The Dilemma Of Business Ethics

Post by Capsim
February 10, 2012

Previously, we introduced a framework that you can use to shape ethical discussions in your classroom. Today, we will talk about why these discussions are crucial for your students before they get into the corporate world.

Stories from Wall Street point to an ongoing crisis in business ethics. The global financial meltdownof 2008, a result of unethical behavior in the U.S. and Western Europe regarding sub prime mortgages and other instruments, caused roll on effects around the world that can still be felt by hundreds of thousands of people.

According to the Wall Street Journal, 79 percent of young Americans believe that there are no absolute standards in ethics.

And this crisis in ethical standards is no surprise, given the irresponsible behavior of business leaders over the last decade. In an article from 2008 entitled, “Ethics and the Global Financial Crisis,” Dr. Simon Longstaff explained: “At its core, ethics is about making conscious choices in line with an explicit framework of values and principles. It is this reflective engagement with the world that stops individuals, organizations and institutions from stumbling, blindly into ethical ‘death traps.’

Honesty and integrity are essential for the prolonged success of a company, yet it’s clear from stories of greed in the media that ethics is not always a priority in business.

Just look at the recently bankrupt company MF Global, formerly headed by Jon Corzine, who testified “I don’t know” before the House Agriculture Committee when asked about the 1.2 billion in client funds missing from his company’s accounts.

Business school graduates are likely to encounter job-related ethical conflict early in their working life. Often they will be ill-prepared to deal with the situation, assuming, like many, that difficult, ethical business decisions are the province of high-level executives. New to the workplace and keen to advance their career, they may not have the skills necessary to offer an appropriate response in a business setting.

Let’s examine this on a practical level. This is what we see on the news: British Petroleum struggling to stop the Gulf of Mexico oil leak; News Corp. executives grappling with the phone hacking scandal; and American International Group under-collateralizing its credit default swaps product with devastating effects on the world economy. These and more sensational business stories stemmed from unethical business behavior that eventually affected thousands, even millions of people.

Occasionally, stories of a corporation’s positive commitment to ethical conduct also make the news, although usually with a negative angle—stories such as Johnson & Johnson’s national recall of Tylenol (when a consumer tampered with their product to cover up a murder) or Google’s withdrawal from the Chinese market (when their servers were the target of espionage and email hacking.)

These are situations that CEOs, boards of directors and other senior-level executives must confront. What do not make the news, however, are scenarios such as this: A mid-level advertising executive pressures a new hire on their account team to “fudge” a routine financial report on media and ad production provided to their client, a brand manager of skin care products with a large packaged-goods company.

Against better judgment, the new hire complies and numbers are massaged to misrepresent the agency’s spending of client funds. The brand manager detects it and internally notifies the entire corporate chain of command. A crisis in confidence ensues between the packaged-goods company and their advertising agency.

When this situation is reviewed at the agency’s senior level, whose job and, potentially, continued advertising career will be on the line in an effort to appease the client and save the business relationship? The mid-level account supervisor who has plausible deniability, or the freshly-minted business grad? From the agency’s perspective, which of these employees is more expendable? The account supervisor with years of experience in the skin care market, or the most recent addition to the account team?

This is the sort of situation business graduates entering the work force must learn to effectively and ethically address. To learn how to arm your students with the skills necessary to handle such ethical situations, access your free eBook – Assessing and Developing Ethical Decision-Making Skills.

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