminal background?

Blanket exclusions are discriminatory. A conviction should disqualify someone from a job only if it is relevant to that job and makes the candidate unqualified or risky in some way. BMW‘s firing of long-term employees for old convictions made no sense. They had proven they could responsibly do the jobs they were hired to do. Dollar General‘s reversal of a job offer because of a six-year-old conviction that the applicant had disclosed, and even though she had worked successfully for another retailer for four years, again made no sense.

3. How would you determine whether a conviction record is ―job related and consistent with business necessity‖? Identify the type of jobs wherein ―job related and business necessity‖ would be relevant and justified.

One example would be that any job involving the handling of cash might be affected by a conviction for petty theft or robbery, but not one for damage to school property. One would not hire as a security guard someone who had been convicted of assault and battery. In each case, the conviction relates directly to the job duties. An employer who hired someone convicted of robbery would unreasonably put the company funds at risk. An employer who hired as a security guard someone who had been convicted of assault and battery would unreasonably put visitors to the firm at risk.

4. What factors would affect your decision? Would it vary by the nature of the conviction? If so, how would it vary? Would it vary by the nature of the business and industry? If so, how would it vary?

Yes, as mentioned above, it would vary by the type and nature of the conviction—first, whether it‘s a misdemeanor or felony, and second, the nature of the crime. Another factor would be how old the conviction was. Any conviction that is more than seven years old is not likely to be relevant.

The decision would not vary necessarily by the nature of the business or industry as much as the nature of the job itself. As discussed above, the job duties would dictate what kinds of prior convictions would be relevant.

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Case 33: To Take or Not to Take 1. What are the ethical issues in this case?

The ethical issue regards a state government agency‘s gift policy and an individual employee‘s more rigorous interpretation of that policy.

2. Am I being too hard on myself? Should I accept the tickets? On what are you basing that decision? What rationalization can I use?

While it is true that your application of the gift policy is more stringent than required, it is important to you to have your own personal code and guiding principles. I do not believe that you should accept the tickets as that would be in violation of your personal values.

3. Should I change my practice of refusing all gifts?

Gift policies regard not only actual conflicts of interest but also the appearance of a conflict of interest. If you believe that not accepting any gifts puts you on better footing with the state‘s vendors with whom you do business, then I would not suggest that you change your practice.

4. Should the state’s policies be modified regarding gifts? If so, how should they be modified?

Yes, the state may consider modifying its practice regarding gifts. I would consider limiting the $100 to per vendor per year. Additionally, the $100 face does not reflect the actual value of the tickets, for example, if it were a sold-out concert and the tickets although $100 face were actually much higher on the secondary market. The $100 face value does not necessarily eliminate the appearance of a conflict of interest if the tickets were hard to get or are for the playoff of a sporting event.

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Case 34: Workplace Spying 1. What are the benefits of employee monitoring? What are the downside consequences?

The benefits of employee monitoring include the ability of employers to keep track of their physical property, including equipment, computers, laptops, and cell phones, as well as the corporate brand of the firm, and the potential for increased productivity if employees know they are being monitored and tracked. When employers will be held accountable for the actions of their employees, then it would make sense for employers to be able to monitor. The downside consequences include the impact to employee privacy.

2. Do you consider any of the company practices reported in this case to be ethically questionable? Which ones and why?

The perhaps unintended consequence of UPS‘s employee monitoring system appears to be ethically questionable. UPS employees as well as Amazon employees report a ―metrics-based harassment,‖ and employees are measured against each other to perform faster, which seems to be resulting in an unsafe or hazardous environment for employees, and even other travelers on the road.

3. What is the correct balance of monitoring of, and discretion for, employees? When does workplace spying cross the line?

Workplace spying crosses the line when employees are not informed that the information is being gathered, and when the information regards the employee‘s personal time. While there may be an expectation of a lack of privacy during an employee‘s time at work, there is no such expectation outside of the office. Additionally, if the monitoring is applied in a discriminatory way or if the data that comes out of the monitoring is not kept private, that would be crossing the line.

4. Should companies place this much stress on their employees?

The goal of an employee monitoring program is not to place additional stress on employees.

However, that is a logical result of some of the monitoring systems. There is some level of monitoring inherent in any employment relationship. Often the appropriate monitoring will depend on the industry and the role of the employee. For example, those who work in call centers have their phone calls monitored for quality assurance, and those who sell financial services products may have their email monitored because of securities laws. Employers must balance their employees‘ rights with the legal and regulatory framework in which they do business. Some level of additional stress given the nature of an employee‘s job and industry is unavoidable.

5. Is this an example of dehumanizing employees?

Employee monitoring systems can be implemented in a way that will not dehumanize employees. Monitoring systems and policies must be implemented in an environment of transparency. Additionally, it is important for employers to train employees so that they understand the genesis of the monitoring rules—that they are for the protection of not only the employer but often the employee and the end-customer.

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6. Do you think workplace monitoring can be an effective part of an employee engagement program?

It would be difficult to imagine workplace monitoring as an effective part of an employee engagement program in that the inherent privacy concerns seem to violate the spirit of employee engagement. However, it seems possible data gathered from employees may result in trends indicating whether or to what level they have an employee engagement issue.

7. If workplaces adopt a more flexible work-at-home schedule post-COVID-19 pandemic, is the privacy trade-off worth it, with businesses spying on employees at home?

Companies provide the justification for using employee monitoring tools by noting the productivity benefits to the firm. But the use of these tools might actually hurt firm performance in the long run and hurt morale as employees feel micromanaged.

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