BusEth.3.17.14

8/11/2019 BusEth.3.17.14

1/45

1

Professional and Business Ethics

Prof. Peter Hadreas

Spring, 2014

Course Website:

http://www.sjsu.edu/people/peter.hadreas/courses/ProfandBusEthics/

8/11/2019 BusEth.3.17.14

2/45

2

Specific Workplace EthicalTroublespots

Human Resources IssuesPeople Issues

Trevio and Nelson textbook, pp. 113-148.

8/11/2019 BusEth.3.17.14

3/45

3

Discrimination Issues

Trevio and Nelson textbook, pp. 114-122

8/11/2019 BusEth.3.17.14

4/45

4


Three Conditions of Workplace Prejudicial

Discrimination

1. A decision is made about an employee notby merit, but about employee

s membership

in a group.

2. The decision assumes employee

s groupis moral lyinferior and thereby deserving ofunequal treatment.

3. The decision causes the employee harm.

8/11/2019 BusEth.3.17.14

5/45

5


Benchmarks of Anti-Discrimination Legislation

1. 1964 -- Civil Rights Act of 1964. Title VII (aboutEmployment) applies to all employers, whether publicor private with 15 employees or more:It shall be unlawful employment practice for anemployer (1) to fail or refuse to hire or to discharge anyindividual or otherwise discriminate against anyindividual . . . because of an individuals race, color,religion, sex or national origin; . . .

2. 1967 -- Age Discrimination in Employment Act.Extends to people 40 years old and older.

8/11/2019 BusEth.3.17.14

6/45

6


Benchmarks of Anti-Discrimination Legislation

3. 1972 -- The Equal Employment Opportunity Act. It foundsEqual Employment Opportunity Commission (EEOC) which hascapacity enforce various statutes and decisions and to prosecutecomplaints of job discrimination.

4. 1993 -- The Family and Medical Leave Act

or FMLA,

passedby US Congress. Employers with 50 employees or more mustprovide up to 12 weeks of unpaid, job protected leave a year toemployees who have worked for at least one year to care for: 1) anewborn; 2) newly adopted or foster child; 3) a child, spouse orparent with a serious health condition; or, 4) for the serioushealth condition of the employee.

5. 1994 -- Americans with Disabilities Act. (Proposed in 1990)textbook, p. 118.

8/11/2019 BusEth.3.17.14

7/457


Seven Protected Categories of Federal Anti-

Discrimination Law

1. Race2. Color

3. Religion (creed)4. Sex (gender)5. National origin (ethnicity)6. Age7. Disability

8/11/2019 BusEth.3.17.14

8/458


QUESTION

In 1996, a majority of California voters passedProposition 209. It changed the language of Art. I

31 of the California State Constitution to read:

Sec. 31. (a) The state shall not discriminate against, or grantpreferential treatment to, an individual or group on the basis ofrace, sex, color, ethnicity, or national origin in the operation ofpublic employment, public education or public contracting.

Does that mean that preferential treatment,Affirmative Action, according to race, sex, color,

ethnicity or national origin is illegal in California?

8/11/2019 BusEth.3.17.14

9/459


Sexual Harassment--Definition

I- Qui pro Quo Harassment1. Unwelcome sexual advances or requests for sexual favorswhen submission to such conduct, implicitly or explicitly, is madea condition of employment.

2. 1. Unwelcome sexual advances or requests for sexual favorswhen submission to such conduct, implicitly or explicitly, is madea basis for employment decisions affecting an individual.

II -- Hostile Work Environment HarassmentRepeated sexual advances or sexual innuendos (this may involve,for example, raunchy jokes or lewd name calling) which interferewith an individuals work performance by creating a hostile,intimidating and/or offensive work atmosphere.textbook, pp. 118-119.

8/11/2019 BusEth.3.17.14

10/4510

Basic Legal Distinction Between Types ofWrongdoing: Crimes vs. Torts

CRIMES

1. A public wrong againstSociety.2. 'Plaintiff' (prosecutor) is

the state (offended person isusually a witness).3. Mostly statutory law.4. Prosecutor's burden ofproof: gui l ty beyond areasonable doubt.

5. Consent rarely a defense.6. No damages are necessary7. Basis for criminal guilt: anintentional act andsometimes gross negligence

or recklessness.

TORTS1. A private wrong againstindividuals or businesses.2. Plaintiff is an individual or

business.3. Mostly common law.4. Plaintiff's burden of proof:preponderance of

evidence.

5. Consent usually a defense.

6. Damages must be shown.7. Basis for tort liability: anintentional act, negligence(determined byreason able person standard).

