WHAT IS MANAGEMENT - Novellanovella.mhhe.com/olc2/dl/572538/dias1_im_ch04_FINAL1.doc · Web viewNow go to the “Investors” section and click on the “Corporate Governance” section

4

DEMONSTRATING ETHICAL BEHAVIOR AND SOCIAL RESPONSIBILITY

Other Teaching Tools 4.3

Video Notes 4.4

Brief Chapter Outline and Learning Goals 4.5

Lecture Outline and Lecture Notes 4.7

Career and Study Skills Notes 4.16

CAREER DEVELOPMENT: Knowledge is the Key to Performance 4.16

STUDY SKILLS: The Need to Succeed 4.25

Lecture Links 4.26

LECTURE LINK 4-1 Merck and Ethics (Part I) 4.26

LECTURE LINK 4-2 Saving Lives with the LifeStraw 4.27

LECTURE LINK 4-3 Wal-Mart to the Rescue 4.27

LECTURE LINK 4-4 Off-Label Drug Prescriptions 4.28

LECTURE LINK 4-5 Pension Plans Under Attack 4.29

LECTURE LINK 4-6 Blending Activism and Enterprise 4.29

LECTURE LINK 4-7 E-Cycling 4.30

Bonus Internet Exercises 4.31

BONUS INTERNET EXERCISE 4-1 Exploring Community Service 4.31

BONUS INTERNET EXERCISE 4-2 Researching Codes of Ethics 4.32

BONUS INTERNET EXERCISE 4-3 Balancing Profitability and Social 4.33Responsibility

BONUS INTERNET EXERCISE 4-4 Social Responsibility Successes and 4.35Failures

Critical Thinking Exercises 4.36

CRITICAL THINKING EXERCISE 4-1 Ethical Dilemmas 4.36

4.1

CH

APT

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CRITICAL THINKING EXERCISE 4-2 Ethics in the Workplace 4.40

Bonus Cases 4.42

BONUS CASE 4-1 Got a Deadline? Click Here 4.42

BONUS CASE 4-2 Is It Time for a NYSE Code of Ethics? 4.44

BONUS CASE 4-3 Raven Biotechnologies: If It Isn’t Ethical, It Isn’t 4.46Right (Video Case)

BONUS CASE 4-4 Merck and Ethics (Part II) 4.48

BONUS CASE 4-5 Harry Kraemer’s Moment of Truth 4.50

BONUS CASE 4-6 A Glance into the Future: Your Computer Knows 4.53

BONUS CASE 4-7 Gap’s Evolving View of Ethics 4.56

4.2 INTRODUCTION TO BUSINESS: Instructor’s Resource Manual

OTHER TEACHING TOOLS

For a description of each of these valuable teaching tools, please see the Preface in this manual.

Student Learning ToolsStudent Online Learning Center (OLC) www.mhhe.com/diasbusinessStudent Study GuideSpanish Translation Glossary (OLC)Spanish Translation Quizzes (OLC)

Instructor Teaching ToolsAnnotated Instructor’s Resource ManualIRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)Asset Map Online Learning Center (OLC) www.mhhe.com/diasbusinessPageOutPowerPoint Presentations (on IRCD and OLC)Test Bank Business Videos on DVD Enhanced Cartridge optionSpanish Translation Glossary (OLC)

CHAPTER 4: Demonstrating Ethical Behavior and Social Responsibility 4.3

http://www.mhhe.com/diasbusiness

http://www.mhhe.com/diasbusiness

VIDEO NOTES

Twenty videos are available, geared to individual chapter topics. The teaching notes for these videos are also included in the Video Notes section of this Instructor’s Resource Manual, beginning on page V.1.

VIDEO 4: “Raven Biotechnologies: If It Isn’t Ethical, It Isn’t Right” Raven Laboratories is a biotechnology company founded by Jennie Mather. This

video shows how Raven attempts to develop biotechnological drugs without compromis-ing ethics.

(BONUS CASE 4-3, “Raven Biotechnologies: If It Isn’t Ethical, It Isn’t Right,” on page 4.46 of this manual relates to this video.)


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BRIEF CHAPTER OUTLINE AND LEARNING GOALS

CHAPTER 4

Demonstrating Ethical Behavior and Social Responsibility

I. ETHICS IN BUSINESS

II. ETHICS DEFINEDLEARNING OBJECTIVE 1Define ethics.

III. PERSONAL ETHICSLEARNING OBJECTIVE 2Understand the approaches and the process of making an ethical decision.

IV. CORPORATE ETHICSLEARNING OBJECTIVE 3Distinguish between compliance-based and in-tegrity-based ethics codes, and list the five steps in setting up a corporate ethics code.

A. Sarbanes-Oxley

V. CORPORATE SOCIAL RESPONSIBILITYLEARNING OBJECTIVE 4Describe the indicators of corporate social re-sponsibility.

A. Corporate PhilanthropyB. Corporate ResponsibilityC. Corporate Policy

VI. RESPONSIBILITY TO STAKEHOLDERSLEARNING OBJECTIVE 5Examine corporate responsibility to various stakeholders.

A. CustomersB. InvestorsC. EmployeesD. Society and the Environment


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VII. MEASURING SOCIAL RESPONSIBILITYLEARNING OBJECTIVE 6Describe how social responsibility can be mea-sured

VIII. ETHICS AND SOCIAL RESPONSIBILITY GLOBALLY LEARNING OBJECTIVE 7Discuss ethics and social responsibility on a global level

IX. SUMMARY


LECTURE OUTLINE AND LECTURE NOTES

CHAPTER OPENING PROFILEWomenVenture (Text pages 108-109)

The opening chapter profile features Tené Wells, president of WomenVenture, a nonprofit orga-nization that was founded on social responsibility and continued to thrive based on it. The goal of the or-ganization is to teach women of all ages and levels of education and income how to thrive economically. Tené is herself a graduate of one of the organization’s programs. She came to WomenVenture to get help creating a resume for a better job. After a 20-year career at Honeywell and Medtronic, she became presi-dent of the group that helped launch her.

LECTURE OUTLINE LECTURE NOTES

I. ETHICS IN BUSINESSA. Recent scandals at WorldCom, Tyco, and

ImClone have focused attention on the subject of ethics.

1. What can be done to restore trust in the free-market system?

2. Those that have broken the law need to be punished accordingly.

3. Also helpful: New laws making ac-counting records more transparent and more laws making businesspeople more accountable.

B. The American public has deep concerns about the honesty of businesspeople.

C. Congress has passed new laws intended to make business more responsive to ethi-cal concerns.

POWERPOINT 4-1Chapter Title(Refers to text page 108)

POWERPOINT 4-2Learning Objectives(Refers to text page 109)

CRITICAL THINKING EXERCISE 4-1Ethical DilemmasThis exercise presents ten ex-amples of ethical dilemmas for students to evaluate. (See complete exercise on page 4.36 of this manual.)


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II. ETHICS DEFINEDLEARNING OBJECTIVE 1Define ethics. (Text page 110)

A. ETHICS refers to the standards of moral behavior; that is, behavior that is accepted by society as right vs. wrong.

1. Many Americans have few moral ab-solutes and make decisions situation-ally.

2. However, a general agreement exists in society as to what is right and wrong.

3. Religion and culture are usually our sources of ethics, but these two fac-tors vary among people.

B. Even in today’s diverse culture, there are still common standards of ethical behavior.

1. Integrity, respect for human life, self-control, honesty, courage, and self-sacrifice are right.

2. Cheating, cowardice, and cruelty are wrong.

3. All major religions support a version of the golden rule.

C. Ethics is not the same thing as the law. 1. An action for which you could be fined

or imprisoned is ILLEGAL. 2. Usually something that is illegal is also

unethical, but something unethical doesn’t have to be illegal.

3. Ethical standards are “right-vs.-wrong” behavior according to society.

4. Determining the right ethical course can be difficult.

POWERPOINT 4-3Ethics Defined (Refers to text pages 110-113)

TEXT REFERENCE Real World Business Apps(Box in text on page 111)Marge Green is a human re-source assistant at a medium-size insurance company. Her boss has just asked her to de-velop an ethics standards program for the company. She begins by doing some basic research on ethics, in-cluding concepts covered in this chapter.

CRITICAL THINKING EXERCISE 4-2Ethics in the WorkplaceThis exercise presents four situations involving work-place ethics. Student are asked to identify their imme-diate reaction. (See complete exercise on page 4.40 of this manual.)

TEXT REFERENCE Ethical Challenge: Ethical Culture Crash(Box in text on pages 112-113) Motorola proudly proclaims that it is dedicated to “un-compromising integrity.” However, when operating in other countries, cultural norms are often very differ-ent.


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III. PERSONAL ETHICSLEARNING OBJECTIVE 2Understand the approaches and the process of making an ethical decision. (Text pages 113-115)

A. Personal ethics are what guide us in mak-ing the right decision.

B. There are five main approaches to making an ethical decision:

1. the utilitarian approach; 2. the rights approach; 3. the fairness or justice approach; 4. the common good approach;

5. the virtue approach.C. The Center for Applied Ethics has devel-

oped another framework involving eight principles:

1. concern for the well-being of others; 2. respect for the autonomy of others; 3. trustworthiness and honesty; 4. willing compliance with the law (with

the exception of civil disobedience); 5. basic justice; being fair; 6. refusing to take unfair advantage; 7. benevolence; doing good; 8. preventing harm to others and the

world around us.D. A five-step process to ethical decision

making can be used on a day-to-day basis. 1. Recognize an ethical issue. 2. Get the facts. 3. Evaluate alternative actions. 4. Act on your decision. 5. Reflect on your decision.

POWERPOINT 4-4Personal Ethics (Refers to text pages 113-114)

TEXT FIGURE 4.1 Five Sources of Ethical (Box in text on page 114)

BONUS CASE 4-1Got a Deadline? Click HereWith the advent of the World Wide Web, plagiarism has become as easy as “point and click.” (See complete case, discussion questions, and suggested answers on page 4.42 of this manual.)

BONUS INTERNETEXERCISE 4-1Exploring Community ServiceThis exercise encourages stu-dents to use the Internet to explore opportunities for community service. (See complete exercise on page 4.31 of this manual.)

POWERPOINT 4-5Personal Ethics (Refers to text pages 113-115)

POWERPOINT 4-6Personal Ethics (Refers to text page 115)


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IV. CORPORATE ETHICSLEARNING OBJECTIVE 3Distinguish between compliance-based and in-tegrity-based ethics codes, and list the five steps in setting up a corporate ethics code. (Text pages 116-118)

A. Most companies have a formal code of ethics by which employees must abide.

1. Eighty-nine percent of corporations have written codes of ethics—90% of large companies do.

2. Although ethics codes vary greatly, they can be classified into two major categories: compliance-based and in-tegrity-based.

a. COMPLIANCE - BASED ETHICS CODES prevent unlawful behavior by increasing control and by pe-nalizing wrongdoers.

b. INTEGRITY - BASED ETHICS CODES define the organization’s guiding values and create an envi-ronment that supports ethically sound behavior; it stresses a shared accountability among em-ployees.

3. A five-step process can help improve America’s business ethics.

a. Top management must adopt and unconditionally support an explicit code of conduct.

b. Employees must understand that expectations for ethical behavior begin at the top and all employees are expected to act ethically.

c. Managers and others must be trained to consider the ethical im-

POWERPOINT 4-7Corporate Ethics (Refers to text pages 116-118)

BONUS INTERNETEXERCISE 4-2Researching Codes of EthicsMost companies publish codes of ethics to provide ethical guidelines for em-ployees. This Internet exer-cise directs students to re-search these codes of ethics on the Internet. (See com-plete exercise on page 4.32 of this manual.)

TEXT FIGURE 4.2Strategies for Ethics Man-agement (Box in text on page 116)

BONUS CASE 4-2Is It Time for a NYSE Code of Ethics?Doctors have a code of ethics. Advertisers have a code of ethics. Is it time for the NYSE to enact a code of ethics? (See complete case, discussion questions, and suggested answers on page 4.44 of this manual.)


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V. CORPORATE SOCIAL RESPONSI-BILITY DEFINED

LEARNING OBJECTIVE 4Describe the indicators of corporate social re-sponsibility. (Text pages 118-121)

A. CORPORATE SOCIAL RESPONSIBILITY (CSR) is the level of concern a business has for the welfare of society.

1. Corporations need to be good citizens as well.

2. Three determinants are used to judge the social performance of a company.

B. Corporate Philanthropy 1. CORPORATE PHILANTHROPY is an

indicator of social responsibility that in-cludes charitable donations.

