WHAT IS MANAGEMENT - Novellanovella.mhhe.com/olc2/dl/582338/ghilyer1_im14_FINAL.doc · Web view4 Provide an example of “a more everyday sort of corruption” other than the one

MANAGEMENT IN THE 21ST CENTURY

Other Teaching Tools 14.3

Video Notes 14.4

Brief Chapter Outline and Learning Goals 14.5

Lecture Outline and Lecture Notes 14.7

Notes for End-of-Chapter Materials 14.20

REVIEW QUESTIONS 14.20

DISCUSSION EXERCISE 14.1 Outsourcing: Beyond Bangalore 14.21

DISCUSSION EXERCISE 14.2 Online Extra: Calling the Ethics Cops 14.21

Career Management Notes 14.23

Study Skills Notes 14.25

Lecture Links 14.26

LECTURE LINK 14-1 Digital Data: We’re Losing It 14.26

LECTURE LINK 14-2 Why We Type This Way 14.26

LECTURE LINK 14-3 E-Mail Never Goes Away 14.27

LECTURE LINK 14-4 Blending Activism and Enterprise 14.28

LECTURE LINK 14-5 Wal-Mart to the Rescue 14.28

Bonus Internet Exercises 14.30

BONUS INTERNET EXERCISE 14-1 Spam Statistics 14.30

BONUS INTERNET EXERCISE 14-2 Researching Codes of Ethics 14.31

BONUS INTERNET EXERCISE 14-3 Exploring Community Service 14.32

Critical Thinking Exercise 14.33

CRITICAL THINKING EXERCISE 14-1 Ethical Dilemmas 14.33

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Bonus Cases 14.37

BONUS CASE 14-1 Gap’s Evolving View of Ethics 14.37

BONUS CASE 14-2 Merck and Ethics 14.39

BONUS CASE 14-3 Off-Label Drug Prescriptions 14.43

BONUS CASE 14-4 Cell Phone Privacy? 14.45

14.2 MANAGEMENT: A REAL WORLD APPROACH: 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/ghillyermanagement) Student Study GuideSpanish Translation Glossary (OLC)Spanish Translation Quizzes (OLC)

Instructor Teaching ToolsInstructor Online Learning Center (www.mhhe.com/ghillyermanagement)Annotated Instructor’s Resource ManualIRCD (Instructor’s Resource Manual, Test Bank, PowerPoints, EZtest)Asset Map PageOutPowerPoint Presentations (on IRCD and OLC)Test Bank Management at the Movies (DVD)Management Videos on DVD Enhanced Cartridge optionSpanish Translation Glossary (OLC)

CHAPTER 14: Management in the 21st Century 14.3

VIDEO NOTES

Two video series are available for use with MANAGEMENT: A REAL-WORLD APPROACH.

Management at the Movies This innovative video collection includes video clips from twenty of the best Hollywood films.

The Video Notes section of this Instructor’s Resource Manual (beginning on page V.1) provides In-structor’s Teaching Notes for each of the video segments, along with Student Materials keyed to chapter concepts.

MOVIE 3. “John Q” (“Runaround”) (1:51) This clip shows John discussing the loss of his health coverage with the personnel manager.

This can be used to illustrate a firm’s responsibility in communicating with employees and the importance of behaving ethically.

MOVIE 17. “Agent Cody Banks” (“Gadgetology”) (2:37) In this scene, a nontraditional intelligence agent receives the gadgets necessary to perform

his mission.

Management Videos on DVDAlso included are twenty videos 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.50.

VIDEO 14: “Raven Biotechnologies: If It Isn’t Ethical, It Isn’t Right” (11:00)Discussions of changing approaches to drug research and the ethics involved in those

changes are highlighted in this video. Works on multiple levels with content for this chapter.


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BRIEF CHAPTER OUTLINE AND LEARNING GOALS

CHAPTER 14

Management in the 21st Century

I. ORGANIZATIONS IN THE 21ST CENTURYLEARNING OBJECTIVE 1Discuss how managers might manage in the fu-ture.

II. GROWTH OF TECHNOLOGYLEARNING OBJECTIVE 2Identify how technology impacts the managerial role.

III. VIRTUAL MANAGEMENTLEARNING OBJECTIVE 3Review the challenges of managing a virtual team.

IV. ETHICS AND SOCIAL RESPONSIBILITYLEARNING OBJECTIVE 4Discuss social responsibility and organization’s code of ethics.

V. CODES OF ETHICSA. Content of Ethical CodesB. Behaving EthicallyC. Behaving HonestlyD. Dealing with Ethical Dilemmas

VI. LAWS RELATING TO ETHICS IN BUSINESSLEARNING OBJECTIVE 5Identify laws pertaining to ethics in business.

A. Competitive BehaviorB. Corporate GovernanceC. Consumer ProtectionD. Environmental Protection


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E. Ethical Standards and CultureF. Corporate Gift GivingG. Intellectual Property

VII. SOCIAL RESPONSIBILITYLEARNING OBJECTIVE 6Explain social responsibility.

A. Profit MaximizationB. Trusteeship ManagementC. Social InvolvementD. Measuring Social ResponsibilityE. Actions Necessary to Implement Social ResponsibilityF. Conducting a Social Audit


LECTURE OUTLINE AND LECTURE NOTES

THE WORLD OF WORKTaco Barn Becomes Socially Responsible (Text pages 404-405)

Tony is given new orders regarding a major initiative to reposition Taco Barn as a more socially responsible organization. This will mean meeting with his employees and coming up with ideas to give the store a more environmentally-friendly atmosphere, including healthier menu items, recyclable packaging, supporting local growers, etc.

1. What is a social audit and how is it done? Refer to pages 422-423 for guidance on this.

A social audit allows management to evaluate the success or lack of success of programs de-signed to improve the social performance of the organization. Rather than looking exclusively at eco-nomic and financial measures, the social audit can be a beginning point for encouraging environmental and social strategies that really work.

2. Is Taco Barn simply following a trend here, or is there evidence that this is a real commitment on the part of the organization? Explain your answer.

The true measure of any corporate change lies in changing the thinking of the company’s stock-holders. Management may state a willingness to lose some short-term profits to achieve social objectives. However, they may find stockholders unsympathetic if it has a significant impact on revenue and profit.

On the other hand, the consuming public is becoming more concerned with protecting the envi-ronment and supporting sustainable agriculture. Taco Barn exists within this changing public environ-ment, and must adapt to their concerns. Another growing trend is consumer preference for organic foods. Taco Barn is on the forefront of an economy-wide social trend.

