Reference no: EM13123127

Activity 1 - Introduction to Business Ethics

1. Introduction

Behavioral ethics is a new field drawing on behavioral psychology, cognitive science and related fields to determine why people make the ethical decisions, both good and bad, that they do. Much behavioral ethics research addresses the question of why good people do bad things.

Behavioral ethics may   be the next big thing” in ethics education. N.Y.U. recently asked Prof. Jonathan Haidt, whose research is a major part of the new learning in behavioral ethics, to create a behavioral ethics course there. And John Walsh, who helped create the Office of Compliance Inspections and Examinations at the SEC, recently wrote in Corporate Counsel that the “ultimate promise of behavioralethics…is that it provides pragmatic tools that have been demonstrated to work.

Activity 2:

Based on the videos that you watch above, answer the following questions

1. When asked the vast majority of people will agree with the following two statements. Would you agree with them also?

a. I have solid, well-considered ethical beliefs that can be altered only by reasoned arguments or new evidence.

b. I have character and integrity that will carry me though when I face difficult moral choices.

2. Probably the strongest finding from the last decade research in behavioral ethics is that people simultaneously think of themselves as good people yet frequently lie and cheat (typically in a minor way). Is this consistent with your experience? Do you agree or disagree with the following statements from researchers in the field?

The empirical evidence seems to point to the conclusion that we lie and cheat much more often than we care to admit. At the same time, we strive to maintain a positive image of ourselves, and moral values are a central component of our self-image (Francesa Gino)

Essentially, we cheat up to the level that allows us to retain our self-image as reasonably honest individuals (Dan Ariely)

Evolution prepared us humans to be devious, self-serving, and only half-honest, inclined to grab the lion share of goodies without being thrown out of the group. Homo sapiens became wired for truthfulness only to the extent that it suited us, pleased others, and preserved our reputations. We are willing to break rules to benefit ourselves, but only within limits we can justify. We are good and fair, most of the timeâ€"at least in our own mindsâ€"but that doesnt exactly make us straight shooters. Our internal cop stops us only when we contemplated big transgressions (Mark Matousek)

3. Most empirical research indicates that religiosity is not a significant factor in ethical behavior. Atheists and religious people tend to say that the same actions are ethical and unethical. And while religious people tend to give more money and time to their churches and synagogues, religious and nonreligious people otherwise have similar profiles in terms of altruism and volunteerism. Does this surprise you?

4. Have you known good people to do bad things? Either personally, or you've heard or read about episodes in the media?

6. If so, how would you explain their conduct?

Activity 3 - Bounded Ethicality

Written and Narrated by Associate Professor Lamar Pierce

Incentives are pervasive in every aspect of society. People are rewarded for taking certain actions, and not rewarded for taking others. Workers are paid for their effort and productivity, salespeople are paid for their sales, and small business owners are rewarded with profits for successful ventures. So long as these incentives are well-understood by everyone, they work reasonably well. They motivate effort, performance, and social welfare. But sometimes, individuals have incentives that conflict with their professional responsibilities, often in ways that are not transparent to the public or in their own minds. These conflicts of interest produce serious economic and social problems.

Conflicts of interest are pervasive in markets and in society, and can motivate professionals to act in ways that violate their responsibilities and hurt their client and employers. Doctors, for example, may face a conflict of interest when they are paid more for some procedures than for others. Their professional responsibility is to do what is best for a patient, but their financial incentive is not always aligned with this responsibility. If an oncologist profits from selling chemotherapy agents to their patients, and some agents are more expensive than others, this conflict becomes a problem. Most doctors would never think of profiting in ways that hurt their patients, but some may either consciously or subconsciously.

When there are conflicts of interest, you can almost guarantee that they will at least sometimes lead to bad outcomes. Surprisingly, in many states, real estate agents can represent both the buyer and the seller in a home transaction. The conflict in such transactions is clear. The agent could never have both parties' best interests in mind, just as an attorney could never adequately represent both a plaintiff and defendant in civil lawsuit. Even professors face a conflict of interest when they're designing courses that will be evaluated by students seeking high grades and low workload. If the professor is ultimately promoted based on their popularity with students, will they consider making the course a little bit easier?

The key implication is that managers and policy-makers must constantly evaluate whether professionals and employees might face incentives to act counter to their responsibility. Eliminating conflicts of interest is one of the simplest and most effective ways to reduce unethical behavior. But in order to do so, we must be willing to acknowledge that professional codes of conduct, like those followed by doctors, lawyers, accountants, and real estate agents, do not make people immune to these conflicts, and that these codes are rarely a justification for ignoring the likely outcomes that conflicts of interest create.