2. Strategic philanthropy involves compa-nies making long-term commitments to one cause.

3. Many small businesses also partici-pate in corporate philanthropy.

C. Corporate Responsibility 1. CORPORATE RESPONSIBILITY is

an indicator of social responsibility that includes the actions the company takes that could affect others.

2. It includes everything from hiring mi-norities to making safe products to providing a safe work environment.

3. Green Mountain Coffee Roasters is an example of a company that behaves responsibly.

D. Corporate Policy 1. CORPORATE POLICY refers to the

position a firm takes on social and po-

POWERPOINT 4-8Corporate Social Responsi-bility (Refers to text pages 118-121)

TEXT FIGURE 4.3Examples of Corporate Ethics Policies (Box in text on pages 120-121) LECTURE LINK 4-1Merck and Ethics (Part I)When Merck researchers dis-covered a drug that treated river blindness, there was no profitable market for it. In-stead, Merck provided the drug free of charge to treat millions of people in Africa. (BC 4-4 below updates the Merck story. See complete lecture link on page 4.26 of this manual.)

BONUS CASE 4-4Merck and Ethics (Part II)What happened to Merck? The well-respected com-pany’s reputation for socially responsible behavior (see LL 4-1 above) was tarnished by its handling of the Vioxx controversy. (See complete case, discussion questions, and suggested answers on page 4.48 of this manual.)

BONUS INTERNETEXERCISE 4-3Balancing Profitability and Social ResponsibilityOne measure of a company’s success is how well it gives back to the local economy. This Internet exercise ex-plores whether companies are good corporate citizens. (See complete exercise on page 4.33 of this manual.)

BONUS INTERNETEXERCISE 4-4Social Responsibility


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VI. RESPONSIBILITY TO STAKE-HOLDERS

LEARNING OBJECTIVE 5Examine corporate responsibility to various stakeholders. (Text pages 122-127)

A. Customers 1. Businesses have responsibility to sat-

isfy customers with goods and ser-vices of real value, not an easy task.

2. Three out of five new businesses failperhaps because their owners failed to please their customers.

3. The text discusses the contrasting ways in which two car compa-niesSuzuki and Daimler-Benzhan-dled defects.

4. The payoff for socially conscious be-havior could be new business.

a. Customers view a socially con-scious company more favorably than less socially responsible companies.

b. All else being equal, customers prefer to do business with compa-nies they trust.

B. Investors 1. The late Milton Friedman stated that

corporate social responsibility means making money for stockholders.

a. Ethical behavior is good for share-holder wealth.

b. Even if a mistake is made, a cus-tomer will continue to be loyal if the situation is remedied.

c. The company will end up with more customers in the long run.

POWERPOINT 4-9Responsibility to Stakehold-ers (Refers to text pages 122-123)

LECTURE LINK 4-3Wal-Mart to the RescueAfter Hurricane Katrina dev-astated Waveland, Missis-sippi, Wal-Mart store man-ager Ron Cox contacted the retailer and arranged for a temporary replacement. (See complete lecture link on page 4.27 of this manual.)

BONUS CASE 4-5Harry Kraemer’s Moment of TruthWhen kidney dialysis pa-tients began dying, Baxter International filters were im-plicated. CEO Harry Krae-mer’s response: Do the right thing. (See complete case, discussion questions, and suggested answers on page 4.50 of this manual.)

LECTURE LINK 4-4Off-Label Drug PrescriptionsWhen a new drug is ap-proved for the U.S. market, doctors are legally free to prescribe it “off-label” for any other condition. (See complete lecture link on page 4.28 of this manual.)


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VII. MEASURING SOCIAL RESPON-SIBILITY

LEARNING OBJECTIVE 6Describe how social responsibility can be mea-sured. (Text pages 127-129)

A. The majority of socially responsible efforts—creating safer products, cleaning up the environment—are made with the profit mo-tive in mind.

1. The companies benefit by satisfying the demands of customers.

2. A SOCIAL AUDIT is a systematic evaluation of an organization’s progress toward implementing pro-grams that are socially responsible.

3. A social audit is initiated by the com-pany but is handled by an outside spe-cialist.

4. Some suggest that positive actions be added up and negative effects sub-tracted to get a net social contribution.

B. Four groups serve as “watchdogs” monitor-ing how well companies enforce their ethi-cal and social responsibility policies:

1. Socially conscious investors, who in-sist that companies extend the com-pany’s own high standards to all their suppliers.

2. Environmentalists, who apply pressure by naming companies that don’t abide by the environmentalists’ standards.

3. Union officials, who hunt down viola-tions and force companies to comply to avoid negative publicity.

4. Customers, who take their business elsewhere if a company demonstrates

POWERPOINT 4-11Measuring Social Responsi-bility (Refers to text pages 127-128)

TEXT REFERENCE Thinking Critically: Sharing the Wealth(Box in text on pages 128-129) By giving in times of need, corporations can do good, in the community, and for the bottom line.


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VIII. ETHICS AND SOCIAL RESPON-SIBILITY GLOBALLY

LEARNING OBJECTIVE 7Discuss ethics and social responsibility on a global level. (Text pages 129-132)

A. Ethical problems are not unique to the united states.

1. The text gives the examples of recent “influence peddling” in Japan, South Korea, the People’s Republic of China, and others.

2. What is new is that leaders are being held to new, higher standards.

B. Many American businesses, such as Sears and Dow Chemical, are demanding so-cially responsible behavior from interna-tional suppliers.

1. They make sure their suppliers do not violate U.S. human rights and environ-mental standards.

2. It is in the best interest of companies to be socially responsible.

3. Difficult questions:a. Should international suppliers be

required to adhere to American ethical standards?

b. What about countries where child labor is an accepted part of soci-ety?

c. What about multi-national corpora-tions?

4. None of these questions are easy to answer.

5. They show how complex social re-sponsibility issues are in international markets.

POWERPOINT 4-12Ethics and Social Responsi-bility Globally (Refers to text pages 129-131)

BONUS CASE 4-7Gap’s Evolving View of EthicsFaced with its damaged pub-lic image, Gap took steps to publicize its “social responsi-bility” report. (See complete case, discussion questions, and suggested answers on page 4.56 of this manual.)

TEXT REFERENCE Career Spotlight: So, You Want to Be … a CSR Specialist?(Box in text on page 130)



IX. SUMMARY


CAREER AND STUDY SKILLS NOTES

CAREER DEVELOPMENT BOX:

Knowledge is the Key to Performance (Text page 124)

Instructor’s Notes on Text Box Four:(Objectives to consider and implement to increase students’ knowledge, usage and understanding of the concepts).

Whether it concerns what we have learned as students in a class, employees on the job, or becom-ing involved in a hobby and wanting to become better at something, understanding the terminology of whatever the topic is, is essential. Good illustrations for student’s are:

When you wanted to become better at football, you had to learn the terminology used for playing the game.

When you wanted to join the choir, you needed to learn the directors’ terminology for con-ducting a successful program.

When you wanted to build a computer, you needed the experience and technical knowledge of computer terminology to make the finished product successful.

So, if you want to become better at your trade and achieve success in your job and personal life, you have to learn more about the specific terminology that will educate you and guide you through the unfamiliar learning stage to becoming a successful, experienced person. Once done, this transformation will be the result of new, accumulated skills that can make your life and value to others much more re-warding.

STUDENT EXERCISES:

1. Ask students about the concepts of how organizations are structured. Ask them what they think the (a) slim & trim, (b) layered, and (3) home office with satellites might look like. Use the fol-lowing as explanations of the three ways companies might be structured and help them to under-stand how company structure effects hiring decisions and what a new hire might expect in how they will be managed, supervised, and the level of decision-making ability they may or may not have.

Company Structure

Slim & Trim-Layered-Home Office & Satellites

Slim & Trim

By definition, Company Structure is the way an organization functions based on the top level management structure. A company can have single leadership (single owner) and the decisions regarding the business of the company can be handled quickly without much conferring and meeting with others. This is a slim upper management structure and by design keeps the decision making to few.

This style is often found in a small to mid-size family business. As an employee of this type of organization, your job may have many levels of responsibilities that would be more than a larger com-pany but your authority might be lesser based on the company ownership and decision making. Under-


standing how this type of structure works is helpful so as to lessen any frustration that might occur as your responsibilities are many but your ability to make big decisions is not possible without the approval of the company president or owner.

Types of Companies that are Slim & Trim:Dell ComputersApple Computers

Layered

When a company becomes rather large, many departments are formed (marketing, finance, cus-tomer service, maintenance, executive, etc.) and the layers of the company, from lower level functions to higher level decision making are formed. In the process, many levels of management can also be formed to lead groups to perform job duties throughout the company. As a result, getting approval for things such as paying employees overtime or spending more money on advertising usually must be approved up the company chain of command and can oftentimes lead to red tape and frustration when the outcome could be better but the approval process hinders this from happening.

This check-and-balance approach is why larger companies often become slow and stale in the in-dustry. Smaller companies can frequently take customers and market share away because of their ability to get things done more quickly. Understanding this company structure is important so that expectations and job performance are still maintained, even with the inherent design flaws of a layered company.

Types of Companies that Are Layered:General MotorsGeneral MillsProcter & Gamble

Home Office & Satellites

When a company has a product and service that has mass marketing and selling appeal, it can take the form of a home office base with multiple locations for doing business with the customer. The job of the employee is one of working in a home office role, doing functions to support the satellite opera-tions or working in the field running the store locations, based on the company’s working model.

If you work in the home office, your job duties can be defined by a specific department and usu-ally not highly staffed. Therefore, you may have many job duties and meetings to attend that are in sup-port of the entire organization’s goals. This job and its functions are more structured. Usually department heads of the company work on policies and budgets that are used throughout the organization. The direc-tion and decisions are made at this level and then implemented by the off-site locations.

Employees working at the off-sites are asked to work more directly with the public. Duties usu-ally include opening, maintaining, and closing the business. Policies regarding the product and service are established and carried out so that few decisions are made regarding these issues. The management of the off-site usually includes a store manager, assistant manager, shift leader and full-time and part-time staff. Jobs are assigned accordingly and training and following company policy are highly enforced.

Types of Companies that are Home Office/Satellite in Operation:SubwayMcDonaldsAuto ZoneQuick Lube


Human Relations Department (HR Department)

Large Companies-Mid Size Companies-Small Companies

If you locate your business in Kalamazoo, Michigan, Bellingham, Washington, or Portland, Maine - any town, anywhere - there are specific characteristics about the companies that may differ be-cause of their geographic location which relate to the depth and style of their human resource (HR) De-partments. In most cases, the following is a list of the duties and responsibilities of the HR department:

Job duties and pay Union or non-union shop Training and employment development Hiring Additional/optional benefits like 401K options, medical, dental, etc. Computation and distribution of employee pay Educational programs Procedures manuals RetirementThe list of duties can be short or long and the duties can be few or many. How companies handle

the HR function is often determined by the size of the company.

Small Companies

The HR Director of a small organization is often more of a generalist in his or her approach to handling and carrying out the duties of the HR Department. This person, in most cases, has all the HR re-sponsibilities and it is his or her job to administer them accordingly. In this instance, it can be said that the person would have a good, general knowledge of HR issues and be able to run the department success-fully.

Mid-Size Companies

As you can assume by the description, mid-size companies have more HR functions based on the size of the company, amount of employees, and revenue. As a result, the HR department would operate similarly. The HR director would be responsible for the HR functions but would also rely on other em-ployees to handle other areas like payroll and benefits, training and hiring.

While more help is shown in this example, most often the demand for the HR functions are enor-mous and the job/duties are handled as best as possible. Overall, few employees are available to carry out the HR functions but the HR director is an overseer of the entire HR function and usually keeps the com-pany in line with regard to compliances, proper hiring, firing and training, etc.

Large Companies

Large companies are usually well staffed in the HR Department and have many specialists to han-dle the specific HR duties. This format is necessary to keep the company current and in line with HR compliance as well as in keeping up with employee benefit programs, union concerns, insurance needs for employees and potential lawsuits, etc.

To be an attractive prospect for employment in a large company, it is to your benefit to be con-versant in the best practices of Human Resource management. You stand a better chance of being hired if you have an overall understanding of how a Human Resource Department operates. Knowing how small,


mid-size and large companies handle their HR duties can be a real strength when you approach a larger company for employment.

