Business Ethics
How can we identify, understand and solve the ethical dilemmas that emerge in a business situation?
This is a short course that surveys a number of frameworks and models that can be used to cope with moral and ethical dilemmas. Famous cases will be used to provide a realistic grounding to the content, and participants will be tasked to apply those concepts and discuss their insights. The course is heavily group-focused and includes case discussion and role playing activities.
Sometimes in life we may have to be expedient. But consider the following passage (from Charlotte Gray, p. 204),
The telephone was ringing in Julien’s office. I’m putting you through now,” said Pauline Bobotte,
It was a Communist from Limoges, whom Julien, against his better judgement, had approached for information. He did not want to associate with Communists, but in times of war you sometimes had to be expedient. Even as he explained this to himself he realised that this was exactly the argument employed by [Phillipe] Pétain and [Pierre] Laval.
The difference was that his position was not merely expedient, it had moral backing. Also, his judgement, unlike theirs, was sound. So he hoped.
Preliminary tasks
Before attending the module you should read about these mini cases:
and complete this form:
Handouts
Case (for 1 day version)
- “Who’s Responsible for the Drawbridge Drama?” by Mueller, U., and Schaefer, U., European School of Management & Technology, 2010
- Learning objective: The case introduces students to topics such as “responsible leadership” and “responsible business”. It also provides an engaging illustration of how people look at the same context or phenomenon, but reach very different interpretations and judgments.
Additional cases (for 2 day version)
- Healy, P., and Soltes, E., “Rajat Gupta” Harvard Business School case no. 9-117-004, January 2018
- Waytz, A., and Kilibarda, V., 2014, “Through the Eyes of a Whistle-Blower”, Kellogg School of Management
Primary readings
- Friedman, M., “The Social Responsibility of Business is to Increase its Profits” New York Times Magazine, September 13th 1970 [PDF version here]
- Frye, J., “A Primer on Decision Making through Ethical Analysis“
Secondary readings
- Alchian, A., 1950, “Uncertainty, Evolution, and Economic Theory“, Journal of Political Economy, 58(3):211-221
- Beard, S., “Deep ethics: the long-term quest to decide right from wrong” 18th June 2019
- Heath, J., “A Market Failure Approach to Business Ethics”
- “Just good business” Special Report, The Economist, January 2008
- Strain, Michael R., “Milton Friedman Was Right About Shareholder Capitalism“, Bloomberg Opinion September 18th 2020
- Dumitriu, S., “Why I think Milton Friedman on shareholder primacy is underrated“, January 12th 2021 (+ Twitter thread)
My related research
- 2021 “Insider trading and the potential for sabotage” Business Ethics Journal Review, Vol. 9, Issue 9, pp.54-59
- 2008 “Dealing with Dissent: Whistleblowing, Egalitarianism and the Republic of the Firm” Innovation: The European Journal of Social Science Research, Vol. 21, No. 3, pp. 267-279
Audio
- Martha Stewart w. Sarah Archer, You’re Wrong About, June 20, 2022
- One of those most famous cases of insider trading is Martha Stewart. This podcast episode doesn’t go into detail on the issue (it points that that ultimately she was jailed for obstruction of justice and not insider trading) but I found it an enlightening explanation of her life, her business model and how that relates to shifting cultural dynamics in America. Stewart was entirely self made and provided a wholesome service of showing people how to make beautiful crafts, or – more likely – give them pleasure from watching her make them instead. The claim made in the podcast is that Stewart’s wealth was a function of being personally underestimated and capitalising on how neglected the value of domestic labour and household management had become. Both of these have a clear gender angle. The podcast host is clearly sympathetic to Stewart, but laments the necessity of having to embrace capitalist institutions for her talents to be recognised and rewarded. (Personally I would use this as evidence for the triumphs of capitalism, and how it liberates women from servitude). Regardless of whether Stewart knowingly dumped shares, or whether she was scapegoated and being made an example of (by men!) to bring her down a peg, her story is a fascinating one to reflect on.
