"We become the choices that we make," declared the Saint Thomas
Aquinas quote projected onto a screen in the front left corner
of the room. It was there for the start of the third meeting of
adjunct professor Bonnie Fremgen's Introduction to Business Ethics
class. And if any of the sophomores in the lecture room suspected
it meant she was expecting them to make tough choices that day,
they were right.
About 10 minutes and four transparencies past Aquinas, Fremgen
asked the class to find a page in their course packets with brief
descriptions of six ethical dilemmas. She divided the students
into small groups and assigned each a scenario. Their job: Figure
out the ethically correct course of action and explain their reasoning.
They had five minutes.
In one of the scenarios, a student assigned to a team project
kept missing the group's meetings and wasn't sharing equally in
the work load. As usual, the arrangement was that everyone in
the group would receive the same grade, based on the quality of
their joint final report. What, if anything, were the diligent
students to do about the shirker?
There was quick agreement among the class members: Talk to the
person, reason with him or her, and if that didn't work, appeal
to the professor. Fremgen, who has taught introductory business
ethics for seven years, smiled and nodded indulgently.
"And what is the professor going to say -- that you have to
work it out for yourselves, you're going to be working all the
time with people who don't pull their weight." She eventually
conceded that in the interest of justice there needed to be a
way for the instructor to judge who had done what on the project.
In another scenario a student had received a job offer and was
being pressed to make a decision. The student accepted the offer.
Then an offer arrived from the company the student preferred to
work for. Would it be ethical to renege and take the second job?
The students said yes. They said that by pressuring the student
for a decision, the first employer was engaging in "ethical egoism,"
a concept discussed earlier in class. It means always putting
one's own interests first.
Fremgen suggested an alternative perspective: What if the student's
behavior gave the first employer the impression that graduates
of this school were not to be trusted? What if the company stopped
or curtailed recruiting from the school because of this? In that
case, one person acting in his own self-interest might indirectly
harm many other unseen "stakeholders."
Or not. The point was, it's something to think about.
In the wake of Enron, WorldCom, Tyco, Adelphia and other widely
publicized corporate scandals of the past few years, the public
may be wondering what business schools have been teaching people
lately. Fremgen's class is an example of what goes on -- and has
gone on for decades -- at Notre Dame.
The five-week, one-credit course represents a kind of ethics
boot camp. It's not so much a look at fraudulent expense accounting,
tax-law loopholing and other nefarious business practices -- other
courses do that. It's about stepping back from everyday business
concerns and asking, in the words of the author of the course
textbook, Joseph R. DesJardins '80Ph.D., "What kind of person
should I be? What should I do? What kind of life will I live?"
If that sounds like catechism, well, this is a Catholic university.
But beyond Notre Dame's faith traditions, an emphasis on ethical
decision-making has become recognized as a hallmark of the Mendoza
College of Business. Earlier this year a survey of corporate recruiters
conducted by the Wall Street Journal and Harris Interactive
placed the Notre Dame MBA program among the top five nationally
for producing graduates perceived as having high ethical standards.
Spend any time in Notre Dame's business school and it's clear
that ethics is more than some politically correct nicety tacked
onto the curriculum. Essentially every course the college teaches
has some ethical dimension to it, but several focus specifically
on the discipline. In addition to the introductory course -- which
this past fall became mandatory for all sophomores who have declared
themselves business majors -- undergraduates can take a junior-level
course on ethical issues in such specific business specialties
as accounting and marketing. A special field project gives seniors
the opportunity to work for and report on the charitable efforts
of social service agencies.
Nine ethics courses have been designed for MBA students, including
Catholic Social Thought in Business and Corporate Ethics Statements.
MBAs are required to take the introductory foundations course
and at least one more. Among the many ethics courses offered outside
the business school is one in theology titled Corporate Conscience.
The various teaching and research efforts in business ethics
are coordinated by the college's Center for Ethics and Religious
Values in Business, founded in 1978, and the 2-year-old Institute
for Ethical Business Worldwide.
During the past two spring semesters, Lizzadro Professor of
Accountancy Tom Frecka has presented a five-week symposium on
the business and accounting issues associated with the collapse
of Enron, the giant energy-trading company. This spring he's teaching
a new course on how to investigate and uncover accounting fraud.
The business college has an Ethics Week, a Sophomore Ethics
Day and a lecture series named for Cardinal John O'Hara, first
dean of the business college and a former Notre Dame president,
that brings senior executives to campus to speak throughout fall
semester. Some business schools have started inviting convicted
white-collar criminals in to describe their misdeeds and consequences
to students in a sort of "scared straight" with neckties approach.
Notre Dame has opted for exemplars of good behavior.
"Ours is more of the role-model approach," says Patrick E. Murphy
'70, a professor of marketing and the C.R. Smith II co-director
of the Institute for Ethical Business Worldwide.
The college publishes its own monthly ethics newsletter, Value
Lines, now in its 28th year. September's issue featured results
from a survey of employees on workplace dishonesty, a prayer to
say before beginning work, and inspirational quotes from, among
others, comic actor, writer and director Albert Brooks. ("It's
better to be known by six people for something you're proud of
. . . than by 60 million for something you're not.")
The prodding even extends past commencement. For the past two
semesters, the college has offered MBA alums a free, online course
called Spirituality of Work to reflect on values and ideas about
work and spirituality and to integrate personal beliefs into daily
life. More than 120 alumni have requested to take the class, which
can accommodate only 35 per semester.
"This is a defining characteristic of Notre Dame. It's not just
some marketing strategy," Dean Carolyn Woo said of the college's
emphasis on values, community and integrity in an interview last
year with the Chicago Tribune. Woo also serves as chair
of the Association to Advance Collegiate Schools of Business International,
a major business school accrediting organization. The association
recently increased its emphasis on ethics in the standards schools
must meet to receive accreditation.
Woo insists Notre Dame isn't out to teach students right from
wrong. "That started when they were 2 years old -- we are past
that stage." And she says students already recognize unethical
behavior when they read about it.
"The difference is, knowing and caring do not always lead to
doing. Knowing what other people should do is very different from
what we, ourselves, should do."
"What we're trying to accomplish in our classes is for people
to have better peripheral vision, to have their antennas up higher
and be aware of ethical issues," says Murphy, the marketing professor
and ethics institute director. "We give them more background if
we can't give them more backbone."
Introductory courses like Fremgen's and the similar one taught
to MBA students try to lay a foundation for ethical reasoning
so that when students are faced with a tough decision or are put
in an uncomfortable position, they have a system to refer back
to for choosing the best course.
Make that systems, because even a cursory review of business
ethics reveals the field to be anything but one-dimensional. In
addition to "ethical egoism," there are constructs like utilitarianism
(choose the course of action that produces the greatest good for
the greatest number of people) and duty-based ethics, most famously
promoted by philosopher Immanuel Kant in his "categorical imperative."
Kant's principles include the notion that one should refrain from
doing anything that would lead to problems if everyone else were
to do it. For example, if everyone thought it was okay to cut
in line, anarchy would result.
Business ethics can't, however, be simplified down to one sentence:
"Obey the law." As DesJardins points out in his textbook, laws
aren't always ethical. Slavery was once legal. Likewise, double-dealings
like "creative accounting" can be used to meet the letter of a
law while defeating its obvious purpose.
Business ethics Notre Dame-style does tend to echo Catholic
social teaching. Beyond obeying laws and refraining from lying
and cheating, an imperative seems to exist to work to make the
world a more just and humane place. Students are taught, for instance,
that the subsidies developed countries pay to protect their own
farmers' markets can deny people in poor countries the chance
to compete in the export market and improve their lives.
In his Conceptual Foundations of Business Ethics course for
MBA students, George Enderle, the O'Neil Professor of International
Business Ethics, points out that in some Third World countries
it's customary to bribe government officials to evade pollution
laws. But is it ethical to endanger the health of employees and
people living near the plants? What if the people willingly tolerate
the environmental harm in return for jobs?
Business ethics teaches consideration for all parties affected
by a decision, and that list is typically a long one, embracing
stockholders, employees, creditors, local government, neighbors,
unions, suppliers, distributors. Often interests conflict.
Anyone studying ethics today will be exposed to the case of
Malden Mills. The family-owned company in Lawrence, Massachusetts,
an economically depressed city near the New Hampshire border,
manufactured Polartec fleece, used in high-quality outdoor apparel
by such companies as L.L. Bean and Land's End. In 1995 a fire
destroyed its plant.
The owners might have taken the opportunity to move manufacturing
out of the country to reduce labor costs and taxes -- as many
of its competitors had -- or they simply could have pocketed the
insurance money and quit the business. Instead, President Aaron
Feuerstein, grandson of the company's founder, pledged to rebuild
the plant at the same location. And in a stunning announcement,
he promised to continue to pay his 1,200 employees while the mill
was being rebuilt and to let them keep their medical insurance.
Feuerstein's generosity drew national media attention and much
praise. Here was a business manager willing to sacrifice personal
wealth for the welfare of his employees and community. But some
critics called his actions irresponsible, saying a manager's responsibility
was to maximize profits.
In DesJardins' view, the lesson to be drawn isn't that everyone
should aspire to be as magnanimous as Aaron Feuerstein, whom,
it must be noted, didn't have thousands of shareholders to answer
to because the company was privately held. Rather, Feuerstein
demonstrated that the manager of a business can step back and
consider alternatives beyond those dictated by the profit-maximization
model.
Another widely discussed issue in business ethics involves AIDS
and Africa. Father Oliver Williams, CSC, '61, '69M.A., director
of the Center for Ethics and Religious Values and an associate
professor of management, tells of how he was approached by executives
of the global pharmaceuticals company Merck.
Merck produces the so-called triple cocktail of drugs that effectively
combats HIV. An estimated 29.4 million people in sub-Saharan Africa
are infected with HIV, but the vast majority are too poor to purchase
Merck's medicines.
The priest, who studies how ethics of virtue might inform the
ethical conduct of managers, says there was no easy answer. Withholding
the medicine would be a death sentence to those infected. Giving
the drug away would probably bankrupt the company. It wouldn't
work, either. Effective treatment, he says, depends on timing
and calculating dosages of the medicines according to patients'
T-cell counts. The countries involved lacked clinics and trained
professionals to manage the regimens.
Williams says Merck decided it couldn't help everyone but could
possibly help a single country. It settled on Botswana, where
35 percent of the population is HIV positive. An arrangement was
worked out so that country's government will provide funds to
train paramedics. The Gates Foundation and Merck have agreed to
donate $100 million for clinics and educational outreach. Merck
will provide the medicines.
Williams is currently serving as a visiting professor at the
University of Cape Town and Stellenbosch University in South Africa,
and there AIDS is no less a dilemma for employers. The infection
rate in South Africa is 15 to 20 percent, and the unemployment
rate is 35 percent. As a result, employers who don't require skilled
labor have a choice: They can pay for the medicines their infected
employees need to live. Or they can let workers die, knowing that
thousands of replacements are readily available.
Williams says that on his final exam he asks his South African
MBA students what they would do if they owned a mid-size company
with limited financial resources.
"They're not graded on the answer they give but on the thought
process," the priest says.
Making ethical decisions is one thing, but speaking out against
unethical behavior in one's workplace is something else. In a
national survey reported in Value Lines, 54 percent of
employees said they had witnessed specific ethical or policy violations,
yet 65 percent of those aware of such activities said they'd decided
to keep their mouths shut.
In a separate study Woo cites, a majority of MBAs surveyed said
that if they encountered unethical behavior at their workplace
they would leave the company rather than fight for change.
"That's not a good thing," the dean says, "because change has
to come from within."
The Sarbanes-Oxley Act of 2002, which aims to curb corporate
fraud, includes protection for whistle-blowers who lawfully disclose
information about their employer as part of a fraud investigation.
But Woo says Notre Dame isn't trying to train people to go running
to police or the media when they witness wrongdoing at work. That's
because whistle-blowing can be an act of vengeance. Plus it would
hardly meet the utilitarian ethical ideal to drive a company out
of business and cost everyone, including the virtuous, their jobs
if effective alternatives were available. Better to cure the disease
without killing the patient.
Evidence suggests that employers now place a premium on hiring
employees well-grounded in ethics -- good news for Notre Dame
students, given the school's reputation. In a Wall Street
Journal/Harris Interactive survey reported last fall, 84
percent of recruiters said personal ethics and integrity were
very important attributes in job candidates. Recruiters told the
paper they feel they can detect unethical people by, among other
methods, observing body language in job interviews, checking character
references and scrupulously examining resumes.
So maybe being ethical can help land you a job, but experts
acknowledge that ethical decision-making doesn't guarantee financial
success.
"If ethical behavior always paid," Harvard Business School Professor
Richard Tedlow said in a 2002 article in USA Today, "everyone
would always be ethical."
In his O'Hara Lecture in September, Ethan Allen Interiors CEO
Farooq Kathwari told the audience, "People have to know that doing
something good is better than doing something big in a mediocre
way, or doing something unethical, because you're never going
to be happy. You're always going to be looking over your shoulder."
Kathwari is a Muslim from the disputed Kashmir province of India
who has worked to promote peace in the region while successfully
reinventing the retailer's early American image to be more contemporary.
But however much praise an ethical business manager receives,
the business must still turn a profit. After reading about Aaron
Feuerstein's largesse, the sophomores in Bonnie Fremgen's class
wanted to know what had become of him. Answer: He lost his company.
Malden Mills emerged from its second term in bankruptcy last October,
nearly two years after filing for protection from creditors. The
creditors hold four of the seven seats on the company's board
of directors; Feuerstein
has one of the other three. He holds a 5 percent stake in the
Malden Mills but has been trying to buy back a controlling interest
and keep the company in Lawrence.
Woo says she is sometimes asked by students, "'If you're a nice
guy, don't you have to pay?" Feuerstein's plight suggests that
in the competitive world of business, at least, you do. But the
dean answers with a question: "What is it you don't have to pay
for? What sacrifices are you willing to make to be true to your
values?"
(January 2004)