8/11/2019 BusEth.3.17.14

11/4511

THE REASONABLE PERSON STANDARD

The reasonable person standard involves the legalfiction of the reasonable person. The reasonableperson

is not the average person.

Thereasonable person possesses the general

knowledge of the community at issue but necessarilyactsreasonably.

The reasonable person takes into account:the likelihood his/her act will cause harm to others.

the extent of the harm.the possibility of taking alternative actions of lesserrisk and harm.

8/11/2019 BusEth.3.17.14

12/45

12

Applying the Reasonable PersonStandard in Sexual Harassment Cases:

The Reasonable Woman Standard?

8/11/2019 BusEth.3.17.14

13/45

13

Ellison vs. Brady (1991, Ninth Circuit Court AppealsCase)

Kerry Ellison worked as a revenue agent for theInternal Revenue Service in San Mateo, California.During her initial training in 1984 she met SterlingGray, another trainee, who was also assigned to theSan Mateo office. The two co-workers never becamefriends, and they did not work closely together. . . .In June of 1986 when no one else was in the office,Gray asked Ellison to lunch. She accepted. Grayhad to pick up his son's forgotten lunch, so they

stopped by Gray's house. He gave Ellison a tour ofhis house.

8/11/2019 BusEth.3.17.14

14/45

14


Ellison alleges that after the June lunch Graystarted to pester her with unnecessary questionsand hang around her desk. On October 9, 1986,Gray asked Ellison out for a drink after work. Shedeclined, but she suggested that they have lunchthe following week. She did not want to have lunchalone with him, and she tried to stay away from theoffice during lunch time.

8/11/2019 BusEth.3.17.14

15/45

15


October 22, 1986 Gray handed Ellison a note hewrote on a telephone message slip which read:

I cried over you last night and I'm totally drainedtoday. I have never been in such constant term oil(sic). Thank you for talking with me. I could notstand to feel your hatred for another day.

When Ellison realized that Gray wrote the note, shebecame shocked and frightened and left the room.

8/11/2019 BusEth.3.17.14

16/45

16


Ellison asked a male co-worker to talk to Gray, to tellhim that she was not interested in him and to leave heralone. . . . on the following Monday, she started fourweeks of training in St. Louis, Missouri. Gray mailed her

a card and a typed, single-spaced, three-page letter. Shedescribes this letter as "twenty times, a hundred timesweirder" than the prior note.

8/11/2019 BusEth.3.17.14

17/45

17


Gray wrote, in part:

I know that you are worth knowing with or withoutsex.... Don't you think it odd that two people who have

never even talked together, alone, are striking off suchintense sparks ... I will [write] another letter in the nearfuture.

Explaining her reaction, Ellison stated: "I just thought he

was crazy. I thought he was nuts. I didn't know what hewould do next. I was frightened."

8/11/2019 BusEth.3.17.14

18/45

18

Ellison vs. Brady (1991, Ninth Circuit Court Appeals

Case) included in decision of Robert R. Beezer andAlex Kozinski, Circuit Judges:

We adopt the standard of a reasonable womanbecause a sex-blind reasonable person standard

tends to be male-biased and tends to systematicallyignore the experiences of women.

. . .

We reversethe district court's decision that Ellison did notallege a prima facie case of sexual harassment due

to a hostile working environment. . . .

8/11/2019 BusEth.3.17.14

19/45

19

Sexual Harassment--

Who

s Liable?

An employer --or its agents or supervisoryemployees -- is liable when it knew or shou ld haveknownof the conduct unless the employer canshow it took immediate and appropriate correctiveactions.

Under current law, its difficult for an employer to

claim lack of knowledge of offensive conduct, sinceif the employer had some knowledge of offensiveincidents, the employer was obligated to investigatethe reports.

8/11/2019 BusEth.3.17.14

20/45

20

Conflict of Interest Issues


8/11/2019 BusEth.3.17.14

21/45

21

Conflict of Interest Defined

A conflict of interest occurs when your judgmentor objectivity is compromised. The appearance of

conflict of interestwhen a third party could thinkyour judgment has been compromisedisgenerally considered just as damaging as an actualconflict.

Trevio and Nelson textbook, p. 123.

8/11/2019 BusEth.3.17.14

22/45

22

Conflict of Interest

QUESTION

Why do you think that potential

, that is,merely the appearance of conflict of interestis illegal and unethical, along with actual

conflict of interest?See Trevio and Nelson textbook,Why Is It an Ethical Problem?p. 126.

