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Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netEIGHTH EDITIONShawBusiness EthicsWilliam H. ShawValueSavings(get free stuff)(publisher-direct prices)Visit CengageBrain.com to find. . .Textbooks  • Rental • eBooks • eChaptersStudy Tools  •  Best Buy PackagesVisit http://go.cengage.com/infotrac to learn more.To learn more about Wadsworth, visit www.cengage.com/wadsworthPurchase any of our products at your local college store or at ourpreferred online store www.cengagebrain.com43075_cvr_ptg01_hires.indd 1EIGHTH EDITIONInfoTrac® This textbook includes access to a specialized InfoTrac® collection of journalarticles and reference materials uniquely matched to accompany this book.Business EthicsChoice(pick your format)EIGHTH EDITIONBusiness EthicsWilliam H. ShawSE/Shaw, Business Ethics, 8th Edition   ISBN -978-1-133-94307-5  ©2014  Designer: PMGText & Cover printer: XXX   Binding: PB   Trim: 7.375" x 9.125"   CMYK16/08/12 5:46 PMDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netBusiness Ethics8the di t i o nDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netBusiness Ethics8the di t i o nW i l l i a m H . ShawS a n J o s e S t a t e Un i ve r s i t yAustralia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United StatesDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netBusiness Ethics, Eighth EditionWilliam H. ShawPublisher/Executive Editor: Baxter ClarkAcquisitions Editor: Joann KozyrevDevelopment Editor: Daisuke YasutakeAssistant Editor: Joshua DuncanEditorial Assistant: Marri Straton© 2014, 2011, 2008 Wadsworth, Cengage LearningALL RIGHTS RESERVED. 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AdamsRights Acquisitions Specialist: Mandy GroszkoManufacturing Planner: Sandee MilewskiArt and Design Direction, Production Management,and Composition: PreMediaGlobalFor product information and technology assistance, contact us atCengage Learning Customer & Sales Support, 1-800-354-9706.For permission to use material from this text or product,submit all requests online at www.cengage.com/permissions.Further permissions questions can be emailed topermissionrequest@cengage.comCover Image: ©Paul Price/getty imagesLibrary of Congress Control Number: 2012945758ISBN-13: 978-1-133-94307-5ISBN-10: 1-133-94307-1Wadsworth20 Channel Center StreetBoston, MA 02210USACengage Learning is a leading provider of customized learning solutionswith office locations around the globe, including Singapore, the UnitedKingdom, Australia, Mexico, Brazil, and Japan. Locate your local office atinternational.cengage.com/region.Cengage Learning products are represented in Canada by NelsonEducation, Ltd.For your course and learning solutions, visit www.cengage.com.Purchase any of our products at your local college store or at our preferredonline store www.cengagebrain.com.Instructors: Please visit login.cengage.com and log in to access instructorspecific resources.Printed in the United States of America1  2  3  4  5  6  7  16  15  14  13  12Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netContentsPreface  ixpa rt on e | mor a l ph i l osoph y a n d busi n e s s   1Chapter 1 The Nature of Morality  1Ethics  3Moral versus Nonmoral Standards  5Religion and Morality  10Ethical Relativism  13Having Moral Principles  15Morality and Personal Values  19Individual Integrity and Responsibility  20Moral Reasoning  24Study Corner  30Case 1.1: Made in the U.S.A.—Dumped in Brazil, Africa, Iraq . . .  31Case 1.2: Just Drop off the Key, Lee  34Case 1.3: The A7D Affair  37Chapter 2 Normative Theories of Ethics  40Consequentialist and Nonconsequentialist Theories  42Egoism  43Utilitarianism  46Kant’s Ethics  53Other Nonconsequentialist Perspectives  59Utilitarianism Once More  66Moral Decision Making: A Practical Approach  68Study Corner  70Case 2.1: Hacking into Harvard  71Case 2.2: The Ford Pinto  74Case 2.3: Blood for Sale  77Chapter 3  Justice and Economic Distribution  80The Nature of Justice  83The Utilitarian View  86The Libertarian Approach  90Rawls’s Theory of Justice  97vDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netvi CONTENTSStudy Corner  106Case 3.1: Eminent Domain  107Case 3.2: Battling over Bottled Water  109Case 3.3: Poverty in America  111pa rt t wo | A m e r ic a n Busi n e s s a n d I ts B a sis   114Chapter 4 The Nature of Capitalism  114Capitalism  116Key Features of Capitalism  119Two Arguments for Capitalism  121Criticisms of Capitalism  125Today’s Economic Challenges  133Study Corner  139Case 4.1: Hucksters in the Classroom  140Case 4.2: Licensing and Laissez Faire  142Case 4.3: One Nation under Walmart  144Case 4.4: A New Work Ethic?  147Case 4.5: Casino Gambling on Wall Street  148Chapter 5 Corporations  150The Limited-Liability Company  152Corporate Moral Agency  154Rival Views of Corporate Responsibility  158Debating Corporate Responsibility  164Institutionalizing Ethics within Corporations  169Study Corner  176Case 5.1: Yahoo! in China  177Case 5.2: Drug Dilemmas  179Case 5.3: Levi Strauss at Home and Abroad  182Case 5.4: Free Speech or False Advertising?  186Case 5.5: Charity to Scouts?  188pa rt THREE | busi n e s s AND SOCIETY  191Chapter 6 Consumers  191Product Safety  193Other Areas of Business Responsibility  205Deception and Unfairness in Advertising  214The Debate over Advertising  224Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netcONTENTS      viiStudy Corner  227Case 6.1: Breast Implants  229Case 6.2: Hot Coffee at McDonald’s  231Case 6.3: Sniffing Glue Could Snuff Profits  232Case 6.4: Closing the Deal  234Case 6.5: The Rise and Fall of Four Loko  236Chapter 7 The Environment  239Business and Ecology  242The Ethics of Environmental Protection  246Achieving Our Environmental Goals  251Delving Deeper into Environmental Ethics  256Study Corner  264Case 7.1: Hazardous Homes in Herculaneum  265Case 7.2: Poverty and Pollution  267Case 7.3: The Fordasaurus  269Case 7.4: The Fight over the Redwoods  270Case 7.5: Palm Oil and Its Problems  273PART F OUR | THE ORG ANI Z ATIONAND THE PEOPLE IN IT  276Chapter 8 The Workplace (1): Basic Issues  276Civil Liberties in the Workplace  277Hiring  283Promotions  289Discipline and Discharge  291Wages  295Labor Unions  298Study Corner  307Case 8.1: AIDS in the Workplace  308Case 8.2: Web Porn at Work  310Case 8.3: Speaking Out about Malt  311Case 8.4: Have Gun, Will Travel . . . to Work  312Case 8.5: Union Discrimination  314Chapter 9 The Workplace (2): Today’s Challenges  316Organizational Influence in Private Lives  317Testing and Monitoring  323Working Conditions  329Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netviii CONTENTSRedesigning Work  337Study Corner  341Case 9.1: Unprofessional Conduct?  342Case 9.2: Testing for Honesty  344Case 9.3: She Snoops to Conquer  346Case 9.4: Protecting the Unborn at Work  348Case 9.5: Swedish Daddies  351Chapter 10  Moral Choices Facing Employees  353Obligations to the Firm  354Abuse of Official Position  358Bribes and Kickbacks  364Gifts and Entertainment  368Conflicting Obligations  370Whistle-Blowing  372Self-Interest and Moral Obligation  377Study Corner  381Case 10.1: Changing Jobs and Changing Loyalties  382Case 10.2: Conflicting Perspectives on Conflicts of Interest  383Case 10.3: Inside Traders or Astute Observers?  384Case 10.4: The Housing Allowance  386Case 10.5: Ethically Dubious Conduct  388Chapter 11  Job Discrimination  390The Meaning of Job Discrimination  393Evidence of Discrimination  394Affirmative Action: The Legal Context  399Affirmative Action: The Moral Issues  404Comparable Worth  408Sexual Harassment  410Study Corner  414Case 11.1: Minority Set-Asides  415Case 11.2: Hoop Dreams  417Case 11.3: Raising the Ante  419Case 11.4: Consenting to Sexual Harassment  420Case 11.5: Facial Discrimination  423Suggestions for Further Re ading  425Notes  429Inde x  449Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netPrefaceIt is difficult to imagine an area of study that has greater importance to society or greater relevance tostudents than business ethics. As this text enters its eighth edition, business ethics has become a wellestablished academic subject. Most colleges and universities offer courses in it, and scholarly interestcontinues to grow.Yet some people still scoff at the idea of business ethics, jesting that the very concept is an oxymoron.To be sure, recent years have seen the newspapers filled with lurid stories of corporate misconduct andfelonious behavior by individual businesspeople, and many suspect that what the media report representsonly the proverbial tip of the iceberg. However, these scandals should prompt a reflective person not tomake fun of business ethics but rather to think more deeply about the nature and purpose of business inour society and about the ethical choices individuals must inevitably make in their business and professional lives.Business ethics has an interdisciplinary character. Questions of economic policy and businesspractice intertwine with issues in politics, sociology, and organizational theory. Although business ethicsremains anchored in philosophy, even here abstract questions in normative ethics and political philosophymingle with analysis of practical problems and concrete moral dilemmas. Furthermore, business ethics isnot just an academic study but also an invitation to reflect on our own values and on our own responses tothe hard moral choices that the world of business can pose.