3. How will these new rules impact Tony’s job as a unit manager?

Tony has to balance his own store budget and profitability goals with the new company initiatives and make sure he is able to incorporate the changes with future decision making of his own store.

4. How do you think your organization (or an organization you have worked for in the past) would react to this kind of policy change?

Let students consider how this might have affected their current or previous company’s way of doing business. Would this be a slight shift in their thinking or a dramatic new way to operate?


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LECTURE OUTLINE LECTURE NOTES

I. ORGANIZATIONS IN THE 21ST CENTURY

LEARNING OBJECTIVE 1Discuss how managers might manage in the future. (Text page 406)

A. Projected Changes 1. The gap between competitive compa-

nies in traditional measures will nar-row.

2. Every U.S. business will be forced to become agile, flexible, and adaptive.

3. U.S. companies will have to develop superior knowledge, skill, or capability.

4. Organizational structures will become very fluid.

5. The barrier between leader and fol-lower, manager and worker will close.

B. Organizations have to continuously adapt to these changes.

POWERPOINT 14-1Chapter Title (Refers to text page 404)

POWERPOINT 14-2Learning Objectives (Refers to text page 405)

POWERPOINT 14-3Introduction (Refers to text page 406)


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II. GROWTH OF TECHNOLOGYLEARNING OBJECTIVE 2Identify how technology impacts the manage-rial role. (Text pages 407-408)

A. Terminology for the New Millennium 1. E-Commerce is the abbreviated form

of electronic commerce. 2. Types of e-commerce: a. B2B is business-to-business com-

merce. b. B2C is business-to-consumer. c. C2C is consumer-to-consumer

through electronic marketplaces such as eBay.

B. Technology has changed the manager’s world.

1. Complex calculations can be pro-cessed in seconds.

2. Information can be sent anywhere in the world via electronic mail.

3. Vast amounts of information can be accessed through search engines, such as Google and Yahoo.

4. “Google” has become a verb.5. Bricks-and-mortar stores have been

replaced by clicks-and-mortar online vendors.

6. Vendors now devote equal resources to web stores as they do to their physi-cal stores.

7. Cell phones and PDAs have more power than older room-size computers.

PROGRESS CHECK QUESTIONS (Text page 408)

1. Define the term cyberspace.2. What is electronic commerce?

LECTURE LINK 14-1Digital Data: We’re Losing ItSeventy-five percent of fed-eral government records is in electronic form, and no one is sure how much of it will be readable in as little as ten years. See complete lecture link on page 14.26 of this manual.

POWERPOINT 14-4The Growth of Technology(Refers to text pages 407-408)

LECTURE LINK 14-2Why We Type This WayThe modern office has a 19th century bottleneck – the computer keyboard. See complete lecture link on page 14.26 of this manual.


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III. VIRTUAL MANAGEMENTLEARNING OBJECTIVE 3Review the challenges of managing a virtual team. (Text pages 409-410)

A. Functional organizational structures have been replaced by complex networks.

1. Management must adapt to manage the new supplier networks.

2. Outsourcing offers cost savings, but requires sharing information.

B. A VIRTUAL ORGANIZATION is a tempo-rary network of independent companies – suppliers, customers, and even rivals –linked by information technology to share skills, costs, and access to one another’s markets.

1. One type exists when a group of skilled individuals form a company by communicating via computer, phone, and video conference.

2. A second type occurs when a group of companies, each specializing in a cer-tain function, partner together.

3. The third type occurs when one large company outsources many of its oper-ations using technology so that it can focus on its specialty.

C. Virtual organizations create a network of collaborators that come together, collabo-rate, then disband and form new alliances.

1. Technology ties virtual organizations together with integrated computer and communication technology.

2. Virtual employees can work at any physical location.

3. Text Figure 14.2 presents the benefits

POWERPOINT 14-5Virtual Management(Refers to text pages 409-410)

LECTURE LINK 14-3E-Mail Never Goes AwayWhen it comes to the Inter-net, nothing is ever really forgotten and everything leaves a trail. See complete lecture link on page 14.26 of this manual.

TEXT FIGURE 14.1Virtual Organization (Text page 410)

BONUS INTERNETEXERCISE 14-1Spam StatisticsA growing problem with electronic communication is spam, unwanted e-mail mes-sages. See complete exercise on page 14.30 of this manual.

TEXT FIGURE 14.2Benefits and Challenges of Transforming to a Virtual Organization (Text page 410)


LECTURE OUTLINE LECTURE NOTESCASE INCIDENT 14.1Virtual Organization Creates Virtual Convention (Text page 411)

The Real Estate Cyberspace Society (RECS), founded in 1996, has continued to help real-estate agents by offering its annual convention online. Its first attempt in April 2002 was a success as some 22,000 agents attended by listening to speakers, networking, and visiting exhibitor booths. The 2004 convention was even more successful as over 42,000 real-estate professionals attended with more op-tions for live chats with exhibitors, downloading handouts of keynote speakers, and listen to national live or download their slide shows at a later time.

1. How is it possible to attend an entire convention online?

With the development of virtual technology, agents are linked to booth participants via their own PC capabilities. Web presence is an accepted business activity for many companies and has allowed the usage of e-commerce to thrive and survive in today’s marketplace.

2. Visit the Real Estate Cyberspace Society (RECS) at www.recyber.com. How has the organiza-tion of the convention changed since it was first created?

Students will need to do this web exercise first to best answer this question. Be prepared to give students specific instructions about the website concept so they can understand the beginning point and how the concept has evolved.

3. What are the four key advantages that RECS offers to its members?

Initially, the RECS offered training and support materials to real-estate professional in the form of tapes and newsletters. Today, the organization offers virtual conventions where agents can visit boots, view keynote speakers, and download corresponding support materials, all from their home PC.

4. Would you attend an online convention in your industry? Why or why not?

For students in today’s world of virtual technology, this should be an overwhelming expected way of connecting and communicating with other business contacts in their world.


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IV. ETHICS AND SOCIAL RESPONSIBILITY

LEARNING OBJECTIVE 4Discuss social responsibility and organiza-tion’s code of ethics. (Text page 411-414)

A. ETHICS is a set of moral principles or val-ues that govern behavior.

1. Individuals develop their own set of ethical rules, which help them decide how to behave in difference circum-stance.

2. Businesses also develop ethics that reflect the company’s beliefs about what actions are appropriate and fair.

B. Managers face difficult ethical dilemmas.

POWERPOINT 14-6Ethics and Social Responsibility (Refers to text pages 411-412)

BONUS CASE 14-1Gap’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 14.37 of this manual.