- Why didn’t anyone go to prison for the financial crisis?, You’re Wrong About, Feb 10th 2020
- This episode attempts to explain the low rates of prosecution and conviction for “white collar crime” in the US. It provides an interesting discussion of the discovery of lead paint in Mattel’s children toys, as a result of an outsourced supply chain with inadequate monitoring, and lack of US consumer protection checks. The data it provides on the lack of resources at the disposal of the government is incredible. One thing I believe it misses is the assumption that “corporate wrongdoing” necessarily involves individual (and criminal) wrongdoing. In many cases executives were making decisions under conditions of uncertainty with genuine conflict over the amounts of risk that people were exposed to. I believe that the systemic problems are due more to the regulatory system than any individual or particular corporation behaviour. We should also consider why limited liability exists and what would be lost if we erred on greater flexibility to use individual scapegoats. (Just because some communities lack the resources to adequately defend themselves, and just because society seems willing to make examples of certain types of criminal, does not make that a model to apply more broadly). For further resources on the financial crisis see here.
Textbook
- Crane, A., Matten, D., Glozer, S., and Spence, L., 2019, Business Ethics (Oxford University Press, 5th Edition)
Further courses
- The US Holocaust Museum has a module on Ethical Leadership
“it is better to be unfortunate in reasonable action than to prosper in unreason” Epicurus, ‘Letter to Menoeceus’
Further resources
A true crime case that has some similar themes to the Drawbridge Drama is Jill Dando. I recommend both parts of the True Crime Garage podcast and there’s also a Netflix documentary. Dando was killed (and at first it was thought to have been a stabbing) in a seemingly random attack, and police arrested the local “madman”. I am not sure who killed Dando.
The main argument against it being a hit ordered by Serbian warlord Arkan is that he was meeting BBC journalist John Simpson the same day, which would have presented a much easier target had the motive been retaliation. I think Barry George is our best suspect, but it seems clear that he was initially apprehended and convinced on very weak evidence in part because he served as an easy target. As soon as policy found a weird loner the desire for a simple explanation – a scapegoat – appeared very strong.
An Inspector Calls is the classic literary depiction of how responsibility can be shared among many people. Although I find the social commentary to be frustratingly simplistic, there is a 2015 BBC Drama version that you may find worth watching. The 2017 Netflix Series, ‘13 Reasons Why‘ explores similar themes, but I haven’t watched it.
The 1957 movie, ‘12 Angry Men‘ is a classic. It shows how a natural drive to reach consensus can mask important insights, and that the role of Devil’s Advocate can be important in team settings.
Here is an article on why Peep Show is “the most realistic depiction of evil“.
For more on The Entertainer see here. Here is a BBC article on the Chick-fil-a controversy.
The 2022 Netflix documentary “Downfall: The Case Against Boeing” is a compelling account of how the company attempted to pass blame for the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 on pilot error, instead or recognising the risks caused by modifications to the aircrafts autopilot (which were underplayed in order to avoid additional and expensive pilot training). The trailer is here:
For more on “Dieselgate” see this BB article and this YouTube video:
For more on Theranos see here:
I didn’t include Carlos Ghosn’s actions at Nissan as an example of corporate wrongdoing because the accusations about him imply that the company was being wronged. Such cases of fraud and embezzlement are not a key part of our course, but there is a good Netflix documentary about Carlos Ghosn here.
Here is the DuPont Conaco Double-Hulled Oil Tankers Seal Clapping Commercial (1991), here is a discussion of Cecil the lion, and here is the Wikipedia article about Harambe. This article provides a list of greenwashing. I used to accuse L’Oreal of greenwashing in the lecture because they claim to be “natural” while using carcinogen ingredients (e.g. Titanium dioxide in eye shadow; formaldehyde-releasing preservatives in kids shampoo). Technically those ingredients are “natural” in the sense that they exist in nature, and in low doses are not considered to be particularly harmful. I think the main point is that it is harder to remove trace amounts of cancer-causing chemicals from bananas than it is to just stop using them in cosmetic products. But still, much of the campaign against L’Oreal may be over the top. Judge for yourself.
Here is more on river blindness.
Examples of ridiculous occupational licensing include (h/t Russ Roberts):
- Interior designers in Florida need 6 years of education or experience (source)
- Cosmetologists in New York need 2,100 hours of training (source)
- Florists in Louisiana need to be licensed (source – which also shows which other professions need licenses)
Eyal Press’s 2012 book ‘Beautiful Souls: Saying No, Breaking Ranks, and Heeding the Voice of Conscience in Dark Times‘ is a rich and engaging collection of stories about people refusing to adhere to authority. It shows how whistleblowers are not typically anarchists who enjoy flouting rules, but people who value those rules so highly they insist on holding their superiors to them. It includes the story of a Serbian man who, in 1991, risked his own life to protect captured Croatians from execution, as well a Swiss police official who broke the law by giving entry permits to Jewish refugees in 1938.
