396 Part 5: Cases CASE 2 Starbucks Mission: Social Responsibility and Brand Strength* Howard Schultz joined Starbucks in 1982 as director of retail operations and marketing. Returning from a trip to Milan, Italy, with its 1,500 coffee bars, Schultz recognized an opportunity to develop a similar retail coffee bar culture in Seattle. In 1985 the company tested the first downtown Seattle coffeehouse, served the first Starbucks café latté, and introduced its Christmas Blend. Since then, Starbucks expanded across the United States and around the world, now operating over 21,000 stores in 65 countries. Historically, Starbucks grew at a rate of about three stores a day, although the company cut back on expansion in recent years. The company serves 70 million customers per week and has revenues of approximately $16.4 billion a year. It is the largest coffeehouse company in the world. Starbucks locates its retail stores in high-traffic, high-visibility locations. The stores are designed to provide an inviting coffee bar environment that is an important part of the Starbucks product and experience. It was the intention of Howard Schulz to make Starbucks into “the third place” for consumers to frequent, after home and work. Because the company is flexible regarding size and format, it locates stores in or near a variety of settings, including office buildings, bookstores, and university campuses. It can situate retail stores in select rural and off-highway locations to serve a broader array of customers outside major metropolitan markets and further expand brand awareness. In addition to selling products through retail outlets, Starbucks sells coffee and tea products and licenses its trademark through other channels and partners. For instance, its Frappuccino coffee drinks, Starbucks Doubleshot espresso drinks, super-premium ice creams, and VIA coffees can be purchased in grocery stores and through retailers like Walmart and Target. Starbucks partnered with Courtesy Products to create single-cup Starbucks packets marketed toward hotel rooms. Starbucks also partnered with Green Mountain Coffee Roasters to introduce Starbucks-branded coffee and tea pods to the market. These pods target consumers who own Keurig single-cup brewing machines. Although the two businesses would normally be rivals, this partnership is beneficial for both Green Mountain and Starbucks. Since Green Mountain owns Keurig’s single-serve machines, the partnership enables Starbucks to access this technology to market a new product. Green Mountain benefits because the partnership generates new users of Keurig single-cup brewing machines attracted to the Starbucks name. This partnership between Green Mountain and Starbucks did not stop Starbucks from launching its own line of single-serve machines. In 2012 Starbucks introduced its Verismo *This case was prepared by Michelle Urban and Jennifer Sawayda for and under the direction of O.C. Ferrell and Linda Ferrell © 2015. It was prepared for classroom discussion rather than to illustrate either effective or ineffective handling of an administrative, ethical, or legal decision by management. All sources used for this case were obtained through publicly available material and the Starbucks website. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Case 2: Starbucks Mission: Social Responsibility and Brand Strength 397 580 Brewer that allows consumers to brew a cup of Starbucks coffee in their own homes (later versions include the Verismo 583 and 600). The coffee has the strong, bold flavor of a cup purchased in any Starbucks retail location. Starbucks offers a limited assortment of coffees to emphasize quality rather than quantity. Not to be outdone, Green Mountain released another type of single-serve coffee brewer called the Rivo. Unlike the Verismo that uses powdered milk pods, the Rivo uses fresh milk. The race to conquer the single-serve coffee market is intensifying between the two companies. A common criticism of Starbucks is the company’s strategy for location and expansion. Its “clustering” strategy, placing a Starbucks literally on every corner in some cases, forced many smaller coffee shops out of business. This strategy dominated for most of the 1990s and 2000s and Starbucks became the butt of jokes. Many people began to wonder whether two Starbucks directly across the street from each other were really needed. The last recession brought a change in policy, however. Starbucks pulled back on expansion, closed hundreds of stores around the United States, and focused more on international markets. Now Starbucks is beginning to focus on U.S. expansion once more. At the end of 2014, Starbucks opened a 15,000 square foot Starbucks Reserve Roastery and Tasting Room in Seattle, a place where coffee is roasted, bagged, sold, and shipped internationally. Equipped with a Coffee Library and Coffee Experience Bar, the roastery is intended to redefine the coffee retail experience for customers. The roastery sells 28 to 30 different coffees and gets 1,000 to 2,000 customers daily. CEO Howard Schultz believes the roastery has the potential to redefine the Starbucks retail experience. NEW PRODUCT OFFERINGS Starbucks introduced a number of new products over the years to remain competitive. In 2008 Starbucks decided to return to its essentials with the introduction of its Pike Place Blend that the company hoped would return Starbucks to its roots of distinctive, expertly blended coffee. In order to get the flavor perfect, Starbucks enlisted the input of 1,000 customers over 1,500 hours. To kick off the new choice, Starbucks held the largest nationwide coffee tasting in history. To make the brew even more appealing, Starbucks joined forces with Conservation International to ensure the beans were sustainably harvested. Also, after feedback revealed many of its customers desired a lighter blend, Starbucks introduced Blonde Roast blend in 2011. In 2015 the company commercialized the Flat White based on a latte drink popular in Australia. Unlike previous new offerings, the company did not perform limited-market testing but instead introduced it nationwide in an attempt to remain competitive with rivals. Starbucks executives believe the experience customers have in the stores should be consistent. Therefore, Starbucks began to refocus on the customer experience as one of the key competitive advantages of the Starbucks brand. To enhance the European coffee shop experience for which Starbucks is known, shops are replacing their old espresso machines with new, high-tech ones. To keep the drink-making operation running efficiently and accurately, Starbucks mandated baristas to make no more than two drinks at the same time. It is also introducing more lines of single-origin coffees to appeal to coffee enthusiasts interested in where their coffee comes from. Additionally, Starbucks fosters brand loyalty by increasing repeat business. One of the ways it accomplishes this is through the Starbucks Card, a reloadable card introduced in 2001. For the tech-savvy visitor, Starbucks introduced the Starbucks Reward mobile app. With the app customers are able to order or pre-order their coffee, and merely scan their Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 398 Part 5: Cases phone for payment. Today the company has 12 million active users of its Starbucks Reward mobile app—the third most popular digital payment app in the country. It is estimated that Starbucks processes five million mobile payments a week. Howard Schultz believes the future is digital and is placing more emphasis on digital marketing strategies. STARBUCKS CULTURE In 1990 the Starbucks senior executive team created a mission statement that specified the guiding principles for the company. They hoped the principles included in the mission statement would assist partners in determining the appropriateness of later decisions and actions. After drafting the mission statement, the executive team asked all partners of Starbucks to review and comment on the document. Based on their feedback, the final statement put “people first and profits last.” In fact, the number one guiding principle in the company’s mission statement is to create a great and respectable work environment for its employees. Starbucks has done three things to keep the mission and guiding principles alive over the decades. First, it distributes the mission statement and comment cards for feedback during orientation to all new partners. Second, Starbucks continually relates decisions back to the guiding principle or principles it supports. These principles focus on coffee, partners, customers, stores, neighborhoods, and shareholders. And finally, the company formed a “Mission Review” system so partners can comment on a decision or action relative to its consistency with one of the six principles. These guiding principles and values have become the cornerstone of a strong ethical culture of predominately young and educated workers. Starbucks founder and CEO Howard Schultz has long been a public advocate for increased awareness of ethics in business. In a 2007 speech at Notre Dame, he spoke to students about the importance of balancing “profitability and social consciousness.” Schultz is a true believer that ethical companies do better in the long run, something that has been confirmed by research. Schultz maintains that, while it can be difficult to do the right thing at all times, in the long term it is better for a company to take short-term losses than lose sight of its core values. The care the company shows its employees is a large part of what sets it apart. Starbucks offers all employees who work more than 20 hours per week a comprehensive benefits package that includes stock options as well as medical, dental, and vision benefits. In another effort to benefit employees, Starbucks partnered with Arizona State University (ASU) to offer tuition assistance to those who want to earn a degree from the university’s online program. In 2015 it was voted as one of the most ethical companies on Ethisphere’s annual list for the ninth consecutive year. Another key part of the Starbucks image involves its commitment to ethics and sustainability. To address concerns related to these issues, Starbucks launched the Shared Planet website. Shared Planet has three main goals: to achieve ethical sourcing, environmental stewardship, and greater community involvement. The website is a means of keeping customers current on initiatives within the company. It describes how well Starbucks fares on achieving its social responsibility goals, and it provides a means for customers to learn things like the nutrition data of Starbucks offerings and other concerns related to its products. Starbucks actively partners with nonprofits around the globe. Starbucks is one of the largest buyers of Fair Trade Certified as well as certified organic coffee. Another organization Starbucks partnered with is the Foodservice Packaging Institute/Paper Recovery Alliance. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Case 2: Starbucks Mission: Social Responsibility and Brand Strength 399 The partnership addresses the issue of responsible foodservice packaging in terms of its use, recovery, and processing. Starbucks has also invested over $70 million in programs for farmers around the world. Conservation International joined with Starbucks in 1998 to promote sustainable agricultural practices, namely shade-grown coffee, and help prevent deforestation in endangered regions around the globe. The results of the partnership proved to be positive for both the environment and farmers. For example, in Chiapas, Mexico, shadegrown coffee acreage (that reduces the need to cut down trees for coffee plantations) increased well over 220 percent, while farmers receive a price premium above the market price. Starbucks and Oprah, two of the biggest global brands, joined forces to create Oprah’s Chai Tea in 2014. A specially created blend from the stores of Teavana, these branded products contribute to youth education programs. All profits made from this tea go toward this cause. Starbucks works with many other organizations as well, including the African Wildlife Foundation and Business for Social Responsibility. The company’s efforts at transparency, the treatment of its workers, and its dozens of philanthropic commitments demonstrate how genuine Starbucks is in its mission to be an ethical and socially responsible company. CORPORATE SOCIAL MISSION Although Starbucks supported responsible business practices virtually since its inception, as the company has grown, so has the importance of defending its image. At the end of 1999, Starbucks created a Corporate Social Responsibility department, now known as the Global Responsibility Department. Global Responsibility releases an annual report in order for shareholders to keep track of its performance and can be accessed through the Shared Planet website. Starbucks is concerned about the environment, its employees, suppliers, customers, and communities. Howard Schultz has commented that achieving social change to improve society is an important part of the company’s core identity. Environment In 1992, long before it became trendy to be “green,” Starbucks developed an environmental mission statement to clearly articulate the company’s environmental priorities and goals. This initiative created the Environmental Starbucks Coffee Company Affairs team, the purpose of which was to develop environmentally responsible policies and minimize the company’s “footprint.” As part of this effort, Starbucks began using environmental purchasing guidelines to reduce waste through recycling, conserving energy, and educating partners through the company’s “Green Team” initiatives. Concerned stakeholders can now track the company’s progress through its website that clearly outlines its environmental goals and how Starbucks fares in living up to those goals. Starbucks also began offering a $1 plastic cup for purchase that is good for a recommended 30 uses. This is part of an attempt by Starbucks to make all cups reusable or recyclable by 2015. Employees Growing up poor with a father whose life was nearly ruined by an unsympathetic employer who did not offer health benefits, Howard Schultz always considered the creation of a good Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 400 Part 5: Cases work environment a top priority. He believes companies should value their workers. When forming Starbucks, he decided to build a company that provided opportunities his father did not have. The result is one of the best health care programs in the coffee shop industry. Schultz’s key to maintaining a strong business is developing a shared vision among employees as well as an environment to which they can actively contribute. Understanding how vital employees are, Schultz is the first to admit his company centers on personal interactions: “We are not in the coffee business serving people, but in the people business serving coffee.” Starbucks is known for its diversity, and 40 percent of its baristas are ethnic minorities. However, being a great employer does take its toll on the company. In 2008 Starbucks closed 10 percent of stores in order to continue to provide employees with health insurance. This decision, based on its guiding principle of “people first, profits last,” shows how much the company values its employees. Employees have an opportunity to join Starbuck’s stock-sharing program called Bean Stock. They have generated $1 billion in financial gains through stock options. In 2015 Starbucks gave employees a raise and increased starting pay rates across the country. Starbucks is committed toward the well-being of its employees—both physically and intellectually. As a way to improve employee health, Starbucks established a program for employees called “Thrive Wellness” that offers various resources aimed at assisting employees in incorporating wellness into their lives. The program offers resources such as smoking cessation, weight loss, and exercise. Starbucks also estimates that 70 percent of employees are either currently in college or desire to earn a degree. The aforementioned partnership with ASU provides this opportunity as students can choose from 40 programs online or in person. More than 2,000 employees applied to the program when it was initially launched. The rising cost of education is an important issue that CEO Howard Schultz wants to help alleviate. Suppliers Even though it is one of the largest coffee brands in the world, Starbucks maintains a good reputation for social responsibility and business ethics throughout the international community of coffee growers. It builds positive relationships with small coffee suppliers while also working with governments and nonprofits wherever it operates. Starbucks practices conservation as well as Starbucks Coffee and Farmer Equity Practices (C.A.F.E.), a set of socially responsible coffee-buying guidelines that ensure preferential buying status for participants that receive high scores in best practices. Starbucks pays coffee farmers premium prices to help them make profits and support their families. More than 95 percent of total coffee purchases are C.A.F.E. verified, and the company is on track to have 100 percent of its coffee purchases verified in 2015. The company is also involved in social development programs, investing in programs to build schools and health clinics, as well as other projects that benefit coffeegrowing communities. Starbucks collaborates directly with some of its growers through Farmer Support Centers, located in Costa Rica, Rwanda, Tanzania, South America, and China. Farmer Support Centers provide technical support and training to ensure highquality coffee into the future. It is a major purchaser of Fair Trade Certified, shade-grown, and certified organic beans that further support environmental and economic efforts. In 2013 Starbucks bought its first coffee farm, located in Costa Rica and employing about 70 people. The purchase was one step toward the company’s goal of increasing its ethically sourced coffee to 100 percent by 2015. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Case 2: Starbucks Mission: Social Responsibility and Brand Strength 401 Customers Strengthening its brand and customer satisfaction is more important than ever as Starbucks seeks to regroup after the latest recession forced the company to rethink its strategy. Starbucks refocused the brand by upgrading its coffee-brewing machines, introducing new food and drink items for health- and budget-conscious consumers, and refocusing on its core product. Recognizing the concern over the obesity epidemic, Starbucks ensures that its grab-and-go lunch items are under 500 calories and is involved in two sodium reduction programs: the National Salt Reduction Initiative in New York and the U.K. Food Standards Agency Salt Campaign. The company focuses more on the quality of the coffee, the atmosphere of the coffee shops, and the overall Starbucks experience, rather than continuing its rapid expansion of stores and products. Enhancing the customer experience in its stores became a high priority. As a way to encourage people to relax and spend time there, Starbucks offers free wireless Internet access in all its U.S. stores. They have also partnered with Duracell Powermat to install over 100,000 wireless phone chargers in Starbucks and Teavana locations across the United States. Communities Starbucks coffee shops have long sought to become the “instant gathering spot” wherever they locate, a “place that draws people together.” The company established community stores, which not only serve as a meeting place for community programs and trainings but also as a source of funding to solve issues specific to the local community. There are currently five such locations (including one in Thailand), and Starbucks aims to establish a total of 50 by 2018. The company has partnered with the Schultz Family Foundation (founded by Howard Schultz) to provide training to 700 disadvantaged young people in retail and customer service. Schultz even used the advance and ongoing royalties from his book, Pour Your Heart into It, to create the Starbucks Foundation that provides opportunity grants to nonprofit literacy groups, sponsors young writers’ programs, and partners with Jumpstart, an organization helping children prepare developmentally for school. The company announced its intention to hire 10,000 veterans by 2018. Although Starbucks is known for putting its corporate muscle behind social issues— including unemployment—not all of its social activities have been perceived positively. After the Ferguson, Missouri shooting of a young African American man by a white police officer and the resulting protests, Starbucks created the campaign “Race Together” to encourage discussions of race relations among customers. For one week during the campaign, baristas were encouraged to write “Race Together” on customer cups. It also published “Race Together” newspaper supplements in the hope of taking this discussion national. Despite Schultz’s intention to encourage discussion of a serious topic, many consumers reacted negatively to the campaign. Outrage over Twitter was so intense that the senior vice president of global communications at Starbucks temporarily deleted his Twitter account. Because the issue of race is such an emotionally charged issue and can be difficult to discuss even with family and friends, some marketing experts believe Starbucks took on too much with its campaign. Critics also claimed that they did not want to be reminded of this serious topic on their morning cups of coffee, and some believed the campaign was more of a public-relations stunt. Even in the face of backlash, Schultz and Starbucks continue to support the company’s involvement in discussing serious issues that affect the communities in which it does business. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 402 Part 5: Cases BRAND EVOLUTION Although Starbucks achieved massive success in the last four decades, the company realizes it must modify its brand to appeal to changing consumer tastes. All established companies, no matter how successful, must learn to adapt their products and image to appeal to the shifting demands of their target markets. Starbucks is no exception. The company is associated with premium coffee beverages, an association that served it well over the years. However, as competition in specialty coffee drinks increases, Starbucks recognized the need to expand its brand in the eyes of consumers. One way it is doing this is through adopting more products. In addition to coffee, Starbucks stores sell coffee accessories, teas, muffins, CDs, water, grab-and-go products, Starbuck Petites, upscale food items, hand-crafted sodas called Fizzios, as well as wine and beer in select locations. Food sales make up 20 percent of company revenue. The rise in coffee prices has created an opportunity for expansion into consumer packaged goods that will protect Starbucks against the risks of relying solely on coffee. In order to remain competitive, Starbucks made a series of acquisitions to increase the value of its brand, including Bay Bread (a small artisan bakery), La Boulange (a bakery brand), Evolution Fresh (a juice brand), and Teavana (a tea brand). This allowed Starbucks to offer high quality breakfast sandwiches as well as Paninis and wraps for lunch. To symbolize this shift into the consumer packaged goods business, Starbucks gave its logo a new look. Previously, the company’s circular logo featured a mermaid with the words “Starbucks Coffee” encircling it. In 2011 Starbucks removed the words and enlarged the mermaid to signal to consumers Starbucks is more than just the average coffee retailer. SUCCESS AND CHALLENGES For decades Starbucks revolutionized our leisure time. Starbucks is the most prominent brand of high-end coffee in the world but also one of the defining brands of our time. In most large cities, it is impossible to walk more than a few blocks without seeing the familiar mermaid logo. In the past few decades, Starbucks achieved amazing levels of growth, creating financial success for shareholders. The company’s reputation is built on product quality, stakeholder concern, and a balanced approach to all of its business activities. Of course, Starbucks does receive criticism for putting other coffee shops out of business and creating a uniform retail culture in many cities. Yet the company excels in its relationships with its employees and is a role model for the fast-food industry in employee benefits. In addition, in an age of shifts in supply chain power, Starbucks is as concerned about its suppliers and meeting their needs as it is about any other primary stakeholder. In spite of its efforts to support sustainability and maintain high ethical standards, Starbucks garnered harsh criticism in the past on issues such as a lack of fair trade coffee, hormone-added milk, and Howard Schultz’s alleged financial links to the Israeli government. In an attempt to counter these criticisms, in 2002 Starbucks began offering Fair Trade Certified coffee, a menu item that was quickly made permanent. Approximately 95 percent of coffee in the United States is ethically sourced currently. Starting in late 2008, Starbucks had something new to worry about. A global recession caused the market to bottom out for expensive coffee drinks. The company responded by slowing its global growth plans after years of expanding at a nonstop pace and instead Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Case 2: Starbucks Mission: Social Responsibility and Brand Strength 403 refocused on strengthening its brand, satisfying customers, and building consumer loyalty. After Starbucks stock started to plummet, Howard Schultz returned as CEO to return the company to its former glory. Schultz was successful, and Starbucks rebounded from the effects of the recession. The company is once again looking toward possibilities in international markets. This represents both new opportunities and challenges. When attempting to break into the U.K. market, for instance, Starbucks met with serious resistance. Realizing the homogenization of its stores did not work as well in the United Kingdom, Starbucks began to remodel its stores so they took on a more local feel. At the end of 2012, Starbucks came under public scrutiny for allegedly not paying taxes for the last 14 of the 15 years it was established in the United Kingdom. A protest group called UK Uncut began “sitting in” at the stores, encouraging coffee drinkers to buy their coffee elsewhere. Starbucks claims it did not pay taxes because it did not make a profit. However, the company said it would stop using certain accounting techniques that showed their profits overseas. Starbucks also agreed to pay 20 million pounds over the next two years, whether or not it makes a profit. Starbucks is rapidly expanding in China, and the country is set to become the company’s second largest market behind the United States. Starbucks effectively overcame obstacles in tapping into the Chinese market and adapted its strategy to attract Chinese consumers. After the 2007 closure of the retail operation in the Forbidden City, resulting from cultural concerns of the presence of a Western staple in a sacred area, Starbucks became more sensitive to the specific needs and nuances of the country. Through educating Chinese consumers on coffee (because the beverage is not largely consumed there), they are now drinking as much coffee as Americans. Another challenge Starbucks must address is despite the company’s emphasis on sustainability, billions of disposable Starbucks cups are thrown into landfills each year. Although Starbucks has taken initiatives to make the cups more eco-friendly, such as changing from polyethylene No. 1 to the more eco-friendly polypropylene No. 5, the cup represents a serious waste problem for Starbucks. Starbucks encourages consumers to bring in reusables (such as the Starbucks tumblers it sells) for a 10-cent rebate, yet these account for less than 2 percent of drinks served. The company hopes to achieve less cup waste with its new $1 reusable cup. It remains to be seen whether Starbucks will achieve its goal of total recyclability in the short term. CONCLUSION Despite the setbacks it experienced during the recession, the future looks bright for Starbucks. In 2015 the company underwent a 2-for-1 stock split as its way of addressing record highs in the company’s stock history. It is estimated that Starbucks may double its food revenues within the next five years if its present growth continues. The company continues to expand globally into markets such as Bangalore, India; San Jose, Costa Rica; Oslo, Norway; and Ho Chi Minh City, Vietnam. Schultz is hopeful that the new roastery in Seattle will continue to spread the Starbucks name and the distribution of its coffee globally. The challenges the company experienced and will continue to experience in the future have convinced the firm to focus on its strengths and embrace the opportunity to emphasize community involvement, outreach work, and its overall image and offerings. The company must continue to apply the balanced stakeholder orientation that is so crucial to its success. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 404 Part 5: Cases QUESTIONS FOR DISCUSSION 1. Why do you think Starbucks has been so concerned with social responsibility in its overall corporate strategy? 2. Is Starbucks unique in being able to provide a high level of benefits to its employees? 3. Do you think Starbucks has grown rapidly because of its ethical and socially responsible activities or because it provides products and an environment customers want? 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Practices,” Conservation International, 2013, http://www.conservation.org/campaigns/ starbucks/Pages/CAFE_Practices_Results.aspx (accessed April 23, 2015); Eartheasy.com, “Shade Grown Coffee,” http://www.eartheasy.com/eat_shadegrown_coffee.htm (accessed April 23, 2015); Eatocracy editors, “Starbucks Introduces $1 Reusable Cup to Cut Down on Waste,” Eatocracy, January 3, 2013, http://eatocracy.cnn. com/2013/01/03/starbucks-introduces-1-reusable-cup-to-cut-down-on-waste/ (accessed April 23, 2015); Roxanne Escobales and Tracy McVeigh, “Starbucks hit by UK Uncut Protests as Tax Row Boils Over,” guardian.co.uk, December 8, 2012, http://www.guardian.co.uk/business/2012/dec/08/starbucks-uk-storesprotests-tax (accessed April 23, 2015); Ethisphere Institute, “World’s Most Ethical Companies—Honorees,” Ethisphere, 2015, http://ethisphere.com/worlds-most-ethical/wme-honorees/ (accessed April 23, 2015); Rana Foroohar, “Starbucks for America,” Time, February 16, 2015, 18–23; Bobbie Gossage, “Howard Schultz, on Getting a Second Shot,” Inc., April 2011, 52–54; Haley Geffen, “Starbucks: Howard Schultz on the Coffee Chain’s Expansion under His Leadership,” Bloomberg Businessweek, December 8–14, 2014, 32; Jason Groves and Peter Campbell, “Starbucks Set to Cave in and Pay More Tax after Threats of Boycott at its ‘immoral’ Financial Dealings,” dailymail.co.uk, December 3, 2012, http://www.dailymail.co.uk/news/article-2242596/Starbucks-paytax-public-outcry-financial-dealings.html (accessed April 23, 2015); Bruce Horovitz, “For Starbucks, a split and a jolt,” USA Today, March 19, 2015, 2B; Bruce Horovitz, “Handcrafted Sodas to Bubble Up At Starbucks,” USA Today, June 23, 2014, 4B; Bruce Horovitz, “Starbucks Aims beyond Lattes to Extend Brand to Films, Music and Books,” USA Today, May 19, 2006, A1, A2; Bruce Horovitz, “Starbucks Brews Wireless Charging,” USA Today, June 12, 2014, 2B; Bruce Horovitz, “Starbucks Remakes Its Future,” USA Today, October 18, 2010, 1B–2B; Bruce Horovitz, “Starbucks Sales Pass BK, Wendy’s,” USA Today, April 27, 2011, 1A; Bruce Horovitz, “Starbucks Serving Alcohol At More Sites,” USA Today, March 21, 2014, 3B; Bruce Horovitz, “Starbucks Shells Out Bread for Bakery,” USA Today, June 5, 2012, 1B; Bruce Horovitz, “Starbucks taps into tasting room fad,” USA Today, December 5, 2014, 1B–2B; Bruce Horovitz and Howard Schultz, “Starbucks Hits 40 Feeling Perky,” USA Today, March 7, 2011, 1B, 3B; John Jannarone, “Green Mountain Eclipses Starbucks,” The Wall Street Journal, March 9, 2011, C14; John Jannarone, “Grounds for Concern at Starbucks,” The Wall Street Journal, May 3, 2011, C10; Julie Jargon, “At Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Case 2: Starbucks Mission: Social Responsibility and Brand Strength 405 Starbucks, Baristas Told No More than Two Drinks,” The Wall Street Journal, October 13, 2010, http://online.wsj. com/article/SB10001424052748704164004575548403514060736.html (accessed April 23, 2015); Julie Jargon, “Coffee Talk: Starbucks Chief on Prices, McDonald’s Rivalry,” The