2. Activity

Based on the videos that you watch above, answer the following questions

• What conflicts of interest have you personally experienced in personal or professional roles?
• If you perceive a potential conflict for yourself, what are some ways you might ensure that this conflict doesn't lead to unethical behavior for you and others?
• When have others' conflicts of interest impacted how you or those you know were treated?
• What types of policies can or do organizations implement to try to reduce conflicts of interest or their costs?

Activity 4 - Confirmity Bias

1. Introduction

Written and Narrated by Professor Robert Prentice

Parents seldom accept as an excuse their child's plea of "Hey everyone else is doing it." However, psychological studies demonstrate that those same parents, and everyone else, tend to take their cues for proper behavior in most social contexts from the actions of others. This pressure is called the conformity bias.

Psychologist Solomon Asch found that when he asked subjects to tell which of three lines is the same length as a fourth line, no one had difficulty unless they were placed in group with Asch's confederates who gave obviously wrong answers. Under those conditions, almost all the subjects found it very painful to give the obviously correct answer in contradiction to the strangers' wrong answers. In fact, most participants gave an obviously incorrect answer at least once during the study.

This bias to conform is much greater, of course, when the others in the group are co-employees and/or friends, or when the correct answer is not right there in black and white - as it was in the Asch Study - but is instead a subjective-like an ethical questions.

An employee at the accounting firm KPMG challenged the ethics of tax shelters that the firm was selling. He received a simple e-mail that said: "You're either on the team or off the team."

Well everyone wants to be on the team. We all realize that loyalty is generally an important virtue. But it causes a pressure to conform and this pressure to conform, it can been argued, helped cause Ford employees to sell the Pinto despite awareness of its gas tank dangers, and helped A. H. Robins employees to continue to sell the Dalkon Shield contraceptive IUD despite knowing its ghastly medical consequences.

The impairment of individual decision making known as "groupthink" - where people deciding in groups often make more extreme decisions than any individual member initially supports - can exacerbate the conformity bias. It can be reasonably argued that loyalty and groupthink helped Morton Thiokol employees to remain silent about known O-ring dangers that caused the Challenger space shuttled disaster.

Psychological and organizational pressures can cause even people with good intentions to lie or otherwise act unethically. Good character isn't always sufficient. As Albus Dumbledore told Harry Potter, "It takes a great deal of bravery to stand up to our enemies, but just as much to stand up to our friends."

Activity:

Based on the videos that you watch above, answer the following questions (approx 200-300 words)

• Can you think of a time when you did something just because everyone else was doing it-even when it didn't feel quite right to you? Do you regret it now?
• It was recently observed that "cheating is contagious." Does that sound true to you? Why or why not? If it is true, why might this be the case?
• Loyalty is generally considered a good quality. When a group to which you owe loyalty seems to be making a decision that seems unethical to you, how should you go about trying to balance your loyalty to the group against your own ethical integrity? Have you had an experience like that? If so, how did you resolve it?
• Can you explain how "groupthink" works? Can you think of a time when you have been subject to groupthink?

 Activity 5 - Ethical Fading

1. Introduction

Written and Narrated by Professor Robert Prentice

In the book he wrote about his crimes, disgraced lobbyist Jack Abramoff-Casino Jack-asked: "What was I thinking?" This is a familiar refrain among white collar criminals. Why can they see their ethical failings in retrospect, but not earlier when it really mattered?

Part of the explanation is what professors Ann Tenbrunsel and David Messick call ethical fading. Imagine that you work for a company in internal audit and your boss asks you to inappropriately massage some earnings numbers. And it happens to be the week that the company is deciding whom to lay off in the most recent round of cutbacks. And you want to keep your job, of course. It is possible that you will not even notice the ethical dimensions of the action you have just been asked to take by your boss. These ethical dimensions may just fade from view.

Ethical decisions are often made almost automatically by the parts of our brain that process emotions. Only later do our cognitive processes kick in. When we think we are reasoning to an ethical conclusion, often all we are really doing is searching for rationalizations to support the decision that we have already made instinctively.

As time distances us from the decision we have made, the ethical issues may start to reappear. We may feel the need to reduce the dissonance that results from the conflict of our view of ourselves as ethical people and the unethical action we have committed. Studies show that offering people an opportunity to wash their hands after behaving immorally are often enough to restore their self-image. There's a reason we talk about starting with a "clean" slate.