V. CODES OF ETHICSA. A CODE OF ETHICS is a document that

outlines the principles of conduct to be used in making decisions within an organi-zation.

B. Content of Ethical Codes 1. Codes of ethics are formal documents

that are shared with all employees covering:

a. honesty b. conflicts of interest c. employment practices d. protection of the environment

e. other ethical areas 2. A code of ethics does not prevent un-

ethical behavior. 3. To be effective, codes of ethics must

be enforced.

POWERPOINT 14-7Code of Ethics(Refers to text pages 412-414)

BONUS INTERNETEXERCISE 14-2Researching 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 complete exercise on page 14.31 of this manual.


LECTURE OUTLINE LECTURE NOTESC. Behaving Ethically 1. Ethical decisions have important con-

sequences. 2. Behaving unethically can hurt or end

one’s career. 3. Behaving ethically helps establish trust

in the business world.D. Behaving Honestly 1. The ethical action in some situations is

clear. 2. Employee theft a. This can occur when employees

embezzle money, steal supplies, or accept bribes.

b. The ethical decision is not to steal. 3. Lying about hours worked a. Inaccurately reporting hours

worked is unethical. b. Ethical employees show up at

work when expected. 4. Falsifying records can cause damage

to a company’s reputation.E. Dealing with Ethical Dilemmas 1. Ethical dilemmas are situations in

which the ethical course of action is not clear.

2. Determining the right course of action involves asking oneself difficult ques-tions.

TEXT FIGURE 14.3Solving Ethical Dilemma(Text page 414)

CRITICAL THINKING EXERCISE 14-1Ethical DilemmasThis exercise presents ten ex-amples of ethical dilemmas for students to evaluate. See complete exercise on page 14.33 of this manual.

TEXT FIGURE 14.4Ethical Problems in the Business World (Text page 415)


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VI. LAWS RELATING TO ETHICS IN BUSINESS

LEARNING OBJECTIVE 5Identify laws pertaining to ethics in business. (Text pages 415-419)

A. Competitive Behavior 1. All companies operating in the U.S.

are subject to laws regulating competi-tive behavior.

2. The Antitrust Division of the Justice Department and the Federal Trade Commission enforce these laws.

3. The Sherman Act a. The Sherman Antitrust Act of 1890

makes it illegal for companies to monopolize trade.

b. Mergers can be prohibited if the new company will control too large a share of the market.

4. The Clayton Act a. The Clayton Act of 1914 makes it

illegal to charge different prices to different wholesale customers.

b. The Act also bans the practice of requiring a customer to purchase a second good.

5. The Wheeler-Lea Act a. The Wheeler-Lea Act of 1938

bans unfair or deceptive acts, in-cluding false advertising.

b. Businesses must inform con-sumers of possible unsafe prod-ucts.

B. Corporate Governance 1. The Public Company Accounting Re-

TEXT REFERENCE Career Management Box: Winning Resumes … It’s All About You! Writing a resume is a way to communicate who you are to potential employers. (Box in text on page 415.) An addi-tional exercise and discus-sion is available in this chap-ter on page 14.23.

POWERPOINT 14-8Law Relating to Ethics in Business (Refers to text page 415)

POWERPOINT 14-9Corporate Governance(Refers to text pages 416-417)


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VII. SOCIAL RESPONSIBILITYLEARNING OBJECTIVE 6Explain social responsibility. (Text pages 419-423)

A. SOCIAL RESPONSIBILITY is the obliga-tion that individuals or businesses have to help solve social problems.

B. Profit Maximization 1. In the 19th and early 20th century busi-

ness owners believed that their role was simply to maximize the profits of their companies.

2. Dealing with social problems was not considered a legitimate business activ-ity.

C. Trusteeship Management 1. During the 1920s and 1930s trustee

management became popular. 2. Business owners had obligations to

their employees, customers, and credi-tors.

D. Social Involvement 1. The 1960s brought a more activist ap-

proach. 2. Corporations have a responsibility help

solve problems such as poverty, crime, and environmental destruction.

3. Businesses have obligations to all STAKEHOLDERS, the people – em-ployees, customer, suppliers, and the community – who are affected by the actions of a business.

4. Corporations are now expected to show their commitment to social change.

5. Most corporations actively try to diver-

BONUS CASE 14-2Merck and EthicsWhat happened to Merck? The well-respected company earned its reputation for be-ing socially responsible by donating an important drug. That reputation was tarnished by its handling of the Vioxx controversy. This case ex-plores both parts of Merck’s history. See complete case, discussion questions, and suggested answers on page 14.39 of this manual.

POWERPOINT 14-12Social Responsibility(Refers to text page 419)

TEXT REFERENCE: Study Skills Box: Keep a Journal!Keeping a journal is a pro-ductive way to improve study habits. (Box in text on page 419.) An additional exercise and discussion is available in this chapter on page 14.25.

BONUS INTERNETEXERCISE 14-3Exploring Community ServiceThis exercise encourages stu-dents to use the Internet to explore opportunities for community service. See com-plete exercise on page 14.32 of this manual.

LECTURE LINK 14-5Wal-Mart to the RescueAfter Hurricane Katrina dev-astated Waveland, Missis-


LECTURE OUTLINE LECTURE NOTESETHICAL MANAGEMENT (Text page 421)

You are the line manager for a team of people in your company in the finance sector. One of your key staff members is excellent at her job and is known for her ability to generate a high amount of income for the company. None of your other staff members comes close to her in terms of this.

You are aware that your company’s competitors have made attempts to head hunt this staff member, which she has so far rejected, much to your relief, as your department is heavily reliant upon her abilities and you are paid bonuses based on your department’s profitability.

However, you are certain that this staff member is submitting fraudulent expense claims, some-times several hundred or even thousands of dollars more than she has actually spent – a tiny fraction of the profits she is generating, but fraudulent nonetheless.

1. Should the high amount of income this staff member generates for the company justify looking the other way over these fraudulent expense claims? Why or why not?

