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I need help with 5 questions for my business ethics class. You have to read some articles before you answers the questions.
The questions are:
1- Evaluate the moral rightness or wrongness of the following situation from the perspective of Deontology and the perspective of Utilitarianism and say which view you think makes the most sense:A 57 year old male owner of a large investment firm is having a consensual sexual relationship with his 39-year-old fedmale assistant. The employer initiated the romance but the assistant acquiesced willingly. Neither is married.The employer hired and can fire his assistant; sets the assistant’s work load; and determines if and when his assistant gets a raise. Is the owner acting ethically?
2- Why does Merchant think that having quotas for women on boards of directors is not a good idea?
3- What reasons does she offer for her position?
4- How does Solomon interpret the Milgram experiment from the perspective of Virtue Ethics? Discuss Kay and Woolard’s positions on the idea of pay for performance as the basis for determining CEO compensation.
5- Why are both Friedman and Porter & Kramer critical of the idea of corporate social responsibility?
Please check the attached files for the reading links and powerpoints.
Thanks
http://www.jstor.org.weblib.lib.umt.edu:8080/stable/10.1525/cmr.2011.53.3.60
http://www.jstor.org.weblib.lib.umt.edu:8080/stable/10.1525/cmr.2011.53.3.83
http://blogs.hbr.org/2011/09/quotas-for-women-on-boards-are/
http://www.forbes.com/sites/quickerbettertech/2011/10/31/why-most-women-will-never-become-ceo/
http://va3wn8qp2m.search.serialssolutions.com.weblib.lib.umt.edu:8080/?sid=36520&genre=article&title=Business+Ethics+Quarterly&atitle=VICTIMS+OF+CIRCUMSTANCES%3f+A+DEFENSE+OF+VIRTUE+ETHICS+IN+BUSINESS.&author=Solomon%2c+Robert+C.&authors=Solomon%2c+Robert+C.&date=20030101&volume=13&issue=1&spage=43&issn=1052150X
http://www.jstor.org.weblib.lib.umt.edu:8080/stable/3857860?seq=1
http://www.bankersonline.com/articles/v07n06/v07n06a1.html
http://humanresources.about.com/od/businessethics/qt/workplace-ethics.htm
American Apparel and the Ethics of a Sexually Charged Workplace
http://www.businessweek.com/stories/2005-06-26/living-on-the-edge-at-american-apparel
http://abcnews.go.com/Business/american-apparel-ceo-dov-charney-tarnished-hero/story?id=16229958
Conscious Capitalism (CC)
Conscious Business (CB)
Good Way to do Business
or False Ideal?
Lecture today
“The Role of the Media in the National Carnival”
by Mark Leibovich
3:10 pm GGB 123
Two and a half cheers for CC
James O’Toole & David Vogel
In business “…it is often difficult to do well by doing good.”
O&V cite Iriving Kristel (Two Cheers for Capitalism, 1978): “…despite all its advantages over a centrally planned economy, an unregulated market is prone to boom and bust cycles, rewards short-termism, does not internalize environmental costs nor provide for public goods, and can lead to grossly uneven distributions of wealth both between nations and, internally, among the populations of capitalist countries.”
Why not three cheers?
“We also can’t give the movement three cheers because we are concerned that the Conscious Capitalism movement is creating unrealistic expectations for corporate performance that could serve to undermine other strategies that are needed to reconcile corporate practices and social needs.”
“…virtuous capitalism is difficult to sustain.”
Fall from virtue: J&J; Toyota; BP (Did these companies really “fall from virtue?”)
Virtue in business is generally not sustainable
“Doubtless, virtue can be sustained: witness Southwest Airlines, Nucor, SRC Holdings, and Gore. However, for the vast majority of socially responsible companies, a change in leadership, in technology, or in competitive pressures and, almost always, a takeover will undermine the kinds of behaviors promoted by Conscious Capitalists. ” (emphasis added)
Cf. the case of Robert Owen
CC not the only viable business model
Limited applicability of CC model
“The problem is not that Conscious Capitalism isn’t a viable business model; it clearly is. Rather, it is not the only viable business model. Scores of business books claim to have discovered the key to business success, but none has actually discovered this holy grail for the simple reason that no one business strategy or model is always, or continually, superior to every other one.”
“Because the number of successful business strategies and models is infinite, no one is, or can always be, superior to all the others.”
Is CC “getting religion”? (or is this a straw man or red herring?)
“…many firms have and will continue to prosper that do not subscribe to the principles and practices of Conscious Capitalism. That is why we are not convinced that Mackey, Hirshberg, and others will be any more successful than Owen was two hundred years ago in convincing other executives to “get religion” and change the way they conduct their businesses.” (emphasis added)
Doing good does not mean a firm will necessarily do well.