Job Description & Pay

Job Duties-Responsibilities-Compensation

Understanding job duties is important to the decision to take on said responsibilities and a mea-sure or benchmark regarding the overall success you have in accomplishing the job. In addition to the stated duties, each job has a certain level of responsibilities that go along with the type of job. Finally, a certain level of compensation should be given to the person who performs the specific job.

Job Duties

Job duties are usually given for each job title within an organization. The HR Department usually has a job description that has been written by the department and these are usually contained in binders within that department.

Job Responsibilities

Job responsibilities are in addition to job duties. If, for example, you are working in the electri-cian in a power plant, your job duties may be day-to-day tasks. However, your job responsibility is to also make sure that when you shut power off for repairs or have a reason to make sure no one comes in contact with a fuse panel, you post this information accordingly. As a person who understands the implications of electricity and what can happen if it shocks a person, you have the responsibility and obligation to handle this responsibility accordingly.

Compensation

Job duties and responsibilities are components in establishing the proper compensation that an employee would receive. The compensation can be in direct pay, benefits, and other methods that the company deems fair.

STUDENT EXERCISE:

2. Ask students their opinion about how jobs are found. Use the descriptions of each of the three types (want ads, word of mouth, and employment agencies) as part of your discussion. Ask them how they view the strengths and weaknesses of each of the job search processes.

Employment Agencies

Company Pay-Client Pay-Free Services.If you have ever used an employment agency, you know that the expertise that they can offer has

to be paid for, and there is more than one way for this to occur. Some employment agency services are paid for by the hiring company and the client is therefore free of any charges for using their services. Some employment agencies ask the client to pay for their services, and many other things besides finding the job are covered in these fees. Sometimes the fees are shared by both the client and the hiring com-pany.

Company Pay


If the hiring company is paying for the new employee, usually a brief meeting with the client (person looking for employment) and the employment agency executive takes place to discuss job inter-ests, past job history, resume, and other variables that could affect the outcome of the hiring. Once com-pleted, the employment agency finds companies that would match the client’s interest and sets up inter-views for the prospective employee and employer.

Once this process takes place, the interview is conducted and the process takes it course. The em-ployment agency executive will keep in contact with the client regarding the outcome of any and all inter-views, potential hiring status and the timeline that may take place. Questions by the client can usually be answered by the employment executive and the outcome is usually positive for both parties.

Company Pay Employment Agencies:Snelling Personnel KeystoneJ.E. Wottoua & Associates

Client Pay

When the relationship is one where the client is going to pay for the prospective hiring by an un-known company, a set of objectives are discussed up front and a contract is constructed spelling out what the employment agency will do to assist the client in pursuing the job. Most often, these are jobs of higher status and pay, more professional in nature, and require that the client has a proven job history of similar duties and accomplishments.

The client in most cases is seeking a new career field and is relying on the employment agency to help them find this new career based on the agency’s contacts in the job market. In the process, the client is usually taken through a series of evaluations about their job likes, successes, and conversations about their ideal job. The process can frequently be lengthy and the fee structures are usually around the $5,000 figure for the services that will be rendered by the employment agency.

Caution should be taken if expectations are not realistic and if the hopes of the new career are not met to satisfaction. In most cases, the client can use the employment agency’s services for the remainder of their career pursuits.

Types of Client Pay Employment Agencies:Haldane

Free Services

There are many free employment services available to individuals looking for employment. Local libraries are filled with books and publications on the subject of job searches. Local agencies also put on clinics covering employment topics such as interviewing, job search, resume writing, filling out job appli-cations, etc. Also, using the internet can be a source of employment assistance including hiring agencies in your area, how to write a resume, etc.

Employment Want Ads

Word Of Mouth-Posted-AdvertisedIn most cases, finding jobs is not overly difficult. Finding a career job, however, can be a daunt-

ing task. How jobs become know is a process of many variables. Understanding how this process works can be of great benefit.


Word of Mouth

Hearing about a job directly from someone in the know is a real benefit to the receiver of this in-formation. Usually the specifics of the job (duties, pay, and immediate boss) are also known factors that are shared in this process. The most important element in the entire word of mouth job opportunity is who to talk to about getting an interview and the potential of securing the open position.

In most cases, the open position can be filled quickly either by someone in the company or through the word of mouth process. Once a job is posted on the open market, the interviewing process can take on a new direction. Getting through the process can become more difficult because the pool of candi-dates becomes incrementally greater; you will find yourself pitted against people with wider skill sets and years of employment – you may find it difficult to compete with these qualities if this is your first job or you have limited skills or work experience.

Word of mouth information is usually helpful if you have some connection to someone within the organization and your success will be greatly increased if your skills and experiences are a good match to the job opening.

Posted

Jobs that are posted within the confines of a company through newsletters, memos, job boards, announcements, and other means are intended for hiring an internal candidate whenever possible. Em-ployees are usually familiar with how to evaluate the job listings, departments that would be involved and the other particulars about the job opening. Information on compensation and benefits is also often widely known within the company.

However, in many cases, job postings do have requirements in terms of the duties and which em-ployees would qualify. Job postings are a positive for most or all employees as they see new and better opportunities for advancement in the company in which they are already employed.

Advertised

Jobs that are posted in a company hiring memo, over the internet, placed in local and national newspapers, and in other local advertising mediums are often entry-level jobs which the company can fill on a regular basis.

Many times, applications are handled by telephone, coming in to fill out an application or submit-ting a resume. This is a time-consuming process for the company and the prospective employer, but a necessary one.

While the company may have an internal candidate in mind, it is good policy to post the job both internally and externally. Companies wish to avoid the appearance of impropriety at all costs in the hiring of employees.

STUDENT EXERCISE:

3. Discuss with students the “skills” most often needed to successfully obtain a job. Ask them how much ex-perience they might have in each of these areas and how they might define their skill set.

Self Skills & Attitude

Mechanical-Technical-Verbal-WrittenMechanical skills are very important in regard to how machines and production processes oper-

ate. Having skilled people plan these operations and execute the best possible outcome has great value in


many organizations. Likewise, technical skills that relate to the technological performance of a business is also vital to the success of many businesses. Finally, the ability to communicate in both verbal and written formats is essential to the free trade that exists in the world today. These skills are likewise of the utmost importance to companies that want to compete at a high level in their respective industries.

Mechanical/Technical:

Mechanical and technical skills can be similar, but can also be different in the confines of most organizations. Mechanical skills are used in motors, machinery, electricity, plumbing, carpentry, machin-ing, etc. Technical skills may be the blending of some of the mechanical skills with technological skills such as computer applications of CAD-CAM, computer networking, phone usage and the overall effec-tiveness of the communication tools and outlets of an organization.

Writing & Verbal:

Written communication is integral to all organizations. Companies regularly use communication in many forms: e-mail, company newsletters, annual reports, contracts to vendors, and many aspects of employee training. Verbal skills are those which include telephone conversations with internal and exter-nal customers, face-to-face sales calls, employee meetings, trade show participation – any place where one person is talking directly to one or more persons. How well this is done has a lot to do with the over-all leadership of the company and the expertise of the employee that are hired.

Knowledge is key to performance. We need to understand what methods can be taken to learn and improve study skills. Most study skill improvement guides list the following ways to improve your study skill effectiveness: Find a quiet place to study, a routine that maximizes your study alertness. Learn how to .prioritize, take better notes, use time management, become a better reader, a better writer, or a better listener. Maximize your memory, test taking skills. Reduce procrastination, test taking anxiety.

Here is a good list to begin your own assessment regarding effective study skills. How does this list help to identify what you already know about good study skills and what might be areas that need im-provement?

STUDENT EXERCISES:

4. Now is the time to engage in discussions about the many resources that are available for helping students become at studying and test taking. Some websites that will be helpful to spend time with…Assign the stu-dents to view these specific websites and be prepared to discuss at a later class:

Career Etiquette

Dress-Manners-Professionalism-ResponsibilityIt is important to know what is considered professional dress, how to act professionally, and what

your job responsibilities are. The more you know about these things, the more successful you will be in your career. Understanding how knowledge of each of these areas can assist you in your job will be dis-cussed.

Dress

In the many organizations that exist in the marketplace, the dress of the employee can be varied based on the job duty, company policy and the overall level of professionalism that the company is trying to portray. A maintenance position usually provides the employee with a uniform based on the work that


is performed. Employees in a production capacity can also be included in the company uniform program. Managers may be dressed in dress slacks, dress shoes, and may or may not need to wear a tie, if male.

The department that the manager works in may also dictate a particular dress code. Office staff usually has specific requirements for both women and men. Suits are more often today the dress of upper level management; however, companies are less formal today than in the past. In the scheme of dress for the job, going towards being better dressed and looking more professional is always a good personal pol-icy.

Once your career is started, looking at employees around you can often help you evaluate the dress style of the company. Directing any questions to your immediate boss lets him or her know you are aware and concerned about the importance of the need to look your best on the job!

Job Application & Resume

Honesty-Accuracy-NeatnessHow you portray yourself through the use of a resume can be a tremendous boost to your career.

However, accuracy is the word of advice here. Using false job information or job titles, falsifying educa-tional accomplishments, and job/career accomplishments are danger areas for any job applicant. Once in-formation that is not accurate is falsified, possible termination and other charges may result, all of which will be detrimental to your future employment.

Honesty

While we always hear the quote “honesty is the best policy,” this could not be more true with re-gard to your resume. Your information is in print and can be distributed near and far where many possible companies might look at it and use it accordingly. If you cannot perform up to the level of stated experi-ence or do not have the level of education you indicate on the resume, your career can be capsized before it even gets afloat.

Accuracy

In addition to honesty, accuracy should be hand-in-hand when used on your resume. If you have worked at company XYZ, your job title, dates of employment and duties should be accurate.

If you attended ABC Community College, your course work and grades should be accurate. Prospective employers do check on the information on your resume. The accuracy of the information sup-plied will reflect on your own character and should always be a positive mark for you.

If you have some shortcomings, talk about them honestly. The prospective hiring company will be more pleased that you are honest and accurate about your skills and can then better evaluate your po-tential for the job you have sought. There is no perfect employee that companies potentially hire and they understand that. Being honest and accurate uses your time effectively, and most importantly does not waste the time of a potential hiring company.

Neatness

Finally, all the skill and accomplishments you may have can be short-circuited when your resume and professional work is not handled in a neat and professional manner. Making sure your titles are accu-rate, spelling is correct, and the overall presentation is done as best as possible is the best way to assure that your resume stays in the “call” pile and not the “discard” pile. There are services available to assist you in resume writing and presentation. Considering the importance of the potential outcome, this might be an area worthy seeking professional help.


Job Interview

Preparation-Execution-Follow UpPreparation for a job interview can be very beneficial. Execution is the results of your preparation

and follow-up is the best measure to assure the best possible outcome of your work.

Preparation

Putting together a resume is a process. If you have some experience at it, you can use that experi-ence and progress through the process each time. In the end, a resume is an accurate reflection of your current accomplishments in both your work and education.

When using this information, understand where your strengths and shortcomings lie. A person with a lot of work experience but with no additional education (community college, four-year school, uni-versity, trade, etc.) may find it difficult to get a higher-level job because of the degree requirements. Like-wise, the person with excessive college credits and no practical job experiences may find it difficult to get the job they are seeking.

As a result, some balance of these two areas can often pay high dividends. Think about this: what are your job experiences and level of college and degree accomplishments? Do you see a need to work on one, neither, or both of these areas? Your resume is a reflection of your own work and only you can im-prove upon the expected results.

Execution

Preparing and using your resume can be a great experience. However, how well you execute the writing of the resume and the interview process when you discuss this information has great implications. Having a plan for these steps is vital. Lack of experience can be made up by practice. Using a profes-sional service can likewise assist in answering questions you might have regarding the resume-interview process.

Follow-Up

After you have handled your resume writing accurately and honestly and have executed the re-sume during an interview, proper follow-up is the next step of the process. Follow-up might include a phone call, e-mail, or a personal letter or note to thank the parties involved in the interview process. This final touch can keep your name fresh in the minds of the hiring executives and reaffirm to them your in-tent of wanting to work for this particular company.


STUDY SKILLS BOX:The Need to Succeed (Text page 125)

Instructor’s Notes for Text Box Four:(Objectives to consider and implement to increase students’ knowledge, usage, and understanding of the concepts).