If there is reason to raise her compensation, based on her excellent sales performance, then the company should increase her pay through other means, not by condoning inflated expense reports. This is allowing inaccurate reporting to take place and can become a bigger problem if other employees real-ize that fraudulent expense reports are acceptable. Besides, falsifying expense reports is a form of theft. Knowingly abetting her in her criminal behavior is unethical, and may even be illegal. Companies are regulated by laws to ensure ethical behavior and there can be serious consequences for not employing these standards of behavior.

2. What would your action be if she weren’t such a star performer? Why?

The actions should be the same no matter who the employee is. It is a reflection on the company and should be corrected before it becomes an accepted practice with other employees of the company.

3. How would you go about bringing this to the attention of your boss?

Gathering facts is the first place to start, such as how long the person has been employed, when the misreporting began, any supervisors who might also been involved in the approval process, and what amounts are involved. Once the facts are in place then a meeting with your supervisor should be sched-uled to discuss what remedies can be taken.

4. Do you think the company would terminate this employee? Why or why not?

The decision whether or not to termination this employee should be made only after the facts have been collected and a meeting with the supervisors is held. Once the entire picture is seen, you and your supervisor are in a position to make a better decision. The decision should also be a reflection of the company’s code of ethics that established how they govern ethical behavior within the company.

F. Actions Necessary to Implement Social Responsibility

1. Organizations face pressure from fi-nancial analysts and stockholders to achieve steady increases in earnings


LECTURE OUTLINE LECTURE NOTESon a quarterly basis.

2. This short-term focus makes it difficult to invest in areas that do not contribute immediately to the bottom line.

3. Stockholders may be unsympathetic. 4. Organizational values should be in

tune with the values held by society. 5. Long-range planning should consider

environmental impact.6. Businesses can support volunteer or-

ganizations by donating technology, organizational skills, and manage-ment.

7. Corporate philanthropy involves dona-tions of money, property, or work to socially useful purposes.

G. Conducting a Social Audit 1. A SOCIAL AUDIT is a method used

by management to evaluate the suc-cess or lack of success of programs designed to improve the social perfor-mance of the organization.

2. The social audit can encourage envi-ronmental and social strategies that really work.

3. Most large corporations publish their successes in their annual reports.

4. Socially responsible firms will eventu-ally be rewarded by their markets and stakeholders.

PROGRESS CHECK QUESTIONS (Text page 423)

13. What is social responsibility?14. What are the three schools of thought from which so-

cial responsibility was developed?

POWERPOINT 14-14Conducting a Social Audit(Refers to text pages 422-423)


LECTURE OUTLINE LECTURE NOTES15. Explain the terms philanthropy and volunteerism.16. List the five steps of a social audit.

CASE INCIDENT 14.2Shameless Exploitation in Pursuit of the Common Good (Text page 423)

The success of Paul Newman’s salad dressings in the retail market has resulted in millions of dollars in donations to medical research, education and the environment. In over 20 years, over $175 million has been donated to these numerous charities.

1. What makes Newman’s Own such a positive example of corporate social responsibility?

The success of these products have generated huge profits that have turned into charitable dona-tions over the past twenty years, including funding for medical research, education, and the environment. Their signature program is the creation of the eight Hole in the Wall Gang camps for children with seri-ous illnesses.

2. What other products are now included in the Newman’s Own line?

Following the Newman salad dressings, the offerings grew to spaghetti sauce, popcorn, and lemonade.

3. If the organization used only all-natural ingredients and did not donate their after-tax profits to charity, would they still be held in such high regard? Why or why not?

By assuming social responsibility, the donations to charities perhaps are what have made the sales grow at the rates they have. If the company had kept these profits for their own gain, consumers would not have been as likely to do their part. The clear donation aspect is what consumers are proud of and therefore are willing to seek out these products on a regular basis.

4. Provide an example of something that your organization (or an organization you have worked for in the past) could do to be more socially responsible. Explain your answer.

Students should easily identify causes that their companies could invest in, from using employ-ees’ time, their own products, or their own dollars to help change unfortunate situations into positive out-comes. The collaboration of business and non-for-profit charitable organizations is a powerful force.

THE WORLD OF WORKIt Costs Money to Be Socially Responsible (Text page 424)

The social audit for Taco barn was more positive than many would have thought. In place are ac-tive recycling programs and donations of food to community food banks. However, the next steps still in-volve unit managers looking into purchasing food items from local farmers to help create a more active, social conscience approach to doing business.

1. Are the unit managers’ concerns about increased costs valid? Why or why not?


Probably, considering the entire operation is asked to be profitable. If operating costs rise at a higher rate than sales, it is possible that other variable expenses, such as hourly wages, could be reduced. Profitability is the objective of any business and all variables to how this is achieved must be analyzed at any point to ensure profits occur. On the other hand, positive publicity about Taco Barn’s support of local growers could bring more consumers into the restaurant, increasing revenues to more than offset the in-creased raw material costs.

2. How do you think Tony’s crew members would react if the company did go back on this new com-mitment to social responsibility?

Because of their favorable response to this new initiative, it would be a real negative to initiate this program only later to let it go. If employees are truly in favor, they may be willing to see how the stores budget could be cut in other areas to support this new buying program.

3. What options does Taco Barn have in managing the increase in costs from this new initiative?

The company’s advertising should highlight this new commitment to social responsibility. Many consumers are willing to spend a little more to support a good cause. But in reality, there will probably be increased costs without a corresponding increase in revenues unless Taco Barn increases prices. In the bigger picture, most experts agree that socially responsible firms will eventually be rewarded by their markets and shareholders.

4. Based on the information shared in this case, do you think Taco Barn will follow through on all these commitments? Why or why not?

In the new direction this company wants to take, these new programs are identifying points for how the company does business. The company initiative appears to have a real commitment from upper level management. As these programs are communicated and more relationships are built, the identity of company becomes more pronounced and this new culture evolves to new levels for the company.


NOTES FOR END-OF-CHAPTER MATERIAL

REVIEW QUESTIONS

1. How has technological growth impacted the role of a manager?

Technology has forced organizations to be more agile and adaptive. A tremendous amount of in-formation is available via the Internet. Bricks and mortar stores now have to compete with online stores, forcing traditional retailers to commit more resources to this outlet.

2. What are the challenges involved in running a virtual business?

Virtual organizations decrease the cost of doing business and increase productivity. They also provide a competitive advantage, provide better balance for professional and personal lives, and allow the organization to hire the best talent regardless of location.

Virtual organizations also present challenges. Leaders must move from a control model to a trust method. New forms of communication will be required. Management must be willing to change and adapt to a learning culture. It can also be difficult to monitor employee behavior.