Regarding the importance of involving the local community in a company’s strategy, see Steve Jobs; testimonies to Cupertino city council, in 2006:
…and again in June 2011
For a contrarian view on sweatshops, see here:
My favourite documentary on Lance Armstrong is ‘The Armstrong Lie‘ (2013)
There is also a 2 part “Storyville” documentary called “Lance” available on BBC iPlayer here.
Whistleblowing
- “Through the Eyes of a Whistle-Blower: How Sherry Hunt Spoke Up About Citibank’s Mortgage Fraud“, by Waytz, A., and Kilibarda, V., Kellogg School of Management, 2014
- Learning objective: The case helps students to gain experience resolving ethical dilemmas in which two values may conflict, such as professional duty and personal ethics. It enables students to identify behaviors that help a whistle-blower be effective and discuss how incentive structures, management, and culture play roles in promoting or hindering ethical behavior in organizations.
- Discussion questions
I define whistleblowing as “the unauthorised revelation of wrongdoing”. The German Spy Museum define it as “someone who reveals confidential information about the illegal or immoral practises of their employer.”
The most famous whistleblowing case of recent times is Edward Snowden. Here is a nuanced account of Snowden’s actions and motivations, and the key part is “I found it hard to determine when, in Snowden’s own mind, he graduated from being the emotionally immature and naive person he disdainfully describes himself as at the beginning of his development to being the sophisticated person who could make sound decisions about what is good for humanity he claims to be when he takes the NSA documents.” Citizenfour is a critically acclaimed documentary:
“Reality” is a slow paced but engaging drama that uses the actual FBI transcripts to reveal the case of former NSA translator Reality Winner.
“Official Secrets” is based on a true story, featuring whistleblower Katharine Gun. I found it interesting that she made no attempt to escalate issues internally before going outside the organisation. The fact that she worked for the UK security services added more weight to the magnitude of her actions, but also calls into question whether we should treat people with security clearance differently to dissent in other contexts.
Insider trading
- “Rajat Gupta“, by Healy, P.M., and Soltes, E., Harvard Business School, 2019
- Learning objective: The case explores how a prominent and successful executive can engage in misconduct. In addition, the case explores the nature of illicit insider trading.
- Discussion questions
In 2011 Raj Rajaratnum was given an 11 year prison sentence for insider trading. According to Philip Mirowski (2013) this makes him just one of two people (the other being Bernie Madoff) to have gone to jail for their roles in the 2007-08 global financial crisis. Martin Wolf (2023) claims that the only banker to go to prison from wither the US or the UK was Kareem Serageldin (whereas in Iceland 25 bankers were convicted, 11 in Spain, and 7 in Ireland.
This Vanity Fair article provides an account of Gupta’s more recent autobiography.
Here are a couple of op-eds on the benefits of insider trading:
- “Don’t regulate banking – liberalise it“, by Anthony J. Evans, Guardian Unlimited, September 14th 2009
- “Learning to Love Insider Trading” by Donald Boudreaux, Wall Street Journal, October 24th 2009
- “Insider trading enriches and informs us, and could prevent scandals. Legalize it“, by Dylan Matthews, July 26th 2013
Here is a New York Post article explaining how Nancy Pelosi (and her husband) have benefitted from trading off the stocks of companies that she regulates, and why she is resisting efforts to stop Congressional lawmakers from being able to continue to do so. You can track her trades here. Here is a funny halloween costume.
Here is a case that links insider trading with working from home – a man bought stock in a company that BP were intending to buy and made a $1.8m profit after they did so. His wife worked in M&A at BP, and had been discussing the deal on zoom calls within the family home. For more see here.
Final quote…
“I would think that men wanting revenge would simply have killed him where they found him. The other possibility is kidnap and ransom. Kalesh [a Sudanese Prince] tells me the local kidnappers are pretty honourable – if you pay, they give back the victim unharmed. It’s a matter of business ethics”
McCarry, C., 1973 [2007] The Miernik Dossier, Overlook Duckworth, p.211
Quiz
Finally, you can test your understanding of the content, and provide me with useful feedback, by completing this quiz: