Chapter 1 Discussion:

Ethics & Business

Paul L. Schumann, Ph.D.

© 2004 by Paul L. Schumann. All rights reserved.

1-1
Introduction
 What did Merck do to deal with the disease
“river blindness”?
 Why did Merck invest so much money and
effort into a drug that made no money?

1-2
Nature of Business Ethics
 What does “ethical” mean to you?
 How does Velasquez define “morality”?
 What are the five characteristics that
distinguish moral standards from other
standards?
 How does Velasquez define “ethics”?
 How does Velasquez define “business
ethics”?

1-3
Nature of Business Ethics
 To whom should moral standards apply:
 Should a company be morally responsible for
its actions? Why?
 Should the managers involved be morally
responsible for the actions they take in the
name of a company? Why?
 Should both a company and its managers be
morally responsible? Why?

1-4
Nature of Business Ethics
 In what ways do the following issues
involving multinational companies raise
ethical issues?
 Shift operations to a country with cheaper labor
and less government regulation.
 Transfer materials and money between
countries to escape paying taxes.
 Transfer products to countries that aren’t ready
for the technology.
 Different nations have different standards.

1-5
Nature of Business Ethics
 What is the theory of “ethical relativism”?
 Are there some moral standards that a society
must accept if it is to survive? Examples?
 Do apparent differences in moral standards
across different societies sometimes disappear
on closer examination? Examples?
 If two people disagree on moral standards, does
that mean they both have to be right? Explain?
 What are some examples of incoherent
consequences of the theory of ethical
relativism?
1-6
Nature of Business Ethics
 Is it ethical for someone who believes in
ethical relativism to impose their ethical
relativism morality on others who disagree
with ethical relativism? Explain?

1-7
Moral Development
 According to Kohlberg, what is Stage One
of moral development?
 “The only crime is getting caught.” How is this
an example of Stage One thinking?
 Give an example of Stage One thinking.
 Give an example of employee behavior in a
business that illustrates Stage One thinking.
 As managers, how can we motivate a Stage
One employee to act ethically?

1-8
Moral Development
 According to Kohlberg, what is Stage Two
of moral development?
 “You scratch my back and I’ll scratch yours.”
How is this an example of Stage Two thinking?
 Give an example of Stage Two thinking.
 Give an example of employee behavior in a
business that illustrates Stage Two thinking.
 As managers, how can we motivate a Stage
Two employee to act ethically?

1-9
Moral Development
 According to Kohlberg, what is Stage Three
of moral development?
 Give an example of Stage Three thinking.
 Give an example of employee behavior in a
business that illustrates Stage Three thinking.
 As managers, how can we motivate a Stage
Three employee to act ethically?

1-10
Moral Development
 According to Kohlberg, what is Stage Four
of moral development?
 Give an example of Stage Four thinking.
 Give an example of employee behavior in a
business that illustrates Stage Four thinking.
 As managers, how can we motivate a Stage
Four employee to act ethically?

1-11
Moral Development
 According to Kohlberg, what is Stage Five
of moral development?
 Give an example of Stage Five thinking.
 Give an example of employee behavior in a
business that illustrates Stage Five thinking.
 As managers, how can we motivate a Stage
Five employee to act ethically?

1-12
Moral Development
 According to Kohlberg, what is Stage Six of
moral development?
 Give an example of Stage Six thinking.
 Give an example of employee behavior in a
business that illustrates Stage Six thinking.
 As managers, how can we motivate a Stage Six
employee to act ethically?

1-13
Moral Development
 According to research by Kohlberg and
others, does everyone progress through all
the stages? Explain.
 In what ways are higher stages “better” than
lower stages?
 How has Carol Gilligan criticized
Kohlberg?
 What does the research show about Gilligan’s
ideas?
1-14
For & Against Business Ethics
 Velasquez argues that “…ethical behavior
is the best long-term business strategy for a
company…” (p. 5). Do you agree or
disagree? Why? Examples?

1-15
Moral Responsibility
 What are the two excusing conditions that
can completely eliminate a person’s moral
responsibility?
 Why is ignorance an excusing condition?
• What if a person chooses to be ignorant?
• What if the person is ignorant because of
negligence?
 Why is inability an excusing condition?

1-16
Moral Responsibility
 Your boss orders you to do something
unethical. Should you be able to reduce
your moral responsibility because you were
just “following orders”?
 Murder a competitor?
 Do you have a moral obligation as an employee
to obey the immoral orders of your boss?

1-17
Case: The Air Force Brake
 Cast of characters:
 John Warren: engineer who designed brake,
short-tempered when challenged
 Searle Lawson: 26, engineer grad 1 year ago
 Kermit Vandivier: lab asst, 42, married, 7 kids
 Robert Sink: Warren’s boss, project manager,
not engineer, HS degree, started as draftsman
 Richard Gloor: test engineer
 Russell Van Horn: Sink’s boss
 Russell Line: senior executive

1-18
Case: The Air Force Brake
 What were the 2 key reasons why Goodrich
won the bid to make the A7D brakes?
 Why did Goodrich make an “absurdly low”
bid?
 How was the brake design to be tested?
 Why did the brake design fail the tests?
 What happened when the brakes repeatedly
failed the tests?

1-19
Case: The Air Force Brake
 Who might be affected by what happens?
 What moral issues did Kermit Vandivier
face?
 What choices did Kermit Vandivier have
when he was ordered to write a false report?
 What are the pros and cons of each choice?

1-20
Case: The Air Force Brake
 Is it morally right for a person in
Vandivier’s situation to write a false report?
Why?
 What moral standards can we develop to guide
our moral judgment?
 What is the consistency requirement for moral
standards?
 Do the moral standards meet the consistency
requirement?

1-21
Case: The Air Force Brake
 In terms of Kohlberg’s stages of moral
development, at which stage is:
 Searle Lawson? Why?
 Kermit Vandivier? Why?

1-22
Case: The Air Force Brake
 Additional facts:
 After Goodrich submitted the false report, the
Air Force began flight tests.
 Several near crashes during landings:
• When the brakes were applied on landing, the
wheels would lock, causing the plane to skid 1500
feet down the runway.

1-23
Case: The Air Force Brake
 Who should be morally responsible for any
“accidents” caused by the brakes?
 Kermit Vandivier? Why?
 Searle Lawson? Why?
 John Warren? Why?
 Robert Sink? Why?
 Russell Line? Why?
 Goodrich as a company? Why?

1-24
Case: The Air Force Brake
 Should anyone’s moral responsibility be
reduced due to the ignorance or inability
excuses?
 Kermit Vandivier? Why?
 Searle Lawson? Why?
 John Warren? Why?
 Robert Sink? Why?
 Russell Line? Why?
 Goodrich as a company? Why?

1-25
Case: The Air Force Brake
 Additional facts:
 Vandivier went to a lawyer, then FBI.
 Lawson went to a lawyer, then FBI.
 Air Force began investigation.
 Vandivier resigned from Goodrich.

1-26
Case: The Air Force Brake
 Additional facts:
 US Senate held hearings.
• Vandivier testified.
• Lawson’s testimony supported Vandivier’s.
• Sink and others denied wrongdoing.
– Vandivier dismissed as a high school grad with no
technical training.
– Lawson dismissed as young and inexperienced.

1-27
Case: The Air Force Brake
 Additional facts:
 Vandivier became a newspaper reporter.
 Lawson became an engineer for LTV.
 Warren kept his job.
 Line was promoted.
 Sink was promoted to Line’s job.
 What lessons can be learned from this case?

1-28