Based on the list of study skills that lead to improved study skill outcomes, what can you do to become a better learner? Are you organized and make good use of your time but need better note taking skills to feel prepared for test taking? Are you a good listener and note taker but get anxious when taking tests? Could you improve your time management skills so that you are prepared for the continuous papers and test that are required for each course you are enrolled in? Is your list so large and intimidating that you feel helpless and not sure where to begin? Now is your chance! Begin with what you feel are the three most important items that would help you improve your study skills and overall grade. Once you have successfully done this, make a new list of your top three again. What does this list look like? Are you making progress or are you still struggling with the same issues? What helped you gain success or why do you still have the same problem areas? Our next topic, Time Management, might help reveal why problems still exit in improving study skills and grades.

STUDENT EXERCISES:

1. Ask students to key in on the top three areas where they feel they need improvement. Once done, make a list on the board from the entire class. Find where the common “difficulties” are. Begin a discussion as to what the common study problems are and the potential causes. Once this is com-pleted, begin a discussion about possible solutions that can help minimize or eliminate the diffi-culties.

2. Introduce students to the idea of using a journal. Ask students to purchase a small notebook or journal where they can list the top three areas they feel need the most attention to help them im-prove study habits, preparation and execution. Have them then make notes as to how they intend to make these improvements. Ask them to do this over a period of time such as 2-3 months and then evaluate the results. Have the student then evaluate the results, both positive and negative. Get the student then to make a new top three list (it is possible one or more of their first three listed items could be placed on the top three list a second time) with same approach to how to im-provements and then evaluate how well they were able to accomplish these goals. This exercise is perhaps the most important in the identification and execution of how to improve their study skills.


LECTURE LINKS

LECTURE LINK 4-1

Merck and Ethics (Part I)

River blindness is a parasitic disease transmitted to humans through the bite of the common blackfly found along riverbanks. Unlike many other waterborne diseases, river blindness only occurs around fast flowing rivers and not in pools of stagnant water.

Once the parasite is in the bloodstream, it multiples and spreads throughout the body. The adult parasite, which can survive for up to 15 years, produces offspring called microfilaria. These offspring cause skin rashes, itching, and blindness. River blindness is most prevalent in sub-Saharan Africa, where 28 countries are affected. The World Health Organization estimates that river blindness afflicts 18 million people worldwide. It is the leading cause of blindness in the developing world.

In the early 1970s researchers at the pharmaceutical company Merck were looking for drugs to treat a host of resistant worm parasites in livestock. The researchers imported bacteria from around the world, more than 100,000 species. Fermented in broths, the organisms produced new compounds. These were tried, one by one, in worm-infested mice. In 1975, they hit the jackpot with a soil bacterium from Japan. The new drug, Ivermectin, not only killed all the worms inside the animal, but it also killed biting insects on the skin of the animals after a single dose.

Ivermectin became a financial success with sales greater than those of any other animal health product in the world. It is used against animal parasites in most domestic animals—including cattle, horses, pigs, and dogs.

In 1978, researchers discovered that the drug worked against a parasitic worm in horses, similar to the one that causes river blindness in humans. Researchers at Merck suggested Ivermectin be tried on humans. Within a year doctors had given the new drug to a few patients with excellent results. Ivermectin does not kill the adult parasitic worms in the patient’s body, so it is not a total cure. What it does do is kill off the microworms and keep the adult worms from producing more offspring. The study also showed that a once-a-year dose might be enough to prevent the disease.

Because of these studies, Merck knew that Ivermectin could potentially prevent river blindness. But this disease is prevalent among the poorest people in the world. In some of these poverty-stricken countries, only $1 per year per person can be budgeted for public health. These people could not afford the drug even at a price of pennies per year. Merck then asked governments in Africa, Europe, and the United States to purchase Ivermectin from Merck (at a low price,) but no government agreed to this.

Faced with the fact that they had a drug that could potentially eradicate the disease, Merck an-nounced in 1987 that it would provide Ivermectin without charge to as many people as needed it for as long as river blindness remained a threat.

The Merck donation program is the largest on-going medical donation program in history. Treat-ment programs now exist in 34 countries, and more than 40 million people receive Ivermectin to treat river blindness each year. Merck has formed a partnership with the Bill and Melinda Gates Foundation to distribute the drugs. The Foundation will put up $50 million, matched by $50 million from Merck. In 2002, Celestina Hiza, a Tanzanian grandmother, received the 250 millionth free dose of the drug. i

(BONUS CASE 4-4 on page 4.48 presents the second part of this discussion, Merck’s handling of the Vioxx recall.)


LECTURE LINK 4-2

Saving Lives with the LifeStraw

More than one billion people—one-sixth of the world’s population—are without access to safe drinking water. At any given moment, about half of the world’s poor are suffering from waterborne dis-ease, and 6,000 die each year by consuming unsafe drinking water. The world’s most prolific killer is di-arrheal disease borne bacteria like typhoid, cholera, e.coli, and others. Safe water access has the potential to transform the lives of millions.

Until now, there was not much anyone could do about this because systems to clean water were costly and required electricity and spare parts, etc. But there is now hope for a low-cost solution, the LifeStraw, a personal, low-cost water purification tool. Invented by Mikkel Vestergaard Frandsen, the tool is a plastic pipe filter, a little longer than a toilet-paper tube, and about the same diameter. Inside the tube, a series of mechanical screens, carbon particles, and resin beads filter and kill most pathogenic bac-teria and microorganisms common in water systems throughout the world. Using a patented material called PuroTech Disinfecting Resin, the filters are rated for 185 gallons of water —approximately one year’s use for a single individual.

Mikkel originally wanted nothing to do with his family fabric business, Vestergaard Frandsen, preferring instead to develop small entrepreneurial enterprises in Africa. A 1992 coup in Nigeria forced his return to Denmark, where his father Torben, CEO of Vestergaard Frandsen, convinced him to join the company, founded by his grandfather Kaj to produce hotel uniforms.

Mikkel’s first task was to find something to do with more than 1 million square yards of surplus fabric the company didn’t need. He had the woolen material cut into blankets and sold to aid organiza-tions. Later, as cheap textiles from China began to undermine the business, he looked to more specialized products. He began with a trap for tsetse flies, made with insecticide-laced fabric, and then expanded with products such as wash-resistant mosquito nets (PermaNet) and plastic sheeting that can be used as blan-kets or for temporary shelter (ZeroFly.) Ninety percent of the company’s business is malaria prevention. According to the World Health Organization, such nets have helped reduce childhood-mortality rates by 25% in sub-Saharan Africa.

The company developed the LifeStraw in conjunction with Atlanta’s Carter Center. Over the years a partnership was created with The Carter Center, Rob Fleuren from Holland, and Moshe Frommer from Israel.

The LifeStraw was designed with special care to avoid any moving parts, has no replaceable spare parts, and operates without use of electricity, which does not exist in many areas of the third world. The only force required is the natural source of sucking, something even babies are able to perform. But the beauty of the LifeStraw is the price—initially around $2.00, but that could fall as production ramps up.

Vestergaard Frandsen’s next project is to create a large-capacity household water filter, as well as an insecticide-coated fence to protect crops.ii

LECTURE LINK 4-3

Wal-Mart to the Rescue

Hurricane Katrina leveled most of Waveland, Mississippi, a community of 7,000 on the Missis-sippi Gulf coast. The wind and water wiped out nearly every home and business within a half-mile of the beach, including the Wal-Mart that served the area around Waveland, Pearlington, and Bay St. Louis, Mississippi.


For weeks Wal-Mart store manager Ron Cox watched friends and neighbors get supplies from an emergency distribution point that offered only the basics. The only store in Waveland still selling food and drink was a gas station convenience store. Cox wanted to do something for the community. “They need meat. They need bread. In this part of the country, those are luxuries,” he said.

So Cox contacted Wal-Mart headquarters and arranged for a temporary replacement. Three weeks after the storm, he and his crew erected a miniature version of the largest retail store in the nation—in a 16,000 square foot Wal-Mart tent. Cox set up across the parking lot from the old building, damaged by 12 feet of filthy floodwater.

A crew of 25 staffed the tent store, down from 431 pre-Katrina. They sold canned vegetables, soda, power drinks, crackers, and bug spray. Cox stocked peroxide, alcohol, Germ-X, and over-the counter drugs. He also set up a pharmacy trailer with a computer to find prescriptions for people with no ID.

Cox thinks that the mini-Wal-Mart served another need. “Let’s face it: Wal-Mart is a place people come to socialize.” The store helped “get some normalcy going again.”iii

LECTURE LINK 4-4

Off-Label Drug Prescriptions

Before it can be prescribed in the U.S., a pharmaceutical manufacturer must convince the FDA that a drug is both safe and effective against at least one disease. Any potential new drug must undergo a demanding sequence of tests to win FDA approval. If the preliminary first stage test tube trials go well, the proposed medicine then moves into clinical trials using human subjects. Many drugs fail in prelimi-nary or clinical trial levels. This kind of drug trial is considered the “gold standard” of proof for a drug’s value. According to industry estimates, it costs around $800 million to bring a drug to market. Once the drug is approved for one use, the race is on to profit from the investment before the patent expires.

When the new drug enters the U.S. market, doctors are legally free to prescribe it “off-label” for any other condition. Prescribing drugs for off-label uses is nothing new. Doctors have been doing it for decades to treat rare diseases, pediatric disorders (for which medicines are often not specifically ap-proved,) and various cancers. Many doctors feel the practice can save lives. Statins, for example, were initially approved to lower cholesterol but are now heavily prescribed to prevent heart attacks and strokes (a practice blessed by regulators). Since 1998, the number of off-label prescriptions has nearly doubled. By some estimates, off-label use of prescription medications occurs in about one in every five prescrip-tions filled in the U.S.

The potential for abuse can be seen in the case of Warner-Lambert’s drug Neurontin. The drug was initially approved only for treating epilepsy, a relatively small market. However, in the 1990s, Warner-Lambert sales people paid doctors to prescribe Neurontin for ailments ranging from manic de-pression to restless leg syndrome, although the company had evidence that the drug was ineffective for those ailments. The firm also hired ghost writers to draft articles promoting off-label uses. They then lo-cated doctors to willingly lend their names as authors for a $1,000 “honorarium.” Neurontin sales came in at $2.7 billion in 2003, with off-label prescriptions accounting for an estimated 90%.

In 2004, Warner-Lambert pled guilty to two counts of violating the Food, Drug, and Cosmetics law by misbranding Neurontin, failing to provide adequate directions for use, and interstate commerce of an unapproved drug. Immediately after the verdict, Judge Richard Stearns sentenced the company to pay a $240 million fine, the second largest criminal fine ever imposed in a health care fraud prosecution. iv


LECTURE LINK 4-5

Pension Plans Under Attack

The U.S. airline industry has never fully recovered from 9/11. Since the terrorist attacks, the in-dustry has been in a free fall. Record fuel costs, the lowest fares since the early 1990s, and stiff competi-tion have caused the air carriers to lose billions of dollars. The industry as a whole has lost more than $30 billion dollars. To keep the carriers from economic collapse, labor unions have agreed to millions of dol-lars in concessions and wage cutbacks.

Hardest hit is United Airlines, which has lost $10 billion by itself. But even the labor concessions have not been enough to keep United out of bankruptcy court. Looming large in the equation are the pen-sion obligations to retiring flight attendants, mechanics, and pilots. When it faced the bankruptcy judge in 2002, United had pension obligations of $9.8 billion. This staggering sum was owed to present and future retirees under the terms of their contracts.

United argued that it was financially unable to pay these benefits, and the bankruptcy court agreed. The airline walked away from the pension obligation, the equivalent of taking $267,000 from each pilot, flight attendant, and mechanic.

The Pension Benefit Guaranty Corporation (PBGC), the government agency created in 1975 to bail out domestic companies that default on pension obligations, picked up the tab for United’s pension plans. The PBGC is funded through an employer premium; essentially a tax on employers that fund pen-sion plans. PBGC believes that U.S. pension plans are under-funded by more than $450 billion, with com-panies in financial trouble liable for nearly $100 billion of this amount. The PBGC collects roughly $560 million a year from the private sector, far short of the amount needed to pay the pensions of companies that have fallen on hard times. The agency’s resources will be exhausted within a few years—it is already operating at a deficit of more than $23 billion.

While preserving some of United’s pension benefits, the bankruptcy settlement hit workers and retirees hard. Federal regulations limit the amount of pension payments the PBGC can make to a maxi-mum of about $45,000 a year. The highest paid United workers, such as pilots, faced pension cuts of up to 50%. The pilots also faced a Catch-22. Under one federal law, they were not allowed to work after age 60; under another, the proportion of their pension guaranteed by the PBGC was sharply reduced if they retired before age 65. (This was changed in 2007, allowing pilots to fly until age 65.)