Even if our minds cannot cause an ethical issue to fade from view, a process known as moral disengagement can mitigate the sting of an unethical decision. Moral disengagement is a process by which our brain enables us to turn off our usual ethical standards when we feel the psychological need to do so, just like we'd turn off a TV when a show comes on that makes us uncomfortable.

Studies show, for example, that people who want to buy an article of clothing that they know was manufactured with child labor will suddenly view child labor as less of a societal problem than they thought before. Moral disengagement allows us to suspend our personal codes of ethics, yet continue to view ourselves as ethical people.

There is no easy cure for ethical fading and moral disengagement. Our only option is to be vigilant in looking out for ethical issues and equally circumspect in monitoring our own actions and rationalizations.

3. Activity

Based on the videos that you watch above, answer the following questions (approx 200-300 words):

• Can you explain the concept of ethical fading and perhaps give an example of when it happened to you?
• Can you think of a situation where you were so intent upon pleasing an authority figure, fitting in with your friends, or achieving a goal that you failed to give an ethical issue your full attention? Did that situation cause you regret?
• Can you think of an example of a friend who might have been the victim of ethical fading? Or a person in the news recently?

Activity 6

1. Introduction

Written and Narrated by Professor Robert Prentice

In any kind of decision-making, context counts. The simple reframing of a situation or question can produce a totally different answer from the same person. For example, people would rather buy a hamburger made of meat labeled 75% fat free than meat labeled 25% fat. In fact, when questioned, these people will tell you that the 75% fat-free burger tastes better than the 25% fat burger, even though the burgers are identical.

When NASA was deciding whether to launch the ill-fated space shuttle Challenger, Morton Thiokol's engineers at first opposed the launch on safety grounds. But when their general manager instructed the engineers to "put on their management hats," he reframed the decision from one focusing on safety to one focusing on dollars and cents. The engineers then unfortunately changed their decision.

We need to look beyond the obvious frame of reference in business - "will this be a profitable decision?" - and consider our actions from a broader perspective like "how will this look when it's reported on the front page of the newspaper?"

Decisions made by business people often occur in a context where subjective factors predominate, and the framing of an issue is particularly influential. In Enron's declining days, the company attempted to save money by encouraging employees to minimize travel expenses. An Enron employee later wrote that he intentionally flouted the new policy. While this seems like a clear ethical lapse, in the employee's mind, he deserved to stay in the most expensive hotels and to eat at the best restaurants because of how very hard he was working. He framed the issue in terms of his narrow self-serving interests, not in the broader ethical context of adhering to company policy.

CFOs and accounting personnel at Enron, HealthSouth, and other scandal-ridden companies didn't need a philosophy course to help them figure out that their manipulation of financial statements was unethical. Their problem was that at the time of their actions, their frame of reference was loyalty to the company and to the company's goal of maximizing stock price. Had those employees been able to think in terms of the bigger ethical picture - for example, the impact of their actions on other people's pension funds - they might have acted differently.

3. Activities:

• Studies show that people primed to think about business profits will make different choices than people facing the same decision who have been primed to think about acting ethically. Can you explain how that might affect you in your work life
• Can you think of a situation where you made a decision that you regret and probably would have chosen differently had you looked at the choice in a different way?
• How do politicians and advertisers use framing to channel people's decision?
• How might framing adversely affect your ethical decision making in your projected workplace?
• How can you work to ensure that ethical considerations stay in your frame of reference when you make decisions in your career and your life?

Activity 8 - Fundamental Moral Unit

1. Introduction

Written and Narrated by Professor Deni Elliott

There are so many considerations in making ethical decisions, but what consideration is most important? Different cultures and ethical systems have produced theories that favor one consideration over others. The consideration that a theory favors is called a Fundamental Moral Unit, or FMU.

Many of the classical Western philosophers from the Greek and roman traditions favor the individual as the Fundamental Moral Unit. In these theories, the primary dictate is a negative statement: Don't get in an individual's way in his or her pursuit of the good life.

Feminist theories tend to determine the best choice based on how well those choices strengthen the connections among people and how well the needs of the most vulnerable are addressed. The fundamental moral unit here is relationship between people and is based on the belief that care should be given to those who can't take care of themselves.

Some Eastern theories promote the overall good of the community first and foremost. And some indigenous theories stress human's connection with the world as a whole, with all natural systems and species having an equal right to co-exist. People who grow up in these traditions expect that they and others will sacrifice individual self-interest for the good of the group and the environment. The Fundamental Moral Unit here is called "aggregate good."