“…some firms succeed by doing well, some that do good do not do well, some that don’t do good do well, and some who don’t do good don’t do well!” (But how many firms in each category?)
“We also are skeptical of the commitment of Conscious Capitalism firms to treat all their stakeholders equally and fairly.” (Does CC really argue for this?)
Outsourcing? Restructuring? Layoffs? – hurt some stakeholders, benefit others
Firms have limited opportunities to do well by doing good.
“In short, the “consciousness” of capitalists, or the values they bring to their business activities, do matter; it can enable them to uncover opportunities for virtuous behavior that more conventional owners or managers whose only focus is on the “bottom-line” are more likely to overlook…. Yet, as we discuss below, the number of such “win-win” business opportunities is also limited.”
Re. Wal-mart innovations: Isn’t this just good business practice?
“…if all business activities were to potentially fit into Cell One, then advocates of Conscious Capitalism would have a strong, even compelling, case. Unfortunately, most do not. In fact, Cells Two and Three are now, and are likely to remain, much larger.
Need Government to solve social problems
E.g.: health care
“The fact is that some problems are so large, or systemic, that they cannot be solved solely by the actions of individual businesses”
E.g.: catalytic converters
For example, the problem of urban air pollution in the 1970s could not have been addressed effectively by any one auto company virtuously installing costly catalytic converters in their vehicles. To do so would have put that company at a significant price disadvantage against its converter-less competitors. So Congress passed the Clean Air Act mandating such equipment
What is the positive contribution of CC?
“The singular fresh contribution of Conscious Capitalism is its philosophical squaring of free-market principles with progressive business practices by stressing the profit-making potential of responsible, ethical, and sustainable corporate behavior. Since no corporate managers want to be accused of taking advantage of shareholders, this re-branding is significant because it legitimates a wide range of more responsible corporate practices.”
“Clearly, Conscious Capitalism can inspire the improvement of many corporate practices, which is an objective we applaud and wish to encourage. However, its adherents need to develop a more realistic understanding of what even the most socially conscious capitalists can and cannot accomplish.”
Recommendations…
“A good first step for the movement’s advocates would be to make clearer distinctions between “shoulds,” “cans,” and “wills;” otherwise they risk continually engaging in the fallacy of composition: to wit, “because many virtuous companies are profitable, all are, or can be.”
“It is hard to imagine how a coal company could embrace the principles and practices of environmental sustainability.”
Therefore…
“…we must warn the most enthusiastic of our fellow travelers that they may be over-promising what business can realistically deliver by promoting a false sense of complacency about the capacity of business to solve the world’s problems.”
John Mackey
What Conscious Capitalism Really is…
Response to O’Toole & Vogel’s (O&V) “Two and a half Cheers…”
O&V Fail to understand CC; Mackey thinks they are really referring to Corporate Social Responsibility
V&O miss the point:
CC is not CSR
“Their primary mistake is to fail to understand what CC really is. In so far as their critique is valid, it is not actually referring to Conscious Capitalism, but rather to Corporate Social Responsibility (CSR). As I will explain, these are not synonyms, but represent distinct philosophies of business.”
Basic Principles of CC
4 key principles of Conscious Business (CB)
1. Higher purpose than maximizing profits
Good, True, Beautiful, Heroic
video
2. Stakeholder Interdependence
Customer, employees, suppliers, society, environment
video
3. Conscious Leadership
Importance of CEO and senior leadership
video
4. Conscious culture
self-managing teams, empowerment, transparency, authenticity, a commitment to fairness, personal growth, and love and care
video
Qualities of CB cultures
“While CB cultures can vary tremendously they tend to have a number of similar qualities. These often include self-managing teams, empowerment, transparency, authenticity, a commitment to fairness, personal growth, and love and care. “
“…voluntary exchange for mutual benefit is itself an ethical process.” (Is business fundamentally ethical?)
According to Mackey…
Depicting business by pairing profitability and virtue (as O&V do) is misleading
most businesses are already virtuous
“Ordinary business exchanges are inherently virtuous.
“I believe the argument can be successfully made that ordinary business exchanges aggregated collectively are the greatest creator of value in the entire world and that this value creation is the source of “business virtue.”
CC/CB not CSR
Re Stakeholder equality: Mackey: I never said that
Pop Quiz
Please PRINT your name clearly
Answer all questions
5 minutes
Pop Quiz: Answer True or False:
1 pt. each
1. O’brien argues that Virtue Ethics makes it clear that the SEC should promulgate rules mandating the appointment of more women to BoD.