The former United pension plan covers 120,000 current and retired United workers. Bankruptcy Judge Eugene Wedoff approved the pension plan over the objections of several unions. He called it “the least bad” of the available choices, since it gave unprofitable United the best chance to keep functioning. United’s chief financial officer, Jake Brace, said the verdict was important but said that it “was not a joy-ous day” for the airline.

Employees and retirees are bitter about what they perceive as an inequity of sacrifice. While workers took huge cuts in pension benefits, United CEO Glen Tilton has a $4.5 million annual pension guaranteed by his employment contract with the company.v

LECTURE LINK 4-6

Blending Activism and Enterprise

Gary Erickson’s hero is Julia “Butterfly” Hill, the environmental activist who sat in a 1,000-year-old California redwood tree for two years to protest deforestation. “Looking at someone like her is what encourages me,” says Erickson, the founder and CEO of energy-bar maker Clif Bar. Erickson has suc-cessfully combined social activism and entrepreneurship. The company, which makes the second-best


selling energy bar, is now worth $100 million. While achieving this success he has also pursued environ-mental and social issues and encourages his staff to do so too.

The company began when Erickson couldn’t stand the taste of the best selling energy bars, PowerBars. After spending a year in the kitchen, Erickson perfected the Clif Bar in 1992. The product line was extended with the Luna bar, aimed at women, in 1999 and the Mojo Bar in 2003.

Along the way Erickson has tried, as he puts it, to “reduce Clif Bar’s ecological footprint on the planet.” In 2000 he took steps to eliminate shrink-wrap on bulk-product boxes. That saves Clif Bar some 90,000 pounds of plastic and $445,000 each year. In the offices staff volunteers called the Eco Posse roam the building to encourage recycling and limit employees’ use of paper goods.

Erickson has also launched a project called the “2080 program,” (the total number of work hours in a year) in which employees are encouraged to do volunteer work on company time. “Community ser-vice is often last on their list,” says Erickson. “If we make an opportunity for them to do it during the workweek, they’ll do it.” As part of the project, Clif Bar workers have helped build low-income housing with Habitat for Humanity and delivered food with Meals on Wheels. “Our ability to support these envi-ronmental and social causes is becoming an integral part of who we are,” he says. vi

LECTURE LINK 4-7

E-Cycling

Ever wonder what happens to all those obsolete computers? The U.S. government estimates that 133,000 electronic devices are tossed aside each day, amounting to 3 million tons of e-junk per year. But lurking in this trash are environmental and health time bombs.

Cathode ray tubes from aging TVs and monitors can contain four to eight pounds of lead. Semi-conductors and chip resistors hold toxic cadmium, which has been linked to kidney damage. Mercury in thermostats, relay switches, and telecommunications equipment can seep into waterways, poisoning food sources and exposing humans to possible brain damage.

Companies like Molam International have jumped into the e-cycling market. Each month a mil-lion pounds of electronics are recycled in their warehouse. Outdated monitors are sent to become cheap TVs. Metal products are forged into garbage can wheels. Molam is a pioneer in the e-cyling movement, which makes everyday products out of toxic electronic trash too poisonous to dump just anywhere.

There is currently no federal regulations addressing the proper disposal and recycling of high-tech components. The European Union has passed a law requiring manufacturers to recycle junk electronics free of charge. The U.S. Senate is considering tax incentives for consumers and recyclers who properly handle e-waste, but funding for the initiative is uncertain.

Individual states have stepped into the void. Maine passed a law in 2005 that requires towns to set up centers to collect TVs and monitors and then transport them to be recycled at the manufacturer’s ex-pense. Twenty-five other states are considering similar legislation.

In the meantime, old-fashioned capitalism is driving e-cycling. “We’re all children of Apple, Microsoft, and Dell,” says John Shegerian, president of the Electronic Recyclers of America. “And this industry is just in its infancy. It’s going to grow and grow.”vii


BONUS INTERNET EXERCISESVIII

BONUS INTERNET EXERCISE 4-1

Exploring Community Service

One of the most common reasons people give for not contributing more of their time to their community is that they don’t know where to go to volunteer. You can find out about volunteer options in your zip code by visiting these Internet sites—www.volunteermatch.org; www.1-800-volunteer.org, or www.networkforgood.org. (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

1. Go to one of these volunteer websites. Use the site’s search tools to see what types of volunteer options are available in your area. If your area is not yet included in the site’s database, choose a nearby zip code so that you have an idea of what types of agencies you can contact to offer your services. Write down several volunteer opportunities and the skills required.

2. A new trend in community service is virtual volunteering. Click on the virtual link and search for volunteer opportunities you can do from your computer. Are virtual volunteer opportunities more or less attractive to you than actual hands-on activities? Why?

3. The best way to learn about volunteering is by volunteering, so put your community service plan into action by offering your services to one of the agencies in your area.


http://www.networkforgood.org/

http://www.1-800-volunteer.org/

http://www.volunteermatch.org/


Researching Codes of Ethics

Most companies now publish codes of ethics to provide ethical guidelines for employees. Many of the larger companies publish these codes on their websites, but they may be hard to find.

The Center for the Study of Ethics in the Professions (CSEP) has collected over 850 codes of ethics and put them on their website (http://ethics.iit.edu/codes/). (Sometimes the web address for a loca-tion changes. You might need to search to find the exact location mentioned.) Their collection includes codes of ethics for professional societies, corporations, government, and academic institutions. Earlier versions of codes of ethics of some organizations are available so you can study the developed of codes.

(Some of the more interesting codes of ethics that the Center has collected are the codes of ethics for the CIA and for Enron.)

1. Locate the code of ethics for an educational institution, a media organization, and a business or-ganization. What do the three codes have in common? In what ways do they differ?

2. Find a company for which a previous code is available (such as IBM.) Review the key sections. How has the code changed?


http://ethics.iit.edu/codes/


Balancing Profitability and Social Responsibility

PURPOSE:To explore why some companies are “good citizens” and why some companies are “good for

themselves.”

EXERCISE:One measure of a company’s success, in the eyes of outsiders, is how well they give back to the

local economies they do business in. When companies locate in Anytown USA, they can make such a huge impact on the local economy in many ways. One, they pay taxes to help the local town/city adminis-tration offer local services such as police and fire departments, schools and local parks and recreation. Two, they hire employees from the local community, which helps create jobs. Three, they can also donate their time and money to help other local causes with the general idea that this type of assistance raises the quality of life in the community they also have such an investment in. In many communities, most resi-dents can identify the quality companies that give back by offering financial and manpower help when called upon.

For this exercise, identifying the good companies and those that appear to be good for themselves can be an interesting learning discussion. Use the Internet to answer the following questions:

1. Go to the Target Corporation website (www.target.com) and find the following headings: “About Target;” “Careers;” “News;” “Investors;” “Community;” and “Diversity.” Click on each heading and get familiar with the information provided. (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

2. Now go to the “About Target” heading and read more in the “Fast Facts” section. Briefly explain how much Target donates to local schools.

3. Click on the “Our Values” section and read about the four topics of “Corporate Responsibility,” “5% Giving,” “Protecting the Environment,” and the “LEED: Building Green Program.” What can you say about Target’s level of social responsibility, local community support, and the over-all level of corporate responsibility? Does this place them in a higher level than most companies with regard to giving back to the community?


http://www.target.com/

BONUS INTERNET EXERCISE 4-3 (continued(

4. Now go to the “Investors” section and click on the “Corporate Governance” section. Look at the section entitled “Business Conduct Guide.” How does the company ensure that it operates ethi-cally?

5. Go to the “Diversity” section and click on the heading relating to “Target Team,” “Target Guests,” “Community and Suppliers.” How does Target ensure that it treats each of these groups with respect?

6. Finally, go to the “Community” section and click on the “Everyday Stories” section. Find a story that you think inspires you regarding how Target truly reaches out to the local community. Can you think of other companies that act as socially responsibly as Target? If so, who are they and how do they accomplish these important social obligations?

7. Is Target a “good citizen” or “just good for themselves”? Have they shown how a company can balance profitability and social responsibility?



Social Responsibility Successes and Failures

PURPOSE:To illustrate how businesses have succeeded and failed to be socially responsible by researching

two companies’ performances in corporate philanthropy, employee health and safety, environmental stewardship, and minority and women’s employment and advancement.

EXERCISE:Name at least one example of a company that succeeded or failed to be socially responsible in

each of the categories below. Describe the success or failure. Record the exact URL (web address) of the site you visit.

CATEGORY SUCCESS FAILURE

Corporate Philanthropy Company:URL:Description:

Company:URL:Description:

Employee Health and Safety



Environmental Stewardship



Minority and Women’s Employment and Advancement




CRITICAL THINKING EXERCISES

CRITICAL THINKING EXERCISE 4-1

Ethical Dilemmas

Below are several situations that present ethical questions in a business. Discuss each situation: (a) from the strictly legal viewpoint, (b) from a moral and ethical viewpoint, and (c) from the point of view of what is best in the long run for the company. Be sure to consider both short- and long-range con-sequences. Also look at each situation from the perspective of all groups concerned: customers, stock-holders, employees, government, and community.

1. A disgruntled employee of your major competitor mails top-secret information or new product samples to you. Do you begin to do a dance on your desktop or do you immediately mail the in-formation back to your competitor? What would you do?a. Throw the plans or secrets away.

b. Send them to your research department for analysis.c. Notify your competitor about what is going on.

d. Call the FBI.

2. You are the general manager of a regional chemical company. In the course of producing your bulk chemicals, large amounts of particles and smoke are emitted through your plant’s smoke-stack. The level of pollutants is below current EPA regulations, and you are violating no laws, but neighborhood groups are complaining about minor health problems caused by the smoke. After investigating numerous alternatives, you find the most effective solution would be to install a “scrubber” system, which will remove 90% of the pollutants and ash. Cost: $1 million. Do you install the system?

3. You are a general manager in a cosmetics firm. The results of a study show that your major brand could cause skin cancer. What do you do?

4. You have the opportunity to offer a job to a friend who really needs it. Although you believe that the friend could perform adequately, there are more qualified applicants. What would you do?

5. You are the vice president of a beer company in a state which sets the legal drinking age at

twenty-one. Your boss asks you to organize a lobbying effort to have the drinking age reduced to eighteen. What would you do?

6. Because of a loophole in federal laws you find that you could legally pay your workers less than

the minimum wage. The cost savings you recommend may mean your getting a choice promo-tion. What would you do?

7. You are an accountant in a large firm. Your boss tells you to use a controversial accounting prac-tice, which will make the company’s profits seem higher. She tells you it is only to impress stock-holders and will not be used in statements submitted to the IRS. What would you do?


CRITICAL THINKING EXERCISE 4-1 (continued)

8. You are required to fire a worker for persistent absenteeism, but you know that her absence is be-cause she is caring for her father who is in the advanced stage of Alzheimer’s disease. You feel that the organization is being inhumane in its attitude, but your boss remains insistent. What would you do?

9. A worker is repeatedly late for work. You know she has family problems and is going through a difficult period with an alcoholic husband. Her work is inconsistent—sometimes average, often excellent. She has been with the company for nine years. On Monday she was two hours late for work. What would you do?

10. You believe that your (male) boss is overly friendly with a (female) member of your staff and that she is taking advantage of the situation. What would you do?


NOTES FOR CRITICAL THINKING EXERCISE 4-1

Each of these situations may have several possible solutions. The best solution from the com-pany’s point of view may be quite different from one’s own philosophical point of view. Below are some discussion points.

1. This actual situation is at the heart of a dispute between rivals 3M Corporation and Johnson & Johnson. It seems a 3M employee named Philip Stegora mailed samples he stole of a new casting tape to J&J and three other competitors. He offered to meet and explain the technology for a fee of $20,000.

Here’s what happened in the 3M and J&J case: None of the contacted companies reported his scheme to 3M. Instead, an outside source contacted 3M, who then turned the case over to the FBI. The case could have ended there, but in patent-infringement proceedings, 3M found that J&J had done chemical tests on the sample Stegora had sent. 3M sued and was awarded $116.3 million from J&J for infringing on its patent and misappropriating trade secrets. Sounds like someone should have sent the tape back to J&J in the first place.

2. In considering whether to install the scrubber, both the short and long-term consequences should be addressed. While the level of pollution is legal today, is it likely to be regulated tomorrow? What would be the public relations impact for the company if it installed the system? If it did not? Should the company publicize the scrubber installation or avoid discussing pollution at all?

