Running head: PROFESSIONAL ETHICS Running head: 1

Professional Ethics
BIS 345
Lindsay Snowden
February 23, 2018
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Professional Ethics
Introduction

While running any business, large or small, corporate or local, presents many challenges,

among the most prominent aspects that define a company’s reputation can be its ethical

practices. Under the theory of utilitarianism, we are pressed to consider making a decision based

on how we can do the greatest good for the greatest number of people (Fryer, 2015). Do

businesses today ask themselves this question before they make decisions? Do they consider the

cost of any unethical behavior and the consequences it might have on their reputation? When

unethical decisions surface from within a company, there is bound to be a cloud of questions that

looms over chaos of poor decision making; the thought processes and reasoning will be

scrutinized. Because of this, there is an imperative necessity for companies to weigh their

decisions on the balance and scales of ethical standards.

Chosen Profession

In order to study how ethics function within a business, I’ve chosen to study Leadership

as a profession. Because I am currently in a leadership role in my workplace and intend to

continue into another leadership position after I leave my current company, this is a relevant field

in which for me to conduct research. Because leaders can heavily influence their organization,

learning about the impact of ethical decisions within a company will help me function as a more

knowledgeable, and balanced leader.

To become a balanced leader, it is important to consider Aristotle’s virtuous mean. He

mentions the importance of those in power not exploiting their authority, rather finding a moral

balance that avoids extremes (Fryer, 2015, pp. 178-182). Through this philosophy, it is suggested

that a company must do what it needs to survive while “treating those who are affected by
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corporate activity with consideration” (Fryer, 2015, p. 182). By the virtuous mean, leaders in

business can learn to balance the necessity to make decisions that help their business thrive and

exercise consideration.

Case Studies

Leadership in business is a highly visible profession. The choices of corporate leaders

live under a magnifying glass to the world and are easily scrutinized. Through leadership, you

can create community or destroy it; build a business or burn it to the ground; positively impact

lives, or harm them. Understanding the impact of ethical principles in a position of authority can

influence the success or failure of a leader.

As is evident in many corporate scandals around the globe, the decisions of a leader in

business can make or break a company. Often the most scandalous corporate failures deal in

ethical decision making, or the lack thereof. Here we will study the ethically charged situations

of four leadership case studies in which leaders were faced with ethical dilemmas that tested

their moral strength. In “The Wells Fargo banking Scandal”, an incredibly successful banking

company is caught creating fraudulent accounts, and the authorization of such misconduct is

traced back to corporate leaders. In “The Case of the Million Dollar Decision”, a leader is faced

with making the decision of expanding into a country that potentially functions on bribery.

Another leader, in “The Case of Bad News”, is faced with issues dealing with transparency

preceding an announcement about layoffs and reserving jobs for people in his own country. And

finally, “The Case of Plant Relocation” highlights thee ethical considerations of moving

companies overseas to countries with lower operating standards. Each of these case studies

provides an example of ethical behavior in a leadership role.

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Case Study 1: The Wells Fargo Banking Scandal

In 2016 Wells Fargo announced that it would be paying out $185 million dollars to

customers that were involved in the bank’s creation of millions of unauthorized accounts

(Markkula Center for Applied Ethics, 2017). This ethical dilemma occurred as the result of

pressure put on employees to meet to sales quotas and was exacerbated by large incentive and

bonus programs (Markkula Center for Applied Ethics, 2017). In the face of pressure from the

company to hit unreasonable goals, employees were asked to engage in unethical behaviors that

went against the morals and values of Wells Fargo Bank. Reportedly, many employees quit due

to these requests, and some were even fired for reporting it (Markkula Center for Applied Ethics,

2017). Though Wells Fargo maintains that this incident was due to “a few bad apples” (Markkula

Center for Applied Ethics, 2017), the issue remains that the bank not only engaged in unethical,

fraudulent activity, but they also tried to cover it up.

Because this dilemma focuses on business culture and how social contracts play a role in

ethical conduct within a business, I found it relevant to the importance of ethical decision making

in a leadership role. A leader can have such a profound impact on work culture and can set the

standard for the not only their employees, but an entire company as well. Leaders are looked to

as examples, and if they are not upholding the morals and values of a company, how can they

employees be expected to? This case study is a great example of how unethical behavior rolls

down the hierarchal chain in businesses. Not only did this behavior impact the employees at

Wells Fargo, but their company name and reputation as well. Additionally, it caught my attention

because though I did not collect money from the settlement, I was one of the millions of people

who had a fraudulent account activated under my name. Correlating ethics theories with this real
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life situation will help further the development of my own role as a leader by broadening my

understanding of the consequences of unethical business behavior on business culture.

Case Study 2: The Case of the Million Dollar Decision

In the hypothetical case of “The Million Dollar Decision”, Pegasus International, an

integrated circuits company, is contemplating expanding their market into China. At the time of

this decision-making milestone, it is the opportune time to move in as China has newly opened

its market for wireless internet. Tom Oswald, the CEO of Pegasus International, has been given

information that suggests “pay-offs” are required to obtain licenses in order to work in the cities

and districts. While his sources tell him that agents are contracted out to deal with the licenses

and “what contractors do is their own business” (Markkula Center for Applied Ethics, 2017),

Oswald is not comfortable with the possibility of committing a crime in order to expand into

another country. Because Pegasus International has been built on strong morals, impeccable

ethical standards, honesty and community, Oswald is not sure he wants to compromise his

company’s reputation for expansion. On the other hand, though, it could mean the loss of $100

million in business per year for the company. While no resolution is made at the end of the case

study, Oswald is left weighing the options of his decision.

I chose this ethical dilemma because it emphasizes the importance of ethical decision

making for leaders. While most of the case studies mention here involve some sort of ethical

decision making, this case study provides a clear and upfront dilemma that could realistically be

faced by a business leader. This case study forces a leader to consider the boundaries of ethics

and questions whether they are relative or absolute. At what cost does a corporate leader sacrifice

their ethical values for profit? While making the decision to move into China with the chance of

having to make pay-offs could go unnoticed, it could also cause problems not only legally, but
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for the company’s reputation as well if it were ever to come to light. Oswald, however, is on the

fence about this decision because of the company’s strong ethical reputation. He is forced to

consider what making an unethical decision at the cost of profits could do for company morale.

Aristotle would say to find a balance between profits and virtue; do what benefits the company,

but also consider the community (Fryer, 2015). What stood out to me though, is Oswald’s almost

unwavering desire to remain ethical despite the loss of business. The story truly emphasizes the

value of holding fast to the morals that reflect on your people, your reputation, and your

company.

Case Study 3: The Case of Bad News

In “The Case of Bad News”, George Anderson has just become the CEO of Astratech

Communications International (ACI). He quickly gets to work identifying the issues within the

company and working to resolve them. Coincidentally, around the time that George identifies the

issue of inadequate cost accounting, he receives a call from sales that a major partner is

withdrawing their “backlog” orders and partnering with a French company instead. George is

immediately faced with the dilemma of cutting costs. While he initially makes the decision to cut

everyone’s hours back to a 4-day work week, he eventually realizes his need to lay-off

employees when the 4-day work week just isn’t cutting it due to more companies withdrawing

their accounts from ACI. George decides to be transparent about the lay-offs and receives

backlash for it. Additionally, the media is questioning his decision to lay-off American workers

rather than those in branches of the company in other countries. Despite the hardship, a year later

ACI is flourishing and George feels confident in his decisions and his role with the company.

This case study stood out to me not only because George has to figure out how to

navigate adversity during his first year as CEO, but also because it raised the question of
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transparency. Understanding the importance of being a transparent leader and how to navigate

leading this way is vital to a leader’s reputation. While transparency is not always the answer, it

can help build trust within a company. Though George faced backlash for his transparency, in

the end there would have been backlash for a surprise lay-off as well. The decision to talk about

the lay-off up front (even before detailed were ironed out), would help George build a reputation

of a leader who is open and honest. Being transparent helps a leader to reflect on the ethical

grounds of the rights of others. If people have a right to work, they also have a right to know

when that work will be ending…especially if it is not anticipated.

George was under a lot of pressure his first year as CEO. I chose this article because of

my admiration for George to make tough decisions in tough moments that ultimately benefitted

his company. While ethical decisions may not always resonate with everyone, ultimately they

must be made, easy or not, with the survival of the company in mind. This is a valuable lesson as

a leader that the easy choice may not always be the right choice.

Case Study 4: The Case of Plant Relocation

In “The Case of Plant Relocation”, a chief executive of an “electrochip” manufacturing

company is faced with the various ethical dilemmas associated with moving the plant to another

country in order to cut costs. Along with considering cutting labor costs, the executive must

consider the implications of moving to a country where the standards for using and disposing of

toxic chemicals are lower than in the U.S. The three locations the executive is considering are

Mexico, the Philippines, and South Africa. Both in Mexico and the Philippines wages and health

and safety standards are lower. While in Mexico the residents attribute chemical use from plants

like this to cancer and birth defects, the Philippines do not. However, in both countries the

laborers complain about the living wage being too low and employee turnover is high. In South
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Africa, the minimum wage is slightly lower than that of the U.S. and the health and safety

standards are comparable. What the chief executive is faced with is the impact of their decision

to move to a country that may generate public backlash and have a negative impact on the

company’s public image. The ultimate question for the chief executive here is how much he

wants to compromise his ethical standards in order to positively impact profits for the company

and the shareholders?

I chose this ethical dilemma because it presented a clear question of whether profits or

ethics are more important. As Aristotle would suggest, there must be a balance (Fryer, 2015).

While there are an array of ethical theories that can justify or negate relocating a plant to another

company, Fryer (2015) suggests that it could boil down to the simplistic consideration of cultural

rights. He mentions that “although business activity has the potential to spread economic

development to impoverished communities…corporations should be sensitive to the potential of

their activities to undermine the cultural cohesiveness of those communities” (Fryer, 2015, p.

25). Though it is important to consider the cultural impact of a plant on a certain community, the

corporation must also keep their shareholders in mind. In this scenario, the shareholders are

calling for the plant relocation because profits have fallen due to a wage strike that resulted in

higher wages. The shareholder theory, as Fryer discusses, states that business executives have a

prime responsibility towards their shareholders to maximize profits as much as possible (2015, p.

364). While there is no standard operation for ethics, nor do businesses outline which of the

many ethics theories they should abide by specifically, there is one that brings balance to ethical

decision making: Aristotle’s virtuous mean. The chief executive in this case study must make a

decision about his company. While he could choose to harshly ignore culture and move to a

country without consideration of the consequences, or he could choose to starkly ignore his
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responsibility to the stakeholders, his best course of action would be to find a balance which

considers both profitability and cultural respect. Through the virtuous mean, this balance can be

achieved. The ability of a leader to weigh options in terms of both ethics and profit is a necessary

characteristic and an honorable trait of a balanced leader.

Ethical Behavior in Leadership

Ann Skeet, the director of leadership ethics at the Markulla Center for Applied Ethics

mentions that ethical decision making in leadership roles can be a reflection of “personal

leadership—people’s character and values and how they “show up” in life which,” she says, “is

central to the way they are able to have an impact as leaders” (Skeet, 2018). These case studies

not only provide evidence that ethical decisions in leadership can define one’s character, but also

the reputation of the company that they lead. The ethical decisions that leaders will make will

speak to who they are, and what their company stands for as well. In a profession where actions

and choices are transparent to subordinates, higher-up’s, and the public, it is necessary to weigh

and consider the impact of ethical situations, and make decisions that are honest and balanced.

One ethical theory that is significant in making balanced ethical decisions (besides

Aristotle’s virtuous mean) is the theory of ethical relativism. This theory, in contrast to

absolutism which suggests that if an ethical choice is the correct one where I am from, then it is

the correct one for everyone (Fryer, 2015, p. 214), “draws attention to variations in ideas about

right and wrong, suggesting that what is right in one place, may not be right in another” (Fryer,

2015, p. 2015). Relativism allows for anyone engaged in ethical decision to apply the ethical

theory that is most relevant to the situation. Rather than stubbornly approaching all situations

with the same rigid ethical standard, it is important to consider an eclectic ethical viewpoint in

order to make a balanced decision. Under this umbrella, all ethical theories may be considered
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and applied as necessary. For example, as mentioned previously, considering the rights of the

people within a community affected by corporate activity as well as the rights of the shareholders

(and a corporation’s responsibility to each). Making a decision based rigidly on the “shareholder

theory” or the “human rights theory” alone might exclude justice towards one group or the other.

It’s important to consider a variety of ethical resolutions to make the most sound decision.

Ultimately, all ethical theories are important in business because business activity affects

a multitude of people both within a company, and without. It is the balance of those theories in

decision making that will make the true difference.

Conclusion

In conclusion, studying the impact of ethical decision making in leadership roles can lead

to a greater understanding of how ethics can not only impact a company in a variety of ways, but

also speak to the credit of a leader themselves. With ethical case study examples of leaders who

were faced ethically charged scenarios, made ethically immoral decisions, and withstood

backlash for making the right choice in a tough situation, it is easy to see the vast impact leaders

can have in their field.

Importantly, as Ann Skeet (2018) points out, “Culture is an important element in how

people will behave in their organizational roles, so leaders have an opportunity, as they're

creating an organization in its earliest days, to establish ethical ways of doing things that are

baked into the organization's future life and practices”. Leaders will pave the way, set the

standard, and be the example of ethical practices within an organization; they hold an influential

power that can drive a business and its people to success, or to downfall. Consequently,
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understanding the impact of ethical decision making and the importance of striking an ethical

balance cannot be undervalued.

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References

Fryer, M. (2015). Ethics theory & business practice. Los Angeles: Sage.

Amelio, G. (1999, April 1). The Case of Bad News. Retrieved February 10, 2018, from

https://www.scu.edu/ethics/focus-areas/business-ethics/resources/the-case-of-bad-news/

Markkula Center for Applied Ethics (2017, May 10). Wells Fargo Banking Scandal. Retrieved

January 25, 2018, from https://www.scu.edu/ethics/focus-areas/business-

ethics/resources/wells-fargo-banking-scandal/

Markkula Center for Applied Ethics (1998, April 1). The Case of the Million-Dollar Decision.

Retrieved February 10, 2018, from https://www.scu.edu/ethics/focus-areas/business-

ethics/resources/the-case-of-the-million-dollar-decision/

Musalo, Karen. (2001, January 1). The Case of Plant Relocation. Markkula Center for Applied

Ethics. Retrieved February 18, 2018, from https://www.scu.edu/ethics/focus-

areas/business-ethics/resources/the-case-of-plant-relocation/

Skeet, Ann. (2018). What Is Leadership Ethics? Retrieved February 21, 2018, from

https://www.scu.edu/ethics/focus-areas/leadership-ethics/