8/11/2019 BusEth.3.17.14

23/45

23


Overt Bribes or Kickbacks Subtle

Bribes

Influence Privileged Information

Trade Secrets Insider Trading


8/11/2019 BusEth.3.17.14

24/45

24

Conflict of Interest IssuesOvert Bribes or Kickbacks

and Subtle Bribes Defined

Overt Bribe: remuneration or valuable goods offered toperson(s) for favorable consideration in a futuretransaction. The remuneration or goods are outside ofthe work contract.

Overt Kickback: the payment of an additionalpercentage of cost, outside of the work contract, toperson(s) that are able to influence or control thesource of income.

Subtle 'Bribes': Gifts, outside the work contract, whichcreate a sense of preferentiality, indebtedness orfavoritism towards a client or vendor.Trevio and Nelson textbook, pp. 123-4.

8/11/2019 BusEth.3.17.14

25/45

25


InfluencePersonal conflict of interest

Your relationship with someone in itself canconstitute a conflict of interest. For example, if

youre in charge of purchasing corporateadvertising and your cousin or neighbor or collegefriend owns an advertising agency, it will beconsidered a conflict if you make the decision to

hire than firm. That doesn

t preclude the firm fromthe bidding, but it does preclude you from makingthe decision.

Trevio and Nelson textbook, p. 124.

8/11/2019 BusEth.3.17.14

26/45

26

Conflict of Interest IssuesInfluenceExamples

Personal Conflict of Interest throughInfluence: Jeffrey Skilling, president ofENRON, hired his girlfriend (later wife)for a salary of $600,000 per year.Skilling is currently serving a 24 yrs. 4

mos. prison sentence.

Company-wide Conflict of Interestthrough Influence:

The accounting firm, Arthur Andersen,compromised audits of ENRON tomaintain their consultant contractswith ENRON. Arthur Andersenvoluntarily surrendered its licenses topractice as C. P. A.

s in 2002.

Jeffrey Skilling and

wife, Rebecca,Carter in 2006.

8/11/2019 BusEth.3.17.14

27/45

27


Privileged Information

Trade Secrets

Unlike copyrights (ownedfor life of author + 50years), patents (owned 17 years) and trademarks(owned 10 years but renewable), t rade secrets last

as long as they can be kept secret. The formula forCoca-Cola, for example, is a legendary trade secret.The formula is not patented. It is owned by beingkept secret. Any formula, pattern, device or

compilation of information which gives a companyan advantage over its competitors can count as atrade secret. Employees who disclose such tradesecrets violate the confidentiality owed to theiremployers.

8/11/2019 BusEth.3.17.14

28/45

28


Privileged InformationInsider Trading -- Defined

The buying or selling of stocks or other securitiesby business insiders on the basis of informationthat has not yet been made public and is likely to

affect the price of the stock.

Shaw, William H. and Barry, Vincent, Moral Issues in Business, 11thEd. (Belmont,

CA: Wadsworth, 2010), p. 542.

8/11/2019 BusEth.3.17.14

29/45

29


Privileged InformationInsider Trading

Whos an Insider?

Corporate executives, directors, officers and otherkey employees are insiders.

Employees a company temporarily employs such asaccountants, lawyers, and contractors.



8/11/2019 BusEth.3.17.14

30/45

30


Privileged InformationInsider TradingWhos an Insider?

Non-insiders can still be prosecuted for insidertrading if theyre outsiders whove obtained their

information f rom an insiderwho breaches a legalduty to the corporation

s shareholders for personalgain or to show favor to friends.



8/11/2019 BusEth.3.17.14

31/45

31


Privileged Information

Insider TradingWho

s anInsider?How Martha Stewart Became an

Insider Trader

The CEO of ImClone Drugs, Dr. SamWaksal, found out, before it was madepublic, that the Food and DrugAdministration was not going to approvetheir new cancer drug. Waksal knew when

the news was released ImClone

s stockwould plummet. So Waksal quickly andquietly sold his stock in ImClone and toldhis father and daughter to do so as well.Shaw, William H. and Barry, Vincent, Moral Issues in

Business, 11thEd. (Belmont, CA: Wadsworth, 2010), p.

543.

8/11/2019 BusEth.3.17.14

32/45

32


Privileged InformationInsider TradingWhos an

Insider?How Martha Stewart Became

an Insider Trader

Dr. Waksal also told Martha Stewartwho sold her ImClone stock oneday before the FDA announced itsdecision. Since Waksal was aninsider, breaching his duty to

shareholders for personal gain,and Martha Stewart acted oninformation she obtained from him,she became an insider trader.

8/11/2019 BusEth.3.17.14

33/45

33


Privileged InformationInsider TradingWhats Wrong With It?

Conflict of of interest problem:Insiders or company associates financial gain

is made at the expense of the companys

shareholders.