3. The key word in this question is “could.” The evidence is inconclusive. How would the company be affected if the product were pulled prematurely? How would it be affected if the product causes dozens of cancers and results in huge lawsuits?

4. This is a grey area. Hiring a friend may smack of favoritism. However, with a friend you already know about his or her background, reputation, experience, and work ethic. The friend may be the best one for the job if you value his or her abilities. The downside is that you may have to fire your friend, losing an employee and a friendship.

5. Eighteen to 21-year-olds represent a huge market for liquor. But, again, the public reaction should be considered.

6. Many smaller companies are exempt from minimum wage laws but still pay the prevailing wage. The supply and demand for workers is a more important price factor. A company that pays less than minimum wage will not be able to attract as many qualified workers as one that does.

7. This is the only black and white dilemma. To use dual accounting practices to deceive investors is illegal.

8. This is a direct order from your superior. You might take a meeting with the supervisor to explain the extenuating circumstances, but if there’s no change in his or her position, you will have to fire the employee or be ready to leave your job.

9. This worker is going through a difficult time. Her work is, however, “often excellent.” The costs of training a replacement worker must be weighed against her possibly temporary reduction in productivity.

10. Your boss is guilty of sexual harassment. The female member of your staff may be taking advan-tage of it, but that does not change the reality. The boss’s actions may open your company up to a


sexual harassment suit. Fighting it will be costly and generate bad publicity. The boss needs to be warned, although you might not be the one to do it. If you have a mentor in the firm or a sympa-thetic friend in upper management, you might approach them, confidentially, about the situation. If you decide to talk to the boss yourself, how would you handle the encounter? What could your first sentence possibly be?


CRITICAL THINKING EXERCISE 4-2

Ethics in the Workplace

Below are several situations that present ethical questions in a business such as compensation, ex-pense reports, reporting profit and losses of the company, misrepresentation of facts on resumes, doing personal business on company time, and basic theft from the company. How should these situations be handled? At what point do employees cross the line? What can be done to minimize these things from happening?

Look at the following and answer the questions based on your interpretation and personal feelings about ethics in the workplace:

1. You work for a large cable company and your CEO makes the local news because of his excessive salary and benefits while the local economy is on a downslide and many people are out of work. His total compensation is 30 times the normal paid employee and his benefits include use of the corporate jet, unlimited expense account, and lucrative stock options. Answer the following ques-tions:

SCENARIO: Your neighbor, who husband is out of work, reads about the CEO of your company in the news-paper because of his high salary and benefit package and questions you about how difficult it is to read about the out of control compensations that still occur while many qualified professionals are out of work.

Your immediate feelings are: (circle one)

(a) You are already used to this typical way companies do business and are numb to all the negative discussions.

(b) You are embarrassed being associated with the company and would leave immediately if a comparable job was available.

(c) You have asked your immediate boss the procedures for sending feedback to upper man-agement as your intentions are to speak your mind regarding how difficult it is to work for a company that has little regard for the average worker when considering the pay and com-pensation that upper management enjoys.

(d) You are pleased with the compensation practices of the company because you see yourself moving up the company ranks and envision yourself getting well paid in the future with the same company or elsewhere.

2. You work for a small parts manufacturer company and your co-worker does a lot of travel call-ing on numerous accounts for the company. In a conversation about personal spending for family and friends during the Christmas holiday season, your co-worker expresses his strategy to inflate his expense reports as a way to get extra money for holiday gift spending. This is somewhat of an eye-opening conversation. Answer the following questions:

SCENARIO:You are having your annual review with your immediate boss and it is positive as you expected. Before the review is over, your boss asks if there is anything on your mind that you would like to discuss. Your conversation with your co-worker about inflating expense reports had just occurred that morning.


CRITICAL THINKING EXERCISE 4-2 (continued)


(a) You are already used to this typical way employees take advantage of companies and are numb to all the earlier discussion.

(b) You are embarrassed being associated with your co-worker and would leave immediately if a comparable job was available.

(c) You ask your immediate boss the procedures for reporting employee infractions.

(d) You are fine with the employee practices of the company and have ideas as to how you might put in place the same tactic for your own gain.

3. You work for a large advertising agency and interview a potential new employee who appears to be well versed and, based on his resume, has lots of industry experience. Following the interview, you make phone calls to the previous companies the candidate has worked for and find out that one of the stated companies used the candidate as an independent for hire worker. The candidate did not hold the impressive title of senior account representative nor did he bill a million dollars in business as the resume states. However, the person does report the impressive skills of the can-didate and would highly recommend his employment with your company. Answer the following questions:

SCENARIO:You are discussing the interview with the new candidate with your immediate boss, and the word is this is a great potential new hire for the company. Your boss asks you point-blank how soon the candidate can be hired and up to speed on his job duties, etc.


(a) You are aware of these types of incidents regarding falsifying resumes and discuss the steps to get the new candidate hired.

(b) You are embarrassed being associated with such an interview and would give this responsi-bility immediately to someone else if possible.

(c) You ask your immediate boss if you can confront the candidate about the false information on the resume and see how the discussion develops.

(d) You are fine with the false resume reporting to some extent and feel that the candidate is too good not to hire and plan to get some pointers from the candidate on how to beef up your resume at a later time.


BONUS CASES

BONUS CASE 4-1

Got a Deadline? Click Here

Have a term paper due soon? Dreading the thought of all the work involved? With the advent of the Internet, plagiarism has become as easy as point and click. Some websites list thousands of term pa-pers on hundreds of topics—and the papers are there to be downloaded 24 hours a day. Boston University developed a plan in which a law student posed as a student wanting to buy a term paper to see how easily it could be done. The student secured papers from eight companies in seven states and paid fees ranging from $45 to $175. The university charged the companies in federal court with wire fraud, mail fraud, racketeering, and violating a Massachusetts law that bans the sale of term papers.

Some websites are not affected by current laws because they offer the papers for free. The sites are funded by advertisers who buy space on the sites. The owner of one such website says that the papers on his site are posted there not so that students can plagiarize them but rather to show the substandard writing skills of many college students. You get the idea from the papers on the site that students get re-warded for length. The papers consist of pages and pages of junk, yet many instructors accept them. The owner notes that this says something about the mediocre assignments some professors give year after year. He thinks it is absurd that class assignments can be so vague that a student can go to the Internet, find a generic essay, and receive credit for it. He believes he is doing education a favor by forcing profes-sors to give more specific writing assignments and to require extensive footnotes.

If recycling term papers is now so easy, why do professors continue to assign them? While the writing style used for term papers is different from that used in the workplace, writing develops critical thinking skills and the ability to express thoughts and ideas. Tom Rocklin, director of the Center for Teaching at the University of Iowa, puts it this way: “I have sat down with a group of businesspeople, and they say what they are looking for in new hires are skills developed by a traditional liberal arts education. Discussion, reading, and extended writing are a crucial part of that.” Yet simply downloading a paper from a website does nothing to help a student develop these skills.

DISCUSSION QUESTIONS FOR BONUS CASE 4-1

1. Would you consider purchasing a paper from a website and submitting it as your own? Why or why not? Consider that there is now a website that helps professors check for plagiarism by com-paring student papers with millions of online pages using the top 20 search engines. The system even identifies papers composed of bits and pieces of online text. Does knowing this change your answer to the questions above?

2. Do you agree with the website owner who said he is improving education by posting certain term papers as the mediocre results of mediocre assignments? Justify your answer.

3. View this issue through the eyes of your professor. The websites are out there and your students have access to them. What would you do to discourage your students from committing plagia-rism?


ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 4-1

1. Would you consider purchasing a paper from a website and submitting it as your own? Why or why not? Consider that there is now a website that helps professors check for plagiarism by com-paring student papers with millions of online pages using the top 20 search engines. The system even identifies papers composed of bits and pieces of online text. Does knowing this change your answer to the questions above?This is clearly an unethical thing to do, but students may present several conditions under which

they may feel forced to do this. They were sick, or their father died, etc. The idea is to show that ethics do not vary with circumstances. Plus, the chances of getting caught are increasing with the new web search capabilities.

2. Do you agree with the website owner who said he is improving education by posting certain term papers as the mediocre results of mediocre assignments? Justify your answer.There are no excuses for unethical or illegal behavior, only explanations or defenses. Students

learn by trying and making mistakes. Taking that away from them destroys education and the right to learn by doing.

3. View this issue through the eyes of your professor. The websites are out there and your students have access to them. What would you do to discourage your students from committing plagia-rism?There are many ways to plagiarize. Getting papers from the Internet is only one. Plagiarism re-

sults in failure and dismissal at many schools. Such rules should be clear. But students may have some creative ways of presenting such information and getting conformance.


BONUS CASE 4-2

Is It Time for a NYSE Code of Ethics?

Doctors have the Hippocratic Oath. Pharmacist, mathematicians, advertisers, even football coaches all have codes of ethics. Not investment bankers.

Investment banking would be a complicated area to police. Bankers dole out loans, hammer out contracts, counsel companies on the sensitive topics of mergers and acquisitions. However, it is in these areas that ethical lapses can occur. Investment bankers and stock brokerages have been known to down play the drawbacks of a particular investment to score a big commission. There have been many examples in recent years of brokers shading the truth or engaging in outright unethical behavior.

A group of investment professionals, including investment banker Felix Rohatyn, mergers lawyer Marty Lipton, and New York Stock Exchange Chairman John Reed, has proposed that bankers, brokers, and analysts adopt an industry-wide code of ethics. Instead of trying to create a rule for every ethical deci-sion, the suggested code would contain basic principles about whom the investment community is ac-countable to and what priorities should exist between banker, client, and regulator.

A professional ethics code would be different from a company ethics code. Many analysts are skeptical about individual corporate codes, pointing to the carefully crafted code of ethics established (and ignored) at Enron. In contrast, a professional code could be used as justification for bankers and bro-kers who want to do the right thing when their company demands otherwise.

The group advocating a professional code is trying to distill universal statements or principles. A code could include principles for handling conflicts of interest, behavioral guidelines for dealing with clients and competitors, and some recognition of a broker’s duty to society at large.ix


1. Many in the investment company were implicated in the accounting/underwriting scandals in-volving Enron, WorldCom, and Arthur Andersen. Would a code of ethics have discouraged or prevented these unethical situations?

2. Suppose you were a stockbroker and recognized a profitable, but ethically questionable invest-ment opportunity. The investment would significantly benefit the major corporate directors and generate commission income for you and your brokerage. What is your obligation to other stock-holders, regulators, and society in general?

3. Does a broker have a duty to make as much money for his or her clients as possible? Does the wide separation in wealth between rich and poor create a situation where brokers should stop making as much money as possible for rich people?


1. Many in the investment company were implicated in the accounting/underwriting scandals in-volving Enron, WorldCom, and Arthur Andersen. Would a code of ethics have discouraged or prevented these unethical situations?

It may have discouraged such behavior, but not stopped it entirely. People are always searching for ways to get around rules, and ethical rules are no exception. On the other hand, we should do every-thing possible to have them comply.


2. Suppose you were a stockbroker and recognized a profitable, but ethically questionable invest-ment opportunity. The investment would significantly benefit the major corporate directors and generate commission income for you and your brokerage. What is your obligation to other stock-holders, regulators, and society in general?

It depends entirely on what is meant by “ethically questionable.” Does that mean legally ques-tionable as well? In that case, there is no debate. It is wrong to do. Period. If it means that people might have some question as to why you did something, you have to judge each case by its merits. Things may “look” unethical, but be clearly ethical to others. One has to use one’s own conscience as a guide. Such a question may create lively class discussion as students bring up practices for examples.

3. Does a broker have a duty to make as much money for his or her clients as possible? Does the wide separation in wealth between rich and poor create a situation where brokers should stop making as much money as possible for rich people?

Brokers should not be deciding who deserves to become richer and who does not. Their job is to help people of all classes become richer. The way that poor people become rich is by investing, and bro-kers are there to help.


BONUS CASE 4-3

Raven Biotechnologies: If It Isn’t Ethical, It Isn’t Right (Video Case)

(NOTE: This case can be used with the Video on DVD for this chapter.)

Cancer affects the lives of millions of people each year. While there has been significant progress made toward fighting the disease, finding a cure is considered by many to be the “holy grail” of medicine. For most of the 20th century, cancer-fighting drugs were like World War II bombers. They’d drop thou-sands of bombs hoping that a few would get lucky and hit the target. Since the drugs couldn’t tell the dif-ference between a cancer cell and a healthy cell, they killed them both. But new generations of drugs are more precise, targeting individual disease cells and leaving healthy cells unharmed.

Unfortunately developing effective new treatments for cancer is a lengthy and costly process. Ev-ery step in the process of developing a new drug calls for ethical decision making. The temptation may be to rush the process and cut corners to minimize costs and maximize profits. Does the drug violate a patent that already exists? How far should we go in testing the effectiveness and the side effects of the new prod-uct? Should we test it on animals? Should we test it on humans? How much should we charge for the drug? What should we say in our promotions?

Jennie Mather founded a company called Raven Biotechnologies to develop solutions for the most serious cancer illnesses. She understood from the beginning that ethical decisions were based on ethical management. She used the latest monoclonal technology because it enabled the company to target and attack a single disease cell like a cancer. This is a much safer and ethical way of solving the problem because it dramatically reduces the serious side effects caused by “shotgun” type treatments. Because of these precautions, such drugs tend to go through the government screening process faster and easier.

Mather hires employees who have the same ethical approach to business and the same kind of scientific approach that she has. She knows that management sets the ethical parameters, but that employ-ees must keep those standards. Businesspeople today are conscious of the fact that the public is very sen-sitive to ethical practices because of companies, like Enron, that violated ethical principles. The public is particularly sensitive to issues surrounding pharmaceutical companies. One popular movie focused on the ethics of product testing. Should drugs be tested on humans? If so, how should people taking the test drugs be treated? Is it right to give some people the medicine and others a placebo (a fake medicine)? An-other fundamental issue is price. It costs a lot of money to develop a new drug and companies cannot come up with new solutions to illnesses without making up those huge costs. On the other hand, people without health insurance and people in developing countries simply cannot afford high prices for drugs. Who should bear the cost of providing life-saving drugs to these people?

It’s comforting to know that people like Mather are willing to take the entrepreneurial risks de-manded of a pioneering company like Raven. It is even more comforting to know that Mather and her em-ployees take an ethical approach to everything they do. Everyone looks forward to the day when there are drugs to take for pancreatic cancer, colorectal cancer, and other serious illnesses. We look to science to solve those problems, and we look to ethical managers to apply the science in the right way.


1. What ethical issues concern you most about the development and sale of pharmaceutical drugs? Does Raven address all of your issues?

2. One of the major issues involving pharmaceutical drugs is their high cost. Do you understand why drug companies have to charge such high prices? Should they charge lower prices in coun-tries where the people don’t have the money to buy expensive drugs?


3. Is the need for high ethical standards more or less important in the pharmaceutical industry? Why? What could be done to assure the public that the highest standards are being used?


1. What ethical issues concern you most about the development and sale of pharmaceutical drugs? Does Raven address all of your issues?

This question should generate lots of discussion, from the lack of drugs for AIDS to high prices to questionable testing practices. Raven tries to answer all of those issues. Are students skeptical of the answers? Why? Good discussion starter.

2. One of the major issues involving pharmaceutical drugs is their high cost. Do you understand why drug companies have to charge such high prices? Should they charge lower prices in coun-tries where the people don’t have the money to buy expensive drugs?

The cost of developing and testing a drug can run into the billions of dollars. Those costs have to be made up with high prices. The money is then used to develop newer drugs. Lower prices could be charged, but then fewer drugs would be developed and made available. Canada and other countries have lower prices because their governments demand that lower prices be charged. That is only possible be-cause U.S. buyers pay high prices. Poor people can be charged less if rich people are charged more. That is the way the system works. Again, students may have lots to say on this point.

3. Is the need for high ethical standards more or less important in the pharmaceutical industry? Why? What could be done to assure the public that the highest standards are being used?

The need for high ethical standards is obvious: faulty drugs could lead to greater illness and death. Even high-priced drugs could lead to the same results. That’s why the FDA gets involved with drug development. This case can be used as a springboard to discuss business ethics in general and stu-dent skepticism about business, government, and nonprofit organization ethics in general. What about stu-dent ethics?


BONUS CASE 4-4

Merck and Ethics (Part II)

In 2003, pharmaceutical pioneer Merck had a blockbuster drug, Vioxx, a powerful pain reliever. Discovered in a Merck lab in 1994, the drug was one of a new class of painkillers called COX-2 in-hibitors, which reduce pain and inflammation without the side effects—ulcers and gastrointestinal bleed-ing—that painkillers such as ibuprofen can cause. Vioxx worked beautifully in clinical trials with arthritis patients and was approved by the FDA in 1999. Edward Scolnick, President of Merck Research Labs, even let it be known that he was taking Vioxx himself for back pain.

But in September 2004, Merck removed Vioxx from the market after a study found a higher rate of heart attacks and strokes in patients taking the drug. Vioxx, on the market for five years, had been mar-keted in 80 countries with worldwide sales totaling $2.5 billion in 2003. When it was pulled from the market, 2 million Americans were taking Vioxx.

The pharmaceutical industry was astonished that the well-respected company had marketed a drug known to cause higher rates of cardiac events. Almost twenty years earlier Merck established a reputation for social responsibility by donating a treatment for river blindness to patients in developing countries.

Still more shocking was the admission that as far back as 1998 Merck knew the drug had prob-lems. Even before FDA approval, researchers outside Merck had found evidence that it might increase the risk of a heart attack. In 1998 a group at the University of Pennsylvania discovered that COX-2 inhibitors interfere with enzymes thought to ward off cardiovascular disease. A 2001 study testing the drug against nonprescription naproxen showed that Vioxx was safer than naproxen, but it also found that Vioxx dou-bled the risk of cardiovascular problems. Merck put a positive spin on the data, highlighting the lower risk of side effects, not the cardiac complications.

By April 2002, the FDA mandated that Merck note a possible link to heart attacks and strokes on Vioxx’s label. At the time, Merck was spending more than $100 million a year on direct-to-consumer ad-vertising building the “blockbuster” status of the drug.

Merck continued to minimize the problems up until a month before withdrawing the drug. The death blow to the drug was the results of APPROVe, a database analysis of 1.4 million patients. Ironi-cally, this study was designed to test whether Vioxx reduced the risk of colon polyps. Instead, it showed that patients who took the drug for at least 18 months had double the risk of heart attacks and strokes as those who took the placebo. For a few weeks, Merck focused on the fact that it took 18 months for Vioxx to cause problems. However, Merck researchers continued crunching the data and concluded that the safety window might be as little as three months.

The researchers who told Merck CEO Ray Gilmartin about the APPROVe results pointed out that the company was under no obligation to recall the drug. Merck could take the data to the FDA and have the labeling changed. In fact, the majority of outside clinicians that Merck consulted in the first few days suggested it do just that, since there were millions of people who were benefiting from Vioxx and not get-ting heart attacks. But Gilmartin decided that withdrawing the drug was the responsible thing to do.

Since the drug was withdrawn, investigators have linked Vioxx to more than 27,000 heart attacks or sudden cardiac deaths nationwide from the time it came on the market in 1999 through 2003. Over 11,000 lawsuits have been filed against Merck.x


1. If Merck can donate $50 million in free doses of Ivermectin, what does that say about the amount of revenue the company generates in the drug research and distribution industry?


2. In the case of Vioxx, known serious side affects were being reported and yet the company was slow to suspend or remove the drug from the market. What does this say about the approval process of drugs to the market and why companies would be reluctant to give up the revenue stream for such a common used drug as Vioxx?

3. Merck finally pulls Vioxx from the market and has 11,000 lawsuits to handle. How would you feel if you were the company president and you were a known name and face of a company that was responsible for the stroke or hear attack for a past user of the drug?


1. If Merck can donate $50 million in free doses of Ivermectin, what does that say about the amount of revenue the company generates in the drug research and distribution industry?

Drug companies are some of the highest revenue producers and very profitable if they get their drugs into mainstream use without any major problems. In the case of Merck, it appears to be one of these types of drug companies. However, the process of research and FDA approval can be tedious and costly with no guarantees that the products are going to be successes on the market.

2. In the case of Vioxx, known serious side affects where being reported and yet the company was slow to suspend or remove the drug from the market. What does this say about the approval process of drugs to the market and why companies would be reluctant to give up the revenue stream for a a common used drug as Vioxx?

Market success, as already mentioned, is a conclusion to a commitment of research and numerous expenses for the low percentage that they will have a successful drug reach the marketplace. As a result, getting to this level is a huge potential payoff for the company and therefore a difficult reality to remove this product from the most sought after objective of the company; market approval and market success.

3. Merck finally pulls Vioxx from the market and has 11,000 lawsuits to handle. How would you feel if you were the company president and you were a known name and face of a company that was responsible for the stroke or hear attack for a past user of the drug?

The president of Merck works at such a high level and has such responsibilities, especially to the stockholders of the company, that his business training and business acumen allows him or her to handle these types of situations. The average person would be too emotional about a person responding to a drug with a stroke or heart attack and therefore would not be equipped for such dealings as compared to the seasoned company president or CEO.


BONUS CASE 4-5

Harry Kraemer’s Moment of Truth

During August and September of 2001, kidney dialysis patients started dying in Spain. Nothing seemed exceptional about the deaths of these old, sick patients on dialysis, and the world’s attention was focused on the terrorist attacks in New York and Washington on September 11, 2001. The hospital offi-cials notified the manufacturers of the equipment and searched for a common denominator. The only link—the dialysis filters used in all of the cases had come from a single lot manufactured by Althin Medical AB. The American company Baxter International had bought Althin less than a year earlier.

In the next few weeks, there were 53 deaths in the United States and six other countries that could be linked to Baxter’s filters. Baxter and its CEO Harry M. J. Kraemer Jr. faced a moment of truth. How the company responded to the crisis would affect the company’s relationships with patients, doctors, em-ployees, and investors.

Baxter International sells IV bags, biopharmaceuticals, and drug-delivery systems. Its products treat millions of patients a year. Nearly every product that Baxter sells is a matter of life and death. That makes it incredibly difficult to determine whether a death is due to the disease and predictable or whether the treatment somehow failed.

Although Baxter quickly recalled the lot of filters associated with the patient deaths in Spain, it did not publicly accept responsibility. But in October 2001, news media in Croatia reported that 23 dialy-sis patients had died during the previous week at clinics across the country. The Croatia filters were man-ufactured around the same time as the ones in Spain, but not the same batch. Clearly, something was wrong with the filters.

Alan Heller, president of Baxter’s renal division, immediately ordered a global recall of all of Al-thin’s filters and a distribution hold on the ones that had already been made. The action cost Baxter about $10 million. Then Heller assigned an internal task force the responsibility of confronting the disaster and identifying the cause. The team of 27 brought in specialists in manufacturing, toxicology, marketing, communications, and other specialties and found nothing. Neither did a team of European physicians as-sembled by Baxter.

The cause was not evident until a quality engineer in Althin’s Ronneby, Sweden facility noticed something unusual about one of the recalled filters. At one end of the device, there were a few bubbles that weren’t supposed to be there. Investigation found that in manufacturing, about 10% of filters leaked when tested. These filters were injected with a solution to locate the problem for repair. That solution was supposed to be vacuumed and evaporated from the filters. But the bubbles were evidence that trace amounts of the liquid remained. The solution, made by 3M, had been labeled as non-toxic—and chemi-cally it was. But when heated to body temperature in a patient’s bloodstream, it turned into a gas, causing a fatal pulmonary embolism.

Baxter could have ducked the blame. It could have quietly pulled the filters from the market, and it is likely that few would have noticed. It could have blamed Althin’s former owner, since Baxter had only recently taken over the business. It could have blamed 3M, which made the solution. But Baxter CEO Kraemer told Heller, “Let’s make sure we do the right thing.”

Do the right thing. “We have this situation,” says Kraemer about the filter crisis. “The financial people will assess the potential financial impact. The legal people will do the same. But at the end of the day, if we think it’s a problem that a Baxter product was involved in the deaths of 50 people, then those other issues become pretty easy. If we don’t do the right thing, then we won’t be around to address those other issues.”


In November 2001, Baxter announced that it had identified the probable cause of the dialysis pa-tient deaths and shut down Althin for good. It closed the factories and took a one-time accounting charge to earnings of $189 million to cover the costs of the closure. Baxter also reported the problems with the dialysis filters to rival manufacturers it knew or suspected were using the same process.

On the news of the charge to earnings, the company’s stock dropped slightly but soon recovered. “In the short run,” Heller says, “our results are probably worse for the way we handled things. But in the long run, they’ll be better. Bad ethics and bad judgment ultimately come back to burn you.”