3. Identify the laws that deal with ethical issues in business.

The Sherman Antitrust Act of 1890 makes it illegal for companies to monopolize trade. Mergers can be prohibited if the new company will control too large a share of the market.

The Clayton Act makes it illegal to charge different prices to different wholesale customers. The Act also bans the practice of requiring a customer to purchase a second good.

The Wheeler-Lea Act of 1938 bans unfair or deceptive acts, including false advertising. Busi-nesses must inform consumers of possible unsafe products.

The Public Company Accounting Reform and Investor Protection Act (Sarbanes-Oxley Act) was passed in 2002. SOX includes (1) requirements for auditor independence, (2) restriction on firms engag-ing accounting firms for both auditing and consulting services, (3) independence of firms’ board commit-tees, (4) management’s assessment of internal controls, and (5) personal certification of financial reports by firms’ CEOs and CFOs. Also, some protection is offered to whistleblowers. Destroying documents to impede a federal investigation is illegal.

The Federal Food, Drug, and Cosmetic Act of 1938 bans the same of impure, improperly labeled, and unhealthful foods, drugs, and cosmetics. The Food and Drug Administration has enforcement powers.

The Consumer Product Safety Commission (CPSC) was established in 1972. The law gave the commission power to issue product recalls.

The Truth in Lending Act of 1968 requires creditors to let consumers know how much they are paying in finance charges and interest.

The Equal Credit Opportunity Act of 1975 prohibits creditors from making credit decisions on the basis of discriminatory practices.

The National Environmental Policy Act of 1969 created the Environmental Protection Agency (EPA.) The mission of EPA is to protect human health and safeguard the air, water, and land. Environ-mental protection laws are enforced by the EPA.

The Clean Air Act of 1970 set maximum air pollution standards for each state. In 1990, the act was amended to deal with problems of acid rain, ozone, and toxic substances in the air.


The Toxic Substances Control Act of 1976 was enacted to give the EPA the ability to track and screen industrial chemicals.

The Clean Water Act of 1977 gives the EPA the authority to set standards of the type of pollu-tants that industries can put into bodies of water.

4. What are the three ways in which corporations can demonstrate a sense of social responsibility?

Corporations can demonstrate a sense of social responsibility through (1) philanthropy and volun-teerism, (2) environmental awareness, and (3) sensitivity to diversity and quality of work life.

DISCUSSION EXERCISE 14.1Outsourcing: Beyond Bangalore

Outsourcing has continued to be the ingredient to help U.S. companies save costs and realize competitive bottom line profits. IT services are being outsourced at rates of 24% and will continually rise by 18% with new geographic regions being sought to replace the once dominant India because of rising costs and infrastructure problems.

1. Why are companies starting to look outside India for outsourcing partners?

As a result of the constant growth of outsourcing in this area costs are rising and turnover more prevalent. The area is also experiencing infrastructure problems, and therefore companies are going be-yond this region where new providers can be found at lower costs.

2. What is the lure of cheap labor?

Because of the new, global economy, company executives, who are pressured to show promising company profits to stockholders, are prime users of outsourcing resources that allow them reduce costs and show healthy profits.

3. Why is it difficult to move IT outsourcing into developing countries?

The difficulties include the language and cultural differences, geopolitical differences (example is the human rights issues in China), and the risk of stolen intellectual properties. Conversely, if you keep looking for the lower costs and keeping moving people around, a loss of productivity is sure to follow.

4. What is the impact of this global outsourcing trend on U.S. workers?

U.S. workers have to compete with IT workers all over the world, and this is demonstrated by the 24% of North American companies that are using offshore providers to help with their software needs, This is expected to grow at an 18% annual rate. The effect is that U.S. engineering salaries have stayed the same or lessened over the past five years, encouraging workers to choose other fields further eroding the U.S. competitiveness in these job classifications.

DISCUSSION EXERCISE 14.2Online Extra: Calling the Ethics Cops

Because of an unethical workplace, an emphasis has been placed on more corporate policing of activities as witnessed by the organization ECOA (Ethics & Compliance Officers Association). Recent surveys have shown that workers have witnessed 31% to 52% of co-workers operating unethically. Since mid-2002, a corporate task force of the U.S. Justice Dept. has helped secure more than 700 corporate


fraud convictions, with more than 100 chief executives and presidents convicted, along with more than 80 vice-presidents and more than 30 chief financial officers.

1. Why are companies “finding improprieties very expensive”?

An example of large corporate improprieties would be the insurance brokerage giant March & McLennan, which agreed to pay $850 million to settle allegations of price-fixing and collusion leveled by New York Attorney General Spitzer. Furthermore, top managers at Morgan Stanley recently sent a pow-erful message, for instance, by firing a research analyst and three sales staffers after they took clients to an Arizona strip club. The firm paid $54 million to settle this gender-discrimination case in which com-plaints had been raised about male-only outings. Another example found thefts in 2003 at Nortel in which equipment worth more than $1 million was stolen from a company lab affected by layoffs.

2. What is the ECOA?

The ECOA is the Ethics & Compliance Officers Association, a professional group for in-house cops, which began in 1992 with 16 founding members and has over 1,250 members today.

3. What kind of stature should an ethics officer hold within an organization?

In today’s corporate environment, these officers should be free to scrutinize and investigate ev-erything in the company. Furthermore, they must have senior level status in the company and have the ability to take anything over the CEO’s to the board if necessary.

4 Provide an example of “a more everyday sort of corruption” other than the one given in the case study.

A great time to have a class discussion on more petty corporate crimes like internet and equip-ment usage, to more serious crimes like inflated expense reports and bribery.


CAREER MANAGEMENT NOTES

Writing Resumes…It’s All About You!

Instructor’s Notes for Text Box Fourteen: Objectives to consider and implement to increase stu-dents knowledge, usage and understanding of the concepts.

Have you analyzed the POTENTIAL of your career, considering the overall skills necessary to contribute to a job/company as you see below? This analysis is important to the value of your position as companies evaluate you for hire. Your ability to find this out and put it in some usable format is important and something you will need to become experienced at doing. Let’s look more at this concept.