Wall Street Journal, March 7, 2011, B6; Julie Jargon, “Starbucks Brews Plan Catering to Aficionados,” The Wall Street Journal, September 11, 2014, B7; Julie Jargon, “Starbucks CEO to Focus on Digital,” The Wall Street Journal, January 30, 2014, B6; Julie Jargon, “Starbucks Logo Loses ‘Coffee,’ Expands Mermaid as Firm Moves to Build Packaged-Goods Business,” The Wall Street Journal, January 6, 2011, B4; Julie Jargon, “Starbucks in Pod Pact,” The Wall Street Journal, March 11, 2011, B4; Julie Jargon and Douglas Belkin, “Starbucks to Subsidize Online Degrees,” The Wall Street Journal, June 16, 2014, B3; Sarah Jones, “Starbucks Shows That Healthcare Isn’t a Job Killer by Adding 1,500 Cafes,” PoliticusUSA, December 6, 2012, http://www.politicususa.com/healthcare-providing-starbucks-expanding-1500-cafes.html (accessed April 23, 2015); David Kesmodel and Ilan Brat, “Why Starbucks Takes on Social Issues,” The Wall Street Journal, March 24, 2015, B3; Beth Kowitt, “Coffee Shop, Contained,” Fortune, May 20, 2013, 24; Katie Lobosco, “Oprah Chai Tea Comes to Starbucks,” CNN Money, March 19, 2014, http://money.cnn.com/2014/03/19/news/ companies/oprah-starubucks-tea/ (accessed April 23, 2015); Laura Lorenzetti, “Where Innovation Is Always Brewing,” Fortune, November 17, 2014, 24; Kate McClelland, “Starbucks Founder Speaks on Ethics,” Notre Dame Observer, March 30, 2007, http://ndsmcobserver.com/2007/03/starbucks-founder-speaks-on-ethics/ (accessed April 23, 2015); Adam Minter, “Why Starbucks Won’t Recycle Your Cup,” Bloomberg View, April 7, 2014, http:// www.bloombergview.com/articles/2014-04-07/why-starbucks-won-t-recycle-your-cup (accessed April 23, 2015); MSNBC.com, “Health Care Takes Its Toll on Starbucks,” September 14, 2005, http://www.msnbc.msn.com/ id/9344634/ (accessed April 23, 2015); Reuters, “Starbucks to Open First Outlet in Vietnam in Early February,” Economic Times, January 3, 2013, http://www.reuters.com/article/2013/01/03/starbucks-vietnamidUSL4N0A815420130103 (accessed April 23, 2015); Mariko Sanchanta, “Starbucks Plans Big Expansion in China,” The Wall Street Journal, April 14, 2010, B10; David Schorn, “Howard Schultz: The Star of Starbucks,” 60 Minutes, http://www.cbsnews.com/stories/2006/04/21/60minutes/main1532246.shtml (accessed April 23, 2015); E. J. Schultz, “How VIA Steamed up the Instant Coffee Category,” Advertising Age, January 24, 2011, http:// adage.com/article?article_id=148403 (accessed April 23, 2015); SCS Global Services. “Starbucks C.A.F.E. Practices,” http://www.scsglobalservices.com/starbucks-cafe-practices (accessed April 23, 2015); Starbucks, 2014 Annual Meeting of Shareholders, 2014, https://news.starbucks.com/2014annualmeeting (accessed April 23, 2015); Starbucks, “2008 Annual Report,” http://media.corporate-ir.net/media_files/irol/99/99518/AR2008.pdf (accessed April 23, 2015); “Starbucks: A Farm of Its Own,” Bloomberg Businessweek, March 25–31, 2013, 23; Starbucks, “Community Stores,” http://www.starbucks.com/responsibility/community/community-stores (accessed April 23, 2015); “Starbucks Corp.,” Market Watch, August 7, 2014, http://www.marketwatch.com/ investing/stock/sbux/financials (accessed April 23, 2015); Starbucks Corporation, “Goals & Progress: Farmer Support,” 2015, http://www.starbucks.com/responsibility/global-report/ethical-sourcing/farmer-support (accessed April 23, 2015); “Starbucks Corporation (SBUX),” YAHOO! Finance, http://finance.yahoo.com/q/is?s=S BUX+Income+Statement&annual (accessed April 23, 2015); Starbucks, “Farming Communities,” http://www. starbucks.com/responsibility/community/farmer-support (accessed April 23, 2015); Starbucks, “Food,” http:// www.starbucks.com/menu/food (accessed August 8, 2014); Starbucks, “Goals & Progress: Cup Recycling,” http:// www.starbucks.com/responsibility/global-report/environmental-stewardship/cup-recycling (accessed April 23, 2015); Starbucks, “Investing in Farmers,” http://www.starbucks.com/responsibility/community/farmer-support/ farmer-loan-programs (accessed April 23, 2015); Starbucks, “Recycling & Reducing Waste,” http://www.starbucks. com/responsibility/environment/recycling (accessed April 23, 2015); Starbucks, “Starbucks Company Profile,” September 2013, http://news.starbucks.com/uploads/documents/AboutUs-CompanyProfile-Q3-2013-9.18.13. pdf (accessed April 23, 2015); “Starbucks to Enter China’s Tea Drinks Market,” China Retail News, March 11, 2010, www.chinaretailnews.com/2010/03/11/3423-starbucks-to-enter-chinas-tea-drinks-market (accessed April 23, 2015); “Starbucks Unveils Minimalist New Logo,” USA Today, January 6, 2011, 11B; Starbucks, “Nutrition,” http://www.starbucks.com/responsibility/wellness (accessed April 23, 2015); “Statistics and Facts on Starbucks,” Statista, October 2013, http://www.statista.com/topics/1246/starbucks/ (accessed April 23, 2015); Charlie Rose, “Charlie Rose Talks to Howard Schultz,” Bloomberg Businessweek, April 7–13, 2014, 32; Trefis Team, “Starbucks’ Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 406 Part 5: Cases Profits Surge Despite Sales Slowing Down,” Forbes, January 30, 2014, http://www.forbes.com/sites/ greatspeculations/2014/01/30/starbucks-profits-surge-despite-sales-slowing-down/ (accessed April 23, 2015); David Teather, “Starbucks Legend Delivers Recovery by Thinking Smaller,” The Guardian, January 21, 2010, www.guardian.co.uk/business/2010/jan/21/starbucks-howard-schultz (accessed April 23, 2015); Rachel Tepper, “Starbucks: Square Mobile Payment System Now Live at 7,000 Locations,” The Huffington Post, November 9, 2012, http://www.huffingtonpost.com/2012/11/09/starbucks-square-mobile-payment_n_2101791.html (accessed April 23, 2015); Jorge Velasquez, “Starbucks Debuts $1 Reusable Cup,” KRCA, January 3, 2013, http:// www.kcra.com/news/Starbucks-debuts-1-reusable-cup/-/11797728/17994788/-/5dbclr/-/index.html (accessed April 23, 2015); Daisuke Wakabayashi, “Starbucks Drops Square App as Mobile-Payments Battle Intensifies,” The Wall Street Journal, December 22, 2014, http://blogs.wsj.com/digits/2014/12/22/starbucks-drops-square-app-asmobile-payments-battle-intensifies/ (accessed April 23, 2015); Nicole Wakelin, “The New Starbucks Verismo Single-Serve Home Coffee Brewer,” Wired, November 18, 2012, http://archive.wired.com/geekmom/2012/11/ starbucks-verismo/ (accessed April 23, 2015); Jonathan Watts, “Starbucks Faces Eviction from the Forbidden City,” www.guardian.co.uk, January 18, 2007, http://www.guardian.co.uk/world/2007/jan/18/china.jonathanwatts (accessed April 23, 2015); Dan Welch, “Fairtrade Beans Do Not Mean a Cup of Coffee Is Entirely Ethical,” guardian.co.uk, February 28, 2011, http://www.guardian.co.uk/environment/green-living-blog/2011/feb/28/ coffee-chains-ethical (accessed April 23, 2015); Venessa Wong, “Starbucks Serves up ‘Flat Whites,’ Tries to Prove It Can Still Be Different,” Bloomberg Businessweek, January 6, 2015, http://www.bloomberg.com/news/ articles/2015-01-06/starbucks-serves-up-flat-whites-tries-to-prove-it-can-still-be-different (accessed April 23, 2015). Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. CHAPTER OBJECTIVES CHAPTER 5 • Provide a comprehensive model for ethical decision making in business • Examine issue intensity as an important element in the ethical decision-making process • Introduce individual factors that influence business ethical decision making • Introduce organizational factors that influence business ethical decision making • Explore the role of opportunity in ethical decision making in business • Understand normative considerations in ethical decision making • Recognize the role of institutions in normative decision making • Examine the importance of principles and core values to ethical decision making CHAPTER OUTLINE ETHICAL DECISION MAKING A Framework for Ethical Decision Making in Business Ethical Issue Intensity Individual Factors Organizational Factors Opportunity Business Ethics Intentions, Behavior, and Evaluations Using the Ethical Decision-Making Model to Improve Ethical Decisions Normative Considerations in Ethical Decision Making Institutions as the Foundation for Normative Values Implementing Principles and Core Values in Ethical Decision Making Understanding Ethical Decision Making © ZoranKrstic/Shutterstock.com Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. AN ETHICAL DILEMMA* Steven, a junior at Northeast State, just started working part-time at a local fast food restaurant chain. Although not his dream job, it paid for tuition and books, and the restaurant gave him the flexible schedule he needed for school. After a few months, Steven found he got along well with all of his coworkers, but it was apparent they did not respect the company or the management. The employees made fun of their bosses and treated the work area like a playground. In some respects, Steven thought it was a fun environment to work in, especially after hours when management was gone for the day. They played their music loudly, laughed, and talked with one another during the down times instead of cleaning up their work areas like they were supposed to. Despite the fact there were ethical policies telling employees how they were expected to act in the workplace, these policies never seemed to be enforced. One day, while working with his coworker Julie on the food assembly table, Steven saw Julie accidentally drop a meat patty on the floor. Without so much as a flinch, she bent down, picked up the patty, stuck it back on the bun, and wrapped it up. It happened so fast that Steven wasn’t even sure he had seen right—especially since Julie had done it so casually. Steven watched in dismay as another worker took the hamburger out to the customer. Over the next few weeks, Steven saw others, including the shift supervisor, do the same thing with burgers and other products. Once, an entire cheeseburger hit the greasy floor, was picked up, and was taken to the customer. This time the customer complained the burger tasted funny and sent it back. Steven noticed other unsanitary practices such as employees not washing their hands between handling meat and vegetables and not washing utensils between uses. Obviously, such practices were against company policies and, if reported, the supervisors in charge could get in trouble and the restaurant would face investigations from the health department. However, there was ample opportunity for things like this to occur. There was no one watching them, and the shift supervisor also engaged in these activities. Steven felt it was the company’s responsibility to hire good people, so they were to blame if these things happened. One day, Steven approached Julie and asked, “Why do so many people here serve food that has fallen on the floor to customers?” Julie thought about it briefly as though she had never considered it before and replied, “I guess it’s because it would take too much time to get another beef patty out of the freezer, cook it, and serve it to the customer. This is a fast food restaurant, after