Kraemer recommended that the compensation committee of Baxter’s board of directors reduce his performance bonus by at least 40% and suggested that his top executives take a 20% cut. xi


i Sources: Erick Eckholm, “River Blindness: Conquering an Ancient Scourge,” The New York Times, January 8, 1989; P. Roy Vagelos, “Social Benefits of a Successful Biomedical Research Company: Merck,” Proceedings of the American Philosophical Society, Vol. 145, December 2001; “Commitment to Society: Merck Expands its Commit-ment to Eliminate River Blindness,” Merck corporate website, www.merck.com; David Shook, “How Merck Is Treating the Third World,” BusinessWeek, October 10, 2002; and Daniel Dickinson, “River Blindness Drug Revives Village Life,” BBC News, September 15, 2002.

ii Sources: Jennie Yabroff, “Water for the World,” Newsweek, June 18, 2007; http://en.wikipedia.org/wiki/LifeS-traw; and www.LifeStraw.com.

iii Source: “Tent Offers Critical Supplies,” The Clarion-Ledger, The Associated Press, September 23, 2005.

iv Sources: Daren Fonda and Barbara Kiviat, “Curbing the Drug Marketers,” Time, July 5, 2004; “‘Off-Label Pre-scription Drug Use Common,” Forbes, May 8, 2006; Bernadette Tansy, “Why Doctors Prescribe Off Label,” San Francisco Chronicle, May 1, 2005; and “Warner-Lambert Pleads Guilty and Is Sentenced for Criminal Health Care Fraud Relating to Off-Label Promotion of Drug Neurontin, Reports U.S. Attorney,” PR Newswire, June 7, 2004.v

vi Source: Maggie Overfelt, “The Best Bosses: Profiles. Gary Erickson, Clif Bar,” Fortune Small Business, October 2003, pp. 40-42.

vii Sources: Associated Press, “E-Cyclers Breathe New Life Into Toxic Trash Too Poisonous To Throw Away,” The Clarion-Ledger, January 1, 2006, p. 1C and “Electronic Recycling Initiative,” National Recycling Coalition, www.nrc-recycle.org.

viii The Internet is a dynamic, changing information source. Web links noted in this manual were checked at the time of publication, but content may change over time. Please review the website before recommending it to your stu-dents.

ix Source: Dennis K. Berman, “Does Wall Street Finally Need an Ethics Code?” The Wall Street Journal, March 10, 2005

x Sources: Rita Rubin, “How Did Vioxx Debacle Happen?” USA Today, October 12, 2004; John Simons and David Stipp, “Will Merck Survive Vioxx?” Fortune, October 18, 2004; Matthew Herper, “The Vioxx Maelstrom,” Forbes, May 22, 2006; and “Vioxx Risk Seen With Short-Term Use—Report,” Reuters, May 17, 2006.

xi Sources: Kenneth H. Hammonds, “Harry Kraemer’s Moment of Truth,” Fast Company, November 2002, page 93; Michael Arndt, “How Does Baxter’s Harry Kraemer Do It?” BusinessWeek Online, July 22, 2002; “Baxter An-nounces Harry Kraemer to Resign as Chairman and CEO,” PR Newswire; Keith Hammonds, “Moment of Truth?” Fast Company, April 2004; Bruce Japsen, “Baxter International Works To Resolve Drug-Delivery Pump Issues,” Chicago Tribune, October 21, 2005.


http://www.nrc-recycle.org/

http://www.LifeStraw.com/

http://en.wikipedia.org/wiki/LifeStraw

http://en.wikipedia.org/wiki/LifeStraw

http://www.merck.com/

1. Should Baxter have recalled all the filters after the Spanish deaths? Discuss.

2. What is Baxter’s ethical responsibility to customers in this situation? To stockholders?

3. Should Baxter be held responsible for the defective filters, given that they owned the filter com-pany for less than a year? Explain.

4. Who is most responsible for the deaths—Baxter’s Althin filter subsidiary or 3M, who provided the implicated cleaning solution?


1. Should Baxter have recalled all the filters after the Spanish deaths? Discuss.

It would have been wise to pull the filters immediately and then begin testing them. If the tests proved negative, the filters could have been reintroduced. Since most of the patients were near death, this is a closer call than it may seem on the surface. People die after operations all the time, and all the devices involved can’t be pulled each time. Nonetheless, it is better to err on the side of caution.

2. What is Baxter’s ethical responsibility to customers in this situation? To stockholders?

Baxter’s duty is to inform customers of its errors and responsibility. It did the right thing, albeit maybe a little too slowly. Stockholders should be informed as well. After all, they are the owners of the firm and need to know what risks they are facing.

3. Should Baxter be held responsible for the defective filters, given that they owned the filter com-pany for less than a year? Explain.

Yes, if you buy something from someone that injures someone else, you are responsible—not the person who sold it to you. None of the injuries were intentional, nor could they have been anticipated. Ev-erything had been done to assure safety of the filters. This was a mechanical, cleaning error. Lack of in-tent does not take away responsibility, however. Or the need for retribution.

4. Who is most responsible for the deaths—Baxter’s Althin filter subsidiary or 3M, who provided the implicated cleaning solution?

Trying to place blame in such a case is a futile exercise. Everyone involved has to assume some of the blame. It is the role of the courts to determine the financial obligations that are incurred.


BONUS CASE 4-6

A Glance into the Future: Your Computer Knows

Microsoft has been on a patent roll. In recent years, it has been one of the U.S. Patent and Trade-mark Office’s biggest customers.

But it’s one particular filing that has been grabbing headlines recently. That is a patent applica-tion filed by the company for a computer system that links workers to their computers via wireless sen-sors that measure their metabolism. The system would allow managers to monitor employees’ perfor-mance by measuring their heart rate, body temperature, movement, facial expression, and blood pressure.

Technology allowing constant monitoring of workers was previously limited to pilots, firefight-ers, and NASA astronauts. This is believed to be the first time a company has proposed developing such software for mainstream workplaces.

Microsoft submitted a patent application for a “unique monitoring system” that could link work-ers to their computers. Wireless sensors could read “heart rate, galvanic skin response, EMG, brain sig-nals, respiration rate, body temperature, facial movements, facial expressions, and blood pressure,” the application states.

The system could also “automatically detect frustration or stress in the user” and “offer and pro-vide assistance accordingly.” Physical changes to an employee would be matched to an individual psy-chological profile based on a worker’s weight, age, and health. If the system picked up an increase in heart rate or facial expressions suggestive of stress or frustration, it would tell management that the em-ployee needed help.

Microsoft, which typically does not comment on individual applications, did offer a bit of com-ment on this patent. According to Horacio Gutierrez, Microsoft’s vice president of intellectual property and licensing, this application could monitor a user heart rate, among other physical states, detect when users need assistance with their activities, and offer assistance by putting them in touch with other users who may be able to help. “It is important to keep in mind that with most organizations in the business of innovation, some of our patent applications reflect inventions that are currently present in our products, and other applications represent innovations being developed for potential future use.”

Trolling through filings can offer a glimpse of where a company is headed, but seeing something in a patent application is far from a guarantee of what will eventually ship. The U.S. Patent Office will decide whether to grant the patent in about a year.xii


1. Do you think Microsoft’s patent application should be approved by the U.S. Patent and Trade-mark Office? Why or why not?

2. Do you think monitoring of employees in this way is ethical or unethical? Legal or illegal? Ex-plain.

3. Would you work for a company if you knew a computer system was monitoring your perfor-mance and measuring your vital signs? Why or why not?

xii Sources: Alexi Mostrous and David Brown, “Microsoft Seeks Patent for Office ‘Spy’ Software,” The Times of London, January 16, 2008; Ina Fried, “Microsoft Revs Its Patent Machine,” www.News.CNET.com, January 16, 2008; and www.uspto.gov.


http://www.uspto.gov/

http://www.News.CNET.com/



1. Do you think Microsoft’s patent application should be approved by the U.S. Patent and Trade-mark Office? Why or why not?

Generally, to qualify for a patent the product must be “new, inventive, and useful or industrially applicable.” The Patent Office does not decide whether the product/idea is ethical or unethical—simply whether it is new and innovative.

2. Do you think monitoring of employees in this way is ethical or unethical? Legal or illegal? Ex-plain.

Interesting discussion. On one hand, the monitoring system will improve productivity by reduc-ing employee time spent in non-work activities. On the other hand, such a system will be intrusive and smacks of “big brother.”

3. Would you work for a company if you knew a computer system was monitoring your performance and measuring your vital signs? Why or why not?

Each student will have an individual opinion, based on their interpretation of individual privacy vs. employer rights.


BONUS CASE 4-7

Gap’s Evolving View of Ethics

In the 1990s, shoe and clothing retailers faced a flood of stories focusing on wage and safety vio-lations in its overseas factories. Did Nike use child labor? Were Kathy Lee’ sweaters produced in “sweat shops”? Companies were forced to confront critics and repair the damage to their reputation.

The first reaction of Gap, the corporate parent of Old Navy and Banana Republic, was to clam up and go into fix-it mode. It built an elaborate monitoring system, which performs more than 8,500 factory inspections. But the company gradually realized that this internal monitoring system was not changing public and industry perceptions. Although Gap monitored 100% of its overseas factories for abuses, no one outside the company knew it.

Recently the company was targeted again when Domini Social Investments and other investors filed a shareholder resolution requesting greater transparency from the company. Gap was forced to pub-lish a “social-responsibility” report. However, instead of producing a sanitized report glossing over the problems, Gap decided to produce a warts-and-all profile of the problems facing the company.

The report found persistent wage, health, and safety violations in most regions where it does busi-ness, including China, Africa, India, and Central and South America. The infractions ranged from failure to provide proper protective equipment to physical abuse. Although discoveries of the worst violations were rare, Gap reported that it had pulled its business from 136 factories and turned down bids from more than 100 others when they failed to meet its labor standards.

The clothing retailer also committed to making changes that are more sweeping. Most signifi-cantly, Gap has agreed to rethink accepted garment-industry business practices, which include unrealistic production cycles that drive such abuses as unpaid overtime.

Even the company’s harshest critics welcome the company’s candor. “Instead of dealing with a black box, we now have a window into data that can really help us make a judgment on how the company is progressing in handling of these issues,” says Conrad MacKerron, a director at As You Sow, a non-profit shareholder advocacy group. “This will put pressure on other retailers to do the same.”

In 2006, Gap Inc. was named as one of the “100 Best Corporate Citizens” among major U.S. companies by Business Ethics magazine.xiii


1. Are you impressed with the effort that Gap has made to respond to the need to have more worker friendly suppliers? Would such information lead you to buy more goods from the Gap or are things like price and quality and value more important?

2. The Gap explored wage, health, and safety issues in its plants. What other issues might the com-pany explore if it wants to assure the best working conditions possible?

3. If you were a stockholder in the Gap, would you be as impressed with its efforts to satisfy the needs of its workers? Would you be more interested in revenues and profits than good wages and working conditions? What concerns might a Gap employee working in one of its stores have be-cause of its social stance?

xiii Sources: Cheryl Dahle, “Gap’s New Look: The See-Through,” Fast Company, September 2004, pp. 69-71 and Kimberly Terry, “Gap Inc. Makes 2006 ‘100 Best Corporate Citizens’ List,” CNNMoney.com, April 27, 2006.




1. Are you impressed with the effort that Gap has made to respond to the need to have more worker friendly suppliers? Would such information lead you to buy more goods from the Gap or are things like price and quality and value more important?

It is one thing to talk about the importance of taking care of workers (talking the talk). It is quite another to actually do your part to help (walk the walk). Students often go to stores that offer the latest in fashion or the best prices and could care less about working conditions for the people who made the goods. It may be difficult, but worthwhile, to explore how your students feel.

2. The Gap explored wage, health, and safety issues in its plants. What other issues might the com-pany explore if it wants to assure the best working conditions possible?

In addition to wage, health, and safety issues, there are the issues of child labor, equal pay for equal work, assistance with getting to work, educational advancement, training, literacy, and more. What other issues would you add?

3. If you were a stockholder in the Gap, would you be as impressed with its efforts to satisfy the needs of its workers? Would you be more interested in revenues and profits than good wages and working conditions? What concerns might a Gap employee working in one of its stores have be-cause of its social stance?

Stockholders are almost exclusively focused on issues such as revenues and profits and price/earnings ratios. They might resent the company spending more money on workers since the costs of pro-duction may go up. Employees may also be concerned about competitive pricing, quality, and value. Not everyone is focused on the needs of the world’s workers. Is that a good thing or not?


ENDNOTES


Documents

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