Let's consider a decision you might encounter if you were a member of your local city council. There is a 50 acre parcel of land in your city's jurisdiction that was designated a hundred years ago to remain open space. Now the area contains some ancient Native burial grounds, but the tribe members a hundred years and tribe members today are happy with the designated use as long as the woodlands around the burial mounds stay intact. A developer would like to build a shopping mall there. As a city council member, you get to decide how that land will be used today: should it remain a park or become a shopping mall?

If you make your choice based only on the good that comes to individuals, you might be tempted to go with the shopping mall. The mall will provide jobs for many of the people in the community who are out of work and the additional income from the taxes from the new property owner and the businesses will allow the city to reduce taxes for individual home owners.

Which choice best advances the overall good of the community in which I live? The policy choice made previously to protect the land respected human connections to natural systems and was sensitive to the culture and history of a minority group. Affirming that decision helps all people in the community maintain trust in government.

We can see how the teachings from all of these traditions can help us in analyzing an important choice. And they can help us answer one more question: Can I find a choice that doesn't cause harm to anyone or anything? If a shopping mall is a good idea for the community, alternative building sites that don't cause harm are waiting to be found.

2. Activity:

Western philosophy identifies the individual as the FMU; feminist theories tend to use relationship and maintaining the connections among people; Eastern and indigenous theories put natural or spiritual systems as the core to be maintained.

1. Give an example to show that you can use these different kinds of thinking to arrive at the same or similar answers for what is morally permitted. Show how, in some instances, the answer to what is morally permitted would be different.

Activity 9 - Incentive Gaming

1. Introduction

Written and Narrated by Associate Professor Lamar Pierce

Organizations and institutions frequently use financial incentives to motivate productive behavior. The majority of people dislike effort to some degree, which forces authorities to either monitor people intensely to ensure that they contribute, or to pay them based on their observable performance. Salespeople are given commissions, bankers are given bonuses, and even teachers are paid for student performance.

The problem with these incentives, of course, is that you need to decide on which metrics to base the incentives, and then communicate those rules to people in order to motivate their performance. You can only pay people based on what you observe, and you can't observe everything. Which is why we get incentive gaming.

Incentive gaming is when people manipulate pay-for-performance schemes in ways that increase their compensation without benefiting the party that pays. Often referred to as "rewarding A while hoping for B", incentive gaming is an example of how opportunistic and strategic people can be when there are financial rewards involved. People will focus all their effort on those incentives that pay them the best, and will even manipulate information to represent their performance on those dimensions as higher than it actually is.

The financial crisis of 2008 provided several excellent examples of incentive gaming. Some mortgage brokers, who were paid commissions for originating mortgages, quickly learned they could earn more money if they relaxed the credit requirements for homebuyers. They were compensated based on originating a loan, not on whether that loan defaulted in subsequent years, a costly outcome for the bank and homeowner. The incentives designed to motivate effort and entrepreneurial behavior also motivate people to increase their earnings in ways that hurt both their customers and market efficiency.

Examples of incentive gaming are everywhere. When teachers are paid based on the standardized test performance of their students, they focus much of their effort on teaching to the test and hurt student education. When salespeople are given bonuses for reaching monthly sales targets, they offer customers unnecessary discounts to buy now rather than later. When workers are paid based on their relative rankings, they may focus their effort on sabotaging their coworker instead of improving their own performance.

The implication of incentive gaming is that managers and policy-makers need to understand that humans are clever and opportunistic beings. If you give them an incentive system, many of them will figure out how to manipulate it to maximize pay and minimize effort. Designers of incentive-based compensation systems must think carefully about unintended consequences, putting themselves in the shoes of their employees, and ask, "If I were given these incentives, what might I do to game them?"

3. Activity:

1. When have you been paid based on your performance, and how did this alter the way you approached your job (for the better and for the worse)?

2. Grades are partly intended to provide incentives for quality work. How do students strategically game grading systems in ways that might pervert this intent?

3. Is gaming unethical, or is it just rationally responding to the incentive system? Whose responsibility is it to stop gaming: the person who designs the incentive system, or the person who exploits it?

4. How do you draw the line between gaming and cheating?

Activity:

1. Psychologist Dan Ariely says that "the first dishonest act is the most important one to prevent." Why does he say that? Do you agree?

2. Can you think of a situation where you were a victim of the slippery slope phenomenon?

3. Have you seen a friend or read about someone in the newspaper who started cutting little corners and was soon in big trouble?