all, and I’m not interested in hearing customers complain about the time it takes for them to get their food. Besides, the restaurants with the fastest service get a bonus from corporate headquarters. Last year the supervisors rewarded us with some extra money for doing our jobs so quickly.” Steven was somewhat taken aback by the honest reply and asked, “Wouldn’t you be disgusted if you were served dirty food at a restaurant?” This time Julie’s response was quick. She said, “What I don’t know won’t hurt me.” She walked off. Several weeks went by and the same practices continued. Steven became more and more concerned about the consequences that could happen in an environment so laid back and unconcerned about safety and health. It seemed like the more time that passed, the worse everyone’s attitude became. One day, at the beginning of his shift, Steven noticed the walk-in freezer had been left open. As he went to shut the door, he discovered a smell of rotten meat. It almost made him vomit. “How could this happen?” he wondered. He threw away the rotten meat without asking anyone because he was afraid of what the answer might be. After Steven threw out the spoiled meat, he began to wonder how the culture of the restaurant got to the point of supporting such practices. He realized the seemingly minor unsanitary practices allowed major issues to arise that could possibly hurt someone. Steven felt he should say or do something, but to whom? He sat down and pondered what he should do. QUESTIONS | EXERCISES 1. Describe the nature of the organizational culture in the restaurant. What kind of opportunities are there for unethical behavior to occur? Are there any opportunities for ethical behavior? 2. What are some of the incentives employees might have to engage in this type of behavior? 3. If the organizational culture of the restaurant does not change, what are some likely outcomes and consequences? *This case is strictly hypothetical; any resemblance to real persons, companies, or situations is coincidental. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 129 T o improve ethical decision making in business, you must first understand how individuals make organizational decisions. Too often it is assumed people in organizations define ethical decisions in exactly the same way they would at home, in their families, or in their personal lives. Within the context of an organizational work group, however, few individuals have the freedom to personally decide ethical issues independent of the organization and its stakeholders. This chapter summarizes our current knowledge of ethical decision making in business and provides a model so you may better visualize the ethical decision making process. Although it is impossible to describe exactly how any one individual or work group might make ethical decisions, we can offer generalizations about average or typical behavior patterns within organizations. These generalizations are based on many studies and at least six ethical decision models that have been widely accepted by academics and practitioners. 1 Based on this research, we present a model for understanding ethical decision making in the context of business organizations. The model integrates concepts from philosophy, psychology, sociology, and organizational behavior. This framework should be helpful in understanding how organizations decide and develop ethical programs. Additionally, we describe some normative considerations that prescribe how organizational decision making should approach ethical issues. Principles and values are used by organizations as a foundation for establishing core values to provide enduring beliefs about appropriate conduct. Therefore, we provide both a descriptive understanding of how ethical decisions are made as well as the normative framework to determine how decisions ought to be made. A FRAMEWORK FOR ETHICAL DECISION MAKING IN BUSINESS As Figure 5–1 shows, our model of the ethical decision-making process in business includes ethical issue intensity, individual factors, and organizational factors such as corporate culture and opportunity. All these interrelated factors influence the evaluations of and intentions behind the decisions that produce ethical or unethical behavior. This model does not describe how to make ethical decisions, but it does help you to understand the factors and processes related to ethical decision making. Ethical Issue Intensity The first step in ethical decision making is to recognize that an ethical issue exists, requiring an individual or work group to choose among several actions that various stakeholders will ultimately evaluate as right or wrong. Ethical awareness is the ability to perceive whether a situation or decision has an ethical dimension. Costly problems can be avoided if employees are able to first recognize whether a situation has an ethical component. However, ethical awareness can be difficult in an environment when employees work in their own areas of expertise with the same types of people. It is easier to overlook certain issues requiring an ethical decision, particularly if the decision becomes a routine part of the job. This makes it important for organizations to train employees how to recognize the potential ethical ramifications of their decisions. Familiarizing employees with company values and training them to recognize common ethical scenarios can help them develop ethical awareness. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 130 Part 3: The Decision-Making Process FIGURE 5–1 Framework for Understanding Ethical Decision Marking in Business Ethical Issue Intensity Individual Factors Ethical or Unethical Behavior Opportunity © Cengage Learning Organizational Factors Business Ethics Evaluations and Intentions The intensity of an ethical issue relates to its perceived importance to the decision maker.2 Ethical issue intensity can be defined as the relevance or importance of an event or decision in the eyes of the individual, work group, and/or organization. It is personal and temporal in character to accommodate values, beliefs, needs, perceptions, the special characteristics of the situation, and the personal pressures prevailing at a particular place and time.3 Senior employees and those with administrative authority contribute significantly to ethical issue intensity because they typically dictate an organization’s stance on ethical issues. Potential ethical issues are identified as risk areas, and employees are trained to recognize these issues. For example, sexual harassment, conflict of interest, bribery, and time theft are all ethical issues that have been identified as risk areas. Additionally, insider trading is considered a serious ethical issue by the government because the intent is to take advantage of information not available to the public. Therefore, it is an ethical issue of high intensity for regulators and government officials. This often puts them at odds with financial companies such as hedge funds. A survey of hedge fund companies revealed 35 percent of respondents feel pressured to break the rules.4 Because of their greater ability to gather financial information from the market—some of which might not be public information—hedge funds and other financial institutions have often come under increased scrutiny by the federal government. Under current law, managers can be held liable for the unethical and illegal actions of subordinates. In the United States, the Federal Sentencing Guidelines for Organizations (FSGO) contain a liability formula judges use as a guideline regarding illegal activities of corporations. For example, many of the Enron employees and managers aware of the firm’s use of off-the-balance-sheet partnerships—that turned out to be the major cause of the energy firm’s collapse—were advised these partnerships were legal, so they were not perceived as an ethical issue. Although such partnerships were legal at that time, the way Enron officials designed them and the methods they used to provide collateral (that is, Enron stock) created a scheme that brought about the collapse of the company.5 Thus, ethical issue intensity involves individuals’ cognitive state of concern about an issue, or whether they have knowledge that an issue is unethical, that in turn indicates their involvement in making choices. The identification of ethical issues often requires the understanding of complex business relationships. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 131 Ethical issue intensity reflects the ethical sensitivity of the individual and/or work group facing the ethical decision-making process. Research suggests that individuals are subject to six “spheres of influence” when confronted with ethical choices—the workplace, family, religion, legal system, community, and profession—and the level of importance of each of these influences varies depending on how important the decision maker perceives the issue to be.6 Additionally, individuals’ moral intensity increases their perceptiveness of potential ethical problems for the firm, which in turn reduces their intention to act unethically.7 Moral intensity relates to individuals’ perceptions of social pressure and the harm they believe their decisions will have on others.8 All other factors in Figure 5–1, including individual factors, organizational factors, and intentions, determine why different individuals perceive ethical issues differently. Unless individuals in an organization share common concerns about ethical issues, the stage is set for ethical conflict. The perception of ethical issue intensity can be influenced by management’s use of rewards and punishments, corporate policies, and corporate values to sensitize employees. In other words, managers can affect the degree to which employees perceive the importance of an ethical issue through positive and/or negative incentives.9 For some employees, business ethical issues may not reach critical awareness if managers fail to identify and educate them about specific problem areas. One study found that more than a third of the unethical situations that lower and middle-level managers face come from internal pressures and ambiguity surrounding internal organizational rules. Many employees fail to anticipate these issues before they arise.10 This lack of preparedness makes it difficult for employees to respond appropriately when they encounter an ethics issue. One field recognized as having insufficient ethics training is science. An Iowa State University scientist resigned and was charged with four felony counts of making false statements after falsifying lab results for AIDS research.11 Although this type of scandal is a rare occurrence in the scientific profession, a panel of experts found young scientists tend to lack knowledge about ethical frameworks to navigate ethical gray areas. Many are therefore unprepared when faced with an ethical issue.12 Organizations that consist of employees with