•••Goals, Organization, and TopicsBusiness Ethics has four goals: to expose students to the important moral issues that arise in variousbusiness contexts; to provide students with an understanding of the moral, social, and economic environments within which those problems occur; to introduce students to the ethical and other concepts that arerelevant for resolving those problems; and to assist students in developing the necessary reasoning andanalytical skills for doing so. Although the book’s primary emphasis is on business, its scope extends torelated moral issues in other organizational and professional contexts.The book has four parts. Part One, “Moral Philosophy and Business,” discusses the nature of moralityand presents the main theories of normative ethics and the leading approaches to questions of economicjustice. Part Two, “American Business and Its Basis,” examines the institutional foundations of business,focusing on capitalism as an economic system and the nature and role of corporations in our society. PartThree, “Business and Society,” concerns moral problems involving business, consumers, and the naturalenvironment. Part Four, “The Organization and the People in It,” identifies a variety of ethical issues andmoral challenges that arise out of the interplay of employers and employees within an organization, including the problem of discrimination.Case studies enhance the main text. These cases vary in kind and in length, and are designed toenable instructors and students to pursue further some of the issues discussed in the text and to analyzethem in more specific contexts. The case studies should provide a lively springboard for classroom discussions and the application of ethical concepts.Business Ethics covers a wide range of topics relevant to today’s world. Three of these are worthdrawing particular attention to.ixDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netx PrefaceBusiness and GlobalizationThe moral challenges facing business in today’s globalized world economy are well represented in the bookand seamlessly integrated into the chapters. For example, Chapter 1 discusses ethical relativism, Chapter4 outsourcing and globalization, and Chapter 8 overseas bribery and the Foreign Corrupt Practices Act; andthere are international examples or comparisons throughout the book. Moreover, almost all the basic issuesdiscussed in the book (such as corporate responsibility, the nature of moral reasoning, and the value of thenatural world—to name just three) are as crucial to making moral decisions in an international businesscontext as they are to making them at home. In addition, cases 1.1, 2.3, 5.1, 5.2, 5.3, 6.3, 7.2, 7.5, 9.5,and 10.4 deal explicitly with moral issues arising in today’s global economic system.The EnvironmentBecause of its ongoing relevance and heightened importance in today’s world, an entire chapter, Chapter7, is devoted to this topic. In particular, it highlights recent environmental disasters, the environmentaldilemmas and challenges we face, and their social and business costs, as well as the changing attitude ofbusiness toward the environment and ecology.Health and Health CareFar from being a narrow academic pursuit, the study of business ethics is relevant to a wide range ofimportant social issues—for example, to health and health care, which is currently the subject of muchdiscussion and debate in the United States. Aspects of this topic are addressed in the text and developed inthe following cases: 2.3: Blood for Sale, 4.2: Licensing and Laissez Faire, 5.2: Drug Dilemmas, 6.1: BreastImplants, 8.1: AIDS in the Workplace, and 9.4: Protecting the Unborn at Work.•••Changes in this EditionYour TextbookInstructors who have used the previous edition will find the organization and general content of the bookfamiliar. They will, however, also be struck by its fresh design and by the graphs, tables, photographs, andother information that now supplement the pedagogical features introduced in previous editions.Feedback from students and instructors suggests that readers benefit greatly not only from marginalsummaries and highlights but also from visual breaks, visual guidance, and visual presentation of data andinformation. So, the new design was crafted to help readers navigate the text more easily, retain contentmore effectively, and review and prepare for tests more successfully. In addition, the Study Corner nowalso includes “For Further Reflection,” a set of open-ended questions intended to help students articulatetheir own response to some of the issues discussed in the text. An updated Suggestions for FurtherReading is intended to provide appropriate material for independent research by students on topics covered in Business Ethics.The text itself has been