4. Cynthia Cooper, whistleblower of the infamous WorldCom financial fraud, wrote: "People don't wake up and say, 'I think I'll become a criminal today.' Instead, it's often a slippery slope and we lose our footing one step at a time." Do you agree? Why or why not?

5. What can people do to prevent a mistake from snowballing down the slippery slope?

Activity 11 - Loss Aversion

1. Introduction:

The objective of this video is to introduce students to the concept of loss aversion so that they can realize how it is one of a series of psychological forces that can cause them to act unethically, almost without realizing it. It is a phenomenon that must be guarded against.

People can relate to the notion that loss aversion has an impact on tax cheating. People will cheat more to avoid a loss than to secure a gain. So, if they have over-withheld, they are less likely to cheat in order to obtain a larger tax refund (which they view as a gain) than they are to cheat if they have under-withheld and are trying to avoid making a tax payment (which they view as a loss).

The two key things about loss aversion are that people hate losses more than they enjoy gains and that they will take risks (including unethical actions) to avoid losses that they would not take to secure gains. Students can usually grasp this idea and relate to it in their everyday lives. A student is more likely to cheat to avoid flunking out of school (a loss) than to move from a B to an A (a gain), unless she has a 4.0 GPA and views the potential B as a loss. In one experiment, subjects were more likely to be in favor of gathering "insider information" and more likely to lie in a negotiation if facing a loss rather than a potential gain. In real life, loss aversion means that people who have made mistakes and perhaps even violated the law through carelessness or inattention often will, upon realizing that fact, take their first consciously wrongful step in order to attempt to ensure that the mistake is not discovered and they do not lose their job or their reputation. They will lie, they will shred, and they will obstruct justice. Martha Stewart was not convicted of insider trading, but of obstructing justice to prevent financial, reputational, and other losses that would come from an insider trading conviction. Frank Quattrone, Wall Street's most influential investment banker during the dot.com boom, was not convicted of securities fraud but of inducing subordinates to destroy e-mails that would have created the loss that follows such a conviction.

Loss aversion also means that firms that are performing well, but not as well as they expected to or as other expected them to, may engage in unethical behavior because they frame their act of profiting (but not profiting as much as expected) as a loss rather than a gain.

3. Activity:

1. Studies show that people hate losses twice as much as they enjoy gains? Is that consistent with your experience?

2. Have you ever been caught off guard doing something you probably shouldn't have been doing (eating the last cookie in the cookie jar, peeking in someone's diary, touching your mother's jewelry) and when surprised with the question: "What are you doing?", quickly and almost automatically (and falsely) said: "Nothing!"

3. A recent study found that when people were under time pressure, they were more willing to cheat to avoid losses ("losing the sale") than to accrue gains ("getting the sale"). Do you think that is how you would react?

4. Can you think of any situations where you or someone you know may have made decisions affected by loss aversion?

5. What steps can people take to minimize the chance that loss aversion will help lead them to act unethically?

1. Introduction:

Written and Narrated by Professor Deni Elliott

More than 2000 years ago Aristotle and other wealthy Athenian men decided how people like themselves should treat one another. Everyone should be free to pursue their own idea of the good life as long as that person's choice did not interfere with somebody else's pursuit of the good life. That idea of "don't cause unjustified harm" was probably the first statement of Western Moral Philosophy.

It's only natural that we should first begin our ethical inquiry by thinking about ourselves, and how we want to be treated by the people around us. Take a few minutes to watch children on a playground. You don't have to wait long before you hear somebody yell, "That's not fair!" or "Cheater." By the time that kids are about 5, they begin to make rules for how to take turns and how to give special privilege to those younger or less able. These children are practicing moral agency.

The difference between a moral agent and a subject of moral worth is this: A moral agent is someone who has the power to intentionally cause harm to another. A subject of moral worth is any being or natural system that is vulnerable - it can be harmed. It's easy to see that children, pets, and even natural resources like water are all subjects of moral worth. They are all clearly vulnerable to harms caused by those who have power over them.

Throughout our history and across cultures, there have been people who were stripped of their ability to have moral agency or sometimes even to count as subjects of moral worth because of inescapable characteristics. That includes people from minority ethnic, racial or religious groups, women, people who are lesbian, gay, or transgendered, and people with disabilities. The moral obligation of moral agents is to use their power with care and never, intentionally cause unjustified harm.

3. Activity:

1. Name some abilities that are essential for someone to be a moral agent.

2. What is necessary for someone to be a subject of moral worth?

3. What is the difference between someone being a subject of moral worth and someone being included in the moral community?