diverse values and backgrounds must train workers in the way the firm wants specific ethical issues handled. Identifying the ethical issues and risks employees might encounter is a significant step toward developing their ability to make ethical decisions. Many ethical issues are identified by industry groups or through general information available to a firm. Flagging certain issues as high in ethical importance could trigger increases in employees’ ethical issue intensity. The perceived importance of an ethical issue has a strong influence on both employees’ ethical judgment and their behavioral intention. In other words, the more likely individuals perceive an ethical issue as important, the less likely they are to engage in questionable or unethical behavior.13 Therefore, ethical issue intensity should be considered a key factor in the ethical decision-making process. Individual Factors When people need to resolve issues in their daily lives, they often base their decisions on their own values and principles of right or wrong. They generally learn these values and principles through the socialization process with family members, social groups, religion, and in their formal education. Good personal values have been found to decrease unethical practices and increase positive work behavior. The moral philosophies of individuals, discussed in detail in Chapter 6, provide principles, values, and rules people use to decide what is moral or immoral from a personal perspective. Values of individuals can be derived from moral philosophies that are applied to daily decisions. However, these values can be Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 132 Part 3: The Decision-Making Process subjective and vary a great deal across different cultures. For example, some individuals might place greater importance on keeping their promises and commitments than others would. Values applied to business can also be used in negative rationalizations, such as “Everyone does it,” or “We have to do what it takes to get the business.”14 Research demonstrates that individuals with certain personalities will violate basic core values, causing a work group to suffer a performance loss of 30 to 40 percent compared to groups with no “bad apples.”15 The actions of specific individuals in scandal-plagued financial companies such as JP Morgan often raise questions about those individuals’ personal character and integrity. They appear to operate in their own self-interest or in total disregard for the law and the interests of society. Although an individual’s intention to engage in ethical behavior relates to individual values, organizational and social forces also play a vital role. An individual’s attitudes as well as social norms help create behavioral intentions that shape his or her decisionmaking process. While an individual may intend to do the right thing, organizational or social forces can alter this intent. For example, an individual may intend to report the misconduct of a coworker, but when faced with the social or financial consequences of doing so, may decide to remain complacent. In this case, social forces overcome a person’s individual values when it comes to taking appropriate action.16 At the same time, individual values strongly influence how people assume ethical responsibilities in the work environment. In turn, individual decisions can be heavily dependent on company policy and the corporate culture. The way the public perceives business ethics generally varies according to the profession in question. Financial institutions, car salespersons, advertising practitioners, stockbrokers, and real estate brokers are often perceived as having the lowest ethics. Research regarding individual factors that affect ethical awareness, judgment, intent, and behavior include gender, education, work experience, nationality, age, and locus of control. Extensive research regarding the link between gender and ethical decision making shows that in many aspects there are no differences between men and women. However, when differences are found, women are generally more ethical than men.17 By “more ethical,” we mean women seem to be more sensitive to ethical scenarios and less tolerant of unethical actions. One study found that women and men had different foundations for making ethical decisions: women rely on relationships; men rely on justice or equity.18 In another study on gender and intentions for fraudulent financial reporting, females reported higher intentions to report than male participants.19 As more and more women work in managerial positions, these findings may become increasingly significant. Education is also a significant factor in the ethical decision-making process. The important thing to remember about education is that it does not reflect experience. Work experience is defined as the number of years in a specific job, occupation, and/or industry. Generally, the more education or work experience people have, the better they are at making ethical decisions. The type of education someone receives has little or no effect on ethics. For example, it doesn’t matter if you are a business student or a liberal arts student— you are similar in terms of ethical decision making. Current research, however, shows students are less ethical than businesspeople, which is likely because businesspeople have been exposed to more ethically challenging situations than students.20 Additionally, those wellversed in business ethics knowledge, including regulatory officials and ethics researchers, are likely to take more time and raise more concerns going through the ethical decisionmaking process than novices such as graduate students.21 This implies that those more familiarized with the ethical decision-making process due to education or experience are likely to spend more time examining and selecting different alternatives to an ethics issue. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 133 Nationality is the legal relationship between a person and the country in which he or she is born. In the twenty-first century, nationality is redefined by regional economic integration such as the European Union (EU). When European students are asked their nationality, they are less likely to state where they were born than where they currently live. The same thing is happening in the United States, as people born in Florida living in New York might consider themselves to be New Yorkers. Research about nationality and ethics appears to be significant in how it affects ethical decision making; however, just how nationality affects ethics is somewhat hard to interpret.22 Because of cultural differences, it is impossible to state that ethical decision making in an organizational context will differ significantly among individuals of different nationalities. The reality of today is that multinational companies look for businesspeople that make good decisions regardless of nationality. Perhaps in 20 years, nationality will no longer be an issue because the multinational individual’s culture will replace national status as the most significant factor in ethical decision making. Age is another individual factor within business ethics. Several decades ago, we believed age was positively correlated with ethical decision making. In other words, the older you are, the more ethical you are. However, recent research suggests there is probably a more complex relationship between ethics and age.23 We believe older employees with more experience have greater knowledge to deal with complex industry-specific ethical issues. Younger managers are far more influenced by organizational culture than older managers.24 Locus of control relates to individual differences in relation to a generalized belief about how you are affected by internal versus external events or reinforcements. In other words, the concept relates to how people view themselves in relation to power. Those who believe in external control (externals) see themselves as going with the flow because that is all they can do. They believe the events in their lives are due to uncontrollable forces. They consider what they want to achieve depends on luck, chance, and powerful people in their company. In addition, they believe the probability of being able to control their lives by their own actions and efforts is low. Conversely, those who believe in internal control (internals) believe they control the events in their lives by their own effort and skill, viewing themselves as masters of their destinies and trusting in their capacity to influence their environment. Current research suggests we still cannot be sure how significant locus of control is in terms of ethical decision making. One study that found a relationship between locus of control and ethical decision making concluded that internals were positively correlated whereas externals were negatively correlated with ethical decisions.25 In other words, those who believe they formed their own destiny were more ethical than those who believed their fate was in the hands of others. Classifying someone as being entirely an internal or entirely an external is probably impossible. In reality, most people have experienced situations where they were influenced by others—particularly authority figures—to engage in questionable actions, as well as other situations where they adhered to what they knew was the correct choice. This does not necessarily mean that externals are unethical or internals are ethical individuals. Organizational Factors Although people can and do make individual ethical choices in business situations, no one operates in a vacuum. Indeed, research has established that in the workplace, the organization’s values often have greater influence on decisions than a person’s own values.26 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 134 Part 3: The Decision-Making Process Ethical choices in business are most often made jointly, in work groups and committees, or in conversations and discussions with coworkers. Employees approach ethical issues TAKE A STAND on the basis of what they learned not only from their own backgrounds, but also from others in the organization. The Conflicts over Privacy in the Workplace outcome of this learning process depends on the strength There is tension between companies and their of personal values, the opportunities to behave unethically, employees over privacy in the workplace. Some and the exposure to others who behave ethically or unethicompanies track employees via company-issued cally. An alignment between a person’s own values and the GPS-enabled smartphones and monitor employees’ values of the organization help create positive work attitudes behavior through social networking sites such as and organizational outcomes. Research has further demFacebook and Twitter. Currently, there are no laws onstrated that congruence in personal and organizational preventing companies from monitoring and tracking values