thoroughly revised. I have updated and reorganized material throughout thebook in order to enhance the clarity of its discussions and the accuracy of its treatment of both philosophical and empirical issues. At all times the goal has been to provide a textbook that students will find clear,understandable, and engaging.Forty-nine case studies—more than ever before—now supplement the main text. Of the casesthat are new to this edition, two relate to the financial and mortgage industries: Case 1.2, “Just Drop Offthe Key, Lee,” broaches the ongoing foreclosure crisis while Case 4.5, “Casino Gambling on Wall Street,”discusses one of the financial instruments involved in the recent financial meltdown. Case 4.1, “HuckstersDownloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netPreface      xiin the Classroom,” deals with commercial intrusion into schools. The ethics of sales is the focus of Case6.4, “Closing the Deal,” while Case 6.5, “The Rise and Fall of Four Loko,” highlights the question of regulating consumer products on paternalistic grounds. Case 8.5, “Union Discrimination,” examines some ofthe ethical issues posed by unions. The environment and the push and pull between business and environmentalists are well illustrated in Case 7.5, “Palm Oil and Its Problems.” Case 9.5, “Swedish Daddies,”shows how the sometimes conflicting demands of parenthood and work life challenge today’s employeesand employers. Cases 10.2, “Conflicting Perspectives on Conflicts of Interest,” and 10.3, “Inside Tradersor Astute Observers?,” provide recent examples of some of the ethical struggles employees can confront.Finally, the issue of comparable worth is the focus of Case 11.3, “Raising the Ante.”Your Media ToolsThe Business Ethics CourseMate is new to this edition. It can be accessed by searching for this book onCengageBrain.com. There you will find an array of online tools designed to reinforce theories and conceptsand help students to understand and better retain the book’s content, and to review and study for tests:Self-TestsTutorial Quizzes (with answers)EssaysFlashcardsCurrent EventsGlossaryPowerPoint SlidesWeb LinksIn addition to these CourseMate offerings, video tutorials will complement each chapter. Watching andreflecting on these can help students improve their grades.Finally, Global Business Ethics Watch exposes viewers to a wealth of online resources, from photographs to videos and articles. Updated several times a day, the Global Business Ethics Watch is an idealone-stop site for classroom discussion and research projects for all things related to business ethics. You andyour students will have access to the latest information from trusted academic journals, news outlets, andmagazines. You also will receive access to statistics, primary sources, case studies, podcasts, and much more.•••Ways of Using the BookA course in business ethics can be taught in a variety of ways. Instructors have different approaches tothe subject, different intellectual and pedagogical goals, and different classroom styles. They emphasizedifferent themes and start at different places. Some of them may prefer to treat the foundational questionsof ethical theory thoroughly before moving on to particular moral problems; others reverse this priority. Stillother instructors frame their courses around the question of economic justice, the analysis of capitalism, orthe debate over corporate social responsibility. Some instructors stress individual moral decision making,others social and economic policy.Business Ethics permits teachers great flexibility in how they organize their courses. A wide range oftheoretical and applied issues are discussed; and the individual chapters, the major sections within them,and the case studies are to a surprising extent self-contained. Instructors can thus teach the book in whatever order they choose, and they can easily skip or touch lightly on some topics in order to concentrate onothers without loss of coherence.Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netxii Preface•••AcknowledgmentsI wish to acknowledge my great debt to the many people whose ideas and writing have influenced me overthe years. Philosophy is widely recognized to involve a process of ongoing dialogue. This is nowhere moreevident than in the writing of textbooks, whose authors can rarely claim that the ideas being synthesized,organized, and presented are theirs alone. Without my colleagues, without my students, and withouta larger philosophical community concerned with business and ethics, this book would not have beenpossible.I particularly want to acknowledge my debt to Vincent Barry. Readers familiar with our textbook andreader Moral Issues in Business1 will realize the extent to which I