Free trade problem:Insider information undermines the possibility

that outsider investors have an equal opportunity toresearch and prudently select investments.

8/11/2019 BusEth.3.17.14

34/45

34

Specific Workplace Issues:(Textbook, Chapter 4)

Main Areas (Continued):

> Use of Corporate Resources(pp. 131-136)> Blowing the Whistle (pp. 138-144)

U f C t R

8/11/2019 BusEth.3.17.14

35/45

35

Use of Corporate Resources

Use of Corpo rate Repu tat ion

Corporate Financial Resou rces

Prov id ing Honest Inform at ion

Trevio and Nelson textbook, pp. 131- 136.

U f C t R

8/11/2019 BusEth.3.17.14

36/45

36

Use of Corporate Resources Use of Corpo rate Repu tat ion1. Company letterheads should only be used for company

business.

2. Posting sensitive information about your boss or coworkeron social networking sites can be interpreted as youre

speaking as as employee of your company. As a resultdiscrimination and privacy issues arise.

3. Dealing with reporters. This is tricky business and shouldnt beattempted by a novice. What off the recordmeans: For the mostpart this means the reporter won

t quote you directly or attribute anyremarks to you. But, you cant tell a reporter that your remarks are offthe record after the fact. But the very best way to make sure that yourremarks are off the record is not give the information to the reporter.


U f C t R

8/11/2019 BusEth.3.17.14

37/45

37

Use of Corporate Resources Use of Corporate Financial ResourcesSimile II [a software company] provides an ethics game

entitled: Where Do You Draw the Line. One of thescenarios:

Which of the following is justifiable:

1. Taking $10 worth of pencils from your company anddistributing them to poor children.

2. Making $10 worth of long-distance calls at work.3. Taking $10 from the petty cash drawer.

Noneofthem.Thebottomlineisthatcorporate

equipmentandservicesshouldbeusedonlyforcompanypurposes.


U f C t R

8/11/2019 BusEth.3.17.14

38/45

38

Use of Corporate Resources Prov ing Honest Inform at ion

Issue often arises as managers feel it necessary to put apositive spin on financial reports.

Understand that putting a positive spin on financial data

can have serious consequences since senior managementmay make crucial decision based on flawed data.

Further, in the case of the manager wishing to delay

expenses until after he or she leaves the area, s/he notonly harms the person who is taking his place. It

sgrossly unfair to ask supplier to wait almost 60 extra daysbefore getting paid.


8/11/2019 BusEth.3.17.14

39/45

39

When All Else Fails:Blowing the Whistle

8/11/2019 BusEth.3.17.14

40/45

40

How to Blow the Whistle

1. Approach Your Immediate Manager First.(Generally do should bring up the issue a few

times if left unheeded at first. In a second

attempt, speel out your concerns in amemo.)

2. Discuss the Issue with Your Family.(Can affect your family as well as yourself.

Keep a diary of the activities related to theissue).

textbook, pp. 140- 144.

8/11/2019 BusEth.3.17.14

41/45

41

How to Blow the Whistle3. Take it to the next level.

(Even though theres been no satisfactionfrom your supervisor, generally a good ideato ask her/him if s/he

ll go with you to the

next level of management.)4. Contact Your Company

s Ethics Officer orOmbudsman. (Also find out your states

protections for whistle-blowers. SeeSarbanes Oxley legislation -- applies topublicly traded corporations. See MBE, p. 143)


8/11/2019 BusEth.3.17.14

42/45

42


5. Consider Going Outside Your Chain ofCommand. (Does issue apply to HumanResources? Internal auditors? Legal

department?6. Go Outside of the Company.(Contact regulators? Press? Understand

effect on whistle-blowers of False ClaimsAct; understand same by Dodd-Frank WallStreet Reform and Consumer ProtectionAct, (MBE, pp. 142-3)


8/11/2019 BusEth.3.17.14

43/45

43


7. Leave the Company.

(

Whistle-blowing is so stressful that in one

study, one-third of whistle-blowerssurveyed would advise other people not toblow the whistle at all.

MBE, p. 144.) But,what sort of situations might make leavingthe company not conscionable?

An alternative: find another job and then blowthe whistle.


8/11/2019 BusEth.3.17.14

44/45

8/11/2019 BusEth.3.17.14

45/45

1. slide # 26, photo of Jeffrey Skilling and his wife, Rebecca Carter:

www.usatoday.com/money/ industries/energy/2006...2. slides # 31 and 32, photo of Martha Stewart:

http://roccosrevolution.com/2011/01/31/martha-stewart-wasnt-put-on-this-earth-to-dance-

and-sing/

Documents

BusEth.3.17.14