2. O’brien discusses the situation in Norway in her article where she states that Norway’s quota required that publicly-held companies raise the percentage of women on boards from 9 percent in 2006 to 40 percent by 2008.
3. O’brien thinks that the SEC diversity disclosure rule is ineffective.
4. Merchant makes it clear that there is plenty of evidence to support the claim that women are more effective BoD members than men.
5. The fact that Merchant mentions Kant several times in her article makes it clear that she is arguing from a Deontological orientation.
6. Marks thinks that women are under less social pressures than men.
2
T/F Quiz Answers
1. O’brien argues that Virtue Ethics makes it clear that the SEC should promulgate rules mandating the appointment of more women to BoD. F
2. O’brien discusses the situation in Norway in her article where she states that Norway’s quota required that publicly-held companies raise the percentage of women on boards from 9 percent in 2006 to 40 percent by 2008. T
3. O’brien thinks that the SEC diversity disclosure rule is ineffective. T
4. Merchant makes it clear that there is plenty of evidence to support the claim that women are more effective BoD members than men. T
5. The fact that Merchant mentions Kant several times in her article makes it clear that she is arguing from a Deontological orientation. F
6. Marks thinks that women are under less social pressure than men. F
3
Should Quotas for Women on Corporate Boards be Mandated by Law?
YES: O’brien
NO: Merchant
4
YES: Gael O’Brien
Quotas might be bad
Stir up discomfort
Undermine corporate governance
Dilute the caliber of the board members
Insult women currently sitting on boards
US not showing leadership in gender diversity
2000: 11.7% women on boards; 2010: 15.7%
SEC new disclosure rule, no teeth; firms allowed to report about diversity
5
Countries that have imposed quotas
Norway, Finland, Denmark, Iceland, Sweden, The Netherlands, France, Italy, Spain [Socialist?]
See U. of Michigan Study criticizing Norway
O’brien: More study needed
6
Quotas are necessary to make progress
Sally Kennedy, Tulane: Quotas needed “to overcome women’s barriers to office…. Just as it is no longer defensible to deny women the vote, the right to serve on juries…so too, do basic principles of democracy, representation, and nondiscrimination require that women serve on corporate boards.”
Why there should be quotas
“Without outside pressure from the SEC, a prestigious commission, or even the threat of a quota, I don’t see the momentum for change that will put sufficient value on the contributions of talented, qualified women and minorities to aggressively recruit them.”
NO: Nilofer Merchant
Quotas for Women on Boards are Wrong
Author is on a board herself, she says
“Board readiness events…” she went to:
No one seemed to be surprised about the “woman’s seat” on BoD at meeting; assumed as the norm
Why? Evidence to the contrary: BoD with high ratio of women to men:
Return on Equity: 53%+ (over firms with low ratio)
Return on Sales: 42%+
Return on invested Capital: 66%+
Women more effective BoD members
What’s the problem?
9
Merchant, continued
“The thinking is that quotas will create a force function to overcome gender gap barriers that have been well documented…I have doubts, for four main reasons:
Quotas signal tokenism: “woman’s seat” issue
Groups don’t change dynamics until they decide to change their dynamics
Quotas don’t necessarily increase the right kind of diversity
Quotas de-emphasize qualifications
Imposing quotas only target symptoms
The goal should not be just “more female board members,” but more female board members who are capable and credible once serving. To do that, we need to promote women into roles where they can gain the relevant experience:…leading a company….” But do women really want this experience? See Gene Mark’s article
10
Gene Marks: Do women really want to be CEO?
Why
Most Women
W
ill Not Become CEO”
“… less than 3% of our largest companies have female leaders…” Why?
Example of the difference in behavior between boys and girls—boys will be boys…
“There is still sexism in the workplace, it is just more concealed.”
“Women also have more personal and social pressures than men And this affects their ability to further their careers and get the experience they need to become good managers…”
11
Women have more social
pressures than men
“But as much as women have achieved in earning their equality, there are still some age old cultural habits that won’t die. Children need their mommies. And most moms I know, whether they have a full time job or not, want to be there for their child.”
Social pressures on women
“She can be earning twice what her husband earns but that’s still not enough. She’s also expected to be a good mom too (and a good daughter-in-law, and a good housekeeper and a good neighbor). And if she’s not “there” for her kids then she’s criticized. She can’t win.”
“Women are held to a much higher standard.”
“…quadruple that pressure
for women trying to raise
children on their own.”
“Don’t deny it- a female’s looks are held to a much higher level of scrutiny than a man’s”
Do you think a woman who looks like Reid Hoffman stands a chance at becoming CEO?
“All these things add up.
The surreptitious judgments in the office.
The social pressures.
The double-standard of behaviors.
The burden of maintaining physical appearances.
And you know what happens? Most women throw in the towel. They don’t want to put up with it. They leave the corporate world to raise families. Or start their own small businesses.”
Is CEO Pay Justifiable by Performance?
Yes: Ira Kay – NO: Edgar Woolard
“What right have the rich to enjoy their warm palaces and mansions, dining plentifully on the best food from all the world, while the poor suffer from hunger and cold?” Book of Amos (Bible)
Pop Quiz 3
1. Kay believes that corporate America is ruled by executive greed, fraud, and corruption and thinks that this is reflected in the many cases of over-the-top CEO pay.
2. Kay believes that the pay-for-performance model of executive compensation has not worked well in most instances.
3. Kay thinks that in most cases CEOs do not deserve the compensation they get.
4. Woolard discusses what he thinks are several myths about CEO compensation.
5. Woolard was CEO at Dupont.
Answers Pop Quiz 3
1. Kay believes that corporate America is ruled by executive greed, fraud, and corruption and thinks that this is reflected in the many cases of over-the-top CEO pay. F
2. Kay believes that the pay-for-performance model of executive compensation has not worked well in most instances. F
3. Kay thinks that in most cases CEOs do not deserve the compensation they get. F
4. Woolard discusses several myths about CEO compensation. T
5. Woolard was CEO at Dupont. T
Is CEO Pay Justifiable by Performance?
Yes: Ira Kay – NO: Edgar Woolard
Pay-for-performance vs internal pay equity
Ira T. Kay YES
[Kay: exec compensation expert—Watson Wyatt]
Myth-busting
The main myth: “…corporate America ruled by executive greed, fraud, and corruption.”
“the myth of the failed pay-for-performance model”
In most cases this model has not failed; exceptions not rule
Real problem is not that CEOs get too much, but that non-executives get too little
Research supports + correlation CEO pay & company performance 241
“the myth of managerial power.”
CEOs control boards and shareholders (false?)
(Is Dodd-Frank “regulatory overreach”? Will it cause “economic decline”)
James Krohe, Jr. “The Revolution That Never Was”
“wonders why U.S. workers have not taken to the streets to protest ‘the blatant abuse of privilege’ exercised by CEOs.” One “wonders why we have not yet witnessed calls for a revolution to quash the ‘financial frolics of today’s corporate aristocrats.’”
Kay
“Not once have I been asked to comment on the vast majority of companies—those in which executives are appropriately rewarded for performance….”
But a lack of evidence is not proof of anything
Some CEO exceptions, but not the rule
“The problem…is not that CEOs receive too much performance-driven, stock-based compensation, but that non-executives receive too little.”
“…I have never witnessed board members straining to find a way to pay an executive more than he is worth.”
Again…this does not demonstrate anything
Empirical evidence; 1500 companies; 20 yrs
Pay-for-performance “sensitivity”; high + correlation
Okay, but check the source
Kay—Are CEOs worth it?
“The relative scarcity of CEO talent….”
“Any influence that CEOs might have over their directors is modest in comparison to the financial risk that CEOs assume when they leave other prospects and take on the extraordinarily difficult task of managing a major corporation….”
Severance packages needed to “attract and retain talent.”
“goals of human-capital program”: attract, retain, and motivate CEOs
“The real threat to U.S. economic growth” is “regulatory overreach” and rejection of market forces re CEO pay.
“Instead of changing executive pay plans to make them more like pay plans for employees, we should be reshaping employee pay to infuse it with the same incentives that drive performance in the company’s upper ranks.”
“Within the context of a free-market economy, equal opportunity—not income equality by fiat—is the goal.”
Edgar Woolard NO
CEOs are paid too much. 4 myths that support this unfair situation
1. CEO Pay by Competition. (“Bull…CEO pay driven by outside consultant surveys ratcheting up pay.)
Better: “internal pay equity” at Dupont: 1.5 x exec VPs
2. Compensation committees are independent (“double bull”)
Comp. com. should deal only with Board, not CEO or HR
Pay-for-performance would be good if it really worked
3. Look how much wealth I created. (“joke”)
CEOs not control stock fluctuations
4. Severance for failing (“worst of all”)
To boards: “Why are you doing that?”
Postscript
“What right have the rich to enjoy their warm palaces and mansions, dining plentifully on the best food from all the world, while the poor suffer from hunger and cold?” Book of Amos (Bible)