is related to commitment, satisfaction, motivation, employees. Companies believe not monitoring these ethics, work stress, and anxiety.27 Although people outplatforms leaves them vulnerable to misconduct. side the organization such as family members and friends For instance, the Internet increased the number of also influence decision makers, the organization develops a distractions in the workplace, and some employees personality that helps determine what is and is not ethical. may spend up to 30 percent of their time at work Just as a family guides an individual, specific industries give using social media sites for non-work purposes. behavioral cues to firms. Within the family develops what is On the other hand, employees argue they have called a culture, and so too in an organization. a right to their privacy. They see tracking as a clear Corporate culture can be defined as a set of values, sign that their employers do not trust them. Another norms, and artifacts, including ways of solving problems major argument is that employers with access to that members (employees) of an organization share. As employee social media sites or smartphones might time passes, stakeholders come to view the company or be able to monitor employee activity outside the organization as a living organism with a mind and will of workplace. Where is the line drawn on ensuring its own. The Walt Disney Co., for example, requires all new employees are working appropriately versus their employees to take a course in the traditions and history of rights to privacy? Disneyland and Walt Disney, including the ethical dimensions of the company. The corporate culture at American 1. Companies should have the right to track Express stresses that employees help customers out of diffiemployees through company smartphones and cult situations whenever possible. This attitude is reinforced monitor their personal Facebook and Twitter through numerous company legends of employees who have accounts. gone above and beyond the call of duty to help customers. 2. Employees should be able to maintain their This strong tradition of customer loyalty might encourage personal privacy and not be tracked through their an American Express employee to take unorthodox steps company smartphones or their Facebook and to help a customer who encounters a problem while travelTwitter accounts. ing overseas. Employees learn they can take some risks in helping customers. Such strong traditions and values have become a driving force in many companies, including Starbucks, IBM, Procter & Gamble, Southwest Airlines, and Hershey Foods. One way organizations can determine the ethicalness and authenticity of their corporate cultures is having organizations go back to their mission statement or goals and objectives. These goals and objectives are often developed by various stakeholders, such as investors, employees, customers, and suppliers. Comparing the firm’s activities with its mission statement, goals, and objectives helps the organization understand whether it is staying true to its values. Additionally, most industries have trade associations that disperse guidelines developed over time from others in the industry. These rules help guide the decision-making process as well. The interaction between the company’s internal rules DEBATE ISSUE Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 135 and regulations and industry guidelines form the basis of whether a business is making ethical or unethical decisions. It also gives an organization an idea of how an ethical or unethical culture may look. An important component of corporate or organizational culture is the company’s ethical conduct. Corporate culture involves values and norms that prescribe a wide range of behavior for organizational members, while ethical culture reflects the integrity of decisions made and is a function of many factors, including corporate policies, top management’s leadership on ethical issues, the influence of coworkers, and the opportunity for unethical behavior. Communication is also important in the creation of an effective ethical culture. There is a positive correlation between effective communication and empowerment and the development of an organizational ethical culture.28 Within the organization as a whole, subcultures can develop in individual departments or work groups, but these are influenced by the strength of the firm’s overall ethical culture, as well as the function of the department and the stakeholders it serves.29 For instance, salespeople are heavily influenced by the subculture of the sales department and face many ethical issues that are not necessarily common to other departments.30 Additionally, because salespeople tend to operate largely outside of the organization, they may not be as socialized to other employees and the organization’s ethical culture.31 Corporate culture and ethical culture are closely associated with the idea that significant others within the organization help determine ethical decisions within that organization. Research indicates the ethical values embodied in an organization’s culture are positively correlated to employees’ commitment to the firm and their sense that they fit into the company. These findings suggest companies should develop and promote their values to enhance employees’ experiences in the workplace.32 The more employees perceive an organization’s culture to be ethical, the less likely they are to make unethical decisions. Those who have influence in a work group, including peers, managers, coworkers, and subordinates, are referred to as significant others. They help workers on a daily basis with unfamiliar tasks and provide advice and information in both formal and informal ways. Coworkers, for instance, can offer help in the comments they make in discussions over lunch or when the boss is away. Likewise, a manager may provide directives about certain types of activities employees perform on the job. Indeed, an employee’s supervisor can play a central role in helping employees develop and fit in socially in the workplace.33 Numerous studies conducted over the years confirm that significant others within an organization may have more impact on a worker’s decisions on a daily basis than any other factor.34 Obedience to authority is another aspect of the influence significant others can exercise. Obedience to authority helps explain why many employees resolve business ethics issues by simply following the directives of a superior. In organizations that emphasize respect for superiors, employees may feel they are expected to carry out orders by a supervisor even if those orders are contrary to the employees’ sense of right and wrong. Rewards and punishments that managers control influence ethical decisions. If firms place all rewards around financial performance, then how objectives are achieved can become a secondary concern. This situation occurred in major banks prior to the financial crisis. If the employee’s decision is judged to be unethical, he or she is likely to say, “I was only carrying out orders,” or “My boss told me to do it this way.” In addition, research shows the type of industry and size of the organization were found to be relevant factors, with larger companies at greater risk for unethical activities.35 Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 136 Part 3: The Decision-Making Process Opportunity Opportunity describes the conditions in an organization that limit or permit ethical or unethical behavior. Opportunity results from conditions that either provide rewards, whether internal or external, or fail to erect barriers against unethical behavior. Examples of internal rewards include feelings of goodness and personal worth generated by performing altruistic or ethical acts. External rewards refer to what an individual expects to receive from others in the social environment in terms of overt social approval, status, and esteem. An example of a condition that fails to erect barriers against unethical behavior is a company policy that does not punish employees who accept large gifts from clients. The absence of punishment essentially provides an opportunity for unethical behavior because it allows individuals to engage in such behavior without fear of consequences. The prospect of a reward for unethical behavior can also create an opportunity for questionable decisions. For example, a salesperson given public recognition and a large bonus for making a valuable sale obtained through unethical tactics will probably be motivated to use such tactics again, even if such behavior goes against the salesperson’s personal value system. If employees observe others at the workplace abusing drugs or alcohol and nobody reports or responds to this conduct, then the opportunity exists for others to engage in these activities.36 Opportunity relates to individuals’ immediate job context—where they work, whom they work with, and the nature of the work. The immediate job context includes the motivational “carrots and sticks” superiors use to influence employee behavior. Pay raises, bonuses, and public recognition act as carrots, or positive reinforcements, whereas demotions, firings, reprimands, and pay penalties act as sticks, or negative reinforcements. One survey reports more than two-thirds of employees steal from their workplaces, and most do so repeatedly.37 As Table 5–1 shows, many office supplies, particularly smaller ones, tend to “disappear” from the workplace. Small supplies such as Post-It notes, copier paper, staples, and pens appear to be the more commonly pilfered items, but some office theft sometimes reaches more serious proportions. For instance, a Charles Schwab & Co. broker used the company’s order system to order office supplies and equipment and then sold them to other people. It is alleged he stole $1 million worth of office equipment from the firm.38 The retail industry is particularly hard hit—total losses from employee theft are often greater than shoplifting at retail chains.39 If there is no enforced policy against this practice, one concern is employees will not learn where to draw the line and get into the habit of taking more expensive items for personal use. The opportunities that employees have for unethical behavior in an organization can be eliminated through formal codes, policies, and rules adequately enforced by management. For instance, the International Federation of Accountants, a global organization that consists of 175 member organizations and associates, periodically updates its ethics standards to cover new risk areas. It updated its conflict of interest policies as well as actions taken against member organizations that violate the code of ethics.40 Financial companies—such as banks, savings and loan associations, and securities companies—developed elaborate sets of rules and procedures to avoid creating opportunities for individual employees to manipulate or take advantage of their trusted positions. In banks, one such rule requires most employees to take a vacation and stay out of the bank a certain number of days every year so they cannot be physically present to cover up embezzlement or other diversions of funds. This rule prevents the opportunity for inappropriate conduct. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 137 TABLE 5–1 Most Common Office Supplies Stolen by Employees 1 Pens, pencils, and highlighters 2 Paper products 3 Paper or binder clips 4 Staplers 5 Scissors 6 Tape dispensers 7 Printer ink 8 Binders Source: “The most stolen office supplies” Boston.com, http://www.boston.com/business/gallery/stolenofficesupplies/ (accessed February 19, 2015). Despite the existence of rules, misconduct can still occur without proper oversight. JP Morgan covers conflicts of interest in its code of conduct, but lapses in oversight resulted in investigations with company officials ignoring corporate policies. Regulators showed concern over whether JP Morgan might have been driving clients toward its own investment products over outside offerings.41 A later investigation tried to determine whether the firm hired an unqualified employee because he was the son of China’s commerce minister. The commerce minister allegedly promised to help the bank in its operations in China.42 Such a violation would not only be a conflict of interest but could also qualify as a type of bribery violating the Foreign Corrupt Practices Act. To avoid these types of situations, companies must adopt checks and balances that create transparency. Opportunity also comes from knowledge. A major type of misconduct observed among employees in the workplace is lying to employees, customers, vendors, or the public or withholding needed information from them.43 A person with expertise or information about the competition has the opportunity to exploit this knowledge. Individuals can be a source of information because they are familiar with the organization. Individuals employed by one organization for many years become “gatekeepers” of its culture and often have the opportunity to make decisions related to unwritten traditions and rules. They socialize newer employees to abide by the rules and norms of the company’s internal and external ways of doing business, as well as understanding when the opportunity exists to cross the line. They function as mentors or supervise managers in training. Like drill sergeants in the army, these trainers mold the new recruits into what the company wants. Their training can contribute to either ethical or unethical conduct. The opportunity for unethical behavior cannot be eliminated without aggressive enforcement of codes and rules. A national jewelry store chain president explained to us how he dealt with a jewelry buyer in one of his stores who took a bribe from a supplier. There was an explicit company policy against taking incentive payments to deal with a specific supplier. When the president of the firm learned about the accepted bribe, he immediately traveled to the office of the buyer in question and terminated his employment. He then traveled to the supplier (manufacturer) selling jewelry to his stores and terminated his relationship with the firm. The message was clear: Taking a bribe is unacceptable for the store’s buyers, and salespeople from supplying companies could cost their firm significant Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 138 Part 3: The Decision-Making Process sales by offering bribes. This type of policy enforcement illustrates how the opportunity to commit unethical acts can be eliminated or at least significantly reduced. As defined previously, stakeholders are those directly and indirectly involved with a company and can include investors, customers, employees, channel members, communities, and special interest groups. Each stakeholder has goals and objectives that somewhat align with other stakeholders and the company. It is the diverging of goals that causes friction between and within stakeholders and the corporation. Most stakeholders understand firms must generate revenues and profit to exist, but not all. Special interest groups or communities may actively seek the destruction of the corporation because of perceived or actual harm to themselves or those things held important to them. The employee is also affected by such stakeholders, usually in an indirect way. Depending upon the perceived threat level to the firm, employees may act independently or in groups to perpetrate unethical or illegal behaviors. For example, one author knew of a newspaper firm that had been losing circulation to one of its competitors, and the loss was putting people at the firm out of work. The projection was if the newspaper could not turn subscriptions around they would be closed within a year. As a result of the announcement employees started pulling up newspaper receptacles and damaging the competition’s automatic newspaper dispensers. Both activities were illegal, yet the employees felt justified because they believed they were helping the company survive. Business Ethics Intentions, Behavior, and Evaluations Ethical business issues and dilemmas involve problem-solving situations where the rules governing decisions are often vague or in conflict. The results of the decision are often uncertain; it is not always immediately clear whether the decision was ethical. There are no magic formulas, nor is there computer software that ethical business issues or dilemmas can be plugged into to get a solution. Even if they mean well, most businesspeople make ethical mistakes. Therefore, there is no substitute for critical thinking and the ability to take responsibility for our own decisions. Individuals’ intentions and the final decision regarding what action they take are the last steps in the ethical decision-making process. The work environment culture has been found to impact recognition and judgment.44 When intentions and behavior are inconsistent with their ethical judgment, people may feel guilty. For example, when an advertising account executive is asked by her client to create an advertisement she perceives as misleading, she has two alternatives: to comply or refuse. If she refuses, she stands to lose business from that client and possibly her job. Other factors—such as pressure from the client, the need to keep her job to pay her debts and living expenses, and the possibility of a raise if she develops the advertisement successfully—may influence her resolution of this ethical dilemma. Because of these factors, she may decide to act unethically and develop the advertisement even though she believes it to be inaccurate. In this example her actions are inconsistent with her ethical judgment, meaning she will probably feel guilty about her decision. Guilt or uneasiness is the first sign an unethical decision may have occurred. The next step is changing the behavior to reduce such feelings. This change can reflect a person’s values shifting to fit the decision or the person changing his or her decision type the next time a similar situation occurs. You can eliminate some of the problematic situational factors by resigning your position. For those who begin the value shift, the following are the usual justifications that reduce and finally eliminate guilt: 1. 2. I need the paycheck and can’t afford to quit right now. Those around me are doing it, so why shouldn’t I? They believe it’s okay. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. Chapter 5: Ethical Decision Making 3. 4. 5. 6. 139 If I don’t do this, I might not be able to get a good reference from my boss or company when I leave. This is not such a big deal, given the potential benefits. Business is business with a different set of rules. If not me, someone else would do it and get rewarded. The road to success depends on how the businessperson defines success. The success concept drives intentions and behavior in business either implicitly or explicitly. Money, security, family, power, wealth, and personal or group gratification are all types of success measures people use. The list described is not comprehensive, and in the next chapter, you will understand more about how success can be defined. Another concept that affects behavior is the probability of rewards and punishments, an issue explained further in Chapter 6. USING THE ETHICAL DECISIONMAKING MODEL TO IMPROVE ETHICAL DECISIONS The ethical decision-making model presented cannot tell you if a business decision is ethical or unethical. It bears repeating that it is impossible to tell you what is right or wrong; instead, we attempt to prepare you to make informed ethical decisions. Although this chapter does not moralize by telling you what to do in a specific situation, it does provide an overview of typical decision-making processes and factors that influence ethical decisions. The model is not a guide for how to make decisions, but is intended to provide you with insights and knowledge about typical ethical decision-making processes in business organizations. Business ethics scholars developing descriptive models have focused on regularities in decision making and the various phenomena that interact in a dynamic environment to produce predictable behavioral patterns. Furthermore, it is unlikely an organization’s ethical problems will be solved strictly by having a thorough knowledge about how ethical decisions are made. By its very nature, business ethics involves value judgments and collective agreement about acceptable patterns of behavior. In the next section, we discuss normative concepts that describe appropriate ethical conduct. We propose gaining an understanding of the factors that make up ethical decision making in business will sensitize you concerning whether the business problem is an ethical issue or dilemma. It will help you know what the degree of ethical intensity may be for you and others, as well as how individual factors such as gender, moral philosophy, education level, and religion within you and others affect the process. We hope you remember the organizational factors that impact the ethics of business decisions and what to look for in a firm’s code of ethics, culture, opportunity, and the significance of other employees and how they sway some people’s intentions and behaviors. You now know non-business factors such as friends, family, and the economic reality of an employee’s situation can lead to unethical business decisions. Finally, we hope you remember that the type of industry, the competition, and stakeholders are all factors that can push some employees into making unethical decisions. In later chapters we delve deeper into different aspects of the ethical decision-making process so ultimately you can make better, more informed decisions and help your company do the right things for the right reasons. Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some ...
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