have drawn on material from that work.Business Ethics is, in effect, a revised and updated version of the textbook portion of that collaborativework, and I am very grateful to Vince for permitting me to use our joint work here.William H. Shaw and Vincent Barry, Moral Issues in Business, 12th ed. (Belmont, Calif.: Wadsworth/Cengage Learning,2013).1Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.netpa rt one | mor a l philosoph y a nd businessCh a pter 1The Nature of MoralityIntroductionsometimes the rich and mighty fall. Takesame time that he and other executives were cashing in theirKenneth Lay, for example. Convicted by a jury in 2006 ofshares and bailing out.conspiracy and multiple counts of fraud, he had been chairEnron’s crash cost the retirement accounts of its employman and CEO of Enron until that once mighty company tookees more than a billion dollars as the company’s stock fella nose dive and crashed. Founded in the 1980s, Enron soonfrom the stratosphere to only a few pennies a share. Outsidebecame a dominant player in the field of energy trading, growinvestors lost even more. The reason Enron’s collapse caughting rapidly to become America’s seventh biggest company. Wallinvestors by surprise—the company’s market value was $28Street loves growth, and Enron was its darling, admired asbillion just two months before its bankruptcy—was that Enrondynamic, innovative, and—of course—had always made its financial recordsprofitable. Enron stock exploded in value,and accounts as opaque as possible. Itincreasing 40 percent in a single year.did this by creating a Byzantine financialThe reason Enron’sThe next year it shot up 58 percent andstructure of off-balance-sheet specialcollapse caught investorsthe year after that an unbelievable 89purpose entities—reportedly as manyby surprise . . . waspercent. The fact that nobody could quiteas 9,000—that were supposed to bethat Enron had alwaysunderstand exactly how the companyseparate and independent from themade its financialmade its money didn’t seem to matter.main company. Enron’s board of direcAfter Fortune magazine voted it “thetors condoned these and other dubiousrecords and accounts asmost innovative company of the year”accounting practices and voted twiceopaque as possible.in 2000, Enron proudly took to callingto permit executives to pursue personalitself not just “the world’s leading energyinterests that ran contrary to those ofcompany” but also “the world’s leadthe company. When Enron was obligeding company.” But when Enron was later forced to declareto redo its financial statements for one three-year period, itsbankruptcy—at the time the largest Chapter 11 filing in U.S.profits dropped $600 million and its debts increased $630history—the world learned that its legendary financial prowessmillion.was illusory and the company’s success built on the sands ofStill, Enron’s financial auditors should have spotted thesehype. And the hype continued to the end. Even with the comand other problems. After all, the shell game Enron was playingpany’s financial demise fast approaching, Kenneth Lay was stillis an old one, and months before the company ran aground,recommending the ­ ompany’s stock to its employees—at thecEnron Vice President Sherron Watkins had warned Lay that1Downloaded 4/22/2015 by Mohamed Gbla, elijahmedsyl@verizon.net2       part one   moral philosophy and businessEnron’s stock price in U.S. dollars in late 2001, before its spectacular collapsethe company could soon “implode in a wave of accountingscandals.” Yet both Arthur Andersen, Enron’s longtime outsideauditing firm, and Vinson & Elkins, the company’s law firm, hadroutinely put together and signed off on various dubious financial deals, and in doing so made large profits for themselves.Arthur Andersen, in particular, was supposed to make surethat the company’s public records reflected financial reality, butAndersen was more worried about its auditing and consultingfees than about its fiduciary responsibilities. Even worse, whenthe scandal began to break, a partner at Andersen organized the shredding of incriminating Enron documents beforeinvestigators could lay their hands on them. As a result, theeighty-nine-year-old accounting firm was convicted of obstructing justice. The Supreme Court later overturned that verdicton a technicality, but by then Arthur Andersen had alreadybeen driven out of business. (The year before Enron wentunder, by the way, the Securities and Exchange Commissionfined Andersen $7 million for approving misleading accounts atWaste Management, and it also had to pay $110 million to settlea lawsuit for auditing work it did for Sunbeam before it, too, filedfor bankruptcy. And when massive accounting fraud was lateruncovered at WorldCom, it cam…