STUDENT EXERCISES:

1. Getting students to do an honest assessment of how becoming a good, valuable employee to po-tential companies is a process of understanding a wide range of skills and knowledge that create value in terms of the potential return on the company’s investment. Have students look at the skills list to help them define their strengths and let them explain why they feel strong about these specific skills. From the following list, have each student pick at least three skills as their primary strengths, followed by three more that consider to be secondary strengths. This exercise will help them really look at all the potential ways to describe themselves with an emphasis on developing an awareness of and ability to define their real strengths.

What skills describe you?

Leadership skills Management skillsTeam building skills Problem solving skillsAnalytical skills Planning skillsMarketing skills Research skillsTechnology skills Hands on skills

2. Break down the elements or ingredients of a basic resume. Show examples of several resumes and describe the various ways they are written and constructed. Discuss the good elements of the samples and also the mistakes. Draw some conclusions as to what you think constitutes a good re-sume and summarize this with the class. Finally, let students bring in samples of their own re-sumes and help them analyze the good elements of their own work and point out where they can make improvements.

3. Have students do research on resume writing. Have them go to various websites to get tips, samples, and expert opinions as to what constitutes as good resume writing. Use some of the fol-lowing websites to help in this exercise:

www.rockportinstitute.com/resumeswww.hotjobs.yahoo.com/resumeswww.rileyguide.com/letters.htmlwww.provenresumes.com


After they finish their research, have students bring in their information and have a discussion about what they found. Ask them what to reveal any new and interesting information they may have uncovered during their work. Emphasize the value of research and what it can do to make them better prepared and more knowledgeable about subjects of interest.


STUDY SKILLS NOTES

Keep a Journal!

Instructor’s Notes for Text Box Fourteen: Objectives to consider and implement to increase stu-dents knowledge, usage and understanding of the concepts.

Introduction of journal use for students can be life changing. Getting students to record their ac-tivities can be eye opening in many ways. The objective of journal use is to learn accountability; however, the best measure of this action is to keep track of time management and decision making with regards to achieving set accomplishments or falling short. Journal use can also have a soothing element to it, as stu-dents can write their feelings during good life experiences and the many other occurrences they will en-counter in their daily lives.

STUDENT EXERCISES:

1. Introduce samples of journals that students can use. Discuss the formatting options they might consider for best results. Make sure students are keeping a log of weekly assignments and a place for larger projects. Ask them to gage their progress including successes and setbacks and ask them to analyze why each outcome occurred as such. Ask them to also keep a section on personal matters, such as:

(a) money difficulties(b) relationship issues(c) job issues(d) life changing decisions (relocation, new career, marriage, etc.)(e) learning difficulties(f) miscellaneous other “issues” that might occur

2. Ask students to go to the internet and research the topic “keeping a journal.” Try the following websites for extensive help on how and why to keep a journal:www.infed.org/research/keeping_a_journal.htmwww.writesite.org/html/journal.htmlwww.pigpog.com/node/1604www.ids.about.com/od/1/a/les_journal.htm

*Allow for extensive discussion about the information students have found regarding keeping a journal and the insight they will discover in this process.


LECTURE LINKS

LECTURE LINK 14-1

Digital Data: We’re Losing It

Parents today have many options to capture the images of their offspring – 35 mm and digital cameras, videotape, and so on. But by the time these children turn 30, sunlight may have faded most of their color childhood photos, and in the off chance that the tiny VHS-C videotapes featuring their many firsts survive decades of heat and humidity, there probably won’t be a machine to play them back on.

Home videos and snapshots aren’t all that are at risk. Librarians and archivists warn we’re losing vast amounts of important scientific and historical material because of disintegration or obsolescence. Al-ready gone is up to 20% of the data collected on Jet Propulsion Laboratory computers during NASA’s 1976 Viking mission to Mars. Also at risk are 4,000 reels of census data stored in a format so obscure that archivists doubt they’ll be able to recover it. Already 75% of federal government records is in electronic form, and no one is sure how much of it will be readable in as little as 10 years. “The more technologi-cally advanced we get, the more fragile we become,” says Abby Smith of the Council on Library and In-formation Resources.

For years, computer scientists said the ones and zeros of digital data would stick around forever. They were wrong. Tests by the National Media Lab, a Minnesota-based government and industry consor-tium, found that magnetic tapes might last only a decade, depending on storage conditions. The fate of floppy disks, videotape, and hard drives is just as bleak. Even the CD-ROM, once touted as indestructible, is proving vulnerable to stray magnetic fields, oxidation, humidity, and material decay. The fragility of electronic media isn’t the only problem. Much of the hardware and software configurations needed to tease intelligible information from preserved disks and tapes are disappearing in the name of progress. “Technology is moving too quickly,” says Charlie Mayn, who runs the Special Media Preservation Lab at the National Archives.

He speaks from experience. In the 1980s, the Archives transferred some 200,000 documents and images onto optical disks, which are now in danger of becoming indecipherable because the system ar-chivists used is no longer on the market. “Any technology can go the way of eight-track and Betamax,” says Smith, whose own dissertation is trapped on an obsolete 5½-inch floppy. “Information doesn’t have much of a chance, unless you keep a museum of tape players and PCs around.” That may not be such a farfetched idea. Mayn’s temperature-controlled lab in the bowels of the National Archives houses many machines once used to record history.

Unfortunately, migration isn’t a perfect solution. “Sometimes not all the data makes the trip,” says Smith.

So what’s to be done? A good way to start is to separate the inconsequential from the historic, and to save the critical data on simple formats. Also, backup important data on another media, and don’t trust “permanent” storage media.i

LECTURE LINK 14-2

Why We Type This Way

The modern office is likely to be equipped with personal computers linked through local area net-works to each other, to the Internet, and to a host of specialized equipment, from laser printers to data-


bases storing millions of customer records. Within this state-of-the-art system is an 18 th century bottle-neck: the computer keyboard.

The computer keyboard is simply a transplanted typewriter keyboard, the same keyboard that has been used since the 1870s. While the arrangement of keys is familiar, it is far from efficient. When C. L. Sholes invented the first typewriters in the 1870s, keys were arranged alphabetically (vestiges of this ar-rangement can be seen on the second row of keys – D F G H J K L). Printing bars were mechanically pushed against the paper by the pressure on the keys. Typists soon became proficient enough to cause jams as they typed faster than the mechanical bars could move.

Typewriter manufacturers went back to the drawing board and designed a new keyboard to slow typists down to speeds within the limits of the crude mechanism. The resulting keyboard is referred to as “Qwerty,” named for the first six keys of the top row. Keys were placed awkwardly to force slower typ-ing. The “A”, for instance, one of the most frequently used keys, was placed under a typist’s left-hand lit-tle finger, the weakest finger on the hand. “E” requires an awkward reach using the middle finger of the left hand. Results were encouraging; typing speeds declined.

Today mechanical keys have been replaced by electronic ones, but the keyboard arrangement has remained unchanged. In the 1930s, Washington State University Professor August Dvorak designed a bet-ter keyboard that groups the most frequently used letters on the home row and eliminates many awkward reaches. The Dvorak system is faster to learn, easier to type, less tiring, and less likely to cause errors than Qwerty. Using it increases typing speed by more than 20%. Yet the system never caught on; typists did not want to learn a new system when their typewriters all used Qwerty, and as long as typists used Qw-erty, manufacturers did not want to produce Dvorak typewriters.

LECTURE LINK 14-3

E-Mail Never Goes Away

When it comes to the Internet, nothing is ever really forgotten and everything leaves a trail. This can be good or bad for business. These data trails can be used by companies to find who has been stealing their trade secrets – or to bust you if you are the thief. They can show who is working and who is goofing off. They can tell vendors who their online customers are and allow them to make better decisions and more money. This information is extraordinarily valuable, and there are laws that require companies to produce it, and do it right now.

In the pre-Enron, pre-WorldCom, pre-Tyco days, the legal rules for retaining communication records said only that a company had to be consistent. A company couldn’t, for example, keep all e-mails except those having to do with a hostile takeover or a case under litigation. If the company’s policy was to erase all old e-mails once a year or once a month, that was okay, as long as the policy was in writing and was strictly followed. Enron, for example, wiped clean its e-mail slate every 72 hours, which is hardly a sur-prise.

Today the rules have changed. Public and many private companies have to keep a copy of written communication of every type (letters, e-mails, even Internet instant messages) for up to seven years. These copies have to be kept in a form that allows their authenticity to be verified, whatever that means. Not only that, but companies must keep a second copy of every message in a different location in case of fire or natural disaster. The second copies must be on nonerasable storage media, such as optical disks. And if the SEC asks you to provide a copy of any given document or every given document, you have un-til close of business today to do it.

If the organization is a health care organization, an insurance company, or even a human re-sources department, the rules are even stricter. If a client asks for a list of every person or organization


who has shared his or her medical records, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires that the organization provide that list...on the spot.

Companies that aren’t a public company, don’t engage in health care, or have no human resources department aren’t off the hook, because these requirements are becoming the accepted standards for all companies. If companies still dump e-mail every 72 hours and end up in court, they are effectively guilty as charged. Penalties for noncompliance right now are mild, but will get stronger in the future, right up to sending people to jail. The new SEC regulations, for example, hold the CEO personally responsible for record retention, meaning he or she, not some nerd in the computer room, will be doing time. Then there are the civil penalties that will come from the inevitable lawsuits.

Every hospital and clinic in America is vulnerable, for they are all in violation. Most companies don’t have the technology to comply with laws already on the books, much less the even stricter ones likely to follow. Faced with the huge costs of complying with the SEC regulations, many companies might be tempted to just take the fine – except for that little part about the CEO going to jail. ii

LECTURE LINK 14-4Blending 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 party of who we are,” he says. iii

LECTURE LINK 14-5

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 receive 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.”iv


BONUS INTERNET EXERCISES

BONUS INTERNET EXERCISE 14-1V

Spam Statistics

A growing problem with electronic communication over the Internet is spam, unwanted e-mail messages. The percentage of spam for most consumers is over 75%. In late 2007 the Internet security firm Postini found that 87% of e-mail messages were spam.

Go to Postini’s website (www.Postini.com) and find the statistics in the online resource center. (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.)

1. How many e-mail messages were processed in the last 24 hours? What percentage of these mes-sages was spam?

2. How do spammers get your e-mail addresses?

3. Postini’s resource center also tracks the number of messages that contain viruses, malicious worms, and Trojan horses. In the last 24 hours, what percentage of e-mail messages were virus infected?

4. Do you think that spam is a real problem for organizations? Why or why not? Will spam change American business reliance on e-mail communication in the future?


BONUS INTERNET EXERCISE 14-2

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/coe.html). (Sometimes the web address for a location changes. You might need to search to find the exact location mentioned.) Their collection in-cludes 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 development of codes.

(Some of the more interesting codes of ethics that the Center has collected are those 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?


BONUS INTERNET EXERCISE 14-3

Exploring Community Service

One of the most common reasons people give for not contributing more of their time to their com-munity 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. 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 volun-teer 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?

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.


CRITICAL THINKING EXERCISE

CRITICAL THINKING EXERCISE 14-1

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.

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.

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.

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.


8. You are required to fire a worker for persistent absenteeism, but you know that her absence is due to caring for her father who is in the advanced stage of Alzheimer’s disease. You feel that the or-ganization is being inhumane in its attitude, but your boss remains intransigent.

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.

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.


NOTES FOR CRITICAL THINKING EXERCISE 14-1

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 would your first sentence be?


BONUS CASES

BONUS CASE 14-1

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 US com-panies by Business Ethics magazine.vi

i

? Sources: Arlyn Tobias Gajilan, “History: We’re Losing It,” Newsweek, July 12, 1999; Fred Moore, “Digital Data’s Future—You Ain’t Seen Nothin’ Yet!” Computer Technology Review, October 1, 2000; and Charles Arthur, “The End of History;” The Independent, June 30, 2003.

ii Source: Robert X. Cringely, “What’s Next: Data Disasters,” Inc. Magazine, November 2003, page 47.

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

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

v 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.


DISCUSSION QUESTIONS FOR BONUS CASE 14-1

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?

ANSWERS TO DISCUSSION QUESTIONS FOR BONUS CASE 14-1

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?

vi 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.


BONUS CASE 14-2

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 water-born 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. The microfilaria 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 is does do is kill off the microworms and to keep the adults 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. vii

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. Vioxx, on the market for five years, had been marketed 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 deathblow to the drug was the results of APPROVe, a database analysis of 1.4 million patients. Ironically, this study was designed to test whether Vioxx reduced the risk of colon polyps. Instead, it showed that pa-tients 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 never had any doubt about what to do. “Withdrawing the drug was going to be the responsible thing to do,” said Gilmartin.

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. Merck has so far lost one of the two cases involving long-term use and two of the four short-term cases.viii


vii 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.


1. In the case of Merck donating the drug Ivermectim to poverty stricken countries, does the com-pany expect to get anything in return for their sizable contributions? Explain.

2. 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?

3. 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 such a common used drug as Vioxx?

4. Merck finally pulls Vioxx from the market and has 11,000 lawsuits to handle and has lost three lawsuits with potentially more to follow. 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 at-tack for a past user of the drug?


1. In the case of Merck donating the drug Ivermectim to poverty stricken countries, does the com-pany expect to get anything in return for their sizable contributions? Explain.

When companies help others for little or no compensation, it is usually a response to what we ex-pect from large companies; helping others and being socially responsible whenever they can. For Merck, this donation of $50 million is a very large amount, but in perspective to the sales they generate (some-where in the several billion dollar range), it would be possible for them to handle this and not be out of their comfort zone. The company also receives very strong public relations for helping this cause which can, over time, keep their name and products in the forefront of consumers.

2. 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 the mainstream use without any major problems. In the case of Merck, they appear 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 their products are going to be successes on the market.

3. 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 such 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.

4. Merck finally pulls Vioxx from the market and has 11,000 lawsuits to handle and has lost three lawsuits with potentially more to follow. How would you feel if you were the company president

viii 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.


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 stoke or heart attack and therefore would not be equipped for such dealings as compared to the sea-soned company president of CEO.


BONUS CASE 14-3

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 in at least one disease. Any potential new drug must undergo a de-manding 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 preliminary 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 (and 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 prescriptions 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%.ix


1. Should the practice of prescribing drugs off-label be restricted or regulated? Why or why not?

2. Did Warner-Lambert sales personnel act ethically in encouraging off-label use for Neurontin? Ethically? Explain.

3. What are the prescribing physicians’ ethical responsibilities in writing off-label prescriptions?

4. Should physicians be required to disclose to patients when they have been compensated by a drug company?


1. Should the practice of prescribing drugs off-label be restricted or regulated? Why or why not?

ix 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.


A flat ban on off-label use would severely restrict physician’s ability to treat patients. It would, however, be safer for patients. Would it be worth the price?

2. Did Warner-Lambert sales personnel act ethically in encouraging off-label use for Neurontin? Ethically? Explain.

Marketing the drug knowing it was ineffective for these conditions was unethical. If they didn’t know, it was a grey area. Regardless, the company’s reputation has definitely suffered.

3. What are the prescribing physicians’ ethical responsibilities in writing off-label prescriptions?

Tough question. If physicians have independent evidence (medical journals, professional con-tacts, etc.) that the off-label use was effective, the benefit to the patient might argue for its ethical use.

4. Should physicians be required to disclose to patients when they have been compensated by a drug company?

Interesting question. Be sure to discuss what informed consent is.


BONUS CASE 14-4

Cell Phone Privacy?

In his 2004 campaign for President, General Wesley Clark campaigned as a strong supporter of national security. But he soon discovered a breach in his personal security. A resourceful blogger, hoping to call attention to the black market in phone records, purchased the records of 100 cell phone calls that Clark had made, no questions asked. The query cost $89.95.

Clark is not the only one who has had their private phone calls revealed. To test one of the online services, Locatecell.com, the FBI paid the company $160 to buy the records for an agent’s cell phone. They received the list within three hours.

The tiny cell phone has become a mainstream tool. About 65% of the U.S. population is cell phone subscribers. But few safeguards are in place to protect customers’ information. Online cell phone information sites can obtain information about who your physician is, whether you are seeing a psychia-trist, whether you are calling that special “friend” too often, and what companies you do business with. Such records could also be used by divorce attorneys and by criminals, such as stalkers or abusive spouses.

Data brokers who sell cell phone records probably get them using one of three techniques. They might have someone inside the cell phone carrier who sells the data. The brokers also use “pretexting,” in which the data broker or investigator pretends to be the cell phone account holder and persuades the car-rier’s employees to release the information. Finally, brokers can try to get access to consumer accounts online. Telephone companies are now encouraging their customers to manage their accounts over the In-ternet. The companies will typically set up the online service in advance, waiting to be activated by the user. If the data broker can figure out how to activate online accounts in the name of a real customer be-fore that customer does, the call records are there for the taking.

The latest of these wireless phones have multimedia color displays, digital cameras, and precision location tracking. This leads to another area of concern: the use of the location tracking feature to watch a user’s movements. One technology allows rental-car companies to track their cars with GPS. Another ap-plication lets a manager track how workers use company-issued cell phones. Privacy advocates worry about the overall ability to gather vast databases tracking the movements of virtually every wireless phone user, even over long periods. Law enforcement agencies view this as a treasure trove. The potential for in-dividuals to abuse the tracking technology is also real. In a recent case, a man was arrested for stalking af-ter using a GPS/cellular system planted under the hood of his ex-girlfriend’s car.x


1. Should cell phone data brokers be able to sell users’ records? Why or why not?

2. Does this practice violate your privacy? Explain.

3. Are the data brokers’ actions legal? Ethical? Why?

x Sources: Lauren Weinstein, “Tiny Cell Phone or Big Brother?” Associate Press, cited by wirednews.com, January 6, 2003; Jonathan Krim, “Online Data Gets Personal: Cell Phone Records for Sale, The Washington Post, July 8, 2005; Bob Sullivan, “Can We Stop The Sale Of Cell Phone Records?” January 17, 2006, MSNBC.com; Frank Main, “Your Phone Records Are For Sale,” Suntimes.com, January 5, 2006; Kristina Dell, “The Spy in Your Pocket,” Time, March 27, 2006; Paul Carrier, “State to Ban Sale of Phone Records,” Portland Press Herald, April 1, 2006; and Tom Sowa, “Measure Protects Phone Records: Bill Makes Web Sale of Cell Data a Crime,” The Spokesman-Re-view, February 7, 2006.



1. Should cell phone data brokers be able to sell users’ records? Why or why not?

Most cell phone users will shout “No.” However, the legal foundation is less clear.

2. Does this practice violate your privacy? Explain.

Probably. What price would students be willing to pay to protect privacy?

3. Are the data brokers’ actions legal? Ethical? Why?

Legal, technically. Ethically, probably not. How do students define “ethical” in this situation.


ENDNOTES


Documents

WHAT IS MANAGEMENT - Novellanovella.mhhe.com/olc2/dl/582338/ghilyer1_im14_FINAL.doc · Web view4 Provide an example of “a more everyday sort of corruption” other than the one